UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
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the Securities Exchange Act of 1934 (Amendment No. )
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E. I. du Pont de Nemours and Company | ||||
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DuPont 1007 Market Street Wilmington, DE 19898 Ellen Kullman Chair of the Board and Chief Executive Officer |
Annual Meeting April 24, 2013
March 15,
2013
Dear Stockholder:
You are invited to attend the Company's 2013 Annual Meeting on Wednesday, April 24, 2013, at 10:30 a.m. local time in the DuPont Theatre, DuPont Building, Wilmington, Delaware.
The enclosed Notice of Annual Meeting and Proxy Statement provide information about the governance of our Company and describe the various matters to be acted upon during the meeting. In addition, there will be a report on the state of the Company's business and an opportunity for you to express your views on subjects related to the Company's operations.
To make it easier for you to vote your shares, you have the choice of voting over the Internet, by telephone, or by completing and returning the enclosed Proxy Card. The Proxy Card describes your voting options in more detail.
This year, we are using the Securities and Exchange Commission's Notice and Access model, allowing us to deliver proxy materials via the Internet. Notice and Access gives the Company a lower-cost way to furnish stockholders with their proxy materials. On March 15, we mailed to certain stockholders of record a "Notice Regarding the Availability of Proxy Materials" with instructions on how to access the proxy materials via the Internet (or request a paper copy) and how to vote online.
If you requested a full set of proxy materials, or if you hold DuPont Common Stock through a Company savings plan, your admission ticket for the Annual Meeting is included on your Proxy Card. A registered stockholder may also use the Notice Regarding the Availability of Proxy Materials, received in the mail, as his or her admission ticket. If you hold shares in a brokerage account, please refer to page 1 of the Proxy Statement for information on how to attend the meeting. If you need special assistance, please contact the DuPont Stockholder Relations Office at 302-774-3034.
In 2012, we expanded into new geographies, successfully launched new products and increased market share in high growth businesses. Full year revenue growth and earnings fell short of expectations as we encountered market headwinds in our performance chemicals segment. However, we maintained our momentum and continued to connect DuPont science to market needs by developing sustainable, innovative solutions to global challenges.
The Annual Meeting gives us an opportunity to review our progress. We appreciate your ownership of DuPont, and I hope you will be able to join us on April 24.
Sincerely,
Ellen Kullman
E. I. du Pont de Nemours and Company
March 15, 2013
To
the Holders of Common Stock of
E. I. du Pont de Nemours and Company
NOTICE OF ANNUAL MEETING
The Annual Meeting of Stockholders of E. I. DU PONT DE NEMOURS AND COMPANY will be held on Wednesday, April 24, 2013, at 10:30 a.m. local time, in the DuPont Theatre in the DuPont Building, 1007 Market Street, Wilmington, Delaware. The meeting will be held to consider and act upon: (1) the election of directors; (2) the ratification of the Company's independent registered public accounting firm; (3) an advisory vote to approve executive compensation; and (4) four stockholder proposals described in the Proxy Statement, and such other business as may properly come before the meeting.
Holders of record of DuPont Common Stock at the close of business on February 27, 2013, are entitled to vote at the meeting.
This notice and the accompanying proxy materials are sent to you by order of the Board of Directors.
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Cornel B. Fuerer Secretary |
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The DuPont 2012 Annual Review will also be available at the above website.
Stockholders may request their proxy materials be delivered to them electronically in 2014 by visiting http://enroll.icsdelivery.com/dd.
2013 ANNUAL MEETING OF STOCKHOLDERS
The enclosed proxy materials are being sent to stockholders at the request of the Board of Directors of E. I. du Pont de Nemours and Company to encourage you to vote your shares at the Annual Meeting of Stockholders to be held April 24, 2013. This Proxy Statement contains information on matters that will be presented at the meeting and is provided to assist you in voting your shares.
The Company's 2012 Annual Report on Form 10-K, containing management's discussion and analysis of financial condition and results of operations of the Company and the audited financial statements, and this Proxy Statement were distributed together beginning March 15, 2013.
Who May Vote
All holders of record of DuPont Common Stock as of the close of business on February 27, 2013 (the record date) are entitled to vote at the meeting. Each share of stock is entitled to one vote. As of the record date, 919,072,377 shares of DuPont Common Stock were outstanding. A majority of the shares voted in person or by proxy is required for the approval of each of the proposals described in this Proxy Statement. Abstentions and broker nonvotes are not counted in the vote. At least a majority of the holders of shares of DuPont Common Stock as of the record date must be present either in person or by proxy at the meeting in order for a quorum to be present.
How to Vote
Even if you plan to attend the meeting you are encouraged to vote by proxy. You may vote by proxy in one of the following ways:
When you vote by proxy, your shares will be voted according to your instructions. If you sign your Proxy Card but do not specify how you want your shares to be voted, they will be voted as the Board of Directors recommends. You can change or revoke your proxy by Internet, telephone or mail at any time provided your vote is received by the cut-off date specified on the Proxy Notice or Proxy Card.
How to Attend the Annual Meeting
If you requested a full set of proxy materials or if you hold stock through one of the savings plans listed below, your admission ticket is attached to your Proxy Card. A registered stockholder may also use the Proxy Notice as his or her admission ticket. You will need to bring your admission ticket, along with picture identification, to the meeting. If you own shares in street name, please bring your most recent brokerage statement, along with picture identification, to the meeting. The Company will use your brokerage statement to verify your ownership of DuPont Common Stock and admit you to the meeting.
Please note that cameras, sound or video recording equipment, or other similar equipment, electronic devices, large bags or packages will not be permitted in the DuPont Theatre.
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Shares Held in Savings Plans
If you participate in one of the following plans, your voting instruction card will include the shares you hold in the plan:
The plan trustees will vote according to the instructions received on your proxy. If proxies for shares in savings plans are not received by Internet, telephone or mail, those shares will be voted by the trustees as directed by the plan fiduciary or by an independent fiduciary selected by the plan fiduciary.
Proxy Statement Proposals
At each annual meeting stockholders are asked to elect directors to serve on the Board of Directors, to ratify the appointment of the Company's independent registered public accounting firm for the year, and to approve, by advisory vote, executive compensation. Other proposals may be submitted by the Board of Directors or stockholders to be included in the proxy statement. To be considered for inclusion in the 2014 Annual Meeting Proxy Statement, stockholder proposals must be received by the Company no later than November 15, 2013.
For any proposal that is not submitted for inclusion in next year's proxy statement, but is instead sought to be considered as timely and presented directly at the 2014 Annual Meeting, Securities and Exchange Commission rules permit management to vote proxies in its discretion if the Company: (1) receives notice of the proposal before the close of business on January 29, 2014 and advises stockholders in the 2014 Annual Meeting Proxy Statement about the nature of the matter and how management intends to vote on such matter; or (2) does not receive notice of the proposal prior to the close of business on January 29, 2014.
Stockholder Nominations for Election of Directors
The Corporate Governance Committee recommends nominees to the Board of Directors for election as directors at each annual meeting. The Committee will consider nominations submitted by stockholders of record and received by the Corporate Secretary by the first Monday in December. Nominations must include a statement by the nominee indicating a willingness to serve if elected and disclosing principal occupations or employment for the past five years. A description of the Director Nomination Process is attached at Appendix A.
Proxy Committee
The Proxy Committee is composed of directors of the Company who vote as instructed the shares of DuPont Common Stock for which they receive proxies. Proxies also confer upon the Proxy Committee discretionary authority to vote the shares on any matter which was not known to the Board of Directors a reasonable time before solicitation of proxies, but which is properly presented for action at the meeting.
Solicitation of Proxies
The Company will pay all costs relating to the solicitation of proxies. Innisfree M&A Incorporated has been retained to assist in soliciting proxies at a cost of $10,000 plus reasonable expenses. Proxies may be solicited by officers, directors and employees of the Company personally, by mail, or by telephone or other electronic means. The Company will also reimburse brokers, custodians, nominees and fiduciaries for reasonable expenses in forwarding proxy materials to beneficial owners of DuPont Common Stock.
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Secrecy in Voting
As a matter of policy, proxies, ballots and voting tabulations that identify individual stockholders are held confidential by the Company. Such documents are available for examination only by the independent tabulation agents, the independent inspectors of election and certain employees associated with tabulation of the vote. The identity of the vote of any stockholder is not disclosed except as may be necessary to meet legal requirements.
DuPont is committed to having sound corporate governance principles and practices. Please visit the Company's website at www.dupont.com, under the "Investor Center" caption, for the Board's Corporate Governance Guidelines, the Board-approved Charters for the Audit, Compensation and Corporate Governance Committees and related information. These Guidelines and Charters may also be obtained free of charge by writing to the Corporate Secretary.
DUPONT BOARD OF DIRECTORS
CORPORATE GOVERNANCE GUIDELINES
These Guidelines serve as an important framework for the Board's corporate governance practices and to assist the Board in carrying out its responsibilities effectively. The Board reviews these Guidelines periodically and may modify them as appropriate to reflect the evolution of its governance practices.
The Board
Responsibility
The Board has an active responsibility for broad corporate policy and overall performance of the Company through oversight of management and stewardship of the Company to enhance the long-term value of the Company for its stockholders and the vitality of the Company for its other stakeholders.
Role
In carrying out its responsibility, the Board has specific functions, in addition to the general oversight of management and the Company's business performance, including providing input and perspective in evaluating alternative strategic initiatives; reviewing and, where appropriate, approving fundamental financial and business strategies and major corporate actions; ensuring processes are in place to maintain the integrity of the Company; evaluating and compensating the CEO; and planning for CEO succession and monitoring succession planning for other key positions.
Duties
Directors are expected to expend sufficient time, energy and attention to assure diligent performance of their responsibility. Directors are expected to attend meetings of the Board, its Committees on which they serve, and the Annual Meeting of Stockholders; review materials distributed in advance of the meetings; and make themselves available for periodic updates and briefings with management via telephone or one-on-one meetings.
Leadership
The position of Chief Executive Officer will normally be vested in the Chair, provided however, that the position may be established independent of the Chair at the discretion of the Board. If the Chair of the Board is not an independent director, there shall be an independent Lead Director. The independent Lead Director shall be elected by the independent Board members. The Lead Director shall serve for at least one year and shall have the following responsibilities:
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Independence
A substantial majority of the Board are independent directors in accordance with the standards of independence of the New York Stock Exchange and as described in the Guidelines. See pages 6-7. The Corporate Governance Committee as well as the Board annually reviews relationships that directors may have with the Company to make a determination of whether there are any material relationships that would preclude a director being independent.
Qualifications
Directors are selected for their integrity and character; sound, independent judgment; breadth of experience, insight and knowledge; and business acumen. Leadership skills, scientific or technology expertise, familiarity with issues affecting global businesses in diverse industries, prior government service, and diversity are among the relevant criteria, which will vary over time depending on the needs of the Board. The Corporate Governance Committee considers candidates for potential nomination to recommend for approval by the full Board.
The Board does not limit the number of other public company boards that a director may serve on. However, the Corporate Governance Committee considers the number of boards a director sits on. Directors are encouraged to limit the number of other public company boards to take into account their time and effectiveness and are expected to advise the Chair in advance of serving on another board.
When a director's principal responsibilities or business association changes significantly, the director will tender his or her resignation to the Chair for consideration by the Corporate Governance Committee of the continued appropriateness for Board service.
No director may stand for reelection to the Board after reaching age 72. An employee director retires from the Board when retiring from employment with the Company, with the exception of the former CEO. The Board may in unusual circumstances and for a limited period ask a director to stand for reelection after the prescribed retirement date.
Election
In accordance with the Company's Bylaws, if none of our stockholders provides the Company with notice of an intention to nominate one or more candidates to compete with the Board's nominees in an election of directors, a nominee must receive more votes cast for than against his or her election or re-election in order to be elected or reelected to the Board. The Board expects a director to tender his or her resignation if he or she fails to receive the required number of votes for re-election. The Board shall nominate for election or re-election as director only candidates who agree to tender, promptly following the annual meeting at which they are elected or re-elected as a director, irrevocable resignations that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which they face re-election and (ii) Board acceptance of such resignation in accordance with the procedures specified in these Guidelines. In addition, the Board shall fill director vacancies and newly created directorships only with candidates who agree to tender, promptly following their appointment to the Board, the same resignation tendered by other directors in accordance with these Guidelines.
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In the event an incumbent director fails to receive the required vote for reelection, the Corporate Governance Committee (or other committee designated by the Board) ("Committee") shall make a recommendation to the Board as to whether to accept or reject the resignation of the incumbent director. The Board shall act on the resignation, taking into account the recommendation of the Committee, and publicly disclose its decision within ninety (90) days following certification of the election results.
The Committee in making its recommendation and the Board in making its decision may consider all facts and circumstances they consider relevant or appropriate in reaching their determinations. The Board expects any director whose resignation is under consideration pursuant to these Guidelines to abstain from participating in the Committee recommendation or the action of the Board regarding whether to accept the resignation.
Orientation and Continuing Education
New directors participate in an orientation process to become familiar with the Company and its strategic plans and businesses, significant financial matters, core values including ethics, compliance programs, corporate governance practices and other key policies and practices through a review of background materials, meetings with senior executives and visits to Company facilities. The Corporate Governance Committee is responsible for providing guidance on directors' continuing education.
Compensation
The Board believes that compensation for outside directors should be competitive. DuPont Common Stock is a key component with payment of a portion of director compensation as DuPont stock, options or similar form of equity-based compensation, which are subject to stock ownership guidelines. The Compensation Committee reviews periodically the level and form of director compensation and, if appropriate, proposes changes for consideration by the full Board.
Annual Self-Evaluation
The Board and each Committee make an annual self-evaluation of its performance with a particular focus on overall effectiveness. The Corporate Governance Committee is responsible for overseeing the self-evaluation process.
Access to Management and Advisors
Directors have access to the Company's management and, in addition, are encouraged to visit the Company's facilities. As necessary and appropriate, the Board and its Committees may retain outside legal, financial or other advisors.
Board Meetings
Selection of Agenda Items
Subject to approval of the Lead Director, the Chair establishes the agenda for Board meetings, in conjunction with Chairs of the Committees. Directors are encouraged to suggest items for inclusion on the agenda and may raise subjects not specifically on the agenda.
Attendance of Senior Executives
The Board welcomes regular attendance of senior executives to be available to participate in discussions. Presentation of matters to be considered by the Board are generally made by the responsible executive.
Executive Sessions
Regularly scheduled Board meetings include a session of all directors and the CEO. In addition, the independent Board members meet in regularly scheduled executive sessions.
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Leadership Assessment
Succession Planning
The Board plans for succession to the position of CEO. The Compensation Committee oversees the succession planning process. To assist the Board, the CEO periodically provides the Board with an assessment of senior executives and their potential to succeed to the position of CEO, as well as perspective on potential candidates from outside the Company. The Board has available on a continuing basis the CEO's recommendation should he/she be unexpectedly unable to serve. The CEO also provides the Board with an assessment of potential successors to key positions.
CEO Evaluation and Compensation
Through an annual process overseen and coordinated by the Compensation Committee, independent directors evaluate the CEO's performance and set the CEO's compensation.
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Guidelines for Determining the Independence
of DuPont Directors
It is the expectation and practice of the Board that, in their roles as members of the Board, all members will exercise their independent judgment diligently and in good faith, and in the best interests of the Company and its stockholders as a whole, notwithstanding any member's other activities or affiliations.
However, in addition, the Board has determined that a substantial majority of its members should be "independent" in that they are free of any material relationship with the Company or Company management, whether directly or as a partner, shareholder or officer of an organization that has a material relationship with the Company. In furtherance of this objective, the Board has adopted the following Guidelines for determining whether a member is considered "independent."
The Board will re-examine the independence of each of its members once per year and again if a member's outside affiliations change substantially during the year.
For purposes of these Guidelines, "members of his/her immediate family" and similar phrases will mean a person's spouse, parents, stepparents, children, stepchildren, siblings, mothers- and fathers-in-law, sons- and daughters-in law, brothers- and sisters-in-law, and anyone (other than an employee) who shares the person's home. "The Company" means the Company and all of its consolidated subsidiaries.
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Current New York Stock Exchange standards state that a director will not be independent:
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Environmental |
Responsibilities include: |
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Policy | | Reviews the Company's environmental policies and practices. | ||||
Committee | | Provides support for the Company's sustainable growth mission. | ||||
Science and |
Responsibilities include: |
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Technology | | Monitors state of science and technology capabilities within the Company. | ||||
Committee | | Oversees the development of key technologies essential to the long-term success of the Company. |
The following chart shows the current committee membership and the number of meetings that each committee held in 2012.
Director |
Audit Committee |
Compensation Committee |
Corporate Governance Committee |
Environmental Policy Committee |
Science and Technology Committee |
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Lamberto Andreotti |
X | |||||||||
Richard H. Brown |
X | X | ||||||||
Robert A. Brown |
X | X | C | |||||||
Bertrand P. Collomb |
X | C | ||||||||
Curtis J. Crawford |
X | X | ||||||||
Alexander M. Cutler |
X | C | ||||||||
Eleuthère I. du Pont |
C | X | ||||||||
Marillyn A. Hewson |
X | X | X | |||||||
Lois D. Juliber |
C | X | ||||||||
Ellen J. Kullman |
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Lee M. Thomas |
X | X | ||||||||
Number of Meetings in 2012 |
7 | 5 | 5 | 2 | 2 | |||||
C = Chair
Directors fulfill their responsibilities not only by attending Board and committee meetings but also through communication with the Chair and CEO and other members of management relative to matters of mutual interest and concern to the Company.
In 2012, eight meetings of the Board were held. Each director attended at least 88% of the aggregate number of meetings of the Board and the committees of the Board on which the director served. Attendance at these meetings averaged 98% among all directors in 2012.
As provided in the Board's Corporate Governance Guidelines, directors are expected to attend the Company's Annual Meeting of Stockholders. Ten directors attended the 2012 Annual Meeting.
Review and Approval of Transactions with Related Persons
The Board of Directors has adopted written policies and procedures relating to the approval or ratification of "Related Person Transactions." Under the policies and procedures, the Corporate Governance Committee ("Governance Committee") (or its Chair, under some circumstances) reviews the relevant facts of all proposed Related Person Transactions and either approves or disapproves of the entry into the Related Person Transaction, by taking into account, among other factors it deems appropriate:
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No director may participate in any discussion or approval of a Related Person Transaction for which he/she or any of his/her immediate family members is the Related Person. Related Person Transactions are approved or ratified only if they are determined to be in the best interests of DuPont and its stockholders.
If a Related Person Transaction that has not been previously approved or previously ratified is discovered, the Related Person Transaction will be presented to the Governance Committee for ratification. If such Related Person Transaction is not ratified by the Governance Committee, then the Company shall either ensure all appropriate disclosures regarding the transaction are made or, if appropriate, take all reasonable actions to attempt to terminate the Company's participation in such transaction.
Under the Company's policies and procedures, a "Related Person Transaction" is generally any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships in which: (i) DuPont was, is or will be a participant; (ii) the aggregate amount involved exceeds $120,000 in any fiscal year; and (iii) any Related Person had, has or will have a direct or indirect material interest. A "Related Person" is generally any person who is, or at any time since the beginning of DuPont's last fiscal year was: (i) a director or an executive officer of DuPont or a nominee to become a director of DuPont; (ii) any person who is known to be the beneficial owner of more than five percent of any class of DuPont's outstanding Common Stock; or (iii) any immediate family member of any of the foregoing persons.
Certain Relationships and Related Transactions
As discussed above, the Governance Committee is charged with reviewing issues involving independence and all Related Person Transactions. DuPont and its subsidiaries purchase products and services from and/or sell products and services to companies of which certain of the directors and executive officers of DuPont, or their immediate family members, are employees. The Governance Committee and the Board have reviewed such transactions and relationships and do not consider the amounts involved in such transactions material. Such purchases from and sales to each company involve less than either $1,000,000 or two percent of the consolidated gross revenues of each of the purchaser and the seller and all such transactions are in the ordinary course of business. Some such transactions are continuing and it is anticipated that similar transactions will occur from time to time. The spouse of Mrs. Kullman, Chair and Chief Executive Officer, was Director Corporate Marketing at DuPont and received total compensation in 2012 valued at $336,000 which was commensurate with that of his peers.
Communications with the Board and Directors
Stockholders and other parties interested in communicating directly with the Board, Chair, Lead Director or other outside director may do so by writing in care of the Corporate Secretary, DuPont Company, 1007 Market Street, D9058, Wilmington, DE 19898. The Board's independent directors have approved procedures for handling correspondence received by the Company and addressed to the Board, Chair, Lead Director or other outside director. Concerns relating to accounting, internal controls, auditing or ethical matters are immediately brought to the attention of the Company's internal audit function and handled in accordance with procedures established by the Audit Committee with respect to such matters, which include an anonymous toll-free hotline (1-800-476-3016) and a website through which to report issues (https://reportanissue.com/dupont/welcome).
Leadership Structure of the Board
The positions of Chair of the Board and CEO are held by the same person, except in specific circumstances. The Board appreciates that any advantages gained by having a single CEO/Chair must be weighed against any associated independence concerns, and has implemented adequate safeguards to address such concerns. Following last year's vote on an independent chair proposal, the Board adopted an independent Lead Director structure consistent with the principles of the ISS. This leadership structure gives the Company the benefit of a combined Chair/CEO balanced by a strong independent Lead Director. The Chair of the Corporate Governance Committee currently serves as Lead Director. Beginning in 2013, the
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independent Lead Director shall be elected annually by the independent Board members. The Lead Director shall serve for at least one year and shall have the following responsibilities:
Regularly scheduled Board meetings include a session of all directors and the CEO. Each director is an equal participant in each decision made by the full Board. In addition, the Board meets in regularly scheduled executive sessions without the participation of the CEO or other senior executives.
Ten of the Board's eleven directors are independent directors in accordance with the standards of independence of the New York Stock Exchange and as described in the Corporate Governance Guidelines. The Corporate Governance Committee as well as the Board annually reviews relationships that directors may have with the Company to make a determination of whether there are any material relationships that would preclude a director from being independent.
All members of the Audit, Compensation and Corporate Governance Committees are independent directors under the Board's Corporate Governance Guidelines and applicable regulatory and listing standards. The Board and each Committee undertake an annual self-evaluation of performance with a particular focus on overall effectiveness. The Corporate Governance Committee is responsible for overseeing the self-evaluation process. Through an annual process overseen and coordinated by the Compensation Committee, independent directors evaluate the CEO's performance and set the CEO's compensation.
Finally, all directors have access to the Company's management. As necessary and appropriate, the Board and its Committees may also retain outside legal, financial or other advisors.
Board's Role in the Oversight of Risk Management
The Board has an active role, directly and through the Board's committee structure, in the oversight of the Company's risk management efforts. It identifies the set of key risks to be monitored by the Board on a recurring basis, and regularly reviews and discusses with members of management information regarding the Company's business disruption, economic, environmental, legal, process safety, regulatory, reputational, strategic, technological and other risks, their potential impact, and the Company's risk mitigation efforts. Each Board committee plays a key role in overseeing the Company's management of risks that are within the committee's area of focus.
By way of example: The Compensation Committee is responsible for overseeing the management of risks relating to the Company's executive compensation practices. The Audit Committee oversees management of accounting, auditing, external reporting and internal control risks. The Corporate Governance Committee addresses risks associated with director independence and potential conflicts of interest. The Environmental Policy Committee focuses on risks associated with emerging regulatory developments related to the environment. The Science and Technology Committee considers key research and development initiatives and the risks related to those programs.
Although each committee is responsible for overseeing the management of certain risks, the full Board is regularly informed by its committees about such risks. This enables the Board and its committees to coordinate risk oversight and the relationships among the various risks.
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Restrictions on Certain Types of Transactions
During 2012, the Company adopted a policy that prohibits directors and officers from engaging in the following types of transactions with respect to the Company's stock: (i) short-term trading; (ii) short sales; (iii) hedging transactions; and (iv) margin accounts and pledging securities. The Company's policy also strongly recommends that all other employees refrain from entering into these types of transactions.
Board's Consideration of Diversity
The Board does not have a formal policy with respect to diversity. However, the Board and the Corporate Governance Committee each believe that it is essential that the Board members represent diverse viewpoints, with a broad array of experiences, professions, skills, geographic representation and backgrounds that, when considered as a group, provide a sufficient mix of perspectives to allow the Board to best fulfill its responsibilities to the long-term interests of the Company's stockholders. See Corporate Governance Guidelines, page 3, under "Qualifications" and the Director Nomination Process at Appendix A.
Code of Business Conduct and Ethics
The Board has adopted a Code of Business Conduct and Ethics for Directors with provisions specifically applicable to directors. In addition, the Company has a Code of Conduct applicable to all employees of the Company, including executive officers, and a Code of Ethics for the Chief Executive Officer, Chief Financial Officer and Controller. The Code of Business Conduct and Ethics for the DuPont Board of Directors, the DuPont Code of Conduct, and Code of Ethics for the Chief Executive Officer, Chief Financial Officer and Controller are available on the Company's website (www.dupont.com) under Investor Center, Corporate Governance. Copies of these documents may also be obtained free of charge by writing to the Corporate Secretary.
The Office of the Chief Executive (OCE) has responsibility for the overall direction and operations of all the businesses of the Company and broad corporate responsibility in such areas as corporate financial performance, environmental leadership and safety, development of global talent, research and development and global effectiveness. All members are executive officers.
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The Audit Committee of the Board of Directors (the "Committee") assists the Board in fulfilling its oversight responsibilities with respect to the external reporting process and the adequacy of the Company's internal controls. Specific responsibilities of the Committee are set forth in the Audit Committee Charter adopted by the Board and last amended effective December 4, 2012. The Charter is available on the Company's website (www.dupont.com) under Investor Center, Corporate Governance.
The Committee is comprised of five directors, all of whom meet the standards of independence adopted by the New York Stock Exchange and the Securities and Exchange Commission. Subject to stockholder ratification, the Committee appoints the Company's independent registered public accounting firm. The Committee approves in advance all services to be performed by the Company's independent registered public accounting firm in accordance with the Committee's Policy on Pre-approval of Services Performed by the Independent Registered Public Accounting Firm. A summary of the Policy is included with this Proxy Statement as part of the proposal seeking ratification of the independent registered public accounting firm.
Management is responsible for the Company's financial statements and reporting process, for establishing and maintaining an adequate system of internal control over financial reporting, and for assessing the effectiveness of the Company's internal control over financial reporting. PricewaterhouseCoopers LLP ("PwC"), the Company's independent registered public accounting firm, is responsible for auditing the Company's Consolidated Financial Statements and for assessing the effectiveness of internal control over financial reporting. The Committee has reviewed and discussed the Company's 2012 Annual Report on Form 10-K, including the audited Consolidated Financial Statements of the Company and Management's Report on Internal Control over Financial Reporting, for the year ended December 31, 2012 with management and with representatives of PwC.
The Committee has also discussed with PwC matters required to be discussed by Statement on Auditing Standards No. 61 (Communications with Audit Committees), as amended, as adopted by the Public Company Accounting Oversight Board ("PCAOB"). The Committee has received from PwC the letter and written disclosures required by applicable requirements of the PCAOB regarding the independent accountant's communications with the Audit Committee concerning independence and has discussed with PwC its independence.
The Committee has considered whether the provision to the Company by PwC of limited non-audit services is compatible with maintaining the independence of PwC. The Committee has satisfied itself as to the independence of PwC.
Based on the Committee's review of the audited Consolidated Financial Statements of the Company, and on the Committee's discussions with management of the Company and with PwC, the Committee recommended to the Board of Directors that the audited Consolidated Financial Statements be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.
AUDIT COMMITTEE
Eleuthère
I. du Pont, Chair
Lamberto Andreotti
Robert A. Brown
Marillyn A. Hewson
Lee M. Thomas
13
Nonemployee directors receive compensation for Board service, which is designed to fairly compensate them for their Board responsibilities and align their interests with the long-term interests of stockholders.
The Compensation Committee, which consists solely of independent directors, has the primary responsibility to review and consider any revisions to directors' compensation. The process for setting director pay is guided by the following principles:
With the assistance of Frederic W. Cook & Co., Inc., the independent compensation consultant retained by the Compensation Committee, the Committee closely monitors trends in director compensation in the marketplace. The compensation program for nonemployee directors for 2012 and 2013 is described in detail in the chart below:
Compensation Element |
2012 |
2013 |
||
---|---|---|---|---|
Annual Retainer (TOTAL) |
$230,000 | $230,000 | ||
Cash Retainer |
$100,000 | $100,000 | ||
Equity Retainer |
$130,000 delivered in the form of 2,520 Time-Vested Restricted Stock Units | $130,000 | ||
|
Granted February 6, 2012; provide for dividend equivalent units; restrictions lapse at separation from service; payable in stock |
Will be delivered concurrent with 2013 Annual Meeting; provide for dividend equivalent units; restrictions lapse restrictions lapse at separation from service; payable in stock |
||
Annual Committee Chair Fee |
All Committee Chairs $20,000 | All Committee Chairs $20,000 | ||
Stock Ownership Guideline |
Time-Vested Restricted Stock Units required to be held until retirement | Time-Vested Restricted Stock Units required to be held until retirement |
||
14
The Company does not pay meeting fees, but does pay for or reimburse directors for reasonable travel expenses related to attending Board, committee, educational, and Company business meetings. Details regarding total director compensation for 2012 are reflected in the table below. E. J. Kullman, Chair of the Board, receives no additional compensation for her service as a director.
Name |
Fees Earned Or Paid In Cash(1) |
Stock Awards(2) |
Change In Pension Value And Nonqualified Deferred Compensation Earnings(3) |
All Other Compensation(4) |
Total |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
L. Andreotti |
$ | 66,667 | $ | 108,334 | $ | 200 | $ | 175,201 | ||||||||
R. H. Brown |
100,000 | 130,486 | $ | 183 | 63,030 | 293,699 | ||||||||||
R. A. Brown |
120,000 | 130,486 | 63,446 | 313,932 | ||||||||||||
B. P. Collomb |
113,333 | 130,486 | 61,462 | 305,281 | ||||||||||||
C. J. Crawford |
100,000 | 130,486 | 24,586 | 63,241 | 318,313 | |||||||||||
A. M. Cutler |
120,000 | 130,486 | 63,482 | 313,968 | ||||||||||||
E. I. du Pont |
120,000 | 130,486 | 56,367 | 306,853 | ||||||||||||
M. A. Hewson |
100,000 | 130,486 | 62,489 | 292,975 | ||||||||||||
L. D. Juliber |
120,000 | 130,486 | 24,534 | 63,119 | 338,139 | |||||||||||
L. M. Thomas |
100,000 | 130,486 | 300 | 230,786 | ||||||||||||
Former Director |
||||||||||||||||
W. K. Reilly |
40,000 | 130,486 | 18 | 59,424 | 229,928 | |||||||||||
Name |
Outstanding Stock Awards at December 31, 2012(a) |
Outstanding Option Awards at December 31, 2012 |
|||||
---|---|---|---|---|---|---|---|
L. Andreotti |
2,251 | | |||||
R. H. Brown |
5,681 | | |||||
R. A. Brown |
5,681 | | |||||
B. P. Collomb |
5,681 | | |||||
C. J. Crawford |
5,681 | 5,700 | |||||
A. M. Cutler |
5,681 | | |||||
E. I. du Pont |
5,681 | | |||||
M. A. Hewson |
5,681 | | |||||
L. D. Juliber |
5,681 | 5,700 | |||||
W. K. Reilly |
3,072 | | |||||
L. M. Thomas |
2,927 | | |||||
15
Our stock ownership guidelines require directors to hold until retirement all annual equity awards granted after 2011. Stock ownership guidelines prior to 2012 required each nonemployee director to hold DuPont Common Stock equal to a multiple of two times the full Annual Retainer. Directors had up to five years from date of election to achieve the required ownership.
Under the DuPont Stock Accumulation and Deferred Compensation Plan for Directors, a director may defer all or part of the Board retainer and committee chair fees in cash or stock units until retirement as a director or until a specified year after retirement. Interest accrues on deferred cash payments and dividend equivalents accrue on deferred stock units. This deferred compensation is an unsecured obligation of the Company.
As part of the retention requirements, equity grants will be held until retirement. However, a director may defer payments beyond retirement.
The Company's retirement income plan for nonemployee directors was discontinued in 1998. Nonemployee directors who began their service on the Board before the plan's elimination continue to be eligible to receive benefits under the plan. Annual benefits payable under the plan equal one-half of the annual Board retainer (up to $85,000 and exclusive of any committee compensation and stock, RSU or option grants) in effect at the director's retirement. Benefits are payable for the lesser of life or ten years.
Directors' Charitable Gift Plan
In October 2008, the Company discontinued its Charitable Gift Plan with respect to future directors. The Directors' Charitable Gift Plan was established in 1993. After the death of a director, the Company will donate five consecutive annual installments of up to $200,000 each to tax-exempt educational institutions or charitable organizations recommended by the director and approved by the Company.
A director is fully vested in the plan after five years of service as a director or upon death or disability. The plan is unfunded; the Company does not purchase insurance policies to satisfy its obligations under the plan. The directors do not receive any personal financial or tax benefit from this program because any charitable, tax-deductible donations accrue solely to the benefit of the Company. Employee directors may participate in the plan if they make a required annual contribution.
Accidental Death and Disability Insurance
The Company maintains $300,000 accidental death and disability insurance on nonemployee directors.
16
The eleven nominees for election as directors are identified on pages 17 through 21. All nominees are now members of the Board of Directors.
The Board has determined that, except for E. J. Kullman, Chair and Chief Executive Officer, each of the nominees and each other person who served as director during 2012 is or was, as the case may be, independent within the independence requirements of the New York Stock Exchange listing standards and in accordance with the Guidelines for Determining the Independence of DuPont Directors set forth in the Board's Corporate Governance Guidelines. See pages 3-7.
The Board knows of no reason why any nominee would be unable to serve as a director. If any nominee should for any reason become unable to serve, the shares represented by all valid proxies will be voted for the election of such other person as the Board of Directors may designate following recommendation by the Corporate Governance Committee, or the Board may reduce the number of directors to eliminate the vacancy.
The Board's Corporate Governance Guidelines describe qualifications for directors. Directors are selected for their integrity and character; sound, independent judgment; breadth of experience, insight and knowledge; and business acumen. Leadership skills, scientific or technological expertise, familiarity with issues affecting global businesses in diverse industries, prior government service, and diversity are among the relevant criteria, which will vary over time depending on the needs of the Board. Additionally, directors are expected to be willing and able to devote the necessary time, energy and attention to assure diligent performance of their responsibility.
When considering candidates for nomination, the Corporate Governance Committee takes into account these factors to assure that new directors have the highest personal and professional integrity, have demonstrated exceptional ability and judgment and will be most effective, in conjunction with other directors, in serving the long-term interest of all stockholders. The Committee will not nominate for election as a director a partner, member, managing director, executive officer or principal of any entity that provides accounting, consulting, legal, investment banking or financial advisory services to the Company.
The following material contains information concerning the nominees, including their period of service as a director, their recent employment, other directorships, including those held during the past five years with a public company or registered investment company, and age as of the 2013 Annual Meeting.
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LAMBERTO ANDREOTTI, 62 Director since April 2012 Chief Executive Officer, since May 2010, of Bristol-Myers Squibb Company, a global biopharmaceutical company. He formerly served as chief operating officer from March 2008 to May 2010, and executive vice president of Bristol-Myers Squibb and president of Worldwide Pharmaceuticals, a division of Bristol-Myers Squibb, from September 2005 until March 2008. Mr. Andreotti is also on the board of directors for Bristol-Myers Squibb (since 2009). He has also held roles with other pharmaceutical companies, including Farmitalia Carlo Erba and Pharmacia. Mr. Andreotti serves on the board of directors of PhRMA Pharmaceutical and Research Manufacturers of America. He formerly served as a Vice Chairman of Mead-Johnson Nutrition Company (2009). As Chief Executive Officer of Bristol-Myers Squibb, Mr. Andreotti has a strong track record of leading a science and technology-based corporation and offers significant insight to the Board in the areas of innovation, global business, corporate governance and investor relations. He also provides the Board with a broad perspective on human resources, finance, marketing and government relations from his experience in various senior leadership roles with Bristol-Myers Squibb. |
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RICHARD H. BROWN, 65 Director since 2001 Former chairman and chief executive officer of Electronic Data Systems Corporation, a leading global services company. Mr. Brown is Chairman of the Board of Directors of Browz Group, LC and a trustee of Command and General Staff College Foundation, Inc. He is a former member of The Business Council, The Business Roundtable, U.S.-Japan Business Council, the French-American Business Council, the President's Advisory Committee on Trade and Policy Negotiations and the President's National Security Telecommunications Advisory Committee. From his experiences as the chief executive officer and chairman of the board of several large public companies, and his role on the compensation and governance committees of others, Mr. Brown offers the Board important global insights in the areas of international business management, corporate governance, human resources, information technology and investor relations. |
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ROBERT A. BROWN, 61 Director since 2007 President of Boston University since September 2005. He previously was provost and professor of chemical engineering at the Massachusetts Institute of Technology from July 1998 through July 2005. Dr. Brown is a member of the National Academy of Sciences, the American Academy of Arts and Sciences, the National Academy of Engineering and a former member of the President's Council of Advisors on Science and Technology. He is a trustee of the University Research Association, and is a member of the Council on Competitiveness. Dr. Brown is chairman of the Academic Research Council of the Ministry of Education of the Republic of Singapore, and also serves on the Research Innovation and Enterprise Council chaired by the Prime Minister of Singapore. With his science and engineering background and from his positions at Boston University and the Massachusetts Institute of Technology, Dr. Brown provides the Board with an invaluable science and technology perspective combined with senior management capabilities. |
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BERTRAND P. COLLOMB, 70 Director since 2007 Former chairman, from 1989 to 2007, and chief executive officer, from 1989 to 2004, of Lafarge, a global manufacturer of building materials, headquartered in Paris, France. He is also a director of Total and ATCO Ltd. (both since 2000). Mr. Collomb is Chairman of the French Institute for Science and Technology (IHEST). He is founder of the Center for Management Research at the Ecole Polytechnique and a member of the Institut de France, as Chairman of the Academie des Sciences Morales et Politiques. Mr. Collomb is also a director of ClimateWorks Foundation. He is a former chairman of the World Business Council for Sustainable Development. Mr. Collomb gives the Board significant insight in the areas of global business, environmental management and corporate governance from his experience as chair and chief executive officer of Lafarge (a leader in environmental management), and his positions on other boards, including as chair of the World Business Council for Sustainable Development. Mr. Collomb also has important non-governmental organization ("NGO") experience to share with the Board from his role as chair of |
18
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CURTIS J. CRAWFORD, 65 Director since 1998 President and Chief Executive Officer, since June 2003, of XCEO, Inc., a consulting firm specializing in leadership and corporate governance, and author of three books on these subjects. He formerly served as president and chief executive officer of Onix Microsystems, Inc. Dr. Crawford is a director of Xylem Corporation (since 2011) and ON Semiconductor Corporation (since 1999). He also serves as a trustee of DePaul University. Dr. Crawford formerly served as a director of Agilysis, Inc. (2005-2008) and ITT Corporation (1996-2011). Through his senior leadership roles in the technology sector, Dr. Crawford provides the Board with expertise in the areas of information technology, research and development, finance, new business development, marketing and manufacturing. As president and chief executive officer of a consulting firm, Dr. Crawford offers unique perspectives on governance and organizational effectiveness. |
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ALEXANDER M. CUTLER, 61 Director since 2008 Chairman and Chief Executive Officer, since 2000, of Eaton, a global diversified industrial manufacturer. He formerly served as Eaton's president and chief operating officer, executive vice president and chief operating officer-Controls and executive vice president-Operations. He serves on the boards of KeyCorp (since 2000), The Electrical Manufacturers Club, The Greater Cleveland Partnership, United Way Services of Greater Cleveland, and the Musical Arts Association. He also chairs the Corporate Governance Committee of The Business Roundtable and is a member of The Business Council. As Chair and CEO of a Fortune 200 company, Mr. Cutler gives the Board a wealth of global business management, finance, investor relations and marketing experience in a multinational manufacturing company. Through his other board roles and his position as Chair of The Business Roundtable Corporate Governance Committee, Mr. Cutler also provides the Board with important insights in the areas of corporate governance and government relations. |
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ELEUTHÈRE I. DU PONT, 46 Director since 2006 President, since 2008, of the Longwood Foundation, a private foundation principally supporting charitable organizations. In 2007 and 2008, he served as senior vice president, operations and chief financial officer of drugstore.com, a leading online provider of health, beauty, vision and pharmacy products. Prior to that, Mr. du Pont served as president and chief financial officer of Wawa, Inc., a chain of food markets in the mid-Atlantic region with sales of $5 billion. From his experiences as president and chief financial officer, Mr. du Pont brings to the Board expertise on corporate governance, accounting, finance, information technology, investment management, investor relations and procurement. He also brings a unique perspective from his roles leading safety, supply chain and operations. |
19
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MARILLYN A. HEWSON, 59 Director since 2007 Chief Executive Officer and President, since January 2013, of Lockheed Martin Corporation, a leader in providing advanced technology products, services and systems integration solutions to defense, civil and commercial customers worldwide. She formerly served as president and chief operating officer of Lockheed Martin from November 2012 through December 2012, executive vice president, Electronic Systems, Lockheed Martin Corporation from January 2010 to December 2012, president, Lockheed Martin Systems Integration-Owego from September 2008 through December 2009, and executive vice president, global sustainment for Lockheed Martin Aeronautics Company from April 2007 to August 2008. Prior to that, Ms. Hewson was president, Kelly Aviation Center L.P. Ms. Hewson is also a director of Lockheed Martin Corporation (since November 2012). She is chair of the Sandia Corporation Board of Directors. Ms. Hewson also serves on the Association of the United States Army Council of Trustees and the University of Alabama's Culverhouse College of Commerce and Business Administration Board of Visitors. Through experiences gained in senior leadership roles at Lockheed Martin, Ms. Hewson provides to the Board broad insight and knowledge on global business management, human resources, finance, supply chain, leveraged services, internal audit and government contracting. In addition, Ms. Hewson offers expertise in government relations. |
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LOIS D. JULIBER, 64 Director since 1995 Retired vice chairman, a position she held from July 2004 to March 2005, of Colgate-Palmolive Company, the principal business of which is the production and marketing of consumer products. Ms. Juliber was chief operating officer of Colgate-Palmolive from 2000 to 2004. She formerly served as executive vice president-Developed Markets, president, Colgate-Palmolive North America and chief technological officer of Colgate-Palmolive. Ms. Juliber is a director of Mondelez International, formerly Kraft Foods Inc. (since 2007). She also serves as Chairman of the MasterCard Foundation and is a Trustee Emeritae of Wellesley College. Ms. Juliber formerly served as a director of Goldman Sachs (2004-2012). Ms. Juliber brings deep and broad global advertising, consulting, finance, human resources, management, consumer products marketing and new business development expertise to the Board from her roles as vice-chair, chief operating officer and chief technological officer at Colgate-Palmolive. In addition, Ms. Juliber provides important audit and governance knowledge from her experiences at Colgate-Palmolive, and her service on the boards of other multinational corporations and nonprofit organizations. |
20
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ELLEN J. KULLMAN, 57 Director since 2008 Chair, since January 2010, and Chief Executive Officer of DuPont since January 2009. Mrs. Kullman served as president of DuPont from October 2008 to December 2008. From June 2006 through September 2008, she served as executive vice president. Prior to that, Mrs. Kullman was group vice president-DuPont Safety & Protection. She is a member of the US-China Business Council, the US-India CEO Forum, and the executive committee of the Business Council. Mrs. Kullman also chairs the executive committee of SCI-America. She is also a member of the board of directors of Catalyst and the board of directors of Change the Equation. She is co-chair of the National Academy of Engineering Committee on Changing the Conversation: From Research to Action. Mrs. Kullman is a director of United Technologies Corporation (since 2011). She is a member of the board of trustees of Tufts University and serves on the board of overseers at Tufts University School of Engineering. Mrs. Kullman formerly served as a director of General Motors Company (2004-2008). As Chief Executive Officer of the Company, Mrs. Kullman is best suited to ensure that critical business issues are brought before the Board, enhancing the Board's ability to consider, evaluate and maintain oversight over business strategies and the Company's risk management efforts. The Board believes that the Company is typically best served by combining the role of Chair and Chief Executive Officer. For a discussion of the Board's leadership structure, refer to page 10 of this Proxy Statement. |
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LEE M. THOMAS, 68 Director since 2011 Retired chairman (June 2007-March 2012) and chief executive officer (March 2007-January 2012), of Rayonier Inc., a global forest products company. He was also president of Rayonier from June 2006 through August 2010. Previously, Mr. Thomas was president and chief operating officer of Georgia-Pacific Corp. Prior to joining Georgia-Pacific, he was chairman/CEO of Law Companies Environmental Group Inc., and administrator of the U.S. Environmental Protection Agency. Mr. Thomas also serves on the boards of Airgas Inc. (since 1998), the Regal Entertainment Group (since 2006) and the World Resources Institute. From his experiences as president/CEO of two public companies, Mr. Thomas provides the Board with a deep understanding of corporate governance, finance, global business and investor relations. He also offers the Board key insights on government relations and environmental management from his tenure as administrator of the Environmental Protection Agency and his senior leadership roles. He brings to the Board valuable organizational management skills through his experiences as an independent consultant and as CEO of a consulting firm. |
21
Set forth below is certain information, as of December 31, 2012, concerning beneficial owners known to DuPont of more than five percent of DuPont's outstanding Common Stock:
Name and Address of Beneficial Owner |
Number of Shares Beneficially Owned |
Percent of Shares Outstanding |
|||||
---|---|---|---|---|---|---|---|
Blackrock, Inc. 40 East 52nd Street New York, NY 10022 |
59,317,304(1) | 6.36(1) | |||||
The following table includes shares of DuPont Common Stock beneficially owned by each director and nominee, by each executive officer named in the 2012 Summary Compensation Table on page 38 of this Proxy Statement and by all directors and executive officers as a group as of December 31, 2012. Under rules of the Securities and Exchange Commission, "beneficial ownership" includes shares for which the individual, directly or indirectly, has or shares voting or investment power, whether or not the shares are held for the individual's benefit.
|
Amount and Nature of Beneficial Ownership (Number of Shares) |
|
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name |
Direct(1) |
Indirect(2) |
Right to Acquire(3) |
Percent of Class(4) |
|||||||||
L. Andreotti |
0 | 0 | 2,251 | ||||||||||
J. C. Borel |
75,882 | 12,000 | 456,341 | ||||||||||
R. H. Brown |
0 | 0 | 41,388 | ||||||||||
R. A. Brown |
0 | 110 | 17,290 | ||||||||||
B. P. Collomb |
9,751 | 0 | 10,645 | ||||||||||
T. M. Connelly, Jr. |
43,570 | 27,973 | 644,259 | ||||||||||
C. J. Crawford |
150 | 235 | 39,506 | ||||||||||
A. M. Cutler |
5,000 | 0 | 30,481 | ||||||||||
E. I. du Pont |
769 | 1,361 | 17,290 | ||||||||||
N. C. Fanandakis |
48,105 | 0 | 200,160 | ||||||||||
M. A. Hewson |
2,000 | 0 | 27,537 | ||||||||||
L. D. Juliber |
0 | 600 | 55,188 | ||||||||||
E. J. Kullman |
300,107 | 8,740 | 1,576,180 | ||||||||||
L. M. Thomas |
6,254 | 2,000 | 2,609 | ||||||||||
M. P. Vergnano |
68,869 | 0 | 323,118 | ||||||||||
Directors and Executive Officers as a Group |
596,844 | 53,430 | 3,554,229 | 0.44% | |||||||||
22
Section 16(a) Beneficial Ownership Reporting Compliance
Directors and executive officers are required to file reports of ownership and changes in ownership of DuPont Common Stock with the Securities and Exchange Commission. In 2012, two reports for B. P. Collomb covering one transaction each were filed late because of administrative error.
Compensation Committee Interlocks and Insider Participation
No individual who served on the Compensation Committee in 2012 was at any time during the year an officer or employee of DuPont or any of the Company's subsidiaries nor was any such person a former officer of DuPont or any of the Company's subsidiaries. No individual who served on the Compensation Committee in 2012 had any relationship requiring disclosure under the Securities and Exchange Commission's rules for disclosure of related party transactions. In addition, no member of the Board of Directors is an executive officer of another entity at which one of the Company's executive officers serves on the board of directors.
The Compensation Committee of the Board of Directors has reviewed the Compensation Discussion and Analysis ("CD&A") section included in this Proxy Statement.
The Compensation Committee has also reviewed and discussed the CD&A with management.
Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the CD&A be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 and in this Proxy Statement.
The members of the Compensation Committee of the Board of Directors have provided this report.
COMPENSATION COMMITTEE
Lois
D. Juliber, Chair
Richard H. Brown
Curtis J. Crawford
Alexander M. Cutler
Marillyn A. Hewson
23
Compensation Discussion and Analysis (CD&A)
Executive Compensation Philosophy and Core Principles
DuPont (referred to throughout this CD&A as "Company", "we" or "our") is a science company. We work collaboratively to find sustainable, innovative, market-driven solutions to solve some of the world's biggest challenges, making lives better, safer, and healthier for people everywhere. The executive compensation programs at DuPont are designed to attract, motivate, reward and retain the high quality executives necessary for Company leadership and accomplishment of our strategies. The following principles guide the design and administration of those compensation programs:
In 2012, we continued to transform our business profile as we experienced challenging market conditions in a few of our businesses.
24
Summary of 2012 Compensation Actions
Pay actions for our Named Executive Officers ("NEOs") in 2012 reflected our Company performance.
2012 Short-Term Performance and Incentive Compensation
|
Revenue growth was 3%;
Earnings per Share ("EPS") growth was negative 6%; TSR was 1.8%. Our performance resulted in a 27
point decrease in the NEO average short-term (annual) incentive payout factor (113% of target in 2011 to 86% of target in 2012). Short-term (annual) incentive awards for NEOs averaged 86% of target and aligned with our overall performance as illustrated in the chart. |
Long-Term Performance and Incentive Compensation
|
Performance-based restricted
stock units ("PSUs") for the 2010 to 2012 performance period were paid out at 200 percent of target and reflected strong performance in three-year revenue growth and three-year TSR relative to our Peer Group. 33% revenue growth vs. 14% Peer
Group median, or 89th percentile rank 50% TSR vs. 25% Peer Group
median, or 89th percentile rank Top quartile performance in TSR and Revenue Growth over the three-year performance period resulted in a payout at 200% of target. |
25
Individual Performance
Each year, the full Board conducts a review of the Chief Executive Officer's performance. In addition, the Chief Executive Officer ("CEO") provides the Compensation Committee ("Committee") with an assessment of performance for each of the NEOs. In addition to the financial performance and overall company performance mentioned on the prior pages, the assessment of individual performance takes into account a number of quantitative and qualitative factors such as attainment of key strategic growth goals, specific revenue and earnings goals for each business, achievement of fixed cost reduction targets, and successful acquisitions/divestitures and integration efforts. In assessing each NEO's individual performance for 2012, the Board and Committee considered the following:
26
Total 2012 NEO Compensation
The Company and individual performance outlined above resulted in total NEO compensation for 2012 as shown in the table that follows. This table is not intended to be a substitute for the Summary Compensation Table ("SCT") or Grants of Plan-Based Awards Table ("GPBAT"). Base salary is shown as of December 31, 2012. Short-term Incentive program ("STIP") awards and Long-term Incentive ("LTI") awards for 2012 are reflected in the SCT and GPBAT. The value of LTI awards reflected in this table differs from the value of equity awards shown in the SCT and GPBAT because those tables reflect the probable outcome of the performance conditions for PSUs. The LTI amounts shown in this table value PSUs at the closing price of DuPont Common Stock on the date of grant, and reflect the value the Committee considered when making LTI awards for 2012.
Name |
2012 Base Salary |
2012 Final STIP |
2012 LTI |
Total Direct Compensation |
2012 TDC % vs 2011 TDC |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
E. J. Kullman |
$ | 1,400,000 | $ | 1,915,000 | $ | 8,500,000 | $ | 11,815,000 | 4% | |||||||
N. C. Fanandakis |
673,000 | 522,000 | 1,694,000 | * | 2,889,000 | 0% | ||||||||||
T. M. Connelly, Jr. |
776,000 | 617,000 | 1,966,500 | 3,359,500 | -2% | |||||||||||
M. P. Vergnano |
675,000 | 498,000 | 1,778,700 | 2,951,700 | 2% | |||||||||||
J. C. Borel |
677,500 | 510,000 | 1,694,000 | 2,881,500 | -1% | |||||||||||
TOTAL |
4,201,500 | 4,062,000 | 15,633,200 | 23,896,700 | ||||||||||||
Consideration of Say on Pay Results
Last year, our shareholders were given the opportunity to participate in an advisory, or non-binding, vote on the compensation of our NEOs, as disclosed in the proxy statement. More than 95% of shareholders approved the compensation of our NEOs. In consideration of the overwhelming support expressed by shareholders, the Committee felt that no fundamental changes to our executive compensation programs were necessary. However, in its ongoing efforts to improve transparency and strengthen the link between pay and performance, the Committee made the following incremental design improvements to our executive compensation programs for 2013:
Determining Executive Compensation
An important aspect of the Compensation Committee's annual work relates to the determination of compensation for the Company's NEOs and other Section 16 officers. The NEOs are the Company's Chair and CEO, Chief Financial Officer and the three other most highly compensated executive officers.
In 2012, the Committee retained Frederic W. Cook & Co., Inc. ("Cook") to serve as an independent compensation consultant to the Committee on executive compensation matters. Cook performs work at the direction and under the supervision of the Committee, and provides no services to DuPont other than those for the Committee.
27
Summarized in the table below are responsibilities for executive compensation.
Compensation Committee |
Determines executive compensation philosophy |
|
|
Approves incentive compensation programs and target STIP and PSU performance expectations |
|
|
Approves all compensation actions for the executive officers, other than the CEO, including base salary, target and actual STIP, equity grants, and target and actual PSU awards |
|
|
Recommends to the full Board pay actions for the CEO, including base salary, target and actual STIP, equity grant, and target and actual PSU award |
|
Independent Board Members |
Assess performance of the CEO |
|
|
Approve all compensation actions for the CEO including base salary, target and actual STIP, equity grant, and target and actual PSU award |
|
Committee Consultant Cook |
Provides advice, research and analytical services on a variety of subjects, including compensation of executive officers, nonemployee director compensation, and executive compensation trends |
|
|
Participates in meetings as requested and communicates with the Chair of the Committee between meetings |
|
CEO |
Provides a performance assessment of the executive officers |
|
|
Recommends compensation targets and actual awards for the executive officers |
|
|
Recommends performance targets for the STIP and PSU programs |
|
In addition to Company and individual performance, the Committee considers a broad number of facts and circumstances in finalizing executive officer pay decisions, including competitive analysis, pay equity multiples, and tally sheets.
Competitive Analysis
To ensure a complete and robust picture of the overall compensation environment and consistent comparisons for the CEO and other NEOs, compensation is assessed primarily against published compensation surveys that represent large companies with median revenue comparable to DuPont's ("Market"), including surveys by Towers Watson, Mercer and Aon Hewitt.
We also use a select group of peer companies ("Peer Group") to:
Because of the smaller number of companies, we periodically find volatility in Peer Group compensation levels year over year. Therefore, we use Market survey information as the primary source of competitive data. Peer Group compensation data is used only for the CEO and only as a secondary data point as described above.
The Peer Group reflects the diverse industries in which we operate, represents the multiple markets in which we compete including markets for executive talent, customers and capital and is comprised of large U.S. and European companies with a strong scientific focus and/or research intensity and a significant international presence.
To help guide the selection process in an objective manner, the Committee established the following criteria for Peer Group companies:
28
The 2012 Peer Group consists of the following companies:
3M Company Air Products & Chemicals, Inc. Baxter International Inc. The Boeing Company Caterpillar Inc. Dow Chemical Company |
Emerson Electric Co. Honeywell International Inc. Ingersoll-Rand plc Johnson & Johnson Johnson Controls, Inc. Kimberly-Clark Corporation |
Merck & Co., Inc. Monsanto Company The Procter & Gamble Company Syngenta AG United Technologies Corporation |
Pay Equity Multiple
The Committee has a long-standing practice of comparing CEO pay to that of other executives. To ensure that NEOs are paid appropriately relative to each other and that we manage the pay differential between the CEO and the other NEOs, we apply a pay equity multiple to average target total cash compensation ("TCC" equals base salary plus STIP awards) and average target total direct compensation ("TDC" equals TCC plus LTI).
The 2012 pay equity multiples were as follows:
Element (Pay Equity Multiple Range) |
2012 |
|||
---|---|---|---|---|
TCC (2 - 3 times NEO) |
2.7 | |||
TDC (3 - 4 times NEO) |
3.2 |
|||
Tally Sheets
Annually, the Committee reviews tally sheets for each NEO that include all aspects of total compensation and the benefits associated with various termination scenarios. Tally sheets, which provide the Committee with information on all elements of actual and potential future compensation of the NEOs, as well as data on wealth accumulation, helped the Committee confirm that there were no unintended consequences of its actions.
Executive Compensation Overview
Components of the Executive Compensation Program
Our executive compensation program consists of the following components:
Compensation Element |
Overview/Objectives |
Market Targeting |
||
---|---|---|---|---|
Base salary |
Foundation of compensation program |
Market Median (Survey) | ||
|
Provides regular source of income for NEOs |
|||
STIP awards |
Align participants with annual goals and objectives |
Market Median | ||
|
Create a direct link to annual financial and operational performance |
|||
|
Actual payout fluctuates with Company performance | |||
LTI awards |
Link pay and performance accelerate growth and balance this growth with productivity, profitability, and capital management |
Market Median | ||
|
Align the interests of executives with stockholders |
Actual value realized | ||
|
Balance plan costs, such as accounting and dilution, with employee-perceived value, potential wealth creation opportunity and employee share ownership expectations |
fluctuates with Company performance | ||
29
Compensation Element |
Overview/Objectives |
Market Targeting |
||
---|---|---|---|---|
Benefits |
Standard range of tax-qualified retirement, medical, dental, vacation benefit, life insurance and disability plans provided to other employees |
Peer Group Median | ||
|
Nonqualified retirement plans that restore those benefits that cannot be paid as a result of Internal Revenue Code ("IRC") limits applicable to tax-qualified retirement plans |
Market Median | ||
|
Nonqualified deferred compensation plan that allows for deferral of base salary, STIP and LTI awards |
|||
Limited perquisites |
Very limited perquisites or personal benefits |
|||
|
Personal financial counseling (excluding tax preparation) at a cost of generally less than $10,000 per NEO |
|||
|
The CEO travels on Company aircraft for business and personal travel. Commercial travel is permitted when security risk is considered minimal and such travel is approved by the Office of the Director of Corporate Security. |
|||
Programs NOT |
Because they do not support our guiding principles we do NOT offer the following: |
|||
offered |
Employment agreements |
|||
|
Severance agreements, other than with respect to agreements of limited duration with newly hired executives where there is demonstrated business need |
|||
|
Change in Control agreements |
|||
|
Tax gross-up on benefits and perquisites other than relocation benefits (except for change in control provisions in our Equity and Incentive Plan, we do not have change in control agreements and, therefore, have no need for tax gross-ups related to Internal Revenue Code Section 280G.) |
|||
|
Supplemental executive retirement benefits |
|||
|
Plans that allow for granting additional years of service or plans that include LTI in the pension calculation |
|||
|
Repricing of stock options or repurchases of underwater stock options for cash |
|||
Mix of Pay
To reinforce our pay for performance philosophy, more than two-thirds of targeted TDC is contingent upon performance and, therefore, fluctuates with our financial results and share price. We believe this approach motivates executives to consider the impact of their decisions on stockholder value.
To mitigate the possible risk inherent in the greater focus on LTI, executives receive an equal mix, by fair value on the grant date, of stock options (rewards for stock price appreciation and direct link to stockholder experience), RSUs (intended as retention tool and linked to stock price) and PSUs (rewards key financial performance relative to the Peer Group in revenue growth and TSR). Overlapping performance cycles in the PSU program assure sustainability of performance.
2012 Target Compensation Mix and "Pay at Risk"
30
Base Salary
In setting 2012 NEO salaries, the Committee took a wide range of facts and circumstances into consideration, including a corporate budget of 3% for 2012, business results, Market competitiveness, Peer Group competitiveness (CEO only), internal relationships, tally sheets and individual performance. Merit increases were effective March 1, 2012. The table below depicts the base salary rate as of December 31. This information is different from the base salary provided in the SCT, which reflects the total base pay received for the year.
Name |
2011 Base Salary |
2012 Base Salary |
Change in Base Salary |
Primary Rationale |
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|
E. J. Kullman |
$ | 1,339,000 | $ | 1,400,000 | 4.6% | Market Adjustment |
|||||
|
Targeted at the Market median |
||||||||||
|
Effective March 1, 2013, 3.0% increase to $1,442,000. |
||||||||||
N. C. Fanandakis |
623,200 | 673,000 | 8.0% | Market adjustment |
|||||||
T. M. Connelly, Jr. |
753,300 | 776,000 | 3.0% | Standard merit increase |
|||||||
M. P. Vergnano |
636,600 | 675,000 | 6.0% | Market adjustment |
|||||||
J. C. Borel |
657,800 | 677,500 | 3.0% | Standard merit increase |
|||||||
Annual Short-Term Incentives
Our annual incentive plan design ensures that our executives maintain a strong focus on those financial metrics (e.g., revenue growth and earnings growth) that have been shown to be closely linked to shareholder value creation over time. For 2012, STIP awards were determined based on the following formula, measures and weightings. The Committee approves these factors at the beginning of each fiscal year. Each element is discussed in greater detail below.
1. Target STIP
Our STIP targets are set as a percent of the midpoint of each level in our salary structure. Employees, including our NEOs, are assigned to a level, taking into consideration a position's Market value, the internal value the Company places on that position and individual circumstances, such as experience. The target STIP percent for each level is reviewed regularly against Market and approved annually by the Committee (or in the case of the CEO, by the Board). The actual calculation of the 2012 Target STIP amount for Mrs. Kullman and the other NEOs is detailed in the table below.
Name |
2012 DuPont Level Midpoint |
* |
2012 Target STIP % |
= |
2012 Target STIP $ |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
E. J. Kullman |
$ | 1,609,045 | 140 | % | $ | 2,252,663 | ||||||||||
N. C. Fanandakis |
658,410 | 90 | % | 592,569 | ||||||||||||
T. M. Connelly, Jr. |
763,625 | 95 | % | 725,444 | ||||||||||||
M. P. Vergnano |
658,410 | 90 | % | 592,569 | ||||||||||||
J. C. Borel |
658,410 | 90 | % | 592,569 | ||||||||||||
31
2. STIP Payout Factor
The weighted average payout factor for the STIP is determined based on actual performance on each measure and the weighting of that performance measure.
Performance Measures
Metric | Weighting | Rationale for Use | ||||||||||||||
Corporate Performance |
Earnings per Share (EPS) [EPS excluding significant items compared to prior year's performance] |
20% |
Most effective and common metric in measuring stockholder value Closely aligns stockholder and executive interests Provides insight with respect to ongoing operating results |
|||||||||||||
Business Unit Performance Because NEOs work across all businesses, their payout factor is based on the total business unit performance versus aggregate targets in the four categories shown to the right. |
1. After Tax Operating Income (ATOI) [Business unit ATOI (excluding significant items) versus budget for the year] |
15% |
Measures profitability at the business unit level leading to corporate EPS results |
|||||||||||||
Payout factors are determined separately for each business and measured based on the business' performance versus budget for the year. |
2. Revenue [Business unit revenue versus budget for the year] |
15% |
Reflects top line growth critical to Company success |
|||||||||||||
3. Cash Flow from Operations (CFFO) [Business unit CFFO versus budget for the year] |
20% |
Measures our ability to translate earnings to cash, indicating the health of our business and allowing the Company to invest for the future |
||||||||||||||
4. Dynamic Planning Factor [Business units are assessed, both qualitatively and quantitatively, on a number of items, such as external factors, currency fluctuations, raw material fluctuations and core values.] |
10% |
Assesses how well a
business unit anticipates and responds to the business environment in a way that creates value for the Company Assures that our plan payouts are relevant to the current business strategy and recognizes the external economic environment |
||||||||||||||
Individual Performance | Individual Performance Assessment [Based on the executive's performance versus personal, predetermined critical operating tasks or objectives, e. g. attainment of key strategic growth goals, specific revenue and earnings goals, achievement of fixed cost reduction targets, and successful acquisitions/divestitures and integration efforts] |
20% |
Takes individual performance into consideration in finalizing STIP payout factors |
32
2012 STIP Performance and Payout Factors
Corporate and business unit performance are converted to a corresponding payout factor based on the concept of "leverage", i.e., the relationship between performance for a given metric and its payout factor. For example, ATOI and CFFO leverage is 2:1 below target and 3:1 above target. Thus, participants are deducted two percentage points in payout for each one percent change in performance below target, and receive three percentage points in payout for each one percent change in performance above target.
For 2013, the leverage in our plan was revised to be more consistent with competitive practice.
Total Company |
Actual vs. Target % |
Payout Factor % |
* |
Weight |
= |
Payout Factor % (Weighted) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate Performance |
94% | 94% | 20 | % | 19% | ||||||||
Business Unit Performance |
78% | 78% | 60 | % | 47% | ||||||||
Individual Performance |
90 - 110% | 90 - 110% | 20 | % | 18% - 22% | ||||||||
Overall Payout Factor |
84% - 88% | ||||||||||||
3. Final STIP Payout
As illustrated in the table below, the final 2012 STIP is determined by multiplying the target STIP amount by the final total payout factor.
Name |
2012 Target STIP $ |
* |
TOTAL Payout Factor % |
= |
2012 Final STIP $ |
2011 Final STIP $ |
% Difference |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
E. J. Kullman |
$ | 2,252,663 | 85 | % | $ | 1,915,000 | $ | 2,509,000 | -24 | % | ||||||||||
N. C. Fanandakis |
592,569 | 88 | % | 522,000 | 660,000 | -21 | % | |||||||||||||
T. M. Connelly, Jr. |
725,444 | 85 | % | 617,000 | 787,000 | -22 | % | |||||||||||||
M. P. Vergnano |
592,569 | 84 | % | 498,000 | 649,000 | -23 | % | |||||||||||||
J. C. Borel |
592,569 | 86 | % | 510,000 | 660,000 | -23 | % | |||||||||||||
2012 STIP awards to Section 16 officers are limited to 0.25% of adjusted net income for the CEO and 0.15% for other Section 16 officers.
LTI
In 2012, our LTI program for NEOs consisted of an equal mix, by fair value on the grant date, of stock options, PSUs and RSUs. For 2013, the Committee revised the mix to 40% PSUs, 30% stock options and 30% RSUs.
33
This shift reinforces our emphasis on pay-for performance. The following table summarizes the performance drivers, mix and objectives for the various LTI components as they relate to NEOs:
|
PSUs |
Stock Options |
RSUs |
|||
---|---|---|---|---|---|---|
2012 LTI Mix | 331/3% |
331/3% |
331/3% |
|||
2013 LTI Mix |
40% |
30% |
30% |
|||
Performance Drivers |
TSR (relative to Peer Group) Revenue growth (intermediate-term) (relative to Peer Group) |
Stock price appreciation (longer-term) |
Stock price appreciation (intermediate-term) |
|||
Objectives |
Focus on business priorities such as revenue growth and TSR, which are obtained through balanced growth, profitability and capital management over a three-year period Stockholder alignment |
Stockholder alignment Link to long-term business objectives Stock ownership Lead/support business strategy Retention |
Stock ownership Capital accumulation Retention |
|||
Program Design |
At the conclusion of the performance cycle, payouts can range from 0% to 200% of the target grant based on pre-established, performance-based corporate objectives. For awards granted in 2012, those objectives are revenue growth and TSR (both on a relative basis versus the Peer Group) over the three-year performance period. PSUs are based on a three-year performance cycle and are awarded annually to each NEO at the beginning of the cycle. |
Options vest in one-third increments over three years. Starting in 2009, options carry a term of seven years. Nonqualified stock option grants are made annually at the closing price on the date of grant. We do not reprice stock options. A reload feature is available for options granted from 1997 through 2003. Effective with options granted in 2004, option grants do not include a reload feature and we do not intend to add this feature in the future. |
RSUs vest in one-third increments over a three-year period. RSUs are typically granted annually. |
|||
2012 LTI Awards
Annual awards to employees, including NEOs, are made at a pre-established Committee meeting in early February. This allows sufficient time for the market to absorb announcement of annual earnings, which is typically made during the fourth week of January. We do not time equity awards in coordination with the release of material nonpublic information. The grant price is the closing price on the date of grant.
Any occasional special awards to employees who are not executive officers are approved by the Special Stock Performance Committee (consisting of the Chairs of the Board and the Compensation Committee), to which the Board of Directors has delegated the authority to approve special equity grants. Awards are effective on the date of approval by the Special Stock Performance Committee.
34
Each year the Committee establishes target LTI values based on a number of factors including Market, internal equity, and cost. For 2012, the Committee increased LTI targets to be more in line with competitive Market levels.
Name |
2012 LTI Grant Date Fair Value* |
|||
---|---|---|---|---|
E. J. Kullman |
$ | 8,500,000 | ||
N. C. Fanandakis** |
1,694,000 | |||
T. M. Connelly, Jr. |
1,966,500 | |||
M. P. Vergnano |
1,778,700 | |||
J. C. Borel |
1,694,000 | |||
PSUs Granted in 2012
The actual number of shares earned for the PSUs granted in 2012 will be based on DuPont's revenue growth and TSR relative to the Peer Group for 2012 through 2014, as shown in the table below.
Performance Targets (2012 - 2014 Performance Period)
Revenue Growth Payout % × Target Award × 50% |
+ |
TSR Payout % × Target Award × 50% |
= |
Final Award |
DuPont Revenue Growth or TSR Relative to the Peer Group |
% of Target Shares Earned (Payout %) |
|||
---|---|---|---|---|
Below 25th percentile* | 0% | |||
At 25th percentile* | 25% | |||
At 50th percentile* | 100% | |||
At or above 75th percentile* | 200% | |||
2009-2011 PSU Program (payable in 2012)
The performance period for PSUs awarded in 2009 ended on December 31, 2011. The final number of shares earned was based on revenue growth and TSR relative to the Peer Group over the three-year performance period. The final payout determination was made in March of 2012 after a review of the Company's and Peer Groups' performance. Revenue growth and TSR were comparable to the 94th and 89th percentiles of the Peer Group, respectively. This resulted in an overall payout of 200%.
|
Performance |
Payout % |
||||
---|---|---|---|---|---|---|
Revenue Growth |
94th percentile rank vs. Peer Group | 200% | ||||
TSR |
89th percentile rank vs. Peer Group |
200% |
||||
|
Final Payout Percent (Average) | 200% | ||||
Further details are provided in the 2012 Option Exercises and Stock Vested table.
35
2010-2012 PSU Program (payable in 2013)
The performance period for PSUs awarded in 2010 ended on December 31, 2012. The final number of shares earned was based on revenue growth and TSR relative to the Peer Group over the three-year performance period. The final payout determination was made in March of 2013 after a review of the Company's and Peer Groups' performance. Revenue growth and TSR were comparable to the 89th and 89th percentiles of the Peer Group, respectively. This resulted in an overall payout of 200%.
|
Performance |
Payout % |
||||
---|---|---|---|---|---|---|
Revenue Growth |
89th percentile rank vs. Peer Group | 200% | ||||
TSR |
89th percentile rank vs. Peer Group |
200% |
||||
|
Final Payout Percent (Average) | 200% | ||||
Further details are provided in the 2012 Option Exercises and Stock Vested table. Maximum units and year-end values for PSUs awarded in 2010 through 2012 are included in the Outstanding Equity Awards table.
Deductibility of Performance-Based Compensation
IRC Section 162(m) generally precludes a public corporation from taking a deduction for compensation in excess of $1,000,000 for its CEO or any of its three other highest-paid executive officers (other than the CEO or Chief Financial Officer), unless certain specific and detailed criteria are satisfied. This limitation does not apply to qualified performance-based compensation.
The Company reviews all compensation programs and payments to determine the tax impact on the Company as well as on the executive officers. In addition, the Company reviews the impact of its programs against other considerations, such as accounting impact, stockholder alignment, market competitiveness, effectiveness and perceived value to employees. Because many different factors influence a well-rounded, comprehensive executive compensation program, some compensation may not be deductible under IRC Section 162(m).
The shareholder-approved Equity and Incentive Plan ("EIP") is designed to allow the Company to issue awards that qualify as performance-based compensation under IRC Section 162(m).
The Company will continue to monitor developments and assess alternatives for preserving the deductibility of compensation payments and benefits to the extent reasonably practicable, consistent with its compensation policies and as determined to be in the best interests of DuPont and its stockholders.
The Committee regularly monitors the Company's compensation programs to assess whether those programs are motivating the desired behaviors while driving the Company's performance and encouraging the appropriate level of risk-taking. In 2012, the Committee asked Frederic W. Cook & Co., Inc. ("Cook") to test whether the Company's compensation programs encourage the appropriate levels of risk-taking given the Company's risk profile. Cook's review encompassed an assessment of risk pertaining to a broad range of design elements, such as mix of pay, performance metrics, goal setting and payout curves, payment timing and adjustments, as well as mitigating program attributes. Cook's analysis found that our compensation programs do not encourage behaviors that would create material risk for DuPont.
Other Mitigating Factors
Payout limitations or "caps" play a vital role in risk mitigation and all metrics in the STIP and PSU programs are capped at 200% payout to protect against excessive payouts. Our performance/payout leverage is slightly less than competitive practice, reflecting our risk profile as a Company, and our rigor in setting performance targets. Clawback provisions, stock ownership guidelines and insider trading policies that
36
prohibit executives from entering into derivative transactions also protect against excessive risk in the Company's incentive programs.
The Company requires that NEOs accumulate and hold shares of DuPont Common Stock with a value equal to a specified multiple of base pay.
In 2012, the Committee updated its stock ownership guidelines to add a retention ratio until the ownership expectation is met. Under the new policy, until the required ownership is reached, executives are required to retain 75% of net shares acquired upon any future vesting of stock units and/or exercise of stock options, after deducting shares used to pay applicable taxes and/or exercise price.
In addition, the Committee increased the CEO multiple from five times to six times base salary.
The multiples for specific executive levels are shown below. Each NEO exceeds the ownership goal.
Multiple of Salary |
2012 Target |
2012 Actual |
|||||
---|---|---|---|---|---|---|---|
CEO |
6x | 14x | |||||
Other NEOs average |
4x | 9x | |||||
DuPont Common Stock may be held in various forms to achieve the applicable ownership guidelines, including: direct ownership, shares and stock units held in employee plans. Stock options and PSUs are not included in determining whether an executive has achieved the ownership levels.
Compensation Recovery Policy (Clawbacks)
The Company has a compensation recovery policy that covers each current and former employee of DuPont or an affiliated company who is or was, as the case may be, the recipient of incentive-based compensation ("Grantee"). If a Grantee engages in misconduct: (i) he/she forfeits any right to receive any future awards or other equity-based incentive compensation; and (ii) the Company may demand repayment of any awards or cash payments already received by a Grantee, including without limitation repayment due to making retroactive adjustments to any awards or cash payments already received by a Grantee, where such award or cash payment was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement as a result of misconduct by the Grantee. The Grantee will be required to provide repayment within ten (10) days following such demand.
"Misconduct" means (i) Grantee's employment or service is terminated for cause, or (ii) the breach of a noncompete or confidentiality covenant set out in the employment agreement, or (iii) the Company has been required to prepare an accounting restatement due to material noncompliance, as a result of fraud or misconduct, with any financial reporting requirement under the securities laws, and the Compensation Committee has determined in its sole discretion, that the Grantee: (A) had knowledge of the material noncompliance or the circumstances that gave rise to such noncompliance and failed to take reasonable steps to bring it to the attention of appropriate individuals within the Company; or (B) personally and knowingly engaged in practices which materially contributed to the circumstances that enabled a material noncompliance to occur.
Awards granted prior to March 2, 2011, are subject to the clawback provisions that were in effect at the time of the grant, as disclosed in prior years' proxy statements.
37
Compensation of Executive Officers
2012 SUMMARY COMPENSATION TABLE
The following table summarizes the compensation of the Named Executive Officers ("NEOs") for the fiscal year ending December 31, 2012. The NEOs are: (i) the Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"); and (ii) the three other most highly compensated executive officers ranked by their total compensation (reduced by the amount of change in pension value and nonqualified deferred compensation earnings) in the 2012 Summary Compensation Table.
Name and Principal Position |
Year |
Salary(1) |
Stock Awards(2) |
Option Awards(3) |
Non-equity Incentive Plan Compensation(4) |
Change in Pension Value and Non-qualified Deferred Compensation Earnings(5) |
All Other Compensation(6) |
Total ($) |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
E. J. Kullman |
2012 | $ | 1,389,833 | $ | 6,158,897 | $ | 2,833,336 | $ | 1,915,000 | $ | 2,932,277 | $ | 433,374 | $ | 15,662,717 | ||||||||||
Chair & |
2011 | 1,332,500 | 5,491,916 | 2,500,011 | 2,509,000 | 3,629,023 | 464,181 | 15,926,631 | |||||||||||||||||
Chief Executive Officer |
2010 | 1,300,000 | 4,701,135 | 2,166,667 | 2,846,000 | 3,475,658 | 307,514 | 14,796,974 | |||||||||||||||||
N. C. Fanandakis |
2012 |
664,700 |
3,816,525 |
564,673 |
522,000 |
1,689,291 |
119,223 |
7,376,412 |
|||||||||||||||||
Executive Vice President & |
2011 | 613,750 | 1,171,689 | 533,345 | 660,000 | 1,590,028 | 127,868 | 4,696,680 | |||||||||||||||||
Chief Financial Officer |
2010 | 533,958 | 694,386 | 320,004 | 807,000 | 1,482,123 | 84,460 | 3,921,931 | |||||||||||||||||
T. M. Connelly, Jr. |
2012 |
772,217 |
1,424,947 |
655,510 |
617,000 |
1,059,224 |
140,330 |
4,669,228 |
|||||||||||||||||
Executive Vice President & |
2011 | 749,633 | 1,391,289 | 633,334 | 787,000 | 725,907 | 156,297 | 4,443,460 | |||||||||||||||||
Chief Innovation Officer |
2010 | 727,750 | 1,099,349 | 506,667 | 987,000 | 1,115,992 | 119,768 | 4,556,526 | |||||||||||||||||
M. P. Vergnano |
2012 |
668,600 |
1,288,868 |
592,912 |
498,000 |
1,294,045 |
118,584 |
4,461,009 |
|||||||||||||||||
Executive Vice President |
|||||||||||||||||||||||||
J. C. Borel |
2012 |
674,217 |
1,227,525 |
564,673 |
510,000 |
1,395,403 |
130,375 |
4,502,193 |
|||||||||||||||||
Executive Vice President |
2011 | 654,600 | 1,171,689 | 533,345 | 660,000 | 1,222,242 | 131,544 | 4,373,420 | |||||||||||||||||
|
2010 | 635,500 | 925,825 | 426,669 | 807,000 | 1,229,722 | 101,475 | 4,126,191 | |||||||||||||||||
38
for Mrs. Kullman and financial counseling for Mr. Borel. For a detailed discussion of the items and amounts reported in this column, including a discussion of how the value of personal use of Company aircraft is calculated, refer to the "All Other Compensation" section of the narrative discussion following this footnote.
Narrative Discussion of Summary Compensation Table
Amounts shown in the "Salary" column of the table above represent base salary earned during 2012. Base salary rate changes for all NEOs are effective March 1. Base salary for 2012 represented 11% of total direct compensation (base salary, STIP awards and long-term incentive ("LTI") awards) for the CEO and, on average, 18% of total direct compensation for the other NEOs, which is consistent with the Compensation Committee's goal of placing emphasis on "at risk" compensation.
Amounts shown in the "Stock Awards" column of the table above represent the aggregate grant date fair value of RSUs and PSUs computed in accordance with FASB ASC Topic 718. For PSUs, the grant date fair value is based upon the probable outcome of the performance conditions. This amount is consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC Topic 718, excluding the effect of estimated forfeitures. Refer to page 42 for a detailed discussion of the grant date fair value of stock awards.
Amounts shown in the "Option Awards" column of the table above represent the aggregate grant date fair value of stock options computed in accordance with FASB ASC Topic 718. Refer to page 42 for a detailed discussion of the grant date fair value of option awards.
Non-Equity Incentive Plan Compensation
Amounts shown in the "Non-Equity Incentive Plan Compensation" column of the table above represent cash-based short-term incentive, or STIP, awards paid for a given year.
Change in Pension Value and Nonqualified Deferred Compensation Earnings
Amounts shown in the "Change in Pension Value and Nonqualified Deferred Compensation Earnings" column of the table above represent the estimated change in the actuarial present value of accumulated benefits for each of the NEOs at the earlier of age 65 or the age at which the NEO is eligible for an unreduced pension. Key actuarial assumptions for the present value of accumulated benefit calculation can be found in Note 18 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2012. Assumptions are further described in the narrative discussion following the Pension Benefits table.
There were no above-market or preferential earnings during 2012 on nonqualified deferred compensation. Generally, earnings on nonqualified deferred compensation include returns on investments in seven core investment alternatives, interest accruals on cash balances, DuPont Common Stock returns and dividend reinvestments. Interest is accrued on cash balances based on a rate that is traditionally less than 120% of the applicable federal rate and dividend equivalents are accrued at a non-preferential rate. In addition, the other core investment alternatives are a subset of the investment alternatives available to all employees under the qualified plan. Accordingly, these amounts are not considered above-market or preferential earnings for purposes of, and are not included in, the 2012 Summary Compensation Table.
As such, all amounts shown in this column reflect the change in the actuarial pension value under the Pension Plan and Pension Restoration Plan. The change in pension value represents the change from 2011
39
to 2012 in the present value of an NEO's accumulated benefit as of the applicable pension measurement date.
Amounts shown in the "All Other Compensation" column of the table above include: (i) perquisites and personal benefits (if greater than or equal to $10,000); (ii) registrant (Company) contributions to qualified defined contribution plans; and (iii) registrant (Company) contributions to nonqualified defined contribution plans. The following table details those amounts.
Name |
Perquisites and Other Personal Benefits |
Registrant Contributions to Qualified Defined Contribution Plans(c) |
Registrant Contributions to Nonqualified Defined Contribution Plans(d) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
E. J. Kullman |
$ | 82,479 | (a) | $ | 22,500 | $ | 328,395 | |||
N. C. Fanandakis |
| 22,500 | 96,723 | |||||||
T. M. Connelly, Jr. |
| 22,500 | 117,830 | |||||||
M. P. Vergnano |
| 22,500 | 96,084 | |||||||
J. C. Borel |
10,295 | (b) | 22,500 | 97,580 | ||||||
The benefit associated with personal use of Company aircraft is imputed as income to Mrs. Kullman at Standard Industry Fare Level ("SIFL") rates. SIFL rates are determined by the U.S. Department of Transportation. They are used to compute the value of nonbusiness transportation aboard employer-provided aircraft as required by the Internal Revenue Service. SIFL rates are used in the calculation of the income imputed to executives in the event of personal travel on Company aircraft. Mrs. Kullman does not receive any gross-up for payment of taxes associated with the described benefit.
40
2012 GRANTS OF PLAN-BASED AWARDS
The following table provides information on STIP awards, stock options, RSUs and PSUs granted in 2012 to each of the Company's NEOs. For a complete understanding of the table, refer to the narrative discussion that follows.
|
|
|
|
|
|
|
|
All Other Stock Awards: Number of Shares of Stock or Units(#) |
|
|
|
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards |
Estimated Future Payouts Under Equity Incentive Plan Awards |
All Other Option Awards: Number of Securities Underlying Options(#) |
|
|
||||||||||||||||||||||||||||
|
|
Exercise or Base Price of Option Awards ($/Sh) |
|
|||||||||||||||||||||||||||||||
|
|
Grant Date Fair Value of Stock and Option Awards |
||||||||||||||||||||||||||||||||
Name |
Grant Date |
Thres- hold |
Target |
Maximum |
Thres- hold(#) |
Target (#) |
Maximum (#) |
|||||||||||||||||||||||||||
E. J. Kullman |
2/6/12 | | $ | 2,252,663 | $ | 4,505,326 | | 54,719 | 109,438 | $ | 3,325,547 | |||||||||||||||||||||||
|
2/6/12 | 54,719 | 2,833,350 | |||||||||||||||||||||||||||||||
|
2/6/12 | 239,302 | $ | 51.78 | 2,833,336 | |||||||||||||||||||||||||||||
N. C. Fanandakis |
2/6/12 |
|
592,569 |
1,185,138 |
|
10,906 |
21,812 |
662,812 |
||||||||||||||||||||||||||
|
2/6/12 | 60,906 | 3,153,713 | |||||||||||||||||||||||||||||||
|
2/6/12 | 47,692 | 51.78 | 564,673 | ||||||||||||||||||||||||||||||
T. M. Connelly, Jr. |
2/6/12 |
|
725,444 |
1,450,888 |
|
12,660 |
25,320 |
769,412 |
||||||||||||||||||||||||||
|
2/6/12 | 12,660 | 655,535 | |||||||||||||||||||||||||||||||
|
2/6/12 | 55,364 | 51.78 | 655,510 | ||||||||||||||||||||||||||||||
M. P. Vergnano |
2/6/12 |
|
592,569 |
1,185,138 |
|
11,451 |
22,902 |
695,935 |
||||||||||||||||||||||||||
|
2/6/12 | 11,451 | 592,933 | |||||||||||||||||||||||||||||||
|
2/6/12 | 50,077 | 51.78 | 592,912 | ||||||||||||||||||||||||||||||
J. C. Borel |
2/6/12 |
|
592,569 |
1,185,138 |
|
10,906 |
21,812 |
662,812 |
||||||||||||||||||||||||||
|
2/6/12 | 10,906 | 564,713 | |||||||||||||||||||||||||||||||
|
2/6/12 | 47,692 | 51.78 | 564,673 | ||||||||||||||||||||||||||||||
Narrative Discussion of Grants of Plan-Based Awards Table
Estimated Future Payouts Under Non-Equity Incentive Plan Awards
Amounts shown in this column of the table above represent STIP award opportunities for 2012 under the EIP. A target STIP award is established for each NEO at the beginning of the relevant fiscal year based on a percentage of the midpoint of the NEO's level in our salary structure. The actual STIP payout for NEOs, which can range from 0% to 200% of target, is based on corporate and total business unit performance and individual performance. Refer to page 31 of this Proxy Statement for more details.
Estimated Future Payouts Under Equity Incentive Plan Awards
Amounts shown in this column of the table above represent the potential payout range of PSUs granted in 2012. Vesting is equally based upon corporate revenue growth and total shareholder return ("TSR"), both relative to the pre-defined peer group. Performance and payouts are determined independently for each metric. At the conclusion of the three-year performance period, the actual award, delivered as DuPont Common Stock, can range from zero percent to 200% of the original grant. Dividend equivalents are applied after the final performance determination.
Any termination of employment, including retirement, within six months of grant results in a forfeiture of the award. For a discussion of the impact on PSUs of any subsequent termination, refer to the table on page 51 of this Proxy Statement.
All Other Stock Awards: Number of Shares of Stock or Units
Amounts shown in this column of the table above represent RSUs granted in 2012 that are paid out in shares of DuPont Common Stock and vest ratably over a three-year period, one-third on each anniversary date. Any termination of employment, including retirement, within six months of grant results in a forfeiture of the award. Dividend equivalents are applied and are subject to the same restrictions as the RSUs. For a
41
discussion of the impact on RSUs of a subsequent termination, refer to the table on page 51 of this Proxy Statement.
For N. C. Fanandakis, this amount includes a retention award of 50,000 RSUs.
All Other Option Awards: Number of Securities Underlying Options
Amounts shown in this column of the table above represent nonqualified stock options granted in 2012 with a seven-year term and ratable vesting over a three-year period, one-third on each anniversary date. The exercise price of options granted, as shown in the table above, is based on the closing price of DuPont Common Stock on the date of grant.
Any termination of employment, including retirement, within six months of grant results in a forfeiture of the award. For a discussion of the impact on options of a subsequent termination, refer to the table on page 51 of this Proxy Statement.
Grant Date Fair Value of Stock and Option Awards
Except with respect to PSUs, amounts shown in this column of the table above reflect the grant date fair value of the equity award computed in accordance with FASB ASC Topic 718. For PSUs, the grant date fair value is based upon the probable outcome of the performance conditions. This amount is consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC Topic 718, excluding the effect of estimated forfeitures. The grant date fair value of the PSUs, subject to the TSR metric, was $69.77, estimated using a Monte Carlo simulation. The grant date fair value of the PSUs, subject to the revenue metric, was based upon the closing price of the underlying DuPont Common Stock as of the grant date, which was $51.78.
The grant date fair value of RSUs reflected in this column is based on the closing price of DuPont Common Stock as of the grant date, which was $51.78.
For purposes of determining the fair value of stock option awards, the Company uses the Black-Scholes option pricing model and the assumptions set forth in the table below. The grant date fair value of options granted in 2012 was $11.84. The Company determines the dividend yield by dividing the current annual dividend on the Company's Common Stock by the option exercise price. A historical daily measurement of volatility is determined based on the expected life of the option granted. The risk-free interest rate is determined by reference to the yield on an outstanding U.S. Treasury Note with a term equal to the expected life of the option granted. Expected life is determined by reference to the Company's historical experience.
|
2012 |
|||
---|---|---|---|---|
Dividend yield |
3.2 | % | ||
Volatility |
34.89 | % | ||
Risk-free interest rate |
0.9 | % | ||
Expected life (years) |
5.3 | |||
42
The following table shows the number of shares underlying exercisable and unexercisable options and unvested and, as applicable, unearned RSUs and PSUs held by the Company's NEOs at December 31, 2012. Market or payout values in the table below are based on the closing price of DuPont Common Stock as of that date.
|
Name |
|
Number of Securities Underlying Unexercised Options (#) Exercisable |
|
Number of Securities Underlying Unexercised Options (#) Unexercisable(1) |
|
Option Exercise Price ($) |
|
Option Expiration Date |
|
Number of Shares or Units of Stock Held That Have Not Vested (#)(2) |
|
Market Value of Shares or Units of Stock Held That Have Not Vested ($) |
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) |
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(4) |
|
||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
E. J. Kullman |
80,000 | $ | 37.75 | 2/4/13 | |||||||||||||||||||||||||||||||||||||||
|
77,100 | 51.01 | 2/6/13 | |||||||||||||||||||||||||||||||||||||||||
|
110,692 | 44.74 | 2/5/14 | |||||||||||||||||||||||||||||||||||||||||
|
646,767 | 23.28 | 2/3/16 | |||||||||||||||||||||||||||||||||||||||||
|
224,292 | 112,147 | 33.49 | 2/2/17 | ||||||||||||||||||||||||||||||||||||||||
|
67,641 | 135,282 | 51.85 | 2/1/18 | ||||||||||||||||||||||||||||||||||||||||
|
239,302 | 51.78 | 2/5/19 | 115,148 | $ | 5,179,357 | 335,264 | $ | 15,080,175 | |||||||||||||||||||||||||||||||||||
|
1,206,492 | 486,731 | ||||||||||||||||||||||||||||||||||||||||||
|
|
2,649 |
37.75 |
2/4/13 |
||||||||||||||||||||||||||||||||||||||||
|
19,500 | 51.01 | 2/6/13 | |||||||||||||||||||||||||||||||||||||||||
|
27,045 | 44.74 | 2/5/14 | |||||||||||||||||||||||||||||||||||||||||
|
44,776 | 23.28 | 2/3/16 | |||||||||||||||||||||||||||||||||||||||||
|
33,126 | 16,564 | 33.49 | 2/2/17 | ||||||||||||||||||||||||||||||||||||||||
|
14,431 | 28,860 | 51.85 | 2/1/18 | ||||||||||||||||||||||||||||||||||||||||
|
47,692 | 51.78 | 2/5/19 | 73,952 | 3,326,361 | 61,498 | 2,766,180 | |||||||||||||||||||||||||||||||||||||
|
141,527 | 93,116 | ||||||||||||||||||||||||||||||||||||||||||
|
|
60,000 |
37.75 |
2/4/13 |
||||||||||||||||||||||||||||||||||||||||
|
70,400 | 51.01 | 2/6/13 | |||||||||||||||||||||||||||||||||||||||||
|
90,692 | 44.74 | 2/5/14 | |||||||||||||||||||||||||||||||||||||||||
|
155,125 | 23.28 | 2/3/16 | |||||||||||||||||||||||||||||||||||||||||
|
52,450 | 26,225 | 33.49 | 2/2/17 | ||||||||||||||||||||||||||||||||||||||||
|
17,136 | 34,271 | 51.85 | 2/1/18 | ||||||||||||||||||||||||||||||||||||||||
|
55,364 | 51.78 | 2/5/19 | 27,458 | 1,235,061 | 80,008 | 3,598,760 | |||||||||||||||||||||||||||||||||||||
|
445,803 | 115,860 | ||||||||||||||||||||||||||||||||||||||||||
|
|
9,751 |
37.75 |
2/4/13 |
||||||||||||||||||||||||||||||||||||||||
|
32,100 | 51.01 | 2/6/13 | |||||||||||||||||||||||||||||||||||||||||
|
48,743 | 44.74 | 2/5/14 | |||||||||||||||||||||||||||||||||||||||||
|
107,463 | 23.28 | 2/3/16 | |||||||||||||||||||||||||||||||||||||||||
|
44,168 | 22,085 | 33.49 | 2/2/17 | ||||||||||||||||||||||||||||||||||||||||
|
14,431 | 28,860 | 51.85 | 2/1/18 | ||||||||||||||||||||||||||||||||||||||||
|
50,077 | 51.78 | 2/5/19 | 23,940 | 1,076,821 | 68,958 | 3,101,731 | |||||||||||||||||||||||||||||||||||||
|
256,656 | 101,022 | ||||||||||||||||||||||||||||||||||||||||||
|
|
12,300 |
37.75 |
2/4/13 |
||||||||||||||||||||||||||||||||||||||||
|
54,900 | 51.01 | 2/6/13 | |||||||||||||||||||||||||||||||||||||||||
|
83,020 | 44.74 | 2/5/14 | |||||||||||||||||||||||||||||||||||||||||
|
131,344 | 23.28 | 2/3/16 | |||||||||||||||||||||||||||||||||||||||||
|
44,168 | 22,085 | 33.49 | 2/2/17 | ||||||||||||||||||||||||||||||||||||||||
|
14,431 | 28,860 | 51.85 | 2/1/18 | ||||||||||||||||||||||||||||||||||||||||
|
47,692 | 51.78 | 2/5/19 | 23,376 | 1,051,452 | 67,868 | 3,052,703 | |||||||||||||||||||||||||||||||||||||
|
340,163 | 98,637 | ||||||||||||||||||||||||||||||||||||||||||
Stock Option Expiration Date |
Outstanding Vesting Dates |
|
---|---|---|
2/2/2017 | Balance vests on February 3, 2013 | |
2/1/2018 | Balance equally vests on February 2, 2013 and 2014 | |
2/5/2019 | Equally vests on February 6, 2013, 2014 and 2015 | |
43
Grant Date |
Outstanding Vesting Dates |
|
---|---|---|
2/3/2010 | Balance vests on February 3, 2013 | |
2/2/2011 | Balance equally vests on February 2, 2013 and 2014 | |
2/6/2012 | Equally vests on February 6, 2013, 2014, and 2015 | |
2/6/2012 | Equally vests on February 6, 2014 and 2016 | |
Grant Date |
Outstanding Vesting Dates |
|
---|---|---|
2/3/2010 | Performance period ended December 31, 2012 | |
2/2/2011 | Performance period ends December 31, 2013 | |
2/6/2012 | Performance period ends December 31, 2014 | |
Because the 2010 PSU award payout of 200% exceeded target (100%), the amount required to be shown in this column represents the maximum number of PSUs payable under outstanding awards (200% of the original grant). The final number of shares earned, if any, will be based on performance on Revenue Growth and TSR relative to the pre-defined peer group (at the time of award).
The plan provides for a payout range of 0% to 200% and dividend equivalent units are applied subsequent to the final performance determination.
* * *
44
2012 OPTION EXERCISES AND STOCK VESTED
The table below shows the number of shares of DuPont Common Stock acquired upon the exercise of stock options and the vesting of RSUs and PSUs during 2012.
|
Option Awards(1) |
Stock Awards(2) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name |
Number of Shares Acquired on Exercise (#) |
Value Realized Upon Exercise ($) |
Number of Shares Acquired on Vesting (#) |
Value Realized Upon Vesting ($) |
|||||||||
E. J. Kullman |
0 | 0 | 238,927 | $ | 12,262,314 | ||||||||
N. C. Fanandakis |
0 | 0 | 27,653 | 1,420,112 | |||||||||
T. M. Connelly, Jr. |
149,648 | $ | 1,811,794 | 63,547 | 3,260,779 | ||||||||
M. P. Vergnano |
0 | 0 | 41,201 | 2,115,121 | |||||||||
J. C. Borel |
0 | 0 | 48,551 | 2,491,668 | |||||||||
The performance period for PSUs granted in 2010 ended on December 31, 2012. The final payout was not determinable as of December 31, 2012. The final payout determination was made in March 2013 by the Compensation Committee after a final review of the Company's performance relative to the Peer Group. The final 2010 PSU shares paid out and the value realized in March 2013 are set forth below. Target units and year-end values for PSUs awarded in 2010 through 2012 are included in the Outstanding Equity Awards table on page 43.
Name |
2010 PSU Final Payout (#)(a) |
PSU Value(b) |
|||||
---|---|---|---|---|---|---|---|
E. J. Kullman |
144,354 | $ | 6,973,742 | ||||
N. C. Fanandakis |
21,322 | 1,030,066 | |||||
T. M. Connelly, Jr. |
33,757 | 1,630,801 | |||||
M. P. Vergnano |
28,429 | 1,373,405 | |||||
J. C. Borel |
28,429 | 1,373,405 | |||||
45
PENSION BENEFITS
(as of Fiscal Year End December 31, 2012)
The table below shows the present value of accumulated benefits for the NEOs under the Pension Plan and the Pension Restoration Plan, as of December 31, 2012. For a complete understanding of the table, refer to the narrative discussion that follows.
Name |
Plan Name |
Number of Years Credited Service |
Present Value of Accumulated Benefit(1) |
||||||
---|---|---|---|---|---|---|---|---|---|
E. J. Kullman |
Pension Plan | 24 | $ | 1,016,894 | |||||
|
Pension Restoration Plan | 24 | 13,884,425 | ||||||
N. C. Fanandakis |
Pension Plan | 34 | 1,573,536 | ||||||
|
Pension Restoration Plan | 34 | 6,176,622 | ||||||
T. M. Connelly, Jr. |
Pension Plan | 35 | 1,622,447 | ||||||
|
Pension Restoration Plan | 35 | 8,346,345 | ||||||
M. P. Vergnano |
Pension Plan | 32 | 1,395,505 | ||||||
|
Pension Restoration Plan | 32 | 5,617,851 | ||||||
J. C. Borel |
Pension Plan | 35 | 1,643,192 | ||||||
|
Pension Restoration Plan | 35 | 6,830,342 | ||||||
Narrative Discussion of Pension Benefits
The NEOs participate in the Pension Plan, a tax-qualified defined benefit pension plan, which covers a majority of the U.S. employees, except those hired or rehired after December 31, 2006. The Pension Plan provides employees with a lifetime retirement income based on years of service and the employees' final average pay near retirement. The normal form of benefit for married individuals is a 50% qualified joint and survivor annuity. The normal form of benefit for unmarried individuals is a single life annuity, which is actuarially equivalent to the normal form for married individuals. Normal retirement age under the Pension Plan is generally age 65 and benefits are vested after five years of service. Under the provisions of the Pension Plan, employees are eligible for unreduced pensions when they meet one of the following conditions:
An employee who is not eligible for retirement with an unreduced pension is eligible for retirement with a reduced pension if he/she is age 50 with at least 15 years of service. His/her pension is reduced by the greater of five percent for every year that his/her age plus service is less than 85 or five percent for every year that his/her age is less than 58. In no event will the reduction exceed 50%. Mr. Connelly is eligible for an unreduced pension. Each other NEO is currently eligible for a reduced pension.
46
The primary pension formula that applies to the NEOs provides a monthly retirement benefit equal to:
Average Monthly Compensation is based on the employee's three highest-paid years or, if greater, the 36 consecutive highest-paid months. Compensation for a given month includes regular compensation plus one-twelfth of an individual's STIP award for the relevant year. Other bonuses are not included in the calculation of Average Monthly Compensation.
If benefits provided under the Pension Plan exceed the applicable IRC compensation or benefit limits, the excess benefit is paid under the Pension Restoration Plan, an unfunded nonqualified plan. Effective January 1, 2007, the form of benefit under the Pension Restoration Plan for participants not already in pay status is a lump sum. The mortality tables and interest rates used to determine lump sum payments are the Applicable Mortality Table and the Applicable Interest Rate prescribed by the Secretary of the Treasury in IRC Section 417(e)(3).
The Company does not grant any extra years of credited service.
Key actuarial assumptions for the present value of accumulated benefit calculation can be found in Note 18 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 ("Long-Term Employee Benefits Note"). All other assumptions are consistent with those used in the Long-Term Employee Benefits Note, except that a retirement age at which the NEO may retire with an unreduced benefit under the Pension Plan is used. The valuation method used for determining the present value of the accumulated benefit is the traditional unit credit cost method.
47
NONQUALIFIED DEFERRED COMPENSATION
The following table provides information on the Company's defined contribution or other plans that provide for deferrals of compensation on a basis that is not tax-qualified. For a complete understanding of the table, refer to the narrative discussion that follows.
|
Executive Contributions in 2012(1) |
Registrant Contributions in 2012(2) |
Aggregate Earnings in 2012(3) |
Aggregate Balance as of 12/31/2012(4) |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|||||||||||||
E. J. Kullman |
|||||||||||||
RSRP |
$ | 218,930 | $ | 328,395 | $ | 243,589 | $ | 2,984,911 | |||||
Deferred STIP |
| | 6,722 | 401,030 | |||||||||
Deferred LTI |
| | 3,124 | 186,338 | |||||||||
Management Deferred Compensation Plan |
| | | | |||||||||
|
|||||||||||||
N.C. Fanandakis |
|||||||||||||
RSRP |
64,482 | 96,723 | 15,294 | 571,119 | |||||||||
Deferred STIP |
| | | | |||||||||
Deferred LTI |
| | 566 | 33,738 | |||||||||
Management Deferred Compensation Plan |
| | | | |||||||||
|
|||||||||||||
T. M. Connelly, Jr. |
|||||||||||||
RSRP |
78,553 | 117,830 | 136,233 | 1,363,814 | |||||||||
Deferred STIP |
| | 23,297 | 1,274,005 |