SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DCWashington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
Securities
(Amendment No.)
Filed by the Registrantþx
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| Definitive Proxy Statement |
| Definitive Additional Materials |
| Soliciting Material Pursuant to |
THE GOODYEAR TIRE & Rubber Company
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
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2012 Annual Meeting of Shareholders
and
Proxy Statement
The Goodyear Tire & Rubber Company
1144 East Market Street
Akron, Ohio44316-0001
DATE: | April | |||
TIME: | 9:00 a.m., Akron Time | |||
| PLACE: | Offices of the Company | |||
| Goodyear Theater | ||||
| 1201 East Market Street | ||||
| Akron, Ohio | ||||
YOUR VOTE IS IMPORTANT
Please vote. Most shareholders may vote by internet or telephone as well as by mail.
Please refer to your proxy card or page 5466 of the Proxy Statement for information on how to vote by
internet or telephone. If you choose to vote by mail, please complete, date and sign your proxy card and
promptly return it in the enclosed envelope.
RICHARD J. KRAMER CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT |
March 9, 2009
Dear Shareholders:
You are cordially invited to attend Goodyear’s 20092012 Annual Meeting of Shareholders, which will be held at the Goodyear Theater, 1201 East Market Street, Akron, Ohio, at 9:00 a.m., Akron Time, on Tuesday, April 7, 2009.17, 2012. During the meeting, we will discuss each item of business described in the Notice of Annual Meeting of Shareholders and Proxy Statement, and give a report on matters of current interest to our shareholders.
This booklet includes the Notice of Annual Meeting as well as the Proxy Statement, which provides information about Goodyear and describes the business we will conduct at the meeting.
We hope you will be able to attend the meeting. Whether or not you plan to attend, it is important that you vote via the internet, by telephone or by completing, dating, signing and promptly returning your proxy card. This will ensure that your shares will be represented at the meeting. If you attend and decide to vote in person, you may revoke your proxy. Remember, your vote is important!
| Sincerely, |
 |
RICHARD J. KRAMER Chairman of the Board, Chief Executive Officer and President |
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Advisory Vote Regarding the Compensation of Our Named Executive Officers (Proxy Item 2)
Ratification of Appointment of Independent Registered Public Accounting Firm (Proxy Item 3)
THE GOODYEAR TIRE & RUBBER COMPANY
2012 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 17, 2012
To the Shareholders:
The 2012 Annual Meeting of Shareholders of The Goodyear Tire & Rubber Company, an Ohio corporation, will be held at the Goodyear Theater (at Goodyear’s principal offices), 1201 East Market Street, Akron, Ohio, on Tuesday, April 17, 2012 at 9:00 a.m., Akron Time, for the following purposes:
| 4. | To act upon such |
The Board of Directors fixed the close of business on February 22, 2012 as the record date for determining shareholders entitled to notice of, and to vote at, the 2012 Annual Meeting. Only holders of record of Goodyear common stock at the close of business on February 22, 2012 will be entitled to vote at the 2012 Annual Meeting and adjournments, if any, thereof.
March 12, 2012
| By order of | ||
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David L. Bialosky, Secretary | ||
Please complete, date and sign your Proxy and return it promptly in the
enclosed envelope, or vote via the internet or by telephone.
I
The Goodyear Tire & Rubber Company
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of The Goodyear Tire & Rubber Company, an Ohio corporation (“Goodyear,” “Company,” “we,” “our” or “us”), to be voted at the annual meeting of shareholders to be held April 17, 2012 (the “Annual Meeting”), and at any adjournments thereof, for the purposes set forth in the accompanying notice.
Goodyear’s executive offices are located at 1144 East Market Street, Akron, Ohio 44316-0001. Our telephone number is 330-796-2121.
Our Annual Report to Shareholders for the year ended December 31, 2011 is enclosed with this Proxy Statement. The Annual Report is not considered part of the proxy solicitation materials. The approximate date on which this Proxy Statement and the related materials are first being sent to shareholders is March 12, 2012.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on April 17, 2012:
The Proxy Statement, Proxy Card and Annual Report to Shareholders for the year ended December 31, 2011 are available atwww.proxyvote.com.
Shares Voting. Holders of shares of the common stock, without par value, of Goodyear (the “Common Stock”) at the close of business on February 22, 2012 (the “record date”) are entitled to notice of, and to vote the shares of Common Stock they hold on the record date at, the Annual Meeting. As of the close of business on the record date, there were 244,707,542 shares of Common Stock outstanding and entitled to vote at the Annual Meeting. Each share of Common Stock is entitled to one vote.
Quorum. In order for any business to be conducted, holders of at least a majority of shares entitled to vote must be represented at the meeting, either in person or by proxy.
Adjourned Meeting. The holders of a majority of shares represented at the meeting, whether or not a quorum is present, may adjourn the meeting. If the time and place of the adjourned meeting is announced at the time adjournment is taken, no other notice need be given.
Vote Required. In accordance with Goodyear’s Articles of Incorporation, a director nominee must receive, in an uncontested election of directors for which cumulative voting is not in effect, a greater number of votes cast “for” his or her election than “against” his or her election. Under Ohio law, an incumbent director who is not re-elected will continue in office as a “holdover” director until his or her successor is elected by a subsequent shareholder vote, or his or her earlier resignation, removal from office or death. In order to address “holdover” terms for any incumbent directors who fail to be re-elected under our majority vote standard, our Corporate Governance Guidelines provide that if a director nominee does not receive a majority affirmative vote, he or she will promptly offer his or her resignation as a director to the Board of Directors. Within 90 days, the Board will decide, after taking into account the recommendation of the Governance Committee (in each case excluding the nominee(s) in question), whether to accept the resignation. The Governance Committee and the Board may consider any relevant factors in deciding whether to accept a director’s resignation. The Board’s explanation of its decision shall be promptly disclosed in a filing with the Securities and Exchange Commission.
The affirmative vote of at least a majority of the shares of Common Stock outstanding on the record date is required for a management or shareholder proposal, other than an advisory vote, to be adopted at the Annual Meeting. When considering the results of advisory votes, the Board of Directors intends to consider only those votes actually cast at the Annual Meeting.
Abstentions and “broker non-votes,” which occur when your broker does not have discretionary voting authority on a matter and you do not provide voting instructions, have the same effect as votes against any proposal voted upon by shareholders but have no effect on the election of directors or advisory votes.
Voting Shares Held in Street Name. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name,” and these proxy materials are being forwarded to you by your broker, bank or nominee who is considered the shareholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank or nominee on how to vote and are also invited to attend the Annual Meeting. Your broker, bank or nominee has enclosed a voting instruction card for you to use in directing the broker, bank or nominee regarding how to vote your shares. If you do not return the voting instruction card, the broker or other nominee will determine if it has the discretionary authority to vote on the particular matter. Under applicable New York Stock Exchange rules, brokers have the discretion to vote only on any matters deemed by the New York Stock Exchange to be routine, such as the ratification of the selection of an accounting firm (Proxy Item 3).The election of directors (Proxy Item 1) and the executive compensation advisory vote (Proxy Item 2) are not considered to be routine matters, and your broker will not have discretion to vote on those matters unless you specifically instruct your broker to do so by returning your signed voting instruction card. If you do not provide voting instructions to your broker, your shares will not be voted for any director nominee or on any matter on which your broker does not have discretionary authority (resulting in a broker non-vote). Broker non-votes will have the same effect as a vote against a proposal, but will have no effect on the election of directors or advisory votes.
Cumulative Voting for Directors. In the voting for directors, you have the right to vote cumulatively for the candidates nominated. Under the Ohio General Corporation Law, all of the shares of Common Stock may be voted cumulatively in the election of directors if any shareholder gives written notice to our President, a Vice President or the Secretary not less than 48 hours before the time set for the Annual Meeting, and an announcement of the notice is made at the beginning of the Annual Meeting by the Chairman or the Secretary or by or on behalf of the shareholder giving such notice. If cumulative voting is in effect, you may (a) give one candidate the number of votes equal to ten times the number of shares of Common Stock you are entitled to vote, or (b) distribute your votes among the ten candidates as desired.
Voting of Proxy. Messrs. David L. Bialosky, Darren R. Wells and Bertram Bell have been designated as proxies to vote shares of Common Stock in accordance with your instructions. You may give your instructions using the accompanying proxy card, via the internet or by telephone.
Your shares will be voted for the ten nominees identified at pages 8 through14, unless your instructions are to vote against any one or more of the nominees or to vote cumulatively for one or more of the nominees for election. The proxies may cumulatively vote your shares if they consider it appropriate, except to the extent you expressly withhold authority to cumulate votes as to a nominee.
Your Board of Directors anticipates that all of the nominees named will be available for election. In the event an unexpected vacancy occurs, your proxy may be voted for the election of a new nominee designated by the Board of Directors.
Proxies received and not revoked prior to the Annual Meeting will be voted in favor of the advisory resolution regarding the compensation of our named executive officers (Proxy Item 2) and the proposal of the Board of Directors to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2012 (Proxy Item 3), unless your instructions are otherwise.
Revocability of Proxy. You may revoke or revise your proxy (whether given by mail, via the internet or by telephone) by the delivery of a later proxy or by giving notice to Goodyear in writing or in open meeting. Your proxy revocation or revision will not affect any vote previously taken. If you hold your shares in “street name” please refer to the information forwarded by your broker, bank or nominee who is considered the shareholder of record for procedures on revoking or changing your voting instructions.
Confidentiality. Your vote will be confidential except (a) as may be required by law, (b) as may be necessary for Goodyear to assert or defend claims, (c) in the case of a contested election of director(s), or (d) at your express request.
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
Goodyear is committed to having sound corporate governance principles. Having such principles is essential to running Goodyear’s business efficiently and to maintaining Goodyear’s integrity in the marketplace. Goodyear’s Corporate Governance Guidelines, Business Conduct Manual, Board of Directors and Executive Officers Conflict of Interest Policy and charters for each of the Audit, Compensation, Corporate Responsibility and Compliance, Finance, and Governance Committees are available at http://www.goodyear.com/investor/investorgovernance.html. Please note, however, that information contained on the website is not incorporated by reference in this Proxy Statement or considered to be a part of this document. A copy of the committee charters and corporate governance policies may also be obtained upon request to the Goodyear Investor Relations Department.
Board Independence
The Board has determined that eight of the ten director nominees (Mmes. Peterson and Streeter and Messrs. Conaty, Firestone, Geissler, Hellman, McCollough and Weidemeyer) are independent within the meaning of Goodyear’s independence standards, which are based on the criteria established by the New York Stock Exchange and are included as Annex I to Goodyear’s Corporate Governance Guidelines. Messrs. Boland, O’Neal and Sullivan, who are not standing for re-election at the Annual Meeting, are also independent. Mr. Kramer, our Chairman of the Board, Chief Executive Officer and President, is not considered independent. In addition, in light of his relationship with the United Steelworkers (the “USW”), Mr. Wessel is not considered independent. Further, the Board expects that Mr. Wessel will recuse himself from discussions and deliberations regarding Goodyear’s relationship with the USW. The Board also determined that the nature and size of the ordinary course commercial relationships between Goodyear and Xerox Corporation, which were less than one-tenth of one percent (0.1%) of Xerox’s consolidated gross revenues in each of the last three completed fiscal years, did not impair the independence of Mr. Firestone.
Board Structure and Committee Composition
As of the date of this Proxy Statement, Goodyear’s Board has thirteen directors, each elected annually, and the following five committees: (1) Audit, (2) Compensation, (3) Corporate Responsibility and Compliance, (4) Finance, and (5) Governance. The current membership and the function of each of the committees are described below. Each of the committees operates under a written charter adopted by the Board. During 2011, the Board held seven meetings. Each director attended at least 75% of all Board and applicable Committee meetings. Directors are expected to attend annual meetings of Goodyear’s shareholders. All of the directors attended the last annual meeting of shareholders, except for Mr. Wessel whose attendance was excused due to an unavoidable conflict with another business meeting. As described on Goodyear’s website at http://www.goodyear.com/investor/investor_contact_brd.html, shareholders may communicate with the Board or any of the directors (including the Lead Director or the non-management directors as a group) by sending correspondence to the Office of the Secretary, The Goodyear Tire & Rubber Company, 1144 East Market Street, Akron, Ohio 44316-0001. All communications will be compiled by the Secretary and submitted to the Board or the individual directors on a periodic basis.
Audit Committee
The members of the Audit Committee are Mr. Boland, Mr. Firestone, Mr. Geissler and Mr. Hellman (Chairman). If you do not provide voting instructions to your broker, your shares will not be voted on any proposal on which your broker does not have discretionary authority (resulting in a broker non-vote). Broker non-votes will have no effect on the election of directors, but will have the same effect as a vote against the other proposals.
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| Responsibility | ||||||||||||||||||||
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Name of Director | Audit | Compensation | Compliance | Finance | Governance | |||||||||||||||
Non-Management Directors | ||||||||||||||||||||
| James C. Boland* | X | ** | X | |||||||||||||||||
| James A. Firestone* | X | X | ||||||||||||||||||
| W. Alan McCollough* | X | X | ** | |||||||||||||||||
| Steven A. Minter* | X | X | ||||||||||||||||||
| Denise M. Morrison* | X | X | ** | |||||||||||||||||
| Rodney O’Neal* | X | X | ||||||||||||||||||
| Shirley D. Peterson* | X | X | ||||||||||||||||||
| Stephanie A. Streeter*(1) | X | X | ||||||||||||||||||
| G. Craig Sullivan* | X | ** | X | |||||||||||||||||
| Thomas H. Weidemeyer* | X | X | ** | |||||||||||||||||
| Michael R. Wessel | X | |||||||||||||||||||
Management Director | ||||||||||||||||||||
| Robert J. Keegan(2) | ||||||||||||||||||||
Number of Meetings in Fiscal 2008 | 6 | 7 | 3 | 3 | 5 | |||||||||||||||
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The Audit Committee assists the Board in fulfilling its responsibilities for oversight of the integrity of Goodyear’s financial statements, Goodyear’s compliance with legal and regulatory requirements related to financial reporting, the independent registered public accounting firm’s qualifications and independence, and the performance of Goodyear’s internal auditors and independent registered public accounting firm. Among other things, the Audit Committee prepares the Audit Committee report for inclusion in the annual proxy statement; annually reviews the Audit Committee charter and the Committee’s performance; appoints, evaluates and determines the compensation of Goodyear’s independent registered public accounting firm; reviews and approves the scope of the annual audit plan; reviews and pre-approves all auditing services and permitted non-audit services (and related fees) to be performed by the independent registered public accounting firm; oversees investigations into complaints concerning financial matters; and reviews policies and guidelines with respect to risk assessment and risk management, including Goodyear’s major financial risk exposures. The Audit Committee works closely with management as well as Goodyear’s independent registered public accounting firm. The Audit Committee has the authority to obtain advice and assistance from, and receive appropriate funding from Goodyear for, outside legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties. The report of the Audit Committee is on page 64 of this Proxy Statement.
Compensation Committee
The members of the Compensation Committee are Mr. Conaty, Mr. McCollough, Mr. O’Neal, Mr. Sullivan and Mr. Weidemeyer (Chairman), and effective February 28, 2012, Ms. Streeter (who was a member of the Audit Committee prior to that date). The Board has determined that each member of the Compensation Committee is independent within the meaning of Goodyear’s independence standards. The Committee met six times in 2011.
The Board of Directors has delegated to the Compensation Committee primary responsibility for establishing and administering Goodyear’s compensation programs for executive officers and other key personnel. The Compensation Committee oversees Goodyear’s compensation and benefit plans and policies for directors, executive officers and other key personnel, administers its stock plans (including reviewing and recommending equity grants to executive officers and other key personnel), and reviews and approves annually all compensation decisions relating to executive officers, including the Chief Executive Officer (“CEO”). The Compensation Committee also prepares a report on executive compensation for inclusion in the annual proxy statement and reviews and discusses the Compensation Discussion and Analysis with management and recommends its inclusion in the annual proxy statement. The report of the Compensation Committee is on page 38 of this Proxy Statement.
In performing its duties, the Compensation Committee meets periodically with the CEO to review compensation policies and specific levels of compensation paid to executive officers and other key personnel, and reports and makes recommendations to the Board regarding executive compensation policies and programs. The Compensation Committee informs the non-management directors of the Board of its decisions regarding compensation for the CEO and other significant decisions related to the administration of its duties. The Compensation Committee also will consider the results of shareholder advisory votes on executive compensation matters and the changes, if any, to Goodyear’s executive compensation policies, practices and plans that may be warranted as a result of any such vote and reviews an annual risk assessment of Goodyear’s executive compensation policies, practices and plans as part of its role in overseeing management’s identification and management of, and planning for, compensation-related risks. Under its charter, the Compensation Committee may delegate its authority to one or more of its members as appropriate.
The Compensation Committee has the authority to retain and terminate outside advisors, including independent compensation consultants, to assist it in evaluating actual and proposed compensation for executive officers. The Compensation Committee also has the authority to approve any such consultant’s fees and the other terms of such retention. The Compensation Committee solicits advice from its independent compensation consultant, Frederic W. Cook & Co., Inc., on executive compensation matters relating to the CEO and other executive officers. This advice has consisted primarily of assistance with benchmarking compensation for senior executives and directors, assistance in the design of the cash and equity-based variable incentive plans, assistance in structuring the CEO
compensation program, and advice on current and evolving market practices for specific components of compensation, such as incentive awards, severance and change-in-control protection policies, non-qualified benefit plans and perquisites.
Committee on Corporate Responsibility and Compliance
The members of the Committee on Corporate Responsibility and Compliance are Mr. Geissler, Mrs. Peterson (Chairperson) and Mr. Wessel. The Committee met three times in 2011.
The Committee on Corporate Responsibility and Compliance reviews Goodyear’s legal compliance programs as well as its business conduct policies and practices and its policies and practices regarding its relationships with shareholders, employees, customers, governmental agencies and the general public. The Committee also monitors Goodyear’s objectives, policies and programs with respect to environmental sustainability, workplace health and safety, diversity and product quality. The Committee may also recommend appropriate new policies to the Board of Directors.
Finance Committee
The members of the Finance Committee are Mr. Firestone (Chairman), Mr. Hellman, Mr. O’Neal, Mr. Sullivan and Mr. Weidemeyer. The Committee met four times in 2011.
The Finance Committee consults with management and makes recommendations to the Board of Directors regarding Goodyear’s capital structure, dividend policy, tax strategies, compliance with terms in financing arrangements, risk management strategies, banking arrangements and lines of credit, and pension plan funding. The Finance Committee also reviews and consults with management regarding policies with respect to interest rate and foreign exchange risk, liquidity management, counterparty risk, derivative usage, credit ratings, and investor relations activities.
Governance Committee
The members of the Governance Committee are Mr. Boland, Mr. Conaty, Mr. McCollough (Chairman), Mrs. Peterson and Ms. Streeter. The Board has determined that each member of the Governance Committee is independent within the meaning of Goodyear’s independence standards. The Committee met five times in 2011.
The Governance Committee identifies, evaluates and recommends to the Board of Directors candidates for election to the Board. The Committee also develops and recommends appropriate corporate governance guidelines, recommends policies and standards for evaluating the overall effectiveness of the Board of Directors in the governance of Goodyear and undertakes such other activities as may be delegated to it from time to time by the Board of Directors.
Board Leadership Structure
Mr. Kramer serves as our Chairman of the Board, Chief Executive Officer and President. The Board also has a “Lead Director” who is responsible for coordinating the activities of the non-management directors and leading executive sessions of the non-management directors, which are generally held in conjunction with each regularly scheduled Board meeting. Additional duties of our Lead Director are set forth in Annex II to our Corporate Governance Guidelines. Mr. McCollough currently serves as our Lead Director.
The Board believes that the current Board leadership structure is the most appropriate for the Company and its shareholders at this time. Mr. Kramer has held positions of increasing responsibility at Goodyear for the past twelve years, including Chief Financial Officer and President, North American Tire, and has extensive knowledge of the Company and the tire industry, which is valuable to the Board in his role as Chairman. In addition, the Board has an independent Lead Director to ensure that the independent and non-management members of the Board maintain proper oversight of management. The Board has no policy that requires the combination or separation of the Chairman and CEO roles, and may reconsider our leadership structure from time to time based on considerations at that time.
Board’s Role in Risk Oversight
Management continually monitors the material risks facing the Company, including competitive, financial (accounting, liquidity and tax), legal, operational, regulatory and strategic risks. The Board as a whole has responsibility for oversight of management’s identification and management of, and planning for, those risks. Reviews of certain areas are conducted by relevant Board Committees that report their deliberations to the Board.
The Board and its Committees oversee risks associated with their principal areas of focus, as summarized below. The Board and its Committees exercise their risk oversight function by carefully evaluating the reports they receive from management and by making inquiries of management with respect to areas of particular interest to the Board. Board oversight of risk is enhanced by the fact that the Lead Director and Chairman attend virtually all Committee meetings and that Committee reports are provided to the full Board following each Committee meeting. We believe that our leadership structure also enhances the Board’s risk oversight function since our Lead Director regularly discusses the material risks facing the Company with management. The Chairman is also expected to report candidly to his fellow directors on his assessment of the material risks we face, based upon the information he receives as part of his management responsibilities. Both the Lead Director and the Chairman are well-equipped to lead Board discussions on risk issues.
| Board/Committee | Primary Areas of Risk Oversight | |
Full Board | Strategic, financial and execution risk associated with the annual operating plan and five-year strategic plan (including allocation of capital investments); major litigation and regulatory matters; acquisitions and divestitures; and management succession planning. | |
Audit Committee | Risks associated with financial matters, particularly financial reporting, accounting, disclosure and internal controls. | |
Compensation Committee | Risks associated with the establishment and administration of executive compensation and equity-based compensation programs and performance management of executive officers. | |
Governance Committee | Risks associated with Board effectiveness and organization, corporate governance matters, and director succession planning. | |
Finance Committee | Risks associated with liquidity, pension plans (including investment performance, asset allocation and funded status), taxes, currency and interest rate exposures and insurance strategies. | |
Committee on Corporate Responsibility and | Risks associated with health, safety and the environment, sustainability and the Company’s legal and ethical compliance program. | |
Consideration of Director Nominees
The policy of the Governance Committee is to consider properly submitted shareholder nominations of candidates for membership on the Board as described below under “Identifying and Evaluating Nominees for Director.” In evaluating such nominations, the Governance Committee seeks to address the criteria described below under “Director Selection Guidelines.”
Any shareholder desiring to submit a proposed candidate for consideration by the Governance Committee should send the name of such proposed candidate, together with biographical data and background information concerning the candidate, to the Office of the Secretary, The Goodyear Tire & Rubber Company, 1144 East Market Street, Akron, Ohio 44316-0001.
Director Selection Guidelines
The Board of Directors has approved guidelines for selecting directors as part of our Corporate Governance Guidelines. Criteria considered in the selection of directors include:
Personal qualities and characteristics, including the highest personal and professional integrity, sound judgment, and reputation in the business community or a record of public service;
Substantial business experience or professional expertise and a record of accomplishments;
Experience and stature necessary to be highly effective, working with other members of the Board, in serving the long-term interests of shareholders;
Ability and willingness to devote sufficient time to the affairs of the Board and the Company and to carry out their duties effectively; and
The needs of the Company at the time of nomination to the Board and the fit of a particular individual’s skills and personality with those of the other directors in building a Board that is effective and responsive to the needs of the Company.
In order to provide a diversity of perspectives in Board deliberations, the nominating process should also attempt to ensure that the Board as a whole reflects diverse business experience, substantive expertise, skills and background, as well as diversity in personal characteristics, such as age, gender and ethnicity. A person’s ability to satisfy Goodyear’s independence standards and those of the New York Stock Exchange may also be evaluated.
Identifying and Evaluating Nominees for Director
The Governance Committee is responsible for identifying, screening and recommending persons for nomination to the Board. The Governance Committee considers candidates for Board membership suggested by its members and other Board members, as well as management and shareholders. On occasion, the Committee may also retain third-party executive search firms to identify candidates. In addition, under our prior master labor agreement with the USW, the USW had the right to nominate a candidate for consideration for membership on the Board. Mr. Wessel, who became a director in December 2005, was identified and recommended by the USW.
Once a prospective nominee has been identified, the Committee makes an initial determination as to whether to conduct a full evaluation of the candidate. This initial determination is based on whatever information is provided to the Committee with the recommendation of the prospective candidate, as well as the Committee’s own knowledge of the prospective candidate, which may be supplemented by inquiries to the person making the recommendation or others. The preliminary determination is based primarily on the need for additional Board members and the likelihood that the prospective nominee can satisfy the director selection guidelines described above. If the Committee determines, in consultation with the Chairman of the Board and other Board members as appropriate, that additional consideration is warranted, it may request a third-party search firm to gather additional information about the prospective nominee’s background and experience and to report its findings to the Committee. The Committee then evaluates the prospective nominee against the standards and qualifications set out in Goodyear’s director selection guidelines. The Committee also considers such other relevant factors as it deems appropriate, including the balance of management and independent directors and the evaluations of other prospective nominees. As described above under “Director Selection Guidelines,” diversity is among the many factors that the Committee considers in evaluating prospective nominees. We consider the members of our Board to have a diverse set of business and personal experiences, backgrounds and expertise, and to be diverse in terms of age, gender and ethnicity.
In connection with this evaluation, the Committee determines whether to interview the prospective nominee, and if warranted, one or more members of the Committee, and others as appropriate, interview prospective nominees in person or by telephone. After completing this evaluation and interview, the Committee makes a recommendation to the full Board as to the persons who should be elected to the Board, and the Board makes its decision after considering the recommendation and report of the Committee.
(Item 1 on your Proxy)
The Board of Directors has selected the following ten nominees recommended by the Governance Committee for election to the Board of Directors. The directors will hold office from their election until the next Annual Meeting of Shareholders, or until their successors are elected and qualified. If any of these nominees for director becomes unavailable, the persons named in the proxy intend to vote for any alternate designated by the current Board of Directors.
WILLIAM J. CONATY
Current Principal Occupation: President of Conaty Consulting LLC and Advisory Partner of Clayton, Dubilier & Rice, LLC
Goodyear Director Since:August 1, 2011
Current Goodyear Committee Assignments:
Compensation
Governance
Description of Business Experience:
Mr. Conaty served as Senior Vice President of Corporate Human Resources for General Electric Company from 1993 to 2007. He joined General Electric in 1967 and in his 40-year career, moved through a progression of leadership roles in the company’s transportation, aerospace and aircraft engines businesses. Following his retirement from General Electric, he formed Conaty Consulting LLC and joined Clayton, Dubilier & Rice as an advisory partner. He also serves on the advisory board of Cornell University’s Center for Advanced Human Resource Studies and is a trustee of Bryant University and Dartmouth-Hitchcock Hospital.
Mr. Conaty has extensive human resources, executive compensation and executive management experience from his long and successful tenure at General Electric. His skills in coaching and developing leaders and teams are an asset to both the Board of Directors and Goodyear, particularly with respect to talent development, succession planning, labor relations and executive compensation matters.
Other Public Company Directorships Held Since January 1, 2007:
Hewitt Associates (2008 — 2010)
Age:66
JAMES A. FIRESTONE
Current Principal Occupation: Executive Vice President and President, Corporate Operations of Xerox Corporation
Goodyear Director Since:December 3, 2007
Current Goodyear Committee Assignments:
Audit
Finance (Chairman)
Description of Business Experience:
Mr. Firestone is an Executive Vice President of Xerox Corporation and has been President, Corporate Operations since September 2008. Mr. Firestone was President of Xerox North America from October 2004 to September 2008. He has also served as head of Xerox’s channels group and as chief strategy officer. Before joining Xerox in 1998, Mr. Firestone worked for IBM Corporation as general manager of the Consumer Division and for Ameritech Corporation as president of Consumer Services. He began his business career in 1978 with American Express, where during his 15-year tenure he ultimately rose to President, Travelers Cheques.
Mr. Firestone has extensive executive management experience in positions of increasing responsibility, including most recently as a senior executive officer of Xerox Corporation, which is of similar size and global complexity as Goodyear. He also has over 16 years of profit and loss management responsibility, as well as over 10 years of international business experience while working in Japan for American Express. These experiences provide him with unique and valuable insights as a director of Goodyear, particularly with respect to operations and finance matters.
Other Public Company Directorships Held Since January 1, 2007:
The Nomura Partners Fund (2005 — present)
Age:57
WERNER GEISSLER
Current Principal Occupation: Vice Chairman, Global Operations of The Procter & Gamble Company
Goodyear Director Since:February 21, 2011
Current Goodyear Committee Assignments:
| ��� | Audit |
Corporate Responsibility and Compliance
Description of Business Experience:
Mr. Geissler has been Vice Chairman, Global Operations of The Procter & Gamble Company since August 2007 and was Group President, Central & Eastern Europe, Middle East and Africa from July 2004 to July 2007. He joined Procter & Gamble in 1979 and has held positions of increasing responsibility in various brand and general management and operations roles in Europe, the Middle East, Central Asia, Japan, Africa and the United States. He is also a member of the Supervisory Board and Audit Committee of the International Management Development School in Lausanne, Switzerland, a leading global institution for senior management education.
Mr. Geissler, a native of Germany, has deep executive management experience, including as a senior executive officer of Procter & Gamble, where he currently oversees Procter & Gamble’s extensive worldwide business operations. He has significant international business experience and profit and loss management responsibility. These experiences provide him with valuable insights as a director of Goodyear, particularly with respect to consumer marketing and international, operations and finance matters.
Other Public Company Directorships Held Since January 1, 2007:
None
Age:58
PETER S. HELLMAN
Current Principal Occupation: Retired. Formerly President and Chief Financial and Administrative Officer of Nordson Corporation
Goodyear Director Since:October 5, 2010
Current Goodyear Committee Assignments:
Audit (Chairman)
Finance
Description of Business Experience:
Mr. Hellman retired from Nordson Corporation, a designer, manufacturer and marketer of industrial equipment, in 2008 after a career of over 20 years with large, multinational companies in both financial and operating executive positions. Mr. Hellman was President and Chief Financial and Administrative Officer of Nordson Corporation from 2004 to January 2008 and Executive Vice President and Chief Financial and Administrative Officer from 2000 to 2004. Prior to joining Nordson in 2000, Mr. Hellman was with TRW Inc. for 10 years and held various positions, including as President and Chief Operating Officer and as Chief Financial Officer. Mr. Hellman also serves on the boards of several nonprofit organizations.
Mr. Hellman has significant financial reporting expertise due to his service as a Chief Financial Officer at both Nordson and TRW, providing him with the necessary skills to be Chairman of our Audit Committee, where he also qualifies as an “audit committee financial expert.” He also has extensive operational experience at both companies. In addition, Mr. Hellman has served on public company boards for over 17 years. Through his board and management experience, Mr. Hellman also has significant experience with corporate governance practices and legal and regulatory compliance issues. Mr. Hellman’s financial and operating experience, business leadership skills and board experience enable him to provide valuable contributions as a Goodyear director.
Other Public Company Directorships Held Since January 1, 2007:
Baxter International Inc. (2005 — present)
Owens-Illinois, Inc. (2007 — present)
Qwest Communications International Inc. (2000 — March 2011)
Nordson Corporation (2001 — 2008)
Age:62
RICHARD J. KRAMER
Current Principal Occupation: Chairman of the Board, Chief Executive Officer and President of Goodyear
Goodyear Director Since: February 22, 2010
Description of Business Experience:
Mr. Kramer joined Goodyear in March 2000 as Vice President — Corporate Finance, serving in that capacity as Goodyear’s principal accounting officer until August 2002, when he was elected Vice President, Finance — North American Tire. In August 2003, he was named Senior Vice President, Strategic Planning and Restructuring, and in June 2004 was elected Executive Vice President and Chief Financial Officer. Mr. Kramer was elected President, North American Tire in March 2007 and continued to serve as Chief Financial Officer until August 2007. In June 2009, Mr. Kramer was elected Chief Operating Officer and continued to serve as President, North American Tire until February 16, 2010. He was elected Chief Executive Officer and President effective April 13, 2010 and Chairman effective October 1, 2010. Prior to joining Goodyear, Mr. Kramer was with PricewaterhouseCoopers LLP for 13 years, including two years as a partner.
Mr. Kramer has been an executive officer of Goodyear for 12 years. Mr. Kramer has held several key positions at Goodyear and has had a critical role in creating our strategy and strengthening our leadership teams as Chief Executive Officer and previously as Chief Financial Officer and as President, North American Tire. Mr. Kramer’s deep knowledge of Goodyear, global markets, manufacturing, finance and accounting provides our Board with valuable perspectives that are necessary to advance Goodyear’s business and the interests of our shareholders.
Mr. Kramer does not serve on any Board committees.
Other Public Company Directorships Held Since January 1, 2007:
None
Age:48
W. ALAN McCOLLOUGH
Current Principal Occupation: Retired. Formerly Chairman and Chief Executive Officer of Circuit City Stores Inc.
Goodyear Director Since:April 10, 2007
Current Goodyear Board Assignments:
Lead Director
Current Goodyear Committee Assignments:
Compensation
Governance (Chairman)
Description of Business Experience:
Mr. McCollough joined Circuit City Stores Inc., a consumer electronics retailer, in 1987 as general manager of corporate operations, and was named assistant vice president in 1989, president of central operations in 1991, and
senior vice president of merchandising in 1994. He served as President and Chief Operating Officer from 1997 to 2000 and as President and Chief Executive Officer from 2000 to 2002. Mr. McCollough was elected Chairman, President and Chief Executive Officer of Circuit City in 2002 and served in those capacities until 2005. He remained Chief Executive Officer until February 2006 and Chairman until his retirement in June 2006. Mr. McCollough also serves as a trustee of the Joslin Diabetes Center, a nonprofit organization.
Mr. McCollough has extensive senior executive management experience, particularly in operations and consumer merchandising and marketing. His experience as Chairman and Chief Executive Officer of Circuit City provides him with the necessary skills to be Lead Director. Mr. McCollough’s past service as Chairman of Circuit City, as well as his current service on other public company boards of directors, provides us with important perspectives on corporate governance matters.
Other Public Company Directorships Held Since January 1, 2007:
La-Z-Boy Inc. (2007 — present)
VF Corporation (2000 — present)
Age:62
SHIRLEY D. PETERSON
Current Principal Occupation: Retired. Formerly a partner in the law firm of Steptoe & Johnson LLP
Goodyear Director Since:April 13, 2004
Current Goodyear Committee Assignments:
Corporate Responsibility and Compliance (Chairperson)
Governance
Description of Business Experience:
Mrs. Peterson was President of Hood College, a liberal arts college in Frederick, Maryland, from 1995 to 2000. From 1989 to 1993 she served in the U.S. Government, first appointed by President George H.W. Bush as Assistant Attorney General in the Tax Division of the Department of Justice, then as Commissioner of the Internal Revenue Service. She was also a partner in the law firm of Steptoe & Johnson LLP where she served a total of 22 years from 1969 to 1989 and from 1993 to 1994. Mrs. Peterson was a Trustee of Bryn Mawr College from 1994 to 2007 and is currently a Trustee Emerita.
Mrs. Peterson’s legal, financial and executive management experience from both the public and private sectors provides Goodyear with important perspectives on accounting, tax and regulatory issues, and corporate governance matters. She serves, and has served, on several public company boards, including diverse committee assignments. Her public company board experience, particularly her service on several governance and audit committees, provides us with valuable perspectives on the policies and practices of other public companies, including several in the manufacturing sector.
Other Public Company Directorships Held Since January 1, 2007:
AK Steel Holding Corporation (2004 — present)
Wolverine World Wide, Inc. (2005 — present)
Champion Enterprises, Inc. (2004 — 2010)
DWS Mutual Funds, Independent Trustee (1995 — 2008)
Federal-Mogul Corporation (2002 — 2007)
Age:70
STEPHANIE A. STREETER
Current Principal Occupation: Chief Executive Officer of Libbey Inc.
Goodyear Director Since:October 7, 2008
Current Goodyear Committee Assignments:
Compensation
Governance
Description of Business Experience:
Ms. Streeter joined Libbey Inc., a producer of glass tableware products, as Chief Executive Officer on August 1, 2011. Previously, Ms. Streeter was with Banta Corporation, a provider of printing and supply chain management services, serving as President and Chief Operating Officer beginning in January 2001, and was elected Chief Executive Officer in 2002 and Chairman in 2004. She served as Chairman, President and Chief Executive Officer of Banta until its acquisition by R.R. Donnelley & Sons in 2007. Ms. Streeter also spent 14 years with Avery Dennison Corporation in a variety of product and business management positions, including as Group Vice President of Worldwide Office Products from 1996 to 2000. Ms. Streeter was a member of the board of directors of the United States Olympic Committee from 2004 to 2009, where she also served as Acting Chief Executive Officer from March 2009 to March 2010. She also serves on the board of Catalyst, a nonprofit organization.
Ms. Streeter has extensive senior executive management experience. Her experiences as Chief Executive Officer of Libbey, as Chairman, President and Chief Executive Officer of Banta and at Avery Dennison provided Ms. Streeter with an understanding of the operations and performance of public companies. Ms. Streeter’s service on several public company and nonprofit boards of directors also provide us with important insights on practices across a variety of industries.
Other Public Company Directorships Held Since January 1, 2007:
Libbey Inc. (August 2011 — present)
Kohl’s Corporation (2007 — present)
Banta Corporation (2001 — 2007)
Age:54
THOMAS H. WEIDEMEYER
Current Principal Occupation: Retired. Formerly Senior Vice President and Chief Operating Officer of United Parcel Service, Inc.
Goodyear Director Since:December 9, 2004
Current Goodyear Committee Assignments:
Compensation (Chairman)
Finance
Description of Business Experience:
Mr. Weidemeyer served as Senior Vice President and Chief Operating Officer of United Parcel Service, Inc., a transportation and logistics company, from January 2001, and as President and Chief Operating Officer of UPS Airlines from July 1994, until his retirement in February 2004. Mr. Weidemeyer became Manager of the Americas
International Operation of UPS in 1989, and in that capacity directed the development of the UPS delivery network throughout Central and South America. In 1990, he became Vice President and Airline Manager of UPS Airlines and in 1994 was elected its President and Chief Operating Officer. Mr. Weidemeyer was a director of United Parcel Service from 1998 to 2003.
Mr. Weidemeyer has 38 years of management and executive leadership experience. His logistics, finance and international management experience provides us with valuable insights on our supply chain and financial management practices, as well as our overall business. His service on other boards of directors also provides us with perspectives on issues facing companies in different industries.
Other Public Company Directorships Held Since January 1, 2007:
NRG Energy, Inc. (2003 — present)
Waste Management, Inc. (2005 — present)
Age:64
MICHAEL R. WESSEL
Current Principal Occupation: President of The Wessel Group Incorporated
Goodyear Director Since: December 6, 2005
Current Goodyear Committee Assignments:
Corporate Responsibility and Compliance
Description of Business Experience:
Mr. Wessel has served as President of The Wessel Group Incorporated, a government and political affairs consulting firm, since May 2006. Prior to founding The Wessel Group, he served as Senior Vice President of the Downey McGrath Group, a government affairs consulting firm, from March 1999 to December 2005 and as Executive Vice President from January 2006 to April 2006.
Mr. Wessel is an attorney with over 30 years of experience as an economic and international trade policy advisor in Washington, D.C. Mr. Wessel has acted as an advisor to Congressman Richard Gephardt, both in the U.S. House of Representatives and to his presidential campaigns in 1987-88 and 2003-04, to the Clinton/Gore Transition Office in 1992 and 1993, and to Senator John Kerry’s presidential campaign in 2004. Mr. Wessel also serves as a Commissioner on the U.S.-China Economic and Security Review Commission, a position he has held since April 2001.
Mr. Wessel’s extensive experience with public policy matters and his government service, including as an advisor to former Majority Leader Gephardt and as an appointee on government commissions, provides us with valuable perspectives on public policy matters impacting trade, international economic affairs and other matters of importance to Goodyear.
Other Public Company Directorships Held Since January 1, 2007:
None
Age:52
Mr. James C. Boland and Mr. G. Craig Sullivan were not nominated for re-election to the Board of Directors due to the retirement age provisions of Goodyear’s Corporate Governance Guidelines. Messrs. Boland and Sullivan will be retiring from the Board at the Annual Meeting after nine years and six years, respectively, of distinguished service. Mr. Rodney O’Neal will not stand for re-election to the Board of Directors after eight years of service due to his responsibilities at Delphi Automotive PLC. Goodyear and the Board of Directors are deeply grateful for their leadership and guidance during their tenure on the Board.
Your Board of Directors unanimously recommends that shareholders vote FOR each of the nominees for director named in this Proxy Statement (Proxy Item 1).
BENEFICIAL OWNERSHIP OF COMMON STOCK
The persons identified in the table below have reported that they beneficially owned at December 31, 2011 more than 5% of the outstanding shares of the Common Stock as follows:
Name and Address of Beneficial Owner | Shares of Common Stock Beneficially Owned | Percent of Common Stock Outstanding Beneficially Owned | ||||||
Wellington Management Company, LLP | 21,678,236 | (1) | 8.9 | % | ||||
BlackRock, Inc. | 15,569,705 | (2) | 6.4 | % | ||||
The Vanguard Group, Inc. | 14,571,610 | (3) | 6.0 | % | ||||
Aronson+Johnson+Ortiz, LP | 12,856,200 | (4) | 5.3 | % | ||||
| (1) | Shared voting power in respect of 19,311,636 shares and shared dispositive power in respect of 21,678,236 shares, as stated in a Schedule 13G filed with the Securities and Exchange Commission |
| (2) | Sole voting and |
| (3) | Sole voting power in respect of 341,963 shares, sole dispositive power in respect of 14,229,647 shares and shared dispositive power in respect of 341,963 shares, as stated in a Schedule 13G filed with the Securities and Exchange Commission on February 10, 2012. |
| (4) | Sole voting power in respect of 7,580,000 shares and sole dispositive power in respect of 12,856,200 shares, as stated in a Schedule 13G filed with the Securities and Exchange Commission on February 14, 2012. |
In addition, The Northern Trust Company, 50 South LaSalle Street, Chicago, Illinois 60603, has indicated that at the record date it held 8,535,761 shares, or approximately 3.5% of the outstanding shares, of Common Stock as the trustee of various employee savings plans sponsored by Goodyear and certain subsidiaries.
On February 22, 2012, each director and nominee, each person named in the Summary Compensation Table on page 39, and all directors and executive officers as a group, beneficially owned the number of shares of Common Stock set forth in the table below.
| Beneficial Ownership at February 22, 2012(1) | Deferred Share Equivalent Units and Restricted Stock Units | Percent of Class | ||||||||||||||||||
Name | Shares of Common Stock Owned Directly(2) | Shares of Common Stock Held in Savings Plan(3) | Shares of Common Stock Subject to Exercisable Options(4) | |||||||||||||||||
James C. Boland | 3,000 | -0- | -0- | 64,545 | (7) | * | ||||||||||||||
William J. Conaty | -0- | -0- | -0- | 3,833 | (7) | * | ||||||||||||||
James A. Firestone | -0- | -0- | -0- | 33,117 | (7) | * | ||||||||||||||
Werner Geissler | -0- | -0- | -0- | 7,196 | (7) | * | ||||||||||||||
Peter S. Hellman | -0- | -0- | -0- | 10,369 | (7) | * | ||||||||||||||
W. Alan McCollough | -0- | -0- | -0- | 35,927 | (7) | * | ||||||||||||||
Rodney O’Neal | -0- | -0- | -0- | 51,575 | (7) | * | ||||||||||||||
Shirley D. Peterson | 1,000 | -0- | -0- | 49,673 | (7) | * | ||||||||||||||
Stephanie A. Streeter | -0- | -0- | -0- | 29,058 | (7) | * | ||||||||||||||
G. Craig Sullivan | 5,000 | -0- | -0- | 48,153 | (7) | * | ||||||||||||||
Thomas H. Weidemeyer | 1,000 | -0- | -0- | 46,875 | (7) | * | ||||||||||||||
Michael R. Wessel | -0- | -0- | -0- | 41,821 | (7) | * | ||||||||||||||
Richard J. Kramer | 205,609 | (5) | 219 | 536,616 | 455 | (8) | * | |||||||||||||
Darren R. Wells | 27,570 | 161 | 211,318 | 75,000 | (9) | * | ||||||||||||||
Arthur de Bok | 62,674 | -0- | 300,859 | 75,000 | (9) | * | ||||||||||||||
Joseph B. Ruocco | 124,690 | 51,850 | 129,674 | 40,000 | (10) | * | ||||||||||||||
David L. Bialosky | 79,337 | (6) | -0- | 57,882 | -0- | * | ||||||||||||||
All directors, the named executive officers and all other executive officers as a group (27 persons) | 717,462 | 56,821 | 1,737,279 | 768,381 | 1.0 | % | ||||||||||||||
| * | Less than 1% |
| (1) | The number of shares indicated as beneficially owned by each of
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS Compensation Discussion and Analysis Overview During 2011, we continued to face an uncertain business environment as the economic recovery in developed markets was impacted by uncertainty surrounding sovereign debt issues in Europe and the United States and continued high levels of unemployment. We also continued to face a number of substantial challenges, such as record high raw material costs, rising energy costs, wage inflation in emerging markets, and increased pressure from our under-funded pension obligations primarily due to the artificially low interest rate environment currently maintained by the Federal Reserve in an effort to spark economic recovery. We acted to address the uncertain economic environment and the challenges described above by implementing the following strategic initiatives aimed at permitting us to emerge stronger in the future: Continue to focus on consumer-driven product innovation; Take a selective approach to the market, targeting profitable segments where we have competitive advantages; Focus on price and product mix improvements to address rising raw material costs; Achieve cost reductions of $1.0 billion over three years from 2010 to 2012; Improve our manufacturing efficiency, including recovering unabsorbed fixed costs incurred during the recession; Focus on cash flow to provide funding for investments in future growth; and Create an advantaged supply chain focused on optimizing inventory levels and further improving customer service. In spite of the macroeconomic and industry-specific challenges we faced, we produced record net sales and segment operating income in 2011 on essentially flat unit volumes. During 2011, improved price and product mix of nearly $2.4 billion more than offset the impact on segment operating income of unprecedented raw material cost increases of nearly $2.0 billion, exclusive of approximately $177 million of raw material cost savings included in our cost savings plan. In 2011, raw material cost increased approximately 30% compared to 2010 and was nearly 2.5 times our previous largest annual increase. Price and product mix also drove a 17% improvement in revenue per tire, excluding the impact of foreign currency translation, in 2011 compared to 2010, reflecting our continued focus on driving improved price and product mix through innovative product offerings in targeted market segments. In 2011, we realized approximately $281 million of cost savings, bringing the total cost savings for 2010 and 2011 to approximately $748 million, remaining on track to achieve our $1.0 billion goal over three years by the end of 2012. We also recovered approximately $195 million of under-absorbed fixed overhead costs in 2011 compared to 2010, and had the following key achievements: Continued progress on actions to reduce our high-cost manufacturing capacity, including the closure of our factory in Union City, Tennessee in July 2011 which is part of our multi-year effort to realign the cost structure of our North American Tire operating unit; Began production of tires at our new factory in Pulandian, China, supporting our key strategy of winning in this growing region; Continued improvements in working capital efficiency, measured as a percent of sales; Made capital investments of over $1.0 billion in support of future growth opportunities, including significant investments in emerging markets in China and Chile; and Launched 46 new products, thereby increasing the percentage of our sales coming from recently launched products. The factors described above resulted in the delivery of $343 million in net income in 2011 versus a prior year net loss of $216 million, and our Common Stock increased in value by nearly 20% in 2011, outpacing the S&P 500 Index which was flat year-over-year. The table below summarizes some key financial highlights and the year-over-year improvements compared to 2010:
As a result of our strong operating performance described above, the performance targets under our annual incentive plan were exceeded and payouts were made ranging from 131% to 150% of target for our named executive officers. In addition, the performance targets for the 2011 performance periods under our 2009-2011, 2010-2012 and 2011-2013 long-term awards were exceeded and payouts were approved for the applicable periods, subject to continued service, at 150% of target for our named executive officers. In response to current executive compensation trends and after considering the results of our 2011 say-on-pay vote, the Compensation Committee also: Added a three-year total shareholder return modifier to our long-term awards beginning in 2011 for further alignment with shareholder interests; Revised the design of our long-term awards beginning in 2012 by establishing a three-year plan whereby the performance targets for each year of the three-year period are established on the grant date in order to provide greater accountability for long-term results, weighted 50% for the first year, 30% for the second year and 20% for the third year; Changed our peer group composition; Strengthened our stock ownership guidelines; and Adopted a claw-back policy. The discussion that follows elaborates on the Compensation Committee’s compensation philosophy, compensation decision-making process, the elements of our compensation program, and the specifics of grants made and payouts approved in 2011 to our named executive officers in light of the challenging and uncertain economic environment. Compensation Approach The key objectives of our executive compensation program are to: motivate executives and other key personnel to attain appropriate short-term and long-term performance goals and manage the Company for sustained long-term growth, align executives’ interests with those of our shareholders, and attract and retain qualified and experienced executive officers and other key personnel. In support of these objectives, we provide executive compensation and benefits that are market-competitive in which a large portion of the total opportunity is variable and tied to our performance and changes in shareholder value over a multi-year period. The key components of compensation provided to our executive officers and how each supports our compensation objectives are presented in the following table:
Annual Compensation | Base Salary |
• All employees • Provide a minimum level of fixed compensation necessary to attract and retain employees Management Incentive Plan — Annual Cash Incentive | • Annual cash incentive based on corporate EBIT performance. Awards may be reduced (but not increased) based on corporate and/or operating unit performance measures, such as operating cash flow, and individual performance. • Certain executive officers (including all named executive officers) • Link annual cash compensation to attainment of key short-term performance goals: • Across total company and • Of the individual as measured by achievement of specific strategic goals and demonstrated leadership Long-Term Compensation | Stock Options | • Long-term equity incentive program that • Key employees (including all named executive officers) • Link realized compensation
• Facilitate retention
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| Component | Description | Participants | Objectives | |||
| Performance Share Grants | • Long-term equity incentive program with award payouts tied to achievement of corporate goals over a one-year performance period and stock performance over a three-year vesting period, subject to a relative total shareholder return modifier over that three-year period. | • Executive officers (including all named executive | • Link multi-year compensation • Facilitate retention • Align the interests of management with those of shareholders | |||
| Executive Performance Plan | • Long-term cash incentive program with award payouts tied to achievement of corporate goals over a three-year period, with performance | • Key employees (including all named executive officers) | • Link multi-year compensation to • Facilitate retention • Align the interests of | |||
| Retirement Programs | ||||||
| Supplementary Pension Plan and Excess Benefit Plans | • Additional retirement benefits | • Key employees (including named executive officers) | • Facilitate attraction and retention of executive officers • Provide for retirement replacement income, thereby facilitating an orderly succession of talent within the organization | |||
| Qualified Retirement Plans | • Post-retirement benefits | • All U.S. employees | • Necessary to attract and retain employees | |||
| Component | Description | Participants | Objectives | |||
| Other Executive Benefits | ||||||
| Perquisites | • Home security systems • Tire program • Financial planning and tax preparation services • Annual physical exams • Use of company aircraft (in limited circumstances, and with the | • Certain executive officers (including certain of the | • Assure protection of executive officers • Enable executives to focus on Company business with minimal disruption | |||
| Other Benefits | • Medical, welfare and other | • All employees | • Necessary to attract and retain employees | |||
Compensation Philosophy and Key Principles
The following core principles form the foundation of the compensation program for our executives, including the Chairman, Chief Executive Officer and President (“CEO”) and the other executive officers named in the Summary Compensation Table (together with the CEO, the “named executive officers”):
First, compensation programs should motivate our executives to take actions that are aligned with our short- and long-term strategic objectives, and appropriately balance risk versus potential reward.
Second, as executives move to a greater level of responsibility, the percentage of their pay based on performance should increase to ensure the highest level of accountability to shareholders.
Third, performance pay should offer an opportunity for above average compensation when our performance exceeds our goals balanced by the risk of below average compensation when it does not.
Fourth, the percentage of total compensation paid in the form of equity should also increase as executives have increasing responsibility for corporate performance, thereby more closely aligning their interests with those of our shareholders.
In implementing our executive compensation program according to the principles described above, we take into account our challenging financial position, which is driven in part by under-funded legacy pension obligations that do not reflect the cost of our ongoing business operations.
We generally target base salaries for our named executive officers below median market rates, as required by our master labor agreement with the United Steelworkers (the “USW Agreement”), and we target performance-based and equity compensation at rates that, on average, are either at the median market rate or somewhat above such rate. The actual positioning of target compensation relative to the median varies based on each executive’s experience and skill set, and generally results in executives who are new in their role being placed lower in the range and those with more experience being placed higher in the range. We emphasize variable compensation because it minimizes fixed expense associated with salary and enables annual cash compensation and total compensation to fluctuate directly with performance against operating goals and changes in share price, thereby ensuring that overall costs are aligned with performance and that executives receive a leveraged and attractive compensation opportunity that varies based on results. This approach also provides an opportunity for actual compensation to exceed targeted market rates through superior performance. Conversely, executives may earn less
than target for performance that does not meet our goals or due to declines in our stock price, and as a result, when our stock price declines and/or specific operating objectives are not attained, realized compensation may fall into the lower quartile relative to market rates.
Consistent with the above philosophy, the Compensation Committee believes that base salary should comprise approximately 20% of “primary compensation,” which we define to include salary, annual cash incentive and long-term compensation. The remaining portion of the primary compensation opportunity is a mix of annual cash incentive, stock options, performance shares and long-term cash-based incentive awards. The design and mix of our variable compensation has evolved over the past several years to balance cost, share dilution and attraction and retention objectives in support of the core principles described above. The market value of our Common Stock, which continued to experience significant volatility during 2011, and the availability of shares under our equity compensation plans constrain our ability to use stock-based compensation to deliver a specified level of targeted compensation opportunity.
Compensation Decision-Making
Our Board of Directors has delegated to the Compensation Committee of the Board primary responsibility for establishing and administering our compensation programs for executive officers and other key personnel. The Compensation Committee oversees our compensation and benefit plans and policies, administers our stock plans (including reviewing and recommending equity grants to executive officers), and reviews and approves annually all compensation decisions relating to executive officers, including those for the CEO and the other named executive officers.
In performing its duties, the Compensation Committee meets periodically with the CEO to review compensation policies and specific levels of compensation paid to executive officers and other key personnel, and reports and makes recommendations to the Board regarding executive compensation policies and programs. In addition, the CEO annually makes recommendations to the Compensation Committee regarding salary adjustments and the setting of annual incentive targets and awards and long-term compensation targets and awards for executive officers other than himself, including the other named executive officers. In determining the compensation of a named executive officer, the Compensation Committee considers individual performance, our performance and relative shareholder return, the compensation of officers with similar responsibilities at comparable companies, the awards given to the named executive officer in past years, the relationship between the compensation to be received by the officer and the compensation to be received by the other named executive officers (which we refer to as “internal pay equity”), including comparing the relationship to that found at comparable companies, and such other factors that the Committee deems relevant that are discussed elsewhere in this Compensation Discussion and Analysis.
On an ongoing basis, the Compensation Committee reviews our executive compensation practices to determine whether they meet, and are consistent with, the key objectives of our compensation program. The Compensation Committee generally adheres to the guidelines and philosophy described above under “Compensation Philosophy and Key Principles.” However, significant changes in our business or the markets in general, may cause the Compensation Committee to deviate from these guidelines if deemed appropriate. This allows the Compensation Committee to motivate our executives and other key personnel to attain appropriate short-term and long-term performance goals and to manage the Company for sustained long-term growth, serve the best interests of the Company and our shareholders, and attract and retain talented executives.
The Compensation Committee considered the economic and tire industry environment when it established our executive compensation program in February 2011. The performance targets for the 2011 performance period under our variable incentive plans would be achieved, at the target performance level, if we successfully executed our operating plan for 2011, which reflected the challenging and uncertain economic and industry environment. The targets the Compensation Committee established were considered aggressive targets, the achievement of which would mean we had successfully met the significant challenges posed by the continuing uneven economic
conditions, were a stronger competitor and were poised for future growth. However, in light of the lower overall performance targets relative to pre-recessionary periods that were established for the 2011 awards under our variable incentive plans, the Compensation Committee provided that the maximum award would continue to be 150% of target, rather than 200% of target as was the case before 2009. In order to further align our long-term incentive plans with shareholder interests, awards made under those plans in 2011 were subject to an increase or decrease of up to 20% based on our total shareholder return versus the S&P 500 over the three-year period ending on December 31, 2013.
Role of Compensation Consultant
The Compensation Committee has the authority to retain and terminate outside advisors, including compensation consultants, to assist it in evaluating actual and proposed compensation for our executive officers. During 2011, the Compensation Committee retained Frederic W. Cook & Co., Inc., as its independent compensation consultant, to provide advice and assistance on executive compensation matters, including the 2011 compensation decisions that are discussed elsewhere in this Compensation Discussion and Analysis. As part of its engagement, Frederic W. Cook & Co. reviewed our executive compensation peer group and conducted a competitive analysis of compensation for the named executive officers as well as our operational and stock price performance relative to the peer group. Frederic W. Cook & Co. also assisted the Committee with a variety of other issues, including setting CEO compensation, compensation issues related to leadership succession activities, and the design and establishment of performance goals under our variable incentive plans. In addition, Frederic W. Cook & Co. reviewed and provided recommendations regarding our non-management director compensation program and made a presentation to the full Board on trends and regulatory developments in executive compensation. A representative of Frederic W. Cook & Co. regularly attends Compensation Committee meetings. Frederic W. Cook & Co. works with Goodyear management only under the direction of the Compensation Committee and does not provide any other advice or consulting services to the Company.
Benchmarking of Primary Compensation
As noted above, the Compensation Committee generally targets primary compensation levels for named executive officers at or slightly above median market rates. For these purposes, the Compensation Committee has determined “market” rates by considering two sources:
proxy statements of 16 peer companies with annual revenues ranging from $9.5 billion to $53.8 billion and median revenues of $19.7 billion (for 2011, we had revenues of $22.8 billion); and
broad-based compensation surveys published from time to time by national human resources consulting firms.
For 2011 compensation decisions, the peer group noted above consisted of:
• 3M Company | • Johnson Controls, Inc. | |
• Caterpillar Inc. | • Lear Corporation | |
• Deere & Co. | • PACCAR Inc. | |
• E.I. du Pont de Nemours and Co. | • PPG Industries, Inc. | |
• Eaton Corporation | • Textron Inc. | |
• Emerson Electric Co. | • TRW Automotive Holdings Corp. | |
• Honeywell International Inc. | • United Technologies Corporation | |
• Illinois Tool Works Inc. | • Whirlpool Corporation | |
This peer group was selected because the companies, as a whole, represent organizations of comparable size and complexity that we compete with for executive talent. The peer group includes companies in similar industries with comparable business models and global reach, but does not include other companies in the tire industry because no other U.S.-based tire company is similar in size and complexity to us and non-U.S.-based tire companies do not publish comparable compensation information.
In August 2011, the Compensation Committee comprehensively reviewed the composition of the peer group using the following criteria: (1) size, including revenues, market capitalization and enterprise value; (2) global manufacturing focus; (3) industry focus, particularly companies in the automotive industry; (4) consumer branded product companies; (5) companies with which we compete for executive talent; and (6) number of employees. As a result of that review, the Compensation Committee removed Emerson Electric, Textron and United Technologies from our 2012 peer group and added Cummins, Ingersoll-Rand, Parker-Hannifin and Stanley Black & Decker. The Compensation Committee may continue to make changes in the peer group from time to time based on the criteria described above or other relevant factors.
Data with respect to comparable elements of primary compensation is compiled for the peer group of companies described above from available sources, including, in most cases, the most recently available annual proxy statements and other SEC filings that address executive compensation matters.
Elements of Compensation
Annual Compensation
Base Salaries
We target base salaries below median market rates, as required by the USW Agreement, and place correspondingly greater emphasis on performance-based incentive and equity compensation. Salary guidelines for each named executive officer’s position are based primarily on market data that we derive through our benchmarking practices, as described above. We also develop salary guidelines from compensation surveys based on revenues of the surveyed companies. In addition to data derived from these surveys, the Compensation Committee reviews general surveys prepared by national human resources consulting firms indicating past, present and annual increases to salaries for executive positions. The Compensation Committee also considers the CEO’s recommendations (other than with respect to his base salary), which are based in substantial part on the guidelines described above as well as on certain subjective factors, including the CEO’s evaluation of the performance of each named executive officer against corporate, operating unit and individual objectives established at the start of each year, their current and future responsibilities, our recent financial performance, retention considerations, internal pay equity, and general economic and competitive conditions.
2011 Base Salary Decisions
Using the methodologies described above for setting salary guidelines, we compared total compensation levels for our named executive officers and our other executive officers against market compensation data provided by Frederic W. Cook & Co. We concluded that the base salaries of our named executive officers were, in the aggregate, below the market median, consistent with the USW Agreement.
In 2011, the overall increase in base salaries for all executive officers, excluding the CEO and executive officers who received significant promotions, was 3.8%. Base salary increases were determined in February 2011. Messrs. Wells, de Bok, Ruocco and Bialosky received increases of 4.9%, 2.8%, 3.4% and 4.0%, respectively. Mr. Kramer, our CEO, did not receive a base salary increase in 2011. Salaries of the named executive officers in 2011 were an average of 15% lower than the median indicated by the salary guidelines described above. Salaries in 2011 averaged approximately 20% of primary compensation paid to the named executive officers.
Annual Cash Incentives Under the Management Incentive Plan
The Management Incentive Plan, which was approved by our shareholders in 2008, provides annual cash-based incentives for all of the named executive officers and is designed to comply with the performance-based
compensation requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Incentive payments to our named executive officers under the Management Incentive Plan are intended to be fully deductible for federal income tax purposes.
Under the Management Incentive Plan, each participant is eligible to receive a maximum performance award equal to a percentage of the Company’s EBIT for the year. “EBIT,” as defined in the Management Incentive Plan, means the Company’s net sales, less cost of goods sold, and selling, administrative and general expenses, as reported in the Company’s consolidated statement of operations for the year, prior to accrual of any amounts for payment under the Management Incentive Plan, adjusted to eliminate the effects of charges for restructurings, discontinued operations, extraordinary items, other unusual or non-recurring items, and the cumulative effect of tax or accounting changes, each as defined by generally accepted accounting principles or identified in the Company’s consolidated financial statements, notes to the consolidated financial statements or management’s discussion and analysis of financial condition and results of operations.
Specifically, the CEO is eligible to receive a performance award equal to 0.75% of EBIT and the other named executive officers are each eligible to receive a performance award equal to 0.50% of EBIT. The actual performance award granted to a participant is determined by the Compensation Committee, which retains the discretionary authority to reduce or eliminate (but not increase) a performance award based on its consideration of, among other things, corporate and/or business unit performance against achievement of financial or non-financial goals, economic and relative performance considerations, and assessments of individual performance, which we refer to as the “MIP performance objectives.”
The MIP performance objectives are designed to emphasize important short-term operating and tactical objectives that directly drive the creation of shareholder value and provide appropriate balance with the metrics used in our long-term incentives. An individual’s target incentive level for the award, taking into account the MIP performance objectives, is set annually at rates somewhat above median market levels so that when combined with the below median base salaries required by the USW Agreement, we provide an overall annual compensation opportunity slightly above median market levels. Each MIP performance objective has a target level as well as a threshold and maximum level, which are determined based on the perceived difficulty of the established targets and actual results for those measures in prior years.
Awards are generally paid in cash. However, named executive officers may elect to defer all or a portion of their award in the form of cash or stock units. If deferred in the form of stock units, we will match 20% of the deferred amount with additional stock units that will vest in one year subject to the executive’s continued employment. Any stock units are converted to shares of Common Stock and paid to the participant in January of the fourth year following the end of the plan year under which the award was earned. See “Executive Deferred Compensation Plan” below.
2011 Annual Incentive Payouts
For 2011, our EBIT, prior to accrual of any amounts for payment under the Management Incentive Plan, was $1,251 million. As a result, Mr. Kramer was eligible to receive a maximum performance award equal to $9,382,500, and the other named executive officers were each eligible to receive a maximum performance award equal to $6,255,000.
In 2011, the MIP performance objectives under the Management Incentive Plan were as follows:
for corporate officers (including Messrs. Kramer, Wells, Ruocco and Bialosky): (i) 40% based on Goodyear’s EBIT, after accrual of any amounts for payment under the Management Incentive Plan (“Corporate EBIT”); (ii) 40% based on Goodyear’s “operating cash flow” (cash flow from operations and investing activities, each adjusted for foreign currency exchange, less the change in restricted cash and dividends paid to minority interests in subsidiaries); and (iii) 20% based on the operating drivers described below.
for officers of our four operating units (including Mr. de Bok) (a) 60% on that operating unit’s results as follows: (i) 40% based on the operating unit’s EBIT, after accrual of any amounts for payment under the Management Incentive Plan (“Operating Unit EBIT”); (ii) 40% based on the operating unit’s operating cash flow (as defined above); and (iii) 20% based on the operating drivers described below; and (b) 40% on overall company results as described in the preceding bullet point. We believe these weightings hold our operating unit executives most accountable for financial results in the areas where they have the most control and influence, but also motivate them to work cooperatively with other operating units to maximize results for the entire Company.
The Compensation Committee used Corporate EBIT and Operating Unit EBIT to measure our results of operations and operating cash flow to measure our liquidity, which enables us to provide funding for investments in future growth.
In 2011, the Compensation Committee established the following operating drivers that were consistent with our annual operating plan and are tied to the achievement of important strategic objectives that drive the success of our business:
Strategic Drivers | Operating Drivers | |
| Lower Cost Structure | Implement $300 million of cost savings under our cost savings plan. | |
| Leveraged Distribution/Build Brand Strength | Effectively manage the price/mix/volume/share/raw materials/foreign exchange equation (in the aggregate) to maximize profitability, and increase market share in targeted product segments. | |
| Product Leadership | Deliver more than 50 new product launches, and achieve intended sales volume impact from new products. | |
| Advantaged Supply Chain | Meet “On Time in Full” goals. | |
The Compensation Committee established the MIP performance objectives in February 2011, taking into account the economic environment that is discussed above under the heading “Overview.” The Compensation Committee provided greater focus on the achievement of our profitability measures by increasing the relative weight of Corporate or Operating Unit EBIT to 40% (from 30% in 2010) and decreasing the relative weight of the operating drivers described above to 20% (from 30% in 2010). Consistent with past practices, the Compensation Committee also excluded accelerated depreciation expense related to plant closures from the Corporate EBIT target. Overall, the Compensation Committee believed the MIP performance objectives reflected a significant stretch for the Company given the financial and operating challenges presented by the uncertain economic environment.
In February 2012, the Compensation Committee reviewed actual results for 2011 with respect to achievement of the company-wide and operating unit MIP performance objectives.
For overall company results (the performance of which is relevant for determining Mr. Kramer’s, Mr. Wells’, Mr. Ruocco’s and Mr. Bialosky’s incentive payments), target Corporate EBIT was $800 million and actual Corporate EBIT was $1,251 million, or 56% above target, and target operating cash flow was $(600) million and actual operating cash flow was $(216) million, or 64% above target. The Compensation Committee determined that a negative operating cash flow target was appropriate given our planned capital expenditures of $1.1 billion to $1.2 billion, which enable us to take advantage of future growth opportunities, anticipated increases in working capital due primarily to higher raw material costs and the need to build inventory levels to support customer service levels, and anticipated global pension contributions of $250 million to $300 million.
The Europe, Middle East and Africa Tire (“EMEA”) unit (the performance of which is relevant for determining Mr. de Bok’s incentive payment) exceeded its Operating Unit EBIT target by 63% and exceeded its operating cash flow threshold by 49%, but fell short of its target.
The Compensation Committee also considered our achievement of the operating drivers, including the degree of difficulty in achieving our goals under those drivers given the economic environment during 2011 and other qualitative supporting factors, such as our underlying operating performance. The Committee then assessed whether our performance against the operating drivers was below, at or above target, taking into consideration the qualitative factors described in the preceding sentence. The Committee determined that we met or exceeded three of the four operating drivers but fell short of our cost savings goal. In reaching that conclusion, the Committee considered, among other things, the following achievements by Goodyear and the contributions of each operating unit to those achievements:
Achieving approximately $281 million of cost savings under our cost savings plan versus a goal of $300 million.
Successful focus on price/mix leading to a nearly $2.4 billion improvement, which exceeded raw material cost increases, and increases in our market share in targeted product segments.
Achieving a significantly better than expected sales volume impact from new products, including from launching 46 new products globally.
Exceeding our “On Time in Full” goals.
Since the Corporate EBIT or Operating Unit EBIT, as the case may be, and overall company operating cash flow targets were exceeded, and EMEA’s operating cash flow threshold was exceeded, the Committee determined that the operating driver performance should mirror the calculated performance using the financial performance measures. In reaching this decision, the Committee considered whether the performance under the financial performance measures and the operating drivers were appropriately aligned, and concluded that they were.
The Compensation Committee then reviewed its assessment of the CEO’s performance during 2011 and the CEO’s assessment of each of the other named executive officer’s performance during 2011, and their respective contributions to our results. In particular, the Compensation Committee considered the CEO’s contributions to the achievement of:
Our financial and operating goals in the face of uncertain economic conditions and rapidly rising raw material costs,
Strong working capital management,
Effectively managing investments in new manufacturing capacity,
Driving operational excellence initiatives, and
Continued strengthening of our leadership team.
The CEO and the Compensation Committee also considered the contributions of the other named executive officers in furthering the Company’s strategic initiatives described in the preceding bullet points.
In light of our Corporate EBIT or Operating Unit EBIT, as the case may be, operating cash flow and operating driver performance and the other considerations described above, the Compensation Committee limited the awards for Messrs. Kramer, Wells, Ruocco and Bialosky to payouts of 150% and for Mr. de Bok to a payout of 131% of their respective target amounts under the 2011 MIP performance objectives.
The table below presents information regarding the potential and actual awards for our named executive officers under the Management Incentive Plan:
Name | Maximum Award ($) | Target Under MIP Performance Objectives ($) | Actual Award ($) | Actual Award as a % of Target Under MIP Performance Objectives | Actual Award as a % of Base Salary | |||||||||||||||
Kramer | $ | 9,382,500 | $ | 1,400,000 | $ | 2,100,000 | 150 | % | 210 | % | ||||||||||
Wells | 6,255,000 | 476,257 | 714,386 | 150 | % | 136 | % | |||||||||||||
de Bok | 6,255,000 | 495,495 | 649,098 | 131 | % | 119 | % | |||||||||||||
Ruocco | 6,255,000 | 347,361 | 521,042 | 150 | % | 108 | % | |||||||||||||
Bialosky | 6,255,000 | 390,000 | 585,000 | 150 | % | 114 | % | |||||||||||||
Long-Term Compensation
Long-term incentives are delivered through grants of stock options and performance shares under our 2008 Performance Plan, a shareholder-approved equity compensation plan, and long-term cash-based incentive awards under our Executive Performance Plan. Long-term performance-based compensation is generally designed to represent approximately 65% of the primary compensation of named executive officers, assuming target performance levels. This is consistent with our emphasis on long-term compensation, which better ties the executive’s compensation to long-term operational success and shareholder value creation. The mix of long-term compensation between stock option grants, performance share grants and cash-based long-term incentives was based, in part, on the market value of our Common Stock, the number of shares available for grant under the 2008 Performance Plan, and considerations relating to managing the dilutive effect of share-based awards. These factors impact our ability to use stock-based compensation to deliver a specified level of targeted compensation opportunity. As a result, the Compensation Committee believes that a cash-based plan, in combination with our stock-based awards, is necessary to provide competitive performance and retention incentives. In order to further align our long-term incentive plans with shareholder interests, awards made under those plans are now subject to an increase or decrease of up to 20% based on our total shareholder return versus the S&P 500 over the three-year period of those awards.
The amount and terms of grants to named executive officers under the 2008 Performance Plan and the Executive Performance Plan are based on criteria established by the Compensation Committee and include responsibility level, base salary level, current Common Stock market price, officer performance, recent Goodyear performance, internal pay equity, and, with respect to the 2008 Performance Plan, the number of shares available under the plan.
Cash-Based Awards Under the Executive Performance Plan
The Executive Performance Plan provides long-term incentive compensation opportunities in order to motivate key personnel to achieve our long-term business objectives and to attract, retain and reward key personnel.
2011 Grants Under the Executive Performance Plan
The Compensation Committee granted Executive Performance Plan units in February 2011 that have the following characteristics:
the target value is $100 per unit;
the payout amount is based on results over a three-year period, with performance goals established annually;
the payout amount can range from $0 per unit to $150 per unit for the 2011 performance period based on actual results (and assuming the recipient remains continuously employed by us through the entire three-year period); and
the payout amount can increase or decrease up to 20% based on our total shareholder return versus the S&P 500 over the three-year period ending December 31, 2013.
The number of target units awarded annually to each named executive officer is based on a number of considerations, including market data about competitive long-term compensation, share availability under our equity compensation plans and the CEO’s recommendations (other than with respect to his own award), which are based on the CEO’s evaluation of the performance of each named executive officer, our recent performance, internal pay equity, retention considerations, and general economic and competitive conditions.
The performance criteria for the 2011 performance period for the 2011-2013 awards were, consistent with our strategic plan, based 50% on net income and 50% on total cash flow, net of debt. The same performance criteria were used for the 2011 performance period for the 2009-2011 and 2010-2012 awards. Results were based on our consolidated performance, with no award tied to business unit performance. In this manner, the plan balances performance measures used under the Management Incentive Plan and reinforces the need for teamwork among executives. Net income was used as a measure to focus on improvement in profitability. Cash flow focused on our efforts to manage the cash requirements associated with our business, including our debt and pension obligations, and our efforts to improve our capital structure and provide funding for investments in future growth. Adjusting for net debt provides incentive to reduce our obligations, including our debt and pension obligations. The amount of debt that is netted out is equal to the change in our total debt and our cash and cash equivalents, as adjusted for our pension contributions. The Compensation Committee decided to continue to provide for the annual establishment of performance goals for the 2011-2013 awards, subject to a total shareholder return modifier over that three-year period, under the Executive Performance Plan due to the continuing uncertain economic environment and corresponding difficulty in setting multi-year goals. The Compensation Committee set the performance targets for the 2011 performance period taking into account the economic environment that existed in 2011 and that is discussed in more detail above under the heading “Overview.” The Compensation Committee also emphasized the balance between liquidity and profitability by equally weighting net income and cash flow, net of debt. The performance targets for the 2011 performance period would be achieved at the target performance level if we successfully executed our operating plan for 2011.
The value of the units granted for the 2011-2013 awards (assuming payout at $100 per unit) represents approximately 60% of the value of total long-term compensation awarded to the named executive officers in 2011. Included in the 2011-2013 awards were grants of 38,284; 12,500; 13,250; 7,300; and 8,713 units to Messrs. Kramer, Wells, de Bok, Ruocco and Bialosky, respectively.
See “Performance for the 2011 Performance Period Under the Executive Performance Plan and With Respect to Performance Shares” at page 31 for further information on our achievement of the performance targets.
Performance Shares
We provide performance shares to our executive officers in order to more closely align executive compensation to the performance of our Common Stock. We believe that performance shares, like the cash-based Executive Performance Plan, drive operational performance while also driving shareholder value creation, thereby better aligning the interests of our executives with those of our shareholders.
2011 Performance Share Grants
The Compensation Committee granted performance shares under the 2008 Performance Plan in February 2011 that have the following terms:
performance shares are earned, but not vested, based on results over a one-year performance period as compared to performance goals set at the start of that performance period;
in order to provide an additional retention incentive, performance shares vest contingent upon the participant’s continued service through December 31, 2013, except in the event of retirement, death, disability or severance following a change-in-control;
the number of performance shares earned can increase or decrease up to 20% based on our total shareholder return versus the S&P 500 over the three-year period ending December 31, 2013; and
once vested, performance shares are paid 100% in Common Stock.
The number of performance shares awarded annually to each named executive officer, measured by the percentage of total long-term compensation represented by such shares, is based on a number of considerations, including market data for comparable long-term incentive compensation and the CEO’s recommendations (other than with respect to his own award), which are based in part on certain subjective factors, including the CEO’s evaluation of the performance of each named executive officer, our recent performance, share availability under our equity compensation plans, internal pay equity, retention considerations, and general economic and competitive conditions.
The performance criteria for the 2011 performance period for the 2011-2013 awards were based 50% on net income and 50% on total cash flow, net of debt, as described above under “Cash-Based Awards Under the Executive Performance Plan” in order to align management’s efforts to achieve our goals under our long-term incentive compensation plans. The Compensation Committee decided to continue to provide for a one-year performance period and a three-year vesting period, subject to a total shareholder return modifier over that three-year period, for awards of performance shares due to the continuing uncertain economic environment and corresponding difficulty in setting multi-year goals. The value of the performance shares granted for the 2011-2013 awards represents approximately 10% of the value of total long-term compensation awarded to the named executive officers in 2011. In 2011, target grants of 43,853; 11,682; 12,580; 8,360; and 9,132 performance shares for the 2011-2013 period were made to Messrs. Kramer, Wells, de Bok, Ruocco and Bialosky, respectively, having the terms described above.
Performance for the 2011 Performance Period Under the Executive Performance Plan and With Respect to Performance Shares
The table below shows the performance goals and corresponding earn out percentages for awards granted for the 2011 performance period. The goals for total cash flow, net of debt, reflected planned capital investments of $1.1 billion to $1.2 billion, an increase in working capital due primarily to higher raw material costs and the need to build inventory levels to support customer service levels, and anticipated global pension contributions of $250 million to $300 million.
| Payout per Executive Performance Plan Unit or Performance Share | ||||||||||||
| 50% | 100% | 150% | ||||||||||
Performance Measure (2011): | ||||||||||||
Net income | $10 million | $123 million | $258 million | |||||||||
Total cash flow, net of debt | $(245) million | $(45) million | $ 55 million | |||||||||
The Executive Performance Plan and the 2008 Performance Plan permit the Committee to make adjustments to actual company results for the performance measures for extraordinary items and other relevant factors. Over the one-year performance period, actual company results were adjusted to exclude restructuring charges. The table below shows actual adjusted results with respect to the performance measures during the 2011 performance period.
| Target | Actual Adjusted Results | Performance ( % over target) | Payout Percentage | |||||||||||||
Performance Measure (2011): | ||||||||||||||||
Net income | $123 million | $486 million | 295% | 150% | ||||||||||||
Total cash flow, net of debt | $(45) million | $203 million | 551% | 150% | ||||||||||||
During the 2011 performance period, we faced a number of challenges and took action to meet those challenges, as discussed above under the heading “Overview.” As a result, we exceeded our maximum total cash flow, net of debt target for the 2011 performance period due to our efforts to manage cash flow during the performance period,
particularly with respect to working capital, and exceeded our maximum net income target for the 2011 performance period primarily due to price and product mix improvements, cost saving actions and other strategic initiatives we implemented in response to global economic conditions.
Executive Performance Plan
Based on the results during the 2011 performance period, the Compensation Committee approved earnings on the Executive Performance Plan awards for such period in an amount equal to 150% of the target amount per unit. The payout of these amounts is contingent upon the named executive officer’s continued service through December 31, 2011 (for 2009-2011 awards), December 31, 2012 (for 2010-2012 awards) and December 31, 2013 (for 2011-2013 awards), except in the case of certain events, such as retirement, death, disability or severance following a change-in-control.
The table below shows amounts earned for each of the named executive officers in respect of their grants under the Executive Performance Plan for the 2011 performance period with respect to their 2009-2011 awards:
Name | Target Award ($) | Maximum Award ($) | Actual Award ($) | |||||||||
Kramer | $ | 803,867 | $ | 1,205,800 | $ | 1,205,800 | ||||||
Wells | 330,933 | 496,400 | 496,400 | |||||||||
de Bok | 587,233 | 880,850 | 880,850 | |||||||||
Ruocco | 260,333 | 390,500 | 390,500 | |||||||||
Bialosky | 333,333 | 500,000 | 500,000 | |||||||||
The table below shows amounts earned for each of the named executive officers in respect of their grants under the Executive Performance Plan for the 2011 performance period with respect to their 2010-2012 awards:
Name | Target Award ($) | Maximum Award ($) | Actual Award ($)(1) | |||||||||
Kramer | $ | 1,020,933 | $ | 1,531,400 | $ | 1,531,400 | ||||||
Wells | 328,933 | 493,400 | 493,400 | |||||||||
de Bok | 351,967 | 527,950 | 527,950 | |||||||||
Ruocco | 241,667 | 362,500 | 362,500 | |||||||||
Bialosky | 290,433 | 435,650 | 435,650 | |||||||||
| (1) | Payable contingent on continued service through December 31, 2012. |
The table below shows amounts earned for each of the named executive officers in respect of their grants under the Executive Performance Plan for the 2011 performance period with respect to their 2011-2013 awards:
Name | Target Award ($) | Maximum Award ($) | Actual Award ($)(1) | |||||||||
Kramer | $ | 1,276,133 | $ | 1,914,200 | $ | 1,914,200 | ||||||
Wells | 416,667 | 625,000 | 625,000 | |||||||||
de Bok | 441,667 | 662,500 | 662,500 | |||||||||
Ruocco | 243,333 | 365,000 | 365,000 | |||||||||
Bialosky | 290,433 | 435,650 | 435,650 | |||||||||
| (1) | Payable contingent on continued service through December 31, 2013 and subject to a three-year relative total shareholder return modifier. |
For further information on the tax deductibility of awards under the Executive Performance Plan, see “Tax Deductibility of Pay” at page 37.
Performance Shares
Based on the results during the 2011 performance period, the Compensation Committee approved earnings with respect to performance share awards for such period in an amount equal to 150% of the target number of performance shares.
The table below shows the earnings for each of the named executive officers in respect of their 2011-2013 grants of performance shares for the 2011 performance period:
Name | Target Award (Shares) | Maximum Award (Shares) | Actual Number of Shares Earned(1) | |||||||||
Kramer | 43,853 | 65,779 | 65,779 | |||||||||
Wells | 11,682 | 17,523 | 17,523 | |||||||||
de Bok | 12,580 | 18,870 | 18,870 | |||||||||
Ruocco | 8,360 | 12,540 | 12,540 | |||||||||
Bialosky | 9,132 | 13,698 | 13,698 | |||||||||
| (1) | Payable contingent on continued service through December 31, 2013 and subject to a three-year relative total shareholder return modifier. |
Payout of 2009 — 2011 Long-Term Awards
The Compensation Committee also approved the distribution of shares of Common Stock for previously earned performance shares and the payout of amounts earned under the Executive Performance Plan to the named executive officers, in each case, with respect to the 2009-2011 awards.
Stock Options
The Compensation Committee annually grants stock options to named executive officers and other key employees to link our executives’ compensation to results earned by shareholders and to build executive stock ownership. Stock options constitute an important element of our long-term incentive compensation program. Because options result in gains only in the event that the stock price appreciates, they serve to align the interests of management with shareholders.
2011 Stock Option Grants
Stock options granted under the 2008 Performance Plan in 2011 have the following terms:
options vest in equal, annual installments over a four-year period;
options have a ten-year term; and
the exercise price is equal to the closing market price of our Common Stock on the date of grant.
All options granted to named executive officers during 2011 were non-qualified stock options. The portion of long-term incentive compensation provided in the form of stock option grants each year is determined based on the number of available options under the 2008 Performance Plan, as well as market data on long term-compensation. We use a Black-Scholes valuation model to determine the number of stock options needed to provide the desired value consistent with overall median market compensation.
In 2011, grants of 264,833; 70,405; 75,586; 50,480; and 56,439 stock options were made to Messrs. Kramer, Wells, de Bok, Ruocco and Bialosky, respectively, having the terms described above. The value of these stock option grants represents approximately 30% of the value of total long-term compensation awarded to the named executive officers in 2011.
Restricted Stock Awards
The Compensation Committee occasionally grants shares of restricted stock or restricted stock units to named executive officers and other key employees, typically to replace similar stock-based awards or other benefits at a prior employer, to recognize extraordinary effort or for retention purposes. Restricted stock links executives to the results earned by shareholders and builds executive stock ownership.
In December 2011, the Compensation Committee granted 55,000 restricted stock units to each of Messrs. Wells and de Bok and 40,000 restricted stock units to Mr. Ruocco. The restricted stock units will vest and convert into shares of Common Stock three years from the date of grant (in December 2014). The Compensation Committee made these grants in consideration of Mr. Wells’, Mr. de Bok’s and Mr. Ruocco’s significant contributions to Goodyear and importance to Goodyear in the future.
Retirement Benefits
We provide our named executive officers with retirement benefits under both tax-qualified and non-qualified retirement plans. The tax-qualified plan benefits are pursuant to a defined benefit pension plan, the Goodyear Salaried Pension Plan (the “Salaried Plan”), and a defined contribution plan, the Goodyear Employee Savings Plan for Salaried Employees (the “Savings Plan”). The non-qualified plan benefits are pursuant to an unfunded defined benefit plan, the Goodyear Supplementary Pension Plan (the “Supplementary Plan”).
The Salaried Plan is designed to provide tax-qualified pension benefits for U.S.-based salaried employees hired prior to January 1, 2005. The Savings Plan is designed to provide an opportunity for U.S.-based salaried employees to save for retirement on a tax-deferred basis. Messrs. Kramer and Wells participate in the Salaried Plan along with other Goodyear employees. Effective December 31, 2008, the Salaried Plan accrued benefit was frozen. Since that date tax-qualified benefit accruals for Messrs. Kramer and Wells and other Goodyear salaried employees who participate in the Salaried Plan are provided by Company contributions under the retirement contributions feature of the Savings Plan. Salaried employees hired after December 31, 2004, including Messrs. Ruocco and Bialosky, also participate in the retirement contributions feature of the Savings Plan. Participants in the Savings Plan, including all of the named executive officers other than Mr. de Bok, are currently eligible to receive Company matching contributions in addition to the retirement contributions described above.
Mr. de Bok does not participate in the Salaried Plan or the Savings Plan, instead he participates in Goodyear’s Netherlands Pension Plan and in government-sponsored (but Company-funded) pension plans in The Netherlands and Belgium.
The Supplementary Plan provides additional pension benefits to executive officers and certain other key individuals identified by the Compensation Committee. All of the named executive officers participate in the Supplementary Plan. The Supplementary Plan provides pension benefits to participants who retire with at least 30 years of service, retire after age 55 with at least ten years of service or retire after age 65 with at least five years of service. However, benefits payable under the Supplementary Plan are offset by the amount of any benefits payable under the Salaried Plan, the retirement contributions feature of the Savings Plan, applicable non-U.S. pension plans, and certain prior employer pension plans. The Committee believes supplemental executive retirement plans such as the Supplementary Plan are an important part of executive compensation and are utilized by most large companies, many of which compete with the Company for executive talent. Retirement benefits, including those provided through a supplemental executive retirement plan, are a critical component of an executive’s overall compensation program and are essential to attracting, motivating and retaining talented executives with a history of leadership and to providing retirement replacement income. Retirement benefits are an important factor in an executive’s decision to accept or reject a new position.
We also maintain a non-qualified unfunded defined benefit Excess Benefit Plan that pays an additional pension benefit over that paid from the Salaried Plan if a participant does not meet the eligibility requirements of the Supplementary Plan. None of the named executive officers are currently eligible to receive a benefit under the
Supplementary Plan because they have not met the age and service requirements discussed in the prior paragraph, and Messrs. de Bok, Ruocco and Bialosky are not eligible to participate in the defined benefit Excess Benefit Plan. The additional benefit under the defined benefit Excess Benefit Plan is equal to the amount a participant would have received from the Salaried Plan but does not because of the limitations imposed by the Code on pension benefits under qualified plans. This plan is provided to allow the extension of benefits from the qualified plan to individuals whose compensation exceeds the Code limitations for qualified plans. Like the qualified plans, effective December 31, 2008 accruals were frozen under the defined benefit Excess Benefit Plan. For employees hired after December 31, 2004, and for all employees as of December 31, 2008, who do not meet the eligibility requirements of the Supplementary Plan, there is a corresponding non-qualified defined contribution Excess Benefit Plan that mirrors the retirement contributions feature of the Savings Plan. Mr. de Bok is not eligible to participate in the defined contribution Excess Benefit Plan.
For more information regarding the terms of these plans and the named executive officers’ accrued benefits under these plans, see the table captioned “Pension Benefits” and the accompanying narrative at page 46.
Severance and Change-in-Control Benefits
We provide for the payment of severance benefits to our named executive officers upon certain types of terminations of employment. The Goodyear Continuity Plan for Salaried Employees (the “Continuity Plan”) provides certain severance benefits to our employees and employees of our subsidiaries who participate in the Executive Performance Plan, Management Incentive Plan, Performance Recognition Plan or Savings Plan.
The Continuity Plan is designed to attract, retain and motivate employees, provide for stability and continuity in the event of an actual or threatened change-in-control, and ensure that our employees are able to devote their full time and attention to the Company’s operations in the event of an actual or threatened change-in-control.
The Continuity Plan and the related change-in-control triggers (commonly referred to as “double triggers”) are described in more detail under the heading “Potential Payments Upon Termination or Change-in-Control” at page 49, and generally provide for the payment of severance benefits if employment is terminated under certain circumstances during certain periods before or within two years following a change-in-control of the Company. The change-in-control triggers in our 2008 Performance Plan are substantially similar to those in the Continuity Plan. We selected the specific change-in-control triggers used in the Continuity Plan, such as the acquisition of 20% or more of Goodyear’s Common Stock, a significant change in the composition of the Board of Directors or the acquisition of actual control of Goodyear, based upon our review of market practices, including provisions included in similar agreements of other public companies, and statutory provisions, such as the Ohio Control Share Acquisition Law, that could also be triggered in the event of a change-in-control. Based upon that review, we determined that the terms and conditions of the Continuity Plan, including the specific change-in-control triggers and excise tax gross-up provisions, were consistent with market practices and are a necessary component of a competitive compensation program. We also believe that the Continuity Plan is in the best interests of the Company and our shareholders because it ensures that we will have the continued commitment of our employees in the event of an actual or threatened change-in-control.
The Compensation Committee decided that employees who are hired or promoted and, as a result of that hiring or promotion, would become eligible to receive excise tax gross-ups for the first time on or after February 22, 2010 will not receive any such gross-ups. In addition, executive officers hired or promoted into certain executive positions named in the Continuity Plan on or after February 22, 2010 (including Mr. Kramer, who became CEO on April 13, 2010) will no longer receive severance benefits if they terminate their employment without good reason during the thirteenth month following a change-in-control.
The Goodyear Tire & Rubber Company Executive Severance Plan (the “Severance Plan”) provides severance benefits to each of the named executive officers (other than Mr. de Bok) and certain key employees if their employment is terminated by us other than for Cause (as defined in the Severance Plan), death or disability, and other than in connection with a change-in-control.
The Compensation Committee believes that our severance benefits are a necessary component of a competitive compensation program and that those severance benefits are not significantly different from the severance benefits typically in place at other companies.
For additional information regarding the terms of the Continuity Plan and the Severance Plan and benefits payable under those plans, see “Potential Payments Upon Termination or Change-in-Control” at page 49.
Perquisites
We provide certain executive officers, including our named executive officers, with limited personal benefits and perquisites, as described below and in footnote 5 to the Summary Compensation Table at page 41. The Compensation Committee has reviewed and approved the perquisites described below. While the Compensation Committee does not consider these perquisites to be a significant component of executive compensation, it recognizes that such perquisites are an important factor in protecting our executive officers and in enabling them to focus on our business with minimal disruption. We do not provide any tax reimbursements to our executive officers for any of the perquisites we provide them.
Home Security Systems. We pay for the cost of home security systems for a limited number of executive officers in order to enhance their safety and protect our investment in them. We cover the cost of installation, monitoring and maintenance for these systems.
Use of Company Aircraft. In limited circumstances, executive officers are permitted to use our company aircraft for personal travel. In these circumstances, the executive is also required to reimburse us for a portion of the cost of such use in an amount determined using the Standard Industry Fare Level.
Tire Program. We offer our executive officers and Board members the opportunity to receive up to two sets of tires per year at our expense, including the cost of tires, mounting, balancing and disposal fees.
Financial Planning and Tax Preparation Services. We offer financial assistance to our executive officers to help them cover the cost of financial planning and tax preparation services. In providing this benefit, we seek to alleviate our executives’ concern regarding personal financial planning so that they may devote their full attention to our business. The maximum annual cost to the Company under this program is $9,000 per officer.
Club Memberships. We pay the annual dues for a corporate club membership that is available to Mr. Kramer. None of the other named executive officers utilize this corporate club membership. The membership is intended to be used primarily for business purposes, although members may use the club for personal purposes so long as they pay all incremental costs, other than the annual dues, related to that personal use.
Annual Physical Exams. We strongly encourage our executive officers to have an annual comprehensive physical examination which we pay for in order to enhance their physical well-being and protect our investment in them.
Executive Deferred Compensation Plan
The Goodyear Executive Deferred Compensation Plan (the “Deferred Compensation Plan”) is a non-qualified deferred compensation plan that provides named executive officers and other highly compensated employees the opportunity to defer various forms of compensation. The plan provides several deferral period options. During 2011, no named executive officers made deferrals under the Deferred Compensation Plan. For participants, this offers an additional means to save for retirement on a tax-deferred basis. There is no premium or guaranteed return associated with the deferral.
For additional information regarding the terms of the deferred compensation plan and participant balances, see “Nonqualified Deferred Compensation” at page 48.
Other Benefits
Payments to Expatriate Employees. Where warranted, we provide tax equalization payments, housing allowances, and other similar benefits to employees, including Mr. de Bok, living outside of their home country to compensate them for the additional costs of those assignments.
Tax Deductibility of Pay
Section 162(m) of the Code provides that compensation paid to a public company’s chief executive officer and its three other highest paid executive officers at the end of the year (other than its chief financial officer) in excess of $1 million is not deductible unless certain requirements have been satisfied. The Compensation Committee believes that awards under the Management Incentive Plan and the 2008 Performance Plan qualify for full deductibility under Section 162(m).
Although compensation paid under the Executive Performance Plan is performance-based, it does not qualify for the deductibility exception for performance-based compensation since that Plan has not been approved by our shareholders. Therefore, payments under the Executive Performance Plan are subject to the Section 162(m) limitation on deductibility. Because of our significant U.S. deferred tax assets from prior periods, the limitation on deductibility has no impact on our financial position. In reviewing and considering payouts or earnings under the Executive Performance Plan, the Compensation Committee considered not only the impact of the lost tax deductions, but also the significant U.S. deferred tax assets available to us from prior periods, as well as the benefits realized by us and our shareholders from the successful efforts of our senior management team. In balancing these considerations, the Compensation Committee concluded that it would be appropriate to approve payouts in respect of the 2009-2011 grants and earnings for the 2011 performance period in respect of the 2010-2012 and 2011-2013 grants.
Stockholding Guidelines
To better link the interests of management and our stockholders, the Compensation Committee revised our stockholding guidelines for executive officers effective August 1, 2011. These guidelines specify a number of shares that our executive officers are expected to accumulate and hold based on a multiple of annual base salary of two times for elected Vice Presidents, three times for Senior Vice Presidents, Executive Vice Presidents and the Presidents of our operating units, and five times for the CEO. Therefore, the stockholding requirement for Mr. Kramer is five times his annual base salary and for Messrs. Wells, de Bok, Ruocco and Bialosky is three times their annual base salary. All shares of Common Stock owned outright by executive officers (or their spouses) and held by them in the Goodyear stock fund of the Savings Plan, and 60% of the shares of restricted stock, restricted stock units and earned (but unvested) performance shares awarded to executive officers and share equivalent units held in our deferred compensation plan, are counted as ownership in assessing compliance with the guidelines. Unexercised stock options and unearned performance shares are not counted toward compliance with the guidelines. The stock price used in assessing compliance with the guidelines as of May 1st of each year will be the average closing stock price for the prior 60-day period. As a result of the adoption of the revised stockholding guidelines, the stockholding requirement for each of our named executive officers increased significantly.
The stockholding guidelines also include stock retention provisions. If an executive officer has met their stockholding requirement, they are required to retain 25% of the net shares received from any exercised options or any vested shares of Common Stock for at least one year from the date of exercise or vesting and may only sell or otherwise dispose of shares to the extent they will still meet their stockholding requirement following that sale or disposition. If an executive officer has not met their stockholding requirement, they are required to retain all of the net shares received from any exercised options or any vested shares of Common Stock, and may not sell or otherwise dispose of shares, until they have met their stockholding requirement unless they demonstrate a need to sell shares due to a financial hardship. Net shares are the shares remaining after payment of the exercise price and/or withholding taxes.
Messrs. de Bok and Ruocco have met their stockholding requirement, and Messrs. Kramer, Wells and Bialosky are making progress towards satisfying their stockholding requirement.
Insider Trading Policy
We have adopted, as part of our insider trading policy, prohibitions on the short sale of our Common Stock and other securities and the issuance, purchase or sale of, or trading or dealing in, puts, calls or other options or rights relating to our Common Stock and other securities. These provisions prohibit our directors, executive officers and employees from hedging the risk of their ownership of our Common Stock. We also prohibit our directors, executive officers and employees from holding our Common Stock and other securities in a margin account or otherwise pledging them as collateral for a loan.
Recovery of Compensation
If the Compensation Committee determines that an executive officer has engaged in conduct detrimental to the Company, the Compensation Committee may take a range of actions to remedy this conduct, prevent its recurrence and impose appropriate discipline. Discipline would vary depending on the facts and circumstances, and may include (1) termination of employment, (2) cancelling or reducing any outstanding compensatory grants or awards, (3) initiating an action for breach of fiduciary duty or fraud which could include recovery of any unjustly obtained incentive compensation, and (4) requiring reimbursement of compensation or other payments in accordance with provisions of the Sarbanes-Oxley Act of 2002, our claw-back policy described below or the terms of the relevant compensation plan. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities.
Effective for 2012 awards, the Compensation Committee adopted a claw-back policy that effectively contractually extends the claw-back provisions of the Sarbanes-Oxley Act of 2002 that apply to our Chief Executive Officer and Chief Financial Officer to the Presidents of each of our strategic business units and all of our Senior Vice Presidents. If we are required to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement as a result of misconduct, the claw-back policy would permit the Compensation Committee to require reimbursement of (1) any incentive compensation received from us during the one-year period following the publication of misstated financial statements and (2) any profits realized from the sale of our securities during that one-year period. We will make any necessary revisions to our claw-back policy once implementing rules pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 are adopted by the Securities and Exchange Commission and the New York Stock Exchange.
In addition, under our Executive Performance Plan and equity compensation plans, the Compensation Committee may require a plan participant who engages in competition with us within 18 months after their termination of employment to return or forfeit the realized value of all awards under those plans during such period of time that the Compensation Committee determines. Our Severance Plan also provides for the recovery or forfeiture of severance payments if a person receiving payments pursuant to the plan violates certain confidentiality, non-disparagement, non-solicitation and non-competition covenants.
COMPENSATION COMMITTEE REPORT
We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussion with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in Goodyear’s Annual Report on Form 10-K for the year ended December 31, 2011.
The Compensation Committee
Thomas H. Weidemeyer, Chairman
William J. Conaty
W. Alan McCollough
Rodney O’Neal
G. Craig Sullivan
Summary Compensation Table
The table below sets forth information regarding the compensation of the CEO, the Chief Financial Officer of Goodyear (the “CFO”), and the persons who were, at December 31, 2011, the other three most highly compensated executive officers of Goodyear (collectively, the “named executive officers”) for services in all capacities to Goodyear and its subsidiaries during 2009, 2010 and 2011.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||||||||||||||||
Richard J. Kramer Chairman of the Board, Chief Executive Officer and President(6) | 2011 | $ | 1,000,000 | $ | 0 | $ | 683,230 | $ | 1,829,996 | $ | 6,751,400 | $ | 1,899,524 | $ | 58,920 | $ | 12,223,070 | |||||||||||||||||||
| 2010 | 929,924 | 0 | 479,992 | 1,392,000 | 5,653,500 | 1,626,814 | 52,161 | 10,134,391 | ||||||||||||||||||||||||||||
| 2009 | 678,523 | 0 | 108,479 | 902,635 | 3,287,129 | 529,050 | 47,226 | 5,553,042 | ||||||||||||||||||||||||||||
Darren R. Wells Executive Vice President and Chief Financial Officer | 2011 | 526,667 | 0 | 966,856 | 486,499 | 2,329,186 | 429,659 | 35,355 | 4,774,222 | |||||||||||||||||||||||||||
| 2010 | 490,000 | 0 | 404,801 | 450,002 | 2,340,800 | 377,450 | 29,875 | 4,092,928 | ||||||||||||||||||||||||||||
| 2009 | 450,000 | 0 | 48,100 | 293,157 | 1,471,400 | 144,875 | 46,428 | 2,453,960 | ||||||||||||||||||||||||||||
Arthur de Bok President, Europe, Middle East and Africa Tire(7) | 2011 | 545,000 | 0 | 980,846 | 522,299 | 2,720,398 | 592,029 | 26,381 | 5,386,953 | |||||||||||||||||||||||||||
| 2010 | 523,333 | 0 | 415,299 | 481,499 | 3,062,520 | 473,971 | 29,673 | 4,986,295 | ||||||||||||||||||||||||||||
| 2009 | 500,000 | 0 | 50,356 | 358,249 | 2,310,350 | 137,356 | 23,635 | 3,379,946 | ||||||||||||||||||||||||||||
Joseph B. Ruocco Senior Vice President, Human Resources | 2011 | 484,667 | 0 | 701,049 | 348,817 | 1,639,042 | 244,772 | 23,972 | 3,442,319 | |||||||||||||||||||||||||||
David L. Bialosky Senior Vice President, General Counsel and Secretary(8) | 2011 | 513,333 | 0 | 142,277 | 389,993 | 1,956,300 | 254,391 | 24,016 | 3,280,310 | |||||||||||||||||||||||||||
| 2010 | 500,000 | 0 | 122,495 | 367,503 | 1,498,150 | 158,063 | 21,127 | 2,667,338 | ||||||||||||||||||||||||||||
| 2009 | 136,364 | 650,000 | 1,339,982 | 299,992 | 500,000 | 26,998 | 2,908 | 2,956,244 | ||||||||||||||||||||||||||||
| (1) | Represents the aggregate grant date fair value as of the respective grant date for each award. The maximum amount to be awarded with respect to each of the named executive officers is shown in the Grants of Plan-Based Awards Table in the column “Estimated Future Payouts Under Equity Incentive Plan Awards — Maximum.” The assumptions made in valuing stock awards reported in this column are discussed in Note to the Consolidated Financial Statements No. 1, “Accounting Policies” under “Stock-Based Compensation” and Note to the Consolidated Financial Statements No. 18, “Stock Compensation Plans” included in Goodyear’s Annual Report for the year ended December 31, 2011. For additional information regarding such grants, see “Compensation Discussion and Analysis — Elements of Compensation — Long-Term Compensation — Performance Shares,” “— 2011 Performance Share Grants” and “— Restricted Stock Awards.” See also “Grants of Plan-Based Awards” below. |
| (2) | Represents the aggregate grant date fair value as of the respective grant date for each award. The assumptions made in valuing option awards reported in this column are discussed in Note to the Consolidated Financial Statements No. 1, “Accounting Policies” under “Stock-Based Compensation” and Note to the Consolidated Financial Statements No. 18, “Stock Compensation Plans” included in Goodyear’s Annual Report for the year ended December 31, 2011. For additional information regarding such grants, see “Compensation Discussion and Analysis — Elements of Compensation — Long-Term Compensation — Stock Options” and “— 2011 Stock Option Grants.” See also “Grants of Plan-Based Awards” below. |
| (3) | Represents amounts awarded under the Management Incentive Plan for performance during 2011 and 2010 and amounts awarded under the Management Incentive Plan or Performance Recognition Plan for performance during 2009. For additional information regarding amounts awarded to the named executive
— Long-Term Compensation — Cash-Based Awards Under the Executive Performance Plan,
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The following table provides further information on the amounts payable, or earned but not yet payable, under the Management Incentive Plan (MIP) and the Executive Performance Plan (EPP) for performance periods ending on December 31, 2011:
| MIP (Currently Payable) | 2009-2011 EPP (Currently Payable) | 2010-2012 EPP (Not Yet Payable) | 2011-2013 EPP (Not Yet Payable) | |||||||||||||
Mr. Kramer | $ | 2,100,000 | $ | 1,205,800 | $ | 1,531,400 | $ | 1,914,200 | ||||||||
Mr. Wells | 714,386 | 496,400 | 493,400 | 625,000 | ||||||||||||
Mr. de Bok | 649,098 | 880,850 | 527,950 | 662,500 | ||||||||||||
Mr. Ruocco | 521,042 | 390,500 | 362,500 | 365,000 | ||||||||||||
Mr. Bialosky | 585,000 | 500,000 | 435,650 | 435,650 | ||||||||||||
| (4) | Represents total change in pension value for each named executive officer, which reflects both the accrual of additional benefits and changes in the
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| Increase in Pension Value due to Benefit Accrual | Increase in Pension Value due to Assumption Changes | Total Increase in Pension Value | ||||||||||
Mr. Kramer | $ | 1,289,676 | $ | 609,848 | $ | 1,899,524 | ||||||
Mr. Wells | 285,060 | 144,599 | 429,659 | |||||||||
Mr. de Bok | 424,372 | 167,657 | 592,029 | |||||||||
Mr. Ruocco | 192,310 | 52,462 | 244,772 | |||||||||
Mr. Bialosky | 217,075 | 37,316 | 254,391 | |||||||||
No nonqualified deferred compensation earnings are required to be reported because the Deferred Compensation Plan does not provide for “above-market” or preferential earnings as defined in applicable Securities and Exchange Commission rules and regulations.
| (5) | Includes amounts for home security system monitoring expenses, personal financial planning services, the cost of annual physical exams, and provision of up to two sets of automobile tires per year. Mr. Kramer’s total also includes amounts for the personal use of company aircraft and the annual dues for a club membership. Mr. de Bok’s total also includes amounts for a company car. None of the individual perquisites provided to our named executive officers had a value in |
| (6) | Mr. Kramer was elected Chief Executive Officer and President effective April 13, 2010 and was elected Chairman of the Board effective October 1, 2010. |
| (7) | The amounts in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” and the “All Other Compensation” columns were converted from euros to U.S. dollars at the exchange rates in effect at December 31, 2009 of€1 = $1.44, December 31, 2010 of€1 = $1.34 and December 31, 2011 of€1 = $1.30. All other amounts were originally determined in U.S. dollars. |
| (8) | Mr. Bialosky was elected Senior Vice President, General Counsel and Secretary on September 23, 2009. Mr. Bialosky’s 2009 bonus includes a $275,000 sign-on bonus and a $375,000 bonus agreed to as part of his hiring package. |
Grants of Plan-Based Awards
The following table summarizes grants of plan-based awards made to the named executive officers during 2011.
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | All Other Option Awards: Number of Securities Underlying Options (#)(4) | Exercise or Base Price of Option Awards ($/Sh)(5) | Grant Date Fair Value of Stock and Option Awards ($) | |||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||
Kramer | 2/22/2011 | $ | 1,914,200 | $ | 3,828,400 | $ | 5,742,600 | $ | — | |||||||||||||||||||||||||||||||||||
Kramer | 2/22/2011 | 21,926 | 43,853 | 65,779 | 683,230 | |||||||||||||||||||||||||||||||||||||||
Kramer | 2/22/2011 | 264,833 | $ | 13.91 | 1,829,996 | |||||||||||||||||||||||||||||||||||||||
Wells | 2/22/2011 | 500,000 | 1,000,000 | 1,500,000 | — | |||||||||||||||||||||||||||||||||||||||
Wells | 2/22/2011 | 5,841 | 11,682 | 17,523 | 182,006 | |||||||||||||||||||||||||||||||||||||||
Wells | 2/22/2011 | 70,405 | 13.91 | 486,499 | ||||||||||||||||||||||||||||||||||||||||
Wells | 12/6/2011 | 55,000 | 784,850 | |||||||||||||||||||||||||||||||||||||||||
Wells | 12/6/2011 | 125,000 | 250,000 | 375,000 | — | |||||||||||||||||||||||||||||||||||||||
de Bok | 2/22/2011 | 537,500 | 1,075,000 | 1,612,500 | — | |||||||||||||||||||||||||||||||||||||||
de Bok | 2/22/2011 | 6,290 | 12,580 | 18,870 | 195,996 | |||||||||||||||||||||||||||||||||||||||
de Bok | 2/22/2011 | 75,586 | 13.91 | 522,299 | ||||||||||||||||||||||||||||||||||||||||
de Bok | 12/6/2011 | 55,000 | 784,850 | |||||||||||||||||||||||||||||||||||||||||
de Bok | 12/6/2011 | 125,000 | 250,000 | 375,000 | — | |||||||||||||||||||||||||||||||||||||||
Ruocco | 2/22/2011 | 365,000 | 730,000 | 1,095,000 | — | |||||||||||||||||||||||||||||||||||||||
Ruocco | 2/22/2011 | 4,180 | 8,360 | 12,540 | 130,249 | |||||||||||||||||||||||||||||||||||||||
Ruocco | 2/22/2011 | 50,480 | 13.91 | 348,817 | ||||||||||||||||||||||||||||||||||||||||
Ruocco | 12/6/2011 | 40,000 | 570,800 | |||||||||||||||||||||||||||||||||||||||||
Bialosky | 2/22/2011 | 435,650 | 871,300 | 1,306,950 | — | |||||||||||||||||||||||||||||||||||||||
Bialosky | 2/22/2011 | 4,566 | 9,132 | 13,698 | 142,277 | |||||||||||||||||||||||||||||||||||||||
Bialosky | 2/22/2011 | 56,439 | 13.91 | 389,993 | ||||||||||||||||||||||||||||||||||||||||
| (1) | Represents grants of awards under the Executive Performance
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| (2) | Grants of performance shares
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| (3) | Grants of restricted stock awards under the |
| (4) | Grants of stock option
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Equity Awards at Fiscal Year-End
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| Stock Awards | ||||||||||||||||||||||||
| Option Awards | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | ||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#)(1) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($)(2) | Option Expiration Date | ||||||||||||||||||||
Kramer | 2,861 | * | $ | 12.21 | 12/3/2012 | 225,785 | (12) | $ | 3,199,373 | |||||||||||||||
| 6,822 | * | 13.83 | 12/2/2013 | |||||||||||||||||||||
| 2,668 | * | 13.83 | 12/3/2012 | |||||||||||||||||||||
| 26,000 | 17.15 | 12/6/2015 | ||||||||||||||||||||||
| 3,253 | * | 17.35 | 8/6/2012 | |||||||||||||||||||||
| 2,371 | * | 17.35 | 12/3/2012 | |||||||||||||||||||||
| 6,117 | * | 17.35 | 12/2/2013 | |||||||||||||||||||||
| 8,961 | * | 17.35 | 12/9/2014 | |||||||||||||||||||||
| 55,000 | 24.71 | 2/27/2017 | ||||||||||||||||||||||
| 5,236 | * | 28.03 | 8/6/2012 | |||||||||||||||||||||
| 1,928 | * | 28.03 | 12/3/2012 | |||||||||||||||||||||
| 5,062 | * | 28.03 | 12/2/2013 | |||||||||||||||||||||
| 7,551 | * | 25.33 | 12/9/2014 | |||||||||||||||||||||
| 10,573 | * | 25.33 | 12/6/2015 | |||||||||||||||||||||
| 7,214 | * | 27.93 | 12/9/2014 | |||||||||||||||||||||
| 10,100 | * | 27.93 | 12/6/2015 | |||||||||||||||||||||
| 38,055 | 12,685 | (5) | 26.74 | 2/21/2018 | ||||||||||||||||||||
| 82,524 | 82,524 | (6) | 4.81 | (3) | 2/26/2019 | |||||||||||||||||||
| 7,486 | * | 13.22 | 12/2/2013 | |||||||||||||||||||||
| 11,397 | 11,397 | (7) | 18.12 | (3) | 8/4/2019 | |||||||||||||||||||
| 9,987 | * | 14.32 | 12/9/2014 | |||||||||||||||||||||
| 52,647 | 157,943 | (8) | 12.74 | (3) | 2/23/2020 | |||||||||||||||||||
| 264,833 | (9) | 13.91 | (3) | 2/22/2021 | ||||||||||||||||||||
Wells | 12,500 | $ | 15.55 | 8/6/2012 | 110,184 | (13) | $ | 1,561,307 | ||||||||||||||||
| 13,000 | 7.94 | 12/3/2012 | ||||||||||||||||||||||
| 2,500 | 5.52 | 8/5/2013 | ||||||||||||||||||||||
| 8,268 | 6.81 | 12/2/2013 | ||||||||||||||||||||||
| 15,600 | 12.54 | 12/9/2014 | ||||||||||||||||||||||
| 752 | * | 13.38 | 8/5/2013 | |||||||||||||||||||||
| 1,089 | * | 13.38 | 12/2/2013 | |||||||||||||||||||||
| 13,500 | 17.15 | 12/6/2015 | ||||||||||||||||||||||
| 667 | * | 17.73 | 8/5/2013 | |||||||||||||||||||||
| 2,970 | * | 17.73 | 12/2/2013 | |||||||||||||||||||||
| 13,500 | 24.71 | 2/27/2017 | ||||||||||||||||||||||
| 9,249 | 3,084 | (5) | 26.74 | 2/21/2018 | ||||||||||||||||||||
| 41,999 | 42,000 | (6) | 4.81 | (3) | 2/26/2019 | |||||||||||||||||||
| 17,019 | 51,060 | (8) | 12.74 | (3) | 2/23/2020 | |||||||||||||||||||
| 70,405 | (9) | 13.91 | (3) | 2/22/2021 | ||||||||||||||||||||
de Bok | 13,500 | $ | 7.94 | 12/3/2012 | 142,684 | (14) | $ | 2,021,832 | ||||||||||||||||
| 12,500 | 6.81 | 12/2/2013 | ||||||||||||||||||||||
| 17,680 | 12.54 | 12/9/2014 | ||||||||||||||||||||||
| 33,000 | 15.23 | 10/4/2015 | ||||||||||||||||||||||
| 30,000 | 17.15 | 12/6/2015 | ||||||||||||||||||||||
| 30,000 | 24.71 | 2/27/2017 | ||||||||||||||||||||||
| 22,428 | 7,477 | (5) | 26.74 | 2/21/2018 | ||||||||||||||||||||
| 1,969 | 26.74 | 12/2/2013 | ||||||||||||||||||||||
| 51,325 | 51,325 | (6) | 4.81 | (3) | 2/26/2019 | |||||||||||||||||||
| 18,211 | 54,633 | (8) | 12.74 | (3) | 2/23/2020 | |||||||||||||||||||
| 75,586 | (9) | 13.91 | (3) | 2/22/2021 | ||||||||||||||||||||
Name Ruocco Bialosky Stock Awards Option Awards Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#) Market
Value of
Shares or
Units of
Stock
That Have
Not
Vested
($)(4) Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)(1) Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#) Option
Exercise
Price
($)(2) Option
Expiration
Date 22,599 7,534 (10) $ 21.08 (3) 8/5/2018 65,515 (15) $ 928,348 46,299 46,299 (6) 4.81 (3) 2/26/2019 12,503 37,512 (8) 12.74 (3) 2/23/2020 50,480 (9) 13.91 (3) 2/22/2021 15,974 15,974 (11) $ 16.86 (3) 9/23/2019 104,039 (16) $ 1,474,233 13,899 41,699 (8) 12.74 (3) 2/23/2020 56,439 (9) 13.91 (3) 2/22/2021
| * | Represents the
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (15) | 12,975 earned performance share units vest on December 31, 2012, 12,540 earned performance share units vest on December 31, 2013 (subject to a three-year relative total shareholder return modifier), and |
| (16) | 27,283 restricted shares vest on September 23, 2012, 48,636 restricted shares vest on September 23, 2013, 14,422 earned performance share units vest on December 31, 2012, and
During the restriction period for shares of restricted stock, the recipient is not entitled to delivery of the shares, restrictions are placed on the transferability of the shares, and all or a portion of the shares will be forfeited if the recipient terminates employment for reasons other than as approved by the Compensation Committee. Upon expiration of the restriction period, the appropriate number of shares of Common Stock will be delivered to the grantee free of all restrictions. During the restriction period for shares of restricted stock, the grantee shall be entitled to vote restricted shares and, unless the Compensation Committee otherwise provides, to receive dividends, if any. Restricted stock units do not have any voting rights and, unless the Compensation Committee otherwise provides, are entitled to receive dividends, if any. Earned, but unvested, performance share units do not have any voting rights and are not entitled to receive dividend equivalents. For additional information regarding the terms of the performance share units, see “Compensation Discussion and Analysis — Elements of Compensation — Long-Term Compensation — Performance Shares — 2011 Performance Share Grants” at page 30. Option Exercises and Stock Vested The following table sets forth certain information regarding option exercises by, and the vesting of stock awards for, the named executive officers during 2011.
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Defined Contribution Plan Benefits
The Savings Plan is a tax-qualified defined contribution plan that permits eligible employees, including all of the named executive officers (other than Mr. de Bok), to contribute 1% to 50% of their compensation to their Savings
Plan account, subject to an annual contribution ceiling ($16,500 in 2011). Savings Plan participants who are age 50 or older and contributing at the maximum plan limits or at the annual contribution ceiling are entitled to make “catch-up” contributions annually up to a specified amount ($5,500 in 2011). Participants in the Savings Plan are eligible to receive Company matching contributions in addition to the retirement contributions described below under “Pension Benefits.” Savings Plan participants are also eligible to make after-tax contributions subject to limits imposed by the Code. Contributions are invested, at the direction of the participant, in any one or more of the fifteen available funds and/or in mutual funds under a self-directed account.
Pension Benefits
Goodyear’s Salaried Pension Plan is a defined benefit plan qualified under the Code in which U.S.-based salaried employees hired before January 1, 2005 participate, including Messrs. Kramer and Wells. Accruals in the Salaried Plan were frozen effective December 31, 2008. The Salaried Plan was designed to provide tax-qualified pension benefits for most Goodyear salaried employees. The Salaried Plan contains formulas based on age and service. These formulas are multiplied by five-year average compensation below and above a breakpoint ($51,000 in 2008, the year the Salaried Plan was frozen), with the result representing a lump sum benefit under the plan. Compensation is held to the qualified plan limit under the Code, which was $230,000 for 2008. A portion of the benefit may be paid by employee contributions. Effective December 31, 2007, all active participants in the Salaried Plan became vested and are entitled to a benefit upon any termination of employment. Benefits are available on a five-year certain and continuous annuity basis at age 65, by converting the lump sum to an annuity. Annuity benefits payable to a participant who retires prior to age 65 are subject to a reduction for each month retirement precedes age 65. Benefits under the Salaried Plan are funded by an irrevocable tax-exempt trust.
Participation in the Salaried Plan was frozen effective December 31, 2004. Subsequent hires, including Messrs. Ruocco and Bialosky, participate in the retirement contributions feature of the Savings Plan. Under the Savings Plan, each participant receives an allocation each pay period equal to a percentage of compensation, with compensation held to the qualified plan limit under the Code. Effective January 1, 2009, Salaried Plan participants, including Messrs. Kramer and Wells, also began receiving allocations under the retirement contributions feature of the Savings Plan.
Non-U.S.-based employees, such as Mr. de Bok, participate in neither the Salaried Plan nor the Savings Plan; instead Mr. de Bok participates in Goodyear’s Netherlands Pension Plan and in government-sponsored (but Company-funded) pension plans in The Netherlands and Belgium.
Goodyear also maintains the Supplementary Plan, a non-qualified, unfunded plan which provides additional retirement benefits to our executive officers and certain other key employees, including all of the named executive officers. The Supplementary Plan provides pension benefits to participants who retire with at least 30 years of service, retire after age 55 with at least ten years of service or retire after age 65 with at least five years of service. The formula for an annuity benefit is based on a percentage determined using credited service (22% with 10 years, 38% with 20 years, 48% with 30 years and 54% with 40 years) times five-year average compensation above the breakpoint ($53,400 in 2011), with compensation inclusive of base salary and annual incentive payments. The five-year average compensation uses the highest five calendar years, not necessarily consecutive, out of the last ten years. Benefits are offset for the Salaried Plan, the retirement contributions feature of the Savings Plan, applicable non-U.S. benefits and certain prior employer benefits. Under the Supplementary Plan, benefits payable to a participant who retires prior to age 62 are subject to a reduction of 0.4% for each month retirement precedes age 62. Participants may elect a lump sum payment of benefits under the Supplementary Plan for benefits accrued and vested prior to January 1, 2005, subject to the approval of Goodyear’s ERISA Appeals Committee. For benefits accrued or vested on or after January 1, 2005, payment will be made in a lump sum. Benefits vested on or after January 1, 2005 cannot be distributed prior to six months after separation of service. The Supplementary Plan benefits for all named executive officers are not yet vested.
We also maintain a non-qualified unfunded defined benefit Excess Benefit Plan that pays an additional pension benefit over that paid from the Salaried Plan if a participant does not meet the eligibility requirements of the
Supplementary Plan. The additional benefit is equal to the amount a participant would have received from the Salaried Plan but does not because of the limitations imposed by the Code on pension benefits under qualified plans. This plan is provided to allow the extension of benefits from the qualified plan to individuals whose income exceeds the Code guidelines for qualified plans. Distribution of amounts earned and vested prior to January 1, 2005, will be paid out in the same manner as the Salaried Plan unless otherwise elected by the participant at least 12 months prior to termination or severance. Distributions for amounts earned or vested on or after January 1, 2005, will be paid out in a lump sum. For participants considered to be among the top 50 wage earners of the Company, benefits vested on or after January 1, 2005 are paid out six months after termination of service. For employees hired after December 31, 2004, and for all employees as of December 31, 2008, there is a corresponding defined contribution Excess Benefit Plan that mirrors the retirement contributions feature of the Savings Plan. Like the qualified plans, effective December 31, 2008 accruals were frozen under the defined benefit Excess Benefit Plan and all affected participants began receiving defined contribution allocations under the defined contribution Excess Benefit Plan.
The Pension Benefits table below shows for the named executive officers the number of years of credited service, present value of accumulated benefit and payments during the last fiscal year, for each defined benefit plan. Compensation is held to the qualified plan limit under the Code, which is $230,000 for 2008. A portion of the benefit may be paid by employee contributions. Effective December 31, 2007, all active participants in the Salaried Plan became vested and are entitled to a benefit upon any termination of employment. Benefits are available on a five-year certain and continuous annuity basis at age 65, by converting the lump sum to an annuity. Annuity benefits payable to a participant who retires prior to age 65 are subject to a reduction for each month retirement precedes age 65. Benefits under the Salaried Plan are funded by an irrevocable tax-exempt trust.
36
Generally, a participant’s years of credited service under the Supplementary Plan are based on the years an employee participates in the Salaried Plan. However, in certain cases, credit for service prior to participation in the Salaried Plan is granted. Such cases include service with a predecessor employer. Mr. Kramer received 13.6 additional years of credited service in connection with his hiring by Goodyear in respect of service with a prior employer. The benefits paid to Mr. Kramer under the Supplementary Plan will be reduced by amounts he is entitled to receive under the pension plan maintained by his prior employer. Due to this service grant, the present value of accumulated benefit in the Pension Benefits table is $2,382,264 higher for Mr. Kramer. Messrs. Wells, de Bok, Ruocco and Bialosky did not receive any additional years of credited service.
Mr. Kramer is eligible for immediate commencement of the benefit from the Salaried Plan as of December 31, 2011, and will be eligible to receive a benefit from the Supplementary Plan if he remains employed by us until 2016. Mr. Wells is eligible for immediate commencement of the benefit from the Salaried Plan as of December 31, 2011, and will be eligible to receive a benefit from the Supplementary Plan if he remains employed by us until 2020. Messrs. de Bok, Ruocco and Bialosky will be eligible to receive a benefit from the Supplementary Plan if they remain employed by us until 2017, 2018 and 2019, respectively.
For Mr. de Bok, the Pension Benefits table shows the benefits payable under the Supplementary Plan and Goodyear’s Netherlands Pension Plan. The Netherlands Pension Plan provides an annuity benefit based on career average earnings. This benefit is an offset to the Supplementary Plan benefit. The present value of the Netherlands Pension Plan benefit is determined based on the assumptions used for financial reporting of the Netherlands Pension Plan as of December 31, 2011 (and which are set forth following the Pension Benefits Table), with the exception that the commencement age is taken to be 62. The Supplementary Plan value is based on the U.S. financial reporting assumptions, as discussed above. Mr. de Bok is currently vested in his benefit from the Netherlands Pension Plan but is not yet eligible to commence the benefit. In addition to the offset for the Netherlands Pension Plan, the Supplementary Plan present value also will be offset for the value of Company contributions to the governmental plans in Belgium and The Netherlands.
Name Plan Name Kramer Wells de Bok(2) Ruocco Bialosky Number of Years
Credited Service
(#) Present Value of
Accumulated Benefit
($)(1) Payments
During Last
Fiscal Year
($) Supplementary Pension Plan 25.42 $ 5,423,881 $ — Salaried Pension Plan 8.83 189,303 — Supplementary Pension Plan 9.42 1,034,348 — Salaried Pension Plan 6.42 131,920 — Supplementary Pension Plan 10.00 1,079,856 — Netherlands Pension Plan 10.00 583,431 — Supplementary Pension Plan 3.42 565,907 — Supplementary Pension Plan 2.25 439,452 —
| (1) | All amounts shown are estimates as of December 31,
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| (2) | The amounts
|
The amounts set forth in the table above are based on the following assumptions:
the measurement date is December 31, 2011
the form of payment is a lump sum (annuity for Mr. de Bok’s Netherlands pension)
the interest rate used to calculate the Supplementary Plan lump sum payment:
Benefits commencing in 2012 or later: 2.00%
the interest rate used to calculate the Salaried Plan lump sum payment:
Benefits commencing in 2012 or later: 4.50% (Messrs. Kramer and Wells)
the mortality assumptions used to calculate the lump sum are those set forth in Revenue Ruling 2007-67, as updated by IRS Notice 2008-85 for the Salaried Plan, and those set forth in UP-1984 Mortality for the Supplementary Plan (a modified version of the Prognosetafel 2010-2060 mortality table is used to determine the present value of Mr. de Bok’s Netherlands pension)
the discount rate used to determine the present value of the accumulated benefit is 4.50% (6.00% for Mr. de Bok’s Netherlands pension)
the benefit commencement age is 62 (or, if older, age at the measurement date)
the accumulated benefit is calculated based on credited service and pay as of December 31, 2011 (for the Salaried Plan, credited service and pay as of December 31, 2008).
Nonqualified Deferred Compensation
associated with any deferral. Distribution of deferred amounts may begin after separation of service or in a selected number of years ranging from one to 20. Payment of deferred amounts will be in a lump sum or up to 15 annual installments, as elected at the time of deferral. Redeferral is allowed only if elected one year prior to the scheduled payout and the new deferral does not commence for at least five years after the originally scheduled date of distribution. Any stock units are converted to shares of Common Stock and distributed to the participant in January of the fourth year following the end of the plan year under which the award was earned.
The Deferred Compensation Plan is unfunded. The following table sets forth certain information regarding nonqualified deferred compensation of the named executive officers.
Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | |||||||||||||||
Kramer | — | — | $ | 1,725 | — | $ | 118,680 | |||||||||||||
Wells | — | — | — | — | — | |||||||||||||||
de Bok | — | — | — | — | — | |||||||||||||||
Ruocco | — | — | — | — | — | |||||||||||||||
Bialosky | — | — | — | — | — | |||||||||||||||
| (1) | Represents deferral in 2011 of base salary
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Potential Payments Upon Termination or Change-in-Control
We provide for the payment of severance and certain other benefits to our named executive officers upon certain types of terminations of employment, as described below.
Continuity Plan
The Continuity Plan provides severance benefits to certain of our salaried employees, including our named executive officers, if their employment is terminated under certain circumstances during certain periods before or within two years following a change-in-control of the Company.
The Continuity Plan divides our salaried employees into three groups: Tier 1, Tier 2 and Tier 3. Tier 1 generally includes all of our elected officers, including the named executive officers, and other employees who participate in our Executive Performance Plan; Tier 2 generally includes all salaried employees who participate in our annual incentive plan other than Tier 1 employees; and Tier 3 generally includes all other full-time salaried employees who participate in our Savings Plan. The Continuity Plan provides the following benefits to salaried employees in each tier:
| • | Tier 1. A Tier 1 employee is eligible to receive benefits under the Continuity Plan if the employee’s employment is terminated involuntarily without “Cause” or by the employee for “Good Reason” (as such terms are defined below) during certain periods before or within two years following a |
|
| • | Tier 3. The Plan generally provides Tier 3 employees whose employment is terminated involuntarily without “Cause” or by the employee for “Good Reason” within two years following a Hostile Change in |
It is our expectation that should a change-in-control transaction occur, many of our employees would retain their jobs and continue to be employed by the surviving company and, therefore, would not be entitled to benefits under the Continuity Plan.
As used in the Continuity Plan:
“Cause” means (1) the continued failure by an eligible employee to substantially perform the employee’s duties with the Company (other than any such failure resulting from the employee’s incapacity due to physical or mental illness), (2) the engaging by the employee in conduct which is demonstrably injurious to the Company, monetarily or otherwise, (3) the employee committing any felony or any crime involving fraud, breach of trust or misappropriation or (4) any breach or violation of any agreement relating to the employee’s employment with the Company where the Company, in its discretion, determines that such breach or violation materially and adversely affects the Company.
A “Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:
| (1) | any person is or becomes the beneficial owner (as defined inRule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company other than securities acquired by virtue of the exercise of a conversion or similar privilege or right unless the security being so converted or pursuant to |
40
| which such right was exercised was itself acquired directly from the Company) representing 20% or more of (A) the then outstanding shares of Common Stock of the Company or (B) the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors; or |
| (2) | the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board of Directors (the “Incumbent Board”): individuals who, on April 10, 2007, constitute the Board of Directors and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including, without limitation, a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board of Directors or nomination for election by the Company’s | |
| (3) | there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than a merger or consolidation pursuant to which (A) the voting securities of the Company outstanding immediately prior to such merger or consolidation will continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) more than 50% of the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, (B) no person will become the beneficial owner, directly or indirectly, of securities of the Company or such surviving entity or any parent thereof representing 20% or more of the outstanding shares of common stock or the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to such merger or consolidation) and (C) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation (or any parent thereof) resulting from such merger or consolidation; or | |
| (4) | the |
“Good Reason” means the occurrence, without the affected eligible employee’s written consent, of any of the following:
| (1) | the assignment to the employee of duties that are materially inconsistent with the employee’s position (including, without limitation, offices or titles), authority, duties or responsibilities immediately prior to a Potential Change in Control or in the absence thereof, a Change in Control or a Hostile Change in Control (other than pursuant to a transfer or promotion to a position of equal or enhanced responsibility or authority) or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the employee, provided, however, that any such assignment or diminution that is primarily a result of the Company no longer being a publicly traded entity or becoming a subsidiary or division of another entity shall not be deemed “Good Reason” for purposes of the Continuity Plan, except that an employee shall have Good Reason if the Company is no longer a publicly traded entity and, immediately before the Change in Control or Hostile Change in Control that caused the Company no longer to be a publicly traded entity, substantially all of the employee’s duties and responsibilities related to public investors or government agencies that regulate publicly traded entities; |
41
| (2) | change in the location of such employee’s principal place of business by more than 50 miles when compared to the employee’s principal place of business immediately before a Potential Change in Control, or in the absence thereof, a Change in Control or a Hostile Change in Control; | |
| (3) | a material reduction in the Employee’s annual base salary or annual incentive opportunity from that in effect immediately before a Potential Change in Control, or in the absence thereof, a Change in Control or a Hostile Change in Control; | |
| (4) | a material increase in the amount of business travel required of the employee when compared to the amount of business travel required immediately before a Potential Change in Control, or in the absence thereof, a Change in Control or a Hostile Change in Control; and | |
| (5) | the failure by any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the businessand/or assets of the Company, to expressly assume and agree to perform the Continuity Plan in the same manner and to the same extent that the Company would be required to perform it if no succession had taken place. |
“Hostile Change in Control”means a Change in Control that a majority of the Incumbent Board has not determined to be in the best interests of the Company and its shareholders.
A “Potential Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:
| (1) | the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; | |
| (2) | the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control; | |
| (3) | any person becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company other than securities acquired by virtue of the exercise of a conversion or similar privilege or right unless the security being so converted or pursuant to which such right was exercised was itself acquired directly from the Company) representing 20% or more of either the then outstanding shares of Common Stock of the Company or the combined voting power of the Company’s then outstanding securities; or | |
| (4) | the Board adopts a resolution to the effect that a Potential Change in Control has occurred. |
The description above is meant only to be a summary of the provisions of the Continuity Plan. The Continuity Plan was filed as Exhibit 10.17 to our Annual Report onForm 10-K for the year ended December 31, 2008, filed with the Securities and Exchange Commission on February 18, 2009.
Other Severance BenefitsPlan
The Severance Plan under appropriate circumstances, such as reductions in force or elimination of positions, we may provideprovides severance benefits to executive officers,certain key employees, including theour named executive officers, whoseif their employment terminates prior to retirement. In determining whether to provide such benefitsis terminated by the Company and in what amount, we consider all relevant facts and circumstances, including length of service, circumstances of the termination, the executive officer’s contributions to our objectives,its affiliates other than for “Cause,” death or disability, and other relevant factors. When we provide such benefits, typicallythan in connection with a change-in-control. “Cause” generally means (i) the amountcontinued failure to substantially perform the participant’s duties with the Company or its affiliates, (ii) engaging in conduct which is demonstrably injurious to the Company or its affiliates, (iii) the commission of severance isany felony or any crime involving fraud, breach of trust or misappropriation or (iv) any breach or violation of any agreement relating to the equivalent of six to 18 months ofparticipant’s employment that materially and adversely affects the Company or its affiliates.
Plan participants will generally receive: (i) earned but unpaid base salary plus an amount based on the individual’s targetand annual incentive compensation and accrued paid vacation, sick leave, sabbatical, holiday and other paid time off; (ii) a pro-rated annual incentive payment thenbased on actual performance for the entire fiscal year in effect and health, welfare and other benefit payments over an equivalent period. Theamount not to exceed the participant’s target annual incentive; (iii) a cash severance payment may be paid in a lump sum or in installments. We also may provide limited outplacement and personal financial planning servicesequal to eligible executive officers following their termination.
Compensation Committee and currently ranges from 1.0x to 2.0x; (iv) continued health care coverage for a number of years equal to the participant’s severance multiple; and (v) outplacement services in an amount not to exceed $25,000. To be eligible to receive the benefits described in clauses (ii) through (v) above, the participant must execute a release and agree, among other things, not to compete with the Company or solicit its employees for a number of years equal to the participant’s severance multiple.
Messrs. Kramer, Wells, Ruocco and Bialosky are participants in the Severance Plan. Mr. Kramer’s severance multiple is 2.0x and Messrs. Wells’, Ruocco’s and Bialosky’s severance multiple is 1.5x. Mr. de Bok is not a participant in the Severance Plan.
The Severance Plan became effective on June 8, 2010 and will continue in effect plus (b)for three years, and thereafter will automatically renew for additional one-year periods unless the pro rata portion of Mr. Keegan’s target annual incentive payment for the then-current fiscal year. This severance compensation is not payable if, andCompany provides notice, at least 90 days prior to the extent that, Mr. Keegan receives benefits underend of the Continuity Plan. If severance compensation is paid to Mr. Keegan under the agreement, the agreement restricts Mr. Keegan from participating in any business that competes with us for a
42
The description above is meant only to be a summary of the provisions of Mr. Keegan’s employment agreement.the Severance Plan. The employment agreementSeverance Plan was filed as Exhibit 10.1610.1 to our AnnualCurrent Report onForm 10-K for the year ended December 31, 2008,8-K that was filed with the Securities and Exchange Commission on February 18, 2009.
Quantification of Termination Benefits
The tables below show amounts that would be payable to each of the current named executive officers, as of December 31, 2008,2011, upon the termination of their employment in the circumstances indicated in each column of the tables. The amounts shown are calculated on the assumption that the triggering event occurred on December 31, 2008.2011. Other assumptions used to determine such amounts are described below.
Performance RecognitionManagement Incentive Plan. The amounts shown in the tables for annual cash incentive under the Performance RecognitionManagement Incentive Plan are the amounts earned under Performance RecognitionManagement Incentive Plan awards for the year ended December 31, 2008.2011. Such amounts are payable at the normal time that payouts are made for 20082011 awards under the Performance RecognitionManagement Incentive Plan. The “Termination for Cause” scenario assumes no payout because the plan gives the Compensation Committee discretion to eliminate or reduce performance awards prior to payment.
Severance Payments. For the current named executive officers other than Mr. Keegan,The amounts shown in the column captioned “Termination Without Cause” equal 18 months of the named executive officer’s base salary and target annual incentive payments, which represents the maximum amount of such severance paid by Goodyear historically in this scenario. (See “Other Severance Benefits” above.) For Mr. Keegan, amounts shown in the column captioned “Termination Without Cause/For Good Reason” are calculated in accordance with the terms of the Severance Plan (other than for Mr. Keegan’s employment agreement.de Bok, who is not a participant in the Severance Plan). (See “Severance Plan” above.) The amounts shown in the column captioned “Involuntary Termination Within Two Years of Change in Control” are calculated in accordance with the terms of the Continuity Plan. (See “Continuity Plan” above.)
Performance Shares. The amounts shown in the tables for outstanding performance sharesshare awards are divided equally between cash andattributable solely to equity and represent the value (calculated based on a per share price of $5.97,$14.17, the closing market price of our Common Stock on December 31, 2008) of all outstanding performance shares as of December 31, 2008. With respect to awards to Mr. Harvie (who is the only named executive officer eligible for retirement under the Performance Plans) of performance shares with performance periods ending after December 31, 2008, this amount includes a pro rata portion, through December 31, 2008, of the value of such shares based on the estimated vesting with respect to such awards.30, 2011). In the event of termination for cause, it is assumed the Compensation Committee would exercise its discretion to cancel any outstanding awards.
Executive Performance Plan. The amounts shown in the tables for cash payouts under the Executive Performance Plan are the estimated payoutsamounts earned and payable under all outstandingthe 2009-2011 Executive Performance Plan grants asawards and, in addition, the amounts shown in the column captioned “Involuntary Termination Within Two Years of December 31, 2008. For grants with performance periods ending on December 31, 2008,Change in Control” include the amount shown includes the amount actuallyamounts earned, under such grants, and for grants with performance periods ending after December 31, 2008, the amount shown includes a pro rata portion, through December 31, 2008, of the total amountbut not yet payable, under such grants based on the estimated future payouts under such grants as of December 31, 2008.2010-2012 and 2011-2013 Executive Performance Plan awards. Under the Executive Performance Plan, an employee whose employment is terminated due to the employee’s death, disability, retirement, layoff or leave of absence is entitled to a prorated payout for any uncompleted performance periods only if such employee was eligible for retirement as of the date of termination.periods. Amounts are payable at the normal time that payouts are made for outstanding grants under
43
Stock Options. The Performance PlansOur equity compensation plans provide that unexercised stock options terminate automatically if the optionee ceases to be an employee of Goodyear or one of its subsidiaries for any reason, except that (a) upon retirement or disability of the optionee more than six months after the grant date, the stock option will become immediately exercisable and remain exercisable until the earlier of five years or its expiration date, and (b) in the event of the death of the optionee more than six months after the grant thereof,date, each stock option will become immediately exercisable and remain exercisable until the earlier of three years after the date of death of the optionee or its expiration date.date, and (c) for options granted on or after June 8, 2010, in the event of the termination of the optionee’s employment other than for cause, each vested stock option will remain exercisable for 90 days following the date of termination of their employment. For these purposes, resignations, terminations without cause, and involuntary terminations upon a change in control are treated like a retirement if the employee is eligible for retirement as of the date of termination. Accordingly, the amounts shown in the tables under those scenarios for stock options are the in-the-money value of all outstanding unvested stock options as of December 31, 2008 (calculated based on a per share price of $5.97, the closing market priceHowever, none of our Common Stocknamed executive officers were eligible for retirement on December 31, 2008).2011. In the event of a termination for cause, it is assumed that the Compensation Committee would exercise its discretion to cancel any outstanding unvested stock options.
Retirement Benefits. The tables below show the additional pensionretirement benefits that would be payable to the named executive officer if the named executive officer’s employment was terminated on December 31, 2008,2011, and that named executive officer was vested in the benefit as of that date. Mr. Keegan and Mr. Harvie have amounts payable from the Supplementary Plan because they were eligible to retire at December 31, 2008. The “Involuntary Termination Within Two Years of Change in ControlControl” column shows the amounts payable with two additional years of credited service under the Supplementary Plan, as provided in the Continuity Plan. Mr. WellsKramer and Mr. Kramer wereWells are not yet vested in a Supplementary Plan benefit and would instead receive a benefitbenefits from the defined benefit and defined contribution Excess Benefit Plans. Mr. Ruocco and Mr. Bialosky are not yet vested in a Supplementary Plan benefit, are not eligible to participate in the defined benefit Excess Benefit Plan or the Salaried Plan, and would instead receive benefits from the defined contribution Excess Benefit Plan. The Supplementary Plan amounts shown in the Pension Benefits Table are the present values at December 31, 2011 of benefits that would be payable in lump sum form at age 62.62 (or age at December 31, 2011, if older than 62). The amounts, if any, shown in the tables below for the Supplementary Plan and the Excess Benefit PlanPlans are the additional amounts that would be payable, together with the amounts shown in the Pension Benefits Table, in lump sum form six months after termination of employment at December 31, 2008.2011. The Salaried Plan values shown in the Pension Benefits Table are the present values at December 31, 2011 of benefits that would be payable in lump sum form at age 62.62 (or age at December 31, 2011, if older than 62). The amounts, if any, shown in the tables below for Mr. Keegan, Mr. Wells, Mr. Kramer and Mr. HarvieWells under the Salaried Plan are the additional amounts that would be payable immediately, together with the amounts shown in the Pension Benefits Table, in lump sum form after termination of employment at December 31, 2008.2011. Mr. de Bok is not yet vested in a Supplementary Plan benefit and is not eligible to participate in the Excess Benefit PlanPlans or the Salaried Plan. For Mr. de Bok, the Pension Benefits Table shows the present value of the accrued benefit under the Netherlands Pension Plan.
Other Benefits. The amounts shown for other benefits for each scenario include the payment of accrued vacation. In addition, the amounts shown in the column captioned “Termination Without Cause” include reimbursement of COBRA payments and payments for outplacement services (only(capped at $25,000), and the amounts shown in the casecolumn captioned “Involuntary Termination Within Two Years of termination without cause and involuntary termination within two years of a changeChange in control, and in each case capped at $25,000), personal financial planning services (in the amount of $9,000), payment of accrued vacation,Control” include reimbursement of COBRA payments, payments for a period of 18 months following termination of employment (only in the case of termination without cause and involuntary termination within two years of a change in control)outplacement services (capped at $25,000), health care andpayments for life insurance coverage, and reimbursement for legal fees.
44
| Involuntary | ||||||||||||||||||||
| Termination | ||||||||||||||||||||
| Termination | Within Two | |||||||||||||||||||
| Without | Years of | |||||||||||||||||||
| Cause/For | Change in | |||||||||||||||||||
| Resignation | Good Reason | Termination For | Control | |||||||||||||||||
Benefits or Payments | (1) | (2) | Cause | Retirement | (3) | |||||||||||||||
| Annual Cash Incentive under Performance Recognition Plan | $ | — | * | $ | — | * | $ | — | $ | — | * | $ | — | * | ||||||
| Cash Severance | — | 6,160,000 | — | — | 32,138,000 | |||||||||||||||
| Performance Shares-Cash Component | 43,800 | 43,800 | — | 43,800 | 330,016 | |||||||||||||||
| Cash Payout under Executive Performance Plan Awards | 4,600,000 | ˆ | 4,600,000 | ˆ | — | 4,600,000 | 4,600,000 | ˆ | ||||||||||||
Total Cash | 4,643,800 | 10,803,800 | — | 4,643,800 | 37,068,016 | |||||||||||||||
Equity | ||||||||||||||||||||
| Restricted Stock | — | — | — | — | — | |||||||||||||||
| Performance Shares | 43,800 | 43,800 | — | 43,800 | 330,016 | |||||||||||||||
| Stock Options | — | — | — | — | — | |||||||||||||||
Total Equity | 43,800 | 43,800 | — | 43,800 | 330,016 | |||||||||||||||
Retirement Benefits | ||||||||||||||||||||
| Salaried Pension Plan(4) | 9,128 | 9,128 | 9,128 | 9,128 | 9,128 | |||||||||||||||
| Supplementary Pension Plan(4) | 424,131 | 424,131 | 424,131 | 424,131 | 1,245,809 | |||||||||||||||
| Excess Benefit Plan | — | — | — | — | — | |||||||||||||||
| Retiree Medical | — | — | — | — | — | |||||||||||||||
Total Retirement Benefits | 433,259 | 433,259 | 433,259 | 433,259 | 1,254,937 | |||||||||||||||
Vested Deferred Compensation(5) | — | — | — | — | — | |||||||||||||||
Other Benefits | 136,269 | 178,045 | 136,269 | 136,269 | 193,597 | |||||||||||||||
Excise TaxGross-Up | — | — | — | — | 12,055,188 | |||||||||||||||
Total | $ | 5,257,128 | $ | 11,458,904 | $ | 569,528 | $ | 5,257,128 | $ | 50,901,754 | ||||||||||
Benefits or Payments | Resignation (1) | Termination Without Cause | Termination For Cause | Retirement (2) | Involuntary Termination Within Two Years of Change in Control (3) | |||||||||||||||
Annual Cash Incentive under Management Incentive Plan | $ | 2,100,000 | * | $ | 2,100,000 | * | $ | — | $ | 2,100,000 | * | $ | 2,100,000 | * | ||||||
Cash Severance | — | 4,800,000 | — | — | 11,946,400 | |||||||||||||||
Cash Payout under Executive Performance Plan Awards | 3,617,400 | * | 3,617,400 | * | — | 3,617,400 | * | 8,594,400 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Cash | 5,717,400 | 10,517,400 | — | 5,717,400 | 22,640,800 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Equity | ||||||||||||||||||||
Restricted Stock | 804,091 | 804,091 | 804,091 | 804,091 | 1,466,482 | |||||||||||||||
Performance Shares | 378,778 | 378,778 | — | 378,778 | 2,111,684 | |||||||||||||||
Stock Options | — | — | — | — | 1,067,140 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Equity | 1,182,869 | 1,182,869 | 804,091 | 1,182,869 | 4,645,306 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Retirement Benefits(4) | ||||||||||||||||||||
Salaried Pension Plan | — | — | — | — | — | |||||||||||||||
Supplementary Pension Plan | — | — | — | — | — | |||||||||||||||
Excess Benefit Plans | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Retirement Benefits | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Vested Deferred Compensation(5) | — | — | — | — | — | |||||||||||||||
Other Benefits | 96,154 | 148,634 | 96,154 | 96,154 | 152,546 | |||||||||||||||
Excise Tax Gross-Up | — | — | — | — | 6,230,362 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 6,996,423 | $ | 11,848,903 | $ | 900,245 | $ | 6,996,423 | $ | 33,669,013 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| * | ||
| (1) | In the event of death or disability, an additional | |
| (2) | ||
| (3) | The amounts to be paid under | |
| (4) | The Pension Benefits Table (on page | |
45
| Involuntary | ||||||||||||||||||||
| Termination | ||||||||||||||||||||
| Within Two | ||||||||||||||||||||
| Years of | ||||||||||||||||||||
| Termination | Change in | |||||||||||||||||||
| Resignation | Without | Termination For | Retirement | Control | ||||||||||||||||
Benefits or Payments | (1) | Cause | Cause | (2) | (3) | |||||||||||||||
| Annual Cash Incentive under Performance Recognition Plan | $ | — | * | $ | — | * | $ | — | $ | — | * | $ | — | * | ||||||
| Cash Severance | — | 1,185,000 | — | — | 4,470,000 | |||||||||||||||
| Performance Shares-Cash Component | 7,592 | 7,592 | — | 7,592 | 78,965 | |||||||||||||||
| Cash Payout under Executive Performance Plan Awards | 400,000 | ˆ | 400,000 | ˆ | — | 400,000 | 400,000 | ˆ | ||||||||||||
Total Cash | 407,592 | 1,592,592 | — | 407,592 | 4,948,965 | |||||||||||||||
Equity | ||||||||||||||||||||
| Restricted Stock | — | — | — | — | — | |||||||||||||||
| Performance Shares | 7,592 | 7,592 | — | 7,592 | 78,965 | |||||||||||||||
| Stock Options | — | — | — | — | — | |||||||||||||||
Total Equity | 7,592 | 7,592 | — | 7,592 | 78,965 | |||||||||||||||
Retirement Benefits | ||||||||||||||||||||
| Salaried Pension Plan(4) | 15,836 | 15,836 | 15,836 | 15,836 | 15,836 | |||||||||||||||
| Supplementary Pension Plan | — | — | — | — | — | |||||||||||||||
| Excess Benefit Plan(4) | — | — | — | — | — | |||||||||||||||
| Retiree Medical | — | — | — | — | — | |||||||||||||||
Total Retirement Benefits | 15,836 | 15,836 | 15,836 | 15,836 | 15,836 | |||||||||||||||
Vested Deferred Compensation | — | — | — | — | — | |||||||||||||||
Other Benefits | 52,269 | 97,627 | 52,269 | 52,269 | 106,477 | |||||||||||||||
Excise TaxGross-Up | — | — | — | — | 1,732,992 | |||||||||||||||
Total | $ | 483,289 | $ | 1,713,647 | $ | 68,105 | $ | 483,289 | $ | 6,883,235 | ||||||||||
46
| Involuntary | ||||||||||||||||||||
| Termination | ||||||||||||||||||||
| Within Two | ||||||||||||||||||||
| Years of | ||||||||||||||||||||
| Termination | Change in | |||||||||||||||||||
| Resignation | Without | Termination For | Retirement | Control | ||||||||||||||||
Benefits or Payments | (1) | Cause | Cause | (2) | (3) | |||||||||||||||
| Annual Cash Incentive under Performance Recognition Plan | $ | — | * | $ | — | * | $ | — | $ | — | * | $ | — | * | ||||||
| Cash Severance | — | 1,650,000 | — | — | 9,000,000 | |||||||||||||||
| Performance Shares-Cash Component | 28,470 | 28,470 | — | 28,470 | 249,015 | |||||||||||||||
| Cash Payout under Executive Performance Plan Awards | 1,100,000 | ˆ | 1,100,000 | ˆ | — | 1,100,000 | 1,100,000 | ˆ | ||||||||||||
Total Cash | 1,128,470 | 2,778,470 | — | 1,128,470 | 10,349,015 | |||||||||||||||
Equity | ||||||||||||||||||||
| Restricted Stock | 59,700 | 59,700 | 59,700 | 59,700 | 617,847 | |||||||||||||||
| Performance Shares | 28,470 | 28,470 | — | 28,470 | 249,015 | |||||||||||||||
| Stock Options | — | — | — | — | — | |||||||||||||||
Total Equity | 88,170 | 88,170 | 59,700 | 88,170 | 866,862 | |||||||||||||||
Retirement Benefits | ||||||||||||||||||||
| Salaried Pension Plan(4) | 19,781 | 19,781 | 19,781 | 19,781 | 19,781 | |||||||||||||||
| Supplementary Pension Plan | — | — | — | — | — | |||||||||||||||
| Excess Benefit Plan(4) | — | — | — | — | — | |||||||||||||||
| Retiree Medical | — | — | — | — | — | |||||||||||||||
Total Retirement Benefits | 19,781 | 19,781 | 19,781 | 19,781 | 19,781 | |||||||||||||||
Vested Deferred Compensation(5) | — | — | — | — | — | |||||||||||||||
Other Benefits | 53,615 | 97,155 | 53,615 | 53,615 | 108,519 | |||||||||||||||
Excise TaxGross-Up | — | — | — | — | 3,448,563 | |||||||||||||||
Total | $ | 1,290,036 | $ | 2,983,576 | $ | 133,096 | $ | 1,290,036 | $ | 14,792,740 | ||||||||||
| (5) | No additional amounts are payable upon any of the triggering events under our deferred compensation plans. For information on Mr. Kramer’s aggregate vested balance as of December 31, |
47
| Involuntary | ||||||||||||||||||||
| Termination | ||||||||||||||||||||
| Within Two | ||||||||||||||||||||
| Years of | ||||||||||||||||||||
| Termination | Change in | |||||||||||||||||||
| Resignation | Without | Termination For | Control | |||||||||||||||||
Benefits or Payments | (1) | Cause | Cause | Retirement | (2) | |||||||||||||||
| Annual Cash Incentive under Performance Recognition Plan | $ | — | * | $ | — | * | $ | — | $ | — | * | $ | — | * | ||||||
| Cash Severance | — | 1,290,000 | — | — | 6,340,000 | |||||||||||||||
| Performance Shares-Cash Component | 45,469 | 45,469 | — | 45,469 | 150,504 | |||||||||||||||
| Cash Payout under Executive Performance Plan Awards | 1,540,000 | ˆ | 1,540,000 | ˆ | — | 1,540,000 | 1,540,000 | ˆ | ||||||||||||
Total Cash | 1,585,469 | 2,875,469 | — | 1,585,469 | 8,030,504 | |||||||||||||||
Equity | ||||||||||||||||||||
| Restricted Stock | — | — | — | — | — | |||||||||||||||
| Performance Shares | 45,469 | 45,469 | — | 45,469 | 150,504 | |||||||||||||||
| Stock Options | — | — | — | — | — | |||||||||||||||
Total Equity | 45,469 | 45,469 | — | 45,469 | 150,504 | |||||||||||||||
Retirement Benefits | ||||||||||||||||||||
| Salaried Pension Plan(3) | 15,527 | 15,527 | 15,527 | 15,527 | 15,527 | |||||||||||||||
| Supplementary Pension Plan(3) | — | — | — | — | 114,077 | |||||||||||||||
| Excess Benefit Plan | — | — | — | — | — | |||||||||||||||
| Retiree Medical | — | — | — | — | — | |||||||||||||||
Total Retirement Benefits | 15,527 | 15,527 | 15,527 | 15,527 | 129,604 | |||||||||||||||
Vested Deferred Compensation | — | — | — | — | — | |||||||||||||||
Other Benefits | 48,231 | 85,651 | 48,231 | 48,231 | 93,439 | |||||||||||||||
Excise TaxGross-Up | — | — | — | — | 2,267,128 | |||||||||||||||
Total | $ | 1,694,696 | $ | 3,022,116 | $ | 63,758 | $ | 1,694,696 | $ | 10,671,179 | ||||||||||
Benefits or Payments | Resignation (1) | Termination Without Cause | Termination For Cause | Retirement (2) | Involuntary Termination Within Two Years of Change in Control (3) | |||||||||||||||
Annual Cash Incentive under Management Incentive Plan | $ | 714,386 | * | $ | 714,386 | * | $ | — | $ | 714,386 | * | $ | 714,386 | * | ||||||
Cash Severance | — | 1,516,886 | — | — | 4,347,047 | |||||||||||||||
Cash Payout under Executive Performance Plan Awards | 1,489,200 | * | 1,489,200 | * | — | 1,489,200 | * | 3,101,000 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Cash | 2,203,586 | 3,720,472 | — | 2,203,586 | 8,162,433 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Equity | ||||||||||||||||||||
Restricted Stock | — | — | — | — | 1,062,750 | |||||||||||||||
Performance Shares | 212,550 | 212,550 | — | 212,550 | 711,107 | |||||||||||||||
Stock Options | — | — | — | — | 484,441 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Equity | 212,550 | 212,550 | — | 212,550 | 2,258,298 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Retirement Benefits(4) | ||||||||||||||||||||
Salaried Pension Plan | — | — | — | — | — | |||||||||||||||
Supplementary Pension Plan | — | — | — | — | — | |||||||||||||||
Excess Benefit Plans | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Retirement Benefits | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Vested Deferred Compensation | — | — | — | — | — | |||||||||||||||
Other Benefits | 41,154 | 89,284 | 41,154 | 41,154 | 98,554 | |||||||||||||||
Excise Tax Gross-Up | — | — | — | — | 2,085,681 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 2,457,290 | $ | 4,022,305 | $ | 41,154 | $ | 2,457,290 | $ | 12,604,966 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| * | ||
| (1) | In the event of death or disability, an additional $2,110,357 would be | |
| (2) | Mr. Wells is not eligible for retirement. |
| (3) | The amounts to be paid under |
| The Pension Benefits Table (on page |
48
| Involuntary | ||||||||||||||||||||
| Termination | ||||||||||||||||||||
| Within Two | ||||||||||||||||||||
| Years of | ||||||||||||||||||||
| Termination | Change in | |||||||||||||||||||
| Resignation | Without | Termination For | Retirement | Control | ||||||||||||||||
Benefits or Payments | (1) | Cause | Cause | (2) | (3) | |||||||||||||||
| Annual Cash Incentive under Performance Recognition Plan | $ | — | * | $ | — | * | $ | — | $ | — | * | $ | — | * | ||||||
| Cash Severance | 1,100,604 | 3,974,679 | — | 1,100,604 | 7,060,000 | |||||||||||||||
| Performance Shares-Cash Component | 16,060 | 16,060 | — | 16,060 | 156,826 | |||||||||||||||
| Cash Payout under Executive Performance Plan Awards | 870,000 | ˆ | 870,000 | ˆ | — | 870,000 | 870,000 | ˆ | ||||||||||||
Total Cash | 1,986,664 | 4,860,739 | — | 1,986,664 | 8,086,826 | |||||||||||||||
Equity | ||||||||||||||||||||
| Restricted Stock | — | — | — | — | 357,215 | |||||||||||||||
| Performance Shares | 16,060 | 16,060 | — | 16,060 | 156,826 | |||||||||||||||
| Stock Options | — | — | — | — | — | |||||||||||||||
Total Equity | 16,060 | 16,060 | — | 16,060 | 514,041 | |||||||||||||||
Retirement Benefits | ||||||||||||||||||||
| Netherlands Pension Plan(4) | — | — | — | — | — | |||||||||||||||
| Supplementary Pension Plan(4) | — | — | — | — | — | |||||||||||||||
| Excess Benefit Plan | — | — | — | — | — | |||||||||||||||
| Retiree Medical | — | — | — | — | — | |||||||||||||||
Total Retirement Benefits | — | — | — | — | — | |||||||||||||||
Vested Deferred Compensation | — | — | — | — | — | |||||||||||||||
Other Benefits | 47,462 | 72,462 | 47,462 | 47,462 | 72,462 | |||||||||||||||
Excise TaxGross-Up | — | — | — | — | — | |||||||||||||||
Total | $ | 2,050,186 | $ | 4,949,261 | $ | 47,462 | $ | 2,050,186 | $ | 8,673,328 | ||||||||||
Benefits or Payments | Resignation (1) | Termination Without Cause | Termination For Cause | Retirement (2) | Involuntary Termination Within Two Years of Change in Control (3) | |||||||||||||||
Annual Cash Incentive under Management Incentive Plan | $ | 649,098 | * | $ | 649,098 | * | $ | — | $ | 649,098 | * | $ | 649,098 | * | ||||||
Cash Severance | 3,055,061 | 8,293,201 | — | 3,055,061 | 4,561,590 | |||||||||||||||
Cash Payout under Executive Performance Plan Awards | 2,642,550 | * | 2,642,550 | * | — | 2,642,550 | * | 4,360,950 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Cash | 6,346,709 | 11,584,849 | — | 6,346,709 | 9,571,638 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Equity | ||||||||||||||||||||
Restricted Stock | — | — | — | — | 1,486,681 | |||||||||||||||
Performance Shares | 222,512 | 222,512 | — | 222,512 | 757,677 | |||||||||||||||
Stock Options | — | — | — | — | 578,180 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Equity | 222,512 | 222,512 | — | 222,512 | 2,822,538 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Retirement Benefits(4) | ||||||||||||||||||||
Netherlands Pension Plan | — | — | — | — | — | |||||||||||||||
Supplementary Pension Plan | — | — | — | — | — | |||||||||||||||
Excess Benefit Plans | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Retirement Benefits | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Vested Deferred Compensation | — | — | — | — | — | |||||||||||||||
Other Benefits | 52,885 | 77,885 | 52,885 | 52,885 | 77,885 | |||||||||||||||
Excise Tax Gross-Up | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 6,622,105 | $ | 11,885,245 | $ | 52,885 | $ | 6,622,105 | $ | 12,472,060 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| * | ||
| (1) | In the event of death or disability, an additional | |
| (2) | Mr. de Bok is not eligible for retirement. | |
| (3) | The amounts to be paid under | |
| (4) | The Pension Benefits Table (on page |
Joseph B. Ruocco (Senior Vice President, Human Resources)
Benefits or Payments | Resignation (1) | Termination Without Cause | Termination For Cause | Retirement (2) | Involuntary Termination Within Two Years of Change in Control (3) | |||||||||||||||
Annual Cash Incentive under Management Incentive Plan | $ | 521,042 | * | $ | 521,042 | * | — | $ | 521,042 | * | $ | 521,042 | * | |||||||
Cash Severance | — | 1,256,042 | — | — | 3,131,389 | |||||||||||||||
Cash Payout under Executive Performance Plan Awards | 1,171,500 | 1,171,500 | — | 1,171,500 | 2,261,500 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Cash | 1,692,542 | 2,948,584 | — | 1,692,542 | 5,913,931 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Equity | ||||||||||||||||||||
Restricted Stock | — | — | — | — | 566,800 | |||||||||||||||
Performance Shares | 182,495 | 182,495 | — | 182,495 | 544,043 | |||||||||||||||
Stock Options | — | — | — | — | 500,126 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Equity | 182,495 | 182,495 | — | 182,495 | 1,610,969 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Retirement Benefits(4) | ||||||||||||||||||||
Salaried Pension Plan | — | — | — | — | — | |||||||||||||||
Supplementary Pension Plan | — | — | — | — | — | |||||||||||||||
Excess Benefit Plans | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Retirement Benefits | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Vested Deferred Compensation | — | — | — | — | — | |||||||||||||||
Other Benefits | 37,692 | 83,518 | 37,692 | 37,692 | 91,684 | |||||||||||||||
Excise Tax Gross-Up | — | — | — | — | 1,377,920 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 1,912,730 | $ | 3,214,597 | $ | 37,692 | $ | 1,912,730 | $ | 8,994,504 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| * | This amount is included in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column. |
| (1) | In the event of death or disability, an additional $1,451,548 would be paid under “Cash Payout under Executive Performance Plan Awards” and “Equity— Performance Shares,” if at all, only upon achievement of the applicable targets following the completion of the applicable performance periods, and $15,744 would be paid under “Equity — Restricted Stock” and $500,126 would be paid under “Equity — Stock Options.” |
| (2) | Mr. Ruocco is not eligible for retirement. |
| (3) | The amounts to be paid under “Equity— Restricted Stock,” “Equity— Performance Shares” and “Equity—Stock Options” represent grants under our 2008 Performance Plan and are payable following an involuntary termination within two years of a change in control, similar to our Continuity Plan. |
| (4) | The Pension Benefits Table (on page 48) shows the present value of the accumulated benefit under the Supplementary Plan, calculated based on the assumptions set forth following that table. Mr. Ruocco is not yet vested in a Supplementary Plan benefit and would instead receive a benefit from the defined contribution Excess Benefit Plan. The Supplementary Plan benefit value of $565,907 (as shown in the Pension Benefits Table) would be reduced to |
David L. Bialosky (Senior Vice President, General Counsel and Secretary)
Benefits or Payments | Resignation (1) | Termination Without Cause | Termination For Cause | Retirement (2) | Involuntary Termination Within Two Years of Change in Control (3) | |||||||||||||||
Annual Cash Incentive under Management Incentive Plan | $ | 585,000 | * | $ | 585,000 | * | — | $ | 585,000 | * | $ | 585,000 | * | |||||||
Cash Severance | — | 1,365,000 | — | — | 3,562,600 | |||||||||||||||
Cash Payout under Executive Performance Plan Awards | 1,500,000 | * | 1,500,000 | * | — | 1,500,000 | * | 2,806,950 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Cash | 2,085,000 | 3,450,000 | — | 2,085,000 | 6,954,550 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Equity | ||||||||||||||||||||
Restricted Stock | — | — | — | — | 1,075,772 | |||||||||||||||
Performance Shares | 75,625 | 75,625 | — | 75,625 | 474,093 | |||||||||||||||
Stock Options | — | — | — | — | 74,304 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Equity | 75,625 | 75,625 | — | 75,625 | 1,624,169 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Retirement Benefits(4) | ||||||||||||||||||||
Salaried Pension Plan | — | — | — | — | — | |||||||||||||||
Supplementary Pension Plan | — | — | — | — | — | |||||||||||||||
Excess Benefit Plans | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Retirement Benefits | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Vested Deferred Compensation | — | — | — | — | — | |||||||||||||||
Other Benefits | 40,000 | 85,826 | 40,000 | 40,000 | 94,064 | |||||||||||||||
Excise Tax Gross-Up | — | — | — | — | 1,810,325 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 2,200,625 | $ | 3,611,451 | $ | 40,000 | $ | 2,200,625 | $ | 10,483,108 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| * | These amounts are included in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column. |
49
| (1) | In the event of death or disability, an additional $1,705,410 would be paid under “Cash Payout under Executive Performance Plan Awards” and “Equity — Performance Shares,” if at all, only upon achievement of the applicable targets following the completion of the applicable performance periods, $1,075,772 would be paid under “Equity— Restricted Stock” and $74,304 would be paid under “Equity — Stock Options.” |
| (2) | Mr. Bialosky is not eligible for retirement. |
| (3) | The amounts to be paid under “Equity— Restricted Stock,” “Equity— Performance Shares” and “Equity—Stock Options” represent grants under our 2008 Performance Plan and are payable following an involuntary termination within two years of a change in control, similar to our Continuity Plan. |
| (4) | The Pension Benefits Table (on page 48) shows the present value of the accumulated benefit under the Supplementary Plan, calculated based on the assumptions set forth following that table. Mr. Bialosky is not yet vested in a Supplementary Plan benefit and would instead receive a benefit from the defined contribution Excess Benefit Plan. The Supplementary Plan benefit value of $439,452 (as shown in the Pension Benefits Table) would be reduced to the defined contribution Excess Benefit Plan benefit value of $76,283 if one of the triggering events occurred as of December 31, 2011. He is not eligible to participate in the Salaried Plan or the defined benefit Excess Benefit Plan. |
The table below sets forth information regarding the compensation paid to our non-employee directors during 2008.
| Fees Earned or Paid | ||||||||||||||||
| in Cash | Stock Awards | All Other | Total | |||||||||||||
Name | ($) | ($)(1) | Compensation ($)(2) | ($) | ||||||||||||
| Boland | $ | 150,000 | $ | (544,683 | ) | $ | 34,186 | $ | (360,497 | ) | ||||||
| Breen(3) | 20,398 | (1,247,261 | ) | 2,043 | (1,224,820 | ) | ||||||||||
| Firestone | 75,000 | 22,809 | — | 97,809 | ||||||||||||
| Hudson(3) | 20,398 | (993,841 | ) | — | (973,443 | ) | ||||||||||
| McCollough | 82,280 | (15,315 | ) | — | 66,965 | |||||||||||
| Minter | 58,288 | (5) | (849,539 | ) | — | (791,251 | ) | |||||||||
| Morrison | 82,280 | (230,849 | ) | 3,826 | (144,743 | ) | ||||||||||
| O’Neal | 77,720 | (365,376 | ) | 2,104 | (285,552 | ) | ||||||||||
| Peterson | 75,000 | (322,825 | ) | — | (247,825 | ) | ||||||||||
| Streeter(4) | 17,527 | — | — | 17,527 | ||||||||||||
| Sullivan | 85,000 | (75,507 | ) | — | 9,493 | |||||||||||
| Weidemeyer | 85,000 | (260,239 | ) | 2,252 | (172,987 | ) | ||||||||||
| Wessel | 75,000 | (147,181 | ) | 1,483 | (70,698 | ) | ||||||||||
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | ||||||||||||
Boland | $ | 145,261 | $ | 110,000 | $ | 35,622 | $ | 290,883 | ||||||||
Conaty(3) | 45,734 | 18,234 | — | 63,968 | ||||||||||||
Firestone | 117,225 | 110,000 | — | 227,225 | ||||||||||||
Geissler(4) | 100,678 | 66,917 | — | 167,595 | ||||||||||||
Hellman | 136,304 | 108,804 | — | 245,108 | ||||||||||||
McCollough | 159,739 | 110,000 | — | 269,739 | ||||||||||||
Morrison(5) | 33,956 | 58,626 | 1,198 | 93,780 | ||||||||||||
O’Neal | 110,000 | 110,000 | — | 220,000 | ||||||||||||
Peterson | 117,225 | 110,000 | 34,773 | 261,998 | ||||||||||||
Streeter | 110,000 | 110,000 | 1,191 | 221,191 | ||||||||||||
Sullivan | 115,549 | 110,000 | — | 225,549 | ||||||||||||
Weidemeyer | 127,226 | 110,000 | 34,179 | 271,405 | ||||||||||||
Wessel | 110,000 | 110,000 | — | 220,000 | ||||||||||||
| (1) | Represents | |
As of December 31, 2011, the following directors held the total number of restricted stock units and deferred share equivalent units indicated next to his or her name:
Name | Number of Restricted Stock Units | Number of Deferred Share Equivalent Units | Total Share Equivalents | |||||||||
Boland | 27,409 | 34,262 | 61,671 | |||||||||
Conaty | 1,946 | — | 1,946 | |||||||||
Firestone | 27,409 | 3,821 | 31,230 | |||||||||
Geissler | 5,308 | — | 5,308 | |||||||||
Hellman | 8,481 | — | 8,481 | |||||||||
McCollough | 27,409 | 6,631 | 34,040 | |||||||||
Morrison | — | 16,266 | 16,266 | |||||||||
O’Neal | 27,409 | 22,279 | 49,688 | |||||||||
Peterson | 27,409 | 20,377 | 47,786 | |||||||||
Streeter | 27,171 | — | 27,171 | |||||||||
Sullivan | 27,409 | 18,857 | 46,266 | |||||||||
Weidemeyer | 27,409 | 17,579 | 44,988 | |||||||||
Wessel | 27,409 | 12,525 | 39,934 | |||||||||
| (2) | Represents | |
| (3) |
50
| (4) | Mr. Geissler was elected to the Board of Directors on February 21, 2011. |
| (5) |
Goodyear directors who are not officers or employees of Goodyear or any of its subsidiaries receive, as compensation for their services as a director, a combination of cash retainer and stock awards pursuant to the Outside Directors’ Equity Participation Plan (the “Directors’ Equity Plan”).
For the year ended December 31, 2008,2011, outside directors received cash compensation in the amount of $18,750$27,500 per calendar quarter. Beginning January 1, 2012, the quarterly cash retainer will increase to $28,750. The Lead Director received an additional $13,750 per calendar quarter. The chairpersonchairpersons of the Audit Committeeand Compensation Committees received an additional $5,000 per calendar quarter, and the chairpersons of all other committees received an additional $2,500 per calendar quarter. Any director who attended more than 24 board and committee meetings received $1,700 for each additional meeting attended ($1,000 if the meeting was attended by telephone). In addition, the Board may form special committees from time to time and determine the compensation of the chairperson of such committees. Travel and lodging expenses incurred in attending board and committee meetings are paid by Goodyear. Mr. Keegan doesKramer did not receive additional compensation for his service as a director.
Outside directors also participate in the Directors’ Equity Plan, which is intended to further align the interests of directors with the interests of shareholders by making part of each director’s compensation dependent on the value and appreciation over time of our Common Stock. For the year ended December 31, 2008,2011, on the first business day of each calendar quarter, each eligible director who wasreceived a directorgrant of restricted stock units with a grant date fair value of $27,500 for the entire precedingportion of the previous calendar quarter had $23,750 accruedduring which he or she served as a director. Beginning January 1, 2012, the quarterly restricted stock unit grant will have a grant date fair value of $28,750. These restricted stock units will be paid to his or her plan account. Amounts accrued are converted into units equivalentdirectors in value to shares of Common Stock aton the fair market valuefifth business day of the Common Stock onquarter following the accrual date. Under this plan,quarter during which the units receive dividend equivalents (if dividends are paid) atdirector leaves the same rate as our Common Stock, which dividends will also be converted into units in the same manner.Board. The Directors’ Equity Plan also permits each participant annually to elect to have 25%, 50%, 75% or 100% of his or her cash retainer and meeting fees deferred and converted into share equivalent units based on the closing market price of our Common Stock on the accrual date. Under this plan, the restricted stock units and share equivalent units receive dividend equivalents on substantially(if dividends are paid) at the same basis. Therate as our Common Stock, which dividends will be converted into restricted stock units or share equivalent units, as the case may be, based on the closing market price of our Common Stock on the dividend payment date. Share equivalent units accrued prior to October 1, 2010 will be converted to a dollar value at the closing market price of our Common Stock on the later of the first business day of the seventh month following the month during which the participant ceasesceased to be a director and the fifth business day of the year next following the year during which the participant ceased to be a director. Such amounts earned and vested prior to January 1, 2005, will be paid in ten annual installments or, at the discretion of the Compensation Committee, in a lump sum or in fewer than ten installments beginning on the fifth business day following the conversion from share equivalent units to a dollar value. Amounts earned and vested after December 31, 2004, will be paid out in a lump sum on the fifth business day following the conversion from units to dollar value. Amounts in Directors’ Equity Plan accounts that are to be paid in installments will earn interest from the date converted to a dollar value until paid at a rate one percent higher than the prevailing yield on United States Treasury securities having a ten-year maturity on the conversion date.
The Compensation Committee recommended, and the Board of Directors approved revised stockholding guidelines for directors.directors effective May 1, 2012. These guidelines specify that a director must accumulate and hold a number of shares equal in value to five times the annual cash retainer within five years of the later of the effective date of the program or the date of election as a director.retainer. Shares owned directly and restricted stock units and share equivalent units accrued to a Directors’ Equity Plan account are counted as ownership in assessing compliance with the guidelines. The earlieststock price to be used in assessing compliance datewith the guidelines as of May 1st of each year will be the average closing stock price for the prior 60-day period. As a result of the adoption of the revised stockholding guidelines, the stockholding requirement for each of our directors is February 27, 2012.will increase significantly. All of our directors, other than Mr. Firestone, Mr. McColloughMessrs. Conaty, Geissler and Ms. StreeterHellman (who have all recently joined Goodyear since the adoptionBoard of the guidelines)Directors), have met the requiredtheir prior stockholding guidelines well in advance of the required compliance date.
Goodyear also sponsors a Directors’ Charitable Award Program funded by life insurance policies owned by Goodyear on the lives of pairs of directors. Goodyear donates $1 million per director to one or more qualifying
charitable organizations recommended by each director after both of the paired directors are deceased. Assuming
51
Risks Related to Compensation Policies and Practices
We have reviewed our compensation policies and practices for our employees and have concluded that the risks arising from those policies and practices are not reasonably likely to have a material adverse effect on us.
ADVISORY VOTE REGARDING THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
(Item 2 on your Proxy)
We are seeking your vote to approve, on an advisory (or non-binding) basis, the compensation of our named executive officers as disclosed in this Proxy Statement.
As discussed in our Compensation Discussion and Analysis starting on page 18, our executive compensation program is designed to:
motivate executives and other key personnel to attain appropriate short-term and long-term performance goals and manage the Company for sustained long-term growth,
align executives’ interests with those of our shareholders, and
attract and retain qualified and experienced executive officers and other key personnel.
We believe that the Company’s executive compensation programs have been effective at achieving these key objectives.
We made significant progress during 2011 on important financial and operational goals that will enable us to emerge stronger in the future. In 2011, we:
Achieved record net sales of $22.8 billion.
Achieved record total segment operating income of nearly $1.4 billion.
Achieved nearly $2.4 billion in price and product mix improvements which allowed us to more than offset the impact on segment operating income of unprecedented raw material cost increases of nearly $2.0 billion (exclusive of approximately $177 million in cost savings). In 2011, raw material cost increased approximately 30% compared to 2010 and was nearly 2.5 times our previous largest annual increase.
Realized approximately $281 million of cost savings under our cost savings plan.
Recovered approximately $195 million of under-absorbed fixed overhead costs.
Made capital investments of over $1.0 billion in support of future growth opportunities, including significant investments in emerging markets in China and Chile.
Launched 46 new products, thereby increasing the percentage of our sales coming from recently launched products.
Our Common Stock increased in value by nearly 20% in 2011, outpacing the S&P 500 Index which was flat year-over-year.
We believe that our executive compensation program appropriately rewards our named executive officers and other key personnel for the significant financial and operational achievements noted above and for guiding the Company through the uncertain economic conditions that we continue to experience in many parts of the world.
The advisory resolution set forth below, commonly known as a “say-on-pay” proposal, gives you the opportunity to express your views on our executive compensation program for our named executive officers. The “say-on-pay”
proposal is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the executive compensation policies, practices and plans described in this Proxy Statement. The resolution does not address the matters disclosed under the headings “Director Compensation” or “Risks Related to Compensation Policies and Practices,” nor is it intended to indicate your approval of future “golden parachute” payments. We will seek shareholder approval of any “golden parachute” payments at the time of any transaction triggering such payments to the extent required by applicable law.
We ask you to vote “FOR” the following resolution which will be presented by the Board of Directors at the Annual Meeting:
“RESOLVED, that the shareholders of The Goodyear Tire & Rubber Company approve, on an advisory basis, the compensation of the named executive officers as disclosed in the Company’s Proxy Statement for the 2012 Annual Meeting of Shareholders.”
Although this proposal is an advisory vote that will not be binding on the Compensation Committee or the Board of Directors, the Compensation Committee will consider the results of this shareholder advisory vote and the changes, if any, to our executive compensation policies, practices and plans that may be warranted as a result of this vote. The Board of Directors has determined, consistent with the shareholders’ vote on the matter in 2011, to hold an advisory vote regarding the compensation of our named executive officers every year until the next vote on the frequency of such advisory votes, which is currently expected to occur at the 2017 Annual Meeting of Shareholders.
Your Board of Directors unanimously recommends that shareholders vote FOR the advisory resolution regarding the compensation of our named executive officers (Proxy Item 2).
During 2008,2011, Goodyear and its subsidiaries, in the ordinary course of their business and at competitive prices and terms, made sales to or purchases from, or engaged in other transactions with, corporations of which certain Goodyear non-management directors are executive officersand/or directors. Goodyear does not consider the transactions to be material to its business and believes such transactions were not material in relation to the business of such other corporations or the interests of the directors concerned.
On an annual basis, each director and executive officer is obligated to complete a Director and Officer Questionnaire that requires disclosure of any transactions with the Company in which the director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest. Under the “Board of Directors and Executive Officers Conflict of Interest Policy,” directors and executive officers are expected to promptly disclose potential conflicts of interest to Goodyear’s General Counsel, who may consult with the Chairman of the Governance Committee on matters of interpretation of the policy. Any waivers of the policy are required to be approved by the Board of Directors, and any such waivers will be promptly disclosed to shareholders.
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and officers to file reports of holdings and transactions in our equity securities with the Securities and Exchange Commission. As a practical matter, we assist our directors and officers by completing and filing these reports electronically on their behalf. We believe that our directors and officers timely complied with all such filing requirements during SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE2011, except that a Form 4 reporting the purchase of 1,280 shares of Common Stock in a broker-directed account beneficially owned by Arthur de Bok was not timely filed.2008.
The Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) as Goodyear’s independent registered public accounting firm for the fiscal year ending December 31, Fees Incurred by Goodyear for PwC The following table presents fees and expenses for services rendered by PwC for fiscal PRINCIPAL ACCOUNTANT FEES AND SERVICES2009.2012. Representatives of PwC are expected to be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.20082011 and 2007. (In thousands) 2008 2007 Audit Fees and Expenses(1) $ 12,916 $ 15,086 Audit-Related Fees and Expenses(2) 384 2,305 Tax Fees and Expenses(3) 1,830 1,749 All Other Fees and Expenses(4) 328 195 Total $ 15,458 $ 19,335
(In thousands) | 2011 | 2010 | ||||||
Audit Fees and Expenses(1) | $ | 13,126 | $ | 14,641 | ||||
Audit-Related Fees and Expenses(2) | 1,167 | 1,112 | ||||||
Tax Fees and Expenses(3) | 1,792 | 1,954 | ||||||
All Other Fees and Expenses(4) | 1,038 | 1,022 | ||||||
|
|
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| |||||
Total | $ | 17,123 | $ | 18,729 | ||||
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|
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| (1) | Audit fees and expenses represent fees and expenses for professional services provided in connection with the audit of our financial statements and the effectiveness of internal control over financial reporting, the review of our quarterly financial statements and audit services provided in connection with other statutory or regulatory filings. | |
| (2) | Audit-related fees and expenses consist primarily of accounting consultations and services related to business acquisitions and divestitures. | |
| (3) | Tax fees and expenses consist primarily of assistance in the preparation of international tax returns and consultations on various tax matters worldwide. | |
| (4) | All other fees and expenses principally include fees related to |
52
Management has the primary responsibility for the integrity of Goodyear’s financial information and the financial reporting process, including the system of internal control over financial reporting. PricewaterhouseCoopers LLP (“PwC”), Goodyear’s independent registered public accounting firm, is responsible for conducting independent audits of Goodyear’s financial statements and the effectiveness of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”) and expressing an opinion on the financial statements and the effectiveness of internal control over financial reporting based upon those audits. The Audit Committee is responsible for overseeing the conduct of these activities by management and PwC. As part of its oversight responsibility, the Audit Committee has reviewed and discussed the audited financial statements, the adequacy of financial controls and the effectiveness of Goodyear’s internal control over financial reporting with management and PwC. The Audit Committee also has discussed with PwC the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended, as adopted by the PCAOB in Rule 3200T. The Audit Committee has received the written disclosures and the letter from PwC required by applicable requirements of the PCAOB regarding PwC’s communications with the Audit Committee concerning independence, and has discussed with PwC their independence from Goodyear. Based on the review and discussions with management and PwC referred to above, the Audit Committee has recommended to the Board of Directors that Goodyear include the audited consolidated financial statements of Goodyear and subsidiaries for the year ended December 31, The Audit Committee Peter S. Hellman, Chairman James C. Boland James A. FirestoneREPORT OF THE AUDIT COMMITTEE20082011 in Goodyear’s Annual Report onForm 10-K for the year ended December 31, 20082011 and in its 20082011 Annual Report to Shareholders. ChairmanW. Alan McColloughShirley D. Peterson53
Stephanie A. Streeter
MISCELLANEOUS
(Item 3 on your Proxy)
The Audit Committee of the Board has appointed PwC as the independent registered public accounting firm to audit Goodyear’s consolidated financial statements as of and for the fiscal year ending December 31, 2012 and its internal control over financial reporting as of December 31, 2012. During fiscal year 2011, PwC served as Goodyear’s independent registered public accounting firm and also provided audit-related, tax and other services. See “Principal Accountant Fees and Services” above.
The following resolution will be presented by the Board of Directors at the Annual Meeting:
“RESOLVED, that the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company for the year ending December 31, 2012 is hereby ratified.”
In the event the appointment of PwC is not ratified by the shareholders, the adverse vote will be deemed to be an indication to the Audit Committee that it should consider selecting another independent registered public accounting firm for 2013.
Your Board of Directors unanimously recommends that shareholders vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2012 (Proxy Item 3).
Your Board of Directors does not intend to bring any other business before the Annual Meeting and is not aware of any other business intended to be presented by any other person.
After the conclusion of the matters described above, shareholders will have an opportunity to ask appropriate questions regarding Goodyear and its operations.
If any other matters properly come before the Annual Meeting, your proxy will be voted by Messrs. Bialosky, Wells or Bell in such manner as they, in their discretion, deem appropriate.
If a shareholder desires to have a proposal included in the proxy materials of the Board of Directors for the 2010 annual meeting2013 Annual Meeting of shareholders,Shareholders, such proposal shall conform to the applicable proxy rules of the Securities and
Exchange Commission concerning the submission and content of proposals, including Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and must be received by Goodyear prior to the close of business on November 9, 2009.12, 2012. In addition, if a shareholder intends to present a proposal at Goodyear’s 2010 annual meeting without theor other business (not including a proposal submitted for inclusion of such proposal in Goodyear’sour proxy materials pursuant to Rule 14a-8) or to nominate a candidate for election as a director at the 2013 Annual Meeting of Shareholders, the shareholder’s notice must be delivered to, or mailed and writtenreceived by, the Secretary at the principal executive offices of the Company not earlier than December 18, 2012 and not later than the close of business on January 17, 2013. If notice of sucha proposal or a director nomination is not received by Goodyear onthe Company in accordance with the dates specified in the Code of Regulations or before January 23, 2010,pursuant to Rule 14a-8, as the case may be, then the proposal or director nomination will be deemed untimely and we will have the right to exercise discretionary voting authority and vote proxies solicited by the Board of Directors for the 2010 annual meeting will confer discretionary authorityreturned to vote onus with respect to such proposal if presented at the meeting.or director nomination. Shareholder proposals or director nominations should be sent to the executive offices of Goodyear, 1144 East Market Street, Akron, Ohio44316-0001, Attention: Office of the Secretary.
For a proposal or director nomination to be properly presented at an annual meeting of shareholders, a shareholder must comply with the deadlines described in the preceding paragraph, as well as all of the other requirements of the Code of Regulations. Goodyear reserves the right to reject, rule out of order, or take other appropriate action with respect to any proposal or director nomination that does not comply with these and other applicable requirements.
A separate “Confidential Voting Instructions” card is being sent to each employee or former employee participating in the Goodyear Common Stock fund of certain employee savings plans. Shares of Common Stock held in the trust for these plans will be voted by the trustee as instructed by the plan Savings Plan Sharesparticipants.participants who participate in the Goodyear Common Stock fund. Shares held in the trust for which voting instructions are not received will be voted by the trustee in the same proportion as it votes shares for which voting instructions were received from participants in the Goodyear Common Stock fund of the applicable savings plan.
You may vote your shares using the internet by accessing the following web site: http://www.proxyvote.com or by making a toll-free telephone call within the United States of America or Canada using a touch-tone telephone to the toll-free number provided on your proxy card, or if you hold your shares in “street name,” on the voting instruction card provided by your broker or nominee.Internet and Telephone Voting
Goodyear has adopted a procedure called “householding,” which has been approved by the Securities and Exchange Commission. Under this procedure, Goodyear is delivering only one copy of the Annual Report and Proxy Statement to multiple shareholders who share the same address and have the same last name, unless Goodyear has received contrary instructions from an affected shareholder. This procedure reduces Goodyear’s printing costs, mailing costs and fees. Shareholders who participate in householding will continue to receive separate proxy cards. Goodyear will deliver promptly upon written or oral request a separate copy of the Annual Report and the Proxy Statement to any shareholder at a shared address to which a single copy of either of those documents was delivered. To receive a separate copy of the Annual Report or Proxy Statement, you may write or call Goodyear’s Investor Relations Department at The Goodyear Tire & Rubber Company, 1144 East Market Street, Akron, Ohio44316-0001, Attention: Investor Relations, telephone(330) 796-3751. You may also access Goodyear’s Annual Report and Proxy Statement on the Investor Relations section of Goodyear’s website at www.goodyear.com or at www.proxyvote.com. If you are a holder of record and would like to revoke your householding consent and receive a separate copy of the Annual Report or Proxy Statement in the future, please contact Broadridge, either by calling toll free at(800) 542-1061 or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. You will be removed from the householding program within 30 days of receipt of the revocation of your consent. Any shareholders of record who share the same address and currently receive multiple copies of Goodyear’s Annual Report and Proxy Statement who wish to receive only one copy of these materials per household in the future Shareholders Sharing The Same Addresspleaseshould contact Goodyear’s Investor Relations Department at the address or telephone number listed above to participate in the householding program.54
GOODYEAR WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF GOODYEAR’S ANNUAL REPORT ONFORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, Form 10-K2008,2011, INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS, SCHEDULES AND LIST OF EXHIBITS, AND ANY PARTICULAR EXHIBIT SPECIFICALLY REQUESTED. REQUESTS SHOULD BE SENT TO: THE GOODYEAR TIRE & RUBBER COMPANY, 1144 EAST MARKET STREET, AKRON, OHIO44316-0001, ATTN: INVESTOR RELATIONS. THE ANNUAL REPORT ONFORM 10-K IS ALSO AVAILABLE AT WWW.GOODYEAR.COM.
The costs of soliciting proxies will be borne by Goodyear. Goodyear has retained D.F. King & Co., Inc., 48 Wall Street, 22nd Floor, New York, New York 10005, to assist in distributing proxy materials and soliciting proxies for an estimated fee of $11,500, plus reimbursement of reasonable out-of-pocket expenses. D.F. King & Co. may solicit proxies from shareholders by mail, telephone or the internet. In addition, officers or other employees of Goodyear may, without additional compensation therefor, solicit proxies in person or by telephone or the internet. March Costs of Solicitation12, 20129, 2009
55
| By Order of the Board of Directors |
|
| David L. Bialosky, Secretary |
C/O COMPUTERSHARE TRUST COMPANY, N.A. P.O. BOX 43069 PROVIDENCE, RI 02940-3069 | VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on April 16, 2012. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | |
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS If you would like to reduce the costs incurred by The Goodyear Tire & Rubber Company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access shareholder communications electronically in future years. | ||
VOTE BY TELEPHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on April 16, 2012. Have your proxy card in hand when you call and then follow the instructions. | ||
VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to The Goodyear Tire & Rubber Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. If you vote via the Internet or by phone, please do not mail your card. Your vote is important. Please vote immediately. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | |||||||
| M42876-P20443 KEEP THIS PORTION FOR YOUR RECORDS | |||||||
| DETACH AND RETURN THIS PORTION ONLY | |||||||
| THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | |||||||
THE GOODYEAR TIRE & RUBBER COMPANY | ||||||||||||||||||||||||||||||
The Board of Directors recommends that you vote FOR the election of all Nominees. | ||||||||||||||||||||||||||||||
ITEM 1. Election of Directors NOMINEES: | For | Against | Abstain | |||||||||||||||||||||||||||
1a) William J. Conaty 1b) James A. Firestone 1c) Werner Geissler 1d) Peter S. Hellman | ¨ ¨ ¨ ¨ | ¨ ¨ ¨ ¨ | ¨ ¨ ¨ ¨ | 1i) Thomas H. Weidemeyer 1j) Michael R. Wessel The Board of Directors recommends that you vote FOR the following proposals. | For ¨ ¨ | Against ¨ ¨ | Abstain ¨ ¨ | |||||||||||||||||||||||
1e) Richard J. Kramer 1f) W. Alan McCollough 1g) Shirley D. Peterson | ¨ ¨ ¨ | ¨ ¨ ¨ | ¨ ¨ ¨ | ITEM 2. Advisory vote on executive compensation. ITEM 3. Ratification of appointment of PricewaterhouseCoopers LLP as Independent Registered Public Accounting Firm. | ¨ ¨ | ¨ ¨ | ¨ ¨ | |||||||||||||||||||||||
1h) Stephanie A. Streeter | ¨ | ¨ | ¨ | |||||||||||||||||||||||||||
| Please indicate if you plan to attend this meeting. | ¨ Yes | ¨ No | ||||||||||||||||||||||||||||
Please sign name exactly as it appears above. Each joint owner should sign. Please indicate title if you are signing as executor, administrator, trustee, custodian, guardian or corporate officer. The undersigned hereby acknowledges receipt of the Notice of 2012 Annual Meeting of Shareholders and Proxy Statement. | ||||||||||||||||||||||||||||||
| Signature (Joint Owners) | ||||||||||||||||||||||||||||||
| Date | ||||||||||||||||||||||||||||||
Vote on ProposalsANNUAL MEETING OF SHAREHOLDERS
THE GOODYEAR TIRE & RUBBER COMPANY
APRIL 17, 2012
9:00A.M.
OFFICES OF THE COMPANY
GOODYEAR THEATER
1201 EAST MARKET STREET
AKRON, OHIO
PLEASE VOTE — YOUR VOTE IS IMPORTANT
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The 2012 Notice and Proxy Statement and 2011 Annual Report are available at www.proxyvote.com.
M42877-P20443
 | ||||||||
| THE GOODYEAR TIRE & RUBBER COMPANY | ||||||||
PROXY FOR 2012 ANNUAL MEETING OF SHAREHOLDERS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS | ||||||||
The undersigned, a holder (or designated proxy) of If you sign and return this card without marking, this proxy card will be treated as being FOR the election of Directors (with discretionary authority to cumulate votes), and FOR Items 2 and 3. | ||||||||
If you plan to attend the 2012 ANNUAL MEETING, please mark the box indicated on the reverse side. THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE MARK, DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. | ||||||||
C/O COMPUTERSHARE TRUST COMPANY, N.A. P.O. BOX 43069 PROVIDENCE, RI 02940-3069 | VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on April 12, 2012. Have your voting instruction card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | |
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS If you would like to reduce the costs incurred by The Goodyear Tire & Rubber Company in mailing proxy materials, you can consent to receiving all future proxy statements, voting instruction cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access shareholder communications electronically in future years. | ||
VOTE BY TELEPHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on April 12, 2012. Have your voting instruction card in hand when you call and then follow the instructions. | ||
VOTE BY MAIL Mark, sign and date your voting instruction card and return it in the postage-paid envelope we have provided or return it to The Goodyear Tire & Rubber Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. If you vote via the Internet or by phone, please do not mail your card. Your vote is important. Please vote immediately. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | |||||||
| M42878-P20443 KEEP THIS PORTION FOR YOUR RECORDS | |||||||
| DETACH AND RETURN THIS PORTION ONLY | |||||||
| THIS VOTING INSTRUCTION CARD IS VALID ONLY WHEN SIGNED AND DATED. | |||||||
THE GOODYEAR TIRE & RUBBER COMPANY | ||||||||||||||||||||||||||||||
The Board of Directors recommends that you vote FOR the election of all Nominees. | ||||||||||||||||||||||||||||||
ITEM 1. Election of Directors NOMINEES: | For | Against | Abstain | |||||||||||||||||||||||||||
1a) William J. Conaty 1b) James A. Firestone 1c) Werner Geissler 1d) Peter S. Hellman | ¨ ¨ ¨ ¨ | ¨ ¨ ¨ ¨ | ¨ ¨ ¨ ¨ | 1i) Thomas H. Weidemeyer 1j) Michael R. Wessel The Board of Directors recommends that you vote FOR the following proposals. | For ¨ ¨ | Against ¨ ¨ | Abstain ¨ ¨ | |||||||||||||||||||||||
1e) Richard J. Kramer 1f) W. Alan McCollough 1g) Shirley D. Peterson | ¨ ¨ ¨ | ¨ ¨ ¨ | ¨ ¨ ¨ | ITEM 2. Advisory vote on executive compensation. ITEM 3. Ratification of appointment of PricewaterhouseCoopers LLP as Independent Registered Public Accounting Firm. | ¨ ¨ | ¨ ¨ | ¨ ¨ | |||||||||||||||||||||||
1h) Stephanie A. Streeter | ¨ | ¨ | ¨ | |||||||||||||||||||||||||||
| Please indicate if you plan to attend this meeting. | ¨ Yes | ¨ No | ||||||||||||||||||||||||||||
Authorization: I acknowledge receipt of the Notice of 2012 Annual Meeting of Shareholders and Proxy Statement. I hereby instruct the trustee to vote by proxy, in the form solicited by the Board of Directors, the number of full shares in this Plan account(s) as specified above, or, if not specified above, as recommended by the Board of Directors. | ||||||||||||||||||||||||||||||
| Signature (Joint Owners) | ||||||||||||||||||||||||||||||
| Date | ||||||||||||||||||||||||||||||
Vote on ProposalsANNUAL MEETING OF SHAREHOLDERS
THE GOODYEAR TIRE & RUBBER COMPANY
APRIL 17, 2012
9:00A.M.
OFFICES OF THE COMPANY
GOODYEAR THEATER
1201 EAST MARKET STREET
AKRON, OHIO
PLEASE VOTE — YOUR VOTE IS IMPORTANT
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The 2012 Notice and Proxy Statement and 2011 Annual Report are available at www.proxyvote.com.
M42879-P20443
| ||||||||
CONFIDENTIAL VOTING INSTRUCTIONS 2012 ANNUAL MEETING OF SHAREHOLDERS FOR EMPLOYEE SAVINGS AND OTHER PLANS Solicited on Behalf of April 17, 2012 | ||||||||
The proxy soliciting materials furnished by the Board of Directors of The Goodyear Tire & Rubber Company in connection with the Annual Meeting of Shareholders to Under each employee savings or similar plan in which you participate, you have the As a participant in and a named fiduciary (i.e., the responsible party identified in the voting section of each Plan Document) under an employee savings plan or other similar plan, you have the right to direct The Northern Trust Company, as trustee, how to vote the shares of Common Stock of The Goodyear Tire & Rubber Company allocated to this account under such plan as well as a portion of any shares for which no timely voting instructions are received from other participants. Each savings plan provides that the trustee will vote the shares for which voting instructions have not been received in the same proportion as it votes the shares for which it has received such instructions unless to do so would be inconsistent with the trustee’s duties. If you wish to have the shares allocated to this account under the plan as well as a portion of any shares for which no timely voting instructions are received from other participants voted by the I hereby instruct the trustee to vote (or cause to be voted) all shares of Common Stock of The Goodyear Tire & Rubber Company credited to this account under each plan at February 22, 2012 at the Annual Meeting of Shareholders to be held on April 17, 2012 and at any adjournment thereof as indicated on the reverse side hereof and upon all other matters as may properly come before the meeting or any adjournment thereof. Unless otherwise specified on the reverse side, if you give your instructions by signing and returning this card, or by telephone or via the Internet, the Trustee will vote FOR the election of Directors (with discretionary authority to cumulate votes), and FOR Items 2 and 3. | ||||||||
If you plan to attend the 2012 ANNUAL MEETING, please mark the box indicated on the reverse side. THIS CONFIDENTIAL VOTING INSTRUCTION CARD IS CONTINUED ON THE REVERSE SIDE. PLEASE MARK, DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. | ||||||||
