| A: | Under our By-laws, in an uncontested election of directors, as we have this year, the affirmative vote of a majority of the votes cast is required for the 2011 Annual Meeting of Shareholders. Only shareholders of record at the close of business on the record date are entitled to receive notice of the annual meeting and to vote at the 2011 Annual Meeting. At the close of business on March 7, 2011, there were 80,277,871 outstanding shares of IFF’s common stock. Each share of common stock is entitled to one vote on each matter properly brought before the 2011 Annual Meeting.What will I vote on?
There are four proposals scheduled to be voted on at the 2011 Annual Meeting:
| | | | • | the election of 12 membersdirectors, which means that a nominee must receive a greater number of the Board of Directors, eachvotes “FOR” his or her election than votes “AGAINST” in order to hold office for a one-year term until the Annual Meeting in 2012;be elected. |
| | Q: | • | How many votes are needed to approve the ratification of PricewaterhouseCoopers LLPthe independent registered public accounting firm (Proposal 2)? |
| A: | Under our By-laws, the affirmative vote of a majority of the votes cast is required to ratify the selection of PwC as our independent registered public accounting firm for 2011;the 2013 fiscal year. |
| Q: | How many votes are needed to approve the advisory proposal regarding Say on Pay (Proposal 3)? |
| A: | • | Proposal 3 is an advisory vote. This means that while we ask shareholders to approve a resolution regarding Say on Pay, it is not an action that requires shareholder approval. If a majority of votes are cast “FOR” the Say on Pay proposal, we will consider the proposal to be approved. |
| Q: | What if I abstain from voting on a proposal? |
| A: | If you sign and return your proxy marked “abstain,” your shares will be counted for purposes of determining whether a quorum is present. For Proposals 1, 2 and 3, abstentions are not counted as votes cast, and will not affect the outcome of the vote. |
| Q: | What if I am a beneficial shareholder and I do not give the nominee voting instructions? |
| A: | If you are a beneficial shareholder and your shares are held in “street name,” the Broker is bound by the rules of the New York Stock Exchange (“NYSE”) regarding whether or not it can exercise discretionary voting power for any particular proposal if the Broker has not received voting instructions from you. Brokers have the authority to vote shares for which their customers do not provide voting instructions on certain routine matters. A broker non-vote occurs when a Broker returns a proxy but does not vote on a particular proposal because the Broker does not have discretionary authority to vote on the compensationproposal and has not received specific voting instructions for the proposal from the beneficial owner of our named executive officers in 2010the shares. Broker non-votes are considered to be present at the meeting for purposes of determining the presence of a quorum but are not counted as disclosed in this Proxy Statement;votes cast. |
The table below sets forth, for each proposal on the ballot, whether a Broker can exercise discretion and vote your shares absent your instructions and if not, the impact of such Broker non-vote on the approval of the proposal. | | | | | Proposal | | Can Brokers Vote
Absent Instructions? | | Impact of
Broker Non-Vote | Election of Directors | • | an advisory vote regarding the frequencyNo | | None | Ratification of future advisory votesAuditors | | Yes | | Not Applicable | Say on executive compensation.Pay | | No | | None |
How many votes must be present to hold the 2011 Annual Meeting?
A “quorum” is necessary to hold the 2011 Annual Meeting. A quorum is established if the holders of a majority of the votes entitled to be cast by shareholders are present at the meeting, either in person or by
6
| Q: | What if I sign and return my proxy without making any selections? |
| A: | If you sign and return your proxy without making any selections, your shares will be voted “FOR” each of the director nominees, and “FOR” each of the two other proposals. If other matters properly come before the meeting, the proxy holders will have the authority to vote on those matters for you at their discretion. If your shares are held in “street name,” see the question above on how to vote your shares. |
| Q: | How do I change my vote? |
| A: | A shareholder of record may revoke his or her proxy by giving written notice of revocation to our Corporate Secretary before the meeting, by delivering a later-dated proxy (either in writing, by telephone or over the Internet), or by voting in person at the 2013 Annual Meeting. |
proxy. Abstentions and broker non-votes are counted as present for purposes of determining a quorum. Shares of common stock represented by executed proxies received by the Company will be counted for purposes of establishing a quorum at the meeting, regardless of how or whether suchIf your shares are voted on any specific proposal.
held in “street name,” you may change your vote by following your nominee’s procedures for revoking or changing your proxy.| Q: | What shares are covered by my proxy card? |
| A: | Your proxy reflects all shares owned by you at the close of business on March 4, 2013. For participants in our 401(k) plans, shares held in your account as of that date are included in your proxy. |
| Q: | What does it mean if I receive more than one proxy card? |
| A: | If you receive more than one proxy card, it means that you hold shares in more than one account. To ensure that all your shares are voted, you should sign and return each proxy card. Alternatively, if you vote by telephone or on the Internet, you will need to vote once for each proxy card and voting instruction card you receive. |
| Q: | Who can attend the 2013 Annual Meeting? |
| A: | Only shareholders and our invited guests are permitted to attend the 2013 Annual Meeting. To gain admittance, you must bring a form of personal identification to the meeting, where your name will be verified against our shareholder list. If a nominee holds your shares and you plan to attend the meeting, you should bring a brokerage statement showing your ownership of the shares as of the record date or a letter from the nominee confirming such ownership, and a form of personal identification. If you wish to vote your shares that are held by a nominee at the meeting, you must obtain a proxy from your nominee and bring such proxy to the meeting. |
| Q: | If I plan to attend the 2013 Annual Meeting, should I still vote by proxy? |
| A: | Yes. Casting your vote in advance does not affect your right to attend the 2013 Annual Meeting. If you send in your proxy card and also attend the meeting, you do not need to vote again at the meeting unless you want to change your vote. Written ballots will be available at the 2013 Annual Meeting for shareholders of record. |
What are the voting recommendations of IFF’s Board of Directors?II. PROPOSAL I — ELECTION OF DIRECTORS
IFF’sOur Board of Directors currently has eleven members. Upon the recommendation of the Nominating and Governance Committee of our Board, our Board has nominated each of our current directors and one new nominee, Christina Gold, for election at the 2013 Annual Meeting for a one-year term that expires at the 2014 Annual Meeting. Each nominee has consented to serve if elected. Proxies cannot be voted for a greater number of persons than the number of nominees named. Pursuant to our Corporate Governance Guidelines, a person that has previously served for twelve consecutive full annual terms on the Board cannot continue to serve as a director following the subsequent annual meeting of shareholders, unless (i) such person is a “Grandfathered Person” or one of our officers or (ii) the Board has made a determination that the nomination of such person would be in the best interests of our Company and our shareholders. “Grandfathered Persons” are eligible to serve as directors until the annual meeting of shareholders which occurs after the date that the director has turned 72. As of the date of this proxy statement, Mr. Martinez, a “Grandfathered Person,” is 73. Pursuant to the recommendation of the Nominating and Governance Committee, the Board has determined that it is in the best interests of the Company and our shareholders to re-nominate Mr. Martinez for an additional term in light of his extensive experience and substantial contribution as Lead Director of the Board. We believe that each of our nominees possesses the experience, skills and qualities to fully perform his or her duties as a director and to contribute to our success. Each of our nominees is being nominated because he or she possesses the highest standards of personal integrity and interpersonal and communication skills, is highly accomplished in his or her field, has an understanding of the interests and issues that are important to our shareholders and is able to dedicate sufficient time to fulfilling his or her obligations as a director. Our nominees as a group complement each other and each other’s respective experiences, skills and qualities. The Nominating and Governance Committee retained an independent global search firm, which identified Ms. Gold as a potential nominee for director. Thereafter, the Nominating and Governance Committee evaluated Ms. Gold’s qualifications in light of the Company’s guidelines and initiated a process that resulted in her nomination as a director, including interviews with the Chair of the Nominating and Governance Committee, the Lead Director and the Chairman of the Board. The Nominating and Governance Committee recommended Ms. Gold as a nominee because of a number of valuable characteristics she would bring to the Board, including her extensive international and domestic business experience, her familiarity with the Company’s customer base, her financial expertise and her prior experience as a chief executive officer. Each nominee’s principal occupation and other pertinent information about the particular experience, qualifications, attributes and skills that led the Board to conclude that such person should serve as a director appears on the following pages. The Board recommends that youa vote your shares as follows: | | |  | • | “FOR”Marcello V. Bottoli, 51 — An Italian national with extensive international experience, Mr. Bottoli has been an operating partner of Advent International, a global private equity firm, since 2010, and served as Interim Chief Executive Officer of Pandora A/S, a designer, manufacturer and marketer of hand-finished and modern jewelry, from August 2011 until March 2012. Mr. Bottoli served as President and Chief Executive Officer of Samsonite Inc., a luggage manufacturer and distributor, from March 2004 through January 2009, and President and Chief Executive Officer of Louis Vuitton Malletier, a manufacturer and retailer of luxury handbags and accessories, from 2001 through 2002. Previously, Mr. Bottoli played a number of roles with Benckiser N.V., and then Reckitt Benckiser plc, a home, health and personal care products company, following the electionmerger of eachBenckiser with Reckitt & Colman Ltd. His experience as a chief executive and emphasis on consumer products, strategic insights and marketing has enabled Mr. Bottoli to provide many insights and contributions to our Board. Mr. Bottoli serves on the board of directors of True Religion Apparel, Inc., a California-based fashion jeans, sportswear and accessory manufacturer and retailer, is Chairman of Pharmafortune S.A., a pharmaceuticals and biotechnology manufacturer, is Deputy Chairman of Blushington LLC, a makeup and beauty services retailer, and is Deputy Chairman of Pandora A/S. He has served on our Board since 2007. | | |  | | Linda B. Buck, 66 — Dr. Linda Buck has been a Howard Hughes Medical Institute Investigator since 1994, a Member of the 12 nominees toFred Hutchinson Cancer Research Center, a biomedical research institute, since 2002, and Affiliate Professor of Physiology and Biophysics at the Board; | | | • | “FOR”University of Washington since 2003. Dr. Buck’s research has provided key insights into the ratificationmechanisms underlying the sense of the selection of PricewaterhouseCoopers LLP as IFF’s independent registered public accounting firm for 2011; | | | • | “FOR” the approval of the compensation paidsmell. This experience is useful to our named executive officersresearch and development efforts in 2010;both flavors and | | | • | A recommendation that future votes fragrances, as is Dr. Buck’s technical background in evaluating a host of issues. Dr. Buck is the recipient of numerous awards, including The Nobel Prize in Physiology or Medicine in 2004. Dr. Buck served on executive compensation be held every year.the board of directors of DeCode Genetics Inc., a biotechnology company, from 2005 to 2009 and joined our Board in 2007. |
How do I vote?
You may vote in several different ways:
In person at the 2011 Annual Meeting
You may vote in person at the 2011 Annual Meeting. You may also be represented by another person at the meeting by executing a proxy properly designating that person. If you are the beneficial owner of shares held in “street name,” you must obtain a legal proxy from your broker, bank or other holder of record and present it to the inspectors of election with your ballot to be able to vote at the meeting.
By telephone
You may vote by calling the telephone number specified on the website provided in the Notice of Internet Availability. Please have your Notice of Internet Availability handy when you call, and use any touch-tone phone to transmit your voting instructions.
By Internet
You may vote by using the Internet,www.proxyvote.com, to submit your voting instructions. Please have your Notice of Internet Availability handy when you go online. If you vote on the Internet, you may also request electronic delivery of future proxy materials.
By mail
You may vote by completing, signing, dating and returning a proxy card which will be mailed to you if you request delivery of a full set of proxy materials. A proxy card may also be mailed to you, at the Company’s option, beginning on or after the tenth day following the mailing of the Notice of Internet Availability. In either case, a postage-paid envelope will be provided along with the proxy card.
Telephone and Internet voting for shareholders of record will be available until 11:59 PM Eastern Time on May 2, 2011. A mailed proxy card must be received by May 2, 2011 in order to be voted at the Annual Meeting. If you are a 401(k) plan participant, telephone and Internet voting will be available until, or your mailed proxy card must be received by, 11:59 P.M. Eastern Time on April 28, 2011. The availability of telephone and Internet voting for beneficial owners of other shares held in “street name” will depend on your broker, bank or other holder of record and we recommend that you follow the voting instructions on the Notice of Internet Availability that you receive from them.
If you are mailed a set of proxy materials and a proxy card or voting instruction card and you choose to vote by telephone or by Internet, you do not have to return your proxy card or voting instruction card.
7
However, even if you plan to attend the 2011 Annual Meeting, we recommend that you vote your shares in advance so that your vote will be counted if you later decide not to attend the meeting.
How can I change my vote?
If you are a shareholder of record, you may revoke your proxy before it is exercised by:
| | |  | • | SendingJ. Michael Cook, 70 — Mr. Cook retired as Chairman and Chief Executive Officer of Deloitte & Touche, a written noticeleading global professional services firm, in 1999, and has been a leader of his profession. His experience as a Chief Executive Officer and in accounting and corporate governance is an asset to the Officeus, and he is one of the Secretary, International Flavorsleaders of our Board. He has served as Chairman of the American Institute of Certified Public Accountants and as a member of its Auditing Standards Board. He led the Board of the Financial Accounting Foundation, the overseer of accounting standards boards, and the World Congress of Accountants. Mr. Cook is an emeritus member of the Advisory Council of the Public Company Accounting Oversight Board (“PCAOB”), is a member of the PCAOB’s Standing Advisory Group, and was a member of the Securities and Exchange Commission’s Advisory Committee on Improvements to Financial Reporting. In 2002, Mr. Cook was named one of the Outstanding Directors in America by Director’s Alert and was a member of the National Association of Corporate Directors’ Blue Ribbon Commission on Director Professionalism and Audit Committees. He served as a director of Eli Lilly until April 2009 and Dow Chemical Company until May 2006 and is currently a director of Comcast Corporation and Chairman of the Board of Comeback America Initiative (CAI). Mr. Cook joined our Board in 2000. | | |  | | Roger W. Ferguson, Jr., 61 — Mr. Ferguson has been the President and Chief Executive Officer of TIAA-CREF, a major financial services company, since 2008. Mr. Ferguson was an associate and partner at McKinsey & FragrancesCompany from 1984 to 1997 and also was an associate with a major law firm. Mr. Ferguson has also served in various policy-making positions, including as Vice-Chairman of the Board of Governors of the U.S. Federal Reserve System from 1999 until 2006, and as Chairman of Swiss America Holding Corporation, a global reinsurance company, from 2006 until 2008. Mr. Ferguson currently serves on the Advisory Committee of Brevan Howard Asset Management LLP, a global alternative asset manager, and is a director of Audax Health, an end-to-end digital health company. He was also a member of the President’s Council on Jobs and Competitiveness and serves on the board of a number of charitable and non-governmental organizations, including the Committee on Economic Development, Memorial Sloan-Kettering Cancer Center and the Economic Club of New York. His background provides excellent experience for dealing with the varied financial and other issues which our Board deals with on a regular basis. Mr. Ferguson has been a member of our Board since 2010. | | |  | | Andreas Fibig, 51 — Based in Berlin, Germany, Mr. Fibig has been President and Chairman of the Board of Management of Bayer HealthCare Pharmaceuticals, the pharmaceutical division of Bayer AG, since September 2008. Prior to this position, Mr. Fibig held a number of positions of increasing responsibility at Pfizer Inc., 521 West 57 Street,a research-based pharmaceutical company, including as Senior Vice President in the US Pharmaceutical Operations group from 2007 through 2008 and as President, Latin America, Africa and Middle East from 2006 through 2007. These positions, including prior work experience with pharmaceutical companies Pharmacia GmbH and Boehringer Ingelheim GmbH, have provided him with extensive experience in international business, product development and strategic planning, which are assets to our Board. Mr. Fibig is a board member of EFPIA, the European Federation of Pharmaceutical Industries and Associations, Council of the Americas and vfa, the German Association of Research-Based Pharmaceutical Companies. He chairs the Board of Trustees of the Max Planck Institute for Infection Biology. He joined our Board in 2011. | | |  | | Christina Gold, 64 — From September 2006 until September 2010, Ms. Gold was Chief Executive Officer, President and a director of The Western Union Company, a leading company in global money transfer. She was President of Western Union Financial Services, Inc. and Senior Executive Vice President of First Data Corporation, former parent company of The Western Union Company and provider of electronic commerce and payment solutions, from May 2002 to September 2006. Prior to that, Ms. Gold served as Vice Chairman and Chief Executive Officer of Excel Communications, Inc., a former telecommunications and e-commerce services provider, from October 1999 to May 2002. From 1998 to 1999, Ms. Gold served as President and CEO of Beaconsfield Group, Inc., a direct selling advisory firm that she founded. Prior to founding Beaconsfield Group, Ms. Gold spent 28 years (from 1970 to 1998) with Avon Products, Inc., a leading global beauty company, in a variety of positions, including as Executive Vice President, Global Direct Selling Development, Senior Vice President and President of Avon North America, and Senior Vice President & CEO of Avon Canada. Ms. Gold is currently a director of ITT Corporation, a manufacturer of highly engineered components and technology solutions for industrial markets, New York Life Insurance, a private mutual life insurance company and Exelis, Inc., a diversified, global aerospace, defense and information solutions company. She also sits on the board of Safe Water Network, a non-profit organization working to develop locally owned, sustainable solutions to provide safe drinking water. Her wide-ranging global leadership, management and marketing experience as a chief executive officer and service as a director makes Ms. Gold well-suited to address the operational and financial matters that our Board faces. Ms. Gold is a nominee for election as a new director at the 2013 Annual Meeting. |
| | |  | | Alexandra A. Herzan, 53 — As the granddaughter of our founder, Ms. Herzan has a long-term understanding of many aspects of our operations and brings a unique perspective to Board deliberations. Ms. Herzan has been the President and Treasurer of the Lily Auchincloss Foundation, Inc., a charitable foundation, since 1997, and a director of the van Ameringen Foundation, Inc., since 1992. These positions have provided executive and leadership experience, as well as an understanding of corporate governance, strategy and financial management at the Board level. As a trustee of a number of private trusts, as well as the Museum of Modern Art in New York 10019 stating that your proxy is revoked. The notice must be received priorCity, she developed financial savvy translatable to our business. She also sits on the 2011 Annual Meeting;boards of the Fountain House and the Masters School, both not-for-profit organizations. Ms. Herzan joined our Board in 2003. | | |  | • | SigningHenry W. Howell, Jr., 71 — Until 2000, Mr. Howell served in various positions during his 34 years with J.P. Morgan, a financial services firm, and deliveringsecured extensive business development, finance and international management experience which enables Mr. Howell to provide both a later-dated proxy cardpublic and a private sector perspective on corporate finance, corporate governance and mergers and acquisitions. This experience also serves us well in conjunction with his service on our Nominating and Governance and Audit Committees. While at J.P. Morgan, Mr. Howell had several overseas assignments including head of banking operations in Germany and Chief Executive Officer of J.P. Morgan’s Australian merchant banking affiliate, which was publicly listed. Both of these positions enhanced his ability to analyze complex international business and financial matters. He is currently on the Officeboard of the Secretary after voting by telephone or usingNorton Museum and is a life trustee of the Internet, so that it is received prior to the 2011 Annual Meeting;Chicago History Museum. Mr. Howell joined our Board in 2004. | | |  | • | Voting by telephone or usingKatherine M. Hudson, 66 — As Chairperson, President and Chief Executive Officer of Brady Corporation, a global manufacturer of identification solutions and specialty industrial products, from 1994 until 2004, Ms. Hudson oversaw a doubling of annual revenues. Her prior experience over 24 years with Eastman Kodak covered various areas of responsibility, including systems analysis, supply chain, finance and information technology. This broad experience has translated to sound guidance to our Board. Ms. Hudson has served as a director on the Internet after the dateboards of your proxy cardApple Computer Corporation, a designer and before the 2011 Annual Meeting; ormanufacturer of consumer electronics and software products, CNH Global NV, a manufacturer of agricultural and construction equipment, and, between 2000 and 2012 Charming Shoppes, Inc., a woman’s specialty retailer. Ms. Hudson has served on our Board since 2008. | | |  | • | AttendingArthur C. Martinez, 73 — Having served as Chairman and Chief Executive Officer of Sears, Roebuck and Company, a large retailer, from 1995 until 2000, Mr. Martinez obtained experience on a myriad of issues arising in a large corporation. This experience, together with the financial expertise which led him to be Chairman of the Board of the Federal Reserve Bank of Chicago from 2000 until 2002, enables him to provide expert guidance and leadership to us and our Board of Directors. He is currently a director of IAC/InterActiveCorp, a leading internet company, Fifth and Pacific, Inc., a retail-based premium brands company, American International Group, Inc., an insurance and financial services organization, and is currently Chairman of the Board of HSN, Inc., an interactive multi-channel retailer. He also served as a director of PepsiCo, Inc. from 1999 to 2012, and is currently trustee of numerous charitable organizations, including Northwestern University, the Chicago Symphony, Greenwich Hospital and Maine Coast Heritage Trust. Mr. Martinez joined our Board in 2000. | | |  | | Dale F. Morrison, 64 — Mr. Morrison has been a founding partner of TriPointe Capital Partners, a private equity firm, since 2011. Prior to TriPointe, he served from 2004 until 2011 Annual Meetingas the President and votingChief Executive Officer of McCain Foods Limited, an international leader in person by ballot. Your attendancethe frozen food industry. A food industry veteran, his experience includes service as Chief Executive Officer and President of Campbell Soup Company, various roles at General Foods and PepsiCo and as an operating partner of Fenway Partners, a private equity firm. Mr. Morrison is a seasoned executive with strong consumer marketing and international credentials and his knowledge of our customer base is invaluable to our Board. Mr. Morrison is currently a Director of the Center of Innovation at the 2011 Annual MeetingUniversity of North Dakota, the Non-Executive Chairman of Findus Group, a frozen foods company, and a Director of InterContinental Hotels Group, an international hotel company, and he previously served as a director of Trane, Inc. He joined our Board in person will not cause your previously granted proxy2011. | | |  | | Douglas D. Tough, 63 — Mr. Tough has been our Chairman and Chief Executive Officer since March 2010. Previously, he served as Chief Executive Officer and Managing Director of Ansell Limited, a global leader in healthcare barrier protection, from 2004 until March 2010. Mr. Tough joined our Board in 2008 and served as our non-Executive Chairman from October 2009 until he became our CEO. Mr. Tough’s experience as a Chief Executive Officer of a major global company is directly translatable to be revoked unless you specifically so request or you vote by ballot athis work as our Chairman and CEO, as is his prior 17 year service with Cadbury Schweppes Plc., a major food and beverage company, where he served in a variety of executive positions throughout North America and the meeting.rest of the world. Mr. Tough is currently a director of Molson Coors Brewing Company, a multi-national beverage company. |
If you are a beneficial owner of shares held in “street name”, you may submit new proxy voting instructions by contacting your bank, broker or other holder of record.
How are votes counted?
In the election of the directors (Item 1 of the Proxy Statement), your vote may be cast “FOR” or “AGAINST” a nominee, or you may “ABSTAIN”. Likewise, for the other proposals (Items 2 and 3 in this Proxy Statement), other than the “frequency” advisory vote (Item 4 in this Proxy Statement), your vote may be cast “FOR”, “AGAINST” or you may “ABSTAIN”. For the “frequency” advisory vote (Item 4 in this Proxy Statement), you may vote for future advisory votes on executive compensation to be held every “ONE”, “TWO”, or THREE” years or you may “ABSTAIN”.
Additional information concerning the required vote for each proposal, including the treatment of abstentions and broker non-votes, is included below under the heading “How many votes are needed to approve the proposals?”.
All executed proxies will be voted in accordance with the voting instructions contained in those proxies. If you are a shareholder of record and you furnish your proxy using the Internet, by phone or by returning a proxy card but do not indicate your voting preferences, the persons named in the proxy will vote your shares represented by that proxy in accordance with the recommendation of our Board of Directors as described under the heading “What are the voting recommendations of IFF’s Board of Directors?”.
Who will count the votes?
A representative from Broadridge Financial Solutions, Inc. will tabulate the votes and serve as the Company’s inspector of election at the 2011 Annual Meeting.
What is an abstention?
An “abstention” occurs when a shareholder executes a proxy using the Internet, by phone or by returning a proxy card, but he or she refrains from voting as to a particular matter by indicating that he or she “abstains” as to that matter.
What is a broker non-vote?
A “broker non-vote” occurs when a brokerage firm or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have authority to vote on a “non-routine” proposal without receiving voting instructions from the beneficial owner. To the extent that they
8
III. CORPORATE GOVERNANCE have not received voting instructions on a “non-routine” proposal, brokers report such number of shares as “non-votes”.
Under New York Stock Exchange (“NYSE”) rules, the election of directors (Item 1 in this Proxy Statement) will be treated as a “non-routine” proposal. In addition, the advisory vote on our executive compensation (Item 3 in this Proxy Statement) and the advisory “frequency” vote (Item 4 in this Proxy Statement) are both “non-routine” proposals. This means that if a brokerage firm holds your shares on your behalf, those shares will not be voted on the election of directors or the two advisory votes unless you provide instructions to that firm by voting your proxy.
The ratification of the selection of an independent registered public accounting firm (Item 2 in this Proxy Statement) is considered a “routine” proposal, and brokers generally may vote on behalf of beneficial owners who have not furnished voting instructions, subject to the rules of the NYSE concerning transmission of proxy materials to beneficial owners, and subject to any proxy voting policies and procedures of those brokerage firms.
In order to ensure that any shares held on your behalf by a brokerage firm or other organization are voted in accordance with your wishes, we encourage you to provide instructions to that firm or organization by voting your proxy.
How many votes are needed to approve the proposals?
The affirmative vote of a majority of the votes cast is required for the election of directors, which means that a nominee must receive a greater number of votes “FOR” his or her election than votes “AGAINST” in order to be elected. Votes cast do not include any abstentions or broker non-votes with respect to a nominee’s election and, therefore abstentions and broker non-votes will have no effect on the outcome of the elections. The Company’s By-laws include this majority voting standard for uncontested elections and provide that any director nominee in an uncontested election who does not receive an affirmative majority of votes cast must promptly offer his or her resignation. A description of the process which, under our By-laws and Corporate Governance Guidelines will be followed if such an event occurs, is included in this Proxy Statement under the heading “Proposals Requiring YourVote-Item 1-Election of Directors.”The affirmative vote of a majority of the votes cast is required to ratify the selection of PricewaterhouseCoopers LLP (“PwC”) as the Company’s independent registered public accounting firm for 2011. Votes cast do not include any abstentions or broker non-votes with respect to this proposal and, therefore abstentions and broker non-votes will have no effect on the outcome of this proposal.
Since the vote regarding out executive compensation and the vote regarding the frequency of future votes on executive compensation are advisory in nature and non-binding on the Company, there is no set “approval” requirement; however, the votes cast in connection with the vote on our executive compensation and the vote regarding the frequency of future votes on executive compensation will be considered in the manner described in each of the proposals.
Where can I find the voting results of the 2011 Annual Meeting?
IFF will announce preliminary voting results at the 2011 Annual Meeting and will publish final results in a Current Report onForm 8-K to be filed with the SEC within 4 business days of the 2011 Annual Meeting.
Do I need an admission ticket to attend the 2011 Annual Meeting?
You will need either an admission ticket or proof that you own IFF shares to enter the 2011 Annual Meeting. If you plan to attend the meeting and have received a proxy card, please bring the admission ticket accompanying the proxy card and check the box on that proxy card indicating that you will be attending. If you are a shareholder of record and you vote by Internet or telephone, you may also indicate if you plan to attend the meeting. If you do not have an admission ticket, you must bring evidence of your ownership of
9
IFF stock (which, if you are a beneficial holder, can be obtained from your bank, broker or other record holder of your shares), in order to be admitted. You may also request a ticket by writing to the Office of the Secretary, International Flavors & Fragrances Inc., at the address noted above. Evidence of your ownership must accompany your letter. You must also present a form of personal photo identification in order to be admitted to the meeting.
How do I obtain a separate Notice of Internet Availability if I share an address with other shareholders?
When more than one shareholder of record of IFF’s common stock shares the same address, we may deliver only one Notice of Internet Availability to that address unless we have received contrary instructions from one or more of those shareholders. Similarly, brokers and other nominees holding shares of IFF’s common stock in “street name” for more than one beneficial owner with the same address may deliver only one Notice of Internet Availability to that address if they have received consent from those beneficial owners. We will deliver promptly upon written or oral request a separate Notice of Internet Availability to any shareholder, including a beneficial owner of shares held in “street name,” at a shared address to which a single Notice of Internet Availability was delivered. To receive additional Notices of Internet Availability, or if you are a shareholder of record and would like to receive separate Notices of Internet Availability for future annual meetings, you may call or write the Office of the Secretary, International Flavors & Fragrances Inc., 521 West 57 Street, New York, New York 10019 (telephone:212-765-5500). If you are a beneficial owner of shares held in “street name” and would like to receive separate Notices of Internet Availability, you may contact your bank, broker or other holder of record. In addition, if you are a shareholder of record who shares the same address with another shareholder of record and you currently receive separate copies of the Notice of Internet Availability, you may write or call the Office of the Secretary as indicated above to request that a single Notice of Internet Availability be delivered to that address.
Who pays for the cost of this proxy solicitation?
IFF will pay the entire cost of soliciting proxies. In addition to solicitation by mail, proxies may be solicited on the Company’s behalf by directors, officers or employees in person, by telephone, by facsimile or by electronic mail. The Company has retained Georgeson Inc. to assist in proxy solicitation for a fee of $7,500 plus expenses. The Company will reimburse banks, brokers and other custodians, nominees and fiduciaries for their costs in sending proxy materials to the beneficial owners of the Company’s common stock.
How can I obtain a copy of IFF’s Annual Report onForm 10-K for the year ended December 31, 2010?
IFF will on a request in writing provide without charge to each person from whom proxies are being solicited for the 2011 Annual Meeting a copy of our Annual Report onForm 10-K for the year ended December 31, 2010, including the financial statements and any schedules, required to be filed with the Securities and Exchange Commission, excluding exhibits. We may impose a reasonable fee for providing the exhibits to the Annual Report onForm 10-K. Requests should be made to the Office of the Secretary, International Flavors & Fragrances Inc., 521 West 57 Street, New York, N.Y. 10019. IFF’s Annual Report onForm 10-K is also available free of charge through the Investor Relations — SEC Filings link on our website,www.iff.com.
10
CORPORATE GOVERNANCE
Corporate Governance Guidelines
Our Board of Directors has responsibilityis responsible for overseeing the management of theour Company. The Board has adopted Corporate Governance Guidelines which summarize set forth our governance principles relating to, among other things:director qualifications and responsibilities; board structure and meetings; management succession; and the practices the Board will follow with respect to Board membership and selection, responsibilities of directors, Board meetings,performance evaluation of theour Board and Chief Executive Officer (“CEO”), succession planning, Board committees and director compensation. In December 2010, and subsequently in February 2011, the Nominating and Governance Committee and the Board reviewed and revised the Corporate Governance Guidelines. . A copy of the Company’sour Corporate Governance Guidelines is available through the Investor RelationsInvestors — Corporate Governance link on our website, www.iff.com. Independence of Directors The Board has affirmatively determined that our new director nominee, Ms. Gold, and each of our current directors (other than Mr. Tough) meet our independence requirements and those of the Company’s website,www.iff.com. Board Leadership Structure To ensure independence and breadth of needed expertise and diversity of our Board of Directors,As stated in our Corporate Governance Guidelines, require ourthe Board to be compriseddoes not have a policy that requires a separation of between seven and thirteen members, a majority of whom are required to be independent in accordance with NYSE standards. Our Board is currently comprised of 13 members, 12 of whom are independent, and all Board committees are composed solely of independent directors. Pursuant to the Corporate Governance Guidelines, our Board is free to choose its Chairman of the Board in any wayand CEO positions. The Board believes that seems best forit is important that it have the Company at anyflexibility to make this determination from time and we believe that this flexibility allows our Board to re-evaluate the particular leadership needs of the Company at any point in time based on the particular facts and circumstances then affecting our business. As a result, Currently, we combine the Board does not have a policy that requires the roles of Chairman of the Board and CEO to be separate or, if the Board determines at any time that these roles should be separate, a policy that dictates whether the Chairman of the Board should be selected from the non-employee directors or an employee of the Company. Because our Corporate Governance Guidelines do not require separation of the Chairman and CEO positions, the Board has also established the role of independent Lead Director as an integral part of our Board leadership structure to serve as the liaison between the independent directors and the Chairman and CEO. The role and responsibilities of our Lead Director are described below under the heading “Lead Director.” On October 1, 2009, Douglas D. Tough, who was a Board member at the time, assumed the role of non-executive Chairman, with the plan that he would assume the additional role of CEO when his contract with his then employer expired, no later than the first quarter of 2010. On March 1, 2010, Mr. Tough assumed the additional role of CEO. As our prior Chairman and Chief Executive Officer resigned from these positions effective September 30, 2009, in the interim, beginning on October 1, 2009, our Board established a temporary Office of the CEO, which was comprised of three executive officers: our Executive Vice President and Chief Financial Officer (“CFO”), our Group President, Fragrances, and our Group President, Flavors. Knowing that this arrangement would be in place only on a temporary basis, the Board chose to establish the temporary Office of the CEO comprised of these three executive officers because the Board believed that this structure best suited the needs of the Company in terms of filling the CEO position with persons most familiar with the Company until Mr. Tough was able to assume the role and responsibilities of the CEO, while also allowing these executives to maintain and fulfill the responsibilities associated with their current positions. The temporary Office of the CEO was disbanded when Mr. Tough assumed the role as our CEO on March 1, 2010.
With regard to the currently combined positions of Chairman and CEO, we believe that this leadership structure has been effective for the Company, and this Board leadership structure is commonly utilized by other public companies in the United States.CEO. We believe that combining the rolesCEO, as a Company executive, is in the best position to fulfill the Chairman’s responsibilities, including those related to identifying emerging issues facing our Company, and communicating essential information to the Board about our performance and strategies. We also believe that the combined role of Chairman and CEO provides us with a distinct leader and allows us to present a single, uniform voice to our customers, business partners, shareholders and employees. We also believe that designating an independent Lead Director provides the opportunity for many of the benefits similar to having an independent Chairman and provides an appropriately balanced form of leadership for our Company. In addition, our Board is otherwise comprised solely of independent directors who together oversee the Company’s business. Our independent
11
directors evaluate the performance of our CEO on an annual basis through an objective procedure developed by our wholly independent Nominating and Governance Committee. If at any point in time the Board feels that its current leadership structure may be better served by separating the roles of Chairman and CEO, it may then determine to separate these positions. However, at this point in time, we believe thatIn order to mitigate any potential disadvantages of a combined Chairman and CEO, the current board leadership structure isBoard has created the best structure forposition of Lead Director to facilitate and strengthen the Board’s independent oversight of our Companyperformance, strategy and our shareholders. succession planning and to promote effective governance standards. The independent directors of the Board elect a Lead Director from among the independent directors. Our current Lead Director is elected by and from our independent Board members and has clearly delineated and comprehensive duties. Mr. Martinez.The roleduties of our Lead Director includes (i) include: presiding overat all meetings of non-employeethe Board at which the Chairman is not present, including executive sessions of the independent directors, and providing prompt feedback regarding those meetings to the Chairman and CEO, (ii) CEO; providing suggestions for Board meeting agendas, with the involvement of ourthe Chairman and CEO and input from other directors, (iii) assuring thatdirectors; serving as the Board andliaison between the Chairman and CEO understand each other’s views on all critical matters, (iv) the independent directors; monitoring significant issues occurring between Board meetings and assuring Board involvement when appropriate, (v) serving as a sounding board for our Chairmanappropriate; and CEO and (vi) ensuring, in consultation with ourthe Chairman and CEO, the adequate and timely exchange of information and supporting data between the Company’sour management and the Board. Board and Committee MembershipsCommittees Our Board has an Audit Committee, a Compensation Committee and a Nominating and Governance Committee, each of which operates under a written charter adopted by the Board. Each committeeCommittee reviews its charter at least annually and recommends charter changes to the Board as appropriate. In December 2010,2012, each of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee reviewed its charter, and the Audit Committee and Compensation Committee revised its charter.their charters. The revised chartercharters of each committee wasthose committees were subsequently approved by the Board. UnderEach Committee charter provides that the charter of each committee, the committeeCommittee will annually reviews the committee’s ownreview its performance. A current copy of each of the Audit Committee, Compensation Committee and Nominating and Governance Committee charters is available through the Investor RelationsInvestors — Corporate Governance link on the Company’sour website,www.iff.com. www.iff.com.The table below provides the current membership and chairperson for each of our Board committeesCommittees and identifies our current Lead Director.
| | | | | | | | | | | | | | | | | | Name | | | | Audit | | | | Compensation | | | | Nominating &
Governance | | | | Lead Director | Marcello V. Bottoli | | | | | | | | X | | | | | | | | | Linda B. Buck | | | | | | | | | | | | X | | | | | J. Michael Cook | | | | | | | | X (Chair) | | | | | | | | | Roger W. Ferguson, Jr. | | | | | | | | X | | | | | | | | | Andreas Fibig | | | | | | | | | | | | X | | | | | Alexandra A. Herzan | | | | | | | | X | | | | | | | | | Henry W. Howell, Jr. | | | | X | | | | | | | | X (Chair) | | | | | Katherine M. Hudson | | | | X (Chair) | | | | | | | | | | | | | | | | | | | | | | Nominating &
| | | | Name | | | Audit | | | Compensation | | | Governance | | | Lead Director | Margaret Hayes Adame | | | X | | | | | | | | | | Marcello Bottoli | | Arthur C. Martinez | | | | X | | | | | | | Linda B. Buck | | | | | | | | | X | | | | X | J. Michael Cook | | Dale F. Morrison | | | | X (Chairman) | | | | | | | Roger W. Ferguson, Jr. | | | | | | X | | | | | | | Andreas Fibig | | | | | | | | | X | | | | Peter A. Georgescu | | | | | | | | | X | | | | Alexandra A. Herzan | | | | | | X | | | | | | | Henry W. Howell, Jr. | | | X | | | | | | X (Chairman) | | | | Katherine M. Hudson | | | X (Chairperson) | | | | | | | | | | Arthur C. Martinez | | | X | | | | | | X | | | X | Dale F. Morrison | | | X | | | | | | | | | | Douglas D. Tough | | | | | | | | | | | | | Douglas D. Tough | | | | | | | | | | | | | | | | |
12
X = Committee memberBoard and Committee Meetings Risk Management Oversight
Our Board of Directors oversees the Company’s risk management processes and, pursuant to the charter of the Audit Committee, the Audit Committee assists the Board in reviewing and assessing with management this process, the Company’s risk profile, and the policies and procedures put in place to manage such risks, in particular as they relate to financial risk assessment and financial risk management.held seven meetings during 2012. The Audit Committee reports toheld nine meetings, the full Board, which considersCompensation Committee held five meetings and the Company’s risk profileNominating and its general risk management strategy. TheGovernance Committee held four meetings during 2012. Each of our directors attended at least 75% of the total meetings of the Board and the Audit Committee focusCommittees on which he or she served during 2012. All of our directors who were serving on the most significant risks facingday of last year’s annual meeting of shareholders attended that meeting in person or by teleconference, other than a director who retiredthat day. Under our Corporate Governance Guidelines, unless there are mitigating circumstances, such as medical, family or business emergencies, Board members should endeavor to participate (either in person or by telephone) in all Board meetings and all Committee meetings of which the Company, including operational risk, financial risk, credit riskdirector is a member and liquidity risk, as well asto attend our annual meeting of shareholders. Our non-employee directors, all of whom are currently independent, meet in executive session, without the Company’s general riskpresence of any corporate officer or member of management, strategy, and also seek to ensure that risks undertaken by the Company are consistentin conjunction with the Board’s approach to risk. Whileregular meetings of the Board oversees the Company’s risk management, Company management is primarily responsible forday-to-day risk management processes, and reports to either the fullCommittees. During 2012, our non-employee directors met in executive session as part of every regularly scheduled Board or the and Committee meeting. Audit Committee as requested by the Board, regarding these processes. We believe this division of responsibility is the most effective approach for addressing the Company’s risk management. For a discussion of our CompensationResponsibilities The Audit Committee’s role in risk management oversight in connection with our compensation structure for our executiveresponsibilities include overseeing and non-executive employees, see below under reviewing: the heading “Assessment of Incentive Risk”. Audit Committee
Our Audit Committee oversees and reviews the Company’s financial reporting process and the integrity of the Company’sour financial statements and related financial information, the Company’sinformation;
our internal control environment, systems and performance, performance; the audit process of the Company’sfollowed by our independent accountant and our internal auditors; the appointment, qualifications, independence appointment and performance of theour independent accountant and our internal auditors; the process by which we assess and performance of the Company’s internal audit function, the Company’s financial risk management processes,manage risk; and the procedures for monitoring compliance with laws and regulations and with the Company’sour Code of Business Conduct and Ethics. Our Board has determined that each of Mr. Howell, Ms. Hudson, Mr. Martinez and Mr. Morrison is an “audit committee financial expert” under applicable rules of the SEC and has accounting or related financial management expertise as required by applicable NYSE rules. The Board has also determined that all members of the Audit Committee meet the financial literacy standards of the NYSE. None of our Audit Committee members currently serves on the audit committee of more than three public companies. The Audit Committee has established, together with members of the Company’s management, a hiring policy for employees or former employees of the Company’s independent accountant, consistent with the requirements of the NYSE. Under procedures adopted by the Audit Committee, the Audit Committee also reviews and pre-approves all audit and non-audit services performed by the Company’sour independent accountant. The Audit Committee may, when it deems appropriate, delegate authoritycertain of its responsibilities to one or more Audit Committee members or subcommittees. Independence and Financial Expertise The Board reviewed the background, experience and independence of the Audit Committee members and based on this review, the Board determined that each member of the Audit Committee: meets the independence requirements of the NYSE’s corporate governance listing standards; meets the enhanced independence standards for audit committee members required by the Securities and Exchange Commission (“SEC”); and is financially literate, knowledgeable and qualified to review financial statements. In addition, the Board determined that each of Messrs. Howell, Martinez and Morrison and Ms. Hudson qualifies as an “audit committee financial expert” under SEC rules. Compensation CommitteeResponsibilities OurThe Compensation Committee is responsible for Committee’s responsibilities include: determining, subject to approval by the independent directors of the Board, the CEO’s compensation; establishing executive officer compensation, for making recommendationscompensation; recommending to the full Board concerning chief executive officer and director compensation and for overseeingany changes to the compensation and benefit programs for other employees. Processes and Procedures Regarding Compensation
Rolebenefits of the Compensation Committeedirectors; and
conducting a risk assessment of our executive compensation programs. Under our Compensation Committee’sits charter, the Compensation Committee is responsible for assisting the Board in ensuring that long termlong-term and short termshort-term compensation provide performance incentives to management, and that compensation plans are appropriate and competitive and reflect the goals and performance of management and theour Company. As discussed in more detail in this proxy statement under the heading
13
“Compensation “Compensation Discussion and Analysis”,Analysis,” the Compensation Committee considers as appropriate and as contemplated by Company policies, plans and programs, Company-wide performance against applicable annual and long termlong-term performance goals pre-established by the Compensation Committee. If the Compensation Committee deems it appropriate, it may delegate anycertain of its responsibilities to one or more Compensation Committee members or subcommittees.
TheIn addition, the Compensation Committee works with the Board, other Board committees and the Company’s senior management, and meets regularly in executive session, without Company management present. The Compensation Committee establishes an annual schedule for matters to be considered by it, including approving our senior executives’ performance objectives and taking compensation actions. The Compensation Committee makes recommendations to the Board concerning the compensation and benefits of non-employee directors, after reviewing and considering recommendations from its independent compensation consultant, and makes recommendations to the independent directors of the Board regarding the chief executive officer’s compensation. The Compensation Committee also reviews and adopts, and where necessary or appropriate, recommends for Boardand/or shareholder approval, our compensation and benefits policies, plans and programs, and amendments thereto, taking into account economic and business conditions, and comparative/competitivecomparative compensation and benefit performance levels. Eligible employees Independence The Board reviewed the background, experience and the type, amount and timingindependence of compensation and benefits under our compensation and benefits policies, plans and programs are also determined by the Compensation Committee. In fulfilling its responsibilities, the Compensation Committee conducts or authorizes studiesmembers and surveysbased on compensation practices in relevant industries to maintainthis review, the Company’s competitiveness and ability to recruit and to retain highly qualified personnel. At least every two years, with the assistanceBoard determined that each member of an experienced independent compensation consultant, the Compensation Committee: meets the independence requirements of the NYSE’s corporate governance listing standards; is an “outside director” pursuant to the criteria established by the Internal Revenue Service; and meets the enhanced independence standards for Compensation Committee conducts a surveymembers established by the SEC. Role of comparative/competitive executive officer compensation. Compensation Consultant The Compensation Committee is authorizedhas the sole authority to retain compensation consultants or advisors to assist it in evaluating CEO, senior executive and outsidenon-employee director compensation. The Compensation Committee has the sole authority to retain and to terminate any such consultants or advisors, including the sole authority to approve their fees and other retention terms. The Compensation Committee’s independentManagement also retains its own outside compensation consultant for 2010 was W.T. Haigh & Company. Assessment of Incentive Risk
consultants. In the fourth quarter of 2010, the Compensation Committee, working with its independent compensation consultant, conducted a risk assessment of the Company’s executive compensation programs. The goal of this assessment was to determine whether the general structure of the Company’s executive compensation policies and programs, annual and long term performance goalsand/or the administration of the programs posed any material risks to the Company. In addition, with the input of the Company’s Senior Vice President, Human Resources, the Committee reviewed compensation programs and policies below the executive level in a Company-wide risk assessment. The Committee shared the results of this review with our full Board of Directors as part of the Committee’s report to the Board. For 2011 compensation policies, programs and annual and long term performance goals, the Committee intends to follow this same approach. The Committee determined that the performance goals and incentive plan structures established in 2010 would not result in excessive risk that inappropriate business decisions or strategies would be made or implemented by our senior executivesand/or employees generally. The approved goals under our Annual Incentive Plan (“AIP”) and Long Term Incentive Plan (“LTIP”) (and similar programs established for non-executive employees) are entirely consistent with our financial plans and strategies and operating model reviewed with our Board, which monitors operational and financial performance and material business decisions and initiatives throughout the year. In addition, incentive awards have generally been made based on a review of achievement against certain financial metrics, which lessens the risk associated with relying on any single financial metric. We believe these factors encourage our executive officers to manage the Company in a prudent manner.
14
Role of Compensation Consultants
As discussed in more detail in this Proxy Statement under the heading “Compensation Discussion and Analysis — Role of Outside Advisors and Management”,2012, the Compensation Committee directly engaged W.T. Haigh & Company (“Haigh & Company”) as its independent compensation consultant to conduct a “benchmarking” survey in 2010.2012. The Compensation Committee also directly engaged W.T. Haigh & Company for recommendations on senior executive and non-employee director compensation in 2010 and continues to do so in 2011. Our CEO and our Senior Vice President, Human Resources work with the Compensation Committee and the Committee’s independent compensation consultant. W.T.2012. Haigh & Company does not provide any non-executive compensation relatedcompensation-related services to us. The Compensation Committee considered the Company. Management also retains its own outside compensation consultants. In 2010, management retained Steven Hallindependence of Haigh & Partners for advisory services in connection with executive compensation plans, including the Company’s post-employment benefits,Company and Buck Consultants for actuarial work, plan structure and similar services for the Company’s retirement plans.
determined that no conflicts of interest were raised.Role of Management Our Compensation Committee relies on management for legal, tax, compliance, finance and human resource recommendations, data and analysis for the design and administration of the Company’s compensation, benefits and perquisite programs for our senior executives. The Compensation Committee combines this information with the recommendations and information from its independent compensation consultant. Our CEO, andour Senior Vice President, Human Resources (“SVP HR”) and our Senior Vice President, General Counsel and Corporate Secretary (“General Counsel”) generally attend Compensation Committee meetings. Neither of them participates in any decisions relating to his or her own compensation. CEO performance and compensation are discussed by the Compensation Committee in executive session, with advice and participation from the Company’sCompensation Committee’s independent compensation consultant where and as requested by the Compensation Committee. Our CEO and Senior Vice President, Human Resources,SVP HR, without the presence of any other members of senior management, actively participate in the performance and compensation discussions for our senior executives, including making recommendations to the Compensation Committee as to the amount and form of compensation. Compensation Committee Interlocks and Insider Participation None of the members of the Compensation Committee was at any time during 2012 or at any other time an officer or employee of ours. None of our executive officers serves as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Compensation Committee. Nominating and Governance CommitteeResponsibilities OurThe Nominating and Governance Committee monitorsCommittee’s responsibilities include: developing and reviewing criteria for the selection of directors, and making recommendations to the Board composition and director qualification requirements, identifieswith respect thereto; identifying qualified individuals to serve on the Board, recommendsBoard; recommending to the Board a slate ofthe nominees to be proposed by the Board for election by the shareholdersas directors at the annual meeting of shareholders, reviews potential Board candidates (as further described below undershareholders; reviewing the heading “Director Candidates”), reviewsqualifications of director candidates; establishing and reviewing policies pertaining to roles, responsibilities, tenure and removal of directors; reviewing management succession plans and monitorsmonitoring corporate governance issues. In addition, this Committee has developed a process for conducting an annual evaluation of the effectiveness ofissues; overseeing the Board as a whole,evaluation process as well as for the annual CEO evaluation process; reviewing the contributionsand recommending changes to our Corporate Governance Guidelines; and reviewing and, if appropriate, approving transactions with related parties. The Nominating and Governance Committee may, when it deems appropriate, delegate certain of individual directors. Independence of Directorsits responsibilities to one or more Nominating and Governance Committee Members and Related Person Mattersmembers or subcommittees.Independence The Board has affirmatively determined that each current directorreviewed the background, experience and nominee for director, other than Mr. Tough, has no material relationship with the Company affecting his or her independence as a director, and that each is “independent” within the meaning of the Board’s independence standards, which areNominating and Governance Committee members and based on this review, the same categorical independence standards as established by the New York Stock Exchange in Section 303A.02 of the NYSE Listed Company Manual. In making each of these independence determinations, the Board considered and broadly assessed, from the standpoint of materiality and independence, all of the information provided by each director or nominee in response to detailed inquiries concerning his or her independence and any direct or indirect business, family, employment, transactional or other relationship or affiliation of such director with the Company. Our review of the information provided in response to these inquiries indicated that none of our independent directors engaged in any transactions, relationships or arrangements that might affect the determination of their independence or which would require Board review. The Board has also determined that each member of the Audit Committee, Compensation Committee and Nominating and Governance Committee meets the independence requirements of the NYSE’s corporate governance listing standards. Director Candidates Our Nominating and Governance Committee has established a policy regarding the consideration of director candidates, including candidates recommended by shareholders. The Nominating and Governance Committee, together with other Board members, from time to time, as appropriate, identifies the need for new Board members. Proposed director candidates who satisfy the criteria described below and who otherwise qualify for membership on the Board are identified by the Nominating and Governance Committee. In identifying candidates, the Nominating and Governance Committee seeks input and participation from other Board members and other appropriate sources so that all points of view are considered and the best possible candidates identified. The Nominating and Governance Committee may also engage a search firm to assist it in identifying potential candidates. Members of the Nominating and Governance Committee and other Board members, as appropriate, interview selected director candidates, evaluate the director candidates and determine which candidates are to be recommended by the Nominating and Governance Committee to the Board. Our Nominating and Governance Committee evaluates the suitability of potential candidates nominated by shareholders in the same manner as other candidates recommended to the Nominating and Governance Committee. Under our By-laws, if a shareholder wishes to submit a director candidate for consideration by the Nominating and Governance Committee, the shareholder must submit that recommendation to the Nominating and Governance Committee, c/o the Secretary of International Flavors & Fragrances Inc., in writing, not less than 90 days nor more than 120 days prior to the anniversary date of the prior year’s annual meeting of shareholders. The request must be accompanied by the information concerning the director candidate and nominating shareholder described in Article I, Section 3(d)(2) of our By-laws. The Nominating and Governance Committee may also request any additional background or other information from any director candidate or recommending shareholder as it may deem appropriate. Board candidates are considered based on various criteria which may change over time and as the composition of the Board changes. At a minimum, our Nominating and Governance Committee considers the following factors as part of its review of all director candidates and in recommending potential director candidates to the Board: judgment, character, expertise, skills and knowledge useful to the oversight of our business; diversity of viewpoints, backgrounds, experiences and other demographics; business or other relevant experience; and the extent to which the interplay of the candidate’s expertise, skills, knowledge and experience with that of other Board members will build a Board that is independent undereffective, collegial and responsive to our needs and to the requirements and standards of the NYSE and the SEC. To ensure independence and to provide the breadth of needed expertise and diversity of our Board, our By-laws currently require our Board to have twelve members. The Board periodically reviews its size and makes appropriate adjustments. While the Nominating and Governance Committee has not adopted a formal diversity policy with regard to the selection of director nominees, diversity is one of the factors that the Nominating and Governance Committee considers in identifying director nominees. As part of this process, the Nominating and Governance Committee evaluates how a particular candidate would strengthen and increase the diversity of the Board in terms of how that candidate may contribute to the Board’s overall balance of perspectives, backgrounds, knowledge, experience, skill sets and expertise in substantive matters pertaining to our business. The Nominating and Governance Committee also annually reviews each current Board member’s suitability for continued service as a member of our Board. In addition, in the event that a current director has a significant change in status, including changes in employment or skill set, the director is required to report that change to the Chairman of the Nominating and Governance Committee so that the Nominating and Governance Committee can review the change and make a recommendation to the full Board regarding the continued appropriateness of that director’s Board membership. Risk Management Oversight Board Role in Management of Risk Our Board is actively involved in the oversight and management of risks that could affect our Company. This oversight and management is conducted primarily through the Audit and Compensation Committees of the Board, but the full Board has retained responsibility for the general oversight of risks. While the Board oversees our risk management, our management is primarily responsible for day-to-day risk management processes, and reports to the full Board and the Audit and Compensation Committees regarding these
15
independence standardsManagement maintains an enterprise risk management (“ERM”) process which is designed to identify and assess our global risks and to develop steps to mitigate and manage risks. The Board receives regular reports on the ERM process. The Board and the Audit Committee focus on the most significant risks facing us, including operational risk, financial risk, litigation risk, tax risk, credit risk and liquidity risk, as well as our general risk management strategy, and how these risks are being managed. The Audit Committee is primarily responsible for assisting the Board in reviewing and assessing with management our ERM process, our risk profile and our policies and practices with respect to each member of the Auditrisk assessment and risk management, in particular as they relate to financial risk. The Compensation Committee is also independent underprimarily responsible for managing risks associated with compensation policies and practice, our compensation plans (including equity compensation plans and programs), severance, change in control and other employment-related matters.Compensation Risks In the independence criteria required by the SEC for audit committee members and, with respect to each memberfourth quarter of 2012, the Compensation Committee, is an “outside director” pursuantworking with its independent compensation consultant, conducted a risk assessment of our executive compensation programs. The goal of this assessment was to determine whether the criteriageneral structure of our executive compensation policies and programs, annual and long-term performance goals or the administration of the programs posed any material risks to our Company. In addition, with the input of our SVP HR, the Compensation Committee reviewed compensation programs and policies below the executive level in a Company-wide risk assessment. The Compensation Committee shared the results of this review with our full Board of Directors. The Compensation Committee determined that the performance goals and incentive plans in place during 2012 did not result in excessive risk that inappropriate business decisions or strategies would be made or implemented by our senior executives or employees generally. The approved goals under our Annual Incentive Plan (“AIP”) and Long-Term Incentive Plan (“LTIP”) (and similar programs established for non-executive employees) are consistent with our financial plans and strategies and operating model that have been reviewed and approved by our Board. In addition, incentive awards have generally been made based on a review of achievement against multiple financial metrics, which lessens the Internal Revenue Service and isrisk associated with relying on any single financial metric. We believe these factors encourage our executive officers to manage our Company in a “non-employee director” pursuant to criteria established by the SEC. prudent manner.Related Person Transactions Our Board of Directors has adopted a written policy for the review and the approval or ratification of any related person transaction. This policy is available through the Investor RelationsInvestors — Corporate Governance link on the Company’sour website,www.iff.com. www.iff.com. The policy defines “related person” and “related person transaction” in a detailed manner. Under the policy, a related person transaction requires the approval or ratification of the Nominating and Governance Committee. The Audit Committee will be consulted if accounting issues are involved in the transaction. Under the policy, a related person transaction will be approved or ratified only if the Nominating and Governance Committee determines that it is being entered into in good faith and on fair and reasonable terms which are in the best interest of theour Company and itsour shareholders. No related person may participate in the review of a transaction in which he or she may have an interest. In addition, except for non-discretionary contributions made pursuant to the Company’sour matching contributions program, a charitable contribution by theour Company to an organization in which a related person is known to be an officer, director or trustee, will beis subject to approval or ratification under the policy by the Nominating and Governance Committee. There were no “related person transactions” sincein 2012 in excess of $120,000 in which the beginning of 2010Company was a participant involving any director, director nominee or executive officer of theour Company, any known 5% or greater shareholder of the Company or any immediate family member of any of the foregoing persons (together “related persons”). A “related person transaction” generally means a transaction involving more than $120,000 in which the Company is a participant and in which a related person has a direct or indirect material interest under SEC rules. Board and Committee Meetings
Our Board of Directors held six meetings during 2010. The Audit Committee held six meetings, the Compensation Committee held six meetings and the Nominating and Governance Committee held six meetings during 2010. Each of our directors attended at least 75% of the total meetings of the Board and Committees on which he or she served during 2010. All of our directors who were serving on the day of last year’s Annual Meeting attended that meeting, other than a director who retired that day. Under our Corporate Governance Guidelines, unless there are mitigating circumstances, such as medical, family or business emergencies, Board members should endeavor to participate in person in all Board meetings and all Committee meetings of which the director is a member and to attend the Company’s annual meeting of shareholders. The non-management directors of the Company, all of whom are currently independent, meet in executive session, without the presence of any corporate officer or member of management, in conjunction with regular meetings of the Board. During 2010, the non-management directors met in executive session as part of every Board meeting.
Shareholder Communications
Shareholders and other parties interested in communicating directly with the Lead Director, the non-management directors as a group or all directors as a group, may do so by writing to the Lead Director or the Non-Management Directors or the Board of Directors, in each case,c/o Secretary, International Flavors & Fragrances Inc., 521 West 57th Street, New York, New York 10019. The Nominating and Governance Committee has approved a process for handling letters received by the Company and addressed to the Lead Director, the non-management members of the Board or the entire Board. Under that process, the Secretary of the Company forwards to the Lead Director all correspondence received, without opening or screening.
16
Director Candidates
Our Nominating and Governance Committee has established a policy regarding the consideration of director candidates, including candidates recommended by shareholders. The Nominating and Governance Committee, together with other Board members, will from time to time, as appropriate, identify the need for new Board members. Proposed director candidates who would satisfy the criteria described below and who otherwise qualify for membership on the Board are identified by the Nominating and Governance Committee. In identifying candidates, the Nominating and Governance Committee seeks input and participation from other Board members and other appropriate sources so that all points of view can be considered and so that the best possible candidates can be identified. The Nominating and Governance Committee may also engage a search firm to assist it in identifying potential candidates. Members of the Nominating and Governance Committee and other Board members, as appropriate, will interview selected director candidates, evaluate the director candidates and determine which candidates are to be recommended by the Nominating and Governance Committee to the Board.
Under the Company’s policy regarding director candidates, if a shareholder wishes to submit a director candidate for consideration by the Nominating and Governance Committee, the shareholder must submit that recommendation to the Nominating and Governance Committee,c/o the Secretary of the Company, in writing, not less than 120 days nor more than 150 days prior to the anniversary date of the prior year’s annual meeting. The request must be accompanied by the same information concerning the director candidate and nominating shareholder as described in Article I, Section 3(a) of the Company’s By-laws for shareholder nominations for director to be presented at an annual shareholders meeting. The Nominating and Governance Committee may also request any additional background or other information from any director candidate or recommending shareholder as it may deem appropriate.
Board candidates are considered based on various criteria which may change over time and as the composition of the Board changes. At a minimum, our Nominating and Governance Committee considers the following factors as part of its review of all director candidates and in recommending potential director candidates to the Board:
| | | | • | Judgment, character, expertise, skills and knowledge useful to the oversight of the Company’s business; | | | • | Diversity of viewpoints, backgrounds, experiences and other demographics; | | | • | Business or other relevant experience; and | | | • | The extent to which the interplay of the candidate’s expertise, skills, knowledge and experience with that of other Board members will build a Board that is effective, collegial and responsive to the needs of the Company and to the requirements and standards of the NYSE and the SEC. |
To ensure independence and to provide the breadth of needed expertise and diversity of our Board, our Corporate Governance Guidelines require our Board to be comprised of between seven and thirteen members. The Board periodically reviews its size and makes appropriate adjustments. While the Nominating and Governance Committee has not adopted a formal diversity policy with regard to the selection of director nominees, diversity is one of the factors that the Committee considers in identifying director nominees. As part of this process, the Committee evaluates how a particular candidate would strengthen and increase the diversity of the Board in terms of how that candidate may contribute to the Board’s overall balance of perspectives, backgrounds, knowledge, experience, skill sets and expertise in substantive matters pertaining to the Company’s business. The Committee also annually reviews each current board member’s suitability for continued service as a director of the Company. In addition, in the event that a current director has a significant change in status, including changes that may impact the diversity of the Board, such as changes in employment or skill set, the director is required to report that change to the Board so that the Nominating and Governance Committee can review the change and make a recommendation to the full Board regarding the continued appropriateness of that director’s Board membership.
17
Code of Business Conduct and Ethics We have adopted a Code of Business Conduct and Ethics (the “Code”“Code of Ethics”) that applies to all of our chief executive officer,employees, including our CEO and our principal financial officer (who is also our principal accounting officerofficer). We have also adopted a Code of Conduct for Directors and to all other Company directors, officers and employees. A copya Code of Conduct for Executive Officers (together with the Code isof Ethics, the “Codes”). The Codes are available through the Investor RelationsInvestors — Corporate Governance link on our website,www.iff.com. www.iff.com. Only the Board of Directors or the Audit Committee of the Board may grant a waiver from any provision of the Codeour Codes in favor of a director or executive officer, and any such waiver and any amendments to the Codes will be publicly disclosed. Thedisclosed on our website, www.iff.com. Share Retention Policy We encourage our executives to own our common stock so that they share the same long-term investment risk as our shareholders. Under our Share Retention Policy, each executive must retain shares of Company will disclose substantive amendments to andcommon stock based on a targeted ownership level. There is no deadline by which an executive must meet his or her retention requirement. However, until the retention requirement is met, the executive must retain a portion (50%, in the case of the executive officers named in this proxy statement (or “NEOs”)) of any waiversshares of common stock acquired from the Code grantedexercise of a stock option or stock settled appreciation rights or the vesting of restricted stock or restricted stock units (after payment of any exercise price and taxes). The targeted ownership levels are (1) the lesser of shares equal in value to five times base salary or 120,000 shares for our CEO, (2) the Company’s chieflesser of shares equal in value to three times base salary or 35,000 shares for our CFO and Group Presidents, and (3) the lesser of shares equal in value to two times base salary or 20,000 shares for our SVP, General Counsel. In determining compliance with the retention requirement, we count all outstanding shares owned by the executive, officer, principalvalued at the closing stock price of our common stock as of the date of calculation, and all outstanding purchased restricted stock held by the executive at the purchase price. These ownership levels provide executives flexibility in personal financial officerplanning, yet require them to maintain ongoing and substantial investment in our common stock. As of February 22, 2013, all of our NEOs met their individual stock ownership requirements. Additional detail regarding ownership of our common stock by our executives is included in this proxy statement under the heading “Securities Ownership of Management, Directors and Certain Other Persons.” Policy Regarding Derivatives, Short Sales, Hedging and Pledges Under our insider trading policy, directors and executive officers, including our NEOs, are prohibited from entering into transactions designed to hedge against economic risks associated with an investment in our common stock. These individuals may not trade in derivatives in our securities (such as put and call options), effect “short sales” of our common stock, or principal accounting officer,enter into monetization transactions or similar arrangements (such as wellprepaid variable forwards, equity swaps, collars or exchange funds) relating to our securities. These individuals are also prohibited from holding shares of our common stock in margin accounts or pledging shares of our common stock as any other executive officer or director, on the Company’s website, www.iff.com.
18collateral for a loan.
IV. DIRECTORS’ COMPENSATION Annual Director Cash and Equity Compensation Each non-employee director who served during 2010 received an annual retainer of $175,000$200,000 relating to the service year from the 20102012 Annual Meeting of Shareholders (the “2012 Annual Meeting”) to the 20112013 Annual Meeting. Of this amount, we paid $75,000$100,000 in cash in November 2012, and we paid $100,000 in Restricted Stock Units (“RSUs”) issued under our shareholder-approved stock award and incentive plan on the date of the 20102012 Annual Meeting of Shareholders.Meeting. The RSUs vest on the third anniversary of the grant date and are subject to accelerated vesting upon a change in control. The number of1,655 RSUs granted 1,987,to each director on the date of the 2012 Annual Meeting was based oncalculated using the closing market price of the Company’sour common stock on the grant date. Once the RSUs vest, each non-employee director is required to defer all of the vested RSUs under our Deferred Compensation Plan (“DCP”) until he or she separates from service on our Board of Directors. Given that RSUs will be deferred until each director’s separation from service and each director’s stock ownership will increase during his or her term of service, there are no specified minimum share ownership requirements applicable to our directors. Any director who is an employee of theour Company does not receive any additional compensation for his or her service as a director. The $75,000 cash portion of Mr. Tough’s annual retainerOur Compensation Committee has not recommended any changes to the compensation we pay to our non-employee directors for service as a non-employee director from the date of the 2009 Annual Meeting of Shareholders until he became our CEO on March 1, 2010 was prorated based on the number of days he served as a non-employee director. In 2010, the Company paid $12,123 in cash to Mr. Tough for his service as a non-employee director (with the remainder of $50,959 having been paid to him in 2009). 2013.Annual Committee Chair and Lead Director Compensation During 2010,2012, the ChairpersonChair of each of the Audit Committee and Compensation Committee and the Lead Director received an annual cash retainer of $15,000 in addition to the annual retainer described above. The Chair of the Nominating and Governance Committee received an annual cash retainer of $15,000. The Chairperson of each of the$10,000. Our Compensation Committee and Nominating and Governance Committee each received an annual cash retainer of $10,000. The Lead Director received an annual cash fee of $15,000. has not recommended any changes to these amounts for 2013.Participation in the Company’sour Deferred Compensation Plan Non-employee directors are eligible to participate in our Deferred Compensation Plan (“DCP”).DCP. In addition to mandatory deferral of vested RSUs granted in orand after 2008, a non-employee director may defer all or a portion of his or her cash compensation, as well as any RSUs granted to him or her prior to 2008, subject to tax law requirements. Additional details regarding our DCP may be found in this Proxy Statementproxy statement under the heading “Non-Qualified“Executive Compensation — Non-Qualified Deferred Compensation”.Compensation.” Non-employee directors are not entitled to matching contributions or the 25% premium on deferrals into our common stock fund that are applicable to employees, as described in that section. Earnings on any deferrals into the interest bearing account of the DCP were not above market and thus are not included in the Director Compensation Table below. We reimburse our non-employee directors for travel and lodging expenses incurred in connection with their attendance at Board and Committee meetings, our shareholder meetings and other Company-related activities. In addition, each current and former director including any former employee directors, who began service as a director before May 14, 2003 is eligible to participate in our Director Charitable Contribution Program (“DCCP”). Under the DCCP, directors arewere paired together and theour Company purchased joint life insurance policies on the lives of each paired set of participating directors. The Company isWe are the owner and sole beneficiary of the policies and isare responsible for payment of any premiums. In 2009, the insurance policies were restructured so that no further premiums are required. Assuming no changes to the current Federal tax laws relating to charitable contributions, and if certain other assumptions are met, the Company expectswe expect to recover all of the premium costs that have been paid by the Companyus and the after-tax cost of the Company’sour anticipated charitable contributions pursuant to this program. After a covered director dies, the Companywe will donate $500,000 to one or more qualifying charitable organizations previously designated by the deceased director.
19
Directors first elected on or after May 14, 2003 do not participate in the DCCP. However, all current directors, including those who participate in our DCCP, are eligible to participate in our Matching Gift Program. Under this Program, it is The IFF Foundation’s intent toprogram, we match, on a dollar for dollar basis, contributions made by directors to qualifying charitable organizations up to a maximum of $10,000 per person per year. Changes to Directors’ Compensation for 2011
In December 2010, our Board of Directors, based on the recommendation of the Compensation Committee’s independent compensation consultant and the Compensation Committee, approved an increase in the cash portion of the annual retainer for non-employee directors from $75,000 to $100,000, effective with the service term commencing as of the date of the 2011 Annual Meeting. The increase in cash retainer was made based on the fact that (i) the director’s retainer has not been increased since 2007 and (ii) the total retainer was positioned below the median versus the Consumer Peer Group based on a November 2010 review conducted by the independent consultant. The Board also approved an increase in the annual retainer of the Chairman of the Compensation Committee, from $10,000 to $15,000, effective as of the date of the 2011 Annual Meeting. This change was made to reflect the increasing service requirements of our Compensation Committee Chairman and to reflect peer company practices for Compensation Committee Chairperson compensation.
The following table details the compensation paid to or earned by our non-employee directors for the year ended December 31, 2010. 2012.20102012 Directors’ Compensation
| | | | | | | | | | | | | | | | | | | | | | | | | | | Stock
| | Option
| | All Other
| | | | | | Fees Earned or
| | Awards
| | Awards
| | Compensation
| | | | Name(1) | | Paid in Cash ($)(2) | | ($)(3)(4) | | ($)(5) | | ($) | | Total ($) | | (a) | | (b) | | (c) | | (d) | | (g) | | (h) | | | | Margaret Hayes Adame | | $ | 75,014 | | | $ | 94,124 | | | $ | 0 | | | $ | 0 | | | $ | 169,138 | | | Marcello Bottoli | | $ | 75,014 | | | $ | 94,124 | | | $ | 0 | | | $ | 0 | | | $ | 169,138 | | | Linda B. Buck | | $ | 75,014 | | | $ | 94,124 | | | $ | 0 | | | $ | 0 | | | $ | 169,138 | | | J. Michael Cook | | $ | 85,014 | | | $ | 94,124 | | | $ | 0 | | | $ | 10,000 | (6) | | $ | 189,138 | | | Roger W. Ferguson, Jr. | | $ | 75,014 | | | $ | 94,124 | | | $ | 0 | | | $ | 0 | | | $ | 169,138 | | | Peter A. Georgescu | | $ | 85,014 | | | $ | 94,124 | | | $ | 0 | | | $ | 10,000 | (6) | | $ | 189,138 | | | Alexandra A. Herzan | | $ | 75,014 | | | $ | 94,124 | | | $ | 0 | | | $ | 10,000 | (6) | | $ | 179,138 | | | Henry W. Howell, Jr. | | $ | 90,014 | | | $ | 94,124 | | | $ | 0 | | | $ | 9,000 | (6) | | $ | 193,138 | | | Katherine M. Hudson | | $ | 75,014 | | | $ | 94,124 | | | $ | 0 | | | $ | 0 | | | $ | 169,138 | | | Arthur C. Martinez | | $ | 90,014 | | | $ | 94,124 | | | $ | 0 | | | $ | 0 | | | $ | 184,138 | | | Burton M. Tansky(7) | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
| | | | | | | | | | | | | | | | | | | | | Name | | Fees Earned or
Paid in Cash($)(1) | | | Stock
Awards
($)(2)(3)(4) | | | Option
Awards
($)(2)(5) | | | All Other
Compensation
($)(6) | | | Total ($) | | Margaret Hayes Adame (7) | | | 23 | | | | — | | | | — | | | | — | | | | 23 | | Marcello V. Bottoli | | | 100,055 | | | | 93,805 | | | | — | | | | 6,740 | | | | 200,600 | | Linda B. Buck | | | 100,055 | | | | 93,805 | | | | — | | | | — | | | | 193,860 | | J. Michael Cook | | | 115,055 | | | | 93,805 | | | | — | | | | 10,000 | | | | 218,860 | | Roger W. Ferguson, Jr. | | | 100,055 | | | | 93,805 | | | | — | | | | 10,000 | | | | 203,860 | | Andreas Fibig | | | 100,055 | | | | 93,805 | | | | — | | | | — | | | | 193,860 | | Alexandra A. Herzan | | | 100,055 | | | | 93,805 | | | | — | | | | 5,000 | | | | 198,860 | | Henry W. Howell, Jr. | | | 110,055 | | | | 93,805 | | | | — | | | | 10,000 | | | | 213,860 | | Katherine M. Hudson | | | 115,055 | | | | 93,805 | | | | — | | | | 10,000 | | | | 218,860 | | Arthur C. Martinez | | | 115,055 | | | | 93,805 | | | | — | | | | 10,000 | | | | 218,860 | | Dale F. Morrison | | | 100,055 | | | | 93,805 | | | | — | | | | 10,000 | | | | 203,860 | |
| | | | (1) | | Compensation paid to our CEO Douglas D. Tough for his service as a non-employee director of the Company during 2010 is included in the Summary Compensation Table and is not included in this table. | | (2) | | The amounts in this column include (i) the annual cash retainer for service as a non-employee director, (ii) for certain directors, the annual cash retainer for service as Lead Director or as chairperson of a Board committee during 2012, and (iii) nominal amounts of cash paid in lieu of fractional shares of common stock. Of the amounts in this column, the following amounts were deferred in 20102012 under our Deferred Compensation Plan:Plan, or DCP: Mr. Cook — $85,014,$115,055; Mr. Ferguson, Jr. — $75,014,$100,055; Mr. GeorgescuFibig — $85,014,$50,028; Mr. Howell — $90,014.$110,055; and Mr. Morrison — $100,055. Earnings in our DCP were not above-market or preferential and thus are not reported in this table. |
| (3) | (2) | The amounts in the Stock Awards and Option Awards columns represent the aggregate grant date fair value of equity awards granted during the fiscal year ended December 31, 2010,2012, computed in accordance with FASB ASC Topic 718. Details on and assumptions used in calculating the grant date fair value of RSUs and options may be found in Note 11 to the Company’sour audited financial statements for the year ended December 31, 20102012 included in the Company’sour Annual Report onForm 10-K filed with the SEC on February 24, 2011.26, 2013. |
20
| | | (4) | (3) | Each director (other than Mr. Tansky)Mrs. Adame) received a grant on April 27, 2010May 1, 2012 of 1,9871,655 RSUs under our 2010 Stock Award and Incentive Plan. None of our Directors forfeited any RSUs or shares of deferred stock during 2010.2012. |
| | (4) | | OnAs of December 31, 2010,2012, our directors held the following number of unvested RSUs and shares of deferred common stock: Mrs. Adame: 7,472 RSUs and 10,104 deferred shares, Mr. Bottoli: 7,472 RSUs and 1,522 deferred shares, Dr. Buck: 7,472 RSUs and 1,522 deferred shares, Mr. Cook: 7,472 RSUs and 11,373 deferred shares, Mr. Ferguson: 1,987 RSUs and 0 deferred shares, Mr. Georgescu: 7,472 RSUs and 27,080 deferred shares, Mrs. Herzan: 7,472 RSUs and 6,471 deferred shares, Mr. Howell: 7,472 RSUs and 18,186 deferred shares, Ms. Hudson: 6,569 RSUs and 0 deferred shares, Mr. Martinez: 7,472 RSUs and 22,110 deferred shares, Mr. Tansky: 5,485 RSUs and 0 deferred shares. | | | | The deferred shares, which are held under the DCP, result from deferral of vested equity grants, voluntary deferral of retainer fees or the crediting of additional share units as a result of reinvestment of dividend equivalents. Deferred shares will be settled by delivery of common stock upon the director’s separation from service on the Board of Directors, or, in the case of voluntary deferrals, as otherwise elected by the director. All of the deferred shares are included for each director in the Beneficial Ownership Table. | |
| | | | | | | | | Director | | RSUs | | | Deferred
Stock | | Margaret Hayes Adame | | | 3,572 | | | | — | | Marcello V. Bottoli | | | 5,227 | | | | 7,220 | | Linda B. Buck | | | 5,227 | | | | 7,220 | | J. Michael Cook | | | 5,227 | | | | 17,535 | | Roger W. Ferguson, Jr. | | | 5,227 | | | | — | | Andreas Fibig | | | 3,504 | | | | — | | Alexandra A. Herzan | | | 5,227 | | | | 12,401 | | Henry W. Howell, Jr. | | | 5,227 | | | | 28,237 | | Katherine M. Hudson | | | 5,227 | | | | 4,675 | | Arthur C. Martinez | | | 5,227 | | | | 28,777 | | Dale F. Morrison | | | 3,504 | | | | 780 | |
The deferred shares, which are held under the DCP, result from deferral of vested equity grants, voluntary deferral of retainer fees or the crediting of additional share units as a result of reinvestment of dividend equivalents. Deferred shares will be settled by delivery of common stock upon the director’s separation from service on the Board, or, in the case of voluntary deferrals, as otherwise elected by the director. All of the deferred shares are included for each director in the Beneficial Ownership Table. | (5) | | We did not grant any options to our directors in 2010.2012. None of the options held by any director expired or were forfeited during 2010.2012. On December 31, 2010, our2012, the following directors held the following number of outstanding options:options indicated as of December 31, 2012: Mr. Cook - 6,000; Mrs. Adame: 12,000 options, Mr. Bottoli: 0 options, Dr. Buck: 0 options, Mr. Cook: 12,000 options, Mr. Georgescu: 9,000 options,Herzan - 6,000; and Mrs. Herzan: 6,000 options, Mr. Howell: 0 options, Ms. Hudson: 0 options, Mr. Martinez: 6,000 options and Mr. Tansky: 3,000 options.Adame - 6,000. | |
| (6) | | This amount represents a matching charitable contribution paidThe amounts in this column are contributions made by the Company during 2010us under the Company’sour Matching Gift Program.Program to eligible charitable organizations matching contributions of the director to those charitable organizations during 2012. | |
| (7) | | Mr. TanskyMrs. Adame retired as a member of our Board of Directors effective as of our 20102012 Annual Meeting date. His fees for service as a director during 2010 were paid in 2009. |
21
V. SECURITIES OWNERSHIP OF MANAGEMENT, DIRECTORS
AND CERTAIN OTHER PERSONS Beneficial Ownership Table Directors and Executive Officers The following table sets forth certain information regarding the beneficial ownership of the Company’s Common Stockour common stock as of March 3, 2011,February 22, 2013, by each current director and nominee for director, the persons named in the Summary Compensation Table in this Proxy Statementproxy statement and all current directors and executive officers as a group. | | | | | | | | | | | | | | | | | | | | Rights to Acquire
| | | | | | | | | | | Beneficial
| | | | | | | | Shares of
| | | Ownership of
| | | | | | | | Common Stock
| | | Shares of
| | | | | | | | Beneficially
| | | Common Stock
| | | Percent
| | | | | Owned(1) | | | (2) | | | of Class | | | | | Margaret Hayes Adame | | | 14,604 | | | | 12,000 | | | | (3 | ) | | Kevin C. Berryman | | | 35,026 | | | | 0 | | | | (3 | ) | | Marcello Bottoli | | | 1,522 | | | | 0 | | | | (3 | ) | | Linda B. Buck | | | 1,522 | | | | 0 | | | | (3 | ) | | Angelica T. Cantlon | | | 28,761 | | | | 0 | | | | (3 | ) | | J. Michael Cook | | | 13,373 | | | | 12,000 | | | | (3 | ) | | Roger W. Ferguson, Jr. | | | 0 | | | | 0 | | | | (3 | ) | | Beth E. Ford | | | 27,862 | | | | 0 | | | | (3 | ) | | Peter A. Georgescu | | | 40,580 | | | | 9,000 | | | | (3 | ) | | Alexandra Herzan | | | 813,792 | (4) | | | 6,000 | | | | 1.01 | % | | Henry W. Howell, Jr. | | | 19,186 | | | | 0 | | | | (3 | ) | | Katherine M. Hudson | | | 2,500 | | | | 0 | | | | (3 | ) | | Arthur C. Martinez | | | 25,860 | | | | 6,000 | | | | (3 | ) | | Nicolas Mirzayantz | | | 79,621 | | | | 0 | | | | (3 | ) | | Douglas D. Tough | | | 58,896 | | | | 0 | | | | (3 | ) | | Hernan Vaisman | | | 47,537 | | | | 0 | | | | (3 | ) | | Dennis M. Meany(5) | | | 88,742 | | | | 0 | | | | (3 | ) | | Burton M. Tansky(6) | | | 8,143 | | | | 3,000 | | | | (3 | ) | | All Directors and Executive Officers as a Group (18 persons)(7) | | | 1,221,383 | | | | 45,000 | | | | 1.61 | % |
See footnotes on the following page.
22
Certain Other Owners
The following table sets forth information regarding each person known by us to be the beneficial owner of more than 5% of the Company’s outstanding Common Stock To our knowledge, except as of March 3, 2011 based on a review of filings with the SEC. Unless otherwise indicated, beneficial ownership is direct.
| | | | | | | | | | | | | | | | | | | | | | | | | Number of Shares and Nature of Beneficial Ownership | | | | Sole
| | Shared
| | Sole
| | Shared
| | | | | | Voting
| | Voting
| | Investment
| | Investment
| | Percent
| Name and Address of Beneficial Owner | | Power | | Power | | Power | | Power | | of Class | | | | BlackRock Inc.(8) | | | 4,686,587 | | | | 0 | | | | 4,686,587 | | | | 0 | | | | 5.86 | % | 40 East 52nd Street
New York, NY 10022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | T. Rowe Price Associates, Inc.(9) | | | 1,482,409 | | | | 0 | | | | 6,582,623 | | | | 0 | | | | 8.20 | % | 100 E. Pratt Street
Baltimore, MD 21202 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The Vanguard Group, Inc.(10) | | | 101,130 | | | | 0 | | | | 3,992,695 | | | | 101,130 | | | | 5.12 | % | 100 Vanguard Blvd.
Malvern, PA 19355 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Name and Address of Beneficial Owner(1) | | Shares of
Common Stock
Beneficially
Owned(2) | | | Rights to Acquire
Beneficial
Ownership of
Shares of
Common Stock(3) | | | Percent of
Class** | | Kevin C. Berryman | | | 64,687 | | | | 18,883 | | | | * | | Marcello V. Bottoli | | | 7,220 | | | | — | | | | * | | Linda B. Buck | | | 7,220 | | | | — | | | | * | | Anne Chwat | | | 30,853 | | | | 2,471 | | | | * | | J. Michael Cook | | | 21,997 | (4) | | | 6,000 | | | | * | | Roger W. Ferguson, Jr. | | | — | | | | — | | | | * | | Andreas Fibig | | | — | | | | — | | | | * | | Christina Gold | | | — | | | | — | | | | * | | Alexandra Herzan | | | 819,722 | (5) | | | 6,000 | | | | 1.0 | % | Henry W. Howell, Jr. | | | 29,237 | | | | — | | | | * | | Katherine M. Hudson | | | 7,175 | | | | — | | | | * | | Arthur C. Martinez | | | 32,527 | | | | — | | | | * | | Nicolas Mirzayantz | | | 74,276 | | | | 12,088 | | | | * | | Dale F. Morrison | | | 780 | | | | — | | | | * | | Douglas D. Tough | | | 166,796 | | | | 53,956 | | | | * | | Hernan Vaisman | | | 28,866 | | | | 22,187 | | | | * | | All Directors and Executive Officers as a Group (20 persons) | | | 1,399,676 | | | | 134,898 | | | | 1.9 | % |
| ** | Based on 81,518,800 shares of common stock outstanding. |
| (1) | The address of each person named in the table is c/o International Flavors & Fragrances Inc., 521 West 57th Street, New York, New York 10019. |
| (2) | This column includes (i) share unit balances held in the IFF Stock Fund under our Deferred Compensation PlanDCP credited to participants’ accounts (where applicable) and, for executive officers may include certain premium share units held under that plan as well as unvestedthe DCP, (ii) shares held in our 401(k) Retirement Investment Fund Plan and (iii) shares of Purchased Restricted Stock. PremiumStock (“PRS”). Shares of PRS and premium share units held by executives in the IFF Stock Fund under our DCP are subject to vesting and may be forfeited if the participant’s employment is terminated. |
| (2)(3) | | TheThis column reflects the number of shares listed in this column are those whichof common stock that the named person has (or will have within 60 days after March 3, 2011) the right to acquire pursuant to options, RSUs and stock-settled appreciation rights (“SSARs”) that are exercisable or vest within 60 days of February 22, 2013. The number of shares of common stock that could be obtained from SSARs is estimated by dividing (1) the aggregate appreciation in share price (calculated by multiplying the number of outstanding SSARs which can be exercised within 60 days of February 22, 2013 by the difference between (i) the closing price of our common stock on February 22, 2013 ($72.46) and (ii) the SSAR exercise price), by (2) the closing price of our common stock options granted byon February 22, 2013. This column also reflects shares earned under the Company.completed 2010-2012 LTIP cycle that have not yet been issued. | | (3) | | Less than 1%. | |
| (4) | Includes 4,362 shares held by The 2012 Cook Grandchildren’s Trust, of which Mr. Cook’s spouse is trustee. Mr. Cook disclaims beneficial ownership of these shares, and the inclusion in this table of the shares held by the trust shall not be deemed an admission by Mr. Cook of beneficial ownership of the shares. |
| (5) | Mrs. Herzan is a director of the van Ameringen Foundation, Inc., which owns 274,673 shares, President, Treasurer and a director of the Lily Auchincloss Foundation, which owns 11,000 shares, a trustee and a beneficiary of a trust which holds 519,581 shares, and a trustee and a beneficiary of a trust which owns 567 shares, all of which shares are included in Mrs. Herzan’s ownership. Mrs. Herzan disclaims beneficial ownership of the shares owned by the van Ameringen Foundation, Inc. and the Lily Auchincloss Foundation. She directly owns 1,500Foundation and the inclusion in this table of these shares shall not be deemed an admission by Mrs. Herzan of beneficial ownership of these shares. |
Certain Other Owners The following table sets forth information regarding each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, as of February 22, 2013, based on a review of filings with the SEC. Unless otherwise indicated, beneficial ownership is direct. | | | | | | | | | | | | | | | | | | | | | | | | Number of Shares and Nature of Beneficial Investment Ownership | | Name and Address of Beneficial Owner | | Sole
Voting
Power | | | Shared
Voting
Power | | | Sole
Investment
Power | | | Shares
Investment
Power | | | Percent
of Class** | | BlackRock, Inc. (1) 40 East 52nd Street New York, NY 10022 | | | 5,396,303 | | | | — | | | | 5,396,303 | | | | — | | | | 6.6 | % | | | | | | | Capital Research Global Investors (2) 333 South Hope Street Los Angeles, CA 90071 | | | 5,321,500 | | | | | | | | 5,321,500 | | | | | | | | 6.5 | % | | | | | | | Massachusetts Financial Services Company (3) 111 Huntington Avenue Boston, MA 02199 | | | 5,570,548 | | | | — | | | | 6,676,359 | | | | — | | | | 8.2 | % | | | | | | | The Vanguard Group, Inc. (4) 100 Vanguard Blvd. Malvern, PA 19355 | | | 146,776 | | | | — | | | | 4,635,031 | | | | 137,824 | | | | 5.9 | % |
| (5) | ** | Based on a Form 581,518,800 shares of common stock outstanding. |
| (1) | This amount is based solely on Amendment No. 3 to Schedule 13G filed with the SEC on February 8, 2011 and other information available to the Company.6, 2013. |
| (6)(2) | | BasedThis amount is based solely on a Form 4Schedule 13G filed with the SEC on April 29, 2010 and other information available to the Company.February 13, 2013. |
| (7)(3) | | Excluding Mr. Meany, whoThis amount is no longer employed by the Company, and Mr. Tansky, who retired from his directorship. | | (8) | | As reported in Schedule 13G/A dated as of February 4, 2011. | | (9) | | As reported in Schedule 13G/A dated as of February 10, 2011. | | (10) | | As reported inbased solely on Schedule 13G dated as offiled with the SEC on February 10, 2011.12, 2013. |
23
| (4) | This amount is based solely on Amendment No. 2 to Schedule 13G filed with the SEC on February 11, 2013. |
VI. PROPOSAL II — RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers to file reports of their initial holdings of IFF common stock and any subsequent transactions in Company shares with the SEC and to provide the Company with copies of all such filings. The Company must report any failures to file by the required dates. Based on a review of our 2010 records we believe that our directors and officers who were subject to Section 16 met all applicable filing requirements.
Directors and Officers Indemnification and Insurance
Our By-laws provide for the indemnification of our officers and directors against certain liabilities that could potentially be incurred by them in connection with the performance of their duties to the Company and its subsidiaries. Our By-laws authorize the Company to provide indemnification and advancement rights by separate agreement to certain persons, including our officers and directors, and our Board has approved a form of indemnification agreement to be entered into with each of our directors and officers. The Company also maintains directors and officers liability indemnification insurance coverage. This insurance covers director and officers individually where exposures exist, other than those for which the Company is able to provide direct or indirect indemnification. The current policies run from March 18, 2010 through March 18, 2011 and are in the process of being renewed. The primary carrier under the current policy is ACE American Insurance Company. The current annual premium for this program is $936,150. No sums have been paid under this coverage to the Company or any director or officer, nor have any claims for reimbursement been made under this policy.
Shareholders Proposals
In order for a shareholder proposal to be considered for inclusion in IFF’s proxy materials for next year’s annual meeting of shareholders, the Secretary of the Company must receive the written proposal no later than November 11, 2011. Under Article I, Section 3 of the Company’s By-laws, in order for a shareholder to submit a proposal or to nominate any director at an annual meeting of shareholders, the shareholder must give written notice to the Secretary of the Company not less than 60 days nor more than 90 days prior to the anniversary date of this year’s annual meeting of shareholders. The notice must also meet all other requirements contained in the Company’s By-laws, including the requirement to contain specified information about the proposed business of the candidate and the shareholder making the proposal. If the next annual meeting is scheduled on a date that is not within 30 days before or after the anniversary date of this year’s annual meeting, the Secretary of the Company must receive the notice given by the shareholder not later than the close of business on the tenth day following the day on which the notice of the date of next year’s annual meeting is mailed or public disclosure of the date of next year’s annual meeting is made, whichever occurs first.
24
PROPOSALS REQUIRING YOUR VOTE
ITEM 1 — ELECTION OF DIRECTORS
Information about Nominees
Our Board of Directors currently has thirteen members. Each of these Board members, other than Peter A. Georgescu, is standing for election to hold office until the next annual meeting of shareholders.
On February 1, 2011, our Board amended the provisions of the Company’s By-laws setting out eligibility requirements for our directors in order to transition to a system whereby the maximum time period for which a director may serve as a director is based on the director’s years of service instead of an age-based standard. The By-laws were amended to provide that no director of the Company, other than a director who is a Grandfathered Person (defined below) or a director who is also an officer of the Company, will be eligible to continue to serve as a director of the Company after the date of, or to stand for the re-election at, an annual meeting of shareholders, if as of the date of that annual meeting the person shall have served as a director of the Company for twelve consecutive full annual terms. Additionally, the amendment provides that no director who is a Grandfathered Person will be eligible to continue to serve as a director of the Company after the date of, or stand for the re-election at, the annual meeting of shareholders following the date of his or her 72nd birthday. A “Grandfathered Person” is defined as any person serving as a director of the Company as of February 1, 2011 whose age as of that date plus the number of full annual terms that such person served as a director of the Company as of that date is equal to or exceeds 75. The following directors of the Company are Grandfathered Persons who are standing for election: Margaret Hayes Adame, J. Michael Cook and Arthur C. Martinez. Mr. Georgescu, who is also a Grandfathered Person under the amended By-laws, is 72 as of the date of this Proxy Statement; therefore, he will retire as a director as of the 2011 Annual Meeting. Prior to this amendment to our By-laws, none of the directors of the Company was eligible to continue to serve as a director of the Company after the date of, or stand for there-election at, the annual meeting of stockholders following the date of his or her 72nd birthday.
The affirmative vote of a majority of the votes cast is required for the election of directors, which means that a nominee must receive a greater number of votes “FOR” his or her election than votes “AGAINST” in order to be elected. Votes cast do not include any abstentions or broker non-votes with respect to a nominee’s election.
Our By-laws include this majority voting standard for uncontested elections and provide that any director nominee in an uncontested election who does not receive an affirmative majority of votes cast must promptly offer his or her resignation. If this situation were to occur, the process outlined in our By-laws and Corporate Governance Guidelines would be followed and generally the Nominating and GovernanceAudit Committee of our Board of Directors would consider the resignation offer and make a recommendation to the Board. The independent directors on the Board would then evaluate and determine whether to accept or reject the resignation based on the relevant facts and circumstances. Any director who so tenders a resignation will not participate in the deliberations of either the Nominating and Governance Committee or the independent directors. The Board of Directors will promptly disclose its decision and the basis for that decision in a filing with the SEC. Under our By-laws, a plurality voting standard would apply in a contested director election, which would occur if, as of the record date for the meeting where directors are to be elected, the number of director nominees exceeds the number of directors to be elected at such meeting.
Each nominee elected as a director will continue in office until his or her successor has been elected and qualified, or until his or her earlier death, resignation or retirement. Each nominee has indicated that he or she will serve if elected. We expect each nominee for election as a director to be able to stand for election and to serve if elected. If any nominee is not able to serve (which is not anticipated), proxies will be voted in favor of the remainder of those nominated and may be voted for substitute nominees, unless the Board chooses to reduce the number of directors serving on the Board.
The principal occupation and certain other information regarding the background and qualifications of the nominees, including the experience and skills that led to the selection of that nominee for membership on our Board, are set forth on the following pages. All of the nominees are presently directors of the Company and all of the nominees, except for Andreas Fibig and Dale F. Morrison, were elected by our shareholders at the Company’s 2010 Annual Meeting of Shareholders. In March 2011, Mr. Fibig and Mr. Morrison were appointed by the Board to fill newly-created Board positions. Both new directors were
25
recommended to the Nominating and Governance Committee following a requested search by an independent global search firm and interviews by the Lead Director (who is a member of that Committee) and the Chairman of the Board. They were both recommended for a number of valuable characteristics they would bring to the Board, including, in the case of Mr. Fibig, broad business experience, including extensive product and strategic development experience and numerous international roles, and, in the case of Mr. Morrison, extensive marketing experience and financial expertise, including his current position as a chief executive officer of a global multinational company.
IFF’s Board of Directors recommends a vote FOR the election of the nominees as Directors.
The following table sets forth the names, ages, principal occupations and other information about the director nominees:
| | |  | | Margaret Hayes Adame, 71—Ms. Adame is President and Chief Executive Officer of Fashion Group International, Inc. (FGI) since 1992, an international trade organization with 5,000 members throughout the world. FGI’s production of runway trends, business symposiums and special events in the fashion industry provide Ms. Hayes with a unique insight into the Company’s markets, particularly the fragrance market. Prior senior level experience in the specialty retail/department store sector buttresses her understanding of areas into which our products are sold. She is a recipient of numerous achievement awards, including ones from the Fragrance Foundation, Cosmetic Executive Women and the Fragrance Research Fund. This experience has led her to make numerous contributions as a director of IFF where she has served since 1993. Ms. Hayes is also a director of Movado Group, Inc and has been a trustee of Montefiore Medical Center since 1995. | | | |  | | Marcello Bottoli, 48—An Italian national with extensive international experience, Mr. Bottoli is currently an operating partner of Advent International, a global private equity firm. Previously, Mr. Bottoli played a key role in a number of businesses, including the initial public offering of Benckiser N.V. on the Amsterdam and New York stock exchanges (1997), and the integration of leading brands following the Reckitt & Colman and Benckiser merger (1999), with emphasis on consumer, strategic insights, creativity and research and development; as President and Chief Executive Officer of Louis Vuitton Malletier, a manufacturer and retailer of luxury handbags and accessories (until 2002); and as President and Chief Executive Officer of Samsonite Inc., a luggage manufacturer and distributor (until January 2009). His experience as a chief executive and within the industries to which IFF sells its products has led Mr. Bottoli to provide many insights and contributions on the IFF Board. Mr. Bottoli serves on the board of directors of True Religion Brand Jeans, a California-based fashion jeans, sportswear and accessory manufacturer and retailer, and Pandora A/S, a designer, manufacturer and marketer of hand finished and modern jewelry. He has served on IFF’s Board since 2007. | | | |  | | Linda B. Buck, 64—A Howard Hughes Medical Institute Investigator and Member at Fred Hutchinson Cancer Research Center, a biomedical research institute, and Affiliate Professor of Physiology and Biophysics at the University of Washington, Dr. Buck’s research has provided key insights into the mechanisms underlying the sense of smell. This experience is useful to the Company’s research and development efforts in both flavors and fragrances, as is Dr. Buck’s technical background in evaluating a host of issues. Dr. Buck is the recipient of numerous awards, including The Nobel Prize in Physiology or Medicine in 2004. Dr. Buck served on the board of directors of DeCode Genetics Inc., a biotechnology company, from 2005 to 2009 and joined IFF’s Board in 2007. | | | |  | | J. Michael Cook, 68—The Chairman and Chief Executive Officer Emeritus of Deloitte & Touche, a leading global professional services firm, Mr. Cook has been a leader of his profession. His experience as a Chief Executive Officer and in accounting and in corporate governance is an asset to the Company, and he is one of the leaders of the IFF Board. He has served as Chairman of the American Institute of Certified Public Accountants and a member of its Auditing Standards Board. He led the Board of the Financial Accounting Foundation, the overseer of accounting standards boards, and the World Congress of Accountants. Mr. Cook is an emeritus member of the Advisory Council of the Public Company Accounting Oversight Board (PCAOB) and was a member of the SEC’s Advisory Committee on Improvements to Financial Reporting. In 2002, Mr. Cook was named one of the Outstanding Directors in America by Director’s Alert and was a member of the National Association of Corporate Directors’ Blue Ribbon Commission’s Director Professionalism and Audit Committee. He served as a director of Eli Lilly and Dow Chemical Company and is currently a Trustee of the Scripps Research Institute, a director of Comcast Corporation and Chairman of the Board of Comeback America Initiative (CAI). Mr. Cook joined IFF’s Board in 2000. |
26
| | | | | |  | | Roger W. Ferguson, Jr., 59—The President and Chief Executive Officer, since 2008, of TIAA-CREF, a financial services company with over $450 billion in assets at year end, Mr. Ferguson has a broad educational background which includes a law degree and a Ph.D. in economics. His outstanding work experience includes service with a major law firm, various policy-making positions with the Federal Reserve, eventually serving as its Vice-Chairman from 1999 until 2006, and service as Chairman of Swiss Re America Holding Corporation from 2006-2008, a global reinsurance company. He also serves as a US Presidential Economic Advisor. Mr Ferguson currently serves on the Advisory Committee of Brevan Howard Asset Management, the international council of advisors of the China Banking Regulatory Commission, the Board of Trustees of the Committee for Economic Development, the Board of Overseers of MemorialSloan-Kettering Cancer Center, and the Board of Directors of the Partnership for New York City. This background provides excellent experience for dealing with the varied financial and other issues which the Company’s Board deals with on a regular basis. Mr. Ferguson has been a member of IFF’s Board since 2010. | | | |  | | Andreas Fibig, 49—Based in Berlin, Germany, Mr. Fibig has been Chairman of the Board of Management of Bayer Schering Pharma AG, the pharmaceutical division of Bayer AG, since September 2008. Prior to this position, Mr. Fibig held a number of positions of increasing responsibility at Pfizer Inc., including as Senior Vice President in the US Pharmaceutical Operations group (from 2007-2008) and as President, Latin America, Africa and Middle East (from 2006-2007). These positions, including prior work experience with Pharmacia GmbH and Boehringer Ingelheim GmbH, have provided him with extensive experience in international business, product development and strategic planning, which are assets to IFF’s Board. Mr. Fibig is a Board member of EFPIA, the European Federation of Pharmaceutical Industries and Associations, and chairs the Board of Trustees of the Max Planck Institute for Infection Biology. He joined IFF’s Board in 2011. | | | |  | | Alexandra A. Herzan, 51—As the granddaughter of the founder of the Company, Ms. Herzan has a long-term understanding of many aspects of its operations and brings a unique perspective to Board deliberations. Ms. Herzan is the President and Treasurer of the Lily Auchincloss Foundation, Inc., a charitable foundation, and a director of the van Ameringen Foundation, Inc. These positions have provided executive experience as well as experience working with teams. As a trustee of a number of private trusts she developed financial savvy translatable to the Company business. Ms. Herzan joined the IFF Board in 2003. | | | |  | | Henry W. Howell, Jr., 69—During his 34 years with J.P. Morgan, a financial services firm, Mr. Howell secured extensive business development, finance and international management experience which is very useful in analyzing various Company issues which arise at the Board of Directors, including new capital projects and acquisitions. This experience also serves the Company well in considering Audit Committee and Nominating and Governance Committee issues. While at J.P. Morgan, Mr. Howell had several overseas assignments including head of banking operations in Germany and CEO of J.P. Morgan’s 40% owned, Australian merchant banking affiliate which was publicly listed and operated throughout the country. Both these assignments enhanced his ability to analyze complex international business and financial matters. He is currently on the Board of the Chicago History Museum, as well as other charitable organizations. Mr. Howell joined IFF’s Board in 2004. | | | |  | | Katherine M. Hudson, 64—As Chairperson, President and Chief Executive Officer of Brady Corporation, a global manufacturer of identification solutions and specialty industrial products, from 1994 until 2004, Ms. Hudson oversaw a doubling of annual revenues. Prior experience with Eastman Kodak (24 years) covered various areas of responsibility including systems analysis, supply chain, finance and information technology. This broad experience has translated to sound guidance to the Company and its Board. Ms. Hudson has served as a director on the boards of Apple Computer Corporation, a designer and manufacturer of consumer electronics and software products, and CNH Global NV, a manufacturer of agricultural and construction equipment. She currently sits on the board and is chairperson of the Audit Committee of Charming Shoppes, Inc., a woman’s specialty retailer, and has served on the IFF Board since 2008. | | | |
27
| | |  | | Arthur C. Martinez, 71—Having served as Chairman and Chief Executive Officer of Sears, Roebuck and Company, a large retailer, from 1995 until 2000, Mr. Martinez obtained experience on a myriad of issues arising in a large corporation. This experience, along with the financial expertise which led him to be Chairman of the Board of the Federal Reserve Bank of Chicago from 2000 until 2002, enable him to provide expert guidance and leadership to IFF and its Board of Directors. He is also a director of PepsiCo, Inc., IAC/InterActiveCorp, Liz Claiborne, Inc., AIG/American International Group, Inc., and Chairman of the Board of HSN, Inc, as well as numerous non-profit boards. Mr. Martinez joined the IFF Board in 2000. | | | |  | | Dale Morrison, 62—Mr. Morrison has served, since 2004, as the President and Chief Executive Officer of McCain Foods Limited, an international leader in the frozen food industry. A food industry veteran, his experience includes service as CEO and President of Campbell Soup Company, various roles at General Foods and PepsiCo and an operating partner of Fenway Partners, a private equity firm. Mr. Morrison is a seasoned executive with strong consumer marketing and international credentials and his knowledge of IFF’s customer base is invaluable to our Board. Mr. Morrison is currently a Director of the Center of Innovation at the University of North Dakota. He joined IFF’s Board in 2011. | | | |  | | Douglas D. Tough, 61—Mr. Tough has been IFF’s Chairman and Chief Executive Officer since March 2010. Previously, he served as Chief Executive Officer and Managing Director of Ansell Limited, a global leader in healthcare barrier protection, from 2004 until March 2010. Mr. Tough joined the IFF Board in 2008 and served as its non-Executive Chairman from October 2009 until he became CEO of the Company on March 1, 2010. Mr. Tough’s experience as the CEO of a major global company is directly translatable to his work as Chairman and CEO of IFF, as is his prior 17 year service with Cadbury Schweppes Plc, a major food and beverage company, in a variety of executive positions throughout North America and the rest of the world. |
28
| | ITEM 2 — | RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
The Audit Committee has selected PricewaterhouseCoopers LLP as the Company’sour independent registered public accounting firm for 2011,2013, and theour Board of Directors has directed that our management submit that selection for ratification by our shareholders at the 20112013 Annual Meeting. Although ratification is not required by our By-laws or otherwise, we are submitting the selection of PricewaterhouseCoopers LLPPwC to our shareholders for ratification as a matter of good corporate governance. The Audit Committee will consider the outcome of our shareholders’ vote in connection with the Audit Committee’s selection of the Company’sour independent registered public accounting firm in the next fiscal year, but is not bound by the shareholdersshareholders’ vote. Even if the selection is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent auditorregistered public accounting firm at any time if it determines that a change would be in the best interests of theour Company and our shareholders.
Representatives of PricewaterhouseCoopers LLPPwC are expected to attend the 20112013 Annual Meeting, where they will be available to respond to questions and, if they desire, to make a statement. IFF’sOur Board of Directors recommends a vote FOR the ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLPPwC as the Company’sour Independent Registered Public Accounting Firm for 2011. Principal Accountant Fees and Services The following table provides detail about fees for professional services rendered by PricewaterhouseCoopers LLPPwC for the years ended December 31, 20102012 and December 31, 2009. | | | | | | | | | | | | | 2010 | | | 2009(5) | | | | | Audit Fees (1) | | $ | 3,307,441 | | | $ | 3,684,900 | | | Audit-Related Fees (2) | | | 58,759 | | | | 75,100 | | | Tax Fees (3) | | | 2,185,715 | | | | 2,097,100 | | | All Other Fees (4) | | | 23,557 | | | | 11,000 | | | | | | | | | | | | | Total | | $ | 5,575,472 | | | $ | 5,868,100 | | | | | | | | | | | |
| | | | | | | | | | | | 2012 | | | 2011 | | Audit Fees(1) | | $ | 4,631,616 | | | $ | 4,233,897 | | Audit-Related Fees(2) | | | 569,926 | | | | — | | Tax Fees(3) | | | | | | | | | Tax Compliance | | | 1,038,244 | | | | 525,258 | | Other Tax Services | | | 753,807 | | | | 415,782 | | All Other Fees(4) | | | 27,619 | | | | 9,799 | | | | | | | | | | | Total | | $ | 7,021,212 | | | $ | 5,184,736 | | | | | | | | | | |
| | | | (1) | | Audit Fees were for professional services rendered for audits of the Company’sour consolidated financial statements and statutory and subsidiary audits, consents and review of reports filed with the SEC and consultations concerning financial accounting and reporting standards. Audit Fees also included the fees associated with an annual audit of the Company’sour internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, integrated with the audit of the Company’sour annual financial statements. | |
| (2) | | Audit-Related Fees were for assurance and related services for employee benefit plan audits, attestation services that are not required by statute or regulation and in 2010, consultations concerning statutory audits.diligence. | |
| (3) | | Tax Fees were forCompliance services consisted of fees related to tax compliance, including the preparation of tax returns, assistance with tax audits and claims for refund,appeals, indirect taxes, expatriate tax compliance services and transfer pricing services. Other Tax Services consisted of tax planning and tax advice, including assistance with and representation in tax audits and appeals, tax services for employee benefit plans, indirect taxes and expatriate tax complianceadvisory services. | |
| (4) | | All Other Fees were for software licenses and other professional services. | | (5) | | Certain fees in 2009, including out-of-pocket costs, have been reclassified out of All Other Fees into the appropriate services to which they apply. |
Audit Committee Pre-Approval Policies and Procedures for Audit and Permitted Non-Audit Services
The Audit Committee’s policy isCommittee has established policies and procedures to pre-approve all audit and non-audit services by category, including audit-related services, tax services and other permitted non-audit services to be provided by the independent registered public accounting firm to the Company. In accordance withour Company by category, including audit-related services, tax services and other permitted non-audit services. Under the policy, the Audit Committee regularly reviews and receives updates onpre-approves all services obtained from our independent auditor by category of service, including a review of specific services provided byto be performed, fees expected to be incurred within each category of service and the potential impact of such services on auditor independence. The term of any pre-approval is for the financial year, unless the Audit Committee specifically provides for a different period in the pre-approval. If it becomes necessary to engage the independent registered public accounting firm, and the Company’s management may submitauditor for additional services for approval. not contemplated in the original pre-approval, the Audit Committee requires separate pre-approval before engaging the independent auditor. To facilitate the approval process, the policy delegates pre-approval authority to the Audit Committee chairperson to pre-approve services up to $20,000, and the Audit Committee may also delegate pre-approval authority to theone or more of its members to pre-approve services. The Audit Committee chairperson, or to the Company’s Chief Financial Officer (for services, other than audit or attest services) to the extent permitted under the SEC’s pre-approval requirements. The Committee member or CFO to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting. All services rendered by PricewaterhouseCoopers LLPPwC to theour Company are permissible under applicable laws and regulations. During 2010,2012, all services performed by PricewaterhouseCoopers LLPPwC which were subject to the SEC’s pre-approval requirements were approved by the Audit Committee in accordance with the Audit Committee’s pre-approval policy.
29policy in effect during 2012.
AUDIT COMMITTEE REPORT The Audit Committee (“we”,we,” “us” or the “Committee”) oversees the Company’s financial reporting process of International Flavors & Fragrances Inc. (the “Company”) on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal control over financial reporting and disclosure controls and procedures designed to ensure compliance with accounting standards and applicable laws and regulations. The Company’s independent auditors, PricewaterhouseCoopers LLP (“PwC”), report directly to us. We have sole authority to appoint, oversee, evaluate and discharge the independent auditors and to approve the fees paid by the Company for their services. PwC annually performs an independent audit of the consolidated financial statements and expresses an opinion on the conformity of those financial statements with U.S. generally accepted accounting principles and the effectiveness of the Company’s internal control over financial reporting. PwC also conducts quarterly reviews of the Company’s financial statements.
We review with PwC the scope of its services, the results of its audits and reviews, its evaluation of the Company’s internal control over financial reporting, and the overall quality of the Company’s financial reporting. We meet regularly with PwC, and separately with the Company’s internal auditors, without management present. We also meet regularly with management without PwC present, and we discuss management’s evaluation of PwC’s performance.
For 2010,2012, we have reviewed and discussed the Company’s audited financial statements with management and PwC.management. We have reviewed and discussed with management its process for preparing its report on its assessment of the Company’s internal control over financial reporting, and at regular intervals we received updates on the status of this process and actions taken by management to respond to issues and deficiencies identified. We discussed with PwCPricewaterhouseCoopers, LLP (“PwC”), the Company’s independent registered public accounting firm, its audit of the effectivenessfinancial statements and of the Company’s internal control over financial reporting. We discussed with PwC and the Company’s internal auditors the overall scope and plans for their respective audits. We have revieweddiscussed with PwC its judgments about the quality of the Company’s accounting principles as applied in the Company’s financial reporting and other matters as are required to be discussed by the Statement on Auditing Standards (SAS) No. 61 (Communication with Audit Committees), as amended (AICPA Professional Standards Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T, as may be modified or supplemented.3200T. We also received from PwC and discussed with PwC itsthe written disclosures and the letter regarding its independence from management and the CompanyPwC as required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and discussed with PwC its independence. We concluded that PwC’s independence was not compromisedadversely affected by the non-audit services provided by PwC, the majority of which consisted of audit-related and tax services. In relianceBased on the reviews and discussions referred to above, we recommended to the Board (and the Board subsequently approved our recommendation) that the audited financial statements be included in the Annual Report onForm 10-K for the fiscal year ended December 31, 20102012 for filing with the SEC. We also evaluated and selected PwC as the Company’s independent auditors for 2011,2013, which the shareholders will be asked to ratify at the 20112013 Annual Meeting of Shareholders. Katherine M. Hudson
(Chairperson)
Margaret Hayes Adame(Chair) Henry W. Howell, Jr.
Arthur C. Martinez
30
Dale F. MorrisonVII. COMPENSATION DISCUSSION AND ANALYSIS | | ITEM 3 — | ADVISORY VOTE ON EXECUTIVE COMPENSATION |
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (known as theDodd-FrankExecutive Summary Act), provides that a public company’s proxy statement in connection with the company’s annual meeting of shareholders must, at least once every three years, allow shareholders to cast an advisory, nonbinding vote regarding the compensation of the company’s named executive officers as disclosed in accordance with the SEC’s rules.
As discussed in theThis Compensation Discussion and Analysis and the tables and narratives that follow, the compensation packages for our named executive officers areis designed to attract, retain and motivate our executives who are critical to our success, to reward achievement of both annual and long term performance goals, as well as to align the interests of our executives with those of our shareholders. Pursuant to our programs, an average of 73% of each named executive officer’s 2010 target total direct compensation is considered “variable” and, therefore, tied to our company’s performance based on a number of financial goalsand/or company stock price performance. For example, the Company’s 2010 Annual Incentive Plan (“AIP”) provides for awards to be earned based on the Company’s performance against sales growth, operating profit, gross margin and working capital objectives. Our2010-2012,2009-2011 and2008-2010 Long-Term Incentive Plan (“LTIP”) performance cycles provide for awards to be earned based on our annual earnings per share (EPS) performance and our annual and cumulative total shareholder return (TSR) performance relative to the S&P 500. In addition, a supplemental performance metric was added for the2008-2010 LTIP performance cyle. This supplemental metric was based on improvement in operating profit margin (Earnings before interest and taxes) for 2010 as compared to 2009. In the case of our AIP and LTIP programs, actual awards can vary from 0% to 200% of the target amount and are dependent upon our performance versus each program’s predefined performance objectives. In addition, under our Equity Choice Program (ECP), the ultimate value realized by the executive is dependent upon our stock price performance over the vesting period.
For additional information on the compensation program for our named executive officers, including specific information about compensation in 2010, please read the Compensation Discussion and Analysis, along with the subsequent tables and narrative descriptions.
At the 2011 Annual Meeting, we will ask our shareholders to approve our named executive officer compensation as described in this proxy statement. This proposal, referred to as a“Say-on-Pay Proposal,” provides our shareholders with a clear understanding of our compensation philosophy and objectives, compensation-setting process, and the opportunity to express their views on our named executive officers’ compensation. In accordance with the Dodd-Frank Act, the vote will be an advisory vote regarding our Company’s named executive officer compensation program generally and does not examine any particular compensation element individually. Accordingly, the Company will present the following advisorySay-on-Pay Proposal at the 2011 Annual Meeting for shareholder approval:
“RESOLVED, that, the compensation paid to the Company’s named executive officers, as disclosed in this proxy statement for the Company’s 2011 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and related narrative disclosure, is hereby approved.”
Thissay-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or our Board. However, the Compensation Committee intends to review the results of the advisory vote and will be cognizant of the feedback received from the voting results as it completes its annual review and engages in the compensation planning process.
The Board of Directors believes the2012 compensation of our named executive officers, is appropriate and promotes the best interests of our shareholders and therefore recommends that shareholders vote FOR approvalor NEOs. As discussed in Proposal III of this resolution.
31
| | ITEM 4 — | ADVISORY VOTE ON THE FREQUENCY OF THE ADVISORY VOTE ON EXECUTIVE COMPENSATION |
In accordance with the Dodd-Frank Act,proxy statement, we are seeking an advisory, non-binding, vote on the frequency of future shareholder advisory votes onconducting our executive compensation programs as disclosed pursuant to the SEC’s disclosure rules. A shareholder advisory vote on executive compensation (such as Item 3 in this Proxy Statement) is referred to as a “Say on Pay Proposal”. In this Item 4, we are asking for shareholder input as to whether, after this year, aannual Say on Pay Proposalvote that requests your approval of the compensation of our NEOs as described in this section and in the tables and accompanying narrative contained in “Executive Compensation.” To assist you with this vote, you should occur every year, every two years or every three years. Future votes on the frequency of future Say on Pay Proposals will occur at an interval decided by the Board of Directors, but not with less frequency than at least once every six years.
We are recommending that a Say on Pay Proposal be submitted to shareholders every year. Our Board of Directors believes that an advisory vote every year is the best approach forreview our Company and our shareholders. An annual advisory vote provides more frequent shareholder feedback to our Board of Directors, the Compensation Committee and management regarding our executive compensation programs and policies. Our Board of Directors, Compensation Committee and management intend to consider this advisory vote as part ofphilosophies, the design of our executive compensation programs and communication of suchhow, we believe, these programs have contributed to our shareholders.
You may cast your vote for your preferred frequency for future Say on Pay Proposals by indicating your choice that future Say on Pay Proposals should be submitted to shareholders every year, every two years or every three years, or you may choose to abstain from voting on this issue, in response to the resolution set forth below.
“RESOLVED, that whichever of the three frequency choices of: every year, every two years or every three years receives the most shareholder votes will be considered the shareholders’ preferred frequency in regard to how often a “Say on Pay Proposal” should be submitted to the Company’s shareholders in future Company proxy statements relating to our Annual Meetings of Shareholders.”
If none of the three choices receives a majority of the votes cast, the choice that receives the most number of votes will be considered to be the result of this advisory, non-binding shareholder vote. Uninstructed proxy cards will be voted in accordance with the Board of Directors’ recommendation that a Say on Pay Proposal be submitted to shareholders every year. Although this vote regarding the frequency of future Say on Pay Proposals is advisory only, our Board of Directors, Compensation Committee and management will review the results and give appropriate consideration to the outcome of the voting on this proposal.
IFF’s Board of Directors believes that it is in the best interest of the Company to have Say on Pay Proposals considered by shareholders every year, and therefore recommends that shareholders vote for a frequency of “ONE YEAR” for future Say on Pay Proposals in response to this resolution.
32
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
This Compensation Discussion & Analysis (“CD&A”) describes IFF’s executive compensation program for 2010 and certain elements of the 2011 program. It explains how the Compensation Committee of our Board of Directors (the “Committee”) determined 2010 compensation for our executives, including the persons identified as Named Executive Officers (“NEOs”) in this Proxy Statement.
As reflected in the Corporate Governance — Board Leadership Structure section of this Proxy Statement and in the tables and narratives following this CD&A, on October 1, 2009 Douglas D. Tough, who was then a member of our Board of Directors, assumed the role of non-executive Chairman, with the plan that he would assume the additional role of Chief Executive Officer (“CEO”) when his contract with his then employer expired. In conjunction with this change in management which was approved by our Board of Directors, upon the recommendation of the Committee with the assistance of its independent compensation consultant, the Board (with Mr. Tough recusing himself) approved Mr. Tough’s compensation package. The Company entered into a letter agreement with him on September 8, 2009 reflecting the approved compensation. On March 1, 2010, Mr. Tough assumed the role of Chairman and CEO.
In the interim, beginning on October 1, 2009 until March 1, 2010, our Board established a temporary Office of the CEO, which was comprised of Kevin C. Berryman, our Executive Vice President and Chief Financial Officer (“CFO”), Nicolas Mirzayantz, our Group President, Fragrances and Hernan Vaisman, our Group President, Flavors. As a result, we have seven NEOs being reported in this Proxy Statement, including the three individuals who served together in the temporary Office of the CEO, as well as Beth E. Ford, our Executive Vice President, Head of Supply Chain, Dennis M. Meany, our former Senior Vice President, General Counsel and Secretary, and Angelica Cantlon, our Senior Vice President, Human Resources (“SVP HR”). Mr. Meany, age 63, retired from the Company on December 31, 2010.
Although he was not yet serving as CEO, Mr. Tough, together with Ms. Cantlon, our SVP HR, assisted the Committee in its determinations regarding the compensation ofFor 2012, our NEOs (other than the CEO) for 2010. Their roles in assisting the Committee remained generally consistent with the roles the CEO and the SVP HR have played in prior years. The members of the temporary Office of the CEO did not participate in decisions regarding executive compensation during their tenure in this office.
Executive Summary
The following summarizes the Company’s executive compensation program for 2010 including:
were: | | | Douglas D. Tough | • | Chief Executive Officer and Chairman | Kevin C. Berryman | | Executive compensation program objectives;Vice President and Chief Financial Officer | Nicolas Mirzayantz | | Group President, Fragrances | Hernan Vaisman | • | Components of total direct compensation;Group President, Flavors | Anne Chwat | | | • | Consideration of market benchmarks; | | | • | 2010 compensation highlightsSenior Vice President, General Counsel and actions; | | | • | Pay for performance and variable, at-risk pay; and | | | • | Other key program features.Corporate Secretary |
Executive Compensation Program ObjectivesPhilosophy
The Company’score of our executive compensation philosophy is that our executives’ pay should be linked to achievement of financial and operational performance metrics that build shareholder value. Consequently, we designed our compensation program to motivate and reward our executives for the achievement of both annual and long-term business goals by providing a significant portion of compensation that is intendedvariable and tied directly to meet the following objectives: | | | | • | Attract, retain and develop talented individuals who are critical to our success by providing competitive total compensation opportunities relative to similar companies in our peer groups, consistent with the Company’s performance. |
33
| | | | • | Motivate and reward our executives for the achievement of both annual and long-term business goals and strategic objectives by providing a significant portion of compensation that is variable and tied directly to achievement of these goals and objectives. | | | • | Align the interests of our executives with those of our shareholders by providing a significant portion of our executives’ total direct compensation in the form of Company stock and to encourage their direct investment as well as long-term ownership. |
In furtherance of the above objectives, weCompany and individual performance. We believe that executive compensation should (i) be tied to overall Company performance; (ii) reflect each executive’s level of responsibility; (iii) vary based on individual performance and contribution; and (iv) include a significant equity component. We believe that by keeping the majority of executive pay “variable” and “equity-based” we can best ensure alignment with shareholder value and Company growth.Our 2012 NEO Pay Was Tied to Our 2012 Performance In 2012, we delivered solid results, including local currency sales growth of 4%, adjusted operating profit growth of 3%, and adjusted EPS growth of 6%. Looking over the past three years on an average basis, we continue to meet our long-term financial targets. This solid performance goalswas achieved despite the various challenges the organization faced in 2012, including continued economic uncertainty, weakened consumer confidence and the continued high cost of raw material. Furthermore, we continued to execute on key elements of our strategic plan during the year, including: leveraging our geographic footprint – we opened a new facility in Singapore, a creative facility in India, and announced a $50 million investment to build out our facility in Turkey; strengthening our innovation platform – we continue to strengthen our platforms by leveraging our knowledge of consumer trends to drive technological developments and external collaborations to better anticipate and address consumers’ future needs; and maximizing our portfolio – we continue to focus our efforts on improving our performance by further leveraging our advantaged portfolio and implementing solutions to fix less attractive areas, such as exiting low-margin sales activities in our Flavors business which contributed to our improved gross profit margins in 2012. Based on these accomplishments, we met all of the target performance levels for our corporate and business financial metrics under our LTIP, and three out of the four performance levels under our AIP. As a result of these achievements, the 2012 annual compensation purposes areof our NEOs increased as compared to their respective compensation in 2011 as discussed below. 2012 Annual Incentive Plan Targets and Payout. Our 2012 Annual Incentive Plan (“AIP”) performance targets were based upon our annual and long-term profitability targets and our 2011 actual results. Our AIP continues to be based on the challengingachievement of four financial performance metrics: (1) local currency sales growth, (2) operating profit, (3) gross margin and (4) working capital. These performance metrics are measured (A) at the consolidated corporate level for our CEO, our CFO and our General Counsel and (B) at both the consolidated corporate level and the business unit level for the Group President of each of our business units. For 2012, at the corporate level, we exceeded our targets in three of the four performance indicators. As a result, the overall corporate AIP payout was approximately 127% of the target award for those NEOs evaluated solely on corporate performance. Our Flavors business unit sustained similar strong performance, particularly in Sales Growth and Gross Margin. This resulted in an AIP payout, when combined with the corporate level performance, of approximately 130% of the target award for our Group President, Flavors. Our Fragrance business unit also exceeded Sales Growth expectations and returned a strong performance against Gross Margin targets. Consequently, the AIP payout, when combined with the corporate level performance, was approximately 123% of the target award for our Group President, Fragrances. Long-Term Incentive Plan Results for 2012. Our LTIP is structured in three-year cycles, which are administered in four equally-weighted performance segments: Year 1, Year 2, Year 3 (each an “annual performance segment”) and cumulative performance over the three-year period (the “cumulative performance segment”). During the three annual performance segments, Company performance is measured against two equally-weighted financial metrics. For the 2010-2012 LTIP Cycle and the 2011-2013 LTIP Cycle, these two metrics were Earnings Per Share (the “EPS”) and our Total Shareholder Return (“TSR”) versus the S&P 500 (the “Company TSR”). Commencing with the 2012-2014 LTIP cycle, the Compensation Committee (the “Committee”) approved the use of Economic Profit (EP) (as defined below), rather than EPS, as the second financial metric. We will continue to use Company TSR as the second financial metric of Company performance for the annual performance segments of the 2012-2014 LTIP Cycle. In addition, Company TSR will continue as the sole financial metric for the cumulative segment for all of the current LTIP Cycles (the “Cumulative TSR Goal”). For 2012, our EP was $203 million, as adjusted for LTIP 2012 non-core items described below under “2012 Company LTIP Performance.” This result exceeded both the threshold performance level of $182 million and target performance level of $198 million but did not reach maximum performance level of $216 million. As a result, our NEOs earned approximately 129% of the EP Goal for Year 1 in the 2012-2014 LTIP Cycle. For 2012, our EPS was $4.03, as adjusted for LTIP 2012 non-core items. This result was just above the target performance level of $4.00 and below maximum performance level of $4.30. As a result our NEOs earned approximately 108% of the EPS Goal for Year 2 of the 2011-2013 LTIP Cycle and Year 3 of the 2010-2012 LTIP Cycle. Our TSR for 2012 was just below the 75th percentile, and generated a near maximum payout of approximately 198%. Our cumulative TSR for the 2010-2012 LTIP performance cycle was at the 76th percentile, which surpassed the maximum 75th percentile measure, and resulted in a maximum 200% payout. As a result, our NEOs earned approximately 198% of the TSR Goal for the 2012 segment of each of the current LTIP Cycles and earned 200% of the TSR Goal for the cumulative segment. The LTIP award earned for the 2012 segment of the 2011-2013 and 2012-2014 LTIP Cycles was approximately 153% and 164% of the target, respectively. These summary findings are outlined in greater detail in the sections titled “2012 Company and Business Unit AIP Performance” and “Long Term Incentive Plan” below. Compensation Related Corporate Governance. To ensure continued alignment of compensation with Company performance and the creation of shareholder value, we maintain strong compensation related corporate governance policies, including the following: We require our executives, including our NEOs, to meet certain stock ownership guidelines; Our Executive Separation Policy (“ESP”) provides that any equity awards made after December 2010 are subject to a “double trigger” and only accelerate in connection with a change in control if an ESP participant is terminated without cause or terminates for “Good Reason” within two years following a change in control; and We do not provide tax gross-up for payments made in connection with a change in control for Mr. Tough nor, under the ESP, for executives who joined after March 8, 2010. Our Executive Compensation Program We pay for performance. Our NEO’s target compensation for 2012 reflects our commitment that a significant portion of our executive compensation should be variable and tied directly to achievement of our short-term and long-term financial and strategic expectations set byoperational objectives. During 2012, as in prior years, our BoardNEOs’ direct compensation primarily consisted of Directors for our entire organization. Components of Total Direct Compensation (see pages 43-52)
| | | | | | | Fixed or
| | | Component
| | Variable | | Objective
| | Base Salary (see page 43)
| | Fixed | | Attract and retain executives by offering salary that is competitive with market opportunities and that recognizes executives’ organization level, role, responsibility and experience. | Annual Incentive Plan
(“AIP”) (see page 44) | | Variable | | Motivate and reward the achievement of the Company’s annual performance objectives including sales growth, operating profit, gross margin and working capital. | Long-Term Incentive Plan
(“LTIP”) (see page 47) | | Variable | | Motivate and reward the annual and cumulative earnings per share (“EPS”) and relative total shareholder return (“TSR”) performance over rolling three-year periods. Also, align executives’ interests with those of shareholders by paying 50% of the earned award in Company stock and including TSR as a key measure of long-term performance. | Equity Choice Program
(“ECP”) (see page 50) | | Variable | | Align executives’ interests with interests of shareholders through equity-based compensation. Encourage direct investment in the Company when participants choose Purchased Restricted Stock. |
Illustrative Mix of Compensation
The average of each NEO’s percentage of compensation that is considered variable (based on target performance) versus fixed, short-term versus long-term(1) base salary, (2) AIP awards, (3) LTIP awards and cash versus equity, in each case as a portion of total target compensation is illustrated below:
34
Market Benchmarking (see page 38)
The Committee’s “philosophical” goal is to position target total compensation at generally the 60th to 65th percentile of relevant market benchmarks. To help the Committee determine appropriate target compensation levels of our executives, the Committee’s independent compensation consultant used publicly available compensation data from 17 Consumer Product Peer Companies, 15 Specialty Chemical and Flavoring Peer Companies and, in addition, third party general industry survey data. Based on an analysis of this data by the consultant, a “market reference” range is set for each executive, generally between the 50th and 75th percentile(4) Equity Choice Program (“ECP”) awards. During 2012, of the most appropriate market data for that executive’s position, which is considered in setting each executive’s compensation. In 2010, our NEOs’ average target totaldirect compensation payable to our CEO and our other four NEOs, approximately 77% was positioned atvariable, of which approximately 72% was tied to long-term performance metrics.
As illustrated in the 61st percentile. 2010 Compensation Actions and Performance Highlights (see pages 43-52)
| | | | • | Base Salary (page 43). Three of our six NEOs eligible for salary increases received an increase in 2010. The decisions whether or not to increase salaries were generally based on position versus market and internal salary relationships. The average increase for those NEOs receiving increases approximated 7%. Mr. Tough became an employee of the Company in 2010 and was not eligible for a salary increase. | | | • | AIP Award (pages 44-47). The Company had strong performance results across all business segments and performance measures for 2010. 2010 performance versus its 2010 AIP goals on a corporate basis was determined to be at 179.5% of target, reflecting strong local currency revenue growth, sharply higher operating profit in dollars, and significant reductions in core working capital requirements. Gross margin as a percent of sales was the only AIP metric that did not meet target, reflecting rising input costs in the second half of the year and higher manufacturing expenses needed to meet customer delivery requirements in a more complex operating environment. On average, individual AIP awards paid to our NEOs were 176.5% of target. The “Pay for Performance” charttables below, illustrates differences in payout relative to AIP performance versus goals over the five-year period covering 2006 to 2010. | | | • | LTIP Award (pages 47-50). For the three-year LTIP performance cycle covering2008-2010, performance was determined to be at 121.7% of target. The company earned 80% of target for its EPS performance, 151.3% of target for its relative TSR performance and 49% of target for the 2010 supplemental measure of operating profit margin improvement. The “Pay for Performance” chart below illustrates variability of payout relative to LTIP performance versus goals over the five three-year periods ending 2006 to 2010. | | | • | ECP Award (pages 50-52). In 2010, as it has since 2006, the Committee granted participants an ECP award denominated as a dollar value within a competitive range developed based on peer group and survey long-term incentive practices data. With respect to the form of an ECP award, each individual may choose from purchased restricted stock (“PRS”) (where a participant may purchase shares of stock at 50% of the market price), stock-settled appreciation rights (“SSARs”) or time-vested restricted stock units (“RSUs”). Based on the participants’ election as to which form of equity comprises their individual grants, grant date values can range from 80% of the initial award value (with the maximum amount of time-vested RSUs selected) to 120% of the initial award value (with the maximum amount of PRS selected). In 2010, our NEOs were granted an average initial award value of $635,714. Based on their individual ECP elections, on a risk-adjusted basis (as described below under Equity Choice Program and Other Equity Awards), 105.1% of the NEOs’ aggregate initial award value was granted to them (excluding our CEO’s sign-on grant). Actual value delivered will depend on future stock price performance. |
35
Pay for Performance and Incentive Compensation Variability 2006 — 2010
The following chart illustrates the variability of actual awards earned as a percent of target, relative toin both the AIP and LTIP, vary based on our financial and operational performance.
For the five AIP plan years from 2008 to and including 2012, the actual payout as a percentage of target compensation was volatile. The combined payout for NEOs based on corporate and business unit performance versus goalsas a percentage of target ranged from approximately 28% to 177%, with an average payout of approximately 88% of target over the five-yearfive year period. During this period, covering 2006our local currency sales grew at a compound annual growth rate (“CAGR”) of approximately 5%. Over the 2008-2012 period, operating profit (excluding non-core items such as restructuring charges) experienced an approximately 6% CAGR from $367 million in 2008 to 2010: Other Key Program Features
| | | | • | Stock Ownership and Share Retention (see page 52). Our executives, including our NEOs, are required to meet certain stock ownership guidelines. Until the targeted ownership level is achieved, all of our NEOs are required to hold 50% of “net gain shares.” These targeted ownership levels are a key feature of our overall compensation program intended to align our executive team’s interests with those of our shareholders. | | | • | Retirement Benefits and Perquisites (see page 52-54). We provide retirement benefits that the Company believes are competitive with our peer companies. We provide supplemental benefits so that our executives may receive the full benefit earned under the retirement formula without reduction based on tax-qualified limits. We also provide certain perquisites that we believe are appropriate for our senior executives. | | | • | Executive Separation Policy (ESP, page 54). We provide severance and other benefits to our senior executives including our NEOs whose employment is terminated not for cause. We believe this policy is necessary to retain and attract top executive talent and is consistent with policies in companies with whom we compete for talent. The level of separation compensation, which was reduced by the Committee for certain executives in 2007, varies by the executive’s organization level, consistent with market practices and levels. In addition, the Committee took the following actions during 2010: |
| | | | • | Eliminated TaxGross-Ups for New Participants (see page 54). On December 14, 2010, based on the recommendation of the Committee, our Board adopted the elimination of any taxgross-up payments related to severance payments in connection with a change in control for new employees after March 8, 2010. Participants in the Executive Severance Plan (ESP) prior to that date remain eligible for a taxgross-up unless a cut-back of 10% or less in severance payments eliminates the imposition of excise tax related to “golden parachute” payments. Mr. Tough is not eligible to receive taxgross-up payments under his negotiated letter agreement. |
36
| | | | • | Added Double Trigger Equity Acceleration Feature: On December 14, 2010, the Board amended the ESP to provide that any equity awards made after this date would accelerate in connection with a change in control only if an ESP participant is terminated without cause or terminates for “Good Reason” within two years following a change in control. |
ConsiderationWe align the interests of Shareholder Advisory Voteour executives with those of our shareholders.
The Committee believes that the non-binding shareholder advisory vote on the Company’s We have designed our executive compensation to provide a significant portion of our executives’ total direct compensation in the form of equity and to encourage their direct investment in the Company as well as long-term ownership. For 2012, approximately 54% of the average variable target compensation payable to our CEO and our other four NEOs was payable in equity. For 2012, the proportion of long-term incentive compensation opportunity provided in the form of equity versus cash for the CEO and the average of our other four NEOs, as a group, was as follows:Target Long-Term Incentive Compensation 
Stock ownership and share retention policy. Our executives, including our NEOs, are required to meet certain share ownership guidelines to align our executives’ interests with those of our shareholders under our Share Retention Policy. Until the targeted ownership level is achieved, each of our NEOs is required to hold 50% of the shares acquired from the exercise of a stock option or stock-settled appreciation right or the vesting of restricted stock or restricted stock units (after payment of any exercise price and taxes). Our NEOs are not permitted to pledge shares that are counted towards their retention requirements as collateral for individual loans. Additional information about our Share Retention Policy is set forth in Item 3 — Advisory Vote on Executive Compensation, will provide useful feedback to the Committee regarding whether it is achieving its goal of designing an executive compensation program that promotes the best interests of the Company by providing its executives with the appropriate compensation and meaningful incentives. The Committee intends to review the results of the advisory vote, being completed for the first time this year, and will be cognizant of this feedback as it completes its annual review of each pay element and the total compensation packages for our NEOs with respect to the next fiscal year. Role of Compensation Committee, Outside Advisors and Managementabove under “Corporate Governance – Share Retention Policy.”
Compensation CommitteeSetting Process Pursuant to its Charter, theOur Committee assists the Board in ensuring that a proper system of long term and short term compensation is in place to provide performance-oriented incentives to management, and that compensation plans are appropriate and competitive and properly reflect the objectives and performance of management and the Company. The Committee has responsibilityresponsible for overseeing the determination,design, implementation and administration of remuneration, includinglong-term and short-term compensation (including equity awards, benefits and perquisites, ofperquisites) for all executive officers and other members of senior management. The Committee recommends CEO compensation to the full Board for its approval. Outside Advisors
To assist it During 2012, as in fulfilling its responsibilities,the prior year, the Committee engaged W.T. Haigh & Company (“W.T. Haigh”Haigh & Company”) as its independent compensation consultant throughout 2010. W.T.to assist it in fulfilling its responsibilities. Haigh regularly participates in Committee meetings and meets privately with& Company is engaged exclusively by the Committee at its request. To date, W.T. Haigh has worked exclusively on executive and director compensation initiatives and plans on behalf of the Committeematters and does not have other consulting arrangements with the Company.
In 2010, W.T. Haigh reviewed and made recommendations to the Committee concerning our executive compensation philosophy and programs including:
| | | | • | re-affirming the Company’s executive compensation philosophy; | | | • | conducting total compensation market reviews for 30 executive positions, including each NEO position; | | | • | conducting total compensation market reviews for and advising on non-employee director compensation; | | | • | supporting the administration of the Company’s existing AIP, LTIP and ECP; and | | | • | reviewing executive benefits and perquisites and the relevant design features, including the ESP and payments of benefits that may be triggered in the event of a termination following a change in control. |
The Company also retains Steven Hall & Partners for advisory services concerning compensation plan documents, including the Company’s equity award and incentive, executive separation and deferred compensation plans, and Buck Consultants for actuarial work and other services relating to the Company’s retirement plans and other post-employment benefits. These services are administrative or technical in
37
nature and neither of these consultants played a role in determining or recommending the amount or form of executive or director compensation during 2010.
Management
With the input of W.T. Haigh, ourOur CEO and Senior Vice President, Human Resources, evaluatedSVP HR, with input from Haigh & Company, evaluate the performance and competitive pay position for each other NEO, other than themselves, and mademake recommendations to the Committee concerning each such officer’s target 2010annual compensation. Our CEO followedfollows the same process with regard to the target 2010 compensation for our SVP HR, without her input, and the Committee follows the same process with regard to the target compensation for our CEO, without his input. The membersAs part of its compensation setting process, the Committee also considers the results of the temporary officeprior-year’s shareholder advisory vote on our executive compensation. It believes these voting results provide useful feedback regarding whether shareholders agree that the Committee is achieving its goal of designing an executive compensation program that promotes the best interests of the CEO did not participate in this process. Both our CEOCompany and Senior Vice President, Human Resources, generally attend Committee meetings but do not attendits shareholders by providing its executives with the portion(s)appropriate compensation and meaningful incentives. As part of meetings where their ownits 2012 compensation is discussed or determined. They periodically providesetting process, the Committee with updatesreviewed the results of progress againstthe 2011 shareholder advisory vote, in which 97% of the votes cast were voted in favor of our performance goals, and provide management’s views and recommendations concerning compensation elements including: | | | | • | performance criteria and targets under our AIP and LTIP, including potential threshold and maximum performance targets, based on the Company’s financial, operating and strategic plans; | | | • | placement of executives within salary grades; | | | • | adjustments to a particular executive’s compensation, including equity compensation, based on individual performance, responsibilities or other considerations; | | | • | the Company’s executive separation policy; and | | | • | perquisites. |
Our management also provides similar input to W.T. Haigh but does not oversee its activities.
executive compensation.Principles for Setting Compensation LevelsTargets On an annual basis, the Committee reviews and approves the compensation forof our executive officers and other members of senior management, including our NEOs. As in prior years, the Committee’s decisions for 2010 compensation took into account the compensation range for each executive’s grade, as well as “market benchmarking” and individual performance. We use a global grading structure for our employees, including our executives,NEOs, with compensation ranges for each grade. ExecutivesOur NEOs are placed in a particular grade based on internal factors (including scope of responsibilities and job complexity) and an external market evaluation. The external market evaluation is based on published third party general survey information and a review of like positions within our selected peer groups described below. This process is often referred to as “market benchmarking.” Benchmarking also provides information that we use in internal pay review for various positions and grade levels. We update the external market benchmarking and peer group data annually. Peer GroupsMarket Benchmarking
The Committee’s goal is to position target total direct compensation (salary, annual incentive compensation, long-term incentive compensation and equity awards) between the 50th to 75th percentile of relevant market benchmarks and to position total cash compensation at slightly above median. We use compensation data from other companies to benchmark our compensation levels. However,The Committee has traditionally believed that it iswas difficult to define a single peer group for our market benchmarking that appropriately reflects the particular diversity of responsibilities within our business. The Company has few publicly tradedbusiness, especially because none of our major direct competitors files reports with the Securities and our industry is highly fragmented, both geographically and across product lines. Therefore, with assistance from its independent compensation consultant,Exchange Commission. Consequently, the Committee identifiedhad previously utilized two separate and distinct peer groups — a consumer product companies peer group and a specialty chemical and flavoring companies peer group.group, which were equally weighted. The Committee would then review general industry data, provided by Haigh & Company, from Towers Watson’s 2011 Executive Compensation Database, to support the Committee’s analysis and enable it to obtain a more general understanding of current compensation practices. In October 2011, with the assistance of Haigh & Company, the Committee undertook its annual review of peer groups. As part of this review, the Committee noted that the Company primarily (i) focuses on consumer-oriented products and (ii) competes with other consumer product companies for executive talent. Consequently, the Committee decided to eliminate the specialty chemical companies peer group as a peer group for benchmarking Company compensation. 2012 Benchmarking for CEO, CFO and Group Presidents. For 2012 compensation decisions regarding (i) the CEO, (ii) the CFO and (iii) each of the Group Presidents, the Committee, based on the input of its independent compensation consultant,recommendations from Haigh & Company, decided to usebenchmark compensation against the average of (1) the same Consumer Peer Group utilized in 2011 and (2) the General Industry Cut of the Towers Watson General Industry Index Survey. The Consumer Peer Group was selected using the following criteria in reviewing and selecting the peer group companies: | | | | | 1. | USU.S. publicly traded companies of comparable size (generally based on revenue of $1B — $5B and market capitalization of $1B — $8B); |
38
| | | | | 2. | Global scope with significant international presence (international operations generally accounting for at least 25% of total revenues); | |
| | 3. | Strong in-house Research and Development (“R&D”) activities (R&D expense generally over 1% of total revenue); | |
| | 4. | Growth orientation, with positive sales and earnings growth over the three years prior to the review and selection of the peer groups; | |
| | 5. | Competitors for executive talent; and | |
| | 6. | Progressive companies with positive reputations. |
Based onFor 2012, the foregoing criteria, in July 2009, the Committee approved the peer groups consistingConsumer Peer Group consisted of the following companies, and these peer groups were used for 2010 compensation benchmarking: | | | | Consumer Peer Group | | | Consumer Product Peer GroupAlberto-Culver | | | Specialty Chemical & Flavoring Peer GroupHormel Foods | Alberto-CulverChurch & Dwight | | | AlbemarleJarden | Church & DwightClorox | | | Arch ChemicalsMcCormick | CloroxDel Monte Foods | | | CabotNewell Rubbermaid | Del Monte FoodsElizabeth Arden | | | Corn Products | Elizabeth Arden | | | Cytec Industries | Energizer Holdings | | | Ecolab | Estee Lauder | | | Ferro | Herbalife | | | FMC | Hershey | | | HB Fuller | Hormel Foods | | | Lubrizol | Jarden | | | PolyOne | McCormick | | | RPM | Newell Rubbermaid | | | Sensient | | Nu Skin Enterprises | Energizer Holdings | | Sigma-AldrichRalcorp | RalcorpEstee Lauder | | | ValsparRevlon | RevlonHerbalife | | | Tupperware | Tupperware | | | | | Hershey | | |
Based on the recommendation of its independent compensation consultant, the Committee approved certain changes from the peer groups used for 2009 compensation decisions, which are reflected in the peer groups above. Certain companies were eliminated from the previous peer groups due to changes in their business scope, their type of ownership or their being acquired, and those companies were replaced by companies considered more in line with the criteria described above. At the time of the Committee’s review and selectiondetermination of the above peer groups, IFF wasmarket reference ranges, we were positioned at approximately the 40th40th percentile of both peer groupsthe Consumer Peer Group in terms of revenue, the primary scope comparison measure. IFF’smeasure, for the respective fiscal year. Our current relative revenue remainsis positioned asat approximately the 40th percentile. Our peer groups35th percentile for compensation benchmarking (as listed above) are different from the peer group used in our financial performance graph included in our Annual Report onForm 10-K. BothConsumer Peer Group.As discussed above, the Committee weighed equally the compensation and financial peer groups include companies that are international in scopeand/or sell
39
their products todata derived from a General Industry Cut of the types of customers that also buy our products. However, the financial performance peer group includes companies that exceed the size criteria identified for our compensation peer groups.Towers Watson General Industry Index Survey. The Committee believes that, for the compensation peer groups, comparably sized companies better reflect the competition we face for executive talent.
General Survey Data To support the Committee’s analysis of our 2010 executive compensation levels and to enable the Committee to obtain a more general understanding of current compensation practices, the Committee’s independent compensation consultant also provided general industry data from Towers Perrin’s 2009 Executive Compensation Database, a broad-based survey. In addition, the consultant provided data relating to a segment of this database consisting ofIndustry Cut comprises 181 companies having $1 billion to $3$6 billion in reported revenues, as well as a larger sample of companies with median revenues of $5.5 billion, in each case excluding energy$2.6 billion. Energy and financial companies. These two industry segmentscompanies were excluded from this selection as the data because we believe theseCommittee believed that the industry business models and theirthe pay practices of these two industries are less comparable to ours, particularly in a volatile economic climate.
2012 Benchmarking for Other Executive Officers. Based on recommendations by its compensation consultant, the Committee determined that the Consumer Peer Group did not provide sufficient comparative data for the other executive officer positions that were reviewed by the Committee. Consequently, for all other executive officer positions, including the General Counsel, instead of using the Consumer Peer Group, the Committee used the aggregate data available from a select cut of the Towers Watson General Industry index that (i) identified themselves as belonging to the consumer products or beverage industry and (ii) had revenues between $1 billion and $6 billion (the “Consumer Products Select Cut”). The Committee averaged (1) the Consumer Products Select Cut with (2) the Towers Watson General Industry Index to determine median and 75th percentile target compensation. For 2012, the Consumer Products Select Cut comprised 19 companies with reported revenues of between $1 billion and $6 billion, with median revenue of $3.2 billion. The companies included in the Consumer Products Select Cut were as follows: | | | Acuity Brands | | Jack In The Box | Armstrong World Industries | | Lorillard Tobacco | Brown-Forman | | Mattel | Chiquita Brands | | Molson Coors Brewing Company | HNI Corp | | Polaris Industries | Hanesbrands | | Ralcorp Holdings | Harman International Industries | | Revlon | Hasbro | | Steelcase | Hershey | | Tupperware | J.M. Smucker | | |
Use of Market Reference and Setting Target Total Direct CompensationRanges Based on the compensation peer group and other data, the. The Committee’s independent compensation consultant developsderives the median and 75th75th percentile “market reference” values for each executive position. In doing so, and to reflectposition based on the mostaverage of the two relevant source for competitive executive talent for that position, the peer groups and general industry data may be assigned a different weight depending upon the position.compensation indexes. The “market weighting” forCommittee’s consultant then analyzes each position is reviewed and agreed to in principle by the Committee at the same time the Committee approves the peer groups, and for 2010 compensation decisions did not changeNEO’s actual pay from the prior year. As noted above, the Committee’s “philosophical” goal is to position target total compensation at approximately the 60th to 65th percentile of relevant benchmarks.
The Committee’s independent compensation consultant analyzes each executive’s actualfiscal year and target total direct pay (as described below under “Compensation Elementscompensation and Targeted Mix”)target total cash compensation against the median to 75thand the 75th percentile range of each executive’s market reference range and reviews this analysis with the Committee and, in the case of the compensation of NEOs other than the CEO, with the CEO. Individual components of total direct pay (meaning salary, annual incentive compensation long term incentive compensation and equity awards) are benchmarked versus market on an individual basis for our CEO, on an average basis for our EVP’sCFO and Group Presidents, collectively, and on an average basis for our SVP’s,Senior Vice Presidents, collectively. In determining target total target direct paycompensation for each executive in 2010,2012, the Committee considered the consultant’s market reference analysis. In addition, the Committee considered a number of other important factors, including each executive’s: scope of responsibilities; | | | | • | individual performance; | | | • | scope of responsibilities; | | | • | relative responsibilities compared with other senior Company executives; | | | • | contribution relative to overall Company performance; | | | • | compensation relative to his or her peers within the organization; | | | • | long term potential; and | | | • | retention. |
relative responsibilities compared with other senior Company executives; contribution relative to overall Company performance; compensation relative to his or her peers within the organization; The Committee uses the market reference range in order to establish a starting point for the compensation levels that the Committee believes would provide our executive teamNEOs with competitive compensation in order to incentivize and retain our top executives.compensation. However, the actual target total target direct paycompensation approved by the Committee may be above or below the market reference range based on the Committee’s review of market compensation levels, and taking all of the above factors into account.
40
The following chart illustrates for each of our NEO’s, the NEO’s relative position of the executive’s target total direct pay as compared to the median and 75th percentile market reference range for that particular executive:
Driven by ourits desire to create internal pay equity among our senior executives all of our Group Presidents and Executive Vice Presidents have a comparable level ofthe individual factors set forth above. For 2012, the target total direct compensation (based onof our CEO and each of our other NEOs was between the salaries for Messrs. Mirzayantz50th and Vaisman approved in March 2010). This equalization process has created some variance below the 75th percentile of the relevant market reference range for Messrs. Mirzayantz and Vaisman and above the market reference range for Ms. Ford. Ms. Ford’s target total direct compensation also reflects a compensation level negotiated at the time of her hire in 2008.
range. Actual compensation paid for the year, as compared to target compensation approved at the beginning of the year, may differ depending on Company and individual performance. Actual compensation paid is discussed below under Program Components and Policies and inConsequently, the tables and narratives following this CD&A. Tally Sheets
In 2010, the Committee reviewed “tally sheets” for certain NEOs, but, in part, because of the significant management changes in 2010, did not consider these “tally sheets” in making 2010 compensation decisions. These “tally sheets”, which were preparedactual pay received by the Committee’s independent compensation consultant, were designed to give the Committee a full view of compensation paid to these NEOs, including an “income statement” (showing all annual company costs for compensation paid to these NEOs), a “balance sheet” (showing the compensation that has been accrued under various plans for each individual) and a “liability sheet” (showing the liability to the Company if the individual were to separate from employment). The Committee believes these “tally sheets”NEO may be useful in the future, when year over year and multi-year comparisons can be made. The Committee did not otherwise refer to any type of wealth accumulation analysis.
41
Compensation Elements and Targeted Mix Our executive compensation program includes direct paycompensation and indirect pay elements as follows. compensation elements. Our indirect compensation comprises (i) Company-sponsored benefit programs, many of which are broadly available to our employees, (ii) our Deferred Compensation Program and (iii) our perquisite program. We believe that direct compensation, which constituted an average of 94% of total actual compensation paid to our NEOs in 2012 should be the principal form of compensation.Direct PayCompensation DirectThe table below provides a brief description of the principal elements of direct compensation, whether such compensation is fixed or variable, and the compensation program objectives served by each pay consists of: | | | | | Element | | Fixed or
Variable | | Primary Objective | Base Salary | | Fixed | | • To attract and retain executives by offering salary that is competitive with market opportunities and that recognizes each executive’s position, role, responsibility and experience. | | | | AIP award | | Variable | | • | Base salary;To motivate and reward the achievement of our annual performance objectives including sales growth, operating profit, gross margin and working capital. | | | | LTIP award | | Variable | | • | AIP award;To motivate and reward the annual profitability performance and the annual and cumulative relative TSR performance over rolling three-year periods.• To align executives’ interests with those of shareholders by paying 50% of the earned award in shares of our common stock (with the remaining 50% being payable in cash) and including TSR as a key measure of long-term performance. | | | | ECP award | • | LTIP award; and | | | | Variable | | • | ECP award.To align executives’ interests with the interests of shareholders through equity-based compensation.• To encourage direct investment in the Company and to serve as a retention tool. |
The payouts under our AIP and LTIP andplans are based on our achievement of performance metrics set at the beginning of the relevant measurement period, while our ECP awards are variable compensation components. Their value is based ongranted at the Company’sbeginning of each year and reflect the performance and,of the NEO in the case of the LTIPprior year and ECP awards, the Company’s share price. Theare used as a retention tool. These payouts under these annual and long term awards maywill vary from year to year and thus reflect the impact our executives have on our Company’s success. NEO compensation will vary with performance.For 2010,2012, at target AIP and LTIP achievement levels and actual ECP award,awards, the components of total direct paycompensation for our CEO and the average of our other four NEOs, as a group, were as follows: | | | (1) | | Excludes a one-time Equity Choice Award grant made to Mr. Tough under the ECP valued at $750,000 as a sign-on grant. Mr. Tough elected for this grant, which vests 100% on the first anniversary of the effective date of his hire as CEO, to be made as Purchased Restricted Stock. |
The 80%81% weighting, in the case of our CEO, and the 72% average weighting, in the case of our other NEOs, of direct pay towards performance-basedcompensation which is variable compensation closely aligns our executives’ compensation opportunity with Company performance by enabling our senior executives to earn more than target compensation if the Company achieves superior performance or will cause them to earn less than target compensation if we do not meet our performance goals or if the value of our common stock does not increase over time. The proportionately greater “variable” portion of direct compensation targeted for our CEO reflects his role and responsibility as our senior executive most accountable to our Board of Directors and shareholders for entity-wideCompany-wide performance. Long termLong-term compensation to our senior executivesNEOs includes LTIP awards and equity awards under our ECP.ECP awards. LTIP awards, if earned, are paid out 50% in common stock and 50% in cash. Equity makes up a larger portion
of total long termlong-term compensation than non-equity.cash. This approach, combined with our Share Retention Policy discussed above, is intended to promote significant long termlong-term stock ownership by each of our executives and to align their interests, and their at-risk longer term compensation, with those of our shareholders. The ECP, combined with our Share Retention Policy discussed below, encourages stock ownership and real investment in our Company.
42
For 2010, the proportion of long term incentive compensation opportunity provided in the form of equity versus cash for the CEO and the average of our other NEOs, as a group, were as follows:
The Committee periodically reviews and adjusts the mix between short termshort-term and long termlong-term incentive compensation opportunities and between cash and non-cash opportunities based on (1) benchmarking and other external data, (2) recommendations from its independent compensation consultant and (3) recommendations from our CEO and Senior Vice President, Human Resources. It should also be noted that Mr. Berryman, Mr. Mirzayantz and Mr. Vaisman did not receive any additional compensation for their temporary additional responsibilities as part of the temporary office of the CEO. Indirect Pay
Indirect pay includes:
| | | | • | Benefits (broad-based benefit programs); | | | • | DeferredSVP HR.Direct Compensation Plan (“DCP”); | | | • | Pension Plan and Supplemental Retirement Plan (“SRP”) for certain eligible executives; and | | | • | Personal benefits (our perquisite program). |
Our executives participate in Company-sponsored benefit programs, many of which are broadly available to our employees. We also maintain other benefit and perquisite programs for our senior management. In 2010, the Committee’s independent compensation consultant reviewed the perquisites program for its senior executives and advised the Committee that these programs are in line with market practice. Accordingly, the Committee did not make any changes to the perquisites program.
Program Components and Policies2012 Compensation Decisions
The Committee reviews the salaries of our CEO and other senior executives, including our other NEOs annually. Effective April 1, 2010,During the first quarter of 2012, the Committee approved increases indecided to delay its annual evaluation of salaries until the beginning of the second half of 2012 as part of the Company’s evaluation of overall global compensation costs. In July 2012, the Committee reviewed the base salaries of those NEOs whose base salary had not been adjusted for at least 18 months. Based on the interval since the last base salary adjustment and each NEO’s individual performance, the Committee increased the base salary of Messrs. Berryman, Mirzayantz and Vaisman in the amount ofby $25,000, $10,000, and $50,000,$25,000, respectively. Effective OctoberThese increases were effective July 1, 2010, the Committee approved an increase in the base2012, as were Company salary for Ms. Cantlon, who commenced employment with the Company in August 2009, in the amount of $15,000. The Committee approved these increases to reflect current market conditions and, in the case of Messrs. Mirzayantz and Vaisman, our two Business Unit Presidents, to align their base salaries with each other and with our Executive Vice Presidents. Based on the Committee’s determination that the salaries of our senior executives were in line with market reference, the Committee did not approve increases in 2010 base salaries for any of our other NEOs.
43
Annual Incentive Plan General:The Company maintains the AIP for our NEOs and certain other employees. Payouts, which were approved in early 2011 and awarded underFor our shareholder-approved 2010 Stock Award and Incentive Plan, dependNEOs, 2012 AIP payouts depended on the achievement of specific Company-wide quantitative and strategic enterprise (i.e., Company-wide) performance goals, along with individual contribution toward the enterprise results based on business unit or functional goals.goals for the Group Presidents. Each year the Committee sets an AIP target (stated as a percentage of base salary) for each NEO. For 2012, the Committee decided to maintain the AIP percentage targets at the same level as 2011. However, as a result of the mid-year salary increases, the AIP dollar target amount was increased for Messrs. Berryman, Mirzayantz and Vaisman. | | | | | | | | | | | | | | | | 2012 Salary | | | Target AIP as
% Base Salary | | | AIP Target | | Douglas D. Tough | | $ | 1,200,000 | | | | 120 | % | | $ | 1,440,000 | | Kevin C. Berryman | | $ | 512,500 | | | | 80 | % | | $ | 410,000 | | Nicolas Mirzayantz | | $ | 505,000 | | | | 80 | % | | $ | 404,000 | | Hernan Vaisman | | $ | 512,500 | | | | 80 | % | | $ | 410,000 | | Anne Chwat | | $ | 450,000 | | | | 60 | % | | $ | 270,000 | |
Performance Metrics and Capped AIP Payouts: Based on a review of the annual and long-term financial goals, operational plans and strategic initiatives and the prior year’s actual results, the Committee annually sets the financial performance metrics for the Company and the respective business units that it will use to measure performance as well as the relative weighting that will be assigned to each metric. The Committee then approves threshold, target and maximum performance levels for each performance metric. Upon achievement of the relative performance level, an executive has the opportunity to earn up to 200% of his or herthe following AIP target AIP award for significantly above target or superior performance or lower than target (or no) annual incentive compensation for below target performance. At the beginning of 2010, the Committee approved the AIP targets (stated as a percentage of base salary) as follows: | | | | | | | | | | | Ø | | Threshold — | | | 25% | | | | Ø | | Target — | | | Target AIP as
100% | | Level
| | % Base Salary | Chairman & Chief Executive OfficerØ | | 120% | Business Unit Presidents and Executive Vice PresidentsMaximum — | | 80% | Senior Vice Presidents200% | | 60% |
The2012 AIP Performance Metrics: As discussed above, AIP target percentages of the executives’ base salaries did not change from the prior year. Minimum Funding: Failure to meet the threshold level of performance overall in the aggregate will generally result in no AIP award for that year. However, the Committee may, under certain circumstances, exercise discretion and pay out an award.
Goal Setting Process: Each year, our CEO proposes and reviews with our Board the Company’s annual and long term financial goals, operational plans and strategic initiatives. Based on these Board-approved strategic goals, the CEO, the CFO and the SVP HR recommend to the Committee AIP performance metrics that they deem to be appropriate. The Committee considers these recommendations and consults with its independent compensation consultant before approving the AIP performance metrics. For 2010 AIP, the Committee, based upon the recommendations from management and with the input of its independent compensation consultant, decided to simplify the AIP goals from those used for 2009 AIP and to make them more consistent throughout the organization. Namely, the Committee decided to eliminate the non-financial strategic goals and the “Balanced Scorecard” approach that were used in the past and instead to establish only financial goals for AIP. This change to the AIP program helps align the corporate and business unit components of our performance goals and provides consistent definitions and metrics with which to measure performance. The Committee decided to take this approach as it felt that by providing greater focus and fewer metrics, company annual operating performance and shareholder value could be enhanced.
2010 Financial Goals and Objectives: For 20102012 AIP awards, the Committee approved four financial performance metrics: (1) local currency sales growth, an increase in(2) operating profit, (3) gross margin improvementspercentage and improvements in(4) working capital.capital percentage. These financial goalsperformance metrics were selected for the following reasons:
| | | | • | Local currency sales growth helps to encourage both market share and market expansion and alsoLocal currency sales growth reflects both increases in market share and sales expansion, which drives increases in gross profit. By measuring achievement exclusive of currency fluctuations, this goal helps to ensure that we are rewarding real incremental achievement. | | | • | An increase in operating profit (in dollar terms) encourages the management of gross profit dollars against operating expenses. Achieving this goal helps provide the Company the funding to reinvest in the business to drive future growth. | | | • | Improvement in gross margin percentage (%) is an important measure for analyzing cost and efficiencies. | | | • | Improvements in working capital support better operating cash flows. For this purpose, we define working capital as inventories, trade accounts receivable less trade accounts payable. |
44
An increase in operating profit (in dollar terms) encourages the management of gross profit dollars against operating expenses. Achieving this goal helps provide the Company with the funding to reinvest in the business to drive future growth.Improvement in gross margin percentage is an important measure for analyzing our ability to effectively recover increases in the cost of raw materials, cost discipline and operating efficiencies. Improvements in working capital drive better operating cash flow generation. For this purpose, we define working capital as inventories and trade accounts receivable less trade accounts payable. EachFor 2012, the weighting assigned to each of the above financial goalsperformance metrics was assigned a different weighting as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate Participants (1) | | | | Business Unit Participants (2) | | | | | | Corporate
| | | | Bus. Unit
| | | | Corporate
| | | | Bus. Unit
| | | | Total
| | | Performance Objective | | | Weighting | | | | Weighting | | | | Weighting | | | | Weighting | | | | Weighting | | | Local Currency Sales Growth | | | | 40 | % | | | | 0 | % | | | | 20 | % | | | | 20 | % | | | | 40 | % | | Operating Profit $ | | | | 30 | % | | | | 0 | % | | | | 15 | % | | | | 15 | % | | | | 30 | % | | Gross Margin % | | | | 10 | % | | | | 0 | % | | | | 0 | % | | | | 10 | % | | | | 10 | % | | Working Capital | | | | 20 | % | | | | 0 | % | | | | 20 | % | | | | 0 | % | | | | 20 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | 100 | % | | | | 0 | % | | | | 55 | % | | | | 45 | % | | | | 100 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | Corporate Participants(1) | | | Business Unit Participants(2) | | | Performance Metric | | Corporate
Weighting | | | Bus. Unit
Weighting | | | Corporate
Weighting | | | Bus. Unit
Weighting | | | Total
Weighting | | | Local Currency Sales Growth | | | 40 | % | | | 0 | % | | | 20 | % | | | 20 | % | | | 40 | % | | Operating Profit $ | | | 30 | % | | | 0 | % | | | 15 | % | | | 15 | % | | | 30 | % | | Gross Margin Percentage | | | 15 | % | | | 0 | % | | | 0 | % | | | 15 | % | | | 15 | % | | Working Capital Percentage | | | 15 | % | | | 0 | % | | | 15 | % | | | 0 | % | | | 15 | % | | Total | | | 100 | % | | | 0 | % | | | 50 | % | | | 50 | % | | | 100 | % |
| | | | (1) | | All NEO’sNEOs except our two Business UnitGroup Presidents. |
| (2) | | Our Business Unit Presidentstwo Group Presidents. |
The local currency sales growth and operating profit goals were assigned a greater weight than the gross margin and working capital goals because the Committee believes that the firstthese two goalsperformance metrics are the most relevant measures of overall annual Company performance and are key to driving sustained long-term growth. TheFor 2012, the Committee approved revisions to the relative weightings of gross margin (from 20% to 15%) and operating profit goals were new for 2010, and replaced two goalsworking capital (from 10% to 15%) so that were used for 2009 AIP awards — earnings before interest and taxes (represented as profit margin as a percentage of sales) and return on invested capital. they would be valued equally. The Committee believes that the above financialhigher working capital weighting provides a more meaningful and appropriate incentive level.2012 Performance Levels: Our 2012 AIP performance criteria, which are derived from the Board-approved goals for our Company, are critical measures of our operating success and are strongly aligned with shareholder interests. For 2010, the specific target levels for each financial objective were based on improvement versusupon our long-term and annual targets and our 2011 actual 2009 results. AchievementOver the past four years, as economic volatility has increased, our performance based compensation has become volatile with performance payouts varying from less than 50% to more than 150% of target awards. At the beginning of 2012, when the Committee was approving performance levels, the Committee sought to establish AIP performance levels that were challenging, but that reduced the volatility of AIP payouts. Specifically, the Committee considered the anticipated impact of the targets would represent a significant step towards achievingincreases in raw material inputs which began in the Company’s previously announced long term strategic financial goalsmiddle of growing local currency sales by 4% per year, improving operating margins2011 and were expected to 18% of salescontinue throughout 2012 and growing earnings per share on average by 10+% per year, which goals werethe economic recession in place at the time the AIP goals were set. Western Europe that was anticipated to continue into 2012.Overall2012 Company and Business Unit AIP PerformancePerformance:
Our actual performance against our 20102012 AIP corporate financial objectivesmetrics is set forth in the tables below. In establishing AIP financial objectivesperformance metrics and in determining actual achievement against financial goals, the Committee eliminatesperformance metrics, we eliminated the impact of certain discrete non-core revenues and expenses (net of related benefits realized during the period). This iswas done by the Committee in order to focus performance goalsmetrics and achievement against goalsthose metrics on our core operating results. For 2010,2012, the AIP financial goalstarget performance levels and actual achievement against these financial goals therefore havethe target performance levels excluded approximately $10 million of pre-tax costs associated with (i) our Fragrance strategic initiative, (ii) other non-budgeted special projects approved by the European manufacturing rationalization program. For comparability purposes, the Committee also excluded (from both the AIP goalsBoard throughout 2012 and actual achievement against those goals) the benefits associated with the 2009 implementation of a revised reporting methodology fornon-U.S. research and development credits.(iii) unbudgeted mark-to-market adjustments related to our Deferred Compensation Plan. Similarly, the Committeewe excluded the effects of incentive compensation provisions in calculating gross margin performance in order to better focus on the underlying operating performance of the Company’sour product portfolio. The Committee believes that the necessary self-funding of incentive compensation payments is covered in the operating profit component of the AIP
45
Corporate Performanceprogram. Based onThe table below reflects the adjustments described above, our actual performance results against our 2010 AIP financial metrics, their respective targets areand the payouts earned for each metric and overall by each NEO that is evaluated solely on corporate performance, Messrs. Tough and Berryman and Ms. Chwat. | | | | | | | | | | | | | | | | | | | | | | | | | | Performance Metric | | Threshold | | | Target | | | Actual | | | Award Payout (as % of
Target) | | | Corporate
Weighting | | | Total Weighted
Award | | Local Currency Sales Growth | | | 1.6% | | | | 3.6% | | | | 4.4% | | | | 140.0% | | | | 40% | | | | 56.0% | | Operating Profit | | | $474M | | | | $496M | | | | $494M | | | | 93.7% | | | | 30% | | | | 28.1% | | Gross Margin | | | 39.2% | | | | 40.7% | | | | 41.9% | | | | 177.7% | | | | 15% | | | | 26.7% | | Working Capital | | | 32.6% | | | | 31.1% | | | | 31.0% | | | | 106.7% | | | | 15% | | | | 16.0% | | | Total Award (as % Target) | | | 25% | | | | 100% | | | | — | | | | — | | | | 100% | | | | 126.8% | |
During 2012, our corporate performance was between target and maximum for each of local currency sales growth, gross margin and working capital, and was slightly below target for operating profit. The actual dollar amount earned by each NEO is set forth in the tables below for overall corporate and Business Unit performance: Corporate Performance
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Award
| | | | | | | | | | | | | | | | | | | | | | Payout as %
| | | | | | | | | | | | | | | | | | | | | | of Target
| | | | Corporate
| | | | Weighted
| | | Performance Objective | | | Target | | | | Actual | | | | (0%-200%) | | | | Weighting | | | | Award | | | Local Currency Sales Growth | | | | 2.5 | % | | | | 13.1 | % | | | | 200 | % | | | | 40 | % | | | | 80.0 | % | | Operating Profit $M | | | $ | 390.0 | | | | $ | 420.0 | | | | | 200 | % | | | | 30 | % | | | | 60.0 | % | | Gross Margin % | | | | 42.2 | % | | | | 41.7 | % | | | | 64 | % | | | | 10 | % | | | | 6.4 | % | | Working Capital | | | | 31.0 | % | | | | 30.0 | % | | | | 165 | % | | | | 20 | % | | | | 33.1 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Award (as % Target) | | | | | | | | | | | | | | | | | | | 100 | % | | | | 179.5 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | |
under “2012 Individual AIP Payouts.”Flavors President Business Unit Performance | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Flavors
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Flavors
| | | | President
| | | | | | | | | | | | | | | | | | | | | | | | | | Award
| | | | President
| | | | Business
| | | | | | | | | | | | | | | | | | | | | | | | | | Payout as %
| | | | Business
| | | | Unit
| | | | | | | | Corporate
| | | | | | | | | | | | | | | | | | of Target
| | | | Unit
| | | | Weighted
| | | | Corporate
| | | | Weighted
| | | | Total
| | | Performance Objective | | | Target | | | | Actual | | | | (0%-200%) | | | | Weighting | | | | Award | | | | Weighting | | | | Award | | | | Award | | | Local Currency Sales Growth | | | | 3.6 | % | | | | 10.1 | % | | | | 200.0 | % | | | | 20 | % | | | | 40.0 | % | | | | 20 | % | | | | 40.0 | % | | | | 80.0 | % | | Operating Profit $M | | | $ | 234.0 | | | | $ | 243.0 | | | | | 176.9 | % | | | | 15 | % | | | | 26.5 | % | | | | 15 | % | | | | 30.0 | % | | | | 56.5 | % | | Gross Margin % | | | | 42.6 | % | | | | 42.3 | % | | | | 77.6 | % | | | | 10 | % | | | | 7.8 | % | | | | 0 | % | | | | 0.0 | % | | | | 7.8 | % | | Working Capital | | | | 25.1 | % | | | | 25.6 | % | | | | 76.0 | % | | | | 0 | % | | | | 0.0 | % | | | | 20 | % | | | | 33.1 | % | | | | 33.1 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Award (as % Target) | | | | | | | | | | | | | | | | | | | 45 | % | | | | 74.3 | % | | | | 55 | % | | | | 103.1 | % | | | | 177.4 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The table below reflects the AIP financial metrics, their respective targets and the payouts earned for each metric and overall by our Group President, Flavors. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Performance Metric | | Threshold | | | Target | | | Award Payout (as % of
Target) | | | Bus. Unit Weighting | | | Bus. Unit Weighted
Award | | | Corp. Weighting | | | Corp Weighted
Award | | | Total
Weighted Award | | Local Currency Sales Growth | | | 2.0 | % | | | 4.0 | % | | | 170.0 | % | | | 20 | % | | | 34.0 | % | | | 20 | % | | | 28.0 | % | | | 62.0 | % | Operating Profit | | $ | 284M | | | $ | 299M | | | | 97.0 | % | | | 15 | % | | | 14.5 | % | | | 15 | % | | | 14.1 | % | | | 28.6 | % | Gross Margin | | | 40.1 | % | | | 41.6 | % | | | 153.0 | % | | | 15 | % | | | 23.0 | % | | | 0 | % | | | — | | | | 23.0 | % | Working Capital | | | — | | | | — | | | | — | | | | 0 | % | | | — | | | | 15 | % | | | 16.0 | % | | | 16.0 | % | Total Award (as % Target) | | | 25 | % | | | 100 | % | | | — | | | | 50 | % | | | 71.5 | % | | | 50 | % | | | 58.1 | % | | | 129.6 | % |
During 2012, our Flavors business unit performance was between target and maximum for each of local currency sales growth and gross margin, and was slightly below target for operating profit. The actual dollar amount earned by our Group President, Flavors is set forth below under “2012 Individual AIP Payouts.” Fragrances PresidentFragrance Business Unit Performance
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fragrance
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fragrance
| | | | President
| | | | | | | | | | | | | | | | | | | | | | | | | | Award
| | | | President
| | | | Business
| | | | | | | | | | | | | | | | | | | | | | | | | | Payout as %
| | | | Business
| | | | Unit
| | | | | | | | Corporate
| | | | | | | | | | | | | | | | | | of Target
| | | | Unit
| | | | Weighted
| | | | Corporate
| | | | Weighted
| | | | Total
| | | Performance Objective | | | Target | | | | Actual | | | | (0%-200%) | | | | Weighting | | | | Award | | | | Weighting | | | | Award | | | | Award | | | Local Currency Sales Growth | | | | 2.0 | % | | | | 15.7 | % | | | | 200.0 | % | | | | 20 | % | | | | 40.0 | % | | | | 20 | % | | | | 40.0 | % | | | | 80.0 | % | | Operating Profit $M | | | $ | 197.0 | | | | $ | 239.0 | | | | | 200.0 | % | | | | 15 | % | | | | 30.0 | % | | | | 15 | % | | | | 30.0 | % | | | | 60.0 | % | | Gross Margin % | | | | 41.8 | % | | | | 41.7 | % | | | | 92.5 | % | | | | 10 | % | | | | 9.3 | % | | | | 0 | % | | | | 0.0 | % | | | | 9.3 | % | | Working Capital | | | | 37.1 | % | | | | 34.8 | % | | | | 200.0 | % | | | | 0 | % | | | | 0.0 | % | | | | 20 | % | | | | 33.1 | % | | | | 33.1 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Award (as % Target) | | | | | | | | | | | | | | | | | | | 45 | % | | | | 79.3 | % | | | | 55 | % | | | | 103.1 | % | | | | 182.4 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The table below reflects the AIP financial metrics, their respective targets and the payouts earned for each metric and overall by our Group President, Fragrance. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Performance Metric | | Threshold | | | Target | | | Award
Payout (as % of
Target) | | | Bus. Unit
Weighting | | | Bus. Unit
Weighted
Award | | | Corp. Weighting | | | Corp.
Weighted
Award | | | Total
Weighted
Award | | Local Currency Sales Growth | | | 1.0 | % | | | 3.0 | % | | | 110.0 | % | | | 20 | % | | | 22.0 | % | | | 20 | % | | | 28.0 | % | | | 50.0 | % | Operating Profit | | $ | 227M | | | $ | 237M | | | | 106.8 | % | | | 15 | % | | | 16.0 | % | | | 15 | % | | | 14.1 | % | | | 30.1 | % | Gross Margin | | | 38.0 | % | | | 39.5 | % | | | 180.0 | % | | | 15 | % | | | 27.0 | % | | | 0 | % | | | — | | | | 27.0 | % | Working Capital | | | — | | | | — | | | | — | | | | 0 | % | | | — | | | | 15 | % | | | 16.0 | % | | | 16.0 | % | Total Award (as % Target) | | | 25 | % | | | 100 | % | | | — | | | | 50 | % | | | 65.0 | % | | | 50 | % | | | 58.1 | % | | | 123.1 | % |
During 2012, our Fragrance business unit performance was between target and maximum for each of local currency sales growth and gross margin and operating profit. The actual dollar amount earned by our Group President, Fragrance is set forth below under “2012 Individual AIP Award and Discretionary Bonus DeterminationPayouts.” 2012 Individual AIP Payouts The AIP payout for 20102012 for the NEOs, based on the actual achievement of each of the financial objectives,performance metrics, is discussed in greater detail in this proxy statement under the heading Grants“Grants of Plan-Based Awards.” Based on the CompanyCorporate and Business Unit performance outlined in the tables above, 20102012 AIP awardspayouts were as follow: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Actual AIP $
| | | | Actual AIP $
| | | | | | | | | | | | | | Target AIP
| | | | Actual AIP as
| | | | for 2010
| | | | as % Base
| | | Executive | | | 2010 Salary | | | | Target AIP % | | | | $ | | | | % Target(4) | | | | Performance | | | | Salary | | | Douglas D. Tough(1) | | | $ | 1,000,000 | | | | | 120 | % | | | $ | 1,207,233 | | | | | 176.4 | % | | | $ | 2,129,559 | | | | | 213.0 | % | | Kevin C. Berryman | | | $ | 500,000 | | | | | 80 | % | | | $ | 400,000 | | | | | 176.4 | % | | | $ | 705,600 | | | | | 141.1 | % | | Nicolas Mirzayantz(2) | | | $ | 493,750 | | | | | 80 | % | | | $ | 400,000 | | | | | 179.3 | % | | | $ | 717,080 | | | | | 145.2 | % | | Hernan Vaisman(2) | | | $ | 487,500 | | | | | 80 | % | | | $ | 400,000 | | | | | 174.3 | % | | | $ | 697,280 | | | | | 143.0 | % | | Beth E. Ford | | | $ | 500,000 | | | | | 80 | % | | | $ | 400,000 | | | | | 176.4 | % | | | $ | 705,600 | | | | | 141.1 | % | | Dennis M. Meany | | | $ | 414,000 | | | | | 60 | % | | | $ | 248,400 | | | | | 176.4 | % | | | $ | 438,178 | | | | | 105.8 | % | | Angelica T. Cantlon(3) | | | $ | 318,750 | | | | | 60 | % | | | $ | 191,268 | | | | | 176.4 | % | | | $ | 337,397 | | | | | 105.9 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | (1) | | Monthly salary effective March 1, 2010 through December 31, 2010 and AIP calculated based on number of days employed in 2010. | (2) | | For salary increases effective April 1, target AIP is calculated as if the increase were made January 1. | (3) | | Salary increase effective October 1, 2010 from $315,000 to $330,000 and AIP calculated based on the number of days at each salary. | (4) | | As adjusted to fund one-time performance award for non-AIP participants. |
46
| | | | | | | | | | | | | | | | | | | 2012 Payout | | | Executive | | 2012 AIP Target ($) | | | As % of Target | | | Award ($) | | Douglas D. Tough | | $ | 1,440,000 | | | | 126.8 | % | | $ | 1,825,632 | | Kevin C. Berryman | | $ | 410,000 | | | | 126.8 | % | | $ | 519,867 | | Nicolas Mirzayantz | | $ | 404,000 | | | | 123.1 | % | | $ | 497,149 | | Hernan Vaisman | | $ | 410,000 | | | | 129.6 | % | | $ | 531,308 | | Anne Chwat | | $ | 270,000 | | | | 126.8 | % | | $ | 342,306 | |
In determining actual bonus amounts, while Company and Business Unit performance would have allowed for higher bonus payments based on the application of the AIP formula, the Committee exercised its discretion to reduce the level of bonus awards and lowered the bonus payments that would have otherwise been payable to the NEOs by approximately $105,000 in the aggregate in order to fund a one-time performance award for non-AIP participants. In addition to the AIP payouts described above, the Committee approved a discretionary one-time cash bonus of $500,000 to Mr. Tough as a sign-on bonus payable July 1, 2010 to compensate him for certain forfeited bonus opportunities at his former employer. The Committee considered this cash payment to be a reasonable inducement to retain Mr. Tough’s services as our Chairman and Chief Executive Officer.
For the five AIP plan years from 2006 to and including 2010 the actual corporate percentage payout under the AIP against the annual performance goals ranged from 40% to 171.3%, with an average payout of 101.4% of target over the five year period. During this period, our local currency sales grew at a compound annual growth rate of approximately 5%. Following a very challenging 2009 that was impacted by the global financial crisis, the Company’s performance in 2010 rebounded strongly. Local currency sales growth in 2010 was at an all-time high of 13%, above several of our key competitors. The positive impact of the higher sales volume plus margin improvement associated with lower input costs and internal improvement initiatives enabled us to improve operating profit (excluding extraordinary or special items such as restructuring charges and employee separation costs) by more than 200 basis points versus 2009. Over the2005-2010 period, operating profit (excluding extraordinary or special items such as restructuring charges and employee separation costs) increased by nearly 150% from $290 million in 2005 to $426 million in 2010. Our operating profit margin improved by 170 basis points from 14.6% of sales to 16.3% in 2010. Our core working capital improved over the same period, declining from 32.7% of yearly sales to 30.1% by the end of 2010.
Long TermLong-Term Incentive Plan
In early 2010, the Committee approved grants ofWe believe that LTIP awards toreward our senior executives,executive officers, including our NEOs, underfor financial results and align their interests with the Company’s shareholder-approved 2010 Stock Awardinterests of our shareholders. Annually, the Committee reviews the LTIP to determine (1) the metrics that should be used to encourage long-term success, (2) the weightings that should be applied to such metrics and Incentive Plan. These grants cover(3) the2010-2012 performance cycle. annual and cumulative targets for such metrics. The Committee believes that commencing a new3-year three-year LTIP cycle each year helps (i) to provide a regular opportunity to re-evaluate long term measures,long-term metrics, (ii) to align goals with the ongoing strategic planning process;process and (iii) to reflect changes in our business priorities and market factors. In early 2010,The Committee also annually sets a total LTIP target award for each NEO, which reflects the total LTIP value a NEO has the opportunity to receive at the end of the three-year cycle if we meet all our targets. To the extent that we meet the minimum target financial goals or the maximum financial goals, the actual payout to the NEO could be significantly less or more than the total LTIP target award. Performance Segments. Given the difficulty in setting long-term goals in the current economic environment, the Committee alsobelieves that the LTIP should continue to comprise four performance segments: (i) Year 1, (ii) Year 2, (iii) Year 3 and (iv) Cumulative over the three-year period. In each performance segment, 25% of the total LTIP Target Award is earned. The NEO must be employed at the time payouts under the LTIP are made in order to receive the actual payout at the completion of the LTIP cycle. Performance Metrics. As discussed above, commencing with the 2012-2014 LTIP Cycle, the Committee decided to use EP and TSR, rather than EPS and TSR, as the financial metrics for measuring Company performance for the three annual performance segments. For the two other current LTIP Cycles, 2010-2012 and 2011-2013, EPS and TSR will continue to be the two financial metrics used in the annual performance segments. EP measures operating profitability after considering (i) all our operating costs, (ii) income taxes and (iii) a charge for the capital employed in the business. Capital employed primarily includes working capital, property, plant and equipment, and intangible assets. The capital charge is determined by applying the estimated weighted average cost of capital (“WACC”) times the average invested capital employed. The estimated WACC rate is the blended average cost of our debt and equity capital. As part of a strategic review of our businesses in 2010, we began including EP in the evaluation of relative performance across our business portfolio. We believe that evaluating EP helps us identify the sources and drivers of value across our businesses. Furthermore, we believe that EP growth is closely linked to the creation of shareholder value. Consequently, the Committee believes that changing from EPS to EP more closely aligned our compensation with the creation of long-term shareholder value. For 2012, the Committee approved a supplementalTSR as the second financial metric for the 2010 segment of the2008-2010annual performance segments for each current LTIP performance cycle. In early 2011, the Committee approved payouts under the completed2008-2010 LTIP performance cycle, as well as credits (or “bankings”)Cycle and to continue to use a three-year TSR for the 2010 segment of the ongoing2009-2011 LTIP and 2010-2012 LTIP performance cycles. 2010-2012 LTIP
For the2010-2012 LTIP performance cycle, the Committee approved LTIP target award grants to our NEOs as follows:
| | | | Level | | | LTIP Target Amount | Chairman & Chief Executive Officer | | | $1,894,064(1)(2) | Executive Vice Presidents and Group Presidents | | | $450,000(2) | Senior Vice Presidents | | | 60% of base salary | | | | |
| | | (1) | | Reflects March 1, 2010 employment date. | | (2) | | The LTIP target amount for these individuals was set at a fixed dollar amount, not a percentage of base salary. |
Based on the recommendation of its independent compensation consultant, in 2010 the Committee approved increases in the LTIP target for Mr. Berryman, Mr. Mirzayantz, Mr. Vaisman and Ms. Ford over the prior year LTIP performance cycle by $50,000, $70,000, $90,000 and $50,000, respectively. These increases were part of our internal pay equity analysis and were intended to align the LTIP target amounts for all our Business Unit Presidents and Executive Vice Presidents.
47
For the2010-2012 performance cycle, the LTIP performance categories and their respective weightings are:
| | | | | | | | | | | | | | | Percentage Weighting of
| | | Percentage Weighting of
| | | | | | | | Earnings Per Share (EPS)
| | | Total shareholder return
| | | Total Weighting of
| | | | | Growth out of the Total
| | | (TSR) relative to the S&P 500*
| | | Segment out of the Total
| | Segment | | | LTIP Cycle | | | out of the Total LTIP Cycle | | | LTIP Cycle | | 2010 Segment (Year 1) | | | 12.5% | | | 12.5% | | | 25.0% | | 2011 Segment (Year 2) | | | 12.5% | | | 12.5% | | | 25.0% | | 2012 Segment (Year 3) | | | 12.5% | | | 12.5% | | | 25.0% | Cumulative Segment(2010-2012) | | | 0.0% | | | 25.0% | | | 25.0% | | | | | | | | | | | | Total LTIP Cycle | | | 37.5% | | | 62.5% | | | 100.0% | | | | | | | | | | | |
| | | * | | The Committee’s independent compensation consultant measures changes in stock price plus dividends paid (assuming the dividends are reinvested) for the S&P 500 companies over the performance period. The market price for purposes of calculating the TSR of the Company and the S&P 500 on each year-end or cycle-end date was or will be determined based on the average closing price per share of each company’s common stock over the period of 20 consecutive trading days preceding that date, as reported by a reputable reporting service. |
In setting the2010-2012 LTIP performance goals, the Committee believed that growth in earnings per share is a key indicator for measuring improvement in our long term shareholder value. For 2010, the EPS growth target was established in light of the difficult economic environment and its expected impact on our operating results.cumulative segment. The Committee also believes that TSR as compared to other public companies in which shareholders may choose to invest is a good indicator of our overall long termlong-term performance, and directly ties our executives’ compensation opportunity to our share price appreciation and dividend payments relative to a major large-cap index.
GivenTSR is calculated by measuring the difficulty in setting long term goalschange in the current economic environment,market price of stock plus dividends paid (assuming the Committee continues to believe thatdividends are reinvested) for the segmentationCompany and the S&P 500 companies over the performance period. The market price for purposes of calculating the TSR of the Company and the S&P 500 on each year-end or cycle-end date is determined based on the average closing price per share of each three year LTIP performance cycle providescompany’s common stock over the Committee the opportunity to review LTIP goalsyear-to-year in order to align more closely with the Company’s updated strategic planning processes. Accordingly, the2010-2012 LTIP performance cycle is administered in four performance segments: Year 1, Year 2, Year 3 and Cumulative,period of 20 consecutive trading days preceding that date, as indicated in the table above. reported by a reputable reporting service. For each of the first three annual performance segments, the EP or EPS goal, as the case may be, and the TSR goal carry an equal weighting.are set at the beginning of the each annual performance segment and are equally weighted. For the Cumulativecumulative segment, the TSR goal is set at the beginning of the three-year cycle and is weighted at 100%. Due to The table below sets forth the continued unsettled economic environment whenrelative weightings of each metric for the2010-2012 LTIP objectives were establishedCycle and the continued difficulty2011-2013 LTIP Cycle. | | | | | | | | | | | | | | Segment | | Earnings Per Share (EPS) Growth | | | Total Shareholder Return
(TSR) relative to the S&P 500 | | | Total Weighting of
Segment | | Year 1 | | | 12.5 | % | | | 12.5 | % | | | 25 | % | Year 2 | | | 12.5 | % | | | 12.5 | % | | | 25 | % | Year 3 | | | 12.5 | % | | | 12.5 | % | | | 25 | % | Cumulative Segment
(Year 1-Year 3) | | | 0 | % | | | 25 | % | | | 25 | % | Total LTIP Cycle | | | 37.5 | % | | | 62.5 | % | | | 100 | % |
The table below sets forth the relative weightings of setting a3-year EPS goal ineach metric for the 2012-2014 cycle that environment, as it did with the prior LTIP performance cycle, the Committee decided not to include the Cumulative3-year segment measurement with respect to the EPS goal. The EPS goal for each annual segment is establishedwas approved by the Committee duringat the first quarterbeginning of 2012: | | | | | | | | | | | | | | Segment | | Economic Profit (EP) Growth | | | Total Shareholder Return (TSR) relative to the S&P 500 | | | Total Weighting of Segment | | Year 1 | | | 12.5 | % | | | 12.5 | % | | | 25 | % | Year 2 | | | 12.5 | % | | | 12.5 | % | | | 25 | % | Year 3 | | | 12.5 | % | | | 12.5 | % | | | 25 | % | Cumulative Segment
(Year 1-Year 3) | | | 0 | % | | | 25 | % | | | 25 | % | Total LTIP Cycle | | | 37.5 | % | | | 62.5 | % | | | 100 | % |
At the end of each year, the Committee reviews our annual performance and cumulative performance for the then-ended three-year cycle. To the extent that our annual performance has exceeded the threshold annual EP or EPS goal, as the case may be, and the threshold annual TSR goal, the Committee approves “banking” the credit that will be applied to the payout at the end of the applicable year. three-year cycle. For the 2010 segmentthree-year cycle then-ended, the Committee approves the total payout, taking into consideration the performance for each of the prior annual performance segments.2010-20122012-2014 LTIP Target Awards
In early 2012, the Committee approved the following total LTIP Target Awards to our NEOs for the 2012-2014 performance cycle: | | | | | | Level | | Total LTIP Target Award | | Douglas D. Tough | | $ | 2,000,000 | | Kevin C. Berryman | | $ | 450,000 | | Nicolas Mirzayantz | | $ | 450,000 | | Hernan Vaisman | | $ | 450,000 | | Anne Chwat | | $ | 270,000 | |
The Committee set the Cumulative three-year TSR Goal for the 2012-2014 LTIP cycle at the relative minimum and maximum achievementsame levels requiredthat had been set for various payout levels were setthe prior year’s LTIP cycle, as follows: | | | | | | | Criteria | | Threshold (25%) | | Target (100%) | | Maximum (200%) | Criteria | | Minimum (25%) | | Target (100%) | | Maximum (200%) | | EPS Growth | | 92% of fiscal year target | | Fiscal year target | | 108% of fiscal year target | Cumulative TSR vs S&P 500 | | 35th35th percentile | | 55th55th percentile | | 75th75th percentile |
Performance results belowFor the minimum achievement threshold for a specific year or cumulatively, in the case of TSR, result in no amounts being earned for that performance component. For the2010-2012 performance cycle, the minimum and maximum performance levels for TSR remained at the 35th and 75th percentiles, respectively as they had for the previous cycle. The Committee believed at the time that due to the volatility in the equity markets, providing this broader performance range might help mitigate the effects of volatility of the Company’s stock.
48
For the2010-20122012-2014 performance cycle, the Committee determined that 50% of the value of any payouts would be paid in cash and 50% would be paid in full value shares. This is consistent with payout ratios for the2008-2010 2010-2012 and2009-2011 2011-2013 LTIP performance cycles. The Committee believes that paying 50% of the LTIP value in full value shares creates a stronger alignment between executives and shareholders, and provides additional incentive for executives to achieve superior Company performance and to produce share price appreciation over the three-year performance cycle. The number of shares of Companyour common stock for the 50% portion that would be paid in stock is determined based on the market price of the common stock at the beginning of the cycle. For the 2012 cycle, it was based on $42.01$55.65 per share, the closing market price on January 4, 2010,3, 2012, the first stock trading day of the cycle. At the conclusion of each of the first two annual performance segment,segments, the dollar value and number of shares iswill be “banked” based on the performance of thateach such segment. When the final performance segment and the three-year cycle isare concluded and the LTIP payouts are approved by the Committee, the cumulative dollar value and cumulative number of full value shares arewill be paid to the executive.
2012 Company LTIP Performance: For 2012, the LTIP target performance levels and actual achievement against the target performance levels excluded costs associated with (i) non-recurring tax events, including our Spanish tax settlement, (ii) our Fragrance Strategic Initiative, (iii) other non-budgeted special projects approved by the Board throughout 2012 and (iv) unbudgeted mark-to-market adjustments related to our Deferred Compensation Plan (collectively, the “LTIP 2012 non-core items”). Annual LTIP Goals In early 2012, the Committee also set (1) the threshold, target and maximum 2012 annual EP goal for the 2012-2014 LTIP Cycle, (2) the threshold, target and maximum 2012 annual EPS goal for the 2010-2012 LTIP Cycle and the 2011-2013 LTIP Cycle and (3) the threshold, target and maximum annual TSR Goal which would apply to each of the three current LTIP performance cycles, as follows: | | | | | | | Criteria | | Threshold (25%) | | Target (100%) | | Maximum (200%) | EP | | $182M | | $198M | | $216M | EPS | | $3.74 | | $4.00 | | $4.30 | Annual TSR vs S&P 500 | | 35th percentile | | 55th percentile | | 75th percentile |
2012-2014 LTIP Performance For the 20102012 segment of the2010-2012 2012-2014 LTIP performance cycle, the EPSour EP of $3.37$203 million, as adjusted for LTIP 2012 non-core items, was achieved, which is 192% ofbetween the target performance level of $3.14 for the 2010 segment$198 million and our TSR was positioned at approximately the 77th percentile versus the S&P 500 which represents 200%maximum performance level of the target of the 55th percentile for the 2010 segment.$216 million. As a result, our NEOs earned approximately 129% of the EP goal for the year. Our TSR for 2012 was just below the 75th percentile, and as a result, our NEOs earned approximately 198% of the TSR goal for the 2012 segment. The LTIP award earned and “banked” for the 20102012 segment of the2010-2012 2012-2014 LTIP cycleCycle was therefore equal to 196%approximately 164% of target. 2009-20112011-2013 LTIP Performance LTIP
For the 20102012 segment of the 2011-2012 LTIP Cycle, our EPS of $4.03, as adjusted for non-recurring or one-time items, was between the target performance level of $4.00 and maximum performance level of $4.30. As a result, our NEOs earned approximately 108% of the EPS Goal for the year. Our TSR for 2012 was slightly below the 75th percentile, which was nearly at the maximum performance level of the 75th percentile. As a result, our NEOs earned approximately 198% of the TSR goal for the 2012 segment. The LTIP award earned and “banked” for the 2012 segment of the 2011-2013 LTIP Cycle was therefore equal to approximately 153% of target. 2009-20112010-2012 LTIP Performance and Payout
For the 2012 segment of the 2010-2012 LTIP performance cycle, the achievement described above with respect to the 20102012 segment of the 20102012 performance cycle was applied to this performance cycle as well. AsOur Cumulative TSR was positioned at approximately the 76th percentile versus the S&P 500, which equates to a result, the LTIP award earned and “banked”maximum payout of 200% of target. The overall payout for the 2010 segment of the2009-20112010-2012 LTIP performance cycle was equal to 196%approximately 150% of target. 2008-2010 LTIP
In early 2010, the Committee approved a one-year supplemental performance metric for the Company’s2008-2010 LTIP performance cycle. The supplemental metric relates to improvement in operating profit (EBIT) margin measured over the fiscal 2010 period as compared to 2009. The Committee established this supplemental metric to provide increased focus on the significance of driving improvement in operating profit margin, which continues to be an important factor in increasing long term shareholder value. The Committee decided to add this one-year supplemental financial target, as a means of providing further targeted incentive for our senior management team to continue to deliver improved financial results under this metric, particularly in light of the global economic uncertainty which began in late 2008 and has continued through the current period.
Performance and related payout of awards relative to target, including the supplemental metric, under the2008-2010 LTIP cycle were determined based on the following minimum and maximum achievement levels for the cycle, which levels, other than the supplemental metric, were established at the beginning of the cycle, and were calculated on a straight-line basis:
| | | | | | | Criteria | | Minimum (25%) | | Target (100%) | | Maximum (200%) | | EPS Growth | | 70% of fiscal year target | | Each fiscal year target | | 130% fiscal year target | TSR vs S&P 500 | | 40th percentile | | 55th percentile | | 75th percentile | Supplemental Metric relating to improvement in operating profit (EBIT) margin from 2009 to 2010 | | Operating profit of 15.9% of sales | | Operating profit of 16.3% of Sales | | Operating profit of 16.7% of sales |
The overall payout for the2008-2010 LTIP performance cycle of 121.7% was based on the following EPS and TSR results against objectives, as determined by the Committee in February 2011. For each segment in the LTIP cycle, EPS and TSR are weighted equally.
49
| | | | | | | | | | | | | | | | | | | | | Segment | | Segment
Weighted EPS
Result | | | Segment
Weighted TSR
Result | | | Combined
Segment
Weighted
Result | | | Segment
Weighting | | | Overall
Result | | 2010 | | | 192 | % | | | 200 | % | | | 196 | % | | | 25.00 | | | | 49.0 | % | 2011 | | | 39 | % | | | 63 | % | | | 51 | % | | | 25.00 | | | | 12.7 | % | 2012 | | | 108 | % | | | 198 | % | | | 153 | % | | | 25.00 | | | | 38.2 | % | Cumulative | | | — | | | | 200 | % | | | 200 | % | | | 25.00 | | | | 50.0 | % | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | | | | | | 100.00 | | | | 149.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Combined
| | | | | | | | | | | | | | Segment
| | | Segment
| | | Segment
| | | Supplemental
| | | | | | | | | | | Weighted EPS
| | | Weighted TSR
| | | Weighted
| | | Weighted OP
| | | Segment
| | | Overall
| | Segment | | Result | | | Result | | | Result | | | Result | | | Weighting | | | Result | | | | | 2008 | | | 100.0 | % | | | 42.5 | % | | | 142.5 | % | | | — | | | | 25.0 | % | | | 35.6 | % | | 2009 | | | 0.0 | % | | | 62.5 | % | | | 62.5 | % | | | — | | | | 25.0 | % | | | 15.6 | % | | 2010 and Supplemental | | | 30.0 | % | | | 100.0 | % | | | 130.0 | % | | | 24.5 | | | | 25.0 | % | | | 38.6 | % | | Cumulative | | | 30.0 | % | | | 97.5 | % | | | 127.5 | % | | | — | | | | 25.0 | % | | | 31.9 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | | | | | | | | | | 100 | % | | | 121.7 | % |
The LTIP payout for the 2008-2010 2010-2012 performance cycle for the NEO group,NEOs, based on the actual achievement of quantitative objectives, is discussed in greater detail following the Grants of Plan-Based Awards Table. The payout for the2008-2010 LTIP performance cycle was 121.7% as described above. In establishing the LTIP EPS growth objective for each LTIP segment and in determining actual achievement against that objective, the Committee eliminates the impact of certain discrete non-core costs (net of related benefits realized during the period), on a consistent basis and for the same reasonitems as discussed above under “Overall“2012 Company AIPLTIP Performance.” During the2008-2010 2012 segment of the 2010-2012 LTIP performance cycle, adjusted EPS (excluding extraordinary or special items such as restructuring charges, pension curtailment loss, employee separation costs, costs associated with(which excluded the change in CEO, material gains on disposition of assets and certain one-time tax benefits)LTIP 2012 non-core items) grew approximately 27%5%. As is the case for the AIP calculation, both the LTIP goal and the calculation of actual performance against that goal exclude the impact associated with a revised reporting methodology fornon-U.S. research and development credits. For the LTIP performance cycles that concluded in 20062008 through and including 2010,2012, the actual overall corporate percentage payout under the LTIP against those long termlong-term cycle performance goals ranged from 90.6%approximately 91% to 121.7%150%, with an average payout of 107.7%120% over the five LTIP performance cycles. Equity Choice Program Awards We believe that equity is a key component of our long-term incentive compensation as it (1) provides participants with a meaningful stake in the Company, thereby aligning their interests more closely with shareholders and Other(2) helps to attract and retain top talent and encourages participants to focus on long-term success. We believe that our Equity Awards Choice Program (“ECP”) is an effective vehicle to encourage ownership as it provides participants the flexibility to allocate their award among three types of equity. In 2010, we continuedaddition, in connection with the initial employment of an executive officer, the Committee believes that it is appropriate to grant the new executive officer equity as part of a competitive compensation package and to provide the new executive officer a stake in the long-term performance of the Company.Annually our Committee determines the dollar range of ECP awards for each level of participating executive based on peer group and long-term incentive practices survey data and a review of the competitiveness of the combined value of the ECP awards and LTIP awards with market practices. For 2012, these ranges were as follows: | | | | | | | | | | | | | | | | Lower Limit | | | Midpoint | | | Upper Limit | | CEO | | $ | 750,000 | | | $ | 1,500,000 | | | $ | 2,250,000 | | Group President, CFO | | $ | 225,000 | | | $ | 450,000 | | | $ | 675,000 | | General Counsel | | $ | 150,000 | | | $ | 300,000 | | | $ | 450,000 | |
The Committee then approves the actual dollar award to be granted to each NEO other than the CEO, and recommends to the independent members of the Board of Directors for approval the actual dollar award for the CEO. For 2012, similar to prior years, the actual amount is based on an evaluation of the NEO’s individual performance, long-term potential and market factors, including retention issues. Reflecting our senior executives under2011 performance, the ECP awards granted in 2012 to each of our 2010 StockNEOs, other than our CEO, was at or below the award received in 2011. For 2012, the Committee increased the ECP Award of our CEO from $1.5 million to $1.8 million reflecting Mr. Tough’s sustained high level of performance and Incentive Plan. to provide a total 2012 long-term award opportunity (ECP award plus 2012 LTIP target award) that was fully competitive with market benchmarks. The actual value of this award will depend on future stock price performance. ECP participants, including all of our NEOs, may choose from three types of equity award grants — purchased restricted stock(1) Purchased Restricted Stock (“PRS”), (2) stock settled appreciation rights (“SSARs”), and restricted(3) Restricted Stock Units (“RSUs”). Each type of equity award is assigned an adjustment factor to provide incentive to participants to accumulate shares to promote retention and align participants’ interests with those of our shareholders. Elections are made in 5% increments, with a maximum of 50% that may be received in RSUs. Based on the participant’s election, a participant’s dollar award value is converted into PRS, SSARs or RSUs on the grant date based on the market price of our common stock units (“RSUs”) — defined as follows: on such date. The table below sets forth each of the three types of equity awards offered and their adjustment factor.During 2012, ECP participants, including all of our NEOs, made choices based on the differences among the equity award types described below. In January 2013, our Compensation Committee approved changes to the ECP, and these changes are detailed in the “Revisions to our 2013 Compensation Plans” section at the end of this Compensation Discussion and Analysis. | | | | | | | Types of
Equity | • | Description of Equity Type | | Adjustment
Factor | | PRS — | | PRS are restricted shares of the Company’sour stock which an ECP participant may purchase at a 50% discount offof the closing market price on the grant date. AnIf an ECP participant who chooses PRS, then he or she must write a check (or deliver shares with an equivalent value) for the dollar amount of the ECP award that he or she is requiredelecting to fundreceive in PRS. Upon receipt of the purchasefunds by the Company, the ECP participant receives a number of PRS from his or her own financial resources, thereby puttingshares equal to (i) the executive’s personal finances at risk. amount of the awardplus (ii) the amount of the participant funding,divided by the closing stock price of the Company’s common stock on the date of grant. During the restricted period, a PRS holder has the same rights as an ordinary shareholder including the right to vote and non-preferential dividend rights. On the vesting date, which is 35 months from the date of grant, PRS shares become unrestricted. PRS shares are the most rapid way for participants to accumulate and build share ownership based on the participant’s direct investment in our stock. As an incentive to promote share accumulation and direct investment in our stock, there is a 20% adjustment upward of the award value if PRS is elected. | | | 120 | % | SSARS | | | • | SSARs — SSARs are essentially a contractual right to receive the value, in shares of Company stock, of the appreciation in the Company’sour stock price from the SSAR grant date to the date the SSAR is exercised by the participant. As an approximation of binomial stock option valuation methods used under ASC Topic 718, participants receive a number of SSARs equivalent to four times the elected SSAR award value divided by the grant price. SSARs provide upside potential for share accumulation and alignment with shareholders because SSARsSSARS only have no value if the stock price remains the same or decreasesincreases after the grant date. As a result, SSARS have a neutral adjustment factor. SSARs become exercisable on a stated vesting date, which is 35 months from the grant date, and expire on the seventh anniversary of the grant date. SSARs do not require a financial investment by the SSAR grantee. | | | 100 | % | RSUs | | | • | RSUs — RSUs are the Company’sour promise to issue unrestricted shares of the Company’sour stock on the stated vesting date, which is 35 months from the grant date. RSUs continue to have value even when the stock price remains the same or declines and do not require a financial investment by theThe lower RSU grantee.adjustment factor reflects an incentive toward equity compensation choices that provide for more rapid accumulation of shares. | | | 60 | % |
The Committee believes that by offering executives a choice as to the formAs an example of their equity awards,how the ECP will better address their individual needs regarding financial planning, stageoffers the participant a range of career and risk profile. In addition,outcomes, the following table shows the different number of shares at vesting for an ECP award of $100,000. For all three choices, vesting occurs approximately three years from the grant date: | | | | | | | | | | | | | | Assumes a Common Share Value of $60.00 at Award | | | | | PRS | | | SSARs | | | RSU | | Award Value | | $ | 100,000 | | | $ | 100,000 | | | $ | 100,000 | | Adjustment Factor | | | 1.2 | | | | 1.0 | | | | 0.6 | | Post-Factor Value | | $ | 120,000 | | | $ | 100,000 | | | $ | 60,000 | | Participant Required Investment | | $ | 120,000 | | | | — | | | | — | | At Grant Date | | | 4,000(1) Shares | | | | 6,667 SSARs | | | | 1,000 Shares | | Dollar Value of Award At Vesting/Exercise (Assuming $70 Price) | | $ | 160,000 | (1) | | $ | 66,670 | | | $ | 70,000 | | Dollar Value of Award At Vesting/Exercise (Assuming $50 Price) | | $ | 80,000 | (1) | | $ | 0 | | | $ | 50,000 | |
| (1) | Excludes the $120,000 investment made by ECP participant. |
The Committee believes that a vesting period of approximately three-yearsthree years for the various 50
formseach type of equity is consistent with a goal of executive retention, is an attractive tool for recruiting, motivating and retaining executive talent and encourages alignment with shareholders by reinforcing real investment and ownership by our executives. From time to time, the Committee may award ECP grants that have a shorter vesting period.
Under the ECP, each participant may choose among the three types of equity up to the participant’s total award value. The specific award value granted is determined by the Committee considering factors such as individual performance and overall contribution to the enterprise, future potential of the executive, need for retention and relevant market long term and total compensation levels.
An ECP participant may elect to receive his or her total dollar award in increments of 10% across the three forms of equity with a maximum allocation to RSUs of 50% of such total award value. A participant’s dollar award value is converted into PRS, SSARsand/or RSUs on the grant date based on the participant’s election, with the three forms of awards being “risk-adjusted” upwards or downwards to reflect the varying degree of risk to the participant with each form, as described above. PRS shares, which are considered the most risky, carry a 120% weight, SSARs, which are considered medium risk, carry a 100% weight and RSUs, which are considered the least risky, carry a 60% weight. The Committee approved these risk adjustments at the program’s inception with input from its independent compensation consultant and did not change them in 2010. As an example of how the risk adjustment works, if an ECP participant’s total dollar-denominated award value is $100,000 and he or she elects 100% of the award in PRS, then the total award value used to determine the number of PRS shares to be granted on the grant date is $120,000 ($100,000 x 120% PRS adjustment factor). ECP participants must make their elections prior to the grant date, and once an election is made it may not be changed.
The following table shows the ECP dollar award value allocated toapproved by the Committee for each NEO during 20102012 as well as the percentage and risk-adjustedadjusted dollar value after application of the adjustment factor of each type of equity elected by each NEO: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total ECP
| | | PRS ($ amount
| | | SSARs ($ amount
| | | RSUs ($ amount
| | | | | | | Dollar
| | | reflects 120%
| | | reflects 100%
| | | reflects 60%
| | | | | | | Award
| | | “risk
| | | “risk
| | | “risk
| | NEO Position | | Name | | Value | | | adjustment”) | | | adjustment”) | | | adjustment”) | | | | | | | | | | % | | | $ | | | % | | | $ | | | % | | | $ | | | | | CEO & President | | Douglas D. Tough(1) | | $ | 1,500,000 | | | | 30 | % | | $ | 540,000 | | | | 20 | % | | $ | 300,000 | | | | 50 | % | | $ | 450,000 | | | | | | | $ | 750,000 | | | | 100 | % | | $ | 900,000 | | | | | | | | | | | | | | | | | | | Executive Vice President and Chief Financial Officer | | Kevin C. Berryman | | $ | 600,000 | | | | 70 | % | | $ | 504,000 | | | | 30 | % | | $ | 180,000 | | | | 0 | % | | $ | 0 | | | Group President, Fragrances | | Nicolas Mirzayantz | | $ | 600,000 | | | | 80 | % | | $ | 576,000 | | | | 20 | % | | $ | 120,000 | | | | 0 | % | | $ | 0 | | | Group President, Flavors | | Hernan Vaisman | | $ | 600,000 | | | | 0 | % | | $ | 0 | | | | 50 | % | | $ | 300,000 | | | | 50 | % | | $ | 180,000 | | | Executive Vice President, Head of Supply Chain | | Beth E. Ford | | $ | 450,000 | | | | 0 | % | | $ | 0 | | | | 100 | % | | $ | 450,000 | | | | 0 | % | | $ | 0 | | | Senior Vice President, General Counsel and Secretary | | Dennis M. Meany | | $ | 350,000 | | | | 100 | % | | $ | 420,000 | | | | 0 | % | | $ | 0 | | | | 0 | % | | $ | 0 | | | Senior Vice President, Human Resources | | Angelica T. Cantlon | | $ | 350,000 | | | | 100 | % | | $ | 420,000 | | | | 0 | % | | $ | 0 | | | | 0 | % | | $ | 0 | |
| | | (1) | | Includes a one-time Equity Choice Award grant made to Mr. Tough under the ECP valued at $750,000 as a sign-on grant. Mr. Tough elected for this grant, which vests 100% on the first anniversary of the effective date of his hire as CEO, to be made in PRS. The Committee considered the initial ECP grant to be a reasonable inducement to hire Mr. Tough as our Chairman and Chief Executive Officer. |
In 2010, in order to better reflect market practice, the Committee increased the applicable range for ECP grants to our Executive Vice Presidents and our Business Unit Presidents — from a range of$200,000-$600,000 to a range of$225,000-$675,000. Except for Mr. Tough’s one-time grant, all of the above grants were within the ECP dollar value range for each participant’s compensation grade level, as approved by the Committee.
51
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PRS | | | SSARs | | | RSU | | | | | Unadjusted
ECP Award | | | Percent
Election | | | Adjusted
Value | | | Percent
Election | | | Adjusted
Value | | | Percent
Election | | | Adjusted
Value | | Adjustment Factor | | | | | | | | | | | 120% | | | | | | | | 100% | | | | | | | | 60% | | Douglas D. Tough | | $ | 1,800,000 | | | | 100% | | | $ | 2,160,000 | | | | 0% | | | $ | — | | | | 0% | | | $ | — | | Kevin C. Berryman | | $ | 600,000 | | | | 80% | | | $ | 576,000 | | | | 20% | | | $ | 120,000 | | | | 0% | | | $ | — | | Nicolas Mirzayantz | | $ | 500,000 | | | | 100% | | | $ | 600,000 | | | | 0% | | | $ | — | | | | 0% | | | $ | — | | Hernan Vaisman | | $ | 600,000 | | | | 0% | | | $ | — | | | | 50% | | | $ | 300,000 | | | | 50% | | | $ | 180,000 | | Anne Chwat | | $ | 350,000 | | | | 100% | | | $ | 420,000 | | | | 0% | | | $ | — | | | | 0% | | | $ | — | |
The Committee, as it did in 2009, allowed ECP participants who choose to acquire PRS shares to fund their purchases either by paying cash or by tendering previously owned unrestricted shares of the Company’s Common Stock. The Committee wanted to encourage continued purchases of PRS shares by ECP participants. However, the Committee recognized that certain ECP participants might not have been able to pay more cash in 2010 to invest in additional PRS shares or they would have needed to sell Company shares they already owned to fund their additional PRS purchases. Theactual equity award grants to each NEO, based on the above elections, are identified in the Grants of Plan-Based Awards Table.
The Committee, at its meeting on April 26, 2010,January 30, 2012, approved the 20102012 ECP values allocatedawarded to each senior executive, including our NEOs, and theNEOs. The grants that were made on June 2, 2010.May 1, 2012. The period of time between approval of ECP values and the actual grant date gives ECP participants time to make their irrevocable ECP elections and to arrange finances for the purchase of PRS if so elected. In addition, in order to allow ECP participants to use vested PRS shares to purchase additional PRS shares in 2010, the Committee decided to make the ECP grants on June 2, 2010, rather than the date of the 2010 Annual Meeting of Shareholders. Thus, certain executives, who received ECP grants on May 8, 2007 which grants vested on May 8, 2010, were able to use those vested shares to purchase additional PRS shares. The Committee also determined that the 20102012 ECP grants would vest on April 2, 2013,1, 2015, which is slightly less than three years from the grant date. This decision wasdate, to enable participants to use vested PRS shares to acquire new PRS shares in 2013. The Committee expects to continue this grant process in 2011 and in the future. The one-time grant to our CEO has a shorter vesting period. As an inducement for Mr. Tough to join our Company as our Chairman and CEO, he was awarded a one-time grant on March 24, 2010, which vests on March 1, 2011, the first anniversary of his commencement as our CEO.
Stock Ownership and Share Retention Policy
We encourage our executives to own Company stock so that they share the same long term investment risk as our shareholders. Under our Share Retention Policy, executives must retain a portion of any shares of stock acquired under our equity award plans. The percentage of “net gain shares” required to be retained by each of our CEO and our other NEOs is 50%. “Net gain shares” are the shares remaining from a stock option or SSAR exercise after payment of the exercise price and taxes, or the shares remaining after payment of taxes on the vesting of PRS or RSUs. Any Company shares sold or traded by an executive to fund PRS purchases under the ECP are not subject2015, to the share retention requirement.
Once an executive reaches a targeted ownership level of our common stock, he or she is exempt from further share retention requirements so long as he or she maintains that targeted ownership level. The targeted ownership levels are the lesser of five times base salary or 120,000 shares for the CEO, the lesser of three times base salary or 35,000 shares for our Business Unit Presidents and Executive Vice Presidents and the lesser of two times base salary or 20,000 shares for our Senior Vice Presidents. The dollar value of shares held is calculated based on the Company’s stock price and the value of cash or shares used to acquire PRS. These ownership levels provide executives flexibility in personal financial planning, yet continue to maintain ongoing and substantial investment in Company stock.
At year end 2010, all NEOs were subject to continued share retention requirements, other than Mr. Mirzayantz and Mr. Meany, who had satisfied the targeted ownership level. Additional detail regarding ownership of our common stock by our executives is included in the Beneficial Ownership Table.
Defined Benefit Pension Plan and Supplemental Retirement Plan (“SRP”)
Certain senior executives, including Mr. Meany, a NEO, were grandfathered under our defined benefit pension plan, which, as of January 1, 2006, was closed to new employees and which, as of December 31, 2007,
52
was frozen for all participants who did not meet a combined age and years of service total of 70. Those employees who were not grandfathered under the plan, including all of our other NEOs, became eligible to participate in an enhanced 401(k) plan.
The retirement benefits under our tax-qualified defined benefit pension plan for participants, including Mr. Meany, may be limited under IRS rules covering tax-qualified retirement plans. We have a non-qualified SRP to pay that part of an executive’s retirement benefit that, because of the IRS limitations, cannot be paid under the tax-qualified pension plan. Benefits are calculated under the SRP in the same manner as the tax-qualified pension plan. The Committee believes that the full retirement benefit earned by an executive under our retirement benefit formula should be paid without reduction and that a supplemental plan is common in the industry and important to retain our senior executives.
We do not have a policy regarding the crediting of additional years of service under our SRP. However, as described under the heading Termination of Employment and Change in Control Arrangements, additional years of service may be credited to a participant in connection with certain terminations within two years following a change in control. Our rationale for granting this additional credit is consistent with our rationale for other enhanced severance benefits offered in connection with a change in control as described under the heading Executive Separation Policy below. In addition, on acase-by-case negotiated basis, from time to time, executives may be credited with additional years of service.
Deferred Compensation Plan (“DCP”) We offer toU.S.-based executives an opportunity to participate in our DCP, as a cost-effective benefit that enhances the competitiveness of our compensation program. The DCP provides participants with a way to delay receipt of income and thus income taxation until a future date. When deferred, the amount of compensation is not reduced by income taxes, and the executive can choose to have this “pre-tax” amount deemed invested in one or more notional investments that generally track investment funds offered under our 401(k) savings plan. Although the executive will eventually owe income taxes on any amounts distributed from the DCP, the ability to invest on a “pre-tax” basis allows for a higher ultimate after-tax return. By providing a wealth-building opportunity through the DCP, we are better able to attract and retain executives to the Company. executives.Through the DCP, we also provide the same level of matching contributions to executives that would be made under our 401(k) savings plan but for limitations under U.S. tax law. We also use the DCP to encourage executives to acquire deferred IFFshares of our common stock that isare economically equivalent to ownership of our common stock but isare on a tax-deferred basis. If an executive elects to defer receipt of cash compensation and invests it in credits of deferred common stock of the Company stock under the DCP, we credit an additional 25% of the amount deferred in the executive’s deferred Company stockDCP account contingent on the executive remaining employed by the Company (other than retirement) for the full calendar year following the year when such credit is made. We do this to encourage executives to be long termlong-term owners of a significant equity stake in IFF,us and to foster an entrepreneurial culture,create a close alignment between the interests of executives and those of shareholders and a deeper commitment to IFF. IFF’sour shareholders.Our costs in offering the DCP consist of the time-value of money costs, the cost of the matching contribution that supplementsupplements the 401(k) savings plan, the 25% premium for cash deferrals into deferred Companycommon stock and administrative costs. If notional investments within the DCP increase in value, the amount of our payment obligation will increase. The time-value of money cost results from the delay in the time at which we can take tax deductions for compensation payable to a participating executive. If notional investments within the DCP increase in value, the amount of our payment obligation will increase. This treatment limits our costs to the time-value of money cost resulting from our paying income tax on the returns of our direct investments earlier than the time at which we are able to claim tax deductions by paying out the deferred compensation. Our supplemental matching contributions and premiums on cash deferrals into deferred common stock for NEOs are reflected in the Summary Compensation Table and in the All Other Compensation Table.
53
Perquisite Program TheOur NEO perquisites program offers non-monetary benefits that are competitive and consistent with the marketplace as determined through a market study conducted by our independent compensation consultant in 2010.2011. Under the perquisites program, executives are eligible to receive certain benefits including: Company car or car allowance: The CEO and the other NEOs are eligible to obtain a Company-provided automobile once every 3 years; | | | | • | Company car or car allowance: The CEO and the other NEOs are eligible to obtain a company-provided automobile once every 3 years. Other senior executives are eligible to be provided a Company leased car (chosen from a selected list) or a car allowance; | | | • | Annual physical exam (once every 12 months); | | | • | Financial planning (up to approximately $10,000 per year); | | | • | Tax preparation and estate planning (up to $4,000 over a 3 year period); and | | | • | Health club membership (up to $3,000 annually). |
Financial planning (up to approximately $10,000 per year); Tax preparation and estate planning (up to $4,000 over a three-year period); and Health club membership (up to $3,000 annually). As part of his employment agreement our CEO is entitled to receive a $25,000 annual allowance for financial planning, tax preparation and estate planning services, rather than the above limits. He is also entitled to have the Company pay for dues for a luncheon club in Manhattan, but this perquisite was not exercised in 2010.2011 or 2012. The personal value of all perquisites (other than the annual physical examination) is reported as income to the individual and accordingly is subject to tax. The Committee believes that the total value of our perquisites program is reasonable. Additional details concerning perquisites are included in the footnotes to the All Other Compensation Table. Executive Separation Policy (“ESP”) We provide severance and other benefits under our ESP to senior executives whose employment is terminated not for cause and not due to a voluntary termination. This policy helps us in competing with other companies in recruiting and retaining qualified executives. When recruiting an executive from another company, the executive in most cases will seek contract terms that provide compensation if his or her employment is terminated by us in cases in which the executive has not engaged in misconduct. The level of separation pay under the ESP is based on a tier system and each executive’s assigned tier is based on the executive’s grade level. All our NEOs are in Tier I. The specific separation pay by tier was determined by the Committee and developed with the assistance of its independent compensation consultant. We believe thatconsultant and determined by the ESP provides a level of separation pay and benefits that is within a range of competitive practice of our peer group companies. We provide separation pay and benefits under the ESP on the condition that, for specified periods following termination, the departed executive not compete with us, solicit our customers and employees, or take other actions that harm our business. In addition, having pre-set terms governing the executive’s separation from service tends to reduce the time and effort needed to negotiate individual termination agreements, and promotes more uniform and fair treatment of executives.
Effective as of December 14, 2010, upon the recommendation of the Committee, our Board amended the definition of “change in control” included in our ESP to align it with the definition in our shareholder-approved 2010 Stock Award and Incentive Plan. As revised, a change in control is triggered by ownership of 50% rather than 40% of the Company’s voting stock or by a merger if the pre-merger shareholders own less than 50% rather than less than 60% of the voting stock.
In line with what the Committee (with the assistance of its independent compensation consultant) understands is competitive practice, we provide a higher level of severance payments and benefits if the executive were to be terminated without cause or elects to terminate employment with good reason within two years after a change in control. These protections provide a number of important benefits. If a change in control event is developing, executives who lack these assurances may act to protect their own interests by seeking employment elsewhere. Change in control transactions take time to unfold, and a stable management team will help to preserve our operations and shareholder value either by preserving the sale value
54
of IFF or, if no transaction is consummated, by ensuring that our business will continue without undue disruption. In addition, having change in control protections in place encourages management to consider, on an on-going basis, whether a strategic transaction could be advantageous to our shareholders — even a transaction that would yield control of IFF to a third party and result in job loss to the executive. Effective as of December 14, 2010, our Board amended the ESP to provide that any equity grants made after that date will accelerate on a “double-trigger” basis, i.e., if the executive is terminated without cause or terminates with “good reason” within 2 years after the change in control. Prior to the amendment, equity grants provided for acceleration of vesting of equity awards for ESP participants upon the occurrence of a change in control on a “single-trigger” basis, without regard to whether the executive will be terminated. These amended terms encourage executives to consider and support transactions that could benefit shareholders and do not provide an extra benefit to executives simply due to a change in control.
Some aspects of change in control protections can be expensive, particularly payments that offset the adverse tax consequences to the executive if the U.S. golden parachute excise tax is triggered. Effective as of December 14, 2010, our Board, upon the recommendation of the Committee, amended the ESP to eliminate a“gross-up” for this excise tax for new ESP participants after that date. The ESP “gross up” provision was replaced by a “modified cut-back” provision, where severance or other payments to that participant would be reduced if this reduction would produce a better after-tax result for the participant, but there would be no reduction if, without the reduction, the participant (who would be responsible for any excise tax) would have a better after-tax result. Participants in the ESP on or prior to March 8, 2010, remain eligible for the excise taxgross-up, except in the limited case where a cut-back of 10% would avoid the excise tax. Under Mr. Tough’s negotiated letter agreement, he is not entitled to a taxgross-up for severance in the event of a termination in connection with a change in control.
Committee. In 2007, the Committee,Company, on a prospective basis reduced the level of severance under the ESP in situations of termination not for cause and not involving a change in control. For Tier I eligible executives hired after October 22, 2007, including Mr. Berryman, Ms. Ford and Ms. Cantlon, severance was reduced from 24 to 18 months. However, in order to induce Mr. Toughour CEO to join the Company, as CEO, his negotiated letter agreement provides him with a Tier I severance payment of 24 months. An executive receiving benefits underIn 2012, our CEO reached the age of 63 and, in accordance with the terms of his letter agreement, his severance payment was reduced to 18 months. We believe that the ESP must generally continue to be employed at the timeprovides a level of paymentseparation pay and benefits that is within a range of an LTIP award or vestingcompetitive practice of an equity award, except that an executive who is terminated during a three-year LTIP cycle may receive a pro rata payout for service during each segment in that cycle or an executive who has outstanding unvested equity award(s) may be entitled to continued vestingour peer group companies.A discussion of a pro rata portion of those award(s). In the event relevant performance measures on which incentive payments are based are subsequently restated or otherwise adjusted in a manner that would reduce the size of a payment, the Committee would expect to seek recovery of or reduction in these incentive payments, but only if the Committee determines it appropriate under the particular circumstances, including misconduct, failure to exercise oversight, or other appropriate circumstances as may occur. In addition, any SEC or other rules adopted by the New York Stock Exchange governing recoupment of compensation under The Dodd-Frank Wall Street Reform and Consumer Protection Act will automatically apply to the ESP.
Additional details regarding our ESP, and the payments that each of our CEO’s letter agreement are includedNEOs would have been eligible to receive had a covered termination occurred as of December 31, 2012 is set forth below under the heading“Potential Payments upon Termination of Employment andor Change in Control Arrangements.
Control.”Executive Death Benefit Plan The Company’sOur Executive Death Benefit Plan provides participants, including each of the NEOs, with a pre-retirement death benefit equal to the excess of twice the participant’s annual base salary (excluding bonus and other forms of compensation) aboveless $50,000, the death benefit provided by the Company’sour basic group term life insurance plan for employees and retirees, less $50,000 of group coverage.retirees. The plan also provides a death benefit post-retirement, or pre-retirement after attainment ofattaining age 70, equal to twiceone times the participant’s base salary (excluding bonus and other forms of compensation) for the year in which the participant retires or reaches the age of 70, assuming the participant was an executive officer, less $12,500 of group coverage
55
for retired participants and less $50,000 for senior participants (those who have attained the age of 70 and remain employed with the Company). The CommitteeWe generally attemptsattempt to structure executive compensation to be tax deductible. However, the Committee also believes that under some circumstances, such as to attract or to retain key executives, to recognize outstanding performance or to take into account the external business environment, it may be important to compensate one or more key executives above tax deductible limits. In 2010, all NEORevisions to our 2013 Compensation Programs At its January 28, 2013 meeting, the Compensation Committee adopted the following revisions to the Equity Choice Program. These revisions will affect award amounts granted to NEOs and other executives as part of 2013 compensation exceptactions. Changes in RSU Equity Choice. The adjustment factor for certain amounts paidthe RSU equity choice was increased from 0.6 to Mr. Tough in connection with his becoming our CEO,1.0, and the maximum choice restriction on RSUs was tax deductible. 2011 Compensation Actions
In July 2010, with the assistance of its independent compensation consultant, the Committee reviewed the peer groups to be used for 2011 compensation decisions. The general selection, approach and criteria described above under Benchmarking will notremoved. This change for 2011 and there were no changeswas made to more closely align the peer groups.
We expect thatuse of service-based, full value awards with market practices where such awards can make up a larger percentage of overall compensation. This change also makes the award more valuable for all participants who are not able through personal circumstances to fund the purchase of PRS.Change in PRS Equity Choice.The PRS equity choice was changed in structure from a 50% discount at purchase (the participant purchased restricted shares at 50% of the closing market price on the grant date) to a 100% match upon grant (for each share purchased at full value by the participant, the participant receives a matching share of restricted stock). This change was made to provide a more tax efficient grant to participants who are located in countries where PRS is taxed differently than in the U.S. This change results in no increase in compensation programsvalue at grant, and matched restricted shares will be forfeited if any of the underlying shares are sold. Change in SSAR Equity Choice. Participants selecting SSARs will now receive a number of SSARs equal to 4.5 times the elected SSARs value divided by the grant price, an increase from the current 4.0 multiple. This change was made to more closely align the ratio of SSARs to a restricted share with our binomial valuation model. Non-GAAP Reconciliation This Compensation Discussion and Analysis includes the following non-GAAP financial measures: local currency sales, adjusted operating profit and adjusted earnings per share. Please see Exhibit A of this proxy statement for our senior executives will generally remain the same as described above in 2011.
56a reconciliation of such metrics.
COMPENSATION COMMITTEE REPORT The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this Proxy Statement.proxy statement. Based on those reviews and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statementproxy statement for filing with the SECSecurities and Exchange Commission and incorporated by reference into the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2010. Compensation Committee
J. Michael Cook (Chairman)
Marcello Bottoli
Roger W. Ferguson, Jr.
Alexandra A. Herzan
57
| Compensation Committee | | J. Michael Cook (Chair) | | Marcello V. Bottoli | Roger W. Ferguson, Jr. | Alexandra A. Herzan |
VIII. PROPOSAL III — ADVISORY VOTE ON EXECUTIVE COMPENSATION The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (known as the Dodd-Frank Act) requires us to provide our shareholders with the opportunity to approve, on a nonbinding, advisory basis, the compensation of our NEOs as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC, often referred to as “Say on Pay.” As discussed in detail in the Compensation Discussion and Analysis and the compensation tables and narratives that follow, the compensation program for our NEOs is designed (i) to attract, retain and motivate our executives who are critical to our success, (ii) to reward achievement of both annual and long-term performance goals, and (iii) to align the interests of our executives with those of our shareholders. Pursuant to our compensation program, an average of 77% of our NEO’s 2012 target total direct compensation is considered “variable” and tied to our Company’s performance based on a number of financial goals and Company stock price performance and dividend return (TSR). We believe that our executive compensation program strikes the appropriate balance between utilizing responsible, measured pay practices and rewarding the achievement of financial and operational performance metrics that build shareholder value. This balance is evidenced by the following: Our AIP rewards the achievement of our annual performance objectives by providing awards based on the attainment of four financial performance metrics: (1) local currency sales growth, (2) operating profit, (3) gross margin and (4) working capital. Our LTIP rewards solid Company performance by providing awards based on (i) our annual EPS performance or, beginning with the 2012-2014 LTIP cycle, Economic Profit and (ii) our annual and cumulative TSR performance relative to the S&P 500. In addition, the LTIP aligns our executives’ interests with those of our shareholders by paying 50% of the earned award in shares of our common stock. Our ECP incentivizes our executives to create value for our shareholders by providing equity-based compensation. We require our NEOs to meet certain stock ownership guidelines under our Share Retention Policy to promote alignment of our executives’ interests with those of our shareholders and to discourage excessive risk taking for short-term gains. For additional information on the compensation program for our NEOs, including specific information about compensation in 2012, please see the information in this proxy statement under the heading “Compensation Discussion and Analysis,” along with the compensation tables and narrative descriptions that follow. We provide our shareholders with the opportunity to cast the Say on Pay vote on an annual basis. In accordance with the Dodd-Frank Act, the Say on Pay vote will be an advisory vote regarding our Company’s NEO compensation program generally and does not examine any particular compensation element individually. Because the Say on Pay vote is advisory, it is not binding on our Company, our Compensation Committee Interlocks and Insider Participation None of the members ofor our Board. However, the Compensation Committee was at any time during 2010 or at any other time an officer or employeeintends to review the results of the Company. No executive officeradvisory vote and will be cognizant of the Company servesfeedback received from the voting results as a memberit completes its annual review and engages in the compensation planning process.Accordingly, we will ask our shareholders to vote on the following resolution at the 2013 Annual Meeting: “RESOLVED, that, the compensation paid to the Company’s NEOs, as disclosed in this proxy statement for our 2013 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the board of directors orSecurities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation committee of any other entity that has one or more executive officers serving as a member of ourtables and related narrative disclosure, is hereby approved.” The Board of Directors or Compensation Committee. IX. EXECUTIVE COMPENSATIONSummary Compensation Table The following table sets forth the 2012, 2011 and 2010 compensation for: our three other most highly compensated executive officers. We refer to the executive officers included in the Summary Compensation Table details compensationas our NEOs. A detailed description of the Company’s named executive officers during 2010plans and where applicable, 2009programs under which our NEOs received the following compensation can be found in this proxy statement under the heading “Compensation Discussion and 2008. Analysis.”20102012 Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Change in
| | | | | | | | | | | | | | | | | | | | Pension
| | | | | | | | | | | | | | | | | | | | Value and
| | | | | | | | | | | | | | | | | | | | Nonqualified
| | | | | | | | | | | | | | | | | | Non-Equity
| | Deferred
| | | | | | | | | | | | | | Stock
| | Option
| | Incentive Plan
| | Compensation
| | All Other
| | | Name and
| | | | Salary
| | Bonus
| | Awards
| | Awards
| | Compensation
| | Earnings
| | Compensation
| | Total
| Principal Position
| | Year
| | ($)
| | ($)
| | ($)
| | ($)
| | ($)
| | ($)
| | ($)
| | ($)
| | (a) | | (b) | | (c)(1)(2) | | (d) | | (e)(3)(4) | | (f)(3) | | (g)(5)(6)(7) | | (h)(8) | | (i)(9) | | (j) | | | | Douglas D. Tough (10) | | | 2010 | | | | 1,000,000 | | | | 500,000(11 | ) | | | 3,684,505 | | | | 278,093 | | | | 3,233,970 | | | | 0 | | | | 202,442 | | | | 8,899,010 | | Non-Executive Chairman
(from October 1, 2009
until February 28, 2010)
and Chairman and Chief Executive
Officer (since March 1, 2010) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kevin C. Berryman | | | 2010 | | | | 500,000 | | | | 0 | | | | 725,380 | | | | 166,851 | | | | 1,033,517 | | | | 0 | | | | 139,817 | | | | 2,565,565 | | | Member, Temporary Office | | | 2009 | | | | 314,423 | | | | 100,000 | | | | 947,584 | | | | 279,275 | | | | 415,683 | | | | 0 | | | | 182,795 | | | | 2,239,760 | | of the Chief Executive Officer
(until February 28, 2010) and
Executive Vice President
and Chief Financial Officer(12) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nicolas Mirzayantz | | | 2010 | | | | 493,750 | | | | 0 | | | | 797,387 | | | | 111,231 | | | | 1,054,285 | | | | 119,399 | | | | 119,439 | | | | 2,695,491 | | | Member, Temporary Office | | | 2009 | | | | 475,000 | | | | 76,893 | | | | 693,987 | | | | 165,118 | | | | 245,030 | | | | 22,246 | | | | 96,846 | | | | 1,775,120 | | | of the Chief Executive Officer | | | 2008 | | | | 475,000 | | | | 0 | | | | 589,581 | | | | 110,144 | | | | 253,073 | | | | 49,489 | | | | 99,539 | | | | 1,576,826 | | (until February 28, 2010) and
Group President, Fragrances(12) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Hernan Vaisman | | | 2010 | | | | 487,500 | | | | 0 | | | | 389,574 | | | | 278,093 | | | | 1,022,540 | | | | 0 | | | | 83,678 | | | | 2,261,385 | | | Member, Temporary Office | | | 2009 | | | | 450,000 | | | | 0 | | | | 742,045 | | | | 0 | | | | 473,625 | | | | 0 | | | | 89,213 | | | | 1,754,883 | | | of the Chief Executive Officer | | | 2008 | | | | 450,000 | | | | 0 | | | | 314,987 | | | | 317,740 | | | | 434,397 | | | | 0 | | | | 72,222 | | | | 1,589,346 | | (until February 28, 2010) and
Group President, Flavors(12) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Beth E. Ford | | | 2010 | | | | 500,000 | | | | 0 | | | | 221,400 | | | | 417,139 | | | | 1,019,622 | | | | 0 | | | | 104,433 | | | | 2,262,594 | | | Executive Vice President, | | | 2009 | | | | 500,000 | | | | 0 | | | | 415,997 | | | | 247,677 | | | | 437,682 | (13) | | | 0 | | | | 77,362 | | | | 1,678,717 | | | Head of Supply Chain | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Dennis M. Meany | | | 2010 | | | | 414,000 | | | | 0 | | | | 542,192 | | | | 0 | | | | 647,393 | | | | 188,068 | | | | 109,691 | | | | 1,901,344 | | | Former Senior Vice President, | | | 2009 | | | | 414,000 | | | | 0 | | | | 604,199 | | | | 0 | | | | 262,887 | | | | 113,943 | | | | 105,297 | | | | 1,500,326 | | | General Counsel and | | | 2008 | | | | 410,500 | | | | 0 | | | | 509,243 | | | | 0 | | | | 324,716 | | | | 291,110 | | | | 97,473 | | | | 1,633,042 | | | Secretary (until December 31, 2010) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Angelica Cantlon | | | 2010 | | | | 318,750 | | | | 0 | | | | 512,968 | | | | 0 | | | | 480,697 | | | | 0 | | | | 56,227 | | | | 1,368,642 | | | Senior Vice President, | | | 2009 | | | | 124,182 | | | | 0 | | | | 313,864 | | | | 0 | | | | 78,870 | | | | 0 | | | | 5,283 | | | | 522,199 | | | Human Resources | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and
Principal Position | | Year | | | Salary
($)
(1)(2) | | | Bonus
($) | | | Stock
Awards
($)
(3)(4) | | | Option
Awards
($)
(3) | | | Non-Equity
Incentive Plan
Compensation
($)
(5)(6) | | | Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
(7) | | | All Other
Compensation
($)
(8)(9) | | | Total
($) | | Douglas D. Tough | | | 2012 | | | | 1,200,000 | | | | — | | | | 3,158,257 | | | | — | | | | 3,451,664 | | | | — | | | | 387,697 | | | | 8,197,618 | | Chairman and Chief | | | 2011 | | | | 1,200,000 | | | | — | | | | 2,483,416 | | | | — | | | | 872,614 | | | | — | | | | 318,065 | | | | 4,874,095 | | Executive Officer | | | 2010 | | | | 1,000,000 | | | | 500,000 | | | | 3,684,505 | | | | 278,093 | | | | 3,233,970 | | | | — | | | | 202,442 | | | | 8,899,010 | | | | | | | | | | | | Kevin C. Berryman | | | 2012 | | | | 511,458 | | | | — | | | | 800,623 | | | | 82,580 | | | | 896,236 | | | | — | | | | 180,255 | | | | 2,471,152 | | Executive Vice President | | | 2011 | | | | 500,000 | | | | — | | | | 558,472 | | | | 143,994 | | | | 245,338 | | | | — | | | | 126,971 | | | | 1,574,775 | | and Chief Financial Officer | | | 2010 | | | | 500,000 | | | | — | | | | 725,380 | | | | 166,851 | | | | 1,033,517 | | | | — | | | | 154,897 | | | | 2,580,645 | | | | | | | | | | | | Nicolas Mirzayantz | | | 2012 | | | | 504,583 | | | | — | | | | 824,602 | | | | — | | | | 873,518 | | | | 201,264 | | | | 161,201 | | | | 2,565,168 | | Group President, | | | 2011 | | | | 500,000 | | | | — | | | | 874,637 | | | | — | | | | 194,884 | | | | 250,173 | | | | 118,069 | | | | 1,937,763 | | Fragrances | | | 2010 | | | | 493,750 | | | | — | | | | 797,387 | | | | 111,231 | | | | 1,054,285 | | | | 119,399 | | | | 122,439 | | | | 2,698,491 | | | | | | | | | | | | Hernan Vaisman | | | 2012 | | | | 511,458 | | | | — | | | | 393,434 | | | | 206,449 | | | | 907,677 | | | | — | | | | 88,300 | | | | 2,107,318 | | Group President, Flavors | | | 2011 | | | | 500,000 | | | | — | | | | 402,470 | | | | 239,987 | | | | 437,028 | | | | — | | | | 93,971 | | | | 1,673,456 | | | | | 2010 | | | | 487,500 | | | | — | | | | 389,574 | | | | 278,093 | | | | 1,022,540 | | | | — | | | | 83,678 | | | | 2,261,385 | | | | | | | | | | | | Anne Chwat (10) | | | 2012 | | | | 450,000 | | | | 22,500 | | | | 554,769 | | | | — | | | | 540,003 | | | | — | | | | 200,243 | | | | 1,767,515 | | Senior Vice President, | | | 2011 | | | | 322,211 | | | | — | | | | 863,335 | | | | — | | | | 116,445 | | | | — | | | | 224,134 | | | | 1,526,125 | | General Counsel and Corporate Secretary | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | (1) | | The amounts in this column related to 20102012 include the following amounts deferred under the DCP: Mr. Tough: $72,000;Tough — $ 96,000; Mr. Berryman: $55,000;Berryman — $ 41,000; Mr. Mirzayantz: $49,375; Mr. Vaisman: $39,000;Vaisman — $ 41,000; and Ms. Ford: $40,000; Mr. Meany: $82,800; Ms. Cantlon: $6,375.Chwat — $ 135,000. | |
| (2) | | The amounts in this column related to 20102012 include the following amounts deferred under the Retirement Investment Fund Plan (401(k)): Mr. Tough: $17,348;Tough — $ 22,500; Mr. Berryman: $22,000;Berryman — $ 22,500; Mr. Mirzayantz — $ 17,000; Mr. Vaisman — $ 22,500; and Ms. Chwat — $ 22,500. |
58
| | | | | Mr. Mirzayantz: $16,500; Mr. Vaisman: $22,000; Ms. Ford: $16,500; Mr. Meany: $19,872; Ms. Cantlon: $22,000. | | | (3) | | The amounts in the Stock Awards and Option Awards columns represent the aggregate grant date fair value of equity awards granted during theeach respective fiscal year, ended December 31, 2010, calculated in accordance with FASB ASC Topic 718. Amounts in these columns reported for 2008 have also been restated to reflect the aggregate grant date fair value of equity awards granted during that year. Details on and assumptions used in calculating the grant date fair value of RSUs, PRS, SSARs, options and LTIP equity incentive compensation may be found in Note 11 to the Company’sour audited financial statements for the fiscal year ended December 31, 20102012 included in the Company’sour Annual Report onForm 10-K filed with for the SEC on February 24, 2011. | | | | fiscal year ended December 31, 2012. The grant date fair value attributable to the2010-2012 2012-2014 LTIP cycle awards reportedincluded in the Stock Awards column (e) pertains to the 50% portion of those awards that will be payable in IFFour common stock if the performance conditions are satisfied and is based |
| on the probable outcome of such conditions. The value of these awards at the grant date if the maximum level of performance conditions were to be achieved is as follows: Mr. Tough $1,863,758;— $ 1,995,800; Mr. Berryman $442,800;— $ 449,055; Mr. Mirzayantz $442,800;— $ 449,055; Mr. Vaisman $442,800;— $ 449,055; and Ms. Ford, $442,800; Mr. Meany, $244,426; Ms. Cantlon, $185,976.Chwat — $ 269,433. The actual number of shares earned by the NEOs for the completed2008-2010 2010-2012 LTIP cycle, for the 20102012 segment of the2009-2011 2011-2013 LTIP cycle, and for the 20102012 segment of the2010-2012 2012-2014 LTIP cycle can be found in the narrative following the Grants of Plan BasedPlan-Based Awards Table under the heading “Long-Term Incentive Plan (LTIP)Plan.”. | |
| (4) | | The following named executive officers paidNEOs purchased the following amounts fornumber of shares of PRS indicated in fiscal year 2010, which2012, in each case wasat a price per share equal to 50% of the closing stock price on the date of grant: Mr. Tough: $539,983Tough — $ 2,160,357 for 24,042 shares and $899,993 for 39,301 shares as part of his 2010sign-on-award; Mr. Berryman: $503,980 for 22,43971,535 shares; Mr. Mirzayantz: $575,987Berryman — $ 576,095 for 25,64519,076 shares; Mr. Meany: $419,980Mirzayantz — $ 600,074 for 18,69919,870 shares; and Ms. Cantlon: $419,980Chwat —$ 420,052 for 18,69913,909 shares. As discussed in the Compensation Discussion and Analysis, participants in our Equity Choice ProgramECP are permitted to satisfy the purchase price of PRS shares by tendering shares of IFFour common stock. Mr. Mirzayantz and Mr. MeanyAll of the NEOs who purchased PRS shares in 2012 other than Ms. Chwat tendered shares in full or partial satisfaction ofto satisfy the purchase price for these PRS shares granted to them in fiscal 2010.shares. | |
| (5) | | The amounts in this column related to 20102012 include the following amounts earned under the 20102012 AIP: Mr. Tough: $2,129,559;Tough — $ 1,825,632; Mr. Berryman: $705,600;Berryman — $ 519,867; Mr. Mirzayantz: $717,080;Mirzayantz — $ 497,149; Mr. Vaisman: $697,280;Vaisman — $ 531,308; and Ms. Ford: $705,600; Mr. Meany: $438,178; Ms. Cantlon: $337,397. The amounts in this column related to 2010 include the following amounts deferred under the DCP: Mr. Tough: $638,868; Mr. Mirzayantz: $179,270. The AIP amount for Mr. Tough was pro-rated based on the number of days he served as an employee in 2010.Chwat — $ 342,306. | |
| (6) | | LTIP cycles that commenced in or after 2008 are comprised ofhave four performance segments related to each year in the three-year LTIP cycle and the cumulative results for the full three-year cycle. Any amounts earned under a performance segment are credited on behalf of the executive at the end of the relevant segment, but such credited amounts are not paid until the completion of the three-year LTIP cycle. Upon completion, one-half of any award earned for a completed LTIP cycle is paid in cash and the remaining half is paid in shares of our common stock. The cash portion of the NEOs’ credited awards is reported in this column for the year in which such amount was earned, rather than in the year in which such award is actually paid. | | | | The amounts in this column related to 20102012 include the amounts earned and credited for the 2012 segment of the 2011-2013 and 2012-2014 LTIP cycles and the following amounts earned for the 20102012 and cumulative segments under the2008-2010 completed 2010-2012 LTIP cycle: Mr. Tough: $340,100;Tough — $ 835,282; Mr. Berryman: $119,667;Berryman — $ 198,450; Mr. Mirzayantz: $133,855;Mirzayantz — $ 198,450; Mr. Vaisman: $126,810; Ms. Ford: $105,772; Mr. Meany: $87,499Vaisman — $ 198,450; and Ms. Cantlon: $50,690. The foregoing LTIP amounts for each of Mr. Tough, Mr. Berryman and Ms. Cantlon were pro-rated based on the number of days served as an employee during each segment within the LTIP cycle.Chwat — $ 90,946. | |
| (7) | | The amounts in this column related to 2010 include the following cash amounts credited on behalf of the executive: (i) under the2009-2011 LTIP cycle based on the executive’s target cash amount for |
59
| | | | | the 2010 segment of that LTIP cycle and based on the Company’s achievement of the corporate performance goals for that segment: Mr. Tough: $300,265; Mr. Berryman: $98,000; Mr. Mirzayantz: $93,100; Mr. Vaisman: $88,200; Ms. Ford: $98,000; Mr. Meany: $60,858 and Ms. Cantlon: $46,305; and (ii) under the2010-2012 LTIP cycle based on the executive’s target cash amount for the 2010 segment of that LTIP cycle and based on the Company’s achievement of the corporate performance goals for that segment: Mr. Tough: $464,046; Mr. Berryman: $110,250; Mr. Mirzayantz: $110,250; Mr. Vaisman: $110,250; Ms. Ford: $110,250; Mr. Meany: $60,858 and Ms. Cantlon: $46,305. The credited amounts for Mr. Tough for the 2010 segment of the2009-2011 and2010-2012 LTIP cycles were pro-rated based on the number of days served as an employee during the 2010 segment. | | (8) | | The amounts in this column represent the aggregate change in the actuarial present value of the named executive officer’sNEO’s accumulated benefit under our U.S. Pension Plan (our qualified defined benefit plan) and our Supplemental Retirement Plan (our non-qualified defined benefit plan). Earnings in the interest bearing account in the DCP were not above-market, and earnings in other investment choices under the DCP were not preferential, and therefore are thus not included. |
| (9)(8) | | Details of the amounts set forth in this column related to 20102012 are included in the All Other Compensation Table. |
| (9) | | (10) | | PriorAmounts for 2011 and 2010 were restated to Mr. Tough’s commencent of service as our CEO on March 1,adjust certain relocation and other perquisites paid in 2011 or 2010 he served as a non-employee director ofthat were inadvertently omitted from, or reflected in the Company. Compensation paid to Mr. Tough in his capacity as a non-employee director during 2010 is included in this table as part of the amount reportedincorrect year, in the All Other Compensation column. | | (11) | | This amount represents a sign-on bonus paid to Mr. Tough on July 1,columns in 2011 and 2010. | | (12) | | As discussed in the Compensation Discussion and Analysis, Messrs. Berryman, Mirzayantz and Vaisman served as members of the temporary Office of the CEO from October 1, 2009 until Mr. Tough’s commencement of service as our CEO on March 1, 2010. While serving in this temporary office, and following such service, these NEOs continued also to serve in their preexisting roles with IFF, and their 2010 compensation was not adjusted to reflected their temporary additional responsibilities. | | (13) | | Includes $20,853 paid in cash as part of a discretionary make-whole payment relating to the pro-ration of the2007-2009 LTIP cycle. |
60
| (10) | | Ms. Chwat was hired on April 14, 2011. |
20102012 All Other Compensation
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Life
| | | | | | | | | | | | | | | | Company
| | | | | | Financial/
| | Insurance/
| | | | Housing/
| | | | | | | | | | | | Match to
| | | | | | Estate
| | Executive
| | | | Relocation
| | | | | | | | | | Dividends
| | Defined
| | | | | | Planning and
| | Death
| | Annual
| | Expenses/
| | | | | | | | | | on stock
| | Contribution
| | | | Club
| | Tax
| | Benefit
| | Physical
| | Tax
| | Director
| | | | | | | | awards (1) | | Plans(2) | | Auto(3) | | memberships | | Preparation | | Program(4) | | Examination | | Gross-ups | | Compensation | | Total | | | | Douglas D. Tough | | | 2010 | | | $ | 42,764 | | | $ | 85,817 | | | $ | 16,938 | | | $ | 0 | | | $ | 25,000 | | | $ | 18,283 | | | $ | 0 | | | $ | 1,517(5 | ) | | $ | 12,123(6 | ) | | $ | 202,442 | | | Kevin C. Berryman | | | 2010 | | | $ | 17,097 | | | $ | 53,212 | | | $ | 15,285 | | | $ | 3,000 | | | $ | 12,080 | | | $ | 3,259 | | | $ | 0 | | | $ | 35,884(7 | ) | | $ | 0 | | | $ | 139,817 | | | Nicolas Mirzayantz | | | 2010 | | | $ | 59,950 | | | $ | 34,563 | | | $ | 10,658 | | | $ | 0 | | | $ | 12,131 | | | $ | 2,137 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 119,439 | | | Hernan Vaisman | | | 2010 | | | $ | 28,283 | | | $ | 48,119 | | | $ | 915 | | | $ | 0 | | | $ | 3,102 | | | $ | 3,259 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 83,678 | | | Beth E. Ford | | | 2010 | | | $ | 22,742 | | | $ | 50,044 | | | $ | 11,942 | | | $ | 3,000 | | | $ | 15,792 | | | $ | 913 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 104,433 | | | Dennis M. Meany | | | 2010 | | | $ | 48,113 | | | $ | 23,404 | | | $ | 13,567 | | | $ | 3,000 | | | $ | 12,138 | | | $ | 7,519 | | | $ | 1,950 | | | $ | 0 | | | $ | 0 | | | $ | 109,691 | | | Angelica Cantlon | | | 2010 | | | $ | 14,813 | | | $ | 22,313 | | | $ | 15,946 | | | $ | 1,352 | | | $ | 0 | | | $ | 1,803 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 56,227 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Dividends
on Stock
Awards
($)(1) | | | Company
Match to
Defined
Contribution
Plans
($)(2) | | | Auto
($)(3) | | | Club
Memberships
($) | | | Financial/
Estate
Planning and
Tax
Preparation
($) | | | Executive
Death
Benefit
Program
($)(4) | | | Annual
Physical
Examination
($) | | | Matching
Charitable
Contributions
($)(5) | | | Housing/
Relocation
Expenses/
Tax
Gross-ups
($) | | | Total
($) | | Douglas D. Tough | | | 2012 | | | | 174,829 | | | | 94,156 | | | | 25,552 | | | | — | | | | 25,000 | | | | 63,000 | | | | 4,200 | | | | 960 | | | | — | | | | 387,697 | | Kevin C. Berryman | | | 2012 | | | | 66,395 | | | | 50,719 | | | | 16,111 | | | | 2,620 | | | | 14,409 | | | | 20,000 | | | | — | | | | 10,000 | | | | — | | | | 180,254 | | Nicolas Mirzayantz | | | 2012 | | | | 99,509 | | | | 17,245 | | | | 13,812 | | | | 3,000 | | | | 9,635 | | | | 18,000 | | | | — | | | | — | | | | — | | | | 161,201 | | Hernan Vaisman | | | 2012 | | | | 12,755 | | | | 35,875 | | | | 4,203 | | | | — | | | | 6,267 | | | | 25,000 | | | | 4,200 | | | | — | | | | — | | | | 88,300 | | Anne Chwat | | | 2012 | | | | 35,537 | | | | 51,664 | | | | 19,243 | | | | — | | | | 3,000 | | | | 15,000 | | | | 4,200 | | | | 8,000 | | | | 63,598 | (6) | | | 200,242 | |
| | | | (1) | | The amounts in this column are the total dollar value of dividends paid during 20102012 on shares of PRS. | |
| (2) | | The amounts in this column includeinclude: (i) amounts matched by theour Company under the Company’sour Retirement Investment Fund Plan (401(k)),; (ii) amounts matched or set aside by theour Company under the Company’sour DCP (which are matching contributions that would otherwise be made under our 401(k) plan but for limitations under U.S. tax law); and (iii) the dollar value of premium shares credited to the accounts of participants in the DCP who elect to defer their cash compensation into the IFF ShareStock Fund. The premium shares may be forfeited if the executive does not remain employed by theour Company for the full calendar year following the year during which such shares are credited. Dividend equivalents are credited on shares (including premium shares) held in accounts of participants who defer into the IFF Share Fund; dividendStock Fund. Dividend equivalents are included in the Aggregate Earnings in Last Fiscal Year column of the Non-Qualified Deferred Compensation Table and are not included in the amounts represented in this column. | |
| (3) | | The amounts in this column are amounts for the personal use of automobiles provided by theour Company. The value of personal use of automobiles provided by the Companyus was determined by using standard IRS vehicle value tables and multiplying that value by the percent of personal use. The value of fuel was determined by multiplying the overall fuel cost by the percent of personal use. In both cases personal use percentspercentages were determined on a mileage basis. The amounts in this column also include the cost paid by the Companyus for a parking garage. | |
| (4) | | The amounts in this column are the 2012 costs to the Companywe incurred for the corporate ownedcorporate-owned life insurance coverage it haswe have purchased to offset liabilities that may be incurred under the Company’sour Executive Death Benefit Program. No participant in this Programprogram has or will have any direct interest in the cash surrender value of the underlying insurance policy. | |
| (5) | The amounts in this column are contributions made by us under our Matching Gift Program to eligible charitable organizations matching contributions made by our NEOs to those charitable organizations during 2012. |
| (6) | This amount is for Mr. Tough’s useincludes reimbursement of a Company-owned apartment in 2010. | | (6) | | This amount is a portion of the retainer paid to Mr. Tough for his service as a non-employee director of the Company from April 27, 2009 until February 28, 2010. The remainder of the retainer was paid to him in 2009. | | (7) | | This amount is for relocation assistanceexpenses incurred by Ms. Chwat in connection with Mr. Berryman’s commencement of employment with the Company, including a one-time allowanceher relocation to New York in the amount of $13,123 to cover home acquisition expenses$48,045 and $11,026 to cover moving expenses$15,553 in reimbursement for taxes associated with histhe relocation and a taxgross-up on the home acquisition expenses of $11,735.expense. |
61
Employment Agreements or Arrangements Our Board elected Douglas D. Tough as its non-executive Chairman effective October 1, 2009 and, pursuant to the terms of a letter agreement dated September 8, 2009 between theour Company and Mr. Tough, he became the Company’sour executive Chairman and Chief Executive Officer effective March 1, 2010, when his contract2010. In conjunction with his former employer expired. employment, an equity award was made on March 24, 2010 under the Equity Choice Plan, or ECP, described in this proxy statement under the heading “Compensation Discussion and Analysis,” at a value of $750,000 which vested on March 1, 2011. Under this agreement, Mr. Tough’s employment is on an at-will basis until terminated by either party. Mr. Tough is entitled to the following compensation under the agreement: | | | | • | Annual base salary of $1,200,000 per annum. | | | • | A target AIP bonus of 120% of his base salary and a potential maximum annual bonus of 240% of his base salary. | | | • | An LTIP target of $2,000,000. Mr. Tough is only entitled to a pro-rated award under the2008-2010,2009-2011 and 2010-2012 LTIP cycles. | | | • | In conjunction with his employment, an equity award was made on March 24, 2010 under the Equity Choice Program at a value of $750,000. This award was generally subject to continued employment (except as described under the heading “Termination of Employment and Change in Control Arrangements — Other Separation Arrangements”) and vested on March 1, 2011. This$750,000 value was allocated by Mr. Tough to Purchased Restricted Stock under the program. | | | • | A special bonus in the amount of $500,000, which was paid on July 1, 2010. |
Mr. Tough participates in all of the Company’s employee and executive benefit plans and programs for its senior executives, including being eligible for annual awards under the Equity Choice Program, AIP and LTIP, and is entitled to annual paid vacation and Company-provided senior executive perquisites or as otherwise approved for him by our Board or Compensation Committee. Mr. Tough participates in the Company’s Executive Death Benefit Plan described in the Compensation Discussion and Analysis above, pursuant to which the Company has purchased, and pays the entire cost on, a corporate owned life insurance policy on the life of Mr. Tough. The plan provides a pre-retirement death benefit equal to twice hisMinimum annual base salary (excludingof $1,200,000, which may be increased by the Board of Directors after March 2, 2012. A target AIP bonus and other forms of compensation), less $50,000120% of group coverage, or a post-retirement death benefit equal to twice his final base salary (excludingand a potential maximum annual bonus of 240% of his base salary. An LTIP target of $2,000,000. The letter agreement provides for non-competition, non-solicitation, non-disclosure, cooperation and other forms of compensation), less $12,500 of group coverage. non-disparagement covenants.Mr. Tough’s letter agreement grants him certain rights upon termination of his employment. These rights are described in this proxy statement under the heading “Termination of Employment and Change in Control Arrangements — Other Separation Arrangements”. None of our other NEOs is a party to a written employment agreement. Their compensation is approved by the Compensation Committee and is generally determined by the terms of the various compensation plans in which they are participants and which are described in this proxy statement more fully above in the Compensation Discussion and Analysis, in the narrative following the Grants of Plan-Based Awards Table and under the heading “Termination of Employment and Change in Control Arrangements”.Arrangements.” In addition, their salary is reviewed, determined and approved on an annual basis by our Compensation Committee. Executives may be entitled to certain compensation arrangements provided or negotiated in connection with their commencement of employment with theour Company. Grants of Plan-Based Awards The following table provides information regarding grants of plan-based awards to our named executive officersNEOs during 2010.2012. The amounts reported in the table under “Estimated Future Payouts Underunder Non-Equity Incentive Plan Awards” and “Estimated Future Payouts Underunder Equity Incentive Plan Awards” represent the threshold, target and maximum awards under our AIP and LTIP programs. The
62
performance conditions applicable to the AIP and LTIP are described in the Compensation Discussion and Analysis. With regard to the AIP, the percentage of each NEO’s target award that was actually achieved for 2012 based on satisfaction of the AIP performance conditions is discussed in the narrative following the Grants of Plan-Based Awards Table.Compensation Discussion and Analysis. The amount actually paid to each named executive officerNEO in 20112013 based on 20102012 performance under the AIP is included in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. With regard to the LTIP, the amountamounts of each NEO’s award that waswere actually achieved for 2010-2012 based on satisfaction of the performance conditions for the2008-2010 2010-2012 LTIP and the 20102012 segment of each of the2009-2011 2011-2013 LTIP and2010-2012 2012-2014 LTIP cycles is discussed in the narrativeare set forth following the Grants of Plan-Based Awards Table. In addition, cash amounts earned by each named executive officerNEO for the cumulative and 2010 segments2012 segment of the2008-2010 2010-2012 LTIP cycle and the 2010 segment2012 segments of the2009-2011 2011-2013 LTIP and2010-2012 2012-2014 LTIP cycles are also included in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. However, any cash or shares credited to a NEO based on achievement of performance conditions during a segment will not be paid until completion of the full LTIP cycle. 2012 Grants of Plan-Based Awards in 2010 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | All Other
| | | | | | | | | | | | | | | | | | | | | | | | | | All Other
| | | Option
| | | | | | Grant Date
| | | | | | | | | | | | | | | | | | | | Stock
| | | Awards:
| | | Exercise
| | | Fair Value
| | | | | | | | | | | | | | | | | | | | Awards:
| | | Number of
| | | or Base
| | | of Stock
| | | | | | | | | | | Date of
| | | | | | | | | Number of
| | | Securities
| | | Price of
| | | and
| | | | | Type of
| | | Grant
| | | Compensation
| | | Estimated Future Payouts
| | | Estimated Future Payouts
| | | Shares
| | | Underlying
| | | Option
| | | Option
| | | | | Award
| | | Date
| | | Committee
| | | Under Non-Equity
| | | Under Equity
| | | of Stock or
| | | Options
| | | Awards
| | | Awards
| | | Name | | (1) | | | (2) | | | Approval | | | Incentive Plan Awards | | | Incentive Plan Awards | | | Units (#)(3) | | | (#)(4) | | | ($/Sh) (#)(5) | | | ($)(6) | | | | | | | | | | | | | | Threshold
| | | Target
| | | Maximum
| | | Threshold
| | | Target
| | | Maximum
| | | | | | | | | | | | | | | | | | | | | | | | | | ($)
| | | ($)
| | | ($)
| | | ($)
| | | ($)
| | | ($)
| | | | | | | | | | | | | | | (a) | | | | | (b) | | | | | | (c) | | | (d) | | | (e) | | | (f) | | | (g) | | | (h) | | | (i) | | | (j) | | | (k) | | | (l) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Douglas D. Tough | | | AIP | | | | 3/8/2010 | | | | 3/8/2010 | | | | 301,808 | | | | 1,207,233 | | | | 2,414,466 | (7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2008 LTIP | | | | 3/8/2010 | (8) | | | 3/8/2010 | | | | 69,863 | | | | 279,452 | | | | 558,904 | (8) | | | 69,863 | | | | 279,452 | | | | 558,904 | (9) | | | | | | | | | | | | | | | 279,452 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2009 LTIP | | | | 3/8/2010 | (8) | | | 3/8/2010 | | | | 153,196 | | | | 612,785 | | | | 1,225,570 | (8) | | | 153,196 | | | | 612,785 | | | | 1,225,570 | (9) | | | | | | | | | | | | | | | 612,785 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2010 LTIP | | | | 3/8/2010 | | | | 3/8/2010 | | | | 236,758 | | | | 947,032 | | | | 1,894,064 | (10) | | | 236,758 | | | | 947,032 | | | | 1,894,064 | (11) | | | | | | | | | | | | | | | 931,879 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PRS | | | | 3/24/2010 | | | | 3/8/2010 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 39,301 | (12) | | | | | | | | | | | 899,992 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | 6/2/2010 | | | | 4/26/2010 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 10,017 | (13) | | | | | | | | | | | 420,413 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PRS | | | | 6/2/2010 | | | | 4/26/2010 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 24,042 | (14) | | | | | | | | | | | 539,983 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | SSAR | | | | 6/2/2010 | | | | 4/26/2010 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | 26,714 | | | | 44.92 | | | | 278,092 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kevin C. Berryman | | | AIP | | | | 3/8/2010 | | | | 3/8/2010 | | | | 100,000 | | | | 400,000 | | | | 800,000 | (7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2010 LTIP | | | | 3/8/2010 | | | | 3/8/2010 | | | | 56,250 | | | | 225,000 | | | | 450,000 | (10) | | | 56,250 | | | | 225,000 | | | | 450,000 | (11) | | | — | | | | — | | | | — | | | | 221,400 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PRS | | | | 6/2/2010 | | | | 4/26/2010 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 22,439 | (14) | | | | | | | | | | | 503,980 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | SSAR | | | | 6/2/2010 | | | | 4/26/2010 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | 16,028 | | | | 44.92 | | | | 166,851 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nicolas Mirzayantz | | | AIP | | | | 3/8/2010 | | | | 3/8/2010 | | | | 100,000 | | | | 400,000 | | | | 800,000 | (7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2010 LTIP | | | | 3/8/2010 | | | | 3/8/2010 | | | | 56,250 | | | | 225,000 | | | | 450,000 | (10) | | | 56,250 | | | | 225,000 | | | | 450,000 | (11) | | | | | | | | | | | | | | | 221,400 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PRS | | | | 6/2/2010 | | | | 4/26/2010 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 25,645 | (14) | | | | | | | | | | | 575,987 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | SSAR | | | | 6/2/2010 | | | | 4/26/2010 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 10,685 | | | | 44.92 | | | | 111,231 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Hernan Vaisman | | | AIP | | | | 3/8/2010 | | | | 3/8/2010 | | | | 100,000 | | | | 400,000 | | | | 800,000 | (7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2010 LTIP | | | | 3/8/2010 | | | | 3/8/2010 | | | | 56,250 | | | | 225,000 | | | | 450,000 | (10) | | | 56,250 | | | | 225,000 | | | | 450,000 | (11) | | | — | | | | — | | | �� | — | | | | 221,400 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | 6/2/2010 | | | | 4/26/2010 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,007 | (13) | | | — | | | | — | | | | 168,174 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | SSAR | | | | 6/2/2010 | | | | 4/26/2010 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 26,714 | | | | 44.92 | | | | 278,093 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Beth E. Ford | | | AIP | | | | 3/8/2010 | | | | 3/8/2010 | | | | 100,000 | | | | 400,000 | | | | 800,000 | (7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2010 LTIP | | | | 3/8/2010 | | | | 3/8/2010 | | | | 56,250 | | | | 225,000 | | | | 450,000 | (10) | | | 56,250 | | | | 225,000 | | | | 450,000 | (11) | | | — | | | | — | | | | — | | | | 221,400 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | SSAR | | | | 6/2/2010 | | | | 4/26/2010 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 40,071 | | | | 44.92 | | | | 417,139 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Dennis M. Meany | | | AIP | | | | 3/8/2010 | | | | 3/8/2010 | | | | 62,100 | | | | 248,400 | | | | 496,800 | (7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2010 LTIP | | | | 3/8/2010 | | | | 3/8/2010 | | | | 31,050 | | | | 124,200 | | | | 248,400 | (10) | | | 31,050 | | | | 124,200 | | | | 248,400 | (11) | | | — | | | | — | | | | — | | | | 122,212 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PRS | | | | 6/2/2010 | | | | 4/26/2010 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 18,699 | (14) | | | — | | | | — | | | | 419,980 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Angelica Cantlon | | | AIP | | | | 3/8/2010 | | | | 3/8/2010 | | | | 47,817 | | | | 191,269 | | | | 382,538 | (7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2010 LTIP | | | | 3/8/2010 | | | | 3/8/2010 | | | | 23,625 | | | | 94,500 | | | | 189,000 | (11) | | | 23,625 | | | | 94,500 | | | | 189,000 | (11) | | | — | | | | — | | | | — | | | | 92,988 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PRS | | | | 6/2/2010 | | | | 4/26/2010 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 18,699 | (14) | | | — | | | | — | | | | 419,980 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Type of
Award (1) | | | Grant Date (2) | | | Date of
Compensation
Committee
Approval | | | Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards | | | Estimated Future Payouts
Under Equity
Incentive Plan Awards | | | All Other
Stock Awards:
Number of
Shares
of Stock or
Units (#)(3) | | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(4) | | | Exercise
or Base
Price of
Option
Awards
($/Sh)
(#)(5) | | | Grant Date
Fair Value
of Stock
and
Option
Awards
($)(6) | | | | | | | | | | | | | | Threshold
($) | | | Target
($) | | | Maximum
($) | | | Threshold
($) | | | Target
($) | | | Maximum
($) | | | | | | | | | | | | | | Douglas D. Tough | | | AIP | | | | 1/31/2012 | | | | 1/30/2012 | | | | 360,000 | | | | 1,440,000 | | | | 2,880,000 | (7) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2012 LTIP | | | | 1/31/2012 | | | | 1/30/2012 | | | | 250,000 | | | | 1,000,000 | | | | 2,000,000 | (8) | | | 250,000 | | | | 1,000,000 | | | | 2,000,000 | (9) | | | | | | | | | | | | | | | 997,900 | | | | | PRS | | | | 5/1/2012 | | | | 1/30/2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 71,535 | (10) | | | | | | | | | | | 2,160,357 | | Kevin C. Berryman | | | AIP | | | | 1/30/2012 | | | | 1/30/2012 | | | | 102,500 | | | | 410,000 | | | | 820,000 | (7) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2012 LTIP | | | | 1/30/2012 | | | | 1/30/2012 | | | | 56,250 | | | | 225,000 | | | | 450,000 | (8) | | | 56,250 | | | | 225,000 | | | | 450,000 | (9) | | | | | | | | | | | | | | | 224,528 | | | | | PRS | | | | 5/1/2012 | | | | 1/30/2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 19,076 | (10) | | | | | | | | | | | 576,095 | | | | | SSAR | | | | 5/1/2012 | | | | 1/30/2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7,948 | | | | 60.39 | | | | 82,580 | | Nicolas Mirzayantz | | | AIP | | | | 1/30/2012 | | | | 1/30/2012 | | | | 101,000 | | | | 404,000 | | | | 808,000 | (7) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2012 LTIP | | | | 1/30/2012 | | | | 1/30/2012 | | | | 56,250 | | | | 225,000 | | | | 450,000 | (8) | | | 56,250 | | | | 225,000 | | | | 450,000 | (9) | | | | | | | | | | | | | | | 224,528 | | | | | PRS | | | | 5/1/2012 | | | | 1/30/2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 19,870 | (10) | | | | | | | | | | | 600,074 | | Hernan Vaisman | | | AIP | | | | 1/30/2012 | | | | 1/30/2012 | | | | 102,500 | | | | 410,000 | | | | 820,000 | (7) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2012 LTIP | | | | 1/30/2012 | | | | 1/30/2012 | | | | 56,250 | | | | 225,000 | | | | 450,000 | (8) | | | 56,250 | | | | 225,000 | | | | 450,000 | (9) | | | | | | | | | | | | | | | 224,528 | | | | | SSAR | | | | 5/1/2012 | | | | 1/30/2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 19,870 | | | | 60.39 | | | | 206,449 | | | | | RSU | | | | 5/1/2012 | | | | 1/30/2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,980 | (11) | | | | | | | | | | | 168,906 | | | | | | | | | | | | | | | | Anne Chwat | | | AIP | | | | 1/30/2012 | | | | 1/30/2012 | | | | 67,500 | | | | 270,000 | | | | 540,000 | (7) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2012 LTIP | | | | 1/30/2012 | | | | 1/30/2012 | | | | 33,750 | | | | 135,000 | | | | 270,000 | (8) | | | 33,750 | | | | 135,000 | | | | 270,000 | (9) | | | | | | | | | | | | | | | 134,717 | | | | | PRS | | | | 5/1/2012 | | | | 1/30/2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 13,909 | (10) | | | | | | | | | | | 420,052 | |
| | | | (1) | | AIP = 20102012 AIP | | | 2008 LTIP =2008-2010 Long-Term Incentive Plan Cycle | | | 2009 LTIP =2009-2011 Long-Term Incentive Plan Cycle | | | 2010 LTIP =2010-2012 Long-Term Incentive Plan Cycle |
63
RSU = Restricted Stock UnitPRS = Purchased Restricted Stock SSAR = Stock Settled Appreciation Right | | | | | RSU = Restricted Stock Unit | | | PRS = Purchased Restricted Stock | | | SSAR = Stock Settled Appreciation Right | | | (2) | | All equity-basedequity, AIP and LTIP grants below were made under our 2000 Stock Award and Incentive Plan (if the grant date was before April 27, 2010) or under our 2010 Stock Award and Incentive Plan (if the grant date was on or after April 27, 2010).SAIP. The material terms of these types of awards are described in this proxy statement under the Compensationheading “Compensation Discussion and Analysis.” | |
| (3) | | The amounts in this column represent the number of RSUs and the number of PRS shares granted under the ECP in 20102012 on the applicable grant date. The material terms of ECP awards are described in this proxy statement under the heading “Compensation Discussion and Analysis.” | |
| (4) | | The amounts in this column represent the number of SSARs granted in 2010 onunder the applicable grant date. We did not grant any options to our named executive officers in 2010.ECP. | |
| (5) | | The amounts in this column represent the exercise price of each SSAR granted, which for each SSAR, is the closing market price of a share of our common stock on the grant date. | |
| (6) | | The amounts in this column represent the aggregate grant date fair value of equity awards granted to our named executive officersNEOs during the fiscal year ended December 31, 2010,2012, calculated in accordance with FASB ASC Topic 718. The grant date fair value of LTIP awards pertains to the 50% portion of those awards that will be payable in shares of our common stock if the performance conditions are satisfied, and is based on the probable outcome of such conditions. | |
| (7) | | The amounts in this row in the Estimated Future Payouts Under Non-Equity Incentive Plan Awards columns (c), (d) and (e) are the threshold, target and maximum dollar values under our 20102012 AIP. | |
| (8) | | The amounts in these rows in columns (c), (d) and (e) are the pro-rated threshold, target and maximum dollar values of the 50% portion of our2008-2010 LTIP and2009-2011 LTIP cycles that would be payable to Mr. Tough in cash if the performance conditions are satisfied. Pursuant to the terms of his employment letter agreement, Mr. Tough is entitled only to a pro-rated amount under each such LTIP cycle based on the number of days he serves as an employee during that LTIP cycle. | | (9) | | The amounts in these rows in columns (f), (g) and (h) are the pro-rated threshold, target and maximum dollar values of the 50% portion of our2008-2010 LTIP and2009-2011 LTIP cycles that would be payable to Mr. Tough in stock if the performance conditions are satisfied. The number of shares of Company stock for the 50% portion payable in stock was determined at the beginning of each cycle based on the closing market price of a share of our common stock on the first stock trading day of the cycle, which for the2008-2010 cycle was $47.20, the closing market price of a share of our common stock on January 2, 2008; and for the2009-2011 cycle was $30.60, the closing market price of a share of our common stock on January 2, 2009. Pursuant to the terms of his employment letter agreement, Mr. Tough is entitled only to a pro-rated amount under each such LTIP cycle based on the number of days he actually serves as an employee during that LTIP cycle. | | (10) | | The amounts in this row in the Estimated Future Payouts Under Non-Equity Incentive Plan Awards columns (c), (d) and (e) are the threshold, target and maximum dollar values of the 50% portion of our2010-2012 2012-2014 LTIP cycle that would be payable in cash if the performance conditions are satisfied. Mr. Tough is entitled only to a pro-rated amount for this LTIP cycle based on the number of days he actually serves as an employee during that LTIP cycle. |
| (11)(9) | | The amounts in this row in the Estimated Future Payouts Under Equity Incentive Plan Awards columns (f), (g) and (h) are the threshold, target and maximum dollar values of the 50% portion of our2010-2012 2012-2014 LTIP cycle that would be payable in stock if the performance conditions are satisfied. The number of shares of Companyour common stock for the 50% portion payable in stock was determined at the beginning of the cycle, based on $42.01$52.88 per share, the closing market price of a share of our common stock on January 4, 2010,3, 2012, the first stock trading day of the cycle. Mr. Tough is entitled onlycycle; however, the actual value to a pro-rated amount for this LTIP cycle basedbe realized may vary depending on the numberclosing market price of days he actually serves as an employee during that LTIP cycle.a share of our common stock on the payout date for such awards. |
64
| (10) | | | (12) | | This grant was approved by our Board of Directors in connection with Mr. Tough’s commencement of employment as our CEO on March 1, 2010. | | (13) | | This amount represents the number of RSUs granted under the Equity Choice Program or otherwise, as described in the Compensation Discussion and Analysis. Dividends are not paid on RSUs. | | (14) | | This amount represents the number of shares of PRS granted under the Equity Choice Program, as described in the Compensation Discussion and Analysis. Non-preferential dividendsECP. Dividends are paid on PRS. Footnote 45 to the Summary Compensation Table listsstates the dollar amount of consideration paid by our NEOs (in cash or shares) for these PRS awards. |
65
| (11) | | This amount represents the number of RSUs granted under the ECP. Dividends are not paid on RSUs. |
Equity Choice Program and Other Equity Awards
In 2006, following the Compensation Committee’s recommendation and with the assistance of the Committee’s independent compensation consultant, our Board approved our Equity Choice Program as a long term incentive program for our senior management. During 2010, the Compensation Committee approved PRS, SSAR and RSU grants under this program, based on individual elections, to all of our named executive officers (other than our CEO, whose grants were approved by the our Board in accordance with his employment letter agreement). Under this Equity Choice Program, dividends are paid on shares of PRS at the same rate paid to our shareholders. During 2010, we did not grant any awards to named executive officers other than pursuant to the Equity Choice Program.
A discussion of the terms and the total dollar value of awards granted in 2010 to our named executive officers is included in the Compensation Discussion and Analysis. The number of shares under those awards and the date those awards were granted are included in the Grants of Plan-Based Awards Table and the Outstanding Equity Awards at Fiscal Year-End Table.
AnnualLong-Term Incentive PlanThe Compensation Committee established all performance goals under our AIP at the beginning of 2010. Under the AIP, each executive officer, had an annual incentive award target for 2010 based on the achievement of specific quantitative financial corporate goals and, in the case of our two Group Presidents, derivative business unit financial performance goals. The corporate objectives and the derivative business unit objectives for 2010 under the AIP related to local currency sales growth, an increase in operating profit, gross margin improvements and improvements in working capital. The actual achievement against the corporate and business unit goals under the AIP, as well as the actual AIP payouts to each of our NEOs, are set forth in the Compensation Discussion and Analysis. The AIP payout to Mr. Tough was prorated based on the number of days employed in 2010.
Under our2010-2012 LTIP each executive officer had an award target for the2008-2010Payout LTIP cycle based on achieving specific quantitative corporate performance goals which the Compensation Committee established at the beginning of the cycle or at the beginning of each year during the cycle. The2008-2010 LTIP cycle was administered in four equal performance segments related to each of the three years in the LTIP cycle and the cumulative results for the full three-year cycle. For this LTIP cycle, the goals related to improvements in earnings per share and total shareholder return (“TSR”) relative to the S&P 500. In addition, in early 2010, the Committee approved a one-year supplemental performance metric for the Company’s2008-2010 LTIP cycle. The supplemental metric related to improvement in operating profit (EBIT) margin measured over the fiscal 2010 period as compared to 2009.
For the2008-2010 LTIP cycle, on an overall basis, we achieved 121.7% of the corporate performance goals, as set forth in the Compensation Discussion and Analysis. Therefore, Mr. Mirzayantz, Mr. Vaisman and Mr. Meany who were each employed by the Company during the entire three-year cycle, each received 121.7% of his target incentive compensation for the cycle. Executive officers who were not employed by the Company for the entire three-year2008-2010 LTIP cycle are entitled only to a pro-rated amount for the LTIP cycle based on the number of days served as an employee during the relevant LTIP segment or cycle. Accordingly, Mr. Tough and Ms. Ford each received 121.7%, Mr. Berryman received 113.2% and Ms. Cantlon received 127.4% of his or her target incentive compensation for the cycle. As determined by the Compensation Committee, for the2008-2010 LTIP cycle, 50% of the LTIP payout was paid in cash and 50% was paid in Company stock based on the closing market price on the first stock trading day of the cycle. These payouts were made in early 2011.
The following chart illustratestable sets forth the total amount earned by each NEO based on achievement of the corporate performance goals for each segment under the2008-2010 2010-2012 LTIP cycle and based on each executive’s target amount (or reduced target amount for those executiveseach NEO who werewas not employed for
66
the entire three-year cycle). The amount reported in the “Total” column is the amount that wasbeing paid out to the executive officersNEOs in early 2011 upon2013 following completion of the2008-2010 2010-2012 LTIP cycle. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Segment 1 —
| | Segment 2 —
| | Segment 3 —
| | Segment 4 —
| | | | | | 2008 | | 2009 | | 2010 | | 2008 — 2010 | | Total | | | | Cash
| | Shares
| | Cash
| | Shares
| | Cash
| | Shares
| | Cash
| | Shares
| | Cash
| | Shares
| | | | ($) | | (#) | | ($) | | (#) | | ($) | | (#) | | ($) | | (#) | | ($) | | (#) | | | | Mr. Tough | | | — | | | | — | | | | — | | | | — | | | | 107,875 | | | | 2,285 | | | | 232,225 | | | | 4,921 | | | | 340,100 | | | | 7,206 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mr. Berryman | | | — | | | | — | | | | 31,250 | | | | 662 | | | | 77,200 | | | | 1,635 | | | | 42,467 | | | | 901 | | | | 150,917 | | | | 3,198 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mr. Mirzayantz | | | 67,688 | | | | 1,434 | | | | 29,687 | | | | 629 | | | | 73,340 | | | | 1,553 | | | | 60,515 | | | | 1,283 | | | | 231,230 | | | | 4,899 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mr. Vaisman | | | 64,125 | | | | 1,358 | | | | 28,125 | | | | 596 | | | | 69,480 | | | | 1,473 | | | | 57,330 | | | | 1,215 | | | | 219,060 | | | | 4,642 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ms. Ford | | | 53,486 | | | | 1,133 | | | | 23,459 | | | | 497 | | | | 57,953 | | | | 1,227 | | | | 47,819 | | | | 1,014 | | | | 182,717 | | | | 3,871 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mr. Meany | | | 44,246 | | | | 938 | | | | 19,406 | | | | 411 | | | | 47,941 | | | | 1,016 | | | | 39,558 | | | | 837 | | | | 151,151 | | | | 3,202 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ms. Cantlon | | | — | | | | — | | | | 6,152 | | | | 131 | | | | 36,477 | | | | 774 | | | | 14,213 | | | | 299 | | | | 56,842 | | | | 1,204 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Under our | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Segment 1
(2010) | | | Segment 2
(2011) | | | Segment 3
(2012) | | | Cumulative
(2010 –2012) | | | Total | | | | | Cash
($) | | | Shares (#) | | | Cash
($) | | | Shares
(#) | | | Cash
($) | | | Shares
(#) | | | Cash
($) | | | Shares
(#) | | | Cash
($) | | | Shares
(#) | | Douglas D. Tough | | | 464,046 | | | | 11,047 | | | | 120,036 | | | | 2,857 | | | | 361,766 | | | | 8,612 | | | | 473,516 | | | | 11,270 | | | | 1,419,364 | | | | 33,786 | | Kevin C. Berryman | | | 110,250 | | | | 2,624 | | | | 28,519 | | | | 679 | | | | 85,950 | | | | 2,046 | | | | 112,500 | | | | 2,678 | | | | 337,219 | | | | 8,027 | | Nicolas Mirzayantz | | | 110,250 | | | | 2,624 | | | | 28,519 | | | | 679 | | | | 85,950 | | | | 2,046 | | | | 112,500 | | | | 2,678 | | | | 337,219 | | | | 8,027 | | Hernan Vaisman | | | 110,250 | | | | 2,624 | | | | 28,519 | | | | 679 | | | | 85,950 | | | | 2,046 | | | | 112,500 | | | | 2,678 | | | | 337,219 | | | | 8,027 | | Anne Chwat (1) | | | — | | | | — | | | | 12,833 | | | | 306 | | | | 51,570 | | | | 1,227 | | | | 39,376 | | | | 938 | | | | 103,779 | | | | 2,471 | |
| (1) | Based on a pro-rated target amount due to her commencement of employment on April 14, 2011. |
2011-2013 LTIP each executive officer also has an award target for each of the2009-2011Credit and2010-2012 performance cycles based on achieving specific quantitative corporate performance goals which the Committee established at the beginning of the respective cycle. Like the2008-2010 LTIP cycle, each of the2009-2011 and2010-2012 LTIP cycles is administered in four equal performance segments related to each year in the LTIP cycle and the cumulative results for the full cycle. Depending on the extent to which the Company achieves the corporate performance goals for each segment, a portion of the executive’s LTIP award may be credited on behalf of the executive, but any credited portion will not be paid until the completion of the full LTIP cycle. Amounts credited for future payout under the2009-2011 and2010-2012 LTIP cycles will be paid 50% in cash and 50% in Company stock, based on the closing market price on the first trading day of the respective cycle. Based on the Company’sour achievement of the corporate performance goals for the 20102012 segment (the second segment) of the2009-2011 2011-2013 LTIP cycle and the executive’s target amount, the following cash amounts and number of shares of our stock have been credited on behalf of the executive: Mr. Tough — $300,265 and 9,812 shares (based on a pro-rated target amount), Mr. Berryman — $98,000 and 3,203 shares, Mr. Mirzayantz — $93,100 and 3,042 shares, Mr. Vaisman — $88,200 and 2,883 shares, Ms. Ford — $98,000 and 3,203 shares, Mr. Meany — $60,858 and 1,989 shares and Ms. Cantlon — $46,305 and 1,513 shares (based on a pro-rated target amount). | | | | | | | | | | | | Segment 2
(2012) | | | | | Cash
($) | | | Shares
(#) | | Douglas D. Tough | | | 382,000 | | | | 6,864 | | Kevin C. Berryman | | | 85,950 | | | | 1,545 | | Nicolas Mirzayantz | | | 85,950 | | | | 1,545 | | Hernan Vaisman | | | 85,950 | | | | 1,545 | | Anne Chwat | | | 51,570 | | | | 926 | |
2012-2014 LTIP Credit Based on the Company’sour achievement of the corporate performance goals for the 20102012 segment (the first segment) of the2010-2012 2012-2014 LTIP cycle and the executive’s target amount, the following cash amounts and number of shares of our stock have been credited on behalf of the executive: Mr. Tough — $464,046 and 11,047 shares (based on a pro-rated target amount), Mr. Berryman — $110,250 and 2,624 shares, Mr. Mirzayantz — $110,250 and 2,624 shares, Mr. Vaisman — $110,250 and 2,624 shares, Ms. Ford — $110,250 and 2,624 shares, Mr. Meany — $60,858 and 1,448 shares and Ms. Cantlon — $46,305 and 1,102 shares. Pursuant to his offer of employment, Mr. Berryman was deemed to have been employed by the Company for the entire 2009 segment of each of the2008-2010 and2009-2011 LTIP cycles. Additional details regarding our Annual Incentive Plan and Long Term Incentive Plan are included in the Compensation Discussion and Analysis.
67
| | | | | | | | | | | | Segment 1
(2012) | | | | | Cash
($) | | | Shares
(#) | | Douglas D. Tough | | | 408,750 | | | | 7,730 | | Kevin C. Berryman | | | 91,969 | | | | 1,740 | | Nicolas Mirzayantz | | | 91,969 | | | | 1,740 | | Hernan Vaisman | | | 91,969 | | | | 1,740 | | Anne Chwat | | | 55,181 | | | | 1,043 | |
Equity Compensation Plan Information We are currently granting equity awards only under our 2010 SAIP, which replaced our 2000 SAIP and the 2000 Supplemental Stock Award Plan (the “2000 Supplemental Plan”). The following table provides information regarding our common stock which may be issued under our equity compensation plans as of December 31, 2010. | | | | | | | | | | | | | | | | | Number of
| | | | | | | | | | | securities to be
| | | | | | Number of securities
| | | | | issued upon
| | | | | | remaining available for
| | | | | exercise of
| | | | | | future issuance under
| | | | | outstanding
| | | Weighted-average
| | | equity compensation
| | | | | options,
| | | exercise price of
| | | plans (excluding
| | | | | warrants and
| | | outstanding options,
| | | securities reflected in
| | | | | rights
| | | warrants and rights
| | | column (a))
| | | Plan Category | | (a) | | | (b) | | | (c) | | | | | Equity compensation plans approved by security holders (1) | | | 2,010,848 | (2) | | $ | 38.17 | (3) | | | 1,870,589 | (4) | | Equity compensation plans not approved by security holders (5) | | | 548,510 | | | | 30.24 | (3) | | | 361,546 | (6) | | | | | | | | | | | | | | | | Total | | | 2,559,358 | | | | 37.46 | (3) | | | 2,232,135 | |
| | | | | | | | | | | | | Plan Category | | Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights | | | Weighted-average
exercise price of
outstanding options,
warrants and rights | | | Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a)) | | | | | (a) | | | (b) | | | (c) | | Equity compensation plans approved by security holders (1) | | | 1,238,238 | (2) | | $ | 45.25 | (3) | | | 1,475,249 | (4) | Equity compensation plans not approved by security holders (5) | | | 277,289 | | | | 31.33 | (3) | | | 275,877 | (6) | | | | | | | | | | | | | | Total | | | 1,515,527 | | | $ | 44.94 | (3) | | | 1,751,126 | |
| | | | (1) | | Represents the 2010 Stock Award and Incentive Plan,SAIP, the 2000 Stock Award and Incentive PlanSAIP and the 2000 Stock Option Plan for Non-Employee Directors. The 2010 SAIP and the 2000 Stock Award and Incentive Plan providesSAIP provide for the award of stock options, RSUs and other equity-based awards. | |
| (2) | | Includes options, RSUs, SSARs, the number of shares to be issued under the 2010-2012 LTIP cycle based on actual performance, and the maximum number of shares that may be issued under the2009-2011 2011-2013 and2010-2012 2012-2014 LTIP cycles if the performance conditions for each of those cycles are satisfied at the maximum level. The number of SSARs that may be issued upon exercise was calculated by dividing (i) the product of (a) the excess of the closing market price of the Company’s Common Stockour common stock on the last trading day of 20102012 over the exercise price, and (b) the number of SSARs outstanding by (ii) the closing market price on the last trading day of 2010.2012. Excludes outstanding shares of PRS under the 2010 SAIP and 2000 Stock Award and Incentive Plans.SAIP. | |
| (3) | | Weighted average exercise price of outstanding options and SSARs. Excludes restricted stock units,RSUs, shares credited to accounts of participants in the DCP and shares that may be issued under the2009-2011 2011-2013 and2010-2012 2012-2014 LTIP cycles. | |
| (4) | | Does not include 2,013,063282,274 equity awards outstanding as of December 31, 20102012 under the 2000 Stock Award and Incentive Plan (“2000 SAIP”)SAIP or 266,16212,917 equity awards outstanding as of December 31, 20102012 under the 2000 Supplemental Stock Award Plan (“2000 Supplemental Plan”).Plan. As approved by shareholders at the Annual Meetingannual meeting held on April 27, 2010, shares authorized under the 2000 SAIP and |
| 2000 Supplemental Plan, but not used under those plans for any reason, are added to shares available for awards under the 2010 Stock Award and Incentive Plan.SAIP. As a result, any outstanding grants under either of those plans that are cancelled will become available for grant under the 2010 Stock Award and Incentive Plan.SAIP. |
| 5)(5) | | RepresentsWe currently have three equity compensation plans that have not been approved by our shareholders: (i) the 2000 Supplemental Stock Award Plan, (ii) the DCP, which is described in this proxy statement under the heading “Non-Qualified Deferred Compensation,” and (iii) a pool of shares that may be used for annual awards of 1,000 shares to each non-employee director. (AlthoughAlthough we are no longer granting these annual 1,000 share stock awards to directors, the pool of shares remains authorized.) | |
| (6) | | Includes 317,796232,127 shares remaining available for issuance under the DCP and 43,750 shares remaining available for issuance from a pool of shares that may be used for annual awards of 1,000 shares to each non-employee director. (Although we are no longer granting these annual 1,000 share stock awards to directors,No shares remain available for issuance under the pool of shares remains authorized.)2000 Supplemental Plan. |
68
2000 Supplemental Stock Award Plan and Directors’ Annual Stock Award Pool On November 14, 2000, our Board approved the 2000 Supplemental Stock Award Plan. Under applicable NYSE rules, this plan did not require approval by shareholders. The 2000 Supplemental Stock Award Plan is a stock-based incentive plan designed to attract, retain, motivate and reward employees and certain other persons who provide services to theour Company. This plan excludes all of our executive officers and directors. Under this plan, eligible participants could be granted nonqualified stock options, stock appreciation rights, restricted stock, deferred stock, and other stock-based awards under terms and conditions identical to those under our shareholder-approved 2000 Stock Award and Incentive Plan.SAIP. The total number of shares originally reserved for awards under the 2000 Supplemental Stock Award Plan was 4,500,000. A total of 128,02212,917 options and 137,745 RSUs were outstanding under that plan as of December 31, 2010.2012. As of April 27, 2010, no new awards will behave been granted under this plan. In September 2000, our Board authorized and reserved a pool of 100,000 shares of our common stock to be used for annual awards of 1,000 shares to each non-employee director each year. The shares could be issued out of authorized but unissued shares or treasury shares. Under applicable NYSE rules, this pool did not require approval by shareholders. Effective as of the 2007 Annual Meeting, directors no longer receive this annual award of 1,000 shares. The last award of shares made to directors from this pool was in October 2006.
69
Outstanding Equity Awards at Fiscal Year-End The following table provides information regarding outstanding equity awards held by our named executive officersNEOs at December 31, 2010. 2012.20102012 Outstanding Equity Awards at Fiscal Year EndYear-End
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity
| | | | | | | | | | | | | | | | | | | | | | | | | | | Equity Incentive
| | | Incentive Plan
| | | | | | | | | | | | | | | | | | | | | | | | | | | Plan Awards;
| | | Awards; Market
| | | | | | | | | | | | | | | | | | | | | | | | | | | Number of
| | | or Payout
| | | | | | | | | Number of
| | | Number of
| | | | | | | | | Number of
| | | | | | Unearned
| | | Value of
| | | | | | | | | Securities
| | | Securities
| | | | | | | | | Shares or
| | | Market Value
| | | Shares,
| | | Unearned
| | | | | | | | | Underlying
| | | Underlying
| | | | | | | | | Units of
| | | of Shares or
| | | Units Or Other
| | | Shares,
| | | | | | | | | Unexercised
| | | Unexercised
| | | Option
| | | Option
| | | Stock That
| | | Units of Stock
| | | Rights That
| | | Units or Other
| | | | | | | | | Options(#)
| | | Options (#)
| | | Exercise
| | | Expiration
| | | Have Not
| | | That Have Not
| | | Have Not
| | | Rights That Have
| | Name
| | Grant
| | Grant
| | Exercisable
| | | Unexercisable
| | | Price ($)
| | | Date
| | | Vested ($)
| | | Vested ($)
| | | Vested (#)
| | | Not Vested ($)
| | | (a) | | Date | | Type(1) | | (b) | | | (c) | | | (e) | | | (f) | | | (g) | | | (h) | | | (i) | | | (j) | | | | | Douglas Tough | | 10/1/2008 | | RSU | | | | | | | | | | | | | | | | | | | 1,467 | (2) | | $ | 81,551 | | | | | | | | | | | | | 4/28/2009 | | RSU | | | | | | | | | | | | | | | | | | | 3,115 | (2) | | $ | 173,163 | | | | | | | | | | | | | 3/8/2010 | | 2009 LTIP | | | | | | | | | | | | | | | | | | | 15,882 | (3) | | $ | 882,880 | | | | 20,028 | (4) | | $ | 1,113,357 | | | | | 3/8/2010 | | 2010 LTIP | | | | | | | | | | | | | | | | | | | 11,047 | (5) | | $ | 614,103 | | | | 33,814 | (6) | | $ | 1,879,720 | | | | | 3/24/2010 | | PRS | | | | | | | | | | | | | | | | | | | 39,301 | (7) | | $ | 2,184,743 | | | | | | | | | | | | | 6/2/2010 | | PRS | | | | | | | | | | | | | | | | | | | 24,042 | (8) | | $ | 1,336,495 | | | | | | | | | | | | | 6/2/2010 | | RSU | | | | | | | | | | | | | | | | | | | 10,017 | (8) | | $ | 556,845 | | | | | | | | | | | | | 6/2/2010 | | SSAR | | | 0 | | | | 26,714 | (8) | | $ | 44.92 | | | | 6/2/2017 | | | | | | | | | | | | | | | | | | | Kevin C. Berryman | | 5/27/2009 | | RSU | | | | | | | | | | | | | | | | | | | 13,124 | (9) | | $ | 729,563 | | | | | | | | | | | | | 5/15/2009 | | 2009 LTIP | | | | | | | | | | | | | | | | | | | 5,184 | (3) | | $ | 288,179 | | | | 6,536 | (4) | | $ | 363,336 | | | | | 8/27/2009 | | PRS | | | | | | | | | | | | | | | | | | | 5,322 | (10) | | $ | 295,850 | | | | | | | | | | | | | 8/27/2009 | | SSAR | | | 0 | | | | 35,486 | (10) | | $ | 36.07 | | | | 8/27/2016 | | | | | | | | | | | | | | | | | | | | | 3/8/2010 | | 2010 LTIP | | | | | | | | | | | | | | | | | | | 2,624 | (5) | | $ | 145,868 | | | | 8,034 | (6) | | $ | 446,610 | | | | | 6/2/2010 | | PRS | | | | | | | | | | | | | | | | | | | 22,439 | (8) | | $ | 1,247,384 | | | | | | | | | | | | | 6/2/2010 | | SSAR | | | | | | | 16,028 | (8) | | | 44.92 | | | | 6/2/2017 | | | | | | | | | | | | | | | | | | | Nicolas Mirzayantz | | 5/6/2008 | | PRS | | | | | | | | | | | | | | | | | | | 18,942 | (11) | | $ | 1,052,986 | | | | | | | | | | | | | 5/6/2008 | | SSAR | | | 0 | | | | 11,092 | (11) | | $ | 42.19 | | | | 5/6/2015 | | | | | | | | | | | | | | | | | | | | | 3/9/2009 | | 2009 LTIP | | | | | | | | | | | | | | | | | | | 4,923 | (3) | | $ | 273,670 | | | | 6,210 | (4) | | $ | 345,214 | | | | | 5/27/2009 | | PRS | | | | | | | | | | | | | | | | | | | 33,070 | (10) | | $ | 1,838,361 | | | | | | | | | | | | | 5/27/2009 | | SSAR | | | 0 | | | | 23,622 | (10) | | $ | 30.48 | | | | 5/27/2016 | | | | | | | | | | | | | | | | | | | | | 3/8/2010 | | 2010 LTIP | | | | | | | | | | | | | | | | | | | 2,624 | (5) | | $ | 145,868 | | | | 8,034 | (6) | | $ | 446,610 | | | | | 6/2/2010 | | PRS | | | | | | | | | | | | | | | | | | | 25,645 | (8) | | $ | 1,425,606 | | | | | | | | | | | | | 6/2/2010 | | SSAR | | | | | | | 10,685 | (8) | | $ | 44.92 | | | | 6/2/2017 | | | | | | | | | | | | | | | | | | | Hernan Vaisman | | 5/6/2008 | | SSAR | | | 0 | | | | 31,998 | (11) | | $ | 42.19 | | | | 5/6/2015 | | | | | | | | | | | | | | | | | | | | | 5/6/2008 | | PRS | | | | | | | | | | | | | | | | | | | 6,399 | (11) | | $ | 355,720 | | | | | | | | | | | | | 3/9/2009 | | 2009 LTIP | | | | | | | | | | | | | | | | | | | 4,665 | (3) | | $ | 259,327 | | | | 5,880 | (4) | | $ | 326,869 | | | | | 5/27/2009 | | PRS | | | | | | | | | | | | | | | | | | | 28,346 | (10) | | $ | 1,575,754 | | | | | | | | | | | | | 5/27/2009 | | RSU | | | | | | | | | | | | | | | | | | | 4,724 | (10) | | $ | 262,607 | | | | | | | | | | | | | 3/8/2010 | | 2010 LTIP | | | | | | | | | | | | | | | | | | | 2,624 | (5) | | $ | 145,868 | | | | 8,034 | (6) | | $ | 446,610 | | | | | 6/2/2010 | | RSU | | | | | | | | | | | | | | | | | | | 4,007 | (8) | | | 222,749 | | | | | | | | | | | | | 6/2/2010 | | SSAR | | | | | | | 26,714 | (8) | | $ | 44.92 | | | | 6/2/2017 | | | | | | | | | | | | | | | | | | | Beth E. Ford | | 10/7/2008 | | RSU | | | | | | | | | | | | | | | | | | | 4,634 | (11) | | $ | 257,604 | | | | | | | | | | | | | 11/4/2008 | | PRS | | | | | | | | | | | | | | | | | | | 8,123 | (11) | | $ | 451,558 | | | | | | | | | | | | | 11/4/2008 | | RSU | | | | | | | | | | | | | | | | | | | 2,030 | (11) | | $ | 112,848 | | | | | | | | | | | | | 3/9/2009 | | 2009 LTIP | | | | | | | | | | | | | | | | | | | 5,184 | (3) | | $ | 288,179 | | | | 6,536 | (4) | | $ | 363,336 | | | | | 5/27/2009 | | PRS | | | | | | | | | | | | | | | | | | | 14,173 | (10) | | $ | 787,877 | | | | | | | | | | | | | 5/27/2009 | | SSAR | | | 0 | | | | 35,433 | (10) | | $ | 30.48 | | | | 5/27/2016 | | | | | | | | | | | | | | | | | | | | | 6/2/2010 | | SSAR | | | 0 | | | | 40,071 | (8) | | $ | 44.92 | | | | 6/2/2017 | | | | | | | | | | | | | | | | | | | | | 3/8/2010 | | 2010 LTIP | | | | | | | | | | | | | | | | | | | 2,624 | (5) | | | 145,868 | | | | 8,034 | (6) | | | 446,610 | | | Dennis M. Meany | | 5/6/2008 | | RSU | | | | | | | | | | | | | | | | | | | 2,000 | (11) | | $ | 111,180 | | | | | | | | | | | | | 5/6/2008 | | PRS | | | | | | | | | | | | | | | | | | | 14,505 | (11) | | $ | 806,333 | | | | | | | | | | | | | 3/9/2009 | | 2009 LTIP | | | | | | | | | | | | | | | | | | | 3,219 | (3) | | $ | 178,944 | | | | 4,058 | (4) | | $ | 225,584 | | | | | 5/27/2009 | | PRS | | | | | | | | | | | | | | | | | | | 31,496 | (10) | | $ | 1,750,863 | | | | | | | | | | | | | 3/8/2010 | | 2010 LTIP | | | | | | | | | | | | | | | | | | | 1,448 | (5) | | $ | 80,494 | | | | 4,434 | (6) | | $ | 246,486 | | | | | 6/2/2010 | | PRS | | | | | | | | | | | | | | | | | | | 18,699 | (8) | | $ | 1,039,477 | | | | | | | | | | | Angelica T. Cantlon | | 8/27/2009 | | PRS | | | | | | | | | | | | | | | | | | | 9,980 | (10) | | $ | 554,788 | | | | | | | | | | | | | 8/10/2009 | | 2009 LTIP | | | | | | | | | | | | | | | | | | | 1,903 | (3) | | $ | 105,788 | | | | 2,788 | (4) | | $ | 154,985 | | | | | 3/8/2010 | | 2010 LTIP | | | | | | | | | | | | | | | | | | | 1,102 | (5) | | $ | 61,260 | | | | 3,374 | (6) | | $ | 187,561 | | | | | 6/2/2010 | | PRS | | | | | | | | | | | | | | | | | | | 18,699 | (8) | | $ | 1,039,477 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Grant
Date | | | Grant
Type (1) | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | | Option
Exercise
Price
($) | | | Option
Expiration
Date | | | Number of
Shares or
Units of
Stock That
Have Not
Vested
($) | | | Market Value
of Shares or
Units of Stock
That Have Not
Vested
($)(2) | | | Equity Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or Other
Rights That
Have
Not Vested (#) | | | Equity
Incentive Plan
Awards: Market
or Payout
Value of
Unearned
Shares,
Units or Other
Rights That Have
Not Vested
($)(2) | | Douglas D. Tough | | | 6/2/2010 | | | PRS | | | | | | | | | | | | | | | | | | | 24,042 | (3) | | | 1,599,755 | | | | | | | | | | | | | 6/2/2010 | | | RSU | | | | | | | | | | | | | | | | | | | 10,017 | (3) | | | 666,531 | | | | | | | | | | | | | 6/2/2010 | | | SSAR | | | — | | | | 26,714 | (3) | | | 44.92 | | | | 6/2/2017 | | | | | | | | | | | | | | | | | | | | | 1/31/2011 | | | 2011 LTIP | | | | | | | | | | | | | | | | | | | 9,141 | (4) | | | 608,242 | | | | 17,970 | (5) | | | 1,195,724 | | | | | 6/2/2011 | | | PRS | | | | | | | | | | | | | | | | | | | 40,560 | (6) | | | 2,698,862 | | | | | | | | | | | | | 6/2/2011 | | | RSU | | | | | | | | | | | | | | | | | | | 4,345 | (6) | | | 289,116 | | | | | | | | | | | | | 1/31/2012 | | | 2012 LTIP | | | | | | | | | | | | | | | | | | | 7,730 | (7) | | | 514,354 | | | | 28,366 | (8) | | | 1,887,474 | | | | | 5/1/2012 | | | PRS | | | | | | | | | | | | | | | | | | | 71,535 | (9) | | | 4,759,939 | | | | | | | | | | Kevin C. Berryman | | | 5/27/2009 | | | RSU | | | | | | | | | | | | | | | | | | | 6,562 | (10) | | | 436,635 | | | | | | | | | | | | | 8/27/2009 | | | SSAR | | | 35,486 | (11) | | | — | | | | 36.07 | | | | 8/27/2016 | | | | | | | | | | | | | | | | | | | | | 6/2/2010 | | | PRS | | | | | | | | | | | | | | | | | | | 22,439 | (3) | | | 1,493,091 | | | | | | | | | | | | | 6/2/2010 | | | SSAR | | | — | | | | 16,028 | (3) | | | 44.92 | | | | 6/2/2017 | | | | | | | | | | | | | | | | | | | | | 1/31/2011 | | | 2011 LTIP | | | | | | | | | | | | | | | | | | | 2,058 | (4) | | | 136,939 | | | | 4,042 | (5) | | | 268,955 | | | | | 6/2/2011 | | | PRS | | | | | | | | | | | | | | | | | | | 5,021 | (6) | | | 334,097 | | | | | | | | | | | | | 6/2/2011 | | | SSAR | | | — | | | | 12,554 | (6) | | | 62.13 | | | | 6/2/2018 | | | | | | | | | | | | | | | | | | | | | 6/2/2011 | | | RSU | | | | | | | | | | | | | | | | | | | 3,138 | (6) | | | 208,803 | | | | | | | | | | | | | 1/30/2012 | | | 2012 LTIP | | | | | | | | | | | | | | | | | | | 1,740 | (7) | | | 115,780 | | | | 6,382 | (8) | | | 424,658 | | | | | 5/1/2012 | | | PRS | | | | | | | | | | | | | | | | | | | 19,076 | (9) | | | 1,269,317 | | | | | | | | | | | | | 5/1/2012 | | | SSAR | | | — | | | | 7,948 | (9) | | | 60.39 | | | | 5/1/2019 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Grant
Date | | | Grant
Type (1) | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | | Option
Exercise
Price
($) | | | Option
Expiration
Date | | | Number of
Shares or
Units of
Stock That
Have Not
Vested
($) | | | Market Value
of Shares or
Units of Stock
That Have Not
Vested
($)(2) | | | Equity Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or Other
Rights That
Have
Not Vested (#) | | | Equity
Incentive Plan
Awards: Market
or Payout
Value of
Unearned
Shares,
Units or Other
Rights That Have
Not Vested
($)(2) | | Nicolas Mirzayantz | | | 5/6/2008 | | | SSAR | | | 5,546 | (12) | | | — | | | | 42.19 | | | | 5/6/2015 | | | | | | | | | | | | | | | | | | | | | 6/2/2010 | | | PRS | | | | | | | | | | | | | | | | | | | 25,645 | (3) | | | 1,706,418 | | | | | | | | | | | | | 6/2/2010 | | | SSAR | | | — | | | | 10,685 | (3) | | | 44.92 | | | | 6/2/2017 | | | | | | | | | | | | | | | | | | | | | 1/31/2011 | | | 2011 LTIP | | | | | | | | | | | | | | | | | | | 2,058 | (4) | | | 136,939 | | | | 4,042 | (5) | | | 268,955 | | | | | 6/2/2011 | | | PRS | | | | | | | | | | | | | | | | | | | 17,576 | (6) | | | 1,169,507 | | | | | | | | | | | | | 6/2/2011 | | | RSU | | | | | | | | | | | | | | | | | | | 1,883 | (6) | | | 125,295 | | | | | | | | | | | | | 1/30/2012 | | | 2012 LTIP | | | | | | | | | | | | | | | | | | | 1,740 | (7) | | | 115,780 | | | | 6,382 | (8) | | | 424,658 | | | | | 5/1/2012 | | | PRS | | | | | | | | | | | | | | | | | | | 19,870 | (9) | | | 1,322,150 | | | | | | | | | | Hernan Vaisman | | | 6/2/2010 | | | RSU | | | | | | | | | | | | | | | | | | | 4,007 | (3) | | | 266,626 | | | | | | | | | | | | | 6/2/2010 | | | SSAR | | | — | | | | 26,714 | (3) | | | 44.92 | | | | 6/2/2017 | | | | | | | | | | | | | | | | | | | | | 1/31/2011 | | | 2011 LTIP | | | | | | | | | | | | | | | | | | | 2,058 | (4) | | | 136,939 | | | | 4,042 | (5) | | | 268,955 | | | | | 6/2/2011 | | | SSAR | | | — | | | | 20,923 | (6) | | | 62.13 | | | | 6/2/2018 | | | | | | | | | | | | | | | | | | | | | 6/2/2011 | | | RSU | | | | | | | | | | | | | | | | | | | 3,138 | (6) | | | 208,803 | | | | | | | | | | | | | 1/30/2012 | | | 2012 LTIP | | | | | | | | | | | | | | | | | | | 1,740 | (7) | | | 115,780 | | | | 6,382 | (8) | | | 424,658 | | | | | 5/1/2012 | | | SSAR | | | — | | | | 19,870 | (9) | | | 60.39 | | | | 5/1/2019 | | | | | | | | | | | | | | | | | | | | | 5/1/2012 | | | RSU | | | | | | | | | | | | | | | | | | | 2,980 | (9) | | | 198,289 | | | | | | | | | | Anne Chwat | | | 4/14/2011 | | | 2011 LTIP | | | | | | | | | | | | | | | | | | | 1,233 | (4) | | | 82,044 | | | | 2,428 | (5) | | | 161,559 | | | | | 5/3/2011 | | | RSU | | | | | | | | | | | | | | | | | | | 3,171 | (13) | | | 210,998 | | | | | | | | | | | | | 6/2/2011 | | | PRS | | | | | | | | | | | | | | | | | | | 13,520 | (6) | | | 899,621 | | | | | | | | | | | | | 1/30/2012 | | | 2012 LTIP | | | | | | | | | | | | | | | | | | | 1,043 | (7) | | | 69,401 | | | | 3,830 | (8) | | | 254,848 | | | | | 5/1/2012 | | | PRS | | | | | | | | | | | | | | | | | | | 13,909 | (9) | | | 925,505 | | | | | | | | | |
| | | | (1) | | 20092011 LTIP =2009-2011 2011-2013 Long-Term Incentive Plan Cycle
2010 LTIP =2010-2012 Long-Term Incentive Plan Cycle
PRS = Purchased Restricted Stock
RSU = Restricted Stock Unit
SSAR = Stock Settled Appreciation Right |
70
PRS = Purchased Restricted StockRSU = Restricted Stock Unit SSAR = Stock Settled Appreciation Right | | | | (2) | | This grantThe market value was made for Mr. Tough’s service as a non-executive member of the Company’s Board of Directors, and vestsdetermined based on the third anniversaryclosing price of our common stock on December 31, 2012. For PRS awards, the grant date. This grant must be automatically deferred upon vesting.amounts in this column do not reflect the purchase price paid by the NEO for PRS shares under the ECP as described in the Compensation Discussion and Analysis. | |
| (3) | | This award vests on April 2, 2013. |
| (4) | | This amount represents the total number of shares of stock that have been credited for the 20092011 and 20102012 segments of the2009-2011 2011-2013 LTIP cycle. These shares will remain unvested until the completion of the full three-year LTIP cycle. The number of shares credited for Ms. Cantlon for the 2009 segment and for Mr. Tough for the 2010 segment of the2009-2011 LTIP cycle was pro-rated based on the number of days served as an employee during the applicable segment. Because he commenced employment with the Company in 2010, Mr. Tough was not credited with any shares for the 2009 segment of the2009-2011 LTIP cycle. Pursuant to the terms of his offer of employment, Mr. Berryman is deemed to have been an employee for the entire 2009 segment of this LTIP cycle. |
| (4)(5) | | This amount represents the maximum number of shares of stock that remain subject to the achievement of specified performance objectives over the remaining two open segments of the2009-2011 2011-2013 LTIP cycle. Shares earned during any segment of the2009-2011 2011-2013 LTIP cycle will remain unvested until the completion of the full three-year cycle. |
| (6) | | This award vests April 2, 2014. |
(5)(7) | | This amount represents the number of shares of stock that have been credited for the 20102012 segment of the2010-2012 2012-2014 LTIP cycle. These shares will remain unvested until the completion of the full three-year LTIP cycle. The number of shares credited for Mr. Tough for the 2010 segment of the2010-2012 LTIP cycle was pro-rated based on the number of days served as an employee during the segment. |
| (6)(8) | | This amount represents the maximum number of shares of stock that remain subject to the achievement of specified performance objectives over the remaining three open segments of the2010-2012 2012-2014 LTIP cycle. Shares earned during any segment of the2010-2012 2012-2014 LTIP cycle will remain unvested until the completion of the full three-year cycle. |
| (7)(9) | | This grant vestedaward vests on MarchApril 1, 2011.2015. |
| (10) | | (8) | | This amount represents the unvested portion of a grant that was made in connection with Mr. Berryman’s commencement of employment in 2009. This grant vests on April 2, 2013. | | (9) | | 20% of this grant vests (or vested)per year on each of the first, second, third, fourth and fifth anniversaries of the grant date. |
| (10)(11) | | This grant vestsaward vested on March 27, 2012. This is the amount of unexercised SSARs. |
| (11)(12) | | This grantaward vested on May 6, 2011. This is the amount of unexercised SSARs. |
| (13) | | This award was approved by our Compensation Committee in connection with Ms. Chwat’s commencement of employment, and vests on the third anniversary of the grant date.May 3, 2014. |
71
Option Exercises and Stock Vested The following table provides information regarding exercises of options and SSARs and stock vested during 20102012 for each of our named executive officers. NEOs.20102012 Option Exercises and Stock Vested
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | | | | | | | Number of Shares
| | | | | | | | | Number of Shares
| | | | | | | | | | | Acquired on
| | | Value Realized on
| | | | | | Acquired on
| | | Value Realized on
| | Name
| | Type of
| | | Exercise (#)
| | | Exercise ($)
| | | Type of
| | | Vesting (#)
| | | Vesting ($)
| | | (a) | | Award(1) | | | (b) | | | (c) | | | Award(1) | | | (d) | | | (e) | | | | | Douglas Tough | | | | | | | — | | | | — | | | | 2008 LTIP | (4) | | | 7,206 | | | $ | 400,582 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | $ | 400,582 | | | Kevin C. Berryman | | | | | | | — | | | | — | | | | RSU | (2) | | | 3,280 | (3) | | $ | 148,190 | | | | | | | | | | | | | | | | | | 2008 LTIP | (4) | | | 3,198 | | | $ | 177,777 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | $ | 325,967 | | | Nicolas Mirzayantz | | | | | | | | | | | | | | | PRS | (5)(6) | | | 20,857 | | | $ | 400,663 | | | | | | SSAR | | | | 25,000 | (7) | | $ | 412,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2008 LTIP | (4) | | | 4,899 | | | $ | 272,335 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | $ | 672,998 | | | Hernan Vaisman | | | | | | | — | | | | — | | | | RSU | (5) | | | 1,564 | | | $ | 70,536 | | | | | | | | | | | | | | | | | | PRS | (5)(6) | | | 14,600 | | | $ | 280,466 | | | | | | | | | | | | | | | | | | 2008 LTIP | (4) | | | 4,642 | | | $ | 258,049 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | $ | 609,051 | | | Beth E. Ford | | | | | | | — | | | | — | | | | 2008 LTIP | (4) | | | 3,871 | | | $ | 215,189 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | $ | 215,189 | | | Dennis M. Meany | | | | | | | — | | | | — | | | | PRS | (5)(6) | | | 15,063 | | | $ | 289,360 | | | | | | | | | | | | | | | | | | 2008 LTIP | (4) | | | 3,202 | | | $ | 177,999 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | $ | 467,359 | | | Angelica Cantlon | | | | | | | — | | | | — | | | | 2008 LTIP | (4) | | | 1,204 | | | $ | 66,930 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | $ | 66,930 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | Name | | Type of
Award (1) | | | Number of Shares
Acquired on
Exercise (#) | | | Value Realized on
Exercise ($) | | | Type of Award(1) | | | Number of Shares
Acquired on
Vesting (#) | | | Value Realized on
Vesting ($) | | Douglas D. Tough | | | | | | | | | | | | | | | RSU | (2) | | | 3,115 | | | | 188,582 | | | | | | | | | | | | | | | | | 2010 LTIP(3) | | | | 33,786 | | | | 2,248,120 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,436,702 | | | | | | | | | | | | | | | | | | | | | | | | | | | Kevin C. Berryman | | | | | | | | | | | | | | | RSU | (4) | | | 3,281 | | | | 187,115 | | | | | | | | | | | | | | | | | PRS | (5)(6) | | | 5,322 | | | | 216,020 | | | | | | | | | | | | | | | | | 2010 LTIP(3) | | | | 8,027 | | | | 534,117 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 937,252 | | | | | | | | | | | | | | | | | | | | | | | | | | | Nicolas Mirzayantz | | | SSAR | | | | 23,622 | (7) | | | 587,243 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PRS | (5)(6) | | | 33,070 | | | | 1,434,577 | | | | | | | | | | | | | | | | | 2010 LTIP | (3) | | | 8,027 | | | | 534,117 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,968,694 | | | | | | | | | | | | | | | | | | | | | | | | | | | Hernan Vaisman | | | | | | | | | | | | | | | RSU | (6) | | | 4,724 | | | | 276,921 | | | | | | | | | | | | | | | | | PRS | (5)(6) | | | 28,346 | | | | 1,229,649 | | | | | | | | | | | | | | | | | 2010 LTIP(3) | | | | 8,027 | | | | 534,117 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,040,687 | | | | | | | | | | | | | | | | | | | | | | | | | | | Anne Chwat | | | | | | | | | | | | | | | 2010 LTIP | (3) | | | 2,471 | | | | 164,420 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 164,420 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | (1) | | RSU = Restricted Stock Unit
|
| | PRS = Purchased Restricted Stock
2008 |
| | 2010 LTIP = 2008-20102010-2012 Long-Term Incentive Plan Cycle
|
| | SSAR = Stock Settled Appreciation Right | |
| (2) | | The award represented in this row was granted in 2009, when Mr. Tough was a non-employee director of our Company, and vested on May 27, 2010.April 28, 2012. The value is based on the closing stock price of $45.18$60.54 on the vesting date. | | (3) | | Of this amount, the executive deferred, Mr. Tough was required to automatically defer these shares under our DCP described in this proxy statement under the heading “Non-Qualified Deferred Compensation”, 3,280 shares.Compensation.” Dividend equivalents are credited on vested deferred LTIPRSU shares. The actual realized value will depend upon the closing price of our common stock on the date the shares are issued to the executive.Mr. Tough. |
72
| (3) | | | (4) | | The award represented in this row is the equity portion of the2008-2010 2010-2012 LTIP award, for which performance was completed on December 31, 2010.2012. The number of shares represents the actual number of shares that will be issued to the participant in March 2011,2013, as determined by the Board of Directors in January 2011.2013. The value realized is based on the set number of shares and the closing market price of a share of our common stock on December 31, 2010,2012, which was $55.59;$66.54; however, the actual value realized may vary depending on the closing market price of a share of our common stock on the payout date. |
| (4) | | | | With respect toA grant of 16,404 RSUs was made in connection with Mr. Berryman’s commencement of employment in 2009. 20% of this grant vests on each of the equityfirst, second, third, fourth and fifth anniversaries of the grant date. The portion of the2007-2009 LTIP award for which performance was completed on December 31, 2009 (but which was not previously reported as vested), and was paid out to executives on February 1, 2010, Mr. Berryman received 732 shares with a realized value of $29,580; Mr. Mirzayantz received 2,445 shares with a realized value of $98,811; Mr. Vaisman received 2,223 shares with a realized value of $89,827 shares; Ms. Ford received 1,547 shares with a realized value of $62,514; Mr. Meany received 2,223 shares with a realized value of $89,827; and Ms. Cantlon received 144 shares with a realized value of $5,819. In each case, the realizedthat vested in 2012 is represented in this row. The value is based on the closing marketstock price of a share of our common stock, which was $40.41,$57.03 on the payoutvesting date. Ms. FordMr. Berryman deferred all of the 1,547these shares allocated to her, including 427 shares of IFF Common Stock issued as part of a discretionary make-whole payment relating to the pro-ration of the2007-2009 LTIP cycle, under theour DCP described in this proxy statement under the heading “Non-Qualified Deferred Compensation.” Dividend equivalents are credited on vested deferred LTIPRSU shares. The actual realized value for Ms. Ford will depend upon the closing market price of a share of our common stock on the date the shares are issued to her.Mr. Berryman. | |
| (5) | | The award representedamounts set forth in this row was granted in 2007 undertable as the Equity Choice Program and vested on May 8, 2010. The value realized is based on the closing price of our common stock, which was $45.10, on the vesting date. | | (6) | | The value realized attributable to vested PRS is the product of (a) the number of vested shares of PRS and (b) the closing price of our common stock on the vesting date, less the aggregate amount paid by the executive to purchase the PRS. Without taking into account the considerationamount paid by the respective executive for his or her PRS shares, the value realized on vesting in the Value Realized on Vesting column (e) attributable to PRS for this executive would be: M. Berryman—$311,976; Mr. Mirzayantz: $940,651;Mirzayantz—$1,938,563; and Mr. Vaisman: $658,460; Mr. Meany: $679,341.Vaisman—$1,661,643. |
| (7)(6) | | The award represented in this row was granted in 20062009 under the Equity Choice ProgramECP and vested on May 9, 2009.March 27, 2012. The value realized is based on the closing price of our common stock, which was $58.62, on the vesting date. |
| (7) | | The award represented in this row was granted in 2009 under the ECP and vested on March 27, 2012. The value realized is based on the difference between the exercise price of $36.00$30.48 and the closing price of our common stock, which was $52.48,$55.34, on the exercise date of November 24, 2010, and was paid in the form of 7,850 shares of common stock being issued to the executive.June 13, 2012. |
73
Pension Benefits We provide a defined benefit pension plan (the “U.S. Pension Plan”) to eligible United States-based employees hired before January 1, 2006. Of our named executive officers,NEOs, only Mr. Mirzayantz and Mr. Meany, who retired on December 31, 2010, currently participateparticipates in the U.S. Pension Plan. Mr. Meany began receiving benefits in January 2011. U.S. employees hired on or after January 1, 2006, including all of our other named executive officers,NEOs, are not eligible to participate in the U.S. Pension Plan. We pay the full cost of providing benefits under the U.S. Pension Plan.Compensation and service earned after December 31, 2007 are not taken into account in determining an employee’s benefit under the U.S. Pension Plan; however, this provision does not apply to any employeePlan except for employees whose combined age and years of service equaled or exceeded 70 as of December 31, 2007. As Mr. Meany’s benefits wereMirzayantz did not frozen because his age and years of service as of December 31, 2007 equaled or exceeded 70.satisfy this requirement, Mr. Mirzayantz had his benefit frozen as of December 31, 2007. We pay the full cost of providing benefits under the U.S. Pension Plan.
The monthly pension benefit is equal to the number of years of credited service as of December 31, 20102012 times the difference between (a) 1.7% times final average compensation, and (b) 1.25% times the social security amount. Final average compensation for purposes of the U.S. Pension Plan is the average of the five consecutive years of compensation during the last ten years before December 31, 20102007 that produce the highest average. The term “compensation” means the basic rate of monthly salary (as of April 1 each year) plus 1/12 of any Annual Incentive PlanAIP cash award received for the preceding year, reduced by any compensation deferred under our Deferred Compensation Plan.DCP. The normal retirement age under the U.S. Pension Plan is age 65. Various provisions of the Internal Revenue Code of 1986, as amended (“IRC”) limit the amount of compensation used in determining benefits payable under our U.S. Pension Plan. We established a non-qualified Supplemental Retirement Plan to pay that part of the pension benefit that, because of these IRC limitations, cannot be paid under the U.S. Pension Plan to our U.S. senior executives. For purposes of the Supplemental Retirement Plan, “compensation” includes any salary and Annual Incentive PlanAIP amounts, including amounts deferred under our Deferred Compensation Plan. A description of our practices with regard to crediting additional years of service under our Supplemental Retirement Plan is included in the Compensation Discussion and Analysis. DCP.Employees with at least 10 years of service are eligible for early retirement under the U.S. Pension Plan and the Supplemental Retirement Plan beginning at age 55. The benefit at early retirement is an unreduced benefit payable at age 62 or a reduced benefit (4% per year) if payablepaid prior to age 62. At December 31, 2010, Mr. Meany was age 63 with more than 10 years of service (including service with Bush Boake Allen Inc. (“BBA”)) and therefore he was eligible for early retirement with unreduced benefits as of December 31, 2010. We acquired BBA in 2000, and the Bush Boake Allen Inc. Retirement Plan (the “BBA Plan”) was merged into our U.S. Pension Plan on December 31, 2000. Benefit accruals under the BBA Plan were frozen as of that date. Benefit service under our U.S. Pension Plan for former BBA employees, including Mr. Meany, starts after December 1, 2000. The BBA pension benefit is payable in addition to the benefit participants earn under our U.S. Pension Plan for service after December 1, 2000
The total benefit under the U.S. Pension Plan for former BBA employees, including Mr. Meany, will be equal to (a) the frozen BBA Plan benefit as of December 31, 2000, plus (b) the benefit accrued under the U.S. Pension Plan after December 1, 2000. The value of the frozen accrued benefit under the BBA Plan is included in the Present Value of Accumulated Benefits columns in the Pension Benefits Table.
The normal retirement benefit under the BBA Plan is payable at age 65. For participants in the BBA Plan on December 31, 2000, including Mr. Meany, the following provisions apply in calculating the pension benefit earned as of December 31, 2000:
The benefit from the BBA Plan is the sum of (A) the benefit earned under the BBA Plan as of December 31, 1999, plus (B) the benefit earned under the BBA Plan during 2000. The formula for
74
determining each of these components of the BBA Plan benefit is described below. For purposes of the BBA Plan, final average earnings means the five highest consecutive calendar years’ earnings out of the last ten calendar years of earnings prior to December 31, 2000.
| | | | A. | For service prior to January 1, 2000, the participant’s BBA Plan pension benefit is the greatest of the amounts determined under subparagraphs (i), (ii) or (iii) below: | | | (i) | the sum of: |
| | | | (A) | 1.05% of that portion of the participant’s final average earnings as of December 31, 2000 not in excess of the social security average wage base plus 1.5% of that portion of his or her final average earnings as of December 31, 2000 in excess of the social security average wage base, multiplied by the participant’s number of years of service as of December 31, 1999, not in excess of the service limitation applicable to the participant, plus | | | (B) | 1.5% of the participant’s final average earnings as of December 31, 2000 multiplied by the participant’s number of years of service as of December 31, 1999 in excess of the service limitation applicable to the participant, |
| | | | (ii) | 1.1% of the participant’s final average earnings as of December 31, 2000 multiplied by the participant’s number of years of service as of December 31, 1999; | | | (iii) | the sum of: |
| | | | (A) | the participant’s accrued benefit on June 30, 1987, determined under the terms of the BBA Plan or a prior BBA pension plan in effect from time to time prior to July 1, 1987 (“BBA Prior Plan”), including any minimum benefit provided thereunder, and | | | (B) | the benefit determined under paragraph (i) or (ii) above but based solely on the participant’s years of service from June 30, 1987 to December 31, 1999; |
provided, that in no event will the BBA Plan benefit accrued as of December 31, 1999 be less than (x) such participant’s benefit as of December 31, 1988 under the terms of the BBA Plan or BBA Prior Plan then in effect, or (y) the benefit accrued by the participant as of December 31, 1999 under the terms of the BBA Plan then in effect.
| | | | B. | For service during calendar year 2000, the participant’s BBA Plan pension benefit is the following result: | | | (i) | 1.67% of the participant’s final average earnings as of December 31, 2000, minus | | | (ii) | 1.67% of the participant’s primary social security benefit multiplied by the number of the participant’s years of service between January 1, 2000 and the date the participant would attain age 65 (up to a maximum of 50% of the participant’s primary social security benefit), multiplied by a fraction, the numerator of which is the participant’s years of service as of December 31, 2000 and the denominator of which is the participant’s years of service projected to age 65. |
Early Retirement BBA Plan Benefit
Participants may retire with a full, unreduced frozen BBA Plan benefit commencing at age 62, if (i) they are at least 55 years old and have at least ten years of eligibility service, or (ii) the sum of their age at their last birthday plus the full years of benefit service at the time of termination of employment from IFF is at least 65. Mr. Meany is eligible for a full, unreduced frozen BBA Plan benefit commencing at age 62 and is currently receiving benefits.
The following table provides information for our named executive officersNEOs regarding the Company’s defined benefit retirement plans.our U.S. Pension Plan and Supplemental Retirement Plan. The present value of accumulated benefits payable to the named executive officersNEOs under each of our retirement plans was determined using the following assumptions: an interest rate of 5.6%4.1%; the RP-2000 Combined Healthy Participant Male/Female Mortality Table;with projections of mortality improvements; 80% of participants are married with a spouse four years younger and are receiving a 50% joint and survivor
75
annuity and 20% of participants are unmarried and are receiving a straight life annuity with a five yearfive-year guarantee. Additional information regarding the valuation method and material assumptions used to determine the accumulated benefits reported in the table is presented in Note 13 to the Company’sour consolidated financial statements included in the Company’sour 2012 Annual Report onForm 10-K for the fiscal year ended December 31, 2010.Report. The information provided in the columns (c), (d1) and (d2)other than the Payments During Last Fiscal Year column is presented as of December 31, 2010,2012, the measurement date used for financial statement reporting purposes with respect to our audited financial statements for the fiscal year ended December 31, 2010. 2012.2010 Pension Benefits
| | | | | | | | | | | | | | | | | | | | | | | | | Present
| | Present
| | | | | | | | | | Value of
| | Value of
| | | | | | | | | | Accumulated
| | Accumulated
| | Payments
| | | | | | Number
| | Benefits
| | Benefits
| | During
| | | | | | of Years
| | Assuming
| | Assuming
| | Last
| | | | | | Credited
| | Retirement
| | Retirement
| | Fiscal
| | | | | | Service
| | Age of 62
| | Age of 65
| | Year
| | Name | | Plan Name | | (#) | | ($) | | ($) | | ($) | | (a) | | (b) | | (c) | | (d1)(1) | | (d2)(2) | | (e) | | | | Douglas D. Tough(3) | | | | — | | | — | | | | — | | | | — | | | Kevin C. Berryman(3) | | | | — | | | — | | | | — | | | | — | | | Nicolas Mirzayantz(4) | | U.S. Pension Plan | | 16.23 | | $ | 293,712 | | | $ | 232,345 | | | | | | | | | Supplemental Retirement Plan | | 16.23 | | $ | 468,003 | | | $ | 370,220 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 761,715 | | | $ | 602,565 | | | | | | | Hernan Vaisman(3) | | | | — | | | — | | | | — | | | | — | | | Beth E. Ford(3) | | | | — | | | — | | | | — | | | | — | | | Dennis M. Meany | | U.S. Pension Plan | | 33.64 | | $ | 1,001,335 | (5) | | $ | 925,344 | (5) | | | | | | | | Supplemental Retirement Plan | | 10.23 | | $ | 679,307 | | | $ | 627,754 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 1,680,642 | | | $ | 1,553,098 | | | | | | | Angelica Cantlon(3) | | | | — | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | Name | | Plan Name | | Number
of Years
Credited
Service
(#) | | | Present
Value of
Accumulated
Benefits
Assuming
Retirement
Age of 62
($)(1) | | | Present
Value of
Accumulated
Benefits
Assuming
Retirement
Age of 65
($)(2) | | | Payments
During
Last
Fiscal
Year ($) | | Douglas D. Tough(3) | | | | | — | | | | — | | | | — | | | | — | | Kevin C. Berryman(3) | | | | | — | | | | — | | | | — | | | | — | | Nicolas Mirzayantz(4) | | U.S. Pension Plan | | | 16.23 | | | | 467,784 | | | | 384,371 | | | | — | | | | Supplemental Retirement Plan | | | 16.23 | | | | 745,369 | | | | 612,458 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,213,153 | | | | 996,829 | | | | | | | | | | | | | | | | | | | | | | | | | Hernan Vaisman(3) | | | | | — | | | | — | | | | — | | | | — | | Anne Chwat(3) | | | | | — | | | | — | | | | — | | | | — | |
| | | | (1) | | For participants in the U.S. Pension Plan and the Supplemental Retirement Plan as of December 31, 2010 (Mr. Mirzayantz and Mr. Meany), theThe amounts in this column assume benefit commencement at unreduced early retirement at age 62 (with at least 10 years of credited service) and otherwise were determined using interest rate, mortality and payment distribution assumptions consistent with those used in the Company’sour financial statements. | |
| (2) | | For participants in the U.S. Pension Plan and the Supplemental Retirement Plan as of December 31, 2010 (Mr. Mirzayantz and Mr. Meany), theThe amounts in this column assume benefit commencement at normal retirement at age 65 and otherwise were determined using interest rate, mortality and payment distribution assumptions consistent with those used in the Company’sour financial statements. | |
| (3) | | This executive is not eligible to participate in the U.S. Pension Plan, the Supplemental Retirement Plan or any other defined benefit plan because he or she commenced U.S. employment with theour Company after January 1, 2006. | |
| (4) | | Benefits for this executiveMr. Mirzayantz under the U.S. Pension Plan and Supplemental Retirement Plan were frozen as of December 31, 2007 because his age and service as of December 31, 2007 did not equal or exceed 70. | | (5) | | Amounts under the U.S. Pension Plan for this executive include frozen accumulated benefits under the BBA Plan. Mr. Meany retired, at age 63, on December 31, 2010 and began receiving benefits in 2011. |
76
Non-Qualified Deferred Compensation We offer to our executive officers and other senior employees based in the United States an opportunity to defer compensation under our Deferred Compensation Plan (“DCP”),DCP, which is our non-qualified deferred compensation plan. The DCP allows these employees to defer salary, annual and long termlong-term incentive awards and receipt of stock under some equity awards. There is no limit on the amount of compensation that a participant may elect to defer. The deferral period can extend for a specified number of years or until retirement or employment termination, and participants may elect to extend deferrals, subject to applicable tax laws. Subject to certain limitations on the number of installments and periods over which installments will be paid, participants in the DCP elect the timing and number of installments as to which the participant’s DCP account will be settled. Deferred cash compensation may be treated at the election of the participant as invested in (i) a variety of equity and debt mutual funds offered by The Vanguard Group, which administers the DCP, or (ii) a fund valued by reference to the value of IFF’sour common stock with dividends reinvested (the “IFF Stock Fund”), or (iii) an interest-bearing account. Except for deferrals into the IFF stock fund,Stock Fund, the participant may generally change his or her choice of funds at any time. For the interest-bearing account, our Compensation Committee establishes an interest rate each year which we intend to be equal to 120% of the applicable federal long termlong-term interest rate. For 20102012 this interest rate was 4.93%3.33% and for 20112013 this interest rate is 4.24%2.86%. We make matching contributions under the DCP to make up for tax limitations on our matching contributions under our 401(k) plan, which is called our Retirement Investment Fund Plan.Plan, a 401(k) plan. Until December 31, 2007, for employees hired prior to January 1, 2006, including Mr. Mirzayantz, and Mr. Meany, thethis 401(k) plan provided for matching contributions at a rate of $0.50 for each dollar of contribution up to 6% of a participant’s salary. This matching contribution rate continued to apply to Mr. Meany after December 31, 2007 until his retirement since his benefits have not been frozen under the U.S. Pension Plan. For U.S. employees hired on or after January 1, 2006, including all of our other named executive officersNEOs and, effective January 1, 2008 for participants whose benefits have been frozen under the U.S. Pension Plan, including Mr. Mirzayantz, thethis 401(k) plan provides for matching contributions at a rate of $1.00 for each dollar of contribution up to 4% of a participant’s salary plus $0.75 for each dollar of contribution above 4% up to 8% of a participant’s salary. Additional details regarding the U.S. Pension Plan freeze are included above under “Pension Benefits”. Tax rules limit the amount of the Company match under the 401(k) plan for our senior executives. The DCP matching contribution reflects the amount of the matching contribution which is limited by the tax laws. The same requirements under the 401(k) plan for matching, including vesting, apply to matching contributions under the DCP. Currently,These matching contributions are automatically vestedvest once a participant completes three years of service with theour Company. The DCP gives employees who are participants an incentive to defer compensation into the IFF common stock fundStock Fund by granting a 25% premium, credited in additional deferred stock, on all cash compensation deferred into the stock fund. The shares representing the premium generally are forfeited if employment ends prior to December 31 of the calendar year following the year during which the deferral was made or if the participant withdraws any deferred stock within one year of deferral. Vesting of the premium deferred stock accelerates upon a change in control. RSUs granted under our equity compensation plans may also be deferred upon vesting, but no premium is added.
77
The following table provides information for our named executive officersNEOs regarding our DCP, the plan that provides for the deferral of compensation on a basis that is not tax-qualified. 20102012 Non-Qualified Deferred Compensation
| | | | | | | | | | | | | | | | | | | | | | | | | Executive
| | Registrant
| | Aggregate
| | Aggregate
| | Aggregate
| | | | Contributions in
| | Contributions in
| | Earnings in
| | Withdrawals/
| | Balance at
| | Name | | Last FY ($) | | Last FY ($) | | Last FY ($) | | Distributions ($) | | Last FYE ($) | | (a) | | (b) | | (c)(1) | | (d) | | (e) | | (f)(2) | | | | Doug Tough | | $ | 72,000 | (3) | | $ | 64,125 | | | $ | 16,139 | | | $ | 0 | | | $ | 152,264 | | | Kevin C. Berryman | | $ | 207,553 | (4) | | $ | 43,501 | | | $ | 67,776 | | | $ | 0 | | | $ | 365,273 | | | Nicolas Mirzayantz | | $ | 49,375 | (3) | | $ | 14,583 | | | $ | 68,833 | | | $ | 0 | | | $ | 660,108 | | | Hernan Vaisman | | $ | 39,000 | (3) | | $ | 29,816 | | | $ | 61,039 | | | $ | 0 | | | $ | 259,040 | | | Beth E. Ford | | $ | 105,884 | (5) | | $ | 34,914 | | | $ | 66,409 | | | $ | 0 | | | $ | 342,737 | | | Dennis M. Meany | | $ | 82,800 | (3) | | $ | 16,054 | | | $ | 376,705 | | | $ | 0 | | | $ | 1,683,892 | | | Angelica Cantlon | | $ | 6,375 | (3) | | $ | 1,375 | | | $ | 876 | | | $ | 0 | | | $ | 8,626 | |
| | | | | | | | | | | | | | | | | | | | | Name | | Executive
Contributions
in Last FY ($) | | | Registrant
Contributions
in Last FY
($)(1) | | | Aggregate
Earnings
in Last
FY ($) | | | Aggregate
Withdrawals/
Distributions ($) | | | Aggregate
Balance at
Last FYE
($)(2) | | Douglas D. Tough | | | 283,554 | (3) | | | 76,656 | | | | 68,553 | | | | — | | | | 1,679,568 | | Kevin C. Berryman | | | 226,606 | (4) | | | 33,219 | | | | 230,611 | | | | — | | | | 1,097,629 | | Nicolas Mirzayantz | | | 11,400 | (5) | | | 1,995 | | | | 104,513 | | | | — | | | | 960,797 | | Hernan Vaisman | | | 41,000 | (6) | | | 18,375 | | | | 98,742 | | | | — | | | | 472,307 | | Anne Chwat | | | 165,780 | (7) | | | 34,164 | | | | 48,781 | | | | — | | | | 492,625 | |
| | | | (1) | | The amounts in this column are included in the All Other Compensation column for 20102012 in the Summary Compensation Table, and represent employer contributions credited to the participant’s account during 2010,2012, as well as certain contributions credited in the first quarter of 20112013 related to compensation earned in 2010.2012. | |
| (2) | | If a person was a named executive officerNEO in previous years’ proxy statements, this amount includes amounts that were included as compensation previously reported for that person in the Summary Compensation Table for those previous years. Of the totals in this column, the following amounts were reported as compensation in the Summary Compensation Table for 2006: Mr. Mirzayantz — $87,985; Mr. Meany—$92,267; for 2007: Mr. Mirzayantz—Mirzayantz — |
| $160,010; Mr. Meany—$96,188; for 2008: Mr. Mirzayantz—$63,269;Mirzayantz — $63,269; Mr. Vaisman—$40,371; Mr. Meany—$96,728; andVaisman — $40,371; for 2009: Mr. Berryman—$52,186;Berryman — $52,186; Mr. Mirzayantz—$31,228;Mirzayantz — $31,228; Mr. Vaisman—$69,574;Vaisman — $69,574; for 2010: Mr. Meany—$100,335;Tough — $774,993; Mr. Berryman — $98,501; Mr. Mirzayantz — $243,228; Mr. Vaisman — $68,816; and for 2011: Mr. Tough — $559,028; Mr. Berryman — $91,063; Mr. Mirzayantz — $45,600; Mr. Vaisman — $364,913; and Ms. Ford—$110,449Chwat — $316,928. | |
| (3) | | ThisOf this amount, $96,000 is included in the Salary column for 20102012 in the Summary Compensation Table. | | (4) | | Of this amount, $55,000 is included in the Salary column for 2010 in the Summary Compensation Table. The executive Mr. Tough also deferred RSUs with a value of $152,553,$187,554, based on the market price of a share of our common stock on the date the shares were deposited into his deferral account in 2012. Mr. Tough was required to defer these RSUs under the executive’s deferral account.terms of a grant of RSUs made in 2009 for his service as a non-employee director of our Company. These deferred RSUs are included in the 20102012 Option Exercises and Stock Vested Table with a value of $148,190$188,582 based on the closing market price of a share of our common stock on the vesting date. |
| (5) | (4) | Of this amount, $40,000$41,000 is included in the Salary column for 20102012 in the Summary Compensation Table. The executiveMr. Berryman deferred shares issued for the2007-2009 LTIP cycleRSUs granted in 2009 with a value of $65,884,$185,606, based on the closing market price of a share of our common stock on the date the shares were deposited into the executive’shis deferral account.account in 2012. These deferred LTIP sharesRSUs are included in the 20102012 Option Exercises and Stock Vested Table with a value of $62,514$187,115 based on the closing market price of a share of our common stock on the vesting date. |
| (5) | None of this amount is reported as compensation for 2012 in the Summary Compensation Table. This amount was included in the Non-Equity Incentive Plan Compensation column for 2011 in the Summary Compensation Table. |
| (6) | This amount is included in the Salary column for 2012 in the Summary Compensation Table. |
| (7) | Of this amount, $135,000 is included in the Salary column for 2012 in the Summary Compensation Table. Ms. Chwat also deferred $30,780 which was included in the Non-Equity Incentive Plan Compensation column for 2012 in the Summary Compensation Table. |
Potential Payments upon Termination of Employment andor Change in Control Arrangements Executive Separation Policy and Other Termination Benefits We provide severance payments and benefits to our named executive officersNEOs and other senior officers of theour Company based on their level under our Executive Separation Policy, (“ESP”). Theor ESP, covers an executive’s separation from service, with different benefit levels (Tiers) for separations unrelated to a change in control (“CiC”) and for separations within two years following a CiC. The following describes the ESP’s level of payments and benefits for “Tier I” employeesdated December 14, 2010. Executives hired on or before October 22, 2007, including the following named executive officers who are still employees of the Company: Mr. Mirzayantz and Mr. Vaisman. PursuantVaisman, were grandfathered and therefore are eligible to his employment agreement, Mr. Tough would also receive “Tier I” benefits exceptcalculated in accordance with the terms of the plan as provided below. Our
78
other named executive officers who are still employees, Mr. Berryman, Ms. Ford and Ms. Cantlon, were each hired after October 22, 2007 and would thus be entitledin effect prior to reduced “Tier I” severance benefits, as described below. As Mr. Meany retired effective as of December 31, 2010, he is no longer entitled to severance and benefits under the ESP.
During 2010, the2010. The Compensation Committee amended themay also agree to vary or provide enhanced benefits to specific executives.The ESP to make the policy more restrictive with regard to certainprovides for severance payments and benefits resulting fromin connection with a CiC or termination of employment following a CiC. The principal changes were as follows: | | | | • | Executives designated for ESP participation after March 2010 will not be entitled to a tax“gross-up” offsetting so-called “golden parachute taxes” and related income taxes. For such executives, in certain cases payments under the ESP will be reduced if such reduction would result in the executive retaining a greater amount of payments and benefits on an after-tax basis. | | | • | The notice period required for us to change the ESP was reduced from one year to 90 days. For executives already participating in the ESP, due to the existing one-year notice requirement, this change will apply to ESP modifications beginning in 2012. | | | • | Equity awards granted after December 2010 will not automatically vest upon a CiC, but will vest if we terminate the executive not for cause or the executive terminates for good reason within two years after the CiC (for current ESP participants, this change is effective for a CiC occurring in 2012 or later). | | | • | The definition of CiC was modified so that a CiC will be triggered only if 50% of the outstanding voting power were acquired, ratherthe executive in certain circumstances, with the value of such benefits varying depending on whether the termination occurs prior to or more than 40%, and only if a merger would result in our pre-merger shareholders holding less than 50% of the resulting company’s stock rather than less than 60% (for current ESP participants, this change is effective for a CiC occurring in 2012 or later). |
Terminations without cause and not within the two years after a CiC. If we terminate a participant’s employment without cause and notChange in Control (as defined below) or within two years of a Change in Control.Covered Terminations. Under the ESP, an executive will receive severance payments if his or her employment is terminated by us without cause or by the executive for good reason. “Cause” means (i) willful and continued failure of the executive to perform substantially his or her duties after demand for performance has been made; (ii) willful engagement by the executive in unauthorized conduct that is materially detrimental to us, including misconduct that results in material noncompliance with financial reporting requirements; or (iii) willful engagement by the executive in illegal conduct or acts of serious dishonesty which materially adversely affects us. “Good Reason” means any of the following: (i) a material reduction in the executive’s base salary as in effect before a Change in Control; (ii) our failure to continue a compensation or benefit plan for the executive, unless the plan is replaced by a comparable plan or it ends due to its normal expiration, or other action that materially adversely affects participation in one of these plans; (iii) a material change in the executive’s position, level, authority or responsibilities in a way that | adversely impacts the executive; (iv) relocation of the executive’s work assignment by more than 45 miles; or (v) the failure of a successor company to assume our obligations under the ESP. However, “good reason” will exist only if the executive gives us notice within 90 days after occurrence of one of the foregoing events and we fail to correct the matter within 30 days after receipt of such notice. |
A “Change in Control” (or “CiC”) will be deemed to have occurred when (i) a person or group acquires our stock and becomes a beneficial owner of 50% or more of our outstanding voting power; (ii) board members at January 1, 2010 (as well as generally any new director approved by at least two-thirds of the incumbent directors), cease to be at least a majority of the Board; (iii) immediately following a merger, consolidation, recapitalization or reorganization, either new members constitute a majority of the Board of, or our voting securities outstanding before the event do not represent at least 50% of the voting power in, the surviving entity; or (iv) our shareholders approve a plan of complete liquidation and the liquidation commences, or a sale or disposition of substantially all of our assets (or similar transaction) is completed. Severance payment. Upon the occurrence of a covered termination prior to or more than two years after a CiC, we will paythe executive is entitled to receive a monthly severance for 24 months, or if a shorter period, until age 65. As approved by our Compensation Committee, “Tier I” executives hired after October 22, 2007 would receive severance benefits for 18 months, rather than 24 months, or if a shorter period, until age 65. The monthly payment will equal the sum of (A) the participant’s monthlyto (1) such executive’s base salary at the date of termination plus (B) 1/12th of the participant’s(2) such executive’s average AIP bonus for the three most recent years. We also payyears, paid in regular installments for 18 months (24 months for executives hired prior to October 22, 2007) following the termination (or until the executive attains age 65 if earlier). Prorated LTIP and Equity. An executive receiving benefits under the ESP must generally continue to be employed at the time of payment of an LTIP award or vesting of an equity award, except that an executive who is terminated during a prorated AIP bonusthree-year LTIP cycle may receive a pro rata payout for the yearservice during each segment in that cycle or may be entitled to continued vesting of termination based on actual performance for the full year and we will also pay a prorated LTIP bonus for the then ongoing LTIP cycles based on actual performance for those cycles. The proratedpro rata portion of theunvested equity award(s). For LTIP, award that will remain outstanding is based on the number of days during the performance period preceding the participant’s termination (divided by the total number of days in the performance period), with such prorated portion to be earned and payable at such time as the LTIP awards for the applicable performance period otherwise become earned and payable based on actual performance, except that the Committee may, instead inmake a good faith estimate of the actual performance achieved through the date of termination and rely on this estimate to determine the resulting prorated portion payable in settlement of such LTIP award. Any portion of the Employee’s LTIP awards in excess of such prorated portion Benefit continuation. The executive will be forfeited. Equity awards will continueentitled to be governed by the termscontinuation of the equity plan and award agreements. We also continue medical, dental and insurance benefits duringfor such executive and his or her dependents for a period terminating on the severance period. In our discussionearlier of payments upon18 months (24 months for executives hired prior to October 22, 2007) following termination of employment, the commencement of eligibility for benefits under a separation from service, to “prorate” an award, such as AIP, means to pay a fraction ofnew employer’s welfare benefits plan, or the award equal to the number of days in the period that the participant worked divided by the total number of days in the period (which would be 365 in the case of an AIP award). For this typeexecutive’s attaining age 65. Impact of termination upon CiC. Upon the ESP does not provide additional pension credit or, subject to Committee discretion, alter the termsoccurrence of stock options or other equity awards.
79
Terminations not fora termination by us without cause or by the executive for good reason and within the two years after a CiC. We provide severance and related benefits under the ESP to a participant terminated by us without cause, or who terminates for “good reason,” during the two years following a CiC. These are:CiC, the executive would be entitled to:A severance payment equal to three times the sum of (i) the executive’s highest annual salary during the five years preceding termination and (ii) the higher of his or her average AIP bonus for the three most recent years or his or her target AIP bonus for the year of termination, payable in a lump-sum; A prorated portion of the target LTIP for the cycles then in progress; | | | | • | A lump-sum payment equal to three times the sum of (i) the participant’s highest annual salary during the five years preceding termination and (ii) the higher of his or her average AIP bonus for the three most recent years or his or her target AIP bonus for the year of termination; | | | • | A prorated portion of the target LTIP for the cycles then in progress; | | | • | A prorated portion of the target AIP bonus for the year of termination; | | | • | Vesting of any stock options or SSARs not already vested upon the CiC with the remainder of the option or SSAR term to exercise the participant’s options or SSARs; | | | • | Vesting of restricted stock and RSU awards not already vested upon the CiC and, unless deferred by the participant, settlement of restricted stock and RSU awards; | | | • | For participantsA prorated portion of the target AIP bonus for the year of termination; Vesting of any stock options or SSARs granted after December 14, 2010 not already vested upon the CiC with the remainder of the option or SSAR term to exercise the executive’s options or SSARs; Vesting of restricted stock and RSU awards granted after December 14, 2010 not already vested upon the CiC and, unless deferred by the executive, settlement of restricted stock and RSU awards; For executives in our Supplemental Retirement Plan, an additional three years’ credit of age and compensation for pension calculation purposes, with the assumption that annual compensation would have continued at current rates during the additional period, and full funding of any supplemental pension obligation through a rabbi trust. (Of our NEOs who are still employed by the Company, this provision applies only to Mr. Mirzayantz, as our other NEOs are not eligible to participate in our defined benefit pension plans); and | | | • | Continuation of medical, dental and life insurance coverage for three years, or until the participant obtains new employment providing similar benefits. |
If payments to a participant would trigger the golden parachute excise tax, we will, in certain cases, pay an additional amount, commonly calledthree years’ credit of age and compensation for pension calculation purposes, with the assumption that annual compensation would have continued at current rates during the additional period, and full funding of any supplemental pension obligation through a“gross-up payment,” so that rabbi trust. (Of our NEOs, this provision applies only to Mr. Mirzayantz, as our other NEOs are not eligible to participate in our defined benefit pension plans); and
Continuation of medical, dental, disability and life insurance coverage for three years, or until the after-tax value of the participant’s payments and benefits under theexecutive obtains new employment providing similar benefits. Tax Gross Up. For executives who were designated as ESP and other compensation paid by us would be the same as though no excise taxes applied. For a participant in the policy on or beforeparticipants prior to March 8, 2010, who has not been terminated for “cause” (a“Pre-Amendment Employee”), the Companywe will pay agross-up “gross-up” payment for any excise taxes that would includemay be payable by the additional income taxes andexecutive as a result of any termination following a change in control, other adverse tax effects to the participant resulting from our paying thegross-up payment. If, however,than a limited reduction of severance payments ortermination for “cause,” except in the vestinglimited case where a cut-back of equity awards would avoid the golden parachute excise tax, then the severance amount or such vesting will be reduced in order to eliminate the need for agross-up payment. We would reduce payments for this purpose only if the reduction would not exceed 10% of the amount ofseverance payments that could be received by the participant without triggeringwould avoid the excise tax. Executives first designated foras ESP participationparticipants after March 8, 2010 will not be entitled to suchreceive a tax“gross-up” relating “gross-up” payment. Instead their severance payments would be subject to golden parachute taxes. For such executives, in certain casesa “modified cut-back” provision, where severance or other payments under the ESP willto that executive would be reduced if suchthis reduction would produce a better after-tax result infor the executive. There would be no reduction, however, if the executive retaining(who would be responsible for any excise tax) would have a greater amount of paymentsbetter after-tax result without the reduction. Messrs. Berryman, Mirzayantz and benefits on an after-tax basis. Vaisman were each designated as ESP participants prior to March 8, 2010 and are therefore eligible to receive a tax “gross-up” payment, if applicable.Accelerated vesting of awards upon a CiC without regardCiC. For awards made prior to termination. TheDecember 14, 2010, the ESP provides that, upon a CiC (regardless of whether the employee is subsequently terminated following the CiC), stock options, restricted stock and SSARsother equity awards become fully vested and exercisable, and forfeiture and deferral conditions and other restrictions on restricted stock and other equity awards will end, except to the extent waived by the participantexecutive and subject to applicable tax rules. For the NEOs, this acceleration will not apply to awards granted after 2010 if the CiC occurs in 2012 or later; in such case, the equity awards instead will become vested and exercisable if we terminate the executive’s employment not for cause or the executive terminates for good reason within two years after the CiC. Death, disability or retirement. The ESP provides for payments and benefits upon death, disability or retirement at or after age 62. If one of these events occurs before or more than two years after a CiC, the participantexecutive or the participant’sexecutive’s estate will receive a prorated portion of the AIP and LTIP awards that would have become payable had he or she continued employment for the full performance period, based on actual performance achieved. In this case, we do not alter the terms of stock options. If one of these events occurs,achieved, and restricted stock and restricted stock unitRSU awards fully vest and are settled unless deferred. In addition, if one of these events occurs within two years after a CiC, the participantexecutive would receive the same AIP and LTIP awards (subject to
80
achievement of certain minimum performance requirements) and vesting of equity awards as for a termination not for cause within two years after a CiC, except that options will remain outstanding for no more than one year following death and three years following termination due to disability. In addition to the amounts paid under the ESP, in the event of death, our NEOs would be entitled to payments under the Company’sour Executive Death Benefit Plan as described in this proxy statement under the Compensationheading “Compensation Discussion and Analysis under the heading— Executive Death Benefit Plan.” In the event of disability, our NEOs would be entitled to payments under the Company’sour Disability Insurance Program that applies to salaried employees generally (60% of monthly salary up to a maximum of $15,000 per month). Definitions of Key Terms under the ESP. A CiC occurs if any of these events happen:
| | | | • | A person or group acquires our stock and so becomes a beneficial owner of 50% or more of the voting power in IFF; | | | • | Board members at January 1, 2010 (as well as generally any new director approved by at least two-thirds of the incumbent directors), cease to be at least a majority of the Board; | | | • | Immediately following a merger, consolidation, recapitalization or reorganization of IFF, either new members constitute a majority of the Board of, or our voting securities outstanding before the event do not represent at least 50% of the voting power in, the surviving entity; or | | | • | Our shareholders approve a plan of complete liquidation and the liquidation commences, or a sale or disposition of substantially all of our assets (or similar transaction) is completed. |
“Good reason” means any of the following, unless the participant consents in writing to the event:
| | | | • | A material reduction in the participant’s base salary as in effect before the CiC; | | | • | Our failure to continue a compensation or benefit plan for the participant, unless the plan is replaced by a comparable plan or it ends due to its normal expiration, or other action that materially adversely affects participation in one of these plans; | | | • | A material change in the participant’s position, level, authority or responsibilities in a way that adversely impacts the participant; | | | • | Relocation of the participant’s work assignment by more than 45 miles; or | | | • | The failure of a successor to assume our obligations under the ESP. |
However, “good reason” will exist only if the participant gives us notice within 90 days after occurrence of one of the foregoing events and we fail to correct the matter within 30 days after receipt of such notice.
“Cause” means an executive’s:
| | | | • | Willful and continued failure to perform substantially his or her duties after demand for performance has been made; | | | • | Willfully engaging in unauthorized conduct which is materially detrimental to us, including misconduct that results in material noncompliance with financial reporting requirements; or | | | • | Willfully engaging in illegal conduct or acts of serious dishonesty which materially adversely affects us. |
Participant Obligations for the Protection of Our Business. As a condition of the participant’sexecutive’s right to receive severance payments and benefits, the ESP requires that he or she not compete with us, or induce customers, suppliers or others to curtail their business with us, or induce employees or others to terminate employment or service with us. These restrictions apply while a participantan executive is employed before a CiC and following a termination of employment before a CiC during any period in which the participantexecutive is receiving severance benefits. The ESP also conditions severance payments and benefits on the participantexecutive meeting commitments relating to confidentiality, cooperation in litigation and return of our property. A If an executive is terminated prior to a CiC and is found to have either failed to comply with these commitments during the two years prior to termination or during the period following termination for which such commitments apply (typically for two years), our ESP includes a “clawback”
81
provision that requires that a participantthe executive (1) forfeit somethe unexercised portion of any options and any unvested awards and (2) repay us (i) the total amount of any cash payments made to the executive under the ESP (other than amounts deemed earned as of the termination date and cash benefits under welfare plans), (ii) cash paid to the executive under the AIP or LTIP in the two years preceding termination and (iii) any gains realized from option exercises and settlements of restricted stock or other equity awards if the participant fails to meet these commitments. awards.Effect of IRC Section 409A. The timing of our payment of some payments and benefits may be restricted under Internal Revenue CodeIRC Section 409A, which regulates deferred compensation. Some amounts payable to any of our named executive officersNEOs or other participants inunder the ESP upon termination may be delayed until six months after termination. Other Separation Arrangements Details regarding Mr. Tough’s letter agreement dated September 8, 2009 are included in this proxy statement under the heading “Employment Agreements or Arrangements” following the Summary Compensation Table. In addition, under the terms of his letter agreement, Mr. Tough is a participant in the Company’sour ESP and is entitled to certain payments upon termination as set forth in his letter agreement and in the ESP, as applicable. modified by his letter agreement. If Mr. Tough’s employment is terminated by us without Causecause or by Mr. Tough for Good Reason (each as defined in his letter agreement), separation benefitsgood reason, the severance payment due to Mr. Tough under the ESP as described above will not be less than (i) a pro rata AIP bonus for the year of termination based on actual performance and paid when AIP bonuses are paid generally, (ii) payroll installments of severance for 2 years in the aggregate amount equal to 2(i) 1.5 times the sum of Mr. Tough’s annual base salary and target AIP amount (a reduced amount and payment period applies for aif the termination date occurs after he has attained age 63 but prior to attaining age 63),64, payable for 18 months following the termination, or (ii) 1.0 times the sum of Mr. Tough’s annual base salary and (iii)target AIP amount if the termination date occurs after he attains age 64, payable for 12 months following the termination. Mr. Tough is also entitled to continued participation in the Company’sour welfare benefit plans during the applicable severance pay period at active employee rates. If such termination had occurred prior to July 1, 2010,Under Mr. Tough would have been paidTough’s letter agreement, “Cause” means his special bonus, and if such termination had occurred prior to March 1, 2011 the first anniversaryindictment for or conviction of a felony or any crime involving moral turpitude, dishonesty, fraud, theft or financial impropriety, or any of the effective date of Mr. Tough’s employment, his sign-on awardevents described as “cause” under the Equity Choice Program would have become vested onESP as described above; and “good reason” means any of the following (1) any adverse change in his status or position as CEO and Chairman, or any removal from or failure to reappoint him to those positions, (2) any reduction in base salary or AIP target bonus, (3) a pro rata basis. requirement to relocate outside the New York City metropolitan area, or (4) any failure of our Company to obtain an agreement from any successor company to our Company’s assets or business to assume and perform the letter agreement. If such termination occurs in contemplation of or within 2two years after a CiC (as defined in the ESP and as described above), the above separation benefits are modified to provide a severance payment multiple of “3”(i) two times the sum of Mr. Tough’s annual base salary and36-month payment period, instead of “2” and target AIP amount, payable over 24 months (and a reducedif the termination occurs after he has attained age 63 but prior to attaining age 64, or (ii) 1.5 times the sum of Mr. Tough’s annual base salary and target AIP amount, and payment period for apayable over 18 months if the termination occurs after attaining age 63). 64. If Mr. Tough’s employment terminates on account of death or disability, he would be entitled to the benefits provided under the ESP, and if such termination event had occurred prior to July 1, 2010, he would have been entitled to his special bonus.ESP. Mr. Tough will not be entitled to any payment (including any taxgross-up) respecting taxes he may owe under Internal Revenue CodeIRC Section 4999 (so-called “golden parachute taxes”). The separation benefits payments are subject to Mr. Tough’s delivery to the Companyus of an executed general release, resignation from all offices, directorships and fiduciary positions with theour Company and continued compliance with the restrictive covenants below. Under his letter agreement, Mr. Tough is subject to restrictive covenants regarding non-competition, non-solicitation, confidentiality, cooperation and non-disparagement. Upon a termination of Mr. Tough’s employment for any reason, the non-competition and non-solicitation covenants continue to apply for 2(1) 1.5 years (or a shorter period ifafter he hadhas attained age 63).63 but prior to age 64 on the date of termination, or (2) one year once he has attained age 64 on the date of termination. If Mr. Tough’s employment terminates prior to a CiC and he fails to comply with the restrictive covenants, Mr. Tough’s unexercised options and SSARs, and any other unvested award will be immediately forfeited and canceled, no further separation benefits will be provided and Mr. Tough may be subject to a claw-back with respect to any paid separation benefits and certain other amounts.
the clawback provisions in the ESP apply.Payments and Benefits Upon a CiCChange in Control and Various Types of Terminations. TerminationsThe following table shows the estimated payments and value of benefits that we would provide to each of our NEOs who are still employeesunder the ESP or, in the case of the CompanyMr. Tough, his employment agreement, if the triggering events described in the heading of the table had occurred on December 31, 2010. Although Mr. Meany was eligible for retirement at that date under our U.S. Pension Plan, as described under Pension Benefits, none2012. None of our other NEOs is currently eligible for any additional benefits upon early retirement. The Company also does notretirement nor do we provide any additional benefits to our NEOs upon a voluntary resignation or termination for cause. Certain assumptions made for purposes of presenting this information and certain amounts not reflected in the table are
82
explained below. For all cases, the per share market price of our common stock is assumed to be $55.59,$66.54, the actual closing price per share on the last trading day of the year, December 31, 2010.2012. In preparing the estimates in this table, we have assumed that any CiC would also constitute a “change in ownership and control” for purposes of the golden parachute excise tax rules. We have also assumed that any vestingand/or performance period under our annual and long term incentive plans that would occur at the end of our 2010 fiscal year would occur upon completion of the last business day of the year, so that such vesting or performance period would have occurred immediately after the assumed time of termination. All amounts included in the table are stated in the aggregate, even if the payments will be made on a monthly basis. The amounts set forth in the table below reflect the additional amounts of compensation that would be payable as a result of the indicated triggering event. Except as noted in footnote (6)(7) of the table, these amounts do not include payments and benefits to the extent that they are provided on a non-discriminatory basis to salaried employees generally upon termination of employment. The salary, Annual Incentive PlanAIP award and Long Term Incentive PlanLTIP award otherwise payable to each NEO through December 31, 20102012 is included in the Summary Compensation Table. In addition to the amounts set forth in the table below, in the event of a CiC, the aggregate balance held in the Company’s Deferred Compensation Planour DCP for each of our NEOs who participate in that plan will be automatically accelerated and settled within five business days of the CiC, as opposed to the participant’s original deferral election. The amounts that would have been accelerated in the event of a CiC as well as, in all other cases, the amounts each of our NEOs who participate in that plan would have received according to the participant’s original deferral election, are shown in the Aggregate Balance at Fiscal Year-End column of the Non-Qualified Deferred Compensation PlanDCP Table. The timing and form of payments which may be made under that plan in events other than a CiC are described in the accompanying narrative to that table. The regular pension benefits that each ofMr. Mirzayantz, our only eligible NEOsNEO, would receive under the normal terms of the Company’sour U.S. Pension Plan and Supplemental Retirement Plan are shown in the Present Value of Accumulated Benefit Assuming Retirement Age of 65 column of the Pension Benefits Table. The timing and form of payments which may be made under these plans are described in the accompanying narrative to that table. The amounts shown in the table below as Incremental Non-Qualified Pension are explained in footnote (11)(12) in the table presented below.
83
Potential Payments upon Termination and Change in Control | | | | | | | | | | | | | | | | | | | | | | | | | | | | Involuntary
Termination
Not for
Cause Prior
to or More
Than 2 Years
After a CiC | | | Death Prior
to or More
Than 2
Years
After a CiC | | | Separation
Due to
Disability
Prior to or
More Than
2 Years
After a CiC | | | Involuntary or
Good Reason
Termination
Within 2 Years
After a CiC | | | Death
Within 2
Years
After a CiC | | | Separation
Due to
Disability
Within 2
Years
After a CiC | | Douglas D. Tough (1) | | | | | | | | | | | | | | | | | | | | | | | | | Salary | | $ | 1,800,000 | | | $ | — | | | $ | — | | | $ | 1,987,206 | (2) | | $ | — | | | $ | — | | AIP | | | 2,160,000 | (3) | | | — | | | | — | | | | 2,880,000 | (4) | | | — | | | | — | | LTIP(5) | | | 2,001,825 | | | | 2,001,825 | | | | 2,001,825 | | | | 2,001,825 | | | | 2,001,825 | | | | 2,001,825 | | ECP Acceleration(6) | | | — | | | | 6,631,781 | | | | 6,054,224 | | | | 6,631,781 | | | | 6,631,781 | | | | 6,631,781 | | Medical Benefits(7) | | | 26,884 | | | | — | | | | — | | | | 40,325 | | | | — | | | | — | | Executive Death Benefit(8) | | | — | | | | 2,400,000 | | | | — | | | | — | | | | 2,400,000 | | | | — | | Executive Death Benefit
Cost(9) | | | 126,167 | | | | — | | | | — | | | | 189,250 | | | | — | | | | — | | Disability Insurance(10) | | | — | | | | — | | | | 180,000 | | | | — | | | | — | | | | 180,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 6,114,876 | | | $ | 11,033,606 | | | $ | 8,236,049 | | | $ | 13,730,387 | | | $ | 11,033,606 | | | $ | 8,813,606 | | | | | | | | | Kevin C. Berryman | | | | | | | | | | | | | | | | | | | | | | | | | Salary | | $ | 787,500 | | | $ | — | | | $ | — | | | $ | 1,575,000 | | | $ | — | | | $ | — | | AIP | | | 540,200 | (3) | | | — | | | | — | | | | 1,260,000 | (4) | | | — | | | | — | | LTIP(5) | | | 450,411 | | | | 450,411 | | | | 450,411 | | | | 450,411 | | | | 450,411 | | | | 450,411 | | ECP Acceleration(6) | | | — | | | | 2,956,755 | | | | 2,505,986 | | | | 2,956,755 | | | | 2,956,755 | | | | 2,956,755 | | Medical Benefits(7) | | | 40,649 | | | | — | | | | — | | | | 81,298 | | | | — | | | | — | | Executive Death Benefit(8) | | | — | | | | 1,050,000 | | | | — | | | | — | | | | 1,050,000 | | | | — | | Executive Death Benefit
Cost(9) | | | 30,125 | | | | — | | | | — | | | | 60,250 | | | | — | | | | — | | Disability Insurance(10) | | | — | | | | — | | | | 180,000 | | | | — | | | | — | | | | 180,000 | | Tax Gross-up(11) | | | — | | | | — | | | | — | | | | 1,856,670 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 1,848,885 | | | $ | 4,457,166 | | | $ | 3,136,397 | | | $ | 8,240,384 | | | $ | 4,457,166 | | | $ | 3,587,166 | | | | | | | | | Nicolas Mirzayantz | | | | | | | | | | | | | | | | | | | | | | | | | Salary | | $ | 1,020,000 | | | $ | — | | | $ | — | | | $ | 1,530,000 | | | $ | — | | | $ | — | | AIP | | | 642,310 | (3) | | | — | | | | — | | | | 1,224,000 | (4) | | | — | | | | — | | LTIP(5) | | | 450,411 | | | | 450,411 | | | | 450,411 | | | | 450,411 | | | | 450,411 | | | | 450,411 | | ECP Acceleration(6) | | | — | | | | 2,832,420 | | | | 2,601,410 | | | | 2,832,420 | | | | 2,832,420 | | | | 2,832,420 | | Incremental Non-Qualified
Pension(12) | | | — | | | | — | | | | — | | | | 860,834 | | | | — | | | | — | | Medical Benefits(7) | | | 54,199 | | | | — | | | | — | | | | 81,298 | | | | — | | | | — | | Executive Death Benefit
Proceeds(8) | | | — | | | | 1,020,000 | | | | — | | | | — | | | | 1,020,000 | | | | — | | Executive Death Benefit
Cost(9) | | | 36,167 | | | | — | | | | — | | | | 54,250 | | | | — | | | | — | | Disability Insurance(10) | | | — | | | | — | | | | 180,000 | | | | — | | | | — | | | | 180,000 | | Tax Gross-up(11) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 2,203,087 | | | $ | 4,302,831 | | | $ | 3,231,821 | | | $ | 7,033,213 | | | $ | 4,302,831 | | | $ | 3,462,831 | |
POTENTIAL PAYMENTS UPON TERMINATION AND CHANGE IN CONTROL
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Involuntary
| | | | | | | | | | | | | | | | | | | | | | Termination Not for
| | | | | | Separation Due to
| | | Involuntary or Good
| | | | | | | | | | | | | Cause Prior to or
| | | Death Prior to or
| | | Disability Prior to
| | | Reason Termination
| | | | | | Separation Due to
| | | | | | | More Than 2 Years
| | | More Than 2 Years
| | | or More Than 2
| | | Within 2 Years
| | | Death Within 2
| | | Disability Within 2
| | | | | | | After a Change in
| | | After a Change in
| | | Years After a
| | | After a Change in
| | | Years After a
| | | Years After a
| | | Name | | Benefit | | Control | | | Control(1) | | | Change in Control | | | Control | | | Change in Control | | | Change in Control | | | | | Douglas Tough | | Salary | | $ | 2,400,000 | | | $ | — | | | $ | — | | | $ | 3,600,000 | | | $ | — | | | $ | — | | | | | Annual Incentive Plan | | | 2,160,000 | (2) | | | — | | | | — | | | | 4,320,000 | (3) | | | — | | | | — | | | | | Long-Term Incentive Plan(4) | | | — | | | | 2,207,281 | | | | 2,207,281 | | | | 2,207,281 | | | | 2,207,281 | | | | 2,207,281 | | | | | Equity Award Acceleration(5) | | | — | | | | 2,923,145 | | | | 2,638,106 | | | | 2,709,020 | | | | 2,923,145 | | | | 2,923,145 | | | | | Incremental Non-Qualified Pension | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | Medical Benefits(6) | | | 20,900 | | | | — | | | | — | | | | 31,351 | | | | | | | | | | | | | Executive Death Benefit Proceeds(7) | | | — | | | | 2,400,000 | | | | — | | | | — | | | | 2,400,000 | | | | — | | | | | Executive Death Benefit Premium(8) | | | 36,565 | | | | — | | | | — | | | | 54,848 | | | | — | | | | — | | | | | Disability Insurance Proceeds(9) | | | — | | | | — | | | | 180,000 | | | | — | | | | — | | | | 180,000 | | | | | Excise Tax and TaxGross-up(10) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 4,617,465 | | | | 7,530,426 | | | | 5,025,387 | | | | 12,922,500 | | | | 7,530,426 | | | | 5,310,426 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kevin C. Berryman | | Salary | | $ | 750,000 | | | $ | — | | | $ | — | | | $ | 1,500,000 | | | $ | — | | | $ | — | | | | | Annual Incentive Plan | | | 425,400 | (2) | | | — | | | | — | | | | 1,200,000 | (3) | | | — | | | | — | | | | | Long-Term Incentive Plan(4) | | | — | | | | 642,167 | | | | 642,167 | | | | 642,167 | | | | 642,167 | | | | 642,167 | | | | | Equity Award Acceleration(5) | | | — | | | | 2,536,540 | | | | 1,672,835 | | | | 2,536,540 | | | | 2,536,540 | | | | 2,536,540 | | | | | Incremental Non-Qualified Pension | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | Medical Benefits(6) | | | 31,458 | | | | — | | | | — | | | �� | 62,917 | | | | | | | | | | | | | Executive Death Benefit Proceeds(7) | | | — | | | | 1,000,000 | | | | — | | | | — | | | | 1,000,000 | | | | — | | | | | Executive Death Benefit Premium(8) | | | 4,888 | | | | — | | | | — | | | | 9,776 | | | | — | | | | — | | | | | Disability Insurance Proceeds(9) | | | — | | | | — | | | | 180,000 | | | | — | | | | — | | | | 180,000 | | | | | Excise Tax and TaxGross-up(10) | | | — | | | | — | | | | — | | | | 1,856,121 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 1,211,747 | | | | 4,178,707 | | | | 2,495,002 | | | | 7,807,521 | | | | 4,178,707 | | | | 3,358,707 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nicolas Mirzayantz | | Salary | | $ | 1,000,000 | | | $ | — | | | $ | — | | | $ | 1,500,000 | | | $ | — | | | $ | — | | | | | Annual Incentive Plan | | | 279,937 | (2) | | | — | | | | — | | | | 1,200,000 | (3) | | | — | | | | — | | | | | Long-Term Incentive Plan(4) | | | — | | | | 622,958 | | | | 622,958 | | | | 622,958 | | | | 622,958 | | | | 622,958 | | | | | Equity Award Acceleration(5) | | | — | | | | 3,693,188 | | | | 2,837,398 | | | | 3,693,188 | | | | 3,693,188 | | | | 3,693,188 | | | | | Incremental Non-Qualified Pension(11) | | | — | | | | — | | | | — | | | | 630,101 | | | | — | | | | — | | | | | Medical Benefits(6) | | | 41,945 | | | | — | | | | — | | | | 62,917 | | | | — | | | | — | | | | | Executive Death Benefit Proceeds(7) | | | — | | | | 1,000,000 | | | | — | | | | — | | | | 1,000,000 | | | | — | | | | | Executive Death Benefit Premium(8) | | | 4,273 | | | | — | | | | — | | | | 6,410 | | | | — | | | | — | | | | | Disability Insurance Proceeds(9) | | | — | | | | — | | | | 180,000 | | | | — | | | | — | | | | 180,000 | | | | | Excise Tax and TaxGross-up(10) | | | — | | | | — | | | | — | | | | 1,839,744 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 1,326,155 | | | | 5,316,146 | | | | 3,640,356 | | | | 9,555,318 | | | | 5,316,146 | | | | 4,496,146 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Hernan Vaisman | | Salary | | $ | 1,000,000 | | | $ | — | | | $ | — | | | $ | 1,500,000 | | | $ | — | | | $ | — | | | | | Annual Incentive Plan | | | 648,001 | (2) | | | — | | | | — | | | | 1,200,000 | (3) | | | — | | | | — | | | | | Long-Term Incentive Plan(4) | | | — | | | | 603,750 | | | | 603,750 | | | | 603,750 | | | | 603,750 | | | | 603,750 | | | | | Equity Award Acceleration(5) | | | — | | | | 2,563,662 | | | | 1,849,851 | | | | 2,563,662 | | | | 2,563,662 | | | | 2,563,662 | | | | | Incremental Non-Qualified Pension | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | Medical Benefits(6) | | | 65,917 | | | | — | | | | | | | | 98,875 | | | | — | | | | — | | | | | Executive Death Benefit Proceeds(7) | | | — | | | | 1,000,000 | | | | — | | | | — | | | | 1,000,000 | | | | | | | | | Executive Death Benefit Premium(8) | | | 6,517 | | | | — | | | | — | | | | 9,776 | | | | — | | | | — | | | | | Disability Insurance Proceeds(9) | | | — | | | | — | | | | 180,000 | | | | — | | | | — | | | | 180,000 | | | | | Excise Tax and TaxGross-up(10) | | | — | | | | — | | | | — | | | | 1,773,886 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 1,720,435 | | | | 4,167,412 | | | | 2,633,601 | | | | 7,749,949 | | | | 4,167,412 | | | | 3,347,412 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Beth E. Ford | | Salary | | $ | 750,000 | | | $ | — | | | $ | — | | | $ | 1,500,000 | | | $ | — | | | $ | — | | | | | Annual Incentive Plan | | | 388,583 | (2) | | | — | | | | — | | | | 1,200,000 | (3) | | | — | | | | — | | | | | Long-Term Incentive Plan(4) | | | — | | | | 642,167 | | | | 642,167 | | | | 642,167 | | | | 642,167 | | | | 642,167 | | | | | Equity Award Acceleration(5) | | | — | | | | 2,579,171 | | | | 1,261,891 | | | | 2,579,171 | | | | 2,579,171 | | | | 2,579,171 | | | | | Incremental Non-Qualified Pension | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | Medical Benefits(6) | | | 31,458 | | | | — | | | | | | | | 62,917 | | | | | | | | | | | | | Executive Death Benefit Proceeds(7) | | | — | | | | 1,000,000 | | | | — | | | | — | | | | 1,000,000 | | | | — | | | | | Executive Death Benefit Premium(8) | | | 1,370 | | | | — | | | | — | | | | 2,739 | | | | — | | | | — | | | | | Disability Insurance Proceeds(9) | | | — | | | | — | | | | 180,000 | | | | — | | | | — | | | | 180,000 | | | | | Excise Tax and TaxGross-up(10) | | | — | | | | — | | | | — | | | | 1,624,007 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 1,171,411 | | | | 4,221,338 | | | | 2,084,058 | | | | 7,611,001 | | | | 4,221,338 | | | | 3,401,338 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Involuntary
Termination
Not for
Cause Prior
to or More
Than 2 Years
After a CiC | | | Death Prior
to or More
Than 2
Years
After a CiC | | | Separation
Due to
Disability
Prior to or
More Than
2 Years
After a CiC | | | Involuntary or
Good Reason
Termination
Within 2 Years
After a CiC | | | Death
Within 2
Years
After a CiC | | | Separation
Due to
Disability
Within 2
Years
After a CiC | | Hernan Vaisman | | | | | | | | | | | | | | | | | | | | | | | | | Salary | | $ | 1,050,000 | | | $ | — | | | $ | — | | | $ | 1,222,721 | (13) | | $ | — | | | $ | — | | AIP | | | 899,921 | (3) | | | — | | | | — | | | | 1,349,881 | (4) | | | — | | | | — | | LTIP(5) | | | 450,411 | | | | 450,411 | | | | 450,411 | | | | 450,411 | | | | 450,411 | | | | 450,411 | | ECP Acceleration(6) | | | — | | | | 1,465,745 | | | | 673,718 | | | | 1,465,745 | | | | 1,465,745 | | | | 1,465,745 | | Medical Benefits(7) | | | 54,199 | | | | — | | | | — | | | | 81,298 | | | | — | | | | — | | Executive Death Benefit
Proceeds(8) | | | — | | | | 1,050,000 | | | | — | | | | — | | | | 1,050,000 | | | | — | | Executive Death Benefit
Cost(9) | | | 50,167 | | | | — | | | | — | | | | 75,250 | | | | — | | | | — | | Disability Insurance(10) | | | — | | | | — | | | | 180,000 | | | | — | | | | — | | | | 180,000 | | Tax Gross-up(11) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 2,504,698 | | | $ | 2,966,156 | | | $ | 1,304,129 | | | $ | 4,645,306 | | | $ | 2,966,156 | | | $ | 2,096,156 | | | | | | | | | Anne Chwat | | | | | | | | | | | | | | | | | | | | | | | | | Salary | | $ | 675,000 | | | $ | — | | | $ | — | | | $ | 1,350,000 | | | $ | — | | | $ | — | | AIP | | | 92,340 | (3) | | | — | | | | — | | | | 810,000 | (4) | | | — | | | | — | | LTIP(5) | | | 270,246 | | | | 270,246 | | | | 270,246 | | | | 270,246 | | | | 270,246 | | | | 270,246 | | ECP Acceleration(6) | | | — | | | | 1,196,143 | | | | 1,196,143 | | | | 1,196,143 | | | | 1,196,143 | | | | 1,196,143 | | Medical Benefits(7) | | | 40,649 | | | | — | | | | — | | | | 81,298 | | | | — | | | | — | | Executive Death Benefit Proceeds(8) | | | — | | | | 900,000 | | | | — | | | | — | | | | 900,000 | | | | — | | Executive Death Benefit Cost(9) | | | 22,625 | | | | — | | | | — | | | | 45,250 | | | | — | | | | — | | Disability Insurance(10) | | | — | | | | — | | | | 180,000 | | | | — | | | | — | | | | 180,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 1,100,860 | | | $ | 2,366,389 | | | $ | 1,646,389 | | | $ | 3,752,937 | | | $ | 2,366,389 | | | $ | 1,646,389 | |
84
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Involuntary
| | | | | | | | | | | | | | | | | | | | | | Termination Not for
| | | | | | Separation Due to
| | | Involuntary or Good
| | | | | | | | | | | | | Cause Prior to or
| | | Death Prior to or
| | | Disability Prior to
| | | Reason Termination
| | | | | | Separation Due to
| | | | | | | More Than 2 Years
| | | More Than 2 Years
| | | or More Than 2
| | | Within 2 Years
| | | Death Within 2
| | | Disability Within 2
| | | | | | | After a Change in
| | | After a Change in
| | | Years After a
| | | After a Change in
| | | Years After a
| | | Years After a
| | | Name | | Benefit | | Control | | | Control(1) | | | Change in Control | | | Control | | | Change in Control | | | Change in Control | | | | | Dennis M. Meany(12) | | Salary | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | Annual Incentive Plan | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | Long-Term Incentive Plan(4) | | | — | | | | 267,030 | | | | — | | | | — | | | | — | | | | — | | | | | Equity Award Acceleration(5) | | | — | | | | 2,949,263 | | | | — | | | | — | | | | — | | | | — | | | | | Incremental Non-Qualified Pension(11) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | Medical Benefits(6) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | Executive Death Benefit Proceeds(7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | Executive Death Benefit Premium(8) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | Disability Insurance Proceeds(9) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | Excise Tax and TaxGross-up(10) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | — | | | | 3,216,293 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Angelica T. Cantlon | | Salary | | $ | 495,000 | | | $ | — | | | $ | — | | | $ | 990,000 | | | $ | — | | | $ | — | | | | | Annual Incentive Plan | | | 201,185 | (2) | | | — | | | | — | | | | 594,000 | (3) | | | — | | | | — | | | | | Long-Term Incentive Plan(4) | | | — | | | | 220,206 | | | | 220,206 | | | | 220,206 | | | | 220,206 | | | | 220,206 | | | | | Equity Award Acceleration(5) | | | — | | | | 994,297 | | | | 994,297 | | | | 994,297 | | | | 994,297 | | | | 994,297 | | | | | Incremental Non-Qualified Pension | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | Medical Benefits(6) | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | Executive Death Benefit Proceeds(7) | | | — | | | | 630,000 | | | | — | | | | — | | | | 630,000 | | | | — | | | | | Executive Death Benefit Premium(8) | | | 2,704 | | | | — | | | | — | | | | 3,606 | | | | — | | | | — | | | | | Disability Insurance Proceeds(9) | | | — | | | | — | | | | 180,000 | | | | — | | | | — | | | | 180,000 | | | | | Excise Tax and TaxGross-up(10) | | | — | | | | — | | | | — | | | | 901,955 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 698,889 | | | | 1,844,503 | | | | 1,394,503 | | | | 3,704,064 | | | | 1,844,503 | | | | 1,394,503 | |
| | | | (1) | | Amounts in this column for Mr. Meany are amountsPursuant to the terms of the ESP, an executive who elects to retire after attaining age 62 is entitled to the same benefits that are payablereflected under the “Separation Due to him following his actual retirement on December 31, 2010. Amounts for all other named executives are amounts thatDisability” columns (less any disability insurance proceeds). Mr. Tough is currently our only executive who would be payableentitled to receive this benefit upon death prior to or more than two years after a CiC.voluntary retirement. | |
| (2) | | Amount has been downward adjusted by $412,794 to reflect the application of the cut-back provisions of the ESP to avoid excise tax. |
| (3) | | This amount is based onrepresents 1.5 times (or in the case of Messrs. Mirzayantz and Vaisman, two times) the average annual incentiveAIP award paid for performance in the three years preceding the year of the presumed December 31, 20102012 termination (i.e., the three years ending December 31, 2009) under the AIP2011) (or averaged over the lesser number of years during which the executive was eligible for AIP awardsawards) or, if not eligible for an AIP award before 20102012 (the presumed year of termination), the Executive’sexecutive’s target annual incentive under the AIP for 2010).2012. This amount does not take into account any actual AIP amounts paid for 2010,2012, which are set forth in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. |
| (3)(4) | | This amount represents three times (or in the case of Mr. Tough, two times) the greater ofof: (i) the executive’s average annual incentive award paid for performance in the three years preceding the year of the presumed December 31, 20102012 termination (i.e., the three years ending December 31, 2009)2011) under the AIP (or averaged over the lesser number of years during which the executive was eligible for AIP awards); or (ii) the executive’s target annual incentive for the presumed year of termination (2010)(2012). This amount does not take into account any actual AIP amounts paid for 2010,2012, which are set forth in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. |
| (4)(5) | | The amounts in this row are the additional LTIP amounts that would be payable as severance (or, in the case of Mr. Meany, following retirement), which, with respect to the2008-2010,2009-2011 2011-2013 and 2012-2014 LTIP and2010-2012cycles and pursuant to the ESP,that would be paid in cash. If death or disability does not take place within two years after a CiC, then this amount iscash, based on actual performance of the relevant LTIP cycle. If death, disability, involuntary termination not for cause or termination by the executive for good reason takes place within two years after a CiC, then this amount is based onprorated target LTIP for the relevant LTIP cycle. | | | | Thecycles in progress. Prorated amounts reportedare based on the number of days worked in this row represent:each performance period divided by the actual amounts previously earned and banked under the 2009 segmenttotal number of the2009-2011days in each performance period for each relevant LTIP cycle; actual amounts earned and banked under the 2010 segment of the2009-2011 and2010-2012 LTIP cycles, and pro-rated target amounts for the cumulative segment of each of the2009-2011 and2010-2012 LTIP cycles.cycle. This amount does not take |
85
| | | | | into account the actual amounts paid out under the completed2008-2010 2010-2012 LTIP cycle, which are discussed in the narrative following the Grants of Plan BasedPlan-Based Award Table under the heading “Long-Term Incentive Plan”.Plan.” |
| (5)(6) | | For termination due to death or disability more than two years prior to a CiC, the amounts in this row represent the aggregate value of RSU and PRS awards which would immediately vest upon occurrence of the termination event. For termination events within two years after a CiC, the amounts in this row represent the aggregatein-the-money value of the options, SSARs, RSUs, PRS and other equity awards which would become vested as a direct result of the CiC before the stated vesting date specified in the applicable equity award document. TheseFor grants prior to 2010, these amounts would be payable upon a CiC, even if the executive’s employment is not terminated. The stated vesting date in the equity award document is the date at which an award would have been vested if there were not a CiC and if there were not any termination of the executive’s employment. The calculation of these amounts does not attribute any additional value to options based on their remaining exercise term and does not discount the value of awards based on the portion of the vesting period elapsed at the date of the CiC. These amounts also do not include any value for equity awards that, by their terms, are not accelerated and continue to vest. |
| (6)(7) | | Amounts in this row are the COBRA costs of medical and dental benefits for the covered period based on assumptions used for financial reporting purposes. Although our medical and dental insurance is generally available to our employees, only participants in our ESP, including our named executive officers,NEOs, would be entitled to have the benefits paid for by theour Company. Ms. Cantlon was not a participant in our medical and dental insurance plans as of December 31, 2010 and therefore no amount is included for her. |
| (7)(8) | | The amounts in this row are the amounts that would be payable under our Executive Death Benefit Plan upon the death of the named executive officer.NEO. |
| (8)(9) | | The amounts in this row are the total dollar value of the additional premiumscosts that we would be payableincur to continue the Executive Death Benefit Plan for the named executive officer.NEO. |
| (9)(10) | | The amounts in this row are the amounts that would be payable under our disability insurance program upon the named executive officer’sNEO’s separation from employment due to long-term disability. This program is generally available to salaried employees. |
| (11) | | (10) | | This amount represents the payment of a“gross-up” to offset the estimated amount of the golden parachute excise tax that would apply to each executive, and the amount of additional income and other taxes payable by the executive as a result of thegross-up payment. For purposes of computing this“gross-up” “gross-up,” we include the present value of all accelerated equity awards. No excise tax orgross-up payment would be triggered by the accelerated vesting of equity upon the occurrence of a CiC without a termination event. For Mr. Vaisman, no “gross-up” is reflected, as a reduction of $352,279 would be applied to his severance benefits pursuant to the cut-back provisions of the ESP. |
| | We would not be entitled to claim tax deductions for a portion of the compensation paid in this circumstance; weconnection with “gross-up” payments. We estimate our federal income tax payable on the non-deductible portion of compensation to these executive officers would be, in the aggregate, $11,129,966.$2,675,844. |
| (12) | | (11) | | Mr. Mirzayantz is the only NEO who is eligible to participate in the Supplemental Retirement Plan. The amounts in this row represent (i) the incremental increase in the present value of the executive’shis pension benefit reflecting an additional 3 yearsthree years’ credit of age and credited service under our Supplemental Retirement Plan without regard to whethercompensation for pension calculation purposes, with the executive’s benefits underassumption that annual compensation would have continued at current rates during the Supplemental Retirement Plan have been frozen. The incremental increase also reflectsadditional period and (ii) the value of subsidized early commencement of pension benefits under our Supplemental Retirement Plan prior to age 62 for Mr. Mirzayantz, who would have at least 10 years of service after crediting62. |
| (13) | | Amount has been downward adjusted by $352,279 to reflect the additional 3 years of service. | | | | Mr. Mirzayantz, who is the only named executive officer who currently participates in the Supplemental Retirement Plan, would have at least 10 years of service as a result of a CiC. The amounts in this row would be payable upon termination in a lump sum amount, except that our ability to make this lump sum payment insteadapplication of the Supplemental Retirement Plan’s usual formcut-back provisions of benefit may be limited under Internal Revenue Code Section 409A. In addition, the Company may electESP to pay the executive other benefits accrued under the Supplemental Retirement Plan in a lump sumavoid excise tax. |
86
| | | | | amount upon termination of employment. Information regarding the pension benefits accrued under that plan is included in the Pension Benefits Table. | | (12) | | Since Mr. Meany was 63 at December 31, 2010 and had more than ten years of service, he was eligible for retirement at an unreduced benefit. The present value of accumulated benefits that is payable to Mr. Meany based on his retirement date of December 31, 2010 (including the frozen accumulated benefits under the BBA Plan and using the same valuation method and material assumptions as under the 2010 Pension Benefits Table) is $1,680,642 including $1,001,335 under the U.S. Pension Plan and $679,307 under the Supplemental Retirement Plan). Additional details regarding our pension benefits are included under the heading “Pension Benefits”. Mr Meany was our only named executive officer who would be entitled to receive these benefits upon voluntary retirement. |
X. OTHER MATTERSSection 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who beneficially own more than 10% of a registered class of our equity securities, to file reports with the SEC relating to their common stock ownership and changes in such ownership, and to furnish us with copies of all Section 16(a) forms they file. Based on a review of our records and certain written representations received from our executive officers and directors, we believe that during the year ended December 31, 2012, all Section 16(a) filing requirements applicable to directors, executive officers and greater than 10% shareholders were complied with on a timely basis, except that a Form 4 with respect to one equity grant was filed late due to an administrative error, for each our executive officers, Messrs. Baydar, Berryman, Fortanet, Mirzayantz, O’Leary, Tough and Vaisman and Mses. Cantlon and Chwat. Proxy Solicitation Costs We will pay the entire cost of soliciting proxies. In addition to solicitation by mail, proxies may be solicited on our behalf by directors, officers or employees in person, by telephone, by facsimile or by electronic mail. We have retained Georgeson Inc. to assist in proxy solicitation for a fee of $8,000 plus expenses. We will reimburse banks, brokers and other custodians, nominees and fiduciaries for their costs in sending proxy materials to the beneficial owners of our common stock. Shareholder Proposals In order for a shareholder proposal to be considered for inclusion in our proxy materials for next year’s annual meeting of shareholders, the Secretary of our Company must receive the written proposal no later than November 14, 2013. Under Article I, Section 3 of our By-laws, in order for a shareholder to submit a proposal or to nominate any director at next year’s annual meeting of shareholders, the shareholder must give written notice to the Secretary of our Company not less than 90 days nor more than 120 days prior to the anniversary date of this year’s annual meeting of shareholders provided next year’s annual meeting is called for on a date that is within 30 days before or after such anniversary date. Assuming that next year’s annual meeting is held on schedule, we must receive written notice of your intention to introduce a nomination or other item of business at that meeting between December 31, 2013 and January 30, 2014. The notice must also meet all other requirements contained in our By-laws, including the requirement to contain specified information about the proposed business or the director nominee and the shareholder making the proposal. As of the date of this Proxy Statement,proxy statement, we do not know of any matters to be presented at the 20112013 Annual Meeting other than those described in this Proxy Statement.proxy statement. If any other matters should properly come before the meeting, proxies in the enclosed form will be voted on those matters in accordance with the judgment of the person or persons voting the proxies, unless otherwise specified. ForShareholder Communications Shareholders and other parties interested in communicating directly with the date, time, locationLead Director, the non-management directors as a group or all directors as a group may do so by writing to the Lead Director or the non-management directors or the Board of Directors, in each case, c/o Corporate Secretary, International Flavors & Fragrances Inc., 521 West 57th Street, New York, New York 10019. All communications should include the name, address, telephone number and informationemail address (if any) of the person submitting the communication and indicate whether the person is a shareholder of our Company. The Board has approved a process for handling correspondence received by our Company on behalf of a non-management director or directors as a group. Under that process, the General Counsel reviews all such correspondence and maintains a log of and forwards to the appropriate Board member, correspondence that is relevant to (i) the functions of the Board or committees thereof or (ii) other significant matters involving our Company. The General Counsel may screen frivolous or unlawful communications and commercial advertisements. Directors may review the log maintained by the General Counsel at any time. Concerns relating to accounting, internal controls or auditing matters are immediately brought to the attention of our internal audit group and handled in accordance with procedures established by the Audit Committee with respect to such matters. Electronic Delivery This year we again have elected to take advantage of the SEC’s rule that allows us to furnish proxy materials to you online. We believe electronic delivery will expedite shareholders’ receipt of materials, while lowering costs and reducing the environmental impact of our 2013 Annual Meeting by reducing printing and mailing of full sets of materials. We mailed the Notice containing instructions on how to obtain directionsaccess our proxy statement and annual report online on or about March 14, 2013. If you would like to attendreceive a paper copy of the 2011 Annual Meeting of Shareholders and for informationproxy materials, the Notice contains instructions on how to votereceive a paper copy. Householding We have adopted a procedure approved by the SEC called “householding.” Under this procedure, shareholders of record who have the same address and last name will receive only one copy of our Notice, unless one or more of these shareholders notifies us that they wish to continue receiving individual copies. This procedure will reduce our printing costs and postage fees. If you are eligible for householding, but you and other shareholders of record with whom you share an address currently receive multiple copies of the Notice, or if you hold stock in more than one account, and in either case you wish to receive only a single copy of the Notice for your household, please contact our Corporate Secretary, International Flavors & Fragrances Inc., 521 West 57th Street, New York, New York 10019 (telephone: 212-765-5500). If you participate in householding and wish to receive a separate copy of the Notice, or if you do not wish to participate in householding and prefer to receive separate copies of the Notice in the future, please contact American Stock Transfer & Trust Company as indicated above. Beneficial shareholders can request information about householding from their nominee. Available Information We will furnish without charge to each person whose proxy is being solicited, upon request of any such person, a copy of the 2012 Annual Report as filed with the SEC, including the financial statements and schedules thereto, but not the exhibits. In addition, such report is available, free of charge, through the Investors — SEC Filings link on our internet website at, www.iff.com. A request for a copy of such report should be directed to International Flavors & Fragrances Inc., 521 West 57th Street, New York, NY 10019, Attention: Investor Relations. A copy of any exhibit to the Form 10-K for the year ended December 31, 2012 will be forwarded following receipt of a written request with respect thereto addressed to Investor Relations. EXHIBIT A SALES GROWTH — GAAP TO NON-GAAP RECONCILIATION | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2008 | | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | CAGR | | Reported Sales Growth | | | 5 | % | | | -3 | % | | | 13 | % | | | 6 | % | | | 1 | % | | | 4.4 | % | Local Currency Sales Growth | | | 2 | % | | | 0 | | | | 13 | % | | | 4 | % | | | 4 | % | | | 4.6 | % |
Local currency sales growth is calculated by translating prior year sales at the meeting as well as identification ofexchange rates used for the matters to be voted upon at the meeting, please see Questions and Answers about the Proxy Materials and the Annual Meeting.
87
OPERATING PROFIT — GAAP TO NON-GAAP RECONCILIATION | | | | | | | | | | | | | | | | | | | | | (IN THOUSANDS) | | 2007 | | | 2011 | | | 2012 | | | YoY
Growth | | | 5-YR CAGR | | As Reported Operating Profit | | $ | 359,083 | | | $ | 427,729 | | | $ | 486,618 | | | | 14 | % | | | 6 | % | R&D Credit | | | 2,130 | | | | — | | | | — | | | | | | | | | | Revised Operating Profit | | | 361,213 | 1 | | | 427,729 | | | | 486,618 | | | | 14 | % | | | 6 | % | Pension Curtailment Loss | | | 5,943 | | | | — | | | | — | | | | | | | | | | Restructuring and Other Charges | | | — | | | | 13,172 | | | | 1,668 | | | | | | | | | | Patent Litigation Settlement | | | — | | | | 33,495 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Adjusted Operating Profit | | $ | 367,156 | | | $ | 474,396 | | | $ | 488,286 | | | | 3 | % | | | 6 | % | | | | | | | | | | | | | | | | | | | | | |
| 1 | 2007 period revised to properly recognize R&D expense, net of R&D credits, to be consistent with other period presentations |
EARNINGS PER SHARE (EPS) — GAAP TO NON-GAAP RECONCILIATION | | | | | | | | | | | | | | | | | | (PER SHARE DATA) | | 2011 | | | 2012 | | | YoY Growth | | As Reported EPS | | $ | 3.26 | | | $ | 3.09 | | | | -5.2 | % | Restructuring and Other Charges | | | 0.11 | | | | 0.01 | | | | | | Patent Litigation Settlement | | | 0.36 | | | | — | | | | | | Spanish Tax Settlement | | | — | | | | 0.88 | | | | | | | | | | | | | | | | | | | Adjusted EPS2 | | $ | 3.74 | | | $ | 3.98 | | | | 6 | % | | | | | | | | | | | | | |
| 2 | The sum of EPS Reported, plus the per share effects of items added back to reconcile to EPS as Adjusted, may not equal the total EPS as Adjusted due to rounding differences. |
EXHIBIT A (continued) AVERAGE WORKING CAPITAL | | | | | | | | | | | | | | | | | | | | | | | | | (IN THOUSANDS) | | Q4 07 | | | Q1 08 | | | Q2 08 | | | Q3 08 | | | Q4 08 | | | 5-Period Avg. | | Accounts Receivable before allowance for doubtful accounts | | $ | 412,221 | | | $ | 464,251 | | | $ | 477,195 | | | $ | 470,363 | | | $ | 412,127 | | | $ | 447,231 | | Inventory | | | 484,222 | | | | 512,034 | | | | 525,651 | | | | 509,281 | | | | 479,567 | | | | 502,151 | | Accounts Payable | | | (130,992 | ) | | | (133,236 | ) | | | (137,178 | ) | | | (115,511 | ) | | | (114,997 | ) | | | (126,383 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Core Working Capital | | $ | 765,451 | | | $ | 843,049 | | | $ | 865,668 | | | $ | 864,133 | | | $ | 776,697 | | | $ | 822,999 | | | | | | | | | | | | | | | | | | | | | | | | | | | 2008 Net Sales | | | | | | | | | | | | | | | | | | | | | | $ | 2,389,372 | | 5-Period Avg. as a % of Net Sales | | | | | | | | | | | | | | | | | | | | | | | 34 | % | | | | | | | | (IN THOUSANDS) | | Q4 11 | | | Q1 12 | | | Q2 12 | | | Q3 12 | | | Q4 12 | | | 5-Period Avg. | | Accounts Receivable before allowance for doubtful accounts3 | | $ | 478,177 | | | $ | 527,709 | | | $ | 523,389 | | | $ | 543,133 | | | $ | 508,736 | | | $ | 516,229 | | Inventory | | | 544,439 | | | | 555,017 | | | | 539,267 | | | | 547,676 | | | | 540,658 | | | | 545,411 | | Accounts Payable | | | (208,759 | ) | | | (189,223 | ) | | | (169,673 | ) | | | (160,956 | ) | | | (199,272 | ) | | | (185,577 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Core Working Capital | | $ | 813,857 | | | $ | 893,503 | | | $ | 892,983 | | | $ | 929,853 | | | $ | 850,122 | | | $ | 876,063 | | | | | | | | | | | | | | | | | | | | | | | | | | | 2012 Net Sales | | | | | | | | | | | | | | | | | | | | | | $ | 2,821,446 | | 5-Period Avg. as a % of Net Sales | | | | | | | | | | | | | | | | | | | | | | | 31 | % |
| 3 | Q4 2011 and Q1 2012 have been revised to be consistent with other period presentations. |
| | | 
INTERNATIONAL FLAVORS & FRAGRANCES INC. 521 WEST 57TH STREET NEW YORK, NY 10019 | | VOTE BY INTERNET — -www.proxyvote.com | | Use the Internetinternet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day beforedate and time indicated on the cut-off date or meeting date.reverse side. Have your proxy card in hand when you access the web INTERNATIONAL FLAVORS & FRAGRANCES INC. site and follow the instructions to obtain your records and to create an 521 WEST 57TH STREET electronic voting instruction form. NEW YORK, NY 10019 instructions. | | ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS SHAREHOLDER COMMUNICATIONS | | If you would like to reduce the costs incurred by our companyInternational Flavors & Fragrances Inc. in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet.e-mail. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materialsshareholder communications electronically in future years. | | | | | VOTE BY PHONE —- 1-800-690-6903 | | | Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day beforedate and time indicated on the cut-off date or meeting date.reverse side. Have your proxy card in hand when you call and then follow the instructions. | | | | | VOTE BY MAIL | | | Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. 11717 by the date and time indicated on the reverse side. | | | | | VOTE IN PERSON | | | You may vote your shares in person by attending the Annual Meeting. |
| | | | | TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: M30720-P09080 | | | | | KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
| | | | | | | | | DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | INTERNATIONAL FLAVORS & FRAGRANCES INC. | | | | | | | | | The Board of Directors recommends you vote FOR Proposals 1, 2 and 3. | | | | | | | | | | | | | 1. | | Election of Directors | | | | | | | | | | | | | | | | | | | | | | | | | Nominees: | | For | | Against | | Abstain | | | | | | | | | | | | | | | | | | | | | 1a. Margaret Hayes Adame 0 0 0 1b. | | Marcello V. Bottoli 0 0 0 For Against Abstain 1c. | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | | | | | | | | | | 1b. | | Linda B. Buck 0 0 0 | | ¨ | | ¨ | | ¨ | | | | | | | | | | For | | Against | | Abstain | | | | | | | 1c. | | J. Michael Cook | | ¨ | | ¨ | | ¨ | | | | 1j. | | Arthur C. Martinez 0 0 0 | | | | ¨ | | ¨ | | ¨ | | | | | | | 1d. J. Michael Cook 0 0 0 1k. Dale F. Morrison 0 0 0 1e. | | Roger W. Ferguson, Jr. 0 0 0 | | ¨ | | ¨ | | ¨ | | | | 1k. | | Dale F. Morrison | | | | ¨ | | ¨ | | ¨ | | | | | | | 1e. | | Andreas Fibig | | ¨ | | ¨ | | ¨ | | | | 1l. | | Douglas D. Tough 0 0 0 | | | | ¨ | | ¨ | | ¨ | | | | | | | 1f. | | Christina Gold | | ¨ | | ¨ | | ¨ | | | | 2. | | To ratify the selection of PricewaterhouseCoopers LLP 1f. Andreas Fibig 0 0 0 as the Company’s independent registered public 0 0 0 accounting firm for 2011. 2013. | | ¨ | | ¨ | | ¨ | | | | | | | 1g. | | Alexandra A. Herzan 0 0 0 | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | | | | | | | 1h. | | Henry W. Howell, Jr. | | ¨ | | ¨ | | ¨ | | | | 3. | | Advisory vote onto approve the compensation paid to the 0 0 0 Company’s named executive officers in 2010. 1h. Henry W. Howell, Jr. 0 0 0 The Board of Directors recommends you vote for 1 year on the following proposal: 1 Year 2 Years 3 Years Abstain 2012. | | ¨ | | ¨ | | ¨ | | | | | | | 1i. | | Katherine M. Hudson 0 0 0 4. Advisory vote on the frequency of future 0 0 0 0 executive compensation votes. | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For address changes and/or comments, please check this 0 box and write them on the back where indicated. | | | | | | ¨ | | | | NOTE:Such other business as may properly come before the meeting or any adjournment or postponement thereof. | | | | | | | | | | | | | | | Please indicate if you plan to attend this meeting. 0 0 | | ¨ | | ¨ | | | | | | | | | | | | | | | | | | | | | Yes | | No | | | | | | | | | | | | | | | | | | | (Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, trustee or guardian, please add your title as such. When signing as joint tenants, all parties in the joint tenancy must sign. If signer is a corporation or partnership, please sign in full corporate or partnership name by duly authorized officer. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | | Date | | | | Signature (Joint Owners) | | Date | | |
| ADMISSION TICKET INTERNATIONAL FLAVORS & FRAGRANCES INC. ANNUAL MEETING OF SHAREHOLDERS MAY 3, 2011 APRIL 30, 2013 AT 10:00 A.M. INTERNATIONAL FLAVORS & FRAGRANCES INC. 521 WEST 57TH STREET NEW YORK, NY 10019 (Attendees are requested to enter at 533 West 57th Street.) ADMITS ONE SHAREHOLDER Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. M30721-P09080 |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. | | | | | | | | | | | | | | | INTERNATIONAL FLAVORS & FRAGRANCES INC. THIS PROXY CARD/VOTING INSTRUCTION FORM IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS ANNUAL MEETING OF SHAREHOLDERS MAY 3, 2011 APRIL 30, 2013 The undersigned hereby appoint(s) each of Messrs. Douglas D. Tough, Kevin C. Berryman and Jodie Simon FriedmanMs. Anne Chwat as the attorney and proxy of the undersigned, with full power of substitution, to vote the number of shares of stock the undersigned is entitled to vote at the Annual Meeting of Shareholders of International Flavors & Fragrances Inc. to be held at the headquarters of the Company on Tuesday, May 3, 2011April 30, 2013 at 10:00 A.M. Eastern Time, and any adjournment(s) or postponement(s) thereof (the “Meeting”). IF YOU ARE A SHAREHOLDER OF RECORD, THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED ON THE REVERSE SIDE. IF NO SUCH DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR, FOR ITEMS 2 AND 3 FOR 1 YEAR IN ITEM 4 AND ACCORDING TO THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING. VOTING INSTRUCTIONS MUST BE RECEIVED BY 11:59 P.M. EASTERN TIME ON MAY 2, 2011. APRIL 29, 2013. If you are a participant in the International Flavors & Fragrances Inc. Retirement Investment Fund Plans (the “401(k) Plans”), this proxy covers all shares for which the undersigned has the right to give voting instructions to Vanguard Fiduciary Trust Company, the trustee of the 401(k) Plans. This proxy, when properly executed, will be voted as directed by the undersigned on the reverse side. Shares in the 401(k) Plans for which voting instructions are not received by 11:59 P.M. Eastern Time on April 28, 2011,25, 2013, or if no choice is specified, will be voted by the trustee in the same proportion as the shares for which voting instructions are received from other participants in the applicable 401(k) Plan. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD/VOTING INSTRUCTION FORM PROMPTLY USING THE ENCLOSED REPLY ENVELOPE | | | | | | | Address Changes/Comments: (If | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) CONTINUED AND TO BE SIGNED ON REVERSE SIDE | | |
|
