UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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Securities Exchange Act of 1934
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THE GOODYEAR TIRE & RUBBER COMPANY
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Commencing on April 5, 2013, The Goodyear Tire & Rubber Company provided the following information to certain shareholders:
Say on Pay Proposal April 5, 2013 |
Executive Summary Strong Operating Performance in 2012 Policies Around Pay Indicate Board’s Attention to Best Practices Our segment operating income in 2012 was the second highest in Goodyear’s history We achieved record results in North America during 2012 We have continuously improved our compensation program by adopting emerging best practices Examples include in recent years the addition of a TSR metric, double trigger change-in-control, elimination of tax gross-ups, prohibitions against pledging/hedging, among others Below Peer Median Pay Indicate Good Alignment with Peer Group A quantitative analysis of Goodyear’s CEO pay vs. performance shows that below median total shareholder return is accompanied by below median pay Pay is targeted at about median going forward to reflect our CEO’s successful tenure to date and the company’s strong operating performance Our CEO’s base salary is set at below median market rates Low Realized Pay* and 90% Performance-Based Pay Indicate Pay for Performance Alignment During our CEO’s tenure, Goodyear experienced outstanding results, increasing 3 year cumulative segment operating income by 47% versus the cumulative total in the 3 years prior Only 10% of our CEO’s compensation is fixed while the remaining 90% is performance-based variable pay Our CEO’s realized pay has been significantly less than the reported Summary Compensation Table amount over the last 3 years Financial performance metrics and a TSR metric in the pay program align pay and performance Incentive plan performance goals reflect economic and business cycle; they do not reflect an effort to make awards easier to earn Executive Pay and Company Performance Are Well Aligned at Goodyear 2 * Realized pay includes the base salary, annual incentive earned, long term incentive earned and the pre-tax compensation earned upon the exercise of stock options and vesting of stock awards regardless of when they were granted |
Strong 2012 Operating Performance Reflected in Sound Compensation Plan Metrics 3 Record Results in North America Our performance in North America provides further strong evidence of success We achieved record results of $514 million in segment operating income in North America, significantly exceeding 2013 target of $450 million a year early Enhanced Earnings Power and Consistency in a Weak Environment in 2012 Tire industry unit volumes, unlike volumes in the automotive and other industries, have fallen back to the low levels seen during the depths of the recent recession Despite this, Goodyear’s segment operating income in 2012 was the second highest in Goodyear’s history, following our record-setting performance in 2011 2011 and 2012 mark the only period in the history of Goodyear during which segment operating income exceeded $1.2 billion for two consecutive years Increase in Segment Operating Income During Our CEO’s Tenure (2010- present)* Performance Metrics Are Rigorous and Reflect Market Conditions Goodyear is engaged in a multi-year cyclical business and performance metrics are adjusted annually to reflect anticipated market conditions Given strong tire market headwinds, we expected a larger decline in earnings in 2012 but sound management led to above target achievement on three metrics and 2.5% below target on the fourth metric *See Reconciliation of Segment Operating Income to Net Income on Slide 10 |
Realized Pay Shows Pay for Performance Alignment As reported in the Summary Compensation Table at pages 40-42 of Goodyear’s Proxy Statement dated March 18, 2013 For more information on our calculation of realized pay, see “Summary of Realized Pay Earned by Our Chief Executive Officer for 2010, 2011 and 2012” at pages 42-43 of Goodyear’s Proxy Statement dated March 18, 2013 Realized pay includes the base salary, annual incentive earned, long term incentive earned and the pre-tax compensation earned upon the exercise of stock options and vesting of stock awards regardless of when they were granted; realizable pay, according to ISS, equals the sum of base salary, change in pension value, deferred compensation and “all other” compensation as reported in the Summary Compensation Table, earned bonus, short-term cash incentives, the earned (or target if not yet earned) value of any long-term cash awarded during the period, and fair value of all equity awarded (or earned, for performance shares where the performance period has ended) during the prior three fiscal years, valued as of the most recent FY end date 4 Our CEO’s realized pay has been significantly less than the reported Summary Compensation Table amount over the last 3 years Beginning with 2011 awards, over 70% of CEO compensation is influenced by stock price, tying executive pay to the stock price The tables below show that CEO pay in fact closely tracks company performance 2012 Realized CEO Compensation 2010-2012 Realized CEO Compensation vs. Summary Compensation Table (1) (2) (3) |
Segment Operating Income vs. CEO Total Compensation 5 Total CEO compensation over 3 years declined while company operating performance was strong *See Reconciliation of Segment Operating Income to Net Income on Slide 10 |
Managing Pension Liabilities 6 Management is Taking Solid Steps to Manage Pension and Retiree Liabilities Froze U.S. salaried plan Closed USW plan to new entrants Created VEBA trust for USW retiree medical plans Capped salaried retiree medical plan At beginning of 2013, we implemented a hedging program to reduce plan volatility In February, we executed a plan to pre-fund frozen U.S. plans to eliminate ongoing risk Strong Performance in Face of Unfunded Pension Liability Our performance is a significant achievement for a company dealing with unfunded pension liabilities that we estimate are dragging the stock price down by as much as $7/share This liability should not be seen as a reflection on the performance of the current management team or a cause of pay for performance misalignment Management has led the company to record performance over the last two years in light of the fact that the company’s stock price has been negatively impacted by inherited pension liabilities that jumped due to an artificially low interest rate environment (~85% of the 5-year unfunded increase in U.S. plans) Pension liabilities continue to provide a headwind to stock price even with record performance; management is taking steps to manage long-term pension liabilities |
Peer Group is Well Structured for Goodyear 7 |
Continuous Focus On Best Practices Around Pay 8 LTI Tied to TSR vs. S&P 500 Prohibit Hedging and Pledging Payouts earned under our long-term incentive plans based on financial performance are subject to an increase or decrease of up to 20% based on our total shareholder return versus the S&P 500 over the three-year period of the awards, beginning with our 2011 award cycle We prohibit the hedging and pledging of our common stock by officers, directors and employees, most recently strengthening those prohibitions in 2011 Robust Stockholding Guidelines We have 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 that require continued share retention even after targeted levels of ownership are attained. We most recently strengthened those guidelines in 2011 Double-Trigger Change- in-Control Provisions We included double-trigger change-in-control provisions in our change-in-control plan since 2007 and in our equity compensation plans since 2008 Our Compensation Committee has adopted a number of best practices that are consistent with our performance-based compensation philosophy and serve the long-term interests of our shareholders Eliminated Tax Gross-Ups Clawback Policy We adopted a clawback policy in 2011 We eliminated excise tax gross-ups and “walk away” rights in our change-in-control plan for future participants in 2010 and for all participants in 2013 We eliminated tax gross-ups to our executive officers for all perquisites beginning in 2009 |
Support our 2013 Say on Pay Proposal Our Board of Directors is confident that the company’s executive compensation program has been a key factor in driving Goodyear’s operating performance Our operating and financial performance was strong in 2012 and our payouts mirrored that performance Realized pay data and below median relative pay indicate that the pay program’s structure aligns pay and performance Our continued engagement with shareholders on this matter and adoption of emerging best practices demonstrates the Board’s commitment to improving the program 9 The Board firmly believes that Goodyear’s executive pay plans are aligned with shareholder interests and are instrumental to our ability to continue to attract, incent, motivate and retain the best management team in the industry and to continue Goodyear’s positive momentum |
10 Reconciliation of Segment Operating Income Twelve Months Ended December 31, ($ in millions) |