INTRODUCTION
The Nominating and Governance Committee establishes the Board Membership Criteria, assists the Board by identifying individuals qualified to become Board members, recommends to the Board matters of corporate governance, facilitates the annual review of the performance of the Board and its committees, and periodically reviews CEO and management succession plans.
ROLES AND RESPONSIBILITIES
●Members Thomas “Tony” K. Brown
David B. Dillon
Michael L. Eskew
(chair until 11/12/2019)
Herbert L. Henkel
(until 11/12/2019)
Muhtar Kent (chair from
11/12/2019)
Edward M. Liddy
Dambisa F. Moyo
(from 11/12/2019)
Gregory R. Page
(until 11/12/2019) Meetings in 20194 The Board of Directors has determined that all Nominating and Governance Committee members are “independent” under the NYSE listing standards. The Nominating and Governance Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities. Nominating and Governance Committee Charter www.3M.com> Investor Relations > Governance > Governance Documents > Committee Charters | Introduction The Nominating and Governance Committee establishes the Board Membership Criteria, assists the Board by identifying individuals qualified to become Board members, recommends to the Board matters of corporate governance, facilitates the annual review of the performance of the Board and its committees, and periodically reviews CEO and management succession plans. Roles and Responsibilities • Selects and recommends director candidates to the Board of Directors, in light of the Board Membership Criteria adopted by the Board, either to be submitted for election at the Annual Meeting or to fill any vacancies on the Board, including consideration of any stockholdershareholder nominees for director (submitted in accordance with the Company’s Bylaws); |
● | • Reviews and makes recommendations to the Board of Directors concerning the composition and size of the Board and its committees, the Board membership criteria,Membership Criteria, frequency of meetings, and changes in compensation for non-employee directors; |
● | • Reviews the Company’s Corporate Governance Guidelines at least annually, and recommends any proposed changes to the Board for approval; |
● | • Develops and recommends to the Board standards to be applied in making determinations on the types of relationships that constitute material relationships between the Company and a director for purposes of determining director independence; |
● | • Reviews and approves or ratifies any transaction between the Company and any related person, which is required to be disclosed under the rules of the Securities and Exchange Commission; |
● | • Develops and recommends to the Board for its approval an annual self-assessment process of the Board and its committees and oversees the process; |
● | • Reviews periodically with the Chairman/CEO succession plans relating to positions held by elected corporate officers, and makes recommendations to the Board with respect to the selection of individuals to occupy these positions; |
● | • Periodically reviews the corporate contribution program (3Mgives) and the contribution activities of the 3M Foundation, which is funded by the Company; and |
● | • Periodically reviews the Company’s positions and engagement on important public policy and corporate governance issues affecting its business, including Sustainability and the political contributions ofby 3M and its Political Action Committee.Committee, and shareholder engagement. |
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SCIENCE, TECHNOLOGY & SUSTAINABILITY COMMITTEE (from 11/12/2019)
Members Pamela J. Craig
Herbert L. Henkel
Amy E. Hood
Gregory R. Page (chair)
Patricia A. Woertz
Meetings in 20190 The Board of Directors has determined that all Science, Technology & Sustainability Committee members are “independent” under the NYSE listing standards. The Science, Technology & Sustainability Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities. Science, Technology & Sustainability Committee Charter
www.3M.com> Investor Relations > Governance > Governance Documents > Committee Charters | Introduction The responsibility of the Science, Technology & Sustainability Committee (the “Committee”) of the 3M Board of Directors is to oversee the twin demands of developing products to meet the ever-changing needs of our customers while ensuring that those products cause no harm to people or to our planet. The Committee is responsible for providing the general oversight of the significant scientific and technological aspects of 3M’s businesses and the Company’s sustainability and stewardship activities. Roles and Responsibilities • Monitors and reviews the overall strategy, direction and effectiveness of the Company’s research and development activities; • Reviews management’s strategy and allocation of resources for research and development activities, including product line extensions and new product platforms; • Reviews the Company’s policies and programs on sustainability; environmental and product stewardship; and environmental, health and safety, including for compliance with all applicable laws and regulations; • Assists the Board in identifying and analyzing significant emerging science and technology, disruptive innovations, sustainability, materials vulnerability, and geopolitical issues that may impact the Company’s overall business strategy, global business continuity and financial results; and • Annually reviews the Company’s Sustainability Report. |
Director Compensationcompensation and Stock Ownership Guidelinesstock ownership guidelines
Director compensation philosophy and elements
The Nominating and Governance Committee periodically receives reports on the status of Board compensation in relation to other large U.S. companies and is responsible for recommending to the Board changes in compensation for non-employee directors. In developing its recommendations, the Committee is guided by the following goals:
● | Compensation should fairly pay directors for work required in a company of 3M’s size and scope; |
● | • Compensation should fairly pay directors for work required in a company of 3M’s size and scope; • A significant portion of the total compensation should be paid in common stock to align directors’ interests with the long-term interests of stockholders; and |
● | The structure of the compensation should be simple and transparent. |
Periodically, at the request of the total compensation should be paid in common stock to align directors’ interests with the long-term interests of shareholders; and
• The structure of the compensation should be simple and transparent.
The Nominating and Governance Committee works with an independent compensation consultant to support its objectives of maintaining a reasonable and appropriate program. For 2019, Frederic W. Cook & Co., Inc. conducts a survey of director compensation at other large U.S. companies and provides(“FW Cook”) provided the Committee with expert advisory support to the Committeeadvice on the compensation of non-employee directors.directors, in addition to analyzing market data on director compensation at the same peer group of 17 companies approved by the Compensation Committee for evaluating Named Executive Officer compensation. Neither the Company nor the Nominating and Governance Committee has any arrangement with any other compensation consultant who has a role in determining or recommending the amount or form of director compensation.
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Our director program is comprised of a mix of cash and equity that is intended to approximate the peer-group median mix. Our directors’ overall target total direct compensation is consistent with 3M’s size and market-capitalization value relative to its peers. In addition, our hold-until-termination requirement on the annual stock retainer is rigorous relative to the holding requirement of our peers. For more information on the peer group, please see the section entitled “Executive peer group” beginning on page 62 of this Proxy Statement. Non-employee directors’ compensation includes the following compensation elements:
Annual Compensation —In May 2016,2019, the Nominating and Governance Committee considered a board compensation study prepared by Frederic W. Cook & Co., Inc.FW Cook. After reviewing that study, the Committee recommended andno changes in the Board approved an increase of $5,000 incompensation for non-employee directors. As a result, the 2019 annual compensation for non-employee directors from $280,000 to $285,000, effective January 1, 2016. All of the $5,000 increase was allocated to an increase in the annual cash retainer (from $120,000 to $125,000). The annual stock retainer of $160,000 remains unchanged.$305,000. Approximately 44 percent of the annual compensation (or $125,000)$135,000) is payable in cash in four quarterly installments and approximately 56 percent of the annual compensation (or $160,000)$170,000) is payable in 3M common stock equivalents (“Deferred Stock Units”) granted after the Annual Meeting.Meeting (referred to as the “annual stock retainer”). In addition, the Lead Director receives an annual fee of $35,000, the chair of the Audit Committee receives an additional annual fee of $25,000, and the chairchairs of the Compensation, Committee receivesFinance (before it was ended), Nominating and Governance, and Science, Technology & Sustainability Committees each receive an additional annual fee of $20,000. The chairs of the Finance and Nominating and Governance Committees each receive an additional annual fee of $15,000. The Lead Director receives an additional annual fee of $30,000.and committee chair fees are payable in cash in four quarterly installments. There are no meeting fees. In lieu of receiving the Deferred Stock Units, a director may elect to receive 3M common shares on a current basis, but such shares must be retained until the director leaves the Board. Similarly, in lieu of cash fees, a director may elect to receive 3M common stock of the Company.shares or Deferred Stock Units. Non-employee directors also may also voluntarilyelect to defer all or part of their annual cash fees or stock awardscompensation until they cease to be members of the Board.
Deferred Stock —For directorseach director who have elected to defer theirreceives all or a portion of the annual stock awards or annual cash fees into a commonin deferred stock, equivalents account (“Deferred Stock”), the Company credits their accountshis or her account with a number of 3M common stock equivalents (including fractional share equivalents)Deferred Stock Units equal to the number of actual shares (including fractional shares) of 3M common stock whichthat otherwise could have been purchased with such deferred amounts on the first day of the calendar quarter,fees, as determined using the closing sales price for a share of 3M common stock on the NYSE onfor the last businesstrading day immediately preceding the earliest date such date. In addition,amount otherwise could have been be paid to the director if taken on a current basis. For each payment date for dividendsordinary cash dividend paid on 3Mthe shares of the Company’s common stock, the Company also credits to the directors’ accounts awith an additional number of 3M common stock equivalents having a value equalDeferred Stock Units on the dividend payment date. The number of additional Deferred Stock Units credited to each directors’ account is calculated by dividing the aggregate dividends that otherwise would have been paid on the shares underlying the aggregate number of Deferred Stock Units credited to the director’s account on the relevant dividend determinedrecord date by using the closing sales price for a share of 3M common stock on the NYSE onfor the sixth businesslast trading day immediately preceding the applicable dividend recordpayment date. The Deferred Stock isUnits are fully vested upon grant but doesdo not have voting rights. Appropriate adjustments to the amountnumber of Deferred Stock shallUnits credited to each director’s account will be made to the accounts for stock splits, stock dividends, merger, consolidation, paymentmergers, consolidations, payments of dividends other than in cash, and similar circumstances affecting 3M common stock. The shares of 3M common stock underlying the Deferred Stock Units will be distributed in a single lump sum during the month of January in the first year after the director leaves the Board, unless the non-employee director elects an alternative distribution schedule prior to the beginning of the year in which the fees are earned. Non-employee directors may elect to receive distribution of the shares of 3M common stock to non-employee directors beginning onunderlying his or her Deferred Stock Units for a year in a single lump sum during the month of January 1 ofin the first or second year following the year in which they leave the Board eitheror in a lump sumseries of three, five, or in up to ten annual installments pursuant tobeginning on the first business day of January in the first year following their deferral elections.termination of Board service.
All Other Compensation —The column below showing “All Other Compensation” includes the incremental cost of complimentary products and matching gifts. The non-employee directors are eligible to participate in the Company’s matching gift program on the same terms as 3M employees. Under this program, the 3M Foundation will match up to a total of $5,000 a year in contributions by the director to eligible educational institutions and, effective January 1, 2020, up to a total of higher education.$1,000 a year in contributions by the director to eligible charitable organizations.
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2019 director compensation table
2016 Director Compensation Table |
The total 20162019 compensation of our non-employee directors is shown in the following table:
| NON-EMPLOYEE DIRECTORS | | FEES EARNED OR
PAID IN CASH
($)(1) | | STOCK
AWARDS
($)(2) | | ALL OTHER
COMPENSATION
($)(3) | | TOTAL
($) |
Linda G. Alvarado (retired from the Board,
effective May 10, 2016) | | 44,986 | | 57,268 | | 0 | | 102,254 |
| Sondra L. Barbour | | 125,000 | | 160,000 | | 0 | | 285,000 |
| Thomas “Tony” K. Brown | | 125,000 | | 160,000 | | 0 | | 285,000 |
| Vance D. Coffman* | | 137,514 | | 160,000 | | 5,000 | | 302,514 |
| David B. Dillon | | 125,000 | | 160,000 | | 5,000 | | 290,000 |
| Michael L. Eskew* | | 175,000 | | 160,000 | | 1,000 | | 336,000 |
| Herbert L. Henkel* | | 150,000 | | 160,000 | | 0 | | 310,000 |
| Muhtar Kent | | 127,486 | | 160,000 | | 0 | | 287,486 |
| Edward M. Liddy* | | 140,000 | | 160,000 | | 0 | | 300,000 |
| Gregory R. Page (elected February 1, 2016) | | 114,351 | | 146,448 | | 5,000 | | 265,799 |
| Robert J. Ulrich | | 125,000 | | 160,000 | | 0 | | 285,000 |
| Patricia A. Woertz (elected February 2, 2016) | | 114,011 | | 146,011 | | 0 | | 260,022 |
* Committee Chair
| Non-Employee Directors | | Fees
Earned or
Paid in
Cash
($)(1) | | Stock
Awards
($)(2) | | All Other
Compensation
($)(3) | | Total
($) |
| Sondra L. Barbour(retired from the Board, effective May 14, 2019)** | | 49,697 | | — | | — | | 49,697 |
| Thomas “Tony” K. Brown | | 135,000 | | 170,000 | | 5,389 | | 310,389 |
| Pamela J. Craig (elected to the Board, effective May 14, 2019)** | | 85,303 | | 170,000 | | 5,262 | | 260,565 |
| David B. Dillon* | | 160,000 | | 170,000 | | 5,757 | | 335,757 |
| Michael L. Eskew* | | 187,283 | | 170,000 | | 270 | | 357,553 |
| Herbert L. Henkel* | | 155,000 | | 170,000 | | 588 | | 325,588 |
| Amy E. Hood | | 135,000 | | 170,000 | | 834 | | 305,834 |
| Muhtar Kent* | | 155,000 | | 170,000 | | 752 | | 325,752 |
| Edward M. Liddy* | | 135,000 | | 170,000 | | — | | 305,000 |
| Dambisa F. Moyo | | 135,000 | | 170,000 | | 767 | | 305,767 |
| Gregory R. Page* | | 137,717 | | 170,000 | | 398 | | 308,115 |
| Patricia A. Woertz | | 135,000 | | 170,000 | | 411 | | 305,411 |
(1) This column represents the amount of all fees earned or paid in cash for services as a director.
(2) | * | Lead Director or Committee Chair during all or a portion of 2019. |
| ** | Director compensation prorated according to effective date of election or retirement. |
| (1) | This column represents the amount of all fees earned or paid in cash for services as a director. |
| (2) | This column represents the grant date fair value of the stock awards made in 2019, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation. The Company does not grant stock options to non-employee directors. Since all stock awards vest on the grant date, there are no unvested stock awards outstanding at year end. |
| (3) | This column includes the incremental cost of complimentary products and matching gifts. Non-employee directors are eligible to participate in the Company’s matching gift program on the same terms as 3M employees. Under this program, the 3M Foundation will match up to a total of $5,000 a year in contributions by the director to eligible educational institutions and, effective January 1, 2020, up to a total of $1,000 a year in contributions by the director to eligible charitable organizations. |
Reasonableness of non-employee director compensation
As described above, our philosophy on director compensation is to pay directors fairly for work required in a company of our size and complexity, make a significant portion of the stock awards madetotal compensation equity based to align directors’ interests with those of our shareholders and structure compensation in 2016, computeda simple and transparent manner. We believe that the application of this philosophy has resulted in accordancea non-employee director compensation program that reflects best-in-class design with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures. The Company does not grant stock options to non-employee directors. Since all stock awards vest on the grant date, there are no unvested stock awards outstanding at year end.
following provisions:
(3) This column includes matching gifts. Non-employee directors are eligible to participate in the Company’s matching gift program on the same terms as 3M employees. Under this program, the 3M Foundation will match up to a total of $5,000 a year in contributions by the director to eligible institutions of higher education.
Stock Ownership Guidelines• | Retainer-only cash compensation with no fees for attending meetings that are an expected part of board service. |
| • | Additional retainers for special roles having greater responsibilities, such as Lead Director and committee chairs, to recognize the incremental additional time and effort required. |
| • | Equity delivered in the form of current or deferred full-value shares, where annual grants are based on a competitive fixed-value formula and immediate vesting helps avoid director entrenchment. |
| • | A requirement to retain the stock retainer portion of annual compensation issued on or after October 1, 2007, until termination from Board service, which includes net after-tax shares attributable to current payments and pre-tax shares attributable to deferrals. |
| • | Flexible voluntary deferral provisions and no material benefits or perquisites. |
| • | Our 2016 Long-Term Incentive Plan, approved by shareholders at the 2016 Annual Meeting, includes a $600,000 annual compensation limit on all forms of compensation for non-employee directors. |
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Stock ownership guidelines
The Board requires that each director retain the stock retainer portion (currently valued at $160,000)$170,000) of the annual compensation issued on or after October 1, 2007, until the director leaves the Board. Information regardingaccumulatedregarding accumulated stock and deferred stock units is set forth in the section entitled “Security Ownershipownership of Management”management” beginning on page 7292 of this Proxy Statement.
Hedging and Pledging Policies |
Hedging and pledging policies
The Company’s stock trading policies prohibit directors and the Company’s executive officers from (i) purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of the Company’s common stock, including prepaid variable forward contracts, equity swaps, collars andexchangeand exchange funds; (ii) engaging in short sales related to the Company’s common stock; (iii) placing standing orders; (iv) maintaining margin accounts; and (v) pledging 3M securities as collateral for a loan. All transactions in 3M securities by directors and executive officers must be pre-cleared with the DeputyCompany’s General Counsel.
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PROPOSAL 
2 | Ratification of the Appointment of Independent Registered Public Accounting Firm for 2020 • Ratify the appointment of PricewaterhouseCoopers LLP as 3M’s independent registered public accounting firm for 2020. • Based on its assessment of the qualifications and performance of PricewaterhouseCoopers LLP (“PwC”), the Audit Committee believes that it is in the best interests of the Company and its shareholders to retain PwC. |
| | |
AUDIT COMMITTEE
MATTERS
Proposal No. 2: Ratification of the Appointment of Independent Registered Public Accounting Firm for 2017
The Audit Committee is directly responsible for the appointment, compensation (including approval of all fees), retention, and oversight of the Company’s independent registered public accounting firm (“Independent Accounting Firm”) retained to perform the audit of our financial statements and our internal control over financial reporting.
The Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) to serve as 3M’s Independent Accounting Firm for 2017.2020. PwC has been 3M’s Independent Accounting Firm since 1998. Prior to that, 3M’s Independent Accounting Firm was Coopers & Lybrand (untilfrom 1975 until its merger with Price Waterhouse in 1998).1998. In accordance with SEC rules and PwC policy, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide service to our Company. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years. The process for selection of the Company’s lead audit partner pursuant to this rotation policy involves a meeting between the Chair of the Audit Committee and the candidate for the role, as well as discussion by the full Committee and with management.
The Audit Committee annually reviews PwC’s independence and performance in connection with the Audit Committee’s determination of whether to retain PwC or engage another firm as our Independent Accounting Firm. In the course of these reviews, the Audit Committee considers, among other things:
●• | PwC’s historical and recent performance on the 3M audit, including input from those 3M employees with substantial contact with PwC throughout the year about PwC’s quality of service provided, and the independence, objectivity, and professional skepticism demonstrated throughout the engagement by PwC and its audit team; |
●• | an analysis of PwC’s known legal risks and significant proceedings; |
●• | external data relating to audit quality and performance, including recent Public Company Accounting Oversight Board (“PCAOB”) reports on PwC and its peer firms; |
●• | PwC’s independence; |
●• | the appropriateness of PwC’s fees, on both an absolute basis and as compared to its peer firms; |
●• | PwC’s tenure as our independent auditor and its familiarity with our global operations and businesses, accounting policies and practices and internal control over financial reporting; and |
●• | PwC’s capability and expertise in handling the breadth and complexity of our global operations, including the Company’s phased implementation of an enterprise resource planning system on a worldwide basis over the next several years. |
Based on this evaluation, the Audit Committee believes that PwC is independent and that it is in the best interests of the Company and our stockholdersshareholders to retain PwC to serve as our Independent Accounting Firm for 2017.2020.
We are asking our stockholdersshareholders to ratify the selection of PwC as our Independent Accounting Firm for 2017.2020. Although ratification is not required by our Bylaws or otherwise, the Board is submitting the selection of PwC to our stockholdersshareholders for ratification as a matter of good corporate governance. If the selection of PwC is not ratified, the Audit Committee will consider whether it is appropriate to select another Independent Accounting Firm. Even if the selection is ratified, the Audit Committee may in its discretion select a different Independent Accounting Firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.shareholders.
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PwC representatives are expected to attend the Annual Meeting where they will be available to respond to appropriate questions and, if they desire, to make a statement.
RECOMMENDATION OF THE AUDIT COMMITTEE |
|
  | The Audit Committee of the Board of Directors unanimously recommends a vote “FOR” “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2017.2020. Proxies solicited by the Board of Directors will be voted “FOR” “FOR” ratification unless a stockholdershareholder indicates otherwise in voting the proxy. |
2017 Proxy Statement | 31
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Audit Committee report
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. The management of the Company is responsible for (i) the preparation of complete and accurate annual and quarterly consolidated financial statements (“financial statements”) in accordance with generally accepted accounting principles in the United States, (ii) maintaining appropriate accounting and financial reporting principles and policies and internal controls designed to assure compliance with accounting standards and laws and regulations, and (iii) an assessment of the effectiveness of internal control over financial reporting. The Independent Accounting Firm is responsible for planning and conducting in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”) an audit of the Company’s annual consolidated financial statements and a review of the Company’s quarterly financial statements and expressing opinions on the Company’s financial statements and internal control over financial reporting based on the integrated audits.
In this context, the Audit Committee has met and held discussions with management and the Independent Accounting Firm regarding the fair and complete presentation of the Company’s results and the assessment of the Company’s internal control over financial reporting. The Audit Committee has discussed significant accounting policies applied by the Company in its financial statements, as well as alternative treatments. Management has represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States, and the Audit Committee has reviewed and discussed the consolidated audited financial statements with management and the Independent Accounting Firm. The Audit Committee has discussed with the Independent Accounting Firm matters required to be discussed pursuant to the PCAOB’s Auditing Standards on Communicationsapplicable requirements of the PCAOB and the Securities and Exchange Commission with Audit Committees, as currently in effect.Committees.
In addition, the Audit Committee has reviewed and discussed with the Independent Accounting Firm the auditor’s independence from the Company and its management. As part of that review, the Audit Committee has received the written disclosures and the letters required by applicable requirements of the PCAOB regarding the Independent Accounting Firm’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed the Independent Accounting Firm’s independence from the Company.
The Audit Committee also has considered whether the Independent Accounting Firm’s provision of non-audit services to the Company is compatible with the auditor’s independence. The Audit Committee has concluded that the Independent Accounting Firm is independent from the Company and its management.
The Audit Committee has discussed with the Company’s Internal Audit Department and Independent Accounting Firm the overall scope of and plans for their respective audits. The Audit Committee meets with the Internal Auditor, Chief Compliance Officer, the General Counsel, and representatives of the Independent Accounting Firm in regular and executive sessions, to discuss the results of their examinations, the evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting and compliance programs.
In reliance on the reviews and discussions referred to above, the Audit Committee has recommended to the Board of Directors, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016,2019, for filing with the SEC.
Submitted by the Audit Committee
Herbert L. Henkel,
David B. Dillon, Chair
Sondra L. Barbour
Thomas “Tony” K. Brown
David B. DillonPamela J. Craig
Dambisa F. Moyo
Gregory R. Page
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Audit Committee policy on pre-approval of audit and permissible non-audit services of the independent accounting firm
Audit Committee Policy on Pre-Approval of Audit and Permissible Non-Audit Services of the
Independent Accounting Firm |
The Audit Committee is responsible for appointing and overseeing the work of the Independent Accounting Firm. The Audit Committee has established the following procedures for thea policy requiring its pre-approval of all audit and permissible non-audit services provided by the Independent Accounting Firm.
Before engagement of
The policy identifies the guiding principles that must be considered by the Audit Committee in approving services to ensure that the Independent Accounting FirmFirm’s independence is not impaired; describes the Audit, Audit-Related, Tax and All Other services that may be provided and the non-audit services that may not be performed; and sets forth the pre-approval requirements for all permitted services. The policy provides for the next year’s audit,pre-approval of specific types of Audit, Audit-Related, Tax and Other services and a limited fee estimate range for such services on an annual basis. The policy also requires specific pre-approval of all permitted services not already included in the annual pre-approval. The Independent Accounting Firm will submitis required to report periodically to the Audit Committee for approval a detailed descriptionregarding the extent of services it expects to render to the Company during that year for each of the following categories of services:
● | Audit services include audit work performed in the preparation of consolidated financial statements, as well as work that generally only the Independent Accounting Firm can reasonably be expected to provide, including comfort letters, statutory audits, attest services, and consultation regarding financial accounting and/or reporting standards; |
● | Audit-related services are for assurance and related services that are traditionally performed by the Independent Accounting Firm, including due diligence related to mergers and acquisitions or dispositions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements; |
● | Tax services include all services performed by the Independent Accounting Firm’s tax personnel except those services specifically related to the audit of the financial statements, and include fees in the areas of tax compliance, tax planning, and tax advice; and |
● | Other services are those services not captured in the other categories. |
Before engagement, the Audit Committee pre-approves these services by category of service. The fees are budgetedprovided in accordance with their pre-approval and the Audit Committee requiresfees for the Independent Accounting Firmservices performed to report actual fees in comparison to the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the Independent Accounting Firm for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging the Independent Accounting Firm.date.
The Audit Committee has delegated pre-approvalCommittee’s policy delegates to its Chair the authority to the chairaddress requests for pre-approval of the Committee.services in certain limited circumstances between Audit Committee meetings. The chair, in his discretion, must either seek immediate approval by e-mail from the other Audit Committee members, or report for informational purposes only, any pre-approval decisions to the Audit Committee for its approval at its next scheduled meeting.
Fees of the Independent Accounting Firm |
The Audit Committee may not delegate to management the Audit Committee’s responsibility to pre-approve permitted services of the Independent Accounting Firm.
All Audit, Audit-Related, Tax and All Other services described below were approved by the Audit Committee before services were rendered.
Fees of the independent accounting firm
The following table represents fees billed for professional services rendered by PricewaterhouseCoopers LLP (“PwC”) for the audit of the Company’s consolidatedfinancialconsolidated financial statements for the years ended December 31, 20152018 and 2016,2019, and fees billed for other services rendered by PwC during those periods.
Audit and Non-Audit Fees
AUDIT AND NON-AUDIT FEES ($ in Millions)IN MILLIONS)
| | 2015 | | 2016 |
| Audit Fees: | | $15.4 | | $15.1 |
| Audit-Related Fees: | | 3.3 | | 0.5 |
| Tax Fees: | | 1.8 | | 1.0 |
| All Other Fees: | | 0.2 | | 0.2 |
| Total | | $20.7 | | $16.8 |
| | | 2018 | | | 2019 | |
| Audit Fee: | | $ 18.6 | | | $ 18.8 | |
| Audit-Related Fee: | | 1.3 | | | 1.3 | |
| Tax Fee: | | 0.7 | | | 0.7 | |
| All Other Fee: | | 0.2 | | | 0.1 | |
| Total | | $ 20.8 | | | $ 20.9 | |
| | | | | | | |
In the above table, in accordance with SEC rules, “Audit” fees consisted of audit work and review services, as well as work generally only the independent registered public accounting firm can reasonably be expected to provide, such as statutory audits, procedures related to the adoption of new accounting standards, comfort letters, consents, and review of documents filed with the Securities and Exchange Commission. “Audit-related” fees consisted principally of financial due diligence, carve out audit procedures, procedures related to the adoption of new accounting standards in future years, internal control and system audit procedures for periods prior to the rollout of the ERP system, agreed-upon procedures, employee benefit plan audits, and other attestattestation services. “Tax” fees consisted principally of tax compliance services in foreign jurisdictions, assistance with transfer pricing documentation, assistance with excise tax filings, and advice on foreign and domestic tax related matters. “All Other” fees consisted of general industry and accounting training, information security vendor assessments, licenses for accounting research software, and other permissible services that do not fall into the three categories listed above.
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Audit Committee restrictions on hiring employees of the independent accounting firm
Audit Committee Restrictions on Hiring Employees of the Independent Accounting Firm |
The Audit Committee has adopted restrictions on the hiring by the Company of any PwC partner, director, manager, staff, reviewing actuary, reviewing tax professional, and any other persons having responsibility for providing audit assurance on any aspect of PwC’s certification of the Company’s financial statements. Audit assurance includes all work that results in the expression of an opinion on financial statements, including audits of statutory accounts.
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| | | |
PROPOSAL
| Advisory Approval of Executive Compensation • Approve, on an advisory basis, the compensation of our Named Executive Officers. • Our executive compensation program appropriately aligns our executives’ compensation with the performance of the Company and its business units as well as their individual performance. |
| | |
EXECUTIVE
COMPENSATION
Proposal No. 3: Advisory Approval of Executive Compensation
Section 14A of the Securities Exchange Act provides our stockholdersshareholders with the opportunity to approve, on an advisory basis, the compensation of our named executive officers as described in this Proxy Statement. This is the sixthtenth year that the Company is asking stockholdersshareholders to vote on this type of proposal, known as a “say-on-pay” proposal. As required by Section 14A of the Securities Exchange Act, the Company anticipates providing its stockholders with the opportunity at its 2017 Annual Meeting to cast an advisory vote on the frequency with which stockholders will be offered the chance to vote on future say-on-pay proposals.
We believe that our executive compensation program is consistent with our core compensation principles and is structured to assure that those principles are implemented. At the Annual Meeting of StockholdersShareholders held on May 10, 2016,14, 2019, approximately 9695 percent of the votes cast on this issue voted to approve the compensation of the Company’s named executive officers as disclosed in last year’s Proxy Statement. Although the vote was non-binding, the Compensation Committee believes this level of approval percentage indicates that our stockholdersshareholders strongly support our core compensation principles and our executive compensation program, and we believe our stockholders as a whole should support them as well.program.
Thus, the Company is submitting to stockholdersshareholders the following resolution for their consideration and approval:
“RESOLVED, that the stockholdersshareholders approve, on an advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission (including in the Compensation Discussion and Analysis, the accompanying compensation tables and related narrative).”
As described in
We encourage you to read the entire Compensation Discussion and Analysis portion of this Proxy Statement 3M delivered another year of strongto learn more about our executive compensation program and the impact that our financial performance in 2016. These results reflectedhas on the strong performance of the Company’s leadership team, including the Named Executive Officers, which impacted their annual and long-term incentive compensation earned during 2016.by our leadership team.
While the Board of Directors and the Compensation Committee intend to carefully consider the results of the voting on this proposal when making future decisions regarding executive compensation, the vote is not binding on the Company or the Board and is advisory in nature. The Company currently holds advisory votes on the compensation of named executive officers annually. Accordingly, the next such advisory vote is expected to occur at the 20182021 Annual Meeting.
RECOMMENDATION OF THE BOARD |
|
| The Board of Directors unanimously recommends a vote “FOR” this proposal for the reasons discussed above. Proxies solicited by the Board of Directors will be voted “FOR” this proposal unless a stockholdershareholder indicates otherwise in voting the proxy. |
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Proposal No. 4: Advisory Approval on the Frequency of Advisory Votes on Executive Compensation
As required by Section 14A of the Securities Exchange Act, the Company is providing its stockholders with the opportunity to cast an advisory vote on the frequency with which stockholders will be offered the opportunity to cast future advisory votes on the compensation of its named executive officers. Stockholders may choose from the following alternatives: 1 Year, 2 Years, 3 Years, or to abstain from voting on this proposal.
After careful consideration, the Board of Directors recommends annual (“1 Year”) advisory votes on the compensation of the Company’s executives. It continues to believe that annual votes will provide the clearest and most useful feedback from stockholders to the Companyand the Compensation Committee in this important area, and will confirm the Company’s commitment to frequent and transparent communications with investors.
Stockholders are not voting to approve or disapprove of the Board’s recommendation. Instead, stockholders have four choices with respect to this proposal: “1 Year”, “2 Years”, “3 Years”, or “Abstain”. For the reasons discussed above, we are asking our stockholders to vote for a frequency of “1 Year” when voting on this proposal.
While the Board of Directors and especially the Compensation Committee intend to carefully consider the results of the voting on this proposal, the vote is not binding on the Company or the Board and is advisory in nature.
RECOMMENDATION OF THE BOARD
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|
| The Board of Directors unanimously recommends a vote in favor of conducting an advisory vote on executive compensation every “1 year”. Proxies solicited by the Board of Directors will be voted in favor of conducting an advisory vote on executive compensation every “1 year” unless a stockholder indicates otherwise in voting the proxy.
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Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes 3M’s executive compensation program, explains how 3M’s Compensation Committee oversees and implementsthis program, and reviews the 20162019 compensation forthefor the current and former executive officers identified below. Throughout this Compensation Discussion and Analysis and elsewhere in this Proxy Statement, we refer to this group of individuals as the “Named Executive Officers.”
NAMEName | | TITLETitle(1) |
Inge G. ThulinMichael F. Roman | | Chairman of the Board, President and Chief Executive Officer |
| Inge G. Thulin(2) | | Former Executive Chairman of the Board |
| Nicholas C. Gangestad | | Senior Vice President and Chief Financial Officer |
Michael F. RomanAshish K. Khandpur | | Executive Vice President, IndustrialTransportation and Electronics Business Group |
| Julie L. Bushman(3) | | Executive Vice President, International Operations |
| Joaquin Delgado(4) | | Former Executive Vice President, Consumer Business Group |
| Michael G. Vale | | Executive Vice President, Health CareSafety and Industrial Business Group |
As an aid to assist readers to more quickly navigate
| (1) | Reflects the title of each Named Executive Officer as of March 1, 2020. |
| |
| (2) | Mr. Thulin retired from employment with the Company, effective June 1, 2019. |
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| (3) | Ms. Bushman has announced her intention to retire and is expected to separate from employment with the Company, effective April 1, 2020. |
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| (4) | Dr. Delgado separated from employment with the Company on July 1, 2019. |
To enable quicker navigation of the information provided, this Compensation Discussion and Analysis is organized into four distinct sections:
| Section I:Executive Summary | 37 | 51 |
| Section II: How We Determine Compensation | 42 | 57 |
Section III: How We Paid our Named Executive Officers in 20162019 | 49 | 65 |
| Section IV: Ways in Which We Address Risk and Governance | 55 | 71 |
For the meaning of certain capitalized terms used throughout this Compensation Discussion and Analysis, see “Meaning of Certain Terms”certain terms” on page 4864 of this Proxy Statement.
SECTION I: Executive Summary |
2016 Financial Performance and Business Highlights |
For 3M, 2016 was a year of strong
Section I: Executive summary
Selected 2019 financial performance and business highlights
3M’s 2019 financial performance was achieved through disciplined execution, impacted by weakness in a challenging macro environment.
EARNINGS PER
SHARE GROWTH | | ORGANIC LOCAL
CURRENCY SALES GROWTH | | RETURN ON
INVESTED CAPITAL* | | FREE CASH
FLOW CONVERSION* |
| +7.7% | | -0.1% | | 22.6% | | 104% |
●Earnings per share grew from $7.58 in 2015 to $8.16 in 2016 ●Expanded full-year operating income margins 110 basis points to 24.0 percent | | ●Continued low-growth external environment ●Four of five Business Groups were flat to positive ●Three of four geographic areas were positive | | ●Efficiently deploying capital across the business ●Fourth consecutive year of at least 20 percent | | ●Third consecutive year greater than 100 percent |
* See Appendix Acertain end markets (China, automotive and electronics) and channel inventory adjustments. The table below reflects the Company’s performance against the key metrics underlying the Company’s performance share awards, both as determined in accordance with GAAP and as adjusted to this Proxy Statement for a reconciliationbetter reflect the Committee’s view of free cash flow and free cash flow conversion to our results as reported under generally accepted accounting principles in the United States and the calculation of return on invested capitalas shown here.Company’s 2019 operating performance.
| | | Results Determined in
Accordance with GAAP
(to the Extent Applicable) | | Results as Adjusted to Better
Reflect the Committee’s
View of the Company’s 2019
Operating Performance |
| Earnings Per Share Growth | | -12.1% | | -6.9%* |
| Organic Local Currency Sales Growth | | -1.5% | | -1.5% |
| Return on Invested Capital | | 17.5%* | | 22.9%* |
| Free Cash Flow Conversion | | 117.5%* | | 106.0%* |
| * | See Appendix A to this Proxy Statement for a reconciliation of earnings per share, operating margin performance, free cash flow and free cash flow conversion to our results for the most directly comparable financial measures as reported under generally accepted accounting principles in the United States, and the calculation of return on invested capital. See “Adjustments for certain special items” on page 60 below for additional information concerning the Committee’s general approach to adjustments. |
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We believeBased on the Company’s financial performance and consistent with our pay-for-performance philosophy, the 2019 annual incentive payments that our ability to deliver consistent results over time is reflected in our total stockholder return, which was in the top one-third of our executive compensation peer group for the one-, three-,Named Executive Officers received and five-year periods endingtheir performance share accruals based on December 31, 2016.2019 performance were below targeted levels. For additional information, see “Total Stockholder Return”“Impact of company performance on page 40incentive compensation and real pay delivery,” “2019 annual incentive” and “Performance share accruals based on 2019 performance” beginning on pages 53, 66 and 70, respectively. The stock, stock options and other long-term incentive compensation awards held by our Named Executive Officers throughout 2019 also decreased in value during the year with the decline in the market value of this Proxy Statement.our shares.
Other noteworthy
Noteworthy accomplishments from January 1, 2019, through March 1, 2020, include the following:
●• | CelebratedRealigned our organizational structure and streamlined our global operating model around four new business groups to further align to customers and go-to-market models for improved growth, operating agility, and accountability;
|
| |
| • | Completed the grand openingacquisition of M*Modal to strengthen our Health Information Systems portfolio and complement organic growth; |
| |
| • | Completed the acquisition of Acelity, Inc. to bolster our Medical Solutions business and support our growth strategy to offer comprehensive advanced and surgical wound care solutions; |
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| • | Strengthened our portfolio going forward by completing the divestitures of our new $150 million laboratory in St. Paul, Minnesota;gas and flame detection business and advanced ballistics-protection business; and announced the divestiture of substantially all of the drug delivery business; |
● | Achieved
|
| • | Awarded a total of 3,616 patents from patent offices around the world in 2019, including 700 patents granted to 3M by the United States Patent and Trademark Office, which brings to more than 121,000 the total number of patents awarded to 3M in its corporate history; |
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| • | Established a new Board committee to provide oversight of the Company’s strategies related to research and development, commercialization, sustainability, environmental stewardship, and other related activities, which will help ensure that the Company is building on its strong innovation capabilities while maintaining the Company’s high product stewardship standards; |
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| • | Over 100 consecutive years of paying dividends to stockholders;shareholders and 62 consecutive years of annual increases; |
● | Awarded 668 patents in The United States and 3,770 globally, bringing the total to more than 109,000 patents awarded to 3M throughout its corporate history;
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●• | Reported an all-time high free cash flow of $5.4 billion for 2019, up 10 percent over 2018; |
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| • | Returned $6.4$4.7 billion to stockholdersshareholders via dividends and gross share repurchases; and |
● | Improved our employment brand by earning recognition as the “Top Dream Company” in the 2016 Millennial Career Survey conducted by the National Society of High School Scholars; and
|
●• | Continued progress onRecognized by FORTUNE®magazine as one of the “World’s Most Admired Companies,” which 3M management believes is a recognition of our three key levers: Portfolio Management, Investing in Innovation, and Business Transformation.
ability to create a foundation of trust with all of our stakeholders. |
Factors Creating Alignment Between Pay and Performance |
Factors creating alignment between pay and performance
3M’s executive compensation program is designed to maintain a strong alignment between corporate performance and executive compensation by tying incentive compensation to the achievement of performance metrics that we believe increase the Company’s long-termvalue. Highlightslong-term value. For 2019, highlights of the program include:
●• | A large portion of each executive’s target Total Direct Compensation (cash plus long-term incentives) is performance-based, varying from 90 percent for ChiefExecutiveChief Executive Officer Inge ThulinMichael Roman to a range of 79-8572-86 percent for the other Named Executive Officers; and |
● | |
| • | The incentive compensation opportunities provided to the Named Executive Officers are based onutilize multiple performance-based metrics focused primarily on growth in revenue and earnings performance, increase in 3M’s common stock price, efficient use of capital, and free cash flow conversion. |
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Impact of Company Performance on Incentive Compensation |
Impact of company performance on incentive compensation and real pay delivery
One objective of our incentive compensation program is to align our Named Executive Officers’ real pay delivery with performance. The Company’s performance directly impacted incentive compensation decisions and pay outcomes for our Named Executive Officers as follows:
2016 Annual Incentive Compensation
For the Named Executive Officers paid on the basis of the Company’s overall performance, the 20162019 annual incentive compensation payout (before any adjustment for individual performance) averaged 98 percent of the target amount. The payouts reflect our solid performance against the goals established for 2016:
●For the Named Executive Officers paid on the basis of the Company’s overall performance, the 2019 annual incentive compensation payout (before any adjustment for individual performance) was 62 percent of the target amount. The payouts reflect the Committee’s view of our performance against the goals established for 2019, as shown below. | |  |
| • | Local currency sales achieved 9896 percent of plan;plan, which resulted in an 80 percent payout for this metric (40 percent of target after adjusting for weighting); | |
●• | 3M economic profit achieved 10184 percent of plan;plan, which was below the threshold required to receive a payment based on this metric; and | |
●• | 3M’s 20162019 economic profit represented 9786 percent of its 2015 results. 2018 results, which resulted in a 72 percent payout for this metric (22 percent of target after adjusting for weighting). |
The achievement levels described above reflect certain adjustments that the Committee believed were appropriate to better reflect the Company’s performance against its 2019 operating plan. See Appendix A to this Proxy Statement for a reconciliation of local currency sales to our results for the most directly comparable financial measure as reported under GAAP, and the calculation of 2018 and 2019 economic profit.
Performance share award payouts and accruals (long-term incentive compensation)
The three-year performance period for the 2017 Performance Share Awards (Long-Term Incentive Compensation)
The number of shares delivered pursuant to the performance share awards issued to the Named Executive Officers ended on December 31, 2019. Based on the financial results achieved during 2017 – 2019 and excluding dividend equivalents, the Named Executive Officers received 1.189 shares of 3M common stock for the 2014-2016each target performance period equaled 123 percent of the target number of shares awarded. The actual number of shares issued exceeded the target number of performance shares awarded dueshare subject to solid performance against the performance goals established for these awards in February 2014, as shown below.
Relative Organic Volume Growth
(40% Weighting) | | ROIC
(40% Weighting) | | New Product Vitality Index
(20% Weighting) |
 | |  | |  |
●2014 performance exceeded the target level established for these awards
●No shares were earned based on 2015 and 2016 performance for this metric
| | ●Numbers shown exclude the impact of acquisitions
●2014, 2015, and 2016 performance exceeded the maximum level established for these awards
| | ●Performance for each year shown exceeded the threshold level established for these awards
●Results reflect shift to a more rigorous process focused on creating products with greater potential impact
|
their 2017 Performance Share Awards. After considering the appreciationchange in the pricemarket value of 3M’s common stock over the three-year performance period and the additional shares delivered pursuant to the dividend equivalent rights granted as part of the 2017 Performance Share Awards, the value of the total number of 3M shares delivered to the Named Executive Officers in settlement of these awards (determined using the closing price of a share of 3M common stock on the NYSE for December 30, 2016)31, 2019) equaled 179120 percent of the value of the target number of performance shares subject to such awards (determined using the closing price of a share of 3M common stock on the NYSE for March 3, 2014,1, 2017, the initial grant date of 2014for the 2017 performance share awards).
When evaluating the payouts for these awards against the Company’s performance, it is important to keep in mind the weightings applied to each year (2017 – 50 percent; 2018 – 30 percent; and 2019 – 20 percent) and each metric (Relative Organic Volume Growth – 40 percent; Return on Invested Capital – 20 percent; Earnings per Share Growth – 20 percent; and Free Cash Flow Conversion – 20 percent). As illustrated in the charts below, the above target payout of these awards was driven primarily by the Company’s strong 2017 Proxy Statement | Relative Organic Volume Growth, Return on Invested Capital, and Earnings per Share Growth, which was partially offset by the Company’s below target performance on certain metrics for 2018 and 2019.
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The attainment levels described above reflect certain adjustments that the Committee believed were appropriate to better reflect the Company’s performance during the performance period. See Appendix A to this Proxy Statement for a reconciliation of earnings per share, operating margin performance, free cash flow and free cash flow conversion to our results for the most directly comparable financial measures as reported under GAAP, and the calculation of return on invested capital.
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The Company’s 2019 performance will have a more pronounced impact on the payouts for the 2018 Performance Share Awards and 2019 Performance Share Awards, where the weighting of 2019 performance is 30 percent and 50 percent, respectively. To illustrate this point, the table below shows the number of shares of 3M common stock accrued per target performance share based on the Company’s performance for the performance share awards that were outstanding at December 31, 2019.
For additional information concerning the overall status of the performance share awards that were outstanding at December 31, 2019, and the impact that the Company’s 2019 performance had on such awards, see “Status of outstanding performance share awards” and “Performance share accruals based on 2019 performance” beginning on pages 68 and 70, respectively.
Stock and Long-Term Incentive Compensationlong-term incentive compensation
The performance of 3M’s stock has a material impact on the amount of compensation actually realized by our Named Executive Officers. Our stock ownership guidelines require covered executives, including the Named Executive Officers, to own amounts of Company stock having a value exceeding a specified multiple of their base salary. If the market price of 3M’s stock declines, so does the value of the stock they own.
Similarly, stock options and other long-term incentive awards held by our Named Executive Officers increase or decrease in value along with increases and decreases in the value of 3M’s common stock.
The stock, stock options and other long-term incentive compensation granted toawards held by our Named Executive Officers during and in years prior to 2016 increasedthroughout 2019 decreased in value during the year as the closing price for a share of the Company’s common stock on the NYSE increaseddecreased from $150.64$190.54 on December 31, 2015,2018, to $178.57$176.42 on December 30, 2016.31, 2019.
As reflected in the following table,
Total shareholder return
The graphs below illustrate 3M’s stock performance (annualized total stockholder return of 11 percent over the three-year period ending on December 31, 2016) continuesrelative to compare favorably with the stock performance of the S&P 500 and the peer companies included in the Company’s executive peer group (for(excluding DuPont de Nemours, Inc., formerly DowDuPont Inc., which the median total stockholder return over the same three-year period was nine percent)excluded due to its spinoff of two independent public companies during 2019 – Dow Inc. and Corteva, Inc.), as described under “Competitive Pay”pay” beginning on page 4661 of this Proxy Statement.
ANNUALIZED TOTAL STOCKHOLDER RETURNS OF 3M’S EXECUTIVE COMPENSATION PEER GROUP
Note: 5-Year Return5-year period = Five years ending 12/31/16; 3-Year Return19; 3-year period = Three years ending 12/31/16; 1-Year Return19; 1-year period = One year ending 12/31/1619 Source: Bloomberg. No information is provided for Tyco International plc, which completed its combination with Johnson Controls, Inc., effective as of September 2, 2016, and is now known as "Johnson Controls International plc."
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2019 say on pay
In 2016,2019, approximately 9695 percent of the votes cast on our say-on-pay proposal approved the compensation of our named executive officers as disclosed in last year’s Proxy Statement. Although the vote was non-binding, the Committee believes this level of approval indicates that stockholdersshareholders strongly support our executive compensation programs and policies. The Committee willconsiderwill consider the results of this year’s say-on-pay proposal, as well as feedback from our stockholders,shareholders, when making future executive compensation decisions.
For information concerning our investor outreach efforts, please refer to the section entitled “Stockholder“Shareholder Outreach and Engagement” on page 1724 of this Proxy Statement.
Noteworthy compensation program actions since January 1, 2019
Since January 1, 2019, 3M and the Committee took the noteworthy actions described below as part of the Company’s executive compensation program.
Noteworthy Compensation Actions• | Approved participation of all executive officers in the broad-based Annual Incentive Plan (as opposed to the Executive Annual Incentive Plan), effective for 2016plan years beginning on or after January 1, 2020. |
| • | Recalculated the number of shares required to be beneficially owned by our executive officers in order to maintain compliance with our stock ownership guidelines, effective December 31, 2019. |
| • | Approved a new severance plan for certain U.S. executives (including the Named Executive Officers) to provide separation payments and benefits upon a qualifying termination of employment. Among other things, the new plan is intended to help support talent recruitment and retention objectives and provide a consistent approach to executive departures. For more information concerning the new severance plan, see “New severance plan” and “Rights and payments upon a qualifying termination under the severance plan” beginning on pages 61 and 85 of this Proxy Statement, respectively. |
During 2016, we implemented the following changes with respect to our executive compensation program:
●Amended the definition of “Retirement” in our Annual Incentive PlanCompensation policies and our 2008 Long-Term Incentive Plan effective as of January 1, 2016, to mean a termination of employment with the Company after attaining age 55 with at least 10 years of service. Prior to this change, the term “Retirement” meant a termination of employment with the Company after attaining age 55 with at least five years of service. This change was made to better align the benefits of long-term service to the Company with the commitment required to earn them. The previous definition continues to apply to awards granted under our 2008 Long-Term Incentive Plan before January 1, 2016.
●Recalculated the number of shares required to be beneficially owned by our executive officers in order to maintain compliance with our stock ownership guidelines, effective December 31, 2016.
Compensation Policies and Practices |
practicesOur compensation program is designed to provide appropriate performance incentives and avoid compensation practices that do not promote the interests of our stockholders.shareholders.
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Section II: How we determine executive compensation
SECTION II: How We Determine Compensation |
Principles of Our Executive Compensation Program |
Principles
The Company maintains global compensation principles that are intended to ensure that its compensation practices are fair and reasonable as applied to both executive and non-executive employees. These principles align with the Company’s vision and strategies, balance both individual and enterprise-wide performance and seek to provide competitive wages and benefits with consistent positioning in the median range of the most-relevant markets to employees based on roles, responsibilities, skills, and performance. 3M also believes that the compensation of its executives should be closely tied to the performance of the Company, so that their interests are aligned with the interests of long-term 3M stockholders.shareholders. Consistent with this philosophy, the following core principles provide a framework for the Company’s executive compensation program:
●• | Total Direct Compensation should be competitive to attract the best talent to 3M, motivate executives to perform at their highest levels, reward individual contributions that improve the Company’s ability to deliver outstanding performance, and retain those executives with the leadership abilities and skills necessary for building long-term stockholdershareholder value; |
●• | The portion of Total Direct Compensation that is performance-based and is, therefore, at risk should increase with the level of an individual’s responsibility; |
●• | The program should balance incentives for delivering outstanding long-term, sustainable performance against the potential risk of encouragingto encourage inappropriate risk-taking; |
●• | The metrics and targets for earning performance-based incentives should be consistent with, and aligned to, increasing stockholdershareholder value over the long term; and |
●• | Executives are most effectively motivated to build long-term stockholder value when aA significant portion of theireach executive’s personal net worth isshould be tied to the value of 3M common stock.stock as further motivation to build long-term shareholder value and mitigate the risk of inappropriate risk-taking. |
Roles and Responsibilities |
To monitor and support the effectiveness of this program, the Committee periodically reviews the compensation principles used for setting annual total cash compensation for the Company’s global workforce and approves the methodology for determining annual long-term incentive target grant values for employees eligible to receive such awards. The Company also periodically compares its pay components to those of other premier companies and adjusts them as necessary to stay competitive and attract, retain, and motivate a highly qualified, diverse workforce at all levels throughout the organization, not just for its executives.
Roles and responsibilities
The Company believes that a collaborative process best ensures that compensation decisions reflect the principles of our executive compensation program. Set forth below is a summary of the roles and responsibilitiesofresponsibilities of the key participants that were involved in making decisions relating to the compensation that our Named Executive Officers earned in 2016.2019.
RESPONSIBLE PARTYResponsible Party | | PRIMARY ROLES AND RESPONSIBILITIES RELATING TO COMPENSATION DECISIONSPrimary Roles and Responsibilities Relating to Compensation Decisions |
Compensation Committee
(Composed solely of independent,
non-employee non- employee directors and reports to
the Board) | | ●• Reviews the design of, and risks associated with, the Company’s compensation policies and practices; ●• Approves annual performance goals (including performance metrics for long-term incentives) and the compensation of our Chief Executive Officer and Executive Chairman (including performance metrics and goals for performance-based long-term and short-term incentive compensation), subject to ratification by the independent members of the Board of Directors; ●• Approves annual performance goals and objectives for our Chief Executive Officer and Executive Chairman; • Acting through the Committee’s Chairman, conducts an annual evaluation of our Chief Executive Officer’s and Executive Chairman’s performance and reviews such evaluation with the independent members of the Board of Directors; ●• Approves the compensation of our other Named Executive Officers (including performance metrics and goals for performance-based long-term incentives)and short-term incentive compensation); and ●• Approves all changes to the composition of the executive peer group. |
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Independent Non-employee
Non- employee Members of the Board of Directors | | ●Considers the Committee’s recommendation regarding the compensation of our Chief Executive Officer and, if deemed appropriate, approves such compensation; and
●• Considers the Committee’s annual evaluation of our Chief Executive Officer’s performance. • Considers the Committee’s actions regarding the compensation of our Chief Executive Officer and Executive Chairman and, if deemed appropriate, ratifies such actions. |
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RESPONSIBLE PARTYResponsible Party | | PRIMARY ROLES AND RESPONSIBILITIES RELATING TO COMPENSATION DECISIONSPrimary Roles and Responsibilities Relating to Compensation Decisions |
Independent Consultant to the
Compensation Committee*
(Frederic W. Cook & Co., Inc.) | | ●• Provides the Committee with advice regarding the design of and risks associated with, all elements of the Company’s executive compensation program; ●• Reviews and provides an assessment of the material economic and reputational risks associated with the Company’s incentive compensation programs; • Reviews and provides an independent assessment of materials provided to the Committee by management of the Company; ●• Provides advice and recommendations to the Committee regarding the composition of the compensation peer groups; ●• Provides expert knowledge of regulatory developments, marketplace trends and best practices relating to executive compensation and competitive pay levels; ●• Makes recommendations regarding the compensation of the Named Executive Officers (including our Chief Executive Officer)Officer and Executive Chairman); and ●• Regularly attends and actively participates in the meetings of the Committee, including executive sessions. |
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Chief Executive Officer
(Assisted by our Senior Vice President,
Human Resources, and other
Company employees) | | ●• Approves annual performance goals and objectives for the Named Executive Officers (other than himself)himself and our Executive Chairman); ●• Conducts an annual performance evaluation for each of the Named Executive Officers (other than himself)himself and our Executive Chairman) and presents the results to the Committee; and ●• Makes recommendations to the Committee with respect to the compensation of the Named Executive Officers (other than himself)himself and our Executive Chairman) based on histhe final assessment of their performance. |
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* During 2016, the Committee was assisted by its independent compensation consultant, George B. Paulin of Frederic W. Cook & Co., Inc. (“FW Cook”). Other than the support that it provided to the Committee, FW Cook provided no other services to the Company or 3M management, with the exception of independent advisory support to the Nominating and Governance Committee on the compensation of 3M’s non-employee directors so that valuation methodologies and peer groups are consistent with those used for executives and other employees. During the year, the Committee conducted an evaluation of the independence of Mr. Paulin and his firm considering the relevant regulations of the Securities and Exchange Commission and the NYSE listing standards. The Committee concluded that the services performed by Mr. Paulin and his firm raised no conflicts of interest.
Elements* | During 2019, the Committee was assisted by its independent compensation consultant, George B. Paulin of Target 2016 Total Direct CompensationFW Cook. Other than the support that it provided to the Committee, FW Cook provided no other services to the Company or 3M management, with the exception of independent advisory support to the Nominating and Governance Committee on the compensation of 3M’s non-employee directors so that valuation methodologies and peer groups are consistent with those used for executives and other employees. During the year, the Committee considered an evaluation of the independence of Mr. Paulin and his firm based on the relevant regulations of the Securities and Exchange Commission and the NYSE listing standards. The Committee concluded that the services performed by Mr. Paulin and his firm did not raise any noteworthy conflicts of interest. |
Elements of target 2019 total direct compensation
The illustration below and the discussion that follows show how the target Total Direct Compensation of the Named Executive Officers (excluding our former Executive Chairman) was apportioned amongbaseamong base salary, annual incentives, performance share awards and long-term incentivesstock options for 2016,2019, and how these elements relate to the strategic business goals of the Company.
Abbreviations: AIP = Annual incentive pay; PSAs = Performance share awards.
CEO* | | Other NEOs (Average)Numbers do not add to 100 percent due to rounding. |
 | Amounts shown reflect the average apportionment for all Named Executive Officers other than Mr. Roman and Mr. Thulin. Including Mr. Thulin, the average apportionment for the other Named Executive Officers would be as follows: base salary — 18 percent; AIP — 18 percent; stock options — 29 percent; performance shares — 35 percent; and performance-based pay — 82 percent. |
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BASE SALARY
Base Salary | | |
Percentage of Target 20162019 Total
Direct Compensation: | |
CEO – 10%
| |
Other NEOs – 17%19% | | |
3M pays each of its executives a base salary in cash on a monthly basis. The amount of this base salary is reviewed at least annually and does not vary with the performance of the Company. Base salaries are designed to compensatethecompensate the executives for their normal day-to-day responsibilities, and it is the only component of their compensation that is considered to be fixed rather than variable in nature.
ANNUAL INCENTIVE
Annual Incentive | | |
Percentage of Target 20162019 Total
Direct Compensation: | | Performance Metrics and Weighting: |
CEO – 16%15%
Other NEOs – 15%17% | | Performance Metrics:
- • 50% Local Currency Sales (of 3M or a business unit, as applicable) vs. Plan
-
|
| • 20% Economic Profit (of 3M or a business unit, as applicable) vs. Plan
- |
| • 30% Economic Profit of 3M vs. Prior Year |
3M provides its executives with annual incentive compensation through plans that are intended to align a significant portion of their Total Cash Compensation with the financial performance of the Company and its business units. Each executive is assigned a target amount of annual incentive compensation as part of his or her target Total Cash Compensation, but the amount of annual incentive compensation actually paid depends on the performance of 3M and its relevant business units as well as the executives’each executive’s individual performance.
3M’s AIP offers eligible employees an opportunity to earn short-term incentive compensation based on three performance metrics, which were weighted for 2019 as indicated above. All 2019 performance targets for 2016:our Corporate AIP plan were set at or above 2018 results.
● | Local Currency Sales (of 3M or a business unit, as applicable) vs. plan for the current year (50 percent); |
● | Economic Profit (of 3M or a business unit, as applicable) vs. plan for the current year (20 percent); and |
● | 3M Economic Profit vs. actual results for the prior year (30 percent). |
The actual amount paid to an eligible employee for a particular year may range from 0 percent to 200 percent of the employee’s target amount for that year, depending on the performance of the Company and its business units compared to the performance goals approved by the Compensation Committee. The amount of annual incentive compensation paid to an eligible employee also may be increased by up(up to 30 percentpercent), reduced or be reduced by up to 100 percenteliminated entirely based on the employee’s individual performance during that year. Individual performance takes into account both quantitative (financial results,for example) and qualitative (market and economic circumstances, for example) factors. In no event, however, may the total amount paid to an eligible employee exceed 200 percent of the employee’s target amount for the year.
In determining the amount of annual incentive compensation paid to a Named Executive Officer, the Named Executive Officer’s individual performance is considered based upon the annual performance evaluation that Mr. Thulin,Roman, assisted by 3M’s Senior Vice President, Human Resources, doesand other Company employees, completed for each Named Executive Officer (other than himself)himself and Mr. Thulin) and the annual performance evaluation that the Compensation Committee (acting through its Chairman) doescompleted for each of Mr. Roman and Mr. Thulin. These performance evaluations are done according to 3M’s overall performance assessment and management processes, which involve setting annual financial and non-financial goals and objectives for each individual and then assessing the individual’s overall performance against these goals and objectives at the end of the year. While the annual incentive compensation earned by mosteligible 3M executivesemployees generally is determined under the AIP, the annual incentive compensation earned during 2019 by 3M’s Named Executive Officers, as well as the other senior executives whose compensation is decided by the Committee is(including all of the Named Executive Officers) was determined under the Executive Plan approved by 3M’s stockholdersshareholders at the 2007 Annual Meeting. A total of 1820 senior executives participated in this Executive Plan during 2016. This2019. The Company utilized the Executive Plan which isin 2019 to provide performance-based compensation that, at the time action was taken to designate the plan participants for 2019, was intended to provide compensation that isbe exempt from the $1 million annual deduction limit of state tax laws that are similar to Section 162(m) of the Internal Revenue Code, providesas in effect prior to the Tax Cuts and Jobs Act of 2017. Given the number of states that have eliminated the performance-based compensation for whichexception to the performance goal isannual deduction limit since the enactment of the Tax Cuts and Jobs Act of 2017, the Committee decided to include the Company’s Adjusted Net Income.senior executives in the broad-based AIP beginning in 2020.
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Assuming the Company meets the Adjusted Net Income goal, the Executive Plan provides the Committee with discretion to determine the amount of annual incentive compensation paid to 3M’s Named Executive Officers and its other senior executives. The Executive Plan establishes a maximum amount of annual incentive compensation that may be earned by each covered executive for a year (a percentage of the Company’s Adjusted Net Income for such year) and then theCommitteethe Committee utilizes this discretion to pay each covered executive less than this maximum amount based on such factors as it deems relevant. Since the Executive Plan was first adopted in 2007, the Committee has rarely used this discretion to pay a covered executive (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the broad-based AIP (including the individual performance multiplier).
LONG-TERM INCENTIVES
Long-Term Incentives | | |
Percentage of Target 20162019 Total
Direct Compensation: | | Performance Metrics and Weighting: |
CEO – 37%38% Stock Options37%
| | • 20% Earnings per Share Growth |
| 38% Performance Shares Other NEOs – 34% Stock Options
34% Performance Shares
| | Performance Metrics:
- • 40% Relative Organic Volume Growth
-
|
| Other NEOs – 32% Stock Options | | • 20% ROIC
- Return on Invested Capital |
| 32% Performance Shares | | • 20% Free Cash Flow Conversion
- 20% EPS Growth |
3M provides long-term incentive compensation to its executives through an incentive plan approved by the Company’s stockholders.shareholders. This is a typical omnibus-type plan that authorizes the Committee to grant stock options, restricted stock, restricted stock units, stock appreciation rights, performance shares, and other stock awards to employees of the Company.Company and its subsidiaries. The Company provides its executives with this long-term incentive compensation based on 3M common stock in order to effectively motivate such executives to build long-term stockholdershareholder value.
In determining the initialperformance-adjusted target grant value of the stock options and performance shares provided to our Named Executive Officers, the Compensation Committee considers the individual performance of our Named Executive Officers using the performance evaluations described under “Annual Incentive” above.on page 59.
Our Named Executive Officers also may receive special equity awards on an ad hoc basis as new hires or for recognition and retention, promotions, or other purposes.
OurAdjustments for certain special items
In determining the level of achievement of the performance goals established under the AIP and the performance share awards for any given period, the costs, sales and impact on assets and liabilities from acquisitions are excluded in the year that the acquisition is completed. The Committee also makes other adjustments from time to time for special items that it believes are unrelated to the operational performance of the Company for the relevant measurement period (e.g., changes in tax laws or accounting principles, asset write-downs, the impact of restructurings, divestitures or asset sales in which net gains or losses exceed certain thresholds, unusual tax transactions, litigation or claim judgments and settlements, and other special items described in management’s discussion and analysis of financial conditions and results of operations appearing in the Company’s annual/quarterly report to shareholders for the applicable period). These adjustments can have either a positive or negative impact on award payouts.
See Appendix A to this Proxy Statement for additional details concerning the adjustments made to certain metrics under the AIP and the outstanding performance share awards.
Benefits and perquisites
The Company’s Named Executive Officers participate in the same health care, disability, life insurance, pension, and 401(k) benefit plans available to most of the Company’s U.S. employees.
They also are also eligible to receive certain additional benefits and perquisites that are provided for the convenience (financial planning assistance and meals when attending to 3M business, for example), financial security (nonqualified deferred compensation plans and premiums for additional life insurance coverage, for example), or personal security (travel on corporate aircraft and home(home security equipment/monitoring, for example) or personal health (on-site exercise facilities and physical exams, for example) of the executives.
Subject Our Named Executive Officers and other employees also may receive Company tickets for sporting or other events. The Company believes that the benefits and perquisites offered generally are similar to a few exceptions (travel on corporate aircraft, for example), 3M generally providesthose of our peers and assist in attracting and retaining executives. In some cases, there is no incremental cost to the Company associated with providing these additional benefits and perquisites (physical exams and certain tickets to events, for example) or the executives pay all or a substantial portion of the incremental costs incurred by the Company (on-site exercise facilities, for example).
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These additional benefits and perquisites generally are provided on a consistent basis only to a limited group of our most senior U.S. employees (including all of the Named Executive Officers), although enhanced personal security equipment and monitoring is provided only to our executives on aconsistent basis, althoughChief Executive Officer and the type of additional life insurance coverage provided varies based on the date the executiveemployee was first appointed to an executive position. Individuals first appointed to an executive position on or before February 28,August 31, 2003, receive additional life insurance coverage that is provided through a whole life insurance policy or a universal life insurance policy. Individuals first appointed on or after MarchSeptember 1, 2003, including our Chief Executive Officer, receive group term life insurance coverage.
These
The Company also operates aircraft that are used by our senior officers and other employees to conduct company business. For personal security reasons, the Board of Directors requires our Chief Executive Officer to use the Company’s aircraft for all air travel, both business and personal. Our Chief Executive Officer’s spouse and other guests also may accompany him on flights.
The incremental cost to the Company of providing these additional benefits are describedto the Named Executive Officers is reflected in the All Other Compensation Table. No tax gross-ups are provided on any of these additional benefits and perquisites. The entire program applied
New severance plan
In the first half of 2019, the Committee’s independent compensation consultant, FW Cook, conducted an analysis of the benefits and perquisites offered to approximately 100 membersexecutives at companies in the executive peer group. Following completion of senior management during 2016,its work, FW Cook informed the Compensation Committee that maintenance of formal severance arrangements for some or all of their executives was a common practice among executive peer group members. Based upon the results of its analysis, FW Cook recommended that the Committee consider implementing a new executive severance plan in order to support talent recruitment and retention objectives (especially at times when there are uncertainties around restructurings and reductions in force) and to provide a consistent approach to executive departures. With FW Cook’s assistance, the Committee then discussed the pros and cons associated with adoption of a formal severance plan and other related issues over the course of the next nine months, including allthe benefits that a formal plan would provide the Company, the scope of eligible employees, the various termination scenarios that would be covered, and the compensation and benefits that would be offered. After considering the issues, the Committee recommended that the Board adopt a new 3M Executive Severance Plan to provide separation pay and benefits to certain U.S. employees (including each of the Named Executive Officers.Officers) in the event of a qualifying termination of employment. Upon the Committee’s recommendation, the independent members of the Board of Directors unanimously approved the 3M Executive Severance Plan, which became effective on February 3, 2020. Additional details concerning the benefits made available under the plan and the circumstances under which benefits will be made available can be found under “Rights and payments upon a qualifying termination under the severance plan” beginning on page 85.
2017 Proxy Statement | 45
TableSeparation pay
In 2019, we entered into an agreement with Dr. Delgado under which he received $1,750,000 upon the Company’s separation of Contentshis employment without cause and his execution of a release of all claims against the Company and its affiliates. In accordance with the terms of the applicable plans and award agreements, Dr. Delgado remained eligible to receive a prorated annual incentive payment for 2019 based upon 3M’s actual performance and continues to vest in his outstanding stock options and performance shares, except that his 2019 performance shares were prorated based on the portion of the year worked. Dr. Delgado remains subject to existing non-competition, non-solicitation, and confidentiality obligations.
Competitive pay
We compete for executive talent in a global market. In order to ensure that we are providing Total Direct Compensation that is competitive, the Committee annually conducts a rigorous benchmarking process with the help of its independent compensation consultant, FW Cook. During this process, the Committee generally considers available pay data for two peer groups: an executive peer group and a survey peer group.
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Executive Peer Grouppeer group
For 2016,2019, the executive peer group consisted of the 18 companies identified below (which remained the same as in the previous year, except for the elimination of Covidiendue to its merger with Medtronic)year), as recommended by the Committee’s independent compensation consultant and approved by the Committee. The companies in this executive peer group were selected because (1) their performance was monitored regularly by the same market analysts who monitor the performance of 3M (investment peers), and/or (2) they met criteria based on similarity of their business and pay models, market capitalization (based on an eight-quarter rolling average), and annual revenues.revenues and compete with 3M for talent or capital.
| (Dollars in millions) | | | | |
LATEST FOUR QUARTERS
REVENUES | | | TRAILING 8-QUARTER AVERAGE
MARKET CAPITALIZATION | |
| General Electric Company | $120,273 | | Johnson & Johnson | $301,663 |
| Johnson & Johnson | $71,890 | | General Electric Company | $275,757 |
| The Procter & Gamble Company | $65,231 | | The Procter & Gamble Company | $221,109 |
| United Technologies Corporation | $57,244 | | Medtronic plc | $107,848 |
| Dow Chemical Company | $48,158 | | 3M Company | $101,422 |
| Honeywell International, Inc. | $39,302 | | United Technologies Corporation | $87,349 |
| Caterpillar Inc. | $38,537 | | Honeywell International, Inc. | $84,911 |
| 3M Company | $30,109 | | Danaher Corporation | $60,562 |
| Medtronic plc | $29,361 | | Dow Chemical Company | $59,812 |
| Deere & Company | $26,545 | | E. I. du Pont de Nemours and Company | $57,746 |
| E. I. du Pont de Nemours and Company | $24,594 | | Caterpillar Inc. | $47,726 |
| Eaton Corporation plc | $19,747 | | Kimberly-Clark Corporation | $44,491 |
| Kimberly-Clark Corporation | $18,202 | | Illinois Tool Works Inc. | $37,905 |
| Danaher Corporation | $16,882 | | Emerson Electric Co. | $34,441 |
| Emerson Electric Co. | $14,401 | | Eaton Corporation plc | $28,519 |
| Illinois Tool Works Inc. | $13,599 | | Deere & Company | $28,115 |
| TE Connectivity Ltd. | $12,468 | | TE Connectivity Ltd. | $24,060 |
| Corning Incorporated | $9,390 | | Corning Incorporated | $23,209 |
| 75th Percentile | $48,158 | | 75th Percentile | $87,349 |
| Mean | $36,813 | | Mean | $89,719 |
| Median | $26,545 | | Median | $57,746 |
| 25th Percentile | $16,882 | | 25th Percentile | $34,441 |
| 3M Percentile Rank | 57% | | 3M Percentile Rank | 79% |
| (Dollars in millions) | | | | Trailing Eight-Quarter | | |
| Latest Four Quarters Revenues | | | | Average Market Capitalization | | |
| General Electric Company | | $95,214 | | Johnson & Johnson | | $357,993 |
| Johnson & Johnson | | $82,059 | | The Procter & Gamble Company | | $258,771 |
| United Technologies | | $77,046 | | Medtronic plc | | $132,027 |
| The Procter & Gamble Company | | $69,594 | | Honeywell International, Inc. | | $116,945 |
| Caterpillar Inc. | | $53,800 | | United Technologies Corporation | | $109,629 |
| Deere & Company | | $38,880 | | 3M Company | | $106,606 |
| Honeywell International, Inc. | | $36,709 | | General Electric Company | | $ 91,417 |
| 3M Company | | $32,136 | | Danaher Corporation | | $ 91,106 |
| Medtronic plc | | $31,062 | | Caterpillar Inc. | | $ 77,953 |
| Johnson Controls International plc | | $24,080 | | Deere & Company | | $ 50,140 |
| Eaton Corporation plc | | $21,390 | | Illinois Tool Works Inc. | | $ 49,275 |
| Kimberly-Clark Corporation | | $18,450 | | Kimberly-Clark Corporation | | $ 43,137 |
| Emerson Electric Co. | | $18,376 | | Emerson Electric Co. | | $ 42,392 |
| Danaher Corporation | | $17,911 | | Eaton Corporation plc | | $ 35,127 |
| Illinois Tool Works Inc. | | $14,109 | | Johnson Controls International plc | | $ 31,431 |
| TE Connectivity Ltd. | | $13,269 | | TE Connectivity Ltd. | | $ 29,847 |
| Corning Incorporated | | $11,503 | | Corning Incorporated | | $ 23,820 |
| 75th Percentile | | $57,749 | | 75th Percentile | | $111,458 |
| Mean | | $38,966 | | Mean | | $ 96,313 |
| Median | | $27,571 | | Median | | $ 64,047 |
| 25th Percentile | | $18,260 | | 25th Percentile | | $ 40,576 |
| 3M Percentile Rank | | 55% | | 3M Percentile Rank | | 72% |
All data shown was obtained from Standard & Poor’s Capital IQ. Revenues are stated in millions for the latest available four quarterquarters disclosed as of February 28, 2017.2020. Market Capitalizations are stated in millions as of February 28, 2017. No2020. Given the significant impact that the spinoffs of two independent public companies (Dow Inc. and Corteva, Inc.) had on the revenues and market capitalization of DuPont de Nemours, Inc. (formerly DowDuPont Inc.), the table above does not include information is provided for Tyco International plc, which completed its combination with Johnson Controls, Inc., effective as of September 2, 2016, and is now known as “Johnson Controls International plc.”such entity.
The Committee, with assistance from its independent compensation consultant, periodically reviews the composition of the executive peer group to determine whether any changes are appropriate. At the recommendation ofFollowing its independent compensation consultant,review in August 2019, the Committee replaced Parker-Hannifin Corporation with General Electric Company in August 2016 to more closely align the composition of the executive peer group with our investment peers. Following the completion of Tyco International’s combination with Johnson Controls and its related restructuring, the Committee also replaced Tyco International with JohnsonControls International plc in January 2017, as recommended by the Committee’s independent compensation consultant. Thesedetermined that no changes did not affect 2016 compensation decisions made by the Committee.were needed at that time.
The Company receives pay data and information on the executive compensation practices at the companies in 3M’s executive peer group from Aon Hewitt and FW Cook.
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Survey Peer Grouppeer group
For 2016,2019, there arewere approximately 170250 comparator companies in the survey peer group. Although the number and identity of the companies varies from year to year and from survey to survey, each of the companies included in the survey peer group are either part of the Standard& Poor’s 500 Index or havehad annual revenue exceeding $20$10 billion. All of the companies in the survey peer group also participate in one or more executive compensation surveys obtained from three consulting firms (Aon, Hewitt, FW Cook, and Willis Towers Watson). Pay data for the survey peer group is statistically regressed to recognize the different sizes of the comparator companies (based on annual revenues) as compared to the size of 3M. The Committee does not review the identity of the companies in the survey peer group.
How the Committee Uses Competitive Pay Dataestablishes target compensation levels using competitive pay data
The Committee considers the pay data from the Peer Groups as a reference point when establishing the target Total Cash Compensation and the initial target value of long-term incentive compensation to be provided to our executives in any given year.year before consideration of individual circumstances. For each executive,Named Executive Officer, the Committee generally triesCommittee’s general approach is to set such amounts at or very near the median for the corresponding items of compensation provided to similarly situated executives in the executive peer group. In situations where the Committee believes that there is insufficient market data for one or more positions, the Committee starts with the median amountforamount for a similar position and adjusts that amount up or down (generally not more than 15 percent) to arrive at a number that it uses as the “median” for that position. The final amounts of target amountsTotal Cash Compensation established by the Committee for each executive may vary (generallybased on individual circumstances, but generally are set between 80 and 120 percent of the relevant median) based on individual circumstances.applicable median. When setting the target amounts for any individual executive, the Committee may consider the breadth and complexity of the executive’s duties and responsibilities, the scores assigned to the executive for his or her leadership behaviors (e.g., customer focus, strategic mindset, operational leadership), the financial and operational performance of the business activities for which the executive is responsible, experience and time in their current position, internal pay equity, individual performance, and such other factors as the Committee determines to be appropriate. The pay data for the survey peer group is used by the Committee to assess the reasonableness of the benchmarking results for each executive position benchmarked, helping to ensure that the Company’s compensation objectives are being met.
The Committee also uses information on the executive compensation practices at companies in the executive peer group when considering design changes to the Company’s executive compensation program. Overall, the Company believes that use of this information from the Peer Groups enables the Committee to create better alignment between executive pay and performance and to help ensure that 3M can attract and retain high-performing executive leaders.
Tally sheets
The Committee periodically reviews a report comparing the amounts of compensation actually received by the Company’s Named Executive Officers to the amounts reported in its annual proxy statement and summarizing the compensation that would be owed to such individuals in the event of the termination of their employment under various circumstances. Reviewing this report helps theCommitteethe Committee better understand the Company’s potential obligations to the Named Executive Officers following the termination of their employment. It also helps the Committee better assess the risk of any of the Named Executive Officers leaving the Company prematurely because the Company is not providing sufficient retention incentives.
Tax considerations
Section 162(m) of the Internal Revenue Code prohibitsdisallows a company from deductingtax deduction to public companies for compensation paid per year in excess of $1 million to certain current and former executive officers of the Company (although there historically was an exception to this $1 million annual limitation for performance-based compensation if certain requirements set forth in Section 162(m) and the applicable regulations were met and for a company’s chief financial officer and former executive officers). As a result, we expect that compensation paid in anyper year to any Covered Employee, but this limit does not apply to performance-based compensation that meets certain requirements under Section 162(m). For this purpose, the term “Covered Employee” means our Chief Executive Officer and each other Named Executive Officer whose compensation is reported in the Summary Compensation Table for the preceding year by reason of being among the three most highly compensatedOfficers and certain other current and former executive officers for that year, but does not include the Chief Financial Officer. TheCommittee continues to emphasize performance-based compensation for executives. However, the Committee believes that its primary responsibility is to provide a compensation program that attracts, retains, and rewards the executive talent necessary for the Company’s success. Consequently, in any year, the Committee may authorize compensation in excess of $1 million generally will not be deductible, subject to limited exceptions. Interpretations of and changes in applicable tax laws and regulations as well as other factors beyond the control of the Committee can affect deductibility of compensation, and there can be no assurance that is notcompensation paid to our executive officers will be tax deductible. The Committee has in prior years considered “performance-based compensation” for purposesthe tax implications (including the potential lack of deductibility under Section 162(m).) when making compensation decisions but reserves the right to make future compensation decisions based on other factors. The Committee recognizesalso reserves the right to make changes or amendments to existing compensation programs and arrangements, including changes or amendments that may result in the loss of tax deductions, if the tax deduction may be unavoidable under these circumstances.Committee believes it is in the best interests of the Company and its shareholders to do so.
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Say-on-Pay Advisory Approval of Executive Compensation |
At our 2016 Annual Meeting, we conducted an advisory voteMeaning of stockholders with respect to the compensation of our named executive officers as disclosed in last year’s Proxy Statement. Approximately 96 percent of votes cast on this item approved the compensation of our named executive officers as disclosed in the 2016 Proxy Statement. While the approval was advisory in nature, the Committee believes the outcome of this vote servesas confirmation that an overwhelming majority of our stockholders believe that the pay of the named executive officers was appropriately aligned with the performance of the Company as well as the interests of our stockholders. As a result, the Committee chose not to make any changes in our executive compensation programs or policies or the compensation of any Named Executive Officer based on the favorable outcome of this vote.certain terms
Except as otherwise noted, capitalized terms used in this Compensation Discussion and Analysis have the meaning specified below.
ADJUSTED NET INCOMEAdjusted Net Income | | means the net income of 3M as reported in its Consolidated Statement of Income, as adjusted to exclude special items. |
AIP | | means the broad-based Annual Incentive Plan by which the Company provides annual incentive compensation to approximately 30,00035,000 eligible employees. |
COMMITTEE
Committee | | means the Compensation Committee of the Board of Directors of 3M Company. |
ECONOMIC PROFIT
Economic Profit | | means the adjusted net income of 3M (net income including non-controlling interest plus after-tax interest expense, as reported in its Consolidated Statement of Income) reported in its Consolidated Statement of Income) or a business unit operating income, plus interest income and minus income taxes, adjusted to exclude certain special items and the impact of acquisitions or divestitures in the year each acquisition or divestiture is completed (unless such acquisition or divestiture is included in the operating plan for the business unit), less a charge (10 percent in 2016)2019) for the capital used to generate such operating income. The Economic Profit of 3Mmetric measured versus 3M’s prior year results is calculated using total Company average invested capital (equity plus debt, as reported in its Consolidated Balance Sheet), while the Economic Profit of a business unitmetric measured versus plan is calculated using only accounts receivable and inventories of such business unit as capital. |
EPS GROWTH
Earnings per Share (EPS) Growth | | means the percentage increase or decrease in 3M’s diluted earnings per share attributable to 3M common stockholdersshareholders (as reported in its Consolidated Statement of Income) for a year as compared to the previous year, in each case, as adjusted to exclude certain special items. |
EXECUTIVE PLAN
Executive Plan | | means the Executive Annual Incentive Plan by which the Company provides annual incentive compensation to the Named Executive Officers as well as certain other executives. |
FREE CASH FLOW
CONVERSION
Free Cash Flow Conversion | | means the sum of 3M’s operating cash flows minus capital expenditures, divided by net income. income, as adjusted to exclude certain special items. |
NEW PRODUCT VITALITY
INDEX
GAAP | | means generally accepted accounting principles in the percentage of the Company’s total sales derived from products introduced within the last five years. United States. |
ORGANIC LOCAL
CURRENCY SALES
GROWTH
Local Currency Sales | | means the net sales of 3M (as reported in its Consolidated Statement of Income) or a business unit, in local currency, adjusted to exclude the impact of acquisitions or divestitures in the year each acquisition or divestiture is completed (unless such acquisition or divestiture is included in the operating plan for the business unit). |
PEER GROUPS
Organic Local Currency Sales Growth | | means the percentage amount by which 3M’s net sales (as reported in its Consolidated Statement of Income) for a year increase or decrease as compared to the previous year, in each case, adjusted to neutralize the sales attributable to acquisitions or divestitures for the 12-month period following the date each acquisition or divestiture is completed and to exclude currency effects. |
| Peer Groups | | means both 3M’s executive peer group of 18 companies,and the survey peer group, each as described in the “Competitive Pay”pay” section of this Compensation Discussion and Analysis and the survey peer group.Analysis. |
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RELATIVE ORGANIC
VOLUME GROWTHRelative Organic Volume Growth | | means the percentage amount by which the percentage increase or decrease in 3M’s net sales (as reported in its Consolidated Statement of Income) for a year as compared to the previous year exceeds the percentage increase or decrease in worldwide real sales growth over the same period, as reflected in the Worldwide Industrial Production Index published by Global Insight. For this purpose, 3M’s net sales are adjusted to excludeneutralize price and currency effects and, during the 12-month period following the date of each acquisition or divestiture, the sales attributable to acquisitionssuch acquired or divestitures for the 12 months following the date each acquisitiondivested business or divestiture is completed, and to exclude price and currency effects, exceeds worldwide real sales growth as reflected in the worldwide Industrial Production Index, as published by Global Insight. products. |
RETURN ON INVESTED
CAPITAL
Return on Invested Capital | | means the operating income of 3M (as reported in its Consolidated Statement of Income), plus interest income and minus income taxes, adjusted to exclude certain special items and the impact of acquisitions or divestitures in the year each acquisition or divestiture is completed, divided by the average invested capital (equity plus debt, as reported in its Consolidated Balance Sheet). |
TOTAL CASH
COMPENSATION
Total Cash Compensation | | means the total of an individual’s base salary and annual incentive compensation. |
TOTAL DIRECT
COMPENSATION
Total Direct Compensation | | means the total of an individual’s Total Cash Compensation plus the compensation value of their annual long-term incentive compensation awards (which is based on their grant date fair value as measured under accounting standards). |
SECTION III: How We Paid Our Named Executive Officers In 2016 |
2016 Base Salary and Target Total Cash Compensation64 | 3M Company |
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Section III: How we paid our named executive officers in 2019
2019 base salary and target total cash compensation
The Committee considers changes in the base salaries and target Total Cash Compensation of the Named Executive Officers at least annually. As part of its normal process to progress senior executives to a level of compensation that is commensurate with their responsibilities, the Committee also periodically considers adjustments to the base salaries and target Total Cash Compensation of senior executives whose rate of pay is set below the market median. All adjustments are made only after considering the most recent compensation data available to the Committee for executives with similar responsibilities at companies in the Peer Groups, each individual’s place in the salarytarget total cash compensation range for his or her position, and the individual’s job performance.
At the time Mr. Gangestad and Mr. Roman were appointed to their current positions, and consistent with our normal process, each executive was given a base salary and target Total Cash Compensation below the median for such elements paid to executives serving in similar positions at companies in the Peer Groups. Since that time, the Committee has periodically reviewed each executive’s performance and approved increases that are intended to bring his base salary and target Total Cash Compensation closer to the median.
In January 2016,February 2019, the Committee approved (and, in the followingcase of Mr. Roman, the independent members of the Board ratified) the increases in the base salarysalaries and target Total Cash Compensation shown below for the Named Executive Officers following completion of their annual performance evaluations. No changes were made to Mr. Gangestad andThulin’s, Ms. Bushman’s, Dr. Delgado’s or Mr. Roman.Vale’s base salary or target Total Cash Compensation at that time. The adjustments to Mr. Roman’s compensation primarily were intended to progress his compensation closer to the market median.
| NAME | | PREVIOUS
BASE
SALARY | | NEW BASE
SALARY
EFFECTIVE
2/1/16 | | %
INCREASE | | PREVIOUS TARGET
TOTAL CASH
COMPENSATION | | NEW TARGET
TOTAL CASH
COMPENSATION
EFFECTIVE
2/1/16 | | %
INCREASE |
| Nicholas C. Gangestad | | | $627,327 | | | | $664,967 | | | 6% | | | $1,254,655 | | | | $1,329,934 | | | 6% |
| Michael F. Roman | | | $691,076 | | | | $732,541 | | | 6% | | | $1,278,490 | | | | $1,355,199 | | | 6% |
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| Name | | Previous
Base Salary
($) | | New
Base Salary
Effective
4/1/19
($) | | %
Increase | | Previous
Target
Total Cash
Compensation
($) | | New Target
Total Cash
Compensation
Effective
4/1/19
($) | | %
Increase |
| Michael F. Roman | | 1,199,952 | | 1,299,948 | | 8% | | 3,120,000 | | 3,380,000 | | 8% |
| Nicholas C. Gangestad | | 841,495 | | 870,105 | | 3% | | 1,682,989 | | 1,740,211 | | 3% |
| Ashish K. Khandpur | | 614,386 | | 638,962 | | 4% | | 1,136,700 | | 1,182,168 | | 4% |
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As a result of these increases, Mr. Gangestad’s and Mr. Roman’s target Total Cash Compensation wasrepresented 90 percent of the median value of the corresponding compensation provided to chief executive officers at or near 85companies in the executive peer group, and the target Total Cash Compensation of Mr. Gangestad and Mr. Khandpur represented 102 percent and 94 percent, respectively, of the median value of the corresponding compensation provided to executives with similar responsibilities at companies in the executive peer group.
In March 2019, the Committee approved the adjustments in base salaries and target Total Cash Compensation shown below in connection with Mr. Khandpur’s appointment to Executive Vice President, Transportation and Electronics Business Group, and Mr. Vale’s appointment to Executive Vice President, Safety and Industrial Business Group. The adjustments were intended to better align the target Total Cash Compensation of each executive with the breadth of responsibilities accompanying their expanded roles after the realignment of the Company from five to four business groups.
| Name | | Previous
Base Salary
($) | | New
Base Salary
Effective
7/1/19
($) | | %
Increase | | Previous
Target
Total Cash
Compensation
($) | | New Target
Total Cash
Compensation
Effective
7/1/19
($) | | %
Increase |
| Ashish K. Khandpur | | 638,962 | | 706,434 | | 11% | | 1,182,168 | | 1,307,000 | | 11% |
| Michael G. Vale | | 710,703 | | 745,890 | | 5% | | 1,314,899 | | 1,380,000 | | 5% |
As a result of these increases, the target Total Cash Compensation of these Named Executive Officers represented 90 percent and 95 percent, respectively, of the median value of the corresponding compensation provided to executives with similar responsibilities at companies in the executive peer group.
In February 2016, the Committee approved (and in the case of Mr. Thulin, the independent members of the Board of Directors ratified) the increases in the base salariesand target Total Cash Compensation shown below for the Named Executive Officers following completion of their annual performance evaluations. Mr. Delgado’s and Mr. Vale’s increases were both based on a combination of strong operational performance and market adjustment to bring their target Total Cash Compensation closer to the median paid to executives serving in similar positions at companies in the executive peer group.
| NAME | | PREVIOUS
BASE
SALARY | | NEW BASE
SALARY
EFFECTIVE
4/1/16 | | %
INCREASE | | PREVIOUS TARGET
TOTAL CASH
COMPENSATION | | NEW TARGET
TOTAL CASH
COMPENSATION
EFFECTIVE
4/1/16 | | %
INCREASE |
| Inge G. Thulin | | | $1,462,177 | | | | $1,491,180 | | | 2% | | | $3,712,051 | | | | $3,877,224 | | | 4% |
| Nicholas C. Gangestad | | | $664,967 | | | | $679,929 | | | 2% | | | $1,329,934 | | | | $1,359,858 | | | 2% |
| Michael F. Roman | | | $732,541 | | | | $748,966 | | | 2% | | | $1,355,199 | | | | $1,385,691 | | | 2% |
| Joaquin Delgado | | | $581,198 | | | | $632,385 | | | 9% | | | $1,075,215 | | | | $1,170,000 | | | 9% |
| Michael G. Vale | | | $585,464 | | | | $632,385 | | | 8% | | | $1,083,107 | | | | $1,170,000 | | | 8% |
As a result of these increases, the target Total Cash Compensation of these Named Executive Officers ranged from 87 to 111 percent of the median value of the corresponding compensation provided to executives with similar responsibilities at companies in the executive peer group.
In August 2016, the Committee approved the increases in the base salary and target Total Cash Compensation shown below for the Named Executive Officers (other than Mr. Thulin). The increases were designed to bring each executive’s target Total Cash Compensation closer to the median paid to executives serving in similar positions at companies in the executive peer group, consistent with individual performance.
| NAME | | PREVIOUS
BASE
SALARY | | NEW BASE
SALARY
EFFECTIVE
10/1/16 | | %
INCREASE | | PREVIOUS TARGET
TOTAL CASH
COMPENSATION | | NEW TARGET
TOTAL CASH
COMPENSATION
EFFECTIVE
10/1/16 | | %
INCREASE |
| Nicholas C. Gangestad | | | $679,929 | | | | $713,925 | | | 5% | | | $1,359,858 | | | | $1,427,850 | | | 5% |
| Michael F. Roman | | | $748,966 | | | | $771,435 | | | 3% | | | $1,385,691 | | | | $1,427,262 | | | 3% |
| Joaquin Delgado | | | $632,385 | | | | $670,328 | | | 6% | | | $1,170,000 | | | | $1,240,200 | | | 6% |
| Michael G. Vale | | | $632,385 | | | | $682,976 | | | 8% | | | $1,170,000 | | | | $1,263,600 | | | 8% |
As a result of these increases, each of the executives’ target Total Cash Compensation was at or near the median value of the corresponding compensation provided to executives with similar responsibilities at companies in the executive peer group, except that Mr. Gangestad’starget Total Cash Compensation was at 91 percent of the median value. Provided that Mr. Gangestad continues to perform at a satisfactory level, the Committee expects to continue increasing his compensation periodically until his target Total Cash Compensation is at or near the median.
50 | 3M
Table of Contents
2019 annual incentive
During 2016,2019, the Committee provided the Named Executive Officers with the opportunity to earn short-term incentive compensation under the Executive Plan. Each Named Executive Officer’s target annual incentive for the year was equal to the difference between his or her target Total Cash Compensation and annual base salary. Each of the Named Executive Officers was assigned to an appropriate business unit (the entire Company, in some cases) established under the AIP for the purpose of measuring business performanceduring 2016performance during 2019 and converting that performance into a payout based ondetermined in accordance with the AIP’s formulas.terms of the AIP. While none of the Named Executive Officers arewere covered by the AIP during 2019, the Committee rarely uses its discretion under the Executive Plan to pay the covered executives (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the AIP (including the individual performance multiplier).
The amounts payable under the AIP for 20162019 were based on the following performance results for the Company and, as applicable, the respective business units to which the Named Executive Officers were assigned:assigned for all or part of the year:
(DOLLAR AMOUNTS IN MILLIONS)
BUSINESS UNIT | | LOCAL CURRENCY SALES
(50%) | | ECONOMIC PROFIT
(20%) | | TOTAL 3M ECONOMIC
PROFIT VS. PRIOR YEAR
(30%) | | WEIGHTED
AVERAGE
PAYOUT %
BASED ON
PAYOUT
CURVE |
| PLAN | | ACTUAL | | ACTUAL
VS.
PLAN | PLAN | | ACTUAL | | ACTUAL
VS.
PLAN | PRIOR
YEAR | | ACTUAL | | ACTUAL
VS.
PRIOR
YEAR |
| Total Company | | | 31,137 | | | | 30,466 | | | 98% | | | 2,864 | | | | 2,897 | | | 101% | | 2,975 | | 2,897 | | 97% | | 98% |
| Industrial Business Group | | | 10,590 | | | | 10,440 | | | 99% | | | 1,469 | | | | 1,375 | | | 94% | | 2,975 | | 2,897 | | 97% | | 95% |
| Consumer Business Group | | | 4,561 | | | | 4,508 | | | 99% | | | 633 | | | | 590 | | | 93% | | 2,975 | | 2,897 | | 97% | | 94% |
| Health Care Business Group | | | 5,653 | | | | 5,618 | | | 99% | | | 1,179 | | | | 1,079 | | | 92% | | 2,975 | | 2,897 | | 97% | | 94% |
| | | Local Currency Sales
(50%) | | Economic Profit
(20%) | | Total 3M Economic
Profit vs. Prior Year
(30%) | | Weighted
Average
Payout % |
(Dollar Amounts in Millions)
Business Unit | | Plan | | Actual | | Actual
vs.
Plan | | Plan | | Actual | | Actual
vs.
Plan | | Prior Year | | Actual | Actual
vs.
Prior Year | | Based On
Payout
Curve |
| Total Company | | 33,402 | | 32,114 | | 96% | | 5,693 | | 4,808 | | 84% | | 3,752 | | 3,229 | 86% | | 62% |
| International Operations | | 20,293 | | 19,468 | | 96% | | 3,751 | | 3,208 | | 86% | | 3,752 | | 3,229 | 86% | | 75% |
| Transportation and Electronics Business Group | | 10,351 | | 9,754 | | 94% | | 2,063 | | 1,573 | | 76% | | 3,752 | | 3,229 | 86% | | 57% |
| Safety and Industrial Business Group | | 12,653 | | 11,910 | | 94% | | 2,166 | | 1,791 | | 83% | | 3,752 | | 3,229 | 86% | | 57% |
| Health Care Business Group | | 7,100 | | 6,927 | | 98% | | 1,481 | | 1,421 | | 96% | | 3,752 | | 3,229 | 86% | | 85% |
| Consumer Business Group | | 5,189 | | 5,512 | | 99% | | 750 | | 721 | | 96% | | 3,752 | | 3,229 | 86% | | 87% |
Since the Company satisfied the Executive Plan’s performance objective by earning Adjusted Net Income of $5.05$5.3 billion for 2016,2019, the plan authorized the Committee to approve payments of annual incentive compensation to each Named Executive Officer equal to a maximum of one-quarter of one percent of such Adjusted Net Income ($12,625,000). As explained above, however,13 million), subject to the Executive Plan authorizes the CommitteeCommittee’s negative discretion to pay each covered executive any amount less than this maximum amount basedonbased on such factors as it deems relevant.relevant, including the goals set forth under the AIP. At its meeting in February 20172020 and consistent with its past practice, the Committee approved (and with respect to Mr. Roman and Mr. Thulin, the independent members of the Board of Directors ratified) a payment to each executive equal to the amount such executive would have received had he or she been participating in the broad-based AIP (including the individual performance multiplier), as shown below..
| NAME | | TARGET 2016
ANNUAL
INCENTIVE* | | ACTUAL 2016
ANNUAL
INCENTIVE | | PAYOUT AS A
% OF TARGET |
| Inge G. Thulin | | | $2,352,132 | | | | $2,303,678 | | | 98% |
| Nicholas C. Gangestad | | | $681,641 | | | | $667,599 | | | 98% |
| Michael F. Roman | | | $635,143 | | | | $602,433 | | | 95% |
| Joaquin Delgado | | | $534,791 | | | | $503,290 | | | 94% |
| Michael G. Vale | | | $538,371 | | | | $506,664 | | | 94% |
* These amounts are prorated to reflect the increases in Total Cash Compensation described above that resulted in corresponding increases in each individual’s target annual incentive compensation.
| Name | | Target 2019
Annual
Incentive*
($) | | Actual 2019
Annual
Incentive
($) | | Payout
as a %
of Target |
| Michael F. Roman | | 2,040,051 | | 1,256,671 | | 62% |
| Inge G. Thulin | | 620,548 | | 382,259 | | 62% |
| Nicholas C. Gangestad | | 862,953 | | 531,579 | | 62% |
| Ashish K. Khandpur | | 581,003 | | 325,583 | | 56% |
| Julie L. Bushman | | 680,538 | | 507,681 | | 75% |
| Joaquin Delgado | | 294,066 | | 256,137 | | 87% |
| Michael G. Vale | | 626,632 | | 396,967 | | 63% |
| * | These amounts are prorated to reflect the increases in Total Cash Compensation described above that resulted in corresponding increases (if any) in each individual’s target annual incentive compensation. The amounts shown for Mr. Thulin and Dr. Delgado have been prorated to reflect their separation from the Company, effective as of June 1, 2019, and July 1, 2019, respectively. |
Long-Term Incentives — 2016 Annual Grants66 | 3M Company |
Table of Contents
Long-term incentives — 2019 annual grants
After considering the most recent long-term incentive compensation data available from companies in the Peer Groups and after taking into account its evaluation of their individual performance during 2015,2018 and Mr. Thulin’s anticipated retirement in 2019, the Committee approved (and in the case of Mr. Roman and Mr. Thulin, the independent members of the Board of Directors ratified) the following performance-adjusted target compensation values for the Named ExecutiveOfficers’ 2016Executive Officers’ 2019 long-term incentive compensation awards. For ease of comparison, the following table below also shows the performance-adjusted target compensation values of the Named Executive Officers’ 20152018 long-term incentive compensation awards.
2017 Proxy Statement | 51
| Name | | Performance-
Adjusted
Target Grant
Value of 2018
Annual Awards
($) | | Performance-
Adjusted
Target Grant
Value of 2019
Annual Awards
($) |
| Michael F. Roman | | 4,720,000* | | 10,000,000 |
| Inge G. Thulin | | 9,000,000* | | 4,687,000 |
| Nicholas C. Gangestad | | 4,673,500 | | 3,640,000 |
| Ashish K. Khandpur | | 2,268,290 | | 3,496,080 |
| Julie L. Bushman | | 2,913,400 | | 2,330,720 |
| Joaquin Delgado | | 2,268,290 | | 1,165,360 |
| Michael G. Vale | | 2,268,290 | | 2,268,290 |
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| NAME | | INITIAL ESTIMATED
VALUE OF 2015
ANNUAL AWARDS | | INITIAL ESTIMATED
VALUE OF 2016
ANNUAL AWARDS |
| Inge G. Thulin | | | $11,000,168 | | | | $11,000,156 | |
| Nicholas C. Gangestad | | | $2,792,085 | | | | $2,956,626 | |
| Michael F. Roman | | | $1,808,553 | | | | $2,022,295 | |
| Joaquin Delgado | | | $2,015,810 | | | | $2,222,672 | |
| Michael G. Vale | | | $2,047,344 | | | | $2,257,406 | |
| * | Excludes the target grant value of special grants made in 2018 in connection with the changes in Mr. Roman’s and Mr. Thulin’s roles and responsibilities. If such values had been included, the performance-adjusted target grant value of Mr. Roman’s and Mr. Thulin’s 2018 annual awards would have been $7,220,000 and $9,750,000, respectively. |
Consistent with market practices at companies in the Peer Groups, during 2016,2019, the Committee chose to deliver one-half of the initial estimatedperformance-adjusted target grant value of the annual long-term incentive compensation awards provided to 3M’s Named Executive Officers (other than Mr. Thulin) in the form of stock options and the remaining one-half in the form of performance shares. Mr. Thulin’s awards were delivered approximately 33 percent in the form of stock options and 67 percent in the form of performance shares given the anticipated forfeiture of one half of such performance shares upon his anticipated retirement pursuant to the terms of the original grant agreements.
2016 Stock Options
2019 stock options
Stock options granted to the Named Executive Officers in 20162019 as part of their long-term incentive compensation have the following features:
●• | an exercise price equal to the closing price of a share of 3M common stock on the NYSE for the date of grant; |
●• | a ratable three-year vesting schedule; and |
●• | a maximum term of 10 years. |
2016 Performance Share Awards
2019 performance share awards
Performance shares awarded in 20162019 will result in the issuance of actual shares of 3M common stock to 3M’s Named Executive Officers if the Company achieves certain financial goals over the years 2016, 2017,2019, 2020, and 2018.2021. The number of shares of 3M common stock that will be issued for each 20162019 performance share is linked to the Company’s performance as measured by the criteria of Earnings per Share Growth (20 percent weighting), Relative Organic Volume Growth (40 percent weighting), Return on Invested Capital (20 percent weighting), and Free Cash Flow Conversion (20 percent weighting), and Earnings Per Share Growth (20 percent weighting). These performance criteria were selected because they are aligned with 3M’s operating plan and the financial objectives communicatedto stockholderscommunicated to shareholders, and the Committee believes that they are important drivers of long-term stockholdershareholder value. Attainment of these four independent performance criteria is measured separately for each calendar year during the three-year measurement period, with each year weighted as follows: 20162019 — 50 percent; 20172020 — 30 percent; and 20182021 — 20 percent. However, the formulastargets by which the Company’s performance is measured do not change over the three-year performance period.
The
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Excluding shares issued pursuant to dividend equivalent rights, the actual number of shares of 3M common stock that will be delivered at the end of the three-year performance period ending on December 31, 2018,2021, may be anywhere from 0 percent to 200 percent of the target number of performance shares awarded, depending on the performance of the Company during the performance period. However, an executive may forfeit all or a portion of such shares if he or she does not remain employed by the Company throughout the three-year performance period.
For awards tied to the achievement of performance goals over the years 2016, 2017,2019, 2020, and 2018,2021, the Committee approved the following formulastargets for determining the number of shares of 3M common stock to be delivered for each performance share awarded, with the total number of shares actually delivered being the sum of the number of shares earned as a result of the Company’s achievement of each of the four financial goals.goals, plus the number of shares issued pursuant to dividend equivalent rights granted with respect to the shares earned. In the event that the Company’s performance as measured by any of these performance criteria falls between any of the percentages listed below, the number of shares of 3M common stock earned will be determined by linear interpolation.
RELATIVE
ORGANIC
VOLUME GROWTH | | % OF
PERFORMANCE
SHARES | | | RETURN
ON
INVESTED
CAPITAL | | % OF
PERFORMANCE
SHARES | | | EPS
GROWTH | | % OF
PERFORMANCE
SHARES | | | FCF
CONVERSION | | % OF
PERFORMANCE
SHARES | | | TOTAL % OF
PERFORMANCE
SHARES |
| below -1.0% | | | 0% | | | | below 18.0% | | | 0% | | | | below 7.0% | | | 0% | | | | below 95.0% | | | 0% | | | | | 0% | |
| -1.0% | | | 8% | | | | 18.0% | | | 4% | | | | 7.0% | | | 4% | | | | 95.0% | | | 4% | | | | | 20% | |
| 0.5% | | | 40% | | | | 20.0% | | | 20% | | | | 9.0% | | | 20% | | | | 100.0% | | | 20% | | | | | 100% | |
| 2.0% or | | | 80% | | | | 23.0% or | | | 40% | | | | 12.0% or | | | 40% | | | | 105.0% or | | | 40% | | | | | 200% | |
| higher | | | | | | | higher | | | | | | | higher | | | | | | | higher | | | | | | | | | |
| | | | | | Relative | | | | | | | | | | | | | | | | |
| | | % of | | Organic | | % of | | Return on | | % of | | | | % of | | Total % of |
| EPS | | Performance | | Volume | | Performance | | Invested | | Performance | | FCF | | Performance | | Performance |
| Growth | | Shares | | Growth | | Shares | | Capital | | Shares | | Conversion | | Shares | | Shares |
| below 4.0% | | 0% | | | below -1.0% | | 0% | | | below 20.0% | | 0% | | | below 95.0% | | 0% | | | 0% | |
| 4.0% | | 4% | | | -1.0% | | 8% | | | 20.0% | | 4% | | | 95.0% | | 4% | | | 20% | |
| 8.0% | | 20% | | | 0.5% | | 40% | | | 22.0% | | 20% | | | 100.0% | | 20% | | | 100% | |
| 12.0% or higher | | 40% | | | 2.0% or higher | | 80% | | | 25.0% or higher | | 40% | | | 105.0% or higher | | 40% | | | 200% | |
The above formulastargets are not a prediction of how 3M will perform during the years 20162019 through 20182021 or any other period in the future. The sole purpose of these formulas, which were approved by the Committee in February 2016,2019, is to establish a method for determining the number of shares of 3M common stock to be delivered for the performance share awards described above. 3M is not providing any guidance, nor updating any prior guidance, of its future performance with the disclosure of these formulas, and you are cautioned not to rely on these formulas as a prediction of 3M’s future performance.
52 | 3M
Table of ContentsLong-term incentives — all outstanding performance share awards
Long-Term Incentives — All Outstanding Performance Share Awards |
The Company’s annual award cycle and three-year performance periods result in an overlap of awards. For example, the performance goals for 20162019 performance share awards relate to the years 2016, 2017,2019, 2020, and 2018.2021. Similarly, the performance goals for 20152018 performance share awards relate to the years 2015, 2016,2018, 2019, and 2017,2020, and so on, as shown below. Performance against the goals established for each award are measured separately for each calendar year during the measurement period, with each year weighted as shown below in parenthesis. The Committee believes this structure reduces motivation to maximize performance in any one period by providing the highest levelhighest-level rewards only by building sustainable long-term results.
| AWARD | 2014 | | 2015 | | 2016 | | 2017 | | 2018 | |
| 2014 PSA | Year 1 (50%) | | Year 2 (30%) | | Year 3 (20%) | | | | | |
| 2015 PSA | | | Year 1 (50%) | | Year 2 (30%) | | Year 3 (20%) | | | |
| 2016 PSA | | | | | Year 1 (50%) | | Year 2 (30%) | | Year 3 (20%) | |
| Award | | 2017 | | 2018 | | | 2019 | | | 2020 | | 2021 |
| 2017 PSA | | Year 1 (50%) | | Year 2 (30%) | | | Year 3 (20%) | | | | | |
| 2018 PSA | | | | Year 1 (50%) | | | Year 2 (30%) | | | Year 3 (20%) | | |
| 2019 PSA | | | | | | | Year 1 (50%) | | | Year 2 (30%) | | Year 3 (20%) |
| | | | | | | | | | | | | |
Status of Outstanding Performance Share Awardsoutstanding performance share awards
The Committee periodically reviews the Company’s performance against the goals established for each performance share award throughout the duration of its applicable measurement period. The table below summarizes the status of the different performance share awards held by the Named Executive Officers as of December 31, 2016.
AWARD AND
MEASUREMENT
PERIOD | | PERFORMANCE
MEASURES AND
WEIGHTING | | PERFORMANCE LEVELS | | % OF SHARES ACCRUED
PER PERFORMANCE
SHARE AT SPECIFIED
PERFORMANCE LEVELS | | ACTUAL
PERFORMANCE
LEVEL
ACHIEVED* | | SHARES ACCRUED
PER PERFORMANCE
SHARE BASED
ON ACTUAL
PERFORMANCE** |
| THRESHOLD | | TARGET | | MAXIMUM | | THRESHOLD | | TARGET | | MAXIMUM |
| 2016 PSA | | Relative Organic | | -1.0% | | 0.5% | | 2.0% | | 8% | | 40% | | 80% | | -1.8% (2016) | | 0.000 (2016) |
| | Volume Growth | | | | | | | | | | | | | | | | |
| 2016-2018 | | Return on | | 18.0% | | 20.0% | | 23.0% | | 4% | | 20% | | 40% | | 22.6% (2016) | | 0.187 (2016) |
| Measurement | | Invested Capital | | | | | | | | | | | | | | | | |
| Period | | Earnings per | | 7.0% | | 9.0% | | 12.0% | | 4% | | 20% | | 40% | | 7.7% (2016) | | 0.048 (2016) |
| | Share Growth | | | | | | | | | | | | | | | | |
| | Free Cash Flow | | 95.0% | | 100.0% | | 105.0% | | 4% | | 20% | | 40% | | 103.8% (2016) | | 0.176 (2016) |
| | Conversion | | | | | | | | | | | | | | | | |
| | | | | | 2016 PSA Total (as of December 31, 2016) | | 0.411 shares |
| 2015 PSA | | Relative Organic | | -1.0% | | 0.5% | | 2.0% | | 8% | | 40% | | 80% | | -1.8% (2016) | | 0.000 (2016) |
| | Volume Growth | | | | | | | | | | | | | | -1.1% (2015) | | 0.000 (2015) |
| 2015-2017 | | Return on | | 18.0% | | 20.0% | | 23.0% | | 4% | | 20% | | 40% | | 22.6% (2016) | | 0.112 (2016) |
| Measurement | | Invested Capital | | | | | | | | | | | | | | 25.0% (2015) | | 0.200 (2015) |
| Period | | Earnings per | | 7.0% | | 9.0% | | 12.0% | | 4% | | 20% | | 40% | | 7.7% (2016) | | 0.029 (2016) |
| | Share Growth | | | | | | | | | | | | | | 1.2% (2015) | | 0.000 (2015) |
| | Free Cash Flow | | 95.0% | | 100.0% | | 105.0% | | 4% | | 20% | | 40% | | 103.8% (2016) | | 0.106 (2016) |
| | Conversion | | | | | | | | | | | | | | 102.6% (2015) | | 0.152 (2015) |
| | | | | | 2015 PSA Total (as of December 31, 2016) | | 0.599 shares |
| 2014 PSA | | Relative Organic | | -1.0% | | 0.5% | | 2.0% | | 8% | | 40% | | 80% | | -1.8% (2016) | | 0.000 (2016) |
| | Volume Growth | | | | | | | | | | | | | | -1.1% (2015) | | 0.000 (2015) |
| | | | | | | | | | | | | | | | 1.2% (2014) | | 0.293 (2014) |
| 2014-2016 | | Return on | | 18.0% | | 20.0% | | 22.0% | | 8% | | 40% | | 80% | | 22.6% (2016) | | 0.160 (2016) |
| Measurement | | Invested Capital | | | | | | | | | | | | | | 25.0% (2015) | | 0.240 (2015) |
| Period | | | | | | | | | | | | | | | | 22.4% (2014) | | 0.400 (2014) |
| | New Product | | 29.0% | | 34.0% | | 39.0% | | 4% | | 20% | | 40% | | 30.4% (2016) | | 0.017 (2016) |
| | Vitality Index | | | | | | | | | | | | | | 32.1% (2015) | | 0.042 (2015) |
| | | | | | | | | | | | | | | | 32.8% (2014) | | 0.081 (2014) |
| | | | | | | | | | | | 2014 PSA Total (as of December 31, 2016) | | 1.233 shares |
* The reported level of performance achieved for Relative Organic Volume Growth has been determined, in part, using Worldwide IPI for each relevant period, as reported by Global Insights on January 15, 2017. The final performance level achieved may vary based on changes in reported Worldwide IPI for the relevant period.2019.
**The number of shares of 3M common stock accrued with respect to each performance share subject to a performance share award is determined based on the Company’s performance against the specified goals established for each performance measure. In the event that the Company’s performance for any given performance measure falls between any two performance levels, the number of shares of 3M common stock accrued is determined by linear interpolation.
2017 Proxy Statement | 53
Table of Contents
Award and
Measurement
Period | | Performance
Measures and
Weighting | | Performance Levels | |
% of Shares Accrued
per Performance
Share at Specified
Performance Levels | | Actual
Performance
Level
Achieved*,** | | Shares Accrued
per Performance
Share Based
on Actual
Performance*** |
| | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum | | |
| 2019 PSA | | Earnings per | | 4.0% | | 8.0% | | 12.0% | | 4% | | 20% | | 40% | | -6.9% (2019) | | 0.000 (2019) |
| | | Share Growth | | | | | | | | | | | | | | | | |
| 2019-2021 | | Relative Organic | | -1.0% | | 0.5% | | 2.0% | | 8% | | 40% | | 80% | | -2.9% (2019) | | 0.000 (2019) |
| Measurement | | Volume Growth | | | | | | | | | | | | | | | | |
| Period | | Return on | | 20.0% | | 22.0% | | 25.0% | | 4% | | 20% | | 40% | | 22.9% (2019) | | 0.130 (2019) |
| | | Invested Capital | | | | | | | | | | | | | | | | |
| | | Free Cash Flow | | 95.0% | | 100.0% | | 105.0% | | 4% | | 20% | | 40% | | 106.0% (2019) | | 0.200 (2019) |
| | | Conversion | | | | | | | | | | | | | | | | |
| | | 2019 PSA Total (as of December 31, 2019) | | 0.330 shares |
| 2018 PSA | | Earnings per | | 4.0% | | 8.0% | | 12.0% | | 4% | | 20% | | 40% | | -6.9% (2019) | | 0.000 (2019) |
| | | Share Growth | | | | | | | | | | | | | | 8.6% (2018) | | 0.115 (2018) |
| 2018-2020 | | Relative Organic | | -1.0% | | 0.5% | | 2.0% | | 8% | | 40% | | 80% | | -2.9% (2019) | | 0.000 (2019) |
| Measurement | | Volume Growth | | | | | | | | | | | | | | -1.0% (2018) | | 0.040 (2018) |
| Period | | Return on | | 18.0% | | 20.0% | | 23.0% | | 4% | | 20% | | 40% | | 22.9% (2019) | | 0.118 (2019) |
| | | Invested Capital | | | | | | | | | | | | | | 24.6% (2018) | | 0.200 (2018) |
| | | Free Cash Flow | | 95.0% | | 100.0% | | 105.0% | | 4% | | 20% | | 40% | | 106.0% (2019) | | 0.120 (2019) |
| | | Conversion | | | | | | | | | | | | | | 92.8% (2018) | | 0.000 (2018) |
| | | 2018 PSA Total (as of December 31, 2019) | | 0.593 shares |
| 2017 PSA | | Earnings per | | 4.0% | | 8.0% | | 12.0% | | 4% | | 20% | | 40% | | -6.9% (2019) | | 0.000 (2019) |
| | | Share Growth | | | | | | | | | | | | | | 8.6% (2018) | | 0.069 (2018) |
| | | | | | | | | | | | | | | | | 12.4% (2017) | | 0.200 (2017) |
| 2017-2019 | | Relative Organic | | -1.0% | | 0.5% | | 2.0% | | 8% | | 40% | | 80% | | -2.9% (2019) | | 0.000 (2019) |
| Measurement | | Volume Growth | | | | | | | | | | | | | | -1.0% (2018) | | 0.024 (2018) |
| Period | | | | | | | | | | | | | | | | 1.7% (2017) | | 0.360 (2017) |
| | | Return on | | 18.0% | | 20.0% | | 23.0% | | 4% | | 20% | | 40% | | 22.9% (2019) | | 0.079 (2019) |
| | | Invested Capital | | | | | | | | | | | | | | 24.6% (2018) | | 0.120 (2018) |
| | | | | | | | | | | | | | | | | 25.2% (2017) | | 0.200 (2017) |
| | | Free Cash Flow | | 95.0% | | 100% | | 105.0% | | 4% | | 20% | | 40% | | 106.0% (2019) | | 0.080 (2019) |
| | | Conversion | | | | | | | | | | | | | | 92.8% (2018) | | 0.000 (2018) |
| | | | | | | | | | | | | | | | | 97.3% (2017) | | 0.057 (2017) |
| | | 2017 PSA Total (as of December 31, 2019) | | 1.189 shares |
| * | The reported level of performance achieved for Relative Organic Volume Growth has been determined, in part, using Worldwide IPI for each relevant period, as reported by Global Insights on January 15, 2020. The final performance level achieved may vary based on changes in reported Worldwide IPI for the relevant period. |
| ** | For purposes of calculating Earnings per Share Growth for any given fiscal year, the baseline earnings per share figure is set equal to the final adjusted earnings per share figure used to calculate the Earnings per Share Growth attainment for the preceding year. As a result, any increase in earnings per share attributable to adjustments in one fiscal year necessarily will make it more difficult for the Company to achieve its Earnings per Share Growth target in the following year. |
| *** | The number of shares of 3M common stock accrued with respect to each performance share subject to a performance share award is determined based on the Company’s performance, as adjusted for certain special items, against the specified goals established for each performance measure taking into account the weighting for the applicable performance year and measure. In the event that the Company’s performance for any given performance measure falls between any two performance levels, the number of shares of 3M common stock accrued is determined by linear interpolation. See Appendix A to this Proxy Statement for details concerning the adjustments made to certain metrics under the AIP and the outstanding performance share awards. |
Table of Contents
Performance Share Accruals Basedshare accruals based on 2016 Performance2019 performance
The table below shows the number of shares of 3M common stock that were accrued (excluding dividend equivalents) for the outstanding performance share awards held by each Named Executive Officer based on the Company’s performance during 2016.2019.
| NAME | PERFORMANCE
SHARE AWARD | | PERFORMANCE
SHARES
AWARDED | | SHARES ACCRUED
PER PERFORMANCE
SHARE BASED ON
2016 PERFORMANCE | | TOTAL SHARES
ACCRUED
BASED ON 2016
PERFORMANCE* | | MARKET VALUE
OF SHARES
ACCRUED
BASED ON 2016
PERFORMANCE** |
| Inge G. Thulin | 2016 PSA | | | 34,464 | | | | 0.411 | | | | 14,147 | | | | $2,526,314 | |
| 2015 PSA | | | 34,507 | | | | 0.247 | | | | 8,499 | | | | $1,517,665 | |
| 2014 PSA | | | 38,650 | | | | 0.177 | | | | 6,841 | | | | $1,221,606 | |
| | | | | | | | | | | | Total | | | $5,265,585 | |
| Nicholas C. Gangestad*** | 2016 PSA | | | 9,788 | | | | 0.411 | | | | 4,018 | | | | $717,490 | |
| 2015 PSA | | | 9,255 | | | | 0.247 | | | | 2,279 | | | | $406,978 | |
| 2014 PSA | | | 8,678 | | | | 0.177 | | | | 1,537 | | | | $274,506 | |
| | | | | | | | | | | | Total | | | $1,398,974 | |
| Michael F. Roman | 2016 PSA | | | 6,778 | | | | 0.411 | | | | 2,782 | | | | $496,848 | |
| 2015 PSA | | | 5,994 | | | | 0.247 | | | | 1,476 | | | | $263,598 | |
| 2014 PSA | | | 5,476 | | | | 0.177 | | | | 971 | | | | $173,364 | |
| | | | | | | | | | | | Total | | | $933,809 | |
| Joaquin Delgado | 2016 PSA | | | 8,033 | | | | 0.411 | | | | 3,297 | | | | $588,770 | |
| 2015 PSA | | | 7,295 | | | | 0.247 | | | | 1,796 | | | | $320,774 | |
| 2014 PSA | | | 6,778 | | | | 0.177 | | | | 1,200 | | | | $214,295 | |
| | | | | | | | | | | | Total | | | $1,123,838 | |
| Michael G. Vale | 2016 PSA | | | 8,251 | | | | 0.411 | | | | 3,387 | | | | $604,750 | |
| 2015 PSA | | | 7,493 | | | | 0.247 | | | | 1,845 | | | | $329,424 | |
| 2014 PSA | | | 6,778 | | | | 0.177 | | | | 1,200 | | | | $214,295 | |
| | | | | | | | | | | | Total | | | $1,148,468 | |
*
| Name | | Performance
Share Award | | Target
Number of
Performance
Shares | | Shares Accrued Per
Target Performance
Share Based on
2019 Performance | | Total Shares
Accrued
Based on 2019
Performance* | | Market Value of
Shares Accrued
Based on 2019
Performance**
($) |
| Michael F. Roman | | 2019 PSA | | 24,098 | | 0.330 | | 7,952 | | 1,402,952 |
| | | 2018 PSA | | 16,596 | | 0.238 | | 3,948 | | 696,427 |
| | | 2017 PSA | | 6,467 | | 0.159 | | 1,026 | | 181,032 |
| | | | | | | | | Total | | 2,280,411 |
| Inge G. Thulin | | 2019 PSA | | 7,531*** | | 0.330 | | 2,485 | | 438,386 |
| | | 2018 PSA | | 16,804 | | 0.238 | | 3,997 | | 705,101 |
| | | 2017 PSA | | 31,603 | | 0.159 | | 5,013 | | 884,455 |
| | | | | | | | | Total | | 2,027,942 |
| Nicholas C. Gangestad | | 2019 PSA | | 8,772 | | 0.330 | | 2,895 | | 510,694 |
| | | 2018 PSA | | 10,101 | | 0.238 | | 2,403 | | 423,900 |
| | | 2017 PSA | | 9,686 | | 0.159 | | 1,537 | | 271,128 |
| | | | | | | | | Total | | 1,205,722 |
| Ashish K. Khandpur | | 2019 PSA | | 8,425 | | 0.330 | | 2,780 | | 490,433 |
| | | 2018 PSA | | 4,903 | | 0.238 | | 1,166 | | 205,655 |
| | | 2017 PSA | | 3,689 | | 0.159 | | 586 | | 103,387 |
| | | | | | | | | Total | | 799,475 |
| Julie L. Bushman | | 2019 PSA | | 5,617 | | 0.330 | | 1,853 | | 326,956 |
| | | 2018 PSA | | 6,297 | | 0.238 | | 1,498 | | 264,273 |
| | | 2017 PSA | | 4,867 | | 0.159 | | 772 | | 136,264 |
| | | | | | | | | Total | | 727,493 |
| Joaquin Delgado | | 2019 PSA | | 1,405 | | 0.330 | | 463 | | 81,739 |
| | | 2018 PSA | | 4,903 | | 0.238 | | 1,166 | | 205,655 |
| | | 2017 PSA | | 5,974 | | 0.159 | | 948 | | 167,182 |
| | | | | | | | | Total | | 454,576 |
| Michael G. Vale | | 2019 PSA | | 5,467 | | 0.330 | | 1,804 | | 318,223 |
| | | 2018 PSA | | 4,903 | | 0.238 | | 1,166 | | 205,655 |
| | | 2017 PSA | | 6,138 | | 0.159 | | 974 | | 171,799 |
| | | | | | | | | Total | | 695,677 |
| * | The amounts in this column reflect the number of shares accrued (excluding dividend equivalents) based on, among other things, Worldwide IPI for the 2019 calendar year, as reported by Global Insights on January 15, 2020. The final number of shares accrued may vary in the event of changes in Worldwide IPI reported by Global Insights. Due to rounding, the numbers shown in this column may not equal the result obtained by multiplying the Target Number of Performance Shares by the Shares Accrued Per Target Performance Share Based on 2019 Performance. See Appendix A to this Proxy Statement for a reconciliation of the adjusted earnings per share figures used to calculate the amounts shown above to the earnings per share figures determined in accordance with GAAP. |
| ** | Represents the closing price of a share of 3M common stock on the NYSE for December 31, 2019 ($176.42), multiplied by the total number of shares accrued (before rounding and excluding dividend equivalents) based on the Company’s 2019 performance. |
| *** | In accordance with the terms of the award, the target number of performance shares subject to Mr. Thulin’s 2019 performance share award was reduced based on his June 1, 2019, retirement. Prior to this reduction, the target number of performance shares subject to Mr. Thulin’s 2019 performance share award was 15,061. |
Table of shares accrued based on, among other things, Worldwide IPI for the 2016 calendar year, as reported by Global Insights on January 15, 2017. The final number of shares accrued may vary in the event of changes in Worldwide IPI reported by Global Insights. Due to rounding, the numbers shown in this column may not equal the result obtained by multiplying the Performance Shares Awarded by the Shares Accrued Per Performance Share Based on 2016 Performance.Contents
** Represents the closing price of a share of 3M common stock on the NYSE for December 30, 2016 ($178.57), multiplied by the actual number of shares accrued (before rounding) based on the Company’s 2016 performance.
*** Mr. Gangestad was appointed to the position of Senior Vice President and Chief Financial Officer effective June 6, 2014.
Although shares of 3M common stock are accrued annually for each outstanding performance share award, an executive may forfeit all or a portion of the shares otherwise issuable pursuant to his or her award if he or she does not remain employed by the Company throughout the entire three-year performance period.
For additional information concerning the manner in which the compensation of the Named Executive Officers is determined and the role of the Compensation Committee and its advisors, see Section II of this Compensation Discussion and Analysis beginning on page 42.57.
54 | 3M
Table of ContentsSection IV: Ways in which we address risk and governance
SECTION IV: Ways in Which We Address Risk and Governance |
Stock Ownership Guidelines |
Stock ownership guidelines
The Company maintains robust stock ownership guidelines that apply to all Section 16 officers of the Company and are designed to increase an executive’s equity stake in 3M and more closely align his or her financial interests with those of 3M’s stockholders.shareholders. The following table below shows the stock ownership guideline for each Named Executive Officer (other than Mr. Thulin and Dr. Delgado) and their compliance status as of December 31, 2016:2019. As former employees, Mr. Thulin and Dr. Delgado are no longer subject to the Company’s stock ownership guidelines.
NAME | MULTIPLE OF MEASUREMENT DATE
BASE SALARY REQUIRED | | COMPLIANCE STATUS
AS OF DECEMBER 31, 2016* | | | Percentage of Named Executive
Officers in compliance
with the Company’s stock
ownership guidelines as of
December 31, 2019: 100% |
| | Multiple of | | | |
| | Measurement Date | | Compliance Status | |
| Name | | Base Salary Required | | as of December 31, 2016:100%
2019* | |
Inge G. ThulinMichael F. Roman | | 6x | | In compliance | |
| Nicholas C. Gangestad | | 3x | | In compliance | |
| Ashish K. Khandpur | | 3x | | In compliance | |
| Julie L. Bushman | | 3x | | In compliance | |
Michael F. RomanG. Vale | 3x | | In compliance | |
Joaquin Delgado | 3x | | In compliance | |
| * | In accordance with the terms of the stock ownership guidelines, the number of shares required to be beneficially owned by each Named Executive Officer in order to maintain compliance was most recently recalculated as of December 31, 2019, using the closing price of a share of 3M common stock on the NYSE for December 31, 2019. Although each such Named Executive Officer (other than Mr. Roman) has until December 31, 2022, to acquire beneficial ownership of any additional shares required as a result of the recalculation, each such individual beneficially owned a sufficient number of shares on December 31, 2019, to comply with the new ownership levels required. |
Michael G. Vale** | 3x | | In compliance | As a result of Mr. Roman’s appointment to the position of Chief Executive Officer and the resulting increase in his required level of ownership, effective July 1, 2018, from a multiple of three times his annual base salary to a multiple of six times his annual base salary, Mr. Roman has until June 30, 2023, to acquire beneficial ownership of any additional shares required as a result of the December 31, 2019, recalculation. Mr. Roman beneficially owned a sufficient number of shares on December 31, 2019, to comply with the new ownership level required. |
* In accordance with the terms of the stock ownership guidelines, the number of shares required to be beneficially owned by each Named Executive Officer in order to maintain compliance was recalculated as of December 31, 2016, using the closing price of a share of 3M common stock on the NYSE for December 30, 2016. Although each of the Named Executive Officers has until December 31, 2019, to acquire beneficial ownership of any additional shares required as a result of the recalculation, each individual beneficially owned a sufficient number of shares on December 31, 2016, to comply with the new ownership levels required.
The stock ownership guidelines provide that the number of shares required to be beneficially owned by each covered executive will be calculated using such executive’s annual base salary at the time of his or her initial appointment to a Section 16 position and again at the time of a position change from one multiple level to another multiple level, and the fair market value of 3M common stock at that time. The guidelines also provide that the number of shares required to be beneficially owned also isby each executive will be recalculated every three years measured from December 31, 2013, using theirhis or her annual base salary and the fair market value of 3M common stock at the recalculation date. Pursuant to the terms of the guidelines, the next periodic recalculation date is scheduled to occur on December 30, 2022.
Each covered executive is expected to attain beneficial ownership of the number of shares of 3M stock determined by the guidelines within five years of his or her initial appointment to a position covered by the guidelines or a position change from one multiple level to another multiple level. The guidelines also provide that each covered executive whose required level of ownership increases as a result of a periodic recalculation will have three years from the recalculation date (or the balance of the five-year period since the date of their initial appointment or latest position change, if longer) to acquire beneficial ownership of any additional shares required as a result of the recalculation. However, if a covered executive is not making adequate progress to meet the required level of ownership within the applicable time period, the guidelines provide that he or she will be required to hold and not sell a sufficient number of the after-tax 3M shares received upon the next payout of performance shares to be on track to satisfy the required ownership level.
Table of Contents
For purposes of these guidelines, shares owned directly by a covered executive or by members of the covered executive’s immediate family, shares owned indirectly through a covered executive’s account in the Company’s 401(k) plan or another deferred compensation plan, unvestedoutstanding shares of restricted stock owned by a covered executive, and shares represented by unvestedoutstanding restricted stock units granted to a covered executive are all considered to be beneficially owned by the covered executive and are counted in determining attainment of the required beneficial ownership level.
For more information concerning the 3M stock ownership of the Named Executive Officers, see the section entitled “Security Ownershipownership of Management”management” beginning on page 7292 of this Proxy Statement.
2017 Proxy Statement | 55
TableProhibition of Contentshedging and pledging
Prohibition of Hedging and Pledging |
The Company’s stock trading policies prohibitprohibits the Company’s directors and executive officers from (1) purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of the Company’s common stock, including prepaid variable forward contracts, equity swaps, collars, and exchange funds; (2) engaging in short sales related to the Company’s common stock; (3) placing standing orders; (4) maintaining margin accounts; and (5) pledging 3M securities as collateral for a loan. All transactions in 3M securities by directors and executive officers must be pre-cleared with the Company’s Deputy General Counsel.
Policy on Reimbursement of Incentive Payments (“Clawback”) |
Clawback policy
The Company’s Board of Directors has adopted a policy requiring theunder which it is authorized to require reimbursement of excess incentivecertain cash and equity compensation payments madeprovided to an executive in the event thatif (1) 3M is required to make a material restatement of its financial statements.statements, whether or not the result of misconduct by the executive or any other individual, (2) the executive commits an act of misconduct that causes, or might reasonably be expected to cause, significant financial or reputational harm to the Company, or (3) the executive fails to identify, escalate, monitor or manage, in a timely manner and as reasonably expected, risks material to the Company, which cause, or might reasonably be expected to cause, significant financial or reputational harm to the Company. The policy also authorizes the Company to require reimbursement of any profits the executive realizes on the sale of Company securities during the 12-month period following the issuance by the Company of a financial report that, due to the misconduct of the executive, is materially noncompliant with Federal securities laws. This policy applies to all senior executives of the Company, including all of the Named Executive Officers. This
The Board of Directors continues to monitor regulatory developments relating to recoupment of incentive-based compensation and intends to further amend this policy, does not requireif necessary, to comply with any misconduct on the part of the covered executive whose excess incentive compensation payment is being reimbursed. As long as the Company is required to make a material restatement of its financial statements that causes an incentive compensation payout to be higher than it should have been, the Company may seek to recover the overpayment from all affected executives irrespective of whether their conduct contributed to the needfinal regulations issued for the restatement. The Company established this policy prior topurpose of implementing the passagerequirements of the Dodd-Frank Act, which establishes new requirements for such policies. Upon issuance by the Securities and Exchange CommissionAct.
Assessment of final implementing regulations for the Dodd-Frank Act’s requirements, the Company will make any changesrisk related to its existing policy as may be required to comply with those regulations.compensation programs
Assessment of Risk Related to Compensation Programs |
Based on the Company’s
Following completion of a recent compensation risk assessment, the Company has determinedconcluded that none of its compensation policies and practices is reasonably likely to have a material adverse effect on the Company. To conductIn connection with this assessment, the Company completed an inventory of its executive and non-executive compensation programs globally, with particular emphasis on incentive compensation plans or programs. Furthermore,The scope of the fiscal 2019 risk assessment generally was consistent with that conducted in recent market events have broughtyears, including heightened attention toon plan design, and whether the design, oversight, and controls in place have the potential to create not only financial risk, but reputational risk as well. As a result, we expanded the scope of our fiscal 2016 risk assessment to account for these evolving concerns. Based on this expanded assessment, the Company evaluated the primary components of its compensation plans and practices to identify whether those components, either alone or in combination, properly balanced compensation opportunities and risk.
The Company believes that our overall cash versus equity pay mix, balance of shorter-term versus longer-term performance focus, balance of revenue versus profit focused performance measures, stock ownership guidelines, and “clawback” policy all work together to provide our employees and executives with incentives to deliver outstanding performance to build long-term stockholdershareholder value, while taking only necessary and prudent risks. In this regard, the Company’s strong ethics and its corporate compliance systems, which are overseen by the Audit Committee, further mitigate against excessive or inappropriate risk taking. In addition, our employee sales plans are designed under global guidelines, where oversight of plan terms, administration, and operation is strongstronger and governance roles are segregated.
Table of Contents
The Compensation Committee, with assistance from its independent compensation consultant, George B. Paulin of FW Cook, reviewed the Company’s risk assessment and a separate risk assessment that Mr. Paulin conducted for the Committee on the Company’s executive compensation policies and practices. Based on its consideration of these assessments, the Committee concurred with the Company’s determination that none of its compensation policies and practices is reasonably likely to have a material adverse effect on the Company.
56 | 3M
Table of Contents
Compensation Committee Reportreport
In accordance with the Securities and Exchange Commission’s disclosure requirements for executive compensation, the Compensation Committee of the Board of Directors of 3M Company (the “Committee”) has reviewed and discussed with 3M Managementmanagement the Compensation Discussion and Analysis. Based on this review and these discussions with 3M Management,management, the Committee recommended to the Board of Directors that thisthe Compensation Discussion and Analysis be included in the 20172020 Proxy Statement of 3M Company and 3M Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2019.
Submitted by the Compensation Committee
Michael
Herbert L. Eskew,Henkel, Chair
Vance D. Coffman
Amy E. Hood
Muhtar Kent
Edward M. Liddy
Robert J. Ulrich
Patricia A. Woertz
Compensation Committee Interlocksinterlocks and Insider Participationinsider participation
The members of the Compensation Committee are named in the section titled “Compensation Committee” on page 2639 of this Proxy Statement. No members of the Compensation Committee were officers or employees of 3M or any of its subsidiaries during the year, were formerly 3M officers, or had any relationship otherwise requiring disclosure.
2017 Proxy Statement | 57
Table of Contents
Executive compensation tables
EXECUTIVE COMPENSATION TABLES2019 summary compensation table
2016 Summary Compensation Table |
The following table shows the compensation earned or received during 2016, 2015,2019, 2018, and 20142017 by each of 3M’s Named Executive Officersnamed executive officers (as determined pursuant to the Securities and Exchange Commission’s disclosure requirements for executive compensation in Item 402 of Regulation S-K).
NAME AND PRINCIPAL
POSITION | YEAR | | SALARY ($) | | 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
($)(5) | | TOTAL
($) |
Inge G. Thulin
Chairman of the Board,
President and Chief
Executive Officer | 2016 | | 1,483,929 | | 5,500,110 | | | 5,502,854 | | | | 2,303,678 | | | | 1,319,993 | | | | 560,110 | | | 16,670,674 |
| 2015 | | 1,448,153 | | 5,500,071 | | | 5,497,855 | | | | 2,330,134 | | | | 3,941,164 | | | | 723,685 | | | 19,441,062 |
| 2014 | | 1,392,560 | | 4,750,085 | | | 4,053,263 | | | | 3,500,000 | | | | 5,806,064 | | | | 613,617 | | | 20,115,589 |
Nicholas C. Gangestad
Senior Vice President
and Chief Financial
Officer | 2016 | | 681,551 | | 1,562,067 | | | 1,562,767 | | | | 667,599 | | | | 1,303,839 | | | | 55,958 | | | 5,833,781 |
| 2015 | | 601,743 | | 1,475,154 | | | 1,474,443 | | | | 571,980 | | | | 939,858 | | | | 61,885 | | | 5,125,063 |
| 2014 | | 449,493 | | 2,207,637 | | | 188,579 | | | | 476,102 | | | | 755,436 | | | | 41,561 | | | 4,118,808 |
Michael F. Roman(6)
Executive Vice
President, Industrial
Business Group | 2016 | | 747,022 | | 1,081,701 | | | 1,082,225 | | | | 602,433 | | | | 1,444,650 | | | | 56,774 | | | 5,014,805 |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Joaquin Delgado(6)
Executive Vice
President, Consumer
Business Group | 2016 | | 629,074 | | 1,281,986 | | | 1,282,703 | | | | 503,290 | | | | 755,674 | | | | 100,966 | | | 4,553,693 |
| 2015 | | 575,556 | | 1,162,750 | | | 1,162,281 | | | | 504,873 | | | | 554,499 | | | | 113,002 | | | 4,072,961 |
| | | | | | | | | | | | | | | | | | | | | | |
Michael G. Vale
Executive Vice
President, Health Care
Business Group | 2016 | | 633,302 | | 1,316,777 | | | 1,317,456 | | | | 506,664 | | | | 679,826 | | | | 62,745 | | | 4,516,770 |
| 2015 | | 579,780 | | 1,194,309 | | | 1,193,802 | | | | 531,622 | | | | 519,134 | | | | 73,086 | | | 4,091,733 |
| 2014 | | 559,971 | | 2,833,107 | | | 620,450 | | | | 525,978 | | | | 701,854 | | | | 67,001 | | | 5,308,361 |
(1) The amounts in the Stock Awards column reflect the aggregate grant date fair value of such awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note 15 to the Company’s audited financial statements for the fiscal year ended December 31, 2016, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 9, 2017. The amounts included in this column for the performance share awards made during 2016 are calculated based on the probable satisfaction of the performance conditions for such awards. If the highest level of performance is achieved for these performance share awards, the maximum value of these awards at the grant date would be as follows: Mr. Thulin — $11,000,220; Mr. Gangestad — $3,124,134; Mr. Roman — $2,163,402; Mr. Delgado — $2,563,972; and Mr. Vale — $2,633,554.
Name and
Principal Position | | Year | | Salary
($) | | 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
($)(5) | | Total
($) |
Michael F. Roman(6)
Chairman of the Board, President and Chief Executive Officer | | 2019 | | 1,249,568 | | 5,000,094 | | 4,999,946 | | 1,256,671 | | 5,642,262 | | 173,025 | | 18,321,566 |
| | 2018 | | 1,049,976 | | 3,610,286 | | 3,610,217 | | 1,431,503 | | 3,020,986 | | 141,771 | | 12,864,739 |
| | 2017 | | 839,575 | | 1,227,825 | | 1,228,374 | | 1,090,797 | | 2,347,859 | | 70,788 | | 6,805,218 |
Inge G. Thulin(7)
Former Executive Chairman of the Board | | 2019 | | 416,667 | | 3,125,007 | | 1,562,023 | | 382,259 | | 2,689,641 | | 31,476 | | 8,207,073 |
| | 2018 | | 1,269,200 | | 3,750,032 | | 6,000,564 | | 1,877,798 | | — | | 632,492 | | 13,530,086 |
| | 2017 | | 1,526,595 | | 6,000,146 | | 6,002,785 | | 4,121,830 | | 2,175,108 | | 708,729 | | 20,535,193 |
Nicholas C. Gangestad
Senior Vice President and Chief Financial Officer | | 2019 | | 862,953 | | 1,820,102 | | 1,820,002 | | 531,579 | | 2,488,003 | | 60,357 | | 7,582,996 |
| | 2018 | | 830,995 | | 2,336,765 | | 2,336,984 | | 787,783 | | 1,384,479 | | 62,458 | | 7,739,464 |
| | 2017 | | 778,103 | | 3,339,178 | | 1,839,705 | | 1,110,975 | | 2,110,908 | | 68,372 | | 9,247,241 |
Ashish K. Khandpur(8)
Executive Vice President, Transportation and Electronics Business Group | | 2019 | | 683,422 | | 1,748,103 | | 1,748,032 | | 325,583 | | 1,342,856 | | 46,535 | | 5,894,531 |
Julie L. Bushman(8)
Executive Vice President, International Operations | | 2019 | | 800,502 | | 1,165,471 | | 1,165,366 | | 507,681 | | 1,982,778 | | 29,170 | | 5,650,968 |
| | 2018 | | 792,795 | | 1,456,748 | | 1,456,856 | | 649,048 | | 945,379 | | 38,525 | | 5,339,351 |
Joaquin Delgado
Former Executive Vice President, Consumer Business Group | | 2019 | | 368,892 | | 582,839 | | 582,700 | | 256,137 | | 1,155,625 | | 1,788,819 | | 4,735,012 |
| | 2018 | | 694,090 | | 1,134,260 | | 1,134,284 | | 532,836 | | 700,842 | | 101,075 | | 4,297,387 |
| | 2017 | | 680,383 | | 1,134,224 | | 1,134,687 | | 561,067 | | 1,174,715 | | 99,466 | | 4,784,542 |
Michael G. Vale
Executive Vice President, Safety and Industrial Business Group | | 2019 | | 737,093 | | 1,134,348 | | 1,134,151 | | 396,967 | | 1,619,621 | | 60,282 | | 5,082,462 |
| | 2018 | | 707,186 | | 1,134,260 | | 1,134,284 | | 533,871 | | 127,703 | | 65,850 | | 3,703,154 |
| | 2017 | | 693,221 | | 1,165,361 | | 1,165,908 | | 629,703 | | 980,555 | | 61,498 | | 4,696,246 |
(2) The amounts in the Option Awards column reflect the aggregate grant date fair value of such awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note 15 to the Company’s audited financial statements for the fiscal year ended December 31, 2016, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 9, 2017.
| (1) | The amounts in the Stock Awards column reflect the aggregate grant date fair value of such awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note 18 to the Company’s audited financial statements for the fiscal year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020. The amounts included in this column for the performance share awards made during 2019 are calculated based on the probable satisfaction of the performance conditions for such awards. If the highest level of performance is achieved for these performance share awards, the maximum value of these awards at the grant date would be as follows: Mr. Roman — $10,000,188; Mr. Thulin — $6,250,014; Mr. Gangestad — $3,640,204; Mr. Khandpur — $3,496,206; Ms. Bushman — $2,330,942; Dr. Delgado — $1,165,678; and Mr. Vale — $2,268,696. |
| (2) | The amounts in the Option Awards column reflect the aggregate grant date fair value of such awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note 18 to the Company’s audited financial statements for the fiscal year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020. |
| (3) | The amounts in the Non-Equity Incentive Plan Compensation column reflect the annual incentive compensation earned by each individual during the year specified pursuant to the Company’s Executive Annual Incentive Plan. |
| (4) | Except with respect to Mr. Thulin, the amounts in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column reflect the actuarial increase in the present value (if any) of each individual’s pension benefits under all defined benefit pension plans of the Company, determined using the same interest rate and mortality assumptions as those used for financial statement reporting purposes. See Note 13 to the Company’s audited financial statements for the fiscal year ended December 31, |
(3) The amounts in the Non-Equity Incentive Plan Compensation column reflect the annual incentive compensation earned by each individual during 2016 under the Company’s Executive Annual Incentive Plan.
(4) The amounts in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column reflect the actuarial increase in the present value of each individual’s pension benefits under all defined benefit pension plans of the Company, determined using the same interest rate and mortality assumptions as those used for financial statement reporting purposes. See Note 11 to the Company’s audited financial statements for the fiscal year ended December 31, 2016, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 9, 2017. There were no above-market earnings on deferred compensation under the Company’s nonqualified deferred compensation programs.
(5) See the All Other Compensation table below for details.
(6) No amounts are reported for Mr. Roman for the years 2014 and 2015, or for Mr. Delgado for the year 2014, since they were not named executive officers of the Company for those years.
58 | 3M
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2016 | 2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020. Mr. Thulin commenced his pension benefits and as such, the December 31, 2019, value of his benefit under the Nonqualified Pension Plan was set equal to the gross amount of the payment he received in 2019 and the present value of his benefit under the Employee Retirement Income Plan was determined based on his final benefit amount and payment form selected. There were no above-market earnings on deferred compensation under the Company’s nonqualified deferred compensation programs. |
| (5) | See the All Other Compensation Tabletable below for details of the amounts reported for 2019. |
| (6) | Mr. Roman was appointed Chief Executive Officer, effective July 1, 2018. Prior to that, Mr. Roman served as the Company’s Executive Vice President and Chief Operating Officer from 2017 to his appointment as Chief Executive Officer. |
| (7) | Mr. Thulin served as the Company’s Executive Chairman from July 1, 2018, until his retirement on June 1, 2019. Prior to that, Mr. Thulin served as 3M’s Chairman of the Board, President and Chief Executive Officer from 2012 to his appointment as Executive Chairman in 2018. |
| (8) | No amounts are reported for Mr. Khandpur for the years 2017 and 2018, or for Ms. Bushman for the year 2017, since they first became Named Executive Officers after those years. |
| NAME | | 401(K)
COMPANY
CONTRIBUTIONS
($)(1) | | VIP
EXCESS
COMPANY
CONTRIBUTIONS
($)(2) | | EXECUTIVE
LIFE
INSURANCE
($)(3) | | FINANCIAL
PLANNING
($)(4) | | PERSONAL
AIRCRAFT
USE
($)(5) | | SECURITY
SYSTEMS/
SERVICES
($)(6) | | PERSONAL
AUTO
USE
($)(7) | | OTHER
($)(8) | | TOTAL
($) |
| Inge G. Thulin | | 5,358 | | 81,555 | | 286,115 | | 13,350 | | | 163,764 | | | | 2,374 | | | | 7,594 | | | 0 | | 560,110 |
| Nicholas C. Gangestad | | 5,677 | | 25,586 | | 12,755 | | 11,940 | | | 0 | | | | 0 | | | | 0 | | | 0 | | 55,958 |
| Michael F. Roman | | 5,431 | | 24,950 | | 14,263 | | 11,880 | | | 0 | | | | 0 | | | | 0 | | | 250 | | 56,774 |
| Joaquin Delgado | | 5,921 | | 22,301 | | 59,334 | | 13,410 | | | 0 | | | | 0 | | | | 0 | | | 0 | | 100,966 |
| Michael G. Vale | | 7,873 | | 30,558 | | 10,964 | | 13,350 | | | 0 | | | | 0 | | | | 0 | | | 0 | | 62,745 |
(1) The amounts shown reflect 3M matching and additional automatic contributions under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan. All eligible employees under this plan may receive 3M matching contributions on their pre-tax or Roth 401(k) contributions to the plan on up to five percent of their eligible pay. Eligible employees hired on or after January 1, 2009, also receive additional automatic 3M retirement income contributions equal to three percent of their eligible pay.
(2) The amounts shown reflect 3M matching contributions under the VIP Excess Plan, a nonqualified defined contribution plan. Eligibility for this plan and its matching contributions is limited to employees whose2019 all other compensation exceeds a limit established by Federal income tax laws for tax-qualified defined contribution plans. The plan permits eligible employees to save additional amounts from their current cash compensation beyond the contribution limits established by Federal tax laws, and to receive Company matching contributions similar to the matching contributions provided under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan.table
(3) The amounts shown reflect the amount of premiums paid by the Company on behalf of each individual with respect to their respective universal life or term life insurance policies obtained for them under the Executive Life Insurance Plan.
| Name | | 401(k)
Company
Contributions
($)(1) | | VIP
Excess
Company
Contributions
($)(2) | | Executive
Life
Insurance
($)(3) | | Financial
Planning
($)(4) | | Personal
Aircraft
Use
($)(5) | | Security
Systems/
Services
($)(6) | | Other
($)(7) | | Total
($) |
| Michael F. Roman | | 4,500 | | 52,462 | | 23,760 | | 15,132 | | 76,557 | | 614 | | — | | 173,025 |
| Inge G. Thulin | | 4,800 | | 13,176 | | — | | 13,500 | | — | | — | | — | | 31,476 |
| Nicholas C. Gangestad | | 5,394 | | 25,983 | | 15,480 | | 13,500 | | — | | — | | — | | 60,357 |
| Ashish K. Khandpur | | 6,246 | | 16,457 | | 11,832 | | 12,000 | | — | | — | | — | | 46,535 |
| Julie L. Bushman | | 6,300 | | — | | 8,194 | | 14,676 | | — | | — | | — | | 29,170 |
| Joaquin Delgado | | 5,934 | | 7,676 | | 11,709 | | 13,500 | | — | | — | | 1,750,000 | | 1,788,819 |
| Michael G. Vale | | 7,846 | | 26,175 | | 12,761 | | 13,500 | | — | | — | | — | | 60,282 |
(4) These amounts reflect fees for personal financial planning and tax return preparation services paid by the Company on behalf of each individual.
(5) This amount reflects the aggregate incremental cost to the Company for Mr. Thulin’s personal use of corporate aircraft during 2016. This aggregate incremental cost was calculated by combining the variable operating costs of such travel, including the cost of fuel, landing fees, parking fees, trip preparation fees, enroute communication charges, enroute navigation charges, on-board catering, and crew travel expenses. The Compensation Committee requires Mr. Thulin to use the corporate aircraft for all business and personal travel.
(6) This amount reflects the expenses incurred by 3M during 2016 for home security equipment and monitoring services at the personal residence of Mr. Thulin.
(7) This amount reflects the aggregate incremental cost to the Company for Mr. Thulin’s personal use of a Company-provided automobile and local ground transportation. These costs include lease payments for the vehicle, fuel, insurance premiums, repairs, and maintenance.
(8) This amount reflects the aggregate incremental cost to the Company for meals provided to Mr. Roman’s spouse while accompanying the executive on a business trip at the Company’s request.
Grants(1) | The amounts shown reflect 3M matching and additional automatic contributions under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan. All eligible employees under this plan may receive 3M matching contributions on their pre-tax or Roth 401(k) contributions to the plan on up to five percent of Plan-Based Awardstheir eligible pay. Eligible employees hired on or after January 1, 2009, also receive additional automatic 3M retirement income contributions equal to three percent of their eligible pay. |
| (2) | The amounts shown reflect 3M matching contributions under the VIP Excess Plan, a nonqualified defined contribution plan. Eligibility for this plan and its matching contributions is limited to employees whose compensation exceeds a limit established by Federal income tax laws for tax-qualified defined contribution plans. The plan permits eligible employees to save additional amounts from their current cash compensation beyond the contribution limits established by Federal tax laws, and to receive Company matching contributions similar to the matching contributions provided under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan. |
| (3) | The amounts shown reflect the amount of premiums paid by the Company on behalf of each individual with respect to their respective universal life or term life insurance policies obtained for them under the Executive Life Insurance Plan. |
| (4) | These amounts reflect fees for personal financial planning and tax return preparation services paid by the Company on behalf of each individual. |
| (5) | This amount reflects the aggregate incremental cost to the Company for Mr. Roman’s personal use of corporate aircraft during 2019. This aggregate incremental cost was calculated by combining the variable operating costs of such travel, including the cost of fuel, landing fees, parking fees, trip preparation fees, en route communication charges, en route navigation charges, on-board catering, and crew travel expenses. The Compensation Committee required Mr. Roman to use the corporate aircraft for all business and personal travel. |
| (6) | This amount reflects the expenses incurred by 3M during 2019 for home security equipment and monitoring services at the personal residence of Mr. Roman. |
| (7) | The amount shown reflects the payment made to Dr. Delgado under the terms of a separation agreement. For more information concerning the arrangement with Dr. Delgado, see the section entitled “Separation pay” on page 61 of this Proxy Statement. |
Grants of plan-based awards
The following table reflects the various equity and non-equity plan awards granted to the Named Executive Officers during 2016.2019. With the exception of the annual incentive compensation earned by such Named Executive Officers under the Executive Annual Incentive Plan, all of the awards referred to in this table were granted under the 20082016 Long-Term Incentive Plan.
2017 Proxy Statement | 59
Table of Contents
2016 Grants of Plan-Based Awards Table
| | | | | | |
ESTIMATED FUTURE
PAYOUTS UNDER
NON-EQUITY
INCENTIVE PLAN
AWARDS(2) | | ESTIMATED FUTURE PAYOUTS
UNDER EQUITY INCENTIVE
PLAN AWARDS(3) | | ALL
OTHER
STOCK
AWARDS:
NUMBER
OF SHARES
OF STOCK
OR UNITS
(#) | | ALL
OTHER
OPTION
AWARDS:
NUMBER OF
SECURITIES
UNDERLYING
OPTIONS
(#)(4) | | EXERCISE
OR BASE
PRICE OF
OPTION
AWARDS
($/SH)(5) | | GRANT
DATE FAIR
VALUE OF
STOCK
AND
OPTION
AWARDS
($)(6) |
| NAME | | | TYPE OF
GRANT(1) | | GRANT
DATE | | TARGET
($) | | MAXIMUM
($) | | THRESHOLD
(#) | | TARGET
(#) | | MAXIMUM
(#) | | | |
Inge G.
Thulin | | | 16PS | | 03/01/2016 | | | | | | 6,893 | | | 34,464 | | | 68,928 | | | | | | | | | | 5,500,110 |
| | Option | | 02/02/2016 | | | | | | | | | | | | | | | | | 245,116 | | | 147.87 | | 5,502,854 |
| | | AIP | | n/a | | 2,352,132 | | 12,625,000 | | | | | | | | | | | | | | | | | | |
Nicholas C.
Gangestad | | | 16PS | | 03/01/2016 | | | | | | 1,958 | | | 9,788 | | | 19,576 | | | | | | | | | | 1,562,067 |
| | Option | | 02/02/2016 | | | | | | | | | | | | | | | | | 69,611 | | | 147.87 | | 1,562,767 |
| | | AIP | | n/a | | 681,641 | | 12,625,000 | | | | | | | | | | | | | | | | | | |
Michael F.
Roman | | | 16PS | | 03/01/2016 | | | | | | 1,356 | | | 6,778 | | | 13,556 | | | | | | | | | | 1,081,701 |
| | Option | | 02/02/2016 | | | | | | | | | | | | | | | | | 48,206 | | | 147.87 | | 1,082,225 |
| | | AIP | | n/a | | 635,143 | | 12,625,000 | | | | | | | | | | | | | | | | | | |
Joaquin
Delgado | | | 16PS | | 03/01/2016 | | | | | | 1,607 | | | 8,033 | | | 16,066 | | | | | | | | | | 1,281,986 |
| | Option | | 02/02/2016 | | | | | | | | | | | | | | | | | 57,136 | | | 147.87 | | 1,282,703 |
| | | AIP | | n/a | | 534,791 | | 12,625,000 | | | | | | | | | | | | | | | | | | |
Michael G.
Vale | | | 16PS | | 03/01/2016 | | | | | | 1,650 | | | 8,251 | | | 16,502 | | | | | | | | | | 1,316,777 |
| | Option | | 02/02/2016 | | | | | | | | | | | | | | | | | 58,684 | | | 147.87 | | 1,317,456 |
| | | AIP | | n/a | | 538,371 | | 12,625,000 | | | | | | | | | | | | | | | | | | |
(1) Abbreviations for the Type of Grant: 16PS = 2016 performance shares; Option = stock options; AIP = annual incentive.2019 GRANTS OF PLAN-BASED AWARDS TABLE
(2) The amounts shown as the Estimated Future Payouts Under Non-Equity Incentive Plan Awards reflect the target and maximum amounts that may be earned by each individual during 2016 under the Executive Annual Incentive Plan. This plan establishes a maximum amount of annual incentive compensation that may be earned by each covered executive during a plan year (established for purposes of complying with Section 162(m) of the Internal Revenue Code), which for each of the Named Executive Officers was one-quarter of one percent of the Company’s Adjusted Net Income for 2016, and then permits the Compensation Committee to pay each covered executive less than this maximum amount based on such factors as it deems relevant. Since the Executive Annual Incentive Plan was first adopted in 2007, the Compensation Committee has rarely used this discretion to pay a covered executive (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the Company’s broad-based Annual Incentive Plan (see “Elements of Target 2016 Total Direct Compensation— Annual Incentive” portion of the Compensation Discussion and Analysis in this Proxy Statement).
| | | | | | | Estimated Future
Payouts Under
Non-Equity
Incentive Plan
Awards(2) | | Estimated Future
Payouts Under
Equity
Incentive Plan
Awards(3) | | All
Other
Stock
Awards:
Number
of Shares
of Stock | | All
Other
Option
Awards:
Number of
Securities
Underlying | | Exercise
or Base
Price of
Option | | Grant
Date Fair
Value of
Stock and
Option |
| Name | | Type of
Grant(1) | | Grant
Date | | Target
($) | | Maximum
($) | | Threshold
(#) | | Target
(#) | | Maximum
(#) | | or Units
(#) | | Options
(#)(4) | | Awards
($/Sh)(5) | | Awards
($)(6) |
| Michael F. Roman | | 19PS | | 03/01/19 | | | | | | 4,820 | | 24,098 | | 48,196 | | | | | | | | 5,000,094 |
| | Option | | 02/05/19 | | | | | | | | | | | | | | 146,240 | | 201.12 | | 4,999,946 |
| | AIP | | n/a | | 2,040,051 | | 13,277,243 | | | | | | | | | | | | | | |
| Inge G. Thulin | | 19PS | | 03/01/19 | | | | | | 3,012 | | 15,061 | | 30,122 | | | | | | | | 3,125,007 |
| | Option | | 02/05/19 | | | | | | | | | | | | | | 45,686 | | 201.12 | | 1,562,023 |
| | AIP | | n/a | | 1,500,000 | | 13,277,243 | | | | | | | | | | | | | | |
| Nicholas C. Gangestad | | 19PS | | 03/01/19 | | | | | | 1,754 | | 8,772 | | 17,544 | | | | | | | | 1,820,102 |
| | Option | | 02/05/19 | | | | | | | | | | | | | | 53,232 | | 201.12 | | 1,820,002 |
| | AIP | | n/a | | 862,953 | | 13,277,243 | | | | | | | | | | | | | | |
| Ashish K. Khandpur | | 19PS | | 03/01/19 | | | | | | 1,685 | | 8,425 | | 16,850 | | | | | | | | 1,748,103 |
| | Option | | 02/05/19 | | | | | | | | | | | | | | 51,127 | | 201.12 | | 1,748,032 |
| | AIP | | n/a | | 581,003 | | 13,277,243 | | | | | | | | | | | | | | |
| Julie L. Bushman | | 19PS | | 03/01/19 | | | | | | 1,123 | | 5,617 | | 11,234 | | | | | | | | 1,165,471 |
| | Option | | 02/05/19 | | | | | | | | | | | | | | 34,085 | | 201.12 | | 1,165,366 |
| | AIP | | n/a | | 680,538 | | 13,277,243 | | | | | | | | | | | | | | |
| Joaquin Delgado | | 19PS | | 03/01/19 | | | | | | 562 | | 2,809 | | 5,618 | | | | | | | | 582,839 |
| | Option | | 02/05/19 | | | | | | | | | | | | | | 17,043 | | 201.12 | | 582,700 |
| | AIP | | n/a | | 593,007 | | 13,277,243 | | | | | | | | | | | | | | |
| Michael G. Vale | | 19PS | | 03/01/19 | | | | | | 1,093 | | 5,467 | | 10,934 | | | | | | | | 1,134,348 |
| | Option | | 02/05/19 | | | | | | | | | | | | | | 33,172 | | 201.12 | | 1,134,151 |
| | AIP | | n/a | | 626,632 | | 13,277,243 | | | | | | | | | | | | | | |
(3) The amounts shown as the Estimated Future Payouts Under Equity Incentive Plan Awards with respect to 2016 performance shares reflect the threshold, target, and maximum number of shares of 3M common stock that may be earned by each individual as a result of the 2016 performance shares granted to each individual during 2016 under the 2008 Long-Term Incentive Plan. The actual number of shares of 3M common stock to be delivered as a result of these performance shares will be determined by the performance of the Company during the three-year performance period of 2016, 2017, and 2018, as measured against four performance criteria selected by the Compensation Committee (Relative Organic Volume Growth, Return on Invested Capital, Earnings Per Share Growth and Free Cash Flow Conversion). For more information on these performance criteria and the formulas for determining the number of shares of 3M common stock payable as a result of these performance shares, please refer to the “Long-Term Incentives — 2016 Annual Grants” portion of the Compensation Discussion and Analysis in this Proxy Statement.
| (1) | Abbreviations: 19PS = 2019 performance shares; Option = stock options; AIP = annual incentive pay. |
| (2) | The amounts shown as the Estimated Future Payouts Under Non-Equity Incentive Plan Awards reflect the target and maximum amounts that may be earned by each individual during 2019 under the Executive Annual Incentive Plan. This plan establishes a maximum amount of annual incentive compensation that may be earned by each covered executive during a plan year (initially established with the intent of complying with performance-based compensation exception of Section 162(m) of the Internal Revenue Code and similar state laws), which for each of the Named Executive Officers was one-quarter of one percent of the Company’s Adjusted Net Income for 2019, and then permits the Compensation Committee to pay each covered executive less than this maximum amount based on such factors as it deems relevant. Since the Executive Annual Incentive Plan was first adopted in 2007, the Compensation Committee has rarely used this discretion to pay a covered executive (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the Company’s broad-based Annual Incentive Plan. (For additional information, see “Annual Incentive” beginning on page 59 of this Proxy Statement). |
| (3) | The amounts shown as the Estimated Future Payouts Under Equity Incentive Plan Awards with respect to 2019 performance shares reflect the threshold, target, and maximum number of shares of 3M common stock (disregarding dividend equivalents) that may be earned by each individual as a result of the 2019 performance shares granted under the 2016 Long-Term Incentive Plan. The actual number of shares of 3M common stock to be delivered as a result of these performance shares will be determined by the performance of the Company during the three-year performance period of 2019, 2020, and 2021, as measured against four performance criteria selected by the Compensation Committee (Relative Organic Volume Growth, Return on Invested Capital, Earnings per Share Growth and Free Cash Flow Conversion). For more information on these performance criteria and the formulas for determining the number of shares of 3M common stock payable as a result of these performance shares, please refer to the “Long-term incentives — 2019 annual grants” beginning on page 67 of this Proxy Statement. |
| (4) | The amounts shown as the All Other Option Awards reflect the number of shares of 3M common stock subject to nonqualified stock options granted to each individual during 2019 under the 2016 Long-Term Incentive Plan. The options granted on February 5, 2019, were part of the Company’s annual equity grants made to approximately 6,000 employees, and they vest in installments of one-third on each of the first three anniversaries of the grant date. |
(4) The amounts shown as the All Other Option Awards reflect the number of shares of 3M common stock subject to nonqualified stock options granted to each individual during 2016 under the 2008 Long-Term Incentive Plan. The options granted on February 2, 2016, were part of the Company’s annual grant of stock options to the approximately 6,000 employees participating in the plan, and they vest in installments of one-third on each of the first three anniversaries of the grant date.
(5) The exercise price for all stock options granted under the Company’s 2008 Long-Term Incentive Plan is set at the closing price at which 3M common stock traded on the New York Stock Exchange on the option grant date.
(6) The amounts in the Grant Date Fair Value of Stock and Option Awards column were determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures, and, in the case of performance share awards, are based upon the probable outcome of the applicable performance conditions. Assumptions made in the calculation of these amounts are included in Note 15 to the Company’s audited financial statements for the fiscal year ended December 31, 2016, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 9, 2017.
60 | 3M
Table of Contents
| (5) | The exercise price for all stock options granted under the Company’s 2016 Outstanding EquityLong-Term Incentive Plan is set at the closing price at which 3M common stock traded on the NYSE on the option grant date. |
| (6) | The amounts in the Grant Date Fair Value of Stock and Option Awards column were determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures, and, in the case of performance share awards, are based upon the probable outcome of the applicable performance conditions at Fiscal Year-End Tablethe time of grant. Assumptions made in the calculation of these amounts are included in Note 18 to the Company’s audited financial statements for the fiscal year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020. |
| | | OPTION AWARDS | | STOCK AWARDS |
NAME | | | NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS (#)
EXERCISABLE | | NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS (#)
UNEXERCISABLE | | OPTION
EXERCISE
PRICE
($) | | OPTION
EXPIRATION
DATE | | NUMBER
OF
SHARES OR
UNITS OF
STOCK
THAT HAVE
NOT
VESTED (#) | | MARKET
VALUE
OF SHARES
OR UNITS OF
STOCK THAT
HAVE NOT
VESTED
($)(1) | | EQUITY
INCENTIVE
PLAN
AWARDS:
NUMBER OF
UNEARNED
SHARES, UNITS
OR OTHER
RIGHTS THAT
HAVE NOT
VESTED (#) | | EQUITY
INCENTIVE PLAN
AWARDS:
MARKET OR
PAYOUT VALUE
OF UNEARNED
SHARES, UNITS
OR OTHER
RIGHTS THAT
HAVE NOT
VESTED
($)(1) |
| Inge G. Thulin | | | | | | | | | | | | | | | | | | | | | | 34,507(6) | | | 6,161,915 |
| | | | | | | | | | | | | | | | | | | | | | 34,464(7) | | | 6,154,236 |
| | | | 50,792 | | | | 0 | | | | 77.18 | | | 05/13/2018 | | | | | | | | | | |
| | | | | 59,584 | | | | 0 | | | | 54.11 | | | 02/08/2019 | | | | | | | | | | |
| | | | 50,166 | | | | 0 | | | | 78.72 | | | 02/07/2020 | | | | | | | | | | |
| | | | 43,560 | | | | 0 | | | | 89.47 | | | 02/08/2021 | | | | | | | | | | |
| | | | 204,804 | | | | 0 | | | | 87.89 | | | 02/07/2022 | | | | | | | | | | |
| | | | 204,950 | | | | 0 | | | | 101.49 | | | 02/03/2023 | | | | | | | | | | |
| | | | 137,445 | | | | 68,723(2) | | | | 126.72 | | | 02/02/2024 | | | | | | | | | | |
| | | | 76,454 | | | | 152,910(3) | | | | 165.94 | | | 02/03/2025 | | | | | | | | | | |
| | | | - | | | | 245,116(4) | | | | 147.87 | | | 02/02/2026 | | | | | | | | | | |
Nicholas C.
Gangestad | | | | | | | | | | | | | | | | | | | | | | 9,255(6) | | | 1,652,665 |
| | | | | | | | | | | | | | | | | | | | | 9,788(7) | | | 1,747,843 |
| | | | 2,888 | | | | 0 | | | | 77.18 | | | 05/13/2018 | | | | | | | | | | |
| | | | 4,004 | | | | 0 | | | | 54.11 | | | 02/08/2019 | | | | | | | | | | |
| | | | 3,362 | | | | 0 | | | | 78.72 | | | 02/07/2020 | | | | | | | | | | |
| | | | 3,092 | | | | 0 | | | | 89.47 | | | 02/08/2021 | | | | | | | | | | |
| | | | 6,219 | | | | 0 | | | | 87.89 | | | 02/07/2022 | | | | | | | | | | |
| | | | 6,505 | | | | 0 | | | | 101.49 | | | 02/03/2023 | | | | | | | | | | |
| | | | 6,394 | | | | 3,198(2) | | | | 126.72 | | | 02/02/2024 | | | | | | | | | | |
| | | | 20,503 | | | | 41,009(3) | | | | 165.94 | | | 02/03/2025 | | | | | | | | | | |
| | | | - | | | | 69,611(4) | | | | 147.87 | | | 02/02/2026 | | | | | | | | | | |
2019 outstanding equity awards at fiscal year-end table
| | | Option Awards | | Stock Awards |
| Name | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | Option
Exercise
Price
($) | | Option
Expiration
Date | | Number
of Shares
or Units
of Stock
That
Have
Not
Vested
(#) | | Market
Value
of Shares
or Units of
Stock That
Have Not
Vested
($)(1) | | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested (#) | | Equity
Incentive
Plan
Awards:
Market or
Payout
Value
of Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested
($)(1) |
| Michael F. Roman | | | | | | | | | | | | | | 10,202(7) | | 1,799,837 |
| | | | | | | | | | | | | | | 6,394(7) | | 1,128,029 |
| | | | | | | | | | | | | | | 24,098(8) | | 4,251,369 |
| | | 8,906 | | | | 78.72 | | 02/07/20 | | | | | | | | |
| | | 10,067 | | | | 89.47 | | 02/08/21 | | | | | | | | |
| | | 9,747 | | | | 87.89 | | 02/07/22 | | | | | | | | |
| | | 10,610 | | | | 101.49 | | 02/03/23 | | | | | | | | |
| | | 25,867 | | | | 126.72 | | 02/02/24 | | | | | | | | |
| | | 39,846 | | | | 165.94 | | 02/03/25 | | | | | | | | |
| | | 48,206 | | | | 147.87 | | 02/02/26 | | | | | | | | |
| | | 34,832 | | 17,417(2) | | 175.76 | | 02/06/27 | | | | | | | | |
| | | 18,916 | | 37,834(3) | | 233.63 | | 02/04/28 | | | | | | | | |
| | | 12,094 | | 24,190(4) | | 195.52 | | 07/01/28 | | | | | | | | |
| | | | | 146,240(5) | | 201.12 | | 02/04/29 | | | | | | | | |
| Inge G. Thulin | | | | | | | | | | | | | | 12,968(7) | | 2,287,815 |
| | | | | | | | | | | | | | | 3,836(7) | | 676,747 |
| | | | | | | | | | | | | | | 7,531(8) | | 1,328,619 |
| | | 204,950 | | | | 101.49 | | 02/03/23 | | | | | | | | |
| | | 206,168 | | | | 126.72 | | 02/02/24 | | | | | | | | |
| | | 229,364 | | | | 165.94 | | 02/03/25 | | | | | | | | |
| | | 245,116 | | | | 147.87 | | 02/02/26 | | | | | | | | |
| | | 170,219 | | 85,110(2) | | 175.76 | | 02/06/27 | | | | | | | | |
| | | 48,092 | | 96,187(3) | | 233.63 | | 02/04/28 | | | | | | | | |
| | | — | | 45,686(5) | | 201.12 | | 02/04/29 | | | | | | | | |
2017 Proxy Statement | 61
Table of Contents
| | | Option Awards | | Stock Awards |
| Name | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | Option
Exercise
Price
($) | | Option
Expiration
Date | | Number
of Shares
or Units
of Stock
That
Have
Not
Vested
(#) | | Market
Value
of Shares
or Units of
Stock That
Have Not
Vested
($)(1) | | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested (#) | | Equity
Incentive
Plan
Awards:
Market or
Payout
Value
of Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested
($)(1) |
| Nicholas C. Gangestad | | | | | | | | | | | | | | 10,101(7) | | 1,782,018 |
| | | | | | | | | | | | | | | 8,772(8) | | 1,547,556 |
| | | 3,092 | | | | 89.47 | | 02/08/21 | | | | | | | | |
| | | 6,219 | | | | 87.89 | | 02/07/22 | | | | | | | | |
| | | 6,505 | | | | 101.49 | | 02/03/23 | | | | | | | | |
| | | 9,592 | | | | 126.72 | | 02/02/24 | | | | | | | | |
| | | 61,512 | | | | 165.94 | | 02/03/25 | | | | | | | | |
| | | 69,611 | | | | 147.87 | | 02/02/26 | | | | | | | | |
| | | 52,167 | | 26,085(2) | | 175.76 | | 02/06/27 | | | | | | | | |
| | | 18,730 | | 37,461(3) | | 233.63 | | 02/04/28 | | | | | | | | |
| | | | | 53,232(5) | | 201.12 | | 02/04/29 | | | | | | | | |
| | | | | | | | | | | 6,221(6) | | 1,097,509 | | | | |
| Ashish K. Khandpur | | | | | | | | | | | | | | 4,903(7) | | 864,987 |
| | | | | | | | | | | | | | | 8,425(8) | | 1,486,339 |
| | | 3,605 | | | | 89.47 | | 02/08/21 | | | | | | | | |
| | | 5,760 | | | | 87.89 | | 02/07/22 | | | | | | | | |
| | | 6,505 | | | | 101.49 | | 02/03/23 | | | | | | | | |
| | | 7,838 | | | | 126.72 | | 02/02/24 | | | | | | | | |
| | | 25,445 | | | | 165.94 | | 02/03/25 | | | | | | | | |
| | | 29,392 | | | | 147.87 | | 02/02/26 | | | | | | | | |
| | | 19,868 | | 9,935(2) | | 175.76 | | 02/06/27 | | | | | | | | |
| | | 9,090 | | 18,183(3) | | 233.63 | | 02/04/28 | | | | | | | | |
| | | | | 51,127(5) | | 201.12 | | 02/04/29 | | | | | | | | |
| Julie L. Bushman | | | | | | | | | | | | | | 6,297(7) | | 1,110,917 |
| | | | | | | | | | | | | | | 5,617(8) | | 990,951 |
| | | 9,000 | | | | 89.47 | | 02/08/21 | | | | | | | | |
| | | 30,875 | | | | 87.89 | | 02/07/22 | | | | | | | | |
| | | 24,650 | | | | 101.49 | | 02/03/23 | | | | | | | | |
| | | 40,535 | | | | 126.72 | | 02/02/24 | | | | | | | | |
| | | 37,514 | | | | 165.94 | | 02/03/25 | | | | | | | | |
| | | 41,181 | | | | 147.87 | | 02/02/26 | | | | | | | | |
| | | 26,211 | | 13,107(2) | | 175.76 | | 02/06/27 | | | | | | | | |
| | | 11,676 | | 23,353(3) | | 233.63 | | 02/04/28 | | | | | | | | |
| | | | | 34,085(5) | | 201.12 | | 02/04/29 | | | | | | | | |
Table of Contents
| | OPTION AWARDS | | STOCK AWARDS | | Option Awards | | Stock Awards |
NAME | | NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS (#)
EXERCISABLE | | NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS (#)
UNEXERCISABLE | | OPTION
EXERCISE
PRICE
($) | | OPTION
EXPIRATION
DATE | | NUMBER
OF
SHARES OR
UNITS OF
STOCK
THAT HAVE
NOT
VESTED (#) | | MARKET
VALUE
OF SHARES
OR UNITS OF
STOCK THAT
HAVE NOT
VESTED
($)(1) | | EQUITY
INCENTIVE
PLAN
AWARDS:
NUMBER OF
UNEARNED
SHARES, UNITS
OR OTHER
RIGHTS THAT
HAVE NOT
VESTED (#) | | EQUITY
INCENTIVE PLAN
AWARDS:
MARKET OR
PAYOUT VALUE
OF UNEARNED
SHARES, UNITS
OR OTHER
RIGHTS THAT
HAVE NOT
VESTED
($)(1) | |
| Michael F. Roman | | | | | | | 5,994(6) | | | 1,070,349 | |
| | | | | | | | | | | | | | | | | | | | | | 6,778(7) | | | 1,210,347 | |
| | | 6,604 | | 0 | | | | 77.18 | | 05/13/2018 | | | | |
| | | 4,944 | | 0 | | | | 54.11 | | 02/08/2019 | | | | |
| | | | 8,906 | | 0 | | | | 78.72 | | 02/07/2020 | | | | |
| | | 10,067 | | 0 | | | | 89.47 | | 02/08/2021 | | | | |
| | | 9,747 | | 0 | | | | 87.89 | | 02/07/2022 | | | | |
| | | 10,610 | | 0 | | | | 101.49 | | 02/03/2023 | | | | |
| | | 17,244 | | 8,623(2) | | | | 126.72 | | 02/02/2024 | | | | |
| | | 13,281 | | 26,565(3) | | | | 165.94 | | 02/03/2025 | | | | |
| | | - | | 48,206(4) | | | | 147.87 | | 02/02/2026 | | | | |
| | | 12,646(5) | | 2,258,196 | | | |
| Name | | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | Option
Exercise
Price
($) | | Option
Expiration
Date | | Number
of Shares
or Units
of Stock
That
Have
Not
Vested
(#) | | Market
Value
of Shares
or Units of
Stock That
Have Not
Vested
($)(1) | | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested (#) | | Equity
Incentive
Plan
Awards:
Market or
Payout
Value
of Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested
($)(1) |
| Joaquin Delgado | | | | | 7,295(6) | | | 1,302,668 | | | | | | | | | | | | | | 4,903(7) | | 864,987 |
| | | | | 8,033(7) | | | 1,434,453 | | | | | | | | | | | | | | 1,405(8) | | 247,870 |
| | | 8,440 | | 0 | | | | 77.18 | | 05/13/2018 | | | | | 36,126 | | | | 87.89 | | 02/07/22 | | | | | | | | |
| | | 47,390 | | 0 | | | | 78.72 | | 02/07/2020 | | | | | 35,490 | | | | 101.49 | | 02/03/23 | | | | | | | | |
| | | 43,106 | | 0 | | | | 89.47 | | 02/08/2021 | | | | | 32,428 | | | | 126.72 | | 02/02/24 | | | | | | | | |
| | | 36,126 | | 0 | | | | 87.89 | | 02/07/2022 | | | | | 48,489 | | | | 165.94 | | 02/03/25 | | | | | | | | |
| | | 35,490 | | 0 | | | | 101.49 | | 02/03/2023 | | | | | 57,136 | | | | 147.87 | | 02/02/26 | | | | | | | | |
| | | 21,618 | | 10,810(2) | | | | 126.72 | | 02/02/2024 | | | | | 32,175 | | 16,089(2) | | 175.76 | | 02/06/27 | | | | | | | | |
| | | 16,162 | | 32,327(3) | | | | 165.94 | | 02/03/2025 | | | | | 9,090 | | 18,183(3) | | 233.63 | | 02/04/28 | | | | | | | | |
| | - | | 57,136(4) | | | | 147.87 | | 02/02/2026 | | | | | | | 17,043(5) | | 201.12 | | 02/04/29 | | | | | | | | |
| Michael G. Vale | | | | | 7,493(6) | | | 1,338,025 | | | | | | | | | | | | | | 4,903(7) | | 864,987 |
| | | | | 8,251(7) | | | 1,473,381 | | | | | | | | | | | | | | 5,467(8) | | 964,488 |
| | | 8,440 | | 0 | | | | 77.18 | | 05/13/2018 | | | | 7,812 | | | | 89.47 | | 02/08/21 | | | | | | | | |
| | | 8,444 | | 0 | | | | 54.11 | | 02/08/2019 | | | | 30,875 | | | | 87.89 | | 02/07/22 | | | | | | | | |
| | | 8,906 | | 0 | | | | 78.72 | | 02/07/2020 | | | | 43,705 | | | | 101.49 | | 02/03/23 | | | | | | | | |
| | | 7,812 | | 0 | | | | 89.47 | | 02/08/2021 | | | | 31,559 | | | | 126.72 | | 02/02/24 | | | | | | | | |
| | | 30,875 | | 0 | | | | 87.89 | | 02/07/2022 | | | | 49,804 | | | | 165.94 | | 02/03/25 | | | | | | | | |
| | | 43,705 | | 0 | | | | 101.49 | | 02/03/2023 | | | | 58,684 | | | | 147.87 | | 02/02/26 | | | | | | | | |
| | | 21,039 | | 10,520(2) | | | | 126.72 | | 02/02/2024 | | | | 33,061 | | 16,531(2) | | 175.76 | | 02/06/27 | | | | | | | | |
| | | 16,601 | | 33,203(3) | | | | 165.94 | | 02/03/2025 | | | | 9,090 | | 18,183(3) | | 233.63 | | 02/04/28 | | | | | | | | |
| | | - | | 58,684(4) | | | | 147.87 | | 02/02/2026 | | | | | | 33,172(5) | | 201.12 | | 02/04/29 | | | | | | | | |
| | | 12,646(5) | | 2,258,196 | | |
FOOTNOTES TO 20162019 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
(1) The market value of performance shares or RSUs that have not vested was determined by multiplying the closing price of a share of 3M common stock on the NYSE for December 30, 2016 ($178.57), by the number of performance shares or RSUs shown, respectively.
| (1) | The market value of performance shares or RSUs that have not vested was determined by multiplying the closing price of a share of 3M common stock on the NYSE for December 31, 2019 ($176.42), by the number of performance shares or RSUs shown, respectively. |
| (2) | These stock options vested in full on February 7, 2020. |
| (3) | These stock options vested or will vest in installments of one-half on February 6, 2020, and February 6, 2021. |
| (4) | These stock options will vest in installments of one-half on July 1, 2020, and July 1, 2021. |
| (5) | These stock options vested or will vest in installments of one-third on each of February 5, 2020, February 5, 2021, and February 5, 2022. |
| (6) | These restricted stock units will vest in installments of one-half on December 1, 2020, and December 1, 2022, provided that the holder remains in employment with 3M through such date. |
| (7) | The shares of 3M common stock to be delivered as a result of the Company’s performance over the three-year performance period ending December 31, 2020, will not vest until December 31, 2020. Under the terms of the awards, these shares of 3M common stock will be delivered no later than March 15, 2021, unless deferred by the executive. In accordance with the Securities and Exchange Commission’s regulations, the number of shares and payout value for these performance shares reflect the target payout under the formula for this grant since the Company’s performance during the first two years of the three-year performance period exceeded the threshold levels for this grant. |
| (8) | The shares of 3M common stock to be delivered as a result of the Company’s performance over the three-year performance period ending December 31, 2021, will not vest until December 31, 2021. Under the terms of the awards, these shares of 3M common stock will be delivered no later than March 15, 2022, unless deferred by the executive. In accordance with the Securities and Exchange Commission’s regulations, the number of shares and payout value for these performance shares reflect the target payout under the formula for this grant since the Company’s performance during the first year of the three-year performance period has exceeded the threshold levels for this grant. |
62 | 3M
Table of Contents
2019 option exercises and stock vested table
(2) These stock options vested in full on February 4, 2017.
(3) These stock options vested or will vest in installments of one-half on February 3, 2017, and February 3, 2018.
| | | Option Exercises and Stock Vested |
| | | Option Awards | | Stock Awards |
| Name | | Number of
Shares
Acquired on
Exercise (#) | | Value
Realized
on Exercise
($)(1) | | Number of
Shares
Acquired on
Vesting (#) | | Value
Realized
on Vesting
($)(2) |
| Michael F. Roman | | 4,944(3) | | 719,550 | | 21,052(10) | | 3,629,898 |
| Inge G. Thulin | | 298,530(4) | | 26,270,916 | | 41,081(11) | | 7,247,510 |
| Nicholas C. Gangestad | | 1,681(5) | | 205,819 | | 12,591(12) | | 2,221,304 |
| Ashish K. Khandpur | | 3,362(6) | | 320,995 | | 4,795(13) | | 845,934 |
| Julie L. Bushman | | 13,172(7) | | 1,592,596 | | 18,972(14) | | 3,262,944 |
| Joaquin Delgado | | 63,560(8) | | 6,241,164 | | 7,766(15) | | 1,370,078 |
| Michael G. Vale | | 8,906(9) | | 1,073,838 | | 20,625(16) | | 3,554,566 |
(4) These stock options vested or will vest in installments of one-third on each of February 2, 2017, February 2, 2018, and February 2, 2019.
(5) These restricted stock units will vest in full on December 1, 2019, assuming continued employment.
(6) The shares of 3M common stock to be delivered as a result of the Company’s performance over the three-year performance period ending December 31, 2017, will not vest until December 31, 2017. Under the terms of the 2008 Long-Term Incentive Plan, these shares of 3M common stock will be delivered no later than March 15, 2018. In accordance with the Securities and Exchange Commission’s regulations, the number of shares and payout value for these performance shares reflect the target payout under the formula for this grant since the Company’s performance during the first two years of the three-year performance period exceeded the threshold levels for this grant.
(7) The shares of 3M common stock to be delivered as a result of the Company’s performance over the three-year performance period ending December 31, 2018, will not vest until December 31, 2018. Under the terms of the 2008 Long-Term Incentive Plan, these shares of 3M common stock will be delivered no later than March 15, 2019. In accordance with the Securities and Exchange Commission’s regulations, the number of shares and payout value for these performance shares reflect the target payout under the formula for this grant since the Company’s performance during the first year of the three-year performance period exceeded the threshold levels for this grant.
2016 Option Exercises and Stock Vested Table |
| | OPTION EXERCISES AND STOCK VESTED |
| | OPTION AWARDS | | STOCK AWARDS |
| NAME | | NUMBER OF SHARES
ACQUIRED ON
EXERCISE (#) | | VALUE REALIZED
ON EXERCISE
($)(1) | | NUMBER OF SHARES
ACQUIRED ON
VESTING (#) | | VALUE REALIZED
ON VESTING
($)(2) |
| Inge G. Thulin | | | 45,758 | (3) | | | | 3,901,684 | | | | 47,663 | (8) | | | 8,511,214 |
| Nicholas C. Gangestad | | | 2,612 | (4) | | | | 213,505 | | | | 10,702 | (9) | | | 1,910,991 |
| Michael F. Roman | | | 5,536 | (5) | | | | 508,283 | | | | 6,752 | (10) | | | 1,205,758 |
| Joaquin Delgado | | | 17,996 | (6) | | | | 1,790,827 | | | | 32,866 | (11) | | | 5,903,367 |
| Michael G. Vale | | | 2,156 | (7) | | | | 150,968 | | | | 8,359 | (12) | | | 1,492,597 |
FOOTNOTES TO 20162019 OPTION EXERCISES AND STOCK VESTED TABLE
(1) The amounts shown as Value Realized on Exercise were determined by multiplying the number of shares acquired on exercise by the difference between the market price of a share of 3M common stock on the exercise date and the per share exercise price of the options.
(2) The amounts shown as Value Realized on Vesting were determined by multiplying the number of shares acquired on vesting by the market price of a share of 3M common stock on the vesting date.
(3) | (1) | The amounts shown as Value Realized on Exercise were determined by multiplying the number of shares acquired on exercise by the difference between the closing price of a share of 3M common stock on the NYSE for the exercise date and the per share exercise price of the options. |
| |
| (2) | The amounts shown as Value Realized on Vesting were determined by multiplying the number of shares acquired on vesting by the closing price of a share of 3M common stock on the NYSE for the vesting date. |
| |
| (3) | The stock options exercised by Mr. Roman were granted on February 9, 2009, and had an exercise price of $54.11 per share. |
| |
| (4) | The stock options exercised by Mr. Thulin were granted on February 9, 2010, February 8, 2011 and February 7, 2012, and had an exercise price between $78.72 and $89.47 per share. |
| |
| (5) | The stock options exercised by Mr. Gangestad were granted on February 9, 2010, and had an exercise price of $78.72 per share. |
| |
| (6) | The stock options exercised by Mr. Khandpur were granted on February 9, 2010, and had an exercise price of $78.72 per share. |
| |
| (7) | The stock options exercised by Ms. Bushman were granted on February 9, 2010, and had an exercise price of $78.72 per share. |
| |
| (8) | The stock options exercised by Dr. Delgado were granted on February 9, 2010, and February 8, 2011, and had an exercise price between $78.72 and $89.47 per share. |
| |
| (9) | The stock options exercised by Mr. Vale were granted on February 9, 2010, and had an exercise price of $78.72 per share. |
| |
| (10) | Reflects the number of shares earned by Mr. Roman upon the vesting of restricted stock units and performance shares granted to him under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. Of this total number of shares, 12,646 were attributable to restricted stock units granted on December 1, 2014, and 8,406 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. Mr. Roman previously elected to defer receipt of all of the shares issuable pursuant to his 2017 performance shares until following his termination of employment. |
| |
| (11) | Reflects the number of shares earned by Mr. Thulin upon the vesting of performance shares granted to him under the 2016 Long-Term Incentive Plan. All 41,081 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. Mr. Thulin previously elected to defer receipt of all of these shares until following his termination of employment. |
| |
| (12) | Reflects the number of shares earned by Mr. Gangestad upon the vesting of performance shares granted to him under the 2016 Long-Term Incentive Plan. All 12,591 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. |
| |
| (13) | Reflects the number of shares earned by Mr. Khandpur upon the vesting of performance shares granted to him under the 2016 Long-Term Incentive Plan. All 4,795 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. Mr. Khandpur previously elected to defer receipt of all of these shares until following his termination of employment. |
| |
| (14) | Reflects the number of shares earned by Ms. Bushman upon the vesting of restricted stock units and performance shares granted to her under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. Of this total number of shares, 12,646 were attributable to restricted stock units granted on December 1, 2014, and 6,326 of these shares were attributable to her 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. |
| |
| (15) | Reflects the number of shares earned by Dr. Delgado upon the vesting of performance shares granted to him under the 2016 Long-Term Incentive Plan. All 7,766 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. |
| |
| (16) | Reflects the number of shares earned by Mr. Vale upon the vesting of restricted stock units and performance shares granted to him under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. Of this total number of shares, 12,646 |
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were attributable to restricted stock units granted on May 8, 2007,December 1, 2014, and had an exercise price of $84.78 per share.
(4) The stock options exercised by Mr. Gangestad were granted on May 8, 2007, and had an exercise price of $84.78 per share.
(5) The stock options exercised by Mr. Roman were granted on May 9, 2006, and May 8, 2007, and had exercise prices between $84.78 and $87.35 per share.
(6) The stock options exercised by Mr. Delgado were granted on May 8, 2007, and February 9, 2009, and had exercise prices between $54.11 and $84.78 per share.
(7) The stock options exercised by Mr. Vale were granted on May 8, 2007, and had an exercise price of $84.78 per share.
(8) Reflects the number of shares earned by Mr. Thulin upon the vesting of performance shares granted to him under the 2008 Long-Term Incentive Plan. All 47,6637,979 of these shares were attributable to his 20142017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2016. Mr. Thulin previously elected to defer receipt of all of these shares until following his termination of employment.
(9) Reflects the number of shares earned by Mr. Gangestad upon the vesting of performance shares granted to him under the 2008 Long-Term Incentive Plan. All 10,702 of these shares were attributable to his 2014 performance shares for which the three-year performance period was completed on December 31, 2016.
(10) Reflects the number of shares earned by Mr. Roman upon the vesting of performance shares granted to him under the 2008 Long-Term Incentive Plan. All 6,752 of these shares were attributable to his 2014 performance shares for which the three-year performance period was completed on December 31, 2016. Mr. Roman previously elected to defer receipt of all of these shares until following his termination of employment.
(11) These shares were acquired by Mr. Delgado upon the vesting of restricted stock units and performance shares granted to him under the 2008 Long-Term Incentive Plan. Of this total number of shares, 24,507 were attributable to restricted stock units granted on September 1, 2011, and 8,359 were attributable to his 2014 performance shares for which the three-year performance period was completed on December 31, 2016.
(12) Reflects the number of shares earned by Mr. Vale upon the vesting of performance shares granted to him under the 2008 Long-Term Incentive Plan. All 8,359 of these shares were attributable to his 2014 performance shares for which the three-year performance period was completed on December 31, 2016.2019. Mr. Vale previously elected to defer receipt of all theseof the shares issuable pursuant to his 2017 performance shares until following his termination of employment.
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Table of ContentsPension benefits
The following table shows the present value of the accumulated benefits payable to each of the Named Executive Officers, as well as the number of years of service credited to each individual, under each of the Company’s defined benefit pension plans determined using the same interest rate and mortality assumptionsasassumptions as those used for financial statement reporting purposes. See Note 1113 to the Company’s audited financial statements for the fiscal year ended December 31, 2016,2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 9, 2017.6, 2020.
2016 Pension Benefits Table
| NAME | | | PLAN NAME | | NUMBER
OF YEARS
CREDITED
SERVICE (#) | | PRESENT
VALUE OF
ACCUMULATED
BENEFITS
($) | | PAYMENTS
DURING
LAST FISCAL
YEAR
($) |
| Inge G. Thulin | | | Employee Retirement Income Plan | | 37 | | | 1,884,241 | * | | | 0 |
| | | Nonqualified Pension Plan | | 37 | | | 24,338,623 | | | | 0 |
| Nicholas C. Gangestad | | | Employee Retirement Income Plan | | 31 | | | 1,113,002 | | | | 0 |
| | | Nonqualified Pension Plan | | 31 | | | 2,977,932 | | | | 0 |
| Michael F. Roman | | | Employee Retirement Income Plan | | 28 | | | 1,278,144 | | | | 0 |
| | | Nonqualified Pension Plan | | 28 | | | 3,832,158 | | | | 0 |
| Joaquin Delgado | | | Employee Retirement Income Plan | | 29 | | | 1,261,453 | | | | 0 |
| | | Nonqualified Pension Plan | | 29 | | | 3,976,947 | | | | 0 |
| Michael G. Vale | | | Employee Retirement Income Plan | | 24 | | | 787,892 | | | | 0 |
| | | Nonqualified Pension Plan | | 24 | | | 2,402,038 | | | | 0 |
2019 PENSION BENEFITS TABLE
| Name | | Plan Name | | Number
of Years
Credited
Service
(#) | | Present
Value of
Accumulated
Benefits
($) | | Payments
During
Last Fiscal
Year
($) |
| Michael F. Roman | | Employee Retirement Income Plan | | 31 | | 1,839,130 | | — |
| | | Nonqualified Pension Plan | | 31 | | 14,282,279 | | — |
| Inge G. Thulin | | Employee Retirement Income Plan | | 40 | | 2,019,001* | | 71,293 |
| | | Nonqualified Pension Plan | | 40 | | — | | 28,680,254 |
| Nicholas C. Gangestad | | Employee Retirement Income Plan | | 35 | | 1,683,480 | | — |
| | | Nonqualified Pension Plan | | 35 | | 8,390,844 | | — |
| Ashish K. Khandpur | | Employee Retirement Income Plan | | 25 | | 1,095,946 | | — |
| | | Nonqualified Pension Plan | | 25 | | 3,427,582 | | — |
| Julie L. Bushman | | Employee Retirement Income Plan | | 36 | | 1,942,755 | | — |
| | | Nonqualified Pension Plan | | 36 | | 8,231,838 | | — |
| Joaquin Delgado | | Employee Retirement Income Plan | | 32 | | 1,710,547** | | 51,145 |
| | | Nonqualified Pension Plan | | 32 | | 6,676,594 | | — |
| Michael G. Vale | | Employee Retirement Income Plan | | 27 | | 1,234,502 | | — |
| | | Nonqualified Pension Plan | | 27 | | 4,683,307 | | — |
* A portion | Mr. Thulin commenced payment of Mr. Thulin’shis benefits will actually be paid byunder the specified plan during 2019. As a result, the amounts shown were determined based on his final benefit amount (after adjustment to reflect the pension plan maintained by the Company’s subsidiary in Sweden (based on the yearsbenefits he was employedearned during his employment in Sweden before transferringhis transfer to the United States), and the payment form selected. |
| |
| ** | Dr. Delgado commenced payment of his benefits under the specified plan during 2019. As a result, the amounts shown were determined based on his final benefit amount paid by this plan in Sweden will reduceand the amount paid by the Employee Retirement Income Plan.payment form selected. |
The Employee Retirement Income Plan (“ERIP”) is a tax-qualified defined benefit pension plan maintained by 3M for its eligible employees in the United States. Effective January 1, 2001, the Company amended the ERIP to include a pension equity formula for (1) employees hired or rehired on or after January 1, 2001, and (2) employees who voluntarily elected the pension equity formula during the one-time choice election period in 2001. The ERIP was closed to new participants effective January 1, 2009, meaning that employees hired or rehired on or after January 1, 2009, do not participate in the plan. Of the Named Executive Officers, Mr. Roman, Mr. Thulin, Mr. Gangestad, Mr. Roman,Khandpur, Ms. Bushman and Mr.Dr. Delgado participate under the non-pension equity formula of the ERIP (the Portfolio I Plan), while Mr. Vale participates under the pension equity formula of the ERIP (the Portfolio II Plan). Retirement benefits under the ERIP are based on an employee’s years of service and average annual earnings during the employee’s four highest-paid consecutive years of service. As applied to the Named Executive Officers, earnings for purposes of the ERIP include base salary and target annual incentive compensation. All benefits earned under the ERIP by the Named Executive Officers will be payable in the form of life annuities, unless an individual elects at the time their employment ends to receive the entire amount of his or her earned pension benefits in the form of a single lump-sum cash payment.
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Under the Portfolio I Plan, employees earn annual benefits payable at retirement generally equal to 1.15 percent of their high-four average annual earnings multiplied by their years of service plus 0.35 percent of their high-four average annual earnings in excess of a Social Security breakpoint multiplied by their years of service (up to a maximum of 35 years). The Social Security breakpoint is an average of the Social Security taxable wage bases for each of the 35 years ending with the year each employee qualifies for receiving unreduced Social Security retirement benefits. Under the Portfolio I Plan, an employee may retire with an unreduced pension at age 60 (61 or 62 for employees born after 1942 and 1959, respectively). If the employee’s age and service at the time of retirement total at least 90 (91 or 92 for employees born after 1942 and 1959, respectively) the employee also would receive a Social Security bridge payment until age 62. Mr. Thulin is eligible to retire withcurrently receives unreduced earlyretirement benefits, and Dr. Delgado currently receives reduced retirement benefits. EachAs of March 13, 2020, each of Mr. DelgadoRoman, Mr. Gangestad, and Mr. Roman areMs. Bushman is eligible to retire with reduced early retirement benefits, with the reduction being equal to 5 percent of the pension otherwise payable for each year that hesuch executive retires prior to age 62.61 (age 62 for Mr. Gangestad and Ms. Bushman).
Under the Portfolio II Plan, employees earn pension credits (from 3 percent to 12 percent) for each year of employment based on their age and accumulated years
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of service under the plan. Once their employment ends, these accumulated pension credits are multiplied by their high-four average annual earnings and added to an amount determined by multiplying one-half of these accumulated pension credits by their high-four average annual earnings in excess of a Social Security integration level (70 percent of the Social Security taxable wage base in the year employment ends). The sum of these two amounts is then converted into an annuity payable over the lifetime of the employee using fixed conversion factors. The Portfolio II Plan does not provide any subsidies for early retirement.
As a tax-qualified plan, the ERIP is subject to a variety of limits that apply to both the amount of any employee’s earnings that may be considered when determining the benefits earned under the plan as well as the maximum amount of benefits that any employee may earn. TheNonqualifiedThe Nonqualified Pension Plan is designed to provide additional benefits to employees, including the Named Executive Officers, affected by these limits. The amount of benefits earned under this Nonqualified Pension Plan generally equals the amount of benefits an employee was not able to earn under the ERIP as a result of the limits imposed by Federal tax laws. The benefits earned under this Nonqualified Pension Plan are generally paid in the form of a single lump-sum cash payment following the termination of their employment (subject to any applicable delay under Federal tax laws). Current employees were given a one-time opportunity during 2008 to elect to receive their benefits earned under this Nonqualified Pension Plan in the form of a life annuity following their retirement, and none of the Named Executive Officers elected to receive their benefits in the form of a life annuity.
Nonqualified Deferred Compensation |
Nonqualified deferred compensation
The following table reflects the participation during 20162019 by the Named Executive Officers in three nonqualified deferred compensation plans offered by the Company. The Deferred Compensation Excess Plan allows eligible employees to defer for a number of years or until retirement from the Company the receipt of a portion of their base salary and the portion of their annual incentive compensation paid in cash.compensation. The Performance Awards Deferred Compensation Plan allows eligible employees to defer for a number of years or until retirement from the Company the payout of their performance share or performance unit awards under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. The VIP Excess Plan allows eligible employees to defer until retirement from the Company the receipt of a portion of their base salary and the portion of their annual incentive compensation paid in cash.compensation. All three plans generally allow the eligible employees to elect to receive payment of their account balances in the form of either a single lump sum payment or in up to ten annual installments. With the exception of deferrals of performance shares under the Performance Awards Deferred Compensation Plan, earnings are credited to the amounts deferred under all three plans based on the returns paid on the investment funds available to participants in 3M’s qualified 401(k) plan or a fixed rate of return based on corporate bond yields (as selected by each participant). Earnings are credited to the deferrals of performance shares under the Performance Awards Deferred Compensation Plan based on the return on shares of 3M common stock, including reinvested dividends.
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2016 Nonqualified Deferred Compensation Table
| NAME | | EXECUTIVE
CONTRIBUTIONS IN
LAST FY
($)(1) | | REGISTRANT
CONTRIBUTIONS IN
LAST FY
($)(2) | | AGGREGATE
EARNINGS IN
LAST FY
($)(3) | | AGGREGATE
WITHDRAWALS/
DISTRIBUTIONS
($) | | AGGREGATE
BALANCE AT LAST
FYE
($)(4) |
| Inge G. Thulin | | | | | | | | | | | | | | | | | | |
| VIP Excess Plan | | | 270,201 | | | | 81,555 | | | | 54,473 | | | 0 | | | 2,033,236 | |
| Deferred Compensation Excess Plan | | | 1,747,601 | | | | 0 | | | | 53,831 | | | 0 | | | 2,160,124 | |
| Performance Awards Deferred | | | 7,163,603 | | | | 0 | | | | 3,033,339 | | | 0 | | | 16,246,532 | |
| Compensation Plan | | | | | | | | | | | | | | | | | | |
| Nicholas C. Gangestad | | | | | | | | | | | | | | | | | | |
| VIP Excess Plan | | | 92,363 | | | | 25,586 | | | | 26,542 | | | 0 | | | 315,077 | |
| Deferred Compensation Excess Plan | | | 0 | | | | 0 | | | | 0 | | | 0 | | | 0 | |
| Performance Awards Deferred | | | 1,175,568 | | | | 0 | | | | 388,708 | | | 0 | | | 2,054,875 | |
| Compensation Plan | | | | | | | | | | | | | | | | | | |
| Michael F. Roman | | | | | | | | | | | | | | | | | | |
| VIP Excess Plan | | | 104,996 | | | | 24,950 | | | | 11,229 | | | 0 | | | 449,829 | |
| Deferred Compensation Excess Plan | | | 0 | | | | 0 | | | | 5,928 | | | 0 | | | 207,433 | |
| Performance Awards Deferred | | | 0 | | | | 0 | | | | 0 | | | 0 | | | 0 | |
| Compensation Plan | | | | | | | | | | | | | | | | | | |
| Joaquin Delgado | | | | | | | | | | | | | | | | | | |
| VIP Excess Plan | | | 95,395 | | | | 22,301 | | | | 72,647 | | | 0 | | | 826,969 | |
| Deferred Compensation Excess Plan | | | 126,218 | | | | 0 | | | | 18,041 | | | 0 | | | 144,259 | |
| Performance Awards Deferred | | | 0 | | | | 0 | | | | 0 | | | 0 | | | 0 | |
| Compensation Plan | | | | | | | | | | | | | | | | | | |
| Michael G. Vale | | | | | | | | | | | | | | | | | | |
| VIP Excess Plan | | | 98,493 | | | | 30,558 | | | | 41,045 | | | 0 | | | 710,741 | |
| Deferred Compensation Excess Plan | | | 0 | | | | 0 | | | | 913 | | | 0 | | | 19,503 | |
| Performance Awards Deferred | | | 0 | | | | 0 | | | | 0 | | | 0 | | | 0 | |
| Compensation Plan | | | | | | | | | | | | | | | | | | |
FOOTNOTES TO 20162019 NONQUALIFIED DEFERRED COMPENSATION TABLE
| Name | | Executive
Contributions
in Last FY
($)(1) | | Registrant
Contributions
in Last FY
($)(2) | | Aggregate
Earnings in
Last FY
($)(3) | | | Aggregate
Withdrawals/
Distributions
($) | | Aggregate
Balance at Last
FYE
($)(4) |
| Michael F. Roman | | | | | | | | | | | |
| VIP Excess Plan | | 251,645 | | 56,395 | | | 41,029 | | | — | | 1,235,898 |
| Deferred Compensation Excess Plan | | — | | — | | | 8,458 | | | — | | 231,049 |
Performance Awards Deferred
Compensation Plan | | 1,484,748 | | — | | | (241,480 | ) | | — | | 3,672,315 |
| Inge G. Thulin | | | | | | | | | | | | |
| VIP Excess Plan | | 210,447 | | 46,825 | | | 133,424 | | | — | | 3,692,807 |
| Deferred Compensation Excess Plan | | 938,899 | | — | | | 326,793 | | | — | | 9,083,916 |
Performance Awards Deferred
Compensation Plan | | 7,569,122 | | — | | | (2,144,679 | ) | | — | | 39,257,779 |
| Nicholas C. Gangestad | | | | | | | | | | | | |
| VIP Excess Plan | | 146,074 | | 31,747 | | | 173,732 | | | — | | 1,058,950 |
| Deferred Compensation Excess Plan | | — | | — | | | — | | | — | | — |
Performance Awards Deferred
Compensation Plan | | 1,072,070 | | — | | | (216,321 | ) | | — | | 3,594,778 |
| Ashish K. Khandpur | | | | | | | | | | | | |
| VIP Excess Plan | | 131,636 | | 27,647 | | | 130,840 | | | — | | 735,378 |
| Deferred Compensation Excess Plan | | — | | — | | | — | | | — | | — |
Performance Awards Deferred
Compensation Plan | | 900,125 | | — | | | (114,202 | ) | | — | | 1,502,658 |
| Julie L. Bushman | | | | | | | | | | | | |
| VIP Excess Plan | | 35,773 | | 10,256 | | | 36,698 | | | — | | 249,702 |
| Deferred Compensation Excess Plan | | — | | — | | | — | | | — | | — |
Performance Awards Deferred
Compensation Plan | | — | | — | | | — | | | — | | — |
| Joaquin Delgado | | | | | | | | | | | | |
| VIP Excess Plan | | 53,176 | | 10,305 | | | 257,599 | | | — | | 1,468,136 |
| Deferred Compensation Excess Plan | | — | | — | | | 35,594 | | | — | | 193,048 |
Performance Awards Deferred
Compensation Plan | | — | | — | | | — | | | — | | — |
| Michael G. Vale | | | | | | | | | | | | |
| VIP Excess Plan | | 108,096 | | 30,283 | | | 109,741 | | | — | | 1,295,387 |
| Deferred Compensation Excess Plan | | — | | — | | | 2,157 | | | — | | 23,205 |
Performance Awards Deferred
Compensation Plan | | 1,807,439 | | — | | | (296,693 | ) | | — | | 4,531,829 |
FOOTNOTES TO 2019 NONQUALIFIED DEFERRED COMPENSATION TABLE
| (1) | With the exception of the amounts contributed by Mr. Roman, Mr. Thulin, Mr. Gangestad, Mr. Khandpur, and Mr. Vale from the payout of their performance share awards for the 2016-2018 performance period and by Mr. Khandpur from the payout of his annual incentive earned in 2018, all amounts contributed by these individuals during 2019 have been included in the Summary Compensation Table as Salary, Stock Awards, or Non-Equity Incentive Plan Compensation earned in 2017, 2018, or 2019. The Summary Compensation Table does not reflect any portion of the contributions from the payout of Mr. Roman’s, Mr. Thulin’s, Mr. Gangestad’s, Mr. Khandpur’s and Mr. Vale’s performance share awards for the 2016-2018 performance period because those awards were granted in 2016 and does not reflect any portion of the contributions from Mr. Khandpur’s 2018 annual incentive payment because those amounts were earned prior to the first year he became a Named Executive Officer. |
| |
| (2) | The amounts shown reflect 3M matching contributions under the VIP Excess Plan, a nonqualified defined contribution plan. Eligibility for this plan and its matching contributions is limited to employees whose compensation exceeds a limit established by Federal income tax laws for tax-qualified defined contribution plans. The plan permits eligible employees to save additional amounts from their current cash compensation beyond the contribution limits established by Federal tax laws, and to receive |
(1)Table of Contents
Company matching contributions similar to the matching contributions provided under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan. With the exception of the amounts contributed by3M matching contributions to Mr. Roman from the payoutKhandpur’s VIP Excess Plan account in respect of his 2018 annual incentive earned during 2015,all amounts contributed by these individuals during 2016 have been includedpayment (paid in the Summary Compensation Table as Salary, Stock Awards, or Non-Equity Incentive Plan Compensation earned in 2014, 2015, or 2016. Since Mr. Roman was not a named executive officer for 2015, the Summary Compensation Table does not reflect any of his 2015 annual incentive compensation from which this contribution was made during 2016.
(2) All2019), all amounts contributed by the Company on behalf of these individuals during 20162019 are included in the “All Other Compensation” column of the Summary Compensation Table.
(3) None of these amounts is included in the The Summary Compensation Table as compensation earned in 2016, since nonedoes not reflect any portion of the Company’s nonqualified deferred compensation plans provide above-market or preferential earnings.3M matching contributions made to Mr. Khandpur’s VIP Excess Plan account in respect of his 2018 annual incentive payment because those amounts were earned prior to the first year he became a Named Executive Officer.
(4) Includes the following amounts that were reported as compensation in the Summary Compensation Table for prior years: Mr. Thulin — $9,364,341; Mr. Gangestad — $390,236; Mr. Roman — $0; Mr. Delgado — $150,274; and Mr. Vale — $212,661.
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Potential Payments Upon Termination(3) | None of these amounts are included in the Summary Compensation Table as compensation earned in 2019, since none of the Company’s nonqualified deferred compensation plans provide above-market or Changepreferential earnings. |
| |
| (4) | Includes the following amounts that were reported as compensation for 2017 and 2018 in Controlthe Summary Compensation Table: Mr. Roman — $501,252; Mr. Thulin — $5,554,184; Mr. Gangestad — $384,096; Mr. Khandpur — $0; Ms. Bushman — $107,497; Dr. Delgado — $1,144,068; and Mr. Vale — $280,955. |
Potential payments upon termination or change in control
As reflected in the Compensation Discussion and Analysis portion of this Proxy Statement, 3M has no employment agreements with any of the Named Executive Officers nor does it have any severance or change in control plans or arrangements that would provide severance benefits to any of the Named Executive Officers solely in the event of the termination of their employment or a change in control of the Company. We also do not have any agreements that would provide automatic “single-trigger” accelerated vesting of equity compensation or excise tax gross-up payments to any of our Named Executive Officers in the event of a change in control of the Company. However,
Effective February 3, 2020, 3M adopted a new severance plan to provide separation benefits to eligible U.S. employees (including the Named Executive Officers) who incur a qualifying termination. In addition, certain of the Company’s executive compensation and benefit plans provide all participants (including the Named Executive Officers) with certain rights or the right to receive payments in the event of the termination of their employment or upon a change in control of the Company. The terms applicable to these potential rights or payments in various situations are described below. Payments or benefits under other plans and arrangements that are generally provided on a non-discriminatory basis to all similarly situated employees of the Company upon the termination of their employment are not described, including (a) accrued base salary; (b) annual incentive earned with respect to completed performance periods; (c) retiree welfare benefits provided to substantially all of the Company’s U.S. employees, including retiree medical benefits; (d) distribution of vested account balances under the Company’s qualified 401(k) plan; (e) accrued pension benefits under the Company’s defined benefit pension plans payable following an employee’s retirement or other termination of employment (the amounts of these benefits earned by the Named Executive Officers are reported in the 20162019 Pension Benefits Table); (f) life insurance benefits generally available to all salaried employees; and (g) distribution of account balances under the Company’s nonqualified deferred compensation plans (the amount of these account balances of the Named Executive Officers are reported in the 20162019 Nonqualified Deferred Compensation Table).
Rights and Payments Upon Retirementpayments upon retirement
Following retirement (as described below), the Named Executive Officers are entitled to receive:
●• | continued vesting of stock options previously granted under the Company’s stock plans, and the opportunity to exercise vested stock options previously granted under such plans during the remainder of the original term (up to 10 years) of such options; |
● | |
| • | an annual incentive plan payment for the year of retirement, prorated based on the number of days worked prior to the date of separation; |
| |
| • | for those Named Executive Officers whose initial appointmentinitially appointed to a 3M executive position occurred prior tobefore January 1, 2006, or after December 31, 2017, payment for all previously granted performance shares upon completion of the respective three-year performance period (prorated to reflect the portion of the year worked only with respect to the performance shares granted in the year of retirement) and based on actual performance; and |
● | |
| • | for those Named Executive Officers whose initial appointmentinitially appointed to a 3M executive position occurred on or after January 1, 2006, and on or before December 31, 2017, payment for all previously granted performance shares upon completion of the respective three-year performance period (prorated to reflect the portion of the three-year performance period that occurred prior to the date of the Named Executive Officer’s retirement) and based on actual performance. |
For this purpose, the term “Retirement” means a termination of employment with the Company after attaining age 55 with at least 10 years of service (age 55 with at least five years of service for awards granted before January 1, 2016).
Rights and Payments Upon Termination Due to Disability
In the event of the termination of their employment due to disability, the Named Executive Officers are entitled to receive:
●84 | continued vesting of stock options previously granted under the Company’s stock plans, and the opportunity to exercise vested stock options previously granted under such plans during the remainder of the original term (up to 10 years) of such options; |
● | immediate vesting of all restricted stock units previously granted under the Company’s stock plans; and |
● | payment for all previously granted performance shares upon completion of the respective three-year performance period, based on actual performance.3M Company |
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Rights and Payments Upon Termination Duepayments upon termination due to Deathdeath
In the event of the termination of their employment due to death, the Named Executive Officers are entitled to receive:
●• | immediate vesting of all unvested stock options and restricted stock units previously granted under the Company’s stock plans, and the opportunity for the Named Executive Officer’s estate or beneficiaries to exercise all vested stock options during the two-year period following the date of death (but not beyond the original expiration date of any such stock option); |
2017 Proxy Statement | 67
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● | |
| • | payment to the Named Executive Officer’s estate or beneficiaries, no later than March 15 of the year following the year in which the Named Executive Officer died, for all previously granted performance shares (in the same amount as paid for the performance shares granted to other Named Executive Officers if the date of death occurs after the end of the three-year performance period for such shares, and at the lesser of the target value or such other amount as determined by the Committee in its discretion if the date of death occurs before the end of the three-year performance period for such shares); and |
● | |
| • | payment to the Named Executive Officer’s beneficiaries of the proceeds from the life insurance policies provided for such Named Executive Officer pursuant to the Company’s Executive Life Insurance Plan. |
Rights and Payments Upon Termination for Any Other Reasonpayments upon termination due to disability
In the event of the termination of their employment due to disability, the Named Executive Officers are entitled to receive:
| • | continued vesting of stock options previously granted under the Company’s stock plans, and the opportunity to exercise vested stock options previously granted under such plans during the remainder of the original term (up to 10 years) of such options; |
| |
| • | immediate vesting of all restricted stock units previously granted under the Company’s stock plans; and |
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| • | payment for all previously granted performance shares upon completion of the respective three-year performance period, based on actual performance. |
Rights and payments upon a qualifying termination under the severance plan
Effective February 3, 2020, the Company adopted the 3M Executive Severance Plan (which we refer to as the “Severance Plan”) for any reasoncertain U.S. executives, including our Named Executive Officers, to provide separation benefits in the event an eligible employee’s employment is terminated by 3M other than for Misconduct or an eligible employee resigns for Good Reason. An eligible employee who becomes entitled to benefits under the Severance Plan receives the following:
| • | continued payment of his or her annual base salary for a number of months (24 months for the Chief Executive Officer, and 18 months for all other Named Executive Officers); |
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| • | continued payment of annual incentive payments that would have been paid if the participant remained employed through the end of the severance payment period, calculated based on actual results for the relevant year, using the participant’s final performance rating as of the end of the applicable year (or if none, a performance rating of “fully meets expectations” or equivalent), and prorated based on the number of days in the year preceding the end of the severance period (if the severance payment period ends prior to the end of a year); |
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| • | an opportunity to exercise all vested stock options and stock appreciation rights following the participant’s termination and prior to the expiration date of such award; |
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| • | accelerated vesting and payment of a prorated portion of the participant’s outstanding “annual” restricted stock units, with proration based on the number of full years of the participant’s completed service over the number of years required to vest under the original vesting schedule; |
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| • | outstanding performance share awards will not be forfeited solely as a result of the participant’s termination, and the target number of shares under each award will be prorated based on the number of months the participant worked during the applicable performance period; |
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| • | full vesting of the participant’s VIP company contribution account; and |
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| • | outplacement services in accordance with 3M’s policy. |
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Any severance payments under the Severance Plan will be reduced on a dollar-for-dollar basis (but not below $0) by any payments the participant may receive under his or her non-competition agreement with 3M. In addition, severance payments will cease in the event the participant becomes reemployed by 3M.
The Severance Plan does not provide severance benefits to employees who terminate pursuant to a mandatory retirement death,policy adopted by the Board. Employees who terminate in connection with a spinoff, divestiture or disability (and other thansimilar transaction involving the employee’s business unit may be eligible to participate at the discretion of the Company. To be eligible to receive benefits under the Severance Plan, an employee must execute and not revoke a general release of claims in favor of the Company in form approved by the Company.
In addition, in the event a Named Executive Officer’s payments under the Severance Plan would be subject to an excise tax on “parachute payments” in connection with a change in control of the Company due to the application of Section 280G of the Internal Revenue Code, the Named Executive Officer will not be entitled to a “gross-up.” Instead, the Named Executive Officer’s “parachute payments” may be reduced if such reduction would provide the Named Executive Officer with a greater post-tax benefit than he or she would receive if the excise taxes were to apply.
For purposes of the Severance Plan, the terms “Misconduct” and “Good Reason” mean the following:
“Misconduct” means (i) the employee’s willful failure to substantially perform his or her duties (other than a failure resulting from his or her disability); (ii) the employee’s willful failure to carry out, or comply with any lawful and reasonable directive of the Board or his or her immediate supervisor; (iii) the occurrence of any act or omission by the employee that could reasonably be expected to result in (or has resulted in) his or her conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or indictable offense or crime involving moral turpitude; (iv) the employee’s commission of an act of fraud, embezzlement, misappropriation, misconduct, or breach of fiduciary duty against the Company or any of its subsidiaries or affiliates or any of their officers, directors, employees, customers, suppliers, insurers or agents; (v) the employee’s material breach of any material provision of any written agreement with the Company or any subsidiary; (vi) any action (or inaction) by the employee that 3M reasonably determines constitutes gross negligence or misconduct in the performance of his or her duties and responsibilities; or (vii) any other intentional misconduct by the Named Executive Officer that significantly affects the business or affairs of the Company or any subsidiary in an adverse manner.
“Good Reason” means, with respect to a voluntary termination occurring within 18 months following a change in control of the Company, (i) a material diminution in the employee’s position, authority, duties or responsibilities as described further below):in effect immediately prior to the change in control, (ii) a material diminution in the employee’s base salary or annual planned cash compensation, or (iii) a material change in the geographic location at which the employee is required to perform services for his or her employer. If the voluntary termination does not occur within 18 months following a change in control, “Good Reason” means (i) a material diminution in the employee’s base salary or annual planned cash compensation, other than an across-the-board reduction that applies to all comparable positions, or (ii) a change in excess of 100 miles in the primary work location at which the employee is required to perform services for his or her employer. For terminations that do not occur within 18 months following a change in control, the employee will be required to provide written notice to the Company of the grounds for a Good Reason termination within 30 days of the initial existence of such grounds, and the Company has 30 days from the date of such notice to cure such circumstances. An employee must terminate employment for Good Reason within 60 days after the first occurrence of the applicable grounds.
● | the Named Executive Officers will have the opportunity to exercise vested stock options granted under the Company’s stock plans within the first 90 days following the termination date (but not beyond the original expiration date of any such stock option), at which time any remaining vested stock options are forfeited; and |
● | all unvested stock options, restricted stock units, and performance shares granted to the Named Executive Officers are forfeited immediately. |
Rights and Payments Uponpayments upon a Changequalifying termination in Controlconnection with a change in control
If the Company terminates a Named Executive Officer’s employment for reasons other than Misconduct (for(or for awards granted prior to May 10, 2016, withoutreasons other than Cause) or if a Named Executive Officer resigns for Good Reason, in any such case within 18 months following a “change in control event” of the Company (as defined for purposes of Section 409A of the Internal Revenue Code), then in addition to any benefits provided under the Severance Plan described above, all of the Named Executive Officer’s outstanding unvested stock options and restricted stock units granted under the Company’s stock plans will be immediately vested and all of such Named Executive Officer’s outstanding performance shares will be prorated and settled in accordance with the terms of the plan.
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For purposes of our outstanding long-term incentive awards, the terms “Misconduct”, “Cause”,“Misconduct,” “Cause,” and “Good Reason” mean the following:
“Misconduct” means (i) the Named Executive Officer’s willful failure to substantially perform his or her duties (other than a failure resulting from his or her disability); (ii) the Named Executive Officer’s willful failure to carry out, or comply with any lawful and reasonable directive of the Board or his or her immediate supervisor; (iii) the occurrence of any act or omission by the Named Executive Officer that could reasonably be expected to result in (or has resulted in) his or her conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or indictable offense or crime involving moral turpitude; (iv) the Named Executive Officer’s commission of an act of fraud, embezzlement, misappropriation, misconduct, or breach of fiduciary duty against the Company or any of its subsidiaries or affiliates or any of their officers, directors, employees, customers, suppliers, insurers or agents; (v) the Named Executive Officer’s material breach of any material provision of any written agreement with the Company or any subsidiary; or (vi) any other intentional misconduct by the Named Executive Officer that significantly affects the business or affairs of the Company or any subsidiary in an adverse manner.
“Cause” means a material violation of any policy of the Company, or embezzlement or theft of property belonging to the Company.
“Good Reason” means (i) a material diminution in the Named Executive Officer’s position, authority, duties, or responsibilities as in effect immediately prior to the change in control; (ii) a material diminution in the Named Executive Officer’s base salary or annual planned cash compensation; or (iii) a material change in the geographic location at which the Named Executive Officer is required to perform services for the Company.
Rights and payments upon termination for any other reason
In the event of the termination of their employment for any reason that does not qualify for Severance Plan benefits other than retirement, death, or disability (and other than in connection with a change in control, as described further below):
| • | the Named Executive Officers will have the opportunity to exercise vested stock options granted under the Company’s stock plans within the first 90 days following the termination date (but not beyond the original expiration date of any such stock option), at which time any remaining vested stock options are forfeited; and |
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| • | all unvested stock options, restricted stock units, and performance shares granted to the Named Executive Officers are forfeited immediately. |
The amounts payable to or on behalf of each of the Named Executive Officers in each of the above situations (other than amounts relating to payments or benefits generally provided on a non-discriminatory basis to all similarly situated employees) is reflected in the following table below, assuming that each individual’s employment had terminated and/or a change in control of the Company had occurred on December 31, 2016.2019. As of December 31, 2016, Mr. Thulin,2019, Mr. Roman, Mr. Gangestad, and Mr. DelgadoMs. Bushman were eligible to retire (as that term is defined for purposes of 3M’s stock plans). Mr. Thulin retired from employment with the Company effective as of June 1, 2019, and Dr. Delgado’s employment with the Company ended on July 1, 2019. The amounts shown below do not reflect payments and benefits available under the Severance Plan, as it was not in effect on December 31, 2019.
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2016 Potential Payments Upon Termination or Change in Control Table
| NAME | | | TERMINATION OF EMPLOYMENT DUE TO… | | OUTSTANDING
PERFORMANCE
SHARE
AWARDS ($)(1) | | UNVESTED
RSUS
($)(2) | | UNVESTED
OPTIONS
($)(3) | | LIFE
INSURANCE
PROCEEDS
($)(4) | | TOTAL
($) |
| Inge G. Thulin | | | Retirement | | 0 | | 0 | | 0 | | 0 | | 0 |
| | | Death | | 12,316,151 | | 0 | | 13,019,602 | | 10,391,214 | | 35,726,967 |
| | | Termination due to disability | | 0 | | 0 | | 0 | | 0 | | 0 |
| | | | Termination for other reason | | 0 | | 0 | | 0 | | 0 | | 0 |
| | | Resignation for Good Reason/Non-Cause | | 5,882,185 | | 0 | | 13,019,602 | | 0 | | 18,901,787 |
| | | Termination within 18 months following | | | | | | | | | | |
| | | Change in Control | | | | | | | | | | |
| Nicholas C. Gangestad | | | Retirement | | 0 | | 0 | | 0 | | 0 | | 0 |
| | | Death | | 3,400,509 | | 0 | | 2,820,818 | | 2,855,701 | | 9,077,028 |
| | | Termination due to disability | | 0 | | 0 | | 0 | | 0 | | 0 |
| | | Termination for other reason | | 0 | | 0 | | 0 | | 0 | | 0 |
| | | Resignation for Good Reason/Non-Cause | | 1,608,594 | | 0 | | 2,820,818 | | 0 | | 4,429,412 |
| | | Termination within 18 months following | | | | | | | | | | |
| | | Change in Control | | | | | | | | | | |
| Michael F. Roman | | | Retirement | | 0 | | 0 | | 0 | | 0 | | 0 |
| | | Death | | 2,280,696 | | 2,258,196 | | 2,262,543 | | 2,854,524 | | 9,655,959 |
| | | Termination due to disability | | 0 | | 2,258,196 | | 0 | | 0 | | 2,258,196 |
| | | Termination for other reason | | 0 | | 0 | | 0 | | 0 | | 0 |
| | | Resignation for Good Reason/Non-Cause | | 1,066,749 | | 2,258,196 | | 2,262,543 | | 0 | | 5,587,488 |
| | | Termination within 18 months following | | | | | | | | | | |
| | | Change in Control | | | | | | | | | | |
| Joaquin Delgado | | | Retirement | | 0 | | 0 | | 0 | | 0 | | 0 |
| | | Death | | 2,737,121 | | 0 | | 2,722,864 | | 2,351,156 | | 7,811,141 |
| | | | Termination due to disability | | 0 | | 0 | | 0 | | 0 | | 0 |
| | | Termination for other reason | | 0 | | 0 | | 0 | | 0 | | 0 |
| | | Resignation for Good Reason/Non-Cause | | 1,285,999 | | 0 | | 2,722,864 | | 0 | | 4,008,863 |
| | | Termination within 18 months following | | | | | | | | | | |
| | | Change in Control | | | | | | | | | | |
| Michael G. Vale | | | Retirement | | 0 | | 0 | | 0 | | 0 | | 0 |
| | | Death | | 2,811,406 | | 2,258,196 | | 2,766,415 | | 2,527,200 | | 10,363,217 |
| | | Termination due to disability | | 0 | | 2,258,196 | | 0 | | 0 | | 2,258,196 |
| | | Termination for other reason | | 0 | | 0 | | 0 | | 0 | | 0 |
| | | Resignation for Good Reason/Non-Cause | | 1,320,902 | | 2,258,196 | | 2,766,415 | | 0 | | 6,345,513 |
| | | Termination within 18 months following | | | | | | | | | | |
| | | Change in Control | | | | | | | | | | |
FOOTNOTES TO 20162019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
(1) The amounts in this column reflect the value of performance share awards under the 2008 Long-Term Incentive Plan for which the three-year performance period has not been completed (adjusted to reflect the closing market price of 3M common stock on December 30, 2016)
| Name | | Termination of
Employment Due to… | | Cash
Severance
($) | | Outstanding
Performance
Share Awards
($)(1) | | Unvested
RSUs
($)(2) | | Unvested
Options
($)(3) | | Life
Insurance
Proceeds
($)(4) | | Total
($) |
| Michael F. Roman | | Retirement | | — | | — | | — | | — | | — | | — |
| | | Death | | — | | 7,179,235 | | — | | 11,495 | | 3,000,000 | | 10,190,730 |
| | | Disability | | — | | — | | — | | — | | — | | — |
| | | Qualifying Termination in connection with a Change in Control | | — | | 3,566,845 | | — | | 11,495 | | — | | 3,578,340 |
| | | Other Reason | | — | | — | | — | | — | | — | | — |
| Inge G. Thulin | | Retirement | | — | | — | | — | | — | | — | | — |
| Nicholas C. Gangestad | | Retirement | | — | | — | | — | | — | | — | | — |
| | | Death | | — | | 3,329,574 | | 1,097,509 | | 17,216 | | 3,000,000 | | 7,444,299 |
| | | Disability | | — | | — | | 1,097,509 | | — | | — | | 1,097,509 |
| | | Qualifying Termination in connection with a Change in Control | | — | | 1,818,367 | | 1,097,509 | | 17,216 | | — | | 2,933,092 |
| | | Other Reason | | — | | — | | — | | — | | — | | — |
| Ashish K. Khandpur | | Retirement | | — | | — | | — | | — | | — | | — |
| | | Death | | — | | 2,351,326 | | — | | 6,557 | | 2,614,000 | | 4,971,883 |
| | | Disability | | — | | — | | — | | — | | — | | — |
| | | Qualifying Termination in connection with a Change in Control | | — | | 1,131,850 | | — | | 6,557 | | — | | 1,138,407 |
| | | Other Reason | | — | | — | | — | | — | | — | | — |
| Julie L. Bushman | | Retirement | | — | | — | | — | | — | | — | | — |
| | | Death | | — | | 2,101,868 | | — | | 8,651 | | 2,900,846 | | 5,011,365 |
| | | Disability | | — | | — | | — | | — | | — | | — |
| | | Qualifying Termination in connection with a Change in Control | | — | | 1,142,458 | | — | | 8,651 | | — | | 1,151,109 |
| | | Other Reason | | — | | — | | — | | — | | — | | — |
| Joaquin Delgado | | Other Reason(5) | | 1,750,000 | | — | | — | | — | | — | | 1,750,000 |
| Michael G. Vale | | Retirement | | — | | — | | — | | — | | — | | — |
| | | Death | | — | | 1,829,475 | | — | | 10,910 | | 2,760,000 | | 4,600,385 |
| | | Disability | | — | | — | | — | | — | | — | | — |
| | | Qualifying Termination in connection with a Change in Control | | — | | 954,942 | | — | | 10,910 | | — | | 965,852 |
| | | Other Reason | | — | | — | | — | | — | | — | | — |
FOOTNOTES TO 2019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
| (1) | The amounts in this column reflect the value of performance share awards under the 2016 Long-Term Incentive Plan for which the three-year performance period has not been completed (adjusted to reflect the closing price of a share of 3M common stock on the NYSE for December 31, 2019 ($176.42)), and which would be paid upon the occurrence of the respective triggering events in accordance with the terms of the awards. |
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| (2) | The amounts in this column reflect the value of the shares underlying the unvested 3M restricted stock units that would vest upon the occurrence of the respective triggering events in accordance with the terms of the awards. Share values are based on the closing price of a share of 3M common stock on the NYSE for December 31, 2019 ($176.42). |
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| (3) | The amounts in this column reflect the intrinsic value on December 31, 2019, of unvested, in-the-money 3M stock options that will vest upon the occurrence of the respective triggering events in accordance with the existing contractual terms of the stock options. Intrinsic values are based on the closing price of a share of 3M common stock on the NYSE for December 31, 2019 ($176.42). |
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| (4) | The amounts in this column reflect the life insurance proceeds that would be payable to each individual’s beneficiary or beneficiaries pursuant to the policies obtained for them under the Executive Life Insurance Plan. Under such plan, individuals first appointed to an executive position on or before August 31, 2003, receive additional life insurance coverage that is provided through a universal life insurance policy and individuals first appointed on or after September 1, 2003, receive additional group term life insurance coverage. |
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| (5) | The amount shown reflects the payment made to Dr. Delgado under the terms of a separation agreement. For more information concerning the arrangement with Dr. Delgado, see the section entitled “Separation pay” on page 61 of this Proxy Statement. |
Pay ratio
Presented below is the ratio of annual total compensation of our CEO to the annual total compensation of our median employee (excluding our CEO) for 2019. The ratio reflects a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the Securities Exchange Act of 1934.
In determining the ratio below, we began by using the same median employee (a full-time production employee in the Midwestern United States) identified for purposes of calculating the ratio included in our 2018 and 2019 proxy statement because there have not been changes in our employee population or employee compensation arrangements that we believe would significantly impact the pay ratio disclosure. The median employee initially was identified based on target annual total cash compensation for each employee as of December 31, 2017. For these purposes, annual total cash compensation included base salary or hourly wages, cash incentives, commissions, and comparable cash elements of compensation in non-U.S. jurisdictions and was calculated using internal human resources records. All amounts were annualized for permanent employees who did not work for the entire year, such as new hires, employees on paid or unpaid leave of absence and employees called for active military duty. We did not apply any cost-of-living adjustments as part of the calculation.
The median employee was selected from among 90,823 full-time, part-time, temporary, and seasonal workers who were employed as of December 31, 2017. As permitted by Item 402(u) of Regulation S-K, we excluded 1,575 employees (including 966 non-U.S. employees) who joined the Company during 2017 as part of our acquisition of Scott Safety when making this determination. Except for the employees excluded on the basis of the Scott Safety acquisition completed in 2017, we did not exclude any other employees (whether pursuant to the de minimis exemption for foreign employees or any other permitted exclusion).
As determined in accordance with Item 402 of Regulation S-K, the provisions2019 annual total compensation was $18,321,566 for our CEO and $57,494 for our median employee. Among other things, these amounts include base salary, overtime, incentive payments, stock-based compensation (based on the grant date fair value of the plan.
(2) The amountsawards granted during 2019), changes in pension values and retirement plan contributions. As calculated in this column reflectmanner, the valueratio of unvested 3M restricted stock units that would vest upon the occurrence of the respective triggering events in accordance with the provisions of the 2008 Long-Term Incentive Plan. Share values are based on the closing price of a share of 3M common stock on the NYSEour CEO’s total compensation to our median employee’s total compensation for December 30, 2016 ($178.57).fiscal year 2019 is 319 to 1.
(3) The amounts in this column reflect the spread value on December 31, 2016, of unvested, in-the-money 3M stock options that will vest upon the occurrence of the respective triggering events in accordance with the provisions of the 2008 Long-Term Incentive Plan. Spread values are based on the closing price of a share of 3M common stock on the NYSE for December 30, 2016 ($178.57).
(4) The amounts in this column reflect the life insurance proceeds that would be payable to each individual’s beneficiary or beneficiaries pursuant to the universal life or term life insurance policies obtained for them under the Executive Life Insurance Plan. Individuals first appointed to an executive position on or before February 28, 2003, receive additional life insurance coverage that is provided through a whole life insurance policy or a universal life insurance policy. Individuals first appointed on or after March 1, 2003, receive group term life insurance coverage.
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PROPOSAL
4 | Shareholder Proposal on Setting Target Amounts for CEO Compensation • Shareholder proposal on setting target amounts for CEO compensation, if properly presented at the meeting. • See the Board’s opposition statement. |
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STOCKHOLDER PROPOSAL
Proposal No. 5: Stockholder Proposal on Implementation of Holy Land Principles
3M has received a stockholdershareholder proposal from the Holy Land Principles, Inc., P.O. Box 15128, Washington, D.C. 20003,United Steelworkers, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, 60 Boulevard of the Allies, Pittsburgh, PA 15222, the owner of 2168 shares of 3M common stock (the “Proponent”). The Proponent has requested that the Company include the following proposal and supporting statement ((in italics)italics) in its proxy statement for the Annual Meeting of Stockholders.Shareholders. The proposal may be voted on at the Annual Meeting only if properly presented by the Proponent or the Proponent’s qualified representative. For the reasons set forth following the Proponent’s statement, your Board of Directors recommends that you vote “AGAINST” this proposal.
American Principles Following American Investment
HOLY LAND PRINCIPLES 3M RESOLUTION
WHEREAS, 3M has operations in Palestine/Israel;
WHEREAS, achieving a lasting peace in the Holy Land --with security for Israel and justice for Palestinians --encourages us to promote a means for establishing justice and equality;
WHEREAS, fair employment should be the hallmark of any American company at home or abroad and is a requisite for any just society;
WHEREAS, Holy Land Principles Inc., a non-profit organization, has proposed a set of equal opportunity employment principles to serve as guidelines for corporations in Palestine/Israel.
These are:
1. | Adhere to equal and fair employment practices in hiring, compensation, training, professional education, advancement and governance without discrimination based on national, racial, ethnic or religious identity. |
2. | Identify underrepresented employee groups and initiate active recruitment efforts to increase the number of underrepresented employees. |
3. | Develop training programs that will prepare substantial numbers of current minority employees for skilled jobs, including the expansion of existing programs and the creation of new programs to train, upgrade, and improve the skills of minority employees. |
4. | Maintain a work environment that is respectful of all national, racial, ethnic and religious groups. |
5. | Ensure that layoff, recall and termination procedures do not favor a particular national, racial, ethnic or religious group. |
6. | Not make military service a precondition or qualification for employment for any position, other than those positions that specifically require such experience, for the fulfillment of an employee’s particular responsibilities. |
7. | Not accept subsidies, tax incentives or other benefits that lead to the direct advantage of one national, racial, ethnic or religious group over another. |
8. | Appoint staff to monitor, oversee, set timetables, and publicly report on their progress in implementing the Holy Land Principles. |
RESOLVED: Shareholders of 3M Corporation (the “Company’’) request that the Compensation Committee of the Board of Directors to: Maketake into consideration the pay grades and/or salary ranges of all possible lawful efforts to implement and/classifications of Company employees when setting target amounts for CEO compensation. The Compensation Committee should describe in the Company’s proxy statements for annual shareholder meetings how it complies with this requested policy. Compliance with this policy is excused if it will result in the violation of any existing contractual obligation or increase activity on eachthe terms of the eight Holy Land Principles.any existing compensation plan.
SUPPORTING STATEMENT
SUPPORTING STATEMENTLike at many companies, our Company’s Compensation Committee uses peer group benchmarks of what other companies pay their CEOs to set its target CEO compensation. These target pay amounts are then subject to performance adjustments. To ensure that our Company’s CEO compensation is reasonable relative to our Company’s overall employee pay philosophy and structure, we believe that the Compensation Committee should also consider the pay grades and/or salary ranges of Company employees when setting CEO compensation target amounts.
This proposal does not require the Compensation Committee to use other employee pay data in a specific way to set CEO compensation targets. Under this proposal, the Compensation Committee will have discretion to determine how other employee pay should impact CEO compensation targets. The proponent believes that 3M benefits by hiring fromCompensation Committee also will retain authority to use peer group benchmarks and/or any other metric to set CEO compensation target amounts. Over time, using peer group benchmarks to set CEO compensation can lead to pay inflation. Although many companies target CEO compensation at the widest available talent pool. An employee’s abilitymedian of their peer group, certain companies have targeted their CEO’s pay above median. In addition, peer groups can be cherry-picked to do the job should be the primary consideration in hiringinclude larger or more successful companies where CEO compensation is higher. (Charles Elson and promotion decisions.Craig Ferrere, “Executive Superstars, Peer Groups and Overcompensation,” Journal of Corporation Law, Spring 2013).
Implementation of the Holy Land Principles--which are pro-Jewish, pro-Palestinian and pro-company --will demonstrate concern for human rights and equality of opportunity in its international operations.
Please vote your proxyFOR these concerns.
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The current system of using peer group benchmarks, without taking into account the pay grades or salary ranges of all company employees, when determining CEO compensation has had the effect of CEO pay far outpacing that of average employees. In 2018, the average S&P 500 CEO made 287 times that of their median employee. For our Company, the CEO/median employee ratio calculated in 2018 was 302 to 1. According to the 2006 report The State of Working America the ratio of CEO pay to average worker pay has risen from 35 to 1 in 1979, to 71 to 1 in 1989, to 248 to 1 in 1998. The current system of determining CEO compensation without taking into account the pay of average company employees has led to glaring inequality between the workers who make our company what it is and the man or woman who sits at the top.
For those reasons, we urge you to vote in favor of this proposal.
Board’s statement opposing the proposal
Board’s Statement Opposing the Proposal |
After careful consideration, and for the reasons set forth below, the Board believes that it is not in the best interests of 3M or its stockholders forshareholders to approve the Board to adopt the Holy Land Principles.proposed resolution.
| 1. | 3MThe Company already has established solidlymaintains global compensation principles that are intended to ensure that its commitmentcompensation practices are fair and reasonable as applied to upholding humanboth executive and workplace rights in all 3M operations. 3M’s Global Human Rights Policy statement, which was adopted in 2013, reinforcesnon-executive employees. These principles align with the Company’s commitmentvision and strategies, balance both individual and enterprise-wide performance and seek to providing a workplace that is safe, healthy, free from violence, harassment, or discrimination,provide competitive wages and compliantbenefits with applicable laws relating to wages, work hours, and work conditions. Similarly, 3M became a memberconsistent positioning in the median range of the U.N. Global Compact (UNGC) in early 2014, thereby committingmarkets that are most relevant to align our operationsemployees based on roles, responsibilities, skills, and strategies withperformance. To monitor and support the UNGC principles on human rights. While 3M has always acted in accordance witheffectiveness of this program, the core values represented byCompany also periodically compares its pay components to those of other premier companies, and adjusts them as necessary to stay competitive and attract, retain, and motivate a highly qualified, diverse workforce at all levels throughout the UNGC, we remain proud to formalize our commitment toorganization, not just for its 10 principles, including the areas of human rights, labor, and environmental, and to grow our partnership with the organization. 3M’s approach to managing and ensuring human rights aligns with 3M’s Code of Conduct, (available in various languages on our Company website, atwww.3m.com/3M/en_US/company-us/about-3m/), which recognizes the right of all employees globally to have a respectful workplace. Likewise, our commitment is embodied in 3M’s Human Resource Principles, which respect the dignity and worth of all individuals, encourage the initiative of each employee, challenge individual capabilities, and provide equal opportunity for development for all. Importantly, unlike the practices set forth in the Holy Land Principles, which emphasize only one area of the world, our commitments transcend a single area and apply to all our operations globally.executives. |
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| 2. | OurThe Board of Directors believes that the overwhelming majority of our shareholders support the Company’s current executive compensation program. As described in more detail in the Compensation Discussion and Analysis portion of this Proxy Statement, the current program emphasizes a strong pay-for-performance philosophy and seeks to align the compensation of the Company’s Chief Executive Officer and other executive officers with the interests of long-term 3M shareholders. In 2019, approximately 95 percent of the votes cast on the Company’s say-on-pay proposal approved the compensation of the named executive officers as disclosed in last year’s Proxy Statement. |
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| 3. | The Compensation Committee already reviews and considers the ratio of annual total compensation of our Chief Executive Officer to the annual total compensation of our median employee (excluding our Chief Executive Officer), as reported in the proxy statement, which the Company also places great value on ethical conductbelieves provides a similar perspective to the Compensation Committee at no incremental cost to the Company. 3M has operations and sustainabilitydifferent compensation programs in about 70 countries around the world,world. Compliance with initiatives that far outreach the trainingproposal would require substantial coordination with local employees in foreign countries to collect and development guidelines identified intransmit the Holy Land Principles. We have been recognized four years in a row by The Ethisphere®Institute as one of The World’s Most Ethical Companies®(2014, 2015, 2016 and 2017). Our Sustainability goals, which can be found in our annual Sustainability Reportnecessary data on our Company website atwww.3m.com/3M/en_US/sustainability-report/, and on which our progress is measured on an ongoing basis, include actions in support“all classifications” of the educationCompany’s approximately 96,000 employees worldwide, all of which would need to be carefully analyzed and development of our employeessummarized. The Company believes that the time, cost, and our communities. We will continueresource burden associated with implementing the proposal is not warranted by any incremental benefit that the resulting information may be able to invest in increasing access for people worldwide to science, technology, engineering, math, and business skills. We are committed to improving lives through investments in environment, health and safety programs, and to strengthening our pipeline of diverse talent in every region in which we operate as a core part of our sustainability strategy. We aspire to provide training to 5 million people globally on worker and patient safety. The ethical treatment of people inside and outside 3M is a clearly established priority for our Company. |
3. | 3M values diversity in the workforce and in the global markets and communities we serve. At 3M, diversity is essential to innovation. We are fortunate to have a global workforce, and we celebrate this diversity every day. It is an integral part of who we are as a company. We recruit, hire, retain, and advance the best talent globally, while offering an inclusive environment where each individual can be and give their best. 3M has formed strategic partnerships with many professional associations, colleges, and universities to help identify diverse, well qualified candidates. We actively support career enrichment opportunities for people from diverse backgrounds. We have a long history of providing financial and in-kind donations, including product donations and volunteer support, to diversity-targeted institutions and nonprofit organizations. Our community investments enhance community vibrancy by improving standards of living, preparing youth for success, supporting the arts, and contributing to global humanitarian relief efforts. In short, we believe that our deep commitment to diversity brings business, social, cultural, and economic benefits, and it is pervasive in all we do.offer. |
For all these reasons, the adoption of the regionallyfocused Holy Land Principles and the administrative requirements contained therein is unnecessary, burdensome, and not in the best interests of 3M or its stockholders. RECOMMENDATION OF THE BOARD
RECOMMENDATION OF THE BOARD
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  | The Board of Directors unanimously recommends a vote “AGAINST” “AGAINST” this proposal. Proxies solicited by the Board of Directors will be voted “AGAINST” “AGAINST” this proposal unless a stockholdershareholder indicates otherwise in voting the proxy. |
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STOCK OWNERSHIP
INFORMATION
| Stock ownership information |
Security Ownershipownership of Managementmanagement
The following table includes all 3M stock basedstock-based holdings, as of February 28, 2017,29, 2020, of the directors and the Named Executive Officers set forth in the Summary Compensation Table, and the directors and executive officers as a group.
COMMON STOCK AND TOTAL STOCK-BASED HOLDINGS
Common Stock and Total Stock-Based Holdings |
| NAME AND PRINCIPAL POSITION | | STOCK(1) | | RESTRICTED
STOCK
UNITS(2) | | DEFERRED
STOCK(3) | | TOTAL(4) | | PERCENT
OF CLASS |
| Sondra L. Barbour, Director | | — | | | — | | | 2,416 | | 2,416 | | (5) |
| Thomas “Tony” K. Brown, Director | | — | | | — | | | 3,700 | | 3,700 | | (5) |
| Vance D. Coffman, Director | | 6,446 | | | — | | | 39,185 | | 45,631 | | (5) |
| David B. Dillon, Director | | — | | | — | | | 1,398 | | 1,398 | | (5) |
| Michael L. Eskew, Director | | — | | | — | | | 34,265 | | 34,265 | | (5) |
| Herbert L. Henkel, Director | | — | | | — | | | 29,640 | | 29,640 | | (5) |
| Muhtar Kent, Director | | — | | | — | | | 7,794 | | 7,794 | | (5) |
| Edward M. Liddy, Director | | — | | | — | | | 49,855 | | 49,855 | | (5) |
| Gregory R. Page, Director | | 1,000 | | | — | | | 1,321 | | 2,321 | | (5) |
| Robert J. Ulrich, Director | | 16,221 | | | — | | | 6,797 | | 23,018 | | (5) |
| Patricia A. Woertz, Director | | 876 | | | — | | | — | | 876 | | (5) |
| Inge G. Thulin, Director, | | 1,066,714 | | | — | | | 136,576 | | 1,203,290 | | (5) |
| Chairman of the Board, President and Chief Executive Officer | | | | | | | | | | | | |
| Nicholas C. Gangestad, | | 106,978 | | | — | | | 11,507 | | 118,485 | | (5) |
| Senior Vice President and Chief Financial Officer | | | | | | | | | | | | |
| Michael F. Roman, | | 125,396 | | | 12,646 | | | 6,499 | | 144,541 | | (5) |
| Executive Vice President | | | | | | | | | | | | |
| Joaquin Delgado, | | 280,618 | | | — | | | — | | 280,618 | | (5) |
| Executive Vice President | | | | | | | | | | | | |
| Michael G. Vale, | | 199,246 | | | 12,646 | | | 8,047 | | 219,939 | | (5) |
| Executive Vice President | | | | | | | | | | | | |
| All Directors and Executive Officers as a Group (27 persons) | | 3,190,595 | | | 67,466 | | | 351,915 | | 3,609,976 | | (5) |
| Name and principal position | | Stock(1) | | | Restricted
Stock
Units(2) | | | Deferred
Stock(3) | | | Total(4) | | | Percent
of Class | |
| Thomas “Tony” K. Brown, Director | | | — | | | | — | | | | 6,753 | | | | 6,753 | | | (5) | |
| Pamela J. Craig, Director | | | — | | | | — | | | | 1,002 | | | | 1,002 | | | (5) | |
| David B. Dillon, Director | | | 1,200 | | | | — | | | | 4,255 | | | | 5,455 | | | (5) | |
| Michael L. Eskew, Director | | | — | | | | — | | | | 42,659 | | | | 42,659 | | | (5) | |
| Herbert L. Henkel, Director | | | — | | | | — | | | | 36,988 | | | | 36,988 | | | (5) | |
| Amy E. Hood, Director | | | 24 | | | | — | | | | 2,139 | | | | 2,163 | | | (5) | |
| Muhtar Kent, Director | | | — | | | | — | | | | 13,458 | | | | 13,458 | | | (5) | |
| Edward M. Liddy, Director | | | — | | | | — | | | | 58,999 | | | | 58,999 | | | (5) | |
| Dambisa F. Moyo, Director | | | 1,430 | | | | — | | | | 104 | | | | 1,534 | | | (5) | |
| Gregory R. Page, Director | | | 4,000 | | | | — | | | | 5,159 | | | | 9,159 | | | (5) | |
| Patricia A. Woertz, Director | | | 2,580 | | | | — | | | | 1,002 | | | | 3,582 | | | (5) | |
| Michael F. Roman, Chairman of the Board, President and Chief Executive Officer | | | 313,845 | | | | — | | | | 29,221 | | | | 343,066 | | | (5) | |
| Inge G. Thulin, Former Executive Chairman of the Board | | | 1,344,758 | | | | — | | | | 201,328 | | | | 1,546,086 | | | (5) | |
| Nicholas C. Gangestad, Senior Vice President and Chief Financial Officer | | | 307,927 | | | | 6,221 | | | | 20,564 | | | | 334,712 | | | (5) | |
| Ashish K. Khandpur, Executive Vice President, Transportation and Electronics Business Group | | | 147,408 | | | | — | | | | 13,250 | | | | 160,658 | | | (5) | |
| Julie L. Bushman, Executive Vice President, International Operations | | | 296,714 | | | | — | | | | — | | | | 296,714 | | | (5) | |
| Joaquin Delgado, Former Executive Vice President, Consumer Business Group | | | 272,269 | | | | — | | | | — | | | | 272,269 | | | (5) | |
| Michael G. Vale, Executive Vice President, Safety and Industrial Business Group | | | 320,435 | | | | — | | | | 33,690 | | | | 354,125 | | | (5) | |
| All Directors and Executive Officers as a Group (25 persons) | | | 2,139,990 | | | | 11,666 | | | | 304,103 | | | | 2,455,759 | | | (5) | |
FOOTNOTES TO COMMON STOCK AND TOTAL STOCK-BASED HOLDINGS TABLE
(1) This column lists beneficial ownership of 3M common stock as calculated under Securities and Exchange Commission rules. Unless otherwise noted, voting power and investment power in the shares are exercisable solely by the named person, and none of the shares are pledged as security by the named person. In accordance with Securities and Exchange Commission rules, this column also includes shares that may be acquired pursuant to stock options that are or will be exercisable within 60 days of February 28, 2017, as follows: Mr. Thulin 1,003,846, Mr. Gangestad 96,984, Mr. Roman 119,376, Mr. Delgado 245,910, and Mr. Vale 184,064.
| (1) | This column lists beneficial ownership of 3M common stock as calculated under Securities and Exchange Commission rules. Unless otherwise noted, voting power and investment power in the shares are exercisable solely by the named person, and none of the shares are pledged as security by the named person. In accordance with Securities and Exchange Commission rules, this column also includes shares that may be acquired pursuant to stock options that are or will be exercisable within 60 days of February 29, 2020, as follows: Mr. Roman — 295,265 shares, Mr. Thulin — 1,252,340 shares, Mr. Gangestad — 289,986 shares, Mr. Khandpur — 143,571 shares, Ms. Bushman — 257,786 shares, Mr. Delgado — 248,092 shares and Mr. Vale — 301,269 shares. This column includes the following shares over which the named person shares voting and/or investment power: Mr. Khandpur — 1,573 shares held by a family member. |
(2) This column reflects restricted stock units that generally vest over a three- to five-year period, assuming continued employment until each vesting date (or until the individual retires from the Company, in some cases). The executive officers do not have voting power with respect to the shares listed in this column.
(3) This column reflects shares earned by the directors as a result of their service on the Board of Directors, the payout of which has been deferred until following the termination of their membership on the Board of Directors. This column also includes the following shares of the Company’s common stock which the executive officers are entitled to receive following their retirement from the Company as a result of their election to defer the payout of their performance share awards granted under the Company’s long-term incentive plan: Mr. Thulin 136,576, Mr. Gangestad 11,507, Mr. Roman 6,499, and Mr. Vale 8,047, and All Directors and Executive Officers as a Group 351,915. Neither the directors nor the executive officers have voting power with respect to the shares listed in this column.
(4) This column shows the individual’s total 3M stock-based holdings, including the securities shown in the “Stock” column (as described in note 1), in the “Restricted Stock Units” column (as described in note 2), and in the “Deferred Stock” column (as described in note 3).
(5) Each director and executive officer individually, and All Directors and Executive Officers as a Group, beneficially owned less than one percent of the outstanding common stock of the Company.
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| (2) | This column reflects restricted stock units that generally vest over a three- to five-year period, assuming continued employment until each vesting date (or until the individual retires from the Company, in some cases). The executive officers do not have voting power with respect to the shares listed in this column. |
| (3) | This column reflects shares earned by the directors as a result of their service on the Board of Directors, the payout of which has been deferred until following the termination of their membership on the Board of Directors. This column also includes shares of the Company’s common stock which the executive officers are entitled to receive following their retirement from the Company as a result of their election to defer all or a portion of the payout of their performance share awards granted under the Company’s long-term incentive plan. Neither the directors nor the executive officers have voting power with respect to the shares listed in this column. |
| (4) | This column shows the individual’s total 3M stock-based holdings, including the securities shown in the “Stock” column (as described in note 1), in the “Restricted Stock Units” column (as described in note 2), and in the “Deferred Stock” column (as described in note 3). |
| (5) | Each director and executive officer individually, and All Directors and Executive Officers as a Group, beneficially owned less than one percent of the outstanding common stock of the Company. |
Security Ownershipownership of Certain Beneficial Ownerscertain beneficial owners
The following table sets forth information regarding beneficial owners of more than 5 percent of the outstanding shares of 3M common stock.
| NAME/ADDRESS | | COMMON STOCK
BENEFICIALLY
OWNED | | PERCENT OF
CLASS |
| State Street Corporation(1) | | | | |
| State Street Financial Center | | | | |
| One Lincoln Street | | | | |
| Boston, MA 02111 | | 45,814,616 | | 7.62 |
| The Vanguard Group(2) | | | | |
| 100 Vanguard Blvd. | | | | |
| Malvern, PA 19355 | | 43,987,411 | | 7.31 |
| BlackRock, Inc.(3) | | | | |
| 55 East 52nd Street | | | | |
| New York, NY 10055 | | 35,967,152 | | 6.0 |
(1) In a Schedule 13G filed with the Securities and Exchange Commission on February 14, 2017, State Street Corporation reported that, as of December 31, 2016, it had shared voting power with respect to 45,814,616 shares of 3M common stock and shared dispositive power with respect to 45,814,616 shares of 3M common stock. State Street Bank and Trust Company, an affiliate of State Street Corporation, reported that, as of December 31, 2016, acting in various capacities, it had shared voting power with respect to 36,432,004 shares of 3M common stock and shared dispositive power with respect to 36,432,004 shares of 3M common stock. Of these shares, 14,740,102 shares were held as trustee or investment manager for certain 3M savings plan, including the Company’s Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan, which are 401(k) retirement savings plans. State Street Bank and Trust Company provides custody, investment management, and corporate finance services to the Company and a number of employee benefit plans sponsored by the Company and its affiliates. The 3M Employee Retirement Income Plan, the 3M Voluntary Investment Plan and Employee Stock Ownership Plan, the 3M Savings Plan, 3M Retiree Welfare Benefit Plan and the 3M Employees’ Welfare Benefits Association (Trust II) Plan utilize State Street Global Advisors, an affiliate of State Street Bank and Trust Company, as an investment manager. State Street Bank and Trust Company also provides custody services for the Company’s defined contribution plans in the U.S. Further, State Street Bank and Trust Company is a participant of 3M Company’s $3.75 billion revolving credit agreement dated March 9, 2016. In total, the Company and the various employee benefit plans paid fees of $2.8 million to State Street Bank and Trust Company and its affiliates in 2016. The fees paid are reviewed by the Company (with respect to the credit agreement) and the fiduciaries of the employee benefit plans and are determined to be reasonable for the services provided.
| Name/address | | Common Stock
Beneficially
Owned | | Percent
of Class | |
The Vanguard Group(1)
100 Vanguard Blvd.
Malvern, PA 19355 | | | 50,504,075 | | | 8.78 | |
State Street Corporation(2)
State Street Financial Center
One Lincoln Street
Boston, MA 02111 | | | 42,320,337 | | | 7.36 | |
BlackRock, Inc.(3)
55 East 52nd Street
New York, NY 10055 | | | 41,713,628 | | | 7.30 | |
(2) In a Schedule 13G/A filed with the Securities and Exchange Commission on February 9, 2017, The Vanguard Group reported that, as of December 31, 2016, it had sole voting power with respect to 937,201 shares, shared voting power with respect to 116,804 shares, sole dispositive power with respect to 42,939,475 shares, and shared dispositive power with respect to 1,047,936 shares. Vanguard provides investment management services to the Company’s defined contribution plans in the U.S. through co-mingled mutual fund vehicles. The 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan use these investments in their defined contribution investment choices. Fees paid for investment management of these funds are incorporated into the fund NAV on a daily basis and fully disclosed as an expense ratio for the funds. As a result, these fees are paid by participants in the Company’s defined contribution plans and are not paid by the Company. The total amount of the fees will fluctuate based on the plan participant allocation decisions. The fees paid are reviewed by the fiduciaries of the retirement plans and are determined to be reasonable for the services provided.
| (1) | In a Schedule 13G/A filed with the Securities and Exchange Commission on February 12, 2020, The Vanguard Group reported that, as of December 31, 2019, it had sole voting power with respect to 869,956 shares, shared voting power with respect to 153,602 shares, sole dispositive power with respect to 49,524,158 shares, and shared dispositive power with respect to 979,917 shares. It also reported that Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 674,130 shares or 0.11 percent of 3M common stock outstanding as a result of its serving as investment manager of collective trust accounts. It further reported that Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 491,319 shares or 0.08 percent of 3M common stock outstanding as a result of its serving as investment manager of Australian investment offerings. Vanguard provides investment management services to the Company’s defined contribution plans in the U.S. through a co-mingled mutual fund vehicle. The 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan use this investment in their defined contribution investment choices. Fees paid for investment management of the fund are incorporated into the fund NAV on a daily basis and fully disclosed as an expense ratio for the fund. As a result, these fees are paid by participants in the Company’s defined contribution plans and are not paid by the Company. The total amount of the fees will fluctuate based on the plan participant allocation decisions. The fees paid are reviewed by the fiduciaries of the retirement plans and are determined to be reasonable for the services provided. |
| (2) | In a Schedule 13G filed with the Securities and Exchange Commission on February 13, 2020, State Street Corporation reported that, as of December 31, 2019, it had shared voting power with respect to 34,053,004 shares of 3M common stock and shared dispositive power with respect to 42,314,931 shares of 3M common stock. Of these shares, 11,668,839 shares were held as trustee or investment manager for certain 3M savings plans, including the Company’s Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan, which are 401(k) retirement savings plans. State Street Bank and Trust Company provides custody, investment management, and corporate finance services to the Company and a number of employee benefit plans sponsored by the Company and its affiliates. The 3M Voluntary Investment Plan and Employee Stock Ownership Plan, the 3M Savings Plan, and the 3M Retiree Welfare Benefit Plan utilize State Street Global Advisors, an affiliate of State Street Bank and Trust Company, as an investment manager. State Street Bank and Trust Company also provides custody services for the Company’s defined contribution plans in the U.S. Further, State Street Bank and Trust Company is a participant of 3M Company’s $3 billion five-year credit agreement dated November 15, 2019. In total, the Company and the various employee benefit plans paid fees of $1.6 million in 2019 to State Street Bank and Trust Company and its affiliates, a majority of which was paid by the participants in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan. In addition, the Trustee will charge the funds held by the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan an annual administration fee and transaction fees which are incorporated into the funds’ NAV. The fees paid are reviewed by the Company (with respect to the credit agreement) and the fiduciaries of the employee benefit plans and are determined to be reasonable for the services provided. |
(3) In a Schedule 13G/A filed with the Securities and Exchange Commission on January 19, 2017, BlackRock, Inc. reported that, as of December 31, 2016, it had sole voting power with respect to 30,650,815 shares and sole dispositive power with respect to 35,967,152 shares, of which 15,781 shares were held as investment manager for the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan. BlackRock, Inc. and its affiliates provide investment management services to several employee benefit plans sponsored by the Company and its Canadian affiliate. The 3M Employee Retirement Income Plan, the 3M Voluntary Investment Plan and Employee Stock Ownership Plan, the 3M Savings Plan and the 3M Canada Company Master Trust utilize these investment management services. In total, the various employee benefit plans paid fees of $2.6 million in 2016 to BlackRock, Inc. and its affiliates, a majority of which was paid by the participants in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan. The fees paid are reviewed by the fiduciaries of the employee benefit plans and are determined to be reasonable for the services provided.
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| (3) | In a Schedule 13G/A filed with the Securities and Exchange Commission on February 5, 2020, BlackRock, Inc. reported that, as of December 31, 2019, it had sole voting power with respect to 35,673,569 shares and sole dispositive power with respect to 41,713,628 shares, of which 30,795 shares were held as investment manager for the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan. BlackRock, Inc. and its affiliates provide investment management services to several employee benefit plans sponsored by the Company and its Canadian affiliate. The 3M Voluntary Investment Plan and Employee Stock Ownership Plan, the 3M Savings Plan and the 3M Canada Company Master Trust utilize these investment management services. In total, the various employee benefit plans paid fees of $2.7 million in 2019 to BlackRock, Inc. and its affiliates, a majority of which was paid by the participants in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan. In addition, the Trustee will charge the funds held by the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan an annual administration fee and transaction fees which are incorporated into the funds’ NAV. The fees paid are reviewed by the fiduciaries of the employee benefit plans and are determined to be reasonable for the services provided. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and any person owning more than 10 percent of the outstanding shares of 3M common stock, to file with the Securities and Exchange Commission reports regarding their ownership and changes in their ownership of our stock. As a practical matter, 3M assists its directors and executive officers by monitoring transactions and completing and filing Section 16 reports on their behalf. 3M believes that during 2016, its directors and executive officers timely filed all required Section 16(a)reports. In making this statement, 3M has relied upon examination of copies of Forms 3, 4, and 5 and the written representations of its directors and executive officers.
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OTHER
INFORMATION
Proxy Statementstatement
The Board of Directors (the “Board”) of 3M Company, a Delaware corporation (“3M” or the “Company”) is soliciting proxies for the Company’s Annual Meeting of Stockholders.Shareholders. You are receiving a Proxy Statement because you own shares of 3M common stock that entitle you to vote at the meeting. By use of a proxy you can vote, whether or not you attend the meeting. The Proxy Statement describes the matters we would like you to vote on and provides information on those matters so you can make an informed decision.
The information included in this Proxy Statement relates to proposals to be voted on at the meeting (if properly presented), the voting process, 3M’s Board and Board committees, the compensation of directors and certain executive officers, and other required information.
Purpose of the Annual Meeting |
Purpose of the Annual Meeting
The purpose of the Annual Meeting is to elect the directors identified in this Proxy Statement and to conduct the business described in the Notice of Annual Meeting.
Annual Meeting Admission
How do I attend the 20172020 Annual Meeting? What do I need to bring?
Only stockholdersshareholders who held shares of 3M common stock as of the close of business on March 14, 2017,17, 2020, the record date, are invited to attend the Annual Meeting. To attend the meeting, you will need to pre-register and bring an admission ticket and a valid government issued photo identification. You will need to RSVP and print an admission ticket in advance by visitingwww.proxyvote.comand following the instructions there. You will need the 16-digit control number to accesswww.proxyvote.com.www.proxyvote.com. You can find your control number on:
●• | your proxy card included in this Proxy Statement if itwas mailed to you; |
●• | your Notice of Internet Availability of Proxy Materialsif you received proxy materials via electronicdelivery;electronic delivery; or |
●• | your voting instruction card if you hold your sharesin street name through a broker or other nominee. |
If you are not a record date stockholder,shareholder, you may be admitted to the meeting only if you have a valid legal proxy from a record date stockholdershareholder who has pre-registered and obtained an admission ticket. You must present that proxy and admission ticket, as well as a valid government issued photo identification, at the entrance to the meeting.
On the day of the meeting, an admission ticket, along with a valid government issued photo identification such as a driver’s license or passport, must be presented in order to be admitted to the Annual Meeting. Please note that seating is limited, and admission is on a first-come, first-served basis.
For questions about admission to the Annual Meeting, please contact us at 1-800-3M HELPS (1-800-364-3577).
If you do not provide photo identification or comply with the other procedures outlined here, you will not be admitted to the Annual Meeting.
Use of cameras, recording devices, computers and other electronic devices, such as smartphones and tablets, will not be permitted at the meeting. For security reasons, you will be required to enterpass through a metal detectordetection screening before being granted access to the meeting. No large bags or packages are allowed at the meeting.
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How do I listen to the live webcast?
If you are unable to attend the Annual Meeting, you can listen to the live webcast of the business portion of the meeting by visitinghttp://investors.3M.com, orwww.3M.comunder Investor Relations — Annual Meeting Live Webcast.
2017
Could emerging developments regarding the coronavirus affect our ability to hold an in-person Annual Meeting?
We are actively monitoring the coronavirus (COVID-19) situation. In the event it is not possible or advisable to hold our Annual Meeting in person, we will publicly announce, as soon as practicable before the meeting, a determination to hold the meeting solely by means of remote communication online. In that event, you or your proxyholder could participate, vote and examine the list of shareholders of record by accessing a designated website using your 16-digit control number. Please monitor our investor relations website athttps://investors.3m.comfor updated information.
Information about the Notice of Internet Availability of Proxy Statement | 75
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Information About the Notice of Internet Availability of Proxy Materials |
Why did I receive a Notice of Internet Availability of the proxy materialsProxy Materials and not the printed proxy materials?
The Securities and Exchange Commission allows companies to furnish their proxy materials to stockholdersshareholders over the Internet. As a result, we are mailing to many of our stockholdersshareholders a Notice of Internet Availability of Proxy Materials instead of a paper copy of the proxy materials. In addition, we are providing the notice and proxy materials by e-mail to some of our stockholdersshareholders who previously consented to electronic delivery of proxy materials. Those stockholdersshareholders should have received an e-mail containing a link to the Web sitewebsite where the proxy materials are available, as well as a link to the proxy voting Web site.website. All stockholdersshareholders receiving the Notice of Internet Availability of Proxy Materials will have the ability to access the proxy materials over the Internet and to request to receive a paper copy of the proxy materials by mail. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the notice. In addition, the notice contains instructions on how you may request to receive proxy materials in printed form by mail or to access them electronically in connection with future distributions of proxy materials. Distributing proxy materials electronically conserves natural resources and reduces the costs of printing and distributing our proxy materials.
Why did I receive a printed copy of the proxy materials and not the Notice of Internet Availability of Proxy Materials?
We are providing some of our stockholders,shareholders, including stockholdersshareholders who have previously requested to receive paper copies of the proxy materials, with paper copies of the proxy materials instead of the Notice of Internet Availability of Proxy Materials.
How do I view the proxy materials online?
Go towww.proxyvote.comand follow the instructions to view the materials. You will need to provide the control number printed in the box marked by the arrow located on your Notice of Internet Availability of Proxy Materials (see example below — the information in the box is an example only — your number will be different and is unique to you).
  | | 1234 5678 9012 3456 |
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What if I prefer to receive a paper copy of the proxy materials?
You can easily request a paper copy of the proxy materials (including the Notice of Annual Meeting, Proxy Statement, and 20162019 Annual Report) at no cost by using one of the three methods below. You will need to provide the control number printed in the box marked by the arrow located on your Notice of Internet Availability of Proxy Materials (see example above — the information in the box is an example only — your number will be different and is unique to you).
  | ● | ByINTERNET Internet
Logon atwww.proxyvote.com; |
  | ● | ByTELEPHONE Telephone,
Call toll-free at 1-800-579-1639; or |
  | ● | BysendinganE-MAIL sending an E-mail
Send tosendmaterial@proxyvote.com (simply provide in the subject line the control number printed in the box marked by the arrow from your Notice of Internet Availability of Proxy Materials; no other information is necessary). |
Can I request to receive my Notice of Internet Availability of Proxy Materials by e-mail rather than by mail?
You may request to receive proxy materials for future meetings by e-mail viawww.proxyvote.comorwww.investordelivery.comand follow the electronic delivery enrollment instructions. If you choose to access future proxy materials electronically, you will receive an e-mail with instructions containing a link to the Web sitewebsite where those materials are available and a link to the proxy voting Web site.website. Your election to access proxy materials by e-mail will remain in effect until you terminate it.
| Please note that you MAY NOT USE your Notice of Internet Availability of Proxy Materials to vote your shares; it is NOT a form for voting. If you return the Notice of Internet Availability of Proxy Materials in an attempt to vote your shares, that vote will not count. |
| For more information about the Notice of Internet Availability of Proxy Materials, please visit:www.sec.gov/spotlight/ proxymatters/e-proxy.shtml |
Shareholders entitled to vote your shares; it is NOT a form for voting. If you return the Notice of Internet Availability of Proxy Materials in an attempt to vote your shares, that vote will not count.
For more information about the Notice of Internet Availability of Proxy Materials, please visit:www.sec.gov/spotlight/proxymatters/e-proxy.shtml
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Stockholders Entitled to Vote |
Each share of our common stock outstanding as of the close of business on March 14, 2017,17, 2020, the record date, is entitled to one vote at the Annual Meeting on each matter properly brought before the meeting. As of that date, there were 597,596,831575,260,717 shares of common stock issued and outstanding.
Most 3M stockholdersshareholders hold their shares through a broker, bank, trustee, or other nominee (which for simplicity we refer to as a “broker or other nominee”) rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially:
STOCKHOLDER OF RECORDShareholderof Record | | If your shares are registered directly in your name with 3M’s transfer agent, Wells Fargo Bank, N.A.,EQ Shareowner Services, you are considered the stockholdershareholder of record of those shares and the Notice of Internet Availability of Proxy Materials, or if you requested paper delivery, a copy of these proxy materials are being sent directly to you by 3M. As the stockholdershareholder of record, you have the right to grant your voting proxy directly to 3M or to vote in person at the meeting. You may also vote on the Internet or by telephone, as described in the Notice of Internet Availability of Proxy Materials and below under the heading “Voting Methods.methods.” |
BENEFICIAL OWNER2020 Proxy Statement | 97 |
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| BeneficialOwner | | If your shares are held by a broker 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 or other nominee who is considered the stockholdershareholder of record of those shares. As the beneficial owner, you have the right to direct your broker or other nominee on how to vote and are also invited to attend the meeting. However, since you are not the stockholdershareholder of record, you may not vote these shares in person at the meeting, unless you obtain a legal proxy from the broker or other nominee. Your broker or other nominee is obligated to provide you with a voting instruction card for you to use. You may also vote on the Internet or by telephone, as described in the Notice of Internet Availability of Proxy Materials and below under the heading “Voting Methods.methods.” If you fail to provide voting instructions to your broker or other nominee, it will have discretion to vote your shares with respect to Proposal 2, but not with respect to Proposals 1, 3, 4, or 5,4, as described below under “Voting Requirementsrequirements to Elect Directorselect directors and Approve Eachapprove each of the Proposals Describedproposals described in this Proxy Statement.proxy statement.” |
PLAN ACCOUNTSPlanAccounts | | If your shares are held in your account in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan, you are considered the beneficial owner of these shares and the trustee of the plans is considered the stockholdershareholder of record. Participants in 3M’s Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan may direct the trustee on how to vote the shares allocated to their account via the Internet, by telephone, or by signing and submitting the proxy card as described in the Notice of Internet Availability of Proxy Materials and below under the heading “Voting Methods.methods.” Participants in 3M’s Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan may also direct the trustee how to vote a proportionate number of allocated shares of common stock for which it has not received direction by following the same voting instructions. If you fail to direct the trustee how to vote your shares by following these instructions, the trustee will vote your shares as described in the proxy card. |
Proposals you are Asked to Vote on and the Board’s Voting Recommendations |
Proposals you are asked to vote on and the Board’s voting recommendations
The following proposals are included in this Proxy Statement and are scheduled to be voted on at the meeting. 3M’s Board recommends that you vote your shares as indicated below.
PROPOSALS:Proposals: | | THE BOARD’SThe Board’s Voting
VOTING
RECOMMENDATIONS:Recommendations: | | RATIONALE FOR
SUPPORT:Rationale for Support: | | FOR FURTHERFor Further
DETAILS:Details: |
| 1. | | Elect the eleven directors identified in this Proxy Statement, each for a term of one year. | | “FOR” “FOR” each nominee
to the Board | | Our nominees are distinguished leaders who bring a mix of skills and qualifications to the Board and can represent the Interestsinterests of all stockholders.shareholders. | | Page 6 |
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PROPOSALS: | | THE BOARD’S
VOTING
RECOMMENDATIONS: | | RATIONALE FOR
SUPPORT: | | FOR FURTHER
DETAILS:13 |
| 2. | | Ratify the appointment of PricewaterhouseCoopers LLP as 3M’s independent registered public accounting firm for 2017.2020. | | “FOR” “FOR” | | Based on its assessment of the qualifications and performance of PricewaterhouseCoopers LLP (“PwC“PwC”), the Audit Committee believes that it is in the best interests of the Company and its stockholdersshareholders to retain PwC. | | Page 3146 |
| 3. | | Approve, on an advisory basis, the compensation of our named executive officers. | | “FOR” “FOR” | | Our executive compensation program appropriately aligns our executives’ compensation with the performance of the Company and its business units as well as their individual performance. | | Page 3550 |
| 4. | Approve, on an advisory basis, the frequency of advisory votes on executive compensation. | | Every “1 year” | | The Board believes that annual votes will provide the clearest and most useful feedback from stockholders to the Company and the Compensation Committee in this important area. | | Page 36 |
5. | StockholderShareholder proposal on Implementation of Holy Land Principles,setting target amounts for CEO compensation, if properly presented at the meeting. | | “AGAINST” “AGAINST” | | See the Board’s opposition statement. | | Page 7090 |
Other than the proposals described in this Proxy Statement, the Board is not aware of any other matters to be presented for a vote at the Annual Meeting. If you grant a proxy by telephone, Internet, or by signing and returning your proxy card, any of the persons appointed by the Board as proxy holders — Michael F. Roman, Nicholas C. Gangestad, Gregg M. Larson, and Inge G. ThulinIvan K. Fong — will have thediscretionthe discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If any of our nominees is unavailable as a candidate for director, the above-named proxy holders will vote your proxy for another candidate or candidates as may be nominated by the Board of Directors.
Voting Requirements to Elect Directors and Approve Each Of The Proposals Described In This Proxy Statement98 | 3M Company |
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Voting requirements to elect directors and approve each of the proposals described in this proxy statement
| Quorum | | The presence of the holders of a majority of the outstanding shares of common stock entitled to vote at the Annual Meeting, present in person or represented by proxy, is necessary to constitute a quorum. Abstentions and “broker non-votes” are counted as present for purposes of determining a quorum. As discussed below, a “broker non-vote” occurs when a broker or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the broker or other nominee does not have discretionary voting power for that proposal and has not received instructions from the beneficial owner. |
BROKER VOTINGBrokerVoting | | Under New York Stock Exchange (“NYSE”)NYSE rules, brokers have discretionary authority to vote their clients’ shares in “routine” matters (including Proposal 2, the ratification of PwC as our independent registered public accounting firm) so long as the beneficial owner of those shares did not provide voting instructions to the broker at least ten days before the stockholdershareholder meeting. Director elections, stockholder proposals, and executive compensation matters, including say-on-payshareholder proposals, and the equity compensation plan,say-on-pay proposal, are not considered “routine” matters for these purposes. As a result, if you do not provide your broker with instructions as to how to vote your shares, your broker will be prohibited from voting on Proposals 1, 3, 4, and 5,4, resulting in a “broker non-vote” with respect to those proposals. If you are a beneficial owner (other than as a participant in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan), your broker or other nominee is permitted to vote your shares on the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2017,2020, even if it does not receive voting instructions from you. |
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ELECTION OF
DIRECTORSElection ofDirectors | | In accordance with 3M’s Bylaws, each director is elected by the vote of the majority of votes cast (which means the number of votes cast “for” a director’s election exceeds the number of votes cast “against” that director’s election, with “abstentions” and “broker non-votes” not counted as a vote cast either “for” or “against” that director’s election) with respect to that director’s election at anythis meeting for the election of directors at which a quorum is present. However, if the number of nominees exceeds the number of directors to be elected (a “Contested Election”) as of the tenth (10th) day preceding the date the Company first mails its notice of the meeting to its stockholders, the directors shall be elected by the vote of a plurality of the votes cast (which means that the nominees who receive the most affirmative votes will be elected to serve as directors). For an election where the majority vote standard applies, the
|
| | The Nominating and Governance Committee has established procedures under which any incumbent director who is not elected shall offer to tender his or her resignation to the Board. In the event an incumbent director fails to receive a majority of the votes cast in anthe election, that is not a Contested Election, the Nominating and Governance Committee, or such other committee designated by the Board of Directors, shall make a recommendation to the Board of Directors as to whether to accept or reject the resignation of such incumbent director, or whether other action should be taken. The Board of Directors shall act on the resignation, taking into account the Committee’s recommendation, and publicly disclose (by issuing a press release and filing appropriate disclosure with the Securities and Exchange Commission) its decision regarding the resignation and, if such resignation is rejected, the rationale behind the decision within ninety (90) days following certification of the election results. The Nominating and Governance Committee in making its recommendation and the Board of Directors in making its decision each may consider any factors and other information that they consider appropriate and relevant. |
| | An incumbent director who fails to receive a majority of the votes cast in anthe election that is not a Contested Election (as defined above) and who tenders his or her resignation pursuant to the procedures described above shall remain active and engaged in Board activities while the Nominating and Governance Committee and the Board decide whether to accept or reject such resignation, or whether other action should be taken. However, it is expected that such incumbent director shall not participate in any proceedings by the Nominating and Governance Committee or the Board regarding whether to accept or reject such director’s resignation, or whether to take other action with respect to such director. |
| | If the Board of Directors accepts a director’s resignation, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board of Directors may fill the resulting vacancy pursuant to the Bylaws. |
ALL OTHER
PROPOSALSAll OtherProposals | | The affirmative “FOR” vote of a majority of those shares present in person or represented by proxy at the meeting and entitled to vote on the matter is required to approve Proposals 2, 3, and 5. Proposal 4, with multiple choices, is subject to a plurality vote standard.4. In tabulating the voting result for any particular proposal abstentions and, if applicable, “broker non-votes” (if applicable) are not counted as votes “FOR” or “AGAINST” the proposal. An abstention will, however, be counted as entitled to vote on a proposal and will, therefore, have the effect of a vote “AGAINST.” |
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Voting methods
If you hold shares directly as the stockholdershareholder of record, you may vote by granting a proxy or by voting in person at the Annual Meeting by requesting a ballot. If you hold shares beneficially in street name, you may vote by submitting voting instructions to your broker or other nominee or in person at the Annual Meeting by requesting a legal proxy from your broker or other nominee. If you own shares beneficially as a participant in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan, you may vote by submitting voting instructions to the trustee. In most instances, youwillyou will be able to do this over the Internet, by telephone, or by mail. Even if you plan to attend the Annual Meeting, we recommend that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the Annual Meeting.
Please refer to the summary instructions below and those included on your Notice of Internet Availability of Proxy Materials or proxy card or, for shares held in street name, the voting instruction card provided by your broker or other nominee.
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The Internet and telephone voting procedures are designed to authenticate stockholdersshareholders by use of a control number and to allow you to confirm that your instructions have been properly recorded. If you vote by telephone or on the Internet, you do not need to return your proxy card. Telephone and Internet voting for stockholdersshareholders of record will be available 24 hours a day, up until 11:10:59 p.m., EasternCentral Daylight Time, on May 8, 2017.11, 2020. Participants in 3M’s Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan may instruct the trustee how to vote their shares via the Internet, by telephone, or by signing and returning the proxy card by 11:10:59 p.m., EasternCentral Daylight Time, on May 7, 2017.10, 2020.
VOTE BY INTERNET
www.proxyvote.com | | If you have Internet access, you may submit your proxy from any location in the world 24 hours a day, 7 days a week. Have your proxy card or the Notice of Internet Availability of Proxy Materials in hand when you access the Web sitewebsite and follow the instructions to obtain your records and to create an electronic voting instruction form. |
VOTE BY TELEPHONE
1-800-690-6903 | | If you live in the United States, you may use any touch-tone telephone to vote your proxy toll-free 24 hours a day, 7 days a week. Have your proxy card or the Notice of Internet Availability of Proxy Materials in hand when you call and follow the instructions. |
VOTE BY MAIL
 Sign and mail your proxy card | | You may vote by signing and submitting your proxy card to the Company. If you provide specific voting instructions in your proxy card, your shares will be voted as you instruct. If you sign your proxy card, but do not provide voting instructions, your shares will be voted as the Board recommends. Mark, sign, and date your proxy card and return it in the postage-paid envelope provided so that it is received by May 8, 201711, 2020 (or by May 7, 201710, 2020 for participants in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan), to 3M Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. For shares held in street name, you may direct your broker or other nominee on how to vote your shares by following the instructions set forth in the voting instruction card that your broker or other nominee has provided. |
VOTE IN PERSON
 May 9, 2017 -
12, 2020 8:30 a.m., Eastern Daylight TimeCDT Conrad Indianapolis
50 West Washington Street
Indianapolis, Indiana 46204
Archer Hotel 3121 Palm Way Austin, TX 78758 | | If you are a stockholdershareholder of record, you may grant your proxy to 3M or vote in person at the Annual Meeting by requesting a ballot at the meeting. If you are a street name holder, you may vote in person at the Annual Meeting only if you obtain a legal proxy from your broker or other nominee. |
ALL SHARES THAT HAVE BEEN PROPERLY VOTED AND NOT REVOKED WILL BE VOTED AT THE
ANNUAL MEETING. |
Changing your Vote100 | 3M Company |
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Changing your vote
You may change your proxy voting instructions at any time prior to the vote at the Annual Meeting. You may enter a new vote by using the Internet or the telephone or by mailing a new proxy card or new voting instruction card bearing a later date (which will automatically revoke your earlier voting instructions), so long as the new voteisvote is received before the deadlines described above under the heading “Voting Methods.methods.” You may also change your vote by granting a new proxy or by voting in person at the Annual Meeting.
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Table of ContentsCounting the vote
In the election of directors, you may vote “FOR” or “AGAINST” one or more of the nominees or you may “ABSTAIN.” Abstentions will have no effect on the outcome of the election of directors. For Proposals 2, 3, and 5,4, you may vote “FOR,” “AGAINST,” or “ABSTAIN,” but please note that abstentions will have the same effect as a vote “AGAINST.” Proposal 4, with multiple choices, is subject to a plurality vote standard. If you sign your proxy card or broker voting instruction card but provide novotingno voting instructions, your shares will be voted in accordance with the recommendations of the Board. Shares held in your account in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan will be voted by the trustee as described in “Stockholders Entitled“Shareholders entitled to Vote”vote” beginning on page 77.97.
Representatives of Broadridge Financial Solutions, Inc. will tabulate the votes and act as the inspectors of election.
Confidentiality
The Company’s Board of Directors has a policy that all stockholdershareholder proxies, ballots, and tabulations that identify stockholdersshareholders are to be maintained in confidence. No such document will be available for examination, and the identity and vote of any stockholdershareholder will not be disclosed, except as necessary to meet legal requirements andallowand allow the inspectors of election to certify the results of the stockholdershareholder vote. The policy also provides that inspectors of election for stockholdershareholder votes must be independent and cannot be employees of the Company. Occasionally, stockholdersshareholders provide written comments on their proxy card that may be forwarded to 3M management.
Results of the vote
We will issue a press release announcing the preliminary voting results for items of business properly presented at the meeting and will disclose the results for those items in a Current Report on Form 8-K filed with the Securitiesand Exchange Commission within four business days of the Annual Meeting date. The press release with voting results will also be available on our Web sitewebsite atwww.3M.com/profile/pressbox/index.jhtml.
Delivery of Documents to Stockholders Sharing an Address |
Delivery of documents to shareholders sharing an address
Securities and Exchange Commission rules allow us to deliver a single copy of an annual report and proxy statement to any household not participating in electronic proxy material delivery at which two or more stockholdersshareholders reside, if we believe the stockholdersshareholders are members of the same family (a practice called “householding”). We believe that householding benefits both you and the Company by eliminating duplicate mailings to stockholdersshareholders living at the same address and by reducing our printing and mailing costs. Each stockholdershareholder will continue to receive a separate proxy card or voting instruction card.
Your household may have received a single set of proxy materials this year. If you prefer to receive your own copy now or in future years, please request a duplicate set by calling 1-800-579-1639, by going towww.proxyvote.com, by e-mailingsendmaterial@proxyvote.com,, or by writing to 3M Company, c/o Broadridge, 51 Mercedes Way,Edgewood, NY 11717. Alternatively, if your household received multiple sets of proxy materials this year, and members of your household who are entitled to receive proxy materials would all prefer to receive only a single set of proxy materials, you may submit such a request as specified in the preceding sentence.
If a broker or other nominee holds your shares, you may continue to receive some duplicate mailings. Certain brokers will eliminate duplicate account mailings by allowing stockholdersshareholders to consent to such elimination, or through implied consent if a stockholdershareholder does not request continuation of duplicate mailings. Since not all brokers and nominees may offer stockholdersshareholders the opportunity this year to eliminate duplicate mailings, you may need to contact your broker or other nominee directly to discontinue duplicate mailings to your household.
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List of shareholders
A list of the stockholdersshareholders of record entitled to vote at the Annual Meeting will be available for inspection at the Annual Meeting for any purpose germane to the meeting. The list also will be available for ten days priortoprior to the meeting between theduring normal business hours of 7:45 a.m. and 4:30 p.m., Eastern Daylight Time, at our offices at Aearo Technologies, 7911 Zionsville Road, Indianapolis, Indiana 46268,3M Center, St. Paul, MN 55144, by contacting the Secretary of the Company.
Cost of Proxy Solicitation |
Cost of proxy solicitation
3M will pay for the cost of preparing, assembling, printing, mailing, and distributing these proxy materials. You will need to obtain your own Internet access if you choose to access the proxy materials and/or vote over the Internet. In addition to mailing these proxy materials, the solicitation of proxies or votes may be made in person, by telephone, or by electronic communication by our directors, officers, and employees, who will not receive any additional compensation for these solicitation activities. We havehiredhave hired Georgeson Shareholder Communications, Inc. to assist us in the distribution of proxy materials and the solicitation of votes. We will pay Georgeson Shareholder Communications, Inc. a fee of $20,000 plus expenses for these services. We will also reimburse brokerage houses and other custodians, nominees, and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to beneficial owners of stock.
Transfer agent
Our transfer agent is Wells Fargo Bank, N.A.EQ Shareowner Services. All communications concerning stockholdersshareholders of record accounts, including address changes, name changes, common stock transfer requirements, and similar issuescan be handled by contacting Wells Fargo Bank, N.A.EQ Shareowner Services at 1-800-401-1952 (U.S.), 651-450-4064 (outside the U.S.),www.shareowneronline.com, or in writing, P.O. Box 64854, St. Paul, MN 55164-0854.
Requirements for Submissionsubmission of Stockholder Proposalsshareholder proposals for Next Year’snext year’s Annual Meeting
In order for a stockholdershareholder proposal to be considered for inclusion in 3M’s Proxy Statement for next year’s Annual Meeting, our Corporate Secretary must receive the proposal by November 22, 2017.25, 2020. Such proposals must be sent via registered, certified, or express mail (or other means that allows the stockholdershareholder to determine when the proposal was received by the Company) to: Gregg M. Larson,Ivan K. Fong, Senior Vice President, Deputy General Counsel and Secretary, 3M Company, 3M Center, Building 220-14W-06,220-13E-26A, St. Paul, MN 55144-1000. Such proposals must comply with the Securities and Exchange Commission’s regulations regarding the inclusion of stockholdershareholder proposals in Company sponsored proxy materials, such as the stockholdershareholder continuing to own a minimum number of shares until the Annual Meeting and appearing in person or through an authorized representative at the meeting to present the proposal.
Alternatively, stockholdersshareholders intending to present a proposal at next year’s Annual Meeting without having it included in the Company’s Proxy Statement must comply with therequirements set forth in the Company’s Bylaws, a copy of which is available atwww.3M.comunder Investor Relations — Governance. Our Bylaws require, among other things, that our Corporate Secretary receive written notice from the stockholdershareholder no earlier than the close of business on November 22, 2017,25, 2020, and no later than the close of business on December 22, 2017.25, 2020. The notice must contain the information required by our Bylaws.
Proposals received by the Corporate Secretary after the dates mentioned will not be included in the Proxy Statement or acted upon at next year’s Annual Meeting.
By Order of the Board of Directors.
Gregg M. Larson
Ivan K. Fong
Senior Vice President, Deputy General Counsel and Secretary
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| Appendix A - Supplemental consolidated statement of income information |
APPENDIX A- SUPPLEMENTAL FINANCIAL
INFORMATION— NON-GAAP MEASURES
Reconciliation of GAAP to Non-GAAP Financial Measures
(Millions,non-GAAP financial measures (millions, except per-share amounts)
(Unaudited) (unaudited)
In addition to discussing certainreporting financial results determined in accordance with U.S. generally accepted accounting principles (GAAP), the Company also discusses certain non-GAAP measures that exclude special items. Operating income, net income attributable to 3M (hereafter referred to as “net income”), and diluted earnings per share attributable to 3M common shareholders (hereafter referred to as “diluted earnings per share”) are all measures for which 3M provides the reported GAAP measure and an adjusted measure (excluding special items). Special items are not in accordance with, nor are they a substitute for, GAAP measures. Special items represent significant charges or credits that are important to an understanding of the Company’s ongoing operations. The reconciliationCompany uses these non-GAAP measures to evaluate and manage the Company’s operations. The Company believes that discussion of results excluding special items is meaningful to investors as it provides a useful analysis of ongoing operating trends. The determination of special items may not be comparable to similarly titled measures used by other companies.
The reconciliations provided below reconcilesreconcile the non-GAAP financial measures with the most directly comparable GAAP financial measures for the twelve months ended December 31:
| MAJOR GAAP CASH FLOW CATEGORIES | 2016 | | 2015 |
| Net cash provided by operating activities | $6,662 | | | $6,420 | |
| Net cash used in investing activities | (1,403 | ) | | (2,817 | ) |
| Net cash used in financing activities | (4,626 | ) | | (3,648 | ) |
| |
| FREE CASH FLOW (NON-GAAP MEASURE) | 2016 | | 2015 |
| Net cash provided by operating activities | $6,662 | | | $6,420 | |
| Purchases of property, plant and equipment | (1,420 | ) | | (1,461 | ) |
| Free Cash Flow(a) | $5,242 | | | $4,959 | |
| Net Income Attributable to 3M | $5,050 | | | $4,833 | |
| Free Cash Flow Conversion(a) | 104 | % | | 103 | % |
(a) Free cash flow31, 2019, 2018 and free cash flow conversion are not defined under U.S. GAAP. Therefore, they should not be considered a substitute for income or cash flow data prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The Company defines free cash flow conversion as free cash flow divided by net income attributable to 3M. The Company believes free cash flow and free cash flow conversion are meaningful to investors as they function as useful measures of performance and the Company uses these measures as an indication of the strength of the Company and its ability to generate cash.2017:
2017 Proxy Statement | 83
ADJUSTED EARNINGS PER SHARE
(non-GAAP measure)
| | | 2019 |
(Dollars in millions,
except per share
amounts) | | Reported GAAP
Measure | | Adjustment for
Significant Litigation
Related Charges(a) | | Adjustment for loss
on deconsolidation
of Venezuelan
subsidiary(b) | | Adjustment for
Gas & Flame Sale
Gain(c) | | Adjustment for
Fourth Quarter
Restructuring
Items(d) | | Adjustment for
Acelity and M*Modal
Acquisitions(e) | | Adjusted
Non-GAAP
Measure |
| Net Sales | | $ | 32,136 | | | | | | | | | | | | | | | | | | | | | | | $ | 32,136 | |
| Operating Income | | | 6,174 | | | | 762 | | | | — | | | | (112) | | | | 134 | | | | 63 | | | | 7,022 | |
| Operating Income Margin | | | 19.2% | | | | | | | | | | | | | | | | | | | | | | | | 21.9% | |
| Net income attributable to 3M | | $ | 4,570 | | | $ | 590 | | | $ | 162 | | | $ | (128) | | | $ | 117 | | | $ | 108 | | | $ | 5,419 | |
| Earnings per diluted share | | $ | 7.81 | | | $ | 1.01 | | | $ | 0.28 | | | $ | (0.21) | | | $ | 0.20 | | | $ | 0.18 | | | $ | 9.27 | |
| Earnings per diluted share percent change | | | -12.1% | | | | | | | | | | | | | | | | | | | | | | | | -6.9% | |
| | | 2018 | | 2017 |
(Dollars in millions,
except per share
amounts) | | Reported GAAP
Measure | | Adjustment for MN
NRD Resolution(f) | | Adjustment for
Measurement Period
Accounting of
TCJA(g) | | CMD Sale Gain, net
of Restructuring
Items(h) | | Adjusted
Non-GAAP
Measure | | Reported
GAAP
Measure | | | Adjustment
for TCJA(i) | | Adjusted
Non-GAAP
Measure |
| Net Sales | | $ | 32,765 | | | | | | | | | | | | | | | $ | 32,765 | | | $ | 31,657 | | | | | | | $ | 31,657 | |
| Operating Income | | | 7,207 | | | | 897 | | | | — | | | | (381) | | | | 7,723 | | | | 7,692 | | | | — | | | | 7,692 | |
| Operating Income Margin | | | 22.0% | | | | | | | | | | | | | | | | 23.6% | | | | 24.3% | | | | | | | | 24.3% | |
| Net income attributable to 3M | | $ | 5,349 | | | $ | 770 | | | $ | 176 | | | $ | (299) | | | $ | 5,996 | | | $ | 4,858 | | | $ | 762 | | | $ | 5,620 | |
| Earnings per diluted share | | $ | 8.89 | | | $ | 1.28 | | | $ | 0.29 | | | $ | (0.50) | | | $ | 9.96 | | | $ | 7.93 | | | $ | 1.24 | | | $ | 9.17 | |
| Earnings per diluted share percent change | | | 12.1% | | | | | | | | | | | | | | | | 8.6% | | | | -2.8% | | | | | | | | 12.4% | |
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FREE CASH FLOW
(non-GAAP measure)
| RETURN ON INVESTED CAPITAL (NON-GAAP MEASURE) | | 2016 | | 2015 |
| Net income including non-controlling interest | | $5,058 | | $4,841 |
| Interest expense (after-tax)(1) | | 143 | | 106 |
| Adjusted net income (return) | | $5,201 | | $4,947 |
| Average shareholders’ equity (including non-controlling interest)(2) | | $11,316 | | $12,484 |
| Average short-term and long-term debt(3) | | 11,725 | | 9,266 |
| Average invested capital | | $23,041 | | $21,750 |
| Return on Invested Capital(b) | | 22.6% | | 22.7% |
| (1) Effective income tax rate used for interest expense | | 28.3% | | 29.1% |
| (2) Calculation of average equity (includes non-controlling interest) | | | | |
| Ending total equity as of: | | | | |
| March 31 | | $11,495 | | $13,673 |
| June 30 | | 11,658 | | 12,851 |
| September 30 | | 11,769 | | 11,945 |
| December 31 | | 10,343 | | 11,468 |
| Average total equity | | $11,316 | | $12,484 |
| (3) Calculation of average debt | | | | |
| Ending short-term and long-term debt as of: | | | | |
| March 31 | | $11,139 | | $6,566 |
| June 30 | | 11,749 | | 8,484 |
| September 30 | | 12,361 | | 11,216 |
| December 31 | | 11,650 | | 10,797 |
| Average short-term and long-term debt | | $11,725 | | $9,266 |
| | | 2019 |
| | | Reported
Measure | | Adjustment
for Significant
Litigation
Related
Charges(a) | | Adjustment
for loss on
deconsolidation
of Venezuelan
subsidiary(b) | | Adjustment
for Gas &
Flame Sale
Gain(c) | | Adjustment for
Fourth Quarter
Restructuring
Items(d) | | Adjusted
Non-GAAP
Measure |
| Major GAAP Cash Flow Categories | | | | | | | | | | | | | | | | | | | | | | | | |
| Net cash provided by operating activities | | $ | 7,070 | | | | | | | | | | | | | | | | | | | | | |
| Net cash provided by (used in) investing activities | | | (6,444) | | | | | | | | | | | | | | | | | | | | | |
| Net cash used in financing activities | | | (1,124) | | | | | | | | | | | | | | | | | | | | | |
| FREE CASH FLOW (non-GAAP measure) | | | | | | | | | | | | | | | | | | | | | | | | |
| Net cash provided by operating activities | | $ | 7,070 | | | $ | 274 | | | $ | — | | | $ | (17) | | | $ | — | | | $ | 7,327 | |
| Purchases of property, plant and equipment | | | (1,699) | | | | | | | | | | | | | | | | | | | | (1,699) | |
| Free Cash Flow (j) | | $ | 5,371 | | | $ | 274 | | | $ | — | | | $ | (17) | | | $ | — | | | $ | 5,628 | |
| Net Income Attributable | | $ | 4,570 | | | $ | 590 | | | $ | 162 | | | $ | (128) | | | $ | 117 | | | $ | 5,311 | |
| Free Cash Flow Conversion (j) | | | 117.5% | | | | | | | | | | | | | | | | | | | | 106.0% | |
(b) Return on Invested Capital (ROIC) is not defined under U.S. generally accepted accounting principles. Therefore, ROIC should not be considered a substitute for other measures prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines ROIC as adjusted net income (net income including non-controlling interest plus after-tax interest expense) divided by average invested capital (equity plus debt). The Company believes ROIC is meaningful to investors as it focuses on shareholder value creation.
| | | 2018 | | 2017 |
| | | Reported
Measure | | Adjustment
for MN NRD
Resolution(f) | | Adjustment for
Measurement
Period
Accounting of
TCJA(g) | | CMD Sale
Gain, net of
Restructuring
Items(h) | | Adjusted
Non-GAAP
Measure | | Reported
Measure | | Adjustment
for TCJA(i) | | Adjusted
Non-GAAP
Measure |
| Major GAAP Cash Flow Categories | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net cash provided by operating activities | | $ | 6,439 | | | | | | | | | | | | | | | | | | | $ | 6,240 | | | | | | | | | |
| Net cash provided by (used in) investing activities | | | 222 | | | | | | | | | | | | | | | | | | | | (3,086) | | | | | | | | | |
| Net cash used in financing activities | | | (6,701) | | | | | | | | | | | | | | | | | | | | (2,655) | | | | | | | | | |
FREE CASH FLOW
(non-GAAP measure) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net cash provided by operating activities | | $ | 6,439 | | | $ | 679 | | | | | | | $ | 24 | | | $ | 7,142 | | | $ | 6,240 | | | $ | 600 | | | $ | 6,840 | |
| Purchases of property, plant and equipment | | | (1,577) | | | | | | | | | | | | | | | | (1,577) | | | | (1,373) | | | | | | | | (1,373) | |
| Free Cash Flow (j) | | $ | 4,862 | | | $ | 679 | | | $ | — | | | $ | 24 | | | $ | 5,565 | | | $ | 4,867 | | | $ | 600 | | | $ | 5,467 | |
| Net Income Attributable | | $ | 5,349 | | | $ | 770 | | | $ | 176 | | | $ | (299) | | | $ | 5,996 | | | $ | 4,858 | | | $ | 762 | | | $ | 5,620 | |
| Free Cash Flow Conversion (j) | | | 90.9% | | | | | | | | | | | | | | | | 92.8% | | | | 100.2% | | | | | | | | 97.3% | |
84 | 3M
Table of Contents
RETURN ON INVESTED CAPITAL
(non-GAAP measure)
| | | 2019 |
| | | Reported
Measure | | Adjustment
for Significant
Litigation
Related
Charges(a) | | Adjustment
for loss on
deconsolidation
of Venezuelan
subsidiary(b) | | Adjustment
for Gas &
Flame Sale
Gain(c) | | Adjustment for
Fourth Quarter
Restructuring
Items(d) | | Adjustment
for Acelity
and M*Modal
Acquisitions(e) | | Adjusted
Non-GAAP
Measure |
| Net income including non-controlling interest | | $ | 4,582 | | | $ | 590 | | | $ | 162 | | | $ | (128 | ) | | $ | 117 | | | $ | 49 | | | $ | 5,372 | |
| Interest expense (after-tax) (1) | | | 359 | | | | | | | | | | | | | | | | | | | | | | | | 359 | |
| Adjusted net income (Return) | | $ | 4,941 | | | $ | 590 | | | $ | 162 | | | $ | (128 | ) | | $ | 117 | | | $ | 49 | | | $ | 5,731 | |
| Average shareholders’ equity (including non-controlling interest) (2) | | $ | 10,198 | | | $ | 327 | | | $ | — | | | $ | (8 | ) | | $ | 29 | | | $ | (3,512 | ) | | $ | 7,034 | |
| Average short-term and long-term debt (3) | | | 17,982 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 17,982 | |
| Average invested capital | | $ | 28,180 | | | $ | 327 | | | $ | — | | | $ | (8 | ) | | $ | 29 | | | $ | (3,512 | ) | | $ | 25,016 | |
| Return on Invested Capital (k) | | | 17.5% | | | | | | | | | | | | | | | | | | | | | | | | 22.9% | |
| (1) Effective income tax rate used for interest expense | | | 19.8% | | | | | | | | | | | | | | | | | | | | | | | | 19.8% | |
| (2) Calculation of average equity (includes non-controlling interest) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ending total equity as of: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31 | | $ | 9,757 | | | $ | 424 | | | $ | — | | | $ | — | | | $ | — | | | $ | (947 | ) | | $ | 9,234 | |
| June 30 | | | 10,142 | | | | 418 | | | | — | | | | (31 | ) | | | — | | | | (935 | ) | | | 9,594 | |
| September 30 | | | 10,764 | | | | 149 | | | | — | | | | (3 | ) | | | — | | | | (4,173 | ) | | | 6,737 | |
| December 31 | | | 10,126 | | | | 316 | | | | — | | | | — | | | | 117 | | | | (7,990 | ) | | | 2,569 | |
| Average total equity | | $ | 10,198 | | | $ | 327 | | | $ | — | | | $ | (8 | ) | | $ | 29 | | | $ | (3,512 | ) | | $ | 7,034 | |
| (3) Calculation of average debt | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ending short-term and long-term debt as of: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31 | | $ | 16,370 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 16,370 | |
| June 30 | | | 15,806 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 15,806 | |
| September 30 | | | 19,439 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 19,439 | |
| December 31 | | | 20,313 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 20,313 | |
| Average short-term and long-term debt | | $ | 17,982 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 17,982 | |
ADMISSION TICKET AND PHOTO ID REQUIRED FOR THE ANNUAL MEETING
Please note that you will need an admission ticket and a valid photo ID to attend the Annual Meeting. For more details, please read “Annual Meeting Admission” on page 75 of the Proxy Statement.
Table of Contents
| | | 2018 | | 2017 |
| | | Reported
Measure | | Adjustment
for MN NRD
Resolution(f) | | Adjustment for
Measurement
Period
Accounting of
TCJA(g) | | CMD Sale
Gain, net of
Restructuring
Items(h) | | Adjusted
Non-GAAP
Measure | | Reported
Measure | | Adjustment
for TCJA(i) | | Adjusted
Non-GAAP
Measure |
| Net income including non-controlling interest | | $ | 5,363 | | | $ | 770 | | | $ | 176 | | | $ | (263) | | | $ | 6,046 | | | $ | 4,869 | | | $ | 762 | | | $ | 5,631 | |
| Interest expense (after-tax) (1) | | | 268 | | | | | | | | | | | | | | | | 268 | | | | 208 | | | | | | | | 208 | |
| Adjusted net income (Return) | | $ | 5,631 | | | $ | 770 | | | $ | 176 | | | $ | (263) | | | $ | 6,314 | | | $ | 5,077 | | | $ | 762 | | | $ | 5,839 | |
| Average shareholders’ equity (including non-controlling interest) (2) | | $ | 10,407 | | | $ | (136) | | | $ | 207 | | | $ | 236 | | | $ | 10,714 | | | $ | 11,627 | | | $ | 191 | | | $ | 11,818 | |
| Average short-term and long-term debt (3) | | | 14,912 | | | | — | | | | — | | | | — | | | | 14,912 | | | | 12,156 | | | | (150) | | | | 12,006 | |
| Average invested capital | | $ | 25,318 | | | $ | (136) | | | $ | 207 | | | $ | 236 | | | $ | 25,626 | | | $ | 23,783 | | | | 41 | | | $ | 23,824 | |
| Return on Invested Capital (k) | | | 22.2% | | | | | | | | | | | | | | | | 24.6% | | | | 21.3% | | | | | | | | 24.5% | |
| (1) Effective income tax rate used for interest expense | | | 23.4% | | | | | | | | | | | | | | | | 20.0% | | | | 35.5% | | | | | | | | 35.5% | |
| (2) Calculation of average equity (includes non-controlling interest) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ending total equity as of: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31 | | $ | 11,039 | | | $ | (139) | | | $ | 217 | | | $ | — | | | $ | 11,117 | | | $ | 11,040 | | | $ | — | | | $ | 11,040 | |
| June 30 | | | 10,428 | | | | (155) | | | | 217 | | | | 377 | | | | 10,867 | | | | 11,644 | | | | — | | | | 11,644 | |
| September 30 | | | 10,311 | | | | (155) | | | | 217 | | | | 285 | | | | 10,658 | | | | 12,202 | | | | — | | | | 12,202 | |
| December 31 | | | 9,848 | | | | (95) | | | | 176 | | | | 282 | | | | 10,211 | | | | 11,622 | | | | 762 | | | | 12,384 | |
| Average total equity | | $ | 10,407 | | | $ | (136) | | | $ | 207 | | | $ | 236 | | | $ | 10,714 | | | $ | 11,627 | | | $ | 191 | | | $ | 11,818 | |
| (3) Calculation of average debt | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ending short-term and long-term debt as of: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31 | | $ | 15,660 | | | $ | — | | | $ | — | | | $ | — | | | $ | 15,660 | | | $ | 11,711 | | | $ | — | | | $ | 11,711 | |
| June 30 | | | 14,519 | | | | — | | | | — | | | | — | | | | 14,519 | | | | 11,301 | | | | — | | | | 11,301 | |
| September 30 | | | 14,846 | | | | — | | | | — | | | | — | | | | 14,846 | | | | 11,663 | | | | — | | | | 11,663 | |
| December 31 | | | 14,622 | | | | — | | | | — | | | | — | | | | 14,622 | | | | 13,949 | | | | (600) | | | | 13,349 | |
| Average short-term and long-term debt | | $ | 14,912 | | | $ | — | | | $ | — | | | $ | — | | | $ | 14,912 | | | $ | 12,156 | | | $ | (150) | | | $ | 12,006 | |
| (a) | In 2019, the Company recorded significant litigation-related charges of $762 million ($590 million after tax) related to PFAS (certain perfluorinated compounds) matters and coal mine dust respirator mask lawsuits of which $214 million ($166 million after tax) occurred in the fourth quarter. |
| |
| (b) | In the second quarter of 2019, 3M recorded a pre-tax charge of $162 million related to the deconsolidation of the Company’s Venezuelan subsidiary. |
| |
| (c) | In August 2019, 3M closed on the sale of its gas and flame detection business, a leader in fixed and portable gas and flame detection, to Teledyne Technologies Incorporated. 3M’s gas and flame business was part of the overall October 2017 acquisition of underlying legal entities and associated assets of Scott Safety. This business has annual sales of approximately $120 million. The transaction resulted in a pre-tax gain of $112 million that was reported within the Company’s Safety and Industrial business. |
| |
| (d) | During the fourth quarter of 2019, in light of a slower than expected 2019 and to realign 3M’s organizational structure and operating model to improve growth and operational efficiency, respectively, management approved and committed to undertake certain restructuring actions. The Company recorded a fourth quarter 2019 pre-tax charge of $134 million. |
| |
| (e) | In February 2019, 3M completed the acquisition of all of the ownership interests of the technology business of M*Modal for $0.7 billion of cash, net of cash acquired, and assumption of $0.3 billion of M*Modal’s debt. In October 2019, 3M completed the acquisition of all of the ownership interests of Acelity Inc. and its KCI subsidiaries for consideration of $4.5 billion net of cash acquired as shown in the table below, and assumption of $2.3 billion of debt. |
| |
| (f) | In February 2018, 3M reached an agreement with the State of Minnesota that resolved the previously disclosed Natural Resource Damages (NRD) lawsuit filed by the State against the Company related to certain PFCs present in the environment. Under the terms of the settlement, 3M agreed to provide an $850 million grant to the State for a special “3M Water Quality and Sustainability Fund.” This Fund will enable projects that support water sustainability in the Twin Cities East Metro region, such as continued delivery of water to residents and enhancing groundwater recharge to support sustainable growth. The projects will also result in habitat and recreation improvements, such as fishing piers, trails, and open space preservation. 3M recorded a charge of $897 million ($770 million after-tax), inclusive of legal fees and other related obligations, in the first quarter of 2018 associated with the resolution of this matter. |
Table of Contents
Time and Date
8:30 a.m., Eastern Daylight Time
Tuesday, May 9, 2017
Place
Conrad Indianapolis
50 West Washington Street
Indianapolis, Indiana 46204
 |
| |
| (h) | In June 2018, 3M completed the sale of substantially all of its Communication Markets Division and reflected a pre-tax gain of $494 million as a result of this divestiture. Additionally, in December 2018, completed the sale of the remaining telecommunications system integration services portion of the business based in Germany and reflected a pre-tax gain of $15 million as a result of this divestiture. Both divestitures were reported within the Company’s Electronics and Energy business. During the second quarter and fourth quarter of 2018, management approved and committed to undertake certain restructuring actions related to addressing corporate functional costs following the Communication Markets Division divestiture. These actions resulted in a second quarter 2018 pre-tax charge of $105 million and a fourth quarter 2018 pre-tax charge of $22 million, net of adjustments for reductions in cost estimates. |
| |
| (i) | During the fourth quarter of 2017, 3M recorded a net tax expense of $762 million related to the enactment of the Tax Cuts and Jobs Act (the “TCJA”). The expense is primarily related to the TCJA’s transition tax on previously unremitted earnings of non-U.S. subsidiaries and was net of remeasurement of 3M’s deferred tax assets and liabilities considering the TCJA’s newly enacted tax rates and certain other impacts. This provisional amount was subject to adjustment during the measurement period of up to one year following the December 2017 enactment of the TCJA, as provided by recent SEC guidance. In addition to reporting financial results in accordance with GAAP, the Company also provides non-GAAP measures that adjust for the net impact of enactment of the TCJA. This item represents a significant charge that impacted the Company’s financial results. Income, earnings per share, and the effective tax rate are all measures for which 3M provides the reported GAAP measure and an adjusted measure. The adjusted measures are not in accordance with, nor are they a substitute for, GAAP measures. Because of the TCJA, the Company made a $600 million pension contribution to its U.S. defined benefit pension plan. This contribution did not impact 2017 net income, but it did impact Free Cash Flow Conversion and ROIC. The Company considers these non-GAAP measures in evaluating and managing the Company’s operations. The Company believes that discussion of results adjusted for this item is meaningful to investors as it provides a useful analysis of ongoing underlying operating trends. |
| |
| (j) | Free cash flow and free cash flow conversion are not defined under GAAP. Therefore, they should not be considered a substitute for income or cash flow data prepared in accordance with GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The Company defines free cash flow conversion as free cash flow divided by net income attributable to 3M. The Company believes free cash flow and free cash flow conversion is meaningful to investors as they are useful measures of performance and the Company uses these measures as an indication of the strength of the Company and its ability to generate cash. In 2017, net cash provided by operating activities was impacted by 3M’s enactment of the TCJA, along with a U.S. pension contribution of $600 million that 3M made following the signing of tax reform. On a combined basis, these items benefited free cash flow conversion by three percentage points. Refer to the proceeding “Cash Flows from Operating Activities” section for discussion of additional items that impacted operating cash flow. Refer to the proceeding “Cash Flows from Investing Activities” section for discussion on capital spending for property, plant and equipment. |
| |
| (k) | Return on Invested Capital (ROIC) is not defined under U.S. generally accepted accounting principles. Therefore, ROIC should not be considered a substitute for other measures prepared in accordance with GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines ROIC as adjusted net income (net income including non-controlling interest plus after-tax interest expense) divided by average invested capital (equity plus debt). The Company believes ROIC is meaningful to investors as it focuses on shareholder value creation. |
Table of Contents
|
ADMISSION TICKET AND PHOTO ID REQUIRED FOR THE ANNUAL MEETING |
Please note that you must pre-register and bring an admission ticket and a valid photo ID to attend the Annual Meeting. For more details, please read “Annual Meeting Admission” on page 95 of the Proxy Statement. |
Table of Contents
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| This Proxy Statement was printed onrecycled paper with soy based inks in a facility that uses 100% renewable wind energy. | |
Table of Contents
3M CENTER
BLDG. 220-9E-02
ST. PAUL, MN 55144-1000  | SCAN TO
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3M COMPANY | | | | | | |
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| The Board of Directors recommends you vote FOR proposals 1, 2 and 3: | | | | | | |
| | | | | | | | |
| Vote on Directors | | | | | | |
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| 1. | To elect eleven members to the Board of Directors, each for a term of one year. | | | | | | |
| | | | | | | | |
| | Nominees: | | For | | Against | | Abstain |
| | | | | | | | |
| | 1a. | Thomas “Tony” K. Brown | | ☐ | | ☐ | | ☐ |
| | | | | For | | | | |
| | Against1b. | Pamela J. Craig | Abstain | ☐ | | ☐ | | ☐ |
| | Nominees: | | | | | | |
| | | | | | | | | |
| | 1c. | David B. Dillon | | |
| | 1a. | Sondra L. Barbour | | ☐ | | ☐ | | ☐ |
| | | | | | | | | |
| | 1d. | Michael L. Eskew | | |
| | 1b. | Thomas "Tony" K. Brown | | ☐ | | ☐ | | ☐ |
| | | | | | | | | |
| | 1e. | Herbert L. Henkel | | |
| | 1c. | Vance D. Coffman | | ☐ | | ☐ | | ☐ |
| | | | | | | | | |
| | 1f. | Amy E. Hood | | |
| | 1d. | David B. Dillon | | ☐ | | ☐ | | ☐ |
| | | | | | | | | |
| | 1e. | Michael L. Eskew | | ☐ | | ☐ | | ☐ |
| | | | | | | | | |
| | 1f. | Herbert L. Henkel | | ☐ | | ☐ | | ☐ |
| | | | | | | | | |
| | 1g. | Muhtar Kent | | ☐ | | ☐ | | ☐ |
| | | | | | | | | | | |
| | 1h. | Edward M. LiddyDambisa F. Moyo | | ☐ | | ☐ | | ☐ |
| | | | | | | | | | |
| For address changes and/or comments, please check this box and write them on the back where indicated. | | | | | | ☐ |
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| | | | | | |
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| | For | | Against | | Abstain |
| | | | | | | | |
| 1i. | Gregory R. Page | | ☐ | | ☐ | | ☐ |
| | | | | | | | |
| 1j. | Michael F. Roman | | ☐ | | ☐ | | ☐ |
| | | | | | | | |
| 1k. | Patricia A. Woertz | | ☐ | | ☐ | | ☐ |
| | | | | | | | |
| 2. | To ratify the appointment of PricewaterhouseCoopers LLP as 3M’s independent registered public accounting firm. | | ☐ | | ☐ | | ☐ |
| | | | | | | |
| 3. | Advisory approval of executive compensation. | | ☐ | | ☐ | | ☐ |
| | | | | | |
| The Board of Directors recommends you vote AGAINST proposal 4: | | For | | Against | | Abstain |
| | | | | | | |
| 4. | Shareholder proposal on setting target amounts for CEO compensation. | | ☐ | | ☐ | | ☐ |
| | | | | | | |
| NOTE: Such other business as may properly come before the meeting or any adjournment or postponement thereof. | | | | | | |
| Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. |
| | | | | | For | | Against | | Abstain |
| | | | | | | | | | |
| 1i. | Gregory R. Page | | | | ☐ | | ☐ | | ☐ |
| | | | | | | | | | |
| 1j. | Inge G. Thulin | | | | ☐ | | ☐ | | ☐ |
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| 1k. | Patricia A. Woertz | | | | ☐ | | ☐ | | ☐ |
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2. | To ratify the appointment of PricewaterhouseCoopers LLP as 3M's independent registered public accounting firm. | | ☐ | | ☐ | | ☐ |
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3. | Advisory approval of executive compensation. | | ☐ | | ☐ | | ☐ |
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The Board of Directors recommends you vote for every "1 Year" on proposal 4: | | 1 Year | | 2 Years | | 3 Years | | Abstain |
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4. | Advisory approval of the frequency of advisory votes on executive compensation. | | ☐ | | ☐ | | ☐ | | ☐ |
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The Board of Directors recommends you vote AGAINST proposal 5: | | For | | Against | | Abstain |
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5. | Stockholder proposal on implementation of Holy Land Principles. | | ☐ | | ☐ | | ☐ |
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NOTE:Such other business as may properly come before the meeting or any adjournment or postponement thereof. | | | | | | |
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| Signature [PLEASE SIGN WITHIN BOX] | Date |
Maintain a strong alignment between corporate performance and our executive officers’ compensation by having a majority of Total Direct Compensation consist of performance-based compensation.
