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Crown Holdings, Inc.

One Crown Way

Philadelphia, Pennsylvania 19154

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NOTICE OF 2016 ANNUAL MEETING OF SHAREHOLDERS

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NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of CROWN HOLDINGS, INC. ("Company") will be held at the Company's office located at One Crown Way, Philadelphia, Pennsylvania  on the 28^th day of April 2016 at 9:30 a.m. to elect Directors, to ratify the appointment of independent auditors for the fiscal year ending December 31, 2016, to conduct a non-binding say-on-pay advisory vote on the compensation of Named Executive Officers as disclosed in this Proxy Statement and to transact such other business as may properly come before the Annual Meeting.

Only Shareholders of Common Stock of record as of the close of business on March 8, 2016 will be entitled to vote.

Philadelphia, Pennsylvania

March 21, 2016

Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to Be Held on April 28, 2016:

The Proxy Statement and Proxy Card relating to the Annual Meeting of Shareholders

and the Annual Report to Shareholders are available at

 

 

 

 

 

 

Crown Holdings, Inc.

One Crown Way

Philadelphia, Pennsylvania 19154

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PROXY STATEMENT

2016 Annual Meeting of Shareholders

 

 

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DIRECTOR COMPENSATION

 

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The following table shows, as of March 8, 2016, the number of shares of Common Stock beneficially owned by each Director; the Company's Chief Executive Officer, Chief Financial Officer and the three other Executive Officers who were the highest paid during 2015; and all Directors and Executive Officers as a group.  The Directors and Executive Officers of the Company have sole voting and investment power with respect to the securities of the Company listed in the table below.

 

 

 

 

 

 

 

 

CORPORATE GOVERNANCE

 

Meetings of the Board of Directors.  In 2015, there were five meetings of the Board of Directors.  Each Director during his or her term of service attended at least 75% of the aggregate meetings held by the Board and by the committees on which he or she served.

Attendance at the Annual Meeting.  Under the Company's Corporate Governance Guidelines, Directors are expected to attend the Company's Annual Meeting of Shareholders.  In 2015, each of the Directors serving on the Board at the time attended the Annual Meeting of Shareholders.

Director Independence.  The Board has determined that Jenne Britell, Arnold Donald, William Little, Hans Löliger, James Miller, Josef Müller, Thomas Ralph, Caesar Sweitzer, Jim Turner and William Urkiel are independent under the listing standards of the NYSE.  The Board made this determination based on the absence of any of the express disqualifying criteria set forth in the listing standards that require a majority of the Board nominees to be Independent Directors.

In making the foregoing determinations, the Board considered Company payments to the following third parties and the Directors' affiliations with such parties:  For Dr. Britell, Chairman of United Rentals – ordinary course of business equipment rentals at various Company plants and also for Dr. Britell, a director of Quest Diagnostics – routine Company employee medical testing.  For Mr. Donald, a director of Bank of America Corporation – fees for ordinary course treasury and pension management, foreign currency exchange and commodity hedging services and Bank of America Corporation's participation as one of a number of lenders under the Company's senior secured revolving credit facility and term loans.  For Mr. Little, employment of his son-in-law by the Company in a middle management position in Europe.   None of these transactions fell within the NYSE listing standards disqualifying criteria.

Of the remaining Directors, Timothy Donahue is a current Executive Officer of the Company and is therefore not independent.  Mr. Conway was the Chief Executive Officer of the Company until his retirement effective January 1, 2016, and is therefore not independent.

Board Leadership and Risk Oversight.  Mr. Conway became non-executive Chairman of the Board effective January 1, 2016.  Mr. Donahue became Chief Executive Officer of the Company effective January 1, 2016.  Mr. Ralph, as the Chairperson of the Nominating and Corporate Governance Committee, serves as the Presiding Director of the Board and presides over meetings of the executive sessions of the Independent Directors.  The role of the non-executive Chairman of the Board has been defined to include, among other things: creating and maintaining an effective working relationship with the Chief Executive Officer and other members of management and with the other members of the Board; providing the Chief Executive Officer ongoing direction as to Board needs, interests and opinions; and assuring that the Board agenda is appropriately directed to the matters of greater importance to the Company.

The Board's current leadership structure includes Audit, Compensation and Nominating and Corporate Governance Committees that are each chaired by and composed solely of Independent Directors.  Currently, the roles of Chairman of the Board and Chief Executive Officer are held by two different individuals.  The Chairman of the Board, Mr. Conway, presides over meetings of the Board and acts as liaison between the Board and Mr. Donahue, the Chief Executive Officer, who is responsible for the day-to-day management of the Company.  Moreover, the Board believes that its other structural features, including ten Independent Directors among the slate of twelve Directors standing for election at the Company's Annual Meeting, regular meetings of Non-Management Directors in executive session, key committees consisting wholly of Independent Directors and an Independent Presiding Director, provide for substantial independent oversight of the Company's management.

 

 

 

 

 

The Board is responsible for providing oversight of the Company's Executive Officers' responsibilities to assess and manage the Company's risk, including its credit risk, liquidity risk, reputational risk and risk from adverse fluctuations in foreign exchange and interest rates and commodity prices.  The Board periodically meets in person with the Executive Officers regarding the Company's risks and ways to mitigate such risks.  In addition, the Audit Committee periodically reviews with management, internal audit and independent auditors the adequacy and effectiveness of the Company's policies for assessing and managing risk.

Director Stock Ownership, Pledging and Hedging.  Under the Company's Corporate Governance Guidelines, after five years of service on the Board, Non-Employee Directors are expected to hold Company Common Stock having a market value of at least five times the cash base annual Director's fee.  As of March 8, 2016, each Director with five or more years of service on the Board owned the required minimum level of Common Stock.  The Company's Corporate Governance Guidelines prohibit Directors from pledging or hedging transactions relating to Company Common Stock.

Board Committees.  The Board has an Executive Committee, an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.  The Board has approved written charters for the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee that can be found at http://www.crowncork.com/investors/corporate-governance. Each of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee conducts a self-evaluation and review of its charter annually.

Audit Committee.  In 2015, the Audit Committee had ten meetings.  The Audit Committee provides assistance to the Board in discharging its responsibilities in connection with the oversight of the financial accounting practices and internal controls of the Company and represents the Board in connection with the services rendered by the Company's independent auditors.  The current members of the Audit Committee are Dr. Britell and Messrs. Müller, Ralph, Sweitzer and Urkiel.  Dr. Britell serves as Chairperson of the Audit Committee.  The Board has determined that the Directors who serve on the Audit Committee are all independent under the listing standards of the NYSE and that Dr. Britell and Mr. Urkiel are "audit committee financial experts" within the meaning of SEC regulations.

Compensation Committee.  In 2015, the Compensation Committee had three meetings.  The Compensation Committee is responsible for the review of the executive compensation program.  The current members of the Compensation Committee are Messrs. Donald, Little, Löliger and Turner, each of whom is independent under the listing standards of the NYSE.  Mr. Löliger serves as Chairperson of the Compensation Committee.  For further discussion regarding the Compensation Committee's processes and procedures for the consideration of executive compensation, see "Compensation Discussion and Analysis."

Nominating and Corporate Governance Committee.  There were four meetings of the Nominating and Corporate Governance Committee in 2015.  The Nominating and Corporate Governance Committee is responsible for leading the search for individuals qualified to become members of the Board and recommending to the Board individuals as Director nominees.  The Committee also oversees the annual self-evaluation of the Board and its committees and the annual evaluation of management by the Board, makes recommendations to the Board regarding the membership of committees of the Board and performs other corporate governance functions.  The current members of the Nominating and Corporate Governance Committee are Messrs. Little, Löliger, Miller and Ralph, each of whom is independent under the listing standards of the NYSE.  Mr. Ralph serves as Chairperson of the Nominating and Corporate Governance Committee.

 

 

 

 

 

Consistent with the Company's Corporate Governance Guidelines, the Nominating and Corporate Governance Committee seeks Director nominees committed to upholding the highest standards of personal and professional integrity and representing the interests of all Shareholders, not particular Shareholder constituencies.  The Committee identifies nominees for Director by first evaluating the current members of the Board willing to continue in service.  In addition, the Committee regularly assesses the appropriate size of the Board, whether any vacancies on the Board are expected because of  retirement  or otherwise  and  whether the Board needs Directors with particular skills or experience.  To identify and evaluate potential candidates for the Board, the Committee solicits ideas for possible nominees from a number of sources, which may include current Board members, senior-level Company executives and professional search firms.  The Committee will also consider candidates properly submitted by Company Shareholders.  Candidates for the Board are evaluated through a process that may include background and reference checks, personal interviews with members of the Committee and a review of each candidate's qualifications and other relevant characteristics.  The same identifying and evaluating procedures apply to all candidates for Director, whether submitted by Shareholders or otherwise.  The Nominating and Corporate Governance Committee and the Board desire to maintain the Board's diversity and consider factors such as nationality, race and gender as well as professional backgrounds and geographic and industry experiences.  The Committee does not intend to nominate representational Directors but instead considers diversity given the characteristics of the Board in its entirety.

Shareholders who wish to suggest qualified candidates may write, via Certified Mail-Return Receipt Requested, to the Office of the Secretary, Crown Holdings, Inc., One Crown Way, Philadelphia, PA 19154, stating in detail the qualifications of the persons they recommend.  Shareholders must include a letter from each person recommended affirming that he or she agrees to serve as a Director of the Company if elected by Shareholders.  However, through its own resources, the Committee expects to be able to identify an ample number of qualified candidates.  See "Questions and Answers About the 2016 Annual Meeting" for information on bringing nominations for the Board of Directors at the 2017 Annual Meeting.

Proxy Access.  The Board of Directors amended the Company's By-Laws to adopt proxy access in January 2016.  The Company's proxy access By-Law permits Shareholders owning 3% or more of the Company's Common Stock for a period of at least three years to nominate up to the greater of 20% of the Board of Directors or two Directors and include these nominations in our proxy materials.  The number of Shareholders who may aggregate their shares to meet the 3% ownership threshold is limited to 20.  Shareholders will be able to propose proxy access nominees beginning with the 2017 Annual Meeting of Shareholders.

Executive Sessions.  Pursuant to the Company's Corporate Governance Guidelines, the Non-Management Directors of the Company meet periodically at regularly scheduled executive sessions without Management Directors.  The Chairman or the Presiding Director, as appropriate, chairs such meetings.

 

 

 

 

Communications with the Board of Directors.  Shareholders and other interested parties who wish to send communications on any topic to the Chairman, the Presiding Director, the Independent Directors or the Board as a whole may do so by writing c/o Office of the Secretary, Crown Holdings, Inc., One Crown Way, Philadelphia, PA 19154.  Communications will be forwarded to the Directors if they relate to substantive matters and include information, suggestions or comments that the Chairman or Presiding Director, with the assistance of the Corporate Secretary, deems appropriate for consideration by the Directors.

Code of Business Conduct and Ethics.  The Company has a Code of Business Conduct and Ethics that applies to all Directors and employees.  The Code of Business Conduct and Ethics is available on the Company's website at http://www.crowncork.com/investors/corporate-governance.  The Company intends to disclose updates to, and waivers of, the Code of Business Conduct and Ethics on the Company's website.

Transactions with Related Persons.  The Nominating and Corporate Governance Committee is charged with reviewing and approving or ratifying all transactions with related persons of Directors and executive officers required to be disclosed under Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934, as amended ("Regulation S-K").  The written Company policy pertaining to related party transactions is included in the Company's Corporate Governance Guidelines.

Company Website.  The Company's Corporate Governance Guidelines and the Charters of the Audit, Compensation and Nominating and Corporate Governance Committees are available on the Company's website at http://www.crowncork.com/investors/corporate-governance.

 

 

 

 

 

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis ("CD&A") provides an overview of the Company's executive compensation program together with a description of the material factors underlying the decisions that resulted in the compensation provided for 2015 to the Company's Chief Executive Officer ("CEO"), the Company's Chief Financial Officer and the other three Executive Officers who were the highest paid during 2015 (collectively, "Named Executive Officers" or "NEOs").  The names of the Company's 2015 NEOs and their titles at year-end are:

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John W. Conway – Chairman of the Board and Chief Executive Officer (1)

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Thomas A. Kelly – Senior Vice President and Chief Financial Officer

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Timothy J. Donahue – President and Chief Operating Officer (2)

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Gerard H. Gifford – President – European Division

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Jozef Salaerts – President – Asia Pacific Division (3)

The following discussion and analysis contains statements regarding individual and Company performance targets and goals. These targets and goals are disclosed in the limited context of the Company's compensation programs and should not be understood to be statements of management's expectations or estimates of financial results or other guidance.  The Company specifically cautions investors not to apply these statements to other contexts.

2015 Say-on-Pay Vote Results.  At our Annual Meeting of Shareholders held in April 2015, we held a non-binding Shareholder say-on-pay vote on the 2014 compensation of our NEOs.  Approximately 97% of the shares voted at last year's Annual Meeting voted "FOR" our say-on-pay proposal, approving the compensation of our NEOs.  The Compensation Committee ("Committee") believes the results of the say-on-pay vote show strong support for the performance-based and ownership-oriented compensation philosophy that the Committee has utilized.  Accordingly, the Committee did not change its general approach to executive compensation in 2015.  Although the advisory Shareholder vote on executive compensation is non-binding, the Committee will continue to take the outcome of this annual vote into consideration when making compensation decisions for our NEOs.

Executive Summary.  The Company's executive compensation program is designed to motivate our NEOs to create long-term value for our Shareholders and to efficiently use the Company's invested capital in order to grow our business.  To achieve this objective, our program emphasizes long-term incentives and utilizes equity for the delivery of long-term incentives.  In addition, the Company's "at risk" performance-based compensation incentives focus upon the Company's strategy of driving free cash flow and long-term growth of the Company's economic profit, which is driven by efficient utilization of capital, gross profit and cash flow from operations, as well as total shareholder return performance relative to peers.

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⁽¹⁾ Mr. Conway served as Chief Executive Officer of the Company until his retirement on January 1, 2016.

⁽²⁾ Mr. Donahue was appointed the Company's Chief Executive Officer effective January 1, 2016.

⁽³⁾ On February 15, 2016, the Company announced Mr. Salaerts' decision to retire in the second quarter of 2016.

 

 

 

 

Pay-for-Performance.  Our executive compensation program is based on our "pay-for-performance" philosophy, as outlined in the following table.

 

 

 

 

 

At-Risk Compensation.  Consistent with our "pay-for-performance" philosophy, our executive compensation program emphasizes "at risk" compensation and stock ownership. The majority of our NEOs' total direct compensation is tied to the accomplishment of performance objectives.

The allocation of 2015 total direct compensation for our CEO and for our other NEOs among these various components is set forth in the following graphs that highlight the Company's emphasis on "at risk" and equity-based compensation.

 

Recent Program Highlights.  In addition to considering the results of our Shareholders' annual say-on-pay votes and Shareholder and proxy advisory service feedback, we continually monitor our executive compensation program as to competitiveness with our peer group as described below.  We also monitor our compensation program with respect to best practices, and over the last several years we have taken the following actions:

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Revised our anti-pledging and anti-hedging policies to prohibit Officers and Directors from pledging or hedging Company Stock.

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Eliminated tax gross-up provisions from new or revised executive employment agreements.

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Established stock ownership guidelines for our NEOs under which our CEO is expected to own Company Common Stock equal in value to six times his annual base salary and the other NEOs are expected to hold Common Stock equal to three times their annual base salaries.

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Adopted a minimum holding period policy applicable to restricted stock under which the NEOs are required to retain 50% of the after-tax value of any Common Stock received as the result of a restriction lapse for a period of at least two years, even if share ownership guidelines have been satisfied.

 

 

 

 

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Adopted a recoupment or "clawback" policy with respect to the non-equity incentive bonus plan for NEOs.

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Received shareholder approval for our performance-based 2015 Annual Incentive Bonus Plan, pursuant to which annual bonuses may be paid to our NEOs.

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Reduced the benchmarking of our CEO's compensation from the 75th to the 50th percentile of our peer group.

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Eliminated carry-forward of economic profit earned but not eligible for inclusion in annual cash bonus payment calculations for our executives.

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Eliminated individual qualitative factors in determining our executives' annual cash bonuses.

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Changed the allocations under the Company's long-term incentive plan so that the value of the awards of restricted stock is targeted to be two-thirds performance-based and one-third time-based.

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Utilized tally sheets to review total compensation, the current mix of compensation, issues of internal pay equity, payouts under certain potential termination scenarios and the aggregate value of retirement benefits.

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Eliminated tax gross-up payments in connection with automobile allowances.

Role of the Compensation Committee.  The Committee comprises four Non-Employee Directors, all of whom are independent under the NYSE listing standards.  During 2015, the Committee members were Hans Löliger (Chairperson), Arnold Donald, William Little and Jim Turner.  The Committee has responsibility for determining and implementing the Company's philosophy with respect to executive compensation.  To implement this philosophy, the Committee oversees the establishment and administration of the Company's executive compensation program.  The Committee operates under a written charter adopted by the Board of Directors. A copy of this charter is available on the Company's website at http://www.crowncork.com/investors/corporate-governance.

Compensation Philosophy and Objectives.  The Committee maintains a "pay-for-performance" philosophy toward executive compensation. One of the guiding principles of this "pay-for-performance" philosophy is that the executive compensation program should enable the Company to attract, retain and motivate a team of highly qualified executives who will create long-term value for the Shareholders.  To achieve this objective, the Committee has developed an executive compensation program that is ownership-oriented and that rewards the attainment of specific annual, long-term goals that will result in improvement in total shareholder return.  To that end, the Committee believes that the executive compensation program should include both cash and equity-based compensation that rewards specific performance by the Company.  In addition, the Committee continually monitors the effectiveness of the program to ensure that the compensation provided to executives remains competitive relative to the compensation paid to executives in a peer group comprising select container and packaging industry and other manufacturing companies.

 

 

 

 

The Committee annually evaluates the components of the compensation program as well as the desired mix of compensation among these components.  The Committee believes that a substantial portion of the direct compensation paid to the Company's NEOs should be at risk, contingent on the Company's operating and stock market performance.  Consistent with this philosophy, the Committee will continue to place significant emphasis on stock-based compensation and performance-based pay in an effort to more closely align compensation with Shareholder interests and increase executives' focus on the Company's long-term performance.  Accordingly, the annual incentive bonus is largely determined by operating metrics that drive long-term growth and Shareholder value, and approximately two-thirds of the value of the restricted stock granted under the Company's long-term incentive plan is tied to performance of the Company's total shareholder return versus that of a peer group.

Stock Ownership Guidelines and Share Retention Policy.  Consistent with the Committee's stock ownership-oriented compensation philosophy and its focus on long-term performance, the Company maintains stock ownership guidelines under which our NEOs are expected to own Company Common Stock with a minimum value equal to the applicable multiple of base salary set forth in the following table.

Until the ownership requirement is satisfied, an NEO is required to retain 50% of the after-tax value of any Common Stock received as the result of an option exercise or vesting of restricted shares.  At year-end, all of the NEOs either owned more than the minimum level of Common Stock or were otherwise in compliance with the stock ownership guidelines.

Minimum Post-Vesting Holding Period for Restricted Stock.  The Company also maintains a minimum holding period policy applicable to restricted stock with respect to which the restriction has lapsed.  Under this policy, the NEOs are required to retain 50% of the after-tax value of any Common Stock received as the result of a restriction lapse for a period of at least two years.  An NEO who has already satisfied the stock ownership guideline must still retain 50% of the after-tax value of newly unrestricted shares for at least two years.

Committee Process.  The Committee meets as often as necessary to perform its duties and responsibilities.  During 2015, the Committee met three times.  The Committee usually meets with the CEO and, when appropriate, with other Company Officers and outside advisors.  In addition, the Committee periodically meets in executive session without management present.

Setting of Meeting Agenda.  The Committee's meeting agenda is normally established by the Committee Chairperson in consultation with the CEO and the Vice President of Human Resources.  Committee members receive and review materials in advance of each meeting.  Depending on the meeting's agenda, such materials may include: financial reports regarding the Company's performance, reports on achievement of corporate objectives, reports detailing executives' stock ownership and stock awards and information regarding the compensation programs and compensation levels of certain peer group companies.

 

 

 

Use of Tally Sheets.  The Committee reviews tally sheets when setting annual compensation for the NEOs.  These tally sheets allow the Committee to review each NEO's compensation on an aggregate basis and to see how a change in any one component affects each NEO's total compensation.  For 2015, the Committee used the tally sheet information to review total compensation, the current mix of compensation (e.g., cash versus equity), issues of internal pay equity, total value of Company stock held by each NEO, payouts under certain potential termination scenarios and the aggregate value of retirement benefits.

Retention of Compensation Consultants.  The Committee's charter authorizes the Committee, in its sole discretion, to retain and terminate consultants to assist it in the evaluation of compensation for the NEOs.  The Committee has sole authority to approve the fees and other retention terms of any such consultant.

Role of Executive Officers in Compensation Decisions.  The Committee makes all decisions regarding the CEO's compensation.  Decisions regarding the compensation of other NEOs are made by the Committee in consultation with, and upon the recommendation of, the CEO.  In this regard, the CEO provides the Committee evaluations of business goals and objectives and executive performance and recommendations regarding salary levels, equity grants and other incentive awards.

Executive Compensation Consultant.  Pursuant to its authority under its charter to retain compensation consultants, the Committee engaged Pay Governance, LLC, an executive compensation consulting firm, to act as its independent advisor with respect to 2015 compensation decisions.

Consultant Independence.  All services provided by Pay Governance to the Committee are conducted under the direction and authority of the Committee, and all work performed by Pay Governance must be pre-approved by the Committee.  Pay Governance does not provide any other services to the Company, and neither Pay Governance nor the individuals who provide services to the Company owns any shares of the Company's stock.  There are no personal or business relationships between the Pay Governance consultants and any executive of the Company.  In addition, there are no personal relationships between the Pay Governance consultants and any member of the Committee.  Pay Governance maintains a detailed conflict of interest policy in order to ensure that compensation committees receive conflict-free advice.

Use of Benchmarking.  In advising the Committee regarding 2015 compensation for our NEOs, Pay Governance developed competitive compensation levels by establishing a benchmark match for each NEO position in the competitive market.  Competitive levels were developed for the following elements of pay:

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base salary

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target annual incentive

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target total cash compensation (base salary plus target annual incentive)

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long-term equity incentives

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target total direct compensation (target total cash compensation plus the value of long-term equity incentives)

Peer Group Composition.  In establishing its benchmarks for each of the NEOs, Pay Governance gathered data for 17 public companies, or divisions of public companies, defined as the "Peer Group."  Members of the Peer Group are manufacturing companies of similar scope and are generally from the following three categories: (i) other packaging companies, (ii) current or potential suppliers to the Company and (iii) current or potential customers of the Company.  The Peer Group comprises the following companies:

 

 

 

 

Specific benchmark levels were developed using regression analysis to size-adjust the market data to reflect the Company's corporate revenue or the individual business unit revenue, when appropriate.  To provide a broader frame of reference, Pay Governance also analyzed each NEO position against data from general industry.  In establishing its benchmarks for Mr. Gifford, who is a U.S. expatriate, Pay Governance used data based on U.S. competitive rates.  In establishing its benchmarks for Mr. Donahue, due to the limited number of Peer Group members who have chief operating officers, Pay Governance also considered data from a broader group of packaging/metals/non-durable goods manufacturing companies.  With respect to Mr. Donahue, the term "Peer Group" as used herein includes that broader group of companies.

Compensation Strategy for CEO.  The evaluation of the CEO's performance and the setting of his compensation is one of the fundamental duties of the Committee.  In evaluating the CEO's performance, the Committee considered the Company's overall financial, operational and strategic performance.

In determining the CEO's direct compensation for 2015, the Committee evaluated the CEO's performance and the Company's performance in the prior year, as well as performance since Mr. Conway's election as CEO in 2000.  The Committee continued to focus upon the Company's improvement during Mr. Conway's tenure in several key metrics that the Committee believes are essential to increase Shareholder value, including:

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Successful acquisition and integration of Mivisa and Empaque.  The acquisition and integration of two dynamic and significant businesses in the last two years has expanded the Company's geographic footprint, provided access to high performing assets and presented opportunities to reduce costs.

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Empaque.  In February 2015, the Company completed the purchase of Empaque, a leading beverage packaging company in Mexico, which significantly enhanced the Company's position in the global beverage can market.

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Mivisa.  During 2015 the Company continued the integration of Mivisa, a leading Spanish manufacturer of food cans and ends that was acquired by the Company in 2014.  The integration of Mivisa into our European food can business has substantially increased our presence in Spain, one of Europe's leading agricultural economies, and Mivisa's best-in-class operations improved our overall cost position in Europe.

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Strong cash flow generation. Cash flow from operations was $956 million in 2015 and $2,753 million in aggregate for the period 2013-2015, enabling the Company to reinvest $957 million in capital projects over the three years and repurchase approximately 7 million shares of Company Common Stock.

 

 

 

 

 

 

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Investment in growth markets.   The Company has expanded significantly in a number of growth markets important to its future, including in Asia, Latin America and Eastern Europe.  These growth markets now account for over 50% of the Company's global beverage can unit volumes.

·

Shareholder return.  The Company's total shareholder return has increased approximately 520% since November 2000 when Mr. Conway was elected CEO and the price of the Company's Common Stock was $8.19 per share.

CEO Target Compensation.  The Committee used the 50^th percentile of the Peer Group as a guidepost in determining our CEO's target total direct compensation for 2015.  In conjunction with the Committee's emphasis on stock-based compensation, a majority of the CEO's 2015 target compensation was in the form of Company Common Stock.

Compensation Strategy for NEOs other than the CEO.  For 2015, the Committee generally continued following its market-based compensation strategy for the NEOs other than the CEO:

·

Pay levels were evaluated relative to the Peer Group as the primary market reference point.  In addition, general industry data was reviewed as an additional market reference and to ensure robust competitive data.

·

Target total cash compensation and target total direct compensation levels were set towards the middle range of the Peer Group.  The Committee used the 50th percentile of the Peer Group's target total cash compensation and target total direct compensation as a market check in determining compensation.  However, the 50th percentile is a guidepost and not an absolute target.

Components of Compensation.  For 2015, the principal components of compensation for NEOs were:

·

base salary

·

annual incentive bonus

·

long-term equity incentives

·

retirement benefits

·

perquisites

Base Salary.  The Company provides NEOs with base salaries to compensate them for services rendered during the year.  The Committee recognizes that competitive salaries must be paid in order to attract and retain high quality executives.  Normally, the Committee reviews NEO salaries at the end of each year, with any adjustments to base salary becoming effective on January 1 of the succeeding year.  However, under special circumstances, such as a promotion or increased responsibilities, the Committee may act to increase an NEO's salary during the year.

2015 Base Salaries.  The Committee has determined that base salary levels for the NEOs should be targeted towards the middle range of the Peer Group.  Consistent with this market-based pay strategy, the Committee approved an increase in the base salary of Mr. Kelly in order to bring him more in line with the middle range of the Peer Group and increases for Messrs. Donahue, Gifford and Salaerts in order to keep them in line with the middle range of the Peer Group.  Base salaries for each of the NEOs for 2015 were as set forth in the following table.

 

 

 

 

 

Annual Incentive Bonus.  Annual cash bonuses are included as part of the executive compensation program because, consistent with our "pay-for-performance" philosophy, the Committee believes that a significant portion of each NEO's compensation should be contingent on success in driving the long-term operating performance of the Company. Our NEOs are eligible for annual cash bonuses under our shareholder-approved 2015 Annual Incentive Bonus Plan (the "AIB Plan").  For 2015, our NEOs were eligible to receive annual incentive bonuses under the AIB Plan upon the achievement of specified levels of economic profit and modified operating cash flow. The Committee believes the use of economic profit and modified operating cash flow as key performance measures under the AIB Plan drives the Company's long-term operating performance and is closely correlated with long-term increase in Shareholder value.

2015 Bonus Opportunities and Results.  For 2015, the Committee assigned each NEO an annual target level of participation in the AIB Plan together with a maximum annual bonus opportunity as a percentage of each NEO's base salary.  Based upon the Peer Group information provided by Pay Governance and the consideration of officer performance and internal equity, the Committee determined that the target and maximum bonus opportunities for the NEOs for 2015 should be the same as in 2014.  The 2015 minimum, maximum and target bonus opportunities together with actual bonuses paid to the NEOs were as follows.

Performance Measures.  Bonus amounts under the AIB Plan were based on the following performance measures:

·

economic profit – defined generally as net operating profit after tax less cost of capital employed as adjusted for certain items, including currency exchange rates and acquisitions/divestitures

 

 

 

 

 

 

·

modified operating cash flow – defined generally as earnings before interest, taxes, depreciation and amortization reduced by capital spending and adjusted for certain items, including changes in year-end trade working capital and variances in average trade working capital

Cost of Capital.  For purposes of calculating economic profit under the AIB Plan, cost of capital was defined as the average capital employed multiplied by the average cost of capital.  Capital employed was generally defined as total assets less non-interest bearing liabilities and is adjusted for certain items.  Excluded from capital employed were the following items: investments, net goodwill and intangibles, pension and post-employment assets and liabilities and deferred tax assets and liabilities.  Invested capital may also be adjusted for additional capital employed at the direction of the Company's corporate office or in accordance with overall corporate objectives. For 2015, the AIB Plan used a cost of capital of 9%, which is higher than the Company's actual cost of capital.

Weighting of Performance Measures.  At the beginning of 2015, the Committee determined target levels of performance for each performance measure.  At year-end, the Committee assessed the actual results versus the original goals in determining awards.  The Committee must approve all awards, and all awards are subject to review and downward discretionary adjustment by the Committee.

An NEO's actual bonus amount was determined by: (i) multiplying the NEO's target bonus amount by the actual percentage earned for each of the two performance measures, (ii) weighting each performance measure in accordance with a pre-specified formula and (iii) adding the results together to determine the overall payout factor.

As the achievement of economic profit and modified operating cash flow increase in excess of their respective performance targets, the percentages of our NEOs' target bonuses payable with respect to such performance measures also increase. In the case of modified operating cash flow, up to 50% of the target bonus amount will be paid as the achievement level increases from 100% to 120% of the performance target. Conversely, the percentage of the target bonus amount payable with respect to modified operating cash flow decreases as achievement falls below 100% of the applicable performance target, with no amount being payable for achievement levels below the threshold of 80% of the applicable performance target. The modified operating cash flow component of the AIB Plan was determined based upon actual performance compared to a budgeted modified operating cash flow amount.

The economic profit component of the AIB Plan was determined by relating current-year economic profit to prior years economic profit, adjusted for currency fluctuations.  In the case of economic profit, up to 250% of the target bonus amount will be paid for incremental increases in economic profit over 100% of the performance target, with no amount being payable for achievement levels below the threshold of 80% of the applicable performance target.  To the extent modified operating cash flow is achieved at levels of less than 120% of the performance target, up to 250% of the target bonus amount can be achieved based on economic profit.  No portion of the target bonus amount will be paid for economic profit arising from accounting changes or similar non-cash items.

Setting of Target Performance Levels.  Generally, the Committee attempts to set the target performance levels so that the relative difficulty of achieving the targets is consistent among the NEOs in any one year and from year to year.  In making this determination the Committee may consider specific circumstances experienced by the Company in prior years or that the Company expects to face in the coming year.  For example, with respect to modified operating cash flow, targets may be set below prior year actual results due to the forecasted increase in capital investment required for the Company's expansion in growth markets, higher input costs due to price increases by suppliers, prior years' actual working capital and variances in average trade working capital.

 

 

 

 

The economic profit and modified operating cash flow thresholds and targets for 2015 were set at the Company level for the CEO, Chief Operating Officer and Chief Financial Officer and at the divisional level for the other NEOs.  The applicable thresholds, targets and actual achievement levels for 2015 are set forth for each NEO in the following table.

2015 Bonus Calculations.  Messrs. Conway, Kelly and Donahue received bonuses under the AIB Plan equal to 240% of their respective target bonus amounts, 50% attributable to modified operating cash flow and 190% to economic profit.  With respect to the European Division, Mr. Gifford received a bonus under the AIB Plan equal to 300% of his target bonus amount, 50% attributable to modified operating cash flow and 250% to economic profit.  With respect to the Asia Pacific Division, Mr. Salaerts received a bonus under the AIB Plan equal to 300% of his target bonus amount, 50% attributable to modified operating cash flow and 250% to economic profit.

Long-Term Equity Incentives.  The Committee believes that equity-based incentives, delivered through annual grants of time-based restricted stock and performance-based restricted stock, are an important link between executive and Shareholder interests.  Because the Committee believes that a significant portion of the benefits realized from long-term equity-based incentive grants should require continuous improvement in value created for the Shareholders, approximately two-thirds of the targeted value of stock awards to NEOs is performance-based.  Although the Committee may vary the size of annual grants based on the Company's and executive's performance, the total annual equity award granted to each NEO is generally determined based upon the difference between the total direct compensation target established by the Committee, using the competitive market benchmarking and internal factors described above, and the sum of the NEO's base salary and annual incentive bonus opportunity.  See "Compensation Strategy for CEO" and "Compensation Strategy for NEOs other than the CEO."  In addition to the annual equity awards, the Committee may approve equity awards for newly hired executives or in recognition of an executive's promotion or expansion of responsibilities.

 

 

 

 

 

Equity awards to NEOs are generally made by the Committee each year in the form of restricted stock as part of the normal annual compensation review cycle.  The awards for a particular year generally occur in January or February.

The Committee approved the following award structure for 2015:

·

Target Award Levels.  Award levels were generally set to deliver target total direct compensation (sum of base salary, annual and long-term equity incentives) in the middle range of the Peer Group after taking into account the competitive positioning of the executives' target total cash compensation.

·

Performance-Based Restricted Stock.  Approximately two-thirds of an NEO's targeted long-term equity incentive was delivered in performance-based restricted stock that may be earned based upon the Company's total shareholder return relative to a group of industry peers over a three-year performance period.  A target number of shares was established for 2015 for each NEO, as set forth in the "Grants of Plan-Based Awards" table below.  Actual vesting of performance-based share awards generally will not occur until the third anniversary of the grant date, if at all.  The Committee believes that, in addition to linking a substantial portion of our NEOs' compensation to the long-term performance of the Company, the three-year vesting structure provides a strong retention element because an NEO terminating employment (other than for retirement with Committee approval, disability or death) will leave behind unvested awards.

·

Time-Based Restricted Stock.  Approximately one-third of an NEO's targeted long-term equity incentive was delivered in time-based restricted stock that vests in equal annual installments over three years from the date of the award in the amounts set forth on the "Grants of Plan-Based Awards" table below.

Industry Peer Group Composition.  The Committee believes that for purposes of comparing shareholder returns it is appropriate to utilize a recognized publicly available index of container and packaging industry companies as the peer group.  As a result, with respect to determining shareholder return for 2015 grants, the Committee will use the Dow Jones "U.S. Containers & Packaging" Index, currently comprising the Company and the following other companies:

_______________________

⁽¹⁾ This company is the result of a merger of Rock-Tenn Company and MeadWestvaco Corporation in 2015.

 

 

 

 

Performance Vesting Schedule.  The Committee determined that performance-based shares would vest based upon the following schedule.

Calculation of Total Shareholder Return and NEO Forfeiture of Performance-Based Shares.  Total shareholder return is calculated by dividing the closing share price of a company's common stock on the ending date of the applicable three-year calendar period plus cumulative dividends during such period, if any, by the closing share price of such company's common stock on the beginning date of the applicable period.

·

As previously disclosed, the Company's total shareholder return for the three-year calendar period ending December 31, 2013 was approximately 34%, putting the Company at the 19th percentile among the companies in the industry peer group at the time of the award and causing the NEOs to forfeit 100% of their performance shares awarded in 2011.

·

The Company's total shareholder return for the three-year calendar period ending December 31, 2014 was approximately 52% based upon the closing price of the Company's Common Stock on such date (i.e., $50.90 per share) compared to the closing price on December 31, 2011 (i.e., $33.58 per share). When compared, however, to the total shareholder return of the other companies in the industry peer group at the time of the 2012 performance-based share award, the Company ranked at the 44th percentile. Therefore, in accordance with the preceding schedule, the performance-based shares vesting in 2015 pursuant to the 2012 grant were vested at the 72% level, and 28% of the award was forfeited.  The number of performance-based shares from the 2012 grant in which each NEO vested in 2015 based on the Company's stock performance for the three-year calendar period ended December 31, 2014 are set forth below in the table entitled Option Exercises and Stock Vested.

·

The Company's total shareholder return for the three-year calendar period ended December 31, 2015 was approximately 38% based upon the closing price of the Company's Common Stock on such date (i.e., $50.70 per share) compared to the closing price on December 31, 2012 (i.e., $36.81 per share). When compared, however, to the total shareholder return of the other companies in the industry peer group at the time of the 2013 performance-based share award, the Company ranked at the 32nd percentile. Therefore, in accordance with the preceding schedule, the performance-based shares vesting in 2016 pursuant to the 2013 grant were vested at the 37% level, and 63% of the award was forfeited.  Performance-based shares from the 2013 grant did not vest until January 2016 and, therefore, will be set forth in the Option Exercises and Stock Vested table in next year's Proxy Statement.

 

 

 

 

 

 

As clearly evidenced by the preceding information, notwithstanding consistent positive shareholder returns over the years 2011 to 2015, the NEOs have forfeited substantial portions of their performance shares consistent with the Company's pay-for-performance philosophy.

2015 Long-Term Equity Incentive Awards.  The following table sets forth the target number of time-based and performance-based restricted shares granted to the NEOs for 2015 as well as the minimum and maximum number of performance-based shares that may vest based on the Company's total shareholder return

relative to the industry peer group over the applicable performance period.  The table also sets forth the fair market value of the shares on the date of grant based on a share price of $49.80 for time-based restricted stock and $51.92 for performance-based restricted stock (based on a Monte Carlo valuation model).

 

Accelerated Vesting of Mr. Conway's Outstanding Equity Awards.  In connection with Mr. Conway's retirement as the Company's Chief Executive Officer, the Board approved the accelerated vesting of all of Mr. Conway's time-based restricted stock awards and the continued vesting of all of his performance-based restricted stock awards, which may or may not vest at the end of the applicable performance periods based on the actual level of achievement of the applicable performance goals.

Retirement Benefits.  To attract and retain highly qualified senior executives and as an incentive for long-term employment, the Company maintains a number of retirement plans.

U.S. Pension Plan.  In the United States, the Company maintains a defined benefit pension plan ("U.S. Pension Plan") for certain eligible employees in which all U.S.-based NEOs participate.  The U.S. Pension Plan is designed and administered to qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code").  The U.S. Pension Plan provides normal retirement benefits at age 65 based on the average of the five highest consecutive years of earnings in the last ten years prior to employment termination.  For purposes of the U.S. Pension Plan, earnings consist of salary excluding any bonus.  These average earnings are multiplied by 1.25% and by years of service, which yields the annual Company-funded pension benefit.  Under U.S. federal law for 2015, benefits from the U.S. Pension Plan are limited to $210,000 per year and may be based only on the first $265,000 of an employee's annual earnings.

 

 

 

Senior Executive Retirement Plan.  Because of the benefit limits under the U.S. Pension Plan described above, the Company provides additional retirement benefits to the NEOs under the Senior Executive Retirement Plan ("SERP").  The annual benefit for executives eligible to participate in the SERP is based upon a formula equal to (i) 2.25% in the case of Mr. Conway and 2.0% in the cases of the other NEOs of the average of the five highest consecutive years of earnings (consisting of salary and bonus, but excluding stock compensation, and determined without regard to the limits imposed on tax-qualified plans) during the last 10 years of employment times years of service up to twenty years plus (ii) 1.67% in the case of Mr. Conway and 1.45% in the cases of the other NEOs of such earnings for the next fifteen years plus (iii) at the discretion of the Committee, 1% of such earnings for years of service beyond thirty-five years less (iv) Social Security old-age benefits (and similar benefits provided in foreign jurisdictions) attributable to employment with the Company and the Company-funded portion of the executive's Pension Plan benefits.  In the case of Mr. Conway, the SERP is reduced by his benefits under the 401(k) Retirement Savings Plan.  In the case of Mr. Salaerts, the SERP is reduced by his benefits under the international defined contribution retirement plan.  In the case of Mr. Gifford, the SERP is reduced by his benefits under the Company's Restoration Plan (as described below).

All benefits earned under the SERP after December 31, 2004 are paid in a lump sum.  If an NEO with a vested retirement benefit under the SERP dies prior to termination of employment, the NEO's surviving spouse will be entitled to a 50% survivor benefit.  The SERP also provides a lump-sum death benefit of five times the annual retirement benefit.

SERP participants vest in their benefits at the earliest of five years of participation, specified retirement dates, total disability or upon a "change in control" of the Company.

Restoration Plan.  Prior to participating in the SERP, Mr. Gifford became a participant in the Company's Restoration Plan.  Participants in the Restoration Plan receive supplemental retirement benefits equal to the difference between (i) the benefits that they would have accrued under the U.S. Pension Plan if their target bonus amounts were included in compensation for purposes of calculating their benefits under that Plan and if certain statutory benefit limits did not apply and (ii) the benefits that they actually accrue under the U.S. Pension Plan.  As described above, the benefits to which Mr. Gifford is entitled under the SERP will be offset by the benefits to which he is entitled under the Restoration Plan.

Defined Contribution Plan.  The Company also maintains a tax-qualified 401(k) Retirement Savings Plan to which all U.S. salaried employees, including all NEOs except Mr. Salaerts, are able to contribute a portion of their salaries on a pre-tax basis.  Subject to certain Code limits, the Company will match 50% of the first 3% of salary that is contributed to this 401(k) plan.  Mr. Salaerts participates in an international defined contribution retirement benefit plan to which he is permitted to make voluntary contributions.  The Company contributed an amount equal to 9% of Mr. Salaerts' base salary and bonus paid during the year to this plan on his behalf.

Perquisites.  The Company provides the NEOs with a limited number of perquisites and other personal benefits that the Committee believes are reasonable and consistent with its overall compensation program to better enable the Company to attract and retain key executives.  An item is a perquisite if it confers a direct or indirect benefit that has a personal aspect, without regard to whether it may be provided for some business reason or for the convenience of the Company, unless it is generally available on a non-discriminatory basis to all employees.  An item is not a perquisite if it is integrally and directly related to the performance of the executive's duties.  In 2015, the NEOs were provided, among others, the following perquisites: automobile allowances, insurance coverage and, in certain cases, overseas allowances.

 

 

 

 

 

Severance.  The Company has employment agreements with all of the NEOs.  In addition to the compensation components listed above, these contracts provide for post-employment severance payments and benefits in the event of employment termination under certain circumstances.  For more information regarding these potential severance payments and benefits, see "Employment Agreements and Potential Payments upon Termination."  The Committee believes that these contracts provide an incentive to the NEOs to remain with the Company and serve to align the interests of the NEOs and Shareholders, including in the event of a potential acquisition of the Company.

Tax Deductibility of Executive Compensation.  Compensation paid to our CEO and to each of our three highest paid NEOs other than our Chief Financial Officer will not be deductible for federal income tax purposes to the extent such compensation exceeds $1 million in any year unless such compensation is "performance-based" as defined in Section 162(m) of the Code.  The Committee has structured performance-based awards to the NEOs under the Company's long-term equity compensation program that qualify for this exemption. In addition, under the AIB Plan, the Committee has structured annual incentive bonuses that also qualify for this exemption.  However, the Committee believes that Shareholder interests are best served if its discretion and flexibility in awarding compensation is not restricted, even though some compensation awards result in non-deductible compensation expenses. Therefore, the Committee intends to maintain flexibility to pay compensation that is not entirely deductible when sound direction of the Company would make that advisable.

 

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with the Company's management.  Based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

This report is respectfully submitted on February 24, 2016 by the members of the Compensation Committee.

Hans Löliger, Chairperson Arnold Donald William Little Jim Turner

 

 

 

 

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table lists certain information regarding compensation earned during the Company's last three fiscal years by the Company's Chief Executive Officer, Chief Financial Officer and other three Executive Officers who were the highest paid during 2015.

(1)

The amounts in this column, computed in accordance with current Financial Accounting Standard Board guidance for accounting for and reporting of stock-based compensation, represent the aggregate grant-date fair value of time-based restricted stock and performance-based restricted stock (market condition) awards issued by the Company for the respective fiscal years.  The aggregate grant-date fair market values of the time-based restricted stock awards were as follows:  Mr. Conway: $1,979,600 for 2015, $1,979,597 for 2014 and $1,373,140 for 2013; Mr. Kelly: $299,198 for 2015, $271,992 for 2014 and $255,017 for 2013; Mr. Donahue: $537,491 for 2015, $512,516 for 2014 and $512,510 for 2013; Mr. Gifford:  $420,013 for 2015, $399,678 for 2014 and $367,692 for 2013; and Mr. Salaerts: $223,453 for 2015, $212,736 for 2014 and $212,740 for 2013.  The aggregate grant-date fair market values of the performance-based restricted stock, assuming instead that the highest level of performance conditions were to be achieved, would be as follows:  Mr. Conway: $7,594,998 for 2015, $7,264,314 for 2014 and $9,641,145 for 2013; Mr. Kelly:  $1,147,890 for 2015, $998,175 for 2014 and $1,073,602 for 2013; Mr. Donahue: $2,062,218 for 2015, $1,880,314 for 2014 and $2,157,648 for 2013; Mr. Gifford: $1,611,428 for 2015, $1,466,637 for 2014 and $1,548,051 for 2013; and Mr. Salaerts: $857,257 for 2015, $780,652 for 2014 and $895,674 for 2013.  If the minimum level of performance conditions were not to be achieved, the value of the performance-based restricted stock awards would be $0 in all cases.  Further detail surrounding the shares awarded, the method of valuation and the assumptions made are set forth in Note P, "Stock-Based Compensation" to the financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015.  There can be no assurance that the amounts related to performance-based shares will ever be realized by the NEOs.

 

 

 

 

 

 

(2)

The amounts in this column reflect the increase in actuarial present value of defined benefit retirement plans, including supplemental plans, for the respective fiscal years.  Actuarial valuations were based on assumptions that were in accordance with the guidelines of FASB ASC Topic 715 and that are discussed in Note U, "Pensions and Other Postretirement Benefits" to the financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015.  The change in value represents the difference between the highest value disclosed for such benefit in prior years and the value of such benefit at the end of the reporting year.  In 2011, Mr. Conway irrevocably waived his rights to retirement benefits under the Senior Executive Retirement Plan that exceed $32 million.

(3)	The amounts in this column for 2015 include the following items:

*	Life Insurance includes insurance premiums for Mr. Conway under a split-dollar life insurance agreement.

**

Third Country National Expat Benefits include insurance for Mr. Salaerts and, for Mr. Gifford, include $566,639 of tax equalization payments as well as other payments in accordance with the Company's Third Country National Expat Benefits policy, designed to facilitate employees' relocation overseas and to compensate for higher cost-of-living expenses and income taxes over and above those that the relocated employees would have incurred had they remained in their home countries.

(4)	Mr. Conway retired as the Company's Chief Executive Officer effective January 1, 2016.  Mr. Donahue succeeded Mr. Conway as Chief Executive Officer effective January 1, 2016.

(5)	Mr. Salaerts' non-equity compensation for 2015 set forth in the table above has been converted from Singapore Dollars into U.S. Dollars at the December 31, 2015 closing exchange rate of approximately $0.7052.

 

 

 

 

 

Grants of Plan-Based Awards

The following table provides information about the annual incentive bonuses that the Company's NEOs were eligible to receive in 2015 under the Company's Annual Incentive Bonus Plan and stock-based awards granted in 2015 to each of the Company's NEOs under the Company's 2013 Stock-Based Incentive Compensation Plan.  There can be no assurance that the fair value of the performance-based stock awarded to the Company's NEOs in 2015 will ever be realized by the NEOs.  For further information and the assumptions made in determining the grant-date fair values of the stock awards, see "Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies" and Notes A and P to the Company's financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

(1)

These amounts represent the range of annual non-equity incentive bonuses for which the NEOs were eligible in 2015 under the Company's AIB Plan.  For further information relating to the AIB Plan, see "Compensation Discussion and Analysis – Annual Incentive Bonus."  For information regarding the actual value of awards earned under the AIB Plan for 2015, see the Summary Compensation Table above.

(2)

These amounts represent the range of stock-based compensation that might be realized under the 2015 performance-based restricted stock awards.  The potential payouts are based on performance and are therefore at risk. The performance measures are based upon the Company's total shareholder return ("TSR") versus the TSR of a defined peer group of companies that are described in "Compensation Discussion and Analysis – Long-Term Equity Incentives" above.  The vesting of the performance-based shares from the 2015 award will occur in January 2018, with the actual number of shares vesting dependent upon the Company's TSR compared to that of the peer group.  For further details, refer to Note P, "Stock-Based Compensation" to the Company's financial statements in its Annual Report on Form 10-K for the fiscal year ended December 31, 2015.  Rights to the performance-based shares are not forfeited upon death or disability and remain subject to attainment of the performance goal.  Performance-based shares may not be forfeited upon retirement at the discretion of the Committee and, if not forfeited, remain subject to attainment of the performance goal.  Performance-based shares vest upon a "change in control" of the Company based upon the Company's TSR as compared to that of the peer group at the time of the "change in control."

(3)

These amounts represent time-based restricted stock awarded in 2015.  Time-based restricted stock vests annually over three years from the date of the award.  If a participant terminates employment due to retirement with Committee approval, disability or death, or upon a "change in control" of the Company, vesting of the award accelerates.

 

 

 

 

 

(4)

These amounts represent the grant-date fair value of time-based restricted stock and performance-based restricted stock awarded in 2015.  The grant-date fair value of the time-based restricted stock is the $49.80 per share closing price of the Company's Common Stock on the date of the award.  The grant-date fair value of the performance-based shares is $51.92 and is based on a Monte Carlo valuation model.  The Committee has determined that approximately two-thirds of the targeted value of stock awards to NEOs should be performance-based.  In order for the Company in 2015 to deliver two-thirds of the value of an NEO's targeted long-term equity incentive in performance-based restricted stock, somewhat more than one-third of the total number of shares granted were time-based restricted shares, and somewhat less than two-thirds were performance-based restricted shares because the prescribed valuation methods under FASB ASC Topic 718 result in higher per unit values for performance-based restricted stock than for time-based restricted stock. Further details regarding these shares, the method of valuation and the assumptions made are set forth in Note P, "Stock-Based Compensation" to the financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

(5)

Represents grant to Mr. Conway of 116,006 shares of stock-based compensation under the 2013 Stock-Based Incentive Compensation Plan.  Time-based restricted stock totaling 39,751 shares vests over a three-year period as follows: 13,251 shares on January 6, 2016 and 13,250 shares on January 6, 2017 and 2018. The remaining 76,255 shares of performance-based restricted stock vest on January 6, 2018 based on the Company's TSR versus the TSR of a defined peer group of companies, with the final number of performance-based shares actually vesting varying from 0 to 152,510.

(6)

Represents grant to Mr. Kelly of 17,533 shares of stock-based compensation under the 2013 Stock-Based Incentive Compensation Plan.  Time-based restricted stock totaling 6,008 shares vests over a three-year period as follows:  2,003 shares on January 6, 2016 and 2017 and 2,002 shares on January 6, 2018.  The remaining 11,525 shares of performance-based restricted stock vest on January 6, 2018 based on the Company's TSR versus the TSR of a defined peer group of companies, with the final number of performance-based shares actually vesting varying from 0 to 23,050.

(7)

Represents grant to Mr. Donahue of 31,498 shares of stock-based compensation under the 2013 Stock-Based Incentive Compensation Plan.  Time-based restricted stock totaling 10,793 shares vests over a three-year period as follows:  3,598 shares on January 6, 2016 and 2017 and 3,597 shares on January 6, 2018.  The remaining 20,705 shares of performance-based restricted stock vest on January 6, 2018 based on the Company's TSR versus the TSR of a defined peer group of companies, with the final number of performance-based shares actually vesting varying from 0 to 41,410.

(8)

Represents grant to Mr. Gifford of 24,613 shares of stock-based compensation under the 2013 Stock-Based Incentive Compensation Plan.  Time-based restricted stock totaling 8,434 shares vests over a three-year period as follows:  2,812 shares on January 6, 2016 and 2,811 shares on January 6, 2017 and 2018.  The remaining 16,179 shares of performance-based restricted stock vest on January 6, 2018 based on the Company's TSR versus the TSR of a defined peer group of companies, with the final number of performance-based shares actually vesting varying from 0 to 32,358.

(9)

Represents grant to Mr. Salaerts of 13,094 shares of stock-based compensation under the 2013 Stock-Based Incentive Compensation Plan.  Time-based restricted stock totaling 4,487 shares vest over a three-year period as follows:  1,496 shares on January 6, 2016 and 2017 and 1,495 shares on January 6, 2018.  The remaining 8,607 shares of performance-based restricted stock vest on January 6, 2018 based on the Company's TSR versus the TSR of a defined peer group of companies, with the final number of performance-based shares actually vesting varying from 0 to 17,214.

 

 

 

 

 

Outstanding Equity Awards at Fiscal Year-End

The following table shows the number of shares covered by exercisable and unexercisable options (under "Option Awards") and unvested time-based restricted Common Stock and unvested performance-based restricted Common Stock (under "Stock Awards") held by the Company's NEOs on December 31, 2015.  These outstanding equity awards have been granted to the Company's NEOs under the Company's 2006 and 2013 stock-based incentive compensation plans.

(1)	Mr. Gifford's unvested option awards reported under this column vest in equal tranches of 6,000 shares on May 25, 2016 and 2017.

(2)

These amounts represent outstanding unvested time-based restricted stock awards.  Time-based restricted stock vests annually over three years from the date of the award.  Accordingly, with respect to awards made in 2013, the remaining one-third vested on February 28, 2016; with respect to awards made in 2014, the second one-third vested on January 3, 2016 and the final one-third will vest on January 3, 2017; and with respect to awards made in 2015, the first one-third vested on January 6, 2016, the second one-third will vest on January 6, 2017 and the final one-third will vest on January 6, 2018.  If a participant terminates employment due to retirement with Committee approval, disability or death, or upon a "change in control" of the Company, vesting of the unvested time-based restricted stock awards accelerates to the date of termination.

(3)	Computed as of December 31, 2015.  The closing price of the Company's Common Stock on December 31, 2015 was $50.70.

 

 

 

 

 

 

(4)

These amounts represent outstanding unvested performance-based restricted stock at target levels.  The range of shares to be received is 0 to 200% of the target based on the levels of performance achieved under the 2013 award from January 1, 2013 to December 31, 2015, under the 2014 award from January 1, 2014 to December 31, 2016, and under the 2015 award from January 1, 2015 to December 31, 2017.  The number reported does not include any additional shares that may be awarded based upon the Company's performance but does include shares that may be forfeited based on the Company's performance.  The vesting date for the performance-based shares awarded in 2013 was February 28, 2016.  For information relating to the 2016 performance-based share vesting, see "Compensation Discussion and Analysis – Long-Term Equity Incentives."  Rights to the performance-based shares are not forfeited upon death or disability and remain subject to attainment of the performance goal.  Performance-based shares may not be forfeited upon retirement at the discretion of the Committee and, if not forfeited, remain subject to attainment of the performance goal.  Performance-based shares vest upon a "change in control" of the Company based upon the Company's TSR as compared to that of the peer group at the time of the "change in control."

 

 

 

 

 

Option Exercises and Stock Vested

The following table shows the number of shares of the Company's Common Stock acquired and the actual value received during 2015 upon the exercise of stock options or vesting of stock awards.

(1)

The amounts in this column calculate the aggregate dollar amount realized upon exercise by multiplying the number of shares subject to outstanding options times the difference between the market price of the underlying Company Common Stock at the date of exercise and the exercise price of such options.

(2)

Amounts in this column include both time-based restricted and performance-based stock that vested in 2015.  Vested shares included in this column include 82,747 performance-based shares for Mr. Conway, 14,022 performance-based shares for Mr. Donahue, 6,902 performance-based shares for Mr. Gifford and 7,319 performance-based shares for Mr. Salaerts. For further information relating to the vesting of performance-based share awards, see "Compensation Discussion and Analysis – Long-Term Equity Incentives."

(3)	The amounts in this column are the aggregate dollar amount realized upon vesting, calculated by multiplying the number of shares of stock times the market value of the Company Common Stock at the date of vesting.

 

 

 

 

Pension Benefits

The following table shows estimated benefits payable upon retirement to the NEOs under the Company's U.S. Pension Plan and Senior Executive Retirement and Restoration Plans, the pension benefits plans maintained by the Company in which the NEOs participate.

(1)

The U.S. Pension Plan in which the NEOs (other than Mr. Salaerts) participate is designed and administered to qualify under Section 401(a) of the Code.  Mr. Salaerts participates in an international defined contribution retirement benefit plan.  For further information, see "Compensation Discussion and Analysis – Retirement Benefits."

(2)

The annual benefit for the NEOs under the SERP is based upon a formula equal to (i) 2.25% in the case of Mr. Conway and 2.0% in the cases of the other NEOs of the average of the five highest consecutive years of earnings during the last 10 years of service (consisting of salary and bonus, but excluding stock compensation, and determined without regard to the limits imposed on tax qualified plans) times years of service up to twenty years plus (ii) 1.67% in the case of Mr. Conway and 1.45% in the cases of the other NEOs of such earnings for the next fifteen years plus (iii) at the discretion of the Compensation Committee, 1% of such earnings for years of service beyond thirty-five years less (iv) Social Security old-age benefits (and similar benefits provided in foreign jurisdictions) attributable to employment with the Company and the Company-funded portion of the executive's Pension Plan benefits.  In the case of Mr. Conway, the SERP is also reduced by his employer-provided benefits under the 401(k) Retirement Savings Plan, without regard to ESOP or Profit Sharing amounts.  In the case of Mr. Salaerts, the SERP is also reduced by his employer-provided benefits under the international defined contribution retirement plan, without regard to ESOP or Profit Sharing amounts. In the case of Mr. Gifford, the SERP is also reduced by his benefits under the Restoration Plan.  For further information, see "Compensation Discussion and Analysis – Retirement Benefits."

(3)	Years of service are rounded to the nearest full year.

(4)

The calculation of the present value is based on assumptions that were in accordance with the guidelines of FASB ASC Topic 715 and that are discussed in Note U, "Pensions and Other Postretirement Benefits" to the financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

(5)	All of the benefits are vested with respect to the NEOs with exception of the SERP benefits for Messrs. Kelly and Gifford.  Mr. Gifford is vested in his Restoration Plan benefits.

(6)	Mr. Conway has irrevocably waived his right to any lump-sum retirement benefit under the SERP in excess of $32 million.

(7)

The annual supplemental retirement benefit for Mr. Gifford under the Restoration Plan is equal to the difference between (i) the annual benefit he would have accrued under the U.S. Pension Plan if his target bonus amount were included in compensation for purposes of calculating his benefit under such Plan and if certain statutory limitations on benefit accrual did not apply and (ii) the annual benefit he actually accrued under the U.S. Pension Plan.

 

 

 

 

 

 

Employment Agreements and Potential Payments Upon Termination

The Company has employment agreements with all of its NEOs.¹  In addition to the compensation and benefits described above, these contracts provide for certain post-employment severance payments in the event of employment termination under certain circumstances.  The Committee believes that these contracts provide an incentive to the NEOs to remain with the Company and serve to align the interests of the NEOs and Shareholders, including in the event of a potential acquisition of the Company.  In the case of Mr. Donahue, the following description is based upon his new employment agreement with the Company, dated as of December 30, 2015, which Mr. Donahue and the Company entered into in connection with his appointment as the Company's Chief Executive Officer effective January 1, 2016.

Under their employment agreements, Messrs. Conway and Donahue have agreed that, during their employment and for two years thereafter, they shall not compete with the Company or solicit Company employees to terminate employment with the Company.  Messrs. Kelly, Gifford and Salaerts are subject to a similar non-competition provision that is limited to a one-year post-employment period prior to a change in control and two years following a change in control.

Under the agreements for all the NEOs, if an executive's employment is terminated because of a voluntary termination (including retirement) or death, the Company will pay the executive (or his estate, if applicable) his base salary through the date of termination, a pro-rated target (but, for Mr. Donahue, and in the case of a voluntary termination (including retirement) only for Mr. Kelly, a pro-rated actual) bonus payment and any vested retirement, incentive or other benefits.  In the case of a termination of employment due to a disability, each of Messrs. Kelly, Gifford and Salaerts will also be entitled to an annual disability benefit equal to 75% of his base salary and a pro-rated target bonus, and Mr. Donahue will also be entitled to an annual disability benefit equal to 100% of his base salary plus a bonus equal to the average annual bonus paid or payable to him for the three most recently completed years.  If the employment of any of the NEOs is terminated for "Cause," the Company will pay to the executive only the base salary owed through his date of termination and his vested retirement, incentive or other benefits.

Under the agreement for Mr. Donahue, if the employment of the executive is terminated by the Company without Cause or by the executive for "Good Reason" other than within the 12-month period following a "Change in Control," in addition to the executive's base salary through the date of termination, the Company will pay to the executive (i) a pro-rated actual bonus payment and (ii) a lump-sum payment equal to three times the sum of the executive's base salary and his target bonus for the year of termination.  Under the agreements for Messrs. Kelly, Gifford and Salaerts, upon the termination of the executive's employment by the Company without Cause other than within the 12-month period following a Change in Control, the Company will pay to the executive (i) his base salary through the date of termination, (ii) a pro-rated target (but, for Mr. Kelly, a pro-rated actual) bonus payment and (iii) a lump-sum payment equal to the executive's annual base salary.  In all such cases, the Company will also pay to the executive any vested retirement, incentive or other benefits.

Under the agreements for Messrs. Kelly, Donahue, Gifford and Salaerts, if the executive's employment is terminated by the Company without Cause or by the executive for Good Reason, during the 12-month period following a Change in Control, the Company will pay to such executive (i) his base salary through the date of termination plus, (ii) a lump-sum payment equal to three times the sum of the executive's base salary and his average bonus over the three completed years prior to the year of termination. In addition, all stock options and time-based and performance-based restricted stock granted to such executives by the Company will become fully vested and, in the case of stock options, immediately exercisable. In all such cases, the Company will also pay to the executive any vested retirement, incentive or other benefits. Except in the case of Mr. Salaerts, to the extent that the executive would be subject to the excise tax under Code Section 4999 on the amounts and benefits received on a Change in Control for purposes of Code Section 280G, either (i) such amounts and benefits will be reduced or delayed by the minimum amount necessary such that no portion of the amount or benefits is subject to the excise tax or (ii) the full amount and benefits shall be paid, whichever, after taking into account all applicable taxes, including the excise tax, results in the executive's receipt, or an after-tax basis, of the greater amount and benefits.

¹ Mr. Conway retired effective January 1, 2016, so only his continuing non-competition obligations are summarized.

 

 

 

 

The following table provides estimates of the potential severance and other post-termination benefits each NEO would receive assuming his employment was terminated as of December 31, 2015.

 

 

 

 

 

 

(1)

The vesting of time-based and performance-based restricted stock awards accelerates upon (i) termination for retirement with Committee approval, death or disability or (ii) termination without Cause or resignation for Good Reason after a Change in Control.  In the case of acceleration due to retirement, disability or death, the performance-based shares remain outstanding until the performance period ends.  Accordingly, no performance share compensation has been provided for terminations upon retirement, disability or death because payout cannot be assured.  In the case of Mr. Conway, whose retirement was effective January 1, 2016, acceleration of vesting because of his retirement has been approved by the Committee.  For termination after a Change in Control, the target level of performance share compensation has been included.  For further details, refer to the Outstanding Equity Awards at Fiscal Year-End table above and Note P, "Stock-Based Compensation" to the Company's financial statements in its Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

(2)	The additional health care coverage set forth in the first column of this row relates to retirement. Coverage related to disability would be valued at $310,585 for Mr. Conway.

(3)

The amount included in the table for Mr. Kelly is his actual bonus, which he would have received if his employment had terminated on December 31, 2015 due to his retirement.  If Mr. Kelly's employment had terminated on December 31, 2015 due to his Disability or death, he would have received a payment equal to his 2015 target bonus and the amount set forth above would have been $316,800.

(4)

The accelerated stock option vesting amount for Mr. Gifford represents the difference between the closing stock price of $50.70 at December 31, 2015 and the exercise price on the grant date, May 25, 2011, multiplied by the number of unvested shares subject to outstanding options as of December 31, 2015.

 

 

 

 

 

 

PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The firm of PricewaterhouseCoopers LLP, an independent registered public accounting firm, was the independent auditor for the most recently completed fiscal year.  The Audit Committee has appointed PricewaterhouseCoopers as independent auditors to audit and report on the Company's financial statements for 2016.  PricewaterhouseCoopers performs annual audits of the Company's financial statements and assists the Company in the preparation of various tax returns around the world.  A representative or representatives of PricewaterhouseCoopers are expected to be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so.  Such representatives are also expected to be available to respond to questions raised orally at the Annual Meeting or submitted in writing to the Office of the Secretary of the Company before the Annual Meeting.

The Audit Committee reviewed the fees of PricewaterhouseCoopers for the fiscal years ended December 31, 2015 and December 31, 2014.  The Company paid fees in the following categories.  (1) Audit Fees were for professional services rendered for the audits of effectiveness of the internal control over financial reporting and consolidated financial statements of the Company, including the U.S. integrated financial statement and internal controls audit, statutory audits, issuance of comfort letters, consents and assistance with and review of documents filed with the SEC.  (2) Audit-Related Fees include fees for due diligence in connection with mergers and acquisitions and other assurance related services performed in connection with statutory requirements in various countries.  (3) Tax Compliance Fees were for services rendered for tax compliance, including the preparation of tax returns and claims for refunds.  (4) Tax Advisory Services Fees were for tax planning and advice.  (5) All Other Fees were for services rendered for assistance provided primarily to non-U.S. subsidiaries.  The amount of fees for each category in 2015 and 2014 are set forth below.

All of the services described above were approved by the Audit Committee.  The Audit Committee also evaluated whether the non-audit fees paid to PricewaterhouseCoopers are compatible with maintaining their independence as auditors.  The Audit Committee reviews each year the level of Audit and Audit Related Fees in relation to all other fees paid to the independent auditors.  In carrying out this responsibility, the Audit Committee may obtain input from Company management on the general level of fees.  The Audit Committee pre-approves all audit and permitted non-audit services, and related fees, to be performed by its independent auditors.  In addition to the Audit Committee's annual pre-approval, under the Audit Committee Charter, the Chairperson of the Audit Committee has the authority to review and approve other services that may arise during the year with proposed fees up to $250,000 per transaction and reports back any such approvals to the full Audit Committee.  Pursuant to this authority, during 2015 the Chairperson reviewed and approved services with fees totaling less than $45,000 in the aggregate.

 

 

 

 

 

 

AUDIT COMMITTEE REPORT

 

The Audit Committee provides assistance to the Board of Directors by its oversight of the financial accounting practices and the internal controls of the Company and represents the Board in connection with the services rendered by the Company's independent auditors, who report directly to the Audit Committee.

In fulfilling its responsibilities, the Audit Committee has reviewed and discussed with the Company's management and its independent auditors the audited financial statements for the fiscal year ended December 31, 2015 and the Company's system of internal controls and its effectiveness.  Management is responsible for the financial statements and the reporting process, including the system of internal controls, and has represented to the Audit Committee that such financial statements were prepared in accordance with generally accepted accounting principles.  The Company's independent auditors, PricewaterhouseCoopers LLP, are responsible for expressing an opinion as to whether the financial statements fairly present in all material respects the financial position, results of operations and cash flows of the Company in accordance with generally accepted accounting principles in the United States.  PricewaterhouseCoopers has informed the Audit Committee that they have given such an opinion with respect to the audited financial statements for the fiscal year ended December 31, 2015.

The Audit Committee discussed with the independent auditors the matters required to be discussed under the rules adopted by the Public Company Accounting Oversight Board ("PCAOB"). In addition, the Audit Committee discussed with the independent auditors the auditors' independence from the Company and its management, including the matters in the written disclosures and letter which were received by the Audit Committee from the independent auditors as required by applicable requirements of the PCAOB regarding the independent auditors' communications with the Audit Committee regarding independence.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

This report is respectfully submitted on February 24, 2016 by the members of the Audit Committee.

Jenne Britell, Chairperson Josef Müller Thomas Ralph Caesar Sweitzer William Urkiel

 

 

 

 

PROPOSAL 2:  RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

 

The Audit Committee has appointed the firm of PricewaterhouseCoopers LLP, an independent registered public accounting firm, as independent auditors to audit and report on the Company's financial statements for 2016.

Although the submission to Shareholders of the appointment of PricewaterhouseCoopers is not required by law or the Company's By-Laws, the Audit Committee believes it is appropriate to submit this matter to Shareholders to allow a forum for Shareholders to express their views with regard to the Audit Committee's selection.  In the event Shareholders do not ratify the appointment, the Audit Committee may reconsider the appointment of PricewaterhouseCoopers.

The Board of Directors Recommends a Vote FOR the Ratification of the

Appointment of PricewaterhouseCoopers LLP as Independent Auditors.

 

 

 

 

 

PROPOSAL 3:  ADVISORY VOTE ON EXECUTIVE COMPENSATION

At the Annual Meeting, the Company will conduct a non-binding advisory Shareholder vote on executive compensation, commonly referred to as "say-on-pay."  The Company currently conducts advisory votes on executive compensation on an annual basis, and it expects to conduct the next advisory vote at the Company's 2017 Annual Meeting of Shareholders.

The Board of Directors encourages Shareholders, in deciding whether to vote in favor of the advisory resolution below, to review the Compensation Discussion and Analysis section of this Proxy Statement, including the tables and related narrative, for details regarding the Company's executive compensation program and 2015 compensation of Named Executive Officers.

The Board of Directors believes that the executive compensation program aligns the compensation of the Company's executive management with the long-term interests of Shareholders.  To align these interests, the Company compensates executive management with time-based and performance-based restricted stock and also ties a significant portion of executive cash compensation to performance-based metrics that drive Shareholder value.

RESOLVED, that the Shareholders approve, on an advisory basis, the compensation of the Company's Named Executive Officers, as disclosed in the Compensation Discussion and Analysis, the compensation tables and the related disclosure contained in the Company's Proxy Statement for its 2016 Annual Meeting.

Although the vote is non-binding, the Board of Directors and the Compensation Committee expect to take into account the outcome of the vote when considering future executive compensation.

The Board of Directors Recommends an Advisory Vote FOR the Approval

 of this Resolution on Executive Compensation.

 

 

 

 

 

OTHER MATTERS

The Board of Directors knows of no other matter that may be presented for Shareholder action at the Annual Meeting, but if other matters do properly come before the Annual Meeting, or if any of the persons named above to serve as Directors are unable or decline to serve, it is intended that the persons named in the Proxy or their substitutes will vote on such matters and for other nominees in accordance with their best judgment.

 

 

 

The Board of Directors Recommends a Vote FOR Items 1 through 3.

1.	Election of	01 Jenne K. Britell	05 William G. Little	09 Thomas A. Ralph	□	Vote FOR	□	Vote WITHHELD
	directors:	02 John W. Conway	06 Hans J. Löliger	10 Caesar F. Sweitzer		all nominees		from all nominees
		03 Timothy J. Donahue	07 James H. Miller	11 Jim L. Turner		(except as marked)
		04 Arnold W. Donald	08 Josef M. Müller	12  William S. Urkiel

 

 

Instructions: To withhold authority to vote for any indicated nominee(s), write the number(s) of the nominee(s) in the box provided to the right.
2.	Ratification of the appointment of independent auditors for the fiscal year ending December 31, 2016.		□	For	□	Against	□	Abstain
3.	Approval, by non-binding advisory vote, of the resolution on executive compensation as described in the Proxy Statement.		□	For	□	Against	□	Abstain

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR

ITEMS 1 THROUGH 3.