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. )
Filed by the Registrantx Filed by a Party other than the Registrant¨
Check the appropriate box:
| Preliminary Proxy Statement |
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material Pursuant to §240.14a-12 |
THE GOODYEAR TIRE & RUBBER COMPANY
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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| (2) | Aggregate number of securities to which the transaction applies: |
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Notice of
20132014 Annual Meeting of Shareholders
and
Proxy Statement
The Goodyear Tire & Rubber Company
200 Innovation Way
Akron, Ohio 44316-0001
| DATE: | April | |||
| TIME: | 4:30 p.m., Akron Time | |||
| PLACE: | Hilton Akron/Fairlawn | |||
| 3180 West Market Street | ||||
| Akron, Ohio 44333 | ||||
YOUR VOTE IS IMPORTANT
Please vote. Most shareholders may vote by internet or telephone as well as by mail.
Please refer to your proxy card or page 78 85 of the Proxy Statement for information on how to vote by
internet or telephone. If you choose to vote by mail, please complete, date and sign your proxy card and
promptly return it in the enclosed envelope.
| RICHARD J. KRAMER | ||
CHAIRMAN OF THE BOARD, | ||
| CHIEF EXECUTIVE OFFICER
| ||
| AND PRESIDENT |
March , 201314, 2014
Dear Shareholders:
You are cordially invited to attend Goodyear’s 20132014 Annual Meeting of Shareholders, which will be held at the Hilton Akron/Fairlawn, 3180 West Market Street, Akron, Ohio, at 4:30 p.m., Akron Time, on Monday, April 15, 2013.14, 2014. During the meeting, we will discuss each item of business described in the Notice of Annual Meeting of Shareholders and Proxy Statement, and give a report on matters of current interest to our shareholders.
This booklet includes the Notice of Annual Meeting as well as the Proxy Statement, which provides information about Goodyear and describes the business we will conduct at the meeting.
We hope you will be able to attend the meeting. Whether or not you plan to attend, it is important that you vote via the internet, by telephone or by completing, dating, signing and promptly returning your proxy card. This will ensure that your shares will be represented at the meeting. If you attend and decide to vote in person, you may revoke your proxy. Remember, your vote is important!
Sincerely, |
|
RICHARD J. KRAMER
|
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For additional information regarding total segment operating income, a non-GAAP measure, including a reconciliation to income before income taxes, see Note to the Consolidated Financial Statements No. 7, “Business Segments” in our Annual Report for the year ended December 31, 2013 that accompanies this Proxy Statement.
NOTICEOFANNUALMEETINGOFSHAREHOLDERS
THE GOODYEAR TIRE & RUBBER COMPANY
20132014 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 201314, 2014
To the Shareholders:
The 20132014 Annual Meeting of Shareholders of The Goodyear Tire & Rubber Company, an Ohio corporation, will be held at the Hilton Akron/Fairlawn, 3180 West Market Street, Akron, Ohio, on Monday, April 15, 201314, 2014 at 4:30 p.m., Akron Time, for the following purposes:
| 1. | To elect the twelve members of the Board of Directors named in the Proxy Statement to serve one-year terms expiring at the |
| 2. | To consider and approve an advisory resolution regarding the compensation of our named executive officers (Proxy Item 2); |
| 3. |
| To consider and approve a proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for |
| 4. | To consider and vote upon a shareholder proposal (Proxy Item 4), if properly presented at the Annual Meeting; and |
| 5. | To act upon such other matters and to transact such other business as may properly come before the meeting or any adjournments thereof. |
The Board of Directors fixed the close of business on February 20, 201318, 2014 as the record date for determining shareholders entitled to notice of, and to vote at, the 20132014 Annual Meeting. Only holders of record of Goodyear common stock at the close of business on February 20, 201318, 2014 will be entitled to vote at the 20132014 Annual Meeting and adjournments, if any, thereof.
March , 201314, 2014
| By order of the Board of Directors: | ||
 | ||
 | ||
David L. Bialosky, Secretary |
Please vote via the internet or by telephone or complete, date and sign
your Proxy and return it promptly in the enclosed envelope.
enclosed envelope, or vote via the internet or by telephone.
I
GENERALINFORMATION
The Goodyear Tire & Rubber Company
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of The Goodyear Tire & Rubber Company, an Ohio corporation (“Goodyear,” “Company,” “we,” “our” or “us”), to be voted at the annual meeting of shareholders to be held April 15, 201314, 2014 (the “Annual Meeting”), and at any adjournments thereof, for the purposes set forth in the accompanying notice.
Goodyear’s executive offices are located at 200 Innovation Way, Akron, Ohio 44316-0001. Our telephone number is 330-796-2121.
Our Annual Report to Shareholders for the year ended December 31, 20122013 is enclosed with this Proxy Statement. The Annual Report is not considered part of the proxy solicitation materials. The approximate date on which this Proxy Statement and the related materials are first being sent to shareholders is March , 2013.14, 2014.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on April 15, 2013:14, 2014:
The Proxy Statement, Proxy Card and Annual Report to Shareholders for the year ended December 31, 20122013 are available atwww.proxyvote.com.
Holders of shares of the common stock, without par value, of Goodyear (the “Common Stock”) at the close of business on February 20, 201318, 2014 (the “record date”) are entitled to notice of, and to vote the shares of Common Stock they hold on the record date at, the Annual Meeting. As of the close of business on the record date, there were 245,528,843248,226,046 shares of Common Stock outstanding and entitled to vote at the Annual Meeting. Each share of Common Stock is entitled to one vote.
In order for any business to be conducted, holders of at least a majority of shares entitled to vote must be represented at the meeting, either in person or by proxy.
The holders of a majority of shares represented at the meeting, whether or not a quorum is present, may adjourn the meeting. If the time and place of the adjourned meeting is announced at the time adjournment is taken, no other notice need be given.
In accordance with Goodyear’s Articles of Incorporation, a director nominee must receive, in an uncontested election of directors for which cumulative voting is not in effect, a greater number of votes cast “for” his or her election than “against” his or her election. Under Ohio law, an incumbent director who is not re-elected will continue in office as a “holdover” director until his or her successor is elected
GENERALINFORMATION
by a subsequent shareholder vote, or his or her earlier resignation, removal from office or death. In order to address “holdover” terms for any incumbent directors who fail to be re-elected under our majority vote standard, our Corporate Governance Guidelines provide that if a director nominee does not receive a majority affirmative vote, he or she will promptly offer his or her resignation as a director to the Board of Directors. Within 90 days, the Board will decide, after taking into account the recommendation of the Governance Committee (in each case excluding the nominee(s) in question), whether to accept the resignation. The Governance Committee and the Board may consider any relevant factors in deciding whether to accept a director’s resignation. The Board’s explanation of its decision shall be promptly disclosed in a filing with the Securities and Exchange Commission.
The affirmative vote of at least a majority of the shares of Common Stock outstanding on the record date is required for a management or shareholder proposal, other than an advisory vote, to be adopted at the Annual
Meeting. When considering the results of advisory votes, the Board of Directors intends to consider only those votes actually cast at the Annual Meeting.
Abstentions and “broker non-votes,” which occur when your broker does not have discretionary voting authority on a matter and you do not provide voting instructions, have the same effect as votes against any proposal voted upon by shareholders but have no effect on the election of directors or advisory votes.
Voting Shares Held in Street Name.Name
If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name,” and these proxy materials are being forwarded to you by your broker, bank or nominee who is considered the shareholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank or nominee on how to vote and are also invited to attend the Annual Meeting. Your broker, bank or nominee has enclosed a voting instruction card for you to use in directing the broker, bank or nominee regarding how to vote your shares. If you do not return the voting instruction card, the broker or other nominee will determine if it has the discretionary authority to vote on the particular matter. Under applicable rules, brokers have the discretion to vote only on matters deemed to be routine, such as the ratification of the selection of an accounting firm (Proxy Item 9)3).Theelection of directors (Proxy Item 1), the executive compensation advisoryvote (Proxy Item 2), and the approval of the 2013 Performance Planshareholder proposal (Proxy Item 3) and the various amendments to our Articles of Incorporation and Code of Regulations (Proxy Items 4 through 8)4) are not considered to be routine matters, andyour broker will not have discretion to vote on those matters unless you specificallyinstruct your broker to do so byreturning your signed voting instruction card.If you do not provide voting instructions to your broker, your shares will not be voted for any director nominee or on any matter on which your broker does not have discretionary authority (resulting in a broker non-vote). Broker non-votes will have the same effect as a vote against a proposal, but will have no effect on the election of directors or advisory votes.
Cumulative Voting for Directors.Directors
In the voting for directors, you have the right to vote cumulatively for the candidates nominated. Under the Ohio General Corporation Law, all of the shares of Common Stock may be voted cumulatively in the election of directors if any shareholder gives written notice to our President, a Vice President or the Secretary not less than 48 hours before the time set for the Annual Meeting, and an announcement of the notice is made at the beginning of the Annual Meeting by the Chairman or the Secretary or by or on behalf of the shareholder giving such notice. If cumulative voting is in effect, you may (a) give one candidate the number of votes equal to twelve times the number of shares of Common Stock you are entitled to vote, or (b) distribute your votes among the twelve candidates as desired.
GENERALINFORMATION
David L. Bialosky, Darren R. WellsLaura K. Thompson and Bertram Bell have been designated as proxies to vote shares of Common Stock in accordance with your instructions. You may give your instructions using the accompanying proxy card, via the internet or by telephone.
Your shares will be voted for the twelve nominees identified at pages 11 through 20,8 through16, unless your instructions are to vote against any one or more of the nominees or to vote cumulatively for one or more of the nominees for election. The proxies may cumulatively vote your shares if they consider it appropriate, except to the extent you expressly withhold authority to cumulate votes as to a nominee.
Your Board of Directors anticipates that all of the nominees named will be available for election. In the event an unexpected vacancy occurs, your proxy may be voted for the election of a new nominee designated by the Board of Directors.
Proxies received and not revoked prior to the Annual Meeting will be voted in favor of each of Proxy Items 2 through 9,and 3, and against Proxy Item 4, unless your instructions are otherwise.
You may revoke or revise your proxy (whether given by mail, via the internet or by telephone) by the delivery of a later proxy or by giving notice to Goodyear in writing or in open meeting. Your proxy revocation or revision will not affect any vote previously taken. If you hold your shares in “street name” please refer
to the information forwarded by your broker, bank or nominee who is considered the shareholder of record for procedures on revoking or changing your voting instructions.
Confidentiality.Confidentiality
Your vote will be confidential except (a) as may be required by law, (b) as may be necessary for Goodyear to assert or defend claims, (c) in the case of a contested election of director(s), or (d) at your express request.
CORPORATEGOVERNANCEPRINCIPLESANDBOARDMATTERS
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
Goodyear is committed to having sound corporate governance principles. Having such principles is essential to running Goodyear’s business efficiently and to maintaining Goodyear’s integrity in the marketplace. Goodyear’s Corporate Governance Guidelines, Business Conduct Manual, Board of Directors and Executive Officers Conflict of Interest Policy and charters for each of the Audit, Compensation, Corporate Responsibility and Compliance, Finance, and Governance Committees are available at http://www.goodyear.com/investor/investorgovernance.html.investor.goodyear.com/governance.cfm. Please note, however, that information contained on the website is not incorporated by reference in this Proxy Statement or considered to be a part of this document. A copy of the committee charters and corporate governance policies may also be obtained upon request to the Goodyear Investor Relations Department.
Board Independence
The Board has determined that ten of the twelve director nominees (Mmes. Peterson and(Mme. Streeter and Messrs. Conaty, Firestone, Geissler, Hellman, McCollough, McGlade, Morell, Palmore and Weidemeyer) are independent within the meaning of Goodyear’s independence standards, which are based on the criteria established by The NASDAQ Stock Market and are included as Annex I to Goodyear’s Corporate Governance Guidelines. Mr. Kramer, our Chairman of the Board, Chief Executive Officer and President, is not considered independent. In addition, in light of his relationship with the United Steelworkers (the “USW”), Mr. Wessel is not considered independent. Further, the Board expects that Mr. Wessel will recuse himself from discussions and deliberations regarding Goodyear’s relationship with the USW. The Board also determined that the nature and size of the ordinary course commercial relationships between Goodyear and Xerox Corporation and between Goodyear and Air Products and Chemicals, Inc. did not impair the independence of Mr. Firestone or Mr. McGlade, respectively. In each case, the relationships were de minimis, constituting less than one-tenth of one percent (0.1%) or less of either Goodyear’s or the other company’s consolidated gross revenues in the current fiscal year and each of the last three completed fiscal years.
Board Structure and Committee Composition
As of the date of this Proxy Statement, Goodyear’s Board has twelvethirteen directors, each elected annually, and the following five committees: (1) Audit, (2) Compensation, (3) Corporate Responsibility and Compliance, (4) Finance, and (5) Governance. The current membership and the function of each of the committees are described below. Each of the committees operates under a written charter adopted by the Board. During 2012,2013, the Board held eightnine meetings. Each director attended at least 75% of all Board and applicable Committee meetings. Directors are expected to attend annual meetings of Goodyear’s shareholders. All of the directors attended the last annual meeting of shareholders.shareholders, except for Mr. Hellman whose attendance was excused since he was travelling outside of the country. As described on Goodyear’s website at http://www.goodyear.com/investor/investor_contact_brd.html,investor.goodyear.com/contactBoard.cfm, shareholders may communicate with the Board or any of the directors (including the Lead Director or the non-management directors as a group) by sending correspondence to the Office of the Secretary, The Goodyear Tire & Rubber Company, 200 Innovation Way, Akron, Ohio 44316-0001. All communications will be compiled by the Secretary and submitted to the Board or the individual directors on a periodic basis.
The members of the Audit Committee are Mr. Firestone, Mr. Geissler, Mr. Hellman (Chairman), Mr. McCollough and Mr. McCollough.Morell. The Board has determined that each member of the Audit Committee
CORPORATEGOVERNANCEPRINCIPLESANDBOARDMATTERS
is independent within the
meaning of Goodyear’s independence standards and applicable Securities and Exchange Commission rules and regulations, and each of Mr. Hellman and Mr. McCollough is an audit committee financial expert. The Committee met sevensix times in 2012.2013.
The Audit Committee assists the Board in fulfilling its responsibilities for oversight of the integrity of Goodyear’s financial statements, Goodyear’s compliance with legal and regulatory requirements related to financial reporting, the independent registered public accounting firm’s qualifications and independence, and the performance of Goodyear’s internal auditors and independent registered public accounting firm. Among other things, the Audit Committee prepares the Audit Committee report for inclusion in the annual proxy statement; annually reviews the Audit Committee charter and the Committee’s performance; appoints, evaluates and determines the compensation of Goodyear’s independent registered public accounting firm; reviews and approves the scope of the annual audit plan; reviews and pre-approves all auditing services and permitted non-audit services (and related fees) to be performed by the independent registered public accounting firm; oversees investigations into complaints concerning financial matters; and reviews policies and guidelines with respect to risk assessment and risk management, including Goodyear’s major financial risk exposures. The Audit Committee works closely with management as well as Goodyear’s independent registered public accounting firm. The Audit Committee has the authority to obtain advice and assistance from, and receive appropriate funding from Goodyear for, outside legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties. The report of the Audit Committee is on page 75 79 of this Proxy Statement.
Compensation Committee
The members of the Compensation Committee are Mr. Conaty, Mr. McCollough, Ms. Streeter and Mr. Weidemeyer (Chairman). The Board has determined that each member of the Compensation Committee is independent within the meaning of Goodyear’s independence standards and applicable NASDAQ listing standards. The Committee met fivesix times in 2012.2013.
The Board of Directors has delegated to the Compensation Committee primary responsibility for establishing and administering Goodyear’s compensation programs for officers and other key personnel. The Compensation Committee oversees Goodyear’s compensation and benefit plans and policies for directors, officers and other key personnel, administers its stockequity compensation plans (including reviewing and recommendingapproving equity grants to officers and other key personnel), and reviews and approves annually all compensation decisions relating to officers, including the Chief Executive Officer (“CEO”). The Compensation Committee also prepares a report on executive compensation for inclusion in the annual proxy statement and reviews and discusses the Compensation Discussion and Analysis with management and recommends its inclusion in the annual proxy statement. The report of the Compensation Committee is on page 3951 of this Proxy Statement.
In performing its duties, the Compensation Committee meets periodically with the CEO to review compensation policies and specific levels of compensation paid to officers and other key personnel, and reports and makes recommendations to the Board regarding executive compensation policies and programs. The Compensation Committee informs the non-management directors of the Board of its decisions regarding compensation for the CEO and other significant decisions related to the administration of its duties. The Compensation Committee also will consider the results of shareholder advisory votes on executive compensation matters and the changes, if any, to Goodyear’s executive compensation policies, practices and plans that may be warranted as a result of any such vote and reviews an annual risk assessment of Goodyear’s executive compensation policies, practices and
CORPORATEGOVERNANCEPRINCIPLESANDBOARDMATTERS
plans as part of its role in overseeing management’s identification and management of, and planning for, compensation-related risks. Under its charter, the Compensation Committee may delegate its authority to one or more of its members as appropriate.
The Compensation Committee has the authority to retain and terminate outside advisors, including independent compensation consultants, to assist it in evaluating actual and proposed compensation for officers. The Compensation Committee also has the authority to approve, and receive appropriate funding from Goodyear for, any such outside advisor’s fees. Prior to retaining any such advisors, the Compensation Committee considers the independence-related factors identified in applicable securities laws and NASDAQ listing standards. The Compensation Committee has retained Frederic W. Cook & Co., Inc. (“F.W. Cook”) as its compensation consultant, and has determined that F.W. Cook is independent. The Compensation Committee solicits advice from its independent compensation
consultant, Frederic W.F.W. Cook & Co., Inc., on executive compensation matters relating to the CEO and other officers. This advice is described in more detail under the heading “Compensation of Executive Officers and Directors – Compensation Discussion and Analysis – Role of Compensation Consultant.”
Committee on Corporate Responsibility and Compliance
The members of the Committee on Corporate Responsibility and Compliance are Mr. Geissler (Chairman), Mr. McGlade, Mr. Morell, Mrs. Peterson (Chairperson) and Mr. Wessel. The Committee met three times in 2012.2013.
The Committee on Corporate Responsibility and Compliance reviews Goodyear’s legal compliance programs as well as its business conduct policies and practices and its policies and practices regarding its relationships with shareholders, employees, customers, governmental agencies and the general public. The Committee also monitors Goodyear’s objectives, policies and programs with respect to environmental sustainability, workplace health and safety, diversity and product quality. The Committee may also recommend appropriate new policies to the Board of Directors.
The members of the Finance Committee are Mr. Firestone (Chairman), Mr. Hellman, Mr. Palmore and Mr. Weidemeyer. The Committee met fourthree times in 2012.2013.
The Finance Committee consults with management and makes recommendations to the Board of Directors regarding Goodyear’s capital structure, dividend policy, tax strategies, compliance with terms in financing arrangements, risk management strategies, banking arrangements and lines of credit, and pension plan funding. The Finance Committee also reviews and consults with management regarding policies with respect to interest rate and foreign exchange risk, liquidity management, counterparty risk, derivative usage, credit ratings, and investor relations activities.
The members of the Governance Committee are Mr. Conaty, Mr. McGlade, Mr. Palmore (Chairman), Mrs. Peterson and Ms. Streeter. The Board has determined that each member of the Governance Committee is independent within the meaning of Goodyear’s independence standards. The Committee met sixfour times in 2012.2013.
The Governance Committee identifies, evaluates and recommends to the Board of Directors candidates for election to the Board. The Committee also develops and recommends appropriate
CORPORATEGOVERNANCEPRINCIPLESANDBOARDMATTERS
corporate governance guidelines, recommends policies and standards for evaluating the overall effectiveness of the Board of Directors in the governance of Goodyear and undertakes such other activities as may be delegated to it from time to time by the Board of Directors.
Mr. Kramer serves as our Chairman of the Board, Chief Executive Officer and President. TheIn order to ensure that the independent and non-management members of the Board maintain proper oversight of management, the Board also has a “Lead Director” who is responsible for coordinatingan independent Lead Director. The Company’s Corporate Governance Guidelines specifically provide that the activitiesindependent directors of the non-management directors and leadingBoard must elect an independent Lead Director annually. Among other duties, the Corporate Governance Guidelines specify that the Lead Director shall:
Preside at all meetings of the Board at which the Chairman is not present, including executive sessions of the non-managementindependent directors;
Serve as liaison between the Chairman and the independent directors, which are generally helddirectors;
Approve all information sent to the Board, including meeting agendas, and advise the Chairman on such matters, and may specifically request the inclusion of information;
Approve the schedule of Board meetings to assure that there is sufficient time for discussion of all agenda items and advise the Chairman on the same;
Call meetings or executive sessions of the independent directors;
Interview, along with the Chairman of the Governance Committee, Board candidates and make recommendations to the Governance Committee and the Board; and
If requested by major shareholders, ensure that he or she is available for consultation and direct communication in conjunction with regularly scheduled Board meetings.appropriate circumstances.
Mr. McCollough currently serves as our Lead Director. Additional duties of our Lead Director are set forth in Annex II to our Corporate Governance Guidelines. Mr. McCollough currently serves as our Lead Director.
The Board believes that the current Board leadership structure is the most appropriate for the Company and its shareholders at this time. Mr. Kramer has held positions of increasing responsibility at Goodyear for the past thirteenfourteen years, including Chief Financial Officer and President, North American Tire,America, and has extensive knowledge of the Company and the tire industry, which is valuable to the Board in his role as Chairman. In addition,Since 2011, the Board
has an independent Lead Director to ensure that the independent and non-management members of the Board maintain proper oversight of management. The Board has no policy that requires the combination or separation of the Chairman and CEO roles, and may reconsider our leadership structure from time to time based on considerations at that time. The Board intends to consider whether to combine or separate the Chairman and CEO roles in connection with any CEO succession.
Board’s Role in Risk Oversight
Management continually monitors the material risks facing the Company, including competitive, financial (accounting, liquidity and tax), legal, operational, regulatory and strategic risks. The Board as
CORPORATEGOVERNANCEPRINCIPLESANDBOARDMATTERS
a whole has responsibility for oversight of management’s identification and management of, and planning for, those risks. Reviews of certain areas are conducted by relevant Board Committees that report their deliberations to the Board.
The Board and its Committees oversee risks associated with their principal areas of focus, as summarized below. The Board and its Committees exercise their risk oversight function by carefully evaluating the reports they receive from management and by making inquiries of management with respect to areas of particular interest to the Board. Board oversight of risk is enhanced by the fact that the Lead Director and Chairman attend virtually all Committee meetings and that Committee reports are provided to the full Board following each Committee meeting. We believe that our leadership structure also enhances the Board’s risk oversight function since our Lead Director regularly discusses the material risks facing the Company with management. The Chairman is also expected to report candidly to his fellow directors on his assessment of the material risks we face, based upon the information he receives as part of his management responsibilities. Both the Lead Director and the Chairman are well-equipped to lead Board discussions on risk issues.
Board/Committee | Primary Areas of Risk Oversight | |
Full Board | Strategic, financial and execution risk associated with the annual operating plan and five-year strategic plan (including allocation of capital investments); major litigation and regulatory matters; acquisitions and divestitures; and management succession planning. | |
Audit Committee | Risks associated with financial matters, particularly financial reporting, accounting, disclosure and internal controls. | |
Compensation Committee | Risks associated with the establishment and administration of executive compensation and equity-based compensation programs and performance management of officers. | |
Governance Committee | Risks associated with Board effectiveness and organization, corporate governance matters, and director succession planning. | |
Finance Committee | Risks associated with liquidity, pension plans (including investment performance, asset allocation and funded status), taxes, currency and interest rate exposures, and insurance strategies. | |
Committee on Corporate Responsibility and | Risks associated with health, safety and the environment, sustainability, and the Company’s legal and ethical compliance program. | |
Consideration of Director Nominees
The policy of the Governance Committee is to consider properly submitted shareholder nominations of candidates for membership on the Board as described below under “Identifying and Evaluating Nominees for Director.” In evaluating such nominations, the Governance Committee seeks to address the criteria described below under “Director Selection Guidelines.”
Any shareholder desiring to submit a proposed candidate for consideration by the Governance Committee should send the name of such proposed candidate, together with biographical data and
CORPORATEGOVERNANCEPRINCIPLESANDBOARDMATTERS
background information concerning the candidate, to the Office of the Secretary, The Goodyear Tire & Rubber Company, 200 Innovation Way, Akron, Ohio 44316-0001.
The Board of Directors has approved guidelines for selecting directors as part of our Corporate Governance Guidelines. Criteria considered in the selection of directors include:
Personal qualities and characteristics, including the highest personal and professional integrity, sound judgment, and reputation in the business community or a record of public service;
Substantial business experience or professional expertise and a record of accomplishments;
Experience and stature necessary to be highly effective, working with other members of the Board, in serving the long-term interests of shareholders;
Ability and willingness to devote sufficient time to the affairs of the Board and the Company and to carry out their duties effectively; and
The needs of the Company at the time of nomination to the Board and the fit of a particular individual’s skills and personality with those of the other directors in building a Board that is effective and responsive to the needs of the Company.
In order to provide a diversity of perspectives in Board deliberations, the nominating process should also attempt to ensure that the Board as a whole reflects diverse business experience, substantive expertise, skills and background, as well as diversity in personal characteristics, such as age, gender and ethnicity. A person’s ability to satisfy Goodyear’s independence standards and those of The NASDAQ Stock Market may also be evaluated.
Identifying and Evaluating Nominees for Director
The Governance Committee is responsible for identifying, screening and recommending persons for nomination to the Board. The Governance Committee considers candidates for Board membership suggested by its members and other Board members, as well as management and shareholders. On occasion, the Committee may also retain third-party executive search firms to identify candidates. In addition, under our prior master labor agreement with the USW, the USW had the right to nominate a candidate for consideration for membership on the Board. Mr. Wessel, who became a director in December 2005, was identified and recommended by the USW. Mr. Palmore and Mr. McGlade wereMorell was initially identified as a potential candidatescandidate for Board membership by a third-party executive search firm.management.
Once a prospective nominee has been identified, the Committee makes an initial determination as toon whether to conduct a full evaluation of the candidate. This initial determination is based on whatever information is provided to the Committee with the recommendation of the prospective candidate, as well as the Committee’s own knowledge of the prospective candidate, which may be supplemented by inquiries to the person making the recommendation or others. The preliminary determination is based primarily on the need for additional Board members and the likelihood that the prospective nominee can satisfy the director selection guidelines described above. If the Committee determines, in consultation with the Chairman of the Board, the Lead Director and other Board members as appropriate, that additional consideration is warranted, it may request a third-party search firm to
CORPORATEGOVERNANCEPRINCIPLESANDBOARDMATTERS
gather additional information
about the prospective nominee’s background and experience and to report its findings to the Committee. The Committee then evaluates the prospective nominee against the standards and qualifications set out in Goodyear’s director selection guidelines. The Committee also considers such other relevant factors as it deems appropriate, including the balance of management and independent directors and the evaluations of other prospective nominees. As described above under “Director Selection Guidelines,” diversity is among the many factors that the Committee considers in evaluating prospective nominees. We consider the members of our Board to have a diverse set of business and personal experiences, backgrounds and expertise, and to be diverse in terms of age, gender and ethnicity.
In connection with this evaluation, the Committee determines whether to interview the prospective nominee, and if warranted, the Lead Director, the Chairman of the Committee, one or more other members of the Committee, and others as appropriate, interview prospective nominees in person or by telephone. After completing this evaluation and interview, the Committee makes a recommendation to the full Board as to the persons who should be elected to the Board, and the Board makes its decision after considering the recommendation and report of the Committee.
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(ItemITEM 1 on your Proxy)ON YOUR PROXY)
The Board of Directors has selected the following twelve nominees recommended by the Governance Committee for election to the Board of Directors. The directors will hold office from their election until the next Annual Meeting of Shareholders, or until their successors are elected and qualified. If any of these nominees for director becomes unavailable, the persons named in the proxy intend to vote for anyan alternate designated by the current Board of Directors.
WILLIAM J. CONATY
Current Principal Occupation: President of Conaty Consulting LLC and Advisory Partner of Clayton, Dubilier & Rice, LLC
Goodyear Director Since:August 1, 2011
Current Goodyear Committee Assignments:
Compensation
Governance
Description of Business Experience:
Mr. Conaty served as Senior Vice President of Corporate Human Resources for General Electric Company from 1993 to 2007. He joined General Electric in 1967 and in his 40-year career, moved through a progression of leadership roles in the company’s transportation, aerospace and aircraft engines businesses. Following his retirement from General Electric, he formed Conaty Consulting LLC and joined Clayton, Dubilier & Rice as an advisory partner. He is also serves on the advisory board of Cornell University’s Center for Advanced Human Resource Studies and is a trustee of Bryant University and Dartmouth-Hitchcock Hospital.
Mr. Conaty has extensive human resources, executive compensation and executive management experience from his long and successful tenure at General Electric. His skills in coaching and developing leaders and teams are an asset to both the Board of Directors and Goodyear, particularly with respect to talent development, succession planning, labor relations and executive compensation matters.
Other Public Company Directorships Held Since January��January 1, 2008:2009:
Hewitt Associates (2008 — 2010)
Age:6768
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JAMES A. FIRESTONE
Current Principal Occupation: Executive Vice President and President, Corporate Strategy and Asia Operations of Xerox Corporation
Goodyear Director Since:December 3, 2007
Current Goodyear Committee Assignments:
Audit
Finance (Chairman)
Description of Business Experience:
Mr. Firestone is an Executive Vice President of Xerox Corporation and has been President, Corporate Strategy and Asia Operations since September 2008.January 1, 2014. Mr. Firestone was President, Corporate Operations from October 2008 to December 2013 and President of Xerox North America from October 2004 to September 2008. He has also served as head of Xerox’s channels group and as chief strategy officer.group. Before joining Xerox in 1998, Mr. Firestone worked for IBM Corporation as general manager of the Consumer Division and for Ameritech Corporation as president of Consumer Services. He began his business career in 1978 with American Express, where during his 15-year tenure he ultimately rose to President, Travelers Cheques.
Mr. Firestone has extensive executive management experience in positions of increasing responsibility, including most recently as a senior executive officer of Xerox Corporation, which is of similar size and global complexity as Goodyear. He also has over 1720 years of profit and loss management responsibility, as well as over 1015 years of international business experience while working in Japan for American Express.and dealing with joint ventures. These experiences provide him with unique and valuable insights as a director of Goodyear, particularly with respect to operations and finance matters.
Other Public Company Directorships Held Since January 1, 2008:2009:
The Nomura Partners Fund (2005 — present)
Age:5859
WERNER GEISSLER
Current Principal Occupation: Vice Chairman, Global Operations of The Procter & Gamble Company
Goodyear Director Since:February 21, 2011
Current Goodyear Committee Assignments:
Audit
Corporate Responsibility and Compliance (Chairman)
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Description of Business Experience:
Mr. Geissler has been Vice Chairman, Global Operations of The Procter & Gamble Company since August 2007 and was Group President, Central & Eastern Europe, Middle East and Africa from July 2004 to July 2007. He joined Procter & Gamble in 1979 and has held positions of increasing responsibility in various brand and general management and operations roles in Europe, the Middle East, Central Asia, Japan, Africa and the United States. He is also a member of the Supervisory Board and Audit Committee of the International Management Development SchoolInstitute in Lausanne, Switzerland, a leading global institution for senior management education.
Mr. Geissler, a native of Germany, has deep executive management experience, including as a senior executive officer of Procter & Gamble, where he currently oversees Procter & Gamble’s extensive worldwide business operations. He has significant international business experience and profit and loss management responsibility. These experiences provide him with valuable insights as a director of Goodyear, particularly with respect to consumer marketing, and international, operations and finance matters.
Other Public Company Directorships Held Since January 1, 2008:2009:
None
Age:5960
PETER S. HELLMAN
Current Principal Occupation: Retired. Formerly President and Chief Financial and Administrative Officer of Nordson Corporation
Goodyear Director Since:October 5, 2010
Current Goodyear Committee Assignments:
Audit (Chairman)
Finance
Description of Business Experience:
Mr. Hellman retired from Nordson Corporation, a designer, manufacturer and marketer of industrial equipment, in 2008 after a career of over 20 years with large, multinational companies in both financial and operating executive positions. Mr. Hellman was President and Chief Financial and Administrative Officer of Nordson Corporation from 2004 to January 2008 and Executive Vice President and Chief Financial and Administrative Officer from 2000 to 2004. Prior to joining Nordson in 2000, Mr. Hellman was with TRW Inc. for 10 years and held various positions, including as President and Chief Operating Officer and as Chief Financial Officer. Mr. Hellman also serves on the boards of several nonprofit organizations.
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Mr. Hellman has significant financial reporting expertise due to his service as a Chief Financial Officer at both Nordson and TRW, providing him with the necessary skills to be Chairman of our Audit Committee, where he also qualifies as an “audit committee financial expert.” He also has extensive operational experience at both companies. In addition, Mr. Hellman has served on public company boards for over 1819 years. Through his board and management experience, Mr. Hellman also has significant experience with corporate governance practices and legal and regulatory compliance issues. Mr. Hellman’s financial and operating experience, business leadership skills and board experience enable him to provide valuable contributions as a Goodyear director.
Other Public Company Directorships Held Since January 1, 2008:2009:
Baxter International Inc. (2005 — present)
Owens-Illinois, Inc. (2007 — present)
Qwest Communications International Inc. (2000 — 2011)
Nordson Corporation (2001 — 2008)
Age:6364
RICHARD J. KRAMER
Current Principal Occupation: Chairman of the Board, Chief Executive Officer and President of Goodyear
Goodyear Director Since: February 22, 2010
Description of Business Experience:
Mr. Kramer joined Goodyear in March 2000 as Vice President — Corporate Finance, serving in that capacity as Goodyear’s principal accounting officer until August 2002, when he was elected Vice President, Finance — North American Tire. In August 2003, he was named Senior Vice President, Strategic Planning and Restructuring, and in June 2004 was elected Executive Vice President and Chief Financial Officer. Mr. Kramer was elected President, North American Tire in March 2007 and continued to serve as Chief Financial Officer until August 2007. In June 2009, Mr. Kramer was elected Chief Operating Officer and continued to serve as President, North American Tire until February 16, 2010. He was elected Chief Executive Officer and President effective April 13, 2010 and Chairman effective October 1, 2010. Prior to joining Goodyear, Mr. Kramer was with PricewaterhouseCoopers LLP for 13 years, including two years as a partner.
Mr. Kramer has been an executive officer of Goodyear for 1314 years. Mr. Kramer has held several key positions at Goodyear and has had a critical role in creating our strategy and strengthening our leadership teams as Chief Executive Officer and previously as Chief Financial Officer and as President, North American Tire. Mr. Kramer’s deep knowledge of Goodyear, global markets, manufacturing, finance and accounting provides our Board with valuable perspectives that are necessary to advance Goodyear’s business and the interests of our shareholders.
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Mr. Kramer does not serve on any Board committees.
Other Public Company Directorships Held Since January 1, 2008:2009:
The Sherwin-Williams Company (April 2012 —– present)
Age:4950
W. ALAN McCOLLOUGH
Current Principal Occupation: Retired. Formerly Chairman and Chief Executive Officer of Circuit City Stores, Inc.
Goodyear Director Since:April 10, 2007
Current Goodyear Board Assignments:
Lead Director
Current Goodyear Committee Assignments:
Audit
Compensation
Description of Business Experience:
Mr. McCollough joined Circuit City Stores, Inc., a consumer electronics retailer, in 1987 as general manager of corporate operations, and was named assistant vice president in 1989, president of central operations in 1991, and senior vice president of merchandising in 1994. He served as President and Chief Operating Officer from 1997 to 2000 and as President and Chief Executive Officer from 2000 to 2002. Mr. McCollough was elected Chairman, President and Chief Executive Officer of Circuit City in 2002 and served in those capacities until 2005. He remained Chief Executive Officer until February 2006 and Chairman until his retirement in June 2006. Mr. McCollough also serves as a trustee of the Joslin Diabetes Center, a nonprofit organization.
Mr. McCollough has extensive senior executive management experience, particularly in operations and consumer merchandising and marketing. His experience as Chairman and Chief Executive Officer of Circuit City provides him with the necessary skills to be Lead Director and serve on our Audit Committee, where he also qualifies as an “audit committee financial expert.” Mr. McCollough’s past service as Chairman of Circuit City, as well as his current service on other public company boards of directors, provides us with important perspectives on corporate governance and executive compensation matters.
Other Public Company Directorships Held Since January 1, 2008:2009:
La-Z-Boy Inc. (2007 — present)
VF Corporation (2000 — present)
Age:6364
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JOHN E. McGLADE
Current Principal Occupation: Chairman, President and Chief Executive Officer of Air Products and Chemicals, Inc.
Goodyear Director Since:December 5, 2012
Current Goodyear Committee Assignments:
|
Corporate Responsibility and Compliance
Governance
Description of Business Experience:
Mr. McGlade has been Chairman, President and Chief Executive Officer of Air Products and Chemicals, Inc., a global provider of atmospheric, process and specialty gases, since March 2008. He joined Air Products in 1976 and held various positions of increasing responsibility, including as Group Vice President, Chemicals Group, and President and Chief Operating Officer. Mr. McGlade also serves on the board of directors of the American Chemistry Council and is a trustee of Lehigh University.Council.
Mr. McGlade has strong leadership skills and extensive management, international and operating experience, including as Chief Executive Officer of Air Products. He has also had responsibility for the environment, health, safety and quality function during his career at Air Products. These experiences provide him with unique and valuable insights as a director of Goodyear, particularly with respect to operations matters.
Other Public Company Directorships Held Since January 1, 2008:2009:
Air Products and Chemicals, Inc. (2007 — present)
Age:5960
MICHAEL J. MORELL
Current Principal Occupation: Chief Executive Officer and President, Morell Consulting. Formerly Deputy Director of the Central Intelligence Agency
Goodyear Director Since:January 7, 2014
Current Goodyear Committee Assignments:
Audit
Corporate Responsibility and Compliance
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Description of Business Experience:
Mr. Morell retired from the Central Intelligence Agency in 2013 following a 33-year career, including serving as Deputy Director from May 2010 to August 2013 and as Director for Intelligence from May 2008 to April 2010. He also served as Acting Director on two occasions. Mr. Morell has received numerous intelligence and defense awards for his service to the United States.
Mr. Morell has extensive leadership and management experience through his positions with the Central Intelligence Agency, a large and complex global government agency. He also possesses extensive knowledge of national security issues, such as cybersecurity, terrorism and political and economic instability, which directly impact global businesses. These experiences, combined with his strong critical thinking and problem solving skills, will make Mr. Morell a valuable contributor to the Board of Directors.
Other Public Company Directorships Held Since January 1, 2009:
None
Age:55
RODERICK A. PALMORE
Current Principal Occupation: Executive Vice President, General Counsel, Chief Compliance and Risk Management Officer, and Secretary of General Mills, Inc.
Goodyear Director Since:August 7, 2012
Current Goodyear Committee Assignments:
Finance
Governance (Chairman)
Description of Business Experience:
Mr. Palmore joined General Mills, a global manufacturer and marketer of food products, as Executive Vice President, General Counsel, Chief Compliance and Risk Management Officer, and Secretary in February 2008. From 1996 to 2008, he worked for Sara Lee Corporation in a variety of legal leadership roles, ultimately becoming Executive Vice President, General Counsel and Secretary. Prior to 1996, he worked at the U.S. Department of Justice and in private practice.
In his role at General Mills, he is responsible for the company’s worldwide legal activities, corporate ethics, compliance, and corporate security. Through his experience as general counsel of consumer
ELECTIONOFDIRECTORS
product public companies, in private practice and as an Assistant U.S. Attorney, Mr. Palmore has extensive experience in corporate governance and the legal issues facing Goodyear. In addition, his experience provides him with strong risk management skills. This broad business knowledge and public board experience, as well as his strong leadership skills, will be valuable assets to the Board of Directors.
Other Public Company Directorships Held Since January 1, 2008:2009:
CBOE Holdings, Inc. (2000 — present)
Age:61
SHIRLEY D. PETERSON
Current Principal Occupation: Retired. Formerly a partner in the law firm of Steptoe & Johnson LLP
Goodyear Director Since:April 13, 2004
Current Goodyear Committee Assignments:
Corporate Responsibility and Compliance (Chairperson)
Governance
Description of Business Experience:
Mrs. Peterson was President of Hood College, a liberal arts college in Frederick, Maryland, from 1995 to 2000. From 1989 to 1993 she served in the U.S. Government, first appointed by President George H.W. Bush as Assistant Attorney General in the Tax Division of the Department of Justice, then as Commissioner of the Internal Revenue Service. She was also a partner in the law firm of Steptoe & Johnson LLP where she served a total of 22 years from 1969 to 1989 and from 1993 to 1994. Mrs. Peterson was a Trustee of Bryn Mawr College from 1994 to 2007 and is currently a Trustee Emerita.
Mrs. Peterson’s legal, financial and executive management experience from both the public and private sectors provides Goodyear with important perspectives on accounting, tax and regulatory issues, and corporate governance matters. She serves, and has served, on several public company boards, including diverse committee assignments. Her public company board experience, particularly her service on several governance and audit committees, provides us with valuable perspectives on the policies and practices of other public companies, including several in the manufacturing sector.
Other Public Company Directorships Held Since January 1, 2008:
AK Steel Holding Corporation (2004 — present)
Wolverine World Wide, Inc. (2005 — present)
Champion Enterprises, Inc. (2004 — 2010)
DWS Mutual Funds, Independent Trustee (1995 — 2008)
Age:7162
STEPHANIE A. STREETER
Current Principal Occupation: Chief Executive Officer of Libbey Inc.
Goodyear Director Since:October 7, 2008
Current Goodyear Committee Assignments:
Compensation
Governance
Description of Business Experience:
Ms. Streeter joined Libbey Inc., a producer of glass tableware products, as Chief Executive Officer on August 1, 2011. Previously, Ms. Streeter was with Banta Corporation, a provider of printing and supply chain management services, serving as President and Chief Operating Officer beginning in January 2001, and was elected Chief Executive Officer in 2002 and Chairman in 2004. She served as Chairman, President and Chief Executive Officer of Banta until its acquisition by R.R. Donnelley & Sons in 2007. Ms. Streeter also spent 14 years with Avery Dennison Corporation in a variety of product and business management positions, including as Group Vice President of Worldwide Office Products from 1996 to 2000. Ms. Streeter was a member of the board of directors of the United States Olympic Committee from 2004 to 2009, where she also served as Acting Chief Executive Officer from March 2009 to March 2010. She also serves on the board of Catalyst, a nonprofit organization.
Ms. Streeter has extensive senior executive management experience. Her experiences as Chief Executive Officer of Libbey, as Chairman, President and Chief Executive Officer of Banta and at Avery Dennison provide Ms. Streeter with an understanding of the operations and performance of public companies. Ms. Streeter’s service on several public company and nonprofit boards of directors also provide us with important insights on practices across a variety of industries.
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Other Public Company Directorships Held Since January 1, 2008:2009:
Libbey Inc. (2011 — present)
Kohl’s Corporation (2007 — present)
Age:5556
THOMAS H. WEIDEMEYER
Current Principal Occupation: Retired. Formerly Senior Vice President and Chief Operating Officer of United Parcel Service, Inc.
Goodyear Director Since:December 9, 2004
Current Goodyear Committee Assignments:
Compensation (Chairman)
Finance
Description of Business Experience:
Mr. Weidemeyer served as Senior Vice President and Chief Operating Officer of United Parcel Service, Inc., a transportation and logistics company, from January 2001, and as President and Chief Operating Officer of UPS Airlines from July 1994, until his retirement in February 2004. Mr. Weidemeyer became Manager of the Americas International Operation of UPS in 1989, and in that capacity directed the development of the UPS delivery network throughout Central and South America. In 1990, he became Vice President and Airline Manager of UPS Airlines and in 1994 was elected its President and Chief Operating Officer. Mr. Weidemeyer was a director of United Parcel Service from 1998 to 2003.
Mr. Weidemeyer has over 35 years of management and executive leadership experience. His logistics, finance and international management experience provides us with valuable insights on our supply chain and financial management practices, as well as our overall business. His service on other boards of directors also provides us with perspectives on issues facing companies in different industries.
Other Public Company Directorships Held Since January 1, 2008:2009:
NRG Energy, Inc. (2003 — present)
Waste Management, Inc. (2005 — present)
Age:6566
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MICHAEL R. WESSEL
Current Principal Occupation: President of The Wessel Group Incorporated
Goodyear Director Since: December 6, 2005
Current Goodyear Committee Assignments:
Corporate Responsibility and Compliance
Description of Business Experience:
Mr. Wessel has served as President of The Wessel Group Incorporated, a government and political affairs consulting firm, since May 2006. Prior to founding The Wessel Group, he served as Senior Vice President of the Downey McGrath Group, a government affairs consulting firm, from March 1999 to December 2005 and as Executive Vice President from January 2006 to April 2006.
Mr. Wessel is an attorney with over 30 years of experience as an economic and international trade policy advisor in Washington, D.C. Mr. Wessel has acted as an advisor to Congressman Richard Gephardt, both in the U.S. House of Representatives and to his presidential campaigns in 1987-88 and 2003-04, to the Clinton/Gore Transition Office in 1992 and 1993, and to Senator John Kerry’s presidential campaign in 2004. Mr. Wessel also serves as a Commissioner on the U.S.-China Economic and Security Review Commission, a position he has held since April 2001.
Mr. Wessel’s extensive experience with public policy matters and his government service, including as an advisor to former Majority Leader Gephardt and as an appointee on government commissions, provides us with valuable perspectives on public policy matters impacting trade, international economic affairs and other matters of importance to Goodyear.
Other Public Company Directorships Held Since January 1, 2008:2009:
None
Age:5354
Mrs. Shirley D. Peterson was not nominated for re-election to the Board of Directors due to the retirement age provisions of Goodyear’s Corporate Governance Guidelines. Mrs. Peterson will be retiring from the Board at the Annual Meeting after ten years of distinguished service. Goodyear and the Board of Directors are deeply grateful to Mrs. Peterson for her leadership and guidance during her tenure on the Board.
Your Board of Directors unanimously recommends that shareholders vote FOR each of the nominees for director named in this Proxy Statement (Proxy Item 1).
ADVISORYVOTEONEXECUTIVECOMPENSATION
BENEFICIAL OWNERSHIPADVISORY VOTE TO APPROVE THE COMPENSATION OF COMMON STOCKOUR NAMED EXECUTIVE OFFICERS
The persons identified in(ITEM 2 ON YOUR PROXY)
We are seeking your vote to approve, on an advisory (or non-binding) basis, the table below have reported that they beneficially owned at December 31, 2012 more than 5%compensation of the outstanding shares of the Common Stock as follows:
Name and Address of Beneficial Owner | Shares of Common Stock Beneficially Owned | Percent of Common Stock Outstanding Beneficially Owned | ||||||
Wellington Management Company, LLP | 22,507,745 | (1) | 9.2 | % | ||||
The Vanguard Group, Inc. | 16,083,234 | (2) | 6.6 | % | ||||
Appaloosa Management L.P. Appaloosa Partners Inc. | 14,345,610 | (3) | 5.8 | % | ||||
The Hartford Mutual Funds, Inc. | 13,512,817 | (4) | 5.5 | % | ||||
BlackRock, Inc. | 13,015,955 | (5) | 5.3 | % | ||||
In addition, The Northern Trust Company, 50 South LaSalle Street, Chicago, Illinois 60603, has indicated that at the record date it held 7,288,143 shares, or approximately 3.0% of the outstanding shares, of Common Stock as the trustee of various employee savings plans sponsored by Goodyear and certain subsidiaries.
On February 20, 2013, each director and nominee, each personour named in the Summary Compensation Table on page 40, and all directors and executive officers as a group, beneficially owned the number of shares of Common Stock set forthdisclosed in the table below.this Proxy Statement.
| Beneficial Ownership at February 20, 2013(1) | ||||||||||||||||||||
Name | Shares of Common Stock Owned Directly(2) | Shares of Common Stock Held in Savings Plan(3) | Shares of Common Stock Subject to Exercisable Options(4) | Deferred Share Equivalent Units and Restricted Stock Units | Percent of Class | |||||||||||||||
William J. Conaty | -0- | -0- | -0- | 13,265 | (8) | * | ||||||||||||||
James A. Firestone | -0- | -0- | -0- | 42,548 | (8) | * | ||||||||||||||
Werner Geissler | -0- | -0- | -0- | 16,627 | (8) | * | ||||||||||||||
Peter S. Hellman | -0- | -0- | -0- | 19,800 | (8) | * | ||||||||||||||
W. Alan McCollough | -0- | -0- | -0- | 45,358 | (8) | * | ||||||||||||||
John E. McGlade | -0- | -0- | -0- | 602 | (8) | * | ||||||||||||||
Roderick A. Palmore | -0- | -0- | -0- | 3,449 | (8) | * | ||||||||||||||
Shirley D. Peterson | 1,000 | -0- | -0- | 59,105 | (8) | * | ||||||||||||||
Stephanie A. Streeter | -0- | -0- | -0- | 38,490 | (8) | * | ||||||||||||||
Thomas H. Weidemeyer | 1,000 | -0- | -0- | 56,307 | (8) | * | ||||||||||||||
Michael R. Wessel | -0- | -0- | -0- | 51,253 | (8) | * | ||||||||||||||
Richard J. Kramer | 243,446 | (5) | 219 | 772,418 | 455 | (9) | * | |||||||||||||
Darren R. Wells | 35,157 | 161 | 262,225 | 75,000 | (10) | * | ||||||||||||||
Arthur de Bok | 76,283 | -0- | 372,064 | 75,000 | (10) | * | ||||||||||||||
David L. Bialosky | 77,267 | (6) | -0- | 110,323 | -0- | * | ||||||||||||||
Gregory L. Smith | 82,551 | (7) | -0- | 32,685 | -0- | * | ||||||||||||||
All directors, the named executive officers and all other executive officers as a group (23 persons) | 742,346 | 53,771 | 2,175,554 | 647,256 | 1.2 | % | ||||||||||||||
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Our Compensation Discussion and Analysis (“CD&A”), which starts on page 22, describes our executive compensation program. We encourage you to read the CD&A before casting your vote.
Overview
In 2012, the disciplined execution of our strategy and structural changes we made to our business over the past few years helped us deliver strong results in both earnings and operating cash flows. We achieved sustained profitability amidst an environment of global economic uncertainty, weak consumer demand, and volatile raw material costs.
Despite substantial contributions to our pension plans and the strong performance of our portfolio last year, our unfunded pension obligations increased primarily due to decreases in the discount rate driven by the Federal Reserve’s low interest rate policy. We believe our unfunded pension obligations continue to negatively impact our stock price performance. In February 2013, we announced a strategy intended to reduce the exposure of our U.S. pension plans to future interest rate and equity market movements.
Our total segment operating income for 2012 was more than $1.2 billion, marking the second year in a row – and only the third time in the company’s history – that we have reached that level of performance. In addition, we delivered strong cash flow results for the yearThe advisory resolution below, commonly known as a result of progress“say-on-pay” proposal, gives you the opportunity to express your views on our working capital initiatives. Price and product mix drove an 8% improvement in revenue per tire compared to 2011 (excluding the impact of foreign currency translation), reflecting our strategic focus on offering innovative products in profitable target market segments.
In 2012, our strong operating performance enabled us to withstand a variety of severe headwinds that tested both our strategy and resolve. For example, there has yet to be a comprehensive and lasting solution to the Euro crisis, which contributed to slow economic growth and dampened consumer demand in Europe over the past year. Growth in China has slowed from its previous double-digit percent increase. In Latin America, currency volatility and political instability in several countries contributed to a challenging business climate in that region.
Despite this difficult environment, we demonstrated significant progress toward our long-term goals as we continued to move Goodyear in the right direction.
Our positive results were driven by strong performance in three of our four businesses.
In North America, we achieved record segment operating income of $514 million, exceeding our target of $450 million one year ahead of schedule. These results confirm a complete transformation of the business, as record profit was achieved despite volumes that were near recessionary levels.
In Asia Pacific, full-year segment operating income of $259 million was a record, despite slower growth in the key China market and recession in Australia, our largest business in the region.
In Latin America, we delivered segment operating income of $223 million and stabilized the business despite a weak economy and a strong currency in Brazil, our largest business in the region.
Also, we had the following key achievements:
Made capital investments of more than $1.1 billion in support of future growth opportunities, including significant investments in emerging markets in China and Chile;
Completed our move to a new factory in Pulandian, China, supporting our key strategy of winning in both the consumer and commercial tire markets in this growing region;
Offset $576 million in higher raw material costs with $1.0 billion in improved price and product mix;
Realized approximately $346 million of cost savings, bringing the total cost savings for 2010 to 2012 to approximately $1.1 billion and exceeding our $1.0 billion goal for that three-year period; and
Achieved a ratio of working capital to net sales of 10.7%, continuing our track record of improvements in working capital efficiency.
As a result of our operating performance described above, payouts under our annual incentive plan ranged from 38% to 148% of targetexecutive compensation program for our named executive officers. In addition,The “say-on-pay” proposal is not intended to address any specific item of compensation, but rather the performance targets for the 2012 performance periods under our 2010-2012, 2011-2013 and 2012-2014 long-term awards were exceeded and payouts were approved for the applicable periods, subject to continued service, ranging from 141% to 166%overall compensation of target for our named executive officers.
In response to currentofficers and the executive compensation trendspolicies, practices and after consideringplans described in this Proxy Statement.
The resolution is required by Section 14A of the Securities Exchange Act of 1934. The resolution is not intended to indicate your approval of the matters disclosed under the heading “Risks Related to Compensation Policies and Practices” or future “golden parachute” payments. We will seek shareholder approval of any “golden parachute” payments at the time of any transaction triggering such payments to the extent required by applicable law.
We ask you to vote “FOR” the following resolution which will be presented by the Board of Directors at the Annual Meeting:
“RESOLVED, that the shareholders of The Goodyear Tire & Rubber Company approve, on an advisory basis, the compensation of the named executive officers as disclosed in the Company’s Proxy Statement for the 2014 Annual Meeting of Shareholders.”
Although this proposal is an advisory vote that will not be binding on the Compensation Committee or the Board of Directors, the Compensation Committee will consider the results of this shareholder advisory vote and the changes, if any, to our 2012 say-on-payexecutive compensation policies, practices and plans that may be warranted as a result of this vote. The Board of Directors has determined, consistent with the shareholders’ vote on the Compensation Committee also:matter in 2011, to hold an advisory vote regarding the compensation of our named executive officers every year until the next vote on the frequency of such advisory votes, which is currently expected to occur at the 2017 Annual Meeting of Shareholders.
Your Board of Directors unanimously recommends that shareholders vote FOR the advisory resolution to approve the compensation of our named executive officers (Proxy Item 2).
COMPENSATIONDISCUSSIONANDANALYSIS
COMPENSATION DISCUSSION AND ANALYSIS
Amended our change in control plan to eliminate excise tax gross upsThis Compensation Discussion and “walk away” rights for any officer following a change in control;
RevisedAnalysis describes the design of our long-term awards beginning in 2012 by establishing a three-year plan whereby the performance targets for each year of the three-year period are established on the grant date in order to provide greater accountability for long-term results, weighted 50% for the first year, 30% for the second year and 20% for the third year, and maintained the three-year total shareholder return modifier first introduced in 2011; and
Changed our peer group composition for 2012 compensation decisions.
The Compensation Committee also has a number of other policies and practices that we believe are consistent with our performance-basedCompany’s executive compensation philosophy and serveprograms, focusing in particular on the long-term interests of our shareholders:Compensation Committee’s response to the say-on-pay vote and decisions about named executive officers (“NEOs”) in 2013.
Our NEOs for 2013 are:
Name | Title | |
Richard J. Kramer | Chairman, Chief Executive Officer and President | |
Laura K. Thompson | Executive Vice President and Chief Financial Officer* | |
Darren R. Wells | President, Europe, Middle East and Africa* | |
Gregory L. Smith | Senior Vice President, Global Operations | |
Stephen R. McClellan | President, North America | |
David L. Bialosky | Senior Vice President, General Counsel and Secretary |
Double-trigger change-in-control provisions in our change-in-control plan *Mr. Wells previously served as Executive Vice President and our proposedChief Financial Officer. As of December 1, 2013, Performance Plan (and our existing 2008 Performance Plan);Ms. Thompson began serving as Executive Vice President and Chief Financial Officer.
COMPENSATIONDISCUSSIONANDANALYSIS
No tax gross-ups paid to our executive officers for any perquisites;
Robust stockholding guidelines for officers and directors, including stock retention provisions following the exercise of stock options or the vesting of other stock-based awards;CD&A TABLE OF CONTENTS
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Impact of TSR Modifier and Payout of 2011-2013 Long-Term Incentive Awards | 45 | |
| 45 | ||
| 46 | ||
| 46 | ||
Prohibitions on the hedging and pledging of our Common Stock by officers, directors and employees; and
COMPENSATIONDISCUSSIONANDANALYSIS
A claw-back policy.
We feel very positive about the progress made in our North American, Latin American and Asia Pacific businesses in 2012 and are confident in our team’s ability to continue delivering improved profitability. Our strategy is clear, and despite challenges we expect to face, we are positioned to deliver sustainable, positive results over the long term.
We continue to make the necessary adjustments to our business now to be prepared when robust growth in the tire industry returns. We are confident in the fundamentals of the tire industry and in our ability to continue our positive momentum.
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For additional information regarding total segment operating income, a non-GAAP measure, including a reconciliation to income before income taxes, see Note to the Consolidated Financial Statements No. 7, “Business Segments” in our Annual Report for the year ended December 31, 2012.2013 that accompanies this Proxy Statement.
COMPENSATIONDISCUSSIONANDANALYSIS
Compensation ApproachCompany Performance Update
Record Segment Operating Income in 2013. We demonstrated disciplined strategy execution and made structural changes to our business over the past several years in the face of a challenging economic environment. These factors helped Goodyear deliver record segment operating income in 2013. We achieved this result while experiencing weak, but stabilizing, industry conditions in developed markets in 2013 as the economic recovery in Europe and the United States remained tentative.
Performance Highlights. The following summarizes key objectiveselements of the company’s performance in 2013.
Segment Operating Income (in millions)
Total Shareholder Return
 |  |
$1,427 million | $738 million | $1,036 million | $.05/share | |||
EBIT* | Net Income* | Total Cash Flow, Net of Debt* | Reinstated Quarterly Common Stock Dividend | |||
Up 73% |
Stock Price |
| * | As defined for purposes of our compensation plans in 2013 |
COMPENSATIONDISCUSSIONANDANALYSIS
| Key Accomplishments in 2013 | ||||
Record Segment | · | We delivered record total segment operating income of $1.58 billion – representing the third year in a row that we have achieved total segment operating income of more than $1.2 billion – the three best years in the Company’s 115-year history | ||
· | Operating income was at record levels in North America | |||
Strong Cash Flow | · | We generated total cash flow, net of debt of $1 billion in 2013, up 45% | ||
Dividend Payments | · | We reinstated our Common Stock dividend in 2013 as part of our shareholder return program | ||
Clear Path Forward on | · | We froze and fully funded our U.S. salaried pension plans | ||
· | In early 2014, we fully funded our U.S. hourly pension plans, which will be frozen in April 2014 | |||
· | These actions eliminate a long-standing legacy liability that drove volatility in earnings and cash flows | |||
Elements of Executive Compensation
Compensation for NEOs is comprised of a mix of variable and fixed compensation that is strongly linked to company performance and targeted to the median of general industry survey data.
| Main Compensation Elements | Performance Metrics | |||||
Base Salary | · | Cash | Fixed compensation, benchmarked below median | |||
Annual | · | Annual Incentive Program (Paid in Cash) | EBIT | |||
| Operating Cash Flow | ||||||
| New Product Vitality | ||||||
| Manufacturing Productivity | ||||||
| Working Capital Excellence | ||||||
Long-Term | · | Performance | Net Income | |||
| Shares/Cash | Total Cash Flow, Net of Debt | |||||
· | Stock Options | Total Shareholder Return | ||||
COMPENSATIONDISCUSSIONANDANALYSIS
Alignment of Pay and Performance
Goodyear’s executive compensation is strongly aligned to company performance and measurable financial metrics.
Target CEO pay is near the median of general industry survey data and our peer group
Over 90% of our CEO’s pay opportunity is performance based and over 75% is tied to stock price
Our CEO’s realized pay shows strong alignment to our stock price
2011-2013 CEO Realized Pay vs. Summary Compensation Table
(1) As reported in the Summary Compensation Table beginning at page 52 of this Proxy Statement.
(2) Realized pay includes base salary, annual incentive earned, long term incentive to be paid out and pre-tax compensation earned upon the exercise of stock options and vesting of stock awards regardless of when they were granted. For more information on our calculation of realized pay, see “Summary of Realized Pay Earned by Our Chief Executive Officer for 2011, 2012 and 2013” beginning at page 54 of this Proxy Statement.
COMPENSATIONDISCUSSIONANDANALYSIS
As a result of our operating and stock performance, payouts under our annual incentive plan ranged from 187% to 195% of target for our named executive officers. In addition, the performance targets for the 2013 performance periods under our 2011-2013, 2012-2014 and 2013-2015 long-term awards were exceeded and payouts ranging from 150% to 200% of target were approved for the applicable periods, subject to continued service and a relative total shareholder return modifier (which we refer to as the “TSR modifier” and which is described in more detail on page 42). Our stock out-performed 82% of the companies in the S&P 500 during the three-year period ending December 31, 2013, resulting in a TSR modifier of 1.2 times.
2013 Shareholder Engagement and Say on Pay Response
At our 2013 annual meeting, a majority of shareholders approved our say on pay proposal. However, just 56% of voting shareholders were in favor of the proposal, a disappointing result.
In an effort to better understand our investors’ perspective and thoughts regarding our executive compensation program, both our independent Lead Director and a team of our senior management engaged in a shareholder outreach initiative in 2013 and early 2014. We requested the opportunity to meet many of our top shareholders and we ultimately held one-on-one conversations with shareholders representing approximately 37% of our outstanding Common Stock as of December 31, 2013.
Our outreach meetings gave us the chance to highlight the strong operating performance delivered by the Company over the past several years and to make clear our commitment to the alignment of pay and performance. We also received important feedback on the design of our executive compensation program are to:and suggestions for further program improvement. In some cases, we were able to clarify how our compensation program operates and to identify opportunities to improve the clarity of our disclosure. All of the shareholder feedback and suggestions that we received were reported to the Compensation Committee and the Board of Directors for its consideration.
Additionally, the Compensation Committee obtained feedback, advice and recommendations on improvements to our compensation program from its independent compensation consultant, F.W. Cook. The Compensation Committee also reviewed the Company’s performance, the compensation practices of its peers, compensation surveys and other materials regarding executive compensation.
motivate executives
COMPENSATIONDISCUSSIONANDANALYSIS
Program Adjustments in Response to Say on Pay
As a result of the investor feedback we received over the last few years and other key personnel to attain appropriate short-termour own review process, our Compensation Committee made the following changes beginning in 2014:
| Key Program Changes for 2014 | ||||
Enhancing Long-Term Alignment of Pay for Performance | · | Even Weighting Over Performance Period. Three-year performance cycle will be evenly weighted (1/3, 1/3, 1/3) instead of 50%, 30%, 20% (to balance awards across each year in the three-year performance cycle). We will continue to set targets at the beginning of the three-year period. | ||
· | TSR Modifier on Long-Term Payouts in Place. The TSR modifier was adopted in 2011 and applies to payouts for the first time in the three-year performance cycle ending in 2013 (builds stronger link to shareholder returns). The TSR modifier measures the relative performance of our Common Stock versus the S&P 500 (see page 42). | |||
Diversifying Metrics Across Program | · | Short-Term.Change annual incentive metric from “operating cash flow” to “free cash flow from operations” (a key management metric for business performance) to better link compensation to the underlying cash generation of our business. | ||
· | Long-Term.Change long-term incentive metric from “total cash flow, net of debt” to “cash flow return on capital” (greater measurement of capital efficiency with long-term focus). | |||
No Service Credit in Pension, Going Forward | · | Service Credit. No pension credit for newly hired executives to make up for service at prior employers. The company has not granted any pension credit since 2007. | ||
Enhancing CD&A Disclosure | · | Investor Input.We have made significant revisions to the CD&A to enhance the clarity of our disclosure of the pay program, and have listened to investor feedback about how to improve disclosure. | ||
COMPENSATIONDISCUSSIONANDANALYSIS
Diversified Performance Metrics. Following the changes we made for 2014, the mix of performance goals and manage the Company for sustained long-term growth,metrics will be as follows:
align executives’ interests
We believe that these changes, together with those ofour existing compensation practices address feedback from our shareholders and have resulted in a compensation program that is consistent with our performance-based compensation philosophy and serves the long-term interests of our shareholders. That said, we will continue to seek feedback from our investors and consider ongoing enhancements of the program.
COMPENSATIONDISCUSSIONANDANALYSIS
attract
Additional Recent Program Changes and retain qualifiedUpdates
In recent years, the Compensation Committee has adopted a number of best practices that are consistent with our performance-based compensation philosophy and experiencedserve the long-term interests of our shareholders:
| Recent Program Changes and Updates | ||
Strengthened Link to TSR | TSR modifier on long-term awards applies to 2011-2013 (and later) performance cycles | |
Double-Trigger Change-in-Control | Double-trigger change-in-control provisions in our change-in-control plan and our equity compensation plans, and eliminated walk-away rights | |
Reduced Potential Change-in-Control Payments | Reduced potential change-in-control payments by removing long-term cash awards from the calculation of cash severance | |
No Gross-Ups | Eliminated all tax gross-ups | |
No Repricing | No repricing of options without shareholder approval | |
Dividend Policy | No dividends or dividend equivalents on unearned performance-based equity awards | |
Strengthened Stockholding and Retention Policies | Robust stockholding guidelines for officers and directors, including stock retention provisions following the exercise of stock options or the vesting of other stock-based awards | |
No Hedging or Pledging | Prohibitions on the hedging and pledging of our Common Stock by officers, directors and employees | |
Clawback Policy | Robust clawback policy in place | |
COMPENSATIONDISCUSSIONANDANALYSIS
Independent Compensation Governance and Sound Governance Practices | ||
Independent Committee | Compensation Committee consists only of independent Board members | |
Lead Independent Director | Lead Independent Director with clearly defined and robust responsibilities engaged with investors about executive compensation issues during 2013 | |
Leading Independent Consultant | Engaged a leading independent compensation consultant to assist the Compensation Committee and Board in determining executive compensation and evaluating program design | |
The following core principles form the foundation of the compensation program for our executives, including the named executive officers and other key personnel.officers:
| Compensation Philosophy |
First, compensation programs should motivate our executives to take actions that are aligned with our short- and long-term strategic objectives, and appropriately balance risk versus potential reward. |
Second, as executives move to a greater level of responsibility, the percentage of their pay based on performance should increase to ensure the highest level of accountability to shareholders. |
Third, performance pay should offer an opportunity for above average compensation when our performance exceeds our goals balanced by the risk of below average compensation when it does not. |
Fourth,the percentage of total compensation paid in the form of equity should also increase as executives have increasing responsibility for corporate performance, thereby more closely aligning their interests with those of our shareholders. |
In supportCOMPENSATIONDISCUSSIONANDANALYSIS
Components of these objectives, weExecutive Compensation
We provide executive compensation and benefits that are market-competitive in which a large portion of the total opportunity is variable and tied to our performance and changes in shareholder value over a multi-year period. The key components of compensation provided to our executive officers and how each supports our compensation objectives are presented in the following table:
| Component | Objectives | |||||||||
Annual Compensation | ||||||||||
| Base Salary | • | Annual cash compensation | • |
| ||||||
| • | Recognize and reward skills, competencies, experience, leadership and individual contribution | |||||||||
| Annual Incentive | • | Annual cash incentive based on corporate | • |
| ||||||
| • | Across total company and operating units as measured primarily by | |||||||||
| • | By the individual as measured by achievement of specific strategic goals and demonstrated leadership traits | |||||||||
Long-Term Incentive Compensation | ||||||||||
| Stock Options | • | Provides opportunity to purchase stock at a fixed price over a ten-year period. Results in value only if stock price increases. | • |
| ||||||
| • | Facilitate retention | |||||||||
| • | Build executive stock ownership | |||||||||
| • | Align | |||||||||
| • |
| ||||||||||
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as well as changes in share price on both an absolute and relative basis | ||||||||||
| • | Facilitate retention | |||||||||||
| • | Align | |||||||||||
| • | Payable in shares of Common Stock and cash | |||||||||||
COMPENSATIONDISCUSSIONANDANALYSIS
| Component | Description | Objectives | ||||||||
| Retirement Programs | ||||||||||
| Qualified Retirement Plans | • | Post-retirement benefits | • | Necessary to attract and retain employees | ||||||
| Supplementary Pension Plan and Excess Benefit Plans | • | Additional retirement benefits | • |
| ||||||
| • | Provide for retirement replacement income, thereby facilitating an orderly succession of talent | |||||||||
Other Executive Benefits | ||||||||||
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| Perquisites | • | Home security systems
| • |
| ||||||||
| • | Tire program | • | Enable officers to focus on Company business with minimal disruption | |||||||||
| • | Financial planning and tax preparation services | |||||||||||
| • | Annual physical exams | |||||||||||
| • | Limited use of company aircraft | |||||||||||
Other Benefits | • | Medical, welfare and other benefits | • |
| ||||||||
Compensation Philosophy and Key PrinciplesDecision-Making
The following core principles form the foundationCompensation Committee undertakes ongoing review of the compensation program for our executives, including the CEO and the other executive officers named in the Summary Compensation Table (collectively, the “named executive officers”):
First, compensation programs should motivate our executives to take actions that are aligned with our short- and long-term strategic objectives, and appropriately balance risk versus potential reward.
Second, as executives move to a greater level of responsibility, the percentage of their pay based on performance should increase to ensure the highest level of accountability to shareholders.
Third, performance pay should offer an opportunity for above average compensation when our performance exceeds our goals balanced by the risk of below average compensation when it does not.
Fourth, the percentage of total compensation paid in the form of equity should also increase as executives have increasing responsibility for corporate performance, thereby more closely aligning their interests with those of our shareholders.
In implementing our executive compensation program accordingpolicies, practices and plans to determine whether they are consistent with our compensation philosophy and objectives, and whether they need to be modified in light of changes in our business or the markets in general. The Compensation Committee meets periodically with the CEO to review compensation policies and specific levels of compensation paid to officers and other key personnel, and reports and makes recommendations to the principles described above,Board regarding executive compensation policies and programs. In addition, the CEO annually makes recommendations to the Compensation Committee regarding salary adjustments and the setting of annual and long-term incentive targets and awards for officers other than himself, including the other named executive officers.
In determining the compensation of a named executive officer, the Compensation Committee considers various factors, including:
Company performance against corporate and operating unit objectives,
The Company’s relative shareholder return,
The compensation of officers with similar responsibilities at comparable companies,
Individual performance,
Current and future responsibilities,
Retention considerations,
The awards given to the named executive officer in past years, and
The relationship between the compensation to be received by the officer and the compensation to be received by the other named executive officers (which we take into account our challenging financial position, which is driven in part by under-funded legacy pension obligationsrefer to as “internal pay equity”), including comparing the relationship to that do not reflect the cost of our ongoing business operations.found at comparable companies.
COMPENSATIONDISCUSSIONANDANALYSIS
We generally target base salaries for our officers below median market rates, in the aggregate, consistent with the requirements of our master labor agreement with the United Steelworkers (the “USW Agreement”), and we target performance-basedannual and equitylong-term incentive compensation at rates that, on average, are at the median market rate. The actual positioning of target compensation relative to the median varies based on each executive’s experience and skill set, and generally results in executives who are new in their role being placed lower in the range and those with more experience being placed higher in the range. We emphasize variable compensation because it minimizes fixed expense associated with salary and enables annual cash compensation and total compensation to fluctuate directly with performance against operating goals and changes in share price. This approach aligns overall costs with performance and provides executives with a leveraged and attractive compensation opportunity that varies based on results. This approach also provides an opportunity for actual compensation to exceed targeted market rates through superior performance. Conversely, executives may earn less than target for performance that does not meet our goals or due to declines in our stock price, and as a result, when our stock price declines and/or specific operating objectives are not attained, realized compensation may fall into the lower quartile relative to market rates.
Consistent with the above philosophy, theThe Compensation Committee believes that base salary should comprise approximately 20% ofgenerally sets “primary compensation,” which we define to include salary, annual cash incentiveincentives and long-term compensation.compensation, for the CEO and the other named executive officers as follows:
Long-term compensation is delivered through grants of long-term performance-based incentive awards that are payable in shares of Common Stock and cash, and stock options. The remaining portion of the primary compensation opportunity is a performance-based mix of annual cash incentive, stock options,long-term compensation between cash-based long-term incentives, performance shares and long-term cash-based incentive awards. The design and mix of our variable compensation has evolved overstock options is based, in part, on the past several years to balance cost, share dilution and attraction and retention objectives in support of the core principles described above. The market value of our Common Stock, which continued to experience significant volatility during 2012, and the availabilitynumber of shares available for grant under our shareholder-approved equity compensation plans, constrainand considerations relating to managing the dilutive effect of share-based awards. These factors impact our ability to use stock-based compensation to deliver a specified level of targeted compensation opportunity.
Compensation Decision-Making
In performing its duties, the Compensation Committee meets periodically with the CEO to review compensation policies and specific levels of compensation paid to officers and other key personnel, and reports and makes recommendations to the Board regarding executive compensation policies and programs. In addition, the CEO annually makes recommendations to the Compensation Committee regarding salary adjustments and the setting of annual incentive targets and awards and long-term compensation targets and awards for officers other than himself, including the other named executive officers. In determining the compensation of a named executive officer, the Compensation Committee considers individual performance, our performance and relative shareholder return, the compensation of officers with similar responsibilities at comparable companies, the awards given to the named executive officer in past years, the relationship between the compensation to be received by the officer and the compensation to be received by the other named executive officers (which we refer to as “internal pay equity”), including comparing the relationship to that found at comparable companies, and such other factors that the Committee deems relevant that are discussed elsewhere in this Compensation Discussion and Analysis. For further information regarding the Compensation Committee and its authority and responsibilities, see “Corporate Governance Principles and Board Matters – Compensation Committee” at page 4.
On an ongoing basis, the Compensation Committee reviews our executive compensation practices to determine whether they meet, and are consistent with, the key objectives of our compensation program. The Compensation Committee generally adheres to the guidelines and philosophy described above under “Compensation Philosophy and Key Principles.” However, significant changes in our business or the markets in general, may cause the Compensation Committee to deviate from these guidelines if deemed appropriate. This allows the Compensation Committee to motivate our executives and other key personnel to attain appropriate short-term and long-term performance goals and to manage the Company for sustained long-term growth, serve the best interests of the Company and our shareholders, and attract and retain talented executives.
The Compensation Committee considered the economic and tire industry environment when it established our 20122013 executive compensation program in February 2012.2013. The performance targets for the 2012 performance periodestablished under our variableannual and long-term incentive plans would be achieved, at the target performance level, if we successfully executed our operating plan for 2012, which reflected2013 and the challenging and uncertain economic and industry environment.2013-2015 performance cycle. The targets the Compensation Committee established were considered aggressive targets, the achievement of whichthe performance targets would mean we had successfully met the significant challenges posed by continuing weak economic conditions, were a stronger competitor and were poised for future growth. In lightEach performance objective has a target level as well as a threshold and maximum level, which are determined based on the perceived difficulty of the higher overall performanceestablished targets relative to recent recessionary periods (2009 to 2011) that were establishedand actual results for the 2012 awards under our variable incentive plans,those measures in prior years.
COMPENSATIONDISCUSSIONANDANALYSIS
For further information regarding the Compensation Committee provided that the maximum award would be 200% of target, rather than 150% of target, consistent with our practice prior to the recent recession. In order to further align our long-term incentive plans with shareholder interests, awards made under those plans in 2012 were subject to an increase or decrease of up to 20% based on our total shareholder return versus the S&P 500 over the three-year period ending on December 31, 2014.and its authority and responsibilities, see “Corporate Governance Principles and Board Matters – Compensation Committee” at page 5.
Role of Compensation Consultant
The Compensation Committee has the authority to retain and terminate outside advisors, including compensation consultants, to assist it in evaluating actual and proposed compensation for our officers. During 2012,2013, the Compensation Committee retained Frederic W.F.W. Cook & Co., Inc., as its independent compensation consultant, to provide advice and assistance on executive compensation matters, including the 2012 compensation decisions that are discussed elsewhere in this Compensation Discussion and Analysis. consultant.
As part of its engagement, Frederic W.F.W. Cook & Co. reviewed our executive compensation peer group and conducted a competitive analysis of compensation for the named executive officers as well as our operational and stock price performance relative to the peer group. Frederic W.F.W. Cook & Co. also assisted the Committee with a variety of other issues, including setting CEO compensation, compensation issues related to leadership succession activities, and the design and establishment of performance goals under our variable incentive plans, and the design of the new Executive Severance Plan and the proposed 2013 Performance Plan. plans.
In addition, Frederic W.F.W. Cook & Co. reviewed and provided recommendations regarding our non-management director compensation program and made a presentation to the full Board on trends and regulatory developments in executive compensation. A representative of Frederic W.F.W. Cook & Co. regularly attends Compensation Committee meetings. Frederic W.F.W. Cook & Co. works with Goodyear management only under the direction of the Compensation Committee and does not provide any other advice or consulting services to the Company.
Benchmarking of Primary Compensation
As noted above, the Compensation Committee generally targets primary compensation levels for named executive officers at median market rates. For these purposes, the Compensation Committee has determined “market”market rates by considering two sources:
proxyProxy statements of 17 peer companies with annual revenues at the time of the analysis ranging from $10.1 billion to $55.7$60.4 billion and median revenues of $17.3$16.9 billion (for 2012,2013, we had revenues of $21.0$19.5 billion); and
broad-basedBroad-based compensation surveys published from time to time by national human resources consulting firms.
For 20122013 compensation decisions, the peer group noted above consisted of:
• 3M Company | • Johnson Controls, Inc. | |
• Caterpillar Inc. | • Lear Corporation | |
• Cummins Inc. | • PACCAR Inc. | |
• Deere & Co. | • Parker-Hannifin Corporation | |
• E.I. du Pont de Nemours and Co. | • PPG Industries, Inc. | |
• Eaton Corporation plc | • Stanley Black & Decker, Inc. | |
• Honeywell International Inc. | • TRW Automotive Holdings Corp. | |
• Illinois Tool Works Inc. | • Whirlpool Corporation | |
• Ingersoll-Rand plc | ||
COMPENSATIONDISCUSSIONANDANALYSIS
This peer group was selected because the companies, as a whole, represent organizations of comparable size and complexity thatwith which we compete with for executive talent. The peer group includes companies in similar industries with comparable business models and global reach, butreach. It does not include other companies in the tire industry because no other U.S.-based tire company is similar in size and complexity to us, and non-U.S.-based tire companies do not publish comparable compensation information.
For 2012The Compensation Committee strongly believes that performance should be the primary basis on which compensation decisions are made. At the same time, the Compensation Committee believes that our peer group should reflect the fact that our executive officers are responsible for managing a larger and more complex enterprise relative to that of many other publicly traded companies with a larger market capitalization. Accordingly, for 2013 compensation decisions, the Compensation Committee comprehensively reviewed the composition of the peer group using the following criteria: (1) companies with which we compete for executive talent; (2) size, including revenues, market capitalization and enterprise value; (2)(3) global manufacturing focus; (3)(4) industry focus, particularly companies in the automotive industry; (4)(5) consumer branded product companies; (5) companies with which we compete for executive talent; and (6) number of employees. As a result of that review, the Compensation Committee removed Emerson Electric, Textron and United Technologies fromdid not make any changes to our 2012 peer group and added Cummins, Ingersoll-Rand, Parker-Hannifin and Stanley Black & Decker.group. The Compensation Committee may continue to make changes in the peer group from time to time based on the criteria described above or other relevant factors.
Data with respect to comparable elements of primary compensation is compiled for the peer group of companies described above from available sources, including, in most cases, the most recently available annual proxy statements and other SEC filings that address executive compensation matters.
Annual Compensation
Base Salaries
We target base salaries in the aggregate below median market rates, as required by the USW Agreement, and place correspondingly greater emphasis on performance-based incentive and equity compensation. Salary guidelines for each named executive officer’s position are based primarily on market data that we derive through our benchmarking practices, as described above. We also develop salary guidelines from compensation surveys based on revenues of the surveyed companies. In addition to data derived from these surveys, the Compensation Committee reviews general surveys prepared by national human resources consulting firms indicating past, present and annual increases to salaries for executive positions. The Compensation Committee also considers the CEO’s recommendations (other than with respect to his base salary), which are based in substantial part on the guidelines described above as well as on the CEO’s evaluation of the performance of each named executive officer against corporate, operating unit and individual objectives established at the start of each year, their current and future responsibilities, our recent financial performance, retention considerations, internal pay equity, and general economic and competitive conditions.
20122013 Base Salary Decisions
Using the methodologies described above for setting salary guidelines, we compared total compensation levels for our named executive officers and our other officers against market compensation data provided by Frederic W. Cook & Co. We concluded that the base salariesNone of our named executive officers were, in the aggregate, below the market median, consistent with the USW Agreement.
In 2012, the overall increase in base salaries for all officers was 4.3%. Base salary increases were determined in February 2012. Messrs. Kramer, Wells, de Bok and Bialosky received increases of 5.0%, 5.6%, 5.5% and 3.8%, respectively. Mr. Smith, who joined the Company in October 2011, did not receive a base salary increase in 2012.2013, other than Ms. Thompson and Mr. Wells. Ms. Thompson’s base salary increased from $315,000 to $475,000, effective December 1, 2013, due to her promotion to Executive Vice President and Chief Financial Officer. Mr. Wells received a base salary increase of 6.2%, effective December 1, 2013, due to his new role as President, Europe, Middle East and Africa. Salaries of the named executive officers in 20122013 were an average of 7%10% lower than the median indicated by the salary guidelines described above. Salaries in 2012 averaged approximately 17% of primary compensation paid toabove, consistent with the named executive officers.USW Agreement.
2013 Annual Cash Incentives Under the Management Incentive Plan
Under the Management Incentive Plan, each participant is eligible to receive a maximum performance award equal to a percentage of the Company’s EBIT for the year. “EBIT,” as defined in the Management Incentive Plan, means the Company’s net sales, less cost of goods sold, and selling, administrative and general expenses, as reported in the Company’s consolidated statement of operations for the year, prior to accrual of any amounts for payment under the Management Incentive Plan, adjusted to eliminate the effects of charges for restructurings, discontinued operations, extraordinary items, other unusual or non-recurring items, and the cumulative effect of tax
or accounting changes, each as defined by generally accepted accounting principles or identified in the Company’s consolidated financial statements, notes to the consolidated financial statements or management’s discussion and analysis of financial condition and results of operations.
Specifically, the CEO is eligible to receive a performance award equal to 0.75% of EBIT and the other named executive officers are each eligible to receive a performance award equal to 0.50% of EBIT. The actual performance award granted to a participant is determined by the Compensation Committee, which retains the discretionary authority to reduce or eliminate (but not increase) a performance award based on its consideration of, among other things, corporate and/or business unit performance against achievement of financial or non-financial goals, economic and relative performance considerations, and assessments of individual performance, which we refer to as the “MIP performance objectives.”
The MIP performance objectives are designed to emphasize important short-term operating and tactical objectives that directly drive the creation of shareholder value and provide appropriate balance with the metrics used in our long-term incentives. An individual’s target incentive level for the award, taking into account the MIP performance objectives, is set annually at rates near median market levels. Each MIP performance objective has a target level as well as a threshold and maximum level, which are determined based on the perceived difficulty of the established targets and actual results for those measures in prior years.
Awards are generally paid in cash. However, named executive officers may elect to defer all or a portion of their award in the form of cash or stock units. If deferred in the form of stock units, we will match 20% of the deferred amount with additional stock units that will vest in one year subject to the executive’s continued employment. Any stock units are converted to shares of Common Stock and paid to the participant in January of the fourth year following the end of the plan year under which the award was earned. See “Executive Deferred Compensation Plan” below.
2012 Annual Incentive Payouts
For 2012, our EBIT, prior to accrual of any amounts for payment under2013, the Management Incentive Plan, was $1,174 million, and the MIP performance objectives under the Management Incentive Planour annual incentive plans were as follows:
for corporate officers (including Messrs. Kramer, Wells, Bialosky and Smith):Corporate officers: (i) 40% based on Goodyear’s EBIT after accrual of any amounts for payment under the Management Incentive Plan (“Corporate EBIT”); (ii) 40% based on Goodyear’s “operatingoperating cash flow” (cash flow from operations and investing activities, each adjusted for foreign currency exchange, less the change in restricted cash and dividends paid to minority interests in subsidiaries); and (iii) 20% based on the operating drivers described below.
for officersOfficers of our four operating units (including Mr. de Bok)units: (a) 60% on that operating unit’s results as follows: (i) 40% based on the operating unit’s EBIT after accrual of any amounts for payment under the Management Incentive Plan (“Operating Unit EBIT”); (ii) 40% based on the operating unit’s operating cash flow (as defined above);flow; and (iii) 20% based on the operating drivers described below; and (b) 40% on overall company results as described in the preceding bullet point. We believe these weightings hold our operating unit executives most accountable for financial results in the areas where they have the most control and influence, but also motivate them to work cooperatively with other operating units to maximize results for the entire Company.
COMPENSATIONDISCUSSIONANDANALYSIS
overall company results as described in the preceding bullet point. We believe these weightings hold our operating unit executives most accountable for financial results in the areas where they have the most control and influence, but also motivate them to work cooperatively with other operating units to maximize results for the entire Company. |
The Compensation Committee used Corporate EBIT and Operating Unit EBIT to measure our results of operations and operating cash flow to measure our liquidity, which enables us to provide funding for dividends and share repurchases, investments in future growth.growth, pension prefunding, debt repayments and restructuring actions. The Compensation Committee also emphasized the balance between profitability and liquidity by equally weighting EBIT and operating cash flow.
“EBIT,” as defined in our annual incentive plans, means the Company’s net sales, less cost of goods sold and selling, administrative and general expenses, excluding the effects of charges for restructurings, accelerated depreciation, discontinued operations, extraordinary items, other unusual or non-recurring items, and the cumulative effect of tax or accounting changes. “Operating cash flow,” as defined in our annual incentive plans, means cash flow from operations and investing activities, each excluding foreign currency exchange, less the change in restricted cash, dividends paid to minority interests in subsidiaries, and certain cash payments related to restructuring actions. Our “EBIT” and “operating cash flow” targets and results do not include the net effects of actions taken to implement our strategy to fully fund our frozen U.S. pension plans.
In 2012,2013, the Compensation Committee established the following operating drivers that were consistent with our annual operating plan and are tied to the achievement of important strategic objectives that drive the success of our business, which we refer to as our “Strategy Roadmap”:business:
| Operating | |||||
Market-Back Innovation Excellence Target Profitable Market Segments | New Product Vitality | |||||
Operational Excellence | Manufacturing Productivity | |||||
Enabling Investments | Working Capital Excellence | |||||
The Compensation Committee establishedtable below shows the MIP performance objectives in February 2012, taking into account the economic environment that is discussed aboveand corresponding earn out percentages for 2013 under the heading “Overview.” Consistent with past practices, the Compensation Committee excluded accelerated depreciation expense related to plant closures from the Corporate EBIT and Operating Unit EBIT targets and excluded certain cash payments related to restructuring actions from the operating cash flow targets. In addition, the Compensation Committee adjusted our actual results for overall company operating cash flow for actions taken in 2012 to mitigate the impact of a potential future devaluation of the Venezuelan currency (which, in fact, subsequently occurred in February 2013). annual incentive plans.
| Payout Under Annual Incentive Plans | ||||||
| 50% | 100% | 200% | ||||
Overall Company Performance Objectives (2013): | ||||||
Corporate EBIT | $1,050 million | $1,295 million | $1,475 million | |||
Operating cash flow | $ (175) million | $ 25 million | $ 225 million | |||
The Compensation Committee determined that a negativethe operating cash flow target wasobjectives were appropriate given our planned capital expenditures of $1.1$1.0 billion to $1.3$1.2 billion, which enable us to take advantage
COMPENSATIONDISCUSSIONANDANALYSIS
of future growth opportunities, anticipated required global pension contributions of $550approximately $300 million, to $600 million, and interest expense of $360$365 million to $385 million.$390 million, working capital expenditures of up to $100 million, and estimated tax payments. Overall, the Compensation Committee believed the MIP performance objectives reflected a significant stretch for the Company given the financial and operating challenges presented by the uncertain economic environment.
Overall Company performance is relevant for determining the annual incentive payments for Messrs. Kramer, Wells, Smith and Bialosky and Ms. Thompson (for one month). North America’s performance is relevant for determining the annual incentive payments for Mr. McClellan and Ms. Thompson (for 11 months).
In February 2013,2014, the Compensation Committee reviewed actual results for 20122013 with respect to achievement of the company-wide and operating unit MIP performance objectives.
| Target | Actual Results | Percentage | ||||||||||
| ||||||||||||
Corporate EBIT | $ | $ | 173% | |||||||||
Operating cash flow | $ | $ | 200% | |||||||||
The Europe, Middle East and Africa Tire (“EMEA”)North America operating unit (the performance of which is relevant for determining Mr. de Bok’s incentive payment) did not meet eitherexceeded both its maximum Operating Unit EBIT threshold or itsand maximum operating cash flow threshold.targets.
The Compensation Committee also considered our achievement of the operating drivers, including the degree of difficulty in achieving our goals under the drivers given the economic environment during 2012 and other qualitative supporting factors, such as our underlying operating performance. The Committee then assessed whether our performance against the operating drivers was below, at or above target, taking into consideration the qualitative factors described in the preceding sentence.target. The Committee determined that we exceeded two of theall three operating drivers but fell short of our new product vitality goal by approximately two percentage points.drivers. In reaching that conclusion, the Committee considered, among other things, the following achievements by the Company and the contributions of each operating unit to those achievements:
Exceeding our goal for the proportion of branded replacement tire sales volume coming from products launched in the last four years by over 5%.
Achieving approximately $196$233 million of manufacturing productivity cost savings versus a goal of $100 million, and $346 million of total cost savings under our cost savings plan.$200 million.
Achieving aan average ratio of working capital to net sales of 10.7%13.0% versus a goal of 11.2%15.6%.
Since the overall company and North America operating cash flow target wasunit performance targets were exceeded, and the Corporate EBIT target was nearly met, the Committee determined that the operating driver performance should mirror the calculated performance using the financial performance measures for overall company results. Since EMEA did not meet either its Operating Unit EBIT or operating cash flow thresholds, the Committee determined that EMEA would not receive any payout based upon its operating driver performance.measures. In reaching these decisions, the Committee considered whether the performance under the financial performance measures and the operating drivers were appropriately aligned, and concluded that they were.
The Compensation Committee then reviewed its assessment of the CEO’s performance and the CEO’s assessment of each of the other named executive officer’s performance during 2012,2013, and their respective contributions to our results. In particular, the Compensation Committee considered the CEO’s contributions to the achievement of:
Record segment operating income.
Strong working capital management, which drove strong cash flow performance.
COMPENSATIONDISCUSSIONANDANALYSIS
Record segment operating income in North America and Asia Pacific, tempered by poor performance in EMEA due to continued economic weakness in Europe.
Improvements in price and product mixContinued progress on operational excellence initiatives, including $233 million of over $1.0 billion that exceeded raw materialmanufacturing productivity cost increases of $576 million.savings.
Continued strong momentum in innovation.
Successfully completingReinstatement of the dividend on our three-year cost savings plan and exceeding our $1.0 billion goal by $100 million.Common Stock.
Driving operational excellence initiatives.Strong execution of our pension strategy.
Successful negotiation of a new labor agreement with the United Steelworkers.
Continued strengthening of our leadership team.
The CEO and the Compensation Committee also considered the contributions of the other named executive officers in furthering the Company’s strategic initiatives described in the preceding bullet points.
The Compensation Committee then establishesestablished an aggregate incentive pool for all officers, and determinesdetermined the payout for each officer. In this process, the officer’s target incentive amount is first multiplied by the same percentage used to determine the applicable portion of the aggregate incentive pool. (For example, if the portion of the aggregate incentive pool applicable to such officer, e.g., overall company, is funded at 150% of the aggregate target incentive amount, the officer’s individual payout initially would be set at 150% of his individual incentive target.) Then, the CEO assesses the officer’s individual performance and contributions towards Company goals and makes his recommendations with respect to individual payout amounts to the Compensation Committee, which considers the CEO’s recommendations and determines the final payouts. The Compensation Committee undertakes the same process for the CEO and makes the determination as to the final payout amount for the CEO. Officers can earn between 0% and 200% of their target incentive, but the total payout for all officers may not exceed the aggregate incentive pool.
In light of our Corporate EBIT or Operating Unit EBIT, as the case may be, operating cash flow and operating driver performance and the other considerations described above, theThe Compensation Committee limitedapproved the awards for Messrs. Kramer, Wells, Bialosky and Smith to payouts of 148% and for Mr. de Bok to a payout of38% of their respective target amounts under the 2012 MIP performance objectives.
The table below presents information regarding the target and actualfollowing awards for our named executive officers under the Management Incentive Plan:our annual incentive plans:
Name | Target Under MIP Performance Objectives ($) | Actual Award ($) | Actual Award as a % of Target Under MIP Performance Objectives | Actual Award as a % of Base Salary | Target Award ($) | Actual Award ($) | Actual Award as a % of Target Award | |||||||||||||||||||||
Kramer | $ | 1,575,000 | $ | 2,331,000 | 148 | % | 222 | % | $ | 1,575,000 | $ | 2,945,250 | 187 | % | ||||||||||||||
Thompson(1) | 299,108 | 580,194 | 194 | % | ||||||||||||||||||||||||
Wells | 502,850 | 744,218 | 148 | % | 132 | % | 570,000 | 1,065,900 | 187 | % | ||||||||||||||||||
de Bok | 522,522 | 200,000 | 38 | % | 34 | % | ||||||||||||||||||||||
Smith | 472,500 | 883,575 | 187 | % | ||||||||||||||||||||||||
McClellan | 475,000 | 926,250 | 195 | % | ||||||||||||||||||||||||
Bialosky | 405,000 | 599,400 | 148 | % | 111 | % | 432,000 | 807,840 | 187 | % | ||||||||||||||||||
Smith | 446,250 | 660,450 | 148 | % | 126 | % | ||||||||||||||||||||||
| (1) | Ms. Thompson was promoted to Executive Vice President and Chief Financial Officer effective December 1, 2013. She previously served as Vice President, Finance, North America. |
COMPENSATIONDISCUSSIONANDANALYSIS
Long-Term Compensation2013 Grants of Performance-Based Incentives
Long-termThe Compensation Committee granted long-term performance-based incentives are delivered through grantsin February 2013 that have the following characteristics:
The awards will be payable 15% in shares of stock options and performance shares under our 2008 Performance Plan, a shareholder-approved equity compensation plan, and long-term cash-based incentive awards under our Executive Performance Plan. Long-term performance-based compensation is generally designed to represent approximately 65% of the primary compensation of named executive officers, assuming target performance levels. This is consistent with our emphasis on long-term compensation, which better ties the executive’s compensation to long-term operational success and shareholder value creation. The mix of long-term compensation between stock option grants, performance share grants and cash-based long-term incentives was based, in part, on the market value of our Common Stock the number of shares available for grant under the 2008 Performance Plan, and considerations relating to managing the dilutive effect of share-based awards. These factors impact our ability to use stock-based compensation to deliver a specified level of targeted compensation opportunity. As a result, the Compensation Committee believes that a cash-based plan,85% in combination with our stock-based awards,cash.
The payout is necessary to provide competitive performance and retention incentives. In order to further align our long-term incentive plans with shareholder interests, performance share and long-term cash-based incentive awards are subject to an increase or decrease of up to 20% based on our total shareholder return versus the S&P 500results over the three-year period of those awards. In addition, the Compensation Committee further revised the design of our performance share and long-term cash-based incentive awards in 2012 by establishing a three-year plan whereby theperformance cycle, with performance targets for each year of the three-year period are established on the grant date in order to provide greater accountability for long-term results, weighted 50% for the first year, 30% for the second year and 20% for the third year.
The amount and terms of grants to named executive officers under Beginning in 2014, the 2008 Performance Plan and the Executive Performance Plan are based on criteria established by the Compensation Committee and consist of responsibility level, base salary level, current Common Stock market price, officerthree-year performance recent Goodyear performance, internal pay equity, and, with respect to the 2008 Performance Plan, the number of shares available under the plan.
Cash-Based Awards Under the Executive Performance Plan
The Executive Performance Plan provides long-term incentive compensation opportunities in order to motivate key personnel to achieve our long-term business objectives and to attract, retain and reward key personnel.
2012 Grants Under the Executive Performance Plan
The Compensation Committee granted Executive Performance Plan units in February 2012 that have the following characteristics:
the target value is $100 per unit;
the payout amount is based on results over a three-year period, with performance targets forcycle will be evenly weighted (1/3 each year), which balances awards across each year ofin the three-year period established on the grant date, weighted 50% for the first year, 30% for the second year and 20% for the third year;performance cycle.
theThe payout amount can range from $0 per unit0% to $200 per unit200% for the 2012-2014 awards2013-2015 performance cycle based on actual results (and assuming the recipient remains continuously employed by us through the entire three-year period); and.
theThe payout amount can increase or decrease up to 20% (up to a maximum payout of $200 per unit)200%) based on our total shareholder return versus the S&P 500 over the three-year period ending December 31, 2014.2015.
The number of target units awarded annually to each named executive officer is based on a number of considerations, including market data about competitive long-term compensation, share availability under our equity compensation plans and the CEO’s recommendations (other than with respect to his own award), which are based on the CEO’s evaluation of the performance of each named executive officer, our recent performance, internal pay equity, retention considerations, and general economic and competitive conditions.
The performance criteria for the 2012, 2013, 2014 and 20142015 performance periods for the 2012-2014 awards were,2013-2015 performance cycle are, consistent with our strategic plan, based 50% on net income and 50% on total cash flow, net of debt. The same performance criteria were used to measure 2012 performance for the 2010-2012debt, providing a balanced emphasis on profitability and 2011-2013 awards.liquidity. Results werewill be based on our consolidated performance, with no award tied to business unit performance. In this manner, the plan balances performance measures used under the Management Incentive Planour annual incentive plans and reinforces the need for teamwork among executives. Net income wasis used as a measure to focus on improvement in profitability. Cash flow focusedfocuses on our efforts to manage the cash requirements associated with our business, including our debt and pension obligations, and our efforts to improve our capital structure and provide funding for dividends and share repurchases and investments in future growth. Adjusting for net debt provides incentive to reduce our obligations, including our debt and pension obligations. The amount of debt that is netted out is equal to the change in our total debt and our cash and cash equivalents, as adjusted for our pension contributions.
The Compensation Committee set“Net income,” as defined in our long-term incentive plans, means the performance targets for the 2012, 2013 and 2014 performance periods in February 2012, taking into account the economic environment that is discussed above under the heading “Overview.” The Compensation Committee also emphasized the balance between liquidity and profitability by equally weightingCompany’s net income, excluding charges for restructurings, accelerated depreciation, and the cumulative effect of accounting changes. Our “net income” targets and results also exclude (1) the net foreign currency remeasurement loss resulting from the devaluation of the Venezuelan currency and (2) significant tax benefits. Our 2013 “net income” for purposes of our long-term incentive plans was calculated as follows:
Goodyear net income (as reported) | $ | 629 | ||
Restructuring charges | 58 | |||
Net remeasurement loss due to Venezuelan currency devaluation | 92 | |||
Significant tax benefits | (41 | ) | ||
|
| |||
Net income (for compensation plans) | $ | 738 | ||
|
|
COMPENSATIONDISCUSSIONANDANALYSIS
“Total cash flow, net of debt. Consistent with past practices,debt,” as defined in our long-term incentive plans, means cash flow from operations and investing activities, each excluding foreign currency exchange, less the Compensation Committee adjusted actual company results overchange in restricted cash, dividends paid to minority interests in subsidiaries, cash payments related to restructuring actions and pension funding, and the performance period to exclude restructuring charges. In addition, the Compensation Committee adjusted actual company results for totalcumulative effect of accounting changes. Our “total cash flow, net of debt, fordebt” targets and results also exclude the net effects of actions taken in 2012(1) to implement our strategy to fully fund our frozen U.S. pension plans and (2) to mitigate the impact of a potential future devaluation of the Venezuelan currency (which,currency.
The TSR modifier was first introduced in fact, subsequently occurred2011 for the 2011-2013 performance cycle. The TSR modifier measures the relative performance of our Common Stock versus the S&P 500 over the three-year performance cycle of our long-term incentive awards, and is calculated based on the trailing two-month average closing price for our Common Stock and the S&P 500 (as in February 2013). existence at the end of the period), assuming the reinvestment of dividends. The TSR modifier will cause the payout of our long-term incentive awards to increase or decrease up to 20% (up to a maximum payout of 200%) as follows:
Goodyear Common Stock vs. S&P 500 (1) | TSR Modifier | |
| ³ 75th Percentile | 1.2 times | |
| = 50th Percentile | 1.0 times | |
| £ 25th Percentile | 0.8 times |
| (1) | Results between these performance levels will be interpolated. |
The table below shows the aggregate value of the long-term performance-based incentives granted to each of our named executive officers for the 2013-2015 performance cycle at the target award opportunity, as well as the amount payable in shares of Common Stock and cash.
Name | Aggregate Target Award ($)(1) | Portion Payable in Shares (# of Shares) | Portion Payable in Cash ($) | |||||||
Kramer | $ | 6,205,415 | 67,796 | $ | 5,280,000 | |||||
Thompson | 702,300 | 5,897 | 600,000 | |||||||
Wells | 1,409,772 | 15,063 | 1,200,000 | |||||||
Smith | 1,126,845 | 12,311 | 958,800 | |||||||
McClellan | 934,339 | 10,208 | 795,000 | |||||||
Bialosky | 1,043,637 | 11,402 | 888,000 | |||||||
| (1) | Reflects the target amount of the award opportunity for the cash portion of the award plus the grant date fair value for the equity portion. |
COMPENSATIONDISCUSSIONANDANALYSIS
Performance for the 2013 Performance Period
The table below shows the performance goals, actual results and payout percentages for the 2013 performance period applicable to the 2011-2013, 2012-2014 and 2013-2015 performance cycles.
| 2013 Performance Period Net Income | ||||||||||
Performance Cycle | Threshold | Target | Maximum | Actual Results | Payout Percentage | |||||
2011-2013 (1) | $200 million | $505 million | $568 million | $738 million | 150% | |||||
2012-2014 (2) | 180 million | 600 million | 695 million | 200% | ||||||
2013-2015 (3) | 200 million | 505 million | 630 million | 200% | ||||||
| 2013 Performance Period Total Cash Flow, Net of Debt | ||||||||||
Performance Cycle | Threshold | Target | Maximum | Actual Results | Payout Percentage | |||||
2011-2013 (1) | $200 million | $400 million | $500 million | $1,036 million | 150% | |||||
2012-2014 (2) | 310 million | 510 million | 710 million | 200% | ||||||
2013-2015 (3) | 200 million | 400 million | 600 million | 200% | ||||||
| (1) | For the 2011-2013 awards, each year was weighted evenly (33%), goals were set at the beginning of each year and the maximum payout was 150% of the target award opportunity. |
| (2) | For the 2012-2014 awards, each year was weighted 50%, 30%, 20% (2013 = 30%), goals were set on the grant date and the maximum payout was 200% of the target award opportunity. |
| (3) | For the 2013-2015 awards, each year was weighted 50%, 30%, 20% (2013 = 50%), goals were set on the grant date and the maximum payout was 200% of the target award opportunity. |
The goals for total cash flow, net of debt, reflected planned capital investments of $1.1$1.0 billion to $1.3$1.2 billion, anticipated required global pension contributions of $550approximately $300 million, to $600 million, and interest expense of $360$365 million to $385 million. The performance targets for the 2012, 2013 and 2014 performance periods would be achieved at the target performance level if we successfully executed our operating plans for that three-year period.
The value$390 million, working capital expenditures of the units granted for the 2012-2014 awards (assuming payout at $100 per unit) represents approximately 60% of the value of total long-term compensation awarded to the named executive officers in 2012. Included in the 2012-2014 awards were grants of 45,000; 10,593; 11,178; 8,713; and 9,281 units to Messrs. Kramer, Wells, de Bok, Bialosky and Smith, respectively.
See “Performance for the 2012 Performance Period Under the Executive Performance Plan and With Respect to Performance Shares” belowfor further information on our achievement of the performance targets.
Performance Shares
We provide performance shares to our executive officers in order to more closely align executive compensation to the performance of our Common Stock. We believe that performance shares, like the cash-based Executive
Performance Plan, drive operational performance while also driving shareholder value creation, thereby better aligning the interests of our executives with those of our shareholders.
2012 Performance Share Grants
The Compensation Committee granted performance shares under the 2008 Performance Plan in February 2012 that have the following terms:
performance shares are earned based on results over a three-year period, with performance targets for each year of the three-year period established on the grant date, weighted 50% for the first year, 30% for the second year and 20% for the third year;
the number of performance shares earned can range from zero to two performance shares per performance share granted for the 2012-2014 awards based on actual results (and assuming the recipient remains continuously employed by us through the entire three-year period);
the number of performance shares earned can increase or decrease up to 20% (up to a maximum of two performance shares per unit granted) based on our total shareholder return versus the S&P 500 over the three-year period ending December 31, 2014;$100 million, and estimated tax payments.
once vested, performance shares are paid 100% in Common Stock.
The number of performance shares awarded annually to each named executive officer, measured by the percentage of total long-term compensation represented by such shares, is based on a number of considerations, including market data for comparable long-term incentive compensation and the CEO’s recommendations (other than with respect to his own award), which are based on the CEO’s evaluation of the performance of each named executive officer, our recent performance, share availability under our equity compensation plans, internal pay equity, retention considerations, and general economic and competitive conditions.
The performance criteria for the 2012, 2013 and 2014 performance periods for the 2012-2014 awards were based 50% on net income and 50% on total cash flow, net of debt, as described above under “Cash-Based Awards Under the Executive Performance Plan” in order to align management’s efforts to achieve our goals under our long-term incentive compensation plans. The value of the performance shares granted for the 2012-2014 awards represents approximately 10% of the value of total long-term compensation awarded to the named executive officers in 2012. In 2012, target grants of 57,959; 13,643; 14,397; 10,794; and 11,454 performance shares for the 2012-2014 period were made to Messrs. Kramer, Wells, de Bok, Bialosky and Smith, respectively, having the terms described above.
Performance for the 2012 Performance Period Under the Executive Performance PlanandWith Respect to Performance Shares
The table below shows the performance goals and corresponding earn out percentages for the 2012 performance period applicable to the third year of the 2010-2012 awards, the second year of the 2011-2013 awards and the first year of the 2012-2014 awards.
| Payout per Executive Performance Plan Unit or Performance Share | ||||||||||||||||
| 50% | 100% | 150%(1) | 200%(2) | |||||||||||||
Performance Goals (2012): | ||||||||||||||||
Net income | $155 million | $400 million | $525 million | $650 million | ||||||||||||
Total cash flow, net of debt | $(20) million | $160 million | $270 million | $380 million | ||||||||||||
The table below shows actual adjusted results with respect to the performance measures during the 2012 performance period.
| Target | Actual Adjusted Results | Performance (% over target) | Payout Percentage | |||||||||||
Performance Results (2012): | ||||||||||||||
Net income | $ | 400 million | $ | 479 million | 20 | % | 131% | |||||||
Total cash flow, net of debt | $ | 160 million | $ | 714 million | 346 | % | 150%(1)/200%(2) | |||||||
During the 20122013 performance period, we faced a number of challenges and took action to meet those challenges, as discussed above under the heading “Overview.“Executive Summary.” As a result, we exceeded our maximum total cash flow, net of debt targets for the 20122013 performance period due to our efforts to manage cash flow during the performance period, particularly with respect to working capital which was a benefit of $457$415 million in 2012,2013, and exceeded our net income target for the 20122013 performance period primarily due to our continued focus on profitable targeted market segments, the net effect of raw material costs and price and product mix, improvements, cost saving actions that exceeded general inflation, and other strategic initiatives we implemented in response to global economic conditions.
Executive Performance Plan
Based on the results during the 20122013 performance period, the Compensation Committee approved earnings on the Executive Performance Planlong-term incentive awards for such period in an amount equal to 141%150% of the target amount per unit for 2010-2012 and 2011-2013 awards (capped at 150% of target) and 166%200% of the target amount per unit for 2012-2014 awards (capped at 200% of target).and 2013-2015 awards. The payout of these amounts is contingent upon the named executive officer’s continued service during the related three-year period,performance cycle, except in the case of certain events, such as retirement, death, disability or severance following a change-in-control.
COMPENSATIONDISCUSSIONANDANALYSIS
The table below shows amounts earned forby each of the named executive officers in respect of their long-term incentive grants under the Executive Performance Plan for the 2012 performance period with respect to their 2010-2012 awards, which represents one-third of the three-year target award opportunity:
Name | Target Award ($) | Maximum Award ($) | Actual Award ($) | |||||||||
Kramer | $ | 1,020,933 | $ | 1,531,400 | $ | 1,439,519 | ||||||
Wells | 328,933 | 493,400 | 463,796 | |||||||||
de Bok | 351,967 | 527,950 | 496,273 | |||||||||
Bialosky | 290,433 | 435,650 | 409,511 | |||||||||
Smith | — | — | — | |||||||||
The table below shows amounts earned for each of the named executive officers in respect of their grants under the Executive Performance Plan for the 20122013 performance period with respect to their 2011-2013 awards, which represents one-third of the three-year target award opportunity:
Target Award | Actual Award | |||||||||||||||||||
Name | Target Award ($) | Maximum Award ($) | Actual Award ($) (1) | ($) | ($)(1) | |||||||||||||||
Kramer | $ | 1,276,133 | $ | 1,914,200 | $ | 1,799,348 | $ | 1,276,134 | $ | 1,914,203 | ||||||||||
Thompson | 78,300 | 117,450 | ||||||||||||||||||
Wells | 416,667 | 625,000 | 587,500 | 416,666 | 625,006 | |||||||||||||||
de Bok | 441,667 | 662,500 | 622,750 | |||||||||||||||||
Smith | 309,366 | 464,047 | ||||||||||||||||||
McClellan | 221,600 | 332,400 | ||||||||||||||||||
Bialosky | 290,433 | 435,650 | 409,511 | 290,434 | 435,653 | |||||||||||||||
Smith | 309,367 | 464,050 | 436,207 | |||||||||||||||||
| (1) | Payable |
The table below shows amounts earned forby each of the named executive officers in respect of their long-term incentive grants under the Executive Performance Plan for the 20122013 performance period with respect to their 2012-2014 awards, which represents one-half30% of the three-year target award opportunity:
Name | Target Award ($) | Maximum Award ($) | Actual Award ($) (1) | Aggregate Target Award ($) | Portion of Actual Award Payable in Cash ($) (1) | Portion of Actual Award (# of Shares) (1) | ||||||||||||||||
Kramer | $ | 2,250,000 | $ | 4,500,000 | $ | 3,735,000 | $ | 1,585,951 | $ | 2,700,000 | 34,775 | |||||||||||
Thompson | 84,583 | 144,000 | 1,854 | |||||||||||||||||||
Wells | 529,650 | 1,059,300 | 879,219 | 373,331 | 635,580 | 8,186 | ||||||||||||||||
de Bok | 558,900 | 1,117,800 | 927,774 | |||||||||||||||||||
Smith | 325,059 | 556,860 | 6,872 | |||||||||||||||||||
McClellan | 229,736 | 398,880 | 4,465 | |||||||||||||||||||
Bialosky | 435,650 | 871,300 | 723,179 | 305,332 | 522,780 | 6,476 | ||||||||||||||||
Smith | 464,050 | 928,100 | 770,323 | |||||||||||||||||||
| (1) | Payable contingent on continued service through December 31, 2014 and subject to a three-year relative total shareholder return modifier. |
For further information on the tax deductibility of awards under the Executive Performance Plan, see “Tax Deductibility of Pay” at page 38.
Performance Shares
Based on the results during the 2012 performance period, the Compensation Committee approved earnings with respect to performance share awards for such period in an amount equal to 166% of the target number of performance shares.
The table below shows the earnings foramounts earned by each of the named executive officers in respect of their 2012-2014long-term incentive grants of performance shares for the 20122013 performance period with respect to their 2013-2015 awards, which represents one-half of the three-year target award opportunity:
Name | Target Award (Shares) | Maximum Award (Shares) | Actual Number of Shares Earned(1) | Aggregate Target Award ($) | Portion of Actual Award Payable in Cash ($) (1) | Portion of Actual Award Payable in Shares (# of Shares) (1) | ||||||||||||||||
Kramer | 28,980 | 57,959 | 48,105 | $ | 3,102,708 | $ | 5,280,000 | 67,796 | ||||||||||||||
Thompson | 340,254 | 600,000 | 5,898 | |||||||||||||||||||
Wells | 6,822 | 13,643 | 11,323 | 702,812 | 1,200,000 | 15,064 | ||||||||||||||||
de Bok | 7,199 | 14,397 | 11,949 | |||||||||||||||||||
Smith | 563,429 | 958,800 | 12,312 | |||||||||||||||||||
McClellan | 467,170 | 795,000 | 10,208 | |||||||||||||||||||
Bialosky | 5,397 | 10,794 | 8,959 | 521,819 | 888,000 | 11,402 | ||||||||||||||||
Smith | 5,727 | 11,454 | 9,506 | |||||||||||||||||||
| (1) | Payable contingent on continued service through December 31, |
COMPENSATIONDISCUSSIONANDANALYSIS
Impact of TSR Modifier and Payout of 2010-20122011 - 2013 Long-Term Incentive Awards
Our stock out-performed 82% of the companies in the S&P 500 during the three-year period ending December 31, 2013, resulting in a TSR modifier of 1.2 times. See page 42 for more information on the calculation of the TSR modifier.
The Compensation Committee also approved the distributionpayout of shares of Common Stock for previously earned performance shares and the payout of amounts earned under the Executive Performance Plancash to the named executive officers in each case, with respect to the 2010-2012 awards.2011-2013 performance cycle as follows.
Stock Options
| Cash Payout | ||||||||||||||||||||
Name | 2011 Performance Period (1) | 2012 Performance Period (2) | 2013 Performance Period | Impact of TSR Modifier | Total Payout of 2011-2013 Awards | |||||||||||||||
Kramer | $ | 1,914,200 | $ | 1,799,348 | $ | 1,914,203 | $ | 1,125,550 | $ | 6,753,301 | ||||||||||
Thompson | 117,600 | 110,403 | 117,450 | 69,091 | 414,544 | |||||||||||||||
Wells | 625,000 | 587,500 | 625,006 | 367,501 | 2,205,007 | |||||||||||||||
Smith | 464,050 | 436,207 | 464,047 | 272,861 | 1,637,165 | |||||||||||||||
McClellan | 332,400 | 312,456 | 332,400 | 195,451 | 1,172,707 | |||||||||||||||
Bialosky | 435,650 | 409,511 | 435,653 | 256,162 | 1,536,976 | |||||||||||||||
The Compensation Committee annually grants stock options to named executive officers and other key employees to link our executives’ compensation to results earned by shareholders and to build executive stock ownership. Stock options constitute an important element of our long-term incentive compensation program. Because options result in gains only in the event that the stock price appreciates, they serve to align the interests of management with shareholders.
Shares Payout | ||||||
Name | 2011 Performance Period (# of Shares) (1) | Impact of TSR Modifier (# of Shares) | Total Payout of 2011-2013 Awards (# of Shares) | |||
Kramer | 65,779 | 13,156 | 78,935 | |||
Thompson | 4,188 | 837 | 5,025 | |||
Wells | 17,523 | 3,504 | 21,027 | |||
Smith | 16,261 | 3,252 | 19,513 | |||
McClellan | 11,182 | 2,237 | 13,419 | |||
Bialosky | 13,698 | 2,739 | 16,437 | |||
| (1) | Previously reported in 2011 Summary Compensation Table and Proxy Statement dated March 12, 2012. |
| (2) | Previously reported in 2012 Summary Compensation Table and Proxy Statement dated March 18, 2013. |
Stock options granted under the 2008 Performance Plan in 20122013 have the following terms:
options vest in equal, annual installments over a four-year period;
options have a ten-year term; and
the exercise price is equal to the closing market price of our Common Stock on the date of grant.
All options granted to named executive officers during 20122013 were non-qualified stock options. The portion of long-term incentive compensation provided in the form of stock option grants each year is determined based on the number of available options under the 2008 Performance Plan,our equity compensation plans, as well as market data on long term-compensation. We use a Black-Scholes valuation model to determine the number of stock options needed to provide the desired value consistent with overall median market compensation.
In 2012, grants of 353,218; 83,147; 87,739; 65,781;
COMPENSATIONDISCUSSIONANDANALYSIS
The table below shows the aggregate grant date fair value and 69,807the number of stock options were madegranted to Messrs. Kramer, Wells, de Bok, Bialosky and Smith, respectively, having the terms described above. The valueeach of these stock option grants represents approximately 30% of the value of total long-term compensation awarded to theour named executive officers in 2012.2013.
Name | Aggregate Grant Date Fair Value ($) | Number of Stock Options (#) | ||||
Kramer | $ | 2,640,000 | 442,211 | |||
Thompson | 318,918 | 42,249 | ||||
Wells | 599,992 | 98,369 | ||||
Smith | 479,397 | 80,301 | ||||
McClellan | 397,495 | 66,582 | ||||
Bialosky | 443,995 | 74,371 | ||||
In December 2013, the Compensation Committee granted 40,000 restricted stock units to Ms. Thompson and 25,000 restricted stock units to each of Messrs. Smith and McClellan. The restricted stock units will vest and convert into shares of Common Stock three years from the date of grant (in December 2016). The Compensation Committee made the grant to Ms. Thompson due to her election as Executive Vice President and Chief Financial Officer and made the grants to Messrs. Smith and McClellan in consideration of their respective contributions to Goodyear and importance to Goodyear in the future. The Compensation Committee believes that restricted stock links executives to the results earned by shareholders and builds executive stock ownership.
We provide our named executive officers with retirement benefits under both tax-qualified and non-qualified retirement plans. The tax-qualifiedTax-qualified plan benefits are pursuant to a defined benefit pension plan, the Goodyear Salaried Pension Plan (the “Salaried Plan”), which was frozen effective December 31, 2008, and a defined contribution plan, the Goodyear Employee Savings Plan for Salaried Employees (the “Savings Plan”). The non-qualifiedNon-qualified plan benefits are pursuant to an unfunded defined benefit plan, the Goodyear Supplementary Pension Plan (the “Supplementary Plan”).
The Salaried We also maintain a non-qualified unfunded defined benefit Excess Benefit Plan, is designed to provide tax-qualifiedwhich was also frozen effective December 31, 2008, that pays an additional pension benefits for U.S.-based salaried employees hired prior to January 1, 2005. The Savings Plan is designed to provide an opportunity for U.S.-based salaried employees to save for retirement on a tax-deferred basis. Messrs. Kramer and Wells participate inbenefit over that paid from the Salaried Plan along with other Goodyear employees. Effective December 31, 2008,if a participant does not meet the Salaried Plan accrued benefit was frozen. Since that date tax-qualified benefit accruals for Messrs. Kramer and Wells and other Goodyear salariedeligibility requirements of the Supplementary Plan. For all employees who participate indo not meet the Salariedeligibility requirements of the Supplementary Plan, are provided by Company contributions underthere is also a corresponding non-qualified defined contribution Excess Benefit Plan that mirrors the retirement contributions feature of the Savings Plan.
None of the named executive officers, other than Ms. Thompson, are currently eligible to receive a benefit under the Supplementary Plan because they have not met the age and service requirements of the Supplementary Plan. Messrs. Kramer, Wells and McClellan and Ms. Thompson will receive benefits from the frozen Salaried employees hired after December 31, 2004, includingPlan, and Messrs. Kramer, Wells and McClellan will receive benefits from the frozen defined benefit Excess Benefit Plan upon termination prior to retirement eligibility. Mr. McClellan will also receive a benefit from the Wingfoot Commercial Tire Systems, LLC Supplemental Retirement Plan, an unfunded non-qualified defined benefit plan sponsored by Wingfoot Commercial Tire Systems, LLC, a wholly-owned subsidiary of the Company at which Mr. McClellan previously held an executive position. Messrs. Bialosky and Smith alsoare not eligible to participate in the retirement contributions feature ofSalaried Plan or the Savingsdefined benefit Excess Benefit Plan. Participants in the Savings Plan, including all of the named executive officers, other than Mr. de Bok, are currently eligible to receive Company matching contributions in addition to theand retirement contributions described above.contributions.
Mr. de Bok does not participate in the Salaried Plan or the Savings Plan, instead he participates in Goodyear’s Netherlands Pension Plan and in government-sponsored (but Company-funded) pension plans in The Netherlands and Belgium.
COMPENSATIONDISCUSSIONANDANALYSIS
The Supplementary Plan provides additional pension benefits to officers and certain other key individuals identified by the Compensation Committee. All of the named executive officers participate in the Supplementary Plan. The Supplementary Plan provides pension benefits to participants who retire with at least 30 years of service, retire after age 55 with at least ten years of service or retire after age 65 with at least five years of service. Benefits payable under the Supplementary Plan are offset by the amount of any benefits payable under the Salaried Plan, the retirement contributions feature of the Savings Plan, applicable non-U.S. pension plans, and certain prior employer pension plans. The Committee believes supplemental executive retirement plans such as the Supplementary Plan are an important part of executive compensation and are utilized by mostmany large companies many of whichthat compete with the Company for executive talent. Retirement benefits, including those provided through a supplemental executive retirement plan, are a critical component of an executive’s overall compensation program and are
essential to attracting, motivating and retaining talented executives with a history of leadership and to providing retirement replacement income. Retirement benefits are an important factor in an executive’s decision to accept or reject a new position.
We also maintain In 2013, the Compensation Committee determined, consistent with its past practice, to adopt a non-qualified unfunded defined benefit Excess Benefit Plan that pays anpolicy prohibiting the grant of additional pension benefit over that paid from the Salaried Plan if a participant does not meet the eligibility requirements of the Supplementary Plan. None of the named executive officers are currently eligible to receive a benefit underservice credit in the Supplementary Plan because they have not met the agefor newly hired officers and service requirements discussed in the prior paragraph, and Messrs. de Bok, Bialosky and Smith are not eligible to participate in the defined benefit Excess Benefit Plan. The additional benefit under the defined benefit Excess Benefit Plan is equal to the amount a participant would have received from the Salaried Plan but does not because of the limitations imposed by the Internal Revenue Code of 1986, as amended (the “Code”), on pension benefits under qualified plans. This plan is provided to allow the extension of benefits from the qualified plan to individuals whose compensation exceeds the Code limitations for qualified plans. Like the qualified plans, effective December 31, 2008 accruals were frozen under the defined benefit Excess Benefit Plan. For employees hired after December 31, 2004, and for all employees as of December 31, 2008, who do not meet the eligibility requirements of the Supplementary Plan, there is a corresponding non-qualified defined contribution Excess Benefit Plan that mirrors the retirement contributions feature of the Savings Plan. Mr. de Bok is not eligible to participate in the defined contribution Excess Benefit Plan.other key employees.
For more information regarding the terms of these plans and the named executive officers’ accrued benefits under these plans, see “Defined Contribution Plan Benefits” at page 61 and “Pension Benefits” at page 48.62.
Severance and Change-in-Control Benefits
In February 2013, we amended our Executive Severance Plan (the “Executive Severance Plan”) to provide for the payment of severance benefits to our officers, including all of the named executive officers, but excluding Mr. de Bok, if their employment is terminated under certain circumstances during certain periods before or within two years following a change-in-control of the Company. The amendment replaced benefits that were previously provided under the Continuity Plan for Salaried Employees. In amending the Executive Severance Plan, we eliminated (a) excise tax gross-up provisions for all officers and (b) the right of any officer to voluntarily terminate their employment following a change-in-control and receive severance benefits other than in the case of Good Reason (as defined in the Executive Severance Plan).
The Executive Severance Plan is designed to attract, retain and motivate employees,officers, provide for stability and continuity in the event of an actual or threatened change-in-control, and ensure that our employeesofficers are able to devote their full time and attention to the Company’s operations in the event of an actual or threatened change-in-control.
The Executive Severance Plan and the related change-in-control triggers (commonly referred to as “double triggers”) generally provide for the payment of severance benefits if employment is terminated under certain circumstances during certain periods before or within two years following a change-in-control of the Company. The change-in-control triggers in our 2008 Performance Plan and our proposed 2013 Performance Planequity compensation plans are substantially similar to those in the Executive Severance Plan. We selected the specific change-in-control triggers used in the Executive Severance Plan and the proposed 2013 Performance Plan,our equity compensation plans, such as the acquisition of 20% or more of Goodyear’s Common Stock, a significant change in the composition of the Board of Directors or the acquisition of actual control of Goodyear, based upon our review of market practices, including provisions included in similar agreements of other public companies. Based upon that review, we determined that the terms and conditions of the Executive Severance Plan, including the specific change-in-control triggers were consistent with market practices.
The Executive Severance Plan also continues to provide severance benefits to our officers, including each of the named executive officers, (other than Mr. de Bok), if their employment is terminated by us other than for Cause (as defined in the Executive Severance Plan), death or disability, and other than in connection with a change-in-control.
COMPENSATIONDISCUSSIONANDANALYSIS
To be eligible to receive benefits under the Executive Severance Plan, an officer must execute a release and agree, among other things, to certain confidentiality, non-disparagement, non-solicitation and non-competition covenants.
The Compensation Committee believes that our severance benefits are in the best interests of the Company and our shareholders, are a necessary component of a competitive compensation program, and are not significantly different from thein line with severance benefits typically in place at other companies.
For additional information regarding the terms of the Executive Severance Plan and benefits payable under that plan, see “Potential Payments Upon Termination or Change-in-Control” at page 51.66.
We provide certain executive officers, including our named executive officers, with limited personal benefits and perquisites, as described below and in footnote 5 to the Summary Compensation Table at page 41.54. The Compensation Committee has reviewed and approved the perquisites described below. While theThe Compensation Committee does not consider these perquisites to be a significant component of executive compensation, it recognizes that suchthese perquisites are an important factor in protecting our executive officers and in enabling them to focus on our business with minimal disruption. We do not provide any tax reimbursements to our executive officers for any of the perquisites we provide them.
Home Security Systems. We pay for the cost of home security systems for a limited number of executive officers in order to enhance their safety and protect our investment in them. We cover the cost of installation, monitoring and maintenance for these systems.
Use of Company Aircraft. In limited circumstances, executive officers are permitted to use our company aircraft for personal travel. In these circumstances, the executive is also required to reimburse us for a portion of the cost of such use in an amount determined using the Standard Industry Fare Level.
Tire Program. We offer our executive officers and Board members the opportunity to receive up to two sets of tires per year at our expense, including the cost of tires, mounting, balancing and disposal fees.
Financial Planning and Tax Preparation Services. We offer financial assistance to our executive officers to help them cover the cost of financial planning and tax preparation services. In providing this benefit, we seek to alleviate our executives’ concern regarding personal financial planning so that they may devote their full attention to our business. The maximum annual cost to the Company under this program is $9,000 per officer.
Club Memberships. We pay the annual dues for a corporate club membership that is available to Mr. Kramer.Messrs. Kramer and McClellan. None of the other named executive officers utilize this corporate club membership. The membership is intended to be used primarily for business purposes, although members may use the club for personal purposes so long as they pay all incremental costs, other than the annual dues, related to that personal use.
Annual Physical Exams. We strongly encourage our executive officers to have an annual comprehensive physical examination which we pay for in order to enhance their physical well-being and protect our investment in them.
COMPENSATIONDISCUSSIONANDANALYSIS
Executive Deferred Compensation Plan
The Goodyear Executive Deferred Compensation Plan (the “Deferred Compensation Plan”) is a non-qualified deferred compensation plan that provides named executive officers and other highly compensated employees the opportunity to defer various forms of compensation. The plan provides several deferral period options. During 2012, no named executive officers made deferrals under the Deferred Compensation Plan. For participants, this offers an additional means to save for retirement on a tax-deferred basis. There is no guaranteed return associated with any deferred amounts. During 2013, no named executive officers made deferrals under the Deferred Compensation Plan.
For additional information regarding the terms of the deferred compensation planDeferred Compensation Plan and participant balances, see “Nonqualified Deferred Compensation” at page 51.65.
Payments to Expatriate Employees. Where warranted, we provide tax equalization payments, housing allowances, and other similar benefits to employees, including Mr. de Bok,Wells, living outside of their home country to compensate them for the additional costs of those assignments.
Section 162(m) of the Code provides that compensation paid to a public company’s chief executive officer and its three other highest paid executive officers at the end of the year (other than its chief financial officer) in excess of $1 million is not deductible unless certain requirements have been satisfied. The Compensation Committee believes that awards under the Management Incentive Plan and the 2008 Performance Planour equity compensation plans qualify for full deductibility under Section 162(m).
Although compensation paid under the Executive Performance Plan is performance-based, it does not qualify for the deductibility exception for performance-based compensation since that Plan has not been approved by our shareholders. Therefore, payments under the Executive Performance Plan are subject to the Section 162(m) limitation on deductibility. Because of our significant U.S. deferred tax assets from prior periods, the limitation on deductibility has no impact on our financial position. In reviewing and considering payouts or earnings under the Executive Performance Plan, the Compensation Committee considered not only the impact of the lost tax deductions, but also the significant U.S. deferred tax assets available to us from prior periods, as well as the benefits realized by us and our shareholders from the successful efforts of our senior management team. In balancing these considerations, the Compensation Committee concluded that it would be appropriate to approve payouts in respect of the 2010-20122011-2013 grants and earnings for the 20122013 performance period in respect of the 2011-20132012-2014 and 2012-20142013-2015 grants. Beginning April 15, 2013, we ceased granting any further awards from the Executive Performance Plan. Future similar awards will be granted pursuant to the shareholder-approved 2013 Performance Plan, which is designed to enable us to provide performance-based compensation to senior executive officers that may be intended to meet the requirements for tax deductibility under Section 162(m) of the Code.
To better link the interests of management and our stockholders, the Compensation Committee has established stockholding guidelines for our officers. These guidelines specify a number of shares that our officers are expected to accumulate and hold based on a multiple of annual base salary of twofive times for elected Vice Presidents,the CEO, three times for Senior Vice Presidents, Executive Vice Presidents, and the Presidents of our operating units and fiveSenior Vice Presidents, and two times for the CEO.elected Vice Presidents. Therefore, the stockholding requirement for Mr. Kramer is five times his annual base salary and for Ms. Thompson and Messrs. Wells, de Bok,Smith, McClellan and Bialosky and Smith is three times their annual base salary. All shares of
COMPENSATIONDISCUSSIONANDANALYSIS
Common Stock owned outright by officers (or their spouses) and held by them in the Goodyear stock fund of the Savings Plan, and 60% of the shares of restricted stock, restricted stock units and earned (but unvested) performance shares awarded to officers and share equivalent units held in our deferred compensation plan, are counted as ownership in assessing compliance with the guidelines. Unexercised stock options and unearned performance shares are not counted toward compliance with the guidelines. The stock price used in assessing compliance with the guidelines as of May 1st of each year will be the average closing stock price for the prior 60-day period.
The stockholding guidelines also include stock retention provisions. If an officer has met their stockholding requirement, they are required to retain 25% of the net shares received from any exercised options or any vested shares of Common Stock for at least one year from the date of exercise or vesting and may only sell or otherwise dispose of shares to the extent they will still meet their stockholding requirement following that sale or disposition. If an officer has not met their stockholding requirement, they are required to retain all of the net shares received from any exercised options or any vested shares of Common Stock, and may not sell or otherwise dispose of shares until they have met their stockholding requirement, unless they demonstrate a need to sell shares due to a financial hardship. Net shares are the shares remaining after payment of the exercise price and/or withholding taxes.
Following the May 1, 2012 assessment, the stockholding requirement for each of our named executive officers increased significantly. Our named executive officers are making progress towards satisfying their stockholding requirement.
RestrictionsProhibition on Hedging and Pledging
We have adopted, as part of our insider trading policy, prohibitions on the short sale of our Common Stock and other securities and the issuance, purchase or sale of, or trading or dealing in, puts, calls or other options or rights relating to our Common Stock and other securities. These provisions prohibit our directors, officers and employees from hedging the risk of their ownership of our Common Stock. We also prohibit our directors, officers and employees from holding our Common Stock and other securities in a margin account or otherwise pledging them as collateral for a loan.
Recovery of Compensation (Clawback Policy)
If the Compensation Committee determines that an officer has engaged in conduct detrimental to the Company, the Compensation Committee may take a range of actions to remedy this conduct, prevent its recurrence and impose appropriate discipline. Discipline would vary depending on the facts and circumstances, and may include (1) termination of employment, (2) cancelling or reducing any outstanding compensatory grants or awards, (3) initiating an action for breach of fiduciary duty or fraud which could include recovery of any unjustly obtained incentive compensation, and (4) requiring reimbursement of compensation or other payments in accordance with provisions of the Sarbanes-Oxley Act of 2002, our claw-back policy described below or the terms of the relevant compensation plan. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities.
Effective forBeginning with awards made in 2012, awards, the Compensation Committee adopted a claw-back policy that effectively contractually extends the claw-back provisions of the Sarbanes-Oxley Act of 2002 that apply to our Chief Executive Officer and Chief Financial Officer to the Presidents of each of our strategic business units and all of our Senior Vice Presidents. If we are required to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement as a result of misconduct, the claw-back policy would permit the Compensation Committee to require reimbursement of (1) any incentive compensation received from us during the one-year period following the publication
COMPENSATIONDISCUSSIONANDANALYSIS
of misstated financial statements and (2) any profits realized from the sale of our securities during that one-year period. We will make any necessary revisions to our claw-back policy once implementing rules pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 are adopted by the Securities and Exchange Commission and The NASDAQ Stock Market.
In addition, under our Executive Performance Plan and equity compensation plans, the Compensation Committee may require a plan participant who engages in competition with us within 18 months after their termination of employment to return or forfeit the realized value of all awards under those plans during such period of time that the Compensation Committee determines. Our Executive Severance Plan also provides for the recovery or forfeiture of severance payments if a person receiving payments pursuant to the plan violates certain confidentiality, non-disparagement, non-solicitation and non-competition covenants.
We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussion with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in Goodyear’s Annual Report on Form 10-K for the year ended December 31, 2012.2013.
The Compensation Committee
Thomas H. Weidemeyer, Chairman
William J. Conaty
W. Alan McCollough
Stephanie A. Streeter
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
COMPENSATION OF NAMED EXECUTIVE OFFICERS
The table below sets forth information regarding the compensation of the CEO, the current and former Chief Financial Officer of Goodyear (the “CFO”), and the persons who were, at December 31, 2012,2013, the other three most highly compensated executive officers of Goodyear (collectively, the “named executive officers”) for services in all capacities to Goodyear and its subsidiaries during 2010, 2011, 2012 and 2012.2013.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||||||||||||||||
Richard J. Kramer Chairman of the Board, Chief Executive Officer and President(6) | 2012 | $ | 1,033,333 | $ | 0 | $ | 786,504 | $ | 2,249,999 | $ | 9,304,867 | $ | 3,673,172 | $ | 57,849 | $ | 17,105,724 | |||||||||||||||||||
| 2011 | 1,000,000 | 0 | 683,230 | 1,829,996 | 6,751,400 | 1,899,524 | 58,920 | 12,223,070 | ||||||||||||||||||||||||||||
| 2010 | 929,924 | 0 | 479,992 | 1,392,000 | 5,653,500 | 1,626,814 | 52,161 | 10,134,391 | ||||||||||||||||||||||||||||
Darren R. Wells Executive Vice President and Chief Financial Officer | 2012 | 555,000 | 0 | 185,136 | 529,646 | 2,674,733 | 846,993 | 33,325 | 4,824,833 | |||||||||||||||||||||||||||
| 2011 | 526,667 | 0 | 966,856 | 486,499 | 2,329,186 | 429,659 | 35,355 | 4,774,222 | ||||||||||||||||||||||||||||
| 2010 | 490,000 | 0 | 404,801 | 450,002 | 2,340,800 | 377,450 | 29,875 | 4,092,928 | ||||||||||||||||||||||||||||
Arthur de Bok President, Europe, Middle East and Africa Tire(7) | 2012 | 570,000 | 0 | 195,367 | 558,897 | 2,246,797 | 922,728 | 24,858 | 4,518,647 | |||||||||||||||||||||||||||
| 2011 | 545,000 | 0 | 980,846 | 522,299 | 2,720,398 | 592,029 | 26,381 | 5,386,953 | ||||||||||||||||||||||||||||
| 2010 | 523,333 | 0 | 415,299 | 481,499 | 3,062,520 | 473,971 | 29,673 | 4,986,295 | ||||||||||||||||||||||||||||
David L. Bialosky Senior Vice President, General Counsel and Secretary | 2012 | 533,333 | 0 | 146,475 | 419,025 | 2,141,601 | 398,517 | 26,260 | 3,665,211 | |||||||||||||||||||||||||||
| 2011 | 513,333 | 0 | 142,277 | 389,993 | 1,956,300 | 254,391 | 24,016 | 3,280,310 | ||||||||||||||||||||||||||||
| 2010 | 500,000 | 0 | 122,495 | 367,503 | 1,498,150 | 158,063 | 21,127 | 2,667,338 | ||||||||||||||||||||||||||||
Gregory L. Smith Senior Vice President, Global Operations | 2012 | 525,000 | 0 | 155,431 | 444,671 | 1,866,980 | 165,295 | 34,848 | 3,192,225 | |||||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||||||||||||||||
| Richard J. Kramer | ||||||||||||||||||||||||||||||||||||
| Chairman of the Board, Chief Executive Officer and President | 2013 | $ | 1,050,000 | $ | 0 | $ | 925,415 | $ | 2,640,000 | $ | 13,965,003 | $ | 538,440 | $ | 71,642 | $ | 19,190,500 | |||||||||||||||||||
| 2012 | 1,033,333 | 0 | 786,504 | 2,249,999 | 9,304,867 | 3,673,172 | 57,849 | 17,105,724 | ||||||||||||||||||||||||||||
| 2011 | 1,000,000 | 0 | 683,230 | 1,829,996 | 6,751,400 | 1,899,524 | 58,920 | 12,223,070 | ||||||||||||||||||||||||||||
| Laura K. Thompson | ||||||||||||||||||||||||||||||||||||
| Executive Vice President and Chief Financial Officer(6) | 2013 | 321,667 | 0 | 1,007,100 | 318,918 | 1,510,735 | 26,908 | 43,692 | 3,229,020 | |||||||||||||||||||||||||||
| Darren R. Wells | ||||||||||||||||||||||||||||||||||||
| President, Europe, Middle East and Africa and former Chief Financial Officer(7) | 2013 | 567,917 | 0 | 209,772 | 599,992 | 3,893,987 | 36,634 | 36,507 | 5,344,809 | |||||||||||||||||||||||||||
| 2012 | 555,000 | 0 | 185,136 | 529,646 | 2,674,733 | 846,993 | 33,325 | 4,824,833 | ||||||||||||||||||||||||||||
| 2011 | 526,667 | 0 | 966,856 | 486,499 | 2,329,186 | 429,659 | 35,355 | 4,774,222 | ||||||||||||||||||||||||||||
| Gregory L. Smith | ||||||||||||||||||||||||||||||||||||
Senior Vice President, Global Operations | 2013 | 525,000 | 0 | 733,545 | 479,397 | 3,136,143 | 190,138 | 26,635 | 5,090,858 | |||||||||||||||||||||||||||
| 2012 | 525,000 | 0 | 155,431 | 444,671 | 1,866,980 | 165,295 | 34,848 | 3,192,225 | ||||||||||||||||||||||||||||
| Stephen R. McClellan | ||||||||||||||||||||||||||||||||||||
President, North America | 2013 | 500,000 | 0 | 704,839 | 397,495 | 2,647,981 | 258,030 | 41,699 | 4,550,044 | |||||||||||||||||||||||||||
| David L. Bialosky | ||||||||||||||||||||||||||||||||||||
Senior Vice President, General Counsel and Secretary | 2013 | 540,000 | 0 | 155,637 | 443,995 | 2,910,435 | 187,694 | 27,091 | 4,264,852 | |||||||||||||||||||||||||||
| 2012 | 533,333 | 0 | 146,475 | 419,025 | 2,141,601 | 398,517 | 26,260 | 3,665,211 | ||||||||||||||||||||||||||||
| 2011 | 513,333 | 0 | 142,277 | 389,993 | 1,956,300 | 254,391 | 24,016 | 3,280,310 | ||||||||||||||||||||||||||||
| (1) | Represents the aggregate grant date fair value as of the respective grant date for each award. The maximum amount to be awarded with respect to each of the named executive officers is shown in the Grants of Plan-Based Awards Table in the column “Estimated Future Payouts Under Equity Incentive Plan Awards |
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
| (2) | Represents the aggregate grant date fair value as of the respective grant date for each award. The assumptions made in valuing option awards reported in this column are discussed in Note to the Consolidated Financial Statements No. 1, “Accounting Policies” under “Stock-Based Compensation” and Note to the Consolidated Financial Statements No. 17, “Stock Compensation Plans” included in Goodyear’s Annual Report for the year ended December 31, |
| (3) | Represents amounts awarded under |
The following table provides further information on the amounts payable, or earned but not yet payable, under the MIP and the EPP for performance periods ending on December 31, 2012:2013:
| MIP (Currently Payable) | 2010-2012 EPP (Currently Payable) | 2011-2013 EPP (Not Yet Payable) | 2012-2014 EPP (Not Yet Payable) | 2013 Annual Incentive (Currently Payable) | 2013 Period; 2011-2013 Long- Term Incentive (Currently Payable) | 2011-2013 Impact of TSR Modifer (Currently Payable) | 2013 Period; 2012-2014 Long- Term Incentive (Not Yet Payable) | 2013 Period; 2013-2015 Long- Term Incentive (Not Yet Payable) | ||||||||||||||||||
Mr. Kramer | $ | 2,331,000 | $ | 1,439,519 | $ | 1,799,348 | $ | 3,735,000 | $2,945,250 | $1,914,203 | $1,125,550 | $2,700,000 | $5,280,000 | |||||||||||||
Ms. Thomspon | 580,194 | 117,450 | 69,091 | 144,000 | 600,000 | |||||||||||||||||||||
Mr. Wells | 744,218 | 463,796 | 587,500 | 879,219 | 1,065,900 | 625,006 | 367,501 | 635,580 | 1,200,000 | |||||||||||||||||
Mr. de Bok | 200,000 | 496,273 | 622,750 | 927,774 | ||||||||||||||||||||||
Mr. Smith | 883,575 | 464,047 | 272,861 | 556,860 | 958,800 | |||||||||||||||||||||
Mr. McClellan | 926,250 | 332,400 | 195,451 | 398,880 | 795,000 | |||||||||||||||||||||
Mr. Bialosky | 599,400 | 409,511 | 409,511 | 723,179 | 807,840 | 435,653 | 256,162 | 522,780 | 888,000 | |||||||||||||||||
Mr. Smith | 660,450 | — | 436,207 | 770,323 | ||||||||||||||||||||||
| (4) | Represents total change in pension value for each named executive officer, which reflects both the accrual of additional benefits and changes in the assumptions used to value the benefits. The discount rate used to calculate the pension value |
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
| Increase in Pension Value due to Benefit Accrual | Increase in Pension Value due to Assumption Changes | Total Increase in Pension Value | ||||||||||
Mr. Kramer | $ | 1,803,120 | $ | 1,870,052 | $ | 3,673,172 | ||||||
Mr. Wells | 394,244 | 452,749 | 846,993 | |||||||||
Mr. de Bok | 436,051 | 486,677 | 922,728 | |||||||||
Mr. Bialosky | 266,113 | 132,404 | 398,517 | |||||||||
Mr. Smith | 127,397 | 37,898 | 165,295 | |||||||||
Increase in Pension Value due to Benefit Accrual | Decrease in Pension Value due to Assumption Changes | Total Increase in Pension Value | ||||||
Mr. Kramer | $ 2,607,627 | $ (2,069,187 | ) | $ 538,440 | ||||
Ms. Thompson | 428,373 | (401,465 | ) | 26,908 | ||||
Mr. Wells | 541,030 | (504,396 | ) | 36,634 | ||||
Mr. Smith | 270,982 | (80,844 | ) | 190,138 | ||||
Mr. McClellan | 943,253 | (685,223 | ) | 258,030 | ||||
Mr. Bialosky | 338,385 | (150,691 | ) | 187,694 | ||||
No nonqualified deferred compensation earnings are required to be reported because the Deferred Compensation Plan does not provide for “above-market” or preferential earnings as defined in applicable Securities and Exchange Commission rules and regulations.
| (5) | Includes amounts for home security system monitoring expenses, personal financial planning services, the cost of annual physical exams, and provision of up to two sets of automobile tires per year. Mr. Kramer’s total also includes amounts for the personal use of company aircraft of $25,459 and the annual dues for a club membership. |
| Mr. Kramer, |
| (6) | Ms. Thompson was elected Executive Vice President and Chief |
| (7) | Mr. Wells was elected President, Europe, Middle East and |
Summary of Realized Pay Earned by Our Chief Executive Officer for 2010, 2011, 2012 and 20122013
Our compensation programs for Mr. Kramer and our other officers are primarily based on performance. The table below is a summary of the pay Mr. Kramer actually realized in 2010, 2011 and 2012. The information shown below is intended to supplement and not be a substitute for the information in the Summary Compensation Table. The Summary Compensation Table includes several items that are driven by accounting and actuarial assumptions, which are not necessarily reflective of compensation actually realized by Mr. Kramer in a particular year. For example, the information required to be in the Summary Compensation Table combines pay actually received (base salary and annual cash incentive payments) with the accounting value of equity compensation granted, which may never be realized, and earned but unvested long term cash awards, which continue to be subject to forfeiture, as well as
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
a TSR modifier, until the vesting date. The Summary Compensation Table is also required to include other compensation (contributions to qualified defined contribution plans and perquisites) and the change in pension values (based on actuarial assumptions), much of which is not realized in the periods presented.
The following table reports the base salary, annual incentive earned, long term incentive earnedto be paid out for the three-year performance periodcycle ending in each respective year and the pre-tax compensation earned upon the exercise of stock options and the vesting of stock awards regardless of when they were granted. We believe that this table represents the compensation actually realized by Mr. Kramer which is considerably less than that shown in the Summary Compensation Table.
Name | Year | Salary ($)(1) | Annual Incentive ($)(2) | Long Term Incentive Payout ($)(3) | Stock Option Exercises ($)(4) | Equity (PSU) Vesting ($)(5) | Total Realized Pay ($) | Year | Salary ($)(1) | Annual Incentive ($)(2) | Long Term Incentive Payout ($)(3) | Stock Option Exercises ($)(4) | Equity (PSU) Vesting ($)(5) | Total Realized Pay ($) | ||||||||||||||||||||||||||||||||||||||||||
Kramer | 2012 | $ | 1,033,333 | $ | 2,331,000 | $ | 4,502,319 | $ | 2,347 | $ | 780,458 | $ | 8,649,457 | 2013 | $ | 1,050,000 | $ | 2,945,250 | $ | 6,753,301 | $ | 129,482 | $ | 1,882,600 | $ | 12,760,633 | ||||||||||||||||||||||||||||||
| 2011 | 1,000,000 | 2,100,000 | 3,617,400 | — | 378,778 | 7,096,178 | 2012 | 1,033,333 | 2,331,000 | 4,502,319 | 2,347 | 780,458 | 8,649,457 | |||||||||||||||||||||||||||||||||||||||||||
| 2010 | 929,924 | 1,716,300 | 1,200,000 | — | 191,721 | 4,037,945 | 2011 | 1,000,000 | 2,100,000 | 3,617,400 | — | 378,778 | 7,096,178 | |||||||||||||||||||||||||||||||||||||||||||
| (1) | Mr. Kramer’s salary was targeted below market median |
| (2) | Mr. Kramer’s individual targets were set at |
| (3) | Sixty percent of Mr. Kramer’s long term incentive target is |
| (4) | Thirty percent of Mr. Kramer’s long term incentive target is granted in the form of stock options. In |
| (5) | Ten percent of Mr. Kramer’s long term incentive target is |
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
The following table summarizes grants of plan-based awards made to the named executive officers during 2012.2013.
All Stock Awards: Number Shares | All Other Option Awards: Number of Securities | Exercise or Base Price of | Grant Date Fair Value of Stock and | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Option Awards: Number of Securities Underlying Options (#)(3) | Exercise or Base Price of Option Awards ($/Sh)(4) | Grant Date Fair Value of Stock and Option Awards ($) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Stock or Units (#)(3) | Underlying Options (#)(4) | Option Awards ($/Sh)(5) | Option Awards ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kramer | 2/27/2012 | $ | 2,250,000 | $ | 4,500,000 | $ | 9,000,000 | 2/28/2013 | $ | 2,640,000 | $ | 5,280,000 | $ | 10,560,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kramer | 2/27/2012 | 28,980 | 57,959 | 115,918 | $ | 786,504 | 2/28/2013 | 33,898 | 67,796 | 135,592 | $ | 925,415 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kramer | 2/27/2012 | 353,218 | $ | 12.94 | 2,249,999 | 2/28/2013 | 442,211 | $ | 12.98 | 2,640,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Thompson | 2/28/2013 | 135,000 | 270,000 | 540,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Thompson | 2/28/2013 | 1,733 | 3,466 | 6,932 | 47,311 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Thompson | 2/28/2013 | 22,613 | 12.98 | 135,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Thompson | 6/14/2013 | 3,169 | (6) | 15.43 | (7) | 18,919 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Thompson | 12/13/2013 | 165,000 | 330,000 | 660,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Thompson | 12/13/2013 | 1,215 | 2,431 | 4,862 | 54,989 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Thompson | 12/13/2013 | 16,467 | 22.62 | 164,999 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Thompson | 12/13/2013 | 40,000 | 904,800 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wells | 2/27/2012 | 529,650 | 1,059,300 | 2,118,600 | 2/28/2013 | 568,500 | 1,137,000 | 2,274,600 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wells | 2/27/2012 | 6,822 | 13,643 | 27,286 | 185,136 | 2/28/2013 | 7,300 | 14,599 | 29,198 | 199,276 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wells | 2/27/2012 | 83,147 | 12.94 | 529,646 | 2/28/2013 | 95,226 | 12.98 | 568,499 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
de Bok | 2/27/2012 | 558,900 | 1,117,800 | 2,235,600 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
de Bok | 2/27/2012 | 7,199 | 14,397 | 28,794 | 195,367 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
de Bok | 2/27/2012 | 87,739 | 12.94 | 558,897 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Wells | 12/13/2013 | 31,500 | 63,000 | 126,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Wells | 12/13/2013 | 232 | 464 | 928 | 10,496 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Wells | 12/13/2013 | 3,143 | 22.62 | 31,493 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Smith | 2/28/2013 | 479,400 | 958,800 | 1,917,600 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Smith | 2/28/2013 | 6,156 | 12,311 | 24,622 | 168,045 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Smith | 2/28/2013 | 80,301 | 12.98 | 479,397 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Smith | 12/13/2013 | 25,000 | 565,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| McClellan | 2/28/2013 | 397,500 | 795,000 | 1,590,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| McClellan | 2/28/2013 | 5,104 | 10,208 | 20,416 | 139,339 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| McClellan | 2/28/2013 | 66,582 | 12.98 | 397,495 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| McClellan | 12/13/2013 | 25,000 | 565,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bialosky | 2/27/2012 | 435,650 | 871,300 | 1,742,600 | 2/28/2013 | 444,000 | 888,000 | 1,776,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bialosky | 2/27/2012 | 5,397 | 10,794 | 21,588 | 146,475 | 2/28/2013 | 5,701 | 11,402 | 22,804 | 155,637 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bialosky | 2/27/2012 | 65,781 | 12.94 | 419,025 | 2/28/2013 | 74,371 | 12.98 | 443,995 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Smith | 2/27/2012 | 464,050 | 928,100 | 1,856,200 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Smith | 2/27/2012 | 5,727 | 11,454 | 22,908 | 155,431 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Smith | 2/27/2012 | 69,807 | 12.94 | 444,671 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Grants of the cash portion of our long-term incentive awards on February 28, 2013 were made under the Executive Performance Plan and grants on December 13, 2013 were made under the 2013 Performance Plan. For additional information regarding such awards, see “Compensation Discussion and Analysis — Elements of Compensation — Long-Term Compensation — |
| (2) | Grants of |
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
| (3) | Grants of restricted stock awards were made under the 2013 Performance |
Grants of stock option awards |
Unless otherwise indicated, the exercise price of each stock option is equal to |
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information about outstanding equity awards held by the named executive officers as of December 31, 2012.
| Stock Awards | ||||||||||||||||||||||||||||||||
| Option Awards | 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 ($)(4) | ||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#)(1) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($)(2) | 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 ($)(4) | ||||||||||||||||||||||||||
Kramer | 217,376 | (12) | $ | 3,001,963 | 28,979 | (17) | $ | 400,200 | ||||||||||||||||||||||||
| 6,822 | * | $ | 13.83 | 12/2/2013 | ||||||||||||||||||||||||||||
| 26,000 | 17.15 | 12/6/2015 | ||||||||||||||||||||||||||||||
| 6,117 | * | 17.35 | 12/2/2013 | |||||||||||||||||||||||||||||
| 8,961 | * | 17.35 | 12/9/2014 | |||||||||||||||||||||||||||||
| 55,000 | 24.71 | 2/27/2017 | ||||||||||||||||||||||||||||||
| 5,062 | * | 28.03 | 12/2/2013 | |||||||||||||||||||||||||||||
| 7,551 | * | 25.33 | 12/9/2014 | |||||||||||||||||||||||||||||
| 10,573 | * | 25.33 | 12/6/2015 | |||||||||||||||||||||||||||||
| 7,214 | * | 27.93 | 12/9/2014 | |||||||||||||||||||||||||||||
| 10,100 | * | 27.93 | 12/6/2015 | |||||||||||||||||||||||||||||
| 50,740 | 26.74 | 2/21/2018 | ||||||||||||||||||||||||||||||
| 123,786 | 41,262 | (5) | 4.81 | (3) | 2/26/2019 | |||||||||||||||||||||||||||
| 7,486 | * | 13.22 | 12/2/2013 | |||||||||||||||||||||||||||||
| 17,095 | 5,699 | (6) | 18.12 | (3) | 8/4/2019 | |||||||||||||||||||||||||||
| 9,987 | * | 14.32 | 12/9/2014 | |||||||||||||||||||||||||||||
| 105,295 | 105,295 | (7) | 12.74 | (3) | 2/23/2020 | |||||||||||||||||||||||||||
| 66,208 | 198,625 | (8) | 13.91 | (3) | 2/22/2021 | |||||||||||||||||||||||||||
| 353,218 | (9) | 12.94 | (3) | 2/27/2022 | ||||||||||||||||||||||||||||
Wells | 103,846 | (13) | $ | 1,434,113 | 6,821 | (17) | $ | 94,198 | ||||||||||||||||||||||||
| 2,500 | $ | 5.52 | 8/5/2013 | |||||||||||||||||||||||||||||
| 8,268 | 6.81 | 12/2/2013 | ||||||||||||||||||||||||||||||
| 15,600 | 12.54 | 12/9/2014 | ||||||||||||||||||||||||||||||
| 752 | * | 13.38 | 8/5/2013 | |||||||||||||||||||||||||||||
| 1,089 | * | 13.38 | 12/2/2013 | |||||||||||||||||||||||||||||
| 13,500 | 17.15 | 12/6/2015 | ||||||||||||||||||||||||||||||
| 667 | * | 17.73 | 8/5/2013 | |||||||||||||||||||||||||||||
| 2,970 | * | 17.73 | 12/2/2013 | |||||||||||||||||||||||||||||
| 13,500 | 24.71 | 2/27/2017 | ||||||||||||||||||||||||||||||
| 12,333 | 26.74 | 2/21/2018 | ||||||||||||||||||||||||||||||
| 62,999 | 21,000 | (5) | 4.81 | (3) | 2/26/2019 | |||||||||||||||||||||||||||
| 34,039 | 34,040 | (7) | 12.74 | (3) | 2/23/2020 | |||||||||||||||||||||||||||
| 17,601 | 52,804 | (8) | 13.91 | (3) | 2/22/2021 | |||||||||||||||||||||||||||
| 83,147 | (9) | 12.94 | (3) | 2/27/2022 | ||||||||||||||||||||||||||||
de Bok | 105,819 | (14) | $ | 1,461,360 | 7,198 | (17) | $ | 99,404 | ||||||||||||||||||||||||
| 12,500 | $ | 6.81 | 12/2/2013 | |||||||||||||||||||||||||||||
| 17,680 | 12.54 | 12/9/2014 | ||||||||||||||||||||||||||||||
| 33,000 | 15.23 | 10/4/2015 | ||||||||||||||||||||||||||||||
| 30,000 | 17.15 | 12/6/2015 | ||||||||||||||||||||||||||||||
| 30,000 | 24.71 | 2/27/2017 | ||||||||||||||||||||||||||||||
| 29,905 | 26.74 | 2/21/2018 | ||||||||||||||||||||||||||||||
| 1,969 | 26.74 | 12/2/2013 | ||||||||||||||||||||||||||||||
| 76,987 | 25,663 | (5) | 4.81 | (3) | 2/26/2019 | |||||||||||||||||||||||||||
| 36,422 | 36,422 | (7) | 12.74 | (3) | 2/23/2020 | |||||||||||||||||||||||||||
| 18,896 | 56,690 | (8) | 13.91 | (3) | 2/22/2021 | |||||||||||||||||||||||||||
| 87,739 | (9) | 12.94 | (3) | 2/27/2022 | ||||||||||||||||||||||||||||
Name Bialosky Smith Stock Awards Option Awards 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
($)(4) Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)(1) Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#) Option
Exercise
Price
($)(2) 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
($)(4) 71,293 (15) $ 984,556 5,397 (17) $ 74,533 23,961 7,987 (10) $ 16.86 (3) 9/23/2019 27,799 27,799 (7) 12.74 (3) 2/23/2020 14,109 42,330 (8) 13.91 (3) 2/22/2021 65,781 (9) 12.94 (3) 2/27/2022 58,318 (16) $ 805,372 5,727 (17) $ 79,090 15,234 45,703 (11) $ 13.64 (3) 10/24/2021 69,807 (9) 12.94 (3) 2/27/2022
Represents the grant of a reinvestment option. Each stock option granted prior to 2008 included a right to the automatic grant of a new option, which we refer to as a “reinvestment option,” for the number of shares tendered upon the exercise of the original stock option and withheld to pay income taxes. |
| (7) | The closing market price of the Common Stock on the date of grant was $15.31. |
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information about outstanding equity awards held by the named executive officers as of December 31, 2013.
| Stock Awards | ||||||||||||||||||||||||||||||||
| Option Awards | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | 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 ($)(3) | ||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#)(1) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($)(2) | Option Expiration Date | ||||||||||||||||||||||||||||
Kramer | 254,168(12) | $ | 6,061,907 | 45,489(18) | $1,084,913 | |||||||||||||||||||||||||||
| 26,000 | $17.15 | 12/6/2015 | ||||||||||||||||||||||||||||||
| 8,961* | 17.35 | 12/9/2014 | ||||||||||||||||||||||||||||||
| 55,000 | 24.71 | 2/27/2017 | ||||||||||||||||||||||||||||||
| 7,551* | 25.33 | 12/9/2014 | ||||||||||||||||||||||||||||||
| 10,573* | 25.33 | 12/6/2015 | ||||||||||||||||||||||||||||||
| 7,214* | 27.93 | 12/9/2014 | ||||||||||||||||||||||||||||||
| 10,100* | 27.93 | 12/6/2015 | ||||||||||||||||||||||||||||||
| 50,740 | 26.74 | 2/21/2018 | ||||||||||||||||||||||||||||||
| 165,048 | 4.81 | 2/26/2019 | ||||||||||||||||||||||||||||||
| 22,794 | 18.12 | 8/4/2019 | ||||||||||||||||||||||||||||||
| 9,987* | 14.32 | 12/9/2014 | ||||||||||||||||||||||||||||||
| 157,942 | 52,648 (4) | 12.74 | 2/23/2020 | |||||||||||||||||||||||||||||
| 132,416 | 132,417 (5) | 13.91 | 2/22/2021 | |||||||||||||||||||||||||||||
| 88,304 | 264,914 (6) | 12.94 | 2/27/2022 | |||||||||||||||||||||||||||||
| 442,211 (7) | 12.98 | 2/28/2023 | ||||||||||||||||||||||||||||||
Thompson | 50,316(13) | $ | 1,200,037 | 3,566(18) | $85,049 | |||||||||||||||||||||||||||
| 3,169*(8) | $15.43 | 12/9/2014 | ||||||||||||||||||||||||||||||
| 2,500 | 17.15 | 12/6/2015 | ||||||||||||||||||||||||||||||
| 3,000 | 24.71 | 2/27/2017 | ||||||||||||||||||||||||||||||
| 2,606 | 26.74 | 2/21/2018 | ||||||||||||||||||||||||||||||
| 31,535 | 4.81 | 2/26/2019 | ||||||||||||||||||||||||||||||
| 10,722 | 3,575 (4) | 12.74 | 2/23/2020 | |||||||||||||||||||||||||||||
| 8,357 | 8,357 (5) | 13.91 | 2/22/2021 | |||||||||||||||||||||||||||||
| 4,709 | 14,129 (6) | 12.94 | 2/27/2022 | |||||||||||||||||||||||||||||
| 22,613 (7) | 12.98 | 2/28/2023 | ||||||||||||||||||||||||||||||
| 16,467 (9) | 22.62 | 12/13/2023 | ||||||||||||||||||||||||||||||
Wells | 103,057(14) | $ | 2,457,909 | 10,259(18) | $244,677 | |||||||||||||||||||||||||||
| 15,600 | $12.54 | 12/9/2014 | ||||||||||||||||||||||||||||||
| 13,500 | 17.15 | 12/6/2015 | ||||||||||||||||||||||||||||||
| 13,500 | 24.71 | 2/27/2017 | ||||||||||||||||||||||||||||||
| 12,333 | 26.74 | 2/21/2018 | ||||||||||||||||||||||||||||||
| 83,999 | 4.81 | 2/26/2019 | ||||||||||||||||||||||||||||||
| 51,059 | 17,020 (4) | 12.74 | 2/23/2020 | |||||||||||||||||||||||||||||
| 35,202 | 35,203 (5) | 13.91 | 2/22/2021 | |||||||||||||||||||||||||||||
| 20,786 | 62,361 (6) | 12.94 | 2/27/2022 | |||||||||||||||||||||||||||||
| 95,226 (7) | 12.98 | 2/28/2023 | ||||||||||||||||||||||||||||||
| 3,143 (9) | 22.62 | 12/13/2023 | ||||||||||||||||||||||||||||||
Smith | 86,240(15) | $ | 2,056,824 | 8,445(18) | $201,413 | |||||||||||||||||||||||||||
| 30,468 | 30,469(10) | $ | 13.64 | 10/24/2021 | ||||||||||||||||||||||||||||
| 17,451 | 52,356 (6) | 12.94 | 2/27/2022 | |||||||||||||||||||||||||||||
| 80,301 (7) | 12.98 | 2/28/2023 | ||||||||||||||||||||||||||||||
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
| Stock Awards | ||||||||||||||||||||||||||||||||
| Option Awards | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value Of Unearned Shares, Units or Other Rights That Have Not Vested ($)(4) | ||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#)(1) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($)(2) | Option Expiration Date | ||||||||||||||||||||||||||||
McClellan | 59,211(16) | $ | 1,412,182 | 6,592(18) | $157,219 | |||||||||||||||||||||||||||
| 9,100 | $ | 12.54 | 12/9/2014 | |||||||||||||||||||||||||||||
| 4,500 | 17.15 | 12/6/2015 | ||||||||||||||||||||||||||||||
| 4,500 | 24.71 | 2/27/2017 | ||||||||||||||||||||||||||||||
| 3,932 | 26.74 | 2/21/2018 | ||||||||||||||||||||||||||||||
| 33,429 | 4.81 | 2/26/2019 | ||||||||||||||||||||||||||||||
| 16,974 | 5,658 (4) | 12.74 | 2/23/2020 | |||||||||||||||||||||||||||||
| 11,554 | 11,554 (5) | 13.91 | 2/22/2021 | |||||||||||||||||||||||||||||
| 10,714 | 10,714 (11) | 9.88 | 10/4/2021 | |||||||||||||||||||||||||||||
| 11,338 | 34,015 (6) | 12.94 | 2/27/2022 | |||||||||||||||||||||||||||||
| 66,582 (7) | 12.98 | 2/28/2023 | ||||||||||||||||||||||||||||||
Bialosky | 26,837(17) | $ | 640,062 | 7,859(18) | $187,437 | |||||||||||||||||||||||||||
| 31,948 | $ | 16.86 | 9/23/2019 | |||||||||||||||||||||||||||||
| 41,698 | 13,900(4) | 12.74 | 2/23/2020 | |||||||||||||||||||||||||||||
| 28,219 | 28,220(5) | 13.91 | 2/22/2021 | |||||||||||||||||||||||||||||
| 16,445 | 49,336(6) | 12.94 | 2/27/2022 | |||||||||||||||||||||||||||||
| 74,371(7) | 12.98 | 2/28/2023 | ||||||||||||||||||||||||||||||
| * | Represents the grant of a reinvestment option. See Note 6 under the Grants of Plan-Based Awards Table for additional information. |
| (1) | Because the options in this column were fully vested as of December 31, |
| (2) | The exercise price of each option granted under our |
Calculated by multiplying |
| (4) | Vests in full on February 23, 2014. |
| (5) |
| Vests as to one-half of the options on each of February |
Vests as to one-third of the options on each of February |
Vests as to one-fourth of the options on each of February |
| (8) | Vests in full on June 14, 2014. |
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
| (9) | Vests as to one-fourth of the options on each of December 13, 2014, December 13, 2015, December 13, 2016 and December 13, 2017. |
| (10) |
| Vests as to |
| (11) | Vests as to one-half of the options on each of October 4, 2014 and October 4, 2015. |
| (12) |
|
| (13) | 4,419 earned performance share units vest on December 31, 2014, |
19,508 earned performance share units vest on December 31, |
| (15) | 16,378 earned performance share units vest on December 31, 2014, 12,311 earned performance share units vest on December 31, 2015 (each subject to a three-year relative total shareholder return modifier), 32,551 restricted shares vest on October 24, |
| (16) | 10,641 earned performance share units vest on December 31, 2014, 10,208 earned performance share units vest on December 31, 2015 (each subject to a three-year relative total shareholder return modifier), 13,362 restricted stock units vest as to one-half of the units on each of February 23, 2014 and February 23, 2015, and 25,000 restricted stock units vest on December 13, 2016. |
| (17) | 15,435 earned performance share units vest on December 31, 2014 and 11,402 earned performance share units vest on December 31, 2015 (each subject to a three-year relative total shareholder return modifier). |
| (18) | Unearned performance share units that will vest on December 31, 2014 or December 31, 2015, subject to the achievement of performance goals in |
During the restriction period for shares of restricted stock, the recipient is not entitled to delivery of the shares, restrictions are placed on the transferability of the shares, and all or a portion of the shares will be forfeited if the recipient terminates employment for reasons other than as approved by the Compensation Committee. Upon expiration of the restriction period, the appropriate number of shares of Common Stock will be delivered to the grantee free of all restrictions. During the restriction period for shares of restricted stock, the grantee shall be entitled to vote restricted shares and unlessreceive dividends. For grants made after April 2013, shares of restricted stock will be credited with notional dividends that vest and are payable in cash (without interest) at the Compensation Committee otherwise provides,same time and subject to receive dividends, if any.the same conditions as the underlying shares of restricted stock. Restricted stock units do not have any voting rights but receive dividend equivalents that vest and unlessare payable in shares of Common Stock at the Compensation Committee otherwise provides, are entitledsame time and subject to receive dividends, if any.the same conditions as the underlying restricted stock units. Earned and unearned, but unvested, performance share units do not have any voting rights and are not entitled to receive dividend equivalents. For additional information regarding the terms of the performance share units,
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
see “Compensation Discussion and Analysis — Elements of Compensation — Long-Term Compensation — Performance Shares — 2012 Performance Share Grants.2013 Grants of Performance-Based Incentives.”
Option Exercises and Stock Vested
The following table sets forth certain information regarding option exercises by, and the vesting of stock awards for, the named executive officers during 2012.2013.
| Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized On Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized On Vesting ($) | Number of Shares Acquired on Exercise (#) | Value Realized On Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized On Vesting ($) | ||||||||||||||||||||
Kramer | 75 | $ | 2,347 | 56,514 | $ | 780,458 | (2) | 3,205 | $ 129,482 | 78,935 | $ 1,882,600(2 | ) | ||||||||||||||||
Thompson | 831 | 13,892 | 5,025 | 119,846(2 | ) | |||||||||||||||||||||||
Wells | 1,572 | 40,745 | 17,661 | 243,898 | (2) | 5,850 | 158,608 | 27,694 | 591,165(3 | ) | ||||||||||||||||||
de Bok | 3,315 | 68,979 | 48,814 | 667,689 | (3) | |||||||||||||||||||||||
Smith | — | — | 19,513 | 465,385(2 | ) | |||||||||||||||||||||||
McClellan | 1,110 | 31,840 | 20,086 | 409,714(4 | ) | |||||||||||||||||||||||
Bialosky | — | — | 41,705 | 546,480 | (4) | — | — | 65,073 | 1,467,364(5 | ) | ||||||||||||||||||
Smith | — | — | — | — | ||||||||||||||||||||||||
| (1) | Represents the difference between the exercise price and the fair market value of our Common Stock on the date of exercise. |
| (2) | Represents the total value realized upon the vesting of performance share awards for |
| (3) | Represents the total value realized upon the vesting of |
| (4) | Represents the total value realized upon the vesting of |
| (5) | Represents the total value realized upon the vesting of 16,437 performance share awards for 2011-2013, which were paid 100% in shares of Common Stock, and the total value realized upon the vesting of 48,636 shares of restricted stock. |
Defined Contribution Plan Benefits
The Savings Plan is a tax-qualified defined contribution plan that permits eligible employees, including all of the named executive officers, (other than Mr. de Bok), to contribute 1% to 50% of their compensation to their Savings Plan account, subject to an annual contribution ceiling ($17,00017,500 in 2012)2013). Savings Plan participants who are age 50 or older and contributing at the maximum plan limits or at the annual contribution ceiling are entitled to make “catch-up” contributions annually up to a specified amount ($5,500 in 2012)2013). Participants in the Savings Plan are eligible to receive Company matching contributions in addition to the retirement contributions described below under “Pension Benefits.” Savings Plan participants are also eligible to make after-tax contributions subject to limits imposed by the Code. Contributions are invested, at the direction of the participant, in any one or more of the fifteen available funds and/or in mutual funds under a self-directed account.
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
Goodyear’s Salaried Pension Plan is a defined benefit plan qualified under the Code in which U.S.-based salaried employees hired before January 1, 2005 participate, including Messrs. Kramer, Wells and Wells.McClellan and Ms. Thompson. Accruals in the Salaried Plan were frozen effective December 31, 2008. The Salaried Plan was designed to provide tax-qualified pension benefits for most Goodyear salaried employees. The Salaried Plan contains formulas based on age and service. These formulas are multiplied by five-year average compensation below and above a breakpoint ($51,000 in 2008, the year the Salaried Plan was frozen), with the result representing a lump sum benefit under the plan. Compensation is held to the qualified plan limit under the Code, which was $230,000 for 2008. A portion of the benefit may be paid by employee contributions. Effective December 31, 2007, all active participants in the Salaried Plan became vested and are entitled to a benefit upon any termination of employment. Benefits are available on a five-year certain and continuous annuity basis at age 65, by converting the lump sum to an annuity. Annuity benefits payable to a participant who retires prior to age 65 are subject to a reduction for each month retirement precedes age 65. Benefits under the Salaried Plan are funded by an irrevocable tax-exempt trust.
Participation in the Salaried Plan was frozen effective December 31, 2004. Subsequent hires, including Messrs. Bialosky and Smith, participate in the retirement contributions feature of the Savings Plan. Under the Savings Plan, each participant receives an allocation each pay period equal to a percentage of compensation, with compensation held to the qualified plan limit under the Code. Effective January 1, 2009, Salaried Plan participants, including Messrs. Kramer, Wells and Wells,McClellan and Ms. Thompson, also began receiving allocations under the retirement contributions feature of the Savings Plan.
Non-U.S.-based employees, such as Mr. de Bok, participate in neither the Salaried Plan nor the Savings Plan; instead Mr. de Bok participates in Goodyear’s Netherlands Pension Plan and in government-sponsored (but Company-funded) pension plans in The Netherlands and Belgium.
Goodyear also maintains the Supplementary Plan, a non-qualified, unfunded plan which provides additional retirement benefits to our officers and certain other key employees, including all of the named executive officers. The Supplementary Plan provides pension benefits to participants who retire with at least 30 years of service, retire after age 55 with at least ten years of service or retire after age 65 with at least five years of service. The formula for an annuity benefit is based on a percentage determined using credited service (22% with 10 years, 38% with 20 years, 48% with 30 years and 54% with 40 years) times five-year average compensation above the breakpoint ($55,05056,850 in 2012)2013), with compensation inclusive of base salary and annual incentive payments. The five-year
average compensation uses the highest five calendar years, not necessarily consecutive, out of the last ten years. Benefits are offset for the Salaried Plan, the retirement contributions feature of the Savings Plan, applicable non-U.S. benefits and certain prior employer benefits. Under the Supplementary Plan, benefits payable to a participant who retires prior to age 62 are subject to a reduction of 0.4% for each month retirement precedes age 62. Participants may elect a lump sum payment of benefits under the Supplementary Plan for benefits accrued and vested prior to January 1, 2005, subject to the approval of Goodyear’s ERISA Appeals Committee. For benefits accrued or vested on or after January 1, 2005, payment will be made in a lump sum. Benefits vested on or after January 1, 2005 cannot be distributed prior to six months after separation of service. TheMs. Thompson is the only named executive officer vested in the Supplementary Plan benefitsbenefits.
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
Messrs. Kramer, Wells and McClellan and Ms. Thompson are eligible for allimmediate commencement of the benefit from the Salaried Plan as of December 31, 2013. Messrs. Smith and Bialosky are not participants in the Salaried Plan. The chart below indicates the date at which each named executive officers are not yet vested.officer is or will be eligible to receive a benefit from the Supplementary Plan.
Supplementary Plan | ||
Name | Earliest Eligibility for Benefit Commencement | |
Kramer | July 31, 2016 | |
Thompson | Currently eligible | |
Wells | December 31, 2020 | |
Smith | October 31, 2021 | |
McClellan | December 31, 2017 | |
Bialosky | September 30, 2019 | |
We also maintain a non-qualified unfunded defined benefit Excess Benefit Plan that pays an additional pension benefit over that paid from the Salaried Plan if a participant does not meet the eligibility requirements of the Supplementary Plan. The additional benefit is equal to the amount a participant would have received from the Salaried Plan but does not because of the limitations imposed by the Code on pension benefits under qualified plans. This plan is provided to allow the extension of benefits from the qualified plan to individuals whose incomecompensation exceeds the Code guidelines for qualified plans. Distribution of amounts earned and vested prior to January 1, 2005 will be paid out in the same manner as the Salaried Plan unless otherwise elected by the participant at least 12 months prior to termination or severance. Distributions for amounts earned or vested on or after January 1, 2005 will be paid out in a lump sum. For participants considered to be among the top 50 wage earners of the Company, benefits vested on or after January 1, 2005 are paid out six months after termination of service. For employees hired after December 31, 2004, and for all employees as of December 31, 2008, who do not meet the eligibility requirements of the Supplementary Plan, there is a corresponding defined contribution Excess Benefit Plan that mirrors the retirement contributions feature of the Savings Plan. Like the qualified plans, effective December 31, 2008 accruals were frozen under the defined benefit Excess Benefit Plan and all affected participants began receiving defined contribution allocations under the defined contribution Excess Benefit Plan.
Mr. McClellan was an employee of Wingfoot Commercial Tires Systems, LLC, a wholly-owned subsidiary of Goodyear, from July 31, 2001 to September 1, 2003. During this period, he participated in the Wingfoot Commercial Tires Systems, LLC Supplemental Retirement Plan and he retains a frozen accrued benefit in that plan. This non-qualified unfunded defined benefit pension plan was established for management-level employees at Wingfoot Commercial Tires Systems in order to provide pension benefits that were equivalent to the combination of the Salaried Plan and the defined benefit Excess Benefit Plan pension benefits for Goodyear employees. Mr. McClellan will receive a benefit from the Wingfoot Commercial Tires Systems, LLC Supplemental Retirement Plan only if he does not meet the eligibility requirements for the Goodyear Supplementary Plan upon termination of employment with Goodyear. Distributions will be paid out in a manner similar to that of the defined benefit Excess Benefit Plan.
The Pension Benefits table below shows for the named executive officers the number of years of credited service, present value of accumulated benefit and payments during the last fiscal year, for each defined benefit plan.
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
The “Present Value of Accumulated Benefit” is the lump-sumlump sum value as of December 31, 20122013 of the expected pension benefit payable at age 62 that was earned as of December 31, 2012.2013. That is, the benefit reflects service and compensation only through 2012,2013, not projected for future years. The benefit payment at age 62 is assumed to be the lump sum form. The present value is measured using the same assumptions used for financial reporting purposes (and which are set forth following the Pension Benefits Table), with the exception of the commencement age. The commencement age is assumed to be 62 because that is the age at which the Supplementary Plan benefit is payable with no reduction for early retirement.
Generally, a participant’s years of credited service under the Supplementary Plan are based on the years an employee participatesof employment with Goodyear. However, in the Salaried Plan. However, in certain cases,past, credit for service prior to participation in the Salaried Plan isemployment with Goodyear was infrequently granted. Such cases include service with a predecessor employer. Mr. Kramer received 13.6 additional years of credited service in connection with his hiring by Goodyear in 2000 in respect of service with a prior employer. The benefits paid to Mr. Kramer under the Supplementary Plan will be reduced by amounts he is entitled to receive under the pension plan maintained by his prior employer. Due to this service grant, the present value of accumulated benefit in the Pension Benefits table is $3,724,091$3,738,045 higher for Mr. Kramer. Messrs. Wells, de Bok, Bialosky and Smith did not receiveNone of the other named executive officers have received any additional years of credited service.
Mr. Kramer is eligible for immediate commencementIn 2013, the Compensation Committee determined, consistent with its past practice, to adopt a policy prohibiting the grant of the benefit from the Salaried Plan as of December 31, 2012, and will be eligible to receive a benefit fromadditional service credit in the Supplementary Plan if he remains employed by us until 2016. Mr. Wells is eligible for immediate commencement of the benefit from the Salaried Plan as of December 31, 2012,newly hired officers and will be eligible to receive a benefit from the Supplementary Plan if he remains employed by us until 2020. Messrs. de Bok, Bialosky and Smith will be eligible to receive a benefit from the Supplementary Plan if they remain employed by us until 2017, 2019 and 2021, respectively.
For Mr. de Bok, the Pension Benefits table shows the benefits payable under the Supplementary Plan and Goodyear’s Netherlands Pension Plan. The Netherlands Pension Plan provides an annuity benefit based on career average earnings. This benefit is an offset to the Supplementary Plan benefit. The present value of the Netherlands Pension Plan benefit is determined based on the assumptions used for financial reporting of the Netherlands Pension Plan as of December 31, 2012 (and which are set forth following the Pension Benefits Table), with the exception that the commencement age is taken to be 62. The Supplementary Plan value is based on the U.S. financial reporting assumptions, as discussed above. Mr. de Bok is currently vested in his benefit from the Netherlands Pension Plan but is not yet eligible to commence the benefit. In addition to the offset for the Netherlands Pension Plan, the Supplementary Plan present value also will be offset for the value of Company contributions to the governmental plans in Belgium and The Netherlands.other key employees.
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($)(1) | Payments During Last Fiscal Year ($) | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($)(1) | Payments During Last Fiscal Year ($) | ||||||||||||||||||||
Kramer | Supplementary Pension Plan | 26.42 | $ | 9,033,271 | $ | — | Supplementary Pension Plan | 27.42 | $ | 9,617,604 | $ | — | ||||||||||||||||
| Salaried Pension Plan | 8.83 | 253,085 | — | Salaried Pension Plan | 8.83 | 207,192 | — | |||||||||||||||||||||
Thompson | Supplementary Pension Plan | 30.17 | 1,419,344 | — | ||||||||||||||||||||||||
| Salaried Pension Plan | 25.17 | 265,437 | — | |||||||||||||||||||||||||
Wells | Supplementary Pension Plan | 10.42 | 1,833,210 | — | Supplementary Pension Plan | 11.42 | 1,905,521 | — | ||||||||||||||||||||
| Salaried Pension Plan | 6.42 | 180,051 | — | Salaried Pension Plan | �� | 6.42 | 144,374 | — | ||||||||||||||||||||
de Bok(2) | Supplementary Pension Plan | 11.00 | 1,411,392 | — | ||||||||||||||||||||||||
Smith | Supplementary Pension Plan | 2.17 | 372,102 | — | ||||||||||||||||||||||||
McClellan | Supplementary Pension Plan | 26.00 | 2,438,860 | — | ||||||||||||||||||||||||
| Netherlands Pension Plan | 11.00 | 1,174,623 | — | Salaried Pension Plan | 21.00 | 360,686 | — | |||||||||||||||||||||
Bialosky | Supplementary Pension Plan | 3.25 | 837,969 | — | Supplementary Pension Plan | 4.25 | 1,025,663 | — | ||||||||||||||||||||
Smith | Supplementary Pension Plan | 1.17 | 181,964 | — | ||||||||||||||||||||||||
| (1) | All amounts shown are estimates as of December 31, |
The amounts set forth in the table above are based on the following assumptions:
the measurement date is December 31, 20122013
the form of payment is a lump sum (annuity for Mr. de Bok’s Netherlands pension)
the interest rate used to calculate the Supplementary Plan lump sum payment:
Benefitspayment for benefits commencing in 20132014 or later: 1.00%1.75%
the interest rate used to calculate the Salaried Plan lump sum payment:
Benefitspayment for benefits commencing in 20132014 or later: 3.50%4.50% (Messrs. Kramer, Wells and Wells)McClellan and Ms. Thompson)
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
the mortality assumptions used to calculate the lump sum are those set forth in Revenue Ruling 2007-67, as updated by IRS Notice 2008-852013-49 for the Salaried Plan, and those set forth in UP-1984 Mortality for the Supplementary Plan (a modified version of the Prognosetafel 2010-2060 mortality table is used to determine the present value of Mr. de Bok’s Netherlands pension)
the discount rate used to determine the present value of the accumulated benefit is 3.50% (also 3.50% for Mr. de Bok’s Netherlands pension)4.50%
the benefit commencement age is 62 (or, if older, age at the measurement date)
the accumulated benefit is calculated based on credited service and pay as of December 31, 20122013 (for the Salaried Plan, credited service and pay as of December 31, 2008).
Nonqualified Deferred Compensation
The Goodyear Executive Deferred Compensation Plan is a non-qualified deferred compensation plan that provides named executive officers and certain other highly compensated employees the opportunity to defer their base salary and annual incentive payments. Deferred amounts may be invested in one of five investment alternatives or, with respect to annual incentive payments, Goodyear stock units. Four of these investment alternatives are funds managed by The Northern Trust Company, and currently include a money market fund, a bond fund, an equity index fund and a balanced fund. The average interest rate payable with respect to funds invested in the Northern Trust money market fund was 0.01% for the year ended December 31, 2012.2013. The fifth investment vehicle is a growth fund managed by American Century Investments. Investment elections among the five investment alternatives may be changed daily. Deferrals of annual incentive payments into Goodyear stock units will result in a 20% premium paid in stock units that will vest in one year. There is no guaranteed return associated with any deferred amounts.amounts, and deferred amounts are subject to the claims of creditors in the event of our bankruptcy. Distribution of deferred amounts may begin after separation of service or in a selected number of years ranging from one to 20. Payment of deferred amounts will be in a lump sum or up to 15 annual installments, as elected at the time of deferral. Redeferral of amounts originally deferred prior to January 1, 2005 is allowed only if elected one year prior to the scheduled payout and the new deferral does not commence for at least five years after the originally scheduled date of distribution.payout. Any stock units are converted to shares of Common Stock and distributed to the participant in January of the fourth year following the end of the plan year under which the award was earned.
The Deferred Compensation Plan is unfunded. The following table sets forth certain information regarding nonqualified deferred compensation of the named executive officers.
Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | ||||||||||||||||||||||||
Kramer | — | — | $ | 7,031 | — | $ | 125,711 | — | — | $ | 15,452 | — | $ | 141,163 | ||||||||||||||||||||
Thompson | — | — | — | — | — | |||||||||||||||||||||||||||||
Wells | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
de Bok | — | — | — | — | — | |||||||||||||||||||||||||||||
Smith | — | — | — | — | — | |||||||||||||||||||||||||||||
McClellan | — | — | — | — | — | |||||||||||||||||||||||||||||
Bialosky | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Smith | — | — | — | — | — | |||||||||||||||||||||||||||||
| (1) | Represents deferral in |
| (2) | No portion of these earnings were included in the Summary Compensation Table because the Deferred Compensation Plan does not provide for “above-market” or preferential earnings as defined in applicable Securities and Exchange Commission rules and regulations. |
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
Potential Payments Upon Termination or Change-in-Control
We provide for the payment of severance and certain other benefits to our named executive officers upon certain types of terminations of employment, as described below.
On February 28, 2013, we amended and restated the Executive Severance Plan to replace benefits that were previously provided under the Continuity Plan for Salaried Employees. In amending the Executive Severance Plan, the Company eliminated (1) excise tax gross-up provisions for all officers and (2) the right of any officer to voluntarily terminate their employment following a change-in-control and receive severance benefits other than in the case of Good Reason (as such term is defined below).
The Executive Severance Plan provides severance benefits to the Company’s officers, including itsall of the named executive officers, (other than Mr. de Bok), as follows:
| (1) | If a participant’s employment is terminated by the Company and its affiliates other than for Cause (as such term is defined below), death or disability (and other than in connection with a change-in-control, as |
| described in paragraph (2) below), such participant will generally receive: (i) earned but unpaid base salary and annual incentive compensation and accrued paid vacation, sick leave, sabbatical, holiday and other paid time off; (ii) a pro-rated annual incentive payment based on actual performance for the entire fiscal year in an amount not to exceed the participant’s target annual incentive; (iii) a cash severance payment equal to the sum of the participant’s base salary and target annual incentive at the time of severance multiplied by the participant’s severance multiple, which is established by the Compensation Committee and currently ranges from 1.0x to 2.0x; (iv) if the sum of the participant’s age plus years of credited service is equal to or greater than 75, vesting of the participant’s benefit under the Supplementary Plan; (v) continued health care coverage for a number of years equal to the participant’s severance multiple; and (vi) outplacement services in an amount not to exceed $25,000. Mr. Kramer’s severance multiple is 2.0x and |
| (2) | If a participant’s employment is terminated involuntarily other than for Cause, death, disability or mandatory retirement or by the participant for Good Reason during the pendency of, and for ninety days following the cessation of, a Potential Change in Control (as such term is defined below) or within two years following a Change in Control (as such term is defined below), such participant will generally receive: (i) earned but unpaid base salary and annual incentive compensation and accrued paid vacation, sick leave, sabbatical, holiday and other paid time off; (ii) a pro-rated annual incentive payment based on the participant’s target annual incentive; (iii) a cash severance payment equal to twice the sum of the participant’s base salary and target annual incentive; (iv) if the participant has at least five years of service, vesting of the participant’s Supplementary Plan benefit; (v) continued health care coverage for up to two years; and (vi) outplacement services in an amount not to exceed $25,000 and reimbursement for certain legal fees incurred in connection with certain claims made under the Executive Severance Plan. |
To be eligible to receive the benefits described above, the participant must execute a release and agree, among other things, to certain confidentiality, non-disparagement, non-solicitation and non-competition covenants.
The Executive Severance Plan became effective on February 28, 2013 and will continue in effect for three years, and thereafter will automatically renew for additional one-year periods unless the Company provides notice, at least 90 days prior to the end of the initial or extended term, of its intent not to renew the Executive Severance Plan.
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
As used in the Executive Severance Plan:
“Cause” means (1) the continued failure by an eligible employee to substantially perform the employee’s duties with the Company (other than any such failure resulting from the employee’s incapacity due to physical or mental illness), (2) the engaging by the employee in conduct which is demonstrably injurious to the Company, monetarily or otherwise, (3) the employee committing any felony or any crime involving fraud, breach of trust or misappropriation or (4) any breach or violation of any agreement relating to the employee’s employment with the Company where the Company, in its discretion, determines that such breach or violation materially and adversely affects the Company.
A “Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:
| (1) | any person is or becomes the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company other than securities acquired by virtue of the exercise of a conversion or similar privilege or right unless the security being so converted or pursuant to which such right was exercised was itself acquired directly from the Company) representing 20% or more of (A) the then outstanding shares of Common Stock of the Company or (B) the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors; or |
| (2) | the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board of Directors (the “Incumbent Board”): individuals who, on February 28, 2013, |
| constitute the Board of Directors and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including, without limitation, a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board of Directors or nomination for election by the Company’s shareholders was approved or recommended by a vote of at least two-thirds of the directors then still in office who either were directors on February 28, 2013 or whose appointment, election or nomination for election was previously so approved or recommended; or |
| (3) | there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than a merger or consolidation pursuant to which (A) the voting securities of the Company outstanding immediately prior to such merger or consolidation will continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) more than 50% of the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, (B) no person will become the beneficial owner, directly or indirectly, of securities of the Company or such surviving entity or any parent thereof representing 20% or more of the outstanding shares of common stock or the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to such merger or consolidation) and (C) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation (or any parent thereof) resulting from such merger or consolidation; or |
| (4) | the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, (A) more than 50% of the outstanding shares |
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of which (or of any parent of such entity) is owned by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale, (B) in which (or in any parent of such entity) no person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the outstanding shares of common stock resulting from such sale or disposition or the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to such sale or disposition) and (C) in which (or in any parent of such entity) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors. |
“Good Reason”Reason” means the occurrence during the pendency of, and for ninety days following the cessation of, a Potential Change in Control or within two years following a Change in Control, without the affected eligible employee’s written consent, of any of the following:
| (1) | the assignment to the employee of duties that are materially inconsistent with the employee’s authority, duties or responsibilities immediately prior to a Potential Change in Control or, in the absence thereof, a Change in Control (other than pursuant to a transfer or promotion to a position of equal or enhanced responsibility or authority) or any other action by the Company which results in a material diminution in such authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the employee, provided, however, that any such material diminution that is primarily a result of the Company no longer being a publicly traded entity or becoming a subsidiary or division of another entity shall not be deemed “Good Reason” for purposes of the Executive Severance Plan, except that an employee shall have Good Reason if the Company is no longer a publicly traded entity and, immediately before the Change in Control that caused the Company no longer to be a publicly traded entity, substantially all of the employee’s duties and responsibilities related to public investors or government agencies that regulate publicly traded entities; |
| (2) | a change in the location of such employee’s principal place of business by more than 50 miles when compared to the employee’s principal place of business immediately before a Potential Change in Control or, in the absence thereof, a Change in Control; |
| (3) | a material reduction in the Employee’s annual base salary or target annual incentive opportunity from that in effect immediately before a Potential Change in Control or, in the absence thereof, a Change in Control; and |
| (4) | the failure by any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, to expressly assume and agree to perform the Executive Severance Plan in the same manner and to the same extent that the Company would be required to perform it if no succession had taken place. |
A “Potential Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:
| (1) | the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; |
| (2) | the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control; |
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
| (3) | any person becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company other than securities acquired by virtue of the exercise of a conversion or similar privilege or right unless the security being so converted or pursuant to which such right was exercised was itself acquired directly from the Company) representing 20% or more of either the then outstanding shares of Common Stock of the Company or the combined voting power of the Company’s then outstanding voting securities; or |
| (4) | the Board adopts a resolution to the effect that a Potential Change in Control has occurred. |
The description above is meant only to be a summary of the provisions of the Executive Severance Plan. The Executive Severance Plan was an exhibit to a Form 8-K filed with the Securities and Exchange Commission on March ,6, 2013.
Quantification of Termination Benefits
The tablestable below showshows amounts that would be payable to each of the named executive officers, as of December 31, 2012,2013, upon the termination of their employment in the circumstances indicated in each columnrow of the tables.table. The amounts shown are calculated on the assumption that the triggering event occurred on December 31, 2012.2013. We have assumed that, if a named executive officer resigned or was terminated for cause, the Compensation Committee would have exercised its discretion to cancel any outstanding awards in respect of the performance cycles ending on December 31, 2013 prior to the payment of those awards in February 2014. Other assumptions used to determine suchthe amounts shown are described below.
Management Incentive Plan.CashSeverance. The amounts shown in the tables for annual cash incentive under the Management Incentive Plan are the amounts earned under Management Incentive Plan awards for the year ended December 31, 2012. Such amounts are payable at the normal time that payouts are made for 2012 awards under the Management Incentive Plan. The “Termination for Cause” scenario assumes no payout because the plan gives the Compensation Committee discretion to eliminate or reduce performance awards prior to payment.
Severance Payments. The amounts shown in the columnsrows captioned “Termination Without Cause” and “Involuntary Termination Within Two Years of Change in Control” are calculated in accordance with the terms of the Executive Severance Plan (other than for Mr. de Bok, who is not a participant in the Executive Severance Plan).Plan. (See “Executive Severance Plan” above.). Cash severance is not payable in any other circumstance.
Performance Shares.Annual and Long-Term Cash Incentives. The amounts shown in the tablestable for outstandingannual and long-term cash incentives are the amounts earned for the annual or three-year performance share awards are attributable solely to equity (calculated based on a per share price of $13.81, the closing market price of our Common Stock oncycles ended December 31, 2012). In the event of termination for cause, it is assumed the Compensation Committee would exercise its discretion to cancel any outstanding awards.
Executive Performance Plan.2013. The amounts shown in the tables for cash payouts under the Executive Performance Plan arerow captioned “Death/Disability” also include the amounts earned andbut not yet payable for completed performance periods under the 2010-2012 Executive Performance Plan awards2012-2014 and in addition, the2013-2015 long-term cash incentive awards. The amounts shown in the columnrow captioned “Involuntary Termination Within Two Years of Change in Control” also include (a) the amounts earned but not yet payable for completed performance periods and (b) the unearned amounts at the target amount of the award opportunity for uncompleted performance periods under the 2011-20132012-2014 and 2012-2014 Executive Performance Plan2013-2015 long-term cash incentive awards. Under the Executive Performance Plan, an employee whose employment is terminated due to the employee’s death, disability, retirement, layoff or leave of absence is entitled to a prorated payout for any uncompleted performance periods. Amounts are payable at the normal time that payouts are made for outstanding grants under the Executive Performance Plan. The “Termination for Cause” scenario assumes no payout because the Executive Performance Plan gives the Compensation Committee discretion to eliminate or reduce performance awards prior to payment.
Stock Options.Equity. Our equity compensation plans provide that unexercised stock options terminate automatically if the optionee ceases to be an employee of Goodyear or one of its subsidiaries for any reason, except that (a) upon retirement or disability of the optionee more than six months after the grant date, the stock option will become immediately exercisable and remain exercisable until the earlier of five years or its expiration date, (b) in the event of the death of the optionee more than six months after the grant date, each stock option will become immediately exercisable and remain exercisable until the earlier of three years after the date of death of the optionee or its expiration date, and (c) for options granted on or after June 8, 2010, in the event of the termination of the optionee’s employment by us other than for cause, each vested stock option will remain exercisable for 90 days following the date of termination of
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
their employment. For these purposes, resignations, terminations without cause, and involuntary terminations upon a change in control are treated like a retirement if the employee is eligible for retirement as of the date of termination. However, none of our named executive officers wereOnly Ms. Thompson was eligible for retirement on December 31, 2012.2013.
The amounts shown in the table for equity with respect to performance share awards are the amounts earned for the three-year performance cycle ended December 31, 2013. The amounts shown in the row captioned “Death/Disability” also include the amounts earned but not yet payable for completed performance periods under the 2012-2014 and 2013-2015 performance share awards. The amounts shown in the row captioned “Involuntary Termination Within Two Years of Change in Control” also include (a) the amounts earned but not yet payable for completed performance periods and (b) the unearned amounts at the target amount of the award opportunity for uncompleted performance periods under the 2012-2014 and 2013-2015 performance share awards. In each case, the eventamounts shown are calculated based on a per share price of a termination for cause, it is assumed that$23.85, the Compensation Committee would exercise its discretion to cancel any outstanding unvested stock options.closing market price of our Common Stock on December 31, 2013.
AdditionalRetirement Benefits. The tablestable below showshows the additional retirement benefits, if any, that would be payable to the named executive officer if the named executive officer’s employment was terminated on December 31, 2012,2013, and that named executive officer was vested in the benefit as of that date. Ms. Thompson is vested in her Supplementary Plan benefit. Mr. Kramer, Mr. Wells and Mr. WellsMcClellan are not yet vested in a Supplementary Plan benefit and would instead receive substantially smaller benefits from the defined benefit and defined contribution Excess Benefit Plans. Mr. Bialosky and Mr. Smith are not yet vested in a Supplementary Plan benefit, are not eligible to participate in the Salaried Plan or the defined benefit Excess Benefit Plan, or the Salaried Plan, and would instead receive substantially smaller benefits from the defined contribution Excess Benefit Plan. The Supplementary Plan and Salaried Plan amounts shown in the Pension Benefits Tabletable are the present values at December 31, 20122013 of benefits that would be payable in lump sum form at age 62 (or age at December 31, 2012,2013, if older than 62). The amounts if any, shown in the tablestable below for the Supplementary Plan and the Excess Benefit Plans are the additional amounts that would be payable, together with the amounts shown in the Pension Benefits Table, in lump sum form six months after termination of employment at December 31, 2012. The Salaried Plan values shown in the Pension Benefits Table are the present values at December 31, 2012 of benefits that would be payable in lump sum form at age 62 (or age at December 31, 2012, if older than 62). The amounts, if any, shown in the tables below for Mr. Kramer and Mr. Wells under the Salaried Plan are the additional amounts that would be payable immediately, together with the amounts shown in the Pension Benefits Table,table, in lump sum form after termination of employment at December 31, 2012. 2013.
Mr. de BokKramer is not yet vested50.2 years old with 27.42 years of credited service in the Supplementary Plan. In the event of a “Termination Without Cause,” Mr. Kramer’s benefit under the Supplementary Plan will become vested because the sum of his age and years of service equals or exceeds 75. In the event of an “Involuntary Termination Within Two Years of Change in Control,” Mr. Kramer’s benefit under the Supplementary Plan will become vested since he has five years of credited service. The difference between the amount payable from the Supplementary Plan upon a triggering event ($9,847,087) and is not eligible to participatethe value presented in the Excess Benefit Plans or the Salaried Plan. For Mr. de Bok, the Pension Benefits Table showstable ($9,617,604) is solely due to differences in the present valueassumptions used in the calculations.
In the event of the accruedan “Involuntary Termination Within Two Years of Change in Control,” Mr. Wells’ benefit under the Netherlands Pension Plan.Supplementary Plan will become vested since he has five years of credited service. The same value would be provideddifference between the amount payable from the NetherlandsSupplementary Plan upon a triggering event ($1,683,599) and the value presented in the Pension Benefits table ($1,905,521) is solely due to differences in the assumptions used in the calculations.
In the event of an “Involuntary Termination Within Two Years of Change in Control,” Mr. McClellan’s benefit under the Supplementary Plan after terminationwill become vested since he has five years of employment at December 31, 2012.credited service. The difference between the amount payable from the Supplementary Plan upon a triggering event ($2,155,111) and the value presented in the Pension Benefits table ($2,438,860) is solely due to differences in the assumptions used in the calculations.
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS
AllOther Benefits. The amounts shown for all other benefits for each scenario include the payment of accrued vacation. In addition, the amounts shown in the columnrow captioned “Termination Without Cause” include reimbursement of COBRA payments and payments for outplacement services (capped at $25,000), and the amounts shown in the columnrow captioned “Involuntary Termination Within Two Years of Change in Control” include reimbursement of COBRA payments, payments for outplacement services (capped at $25,000), and reimbursement for legal fees, if any (assumed to be $0 for purposes of the tablestable below).
Richard J. Kramer (Chairman of the Board, Chief Executive Officer and President)
Benefits or Payments | Resignation (1) | Termination Without Cause | Termination For Cause | Retirement (2) | Involuntary Termination Within Two Years of Change in Control (3) | |||||||||||||||
Annual Cash Incentive under Management Incentive Plan | $ | 2,331,000 | * | $ | 2,331,000 | * | $ | — | $ | 2,331,000 | * | $ | 2,331,000 | * | ||||||
Cash Severance | — | 5,250,000 | — | — | 5,250,000 | |||||||||||||||
Cash Payout — Executive Performance Plan Awards | 4,502,319 | 4,502,319 | — | 4,502,319 | 11,950,867 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Cash | 6,833,319 | 12,083,319 | — | 6,833,319 | 19,531,867 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Equity | ||||||||||||||||||||
Restricted Stock | 1,429,225 | 1,429,225 | — | 1,429,225 | 1,429,225 | |||||||||||||||
Performance Shares | 780,458 | 780,458 | — | 780,458 | 2,753,417 | |||||||||||||||
Stock Options | — | — | — | — | 791,323 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Equity | 2,209,683 | 2,209,683 | — | 2,209,683 | 4,973,965 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Retirement Benefits(4) | ||||||||||||||||||||
Salaried Pension Plan | — | — | — | — | — | |||||||||||||||
Supplementary Pension Plan | — | — | — | — | — | |||||||||||||||
Excess Benefit Plans | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Retirement Benefits | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Vested Deferred Compensation(5) | — | — | — | — | — | |||||||||||||||
Other Benefits | 100,962 | 154,245 | 100,962 | 100,962 | 154,245 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 9,143,964 | $ | 14,447,247 | $ | 100,962 | $ | 9,143,964 | $ | 24,660,077 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Name | Triggering Event | Cash Severance | Annual and Long-Term Cash Incentives | Equity | Additional Retirement Benefits | All Other Benefits | Total | |||||||||||||||||||
Kramer | Death/Disability | $ | 0 | $ | 21,413,551 | $ | 17,542,768 | $ | 0 | $ | 100,962 | $ | 39,057,281 | |||||||||||||
| Termination Without Cause | 5,250,000 | 9,698,551 | 4,350,884 | 229,483 | 157,624 | 19,686,542 | ||||||||||||||||||||
| Involuntary Termination Within Two Years of Change in Control | 5,250,000 | 24,953,548 | 18,627,670 | 229,483 | 157,624 | 49,218,325 | ||||||||||||||||||||
Thompson | Retirement/ Death/ Disability | 0 | 1,607,937 | 873,030 | 0 | 54,808 | 2,535,775 | |||||||||||||||||||
| Termination Without Cause | 1,161,162 | 994,737 | 119,846 | 0 | 98,019 | 2,373,764 | ||||||||||||||||||||
| Involuntary Termination Within Two Years of Change in Control | 1,548,216 | 2,285,934 | 1,974,665 | 0 | 104,090 | 5,912,905 | ||||||||||||||||||||
Wells | Death/Disability | 0 | 5,922,706 | 4,677,109 | 0 | 57,692 | 10,657,507 | |||||||||||||||||||
| Termination Without Cause | 1,755,000 | 3,270,907 | 501,494 | 0 | 105,337 | 5,632,738 | ||||||||||||||||||||
| Involuntary Termination Within Two Years of Change in Control | 2,340,000 | 6,797,617 | 5,458,868 | 0 | 112,886 | 14,709,371 | ||||||||||||||||||||
Smith | Death/Disability | 0 | 4,806,719 | 3,480,402 | 0 | 40,385 | 8,327,506 | |||||||||||||||||||
| Termination Without Cause | 1,496,250 | 2,520,740 | 465,385 | 0 | 89,383 | 4,571,758 | ||||||||||||||||||||
| Involuntary Termination Within Two Years of Change in Control | 1,995,000 | 5,471,750 | 4,478,857 | 0 | 97,383 | 12,042,990 | ||||||||||||||||||||
COMPENSATIONOFNAMEDEXECUTIVEOFFICERS Darren R. Wells (Executive Vice President and Chief Financial Officer)
Benefits or Payments | Resignation (1) | Termination Without Cause | Termination For Cause | Retirement (2) | Involuntary Termination Within Two Years of Change in Control (3) | |||||||||||||||
Annual Cash Incentive under Management Incentive Plan | $ | 744,218 | * | $ | 744,218 | * | $ | — | $ | 744,218 | * | $ | 744,218 | * | ||||||
Cash Severance | — | 1,601,945 | — | — | 2,135,700 | |||||||||||||||
Cash Payout — Executive Performance Plan Awards | 1,450,596 | 1,450,596 | — | 1,450,596 | 3,542,315 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Cash | 2,194,814 | 3,796,759 | — | 2,194,814 | 6,422,233 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Equity | ||||||||||||||||||||
Restricted Stock | — | — | — | — | 1,035,750 | |||||||||||||||
Performance Shares | 243,898 | 243,898 | — | 243,898 | 736,487 | |||||||||||||||
Stock Options | — | — | — | — | 297,761 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Equity | 243,898 | 243,898 | — | 243,898 | 2,069,998 | |||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||
Retirement Benefits(4) | ||||||||||||||||||||
Salaried Pension Plan | — | — | — | — | — | |||||||||||||||
Supplementary Pension Plan | — | — | — | — | — | |||||||||||||||
Excess Benefit Plans | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Retirement Benefits | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Vested Deferred Compensation | — | — | — | — | — | |||||||||||||||
Other Benefits | 54,327 | 103,136 | 54,327 | 54,327 | 111,072 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 2,493,039 | $ | 4,143,793 | $ | 54,327 | $ | 2,493,039 | $ | 8,603,303 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Name | Triggering Event | Cash Severance | Annual and Long-Term Cash Incentives | Equity | Additional Retirement Benefits | All Other Benefits | Total | |||||||||||||||||||
McClellan | Death/Disability | $ | 0 | $ | 3,844,541 | $ | 2,452,566 | $ | 0 | $ | 57,692 | $ | 6,354,799 | |||||||||||||
| Termination Without Cause | 1,462,500 | 2,098,957 | 320,043 | 0 | 109,620 | 3,991,120 | ||||||||||||||||||||
| Involuntary Termination Within Two Years of Change in Control | 1,950,000 | 4,375,047 | 3,311,033 | 0 | 118,597 | 9,754,677 | ||||||||||||||||||||
Bialosky | Death/Disability | 0 | 4,470,775 | 2,813,689 | 0 | 41,538 | 7,326,002 | |||||||||||||||||||
| Termination Without Cause | 1,458,000 | 2,344,816 | 392,022 | 0 | 90,537 | 4,285,375 | ||||||||||||||||||||
| Involuntary Termination Within Two Years of Change in Control | 1,944,000 | 5,085,032 | 3,001,150 | 0 | 98,537 | 10,128,719 | ||||||||||||||||||||
COMPENSATIONOFDIRECTORS Arthur de Bok (President, Europe, Middle East and Africa Tire)
Benefits or Payments | Resignation (1) | Termination Without Cause | Termination For Cause | Retirement (2) | Involuntary Termination Within Two Years of Change in Control (3) | |||||||||||||||
Annual Cash Incentive under Management Incentive Plan | $ | 200,000 | * | $ | 200,000 | * | $ | — | $ | 200,000 | * | $ | 200,000 | * | ||||||
Cash Severance | 3,684,636 | 8,412,769 | — | 3,684,636 | 8,412,769 | |||||||||||||||
Cash Payout — Executive Performance Plan Awards | 1,552,173 | 1,552,173 | — | 1,552,173 | 3,765,197 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Cash | 5,436,809 | 10,164,942 | — | 5,436,809 | 12,377,966 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Equity | ||||||||||||||||||||
Restricted Stock | — | — | — | — | 1,035,750 | |||||||||||||||
Performance Shares | 260,968 | 260,968 | — | 260,968 | 786,010 | |||||||||||||||
Stock Options | — | — | — | — | 346,271 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Equity | 260,968 | 260,968 | — | 260,968 | 2,168,031 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Retirement Benefits(4) | ||||||||||||||||||||
Netherlands Pension Plan | — | — | — | — | — | |||||||||||||||
Supplementary Pension Plan | — | — | — | — | — | |||||||||||||||
Excess Benefit Plans | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Retirement Benefits | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Vested Deferred Compensation | — | — | — | — | — | |||||||||||||||
Other Benefits | 55,769 | 80,769 | 55,769 | 55,769 | 80,769 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 5,753,546 | $ | 10,506,679 | $ | 55,769 | $ | 5,753,546 | $ | 14,626,766 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
David L. Bialosky (Senior Vice President, General Counsel and Secretary)COMPENSATION OF DIRECTORS
Benefits or Payments | Resignation (1) | Termination Without Cause | Termination For Cause | Retirement (2) | Involuntary Termination Within Two Years of Change in Control (3) | |||||||||||||||
Annual Cash Incentive under Management Incentive Plan | $ | 599,400 | * | $ | 599,400 | * | $ | — | $ | 599,400 | * | $ | 599,400 | * | ||||||
Cash Severance | — | 1,417,500 | — | — | 1,890,000 | |||||||||||||||
Cash Payout — Executive Performance Plan Awards | 1,280,811 | 1,280,811 | — | 1,280,811 | 2,849,151 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Cash | 1,880,211 | 3,297,711 | — | 1,880,211 | 5,338,551 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Equity | ||||||||||||||||||||
Restricted Stock | — | — | — | — | 671,663 | |||||||||||||||
Performance Shares | 199,168 | 199,168 | — | 199,168 | 586,594 | |||||||||||||||
Stock Options | — | — | — | — | 86,974 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Equity | 199,168 | 199,168 | — | 199,168 | 1,345,231 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Retirement Benefits(4) | ||||||||||||||||||||
Salaried Pension Plan | — | — | — | — | — | |||||||||||||||
Supplementary Pension Plan | — | — | — | — | — | |||||||||||||||
Excess Benefit Plans | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Retirement Benefits | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Vested Deferred Compensation | — | — | — | — | — | |||||||||||||||
Other Benefits | 41,538 | 87,931 | 41,538 | 41,538 | 95,062 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 2,120,917 | $ | 3,584,810 | $ | 41,538 | $ | 2,120,917 | $ | 6,778,844 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Gregory L. Smith (Senior Vice President, Global Operations)
Benefits or Payments | Resignation (1) | Termination Without Cause | Termination For Cause | Retirement (2) | Involuntary Termination Within Two Years of Change in Control (3) | |||||||||||||||
Annual Cash Incentive under Management Incentive Plan | $ | 660,450 | * | $ | 660,450 | * | $ | — | $ | 660,450 | * | $ | 660,450 | * | ||||||
Cash Severance | — | 1,456,875 | — | — | 1,942,500 | |||||||||||||||
Cash Payout — Executive Performance Plan Awards | — | — | — | — | 1,670,580 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Cash | 660,450 | 2,117,325 | — | 660,450 | 4,273,530 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Equity | ||||||||||||||||||||
Restricted Stock | — | — | — | — | 449,529 | |||||||||||||||
Performance Shares | — | — | — | — | 434,932 | |||||||||||||||
Stock Options | — | — | — | — | 68,502 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Equity | — | — | — | — | 952,963 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Retirement Benefits(4) | ||||||||||||||||||||
Salaried Pension Plan | — | — | — | — | — | |||||||||||||||
Supplementary Pension Plan | — | — | — | — | — | |||||||||||||||
Excess Benefit Plans | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Retirement Benefits | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Vested Deferred Compensation | — | — | — | — | — | |||||||||||||||
Other Benefits | 40,385 | 86,777 | 40,385 | 40,385 | 93,908 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 700,835 | $ | 2,204,102 | $ | 40,385 | $ | 700,835 | $ | 5,320,401 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Director Compensation
The table below sets forth information regarding the compensation paid to our non-employee directors during 2012.2013.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | ||||||||||||||||||||||||
Boland(3) | $ | 33,805 | $ | 61,305 | $ | 35,184 | $ | 130,294 | ||||||||||||||||||||||||
Conaty | 115,000 | 113,750 | 888 | 229,638 | $ | 115,000 | $ | 119,695 | $ — | $ | 234,695 | |||||||||||||||||||||
Firestone | 125,000 | 113,750 | 1,897 | 240,647 | 130,000 | 121,160 | 906 | 252,066 | ||||||||||||||||||||||||
Geissler | 115,000 | 113,750 | — | 228,750 | 125,591 | 119,863 | 1,651 | 247,105 | ||||||||||||||||||||||||
Hellman | 135,000 | 113,750 | — | 248,750 | 135,000 | 120,022 | 1,568 | 256,590 | ||||||||||||||||||||||||
McCollough | 180,000 | 113,750 | — | 293,750 | 169,239 | 121,300 | — | 290,539 | ||||||||||||||||||||||||
McGlade(4) | 8,438 | — | — | 8,438 | ||||||||||||||||||||||||||||
O’Neal(3) | 33,805 | 61,305 | 334 | 95,444 | ||||||||||||||||||||||||||||
Palmore(5) | 46,000 | 17,188 | — | 63,188 | ||||||||||||||||||||||||||||
McGlade | 123,438 | 98,750 | 621 | 222,809 | ||||||||||||||||||||||||||||
Palmore | 130,761 | 119,205 | — | 249,966 | ||||||||||||||||||||||||||||
Peterson | 125,000 | 113,750 | 35,749 | 274,499 | 119,409 | 121,987 | 35,547 | 276,943 | ||||||||||||||||||||||||
Streeter | 115,000 | 113,750 | — | 228,750 | 115,000 | 120,957 | 895 | 236,852 | ||||||||||||||||||||||||
Sullivan(3) | 33,805 | 61,305 | — | 95,110 | ||||||||||||||||||||||||||||
Weidemeyer | 135,000 | 113,750 | 34,788 | 283,538 | 135,000 | 121,847 | 34,307 | 291,154 | ||||||||||||||||||||||||
Wessel | 115,000 | 113,750 | 1,670 | 230,420 | 115,000 | 121,595 | — | 236,595 | ||||||||||||||||||||||||
| (1) | Represents quarterly grants of restricted stock units, together with |
As of December 31, 2013, the following directors held the total number of restricted stock units and deferred share equivalent units indicated next to his or her name:
Name | Number of Restricted Stock Units | Number of Deferred Share Equivalent Units | Total Share Equivalents | Number of Restricted Stock Units | Number of Deferred Share Equivalent Units | Total Share Equivalents | ||||||||||||||||||
Boland | — | 34,262 | 34,262 | |||||||||||||||||||||
Conaty | 11,212 | — | 11,212 | �� | 18,950 | — | 18,950 | |||||||||||||||||
Firestone | 36,675 | 3,821 | 40,496 | 44,470 | 3,829 | 48,299 | ||||||||||||||||||
Geissler | 14,575 | — | 14,575 | 22,320 | — | 22,320 | ||||||||||||||||||
Hellman | 17,748 | — | 17,748 | 25,500 | — | 25,500 | ||||||||||||||||||
McCollough | 36,675 | 6,631 | 43,306 | 44,470 | 6,646 | 51,116 | ||||||||||||||||||
McGlade | — | — | — | 6,259 | — | 6,259 | ||||||||||||||||||
O’Neal | — | 22,279 | 22,279 | |||||||||||||||||||||
Palmore | 1,397 | — | 1,397 | 9,112 | — | 9,112 | ||||||||||||||||||
Peterson | 36,675 | 20,377 | 57,052 | 44,470 | 20,423 | 64,893 | ||||||||||||||||||
Streeter | 36,437 | — | 36,437 | 44,231 | — | 44,231 | ||||||||||||||||||
Sullivan | — | 18,857 | 18,857 | |||||||||||||||||||||
Weidemeyer | 36,675 | 17,579 | 54,254 | 44,470 | 17,619 | 62,089 | ||||||||||||||||||
Wessel | 36,675 | 12,525 | 49,200 | 44,470 | 12,554 | 57,024 | ||||||||||||||||||
| (2) | Represents income associated with the Company’s provision of up to two sets of automobile tires per year to the directors. For Directors |
COMPENSATIONOFDIRECTORS
Goodyear directors who are not officers or employees of Goodyear or any of its subsidiaries receive, as compensation for their services as a director, a combination of cash retainer and stock awards pursuant to the Outside Directors’ Equity Participation Plan (the “Directors’ Equity Plan”).
For the year ended December 31, 2012,2013, outside directors received cash compensation in the amount of $28,750 per calendar quarter. The Lead Director received an additional $13,750 per calendar quarter. The chairpersons of the Audit and Compensation Committees received an additional $5,000 per calendar quarter, and the chairpersons of all other committees received an additional $2,500$3,750 per calendar quarter. Any director who attended more than 24 board and committee meetings received $1,700 for each additional meeting attended ($1,000 if the meeting was attended by telephone). In addition, the Board may form special committees from time to time and determine the compensation of the chairperson of such committees. Travel and lodging expenses incurred in attending board and committee meetings are paid by Goodyear. Mr. Kramer did not receive additional compensation for his service as a director.
Outside directors also participate in the Directors’ Equity Plan, which is intended to further align the interests of directors with the interests of shareholders by making part of each director’s compensation dependent on the value and appreciation over time of our Common Stock. For the year ended December 31, 2012, on the first business day of each calendar quarter,2013, each eligible director received a quarterly grant of restricted stock units with a grant date fair value of $28,750$30,000 for the portion of the previousa calendar quarter during which he or she served as a director. Beginningdirector, payable on the first business day of the subsequent calendar quarter based on the closing market price of our Common Stock on that date. For service on or after January 1, 2013,2014, the quarterly restricted stock unit grant will have a grant date fair value of $30,000.$31,250. These restricted stock units will be paid to directors in shares of Common Stock on the fifth business day of the quarter following the quarter during which the director leaves the Board. The Directors’ Equity Plan also permits each participant annually to elect to have 25%, 50%, 75% or 100% of his or her cash retainer and meeting fees deferred and converted into share equivalent units based on the closing market price of our Common Stock on the accrualpayment date. Under this plan, the restricted stock units and share equivalent units receive dividend equivalents (if dividends are paid) at the same rate as our Common Stock, which dividends will be converted into restricted stock units or share equivalent units, as the case may be, based on the closing market price of our Common Stock on the dividend payment date. Share equivalent units accrued prior to October 1, 2010 will be converted to a dollar value at the closing market price of our Common Stock on the later of the first business day of the seventh month following the month during which the participant ceased to be a director and the fifth business day of the year next following the year during which the participant ceased to be a director. Such amounts earned and vested prior to January 1, 2005, will be paid in ten annual installments or, at the discretion of the Compensation Committee, in a lump sum or in fewer than ten installments beginning on the fifth business day following the conversion from share equivalent units to a dollar value. Amounts in Directors’ Equity Plan accounts that are to be paid in installments will earn interest from the date converted to a dollar value until paid at a rate one percent higher than the prevailing yield on United States Treasury securities having a ten-year maturity on the conversion date. Amounts earned and vested on or after January 1, 2005, will be paid out in a lump sum on the fifth business day following the conversion from share equivalent units to a dollar value. Share equivalent units accrued on or after October 1, 2010 will be paid to directors in shares of Common Stock on the fifth business day of the quarter following the quarter during which the director leaves the Board.
The Compensation Committee approved revised stockholding guidelines for directors effective May 1, 2012. These guidelines specify that a director must accumulate and hold a number of shares equal in value to five times the annual cash retainer. Shares owned directly and restricted stock units and share equivalent units accrued to a Directors’ Equity Plan account are counted as ownership
COMPENSATIONOFDIRECTORS
in assessing compliance with the guidelines. The stock price to be used in assessing compliance with the guidelines as of May 1st of each year will be the average closing stock price for the prior 60-day period. As a result of the adoption of the revised stockholding guidelines, the
stockholding requirement for each of our directors has increased significantly.Messrs. Firestone, McCollough, Weidemeyer and Wessel and Mrs. Peterson Mr. Weidemeyer and Mr. Wessel have met their stockholding requirement. All of our other directors are making progress towards satisfying their stockholding requirement.
Goodyear also sponsors a Directors’ Charitable Award Program funded by life insurance policies owned by Goodyear on the lives of pairs of directors. Goodyear donates $1 million per director to one or more qualifying charitable organizations recommended by each director after both of the paired directors are deceased. Assuming current tax laws remain in effect, Goodyear expects to recover the cost of the program over time with the proceeds of the insurance policies purchased. Directors derive no financial benefit from the program. This program is not available to directors first elected after October 1, 2005.
Risks Related to Compensation Policies and PracticesRISKS RELATED TO COMPENSATION POLICIES AND PRACTICES
We have reviewed our compensation policies and practices for our employees and have concluded that the risks arising from those policies and practices are not reasonably likely to have a material adverse effect on us.
ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
(Item 2 on your Proxy)BENEFICIALOWNERSHIPOFCOMMONSTOCK
We are seeking your vote to approve, on an advisory (or non-binding) basis, the compensation of our named executive officers as disclosed in this Proxy Statement.
As discussed in our Compensation Discussion and Analysis starting on page 19, our executive compensation program is designed to:
motivate executives and other key personnel to attain appropriate short-term and long-term performance goals and manage the Company for sustained long-term growth,
align executives’ interests with those of our shareholders, and
attract and retain qualified and experienced executive officers and other key personnel.
We believe that the Company’s executive compensation programs have been effective at achieving these key objectives.
In 2012, the disciplined execution of our strategy and structural changes we made to our business over the past few years helped us deliver strong results in both earnings and operating cash flows. In 2012, we:
Delivered more than $1.2 billion in total segment operating income for the second year in a row — and only the third time in the company’s history – amidst an environment of global economic uncertainty, weak consumer demand, and volatile raw material costs. (See page 20 for a further explanation of total segment operating income, a non-GAAP measure).
Generated strong cash flow.
Achieved an 8% improvement in revenue per tire compared to 2011 (excluding the impact of foreign currency translation), through our strategic focus on offering innovative products in profitable target market segments.
Achieved record segment operating income in North American Tire of $514 million.
Achieved record segment operating income in Asia Pacific Tire of $259 million.
Made capital investments of more than $1.1 billion in support of future growth opportunities, including significant investments in emerging markets in China and Chile.
We believe that our executive compensation program appropriately rewards our named executive officers and other key personnel for the significant financial and operational achievements noted above and for guiding the Company through the uncertain economic conditions that we continue to experience in many parts of the world.
The advisory resolution set forth below, commonly known as a “say-on-pay” proposal, gives you the opportunity to express your views on our executive compensation program for our named executive officers. The “say-on-pay” proposal is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the executive compensation policies, practices and plans described in this Proxy Statement. The resolution does not address the matters disclosed under the headings “Director Compensation” or “Risks Related to Compensation Policies and Practices,” nor is it intended to indicate your approval of future “golden parachute” payments. We will seek shareholder approval of any “golden parachute” payments at the time of any transaction triggering such payments to the extent required by applicable law.
We ask you to vote “FOR” the following resolution which will be presented by the Board of Directors at the Annual Meeting:
“RESOLVED, that the shareholders of The Goodyear Tire & Rubber Company approve, on an advisory basis, the compensation of the named executive officers as disclosed in the Company’s Proxy Statement for the 2013 Annual Meeting of Shareholders.”
Although this proposal is an advisory vote that will not be binding on the Compensation Committee or the Board of Directors, the Compensation Committee will consider the results of this shareholder advisory vote and the changes, if any, to our executive compensation policies, practices and plans that may be warranted as a result of this vote. The Board of Directors has determined, consistent with the shareholders’ vote on the matter in 2011, to hold an advisory vote regarding the compensation of our named executive officers every year until the next vote on the frequency of such advisory votes, which is currently expected to occur at the 2017 Annual Meeting of Shareholders.
Your Board of Directors unanimously recommends that shareholders vote FOR theadvisory resolution to approve the compensation of our named executive officers (ProxyItem 2).
PROPOSAL TO APPROVE THE ADOPTIONBENEFICIAL OWNERSHIP OF THE 2013 PERFORMANCE PLANCOMMON STOCK
(Item 3 on your Proxy)
At the Annual Meeting, we will ask the shareholders to approve Goodyear’s 2013 Performance Plan (the “Plan”). In general, the Plan empowers Goodyear to grant stock options and stock appreciation rights (“SARs”), and to make restricted stock or restricted stock unit grants, performance grants, other stock-based grants and cash-based grants to officers and other employees of Goodyear and its subsidiaries and to directors of Goodyear.
The Plan is designed to advance the interests of Goodyear and its shareholders by strengthening its ability to attract, retain and reward highly qualified officers and other employees, to motivate them to achieve business objectives established to promote Goodyear’s long term growth, profitability and success, and to encourage their ownership of Common Stock.
The Plan, if adopted, will replace the 2008 Performance Plan (the “2008 Plan”), except with respect to awards then outstanding. If the Plan is approved by the shareholders, we will not make any more awards under our existing equity compensation plans, i.e., the 2008 Plan, the 2005 Performance Plan and the 2002 Performance Plan (collectively, the “Prior Plans”). The Compensation Committee and your Board of Directors believe it is in the best interests of Goodyear and its shareholders to adopt the Plan.
Summary of the Plan
The principal featurespersons identified in the table below have reported that they beneficially owned at December 31, 2013 more than 5% of the Plan are summarized below. The summary does not contain all information that may be important to you. You should read the complete textoutstanding shares of the Plan which is set forthCommon Stock as Exhibit A to this Proxy Statement.follows:
Plan Administration.
Name and Address of Beneficial Owner | Shares of Common Stock Beneficially Owned | Percent of Common Stock Outstanding Beneficially Owned | ||||||
BlackRock, Inc. | ||||||||
40 East 52nd Street New York, New York 10022 | 25,701,493 | (1) | 10.4 | % | ||||
The Vanguard Group, Inc. | ||||||||
100 Vanguard Blvd. Malvern, Pennsylvania 19355 | 18,382,973 | (2) | 7.4 | % | ||||
| (1) | Sole voting power in respect of 24,026,361 shares and sole dispositive power in respect of 25,701,493 shares, as stated in a Schedule 13G/A filed with the Securities and Exchange Commission on January 10, 2014. |
| (2) | Sole voting power in respect of 332,934 shares, sole dispositive power in respect of 18,067,939 shares and shared dispositive power in respect of 315,034 shares, as stated in a Schedule 13G/A filed with the Securities and Exchange Commission on February 11, 2014. |
In addition, The Plan will be administered by a committee (the “Committee”) of not less than three membersNorthern Trust Company, 50 South LaSalle Street, Chicago, Illinois 60603, has indicated that at the record date it held 5,569,466 shares, or approximately 2.2% of the Board of Directors who qualify as “outside directors” within the meaning of Section 162(m) of the Code, as “non-employee directors” within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, and as “independent directors” for purposes of the rules and regulations of The NASDAQ Stock Market. The Committee will have the sole authority to, among other things:
Construe and interpret the Plan,
Make rules and regulations relating to the administration of the Plan,
Select participants, and
Establish the terms and conditions of awards.
The Compensation Committee of the Board of Directors will act as the Committee under the Plan.
Eligibility. Any employee of Goodyear or any of its subsidiaries, including any officer of Goodyear, selected by the Committee is eligible to receive grants of stock options, SARs, restricted stock, restricted stock units, and performance and other awards under the Plan. Directors of Goodyear are also eligible to receive awards (other than performance awards) under the Plan, provided that no director may receive awards in any single fiscal year with an aggregate grant date fair value in excess of $250,000. Subject to the limits specified in the Plan, the selection of participants and the nature and size of awards will be wholly within the discretion of the Committee. It is anticipated that all 20 Board-appointed officers of Goodyear will receive various grants under the Plan and approximately 1,500 other employees of Goodyear and its subsidiaries will participate in at least one feature of the Plan. A participant must be an employee of the Company or a subsidiary or a director of the Company continuously from the date a grant is made through the date of payment or settlement thereof, unless otherwise provided by the Committee.
Shares Subject to The Plan. A total of 11 million (11,000,000)outstanding shares, of Common Stock may be issued underas the Plan. Any sharestrustee of Common Stock that are subject to awards of stock options or SARs will be counted as one share for each share granted for purposes of the aggregate share limit and any shares of Common Stock that are subject to any other awards will be counted as 1.61 shares for each share granted for purposes of the aggregate share limit. In addition, shares of Common Stock that are subject to awards issued under the Plan or under a Prior Plan that expire according to their terms or are forfeited, terminated, canceled or surrendered or are settled, or can be paid, only in cash, or are surrendered in payment of taxes associated with such awards (other than stock options or SARs) will be available for new awards under the Plan as one share for each share subject to awards of stock options or SARs and 1.61 shares for each share subject to any other awards. In no event will (1) any shares of Common Stock subject to a stock option that is canceled upon the exercise of a tandem SAR, (2) any shares of Common Stock subject to awards that are surrendered in payment of the exercise price of a stock option or in payment of taxes associated with the exercise of a stock option or SAR, (3) any shares of Common Stock subject to a SAR that are not issued in connection with the stock settlement of the SAR upon the exercise thereof or (4) any shares of Common Stock reacquiredvarious employee savings plans sponsored by Goodyear on the open market or otherwise using cash proceeds from the exercise of stock options become available for grant under the Plan.and certain subsidiaries.
BENEFICIALOWNERSHIPOFCOMMONSTOCK Adjustments. The maximum number
On February 18, 2014, each director and kind of shares available for issuance under the Plan is subject to appropriate adjustments to reflect certain events, suchnominee, each named executive officer, and all directors and executive officers as a stock dividend, stock split, reorganization, recapitalization or business combination. Similar adjustments may also be made to:
The maximum number of shares which may be subject to any type of award or any outstanding award to any participant during any specified period.
The per share exercise price of any outstanding stock option or SAR andgroup, beneficially owned the number or kind of any units which are the subject of any other outstanding award.
Term, Amendment and Termination. If adopted, the Plan will remain in effect until April 14, 2023, unless sooner terminated by the Board of Directors. Termination will not affect awards then outstanding. The Board of Directors may terminate or amend the Plan at any time without shareholder approval, unless such approval is necessary to comply with the Securities Exchange Act of 1934, the Code, the rules and regulations of The NASDAQ Stock Market or other applicable law. In any event, shareholder approval will be required to, among other things, amend the Plan to increase the maximum number of shares which may be issued pursuant to the Plan, reduce the minimum exercise price for stock options and SARs (or other similar actions), or change the performance measures (as defined below).
Stock Options. The Plan will permit the Committee to grant stock options to officers and selected employees of Goodyear and its subsidiaries and directors of Goodyear. No participant may receive stock options to purchase more than 1,000,000 shares of Common Stock in any calendar year. No more than 11 million (11,000,000) shares may be issued pursuant to incentive stock options. The per share exercise price for any stock option shall not be less than 100% of the fair market value of a share of Common Stock at the date of grant. Fair market value is defined as the closing market price of the Common Stock on The NASDAQ Stock Market on the relevant date. The closing price per share of Common Stock on March , 2013 was$ . The Plan permits the Committee to establish the term (up to ten years) and generally requires that stock options granted to employees become exercisable over a period of not less than three years, subject to pro rata vesting over that period. Stock options granted to employees that are subject to the achievement of one or more performance goals (as defined below) shall have a minimum performance period (as defined below) of one year.
Incentive stock options, as defined in Code Section 422(b), may be granted to employees of Goodyear and its subsidiaries under the Plan, each having a term of up to ten years from the date of grant. The amount of incentive stock options vesting in a particular year cannot exceed $100,000 per grantee, determined using the fair market value of the shares of Common Stock subject to such option or options on the date of grant.
The repricing of stock options and SARs is expressly prohibited by the Plan unless approved by shareholders. For purposes of the Plan, “repricing” means (1) the cancellation of a stock option or SAR in exchange for another award under the Plan if the exercise price of the new award is lower than the exercise price of the cancelled stock option or SAR, (2) a reduction in the exercise price of a stock option or SAR, or (3) the cancellation of a stock option or SAR in exchange for cash or another award under the Plan.
Stock Appreciation Rights. SARs may be granted under the Plan in tandem with, in relation to or independent of any other award under the Plan. The maximum number of shares of Common Stock in respect of which SARs may be granted to any participant during any calendar year is 1,000,000.
A SAR entitles the holder to receive an amount equal to all, or some portion (as determined by the Committee), of the excess of the fair market value of a share of Common Stock on the date of exercise over the fair market value of such share at the date of grant, multiplied by the number of shares as to which the holder is exercising the SAR. SARs may be paid in cash or in shares of Common Stock (at fair market value on the date of exercise), or a combination thereof, as determined by the Committee. The Committee will establish the term (up to ten years) and may also determine that a SAR shall be automatically exercised on one or more specified dates. The Plan generally requires that SARs granted to employees become exercisable over a period of not less than three years, subject to pro rata vesting over that period. SARs granted to employees that are subject to the achievement of one or more performance goals (as defined below) shall have a minimum performance period (as defined below) of one year.
Restricted Stock and Restricted Stock Units. The Plan authorizes the granting of restricted stock and restricted stock units to officers and other key employees of Goodyear and its subsidiaries and to directors of Goodyear. The Committee selects the grantees and determines the terms and conditions of each award.
Restricted stock and restricted stock units granted to employees will be issued subject to a minimum restriction period of three years, subject to the pro rata lapse of those restrictions. During the restriction period, the recipient is not entitled to delivery of the shares or units, restrictions are placed on the transferability of the shares or units,
and all or a portion of the shares or units will be forfeited if the recipient terminates employment for reasons other than as approved by the Committee. The Committee may also require that specified performance goals (as defined below) be attained during the restriction period in which case the restriction period must be at least one year. Upon expiration of the restriction period, the appropriate number of shares of Common Stock will be delivered to the grantee (or credited to the grantee’s account) free of all restrictions. During the restriction period for restricted shares, the grantee shall be entitled to vote restricted shares (but not restricted stock units).
Performance Grants. Under the Plan, officers and key employees of Goodyear and its subsidiaries may be granted the contingent right, expressed in units (which may be equivalent to a share of Common Stock or other monetary value), to receive payments in shares of Common Stock, cash or any combination thereof (“performance grants”) based upon performance over a specified period with a minimum duration of one year (“performance period”). At the time of grant, the Committee shall also establish one or more performance criteria (the “performance measure”) applicable to the performance grant and targets that must be attained relative to the performance measure (“performance goals”).
The performance measure for an award subject to the attainment of performance goals that is intended to qualify for the performance-based exception to Section 162(m) of the Code may be based on any of the following criteria, alone or in combination, as the Committee deems appropriate: (i) net income per share; (ii) net income; (iii) return on sales; (iv) total shareholder return; (v) return on assets; (vi) economic value added; (vii) cash flow; (viii) return on equity; (ix) operating income (which shall equal consolidated sales minus cost of goods sold and selling, administrative and general expense); and (x) return on invested capital. Performance measures may be calculated before or after taxes, interest, depreciation, amortization, discontinued operations, effect of accounting changes, acquisition expenses, restructuring expenses, extraordinary items, non-operating items or unusual charges, as determined by the Committee at the time the performance measures are established. Performance goals may be established on a corporate-wide basis, with respect to one or more business units, divisions, subsidiaries or business segments and in either absolute terms or relative to the performance of one or more comparable companies or an index covering multiple companies.
Performance goals may include a minimum, maximum and target level of performance, with the amount of award based on the level attained. Performance goals and the performance measure(s) for an award intended to qualify for the performance-based exception to Section 162(m) of the Code shall not be changed when so provided in the grant agreement. The Committee may eliminate or decrease (but not increase) the amount of any award intended to qualify for the performance-based exception to Section 162(m) of the Code.
Other Stock-Based Grants. The Plan permits other stock-based grants in shares of Common Stock, in Common Stock equivalents or in other stock-based units on such terms and conditions as the Committee determines. These grants may be made to officers and other key employees of Goodyear and its subsidiaries and to directors of Goodyear.
Limitations on Performance-Based Awards. With respect to stock-based awards (other than stock options and SARs) subject to the attainment of performance goals, the maximum number of shares any participant may receive pursuant to such awards during any calendar year shall not exceed 500,000 shares of Common Stock. With respect to cash-based awards subject to the attainment of performance goals, the maximum amount any participant may receive pursuant to such awards during any calendar year shall not exceed $20 million.
Dividends and Dividend Equivalents. During the restriction period or performance period for restricted stock, restricted stock units, stock-based performance grants and other stock-based grants (but not stock options and SARs), the grantee shall be entitled to receive dividends or dividend equivalents, unless the Committee otherwise provides, provided that no dividends or dividend equivalents shall be payable for awards subject to the attainment of performance goals unless and until the performance goals are satisfied. No dividend equivalents may be granted with respect to any stock options or SARs.
Transferability. Awards under the Plan will not be transferable other than by will or the laws of descent and distribution; except that the Committee may permit the transfer of an award (i) by gift to the employee’s spouse, children and grandchildren, or to a trust or partnership (or similar legal entity) for the benefit of any one or more of them, or (ii) pursuant to a qualified domestic relations order.
Deferrals. The Committee may defer the payment of any award, or permit participants to defer their receipt of payment, for such period or periods and on such terms and conditions as the Committee may specify. Deferrals may be in the form of Common Stock equivalents, which earn dividend equivalents, or in cash, which may earn interest at a rate or rates specified by the Committee.
Limited Exception to Minimum Vesting Requirements. While the Plan generally imposes minimum vesting periods on awards granted to employees, Goodyear may grant up to 5% of the shares authorized under the Plan (up to 550,000 shares) free of those minimum vesting requirements.
Change in Control. In the event that (1) a participant’s employment is terminated other than for Cause or by the participant for Good Reason within two years of a Change in Control of Goodyear or (2) awards granted under the Plan are not assumed, converted, replaced or continued by the resulting entity in connection with a Change in Control of Goodyear: (i) all stock options and SARs then outstanding under the Plan become fully exercisable; (ii) all terms and conditions of all restricted stock grants then outstanding are deemed satisfied; and (iii) all performance grants and other stock-based grants shall be deemed to have been fully earned at the target amount of award opportunity.
“Cause” and “Change in Control” are defined in the Plan in Exhibit A to this Proxy Statement, using a similar standard to that which is used in our Executive Severance Plan, described beginning on page 51. For purposes of the Plan, “Good Reason” has the meaning specified in our Executive Severance Plan or our Continuity Plan for Salaried Employees, as applicable, for the respective participants in those plans.
U.S. Federal Income Tax Consequences. Based on the Code and existing regulations thereunder, the anticipated U.S. federal income tax consequences of the several types of awards under the Plan are as described below.
Grant of Stock Options and SARs. An optionee will not recognize any taxable income at the time a stock option or SAR is granted and Goodyear will not be entitled to a federal income tax deduction at that time.
Exercise of Incentive Stock Options. No ordinary income will be recognized by the holder of an incentive stock option at the time of exercise. The excess of the fair market value of the shares of Common Stock at the time of exercise over the aggregate option exercise price will be an adjustment to alternative minimum taxable income for purposes of the federal “alternative minimum tax” at the date of exercise. If the optionee holds the shares of Common Stock purchased for two years after the date the option was granted and one year after the acquisition of such shares, the difference between the aggregate option price and the amount realized upon disposition of the shares will constitute a long term capital gain or loss, as the case may be, and Goodyear will not be entitled to a federal income tax deduction.
If the shares of Common Stock are disposed of in a sale, exchange or other “disqualifying disposition” within two years after the date of grant or within one year after the date of exercise, the optionee will realize taxable ordinary income in an amount equal to the lesser of (i) the excess of the fair market value of the shares of Common Stock purchased at the time of exercise over the aggregate option exercise price and (ii) the excess of the amount realized upon disposition of such shares over the option exercise price. Goodyear will be entitled to a federal income tax deduction equal to that amount.
Exercise of Non-Qualified Stock Options. Taxable ordinary income will be recognized by the holder of a non-qualified stock option at the time of exercise in an amount equal to the excess of the fair market value of the shares of Common Stock purchased at the time of such exercise over the aggregate option exercise price. Goodyear will
be entitled to a federal income tax deduction equal to that amount. On a subsequent sale of the shares, the optionee will generally recognize a taxable capital gain or loss based upon the difference between the per share fair market value at the time of exercise and the per share selling price at the time of sale. The capital gain or loss will be short term or long term depending on the period of time the shares are held by the optionee following exercise.
Exercise of Stock Appreciation Rights. Upon the exercise of a SAR, the holder will realize taxable ordinary income on the amount of cash received and/or the then current fair market value of the shares of Common Stock acquired. Goodyear will be entitled to a federal income tax deduction equal to that amount. The holder’s basis in any shares of Common Stock acquired will be equal to the amount of ordinary income upon which he or she was taxed. Upon any subsequent disposition, any gain or loss realized will be a capital gain or loss.
Restricted Stock. A participant receiving a grant of restricted stock will not recognize income, and Goodyear will not be allowed a deduction, when restricted shares of Common Stock are granted, unless the participant makes the Section 83(b) election described below. While the restrictions are in effect, a participant will recognize compensation income equal to the amount of the dividends received and Goodyear generally will be allowed a deduction in a like amount.
When the restrictions on the shares of Common Stock are removed or lapse, the excess of fair market value of such shares on the date the restrictions are removed or lapse over the amount paid by the participant for the shares will be ordinary income to the participant. Goodyear will be entitled to a federal income tax deduction equal to that amount. Upon disposition of the shares of Common Stock, the gain or loss recognized by the participant will be treated as a capital gain or loss. The capital gain or loss will be short term or long term depending upon the period of time the shares are held by the participant following the removal or lapse of the restrictions.
If a Section 83(b) election is filed by the participant with the Internal Revenue Service within 30 days after the date of grant, then the participant will recognize ordinary income and the holding period will commence as of the date of grant. The amount of ordinary income recognized by the participant will equal the excess of the fair market value of the shares as of the date of grant over any amount paid by the participant for the shares of Common Stock. Goodyear generally will be entitled to a deduction in a like amount. If such election is made and a participant thereafter forfeits the restricted shares of Common Stock, no refund or deduction will be allowed for the amount previously included in such participant’s income. Dividends paid after a Section 83(b) election is filed by the participant are treated as dividend income and not as compensation income.
Restricted Stock Units and Performance Grants. A participant receiving a restricted stock unit grant or a performance grant will not recognize income, and Goodyear will not be allowed a deduction, at the time the grant is made. When a participant receives payment in cash or shares of Common Stock, the amount of cash and the fair market value of the shares of Common Stock received will be ordinary income to the participant. Goodyear generally will be entitled to a federal income tax deduction equal to that amount.
Withholding Taxes. No withholding taxes are payable in connection with the grant of any stock option or SAR or the exercise of an incentive stock option. However, applicable withholding taxes must be paid at the time of exercise of any non-qualified stock option or SAR by an employee. Withholding taxes generally must also be paid in respect of any restricted stock when the restrictions thereon lapse. In respect of all other awards, withholding taxes must be paid whenever the participant recognizes income for tax purposes.
Section 162(m) Limit. The Plan is also designed to enable Goodyear to provide certain forms of performance-based compensation to senior executive officers that may be intended to meet the requirements for tax deductibility under Section 162(m) of the Code. Section 162(m) of the Code provides that, subject to certain exceptions, Goodyear may not deduct compensation paid to any one of certain executive officers in excess of $1 million in any one year. Section 162(m) excludes performance-based compensation meeting certain requirements from the $1 million limitation on tax deductibility. If the Plan is approved by shareholders, Goodyear expects that all stock options and SARs will qualify as performance-based compensation, and Goodyear will be authorized, but not required, to grant performance awards, restricted stock, restricted stock units and other stock-based grants under
the Plan that will be deductible as performance-based compensation not subject to the $1 million limitation on deductibility.
Other Information. Future benefits under the Plan are not currently determinable. However, current benefits granted to officers and all other employees would not have been increased if they had been made under the proposed Plan. In 2012, the Compensation Committee awarded an aggregate of 174,877 performance shares and 2,004,429 stock options (excluding reinvestment options) to participants under the 2008 Performance Plan. The Grants of Plan-Based Awards Table at page 44 shows the equity incentive plan awards that would have been made in 2012 to our named executive officers if the Plan were in effect at that time.
Setset forth in the table below is certain information regarding the number of shares of our Common Stock that were subject to outstanding stock options or other compensation plan awards at the dates indicated.
EQUITY COMPENSATION PLAN INFORMATIONbelow.
Plan Category | Number of Shares to be Issued upon Exercise of Outstanding Options, Warrants and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Shares Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Shares Reflected in Column (a)) | |||||||||
| (a) | (b) | (c) | ||||||||||
Equity compensation plans approved by shareholders | 13,528,862 | $ | 14.75 | 6,721,618 | (1) | |||||||
Equity compensation plans not approved by shareholders | — | — | — | |||||||||
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Total at December 31, 2012 | 13,528,862 | $ | 14.75 | 6,721,618 | ||||||||
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Equity compensation plans approved by shareholders | 15,258,971 | $ | 14.60 | 4,037,454 | (2) | |||||||
Equity compensation plans not approved by shareholders) | — | — | — | |||||||||
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Total at February 28, 2013 | 15,258,971 | * | $ | 14.60 | 4,037,454 | |||||||
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If the Plan is not approved by shareholders, the Plan will not be adopted and Goodyear will consider other alternatives available with respect to performance based compensation.
The following resolution will be presented by your Board of Directors at the Annual Meeting:
“RESOLVED, that the adoption of the 2013 Performance Plan of The Goodyear Tire & Rubber Company, the complete text of which is set forth as Exhibit A to the Proxy Statement of the Company for the 2013 Annual Meeting of Shareholders be, and the same hereby is, approved.”
Your Board of Directors unanimously recommends that shareholders vote FOR approval ofthe Plan (Proxy Item 3).
PROPOSAL TO APPROVE AMENDMENTS TO GOODYEAR’S CODE OF REGULATIONS WITH RESPECT TO THE REMOVAL OF DIRECTORS
(Item 4 on your Proxy)
Our Board of Directors recommends that Article II, Section 3 of Goodyear’s Code of Regulations (the “Regulations”) be amended to reduce the vote required to remove a director, and to make subsequent amendments to this provision, from a vote of two-thirds of the voting power of the Company to a vote of 60% of the voting power of the Company. The text of the amendments to the Regulations is set forth in Exhibit B to this Proxy Statement.
All of our directors currently stand for election annually and are required to receive a greater number of votes cast “for” his or her election than “against” his or her election in order to be elected. In reaching their recommendation in support of this proposal, the Board of Directors weighed general investor sentiment against supermajority voting provisions against the extraordinary act of removing a director between annual meetings of shareholders, given Goodyear’s unclassified board and majority vote election standard. The Board of Directors ultimately concluded that a reduction in the vote required from two-thirds to 60% of the voting power of the Company struck an appropriate balance between these competing considerations.
Adoption of the amendments to the Regulations requires the affirmative vote of two-thirds of our outstanding Common Stock. This proposal is being submitted contingent upon the adoption by our shareholders of Proxy Items 6 and 7 below, which, if adopted, will eliminate cumulative voting in the election of directors and extend the time period for the call of special meetings. It is possible that Proxy Items 6 and 7 could be adopted even if this proposal fails. If our shareholders fail to adopt Proxy Items 6 and 7, this proposal cannot be adopted by our shareholders.
Your Board of Directors unanimously recommends that shareholders vote FOR approval of amendments to Goodyear’s Code of Regulations to reduce the vote required to remove directors and to make subsequent amendments to this provision (Proxy Item 4).
PROPOSAL TO APPROVE AMENDMENTS TO GOODYEAR’S AMENDED ARTICLES OF INCORPORATION TO ELIMINATE CERTAIN SUPERMAJORITY VOTING PROVISIONS
(Item 5 on your Proxy)
Our Board of Directors recommends that the shareholders approve an amendment to Goodyear’s Amended Articles of Incorporation, as amended (the “Articles”), to reduce the vote required to approve certain business combination transactions from two-thirds of the voting power of the Company to a majority of the voting power of the Company. The text of the amendment to the Articles is set forth in Exhibit B to this Proxy Statement.
Under Ohio law, shareholder approval of business combination transactions generally requires the affirmative vote of the holders of shares entitling them to exercise two-thirds of the voting power of a corporation unless the corporation’s articles of incorporation provide for the affirmative vote of a greater or lesser proportion, but not less than a majority, of the voting power of the corporation. Under the proposal, certain of these statutorily-provided supermajority voting requirements would be eliminated and a new Article would be added to provide that certain mergers, consolidations and sales of all or substantially all of the Company’s assets may be approved by a majority of the voting power of the Company, as permitted under Ohio law.
The Board of Directors has observed that shareholder proposals seeking to remove similar supermajority voting requirements have been proposed in recent years at other public companies and have received significant shareholder support. This evidences the growing investor sentiment that supermajority voting requirements for business combination transactions may permit a minority of shareholders to halt a business combination transaction that is supported by the majority of the shareholders. Given the amount of shareholder support generally for similar proposals and following a careful assessment, the Board of Directors has decided to propose the elimination of the supermajority voting requirements for approval of certain business combination transactions.
Adoption of the amendment to the Articles requires the affirmative vote of two-thirds of our outstanding Common Stock. This proposal is being submitted contingent upon the adoption by our shareholders of Proxy Items 6 and 7 below, which, if adopted, will eliminate cumulative voting in the election of directors and extend the time period for the call of special meetings. It is possible that Proxy Items 6 and 7 could be adopted even if this proposal fails. If our shareholders fail to adopt Proxy Items 6 and 7, this proposal cannot be adopted by our shareholders.
Your Board of Directors unanimously recommends that shareholders vote FOR approval of an amendment to Goodyear’s Amended Articles of Incorporation to reduce the vote required for certain business combination transactions (Proxy Item 5).
PROPOSAL TO APPROVE AMENDMENTS TO GOODYEAR’S AMENDED ARTICLES OF INCORPORATION TO ELIMINATE CUMULATIVE VOTING IN THE ELECTION OF DIRECTORS
(Item 6 on your Proxy)
Our Board of Directors recommends that the shareholders approve amendments to the Articles to eliminate cumulative voting in the election of directors. Under Ohio law, because our Articles currently do not address cumulative voting, our shareholders have the right to elect to vote cumulatively in any election of directors.
Cumulative voting enables a shareholder to cumulate his or her voting power to give one nominee a number of votes equal to the number of directors to be elected multiplied by the number of shares he or she holds, or to distribute the votes among two or more nominees as he or she sees fit. Thus, with cumulative voting, shareholders can cast all of their votes “for” one nominee, instead of voting each share “for” or “against” or “abstain” for each nominee, and thereby can potentially elect a nominee that has not been supported by the holders of a majority of the shares voting on the election of directors. Coupled with the annual election of directors, cumulative voting increases the chances that a minority shareholder could take disruptive actions in opposition to the wishes of the majority of shareholders.
In addition, cumulative voting is at odds with the objectives of Goodyear’s majority voting standard for director elections because cumulative voting potentially empowers shareholders with less than a majority of the shares to determine the directors, while majority voting seeks to hold directors accountable to those with a majority of shares voting on the election of directors. Furthermore, our Regulations, consistent with a mandatory provision of Ohio law, prohibit the removal of an individual director if the votes of a sufficient number of shares are cast against that director’s removal which, if cumulatively voted at an election of all the directors, would be sufficient to elect at least one director. This provision effectively requires the affirmative vote of approximately 92% of the voting power of the Company in order to remove an individual director. Consequently, in furtherance of our proposal to reduce the vote required to remove directors, we are also submitting this proposal to eliminate cumulative voting.
Our Board believes that each director should only be elected if such director receives a majority of the votes cast and that each director should represent the interests of all shareholders, rather than the interests of a minority shareholder or limited constituency. Therefore, our Board believes that it is in the best interests of the Company and the shareholders to eliminate cumulative voting.
The elimination of cumulative voting might under certain circumstances render more difficult or discourage a proxy contest, tender offer or the assumption of control by a holder of a large block of our common shares. Neither management nor our Board is aware of any attempt by any shareholder to accumulate sufficient shares to undertake any such actions. Both management and our Board view this proposal as an appropriate balancing measure in view of the annual election of our directors, our director majority voting standard and the proposal to reduce the vote required to remove directors (see Proxy Item 4).
The proposed amendment would be added as a new Article to the Articles, the text of which is set forth in Exhibit B of this Proxy Statement. In addition, Article Seventh of the Articles, which relates to our director majority voting standard, will be revised to remove references to cumulative voting, as shown in Exhibit B.
Adoption of the amendments to the Articles requires the affirmative vote of two-thirds of our outstanding Common Stock.
Your Board of Directors unanimously recommends that shareholders vote FOR approval of the amendments to Goodyear’s Amended Articles of Incorporation to eliminate cumulative voting in the election of directors (Proxy Item 6).
PROPOSAL TO APPROVE AN AMENDMENT TO GOODYEAR’S CODE OF REGULATIONS WITH RESPECT TO CALLING SPECIAL MEETINGS
(Item 7 on your Proxy)
Our Board of Directors recommends that Article I, Section 2 of the Regulations be amended to change the time by which a special meeting must be called after a request for a special meeting is received from between seven and sixty days to between seven and one hundred twenty days. The text of the amendment to the Regulations is set forth in Exhibit B to this Proxy Statement.
Our Regulations currently provide that special meetings of the shareholders can be called by certain officers of the Company, the Board of Directors or 25% of the holders of our outstanding Common Stock. Upon delivery of a request for a special meeting to a designated officer of the Company, that officer is required to provide notice to the shareholders that a special meeting has been called on a date fixed by that officer that is not less than seven or more than sixty days after the receipt of the request.
In light of the voting thresholds that are proposed to be reduced by Proxy Item 4 (removal of directors) and Proxy Item 5 (business combination transactions), the Board of Directors believes that the maximum time within which a special meeting is required to be called should be extended from sixty days to one hundred twenty days. This amendment will ensure that shareholders and the Board have sufficient time to fully consider the matters to be presented at a special meeting prior to voting, facilitate an orderly special meeting process, including the potential preparation of proxy materials, and allow shareholders adequate time to be represented at a meeting, if desired. However, because the amendment potentially delays a vote on a business combination transaction, it may be viewed as an anti-takeover device that has the effect of discouraging a third party from acquiring or attempting to acquire control of the Company.
Adoption of this amendment to the Regulations requires the affirmative vote of a majority of our outstanding Common Stock.
Your Board of Directors unanimously recommends that shareholders vote FOR approval of an amendment to Goodyear’s Code of Regulations to extend the time to call special meetings (Proxy Item 7).
PROPOSAL TO APPROVE AN AMENDMENT TO GOODYEAR’S CODE OF REGULATIONS TO “OPT OUT” OF THE OHIO CONTROL SHARE ACQUISITION LAW
(Item 8 on your Proxy)
Currently, Section 1701.831 of the Ohio Revised Code (also known as the “Ohio Control Share Acquisition Law”) applies to Ohio corporations unless the corporation specifically opts out of the statute’s application. Our Articles and Regulations are silent on the matter, and therefore the Ohio Control Share Acquisition Law currently applies to us.
The Board of Directors recommends that shareholders vote to amend the Regulations to affirmatively state that the Ohio Control Share Acquisition Law does not apply to us. The text of the amendment to the Regulations is set forth in Exhibit B to this Proxy Statement.
The Ohio Control Share Acquisition Law generally prohibits transactions in which a person obtains one-fifth or more but less than one-third of all the voting power of a corporation, one-third or more but less than a majority of all the voting power of a corporation, or a majority or more of all the voting power of a corporation, unless the shareholders approve the transaction at a special meeting, at which a quorum is present, by both the affirmative vote of a majority of the voting power of the corporation represented at the meeting and the affirmative vote of a majority of the voting power of the corporation represented at the meeting excluding the voting power of interested shares. A corporation can provide in its articles of incorporation or code of regulations that Section 1701.831 does not apply to control share acquisitions of its shares. At this time, we have not provided in our Articles or Regulations that these provisions do not apply to us. If shareholders approve this proposal, a new provision will be added to our Regulations to provide that the Ohio Control Share Acquisition Law does not apply to us.
The Ohio Control Share Acquisition Law was adopted in 1982. At that time, control share acquisition provisions were viewed as an important means for protecting shareholders against coercive and manipulative practices arising in connection with unsolicited tender offers and other control transactions.
Since that time, takeover practices have changed, and other tools have become available for the protection of shareholders against abusive takeover techniques. In particular, in 1990 Ohio adopted Chapter 1704 of the Ohio Revised Code, which addresses interested shareholder transactions. Under Chapter 1704, if any person were to acquire common shares with 10% or more of our voting power without first obtaining approval by the Board of Directors, that person would be required to wait for three years before engaging in certain transactions with us, such as a merger or consolidation, the purchase or sale of substantial shares or assets, or the receipt of a loan or other financial assistance. Even after three years, certain fair price/supermajority vote provisions would apply to transactions between the interested shareholder and us. Our Board of Directors believes that Chapter 1704 gives the Board a reasonably effective tool to prevent abusive takeover techniques and, to that extent, diminishes the need for the protection afforded by control share acquisition provisions.
In addition, there may be circumstances in which the control share acquisition provisions might not be in our interests and the interests of our shareholders. Unlike Chapter 1704, the control share acquisition statute cannot be waived by the Board of Directors. For example, even if the Board approves a tender offer and recommends it to shareholders, the tender offer may not be completed without first calling a special meeting and obtaining shareholder approval in accordance with the control share acquisition provisions. In contrast, Board approval would waive the requirements of Chapter 1704 with respect to the proposed tender offer. Control share acquisition provisions are also generally opposed by investors and corporate governance advisors.
Adoption of the amendment to the Regulations requires the affirmative vote of a majority of our outstanding Common Stock.
Your Board of Directors unanimously recommends that shareholders vote FOR approval of the amendment to Goodyear’s Code of Regulations to “opt out” of the Ohio Control Share Acquisition Law (Proxy Item 8).
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) as Goodyear’s independent registered public accounting firm for the fiscal year ending December 31, 2013. Representatives of PwC are expected to be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
Fees Incurred by Goodyear for PwC
The following table presents fees and expenses for services rendered by PwC for fiscal 2012 and 2011.
(In thousands) | 2012 | 2011 | ||||||
Audit Fees and Expenses(1) | $ | 12,995 | $ | 13,126 | ||||
Audit-Related Fees and Expenses(2) | 1,932 | 1,167 | ||||||
Tax Fees and Expenses(3) | 1,900 | 1,792 | ||||||
All Other Fees and Expenses(4) | 712 | 1,038 | ||||||
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Total | $ | 17,539 | $ | 17,123 | ||||
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All audit, audit-related, tax and other services were pre-approved by the Audit Committee, which concluded that the provision of such services by PwC was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. The Audit Committee’s Pre-Approval Policy provides for pre-approval of audit, audit-related, tax services and all other fees on an annual basis and, in addition, individual engagements anticipated to exceed pre-established thresholds must be separately approved. Under the policy, the Audit Committee delegates pre-approval authority to the Chairman of the Committee. The Chairman is to report any such pre-approval decisions to the Audit Committee at its next scheduled meeting.
Management has the primary responsibility for the integrity of Goodyear’s financial information and the financial reporting process, including the system of internal control over financial reporting. PricewaterhouseCoopers LLP (“PwC”), Goodyear’s independent registered public accounting firm, is responsible for conducting independent audits of Goodyear’s financial statements and the effectiveness of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”) and expressing an opinion on the financial statements and the effectiveness of internal control over financial reporting based upon those audits. The Audit Committee is responsible for overseeing the conduct of these activities by management and PwC.
As part of its oversight responsibility, the Audit Committee has reviewed and discussed the audited financial statements, the adequacy of financial controls and the effectiveness of Goodyear’s internal control over financial reporting with management and PwC. The Audit Committee also has discussed with PwC the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended, as adopted by the PCAOB in Rule 3200T. The Audit Committee has received the written disclosures and the letter from PwC required by applicable requirements of the PCAOB regarding PwC’s communications with the Audit Committee concerning independence, and has discussed with PwC their independence from Goodyear.
Based on the review and discussions with management and PwC referred to above, the Audit Committee has recommended to the Board of Directors that Goodyear include the audited consolidated financial statements of Goodyear and subsidiaries for the year ended December 31, 2012 in Goodyear’s Annual Report on Form 10-K for the year ended December 31, 2012 and in its 2012 Annual Report to Shareholders.
The Audit Committee
Peter S. Hellman, Chairman
James A. Firestone
| Beneficial Ownership at February 18, 2014(1) | ||||||||||||||||||||
Name | Shares of Common Stock Owned Directly(2) | Shares of Common Stock Held in Savings Plan(3) | Shares of Common Stock Subject to Exercisable Options(4) | Deferred Share Equivalent Units and Restricted Stock Units | Percent of Class | |||||||||||||||
William J. Conaty | -0- | -0- | -0- | 20,225(7) | * | |||||||||||||||
James A. Firestone | -0- | -0- | -0- | 49,574(7) | * | |||||||||||||||
Werner Geissler | -0- | -0- | -0- | 23,594(7) | * | |||||||||||||||
Peter S. Hellman | -0- | -0- | -0- | 26,775(7) | * | |||||||||||||||
W. Alan McCollough | -0- | -0- | -0- | 52,391(7) | * | |||||||||||||||
| -0- | -0- | -0- | 7,534(7) | * | ||||||||||||||||
| -0- | -0- | -0- | -0- | * | |||||||||||||||
| -0- | -0- | -0- | 10,387(7) | * | |||||||||||||||
| 1,000 | -0- | -0- | 66,168(7) | * | |||||||||||||||
Stephanie A. Streeter | -0- | -0- | -0- | 45,506(7) | * | |||||||||||||||
Thomas H. Weidemeyer | 1,000 | -0- | -0- | 63,364(7) | * | |||||||||||||||
Michael R. Wessel | -0- | -0- | -0- | 58,299(7) | * | |||||||||||||||
Richard J. Kramer | 294,183 | (5) | 215 | 1,070,343 | 455(8) | * | ||||||||||||||
Laura K. Thompson | 14,685 | -0- | 81,545 | 40,000(9) | * | |||||||||||||||
Darren R. Wells | 59,430 | 141 | 325,193 | 68,486(10) | * | |||||||||||||||
Gregory L. Smith | 95,470 | (6) | -0- | 85,446 | 25,000(9) | * | ||||||||||||||
Stephen R. McClellan | 38,423 | 881 | 145,459 | 38,362(11) | * | |||||||||||||||
David L. Bialosky | 64,941 | -0- | 181,357 | -0- | * | |||||||||||||||
All directors, the
| 955,445 | 53,045 | 2,510,937 | 766,094 | 1.4 | % | ||||||||||||||
| * | Less than 1% |
| (2) | Unless otherwise indicated in a subsequent note, each person named and
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| (3) |
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| (4) | Shares that may be acquired upon the |
| (5) | Includes 103,492 shares acquired under Restricted Stock Purchase Agreements. |
| (6) | Includes 32,551 shares acquired under a Restricted Stock Purchase Agreement. |
BENEFICIALOWNERSHIPOFCOMMONSTOCK
| (7) | Deferred share equivalent units and restricted stock units, each equivalent to a share of Common Stock, accrued to accounts of the director under Goodyear’s Outside Directors’ Equity Participation Plan. Deferred share equivalent units are payable in cash, and restricted stock units are payable in Common Stock, following retirement from the Board of Directors. See “Compensation of Directors” at page 73. |
| (8) | Units, each equivalent to a share of Common Stock, deferred pursuant to performance awards earned, and payable in cash, shares of Common Stock, or any combination thereof, at the election of the executive officer. |
| (9) | Restricted stock units, each equivalent to a share of Common Stock, that vest on December 13, 2016. |
| (10) | 13,362 restricted stock units, each equivalent to a share of Common Stock, that vest as to one-half of the units on each of February 23, 2014 and February 23, 2015, and 55,124 restricted stock units that vest on December 6, 2014. |
| (11) | 13,362 restricted stock units, each equivalent to a share of Common Stock, that vest as to one-half of the units on each of February 23, 2014 and February 23, 2015, and 25,000 restricted stock units that vest on December 13, 2016. |
| (12) | Mr. Morell was elected to the Board of Directors on January 7, 2014. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) as Goodyear’s independent registered public accounting firm for the fiscal year ending December 31, 2014. Representatives of PwC are expected to be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
The following table presents fees and expenses for services rendered by PwC for fiscal 2013 and 2012.
(In thousands) | ||||||||
| 2013 | 2012 | |||||||
Audit Fees and Expenses(1) | $12,836 | $12,995 | ||||||
Audit-Related Fees and Expenses(2) | 356 | 1,932 | ||||||
Tax Fees and Expenses(3) | 1,974 | 1,900 | ||||||
All Other Fees and Expenses(4) | 221 | 712 | ||||||
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Total | $15,387 | $17,539 | ||||||
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| (1) | Audit fees and expenses represent fees and expenses for |
| (2) | Audit-related fees and expenses consist primarily of accounting consultations and services related to business acquisitions and divestitures. |
PRINCIPALACCOUNTANTFEESANDSERVICES
| (3) | Tax fees and expenses consist primarily of assistance in the |
| (4) | All other fees and expenses principally include fees related to advisory services and information and education services. |
All audit, audit-related, tax and other services were pre-approved by the Audit Committee, which concluded that the provision of such services by PwC was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. The Audit Committee’s Pre-Approval Policy provides for pre-approval of audit, audit-related, tax and all other fees on an annual basis and, in addition, individual engagements anticipated to exceed pre-established thresholds must be separately approved. Under the policy, the Audit Committee delegates pre-approval authority to the Chairman of the Committee. The Chairman is to report any such pre-approval decisions to the Audit Committee at its next scheduled meeting.
Management has the primary responsibility for the integrity of Goodyear’s financial information and the financial reporting process, including the system of internal control over financial reporting. PricewaterhouseCoopers LLP (“PwC”), Goodyear’s independent registered public accounting firm, is responsible for conducting independent audits of Goodyear’s financial statements and the effectiveness of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”) and expressing an opinion on the financial statements and the effectiveness of internal control over financial reporting based upon those audits. The Audit Committee is responsible for overseeing the conduct of these activities by management and PwC.
As part of its oversight responsibility, the Audit Committee has reviewed and discussed the audited financial statements, the adequacy of financial controls and the effectiveness of Goodyear’s internal control over financial reporting with management and PwC. The Audit Committee also has discussed with PwC the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended, as adopted by the PCAOB in Rule 3200T. The Audit Committee has received the written disclosures and the letter from PwC required by applicable requirements of the PCAOB regarding PwC’s communications with the Audit Committee concerning independence, and has discussed with PwC their independence from Goodyear.
Based on the review and discussions with management and PwC referred to above, the Audit Committee has recommended to the Board of Directors that Goodyear include the audited consolidated financial statements of Goodyear and subsidiaries for the year ended December 31, 2013 in Goodyear’s Annual Report on Form 10-K for the year ended December 31, 2013 and in its 2013 Annual Report to Shareholders.
The Audit Committee
Peter S. Hellman, Chairman
James A. Firestone
Werner Geissler
W. Alan McCollough
RATIFICATIONOFACCOUNTANTS
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(ITEM 3 ON YOUR PROXY)
The Audit Committee of the Board has appointed PwC as the independent registered public accounting firm to audit Goodyear’s consolidated financial statements as of and for the fiscal year ending December 31, 2014 and its internal control over financial reporting as of December 31, 2014. During fiscal year 2013, PwC served as Goodyear’s independent registered public accounting firm and also provided audit-related, tax and other services. See “Principal Accountant Fees and Services” above.
The following resolution will be presented by the Board of Directors at the Annual Meeting:
“RESOLVED, that the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company for the year ending December 31, 2014 is hereby ratified.”
Ratification of the appointment of PwC requires the affirmative vote of a majority of our outstanding Common Stock. In the event the appointment of PwC is not ratified by the shareholders, the adverse vote will be deemed to be an indication to the Audit Committee that it should consider selecting another independent registered public accounting firm for 2015.
Your Board of Directors unanimously recommends that shareholders vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2014 (Proxy Item 3).
(ITEM 4 ON YOUR PROXY)
The proposal set forth below has been submitted by Mr. John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, the beneficial owner of no fewer than 200 shares of Goodyear’s Common Stock.
Proposal 4 – Independent Board Chairman
RESOLVED: Shareholders request that our Board of Directors to adopt a policy, and amend other governing documents as necessary to reflect this policy, to require the Chair of our Board of Directors to be an independent member of our Board. This independence requirement shall apply prospectively so as not to violate any contractual obligation at the time this resolution is adopted. Compliance with this policy is waived if no independent director is available and willing to serve as Chair. The policy should also specify how to select a new independent chairman if a current chairman ceases to be independent between annual shareholder meetings.
When our CEO is our board chairman, this arrangement can hinder our board’s ability to monitor our CEO’s performance. Many companies already have an independent Chairman. An independent Chairman is the prevailing practice in the United Kingdom and many international markets. This proposal topic won 50%-plus support at 5 major U.S. companies in 2013 including 73%-support at Netflix.
BOARDOFDIRECTORS’RESPONSE
This proposal should also be more favorably evaluated due to the deficiencies in our company’s corporate governance as reported in 2013:
GMI Ratings, an independent investment research firm rated Goodyear F in executive pay and D in accounting, environmental and social issues. Richard Kramer was given $17 million in one year while we faced a potential 12% stock dilution. In 2013 Goodyear executive pay received a whopping 45% negative vote from shareholders. Mr. Kramer’s pay would not fall if annual performance fell and his pension was excessive relative to peers. There were no links to environmental or social performance for executive incentive pay.
Three of our most powerful directors received high negative votes: Richard Kramer (Chairman) 13%, Alan McCollough (Lead Director) 15% and Thomas Weidemeyer (Executive Pay Committee Chairman) 22%. Roderick Palmore, Governance Committee Chairman, deserves blame for the failure of our management’s 2013 simple majority vote proposal. Goodyear shareholders have overwhelmingly supported this topic since 2006. There was not one non-executive member of our audit committee who had substantial industry knowledge. Goodyear had a higher shareholder class action litigation risk than 89% of all rated companies.
GMI said Goodyear had come under investigation, or had been subject to fine, settlement or conviction in regard to the Foreign Corrupt Practices Act, or other bribery or corruption violations, by company employees or other corporate agents. Goodyear’s CO2 intensity ratio was significantly higher than its peers. Goodyear had not identified specific environmental impact reduction targets.
There were forensic accounting ratios related to revenue recognition that had extreme values either relative to industry peers or to our company’s own history. Goodyear had a history of significant restatements, special charges or write-offs.
Returning to the core topic of this proposal from the context of our clearly improvable corporate governance, please vote to protect shareholder value:
Independent Board Chairman – Proposal 4
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
The Board opposes this proposal because, among other things:
| (1) | The Board has in place strong independent leadership in the |
| (2) | It would deprive the Board of the flexibility to determine the most effective Board leadership structure at any particular point in time; and |
| (3) | The current Board leadership structure has led to record performance during Mr. Kramer’s tenure. |
BOARDOFDIRECTORS’RESPONSE
The Company’s Corporate Governance Guidelines specifically provide that the independent directors of the Board must elect an independent Lead Director annually. In 2013, the Board revised the Company’s Corporate Governance Guidelines to further strengthen the role of our Lead Director. Among other duties, the Corporate Governance Guidelines specify that the Lead Director shall:
Preside at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;
Serve as liaison between the Chairman and the independent directors;
Approve all information sent to the Board, including meeting agendas, and advise the Chairman on such matters, and may specifically request the inclusion of information;
Approve the schedule of Board meetings to assure that there is sufficient time for discussion of all agenda items and advise the Chairman on the same;
Call meetings or executive sessions of the independent directors;
Interview, along with the Chairman of the Governance Committee, Board candidates and make recommendations to the Governance Committee and the Board; and
If requested by major shareholders, ensure that he or she is available for consultation and direct communication in appropriate circumstances.
The designation of a Lead Director by the independent directors of the Board demonstrates the Board’s continuing commitment to strong corporate governance, Board independence and the important role of Lead Director. In fact, our Lead Director met directly with several of our largest shareholders in 2013 to discuss executive compensation and corporate governance matters.
The independent directors have ample opportunity to, and regularly do, assess the performance of the CEO and provide meaningful direction to him. The Board has strong, independent oversight of management:
85% of the Company’s directors are independent;
All members of the Compensation, Governance and Audit Committees are independent directors;
Committee Chairs, all of whom are independent, approve agendas for their committee meetings;
Board and Committee agendas are prepared based on discussions with all directors and recommendations from management, and all directors are encouraged to request agenda items, additional information and/or modifications to schedules as they deem appropriate; and
The Board holds executive sessions of the independent directors at each Board meeting.
The Board believes that the Company’s balanced and flexible corporate governance structure, including a Lead Director with clearly-delineated and comprehensive duties, makes it unnecessary and ill-advised to have an absolute requirement that the Chairman be an independent director. The Board believes that adopting such a rule would only limit the Board’s ability to select the director it believes is best suited to serve as Chairman of the Board, in light of all the facts and circumstances known to the Board, and is not in the best interests of the Company and its shareholders. The Board’s approach is consistent with that of most large, publicly traded companies in the United States. According to Shearman & Sterling’s 2013 Corporate Governance Survey of the largest U.S. public companies, 78 percent disclose that the Board has either retained the flexibility to separate or combine the offices of
BOARDOFDIRECTORS’RESPONSE
CEO and Chairman or has no formal policy. The Board believes it is important, especially in our changing and challenging environment, to retain this flexibility.
Currently, the Board believes that having Mr. Kramer serve as Chairman best positions the Company to compete successfully and advance shareholder interests. His extensive knowledge of the Company and the tire industry, gained through 14 years of experience in positions of increasing authority including Chief Financial Officer and President, North America, is valuable to the Board in his role as Chairman. Since 2011, the first full year of Mr. Kramer’s tenure as Chairman and CEO, the Company has achieved three consecutive years of segment operating income of more than $1.2 billion – the three best years in the Company’s 115-year history. Over the same three-year period, the Company’s Common Stock price has increased 102% and the Company has reinstated its Common Stock dividend after an 11-year hiatus.
Approval of this proposal requires the affirmative vote of a majority of our outstanding Common Stock.
FOR THESE REASONS, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “AGAINST” PROPOSAL NUMBER FOUR.
Your Board of Directors does not intend to bring any other business before the Annual Meeting and is not aware of any other business intended to be presented by any other person.
After the conclusion of the matters described above, shareholders will have an opportunity to ask appropriate questions regarding Goodyear and its operations.
If any other matters properly come before the Annual Meeting, your proxy will be voted by Mr. Bialosky, Ms. Thompson or Mr. Bell in such manner as they, in their discretion, deem appropriate.
During 2013, Goodyear and its subsidiaries, in the ordinary course of their business and at competitive prices and terms, made sales to or purchases from, or engaged in other transactions with, corporations of which certain Goodyear non-management directors are executive officers and/or directors. Goodyear does not consider the transactions to be material to its business and believes such transactions were not material in relation to the business of such other corporations or the interests of the directors concerned.
On an annual basis, each director and executive officer is obligated to complete a Director and Officer Questionnaire that requires disclosure of any transactions with the Company in which the director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest. Under the “Board of Directors and Executive Officers Conflict of Interest Policy,” directors and executive officers are expected to promptly disclose potential conflicts of interest to Goodyear’s General Counsel, who may consult with the Chairman of the Governance Committee on matters of interpretation of the policy. Any waivers of the policy are required to be approved by the Board of Directors, and any such waivers will be promptly disclosed to shareholders.
SECTION16(a)REPORTINGCOMPLIANCE
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and officers to file reports of holdings and transactions in our equity securities with the Securities and Exchange Commission. As a practical matter, we assist our directors and officers by completing and filing these reports electronically on their behalf. We believe that our directors and officers timely complied with all such filing requirements during 2013.
Submission of Shareholder Proposals and Nominations
If a shareholder desires to have a proposal included in the proxy materials of the Board of Directors for the 2015 Annual Meeting of Shareholders, such proposal shall conform to the applicable proxy rules of the Securities and Exchange Commission concerning the submission and content of proposals, including Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and must be received by Goodyear prior to the close of business on November 14, 2014. In addition, if a shareholder intends to present a proposal or other business (not including a proposal submitted for inclusion in our proxy materials pursuant to Rule 14a-8) or to nominate a candidate for election as a director at the 2015 Annual Meeting of Shareholders, the shareholder’s notice must be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Company not earlier than December 15, 2014 and not later than the close of business on January 14, 2015. If notice of a proposal or a director nomination is not received by the Company in accordance with the dates specified in the Code of Regulations or pursuant to Rule 14a-8, as the case may be, then the proposal or director nomination will be deemed untimely and we will have the right to exercise discretionary voting authority and vote proxies returned to us with respect to such proposal or director nomination. Shareholder proposals or director nominations should be sent to the executive offices of Goodyear, 200 Innovation Way, Akron, Ohio 44316-0001, Attention: Office of the Secretary.
For a proposal or director nomination to be properly presented at an annual meeting of shareholders, a shareholder must comply with the deadlines described in the preceding paragraph, as well as all of the other requirements of the Code of Regulations. Goodyear reserves the right to reject, rule out of order, or take other appropriate action with respect to any proposal or director nomination that does not comply with these and other applicable requirements.
A separate “Confidential Voting Instructions” card is being sent to each employee or former employee participating in the Goodyear Common Stock fund of certain employee savings plans. Shares of Common Stock held in the trust for these plans will be voted by the trustee as instructed by the plan participants who participate in the Goodyear Common Stock fund. Shares held in the trust for which voting instructions are not received will be voted by the trustee in the same proportion as it votes shares for which voting instructions were received from participants in the Goodyear Common Stock fund of the applicable savings plan.
MISCELLANEOUS
You may vote your shares using the internet by accessing the following web site:
http://www.proxyvote.com
or by making a toll-free telephone call within the United States of America or Canada using a touch-tone telephone to the toll-free number provided on your proxy card, or if you hold your shares in “street name,” on the voting instruction card provided by your broker or nominee.
Shareholders Sharing The Same Address
Goodyear has adopted a procedure called “householding,” which has been approved by the Securities and Exchange Commission. Under this procedure, Goodyear is delivering only one copy of the Annual Report and Proxy Statement to multiple shareholders who share the same address and have the same last name, unless Goodyear has received contrary instructions from an affected shareholder. This procedure reduces Goodyear’s printing costs, mailing costs and fees. Shareholders who participate in householding will continue to receive separate proxy cards.
Goodyear will deliver promptly upon written or oral request a separate copy of the Annual Report and the Proxy Statement to any shareholder at a shared address to which a single copy of either of those documents was delivered. To receive a separate copy of the Annual Report or Proxy Statement, you may write or call Goodyear’s Investor Relations Department at The Goodyear Tire & Rubber Company, 200 Innovation Way, Akron, Ohio 44316-0001, Attention: Investor Relations, telephone (330) 796-3751. You may also access Goodyear’s Annual Report and Proxy Statement on the Investor Relations section of Goodyear’s website at www.goodyear.com or at www.proxyvote.com.
If you are a holder of record and would like to revoke your householding consent and receive a separate copy of the Annual Report or Proxy Statement in the future, please contact Broadridge, either by calling toll free at (800) 542-1061 or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. You will be removed from the householding program within 30 days of receipt of the revocation of your consent.
Any shareholders of record who share the same address and currently receive multiple copies of Goodyear’s Annual Report and Proxy Statement who wish to receive only one copy of these materials per household in the future should contact Goodyear’s Investor Relations Department at the address or telephone number listed above to participate in the householding program.
A number of brokerage firms have instituted householding. If you hold your shares in “street name,” please contact your bank, broker or other holder of record to request information about householding.
GOODYEAR WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF GOODYEAR’S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2013, INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS, SCHEDULES AND LIST OF EXHIBITS, AND ANY PARTICULAR EXHIBIT SPECIFICALLY REQUESTED. REQUESTS SHOULD BE SENT TO: THE GOODYEAR TIRE & RUBBER COMPANY, 200 INNOVATION WAY, AKRON, OHIO 44316-0001, ATTN: INVESTOR RELATIONS. THE ANNUAL REPORT ON FORM 10-K IS ALSO AVAILABLE AT WWW.GOODYEAR.COM.
MISCELLANEOUS
The costs of soliciting proxies will be borne by Goodyear. Goodyear has retained D.F. King & Co., Inc., 48 Wall Street, 22nd Floor, New York, New York 10005, to assist in distributing proxy materials and soliciting proxies for an estimated fee of $13,500, plus reimbursement of reasonable out-of-pocket expenses. D.F. King & Co. may solicit proxies from shareholders by mail, telephone or the internet. In addition, officers or other employees of Goodyear may, without additional compensation therefor, solicit proxies in person or by telephone or the internet.
March 14, 2014
By Order of the Board of Directors |
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David L. Bialosky, Secretary |
C/O COMPUTERSHARE TRUST COMPANY, N.A. P.O. BOX 43069 PROVIDENCE, RI 02940-3069 | VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on April 13, 2014. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS If you would like to reduce the costs incurred by The Goodyear Tire & Rubber Company | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
VOTE BY TELEPHONE - 1-800-690-6903 Use any touch-tone telephone | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mark, sign and
c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
please do not mail your card. Your vote is important. Please vote immediately. |
ANNUAL MEETING OF SHAREHOLDERS THE GOODYEAR TIRE & RUBBER COMPANY APRIL 14, 2014 4:30P.M. HILTON AKRON/FAIRLAWN 3180 WEST MARKET STREET AKRON, OHIO PLEASE VOTE — YOUR VOTE IS IMPORTANT Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The 2014 Notice and Proxy Statement and 2013 Annual Report are available at www.proxyvote.com.
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ANNUAL MEETING OF SHAREHOLDERS
THE GOODYEAR TIRE & RUBBER COMPANY
APRIL 15, 2013
4:30P.M.
HILTON AKRON/FAIRLAWN
3180 WEST MARKET STREET
AKRON, OHIO
PLEASE VOTE — YOUR VOTE IS IMPORTANT
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The 2013 Notice and Proxy Statement and 2012 Annual Report are available at www.proxyvote.com.
M42877-P20443
M67843-K44578-P46522
 | ||||||||
| THE GOODYEAR TIRE & RUBBER COMPANY | ||||||||
PROXY FOR 2014 ANNUAL MEETING OF SHAREHOLDERS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS | ||||||||
The undersigned, a holder (or designated proxy) of shares of the Common Stock of The Goodyear Tire & Rubber Company, hereby appoints David L. Bialosky, Laura K. Thompson and Bertram Bell and each or any of them, the proxies or proxy of the undersigned, with full power of substitution, to represent the undersigned, and to vote all of the shares of Common Stock that the undersigned is entitled to vote, at the Annual Meeting of Shareholders of the Company to be held at the Hilton Akron/Fairlawn in Akron, Ohio, on Monday, April 14, 2014, at 4:30 P.M., Akron time, and at any and all adjournments thereof; with the power to vote said shares for the election of twelve Directors of the Company (with discretionary authority to cumulate votes), upon the other matters listed on the reverse side hereof and upon all other matters as may properly come before the meeting or any adjournment thereof. This Proxy is given and is to be construed according to the laws of the State of Ohio. If you sign and return this card without marking, this proxy card will be treated as being FOR the election of Directors (with discretionary authority to cumulate votes), FOR Items 2 and 3, and AGAINST Item 4. | ||||||||
If you plan to attend the 2014 ANNUAL MEETING, please mark the box indicated on the reverse side. THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE MARK, DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. | ||||||||
C/O COMPUTERSHARE TRUST COMPANY, N.A. P.O. BOX 43069 PROVIDENCE, RI 02940-3069 | VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on April 9, 2014. Have your voting instruction card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | |
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS If you would like to reduce the costs incurred by The Goodyear Tire & Rubber Company in mailing proxy materials, you can consent to receiving all future proxy statements, voting instruction cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access shareholder communications electronically in future years. | ||
VOTE BY TELEPHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on April 9, 2014. Have your voting instruction card in hand when you call and then follow the instructions. | ||
VOTE BY MAIL Mark, sign and date your voting instruction card and return it in the postage-paid envelope we have provided or return it to The Goodyear Tire & Rubber Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. If you vote via the Internet or by phone, please do not mail your card. Your vote is important. Please vote immediately. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||||
| M67844-K44578-P46522 KEEP THIS PORTION FOR YOUR RECORDS | ||||
| DETACH AND RETURN THIS PORTION ONLY | ||||
| THIS VOTING INSTRUCTION CARD IS VALID ONLY WHEN SIGNED AND DATED. | ||||
THE GOODYEAR TIRE & RUBBER COMPANY | ||||||||||||||||||||||||||||||
The Board of Directors recommends that you vote FOR the election of all Nominees. | ||||||||||||||||||||||||||||||
ITEM 1. Election of Directors NOMINEES: | For | Against | Abstain | |||||||||||||||||||||||||||
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1a) William J. Conaty 1b) James A. Firestone 1c) Werner Geissler 1d) Peter S. Hellman | ¨ ¨ ¨ ¨ | ¨ ¨ ¨ ¨ | ¨ ¨ ¨ ¨ | 1k) Thomas H. Weidemeyer 1l) Michael R. Wessel The Board of Directors recommends that you vote FOR the following proposals. | For ¨ ¨ | Against ¨ ¨ | Abstain ¨ ¨ | |||||||||||||||||||||||
1e) Richard J. Kramer 1f) W. Alan McCollough 1g) John E. McGlade 1h) Michael J. Morell 1i) Roderick A. Palmore 1j) Stephanie A. Streeter | ¨ ¨ ¨ ¨ ¨ ¨ | ¨ ¨ ¨ ¨ ¨ ¨ | ¨ ¨ ¨ ¨ ¨ ¨ | ITEM 2. Advisory vote to approve executive compensation. ITEM 3. Ratification of appointment of PricewaterhouseCoopers LLP as Independent Registered Public Accounting Firm. The Board of Directors recommends that you vote AGAINST the following proposal. ITEM 4. Shareholder Proposal re: Independent Board Chairman. | ¨ ¨ ¨ | ¨ ¨ ¨ | ¨ ¨ ¨ | |||||||||||||||||||||||
| Please indicate if you plan to attend this meeting. | Yes ¨ | No ¨ | ||||||||||||||||||||||||||||
Authorization: I acknowledge receipt of the Notice of 2014 Annual Meeting of Shareholders and Proxy Statement. I hereby instruct the trustee to vote by proxy, in the form solicited by the Board of Directors, the number of full shares in this Plan account(s) as specified above, or, if not specified above, as recommended by the Board of Directors. | ||||||||||||||||||||||||||||||
| Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | |||||||||||||||||||||||||||
ANNUAL MEETING OF SHAREHOLDERS
THE GOODYEAR TIRE & RUBBER COMPANY
APRIL 14, 2014
4:30P.M.
HILTON AKRON/FAIRLAWN
3180 WEST MARKET STREET
AKRON, OHIO
PLEASE VOTE — YOUR VOTE IS IMPORTANT
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The 2014 Notice and Proxy Statement and 2013 Annual Report are available at www.proxyvote.com.
M67845-K44578-P46522
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ANNUAL MEETINGCONFIDENTIAL VOTING INSTRUCTIONS 2014 ANNUAL MEETING OF SHAREHOLDERSSHAREHOLDERS
THE GOODYEAR TIRE & RUBBER COMPANYFOR EMPLOYEE SAVINGS AND OTHER PLANS
APRIL 15, 2013Solicited on Behalf of the Board of Directors
4:30P.M.April 14, 2014
HILTON AKRON/FAIRLAWN
3180 WEST MARKET STREET
AKRON, OHIO
PLEASE VOTE — YOUR VOTE IS IMPORTANT
Important Notice RegardingThe proxy soliciting materials furnished by the AvailabilityBoard of Proxy Materials forDirectors of The Goodyear Tire & Rubber Company in connection with the Annual Meeting:
The 2013 Notice and Proxy Statement and 2012 Annual ReportMeeting of Shareholders to be held on Monday, April 14, 2014, are available at www.proxyvote.com.delivered herewith.
M42879-P20443
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THIS CONFIDENTIAL VOTING INSTRUCTION CARD IS CONTINUED ON THE REVERSE SIDE. PLEASE MARK, DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. | ||||||||
