SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
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POLYONE CORPORATION
(Name of Registrant as Specified In Its Certificate)
(Name of Person(s) Filing Proxy Statement, if other thanOther Than the Registrant)
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NOTICE OF 2014
ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
PolyOne Corporation
April 3, 2014
You are cordially invited to attend the PolyOne Corporation Annual Meeting of Shareholders, which will be held at 9:00 a.m. on Wednesday,Thursday, May 11, 2011,15, 2014, at the LACENTRE Conference and Banquet Facility, Champagne C Ballroom, 25777 DetroitPolyOne Corporation’s corporate headquarters located at PolyOne Center, 33587 Walker Road, Westlake, Ohio.
A Notice of the Annual Meeting and the Proxy Statement follow.follows. Please review this material for information concerning the business to be conducted at the Annual Meeting and the nominees for election as Directors.
You will also find enclosed a proxyand/or voting instruction card and an envelope in which to return the card. Whether or not you plan to attend the Annual Meeting, please complete, sign, date and return your enclosed proxyand/or voting instruction card, or vote over theby telephone or over the Internet as soon as possible so that your shares can be voted at the meeting in accordance with your instructions.Your vote is very important.You may, of course, withdraw your proxy and change your vote prior to or at the Annual Meeting, by following the steps described in the Proxy Statement.
I appreciate the strong support of our shareholders over the years and look forward to seeing you at the meeting.
| Sincerely, |
|
Stephen D. Newlin Chairman, President and Chief Executive Officer PolyOne Corporation |
Please refer to the accompanying materials for voting instructions.
April 3, 2014
| 1. | ||
| 2. |
| 3. | ||
| 4. |
You are eligible to vote if you were a shareholder of record at the close of business on March 14, 201118, 2014. Please ensure that your shares are entitled to notice of and to voterepresented at the meeting.
For the Board of Directors |
|
LISA K. KUNKLE |
Vice President, General Counsel and Secretary |
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Shareholders to be held on May 11, 2011:
The proxy statement, proxy card and annual report to shareholders for the fiscal year ended December 31, 20102013 are available at our internet website, www.polyone.com, on the “Investors Relations” page.
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PROXY STATEMENT SUMMARY
Proxy Statement Summary
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.
PolyOne 2014 Annual Meeting of Shareholders
May 15, 2014 9:00 a.m. Eastern Standard Time | PolyOne Center 33587 Walker Road, Avon Lake, Ohio 44012 |
Voting. Shareholders as of the record date, March 18, 2014, are entitled to vote. Each share of common stock is entitled to one vote for each Director nominee and one vote for each of the other proposals to be voted on.
Even if you plan to attend our annual meeting in person, if you are a registered holder, please cast your vote as soon as possible by: | ||||
www.proxypush.com/pol Use the Internet to vote until 11:59 p.m. (CT) on May 14, 2014. |
1-866-883-3382 Use a touch-tone telephone to vote your proxy until 11:59 p.m. (CT) on May 14, 2014. |  MAIL - Mailing your signed proxy or voting instruction form. | ||
| If your shares are held in street name, please follow the instruction provided by your bank or broker to cast your vote. | ||||
Each shareholder’s vote is important. Please complete, sign, date and return your proxy or voting instruction form, or submit your vote and proxy by telephone or the internet. |
Meeting Agenda and Voting Recommendations:
| Page references for more information | Board Vote Recommendation | |||
Election of 11 Directors | 2 | FOR each Director nominee | ||
Company Proposals | ||||
• Advisory approval of our named executives officer compensation | 58 | FOR | ||
• Ratification of Ernst & Young as our auditor for 2014 | 60 | FOR | ||
Shareholder Proposals | No shareholder proposals were submitted for the 2014 Annual Meeting | |||
Transact other business that properly comes before the meeting | ||||
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PROXY STATEMENT SUMMARY
Summary of Board of Directors Nominees
The following table provides summary information as of the date of this proxy statement about each Board of Directors nominee. Detailed information regarding each nominee is found under Proposal 1 – Election of Board of Directors beginning on page 2 of this proxy statement.
| Name | Age | Director Since | Principal Occupationd | Inde pen dent | Committee Memberships | |||||||||||||||||||||||
| AC | CC(1) | EH& SC(1) | N& GC(1) | |||||||||||||||||||||||||
Richard H. Fearon | 58 | 2004 | Vice Chairman & Chief Financial and Planning Officer, Eaton | X | C | X | ||||||||||||||||||||||
Gregory J. Goff | 57 | 2011 | President & CEO, Tesoro | X | X | X | ||||||||||||||||||||||
Gordon D. Harnett | 71 | 1997 | Retired Chairman, President & CEO, Materion Corp. (formerly known as Brush Engineered Materials) | X | X | C | ||||||||||||||||||||||
Sandra B. Lin | 56 | 2013 | Retired President, CEO and Director, Calisolar (now Silicor Materials) | X | X | X | ||||||||||||||||||||||
Richard A. Lorraine | 68 | 2008 | Retired SVP & CFO, Eastman Chemical | X | X | X | ||||||||||||||||||||||
Stephen D. Newlin(2) | 61 | 2006 | Chairman, President & CEO, PolyOne | X | ||||||||||||||||||||||||
Robert M. Patterson(2) | 41 | N/A | Executive Vice President and COO, PolyOne | |||||||||||||||||||||||||
William H. Powell | 68 | 2008 | Retired Chairman & CEO, National Starch and Chemical Company | X | X | C | ||||||||||||||||||||||
Kerry J. Preete | 53 | 2013 | Executive Vice President, Global Strategy, Monsanto | X | X | X | ||||||||||||||||||||||
Farah M. Walters | 69 | 1998 | President & CEO, QualHealth, LLC | X | X | X | ||||||||||||||||||||||
William A. Wulfsohn | 52 | 2011 | President & CEO, Carpenter Technology | X | X | |||||||||||||||||||||||
2013 Meetings | 9 | 6 | 2 | 3 | ||||||||||||||||||||||||
| (1) | Effective May 15, 2014, Director Dr. Carol Cartwright, who is not standing for re-election pursuant to our Director retirement policy and who chaired the Nominating and Governance Committee, will be replaced by Mr. Harnett. Dr. Cartwright also served on the Audit Committee and will not immediately be replaced on the Audit Committee. Also effective May 15, 2014: (a) Mr. Powell will become the Chairperson of the Compensation Committee and will no longer serve as a member of the Environmental Health and Safety Committee; (b) Mr. Goff will become the Chairperson of the Environmental Health and Safety Committee; and (c) Ms. Lin and Mr. Patterson will become members of the Environmental Health and Safety Committee. |
| (2) | As previously disclosed by PolyOne, Mr. Newlin will retire as President and CEO and will become Executive Chairman of the Board of Directors effective May 15, 2014. Mr. Patterson will become President and CEO, effective as of Mr. Newlin’s retirement as President and CEO. |
AC | Audit Committee | N&GC | Nominating and Governance Committee | |||
CC | Compensation Committee | C | Committee Chairperson | |||
EH&SC | Environmental Health and Safety Committee | X | Committee Member |
Attendance: | Director Elections: | |||
| In 2013, each of our current Directors attended at least 75% of the meetings of the Board and committees on which the member served during the period the member was on the Board or committee. | Directors are elected by a plurality of the votes of shares present, in person or by proxy and entitled to vote. |
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PROXY STATEMENT SUMMARY
2013 Performance Highlights
The Board believes that Mr. Newlin and the other Named Executive Officers (as that term is defined in this proxy statement) have performed well in a challenging global environment, and that their compensation is commensurate with this performance.
Financial Performance. In a year marked by continued uncertainty in the global economy, PolyOne Corporation (“PolyOne” or “Company”) delivered strong operating income and revenue growth, and realized further gains from our specialty platform, which accounts for a significant portion of our Company adjusted operating income. We will work to continue this growth trend as we focus on more specialty end-uses in markets such as automotive, consumer, packaging and healthcare. Additional 2013 Company financial performance highlights included:
• Adjusted earnings per share of $1.31, which is a Company all-time high and represents a 31% increase from 2012 | • Year-end revenue increased to $3.8 billion, which represents a 32% increase from 2012 | |
• Our stock price has increased 73% in the past year to $35.35 on December 31, 2013 from $20.42 on December 31, 2012 | • Our specialty platform operating income now represents 62% of our platform operating income, which is up from 2% in 2005 prior to Mr. Newlin’s appointment as CEO of PolyOne | |
• Year-end adjusted operating income increased to $262 million, which represents a 37% increase from 2012 | • Divestiture of our non-core resin assets, which accelerated our Specialty portfolio transformation | |
• Our acquisition of Spartech Corporation (“Spartech”) in 2013 added $0.12 to our adjusted earnings per share in 2013, driven primarily by a reduction in duplicate public company costs, better utilization of manufacturing assets and mix improvement | ||
| Milestone achievement of 17 consecutive quarters of strong double-digit adjusted earnings per share growth, with compounded annual earnings per share percentage growth rate of 25% over this period |
Note: Adjusted earnings per share and adjusted operating income for consolidated PolyOne differ from what is reported under United States generally accepted accounting principles (“GAAP”). See Appendix A for a reconciliation of non-GAAP financial measures to our results as reported under GAAP.
Executive Compensation Results Highlights
Our compensation decisions reflect a balanced and responsible pay approach. The Compensation Committee has responsibility for oversight of PolyOne’s executive compensation programs and works with senior management to align pay with performance. Within that framework, the Compensation Committee and management design executive compensation programs that reward responsible risk-taking. Our executive compensation programs reflect the belief that the amount earned by our executives must, to a significant extent, depend on achieving rigorous Company and business unit performance objectives designed to enhance shareholder value.
The Named Executive Officers earned a 173.8% payout under our Annual Plan and, as a result of strong performance over the past three years, they also earned a 200% cash-settled performance unit payout under PolyOne’s 2011 - 2013 Long-Term Incentive Plan. The chart below sets forth certain key financial results that were used in determining payouts under our 2013 incentive compensation plans (dollar amounts are in millions).
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PROXY STATEMENT SUMMARY
Annual Plan | Measure | Weighting | 2013 Targets | 2013 Results | Payout % | |||||
| Adjusted Operating Income | 50% | $239.3 | $272.5 | 194.9% | ||||||
| Working Capital as a % of Sales | 25% | 10.5% | 10.0% | 191.4% | ||||||
| Revenue | 25% | $3,773.4 | $3,827.8 | 113.9% | ||||||
Total Company Annual Plan Attainment | 173.8% | |||||||||
| Long-Term Incentive Plan: Cash-Settled Performance Units | Measure | Weighting | 2011-2013 Target | 2011-2013 Result | Payout % | |||||
| Cumulative Adjusted Earnings PerShare (2011-2013 performance period) | 100% | $2.79 | $3.65 | 200% | ||||||
All financial measures (Targets and Results) reported in the above table were calculated with adjustments for acquisitions, divestitures and special items pursuant to the terms of the plans and as approved by the Board of Directors.
For information on the terms and conditions of these incentive plans, see the “Analysis of 2013 Compensation Decisions and Actions” section of this proxy statement.
Executive Compensation Program Highlights
Our executive compensation program is designed to achieve the following key objectives:
Some of the compensation best practices we employ to achieve these goals include:
• Under our compensation plans, pay and performance are closely aligned such that, on average, over one-half of the Named Executive Officers’ compensation is performance-based | • Our executives, including our Named Executive Officers, are required to comply with significant share ownership requirements | |
• Our compensation plans emphasize long-term performance and utilize a balanced portfolio of cash and equity to reward sustained performance over time | • No excise tax gross-ups are provided under our management continuity agreements in the event of a change of control for new executive officers, including newly hired Named Executive Officers | |
• We provide limited executive benefits to our Named Executive Officers, and those provided have a sound benefit to our Company’s business | • We maintain no individual employment agreements with Named Executive Officers, except Mr. Newlin |
| Our Directors and Named Executive Officers are prohibited from hedging or pledging Company securities |
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PROXY STATEMENT
POLYONE CORPORATION
PolyOne Center
33587 Walker Road
Avon Lake, Ohio 44012
PROXY STATEMENT
Dated March 21, 2011
Our Board of Directors respectfully requests your proxy for use at the Annual Meeting of Shareholders to be held at the LACENTRE Conference and Banquet Facility, Champagne C Ballroom, 25777 DetroitPolyOne’s corporate headquarters located at PolyOne Center, 33587 Walker Road, Westlake,Avon Lake, Ohio 44012 at 9:00 a.m. on Wednesday,Thursday, May 11, 2011,15, 2014, and at any adjournments of that meeting. This proxy statement is to inform you about the matters to be acted upon at the meeting.
If you attend the meeting, you may vote your shares by ballot. If you do not attend, your shares may still be voted at the meeting if you sign and return the enclosed proxy card.card or vote by telephone or internet as described below. Common shares represented by a properly signed proxy card will be voted in accordance with the choices marked on the card. If no choices are marked, the shares will be voted (1) to elect the nominees listed on pages 3 through 76 of this proxy statement, (2) to approve, by non-binding vote, our named executive officerofficers’ compensation for the fiscal year endingended December 31, 2010, to recommend, by non-binding vote, that future advisory votes on named executive officer compensation occur every year2013 and (3) to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011.2014. You may revoke your proxy before it is voted by giving notice to us in writing or orally at the meeting. Persons entitled to direct the vote of shares held by the following plans will receive a separate voting instruction card: The PolyOne Retirement Savings Plan and the PolyOne Canada Inc. Retirement Savings Program. If you receive a separate voting instruction card for one of these plans, you must sign and return the card as indicated on the card in order to instruct the trustee on how to vote the shares held under the respective plan. You may revoke your voting instruction card before the trustee votes the shares held by it by giving notice in writing to the trustee.
Shareholders may also submit their proxies by telephone or over the Internet. The telephone and Internet voting procedures are designed to authenticate votes cast by use of a personal identification number. These procedures allow shareholders to appoint a proxy to vote their shares and to confirm that their instructions have been properly recorded. Instructions for voting by telephone and over the Internet are printed on the proxy cards.
We are mailing this proxy statement and the enclosed proxy card and, if applicable, the voting instruction card, to shareholders on or about March 28, 2011.April 3, 2014. Our headquarters are located at PolyOne Center, 33587 Walker Road, Avon Lake, Ohio 44012 and our telephone number is(440) 930-1000.
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Page 1
Our Board of Directors currently consists of nine11 Directors. Pursuant to the retirement policy contained in our Corporate Governance Guidelines, Dr. Cartwright will not be nominated for re-election at our Annual Meeting of shareholders. Following our Annual Meeting, assuming the election of all of the Board’s nominees, our Board will consist of 11 Directors because Robert M. Patterson, our Executive Vice President and COO who is not currently a Director, has been nominated by the Board to stand for election at the Annual Meeting. Each Director serves for a one-year term and until a successor is duly elected and qualified, subject to the Director’s earlier death, retirement or resignation. Our Corporate Governance Guidelines provide that all non-employee Directors will retire from the Board not later than the first Annual Meetingannual meeting of Shareholdersshareholders immediately following the Director’s 70th birthday.
A shareholder who wishes to suggestnominate a Director candidateperson for consideration by the Nominating and Governance Committeeelection as a Director must provide written notice to our Secretary in accordance with the procedures specified in Regulation 12 of our Regulations.Code of Regulations (“Regulations”). Generally, the Secretary must receive the notice not less than 60 nor more than 90 days prior to the first anniversary of the date on which we first mailed our proxy materials for the preceding year’s annual meeting. The notice must set forth, as to each nominee, the name, age, principal occupationsoccupation and employment during the past five years, name and principal business of any corporation or other organization in which such occupationsoccupation and employment were carried on and a brief description of any arrangement or understanding between such person and any others pursuant to which such person was selected as a nominee. The notice must include the nominee’s signed consent to serve as a Director if elected. The notice must set forth the name and address of, and the number of our common shares owned by, the shareholder giving the notice and the beneficial owner on whose behalf the nomination is made and any other shareholders believed to be supporting such nominee.
Following are the nominees for election as Directors for terms expiring in 2012,2014, a description of the business experience of each nominee and the names of other publicly-held companies for which he or she currently serves as a director or has served as a director during the past five years. Each nominee for election as Director was previously elected by our shareholders, with the exception of Kerry J. Preete and Robert M. Patterson. As permitted by Regulations 10(a) and 13 of our Regulations, the Board increased its size to 11 members and elected Mr. Preete to fill the resulting vacancy in December 2013. Mr. Patterson’s service as a Director would commence upon his election at the Annual Meeting. The composition of the Board is intended to reflect an appropriate mix of skill sets, experience and qualifications that are relevant to PolyOne Corporation’s business and governance over time.
In addition to the information presented below regarding each nominee’s specific experience, qualifications, attributes and skills that led our Board to the conclusion that the nominee should serve as a Director, the Board also believes that all of our Director nominees are individuals of substantial accomplishment with demonstrated leadership capabilities. Each of our DirectorsDirector nominees also has the following personal characteristics, which are required attributes for all Board nominees: high ethical standards, integrity, judgment and an ability to devote sufficient time to the affairs of our Company. Each of the nominees is a current member of the Board. The reference below each Director’s name to the term of service as a Director includes the period during which the Director served as a Director of The Geon Company (“Geon”) or M.A. Hanna Company (“M.A. Hanna”), each one of our predecessors. The information is current as of March 14, 2011.
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Our Board of Directors |
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GOVERNANCE
Richard H. Fearon Director since 2004 Age — | Vice Chairman and Chief Financial and Planning Officer of Eaton, | |
Gregory J. Goff Director since 2011 Age — 57 | President and Chief Executive Officer of Tesoro Corporation, a leading company in the independent refining and marketing business, since May 2010 and Chairman and Chief Executive Officer of Tesoro Logistics, an NYSE-listed master limited partnership that owns, operates and develops crude oil and refined products and logistics assets, since April 2011. Mr. Goff served as Senior Vice President, Commercial of ConocoPhillips Corporation, an integrated energy company, from 2008 to 2010. Mr. Goff also held various other positions at ConocoPhillips from 1981 to 2008. Mr. Goff serves as a director of the American Fuels and Petrochemical Manufacturers and on the National Advisory Board of the University of Utah Business School. From 2008 to 2010, Mr. Goff served on the Board of Directors of DCP Midstream GP, LLC. We believe that, as a Board member with proven leadership capabilities, Mr. Goff provides a fresh perspective on our strategy and operations. Mr. Goff’s deep understanding of the energy industry and specialty chemical businesses will provide valuable insight into PolyOne’s strategic planning. His experience as the Chief Executive Officer of a large, independent refining and petroleum products marketing company and his participation as a member of national trade associations provide him with invaluable experience that can enhance our Board. | |
Gordon D. Harnett Director since 1997 Age — | Lead Director of our Board of Directors since July 18, 2007. Retired Chairman, President and Chief Executive Officer of Materion Corp. (formerly known as Brush Engineered Materials Inc.), an international supplier and producer of high performance engineered materials. Mr. Harnett served in this capacity from 1991 until his retirement in May 2006. Mr. Harnett serves on the Boards of Directors of | |
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| unique skills in serving as a PolyOne Director. Mr. Harnett’s past experience includes leadership roles at a number of specialty chemical companies, including serving as a senior vice president of Goodrich Specialty Chemicals and president of Tremco, in addition to his role as chief executive officer at Brush Engineered Materials. Mr. Harnett is also uniquely qualified to assist our Board on international issues, as he previously resided in Canada and Japan while actively involved in the international operations of his former employers. Mr. Harnett, Chair of our Compensation Committee, is especially knowledgeable in the area of executive compensation, due to his |
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GOVERNANCE
Sandra B. Lin Director since 2013 Age — 56 | Retired President, Chief Executive Officer and Director of Calisolar, Inc. (now Silicor Materials Inc.), a solar silicon company. Ms. Lin served in this role from August 2010 until December 2011. She was Corporate Executive Vice President, from February 2009 to July 2010, and Executive Vice President, from July 2007 to February 2009, of Celanese Corporation, a global hybrid chemical company. Ms. Lin currently serves on the Boards of Directors of WESCO International, Inc. and American Electric Power Company, Inc. Ms. Lin also serves on the Boards of Directors of the Committee of 200 and Junior Achievement USA. Ms. Lin has extensive senior executive experience, including as a chief executive officer, managing global businesses in multiple industries. This experience, along with her experience as a director for two other public companies, makes Ms. Lin a valuable member of our Board. | ||
Richard A. Lorraine Director since 2008 Age — | Retired Senior Vice President and Chief Financial Officer of Eastman Chemical Company, a specialty chemicals company. Mr. Lorraine served in this capacity from 2003 to 2008. Mr. Lorraine also served as Executive Vice President and Chief Financial Officer of Occidental Chemical Company, a chemical manufacturing company, from 1995 to 2003. Mr. Lorraine serves on the Board of Directors of Carus Corporation. | ||
Stephen D. Newlin Director since 2006 Age — | |||
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| Chairman, President and Chief Executive Officer of PolyOne since February 2006. Mr. Newlin served as President — Industrial Sector of Ecolab, Inc., a global leader in cleaning and sanitizing specialty chemicals, products and services, from 2003 to 2006. Mr. Newlin served as President and a |
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GOVERNANCE
Robert M. Patterson Director Nominee Age — 41 | Executive Vice President and Chief Operating Officer of PolyOne since March 2012. Mr. Patterson served as PolyOne’s Executive Vice President and Chief Financial Officer from January 2011 until March 2012 and as PolyOne’s Senior Vice President and Chief Financial Officer from May 2008 until January 2011. Prior to joining PolyOne, Mr. Patterson served in leadership roles at Novelis, Inc., an aluminum rolled products manufacturer, and SPX Corporation, a multi-industry manufacturer and developer, after starting his career at Arthur Andersen LLP. In connection with Mr. Newlin’s retirement, Mr. Patterson will become President and Chief Executive Officer of PolyOne effective as of May 15, 2014. We believe that, as our incoming Chief Executive Officer, Mr. Patterson is particularly well qualified to serve on our Board, as his past and future service enables him to develop comprehensive knowledge of the various segments of our business and of the critical internal and external challenges we face. Through our robust succession planning process, Mr. Patterson was identified as the right leader to continue our transformation in the future. His responsibility for developing and executing the annual operating plans and strategic plans provide him with the knowledge and experience needed to provide valuable input to our Board. | |
William H. Powell Director since 2008 Age — | Retired Chairman and Chief Executive Officer of National Starch and Chemical Company, a specialty chemicals company. Mr. Powell served in this capacity from 1999 until his retirement in 2006. Mr. Powell serves on the Boards of Directors of Granite Construction Incorporated and FMC Corporation. From 2007 to 2011, he also served on the Board of Directors of Arch Chemicals, Inc. | |
Kerry J. Preete Director since 2013 Age — 53 | Executive Vice President, Global Strategy for Monsanto Company, a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality, since 2010. Mr. Preete was Monsanto Company’s President, Global Crop Protection Division from 2009 to 2010 and Vice President, International Commercial Business from 2008 to 2009. From 1985 to 2008, Mr. Preete served in various roles of increasing responsibility at Monsanto. As PolyOne’s newest Board member, and from his broad experience at a leading, well-known company, we believe Mr. Preete will bring a fresh perspective on running a successful, innovative company. Mr. Preete is specifically adept in not only thinking strategically, but also tactically, and these traits will be valuable to PolyOne as it continues its transformation into the future. Further, his global experience and understanding will assist PolyOne in its plans to operate in different regions and cultures, and we believe his global business acumen is relevant and transferable across industries. Mr. Preete’s operational foundation, strategic expertise, and global experience will be an asset to PolyOne’s Board. | |
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GOVERNANCE
Farah M. Walters Director since 1998 Age — | President and Chief Executive Officer of QualHealth, LLC, a |
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William A. Wulfsohn Director since 2011 Age — 52 | President and Chief Executive Officer of Carpenter Technology Corporation, an NYSE-listed leading provider of specialty metals to numerous industries, since July 2010. Mr. Wulfsohn has served as a director of Carpenter since April 2009. From 2005 to 2010, he served as Senior Vice President, Coatings of PPG Industries, a global supplier of coatings and specialty products and services, and from 2003 to 2005, as Vice President, Coatings and Managing Director, PPG Europe. Prior to joining PPG, Mr. Wulfsohn worked for Morton International, a diversified wholly-owned subsidiary of chemical company Rohm & Haas, as Vice President and General Manager, Automotive Coatings; for Rohm & Haas, a global specialty materials company, as Vice President, Automotive Coatings Business Director; and for Honeywell, a diversified technology and manufacturing company, as Vice President and General Manager, Nylon System. He also worked as an Associate with McKinsey & Company, a global management consulting firm. We believe that Mr. Wulfsohn is a valuable member of our Board. He is a proven leader, with deep and varied experience in technology and successful business operations. His background in managing operations in Europe and Asia/Pacific provides him with international expertise that can be of value to PolyOne. Further, we believe his experience as a Chief Executive Officer of a publicly-traded specialty company has given him unique skills to assist in providing guidance on PolyOne’s continuing transformation. | |
Director Independence
Our Corporate Governance Guidelines requireprovide that a substantial majority of the members of our Board of Directors should be “independent” under the listing standards of the New York Stock Exchange (“NYSE”). To be considered “independent,” the Board of Directors must make an affirmative determination that the Director has no material relationship with us other than as a Director, either directly or indirectly (such as an officer, partner or shareholder of another entity that has a relationship with us or any of our subsidiaries), and that the Director is free from any business, family or other relationship that would reasonably be expected to interfere with the exercise of independent judgment as a Director. In each case, the Board of Directors considers all relevant facts and circumstances in making an independence determination.
The Board of Directors determined that J. Douglas Campbell,Dr. Carol A. Cartwright,Gale Duff-Bloom (who retired during 2010), Richard H. Fearon, Gregory J. Goff, Gordon D. Harnett, Sandra B. Lin, Richard A. Lorraine, Edward J. Mooney, William H. Powell, andKerry J. Preete, Farah M. Walters and William A. Wulfsohn are independent under the NYSE “independent director” listing standards. In making this determination, the Board reviewed significant transactions, arrangements or relationships that a Director might have with our customers or suppliers. In making this determination with respect to Mr. Fearon, the Board determined that the sales of products by the CompanyPolyOne to Eaton, Corporation, of which Mr. Fearon serves as an executive officer, did not create a material relationship or impair the independence of Mr. Fearon because Mr. Fearon receives no material direct or indirect benefit from such transactions, which were undertaken in the ordinary course of business. For 2010,2013, the amount paid to the CompanyPolyOne from sales to Eaton Corporation was less than 0.2%0.3% of the Company’sPolyOne’s consolidated revenues.
Lead Director
Our independent directorsDirectors meet regularly in executive sessions. Our Corporate Governance Guidelines provide that the independent directorsDirectors are to select a Lead Director to preside at executive sessions. The Lead Director acts as the key liaison between the independent directorsDirectors and the Chief Executive Officer (“CEO”), and will also serve as the key liaison between the independent Directors and Mr. Newlin once he becomes Executive Chairman. The Lead Director is responsible for coordinating the activities of the other independent directorsDirectors and for performing various other duties as may from time to time be determined by the independent directors.Directors. Mr. Harnett has served as our Lead Director since July 2007.
Board Leadership Structure
Mr. Newlin is the Chairman of our Board of Directors and our ChiefCEO. Effective as of May 15, 2014, Mr. Newlin will become Executive Officer.Chairman of our Board of Directors and Mr. Patterson will become President and CEO. The Board of Directors believes that this leadership structure is appropriate for our companyCompany given the experience and active involvement of our independent directors,Directors, our corporate governance practices and our Lead Director’s role. Having a Lead Director role helps to ensure greater communication between management and the independent directors,Directors, increases the independent directors’Directors’ understanding of management decisions and Company operations, and provides an additional layer of independent oversight of the Company.PolyOne. The Board of Directors believes that this approach serves
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| Environmental, | Nominating and | ||||||||||||||||||||||||
| Compensation | Health and | Financial | Governance | ||||||||||||||||||||||
| Director | Audit Committee | Committee | Safety Committee | Policy Committee | Committee | ||||||||||||||||||||
| Mr. Campbell | X | X | X | * | |||||||||||||||||||||
| Dr. Cartwright | X | X | * | ||||||||||||||||||||||
| Mr. Fearon | X | * | X | ||||||||||||||||||||||
| Mr. Harnett | X | X | * | ||||||||||||||||||||||
| Mr. Lorraine | X | X | |||||||||||||||||||||||
| Mr. Mooney | X | X | * | X | |||||||||||||||||||||
| Mr. Newlin | X | X | |||||||||||||||||||||||
| Mr. Powell | X | X | X | ||||||||||||||||||||||
| Ms. Walters | X | X | X | ||||||||||||||||||||||
Number of Meetings in 2010 | 7 | 6 | 2 | 3 | 2 | ||||||||||||||||||||
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9
Our Board of Directors oversees a company-wide approach to risk management that is designed to support the achievement of our strategic objectives and improve long-term organizational performance, which we believe will ultimately enhance shareholder value. The Board of Directors
10
Our Board of Directors administers its risk oversight function directly and through its Audit Committee, Financial Policy Committee and Environmental, Health and Safety Committee. The Audit Committee discusses with management our major financial risk exposures and the steps management has taken to monitor and control such exposures, including our risk assessment and risk management policies. The Audit Committee also receives an annual risk assessment report from our internal auditors. The Financial PolicyEnvironmental, Health and Safety Committee assistsperiodically reviews with management the significant risks or exposures faced by PolyOne relating to safety, health, environmental, security and product stewardship standards and practices. Our Board
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oversees and monitors these committees in exercising their responsibilities relating to risk. Our Board of Directors in fulfilling itsalso provides direct oversight and monitoring responsibilities to our shareholders relatingon risk management as it relates to our capital structure, our borrowing and repayment of funds, financial policies, management of foreign exchange risk and other matters of financial risk management, including the utilization of financial derivative products, insurance coverage strategies, banking relationships and other financial matters. The Environmental, Health and Safety Committee periodically reviews with management the significant risks or exposures faced by the Company relating to safety, health, environmental, security and product stewardship standards and practices.
Our Board of Directors sets the appropriate “tone at the top” when it comes to risk tolerance and management by fostering a culture of risk-adjusted decision-making throughout the company.PolyOne. Our Board ensures that the risk management processes designed and implemented by our management team are adapted to the Board’s corporate strategy and are functioning as directed. The Board of Directors also participates in an ongoing effort to assess and analyze the most likely areas of future risk for the companyCompany by asking our management team to discuss the most likely sources of material future risks and how we are addressing any significant potential vulnerability.
The Board of Directors believes that its leadership structure as discussed on pages 7 through 8, supports the risk oversight function of the Board of Directors.
Code of Ethics, Code of Conduct and Corporate Governance Guidelines
In accordance with applicable NYSE listing standards and Securities and Exchange CommissionSEC regulations, the Board of Directors has adopted a Code of Ethics, Code of Conduct and Corporate Governance Guidelines. These are also posted and available on our website at www.polyone.com, under “Corporate Governance” on our investor relations page.
Our Corporate Governance Guidelines to adoptcontain a policy relating to majority voting. Pursuant to the policy, any nominee for election as a Director of the Board who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election in an election of Directors that is not a contested election is expected to tender his or her resignation as a Director to the Board promptly following the certification of the election results. Neither abstentions nor broker non-votes will be deemed to be votes for or withheld from a Director’s election for purposes of the policy, regardless of the rules treating broker non-votes as withheld in uncontested elections of directors.Directors. The Nominating and Governance Committee (without the participation of the affected Director) will consider each resignation tendered under the policy and recommend to the Board whether to accept or reject it. The Board will then take appropriate action on each tendered resignation, taking into account the Nominating and Governance Committee’s recommendation. The Nominating and Governance Committee, in making its recommendation, and the Board, in making its decision, may consider any factors or other information that it considers appropriate, including the reasons (if any) given by shareholders as to why they withheld their votes, the qualifications of the tendering Director and his or her
11
Communication with Board of Directors
Shareholders and other interested parties interested in communicatingwho wish to communicate directly with the Board of Directors as a group, the non-management or independent Directors as a group, or with any individual Director may do so by writing to the Secretary, PolyOne Corporation, 33587 Walker Road, Avon Lake, Ohio 44012. The mailing envelope and letter must contain a clear notation indicating that the enclosed letter is either a “Shareholder-Board of Directors Communication” or an “Interested Party-Board of Directors Communication,” as appropriate.
The Secretary will review all such correspondence and regularly forward to the Board of Directors a log and summary of all such correspondence and copies of all correspondence that, in the opinion of the Secretary, deals with the functions of the Board or committees of the Board or that she otherwise determines requires their attention. Directors may at any time review a log of all correspondence we receive that is addressed to members of the Board and request copies of any such correspondence. Concerns relating to accounting, internal controls or auditing matters are immediately brought to the attention of our internal audit department and handled in accordance with procedures established by the Audit Committee for such matters.
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Board of Directors and Committees
Board Attendance
The Board met six times during 2013, the calendar year being our fiscal year. Each member of our Board attended at least 75% of the meetings held by our Board and the meetings held by the committees of our Board on which such member served during the period for which he or she served as a Director. Each Director is expected to attend the Annual Meeting of Shareholders. In 2013, all of our Directors serving at that time attended the Annual Meeting of Shareholders.
Board Committees
As of the date of this proxy statement, our Board has 11 Directors and the following four committees: Audit, Compensation, Nominating and Governance and Environmental, Health and Safety. Each committee meets periodically throughout the year, reports its actions and recommendations to the Board, receives reports from senior management, annually evaluates its performance and has the authority to retain outside advisors in its discretion. The primary responsibilities of each committee are summarized below and set forth in detail in each committee’s written charter, which is located on our website atwww.polyone.com under “Corporate Governance” on our investor relations page.
| Audit Committee – Primary Responsibilities and Requirements | ||
• Meets with appropriate financial and legal personnel and independent auditors to review our corporate accounting, internal controls, financial reporting and compliance with legal and regulatory requirements | NUMBER OF MEETINGS IN 2013: 9 | |
• Exercises oversight of our independent auditors, internal auditors and financial management | COMMITTEE MEMBERS: C.A. Cartwright R.H. Fearon (C)(F) G.D. Harnett S.B. Lin R.A. Lorraine | |
• Appoints the independent auditors to serve as auditors in examining our corporate accounts | ||
• All members of the Audit Committee meet the financial literacy and independence requirements as set forth in the NYSE listing standards | ||
• PolyOne’s common shares are listed on the NYSE and are governed by its listing standards | ||
C Chair of the Committee
F Meets the requirements of an “audit committee financial expert” as defined by the Securities and Exchange Commission (referred to as “SEC”).
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Compensation Committee – Primary Responsibilities and Requirements | ||
• Reviews and approves the compensation and other benefits afforded our executive officers and other highly-compensated personnel, and has similar responsibilities with respect to non-employee Directors, except that the Compensation Committee’s actions and determinations for directors are subject to the approval of the Board of Directors | NUMBER OF MEETINGS IN 2013: 6 | |
• Works with PolyOne senior management in human resources, legal and finance departments, provides oversight for all of our broad-based compensation and benefit programs and provides policy guidance and oversight on selected human resource policies and practices | COMMITTEE MEMBERS: G.D. Harnett (C) W.H. Powell K.J. Preete F.M. Walters W.A. Wulfsohn | |
• Directly engages the resources of one or more independent outside compensation consultants to assist in assessing the competitiveness and overall appropriateness of our executive compensation programs* | ||
• Evaluates the independence of its consultants** | ||
• Oversees the process by which the Board annually evaluates the performance of the CEO | ||
• All members of the Compensation Committee have been determined to be independent as defined by the NYSE listing standards | ||
C Chair of the Committee
* In 2013, the Compensation Committee, assisted by Towers Watson (the “Consultant”), analyzed competitive market compensation data relating to salary, annual incentives and long-term incentives. In analyzing competitive market data, the Compensation Committee reviewed data from a peer group of similarly-sized United States chemical companies and reviewed data from the Consultant’s Compensation Data Bank and other published surveys. The Consultant then assisted the Compensation Committee in benchmarking base salaries and annual and long-term incentive targets. More detailed information about the compensation awarded to our executive officers in 2013 is provided in the “Compensation Discussion and Analysis” section of this proxy statement. The Consultant maintains regular contact with the Compensation Committee and interacts with management to gather the data needed to prepare reports for Compensation Committee review.
**The Compensation Committee periodically reviews the relationship with the Consultant including the level and quality of services provided, as well as fees for those services. In addition, expenses for other consulting services provided to PolyOne by the Consultant that are not related to executive compensation are monitored to ensure that executive compensation consultant independence is maintained. The Consultant provided us with services under $120,000 that were in addition to the services provided in connection with its advice and recommendations on the amount or form of executive and director compensation.
The Compensation Committee considered all relevant factors, specifically including six consultant independence factors under Rule 10C-1(b)(4)(i) through (vi) under the Securities Exchange Act of 1934 (referred to as the “Exchange Act”) in assessing the independence of the Consultant. The Compensation Committee reviewed each factor in depth, as well as information provided by the Consultant that related to and was responsive to each factor, which assisted in the assessment. Upon completing this assessment, the Compensation Committee also determined that that no “conflicts of interest have been raised by the work performed by the Consultant.”
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| Nominating and Governance Committee – Primary Responsibilities and Requirements | ||
• Identify individuals qualified to become Board members, consistent with criteria approved by the Board* • Select, or recommend that the Board select, the director nominees for the next annual meeting of shareholders • Develop, review and recommend to the Board corporate governance guidelines applicable to PolyOne and directorship practices • Oversee the annual evaluation of the Board • All members of the Nominating and Governance Committee have been determined to be independent as defined by the NYSE listing standards | NUMBER OF MEETINGS IN 2013: 3 | |
| COMMITTEE MEMBERS: C.A. Cartwright (C) R.H. Fearon G.J. Goff S.B. Lin R.A. Lorraine F.M. Walters | ||
C Chair of the Committee
* The Nominating and Governance Committee will consider shareholder suggestions for nominees for election to our Board of Directors. A shareholder that wishes to suggest a Director candidate for consideration by the Nominating and Governance Committee should follow the same procedures described for shareholder nominations for Director on page 2. The Nominating and Governance Committee uses a variety of methods for identifying and evaluating nominees for Directors, including third-party search firms, recommendations from current Board members and recommendations from shareholders. Nominees for election to the Board of Directors are selected on the basis of the following criteria:
While neither the Nominating and Governance Committee nor the Board has a formal policy with respect to the consideration of diversity in identifying director nominees, they do consider diversity when evaluating potential Board nominees. We consider diversity to include differences in race, gender and national origin, as well as differences in viewpoint, background, experience and skills. The Nominating and Governance Committee believes that having a diverse Board leads to more innovation, unique thinking and better governance. At the end of 2013, approximately 27% of our Board members were female; however, if all of our Board nominees are elected following our 2014 Annual Meeting of Shareholders, then this percentage will be 18%. Diversity is a key characteristic that we will consider, and instruct any third-party search firm we use to consider, in searches for future Board members.
The Nominating and Governance Committee also considers such other relevant factors as it deems appropriate, including the current composition of the Board, the balance of management and independent Directors, the need for Audit Committee expertise and the evaluations of other prospective nominees. The Nominating and Governance Committee has established these criteria that any Director nominee, whether suggested by a shareholder or otherwise, should satisfy. A nominee for election to the Board who is suggested by a shareholder will be evaluated by the Nominating and Governance Committee in the same manner as any other nominee for election to the Board. Finally, if the Nominating and Governance Committee determines that a candidate should be nominated for election to the Board, the Nominating and Governance Committee will present its findings and recommendation to the full Board for approval.
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| Environmental, Health and Safety Committee – Primary Responsibilities and Requirements | ||
• The Environmental, Health and Safety Committee exercises oversight with respect to our environmental, health, safety, security and product stewardship policies and practices and our compliance with related laws and regulations | NUMBER OF MEETINGS IN 2013: 2 | |
| COMMITTEE MEMBERS: G.J. Goff S.D. Newlin W.H. Powell (C) K.J. Preete | ||
C Chair of the Committee
The Board and each Committee also conduct an annual self-evaluation |
In 2010,the first half of 2013, we paid our non-employee Directors an annual retainer of $135,000,$165,000, in quarterly in arrears,installments (in arrears), consisting of a cash retainer of $60,000$75,000 and an award of $75,000$90,000 in value of fully vested common shares. We grantIn 2013, the shares payableCompensation Committee analyzed competitive market compensation data provided by the Consultant relating to both the cash retainer and the equity award value. These compensation elements were benchmarked against PolyOne’s peer group as well as other applicable general industries. This analysis demonstrated that the Directors compensation, which had not been increased since 2011 (prior to our size increasing due to merger and acquisition activity), was now below the median of our peer group. As a result, and effective as of the third quarter of 2013, the Board increased the annual retainer to $185,000 (payable in arrears and in quarterly installments) consisting of $85,000 in cash and determine$100,000 in value of fully vested common shares, and increased Lead Director and committee member retainers as described below, to better align the Directors’ cash retainer and equity award value to current market levels.
We pay individual meeting fees only as follows: $2,000 for each unscheduled Board and committee meeting attended and $1,000 for participation in each unscheduled significant telephonic Board and committee meeting. In addition, the Lead Director and chairpersons of the following committees receive the additional fixed annual cash retainers (payable on a quarterly basis in arrears) listed below:
Role | Annual Cash Retainer First and Second | Annual Cash Retainer Third and Fourth Quarters, 2013 | ||
Lead Director | $25,000 | $25,000 | ||
Chair, Audit Committee | $15,000 | $16,000 | ||
Chair, Compensation Committee | $10,000 | $12,500 | ||
Chair, Environmental, Health and Safety Committee | $7,500 | $10,000 | ||
Chair, Nominating and Governance Committee | $7,500 | $10,000 |
We reimburse Directors for expenses associated with each meeting attended.
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GOVERNANCE
Non-employee Directors may defer payment of all or a portion of their annual cash retainer under our Deferred Compensation Plan for Non-Employee Directors (“Deferred Compensation Plan”). Directors may also elect to have their cash retainer converted into our common shares. These shares, as well as the annual retainer consisting of fully vested common shares, may also be deferred under the Deferred Compensation Plan. In 2013, we awarded shares to Directors under our Deferred Compensation Plan and our 2010 Equity and Performance Incentive Plan (as defined herein). Deferred compensation, whether in the form of cash or common shares, is held in trust for the participating Directors. Interest is earned on the cash amounts and dividends, if any, on the deferred common shares accrued for the benefit of the participating Directors.
2013 Non-Employee Directors Compensation Table
Name (a) | Fees Earned or Paid in Cash (b) ($) | Stock Awards (c) ($) | Total ($) | |||
C.A. Cartwright | 89,750 | 95,000 | 184,750 | |||
R.H. Fearon | 96,500 | 95,000 | 191,500 | |||
G.J. Goff | 81,000 | 95,000 | 176,000 | |||
G.D. Harnett | 117,250 | 95,000 | 212,250 | |||
S.B. Lin | 53,184 | 61,621 | 114,805 | |||
R.A. Lorraine | 81,000 | 95,000 | 176,000 | |||
W.H. Powell | 89,750 | 95,000 | 184,750 | |||
K.J. Preete | 3,234 | 3,804 | 7,038 | |||
F.M. Walters | 82,000 | 95,000 | 177,000 | |||
W.A. Wulfsohn | 81,000 | 95,000 | 176,000 |
Fees Earned or Paid in Cash (column (b))
Non-employee Directors may defer payment of all or a portion of their $75,000 annual cash retainer (payable on a quarterly basis), which was increased to $85,000 in the third quarter of 2013, as well as meeting and committee chairperson fees. Fees are prorated based upon time served as a Director in any applicable quarter.
Stock Awards (column (c))
Our non-employee Directors’ stock compensation consisted of an annual award (payable on a quarterly basis) of $90,000, which was increased to $100,000 in the third quarter of 2013, in value of fully vested common shares, which the Directors could elect to defer. We determined the number of shares to be granted by dividing the dollar value by the arithmetic average of the high and low stock price on the last trading day of each quarter. We pay individual meeting fees only as follows: fees of $2,000 for each unscheduled Board and committee meeting attended and fees of $1,000 for participation in each unscheduled significant telephonic Board and committee meeting. In addition, in the first two quarters of 2010, the Chairpersons of each committee received a fixed annual cash retainer (payable on a quarterly basis) as follows: $5,000 for the Environmental, Health and Safety, Nominating and Governance and Financial Policy Committees and $10,000 for the Audit and Compensation Committees. Effective as of the third quarter of 2010, the annual cash retainer for the Chairpersons ofused the following committees was amended to be as follows: $7,500 forquarterly per share fair market values, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”), in calculating the Environmental, Healthnumber of shares: March 28, 2013 — $24.185 (930 shares); June 28, 2013 — $25.010 (899 shares); September 30, 2013 — $30.475 (820 shares); and Safety, Nominating and Governance and Financial Policy Committees and $15,000 for the Audit Committee. In addition, we instituted an annual retainer of $10,000 for our Lead Director, effective as of the third quarter of 2010. We reimburse Directors for their expenses associated with each meeting attended.
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GOVERNANCE
Option Awards Outstanding and Fully-Vested Deferred Compensation Plan for Non-Employee Directors. AShares
The number of outstanding stock options held by each non-employee Director may deferat the compensation as cash or elect to have it converted into our common shares.
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Name | Options Awards: (#) | Deferred Stock Awards: (#) | ||
C.A. Cartwright | - | 30,538 | ||
R.H. Fearon | - | - | ||
G.J. Goff | - | - | ||
G.D. Harnett | 6,000 | 99,605 | ||
S.B. Lin | - | 3,719 | ||
R.A. Lorraine | - | 50,033 | ||
W.H. Powell | - | 46,448 | ||
K.J. Preete | - | 108 | ||
F.M. Walters | 6,000 | 23,096 | ||
W.A. Wulfsohn | - | 10,892 |
| Fees Earned or | Stock | Option | ||||||||||||||||||
| Paid in Cash(1) | Awards(2) | Awards(3) | Total | |||||||||||||||||
| Name | ($) | ($) | ($) | ($) | ||||||||||||||||
| J.D. Campbell | 66,250 | 75,000 | — | 141,250 | ||||||||||||||||
| C.A. Cartwright | 66,250 | 75,000 | — | 141,250 | ||||||||||||||||
G. Duff-Bloom(4) | 21,840 | 27,300 | — | 49,140 | ||||||||||||||||
| R.H. Fearon | 72,500 | 75,000 | — | 147,500 | ||||||||||||||||
| G.D. Harnett | 75,000 | 75,000 | — | 150,000 | ||||||||||||||||
| R.A. Lorraine | 60,000 | 75,000 | — | 135,000 | ||||||||||||||||
| E.J. Mooney | 66,250 | 75,000 | — | 141,250 | ||||||||||||||||
| W.H. Powell | 60,000 | 75,000 | — | 135,000 | ||||||||||||||||
| F.M. Walters | 60,000 | 75,000 | — | 135,000 | ||||||||||||||||
| (1) | ||
| Option Awards | Stock Awards | |||||||||
| Number of | ||||||||||
| Securities Underlying | Number of | |||||||||
| Unexercised Options | Deferred Shares* | |||||||||
| Name | (#) | (#) | ||||||||
| J.D. Campbell | 24,000 | 117,174 | ||||||||
| C.A. Cartwright | 24,000 | 29,552 | ||||||||
| G. Duff-Bloom | 6,000 | 0 | ||||||||
| R.H. Fearon | 15,000 | 0 | ||||||||
| G.D. Harnett | 24,000 | 80,998 | ||||||||
| R.A. Lorraine | 0 | 33,061 | ||||||||
| E.J. Mooney | 0 | 81,524 | ||||||||
| W.H. Powell | 0 | 38,430 | ||||||||
| F.M. Walters | 24,000 | 26,770 | ||||||||
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| Option Awards | ||||||||||
| Number of | ||||||||||
| Shares | Value | |||||||||
| Acquired on | Realized on | |||||||||
| Exercise | Exercise | |||||||||
| Name | (#) | ($) | ||||||||
| J.D. Campbell | 15,000 | 18,075 | ||||||||
| C.A. Cartwright | 15,000 | 9,225 | ||||||||
| G. Duff-Bloom | 33,000 | 82,847 | ||||||||
| R.H. Fearon | 0 | 0 | ||||||||
| G.D. Harnett | 15,000 | 32,025 | ||||||||
| R.A. Lorraine | 0 | 0 | ||||||||
| E.J. Mooney | 0 | 0 | ||||||||
| W.H. Powell | 0 | 0 | ||||||||
| F.M. Walters | 15,000 | 18,825 | ||||||||
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| Right to | Total | ||||||||||||||
| Number of Shares | Acquire | Beneficial | |||||||||||||
| Name | Owned(1) | Shares | Ownership | ||||||||||||
| J. Douglas Campbell | 215,672 | (2) | 24,000 | (3) | 239,672 | ||||||||||
| Carol A. Cartwright | 136,066 | (2) | 24,000 | (3) | 160,066 | ||||||||||
| Richard H. Fearon | 61,259 | 15,000 | (3) | 76,259 | |||||||||||
| Gordon D. Harnett | 141,125 | (2) | 24,000 | (3) | 165,125 | ||||||||||
| Richard A. Lorraine | 33,061 | (2) | — | 33,061 | |||||||||||
| Edward J. Mooney | 141,524 | (2) | — | 141,524 | |||||||||||
| William H. Powell | 118,430 | (2) | — | 118,430 | |||||||||||
| Farah M. Walters | 147,937 | (2) | 18,000 | (3) | 165,937 | ||||||||||
| Stephen D. Newlin | 290,125 | 494,358 | (4) | 784,483 | |||||||||||
| Robert M. Patterson | 100,000 | 70,511 | (4) | 170,511 | |||||||||||
| Kenneth M. Smith | 114,549 | 92,537 | (3)(4) | 207,086 | |||||||||||
| Thomas J. Kedrowski | 108,638 | 70,988 | (4) | 179,626 | |||||||||||
| Bernard Baert | 35,644 | 19,490 | (3)(4) | 55,134 | |||||||||||
| 18 Directors and executive officers as a group | 2,030,891 | 1,271,604 | 3,302,495 | ||||||||||||
| Name | Number of Shares Owned(1) | Right to Acquire Shares | Total Beneficial Ownership | |||
Carol A. Cartwright | 155,261(2) | - | 155,261 | |||
Richard H. Fearon | 76,868 | - | 76,868 | |||
Gregory J. Goff | 10,778 | - | 10,778 | |||
Gordon D. Harnett | 171,663(2) | - | 171,663 | |||
Sandra B. Lin | 5,722 (2) | - | 5,722 | |||
Richard A. Lorraine | 50,033(2) | - | 50,033 | |||
William H. Powell | 100,723(2) | - | 100,723 | |||
Kerry J. Preete(3) | 108(2) | - | 108 | |||
Farah M. Walters | 150,543(2) | 6,000(4) | 156,543 | |||
William A. Wulfsohn | 10,892(2) | - | 10,892 | |||
Stephen D. Newlin | 197,704 | 17,560(5) | 215,264 | |||
Robert M. Patterson | 172,789 | 42,246(5) | 215,035 | |||
Bradley C. Richardson(3) | - | - | - | |||
Richard J. Diemer, Jr.(3) | 63,882 | - | 63,882 |
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GOVERNANCE
| Name | Number of Shares Owned(1) | Right to Acquire Shares | Total Beneficial Ownership | |||
Thomas J. Kedrowski | 214,925 | 9,896(5) | 224,821 | |||
Kenneth M. Smith | 104,845 | 20,978(5) | 125,823 | |||
| 22 Directors and executive officers as a group | 1,700,496 | 167,888 | 1,868,384 |
| (1) | Except as otherwise stated in the following notes, beneficial ownership of the shares held by each individual consists of sole voting power and sole investment power, or of voting power and investment power that is shared with the spouse or other family member of the individual. It includes an approximate number of shares credited to the Named Executive Officers’ accounts in our Retirement Savings Plan (as defined herein), a tax-qualified defined contribution plan. The number of common shares allocated to these individuals from the Retirement Savings Plan is provided by the | |
| (2) | With respect to the Directors, beneficial ownership includes shares held under the Deferred Compensation Plan for Non-Employee Directors as follows: | |
| (3) | Mr. Preete began serving on the Board of Directors on December 18, 2013. Mr. Richardson began serving as our Executive Vice President and Chief Financial Officer on November 11, 2013. Mr. Diemer served as PolyOne’s Senior Vice President and Chief Financial Officer until November 8, 2013. Beneficial ownership information for Mr. Diemer is based on information contained in the last Report on Form 4 with respect to PolyOne filed by Mr. Diemer, which is dated November 8, 2013. |
| (4) | Includes shares the individuals have a right to acquire upon the exercise of options |
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| (5) | Includes the number of shares that would be acquired if the individuals’ outstanding and exercisable stock-settled stock appreciation rights were exercised within 60 days of March 1, 2014 at |
The following table shows information relating to all persons who, as of March 14, 2011,1, 2014, were known by us to beneficially own more than five percent of our outstanding common shares based on information provided in Schedule 13Gs and 13Ds filed with the Securities and Exchange Commission:
Name and Address | Number of Shares | % of Shares | ||||||
BlackRock, Inc. 40 East 52nd Street, New York, New York 10022(1) | 8,541,929 | 8.99% | ||||||
FMR LLC 82 Devonshire Street, Boston, Massachusetts 02109(2) | 7,755,544 | 8.16% | ||||||
The Vanguard Group, Inc. 100 Vanguard Boulevard, Malvern, Pennsylvania 19355(3) | 5,833,381 | 6.14% | ||||||
AllianceBernstein L.P. 1345 Avenue of the Americas New York, New York 10105(4) | 4,951,759 | 5.21% | ||||||
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GOVERNANCE
| As of December 31, |
| (2) | As of December 31, 2013, based upon information contained in a Schedule 13G/A filed with the SEC by FMR LLC, Edward C. Johnson 3d and Fidelity Management & Research Company (collectively, “FMR”). FMR reported that it had sole voting power with respect to 633 of these shares and sole dispositive power with respect to all of these shares. |
| (3) | As of December 31, 2013, based upon information contained in a Schedule 13G/A filed with the SEC by The Vanguard Group, Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd. (collectively, “Vanguard”). Vanguard reported that it had sole voting power with respect to 138,446 of these shares, sole dispositive power with respect to 5,701,135 of these shares and shared dispositive power with respect to 132,246 of these shares. |
| (4) | As of December 31, 2013, based upon information contained in a Schedule 13G filed with the | |
Stock Ownership Guidelines
The purpose of our sharestock ownership guidelines for our non-employee Directors, executive officers and other elected corporate officers(referred to as the “Guidelines”) is to better align theirour Directors’ financial interests with those of our shareholders by requiring themour Directors to own a minimum level of our shares. These individualsIn March 2014, we amended the Guidelines to more accurately reflect the market median multiple of salary for our Directors. This change was necessary because of the significant stock price appreciation that occurred since we last determined the Guidelines (in December 2012 at 22,000 shares). In order to reflect the Board’s commitment to share ownership, the required share ownership level for non-employee Directors is now a minimum of 12,500 shares.
The Directors are expected to make continuing progress towards compliance with the guidelinesGuidelines and to comply fully within five years of becoming subject to the guidelines. These policies, as they relate to our Named Executive Officers, are discussed in the “Compensation Discussion and Analysis” section of this proxy statement. In order to reflect the Board’s commitment to share ownership and
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that certain of our executive officers, andour Directors and persons who own more than 10% of a registered class of our equity securities file reports of ownership and changes in ownership with the Securities and Exchange Commission. ExecutiveSEC. These officers, Directors and greater than 10% shareholders are required by Securities and Exchange CommissionSEC rules to furnish us with copies of all forms they file. Based solely on our review of the copies of such forms received by us and written representation from certain reporting persons, we believe that, during 20102013 and until the date of this proxy statement, all Section 16(a) filing requirements applicable to our executivethose officers, Directors and 10% shareholders were satisfied.
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Page 16
COMPENSATION
Introduction
This discussionCompensation Discussion and analysis includes a description ofAnalysis (“CD&A”) describes the principles underlying our executive compensation policies andas well as our most important executive compensation decisions and practices for 2010, and provides analysis of these policies and decisions.2013. The following disclosure also gives context for the data we present in the compensation tables below and the narratives that accompany the compensation tables.
The following fivesix individuals are our Named Executive Officers for 2010,2013, as that term is defined by the Securities and Exchange Commission:
| Name | ||||
Stephen D. Newlin | Chairman, President and Chief Executive | |||
Robert M. Patterson(1) | Executive Vice President and Chief Operating Officer | |||
Bradley C. Richardson(2) | Executive Vice President and Chief Financial Officer | |||
Richard J. Diemer, Jr.(3) | Former Senior Vice President and Chief Financial Officer | |||
Thomas J. Kedrowski | Executive Vice President, Global Operations and Process Improvement | |||
Kenneth M. Smith | Senior Vice President and Chief Information and Human Resources Officer |
| (1) | Both Mr. Newlin and Mr. Patterson served in the positions shown for the entirety of 2013. Mr. Patterson will become President and Chief Executive Officer upon Mr. Newlin’s retirement from such positions effective May 15, 2014, at which time Mr. Newlin will become Executive Chairman of the Board of Directors. |
| (2) | Mr. Richardson began serving as our Executive Vice President and Chief Financial |
| Mr. | ||
Executive Summary
This section illustrates the relationship between our Named Executive Officers’ compensation and how we measure performance, and highlights significant Compensation Committee actions that occurred in 2013.
We are currently undergoing a leadership transition that we believe will position us to continue to deliver long-term value to our shareholders. Effective as of May 15, 2014, Mr. Newlin will retire as President and Chief Executive Officer and will become Executive Chairman. As of Mr. Newlin’s retirement, Mr. Patterson, who currently serves as our Executive Vice President and Chief Operating Officer, will become President and Chief Executive Officer. Because the leadership transition will take place in 2014, it did not affect which individuals qualified as Named Executive Officers for 2013.
How Pay is Tied to Company Performance. Our compensation programs are designed to: (1) reward employees for generating consistent improvement in Company performance; (2) attract and retain talented executives; and (3) align compensation with the interests of our shareholders and the ultimate goal of improving long-term shareholder value. We believe that executive compensation, both pay opportunities and pay actually earned, should be tied to Company performance. We view Company performance in two primary ways:
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Key 2013 Financial Performance Results. PolyOne delivered outstanding performance results in 2013. The Compensation Committee believes that Mr. Newlin and our other Named Executive Officers have performed extremely well in a challenging global environment and that their compensation is commensurate with this performance. The chart below sets forth key Company results over the previous calendar year (dollar amounts below are in millions, except per share amounts).
| Measure | 2012 | 2013 | Change | |||
Stock Price Per Share(1) | $20.42 | $35.35 | 73% | |||
Market Capitalization(2) | $1,820 | $3,400 | 87% | |||
Adjusted Earnings Per Share | $1.00 | $1.31 | 31% | |||
Adjusted Operating Income(3) | $191 | $262 | 37% | |||
Revenue(4) | $2,900 | $3,800 | 32% | |||
Organic Working Capital as a Percentage of Sales | 10.3% | 10.1% | (2%) |
| (3) | Our specialty platform operating income now represents 62% of our platform operating income, which is up from 2% in 2005, prior to Mr. Newlin’s appointment as CEO of PolyOne. |
| (4) | Revenue increased 32% versus 2012 driven by second-half solid top-line organic growth and the acquisitions of Spartech and Glasforms. |
In late 2009addition, we have achieved seventeen consecutive quarters of strong double-digit adjusted earnings per share growth, with a compounded annual earnings per share percentage growth rate of 25% during this period. We attained a record-level year-end adjusted earnings per share of $1.31.
Following our acquisition of Spartech, a supplier of sustainable plastic sheet, color and early 2010,engineered materials and packaging solutions, and through our aggressive integration efforts, we were confronted with uncertainty regardingare already beginning to see the extentbenefits of a global economic recovery. The housing and automotive markets remained at historically low levels, raw material costs were rising, and income from our Sunbelt joint venture was substantially below its prior year results. Despite these conditions, in early 2010 our Board of Directors approved an annual operating plan designed to position us for stability and continued growth. The plan assumed that we would achieve a 40% improvement in operating results through focused executionthe acquisition. At the time of our acquisition, we estimated improving our earnings per share by $0.01 to $0.02 in 2013. Based on our early success in commercial and operational excellence efforts, as well as our aggressive efforts to eliminate duplicate company costs, we added $0.12 to our adjusted earnings per share in 2013.
Return to Shareholders. Delivering seventeen consecutive quarters of strong double-digit adjusted earnings per share expansion, along with regularly establishing new, record levels of profit and profitability, has created shareholder value in excess of the overall market. These accomplishments were driven by our aggressive goal setting and our relentless efforts to execute our well-defined four pillar strategy which consists of:of specialization, globalization, commercial excellence and operational excellence.
Note: Adjusted earnings per share and marketplace uncertainty provided significant headwindsadjusted operating income for consolidated PolyOne differ from what is reported under United States GAAP. See Appendix A for a reconciliation of non-GAAP financial measures to our results as reported under GAAP.
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2013 Financial Results Under Incentive Plans and Pay-for-Performance. In line with our compensation program’s emphasis on pay-for-performance, compensation awarded to our Named Executive Officers for 2013 reflected PolyOne’s strong financial results. The chart below sets forth certain key financial results that were used in 2010, we focused on generating new business, creating efficienciesdetermining payouts under our short-term and innovating new solutions. Aslong-term incentive compensation plans for 2013, as well as the payout percentages under each plan (dollar amounts are in millions, except for percentages and per share amounts).
| Annual Plan | Measure | Weighting | 2013 Targets | 2013 Results | Payout % | |||||
| Adjusted Operating Income | 50% | $239.3 | $272.5 | 194.9% | ||||||
| Working Capital as a % of Sales | 25% | 10.5% | 10.0% | 191.4% | ||||||
| Revenue | 25% | $3,773.4 | $3,827.8 | 113.9% | ||||||
Total Company Annual Plan Attainment | 173.8% | |||||||||
| Long-Term Incentive Plan: Cash-Settled Performance Units | Measure | Weighting | 2011-2013 Target | 2011-2013 Result | Payout % | |||||
| Cumulative Adjusted Earnings Per Share (2011-2013 performance period) | 100% | $2.79 | $3.65 | 200% | ||||||
All financial measures (Targets and Results) reported in the above table were calculated with adjustments for acquisitions, divestitures and special items pursuant to the terms of the plans and as approved by the Board of Directors.
Annual Incentive Plan:All of our Named Executive Officers earned payouts above their target 2013 Annual Plan opportunities, with an overall payout of 173.8% of target as a result of our intense focus on strategy and execution, in 2010, each of our business platforms attained record-setting levels of operating income or profitability, our revenue climbed 27%, our stock price improved 67% and our dilutedstrong fiscal 2013 performance.
Cash-Settled Performance Units:Cumulative adjusted earnings per share rose 252%. Overall operating incomewas the performance measure for 2010 was 121% higher thanthis award in order to drive improvements in shareholder value. Our strong performance over the prior year. Working capitalpast three years led to a maximum payout (200% of target) for the cash-settled performance units granted to each Named Executive Officer under the 2011 – 2013 Long-Term Incentive Plan.
Stock-Settled Stock Appreciation Rights: We maintained stock price performance hurdle vesting requirements for the stock appreciation right (or “SAR”) awards granted as part of the 2013 – 2015 Long-Term Incentive Program to further align executive compensation with shareholder interests. The 2013 awards initially vest in one-third increments upon achieving each of the following stock price hurdles and maintaining them for thirty consecutive trading days: 10%, 15% and 20% increase respectively over the initial grant date closing stock price of $23.08. These hurdles were met in 2013. The SARs also are subject to additional time-based vesting requirements that lapse one-third on each of the first three anniversaries of the grant date.
Details regarding each of these incentive plans and payments are set forth in the “Analysis of 2013 Compensation Decisions and Actions” section of this proxy statement.
We are pleased with our accomplishments in 2013, and are well-positioned to continue our transformation into a percentage of sales was 9.6% — which we considerhigh performing global specialty company. We believe our executive compensation programs described below and in the accompanying tables played a vital role in driving the strong financial results noted above, and appropriately align pay and performance.
Listening to be world-class performance.Shareholders. At the end2013 Annual Meeting of 2010,Shareholders, we had $378 millionheld our third annual advisory vote on Named Executive Officer compensation. For the second consecutive year, 96% of the votes cast were in cash, $506 millionfavor of this advisory proposal. The Compensation Committee reviewed the voting results and considered this favorable outcome to convey our shareholder’s strong support for the Compensation Committee’s decisions and the existing executive compensation programs and practices. As a result, the Compensation Committee made no material changes in available liquidity,the structure
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of our compensation programs or pay-for-performance philosophy based on the voting results for the proposal. At the 2014 Annual Meeting of Shareholders, we will again hold an improved credit rating,advisory vote to approve the Named Executive Officer compensation. The Compensation Committee expects to consider the results from this year’s and limited near-term debt maturities, positioning us well to fund operating expensesfuture advisory votes on Named Executive Officer compensation.
Executive Compensation Practices and pursue acquisitionsPrograms. The executive compensation practices and programs described below and in the accompanying tables played a vital role in driving strong financial results and aligning pay with performance for 2013, and are designed to further accelerateattract and retain a highly experienced, successful team to manage PolyOne. Our practices and programs are directly linked to our transformation. Throughout 2010,key business objectives and designed to create value for our shareholders.
Highlights of our practices and programs include:
ü Pay-for-Performance – As described below, the majority of executive pay is performance-driven and must be earned every year based on objective, challenging financial goals and individual performance. ü Shareholders Approve our Executive Compensation – In May 2013, we received the support of 96% of the votes cast on our Named Executive Officer compensation proposal pursuant to our third advisory “say-on-pay” vote. ü Mitigate Undue Risk – We utilize maximums on potential payments, include retention vehicles in our compensation programs, provide multiple performance targets and maintain robust Board and management processes to identify risk, which includes a risk assessment of executive compensation programs that is performed each year. ü Meaningful Stock Ownership Guidelines – All Named Executive Officers are subject to stock ownership guidelines, and are either exceeding, or, for our newly-hired Named Executive Officers, are on target to achieve the Guidelines within five years of being subject to such Guidelines. ü Vigorous Corporate Governance – We have policies that prohibit our Named Executive Officers from hedging or pledging our securities. ü Annual Review of Share Utilization – Prior to the annual equity award grants to Named Executive Officers, we evaluate annual and aggregate dilution from stock awards. ü No Excise Tax Gross-Ups – We do not provide excise tax gross-up benefits for “excess parachute payments” under Section 280G of the Internal Revenue Code of 1986, as amended (“Code”) in any new management continuity agreements. We also do not provide tax gross-up benefits for financial planning. ü No Excessive Executive Benefits – We provide limited executive benefits to our Named Executive Officers and those benefits provide value to our business. |
Details on these practices and programs are set forth in this CD&A. |
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2013 Pay-for-Performance Analysis. As described more fully below, we demonstrated our ability to meet and surpass our goals and objectives, with a record-setting year on a number of different measures.
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We believe that the returns to shareholders shown in the above graph indicate that our pay-for-performance philosophy, compensation plan design and selected metrics are working, and have resulted in performance that has provided increased value to our shareholders over both the short and long-term.
We believe the compensation of our Named Executive Officers has been commensurate with our performance results. Since he joined PolyOne in 2006 as its CEO, Mr. Newlin has been highly effective at driving margin growth in the transformation of PolyOne to createa high performing global specialty company. By refocusing the sales force on value and maximize shareholder value was to focusprofits versus volumes, and emphasizing specialty businesses versus those more commodity in nature, Mr. Newlin and his senior management team have driven substantial earnings growth.
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The following graph provides a historical perspective comparing Mr. Newlin’s earned compensation and our Senior Executive Annual Incentive Plan (the “Annual Plan”) on operating income improvement and working capital management, and to link payments under the Long-Term Incentive Plan to improvements in our working capital and creating shareholder value. The performance unit component of the Long-Term Incentive Plan is earned when the pre-established financial goal, working capital as a percentage of sales, is achieved. Performance was based on a one-year period in 2010 and awards are payable in cash after three years (i.e., in early 2013) contingent on the individual’s continued employment with the Company over the time period in order to enhance retention.
For purposes of this graph, pay is defined as the three-year (2010-2012) sum of base salary, earned annual incentive opportunity from 100% to 110% in order to leverage his variable compensation opportunity by placing a greater portionincentives, the value of his pay at risk.
Compensation Philosophy and Objectives
Our executive compensation programs reward our officers’ performance and are specifically linked to our achievement of strategic operating and financial goals and are designed to be competitive in the marketplace. Our executives are rewarded for performance that meets or exceeds our strategic goals, without encouraging excessive risk-taking that could have a detrimental impact on our long-term results and the interests of our shareholders. We believe the design of our compensation plans and the relative mix of compensation elements successfully motivate our executives to improve our overall corporate performance and the profitability of the specific business unitunit(s) for which they are responsible, thus maximizing shareholder value. The main objectives of our executive compensation programs are to:
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Setting 20102013 Executive Compensation Levels
Compensation Consultant
Our executive compensation programs are approved and overseen by the Compensation Committee, which is composed entirely of independent directors.Directors. For 2010,2013, the Compensation Committee selected and retained an independent compensation consultant, Towers Watson,the Consultant to assist the Committee in with
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assessing the competitiveness and overall appropriateness of our executive compensation programs. The Compensation Committee worked in conjunction with Towers Watsonthe Consultant and withconsidered input from members of senior management.
As described below, Towers Watsonthe Consultant assisted the Compensation Committee in approximatingby (1) benchmarking compensation so we could align base salaries, andas well as annual and long-term incentive targets, with our competitive market pay philosophy discussed below, (2) providing guidance on incentive plan design, (3) monitoring and communicating trends in accordanceexecutive compensation to the Compensation Committee, (4) assisting with the market median,proxy statement disclosure, (5) assessing Board of Directors’ compensation and assisted our human resources department in preparing tally sheets to provide the Committee with information regarding our Named Executive Officers’ total annual compensation, termination benefits and wealth accumulation.
Competitive Market Pay Information and Benchmarking
We have designed our compensation programs to be competitive with companies of comparable size and industry with whom we compete for executive talent. We annually analyze competitive market compensation data relating to salary, annual incentives and long termlong-term incentives. The Compensation Committee generally manages individual components of compensation and targetinitially targets total compensation relative to the median (50th Percentile)(50th percentile) of the competitive market data. However, the Compensation Committee considers many other factors, includingconsisting of the responsibilities, performance, contributions and experience of the named executive officer, includingeach Named Executive Officer and compensation in relation to other employees.employees to determine final total compensation amounts. As a result, the Company doeswe do not set total direct compensation or the component parts at levels to achieve a mathematically precise market position. For 2013, Mr. Newlin’s compensation was set above the market median, which is aligned with Company performance and Mr. Newlin’s skills and experience. We also periodically analyze competitive compensation market compensation data relating to retirement benefits and perquisites, most recently in 2009.other benefits. The Compensation Committee obtains advice and recommendations from Towers Watsonthe Consultant in these and other areas of total compensation.
In analyzing competitive market data for the purpose of determining the market median for 2013, we drawdrew from twothree independent sources. We first reviewreviewed proxy statement disclosures of a peer group of similarly-sized U.S.United States chemical companies to establish an estimate of market compensation for our senior executives. This approach providesprovided insight into specific company practices at business competitors or companies facing similar operating challenges.
In 2010, with the guidance of Towers Watson,recent years we conducted a review ofrefined our peer group to ensure it consisted of appropriate companies to which we should be compared. Multiple factors were taken into consideration during the review including: company revenue between $1.03 billion — $4.12 billion, total asset size between $0.70 billion — $2.78 billion and number of employees between 1,950 — 7,800, as well as whether each potential peer company hadreflect our progress toward becoming a global presencespecialty company. In March 2013, we evaluated our current peers and a specialty chemical focus. other potential peers, giving specific consideration to the following factors:
| Factor | Average of Peer Group Comparator | PolyOne 2013 Results | ||
Company Revenue | $3.4 billion | $3.8 billion | ||
Total Asset Size | $3.9 billion | $2.9 billion | ||
Employee Numbers | 6,300 | >7,600 |
We also looked at the frequency with which these companies were used as peers by other companies in our industry, and which companies had identified usPolyOne as a peer.peer, and whether each potential peer company had a global presence and a specialty chemical focus. In addition, we considered whether they wereeach company was in the same SICStandard Industrial Classification code as PolyOne and whether we
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| PolyOne Peer Group | ||||
| Albemarle Corporation | International Flavors & Fragrances Inc. | |||
| A. Schulman, Inc. | Eastman Chemical Company | Rockwood Holdings, Inc. | ||
| Ashland, Inc. | Ecolab, Inc. | RPM International Inc. | ||
| The Scotts Miracle-Gro Company | ||||
| FMC Corporation | Sigma-Aldrich Corporation | |||
| Celanese Corporation | H.B. Fuller Company | |||
| The Valspar Corporation | ||||
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The second and third independent sources of data that we used to augment the peer proxy analysis was the Consultant’s analysis of competitive market data relating to (1) the broader chemical industry and provide a broader sense of market practices, we also review data from Towers Watson’s Executive Compensation Data Base, Towers Watson’s(2) other applicable general industries using the following surveys: the Consultant’s executive compensation database, the Consultant’s Top Management Compensation Survey and Mercer’s Executive Compensation Survey relating to the chemical industry and other applicable general industries, as provided by Towers Watson.Survey. To obtain comparability based on company size, the dataConsultant’s analysis either referencesreferenced a specific sample of comparably-sized companies or calibratescalibrated the pay of a broad sample of companies against company size. ThisThe specific identity of the companies in these surveys was not material to our use of the comparability data isbased on this process used as oneby the Consultant.
Review of several inputs into management’s and the Committee’s determination of market compensation levels.
Management and the Compensation Committee annually review the specific pay disclosures of our peer group and the broad-based survey data provided by Towers Watson described above.the Consultant. Management uses this data to develop recommendations for the Compensation Committee’s review regarding eligibility, award opportunities, performance measures and goals for the incentive plan performance periods commencing in the following year. The Compensation Committee discusses andalso considers this information when making compensation decisions and aligning each of the pay elements with our compensation objectives and relative market practices.
The Compensation Committee and management annually review and consider tally sheets, which are developed collaboratively by Towers Watson and our Human Resources department and reviewed by the Consultant, to determine the reasonableness of the compensation of our Named Executive Officers. The tally sheets provide information regarding each Named Executive Officer’s base salary, annual incentives, long-term incentives, perquisites,other benefits, retirement benefits and wealth accumulation.
Annually, the Chief Executive Officer typicallyCEO recommends, for the Compensation Committee’s review and approval, specific base salary and target incentive adjustments for each of the other Named Executive Officers.Officers, if an adjustment is warranted. The Chief Executive OfficerCEO makes his recommendations in conjunction with the marketplace data and input provided by Towers Watson.the Consultant. He does not participate in any discussions with the Compensation Committee involving his own compensation. With guidance from Towers Watsonthe Consultant regarding market pay levels and based on a rigorous review of 2012 performance and our compensation philosophy, the prior year’s performance, theCompensation Committee determinesdetermined the appropriate base salarypay levels for the Chief Executive Officer.
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| Base | INDEXED RETURNS | |||||||||||||||||||||||
| Period | Years Ending | |||||||||||||||||||||||
| Company / Index | 12/31/05 | 12/31/06 | 12/31/07 | 12/31/08 | 12/31/09 | 12/31/10 | ||||||||||||||||||
| PolyOne Corporation | $ | 100 | $ | 116.64 | $ | 102.33 | $ | 48.99 | $ | 116.17 | $ | 194.25 | ||||||||||||
| S&P 500 Index | $ | 100 | $ | 115.79 | $ | 122.16 | $ | 76.96 | $ | 97.33 | $ | 111.99 | ||||||||||||
| S&P Mid Cap Chemicals | $ | 100 | $ | 117.76 | $ | 149.65 | $ | 94.16 | $ | 150.05 | $ | 209.77 | ||||||||||||
We provide three elements of direct compensation that are discussed in detail below: base salary; annual incentive compensation; and long-term incentive compensation. The following table summarizes the allocation of the compensation opportunity at target, or “pay mix”mix,” that was granted in 20102013 to the Named Executive Officers based upon the primarytheir three elements of compensation (base salary,compensation. Both the annual incentive opportunity and long-term incentive opportunity). Both the annual incentive and long-term incentive opportunity represent the variable
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| PAY MIX ALLOCATION | |||||||||||||||||||||||||
Element | Newlin | Patterson | Smith | Kedrowski | Baert | ||||||||||||||||||||
| Base Salary | 19 | % | 34 | % | 40 | % | 40 | % | 42 | % | |||||||||||||||
| Annual Incentive Opportunity | 20 | % | 21 | % | 22 | % | 22 | % | 21 | % | |||||||||||||||
| Long-Term Incentive Opportunity | 61 | % | 45 | % | 38 | % | 38 | % | 37 | % | |||||||||||||||
Target Pay Mix Allocation | ||||||||||||
| Named Executive Officer | Base Salary % | Annual Incentive % | Long-Term Incentive % | |||||||||
S.D. Newlin | 18% | 20% | 62% | |||||||||
R.M. Patterson | 31% | 22% | 47% | |||||||||
B.C. Richardson | 33% | 22% | 45% | |||||||||
R.J. Diemer, Jr. | 39% | 23% | 38% | |||||||||
T.J. Kedrowski | 39% | 22% | 39% | |||||||||
K.M. Smith | 39% | 22% | 39% | |||||||||
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Analysis of 2013 Compensation Decisions and rewardActions
Base Salary
We pay base salaries to attract talented executives for the attainmentand to provide a fixed base of sustainable, long-term success. For positions with significant business unit responsibilities, annual incentive programs also emphasize success at the business unit level, which may lead to Named Executive Officers at comparable levels being paid differently.
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There are three situations that may warrant an adjustment to base salary:
Annual Merit Increase. All employees’ base salaries are reviewed annually for possible merit increases taking into account the above listed factors, but merit increases are not automatic or guaranteed. In recognition of the significant role Mr. Newlin played in transforming PolyOne into a high-performing organization, as well as his strong leadership, particularly in light of recent merger and acquisition activity, and after a review of competitive market data, the Compensation Committee approved a seven percent adjustment to his annual base salary for 2013, as outlined in the followingbelow table. In the Compensation Committee’s judgment, this base salary is appropriate in order to fairly compensate and retain Mr. Newlin. The Compensation Committee also increased the annual base salaries of each of the other Named Executive Officers (excluding Mr. Kedrowski) in accordance with market pay levels, trends around merit increases and individual specific roles and responsibilities, as outlined below.
Promotion or Change in Role. Base salary may be increased to recognize additional responsibilities resulting from a change in an employee’s role or a promotion to a new position; however, increases are not guaranteed. In recognition of his many contributions to date and as well as the increased responsibilities he assumed in connection with PolyOne’s acquisition of Spartech, the Compensation Committee approved Mr. Kedrowski’s promotion to Executive Vice President, Global Operations and Process Improvement with an increase in annual base salary to $400,000.
Market Adjustment. A market adjustment may be awarded to an individual who is performing successfully when we recognize a significant gap between the market data and the individual’s base salary. No Named Executive Officer received a market adjustment in 2013.
The below table lists the 2013 base salaries that were approved by the Compensation Committee for the Named Executive Officers, with salary changes effective in May 2010:
Named Executive Officer | 2009 Base Salary | 2010 Base Salary | Adjustment % | ||||||||||||
| Stephen D. Newlin | $ | 860,000 | $ | 860,000 | 0% | ||||||||||
| Robert M. Patterson | $ | 415,000 | $ | 430,000 | 3.6% | ||||||||||
| Kenneth M. Smith | $ | 336,000 | $ | 344,000 | �� | 2.4% | |||||||||
| Thomas J. Kedrowski | $ | 322,000 | $ | 333,000 | 3.4% | ||||||||||
| Bernard Baert | $ | 392,931 | $ | 401,683 | 2.2% | ||||||||||
| Named Executive Officer | 2012 Base Salary | 2013 Base Salary | % Change | |||
S.D. Newlin(1) | $980,000 | $1,050,000 | 7% | |||
R.M. Patterson(1) | $515,000 | $551,000 | 7% | |||
B.C. Richardson(2) | N/A | $520,000 | N/A | |||
R.J. Diemer, Jr.(1) | $435,000 | $455,000 | 5% | |||
T.J. Kedrowski(3) | $356,000 | $400,000 | 12% | |||
K.M. Smith(1) | $365,000 | $380,000 | 4% |
| (1) | Messrs. Newlin, Patterson and Smith’s 2013 base salary increases went into effect thirteen months after their 2012 base salary increases, and Mr. Diemer’s increase went into effect fourteen months after his date of hire. |
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| (2) | Mr. Richardson was hired in November 2013 and did not have a PolyOne base salary in 2012. Mr. Richardson’s 2013 base salary was benchmarked against competitive market data for similar roles. |
| (3) | Mr. Kedrowski’s 2013 promotional increase went into effect six months after his last base salary increase. |
Based on the competitive market data provided by Towers Watson,the Consultant, we determined that the 20102013 salaries of the Named Executive Officers were within a range from 93% to 111% of 11% above and 5% below the 2013 market medianmedians for comparable positions, with an average of 103% for all Named Executive Officers.
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Annual Incentive
We pay an annual incentive to use the market median as a reference point and(1) reward our Named Executive Officers for achievement ofachieving specific performance objectives that would advance our profitability,profitability; (2) drive key business results; and (3) recognize individuals based on their contributions to those results. The below table lists the Committee approved the following target2013 individual annual incentive levelsopportunities that were approved by the Compensation Committee for the Named Executive Officers, which are the same as the 2012 individual annual incentive opportunities (for those who were serving in 2012).
| Named Executive Officer | 2013 Annual Incentive Opportunity | |
S.D. Newlin | 110% | |
R.M. Patterson | 70% | |
B.C. Richardson(1) | 65% | |
R.J. Diemer, Jr. | 60% | |
T.J. Kedrowski | 55% | |
K.M. Smith | 55% |
| (1) | Mr. Richardson was hired in November 2013 and did not have a PolyOne annual incentive opportunity for 2012. Mr. Richardson’s annual incentive opportunity was benchmarked against competitive market data for similar roles. |
Based on the competitive market data provided by the Consultant, we determined that the 2013 Annual Plan opportunities for 2010 as follows:
Named Executive Officer | 2009 Annual Plan Target | 2010 Annual Plan Target | ||||||||
| Stephen D. Newlin | 100 | % | 110 | % | ||||||
| Robert M. Patterson | 50 | % | 60 | % | ||||||
| Kenneth M. Smith | 50 | % | 55 | % | ||||||
| Thomas J. Kedrowski | 50 | % | 55 | % | ||||||
| Bernard Baert | 50 | % | 50 | % | ||||||
The Compensation Committee determined, after a thorough evaluation of possible plan designs and performance measures, for the Annual Plan: operating income and working capital as a percentage of sales. The Committee chose to usethat we would maintain the same performance measuresfundamental Annual Plan design in 2013 as thosewe used in 2009 in order2012, however, we added a revenue performance measure to continue to drive profitability, promote working capital management, improve cash flow and drive efficiency in our operations, all of which we believe lead to maximizing shareholder value. We selectedencourage profitable sales growth. The Compensation Committee’s evaluation demonstrated that these performance measures for the Annual Plan as they wereare the most critical elements of PolyOne’s performance for 2010. In theboth 2012 and 2013 and when combined, contribute to sustainable growth. The 2013 Annual Plan theseperformance measures are defined as:
| • | Adjusted Operating | ||
| • | Revenue. Revenue represents net trade sales to third parties. The calculation includes recently acquired businesses (Spartech and Glasforms) and includes our non-core resin business results through the date of its divestiture. |
| • | Working Capital as a Percentage of Sales. Working capital as a percentage of sales is calculated |
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The 2013 performance for 2010 we increased the weighting on operating income from 50% to 65% and we reduced the weighting on working capital as a percentage of sales from 50% to 35%. Mr. Baert is the only Named Executive Officer with responsibility for business unit specific results within the international region, and his incentive opportunity under the Annual Plan is based on operating income for that region. The performance measures and weightings used for the Named Executive Officers in the 2010were based upon PolyOne’s consolidated results and were weighted as follows:
We set aggressive Annual Plan were as follows:
Performance Measure | Newlin | Patterson | Smith | Kedrowski | Baert | ||||||||||||
| Company Operating Income | 65% | 65% | 65% | 65% | — | ||||||||||||
| Business Unit Operating Income (within International) | — | — | — | — | 65% | ||||||||||||
| Consolidated Working Capital as a Percentage of Sales | 35% | 35% | 35% | 35% | 35% | ||||||||||||
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Our 2013 operating income performance goals were able to achieve maximum performance onaggressive and were set in accordance with our working capital as a percentage of sales metric by achieving 9.6%, which is considered world-class performance, and represents an improvement of 20.7% over 2009. In addition, onstrategic plan framework. On a consolidated basis, our performance and results under the total Company adjusted operating income metric were strong; adjusted operating income exceeded the maximumAnnual Plan’s target goal by 14% in 2013. The Company adjusted operating income incentive goal attainment was 194.9% of our target performance level and was 170.7% higher than the prior year.level. We viewed the targeted level of performance for this metric as very challenging to achieve, and hence the actual level of performance reflects superlativeexceptional results.
The 2013 working capital as a percentage of sales performance goals were set in accordance with our strategic plan framework and were intended to maintain our strong working capital performance. In 2013, we were able to sustain our strong performance from the previous year by maintaining a world-class performance working capital as a percentage of sales with an Annual Plan result of 10.0%. As a result of this performance, the working capital as a percentage of sales incentive goal attainment was 191.4% of our target performance level.
As noted above, the 2013 Annual Plan introduced revenue as a performance measure in order to encourage profitable revenue growth. The 2013 revenue performance goals were set in accordance with our strategic plan framework. Revenue increased 32% from 2012, driven by solid second half top-line organic growth and the acquisitions of Spartech and Glasforms. The revenue incentive goal attainment was 113.9% of our target performance level.
The Annual Plan, as it relates to the Named Executive Officers, contains a “negative discretion” feature. If threshold attainment levels are attained, Named Executive Officer’s are eligible for payments up to the maximum permitted under the plan provisions. The Compensation Committee may use its discretion to make a final determination of above-targetthe amount to maximum performance for this metric in 2010 required exceptional performance across all disciplines and business units.
| 2010 Goals | ||||||||||||||||||||||||||||||
| 2009 | 2010 | 2010 | ||||||||||||||||||||||||||||
| Actual | Threshold | Target | Maximum | Actual | % Plan | |||||||||||||||||||||||||
Performance Measure ($ in millions) | Result | (50%) | (100%) | (200%) | Result | Attainment | ||||||||||||||||||||||||
| Company Operating Income | $ | 54.9 | $ | 54.3 | $ | 69.4 | $ | 99.5 | $ | 148.2 | 200.0 | % | ||||||||||||||||||
| Consolidated Working Capital as a Percentage of Sales | 12.1 | % | 12.0 | % | 11.3 | % | 10.6 | % | 9.6 | % | 200.0 | % | ||||||||||||||||||
| Business Unit Operating Income (Baert) | $ | 24.4 | $ | 34.1 | $ | 41.5 | $ | 58.1 | $ | 58.8 | 200.0 | % | ||||||||||||||||||
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| 2013 Goals | ||||||||||||
Performance Measure ($ in millions) | 2012 Actual Result(1) | Threshold 50% | Target 100% | Maximum 200% | 2013 Actual Result | 2013 Payout as % of Target | ||||||
| Company Adjusted Operating Income | $221.0 | $221.4 | $239.3 | $274.3 | $272.5 | 194.9% | ||||||
| Consolidated Working Capital as a Percentage of Sales | 9.9% | 11.1% | 10.5% | 9.9% | 10.0% | 191.4% | ||||||
Revenue | N/A(2) | $3,577.3 | $3,773.4 | $4,157.5 | $3,827.8 | 113.9% | ||||||
| (1) | The 2013 goals (threshold, target and maximum) were set contemplating both completed and planned acquisitions and divestures that would occur during 2013 and, therefore, are not directly comparable to our reported 2012 results. Further, results include amounts related to our non-core resin business. |
| (2) | Revenue was added as a performance measure under the Annual Plan for the first time in 2013. |
The actual amounts earned by the Named Executive Officers under the Annual Plan for 2013 are set forth in the Non-Equity“Non-Equity Incentive Plan CompensationCompensation” column of the 20102013 Summary Compensation Table.
Long-Term Incentive
We provide performance-based long-term incentive compensation to certain of our executives, including the Named Executive Officers, to directly tie the interests of these individuals to the interests of our shareholders. We also believe that long-term incentive compensation is an important retention tool. At the Annual Meeting in May 2008,2010, our shareholders approved the 2008 Equity and Performance Incentive Plan (the “2008 Plan”), which was used to make equity incentive awards in 2010. Our shareholders approved the 2010 Equity and Performance Incentive Plan (the(referred to as the “2010 Plan” or the “Long-Term Incentive Plan”) atunder which we can provide long-term incentive awards to our executives. At the Annual Meeting in May 2012, our shareholders approved the First Amendment to the 2010 Annual Meeting. Our 2011Plan (referred to as the “Amended 2010 Plan”). The 2013 Long-Term Incentive Plan grants will be madewere awarded under the Amended 2010 Plan.
Individual Long-Term Incentive Plan targets, which are reflected as a percentage of base salary, are established with consideration of our competitive market median levels for each Named Executive Officer’s positionpay philosophy discussed in the “Competitive Market Pay Information and Benchmarking” section of this proxy statement and are intended to reward themthe Named Executive Officers for achievement ofachieving specific performance objectives.
| Named Executive Officer | 2012 Long-Term Incentive Opportunity | 2013 Long-Term Incentive Opportunity | % Change | |||||||||||
S.D. Newlin | 350% | 350% | 0% | |||||||||||
R.M. Patterson(1) | 140% | 150% | 7% | |||||||||||
B.C. Richardson (2) | N/A | N/A | N/A | |||||||||||
R.J. Diemer, Jr. | 100% | 100% | 0% | |||||||||||
T.J. Kedrowski | 100% | 100% | 0% | |||||||||||
K.M. Smith | 100% | 100% | 0% |
| (1) | Mr. Patterson’s Long-Term Incentive Plan opportunity was adjusted to better align his compensation with current competitive market data. |
| (2) | Mr. Richardson was hired in November 2013, thus, he did not have a PolyOne Long-Term Incentive Plan opportunity in 2012 or 2013. |
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COMPENSATION
Based on 2013 competitive market data provided by the Consultant, we determined that the individual Long-Term Incentive Plan opportunities granted to the Named Executive Officers in 2013 ranged from 5% above to 29% below the 2013 market median for comparable positions. Individual opportunities varied based on time with PolyOne, individual performance and leadership efforts.
Awards Granted in 2010
On February 2010,15, 2013, we granted long-term incentive awards under the 2008Amended 2010 Plan usingas part of our annual Long-Term Incentive Plan award. For purposes of these grants, and after a thorough evaluation of other possible vehicles, the Compensation Committee elected to retain the same three compensation vehicles withand weightings that we used in the allocation of the award values roughly as follows: 36% of the award’s value was allocated2012 annual Long-Term Incentive Plan, which are listed below. We maintained this plan design to performance units for the 2010 performance period, 30% was allocated to stock-settled SARs and 34% was allocated to RSUs. We chose this mix in ordercontinue to provide a balance between the relative values of the three components andcompensation vehicles while efficiently useusing the shares available under the 2008Amended 2010 Plan.
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Cash-Settled Performance Units
Cash-settled performance units provide an opportunity for employees to receive a cash bonus if specified performance measures are met for a pre-defined performance period. On February 15, 2013, we granted in Februarycash-settled performance units under the Amended 2010 Plan to all Named Executive Officers serving at that time as part of our annual Long-Term Incentive Plan award. The cash-settled performance units will be paid in cash, consistent with past practice, and wereearned based on achievement ofachieving adjusted earnings per share performance goals relating to our working capitalduring the three-year period of January 1, 2013 through December 31, 2015. The Compensation Committee maintained adjusted earnings per share as a percentage of sales during 2010. The Committee selected working capital as a percentage of sales as the 2013 performance measure in order to reinforcedrive improvements in shareholder value. In 2013, we utilized the following four performance periods and relative weightings to drive annual performance as well as cumulative performance. Requiring annual, as well as cumulative, performance goals ensures that adjusted earnings per share growth is a constant and visible incentive goal for our focus on improving working capital. In 2010, we again electedNamed Executive Officers to use a one-year measurement period for performance units in order to sustain our working capital performance attained in 2009, continue our focus on generating cash and in acknowledgement of the significant continued economic uncertainty at the time the goals were set. achieve each year.
Performance Period | Weighting | |
January 1, 2013 through December 31, 2013 | 25% | |
January 1, 2014 through December 31, 2014 | 25% | |
January 1, 2015 through December 31, 2015 | 25% | |
January 1, 2013 through December 31, 2015 | 25% |
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COMPENSATION
The attainment level for the cash-settled performance units iswill be determined at the end of each applicable performance period. We established threshold, target and maximum adjusted earnings per share goals for each of the measurement period, but awards generally do not become vestedabove listed performance periods. Participants will earn, for three years, in order to serve as a retention vehicle.
We do not disclose the specific adjusted earnings per share goals that we established for the cash-settled performance units granted in 2010,2013 in this proxy statement because (1) these goals relate to executive compensation to be earned and/or paid in future years and do not effect a fair understanding of the Named Executive Officers’ compensation for 2013 and (2) we were ablebelieve that disclosure of such goals while the applicable performance period is ongoing would cause us competitive harm. However, we disclose such goals in future proxy statements once the applicable performance periods have ended as part of our discussion and analysis about the amounts earned by the Named Executive Officers under these awards. In setting the applicable target levels, the Compensation Committee considered how achievement of the performance goals could be impacted by events expected to occur in the coming years. When establishing the specific goals for the Adjusted Earnings Per Share performance metric, we specifically considered how likely it will be for us to achieve working capital as a percentage of sales equal to 9.6%, which equated to a maximum level of performance.the goals. We believe this levelthat the threshold goals have been established at levels that should be appropriately difficult to attain, and that the target goals will require considerable and increasing collective effort on the part of performance influenced the improvement in our stock price during the courseemployees, including our Named Executive Officers, to achieve. Achievement of the year, benefiting both PolyOne and our shareholders, and positioned us well for future success. Performance goals at the threshold, target, and maximum levels for the 2010 performance units are shown below.
| 2010 Goals | ||||||||||||||||||||||||||||||
| 2009 | 2010 | 2010 | ||||||||||||||||||||||||||||
| Actual | Threshold | Target | Maximum | Actual | % Plan | |||||||||||||||||||||||||
Performance Measure | Result | (50%) | (100%) | (200%) | Result | Attainment | ||||||||||||||||||||||||
| Working Capital as a Percentage of Sales | 12.1 | % | 12.0 | % | 11.3 | % | 10.6 | % | 9.6 | % | 200 | % | ||||||||||||||||||
Stock-Settled Stock Appreciation Rights
On February 15, 2013, we granted performance-based stock-settled SARs
Restricted Stock Units
To promote share ownership and enhance the retention of our executives, we also granted time-based RSUs inon February 15, 2013 under the Amended 2010 Plan to all Named Executive Officers.Officers serving at that time as part of our annual Long-Term Incentive Plan award. The RSUs vest on the third anniversary of the grant date.
One-Time Awards of Restricted Stock Units
The Compensation Committee granted special one-time awards of RSUs to executives, including Named Executive Officers, in 2013 to reward specific achievements. These grants are described below.
On March 8, 2013, we granted a one-time award of 100,000 RSUs to Mr. Newlin. The award was intended to recognize Mr. Newlin’s significant contributions over the past seven years in transforming PolyOne into a specialty chemical company. Specifically, the award was intended to recognize Mr. Newlin’s success in implementing PolyOne’s four pillar strategy; driving growth in our specialty platform to the point that it now represents more than 50% of our operating profits (at the
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COMPENSATION
time of Mr. Newlin’s grant); significantly upgrading PolyOne’s portfolio by acquiring specialty companies such as GLS Corporation in 2008, ColorMatrix in 2011, and Spartech in 2013; by divesting of PolyOne’s interest in its non-core equity investments, such as Oxy Vinyls and SunBelt as well as our non-core resin business, which was sold in May 2013; creating an effective management team and a robust succession plan; and instituting talent upgrades and discipline throughout the organization.
Because of these significant achievements and his demonstrated ability to deliver results that increase shareholder value, our Compensation Committee believed that the award of 100,000 RSUs was appropriate and consistent with its goal of rewarding executives for stellar performance. The vesting and other conditions of this grant are similar to the RSU grants made on February 15, 2013, with the exception of the vesting provisions relating to Mr. Newlin’s retirement, and will pay out in all cases at the same time as the other grants made on February 15, 2013. This award is set forth in the 2013 Grants of Plan-Based Awards table of this proxy statement.
To recognize their significant contributions with regard to PolyOne’s acquisition of Spartech and its continued successful integration with PolyOne, on March 13, 2013, Messrs. Patterson and Kedrowski were each granted a one-time award of 25,000 RSUs, Mr. Smith was granted a one-time award of 15,000 RSUs and Mr. Diemer was granted a one-time award of 2,500 RSUs (which was later modified and a portion forfeited), as set forth in the “Potential Payments Upon Termination or Change of Control” section of this proxy statement. The vesting and other conditions of these grants are substantially similar to the RSU grants made on February 15, 2013. These awards are also set forth in the 2013 Grants of Plan-Based Awards table of this proxy statement.
Performance Shares
To recognize their significant contributions regarding PolyOne’s acquisition of Spartech and its continued successful integration with PolyOne, on March 13, 2013, Messrs. Patterson and Kedrowski were each granted a one-time award of 25,000 performance shares under the Amended 2010 Plan. The performance shares will be earned contingent upon achieving $65 million in synergies resulting from PolyOne’s acquisition of Spartech (“Synergy Goal”). If the Synergy Goal is achieved, then the performance shares shall become non-forfeitable and fully vested on March 31, 2016. The performance-shares granted to Messrs. Patterson and Kedrowski are set forth in the 2013 Grants of Plan-Based Awards table of this proxy statement.
Awards Granted in Prior Years
In February 2011,2014, the Compensation Committee approved the payoutattainment level of cash-settled performance units granted at the start of 20082011 for the three year performance during the period2008-2010. of January 1, 2011 through December 31, 2013. These cash-settled performance units were based on achievement ofearned by achieving performance goals related to our cumulative adjusted earnings per share over the three-year performance period. For retention purposes, the performance units could not be paid until the end of the vesting period, which began on January 1, 2011 and ended on the payment date, February 28, 2014. The
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| Goals | |||||||||||||||||||||||||
| Threshold | Target | Maximum | |||||||||||||||||||||||
Performance Measure | (50%) | (100%) | (200%) | Actual Result | %Attainment | ||||||||||||||||||||
| Earnings Per Share | $ | 1.50 | $ | 1.63 | $ | 2.31 | $ | 1.70 | 110.3 | % | |||||||||||||||
Performance Measure | 2011 – 2013 Goals* | % Payout | ||||||||
Threshold (50%) | Target (100%) | Maximum (200%) | Actual Result | |||||||
2011-2013 Cumulative Adjusted Earnings per Share | $2.55 | $2.79 | $3.19 | $3.65 | 200% | |||||
* All financial measures (performance measures and results) reported in the above table were calculated with adjustments for acquisitions, divestitures and special items pursuant to the terms of the plans and as approved by the Board of Directors.
Actual payouts of the cash-settled performance units granted in 2011 to the Named Executive Officers under theLong-Term Incentive Plan are set forth in the “Non-Equity Incentive Plan Compensation” column of the 2013 Summary Compensation Table of this proxy statement.
All equity awards outstanding as of December 31, 20102013 are set forth in the Outstanding Equity Awards at 20102013 Fiscal Year-End Table intable of this proxy statement.
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COMPENSATION
Retirement Benefits
We offer the following retirement benefits to eligible employees and certaineligible Named Executive Officers as specified.specified below. Additional details ofabout these plans, as they apply to the Named Executive Officers, are included in the narrative to the 20102013 Pension Benefits Table.and 2013 Nonqualified Deferred Compensation sections of this proxy statement.
Other Benefits
We provide other benefits to the Named Executive Officers, which we believe are necessary to compete for executive talent. The additional benefits for the Named Executive Officers generally consist of a benefit allowance, limited reimbursement of expenses for financial planning and tax preparation, a moving allowance (where applicable), global travel health benefits and an annual physical examination. The specific amounts attributable to the 2013 other benefits provided to the Named Executive Officers are set forth in the “All Other Compensation” column of the 2013 Summary Compensation Table of this proxy statement.
The benefit allowance, and reimbursement of expenses for financial planning and tax preparation are treated as taxable income to the Named Executive Officers and are not grossed up by PolyOne. Tax gross-ups are provided for imputed income for spouse/guest travel.
We also provide other benefits such as medical, dental, life insurance and disability coverage to each United States based Named Executive Officer, which are identical to the benefits provided to all other eligible United States-based employees. We provide vacation and paid holidays to all employees, including the Named Executive Officers. The Named Executive Officers were eligible for the following vacation periods in 2013: Mr. Newlin — five weeks; Mr. Patterson — four weeks; Mr. Richardson – four weeks; Mr. Diemer –four weeks; Mr. Kedrowski — four weeks and Mr. Smith — five weeks.
Employment Agreements with Named Executive Officers
Mr. Newlin and Baert areis a party to an employment agreementsagreement with us, as described below. We do not maintain employment agreements with any of the other Named Executive Officers, although each of our Named Executive Officers is a party to a Continuity Agreement, asmanagement continuity agreement, the details of which are described below and are set forth in the “Potential Payments Upon Termination orChange-in-Control” below.
On February 6, 2006, we entered into an agreement with Mr. Newlin, under which he servesserved as our Chairman, President and Chief Executive Officer. We entered into this agreement in order to attract Mr. Newlin to PolyOne and set the terms of his employment. The agreement provided for specified equity awards that were intended to serve as an inducement to join PolyOne, for Mr. Newlin’sset an initial base salary and provided for his participation in our various long-term incentive and benefit plans in effect during the term of his employment. In addition, the agreement providesprovided for certain payments upon
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COMPENSATION
retirement benefit, as described above and more fully in the narrative for the 2010“2013 Pension Benefits Table.
New Named Executive Officer Compensation and Benefits
Mr. Richardson joined PolyOne as Executive Vice President and Chief Financial Officer with more than 30 years of experience in location for our European headquarters, PolyOne Luxembourg s.à r.l., our wholly owned subsidiary located in Luxembourg, entered into an employment agreement with Bernard Baert, effective September 1, 2009. It is customary in Luxembourg that we maintain an agreement with eachfinancial and operational management, including more than 10 years of our employees, includingexperience as a chief financial officer. The compensation components of Mr. Baert. Among other things, the agreement provides that Mr. Baert will be entitled to a monthlyRichardson’s offer letter include:
Mr. Richardson was also granted a one-time award of a company car. Under20,000 stock-settled RSUs to offset compensation from his previous employer that he forfeited by accepting employment with PolyOne. The RSUs vest on the agreement,third anniversary of the grant date and are in all respects in accordance with the Amended 2010 Plan, as well as the specific terms and conditions approved by the Compensation Committee for the annual grants of RSUs made on February 15, 2013. Commencing in 2014, Mr. Baert may also beRichardson was eligible to participate in our Annualthe Long-Term Incentive Plan, and will be includedwas awarded a grant along with other participants in a defined contributionthe Compensation Committee’s discretion.
With this compensation and benefits cafeteria plan established by PolyOne Luxembourg. Pursuantpackage, the Compensation Committee intended to provide Mr. Richardson with competitive compensation that emphasized equity and performance-based compensation elements to align his pay with shareholder interests. In reaching the terms of the offer letter for Mr. Richardson, the Compensation Committee considered market data, as well Mr. Richardson’s experience and the compensation arrangement that he would have to give up at his employer in accepting a position with PolyOne. This information was used to inform, not dictate, the Compensation Committee’s decision regarding pay. Ultimately, the pay levels and equity award reflected in his offer letter were, in the Compensation Committee’s judgment and based upon available information, a competitive pay package for Mr. Richardson’s position and experience and were not targeted or benchmarked at any particular level.
The Board believes that hiring Mr. Richardson was in the best interests of PolyOne and our shareholders, as he brings the experience and expertise that the Board considers essential to continuing PolyOne on a path towards growth and innovation. The Board determined, in its judgment, that the compensation levels, equity award and other terms of his offer were appropriate and necessary to attract and retain Mr. Richardson.
Executive Severance and Release Agreement with Former Executive
PolyOne and Mr. Diemer agreed that Mr. Diemer would step down from his position as Senior Vice President and Chief Financial Officer effective November 8, 2013. In conjunction with his departure, Mr. Diemer received the benefits that he was entitled to under the Executive Severance Plan and PolyOne and Mr. Diemer executed an executive severance agreement and release (the “Severance Agreement”). The compensation and benefits that Mr. Baert has agreed not to compete with us for a period of twelve months after terminationDiemer received and the terms of the agreement. Mr. Baert’s agreement provides for certain payments upon termination of Mr. Baert’s employment, as described more fullySeverance Agreement are set forth in the “Potential Payments Upon Termination orChange-in-Control” Change of Control” section of this proxy statement.
Perquisites
On November 5, 2013, PolyOne and Mr. Kedrowski were eligibleDiemer executed a consulting agreement under which Mr. Diemer agreed to provide consulting services to PolyOne (the “Consulting Agreement”). In consideration for reimbursementthese consulting services, PolyOne modified specific RSUs granted to Mr. Diemer in 2012 and 2013, which would have otherwise been forfeited under the terms of their relocation expenses under our standard relocation plan. During 2010, we reimbursed Mr. Newlin and Mr. Kedrowski for moving expenses and also provided them with a taxgross-up on all or a portionthe applicable grant agreements upon his separation from service. The terms of these amounts. Details of these amountsthe Consulting Agreement are set
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forth in the All Other“Potential Payments Upon Termination or Change of Control” section of this proxy statement. The Compensation column ofCommittee believes, in its business judgment, that executing the 2010 Summary Compensation Table.
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Long-Term Incentive Plan | ||||||||||
| 2010 Target | 2011 Target | |||||||||
| (as a percentage of | (as a percentage of | |||||||||
Named Executive Officer | Base Salary) | Base Salary) | ||||||||
| Stephen D. Newlin | 300 | % | 350 | % | ||||||
| Robert M. Patterson | 120 | % | 135 | % | ||||||
| Kenneth M. Smith | 90 | % | 100 | % | ||||||
| Thomas J. Kedrowski | 90 | % | 100 | % | ||||||
| Bernard Baert | 90 | % | 100 | % | ||||||
Cash compensation, such as base salary orand annual incentive compensation, is taxable to the recipient as ordinary income when earned, unless deferred under a Company-sponsoredcompany-sponsored deferral plan. Deferrals under Internal Revenue Code tax-qualified plans, such as a 401(k) plan, do not affect our current tax deduction. Deferrals under supplemental executive deferral plans delay our tax deduction until the deferred amount (and any accumulation thereon) is paid. Stock-settled SARs are generally taxable as ordinary income when exercised, RSUs are generally taxable as ordinary income when they vest, and performance shares, RSUs andcash-settled performance units are generally
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Management and the Compensation Committee are aware of Code Section 162(m) of the Internal Revenue Code, which generally limits the deductibility of executive pay in excess of one million dollars for certain Named Executive Officers, and which specifies the requirements for the “performance-based” pay exemption from this limit. The Compensation Committee generally managesintends for our incentive programs to qualify for the performance-based pay exemption. It also reserves the right to provide compensation that does not meet the exemption criteria if, in its sole discretion, it determines that doing so advances our business objectives.
Accounting Considerations
When reviewing preliminary recommendations and in connection with approving the terms of a given incentive plan period, senior management and the Compensation Committee review and consider the accounting implications of a given award, including the estimated expenseand/or and dilutive considerations. Depending uponWith consideration of the type of accounting treatment associated with an incentive plan design, senior management and the Compensation Committee may alter or modify the incentive award due to the accounting treatment if the award (and the related accounting consequences) were to adversely affect our financial performance.
Executive Compensation Governance
Stock Ownership and Retention Guidelines
The current Guidelines require all executives, including the Named Executive Officers, to retain 100% of all net shares obtained through PolyOne as compensation for services provided. This requirement will cease when the Guidelines have been met provided that an officer can only divest of a number of shares such that the Guidelines continue to be met. In general, shares counted toward required ownership include shares directly held, shares and phantom shares held in our retirement or deferral plans, RSUs and performance shares (if the applicable performance criteria are met). The specific levels of sharestock ownership for the Named Executive Officers are noted in the following table. These levels were established in 2010 when, given the sustained impact of volatile stock prices on ownership guidelines, we changed from a value that was a multiple of an executive’s salary to a fixed number of shares. The retention requirement was also added at this time. The share requirements for each level were determined with the help of Towers Watson and represent what was determined at the time to be a reasonable number of shares. Executives are expected to accumulate the specified shares within five years of their becoming subject to the policy.
Element | Newlin | Patterson | Smith | Kedrowski | Baert | ||||||||||||
| Share Ownership Target (in shares) | 315,000 | 60,000 | 90,000 | 80,000 | 50,000 | ||||||||||||
| Total Share Ownership as of 3/14/11 | 744,125 | 228,200 | 171,701 | 158,738 | 80,244 | ||||||||||||
| Attainment Status | 236.2% | 380.3% | 190.8% | 198.4% | 160.5% | ||||||||||||
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| Newlin(1) | Patterson(1) | Richardson(2) | Kedrowski | Smith | ||||||
Stock Ownership Target (in shares) | 125,000 | 65,000 | 45,000 | 30,000 | 20,000 | |||||
Prorated Stock Ownership Target (in shares) | N/A | N/A | 9,000 | N/A | N/A | |||||
Multiple of Salary(3) | 4.4 | 4.1 | 0.6 | 2.8 | 2.0 | |||||
Total Share Ownership as of 3/1/14 | 504,591 | 242,756 | 34,046 | 261,679 | 137,827 | |||||
Value of Total Share Ownership 3/1/14(3) | $18,705,188 | $8,998,965 | $1,262,085 | $9,700,441 | $5,109,247 | |||||
| Value of Share Ownership as a Multiple of Base Salary | 17.8 | 15.4 | 2.4 | 24.3 | 13.4 | |||||
| (1) | Mr. Newlin will become subject to a different stock ownership target upon his retirement as President and Chief Executive Officer and assumption of the Executive Chairman role (62,500 shares). Mr. Patterson will become subject to a different stock ownership target upon his assumption of the President and Chief Executive Officer roles (125,000 shares). |
| (2) | Mr. Richardson has been with PolyOne less than five years and is not yet required to reach 100% of the Guidelines. The stock ownership target for Mr. Richardson has been reduced to reflect that he has been with PolyOne less than five years. |
| (3) | Calculated using PolyOne’s March 17, 2014 closing stock price of $37.07. |
Timing with Respect to Equity Award Grants
Clawback Policy
Prohibition on Hedging Policy
PolyOne’s trading policy currently provides that, consistent with our philosophy to encourage long-term investments, directors,Directors, officers and certain other employees of PolyOne are prohibited from engaging in any speculative transactions involvinghedging or pledging our securities, including buying or selling puts or calls, short sales, or margin purchasessecurities.
Executive Compensation
The following tables, narrative and footnotes discuss the compensation of our securities. If necessary, we plan to modify our policy to comply with the provisions of the Dodd-Frank Act when they are finalized.
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COMPENSATION
The following table sets forth the compensation earned by, and the compensation opportunity granted to, our principal executive officer, our principal financial officer,officers that served in such capacity in 2013, and our three other three most highly compensated executive officers for 2013, during the fiscal years ended December 31, 2010,2013, December 31, 20092012 and December 31, 2008.
| Change in | |||||||||||||||||||||||||||||||||||||||||||||
| Pension | |||||||||||||||||||||||||||||||||||||||||||||
| Non- | Value and | ||||||||||||||||||||||||||||||||||||||||||||
| Equity | Nonqualified | ||||||||||||||||||||||||||||||||||||||||||||
| Incentive | Deferred | ||||||||||||||||||||||||||||||||||||||||||||
| Stock | Option | Plan | Compensation | All Other | |||||||||||||||||||||||||||||||||||||||||
| Name and | Salary | Bonus | Awards(2) | Awards(3) | Compensation(4) | Earnings | Compensation | Total | |||||||||||||||||||||||||||||||||||||
| Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||||||||||||||||
| Stephen D. Newlin, | 2010 | $ | 860,000 | — | $ | 967,589 | $ | 850,590 | $ | 3,030,236 | $ | 538,990 | (5) | $ | 1,263,730 | (7) | $ | 7,511,135 | |||||||||||||||||||||||||||
| Chairman, President & | 2009 | 860,000 | — | 312,547 | 275,559 | 1,720,000 | 516,552 | 138,847 | 3,823,505 | ||||||||||||||||||||||||||||||||||||
| Chief Executive Officer | 2008 | 831,731 | — | 771,931 | 648,168 | 1,044,150 | 4,341,255 | 135,106 | 7,772,341 | ||||||||||||||||||||||||||||||||||||
| Robert M. Patterson, | 2010 | 424,231 | — | 191,760 | 167,700 | 509,077 | — | 71,168 | (8) | 1,363,936 | |||||||||||||||||||||||||||||||||||
| Executive Vice President and | 2009 | 415,000 | — | 60,325 | 53,223 | 415,000 | — | 198,924 | 1,142,472 | ||||||||||||||||||||||||||||||||||||
| Chief Financial Officer | 2008 | 255,385 | — | 307,200 | 160,800 | 107,568 | — | 85,109 | 916,062 | ||||||||||||||||||||||||||||||||||||
| Kenneth M. Smith, | 2010 | 340,923 | — | 107,865 | 94,380 | 504,501 | 130,531 | (6) | 70,308 | (9) | 1,248,508 | ||||||||||||||||||||||||||||||||||
| Senior Vice President, | 2009 | 336,000 | — | 35,179 | 31,042 | 336,000 | 121,177 | 61,563 | 920,961 | ||||||||||||||||||||||||||||||||||||
| Chief Information and Chief Human Resources Officer | 2008 | 333,308 | — | 84,798 | 70,512 | 210,289 | 156,297 | 69,065 | 924,269 | ||||||||||||||||||||||||||||||||||||
| Thomas J. Kedrowski, | 2010 | 328,769 | — | 107,865 | 94,380 | 484,735 | — | 221,966 | (10) | 1,237,715 | |||||||||||||||||||||||||||||||||||
| Senior Vice President, | |||||||||||||||||||||||||||||||||||||||||||||
| Supply Chain and Operations | |||||||||||||||||||||||||||||||||||||||||||||
| Bernard Baert, | 2010 | 398,507 | — | 107,865 | 94,380 | 566,927 | — | 59,377 | (11) | 1,227,056 | |||||||||||||||||||||||||||||||||||
| Senior Vice President, | 2009 | 424,953 | — | 28,194 | 24,898 | 283,974 | — | 78,259 | 840,278 | ||||||||||||||||||||||||||||||||||||
President of Europe and International(1) | 2008 | 415,441 | — | 84,798 | 70,512 | 121,564 | — | 84,388 | 776,703 | ||||||||||||||||||||||||||||||||||||
Name and Principal Position (a) | Year (b) | Salary ($) (c) | Bonus ($) (d) | Stock Awards ($) (e) | Option Awards ($) (f) | Non-Equity Incentive Plan Compensation ($) (g) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (h) | All Other Compensation (5) ($) (i) | Total ($) (j) | |||||||||
| Stephen D. Newlin, Chairman, President and Chief Executive Officer | 2013 | 1,040,846 | - | 3,812,040 | 1,483,710 | 4,649,890 | 161,443 | 285,550 | 11,433,479 | |||||||||
| 2012 | 978,846 | - | 1,519,440 | 1,611,627 | 4,081,699 | 1,273,625 | 274,428 | 9,739,665 | ||||||||||
| 2011 | 946,538 | - | 1,285,508 | 1,282,148 | 4,088,859 | 520,514 | 237,119 | 8,360,686 | ||||||||||
| Robert M. Patterson, Executive Vice President and Chief Operating Officer | 2013 | 546,292 | - | 1,580,236 | 332,481 | 1,177,619 | - | 109,279 | 3,745,907 | |||||||||
| 2012 | 513,461 | - | 318,498 | 338,997 | 1,071,941 | - | 94,919 | 2,337,817 | ||||||||||
| 2011 | 473,269 | - | 247,327 | 247,660 | 996,654 | - | 83,040 | 2,047,950 | ||||||||||
| Bradley C. Richardson, Executive Vice President and Chief Financial Officer(1) | 2013 | 50,000 | - | 606,400 | - | 56,485 | - | 3,250 | 716,135 | |||||||||
| Richard J. Diemer, Jr., Senior Vice President and Chief Financial Officer(2) | 2013 | 403,788 | - | 988,995 (2) | 175,446 (2) | - | - | 1,466,840 (3) | 3,035,069 | |||||||||
| 2012 | 339,635 | - | 537,100 (2) | 185,500 (2) | 381,885 | - | 102,706 | 1,546,826 | ||||||||||
| Thomas J. Kedrowski, Executive Vice President, Global Operations and Process Improvement | 2013 | 398,139 | - | 1,411,752 | 161,367 | 646,981 | - | 67,533 | 2,685,772 | |||||||||
| 2012 | 350,615 | - | 151,944 | 161,857 | 593,368 | - | 57,769 | 1,315,554 | ||||||||||
| 2011 | 341,000 | - | 131,809 | 130,732 | 596,738 | - | 67,058 | 1,267,337 | ||||||||||
| Kenneth M. Smith, Senior Vice President, Chief Information and Human Resources Officer | 2013 | 370,769 | - | 521,154 | 148,371 | 629,618 | 0 (4) | 79,723 | 1,749,635 | |||||||||
| 2012 | 359,615 | - | 151,944 | 161,857 | 612,645 | 249,773 | 77,626 | 1,613,461 | ||||||||||
| 2011 | 350,769 | - | 131,809 | 130,732 | 617,187 | 158,619 | 75,030 | 1,464,146 |
| (1) | Compensation for Mr. | |
| (2) | ||
In connection with the Consulting Agreement, PolyOne modified certain RSUs previously granted to Mr. Diemer in 2012 and 2013, which would have otherwise been forfeited under the terms of the applicable grant agreements. The incremental value of the modified RSUs as reported in Mr. Diemer’s 2013 Stock Awards is $753,270. The modified awards and details regarding their value are set forth in the 2013 Grants of Plan-Based Awards table of this proxy statement and in its accompanying footnotes. In addition, pursuant to FASB ASC Topic 718, Mr. Diemer forfeited $537,100 in reported value of his 2012 and $235,725 in reported value of his 2013 RSUs upon his separation from service pursuant to the terms of his applicable grant agreements, which amounts have not been deducted from the amounts appearing in column (e) above.
In addition, Mr. Diemer forfeited all unvested SARs and cash-settled performance units pursuant to the terms of his applicable grant agreements. Thus, the amounts reported in column (f) of the Summary Compensation Table do not reflect the amounts Mr. Diemer actually received as he forfeited $175,446 (2013) and $124,900 (2012) of his SARs awards.
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| (3) | See the “Potential Payments Upon Termination or Change of Control” section of this proxy statement for a discussion of amounts paid to Mr. Diemer as a result of his separation from service. |
| (4) |
| (5) | Amounts reported in |
Bonus (column (d))
No amounts are reported in this column because PolyOne paid annual incentives to the Named Executive Officers based upon pre-determined performance metrics. These payments, which were made under the PolyOne’s Annual Plan, are reported in the “Non-Equity Incentive Plan Compensation” column (column (g)).
Stock Awards (column (e))
The amounts reported in the “Stock Awards” column include, for 2013, time-vested stock-settled RSUs and performance shares that were granted to the Named Executive Officers, including special one-time RSU and performance share awards granted to specific Named Executive Officers as described in the “Analysis of 2013 Compensation Decisions and Actions” section of the CD&A.
The amounts reported represent the aggregate grant date fair value of those stock awards determined pursuant to FASB ASC Topic 718. Accordingly, this column includes amounts for awards that have not yet vested, as well as for awards that were later cancelled (such as upon an executive’s separation from service). For information regarding the assumptions used in determining the fair value of these awards, please refer to Note 15, Share-Based Compensation, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013. These grants are described more fully in the “Compensation Discussion and Analysis — Analysis of 2013 Compensation Decisions and Actions — Long-Term Incentive — Awards Granted in 2013 — ‘Restricted Stock Units,’ ‘One-Time Awards of Restricted Stock Units’ and ‘Performance Shares’” sections of this proxy statement.
PolyOne cautions that the amounts reported for these awards may not represent the amounts that the Named Executive Officers will actually realize from these awards. To what extent a Named Executive Officer realizes value will depend on our stock price and continued employment. The value actually received upon a release of RSUs to the Named Executive Officers in 2013 is reflected in the 2013 Option Exercises and Stock Vested table of this proxy statement.
Option Awards (column (f))
The amounts reported in the “Option Awards” column include, for 2013, stock-settled SARs with time and performance based vesting requirements that were granted in 2013 to the Named Executive Officers under our Amended 2010 Plan. The amounts reported for 2013 represent the grant date fair value of the SARs granted to each of the Named Executive Officers, calculated in accordance with FASB ASC Topic 718. Accordingly, this column includes amounts for awards that have not yet vested, as well as for awards that were later cancelled (such as upon an executive’s separation from service). For information regarding the assumptions used in determining the fair value of these awards, please refer to Note 15, Share-Based Compensation, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013. These grants are described more fully in the narrative following the 2013 Grants of Plan-Based Awards table and in the “Compensation Discussion and Analysis — Analysis of 2013 Compensation Decisions and Actions — Long-Term Incentive — Awards Granted in 2013 — Stock-Settled Stock Appreciation Rights” section of this proxy statement.
PolyOne cautions that the amounts reported for these awards may not represent the amounts that the Named Executive Officers will actually realize from the awards. To what extent a Named Executive Officer realizes value will depend on our stock price and continued employment. The value actually received upon exercise of SARs by the Named Executive Officers in 2013 is reflected in the 2013 Option Exercises and Stock Vested table of this proxy statement.
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Non-Equity Incentive Plan Compensation (column (g))
The amounts reported in the “Non-Equity Incentive Plan Compensation” column for 2013 include amounts earned by each Named Executive Officer under the 2013 Annual Plan (and paid in February 2014), and cash-settled performance units granted on February 16, 2011 under the 2011 — 2013 Long-Term Incentive Plan (and paid in February 2014). The terms of the Annual Plan are described more fully in the narrative following the 2013 Grants of Plan-Based Awards table and in the “Compensation Discussion and Analysis — Analysis of 2013 Compensation Decisions and Actions — Annual Incentive” section of this proxy statement. The terms of the 2011 — 2013 Long-Term Incentive Plan cash-settled performance units are described more fully in the narrative following the “Compensation Discussion and Analysis — Analysis of 2013 Compensation Decisions and Actions — Awards Granted in Prior Years” section of this proxy statement. The amounts earned by the Named Executive Officers under each plan are listed below.
| Name | Annual Plan ($) | Cash-Settled Performance Units ($) | Total ($) | |||
S.D. Newlin | 1,989,890 | 2,660,000 | 4,649,890 | |||
R.M. Patterson | 664,619 | 513,000 | 1,177,619 | |||
B.C. Richardson | 56,485 | - | 56,485 | |||
R.J. Diemer, Jr. | - | - | - | |||
T.J. Kedrowski | 380,581 | 266,400 | 646,981 | |||
K.M. Smith | 354,418 | 275,200 | 629,618 |
Change in Pension Value and Nonqualified Deferred Compensation Earnings (column (h))
The amounts reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column for 2013 are comprised entirely of changes in pension values between December 31, 2012 and December 31, 2013.
Mr. Newlin is entitled to a supplemental retirement benefit under his employment agreement, as described more fully in the “Compensation Discussion and Analysis — Analysis of 2013 Compensation Decisions and Actions — Retirement Benefits” section of this proxy statement. The amount listed for him for 2013 represents the aggregate change in actuarial present value (determined by subtracting the December 31, 2012 actuarial present value from the December 31, 2013 actuarial present value) of the annual benefit payment that will be payable as a 15-year certain and continuous life annuity beginning at age 61 and assumes that Mr. Newlin has a Qualifying Separation from Service as that term is defined herein.
Mr. Smith participates in the Qualified Pension Plan and the Benefit Restoration Plan that existed prior to PolyOne’s formation in 2000 through the consolidation of Geon and M.A. Hanna. The amount listed for him represents the aggregate change in actuarial present value (determined by subtracting the December 31, 2012 actuarial present value from the December 31, 2013 actuarial present value) of Mr. Smith’s accumulated benefits under the Qualified Pension Plan and the Benefit Restoration Plan. For 2013, the aggregate change in the actuarial present value of Mr. Smith’s accumulated benefits under the Qualified Pension Plan and the Benefits Restoration plan decreased between December 31, 2012 and December 31, 2013 in the amount of $70,384. Therefore, the amount reported for Mr. Smith in column (h) for 2013 is reflected as zero.
All Other Compensation (column (i))
The amounts reported in the “All Other Compensation” column for 2013 reflect, for each Named Executive Officer, the sum of (1) the amounts contributed by PolyOne to the Qualified Savings Plan and the PolyOne Supplemental Retirement Benefit Plan, which are calculated on the same basis for all participants, including the Named Executive Officers, (2) limited tax gross-ups, (3) amounts paid or accrued relating to a Named Executive Officer’s separation from service; and (4) the incremental cost to PolyOne of all other executive benefits that are required to be reported by SEC rules. The material provisions of the Qualified Savings Plan and the PolyOne Supplemental Retirement Benefit Plan are described under the narrative following the 2013 Pension Benefits table section of this proxy statement.
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The narrative following the table describes these components of All Other Compensation:
Name | Company Contributions to Qualified Savings Plan ($) | Company Contributions to PolyOne Supplemental ($) | Tax Gross-ups ($) | Payments Upon Separation from Service ($) | Other Benefits ($) | |||||
S.D. Newlin | 16,575 | 182,237 | 17,645 | - | 69,093 | |||||
R.M. Patterson | 16,575 | 62,715 | 4,686 | - | 25,303 | |||||
B.C. Richardson | - | 3,250 | - | - | - | |||||
R.J. Diemer, Jr. | 16,575 | 34,494 | - | 1,405,162 | 10,609 | |||||
T.J. Kedrowski | 16,575 | 25,198 | - | - | 25,760 | |||||
K.M. Smith | 16,575 | 31,618 | - | - | 31,530 |
Company Contributions to Qualified Savings Plan. PolyOne makes matching contributions on behalf of all employees, including the Named Executive Officers, in accordance with the Qualified Savings Plan.
Company Contributions to PolyOne Supplemental Retirement Benefit Plan. PolyOne makes matching contributions on behalf of all eligible participants, including the Named Executive Officers, under the PolyOne Supplemental Retirement Benefit Plan. PolyOne also makes a retirement contribution in an amount equal to 2% of eligible earnings.
Tax Gross-ups. PolyOne provides a reimbursement for taxes incurred when a spouse/guest travels for business purposes as it is sometimes necessary for spouses to accompany the executives to business functions. These taxes are incurred because of the Internal Revenue Service’s rules governing business travel by spouses/guests and PolyOne reimburses the associated taxes.
Payments Upon Separation from Service. The amounts in this column represent severance related payments that Mr. Diemer received upon his separation from service pursuant to the Executive Severance Plan: $910,000 representing 24 months of salary continuation, a payment equal to the amount calculated under the Annual Plan as earned in 2013 of $421,071 (which was paid in 2014 at the same time as all Named Executive Officer Annual Plan payments), a payment of $17,500 for accrued but unused vacation, 24 months of accrued post-separation medical, vision and dental coverage reimbursements totaling $48,291 and accrued post-separation outplacement services totaling $8,300. The terms and conditions of Mr. Diemer’s separation from service are further described in the “Potential Payments upon Termination or Change of Control” section of this proxy statement.
Other Benefits. Certain additional limited benefits are made available to executives, including the Named Executive Officers. The aggregate incremental value of those benefits is included for each Named Executive Officer in the “All Other Compensation” column of the Summary Compensation Table, but the individual values for each item are not required to be disclosed under SEC rules because none exceeded the greater of $25,000 or 10% of the total amount of personal benefits for each Named Executive Officer. In general, these benefits include a nominal benefit allowance and taxable reimbursement to the Named Executive Officers for financial planning (used by each Named Executive Officer except Mr. Richardson) and reimbursement for the incremental value of spouse/guest travel expenses (used by Messrs. Newlin and Patterson). PolyOne also makes available executive physicals to all Named Executive Officers (used by Messrs. Newlin, Patterson and Smith). Finally, Global CARE (Critical Care Air Rescue and Evacuation) Insurance, which provides supplemental medical services and medical transportation related to business travel, is provided to all Named Executive Officers.
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2013 Grants of Plan-Based Awards
Name (a) | Grant Date (b-1) | Grant Approval Date (b-2) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other (#) (h) | Exercise or (i) | Grant Date Fair Value of Stock and Option/ SAR Awards ($) (j) | |||||||||||||||||||||
Threshold | Target ($) (d) | Maximum ($) (e) | Threshold (#) (f) | Target (#) (g) | ||||||||||||||||||||||||
S.D. Newlin | 572,466 | 1,144,931 | 2,289,862 | |||||||||||||||||||||||||
| 2/15/2013 | 2/15/2013 | 551,250 | 1,102,500 | 2,205,000 | ||||||||||||||||||||||||
| 2/15/2013 | 2/15/2013 | 45,667 | 137,000 | (1) | 23.08 | 1,483,710 | ||||||||||||||||||||||
| 2/15/2013 | 2/15/2013 | 63,000 | (3) | 1,454,040 | ||||||||||||||||||||||||
| 3/8/2013 | 3/7/2013 | 100,000 | (4) | 2,358,000 | ||||||||||||||||||||||||
R.M. Patterson | 191,203 | 382,405 | 764,810 | |||||||||||||||||||||||||
| 2/15/2013 | 2/15/2013 | 123,975 | 247,950 | 495,900 | ||||||||||||||||||||||||
| 2/15/2013 | 2/15/2013 | 10,233 | 30,700 | (1) | 23.08 | 332,481 | ||||||||||||||||||||||
| 3/13/2013 | 12/19/2012 | 25,000 | (2) | 626,250 | ||||||||||||||||||||||||
| 2/15/2013 | 2/15/2013 | 14,200 | (3) | 327,736 | ||||||||||||||||||||||||
| 3/13/2013 | 12/19/2012 | 25,000 | (5) | 626,250 | ||||||||||||||||||||||||
B.C. Richardson | 16,250 | 32,500 | 65,000 | |||||||||||||||||||||||||
| 11/11/2013 | 11/1/2013 | 20,000 | (7) | 606,400 | ||||||||||||||||||||||||
R.J. Diemer, Jr. | 121,137 | 242,273 | 484,546 | |||||||||||||||||||||||||
| 2/15/2013 | 2/15/2013 | 65,250 | 130,500 | 261,000 | ||||||||||||||||||||||||
| 2/15/2013 | 2/15/2013 | 5,400 | 16,200 | (1) | 23.08 | 175,446 | ||||||||||||||||||||||
| 2/15/2013 | 2/15/2013 | 7,500 | (3) | 173,100 | ||||||||||||||||||||||||
| 3/13/2013 | 12/19/2012 | 2,500 | (5) | 62,625 | ||||||||||||||||||||||||
| 11/11/2013 | 11/5/2013 | 16,986 | (6) | 515,016 | ||||||||||||||||||||||||
| 11/11/2013 | 11/5/2013 | 5,622 | (6) | 170,459 | ||||||||||||||||||||||||
| 11/11/2013 | 11/5/2013 | 1,678 | (6) | 50,877 | ||||||||||||||||||||||||
| 11/11/2013 | 11/5/2013 | 558 | (6) | 16,919 | ||||||||||||||||||||||||
T.J. Kedrowski | 109,488 | 218,976 | 437,952 | |||||||||||||||||||||||||
| 2/15/2013 | 2/15/2013 | 60,000 | 120,000 | 240,000 | ||||||||||||||||||||||||
| 2/15/2013 | 2/15/2013 | 4,967 | 14,900 | (1) | 23.08 | 161,367 | ||||||||||||||||||||||
| 3/13/2013 | 12/19/2012 | 25,000 | (2) | 626,250 | ||||||||||||||||||||||||
| 2/15/2013 | 2/15/2013 | 6,900 | (3) | 159,252 | ||||||||||||||||||||||||
| 3/13/2013 | 12/19/2012 | 25,000 | (5) | 626,250 | ||||||||||||||||||||||||
K.M. Smith | 101,962 | 203,923 | 407,846 | |||||||||||||||||||||||||
| 2/15/2013 | 2/15/2013 | 54,750 | 109,500 | 219,000 | ||||||||||||||||||||||||
| 2/15/2013 | 2/15/2013 | 4,567 | 13,700 | (1) | 23.08 | 148,371 | ||||||||||||||||||||||
| 2/15/2013 | 2/15/2013 | 6,300 | (3) | 145,404 | ||||||||||||||||||||||||
| 3/13/2013 | 12/19/2012 | 15,000 | (5) | 375,750 | ||||||||||||||||||||||||
Estimated Future Payouts Under Non-Equity Incentive Plan Awards (columns (c), (d) and (e))
The amounts located in the first row for each Named Executive Officer represent the cash-based award opportunities granted to the Named Executive Officer in 2013 under the Annual Plan. The actual amount earned for 2013 is included in the “Non-Equity Incentive Plan Compensation” column (column (g)) of the 2013 Summary Compensation Table of this proxy statement.
The amounts located in the second row for each Named Executive Officer represent the cash-settled performance units granted in 2013 to the Named Executive Officer under the Amended 2010 Plan as part of the February 15, 2013 annual Long-Term Incentive Plan award. Each performance unit is equal in value to $1.00. These cash-settled performance units are subject to achieving specified performance goals over the performance period from January 1, 2013 to December 31,
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2015. The cash-settled performance units will be paid in cash, if earned, contingent upon the Named Executive Officer remaining in continuous employment through the payment date, which shall be in 2016.
For purposes of both of these incentive awards, we established threshold, target and maximum goals. Participants will earn, for the applicable performance period: (1) 100% for the target award upon attainment of the target performance level; (2) 50% of the target award upon attainment of the “threshold” performance level or (3) 200% of the target award upon attainment of the “maximum” (or greater) performance level. If final performance falls between the threshold and target or between target and maximum, earned award amounts will be interpolated. If threshold performance is not achieved, then no award will be paid to the participants.
Estimated Future Payouts Under Equity Incentive Plan Awards (columns (f) and (g))
| (1) | Stock Appreciation Rights.These amounts represent stock-settled Stock Appreciation Rights granted to the Named Executive Officers on February 15, 2013 as part of our annual Long-Term Incentive award under the Amended 2010 Plan. The SARs initially vest in one-third increments upon attaining each of the following stock price hurdles for thirty consecutive trading days: 10%, 15% and 20% increase respectively, over the initial grant date closing stock price of $23.08. All of the stock price hurdles were achieved in 2013. The SARs are also subject to time-based vesting, which lapses in one-third increments on each of the first three anniversaries of the grant date, generally subject to the officer’s continued employment and have an exercise term of ten years. |
“Threshold” refers to the minimum number of shares underlying the SAR award that will vest upon reaching the threshold level of performance, which is satisfaction of the first stock price hurdle. Threshold equates to vesting inone-third of the SAR award. If threshold performance is not attained, then the participant will not vest in any of the SARs for the 2013 award. “Target” refers to the number of shares underlying the SARs that will vest upon satisfaction of all of the stock price hurdles under the 2013 grant. The SARs do not have a “maximum” level of attainment as a participant cannot receive SARs in excess of the initial award.
| (2) | Performance Shares.These amounts represent a one-time grant of performance shares awarded on March 13, 2013 under the Amended 2010 Plan. The performance shares were intended to recognize Messrs. Patterson and Kedrowski’s significant contributions with regard to the Spartech acquisition and its continued successful integration with PolyOne. |
The performance shares will be earned contingent upon the achievement of the Synergy Goal resulting from PolyOne’s acquisition of Spartech. If the Synergy Goal is achieved, then the performance shares shall become non-forfeitable and fully vested on March 31, 2016. The Synergy Goal is defined as PolyOne’s achievement on or prior to March 31, 2016 of at least $65 million in collective run-rate synergies attributable to PolyOne’s acquisition of Spartech. Calculating whether the Synergy Goal has been achieved shall be consistent with the calculation used by PolyOne to communicate publicly the synergies achieved from March 31, 2013 through March 31, 2016 as a result of the Spartech acquisition. There is no threshold or maximum award, as the performance shares provide for a single payout, which is reported as the “target” payout. Assuming the Synergy Goal is achieved, the performance shares will be distributed upon vesting. The performance shares have dividend equivalent rights that entitle the grantee to dividend equivalents on each share of our common stock underlying the award equal to the dividend per share declared and paid on our issued and outstanding shares of common stock. The dividend equivalent rights are subject to the same restrictions as the underlying performance shares.
All Other Stock Awards: Number of Shares of Stock or Units (RSUs) (column (h))
| (3) | Annual |
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| (4) | One-Time Grant of RSUs for Extraordinary Performance.This amount includes a one-time grant under the |
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| and Analysis — |
| (6) | Award Modification in Connection with Consulting Agreement.These amounts represent modified RSUs previously provided to Mr. Diemer, which modifications were made in consideration for consulting services provided to PolyOne under the Consulting Agreement. The |
| Annual Plan | Cash-Settled Performance Units | |||||||||
| Name | ($) | ($) | ||||||||
| S.D. Newlin | $ | 1,892,000 | $ | 1,138,236 | ||||||
| R.M. Patterson* | 509,077 | — | ||||||||
| K.M. Smith | 375,015 | 129,486 | ||||||||
| T.J. Kedrowski | 361,646 | 123,089 | ||||||||
| B. Baert | 398,507 | 168,420 | ||||||||
A substantial portion of Mr. Diemer’s unvested Long-Term Incentive Plan awards were forfeited as a result of his separation from service under the terms of his applicable grant agreements. For detail regarding the Long-Term Incentive Plan awards that Mr. Diemer forfeited, see footnote (2) to the 2013 Summary Compensation Table of this proxy statement.
| (7) | One-Time Grant of RSUs in | |
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| Estimated Future Payouts Under | ||||||||||||||||||||||||||||||||||||||
| Non-Equity Incentive Plan Awards(2) | ||||||||||||||||||||||||||||||||||||||
| All Other Stock | All Other Options | Grant Date | ||||||||||||||||||||||||||||||||||||
| Awards: | Awards: Number of | Exercise or | Fair Value of | |||||||||||||||||||||||||||||||||||
| Number of | Securities | Base Price of | Stock and | |||||||||||||||||||||||||||||||||||
| Shares of Stock | Underlying | Option | Option | |||||||||||||||||||||||||||||||||||
| Grant | Threshold(3) | Target | Maximum | or Units(4) | Options(5) | Awards(6) | Awards(7) | |||||||||||||||||||||||||||||||
| Name | Date | ($) | ($) | ($) | (#) | (#) | ($/Sh) | ($) | ||||||||||||||||||||||||||||||
| S.D. Newlin | (1) | $ | 473,000 | $ | 946,000 | $ | 1,892,000 | — | — | — | — | |||||||||||||||||||||||||||
| 2/17/2010 | 516,000 | 1,032,000 | 2,064,000 | — | — | — | — | |||||||||||||||||||||||||||||||
| 2/17/2010 | — | — | — | 121,100 | — | — | 967,589 | |||||||||||||||||||||||||||||||
| 2/17/2010 | — | — | — | — | 218,100 | 7.99 | 850,590 | |||||||||||||||||||||||||||||||
| R.M. Patterson | (1) | 127,269 | 254,539 | 509,077 | — | — | — | — | ||||||||||||||||||||||||||||||
| 2/17/2010 | 99,600 | 199,200 | 398,400 | — | — | — | — | |||||||||||||||||||||||||||||||
| 2/17/2010 | — | — | — | 24,000 | — | — | 191,760 | |||||||||||||||||||||||||||||||
| 2/17/2010 | — | — | — | — | 43,000 | 7.99 | 167,700 | |||||||||||||||||||||||||||||||
| K.M. Smith | (1) | 93,754 | 187,508 | 375,015 | — | — | — | — | ||||||||||||||||||||||||||||||
| 2/17/2010 | 60,500 | 121,000 | 242,000 | — | — | — | — | |||||||||||||||||||||||||||||||
| 2/17/2010 | — | — | — | 13,500 | — | — | 107,865 | |||||||||||||||||||||||||||||||
| 2/17/2010 | — | — | — | — | 24,200 | 7.99 | 94,380 | |||||||||||||||||||||||||||||||
| T.J. Kedrowski | (1) | 90,411 | 180,823 | 361,646 | — | — | — | — | ||||||||||||||||||||||||||||||
| 2/17/2010 | 58,000 | 116,000 | 232,000 | — | — | — | — | |||||||||||||||||||||||||||||||
| 2/17/2010 | — | — | — | 13,500 | — | — | 107,865 | |||||||||||||||||||||||||||||||
| 2/17/2010 | — | — | — | — | 24,200 | 7.99 | 94,380 | |||||||||||||||||||||||||||||||
| B. Baert | (1) | 99,627 | 199,254 | 398,507 | — | — | — | — | ||||||||||||||||||||||||||||||
| 2/17/2010 | 74,000 | 148,000 | 296,000 | — | — | — | — | |||||||||||||||||||||||||||||||
| 2/17/2010 | — | — | — | 13,500 | — | — | 107,865 | |||||||||||||||||||||||||||||||
| 2/17/2010 | — | — | — | — | 24,200 | 7.99 | 94,380 | |||||||||||||||||||||||||||||||
38
Exercise or Base Price of Option Awards (column (i))
In setting the base price of these SARs, we followed the practice of using the closing price on the grant date. This practice is narrative disclosure relatingin compliance with the Amended 2010 Plan.
Grant Date Fair Value of Stock and Option Awards (column (j))
The amounts in this column represent the grant date fair value of each equity-based award, computed in accordance with FASB ASC Topic 718. For information regarding the assumptions used in determining the fair value of an award, please refer to Note 15, Share-Based Compensation, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
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Narrative Disclosure Relating to the 20102013 Summary Compensation Table and the 20102013 Grants of Plan-Based Awards table.
39
We do not have employment agreements with any of our Named Executive Officers, except for Messrs. Newlin and Baert.Mr. Newlin. Mr. Newlin’s and Mr. Baert’s employment agreements areagreement is described in detail in the “Compensation Discussion and Analysis — Employment Agreements with Named Executive Officers” and the “Potential Payments Uponupon Termination orChange-in-Control” Change of Control” sections of this proxy statement.
40Severance Agreement with Named Executive Officer
PolyOne and Mr. Diemer agreed that Mr. Diemer would step down from his position as Senior Vice President and Chief Financial Officer effective November 8, 2013. The compensation and benefits Mr. Diemer received and other terms and conditions of his separation from service are set forth in the “Potential Payments Upon Termination or Change of Control” section of this proxy statement. Except for the RSUs modified in accordance with the Consulting Agreement, Mr. Diemer forfeited all unvested awards under the Long-Term Incentive Plan. For details regarding the modified awards, see the description in footnote (6) to the 2013 Grants of Plan-Based Awards table of this proxy statement. For details regarding the awards that were forfeited, see footnote (2) to the 2013 Summary Compensation Table of this proxy statement.
Consulting Agreement with Named Executive Officer
On November 5, 2013, Mr. Diemer executed the Consulting Agreement under which he agreed to provide consulting services for a period of eighteen months beginning on November 11, 2013. In consideration for these consulting services, PolyOne modified certain RSUs previously granted to him, which would have otherwise been forfeited under the terms of the applicable grant agreements. The value of the modified awards, determined in accordance with FASB ASC 718, was $753,270 and is reflected in the 2013 Summary Compensation Table and the 2013 Grants of Plan-Based Awards table of this proxy statement. For details regarding the modified awards, see the description in footnote (6) to the 2013 Grants of Plan-Based Awards table of this proxy statement.
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COMPENSATION
| Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||
| Equity | |||||||||||||||||||||||||||||||||||
| Incentive Plan | |||||||||||||||||||||||||||||||||||
| Number of | Number of | Awards: Number of | |||||||||||||||||||||||||||||||||
| Securities | Securities | Securities | Market Value | ||||||||||||||||||||||||||||||||
| Underlying | Underlying | Underlying | Number of Shares | of Shares or | |||||||||||||||||||||||||||||||
| Unexercised | Unexercised | Unexercised | Option | or Units of Stock | Units of Stock | ||||||||||||||||||||||||||||||
| Options | Options | Unearned | Exercise | Option | That Have Not | That Have Not | |||||||||||||||||||||||||||||
| Exercisable(1) | Unexercisable | Options | Price | Expiration | Vested | Vested(2) | |||||||||||||||||||||||||||||
| Name | (#) | (#) | (#) | ($) | Date | (#) | ($) | ||||||||||||||||||||||||||||
| S.D. Newlin | — | — | — | — | — | 114,700 | (3) | $ | 1,432,603 | ||||||||||||||||||||||||||
| — | — | — | — | — | 246,100 | (4) | 3,073,789 | ||||||||||||||||||||||||||||
| — | — | — | — | — | 121,100 | (5) | 1,512,539 | ||||||||||||||||||||||||||||
| 174,900 | — | — | 9.1850 | 2/20/2013 | — | — | |||||||||||||||||||||||||||||
| 308,400 | — | — | 6.5850 | 3/7/2014 | — | — | |||||||||||||||||||||||||||||
| 191,200 | 95,600 | (6) | — | 6.7650 | 3/5/2015 | — | — | ||||||||||||||||||||||||||||
| — | — | 284,067 | (7) | 1.4300 | 3/4/2016 | — | — | ||||||||||||||||||||||||||||
| — | 218,100 | (8) | — | 7.9900 | 2/16/2017 | — | — | ||||||||||||||||||||||||||||
| R.M. Patterson | — | — | — | — | — | 40,000 | (3) | 499,600 | |||||||||||||||||||||||||||
| — | — | — | — | — | 47,500 | (4) | 593,275 | ||||||||||||||||||||||||||||
| — | — | — | — | — | 24,000 | (5) | 299,760 | ||||||||||||||||||||||||||||
| 40,000 | 20,000 | (6) | — | 7.7200 | 5/14/2015 | — | — | ||||||||||||||||||||||||||||
| 27,433 | — | 54,867 | (7) | 1.4300 | 3/4/2016 | — | — | ||||||||||||||||||||||||||||
| — | 43,000 | (8) | — | 7.9900 | 2/16/2017 | — | — | ||||||||||||||||||||||||||||
| K.M. Smith | — | — | — | — | — | 12,600 | (3) | 157,374 | |||||||||||||||||||||||||||
| — | — | — | — | — | 27,700 | (4) | 345,973 | ||||||||||||||||||||||||||||
| — | — | — | — | — | 13,500 | (5) | 168,615 | ||||||||||||||||||||||||||||
| 18,600 | — | — | 8.9400 | 1/4/2012 | — | — | |||||||||||||||||||||||||||||
| 20,800 | 10,400 | (6) | — | 6.7650 | 3/5/2015 | — | — | ||||||||||||||||||||||||||||
| — | — | 32,000 | (7) | 1.4300 | 3/4/2016 | — | — | ||||||||||||||||||||||||||||
| — | 24,200 | (8) | — | 7.9900 | 2/16/2017 | — | — | ||||||||||||||||||||||||||||
| 49,500 | — | — | 12.2200 | 3/25/2012 | — | — | |||||||||||||||||||||||||||||
| 5,000 | — | — | 6.0000 | 3/31/2013 | — | — | |||||||||||||||||||||||||||||
| T.J. Kedrowski | — | — | — | — | — | 12,600 | (3) | 157,374 | |||||||||||||||||||||||||||
| — | — | — | — | — | 27,700 | (4) | 345,973 | ||||||||||||||||||||||||||||
| — | — | — | — | — | 13,500 | (5) | 168,615 | ||||||||||||||||||||||||||||
| 60,000 | — | — | 7.6750 | 9/9/2014 | — | — | |||||||||||||||||||||||||||||
| 20,800 | 10,400 | (6) | — | 6.7650 | 3/5/2015 | — | — | ||||||||||||||||||||||||||||
| 16,000 | — | 32,000 | (7) | 1.4300 | 3/4/2016 | — | — | ||||||||||||||||||||||||||||
| — | 24,200 | (8) | — | 7.9900 | 2/16/2017 | — | — | ||||||||||||||||||||||||||||
| B.Baert | — | — | — | — | — | 12,600 | (3) | 157,374 | |||||||||||||||||||||||||||
| — | — | — | — | — | 22,200 | (4) | 277,278 | ||||||||||||||||||||||||||||
| — | — | — | — | — | 13,500 | (5) | 168,615 | ||||||||||||||||||||||||||||
| — | 10,400 | (6) | — | 6.7650 | 3/5/2015 | — | — | ||||||||||||||||||||||||||||
| — | — | 25,667 | (7) | 1.4300 | 3/4/2016 | — | — | ||||||||||||||||||||||||||||
| — | 24,200 | (8) | — | 7.9900 | 2/16/2017 | — | — | ||||||||||||||||||||||||||||
| 47,500 | — | — | 12.2200 | 3/25/2012 | — | — | |||||||||||||||||||||||||||||
Name | ||||||||||||||||||
41
| Option Awards | ||||||||||||||||||
| Number of Securities Underlying Unexercised Options Exercisable (#) (b) | Number of Securities Underlying Unexercised Options Unexercisable (#) (c) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) (d) | Option Exercise Price ($) (e) | Option Expiration Date (f) | Number of Shares or Units of Stock That Have Not Vested (#) (g) | Market Value of Shares or Units of Stock That Have Not Vested ($) (h) | Equity Incentive (#) (i) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($) (j) | ||||||||||
S.D. Newlin | - | - | - | - | - | 89,755 (1) | 3,172,839 | - | - | |||||||||
| - | - | - | - | - | 106,238 (2) | 3,755,513 | - | - | ||||||||||
| - | - | - | - | - | 63,582 (3) | 2,247,624 | - | - | ||||||||||
| - | - | - | - | - | 100,667 (4) | 3,558,578 | - | - | ||||||||||
| - | 52,633 (9) | - | 14.81 | 2/16/2021 | - | - | - | - | ||||||||||
| - | 154,667 (10) | - | 14.61 | 2/14/2022 | - | - | - | - | ||||||||||
| - | 137,000 (11) | - | 23.08 | 2/15/2023 | - | - | - | - | ||||||||||
R.M. Patterson | - | - | - | - | - | 17,268 (1) | 610,424 | - | - | |||||||||
| - | - | - | - | - | 22,269 (2) | 787,209 | - | - | ||||||||||
| - | - | - | - | - | 14,331 (3) | 506,601 | - | - | ||||||||||
| - | - | - | - | - | 25,167 (5) | 889,653 | - | - | ||||||||||
| - | - | - | - | - | - | - | 25,167 (8) | 889,653 | ||||||||||
| 20,333 (9) | 10,167 (9) | - | 14.81 | 2/16/2021 | - | - | - | - | ||||||||||
| 16,267 (10) | 32,533 (10) | - | 14.61 | 2/14/2022 | - | - | - | - | ||||||||||
| - | 30,700 (11) | - | 23.08 | 2/15/2023 | - | - | - | - | ||||||||||
B.C. Richardson | - | - | - | - | - | 20,047 (6) | 708,661 | - | - | |||||||||
R.J. Diemer, Jr. | - | - | - | - | - | 17,026 (7) | 601,869 | - | - | |||||||||
| - | - | - | - | - | 5,635 (7) | 199,197 | - | - | ||||||||||
| - | - | - | - | - | 1,682 (7) | 59,459 | - | - | ||||||||||
| - | - | - | - | - | 559 (7) | 19,761 | - | - | ||||||||||
T.J. Kedrowski | - | - | - | - | - | 9,203 (1) | 325,326 | - | - | |||||||||
| - | - | - | - | - | 10,624 (2) | 375,558 | - | - | ||||||||||
| - | - | - | - | - | 6,964 (3) | 246,177 | - | - | ||||||||||
| - | - | - | - | - | 25,167 (5) | 889,653 | - | - | ||||||||||
| - | - | - | - | - | - | - | 25,167 (8) | 889,653 | ||||||||||
| - | 5,367 (9) | - | 14.81 | 2/16/2021 | - | - | - | - | ||||||||||
| - | 15,533 (10) | - | 14.61 | 2/14/2022 | - | - | - | - | ||||||||||
| - | 14,900 (11) | - | 23.08 | 2/15/2023 | - | - | - | - | ||||||||||
K.M. Smith | - | - | - | - | - | 9,203 (1) | 325,326 | - | - | |||||||||
| - | - | - | - | - | 10,624 (2) | 375,558 | - | - | ||||||||||
| - | - | - | - | - | 6,358 (3) | 224,755 | - | - | ||||||||||
| - | - | - | - | - | 15,100 (5) | 533,785 | - | - | ||||||||||
| 10,733 (9) | 5,367 (9) | - | 14.81 | 2/16/2021 | - | - | - | - | ||||||||||
| 7,767 (10) | 15,533 (10) | - | 14.61 | 2/14/2022 | - | - | - | - | ||||||||||
| - | 13,700 (11) | - | 23.08 | 2/15/2023 | - | - | - | - | ||||||||||
| (1) | Represents stock-settled RSUs that were granted on |
| (2) | Represents stock-settled RSUs that were granted on February |
| (3) | Represents stock-settled |
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COMPENSATION
| (4) | Represents a one-time stock-settled RSU award that was granted on March 8, 2013 to reward Mr. Newlin’s extraordinary performance since he joined PolyOne in 2006. The award vests in full on the third anniversary of the grant date. The award includes shares deemed purchased with reinvested dividend equivalents that are subject to the same forfeiture conditions as the shares to which the dividends relate. |
| (5) | Represents stock-settled |
| (6) | Represents a one-time award of 20,000 stock-settled RSUs granted on November 11, 2013. The RSUs vest in full on the third anniversary of the grant date. The RSUs include shares deemed purchased with reinvested dividend equivalents that are subject to the same forfeiture conditions as the shares to which the dividends relate. |
| (7) | Represents modified stock-settled RSUs previously provided to Mr. Diemer, such modifications were made as consideration for services provided under the Consulting Agreement. The terms of the modification are set forth in the narrative to the “Potential Payments Upon Termination or Change of Control – Severance Agreement” section of this proxy statement. The modified RSUs include shares deemed purchased with reinvested dividend equivalents that are subject to the same forfeiture conditions as the shares to which the dividends relate and vest |
| (8) | Represents a one-time grant of performance shares on March 13, 2013 under the Amended 2010 Plan. The performance shares were intended to recognize Messrs. Patterson and Kedrowski’s significant contributions with regard to PolyOne’s acquisition of Spartech and its continued integration into PolyOne. The performance shares will be earned contingent upon the achievement of the Synergy Goal resulting from the acquisition, as set forth in the footnotes of the 2013 Grants of Plan-Based Awards table of this proxy statement. If the Synergy Goal is achieved, then the performance shares vest in full on March 31, 2016. The awards include shares deemed purchased with reinvested dividend equivalents that are subject to the same forfeiture conditions as the shares to which the dividends relate. |
| (9) | Represents stock-settled SARs |
| (10) | Represents stock-settled SARs granted on February 14, 2012 that vest in increments upon the attainment of |
| (11) | Represents stock-settled SARs granted on February 15, 2013 that vest in increments upon the attainment of target prices (based on PolyOne’s minimum stock price and sustained for thirty consecutive trading days) for our common shares as follows: one-third at $25.39; one-third at $26.54; and one-third at $27.70. The stock price hurdles were achieved in 2013. The SARs are now subject to time-based vesting that lapse in one-third increments on each of the first three anniversaries of the grant date. |
Number of Securities Underlying Unexercised Options (#) Exercisable (column (b))
This column shows the fully vested and exercisable SARs held by the Named Executive Officers as of December 31, 2013.
Number of Securities Underlying Unexercised Options (#) Unexercisable (column (c))
This column shows the unvested and unexercisable SARs held by the Named Executive Officers as of December 31, 2013.
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (column (d))
There are no shares underlying unexercised SARs awarded under any equity incentive plan that have not been earned.
Option Exercise Price (column (e))
This column shows the base price for each SAR reported in column (b) and (c).
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COMPENSATION
Option Expiration Date (column (f))
This column shows the expiration dates for each SAR reported in columns (b) and (c).
Number of Shares or Units of Stock That Have Not Vested (column (g))
This column shows the unvested RSUs held by the Named Executive Officers as of December 31, 2013. The RSUs have dividend equivalent rights that entitle the grantee to dividend equivalents on each share of our common stock underlying the award equal to the dividend per share declared and paid on our issued and outstanding shares of common stock. The amounts in this column include all dividend equivalents declared in 2011 through 2013 attributable to the awards (including the 4th quarter dividend declared on December 2, 2013, to shareholders of record on December 17, 2013, which was paid on January 9, 2014).
Market Value of Shares or Units of Stock That Have Not Vested (column (h))
The market value is determined based on the closing market price of our common shares on December 31, 2013 ($35.35).
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (column (i))
This column shows the performance shares held by the Named Executive Officers as of December 31, 2013 that have not vested and have not been earned. The performance shares have dividend equivalent rights that entitle the grantee to dividend equivalents on each share of our common stock underlying the award equal to the dividend per share declared and paid on our issued and outstanding shares of common stock. The amounts in this column include all dividend equivalents declared in 2013 attributable to the awards (including the 4th quarter dividend declared on December 2, 2013, to shareholders of record on December 17, 2013, which was paid on January 9, 2014).
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (column (j))
The market value is determined based on the closing market price of our common shares on December 31, 2013 ($35.35).
Name (a) | Option Awards | Stock Awards | ||||||||||
| Number of Shares Acquired on Exercise (#) (b) | Value Realized on Exercise ($) (c) | Number of Shares Acquired on Vesting (#) (d) | Value Realized on Vesting ($) (e) | |||||||||
S.D. Newlin | 255,300 | 4,048,607 | 124,077 | 2,863,709 | ||||||||
R.M. Patterson | 63,000 | 1,359,370 | 24,590 | 567,539 | ||||||||
B.C. Richardson | - | - | - | - | ||||||||
R.J. Diemer, Jr. | 10,000 | 175,200 | - | - | ||||||||
T.J. Kedrowski | 21,200 | 272,174 | 13,831 | 319,241 | ||||||||
K.M. Smith | 8,067 | 137,946 | 13,831 | 319,241 | ||||||||
Option Awards (columns (b) and (c))
Column (b) reports exercises of stock options and SARs during 2013 on an aggregate basis. The value realized on exercise (column (c)) was computed by determining the difference between the market price of the underlying securities at exercise and the exercise price of the options or SARs. All of Mr. Newlin’s transactions involved SARs that were exercised pursuant to a trading plan established under Rule 10b5-1 of the Exchange Act.
Stock Awards (columns (d) and (e))
Column (d) reports the vesting and release of RSUs during 2013 on an aggregate basis. All of the stock awards that vested and were released in 2013 were granted on February 17, 2010 OPTION EXERCISES AND STOCK VESTEDand released on February 17, 2013. The amounts in this column include shares awarded through the dividend equivalent right feature of the Amended 2010 Plan, which have also been reported in the “All Other Compensation” column of the 2013 Summary Compensation Table of this proxy
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COMPENSATION
statement. The value realized on release (column (e)) was computed by multiplying the number of vested RSUs, including the corresponding dividend equivalent rights, by the closing market price of the underlying securities on the trading day prior to the vesting date, in accordance with the Amended 2010 Plan.
| Option Awards | Stock Awards | |||||||||||||||||
| Number of Shares | ||||||||||||||||||
| Acquired on | Value Realized on | Number of Shares | Value Realized | |||||||||||||||
| Exercise(1) | Exercise(2) | Acquired on Vesting | on Vesting | |||||||||||||||
| Name | (#) | ($) | (#) | ($) | ||||||||||||||
| S.D. Newlin | 142,033 | $ | 1,086,552 | — | — | |||||||||||||
| R.M. Patterson | — | — | — | — | ||||||||||||||
| K.M. Smith | 196,000 | 1,293,444 | — | — | ||||||||||||||
| T.J. Kedrowski | — | — | — | — | ||||||||||||||
| B.Baert | 184,033 | 804,237 | — | — | ||||||||||||||
| Name | Plan Name | Number of Years (#) | Present Value of ($) | Payments During Last ($) | ||||||||||||
S.D. Newlin | Supplemental retirement benefit under employment agreement | - | 7,352,379(1) | - | ||||||||||||
R.M. Patterson | N/A | - | - | - | ||||||||||||
B.C. Richardson | N/A | - | - | - | ||||||||||||
R.J. Diemer, Jr. |
| Number of Years | Present Value of | Payments During Last | ||||||||||||||
| Credited Service | Accumulated Benefit | Fiscal Year | ||||||||||||||
| Name | Plan Name | (#) | ($) | ($) | ||||||||||||
| S.D. Newlin | Supplemental retirement benefit under employment agreement | — | $ | 5,396,797 | (1) | 0 | ||||||||||
| R.M. Patterson | N/A | — | — | — | ||||||||||||
| K.M. Smith | PolyOne Merged Pension Plan | 17.4 | 482,346 | (2)(3) | 0 | |||||||||||
| The Geon Company Section 401(a)(17) Benefit Restoration Plan | 17.4 | 614,691 | (2)(4) | 0 | ||||||||||||
| T.J. Kedrowski | N/A | — | — | — | ||||||||||||
| B. Baert | N/A | — | — | — | ||||||||||||
42
| N/A | - | - | - | |||||||||||||
T.J. Kedrowski | N/A | - | - | - | ||||||||||||
K.M. Smith | PolyOne Merged Pension Plan The Geon Company Section 401(a)(17) Benefit Restoration Plan | 17.4 17.4 | 630,963(2)(3) 804,082(2)(4) | - - |
| (1) | ||
| (2) | ||
| (3) | Mr. Smith’s | |
| (4) | Mr. Smith’s |
43
The Benefit Restoration Plan provides benefits that are in addition to those offered under the Qualified Pension Plan. Benefits are calculated under a formula similar to that of the Qualified Pension Plan, but without the compensation and benefit limits imposed by the Internal Revenue Code. The benefits under the Benefit Restoration Plan are offset by benefits
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COMPENSATION
provided under the Qualified Pension Plan. The Qualified Pension Plan makes available a pension that is paid from funds in trust provided through contributions by us. Any pension benefit provided under the Benefit Restoration Plan is paid from our general assets.
The amount of Mr. Smith’s pension depends on a number of factors including monthly Final Average Earnings (“FAE”) and years of benefit service to us (“Benefit Service”). FAE is determined based on the highest four consecutive calendar years of an employee’s earnings. Earnings include salary, overtime pay, holiday pay, vacation pay, and certain incentive payments including annual cash bonuses, but exclude awards under long-term incentive programs and the match contributed by us in the qualified savings plans. The Qualified Pension Plan provides a monthly lifetime benefit equal to 1.15% times FAE times Benefit Service plus 0.45% times FAE in excess of 2002 Covered Compensation (as defined by the Internal Revenue Code) times Benefit Service limited to 35 years.
A retirement-eligible employee can elect to commence vested benefit payments as early as age 55 in lieu of waiting to age 65. However, the benefit described above is subject to reduction in recognition of the additional payments that are received because of early commencement. The reduction for early retirement is determined differently depending on whether the employee terminated employment before or after attaining age 55. If an employee terminates employment on or after age 55 and commences his or her benefit before age 62, the benefit payments would be reduced by 0.5% per month. If an employee terminates employment before age 55 and commences his or her benefit before age 65, the reduction is more severe and is determined on an actuarially equivalent basis. No reduction will occur if an employee (1) terminates employment on or after age 55 and commences his or her benefit on or after age 62 or (2) terminates employment before age 55 and commences his or her benefit at age 65.
The normal form of payment provides that an employee will receive his or her benefit in a lifetime payment with a minimum of 60 monthly payments guaranteed. Married participants receive payments in an actuarially equivalent 50% joint and survivor form. Other actuarially equivalent monthly lifetime forms of payments are available if elected by thea married participant with spousal agreement if married. Lump sumagreement. Lump-sum payments are not available.
In general, if a married, vested participant dies prior to commencing his pension benefit, then the spouse is eligible to receive the benefit that would have otherwise been payable had the participant terminated employment on the day he died, survived to his normal retirement date and elected a 50% joint and survivor form of payment and then immediately died. The 50% joint and
44
The Qualified Pension Plan and Benefit Restoration Plan were frozen to new entrants effective December 31, 1999. Benefit Service was frozen effective December 31, 2002 in both plans and, effective March 20, 2009, earnings under both plans were frozen for all participants. We decided to freeze these plans following a comprehensive retirement benefits review, during which the Compensation Committee examined whether our retirement programs were consistent with PolyOne goals, including fairness to all associates and competitiveness in the marketplace. With this change, we have a single, and competitive retirement plan for ourU.S.-based United States-based employees.
Messrs. Diemer, Kedrowski, Newlin, Patterson Baert and KedrowskiRichardson do not participate in a defined benefit plan.
We offer a defined contribution retirement benefit to all legacy PolyOne United States employees through the Qualified Savings Plan. The Qualified Savings Plan provides employees with individual retirement accounts funded by (1) an automatic PolyOne-paid contribution of 2% of employee eligible earnings, and (2) an employer-paid match on employee contributions dollar-for-dollar on the first 3% of earnings the employee contributes plus $0.50 per dollar on the next 3% of earnings the employee contributes. The Internal Revenue Code limits employee contributions to the Qualified Savings Plan to $17,500 ($23,000 for participants over age 50) and earnings upon which employee/employer contributions are limited to $255,000 in 2013.
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COMPENSATION
The PolyOne Supplemental Retirement Benefit Plan is an unfunded, nonqualified plan that provides benefits similar to the Qualified Savings Plan, but without the Internal Revenue Code contribution and earnings limitations. Together, these plans are intended to provide the Named Executive Officers with retirement income equivalent to that provided to all other employees who are not impacted by the Internal Revenue Code limitations under the Qualified Savings Plan. As a result, the Named Executive Officers can expect a retirement income that replaces a portion of their income while employed, similar to that received by all other employees participating in the Qualified Savings Plan who are not impacted by the Internal Revenue Code limitations.
During 2008, the Compensation Committee reviewed Mr. Newlin’s total compensation package among the peer companies and across the broader general industry. The Compensation Committee determined that it was in the best interests of PolyOne and our shareholders to provide a supplemental retirement benefit for him that would be competitive with industry practices and serve as an additional retention vehicle. Thus, Mr. Newlin’s employment agreement (which provides for the terms of Mr. Newlin’s employment) was amended and restated on February 21, 2008 to comply with Code Section 409A, and further amended and restated on July 16, 2008 to include certain retirement benefits.benefits and further amended and restated on March 6, 2014 in connection with his retirement as President and Chief Executive Officer and transition to Executive Chairman, effective May 15, 2014. Specifically, the employment agreement was amended to provide that upon a Qualifying Separation from Service (as defined below), Mr. Newlin will be entitled to annual supplemental retirement payments, payable in the form of a15-year certain and continuous life annuity, conditioned upon Mr. Newlin’s execution of a release and waiver. If Mr. Newlin dies or incurs a disability prior to a Qualifying Separation from Service (as defined below), he or his designated beneficiary will be entitled to certain supplemental retirement payments. Generally, Mr. Newlin will be considered to havethe definition of a Qualifying Separation from Service ifis (1) heMr. Newlin attains the age of 55 (he is now 61) and has at least five years of service with us (he now has eight), is serving as Chairman and Chief Executive Officer at the time of his retirement (provided that if the Board, in its sole discretion, has identified a suitable successor for the position of Chief Executive Officer, he only needs to be serving as Chairman at the time of his retirement) and the Board, in its sole discretion, has identified a suitable successor to the position of Chief Executive Officer; or (2) Mr. Newlin’s employment is involuntarily terminated other than for serious causeSerious Cause (as defined in his employment agreement) or Mr. Newlin terminates employment for good reason following a change of control of PolyOne. Under the terms of the amended and restated employment agreement, he will also be treated as a retiree for purposes of any SARs, RSUs, performance shares and cash-settled performance units awarded to him as long-term incentive awards. In addition, he and his eligible dependents will have access to the same retiree medical benefits made available to all retirement eligible employees under our standard retiree medical benefit program, to the extent we continue to maintain such programs for the benefit of our retirees and their eligible dependents. Notwithstanding the foregoing, Mr. Newlin will forfeit his rights to receive the supplemental retirement payments and retiree medical benefits if he engages in any conduct prohibited by his non-competition agreement or any acts that constitute fraud, embezzlement, or disclosure of confidential information or deliberate dishonesty.
| Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(4) | Aggregate Balance at 12/31/2012 ($)(5) | ||||||||||||||||||
S.D. Newlin | 166,018 | 182,237 | 30,296 | - | 1,991,132 | 1,612,581 | ||||||||||||||||||
R.M. Patterson | 165,478 | 62,715 | 344,477 | - | 1,686,376 | 1,113,706 | ||||||||||||||||||
B.C. Richardson | 10,000 | 3,250 | 183 | - | 13,433 | - | ||||||||||||||||||
R.J. Diemer, Jr. | 375,337 | 34,494 | 79,335 | - | 655,218 | 166,052 | ||||||||||||||||||
T.J. Kedrowski | 12,881 | 25,198 | 64,930 | - | 275,494 | 172,485 | ||||||||||||||||||
K.M. Smith | 26,985 | 31,618 | (4,180) | - | 639,181 | 584,758 |
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COMPENSATION
| Aggregate | |||||||||||||||||||||||||
| Executive | Registrant | Earnings | Aggregate | ||||||||||||||||||||||
| Contributions in | Contributions in | in Last | Withdrawals/ | Aggregate Balance | |||||||||||||||||||||
| Last FY(1) | Last FY(2) | FY(3) | Distributions | at Last FY(4)(5) | |||||||||||||||||||||
| Name | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||
| S.D. Newlin | $ | 138,300 | $ | 151,775 | $ | 18,584 | — | $ | 889,436 | ||||||||||||||||
| R.M. Patterson | 193,308 | 38,625 | 58,975 | — | 504,992 | ||||||||||||||||||||
| K.M. Smith | 24,115 | 28,075 | 55,681 | — | 390,683 | ||||||||||||||||||||
| T.J. Kedrowski | 16,038 | 23,121 | 10,612 | — | 102,070 | ||||||||||||||||||||
| B. Baert | — | — | — | — | — | ||||||||||||||||||||
| (1) | These amounts reflect actual amounts earned by the Named Executive Officers in |
| 2010 “Non-Equity Incentive Plan | ||||||||||
| 2010 “Salary” | Compensation” | |||||||||
| Column | Column | |||||||||
| Name | ($) | ($) | ||||||||
| S.D. Newlin | $ | 43,662 | $ | 94,638 | ||||||
| R.M. Patterson | 90,096 | 103,212 | ||||||||
| K.M. Smith | 17,353 | 6,762 | ||||||||
| T.J. Kedrowski | 13,961 | 2,077 | ||||||||
| B. Baert | — | — | ||||||||
| Name | 2013 “Salary” ($) | 2013 “Non-Equity Incentive Plan ($) | ||||||
S.D. Newlin | 53,307 | 112,711 | ||||||
R.M. Patterson | 69,935 | 95,543 | ||||||
B.C. Richardson | 10,000 | - | ||||||
R.J. Diemer, Jr. | 184,394 | 190,943 | ||||||
T.J. Kedrowski | 12,881 | - | ||||||
K.M. Smith | 18,876 | 8,109 |
| (2) | This column contains contributions by us in the last fiscal year under |
| Company Contribution | Newlin | Patterson | Smith | Kedrowski | Baert | ||||||||||||||||||||
| Company Match | $ | 105,075 | $ | 26,740 | $ | 19,436 | $ | 15,006 | — | ||||||||||||||||
| Retirement Contribution | 46,700 | 11,885 | 8,639 | 8,115 | — | ||||||||||||||||||||
| Company Contribution | Newlin | Patterson | Richardson | Diemer (*) | Kedrowski | Smith | ||||||||||||||||||
Company Match | $126,164 | $43,418 | $2,250 | $23,880 | $15,108 | $21,889 | ||||||||||||||||||
Retirement Contribution | $56,073 | $19,297 | $1,000 | $10,614 | $10,090 | $9,729 | ||||||||||||||||||
* In accordance with the administrative procedures of the PolyOne Supplemental Retirement Benefit Plan, Mr. Diemer’s Retirement Contribution will be forfeited on the first day of the seventh month following his separation from service.
All of these amounts are included in the “All Other Compensation” column of the 20102013 Summary Compensation Table.
| (3) | Because amounts included in this column do not include above-market or preferential earnings, none of these amounts are included | |
| (4) | A portion of the balance reflected in the table represents amounts earned by the executives, which they have elected to defer on a voluntary basis. Mr. Smith also has a balance in a frozen |
46
| (5) | Includes amounts reported as compensation for the Named Executive Officers in |
| Executive | Registrant | |||||||||
| Contributions | Contributions | |||||||||
| FY 2006 — 2009 | FY 2006 — 2009 | |||||||||
| Name | ($) | ($) | ||||||||
| S.D. Newlin | $ | 259,478 | $ | 283,535 | ||||||
| R.M. Patterson | 141,693 | 38,097 | ||||||||
| K.M. Smith | 33,328 | 51,275 | ||||||||
| T.J. Kedrowski | — | — | ||||||||
| B. Baert | — | — | ||||||||
| Name | Executive Contributions FY 2006 — 2012 ($) | Registrant Contributions FY 2006 — 2012 ($) | ||||
S.D. Newlin | 714,812 | 782,881 | ||||
R.M. Patterson | 718,312 | 180,662 | ||||
B.C. Richardson | - | - | ||||
R.J. Diemer, Jr. | - | - | ||||
T.J. Kedrowski | 48,083 | 65,697 | ||||
K.M. Smith | 129,127 | 161,791 |
Page 50
COMPENSATION
We currently offer participation in a nonqualified deferred compensation retirement plan, called the PolyOne Supplemental Retirement Benefit Plan.Plan, to specified employees that include the Named Executive Officers. This plan is an unfunded, nonqualified plan that provides benefits similar to our Qualified Savings Plan, but without Internal Revenue Code contribution and earnings limitations. The Named Executive Officers are permitted to elect to defer up to 50% of their salary and annual bonus into the plan. The amounts deferred are credited to accounts selected by the executive that mirror the investment alternatives available in our qualified retirement plan, except that participants cannot elect the PolyOne stock fund with respect to amounts deferred under the nonqualified plan. Each Named Executive Officer who is a participant in the supplemental planPolyOne Supplemental Retirement Benefit Plan is 100% vested in that portion of his or her account that is attributable to elective deferrals and the Company Match. Further, Named Executive Officers who are participants in the plan are vested in the Retirement Contribution (as defined above) upon three years of service. A Named Executive Officer’s vested accounts will commence to be paid to such executive within 30 days of the date of the executive’s termination of employment with us in the form of payment selected by the executive (lump sum(lump-sum payment or payment in installments over a period not exceeding 10 years) on an election form received by us.
The PolyOne Supplemental Retirement Benefit Plan and the frozen plansplan are subject to the rules of Code Section 409A, of the Internal Revenue Code, which restricts the timing of distributions. Thus, payment, or commencement of payment, to the Named Executive Officers of their accounts may need to be delayed by six months following the executive’s “separationseparation from service”service with us.
Summary of Potential Payments
Except for Mr. Diemer, our Named Executive Officers’ employment may be terminated under several possible scenarios. In certain of these scenarios, our plans, agreements, arrangements or typical practices would provide severance benefits in varying amounts to the executive. We do not have employment agreements with our Named Executive Officers other than Messrs. Newlin and Baert.Mr. Newlin. We do have management continuity agreements with each of our Named Executive Officers which agreementsthat provide for specified benefits upon a termination of employment following a change of control, and each of our Named Executive Officers other(other than Messrs. Newlin and Baert participateMr. Newlin) participates in our Executive Severance Plan. Further, ourother Company plans, agreements and arrangements may provide for specified benefits upon a change of control (or for acceleration of such benefits). Severance and other benefits that are payable upon a termination of employmentand/or upon a change of control are described below. The table following the narrative discussion summarizes the amounts payable upon termination or a change of control under certain circumstances to our current Named Executive Officers, assuming that the executive’s employment terminated on December 31, 2010.
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We have entered into management continuity agreements (the(referred to as the “Continuity Agreements”) with all of our elected corporate officers, including each of the Named Executive Officers. The purpose of the Continuity Agreements areserve to encourage the individualsthese key executives to carry out their duties and provide continuity of management in the event of a “change of control” of PolyOne. For these purposes, “change of control” has the meaning ascribed to such term in the Continuity Agreement. The Continuity AgreementsNamed Executive Officers are generally provideprovided with severance protection for the continuation of employment of the individuals (for a period of two or three years depending(depending on the executive) in the same positions and with the same responsibilities, authorities, benefits and level of compensation that they possessed immediately prior to the change of control. The agreements provide severance protection should the officer’shis or her employment be terminated either by us without cause or by the executive for good reason (as defined in the agreements)Continuity Agreements) following a change of control. The agreementsContinuity Agreements are automatically renewed each year unless we give prior notice of termination of the Continuity Agreement.
If a change of control occurs and the Named Executive Officer’s employment is terminated by us or a successor for reasons other than “cause” or is terminated voluntarily by the individual for “good reason,” generallyreason” then the Continuity Agreements generally provide that the individual would be entitled to receive:
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COMPENSATION
For these purposes “cause” is defined generallyand “good reason” have the meanings ascribed to include: (1) following notice and an opportunity to cure, the willful and continued failure of the executive to substantially perform his duties, which causes material and demonstrable injury to the Company; or (2) the willful engaging by the executivesuch terms in other gross misconduct materially and demonstrably injurious to the Company.
To the extent a payment or benefit that is paid or provided under a Continuity Agreement would also be paid or provided under the terms of another plan, program, agreement, arrangement or legal requirement, the executive would be entitled to payment under the Continuity Agreement or such other applicable plan, program, agreement, arrangement or legal requirement, whichever provides for greater benefits, but would not be entitled to benefits under both the Continuity Agreement and such other plan, program, agreement, arrangement or legal requirement.
In addition, in order to receive payment and benefits under the Continuity Agreement, the Named Executive Officer must execute a release of claims against usPolyOne and comply with confidentiality, non-compete and non-solicitation covenants for two or three years, (dependingdepending on the executive).
Employment Agreement with Mr. Newlin
We have entered into an employment agreement with Mr. Newlin, pursuant to which he serves as our Chairman, President and Chief Executive Officer. No other Named Executive Officer executed an employment agreement. The agreement provides that if (1) Mr. Newlin’s employment is terminated by us without Serious Cause (as defined in our Employee Transition Plan)below), (2) Mr. Newlin is not otherwise entitled to receive benefits under his Continuity Agreement (discussed above) and, (3) Mr. Newlin agrees to standard non-compete and non-solicitation covenants for a period of 36 months following the date of termination and (4) Mr. Newlin executes
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Mr. Newlin is also entitled to supplemental retirement benefits under his employment agreement if his employment is involuntarily terminated other than for Serious Cause or if Mr. Newlin terminates employment for “good reason” (as defined above) following a change of control. For this purpose, Serious Cause has the meaning ascribed to such term in the PolyOne Employee Transition Plan as amended from time to time, and also includes any breach of the employment agreement or certain other agreements between us and Mr. Newlin. These supplemental retirement benefits are described more fully in the “Compensation Discussion and Analysis — 2010 Executive Compensation Elements — Retirement“2013 Pension Benefits” section of this proxy statement.
In connection with the changehis retirement as President and Chief Executive Officer and transition to Executive Chairman, Mr. Newlin’s employment agreement was amended, effective May 15, 2014, to provide for various changes in locationrecognition of our European headquarters from Belgiumhis new role. Among other changes, Mr. Newlin’s employment agreement will provide that his management continuity agreement is amended to Luxembourg. There is no specifiedremove as “good reason” an election to terminate employment term under this agreement. PolyOne Luxembourg may terminate the agreement within the legal notice period required by the Luxembourg Labor Code or immediately for gross misconduct. If PolyOne Luxembourg terminates the agreement for any reason other than gross misconduct,during the 30-day period immediately following the first anniversary of a change of control. Furthermore, Mr. BaertNewlin will be entitled to a severance package based onsubstantially the Luxembourg Labor Code, provided that the amount of such severance package will not be less than the amount that Mr. Baert would have received under the formula provided under his former employment with our Belgian subsidiary. Presently, taking into account Mr. Baert’s level of remuneration, seniority and age, if the agreement were terminated by PolyOne Luxembourg for any reason other than gross misconduct, Mr. Baert would be entitled to receive an amount equal to 30 months of “remuneration” (defined as Mr. Baert’s average base salary, incentives and bonuses over the last 36 months plus the value of the use of a company car, meal vouchers, PolyOne Luxembourg’s contribution to the defined contribution pension plan and all other regular payments or benefits granted by his employer). The agreement specifically provides that Mr. Baert is not entitled to anysame severance benefits other than those providedas described above if Mr. Newlin terminates his employment for Good Reason (as defined below). Good Reason is generally defined as a material diminution in authority, duties or responsibilities or any action or inaction by law or under the agreement andCompany that the constitutes a material breach of Mr. Newlin’s employment agreement.
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COMPENSATION
Executive Severance Plan does not apply to him. The specific amounts payable to Mr. Baert under his agreement are summarized in the tables following this narrative discussion.
Effective May 25, 2006, and as amended most recently effective February 17, 2009, the Compensation Committee adopted the Executive Severance Plan. The Executive Severance Plan provides for severance payments upon certain terminations of employment to our executive officers and other elected officers who are expected to make substantial contributions to our success and thereby provide for stability and continuity of operations. All of the Named Executive Officers participate in the Executive Severance Plan except Messrs.Mr. Newlin, and Baert.
The Executive Severance Plan provides that, if we terminatePolyOne terminates the employment of a Named Executive Officer for any reason other than cause, death or disability, then the Named Executive Officer will be entitled to receive:
50
We do not have to make payments to any Named Executive OfficerOfficers under the Executive Severance Plan if he isthey are entitled to receive payment under a Continuity Agreement discussed above. In addition, in order to receive payments under the Executive Severance Plan, the Named Executive Officer must execute a release of claims against us and is subject to confidentiality, non-compete, non-solicitation and non-disparagement covenants during the two-year severance period.
Severance Agreement with Former Executive
PolyOne and Mr. Diemer agreed that Mr. Diemer would step down from his position as Senior Vice President and Chief Financial Officer effective November 8, 2013. In conjunction with his departure, Mr. Diemer received the benefits that he was entitled to under the Executive Severance Plan. The benefits include: $910,000 representing 24 months of salary continuation, a payment equal to the amount calculated under the Annual Plan as earned in 2013 of $421,071 (which will be paid in 2014 at the same time as all Named Executive Officer Annual Plan payments), a payment of $17,500 for accrued but unused vacation, 24 months of accrued post-separation medical, vision and dental coverage reimbursements totaling $48,291 and accrued post-separation outplacement services totaling $8,300. Any of the above noted items that are deemed to be deferred compensation pursuant to Code Section 409A are subject to a six month delay, and will be paid the first day of the seventh month following his separation from service.
PolyOne and Mr. Diemer executed the Severance Agreement whereby Mr. Diemer provided a release of claims, and an acknowledgement that he remains subject to certain confidentiality, non-competition and non-interference obligations.
A portion of Mr. Diemer’s unvested Long-Term Incentive Plan
Consulting Agreement with Former Executive
On November 5, 2013, Mr. Diemer entered into the Consulting Agreement with PolyOne, under which he agreed to provide consulting services for high levelsa period of performance aboveeighteen months, beginning on November 11, 2013. In consideration for these consulting services, PolyOne modified certain RSUs previously granted to him, which would have otherwise been forfeited under the ordinary performance standards compensated by base salary, without limiting our abilityterms of his applicable grant agreements upon his separation from service. For detail regarding the modified awards, see the description in footnote (6) to deductthe 2013 Grants of Plan-Based Awards table of this proxy statement. For details regarding the awards that expenditure for federal income tax purposes. Currently, allwere forfeited, see footnote (2) to the 2013 Summary Compensation Table of this proxy statement.
Annual Plan
All of our Named Executive Officers participate in the Annual Plan. The Annual Plan provides that, if a change of control occurs, we are required to pay each participant a pro-ratedan interim lump-sum cash payment equal to the product of the number
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COMPENSATION
of months that have elapsed in the calendar year prior toin which the change of control occurs and one-twelfth of the participant’s target annual incentive award opportunity in effect prior to the change of control. We have the obligation to make a final payment under the terms of the Annual Plan for the plan year in which the change of control occurs, but may offset the amount of any interim payment made.
Equity/Long-Term Incentive Awards
Each of the grant agreements evidencing outstanding awards of restricted stock,RSUs, stock options, stock appreciation rightsSARs, cash-settled performance units and performance units providesshares provide that the vesting of such award will accelerate upon a change of control. For this purpose, a “change of control” is defined in some instances, the sameAmended 2010 Plan. The grant agreements also provide for prorated vesting upon death, disability and retirement, as those terms are defined in the Annual Plangrant agreements, with the exception of Mr. Newlin’s March 8, 2013 RSU award, (which provides for full vesting upon retirement) and in other instances, the same as in the Continuity Agreements.
Retirement Benefits
Our defined benefit retirement benefit plans applicable to Mr. Smith also have provisions relating to the termination of the participants’his employment with us. Mr. Newlin’s supplemental retirement benefit under his employment agreement also has provisions relating to the termination of his employment with us. These payments are described more fully in the disclosure provided in connection with the 20102013 Pension Benefits Table contained intable of this proxy statement.
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The following table summarizes the amounts payable to the Named Executive Officers (except for Mr. Diemer) upon termination under specified circumstances or upon a change of control. The data in the tablesbelow assumes that each triggering event listed in the tables occurred on December 31, 20102013 and that the stock price for our common shares is $12.49,$35.35, the closing salesmarket price of our common shares on December 31, 2010.
| Involuntary | |||||||||||||||||||||||||||||||||
| Termination | |||||||||||||||||||||||||||||||||
| without Cause or | |||||||||||||||||||||||||||||||||
| Voluntary | Involuntary | Involuntary | for Good Reason | ||||||||||||||||||||||||||||||
| Benefits and | Termination or | Termination | Termination | Following a | |||||||||||||||||||||||||||||
| Name | Payments | Retirement(1) | Disability | Death | with Cause | without Cause | Change of Control | ||||||||||||||||||||||||||
| ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||||||||
| Stephen D. Newlin | |||||||||||||||||||||||||||||||||
| Cash Severance Benefit(2) | 0 | 0 | 0 | 0 | 2,580,000 | 5,418,000 | |||||||||||||||||||||||||||
| Annual Incentive for Year of Termination(3) | 0 | 0 | 0 | 0 | 1,892,000 | 1,892,000 | |||||||||||||||||||||||||||
| Cash-Settled Performance Units(4) | 0 | 4,459,442 | 4,459,442 | 0 | 4,459,442 | 3,096,000 | |||||||||||||||||||||||||||
| Restricted Stock Units(5) | 0 | 3,660,473 | 3,660,473 | 0 | 3,660,473 | 6,018,931 | |||||||||||||||||||||||||||
| Unexercisable Stock Options/SARs(5) | 0 | 3,973,215 | 3,973,215 | 0 | 3,973,215 | 4,670,537 | |||||||||||||||||||||||||||
| Health and Welfare Benefits(6) | 0 | 0 | 0 | 0 | 28,762 | 43,142 | |||||||||||||||||||||||||||
| Other Benefits(7) | 0 | 0 | 0 | 0 | 72,000 | 0 | |||||||||||||||||||||||||||
| Financial Planning Services(8) | 0 | 0 | 0 | 0 | 39,000 | 13,000 | |||||||||||||||||||||||||||
| Lump Sum for Defined Contribution Plans(9) | 0 | 0 | 0 | 0 | 0 | 389,030 | |||||||||||||||||||||||||||
| Excise TaxGross-up(10)(11) | 0 | 0 | 0 | 0 | 0 | 4,787,550 | |||||||||||||||||||||||||||
| Incremental Pension Benefit(12) | 0 | 569,618 | 414,079 | 0 | 569,618 | 569,618 | |||||||||||||||||||||||||||
| Robert M. Patterson | |||||||||||||||||||||||||||||||||
| Cash Severance Benefit(2) | 0 | 0 | 0 | 0 | 860,000 | 2,064,000 | |||||||||||||||||||||||||||
| Annual Incentive for Year of Termination(3) | 0 | 0 | 0 | 0 | 509,077 | 509,077 | |||||||||||||||||||||||||||
| Cash-Settled Performance Units(4) | 0 | 641,078 | 641,078 | 0 | 0 | 398,400 | |||||||||||||||||||||||||||
| Restricted Stock Units(5) | 0 | 886,898 | 886,898 | 0 | 0 | 1,392,635 | |||||||||||||||||||||||||||
| Unexercisable Stock Options/SARs(5) | 0 | 758,243 | 758,243 | 0 | 0 | 895,725 | |||||||||||||||||||||||||||
| Health and Welfare Benefits(6) | 0 | 0 | 0 | 0 | 45,342 | 68,013 | |||||||||||||||||||||||||||
| Financial Planning Services(8) | 0 | 0 | 0 | 0 | 0 | 10,000 | |||||||||||||||||||||||||||
| Outplacement Benefits(13) | 0 | 0 | 0 | 0 | 9,000 | 0 | |||||||||||||||||||||||||||
| Lump Sum for Defined Contribution Plans(9) | 0 | 0 | 0 | 0 | 0 | 148,200 | |||||||||||||||||||||||||||
| Excise TaxGross-up(10) | 0 | 0 | 0 | 0 | 0 | 1,304,162 | |||||||||||||||||||||||||||
| Incremental Pension Benefit(12) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| Kenneth M. Smith | |||||||||||||||||||||||||||||||||
| Cash Severance Benefit(2) | 0 | 0 | 0 | 0 | 688,000 | 1,599,600 | |||||||||||||||||||||||||||
| Annual Incentive for Year of Termination(3) | 0 | 0 | 0 | 0 | 375,015 | 375,015 | |||||||||||||||||||||||||||
| Cash-Settled Performance Units(4) | 518,891 | 518,891 | 518,891 | 0 | 518,891 | 359,400 | |||||||||||||||||||||||||||
| Restricted Stock Units(5) | 407,887 | 407,887 | 407,887 | 0 | 407,887 | 671,962 | |||||||||||||||||||||||||||
| Unexercisable Stock Options/SARs(5) | 444,986 | 444,986 | 444,986 | 0 | 444,986 | 522,360 | |||||||||||||||||||||||||||
| Health and Welfare Benefits(6) | 0 | 0 | 0 | 0 | 31,489 | 47,234 | |||||||||||||||||||||||||||
| Financial Planning Services(8) | 0 | 0 | 0 | 0 | 0 | 10,000 | |||||||||||||||||||||||||||
| Outplacement Benefits(13) | 0 | 0 | 0 | 0 | 9,000 | 0 | |||||||||||||||||||||||||||
| Lump Sum for Defined Contribution Plans(9) | 0 | 0 | 0 | 0 | 0 | 103,970 | |||||||||||||||||||||||||||
| Excise TaxGross-up(10) | 0 | 0 | 0 | 0 | 0 | 930,011 | |||||||||||||||||||||||||||
| Incremental Pension Benefit(12) | 132,861 | 132,861 | 63,346 | 132,861 | 132,861 | 132,861 | |||||||||||||||||||||||||||
| Thomas J. Kedrowski | |||||||||||||||||||||||||||||||||
| Cash Severance Benefit(2) | 0 | 0 | 0 | 0 | 666,000 | 1,548,450 | |||||||||||||||||||||||||||
| Annual Incentive for Year of Termination(3) | 0 | 0 | 0 | 0 | 361,646 | 361,646 | |||||||||||||||||||||||||||
| Cash-Settled Performance Units(4) | 0 | 496,402 | 496,402 | 0 | 0 | 343,600 | |||||||||||||||||||||||||||
| Restricted Stock Units(5) | 0 | 407,887 | 407,887 | 0 | 0 | 671,962 | |||||||||||||||||||||||||||
| Unexercisable Stock Options/SARs(5) | 0 | 444,986 | 444,986 | 0 | 0 | 522,360 | |||||||||||||||||||||||||||
| Health and Welfare Benefits(6) | 0 | 0 | 0 | 0 | 31,187 | 46,780 | |||||||||||||||||||||||||||
| Financial Planning Services(8) | 0 | 0 | 0 | 0 | 0 | 10,000 | |||||||||||||||||||||||||||
| Outplacement Benefits(13) | 0 | 0 | 0 | 0 | 9,000 | 0 | |||||||||||||||||||||||||||
| Lump Sum for Defined Contribution Plans(9) | 0 | 0 | 0 | 0 | 0 | 100,650 | |||||||||||||||||||||||||||
| Excise TaxGross-up(10) | 0 | 0 | 0 | 0 | 0 | 968,437 | |||||||||||||||||||||||||||
| Incremental Pension Benefit(12) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
52
| Name | Benefits and Payments | Voluntary Termination ($) | Retirement(1) ($) | Disability ($) | Death ($) | Involuntary Termination with Cause ($) | Involuntary Termination without Cause ($) | Involuntary Termination without Cause or for Good Reason Following a Change of Control ($) | ||||||||||||||||||||||
S.D. Newlin | ||||||||||||||||||||||||||||||
| Cash Severance Benefit (2) | - | - | - | - | - | 3,150,000 | 6,615,000 | |||||||||||||||||||||||
| Annual Incentive for Year of Termination | - | 1,989,890 | 1,989,890 | 1,989,890 | - | 1,989,890 | 1,989,890 | |||||||||||||||||||||||
| Cash-Settled Performance Units (3) | - | 4,503,703 | 4,503,703 | 4,503,703 | - | 4,503,703 | 5,581,625 | |||||||||||||||||||||||
| Restricted Stock Units (4) | - | 9,603,609 | 7,014,971 | 7,014,971 | - | 9,603,609 | 12,734,543 | |||||||||||||||||||||||
| Unexercisable Stock Options/SARs (4) | - | 4,443,320 | 4,443,320 | 4,443,320 | - | 4,443,320 | 5,969,886 | |||||||||||||||||||||||
| Health and Welfare Benefits (6) | - | - | - | - | - | 48,291 | 72,436 | |||||||||||||||||||||||
| Other Benefits (7) | - | - | - | - | - | 72,000 | - | |||||||||||||||||||||||
| Financial Planning Services (8) | - | - | - | - | - | 39,000 | 13,000 | |||||||||||||||||||||||
| Lump Sum for Defined Contribution Plans | - | - | - | - | - | - | 429,980 | |||||||||||||||||||||||
| Excise Tax Gross-up (9) | - | - | - | - | - | - | - | |||||||||||||||||||||||
| Incremental Pension Benefit (10) | - | - | - | - | - | - | - |
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COMPENSATION
| Name | Benefits and Payments | Voluntary Termination ($) | Retirement(1) ($) | Disability ($) | Death ($) | Involuntary Termination with Cause ($) | Involuntary Termination without Cause ($) | Involuntary Termination without Cause or for Good Reason Following a Change of Control ($) | ||||||||
R.M. Patterson | ||||||||||||||||
| Cash Severance Benefit (2) | - | - | - | - | - | 1,102,000 | 2,810,100 | |||||||||
| Annual Incentive for Year of Termination | - | - | 664,619 | 664,619 | - | 664,619 | 664,619 | |||||||||
| Cash-Settled Performance Units (3) | - | - | 910,004 | 910,004 | - | - | 1,147,388 | |||||||||
| Restricted Stock Units (4) | - | - | 1,463,625 | 1,463,625 | - | - | 2,793,905 | |||||||||
| Performance Shares (5) | - | - | 238,427 | 238,427 | - | - | 889,642 | |||||||||
| Unexercisable Stock Options/SARs (4) | - | - | 929,177 | 929,177 | - | - | 1,260,233 | |||||||||
| Health and Welfare Benefits (6) | - | - | - | - | - | 53,313 | 79,969 | |||||||||
| Financial Planning Services (8) | - | - | - | - | - | - | 10,000 | |||||||||
| Outplacement Benefits | - | - | - | - | - | 8,300 | - | |||||||||
| Lump Sum for Defined Contribution Plans | - | - | - | - | - | - | 182,660 | |||||||||
| Excise Tax Gross-up (9) | - | - | - | - | - | - | 2,048,079 | |||||||||
B.C. Richardson | ||||||||||||||||
| Cash Severance Benefit (2) | - | - | - | - | - | 1,040,000 | 1,144,849 | |||||||||
| Annual Incentive for Year of Termination | - | - | 56,485 | 56,485 | - | 56,485 | 56,485 | |||||||||
| Cash-Settled Performance Units (3) | - | - | - | - | - | - | - | |||||||||
| Restricted Stock Units (4) | - | - | 32,946 | 32,946 | - | - | 708,652 | |||||||||
| Unexercisable Stock Options/SARs (4) | - | - | - | - | - | - | - | |||||||||
| Health and Welfare Benefits (6) | - | - | - | - | - | 48,291 | 48,291 | |||||||||
| Financial Planning Services (8) | - | - | - | - | - | - | 10,000 | |||||||||
| Outplacement Benefits | - | - | - | - | - | 8,300 | - | |||||||||
| Lump Sum for Defined Contribution Plans | - | - | - | - | - | - | 111,540 | |||||||||
T.J. Kedrowski | ||||||||||||||||
| Cash Severance Benefit (2) | - | - | - | - | - | 800,000 | 1,834,742 | |||||||||
| Annual Incentive for Year of Termination | - | - | 380,581 | 380,581 | - | 380,581 | 380,581 | |||||||||
| Cash-Settled Performance Units (3) | - | - | 457,508 | 457,508 | - | - | 572,100 | |||||||||
| Restricted Stock Units (4) | - | - | 856,879 | 856,879 | - | - | 1,836,687 | |||||||||
| Performance Shares (5) | - | - | 238,427 | 238,427 | - | - | 889,642 | |||||||||
| Unexercisable Stock Options/SARs (4) | - | - | 455,304 | 455,304 | - | - | 615,195 | |||||||||
| Health and Welfare Benefits (6) | - | - | - | - | - | 29,572 | 44,358 | |||||||||
| Financial Planning Services (8) | - | - | - | - | - | - | 10,000 | |||||||||
| Outplacement Benefits | - | - | - | - | - | 8,300 | - | |||||||||
| Lump Sum for Defined Contribution Plans | - | - | - | - | - | - | 120,900 | |||||||||
| Excise Tax Gross-up (9) | - | - | - | - | - | - | - | |||||||||
K.M. Smith | ||||||||||||||||
| Cash Severance Benefit (2) | - | - | - | - | - | 760,000 | 1,767,000 | |||||||||
| Annual Incentive for Year of Termination | - | 354,418 | 354,418 | 354,418 | - | 354,418 | 354,418 | |||||||||
| Cash-Settled Performance Units (3) | - | 463,333 | 463,333 | 463,333 | - | 463,333 | 571,825 | |||||||||
| Restricted Stock Units (4) | - | 755,258 | 755,258 | 755,258 | - | 755,258 | 1,459,425 | |||||||||
| Unexercisable Stock Options/SARs (4) | - | 447,431 | 447,431 | 447,431 | - | 447,431 | 600,471 | |||||||||
| Health and Welfare Benefits (6) | - | - | - | - | - | 29,572 | 44,358 | |||||||||
| Financial Planning Services (8) | - | - | - | - | - | - | 10,000 | |||||||||
| Outplacement Benefits | - | - | - | - | - | 8,300 | - | |||||||||
| Lump Sum for Defined Contribution Plans | - | - | - | - | - | - | 114,860 | |||||||||
| Excise Tax Gross-up (9) | - | - | - | - | - | - | - | |||||||||
| Incremental Pension Benefit (10) | 10,818 | 10,818 | 10,818 | - | 10,818 | 10,818 | 10,818 |
| Involuntary | |||||||||||||||||||||||||||||||||
| Termination | |||||||||||||||||||||||||||||||||
| without Cause or | |||||||||||||||||||||||||||||||||
| Voluntary | Involuntary | Involuntary | for Good Reason | ||||||||||||||||||||||||||||||
| Benefits and | Termination or | Termination | Termination | Following a | |||||||||||||||||||||||||||||
| Name | Payments | Retirement(1) | Disability | Death | with Cause | without Cause | Change of Control | ||||||||||||||||||||||||||
| ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||||||||
| Bernard Baert(14) | |||||||||||||||||||||||||||||||||
| Cash Severance Benefit(2) | 0 | 0 | 0 | 0 | 803,367 | 1,205,050 | |||||||||||||||||||||||||||
| Luxembourg Severance(15) | 0 | 0 | 0 | 0 | 1,786,325 | 1,786,325 | |||||||||||||||||||||||||||
| Annual Incentive for Year of Termination(3) | 0 | 0 | 0 | 0 | 398,507 | 398,507 | |||||||||||||||||||||||||||
| Cash-Settled Performance Units(4) | 647,762 | 647,762 | 647,762 | 0 | 647,762 | 451,200 | |||||||||||||||||||||||||||
| Restricted Stock Units(5) | 366,043 | 366,043 | 366,043 | 0 | 366,043 | 603,267 | |||||||||||||||||||||||||||
| Unexercisable Stock Options/SARs(5) | 374,940 | 374,940 | 374,940 | 0 | 374,940 | 452,313 | |||||||||||||||||||||||||||
| Health and Welfare Benefits(6) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| Financial Planning Services(8) | 0 | 0 | 0 | 0 | 0 | 8,000 | |||||||||||||||||||||||||||
| Outplacement Benefits(13) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| Lump Sum for Defined Contribution Plans(9) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| Excise TaxGross-up(10) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| Incremental Pension Benefit(12) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| (1) | Retirement is generally defined as the executive’s attainment of age 55 with ten years of service or age 58 with five years of service. | |
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COMPENSATION
| (2) |
| (3) | For cash-settled performance units granted in 2013 and 2012, awards reflect a prorated target amount in cases of retirement, disability or | |
| (4) | ||
| (5) | ||
| (6) | Continuation of health and welfare benefits | |
| (7) | Mr. Newlin’s employment agreement provides for continuation of certain benefits following an involuntary termination without cause. | |
| (8) | Continuation of financial planning | |
| (9) | ||
| Represents the amount of excise tax that would be imposed on the executive under Code Section 280G | ||
| (10) | Messrs. Newlin and Smith are the only Named Executive Officers entitled to a pension benefit. In the case of Mr. Newlin, the | |
53
During 2010,2013, none of our executive officers or Directors was a member of the Board of Directors or compensation committee of any other company where the relationship would be construed to constitute a committee interlock within the meaning of the rules of the Securities and Exchange Commission.
Policy on Related Person Transactions
Under our Guidelines for Ethical Business Conduct, we prohibit all employees, including our officers and non-employee Directors from engaging in activities that would impact their ability to carry out their duties in an independent, objective fashion. We also have adopted a written “Policy for Review of Transactions Between the Company and Its Directors, Executive Officers and Other Related Persons.” This policy requires an initial review by our Chief Legal Officer, Chief Financial Officer and Ethics and Compliance Officer, in consultation with each other (the “Reviewing Team”), of all transactions, arrangements or relationships with us in which any Director, executive officer or other related person (including immediate family members of all related persons) has a direct or indirect material interest, and which involve $50,000 or more. Further, the Audit Committee must review and approve any transaction that the Reviewing Team determines may be required to be disclosed pursuant to Item 404 ofRegulation S-K under the Exchange Act or any similar provision. In reviewing the related person transactions, the Reviewing Team and the Audit Committee consider the following factors: (1) whether the transaction is in conformity with our Guidelines for Ethical Business Conduct and is in our best interests; (2) whether the transaction would be in the ordinary course of our business; (3) whether the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party; (4) the disclosure
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COMPENSATION
standards set forth in Item 404 ofRegulation S-K under the Exchange Act or any similar provision; and (5) whether the transaction could call into question the status of any Director or Director nominee as an independent director under the NYSE rules.
Risk Assessment of the Compensation Programs
As part of the Compensation Committee’s request,annual governance process, in December 2010,2013, we conducted a formal assessment of our compensation programs to ensure that they do not create risks that are reasonably likely to have a material adverse effect on PolyOne. With guidance and oversight from Towers Watson,the Consultant, our Internal Audit and Human Resources groups completed the initial risk assessment of our compensation programs, including those that extend beyond the executive officers. The assessment was reviewed by our Legallegal department and Finance groups and Towers Watson,the Consultant, with these areasgroups providing additional analysis and validation of the results. The results of the compensation risk assessment were presented to the Compensation Committee at its December 20102013 meeting. The areas we considered in determining that our compensation programs do not pose a material risk to PolyOne included our:
| Compensation Philosophy | Clawback Policy | |||
| Compensation Plan Design | Weightings of Incentive Plan Measures | Anti-Hedging/Anti-Pledging Policies | ||
| Balanced Pay Mix | Compensation Plan |
| Governance and Oversight | Stock Ownership Requirements | |
| Timing on Incentive Payouts | ||
Pay-for-Performance Validation |
54
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth in this proxy statement with management. Based on this review and discussion, the Compensation Committee has recommended to the Board of Directors the inclusion of the Compensation Discussion and Analysis in this proxy statement and in PolyOne’s Annual Report onForm 10-K for the fiscal year ended December 31, 2010.
The Compensation Committee
of the Board of Directors
Gordon D. Harnett, ChairpersonJ. Douglas CampbellEdward J. Mooney
William H. Powell
Kerry J. Preete
Farah M. Walters
55William A. Wulfsohn
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PROPOSAL 2: ADVISORY VOTE
As required under the Dodd-Frank Act and Section 14A of the Exchange Act, our Board of Directors is submitting a “Say on Pay” proposal for shareholder consideration. While the vote on executiveNamed Executive Officer compensation is non-binding and solely advisory in nature, our Board of Directors and the Compensation Committee will review the voting results. If there are a significant number of negative votes, we will seek to understand the concerns that influenced the vote and expect to address them in making future decisions about executive compensation programs.
Currently, advisory “Say on Pay” votes are scheduled to be held once every year. The next advisory vote on Named Executive Officer compensation is expected to occur at our 2015 Annual Meeting of Shareholders.
As described more fully in the “Compensation Discussion and Analysis” section of this proxy statement, the Compensation Committee of our Board of Directors has structured our executive compensation program to achieve the following key objectives:
| Objective | How Our Executive Compensation Program Achieves This Objective | |||
| Setting a significant portion of each Named Executive Officer’s total compensation in the form of variable compensation that is earned when pre-established financial and annual performance goals are achieved. | ||||
Align Goals and Objectives with Interests of Shareholders | Focusing incentive programs on the critical performance measures that determine | |||
Attract, Motivate and Retain Management | Competing effectively to attract, motivate and retain a management team who leads in setting and achieving the overall goals and objectives of |
| Our Board of Directors unanimously recommends a vote FOR Proposal 2 to approve, on an advisory basis, our Named Executive Officer compensation. |
We believe you should vote “FOR” our Named Executive Officer compensation program because the compensation actually earned by our Named Executive Officers for 2010our 2013 performance, as summarized below, was aligned with both our pay for performance objectivepay-for-performance objectives and our performance:Company’s performance. PolyOne had another strong year in 2013, as described above under the “Compensation Discussion and Analysis” section of this proxy statement. Guided by our strong performance results for 2013 and in prior years, our key pay decisions and actions for 2013 included:
56
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PROPOSAL 2: ADVISORY VOTE
Based on these demonstrated links between pay and performance, as well as our more in-depth discussion in the “Compensation Discussion and Analysis” section of this proxy statement regarding how our CEO’s compensation has been commensurate with performance in recent years, we believe we have successfully implemented a pay-for-performance culture at PolyOne. In 2013, we also maintained or implemented pay practices favored by |
The Board of Directors believes the Company’sour compensation programs are well tailored to recruitdemonstrate a clear link between 2013 pay and retain key executives while recognizing and sharing the sacrifices our shareholders have made.performance. The Board of Directors urges you to review carefully the Compensation“Compensation Discussion and AnalysisAnalysis” section of this Proxy Statement that describes our compensation philosophy and programs in greater detail and to approve the following resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers,PolyOne’s Named Executive Officers, as disclosed pursuant to Item 402 ofRegulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
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AUDIT
58
The Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm to audit our financial statements for the fiscal year endedending December 31, 2011.2014. The Board of Directors recommends ratification of the Audit Committee’s appointment of Ernst & Young LLP.
The selection of Ernst & Young LLP as our independent registered public accounting firm is not required to be submitted to a vote of our shareholders for ratification. The Sarbanes-Oxley Act of 2002 requires that the Audit Committee be directly responsible for the appointment, compensation and oversight of our independent auditors. The Board of Directors is submitting the appointment to our shareholders for ratification as a matter of good corporate practice. If our shareholders fail to vote on an advisory basis in favor of the selection, the Audit Committee will reconsider whether to retain Ernst & Young LLP and may retain that firm or another firm without re-submitting the matter to our shareholders. Even if our shareholders ratify the appointment, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in our best interests and the best interests of our shareholders. The affirmative vote of a majority of the shares voting on this proposal is required for ratification.
A representative of Ernst & Young LLP is expected to be present at the Annual Meeting of Shareholders. The representative will be given an opportunity to make a statement if desired and to respond to questions regarding Ernst & Young LLP’s examination of our consolidated financial statements and records for the year ended December 31, 2010.
| Our Board of Directors unanimously recommends a vote FOR Proposal 3 to ratify the Audit Committee’s appointment of Ernst & Young LLP as our independent registered public accounting firm for 2014. |
Independent Registered Public Accountant Services and Related Fee Arrangements
Services provided by Ernst & Young LLP, our independent registered public accounting firm, and related fees in each of the last two fiscal years were as follows:
Audit Fees. Audit services include the annual audit of the financial statements, the audit of internal controls over financial reporting, the reviews of our quarterly reports onForm 10-Q, the issuance of comfort letters and consents, review of registration statements filed with the Securities and Exchange CommissionSEC and international statutory audits. Fees for audit services totaled $1,983,994$4,229,900 in 20102013 and $2,192,039$2,694,800 in 2009.2012. The full Audit Committee or the Chair of the Audit Committee pre-approved all audit services and related fee arrangements billed for 20102013 in accordance with the Audit Committee Pre-Approval Policy for all Audit and Non-Audit Services and Related Fee Arrangements.
Audit-Related Fees. Audit-related services principally include audits of businesses identified for divestment and audits of our employee benefit plans.plan audits, attest services that are not required by statute or regulation and other international attest services not classified as audit fees. Fees for audit-related services totaled $478,015$177,600 in 20102013 and $162,300$149,450 in 2009.2012. The Audit Committee pre-approved all audit-related fee arrangements billed for 2010.
Tax Fees. Tax services include tax compliance, tax advice and tax planning. Fees for tax services totaled $1,060,246$802,000 in 20102013 and $619,800$645,300 in 2009.2012. The Audit Committee pre-approved all tax fee arrangements billed in 2010.
59
Our Audit Committee Pre-Approval Policy for all Audit and Non-Audit Services and Related Fee Arrangements (the “Pre-Approval Policy”) requires our Audit Committee to pre-approve all audit and non-audit services performed by Ernst & Young LLP in order to assure that the provision of such services and related fee arrangements do not impair
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AUDIT
Ernst & Young’sYoung LLP’s independence. Under the Pre-Approval Policy, the Audit Committee may delegate pre-approval authority to one or more of its members, and the member or members to whom the Audit Committee delegates such authority must report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee has formally delegated this pre-approval authority to its Chair. Management has no authority to approve services performed by Ernst & Young LLP that have not been pre-approved by the Audit Committee. The term of any pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period.
Ernst & Young LLP will provide us a description of work scope and supportingback-up documentation regarding the specific services they will provide. At each meeting of the Audit Committee, the current year’s previously pre-approved independent auditor fees along with any proposed revisions will be presented for approval. Any interim requests between Audit Committee meetings to provide services that require separate pre-approval will be submitted to the Audit Committee or the Audit Committee Chair by Ernst & Young LLP and our Chief Financial Officer, or Controller, and must include a statement as to whether, in each of their respective views, the request is consistent with the Commission’s rules on auditor independence.
60
The Committee reviewed with the independent auditors, which have the responsibility for expressing an opinion on the conformity of the financial statements with generally accepted accounting principles and applicable rules and regulations, their judgments as to the quality, not just the acceptability, of PolyOne’s critical accounting principles and estimates and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards. The Committee also reviewed with the independent auditors their report on the company’s internal controlscontrol over financial reporting at December 31, 2010,2013, including the basis for their conclusions. The Audit Committee reviewed and discussed with the independent registered public accounting firm all communications required by generally accepted auditing standards, including the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380),16, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board in Rule 3200T.Board. In addition, Ernst & Young LLP has provided the Committee with the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors’ communications with the Committee concerning independence and the Committee has discussed with Ernst & Young LLP their firm’s independence from management and PolyOne. The Committee has pre-approved all audit and non-audit services and fees provided to the companyCompany by the independent auditors. Based upon the Committee’s considerations, the Committee has concluded that Ernst & Young LLP is independent. The Committee discussed with PolyOne’s internal and independent auditors the overall scope and audit plans and evaluated their performance. The Committee meets with the internal and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of PolyOne’s internal controlscontrol over financial reporting, and the overall quality of PolyOne’s financial reporting. The Audit Committee met eightnine times during 2010.
In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the Annual Report onForm 10-K for the year ended December 31, 2010,2013, for filing with the Securities and Exchange Commission.
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AUDIT
The Committee has re-appointed Ernst & Young LLP as independent auditors for the year 2011.
All members of the Audit Committee concur in this report.
The Audit Committee of
the Board of Directors
Richard H. Fearon, Chairperson
Carol A. Cartwright
Gordon D. Harnett
Sandra B. Lin
Richard A. Lorraine
February 16, 2011
61
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GENERAL
Shareholders of record at the close of business on March 14, 201118, 2014 are entitled to vote at the meeting. On that date, a total of 94,308,81794,117,581 common shares were outstanding. Each share is entitled to one vote.
The affirmative vote of a majority of the common shares represented and voting, in person or by proxy, at any meeting of shareholders at which a quorum is present is required for action by shareholders on any matter, unless the vote of a greater number of shares or voting by classes or series is required under Ohio law. Abstentions and broker non-votes are tabulated in determining the votes present at a meeting for purposes of determining a quorum. Shareholders will not be entitled to dissenter’s rights with respect to any matter to be considered at the Annual Meeting.
Directors are elected by a plurality of the votes of shares present, in person or by proxy, and entitled to vote on the election of Directors at a meeting at which a quorum is present. An abstention or a broker non-vote has the same effect as a vote against a Director nominee, as each abstention or broker non-vote would be one less vote in favor of a Director nominee. Your broker or other nominee willnot be able to vote your shares with respect to the election of Directors if you have not provided directions to your broker. We strongly encourage you to submit your proxy card and exercise your right to vote as a shareholder. Holders of common shares have no cumulative voting rights. If any of the nominees listed on pages 3 through 76 becomes unable or declines to serve as a Director, each properly signed proxy card will be voted for another person recommended by the Board of Directors, however,Directors. However, we have no reason to believe that this will occur.
Because the vote on executiveto approve Named Executive Officer compensation and the frequency of future votes on executive compensation areis advisory, votes, there is technically no minimum vote requirement for these proposals.the proposal. An abstention or broker non-vote will have no effect on these proposalsthe proposal as the abstention or broker non-vote will not be counted in determining the number of votes cast.
The affirmative vote of holders of at least a majority of the shares cast, in person or by proxy, is necessary for the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm. Because the proposal to ratify the appointment of Ernst & Young LLP is considered “routine,” your broker or other nominee will be able to vote your shares with respect to this proposal without your instructions. An abstention or broker non-vote will have no effect on this proposal as the abstention or broker non-vote will not be counted in determining the number of votes cast.
We know of no other matters that will be presented at the meeting,meeting; however, if other matters do properly come before the meeting, the persons named in the proxy card will vote on these matters in accordance with their best judgment.
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GENERAL
Shareholder Proposals
Any shareholder who wishes to submit a proposal to be considered for inclusion in next year’s Proxy Statement should send the proposal to us, addressed to the Secretary, so that it is received on or before November 28, 2011.December 4, 2014. We suggest that all proposals be sent by certified mail, return receipt requested.
Additionally, a shareholder may submit a proposal for consideration at the 20122015 Annual Meeting of Shareholders, but not for inclusion in next year’s Proxy Statement, if the shareholder gives timely written notice of such proposal in accordance with Regulation 8(c) of our Regulations. In general, Regulation 8(c) provides that, to be timely, a shareholder’s notice must be delivered to
62
Our proxy materials for the 20112014 Annual Meeting of Shareholders will be mailed on or about March 28, 2011.April 3, 2014. Sixty days prior to the first anniversary of this date will be January 28, 2012,February 2, 2015, and 90 days prior to the first anniversary of this date will be December 29, 2011.January 3, 2015. Our proxies for the 20112014 Annual Meeting of Shareholders will confer discretionary authority to vote on any matter if we do not receive timely written notice of such matter in accordance with Regulation 8(c). For business to be properly requested by a shareholder to be brought before the 20122014 Annual Meeting of Shareholders, the shareholder must comply with all of the requirements of Regulation 8(c), not just the timeliness requirements set forth above.
Proxy Solicitation
We are making this proxy solicitation and will bear the expense of preparing, printing and mailing this notice and proxy statement. In addition to requesting proxies by mail, our officers and regular employees may request proxies by telephone or in person. We have retained Morrow & Co., LLC, 470 West Avenue, Stamford, CT 06902, to assist in the solicitation for an estimated fee of $7,000$7,500 plus reasonable expenses. We will ask custodians, nominees, and fiduciaries to send proxy material to beneficial owners in order to obtain voting instructions. We will, upon request, reimburse them for their reasonable expenses for mailing the proxy material.
We are mailing our Annual Report to Shareholders, including consolidated financial statements for the year ended December 31, 2010,2013, to shareholders of record with this proxy statement.
We will furnish without charge to each person from whom a proxy is being solicited, upon written request of any such person, a copy of the Annual Report onForm 10-K of the Company for the fiscal year endedending December 31, 2010,2013, as filed with the SEC, including the financial statements and schedules thereto. Requests for copies of such Annual Report onForm 10-K or for information on how to obtain directions to be able to attend the Annual Meeting of Shareholders and vote in person should be directed to: PolyOne Center, 33587 Walker Road, Avon Lake, Ohio 44012, Attention: Secretary.
| For the Board of Directors |
| PolyOne Corporation |
LISA K. KUNKLE |
| Vice President, General Counsel and |
| Secretary |
| April 3, 2014 |
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Reconciliation of Directors
Non-GAAP Financial Measures (Unaudited)
(In millions, except per share data)
| Year Ended December 31, 2013 | Year Ended December 31, 2012 | |||||||||||||||||
| $ | EPS | $ | EPS | |||||||||||||||
Reconciliation to Consolidated Statements of Income | ||||||||||||||||||
Net income from continuing operations attributable to PolyOne shareholders | $ | 94.0 | $ | 0.97 | $ | 53.3 | $ | 0.59 | ||||||||||
Special items, after tax (a) | 30.4 | 0.32 | 35.7 | 0.40 | ||||||||||||||
Tax adjustments (b) | 2.2 | 0.02 | 0.5 | 0.01 | ||||||||||||||
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Adjusted net income / EPS (c) | $ | 126.6 | $ | 1.31 | $ | 89.5 | $ | 1.00 | ||||||||||
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| (a) | Special items are a non-GAAP financial measure. Special items include charges related to specific strategic initiatives or financial restructurings such as: consolidation of operations; debt extinguishment costs; employee separation costs resulting from personnel reduction programs, plant phase-out costs, executive separation agreements; asset impairments; mark-to-market adjustments associated with actuarial gains and losses on pension and other postretirement benefit plans; environmental remediation costs, fines, penalties, remediation costs and related insurance recoveries related to facilities no longer owned or closed in prior years; gains and losses on the divestiture of operating businesses, joint ventures and equity investments; gains and losses on facility or property sales or disposals; results of litigation, fines or penalties, where such litigation (or action relating to the fines or penalties) arose prior to the commencement of the performance period; unrealized gains and losses from foreign currency option contracts; one-time, non-recurring items; and the effect of changes in accounting principles or other such laws or provisions affecting reported results. |
| (b) | Tax adjustments include the net tax expense (benefit) from one-time income tax items and deferred income tax valuation allowance adjustments. |
| Year Ended December 31, | ||||||||
| 2013 | 2012 | |||||||
Reconciliation to Consolidated Operating Income | ||||||||
Adjusted operating income | $ | 261.5 | $ | 191.4 | ||||
Special items in operating income | (30.0) | (53.9) | ||||||
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Operating income - GAAP | $ | 231.5 | $ | 137.5 | ||||
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| Adjusted EPS | 2010Y | 2011Y | 2012Y | 2013Y | ||||||||||||
Net income from continuing operations attributable to PolyOne common shareholders | $ | 152.5 | $ | 153.4 | $ | 53.3 | $ | 94.0 | ||||||||
SunBelt equity earnings, after tax | (14.7 | ) | (3.7 | ) | - | - | ||||||||||
Special items, after tax | 15.8 | (30.5 | ) | 35.7 | 30.4 | |||||||||||
Tax adjustments | (88.3 | ) | (42.3 | ) | 0.5 | 2.2 | ||||||||||
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Adjusted net income | $ | 65.3 | $ | 76.9 | $ | 89.5 | $ | 126.6 | ||||||||
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Diluted shares | 96.0 | 94.3 | 89.8 | 96.5 | ||||||||||||
Adjusted EPS | $ | 0.68 | $ | 0.82 | $ | 1.00 | $ | 1.31 | ||||||||
Senior management uses comparisons of adjusted operating income, adjusted net income from continuing operations attributable to PolyOne shareholders and diluted earnings per share (EPS) from continuing operations attributable to PolyOne shareholders excluding special items to assess performance and facilitate comparability of results. Above is a reconciliation of these non-GAAP financial measures to their most directly comparable measures calculated and presented in accordance with U.S. GAAP.
Page A-1
PolyOne Corporation
63Summary of Special Items (Unaudited)
(In millions, except per share data)
| Special items : | Year Ended December 31, | |||||||
| 2013 | 2012 | |||||||
Cost of sales: | ||||||||
Employee separation and plant phase-out costs | $ | (16.1 | ) | $ | (0.4 | ) | ||
Reimbursement of previously incurred environmental costs | 23.5 | – | ||||||
Environmental remediation costs | (61.2 | ) | (12.8 | ) | ||||
Acquisition related costs | (7.6 | ) | (5.4 | ) | ||||
Pension and other post-retirement mark-to-market adjustment | 1.6 | (1.3 | ) | |||||
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Impact on cost of sales | (59.8 | ) | (19.9 | ) | ||||
Selling and administrative expense: | ||||||||
Employee separation and plant phase-out costs | (38.2 | ) | (11.1 | ) | ||||
Legal related (costs) gains | 5.2 | (0.6 | ) | |||||
Unrealized gain (loss) on foreign currency option contracts | 1.1 | (1.1 | ) | |||||
Acquisition/divestiture related costs | (7.6 | ) | (3.9 | ) | ||||
Pension and other post-retirement mark-to-market adjustment | 42.4 | (40.7 | ) | |||||
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Impact on selling and administrative expense | 2.9 | (57.4 | ) | |||||
Gain on sale of investment in equity affiliates | 26.9 | 23.4 | ||||||
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Impact on operating income | (30.0 | ) | (53.9 | ) | ||||
Debt extinguishment costs | (15.8 | ) | – | |||||
Bridge loan commitment fees – interest expense | (1.9 | ) | (1.3 | ) | ||||
Other income, net | 1.4 | 0.1 | ||||||
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Impact on income from continuing operations before income taxes | (46.3 | ) | (55.1 | ) | ||||
Income tax benefit on special items | 15.9 | 19.4 | ||||||
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Impact of special items on net income attributable to PolyOne | $ | (30.4 | ) | $ | (35.7 | ) | ||
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Basic earnings per common share impact | $ | (0.32 | ) | $ | (0.40 | ) | ||
Diluted earnings per common share impact | $ | (0.32 | ) | $ | (0.40 | ) | ||
Weighted average shares used to compute earnings per share: | ||||||||
Basic | 95.5 | 89.1 | ||||||
Diluted | 96.5 | 89.8 | ||||||
Page A-2
 | Shareowner Services P.O. Box 64945 | |||||||
| St. Paul, MN 55164-0945 | ||||||||
Vote by Internet, Telephone or 24 Your phone or internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy | ||||
| INTERNET– www.proxypush.com/pol Use the Internet 11:59 p.m. (CT) on May | |||
 | PHONE–1-866-883-3382 Use a touch-tone telephone to vote your proxy until 11:59 p.m. (CT) on May 14, 2014. | |||
 | MAIL– Mark, sign and date your proxy card and return it in the postage-paid envelope provided. | |||
| If you vote your proxy by | ||||
Please detach here
| The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1 and FOR Proposals 2 and | ||||||||||||||||||||||||
1. | Election of directors: | 01 02 Gregory J. Goff 06 Stephen D. Newlin 10 Farah M. Walters 03 Gordon D. Harnett 04 Sandra B.Lin 08 | ¨ | Vote FOR all nominees (except as marked) | ¨ | Vote WITHHELD from all nominees | ||||||||||||||||||
(Instructions: To withhold authority to vote write the number(s) of the nominee(s) in the box | ||||||||||||||||||||||||
| 2. | Proposal to approve the advisory resolution on named | ¨ | For | ¨ | Against | ¨ | Abstain | |||||||||||||||
| 3. | Proposal to ratify the appointment of Ernst & Young LLP as | ¨ | For | ¨ | Against | ¨ | Abstain | |||||||||||||||
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED AS THE BOARD RECOMMENDS. | ||||||||||||||||||
| Meeting | ||||||||||||||||||||
| Address Change? Mark box, sign, and | Date | |||||||||||||||||||
| Signature(s) in Box | ||||||||||||
Please sign exactly as your name(s) appears | ||||||||||||
PolyOne Corporation
Thursday, May 15, 2014
9:00 a.m.
PolyOne Corporation Headquarters
33587 Walker Road
Avon Lake, Ohio 44012
proxy
This proxy is solicited by the Board of Directors for use at the Annual Meeting of Shareholders on May 15, 2014.
The shares of common stock you hold will be voted as you specify on the reverse side.
If no choice is specified, this proxy will be voted FOR all the nominees listed in Proposal 1 and FOR Proposals 2 and 3.
By signing this proxy, you revoke all prior proxies and appoint Bradley C. Richardson, Lisa K. Kunkle and Kenneth M. Smith, and each of them, with full power of substitution, to vote your common shares of PolyOne Corporation, held of record on March 18, 2014, on the matters shown on the reverse side hereof and on any other matters that may come before the Annual Meeting of Shareholders and all adjournments.
See reverse for voting instructions.
| Shareowner Services P.O. Box 64945 | |||||||
| St. Paul, MN 55164-0945 | ||||||||
Vote by Internet, Telephone or Mail 24 Hours a Day, 7 Days a Week Your phone or internet vote authorizes the Trustee to as if you marked, signed and returned your voting instruction card. | ||||
| INTERNET– www.proxypush.com/pol Use the Internet to on | |||
| PHONE–1-866-883-3382 Use a touch-tone telephone to vote until 11:59 p.m. (CT) on May 12, 2014. | |||
| MAIL– Mark, sign and instruction card and return paid envelope provided. | |||
| If you vote by internet or by telephone, you do NOT need to | ||||
Please detach here
| The Board of Directors recommends a vote | ||||||||||||||||||||||||
| 1. | Election of directors: | 01 Richard H. Fearon 05 Richard A. Lorraine 09 Kerry J. Preete 02 Gregory J. Goff 06 Stephen D. Newlin 10 Farah M. Walters 03 Gordon D. Harnett 07 Robert M. Patterson 11 William A. Wulfsohn 04 Sandra B. Lin 08 William H. Powell | ¨ | Vote FOR all nominees (except as marked) | ¨ | Vote WITHHELD from all nominees | ||||||||||||||||||
(Instructions: To withhold authority to vote for any indicated nominee, write the number(s) of the | ||||||||||||||||||||||||
| 2. | Proposal to approve the advisory resolution on named executive officer | ¨ | For | ¨ | Against | ¨ | Abstain | |||||||||||||||||
| 3. | Proposal to ratify the appointment of Ernst & Young LLP as | ¨ | For | ¨ | Against | ¨ | Abstain | |||||||||||||||||
| Meeting Attendance? Mark box if you plan to attend 2014 Annual Meeting of | ||||||||||||||||||||
| Address Change? Mark box, sign, and | Date | |||||||||||||||||||
| Signature(s) in Box | ||||||||||||
Please sign exactly as your name(s) appears on voting instruction card. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. | ||||||||||||
PolyOne Corporation
2014 ANNUAL MEETING OF SHAREHOLDERS
Thursday, May 15, 2014
9:00 a.m.
PolyOne Corporation Headquarters
33587 Walker Road
Avon Lake, Ohio 44012
voting instructions
This voting instruction card is solicited by the Board of Directors in connection with the Annual Meeting of Shareholders on May 15, 2014.
As a participant under either the PolyOne Retirement Savings Plan or the PolyOne Canada Inc. Retirement Savings Program (each a “Plan”), I hereby direct New York Life Trust Company as trustee of The PolyOne Retirement Savings Plan or Sun Life Financial as trustee of the PolyOne Canada Inc. Retirement Savings Program (each a “Trustee”) to vote (in person or by proxy), as designated on the reverse side, the whole number of common shares of PolyOne Corporation that are held by the Trustee and attributable to my interest in the Plan on March 18, 2014, and also a proportionate number of shares as of such date as to which no directions have been received, at the Annual Meeting of Shareholders to be held on May 15, 2014.
See reverse for voting instructions.
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