Important Notice Regarding the Availability of Proxy Materials for the Annual Shareholder meeting to be held on June 10, 2020. Important Notice Regarding the Availability of Proxy Materials
This Notice of Annual Meeting and Proxy Statement and the 2017 Annual Report on Form 10-K are available at www.eproxyaccess.com/cat2018.
| 2018 Proxy Statement | |  | |5 and the 2019 Annual Report on Form 10-K are available atwww.investorvote/CAT.
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 2020 PROXY STATEMENT 9
Back to Contents Table of ContentsDIRECTORS& GOVERNANCE
PROPOSAL 1 – ELECTION OF DIRECTORS 
PROPOSAL SNAPSHOT |  | | Shareholders are being asked to elect 12the 11 director nominees named in this Proxy Statement for a one-year term. |  | Board Voting Recommendation:
|  FORthe election of each of the Board’s director nominees. |
OVERVIEWOFOURBOARD OVERVIEW OF OUR BOARDATTENDANCE-2019
| |  |  |  |  |  |  |  |  |  |  |  |  | | | Board | 6 | 6 | 6 | 6 | 6 | 6 | 6 | 6 | 6 | 6 | 6 | 6 | | 99% | Audit | 10 | | | 10 | | 9 | | | | | | 4 | | Compensation &
Human Resources | 6 | | 3 | | | | 6 | | | | 6 | 3 | | Attendance for
incumbent directors for
2019 | Public Policy &
Governance | 6 | 6 | 4 | | 6 | | | 6 | 6 | | | | | * The Board of Directors approved certain committee membership changes effective April 12, 2019. As part of those changes, Mr. Calhoun left the Compensation & Human Resources Committee (CHRC) and joined the Public Policy & Governance Committee (PPGC) and Mr. Wilkins left the Audit Committee and joined the CHRC. Messrs. Calhoun and Wilkins attended all of their former and newly assigned committee meetings held during 2019. |
2020 PROXY STATEMENT 10
Back to ContentsBOARD ATTENDANCE | |  |  |  |  |  |  |  |  |  |  |  |  |  | | | Board | 8 | 2 | 8 | 8 | 6 | 8 | 8 | 7 | 8 | 8 | 8 | 8 | 5 | 97%
Attendance for incumbent
directors for 2017 | | Audit | 11 | | | 11 | | 10 | 11 | | | | | | 7 | Compensation &
Human Resources | 7 | | 7 | | | | | 7 | | | | 7 | | Public Policy &
Governance | 7 | 2 | | | 6 | | | | 7 | 7 | | | |
* | Senator Ayotte joined the board in August 2017 and Mr. Wilkins joined the board in April 2017.
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The Board’s policy is to encourage and expect that all directors attend theeach Annual Shareholder Meeting.Meeting of Shareholders. All directors attended the 2017 shareholder meeting, except Juan Gallardo and Jon Huntsman due to unavoidable conflicts.2019 Annual Meeting. The independent directors generally meet in executive session as part of each regularly scheduled Board meeting. Ed Rust, who was Caterpillar’sThe Board’s independent Presiding Director, through March 31, 2017, and David L. Calhoun, who became the Non-Executive Chairman of the Board on March 31, 2017, presided over the Board’s executive sessions in 2017. 6 |
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Table of Contents2019.
BOARDEVOLUTIONSINCE2015BOARD EVOLUTION SINCE 2011 ✓ | Seven new directors elected | ✓ | Full rotation of Board committee chairs | ✓ | Independent Chairman elected | ✓ | Reallocation of committee responsibilities | ✓ | Expanded qualifications and diversity represented on Board |
■ Three new directors elected ■ Rotation of Board committee chairs ■ Presiding Director elected ■ Expanded qualifications and diversity represented on Board DIVERSITYOFSKILLSANDEXPERTISEDIVERSITY OF SKILLS AND EXPERTISE Our Board nominees offer a diverse range of skills and experience in relevant areas. Summary of Individual Director Skills, Core Competencies and Attributes |
* | Senator Ayotte joined the board in August 2017, and Mr. Wilkins joined the board in April 2017.
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| | | |  |  |  |  |  |  |  |  |  |  |  | | | | | | | | | | | | | | | | | Caterpillar Board
Tenure (Years) | 3 | 9 | 14 | 22 | 20 | 5 | 17 | 11 | 3 | 9 | 3 | 11 years
Average Tenure |  | Board of Directors Experience (other Boards) | • | • | • | • | • | • | • | • | • | • | • | 100% |  | Audit Committee Financial Expert | | | • | | • | | • | | | | | 100% of
Audit Committee Members |  | CEO / Leadership | • | • | • | • | • | • | • | • | • | • | • | 100% |  | Business Development and Strategy | | • | • | • | • | • | • | • | • | • | • | 91% |  | Government / Regulatory Affairs | • | • | | • | • | • | • | • | | • | • | 82% |  | Customer and Product Support Services | | • | • | • | • | • | • | | • | • | • | 82% |  | Finance & Accounting | | • | • | • | • | • | • | | • | • | • | 82% |  | Risk Management | | • | • | • | • | • | • | • | • | • | • | 91% |  | Technology | • | • | | | • | • | • | | • | • | • | 73% |  | Global Experience | • | • | • | • | • | • | | • | • | • | • | 91% |  | Manufacturing / Logistics | | • | • | • | | | | | • | • | | 45% | Gender and Diversity | • | | | • | | • | | • | | | • | 45% | Age | 51 | 62 | 58 | 72 | 72 | 63 | 69 | 65 | 62 | 65 | 68 | 64 years
Average Age |
2020 PROXY STATEMENT 11
Table ofBack to Contents
DIRECTORCONTINUOUSEDUCATIONANDDEVELOPMENTDIRECTOR CONTINUOUS EDUCATION AND DEVELOPMENT The companyCompany places a high importance on the continuous development of its Board. Board members receive on-goingDirectors have opportunities to obtainfor ongoing education and development through participatingparticipation in meetings, subscribingsubscriptions to relevant publications and attendingattendance at activities and professional development training offered by associations such as the National Association of CorporateDirectorsCorporate Directors and Lead Director Network. Directors receive specialized presentations from experts in the Company’s various businesses in the course of their service. Since the last annual shareholder meeting, these presentations have included updates on digital strategy, customer support, the operations of certain Energy and Transportation businesses, cybersecurity, lean manufacturing, connected assets and the Cat® dealer network. These opportunities allow directors to be well informed and to expand their knowledge of trends and issues relevant to their role as a director.role. Directors are also given development and education opportunities through speaking or meeting directly with companymembers of management and other employees, Company dealers and customers to better understand the Company’s operations and business and also through attending companyindustry trade shows such as CONEXPO. BOARD’SROLEINRISKOVERSIGHTBOARD’S ROLE IN RISK OVERSIGHT The Board has oversight for risk management with a focus on the most significant risks facing the Company, including strategic, operational, financial and legal compliance risks. The Board’s risk oversight process builds upon management’s risk assessment and mitigation processes, which include an enterprise risk management program, regular internal management disclosure and compliance committee meetings, a code of business conduct that applies to all employees, executives and directors, quality standards and processes, an ethics and compliance program and comprehensive internal audit processes. The Board’s risk oversight role also includes the selection and oversight of the independent auditors. The Board implements its risk oversight function both as a full Board and through delegation to Board committees, which meet regularly and report back to the full Board. The Board has delegated the oversight of specific risks to Board committees that align with their functional responsibilities. The Audit Committee (AC) assists the Board in overseeing the enterprise risk management program and evaluates and monitors risks related to the Company’s financial reporting requirements, includingsystem of internal controls, the Company’s internal audit functionprogram, the independent auditor, the compliance program, and the independent auditor.information security program. The Audit Committee alsoAC assesses other risks faced by the Company including cybersecurity and information technology risks and the controls implemented to monitor and mitigate these risks, and therisks. The Chief Information Officer attends all bimonthly Audit Committee meetings.AC meetings and provides cybersecurity updates to the AC and Board. The Compensation and Human Resources Committee (CHRC) monitors and assessassesses risks associated with the Company’s employment and compensation policies and practices. The Public Policy and Governance Committee (PPGC) oversees various governance matters and risks related to public policy and environmental, health and safety matters affecting the Company. DIRECTORNOMINATIONSANDEVALUATIONS DIRECTOR NOMINATIONSPROCESS FOR NOMINATING AND EVALUATIONSEVALUATING DIRECTORS
PROCESS FOR NOMINATING AND EVALUATING DIRECTORS |
The Public Policy and Governance Committee (PPGC)PPGC solicits and receives recommendations for potential director candidates from shareholders, management, directors and other sources. In its assessment of each potential candidate, the PPGC considers each candidate’s professional experience, integrity, honesty, judgment, independence, accountability, willingness to express independent thought,understanding of the Company’s business and other factors that the PPGC determines are pertinent in light of the current needs of the Board. Candidates must have successful leadership experience and stature in their primary fields, with a background that demonstrates an understanding of business affairs as well as the complexities of a large, publicly-held company. In addition, candidates must have demonstrated 8 |
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an ability to think strategically and make decisions with a forward-looking focus and the ability to assimilate relevant information on a broad range of complex topics. In evaluating director candidates, the PPGC also considers key skills and experience related to the Company’s strategy for long-term profitable growth, which identifies services, expanded offerings and operational excellence as primary focus areas. Moreover, candidates must have the ability to devote the time necessary to meet a director’s responsibilities and serve on no more than four public company boards in addition to Caterpillar’s Board.Caterpillar. The Board values diversity of talents, skills, abilities and experiences and believes that Board diversity of all types enhances the performance of the Board and provides significant benefits to the Company. Accordingly, the PPGC takes into account the diversity of the Board in selecting new director candidates. DIRECTOR RECRUITMENT PROCESS 2020 PROXY STATEMENT 12
Back to Contents DIRECTORRECRUITMENTPROCESS CANDIDATE RECOMMENDATIONS | Candidate
Recommendations | PPGC | PPGC | BOARDOFDIRECTORS | Board of Directors | | Shareholders | SHAREHOLDERS | | from Shareholders,
Management, Directors,
& Other Sources and other sources |  | Discusses
&Reviews
Qualifications &and Expertise
Enterprise Strategy Board Needs
Diversity
Interviews
RecommendsNominees | | Discusses PPGC
Recommendations Analyzes
Independence Selects Nominees | | Vote on Nominees
at Annual Meeting | | | | | | | | | | |
The following table summarizes certain key characteristics of the Company’s businesses and the associated qualifications, skills and experience that the PPGC believes should be represented on the Board. BUSINESS CHARACTERISTICS | | QUALIFICATIONS, SKILLS AND EXPERIENCE | ●■ The Company is a global manufacturer with products sold around the world. | | ●■ Manufacturing or logistics operations experience ●■ Broad international exposure | ●■ Technology and customer and product support services are extremely important. | | ●■ Customer and product support experience | ●■ The Company’s businesses undertake numerous transactions in many countries and in many currencies. | | ●■ Diversity of race, ethnicity, gender, cultural background or professional experience ●■ High level of financial literacy ●■ Mergers and acquisitions experience | ●■ Demand for many of the Company’s products is tied to conditions in the global commodity, energy, construction and transportation markets. | | ●■ Experience in the evaluation of global economic conditions ●■ Knowledge of commodity, energy, construction or transportation markets | ●■ The Company’s businesses are impacted by regulatory requirements and policies of various governmental entities around the world. | | ●■ Governmental and international trade expertise experience | ●■ The Board’s responsibilities include understanding and overseeing the various risks facing the Company and ensuring that appropriate policies and procedures are in place to effectively manage risk. | | ●■ Risk oversight/management expertise ●■ Relevant executive and leadership experience ●■ Cybersecurity experience |
The Board values diversity of talents, skills, abilities and experiences and believes that Board diversity of all types provides significant benefits to the Company. Although the Board has no specific diversity policy, the PPGC considers the diversity of the Board and potential director candidates in selecting new director candidates.
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Table of ContentsNOMINATIONS FROM SHAREHOLDERS
NOMINATIONS FROM SHAREHOLDERS |
The PPGC considers unsolicited inquiries and director nominees recommended by shareholders in the same manner as nominees from all other sources. Recommendations should be sent to the CorporateSecretary located at 510LakeCookRoad,Suite100,Deerfield,IL 60015.60015. Shareholders may nominate a director candidate to serve on the Board by following the procedures described in our bylaws. Deadlines for shareholder nominations for Caterpillar’s 20192021 Annual Meeting of Shareholders are included in the “Shareholder Proposals and Director Nominations for the 20192021 Annual Meeting” section on page 60.58. The number of persons comprising the Caterpillar Board of Directors is currently established as 12.11. If any of the Board’s nominees should become unavailable to serve as a Director prior to the Annual Meeting, the size of the Board and number of Board nominees will be reduced accordingly. The Board has nominated the following individuals 2020 PROXY STATEMENT 13
Back to stand for election for a one-year term expiring at the annual meeting of shareholders in 2019.Contents DIRECTORCANDIDATEBIOGRAPHIESANDQUALIFICATIONSDIRECTOR CANDIDATE BIOGRAPHIES AND QUALIFICATIONS Directors have been in their current positions for the past five years unless otherwise noted. Information is as of April 1, 2018.14, 2020. The Board has nominated the following individuals to stand for election for a one-year term expiring at the Annual Meeting of Shareholders in 2021. | | | | | |   | KELLY A. AYOTTE Former U.S. Senator representing New Hampshire Age 51 Director since: 2017 INDEPENDENT | | | Other current directorships (1) | | Age49 | | | OTHER CURRENT DIRECTORSHIPS: ●■ The Blackstone Group Inc. | | | | | Other directorships within the last five years | | Director Since2017 | | | CATERPILLAR BOARD COMMITTEE | | | | | Caterpillar Board Committee | | Independent | | | ●Public Policy and Governance | | OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: ■ Bloom Energy Corporation | | Key Qualifications and Skills:
| | | | | The Board believes that Kelly FormerSenatorAyotte provides the CompanyBoard with in depthleadership experience and in-depth knowledge in the areas of public policy, government and law from her experience as U.S. Senator, Attorney General, Deputy Attorney General, and Chief of the Homicide Prosecution Unit for New Hampshire. She offers valuable insights for the company on important public policy issues from her service on the Senate Commerce, Science and Transportation Committee and financial experience from her service on the Senate Budget Committee. In addition to the directorships mentioned above, former Senator Ayotte currently serves on three nonprofit boards that focus on human rights and other global issues. Senator Ayotte was brought to the attention of the Board through her public service.
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| | | | | |  DAVID L. CALHOUN President and CEO of The Boeing Company (aircraft and defense) Age 62 Senior Managing Director since: 2011
INDEPENDENT Presiding Director | OTHER CURRENT DIRECTORSHIPS: | CATERPILLAR BOARD COMMITTEE ■ Public Policy and HeadGovernance, Chair OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: ■ Gates Industrial Corporation plc | | Mr.Calhoun has been President and CEO of Private Equity Portfolio OperationsThe Boeing Company since 2020. Prior to leading Boeing, Calhoun served as senior managing director and head of portfolio operations at The Blackstone Group L.P. (private equity firm) | | | Other current directorships (3) | | Age 60 | | | ●from 2014. Previously, he also served as executive chairman of the board for Nielsen Holdings plc
●from January 2014 to January 2016 and served as Nielsen CEO for seven years beginning in 2006. Mr. Calhoun began his career at The BoeingGeneral Electric Company
●Gates Industrial Corporation plc
| | | | | Other directorships within the last five years | | Director Since2011 | | | ●None
| | | | | Caterpillar Board Committee | | Independent Chairman (GE), where he rose to vice chairman of the Board | | | ●Compensation
| | | | Key Qualificationscompany and Skills:
| | | | | Mr. Calhoun was previously Executive Chairpresident and chief executive officer of Nielsen Holdings N.V. (marketingGE Infrastructure, its largest business unit. During his 26 years at GE, he held a number of operating, finance and media information) (2014-2015). Prior to his position at Blackstone, Mr. Calhoun served as Chairman of the Executive Boardmarketing roles, and Chief Executive Officer of The Nielsen Company B.V. (2006-2013).
The Board believes Mr. Calhounled multiple business units, including GE Transportation and GE Aircraft Engines.He provides valuable insight and perspective into generalto the Board on strategic and business matters, stemming from his extensive operational, executive and management experience with Blackstone and Nielsen and his previous roleroles at General Electric.Electric (GE). He provides valuable insight and perspective to the Board on strategic and business matters, stemming from his extensive operational, executive and management experience. The Board elected Mr. Calhoun also has significant manufacturing and advanced technology industry expertise as evidenced by his leadership of GE’s aircraft engines and transportation businesses.Presiding Director in 2018.
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| | | | | |  DANIEL M. DICKINSON Managing Partner of HCI
Equity Partners
(private (private equity firm) Age 58 Director since: 2006 INDEPENDENT | OTHER CURRENT DIRECTORSHIPS: | | Other current directorships (0) | | Age56CATERPILLAR BOARD COMMITTEE OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | | ●None
| | | | | Other directorships within the last five years | | Director Since2006 | | | ●MISTRAS Group, Inc.
| | | | | Caterpillar Board Committee | | Independent | | | ●Audit
| | | | Key Qualifications and Skills:Mr.
| | | | | The Board believes Mr. Dickinson’sDickinson has served as Managing Partner of HCI Equity Partners since 2001. His experience in mergers and acquisitions, private equity business and his role as an investment bankerbanking provides important insights for evaluating investment opportunities. HisMr. Dickinson’s significant financial experience, both in the United StatesU.S. and internationally, contributes to the Board’s understanding and ability to analyze complex issues. His experience as a former director of a large, publicly-traded multinational corporation enables him to provide meaningful input and guidance to the Board and the Company.Board.
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| | | | | |  JUAN GALLARDO Chairman and Former CEO of Organización
Cultiba, CULTIBA, S.A.B. de C.V.
(beverage (beverage industry) Age 72 Director since: 1998 INDEPENDENT | | | Other current directorships (3) | | Age70 | | | OTHER CURRENT DIRECTORSHIPS: ●■ Grupo Aeroportuario del Pacifico, S.A.B. de C.V. ●■ Grupo Financiero Santander Mexico, S.A.B. de C.V. ●■ Organización Cultiba,CULTIBA, S.A.B. de C.V. | | | | | Other directorships within the last five years | | Director Since1998 | | | CATERPILLAR BOARD COMMITTEE | | | | | Caterpillar Board Committee | | Independent | | | ●Public Policy and Governance | | OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | Key Qualifications and Skills:
| | | | | Mr.Gallardo retired as the CEO is Chairman of Organización Cultiba,CULTIBA, S.A.B. de C.V. where he retired as CEO in February 2016. Mr. Gallardo resides in Mexico, where Caterpillar has a presence. The Board believes Mr. Gallardo’s international business experience, particularly in Latin America, and South America, is important for the Company’s understanding of these markets. His extensive background and active engagement in trade-related issues also contributes to the Board’s expertise. In addition, his experience as a chief executive officerCEO and director of other large, publicly tradedpublicly-traded multinational corporations enables him to provide meaningful input and guidance to the Board in many areas, including risk oversight and the Company.strategy. |
| | | | | |  DENNIS A. MUILENBURG
Chairman, President and
CEO of The Boeing Company
(aircraft and defense)
| | | Other current directorships (1) | | Age54 | | | ●The Boeing Company
| | | | | Other directorships within the last five years | | Director Since2011 | | | ●None
| | | | | Caterpillar Board Committee | | Independent | | | ●Audit
| | | | Key Qualifications and Skills:
| | | | | Prior to his current position, Mr. Muilenburg was Vice Chairman, President and Chief Operating Officer of The Boeing Company (2013-2015). Prior to that, he was Executive Vice President of The Boeing Company and President and Chief Executive Officer of Boeing Defense, Space & Security (2009-2013).
The Board believes Mr. Muilenburg provides valuable insight to the Board on strategic and business matters, stemming from his experience with large-scale product development programs and his worldwide supply chain and manufacturing expertise.
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| | | | | |  WILLIAM A. OSBORN Former Chairman and CEO of
Northern Trust Corporation and The Northern Trust Company
(financial (financial services) Age 72 Director since: 2000 INDEPENDENT | | | Other current directorships (2) | | Age70 | | | OTHER CURRENT DIRECTORSHIPS: ●■ General Dynamics Corporation | | CATERPILLAR BOARD COMMITTEE OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | | Other directorships within the last five years | | Director Since2000 | | | ●None
| | | | | CaterpillarMr.Osborn retired as Chairman in 2009 and as CEO in 2008 of Northern Trust Corporation and The Northern Trust Company. He provides the Board Committee
| | Independent | | | ●Audit, Chair
| | | | Key Qualifications and Skills:
| | | | | The Board believes Mr. Osborn’swith valuable financial expertise and experience is valuable to the Board.experience. In addition, his experience as a chief executive officerCEO and director of other large, publicly tradedpublicly-traded corporations enables him to provide meaningful input and guidance to the Boardin many areas, including public company governance, corporate finance and the Company.risk oversight.
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2020 PROXY STATEMENT 15
Back to Contents |  | DEBRA L. REED-KLAGES Former Chairman and CEO of Sempra Energy (energy infrastructure and utilities) Age 63 Director since: 2015 INDEPENDENT | OTHER CURRENT DIRECTORSHIPS: ■ Lockheed Martin Corporation | | | |
| | | | | CATERPILLAR BOARD COMMITTEE ■ Compensation and Human Resources OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: ■ Oncor Electric Delivery Company LLC |  | DEBRA L. REEDMs.
Reed-Klages retired as Chairman of the Board and
CEO of Sempra Energy
(energy infrastructure
in 2018, having served in these roles since 2012 and utilities) | | | Other current directorships (2) | | Age61 | | | ●Halliburton Company
●Sempra Energy
| | | | | Other directorships within the last five years | | Director Since2015 | | | ●None
| | | | | Caterpillar Board Committee | | Independent | | | ●Compensation
| | | | Key Qualifications and Skills:
| | | | | 2011, respectively. The power, oil and gas industries are key end-user markets for Caterpillar products. Theproducts and the Board believes Ms. Reed’sReed-Klages’ background provides valuable insights into trends in these industries. In addition, her experience as a chief executive officerCEO and director of other large, publicly tradedpublicly-traded corporations enables her to provide meaningful input and guidance to the BoardBoard. Ms. Reed-Klages’ areas of expertise include commodity markets, sustainability and the Company.international operations. |
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| | | | | |  EDWARD B. RUST, JR. Former Chairman and CEO
of State Farm
Mutual Automobile
Insurance Company
(insurance) Age 69 Director since: 2003 INDEPENDENT | | | Other current directorships (2) | | Age67 | | | OTHER CURRENT DIRECTORSHIPS: ●■ Helmerich & Payne, Inc. | | CATERPILLAR BOARD COMMITTEE OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | | Other directorships within the last five years | | Director Since2003 | | | ●None
| | | | | Caterpillar Board Committee | | Independent | | | ●Public Policy and Governance, Chair
| | | | Key Qualifications and Skills:Mr.
| | | | | Mr. Rust retired as Chairman in 2016 and as Chief Executive OfficerCEO in 2015 of State Farm Mutual Automobile Insurance Company.
The Board believes Mr. Rust’s His financial and business experience is valuable to the Board. His role as a past Chairman of the U.S. Chamber of Commerce, chief executive officerCEO of a major national corporation and experience as a director of other large, publicly tradedpublicly-traded multinational corporations enables him to provide meaningful input and guidance to the Board, including with respect to public company governance and the Company.strategy. In addition, his extensive involvement in education improvement complements the Company’s culture of social responsibility.
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| | | | | |   | SUSAN C. SCHWAB Professor at the University
of Maryland School of Public
Policy and Strategic Advisor
for Mayer Brown LLP
(global (global law firm) Age 65 Director since: 2009 INDEPENDENT | | | Other current directorships (3) | | Age63 | | | OTHER CURRENT DIRECTORSHIPS: ●■ Marriott International, Inc. ●The Boeing Company
| | | | | Other directorships within the last five years | | Director Since2009 | | | CATERPILLAR BOARD COMMITTEE | | | | | Caterpillar Board Committee | | Independent | | | ●Public Policy and Governance | | OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | Key Qualifications and Skills:
| | | | | Prior to her current positions, former AmbassadorSchwab has been Professor at the University of Maryland School of Public Policy since 2009 and Strategic Advisor for Mayer Brown LLP since 2010. She held various positions previously, including United StatesU.S. Trade Representative (member of the President’s Cabinet) and Deputy United States Trade Representative.
The Board believes formerAssistant Secretary of Commerce. Ambassador Schwab brings extensive knowledge, insight and experience on international trade and commerce issues to the Board. Her educational experience and role as the U.S. Trade Representative provide important insights for the Company’s global business model and long-standing support of open trade. In addition, her experience as a director of other large, publicly tradedpublicly-traded multinational corporations enables her to provide meaningful input and guidance to the Board, including on strategy and the Company.evaluation of global economic conditions.
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| | | | | |  D. JAMES UMPLEBY III Chairman and CEO of Caterpillar Inc. Age 62 Director since: 2017 MANAGEMENT | OTHER CURRENT DIRECTORSHIPS: | | Other current directorships (1) | | Age60CATERPILLAR BOARD COMMITTEE OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | | ●Chevron Corporation
| | | | | Other directorships withinMr.Umpleby has been CEO of Caterpillar since January 1, 2017, and was elected Chairman of the last five years
| | Director SinceJanuary 2017 | | | ●None
| | | | | Caterpillar Board Committee | | Management | | | ●None
| | | | Key Qualifications and Skills:
| | | | | Prior to his current position, Mr. Umplebyin 2018. He served as a Group President of Caterpillar Inc. (2013from 2013 to 2016),2016 with responsibility for Caterpillar’s Energy & Transportation segment and served as a Caterpillar Vice President and President of Caterpillar Inc. (2010Solar Turbines from 2010 to 2013).
The Board believes2012. Mr. Umpleby’s extensive experience andUmpleby developed a deep knowledge of the Company gainedand its end markets by serving in a wide range of Caterpillar leadership positionsroles. He has extensive international experience and has worked in manufacturing, engineering, manufacturing, marketing, sales and services,services. Mr. Umpleby’s strategic planning and execution skills, along with his extensive industry experience, enables him to provide meaningful inputeffective leadership of the Company and guidance tothe Board.
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|  | MILES D. WHITE Executive Chairman of the Board, Abbott Laboratories (medical devices and the Company.biotechnology) Age 65 Director since: 2011 INDEPENDENT | OTHER CURRENT DIRECTORSHIPS: | CATERPILLAR BOARD COMMITTEE ■ Compensation and Human Resources, Chair OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | | | | | | |
| | | | | |  MILES D. WHITEMr.
White serves as Executive Chairman of the Board of Abbott Laboratories. Mr. White, who joined Abbott in 1984, served as Abbott’s Chairman and CEO of
Abbott Laboratories
(pharmaceuticals and
biotechnology) | | | Other current directorships (2) | | Age63 | | | ●Abbott Laboratories
●McDonald’s Corporation
| | | | | Other directorships within the last five years | | Director Since2011 | | | ●None
| | | | | Caterpillar Board Committee | | Independent | | | ●Compensation, Chair
| | | | Key Qualifications and Skills:
| | | | | The Board believes Mr. White’sfrom 1999 to 2020. His experience as the chief executive officer ofleading a large, complex multinational company provides important insight to the Board. HisMr. White’s skills include knowledge of cross-border operations, strategy and business development, risk assessment, finance, leadership development and succession planning, and corporate governance matters. In addition to his role as an executive officer, hiswith Abbott Laboratories, Mr. White’s experience as a director of other large, publicly tradedpublicly-traded multinational corporations enables him to provide meaningful input and guidance to the Board and the Company.Board.
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| | | | | |  RAYFORD WILKINS, JR. Former Chief Executive
OfficerCEO of Diversified
Businesses at AT&T Inc.
(telecommunications) Age 68 Director since: 2017 INDEPENDENT | | | Other current directorships (2) | | Age66 | | | OTHER CURRENT DIRECTORSHIPS: ●■ Valero Energy Corporation | | CATERPILLAR BOARD COMMITTEE ■ Compensation and Human Resources OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | | Other directorships within the last five years | | Director Since2017 | | | ●América Móvil, S.A.B. de C.V.
| | | | | Caterpillar Board Committee | | Independent | | | ●Audit
| | | | Key Qualifications and Skills:Mr.
| | | | | The Board believes Mr. Wilkins’Wilkins retired as CEO of Diversified Businesses at AT&T Inc. in 2012. His expertise and oversight experience in the information technology arena is valuable to the Board. In addition, hisMr. Wilkins’ experience as an executive officera CEO and director of other large, publicly-traded corporations enables him to provide meaningful input and guidance to the Board, including with respect to corporate finance and the Company.customer and product support.
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2020 PROXY STATEMENT 17
Back to Contents DIRECTOR COMPENSATION The following table sets forth information concerning the compensation for our non-employee directors during the year ended December 31, 2017. Messrs. Oberhelman and2019. Mr. Umpleby, who served as chief executive officersChairman and CEO during 2017,2019, did not receive separate compensation for theirhis service on the board of directors.Board. Compensation for non-employee directors for 20172019 was comprised of the following components: | Cash Retainer | | $ | 150,000 | | Restricted Stock Units (1 Year Vesting) for Chairman | | $ | 375,000 | | Restricted Stock Units (1 Year Vesting) for Members | | $ | 125,000 | | Stipends: | | | | | Audit Committee Chairman | | $ | 25,000 | | Compensation and Human Resources Committee Chairman | | $ | 20,000 | | Public Policy Committee Chairman | | $ | 15,000 |
| | | | Restricted Stock Units (1 Year Vesting) | $ | 150,000 | | Cash Retainer | $ | 150,000 | | Cash Stipends: | | | | Presiding Director | $ | 50,000 | (1) | Audit Committee Chairman | $ | 30,000 | (2) | Compensation and Human Resources Committee Chairman | $ | 25,000 | (2) | Public Policy and Governance Committee Chairman | $ | 20,000 | (2) | (1) Cash stipend effective January 1, 2019 (2) Cash stipend effective April 10, 2019 |
Directors are required to own Caterpillar common stock equal to five times their annual cash retainer. Directors have a five-year period from the date of their election or appointment to meet the target ownership guidelines. All Directors are in compliance with these guidelines. In addition, under the Company’s Directors’ Deferred Compensation Plan, directors may defer 50 percent or more of their annual cash retainer and stipend into an interest-bearing account or an account representing phantom shares of Caterpillar stock, and effective for grants made on or after January 1, 2019, directors may defer 50 percent or more of any stock-based compensation (other than options and stock appreciation rights) upon vesting into an account representing phantom shares of Caterpillar stock. Directors that joined the Board prior to April 1, 2008, also are able to participate in a Charitable Award Program, under which a donation of up to $500,000 will be made by the Company in the director’s name to charitable organizations selected by the director and a donation of up to $500,000 also will be made by the Company in the director’s name to the Caterpillar Foundation. Directors derive no financial benefit from the program. | DIRECTOR COMPENSATION FOR 2017 | | DIRECTOR | | FEES EARNED OR
PAID IN CASH | | RESTRICTED
STOCK UNITS1 | | ALL OTHER
COMPENSATION2 | | TOTAL | | Kelly A. Ayotte | | | $ | 62,500 | | | | $ | 52,079 | | | | $ | — | | | | $ | 114,579 | | | David L. Calhoun | | | $ | 150,000 | | | | $ | 374,987 | | | | $ | — | | | | $ | 524,987 | | | Daniel M. Dickinson | | | $ | 150,000 | | | | $ | 125,028 | | | | $ | 32,456 | | | | $ | 307,484 | | | Juan Gallardo | | | $ | 150,000 | | | | $ | 125,028 | | | | $ | 14,708 | | | | $ | 289,736 | | | Jesse J. Greene, Jr. | | | $ | 150,000 | | | | $ | 125,028 | | | | $ | 5,500 | | | | $ | 280,528 | | | Jon M. Huntsman, Jr. | | | $ | 112,500 | | | | $ | 125,028 | | | | $ | — | | | | $ | 237,528 | | | Dennis A. Muilenburg | | | $ | 150,000 | | | | $ | 125,028 | | | | $ | — | | | | $ | 275,028 | | | William A. Osborn | | | $ | 173,750 | | | | $ | 125,028 | | | | $ | 14,708 | | | | $ | 313,486 | | | Debra L. Reed | | | $ | 150,000 | | | | $ | 125,028 | | | | $ | — | | | | $ | 275,028 | | | Edward B. Rust, Jr. | | | $ | 167,500 | | | | $ | 125,028 | | | | $ | 22,032 | | | | $ | 314,560 | | | Susan C. Schwab | | | $ | 150,000 | | | | $ | 125,028 | | | | $ | 9,600 | | | | $ | 284,628 | | | Miles D. White | | | $ | 170,000 | | | | $ | 125,028 | | | | $ | — | | | | $ | 295,028 | | | Rayford Wilkins, Jr. | | | $ | 112,500 | | | | $ | 93,705 | | | | $ | — | | | | $ | 206,205 | |
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1As of December 29, 2017, the number of vested and non-vested options (NQs), RSUs and Phantom Shares held by these serving as non-employee directors during 2017 was: Ms. Ayotte: 677 (which consists of 458 RSUs and 219 Phantom Shares); Mr. Calhoun: 16,049 (which consists of 3,920 RSUs and 12,129 Phantom Shares); Mr. Dickinson: 27,732 (which consists of 1,307 RSUs and 26,425 Phantom Shares); Mr. Gallardo: 30,327 (which consists of 1,307 RSUs and 29,020 Phantom Shares); Mr. Greene: 1,307 RSUs; Mr. Huntsman: 1,307 RSUs; Mr. Muilenburg: 1,307 RSUs; Mr. Osborn: 1,702 (which consists of 1,307 RSUs and 395 Phantom Shares); Ms. Reed: 5,931 (which consists of 1,307 RSUs and 4,624 Phantom Shares); Mr. Rust: 36,097 (which consists of 1,307 RSUs and 34,790 Phantom Shares); Ms. Schwab: 12,299 (which consists of 1,307 RSUs and 10,992 Phantom Shares); Mr. White: 9,092 (which consists of 1,307 RSUs and 7,785 Phantom Shares); and Mr. Wilkins: 943 RSUs. Ms. Ayotte deferred 50 percent while Mr. Calhoun, Mr. Dickinson, Mr. Gallardo, Ms. Reed, Mr. Rust, Ms. Schwab and Mr. White deferred 100 percent of their 2017 retainer fee into phantom stock in the Directors’ Deferred Compensation Plan.
2All Other Compensation represents amounts paid in connection with the Caterpillar Foundation’s Directors’ Charitable Award Program and the Caterpillar Political Action Committee Charitable Matching Program (CATPAC’s PACMATCH program) and administrative fees associated with the Director’s Charitable Award Program. All outside directors are eligible
2020 PROXY STATEMENT 18
Back to participate in the Caterpillar Foundation Matching Gift Program, and eligible directors may participate in the CATPAC’s PACMATCH program annually. The Caterpillar Foundation will match contributions to eligible two-year or four year colleges or universities, arts and cultural institutions, and public policy or environmental organizations, up to a maximum of $2,000 per eligible organization per calendar year. As part of CATPAC’s PACMATCH program, Caterpillar Inc. will contribute to two charities on behalf of eligible members of the Board of Directors. The annual CATPAC’s PACMATCH contribution limit is $5,000, so the match, per person, would not exceed $5,000. The amounts listed represent the matching contributions as follows: Mr. Dickinson $2,000; Mr. Greene $5,500; Mr. Rust $11,000; and Ms. Schwab $9,600. For directors eligible to participate in the Directors’ Charitable Award Program, the amounts represented include the insurance premium and administrative fees. The premium and administrative fees are as follows: Mr. Dickinson $30,456; Mr. Gallardo $14,708; Mr. Osborn $14,708; and Mr. Rust $11,032.Contents DIRECTOR COMPENSATION FOR 2019 Director | Fees Earned or Paid in Cash | | Restricted
Stock Units(2) | All Other
Compensation(3) | | | Total | Kelly A. Ayotte | $ | 150,000 | | $ | 149,971 | | $ | — | | $ | 299,971 | David L. Calhoun | $ | 214,505 | (1) | $ | 149,971 | | $ | — | | $ | 364,476 | Daniel M. Dickinson | $ | 171,758 | (1) | $ | 149,971 | | $ | 29,657 | | $ | 351,386 | Juan Gallardo | $ | 150,000 | | $ | 149,971 | | $ | 14,725 | | $ | 314,696 | Dennis A. Muilenburg (4) | $ | 150,000 | | $ | 149,971 | | $ | — | | $ | 299,971 | William A. Osborn | $ | 156,992 | (1) | $ | 149,971 | | $ | 19,725 | | $ | 326,688 | Debra L. Reed-Klages | $ | 150,000 | | $ | 149,971 | | $ | 2,000 | | $ | 301,971 | Edward B. Rust, Jr. | $ | 154,245 | (1) | $ | 149,971 | | $ | 29,988 | | $ | 334,204 | Susan C. Schwab | $ | 150,000 | | $ | 149,971 | | $ | 17,000 | | $ | 316,971 | Miles D. White | $ | 173,750 | (1) | $ | 149,971 | | $ | 8,000 | | $ | 331,721 | Rayford Wilkins, Jr. | $ | 150,000 | | $ | 149,971 | | $ | 5,000 | | $ | 304,971 | (1) Total fees earned or paid in 2019 include pro-rated Cash Stipends for directors who transitioned between committee chair positions over the course of the year. (2) As of December 31, 2019, the number of RSUs (including accrued dividend equivalent units) and Phantom Shares held by those serving as non-employee directors during 2019 was: Ms. Ayotte: 1,898 (which consists of 1,109 RSUs and 789 Phantom Shares); Mr. Calhoun: 16,598 (which consists of 1,109 RSUs and 15,489 Phantom Shares); Mr. Dickinson: 28,950 (which consists of 1,109 RSUs and 27,841 Phantom Shares); Mr. Gallardo: 36,127 (which consists of 1,109 RSUs and 35,018 Phantom Shares); Mr. Muilenburg: 1,109 (which consists of 1,109 RSUs); Mr. Osborn: 2,263 (which consists of 1,109 RSUs and 1,154 Phantom Shares); Ms. Reed-Klages: 8,212 (which consists of 1,109 RSUs and 7,103 Phantom Shares); Mr. Rust: 37,762 (which consists of 1,109 RSUs and 36,653 Phantom Shares); Ms. Schwab: 14,921 (which consists of 1,109 RSUs and 13,812 Phantom Shares); Mr. White: 11,867 (which consists of 1,109 RSUs and 10,758 Phantom Shares); and Mr. Wilkins: 1,109 (which consists of 1,109 RSUs). Mr. Calhoun, Mr. Gallardo, Ms. Reed-Klages, Ms. Schwab and Mr. White elected to defer 100 percent of their Cash Retainer and Cash Stipend (as applicable) into Phantom Shares of Caterpillar stock in the Directors’ Deferred Compensation Plan which are included in these Phantom Shares totals. |
(3) All Other Compensation represents amounts paid in connection with the Caterpillar Foundation’s Directors’ Charitable Award Program and the Caterpillar Political Action Committee Charitable Matching Program (CATPAC’s PACMATCH program) and administrative fees associated with the Director’s Charitable Award Program. All outside directors are eligible to participate in the Caterpillar Foundation Matching Gift Program, and eligible directors may participate in the CATPAC’s PACMATCH program annually. The Caterpillar Foundation will match contributions to eligible two-year or four-year colleges or universities, arts and cultural institutions, and public policy or environmental organizations, up to a maximum of $2,000 per eligible organization per calendar year. The amounts listed include the Charitable Foundation matching gifts as follows: Mr. Dickinson $4,000, Ms. Reed-Klages $2,000, Mr. Rust $14,000, Ms. Schwab $12,000 and Mr. White $8,000. As part of CATPAC’s PACMATCH program, Caterpillar Inc. will contribute to two charities on behalf of eligible members of the Board of Directors. The annual CATPAC’s PACMATCH match limit is $5,000. Mr. Osborn, Mr. Rust, Ms. Schwab and Mr. Wilkins had contributions matched. For directors eligible to participate in the Directors Charitable Award Program, the amounts listed represent the insurance premium and administrative fees as follows: Mr. Dickinson $25,657, Mr. Gallardo $14,725, Mr. Osborn $14,725 and Mr. Rust $10,988. (4) Mr. Muilenburg resigned from the Board effective January 26, 2020. |
BOARDELECTIONANDLEADERSHIPSTRUCTURE Directors are elected at each annual meeting to serve for a one-year term. In uncontested elections, directors are elected by a majority of the votes cast for such directorship. If an incumbent director does not receive a greater number of “for” votes than “against” votes, such director must tender his or her resignation to the Board. In contested elections, directors are elected by a plurality vote. Directors must retire at the end of the calendar year in which they reach The mandatory retirement age for directors is 74. Each director who will have reached the age of 72. On January 1, 2017, D. James Umpleby, III, formerly Group President with responsibility for Energy & Transportation, succeeded Douglas R. Oberhelman as Chief Executive Officer and was appointed as a member of our Board of Directors. In planning for74, on or before the succession of Mr. Oberhelman, the Public Policy and Governance Committee (PPGC) and the Board carefully reviewed the Board’s leadership structure and determined that it would be appropriate to separate the rolesdate of the Chairman and Chief Executive Officer and to appoint an independent Chairmannext shareholders’ meeting, shall not stand for re-election at that annual meeting of the shareholders without an express waiver by the Board. Accordingly, on April 1, 2017, David L. Calhoun became our independent Chairman.
Under Caterpillar’s bylaws, the directors annually elect a Chairman. The Board has no fixed policy on whether or not to have an independent chairman. The Boardexecutive or non-executive chairman and believes this determination should be made based on the Company’s best interests of the Company and its shareholders in light of the circumstances at the time. TheOn the recommendation of the PPGC, the Board has elected D. James Umpleby III as its Chairman and David L. Calhoun as its Presiding Director. In the role of Presiding Director, Mr. Calhoun provides strong independent oversight of management and serves as a liaison between the independent directors and the Board believe that this leadership structure is the most appropriate one for the Company at this time,Chairman and CEO, as it allows Mr. Umpleby to focus on the day-to-day management of the business and on executing our strategic priorities, while allowingfurther described below. Mr. Calhoun to focus on leadingalso leads the Board, providing its advice and counsel toBoard’s annual evaluation of Mr. Umpleby, and facilitating the Board’s independent oversightmembers of management.the Board set Mr. Umpleby’s compensation annually based on the recommendation of the Compensation and Human Resources Committee. 2020 PROXY STATEMENT 19
Back to Contents DUTIESANDRESPONSIBILITIESOFPRESIDINGDIRECTOR ■ Preside at all meetings of the Board at which the Chairman & CEO is not present, including executive sessions of the independent directors. ■ Serve as a liaison between the Chairman & CEO and the independent directors. ■ Approve the type of information sent to the Board. ■ Provide input and approve meeting agendas for the Board. ■ Approve meeting schedules, in consultation with the Chairman & CEO and the independent directors, to assure that there is sufficient time for discussion of all agenda items. ■ Has the authority to call meetings of the independent directors. ■ If requested by major shareholders, is available, when appropriate, for consultation and direct communication. ■ Provide the Chairman & CEO with the results of his/her annual performance review in conjunction with the chairman of the Compensation and Human Resources Committee. The Board believes it is important to maintain flexibility as to the Board’s leadership structure. The Board will continue to regularly review its leadership structure and exercise its discretion in recommendingadopting an appropriate and effective framework to assure effective governance and accountability, taking into consideration the needs of the Board and the Company. DUTIES CORPORATEGOVERNANCEGUIDELINESAND RESPONSIBILITIES CODEOF INDEPENDENT CHAIRMAN
● | Preside at all meetings of the Board.
| ● | Encourage and facilitate active participation of all directors.
| ● | Serve as a liaison between the independent directors and the Chief Executive Officer.
| ● | Approve Board meeting materials for distribution.
| ● | Approve Board meeting schedules and agendas.
| ● | Has the authority to call special meetings of the Board.
| ● | Lead the Board’s annual evaluation of the Chief Executive Officer.
| ● | Monitor and coordinate with management on corporate governance issues and developments.
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Table of ContentsCONDUCT
CORPORATE GOVERNANCE GUIDELINES AND CODE OF CONDUCT
Our Board has adopted Guidelines on Corporate Governance Issues (Corporate Governance Guidelines), which are available on our website at www.caterpillar.com/governance.governance. The guidelines reflect the Board’s commitment to oversee the effectiveness of policy and decision-making both at the Board and management level, with a view to enhancingenhance shareholder value over the long term. Caterpillar’s code of conduct is called Our Values in Action. Integrity, Excellence, Teamwork,Commitment and Sustainability are the core values identified in the code and are the foundation for Caterpillar’s corporate existence.code. Our Values in Action apply to all members of the Board and to management and employees worldwide. These values embody the high ethical standards that Caterpillar has upheld since its formation in 1925. Our Values in Action is available on our website at www.caterpillar.com/code. BOARDEVALUATIONPROCESSBOARD EVALUATION PROCESS The Board conducts an annual self-evaluation to determine whether the Board and its committees are functioning effectively. In 2017,2019, the Chairman of the Public Policy and Governance Committee contactedinterviewed each Board member to solicit their feedback. The Public Policy and Governance Committee also developed a discussion outline that wascirculated to the Board members in advance of the Board’s year-end meeting. The Public Policy and Governance Chairman then led a discussion during the Board’s privateexecutive session. Each of the committees of the Board followed a similar process.process and reported to the Board on the outcome of their self-evaluations. The self-evaluation provides the Board with actionable feedback to enhance its performance and effectiveness. BOARDCOMMITTEESBOARD COMMITTEES The Board has three standing committees: Audit, Compensation and Human Resources, and Public Policy and Governance. Each committee meets regularly throughout the year, reports its actions and recommendations to the Board, receives reports from management, annually evaluates its performance and has the authority to retain outside advisors at its discretion. The current primary responsibilities of each committee are summarized below and set forth in more detail ineachin each committee’s written charter, which can be found on Caterpillar’s website at www.caterpillar.com/governance.governance. All committee members are independent under Company, NYSE and SEC standards applicable to Board and committee service, and the Board has determined that each member of the Audit Committee is “financially literate” and an “audit committee financial expert” as defined under SEC rules. 2020 PROXY STATEMENT 20
Back to Contents AUDIT COMMITTEE | | | | CommitteeMembers:
William A. Osborn, Chairman
(pictured below)
Daniel M. Dickinson,
Dennis Chairman
William A. MuilenburgOsborn
Rayford Wilkins,Edward B. Rust, Jr.
NumberofMeetings
in 2017:112019:10  | COMMITTEEROLESANDRESPONSIBILITIES | | COMMITTEE ROLES AND RESPONSIBILITIES■ ●Selects and oversees the independent auditors, ●Involved in selecting including annual evaluation of the independent auditors’ lead audit partnerpartner.
| ■ ●Oversees our financial reporting activities, including our financial statements, annual report and accounting standards and principles principles. | ■ ●Reviews with management the Company’s risk assessment and risk management framework framework.■ ●Approves audit and non-audit services provided by the independent auditors auditors.■ ●Reviews the organization, scope and effectiveness of the Company’s internal audit function, disclosures and internal controls controls.■ ●Sets parameters for and monitors the Company’s hedging and derivatives practices practices.■ ●Provides oversight for the Company’s ethicscompliance program and compliance programs Code of Conduct.■ ●Monitors the Company’sany significant litigation, regulatory, and tax compliance matters.■ ●Oversees information technology systems and related security security.■ Reviews with management cybersecurity risks and strategy to mitigate these risks. | | | | |
COMPENSATIONANDHUMANRESOURCESCOMMITTEE 16Committee |
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Members:
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COMPENSATION AND HUMAN RESOURCES COMMITTEE |
| | | | Committee Members:
Miles D. White, Chairman
(pictured below)
David L. Calhoun
Debra L. ReedReed-Klages
Rayford Wilkins, Jr.
NumberofMeetings
in 2017:7 
| COMMITTEEROLESANDRESPONSIBILITIES | | COMMITTEE ROLES AND RESPONSIBILITIES■ ●Recommends the CEO’s compensation to the Board and establishes the compensation of other executive officers. | ■ ●Establishes, overseesapproves and administersoversees the Company’s equity compensation and employee benefit plans. | ■ ●Reviews incentive compensation arrangements to ensure that incentive pay does not encourage unnecessary risk-taking, and reviews and discusses the relationship between risk management policies and practices, corporate strategy and executive compensation. | ■ ●Recommends to the Board the compensation of independent directors. ■ ●Provides oversight of the Company’s diversity and immigration practices and employee relations. ■ ●Furnishes an annual Committee Report on executive compensation and approves the Compensation Discussion and Analysis section in the Company’s proxy statement. | | | | |
PUBLICPOLICYANDGOVERNANCECOMMITTEE PUBLIC POLICY AND GOVERNANCE COMMITTEE |
| | | | CommitteeMembers:
Edward B. Rust, Jr.,David L. Calhoun, Chairman
(pictured below)
Kelly A. Ayotte
Juan Gallardo
Susan C. Schwab NumberofMeetings
in 2017:7 
| COMMITTEEROLESANDRESPONSIBILITIES | | COMMITTEE ROLES AND RESPONSIBILITIES■ ●Makes recommendations to the Board regarding the size and composition of the Board and its committees, and the criteria to be used for the selection of candidates to serve on the Board. | ■ ●Discusses and evaluates the qualifications of potential and incumbent directors and recommends the slate of director candidates to be nominated for election at the Annual Meeting. | ■ ●Leads the Board in its annual self-evaluation process. ■ ●Oversees the Company’s officersenior executive succession planning. ■ ●Oversees the Company’s environmental, health and safety activities and sustainability. ■ ●Oversees the Company’s corporate governance structure. governance.■ ●Reviews/Advisesadvises on matters of domestic and international public policy affecting the Company’s business, such as trade policy and international trade negotiations and major global legislative and regulatory developments. ■ ●Annually reviews the Company’s charitable contributions to the Caterpillar Foundation and political contributions and policies. ■ ●Oversees investor, customer, community and communitygovernment relations. | | | | |
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2020 PROXY STATEMENT 21
Table ofBack to Contents
DIRECTORINDEPENDENCEDETERMINATIONSDIRECTOR INDEPENDENCE DETERMINATIONS The Company’s Guidelines on Corporate Governance Issues establish that no more than two non-independent directors may serve on the Board at any point in time. A director is “independent” if he or she has no direct or indirect material relationship with the Company or with senior management of the Company and their respective affiliates. Annually, the Board makes an affirmative determination regarding the independence of each director based upon the recommendation of the PPGC and in accordance with the standards in the Company’s Guidelines on Corporate Governance Issues, which are available on our website at www.caterpillar.com/governance.governance. Applying these standards, the Board determined that each of the director nominees, and all other directors who served during 2019, met the independence standards except Mr. Umpleby, who is a current employee of the Company. In reaching this determination, the Board considered, with respect to Ms. Reed, ordinary course business between Sempra Energy and Caterpillar involving the purchase or sale of equipment engines and energy, subject to usual trade terms. COMMUNICATIONWITHTHEBOARDCOMMUNICATION WITH THE BOARD Shareholders, employees and all other interested parties may communicate with any of our directors individually, our Board as a group, our independent directors as a group or any Board committee as a group by email or regular mail: | |  |  |  BY EMAIL |  BY MAIL | BY EMAIL
send an email to
Directors@cat.com directors@cat.com | BY MAIL
mail to Caterpillar Inc.
c/o Corporate Secretary
510 Lake Cook Road, Suite 100
Deerfield, IL 60015
| | | | |
Contacting Caterpillar.CONTACTING CATERPILLAR
While the Board oversees management, it does not participate in day-to-day management functions or business operations. If you wish to submit questions or comments relating to these matters, please use the Contact Us form on our website at www.caterpillar.com/contact, which will help direct your message to the appropriate area of our Company. All communications regarding personal grievances, administrative matters, the conduct of the Company’s ordinary business operations, billing issues, product or service related inquiries, order requests and similar issues will be directed to the appropriate individual within the Company. The Chairman of the Board has instructed the Chief Legal Officer, General Counsel and Corporate Secretary to consult with him if she is unsure who should receive the communication. If a permissible communication is sent, you will receive a written acknowledgement from the Corporate Secretary’s office confirming receipt of your communication. INVESTOROUTREACHINVESTOR OUTREACH We conduct an annual governance review and shareholder outreach throughout the year to ensure management and the Board understand and consider the issues that matter most to our shareholders and reflect the insights and perspectives of our many stakeholders. | | | | | | | WHO PARTICIPATES IN THE INVESTOR OUTREACH PROGRAM? | | | IN WHAT TYPES OF ENGAGEMENT DOES THE COMPANY PARTICIPATE? | | | | | | ●■ Investor and analyst calls | | | | | | | |
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Table ofBack to Contents
AWARDS POLITICALCONTRIBUTIONSAND RECOGNITIONS
Third parties regularly recognize our employees’ innovation, leadership and workplace satisfaction. We are pleased to highlight some of these 2017 awards here.
SOCIAL RESPONSIBILITY AND SUSTAINABILITY | | CORPORATE REPUTATION AND LEADERSHIP | ●Dow Jones Sustainability Index (World and North America)
●The Just 100: America’s Best Corporate Citizens – Forbes
●United Way Worldwide’s Global Corporate Leadership Program
●Corporate Equality Index – Human Rights Campaign Foundation
●2017 China Anti-poverty & Child Development Distinguished Contribution Silver Award – China Development and Research Foundation
●Top 20 Companies for Contribution of Fortune Global 500 – Southern Weekly (China)
●2016 Responsible Brand Award – China Charity Festival (China awarded in 2017)
●The China Women and Children Philanthropy Award – All-China Women’s Federation (China)
●2017 Corporate Social Responsibility Excellent Award (Silver Status) – American Chamber of Commerce in Thailand (Thailand)
| | ●World’s Most Admired Companies – Fortune Magazine
●All-America Executive Team – Institutional Investor
●Best Global Brands Top 100 – Interbrand
●Top 100 Innovators in Diversity and Inclusion – Mogul
●U.S. President’s Volunteer Service Award – Junior Achievement USA
●Top 150 Global Licensors – Global License
●Top 50 Employer – CAREERS & the disABLED Magazine
●Top 50 Employer – Minority Engineer Magazine
●Top 50 Employer – Woman Engineer Magazine
●Military Friendly Employers Silver Award – Victory Media
●Most Valuable Employer for Military – RecruitMilitary
●Top Veteran-Friendly Company – U.S. Veterans Magazine
●#15 Great Place to Work – Great Place To Work Institute (Panama)
●#50 Great Place to Work – Great Place To Work Institute (Central America)
●#10 Great Place to Work (Brazil)
●Top 10 Best Companies to Work For in Brazil (Perkins - Brazil)
●Top 150 Best Companies to Work For – Institute of Administration Foundation of Sao Paulo University (Brazil)
●#93 Best Innovative Company (Brazil)
●The Most Enterprising Company in Piracicaba (Brazil)
●Top of Mind Company “Industry category” (Piracicaba, Brazil)
●Most Admired Brand for Construction Machines PINI Group for Construction Industry (Brazil)
●Best Product Support in 2017 Caterpillar-Sotreq Brazilian Association of Technology for Construction and Mining-Sobratema (Brazil)
●2017 National Safety Award on Outstanding Models for Occupational Safety, Health and Environment – Department of Labor Protection and Welfare, Ministry of Labor (Thailand)
●2017 Anti-Drug Workplace Award or The “White Factory Award” (Level 1) – Department of Labor Protection and Welfare, Ministry of Labor (Thailand)
●The UK’s Most Popular Graduate Recruiters 2017/18 – UK Trendence Research (United Kingdom)
●Top 100 Undergraduate Employers (United Kingdom) – RMP Enterprise (United Kingdom)
●Environmental Quality Award – The Federal Agency of Environmental Protection (Solar Turbines - Mexico)
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Table of ContentsLOBBYING
SUSTAINABILITY
Caterpillar has set aspirational goals for its operations and product stewardship. We believe these standards affirm our determination to lead our industry to a more sustainable future. You can track our progress towards achieving these goals by visiting our website www.caterpillar.com/sustainability.
POLITICAL CONTRIBUTIONS AND LOBBYING
The actions that governments take can impact the Company, our employees, customers and shareholders. It is important for government leaders to understand the impact of such actions. For this reason, the Company participates in the political process and advocates in a responsible and constructive manner on issues that advance the Company’s goals and protect shareholder value. To promote transparency and good corporate citizenship, the Company provides voluntary disclosure relating to its political contribution activities and its political action committee, its engagement in public policy issues and global issues of importance to the Company, including detailed information on the Company’s position with respect to such issues. This information is disclosed on our website 20 |
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at www.caterpillar.com/contributions and includes an itemized list of organizations and individuals that received political contributions from Caterpillar or the Caterpillar Political Action Committee. It also includes a summary of some of the public policy issues important to the Company that may cause us to engage in public advocacy. Caterpillar’s political and advocacy activities at the state, federal and international levels are managed by the Vice President, Global Government & Corporate Affairs, whocoordinateswho coordinates and reviews with senior management the legislative and regulatory priorities that are significant to the Company’s business, and shareholders, as well as related advocacy activities. To ensure appropriate Board oversight of political activities, the Board’s Public Policy and Governance Committee receives regular briefingsreviews the Company’s policy on political activities and contributions and Caterpillar’s significant political activities, including corporate political contributions, political contribution activities of the Company’sCaterpillar Political Action Committee, trade association participation and Caterpillar’s legislative and regulatory priorities, the Company’s political spending and trade association expenditures as well as the activities of Caterpillar’s Political Action Committee.priorities. RELATEDPARTYTRANSACTIONSRELATED PARTY TRANSACTIONS Caterpillar has a written policy governing the approval of transactions with the Company that are expected to exceed $120,000 in any calendar year in which any director, executive officer or their immediate family members will have a direct or indirect material interest. Under the policy, all such transactions must be approved in advance or ratified by the PPGC. Prior to entering into such a transaction, theThe director or officer must submit the details of the proposed transaction to the Company’s Chief Legal Officer, General Counsel and Corporate Secretary,including whether the related person or his or her immediate family member has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10 percent beneficial owner of an entity involved in the transaction). The Chief Legal Officer, General Counsel and Corporate Secretary will then submit the matter to the PPGC for its consideration.
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TableFrom time to time, related persons of Caterpillar may purchase products or services of the Company and its subsidiaries. In connection with these purchases, Caterpillar may provide marketing support directly or indirectly through independent dealers, consistent with sales under similar circumstances to unaffiliated third parties.
2020 PROXY STATEMENT 23
Back to Contents AUDIT PROPOSAL 2 – RATIFICATION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PROPOSAL SNAPSHOT PROPOSAL SNAPSHOT
| | ●What am I voting on?
| Shareholders are being asked to approve the ratification of the Audit Committee’s appointment of PricewaterhouseCoopers as the Company’s independent auditor for 2018.
What am I voting on? Shareholders are being asked to approve the ratification of the Audit Committee’s appointment of PricewaterhouseCoopers (PwC) as the Company’s independent auditor for 2020. Board Voting Recommendation:
FOR the ratification of our independent registered public accounting firm. | | Board Voting Recommendation:
FORthe ratification of our independent registered public accounting firm.
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The Audit Committee (AC) is directly responsible for the appointment, compensation, retention and oversight of the Company’s independent auditor. PricewaterhouseCoopersPwC has been ourCaterpillar’s independent auditor since 1925. Through its extensive experience with the Company, PwC has gained institutional knowledge and a deep understanding of the Company’s operations and business, accounting policies and practices and internal control over financial reporting. The Audit CommitteeAC believes that the retention of PricewaterhouseCoopersPwC to serve as the Company’s independent auditor is in the best interests of the Company and its shareholders. If the appointment of PricewaterhouseCoopersPwC is not approved by the shareholders, the Audit CommitteeAC will consider whether it is appropriate to select another independent auditor. Representatives of PricewaterhouseCoopersPwC will be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so. The representatives will also be available to respond to questions at the meeting. AUDITFEESANDAPPROVALPROCESSAUDIT FEES AND APPROVAL PROCESS The Audit CommitteeAC pre-approves all audit and non-audit services to be performed by the independent auditors in compliance with the Sarbanes-Oxley Act and the SECSecurities and Exchange Commission (SEC) rules regarding auditor independence. The policies and procedures are detailed as to the particular service and do not delegate the Audit Committee’sAC’s responsibility to management. The policies and procedures address any service provided by the independent auditors and any audit or audit-related services to be provided by any other audit service provider. The pre-approval process includes an annual and interim component. Annually, not later than February of each year, management and the independent auditors jointly submit a service matrix of the types of audit and non-audit services that management may wish to have the independent auditor perform for the current year. The service matrix categorizes the types ofservicesof services by audit, audit-related, tax and all other services. Management and the independent auditors jointly submit an annual pre-approval limits request. The request lists aggregate pre-approval limits by service category. The request also lists known or anticipated services and associated fees. The Audit CommitteeAC approves or rejects the pre-approval limits and each of the listed services on the service matrix. During the course of the year, the Audit CommitteeAC chairman has the authority to pre-approve requests for services that were not approved in the annual pre-approval process. However, all services, regardless of fee amounts, are subject to restrictions on the services allowable under the Sarbanes-Oxley Act and SEC rules regarding auditor independence. In addition, all fees are subject to ongoing monitoring by the Audit Committee.AC. 2020 PROXY STATEMENT 24
Back to Contents INDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRMFEEINFORMATIONINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEE INFORMATION Fees for professional services provided by our independent auditor included the following (in millions): | | | | | 2017 | | 2016 | | Audit Fees1 | | | | $ | 34.6 | | $ | 33.3 | | Audit-Related Fees2 | | | | | 1.8 | | | 1.2 | | Tax Compliance Fees3 | | | | | 0.4 | | | 0.4 | | Tax Planning And Consulting Fees4 | | | | | 0.1 | | | 0.1 | | All Other Fees5 | | | | | 0.1 | | | 0.1 | | | | TOTAL | | $ | 37.0 | | $ | 35.1 |
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| | | 2019 | 2018 | Audit Fees(1) | | $ | 35.5 | | 33.6 | Audit-Related Fees(2) | | | 0.6 | | 1.6 | Tax Compliance Fees(3) | | | 0.1 | | 0.5 | Tax Planning And Consulting Fees(4) | | | 0.1 | | 0.1 | All Other Fees(5) | | | 0.1 | | 0.2 | TOTAL | | $ | 36.4 | $ | 36.0 | (1) “Audit Fees” principally includes audit and review of financial statements (including internal control over financial reporting), statutory and subsidiary audits, SEC registration statements, comfort letters and consents. (2) “Audit-Related Fees” principally includes attestation services requested by management, accounting consultations, pre- or post-implementation reviews of processes or systems and audits of employee benefit plan financial statements. Total fees paid directly by the benefit plans, and not by the Company, were $0.6 million in each of 2019 and 2018 and are not included in the amounts shown above. (3) “Tax Compliance Fees” includes, among other things, statutory tax return preparation and review and advice on the impact of changes in local tax laws. (4) “Tax Planning and Consulting Fees” includes, among other things, tax planning and advice and assistance with respect to transfer pricing issues. (5) “All Other Fees” consists principally of license-based services for statutory audit monitoring and accounting and reporting literature research. |
Table of ContentsANONYMOUSREPORTINGOFACCOUNTINGANDOTHERCONCERNS
1“Audit Fees” principally includes audit and review of financial statements (including internal control over financial reporting), statutory and subsidiary audits, SEC registration statements, comfort letters and consents.
2“Audit-Related Fees” principally includes attestation services requested by management, accounting consultations, pre- or post-implementation reviews of processes or systems and audits of employee benefit plan financial statements. Total fees paid directly by the benefit plans, and not by the Company, were $0.6 million in each of 2017 and 2016 and are not included in the amounts shown above.
3“Tax Compliance Fees” includes, among other things, statutory tax return preparation and review and advice on the impact of changes in local tax laws.
4“Tax Planning and Consulting Fees” includes, among other things, tax planning and advice and assistance with respect to transfer pricing issues.
5“All Other Fees” consists principally of license-based services for statutory audit monitoring and accounting and reporting literature research.
ANONYMOUS REPORTING OF ACCOUNTING AND OTHER CONCERNS
The Audit CommitteeAC has established a means for the anonymous and other reporting (where permitted by law) of (i) suspected or actual violations of the code of conduct, our enterprise policies or applicable laws, including those related to accounting practices, internal controls or auditing matters and procedures; (ii) theft or fraud of any amount; (iii) insider trading; (iv) issues with respect to the performance and execution of contracts; (v) conflicts of interest; (vi) violations of securities and antitrust laws; (vii) violations of prohibited harassment policy; and (viii) violations of any applicable anti-bribery law. Any employee, supplier, customer, shareholder or other interested party can submit a report via the following methods: ● | Direct Telephone: 309-494-4393 (English only) | ● | Call Collect Helpline: 770-582-5275 (language translation available) | ● | Confidential Fax: 309-494-4818 | ● | Email: BusinessPractices@cat.com | ● | Internet: www.caterpillar.com/obp |
■ Direct Telephone: 309-494-4393 (English only) ■ Call Collect Helpline: 770-582-5275 (language translation available) ■ Confidential Fax: 309-494-4818 ■ Email: BusinessPractices@cat.com ■ Internet: www.caterpillar.com/obp AUDITCOMMITTEEREPORTAUDIT COMMITTEE REPORT The Audit Committee is composedAC operates under a written charter adopted by the Board of four directors, allDirectors, and each of whom meetits members meets the independence and financial literacy standards contained in the NYSE Listed Company rules, SEC rules and Caterpillar’s Guidelines on Corporate Governance Issues,Issues. The Board has determined that each member of the AC qualifies as an audit committee financial expert under SEC rules and operates under a written charter adopted by the Board of Directors.has accounting or related financial management expertise. Management is responsible for the Company’s internal controls and the financial reporting process. PricewaterhouseCoopers,PwC, acting as independent auditor, is responsible for performing an independent audit of the Company’s consolidated financial statements and internal control over financial reporting in accordance with standards established by the Public Company Accounting Oversight Board (PCAOB). The Audit CommitteeAC has discussed with the Company’s independent auditor the overall scope and execution of the independent audit and has reviewed and discussed the audited financial statements with management. The Audit CommitteeAC also discussed with the independent auditors other matters required by PCAOB auditing standards. 2020 PROXY STATEMENT 25
Back to Contents The independent auditors provided to the Audit CommitteeAC the written communications required by applicable standards of the PCAOB regarding the independent accountant’s communications with the Audit CommitteeAC concerning independence, and the Audit CommitteeAC discussed the independent auditors’ independence with management and the auditors. The Audit CommitteeAC also considered whether the provision of other non-audit services by the Company’s independent auditors to the Company is compatible with maintaining independence. The Audit CommitteeAC concluded that the independent auditors’ independence had not been impaired. Based on the reviews and discussion referred to above, the Audit CommitteeAC recommended to the Board that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.2019. By the members of the Audit Committee:  | |  | |  | |  | Daniel M. Dickinson | | William A. Osborn
(Chairman) | | Dennis A. Muilenburg | | Rayford Wilkins, Jr. |
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Daniel M. Dickinson, Chairman William A. Osborn Edward B. Rust, Jr. 2020 PROXY STATEMENT 26 |
Table ofBack to Contents
COMPENSATION PROPOSAL 3 – ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION PROPOSAL SNAPSHOT PROPOSAL SNAPSHOT
| | ●What am I voting on?
| What am I voting on? Shareholders are being asked to approve, on an advisory basis, the compensation of named executive officers as disclosed in this proxy statement. Board Voting Recommendation:
FOR approval of executive compensation. | | Board Voting Recommendation:
FORapproval of executive compensation.
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On an annual basis, and in compliance with Section 14A of the Securities Exchange Act of 1934, shareholders are being asked to vote on the following advisory resolution: “RESOLVED, that the compensation of Caterpillar’s named executive officers as described under ‘Compensation Discussion and Analysis,’ the compensation tables and the narrative discussion associated with the compensation tables in Caterpillar’s proxy statement for its 20182020 Annual Meeting of Shareholders is hereby APPROVED.” This vote is advisory and therefore not binding on Caterpillar, the Compensation and Human Resources Committee (Committee)(CHRC) or the Board. The Board and the CommitteeCHRC value the opinion of Caterpillar’s shareholders, and to the extent there is any significant vote against Caterpillar’s named executive officer compensation, the Board will consider the reasons for such a vote, and the CommitteeCHRC will evaluate whether any actions are necessary to address those concerns. 24
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Table of Contents
Back to Contents COMPENSATION DISCUSSION & ANALYSIS EXECUTIVESUMMARYEXECUTIVE SUMMARY GOVERNANCEANDPAYFORPERFORMANCEPHILOSOPHY The Compensation and Human Resources Committee (the Committee)(CHRC) believes the executive compensation program at Caterpillar should be structured to align the interests of executives and shareholders. The program should seek to rewardTheir interest lies in rewarding value creation at all stages of ourthe business cycle and provideproviding an increasing percentage of performance-based compensation at higher levels of executive responsibility. CompensationThis performance-based compensation should also be both market competitive and internally equitable. OverChanges made over the last few years theto further align pay with performance have received favorable feedback from our shareholders has resulted in several changes toand support for our executive compensation program. These changes have been well received by our shareholders, as reflected by our 20172019 “say on pay” vote of approximately 96%, up from 93% in the prior year.95 percent reflects this positive response.
In 2017,2019, we continued our shareholder outreach effort,on environmental, social, governance and compensation topics, reaching out to the holders of approximately 40%40 percent of our outstanding shares, to discuss various matters including governance, executive compensation, sustainability and operational performance. In these meetings, our shareholders generally expressed a continued positive view with respect to our executive compensation program. SAY ON PAY SUPPORT | 95% | 94% | 96% | 2019 | 2018 | 2017 |
After considering feedback received from our shareholders through our outreach efforts and the 20172019 “say on pay” results, the CommitteeCHRC determined that the Company’s executive compensation philosophy, compensation objectives and compensation elements continued to be appropriate and did not make any specificmade only modest changes to the executive compensation program in response to the shareholder outreach or “say on pay” results.program. The Committee engages inCHRC conducts an ongoing review of the Company’s executive compensation program to evaluate whether the program supports the Company’s compensation philosophy and objectives and to monitor the program’s alignment with the Company’sits strategic business objectives. In connection with this ongoing review, and based on feedback received through our shareholder outreach, the CommitteeCHRC continues to implement and maintain what it believes are best practices for executive compensation each of which reinforces the Company’s compensation philosophy.and governance. Below is a summary of those practices: | |  | | | | |  | | | WHAT WE DO | | | | WHAT WE DON’T DO | |  | | | | | | | | | | | | | | | | | | | | |  Robust stock ownership requirements (6x base salary for our CEO and 3x base salary for each of the other NEOs). | |  | No individual change-in-control agreements | | Robust annual benchmarking process. | | | No tax gross-ups on change-in-control benefits | | Rigorous CommitteeCHRC oversight of incentive metrics, goals and pay/performance relationship. Clawback Policy.Limited executive perquisites.Strict anti-hedging and anti-pledging policies.Independent compensation consultant. | | |  No individual change-in-control agreements.No tax gross-ups on change-in-control benefits.No backdating, re-pricingrepricing or granting of option awards retroactively. | | Clawback Policy | | | | | Limited executive perquisites | | | | | Strict anti-hedging and anti-pledging policies | | | | | Independent compensation consultant | | | |
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2020 PROXY STATEMENT 28
Back to Contents Table of ContentsCOMPENSATION PROGRAM STRUCTURE
COMPENSATION PROGRAM STRUCTURE |
We are committed to developing and implementing an executive compensation program that directly aligns the interests of the NEOsour Named Executive Officers (NEOs) with the long-term interests of shareholders. To that end, the objectives of the Company’s executive compensation program are to attract, retainmotivate and motivateretain talented executive officers who will improve the company’s performance and provide long-term strategic leadership. ThemajorityoftargetedtotalcompensationforourNEOsisequity-based,vestsovermultipleyearsandistieddirectlytolong-termvaluecreationforshareholders. NEO compensation is comprisedcomposed of three primary components: | BASESALARY |  |  ANNUALINCENTIVEPLAN(AIP) | | ANNUAL LONG-TERMINCENTIVE (AIP)
| | | | LONG-TERM INCENTIVE | | Competitive | | | | | | | Competitive payto
attractand retain
talentedexecutives | | AnopportunitytoearnanannualcashawardbasedontheCompany’sfinancialperformanceandstrategicbusinessobjectives | An opportunity to
earn an annual cash
award based on
the Company’s financial
performance and
high-priority business
initiatives | | | Amixofperformance-based
restrictedstockunits(PRSUs)
and stockoptionstoalign
management’sinterestswith
long-term shareholder’s
shareholders’interests | |
Approximately 90%90percent of our CEO’s 20172019 total targeted total compensationwas variableand/orat-riskcompensation, including 50%50 percent of long-term incentives in the form of PRSUs.  26 |
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2020 PROXY STATEMENT 29
Back to Contents Table of ContentsBUSINESS PERFORMANCE AND RESULTS
BUSINESS PERFORMANCE AND RESULTS |
Caterpillar delivered strong results throughout 2017. Many ofoperational performance and achieved our end markets improved, our team capitalizedbest safety performance on the opportunity and we achieved excellent results. As demand improved during the year, we stayedrecord in 2019. We remained disciplined and maintainedfocused on control of our structural costs, while introducing new products, further developing our digital capabilities and executing the changes outlined in our new strategy. In addition, we delivered improved margins across the three primary segments and maintained a strong balance sheet. As a result, the company’s stock price increased 70 percent in 2017, and the Company’s one year Total Shareholder Return (TSR) improved to 75 percent. Our key financial and business results for 2017 included the following:
STRONG BALANCE SHEET AND CASH FLOW |
*Definitions ofachieving an Enterprise Operating Profit Margin* of 15.4% on $53.8 billion of sales and Adjusted Earnings Per Share, which are non-GAAP metrics usedrevenues for the year. We generated strong operating cash flow and as a result, were able to return $6.2 billion to shareholders, including $4.0 billion in determining performance undershare repurchases. We also raised the dividend by 20% in 2019 and paid dividends of $2.1 billion, maintaining our status as a Dividend Aristocrat. We achieved our 2019 Investor Day Targets for operating margin and returned substantially all Machinery, Energy & Transportation (ME&T) free cash flow to shareholders.
Ourkeyfinancialandbusinessresultsfor2019includedthefollowing: 
2020 PROXY STATEMENT 30
Back to Contents IMPORTANT INFORMATION REGARDING FISCAL 2020 COMPENSATION FOR NAMED EXECUTIVE OFFICERS Due to the potential impact of the COVID-19 pandemic on Caterpillar’s business, management recommended that all Named Executive Officers not receive a 2020 base salary increase or an Annual Incentive Plan payment for 2020 fiscal year results. The CHRC and Strategic Performance Plan, can be found on pages 35 and 38, respectively.Board of Directors took the actions necessary to implement these recommendations by management. ($ in millions)
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Table of ContentsPAY OUTCOMES DEMONSTRATE ALIGNMENT WITH COMPANY PERFORMANCE
PAY OUTCOMES DEMONSTRATE ALIGNMENT WITH COMPANY PERFORMANCE |
Consistent with the Committee’sCHRC’s pay-for-performance philosophy, these improvements in business results were reflected in the resulting pay decisions made for our CEO and the other NEOs in 2017.2019. Compensation outcomes for 20172019 included the following items:  BASE SALARY | ●■ Named Executive Officers (other than the CEO) received an average base salary adjustment of 3.3%. 4.1 percent. |  ANNUAL INCENTIVE | ●In recognition of management’s outstanding performance that resulted in a 93% improvement in enterprise operating profit in 2017 over the prior year, the Committee, consistent with its authority, elected to award 2017 AIP payouts based on the “up year” incentive plan structure.
■ ●Annual incentive awards for 20172019 paid out, on average, at 140%85 percent of target. |  LONG-TERM INCENTIVE | ●■ Based on the Committee’s review of the Company’s 1-, 3- and 5-year relative TSRTotal Shareholder Return (TSR) at the end of 2016 and 2017, respectively: ○2018, the 20172019 equity grantsgrant to the NEOs were sizedCEO was set at approximately the 50th percentile of the compensation peer group.
○group and at or below the 2018 equity grants to50th percentile for the NEOs were sized at approximately the 75th percentile of the compensation peer group.
●2015 – 2017 PRSU grant vested at 100% in 2017.other NEOs.
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CEO COMPENSATION In 2017,2019, the CEO’s actual compensation was belowCHRC recommended and the Board approved a 6.7% increase to Mr. Umpleby’s base salary in recognition of his performance and to further align his target compensation.compensation with the peer group median. Similarly, the Board approved a ten percent adjustment to his annual incentive for 2019. This adjustment recognized Mr. Umpleby’s actualdemonstrated leadership in advancing the enterprise services growth strategy and for leading operational excellence improvements resulting in more durable profitability — notably, delivering greater operating margins as a percent of sales — a key driver of long-term shareholder value and the foundation of higher market multiples. The annual incentive award reflects the Company’s strong results in 2017 coupled with the Committee’s assessmentwas paid at 83% of his superior performance.target. Mr. Umpleby’s 2017 LTI2019 Long-Term Incentive grant was set at 80%the 50th percentile of the Company’s peer group median reflecting his relative tenure as CEO.the Company’s overall TSR results and performance achievements.  CEO COMPENSATION* Target Value Includes: Salary of $1,600,000; annual incentive of $2,800,000; and LTI grant of $10,900,000. Total Target Value: $15,300,000. ** Actual Value Includes: Salary of $1,575,000 (due to proration); annual incentive of $2,336,000; and LTI grant of $10,900,000. Total Actual Value: $14,811,000. |
 *Target Value Includes: Salary of $1,200,000, annual incentive of $1,800,000; and LTI grant of $9,085,000. Total Target value: $12,085,000.
**Actual Value Includes: Salary of $1,200,000, annual incentive of $3,500,000; and LTI grant of $7,250,000. Total Actual value: $11,950,000.
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Table ofBack to Contents
COMPENSATION DISCUSSION & ANALYSIS 2017 NAMED EXECUTIVE OFFICERS |
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D. James Umpleby, III
Chief Executive Officer (CEO)
| Mr. Umpleby became CEO on January 1, 2017. During his first year, he:
●Led the company to increase profit per share from ($0.11) in 2016 to $1.26 in 2017, and doubled adjusted earnings per share to $6.88 in 2017 on an 18 percent increase in sales and revenues.
●Led development and implementation of a new enterprise strategy to achieve long-term profitable growth, with an emphasis on growing services, expanded offerings and operational excellence.
●Deployed the Caterpillar Operating & Execution Model across the company to emphasize allocation of resources to areas with the greatest opportunity for future profitable growth.
●Continued necessary restructuring actions to achieve a more competitive and flexible cost structure while making additional investments for future profitable growth.
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Bradley M. Halverson
Chief Financial Officer (CFO)
and Group President,
Corporate Services
| In 2017, Mr. Halverson:
●Had responsibilities for Corporate Services and the Financial Products Division.
●Improved the already strong financial position of the Company as end markets began their recovery.
●Made key contributions to the Company’s new strategy by embedding the Operating & Execution Model.
●Delivered Return on Equity greater than plan and last year for the Company’s captive finance company, Caterpillar Financial Services, while credit metrics were managed within long-term historical averages.
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Robert B. Charter
Group President, Customer &
Dealer Support
| In 2017, Mr. Charter:
●Led Caterpillar’s growing aftermarket opportunity in partnership with various business units and dealers.
●Drove strong aftermarket performance by quickly responding to a sharp upturn in the mining and oil and gas end markets.
●Deployed Lean initiatives, including inventory management systems across the Global Caterpillar Dealer network.
●Executed new Enterprise Strategy with a focus on growing aftermarket services by connecting assets, implementing customer support agreements, expanding eCommerce capabilities and using digitally enabled solutions.
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Thomas Pellette
Group President,
Energy & Transportation
| In 2017, Mr. Pellette:
●Improved safety and quality, exceeded all full year key financial commitments and developed a more competitive and flexible cost structure.
●Continued expansion of digital solutions including the launch of shop.perkins.com, Perkins® My Engine App and Perkins® SmartCap.
●Delivered increased engine power density and new products, such as our Tier 4 transit locomotive, through key investments under the Operating & Execution Model.
| | | | | | | 
Bob De Lange
Group President,
Construction Industries | In 2017, Mr. De Lange:
●Doubled profit on 23% higher sales, increasing operating margin from 10.5% to 17%.
●Disciplined execution of the Operating & Execution model, including further structural cost reductions and footprint restructuring.
●Focused on Lean and improved safety, quality and inventory turns performance.
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Table of ContentsTHE COMPENSATION PROCESS
THE COMPENSATION AND HUMAN RESOURCES COMMITTEE (CHRC) The CommitteeCHRC is responsible for the executive compensation program design and decision-making process for NEO compensation. The Committee regularlyRegular reviews are conducted of the Company’s executive compensation practices, including the methodologies for setting NEO total compensation, the goals of the program and the underlying compensation philosophy. The Committee also considers the recommendationsRecommendations and market data are provided by itsthe independent compensation consultant and makesto make decisions, as it deems appropriate, regarding executiveNEO compensation based on itsthe assessment of performance and achievement of Company goals. The CommitteeCHRC also exercises its judgment as to what is in the best interests of the Company and its shareholders. 
The Committee,CHRC, with the support of management and its independent compensation consultant, considers many aspects of the Company’s financial and operational performance and other factors when making executive compensation decisions including, but not limited to: ● | Long-term shareholder value creation. | ● | The cyclical nature of the business. | ● | Performance relative to financial guidance provided throughout the year. | ● | Enterprise and Business Unit operational performance. | ● | Performance relative to peers and competitors. | ● | Historic absolute and relative performance. | ● | Key areas management can influence over the short and long term. | ● | Retention of management talent. | ● | Skills, experience and tenure of executive incumbents. |
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■ Long-term shareholder value creation ■ The cyclical nature of the business ■ Performance relative to financial guidance provided throughout the year ■ Enterprise and Business Unit operational performance ■ Performance relative to peers and competitors ■ Historic absolute and relative performance ■ Key areas management can influence over the short- and long-term ■ Development and retention of top talent ■ Skills, experience and tenure of executive incumbents Table of Contents
INDEPENDENT COMPENSATION CONSULTANT The CommitteeCHRC retained Meridian Compensation Partners, LLC (“Meridian”) as its independent compensation consultant.consultant during 2019. Meridian provides executive and director compensation consulting services, to the Committee, including advice regarding the design and implementation of compensation programs, market information, regulatory updates and analyses and trends on executive compensation and benefits. Interactions between Meridian and management are generally limited to discussions on behalf of the CommitteeCHRC or as required to fulfill requests at the Committee’sits direction. During 2017,2019, Meridian did not provide any other services to the Company. Based on these factors, its ownthe CHRC’s evaluation of Meridian’s independence pursuant to the requirements approved and adopted by the SEC and NYSE, and information provided by Meridian, the Committee hasCHRC determined that the work performed by Meridian doesdid not raise any conflicts of interest. 2020 PROXY STATEMENT 32
Back to Contents BENCHMARKING COMPENSATION TO PEERS 2017 Compensation Peer Group2019 COMPENSATION PEER GROUP –
The CommitteeCHRC regularly assesses the market competitiveness of the Company’s executive compensation programs based on peer group data. The 20172019 Compensation Peer Group was established based on the following criteria: ● | ■ Total sales and revenues and market capitalization of the peer companies relative to Caterpillar; ■ Competitors and industry segment; ■ Companies considered potential sources for top talent; ■ Global presence with a significant portion of revenues coming from non-U.S. operations; and 2019 Compensation Peer Group* | ● | Competitors and industry segment; | ● | Global presence with a significant portion of revenues coming from non-U.S. operations; | ● | Geographic footprint |
2017 COMPENSATION PEER GROUP* | 3M Company | | Fluor Corporation | Alcoa | | Ford Motor Company | Archer Daniels MidlandArcher-Daniels-Midland Company | | General Electric Company | The Boeing Company | | Halliburton Company | Cisco Systems, Inc. | | Honeywell International Inc. | Cummins Inc. | | Intel Corporation | Deere & Company | | Johnson Controls, Inc. | E.I. du Pont de Nemours | | Paccar Inc. | and Company | | United Technologies | Emerson Electric Co. | | CorporationPACCAR Inc. | FedEx Corporation | United Technologies Corporation | Fluor Corporation | | *The CHRC removed Dow DuPont from the benchmarking peer group because of its split into three separate public companies in 2019. Otherwise, the 2019 Compensation Peer Group remained unchanged from the prior year. |
* During 2016, the Committee removed four companies from the prior benchmarking peer group: Coca-Cola, Procter & Gamble, General Dynamics and Raytheon.BENCHMARKING METHODOLOGY
Benchmarking Methodology – To account for differences in the size of the compensation peer group companies, market data is statistically adjusted using a regression analysis, by the Committee’s independent compensation consultant, allowing for a comparison of the compensation levels to similarly-sized companies. Market data provided by the independent consultant is sourced from the Aon Total Compensation Measurement Database, and size-adjusted to Caterpillar’s three-year average revenues using regression analysis. Each element of our NEOs’ compensation is then targeted to the median of the peer group.group and adjusted above or below based on performance. To the extent an NEO’s total actual compensation exceeds the peer group median, it is due to outstanding performance, critical skills experience and tenure.notable experience. If anNEO’san NEO’s compensation is below the median, it is generally due to underperformance against relevant metrics or reflective of an individual who is newer in his or her role.
2017 Competitor Peer Group2019 COMPETITOR PEER GROUP –
For 2017,2019, the CommitteeCHRC also assessed the market competitiveness of the Company’s executive compensation programsbusiness performance against a group of competitors that it deems to compete directly with the Company. The Committee noted that althoughAlthough the Company’s peer group described above is an appropriate benchmark for executive compensation at other similarly sized companies, the peer group data does not always provide useful comparisons to other companies that might be experiencing similar business conditions. To that end, and consistent with itsthe Company’s pay-for-performance philosophy, the Committee further sought to compare the Company’s business performance with that ofis compared to its competitors by establishing a “Competitor Peer Group.” The CommitteeCHRC uses the Competitor Peer Group (along with the 2017 Compensation Peer Group)Group and S&P 500 Industrials) to assess relative performance using TSR when awarding long-term incentive awards.awards but is not used to benchmark base pay levels. The 20172019 Competitor Peer Group, which was the same as in 2018, was established based on the following criteria: ● | ■ Compete in the same markets as the Company; ■ Offer similar products and services as the Company; or ■ Serve the same, or similar, industries and end users as the Company. 2019 Competitor Peer Group | | ●Cummins Inc. | Offer similar products and services as the Company; orKomatsu Ltd. | ● | Serve the same, or similar, industries and end users as the Company |
2017 COMPETITOR PEER GROUP | Cummins Inc. | Deere & Company | Sany Heavy Industry Co., Ltd. | Hitachi Construction Machinery Co., Ltd. | Joy Global Inc. | Komatsu Ltd. | Sany Heavy Equipment International Holdings Company Limited | Volvo AB |
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Table of Contents
ROLE OF EXECUTIVE OFFICERS IN DETERMINING EXECUTIVE 2020 PROXY STATEMENT 33
Back to Contents CEO PERFORMANCE EVALUATION AND COMPENSATION The Board, excluding the CEO, all of whom are independent directors, annually conducts the CEO’s performance evaluation. Prior to the Board’s evaluation of the CEO’s performance and its approval of CEO compensation, the CommitteeCHRC makes a preliminary compensation recommendation to the Board based on the Committee’sits initial evaluation and performance review of the CEO. The Board then makes its final determination for CEO presents a performance evaluation and makes compensation recommendations to the Committee for all other NEOs.compensation. EXECUTIVE COMPENSATION AND RISK MANAGEMENT Each year, the CommitteeCHRC assesses the Company’s risk profile relative to the executive compensation program and confirms that the Company’sits compensation programs and policies do not create or encourage excessive risks that are reasonably likely to have a material adverse impact on the Company. Also, the CommitteeCHRC has concluded that the total compensation structure for senior leadership does not inappropriately emphasize short-term stock price performance at the expense of longer-term value creation. In particular, long-term incentive awards, as a significant portion of total compensation, and stocktarget ownership guidelines which NEOs are required to maintain pre- and post-retirement (6x base salary for our CEO and 3x base salary for each of the other NEOs), are structured to align management’s compensation with principles of risk management by maintaining a focus on the long termlong-term performance of the Company. COMPONENTS OF EXECUTIVE COMPENSATION |
TARGET OWNERSHIP GUIDELINES The target ownership guidelines for the CEO is six times base salary and three times base salary for each of the other NEOs. NEOs have a five-year period from their first grant date after appointment to meet the target ownership guidelines. All NEOs are in compliance with these guidelines. COMPONENTS OF EXECUTIVE COMPENSATION NEOs receive a mix of fixed and variable compensation with a focus on long-term and performance-based components.components:   BASE SALARY Base salary is the only fixed component of NEO compensation. The CommitteeCHRC targets base salaries at the size-adjusted median level of the peer group. Each NEO’s base salary is determined by the individual’s level of responsibility and historic performance with reference to the market median. AnnualBase salary increases, if any, are based on achievement of individual and Company objectives, contributions to Caterpillar’s performance and culture, leadership accomplishments and a comparison to those in comparable positions at peer companies. Upon his appointment to the position of CEO,In 2019, Mr. Umpleby’s 2017 salary was set at $1.2increased from $1.5 million which was belowto $1.6 million in recognition of his performance and to further align his target compensation with the peer group median.
In setting2019, Mr. Umpleby’s baseBonfield’s salary the Committee considered several factors including market data of other recently appointed CEOs relativewas increased from $800,000 to peer group medians. Effective April 1, 2018, the Committee increased Mr. Umpleby’s annual salary to $1,500,000. The Committee specifically noted Mr. Umpleby’s strong performance in his first year as CEO and sought$832,000 to align his salary more closely towith the peer group median. 32 |
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Effective Salary adjustments were made effective April 2017, the Committee approved adjustments1, 2019, for the CFOall NEOs and other NEOs. All salaries arewere set at or below the peer group median.
NEO BASE SALARY Name | 2019 | Umpleby | $1,600,000 | Bonfield | $832,000 | Ainsworth | $740,100 | DeLange | $767,400 | Johnson | $820,500 |
2020 PROXY STATEMENT 34
Back to Contents ANNUAL INCENTIVE 20172019 ANNUAL INCENTIVE PLAN DESIGN
The Company’s AIPAnnual Incentive Plan (AIP) is designed to provide each NEO with the opportunity to earn an annual cash payout based on the short-term performance of the Company and each NEO’s respective businesses. The AIP places the majoritya significant percentage of each NEO’s annual cash compensation at risk and aligns the interests of executives and shareholders. The 2017 AIP design provided that an incentive pool would be funded based on the Company’s profit after taxes, with actual payouts based on achieving financial and operational performance measures that were established by the Committee in February 2017. Also, beginningBeginning in 2016, the CommitteeCHRC modified the AIP design to more closely align pay outcomes with business performance by annually comparing the Company’s annual forecasted enterprise operating profitEnterprise Operating Profit to the prior year’s actual enterprise operating profit. Based on thisEnterprise Operating Profit. The comparison the Committee annually determinesis conducted to determine whether the current year will be an “up year” (improved performance) or “down year” (weaker performance) versus the prior year’s actual enterprise operating profitEnterprise Operating Profit results. Beginning in 2019, the AIP design also included a Strategic Objectives Modifier which allows the CHRC to adjust the AIP payment by +/-20% based on the NEO’s contributions to strategic business objectives. All NEOs participated in AIP, and Mr. Ainsworth also participated in the Short-Term Incentive Plan (STIP) for the portion of the year prior to his appointment to Group President.
“Up2019 ANNUAL INCENTIVE PLAN DESIGN Step 1: Determine “Up/Down Year”
If the enterprise operating profit forecast isabovethe prior year’s actual enterprise operating profit results
| | Maximum
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Business
Plan | |  | | The payout for achievement of maximum performance level iscapped at 150%of the target award opportunity. | Target |  | | Achievement target level enterprise operating profit performance goal will result in a payout of100% of the target. | Threshold performance level is set at87% of target. |  | | Performance at threshold will result in a payout of50% of the target opportunity for the year.
Performance below threshold will result inno annual incentive payout.
| | | | | | | | | “Down Year”
If the enterprise operating profit forecast isbelow the prior year’s actual enterprise operating profit results, target incentive award opportunity for each NEO will be reduced in proportion to the decline in the enterprise operating profit
| | Target
| 
Business
Plan | |  | | In a “down year,” there will beno upside opportunity above the target level. | Threshold performance level is set at87% of target.
|  | | Performance at threshold will result in a payout of50% of the reduced target.
Performance below threshold will result inno annual incentive payout.
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In addition to enterprise operating profit performance, a portion of each NEO’s annual incentive will be based on operational performance measures related to their responsibilities, such as machine PINS (market position), aftermarket parts sales and Financial Products Division Return on Equity (FPD ROE), all of which are subject to the same design above. |
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Step 2: AIP Calculation Table2019 ANNUAL INCENTIVE PERFORMANCE MEASURES AND RESULTS
In addition to Enterprise Operating Profit performance, a portion of Contents each NEO’s annual incentive was based on Operating Profit After Capital Charge (OPACC) and Services Revenues, all of which were subject to the same design above. Consistent with this design process, after reviewing the Company’s 20172019 business plan, the CommitteeCHRC determined that 20172019 would be a “downan “up year,” as Enterprise Operating Profit was forecasted to be 14.4% below 2016 Enterprise Operating Profit.above 2018. As a result, each NEO’sthere were no adjustments to the target AIPannual incentive opportunity was reduced by 14.4%, andfor NEOs. For the AIP payout was cappedannual incentive, at target. 2017 ANNUAL INCENTIVE PERFORMANCE MEASURES AND RESULTS
At its February 20172019 meeting, the CommitteeCHRC approved the performance measures described below and the strategic objectives to be used for determining actual payouts under the AIP. payouts.
The largest portion of financial measures (ranging from 5566 percent to 10070 percent) of each NEO’s 2017 AIP2019 annual incentive opportunity was based on Enterprise Operating Profit and the Operating Profit After Capital Charge (OPACC)OPACC for their respective businesses.businesses, where applicable. The remaining portion of each NEO’s annual incentive award opportunity was determined basedby the Services Revenues metric for the enterprise or their respective businesses. Consistent with the Operating & Execution model, Services Revenues align the Company’s emphasis on the achievement of specific operational goals, as described below.services growth strategy with variable incentive opportunity. When establishing the performance targets for 2017,2019, the CommitteeCHRC reviewed the Company’s business plan, historical performance, management recommendations and feedback 2020 PROXY STATEMENT 35
Back to Contents provided by the Committee’s independent compensation consultant. The CommitteeTargets were set the targets for each of the performance measures at levels that were designed to be reasonably achievable with strong management performance. Maximum performance levels were designed to be difficult to achieve in light of historical performance and the Company’s business forecast at the time the measures were approved. The business forecast includes consideration of market, economic and geopolitical factors. The performance measures were also weighted according to the Company’s business priorities and the responsibilities of each NEO. The chartCHRC identified certain objectives to further focus management’s efforts on company’s services growth strategy. These objectives, as well as the performance measures and weightings, were communicated to the NEOs at the beginning of the performance period. The charts below summarizesand on the following page summarize the performance measures, weightings and results that the CHRC reviewed and approved for the 2017 AIP2019 annual incentive for each NEO.  In early 2018, the results for each performance measure noted above were converted into a performance factor and reviewed by the Committee. Each performance factor was multiplied by the respective weightings for each NEO to obtain a final weighted performance factor which was then used to determine actual incentive payments for each of the NEOs.
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RATIONALE Description of Performance Measures
| PERFORMANCE
MEASURE | | DEFINITION | | RATIONALE | |   | | | | | | | ENTERPRISE OPERATING PROFIT | | Enterprise Operating Profit measures the overall profitability of all of Caterpillar’s operations (including ME&T and Financial Products) before taxes, interest and other non-operating items. For AIP purposes, the Enterprise Operating Profit metric will be calculated as Caterpillar Consolidated Operating Profit excluding restructuring costs and mark-to-market gains and losses on pension and post-retirement benefits. | | The CommitteeCHRC approved Enterprise Operating Profit as a performance measure in order to incentincentivize management with respect to enhance the overall profitability of the Company. The CommitteeCHRC believes that Enterprise Operating Profit is an important corporate metric for shareholders to be able to assess the financial health of the Company. | | | | | | | | ENTERPRISE OPERATING PROFIT AFTER CAPITAL CHARGE (OPACC) | | Enterprise Operating Profit After Capital Charge (OPACC) measures how productively and efficiently Caterpillar is utilizing assets to generate shareholder value. For each segment,AIP purposes, Enterprise OPACC is calculated as ME&T operating profit (excluding restructuring costs) less the capital charge. In 2017, For Enterprise OPACC, the capital charge was calculated as theequals average monthlyquarterly ME&T net accountable assets multiplied by a pre-tax capital charge rate of 13 percent. | | OPACC is designed to measure how productively and efficiently the Company’s assets are being utilized by examining the relationship between the value of the Company’s assets and the operating profit that those assets generate. An increase in OPACC means that the Company’s management is utilizing assets more efficiently to generate shareholder value, which the CommitteeCHRC views as key to Caterpillar’s long-term success. | | | | | | | | FINANCIAL PRODUCTS DIVISION RETURN ON EQUITY (FPD ROE)SEGMENT OPERATING PROFIT AFTER CAPITAL CHARGE (OPACC)
| | FPD ROEFor each segment, OPACC is calculated by dividingas segment profit less the full-year profit (after tax) bycapital charge. In 2019, the capital charge was calculated as the average monthly net accountable equity balances, excluding the impactassets multiplied by a pre-tax capital charge rate of interest costs13 percent.
| OPACC is designed to measure how productively and equity changes associated with differences in planned vs. actual dividends. Dividends are payments of retained earnings from Caterpillar Financial Services Corporation and Caterpillar Financial Insurance Services,efficiently the Company’s wholly owned financeassets are being utilized by examining the relationship between the value of the Company’s assets and insurance subsidiaries,the operating profit that those assets generate. An increase in OPACC means that the Company’s management is utilizing assets more efficiently to Caterpillar. | | The Committee approved this measuregenerate shareholder value, which the CHRC views as key to drive accountability for and performance of Caterpillar’s Financial Products Division, including appropriate oversight of risk management, portfolio quality and financial return expectations.long-term success.
| | | | | | | |  | | | | | | | PERCENT OF INDUSTRY SALES (PINS)SERVICES REVENUES
| | PINS capture dealer sales as a percentage of industry sales.Services Revenues measure service-related revenues across Caterpillar including, but not limited to, revenues from aftermarket parts, financing and services provided by direct businesses. Due to the competitively sensitive nature of this measure, the threshold, target and result levels have all been indexed and reported as such.
| | The CommitteeCHRC approved PINSServices Revenues as a performancean important measure intended to further strengthen profitability realized by growth in order to incent improvements in the Company’s competitive position in the markets it serves.aftermarket parts and services. | | | | | | | |
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Back to Contents 2019 ANNUAL INCENTIVE PERFORMANCE MEASURES AND RESULTS 2020 PROXY STATEMENT 37
Back to Contents 2019 INCENTIVE PAYMENTS In early 2020, the results for each performance measure noted above were converted into a performance factor, which was then multiplied by the respective weightings to determine the performance factor for each NEO. Then, the CHRC assessed the individual contributions of each NEO to the Strategic Objectives — the high-priority initiatives critical to deliver the enterprise strategy for long-term profitable growth — to determine the final factor and actual payments. The following are the calculated 2019 cash incentive payments made to the NEOs: | Target
Opportunity | | Salary(1) | | Final
Factor(2) | | Payment(3) | | Umpleby | 175% | X | $ | 1,575,342 | X | 0.85 | = | $ | 2,336,000 | | Bonfield | 115% | X | $ | 824,110 | X | 0.77 | = | $ | 730,000 | | Ainsworth | 115% | X | $ | 736,043 | X | 0.88 | = | $ | 744,000 | | De Lange | 115% | X | $ | 761,877 | X | 0.94 | = | $ | 820,000 | | Johnson | 115% | X | $ | 809,034 | X | 0.90 | = | $ | 840,000 | |
Parts Sales is measured(1) All payments were calculated using Caterpillar branded parts orders. This metric uses actual Caterpillar branded parts orders (at actual price levels), as reporteda daily weighted average salary
(2) The final factor represents the calculated financial performance results adjusted by the Strategic Objectives Modifier; the Strategic Objectives Modifier applied to Mr. Umpleby was 10% and ranged from 0% to 15% for the Dealer Parts Orders Reporting System as compared to plan (at price levels when the plan was finalized). The metric is based on, and reported as, a percentage above or below plan. Dueother NEOs (3) Payments were rounded up to the competitively sensitive nature of this measure, the threshold, target and result levels have all been indexed and reported as such. | | The Committee approved this measure because increasing Caterpillar branded parts sales is an important aspect of the corporate strategy. Aftermarket support is importantnearest thousand; may not recalculate exactly due to our customers and parts are a material component of that support. Aftermarket support is one of the main reasons why customers buy Caterpillar products and is a key differentiator in the global market.
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2017 ANNUAL INCENTIVE PAYMENTS
2017 was initially forecasted to have lower enterprise operating profit than 2016, resulting in a “down year” incentive plan structure. However, actual enterprise operating profit in 2017 significantly exceeded 2016 enterprise operating profit by 93%, and since enterprise operating profit improved, 2017 was an “up year”. Results for 2017 also exceeded 2015 enterprise operating profit, despite 2015 having higher sales and revenues. In recognition of management’s outstanding performance and strong improvements in results throughout the year, and to recognize the recovery of profitability well beyond 2015 performance levels, the Committee, consistent with its authority under the AIP, elected to award the 2017 AIP payouts based on the “up year” incentive plan structure. The Committee determined that these adjustments were reflective of its pay-for-performance philosophy, and in the best interest of the Company and its shareholders. Therefore the Committee approved the following AIP payments for 2017:
| TARGET
OPPORTUNITY | | SALARY1 | | WEIGHTED
PERFORMANCE
FACTOR | | PAYMENT | | Umpleby | 150% | X | $ | 1,200,000 | X | 1.35 | = | $ | 2,430,000 | | Halverson | 115% | X | $ | 804,159 | X | 1.50 | = | $ | 1,387,174 | | Charter | 115% | X | $ | 756,313 | X | 1.43 | = | $ | 1,244,626 | | Pellette | 115% | X | $ | 756,313 | X | 1.50 | = | $ | 1,304,639 | | De Lange | 115% | X | $ | 664,232 | X | 1.20 | = | $ | 916,640 |
1 AIP payment calculated using a daily weighted average salary.
In addition, the Committee sought to reward Mr. Umpleby’s superior performance, by providing an additional discretionary cash award of $1,070,000. In determining the appropriate level of the award, the Committee noted Mr. Umpleby’s superior performance in his first full year as CEO and the Company’s strong financial results, intense focus on operational excellence and profitable growth.
LONG-TERM INCENTIVE 20172019 DESIGN AND SIZING OF GRANT
In 2017,2019, the CommitteeCHRC granted one-half of each NEO’s total long-term incentive (LTI) value in PRSUsPerformance-based Restricted Stock Units (PRSUs) and one-half in non-qualified stock options (Options)(stock options). The stock options vest equally in one-third increments beginning on the first anniversary of the grant date and expire after ten years from grant. Beginning with the 2018 equity grant, to align with market practice, Dividend Equivalent Units (DEUs) accrue on unvested PRSUs, but are settled only if the vesting requirements are met. The DEUs will settle in additional shares, rounded to the nearest whole unit. For the 20172019 grant, the CommitteeCHRC selected ROEReturn on Equity (ROE) as the PRSU performance measure as it aligns management with shareholdersshareholders’ interests by measuring and rewarding profitability relative to shareholders’ investment in the business. The ROE target level was designed to be reasonably achievable with strong management performance. The PRSUs cliff vest at the enduse of the 2017-2019 performance period based on average ROE overmetric and the full three-year period. The Options vest equally in one-third increments beginning on the first anniversarydetermination of the grant date. In February 2017 and 2018, the Committee approved LTI awards that were initially sized at the 50thand 75thpercentile, respectively,performance hurdle for each performance cycle are calibrated with historical performance of the benchmarked LTI valuescompensation and competitor peer groups (as well as S&P 500 Industrials more broadly) and are intended to reward for the Company’s compensation peer group. The Committee viewed these levels of LTI award as appropriate in view of the Company’s 1, 3 and 5-year relative TSR and financial performance at the end of 2016 and 2017, respectively. The Committee further adjusted the LTI awards to reflect the individual performance of each NEO. In light of the Company’s strong financial results and Mr. Umpleby’s superior performance in 2017, in March 2018 the Committee awarded Mr. Umpleby a LTI award that was sized at the 80th percentile of the Company’s peer group.
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The Committee’s process for awarding LTI grant values for NEOs is as follows:
1 | Benchmark the median LTI value for the Company’s compensation peer group. |
2 | Review and consider financial results: 1, 3 and 5-year TSR (vs. the S&P Industrials, Compensation Peer Group and Competitor Peer Group); operational performance; market conditions and strategy execution. |
3 | Adjust award values to reflect individual performance including consistency of performance against goals, leadership contributions, time in role and other relevant factors. |
2015 – 2017 Performance Restricted Stock Units (PRSUs)
For the 2015 grant, one-third of the PRSUs were eligible to vest annually based on three annual 18% ROE hurdles. In addition, any PRSUs that did not vest based on the annual performance hurdle had the opportunity to vest based on the achievement of a three-year average ROE of 18% duringsustained, long-term returns throughout the performance period. Beginningcycles in 2016, the Committee adjusted the vesting terms of future PRSU grants to remove the annual vesting feature and instead to provide for cliff vesting of the entire grant at the end of the three-year performance period subject to achieving the applicable ROE hurdle.
In each of 2015 and 2016, the Company achieved (respectively) 13.3% and 14.3% adjusted ROE, and accordingly none of the PRSUs vested in those years. In 2017, the Company’s adjustedbusiness. The CHRC believes that a strong focus on ROE was 30.6%reinforces effective capital management along with the need to deliver returns above the cost of capital even in a highly cyclical and the three-year average was 19.4%. As a result, 100% of the 2015 PRSU award vested.often challenging macro-economic operating environment, thus aligning leadership priorities with long-term shareholder interests. The table below describes the Company’s ROE performance and PRSU vesting results for the 2015 – 2017 performance period:
2015-2017 PRSUs | |  |
The Committeeis annually reviews the Company’s ROE performancereviewed including any one-time, non-operational or other special items that might impact the ROE result. The Committee recognizes that althoughAlthough certain of these items may significantly impact the Company’s reported financial results, they are not always indicative of the underlying operational performance of the Company or itsmanagement.its management. To that end, in its evaluation of the Company’s ROE results, the Committee usedCHRC uses its discretion to make adjustments to ROE to align compensation outcomes with the operating performance of the Company.
The CHRC’s process for sizing and awarding LTI grant values for NEOs is as follows: 1 | Benchmark the median LTI value for the Company’s compensation peer group | 2 | Review and consider financial results: 1-,3-and5-yearTSR (vs. the S&P 500 Industrials, Compensation Peer Group and Competitor Peer Group); operational performance; market conditions; and strategy execution | 3 | Adjust award values toreflectindividualperformance including consistency of performance against goals, leadership contributions, time in role and other relevant factors |
In February 2019, the CHRC reviewed the Company’s 1-, 3- and 5-year relative TSR and financial performance at the end of 2018. As TSR captures volatility in share price which may not fully reflect the Company’s underlying performance, other factors such as strategy execution and consistency of performance against goals are considered when determining LTI awards. Therefore, the LTI award for the CEO was at 50th percentile of the benchmarked LTI values of the Company’s compensation peer group and at or below 50th percentile for the other NEOs. 2020 PROXY STATEMENT 38
Back to Contents RELATIVE TSR PERFORMANCE (PERCENTILE RANKING VS. PEERS) Performance Period | Compensation Peer Group | Competitor Peer Group | S&P 500 Industrials | 1-Year | 44th | 83rd | 37th | 3-Year | 89th | 83rd | 92nd | 5-Year | 72nd | 83rd | 52nd | Grant Sizing | 50th Percentile |
2017 – 2019 PERFORMANCE RESTRICTED STOCK UNITS (PRSUs) For the 20152017 – 20172019 performance period, the Committeeadjustments were made adjustments to the ROE to account for certain restructuring costs, the impacteffect of a goodwill impairment charge, the effect of | 2018 Proxy Statement | | | |37
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an accounting principle change impacting the accounting for pension and other post-employment benefits and the impact of the 2017 tax reform legislation in the U.S. The Committee also excluded gainsGains from divestitures were excluded as well asdeferredas deferred tax valuation allowance adjustments. In each case, the CommitteeCHRC determined that these adjustments were an appropriate use of its discretion and in the best interestinterests of the Company and its shareholders. STRATEGIC PERFORMANCE PLAN (SPP)
Mr. De Lange isFor the only NEO to participate in2017 grant, the 2015 – 2017 SPP since he was not an executive officer in 2015.PRSUs cliff vested based on a three-year average adjusted ROE result of 40.9 percent, which exceeded the goal of 13 percent. The 2015 – 2017 SPP performance cycle was the final SPP cycle prior tochart below describes the Company’s introduction of PRSUs.
The 2015-2017 SPPROE performance cycle concluded in 2017 with a weighted-average performance factor of 1.17. The measures in this performance cycle were established in February 2015 and were comprised of two components – Earnings Per Share (EPS) and Relative TSR (versus S&P Industrials). In its evaluation of the results the Committee noted the impact of a goodwill impairment charge, the effect of an accounting principle change impacting the accounting for pension and other post-employment benefitsand the impact of the 2017 tax reform legislation in the U.S. The Committee viewed the goodwill impairment charge as neither indicative of the Company’s underlying– 2019 performance nor that of the NEOs and acknowledged the impact of both the accounting change and the tax legislation were not contemplated when the 2015-2017 SPP was developed. Accordingly, the Committee excluded the impact of these expenses, as well as excluding gains from divestitures and deferred tax valuation allowance adjustments from EPS when evaluating and approving the results below. Had the Committee not excluded these items, the overall payout factor for the 2015 – 2017 performance period would have been 0.50.
| PERFORMANCE MEASURE | WEIGHTING | | THRESHOLD
(30% PAYOUT) | | TARGET
(100% PAYOUT) | | MAXIMUM
(200% PAYOUT) | | RESULTS | | PAYOUT
FACTOR | | Adjusted EPS1 | 75% | | $3.50 | | $4.75 | | $5.70 | | $4.57 | | 0.90 | | Relative TSR vs. S&P Industrials | 25% | | 25th Percentile | | 55th Percentile | | 75th Percentile | | 91st Percentile | | 2.00 | | | | | | | | Overall Weighted Factor: | | 1.17 |
1 Average of 2015-2017 adjusted EPS. All EPS figures are adjusted to exclude the following: restructuring costs, 2016 goodwill impairment, 2016 and 2017 effect of an accounting principle change effective January 1, 2016 impacting the accounting for pension and other post-employment benefits, 2017 gain on divestitures, 2016 and 2017 deferred tax valuation allowance adjustments, and 2017 impact of U.S. tax reform.period:
2015 – 2017 PERFORMANCE PERIOD PAYMENTS2017-2019 PRSUs
| NEO | TARGET OPPORTUNITY1 | | FINAL FACTOR | | PAYOUT | | De Lange | 80% of Salary | X | 1.17 | = | $ | 465,277 |
1 Based on pro-rated salary during the performance period.
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RETIREMENT OF BRADLEY M. HALVERSON
On July 31, 2017, Bradley M. Halverson provided notice of his decision to retire as Group President and Chief Financial Officer of the Company. In connection with Mr. Halverson’s retirement, the Company entered into a Retention and Retirement Agreement with Mr. Halverson (the “Agreement”), dated July 31, 2017. Pursuant to the terms of the Agreement as amended, (i) Mr. Halverson will receive a cash payment of $2,612,250 payable as soon as practicable after his retirement effective May 4, 2018, and (ii) Mr. Halverson’s outstanding equity awards will be treated in accordance with their terms, except that the performance-based restricted stock award granted to Mr. Halverson in 2017 will not be prorated. The Agreement also contains various covenants, including restrictive covenants relating to non-competition, non-solicitation, non-disparagement, confidentiality and cooperation.
POST-TERMINATION AND CHANGE IN CONTROL BENEFITS The Company’s change in control provisions are subject to a “double trigger,” and when both a change in control and involuntary termination of employment without cause occur, provide accelerated vesting and maximum payouts under the incentive plans, as described further below.
Except for customary provisions in employee benefit plans and as required by applicable law, the NEOs do not have any pre-existing executive severance packages or contracts; however, the CommitteeCHRC will consider the particular facts and circumstances of an NEO’s separation to determine whether payment of any severance or other benefit to such NEO is appropriate. Change in control benefits are provided under the Company’s long-term and annual incentive plans and represent customary provisions for these types of plans and have no direct correlation with other compensation decisions. There is no cash severance or other benefits for a termination related to change in control beyond what is provided for under the long-term and annual incentive plans. Additional information is disclosedThe Company’s change in control provisions are subject to a “double trigger” and, when both a change in control and involuntary termination of employment without cause occur, provide accelerated vesting and target payouts under the “Potential Payments Upon Termination or Change in Control” beginning on page 48 of this proxy statement.incentive plans, as described further below.
In the event of a qualifying termination of employment following a change in control, maximumtarget payouts are provided under the long-termincentive plans. ■ All unvested stock options, stock appreciation rights, performance-based restricted stock units and restricted stock units vest immediately. ■ Stock options and stock appreciation rights remain exercisable over the normal life of the grant. ■ The annual incentive plan and annual incentive plan.allows for the target award opportunity, prorated based on the individual’s time of employment from the beginning of the performance period through the later of: (1) the change in control or (2) termination of employment. ● | The long-term plan allows for the maximum performance level to be paid under each open plan cycle of the long-term cash plan.
| ● | All unvested stock options, stock appreciation rights, PRSUs and restricted stock units vest immediately.
| ● | Stock options and stock appreciation rights remain exercisable over the normal life of the grant.
| ● | The annual incentive plan allows for the target award opportunity, prorated based on the individual’s time of employment from the beginning of the performance period through the later of: (1) the change in control or (2) termination of employment. |
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TableAdditional information is disclosed in the “Potential Payments Upon Termination or Change in Control” section of Contentsthis proxy statement.
2020 PROXY STATEMENT 39
Back to Contents RETIREMENT AND OTHER BENEFITS In addition to the annual and long-term components of compensation, NEOs participate in health and welfare benefit plans generally available to employees to provide competitive benefits. The defined contribution and defined benefit retirement plans available to the NEOs are also available to many U.S. Caterpillar management and salaried employees. Under the defined benefit pension plans, the benefit is calculated based on years of service and final average monthly earnings. All of the NEOs participate in one or more of the U.S. retirement plans described in the following table, except as otherwise provided below.table: PLAN
TYPEPlan Type | TITLETitle | DESCRIPTIONDescription |  | | |  | | | RETIREMENT INCOME
PLAN (RIP) | Defined benefit pension plan under which benefit amounts are calculated based on years of service and final average monthly earnings and offer annuity payments. On December 31, 2014, the Solar Turbines Incorporated Retirement Plan merged with and into RIP wasand is now a supplement to RIP as of January 1, 2015. As a result, all references herein to “Solar RP” shall refer to benefits accrued under the Solar Turbines Incorporated Retirement Plan supplement to RIP. Solar RP and RIP were closed to new entrants effective January 1, 2011. All U.S.-based NEOs, except (i) Mr. Charter who participates in the Company’s Australian-based defined benefit pension plan and (ii) Mr. De Lange who becameBenefits were frozen for most participants; however, a U.S. based employee after the plan was frozen to new entrants, participate in this plan and, subject to the Company’s right to amend or terminate the plan, continue to earngroup of “Sunset” participants accrued benefits under RIP until the earlier of their separation from service or December 31, 2019. | Sunset participants were hired prior to January 1, 2003, and were age 40 or more as of December 31, 2010. Mr. Umpleby earned benefits under RIP through December 31, 2019. | SUPPLEMENTALSOLAR MANAGERIAL RETIREMENT
OBJECTIVE PLAN (SERP) (MRO) | Non-qualified defined benefit pension plan that works in tandem with the Solar RP supplement to RIP. SERPMRO pays an additional benefit that would otherwise have been paid under Solar RP if cash incentive awards were taken into account under Solar RP. MRO also provides additional pension benefits if the NEO’sSolar RP benefit is limited due to thecertain compensation and annual benefit limits imposed on RIP by the tax code. SERP also pays a benefit that would otherwise have been paid under RIP but for (1) the NEO’s deferral of compensation under SDCP, SEIP or DEIP and (2) exclusions of lump sum discretionary awards and variable base pay from RIP earnings. Subject to the Company’s right to amend or terminate the plan, all U.S.-based NEOs except Messrs. Umpleby and De Lange continue to earn SERP benefits until the earlier of separation or December 31, 2019. Mr. Umpleby participates in a Solar Turbines Incorporated sponsored non-qualified defined benefit pension plan, which is similar to SERP. Subject to the Company’s right to amend or terminate the plan, Mr. Umpleby continues to earnearned benefits until the earlier of separation orunder MRO through December 31, 2019. | |  | CATERPILLAR 401(k) PLANS |
| | | | CATERPILLAR 401(K)
PLANS | U.S.-based NEOs who participatecontinued to earn benefits in a pension plan arewere eligible to participate in thea Caterpillar 401(k) Savings Planplan under which the Company matchesmatched 50 percent of the first 6six percent of the NEO’s eligible pay contributed to the savings plan. Mr. De Lange, who does not401(k). All other U.S.-based NEOs participate in a pension plan, also participates in the Caterpillar 401(k) Savings Plan,plan under which the Company matches 100 percent of the first 6six percent of eligible pay contributed by the participant, and the Company makes an annual non-elective contribution equal to 3%, 4%three percent, four percent or 5%five percent of eligible pay based on the employee’s age and years of service with the Company. | | SUPPLEMENTAL DEFERRED
COMPENSATION PLAN
(SDCP) | All U.S.-based NEOs who are eligible to participate in a Caterpillar 401(k) plan are eligible to participate in SDCP, which provides the opportunity to make deferrals of base salary in excess of the limits imposed on the 401(k) plans by the Internal Revenue Code and to elect deferrals from the AIP and the SPP.STIP. Under the terms of SDCP, participants are eligible to earn matching contributions and annual non-elective contributions based on formulas applicable to them in the Caterpillar 401(k) plans. | | SUPPLEMENTAL
(SEIP) AND DEFERRED
(DEIP) EMPLOYEES’
INVESTMENT PLAN | All U.S.-based NEOs hired prior to March 25, 2007 were previously eligible to participate in SEIP and DEIP. These plans were closed in March 2007. Compensation deferred into SEIP and DEIP prior to January 1, 2005 remains in these plans. | | | | |
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| | | | 2018 Proxy Statement |
2020 PROXY STATEMENT 40
Back to Contents Table of Contents
LIMITED PERQUISITES The Company provides NEOs a limited number of perquisites that the CommitteeCHRC believes are reasonable and consistent with the overall compensation program and those commonly provided in the marketplace. The Committee annually reviews the levels of perquisites provided to the NEOs which include, among other things, home security systems and limited personal use of the Company aircraft and ground transportation. These perquisites are provided to attract and retain talented executive officers,intended to provide for adequatethe security and safety of our executives andas well as to allow the NEOs to devote additional time to devote to Caterpillar business. CostsPerquisites include executive physicals, financial planning, home and personal security and limited use of company aircraft and ground transportation. The costs associated with these perquisites are included in the “2017“2019 All Other Compensation Table” on page 43.Table.” Additionally, in connection with the Company’s relocation of its corporate headquarters to Deerfield, Illinois, certain employees who also relocated to Deerfield received benefits pursuant to the Company’s corporate relocation program. Pursuant to this relocation program, during 2017, each NEO received relocation benefits. These relocation benefits were deemed to be important in retaining our employees in connection with our corporate relocation.
CLAWBACK POLICY Under the Company’s compensation clawback policy, the Board may require reimbursement of any bonus or incentive compensation awarded to an officer or cancel unvested restricted or deferred stock awards previously granted to the officer if all of the following apply: ● | The amount of the bonus, incentive compensation or stock award was calculated based on the achievement of certain financial results that were subsequently the subject of a restatement.
| ● | The officer engaged in intentional misconduct that caused or partially caused the need for the restatement.
| ● | The amount of the bonus, incentive compensation or stock award that would have been awarded to the officer had the financial results been properly reported would have been lower than the amount actually awarded.
|
■ The amount of the bonus, incentive compensation or stock award was calculated based on the achievement of certain financial results that were subsequently the subject of a restatement. ■ The officer engaged in intentional misconduct that caused or partially caused the need for the restatement. ■ The amount of the bonus, incentive compensation or stock award that would have been awarded to the officer had the financial results been properly reported would have been lower than the amount actually awarded. NO HEDGING OR PLEDGING The Company’s insider trading policy prohibits directors, officers and employees from engaging in hedging transactions, holding Company securities in a margin account or otherwise pledging Company securities. TAX IMPLICATIONS: DEDUCTIBILITY OF NEO COMPENSATION Under Section 162(m) of the Internal Revenue Code, generally NEO compensation over $1 million for any year is not deductible for United States income tax purposes. Historically, there was an exemption from this $1 million deduction limit for compensation payments that qualified as “performance-based” under applicable IRS regulations. With the enactment of the 2017 Tax Cuts and Jobs Act, the performance-based compensation exemption has beenwas eliminated under Section 162(m) of the Internal Revenue Code, except with respect to certain grandfathered arrangements. While the Committee considers the deductibility of compensation as one factor, the CommitteeThe CHRC believes that it must maintain flexibility in its approach to executive compensation in order to structure a program that it considers to be the most effective in attracting, motivating and retaining the Company’s key executives.executives, and therefore, the deductibility of compensation is one of several factors considered when making executive compensation decisions. COMPENSATION AND HUMAN RESOURCES COMMITTEE REPORT The Compensation and Human Resources Committee (“CHRC”)(CHRC) has reviewed and discussed the Compensation Discussion & Analysis (CD&A) included in this proxy statement with management and is satisfied that the CD&A fairly and completely represents the philosophy, intent and actionsofactions of the CommitteeCHRC with regard to executive compensation. Based on such review and discussion, we recommend to the Board that the CD&A be included in this proxy statement and the Company’s Annual Report on Form 10-K for filing with the SEC. By the members of the Compensation and Human Resources Committee: Miles D. White (Chairman) Debra L. Reed-Klages Rayford Wilkins, Jr. 2020 PROXY STATEMENT 41
Back to Contents 2019SUMMARYCOMPENSATIONTABLE Name and
Principal Position | Year | | Salary | | Bonus | Stock
Awards(1) | Option
Awards(2) | Non-equity
Incentive Plan
Compensation(3) | Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings(4) | All Other
Compensation(5) | Total Compensation | Total
Without
Change in
Pension
Value(6) | D. James Umpleby III
Chairman & CEO | 2019 | $ | 1,575,000 | $ | — | $ | 5,450,022 | $ | 6,704,943 | $ | 2,336,000 | $ | 18,161,210 | $ | 291,954 | $ | 34,519,129 | $ | 16,357,919 | 2018 | $ | 1,425,000 | $ | — | $ | 6,499,973 | $ | 8,448,354 | $ | 4,742,000 | $ | 5,891,465 | $ | 282,721 | $ | 27,289,513 | $ | 21,398,048 | | 2017 | $ | 1,200,000 | $ | 1,070,000 | $ | 3,288,528 | $ | 5,361,394 | $ | 2,430,000 | $ | — | $ | 685,287 | $ | 14,035,209 | $ | 14,035,209 | Andrew R. J. Bonfield
CFO | 2019 | $ | 824,000 | $ | — | $ | 1,799,934 | $ | 2,214,477 | $ | 730,000 | $ | — | $ | 479,732 | $ | 6,048,143 | $ | 6,048,143 | 2018 | $ | 266,667 | $ | 800,000 | $ | 4,450,025 | $ | 993,465 | $ | 585,000 | $ | — | $ | 86,030 | $ | 7,181,187 | $ | 7,181,187 | Denise C. Johnson
Group President | 2019 | $ | 808,875 | $ | — | $ | 1,799,934 | $ | 2,214,477 | $ | 840,000 | $ | — | $ | 243,684 | $ | 5,906,970 | $ | 5,906,970 | 2018 | $ | 763,002 | $ | — | $ | 2,000,073 | $ | 2,599,472 | $ | 1,677,000 | $ | — | $ | 157,034 | $ | 7,196,581 | $ | 7,196,581 | William P. Ainsworth
Group President | 2019 | $ | 754,250 | $ | — | $ | 1,799,934 | $ | 2,214,477 | $ | 744,000 | $ | — | $ | 30,499 | $ | 5,543,160 | $ | 5,543,160 | Bob De Lange
Group President | 2019 | $ | 761,800 | $ | — | $ | 1,600,018 | $ | 1,968,433 | $ | 820,000 | $ | — | $ | 281,928 | $ | 5,432,179 | $ | 5,432,179 | 2018 | $ | 725,001 | $ | — | $ | 2,149,984 | $ | 2,794,444 | $ | 1,180,000 | $ | — | $ | 453,190 | $ | 7,302,619 | $ | 7,302,619 | 2017 | $ | 664,221 | $ | — | $ | 1,224,639 | $ | 1,996,648 | $ | 1,381,917 | $ | — | $ | 2,455,278 | $ | 7,722,703 | $ | 7,722,703 | (1) The amounts reported in this column represent PRSUs granted in 2019 under the Caterpillar Inc. 2014 Long-Term Incentive Plan (LTIP) and are valued based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, assuming the highest level of performance is achieved for the PRSUs, which at the time of grant reflected the probable level of achievement. Assumptions made in the calculation of these amounts are included in Note 3 “Stock-based compensation” to the Company’s consolidated financial statements for the fiscal year ended December 31, 2019, included in the Company’s Form 10-K filed with the SEC on February 19, 2020. (2) The amounts reported in this column represent non-qualified stock options granted under the LTIP that are valued based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. Assumptions made in the calculation of these amounts are included in Note 3 “Stock-based compensation” to the Company’s consolidated financial statements for the fiscal year ended December 31, 2019, included in the Company’s Form 10-K filed with the SEC on February 19, 2020. (3) The amounts in this column reflect the AIP payments for 2019 for all NEOs except Mr. Ainsworth whose incentive plan compensation consisted of both AIP and STIP. (4) Because no “preferred” or “above market” earnings on compensation deferred into SDCP, SEIP, and/or DEIP are received, the amount shown represents only the change between the actuarial present value of each NEO’s total accumulated pension benefit between December 31, 2018 and December 31, 2019. The amount reported for Mr. Umpleby assumes the pension benefit is payable at his earliest unreduced retirement age. Upon his initial hire with Solar Turbines Inc, a wholly owned subsidiary of Caterpillar, on July 7, 1980, Mr. Umpleby became eligible to participate in the Solar Turbines Inc. Retirement Plan and the Solar Turbines Incorporated Managerial Retirement Objective Plan (Solar MRO). The Solar Turbines Inc. Retirement Plan was merged into the Retirement Income Plan (RIP) as of January 1, 2015; however, all benefit and eligibility provisions of the plan remain unchanged in the merger as described in Supplement O (Solar RP) to RIP. Mr. Umpleby’s change in pension value was primarily due to an increase in his annual pensionable earnings (which include base and annual cash incentive pay) resulting from an additional year of compensation as CEO. The pension benefit is based on the average of the highest consecutive 36 months of pensionable earnings in the 10-year period prior to the determination date of December 31, 2019, the same date on which the Solar RP and Solar MRO were frozen for all participating employees, including Mr. Umpleby. During Mr. Umpleby’s tenure as CEO, there have been no changes made to the plans’ benefit formula provisions (other than to freeze benefit accruals) and Mr. Umpleby’s benefit is determined in the same manner as any similarly situated management employee with a similar service and compensation history. (5) All Other Compensation detail for 2019 is shown in a separate table appearing on the next page. (6) To demonstrate how year-over-year changes in pension value impact total compensation, as determined under SEC rules, we have included this column to show total compensation without pension value changes. The amounts reported in this column are calculated by subtracting the change in pension value reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column, from the amounts reported in the Total Compensation column. The amounts reported in this column differ from, and are not a substitute for, the amounts reported in the Total Compensation column. |
2020 PROXY STATEMENT 42
Back to Contents 2019ALLOTHERCOMPENSATIONTABLE Name | Company Contributions 401(k) | Company Contributions SDCP | Corporate Aircraft/ Transportation(1) | Personal Security(2) | | Other(3) | | Total All
Other Compensation | D. James Umpleby III | $ | 7,500 | $ | 181,110 | $ | 62,494 | $ | 23,355 | $ | 17,495 | $ | 291,954 | Andrew R. J. Bonfield | $ | 14,333 | $ | 41,440 | $ | 2,235 | $ | 4,764 | $ | 416,960 | $ | 479,732 | Denise C. Johnson | $ | 27,441 | $ | 191,242 | $ | 6,780 | $ | 726 | $ | 17,495 | $ | 243,684 | William P. Ainsworth | $ | 25,454 | $ | — | $ | 3,007 | $ | — | $ | 2,038 | $ | 30,499 | Bob De Lange | $ | 45,343 | $ | 177,430 | $ | 2,986 | $ | 1,426 | $ | 54,743 | $ | 281,928 | (1) Values in this column, except as below, include the value of personal aircraft usage based on Caterpillar’s incremental cost per flight hour, including the weighted average variable operating cost of fuel, oil, aircraft maintenance, landing and parking fees, related ground transportation, catering and other smaller variable costs. Mr. Umpleby and the Company have a time-sharing lease agreement, pursuant to which certain costs associated with personal flights are reimbursed by Mr. Umpleby to the Company in accordance with the agreement. A car allowance for Mr. Ainsworth (which ceased upon his appointment to Group President) of $2,769 and the cost of executive transportation provided to Mr. Umpleby of $2,435, Mr. Bonfield of $2,235, Ms. Johnson of $6,780 and Mr. De Lange of $2,770 are included in the totals. (2) Amounts reported for personal security represent the cost provided by outside security providers for installation, monitoring and maintenance of home security and smart home services and for reputation and identity theft protection. The incremental cost associated with the security services is determined based upon the amounts paid to these outside service providers. (3) Values in this column, except as below, include the cost for executive physicals and financial planning services. The incremental cost associated with these services is determined based upon the amounts paid to the approved service providers. The amount reported for Mr. Bonfield also includes relocation expenses of $412,965. Mr. De Lange was previously an International Service Employee (ISE). The amount reported includes payments made in 2019 related to Mr. De Lange’s previous ISE service including Company paid taxes of $36,056 and tax preparation fees of $2,693. |
2020 PROXY STATEMENT 43
Back to Contents GRANTSOFPLAN-BASEDAWARDSIN2019 Name | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Option Awards: Number of Securities Underlying Options(3) (#) | Exercise or Base Price of Option
Awards ($/Share) | Grant Date
Fair Value
of Stock
and Option
Awards ($)(4) | Grant Date | | Threshold ($) | Target ($) | Maximum ($) | | Target (#) | D. James Umpleby III | 3/4/2019 | | | — | | — | | — | | 39,393 | — | $ | — | $ | 5,450,022 | 3/4/2019 | | | — | | — | | — | | — | 163,615 | $ | 138.35 | $ | 6,704,943 | AIP | (5) | $ | 1,378,425 | $ | 2,756,849 | $ | 5,513,698 | | — | — | $ | — | $ | — | Andrew R. J. Bonfield | 3/4/2019 | | | — | | — | | — | | 13,010 | — | $ | — | $ | 1,799,934 | 3/4/2019 | | | — | | — | | — | | — | 54,038 | $ | 138.35 | $ | 2,214,477 | | | | | | | | | | | | | | | | AIP | (5) | $ | 473,863 | $ | 947,726 | $ | 1,895,452 | | — | — | $ | — | $ | — | Denise C. Johnson | 3/4/2019 | | | — | | — | | — | | 13,010 | — | $ | — | $ | 1,799,934 | 3/4/2019 | | | — | | — | | — | | — | 54,038 | $ | 138.35 | $ | 2,214,477 | AIP | (5) | $ | 465,195 | $ | 930,389 | $ | 1,860,778 | | — | — | $ | — | $ | — | William P. Ainsworth | 3/4/2019 | | | — | | — | | — | | 13,010 | — | $ | — | $ | 1,799,934 | 3/4/2019 | | | — | | — | | — | | — | 54,038 | $ | 138.35 | $ | 2,214,477 | AIP/STIP | (5) | $ | 414,556 | $ | 829,112 | $ | 1,658,224 | | — | — | $ | — | $ | — | Bob De Lange | 3/4/2019 | | | — | | — | | — | | 11,565 | — | $ | — | $ | 1,600,018 | 3/4/2019 | | | — | | — | | — | | — | 48,034 | $ | 138.35 | $ | 1,968,433 | AIP | (5) | $ | 438,080 | $ | 876,159 | $ | 1,752,318 | | — | — | $ | — | $ | — |
 |  |  | Miles D. White
(Chairman) | David L. Calhoun | Debra L. Reed(1) The amounts reported represent estimated potential awards under the 2019 AIP for all NEOs other than Mr. Ainsworth who also participated in the 2019 STIP for the portion of the year prior to his appointment to Group President. (2) The amounts reported in this column represent estimated potential awards under the LTIP. PRSUs were granted on March 4, 2019 under the LTIP for the 2019-2021 performance period. PRSUs vest at the end of a three-year performance period subject to the Company’s achievement of an average ROE performance hurdle during that period. There is no threshold or maximum payout opportunity with respect to these PRSUs. (3) Amounts reported represent stock options granted under the LTIP. The exercise price for all stock options granted to the NEOs is the closing price of Caterpillar stock on the grant date. All stock options granted to the NEOs will vest in one-third increments on March 4, 2020, March 4, 2021 and March 4, 2022. (4) The amounts shown do not reflect realized compensation by the NEO. As reported in this column, the value of PRSUs granted in 2019 under the LTIP are based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, assuming the highest level of performance is achieved for the PRSUs, which at the time of the grant reflected the probable level of achievement. (5) The 2019 AIP and STIP estimates shown are based upon each executive’s base salary for 2019. The actual payout was based on the achievement of corporate and business unit performance metrics and the Strategic Objectives Modifier. Please refer to page 36 of the CD&A for a detailed explanation of the various performance metrics. Payments under AIP are limited by a plan cap set at $15 million. The cash payouts for the 2019 plan year are included in the column “Non-equity Incentive Plan Compensation” of the “2019 Summary Compensation Table.” |
Table of Contents
2017 SUMMARY COMPENSATION TABLE
NAME AND
PRINCIPAL POSITION | | YEAR | | SALARY | | BONUS | | | STOCK
AWARDS2 | | OPTION
AWARDS3 | | NON-EQUITY
INCENTIVE PLAN
COMPENSATION4 | | CHANGE IN
PENSION VALUE
AND
NONQUALIFIED
DEFERRED
COMPENSATION
EARNINGS5 | | ALL OTHER
COMPENSATION6 | | SEC TOTAL | | SEC TOTAL
WITHOUT
CHANGE IN
PENSION
VALUE7 | D. James Umpleby, III
CEO | | 2017 | | $ | 1,200,000 | | $ | 1,070,000 | 1 | | $ | 3,288,528 | | $ | 5,361,394 | | | $ | 2,430,000 | | | | $ | — | | | | | $ | 685,287 | | | $ | 14,035,209 | | $ | 14,035,209 | | 2016 | | $ | 825,636 | | $ | — | | | $ | 1,166,657 | | $ | 2,353,971 | | | $ | 858,138 | | | | $ | 62,688 | | | | | $ | 27,097 | | | $ | 5,294,187 | | $ | 5,231,499 | | 2015 | | $ | 815,805 | | $ | — | | | $ | 1,264,698 | | $ | 4,154,987 | | | $ | 247,726 | | | | $ | 2,582,073 | | | | | $ | 83,085 | | | $ | 9,148,374 | | $ | 6,566,301 | Bradley M. Halverson
Group President & CFO | | 2017 | | $ | 804,078 | | $ | — | | | $ | 2,367,6838 | | $ | 2,218,512 | | | $ | 1,387,174 | | | | $ | 444,299 | | | | | $ | 380,950 | | | $ | 7,602,696 | | $ | 7,158,397 | | 2016 | | $ | 786,312 | | $ | — | | | $ | 1,080,269 | | $ | 2,179,625 | | | $ | 852,957 | | | | $ | 231,289 | | | | | $ | 96,250 | | | $ | 5,226,702 | | $ | 4,995,413 | | 2015 | | $ | 786,312 | | $ | — | | | $ | 1,127,963 | | $ | 3,705,673 | | | $ | 244,440 | | | | $ | 2,293,173 | | | | | $ | 90,933 | | | $ | 8,248,494 | | $ | 5,955,321 | Robert B. Charter
Group President | | 2017 | | $ | 756,192 | | $ | — | | | $ | 1,678,238 | | $ | 2,736,169 | | | $ | 1,244,626 | | | | $ | 397,794 | 9 | | | | $ | 714,835 | | | $ | 7,527,854 | | $ | 7,130,060 | | 2016 | | $ | 729,768 | | $ | 500,000 | | | $ | 984,692 | | $ | 1,986,744 | | | $ | 818,510 | | | | $ | 189,327 | | | | | $ | 247,311 | | | $ | 5,456,352 | | $ | 5,267,025 | | 2015 | | $ | 729,768 | | $ | 300,000 | | | $ | 1,046,232 | | $ | 3,437,148 | | | $ | 190,994 | | | | $ | 845,918 | | | | | $ | 541,566 | | | $ | 7,091,626 | | $ | 6,245,708 | Bob De Lange
Group President
| | 2017 | | $ | 664,221 | | $ | — | | | $ | 1,224,639 | | $ | 1,996,648 | | | $ | 1,381,917 | | | | $ | — | 10 | | | | $ | 2,455,278 | | | $ | 7,722,703 | | $ | 7,722,703 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Thomas Pellette
Group President | | 2017 | | $ | 756,192 | | $ | — | | | $ | 1,587,553 | | $ | 2,588,260 | | | $ | 1,304,639 | | | | $ | 478,939 | | | | | $ | 621,423 | | | $ | 7,337,006 | | $ | 6,858,067 |
1This amount represents a $1,070,000 discretionary cash award described on page 36 under the heading “2017 Annual Incentive Payments.”
2Except as otherwise described for Mr. Halverson in footnote 8 below, the amounts reported in this column represent PRSUs granted in 2017 under the Caterpillar Inc. 2014 Long-Term Incentive Plan (LTIP) and are valued based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, assuming the highest level of performance is achieved for the PRSUs, which at the time of grant reflected the probable level of achievement. Assumptions made in the calculation of these amounts are included in Note 2 “Stock-based compensation” to the Company’s consolidated financial statements for the fiscal year ended December 31, 2017, included in the Company’s Form 10-K filed with the SEC on February 15, 2018.
3The amounts reported in this column represent Non-Qualified Stock Options (NQs) granted under the LTIP that are valued based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. Assumptions made in the calculation of these amounts are included in Note 2 “Stock-based compensation” to the Company’s consolidated financial statements for the fiscal year ended December 31, 2017, included in the Company’s Form 10-K filed with the SEC on February 15, 2018.
4The amounts in this column reflect the AIP payments for 2017. The amount for Mr. De Lange also includes a cash incentive payment for the 2015-2017 performance cycle of $465,277.
5Because NEOs do not receive “preferred” or “above market” earnings on compensation deferred into SDCP, SEIP and/or DEIP, the amount shown represents only the change between the actuarial present value of each NEO’s total accumulated pension benefit between December 31, 2016 and December 31, 2017. The amount assumes the pension benefit is payable at each NEO’s earliest unreduced retirement age based upon the NEO’s current pensionable earnings.
6All Other Compensation detail for 2017 is shown in a separate table appearing on the next page.
7To demonstrate how year over year changes in pension value impact total compensation, as determined under SEC rules, we have included this column to show total compensation without pension value changes. The amounts reported in this column are calculated by subtracting the change in pension value reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column, from the amounts reported in the SEC Total column. The amounts reported in this column differ from, and are not a substitute for, the amounts reported in the SEC Total column.
8For Mr. Halverson, this amount also includes the incremental fair value associated with the modification to his outstanding 2017 PRSU award totaling $1,006,886 as described under the heading “Retirement of Bradley M. Halverson.” Pursuant to the SEC disclosure rules, removal of the pro-rata vesting provision is considered a modification resulting in additional compensation being reported in the year of modification. Under ASC 718, the incremental fair value associated with such modification is calculated based on the value of the company’s common stock at the time of modification.
9The amount reported for Mr. Charter has been converted to U.S. dollars using the exchange rate in effect on December 31, 2017 (1 Australian dollar = 0. 78015 U.S. dollar).
10Mr. De Lange ceased participation in the Swiss pension plan effective December 31, 2016. Mr. De Lange received a distribution of his entire plan benefit, based on a December 31, 2016 valuation, in January 2017 and no longer has a balance in the Swiss plan.
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| | | | 2018 Proxy Statement |
Table of Contents
2017 ALL OTHER COMPENSATION TABLE
| NAME | | MATCHING
CONTRIBUTIONS
401(K) | | MATCHING
CONTRIBUTIONS
SDCP | | CORPORATE
AIRCRAFT/
TRANSPORTATION1 | | HOME
SECURITY2 | | OTHER3 | | TOTAL ALL OTHER
COMPENSATION | | D. James Umpleby, III | | | $ | 8,078 | | | | $ | 34,493 | | | | $ | 18,611 | | | | $ | 39,000 | | | $ | 585,105 | | | | $ | 685,287 | | | Bradley M. Halverson | | | $ | 8,009 | | | | $ | 22,460 | | | | $ | 5,788 | | | | $ | 44,454 | | | $ | 300,239 | | | | $ | 380,950 | | | Robert B. Charter | | | $ | 7,386 | | | | $ | 23,263 | | | | $ | 189 | | | | $ | 772 | | | $ | 683,225 | | | | $ | 714,835 | | | Bob De Lange | | | $ | 3,309 | | | | $ | 33,235 | | | | $ | 107 | | | | $ | 45,125 | | | $ | 2,373,502 | 4 | | | $ | 2,455,278 | | | Thomas Pellette | | | $ | 8,100 | | | | $ | 7,237 | | | | $ | 197 | | | | $ | 7,651 | | | $ | 598,238 | | | | $ | 621,423 | |
1The value of personal aircraft usage reported above is based on Caterpillar’s incremental cost per flight hour, including the weighted average variable operating cost of fuel, oil, aircraft maintenance, landing and parking fees, related ground transportation, catering and other smaller variable costs. Mr. Umpleby and the Company have a time-sharing lease agreement, pursuant to which certain costs associated with personal flights are reimbursed by Mr. Umpleby to the Company in accordance with the agreement.
2Amounts reported for home security represent the cost provided by an outside security provider for hardware and monitoring service. The incremental cost associated with the home security services is determined based upon the amounts paid to the outside service provider.
3Amounts reported in this column include allowances and reimbursements related to relocation expenses in connection with the Company’s corporate headquarters relocation to Deerfield, Illinois. All NEOs received the same benefits, and were subject to the same relocation policy, as all other employees who relocated in connection with the corporate headquarters move.
4Mr. De Lange was an International Service Employee (ISE) based in Singapore. The amount shown includes foreign service allowances typically paid by the Company on behalf of the ISE, including allowances paid for moving expenses, housing, mobility premium, home leave, foreign and U.S. taxes. Company paid taxes, relating to this ISE assignment of $1,881,403 were included in this amount, pursuant to the Company’s tax equalization policy for ISEs. These allowances are intended to ensure the Company’s ISEs are in the same approximate financial position as they would have been if they lived in their home country during the time of their international service. These ISE related expenses were valued based on the aggregate incremental cost to the Company and represent the amount accrued for payment or paid to the service provider or the NEO, as applicable.
| 2018 Proxy Statement | | | |43
|
Table of Contents
GRANTS OF PLAN-BASED AWARDS IN 2017
| | ESTIMATED FUTURE PAYOUTS
UNDER NON-EQUITY INCENTIVE
PLAN AWARDS1 | |
ESTIMATED
FUTURE PAYOUTS
UNDER EQUITY
INCENTIVE PLAN
AWARDS2 | | ALL OTHER
STOCK
AWARDS:
NUMBER OF
SHARES OF
STOCK OR
UNITS
(#) | | ALL OTHER
OPTION
AWARDS:
NUMBER OF
SECURITIES
UNDERLYING
OPTIONS3
(#) | | EXERCISE OR
BASE PRICE
OF OPTION
AWARDS
($/SHARE) | | GRANT DATE
FAIR VALUE
OF STOCK
AND OPTION
AWARDS ($)4 | | NAME | | GRANT
DATE | | THRESHOLD
($) | | TARGET
($) | | MAXIMUM
($) | | TARGET
(#) | | | D. James Umpleby, III | | 03/06/2017 | | | | — | | | | | — | | | | | — | | | 37,895 | | — | | | — | | | | $ | — | | | | $ | 3,288,528 | | | | 03/06/2017 | | | | — | | | | | — | | | | | — | | | — | | — | | | 214,370 | | | | $ | 95.66 | | | | $ | 5,361,394 | | | | AIP5 | | | $ | 900,000 | | | | $ | 1,800,000 | | | | $ | 2,700,000 | | | — | | — | | | — | | | | $ | — | | | | $ | — | | | Bradley M. Halverson | | 03/06/2017 | | | | — | | | | | — | | | | | — | | | 15,681 | | — | | | — | | | | $ | — | | | | $ | 1,360,797 | | | | 03/06/2017 | | | | — | | | | | — | | | | | — | | | — | | — | | | 88,705 | | | | $ | 95.66 | | | | $ | 2,218,512 | | | | 7/31/2017 | | | | — | | | | | — | | | | | — | | | 9,583 | | — | | | — | | | | | — | | | | $ | 1,006,8866 | | | | AIP5 | | | $ | 462,392 | | | | $ | 924,783 | | | | $ | 1,387,174 | | | — | | — | | | — | | | | $ | — | | | | $ | — | | | Robert B. Charter | | 03/06/2017 | | | | — | | | | | — | | | | | — | | | 19,339 | | — | | | — | | | | $ | — | | | | $ | 1,678,238 | | | | 03/06/2017 | | | | — | | | | | — | | | | | — | | | — | | — | | | 109,403 | | | | $ | 95.66 | | | | $ | 2,736,169 | | | | AIP5 | | | $ | 434,880 | | | | $ | 869,760 | | | | $ | 1,304,639 | | | — | | — | | | — | | | | $ | — | | | | $ | — | | | Bob De Lange | | 03/06/2017 | | | | — | | | | | — | | | | | — | | | 14,112 | | — | | | — | | | | $ | — | | | | $ | 1,224,639 | | | | 03/06/2017 | | | | — | | | | | — | | | | | — | | | — | | — | | | 79,834 | | | | $ | 95.66 | | | | $ | 1,996,648 | | | | AIP5 | | | $ | 381,933 | | | | $ | 763,866 | | | | $ | 1,145,799 | | | — | | — | | | — | | | | $ | — | | | | $ | — | | | Thomas Pellette | | 03/06/2017 | | | | — | | | | | — | | | | | — | | | 18,294 | | — | | | — | | | | $ | — | | | | $ | 1,587,553 | | | | 03/06/2017 | | | | — | | | | | — | | | | | — | | | — | | — | | | 103,489 | | | | $ | 95.66 | | | | $ | 2,588,260 | | | | AIP5 | | | $ | 434,880 | | | | $ | 869,760 | | | | $ | 1,304,639 | | | — | | — | | | — | | | | $ | — | | | | $ | — | |
1The amounts reported in this column represent estimated potential awards under the 2017 AIP.
2The amounts reported in this column represent estimated potential awards under the LTIP. PRSUs were granted on March 6, 2017 under the LTIP for the 2017-2019 performance period. PRSUs vest at the end of a three-year performance period subject to the Company’s achievement of an average ROE performance hurdle during that period. There is no threshold or maximum payout opportunity with respect to these PRSUs.
3Amounts reported represent stock options granted under the LTIP. The exercise price for all stock options granted to the NEOs is the closing price of Caterpillar stock on the grant date ($95.66). All stock options granted to the NEOs will vest in one-third increments on each of the first through third year anniversaries of the date of grant.
4The amounts shown do not reflect realized compensation by the NEO. As reported in this column, the value of PRSUs granted in 2017 under the LTIP are based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, assuming the highest level of performance is achieved for the PRSUs, which at the time of the grant reflected the probable level of achievement.
5The 2017 AIP estimates shown are based upon each executive’s base salary for 2017. The actual payout was based on the achievement of corporate and business unit performance metrics. Please refer to page 34 of the CD&A for a detailed explanation of the various performance metrics. Payments under the AIP are limited by a plan cap set at $15 million. The cash payouts for the 2017 plan year are included in the column “Non-Equity Incentive Plan Compensation” of the “2017 Summary Compensation Table.”
6This amount represents the incremental fair value associated with the modification to Mr. Halverson’s 2017 PRSU award in connection with his retirement and does not reflect a new equity grant.
44 |
| | | | 2018 Proxy Statement |
Table of Contents
OUTSTANDING EQUITY AWARDS AT 20172019 FISCAL YEAR END Name | Option Awards | | Stock Awards | Number of Securities Underlying
Unexercised SARs/Options | SAR / Option
Exercise Price | SAR / Option Expiration Date(1) | Number of Shares or Units of Stock that have not Vested(2) | Market Value
of Shares or Units of Stock that have not Vested(3) | Equity Incentive Plan Awards: | Grant Date | Exercisable | Unexercisable | Number of Unearned Shares,
Units or other Rights that have not Vested(4) | Market or
Payout Value
of Unearned
Shares, Units
or other Rights
that have not
Vested(5) | D. James Umpleby III | 03/05/2012 | 21,416 | — | $ | 110.09 | 03/05/2022 | | — | $ | — | — | | $ | — | 03/04/2013 | 79,976 | — | $ | 89.75 | 03/04/2023 | | — | $ | — | — | | $ | — | 03/03/2014 | 85,606 | — | $ | 96.31 | 03/03/2024 | | — | $ | — | — | | $ | — | 03/02/2015 | 172,621 | — | $ | 83.00 | 03/02/2025 | | — | $ | — | — | | $ | — | 03/07/2016 | 114,049 | — | $ | 74.77 | 03/07/2026 | | — | $ | — | — | | $ | — | 03/06/2017 | — | — | $ | — | — | | — | $ | — | 37,895 | (6) | $ | 5,596,334 | 03/06/2017 | 142,914 | 71,456 | $ | 95.66 | 03/06/2027 | | — | $ | — | — | | $ | — | 03/05/2018 | — | — | $ | — | — | | — | $ | — | 45,050 | (7) | $ | 6,652,984 | 03/05/2018 | 60,982 | 121,962 | $ | 151.12 | 03/05/2028 | | — | $ | — | — | | $ | — | 03/04/2019 | — | — | $ | — | — | | — | $ | — | 40,304 | (7) | $ | 5,952,095 | 03/04/2019 | — | 163,615 | $ | 138.35 | 03/04/2029 | | — | $ | — | — | | $ | — | Andrew R. J. Bonfield | 09/07/2018 | — | — | $ | — | — | | 13,567 | $ | 2,003,575 | — | | $ | — | 09/07/2018 | — | — | $ | — | — | | — | $ | — | 5,500 | (7) | $ | 812,240 | 09/07/2018 | 7,693 | 15,384 | $ | 141.32 | 03/05/2028 | | — | $ | — | — | | $ | — | 03/04/2019 | — | — | $ | — | — | | — | $ | — | 13,311 | (7) | $ | 1,965,768 | 03/04/2019 | — | 54,038 | $ | 138.35 | 03/04/2029 | | — | $ | — | — | | $ | — | Denise C. Johnson | 03/06/2017 | — | — | $ | — | — | | — | $ | — | 18,294 | (6) | $ | 2,701,658 | 03/06/2017 | — | 34,496 | $ | 95.66 | 03/06/2027 | | — | $ | — | — | | $ | — | 03/05/2018 | — | — | $ | — | — | | — | $ | — | 13,862 | (7) | $ | 2,047,140 | 03/05/2018 | 18,764 | 37,526 | $ | 151.12 | 03/05/2028 | | — | $ | — | — | | $ | — | 03/04/2019 | — | — | $ | — | — | | — | $ | — | 13,311 | (7) | $ | 1,965,768 | 03/04/2019 | — | 54,038 | $ | 138.35 | 03/04/2029 | | — | $ | — | — | | $ | — | William P. Ainsworth | 03/02/2015 | 15,199 | — | $ | 83.00 | 03/02/2025 | | — | $ | — | — | | $ | — | 05/01/2015 | — | — | $ | — | — | | 125 | $ | 18,460 | — | | $ | — | 03/07/2016 | 30,694 | — | $ | 74.77 | 03/07/2026 | | — | $ | — | — | | $ | — | 03/06/2017 | — | — | $ | — | — | | — | $ | — | 12,283 | (6) | $ | 1,813,953 | 03/06/2017 | 46,324 | 23,162 | $ | 95.66 | 03/06/2027 | | — | $ | — | — | | $ | — | 03/05/2018 | — | — | $ | — | — | | — | $ | — | 8,317 | (7) | $ | 1,228,255 | 03/05/2018 | 11,258 | 22,516 | $ | 151.12 | 03/05/2028 | | — | $ | — | — | | $ | — | 03/04/2019 | — | — | $ | — | — | | — | $ | — | 13,311 | (7) | $ | 1,965,768 | 03/04/2019 | — | 54,038 | $ | 138.35 | 03/04/2029 | | — | $ | — | — | | $ | — |
2020 PROXY STATEMENT 45 | | OPTION AWARDS | | STOCK AWARDS | | | | | NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
SARs/OPTIONS | | | | | | | | | | | | | | | | | EQUITY INCENTIVE
PLAN AWARDS: | | NAME | | GRANT DATE | | EXERCISABLE | | UNEXERCISABLE | | SAR /
OPTION
EXERCISE
PRICE | | SAR /
OPTION
EXPIRATION
DATE1 | | NUMBER OF
SHARES OR
UNITS
OF STOCK
THAT HAVE
NOT
VESTED2 | | MARKET VALUE
OF SHARES
OR UNITS OF
STOCK
THAT HAVE
NOT
VESTED3 | | NUMBER OF
UNEARNED
SHARES,
UNITS OR
OTHER RIGHTS
THAT HAVE
NOT VESTED4 | | MARKET OR
PAYOUT VALUE OF
UNEARNED
SHARES, UNITS OR
OTHER RIGHTS
THAT HAVE
NOT VESTED5 | | D. James Umpleby, III | | 03/01/2010 | | | 6,781 | | | | — | | | | $ | 57.85 | | | | 03/01/2020 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/07/2011 | | | 22,696 | | | | — | | | | $ | 102.13 | | | | 03/07/2021 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/05/2012 | | | 21,416 | | | | — | | | | $ | 110.09 | | | | 03/05/2022 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/04/2013 | | | 79,976 | | | | — | | | | $ | 89.75 | | | | 03/04/2023 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/03/2014 | | | 85,606 | | | | — | | | | $ | 96.31 | | | | 03/03/2024 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 02/27/2015 | | | — | | | | — | | | | $ | — | | | | — | | | — | | | $ | — | | | | 16,3256 | | | | $ | 2,572,494 | | | | 03/02/2015 | | | 115,081 | | | | 57,540 | | | | $ | 83.00 | | | | 03/02/2025 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/07/2016 | | | — | | | | — | | | | $ | — | | | | — | | | — | | | $ | — | | | | 18,0297 | | | | $ | 2,841,010 | | | | 03/07/2016 | | | 38,017 | | | | 76,032 | | | | $ | 74.77 | | | | 03/07/2026 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/06/2017 | | | — | | | | — | | | | $ | — | | | | — | | | — | | | $ | — | | | | 37,8957 | | | | $ | 5,971,494 | | | | 03/06/2017 | | | — | | | | 214,370 | | | | $ | 95.66 | | | | 03/06/2027 | | | — | | | $ | — | | | | — | | | | $ | — | | | Bradley M. Halverson | | 03/03/2014 | | | 81,061 | | | | — | | | | $ | 96.31 | | | | 03/03/2024 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 02/27/2015 | | | — | | | | — | | | | $ | — | | | | — | | | — | | | $ | — | | | | 14,5606 | | | | $ | 2,294,365 | | | | 03/02/2015 | | | — | | | | 51,318 | | | | $ | 83.00 | | | | 03/02/2025 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/07/2016 | | | — | | | | — | | | | $ | — | | | | — | | | — | | | $ | — | | | | 16,6947 | | | | $ | 2,630,641 | | | | 03/07/2016 | | | 35,201 | | | | 70,401 | | | | $ | 74.77 | | | | 03/07/2026 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/06/2017 | | | — | | | | — | | | | $ | — | | | | — | | | — | | | $ | — | | | | 15,6817 | | | | $ | 2,471,012 | | | | 03/06/2017 | | | — | | | | 88,705 | | | | $ | 95.66 | | | | 03/06/2027 | | | — | | | $ | — | | | | — | | | | $ | — | | | Robert B. Charter | | 03/07/2011 | | | 23,379 | | | | — | | | | $ | 102.13 | | | | 03/07/2021 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/05/2012 | | | 20,534 | | | | — | | | | $ | 110.09 | | | | 03/05/2022 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/04/2013 | | | 25,369 | | | | — | | | | $ | 89.75 | | | | 03/04/2023 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/03/2014 | | | 27,045 | | | | — | | | | $ | 96.31 | | | | 03/03/2024 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 02/27/2015 | | | — | | | | — | | | | $ | — | | | | — | | | — | | | $ | — | | | | 13,5056 | | | | $ | 2,128,118 | | | | 03/02/2015 | | | 95,199 | | | | 47,599 | | | | $ | 83.00 | | | | 03/02/2025 | | | — | | | $ | | | | | — | | | | $ | — | | | | 03/07/2016 | | | — | | | | — | | | | $ | — | | | | — | | | — | | | $ | — | | | | 15,2177 | | | | $ | 2,397,895 | | | | 03/07/2016 | | | 32,086 | | | | 64,171 | | | | $ | 74.77 | | | | 03/07/2026 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/06/2017 | | | — | | | | — | | | | $ | — | | | | — | | | — | | | $ | — | | | | 19,3397 | | | | $ | 3,047,440 | | | | 03/06/2017 | | | — | | | | 109,403 | | | | $ | 95.66 | | | | 03/06/2027 | | | — | | | $ | — | | | | — | | | | $ | — | | | Bob De Lange | | 03/01/2010 | | | 2,157 | | | | — | | | | $ | 57.85 | | | | 03/01/2020 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/07/2011 | | | 3,359 | | | | — | | | | $ | 102.13 | | | | 03/07/2021 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/05/2012 | | | 2,952 | | | | — | | | | $ | 110.09 | | | | 03/05/2022 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/04/2013 | | | 3,994 | | | | — | | | | $ | 89.75 | | | | 03/04/2023 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/03/2014 | | | 5,795 | | | | — | | | | $ | 96.31 | | | | 03/03/2024 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/02/2015 | | | 21,259 | | | | 10,629 | | | | $ | 83.00 | | | | 03/02/2025 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/07/2016 | | | — | | | | — | | | | $ | — | | | | — | | | — | | | $ | — | | | | 7,4097 | | | | $ | 1,167,510 | | | | 03/07/2016 | | | 15,624 | | | | 31,246 | | | | $ | 74.77 | | | | 03/07/2026 | | | — | | | $ | — | | | | — | | | | $ | — | | | | 03/06/2017 | | | — | | | | — | | | | $ | — | | | | — | | | — | | | $ | — | | | | 14,1127 | | | | $ | 2,223,769 | | | | 03/06/2017 | | | — | | | | 79,834 | | | | $ | 95.66 | | | | 03/06/2027 | | | — | | | $ | — | | | | — | | | | $ | — | |
Back to Contents | 2018 Proxy Statement | | Name | |45Option Awards
| | Stock Awards | Number of Securities Underlying
Unexercised SARs/Options | SAR / Option
Exercise Price | SAR / Option Expiration Date(1) | Number of Shares or Units of Stock that have not Vested(2) | Market Value
of Shares or Units of Stock that have not Vested(3) | Equity Incentive Plan Awards: | Grant Date | Exercisable | Unexercisable | Number of Unearned Shares,
Units or other Rights that have not Vested(4) | Market or
Payout Value
of Unearned
Shares, Units
or other Rights
that have not
Vested(5) |
Bob De Lange | 03/04/2013 | 3,994 | — | $ | 89.75 | 03/04/2023 | | — | $ | — | — | | $ | — | 03/03/2014 | 5,795 | — | $ | 96.31 | 03/03/2024 | | — | $ | — | — | | $ | — | 03/02/2015 | 31,888 | — | $ | 83.00 | 03/02/2025 | | — | $ | — | — | | $ | — | 03/07/2016 | 46,870 | — | $ | 74.77 | 03/07/2026 | | — | $ | — | — | | $ | — | 03/06/2017 | — | — | $ | — | — | | — | $ | — | 14,112 | (6) | $ | 2,084,060 | 03/06/2017 | 53,223 | 26,611 | $ | 95.66 | 03/06/2027 | | — | $ | — | — | | $ | — | 03/05/2018 | — | — | $ | — | — | | — | $ | — | 14,901 | (7) | $ | 2,200,580 | 03/05/2018 | 20,171 | 40,341 | $ | 151.12 | 03/05/2028 | | — | $ | — | — | | $ | — | 03/04/2019 | — | — | $ | — | — | | — | $ | — | 11,832 | (7) | $ | 1,747,350 | 03/04/2019 | — | 48,034 | $ | 138.35 | 03/04/2029 | | — | $ | — | — | | $ | — | (1) Stock options granted in 2017, 2018 and 2019 are exercisable in one-third increments on each of the first through third year anniversaries of the date of grant for all NEOs except Mr. Bonfield. Mr. Bonfield’s 2018 option grant vests in one-third increments on March 5, 2019, March 5, 2020 and March 5, 2021, the same date as the other NEOs. Stock options expire ten years from the grant date for an active employee, except Mr. Bonfield’s 2018 options expire March 5, 2028, the same date as other NEOs. (2) The amounts shown include the portion of any prior RSU grants that were not vested as of December 31, 2019. The 2018 RSU grant to Mr. Bonfield provides for dividend equivalent units (DEUs) to accrue on unvested RSUs when a dividend is paid by the company. The amounts shown include any applicable DEUs as of December 31, 2019 (rounded to the nearest whole unit). (3) Market value is based on the number of RSUs, including, when applicable, DEUs that have not vested (rounded to the nearest whole unit), multiplied by $147.68, the closing price of Caterpillar’s common stock on December 31, 2019. (4) The amounts shown include the portion of any prior PRSU grants that were not vested as of December 31, 2019. The 2018 and 2019 PRSU grants provide for DEUs to accrue on unvested PRSUs when a dividend is paid by the Company. The amount shown includes any applicable DEUs accrued as of December 31, 2019 (rounded to the nearest whole unit). (5) Market value is based on the number of PRSUs, including, when applicable, DEUs that have not vested (rounded to the nearest whole unit) multiplied by $147.68, the closing price of Caterpillar’s common stock on December 31, 2019. (6) This amount represents the PRSUs that vested based on the achievement of an average ROE performance hurdle over the three-year performance cycle. The Company achieved the ROE performance hurdle and, accordingly, the PRSUs were released February 12, 2020. (7) This amount represents the PRSUs that are scheduled to vest following the end of the performance period in 2020 and 2021, respectively, based on the Company’s achievement of an average ROE performance hurdle over the three-year performance period. The number of PRSUs reported in this table assumes the aggregate ROE performance hurdle is achieved for the three-year performance period. |
2020 PROXY STATEMENT 46
Back to Contents Table of Contents
| | | | OPTION AWARDS | | STOCK AWARDS | | | | | NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
SARs/OPTIONS | | | | | | | | | | | | | | | | | EQUITY INCENTIVE
PLAN AWARDS: | | NAME | | GRANT DATE | | EXERCISABLE | | UNEXERCISABLE | | SAR /
OPTION
EXERCISE
PRICE | | SAR /
OPTION
EXPIRATION
DATE1 | | NUMBER OF
SHARES OR
UNITS
OF STOCK
THAT HAVE
NOT
VESTED2 | | MARKET VALUE
OF SHARES
OR UNITS OF
STOCK THAT
HAVE NOT
VESTED3 | | NUMBER OF
UNEARNED
SHARES,
UNITS OR
OTHER RIGHTS
THAT HAVE
NOT VESTED4 | | MARKET OR
PAYOUT VALUE OF
UNEARNED
SHARES, UNITS OR
OTHER RIGHTS
THAT HAVE
NOT VESTED5 | | Thomas Pellette | | 03/07/2011 | | | 3,842 | | | | — | | | | $ | 102.13 | | | | 03/07/2021 | | | — | | $ | — | | | | — | | | | $ | — | | | | | 03/05/2012 | | | 4,456 | | | | — | | | | $ | 110.09 | | | | 03/05/2022 | | | — | | $ | — | | | | — | | | | $ | — | | | | 03/04/2013 | | | 20,569 | | | | — | | | | $ | 89.75 | | | | 03/04/2023 | | | — | | $ | — | | | | — | | | | $ | — | | | | 03/03/2014 | | | 28,220 | | | | — | | | | $ | 96.31 | | | | 03/03/2024 | | | — | | $ | — | | | | — | | | | $ | — | | | | 02/27/2015 | | | — | | | | — | | | | $ | — | | | | — | | | — | | $ | — | | | | 13,5056 | | | | $ | 2,128,118 | | | | 03/02/2015 | | | 95,199 | | | | 47,599 | | | | $ | 83.00 | | | | 03/02/2025 | | | — | | $ | — | | | | — | | | | $ | — | | | | 03/07/2016 | | | — | | | | — | | | | $ | — | | | | — | | | — | | $ | — | | | | 15,2177 | | | | $ | 2,397,895 | | | | 03/07/2016 | | | — | | | | 64,171 | | | | $ | 74.77 | | | | 03/07/2026 | | | — | | $ | — | | | | — | | | | $ | — | | | | 03/06/2017 | | | — | | | | — | | | | $ | — | | | | — | | | — | | $ | — | | | | 18,2947 | | | | $ | 2,882,769 | | | | 03/06/2017 | | | — | | | | 103,489 | | | | $ | 95.66 | | | | 03/06/2027 | | | — | | $ | — | | | | — | | | | $ | — | |
1Stock options granted in 2015, 2016 and 2017 are exercisable in one-third increments on each of the first through third year anniversaries of the date of grant. Stock options expire 10 years from the grant date for an active employee.
2The amounts shown include the portion of any prior RSU grants that were not vested as of December 31, 2017.
3The market value of the non-vested RSUs is calculated using the closing price of Caterpillar common stock on December 29, 2017 ($157.58).
4The amounts shown include the portion of any prior PRSU grants that were not vested as of December 31, 2017.
5The market value of the non-vested PRSUs is calculated using the closing price of Caterpillar common stock on December 29, 2017 ($157.58).
6Represents the PRSUs that vested based on the achievement of an average ROE performance hurdle over the three-year performance cycle. The Company achieved the ROE performance hurdle and, accordingly, the PRSUs were released February 13, 2018.
7Represents the PRSUs that are scheduled to vest following the end of the performance period in 2018 and 2019 respectively based on the Company’s achievement of an average ROE performance hurdle over the three-year performance period. The number of PRSUs reported in this table assumes the aggregate ROE performance hurdle is achieved for the three-year performance period.
2017 OPTION EXERCISES AND STOCK VESTED
Name | Option Awards(1) | | Stock Awards(2) | Number of Shares
Acquired on Exercise | Value Realized
on Exercise | Number of Shares
Acquired on Vesting | Value Realized
on Vesting | D. James Umpleby III | 29,477 | $ | 1,554,655 | | 18,029 | $ | 2,375,862 | Andrew R. J. Bonfield | — | $ | — | | 13,091 | $ | 1,687,849 | Denise C. Johnson | 83,770 | $ | 4,230,647 | | 7,292 | $ | 962,929 | William P. Ainsworth | — | $ | — | | 7,468 | $ | 985,009 | Bob De Lange | 8,468 | $ | 434,072 | | 7,409 | $ | 976,358 | (1) Upon exercise, option holders may surrender shares to satisfy income tax withholding requirements. The amounts shown are gross amounts. (2) Upon vesting of the RSUs or PRSUs, shares are surrendered to satisfy income tax withholding requirements. The amounts shown are gross amounts. |
2019PENSIONBENEFITS Name | Plan Name(1) | Number of Years of Credited Service(2) | Present Value of
Accumulated Benefit(3,4) | Payments During
Last Fiscal Year | D. James Umpleby III | RIP | 25 | $ | 2,445,955 | $ | — | Solar MRO | 25 | $ | 39,167,527 | $ | — | Andrew R. J. Bonfield | — | — | $ | — | $ | — | Denise C. Johnson | — | — | $ | — | $ | — | William P. Ainsworth | — | — | $ | — | $ | — | Bob De Lange | — | — | $ | — | $ | — | (1) Mr. Umpleby participates in the Solar RP and Solar MRO as described in footnote 4 to the Summary Compensation Table. The Solar RP is a noncontributory U.S. qualified defined benefit pension plan and the Solar MRO is a U.S. non-qualified pension plan. Mr. Umpleby entered Solar RP upon his initial hire with Solar Turbines Inc. on July 7, 1980. (2) Upon his initial hire with Solar Turbines Inc, a wholly owned subsidiary of Caterpillar, on July 7, 1980, Mr. Umpleby became eligible to participate in the Solar Turbines Inc. Retirement Plan and the Solar Turbines Incorporated Managerial Retirement Objective Plan (Solar MRO). Mr. Umpleby has more than 39 years of service with the Company and meets the early retirement eligibility requirement of age 55 with at least ten years of service. Early retirement benefits paid under Solar RP and Solar MRO have a three percent reduction per year under age 62. The Solar RP was merged into RIP as of January 1, 2015; however, all benefit and eligibility provisions of Solar RP remain unchanged. The total benefit formula for the Solar RP is 60 percent of final average salary (which includes base pay) prorated for years of service less than 25 minus 65 percent of the monthly Social Security benefit. Final average salary is the average base salary for the highest consecutive 36-month period during the 120-month period prior to retirement. The Solar MRO provides a benefit under the same benefit formula but includes base salary and annual cash incentive pay. Amounts payable under both Solar RP and Solar MRO are based upon a maximum of 25 years of service. The employee’s annual retirement income benefit under the Solar RP is restricted by the Internal Revenue Code limitations and the excess benefits are paid from the Solar MRO. The Solar MRO is not funded. Mr. Bonfield, Mr. Ainsworth, Ms. Johnson and Mr. De Lange do not participate in a pension plan. (3) The present value of accumulated benefits payable is determined assuming commencement on Mr. Umpleby’s earliest unreduced retirement date using a discount rate of 3.15% and the RP-2014 White Collar separate annuitant and non-annuitant mortality table with a load factor of 92.9% adjusted backward to 2006 with MP-2014 and projected forward using Scale MP-2019 with a convergence at 2035 and 75% of long-term convergence rates (0.75% for ages up to and including 85). Mr. Umpleby satisfies the plans’ criteria, attainment of age 55 with at least 10 years of service, for unreduced early retirement benefits payable beginning at age 62. (4) Mr. Umpleby’s change in pension value was primarily due to an increase in his annual pensionable earnings resulting from an additional year of compensation as CEO. The pension benefit is based on the average of the highest consecutive 36 months in the 10-year period prior to the determination date of December 31, 2019, the same date on which the Solar RP and Solar MRO were frozen for all employees, including Mr. Umpleby. Pensionable earnings include base salary and annual cash incentive pay. During Mr. Umpleby’s tenure as CEO, there have been no changes made to the plans’ benefit formula provisions (other than to freeze benefit accruals) and Mr. Umpleby’s benefit is determined in the same manner as any similarly situated management employee with a similar service and compensation history. |
2020 PROXY STATEMENT 47 | | OPTION AWARDS1 | | STOCK AWARDS2 | | NAME | | NUMBER OF SHARES
ACQUIRED ON EXERCISE | | VALUE REALIZED
ON EXERCISE | | NUMBER OF SHARES
ACQUIRED ON VESTING | | VALUE REALIZED
ON VESTING | | D. James Umpleby, III | | | — | | | | $ | — | | | | 832 | | | | $ | 85,030 | | | Bradley M. Halverson | | | 55,144 | | | | $ | 6,516,537 | | | | 832 | | | | $ | 85,030 | | | Robert B. Charter | | | — | | | | $ | — | | | | — | | | | $ | — | | | Bob De Lange | | | 1,572 | | | | $ | 216,103 | | | | — | | | | $ | — | | | Thomas Pellette | | | 17,174 | | | | $ | 2,234,769 | | | | — | | | | $ | — | |
1Upon exercise, option holders may surrender sharesBack to satisfy income tax withholding requirements. The amounts shown are gross amounts.
2Upon vesting of the RSUs, shares are surrendered to satisfy income tax withholding requirements. The amounts shown are gross amounts.Contents
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Table of Contents2019NONQUALIFIEDDEFERREDCOMPENSATION
2017 PENSION BENEFITS
| NAME | | PLAN NAME1 | | NUMBER OF YEARS OF
CREDITED SERVICE2 | | PRESENT VALUE OF
ACCUMULATED BENEFIT3 | | PAYMENTS DURING
LAST FISCAL YEAR | | D. James Umpleby, III | | RIP | | | 25 | | | | $ | 2,143,337 | | | | $ | — | | | | Solar MRO | | | 25 | | | | $ | 12,836,119 | | | | $ | — | | | Bradley M. Halverson | | RIP | | | 29.83 | | | | $ | 2,585,631 | | | | $ | — | | | | SERP | | | 29.83 | | | | $ | 5,722,740 | | | | $ | — | | | Robert B. Charter | | CatSuper Plan | | | 28.67 | | | | $ | 4,384,948 | | | | $ | — | | | Bob De Lange | | Caprevi, Prevoyance | | | — | | | | $ | — | | | | $ | 1,491,6004 | | | Thomas Pellette | | RIP | | | 24.25 | | | | $ | 1,595,468 | | | | $ | — | | | | SERP | | | 24.25 | | | | $ | 1,849,481 | | | | $ | — | |
1Caterpillar Inc. Retirement Income Plan (RIP) is a noncontributory U.S. qualified defined benefit pension plan and the Supplemental Retirement Plan (SERP) is a U.S. non-qualified pension plan. The total benefit formula across both plans is 1.5 percent for each year of service (capped at 35 years) multiplied by the final average earnings during the highest five of the final ten years of employment. Final average earnings include base salary and annual incentive compensation, including amounts deferred. The employee’s annual retirement income benefit under the qualified plan is restricted by the Internal Revenue Code limitations, and the excess benefits are paid from the SERP, which is not funded. Mr. Umpleby participated in the Solar Turbines Incorporated Retirement Plan (Solar RP) through December 31, 2014, and participates in the Solar Turbines Incorporated Managerial Retirement Objective Plan (Solar MRO) because he was originally hired by Solar Turbines Incorporated, a wholly owned subsidiary of Caterpillar. The Solar RP was merged into RIP as of January 1, 2015; however, all benefit and eligibility provisions of Solar RP remain unchanged. The Solar RP is a noncontributory U.S. qualified defined benefit pension plan and the Solar MRO is a U.S. non-qualified pension plan. The total benefit formula for the Solar RP is 60 percent of final average salary prorated for years of service less than 25 minus 65 percent of the monthly Social Security benefit. Final average salary is the average base salary for the highest consecutive 36-month period during the 120-month period prior to retirement. Amounts payable under both Solar RP and Solar MRO are based upon a maximum of 25 years of service. The Solar MRO provides a benefit under the same benefit formula and includes base salary and annual incentive pay. The employee’s annual retirement income benefit under the Solar RP is restricted by the Internal Revenue Code limitations and the excess benefits are paid from the Solar MRO. The Solar MRO is not funded. Mr. Charter participates in the Caterpillar of Australia PTY LTD Retirement Plan (CatSuper Plan), a defined benefit plan. The total benefit formula in the plan is 17.5 percent for each year of service multiplied by final average salary during the highest three of the final ten years of employment. Final average salary for this plan includes base salary and annual incentive compensation, including amounts deferred, without any limitation on the dollar amounts covered. The plan formula produces a lump sum amount. Mr. De Lange participated in the Caprevi, Prevoyance Caterpillar (Swiss Plan), a Swiss pension benefit plan until December 31, 2016. Effective January 1, 2017, Mr. De Lange transferred to U.S. payroll and ceased participation in the Swiss plan. Mr. De Lange received a distribution of his entire plan benefit, based on a December 31, 2016 valuation, in January 2017 and no longer has a balance in the Swiss plan.
2Mr. Umpleby, who participates in the Solar RP and Solar MRO, has more than 25 years of service with the Company and meets the early retirement eligibility requirement of age 55 with at least 10 years of service. Early retirement benefits paid under Solar RP and Solar MRO have a three percent reduction per year under age 62. The Solar RP was merged into RIP as of January 1, 2015; however, all benefit and eligibility provisions of Solar RP remain unchanged. Mr. Halverson and Mr. Pellette participate in RIP and SERP. Amounts payable under both RIP and SERP are based upon a maximum of 35 years of service. All RIP participants may receive their benefit immediately following termination of employment after reaching early retirement eligibility, or may defer benefit payments until any time between early retirement age and normal retirement age. SERP and Solar MRO participants receive their benefit six months after their retirement date. Normal retirement age is defined as age 65 with five years of service. For RIP and SERP participants, early retirement is defined as: any age with 30 years of service, age 55 with 15 years of service or age 60 with 10 years of service. If a participant elects early retirement, benefits are reduced by four percent per year, before age 62. As a current RIP and SERP participant, Mr. Halverson is eligible for early retirement, with a four percent reduction per year under age 62 in both plans. Mr. Charter, who participates in the CatSuper Plan, is currently vested in a benefit attributable to 19.75 years of his service. He also has a benefit under the same plan formula based on an additional 8.92 years of service which will vest if he remains employed with the Company until age 55. This additional benefit would result in a $1,979,664 increase in his accumulated pension value once fully vested. Normal retirement in the CatSuper Plan is defined as age 65 and early retirement is available at age 55, with no reduction to the lump sum earned.
3The amount in this column represents the actuarial present value for each NEO’s accumulated pension benefit on December 31, 2017. For each NEO, it assumes benefits are payable at each NEO’s earliest unreduced retirement age based upon current level of pensionable income. Present value factors use an interest rate of 3.54 percent and the RP-2014 White Collar separate annuitant and non-annuitant mortality table with a load factor of 92.9 percent adjusted backward to 2006 with MP-2014 and projected forward using Scale MP-2017 with a 15-year convergence period and 75 percent of long-term convergence rates (0.75 percent for ages up to and including 85) which are SERP’s year-end disclosure assumptions at December 31, 2017. The amount reported for Mr. Charter has been converted to U.S. dollars using the exchange rate in effect on December 31, 2017 (1 Australian dollar = 0.78015 U.S. dollar).
4The amount reported for Mr. De Lange has been converted to U.S. dollars using the exchange rate in effect on December 31, 2017 (1 Swiss Franc = 1.02423 U.S. dollar).
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Table of Contents
2017 NONQUALIFIED DEFERRED COMPENSATION
| NAME | | PLAN NAME1 | | EXECUTIVE
CONTRIBUTIONS
IN 20172 | | REGISTRANT
CONTRIBUTIONS
IN 20172 | | AGGREGATE
EARNINGS
IN 20173 | | AGGREGATE
BALANCE
AT 12/31/174 | | D. James Umpleby, III | | SDCP | | | $ | 68,986 | | | | $ | 34,493 | | | | $ | 1,229,551 | | | | $ | 3,717,914 | | | | SEIP | | | $ | — | | | | $ | — | | | | $ | 6,109 | | | | $ | 38,700 | | | | DEIP | | | $ | — | | | | $ | — | | | | $ | 888,803 | | | | $ | 3,554,562 | | | Bradley M. Halverson | | SDCP | | | $ | 44,920 | | | | $ | 22,460 | | | | $ | 335,660 | | | | $ | 1,690,551 | | | | SEIP | | | $ | — | | | | $ | — | | | | $ | 3,343 | | | | $ | 7,902 | | | | DEIP | | | $ | — | | | | $ | — | | | | $ | 63,275 | | | | $ | 149,566 | | | Robert B. Charter | | SDCP | | | $ | 46,527 | | | | $ | 23,263 | | | | $ | 13,002 | | | | $ | 125,754 | | | | | | | | | | | | | | | | | | | | | | | | | | Bob De Lange | | SDCP | | | $ | 33,235 | | | | $ | 33,235 | | | | $ | 4,126 | | | | $ | 70,595 | | | | | | | | | | | | | | | | | | | | | | | | | | | Thomas Pellette | | SDCP | | | $ | 14,474 | | | | $ | 7,237 | | | | $ | 81,822 | | | | $ | 265,935 | |
1The Supplemental Deferred Compensation Plan (SDCP) is a non-qualified deferred compensation plan adopted in March 2007 with a retroactive effective date of January 1, 2005, which effectively replaced the Supplemental Employees’ Investment Plan (SEIP) and Deferred Employees’ Investment Plan (DEIP).
2SDCP allows eligible U.S. employees, including all NEOs, to voluntarily defer a portion of their base salary and annual incentive pay into the plan and receive a Company matching contribution. SPP pay may also be deferred, but does not qualify for any Company matching contributions. Amounts deferred by executives in 2017 for base salary, annual incentive pay and/or long-term cash incentive payouts are included in the “2017 Summary Compensation Table.” Matching and/or annual non-elective contributions in non-qualified deferred compensation plans made by Caterpillar in 2017 are also included in the “2017 All Other Compensation Table” under the Matching Contributions SDCP column. SDCP participants may elect a lump sum payment, or an installment distribution payable for up to 15 years after separation.
3Aggregate earnings comprise interest, dividends, capital gains and appreciation/depreciation of investment results. The investment choices available to the participant mirror those of the Company’s 401(k) plan.
4Amounts in this column include the following amounts that were previously reported in the “Summary Compensation Table” for the years 2015–2017 as follows: Mr. Umpleby $345,429; Mr. Halverson $276,033; Mr. Charter $111,619.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Except for customary provisions in employee compensation plans and as required by law, there are no pre-existing severance or change in control agreements with the NEOs.
The following is a summary of the compensation that would become payable under the existing compensation plans if an NEO’s employment had terminated on December 31, 2017 in each of the following scenarios: ● | Voluntary Separation, including retirement that does not qualify as Long-Service Separation | ● | Long-Service Separation (separation after age 55 with 5 or more years of Company service) | ● | Termination for Cause | ● | Termination without Cause or for Good Reason within one year following a change in control (Termination following CIC) |
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Table of Contents
EQUITY AWARDS | | | Voluntary Separation | | ●Stock Options and SARs: Vested awards are exercisable until the earlier of the expiration date or 60 days from the separation date; unvested awards are forfeited
| | | ●PRSUs and RSUs: Unvested awards are forfeited
| Long-Service Separation | | ●Stock Options and SARs granted prior to 2016: Vest and are exercisable until the earlier of the expiration date or 60 months from the separation date
| | | ●Stock Options granted in 2016: Vest and become immediately exercisable for the remaining term of the award
| | | ●Stock Options granted in 2017: Vest over the normal vesting schedule and become exercisable for the remaining term of the award
| | | ●RSUs granted in 2015 and 2016: Accelerated vesting
| | | ●RSUs granted in 2017: Vest over their normal vesting schedule
| | | ●PRSUs granted prior to 2017: Remain outstanding and vest if and to the extent performance goals are achieved
| | | ●PRSUs granted in 2017: Vesting for pro-rated service period based on the number of months employed during the performance cycle; PRSUs remain outstanding and vest if and to the extent performance goals are achieved
| Termination for Cause | | ●Stock Options and SARs: Vested but unexercised awards and unvested awards are forfeited
| | | ●PRSUs and RSUs: Unvested awards are forfeited
| Termination following CIC | | ●Stock Options: Vest and become immediately exercisable for remaining term of the award
| | | ●PRSUs and RSUs: Accelerated vesting of outstanding awards
| ANNUAL INCENTIVE PLAN | | | Voluntary Separation | | ●Payment is forfeited
| Long-Service Separation | | ●Payment for a pro-rated service period based on actual results
| Termination for Cause | | ●Payment is forfeited
| Termination following CIC | | ●Payment for a pro-rated service period assuming achievement of target opportunity
| STRATEGIC PERFORMANCE PLAN | | | Voluntary Separation | | ●Payment is forfeited
| Long-Service Separation | | ●Payment for a pro-rated service period based on actual results
| Termination for Cause | | ●Payment is forfeited
| Termination following CIC | | ●Payment for entire performance period assuming achievement of maximum opportunity
|
DEFERRED COMPENSATION
The “2017“2019 Nonqualified Deferred Compensation” table on page 48 describes unfunded, non-qualified deferred compensation plans that permit the deferral of salary, bonus and short-term cash performance awards by NEOs. These plans also provide for matching and/or annual non-elective contributions by the Company. NEOs are eligible to receive the amount in their deferred compensation accounts following termination under any termination scenario unless the NEO elected to further defer the payment as permitted by the plans.
Name | Plan Name(1) | Executive
Contributions
in 2019(2) | Registrant
Contributions
in 2019(2) | Aggregate
Earnings
in 2019(3) | Aggregate Withdrawals/ Distributions | Aggregate Balance at 12/31/19(4) | D. James Umpleby III | SDCP | $ | 362,220 | $ | 181,110 | $ | 1,052,741 | $ | — | $ | 5,203,650 | SEIP | $ | — | $ | — | $ | 9,155 | $ | — | $ | 45,901 | DEIP | $ | — | $ | — | $ | 903,257 | $ | — | $ | 4,130,940 | Andrew R. J. Bonfield | SDCP | $ | 41,440 | $ | 41,440 | $ | 4,898 | $ | — | $ | 87,778 | Denise C. Johnson | SDCP | $ | 580,453 | $ | 191,242 | $ | 383,878 | $ | — | $ | 2,606,136 | William P. Ainsworth | SDCP | $ | — | $ | — | $ | — | $ | — | $ | — | Bob De Lange | SDCP | $ | 99,708 | $ | 177,430 | $ | 66,711 | $ | — | $ | 513,643 | (1) The Supplemental Deferred Compensation Plan (SDCP) is a non-qualified deferred compensation plan adopted in March 2007 with a retroactive effective date of January 1, 2005, which effectively replaced the Supplemental Employees’ Investment Plan (SEIP) and Deferred Employees’ Investment Plan (DEIP). (2) SDCP allows eligible U.S. employees, including all NEOs, to voluntarily defer a portion of their base salary and annual incentive pay into the plan and receive a Company matching contribution. Amounts deferred by executives in 2019 are included in the “2019 Summary Compensation Table.” Matching and/or annual non-elective contributions in non-qualified deferred compensation plans made by Caterpillar in 2019 are also included in the “2019 All Other Compensation Table” under the Company Contributions SDCP column. SDCP participants may elect a lump sum payment or an installment distribution payable for up to 15 years after separation. (3) Aggregate earnings comprise interest, dividends, capital gains and appreciation/depreciation of investment results. The investment choices available to the participant mirror those of the Company’s 401(k) plans. (4) Amounts in this column include the following amounts reported in the “Summary Compensation Table” for the years 2017–2019 as follows: Mr. Umpleby $1,065,309, Mr. Bonfield $82,880, Ms. Johnson $1,382,725 and Mr. De Lange $441,733. |
TERMS AND 2020 PROXY STATEMENT 48
Back to Contents POTENTIALPAYMENTSUPONTERMINATIONORCHANGEINCONTROL Except for customary provisions in employee compensation plans and as required by law, there are no pre-existing severance or change in control agreements with the NEOs. The following is a summary of the compensation that would become payable under the existing compensation plans if an NEO’s employment had terminated on December 31, 2019 in each of the following scenarios: ■ Voluntary Separation, including retirement that does not qualify as Long-Service Separation ■ Long-Service Separation (separation after age 55 with five or more years of Company service) ■ Termination without Cause or for Good Reason within one year following a change in control (termination following CIC) EQUITY AWARDS | | Voluntary Separation | ■ Stock Options and SARs: Vested awards are exercisable until the earlier of the expiration date or 60 days from the separation date; unvested awards are forfeited | ■ PRSUs and RSUs: Unvested awards are forfeited | Long-Service Separation | ■ Stock Options and SARs granted prior to 2016: Vest and are exercisable until the earlier of the expiration date or 60 months from the separation date | ■ Stock Options granted in 2016: Vest and become immediately exercisable for the remaining term of the award | ■ Stock Options granted in 2017 and after: Vest over the normal vesting schedule and become exercisable for the remaining term of the award | ■ RSUs granted in 2015: Accelerated vesting | ■ RSUs granted in 2017 and after: Vest over their normal vesting schedule | ■ PRSUs granted in 2017 and 2018: Remain outstanding and vest on a prorated basis if and to the extent performance goal is achieved; proration is based on the number of months employed during the performance cycle | ■ PRSUs granted in 2019 and after: Remain outstanding and vest if and to the extent performance goal is achieved | Termination for Cause | ■ Stock Options and SARs: Vested but unexercised awards and unvested awards are forfeited | ■ PRSUs and RSUs: Unvested awards are forfeited | Termination following CIC | ■ Stock Options: Vest and become immediately exercisable for remaining term of the award | ■ PRSUs and RSUs: Accelerated vesting of outstanding awards | ANNUAL INCENTIVE AWARDS | Voluntary Separation | | Long-Service Separation | ■ Payment for a pro-rated service period based on actual results | Termination for Cause | | Termination following CIC | ■ Payment for a pro-rated service period assuming achievement of target opportunity (not applicable to Short-Term Incentive Plan) |
2020 PROXY STATEMENT 49
Back to Contents POTENTIAL PAYMENTS –UPON TERMINATION OR CHANGE IN CONTROL TERMSANDPOTENTIALPAYMENTS–CHANGEINCONTROL The following tabular information quantifies certain payments that would become payable under existing plans and arrangements if the NEO’s employment had terminated on December 31, 2017.2019. The information is provided relative to the NEO’s compensation and service levels as of the date specified. If applicable, they are based on the Company’s closing stock price on December 29, 2017.31, 2019. Name | Termination Scenario(1) | Equity Awards | Annual Incentive(4) | Retention/Retirement
Payment | | | Total | Stock
Options/
SARs(2) | PRSUs/RSUs(3) | D. James Umpleby III | Voluntary Separation | $ | 5,243,669 | $ | 15,983,665 | $ | 2,336,000 | | $ | — | | $ | 23,563,334 | Termination for Cause | $ | — | $ | — | $ | — | | $ | — | | $ | — | Termination following CIC | $ | 5,243,669 | $ | 18,201,308 | $ | 2,756,849 | | $ | — | | $ | 26,201,826 | Andrew R. J. Bonfield | Voluntary Separation | $ | — | $ | — | $ | 730,000 | | $ | — | | $ | 730,000 | Termination for Cause | $ | — | $ | — | $ | — | | $ | — | | $ | — | Termination following CIC | $ | 602,017 | $ | 4,781,488 | $ | 947,726 | | $ | — | | $ | 6,331,231 | Denise C. Johnson | Voluntary Separation | $ | — | $ | — | $ | 840,000 | | $ | — | | $ | 840,000 | Termination for Cause | $ | — | $ | — | $ | — | | $ | — | | $ | — | Termination following CIC | $ | 2,298,656 | $ | 6,714,529 | $ | 930,389 | | $ | — | | $ | 9,943,574 | William P. Ainsworth | Voluntary Separation | $ | 1,709,062 | $ | 4,617,001 | $ | 744,000 | | $ | — | | $ | 7,070,063 | Termination for Cause | $ | — | $ | — | $ | — | | $ | — | | $ | — | Termination following CIC | $ | 1,709,062 | $ | 5,026,429 | $ | 829,112 | | $ | — | | $ | 7,564,603 | Bob De Lange | Voluntary Separation | $ | — | $ | — | $ | 820,000 | | $ | — | | $ | 820,000 | Termination for Cause | $ | — | $ | — | $ | — | | $ | — | | $ | — | Termination following CIC | $ | 1,832,461 | $ | 6,032,039 | $ | 876,159 | | $ | — | | $ | 8,740,659 |
| (1) If a NEO qualifies for Long-Service Separation and voluntarily separates from the company, Long-Service Separation rules will apply. In 2019, Mr. Umpleby and Mr. Ainsworth each qualified for Long-Service Separation and would therefore receive the amounts reported under “Voluntary Separation.” (2) For valuation purposes, as of December 31, 2019 the option exercise price was lower than the year-end closing price of $147.68 for the 2017 and 2019 grants and for Mr. Bonfield’s options granted on September 7, 2018, Proxy Statement | | | and higher than the year-end closing price of $147.68 for the 2018 grant for NEOs other than Mr. Bonfield. The 2017, 2018 and 2019 grants were not fully vested as of December 31, 2019. |49(3) The valuation shown is based on the number of PRSUs and RSUs, including any applicable DEUs, that would vest multiplied by the closing price of Caterpillar common stock on December 31, 2019, which was $147.68 per share.
(4) The AIP provisions limit the payout to a maximum of $15.0 million in any single year. Amounts shown for “Termination following CIC” represent the target payout available under AIP. |
Table of Contents
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL 2020 PROXY STATEMENT 50
| | | EQUITY AWARDS | | | | | | | | | | | | NAME | TERMINATION SCENARIO1 | | STOCK
OPTIONS/
SARS2 | | PRSUs/RSUs3 | | SHORT-TERM
INCENTIVE4 | | TOTAL | | D. James Umpleby, III | Voluntary Separation | | | $ | 23,861,334 | | | | $ | 7,404,001 | | | | $ | 2,430,000 | | | | $ | 33,695,335 | | | Termination for Cause | | | $ | — | | | | $ | — | | | | $ | — | | | | $ | — | | | Termination following CIC | | | $ | 23,861,334 | | | | $ | 11,384,997 | | | | $ | 1,800,000 | | | | $ | 37,046,331 | | | Bradley M. Halverson | Voluntary Separation | | | $ | 15,149,817 | | | | $ | 5,748,676 | | | | $ | 1,387,174 | | | | $ | 22,285,667 | | | Termination for Cause | | | $ | — | | | | $ | — | | | | $ | — | | | | $ | — | | | Termination following CIC | | | $ | 15,149,817 | | | | $ | 7,396,017 | | | | $ | 924,783 | | | | $ | 23,470,617 | | | Robert B. Charter | Voluntary Separation | | | $ | — | | | | $ | — | | | | $ | — | | | | $ | — | | | Termination for Cause | | | $ | — | | | | $ | — | | | | $ | — | | | | $ | — | | | Termination following CIC | | | $ | 15,638,168 | | | | $ | 7,573,452 | | | | $ | 869,760 | | | | $ | 24,081,380 | | | Bob De Lange | Voluntary Separation | | | $ | — | | | | $ | — | | | | $ | — | | | | $ | — | | | Termination for Cause | | | $ | — | | | | $ | — | | | | $ | — | | | | $ | — | | | Termination following CIC | | | $ | 8,323,513 | | | | $ | 3,391,279 | | | | $ | 763,866 | | | | $ | 12,478,658 | | | Thomas Pellette | Voluntary Separation | | | $ | — | | | | $ | — | | | | $ | — | | | | $ | — | | | Termination for Cause | | | $ | — | | | | $ | — | | | | $ | — | | | | $ | — | | | Termination following CIC | | | $ | 15,271,973 | | | | $ | 7,408,781 | | | | $ | 869,760 | | | | $ | 23,550,514 | |
1If an NEO qualifies for long-service separation and voluntarily separates from the company, long-service separation rules will apply. In 2017, Messrs. Umpleby and Halverson each qualified for long-service separation and would therefore receive the amounts reported under “Voluntary Separation.”
2For valuation purposes, as of December 29, 2017, the option exercise price was lower than the year-end closing price of $157.58 for the 2015, 2016 and 2017 grants. The 2015, 2016 and 2017 grants were not fully vested as of December 31, 2017.
3The valuation shown is based upon the number of PRSUs and RSUs that would vest multiplied by the closing price of Caterpillar common stock on December 29, 2017, which was $157.58 per share.
4The plan provisions limit the payoutBack to a maximum of $15.0 million in any single year. Amounts shown for Termination following CIC represent the target payout available under AIP for all NEOs.Contents
RETIREMENT OF BRADLEY M. HALVERSONCOMPENSATION
On July 31, 2017, Bradley M. Halverson provided notice of his decision to retire as Group President and Chief Financial Officer of the Company. In connection with Mr. Halverson’s retirement, the Company entered into a Retention and Retirement Agreement with Mr. Halverson (the “Agreement”), dated July 31, 2017. Pursuant to the terms of the Agreement as amended, (i) Mr. Halverson will receive a cash payment of $2,612,250 payable as soon as practicable after his retirement effective May 4, 2018, and (ii) Mr. Halverson’s outstanding equity awards will be treated in accordance with their terms, except that the performance-based restricted stock award granted to Mr. Halverson in 2017 will not be prorated. The Agreement also contains various covenants, including restrictive covenants relating to non-competition, non-solicitation, non-disparagement, confidentiality and cooperation.
COMPENSATION RISK
The CHRC regularly reviews the Company’s compensation policies and practices, including the risks created by the Company’s compensation plans. In addition, the Company also conducted a review of its compensation plans and related risks to the Company. The Company reviewed its analysis with the CommitteeCHRC and the Committee’s independent compensation consultant, and the CommitteeCHRC concluded that the compensation plans reflected the appropriate compensation goals and philosophy.philosophy and do not incentivize excessive or inappropriate risk taking. Based on this review and analysis, the Company has concluded that any risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company. 50 |
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Table of ContentsCEOPAYRATIO
CEO PAY RATIO
The Company is providing the following disclosure about the relationship of the annual total compensation of its employees to the annual total compensation of Mr. Umpleby, the Chairman and CEO. To better understand this disclosure, it is important to emphasize that the Company’s compensation programs are designed to reflect local market practices across our global operations. The Company strives to create a competitive global compensation program in terms of both the position and the geographic location in which Caterpillar employees are located. As a result, the Company’s compensation programs vary among each local market to provide for a competitive compensation package. ● | ■ The median annual total compensation of all Caterpillar employees, other than Mr. Umpleby, was $65,132. ■ Mr. Umpleby’s annual total compensation, as reported in the Summary Compensation Table was $34,519,129. ■ The ratio of Mr. Umpleby’s annual total compensation compared to the median of the annual total compensation of all employees was 530 to 1. As permitted by SEC rules, it was $65,770. | ● | Mr. Umpleby’s annual total compensation, as reported in the Summary Compensation Table was $14,035,209.
| ● | The ratio of Mr. Umpleby’s annual total compensation compared to the median of the annual total compensation of all employees was 213 to 1.
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We determined ourthat for 2019 the Company could refer to the same median employee that was identified for 2017. There has been no change in either our employee population or our employee compensation arrangements in 2019 and 2018 that we believe would significantly impact our pay ratio disclosure. The median employee was identified by including all fullfull- and part timepart-time employees as of October 1, 2017, of which approximately 43%43 percent were in the U.S. and 57%57 percent were outside of the U.S.United States. The Company did not exclude any of its employees when determining the employee population from which to identify the median employee. For purposes of identifying the Company’s median employee, the Company considered the base salary and annual cash incentive. Base salary and annual cash incentive were chosen because (i) they represent the principal forms of compensation delivered to all employees and (ii) this information is readily available in each country. In addition, compensation was measured using the 12-month period ending December 31, 2017.
The Company’s median employee’s total compensation for 2019 was calculated in accordance with Item 402(c)(2)(x) of Regulation S-K, as required pursuant to the SEC executive compensation disclosure rules. | 2018 Proxy Statement | | | |51
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As required by SEC rules, the annual total compensation for both Mr. Umpleby and the median employee includes the change in pension value during the year. The change in pension value is subject to several variables and may differ significantly based on year-over-year changes in interest rates, changes in eligible earnings and the formula under which the benefits are determined (see footnote 4 to the Summary Compensation Table of Contentson page 42 regarding Mr. Umpleby’s change in pension value). If the change in pension value were eliminated from Mr. Umpleby’s and the median employee’s total compensation, the CEO to median employee pay ratio for 2019 would have been 283 to 1. 2020 PROXY STATEMENT 51
Back to Contents SHAREHOLDER PROPOSALSPROPOSALS PROPOSAL4– SHAREHOLDER PROPOSAL – DECREASE PERCENTPROVIDE A REPORT OF OWNERSHIP REQUIRED TO CALL SPECIAL SHAREHOLDER MEETINGLOBBYING ACTIVITIES  PROPOSAL SNAPSHOT | | What am I voting on?
| Shareholders are being asked to vote on a shareholder proposal that would give holders in the aggregatecalling for additional disclosure of 15 percent of our outstanding common stock the power to call a special shareholder meeting.Caterpillar’s lobbying activity. | Who submitted the proposal?
| The proposal was submitted by Myra K. Young, 9295 Yorkship Court, Elk Grove, CA 95758, who has represented that she is the owner of 50 shares of Caterpillar Inc. common stock. | |  | | Board Voting Recommendation:
AGAINSTproposal
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Caterpillar Inc. is not responsible for the content of this Shareholder proposal or supporting statement.
PROPOSAL 4 — SPECIAL SHAREHOLDER MEETINGS
RESOLVED: The shareholders of Caterpillar Inc. (‘CAT’ or ‘Company’) hereby request the Board of Directors take the steps necessary to amend our bylaws and each appropriate governing document to give holders with an aggregate of 15% net long of our outstanding common stock the power to call a special shareowner meeting. This proposal does not impact our board’s current power to call a special meeting.
SUPPORTING STATEMENT
Delaware law allows 10% of company shares to call a special meeting. A shareholder right to call a special meeting is a way to bring an important matter to the attention of both management and shareholders outside the annual meeting cycle. This is important because there could be 15-months between annual meetings.
A shareholder right to act by written consent and to call a special meeting are two complimentary ways to bring an important matter to the attention of both management and shareholders outside the annual meeting cycle. Both are associated with increased governance quality and shareholder value. Our Company makes no provisions for written consent and requires 25% to call a special meeting.
Currently, 64% of S&P 500 companies have adopted company bylaws, articles of incorporation, or charter provisions to allow shareholders to call a special meeting. Even more than half of all S&P 1500 companies allow shareholders this right.
This proposal topic also won majority votes last year at Salesforce.com, NETGEAR, and United Rentals. It may be possible to adopt this proposal by simply incorporating this text into our governing documents:
“Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board or the President, and shall be called by the Chairman of the Board or President or Secretary upon the order in writing of a majority of or by resolution of the Board of Directors, or at the request in writing of stockholders owning 15% net long of the entire capital stock of the Corporation issued and outstanding and entitled to vote.”
This proposal should be seen in the context that in 2017 many investors voted for a similar proposal at CAT including Northern Trust, BNY Mellon, Morgan Stanley, Franklin Templeton, Invesco, and many others. We urge the Board to join the mainstream of major U.S. companies and establish a right for shareholders owning 15% of our outstanding common sock to call a special meeting.
Please vote for: Special Shareowner Meetings — Proposal 4
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The Board recommends a vote AGAINST this proposal for the reasons provided below.
Caterpillar’s bylaws currently provide that persons collectively holding at least 25 percent of the Company’s common stock may call a special meeting upon written request to the Company’s Corporate Secretary. The current threshold is designed to strike a balance between assuring that shareholders have the ability to call a special meeting and protect against the risk that a small minority of shareholders, including those with special interests, could trigger the expense and distraction of a special meeting to pursue matters that are not widely viewed as requiring immediate attention or for reasons that may not be in the best interests of the Company or all of our shareholders. The Company’s current threshold is well within the mainstream.
Caterpillar continues to view direct shareholder engagement as key to the Company’s success. To that end, Caterpillar leaders meet regularly with shareholders to discuss our strategy, operational performance, and business practices. We also meet with shareholders throughout the year to share perspectives on corporate governance and executive compensation matters. This commitment to ongoing dialogue with our shareholders, together with practices such as annual director elections, majority voting for directors, a “proxy access” right for nominating directors, no supermajority voting provisions and shareholders’ existing right to call special meetings, protects shareholder rights without the expense and risk associated with a lower special meeting threshold.
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PROPOSAL 5 – SHAREHOLDER PROPOSAL – AMEND THE COMPANY’S COMPENSATION CLAWBACK POLICY
| | What am I voting on?
Shareholders are being asked to vote on a proposal that requests the Board of Directors to amend the Company’s compensation clawback policy to include any misconduct or oversight failure that causes significant financial or reputational harm.
Who submitted the proposal?
The proposal was submitted by CtW Investment Group, 1900 L St. NW, Suite 900, Washington, DC 20036Fonds de solidarite des travaileurs du Quebec (FTQ), 545 boulevard Crémazie Est, Bureau 200, Montréal (Québec) H2M 2W4, who has represented that it is the owner of 32 shares of Caterpillar Inc. common stock.
| | | | Board Voting Recommendation:
AGAINSTproposal
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Caterpillar Inc. is not responsible for the content of this Shareholder proposal or supporting statement.
PROPOSAL 5 — AMEND CLAWBACK POLICY
RESOLVED, that shareholders of Caterpillar Inc. (the “Company”) urge the Compensation and Human Resource Committee of the Board of Directors (the “Committee”) to amend the Company’s clawback policy to provide that the Committee will (a) review, and determine whether to seek recoupment of, incentive compensation paid, granted or awarded to a senior executive if, in the Committee’s judgment, (i) there has been conduct resulting in a material violation of law or Company policy that causes significant financial or reputational harm to Company, and (ii) the senior executive engaged in such conduct or failed in his or her responsibility to manage or monitor conduct or risks; and (b) disclose the circumstances of any recoupment if (i) required by law or regulation or (ii) the Committee determines that disclosure is in the best interests of Company and its shareholders.
“Recoupment” is (a) recovery of compensation already paid and (b) forfeiture, recapture, reduction or cancellation of amounts awarded or granted over which Company retains control. These amendments should operate prospectively and be implemented so as not to violate any contract, compensation plan, law or regulation.
SUPPORTING STATEMENT
As long-term shareholders, we believe that compensation policies should promote sustainable value creation. We agree with former GE general counsel Ben Heineman Jr. that recoupment policies are “a powerful mechanism for holding senior leadership accountable to the fundamental mission of the corporation: proper risk taking balanced with proper risk management and the robust fusion of high performance with high integrity.” (http//:blogs.law.harvard.edu/corpgov/2010/08/13/making-sense-out-of-clawbacks/)
Caterpillar has adopted a policy allowing recoupment of certain incentive pay from a corporate officer as a result of a restatement of financial results, taking into account, among other things, whether the incentive award would have been lower based on the restated results. In our view, providing for recoupment only for accounting and financial reporting noncompliance is too narrow. We believe that recoupment is an important remedy for other kinds of conduct that may not cause a restatement, but may harm Caterpillar’s reputation and prospects. As well, it may be appropriate to hold accountable a senior executive who did not commit misconduct but who failed in his or her management or monitoring responsibility. We have seen the effectiveness of such policies in addressing reputational failures without a financial restatement, most notably at Wells Fargo.
Recent legal settlements underscore the need for a stronger policy in this area, notably Caterpillar’s agreement to pay $60 million to settle a class action settlement in 2016 related to possible defects in the Company’s emission control system for certain heavy duty diesel engines. (http://www.pjstar.com/news/20161202/caterpillar-settles-truck-engine-suit-for-60-million). Further in March 2017, federal investigators raided the Company’s facilities related to an ongoing criminal investigation of the Company’s offshore tax structure. (https://www.nytimes.com/2017/03/02/business/caterpillar-raid-tax-practices.html). Such events have the potential to harm the Company’s reputation and goodwill, and a strong recoupment policy can avoid the Company finding itself enmeshed in needless and costly controversy.
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The Board recommends a vote AGAINST this proposal for the reasons provided below.
This proposal is unnecessary because the Company has already adopted a customary and robust executive compensation clawback policy. Our current clawback policy allows the Compensation Committee to recoup cash and equity incentive compensation from officers if their conduct contributed to an accounting restatement. The policy provides the Compensation Committee with discretion to ensure that recoupment would be in the best interests of the Company, but avoids the vague and subjective standards advocated by this proposal. The Company’s current compensation structure and recoupment tools strike the right balance to motivate executives to deliver long-term results, while at the same time discouraging inappropriate behavior.
The proponent’s amendment would introduce vague and imprecise standards into the recoupment process by requiring recoupment if there has been conduct resulting in a “violation of law or Company policy that causes significant financial or reputational harm to the Company” or if he or she “failed in his or her responsibility to manage or monitor conduct or risks.” There is no definition or measurable standard for what conduct qualifies or for calculating the recoupment amount resulting from such harm. The proposed amendment would undermine the effectiveness of our performance-based compensation by introducing the type of subjective evaluations that we have sought to avoid under our performance-based programs.
Requiring public disclosure of all recoupment action could be harmful. SEC rules already require disclosure of recoupment action taken against our CEO, CFO and other named executive officers. Disclosure of recoupment action impacting other officers should be at the Board’s discretion in order to balance investors’ interest in receiving the information with applicable legal, commercial and privacy concerns.
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PROPOSAL 6 – REQUIRE HUMAN RIGHTS QUALIFICATIONSFOR DIRECTOR NOMINEES
 | | What am I voting on?
Shareholders are being asked to vote on a proposal that requests the Board of Directors to nominate for Board election at least one candidate with human rights qualifications.
Who submitted the proposal?
The proposal was submitted by The Domestic and Foreign Missionary Society of the Protestant Episcopal Church in the United States of America, 815 Second Avenue, New York, NY 10017, who has represented that it is the owner of 20044,100 shares of Caterpillar Inc. common stock. The proposal was also submitted by sixfour other co-filers. Pursuant to Rule 14a-8(l)14a-8(I)(1) promulgated under the Securities Exchange Act of 1934, the Company will provide the name, address and number of Company securities held by the co-filers of this shareholder proposal promptly upon receipt of a written or oral request.
| |  | | Board Voting Recommendation:
|  AGAINSTproposal | Caterpillar Inc. is not responsible for the content of this shareholder proposal or supporting statement. |
PROPOSAL PROPOSAL4—PROVIDEAREPORTOFLOBBYINGACTIVITIES Whereas, we believe in full disclosure of Caterpillar’s direct and indirect lobbying activities and expenditures to assess whether Caterpillar’s lobbying is consistent with its expressed goals and in stockholders’ best interests. Resolved, the stockholders of Caterpillar request the preparation of a report, updated annually, disclosing: 1. Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications. 2. Payments by Caterpillar used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient. 3. Caterpillar’s membership in payments to any tax-exempt organization that writes and endorses model legislation. 4. Description of management’s and the Board’s decision-making process and oversight for making payments described in sections 2 and 3 above. For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a trade association or other organization of which Caterpillar is a member. Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the local, state and federal levels. The report shall be presented to the Public Policy and Governance Committee and posted on Caterpillar’s website. SUPPORTINGSTATEMENT Caterpillar spent $36,380,000 from 2010 - 2018 on federal lobbying. This does not responsibleinclude state lobbying expenditures, where Caterpillar also lobbies but disclosure is uneven or absent. For example, Caterpillar spent $547,756 on lobbying in California from 2010 - 2018. Caterpillar also lobbies abroad, spending between €200,000-299,000 on lobbying in Europe for 2018. Caterpillar belongs to the contentChamber of this Shareholder proposalCommerce, which has spent over $1.5 billion on lobbying since 1998. Caterpillar also 2020 PROXY STATEMENT 52
Back to Contents belongs to the Business Roundtable and National Association of Manufacturers, which together spent over $68 million on lobbying for 2017 and 2018 and are lobbying against shareholder rights to file resolutions. Caterpillar does not disclose its payments to trade associations or the supporting statement. PROPOSAL 6 — REQUIRE HUMAN RIGHTS QUALIFICATIONS FOR DIRECTOR NOMINEES
RESOLVED, shareholders requestamounts used for lobbying. And Caterpillar does not disclose its membership in tax-exempt organizations that as elected board directors’ terms of office expire, the Caterpillar Board Nominating Committee nominate for Board election at least one candidate who: has a high level of human rights expertisewrite and experience in human rights matters relevant to Company production and supply chain, related risks, and is widely recognized in business and human rights communities asendorse model legislation, such as reasonably determined by the Board,American Legislative Exchange Counsel (ALEC).
We are concerned that Caterpillar’s lack of disclosure presents reputational risks when its lobbying contradicts company public positions. For example, Caterpillar’s corporate ALEC membership has drawn scrutiny,(1) and will qualify, subjectover 100 companies have publicly left ALEC. And Caterpillar uses the Global Reporting Initiative (GRI) for sustainability reporting, yet currently fails to exceptions in extraordinary circumstances explicitly specified by the Board, as an independent director.* *A director shall not be considered “independent” if, during the last three years, shereport “any differences between its lobbying positions and any stated policies, goals, or he:
● | was, or is affiliated with a company that was an advisor or consultant to Company; | ● | was employed by or had a personal service contract(s) with Company or senior management; | ● | was affiliated with a company or non-profit entity that received the greater of $2 million or 2% of its gross annual revenues from Company; | ● | had a business relationship with Company worth at least $100,000 annually; | ● | has been employed by a public company at which an executive officer of Company serves as a director; | ● | had a relationship of the sorts described herein with any affiliate of Company; and | ● | was a spouse, parent, child, sibling or in-law of any person described above. |
SUPPORTING STATEMENT
WHEREAS, Caterpillar Inc., a global corporation, faces increasingly complex problems as the international social and cultural context changes.
Companies are faced with ethical and legal challenges arising from diverse cultures and political and economic contexts. Today, management must address issues that include human rights, workers’ right to organize, non-discrimination in the workplace, protection of environment, and sustainable community development. Caterpillar itself does business in countries with human rights challenges including China, Singapore, Middle East, Israel and occupied Palestinian territories.other public positions” under GRI Standard 415.
We believe global companies must implement comprehensive codes of conduct, such as those found in Principles for Global Corporate Responsibility: Bench Marks for Measuring Business Performance, developedthe reputational damage stemming from this misalignment between general policy positions and actual direct and indirect lobbying efforts harms long-term value creation by an international group of religious investors (www.bench-marks.org). 56 |
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Table of ContentsCaterpillar. Thus, we urge Caterpillar to expand its lobbying disclosure.
Human rights expertise at both management and board levels is critical to industrials companies’ success because of significant environmental issues associated with their operations. These impact shareholders, lenders, host country governments and regulators, as well as affected communities and indigenous peoples. Companies’ ability to demonstrate policies and best practices reflecting internationally accepted human rights standards can lead either to successful business planning or, if not in place, difficulties in raising new capital and obtaining the necessary licenses from regulators.COMPANY RESPONSE
We believe Caterpillar’s Board of Directors would benefit by electing to its Board independent specialists versed in all business aspects of human rights. Just one authoritative figure with acknowledged expertise and standing could perform a valuable role in ways that would enable the Board to more effectively address issues and risks inherent in its present business model regarding human rights. It would also help ensure that the highest levels of attention are focused on developing human rights standards for new projects.
The Board recommends a vote AGAINST this proposal for the reasons provided below.below: Caterpillar’stransparencyandcurrentdisclosuresregardingitslobbyingexpendituresandpoliticalactivitiesprovideourshareholderswithextensiveinformationonourlobbyingandpoliticalactivities. Caterpillar has adoptedbelieves that transparency in its lobbying expenditures and political activities is important and, therefore, provides both required and voluntary disclosures with respect to its lobbying expenditures and political activities. Caterpillar regularly reviews its disclosures relating to political activity and believes these disclosures are aligned with, and in some instances, exceed those of its peers. Therefore, the Board does not believe that the additional detailed disclosures contemplated by this proposal would be beneficial to shareholders. Caterpillar files required federal Lobbying Disclosure Act reports with Congress. These reports are publicly available at http://disclosures.house.gov and provide Caterpillar’s federal lobbying activities and expenses for the preceding quarter as well as contributions to candidates by the Caterpillar Political Action Committee on a supplier codesemiannual basis. These reports include Caterpillar’s total federal lobbying expenditures, the issue that was the topic of conduct and a human rights policy that considers and incorporates many elements of internationally recognized human rights standards, including the United Nations Declaration of Human Rights (UNDHR) and International Labor Organization’s (ILO) Declaration on Fundamental Principles and Rights at Work. Implementationcommunication, disclosure of the policy is overseen by a dedicated human rights managerCaterpillar individuals who act as lobbyists on behalf of Caterpillar and includes an ongoing assessmentidentification of the impact our operations have on human rights, due diligence, performance tracking, mechanisms to report grievances and remediation processes. The human rights manager consults with external stakeholders and expertslegislative body or executive branch agency that was contacted. In the European Union, Caterpillar voluntarily participates in the human rightsfieldTransparency Register operated by the European Parliament and operates under the European Commission. Through this publicly available resource available at https://ec.europa.eu/transparencyregister, Caterpillar discloses its engagement with policymakers in the European Union regarding issues of interest to Caterpillar’s business and reports such information as its membership in trade associations and annual expenses associated with activities identified in the Register. Caterpillar also voluntarily reports each US. trade association that has received more than $50,000 from Caterpillar in the most recently completed year. Caterpillar participates in organizations that represent industries relevant to our business and that work on issues that align with the Company’s top priorities. These organizations may also represent other industries and interests not relevant to Caterpillar, and the organizations and their other members may take positions with which we do not always agree. Caterpillar posts information about political expenditures by Caterpillar and disbursements by Caterpillar’s Political Action Committee and describes policies and procedures for Company political contributions. In addition, Caterpillar makes voluntary disclosures regarding issues of global importance to the Company, including detailed information on the Company’s position with respect to such issues. All such policies and voluntary reports are available on Caterpillar’s website at www.caterpillar.com/en/company/governance/
political-engagement.html. Caterpillar’sgovernancepoliciesprovideforeffectiveoversightofitspoliticalactivities. Caterpillar’s political and advocacy activities at the state, federal and international levels are managed by the Vice President, Global Government & Corporate Affairs who coordinates and reviews with senior management the legislative and regulatory priorities that are significant to the Company’s business and shareholders, as well as related advocacy activities. To ensure appropriate Board oversight of an internal human rights working group with progress reports periodically reviewed bypolitical activities, the Board’s Public Policy &and Governance Committee reviews the Company’s policy on political activities and contributions and Caterpillar’s significant political activities, including corporate political contributions, political contribution activities of the Board. In 2017, Caterpillar was recognized byPolitical Action Committee, trade association participation and Caterpillar’s legislative and regulatory priorities. The Board believes that existing disclosures meet or exceed any legal requirements and provide shareholders with transparency and visibility into the Dow Jones Sustainability Index (DJSI) as a leader in our industry for human rights for commitment, practicesCompany’s political engagement activities and disclosure,its management and recognized for Caterpillar’s overall sustainability performance to be in the top ten percentoversight of our industry.them. The Board does not believe that setting asideadditional detailed disclosures would be beneficial to shareholders.
(1) https://www.prwatch.org/news/2018/05/13346/take-money-and-run-trump-tax-cuts-boost-earnigs-alec-corps-which-promptly-layoff 2020 PROXY STATEMENT 53
Back to Contents PROPOSAL 5– SHAREHOLDER PROPOSAL – INDEPENDENT BOARD CHAIRMAN PROPOSAL SNAPSHOT | What am I voting on? | Shareholders are being asked to vote on a proposal that asks the Board of Directors to adopt a policy that would require the Chairman of the Board to be an independent director whenever possible. | Who submitted the proposal? | The proposal was submitted by John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, CA 90278 who has represented that he is the owner of 100 shares of Caterpillar Inc. Common Stock. | Board Voting Recommendation: | | AGAINST proposal | Caterpillar is not responsible for the content of this shareholder proposal or the supporting statement. |
PROPOSAL PROPOSAL5—INDEPENDENTBOARDCHAIRMAN Shareholders request our Board of Directors adopt as policy, and amend our governing documents as necessary, to require that the Chairman of the Board be an independent member of the Board whenever possible. Although it would be better to have an immediate transition to an independent Board Chairman, the Board would have the discretion to phase in this policy for the next Chief Executive Officer transition. If the Board determines that a Chairman, who was independent when selected is no longer independent, the Board shall select a new Chairman who satisfies the requirements of the policy within a reasonable amount of time. Compliance with this policy is waived in the unlikely event that no independent director is available and willing to serve as Chairman. This proposal requests that each necessary step be taken to accomplish the above. Boeing is an example of a company changing course and naming an independent board chairman in October 2019. Boeing did not wait for the next CEO succession. Boeing then named David Calhoun (the Caterpillar Lead Director) as Boeing CEO in December 2019. Mr. Calhoun may have too much on his plate to serve any longer at Caterpillar given the current Boeing 737 MAX crisis. Plus Dennis Muilenburg’s reputation may be too tarnished for him to continue serve as a respected director on the Caterpillar Board. An independent Board Chairman would have more time to focus on whether it is prudent to retain Mr. Calhoun, Mr. Muilenburg and Susan Schwab, another Boeing director, on the Caterpillar Board. Association with Boeing does not seem to be good at least for the immediate future. Regarding Mr. Calhoun, Ralph Nader, whose grandniece died in the Ethiopia Boeing 737 MAX crash said: “There is no way he can do this job and do all those other jobs.” Mr. Calhoun may also still be Chairman at Gates Industrial Corp (GTES). This proposal topic also won impressive 42%-support at the Caterpillar 2016 annual meeting. This 42%-support would have been higher (perhaps 47%) if more shareholders had access to independent proxy voting advice. Please vote yes: Independent Board Chairman - Proposal 5 COMPANY RESPONSE After careful consideration, the Board recommends a vote AGAINST this proposal for the reasons provided below: TheBoardshouldbeabletoselectitsleadershipstructure–includingitsChairmanandCEOand–baseduponitsdeterminationofthestructurethatbestservestheinterestsofshareholders. We operate in a highly cyclical and often challenging macro-economic operating environment in which our Board must constantly assess industry change and disruption. Our Board is comprised of directors with diverse backgrounds, 2020 PROXY STATEMENT 54
Back to Contents experience, perspectives and in-depth knowledge about Caterpillar. With this expertise, our Board is uniquely positioned to evaluate Caterpillar’s key challenges and needs, including the optimal leadership structure. The Board elects the Chairman & CEO annually, and, as part of the election process, considers whether to elect the Chairman & CEO or an independent director to serve as Chairman. This flexibility allows the Board the ability to choose the optimal leadership for Caterpillar based on Caterpillar’s needs and circumstances at a particular time rather than pursuant to an inflexible policy established in advance. In the past, the Board has chosen to separate the roles based on such needs and circumstances. The Board currently believes it is in the best interests of Caterpillar and our shareholders for the roles to be combined. Moreover, the Board believes the combined role of Chairman and CEO promotes unified leadership and direction for the Company, which allows for a single, clear focus for management to execute our strategy and business plans. This ensures that the Company is represented by a single voice to dealers, customers, shareholders, employees and other stakeholders. The Board believes in maintaining flexibility with respect to its leadership structure and that a fixed policy requiring a separation of the roles of Chairman and CEO would not benefit Caterpillar or its shareholders. Caterpillar has strong governance practices to ensure independent oversight of the Chairman & CEO and management. The Board recognizes the importance of independent oversight of the Chairman & CEO and management and has already implemented structures and practices to enhance this oversight. In the event that the Chairman is not an independent director, then an independent director is elected to serve as the Presiding Director. Such independent Presiding Director has duties and responsibilities such as: ■ Presiding at all meetings of the Board at which the Chairman & CEO is not present, including executive sessions of the independent directors; ■ Serving as a liaison between the Chairman & CEO and the independent directors; ■ Approving the type of information sent to the Board; ■ Approving meeting agendas for the Board; ■ Approving meeting schedules, in consultation with the Chairman & CEO and the independent directors, to assure that there is sufficient time for discussion of all agenda items; ■ Having the authority to call meetings of the independent directors; ■ If requested by major shareholders, being available for consultation and direct communication; and ■ Providing the Chairman & CEO with the results of the annual performance review in conjunction with the chairman of the Compensation and Human Resources Committee. As part of each Board meeting, the independent directors meet in executive session with no members of management present. During this time, they consider any matters they determine to be appropriate, including evaluation of senior management, Chairman & CEO and management succession. Moreover, Caterpillar’s strong corporate governance practices negate the need for a fixed policy requiring the separation of the roles of Chairman and CEO. Such structures and practices include: ■ With the exception of Mr. Umpleby, all of Caterpillar’s current directors are independent; ■ Annual election of all directors by majority vote; ■ Shareholders’ right to call a special meeting; ■ Director access to senior management; ■ Annual self-evaluations of the Board, its Committees and its Chairman & CEO; and ■ Publicly available Corporate Governance Guidelines that are reviewed on an annual basis. Given the strong leadership of the Company’s Chairman & CEO, the counter-balancing role of the Presiding Director and a Board seat for a human rights specialistcomprised of strong and independent directors, the Board continues to believe it is necessary or a good corporate governance practicein the best long-term interests of the Company and would limitits shareholders to maintain the combined role of Chairman and CEO. For additional information regarding the Board’s views on its leadership structure and why it is best suited for Caterpillar at this time, we encourage shareholders to read the “Board Election and Leadership Structure” and “Duties and Responsibilities of Presiding Director” sections of this proxy, on pages 19 and 20. 2020 PROXY STATEMENT 55
Back to Contents PROPOSAL 6– SHAREHOLDER PROPOSAL – SHAREHOLDER ACTION BY WRITTEN CONSENT PROPOSAL SNAPSHOT | What am I voting on? | Shareholders are being asked to vote on a proposal that will allow shareholders to take action without a meeting if a specified number of shareholders consent to the action in writing. | Who submitted the proposal? | The proposal was submitted by Myra K. Young, 9295 Yorkship Court, Elk Grove, CA 95758, who has represented that she is the owner of 50 shares of Caterpillar Inc. Common Stock. | Board Voting Recommendation: | | AGAINST proposal | Caterpillar is not responsible for the content of this shareholder proposal or the supporting statement. |
PROPOSAL PROPOSAL6—RIGHTTOACTBYWRITTENCONSENT Resolved, Caterpillar, Inc. (“CAT” or “Company”) shareholders request our board of directors undertake steps as necessary to permit written consent by shareholders entitled to cast the minimum number of votes necessary to authorize action at a meeting at which all shareholders entitled to vote were present and voting. This written consent is to be consistent with giving shareholders the fullest power to act by written consent consistent with applicable law, including the ability to identifyinitiate any topic for written consent consistent with applicable law. SUPPORTINGSTATEMENT Shareholder rights to act by written consent and recruitspecial meetings are often complimentary ways to bring urgent matters to the most qualified candidatesattention of management and shareholders outside the annual meeting cycle. Many boards and investors assume a false equivalency between rights of written consent and special meetings. However, any shareholder, regardless how many (or few) shares she owns, can seek to solicit written consents on a proposal. By contrast, calling a special meeting may require a two-step process. A shareholder who does not own the minimum shares required must considerfirst obtain the support of other shareholders. Once that meeting is called, the shareholder must distribute proxies asking shareholders to vote on the proposal to be presented at the special meeting. This two-step process can take more time and expense than the one-step process of soliciting written consents, especially when CAT requires a 25% threshold, instead of 10% as provided for in Delaware law. BlackRock’s proxy voting guidelines for 2019 include the following: In exceptional circumstances and with sufficiently broad rangesupport, shareholders should have the opportunity to raise issues of issues. | 2018 Proxy Statement | | | |57
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Tablesubstantial importance without having to wait for management to schedule a meeting. We therefore believe that shareholders should have the right to solicit votes by written consent provided that: 1) there are reasonable requirements to initiate the consent solicitation process (in order to avoid the waste of Contentscorporate resources in addressing narrowly supported interests); and 2) shareholders receive a minimum of 50% of outstanding shares to effectuate the action by written consent.
This proposal topic is trending positively. Written consent won 47% support at United Rentals in 2018; 51% support in 2019. At Flowserve 43% support in 2018; 51% support in 2019. At Capital One Financial 44% support in 2018; 56% support in 2019. The topic also recently won majorities at JetBlue, Cigna, Applied Materials, Nuance Communications, Netflix, Newell Brands, Gilead Sciences, L3 Technologies, Eastern Chemical Company, Kansas City Southern and HP. Our Company should join the hundreds of major companies that enable shareholders to act by written consent. Increase Shareholder Value Vote for Right to Act by Written Consent - Proposal 6 2020 PROXY STATEMENT 56
Back to Contents COMPANY RESPONSE After careful consideration, the Board recommends a vote AGAINST this proposal for the reasons provided below: Actionbywrittenconsentcouldcircumventtheprocessofashareholdermeeting. The Board believes that shareholder action by written consent can be used to circumvent the important deliberative process of a shareholder meeting. Written consent rights as proposed could deprive many shareholders of the opportunity to deliberate in an open and transparent manner, or even receive accurate and complete information on important pending actions. In addition, permitting shareholder action by written consent can create substantial confusion and disruption for shareholders, as multiple shareholder groups could solicit multiple written consents simultaneously, some of which may be duplicative or contradictory. Allshareholdersshouldhaveanopportunitytodebateactions. The Board believes that all shareholders should have the opportunity to deliberate and vote on pending shareholder actions. Therefore, shareholders should generally act only in the context of an annual or special meeting. To that end, the Company’s organizational documents allow holders of 25 percent or more, in the aggregate, of Caterpillar’s shares to call a special shareholder meeting. This practice allows our shareholders to bring important matters before all shareholders for consideration, while providing the Board with an adequate opportunity to examine any proposed action and provide a carefully considered recommendation to our shareholders. In addition, the Company has afforded shareholders numerous ways to contact members of the Board and share thoughts, opinions and concerns about the Company. 2020 PROXY STATEMENT 57
Back to Contents OTHER IMPORTANT INFORMATION MATTERSRAISEDATTHEANNUALMEETINGNOTINCLUDEDINTHISSTATEMENT We do not know of any matters to be acted upon at the 2020 Annual Meeting other than those discussed in this statement. If any other matter is properly presented, proxy holders will vote on the matter in their discretion. SHAREHOLDERPROPOSALSANDDIRECTORNOMINATIONSFORTHE2021ANNUALMEETING A proposal for action or the nomination of a director to be presented by any shareholder at the 2021 annual meeting of shareholders must be delivered in the manner and accompanied by the information required in our bylaws. ■ Rule14a-8proposals:If the proposal is to be included in our proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, the proposal must be received at the office of the Corporate Secretary on or before January 1, 2021. ■ Proposalsornominationsnottobeincludedinourproxy:If the proposal or the nomination of a director is not to be included in the proxy statement, the proposal must be received at the office of the Corporate Secretary no earlier than February 10, 2021, and no later than April 11, 2021. ■ Proxyaccessnominations:If the proposal is for the nomination of directors to be included in our proxy statement pursuant to proxy access under Article II, Section 4 of Caterpillar’s bylaws, the proposal must be received at the office of the Corporate Secretary no earlier than December 2, 2020, and no later than January 1, 2021. Our bylaws are available on our website at www.caterpillar.com/governance. Shareholder proposals, director nominations and requests for copies of our bylaws should be delivered to CaterpillarInc.c/oChiefLegalOfficer,GeneralCounselandCorporateSecretary,510LakeCookRoad,Suite100,Deerfield,IL60015. PERSONS OWNING MORE THAN FIVE PERCENT OF CATERPILLAR COMMON STOCK The following table lists those persons or groups (based on a review of Schedule 13Gs filed with the SEC) who beneficially own more than five percent of Caterpillar common stock as of December 31, 2017.2019: | NAME AND ADDRESS |
| VOTING AUTHORITY |
| DISPOSITIVE AUTHORITY | | TOTAL AMOUNT
OF BENEFICIAL
OWNERSHIP | | PERCENT
OF CLASS | | SOLE | | SHARED | SOLE | | SHARED | | State Street Corporation and | | 0 | | 31,441,667 | | 0 | | 49,133,811 | | 49,133,811 | | 8.26 | | various direct and indirect subsidiaries1 | | | | | | | | | | | | | | State Street Financial Center | | | | | | | | | | | | | | One Lincoln Street | | | | | | | | | | | | | | Boston, MA 02111 | | | | | | | | | | | | | | The Vanguard Group2 | | 845,099 | | 129,925 | | 42,185,956 | | 952,193 | | 43,138,149 | | 7.25 | | 100 Vanguard Blvd. | | | | | | | | | | | | | | Malvern, PA 19355 | | | | | | | | | | | | | | BlackRock, Inc. | | 32,961,261 | | 0 | | 37,565,629 | | 0 | | 37,565,629 | | 6.30 | | 55 East 52ndStreet | | | | | | | | | | | | | | New York, NY 10055 | | | | | | | | | | | | |
1 State Street Bank and Trust Company serves as investment manager for certain Caterpillar defined contribution plans (17,692,144 shares).
2 Beneficial ownership includes 657,994 shares for which Vanguard Fiduciary Trust Company (“VFTC”), a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner, as a result of serving as investment manager of collective trust accounts. Beneficial ownership also includes 477,469 shares for which Vanguard Investments Australia, Ltd. (“VIA”), a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner as a result of its serving as investment manager of Australian investment offerings.
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Name and Address | Voting Authority | | Dispositive Authority | | Total Amount of Beneficial Ownership | Percent of
class | Sole | Shared | | Sole | Shared | | BlackRock, Inc.
55 East 52nd Street
New York, NY 10055 | 29,389,492 | 0 | | 34,578,559 | 0 | | 34,578,559 | 6.3 | State Street Corporation and
various direct and indirect subsidiaries
State Street Financial Center
One Lincoln Street
Boston, MA 02111 | 0 | 21,833,959 | | 0 | 44,782,540 | | 44,787,748 | 8.1 | The Vanguard Group(1)
100 Vanguard Blvd.
Malvern, PA 19355
| 825,696 | 155,991 | | 48,231,886 | 927,365 | | 49,159,251 | 8.89 | (1) Beneficial ownership includes 624,102 shares for which Vanguard Fiduciary Trust Company (“VFTC”), a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner, as a result of serving as investment manager of collective trust accounts. Beneficial ownership also includes 494,706 shares for which Vanguard Investments Australia, Ltd. (“VIA”), a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner as a result of its serving as investment manager of Australian investment offerings. |
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2020 PROXY STATEMENT 58
Back to Contents SECURITYOWNERSHIPOFEXECUTIVEOFFICERSANDDIRECTORS* Security ownership of Caterpillar’s Executive Officers, Board of Directors and Nominees to the Board of Directors (as of January 1, 2018)2020) is included in the following table.table: | | COMMON
STOCK1 | | SHARES UNDERLYING
STOCK OPTIONS/
SARs/RSUs
EXERCISABLE
WITHIN 60 DAYS | | ADDITIONAL STOCK
OPTIONS/SARs/
RSUs EXERCISABLE
UPON RETIREMENT2 | | TOTAL | Common
Stock(1) | | Shares Underlying
Stock Options/
SARs/RSUs Exercisable within
60 Days | Additional Stock Options/SARs/RSUs Exercisable upon Retirement(2) | Total | William P. Ainsworth | | 56,114 | | 103,745 | 125 | 159,984 | | Kelly A. Ayotte | | 458 | | | — | | | | — | | | 458 | 1,475 | | - | 1,475 | Andrew R.J. Bonfield | | 7,588 | (3) | 7,693 | - | 15,281 | | David L. Calhoun | | 33,055 | | — | | 3,920 | | 36,975 | 44,843 | | - | 44,843 | | Robert B. Charter | | 23,417 | | 223,612 | | — | | 247,029 | | | Bob De Lange | | 10,230 | | 55,140 | | — | | 65,370 | 17,867 | | 161,941 | - | 179,808 | | Daniel M. Dickinson | | 5,247 | | — | | 1,307 | | 6,554 | 7,261 | | - | 7,261 | | Juan Gallardo | | 271,743 | | — | | 1,307 | | 273,050 | 273,807 | | - | 273,807 | | Bradley M. Halverson | | 26,472 | | 116,262 | | 210,424 | | 353,158 | | Denise C. Johnson | | 11,605 | | 18,764 | - | 30,369 | | Dennis A. Muilenburg | | 10,865 | | — | | — | | 10,865 | 11,882 | | - | 11,882 | | William A. Osborn | | 50,338 | | — | | 1,307 | | 51,645 | 52,662 | | - | 52,662 | | Thomas A. Pellette | | 25,792 | | 152,286 | | — | | 178,078 | | | Debra L. Reed | | 5,054 | | — | | — | | 5,054 | | Debra L. Reed-Klages | | 6,071 | | - | 6,071 | | Edward B. Rust, Jr. | | 29,732 | | — | | 1,307 | | 31,039 | 32,099 | | - | 32,099 | | Susan C. Schwab | | 16,980 | | — | | 1,307 | | 18,287 | 18,082 | | - | 18,082 | | D. James Umpleby III | | 37,383 | | 369,573 | | 347,942 | | 754,898 | 64,696 | | 677,564 | - | 742,260 | | Miles D. White | | 6,006 | | — | | 1,307 | | 7,313 | 6,629 | | - | 6,629 | | Rayford Wilkins, Jr. | | 943 | | — | | — | | 943 | 1,960 | | - | 1,960 | | All directors and executive officers as a group3(20 persons) | | 607,451 | | 953,814 | | 590,220 | | 2,151,485 | | All directors and executive officers as a group(4) (20 persons) | | 660,853 | | 1,029,866 | 125 | 1,690,844 | * Each person listed in the table has beneficial ownership of less than 1 percent. (1) Common stock that is directly or indirectly beneficially owned, including stock that is individually or jointly owned and shares over which the individual has either sole or shared investment or voting authority. (2) Stock Options, SARs or RSUs that are not presently exercisable within 60 days but that would become immediately exercisable if such individual was eligible to retire and elected to retire pursuant to long-service separation. (3) Does not include 13,091 unvested restricted stock units granted on September 7, 2018, that will vest on September 7, 2020. (4) None of the shares held by the group has been pledged. | | * Each person listed in the table has beneficial ownership of less than 1 percent. (1) Common stock that is directly or indirectly beneficially owned, including stock that is individually or jointly owned and shares over which the individual has either sole or shared investment or voting authority. (2) Stock Options, SARs or RSUs that are not presently exercisable within 60 days but that would become immediately exercisable if such individual was eligible to retire and elected to retire pursuant to long-service separation. (3) Does not include 13,091 unvested restricted stock units granted on September 7, 2018, that will vest on September 7, 2020. (4) None of the shares held by the group has been pledged. |
* Each person listed in the table has beneficial ownership of less than 1 percent.
1 Common stock that is directly or indirectly beneficially owned, including stock that is individually or jointly owned and shares over which the individual has either sole or shared investment or voting authority.
2 Stock Options, SARs or RSUs that are not presently exercisable within 60 days but that would become immediately exercisable if such individual was eligible to retire and elected to retire pursuant to long-service separation.
3 None of the shares held by the group has been pledged.
DELINQUENT SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEREPORTS Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers, directors and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC and the NYSE, and to furnish Caterpillar with copies of such forms. Based on our review of the forms we have received, or written representations from reporting persons, we believe that, during 2017,the current fiscal year and in prior fiscal years, each of our executive officers and directors complied with all such filing requirements with the exception of one late Form 4 filing by Jananne A. Copeland and one late Form 4 filing by Denise C. Johnson, each disclosing one transaction, which was filed late dueunless previously reported. 2020 PROXY STATEMENT 59
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Table of ContentsACCESSTOFORM10-K
MATTERS RAISED AT THE ANNUAL MEETING NOT INCLUDED IN THIS STATEMENT
We do not know of any matters to be acted upon at the 2018 Annual Meeting other than those discussed in this statement. If any other matter is properly presented, proxy holders will vote on the matter in their discretion.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR THE 2019 ANNUAL MEETING
A proposal for action or the nomination of a director to be presented by any shareholder at the 2019 annual meeting of shareholders must be delivered in the manner and accompanied by the information required in our bylaws.
● | Rule 14a-8 proposals:If the proposal is to be included in our proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, the proposal must be received at the office of the Corporate Secretary on or before January 2, 2019; | ● | Proposals or nominations not to be included in our proxy:If the proposal or the nomination of a director is not to be included in the proxy statement, the proposal must be received at the office of the Corporate Secretary no earlier than February 14, 2019 and no later than April 15, 2019. | ● | Proxy Access nominations:If the proposal is for the nomination of directors to be included in our proxy statement pursuant to proxy access under Article II, Section 4 of Caterpillar’s bylaws, the proposal must be received at the office of the Corporate Secretary no earlier than December 3, 2018 and no later than January 2, 2019. |
Our bylaws are available on our website at www.caterpillar.com/governance. Shareholder proposals, director nominations and requests for copies of our bylaws should be delivered to Caterpillar Inc. c/o General Counsel and Corporate Secretary, 510 Lake Cook Road, Suite 100, Deerfield, IL 60015. Additionally, we request that you send a copy to the following facsimile number: 309-675-6620.
ACCESS TO FORM 10-K
Upon written request, without charge to each record or beneficial holder of Caterpillar common stock as of April 16, 2018,13, 2020, we will provide a copy of our Annual Report on Form 10-K for the year ended December 31, 2017,2019, as filed with the SEC. Written requests should be directed to Caterpillar Inc. Chief Legal Officer, General Counsel and Corporate Secretary at 510 Lake Cook Road, Suite 100, Deerfield, IL 60015. 60 |
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TableNON-GAAP FINANCIAL MEASURES
The following definitions are provided for the non-GAAP financial measures used in this proxy statement. These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of Contentssimilar measures for other companies. Management does not intend these items to be considered in isolation or as a substitute for the related GAAP measures. AdjustedProfit:The Company believes it is important to separately quantify the profit impact of four significant items in order for the Company’s results to be meaningful to readers. These items consist of (i) pension and OPEB mark-to-market losses resulting from plan remeasurements, (ii) U.S. tax reform impact, (iii) restructuring costs in 2018, which were incurred to generate longer-term benefits and (iv) certain deferred tax valuation allowance adjustments. The Company does not consider these items indicative of earnings from ongoing business activities and believes the non-GAAP measures will provide investors with useful perspective on underlying business results and trends and aids with assessing the Company’s period-over-period results. Reconciliations of enterprise operating profit to the most directly comparable GAAP measure, consolidated operating profit, are as follows: (Millions of dollars) | | 2018 | | 2019 | | Consolidated operating profit | | $ | 8,293 | | $ | 8,290 | | Restructuring costs | | $ | 394 | | $ | — | | Enterprise operating profit | | $ | 8,687 | | $ | 8,290 | |
Reconciliations of enterprise operating profit margin to the most directly comparable GAAP measure, operating profit as a percent of sales and revenues, are as follows: | | | 2018 | | | 2019 | | Operating profit as a percent of total sales and revenues | | | 15.2 | % | | 15.4 | % | Restructuring costs(1) | | | 0.7 | % | | — | % | Enterprise operating profit margin | | | 15.9 | % | | 15.4 | % | (1) 2019 restructuring costs were not material. |
Reconciliations of adjusted profit per share to the most directly comparable GAAP measure, profit per share - diluted, are as follows: | | 2018 | | 2019 | | Profit per share - diluted | | $ | 10.26 | | $ | 10.74 | | Per share mark-to-market losses(1) | | $ | 0.64 | | $ | 0.64 | | Per share U.S. tax reform impact | | $ | (0.17) | | $ | (0.31) | | Per share restructuring costs(2) | | $ | 0.50 | | $ | — | | Per share deferred tax valuation allowance adjustment | | $ | (0.01) | | $ | — | | Adjusted profit per share | $ | 11.22 | | $ | 11.06 | | (1) At statutory tax rates. (2) 2018 restructuring costs were at statutory tax rates. 2019 restructuring costs were not material. | |
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Back to Contents FREQUENTLYASKEDQUESTIONSREGARDINGMEETINGATTENDANCEANDVOTING AND VOTINGWHY AM I RECEIVING THESE PROXY MATERIALS?
Q: | | Why am I receiving these proxy materials?
| | |
| A: | | You have received these proxy materials because you areA: You have received these proxy materials because you were a Caterpillar shareholder of record as of April 16,2018, and Caterpillar’s Board of Directors are your soliciting authority (or proxy) to vote your shares at the 2018 Annual Meeting. This proxy statement includes information that we are required to provide to you under SEC rules and is designed to assist you in voting your shares.
| | | | Q: | | How do I obtain an admission ticket to attend the Annual Meeting?
| | |
| A: | | Anyone wishing to attend the Annual Meeting must have an admission ticket. Admission is limited to:
| | | | | | ●Shareholders of record as of April 16, 2018, together with one immediate family member;
●Authorized proxy holders of shareholders of record as of April 16, 2018; or
●An authorized representative of a registered shareholder who has been designated to present a shareholder proposal.
| | | | | | You must provide evidence of your ownership of shares along with your ticket request and follow the requirements for obtaining an admission ticket specified in the “Admission and Ticket Request Procedure” on page 64. Accredited members of the media and analysts are also permitted to attend the Annual Meeting by following the directions provided in the “Admission and Ticket Request Procedure” on page 64.
| | | | Q: | | What is the difference between a registered shareholder and a street name holder?
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| A: | | A registered shareholder is a shareholder whose ownership of Caterpillar common stock is reflected directly on the books and records of our transfer agent, Computershare Shareowner Services LLC. If you hold stock through a bank, broker or other intermediary, you hold your shares in “street name” and are not a registered shareholder. For shares held in street name, the registered shareholder is the bank, broker or other intermediary. Caterpillar only has access to ownership records for registered shareholders.
| | | | Q: | | When was the record date and who is entitled to vote?
| | | | A: | | The Board of Directors set April 16, 2018 as the record date for the 2018 Annual Meeting. Holders of Caterpillar common stock as of the record date are entitled to one vote per share. As of April 16, 2018, there were 597,949,766 shares of Caterpillar common stock outstanding.
A list of all registered shareholders as of the record date will be available for examination by shareholders during normal business hours at 510 Lake Cook Road, Suite 100, Deerfield, IL 60015 at least ten days prior to the Annual Meeting and will also be available for examination at the Annual Meeting. | | | | Q: | | How do I vote?
| | | | A: | | You may vote by any of the following methods: |
 | | In Person– Shareholders that obtain an admission ticket and attend the Annual Meeting will receive a ballot for voting. If you hold shares in street name, you must also obtain a legal proxy from your broker to vote in person and submit the proxy along with your ballot at the meeting.
| | | |  | | By Mail– Complete, sign and return the proxy and/or voting instruction card provided.
| | | |  | | By Mobile Device– Scan this QR code and follow the voting links.
| | | |  | | By Phone– Follow the instructions on your Internet Notice, proxy and/or voting instruction card or email notice.
| | | |  | | By Internet– Follow the instructions on your Internet Notice, proxy and/or voting instruction card or email notice.
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| | If you vote by phone, mobile device or the Internet, please have your Internet Notice, proxy and/or voting instruction card or email notice available. The control number appearing on your Internet Notice, proxy and/ or voting instruction card or email notice is necessary to process your vote. A mobile device, phone or Internet vote authorizes the named proxies in the same manner as if you marked, signed and returned the card by mail.
| | | | Q: | | How do I vote my 401(k) or savings plan shares?
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| A: | | If you participate in a 401(k) or savings plan sponsored by Caterpillar or one of its subsidiaries that includes a Caterpillar stock investment fund, you may give voting instructions to the plan trustee with respect to the shares of Caterpillar common stock in that fund that are associated with your plan account. The plan trustee will follow your voting instructions unless it determines that to do so would be contrary to law. If you do not provide voting instructions, the plan trustee will act in accordance with the employee benefit plan documents. In general, the plan documents specify that the trustee will vote the shares for which it does not receive instructions in the same proportion that it votes shares for which it received timely instructions, unless it determines that to do so would be contrary to law.
You may revoke previously given voting instructions by following the instructions provided by the trustee.
| | | | Q: | | What are “broker non-votes” and why is it important that I submit my voting instructions for shares I hold in street name?
| | | A: | | Under the rules of the New York Stock Exchange (NYSE), if a broker or other financial institution holds your shares in its name and you do not provide your voting instructions to them, that firm’s discretion to vote your shares for you is very limited. For this Annual Meeting, in the absence of your voting instructions, your broker only has discretion to vote on Proposal 2, the ratification of the appointment of our independent registered public accounting firm. It does not have discretion to vote your shares for any of the other proposals expected to be presented at the Annual Meeting. If you do not provide voting instructions and your broker elects to vote your shares on Proposal 2, the missing votes for each of the other proposals are considered “broker non-votes.”
Whether or not you plan to attend the Annual Meeting, we encourage you to vote your shares promptly.
| | | | Q: |
| How can I authorize someone else to attend the Annual Meeting or vote for me?
| | | | A: | | Registered shareholders can authorize someone other than the individual(s) named on the proxy and/or voting instruction card to attend the meeting or vote on their behalf by crossing out the individual(s) named on the card and inserting the name of the individual being authorized or by providing a written authorization to the individual being authorized.
| | | | | | Street name holders can authorize someone other than the individual(s) named on the legal proxy obtained from their broker to attend the meeting or vote on their behalf by providing a written authorization to the individual being authorized along with the legal proxy.
| | | | | | To obtain an admission ticket for an authorized proxy representative, see the requirements specified in the “Admission and Ticket Request Procedure” on page 64.
| | | | Q: |
| How can I change or revoke my proxy?
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| A: |
| Registered shareholders:You may change or revoke your proxy by submitting a written notice of revocation to Caterpillar Inc. c/o Corporate Secretary at 510 Lake Cook Road, Suite 100, Deerfield, IL 60015 before the Annual Meeting or by attending the Annual Meeting and voting in person. For all methods of voting, the last vote cast will supersede all previous votes.
Holders in street name: You may change or revoke your voting instructions by following the specific directions provided to you by your bank or broker.
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| Q: |
| What is the quorum requirement for theAnnual Meeting?
| | | | A: | | A quorum of shareholders is necessary to hold a valid meeting. Holders of at least one-third of all Caterpillar common stock must be present in person or by proxy at the Annual Meeting to constitute a quorum. Abstentions and broker non-votes are counted as present for establishing a quorum.
| | | | Q: |
| What vote is necessary for action to be taken on proposals?
| | | | A: | | In uncontested elections, director nominees are elected by a majority vote of the shares cast, meaning that each director nominee must receive a greater number of shares voted “for” such director than shares voted “against” such director. If an incumbent director does not receive a greater number of shares voted “for” such director than shares voted “against” such director, then such director must tender his or her resignation to the Board of Directors.
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| | In a contested election, director nominees are elected by a plurality of the votes cast, meaning that the nominees with the most affirmative votes are elected to fill the available seats.
| | | | | | All other actions presented for a vote of the shareholders at the Annual Meeting require an affirmative vote of the majority of shares present in person or by proxy and entitled to vote on the subject matter.
| | | | | | Abstentions will have no effect on director elections. Abstentions will have the effect of a vote against all other proposals. Broker non-votes will not have an effect on any of the proposals presented for your vote.
| | | | | | Votes submitted by mail, telephone, mobile device or Internet will be voted by the individuals named on the card (or the individual properly authorized) in the manner indicated. If you do not specify how you want your shares voted, they will be voted in accordance with the Board’s recommendations. If you hold shares in more than one account, you must vote each proxy and/or voting instruction card you receive to ensure that all shares you own are voted.
| | | | Q: |
| What does it mean if I receive more than one proxy card?
| | | | A: | | Whenever possible, registered shares and plan shares for multiple accounts with the same registration will be combined into the same proxy card. Shares with different registrations cannot be combined and as a result, you may receive more than one proxy card. For example, shares held in your individual account will not be combined on the same proxy card as shares held in a joint account with your spouse.
| | | | | | Street shares are not combined with registered or plan shares and may result in your receipt of more than one proxy card. For example, shares held by a broker for your account will not be combined with shares registered directly in your name.
| | | | | | If you hold shares in more than one form, you must vote separately for each notice, proxy and/or voting instruction card or email notification you receive that has a unique control number to ensure that all shares you own are voted. | | | | | | If you receive more than one proxy card for accounts that you believe could be combined because the registration is the same, contact our transfer agent (for registered shares) or your broker (for street shares) to request that the accounts be combined for future mailings.
| | | | Q: |
| What is householding?
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| A: | | The company and its intermediaries may engage in “householding”, which refers to the process pursuant to which delivery requirements for proxy statements and notices may be satisfied with respect to two or more shareholders sharing the same address through the delivery of a single proxy statement or a single Internet Notice addressed to those shareholders, unless contrary instructions have been received. If your proxy materials are being householded and you would prefer to receive a separate proxy statement or notice, or if your household is receiving multiple copies of these documents and you wish to request that future deliveries be limited to a single copy, please notify your broker. You can also request prompt delivery of a copy of the proxy materials by contacting the General Counsel and Corporate Secretary at (224) 551-4160 or 510 Lake Cook Road, Suite 100, Deerfield, Illinois 60615.
| | | | Q: |
| Who pays for the solicitation of proxies?
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| A: | | Caterpillar pays the cost of soliciting proxies on behalf of the Board. This solicitation is being made by mail and through the Internet, but also may be made by telephone or in person. We have hired Innisfree to assist in the solicitation. We will pay Innisfree a fee of $15,000 for these services and will reimburse their out-of-pocket expenses. We will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for sending proxy materials to shareholders and obtaining their votes. Proxies may also be solicited on behalf of the Board by directors, officers or employees of Caterpillar by telephone or in person, or by mail or through the Internet. No additional compensation will be paid to such directors, officers, or employees for soliciting proxies.
| | | | Q: |
| Where can I find voting results of the Annual Meeting?
| | | | A: | | We will announce preliminary voting results at the Annual Meeting and publish the final results in a Form 8-K filed with the SEC within four business days after the Annual Meeting.
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ADMISSION AND TICKET REQUEST PROCEDURE
ADMISSION
Admission is limited to shareholders of record as of April 16, 201813, 2020, and one immediate family member,Caterpillar’s Board of Directors is soliciting your authority (or proxy) to vote your shares at the 2020 Annual Meeting. This proxy statement includes information that we are required to provide to you under SEC rules and is designed to assist you in voting your shares.
A: The 2020 Annual Meeting will be a completely virtual meeting of shareholders, which will be conducted exclusively by webcast. You are entitled to participate in the Annual Meeting only if you were a Caterpillar shareholder as of the close of business on the Record Date, or one individual designated asif you hold a shareholder’s authorizedvalid proxy holder or one representative designated in writing to present a shareholder proposal. In each case, the individual must have an admission ticket and valid government issued photo identification to be admitted tofor the Annual Meeting. In addition, share ownershipThere is no physical location for this meeting. You can attend the Annual Meeting online, vote and submit your questions during the meeting by visiting www.meetingcenter.io/268805716. The password for the meeting is CAT2020. Please follow the registration instructions outlined below. The online meeting will be verified by one ofbegin promptly at 8:00 a.m., Central Time. We encourage you to access the following methods:meeting prior to the start time to provide ample time for check-in. | | | | | | REGISTERED SHAREHOLDERS | | | STREET NAME HOLDERS | | | | Option A
●A copy of your proxy card or notice showing shareholder name and addressOption B
●Name(s) of shareholder,
●Address,
●Phone number, and
●Social security number or shareholder account ID; or
Also include:
●Name of immediate family member guest, if not a shareholder
●Name of authorized proxy representative, if applicable
●Address where tickets should be mailed and phone number
| | One of the following:
●A copy of your April brokerage account statement showing Caterpillar stock ownership as of April 16, 2018; or
●A letter from your broker, bank or other nominee verifying your ownership as of April 16, 2018; or
●A copy of your brokerage account voting instruction card showing shareholder name and address.
Also include:
●Name of immediate family member guest, if not a shareholder.
●Name of authorized proxy representative, if applicable.
●Address where tickets should be mailed and phone number.
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TICKET REQUEST DEADLINEHOW CAN I REGISTER FOR THE ANNUAL MEETING?
A: Ticket requests must include all information specified inRegistered Holders: If you are a registered shareholder (i.e., you hold your shares through the applicable table above and be submitted in writing and received by Caterpillar on or before May 30, 2018. No requests will be processed after that date.
TO SUBMIT A REQUEST
Submit ticket requests by emailCompany’s transfer agent, Computershare), you do not need to catshareservices@cat.com or by mail to Caterpillar Inc. c/o Corporate Secretary, 510 Lake Cook Road, Suite 100, Deerfield, IL 60015. Ticket requests by telephone will not be accepted.
AUTHORIZED PROXY REPRESENTATIVE
A shareholder may appoint a representativeregister to attend the Annual Meeting and/virtually on the Internet. To attend the meeting, please follow the instructions on the Proxy Card or voteNotice that you received with this Proxy Statement. To access the meeting, you will need the 15-digit control number printed on his/her behalf.your card or notice.
Street Holders: If your shares are held in “street name” (i.e., you hold your shares through an intermediary, such as a bank or broker), you must register in advance to attend the Annual Meeting virtually on the Internet. To register, you must submit a Legal Proxy that reflects your proof of proxy power. The admission ticketLegal Proxy must reflect your Caterpillar Inc. holdings along with your name. Please forward a copy of the Legal Proxy, along with your email address to Computershare. Requests for registration should be directed to Computershare either by email to legalproxy@computershare.com (forwarding the email from your broker, or attach an image of your legal proxy) or by mail to Computershare, Caterpillar Inc. Legal Proxy, P.O. Box 43001, Providence, RI 02940-3001. Requests for registration must be requestedlabeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on June 5, 2020. You will receive a confirmation of your registration by the shareholder but will be issued in the nameemail (or by mail, if no email address is provided) after Computershare receives your registration materials. Proponent of the authorized representative. Individuals holding admission tickets that are not issued in their name will not be admitted to the Annual Meeting. The shareholder information specified above and a written proxy authorization must accompany the ticket request. PROPONENT OF A SHAREHOLDER PROPOSALShareholder Proposal
: For each shareholder proposal included in this proxy statement, the shareholder sponsor should notify the Company in writing of the individual authorized to present the proposal on behalf of the shareholder at the Annual Meeting. One admission ticketThe notification should be received no later than 5:00 p.m, Eastern Time, on June 5, 2020, and include the name, address and email address of the authorized individual. The Company will provide the authorized individual with instructions to join the virtual meeting and present the proposal. Please submit notification by email to catshareservices@cat.com or by mail to Caterpillar Inc. c/o Corporate Secretary, 510 Lake Cook Road, Suite 100, Deerfield, IL 60015. A: A registered shareholder is a shareholder whose ownership of Caterpillar common stock is reflected directly on the books and records of our transfer agent, Computershare Inc. If you hold stock through a bank, broker or other intermediary, you hold your shares in “street name” and are not a registered shareholder. For shares held in street name, the registered shareholder is the bank, broker or other intermediary. Caterpillar only has access to ownership records for registered shareholders. A: The Board of Directors set April 13, 2020, as the record date for the 2020 Annual Meeting. Holders of Caterpillar common stock as of the record date are entitled to one vote per share. As of April 13, 2020, there were 541,239,314 shares of Caterpillar common stock outstanding. A list of all registered shareholders as of the record date will be issuedavailable for the designated representative. MEDIA
Accredited members of the media must register with the Companyexamination by shareholders during normal business hours at 510LakeCookRoad,Suite100,Deerfield,IL60015at least ten days prior to the Annual Meeting. To register, please contact Rachel Potts by phone (224-551-4135) or email (Potts_Rachel_A@cat.com).
ANALYSTS
Analysts must register with the Company prior toMeeting and will also be available for examination during the Annual Meeting. To register, please contact Amy Campbell, DirectorMeeting at www.meetingcenter.io/268805716.
2020 PROXY STATEMENT 61
Back to Contents A: You may vote by any of Investor Relations, by phone (309-675-4549) or email (catir@cat.com).the following methods: 64 |
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X
| Please mark your
vote as in this
example | |
The Board of Directors recommends a voteFOR all of the nominees for Director in
Proposal 1,FOR Proposals 2 and 3 | 1. | Election of the following nominees as directors: | | Nominees: | | FOR | | AGAINST | | ABSTAIN | | | | FOR | | AGAINST | | ABSTAIN | | 01. Kelly A. Ayotte | | ☐ | | ☐ | | ☐ | | 07. Debra L. Reed | | ☐ | | ☐ | | ☐ | | 02. David L. Calhoun | | ☐ | | ☐ | | ☐ | | 08. Edward B. Rust, Jr. | | ☐ | | ☐ | | ☐ | | 03. Daniel M. Dickinson | | ☐ | | ☐ | | ☐ | | 09. Susan C. Schwab | | ☐ | | ☐ | | ☐ | | 04. Juan Gallardo | | ☐ | | ☐ | | ☐ | | 10. D. James Umpleby III | | ☐ | | ☐ | | ☐ | | 05. Dennis A. Muilenburg | | ☐ | | ☐ | | ☐ | | 11. Miles D. White | | ☐ | | ☐ | | ☐ | | 06. William A. Osborn | | ☐ | | ☐ | | ☐ | | 12. Rayford Wilkins, Jr. | | ☐ | | ☐ | | ☐ | | | | FOR | | AGAINST | | ABSTAIN | | | | FOR | | AGAINST | | ABSTAIN | 2. | Ratify the appointment of independent registered public accounting firm for 2018. | | ☐ | | ☐ | | ☐ | | 3. Advisory vote to approve executive compensation. | | ☐ | | ☐ | | ☐ |
 | AtThe BoardtheAnnualMeeting– If shares are registered in your name, to vote you will need your 15-digit Control Number provided with the Notice of Directors recommendsthe Meeting or on your Proxy Card. If you are a street name holder, please refer to “How Can I Register for the Annual Meeting?” on page 61 for information on how to register to attend the Annual Meeting in order to vote
AGAINST Proposals 4-6 your shares. |  | By | | FOR | | AGAINST | | ABSTAINMail– Complete, sign and return the proxy and/or voting instruction card provided. | 4.  | Shareholder Proposal ByMobileDevice– Decrease percent of ownership required to call special shareholder meeting. | | ☐ | | ☐ | | ☐ | 5. | Shareholder Proposal – Amend the Company’s compensation clawback policy. | | ☐ | | ☐ | | ☐ | 6. | Shareholder Proposal – Require human rights qualifications for director nominees. | | ☐ | | ☐ | | ☐ |
| | SIGNATURE | | | | SIGNATURE | | NOTE: Please sign exactly as name appears hereon. If more than one owner, each must sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. |
▲ TO VOTE BY MAIL, PLEASE DETACH HERE ▲ |
YOUR VOTE IS IMPORTANT.
Please take a moment now to vote your shares of Caterpillar Inc.
common stock for the upcoming Annual Meeting of Shareholders.
YOU CAN VOTE TODAY USING ONE OF THE FOLLOWING METHODS:
You may vote by telephone, mobile device or Internet 24 hours a day, 7 days a week.
Your telephone, mobile device or Internet vote authorizes the named proxies in the same manner
as if you had marked, signed and returned a proxy card. |
Table of Contents
P R O X Y A N D V O T I N G I N S T R U C T I O N
ANNUAL MEETING OF SHAREHOLDERS—JUNE 13, 2018
ThisIf you vote by phone, mobile device or the Internet, please have your Internet Notice, proxy is solicited on behalf of the Board of Directors
At the Annual Meeting of Shareholders of Caterpillar Inc. (the “Company” or “Caterpillar”) on June 13, 2018, or at any adjournments thereof, the undersigned (i) hereby appoints Suzette M. LONG and Joni J. FUNK, and each of them, proxies with power of substitution to vote the common stock of the undersigned and/or (ii)voting instruction card or email notice available. The control number appearing on your Internet Notice, proxy and/or voting instruction card or email notice is necessary to process your vote. A mobile device, phone or Internet vote authorizes the named proxies in the same manner as if you marked, signed and returned the card by mail.
A: If you participate in a 401(k) or savings plan sponsored by Caterpillar or one of its subsidiaries that includes a Caterpillar stock investment fund, you may give voting instructions to the plan trustee with respect to Caterpillar or subsidiary employee benefit plans (“Plan(s)”) for which THE NORTHERN TRUST COMPANY or CIBC MELLON TRUST COMPANY each act as directed Trustee (the “Trustee” or “Trustees”) for the Plans’ Trusts, respectively, hereby directs the Trustee(s) to appoint Suzette M. LONG and Joni J. FUNK, and each of them, proxies with power of substitution to vote all shares of Caterpillar common stock in that fund that are associated with your plan account by completing the Company’s stock credited to the accounts of the undersigned under any Plan(s) held under the Trusts at the close of business on April 16, 2018, as directed hereon on the following matters, and, in their discretion, on any other matters that may come before the meeting. For Plan participants, if the Trustees have not received directions from the undersigned by 8:00 a.m. Eastern Time, on June 11, 2018, the Trusteesvoting instruction card or email notice you receive. The plan trustee will vote the shares for which they do not receive instructions (“Undirected Shares”) in the same proportion that they votes shares for which they received timelyfollow your voting instructions unless the Trustee(s)it determines that to do so would be contrary to law. Further, underIf you do not provide voting instructions, the Plan(s), participants are “named fiduciaries” as defined under ERISA to the extent of their authority to direct the voting of the shares held in their accounts and the proportionate share of Undirected Shares in the Trust(s). You are encouraged to specify your choices by marking the appropriate boxes. However, if you wish to voteplan trustee will act in accordance with the employee benefit plan documents. In general, the plan documents specify that the trustee will vote the shares for which it does not receive instructions in the same proportion that it votes shares for which it received timely instructions, unless it determines that to do so would be contrary to law.
You may revoke previously given voting instructions by following the instructions provided by the trustee. A: Under the rules of the New York Stock Exchange (NYSE), if a broker or other financial institution holds your shares in its name and you do not provide your voting instructions to them, that firm’s discretion to vote your shares for you is very limited. For this Annual Meeting, in the absence of your voting instructions, your broker only has discretion to vote on Proposal 2, the ratification of the appointment of our independent registered public accounting firm. It does not have discretion to vote your shares for any of the other proposals expected to be presented at the Annual Meeting. If you do not provide voting instructions and your broker elects to vote your shares on Proposal 2, the missing votes for each of the other proposals are considered “broker non-votes.” Whether or not you plan to attend the Annual Meeting, we encourage you to vote your shares promptly. A: RegisteredHolders: Registered shareholders can authorize someone other than the individual(s) named on the Proxy Card or Notice to attend the virtual meeting or vote on their behalf by crossing out the individual(s) named on the Proxy Card or Notice and inserting the name, address and email address of the individual being authorized. Request registration of an authorized representative by forwarding an image of your updated Proxy Card or Notice to Computershare either by email to legalproxy@computershare.com or by mail to Computershare,CaterpillarInc.LegalProxy,P.O.Box43001,Providence,RI02940-3001. StreetHolders: Street name holders can authorize someone other than the individual(s) named on the legal proxy obtained from their broker to attend the virtual meeting or vote on their behalf by providing a written authorization to the individual being authorized along with the legal proxy. Contact information for the authorized individual, including name, address and email address is required for registration of the authorized representative. Requests for registration of an authorized representative along with the contact information specified above and an image of your legal proxy should be directed to Computershare either by email to legalproxy@computershare.com or by mail to Computershare, Caterpillar Inc. Legal Proxy, P.O. Box 43001, Providence, RI 02940-3001. Requests for registration of an authorized representative must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on June 5, 2020. 2020 PROXY STATEMENT 62
Back to Contents A: Shareholders may submit questions either before the Annual Meeting (from May 27 to June 3, 2020) or during the Annual Meeting. If you wish to submit a question either before or during the meeting, please log into www.meetingcenter.io/268805716, enter the meeting password and your 15-digit control number, then follow the instructions to submit a question. Questions pertinent to meeting matters will be answered during the meeting, subject to time limitations. A: Registered Holders: You may change or revoke your proxy by submitting a written notice of revocation to Caterpillar Inc. c/o Corporate Secretary at 510 Lake Cook Road, Suite 100, Deerfield, IL 60015 before the Annual Meeting or by attending the Annual Meeting and voting. For all methods of voting, the last vote cast will supersede all previous votes. StreetHolders: You may change or revoke your voting instructions by following the specific directions provided to you by your bank or broker. A: A quorum of shareholders is necessary to hold a valid meeting. Holders of at least one-third of all Caterpillar common stock must be present in person or by proxy at the Annual Meeting to constitute a quorum. Abstentions and broker non-votes are counted as present for establishing a quorum. A: In uncontested elections, director nominees are elected by a majority vote of the shares cast, meaning that each director nominee must receive a greater number of shares voted “for” such director than shares voted “against” such director. If an incumbent director does not receive a greater number of shares voted “for” such director than shares voted “against” such director, then such director must tender his or her resignation to the Board of Directors’ recommendations, simply signDirectors. In a contested election, director nominees are elected by a plurality of the votes cast, meaning that the nominees with the most affirmative votes are elected to fill the available seats. All other actions presented for a vote of the shareholders at the Annual Meeting require an affirmative vote of the majority of shares present in person or by proxy and return this card.entitled to vote on the subject matter. This Proxy, when properly executed,Abstentions will have no effect on director elections. Abstentions will have the effect of a vote against all other proposals. Broker non-votes will not have an effect on any of the proposals presented for your vote.
Votes submitted by mail, telephone, mobile device or Internet will be voted by the individuals named on the card (or the individual properly authorized) in the manner you have directed.indicated. If you return a signed proxy with no direction given, itdo not specify how you want your shares voted, they will be voted in accordance with the Board’s recommendations. If you hold shares in more than one account, you must vote each proxy and/or voting instruction card you receive to ensure that all shares you own are voted. A: Whenever possible, registered shares and plan shares for multiple accounts with the same registration will be combined into the same proxy card. Shares with different registrations cannot be combined, and as a result, you may receive more than one proxy card. For example, shares held in your individual account will not be combined on the same proxy card as shares held in a joint account with your spouse. Street shares are not combined with registered or plan shares and may result in your receipt of more than one proxy card. For example, shares held by a broker for your account will not be combined with shares registered directly in your name. If you hold shares in more than one form, you must vote separately for each notice, proxy and/or voting instruction card or email notification you receive that has a unique control number to ensure that all shares you own are voted. If you receive more than one proxy card for accounts that you believe could be combined because the registration is the same, contact our transfer agent (for registered shares) or your broker (for street shares) to request that the accounts be combined for future mailings. A: The Company and its intermediaries may engage in “householding”, which refers to the process pursuant to which delivery requirements for proxy statements and notices may be satisfied with respect to two or more shareholders sharing the same address through the delivery of a single proxy statement or a single Internet Notice addressed to those shareholders, unless contrary instructions have been received. If your proxy materials are being householded and you would prefer to receive a separate proxy statement or notice, or if your household is receiving multiple copies of these documents and you wish to request that future deliveries be limited to a single copy, please notify your broker. You can also request prompt delivery of a copy of the proxy materials by contacting the ChiefLegalOfficer,GeneralCounselandCorporateSecretaryat(224)551-4160or510LakeCookRoad,Suite100,Deerfield,Illinois60015. 2020 PROXY STATEMENT 63
Back to Contents A: Caterpillar pays the cost of soliciting proxies on behalf of the Board of Directors’ recommendations. ▲ TO VOTE BY MAIL, PLEASE DETACH HERE ▲ |
PLEASE VOTE TODAY!
SEE REVERSE SIDE FOR FOUR EASY WAYS TO VOTE.
Important Notice RegardingDirectors. This solicitation is being made by mail and through the AvailabilityInternet, but also may be made by telephone or in person. We have hired Georgeson LLC to assist in the solicitation. We will pay Georgeson LLC a fee of Proxy Materials$15,000 for these services and will reimburse their out-of-pocket expenses. We will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for sending proxy materials to shareholders and obtaining their votes. Proxies may also be solicited on behalf of the Board by directors, officers or employees of Caterpillar by telephone or in person, or by mail or through the Internet. No additional compensation will be paid to such directors, officers or employees for soliciting proxies.
A: We will announce preliminary voting results at the Annual Meeting of Shareholdersand publish the final results in a Form 8-K filed with the SEC within four business days after the Annual Meeting. 2020 PROXY STATEMENT 64
Back to be held on June 13, 2018: This Notice of Annual Meeting and Proxy Statement and the 2017 Form 10-K are available atwww.eproxyaccess.com/cat2018.Contents
ELECTRONIC DELIVERY OF PROXY MATERIALS
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