UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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| ☐ | Preliminary Proxy Statement | |
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| ☑ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material Under Rule 14a-12 | |
3M Company
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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2020
Notice of Annual Meeting & Proxy Statement
8:30 a.m., Central Daylight Time
Tuesday, May 12, 2020
Archer Hotel
3121 Palm Way
Austin, Texas 78758
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I sincerely hope you will be able to join us at the |
Dear Stockholder:
We are pleased to invite you to attend 3M’s Annual Meeting of Stockholders, which will be held on Tuesday, May 14, 2019, at 8:30 a.m., Eastern Daylight Time at the Conrad Indianapolis, 50 West Washington Street, Indianapolis, Indiana 46204. Details regarding admission to the meeting and the business to be conducted are provided in the accompanying Notice of Annual Meeting and Proxy Statement. We will report on Company operations and discuss our future plans. There will also be time for your questions and comments.
We sincerely hope you will be able to join us at the Annual Meeting. For information on how to attend the Annual Meeting, or listen to the live webcast, please read “Annual Meeting Admission” on page 88Annual Meeting. For information on how to attend the Annual Meeting, or listen to the live webcast, please read “Annual Meeting Admission” on page 95 of the accompanying Proxy Statement. Your vote is important. Whether or not you plan to attend the Annual Meeting, please vote as soon as possible. You may vote your proxy on the Internet, by telephone, or, if this Proxy Statement was mailed to you, by completing and mailing the enclosed traditional proxy card. Please review the instructions on the proxy card or the electronic proxy material delivery notice regarding each of these voting options.
Thank you for your ongoing support of 3M.
Sincerely,
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March 27, 2019
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Whether or not you plan to attend the | |||
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Thank you for your ongoing support of 3M. Sincerely,
March 25, 2020 | ||
Michael F. Roman Chairman of the | |||
| 2 | 3M Company |
Notice of 2020 Annual Meeting of Shareholders
Items of Businessbusiness
| Board Recommendation | ||||
| 1. | Elect the | “FOR” | ||
| 2. | Ratify the appointment of PricewaterhouseCoopers LLP as 3M’s independent registered public accounting firm for | |||
| 3. | Approve, on an advisory basis, the compensation of our Named Executive Officers. | |||
| 4. | ||||
| 5. | Transact such other business as may properly come before the Annual Meeting and any adjournment or postponement. |
Record Datedate
You are entitled to vote if you were a stockholdershareholder of record at the close of business on Tuesday, March 19, 2019.17, 2020.
Adjournments and Postponementspostponements
Any action on the items of business described above may be considered at the Annual Meeting at the time and on the date specified above or at any time and date to which the Annual Meeting may be properly adjourned or postponed.
Annual Reportreport
Our 20182019 Annual Report, which is not part of the proxy soliciting materials, is enclosed if the proxy materials were mailed to you. The Annual Report is accessible on the Internet by visitingwww.proxyvote.com, if you have received the Notice of Internet Availability of Proxy Materials, or previously consented to the electronic delivery of proxy materials.
By Order of the Board of Directors,
Gregg M. Larson
Ivan K. Fong
Senior Vice President, Deputy General Counsel and Secretary
3M Company
3M Center, St. Paul, Minnesota 55144
Important Notice regarding the availability of proxy materials for the Annual Meeting of Shareholders to be held on May 12, 2020.
The Notice of Annual Meeting, Proxy Statement, and 20182019 Annual Report are available atwww.proxyvote.com. Enter the 16-digit control number located in the box next to the arrow on the Notice of Internet Availability of Proxy Materials or proxy card to view these materials.
THIS PROXY STATEMENT AND PROXY CARD, OR THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS, ARE BEING DISTRIBUTED TO STOCKHOLDERSSHAREHOLDERS ON OR ABOUT MARCH 27, 2019.25, 2020.
 | Time and Date 8:30 a.m., Central Daylight Time Tuesday, May 12, 2020 |
 | Place Archer Hotel, 3121 Palm Way Austin, TX 78758 |
How to vote
Whether or not you plan to attend the meeting, please provide your proxy by either using the Internet or telephone as further explained in this Proxy Statement or filling in, signing, dating, and promptly mailing a proxy card.
 | By Telephone In the U.S. or Canada, you can vote your shares toll-free by calling |
 | By Internet You can vote your shares online at |
 | By Mail You can vote by mail by marking, dating, and signing your proxy card or voting instruction form and returning it in the postage-paid envelope. |
Attending the meeting
If you wish to attend the Annual Meeting in person, you will need to RSVP and print your admission ticket atwww.proxyvote.com. An admission ticket together with a valid government issued photo identification must be presented in order to be admitted to the Annual Meeting. Please refer to the section entitled “Annual Meeting Admission” on page 95 of the Proxy Statement for further details.
We are actively monitoring the coronavirus (COVID-19) situation. In the event it is not possible or advisable to hold our Annual Meeting in person,we will publicly announce, as soon as practicable before the meeting, a determination to hold the meeting solely by means of remote communication online. In that event,you or your proxyholder could participate,vote and examine the list of shareholders of record by accessing a designated website using your 16-digit control number. Please monitor our investor relations website athttps://investors.3m.com for updated information.
| 2020 Proxy Statement | 3 |
| 4 | 3M Company |
Table of contents
| 5 |
PROPOSAL 
1 | Elect the Proxy Statement • Elect the • Our nominees are distinguished leaders who bring a mix of skills and qualifications to the Board and can represent the interests of all |
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Page 13 |
| Age | Director Since | Other Current Public Boards | 3M Committees | |||||||||||
| Director Nominee and Occupation | A | C | F | N&G | ||||||||||
| Thomas “Tony” K. Brown Independent Retired Group Vice President, Global Purchasing, Ford Motor Company | 63 | 2013 | ●ConAgra Foods, Inc. ●Tower International, Inc. (non-executive chair) |  |  | | | |||||||
| Pamela J. Craig Independent Retired Chief Financial Officer, Accenture plc | 62 | New Nominee | ●Akamai Technologies ●Merck & Co. ●Progressive Corporation | | | | | |||||||
| David B. Dillon Independent Retired Chairman of the Board and Chief Executive Officer, The Kroger Co. | 67 | 2015 | ●Union Pacific Corporation |  | | | | |||||||
| Michael L. Eskew Independent Lead Director Retired Chairman of the Board and Chief Executive Officer, United Parcel Service, Inc. | 69 | 2003 | ●The Allstate Corporation ●Eli Lilly and Company ●International Business Machines Corporation (presiding director) | | | | | |||||||
| Herbert L. Henkel Independent Retired Chairman of the Board and Chief Executive Officer, Ingersoll-Rand plc | 70 | 2007 | ●Herc Holdings, Inc. (non-executive chair) | | | | | |||||||
| Amy E. Hood Independent Executive Vice President and Chief Financial Officer, Microsoft Corporation | 47 | 2017 | | | | | ||||||||
| Muhtar Kent Independent Chairman of the Board and former Chief Executive Officer, The Coca-Cola Company | 66 | 2013 | ●The Coca-Cola Company | | | | | |||||||
| Edward M. Liddy Independent Retired Chairman of the Board and Chief Executive Officer, The Allstate Corporation | 73 | 2000 | ●Abbott Laboratories ●AbbVie, Inc. ●The Boeing Company | | | | | |||||||
| Dambisa F. Moyo Independent Founder and CEO, Mildstorm, LLC | 50 | 2018 | ●Barclays PLC ●Chevron Corporation | | | | | |||||||
| Gregory R. Page Independent Retired Chairman of the Board and Chief Executive Officer, Cargill | 67 | 2016 | ●Deere & Company ●Eaton Corporation plc | | | | | |||||||
| Michael F. Roman Chief Executive Officer, 3M Company | 59 | 2018 | | | | | ||||||||
| Patricia A. Woertz Independent Retired Chairman of the Board and Chief Executive Officer, Archer-Daniels-Midland Company | 66 | 2016 | ●The Procter & Gamble Company | | | | | |||||||
| Director | 3M Committees | ||||||||||
| Director Nominee and Occupation | Age | Since | Other Current Public Boards | A | C | N&G | STS | ||||
Thomas “Tony” K. Brown Independent Retired Group Vice President, Global Purchasing, Ford Motor Company | 64 | 2013 | • ConAgra Foods, Inc. |  | | ||||||
Pamela J. Craig Independent Retired Chief Financial Officer, Accenture plc | 63 | 2019 | • Merck & Co. • Progressive Corporation | | | ||||||
David B. Dillon Independent Retired Chairman of the Board and Chief Executive Officer, The Kroger Co. | 68 | 2015 | • Union Pacific Corporation |  | | ||||||
Michael L. Eskew Independent Lead Director Retired Chairman of the Board and Chief Executive Officer, United Parcel Service, Inc. | 70 | 2003 | • The Allstate Corporation • Eli Lilly and Company • International Business Machines Corporation (independent lead director) | | |||||||
Herbert L. Henkel Independent Retired Chairman of the Board and Chief Executive Officer, Ingersoll-Rand plc | 71 | 2007 | • Herc Holdings, Inc. (non-executive chair) | | | ||||||
Amy E. Hood Independent Executive Vice President and Chief Financial Officer, Microsoft Corporation | 48 | 2017 | | | |||||||
Muhtar Kent Independent Retired Chairman of the Board and Chief Executive Officer, The Coca-Cola Company | 67 | 2013 | | | |||||||
Dambisa F. Moyo Independent Founder and CEO, Mildstorm, LLC | 51 | 2018 | • Chevron Corporation | | | ||||||
Gregory R. Page Independent Retired Chairman of the Board and Chief Executive Officer, Cargill | 68 | 2016 | • Deere & Company • Eaton Corporation plc • Corteva, Inc. (non-executive chair) | | | ||||||
Michael F. Roman Chairman of the Board, President and Chief Executive Officer, 3M Company | 60 | 2018 | |||||||||
Patricia A. Woertz Independent Retired Chairman of the Board and Chief Executive Officer, Archer-Daniels-Midland Company | 67 | 2016 | • The Procter & Gamble Company | | | ||||||
| | | Chair | A:Audit | |||
| | | Member | C:Compensation |
| 6 | 3M Company |
Proxy highlightsCorporate governance highlightshighlights*
Corporate governance highlights
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| BOARD SIZE AND INDEPENDENCE | INDEPENDENT LEAD DIRECTOR | MEETING ATTENDANCE | OTHER PUBLIC COMPANY BOARDS | |||||
| 11/13 | Directors are |  | 97% | 1.4 | Average Board Positions | |||
 | ●Independent Lead Director with robust authority ●Separate Chairman and CEO positions | ●Overall attendance at Board and committee meetings ●There wereEIGHT Board meetings in 2018 |  | |||||
The Corporate Governance Highlights above reflect the Board’s current 13 directors. Among them, Sondra L. Barbour is not seeking re-election and will end her service on the 3M Board on May 14, 2019, when her term expires. Inge G. Thulin, Executive Chairman of the Board, announced his intention not to stand for re-election and to retire from the Company on June 1, 2019.
The Qualifications and Attributes, and Demographic Background information below reflect the twelveeleven Director Nominees for this Annual Meeting.
| Qualifications and Attributes |  |  |  |  |  |  |  |  |  |  |  |  | ||||||||||||
| Leadership |  | | | | | | | | | | | | ||||||||||||
| Manufacturing | | | | | | | ||||||||||||||||||
| Supply Chain | | | | | | | | | ||||||||||||||||
| Technology | | | | | | | | | ||||||||||||||||
| Finance | | | | | | | | | | | | | ||||||||||||
| Global | | | | | | | | | | | | |||||||||||||
| Risk Management | | | | | | | | | | | | | ||||||||||||
| Marketing | | | | | | | | | ||||||||||||||||
| Demographic Background | ||||||||||||||||||||||||
| Tenure (Years) | 6 | 0 | 4 | 16 | 12 | 2 | 6 | 19 | 1 | 3 | 1 | 3 | ||||||||||||
| Age (Years) | 63 | 62 | 67 | 69 | 70 | 47 | 66 | 73 | 50 | 67 | 59 | 66 | ||||||||||||
| Gender (Male/Female) | M | F | M | M | M | F | M | M | F | M | M | F | ||||||||||||
| Race/Ethnicity | ||||||||||||||||||||||||
| African American/Black | | | ||||||||||||||||||||||
| Caucasian/White | | | | | | | | | | |
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Proxy highlights Corporate governance highlightsDIRECTOR NOMINEES – DIVERSITY OF SKILLS AND EXPERIENCE
The Nominating and Governance Committee identifies, reviews, and recommends nominees to the Board for approval. The Committee seeks individuals with distinguished records of leadership and success and who will make substantial contributions to Board operations and effectively represent the interests of all stockholders.shareholders. The Committee considers a wide range of factors and experiences, including ensuring an experienced, qualified Board with expertise in the following key areas most relevant to 3M. The numbers indicated in the diagram below represent the number of director nominees who the Committee believes possess each of the skills and experiences.
  | Leadership Significant leadership experience with understanding of complex global organizations, strategy, risk management, and how to drive change and growth. |  | |
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 | Manufacturing As a vertically integrated Company, manufacturing experience is important to understanding the operations and capital needs of the Company. |  | |
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 | Supply Chain Directors with expertise in the management of the upstream and downstream relationships with suppliers and customers provide important perspectives on achieving efficient operations. |  | |
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 | Technology As a diversified technology, science-based Company, directors with technology backgrounds understand |  | |
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 | Finance Financial metrics measures our performance. All directors must understand finance and financial reporting processes. All, but one, Audit Committee members qualify as “audit committee financial |  | |
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 | Global Global business experience is critical to | ||
| 2019. |  |  | |
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 | Risk Management Directors with experience in risk management and oversight, including cybersecurity, play an important role in the |  | |
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 | Marketing Organic growth is one of | ||
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Significant Corporate Governance Actionscorporate governance actions
We recently implemented several changes that demonstrate our ongoing commitment to strong corporate governance practices:
A new board committee
As we continually seek ways to improve corporate governance, our Board Refreshmentannounced in November 2019 that it had established a new committee to strengthen oversight of the Company’s strategies related to research and development, commercialization, sustainability, environmental stewardship and other related activities. The Science, Technology & Sustainability Committee will help ensure 3M is building on its strong innovation capabilities while maintaining 3M’s high product stewardship standards. As a science-based company that relies on investments and capabilities in R&D, commercialization and sustainability for our success, this new Committee aligns with 3M’s strategic priorities and enables the Board greater focus and engagement on a critical element of our strategy.
| 8 | 3M Company |
In addition to forming the Science, Technology & Sustainability Committee, the Board has ended the Finance Committee. The responsibilities of the Finance Committee will be undertaken by the Audit Committee and the full Board.
Board refreshment
We regularly add directors to infuse new ideas and fresh perspectives into the boardroom. InFive out of the past five years, six new10 independent directorsdirector nominees standing for this year’s election have joined our Board.Board within the past four years. In recruiting directors, we focus on how the experience and skill set of each individual complements those of their fellow directors to create a balanced board with diverse viewpoints and backgrounds, deep expertise, and strong leadership experience. At the Annual Meeting, two nominees will be standing for election to the board for the first time. Dr. Dambisa Moyo, who joined the Board in August 2018, holds a doctorate in economics from the University of Oxford
Shareholder outreach and has expertise in examining the interplay of international business and the global economy. Her background includes advising companies in their investment decisions, capital allocation and risk management. Prior to founding Mildstorm LLC, she worked at Goldman Sachs in various roles, including as an economist, and at the World Bank in Washington, D.C. The combination of her banking and financial services industry experience along with her extensive knowledge of macroeconomics, geopolitics and global markets brings valuable insight to the 3M Board. A new nominee, Pamela J. Craig, is the retired Chief Financial Officer of Accenture plc, a global management consulting, technology services and outsourcing company. She served as Accenture's CFO from 2006 through 2013, following her many other leadership roles at Accenture during her 34 years with the company. Her experience as CFO at a global Fortune 500 company, and her skills in financial, audit, risk management, and governance matters, adds valuable expertise to the 3M Board.
Table of Contentsengagement
Proxy highlights Executive compensation
Stockholder Outreach and Engagement
StockholderShareholder engagement is fundamental to our commitment to good governance and essential to maintaining our strong corporate governance practices. We engage regularly with our global investors to gain valuable insights into the governance issues about which they care most. We aim to seek a collaborative and mutually beneficial approach to issues of importance to investors that affect our business, and to ensure that our corporate governance practices remain industry-leading from their perspectives.
During 2018,2019, members of senior management met with a cross-section of stockholdersshareholders owning approximately 3629 percent of our outstanding shares or approximately 5542 percent of our institutional stockholders.shareholders. The meetings included an overview of the Company and a discussion of the Company’s practices on corporate governance, including board refreshment and diversity, director evaluation, directors’ skills matrix, sustainability, succession planning, and board leadership structure.structure, as well as on strategic priorities, capital allocation and structure, environmental and social matters, sustainability, and company culture. In general, investors viewed the Company’s governance practices favorably, including the Board’s leadership structure,Board chairman transition, the mix of tenure and overall diversity, and the disclosure regarding the Directors’ skill sets and qualifications. The feedback from these meetings was shared with the Board of Directors and helped inform the Board on corporate governance practices and trends. Although stockholder engagement is primarily a function of management, our lead independent director and executive chairman attended some of these meetings.
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PROPOSAL
2 | Ratification of the Appointment of Independent Registered Public Accounting Firm for • •Based on its assessment of the qualifications and performance of PricewaterhouseCoopers LLP (“PwC”), the Audit Committee believes that it is in the best interests of the Company and its |
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PROPOSAL
3 | Advisory Approval of Executive Compensation • •Our executive compensation program appropriately aligns our executives’ compensation with the performance of the Company and its business units as well as their individual performance. |
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| 2020 Proxy Statement | 9 |
2018 Financial PerformanceSelected 2019 financial performance and Business Highlightsbusiness highlights
3M’s 20182019 financial performance was achieved through growthdisciplined execution, impacted by weakness in certain end markets (China, automotive, and disciplined execution. Given the impact that certain events had onelectronics) and channel inventory adjustments. The table below reflects the Company’s 2018 financial performance our results are shown belowagainst the key metrics underlying the Company’s performance share awards, both as determined in accordance with GAAP (toand as adjusted to better reflect the extent applicable) and excluding the following: (1) a charge primarily related to the remeasurement of a transition tax under the Tax Cuts and Jobs Act of 2017 (referred to as the “TCJA”) on previously unremitted earnings of non-U.S. subsidiaries, net of remeasurement of 3M’s deferred tax assets and liabilities considering the TCJA’s newly enacted tax rates and other impacts
Proxy highlights Executive compensation
(referred to as the “Net TCJA Transition Tax”), (2) an $897 million ($770 million after-tax) charge related to the settlementCompensation Committee’s view of the previously disclosed Nature Resource Damages (NRD) lawsuit, including (a) $850 million for a grant to the State of Minnesota for a special “3M Grant for Water Quality and Sustainability Fund,” and (b) certain legal fees and other related obligations, and (3) the gains from the divestiture of substantially all of our Communication Markets Division, net of related actions (referred to as the “Net CMD Divestiture Gains”).Company’s 2019 operating performance.
| Results Determined in Accordance with GAAP (to the Extent Applicable) | Results as Adjusted to Better Reflect the Compensation Committee’s view of the Company’s 2019 Operating Performance | |||
| Earnings Per Share Growth | -12.1% | -6.9%* | ||
| Organic Local Currency Sales Growth | -1.5% | -1.5% | ||
| Return on Invested Capital | 17.5%* | 22.9%* | ||
| Free Cash Flow Conversion | 117.5%* | 106.0%* |
| * | See Appendix A to this Proxy Statement for a reconciliation of earnings per share, operating margin performance, free cash flow and free cash flow conversion to our results for the most directly comparable financial measures as reported under generally accepted accounting principles in the United States, and the calculation of return on invested capital. See “Adjustments for certain special items” on page 60 below for additional information concerning the Committee’s general approach to adjustments. |
We believe
Based on the Company’s financial performance and consistent with our pay-for-performance philosophy, the 2019 annual incentive payments that our ability to deliver consistent results over time is reflected in our total stockholder return, which was in the top half of our executive compensation peer group for the three-Named Executive Officers received and five-year periods endingtheir performance share accruals based on December 31, 2018.2019 performance were below targeted levels. For additional information, see “Total Stockholder Return”“Impact of company performance on page 50incentive compensation and real pay delivery,” “2019 annual incentive” and “Performance share accruals based on 2019 performance” beginning on pages 53, 66 and 70, respectively. The stock, stock options and other long-term incentive compensation awards held by our Named Executive Officers throughout 2019 also decreased in value during the year with the decline in the market value of this Proxy Statement.our shares.
Other noteworthy
Noteworthy accomplishments from January 1, 2019, through March 1, 2020, include the following:
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| • | Completed the acquisition of M*Modal to strengthen our Health Information Systems portfolio and complement organic growth; |
Completed the acquisition of Acelity, Inc. to bolster our Medical Solutions business and support our growth strategy to offer comprehensive advanced and surgical wound care solutions; | |
| • | Strengthened our portfolio going forward by completing the divestitures of our gas and flame detection business and advanced ballistics-protection business; and announced the divestiture of substantially all of the drug delivery business; |
| • | Awarded a |
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Over 100 consecutive years of paying dividends to | |
Reported an all-time high free cash flow of $5.4 billion for 2019, up 10 percent over 2018; | |
| • | Returned |
Recognized by |
| 10 | 3M Company |
Proxy highlights Executive compensation
Elements of Target 2018 Total Direct Compensationtarget 2019 total direct compensation
The illustration below and the discussion that follows showshows how the target Total Direct Compensation of the Named Executive Officers (excluding our former Executive Chairman) was apportioned among base salary, annual incentives, performance share awards and stock options for 2018, and how these elements relate to the strategic business goals of the Company.2019.
Abbreviations: AIP = Annual incentive pay; PSAs = Performance share awards.
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| * | |
| ** | Amounts shown reflect the average apportionment for all Named Executive Officers other than Mr. Roman and Mr. Thulin. Including Mr. Thulin, the average apportionment for the other Named Executive Officers would be as follows: base salary — |
Compensation Policiespolicies and Practicespractices
Our compensation program is designed to provide appropriate performance incentives and avoid compensation practices that do not promote the interests of our stockholders.shareholders.
 | We do | We do not | ||||
 Maintain a strong alignment between corporate performance and our executive officers’ compensation by having a majority of Total Direct Compensation consist of performance-based compensation.Conduct an annual assessment for the purpose of identifying and mitigating significant economic and reputational risks in the design of our incentive compensation programs.Have a comprehensive clawback policy that covers both cash and equity compensation and includes provisions addressing reputational and financial risk as well as risk management failures.Use an independent compensation consultant retained by, and reporting directly to, the Compensation Committee.Limit the number and amount of executive perquisites.Prohibit our executive officers from hedging or pledging 3M common stock.Maintain robust stock ownership guidelines applicable to all of our executive officers.Conduct competitive benchmarking to align executive compensation with the market. | ||||||
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2020 Proxy Statement 11
Proxy highlights Executive compensation
Noteworthy Compensation Actions for 2018compensation program actions since January 1, 2019
During 2018,
Since January 1, 2019, 3M and the Compensation Committee took the noteworthy actions described below as part of the Company’s executive compensation program.
Approved | |
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PROPOSAL
4 | Shareholder Proposal on Setting Target Amounts for CEO Compensation • •See the Board’s opposition statement. |
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12 3M Company
1 | Elect the • •Our nominees are distinguished leaders who bring a mix of skills and qualifications to the Board and can represent the interests of all | |
At the 20192020 Annual Meeting, twelveeleven directors are to be elected to hold office until the 20202021 Annual Meeting of StockholdersShareholders and until their successors have been elected and qualified. All nominees are presently 3M directors who were elected by stockholdersshareholders at the 20182019 Annual Meeting, except for Dr. Dambisa Moyo, who joined the Board on August 12, 2018, and Pamela J. Craig, a new nominee, who are standing for election for the first time. The Nominating and Governance Committee, with the assistance of an outside search firm, and input from the independent directors and the Chairman of the Board and Chief Executive Officer, identified Ms. Craig and recommended her to the Board.Meeting. We expect each nominee for election as a director to be able to serve if elected. If any nominee is not able to serve, proxies will be voted in favor of the remainder of those nominated and may be voted for substitute nominees, unless the Board chooses to reduce the number of directors serving on the Board. Each nominee elected as a director will continue in office until his or her successor has been elected and qualified, or until his or her earlier death, resignation, or retirement. Sondra L. BarbourEdward M. Liddy is not seeking re-election and will end her service on the 3M Board on May 14, 2019, when her term expires. Inge G. Thulin, Executive Chairman of the Board of Directors, announced his intention notno longer eligible to stand for re-election and to retire fromas he has reached the Company on June 1, 2019. Mr. Thulin will remain as Executive Chairman of the Board through the Annual Stockholder Meeting on May 14, 2019.mandatory retirement age. We thank both Ms. Barbour and Mr. ThulinLiddy for theirhis many contributions to the Board and to the Company.
The Nominating and Governance Committee reviewed the Board Membership Criteria (described on page 20)19) and the specific experience, qualifications, attributes, and skills of each nominee, including membership(s) on the boards of directors of other public companies. The following pages contain biographical and other information about the nominees. Following each nominee’s biographical information, we have provided information concerning the particular experience, qualifications, attributes, and skills that are deemed most critical to 3M’s long-term success and led the Nominating and Governance Committee and the Board to determine that each nominee should serve as a director. In addition, the majority of our directors serve or have served on boards and board committees (including as committee chairs) of other public companies, which the Board believes provides them with additional board leadership and governance experience, exposure to best practices, and substantial knowledge and skills that further enhance the functioning of our Board.
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Corporate governance at 3M Nominees for director
Age64
Other current directorships
3M Board committee(s) • Audit • Nominating & Governance Directorships within the past five years • Tower International, Inc. |
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Retired Group Vice President, Global Purchasing, Ford Motor Company Professional Highlights Mr. Brown is theRetired Group Vice President, Global Purchasing, Ford Motor Company, a global automotive industry leader. Mr. Brown served in various leadership capacities in global purchasing since joining Ford in 1999. In 2008, he became Ford’s Group Vice President, Global Purchasing, with responsibility for approximately $90 billion of production and non-production procurement for Ford operations worldwide. He retired from Ford on August 1, 2013. From 1997 to 1999 he served in leadership positions at United Technologies Corporation, including its Vice President, Supply Management. From 1991 to 1997 he served as Executive Director, Purchasing and Transportation at QMS Inc. From 1976 to 1991 he served in various managerial roles at Digital Equipment Corporation. Nominee Qualifications Mr. Brown’s |
Age63 Director since2019 Other current directorships • • Progressive (Insurance) Corporation 3M Board committee(s) |
• Science, Technology & Sustainability (from 11/12/2019) Directorships within the past five years • Akamai Technologies, Inc. • VMware, Inc. • Wal-Mart Stores, Inc. |
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Retired Chief Financial Officer, Accenture plc Professional Highlights Ms. Craig is theRetired Chief Financial Officer, Accenture plc., a global management consulting, technology services and outsourcing company. She served as Nominee Qualifications Ms. |  | |
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Corporate governance at 3M Nominees for director
Age68
Other current directorships
3M Board committee(s) • Audit (Chair) • Nominating & Governance Directorships within the past five years • DirecTV |
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Retired Chairman of the Board and Chief Executive Officer, The Kroger Co. Professional Highlights Mr. Dillon is theRetired Chairman of the Board and Chief Executive Officer, The Kroger Co., a large retailer that operates retail food and drug stores, multi-department stores, jewelry stores, and convenience stores throughout the U.S.Mr. Dillon retired on December 31, 2014 as Chairman of the Board of Kroger, where he was Chairman since 2004 and was the Chief Executive Officer from 2003 through 2013. Mr. Dillon served as President of Kroger from 1995 to 2003 and was elected Executive Vice President in 1990. Mr. Dillon served as Director of the Kroger Co. from 1995 through 2014. Mr. Dillon began his retailing career at Dillon Companies, Inc. (later a subsidiary of The Kroger Co.) in 1976 and advanced through various management positions, including its President from Nominee Qualifications Mr. Dillon’s bachelor’s degree in business from the University of Kansas and his law degree from Southern Methodist University, his leadership roles and experiences at The Kroger Co., including serving as Chairman of the Board and Chief Executive Officer, his knowledge of and extensive experiences in leading one of the world’s largest retailers, his experiences in Kroger’s successful $13 billion merger with Fred Meyer, Inc., his leadership in sustainability, his skills in financial and audit matters, and his experiences as a director at the public companies listed, qualify him to serve as a director of 3M. |
Age70 Director since2003 Other current directorships • • Eli Lilly and Company • International Business Machines Corporation (lead independent director) 3M Board committee(s) • • Nominating |
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Professional Highlights Mr. Eskew is theRetired Chairman of the Board and Chief Executive Officer, United Parcel Service, Inc. (“UPS”), a provider of specialized transportation and logistics services. Mr. Eskew was appointed Executive Vice President in 1999 and Vice Chairman in 2000 before becoming Chairman and Chief Executive Officer of UPS in January 2002. He retired as Chairman of the Board and Chief Executive Officer at the end of 2007 but remained as a director of UPS until December 31, 2014. Nominee Qualifications Mr. Eskew’s bachelor’s degree in |
| 2020 Proxy Statement | 15 |
Age71 Director since2007 Other current directorships • Herc Holdings, Inc. 3M Board committee(s) • Compensation (Chair) • Nominating & Governance • Science, Technology & Sustainability (from 11/12/2019) Directorships within the past five years • The Allstate Corporation • C. R. Bard, Inc. • Visteon Corporation | Herbert L. HenkelIndependent Retired Chairman of the Board and Chief Executive Officer, |
Table of ContentsIngersoll-Rand plc
Corporate governance at 3M Nominees for director
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Professional Highlights Mr. Henkel is theRetired Chairman of the Board and Chief Executive Officer, Ingersoll-Rand plc, a manufacturer of industrial products and Nominee Qualifications Mr. Henkel’s |
Age48 Director since2017 Other current directorships • None 3M Board committee(s) • Compensation • Finance (until 11/12/2019) • Science, Technology & Sustainability (from 11/12/2019) |  Amy E. HoodIndependent Executive Vice President and Chief |
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Professional Highlights Ms. Hood isExecutive Vice President and Chief Financial Officer of Microsoft Corporation, a worldwide provider of software, services and solutions. As chief financial officer, Ms. Hood is responsible for leading Microsoft’s worldwide finance organization, including acquisitions, treasury activities, tax planning, accounting and reporting, and internal audit and investor relations. Prior to this role, Ms. Hood was chief financial officer of Microsoft’s Business Division, responsible for the company’s productivity applications and services including Microsoft Office 365, Office, SharePoint, Exchange, Dynamics ERP and Dynamics CRM. During her time in the Business Division, Ms. Hood helped lead the transition to the company’s Office 365 service, and she was deeply involved in the strategy development and overall execution of the company’s successful acquisitions of Skype and Yammer. Ms. Hood joined Microsoft in 2002 and previously held positions in the Server and Tools Business as well as the corporate finance organization. Prior to 2002, she worked at Goldman Sachs & Co. in various investment banking and capital markets groups roles. Nominee Qualifications Ms. Hood’s |  | |
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Corporate governance at 3M Nominees for director
Age67
Other current directorships
3M Board committee(s) • Compensation • Finance (Chair, until 11/12/2019) • Nominating & Governance (Chair, from 11/12/2019) Directorships within the past five years • The Coca-Cola Company |
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Professional Highlights Mr. Kent is theRetired Chairman of the Board and Chief Executive Officer of The Coca-Cola Company, the world’s largest beverage company. Mr. Kent Nominee Qualifications Mr. Kent’s |
Age51 Director since2018 Other current directorships • Chevron Corporation 3M Board committee(s) • • Finance |
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Directorships within the past five years
• Barrick Gold Corporation • SABMiller PLC • Seagate Technology Public Limited Company |
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Founder and CEO, Mildstorm LLC Professional Highlights
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Corporate governance at 3M Nominees for director
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Nominee Qualifications Dr. Moyo’s |
| 2020 Proxy Statement | 17 |
Age68 Director since2016 Other current directorships • • Eaton Corporation plc • Corteva, Inc. 3M Board committee(s) • • Nominating & Governance (until 11/12/2019) • Science, Technology & Sustainability (Chair, from 11/12/2019) Directorships within the past five years |
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Professional Highlights Mr. Page is theRetired Chairman of the Board and Chief Executive Officer, Cargill, an international marketer, processor and distributor of agricultural, food, financial and industrial products and Nominee Qualifications Mr. Page’s |
Age60 Director since2018 Other current directorships • None 3M Board committee(s) • None |  Michael F. Roman Chairman of the Board, President and Chief Executive Officer, |
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Corporate governance at 3M Nominees for director
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| Professional Highlights Mr. Roman is the Chairman of the Board, President and Chief Executive Officer of 3M Company sinceNominee Qualifications Mr. Roman’s |
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Age67 Director since2016 Other current directorships • The Procter & Gamble Company 3M Board committee(s) • Compensation • Finance (until 11/12/2019) • Science, Technology & Sustainability (from 11/12/2019) Directorships within the past five years • Royal Dutch Shell plc • Archer-Daniels-Midland Company |  Patricia A. WoertzIndependent Retired Chairman of the Board and Chief Executive Officer, |
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Professional Highlights Ms. Woertz is the Retired Chairman of the Board and Chief Executive Officer, Archer-Daniels-Midland Company (“ADM”), an agricultural processor and food ingredientNominee Qualifications Ms. Woertz’s |  | |
RECOMMENDATION OF THE BOARD |
  | The Board of Directors unanimously recommends a vote |
Corporate governance at 3MBoard membership criteriaMembership Criteria
3M’s Corporate Governance Guidelines contain Board Membership Criteria whichthat include a list of key skills and characteristics deemed critical to serve 3M’s long-term business strategy and expected to be represented on 3M’s Board. The Nominating and Governance Committee periodically reviews with the Board the appropriate skills and characteristics required of Board members given the current Board composition. It is the intent of the Board that the Board, itself, will be a high performancehigh-performance organization creating competitive advantage for the Company. To perform as such, the Board will be composed of individuals who have distinguished records of leadership and success in their arena of activity and who will make substantial contributions to Board operations and effectively represent the interests of all stockholders.shareholders. The Committee’s and the Board’s assessment of Board candidates includes, but is not limited to, consideration of:
| Roles in and contributions valuable to the business community; | |
| Personal qualities of leadership, character, judgment, and whether the candidate possesses and maintains throughout service on the Board a reputation in the community at large of integrity, trust, respect, competence, and adherence to the highest ethical standards; | |
| Relevant knowledge and diversity of background and experience in business, manufacturing, technology, finance and accounting, marketing, international business, government, and other areas; and | |
| Whether the candidate is free of conflicts and has the time required for preparation, participation, and attendance at all meetings. |
| 2020 Proxy Statement | 19 |
In addition to these minimum requirements, the Committee will also evaluate whether the nominee’s skills are complementary to the existing Board members’ skills, the Board’s needs for particular expertise in certain areas, and will assess the nominee’s impact on Board dynamics, effectiveness, and diversity of experience and perspectives.
Director Nomineesnominees – Diversity of Skillsskills and Experienceexperience
The diagram below summarizes the director nominees’ key skills and experiences in the areas that are most relevant to 3M and shows the number of director nominees who possess each of the skills and experiences:
  | Leadership Significant leadership experience with understanding of complex global organizations, strategy, risk management, and how to drive change and growth. |  |
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 | Manufacturing As a vertically integrated Company, manufacturing experience is important to understanding the operations and capital needs of the Company. |  |
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 | Supply Chain Directors with expertise in the management of the upstream and downstream relationships with suppliers and customers provide important perspectives on achieving efficient operations. |  |
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 | Technology As a diversified technology, science-based Company, directors with technology backgrounds understand |  |
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 | Finance Financial metrics measures our performance. All directors must understand finance and financial reporting processes. All, but one, Audit Committee members qualify as “audit committee financial | |
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 | Global Global business experience is critical to |  |
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 | Risk Management Directors with experience in risk management and oversight, including cybersecurity, play an important role in the | |
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 | Marketing Organic growth is one of | |
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Corporate governance at 3MDiversity Board membership criteria
For 3M, diversity, in its myriad manifestations, is fundamental to innovation, performance, and relevancy. 3M employees reflect that diversity. The Board of Directors regards diversity as an important factor in selecting board nominees to serve on the board.Board. Although the Board has no specificformal diversity policy, when selecting nominees, it actively considers diversity in recruitment and nomination of directors, such as gender, race, ethnicity, and national origin. The current composition of our Board reflects those ongoing efforts and the continued importance of diversity to the Board.
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Identification, Evaluation,evaluation, and Selectionselection of Nomineesnominees
The Nominating and Governance Committee identifies and evaluates individuals who the Committee believes are qualified to become Board members in accordance with the Board Membership Criteria set forth above, and reviews qualified director nominees with the Board. The Committee and the Chairman of the Board interview candidates that meet the Board Membership Criteria, and the Committee selects nominees that best suit the Board’s current needs and recommends them to the Board. The Board reviews such recommendations and determines submissions for election at the next shareholder meeting of the Company in which directors will be elected or filling any vacancies on the Board. The Committee also focuses on overall Board-level succession planning at the director level, periodically reviews the appropriate size and composition of the Board and anticipates future vacancies and needs of the Board. In the event the Committee recommends an increase in the size of the Board or a vacancy occurs, the Committee considers qualified nominees from several sources, including current Board members and nominees recommended by stockholdersshareholders and other persons.
The Committee may from time to time retain a director search firm to help the Committee identify qualified director nominees for consideration by the Committee.
The In 2019, the Committee retained Spencer Stuart in 2018Russell Reynolds to help identify future Board candidates.
The Committee evaluates qualified director nominees at regular or special Committee meetings against the Board Membership Criteria described above then in effect and reviews qualified director nominees with the Board. The Committee and the Chairman of the Board interview candidates that meet the Board Membership Criteria and the Committee selects nominees that best suit the Board’s current needs and recommends one or more of such individuals for election to the Board.
Director Independenceindependence
The Board has adopted a formal set of Director Independence Guidelines with respect to the determination of director independence, which either conform to or are more exacting than the independence requirements of the New York Stock Exchange (“NYSE”) listing standards, and the full text of which is available on our website atwww.3M.com, under Investor Relations — Governance. In accordance with these Guidelines, a director or nominee for director must be determined to have no material relationship with the Company other than as a director. The Guidelines specify the criteria by which the independence of our directors will be determined, including strict guidelines for directors and their immediate family members with respect to past employment or affiliation with the Company or its independent registered public accounting firm. The Guidelines also prohibit Audit and Compensation Committee members from having any direct or indirect financial relationship with the Company, and restrict both commercial and not-for-profit relationships of all directors with the Company. Directors may not be given personal loans or extensions of credit by the Company, and all directors are required to deal at arm’s length with the Company and its subsidiaries, and to disclose any circumstance that might be perceived as a conflict of interest.
In accordance with these Guidelines, the Board undertook its annual review of director independence. During this review, the Board considered transactions and relationships between each director, or any member of his or her immediate family and the Company and its subsidiaries and affiliates in each of the most recent three completed fiscal years. The Board also considered whether there were any transactions or relationships between the Company and a director or any members of a director’s immediate family (or any entity of which a director or an immediate family member is an executive officer, general partner, or significant equity holder). The Board considered that in the ordinary course of business, transactions may occur between the Company and its subsidiaries and companies at which some of our directors are or have been officers. In particular, the Board considered the annual amount of sales to 3M for each of the most recent three completed fiscal years by each of the companies where directors serve or have served as an executive officer, as well as purchases by those companies from 3M. The Board determined that the amount of sales and purchases in each fiscal year was below one percent of the annual revenues of each of those companies, the threshold set forth in the Director Independence Guidelines. The Board also considered charitable contributions to not-for-profit organizations with which our directors or immediate family members are affiliated, none of which approached the threshold set forth in our Director Independence Guidelines.
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Corporate governance at 3M Board membership criteria
As a result of this review, the Board affirmatively determined that the following directors and director nominee are independent under these Guidelines: Sondra L. Barbour, Thomas “Tony” K. Brown, Pamela J. Craig, (new nominee), David B. Dillon, Michael L. Eskew, Herbert L. Henkel, Amy E. Hood, Muhtar Kent, Edward M. Liddy, Dr. Dambisa F. Moyo, Gregory R. Page, and Patricia A. Woertz. The Board has also determined that members of the Audit Committee and Compensation Committee received no compensation from the Company other than for service as a director. Inge G. Thulin, ExecutiveMichael F. Roman, Chairman of the Board, President and Michael F. Roman, Chief Executive Officer, areis considered to not be independent because of theirhis employment by the Company.
Nominees Proposedproposed by Stockholdersshareholders
The Nominating and Governance Committee has a policy to consider properly submitted stockholdershareholder recommendations for candidates for membership on the Board of Directors. StockholdersShareholders proposing individuals for consideration by the Committee must include at least the following information about the proposed nominee: the proposed nominee’s name, age, business or residence address, principal occupation or employment, and whether such person has given written consent to being named in the Proxy Statement as a nominee and to serving as a director if elected. StockholdersShareholders should send the required information about the proposed nominee to:
  | Corporate Secretary |
In order for
For an individual proposed by a stockholdershareholder to be considered by the Committee for recommendation as a Board nominee for the 20202021 Annual Meeting, the Corporate Secretary must receive the proposal by November 28, 2019.25, 2020. Such proposals must be sent via registered, certified, or express mail (or other means that allows the stockholdershareholder to determine when the proposal was received by the Company). The Corporate Secretary will sendrefer properly submitted stockholdershareholder proposed nominations to the Chair of the Nominating and Governance Committee Chair for consideration at a future Committee meeting. Individuals proposed by stockholdersshareholders in accordance with these procedures will receive the same consideration received by individuals identified to the Committee through other means.
Stockholder Nominations -Shareholder nominations – Advance Notice Bylawnotice bylaw
In addition, 3M’s Bylaws permit stockholdersshareholders to nominate directors at an annual meeting of stockholdersshareholders or at a special meeting at which directors are to be elected in accordance with the notice of meeting. StockholdersShareholders intending to nominate a person for election as a director must comply with the requirements set forth in the Company’s Bylaws. With respect to nominations to be acted upon at our 20202021 Annual Meeting, our Bylaws would require, among other things, that the Corporate Secretary receive written notice from the record stockholdershareholder no earlier than November 28, 2019,25, 2020, and no later than December 28, 2019.25, 2020. The notice must contain the information required by the Bylaws, a copy of which is available on our website atwww.3M.com, under Investor Relations — Governance. Nominations received after December 28, 2019,25, 2020, will not be acted upon at the 20202021 Annual Meeting.
Proxy Access Nominationsaccess nominations
Further, pursuant to the proxy access Bylaw adopted by the Board in November 2015, a stockholder,shareholder, or a group of up to 20 stockholders,shareholders, continuously owning for three years at least three percent of our outstanding common shares may nominate and include in our proxy materials up to the greater of two directors and 20 percent of the number of directors currently serving, if the stockholder(s)shareholder(s) and nominee(s) satisfy the Bylaw requirements. For eligible stockholdersshareholders to include in our proxy materials nominees for the 20202021 Annual Meeting, proxy access nomination notices must be received by the Company no earlier than November 28, 2019,25, 2020, and no later than December 28, 2019.25, 2020. The notice must contain the information required by the Bylaws.
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Corporate governance at 3MCorporate governance overview
Role of the Nominating and Governance Committee
The Nominating and Governance Committee identifies individuals who the Committee believes are qualified to become Board members in accordance with the Board Membership Criteria set forth above, and recommends selected individuals to the Board for nomination to stand for election at the next meeting of stockholders of the Company in which directors will be elected. In the event there is a vacancy on the Board between meetings of stockholders, the Committee seeks to identify individuals who the Committee believes are qualified to become Board members in accordance with the Board Membership Criteria, and may recommend one or more of such individuals for appointment to the Board. The Nominating and Governance Committee also focuses on overall Board-level succession planning at the director level.
The Company believes that good corporate governance practices serve the long-term interests of stockholders,shareholders, strengthen the Board and management, and further enhance the public trust 3M has earned from more than a century of operating with uncompromising integrity and doing business the right way. The following sections provide an overview of 3M’s corporate governance practices, which are published on the Company’s website, including the Corporate Governance Guidelines, the Board’s leadership structure and the responsibilities of the independent Lead Director, communication with directors, director independence, the director nomination process, the Board’s role in risk oversight, the Codes of Conduct for directors and employees, public policy engagement, and the Company’s commitment to the environment and sustainability.
Corporate Governance Highlightsgovernance highlights*
| The Corporate governance highlights above reflect the Board’s current 12 directors and related information for 2019. | |
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| BOARD SIZE AND INDEPENDENCE | INDEPENDENT LEAD DIRECTOR | MEETING ATTENDANCE | OTHER PUBLIC COMPANY BOARDS | |||||
| 11/13 | Directors are |  | 97% | 1.4 | Average Board Positions | |||
 | ●Independent Lead Director with robust authority ●Separate Chairman and CEO positions | ●Overall attendance at Board and committee meetings ●There wereEIGHT Board meetings in 2018 |  | |||||
The Corporate Governance Highlights above reflect the Board’s current 13 directors. Among them, Sondra L. Barbour is not seeking re-election and will end her service on the 3M Board on May 14, 2019, when her term expires. Inge G. Thulin, Executive Chairman of the Board, has announced his intention not to stand for re-election and to retire from the Company on June 1, 2019.
Substantial majority of our directors – eleven of our | • Independent directors regularly meet in executive sessions without management. • Independent directors have complete access to management and employees. • Regularly refresh Board; added | ||
Corporate governance at 3M Corporate governance overview
| Board Committee | |||
| Only independent directors serve on the Board’s committees with independent committee chairs empowered to establish committee agendas. | • Committee executive sessions – at each regularly scheduled meeting, members of • Financial expertise – all members of the Audit Committee meet the NYSE listing standards for financial expertise, and | ||
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| Shareholder Rights | |||
| The Board has taken numerous actions – including those proposed by | • Annual election of all directors. • Majority voting for directors in uncontested elections. Incumbent director not receiving majority votes tenders resignation, subject to the Board recommendation for action. • Proxy access – a • Established policies and criteria for director nominations, including candidates recommended by • No supermajority voting provisions in Bylaws or Certificate of Incorporation. • Shareholders holding 25 percent of the outstanding shares have the right to call a special meeting. • No • Established protocol for | ||
| Shareholder Outreach and Engagement | |||
| We maintain a vigorous | • Shareholder engagement is fundamental to our commitment to good governance and essential to maintaining our strong corporate governance practices. We engage regularly with our global investors to gain valuable insights into the governance issues about which they care most. We aim to seek a collaborative and mutually beneficial approach to issues of importance to investors that affect our business, and to ensure that our corporate governance practices remain industry-leading from their perspectives. • During | ||
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Corporate governance at 3MTable of Contents Corporate governance overview
| Risk Oversight | |||
| The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a whole Board and through its committees. | • At least annually, the Board reviews enterprise risks facing the Company and certain of its businesses. Other important categories of risk are assigned to designated Board committees (which are comprised solely of independent directors) that report back to the full Board. The Board has delegated to the Audit Committee through its charter the primary responsibility for the oversight of risks facing the Company, including cybersecurity. The Audit Committee’s charter provides that the Audit Committee shall “discuss policies and procedures with respect to risk assessment and risk management, the Company’s major risk exposures and the steps management has taken to monitor and mitigate such exposures.” The newly established Science, Technology & Sustainability Committee, in providing oversight of the company’s strategies on research and development, commercialization, sustainability, and environmental and product stewardships, reviews the company’s policies and programs on environmental, health and safety, including for compliance with all applicable laws and regulations. The Committee also assists the Board in identifying and analyzing significant emerging science and technology, disruptive innovations, materials vulnerability, and geopolitical issues that may impact the company’s overall strategy, global business continuity and financial results. | ||
| Board Approved Long-Term Strategic Plans and Capital Allocation Strategies | |||
| Each year management presents to the Board, and the Board discusses and approves, detailed long-term strategic plans for the Company. | • Each year management presents to the Board, and the Board discusses and approves, detailed long-term strategic plans for the Company. In addition to the overall strategic plan for the Company and the business groups, the discussions in • The Board also approves the long-term capital structure of the Company to ensure that there is sufficient capital to invest for future growth. • The Company is committed to investing in organic growth, most notably through capital expenditures and research and development. The Company has invested over • The capital allocation plans have flexibility to respond quickly to strategic acquisition opportunities that can strengthen the Company’s portfolio. Over the past five years, 3M has invested approximately • The Company has a long history of returning cash to • Finally, share repurchases represent the last component of 3M’s capital allocation plans. Over the past five years, 3M has returned approximately | ||
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| Director Orientation and Continuing Education | |||
| Our orientation programs familiarize new directors with the company and their role, and our continuing education programs assist directors in maintaining skills and knowledge necessary to perform their duties. | • Our director orientation programs familiarize new directors with 3M’s businesses, strategic plans, and policies, and help prepare them for their role on their assigned committees. • Continuing education programs assist directors in maintaining skills and knowledge necessary for the performance of their duties. These programs may be part of regular Board and Committee meetings or provided by academic or other qualified third parties. | ||
Corporate governance at 3M Corporate governance overview
| Board, Committee, and Director Evaluations | |||
| The Nominating and Governance Committee conducts an annual evaluation of the performance of the Board, each of its committees, and individual directors. | • The results of the annual evaluations of the board and its committees are shared with the Board and help identify areas in which the Board and its committees could improve performance. • Before the November Board meeting, the Chairman/CEO, Lead Director, and • As part of the nomination process, the Nominating and Governance Committee considers the performance and contributions of each individual director and evaluates each of the directors to ensure our directors continue to possess the necessary skills and experience to effectively oversee the Company. On occasion, the Nominating and Governance Committee has not renominated a director based on this individual director evaluation process. | ||
| Compliance | |||
| Creating a | • Code of Business Conduct and Ethics for directors. • Code of Conduct for all employees, including our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer. • Chief Compliance Officer, who has direct reporting obligations to the Audit Committee, provides regular updates to the Audit Committee on compliance with the Company’s Code of Conduct, and at least annually, on the implementation and effectiveness of the Company’s compliance and ethics program. • Disclosure committee as part of the Company’s disclosure controls and procedures for financial reporting. • Disclosure of public policy engagement on our Investor Relations website, under Governance — Governance Documents — “Political Activities and Issue Advocacy,” including disclosure of political contributions and membership in key trade associations where membership dues allocated for lobbying purposes exceed $25,000. | ||
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| Commitment to Sustainability | |||
• 3M’s Strategic Sustainability • Our Sustainability Value Commitment, implemented in December 2018, requires that • Through membership in the RE100, we are committed to transitioning our • In December 2019, we increased our commitment to improving lives around the world with an • Sustainability at 3M is guided by our Innovation Steering Committee and overseen by the newly established Science, Technology & Sustainability Committee of our Company’s Board of Directors. • Our sustainability progress is reported publicly in our annual Sustainability Report, and more information on current initiatives can be found atwww.3M.com/Sustainability. | |||
| Executive Compensation | |||
| Annual advisory approval of executive compensation with approximately | • Strong pay-for-performance philosophy. • Incentive compensation subject to clawback policy that includes provisions addressing reputational and financial risk as well as risk management failures. • Robust stock ownership guidelines for executive officers and stock retention policy for directors. • Prohibition of hedging or pledging 3M stock by directors and executive officers. • No employment • Long-term incentive compensation linked to financial objectives of earnings per share growth, relative organic volume growth, return on invested capital, and free cash flow conversion. | ||
Corporate governance at 3M Corporate governance overview
Corporate Governance Guidelinesguidelines
The Board has adopted Corporate Governance Guidelines which provide a framework for the effective governance of the Company. The guidelines address matters such as the respective roles and responsibilities of the Board and management, the Board’s leadership structure, the responsibilities of the independent Lead Director, director independence, the Board Membership Criteria, Board committees, and Board and management evaluation. The Board’s Nominating and Governance Committee is responsible for overseeing and reviewing the Guidelines at least annually and recommending any proposed changes to the Board for approval. The Corporate Governance Guidelines, the Certificate of Incorporation and Bylaws, the charters of the Board committees, the Director Independence Guidelines, and the Codes of Conduct provide the framework for the governance of the Company and are available on our website atwww.3M.com, under Investor Relations — Governance.
Board’s Rolerole in the Company’s Long-Term Strategycompany’s long-term strategy
Each year management presents to the Board, and the Board discusses and approves, detailed long-term strategic plans for the Company. In addition to the overall strategic plan for the Company and the business groups, the discussions also focused on breakout sessions with the directors on strategic corporate-wide themes of portfolio management, innovation, commercial transformation, manufacturing and supply chain transformation, and people and culture.
Our Company’s long-term strategy is outlined in the 3M Value Model.
3M VALUE MODEL
The 3M Value Model is what differentiates our company in the marketplace. It’s how we create extraordinary value for customers, and premium returns for shareholders. The model is built around four elements: our vision, our strengths, our priorities, and our values.
Corporate governance at 3M Corporate governance overviewOur vision
Our Vision
Our vision drives everything we do:3M Technology Advancing Every Company, 3M Products Enhancing Every Home, 3M Innovation Improving Every Life. It is aspirational and authentic to 3M, and is an important part of the purpose that drives us as an enterprise.
Our Strengthsstrengths
Our strengths help us continually innovate to create differentiated value for customers at above-market growth rates. They also enable us to take advantages of the changes in customers, technology and commercial channels.
In our Customer Inspired Innovation approach, we combine close engagement with customers, deep domain expertise in markets and the science behind our technology platforms to develop unique insights into the critical needs of our customers.
We then leverage our fundamental strengths. In technology, we leverage our deep intellectual property and broad range of technology platforms. In manufacturing, we leverage our unique capabilities in process engineering. Our global capabilities enable us to take that technology and manufacturing strength and deliver through our go-to-market models to serve customers around the world. And finally, our brand adds value in each of our businesses.
We do this while maintaining a focus on our customers – the end users of our solutions. Most of our sales are specified or designed into customer applications. While the channel to our end user may change over time, our global commerce strategy is to connect directly with end users while leveraging the go-to-market model that will deliver where, when and how the end user wants.
Our Prioritiespriorities
We have four priorities that are positioning us for long-term growth and value creation: Portfolio, Transformation, Innovation, and People & Culture. The first three are levers that have been proven to create extraordinary value over time. They form the foundation of our priorities moving forward. They depend on our efforts to advance people and culture. Our focus on advancing people and culture supports the entire value model.
New phase of our transformation journey
On our journey of transformation – one of our strategic priorities – we have taken concrete actions to streamline and improve our operations, including the implementation of a new enterprise resource planning (ERP) system and the April 2019 move from five to four business groups. Enabled by the success of these initiatives, we are now entering a new phase of our transformation journey by implementing, at the beginning of 2020, a new global operating model to further align our four business groups – Safety and Industrial, Transportation and Electronics, Health Care, and Consumer – with the company’s customers and go-to-market models. In this new model, 3M’s business groups now have full responsibility for all facets of strategy, portfolio optimization and resource prioritization across their entire global operations. We continue to transform how we operate and build a more streamlined and customer-driven organization for the future. This latest phase of our transformation journey is designed to improve growth and operational efficiency, and will enable us to create even more value for our customers and shareholders.
Our Valuesvalues
Our values bind us together as one 3M – across business groups and geographies. They include our leadership behaviors – how we want our leaders to act to drive performance, develop others, and continue to win in the marketplace. Then our Code of Conduct; great companies are built on trust from customers, shareholders, employees, communities. We’ve earned that trust and our reputation for integrity over many decades. No one at 3M is free to compromise it. We also have four values that will be a priority moving forward. We are working to make 3M the most inclusive enterprise we can be. This will help us become even more diverse and enable us to become an even more creative and innovative company. We have long been a leader in sustainability and we will continue to advance this across the company. Finally, we will do even more to encourage and challenge every 3M employee to be their best.
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Board’s Rolerole in Risk Oversightrisk oversight
The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a whole Board and through its committees. At least annually, the Board reviews enterprise risks facing the Company and certain of its businesses. Other important categories of risk are assigned to designated Board committees (which are comprised solely of independent directors) that report back to the full Board. The Board has delegated to the Audit Committee through its charter the primary responsibility for the oversight of risks facing the Company, including cybersecurity. The Audit Committee’s charter provides that the Audit Committee shall “discuss policies and procedures with respect to risk assessment and risk management, the Company’s major risk exposures and the steps management has taken to monitor and mitigate such exposures.”
Corporate governance at 3M Corporate governance overview
The Vice President and General Auditor, Corporate Auditing (the “Auditor”), whose appointment and performance is reviewed and evaluated by the Audit Committee and who has direct reporting obligations to the Committee, is responsible for leading the formal risk assessment and management process within the Company. The Auditor, through consultation with the Company’s senior management, periodically assesses the major risks facing the Company and works with those executives responsible for managing each specific risk. The Auditor periodically reviews with the Audit Committee the major risks facing the Company and the steps management has taken to monitor and mitigate those risks. The Auditor’s risk management report, which is provided in advance of the meeting, is reviewed with the entire Board by either the chair of the Audit Committee or the Auditor. The executive responsible for managing a particular risk may also report to the full Board on how the risk is being managed and mitigated. With the establishment of the new Science, Technology & Sustainability Committee and the sunsetting of the Finance Committee in November 2019, the Audit Committee has assumed from the Finance Committee the oversight responsibilities over risks associated with the Company’s capital structure, credit ratings and cost of capital, long-term benefit obligations, and use of or investment in financial products, such as derivatives to manage risk related to foreign currencies, commodities, and interest rates.
The Board has delegated to other committees the oversight of risks within their areas of responsibility and expertise. For example, the Compensation Committee oversees risks associated with the Company’s compensation practices, including by performing an annual review of the Company’s risk assessment of its compensation policies and practices for its employees. The Finance Committee oversees risks associated with the Company’s capital structure, credit ratings and cost of capital, long-term benefit obligations, and use of or investment in financial products, such as derivatives to manage risk related to foreign currencies, commodities, and interest rates. The Nominating and Governance Committee oversees risks associated with the Company’s overall governance and its succession planning process to ensure that the Company has a slate of future, qualified candidates for key management positions. The Science, Technology & Sustainability Committee oversees risks associated with the Company’s environmental and product stewardship efforts, including environmental, health and safety (EHS) legal and regulatory compliance, as well as significant emerging science and technology, disruptive innovations, materials vulnerability, and geopolitical issues that my impact the company’s overall strategy, global business continuity and financial results.
The Board believes that its oversight of risks, primarily through delegation to the Audit Committee, but also through delegation to other committees to oversee specific risks within their areas of responsibility and expertise, and the sharing of information with the full Board, is appropriate for a diversified technology and manufacturing company like 3M. The chair of each committee that oversees risk provides a summary of the matters discussed with the committee to the full Board following each committee meeting. The minutes of each committee meeting are also provided to all Board members. The Board also believes its oversight of risk is enhanced by its current leadership structure (further discussed below) because the Executive Chairman,CEO, who served as our CEO and wasis ultimately responsible for the Company’s management of risk, also chairs regular Board meetings. Given his in-depth knowledge and understanding of the Company, the Executive ChairmanCEO is best able to bring key business issues and risks to the Board’s attention.
Management Succession Planningsuccession planning
The Board plans the succession to the position of Chairman, CEO and other senior management positions. To assist the Board, the Chairman, CEO and Senior Vice President of Human Resources annually assess senior managers and their succession potential for the position of Chairman/CEO and other senior management positions. As a result of a thorough and thoughtful succession planning process, on March 5, 2018,in February 2019, Inge G. Thulin, Executive Chairman of the Board, appointedannounced his intention not to stand for reelection at the 2019 Annual Shareholder Meeting. The Board nominated Michael F. Roman, CEO and a Board member, to serve as Chairman of the Board, effective July 1, 2018, succeeding Inge G. Thulin.May 14, 2019, following his election as a director by shareholders at the 2019 Annual Shareholder Meeting.
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Communication with Directorsdirectors
The Board of Directors has adopted the following process for stockholdersshareholders and other interested parties to send communications to members of the Board. StockholdersShareholders and other interested parties may communicate with the Lead Director, the chairs of the Audit, Compensation, Finance, and Nominating and Governance, and Science, Technology & Sustainability Committees of the Board, or with any of our other independent directors, or all of them as a group, by sending a letter to the following address: Corporate Secretary, 3M Company, 3M Center, Building 220-13E-26A, St. Paul, MN 55144-1000. The Corporate Secretary reviews communications to the independent directors and forwards those communications to the independent directors as discussed below. Communications involving substantive accounting or auditing matters will be immediately forwarded to the Chair of the Audit Committee and the Company’s Chief Compliance Officer consistent with time frames established by the Audit Committee for the receipt of communications dealing with these matters. Communications that pertain to non-financial matters will be forwarded promptly. Items that are unrelated to the duties and responsibilities of the Board will not be forwarded, such as: business solicitation or advertisements; product-related inquiries; junk mail or mass mailings; resumes or other job-related inquiries; and spam.unsolicited commercial emails.
Corporate governance at 3MCompliance Compliance
3M’s Codescodes of Conductconduct
More than a century of operating with uncompromising integrity has earned 3M trust from our customers, credibility with our communities, and dedication from our employees. All of our employees, including our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, are required to abide by 3M’s Code of Conduct to ensure that our business is conducted in a consistently legal and ethical manner. These policies formThe Code forms the foundation of a comprehensive process that includes compliance with corporate policies and procedures and a Company-wide focus on uncompromising integrity in every aspect of our operations. Our Code of Conduct covers many topics, including antitrust and competition law, conflicts of interest, financial reporting, protection of confidential information, and compliance with all laws and regulations applicable to the conduct of our business.
Employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of the Code of Conduct. The Audit Committee has adopted procedures to receive, retain, and treat complaints received regarding accounting, internal accounting controls, or auditing matters, and to allow for the confidential and anonymous submission by employees or others of concerns regarding questionable accounting or auditing matters. Information on how to submit any such communications can be found on 3M’s Investor Relations website, under Governance — Governance Documents — Employee Business Conduct Policies — “Report a concern or ask a question.” Our Chief Compliance Officer, who has direct reporting obligations to the Audit Committee, periodically reports to the Audit Committee on compliance with the Company’s Code of Conduct, including the effectiveness of the Company’s compliance program.
The Board also has adopted a Code of Business Conduct and Ethics for Directors of the Company. This Code incorporates long-standing principles of conduct the Company and the Board follow to ensure the Company’s business and the activities of the Board are conducted with integrity and adherence to the highest ethical standards, and in compliance with the law. The Company’s Code of Conduct for employees and the Code of Business Conduct and Ethics for Directors are available on our website atwww.3M.comunder Investor Relations — Governance — Governance Documents.
Public Policy Engagementpolicy engagement
The Company believes that transparency with respect to the consideration, processes, and oversight of our engagement with lawmakers is important to our stockholders,shareholders, and continuously makes efforts to give our stockholdersshareholders useful information about our public policy engagement. Since 2007, the Company has voluntarily published a detailed explanation of the Company’s political activities which is available on our website atwww.3M.comunder Investor Relations — Governance — Governance Documents — “Political Activities and Issue Advocacy.” There, the Company sets out in detail its positions on important public policy issues, the factors we consider when making political contributions, and the processes we use for legal, financial, executive, and Board oversight of our political activities and contributions. We also provide links to the reports the 3M Political Action Committee files monthly with the
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Federal Election Commission and the Company’s quarterly Lobbying Disclosure reports, as well as a detailed list of our contributions to state candidates and political parties, and contributions to “527” political organizations. The Company also discloses on its website the trade associations the Company joined where $25,000 or more of the dues are allocated for lobbying purposes by the trade association. The Company believes that these disclosures on our website, which exceed the disclosures required by law, offer transparency respecting the Company’s public policy engagement and political activities.
Commitment to the Environment and Sustainabilitysustainability
At 3M, we are working hard to advanceinspired and motivated by Our Vision of advancing every company, enhanceenhancing every home and improveimproving every life. WeIn collaboration with our employees, customers, partners, government and communities, we apply our expertise and technology to help solve problems collaboratively, and with a focus on long term, sustainable solutions that demonstrate our commitment and societal purpose.shared global challenges. Sustainability is fundamentalat the heart of our company. It anchors our purpose-driven innovation in products, manufacturing processes and new technologies—and we’re always trying to do more. It is our business — from sustainability-inspired innovationambition to product stewardshipmeet the increasing expectations of our customers, employees, investors, and stakeholders—and grow our business—by continuing to make bold sustainability commitments and taking stronger actions.
3M has a long-standing commitment to sustainability, infrom our operations. As we seek to improve every life, we see partnerships to help our customers and communities achieve their sustainability goals as key to that ambition.
Corporate governance at 3M Compliance
For more than 40 years, 3M has been a leader among global corporations in sustainability actions and measures, beginning with the creation of its groundbreaking Pollution Prevention Pays (3P) Programprogram that began in 1975.1975 to our increasingly ambitious set of 2025 Sustainability Goals, which are designed to improve the footprint of our own operations, help our customers meet their own sustainability goals and drive action on global environmental and social issues. We report on these efforts annually in our Sustainability Report. As a global corporation, contributing to society through diverse markets, we believe that we have a significant responsibility to society globally, and responsibility toadvance the local communities in which we live and work. Our corporate vision states: “3M technology advancing every company... 3M products enhancing every home... and 3M innovation improving every life.” It is that vision — carried out in collaboration with our customers, communities, and partners — that guides our sustainability strategies and goals and aspirations. Our sustainability efforts improve 3M operations and the operations of our customers. Our product solutions help customers manage their environmental footprint - from paint systems that reduce the need for cleaning solvents to window films that ease energy consumption. Our life cycle management process enables teams to select more sustainable components and encourage more sustainable processes. In addition, our philanthropic and social sustainability programs support the workforce of the future – both in Science, Technology, Engineering and Math (STEM), as well as the skilled trades. For example, our skills-based volunteering programs for employees encourage sustainability thinking inside the company while supporting the environmental and social needs in our local communities. Our 2025 sustainability goals provide us with a holistic approach to driving sustainability in our own operations, in our communities, and for the needs of our customers.
In January 2013, our CEO elevated the company’s focus on sustainability, with emphasis in two areas: (1) developing and commercializing products which help our customers solve their sustainability challenges; and, (2) driving sustainability within 3M operations and supply chain. Sustainability is now embeddedUnited Nations Sustainable Development Goals across the company with dedicated teams in R&D, Supply Chain, business groups, and regions across the globe. Our Science, Technology, and Sustainability Executive Committee provides leadership, oversight, and strategy to encourage and ensure sustainability opportunities are recognized and strong policies and procedures are in place. Our Chief Technology Officer and our Chief Sustainability Officer report annually to the Board’s Nominating and Governance Committee on our sustainability efforts. In addition, our Corporate EHS and Business Conduct Committee ensures our sustainability principles are embedded throughout the company. In December 2018, 3M announced that starting in 2019 every new product will be required to have a Sustainability Value Commitment that builds on 3M’s history of creating products that emphasize reuse, recycling, and reduced resource use for 3M’s operations and for our customers. As of March 1, 2019, 3M's global headquarters in St. Paul – which is home to our largest employee base – will be powered by 100% renewable energy.world. We are also committing to move our entire global operations to 100% renewable energy, with an interim targeta participant of 50% by 2025. As part of this initiative 3M will be joining RE100, an influential group of companies committed to 100% renewable energy.
As part of our sustainability efforts, we are a signatory to the United Nations Global Compact, on Human Rights — a policy initiative for businesses to demonstrate their commitment to ten principles in the areas of human rights, labor, environment, and anti-corruption. We also align our goalsSustainability Report to the guidelines of the Sustainability Accounting Standards Board (SASB), and programsthe Task Force for Climate-Related Financial Disclosures (TCFD) recommendations for helping businesses disclose climate-related financial information. Together with our ambition of improving every life and our strong set of 3M values, these commitments drive and inform our formalized approach to sustainability—the 3M Strategic Sustainability Framework. Announced by CEO Mike Roman on Investor Day in November 2018, the Framework directs our efforts to areas where we can make the greatest impact: Science for Circular, Science for Climate, and Science for Community.
To advance Science for Circular, we design solutions that do more with less material to advance a global circular economy. To help accomplish this, in December 2018, at the United Nations Sustainable Development Goals.Climate Conference (COP24), CTO John Banovetz announced 3M’s Sustainability Value Commitment—requiring all new products entering 3M’s new product commercialization process to demonstrate how they drive impact for the greater good. This commitment builds on 3M’s history of creating more sustainable products and collaborating with our customers to help them reach their own sustainability goals. Additional initiatives to drive circularity include moving more than 30 percent of our manufacturing sites to zero waste to landfill status, membership in the Ellen MacArthur Foundation CE100 and establishing Circular Economy Working Groups to increase use of renewable and recycled materials. We’ve also announced significant product innovations, like 3M’s iconic yellow and green Scotch-Brite®Heavy Duty scrub sponge with scrubbing fibers made from 100 percent recycled content and 3M™ Thinsulate™ 100% Recycled Featherless Insulation that mimics the warmth and performance of down through tiny fibers made from post-consumer recycled plastic.
To advance Science for Climate, we are innovating to decarbonize industry, accelerating global climate solutions and improving 3M’s environmental footprint. We report annuallybelieve that climate change is one of the greatest challenges we face as a society and now is the time to lead and take action—for our climate, and our communities. Since 2002, we’ve achieved a 63.7 percent reduction in Scope 1 and Scope 2 location-based greenhouse gas emissions and have helped our customers avoid emitting over 41 million metric tons CO2 through use of select 3M product platforms in the last three years alone. In 2019, we developed methodologies around Scope 3 Categories 9-12, providing a holistic map of relevant categories for 3M and identifying new opportunities to reduce emissions. We also advanced efforts to better understand our climate risks and are incorporating this analysis into business strategies and actions. In February 2019, CEO Mike Roman committed to moving our entire global operations to 100 percent renewable electricity and increased our interim target to 50 percent by 2025, having already achieved the prior goal of 25 percent. On March 1, 2019, 3M flipped the switch to 100 percent renewable sources of energy at our global headquarters in St. Paul, Minnesota. From a product perspective, our portfolio of window films retain heat in the winter and cool air in the summer, resulting in
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reduced energy use and cost savings. Our innovative 3M™ Smog-reducing Granules and 3M™ Cool Roofing Granules are helping resident and commercial property owners address poor air quality and the urban heat island effect by turning pollution in contact with roofs into water-soluble ions that wash away and reflect sunlight.
To advance Science for Community, we aim to create a more positive world through science, and inspire people to join us. This begins with 3M’s culture, which is rooted in a community of scientists who are driven to create positive impact. We deliver through a variety of products, solutions and services across 3M’s 51 technology platforms and core business groups—Safety and Industrial, Transportation and Electronics, Health Care and Consumer. Examples include the Fluency Direct™ speech recognition system from M*Modal, which increases physician productivity while capturing a more complete, informative patient narrative; School Zone Safety programs that engage key stakeholders in improving the routes children take to school; and personal safety equipment, such as the 3M 8210 (N95) and 3M 8511 (N95) respirators, which can save lives when disaster strikes. To give our employees the space and freedom to innovate these solutions, we have a program that encourages them to spend 15 percent of their working time on these effortsprojects of their own choosing. In addition to maintaining and expanding its diverse and inclusive work environment, 3M strives to help employees grow in their career. In December 2019, 3M unveiled a new 2025 Sustainability Goal and committed to providing 300,000 work hours of service across the globe through the expansion of 3M Impact, our skills-based employee volunteer program. This program joins existing philanthropic and social programs that support the workforce of the future—both in Science, Technology, Engineering and Math (STEM) disciplines, as well as the skilled trades. It is this unique innovation culture, ambition for improving every life and dedicated scientific community that allows 3M to advance the greater good.
Our continued work across the Strategic Sustainability Framework helps advance 3M’s progress toward our 2025 Sustainability Goals, which is reported on in our annual Sustainability Report. Sustainability at 3M is also guided by our Innovation Steering Committee which includes our CEO, CTO and General Counsel. The Committee provides leadership, oversight and strategy to encourage and ensure sustainability opportunities are recognized, and strong policies and procedures are in place. In November 2019, the 3M Board of Directors established a new board-level committee to provide general oversight of the significant scientific and technological aspects of 3M Company’s businesses and the Company’s sustainability and stewardship activities: The Science, Technology & Sustainability Committee. The Committee will review the company’s sustainability policies and programs, identifying and analyzing significant sustainability, materials vulnerability and geopolitical issues that may impact our overall business strategy, global business continuity and financial results.
To learn more, please visitwww.3M.com/Sustainability.
Related Person Transaction Policyperson transaction policy and Proceduresprocedures
The Board of Directors has adopted a written Related Person Transaction Policy and Procedures which is administered by the Nominating and Governance Committee. This Policy applies to any transaction or series of transactions in which the Company or a subsidiary is a participant, the amount involved exceeds $120,000, and a Related Person (as that term is defined in the Policy) has a direct or indirect material interest and which is required to be disclosed under Item 404(a) of Regulation S-K. Transactions that fall within this definition are referred to the Committee for approval, ratification, or other action. Based on its consideration of all of the relevant facts and circumstances, the Committee decides whether or not to approve a transaction and approves only those transactions that are in the best interests of the Company. In the course of its review and approval or ratification of a transaction, the Committee considers:
| The nature of the Related Person’s interest in the transaction; | |
| The material terms of the transaction, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances; | |
| The significance of the transaction to the Related Person; | |
| The significance of the transaction to the Company; | |
| Whether the transaction would impair the judgment of a director or executive officer to act in the best interest of the Company; and | |
| Any other matters the Committee deems appropriate. |
Corporate governance at 3M Board structure and processes
Any Committee member who is a Related Person with respect to a transaction under review may not participate in the deliberations or vote respecting such approval or ratification, except that such a director may be counted in determining the presence of a quorum at a meeting at which the Committee considers the transaction. There were no Related Person Transactions that were referred to the Committee in 2018.2019.
Policy on Adoptionadoption of a Rights Planrights plan
In 2002 and 2003, a 3M stockholdershareholder submitted a stockholdershareholder proposal to 3M regarding the approval process for adopting a stockholders’shareholders’ rights plan (also known as a “poison pill”). 3M does not have a rights plan and is not currently considering adopting one. The Board continues to believe, however, that there may be circumstances under which adoption of a rights plan would give the Board the negotiating power and leverage necessary to obtain the best result for 3M stockholdersshareholders in the context of a takeover effort.
Following consideration of the favorable vote the stockholdershareholder proposal received and in light of this belief, the Board adopted and has reaffirmed a statement of policy on this topic. The Board’s policy is that it will only adopt a rights plan if either: (1) stockholdersshareholders have approved adoption of the rights plan; or (2) the Board (including a majority of the independent members of the Board), in its exercise of its fiduciary responsibilities, makes a determination that, under the circumstances existing at the time, it is in the best interests of 3M’s stockholdersshareholders to adopt a rights plan without the delay in adoption resulting from seeking stockholdershareholder approval.
The Board has directed the Nominating and Governance Committee to review this policy statement on an annual basis and to report to the Board on any recommendations it may have concerning the policy. The terms of the policy, as in effect, are included in 3M’s published Corporate Governance Guidelines and its Proxy Statement.
Board’s Leadership Structureleadership structure
On March 5, 2018,
Following his election to directorship at the Board announced that Michael F. Roman would succeed Inge G. Thulin as Chief Executive Officer effective July 1, 2018. To help ensure a smooth transition, the Board asked Mr. Thulin to continue to serve as Executive ChairmanCompany’s Annual Meeting of the Board, also effectiveShareholders on July 1, 2018. According to the Board’s Corporate Governance Guidelines, the Board has the authority to decide whether the positions of Chairman and CEO should be held by the same person and determine the best arrangement for the Company and its shareholders considering all relevant and changing circumstances. On February 6,May 14, 2019, the Board announced that CEO Michael Roman will bewas nominated and elected to serve as Chairman of the Board following the Company’s Annual Meeting of Stockholders on May 14, 2019. Inge Thulin, 3M’sBoard.
The Board’s current Executive Chairman, announced his intention not to stand for re-election and to retire from the Company on June 1, 2019.
Following the Company’s Annual Meeting of Stockholders, the Board’s leadership structure will consist of:is characterized by:
| A combined Chairman of the Board and CEO; | |
| A strong, independent, and highly experienced Lead Director with well-defined responsibilities that support the Board’s oversight responsibilities; | |
| A robust committee structure consisting entirely of independent directors with oversight of various types of risks; and | |
| An engaged and independent Board. |
The Board of Directors believes that this leadership structure provides independent board leadership and engagement while deriving the benefits of having our CEO also serve as Chairman of the Board. As the individual with primary responsibility for managing the Company’s day-to-day operations and with in-depth knowledge and understanding of the Company, the CEO is best positioned to chair regular Board meetings as the directors discuss key business and strategic issues. Coupled with an independent Lead Director, this combined structure provides independent oversight while avoiding unnecessary confusion regarding the Board’s oversight responsibilities and the day-to-day management of business operations.
The Board believes that adopting a rigid policy on whether to separate or combine the positions of Chairman of the Board and CEO would inhibit the Board’s ability to provide for a leadership structure that would best serve stockholders.shareholders. As a result, the Board has rejected adopting a policy permanently separating or combining the positions of Chairman and CEO in its Corporate Governance Guidelines, which are reviewed at least annually and available on our website atwww.3M.com, under Investor Relations — Governance. Instead, the Board adopted an approach that allows it, in representing the stockholders’shareholders’ best interests, to decide who should serve as Chairman or CEO, or both, under present or anticipated future circumstances.
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Corporate governance at 3M Board structure and processes
The Board believes that combining the roles of CEO and Chairman contributes to an efficient and effective Board. The Board believes that to drive change and continuous improvement within the Company, tempered by respect for 3M’s traditions and values, the CEO must have maximum authority. The CEO is primarily responsible for effectively leading significant change, improving operational efficiency, driving growth, managing the Company’s day-to-day business, managing the various risks facing the Company, and reinforcing the expectation for all employees of continuing to build on 3M’s century-old tradition of uncompromising integrity and doing business the right way.
The Board believes that the Company’s corporate governance measures ensure that strong, independent directors continue to effectively oversee the Company’s management and key issues related to executive compensation, CEO evaluation and succession planning, strategy, risk, and integrity. The Corporate Governance Guidelines provide, in part, that:
| Independent directors comprise a substantial majority of the Board; | |
| Directors are elected annually by a majority vote in uncontested director elections; | |
| Only independent directors serve on the Audit, Compensation, | |
| The committee chairs establish their respective agendas; | |
| The Board and committees may retain their own advisors; | |
| The independent directors have complete access to management and employees; | |
| The independent directors meet in executive session without the CEO or other employees during each regular Board meeting; and | |
| The Board and each committee regularly conduct a self-evaluation to determine whether it and its committees function effectively. |
The Board has also designated one of its members to serve as Lead Director, with responsibilities (described in the next section) that are similar to those typically performed by an independent chairman.
Independent Lead Directorlead director
The Board has designated one of its members to serve as a Lead Director, with responsibilities that are similar to those typically performed by an independent chairman (“Lead Director”). Michael L. Eskew was appointed Lead Director by the independent directors effective November 12, 2012, succeeding Dr. Vance Coffman who had served as Lead Director since 2006. Michael Eskew is a highly experienced director, currently serving on the boards of The Allstate Corporation, Eli Lilly and Company, and International Business Machines Corporation, and is the former Chairman and CEO of United Parcel Service, Inc. His responsibilities include, but are not limited to, the following:
| Presides at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors; | |
| Acts as a key liaison between the Chairman/CEO and the independent directors; | |
| Approves the meeting agendas for the Board, and approves the meeting schedules to assure that there is sufficient time for discussion of all agenda items; | |
| Has the authority to approve the materials to be delivered to the directors in advance of each Board meeting and provides feedback regarding the quality, quantity, and timeliness of those materials (this duty not only gives the Lead Director approval authority with respect to materials to be delivered to the directors in advance of each Board meeting but also provides a feedback mechanism so that the materials may be improved for future meetings); | |
| Has the authority to call meetings of the independent directors; | |
| Communicates Board member feedback to the Chairman/CEO (except that the chair of the Compensation Committee leads the discussion of the Chairman/CEO’s performance and communicates the Board’s evaluation of that performance to the Chairman/CEO); | |
| If requested by major | |
| Performs such other duties as requested by the independent directors. |
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As an agenda item for every regularly scheduled Board and committee meeting, independent directors regularly meet in executive session, without the Chairman/CEO or other members of management present, to consider such matters as they deem appropriate. The Lead Director presides over the Board’s executive sessions.
Corporate governance at 3M Board committees
Board, Committees,committees, and Director Evaluationsdirector evaluations
The Board conducts an annual self-evaluation to determine whether it and its committees are functioning effectively and consider opportunities for continual enhancement. The Chair of the Nominating and Governance Committee solicits and receives comments from all directors and shares those comments with the Committee and the Board. Based on the comments and further discussion and reflection, the Board makes an assessment reviewing areas in which the Board believes improvements could be made to increase the effectiveness of the Board and its committees as well as identifying existing practices which have contributed to high effectiveness and accordingly should be continued. Self-evaluation items requiring follow-up and/or the development and execution of implementation and action plans are monitored on a going-forward basis by the full Board, as well as by individual committees and the chairs thereof, as applicable. While this formal self-evaluation is conducted on an annual basis, directors share perspectives, feedback, and suggestions year-round. The Board and each committee conducted an evaluation of its performance in 2018.2019.
Before the November Board meeting, the Chairman/CEO, Lead Director, and chair of the Nominating and Governance Committee meet to discuss the performance and contributions of each director. As part of the nomination process, the Nominating and Governance Committee considers the performance and contributions of each director and evaluates each of the directors to ensure our directors continue to possess the necessary skills and experience to effectively oversee the Company. On occasion, the Nominating and Governance Committee has not renominated a director based on this individual director evaluation process.
Board and Committee Informationcommittee information
The Board currently has thirteentwelve directors and the following four committees: Audit, Compensation, Finance, and Nominating and Governance.Governance, and Science, Technology & Sustainability. The Board had a Finance Committee until November 12, 2019, when the Science, Technology & Sustainability Committee was established. The membership and the function of each committee, both before and after the November committee structural update, are described below.
During 2018,2019, the Board of Directors held five regularly scheduled meetings and three telephonic meetings. Overall attendance at Board and committee meetings was 9796 percent. During 2018,2019, all of our directors attended at least 75 percent of all Board and Committee meetings on which they served.
The Company has a long-standing policy that directors are expected to attend the Annual Meeting of StockholdersShareholders unless extenuating circumstances prevent them from attending. All directors who were members of the Board as of May 20182019 attended last year'syear’s Annual Meeting of Stockholders, except one directorShareholders. Sondra Barbour was unable to attend due to illness. Dr. Vance Coffman was also not present at the meeting as he was no longer eligible to stand forshe did not seek re-election toand ended her service on the Board having reached the mandatory retirement age under the Board's Corporate Governance Guidelines.on May 14, 2019, when her term expired.
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BOARD COMMITTEE COMPOSITION (JANUARY 1 – NOVEMBER 12, 2019)
| Name of Non-employee Director | Audit | Compensation | Finance | Nominating and Governance | |||||||
| Sondra L. Barbour |  | | |||||||||
| | ||||||||||
(retired from the Board, effective May | 14, 2019) | | | | | ||||||
| Thomas “Tony” K. Brown | | | |||||||||
| Pamela J. Craig (elected to the Board, effective May 14, 2019) | | | |||||||||
| David B. Dillon |  | | | | |||||||
| Michael L. Eskew | | | |||||||||
| Herbert L. Henkel | | | |||||||||
| Amy E. Hood | | | |||||||||
| Muhtar Kent | | | |||||||||
| Edward M. Liddy | | | |||||||||
| Dambisa F. Moyo | | | |||||||||
| Gregory R. Page | | | |||||||||
| Patricia A. Woertz | | |
= Committee Member; = Chair
BOARD COMMITTEE COMPOSITION (SINCE NOVEMBER 12, 2019)
| Name of Non-employee Director | Audit | Compensation | Nominating and Governance | Science, Technology & Sustainability | ||||
| = Committee Member; = Chair | | | ||||||
| Pamela J. Craig | | | ||||||
| David B. Dillon | | | ||||||
| Michael L. Eskew | | |||||||
| Herbert L. Henkel | | | ||||||
| Amy E. Hood | | | ||||||
| Muhtar Kent | | | ||||||
| Edward M. Liddy* | | | ||||||
| Dambisa F. Moyo | | | ||||||
| Gregory R. Page | | | ||||||
| Patricia A. Woertz | | |
= Committee Member; = Chair
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Corporate governance at 3M Board committees
Members Sondra L. Barbour Meetings in The Board of Directors has determined that all Audit Committee members are “independent” and “financially literate” under the NYSE listing standards and that members of the Audit Committee received no compensation from the Company other than for service as a director. The Board has also determined that the following Audit Committee members — David B. Dillon (chair), Sondra L. Barbour, Pamela J. Craig, Dambisa F. Moyo and Gregory R. Page — have “accounting or related financial management expertise” under the NYSE listing standards and are “audit committee financial experts” as that term is defined by applicable Securities and Exchange Commission regulations. The Audit Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities. Audit Committee Charter www.3M.com> Investor | Introduction The Audit Committee assists the Board in its oversight of the integrity of the Company’s financial statements, compliance with legal and regulatory requirements, the qualifications, independence, and performance of the Company’s independent registered public accounting firm (the “Independent Accounting Firm”), the performance of the Company’s internal auditing department, the Company’s financial risk assessment and management, and furnishes a report for inclusion in the Company’s Proxy Statement. Roles and Responsibilities •
• Periodically reviews the Company’s global Treasury activities, including risks associated with cash investments, counterparties, and use of derivatives and other financial instruments for risk management purposes; • Periodically reviews and approves the Company’s use of swaps exemption pursuant to Dodd-Frank derivatives clearing policy; • Periodically obtains reports from senior management, including the Chief Information Officer, regarding the progress on the phased implementation of the global enterprise resource planning system, information technology networks and systems, and the adequacy and effectiveness of the Company’s information security policies and internal controls regarding information security;
|
Corporate governance at 3MCOMPENSATION COMMITTEE Board committees
Corporate governance at 3MFINANCE COMMITTEE (until 11/12/2019)* Board committees
| 40 | 3M Company |
Corporate governance at 3MNOMINATING AND GOVERNANCE COMMITTEE Board committees
Corporate governance at 3MSCIENCE, TECHNOLOGY & SUSTAINABILITY COMMITTEE (from 11/12/2019) Director compensation and stock ownership guidelines
Members Pamela J. Craig Meetings in 20190 The Board of Directors has determined that all Science, Technology & Sustainability Committee members are “independent” under the NYSE listing standards. The Science, Technology & Sustainability Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities. Science, Technology & Sustainability Committee Charter www.3M.com> Investor Relations > Governance > Governance Documents > Committee Charters | Introduction The responsibility of the Science, Technology & Sustainability Committee (the “Committee”) of the 3M Board of Directors is to oversee the twin demands of developing products to meet the ever-changing needs of our customers while ensuring that those products cause no harm to people or to our planet. The Committee is responsible for providing the general oversight of the significant scientific and technological aspects of 3M’s businesses and the Company’s sustainability and stewardship activities. Roles and Responsibilities • Monitors and reviews the overall strategy, direction and effectiveness of the Company’s research and development activities; • Reviews management’s strategy and allocation of resources for research and development activities, including product line extensions and new product platforms; • Reviews the Company’s policies and programs on sustainability; environmental and product stewardship; and environmental, health and safety, including for compliance with all applicable laws and regulations; • Assists the Board in identifying and analyzing significant emerging science and technology, disruptive innovations, sustainability, materials vulnerability, and geopolitical issues that may impact the Company’s overall business strategy, global business continuity and financial results; and • Annually reviews the Company’s Sustainability Report. |
Director compensation and stock ownership guidelines
Director Compensation Philosophycompensation philosophy and Elementselements
The Nominating and Governance Committee periodically receives reports on the status of Board compensation in relation to other large U.S. companies and is responsible for recommending to the Board changes in compensation for non-employee directors. In developing its recommendations, the Committee is guided by the following goals:
• Compensation should fairly pay directors for work required in a company of 3M’s size and scope;
• A significant portion of the total compensation should be paid in common stock to align directors’ interests with the long-term interests of shareholders; and
• The structure of the compensation should be simple and transparent.
The Nominating and Governance Committee works with an independent compensation consultant to support its objectives of maintaining a reasonable and appropriate program. For 2018,2019, Frederic W. Cook & Co., Inc. (“FW Cook”) provided the Committee with expert advice on the compensation of non-employee directors, in addition to analyzing market data on director compensation at the same peer group of 17 companies approved by the Compensation Committee for evaluating Named Executive Officer compensation. Neither the Company nor the Nominating and Governance Committee has any arrangement with any other compensation consultant who has a role in determining or recommending the amount or form of director compensation.
| 42 | 3M Company |
Our director program is comprised of a mix of cash and equity that is intended to approximate the peer-group median mix. Our directors’ overall target total direct compensation is consistent with 3M’s size and market-capitalization value relative to its peers. In addition, our hold-until-termination requirement on the annual stock retainer is rigorous relative to the holding requirement of our peers. For more information on the peer group, please see the section entitled “Executive Peer Group”peer group” beginning on page 5662 of this Proxy Statement. Non-employee directors’ compensation includes the following compensation elements:
Annual Compensation —— In May 2018,2019, the Nominating and Governance Committee considered a board compensation study prepared by FW Cook. After reviewing that study, the Committee recommended andno changes in the Board approved an increase of $10,000 incompensation for non-employee directors. As a result, the 2019 annual compensation for non-employee directors from $295,000 to $305,000, effective January 1, 2018. The annual cash retainer was increased $5,000 (from $130,000 to $135,000). The annual stock retainer was also increased $5,000 (from $165,000 to $170,000).$305,000. Approximately 44 percent of the annual compensation (or $135,000) is payable in cash in four quarterly installments and approximately 56 percent of the annual compensation (or $170,000) is payable in 3M common stock equivalents (“Deferred Stock Units”) granted after the Annual Meeting.Meeting (referred to as the “annual stock retainer”). In addition, the Lead Director receives an annual fee of $35,000, the chair of the Audit Committee receives an additional annual fee of $25,000, and the chairs of the Compensation, Finance and(before it was ended), Nominating and Governance, and Science, Technology & Sustainability Committees each receive an additional annual fee of $20,000. The additional annual fee for the Lead Director also was increased from $30,000 to $35,000, effective January 1, 2018.and committee chair fees are payable in cash in four quarterly installments. There are no meeting fees. In lieu of receiving the Deferred Stock Units, a director may elect to receive 3M common shares on a current basis, but such shares must be retained until the director leaves the Board. Similarly, in lieu of cash fees, a director may elect to receive 3M common stock of the Company.shares or Deferred Stock Units. Non-employee directors also may also voluntarilyelect to defer all or part of their annual cash fees or stock awardscompensation until they cease to be members of the Board.
Deferred Stock —— For directorseach director who elect to receivereceives all or a portion of theirthe annual stock retainer or annual cash retainerfees in deferred stock, the Company credits their accountshis or her account with a number of 3M common stock equivalents (“Deferred Stock Units”)Units equal to the number of actual shares (including fractional shares) of 3M common stock that otherwise could have been purchased with such deferred amounts on the first day of the calendar quarter,fees, as determined using the closing sales price for a share of 3M common stock on the NYSE for the last businesstrading day immediately preceding the earliest date such date. In addition,amount otherwise could have been be paid to the director if taken on a current basis. For each payment date for dividendsordinary cash dividend paid on 3Mthe shares of the Company’s common stock, the Company also credits the directors’ accounts with an additional number of Deferred Stock Units having a value equalon the dividend payment date. The number of additional Deferred Stock Units credited to each directors’ account is calculated by dividing the aggregate dividends that otherwise would have been paid on the shares underlying the aggregate number of Deferred Stock Units credited to their accountsthe director’s account on the relevant dividend record date usingby the closing sales price for a share of 3M common stock on the NYSE for the sixth businesslast trading day immediately preceding the applicable dividend recordpayment date. The Deferred Stock Units are fully vested upon grant but do not have voting rights. Appropriate adjustments to the number of Deferred Stock Units credited to each director’s account will be made for stock splits, stock dividends, mergers, consolidations, payments of dividends other than in cash, and similar circumstances affecting 3M common stock. The shares of 3M common stock underlying the Deferred Stock Units will be distributed in a single lump sum during the month of January in the first year after the director leaves the Board, unless the non-employee director elects an alternative distribution schedule prior to the beginning of the year in which the fees are earned. Non-employee directors may elect to receive distribution of the shares of 3M common stock underlying his or her Deferred Stock Units for a year in either a lump sum
Corporate governance at 3M Director compensation and stock ownership guidelines
payment on the first business day of any of the first through tenth years following the year in which the non-employee director leaves the Board or in a number of annual installments (not to exceed ten) beginning on the first business day of the year following the year in which he or she leaves the Board.
The Board amended and restated the 3M Compensation Plan for Nonemployee Directors, effective January 1, 2019, in order to implement certain changes in the day-to-day administration of the plan and improve conformity to certain market practices. Under the terms of the plan, as amended and restated, all deferred amounts and dividends will be converted to Deferred Stock Units using the closing sales price for a share of 3M common stock on the NYSE for the last trading day immediately preceding the date such amounts otherwise would have been paid if not deferred. The number of distribution alternatives available to non-employee directors also was reduced. For plan years beginning on or after January 1, 2019, non-employee directors may now elect to receive distribution of the shares of 3M common stock underlying their Deferred Stock Units only in a single lump sum during the month of January in the first or second year following the year in which they leave the Board or in a series of three, five, or ten annual installments beginning on the first business day of January in the first year following their termination of Board service.
All Other Compensation —— The column below showing “All Other Compensation” includes the incremental cost of complimentary products and matching gifts. The non-employee directors are eligible to participate in the Company’s matching gift program on the same terms as 3M employees. Under this program, the 3M Foundation will match up to a total of $5,000 a year in contributions by the director to eligible educational institutions and, effective January 1, 2020, up to a total of higher education.$1,000 a year in contributions by the director to eligible charitable organizations.
| 2020 Proxy Statement | 43 |
2018 Director Compensation Table2019 director compensation table
The total 20182019 compensation of our non-employee directors is shown in the following table:
| Non-Employee Directors | Fees Earned or | Stock Awards ($)(2) | All Other Compensation ($)(3) | Total ($) | ||||
| Sondra L. Barbour | 135,000 | 170,000 | 337 | 305,337 | ||||
| Thomas “Tony” K. Brown | 135,000 | 170,000 | — | 305,000 | ||||
| Vance D. Coffman (retired from the Board, effective May 8, 2018)** | 47,843 | 59,616 | — | 107,459 | ||||
| David B. Dillon* | 160,000 | 170,000 | 571 | 330,571 | ||||
| Michael L. Eskew* | 190,000 | 170,000 | 270 | 360,270 | ||||
| Herbert L. Henkel | 135,000 | 170,000 | 621 | 305,621 | ||||
| Amy E. Hood | 135,000 | 170,000 | 763 | 305,763 | ||||
| Muhtar Kent* | 155,000 | 170,000 | 711 | 325,711 | ||||
| Edward M. Liddy* | 155,000 | 170,000 | — | 325,000 | ||||
| Dambisa F. Moyo (appointed to the Board, effective August 12, 2018)** | 52,092 | 66,134 | 436 | 118,662 | ||||
| Gregory R. Page | 135,000 | 170,000 | 440 | 305,440 | ||||
| Patricia A. Woertz | 135,000 | 170,000 | 394 | 305,394 |
| Non-Employee Directors | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | All Other Compensation ($)(3) | Total ($) | ||||
| Sondra L. Barbour(retired from the Board, effective May 14, 2019)** | 49,697 | — | — | 49,697 | ||||
| Thomas “Tony” K. Brown | 135,000 | 170,000 | 5,389 | 310,389 | ||||
| Pamela J. Craig (elected to the Board, effective May 14, 2019)** | 85,303 | 170,000 | 5,262 | 260,565 | ||||
| David B. Dillon* | 160,000 | 170,000 | 5,757 | 335,757 | ||||
| Michael L. Eskew* | 187,283 | 170,000 | 270 | 357,553 | ||||
| Herbert L. Henkel* | 155,000 | 170,000 | 588 | 325,588 | ||||
| Amy E. Hood | 135,000 | 170,000 | 834 | 305,834 | ||||
| Muhtar Kent* | 155,000 | 170,000 | 752 | 325,752 | ||||
| Edward M. Liddy* | 135,000 | 170,000 | — | 305,000 | ||||
| Dambisa F. Moyo | 135,000 | 170,000 | 767 | 305,767 | ||||
| Gregory R. Page* | 137,717 | 170,000 | 398 | 308,115 | ||||
| Patricia A. Woertz | 135,000 | 170,000 | 411 | 305,411 |
| * | Lead Director or Committee Chair |
| ** | Director compensation prorated according to effective date of |
| (1) | This column represents the amount of all fees earned or paid in cash for services as a director. |
| (2) | This column represents the grant date fair value of the stock awards made in |
| (3) | This column includes the incremental cost of complimentary products and matching gifts. Non-employee directors are eligible to participate in the Company’s matching gift program on the same terms as 3M employees. Under this program, the 3M Foundation will match up to a total of $5,000 a year in contributions by the director to eligible educational institutions and, effective January 1, 2020, up to a total of |
Corporate governance at 3M Director compensation and stock ownership guidelines
Reasonableness of Non-Employee Director Compensationnon-employee director compensation
As described above, our philosophy on director compensation is to pay directors fairly for work required in a company of our size and complexity, make a significant portion of the total compensation equity based to align directors’ interests with those of our stockholdersshareholders and structure compensation in a simple and transparent manner. We believe that the application of this philosophy has resulted in a non-employee director compensation program that reflects best-in-class design with the following provisions:
| Retainer-only cash compensation with no fees for attending meetings that are an expected part of board service. | |
| Additional retainers for special roles having greater responsibilities, such as Lead Director and committee chairs, to recognize the incremental additional time and effort required. | |
| Equity delivered in the form of current or deferred full-value shares, where annual grants are based on a competitive fixed-value formula and immediate vesting helps avoid director entrenchment. | |
| A requirement to retain the stock retainer portion of annual compensation issued on or after October 1, 2007, until termination from Board service, which includes net after-tax shares attributable to current payments and pre-tax shares attributable to deferrals. | |
| Flexible voluntary deferral provisions and no material benefits or perquisites. | |
| Our 2016 Long-Term Incentive Plan, approved by shareholders at the 2016 Annual Meeting, includes a $600,000 annual compensation limit on all forms of compensation for non-employee directors. |
| 44 | 3M Company |
Stock Ownership Guidelinesownership guidelines
The Board requires that each director retain the stock retainer portion (currently valued at $170,000) of the annual compensation issued on or after October 1, 2007, until the director leaves the Board. Information regarding accumulated stock and deferred stock units is set forth in the section entitled “Security Ownershipownership of Management”management” beginning on page 8592 of this Proxy Statement.
Hedging and Pledging Policiespledging policies
The Company’s stock trading policies prohibit directors and the Company’s executive officers from (i) purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of the Company’s common stock, including prepaid variable forward contracts, equity swaps, collars and exchange funds; (ii) engaging in short sales related to the Company’s common stock; (iii) placing standing orders; (iv) maintaining margin accounts; and (v) pledging 3M securities as collateral for a loan. All transactions in 3M securities by directors and executive officers must be pre-cleared with the DeputyCompany’s General Counsel.
PROPOSAL
 2 | Ratification of the Appointment of Independent Registered Public Accounting Firm for • •Based on its assessment of the qualifications and performance of PricewaterhouseCoopers LLP (“PwC”), the Audit Committee believes that it is in the best interests of the Company and its | |
The Audit Committee is directly responsible for the appointment, compensation (including approval of all fees), retention, and oversight of the Company’s independent registered public accounting firm (“Independent Accounting Firm”) retained to perform the audit of our financial statements and our internal control over financial reporting.
The Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) to serve as 3M’s Independent Accounting Firm for 2019.2020. PwC has been 3M’s Independent Accounting Firm since 1998. Prior to that, 3M’s Independent Accounting Firm was Coopers & Lybrand from 1975 until its merger with Price Waterhouse in 1998. In accordance with SEC rules and PwC policy, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide service to our Company. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years. The process for selection of the Company’s lead audit partner pursuant to this rotation policy involves a meeting between the Chair of the Audit Committee and the candidate for the role, as well as discussion by the full Committee and with management.
The Audit Committee annually reviews PwC’s independence and performance in connection with the Audit Committee’s determination of whether to retain PwC or engage another firm as our Independent Accounting Firm. In the course of these reviews, the Audit Committee considers, among other things:
| PwC’s historical and recent performance on the 3M audit, including input from those 3M employees with substantial contact with PwC throughout the year about PwC’s quality of service provided, and the independence, objectivity, and professional skepticism demonstrated throughout the engagement by PwC and its audit team; | |
| an analysis of PwC’s known legal risks and significant proceedings; | |
| external data relating to audit quality and performance, including recent Public Company Accounting Oversight Board (“PCAOB”) reports on PwC and its peer firms; | |
| PwC’s independence; | |
| the appropriateness of PwC’s fees, on both an absolute basis and as compared to its peer firms; | |
| PwC’s tenure as our independent auditor and its familiarity with our global operations and businesses, accounting policies and practices and internal control over financial reporting; and | |
| PwC’s capability and expertise in handling the breadth and complexity of our global operations, including the Company’s phased implementation of an enterprise resource planning system on a worldwide basis over the next several years. |
Based on this evaluation, the Audit Committee believes that PwC is independent and that it is in the best interests of the Company and our stockholdersshareholders to retain PwC to serve as our Independent Accounting Firm for 2019.2020.
We are asking our stockholdersshareholders to ratify the selection of PwC as our Independent Accounting Firm for 2019.2020. Although ratification is not required by our Bylaws or otherwise, the Board is submitting the selection of PwC to our stockholdersshareholders for ratification as a matter of good corporate governance. If the selection of PwC is not ratified, the Audit Committee will consider whether it is appropriate to select another Independent Accounting Firm. Even if the selection is ratified, the Audit Committee may in its discretion select a different Independent Accounting Firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.shareholders.
| 3M Company |
Audit committee matters Proposal 2
PwC representatives are expected to attend the Annual Meeting where they will be available to respond to appropriate questions and, if they desire, to make a statement.
RECOMMENDATION OF THE AUDIT COMMITTEE |
 | The Audit Committee of the Board of Directors unanimously recommends a vote |
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. The management of the Company is responsible for (i) the preparation of complete and accurate annual and quarterly consolidated financial statements (“financial statements”) in accordance with generally accepted accounting principles in the United States, (ii) maintaining appropriate accounting and financial reporting principles and policies and internal controls designed to assure compliance with accounting standards and laws and regulations, and (iii) an assessment of the effectiveness of internal control over financial reporting. The Independent Accounting Firm is responsible for planning and conducting in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”) an audit of the Company’s annual consolidated financial statements and a review of the Company’s quarterly financial statements and expressing opinions on the Company’s financial statements and internal control over financial reporting based on the integrated audits.
In this context, the Audit Committee has met and held discussions with management and the Independent Accounting Firm regarding the fair and complete presentation of the Company’s results and the assessment of the Company’s internal control over financial reporting. The Audit Committee has discussed significant accounting policies applied by the Company in its financial statements,as well as alternative treatments. Management has represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States, and the Audit Committee has reviewed and discussed the consolidated audited financial statements with management and the Independent Accounting Firm. The Audit Committee has discussed with the Independent Accounting Firm matters required to be discussed pursuant to the PCAOB’s Auditing Standards on Communicationsapplicable requirements of the PCAOB and the Securities and Exchange Commission with Audit Committees, as currently in effect.Committees.
In addition, the Audit Committee has reviewed and discussed with the Independent Accounting Firm the auditor’s independence from the Company and its management. As part of that review, the Audit Committee has received the written disclosures and the letters required by applicable requirements of the PCAOB regarding the Independent Accounting Firm’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed the Independent Accounting Firm’s independence from the Company.
The Audit Committee also has considered whether the Independent Accounting Firm’s provision of non-audit services to the Company is compatible with the auditor’s independence. The Audit Committee has concluded that the Independent Accounting Firm is independent from the Company and its management.
The Audit Committee has discussed with the Company’s Internal Audit Department and Independent Accounting Firm the overall scope of and plans for their respective audits. The Audit Committee meets with the Internal Auditor, Chief Compliance Officer, the General Counsel, and representatives of the Independent Accounting Firm in regular and executive sessions, to discuss the results of their examinations, the evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting and compliance programs.
In reliance on the reviews and discussions referred to above, the Audit Committee has recommended to the Board of Directors, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018,2019, for filing with the SEC.
Submitted by the Audit Committee
David B. Dillon, ChairSondra L. Barbour
Thomas “Tony” K. Brown
Pamela J. Craig
Dambisa F. Moyo
Gregory R. Page
Audit committee matters Proposal 2
Audit Committee Policypolicy on Pre-Approvalpre-approval of Auditaudit and Permissible Non-Audit Servicespermissible non-audit services of the Independent Accounting Firmindependent accounting firm
The Audit Committee is responsible for appointing and overseeing the work of the Independent Accounting Firm. The Audit Committee has established a policy requiring its pre-approval of all audit and permissible non-audit services provided by the Independent Accounting Firm.
The policy identifies the guiding principles that must be considered by the Audit Committee in approving services to ensure that the Independent Accounting Firm’s independence is not impaired; describes the Audit, Audit-Related, Tax and All Other services that may be provided and the non-audit services that may not be performed; and sets forth the pre-approval requirements for all permitted services. The policy provides for the general pre-approval of specific types of Audit, Audit-Related, Tax and TaxOther services and a limited fee estimate range for such services on an annual basis as set forth in the engagement letter with the Independent Accounting Firm.basis. The policy also requires specific pre-approval of all other permitted services.services not already included in the annual pre-approval. The Independent Accounting Firm is required to report periodically to the Audit Committee regarding the extent of services provided in accordance with their pre-approval and the fees for the services performed to date.
The Audit Committee’s policy delegates to its Chair the authority to address requests for pre-approval of services in certain limited circumstances between Audit Committee meetings. The chair, in his discretion, must either seek immediate approval by e-mail from the other Audit Committee members, or report any pre-approval decisions to the Audit Committee for its approval at its next scheduled meeting.
The Audit Committee may not delegate to management the Audit Committee’s responsibility to pre-approve permitted services of the Independent Accounting Firm.
All Audit, Audit-Related, Tax and All Other services described below were approved by the Audit Committee before services were rendered.
Fees of the Independent Accounting Firmindependent accounting firm
The following table represents fees billed for professional services rendered by PricewaterhouseCoopers LLP (“PwC”) for the audit of the Company’s consolidated financial statements for the years ended December 31, 20172018 and 2018,2019, and fees billed for other services rendered by PwC during those periods.
| 2017 | 2018 | ||||||
| Audit Fees: | $ | 17.4 | $18.6 | ||||
| Audit-Related Fees: | 1.2 | 1.3 | |||||
| Tax Fees: | 0.9 | 0.7 | |||||
| All Other Fees: | 0.1 | 0.2 | |||||
| Total | $ | 19.7 | $20.8 | ||||
AUDIT AND NON-AUDIT FEES ($ IN MILLIONS)
| 2018 | 2019 | |||||
| Audit Fee: | $ 18.6 | $ 18.8 | ||||
| Audit-Related Fee: | 1.3 | 1.3 | ||||
| Tax Fee: | 0.7 | 0.7 | ||||
| All Other Fee: | 0.2 | 0.1 | ||||
| Total | $ 20.8 | $ 20.9 | ||||
In the above table, in accordance with SEC rules, “Audit” fees consisted of audit work and review services, as well as work generally only the independent registered public accounting firm can reasonably be expected to provide, such as statutory audits, comfort letters, consents, and review of documents filed with the Securities and Exchange Commission. “Audit-related” fees consisted principally of carve out audit procedures, procedures related to the adoption of new accounting standards in future years, internal control and system audit procedures for periods prior to the rollout of the ERP system, agreed-upon procedures, employee benefit plan audits, and other attestation services. “Tax” fees consisted principally of tax compliance services in foreign jurisdictions, assistance with transfer pricing documentation, assistance with excise tax filings, and advice on foreign and domestic tax related matters. “All Other” fees consisted of general industry and accounting training, information security vendor assessments, licenses for accounting research software, and other permissible services that do not fall into the three categories listed above.
| 3M Company |
Audit committee matters Proposal 2
Audit Committee Restrictionsrestrictions on Hiring Employeeshiring employees of the Independent Accounting Firmindependent accounting firm
The Audit Committee has adopted restrictions on the hiring by the Company of any PwC partner, director, manager, staff, reviewing actuary, reviewing tax professional, and any other persons having responsibility for providing audit assurance on any aspect of PwC’s certification of the Company’s financial statements. Audit assurance includes all work that results in the expression of an opinion on financial statements, including audits of statutory accounts.
PROPOSAL
| Advisory Approval of Executive Compensation • •Our executive compensation program appropriately aligns our executives’ compensation with the performance of the Company and its business units as well as their individual performance. | |
Section 14A of the Securities Exchange Act provides our stockholdersshareholders with the opportunity to approve, on an advisory basis, the compensation of our named executive officers as described in this Proxy Statement. This is the eighthtenth year that the Company is asking stockholdersshareholders to vote on this type of proposal, known as a “say-on-pay” proposal.
We believe that our executive compensation program is consistent with our core compensation principles and is structured to assure that those principles are implemented. At the Annual Meeting of StockholdersShareholders held on May 8, 2018,14, 2019, approximately 9395 percent of the votes cast on this issue voted to approve the compensation of the Company’s named executive officers as disclosed in last year’s Proxy Statement. Although the vote was non-binding, the Compensation Committee believes this level of approval percentage indicates that our stockholdersshareholders strongly support our core compensation principles and our executive compensation program, and we believe our stockholders as a whole should support them as well.program.
Thus, the Company is submitting to stockholdersshareholders the following resolution for their consideration and approval:
“RESOLVED, that the stockholdersshareholders approve, on an advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission (including in the Compensation Discussion and Analysis, the accompanying compensation tables and related narrative).”
We encourage you to read the entire Compensation Discussion and Analysis portion of this Proxy Statement to learn more about our executive compensation program and the impact that our financial performance has on the annual and long-term incentive compensation earned by our leadership team.
While the Board of Directors and the Compensation Committee intend to carefully consider the results of the voting on this proposal when making future decisions regarding executive compensation, the vote is not binding on the Company or the Board and is advisory in nature. The Company currently holds advisory votes on the compensation of named executive officers annually. Accordingly, the next such advisory vote is expected to occur at the 20202021 Annual Meeting.
RECOMMENDATION OF THE BOARD |
| The Board of Directors unanimously recommends a vote “FOR” this proposal for the reasons discussed above. Proxies solicited by the Board of Directors will be voted “FOR” this proposal unless a |
| 3M Company |
Executive compensation Compensation discussion and analysis
Compensation discussionDiscussion and analysisAnalysis
This Compensation Discussion and Analysis describes 3M’s executive compensation program, explains how 3M’s Compensation Committee oversees and implements this program, and reviews the 20182019 compensation for the current and former executive officers identified below. Throughout this Compensation Discussion and Analysis and elsewhere in this Proxy Statement, we refer to this group of individuals as the “Named Executive Officers.”
| Name | Title(1) | |
| Michael F. Roman | Chairman of the Board, President and Chief Executive Officer | |
| Inge G. Thulin(2) | Former Executive Chairman of the Board | |
| Nicholas C. Gangestad | Senior Vice President and Chief Financial Officer | |
| Julie L. Bushman(3) | Executive Vice President, International Operations | |
| Former Executive Vice President, | ||
| Executive Vice President, Safety and Industrial Business Group |
The table above reflects the title of each Named Executive Officer as of March 1, 2019. As part of the Board’s ongoing leadership succession planning process, two of the Named Executive Officers held multiple positions during the course of the year.
| (2) | Mr. Thulin |
| (3) | Ms. Bushman has announced |
| (4) | Dr. Delgado separated from employment with the Company on |
As previously announced, Mr. Shin and Mr. Little left employment with the Company, effective January 1, 2019, and July 1, 2018, respectively.
To enable quicker navigation of the information provided, this Compensation Discussion and Analysis is organized into four distinct sections:
| Section I: Executive Summary | ||
| Section II: How We Determine Compensation | ||
| Section III: How We Paid our Named Executive Officers in | ||
| Section IV: Ways in Which We Address Risk and Governance |
For the meaning of certain capitalized terms used throughout this Compensation Discussion and Analysis, see “Meaning of Certain Terms”certain terms” on page 5864 of this Proxy Statement.
Section I: Executive Summarysummary
Selected 2018 Financial Performance2019 financial performance and Business Highlightsbusiness highlights
3M’s 20182019 financial performance was achieved through growthdisciplined execution, impacted by weakness in certain end markets (China, automotive and disciplined execution. Given the impact that the Net TCJA Transition Tax, the Water Qualityelectronics) and Sustainability Grant, and the Net CMD Divestiture Gains, had onchannel inventory adjustments. The table below reflects the Company’s 2018 financial performance our results are shown belowagainst the key metrics underlying the Company’s performance share awards, both as determined in accordance with GAAP (toand as adjusted to better reflect the extent applicable) and excluding these three impacts.
TableCommittee’s view of Contentsthe Company’s 2019 operating performance.
Executive compensation Compensation discussion and analysis
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| * | See Appendix A to this Proxy Statement for a reconciliation of earnings per share, operating margin performance, free cash flow and free cash flow conversion to our results for the most directly comparable financial measures as reported under generally accepted accounting principles in the United States, and the calculation of return on invested capital. See “Adjustments for certain special items” on page 60 below for additional information concerning the Committee’s general approach to adjustments. |
We believe
| 2020 Proxy Statement | 51 |
Based on the Company’s financial performance and consistent with our pay-for-performance philosophy, the 2019 annual incentive payments that our ability to deliver consistent results over time is reflected in our total stockholder return, which was in the top half of our executive compensation peer group for the three-Named Executive Officers received and five-year periods endingtheir performance share accruals based on December 31, 2018.2019 performance were below targeted levels. For additional information, see “Total Stockholder Return”“Impact of company performance on page 50incentive compensation and real pay delivery,” “2019 annual incentive” and “Performance share accruals based on 2019 performance” beginning on pages 53, 66 and 70, respectively. The stock, stock options and other long-term incentive compensation awards held by our Named Executive Officers throughout 2019 also decreased in value during the year with the decline in the market value of this Proxy Statement.our shares.
Other noteworthy
Noteworthy accomplishments from January 1, 2019, through March 1, 2020, include the following:
| |
| • | Completed the acquisition of M*Modal to strengthen our Health Information Systems portfolio and complement organic growth; |
| • | Completed the acquisition of Acelity, Inc. to bolster our Medical Solutions business and support our growth strategy to offer comprehensive advanced and surgical wound care solutions; |
| • | Strengthened our portfolio going forward by completing the divestitures of our gas and flame detection business and advanced ballistics-protection business; and announced the divestiture of substantially all of the drug delivery business; |
| • | Awarded a |
| |
| |
| • | Over 100 consecutive years of paying dividends to |
| • | Reported an all-time high free cash flow of $5.4 billion for 2019, up 10 percent over 2018; |
| • | Returned |
| • | Recognized by |
Factors Creating Alignment Between Paycreating alignment between pay and Performanceperformance
3M’s executive compensation program is designed to maintain a strong alignment between corporate performance and executive compensation by tying incentive compensation to the achievement of performance metrics that we believe increase the Company’s long-term value. For 2018,2019, highlights of the program include:
A large portion of each executive’s target Total Direct Compensation (cash plus long-term incentives) is performance-based, varying from | |
| • | The incentive compensation opportunities provided to the Named Executive Officers utilize multiple performance-based metrics focused primarily on revenue and earnings performance, increase in 3M’s common stock price, efficient use of capital, and free cash flow conversion. |
| 3M Company |
Executive compensation Compensation discussion and analysis
Impact of Company Performancecompany performance on Incentive Compensationincentive compensation and Real Pay Deliveryreal pay delivery
One objective of our incentive compensation program is to align our Named Executive Officers’ real pay delivery with performance. The Company’s performance directly impacted incentive compensation pay outcomes for our Named Executive Officers as follows:
2018 Annual Incentive Compensation
For the Named Executive Officers paid on the basis of the Company’s overall performance, the 20182019 annual incentive compensation payout (before any adjustment for individual performance) was 95 percent of the target amount. The payouts reflect our performance against the goals established for 2018 (as shown below) and were calculated excluding the impact of the Net TCJA Transition Tax and a related $600 million pension contribution made in 2017, the Net CMD Divestiture Gains and the Water Quality and Sustainability Grant.
For the Named Executive Officers paid on the basis of the Company’s overall performance, the 2019 annual incentive compensation payout (before any adjustment for individual performance) was 62 percent of the target amount. The payouts reflect the Committee’s view of our performance against the goals established for 2019, as shown below. |  | ||
| • | Local currency sales achieved | ||
| 3M economic profit achieved | |||
| 3M’s | |||
The achievement levels described above reflect certain adjustments that the Committee believed were appropriate to better reflect the Company’s performance against its 2019 operating plan. See Appendix A to this Proxy Statement for a reconciliation of local currency sales to our results for the most directly comparable financial measure as reported under GAAP, and the calculation of 2018 and 2019 economic profit.
Performance share award payouts and accruals (long-term incentive compensation)
The three-year performance period for the 2017 Performance Share Awards (Long-Term Incentive Compensation)
Based on the results described below, the number of shares (excluding dividend equivalents) delivered pursuant to the performance share awards issued to the Named Executive Officers ended on December 31, 2019. Based on the financial results achieved during 2017 – 2019 and excluding dividend equivalents, the Named Executive Officers received 1.189 shares of 3M common stock for the 2016-2018each target performance period equaled 105 percent of the target number of shares awarded.share subject to their 2017 Performance Share Awards. After considering the appreciationchange in the pricemarket value of 3M’s common stock over the three-year performance period and the additional shares delivered pursuant to the dividend equivalent rights granted as part of the awards,2017 Performance Share Awards, the value of the total number of 3M shares delivered to the Named Executive Officers in settlement of these awards (determined using the closing price of a share of 3M common stock on the NYSE for December 31, 2018)2019) equaled 134120 percent of the value of the target number of performance shares subject to such awards (determined using the closing price of a share of 3M common stock on the NYSE for March 1, 2016,2017, the initial grant date of 2016for the 2017 performance share awards).
When evaluating the payouts for these awards against the Company’s performance, it is important to keep in mind the weightings applied to each year (2017 – 50 percent; 2018 – 30 percent; and 2019 – 20 percent) and each metric (Relative Organic Volume Growth – 40 percent; Return on Invested Capital – 20 percent; Earnings per Share Growth – 20 percent; and Free Cash Flow Conversion – 20 percent). As illustrated in the charts below, the above target payout of these awards was driven primarily by the Company’s strong 2017 Relative Organic Volume Growth, Return on Invested Capital, and Earnings per Share Growth, which was partially offset by the Company’s below target performance on certain metrics for 2018 and 2019.
 |  |  |  |
Executive compensation Compensation discussion
The attainment levels described above reflect certain adjustments that the Committee believed were appropriate to better reflect the Company’s performance during the performance period. See Appendix A to this Proxy Statement for a reconciliation of earnings per share, operating margin performance, free cash flow and analysisfree cash flow conversion to our results for the most directly comparable financial measures as reported under GAAP, and the calculation of return on invested capital.
| 54 | 3M Company |
The Company’s 2019 performance will have a more pronounced impact on the payouts for the 2018 Performance Share Awards and 2019 Performance Share Awards, where the weighting of 2019 performance is 30 percent and 50 percent, respectively. To illustrate this point, the table below shows the number of shares of 3M common stock accrued per target performance share based on the Company’s performance for the performance share awards that were outstanding at December 31, 2019.
For additional information concerning the overall status of the performance share awards that were outstanding at December 31, 2019, and the impact that the Company’s 2019 performance had on such awards, see “Status of outstanding performance share awards” and “Performance share accruals based on 2019 performance” beginning on pages 68 and 70, respectively.
Stock and Long-Term Incentive Compensationlong-term incentive compensation
The performance of 3M’s stock has a material impact on the amount of compensation actually realized by our Named Executive Officers. Our stock ownership guidelines require covered executives, including the Named Executive Officers, to own amounts of Company stock having a value exceeding a specified multiple of their base salary. If the market price of 3M’s stock declines, so does the value of the stock they own.
Similarly, stock options and other long-term incentive awards held by our Named Executive Officers increase or decrease in value along with increases and decreases in the value of 3M’s common stock.
The stock, stock options and other long-term incentive compensation granted toawards held by our Named Executive Officers in years prior to 2018throughout 2019 decreased in value during 2018the year as the closing price for a share of the Company’s common stock on the NYSE decreased from $235.37 on December 29, 2017, to $190.54 on December 31, 2018.2018, to $176.42 on December 31, 2019.
Total Stockholder Returnshareholder return
The graphs below illustrate 3M’s stock performance relative to the stock performance of the S&P 500 and the peer companies included in the Company’s executive peer group (excluding DuPont de Nemours, Inc., formerly DowDuPont Inc., which was excluded due to its spinoff of two independent public companies during 2019 – Dow Inc. and Corteva, Inc.), as described under “Competitive Pay”pay” beginning on page 5561 of this Proxy Statement.
 |  |  |
TSR = Share Price Appreciation + Dividend Yield (annualized)
Note: 5-Year Return5-year period = Five years ending 12/31/18; 3-Year Return19; 3-year period = Three years ending 12/31/18; 1-Year Return19; 1-year period = One year ending 12/31/1819 Source: Bloomberg.
| 2020 Proxy Statement | 55 |
2018 SayTable of Contents
2019 say on Paypay
In 2018,2019, approximately 9395 percent of the votes cast on our say-on-pay proposal approved the compensation of our Named Executive Officersnamed executive officers as disclosed in last year’s Proxy Statement. Although the vote was non-binding, the Committee believes this level of approval indicates that stockholdersshareholders strongly support our executive compensation programs and policies. The Committee will consider the results of this year’s say-on-pay proposal, as well as feedback from our stockholders,shareholders, when making future executive compensation decisions.
For information concerning our investor outreach efforts, please refer to the section entitled “Stockholder“Shareholder Outreach and Engagement” on page 924 of this Proxy Statement.
ExecutiveNoteworthy compensation Compensation discussion and analysis program actions since January 1, 2019
During 2018,
Since January 1, 2019, 3M and the Committee took the noteworthy actions described below as part of the Company’s executive compensation program.
| Approved | |
| Recalculated the number of shares required to be beneficially owned by our executive officers in order to maintain compliance with our stock ownership guidelines, effective December 31, 2019. | |
| • | Approved a new |
Compensation Policiespolicies and Practicespractices
Our compensation program is designed to provide appropriate performance incentives and avoid compensation practices that do not promote the interests of our stockholders.shareholders.
 | We do not | |||||
| Maintain a strong alignment between corporate performance and our executive officers’ compensation by having a majority of Total Direct Compensation consist of performance-based compensation. | ||||||
| Conduct an annual assessment for the purpose of identifying and mitigating significant economic and reputational risks in the design of our incentive compensation programs. | ||||||
| Have a comprehensive clawback policy that covers both cash and equity compensation and includes provisions addressing reputational and financial risk as well as risk management failures. | ||||||
| Use an independent compensation consultant retained by, and reporting directly to, the Compensation Committee. | ||||||
| Limit the number and amount of executive perquisites. | ||||||
| Prohibit our executive officers from hedging or pledging 3M common stock. | ||||||
| Maintain robust stock ownership guidelines applicable to all of our executive officers. | ||||||
| Conduct competitive benchmarking to align executive compensation with the market. | ||||||
 | xHave employment | |||
xProvide tax gross-ups on executive perquisites. | ||||
xHave agreements that would provide automatic “single-trigger” accelerated vesting of equity compensation or excise tax gross-up payments to any of our executive officers upon a change in control. | ||||
xPay dividends or dividend equivalents on unearned equity awards. | ||||
xReprice stock options without the approval of 3M | ||||
| 56 | 3M Company |
Executive compensation Compensation discussion and analysis
Section II: How We Determine Executive Compensationwe determine executive compensation
Principles
The Company maintains global compensation principles that are intended to ensure that its compensation practices are fair and reasonable as applied to both executive and non-executive employees. These principles align with the Company’s vision and strategies, balance both individual and enterprise-wide performance and seek to provide competitive wages and benefits with consistent positioning in the median range of the most-relevant markets to employees based on roles, responsibilities, skills, and performance. 3M also believes that the compensation of its executives should be closely tied to the performance of the Company, so that their interests are aligned with the interests of long-term 3M stockholders.shareholders. Consistent with this philosophy, the following core principles provide a framework for the Company’s executive compensation program:
| Total Direct Compensation should be competitive to attract the best talent to 3M, motivate executives to perform at their highest levels, reward individual contributions that improve the Company’s ability to deliver outstanding performance, and retain those executives with the leadership abilities and skills necessary for building long-term | |
| The portion of Total Direct Compensation that is performance-based and is, therefore, at risk should increase with the level of an individual’s responsibility; | |
| The program should balance incentives for delivering outstanding long-term, sustainable performance against the potential to encourage inappropriate risk-taking; | |
| The metrics and targets for earning performance-based incentives should be consistent with, and aligned to, increasing | |
| A significant portion of each executive’s personal net worth should be tied to the value of 3M common stock as further motivation to build long-term |
To monitor and support the effectiveness of this program, the Committee periodically reviews the compensation principles used for setting annual total cash compensation for the Company’s global workforce and approves the methodology for determining annual long-term incentive target grant values for employees eligible to receive such awards. The Company also periodically compares its pay components to those of other premier companies and adjusts them as necessary to stay competitive and attract, retain, and motivate a highly qualified, diverse workforce at all levels throughout the organization, not just for its executives.
Roles and Responsibilitiesresponsibilities
The Company believes that a collaborative process best ensures that compensation decisions reflect the principles of our executive compensation program. Set forth below is a summary of the roles and responsibilities of the key participants that were involved in making decisions relating to the compensation that our Named Executive Officers earned in 2018.2019.
| ||
| Compensation Committee (Composed solely of independent, | • Reviews the design of, and risks associated with, the Company’s compensation policies and practices; • Approves the compensation of our Chief Executive Officer and Executive Chairman (including performance metrics and goals for performance-based long-term and short-term incentive compensation), subject to ratification by the independent members of the Board of Directors; • Approves annual performance goals and objectives for our Chief Executive Officer and Executive Chairman; • Acting through the Committee’s Chairman, conducts an annual evaluation of our Chief Executive Officer’s and Executive Chairman’s performance and reviews such evaluation with the independent members of the Board of Directors; • Approves the compensation of our other Named Executive Officers (including performance metrics and goals for performance-based long-term and short-term incentive compensation); and • Approves all changes to the composition of the executive peer group. | |
| Independent | • Considers the Committee’s annual evaluation of our Chief Executive Officer’s and Executive Chairman’s performance; and • Considers the Committee’s | |
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Executive compensation Compensation discussion and analysis
| Independent Consultant to the Compensation Committee* (Frederic W. Cook & Co., Inc.) | • Provides the Committee with advice regarding the design of all elements of the Company’s executive compensation program; • Reviews and provides an assessment of the material economic and reputational risks associated with the Company’s incentive compensation programs; • Reviews and provides an independent assessment of materials provided to the Committee by management of the Company; • Provides advice and recommendations to the Committee regarding the composition of the compensation peer groups; • Provides expert knowledge of regulatory developments, marketplace trends and best practices relating to executive compensation and competitive pay levels; • Makes recommendations regarding the compensation of the Named Executive Officers (including our Chief Executive Officer and Executive Chairman); and • Regularly attends and actively participates in meetings of the Committee, including executive sessions. | |
| Chief Executive Officer (Assisted by our Senior Vice President, Human Resources, and other Company employees) | • Approves annual performance goals and objectives for the Named Executive Officers (other than himself and our Executive Chairman); • Conducts an annual performance evaluation for each of the Named Executive Officers (other than himself and our Executive Chairman) and presents the results to the Committee; and • Makes recommendations to the Committee with respect to the compensation of the Named Executive Officers (other than himself and our Executive Chairman) based on the final assessment of their performance. | |
| * | During |
Elements of Target 2018 Total Direct Compensationtarget 2019 total direct compensation
The illustration below and the discussion that follows show how the target Total Direct Compensation of the Named Executive Officers (excluding our former Executive Chairman) was apportioned among base salary, annual incentives, performance share awards and stock options for 2018,2019, and how these elements relate to the strategic business goals of the Company.
|  |
Abbreviations: AIP = Annual incentive pay; PSAs = Performance share awards.
| * |
|
| ** | Amounts shown reflect the average apportionment for all Named Executive Officers other than Mr. Roman and Mr. Thulin. Including Mr. Thulin, the average apportionment for the other Named Executive Officers would be as follows: base salary — |
| 58 | 3M Company |
Executive compensation Compensation discussion and analysisBASE SALARY
| Percentage of Target | ||
| CEO – | 10% | |
| Other NEOs – | 19% |
3M pays each of its executives a base salary in cash on a monthly basis. The amount of this base salary is reviewed at least annually and does not vary with the performance of the Company. Base salaries are designed to compensate the executives for their normal day-to-day responsibilities, and it is the only component of their compensation that is considered to be fixed rather than variable in nature.
ANNUAL INCENTIVE
| Percentage of Target | Performance Metrics and Weighting: | |
| CEO – 15% Other NEOs – | ||
3M provides its executives with annual incentive compensation through plans that are intended to align a significant portion of their Total Cash Compensation with the financial performance of the Company and its business units. Each executive is assigned a target amount of annual incentive compensation as part of his or her target Total Cash Compensation, but the amount of annual incentive compensation actually paid depends on the performance of 3M and its relevant business units as well as each executive’s individual performance.
3M’s AIP offers eligible employees an opportunity to earn short-term incentive compensation based on three performance metrics, which were weighted for 20182019 as indicated above. All 20182019 performance targets for our Corporate AIP plan were set at or above 20172018 results.
The actual amount paid to an eligible employee for a particular year may range from 0 percent to 200 percent of the employee’s target amount for that year, depending on the performance of the Company and its business units compared to the performance goals approved by the Compensation Committee. The amount of annual incentive compensation paid to an eligible employee also may be increased (up to 30 percent), reduced or eliminated entirely based on the employee’s individual performance during that year. Individual performance takes into account both quantitative (financial results, for example) and qualitative (market and economic circumstances, for example) factors. In no event, however, may the total amount paid to an eligible employee exceed 200 percent of the employee’s target amount for the year.
In determining the amount of annual incentive compensation paid to a Named Executive Officer, the Named Executive Officer’s individual performance is considered based upon the annual performance evaluation that Mr. Roman, assisted by 3M’s Senior Vice President, Human Resources, and other Company employees, completed for each Named Executive Officer (other than himself and Mr. Thulin) and the annual performance evaluation that the Compensation Committee (acting through its Chairman) completed for each of Mr. Roman and Mr. Thulin. These performance evaluations are done according to 3M’s overall performance assessment and management processes, which involve setting annual financial and non-financial goals and objectives for each individual and then assessing the individual’s overall performance against these goals and objectives at the end of the year. While the annual incentive compensation earned by eligible 3M employees generally is determined under the AIP, the annual incentive compensation earned during 20182019 by the senior executives whose compensation is decided by the Committee (including all of the Named Executive Officers) was determined under the Executive Plan approved by 3M’s stockholdersshareholders at the 2007 Annual Meeting. A total of 1920 senior executives participated in this Executive Plan during 2018.2019. The Company utilizesutilized the Executive Plan in 2019 to provide performance-based compensation that, isat the time action was taken to designate the plan participants for 2019, was intended to be exempt from the $1 million annual deduction limit of state tax laws that are similar to Section 162(m) of the Internal Revenue Code, as in effect prior to the Tax Cuts and Jobs Act of 2017. Given the number of states that have eliminated the performance-based compensation exception to the annual deduction limit since the enactment of the Tax Cuts and Jobs Act of 2017, the Committee decided to include the Company’s senior executives in the broad-based AIP beginning in 2020.
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Assuming the Company meets the Adjusted Net Income goal, the Executive Plan provides the Committee with discretion to determine the amount of annual incentive compensation paid to 3M’s Named Executive Officers and its other senior executives. The Executive Plan establishes a maximum amount of annual incentive compensation that may be earned by each covered executive for a year (a percentage of the Company’s Adjusted Net Income for such year) and then the Committee utilizes this discretion to pay each covered executive less than this maximum amount based on such factors as it deems relevant. Since the Executive Plan was first adopted in 2007, the Committee has rarely used this discretion to pay a covered executive (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the broad-based AIP (including the individual performance multiplier).
Executive compensation Compensation discussion and analysisLONG-TERM INCENTIVES
| Percentage of Target | Performance Metrics and Weighting: | |
| CEO – | ||
| Other NEOs – | ||
3M provides long-term incentive compensation to its executives through an incentive plan approved by the Company’s stockholders.shareholders. This is a typical omnibus-type plan that authorizes the Committee to grant stock options, restricted stock, restricted stock units, stock appreciation rights, performance shares, and other stock awards to employees of the Company and its subsidiaries. The Company provides its executives with this long-term incentive compensation based on 3M common stock in order to effectively motivate such executives to build long-term stockholdershareholder value.
In determining the performance-adjusted target grant value of the stock options and performance shares provided to our Named Executive Officers, the Compensation Committee considers the individual performance of our Named Executive Officers using the performance evaluations described under “Annual Incentive” above.on page 59.
Our Named Executive Officers also may receive special equity awards on an ad hoc basis as new hires or for recognition and retention, promotions, or other purposes.
Adjustments for certain special items
In determining the level of achievement of the performance goals established under the AIP and the performance share awards for any given period, the costs, sales and impact on assets and liabilities from acquisitions are excluded in the year that the acquisition is completed. The Committee also makes other adjustments from time to time for special items that it believes are unrelated to the operational performance of the Company for the relevant measurement period (e.g., changes in tax laws or accounting principles, asset write-downs, the impact of restructurings, divestitures or asset sales in which net gains or losses exceed certain thresholds, unusual tax transactions, litigation or claim judgments and settlements, and other special items described in management’s discussion and analysis of financial conditions and results of operations appearing in the Company’s annual/quarterly report to shareholders for the applicable period). These adjustments can have either a positive or negative impact on award payouts.
See Appendix A to this Proxy Statement for additional details concerning the adjustments made to certain metrics under the AIP and the outstanding performance share awards.
Benefits and Perquisitesperquisites
The Company’s Named Executive Officers participate in the same health care, disability, life insurance, pension, and 401(k) benefit plans available to most of the Company’s U.S. employees. They also are eligible to receive certain additional benefits and perquisites that are provided for the convenience (financial planning assistance and meals when attending to 3M business, for example), financial security (nonqualified deferred compensation plans and premiums for additional life insurance coverage, for example), personal security (home security equipment/monitoring, for example) or personal health (on-site exercise facilities and physical exams, for example) of the executives. Our Named Executive Officers and other employees also may receive Company tickets for sporting or other events. The Company believes that the benefits and perquisites offered generally are similar to those of our peers and assist in attracting and retaining executives. In some cases, there is no incremental cost to the Company associated with providing these additional benefits and perquisites (physical exams and certain tickets to events, for example) or the executives pay all or a substantial portion of the incremental costs incurred by the Company (on-site exercise facilities, for example).
3M generally provides these
| 60 | 3M Company |
These additional benefits and perquisites generally are provided on a consistent basis only to a limited group of approximately 90 of our most senior U.S. employees on a consistent basis,(including all of the Named Executive Officers), although enhanced personal security equipment and monitoring is provided only to our Chief Executive Officer and the type of additional life insurance coverage provided varies based on the date the executiveemployee was first appointed to an executive position. Individuals first appointed to an executive position on or before August 31, 2003, receive additional life insurance coverage that is provided through a universal life insurance policy. Individuals first appointed on or after September 1, 2003, including our Chief Executive Officer, receive group term life insurance coverage.
The Company also operates aircraft that are used by our senior officers and other employees to conduct company business. For personal security reasons, the Board of Directors requires our Chief Executive Officer to use the Company’s aircraft for all air travel, both business and personal. Our Chief Executive Officer’s spouse and other guests also may accompany him on flights.
The incremental cost to the Company of providing these additional benefits to the Named Executive Officers is reflected in the All Other Compensation Table. No tax gross-ups are provided on any of these additional benefits and perquisites. Except as described above,
New severance plan
In the entire program appliedfirst half of 2019, the Committee’s independent compensation consultant, FW Cook, conducted an analysis of the benefits and perquisites offered to approximately 90 membersexecutives at companies in the executive peer group. Following completion of ourits work, FW Cook informed the Compensation Committee that maintenance of formal severance arrangements for some or all of their executives was a common practice among executive peer group members. Based upon the results of its analysis, FW Cook recommended that the Committee consider implementing a new executive severance plan in order to support talent recruitment and retention objectives (especially at times when there are uncertainties around restructurings and reductions in force) and to provide a consistent approach to executive departures. With FW Cook’s assistance, the Committee then discussed the pros and cons associated with adoption of a formal severance plan and other related issues over the course of the next nine months, including the benefits that a formal plan would provide the Company, the scope of eligible employees, the various termination scenarios that would be covered, and the compensation and benefits that would be offered. After considering the issues, the Committee recommended that the Board adopt a new 3M Executive Severance Plan to provide separation pay and benefits to certain U.S. senior management during 2018, including allemployees (including each of the Named Executive Officers.Officers) in the event of a qualifying termination of employment. Upon the Committee’s recommendation, the independent members of the Board of Directors unanimously approved the 3M Executive Severance Plan, which became effective on February 3, 2020. Additional details concerning the benefits made available under the plan and the circumstances under which benefits will be made available can be found under “Rights and payments upon a qualifying termination under the severance plan” beginning on page 85.
Separation pay
In 2019, we entered into an agreement with Dr. Delgado under which he received $1,750,000 upon the Company’s separation of his employment without cause and his execution of a release of all claims against the Company and its affiliates. In accordance with the terms of the applicable plans and award agreements, Dr. Delgado remained eligible to receive a prorated annual incentive payment for 2019 based upon 3M’s actual performance and continues to vest in his outstanding stock options and performance shares, except that his 2019 performance shares were prorated based on the portion of the year worked. Dr. Delgado remains subject to existing non-competition, non-solicitation, and confidentiality obligations.
Competitive Paypay
We compete for executive talent in a global market. In order to ensure that we are providing Total Direct Compensation that is competitive, the Committee annually conducts a rigorous benchmarking process with the help of its independent compensation consultant, FW Cook. During this process, the Committee generally considers available pay data for two peer groups: an executive peer group and a survey peer group.
Executive compensation Compensation discussion and analysispeer group
Executive Peer Group
For 2018,2019, the executive peer group consisted of the companies identified below (which remained the same as in the previous year), as recommended by the Committee’s independent compensation consultant and approved by the Committee. The companies in this executive peer group were selected because (1) their performance was monitored regularly by the same market analysts who monitor the performance of 3M (investment peers), and/or (2) they met criteria based on similarity of their business and pay models, market capitalization (based on an eight-quarter rolling average), and annual revenues and compete with 3M for talent or capital.
| (Dollars in millions) | ||||||
| Latest Four Quarters Revenues | Trailing Eight-Quarter Average Market Capitalization | |||||
| General Electric Company | $121,615 | Johnson & Johnson | $353,823 | |||
| DowDuPont Inc. | $85,977 | The Procter & Gamble Company | $220,986 | |||
| Johnson & Johnson | $81,581 | General Electric Company | $145,807 | |||
| The Procter & Gamble Company | $66,912 | DowDuPont Inc. | $135,613 | |||
| United Technologies Corporation | $66,501 | 3M Company | $123,887 | |||
| Caterpillar Inc. | $54,722 | Medtronic plc | $117,005 | |||
| Honeywell International, Inc. | $41,802 | Honeywell International, Inc. | $109,366 | |||
| Deere & Company | $38,388 | United Technologies Corporation | $100,653 | |||
| 3M Company | $32,765 | Caterpillar Inc. | $80,576 | |||
| Johnson Controls International plc | $31,559 | Danaher Corporation | $69,876 | |||
| Medtronic plc | $30,555 | Illinois Tool Works Inc. | $49,285 | |||
| Eaton Corporation plc | $21,609 | Deere & Company | $46,794 | |||
| Danaher Corporation | $19,893 | Emerson Electric Co. | $42,188 | |||
| Kimberly-Clark Corporation | $18,486 | Kimberly-Clark Corporation | $40,550 | |||
| Emerson Electric Co. | $17,739 | Johnson Controls International plc | $34,075 | |||
| Illinois Tool Works Inc. | $14,768 | Eaton Corporation plc | $33,621 | |||
| TE Connectivity Ltd. | $13,999 | TE Connectivity Ltd. | $30,214 | |||
| Corning Incorporated | $11,290 | Corning Incorporated | $26,124 | |||
| 75th Percentile | $66,501 | 75th Percentile | $117,005 | |||
| Mean | $43,376 | Mean | $96,268 | |||
| Median | $31,559 | Median | $69,876 | |||
| 25th Percentile | $18,486 | 25th Percentile | $40,550 | |||
| 3M Percentile Rank | 51% | 3M Percentile Rank | 77% |
| (Dollars in millions) | Trailing Eight-Quarter | |||||
| Latest Four Quarters Revenues | Average Market Capitalization | |||||
| General Electric Company | $95,214 | Johnson & Johnson | $357,993 | |||
| Johnson & Johnson | $82,059 | The Procter & Gamble Company | $258,771 | |||
| United Technologies | $77,046 | Medtronic plc | $132,027 | |||
| The Procter & Gamble Company | $69,594 | Honeywell International, Inc. | $116,945 | |||
| Caterpillar Inc. | $53,800 | United Technologies Corporation | $109,629 | |||
| Deere & Company | $38,880 | 3M Company | $106,606 | |||
| Honeywell International, Inc. | $36,709 | General Electric Company | $ 91,417 | |||
| 3M Company | $32,136 | Danaher Corporation | $ 91,106 | |||
| Medtronic plc | $31,062 | Caterpillar Inc. | $ 77,953 | |||
| Johnson Controls International plc | $24,080 | Deere & Company | $ 50,140 | |||
| Eaton Corporation plc | $21,390 | Illinois Tool Works Inc. | $ 49,275 | |||
| Kimberly-Clark Corporation | $18,450 | Kimberly-Clark Corporation | $ 43,137 | |||
| Emerson Electric Co. | $18,376 | Emerson Electric Co. | $ 42,392 | |||
| Danaher Corporation | $17,911 | Eaton Corporation plc | $ 35,127 | |||
| Illinois Tool Works Inc. | $14,109 | Johnson Controls International plc | $ 31,431 | |||
| TE Connectivity Ltd. | $13,269 | TE Connectivity Ltd. | $ 29,847 | |||
| Corning Incorporated | $11,503 | Corning Incorporated | $ 23,820 | |||
| 75th Percentile | $57,749 | 75th Percentile | $111,458 | |||
| Mean | $38,966 | Mean | $ 96,313 | |||
| Median | $27,571 | Median | $ 64,047 | |||
| 25th Percentile | $18,260 | 25th Percentile | $ 40,576 | |||
| 3M Percentile Rank | 55% | 3M Percentile Rank | 72% |
All data shown was obtained from Standard & Poor’s Capital IQ. Revenues are stated in millions for the latest four quarters disclosed as of February 28, 2019.2020. Market Capitalizations are stated in millions as of February 28, 2019. Market2020. Given the significant impact that the spinoffs of two independent public companies (Dow Inc. and Corteva, Inc.) had on the revenues and market capitalization of DuPont de Nemours, Inc. (formerly DowDuPont Inc.), the table above does not include information for DowDuPont represents a seven-quarter average due to lack of market financial data over the complete eight-quarter period.such entity.
The Committee, with assistance from its independent compensation consultant, periodically reviews the composition of the executive peer group to determine whether any changes are appropriate. Following its review in 2018,August 2019, the Committee determined that no changes were needed at that time.
The Company receives pay data and information on the executive compensation practices at the companies in 3M’s executive peer group from Aon and FW Cook.
| 62 | 3M Company |
Survey Peer Grouppeer group
For 2018,2019, there were approximately 200250 comparator companies in the survey peer group. Although the number and identity of the companies varies from year to year and from survey to survey, each of the companies included in the survey peer group had annual revenue exceeding $10 billion. All of the companies in the survey peer group also participate in one or more executive compensation surveys obtained from three consulting firms (Aon, FW Cook, and Willis Towers Watson). Pay data for the survey peer group is statistically regressed to recognize the different sizes of the comparator companies (based on annual revenues) as compared to the size of 3M. The Committee does not review the identity of the companies in the survey peer group.
Executive compensation Compensation discussion and analysis
How the Committee Establishes Target Compensation Levels Using Competitive Pay Dataestablishes target compensation levels using competitive pay data
The Committee considers the pay data from the Peer Groups as a reference point when establishing the target Total Cash Compensation and the initial target value of long-term incentive compensation to be provided to our executives in any given year before consideration of individual performance.circumstances. For each Named Executive Officer, the Committee generally triesCommittee’s general approach is to set such amounts between 80 and 120 percent ofat or very near the median for the corresponding items of compensation provided to similarly situated executives in the executive peer group. In situations where the Committee believes that there is insufficient market data for one or more positions, the Committee starts with the median amount for a similar position and adjusts that amount up or down (generally not more than 15 percent) to arrive at a number that it uses as the “median” for that position. The final amounts of target amountsTotal Cash Compensation established by the Committee for each executive may vary based on individual circumstances.circumstances, but generally are set between 80 and 120 percent of the applicable median. When setting the target amounts for any individual executive, the Committee may consider the breadth and complexity of the executive’s duties and responsibilities, the scores assigned to the executive for his or her leadership behaviors (e.g., customer focus, strategic mindset, operational leadership), the financial and operational performance of the business activities for which the executive is responsible, experience and time in their current position, internal pay equity, individual performance, and such other factors as the Committee determines to be appropriate. The pay data for the survey peer group is used by the Committee to assess the reasonableness of the benchmarking results for each executive position benchmarked, helping to ensure that the Company’s compensation objectives are being met.
The Committee also uses information on the executive compensation practices at companies in the executive peer group when considering design changes to the Company’s executive compensation program. Overall, the Company believes that use of this information from the Peer Groups enables the Committee to create better alignment between executive pay and performance and to help ensure that 3M can attract and retain high-performing executive leaders.
Tally Sheetssheets
The Committee periodically reviews a report comparing the amounts of compensation actually received by the Company’s Named Executive Officers to the amounts reported in its annual proxy statement and summarizing the compensation that would be owed to such individuals in the event of the termination of their employment under various circumstances. Reviewing this report helps the Committee better understand the Company’s potential obligations to the Named Executive Officers following the termination of their employment. It also helps the Committee better assess the risk of any of the Named Executive Officers leaving the Company prematurely because the Company is not providing sufficient retention incentives.
Tax Considerationsconsiderations
Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”), disallows a tax deduction to public companies for compensation paid per year in excess of $1 million to “covered employees” (generally, a company’s chief executive officercertain current and its three other highest paidformer executive officers other than its chief financial officer). Prior to enactment of the TCJA,Company (although there historically was an exception to this $1 million annual limitation for performance-based compensation if certain requirements set forth in Section 162(m) and the applicable regulations were met. The Committee has historically designed its compensation programs based on its belief that a substantial portion of the compensation payable to NEOs should be based on the achievement of performance-based targets or otherwise be designed with the intent that such compensation qualifies as deductible performance-based compensation under Section 162(m). As a result, annual incentive compensationmet and certain equity-based compensation arrangements granted to our covered employees in prior years were intended to qualify as performance-based compensation under Section 162(m).
Effective for taxable years beginning after December 31, 2017, the TCJA amended Section 162(m) to eliminate the exception for performance-based compensation and expand the definition of “covered employee” to include a company’s chief financial officer and former executive officers). As a result, we expect that compensation paid per year to our Named Executive Officers and certain individuals who were covered employeesother current and former executive officers in years other than the then-current taxable year.excess of $1 million generally will not be deductible, subject to limited exceptions. Interpretations of and changes in applicable tax laws and regulations as well as other factors beyond the control of the Committee can affect deductibility of compensation, and there can be no assurance that compensation paid to our executive officers who are considered covered employees for purposes of Section 162(m) will be tax deductible.
The Committee will continue to considerhas in prior years considered the tax implications (including the potential lack of deductibility under Section 162(m)) when making compensation decisions but reserves the right to make future compensation decisions based on other factorsfactors. The Committee also reserves the right to make changes or amendments to existing compensation programs and arrangements, including changes or amendments that may result in the loss of tax deductions, if the Committee believes it is in the best interests of the Company and its stockholdersshareholders to do so. The Committee also reserves the right to make changes or amendments to existing compensation programs, including changes or amendments that are intended to modify or eliminate aspects of such arrangements that were intended to take advantage of the former exception to Section 162(m) for performance-based compensation but that the Committee no longer believes are in the best interests of the Company and its stockholders.
Executive compensation Compensation discussion and analysis
Meaning of Certain Termscertain terms
Except as otherwise noted, capitalized terms used in this Compensation Discussion and Analysis have the meaning specified below.
| Adjusted Net Income | means the net income of 3M as reported in its Consolidated Statement of Income, as adjusted to exclude special items. | |
| AIP | means the broad-based Annual Incentive Plan by which the Company provides annual incentive compensation to approximately 35,000 eligible employees. | |
| Committee | means the Compensation Committee of the Board of Directors of 3M Company. | |
| Economic Profit | means the adjusted net income of 3M (net income including non-controlling interest plus after-tax interest expense, as reported in its Consolidated Statement of Income) or a business unit operating income, plus interest income and minus income taxes, adjusted to exclude certain special items and the impact of acquisitions or divestitures in the year each acquisition or divestiture is completed (unless such acquisition or divestiture is included in the operating plan for the business unit), less a charge (10 percent in | |
| Earnings per Share (EPS) Growth | means the percentage increase or decrease in 3M’s diluted earnings per share attributable to 3M common | |
| Executive Plan | means the Executive Annual Incentive Plan by which the Company provides annual incentive compensation to the Named Executive Officers as well as certain other executives. | |
| Free Cash Flow Conversion | means the sum of 3M’s operating cash flows minus capital expenditures, divided by net income, as adjusted to exclude certain special items. | |
| GAAP | means generally accepted accounting principles in the United States. | |
| Local Currency Sales | means the net sales of 3M (as reported in its Consolidated Statement of Income) or a business unit, in local currency, adjusted to exclude the impact of acquisitions or divestitures in the year each acquisition or divestiture is completed (unless such acquisition or divestiture is included in the operating plan for the business unit). | |
| Organic Local Currency Sales Growth | means the percentage amount by which 3M’s net sales (as reported in its Consolidated Statement of Income) for a year increase or decrease as compared to the previous year, in each case, adjusted to | |
| Peer Groups | means both 3M’s executive peer group and the survey peer group, each as described in the “Competitive | |
| Relative Organic Volume Growth | means the amount by which the percentage increase or decrease in 3M’s net sales (as reported in its Consolidated Statement of Income) for a year as compared to the previous year exceeds the percentage increase or decrease in | |
| Return | means the operating income of 3M (as reported in its Consolidated Statement of Income), plus interest income and minus income taxes, adjusted to exclude certain special items and the impact of acquisitions in the year each acquisition is completed, divided by the average invested capital (equity plus debt, as reported in its Consolidated Balance Sheet). | |
| Total Cash Compensation | means the total of an individual’s base salary and annual incentive compensation. | |
| Total Direct Compensation | means the total of an individual’s Total Cash Compensation plus the compensation value of their annual long-term incentive compensation awards (which is based on their grant date fair value as measured under accounting standards). |
| 3M Company |
Executive compensation Compensation discussion and analysis
Section III: How We Paid Our Named Executive Officerswe paid our named executive officers in 20182019
2018 Base Salary
2019 base salary and Target Total Cash Compensationtarget total cash compensation
The Committee considers changes in the base salaries and target Total Cash Compensation of the Named Executive Officers at least annually. As part of its normal process to progress senior executives to a level of compensation that is commensurate with their responsibilities, the Committee also periodically considers adjustments to the base salaries and target Total Cash Compensation of senior executives whose rate of pay is set below the market median. All adjustments are made only after considering the most recent compensation data available to the Committee for executives with similar responsibilities at companies in the Peer Groups, each individual’s place in the salarytarget total cash compensation range for his or her position, and the individual’s job performance.
In February 2018,2019, the Committee approved (and, in the case of Mr. Roman, the independent members of the Board ratified) the increases in the base salaries and target Total Cash Compensation shown below for the Named Executive Officers following completion of their annual performance evaluations. No changes were made to Mr. Roman’sThulin’s, Ms. Bushman’s, Dr. Delgado’s or Mr. Thulin’sVale’s base salary or target Total Cash Compensation at that time. The adjustments to Mr. Roman’s compensation primarily were intended to progress his compensation closer to the market median.
| Name | Previous Base Salary ($) | New Base Salary Effective 4/1/18 ($) | % Increase | Previous Target Total Cash Compensation ($) | New Target Total Cash Compensation Effective 4/1/18 ($) | % Increase | ||||||
| Nicholas C. Gangestad | 799,495 | 841,495 | 5% | 1,598,990 | 1,682,989 | 5% | ||||||
| Hak Cheol Shin | 875,000 | 892,500 | 2% | 1,750,000 | 1,785,000 | 2% | ||||||
| Julie L. Bushman | 769,672 | 800,502 | 4% | 1,424,000 | 1,481,040 | 4% | ||||||
| Frank R. Little | 697,409 | 739,952 | 6% | 1,290,304 | 1,369,015 | 6% | ||||||
| James L. Bauman | 731,188 | 760,477 | 4% | 1,352,800 | 1,406,988 | 4% |
| Name | Previous Base Salary ($) | New Base Salary Effective 4/1/19 ($) | % Increase | Previous Target Total Cash Compensation ($) | New Target Total Cash Compensation Effective 4/1/19 ($) | % Increase | ||||||
| Michael F. Roman | 1,199,952 | 1,299,948 | 8% | 3,120,000 | 3,380,000 | 8% | ||||||
| Nicholas C. Gangestad | 841,495 | 870,105 | 3% | 1,682,989 | 1,740,211 | 3% | ||||||
| Ashish K. Khandpur | 614,386 | 638,962 | 4% | 1,136,700 | 1,182,168 | 4% |
As a result of these increases, Mr. Roman’s target Total Cash Compensation represented 90 percent of the median value of the corresponding compensation provided to chief executive officers at companies in the executive peer group, and the target Total Cash Compensation of these Named Executive Officers ranged from 97Mr. Gangestad and Mr. Khandpur represented 102 percent to 108and 94 percent, respectively, of the median value of the corresponding compensation provided to executives with similar responsibilities at companies in the executive peer group.
In May 2018,March 2019, the Committee approved the adjustments in base salarysalaries and target Total Cash Compensation shown below in connection with Mr. Roman’s appointment to Chief Executive Officer and Mr. Thulin’sKhandpur’s appointment to Executive Chairman.Vice President, Transportation and Electronics Business Group, and Mr. Vale’s appointment to Executive Vice President, Safety and Industrial Business Group. The adjustments were intended to better align the target Total Cash Compensation of each executive with the breadth of responsibilities accompanying their expanded roles after the responsibilities that accompany their new roles.realignment of the Company from five to four business groups.
| Name | Previous Base Salary ($) | New Base Salary Effective 7/1/18 ($) | % Increase | Previous Target Total Cash Compensation ($) | New Target Total Cash Compensation Effective 7/1/18 ($) | % Increase | ||||||
| Michael F. Roman | 900,000 | 1,199,952 | 33% | 2,000,000 | 3,120,000 | 56% | ||||||
| Inge G. Thulin | 1,538,400 | 1,000,000 | -35% | 4,000,000 | 2,500,000 | -38% |
| Name | Previous Base Salary ($) | New Base Salary Effective 7/1/19 ($) | % Increase | Previous Target Total Cash Compensation ($) | New Target Total Cash Compensation Effective 7/1/19 ($) | % Increase | ||||||
| Ashish K. Khandpur | 638,962 | 706,434 | 11% | 1,182,168 | 1,307,000 | 11% | ||||||
| Michael G. Vale | 710,703 | 745,890 | 5% | 1,314,899 | 1,380,000 | 5% |
As a result of these adjustments, Mr. Roman’sincreases, the target Total Cash Compensation was approximately 83of these Named Executive Officers represented 90 percent and 95 percent, respectively, of the median value of the corresponding compensation provided to executives with similar responsibilities at companies in the executive peer group. Mr. Thulin’s adjustment to target Total Cash Compensation reflects a decrease of 38 percent from his final compensation as Chief Executive Officer, which the Committee’s independent compensation consultant recommended to align with median market practice.
Executive compensation Compensation discussion and analysis2019 annual incentive
2018 Annual Incentive
During 2018,2019, the Committee provided the Named Executive Officers with the opportunity to earn short-term incentive compensation under the Executive Plan. Each Named Executive Officer’s target annual incentive for the year was equal to the difference between his or her target Total Cash Compensation and annual base salary. Each of the Named Executive Officers was assigned to an appropriate business unit (the entire Company, in some cases) established under the AIP for the purpose of measuring business performance during 20182019 and converting that performance into a payout determined in accordance with the terms of the AIP. While none of the Named Executive Officers arewere covered by the AIP during 2019, the Committee rarely uses its discretion under the Executive Plan to pay the covered executives (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the AIP (including the individual performance multiplier).
The amounts payable under the AIP for 20182019 were based on the following performance results for the Company and, as applicable, the respective business units to which the Named Executive Officers were assigned for all or part of the year:
| Local Currency Sales (50%) | Economic Profit (20%) | Total 3M Economic Profit vs. Prior Year (30%) | Weighted Average Payout % Based On Payout Curve | |||||||||||||||||
| (Dollar Amounts in Millions) Business Unit | Plan | Actual | Actual vs. Plan | Plan | Actual | Actual vs. Plan | Prior Year | Actual | Actual vs. Prior Year | |||||||||||
| Total Company | 33,514 | 32,869 | 98% | 5,590 | 5,348 | 96% | 3,648 | 3,752 | 103% | 95% | ||||||||||
| International Operations | 20,374 | 20,009 | 98% | 3,539 | 3,507 | 99% | 3,648 | 3,752 | 103% | 96% | ||||||||||
| Safety and Graphics Business Group | 6,889 | 6,830 | 99% | 1,264 | 1,217 | 96% | 3,648 | 3,752 | 103% | 97% | ||||||||||
| Industrial Business Group | 12,428 | 12,232 | 98% | 2,053 | 1,876 | 91% | 3,648 | 3,752 | 103% | 92% | ||||||||||
| Local Currency Sales (50%) | Economic Profit (20%) | Total 3M Economic Profit vs. Prior Year (30%) | Weighted Average Payout % | ||||||||||||||||
| (Dollar Amounts in Millions) Business Unit | Plan | Actual | Actual vs. Plan | Plan | Actual | Actual vs. Plan | Prior Year | Actual | Actual vs. Prior Year | Based On Payout Curve | |||||||||
| Total Company | 33,402 | 32,114 | 96% | 5,693 | 4,808 | 84% | 3,752 | 3,229 | 86% | 62% | |||||||||
| International Operations | 20,293 | 19,468 | 96% | 3,751 | 3,208 | 86% | 3,752 | 3,229 | 86% | 75% | |||||||||
| Transportation and Electronics Business Group | 10,351 | 9,754 | 94% | 2,063 | 1,573 | 76% | 3,752 | 3,229 | 86% | 57% | |||||||||
| Safety and Industrial Business Group | 12,653 | 11,910 | 94% | 2,166 | 1,791 | 83% | 3,752 | 3,229 | 86% | 57% | |||||||||
| Health Care Business Group | 7,100 | 6,927 | 98% | 1,481 | 1,421 | 96% | 3,752 | 3,229 | 86% | 85% | |||||||||
| Consumer Business Group | 5,189 | 5,512 | 99% | 750 | 721 | 96% | 3,752 | 3,229 | 86% | 87% | |||||||||
Since the Company satisfied the Executive Plan’s performance objective by earning Adjusted Net Income of $6.0$5.3 billion for 2018,2019, the plan authorized the Committee to approve payments of annual incentive compensation to each Named Executive Officer equal to a maximum of one-quarter of one percent of such Adjusted Net Income ($1513 million), subject to the Committee’s negative discretion to pay each covered executive any amount less than this maximum based on such factors as it deems relevant, including the goals set forth under the AIP. At its meeting in February 20192020 and consistent with its past practice, the Committee approved (and with respect to Mr. Roman and Mr. Thulin, the independent members of the Board of Directors ratified) a payment to each executive equal to the amount such executive would have received had he or she been participating in the broad-based AIP (including the individual performance multiplier).
| Name | Target 2018 Annual Incentive* ($) | Actual 2018 Annual Incentive ($) | Payout as a % of Target | |||
| Michael F. Roman | 1,510,024 | 1,431,503 | 95% | |||
| Inge G. Thulin | 1,980,800 | 1,877,798 | 95% | |||
| Nicholas C. Gangestad | 830,995 | 787,783 | 95% | |||
| Hak Cheol Shin | 888,125 | 841,943 | 95% | |||
| Julie L. Bushman | 673,985 | 649,048 | 96% | |||
| Frank R. Little | 305,489 | 294,804 | 97% | |||
| James L. Bauman | 640,286 | 590,984 | 92% |
| Name | Target 2019 Annual Incentive* ($) | Actual 2019 Annual Incentive ($) | Payout as a % of Target | |||
| Michael F. Roman | 2,040,051 | 1,256,671 | 62% | |||
| Inge G. Thulin | 620,548 | 382,259 | 62% | |||
| Nicholas C. Gangestad | 862,953 | 531,579 | 62% | |||
| Ashish K. Khandpur | 581,003 | 325,583 | 56% | |||
| Julie L. Bushman | 680,538 | 507,681 | 75% | |||
| Joaquin Delgado | 294,066 | 256,137 | 87% | |||
| Michael G. Vale | 626,632 | 396,967 | 63% |
| * | These amounts are prorated to reflect the increases in Total Cash Compensation described above that resulted in corresponding increases (if any) in each individual’s target annual incentive compensation. The amounts shown for Mr. Thulin and Dr. Delgado have been prorated to reflect their separation from the Company, effective as of June 1, 2019, and July 1, 2019, respectively. |
| 3M Company |
Executive compensation Compensation discussion and analysisLong-term incentives — 2019 annual grants
Long-Term Incentives — 2018 Annual Grants
After considering the most recent long-term incentive compensation data available from companies in the Peer Groups and after taking into account its evaluation of their individual performance during 20172018 and Mr. Thulin’s anticipated transition to Executive Chairman during the second half of 2018,retirement in 2019, the Committee approved (and in the case of Mr. Roman and Mr. Thulin, the independent members of the Board of Directors ratified) the following performance-adjusted target compensation values for the Named Executive Officers’ 20182019 long-term incentive compensation awards. For ease of comparison, the table below also shows the performance-adjusted target compensation values of the Named Executive Officers’ 20172018 long-term incentive compensation awards.
| Name | Performance- Adjusted Target Grant Value of 2017 Annual Awards ($) | Performance- Adjusted Target Grant Value of 2018 Annual Awards ($) | ||||||
| Michael F. Roman | 2,455,580 | 4,720,000 | ||||||
| Inge G. Thulin | 12,000,000 | 9,000,000 | ||||||
| Nicholas C. Gangestad | 3,677,700 | 4,673,500 | ||||||
| Hak Cheol Shin | 2,393,150 | 3,954,500 | ||||||
| Julie L. Bushman | 1,847,830 | 2,913,400 | ||||||
| Frank R. Little | 2,913,400 | 3,496,080 | ||||||
| James L. Bauman | 2,268,290 | 2,836,403 | ||||||
| Name | Performance- Adjusted Target Grant Value of 2018 Annual Awards ($) | Performance- Adjusted Target Grant Value of 2019 Annual Awards ($) | ||
| Michael F. Roman | 4,720,000* | 10,000,000 | ||
| Inge G. Thulin | 9,000,000* | 4,687,000 | ||
| Nicholas C. Gangestad | 4,673,500 | 3,640,000 | ||
| Ashish K. Khandpur | 2,268,290 | 3,496,080 | ||
| Julie L. Bushman | 2,913,400 | 2,330,720 | ||
| Joaquin Delgado | 2,268,290 | 1,165,360 | ||
| Michael G. Vale | 2,268,290 | 2,268,290 |
| * | Excludes the target grant value of special grants made in 2018 in connection with the changes in Mr. Roman’s and Mr. Thulin’s roles and responsibilities. If such values had been included, the performance-adjusted target grant value of Mr. Roman’s and Mr. Thulin’s 2018 annual awards would have been $7,220,000 and $9,750,000, respectively. |
Consistent with market practices at companies in the Peer Groups, during 2018,2019, the Committee chose to deliver one-half of the performance-adjusted target grant value of the annual long-term incentive compensation awards provided to 3M’s Named Executive Officers (other than Mr. Thulin) in the form of stock options and the remaining one-half in the form of performance shares. Mr. Thulin’s awards were delivered approximately 6733 percent in the form of stock options and 3367 percent in the form of performance shares in lightgiven the anticipated forfeiture of one half of such performance shares upon his anticipated retirement pursuant to the terms of the anticipated changes in his duties and responsibilities.original grant agreements.
2018 Stock Options
2019 stock options
Stock options granted to the Named Executive Officers in 20182019 as part of their long-term incentive compensation have the following features:
| an exercise price equal to the closing price of a share of 3M common stock on the NYSE for the date of grant; | |
| a ratable three-year vesting schedule; and | |
| a maximum term of 10 years. |
2018 Performance Share Awards
2019 performance share awards
Performance shares awarded in 20182019 will result in the issuance of actual shares of 3M common stock to 3M’s Named Executive Officers if the Company achieves certain financial goals over the years 2018, 2019, 2020, and 2020.2021. The number of shares of 3M common stock that will be issued for each 20182019 performance share is linked to the Company’s performance as measured by the criteria of Earnings per Share Growth (20 percent weighting), Relative Organic Volume Growth (40 percent weighting), Return on Invested Capital (20 percent weighting), and Free Cash Flow Conversion (20 percent weighting). These performance criteria were selected because they are aligned with 3M’s operating plan and the financial objectives communicated to stockholdersshareholders, and the Committee believes that they are important drivers of long-term stockholdershareholder value. Attainment of these four independent performance criteria is measured separately for each calendar year during the three-year measurement period, with each year weighted as follows: 20182019 — 50 percent; 20192020 — 30 percent; and 20202021 — 20 percent. However, the formulastargets by which the Company’s performance is measured do not change over the three-year performance period.
Executive compensation Compensation discussion and analysis
TheExcluding shares issued pursuant to dividend equivalent rights, the actual number of shares of 3M common stock that will be delivered at the end of the three-year performance period ending on December 31, 2020,2021, may be anywhere from 0 percent to 200 percent of the target number of performance shares awarded, depending on the performance of the Company during the performance period. However, an executive may forfeit all or a portion of such shares if he or she does not remain employed by the Company throughout the three-year performance period.
For awards tied to the achievement of performance goals over the years 2018, 2019, 2020, and 2020,2021, the Committee approved the following formulastargets for determining the number of shares of 3M common stock to be delivered for each performance share awarded, with the total number of shares actually delivered being the sum of the number of shares earned as a result of the Company’s achievement of each of the four financial goals.goals, plus the number of shares issued pursuant to dividend equivalent rights granted with respect to the shares earned. In the event that the Company’s performance as measured by any of these performance criteria falls between any of the percentages listed below, the number of shares of 3M common stock earned will be determined by linear interpolation.
| EPS Growth | % of | Relative Organic Volume Growth | % of Performance Shares | Return on Invested Capital | % of Performance Shares | FCF Conversion | % of Performance Shares | Total % of Performance Shares | ||||||||||||||||||
| below 4.0% | 0% | below -1.0% | 0% | below 18.0% | 0% | below 95.0% | 0% | 0% | ||||||||||||||||||
| 4.0% | 4% | -1.0% | 8% | 18.0% | 4% | 95.0% | 4% | 20% | ||||||||||||||||||
| 8.0% | 20% | 0.5% | 40% | 20.0% | 20% | 100.0% | 20% | 100% | ||||||||||||||||||
| 12.0%or | 40% | 2.0% or | 80% | 23.0% or | 40% | 105.0% or | 40% | 200% | ||||||||||||||||||
| higher | higher | higher | higher | |||||||||||||||||||||||
| Relative | |||||||||||||||||||||
| % of | Organic | % of | Return on | % of | % of | Total % of | |||||||||||||||
| EPS | Performance | Volume | Performance | Invested | Performance | FCF | Performance | Performance | |||||||||||||
| Growth | Shares | Growth | Shares | Capital | Shares | Conversion | Shares | Shares | |||||||||||||
| below 4.0% | 0% | below -1.0% | 0% | below 20.0% | 0% | below 95.0% | 0% | 0% | |||||||||||||
| 4.0% | 4% | -1.0% | 8% | 20.0% | 4% | 95.0% | 4% | 20% | |||||||||||||
| 8.0% | 20% | 0.5% | 40% | 22.0% | 20% | 100.0% | 20% | 100% | |||||||||||||
| 12.0% or higher | 40% | 2.0% or higher | 80% | 25.0% or higher | 40% | 105.0% or higher | 40% | 200% | |||||||||||||
The above formulastargets are not a prediction of how 3M will perform during the years 20182019 through 20202021 or any other period in the future. The sole purpose of these formulas, which were approved by the Committee in February 2018,2019, is to establish a method for determining the number of shares of 3M common stock to be delivered for the performance share awards described above. 3M is not providing any guidance, nor updating any prior guidance, of its future performance with the disclosure of these formulas, and you are cautioned not to rely on these formulas as a prediction of 3M’s future performance.
Long-Term Incentives
Long-term incentives — Other Grants
In connection with the changes in Mr. Roman’s and Mr. Thulin’s roles and responsibilities and after consulting with its independent compensation consultant and considering each executive’s existing compensation packages and other factors, the Committee approved (and the independent members of the Board of Directors ratified) aall outstanding performance share award for each of Mr. Roman and Mr.Thulin with a target grant value of $1,250,000 and $750,000, respectively, and a stock option grant for Mr. Roman with a target grant value of $1,250,000, in each case, effective as of July 1, 2018. The terms and conditions of the grants were the same as those of the 2018 annual grants described in the section entitled “Long-Term Incentives — 2018 Annual Grants” beginning on page 61 of this Proxy Statement.awards
Long-Term Incentives — All Outstanding Performance Share Awards
The Company’s annual award cycle and three-year performance periods result in an overlap of awards. For example, the performance goals for 2019 performance share awards relate to the years 2019, 2020, and 2021. Similarly, the performance goals for 2018 performance share awards relate to the years 2018, 2019, and 2020. Similarly, the performance goals for 2017 performance share awards relate to the years 2017, 2018, and 2019,2020, and so on, as shown below. Performance against the goals established for each award are measured separately for each calendar year during the measurement period, with each year weighted as shown below in parenthesis. The Committee believes this structure reduces motivation to maximize performance in any one period by providing the highest-level rewards only by building sustainable long-term results.
| Award | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||
| 2016 PSA | Year 1 (50%) | Year 2 (30%) | Year 3 (20%) | |||||||||
| 2017 PSA | Year 1 (50%) | Year 2 (30%) | Year 3 (20%) | |||||||||
| 2018 PSA | Year 1 (50%) | Year 2 (30%) | Year 3 (20%) | |||||||||
| Award | 2017 | 2018 | 2019 | 2020 | 2021 | |||||||
| 2017 PSA | Year 1 (50%) | Year 2 (30%) | Year 3 (20%) | |||||||||
| 2018 PSA | Year 1 (50%) | Year 2 (30%) | Year 3 (20%) | |||||||||
| 2019 PSA | Year 1 (50%) | Year 2 (30%) | Year 3 (20%) | |||||||||
Executive compensation Compensation discussion and analysis
Status of Outstanding Performance Share Awardsoutstanding performance share awards
The Committee periodically reviews the Company’s performance against the goals established for each performance share award throughout the duration of its applicable measurement period. The table below summarizes the status of the different performance share awards held by the Named Executive Officers as of December 31, 2018.2019.
| 68 | 3M Company |
| Award and Measurement Period | Performance Measures and Weighting | Performance Levels | % of Shares Accrued per Performance Share at Specified Performance Levels | Actual Performance Level Achieved*, ** | Shares Accrued per Performance Share Based on Actual Performance*** | |||||||||||||
| Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||
| 2018 PSA | Earnings per | 4.0% | 8.0% | 12.0% | 4% | 20% | 40% | 8.6%(2018) | 0.115(2018) | |||||||||
| Share Growth | ||||||||||||||||||
| 2018-2020 | Relative Organic | -1.0% | 0.5% | 2.0% | 8% | 40% | 80% | -1.0%(2018) | 0.040(2018) | |||||||||
| Measurement | Volume Growth | |||||||||||||||||
| Period | Return on | 18.0% | 20.0% | 23.0% | 4% | 20% | 40% | 24.6%(2018) | 0.200(2018) | |||||||||
| Invested Capital | ||||||||||||||||||
| Free Cash Flow | 95.0% | 100.0% | 105.0% | 4% | 20% | 40% | 92.8%(2018) | 0.000(2018) | ||||||||||
| Conversion | ||||||||||||||||||
| 2018PSA Total (as of December31, 2018) | 0.355shares | |||||||||||||||||
| 2017 PSA | Earnings per | 4.0% | 8.0% | 12.0% | 4% | 20% | 40% | 8.6%(2018) | 0.069(2018) | |||||||||
| Share Growth | 12.4%(2017) | 0.200(2017) | ||||||||||||||||
| 2017-2019 | Relative Organic | -1.0% | 0.5% | 2.0% | 8% | 40% | 80% | -1.0%(2018) | 0.024(2018) | |||||||||
| Measurement | Volume Growth | 2.0%(2017) | 0.400(2017) | |||||||||||||||
| Period | Return on | 18.0% | 20.0% | 23.0% | 4% | 20% | 40% | 24.6%(2018) | 0.120(2018) | |||||||||
| Invested Capital | 25.2%(2017) | 0.200(2017) | ||||||||||||||||
| Free Cash Flow | 95.0% | 100.0% | 105.0% | 4% | 20% | 40% | 92.8%(2018) | 0.000(2018) | ||||||||||
| Conversion | 97.3%(2017) | 0.057(2017) | ||||||||||||||||
| 2017 PSA Total (as of December31, 2018) | 1.070shares | |||||||||||||||||
| 2016 PSA | Earnings per | 7.0% | 9.0% | 12.0% | 4% | 20% | 40% | 8.6%(2018) | 0.033(2018) | |||||||||
| Share Growth | 12.4%(2017) | 0.120(2017) | ||||||||||||||||
| 7.7%(2016) | 0.048(2016) | |||||||||||||||||
| 2016-2018 | Relative Organic | -1.0% | 0.5% | 2.0% | 8% | 40% | 80% | -1.0%(2018) | 0.016(2018) | |||||||||
| Measurement | Volume Growth | 2.0%(2017) | 0.240(2017) | |||||||||||||||
| Period | -2.1%(2016) | 0.000(2016) | ||||||||||||||||
| Return on | 18.0% | 20.0% | 23.0% | 4% | 20% | 40% | 24.6%(2018) | 0.080(2018) | ||||||||||
| Invested Capital | 25.2%(2017) | 0.120(2017) | ||||||||||||||||
| 22.6%(2016) | 0.187(2016) | |||||||||||||||||
| Free Cash Flow | 95.0% | 100.0% | 105.0% | 4% | 20% | 40% | 92.8%(2018) | 0.000(2018) | ||||||||||
| Conversion | 97.3%(2017) | 0.034(2017) | ||||||||||||||||
| 103.8%(2016) | 0.176(2016) | |||||||||||||||||
| 2016PSA Total (as of December31, 2018) | 1.054shares | |||||||||||||||||
| Award and Measurement Period | Performance Measures and Weighting | Performance Levels | % of Shares Accrued per Performance Share at Specified Performance Levels | Actual Performance Level Achieved*,** | Shares Accrued per Performance Share Based on Actual Performance*** | |||||||||||||
| Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||
| 2019 PSA | Earnings per | 4.0% | 8.0% | 12.0% | 4% | 20% | 40% | -6.9% (2019) | 0.000 (2019) | |||||||||
| Share Growth | ||||||||||||||||||
| 2019-2021 | Relative Organic | -1.0% | 0.5% | 2.0% | 8% | 40% | 80% | -2.9% (2019) | 0.000 (2019) | |||||||||
| Measurement | Volume Growth | |||||||||||||||||
| Period | Return on | 20.0% | 22.0% | 25.0% | 4% | 20% | 40% | 22.9% (2019) | 0.130 (2019) | |||||||||
| Invested Capital | ||||||||||||||||||
| Free Cash Flow | 95.0% | 100.0% | 105.0% | 4% | 20% | 40% | 106.0% (2019) | 0.200 (2019) | ||||||||||
| Conversion | ||||||||||||||||||
| 2019 PSA Total (as of December 31, 2019) | 0.330 shares | |||||||||||||||||
| 2018 PSA | Earnings per | 4.0% | 8.0% | 12.0% | 4% | 20% | 40% | -6.9% (2019) | 0.000 (2019) | |||||||||
| Share Growth | 8.6% (2018) | 0.115 (2018) | ||||||||||||||||
| 2018-2020 | Relative Organic | -1.0% | 0.5% | 2.0% | 8% | 40% | 80% | -2.9% (2019) | 0.000 (2019) | |||||||||
| Measurement | Volume Growth | -1.0% (2018) | 0.040 (2018) | |||||||||||||||
| Period | Return on | 18.0% | 20.0% | 23.0% | 4% | 20% | 40% | 22.9% (2019) | 0.118 (2019) | |||||||||
| Invested Capital | 24.6% (2018) | 0.200 (2018) | ||||||||||||||||
| Free Cash Flow | 95.0% | 100.0% | 105.0% | 4% | 20% | 40% | 106.0% (2019) | 0.120 (2019) | ||||||||||
| Conversion | 92.8% (2018) | 0.000 (2018) | ||||||||||||||||
| 2018 PSA Total (as of December 31, 2019) | 0.593 shares | |||||||||||||||||
| 2017 PSA | Earnings per | 4.0% | 8.0% | 12.0% | 4% | 20% | 40% | -6.9% (2019) | 0.000 (2019) | |||||||||
| Share Growth | 8.6% (2018) | 0.069 (2018) | ||||||||||||||||
| 12.4% (2017) | 0.200 (2017) | |||||||||||||||||
| 2017-2019 | Relative Organic | -1.0% | 0.5% | 2.0% | 8% | 40% | 80% | -2.9% (2019) | 0.000 (2019) | |||||||||
| Measurement | Volume Growth | -1.0% (2018) | 0.024 (2018) | |||||||||||||||
| Period | 1.7% (2017) | 0.360 (2017) | ||||||||||||||||
| Return on | 18.0% | 20.0% | 23.0% | 4% | 20% | 40% | 22.9% (2019) | 0.079 (2019) | ||||||||||
| Invested Capital | 24.6% (2018) | 0.120 (2018) | ||||||||||||||||
| 25.2% (2017) | 0.200 (2017) | |||||||||||||||||
| Free Cash Flow | 95.0% | 100% | 105.0% | 4% | 20% | 40% | 106.0% (2019) | 0.080 (2019) | ||||||||||
| Conversion | 92.8% (2018) | 0.000 (2018) | ||||||||||||||||
| 97.3% (2017) | 0.057 (2017) | |||||||||||||||||
| 2017 PSA Total (as of December 31, 2019) | 1.189 shares | |||||||||||||||||
| * | The reported level of performance achieved for Relative Organic Volume Growth has been determined, in part, using Worldwide IPI for each relevant period, as reported by Global Insights on January 15, |
| ** | For purposes of calculating Earnings per Share Growth |
| *** | The number of shares of 3M common stock accrued with respect to each performance share subject to a performance share award is determined based on the Company’s performance, as adjusted for certain special items, against the specified goals established for each performance measure taking into account the weighting for the applicable performance |
| 2020 Proxy Statement | 69 |
Executive compensation Compensation discussion and analysisPerformance share accruals based on 2019 performance
Performance Share Accruals Based on 2018 Performance
The table below shows the number of shares of 3M common stock that were accrued (excluding dividend equivalents) for the outstanding performance share awards held by each Named Executive Officer based on the Company’s performance during 2018.2019.
| Name | Performance Share Award | Target Number of Performance Shares | Shares Accrued Per Target Performance Share Based on 2018Performance | Total Shares Accrued Based on 2018 Performance* | Market Value of Shares Accrued Based on 2018 Performance** ($) | |||||||||||
| Michael F. Roman | 2018 PSA | 16,596 | 0.355 | 5,892 | 1,122,582 | |||||||||||
| 2017 PSA | 6,467 | 0.213 | 1,377 | 262,450 | ||||||||||||
| 2016 PSA | 6,778 | 0.129 | 879 | 167,425 | ||||||||||||
| Total | 1,552,457 | |||||||||||||||
| Inge G. Thulin | 2018 PSA | 16,804 | 0.355 | 5,965 | 1,136,651 | |||||||||||
| 2017 PSA | 31,603 | 0.213 | 6,731 | 1,282,487 | ||||||||||||
| 2016 PSA | 34,464 | 0.129 | 4,467 | 851,078 | ||||||||||||
| Total | 3,270,216 | |||||||||||||||
| Nicholas C. Gangestad | 2018 PSA | 10,101 | 0.355 | 3,586 | 683,181 | |||||||||||
| 2017 PSA | 9,686 | 0.213 | 2,063 | 392,998 | ||||||||||||
| 2016 PSA | 9,788 | 0.129 | 1,269 | 241,754 | ||||||||||||
| Total | 1,317,933 | |||||||||||||||
| Hak Cheol Shin | 2018 PSA | 8,547 | 0.355 | 3,034 | 578,066 | |||||||||||
| 2017 PSA | 6,303 | 0.213 | 1,342 | 255,686 | ||||||||||||
| 2016 PSA | 6,601 | 0.129 | 856 | 163,104 | ||||||||||||
| Total | 996,856 | |||||||||||||||
| Julie L. Bushman | 2018 PSA | 6,297 | 0.355 | 2,235 | 425,872 | |||||||||||
| 2017 PSA | 4,867 | 0.213 | 1,037 | 197,514 | ||||||||||||
| 2016 PSA | 5,790 | 0.129 | 750 | 142,978 | ||||||||||||
| Total | 766,364 | |||||||||||||||
| Frank R. Little*** | 2018 PSA | 3,779 | 0.355 | 1,341 | 255,550 | |||||||||||
| 2017 PSA | 7,673 | 0.213 | 1,634 | 311,287 | ||||||||||||
| 2016 PSA | 6,424 | 0.129 | 833 | 158,659 | ||||||||||||
| Total | 725,496 | |||||||||||||||
| James L. Bauman | 2018 PSA | 6,131 | 0.355 | 2,176 | 414,644 | |||||||||||
| 2017 PSA | 5,974 | 0.213 | 1,272 | 242,428 | ||||||||||||
| 2016 PSA | 6,071 | 0.129 | 787 | 150,016 | ||||||||||||
| Total | 807,088 | |||||||||||||||
| Name | Performance Share Award | Target Number of Performance Shares | Shares Accrued Per Target Performance Share Based on 2019 Performance | Total Shares Accrued Based on 2019 Performance* | Market Value of Shares Accrued Based on 2019 Performance** ($) | |||||
| Michael F. Roman | 2019 PSA | 24,098 | 0.330 | 7,952 | 1,402,952 | |||||
| 2018 PSA | 16,596 | 0.238 | 3,948 | 696,427 | ||||||
| 2017 PSA | 6,467 | 0.159 | 1,026 | 181,032 | ||||||
| Total | 2,280,411 | |||||||||
| Inge G. Thulin | 2019 PSA | 7,531*** | 0.330 | 2,485 | 438,386 | |||||
| 2018 PSA | 16,804 | 0.238 | 3,997 | 705,101 | ||||||
| 2017 PSA | 31,603 | 0.159 | 5,013 | 884,455 | ||||||
| Total | 2,027,942 | |||||||||
| Nicholas C. Gangestad | 2019 PSA | 8,772 | 0.330 | 2,895 | 510,694 | |||||
| 2018 PSA | 10,101 | 0.238 | 2,403 | 423,900 | ||||||
| 2017 PSA | 9,686 | 0.159 | 1,537 | 271,128 | ||||||
| Total | 1,205,722 | |||||||||
| Ashish K. Khandpur | 2019 PSA | 8,425 | 0.330 | 2,780 | 490,433 | |||||
| 2018 PSA | 4,903 | 0.238 | 1,166 | 205,655 | ||||||
| 2017 PSA | 3,689 | 0.159 | 586 | 103,387 | ||||||
| Total | 799,475 | |||||||||
| Julie L. Bushman | 2019 PSA | 5,617 | 0.330 | 1,853 | 326,956 | |||||
| 2018 PSA | 6,297 | 0.238 | 1,498 | 264,273 | ||||||
| 2017 PSA | 4,867 | 0.159 | 772 | 136,264 | ||||||
| Total | 727,493 | |||||||||
| Joaquin Delgado | 2019 PSA | 1,405 | 0.330 | 463 | 81,739 | |||||
| 2018 PSA | 4,903 | 0.238 | 1,166 | 205,655 | ||||||
| 2017 PSA | 5,974 | 0.159 | 948 | 167,182 | ||||||
| Total | 454,576 | |||||||||
| Michael G. Vale | 2019 PSA | 5,467 | 0.330 | 1,804 | 318,223 | |||||
| 2018 PSA | 4,903 | 0.238 | 1,166 | 205,655 | ||||||
| 2017 PSA | 6,138 | 0.159 | 974 | 171,799 | ||||||
| Total | 695,677 |
| * | The amounts in this column reflect the number of shares accrued (excluding dividend equivalents) based on, among other things, Worldwide IPI for the |
| ** | Represents the closing price of a share of 3M common stock on the NYSE for December 31, |
| *** | In accordance with the terms of the award, the target number of performance shares subject to Mr. |
| 70 | 3M Company |
Although shares of 3M common stock are accrued annually for each outstanding performance share award, an executive may forfeit all or a portion of the shares otherwise issuable pursuant to his or her award if he or she does not remain employed by the Company throughout the entire three-year performance period.
Executive compensation Compensation discussion and analysis
For additional information concerning the manner in which the compensation of the Named Executive Officers is determined and the role of the Compensation Committee and its advisors, see Section II of this Compensation Discussion and Analysis beginning on page 52.57.
Section IV: Ways in Which We Address Riskwhich we address risk and Governancegovernance
Stock Ownership Guidelinesownership guidelines
The Company maintains robust stock ownership guidelines that apply to all Section 16 officers of the Company and are designed to increase an executive’s equity stake in 3M and more closely align his or her financial interests with those of 3M’s stockholders.shareholders. The table below shows the stock ownership guideline for each Named Executive Officer (other than Mr. LittleThulin and Mr. Shin)Dr. Delgado) and their compliance status as of December 31, 2018.2019. As former employees, Mr. LittleThulin and Mr. ShinDr. Delgado are no longer subject to the Company’s stock ownership guidelines.
Percentage of Named Executive 100% | ||||||
| Multiple of | ||||||
| Measurement Date | Compliance Status | |||||
| Name | Base Salary Required | as of December 31,
| ||||
| Michael F. | 6x | In compliance | ||||
| In compliance | ||||||
| 3x | In compliance | |||||
| Julie L. Bushman | 3x | In compliance | ||||
| 3x | In compliance |
| * | In accordance with the terms of the stock ownership guidelines, the number of shares required to be beneficially owned by each Named Executive Officer |
| ** | As a result of |
The stock ownership guidelines provide that the number of shares required to be beneficially owned by each covered executive will be calculated using such executive’s annual base salary at the time of his or her initial appointment to a Section 16 position and again at the time of a position change from one multiple level to another multiple level, and the fair market value of 3M common stock at that time. The guidelines also provide that the number of shares required to be beneficially owned by each executive will be recalculated every three years using his or her annual base salary and the fair market value of 3M common stock at the recalculation date. Pursuant to the terms of the guidelines, the next periodic recalculation date is scheduled to occur on December 31, 2019.30, 2022.
Each covered executive is expected to attain beneficial ownership of the number of shares of 3M stock determined by the guidelines within five years of his or her initial appointment to a position covered by the guidelines or a position change from one multiple level to another multiple level. The guidelines also provide that each covered executive whose required level of ownership increases as a result of a periodic recalculation will have three years from the recalculation date (or the balance of the five-year period since the date of their initial appointment or latest position change, if longer) to acquire beneficial ownership of any additional shares required as a result of the recalculation. However, if a covered executive is not making adequate progress to meet the required level of ownership within the applicable time period, the guidelines provide that he or she will be required to hold and not sell a sufficient number of the after-tax 3M shares received upon the next payout of performance shares to be on track to satisfy the required ownership level.
| 2020 Proxy Statement | 71 |
For purposes of these guidelines, shares owned directly by a covered executive or by members of the covered executive’s immediate family, shares owned indirectly through a covered executive’s account in the Company’s 401(k) plan or another deferred compensation plan, outstanding shares of restricted stock owned by a covered executive, and shares represented by outstanding restricted stock units granted to a covered executive are all considered to be beneficially owned by the covered executive and are counted in determining attainment of the required beneficial ownership level.
Executive compensation Compensation discussion and analysis
For more information concerning the 3M stock ownership of the Named Executive Officers, see the section entitled “Security Ownershipownership of Management”management” beginning on page 8592 of this Proxy Statement.
Prohibition of Hedginghedging and Pledgingpledging
The Company’s stock trading policies prohibitprohibits the Company’s directors and executive officers from (1) purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of the Company’s common stock, including prepaid variable forward contracts, equity swaps, collars, and exchange funds; (2) engaging in short sales related to the Company’s common stock; (3) placing standing orders; (4) maintaining margin accounts; and (5) pledging 3M securities as collateral for a loan. All transactions in 3M securities by directors and executive officers must be pre-cleared with the Company’s Deputy General Counsel.
Clawback Policypolicy
In 2018, the
The Company’s Board of Directors updated the Company’s clawbackhas adopted a policy to address situations involving significant financial or reputational harm. Pursuant to the terms of the revised policy, the Board of Directorsunder which it is authorized to require reimbursement of certain cash and equity compensation provided to an executive if (1) 3M is required to make a material restatement of its financial statements, whether or not the result of misconduct by the executive ofor any other individual, (2) the executive commits an act of misconduct that hascauses, or might reasonably be expected to cause, significant financial or reputational harm to the Company, or (3) the executive fails to identify, escalate, monitor or manage, in a timely manner and as reasonably expected, risks material to the Company, which havecause, or might reasonably be expected to cause, significant financial or reputational harm to the Company. The policy also authorizes the Company to require reimbursement of any profits the executive realizes on the sale of Company securities during the 12-month period following the issuance by the Company of a financial report that, due to the misconduct of the executive, is materially noncompliant with Federal securities laws. This policy applies to all senior executives of the Company, including all of the Named Executive Officers.
The Board of Directors continues to monitor regulatory developments relating to recoupment of incentive-based compensation and intends to further amend this policy, if necessary, to comply with any final regulations issued for the purpose of implementing the requirements of the Dodd-Frank Act.
Assessment of Risk Relatedrisk related to Compensation Programscompensation programs
Following completion of a recent compensation risk assessment, the Company concluded that none of its compensation policies and practices is reasonably likely to have a material adverse effect on the Company. In connection with this assessment, the Company completed an inventory of its executive and non-executive compensation programs globally, with particular emphasis on incentive compensation plans or programs. The scope of the fiscal 20182019 risk assessment generally was consistent with that of pastconducted in recent years, except that we continued to respond to external market events by givingincluding heightened attention toon plan design, and whether the design, oversight, and controls in place have potential to create not only financial risk, but reputational risk as well. Based on this assessment, the Company evaluated the primary components of its compensation plans and practices to identify whether those components, either alone or in combination, properly balanced compensation opportunities and risk.
The Company believes that our overall cash versus equity pay mix, balance of shorter-term versus longer-term performance focus, balance of revenue versus profit focused performance measures, stock ownership guidelines, and “clawback” policy all work together to provide our employees and executives with incentives to deliver outstanding performance to build long-term stockholdershareholder value, while taking only necessary and prudent risks. In this regard, the Company’s strong ethics and its corporate compliance systems, which are overseen by the Audit Committee, further mitigate against excessive or inappropriate risk taking. In addition, our employee sales plans are designed under global guidelines, where oversight of plan terms, administration, and operation is stronger and governance roles are segregated.
| 72 | 3M Company |
The Compensation Committee, with assistance from its independent compensation consultant, George B. Paulin of FW Cook, reviewed a risk assessment that Mr. Paulin conducted for the Committee on the Company’s executive compensation policies and practices. Based on its consideration of these assessments, the Committee concurred with the Company’s determination that none of its compensation policies and practices is reasonably likely to have a material adverse effect on the Company.
Executive compensation Compensation committee report
Compensation committeeCommittee report
In accordance with the Securities and Exchange Commission’s disclosure requirements for executive compensation, the Compensation Committee of the Board of Directors of 3M Company (the “Committee”) has reviewed and discussed with 3M Managementmanagement the Compensation Discussion and Analysis. Based on this review and these discussions with 3M Management,management, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the 20192020 Proxy Statement of 3M Company and 3M Company’s Annual Report on Form 10-K for the year ended December 31, 2018.2019.
Submitted by the Compensation Committee
Herbert L. Henkel, ChairMichael L. Eskew
Amy E. Hood
Muhtar Kent
Edward M. Liddy
Patricia A. Woertz
Compensation committeeCommittee interlocks and insider participation
The members of the Compensation Committee are named in the section titled “Compensation Committee” on page 3639 of this Proxy Statement. No members of the Compensation Committee were officers or employees of 3M or any of its subsidiaries during the year, were formerly 3M officers, or had any relationship otherwise requiring disclosure.
Executive compensation Executive compensation tables
2018 Summary Compensation Table2019 summary compensation table
The following table shows the compensation earned or received during 2019, 2018, 2017, and 20162017 by each of 3M’s Named Executive Officersnamed executive officers (as determined pursuant to the Securities and Exchange Commission’s disclosure requirements for executive compensation in Item 402 of Regulation S-K).
| Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | ||||||||||||||
| Michael F. Roman Chief Executive Officer | 2018 | 1,049,976 | 3,610,286 | 3,610,217 | 1,431,503 | 3,020,986 | 141,771 | 12,864,739 | ||||||||||||||
| 2017 | 839,575 | 1,227,825 | 1,228,374 | 1,090,797 | 2,347,859 | 70,788 | 6,805,218 | |||||||||||||||
| 2016 | 747,022 | 1,081,701 | 1,082,225 | 602,433 | 1,444,650 | 59,463 | 5,017,494 | |||||||||||||||
| Inge G. Thulin Executive Chairman of the Board | 2018 | 1,269,200 | 3,750,032 | 6,000,564 | 1,877,798 | — | 632,492 | 13,530,086 | ||||||||||||||
| 2017 | 1,526,595 | 6,000,146 | 6,002,785 | 4,121,830 | 2,175,108 | 708,729 | 20,535,193 | |||||||||||||||
| 2016 | 1,483,929 | 5,500,110 | 5,502,854 | 2,303,678 | 1,319,993 | 559,515 | 16,670,079 | |||||||||||||||
| Nicholas C. Gangestad Senior Vice President and Chief Financial Officer | 2018 | 830,995 | 2,336,765 | 2,336,984 | 787,783 | 1,384,479 | 62,458 | 7,739,464 | ||||||||||||||
| 2017 | 778,103 | 3,339,178 | 1,839,705 | 1,110,975 | 2,110,908 | 68,372 | 9,247,241 | |||||||||||||||
| 2016 | 681,551 | 1,562,067 | 1,562,767 | 667,599 | 1,303,839 | 58,109 | 5,835,932 | |||||||||||||||
| Hak Cheol Shin Former Vice Chair and Executive Vice President | 2018 | 888,125 | 1,977,263 | 1,977,438 | 841,943 | 415,495 | 152,921 | 6,253,185 | ||||||||||||||
| 2017 | 838,751 | 1,196,688 | 1,197,153 | 1,121,844 | 1,907,479 | 158,107 | 6,420,022 | |||||||||||||||
| 2016 | 790,201 | 1,053,454 | 1,053,983 | 605,262 | 1,295,944 | 57,514 | 4,856,358 | |||||||||||||||
| Julie L. Bushman(6) Executive Vice President, International Operations | 2018 | 792,795 | 1,456,748 | 1,456,856 | 649,048 | 945,379 | 38,525 | 5,339,351 | ||||||||||||||
| Frank R. Little(6) Former Executive Vice President, Safety and Graphics Business Group | 2018 | 377,839 | 1,748,236 | 1,748,236 | 294,804 | 652,573 | 90,972 | 4,912,660 | ||||||||||||||
| 2017 | 690,639 | 2,657,000 | 1,457,385 | 1,077,371 | 851,463 | 123,833 | 6,857,691 | |||||||||||||||
| James L. Bauman(6) Executive Vice President, Industrial Business Group | 2018 | 753,155 | 1,418,346 | 1,418,344 | 590,984 | 1,351,211 | 56,623 | 5,588,663 | ||||||||||||||
| Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | ||||||||
| Michael F. Roman(6) Chairman of the Board, President and Chief Executive Officer | 2019 | 1,249,568 | 5,000,094 | 4,999,946 | 1,256,671 | 5,642,262 | 173,025 | 18,321,566 | ||||||||
| 2018 | 1,049,976 | 3,610,286 | 3,610,217 | 1,431,503 | 3,020,986 | 141,771 | 12,864,739 | |||||||||
| 2017 | 839,575 | 1,227,825 | 1,228,374 | 1,090,797 | 2,347,859 | 70,788 | 6,805,218 | |||||||||
| Inge G. Thulin(7) Former Executive Chairman of the Board | 2019 | 416,667 | 3,125,007 | 1,562,023 | 382,259 | 2,689,641 | 31,476 | 8,207,073 | ||||||||
| 2018 | 1,269,200 | 3,750,032 | 6,000,564 | 1,877,798 | — | 632,492 | 13,530,086 | |||||||||
| 2017 | 1,526,595 | 6,000,146 | 6,002,785 | 4,121,830 | 2,175,108 | 708,729 | 20,535,193 | |||||||||
| Nicholas C. Gangestad Senior Vice President and Chief Financial Officer | 2019 | 862,953 | 1,820,102 | 1,820,002 | 531,579 | 2,488,003 | 60,357 | 7,582,996 | ||||||||
| 2018 | 830,995 | 2,336,765 | 2,336,984 | 787,783 | 1,384,479 | 62,458 | 7,739,464 | |||||||||
| 2017 | 778,103 | 3,339,178 | 1,839,705 | 1,110,975 | 2,110,908 | 68,372 | 9,247,241 | |||||||||
| Ashish K. Khandpur(8) Executive Vice President, Transportation and Electronics Business Group | 2019 | 683,422 | 1,748,103 | 1,748,032 | 325,583 | 1,342,856 | 46,535 | 5,894,531 | ||||||||
| Julie L. Bushman(8) Executive Vice President, International Operations | 2019 | 800,502 | 1,165,471 | 1,165,366 | 507,681 | 1,982,778 | 29,170 | 5,650,968 | ||||||||
| 2018 | 792,795 | 1,456,748 | 1,456,856 | 649,048 | 945,379 | 38,525 | 5,339,351 | |||||||||
| Joaquin Delgado Former Executive Vice President, Consumer Business Group | 2019 | 368,892 | 582,839 | 582,700 | 256,137 | 1,155,625 | 1,788,819 | 4,735,012 | ||||||||
| 2018 | 694,090 | 1,134,260 | 1,134,284 | 532,836 | 700,842 | 101,075 | 4,297,387 | |||||||||
| 2017 | 680,383 | 1,134,224 | 1,134,687 | 561,067 | 1,174,715 | 99,466 | 4,784,542 | |||||||||
| Michael G. Vale Executive Vice President, Safety and Industrial Business Group | 2019 | 737,093 | 1,134,348 | 1,134,151 | 396,967 | 1,619,621 | 60,282 | 5,082,462 | ||||||||
| 2018 | 707,186 | 1,134,260 | 1,134,284 | 533,871 | 127,703 | 65,850 | 3,703,154 | |||||||||
| 2017 | 693,221 | 1,165,361 | 1,165,908 | 629,703 | 980,555 | 61,498 | 4,696,246 |
| (1) | The amounts in the Stock Awards column reflect the aggregate grant date fair value of such awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note |
| (2) | The amounts in the Option Awards column reflect the aggregate grant date fair value of such awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note |
| (3) | The amounts in the Non-Equity Incentive Plan Compensation column reflect the annual incentive compensation earned by each individual during |
| (4) |
Executive compensation Executive compensation tables
|
| 74 | 3M Company |
| 2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February | |
| (5) | See the All Other Compensation table below for details of the amounts reported for |
| (6) | Mr. Roman was appointed Chief Executive Officer, effective July 1, 2018. Prior to that, Mr. Roman served as the Company’s Executive Vice President and Chief Operating Officer from 2017 to his appointment as Chief Executive Officer. |
| (7) | Mr. Thulin served as the Company’s Executive Chairman from July 1, 2018, until his retirement on June 1, 2019. Prior to that, Mr. Thulin served as 3M’s Chairman of the Board, President and Chief Executive Officer from 2012 to his appointment as Executive Chairman in 2018. |
| (8) | No amounts are reported for |
2018 All Other Compensation Table2019 all other compensation table
| Name | 401(k) Company Contributions ($)(1) | VIP Excess Company Contributions ($)(2) | Executive Life Insurance ($)(3) | Financial Planning ($)(4) | Personal Aircraft Use ($)(5) | Security Systems/ Services ($)(6) | Personal Auto Use ($)(7) | Total ($) | ||||||||||
| Michael F. Roman | 4,950 | 50,883 | 15,480 | 12,000 | 56,743 | 1,715 | — | 141,771 | ||||||||||
| Inge G. Thulin | 5,441 | 65,367 | 286,115 | 13,500 | 249,739 | — | 12,330 | 632,492 | ||||||||||
| Nicholas C. Gangestad | 5,327 | 31,095 | 14,036 | 12,000 | — | — | — | 62,458 | ||||||||||
| Hak Cheol Shin | 5,044 | 33,883 | 100,494 | 13,500 | — | — | — | 152,921 | ||||||||||
| Julie L. Bushman | 6,187 | 10,245 | 8,194 | 13,899 | — | — | — | 38,525 | ||||||||||
| Frank R. Little | 7,613 | 12,566 | 57,293 | 13,500 | — | — | — | 90,972 | ||||||||||
| James L. Bauman | 5,583 | 24,660 | 14,380 | 12,000 | — | — | — | 56,623 | ||||||||||
| Name | 401(k) Company Contributions ($)(1) | VIP Excess Company Contributions ($)(2) | Executive Life Insurance ($)(3) | Financial Planning ($)(4) | Personal Aircraft Use ($)(5) | Security Systems/ Services ($)(6) | Other ($)(7) | Total ($) | ||||||||
| Michael F. Roman | 4,500 | 52,462 | 23,760 | 15,132 | 76,557 | 614 | — | 173,025 | ||||||||
| Inge G. Thulin | 4,800 | 13,176 | — | 13,500 | — | — | — | 31,476 | ||||||||
| Nicholas C. Gangestad | 5,394 | 25,983 | 15,480 | 13,500 | — | — | — | 60,357 | ||||||||
| Ashish K. Khandpur | 6,246 | 16,457 | 11,832 | 12,000 | — | — | — | 46,535 | ||||||||
| Julie L. Bushman | 6,300 | — | 8,194 | 14,676 | — | — | — | 29,170 | ||||||||
| Joaquin Delgado | 5,934 | 7,676 | 11,709 | 13,500 | — | — | 1,750,000 | 1,788,819 | ||||||||
| Michael G. Vale | 7,846 | 26,175 | 12,761 | 13,500 | — | — | — | 60,282 |
| (1) | The amounts shown reflect 3M matching and additional automatic contributions under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan. All eligible employees under this plan may receive 3M matching contributions on their pre-tax or Roth 401(k) contributions to the plan on up to five percent of their eligible pay. Eligible employees hired on or after January 1, 2009, also receive additional automatic 3M retirement income contributions equal to three percent of their eligible pay. |
| (2) | The amounts shown reflect 3M matching contributions under the VIP Excess Plan, a nonqualified defined contribution plan. Eligibility for this plan and its matching contributions is limited to employees whose compensation exceeds a limit established by Federal income tax laws for tax-qualified defined contribution plans. The plan permits eligible employees to save additional amounts from their current cash compensation beyond the contribution limits established by Federal tax laws, and to receive Company matching contributions similar to the matching contributions provided under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan. |
| (3) | The amounts shown reflect the amount of premiums paid by the Company on behalf of each individual with respect to their respective universal life or term life insurance policies obtained for them under the Executive Life Insurance Plan. |
| (4) | These amounts reflect fees for personal financial planning and tax return preparation services paid by the Company on behalf of each individual. |
| (5) | This amount reflects the aggregate incremental cost to the Company for Mr. Roman’s |
| (6) | This amount reflects the expenses incurred by 3M during |
| (7) |
|
Executive compensation Executive compensation tables
Grants of Plan-Based Awardsplan-based awards
The following table reflects the various equity and non-equity plan awards granted to the Named Executive Officers during 2018.2019. With the exception of the annual incentive compensation earned by such Named Executive Officers under the Executive Annual Incentive Plan, all of the awards referred to in this table were granted under the 2016 Long-Term Incentive Plan.
| 75 |
Name | Type of Grant(1) | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) | Estimated Future Payouts Under Equity Incentive Plan Awards(3) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#)(4) | Exercise or Base Price of Option Awards ($/Sh)(5) | Grant Date Fair Value of Stock and Option Awards ($)(6) | ||||||||||||||
| Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||
| Michael F. Roman | 18PS | 03/01/18 | 2,040 | 10,202 | 20,404 | 2,360,131 | ||||||||||||||||
| 18PS | 07/02/18 | 1,279 | 6,394 | 12,788 | 1,250,155 | |||||||||||||||||
| Option | 02/06/18 | 56,750 | 233.63 | 2,360,233 | ||||||||||||||||||
| Option | 07/02/18 | 36,284 | 195.52 | 1,249,984 | ||||||||||||||||||
| AIP | n/a | 1,510,024 | 14,990,682 | |||||||||||||||||||
| Inge G. Thulin | 18PS | 03/01/18 | 2,594 | 12,968 | 25,936 | 3,000,017 | ||||||||||||||||
| 18PS | 07/02/18 | 767 | 3,836 | 7,672 | 750,015 | |||||||||||||||||
| Option | 02/06/18 | 144,279 | 233.63 | 6,000,564 | ||||||||||||||||||
| AIP | n/a | 1,980,800 | 14,990,682 | |||||||||||||||||||
| Nicholas C. Gangestad | 18PS | 03/01/18 | 2,020 | 10,101 | 20,202 | 2,336,765 | ||||||||||||||||
| Option | 02/06/18 | 56,191 | 233.63 | 2,336,984 | ||||||||||||||||||
| AIP | n/a | 830,995 | 14,990,682 | |||||||||||||||||||
| Hak Cheol Shin | 18PS | 03/01/18 | 1,709 | 8,547 | 17,094 | 1,977,263 | ||||||||||||||||
| Option | 02/06/18 | 47,546 | 233.63 | 1,977,438 | ||||||||||||||||||
| AIP | n/a | 888,125 | 14,990,682 | |||||||||||||||||||
| Julie L. Bushman | 18PS | 03/01/18 | 1,259 | 6,297 | 12,594 | 1,456,748 | ||||||||||||||||
| Option | 02/06/18 | 35,029 | 233.63 | 1,456,856 | ||||||||||||||||||
| AIP | n/a | 673,985 | 14,990,682 | |||||||||||||||||||
| Frank R. Little | 18PS | 03/01/18 | 1,511 | 7,557 | 15,114 | 1,748,236 | ||||||||||||||||
| Option | 02/06/18 | 42,035 | 233.63 | 1,748,236 | ||||||||||||||||||
| AIP | n/a | 305,489 | 14,990,682 | |||||||||||||||||||
| James L. Bauman | 18PS | 03/01/18 | 1,226 | 6,131 | 12,262 | 1,418,346 | ||||||||||||||||
| Option | 02/06/18 | 34,103 | 233.63 | 1,418,344 | ||||||||||||||||||
| AIP | n/a | 640,286 | 14,990,682 | |||||||||||||||||||
2019 GRANTS OF PLAN-BASED AWARDS TABLE
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) | Estimated Future Payouts Under Equity Incentive Plan Awards(3) | All Other Stock Awards: Number of Shares of Stock | All Other Option Awards: Number of Securities Underlying | Exercise or Base Price of Option | Grant Date Fair Value of Stock and Option | |||||||||||||||||
| Name | Type of Grant(1) | Grant Date | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | or Units (#) | Options (#)(4) | Awards ($/Sh)(5) | Awards ($)(6) | |||||||||||
| Michael F. Roman | 19PS | 03/01/19 | 4,820 | 24,098 | 48,196 | 5,000,094 | ||||||||||||||||
| Option | 02/05/19 | 146,240 | 201.12 | 4,999,946 | ||||||||||||||||||
| AIP | n/a | 2,040,051 | 13,277,243 | |||||||||||||||||||
| Inge G. Thulin | 19PS | 03/01/19 | 3,012 | 15,061 | 30,122 | 3,125,007 | ||||||||||||||||
| Option | 02/05/19 | 45,686 | 201.12 | 1,562,023 | ||||||||||||||||||
| AIP | n/a | 1,500,000 | 13,277,243 | |||||||||||||||||||
| Nicholas C. Gangestad | 19PS | 03/01/19 | 1,754 | 8,772 | 17,544 | 1,820,102 | ||||||||||||||||
| Option | 02/05/19 | 53,232 | 201.12 | 1,820,002 | ||||||||||||||||||
| AIP | n/a | 862,953 | 13,277,243 | |||||||||||||||||||
| Ashish K. Khandpur | 19PS | 03/01/19 | 1,685 | 8,425 | 16,850 | 1,748,103 | ||||||||||||||||
| Option | 02/05/19 | 51,127 | 201.12 | 1,748,032 | ||||||||||||||||||
| AIP | n/a | 581,003 | 13,277,243 | |||||||||||||||||||
| Julie L. Bushman | 19PS | 03/01/19 | 1,123 | 5,617 | 11,234 | 1,165,471 | ||||||||||||||||
| Option | 02/05/19 | 34,085 | 201.12 | 1,165,366 | ||||||||||||||||||
| AIP | n/a | 680,538 | 13,277,243 | |||||||||||||||||||
| Joaquin Delgado | 19PS | 03/01/19 | 562 | 2,809 | 5,618 | 582,839 | ||||||||||||||||
| Option | 02/05/19 | 17,043 | 201.12 | 582,700 | ||||||||||||||||||
| AIP | n/a | 593,007 | 13,277,243 | |||||||||||||||||||
| Michael G. Vale | 19PS | 03/01/19 | 1,093 | 5,467 | 10,934 | 1,134,348 | ||||||||||||||||
| Option | 02/05/19 | 33,172 | 201.12 | 1,134,151 | ||||||||||||||||||
| AIP | n/a | 626,632 | 13,277,243 | |||||||||||||||||||
| (1) |
|
| (2) | The amounts shown as the Estimated Future Payouts Under Non-Equity Incentive Plan Awards reflect the target and maximum amounts that may be earned by each individual during |
Executive compensation Executive compensation tables
| (3) | The amounts shown as the Estimated Future Payouts Under Equity Incentive Plan Awards with respect to |
| (4) | The amounts shown as the All Other Option Awards reflect the number of shares of 3M common stock subject to nonqualified stock options granted to each individual during |
| 76 | 3M Company |
| (5) | The exercise price for all stock options granted under the Company’s 2016 Long-Term Incentive Plan is set at the closing price at which 3M common stock traded on the NYSE on the option grant date. |
| (6) | The amounts in the Grant Date Fair Value of Stock and Option Awards column were determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures, and, in the case of performance share awards, are based upon the probable outcome of the applicable performance conditions at the time of grant. Assumptions made in the calculation of these amounts are included in Note |
2019 outstanding equity awards at fiscal year-end table
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | ||||||||
| Michael F. Roman | 10,202(7) | 1,799,837 | ||||||||||||||
| 6,394(7) | 1,128,029 | |||||||||||||||
| 24,098(8) | 4,251,369 | |||||||||||||||
| 8,906 | 78.72 | 02/07/20 | ||||||||||||||
| 10,067 | 89.47 | 02/08/21 | ||||||||||||||
| 9,747 | 87.89 | 02/07/22 | ||||||||||||||
| 10,610 | 101.49 | 02/03/23 | ||||||||||||||
| 25,867 | 126.72 | 02/02/24 | ||||||||||||||
| 39,846 | 165.94 | 02/03/25 | ||||||||||||||
| 48,206 | 147.87 | 02/02/26 | ||||||||||||||
| 34,832 | 17,417(2) | 175.76 | 02/06/27 | |||||||||||||
| 18,916 | 37,834(3) | 233.63 | 02/04/28 | |||||||||||||
| 12,094 | 24,190(4) | 195.52 | 07/01/28 | |||||||||||||
| 146,240(5) | 201.12 | 02/04/29 | ||||||||||||||
| Inge G. Thulin | 12,968(7) | 2,287,815 | ||||||||||||||
| 3,836(7) | 676,747 | |||||||||||||||
| 7,531(8) | 1,328,619 | |||||||||||||||
| 204,950 | 101.49 | 02/03/23 | ||||||||||||||
| 206,168 | 126.72 | 02/02/24 | ||||||||||||||
| 229,364 | 165.94 | 02/03/25 | ||||||||||||||
| 245,116 | 147.87 | 02/02/26 | ||||||||||||||
| 170,219 | 85,110(2) | 175.76 | 02/06/27 | |||||||||||||
| 48,092 | 96,187(3) | 233.63 | 02/04/28 | |||||||||||||
| — | 45,686(5) | 201.12 | 02/04/29 | |||||||||||||
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | ||||||||
| Nicholas C. Gangestad | 10,101(7) | 1,782,018 | ||||||||||||||
| 8,772(8) | 1,547,556 | |||||||||||||||
| 3,092 | 89.47 | 02/08/21 | ||||||||||||||
| 6,219 | 87.89 | 02/07/22 | ||||||||||||||
| 6,505 | 101.49 | 02/03/23 | ||||||||||||||
| 9,592 | 126.72 | 02/02/24 | ||||||||||||||
| 61,512 | 165.94 | 02/03/25 | ||||||||||||||
| 69,611 | 147.87 | 02/02/26 | ||||||||||||||
| 52,167 | 26,085(2) | 175.76 | 02/06/27 | |||||||||||||
| 18,730 | 37,461(3) | 233.63 | 02/04/28 | |||||||||||||
| 53,232(5) | 201.12 | 02/04/29 | ||||||||||||||
| 6,221(6) | 1,097,509 | |||||||||||||||
| Ashish K. Khandpur | 4,903(7) | 864,987 | ||||||||||||||
| 8,425(8) | 1,486,339 | |||||||||||||||
| 3,605 | 89.47 | 02/08/21 | ||||||||||||||
| 5,760 | 87.89 | 02/07/22 | ||||||||||||||
| 6,505 | 101.49 | 02/03/23 | ||||||||||||||
| 7,838 | 126.72 | 02/02/24 | ||||||||||||||
| 25,445 | 165.94 | 02/03/25 | ||||||||||||||
| 29,392 | 147.87 | 02/02/26 | ||||||||||||||
| 19,868 | 9,935(2) | 175.76 | 02/06/27 | |||||||||||||
| 9,090 | 18,183(3) | 233.63 | 02/04/28 | |||||||||||||
| 51,127(5) | 201.12 | 02/04/29 | ||||||||||||||
| Julie L. Bushman | 6,297(7) | 1,110,917 | ||||||||||||||
| 5,617(8) | 990,951 | |||||||||||||||
| 9,000 | 89.47 | 02/08/21 | ||||||||||||||
| 30,875 | 87.89 | 02/07/22 | ||||||||||||||
| 24,650 | 101.49 | 02/03/23 | ||||||||||||||
| 40,535 | 126.72 | 02/02/24 | ||||||||||||||
| 37,514 | 165.94 | 02/03/25 | ||||||||||||||
| 41,181 | 147.87 | 02/02/26 | ||||||||||||||
| 26,211 | 13,107(2) | 175.76 | 02/06/27 | |||||||||||||
| 11,676 | 23,353(3) | 233.63 | 02/04/28 | |||||||||||||
| 34,085(5) | 201.12 | 02/04/29 | ||||||||||||||
Executive compensation Executive compensation tables
2018 Outstanding Equity Awards at Fiscal Year-End Table
| Option Awards | Stock Awards | ||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | |||||||||||
| Michael F. Roman | 12,934 | (8) | 2,464,444 | ||||||||||||||||
| 10,202 | (9) | 1,943,889 | |||||||||||||||||
| 6,394 | (9) | 1,218,313 | |||||||||||||||||
| 4,944 | 54.11 | 02/08/19 | |||||||||||||||||
| 8,906 | 78.72 | 02/07/20 | |||||||||||||||||
| 10,067 | 89.47 | 02/08/21 | |||||||||||||||||
| 9,747 | 87.89 | 02/07/22 | |||||||||||||||||
| 10,610 | 101.49 | 02/03/23 | |||||||||||||||||
| 25,867 | 126.72 | 02/02/24 | |||||||||||||||||
| 39,846 | 165.94 | 02/03/25 | |||||||||||||||||
| 32,137 | 16,069 | (2) | 147.87 | 02/02/26 | |||||||||||||||
| 17,416 | 34,833 | (3) | 175.76 | 02/06/27 | |||||||||||||||
| 56,750 | (4) | 233.63 | 02/04/28 | ||||||||||||||||
| 36,284 | (5) | 195.52 | 07/01/28 | ||||||||||||||||
| 12,646 | (6) | 2,409,569 | |||||||||||||||||
| Inge G. Thulin | 63,206 | (8) | 12,043,271 | ||||||||||||||||
| 12,968 | (9) | 2,470,923 | |||||||||||||||||
| 3,836 | (9) | 730,911 | |||||||||||||||||
| 50,166 | 78.72 | 02/07/20 | |||||||||||||||||
| 43,560 | 89.47 | 02/08/21 | |||||||||||||||||
| 204,804 | 87.89 | 02/07/22 | |||||||||||||||||
| 204,950 | 101.49 | 02/03/23 | |||||||||||||||||
| 206,168 | 126.72 | 02/02/24 | |||||||||||||||||
| 229,364 | 165.94 | 02/03/25 | |||||||||||||||||
| 163,410 | 81,706 | (2) | 147.87 | 02/02/26 | |||||||||||||||
| 85,109 | 170,220 | (3) | 175.76 | 02/06/27 | |||||||||||||||
| 144,279 | (4) | 233.63 | 02/04/28 | ||||||||||||||||
| 3M Company |
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | ||||||||
| Joaquin Delgado | 4,903(7) | 864,987 | ||||||||||||||
| 1,405(8) | 247,870 | |||||||||||||||
| 36,126 | 87.89 | 02/07/22 | ||||||||||||||
| 35,490 | 101.49 | 02/03/23 | ||||||||||||||
| 32,428 | 126.72 | 02/02/24 | ||||||||||||||
| 48,489 | 165.94 | 02/03/25 | ||||||||||||||
| 57,136 | 147.87 | 02/02/26 | ||||||||||||||
| 32,175 | 16,089(2) | 175.76 | 02/06/27 | |||||||||||||
| 9,090 | 18,183(3) | 233.63 | 02/04/28 | |||||||||||||
| 17,043(5) | 201.12 | 02/04/29 | ||||||||||||||
| Michael G. Vale | 4,903(7) | 864,987 | ||||||||||||||
| 5,467(8) | 964,488 | |||||||||||||||
| 7,812 | 89.47 | 02/08/21 | ||||||||||||||
| 30,875 | 87.89 | 02/07/22 | ||||||||||||||
| 43,705 | 101.49 | 02/03/23 | ||||||||||||||
| 31,559 | 126.72 | 02/02/24 | ||||||||||||||
| 49,804 | 165.94 | 02/03/25 | ||||||||||||||
| 58,684 | 147.87 | 02/02/26 | ||||||||||||||
| 33,061 | 16,531(2) | 175.76 | 02/06/27 | |||||||||||||
| 9,090 | 18,183(3) | 233.63 | 02/04/28 | |||||||||||||
| 33,172(5) | 201.12 | 02/04/29 | ||||||||||||||
Executive compensation Executive compensation tables
| Option Awards | Stock Awards | ||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | |||||||||||
| Nicholas C. | 19,372 | (8) | 3,691,141 | ||||||||||||||||
| Gangestad | 10,101 | (9) | 1,924,645 | ||||||||||||||||
| 1,681 | 78.72 | 02/07/20 | |||||||||||||||||
| 3,092 | 89.47 | 02/08/21 | |||||||||||||||||
| 6,219 | 87.89 | 02/07/22 | |||||||||||||||||
| 6,505 | 101.49 | 02/03/23 | |||||||||||||||||
| 9,592 | 126.72 | 02/02/24 | |||||||||||||||||
| 61,512 | 165.94 | 02/03/25 | |||||||||||||||||
| 46,407 | 23,204 | (2) | 147.87 | 02/02/26 | |||||||||||||||
| 26,083 | 52,169 | (3) | 175.76 | 02/06/27 | |||||||||||||||
| 56,191 | (4) | 233.63 | 02/04/28 | ||||||||||||||||
| 6,221 | (7) | 1,185,349 | |||||||||||||||||
| Hak Cheol Shin | 12,606 | (8) | 2,401,947 | ||||||||||||||||
| 8,547 | (9) | 1,628,545 | |||||||||||||||||
| 57,587 | 78.72 | 02/07/20 | |||||||||||||||||
| 49,595 | 89.47 | 02/08/21 | |||||||||||||||||
| 46,314 | 87.89 | 02/07/22 | |||||||||||||||||
| 38,450 | 101.49 | 02/03/23 | |||||||||||||||||
| 32,428 | 126.72 | 02/02/24 | |||||||||||||||||
| 39,846 | 165.94 | 02/03/25 | |||||||||||||||||
| 31,298 | 15,650 | (2) | 147.87 | 02/02/26 | |||||||||||||||
| 16,973 | 33,948 | (3) | 175.76 | 02/06/27 | |||||||||||||||
| 47,546 | (4) | 233.63 | 02/04/28 | ||||||||||||||||
| 12,646 | (6) | 2,409,569 | |||||||||||||||||
| Julie L. Bushman | 9,734 | (8) | 1,854,716 | ||||||||||||||||
| 6,297 | (9) | 1,199,830 | |||||||||||||||||
| 13,172 | 78.72 | 02/07/20 | |||||||||||||||||
| 9,000 | 89.47 | 02/08/21 | |||||||||||||||||
| 30,875 | 87.89 | 02/07/22 | |||||||||||||||||
| 24,650 | 101.49 | 02/03/23 | |||||||||||||||||
| 40,535 | 126.72 | 02/02/24 | |||||||||||||||||
| 37,514 | 165.94 | 02/03/25 | |||||||||||||||||
| 27,453 | 13,728 | (2) | 147.87 | 02/02/26 | |||||||||||||||
| 13,105 | 26,213 | (3) | 175.76 | 02/06/27 | |||||||||||||||
| 35,029 | (4) | 233.63 | 02/04/28 | ||||||||||||||||
| 12,646 | (6) | 2,409,569 | |||||||||||||||||
Executive compensation Executive compensation tables
| Option Awards | Stock Awards | |||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | ||||||||||
| Frank R. Little | 15,346 | (8) | 2,924,027 | |||||||||||||||
| 3,779 | (9) | 720,051 | ||||||||||||||||
| 2,146 | 89.47 | 02/08/21 | ||||||||||||||||
| 8,332 | 87.89 | 02/07/22 | ||||||||||||||||
| 9,795 | 101.49 | 02/03/23 | ||||||||||||||||
| 30,690 | 126.72 | 02/02/24 | ||||||||||||||||
| 38,780 | 165.94 | 02/03/25 | ||||||||||||||||
| 30,459 | 15,230 | (2) | 147.87 | 02/02/26 | ||||||||||||||
| 20,663 | 41,327 | (3) | 175.76 | 02/06/27 | ||||||||||||||
| 42,035 | (4) | 233.63 | 02/04/28 | |||||||||||||||
| James L. Bauman | 11,948 | (8) | 2,276,572 | |||||||||||||||
| 6,131 | (9) | 1,168,201 | ||||||||||||||||
| 16,065 | 78.72 | 02/07/20 | ||||||||||||||||
| 10,922 | 89.47 | 02/08/21 | ||||||||||||||||
| 8,996 | 87.89 | 02/07/22 | ||||||||||||||||
| 35,105 | 101.49 | 02/03/23 | ||||||||||||||||
| 23,095 | 126.72 | 02/02/24 | ||||||||||||||||
| 32,718 | 165.94 | 02/03/25 | ||||||||||||||||
| 28,785 | 14,393 | (2) | 147.87 | 02/02/26 | ||||||||||||||
| 16,087 | 32,177 | (3) | 175.76 | 02/06/27 | ||||||||||||||
| 34,103 | (4) | 233.63 | 02/04/28 | |||||||||||||||
FOOTNOTES TO 20182019 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
| (1) | The market value of performance shares or RSUs that have not vested was determined by multiplying the closing price of a share of 3M common stock on the NYSE for December 31, |
| (2) | These stock options vested in full on February |
| (3) | These stock options vested or will vest in installments of one-half on February 6, |
| (4) | These stock options will vest in installments of one-half on July 1, 2020, and July 1, 2021. |
| (5) | These stock options vested or will vest in installments of one-third on each of February |
| |
| (6) |
|
These restricted stock units will vest in installments of one-half on December 1, 2020, and December 1, 2022, provided that the holder remains in employment with 3M through such date. | |
| |
The shares of 3M common stock to be delivered as a result of the Company’s performance over the three-year performance period ending December 31, 2020, will not vest until December 31, 2020. Under the terms of the awards, these shares of 3M common stock will be delivered no later than March 15, 2021, unless deferred by the executive. In accordance with the Securities and Exchange Commission’s regulations, the number of shares and payout value for these performance shares reflect the target payout under the formula for this grant since the Company’s performance during the first two years of the three-year performance period exceeded the threshold levels for this grant. | |
| (8) | The shares of 3M common stock to be delivered as a result of the Company’s performance over the three-year performance period ending December 31, 2021, will not vest until December 31, 2021. Under the terms of the awards, these shares of 3M common stock will be delivered no later than March 15, 2022, unless deferred by the executive. In accordance with the Securities and Exchange Commission’s regulations, the number of shares and payout value for these performance shares reflect the target payout under the formula for this grant since the Company’s performance during the first year of the three-year performance period has exceeded the threshold levels for this grant. |
Executive compensation2019 option exercises and stock vested table Executive compensation tables
2018 Option Exercises and Stock Vested Table
| Option Exercises and Stock Vested | ||||||||||
| Option Awards | Stock Awards | |||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | ||||||
| Michael F. Roman | 6,604 | (3) | 1,119,087 | 7,624 | (8) | 1,452,714 | ||||
| Inge G. Thulin | 59,584 | (4) | 11,756,007 | 38,769 | (9) | 7,386,993 | ||||
| Nicholas C. Gangestad | 1,681 | (5) | 287,518 | 11,010 | (10) | 2,097,880 | ||||
| Hak Cheol Shin | 58,772 | (6) | 11,426,488 | 7,425 | (11) | 1,414,780 | ||||
| Julie L. Bushman | — | — | 6,513 | (12) | 1,241,033 | |||||
| Frank R. Little | — | — | 7,226 | (13) | 1,376,881 | |||||
| James L. Bauman | 11,660 | (7) | 2,255,927 | 6,829 | (14) | 1,301,180 | ||||
| Option Exercises and Stock Vested | ||||||||
| Option Awards | Stock Awards | |||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | ||||
| Michael F. Roman | 4,944(3) | 719,550 | 21,052(10) | 3,629,898 | ||||
| Inge G. Thulin | 298,530(4) | 26,270,916 | 41,081(11) | 7,247,510 | ||||
| Nicholas C. Gangestad | 1,681(5) | 205,819 | 12,591(12) | 2,221,304 | ||||
| Ashish K. Khandpur | 3,362(6) | 320,995 | 4,795(13) | 845,934 | ||||
| Julie L. Bushman | 13,172(7) | 1,592,596 | 18,972(14) | 3,262,944 | ||||
| Joaquin Delgado | 63,560(8) | 6,241,164 | 7,766(15) | 1,370,078 | ||||
| Michael G. Vale | 8,906(9) | 1,073,838 | 20,625(16) | 3,554,566 | ||||
FOOTNOTES TO 20182019 OPTION EXERCISES AND STOCK VESTED TABLE
| (1) | The amounts shown as Value Realized on Exercise were determined by multiplying the number of shares acquired on exercise by the difference between the closing price of a share of 3M common stock on the NYSE for the exercise date and the per share exercise price of the options. |
| (2) | The amounts shown as Value Realized on Vesting were determined by multiplying the number of shares acquired on vesting by the closing price of a share of 3M common stock on the NYSE for the vesting date. |
| (3) | The stock options exercised by Mr. Roman |
| |
| (4) | The stock options exercised by Mr. Thulin were granted on February 9, 2010, February 8, 2011 and February 7, 2012, and had an exercise price between $78.72 and $89.47 per share. |
| (5) | The stock options exercised by Mr. Gangestad were granted on February 9, 2010, and had an exercise price of $78.72 per share. |
| (6) | The stock options exercised by Mr. |
| (7) | The stock options exercised by Ms. Bushman were granted on February 9, 2010, and had an exercise price of $78.72 per share. |
| (8) | The stock options exercised by Dr. Delgado were granted on February 9, 2010, and February 8, 2011, and had an exercise price between $78.72 and $89.47 per share. |
| (9) | The stock options exercised by Mr. |
| (10) | Reflects the number of shares earned by Mr. Roman upon the vesting of restricted stock units and performance shares granted to him under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. |
| (11) | Reflects the number of shares earned by Mr. Thulin upon the vesting of performance shares granted to him under the |
| (12) | Reflects the number of shares earned by Mr. Gangestad upon the vesting of performance shares granted to him under the |
| (13) | Reflects the number of shares earned by Mr. |
| (14) | Reflects the number of shares earned by Ms. Bushman upon the vesting of restricted stock units and performance shares granted to her under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. |
| (15) | Reflects the number of shares earned by |
| (16) | Reflects the number of shares earned by Mr. |
Executive compensation Executive compensation tableswere attributable to restricted stock units granted on December 1, 2014, and 7,979 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. Mr. Vale previously elected to defer receipt of all of the shares issuable pursuant to his 2017 performance shares until following his termination of employment.
The following table shows the present value of the accumulated benefits payable to each of the Named Executive Officers, as well as the number of years of service credited to each individual, under each of the Company’s defined benefit pension plans determined using the same interest rate and mortality assumptions as those used for financial statement reporting purposes. See Note 13 to the Company’s audited financial statements for the fiscal year ended December 31, 2018,2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 7, 2019.6, 2020.
2018 PENSION BENEFITS TABLE | |||||||||
| Name | Plan Name | Number of Years Credited Service (#) | Present Value Of Accumulated Benefits ($) | Payments During Last Fiscal Year ($) | |||||
| Michael F. Roman | Employee Retirement Income Plan | 30 | 1,479,859 | 0 | |||||
| Nonqualified Pension Plan | 30 | 8,999,288 | 0 | ||||||
| Inge G. Thulin | Employee Retirement Income Plan | 39 | 1,913,818 | * | 0 | ||||
| Nonqualified Pension Plan | 39 | 26,167,089 | 0 | ||||||
| Nicholas C. Gangestad | Employee Retirement Income Plan | 34 | 1,275,197 | 0 | |||||
| Nonqualified Pension Plan | 34 | 6,311,124 | 0 | ||||||
| Hak Cheol Shin | Employee Retirement Income Plan | 34 | 1,804,134 | 0 | |||||
| Nonqualified Pension Plan | 34 | 10,277,615 | 0 | ||||||
| Julie L. Bushman | Employee Retirement Income Plan | 35 | 1,558,325 | 0 | |||||
| Nonqualified Pension Plan | 35 | 6,633,490 | 0 | ||||||
| Frank R. Little | Employee Retirement Income Plan | 16 | 720,598 | 0 | |||||
| Nonqualified Pension Plan | 16 | 3,008,598 | 0 | ||||||
| James L. Bauman | Employee Retirement Income Plan | 37 | 1,785,105 | 0 | |||||
| Nonqualified Pension Plan | 37 | 6,434,862 | 0 | ||||||
2019 PENSION BENEFITS TABLE
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefits ($) | Payments During Last Fiscal Year ($) | ||||
| Michael F. Roman | Employee Retirement Income Plan | 31 | 1,839,130 | — | ||||
| Nonqualified Pension Plan | 31 | 14,282,279 | — | |||||
| Inge G. Thulin | Employee Retirement Income Plan | 40 | 2,019,001* | 71,293 | ||||
| Nonqualified Pension Plan | 40 | — | 28,680,254 | |||||
| Nicholas C. Gangestad | Employee Retirement Income Plan | 35 | 1,683,480 | — | ||||
| Nonqualified Pension Plan | 35 | 8,390,844 | — | |||||
| Ashish K. Khandpur | Employee Retirement Income Plan | 25 | 1,095,946 | — | ||||
| Nonqualified Pension Plan | 25 | 3,427,582 | — | |||||
| Julie L. Bushman | Employee Retirement Income Plan | 36 | 1,942,755 | — | ||||
| Nonqualified Pension Plan | 36 | 8,231,838 | — | |||||
| Joaquin Delgado | Employee Retirement Income Plan | 32 | 1,710,547** | 51,145 | ||||
| Nonqualified Pension Plan | 32 | 6,676,594 | — | |||||
| Michael G. Vale | Employee Retirement Income Plan | 27 | 1,234,502 | — | ||||
| Nonqualified Pension Plan | 27 | 4,683,307 | — |
| * |
|
| ** | Dr. Delgado commenced payment of his benefits under the specified plan during 2019. As a result, the amounts shown were determined based on his final benefit amount |
The Employee Retirement Income Plan (“ERIP”) is a tax-qualified defined benefit pension plan maintained by 3M for its eligible employees in the United States. Effective January 1, 2001, the Company amended the ERIP to include a pension equity formula for (1) employees hired or rehired on or after January 1, 2001, and (2) employees who voluntarily elected the pension equity formula during the one-time choice election period in 2001. The ERIP was closed to new participants effective January 1, 2009, meaning that employees hired or rehired on or after January 1, 2009, do not participate in the plan. Of the Named Executive Officers, Mr. Roman, Mr. Thulin, Mr. Gangestad, Mr. Shin,Khandpur, Ms. Bushman and Mr. BaumanDr. Delgado participate under the non-pension equity formula of the ERIP (the Portfolio I Plan), while Mr. LittleVale participates under the pension equity formula of the ERIP (the Portfolio II Plan). Retirement benefits under the ERIP are based on an employee’s years of service and average annual earnings during the employee’s four highest-paid consecutive years of service. As applied to the Named Executive Officers, earnings for purposes of the ERIP include base salary and target annual incentive compensation. All benefits earned under the ERIP by the Named Executive Officers will be payable in the form of life annuities, unless an individual elects at the time their employment ends to receive the entire amount of his or her earned pension benefits in the form of a single lump-sum cash payment.
| 2020 Proxy Statement | 81 |
Under the Portfolio I Plan, employees earn annual benefits payable at retirement generally equal to 1.15 percent of their high-four average annual earnings multiplied by their years of service plus 0.35 percent of their high-four average annual earnings in excess of a Social Security breakpoint multiplied by their years of service (up to a maximum of 35 years). The Social Security breakpoint is an average of the Social Security taxable wage bases for each of the 35 years ending with the year each employee qualifies for receiving unreduced Social Security retirement benefits. Under the Portfolio I Plan, an employee may retire with an unreduced pension at age 60 (61 or 62 for employees born after 1942 and 1959, respectively). If the employee’s age and service at the time of retirement total at least 90 (91 or 92 for employees born after 1942 and 1959, respectively) the employee also would receive a Social Security bridge payment until age 62. Mr. Thulin is eligible to retire withcurrently receives unreduced retirement benefits, and Dr. Delgado currently receives reduced retirement benefits. As of
Executive compensation Executive compensation tables
March 13, 2019,2020, each of Mr. Roman, Mr. Gangestad, and Ms. Bushman and Mr. Bauman is eligible to retire with reduced early retirement benefits, with the reduction being equal to 5 percent of the pension otherwise payable for each year that such executive retires prior to age 61 (age 62 for Mr. Gangestad and Ms. Bushman).
Under the Portfolio II Plan, employees earn pension credits (from 3 percent to 12 percent) for each year of employment based on their age and accumulated years of service under the plan. Once their employment ends, these accumulated pension credits are multiplied by their high-four average annual earnings and added to an amount determined by multiplying one-half of these accumulated pension credits by their high-four average annual earnings in excess of a Social Security integration level (70 percent of the Social Security taxable wage base in the year employment ends). The sum of these two amounts is then converted into an annuity payable over the lifetime of the employee using fixed conversion factors. The Portfolio II Plan does not provide any subsidies for early retirement.
As a tax-qualified plan, the ERIP is subject to a variety of limits that apply to both the amount of any employee’s earnings that may be considered when determining the benefits earned under the plan as well as the maximum amount of benefits that any employee may earn. The Nonqualified Pension Plan is designed to provide additional benefits to employees, including the Named Executive Officers, affected by these limits. The amount of benefits earned under this Nonqualified Pension Plan generally equals the amount of benefits an employee was not able to earn under the ERIP as a result of the limits imposed by Federal tax laws. The benefits earned under this Nonqualified Pension Plan are generally paid in the form of a single lump-sum cash payment following the termination of their employment (subject to any applicable delay under Federal tax laws). Current employees were given a one-time opportunity during 2008 to elect to receive their benefits earned under this Nonqualified Pension Plan in the form of a life annuity following their retirement, and Mr. Shinnone of the Named Executive Officers elected to receive histheir benefits in the form of a life annuity.
Nonqualified Deferred Compensationdeferred compensation
The following table reflects the participation during 20182019 by the Named Executive Officers in three nonqualified deferred compensation plans offered by the Company. The Deferred Compensation Excess Plan allows eligible employees to defer for a number of years or until retirement from the Company the receipt of a portion of their base salary and annual incentive compensation. The Performance Awards Deferred Compensation Plan allows eligible employees to defer for a number of years or until retirement from the Company the payout of their performance share or performance unit awards under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. The VIP Excess Plan allows eligible employees to defer until retirement from the Company the receipt of a portion of their base salary and annual incentive compensation. All three plans generally allow the eligible employees to elect to receive payment of their account balances in the form of either a single lump sum payment or in up to ten annual installments. With the exception of deferrals of performance shares under the Performance Awards Deferred Compensation Plan, earnings are credited to the amounts deferred under all three plans based on the returns paid on the investment funds available to participants in 3M’s qualified 401(k) plan or a fixed rate of return based on corporate bond yields (as selected by each participant). Earnings are credited to the deferrals of performance shares under the Performance Awards Deferred Compensation Plan based on the return on shares of 3M common stock, including reinvested dividends.
Executive compensation Executive compensation tables
2018 NONQUALIFIED DEFERRED COMPENSATION TABLE | |||||||||||
| Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(4) | ||||||
| Michael F. Roman | |||||||||||
| VIP Excess Plan | 195,577 | 43,217 | 22,556 | — | 886,828 | ||||||
| Deferred Compensation Excess Plan | — | — | 6,337 | — | 222,591 | ||||||
| Performance Awards Deferred | 1,347,571 | — | (484,326 | ) | — | 2,429,047 | |||||
| Compensation Plan | |||||||||||
| Inge G. Thulin | |||||||||||
| VIP Excess Plan | 520,603 | 115,858 | 89,402 | — | 3,302,111 | ||||||
| Deferred Compensation Excess Plan | 3,588,473 | — | 198,875 | — | 7,818,224 | ||||||
| Performance Awards Deferred | 7,757,755 | — | (6,828,018 | ) | — | 33,833,336 | |||||
| Compensation Plan | |||||||||||
| Nicholas C. Gangestad | |||||||||||
| VIP Excess Plan | 175,697 | 38,367 | (47,965 | ) | — | 707,396 | |||||
| Deferred Compensation Excess Plan | — | — | — | — | — | ||||||
| Performance Awards Deferred | 520,259 | — | (553,575 | ) | — | 2,739,030 | |||||
| Compensation Plan | |||||||||||
| Hak Cheol Shin | |||||||||||
| VIP Excess Plan | 182,497 | 40,181 | (92,344 | ) | — | 2,046,137 | |||||
| Deferred Compensation Excess Plan | — | — | — | — | — | ||||||
| Performance Awards Deferred | — | — | — | — | — | ||||||
| Compensation Plan | |||||||||||
| Julie L. Bushman | |||||||||||
| VIP Excess Plan | 46,516 | 14,952 | (9,739 | ) | — | 166,975 | |||||
| Deferred Compensation Excess Plan | — | — | — | — | — | ||||||
| Performance Awards Deferred | — | — | — | — | — | ||||||
| Compensation Plan | |||||||||||
| Frank R. Little | |||||||||||
| VIP Excess Plan | 127,021 | 36,043 | 36,017 | — | 1,300,940 | ||||||
| Deferred Compensation Excess Plan | 935,623 | — | 79,098 | — | 2,949,961 | ||||||
| Performance Awards Deferred | — | — | 19,291 | — | 677,650 | ||||||
| Compensation Plan | |||||||||||
| James L. Bauman | |||||||||||
| VIP Excess Plan | 142,395 | 30,618 | 21,941 | — | 835,941 | ||||||
| Deferred Compensation Excess Plan | 825,456 | — | 65,347 | — | 2,492,432 | ||||||
| Performance Awards Deferred | 1,106,652 | — | (414,036 | ) | — | 2,074,859 | |||||
| Compensation Plan | |||||||||||
FOOTNOTES TO 20182019 NONQUALIFIED DEFERRED COMPENSATION TABLE
| Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(4) | |||||||
| Michael F. Roman | ||||||||||||
| VIP Excess Plan | 251,645 | 56,395 | 41,029 | — | 1,235,898 | |||||||
| Deferred Compensation Excess Plan | — | — | 8,458 | — | 231,049 | |||||||
| Performance Awards Deferred Compensation Plan | 1,484,748 | — | (241,480 | ) | — | 3,672,315 | ||||||
| Inge G. Thulin | ||||||||||||
| VIP Excess Plan | 210,447 | 46,825 | 133,424 | — | 3,692,807 | |||||||
| Deferred Compensation Excess Plan | 938,899 | — | 326,793 | — | 9,083,916 | |||||||
| Performance Awards Deferred Compensation Plan | 7,569,122 | — | (2,144,679 | ) | — | 39,257,779 | ||||||
| Nicholas C. Gangestad | ||||||||||||
| VIP Excess Plan | 146,074 | 31,747 | 173,732 | — | 1,058,950 | |||||||
| Deferred Compensation Excess Plan | — | — | — | — | — | |||||||
| Performance Awards Deferred Compensation Plan | 1,072,070 | — | (216,321 | ) | — | 3,594,778 | ||||||
| Ashish K. Khandpur | ||||||||||||
| VIP Excess Plan | 131,636 | 27,647 | 130,840 | — | 735,378 | |||||||
| Deferred Compensation Excess Plan | — | — | — | — | — | |||||||
| Performance Awards Deferred Compensation Plan | 900,125 | — | (114,202 | ) | — | 1,502,658 | ||||||
| Julie L. Bushman | ||||||||||||
| VIP Excess Plan | 35,773 | 10,256 | 36,698 | — | 249,702 | |||||||
| Deferred Compensation Excess Plan | — | — | — | — | — | |||||||
| Performance Awards Deferred Compensation Plan | — | — | — | — | — | |||||||
| Joaquin Delgado | ||||||||||||
| VIP Excess Plan | 53,176 | 10,305 | 257,599 | — | 1,468,136 | |||||||
| Deferred Compensation Excess Plan | — | — | 35,594 | — | 193,048 | |||||||
| Performance Awards Deferred Compensation Plan | — | — | — | — | — | |||||||
| Michael G. Vale | ||||||||||||
| VIP Excess Plan | 108,096 | 30,283 | 109,741 | — | 1,295,387 | |||||||
| Deferred Compensation Excess Plan | — | — | 2,157 | — | 23,205 | |||||||
| Performance Awards Deferred Compensation Plan | 1,807,439 | — | (296,693 | ) | — | 4,531,829 | ||||||
FOOTNOTES TO 2019 NONQUALIFIED DEFERRED COMPENSATION TABLE
| (1) | With the exception of the amounts contributed by Mr. Roman, Mr. Thulin, Mr. Gangestad, Mr. Khandpur, and Mr. |
| |
| (2) | The amounts shown reflect 3M matching contributions under the VIP Excess Plan, a nonqualified defined contribution plan. Eligibility for this plan and its matching contributions is limited to employees whose compensation exceeds a limit established by Federal income tax laws for tax-qualified defined contribution plans. The plan permits eligible employees to save additional amounts from their current cash compensation beyond the contribution limits established by Federal tax laws, and to receive |
| 2020 Proxy Statement | 83 |
Company matching contributions similar to the matching contributions provided under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan. With the exception of 3M matching contributions to Mr. Khandpur’s VIP Excess Plan account in respect of his 2018 annual incentive payment (paid in 2019), all amounts contributed by the Company on behalf of these individuals during 2019 are included in the “All Other Compensation” column of the Summary Compensation Table. The Summary Compensation Table does not reflect any portion of the 3M matching contributions made to Mr. Khandpur’s VIP Excess Plan account in respect of his 2018 annual incentive payment because those amounts were earned prior to the first year he became a Named Executive Officer.
| (3) | None of these amounts are included in the Summary Compensation Table as compensation earned in |
| (4) | Includes the following amounts that were reported as compensation for |
Executive compensationPotential payments upon termination or change in control Executive compensation tables
Potential Payments Upon Termination or Change in Control
As reflected in the Compensation Discussion and Analysis portion of this Proxy Statement, 3M has no employment agreements with any of the Named Executive Officers nor does it have any severance or change in control plans or arrangements that would provide severance benefits to any of the Named Executive Officers solely in the event of the termination of their employment or a change in control of the Company. We also do not have any agreements that would provide automatic “single-trigger” accelerated vesting of equity compensation or excise tax gross-up payments to any of our Named Executive Officers in the event of a change in control of the Company. However,
Effective February 3, 2020, 3M adopted a new severance plan to provide separation benefits to eligible U.S. employees (including the Named Executive Officers) who incur a qualifying termination. In addition, certain of the Company’s executive compensation and benefit plans provide all participants (including the Named Executive Officers) with certain rights or the right to receive payments in the event of the termination of their employment or upon a change in control of the Company. The terms applicable to these potential rights or payments in various situations are described below. Payments or benefits under other plans and arrangements that are generally provided on a non-discriminatory basis to all similarly situated employees of the Company upon the termination of their employment are not described, including (a) accrued base salary; (b) annual incentive earned with respect to completed performance periods; (c) retiree welfare benefits provided to substantially all of the Company’s U.S. employees, including retiree medical benefits; (d) distribution of vested account balances under the Company’s qualified 401(k) plan; (e) accrued pension benefits under the Company’s defined benefit pension plans payable following an employee’s retirement or other termination of employment (the amounts of these benefits earned by the Named Executive Officers are reported in the 20182019 Pension Benefits Table); (f) life insurance benefits generally available to all salaried employees; and (g) distribution of account balances under the Company’s nonqualified deferred compensation plans (the account balances of the Named Executive Officers are reported in the 20182019 Nonqualified Deferred Compensation Table).
Rights and Payments Upon Retirementpayments upon retirement
Following retirement (as described below), the Named Executive Officers are entitled to receive:
| continued vesting of stock options previously granted under the Company’s stock plans, and the opportunity to exercise vested stock options previously granted under such plans during the remainder of the original term (up to 10 years) of such options; | |
| • | an annual incentive plan payment for the year of retirement, prorated based on the number of days worked prior to the date of separation; |
| • | for those Named Executive Officers initially appointed to a 3M executive position before January 1, 2006, or after December 31, 2017, payment for all previously granted performance shares upon completion of the respective three-year performance period (prorated to reflect the portion of the year worked only with respect to the performance shares granted in the year of retirement) and based on actual performance; and |
| • | for those Named Executive Officers initially appointed to a 3M executive position on or after January 1, 2006, and on or before December 31, 2017, payment for all previously granted performance shares upon completion of the respective three-year performance period (prorated to reflect the portion of the three-year performance period that occurred prior to the date of the Named Executive Officer’s retirement) and based on actual performance. |
For this purpose, the term “Retirement” means a termination of employment with the Company after attaining age 55 with at least 10 years of service (age 55 with at least five years of service for awards granted before January 1, 2016).
Rights and Payments Upon Termination Due to Disability
In the event of the termination of their employment due to disability, the Named Executive Officers are entitled to receive:
Executive compensation Executive compensation tables
Rights and Payments Upon Termination Duepayments upon termination due to Deathdeath
In the event of the termination of their employment due to death, the Named Executive Officers are entitled to receive:
| immediate vesting of all unvested stock options and restricted stock units previously granted under the Company’s stock plans, and the opportunity for the Named Executive Officer’s estate or beneficiaries to exercise all vested stock options during the two-year period following the date of death (but not beyond the original expiration date of any such stock option); | |
| • | payment to the Named Executive Officer’s estate or beneficiaries, no later than March 15 of the year following the year in which the Named Executive Officer died, for all previously granted performance shares (in the same amount as paid for the performance shares granted to other Named Executive Officers if the date of death occurs after the end of the three-year performance period for such shares, and at the lesser of the target value or such other amount as determined by the Committee in its discretion if the date of death occurs before the end of the three-year performance period for such shares); and |
| • | payment to the Named Executive Officer’s beneficiaries of the proceeds from the life insurance policies provided for such Named Executive Officer pursuant to the Company’s Executive Life Insurance Plan. |
Rights and Payments Upon Termination for Any Other Reasonpayments upon termination due to disability
In the event of the termination of their employment due to disability, the Named Executive Officers are entitled to receive:
| • | continued vesting of stock options previously granted under the Company’s stock plans, and the opportunity to exercise vested stock options previously granted under such plans during the remainder of the original term (up to 10 years) of such options; |
| • | immediate vesting of all restricted stock units previously granted under the Company’s stock plans; and |
| • | payment for all previously granted performance shares upon completion of the respective three-year performance period, based on actual performance. |
Rights and payments upon a qualifying termination under the severance plan
Effective February 3, 2020, the Company adopted the 3M Executive Severance Plan (which we refer to as the “Severance Plan”) for any reasoncertain U.S. executives, including our Named Executive Officers, to provide separation benefits in the event an eligible employee’s employment is terminated by 3M other than for Misconduct or an eligible employee resigns for Good Reason. An eligible employee who becomes entitled to benefits under the Severance Plan receives the following:
| • | continued payment of his or her annual base salary for a number of months (24 months for the Chief Executive Officer, and 18 months for all other Named Executive Officers); |
| • | continued payment of annual incentive payments that would have been paid if the participant remained employed through the end of the severance payment period, calculated based on actual results for the relevant year, using the participant’s final performance rating as of the end of the applicable year (or if none, a performance rating of “fully meets expectations” or equivalent), and prorated based on the number of days in the year preceding the end of the severance period (if the severance payment period ends prior to the end of a year); |
| • | an opportunity to exercise all vested stock options and stock appreciation rights following the participant’s termination and prior to the expiration date of such award; |
| • | accelerated vesting and payment of a prorated portion of the participant’s outstanding “annual” restricted stock units, with proration based on the number of full years of the participant’s completed service over the number of years required to vest under the original vesting schedule; |
| • | outstanding performance share awards will not be forfeited solely as a result of the participant’s termination, and the target number of shares under each award will be prorated based on the number of months the participant worked during the applicable performance period; |
| • | full vesting of the participant’s VIP company contribution account; and |
| • | outplacement services in accordance with 3M’s policy. |
| 2020 Proxy Statement | 85 |
Any severance payments under the Severance Plan will be reduced on a dollar-for-dollar basis (but not below $0) by any payments the participant may receive under his or her non-competition agreement with 3M. In addition, severance payments will cease in the event the participant becomes reemployed by 3M.
The Severance Plan does not provide severance benefits to employees who terminate pursuant to a mandatory retirement death,policy adopted by the Board. Employees who terminate in connection with a spinoff, divestiture or disability (and other thansimilar transaction involving the employee’s business unit may be eligible to participate at the discretion of the Company. To be eligible to receive benefits under the Severance Plan, an employee must execute and not revoke a general release of claims in favor of the Company in form approved by the Company.
In addition, in the event a Named Executive Officer’s payments under the Severance Plan would be subject to an excise tax on “parachute payments” in connection with a change in control of the Company due to the application of Section 280G of the Internal Revenue Code, the Named Executive Officer will not be entitled to a “gross-up.” Instead, the Named Executive Officer’s “parachute payments” may be reduced if such reduction would provide the Named Executive Officer with a greater post-tax benefit than he or she would receive if the excise taxes were to apply.
For purposes of the Severance Plan, the terms “Misconduct” and “Good Reason” mean the following:
“Misconduct” means (i) the employee’s willful failure to substantially perform his or her duties (other than a failure resulting from his or her disability); (ii) the employee’s willful failure to carry out, or comply with any lawful and reasonable directive of the Board or his or her immediate supervisor; (iii) the occurrence of any act or omission by the employee that could reasonably be expected to result in (or has resulted in) his or her conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or indictable offense or crime involving moral turpitude; (iv) the employee’s commission of an act of fraud, embezzlement, misappropriation, misconduct, or breach of fiduciary duty against the Company or any of its subsidiaries or affiliates or any of their officers, directors, employees, customers, suppliers, insurers or agents; (v) the employee’s material breach of any material provision of any written agreement with the Company or any subsidiary; (vi) any action (or inaction) by the employee that 3M reasonably determines constitutes gross negligence or misconduct in the performance of his or her duties and responsibilities; or (vii) any other intentional misconduct by the Named Executive Officer that significantly affects the business or affairs of the Company or any subsidiary in an adverse manner.
“Good Reason” means, with respect to a voluntary termination occurring within 18 months following a change in control of the Company, (i) a material diminution in the employee’s position, authority, duties or responsibilities as described further below):in effect immediately prior to the change in control, (ii) a material diminution in the employee’s base salary or annual planned cash compensation, or (iii) a material change in the geographic location at which the employee is required to perform services for his or her employer. If the voluntary termination does not occur within 18 months following a change in control, “Good Reason” means (i) a material diminution in the employee’s base salary or annual planned cash compensation, other than an across-the-board reduction that applies to all comparable positions, or (ii) a change in excess of 100 miles in the primary work location at which the employee is required to perform services for his or her employer. For terminations that do not occur within 18 months following a change in control, the employee will be required to provide written notice to the Company of the grounds for a Good Reason termination within 30 days of the initial existence of such grounds, and the Company has 30 days from the date of such notice to cure such circumstances. An employee must terminate employment for Good Reason within 60 days after the first occurrence of the applicable grounds.
Rights and Payments Uponpayments upon a Qualifying Terminationqualifying termination in Connectionconnection with a Changechange in Controlcontrol
If the Company terminates a Named Executive Officer’s employment for reasons other than Misconduct (or for awards granted prior to May 10, 2016, reasons other than Cause) or if a Named Executive Officer resigns for Good Reason, in any such case within 18 months following a “change in control event” of the Company (as defined for purposes of Section 409A of the Internal Revenue Code), then in addition to any benefits provided under the Severance Plan described above, all of the Named Executive Officer’s outstanding unvested stock options and restricted stock units granted under the Company’s stock plans will be immediately vested and all of such Named Executive Officer’s outstanding performance shares will be prorated and settled in accordance with the terms of the plan.
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For purposes of our outstanding long-term incentive awards, the terms “Misconduct”, “Cause”,“Misconduct,” “Cause,” and “Good Reason” mean the following:
“Misconduct” means (i) the Named Executive Officer’s willful failure to substantially perform his or her duties (other than a failure resulting from his or her disability); (ii) the Named Executive Officer’s willful failure to carry out, or comply with any lawful and reasonable directive of the Board or his or her immediate supervisor; (iii) the occurrence of any act or omission by the Named Executive Officer that could reasonably be expected to result in (or has resulted in) his or her conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or indictable offense or crime involving moral turpitude; (iv) the Named Executive Officer’s commission of an act of fraud, embezzlement, misappropriation, misconduct, or breach of fiduciary duty against the Company or any of its subsidiaries or affiliates or any of their officers, directors, employees, customers, suppliers, insurers or agents; (v) the Named Executive Officer’s material breach of any material provision of any written agreement with the Company or any subsidiary; or (vi) any other intentional misconduct by the Named Executive Officer that significantly affects the business or affairs of the Company or any subsidiary in an adverse manner.
“Cause” means a material violation of any policy of the Company, or embezzlement or theft of property belonging to the Company.
“Good Reason” means (i) a material diminution in the Named Executive Officer’s position, authority, duties, or responsibilities as in effect immediately prior to the change in control; (ii) a material diminution in the Named Executive Officer’s base salary or annual planned cash compensation; or (iii) a material change in the geographic location at which the Named Executive Officer is required to perform services for the Company.
Rights and payments upon termination for any other reason
In the event of the termination of their employment for any reason that does not qualify for Severance Plan benefits other than retirement, death, or disability (and other than in connection with a change in control, as described further below):
| the Named Executive Officers will have the opportunity to exercise vested stock options granted under the Company’s stock plans within the first 90 days following the termination date (but not beyond the original expiration date of any such stock option), at which time any remaining vested stock options are forfeited; and | |
| | |
| • | all unvested stock options, restricted stock units, and performance shares granted to the Named Executive Officers are forfeited immediately. |
Executive compensation Executive compensation tables
The amounts payable to or on behalf of each of the Named Executive Officers in each of the above situations (other than amounts relating to payments or benefits generally provided on a non-discriminatory basis to all similarly situated employees) is reflected in the following table below, assuming that each individual’s employment had terminated and/or a change in control of the Company had occurred on December 31, 2018.2019. As of December 31, 2018,2019, Mr. Roman, Mr. Thulin,Gangestad, and Ms. Bushman and Mr. Bauman were eligible to retire (as that term is defined for purposes of 3M’s stock plans). Mr. Shin and Mr. LittleThulin retired from employment with the Company effective as of JanuaryJune 1, 2019, and Dr. Delgado’s employment with the Company ended on July 1, 2018, respectively.2019. The amounts shown below do not reflect payments and benefits available under the Severance Plan, as it was not in effect on December 31, 2019.
| 2020 Proxy Statement |
| Name | Termination of Employment Due to… | Outstanding Performance Share Awards ($)(1) | Unvested RSUs ($)(2) | Unvested Options ($)(3) | Life Insurance Proceeds ($)(4) | Total ($) | ||||||
| Michael F. Roman | Retirement | 0 | 0 | 0 | 0 | 0 | ||||||
| Death | 4,394,424 | 2,409,569 | 1,200,496 | 3,000,000 | 11,004,489 | |||||||
| Disability | 0 | 2,409,569 | 0 | 0 | 2,409,569 | |||||||
| Other reason | 0 | 0 | 0 | 0 | 0 | |||||||
| Qualifying Termination in | 1,791,669 | 2,409,569 | 1,200,496 | 0 | 5,401,734 | |||||||
| Connection with a Change | ||||||||||||
| in Control | ||||||||||||
| Inge G. Thulin | Retirement | 0 | 0 | 0 | 0 | 0 | ||||||
| Death | 9,223,470 | 0 | 6,002,247 | 10,391,214 | 25,616,931 | |||||||
| Disability | 0 | 0 | 0 | 0 | 0 | |||||||
| Other reason | 0 | 0 | 0 | 0 | 0 | |||||||
| Qualifying Termination in | 5,856,085 | 0 | 6,002,247 | 0 | 11,858,332 | |||||||
| Connection with a Change | ||||||||||||
| in Control | ||||||||||||
| Nicholas C. Gangestad | Retirement | 0 | 0 | 0 | 0 | 0 | ||||||
| Death | 3,770,215 | 1,185,349 | 1,761,173 | 3,000,000 | 9,716,737 | |||||||
| Disability | 0 | 1,185,349 | 0 | 0 | 1,185,349 | |||||||
| Other reason | 0 | 0 | 0 | 0 | 0 | |||||||
| Qualifying Termination in | 2,018,082 | 1,185,349 | 1,761,173 | 0 | 4,964,604 | |||||||
| Connection with a Change | ||||||||||||
| in Control | ||||||||||||
| Hak Cheol Shin | Retirement | 0 | 0 | 0 | 0 | 0 | ||||||
| Julie L. Bushman | Retirement | 0 | 0 | 0 | 0 | 0 | ||||||
| Death | 2,127,188 | 2,409,569 | 973,202 | 2,850,846 | 8,360,805 | |||||||
| Disability | 0 | 2,409,569 | 0 | 0 | 2,409,569 | |||||||
| Other reason | 0 | 0 | 0 | 0 | 0 | |||||||
| Qualifying Termination in | 1,069,123 | 2,409,569 | 973,202 | 0 | 4,451,894 | |||||||
| Connection with a Change | ||||||||||||
| in Control | ||||||||||||
| Frank R. Little | Retirement | 0 | 0 | 0 | 0 | 0 | ||||||
| James L. Bauman | Retirement | 0 | 0 | 0 | 0 | 0 | ||||||
| Death | 2,306,487 | 0 | 1,089,725 | 2,813,976 | 6,210,188 | |||||||
| Disability | 0 | 0 | 0 | 0 | 0 | |||||||
| Other reason | 0 | 0 | 0 | 0 | 0 | |||||||
| Qualifying Termination in | 1,240,223 | 0 | 1,089,725 | 0 | 2,329,948 | |||||||
| Connection with a Change | ||||||||||||
| in Control |
Executive compensation Pay ratio
FOOTNOTES TO 20182019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
| Name | Termination of Employment Due to… | Cash Severance ($) | Outstanding Performance Share Awards ($)(1) | Unvested RSUs ($)(2) | Unvested Options ($)(3) | Life Insurance Proceeds ($)(4) | Total ($) | |||||||
| Michael F. Roman | Retirement | — | — | — | — | — | — | |||||||
| Death | — | 7,179,235 | — | 11,495 | 3,000,000 | 10,190,730 | ||||||||
| Disability | — | — | — | — | — | — | ||||||||
| Qualifying Termination in connection with a Change in Control | — | 3,566,845 | — | 11,495 | — | 3,578,340 | ||||||||
| Other Reason | — | — | — | — | — | — | ||||||||
| Inge G. Thulin | Retirement | — | — | — | — | — | — | |||||||
| Nicholas C. Gangestad | Retirement | — | — | — | — | — | — | |||||||
| Death | — | 3,329,574 | 1,097,509 | 17,216 | 3,000,000 | 7,444,299 | ||||||||
| Disability | — | — | 1,097,509 | — | — | 1,097,509 | ||||||||
| Qualifying Termination in connection with a Change in Control | — | 1,818,367 | 1,097,509 | 17,216 | — | 2,933,092 | ||||||||
| Other Reason | — | — | — | — | — | — | ||||||||
| Ashish K. Khandpur | Retirement | — | — | — | — | — | — | |||||||
| Death | — | 2,351,326 | — | 6,557 | 2,614,000 | 4,971,883 | ||||||||
| Disability | — | — | — | — | — | — | ||||||||
| Qualifying Termination in connection with a Change in Control | — | 1,131,850 | — | 6,557 | — | 1,138,407 | ||||||||
| Other Reason | — | — | — | — | — | — | ||||||||
| Julie L. Bushman | Retirement | — | — | — | — | — | — | |||||||
| Death | — | 2,101,868 | — | 8,651 | 2,900,846 | 5,011,365 | ||||||||
| Disability | — | — | — | — | — | — | ||||||||
| Qualifying Termination in connection with a Change in Control | — | 1,142,458 | — | 8,651 | — | 1,151,109 | ||||||||
| Other Reason | — | — | — | — | — | — | ||||||||
| Joaquin Delgado | Other Reason(5) | 1,750,000 | — | — | — | — | 1,750,000 | |||||||
| Michael G. Vale | Retirement | — | — | — | — | — | — | |||||||
| Death | — | 1,829,475 | — | 10,910 | 2,760,000 | 4,600,385 | ||||||||
| Disability | — | — | — | — | — | — | ||||||||
| Qualifying Termination in connection with a Change in Control | — | 954,942 | — | 10,910 | — | 965,852 | ||||||||
| Other Reason | — | — | — | — | — | — |
FOOTNOTES TO 2019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
| (1) | The amounts in this column reflect the value of performance share awards under the |
| (2) | The amounts in this column reflect the value of the shares underlying the unvested 3M restricted stock units that would vest upon the occurrence of the respective triggering events in accordance with the terms of the awards. Share values are based on the closing price of a share of 3M common stock on the NYSE for December 31, |
| (3) | The amounts in this column reflect the |
| 88 | 3M Company |
| (4) | The amounts in this column reflect the life insurance proceeds that would be payable to each individual’s beneficiary or beneficiaries pursuant to the policies obtained for them under the Executive Life Insurance Plan. Under such plan, individuals first appointed to an executive position on or before August 31, 2003, receive additional life insurance coverage that is provided through a universal life insurance policy and individuals first appointed on or after September 1, 2003, receive additional group term life insurance coverage. |
| (5) | The amount shown reflects the payment made to Dr. Delgado under the terms of a separation agreement. For more information concerning the arrangement with Dr. Delgado, see the section entitled “Separation pay” on page 61 of this Proxy Statement. |
Presented below is the ratio of annual total compensation of our CEO to the annual total compensation of our median employee (excluding our CEO) for 2018.2019. The ratio reflects a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the Securities Exchange Act of 1934.
In determining the ratio below, we began by using the same median employee (a full-time production employee in the Midwestern United States) identified for purposes of calculating the ratio included in our 2018 and 2019 proxy statement because there have not been changes in our employee population or employee compensation arrangements that we believe would significantly impact the pay ratio disclosure. The median employee initially was identified based on target annual total cash compensation for each employee as of December 31, 2017. For these purposes, annual total cash compensation included base salary or hourly wages, cash incentives, commissions, and comparable cash elements of compensation in non-U.S. jurisdictions and was calculated using internal human resources records. All amounts were annualized for permanent employees who did not work for the entire year, such as new hires, employees on paid or unpaid leave of absence and employees called for active military duty. We did not apply any cost-of-living adjustments as part of the calculation.
The median employee was selected from among 90,823 full-time, part-time, temporary, and seasonal workers who were employed as of December 31, 2017. As permitted by Item 402(u) of Regulation S-K, we excluded 1,575 employees (including 966 non-U.S. employees) who joined the Company during 2017 as part of our acquisition of Scott Safety when making this determination. Except for the employees excluded on the basis of the Scott Safety acquisition completed in 2017, we did not exclude any other employees (whether pursuant to the de minimis exemption for foreign employees or any other permitted exclusion).
As a result of our CEO transitiondetermined in 2018, and as permitted byaccordance with Item 402(u)402 of Regulation S-K, our CEOthe 2019 annual total compensation was $18,321,566 for purposes of this disclosure was calculated by combining the total compensation for each of Mr. Romanour CEO and Mr. Thulin for the periods of 2018 in which they served as CEO, respectively. The 2018 annual total CEO compensation calculated on this basis was $17,320,459. The 2018 annual total compensation$57,494 for our median employee was $57,313.employee. Among other things, these amounts include base salary, overtime, incentive payments, stock-based compensation (based on the grant date fair value of awards granted during 2018)2019), changes in pension values and retirement plan contributions. As calculated in this manner, the ratio of our CEOs’CEO’s total combined compensation to our median employee’s total compensation for fiscal year 20182019 is 302319 to 1. Because the annual CEO compensation used in calculating this ratio includes the combined compensation of two individuals who served as CEO in 2018, the Company’s pay ratio for 2018 may not be comparable to its pay ratio in other years. For this and other reasons, the Company's pay ratio also may not be comparable to the pay ratios of other companies.
4 | Shareholder Proposal on Setting Target Amounts for CEO Compensation • | ||
•See the Board’s opposition statement. | |||
3M has received a stockholdershareholder proposal from the United Steelworkers, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, 60 Boulevard of the Allies, Pittsburgh, PA 15222, the owner of 68 shares of 3M common stock (the “Proponent”). The Proponent has requested that the Company include the following proposal and supporting statement ((in italics)italics) in its proxy statement for the Annual Meeting of Stockholders.Shareholders. The proposal may be voted on at the Annual Meeting only if properly presented by the Proponent or the Proponent’s qualified representative. For the reasons set forth following the Proponent’s statement, your Board of Directors recommends that you vote “AGAINST” this proposal.
RESOLVED: Shareholders of 3M Corporation (the “Company’’) request that the Compensation Committee of the Board of Directors take into consideration the pay grades and/or salary ranges of all classifications of Company employees when setting target amounts for CEO compensation. The Compensation Committee should describe in the Company’s proxy statements for annual shareholder meetings how it complies with this requested policy. Compliance with this policy is excused if it will result in the violation of any existing contractual obligation or the terms of any existing compensation plan.
Supporting Statement
SUPPORTING STATEMENT
Like at many companies, our Company’s Compensation Committee uses peer group benchmarks of what other companies pay their CEOs to set its target CEO compensation. These target pay amounts are then subject to performance adjustments. To ensure that our Company’s CEO compensation is reasonable relative to our Company’s overall employee pay philosophy and structure, we believe that the Compensation Committee should also consider the pay grades and/or salary ranges of Company employees when setting CEO compensation target amounts.
This proposal does not require the Compensation Committee to use other employee pay data in a specific way to set CEO compensation targets. Under this proposal, the Compensation Committee will have discretion to determine how other employee pay should impact CEO compensation targets. The Compensation Committee also will retain authority to use peer group benchmarks and/or any other metric to set CEO compensation target amounts. Over time, using peer group benchmarks to set CEO compensation can lead to pay inflation. Although many companies target CEO compensation at the median of their peer group, certain companies have targeted their CEO’s pay above median. In addition, peer groups can be cherry-picked to include larger or more successful companies where CEO compensation is higher. (Charles Elson and Craig Ferrere, “Executive Superstars, Peer Groups and Overcompensation,” Journal of Corporation Law, Spring 2013).
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HighThe current system of using peer group benchmarks, without taking into account the pay disparities between CEOs and other senior executives may undermine collaboration and teamwork.grades or salary ranges of all company employees, when determining CEO compensation has had the effect of CEO pay far outpacing that of average employees. In 2018, the average S&P 500 CEO made 287 times that of their median employee. For our Company, the CEO/median employee ratio calculated in 2018 was 302 to 1. According to Institutional Shareholder Services, an excessivethe 2006 report The State of Working America the ratio of CEO pay disparity between theto average worker pay has risen from 35 to 1 in 1979, to 71 to 1 in 1989, to 248 to 1 in 1998. The current system of determining CEO and the next highest-paid named executive officer is a problematic pay practice that may result in a recommendation to its clients that they vote against advisory votes on executive compensation (Institutional Shareholder Services, United States Proxy Voting Manual, February 23, 2016, p. 147). In our view,without taking into account the pay of non-executiveaverage company employees should also be considered. High CEO compensation can impacthas led to glaring inequality between the moraleworkers who make our company what it is and productivity of employeesthe man or woman who are not senior executives. According to a Glassdoor study of employee opinions, “Higher CEO compensation is statistically linked to lower CEO approval ratings on average” (Glassdoor, What Makes a Great CEO?, August 2016, availablesits athttps://www.glassdoor.com/research/studies/what-makes-a-great-ceo/). the top.
For those reasons, we urge you to vote in favor of this proposal.
Stockholder proposal Proposal 4
Board’s Statement Opposingstatement opposing the Proposalproposal
After careful consideration, and for the reasons set forth below, the Board believes that it is not in the best interests of 3M or its stockholdersshareholders to approve the proposed resolution, for the following reasons:resolution.
| 1. | The Company already maintains global compensation principles that are intended to ensure that its compensation practices are fair and reasonable as applied to both executive and non-executive employees. These principles align with the Company’s vision and strategies, balance both individual and enterprise-wide performance and seek to provide competitive wages and benefits with consistent positioning in the median range of the |
| 2. | The Board of Directors believes that the overwhelming majority of our |
| 3. | The Compensation Committee already reviews and considers the ratio of annual total compensation of our Chief Executive Officer to the annual total compensation of our median employee (excluding our Chief Executive Officer), as reported in the proxy statement, which the Company believes provides a similar perspective to the Compensation Committee at no incremental cost to the Company. 3M has operations and different compensation programs in |
RECOMMENDATION OF THE BOARD
  | The Board of Directors unanimously recommends a vote |
Security ownership of management
The following table includes all 3M stock-based holdings, as of February 28, 2019,29, 2020, of the directors and the Named Executive Officers set forth in the Summary Compensation Table, and the directors and executive officers as a group.
| Name and principal position | Stock(1) | Restricted Stock Units(2) | Deferred Stock(3) | Total(4) | Percent of Class | ||||||
| Sondra L. Barbour, Director | — | — | 4,219 | 4,219 | (5) | ||||||
| Thomas “Tony” K. Brown, Director | — | — | 5,567 | 5,567 | (5) | ||||||
| David B. Dillon, Director | — | — | 3,149 | 3,149 | (5) | ||||||
| Michael L. Eskew, Director | — | — | 39,273 | 39,273 | (5) | ||||||
| Herbert L. Henkel, Director | — | — | 33,965 | 33,965 | (5) | ||||||
| Amy E. Hood, Director | 24 | — | 1,101 | 1,125 | (5) | ||||||
| Muhtar Kent, Director | — | — | 11,186 | 11,186 | (5) | ||||||
| Edward M. Liddy, Director | — | — | 55,385 | 55,385 | (5) | ||||||
| Dambisa F. Moyo, Director | 351 | — | 26 | 377 | (5) | ||||||
| Gregory R. Page, Director | 1,000 | — | 3,636 | 4,636 | (5) | ||||||
| Patricia A. Woertz, Director | 2,580 | — | — | 2,580 | (5) | ||||||
| Michael F. Roman, Chief Executive Officer | 219,997 | 12,646 | 20,131 | 252,774 | (5) | ||||||
| Inge G. Thulin, Executive Chairman of the Board | 1,432,018 | — | 215,200 | 1,647,218 | (5) | ||||||
| James L. Bauman, Executive Vice President, Industrial Business Group | 204,642 | — | 17,501 | 222,143 | (5) | ||||||
| Julie L. Bushman, Executive Vice President, International Operations | 256,045 | 12,646 | — | 268,691 | (5) | ||||||
| Nicholas C. Gangestad, Senior Vice President and Chief Financial Officer | 238,406 | 6,221 | 19,705 | 264,332 | (5) | ||||||
| Frank R. Little, Former Executive Vice President | 190,886 | — | 6,916 | 197,802 | (5) | ||||||
| Hak Cheol Shin, Former Vice Chair and Executive Vice President | 426,944 | — | — | 426,944 | (5) | ||||||
| All Directors and Executive Officers as a Group (28 persons) | 4,257,581 | 50,940 | 498,893 | 4,807,414 | (5) | ||||||
COMMON STOCK AND TOTAL STOCK-BASED HOLDINGS
| Name and principal position | Stock(1) | Restricted Stock Units(2) | Deferred Stock(3) | Total(4) | Percent of Class | ||||||||||||||
| Thomas “Tony” K. Brown, Director | — | — | 6,753 | 6,753 | (5) | ||||||||||||||
| Pamela J. Craig, Director | — | — | 1,002 | 1,002 | (5) | ||||||||||||||
| David B. Dillon, Director | 1,200 | — | 4,255 | 5,455 | (5) | ||||||||||||||
| Michael L. Eskew, Director | — | — | 42,659 | 42,659 | (5) | ||||||||||||||
| Herbert L. Henkel, Director | — | — | 36,988 | 36,988 | (5) | ||||||||||||||
| Amy E. Hood, Director | 24 | — | 2,139 | 2,163 | (5) | ||||||||||||||
| Muhtar Kent, Director | — | — | 13,458 | 13,458 | (5) | ||||||||||||||
| Edward M. Liddy, Director | — | — | 58,999 | 58,999 | (5) | ||||||||||||||
| Dambisa F. Moyo, Director | 1,430 | — | 104 | 1,534 | (5) | ||||||||||||||
| Gregory R. Page, Director | 4,000 | — | 5,159 | 9,159 | (5) | ||||||||||||||
| Patricia A. Woertz, Director | 2,580 | — | 1,002 | 3,582 | (5) | ||||||||||||||
| Michael F. Roman, Chairman of the Board, President and Chief Executive Officer | 313,845 | — | 29,221 | 343,066 | (5) | ||||||||||||||
| Inge G. Thulin, Former Executive Chairman of the Board | 1,344,758 | — | 201,328 | 1,546,086 | (5) | ||||||||||||||
| Nicholas C. Gangestad, Senior Vice President and Chief Financial Officer | 307,927 | 6,221 | 20,564 | 334,712 | (5) | ||||||||||||||
| Ashish K. Khandpur, Executive Vice President, Transportation and Electronics Business Group | 147,408 | — | 13,250 | 160,658 | (5) | ||||||||||||||
| Julie L. Bushman, Executive Vice President, International Operations | 296,714 | — | — | 296,714 | (5) | ||||||||||||||
| Joaquin Delgado, Former Executive Vice President, Consumer Business Group | 272,269 | — | — | 272,269 | (5) | ||||||||||||||
| Michael G. Vale, Executive Vice President, Safety and Industrial Business Group | 320,435 | — | 33,690 | 354,125 | (5) | ||||||||||||||
| All Directors and Executive Officers as a Group (25 persons) | 2,139,990 | 11,666 | 304,103 | 2,455,759 | (5) | ||||||||||||||
FOOTNOTES TO COMMON STOCK AND TOTAL STOCK-BASED HOLDINGS TABLE
| (1) | This column lists beneficial ownership of 3M common stock as calculated under Securities and Exchange Commission rules. Unless otherwise noted, voting power and investment power in the shares are exercisable solely by the named person, and none of the shares are pledged as security by the named person. In accordance with Securities and Exchange Commission rules, this column also includes shares that may be acquired pursuant to stock options that are or will be exercisable within 60 days of February |
| 92 | 3M Company |
| (2) | This column reflects restricted stock units that generally vest over a three- to five-year period, assuming continued employment until each vesting date (or until the individual retires from the Company, in some cases). The executive officers do not have voting power with respect to the shares listed in this column. |
Stock ownership information Security ownership of certain beneficial owners
| (3) | This column reflects shares earned by the directors as a result of their service on the Board of Directors, the payout of which has been deferred until following the termination of their membership on the Board of Directors. This column also includes shares of the Company’s common stock which the executive officers are entitled to receive following their retirement from the Company as a result of their election to defer all or a portion of the payout of their performance share awards granted under the Company’s long-term incentive plan. Neither the directors nor the executive officers have voting power with respect to the shares listed in this column. |
| (4) | This column shows the individual’s total 3M stock-based holdings, including the securities shown in the “Stock” column (as described in note 1), in the “Restricted Stock Units” column (as described in note 2), and in the “Deferred Stock” column (as described in note 3). |
| (5) | Each director and executive officer individually, and All Directors and Executive Officers as a Group, beneficially owned less than one percent of the outstanding common stock of the Company. |
Security ownership of certain beneficial owners
The following table sets forth information regarding beneficial owners of more than 5 percent of the outstanding shares of 3M common stock.
| Name/address | Common Stock Beneficially Owned | Percent of Class | ||
| The Vanguard Group(1) | ||||
| 100 Vanguard Blvd. | ||||
| Malvern, PA 19355 | 49,860,941 | 8.56 | ||
| State Street Corporation(2) | ||||
| State Street Financial Center | ||||
| One Lincoln Street | ||||
| Boston, MA 02111 | 42,734,630 | 7.30 | ||
| BlackRock, Inc.(3) | ||||
| 55 East 52nd Street | ||||
| New York, NY 10055 | 39,022,947 | 6.70 |
| Name/address | Common Stock Beneficially Owned | Percent of Class | |||||
| The Vanguard Group(1) 100 Vanguard Blvd. Malvern, PA 19355 | 50,504,075 | 8.78 | |||||
| State Street Corporation(2) State Street Financial Center One Lincoln Street Boston, MA 02111 | 42,320,337 | 7.36 | |||||
| BlackRock, Inc.(3) 55 East 52nd Street New York, NY 10055 | 41,713,628 | 7.30 | |||||
| (1) | In a Schedule 13G/A filed with the Securities and Exchange Commission on February |
| (2) | In a Schedule 13G filed with the Securities and Exchange Commission on February 13, |
| 2020 Proxy Statement | 93 |
Stock ownership information Section 16(a) beneficial ownership reporting compliance
| (3) | In a Schedule 13G/A filed with the Securities and Exchange Commission on February |
| 94 | 3M Company |
Section 16(a) beneficial ownership reporting compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and any person owning more than 10 percent of the outstanding shares of 3M common stock, to file with the Securities and Exchange Commission reports regarding their ownership and changes in their ownership of our stock. As a practical matter, 3M assists its directors and executive officers by monitoring transactions and completing and filing Section 16 reports on their behalf. 3M believes that during 2018, its directors and executive officers timely filed all required Section 16(a) reports, except that a Form 4 reporting the issuance of 327 shares of stock to Dr. Dambisa Moyo as compensation for serving on the 3M Board of Directors was inadvertently filed late due to an administrative oversight. In making this statement, 3M has relied upon examination of copies of Forms 3, 4, and 5 and the written representations of its directors and executive officers.
The Board of Directors (the “Board”) of 3M Company, a Delaware corporation (“3M” or the “Company”) is soliciting proxies for the Company’s Annual Meeting of Stockholders.Shareholders. You are receiving a Proxy Statement because you own shares of 3M common stock that entitle you to vote at the meeting. By use of a proxy you can vote, whether or not you attend the meeting. The Proxy Statement describes the matters we would like you to vote on and provides information on those matters so you can make an informed decision.
The information included in this Proxy Statement relates to proposals to be voted on at the meeting (if properly presented), the voting process, 3M’s Board and Board committees, the compensation of directors and certain executive officers, and other required information.
The purpose of the Annual Meeting is to elect the directors identified in this Proxy Statement and to conduct the business described in the Notice of Annual Meeting.
How do I attend the 20192020 Annual Meeting? What do I need to bring?
Only stockholdersshareholders who held shares of 3M common stock as of the close of business on March 19, 2019,17, 2020, the record date, are invited to attend the Annual Meeting. To attend the meeting, you will need to pre-register and bring an admission ticket and a valid government issued photo identification. You will need to RSVP and print an admission ticket in advance by visitingwww.proxyvote.comand following the instructions there. You will need the 16-digit control number to accesswww.proxyvote.com. You can find your control number on:
| your proxy card included in this Proxy Statement if it was mailed to you; | |
| your Notice of Internet Availability of Proxy Materials if you received proxy materials via electronic delivery; or | |
| your voting instruction card if you hold your shares in street name through a broker or other nominee. |
If you are not a record date stockholder,shareholder, you may be admitted to the meeting only if you have a valid legal proxy from a record date stockholdershareholder who has pre-registered and obtained an admission ticket. You must present that proxy and admission ticket, as well as a valid government issued photo identification, at the entrance to the meeting.
On the day of the meeting, an admission ticket, along with a valid government issued photo identification such as a driver’s license or passport, must be presented in order to be admitted to the Annual Meeting. Please note that seating is limited, and admission is on a first-come, first-served basis.
For questions about admission to the Annual Meeting, please contact us at 1-800-3M HELPS (1-800-364-3577).
If you do not provide photo identification or comply with the other procedures outlined here, you will not be admitted to the Annual Meeting.
Use of cameras, recording devices, computers and other electronic devices, such as smartphones and tablets, will not be permitted at the meeting. For security reasons, you will be required to pass through metal detection screening before being granted access to the meeting. No large bags or packages are allowed at the meeting.
Other information Proxy statement
How do I listen to the live webcast?
If you are unable to attend the Annual Meeting, you can listen to the live webcast of the business portion of the meeting by visitinghttp://investors.3M.com, orwww.3M.comunder Investor Relations — Annual Meeting Live Webcast.
Could emerging developments regarding the coronavirus affect our ability to hold an in-person Annual Meeting?
We are actively monitoring the coronavirus (COVID-19) situation. In the event it is not possible or advisable to hold our Annual Meeting in person, we will publicly announce, as soon as practicable before the meeting, a determination to hold the meeting solely by means of remote communication online. In that event, you or your proxyholder could participate, vote and examine the list of shareholders of record by accessing a designated website using your 16-digit control number. Please monitor our investor relations website athttps://investors.3m.comfor updated information.
Information Aboutabout the Notice of Internet Availability of Proxy Materials
Why did I receive a Notice of Internet Availability of the proxy materialsProxy Materials and not the printed proxy materials?
The Securities and Exchange Commission allows companies to furnish their proxy materials to stockholdersshareholders over the Internet. As a result, we are mailing to many of our stockholdersshareholders a Notice of Internet Availability of Proxy Materials instead of a paper copy of the proxy materials. In addition, we are providing the notice and proxy materials by e-mail to some of our stockholdersshareholders who previously consented to electronic delivery of proxy materials. Those stockholdersshareholders should have received an e-mail containing a link to the website where the proxy materials are available, as well as a link to the proxy voting website. All stockholdersshareholders receiving the Notice of Internet Availability of Proxy Materials will have the ability to access the proxy materials over the Internet and to request to receive a paper copy of the proxy materials by mail. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the notice. In addition, the notice contains instructions on how you may request to receive proxy materials in printed form by mail or to access them electronically in connection with future distributions of proxy materials. Distributing proxy materials electronically conserves natural resources and reduces the costs of printing and distributing our proxy materials.
Why did I receive a printed copy of the proxy materials and not the Notice of Internet Availability of Proxy Materials?
We are providing some of our stockholders,shareholders, including stockholdersshareholders who have previously requested to receive paper copies of the proxy materials, with paper copies of the proxy materials instead of the Notice of Internet Availability of Proxy Materials.
How do I view the proxy materials online?
Go towww.proxyvote.comand follow the instructions to view the materials. You will need to provide the control number printed in the box marked by the arrow located on your Notice of Internet Availability of Proxy Materials (see example below — the information in the box is an example only — your number will be different and is unique to you).
  | 1234 5678 9012 3456 |
| 96 | 3M Company |
What if I prefer to receive a paper copy of the proxy materials?
You can easily request a paper copy of the proxy materials (including the Notice of Annual Meeting, Proxy Statement, and 20182019 Annual Report) at no cost by using one of the three methods below. You will need to provide the control number printed in the box marked by the arrow located on your Notice of Internet Availability of Proxy Materials (see example above — the information in the box is an example only — your number will be different and is unique to you).
  | By Internet |
  | By Telephone |
  | By sending an E-mail |
Other information Proxy statement
Can I request to receive my Notice of Internet Availability of Proxy Materials by e-mail rather than by mail?
You may request to receive proxy materials for future meetings by e-mail viawww.proxyvote.comorwww.investordelivery.comand follow the electronic delivery enrollment instructions. If you choose to access future proxy materials electronically, you will receive an e-mail with instructions containing a link to the website where those materials are available and a link to the proxy voting website. Your election to access proxy materials by e-mail will remain in effect until you terminate it.
Please note that you MAY NOT USE your Notice of Internet Availability of Proxy Materials to vote your shares; it is NOT a form for voting. If you return the Notice of Internet Availability of Proxy Materials in an attempt to vote your shares, that vote will not count. |
| For more information about the Notice of Internet Availability of Proxy Materials, please visit:www.sec.gov/spotlight/ proxymatters/e-proxy.shtml |
Stockholders EntitledShareholders entitled to Votevote
Each share of our common stock outstanding as of the close of business on March 19, 2019,17, 2020, the record date, is entitled to one vote at the Annual Meeting on each matter properly brought before the meeting. As of that date, there were 575,896,636575,260,717 shares of common stock issued and outstanding.
Most 3M stockholdersshareholders hold their shares through a broker, bank, trustee, or other nominee (which for simplicity we refer to as a “broker or other nominee”) rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially:
Shareholderof Record | If your shares are registered directly in your name with 3M’s transfer agent, EQ Shareowner Services, you are considered the |
| 2020 Proxy Statement | 97 |
| Beneficial Owner | If your shares are held by a broker or other nominee, you are considered the beneficial owner of shares held in street name and these proxy materials are being forwarded to you by your broker or other nominee who is considered the | |
| PlanAccounts | If your shares are held in your account in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan, you are considered the beneficial owner of these shares and the trustee of the plans is considered the |
Other information Proxy statement
Proposals you are Askedasked to Votevote on and the Board’s Voting Recommendationsvoting recommendations
The following proposals are included in this Proxy Statement and are scheduled to be voted on at the meeting. 3M’s Board recommends that you vote your shares as indicated below.
| The Board’s Voting Recommendations: | Rationale for Support: | For Further Details: | ||||||
1. | Elect the | “FOR” each nominee to the Board | Our nominees are distinguished leaders who bring a mix of skills and qualifications to the Board and can represent the interests of all | Page | ||||
2. | Ratify | “FOR” | Based on its assessment of the qualifications and performance of PricewaterhouseCoopers LLP (“PwC”), the Audit Committee believes that it is in the best interests of the Company and its | Page | ||||
3. | Approve, on an advisory basis, the compensation of our named executive officers. | “FOR” | Our executive compensation program appropriately aligns our executives’ compensation with the performance of the Company and its business units as well as their individual performance. | Page | ||||
4. |
| Shareholder proposal on setting target amounts for CEO compensation, if properly presented at the meeting. | “AGAINST” | See the Board’s opposition statement. | Page | |||
Other than the proposals described in this Proxy Statement, the Board is not aware of any other matters to be presented for a vote at the Annual Meeting. If you grant a proxy by telephone, Internet, or by signing and returning your proxy card, any of the persons appointed by the Board as proxy holders — Michael F. Roman, Nicholas C. Gangestad, Gregg M. Larson, and Inge G. ThulinIvan K. Fong — will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If any of our nominees is unavailable as a candidate for director, the above-named proxy holders will vote your proxy for another candidate or candidates as may be nominated by the Board of Directors.
| 98 | 3M Company |
Voting Requirementsrequirements to Elect Directorselect directors and Approve Eachapprove each of the Proposals Describedproposals described in This Proxy Statementthis proxy statement
| Quorum | The presence of the holders of a majority of the outstanding shares of common stock entitled to vote at the Annual Meeting, present in person or represented by proxy, is necessary to constitute a quorum. Abstentions and “broker non-votes” are counted as present for purposes of determining a quorum. As discussed below, a “broker non-vote” occurs when a broker or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the broker or other nominee does not have discretionary voting power for that proposal and has not received instructions from the beneficial owner. | |
| BrokerVoting | Under NYSE rules, brokers have discretionary authority to vote their clients’ shares in “routine” matters (including Proposal 2, the ratification of PwC as our independent registered public accounting firm) so long as the beneficial owner of those shares did not provide voting instructions to the broker at least ten days before the If you are a beneficial owner (other than as a participant in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan), your broker or other nominee is permitted to vote your shares on the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for |
Other information Proxy statement
| Election of Directors | In accordance with 3M’s Bylaws, each director is elected by the vote of the majority of votes cast (which means the number of votes cast “for” a director’s election exceeds the number of votes cast “against” that director’s election, with “abstentions” and “broker non-votes” not counted as a vote cast either “for” or “against” that director’s election) with respect to that director’s election at this meeting for the election of directors at which a quorum is present. | |
| The Nominating and Governance Committee has established procedures under which any incumbent director who is not elected shall offer to tender his or her resignation to the Board. In the event an incumbent director fails to receive a majority of the votes cast in the election, the Nominating and Governance Committee, or such other committee designated by the Board of Directors, shall make a recommendation to the Board of Directors as to whether to accept or reject the resignation of such incumbent director, or whether other action should be taken. The Board of Directors shall act on the resignation, taking into account the Committee’s recommendation, and publicly disclose (by issuing a press release and filing appropriate disclosure with the Securities and Exchange Commission) its decision regarding the resignation and, if such resignation is rejected, the rationale behind the decision within ninety (90) days following certification of the election results. The Nominating and Governance Committee in making its recommendation and the Board of Directors in making its decision each may consider any factors and other information that they consider appropriate and relevant. | ||
| An incumbent director who fails to receive a majority of the votes cast in the election and who tenders his or her resignation pursuant to the procedures described above shall remain active and engaged in Board activities while the Nominating and Governance Committee and the Board decide whether to accept or reject such resignation, or whether other action should be taken. However, it is expected that such incumbent director shall not participate in any proceedings by the Nominating and Governance Committee or the Board regarding whether to accept or reject such director’s resignation, or whether to take other action with respect to such director. | ||
| If the Board of Directors accepts a director’s resignation, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board of Directors may fill the resulting vacancy pursuant to the Bylaws. | ||
| All Other Proposals | The affirmative “FOR” vote of a majority of those shares present in person or represented by proxy at the meeting and entitled to vote on the matter is required to approve Proposals 2, 3, and 4. In tabulating the voting result for any particular proposal “broker non-votes” (if applicable) are not counted as votes “FOR” or “AGAINST” the proposal. An abstention will, however, be counted as entitled to vote on a proposal and will, therefore, have the effect of a vote “AGAINST.” |
| 2020 Proxy Statement | 99 |
If you hold shares directly as the stockholdershareholder of record, you may vote by granting a proxy or by voting in person at the Annual Meeting by requesting a ballot. If you hold shares beneficially in street name, you may vote by submitting voting instructions to your broker or other nominee or in person at the Annual Meeting by requesting a legal proxy from your broker or other nominee. If you own shares beneficially as a participant in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan, you may vote by submitting voting instructions to the trustee. In most instances, you will be able to do this over the Internet, by telephone, or by mail. Even if you plan to attend the Annual Meeting, we recommend that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the Annual Meeting.
Please refer to the summary instructions below and those included on your Notice of Internet Availability of Proxy Materials or proxy card or, for shares held in street name, the voting instruction card provided by your broker or other nominee.
Other information Proxy statement
The Internet and telephone voting procedures are designed to authenticate stockholdersshareholders by use of a control number and to allow you to confirm that your instructions have been properly recorded. If you vote by telephone or on the Internet, you do not need to return your proxy card. Telephone and Internet voting for stockholdersshareholders of record will be available 24 hours a day, up until 11:10:59 p.m., EasternCentral Daylight Time, on May 13, 2019.11, 2020. Participants in 3M’s Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan may instruct the trustee how to vote their shares via the Internet, by telephone, or by signing and returning the proxy card by 11:10:59 p.m., EasternCentral Daylight Time, on May 12, 2019.10, 2020.
VOTE BY INTERNET
www.proxyvote.com | If you have Internet access, you may submit your proxy from any location in the world 24 hours a day, 7 days a week. Have your proxy card or the Notice of Internet Availability of Proxy Materials in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. | |
VOTE BY TELEPHONE
1-800-690-6903 | If you live in the United States, you may use any touch-tone telephone to vote your proxy toll-free 24 hours a day, 7 days a week. Have your proxy card or the Notice of Internet Availability of Proxy Materials in hand when you call and follow the instructions. | |
VOTE BY MAIL  Sign and mail your proxy card | You may vote by signing and submitting your proxy card to the Company. If you provide specific voting instructions in your proxy card, your shares will be voted as you instruct. If you sign your proxy card, but do not provide voting instructions, your shares will be voted as the Board recommends. Mark, sign, and date your proxy card and return it in the postage-paid envelope provided so that it is received by May | |
VOTE IN PERSON May 8:30 a.m.,
Archer Hotel 3121 Palm Way Austin, TX 78758 | If you are a |
| ALL SHARES THAT HAVE BEEN PROPERLY VOTED AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING. |
| 100 | 3M Company |
You may change your proxy voting instructions at any time prior to the vote at the Annual Meeting. You may enter a new vote by using the Internet or the telephone or by mailing a new proxy card or new voting instruction card bearing a later date (which will automatically revoke your earlier voting instructions), so long as the new vote is received before the deadlines described above under the heading “Voting Methods.methods.” You may also change your vote by granting a new proxy or by voting in person at the Annual Meeting.
Other information Proxy statement
In the election of directors, you may vote “FOR” or “AGAINST” one or more of the nominees or you may “ABSTAIN.” Abstentions will have no effect on the outcome of the election of directors. For Proposals 2, 3, and 4, you may vote “FOR,” “AGAINST,” or “ABSTAIN,” but please note that abstentions will have the same effect as a vote “AGAINST.” If you sign your proxy card or broker voting instruction card but provide no voting instructions, your shares will be voted in accordance with the recommendations of the Board. Shares held in your account in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan will be voted by the trustee as described in “Stockholders Entitled“Shareholders entitled to Vote”vote” beginning on page 90.97.
Representatives of Broadridge Financial Solutions, Inc. will tabulate the votes and act as the inspectors of election.
The Company’s Board of Directors has a policy that all stockholdershareholder proxies, ballots, and tabulations that identify stockholdersshareholders are to be maintained in confidence. No such document will be available for examination, and the identity and vote of any stockholdershareholder will not be disclosed, except as necessary to meet legal requirements and allow the inspectors of election to certify the results of the stockholdershareholder vote. The policy also provides that inspectors of election for stockholdershareholder votes must be independent and cannot be employees of the Company. Occasionally, stockholdersshareholders provide written comments on their proxy card that may be forwarded to 3M management.
We will issue a press release announcing the preliminary voting results for items of business properly presented at the meeting and will disclose the results for those items in a Current Report on Form 8-K filed with the Securities and Exchange Commission within four business days of the Annual Meeting date. The press release with voting results will also be available on our website atwww.3M.com/profile/pressbox/index.jhtml.
Delivery of Documentsdocuments to Stockholders Sharingshareholders sharing an Addressaddress
Securities and Exchange Commission rules allow us to deliver a single copy of an annual report and proxy statement to any household not participating in electronic proxy material delivery at which two or more stockholdersshareholders reside, if we believe the stockholdersshareholders are members of the same family (a practice called “householding”). We believe that householding benefits both you and the Company by eliminating duplicate mailings to stockholdersshareholders living at the same address and by reducing our printing and mailing costs. Each stockholdershareholder will continue to receive a separate proxy card or voting instruction card.
Your household may have received a single set of proxy materials this year. If you prefer to receive your own copy now or in future years, please request a duplicate set by calling 1-800-579-1639, by going towww.proxyvote.com, by e-mailingsendmaterial@proxyvote.com,, or by writing to 3M Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Alternatively, if your household received multiple sets of proxy materials this year, and members of your household who are entitled to receive proxy materials would all prefer to receive only a single set of proxy materials, you may submit such a request as specified in the preceding sentence.
If a broker or other nominee holds your shares, you may continue to receive some duplicate mailings. Certain brokers will eliminate duplicate account mailings by allowing stockholdersshareholders to consent to such elimination, or through implied consent if a stockholdershareholder does not request continuation of duplicate mailings. Since not all brokers and nominees may offer stockholdersshareholders the opportunity this year to eliminate duplicate mailings, you may need to contact your broker or other nominee directly to discontinue duplicate mailings to your household.
| 2020 Proxy Statement | 101 |
List of Stockholdersshareholders
A list of the stockholdersshareholders of record entitled to vote at the Annual Meeting will be available for inspection at the Annual Meeting for any purpose germane to the meeting. The list also will be available for ten days prior to the meeting between theduring normal business hours of 7:45 a.m. and 4:30 p.m., Eastern Daylight Time, at Aearo Technologies, 7911 Zionsville Road, Indianapolis, Indiana 46268,3M Center, St. Paul, MN 55144, by contacting the Secretary of the Company.
Other information Requirements for submission of stockholder proposals for next year’s Annual Meeting
Cost of Proxy Solicitationproxy solicitation
3M will pay for the cost of preparing, assembling, printing, mailing, and distributing these proxy materials. You will need to obtain your own Internet access if you choose to access the proxy materials and/or vote over the Internet. In addition to mailing these proxy materials, the solicitation of proxies or votes may be made in person, by telephone, or by electronic communication by our directors, officers, and employees, who will not receive any additional compensation for these solicitation activities. We have hired Georgeson Shareholder Communications, Inc. to assist us in the distribution of proxy materials and the solicitation of votes. We will pay Georgeson Shareholder Communications, Inc. a fee of $20,000 plus expenses for these services. We will also reimburse brokerage houses and other custodians, nominees, and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to beneficial owners of stock.
Our transfer agent is EQ Shareowner Services. All communications concerning stockholdersshareholders of record accounts, including address changes, name changes, common stock transfer requirements, and similar issues can be handled by contacting EQ Shareowner Services at 1-800-401-1952 (U.S.), 651-450-4064 (outside the U.S.),www.shareowneronline.com, or in writing, P.O. Box 64854, St. Paul, MN 55164-0854.
Requirements for submission of stockholdershareholder proposals for next year’s Annual Meeting
In order for a stockholdershareholder proposal to be considered for inclusion in 3M’s Proxy Statement for next year’s Annual Meeting, our Corporate Secretary must receive the proposal by November 28, 2019.25, 2020. Such proposals must be sent via registered, certified, or express mail (or other means that allows the stockholdershareholder to determine when the proposal was received by the Company) to: Gregg M. Larson,Ivan K. Fong, Senior Vice President, Deputy General Counsel and Secretary, 3M Company, 3M Center, Building 220-13E-26A, St. Paul, MN 55144-1000. Such proposals must comply with the Securities and Exchange Commission’s regulations regarding the inclusion of stockholdershareholder proposals in Company sponsored proxy materials, such as the stockholdershareholder continuing to own a minimum number of shares until the Annual Meeting and appearing in person or through an authorized representative at the meeting to present the proposal.
Alternatively, stockholdersshareholders intending to present a proposal at next year’s Annual Meeting without having it included in the Company’s Proxy Statement must comply with the requirements set forth in the Company’s Bylaws, a copy of which is available atwww.3M.comunder Investor Relations — Governance. Our Bylaws require, among other things, that our Corporate Secretary receive written notice from the stockholdershareholder no earlier than the close of business on November 28, 2019,25, 2020, and no later than the close of business on December 28, 2019.25, 2020. The notice must contain the information required by our Bylaws.
Proposals received by the Corporate Secretary after the dates mentioned will not be included in the Proxy Statement or acted upon at next year’s Annual Meeting.
By Order of the Board of Directors.
Gregg M. Larson
Ivan K. Fong
Senior Vice President, Deputy General Counsel and Secretary
| 102 | 3M Company |
Reconciliation of GAAP to non-GAAP financial measures(millions, (millions, except per-share amounts) (unaudited)
In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (GAAP), the Company also discusses non-GAAP measures that exclude special items. Operating income, net income attributable to 3M (hereafter referred to as “net income”), and diluted earnings per share attributable to 3M common stockholdersshareholders (hereafter referred to as “diluted earnings per share”) are all measures for which 3M provides the reported GAAP measure and an adjusted measure (excluding special items). Special items are not in accordance with, nor are they a substitute for, GAAP measures. Special items represent significant charges or credits that are important to an understanding of the Company’s ongoing operations. The Company uses these non-GAAP measures to evaluate and manage the Company’s operations. The Company believes that discussion of results excluding special items is meaningful to investors as it provides a useful analysis of ongoing operating trends. The determination of special items may not be comparable to similarly titled measures used by other companies.
The reconciliations provided below reconcile the non-GAAP financial measures with the most directly comparable GAAP financial measures for the twelve months ended December 31, 2019, 2018 and 2017:
ADJUSTED EARNINGS PER SHARE
(non-GAAP measure)
| 2019 | ||||||||||||||||||||||||||||
| (Dollars in millions, except per share amounts) | Reported GAAP Measure | Adjustment for Significant Litigation Related Charges(a) | Adjustment for loss on deconsolidation of Venezuelan subsidiary(b) | Adjustment for Gas & Flame Sale Gain(c) | Adjustment for Fourth Quarter Restructuring Items(d) | Adjustment for Acelity and M*Modal Acquisitions(e) | Adjusted Non-GAAP Measure | |||||||||||||||||||||
| Net Sales | $ | 32,136 | $ | 32,136 | ||||||||||||||||||||||||
| Operating Income | 6,174 | 762 | — | (112) | 134 | 63 | 7,022 | |||||||||||||||||||||
| Operating Income Margin | 19.2% | 21.9% | ||||||||||||||||||||||||||
| Net income attributable to 3M | $ | 4,570 | $ | 590 | $ | 162 | $ | (128) | $ | 117 | $ | 108 | $ | 5,419 | ||||||||||||||
| Earnings per diluted share | $ | 7.81 | $ | 1.01 | $ | 0.28 | $ | (0.21) | $ | 0.20 | $ | 0.18 | $ | 9.27 | ||||||||||||||
| Earnings per diluted share percent change | -12.1% | -6.9% | ||||||||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||||||||||||||
| (Dollars in millions, except per share amounts) | Reported GAAP Measure | Adjustment for MN NRD Resolution(f) | Adjustment for Measurement Period Accounting of TCJA(g) | CMD Sale Gain, net of Restructuring Items(h) | Adjusted Non-GAAP Measure | Reported GAAP Measure | Adjustment for TCJA(i) | Adjusted Non-GAAP Measure | ||||||||||||||||||||||||
| Net Sales | $ | 32,765 | $ | 32,765 | $ | 31,657 | $ | 31,657 | ||||||||||||||||||||||||
| Operating Income | 7,207 | 897 | — | (381) | 7,723 | 7,692 | — | 7,692 | ||||||||||||||||||||||||
| Operating Income Margin | 22.0% | 23.6% | 24.3% | 24.3% | ||||||||||||||||||||||||||||
| Net income attributable to 3M | $ | 5,349 | $ | 770 | $ | 176 | $ | (299) | $ | 5,996 | $ | 4,858 | $ | 762 | $ | 5,620 | ||||||||||||||||
| Earnings per diluted share | $ | 8.89 | $ | 1.28 | $ | 0.29 | $ | (0.50) | $ | 9.96 | $ | 7.93 | $ | 1.24 | $ | 9.17 | ||||||||||||||||
| Earnings per diluted share percent change | 12.1% | 8.6% | -2.8% | 12.4% | ||||||||||||||||||||||||||||
| 103 |
| 2018 | 2017 | 2016 | |||||||||||||||||||||||||||||||
| (Dollars in millions, except per share amounts) | Reported GAAP Measure | Adjustment for MN NRD Resolution(a) | Adjustment for Measurement Period Accounting of TCJA(b) | CMD Sale Gain, net of Restructuring Items(c) | Adjusted Non-GAAP Measure | Reported GAAP Measure | Adjustment for TCJA(d) | Adjusted Non- GAAP Measure | Reported GAAP Measure | ||||||||||||||||||||||||
| Net Sales | $32,765 | $32,765 | $31,657 | $31,657 | $30,109 | ||||||||||||||||||||||||||||
| Operating Income | 7,207 | $897 | $— | $(381) | 7,723 | 7,692 | $— | 7,692 | 7,027 | ||||||||||||||||||||||||
| Operating Income Margin | 22.0 | % | 23.6 | % | 24.3 | % | 24.3 | % | 23.3 | % | |||||||||||||||||||||||
| Net income attributable to 3M | $5,349 | $770 | $176 | $(299) | $5,996 | $4,858 | $762 | $5,620 | $5,050 | ||||||||||||||||||||||||
| Earnings per diluted share | $8.89 | $1.28 | $0.29 | $(0.50) | $9.96 | $7.93 | $1.24 | $9.17 | $8.16 | ||||||||||||||||||||||||
| Earnings per diluted share percent change | 12.1 | % | 8.6 | % | -2.8 | % | 12.4 | % | |||||||||||||||||||||||||
FREE CASH FLOW
(non-GAAP measure)
| 2019 | ||||||||||||||||||||||||
| Reported Measure | Adjustment for Significant Litigation Related Charges(a) | Adjustment for loss on deconsolidation of Venezuelan subsidiary(b) | Adjustment for Gas & Flame Sale Gain(c) | Adjustment for Fourth Quarter Restructuring Items(d) | Adjusted Non-GAAP Measure | |||||||||||||||||||
| Major GAAP Cash Flow Categories | ||||||||||||||||||||||||
| Net cash provided by operating activities | $ | 7,070 | ||||||||||||||||||||||
| Net cash provided by (used in) investing activities | (6,444) | |||||||||||||||||||||||
| Net cash used in financing activities | (1,124) | |||||||||||||||||||||||
| FREE CASH FLOW (non-GAAP measure) | ||||||||||||||||||||||||
| Net cash provided by operating activities | $ | 7,070 | $ | 274 | $ | — | $ | (17) | $ | — | $ | 7,327 | ||||||||||||
| Purchases of property, plant and equipment | (1,699) | (1,699) | ||||||||||||||||||||||
| Free Cash Flow (j) | $ | 5,371 | $ | 274 | $ | — | $ | (17) | $ | — | $ | 5,628 | ||||||||||||
| Net Income Attributable | $ | 4,570 | $ | 590 | $ | 162 | $ | (128) | $ | 117 | $ | 5,311 | ||||||||||||
| Free Cash Flow Conversion (j) | 117.5% | 106.0% | ||||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||||||||||||||
| Reported Measure | Adjustment for MN NRD Resolution(f) | Adjustment for Measurement Period Accounting of TCJA(g) | CMD Sale Gain, net of Restructuring Items(h) | Adjusted Non-GAAP Measure | Reported Measure | Adjustment for TCJA(i) | Adjusted Non-GAAP Measure | |||||||||||||||||||||||||
| Major GAAP Cash Flow Categories | ||||||||||||||||||||||||||||||||
| Net cash provided by operating activities | $ | 6,439 | $ | 6,240 | ||||||||||||||||||||||||||||
| Net cash provided by (used in) investing activities | 222 | (3,086) | ||||||||||||||||||||||||||||||
| Net cash used in financing activities | (6,701) | (2,655) | ||||||||||||||||||||||||||||||
| FREE CASH FLOW (non-GAAP measure) | ||||||||||||||||||||||||||||||||
| Net cash provided by operating activities | $ | 6,439 | $ | 679 | $ | 24 | $ | 7,142 | $ | 6,240 | $ | 600 | $ | 6,840 | ||||||||||||||||||
| Purchases of property, plant and equipment | (1,577) | (1,577) | (1,373) | (1,373) | ||||||||||||||||||||||||||||
| Free Cash Flow (j) | $ | 4,862 | $ | 679 | $ | — | $ | 24 | $ | 5,565 | $ | 4,867 | $ | 600 | $ | 5,467 | ||||||||||||||||
| Net Income Attributable | $ | 5,349 | $ | 770 | $ | 176 | $ | (299) | $ | 5,996 | $ | 4,858 | $ | 762 | $ | 5,620 | ||||||||||||||||
| Free Cash Flow Conversion (j) | 90.9% | 92.8% | 100.2% | 97.3% | ||||||||||||||||||||||||||||
| 104 | 3M Company |
Appendix A Reconciliation of GAAP to RETURN ON INVESTED CAPITAL
(non-GAAP financial measuresmeasure)
| 2019 | ||||||||||||||||||||||||||||
| Reported Measure | Adjustment for Significant Litigation Related Charges(a) | Adjustment for loss on deconsolidation of Venezuelan subsidiary(b) | Adjustment for Gas & Flame Sale Gain(c) | Adjustment for Fourth Quarter Restructuring Items(d) | Adjustment for Acelity and M*Modal Acquisitions(e) | Adjusted Non-GAAP Measure | ||||||||||||||||||||||
| Net income including non-controlling interest | $ | 4,582 | $ | 590 | $ | 162 | $ | (128 | ) | $ | 117 | $ | 49 | $ | 5,372 | |||||||||||||
| Interest expense (after-tax) (1) | 359 | 359 | ||||||||||||||||||||||||||
| Adjusted net income (Return) | $ | 4,941 | $ | 590 | $ | 162 | $ | (128 | ) | $ | 117 | $ | 49 | $ | 5,731 | |||||||||||||
| Average shareholders’ equity (including non-controlling interest) (2) | $ | 10,198 | $ | 327 | $ | — | $ | (8 | ) | $ | 29 | $ | (3,512 | ) | $ | 7,034 | ||||||||||||
| Average short-term and long-term debt (3) | 17,982 | — | — | — | — | — | 17,982 | |||||||||||||||||||||
| Average invested capital | $ | 28,180 | $ | 327 | $ | — | $ | (8 | ) | $ | 29 | $ | (3,512 | ) | $ | 25,016 | ||||||||||||
| Return on Invested Capital (k) | 17.5% | 22.9% | ||||||||||||||||||||||||||
| (1) Effective income tax rate used for interest expense | 19.8% | 19.8% | ||||||||||||||||||||||||||
| (2) Calculation of average equity (includes non-controlling interest) | ||||||||||||||||||||||||||||
| Ending total equity as of: | ||||||||||||||||||||||||||||
| March 31 | $ | 9,757 | $ | 424 | $ | — | $ | — | $ | — | $ | (947 | ) | $ | 9,234 | |||||||||||||
| June 30 | 10,142 | 418 | — | (31 | ) | — | (935 | ) | 9,594 | |||||||||||||||||||
| September 30 | 10,764 | 149 | — | (3 | ) | — | (4,173 | ) | 6,737 | |||||||||||||||||||
| December 31 | 10,126 | 316 | — | — | 117 | (7,990 | ) | 2,569 | ||||||||||||||||||||
| Average total equity | $ | 10,198 | $ | 327 | $ | — | $ | (8 | ) | $ | 29 | $ | (3,512 | ) | $ | 7,034 | ||||||||||||
| (3) Calculation of average debt | ||||||||||||||||||||||||||||
| Ending short-term and long-term debt as of: | ||||||||||||||||||||||||||||
| March 31 | $ | 16,370 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 16,370 | ||||||||||||||
| June 30 | 15,806 | — | — | — | — | — | 15,806 | |||||||||||||||||||||
| September 30 | 19,439 | — | — | — | — | — | 19,439 | |||||||||||||||||||||
| December 31 | 20,313 | — | — | — | — | — | 20,313 | |||||||||||||||||||||
| Average short-term and long-term debt | $ | 17,982 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 17,982 | ||||||||||||||
| 105 |
| 2018 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Reported Measure | Adjustment for MN NRD Resolution(a) | Adjustment for Measurement Period Accounting of TCJA(b) | CMD Sale Gain, net of Restructuring Items(c) | Adjusted Non-GAAP Measure | Reported Measure | Adjustment for TCJA(d) | Adjusted Non-GAAP Measure | Reported GAAP Measure | |||||||||||||||||||||||||||||||||
| Major GAAP Cash | ||||||||||||||||||||||||||||||||||||||||||
| Flow Categories | ||||||||||||||||||||||||||||||||||||||||||
| Net cash provided by | $6,439 | $6,240 | $6,662 | |||||||||||||||||||||||||||||||||||||||
| operating activities | ||||||||||||||||||||||||||||||||||||||||||
| Net cash provided by | 222 | (3,086 | ) | (1,403 | ) | |||||||||||||||||||||||||||||||||||||
| (used in) investing activities | ||||||||||||||||||||||||||||||||||||||||||
| Net cash used in | (6,701 | ) | (2,655 | ) | (4,626 | ) | ||||||||||||||||||||||||||||||||||||
| financing activities | ||||||||||||||||||||||||||||||||||||||||||
| Free Cash Flow | ||||||||||||||||||||||||||||||||||||||||||
| (non-GAAP measure) | ||||||||||||||||||||||||||||||||||||||||||
| Net cash provided by | $6,439 | $679 | $— | $24 | $7,142 | $6,240 | $600 | $6,840 | $6,662 | |||||||||||||||||||||||||||||||||
| operating activities | ||||||||||||||||||||||||||||||||||||||||||
| Purchases of property, | (1,577 | ) | — | — | — | (1,577 | ) | (1,373 | ) | — | (1,373 | ) | (1,420 | ) | ||||||||||||||||||||||||||||
| plant and equipment | ||||||||||||||||||||||||||||||||||||||||||
| Free Cash Flow(e) | $4,862 | $679 | $— | $24 | $5,565 | $4,867 | $600 | $5,467 | $5,242 | |||||||||||||||||||||||||||||||||
| Net Income Attributable | $5,349 | $770 | $176 | $(299 | ) | $5,996 | $4,858 | $762 | $5,620 | $5,050 | ||||||||||||||||||||||||||||||||
| Free Cash Flow Conversion(e) | 90.9 | % | 92.8 | % | 100.2 | % | 97.3 | % | 103.8 | % | ||||||||||||||||||||||||||||||||
| 2018 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Reported Measure | Adjustment for MN NRD Resolution(a) | Adjustment for Measurement Period Accounting of TCJA(b) | CMD Sale Gain, net of Restructuring Items(c) | Adjusted Non-GAAP Measure | Reported Measure | Adjustment for TCJA(d) | Adjusted Non-GAAP Measure | Reported GAAP Measure | |||||||||||||||||||||||||||||||||||
| Net income including | $5,363 | $770 | $176 | $(263 | ) | $6,046 | $4,869 | $762 | $5,631 | $5,058 | ||||||||||||||||||||||||||||||||||
| non-controlling interest | ||||||||||||||||||||||||||||||||||||||||||||
| Interest expense (after-tax) | 268 | — | — | — | 268 | 208 | — | 208 | 143 | |||||||||||||||||||||||||||||||||||
| Adjusted net income (Return) | $5,631 | $770 | $176 | $(263 | ) | $6,314 | $5,077 | $762 | $5,839 | $5,201 | ||||||||||||||||||||||||||||||||||
| Average shareholders’ equity | $10,407 | $(136 | ) | $207 | $236 | $10,714 | $11,627 | $191 | $11,818 | $11,316 | ||||||||||||||||||||||||||||||||||
| (including non-controlling | ||||||||||||||||||||||||||||||||||||||||||||
| interest)(2) | ||||||||||||||||||||||||||||||||||||||||||||
| Average short-term and | 14,912 | — | — | — | 14,912 | 12,156 | (150) | 12,006 | 11,725 | |||||||||||||||||||||||||||||||||||
| long-term debt(3) | ||||||||||||||||||||||||||||||||||||||||||||
| Average invested capital | $25,318 | $(136) | $207 | $236 | $25,626 | $23,783 | $41 | $23,824 | $23,041 | |||||||||||||||||||||||||||||||||||
| Return on Invested Capital(f) | 22.2 | % | 24.6 | % | 21.3 | % | 24.5 | % | 22.6 | % | ||||||||||||||||||||||||||||||||||
| (1) Effective income tax rate | 23.4 | % | 20.0 | % | 35.5 | % | 35.5 | % | 28.3 | % | ||||||||||||||||||||||||||||||||||
| used for interest expense | ||||||||||||||||||||||||||||||||||||||||||||
| (2) Calculation of | ||||||||||||||||||||||||||||||||||||||||||||
| average equity (includes | ||||||||||||||||||||||||||||||||||||||||||||
| non-controlling interest) | ||||||||||||||||||||||||||||||||||||||||||||
| Ending total equity as of: | ||||||||||||||||||||||||||||||||||||||||||||
| March 31 | $11,039 | $(139 | ) | $217 | $— | $11,117 | $11,040 | $— | $11,040 | $11,495 | ||||||||||||||||||||||||||||||||||
| June 30 | 10,428 | (155 | ) | 217 | 377 | 10,867 | 11,644 | — | 11,644 | 11,658 | ||||||||||||||||||||||||||||||||||
| September 30 | 10,311 | (155 | ) | 217 | 285 | 10,658 | 12,202 | — | 12,202 | 11,769 | ||||||||||||||||||||||||||||||||||
| December 31 | 9,848 | (95 | ) | 176 | 282 | 10,211 | 11,622 | 762 | 12,384 | 10,343 | ||||||||||||||||||||||||||||||||||
| Average total equity | $10,407 | $(136 | ) | $207 | $236 | $10,714 | $11,627 | $191 | $11,818 | $11,316 | ||||||||||||||||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||||||||||||||
| Reported Measure | Adjustment for MN NRD Resolution(f) | Adjustment for Measurement Period Accounting of TCJA(g) | CMD Sale Gain, net of Restructuring Items(h) | Adjusted Non-GAAP Measure | Reported Measure | Adjustment for TCJA(i) | Adjusted Non-GAAP Measure | |||||||||||||||||||||||||
| Net income including non-controlling interest | $ | 5,363 | $ | 770 | $ | 176 | $ | (263) | $ | 6,046 | $ | 4,869 | $ | 762 | $ | 5,631 | ||||||||||||||||
| Interest expense (after-tax) (1) | 268 | 268 | 208 | 208 | ||||||||||||||||||||||||||||
| Adjusted net income (Return) | $ | 5,631 | $ | 770 | $ | 176 | $ | (263) | $ | 6,314 | $ | 5,077 | $ | 762 | $ | 5,839 | ||||||||||||||||
| Average shareholders’ equity (including non-controlling interest) (2) | $ | 10,407 | $ | (136) | $ | 207 | $ | 236 | $ | 10,714 | $ | 11,627 | $ | 191 | $ | 11,818 | ||||||||||||||||
| Average short-term and long-term debt (3) | 14,912 | — | — | — | 14,912 | 12,156 | (150) | 12,006 | ||||||||||||||||||||||||
| Average invested capital | $ | 25,318 | $ | (136) | $ | 207 | $ | 236 | $ | 25,626 | $ | 23,783 | 41 | $ | 23,824 | |||||||||||||||||
| Return on Invested Capital (k) | 22.2% | 24.6% | 21.3% | 24.5% | ||||||||||||||||||||||||||||
| (1) Effective income tax rate used for interest expense | 23.4% | 20.0% | 35.5% | 35.5% | ||||||||||||||||||||||||||||
| (2) Calculation of average equity (includes non-controlling interest) | ||||||||||||||||||||||||||||||||
| Ending total equity as of: | ||||||||||||||||||||||||||||||||
| March 31 | $ | 11,039 | $ | (139) | $ | 217 | $ | — | $ | 11,117 | $ | 11,040 | $ | — | $ | 11,040 | ||||||||||||||||
| June 30 | 10,428 | (155) | 217 | 377 | 10,867 | 11,644 | — | 11,644 | ||||||||||||||||||||||||
| September 30 | 10,311 | (155) | 217 | 285 | 10,658 | 12,202 | — | 12,202 | ||||||||||||||||||||||||
| December 31 | 9,848 | (95) | 176 | 282 | 10,211 | 11,622 | 762 | 12,384 | ||||||||||||||||||||||||
| Average total equity | $ | 10,407 | $ | (136) | $ | 207 | $ | 236 | $ | 10,714 | $ | 11,627 | $ | 191 | $ | 11,818 | ||||||||||||||||
| (3) Calculation of average debt | ||||||||||||||||||||||||||||||||
| Ending short-term and long-term debt as of: | ||||||||||||||||||||||||||||||||
| March 31 | $ | 15,660 | $ | — | $ | — | $ | — | $ | 15,660 | $ | 11,711 | $ | — | $ | 11,711 | ||||||||||||||||
| June 30 | 14,519 | — | — | — | 14,519 | 11,301 | — | 11,301 | ||||||||||||||||||||||||
| September 30 | 14,846 | — | — | — | 14,846 | 11,663 | — | 11,663 | ||||||||||||||||||||||||
| December 31 | 14,622 | — | — | — | 14,622 | 13,949 | (600) | 13,349 | ||||||||||||||||||||||||
| Average short-term and long-term debt | $ | 14,912 | $ | — | $ | — | $ | — | $ | 14,912 | $ | 12,156 | $ | (150) | $ | 12,006 | ||||||||||||||||
Appendix A Reconciliation of GAAP to non-GAAP financial measures
| 2018 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Reported Measure | Adjustment for MN NRD Resolution(a) | Adjustment for Measurement Period Accounting of TCJA(b) | CMD Sale Gain, net of Restructuring Items(c) | Adjusted Non-GAAP Measure | Reported Measure | Adjustment for TCJA(d) | Adjusted Non-GAAP Measure | Reported GAAP Measure | |||||||||||||||||||||||||||
| (3) Calculation of | ||||||||||||||||||||||||||||||||||||
| average debt | ||||||||||||||||||||||||||||||||||||
| Ending short-term and | ||||||||||||||||||||||||||||||||||||
| long-term debt as of: | ||||||||||||||||||||||||||||||||||||
| March 31 | $15,660 | $— | $— | $— | $15,660 | $11,711 | $— | $11,711 | $11,139 | |||||||||||||||||||||||||||
| June 30 | 14,519 | — | — | — | 14,519 | 11,301 | — | 11,301 | 11,749 | |||||||||||||||||||||||||||
| September 30 | 14,846 | — | — | — | 14,846 | 11,663 | — | 11,663 | 12,361 | |||||||||||||||||||||||||||
| December 31 | 14,622 | — | — | — | 14,622 | 13,949 | (600) | 13,349 | 11,650 | |||||||||||||||||||||||||||
| Average short-term | $14,912 | $— | $— | $— | $14,912 | $12,156 | $(150) | $12,006 | $11,725 | |||||||||||||||||||||||||||
| and long-term debt | ||||||||||||||||||||||||||||||||||||
| (a) | In 2019, the Company recorded significant litigation-related charges of $762 million ($590 million after tax) related to PFAS (certain perfluorinated compounds) matters and coal mine dust respirator mask lawsuits of which $214 million ($166 million after tax) occurred in the fourth quarter. |
| (b) | In the second quarter of 2019, 3M recorded a pre-tax charge of $162 million related to the deconsolidation of the Company’s Venezuelan subsidiary. |
| (c) | In August 2019, 3M closed on the sale of its gas and flame detection business, a leader in fixed and portable gas and flame detection, to Teledyne Technologies Incorporated. 3M’s gas and flame business was part of the overall October 2017 acquisition of underlying legal entities and associated assets of Scott Safety. This business has annual sales of approximately $120 million. The transaction resulted in a pre-tax gain of $112 million that was reported within the Company’s Safety and Industrial business. |
| (d) | During the fourth quarter of 2019, in light of a slower than expected 2019 and to realign 3M’s organizational structure and operating model to improve growth and operational efficiency, respectively, management approved and committed to undertake certain restructuring actions. The Company recorded a fourth quarter 2019 pre-tax charge of $134 million. |
| (e) | In February 2019, 3M completed the acquisition of all of the ownership interests of the technology business of M*Modal for $0.7 billion of cash, net of cash acquired, and assumption of $0.3 billion of M*Modal’s debt. In October 2019, 3M completed the acquisition of all of the ownership interests of Acelity Inc. and its KCI subsidiaries for consideration of $4.5 billion net of cash acquired as shown in the table below, and assumption of $2.3 billion of debt. |
| (f) | In February 2018, 3M reached an agreement with the State of Minnesota that resolved the previously disclosed Natural Resource Damages (NRD) lawsuit filed by the State against the Company related to certain PFCs present in the environment. Under the terms of the settlement, 3M agreed to provide an $850 million grant to the State for a special “3M Water Quality and Sustainability Fund.” This Fund will enable projects that support water sustainability in the Twin Cities East Metro region, such as continued delivery of water to residents and enhancing groundwater recharge to support sustainable growth. The projects will also result in habitat and recreation improvements, such as fishing piers, trails, and open space preservation. 3M recorded a charge of $897 million ($770 million after-tax), inclusive of legal fees and other related obligations, in the first quarter of 2018 associated with the resolution of this matter. |
| 106 | 3M |
| During the first quarter of 2018, 3M recorded a tax expense of $217 million related to a measurement period adjustment to the provisional amounts recorded in December 2017 from the enactment of the Tax Cuts and Jobs Act (TCJA). In the fourth quarter 2018, 3M finalized the tax impact related to TCJA with a reversal of previously recorded tax expense in the amount of $41 million. | |
| In June 2018, 3M completed the sale of substantially all of its Communication Markets Division and reflected a pre-tax gain of $494 million as a result of this divestiture. Additionally, in December 2018, completed the sale of the remaining telecommunications system integration services portion of the business based in Germany and reflected a pre-tax gain of $15 million as a result of this divestiture. Both divestitures were reported within the Company’s Electronics and Energy business. During the second quarter and fourth quarter of 2018, management approved and committed to undertake certain restructuring actions related to addressing corporate functional costs following the Communication Markets Division divestiture. These actions resulted in a second quarter 2018 pre-tax charge of $105 million and a fourth quarter 2018 pre-tax charge of $22 million, net of adjustments for reductions in cost estimates. | |
| During the fourth quarter of 2017, 3M recorded a net tax expense of $762 million related to the enactment of the Tax Cuts and Jobs Act (the “TCJA”). The expense is primarily related to the TCJA’s transition tax on previously unremitted earnings of non-U.S. subsidiaries and was net of remeasurement of 3M’s deferred tax assets and liabilities considering the TCJA’s newly enacted tax rates and certain other impacts. This provisional amount was subject to adjustment during the measurement period of up to one year following the December 2017 enactment of the TCJA, as provided by recent SEC guidance. In addition to reporting financial results in accordance with GAAP, the Company also provides non-GAAP measures that adjust for the net impact of enactment of the TCJA. This item represents a significant charge that impacted the Company’s financial results. Income, earnings per share, and the effective tax rate are all measures for which 3M provides the reported GAAP measure and an adjusted measure. The adjusted measures are not in accordance with, nor are they a substitute for, GAAP measures. Because of the TCJA, the Company made a $600 million pension contribution to its U.S. defined benefit pension plan. This contribution did not impact 2017 net income, but it did impact Free Cash Flow Conversion and ROIC. The Company considers these non-GAAP measures in evaluating and managing the Company’s operations. The Company believes that discussion of results adjusted for this item is meaningful to investors as it provides a useful analysis of ongoing underlying operating trends. |
| |
Appendix A Reconciliation of GAAP to non-GAAP financial measures
| Free cash flow and free cash flow conversion are not defined under GAAP. Therefore, they should not be considered a substitute for income or cash flow data prepared in accordance with GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The Company defines free cash flow conversion as free cash flow divided by net income attributable to 3M. The Company believes free cash flow and free cash flow conversion is meaningful to investors as they are useful measures of performance and the Company uses these measures as an indication of the strength of the Company and its ability to generate cash. In 2017, net cash provided by operating activities was impacted by 3M’s enactment of the TCJA, along with a U.S. pension contribution of $600 million that 3M made following the signing of tax reform. On a combined basis, these items benefited free cash flow conversion by three percentage points. Refer to the proceeding “Cash Flows from Operating Activities” section for discussion of additional items that impacted operating cash flow. Refer to the proceeding “Cash Flows from Investing Activities” section for discussion on capital spending for property, plant and equipment. | |
| Return on Invested Capital (ROIC) is not defined under U.S. generally accepted accounting principles. Therefore, ROIC should not be considered a substitute for other measures prepared in accordance with GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines ROIC as adjusted net income (net income including non-controlling interest plus after-tax interest expense) divided by average invested capital (equity plus debt). The Company believes ROIC is meaningful to investors as it focuses on shareholder value creation. |
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ADMISSION TICKET AND PHOTO ID REQUIRED FOR THE ANNUAL MEETING | |
Please note that you must pre-register and bring an admission ticket and a valid photo ID to attend the Annual Meeting. For more details, please read “Annual Meeting Admission” on page |
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| This Proxy Statement was printed on recycled paper with soy based inks in a facility that uses 100% renewable wind energy. |
3M CENTER
BLDG.
220-9E-02
ST. PAUL, MN 55144-1000
  | SCAN TO |   |
VOTE BY INTERNET -www.proxyvote.com or scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:10:59 p.m. EasternCentral Daylight Time on May 13, 2019*11, 2020*. Have your proxy card in hand when you access the Web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:10:59 p.m. EasternCentral Daylight Time on May 13, 2019*11, 2020*. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to 3M Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, so that it is received by May 13, 2019*11, 2020*.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by 3M Company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
*Up until 11:10:59 p.m. EasternCentral Daylight Time on May 12, 2019,10, 2020, for participants in 3M's3M’s Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
E96940-P32436-Z76245 KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
| 3M COMPANY | ||||||||||||
The Board of Directors recommends you vote FOR proposals 1, 2 and 3: | |||||||||||||||||
| |||||||||||||||||
| 1. | To elect | ||||||||||||||||
| Nominees: | For | Against | Abstain | ||||||||||||||
| 1a. | Thomas “Tony” K. Brown | ☐ | ☐ | ☐ | |||||||||||||
| 1b. | Pamela J. Craig | ☐ | ☐ | ☐ | |||||||||||||
| 1c. | |||||||||||||||||
| David B. Dillon | |||||||||||||||||
| ☐ | ☐ | ☐ | |||||||||||||||
1d. | Michael L. Eskew | ☐ | ☐ | ☐ | |||||||||||||
1e. | Herbert L. Henkel | ☐ | ☐ | ☐ | |||||||||||||
1f. | Amy E. Hood | ☐ | ☐ | ☐ | |||||||||||||
| 1g. | ☐ | ☐ | ☐ | ||||||||||||||
| 1h. | ☐ | ☐ | ☐ | ||||||||||||||
| For address changes and/or comments, please check this box and write them on the back where indicated. | ☐ | ||||||||||||||||
| | |||||||||||
| For | Against | Abstain | |||||||||||
| 1i. | Gregory R. Page | ☐ | ☐ | ☐ | |||||||||
| 1j. | Michael F. Roman | ☐ | ☐ | ☐ | |||||||||
| 1k. | Patricia A. Woertz | ☐ | ☐ | ☐ | |||||||||
| 2. | To ratify the appointment of PricewaterhouseCoopers LLP as 3M’s independent registered public accounting firm. | ☐ | ☐ | ☐ | |||||||||
| 3. | Advisory approval of executive compensation. | ☐ | ☐ | ☐ | |||||||||
| The Board of Directors recommends you vote AGAINST proposal 4: | For | Against | Abstain | ||||||||||
| 4. | Shareholder proposal on setting target amounts for CEO compensation. | ☐ | ☐ | ☐ | |||||||||
| NOTE: Such other business as may properly come before the meeting or any adjournment or postponement thereof. | |||||||||||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | |||||
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| Signature [PLEASE SIGN WITHIN BOX] | Date |
| Signature (Joint Owners) | Date |
NOTICE OF 20192020 ANNUAL MEETING OF STOCKHOLDERS
SHAREHOLDERS*
Tuesday, May 14, 2019,12, 2020, 8:30 a.m. EasternCentral Daylight TimeConrad Indianapolis50 West Washington StreetIndianapolis, Indiana 46204
Archer Hotel
3121 Palm Way
Austin, Texas 78758
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available atwww.proxyvote.com.www.proxyvote.com.
If you plan to attend the meeting in person, please register and print an admission ticket in
advance atwww.proxyvote.com, following the instructions set forth in the Proxy Statement.
You will need the 16-digit control number printed on the other side of this proxy card.
Questions? Please contact us at 1-800-364-3577
*We are actively monitoring the coronavirus (COVID-19) situation. In the event it is not possible or advisable to hold our Annual Meeting in person, we will publicly announce, as soon as practicable before the meeting, a determination to hold the meeting solely by means of remote communication online. In that event, you or your proxyholder could participate, vote and examine the list of shareholders of record by accessing a designated website using your 16-digit control number. Please monitor our investor relations website at https://investors.3m.com for updated information.
E96941-P32436-Z76245
3M COMPANY
The Board of Directors solicits this proxy for use at the Annual Meeting on Tuesday, May 14, 2019.12, 2020.
The stockholder(s)shareholder(s) whose signature(s) appear(s) on the reverse side of this proxy card hereby appoint(s) Gregg M. Larson,Ivan K. Fong, Nicholas C. Gangestad, and Inge G. ThulinMichael F. Roman or any of them, each with full power of substitution, as proxies, to vote all shares of common stock in 3M Company which the stockholder(s)shareholder(s) would be entitled to vote on all matters which may properly come before the 20192020 Annual Meeting of StockholdersShareholders and any adjournments thereof. THE PROXIES SHALL VOTE SUBJECT TO THE DIRECTION INDICATED ON THE REVERSE SIDE OF THIS CARD. THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION UPON OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. THE PROXIES WILL VOTE AS THE BOARD OF DIRECTORS RECOMMENDS WHERE A CHOICE IS NOT SPECIFIED.
FOR PARTICIPANTS IN 3M'S3M’S VOLUNTARY INVESTMENT PLAN AND EMPLOYEE STOCK OWNERSHIP PLAN (VIP), AND THE 3M SAVINGS PLAN:
In accordance with the terms of the VIP and Savings Plan, shares allocated to the respective accounts in these plans on the record date will be voted by the trustee, State Street Bank and Trust Company, in accordance with the instructions indicated on the reverse side of this card, and in accordance with the judgment of the trustee upon other business as may properly come before the meeting and any adjournments or postponements thereof. In addition, participants, as named fiduciaries for voting purposes in the VIP and the Savings Plan, may instruct State Street (as VIP and the Savings Plan trustee) how to vote a proportionate number of the allocated shares for which no instructions are received by following the same instructions. If no instructions are provided or if this card is not received on or before May 12, 2019,10, 2020, shares held in the respective accounts in the VIP and the Savings Plan will be voted by the trustee in the same proportion that the other participants in the VIP and the Savings Plan direct the trustee to vote shares in the respective accounts.
| Address changes/comments: | |||
(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
(Continued, and must be signed and dated on the other side)