Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
Filed by the Registrant
[X] |
Filed by a Party other than
the Registrant [ ] |
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Check the appropriate
box: |
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Preliminary Proxy
Statement |
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Confidential, for Use of the
Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy
Statement |
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Definitive Additional
Materials |
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Soliciting Material Pursuant to §240.14a-12 |
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Deere and Company |
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Specified In Its Charter) |
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of Person(s) Filing Proxy Statement, if other than the
Registrant) |
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the appropriate box): |
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table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or
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Table of Contents
Notice of 2016
Annual Meeting and Proxy Statement |
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Table of Contents
Notice of 2016 Annual Meeting of
Stockholders
Date: |
Wednesday, February 24, 2016 |
Time: |
10 a.m. Central Standard Time |
Place: |
Deere & Company World Headquarters |
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One John Deere Place, Moline, Illinois
61265 |
At the 2016 Annual Meeting of Stockholders
(the Annual Meeting), stockholders will be asked to:
1. |
Elect the eleven director
nominees named in the Proxy Statement (see page 4) |
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2. |
Approve the compensation of the
Companys named executives on an advisory basis (say-on-pay)
(see page 21) |
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3. |
Ratify the appointment of
Deloitte & Touche LLP as Deeres independent registered public
accounting firm for fiscal 2016 (see
page 61) |
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4. |
Vote on three stockholder
proposals, if properly presented at the meeting (see pages 63 to 68) |
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5. |
Consider any other business
properly brought before the meeting |
You may vote at the Annual Meeting if you
were a Deere stockholder of record at the close of business on December 31,
2015.
YOUR VOTE IS VERY IMPORTANT. We urge
all stockholders to vote on the matters described in the accompanying Proxy
Statement as soon as possible, whether or not they attend the Annual
Meeting. Please refer to the section
beginning on page 1 of the Proxy Statement entitled Voting and Meeting Information for
information about voting by mail, telephone, internet, or in person at the
Annual Meeting.
Along with the accompanying Proxy
Statement, we are also sending you our Annual Report, which includes our fiscal
2015 financial statements. Most stockholders can elect to view future proxy
statements and annual reports via the internet instead of receiving paper copies
in the mail. Please refer to your proxy card and the section entitled
Electronic Delivery of Proxy Statement and
Annual Report on page 3 of the Proxy
Statement for further information.
For the Board of Directors,
Todd E. Davies
Secretary
Moline, Illinois
January 13,
2016
REVIEW YOUR PROXY STATEMENT AND VOTE IN
ONE OF FOUR WAYS: |
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VIA THE
INTERNET Visit the website
listed on your proxy card |
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BY MAIL Sign, date, and return your proxy card in the enclosed
envelope |
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BY TELEPHONE Call the telephone number on your proxy
card |
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IN PERSON Attend the Annual Meeting and vote in
person |
Table of Contents
Proxy Statement Summary
This summary highlights selected
information contained in this Proxy Statement. It does not contain all the
information you should consider. Therefore, we urge you to carefully read the
Proxy Statement in its entirety prior to voting. For additional information,
please review the Companys Annual Report on Form 10-K for the fiscal year ended
October 31, 2015.
Meeting Agenda and Voting
Recommendations
Item |
Voting
Standard |
Vote
Recommendation |
Page
Reference |
1 |
Annual Election of Directors |
Majority of votes cast |
FOR each nominee |
4 |
2 |
Advisory
Vote on Executive Compensation |
Majority of
votes present in person or by proxy |
FOR |
21 |
3 |
Ratification of Independent Registered Public Accounting
Firm |
Majority of votes present in person or by proxy |
FOR |
61 |
4 |
Stockholder Proposals |
Majority
of votes present in person or by proxy |
AGAINST each proposal |
63 to 68 |
Director Nominees
You are being asked to vote on the
election of these 11 directors. Each member of our Board of Directors is elected
annually by majority vote. All directors other than Mr. Allen are independent.
The committee memberships described below reflect the new committee structure
and composition approved by the Board of Directors in January 2016, which will
become effective in February 2016 (see page
12).
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Committee Memberships* |
Name |
Age |
Director Since |
Primary Occupation |
Independent? |
E |
ARC |
CC |
CG |
FIN |
Samuel R.
Allen |
62 |
2009 |
Chairman and CEO,
Deere & Company |
No |
C |
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Crandall C. Bowles |
68 |
1990-1994; since
1999 |
Director, The Springs
Company |
Yes |
X |
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X |
C |
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Vance D.
Coffman |
71 |
2004 |
Retired Chairman,
Lockheed Martin |
Yes |
X |
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C |
X |
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Dipak C. Jain |
58 |
2002 |
Director, Sasin Graduate
Institute of Business Administration |
Yes |
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X |
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X |
Michael O.
Johanns |
65 |
2015 |
Retired United
States Senator from Nebraska |
Yes |
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X |
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X |
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Clayton M.
Jones |
66 |
2007 |
Retired Chairman,
Rockwell Collins |
Yes |
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X |
X |
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Brian M.
Krzanich |
55 |
2016 |
CEO,
Intel |
Yes |
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X |
X |
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Gregory R.
Page |
64 |
2013 |
Executive
Director, Cargill |
Yes |
X |
X |
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C |
Sherry M.
Smith |
54 |
2011 |
Former Executive
VP and CFO, Supervalu |
Yes |
X |
C |
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X |
Dmitri L.
Stockton |
51 |
2015 |
Chairman,
President, and CEO, GE Asset Management, and Senior VP, GE |
Yes |
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X |
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X |
Sheila G.
Talton |
63 |
2015 |
President and
CEO, Gray Matter Analytics |
Yes |
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X |
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X |
*E = Executive; ARC = Audit Review; CC =
Compensation; CG = Corporate Governance; FIN = Finance
X = Member; C =
Chair
Table of Contents
Governance and Compensation
Changes
One thing we have learned in our 175+
years of existence is the importance of change, which is why we strive to assess
everything we do to see how we can do it better. What is true for manufacturing
processes and product innovation is also true for corporate governance and
compensation plans. Below is a summary of changes in these areas we have made
since our last annual meeting:
CORPORATE GOVERNANCE |
●We elected three new directors in
anticipation of the scheduled retirements of four current directors who will be
leaving the Board effective with the Annual Meeting ●Our Board approved changes
to its committee structure by dissolving the Pension Plan Oversight Committee
and creating a new Finance Committee; these changes will become effective in
February 2016 ●As approved by stockholders at our 2015 annual meeting, we amended
our Bylaws to permit holders of 25% or more of our common stock to call special
meetings of stockholders |
COMPENSATION |
●We significantly raised the performance
goals for our short-term incentive plan for 2016 to reflect enduring structural
changes in the operating capabilities of our equipment businesses ●We changed the
investment options under our Defined Contribution Restoration Plan, effectively
eliminating the ability of participants to achieve above-market returns on new
deferrals ●We enhanced the disclosure in the Proxy Statement relating to the
Companys short-term and mid-term incentive plans to, among other things,
further highlight the connection between the performance metrics used in these
plans and the Companys business strategy |
Corporate Governance Highlights
At Deere, we recognize corporate
governance as a vital component of creating long-term stockholder value. That is
why we are committed to sound governance practices, including the
following:
INDEPENDENCE |
BEST
PRACTICES |
●10 of our 11
director nominees are independent
●Independent
Presiding Director has strong role with significant governance
responsibilities
●All Board committees
that meet regularly are composed wholly of independent
directors
●Independent
directors meet regularly in executive session without management
present |
●Directors may not
stand for reelection after their 72nd birthdays absent Board
approval under rare circumstances
●Recoupment policy
for executive incentive compensation
●Stock ownership
requirements for directors and executives that are reviewed
annually
●Anti-hedging and
anti-pledging policies |
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ACCOUNTABILITY |
RISK OVERSIGHT |
●Annual election of
all directors
●Majority voting in
uncontested elections
●Annual performance
self-evaluations by Board and committees |
●Board oversight of
overall Company risk management structure
●Committee oversight
of certain risks related to each committees areas of
responsibility
●Robust Company risk
management processes |
Table of Contents
Fiscal 2015 Performance
Highlights
Despite sales and revenues volumes that
were 20% lower in fiscal 2015 than in the previous year, Deere was able to
generate net income of $1.940 billion. The Companys lower sales reflect further
weakness in the global agricultural sector and a slowdown in
construction-equipment markets. This was partially offset by record performance for the
Companys Financial Services operation and continued strong contributions from
after-market parts sales. Through the adept execution of business plans and
disciplined cost management, Deere will remain well positioned to serve its
customers and make investments in quality and innovation in fiscal
2016.
Net Sales and
Revenues (Millions) |
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Net Income
(Millions) |
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Earnings Per
Share (Diluted) |
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Deere Share Price
(at Oct. 31) |
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Worldwide net sales and revenues
decreased 20% in 2015 vs. 2014, mainly due to lower shipment volumes for
agricultural and construction equipment. Financial Services revenues held
steady at $2.6 billion. 2015 net sales and revenues represents the
fifth-highest in Company history. |
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Net income* was down 39% to
$1.940 billion due primarily to lower shipment volumes and unfavorable
product mix and foreign-currency exchange but still represented the
sixth- highest total in Company history. *Net income attributable to Deere & Company |
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Net income* per share decreased
$2.86 in 2015 compared with 2014. Dividends declared per share were $1.99
in 2013, $2.22 in 2014, and $2.40 in 2015. *Net income attributable to Deere &
Company |
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Deere & Company stock is
traded on the New York Stock Exchange under the ticker symbol DE. Average
number of common shares outstanding (basic) was 385.3 million in 2013,
363.0 million in 2014, and 333.6 million in
2015. |
Cash Flow from Operating
Activities
(Millions) |
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Cash
Flow |
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Dividends |
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Share
Repurchases |
The current quarterly dividend is
$0.60 per share, a rate Deere has boosted 12 times since 2004. Over that
period, the Company returned about 65% of its operating cash flow from
Equipment Operations to investors through dividends and share repurchases
(net of issuances). |
Table of Contents
Fiscal 2015 Executive
Compensation Highlights
Our compensation programs and practices
are designed to create incentive opportunities that align with our stockholders
long-term interests. We use consistent metrics that align with our business
strategy and motivate our employees to create value for stockholders at all
points in the business cycle:
Operating Return on Operating Assets and Return on Equity ➔ Exceptional Operating
Performance
Shareholder Value Added and Revenue Growth ➔ Disciplined
Growth
Total Shareholder Return ➔ Stockholder Experience
The table below highlights the 2015
compensation for the CEO and average named executive officer (NEO) as disclosed
in the Summary Compensation Table of the Proxy Statement. It also shows the
delivery of cash versus equity and the significant portion of compensation that
is performance-based. The STI and MTI amounts for the CEO reflect a reduction of
25% below what the CEO would have otherwise earned based on previously-approved
plan metrics and goals and actual performance results. See further explanation
under Pay for Performance Review and
Analysis in the Executive Summary of the
Compensation Discussion & Analysis on page 25 of the Proxy
Statement.
Summary Compensation Table Elements |
Salary |
STI |
MTI |
Performance Stock Units |
Restricted Stock Units and Stock Options |
Retirement and Other Compensation |
Total |
CEO
% of Total |
$1,500,000 8% |
$2,796,863 15% |
$2,722,500 15% |
$3,712,241 20% |
$4,560,569 24% |
$3,409,157 18% |
$18,701,330 100% |
Cash vs.
Equity |
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Total
Cash 38% |
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Total Equity 44% |
Other 18% |
100% |
Short-Term vs. Long-Term |
Short-Term
23% |
Long-Term 77% |
100% |
Fixed
vs. Performance Based |
Fixed
8% |
Performance
Based 74% |
Other
18% |
100% |
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Average NEO
% of Total |
$627,266 12% |
$1,060,456 20% |
$1,020,204 19% |
$762,866 15% |
$937,287 18% |
$826,225 16% |
$5,234,304 100% |
Cash vs.
Equity |
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Total Cash
51% |
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Total Equity
33% |
Other 16% |
100% |
Short-Term
vs. Long-Term |
Short-Term
32% |
Long-Term 68% |
100% |
Fixed vs. Performance Based |
Fixed
12% |
Performance
Based 72% |
Other
16% |
100% |
COMPENSATION
ELEMENT: |
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DESCRIPTION: |
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Salary |
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Annual base pay |
STI |
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Short-term incentive; annual performance-based
bonus |
MTI |
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Mid-term incentive; performance-based bonus using 3-year
results |
Performance Stock Units |
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Performance-based equity using 3-year
results |
Restricted Stock Units and Stock Options |
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Other equity whose value increases with stock
price |
Retirement and Other Compensation |
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Retirement plan values, benefits, and miscellaneous
compensation |
Table of Contents
Proxy
Statement
Table of Contents
Voting and Meeting Information
Why am I receiving this proxy
statement?
The Deere & Company Board
of Directors (the Board) has made available to you the Notice of Annual
Meeting of Stockholders, this proxy statement (Proxy Statement), our annual
report for the fiscal year ended October 31, 2015 (Annual Report), a proxy
card, and a voter instruction card (collectively, Proxy Solicitation
Materials) either on the internet or by mail in connection with the Deere &
Company (Deere, the Company, we, or us) 2016 Annual Meeting of
Stockholders (the meeting or Annual Meeting). You are receiving this Proxy
Statement because you owned shares of Deere common stock at the close of
business on December 31, 2015, which entitles you to vote at the Annual Meeting.
By use of a proxy, you can vote whether or not you attend the meeting. This
Proxy Statement describes the matters on which you are asked to vote and
provides information about those matters so that you can make an informed
decision.
The Proxy Solicitation Materials are being
mailed to or can be accessed online by stockholders on or about January 13,
2016.
What is Notice and Access and why did
Deere elect to use it?
We make the Proxy
Solicitation Materials available to stockholders electronically via the internet
under the Notice and Access regulations of the U.S. Securities and Exchange
Commission (the SEC).
Most of our stockholders have received a
Notice of Electronic Availability (Notice) in lieu of receiving a full set of
Proxy Solicitation Materials in the mail. The Notice includes information on how
to access and review the Proxy Solicitation Materials and how to vote via the
internet. We believe this method of delivery will expedite distribution of Proxy
Solicitation Materials to you while allowing us to conserve natural resources
and reduce the costs of printing and distributing these materials.
Stockholders who received a Notice but
would like to receive printed copies of the Proxy Solicitation Materials in the
mail should follow the instructions in the Notice for requesting such
materials.
How do I vote?
You can vote either in
person at the Annual Meeting or
by proxy
without attending the meeting. We urge you to vote by proxy even if you plan on
attending so we will know as soon as possible whether enough votes will be
present to constitute a quorum for holding the meeting. If you attend the
meeting in person, you may vote at the meeting and your proxy vote will not be
counted.
To vote your shares, follow the
instructions in the Notice, voter instruction form, or proxy card. Telephone and
internet voting is available to all registered and most beneficial stockholders.
Stockholders voting by proxy may use one
of the following three options:
●fill out the enclosed
voter instruction form or proxy
card, sign it, and mail it in the enclosed
postage-paid envelope;
●vote by internet (if available;
instructions are on the voter instruction form, proxy card, or Notice);
or
●vote by telephone (if available;
instructions are on the voter instruction form, proxy card, or
Notice).
If your shares are held in street name
by a bank, broker, or other holder of record, telephone or internet voting will
be available to you for voting these shares only if offered by the holder of
record. Please refer to the information forwarded by your holder of record to
learn about the options available to you. If your shares are held in street
name and you wish to vote them in person at the meeting, you must obtain a
legal proxy from your holder of record to do so.
The telephone and internet voting
facilities for stockholders will close at 11:59 p.m. Eastern Standard Time on
February 23, 2016. If you vote over the internet, you may incur costs, such as
telephone or internet access charges, for which you will be responsible. The
telephone and internet voting procedures are designed to authenticate
stockholders and to allow you to confirm that your votes have been properly
recorded.
If you hold shares through one of our
employee savings plans, your vote must be received by the plan administrator by
February 19, 2016, or the shares represented by the card will not be
voted.
Can I change my proxy
vote?
Yes. At any time before your shares
are voted by proxy at the meeting, you may change your vote by:
●revoking it by written
notice to Todd E. Davies, our Corporate Secretary, at the address on the cover
of this Proxy Statement;
●delivering a later-dated
proxy (including a telephone or internet vote); or
●voting in person at the
meeting.
If you hold your shares in street name,
please refer to the information forwarded by your bank, broker, or other holder
of record for procedures on revoking or changing your proxy.
How many votes do I
have?
You will have one vote for each
share of Deere common stock that you owned at the close of business on December
31, 2015.
1
Table of
Contents
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Voting and
Meeting Information |
How many shares are
entitled to vote?
There are 316,224,054
shares of Deere common stock outstanding as of December 31, 2015 and entitled to
vote at the meeting. Each share entitles its holder to one vote. There is no
cumulative voting.
How many votes must be
present to hold the meeting?
Under our
Bylaws, a majority of the votes that can be cast must be present in person or by
proxy to constitute a quorum for holding the Annual Meeting. Abstentions and
shares represented by broker non-votes, as described below, will be counted as
present and entitled to vote for purposes of determining a quorum.
What will I be voting
on?
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Election of
directors (see page 4) |
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Advisory resolution to
approve the compensation of the Companys named executives (say-on-pay)
as disclosed in this Proxy Statement (see page
21) |
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Ratification of the
appointment of the independent registered public accounting firm (see
page 61) |
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Stockholder proposal to
adopt a proxy access Bylaw amendment (see page
63) |
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Stockholder proposal
regarding greenhouse gas emissions (see page
65) |
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Stockholder proposal
regarding political spending (see page
67) |
How many votes are needed
for the proposals to pass?
● |
Nominees for director
who receive a majority of for votes cast will be elected as directors.
The number of shares voted for a nominee must exceed the number of
shares voted against that nominee. If an incumbent director nominee does
not receive a majority of votes cast in an uncontested election, our
Bylaws require the director to promptly tender his or her written
resignation to the Board. The Corporate Governance Committee of the Board
will recommend to the Board whether to accept or reject the resignation.
The Board will act on the tendered resignation, taking this recommendation
into account, and publicly disclose its decision and the rationale behind
it within 90 days of the date the election results are certified. In the
event the number of nominees exceeds the number of directors to be
elected, the nominees who receive the most votes will be elected as
directors. |
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For each of the other
proposals to be voted on, the affirmative vote of a majority of the shares
present in person or by proxy must be cast in favor of the proposal for it
to pass. |
What if I vote
abstain?
If you vote to abstain, your
shares will be counted as present for purposes of determining whether enough
votes are present to constitute a quorum for holding the Annual Meeting. A vote
to abstain on the election of directors will have no effect on the outcome. A vote to
abstain on the other proposals will have the effect of a vote against the
proposal.
What if I dont return my
proxy card and dont attend the Annual Meeting?
If you are a holder of record (that is, your shares are registered in
your own name with our transfer agent) and you do not vote your shares, your
shares will not be voted.
If you hold your shares in street name
and you do not give your bank, broker, or other holder of record specific voting
instructions for your shares, your record holder may vote your shares on the
ratification of the independent registered public accounting firm. However, your
record holder may not vote your shares without your specific instructions on the
election of directors, the advisory vote on executive compensation, or the
stockholder proposals.
For the aforementioned proposals on which
a broker may not vote without your instruction, if you do not provide voting
instructions to your broker, the votes will be considered broker non-votes and
will not be counted in determining the outcome of the vote. Broker non-votes
will be counted as present for purposes of determining whether enough votes are
present to constitute a quorum for holding the Annual Meeting.
What happens if a nominee
for director declines or is unable to accept election?
If you vote by proxy and if unforeseen circumstances make it
necessary for the Board to substitute another person for a nominee, we will vote
your shares for that other person.
Is my vote
confidential?
Yes. Your voting records
will not be disclosed to us except:
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as required by
law; |
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to the inspectors of
voting; or |
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if the election is
contested. |
The tabulator, the proxy solicitation
agent, and the inspectors of voting must comply with confidentiality guidelines
that prohibit disclosure of votes to Deere. The tabulator of the votes and at
least one of the inspectors of voting will be independent of Deere and our
officers and directors.
If you are a holder of record or an
employee savings plan participant and you write comments on your proxy card,
your comments will be provided to us but your vote will remain
confidential.
2
Table of
Contents
Annual
Report
Will I receive a copy of
Deeres Annual Report?
We have either
mailed the Annual Report to you with this Proxy Statement or, if you have
previously elected to view our annual reports over the internet, provided in the
Notice the web address for you to access the Annual Report online. The Annual
Report includes our audited financial statements and other financial information
for the fiscal year ended October 31, 2015. We urge you to read it
carefully.
How can I receive a copy
of Deeres 10-K?
You can obtain, free of
charge, a copy of our Annual Report on Form 10-K for the fiscal year ended
October 31, 2015 (the Form 10-K) by:
● |
accessing our internet
site at www.deere.com/stock; or |
● |
writing
to: |
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Deere &
Company Stockholder Relations Department One
John Deere Place Moline, Illinois
61265-8098 |
You can also obtain a copy of our Form
10-K and other filings with the SEC from the SECs EDGAR database at
www.sec.gov.
Householding Information
What is
householding?
Single copies of either
the Proxy Solicitation Materials or the Notice, as applicable, will be sent to
households at which two or more stockholders reside if they appear to be members
of the same family unless one of the stockholders at that address notifies us
that he or she wishes to receive individual copies. This procedure reduces our
printing costs. Householding will not affect dividend check mailings in any
way.
A number of brokerage firms have
instituted householding. If you hold your shares in street name, please
contact your bank, broker, or other holder of record to request information
about householding.
If Proxy Solicitation Materials were
delivered to an address that you share with another stockholder and you desire
to receive separate copies, copies will be sent to you upon written or verbal
request to Deere & Company Stockholder Relations Department, One John Deere
Place, Moline, Illinois 61265-8098, (309) 765-4491.
How do I revoke my
consent to the householding program?
To
revoke your consent to the householding program, you must contact Broadridge
Investor Communication Solutions, Inc. (Broadridge) either by calling toll
free at (800) 542-1061 or by writing to Broadridge, Householding Department, 51
Mercedes Way, Edgewood, New York 11717. You will be removed from the
householding program within 30 days of Broadridges receipt of the revocation of
your consent.
Electronic
Delivery of Proxy Statement and Annual Report
Can I access Deeres
proxy materials and Annual Report electronically?
Most stockholders can elect to view future proxy statements and annual
reports over the internet instead of receiving copies in the mail.
You can choose this option and save us the
cost of producing and mailing these documents by:
● |
following the
instructions provided on your proxy card, voter instruction form, or
Notice; or |
● |
going to
www.proxyvote.com and following the instructions
provided. |
If you choose to receive future proxy
statements and annual reports over the internet, you will receive an e-mail
message next year containing the internet address to access future proxy
statements and annual reports. This e-mail will include instructions for voting
over the internet. If you have not elected electronic delivery, you will receive
a notice indicating that proxy solicitation materials are available at
www.proxyvote.com.
IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON
FEBRUARY 24, 2016: The Proxy Statement and Annual Report are available on our
website at www.deere.com/stock.
Information
not Incorporated into this Proxy Statement
The information on our website
(www.deere.com) is not and shall not be deemed to be a part of this Proxy
Statement nor by reference or otherwise (except to the extent we specifically
incorporate it by reference) incorporated into any other filings we make with
the SEC.
3
Table of
Contents
Item 1
Election of Directors
Identification and
Evaluation of Director Nominees
The
Corporate Governance Committee of the Board is responsible for screening
candidates and recommending director nominees to the full Board, which nominates
the slate of directors for election at each annual meeting of stockholders and
also elects directors to fill vacancies or newly-created seats on the Board. The
Corporate Governance Committee considers candidates as recommended by
stockholders, directors, officers, and third-party search firms. Recommendations
from stockholders are considered by the Corporate Governance Committee in
accordance with the procedures described under the 2017 Stockholder Proposals and Nominations section of this Proxy Statement. The Corporate Governance Committee
reviews all candidates in the same manner, regardless of the source of the
recommendation.
The general criteria and framework for
assessing director candidates are provided by our Corporate Governance Policies,
which are described below in the Corporate
Governance section of this Proxy Statement.
In accordance with our Corporate Governance Policies, when screening candidates
for nomination to the Board, the Corporate Governance Committee considers
skills, experience, international versus domestic background, diversity, age,
and legal and regulatory requirements in the context of an assessment of the
perceived needs of the Board. The Corporate Governance Committee seeks to ensure
that the Board is composed of members whose particular skills, qualifications,
experiences, and attributes, when taken together, allow the Board to satisfy its
responsibilities effectively.
At a minimum, the Board assesses the
diversity of its members and nominees on an annual basis during its performance
evaluation by considering, among other factors, diversity in expertise,
experience, background, ethnicity, and gender.
A director of Deere must tender his or her
resignation from the Board upon any material change in his or her occupation,
career, or principal business activity, including retirement. A director must
retire from the Board upon the first annual meeting of stockholders following
his or her 72nd birthday, except as approved by the Board under rare
circumstances.
Director
Nominees
Following the process described
above, the Corporate Governance Committee has recommended and the Board has
nominated each of Samuel R. Allen, Crandall C. Bowles, Vance D.
Coffman,
Dipak C. Jain, Michael O. Johanns, Clayton
M. Jones, Brian M. Krzanich, Gregory R. Page, Sherry M. Smith, Dmitri L. Stockton, and Sheila G. Talton to be elected for
terms expiring at the annual meeting in 2017. As required by the Companys
Certificate of Incorporation, all members of the Board are elected
annually.
Dmitri L. Stockton and Sheila G. Talton
were elected to the Board effective May 27, 2015 and Brian M. Krzanich was
elected to the Board effective January 6, 2016 for terms expiring at the 2016
annual meeting.
As discussed above, a Deere director is
expected to retire from the Board effective with the first annual meeting of
stockholders following his or her 72nd birthday, except as approved by the Board
under rare circumstances. In accordance with this policy, Joachim Milberg,
Richard B. Myers, and Thomas H. Patrick will be leaving the Board effective with
the 2016 annual meeting. In addition, Charles O. Holliday, Jr. has chosen to
retire from the Board effective with the 2016 annual meeting and will not stand
for reelection. The size of the Board will be reduced in accordance with these
retirements.
The biographies provided below for each
nominee include the nominees:
● |
Age as of December 31,
2015; |
● |
Present and past
professional positions (including positions with Deere, if
applicable); |
● |
Current directorships
at other companies; |
● |
Previous directorships
at public companies and registered investment companies held during the
past five or more years; and |
● |
Key qualifications,
experiences, and attributes qualifying him or her to serve on the
Board. |
Each nominees biography also includes the
nominees Board committee memberships under the new committee structure and
composition approved by the Board in January 2016, which will become effective
in February 2016.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR ALL ELEVEN NOMINEES.
4
Table of
Contents
Item 1 Election of Directors: |
Director
Nominees |
Samuel R. Allen |
Current and
Past Positions: |
Chairman and Chief
Executive Officer of Deere
Age: 62
Director since: 2009
Committees: Executive (Chair) |
● Chairman and Chief
Executive Officer of Deere since February 2010
● President and
Chief Executive Officer of Deere - August 2009 to February 2010
● President and
Chief Operating Officer of Deere - June 2009 to August 2009
● President,
Worldwide Construction & Forestry Division and John Deere Power
Systems of Deere - March 2005 to June 2009
● President, Global
Financial Services, John Deere Power Systems, and Corporate Human
Resources of Deere - November 2003 to March 2005
Other Current
Directorships:
● Whirlpool Corporation
Key
Qualifications, Experiences, and Attributes: In addition to his professional background and prior
Deere Board experience, the following qualifications led the Board to
conclude that Mr. Allen should serve on Deeres Board of Directors: his
leadership experience as an officer of Deere since 2001, the breadth of
his management experiences within and knowledge of each of Deeres major
global operations, and his subject matter knowledge in the areas of
engineering, manufacturing, and industrial management. |
|
|
Crandall C. Bowles |
Current and
Past Positions: |
Director of The Springs
Company
Age: 68
Director from: 1990 to 1994 and since 1999
Committees: Corporate Governance
(Chair) Compensation Executive |
● Director of The
Springs Company (asset management) since 1978
● Chairman of The
Springs Company - August 2007 to March 2015
● Chairman of
Springs Industries, Inc. (Springs Window Fashions) - January 2006 to June
2013
● Co-Chairman and
Co-Chief Executive Officer of Springs Global US, Inc. and Springs Global
Participacoes S.A. - January 2006 to June 2007
● Chairman and Chief
Executive Officer of Springs Industries, Inc. - April 1998 to January
2006
Other Current
Directorships:
●
JPMorgan Chase & Co.
Other Previous
Directorships:
● Sara Lee Corporation
Key Qualifications,
Experiences, and Attributes: In addition to her professional background and prior Deere Board
experience, the following qualifications led the Board to conclude that
Ms. Bowles should serve on Deeres Board of Directors: her leadership
qualities developed from her service as Chairman and Chief Executive
Officer of Springs Industries, Inc., the breadth of her experiences in
auditing, risk management, and other areas of oversight while serving as a
member of the boards of directors of other global corporations, and her
subject matter knowledge in the areas of economics and sales and marketing
of consumer products. |
5
Table of
Contents
Item 1 Election of Directors: |
Director
Nominees |
Vance D. Coffman |
Current and
Past Positions: |
Retired Chairman of
Lockheed Martin Corporation
Age: 71
Director since: 2004
Committees: Compensation (Chair) Corporate
Governance Executive
Presiding
Director-Elect for 2016 |
● Retired Chairman
of Lockheed Martin Corporation (aerospace, defense, and information
technology) since April 2005
● Chairman of
Lockheed Martin Corporation - April 1998 to April 2005
● Chief Executive
Officer of Lockheed Martin Corporation - August 1997 to August
2004
Other Current
Directorships:
● 3M Company
● Amgen
Inc.
Key
Qualifications, Experiences, and Attributes: In addition to his professional background and prior
Deere Board experience, the following qualifications led the Board to
conclude that Mr. Coffman should serve on Deeres Board of Directors: his
leadership qualities developed from his service as Chairman and Chief
Executive Officer of Lockheed Martin Corporation, the breadth of his
experiences in auditing, corporate governance, and other areas of
oversight while serving as a member of the boards of directors of other
global corporations, and his subject matter knowledge in the areas of
engineering, manufacturing, and finance. |
|
|
Dipak C. Jain |
Current and
Past Positions: |
Director, Sasin
Graduate Institute of Business Administration
Age: 58
Director since: 2002
Committees: Audit Review Finance |
● Director, Sasin
Graduate Institute of Business Administration (international graduate
business school) since August 2014
● Chaired Professor
of Marketing, INSEAD - March 2013 to August 2014
● Dean, INSEAD - May
2011 to March 2013
● Dean, Kellogg
School of Management, Northwestern University - July 2001 to September
2009
● Associate Dean for
Academic Affairs, Kellogg School of Management, Northwestern University -
1996 to 2001
● Sandy and Morton Goldman
Professor of Entrepreneurial Studies and Professor of Marketing, Kellogg
School of Management, Northwestern University - 1994 to 2001 and since
2009
Other Current
Directorships:
● Northern Trust Corporation
●
Reliance Industries Limited, India
●
Global Logistics Properties Limited, Singapore
Key Qualifications,
Experiences, and Attributes: In addition to his professional background and prior Deere Board
experience, the following qualifications led the Board to conclude that
Mr. Jain should serve on Deeres Board of Directors: his leadership
qualities developed from his experiences while serving as Director of the
Sasin Graduate Institute of Business Administration, Dean of INSEAD, Dean
of the Kellogg School of Management, and as a foreign affairs advisor for
the Prime Minister of Thailand, the breadth of his experiences in
compensation, corporate governance, and other areas of oversight while
serving as a member of the boards of directors of other global
corporations, and his subject matter knowledge in the areas of marketing,
global product diffusion, and new product forecasting and
development. |
6
Table of
Contents
Item 1 Election of Directors: |
Director
Nominees |
Michael O. Johanns |
Current and
Past Positions: |
Retired United States Senator
from Nebraska
Age: 65
Director since: 2015
Committees: Audit Review Corporate Governance |
● Retired United
States Senator since January 2015
● United States
Senator from Nebraska - January 2009 to January 2015
● United States
Secretary of Agriculture - January 2005 to September 2007
Other Current
Directorships:
● Burlington Capital Group, LLC
Key
Qualifications, Experiences, and Attributes: In addition to his professional background and prior
Deere Board experience, the following qualifications led the Board to
conclude that Mr. Johanns should serve on Deeres Board of Directors: his
leadership qualities developed from his service as a United States
Senator, the United States Secretary of Agriculture, and the Governor of
Nebraska, the breadth of his experiences in law, governance, and other
areas of oversight while serving as a partner of a law firm and a member
of the U.S. Senate and various Senate committees, and his subject matter
knowledge in the areas of agriculture, banking, commerce, and foreign
trade. |
|
|
Clayton M. Jones |
Current and
Past Positions: |
Retired Chairman of Rockwell
Collins, Inc.
Age: 66
Director since: 2007
Committees: Compensation Corporate Governance |
● Retired Chairman
of Rockwell Collins, Inc. (aviation electronics and communications) since
July 2014
● Chairman of
Rockwell Collins, Inc. - July 2013 to July 2014
● Chairman and Chief
Executive Officer of Rockwell Collins, Inc. - September 2012 to July
2013
● Chairman,
President, and Chief Executive Officer of Rockwell Collins, Inc. - June
2002 to September 2012
Other Current
Directorships:
● Cardinal Health, Inc.
●
Motorola Solutions, Inc.
Other Previous
Directorships:
●
Rockwell Collins, Inc.
Key Qualifications,
Experiences, and Attributes: In addition to his professional background and prior Deere Board
experience, the following qualifications led the Board to conclude that
Mr. Jones should serve on Deeres Board of Directors: his leadership
qualities developed from his service as Chairman and Chief Executive
Officer of Rockwell Collins, Inc., the breadth of his experiences in
finance, compensation, and other areas of oversight while serving as a
member of the boards of directors of other global corporations, and his
subject matter knowledge in the areas of government affairs and
marketing. |
7
Table of
Contents
Item 1 Election of Directors: |
Director
Nominees |
Brian M. Krzanich |
Current and
Past Positions: |
Chief Executive Officer
of Intel Corporation
Age: 55
Director since: 2016
Committees: Compensation Corporate Governance |
● Chief Executive
Officer of Intel Corporation (advanced integrated digital technology
platforms) since May 2013
● Executive Vice
President and Chief Operating Officer of Intel Corporation 2012 to May
2013
● Senior Vice
President and General Manager of Manufacturing and Supply Chain of Intel
Corporation 2010 to 2012
● Vice President and
General Manager of Worldwide Manufacturing and Systems of Intel
Corporation 2007 to 2010
Other Current
Directorships:
● Intel Corporation
Key
Qualifications, Experiences, and Attributes: In addition to his professional background, the
following qualifications led the Board to conclude that Mr. Krzanich
should serve on Deeres Board of Directors: his leadership qualities
developed from his service as Chief Executive Officer and Chief Operating
Officer of Intel Corporation, the breadth of his experiences in corporate
governance, strategy, and other areas of oversight while serving as a
member of the boards of directors of Intel and the Semiconductor Industry
Association, and his subject matter knowledge in the areas of
manufacturing, operations, information technology, human resources, and
supply chain management. |
|
|
Gregory R. Page |
Current and
Past Positions: |
Executive Director of Cargill,
Incorporated
Age: 64
Director since: 2013
Committees: Finance (Chair) Audit
Review Executive |
● Executive Director
of Cargill, Incorporated (agricultural, food, financial, and industrial
products and services) since September 2015
● Executive Chairman
of Cargill, Incorporated - December 2013 to September 2015
● Chairman and Chief
Executive Officer of Cargill, Incorporated - 2011 to December
2013
● Chairman, Chief
Executive Officer, and President of Cargill, Incorporated - 2007 to
2011
● President and Chief
Operating Officer of Cargill, Incorporated - 2000 to
2007
Other Current
Directorships:
● Eaton
Corporation plc
Other Previous
Directorships:
●
Carlson
Key Qualifications,
Experiences, and Attributes: In addition to his professional background and prior Deere Board
experience, the following qualifications led the Board to conclude that
Mr. Page should serve on Deeres Board of Directors: his leadership
qualities developed from his experiences while serving as Chairman and
Chief Executive Officer of Cargill, Incorporated, the breadth of his
experiences in auditing, corporate governance, and other areas of
oversight while serving as a member of the boards of directors of other
global corporations, and his subject matter knowledge in the areas of
commodities, agriculture, operating processes, finance, and
economics. |
8
Table of
Contents
Item 1 Election of Directors: |
Director
Nominees |
Sherry M. Smith |
Current and
Past Positions: |
Former Executive Vice
President and Chief Financial Officer of Supervalu
Inc.
Age: 54
Director since: 2011
Committees: Audit Review
(Chair) Finance Executive |
● Executive Vice
President and Chief Financial Officer of Supervalu Inc. (retail and
wholesale grocery and retail general merchandise products) - December 2010
to August 2013
● Senior Vice
President, Finance of Supervalu Inc. - 2005 to 2010
● Senior Vice
President, Finance and Treasurer of Supervalu Inc. - 2002 to
2005
Other Current
Directorships:
● Tuesday Morning Corporation
●
Realogy Holdings Corp.
Key
Qualifications, Experiences, and Attributes: In addition to her professional background and prior
Deere Board experience, the following qualifications led the Board to
conclude that Ms. Smith should serve on Deeres Board of Directors: her
leadership qualities developed from her experience while serving as a
senior executive and as Chief Financial Officer of Supervalu Inc., the
breadth of her experiences in auditing, finance, accounting, compensation,
strategic planning, and other areas of oversight while serving as a member
of the boards of directors of other public corporations, her family
farming background, and her subject matter knowledge in the areas of
finance, accounting, and food and supply chain
management. |
|
|
Dmitri L. Stockton |
Current and
Past Positions: |
Chairman, President, and
Chief Executive Officer of GE Asset Management Incorporated
and Senior Vice President of General Electric Company
Age: 51
Director since: 2015
Committees: Compensation Finance |
● Chairman,
President, and Chief Executive Officer of GE Asset Management Incorporated
(global investments) and Senior Vice President of General Electric Company
(power and water, aviation, oil and gas, healthcare, appliances and
lighting, energy management, transportation, and financial services) since
2011
● President and
Chief Executive Officer of GE Capital Global Banking and Senior Vice
President of GE London - 2008 to 2011
● President and
Chief Executive Officer of GE Consumer Finance, Central & Eastern
Europe - 2005 to 2008
Other Current
Directorships:
● GE
Asset Management Incorporated
●
General Electric RSP U.S. Equity Fund and General Electric RSP Income
Fund
● Elfun
Funds (six directorships)
Other Previous
Directorships:
●
Synchrony Financial
Key Qualifications,
Experiences, and Attributes: In addition to his professional background and prior Deere Board
experience, the following qualifications led the Board to conclude that
Mr. Stockton should serve on Deeres Board of Directors: his leadership
qualities developed from his service as Chairman, President, and Chief
Executive Officer of GE Asset Management Incorporated and as a senior
officer of other global operations, the breadth of his experiences in risk
management, governance, regulatory compliance, and other areas of
oversight while serving as a member of the boards of directors and
trustees of global asset management, investment, and employee benefit
entities, and his subject matter knowledge in the areas of finance,
banking, and asset management. |
9
Table of Contents
Item
1 Election of Directors: |
Director
Nominees |
Sheila G. Talton |
Current and Past Positions: |
President and Chief Executive
Officer of Gray Matter Analytics
Age: 63
Director since: 2015
Committees: Audit Review Finance |
● President and
Chief Executive Officer of Gray Matter Analytics (data analytics
consulting services for financial services and healthcare industries)
since 2013
● President and
Chief Executive Officer of SGT Ltd. (strategy and technology consulting
services) - 2011 to 2013
● Vice President of
Cisco Systems, Inc. (information technology and solutions) - 2008 to
2011
Other Current
Directorships:
● OGE Energy Corporation
● Wintrust Financial Corporation
Other
Previous Directorships:
● Acco Brands Corporation
Key
Qualifications, Experiences, and Attributes: In addition to her professional background and prior
Deere Board experience, the following qualifications led the Board to
conclude that Ms. Talton should serve on Deeres Board of Directors: her
leadership qualities developed from her service as President and Chief
Executive Officer of Gray Matter Analytics and as an officer of other
global technology and consulting firms, the breadth of her experiences in
compensation, governance, risk management, and other areas of oversight
while serving as a member of the boards of directors of other public
corporations, and her subject matter knowledge in the areas of technology,
data analytics, and global
strategies. |
10
Table of Contents
Corporate
Governance
Our
Values
At Deere, our actions are
guided by our core values of integrity, quality, commitment, and innovation. We
strive to live up to these values in everything we do, not just because it is
good business, but because it is the right thing to do. We are committed to
strong corporate governance as a means of upholding these values and ensuring
that we are accountable to our stockholders.
In recognition of the importance of
corporate governance as a component of creating long-term stockholder value, our
Board of Directors has adopted Corporate Governance Policies for the Company.
Our Corporate Governance Policies are periodically reviewed and revised as
appropriate by the Board to ensure that the policies reflect the Boards
corporate governance objectives.
Please visit the Corporate Governance
portion of our website (www.deere.com/corpgov) to learn more about our corporate
governance practices and access the following materials:
● |
Our Corporate |
● |
Charters for our Board |
|
Governance Policies |
|
Committees |
● |
Our Code of Ethics |
● |
Our Code of Business Conduct |
● |
Our Guiding Principles |
● |
Our Supplier Code of Conduct |
● |
Our Global Conflict |
|
|
|
Minerals Policy |
|
|
Director
Independence
As part of our
Corporate Governance Policies, the Board has adopted categorical standards to
assist the Board in evaluating the independence of each director. The
categorical standards are intended to assist the Board in determining whether
certain relationships between our directors and Deere or its affiliates (either
directly or indirectly as a partner, stockholder, officer, director, trustee, or
employee of an organization that has a relationship with Deere) are material
relationships for purposes of the New York Stock Exchange (NYSE) independence
standards. The categorical standards establish thresholds short of which such
relationships are deemed not to be material. The categorical standards are
attached as Appendix A to this Proxy Statement and are included as part of the
Corporate Governance Policies referenced above. A copy may also be obtained upon
request to the Deere & Company Stockholder Relations Department. In
addition, each directors independence is evaluated under our Related Person
Transactions Approval Policy, as discussed in the Review and Approval of Related Person Transactions section below. The independence standards set forth in our
Corporate Governance Policies meet or exceed the independence requirements of
the NYSE.
In November 2015, we reviewed the
independence of each then-sitting director and in January 2016, we reviewed the
independence of Brian M. Krzanich, in each case applying the independence
standards set forth in our Corporate Governance Policies. The reviews considered
relationships and transactions between each director (and his or her immediate
family and affiliates) and each of the following: Deere, Deeres management, and
Deeres independent registered public accounting firm.
Based on this review, at the December 2015
regular Board meeting (and, in the case of Brian M. Krzanich, at a January 5,
2016 special meeting of the Board), the Board affirmatively determined that no
director other than Mr. Allen has a material relationship with Deere and its
affiliates and that each director other than Mr. Allen is independent as defined
in our Corporate Governance Policies and the listing standards of the NYSE. Mr.
Allen is not considered to be an independent director because of his employment
relationship with Deere.
Board Leadership
Structure
The Chairman of the Board
also serves as our Chief Executive Officer. The Board believes that combining
the Chairman and Chief Executive Officer roles is the most appropriate structure
for the Company at this time because: (1) this structure has a longstanding
history of serving our stockholders well, through many economic cycles, business
challenges, and leadership successions; (2) its governance processes, as
described in the Corporate Governance Policies and Board committee charters,
preserve Board independence by ensuring independent discussion among directors
and independent evaluation of and communication with members of senior
management; and (3) the enhanced role of the independent Presiding Director
strengthens the Companys governance structure such that separation of the
Chairman and Chief Executive Officer roles is unnecessary.
Presiding
Director
Charles O. Holliday, Jr.,
an independent director, currently serves as our Presiding Director. Mr.
Holliday is currently serving his seventh term as our Presiding
Director.
The Presiding Director is elected by a
majority of the independent directors upon a recommendation from the Corporate
Governance Committee. The Presiding Director is appointed for a one-year term
beginning upon election and expiring upon the selection of a successor Presiding
Director. In accordance with this process, Vance D. Coffman has been elected to
serve as Presiding Director following Mr. Hollidays retirement from the Board
effective with the 2016 annual meeting.
11
Table of Contents
Corporate Governance: |
Board
Meetings |
The Board has determined that the
Presiding Director should have the following duties and
responsibilities:
● |
Preside at all meetings of the Board
at which the Chairman is not present, including executive sessions of the
independent directors; |
● |
Serve as liaison between the
Chairman and the independent directors; |
● |
In consultation with the Chairman,
review and approve the schedule of meetings of the Board, the proposed
agendas, and the materials to be sent to the
Board; |
● |
Call meetings of the independent
directors when necessary and appropriate; and |
● |
Remain available for consultation
and direct communication with Deeres
stockholders. |
The Board believes that the role of the
Presiding Director exemplifies the Companys continuing commitment to strong
corporate governance and Board independence.
Board
Meetings
Under the Companys
Bylaws, regular meetings of the Board are held at least quarterly at such times
and places as the Board may designate. Our typical practice is to schedule at
least one Board meeting per year at a Company location other than our World
Headquarters in order to provide our directors with first-hand perspectives on
different aspects of our business. The Board met five times during fiscal
2015.
Directors are expected to attend Board
meetings, meetings of committees on which they serve, and stockholder meetings.
Directors are expected to spend the time needed and meet as frequently as
necessary to properly discharge their responsibilities. During fiscal 2015, all
directors attended 75% or more of the meetings of the Board and committees on
which they served except for Joachim Milberg, who attended less than 75% of the
Board and committee meetings at which his attendance was required (four total
absences due to illness). Overall attendance at such meetings was approximately
96%. All directors then in office attended the Annual Meeting of Stockholders in
February 2015.
Each Board meeting normally begins or ends
with a session between the CEO and the independent directors. This provides a
platform for discussions outside the presence of the non-Board
management attendees, as well as an
opportunity for the independent directors to go into executive session (without
the CEO) if requested by any director. The independent directors may meet in
executive session, without the CEO, at any time, and such non-management
executive sessions are scheduled (and in practice typically occur) at each
regularly scheduled Board meeting. The Presiding Director presides over these
executive sessions.
Board
Committees
The Board has delegated
some of its authority to the following five committees of the Board: the
Executive Committee, the Audit Review Committee, the Compensation Committee, the
Corporate Governance Committee, and the Finance Committee. The Finance
Committee, a new committee created by resolution of the Board at its December
2015 meeting, replaces the Pension Plan Oversight Committee, whose dissolution
was approved by the Board at the same meeting. These changes, which will become
effective in February 2016, are intended to focus and enhance the Boards
oversight of the Companys financial affairs. The Finance Committee will
exercise primary business oversight of our Financial Services segment as well as
many global finance and treasury functions, in addition to the pension plan
oversight function formerly exercised by the Pension Plan Oversight Committee.
The Pension Plan Oversight Committee, which was chaired by Thomas H. Patrick and
included Dipak C. Jain, Clayton M. Jones, Richard B. Myers, and Sherry M. Smith
as its members, met twice in fiscal 2015.
In addition to the structural changes
described above, the Board also approved at a special meeting held on January 5,
2016 the rotation of certain directors committee memberships effective February
2016. These committee rotations are consistent with the Boards view, as stated
in the Corporate Governance Policies, that committee rotation is generally
desirable as a practice.
Each of our Board committees has adopted a
charter that complies with current NYSE rules relating to corporate governance
matters. Copies of the committee charters are available at www.deere.com/corpgov
and may also be obtained upon request to the Deere & Company Stockholder
Relations Department. Each committee (other than the Executive Committee, of
which Mr. Allen serves as chair) is composed solely of independent
directors.
12
Table of Contents
Corporate Governance: |
Board
Committees |
The committee structure and memberships described below reflect the
changes approved by the Board in January 2016, which will become effective in
February 2016.
Executive
Committee |
● Acts on behalf of
the Board on matters requiring Board action between meetings of the full
Board
● Authority to act on certain significant
matters limited by our Bylaws and applicable law
● All members, other
than Mr. Allen, are independent |
2015 Meetings: 0
Members:
Samuel R. Allen
(Chair) Crandall C. Bowles Vance D.
Coffman Gregory R. Page Sherry M. Smith |
|
|
Audit Review
Committee |
● Oversees the
independent registered public accounting firms qualifications,
independence, and performance
● Assists the Board
in overseeing the integrity of our financial statements, compliance with
legal requirements, and the performance of our internal
auditors
● Pre-approves all
audit and allowable non-audit services by the independent registered
public accounting firm
● With the
assistance of Company management, approves the selection of the lead
engagement partner of the independent registered public accounting
firm
● Reports its
activities to the full Board
● All members have
been determined to be independent and financially literate under current
NYSE listing standards
● The Board has also
determined that Ms. Smith and Mr. Page are audit committee financial
experts as defined by the SEC and that each has accounting or related
financial management expertise as required by NYSE listing
standards |
2015 Meetings: 5
Members:
Sherry M. Smith (Chair) Dipak C.
Jain Michael O. Johanns Gregory R. Page Sheila G.
Talton
|
|
|
Compensation
Committee |
● Makes
recommendations to the Board regarding incentive and equity-based
compensation plans
● Evaluates and
approves the compensation of our executive officers (except for the
compensation of our CEO, which is approved by the full Board), including
reviewing and approving corporate performance goals and objectives related
to the compensation of our executive officers
● Evaluates and
approves compensation granted pursuant to the Companys equity-based and
incentive compensation plans, policies, and programs
● Retains, oversees,
and assesses the independence of compensation consultants and other
advisors
● Oversees our
policies on structuring compensation programs for executive officers to
preserve tax deductibility
● Reviews and
discusses the CD&A with our management and determines whether to
recommend to the Board that the CD&A be included in our filings with
the SEC
● Reports its
activities to the full Board
● All members have
been determined to be independent under current NYSE listing standards,
including those standards applicable specifically to compensation
committee members |
2015 Meetings: 6
Members:
Vance D. Coffman (Chair)
Crandall C. Bowles Clayton M. Jones Brian M. Krzanich
Dmitri L.
Stockton
|
13
Table of Contents
Corporate Governance: |
Board Oversight of Risk
Management |
Corporate
Governance Committee |
● Monitors corporate
governance policies and oversees our Center for Global Business
Conduct
● Reviews senior
management succession plans and identifies and recommends to the Board
individuals to be nominated as directors
● Makes
recommendations concerning the size, composition, committee structure, and
fees for the Board
● Reviews and
reports to the Board on the performance and effectiveness of the Board and
the Corporate Governance Committee
● Oversees the
evaluation of our management
● Reports its
activities to the full Board
● All members have
been determined to be independent under current NYSE listing
standards |
2015 Meetings:
4
Members:
Crandall C. Bowles (Chair)
Vance D.
Coffman Michael O. Johanns Clayton M. Jones Brian M.
Krzanich
|
|
|
Finance Committee |
● Reviews the
policies, practices, strategies, and risks relating to the financial
affairs of the Company
● Exercises oversight of the business of the
Companys Financial Services segment
● Formulates Company pension funding
policies
● Oversees our pension plans
● Reports its activities to the full
Board
● All members have
been determined to be independent under current NYSE listing
standards |
2015 Meetings: 0 (created in
December 2015; first meeting will take place in February
2016)
Members:
Gregory R. Page (Chair)
Dipak C.
Jain Sherry M. Smith Dmitri L. Stockton Sheila G.
Talton |
Board Oversight of
Risk Management
The Board believes
that strong and effective internal controls and risk management processes are
essential elements in achieving long-term stockholder value. The Board, directly
and through its committees, is responsible for overseeing risks that may affect
the Company.
Risk Management
Approach
The Company maintains a
structured risk management approach to enable the achievement of its strategic
business objectives. Under this approach, risks are identified and classified
into specified categories and escalated as needed within a well-defined internal
risk management structure, which is administered at the management level by a
Management Risk Committee consisting of the CEO and his direct reports. In turn,
the Management Risk Committee is responsible for providing periodic reports to
the Board regarding the Companys risk management processes and reviewing with
the Board high-priority areas of enterprise risk.
Dedicated risk management sessions
typically take place at regularly-scheduled Board meetings each February and
August, and risk management topics are also discussed as needed at other Board
and committee meetings.
Board and Committee Risk Oversight
Responsibilities
Each Board committee
is responsible for oversight of risk categories related to the committees
specific function, while the full Board exercises ultimate responsibility for
overseeing the risk management function as a whole. The Board approved several
changes to its allocation of risk oversight responsibilities in 2015. Most
significantly, as discussed above under Board
Committees, with the formation of the
Finance Committee the Board has centralized its oversight of risks relating to
the Companys financial affairs.
14
Table of Contents
|
Compensation of
Directors |
The respective areas of risk oversight
exercised by the Board and its committees are as follows:
Board/Committee |
Primary Areas of Risk Oversight |
Full Board |
●
Oversees overall Company risk management function and regularly receives
and evaluates reports and presentations from the Chairs of the Audit
Review, Compensation, Corporate Governance, and Finance Committees on
risk-related matters falling within each respective committees oversight
responsibilities |
Audit Review Committee |
●
Oversees operational, strategic, and legal and regulatory risks by
regularly reviewing reports and presentations given by management,
including our Senior Vice President and General Counsel, Senior Vice
President and Chief Financial Officer, and Vice President, Internal Audit,
as well as other operational Company personnel |
|
●
Regularly reviews our risk management practices and risk-related policies
(for example, the Companys Code of Business Conduct, risk management and
insurance portfolio, and legal and regulatory reviews) and evaluates
potential risks related to internal control over financial
reporting |
Compensation Committee |
●
Oversees potential risks related to the design and administration of our
compensation plans, policies, and programs, including our
performance-based compensation programs, to promote appropriate incentives
that do not encourage unnecessary and excessive risk-taking by our
executive officers or other employees |
Corporate Governance Committee |
●
Oversees potential risks related to our governance practices by, among
other things, reviewing succession plans and performance evaluations of
the Board and CEO, monitoring legal developments and trends regarding
corporate governance practices, and evaluating potential related person
transactions |
|
●
Monitors risks relating to environmental factors as well as
product safety and other compliance matters |
Finance Committee |
●
Oversees operational and strategic risks related to the financial affairs
of the Company, including capital structure and liquidity risks, and
reviews the Companys policies and strategies for managing financial
exposure and contingent liabilities |
|
●
Oversees potential risks related to funding our U.S. qualified pension
plans (other than the defined contribution savings and investment plans)
and monitoring compliance with applicable laws and Company policies and
objectives |
Communication with
the Board
If you wish to
communicate with the Board you may send correspondence to: Corporate Secretary,
Deere & Company, One John Deere Place, Moline, Illinois
61265-8098.
The Corporate Secretary will submit your
correspondence to the Board or the appropriate committee, as
applicable.
You may also communicate directly with the
Presiding Director of the Board by sending correspondence to: Presiding
Director, Board of Directors, Deere & Company, Department A, One John Deere
Place, Moline, Illinois 61265-8098.
Political
Contributions
To promote
transparency and good corporate citizenship, we have since 2012 provided
voluntary disclosure relating to the political contribution activities of the
Company and its political action committee. This information is publicly
available at www.deere.com/politicalcontributions.
Compensation of
Directors
We have structured the compensation of our
nonemployee directors with the following objectives in mind:
● |
Recognize the substantial
investment of time and expertise necessary for the directors to discharge
their duties to oversee the global affairs of the
Company |
● |
Align the directors interests
with the long-term interests of our stockholders |
● |
Ensure that the compensation
is easy to understand and is regarded positively by our stockholders and
employees |
We pay nonemployee directors an annual
retainer along with additional fees to committee chairpersons and the Presiding
Director as described below. We do not pay any other committee retainers or
meeting fees. In addition, nonemployee directors
15
Table of Contents
|
Compensation of
Directors |
are awarded restricted stock units
(RSUs) after each annual meeting during their service as directors. A person
who becomes a nonemployee director between annual meetings or who serves a
partial term receives a prorated retainer and a prorated RSU award. We also
reimburse directors for expenses related to meeting attendance. Directors who
are employees receive no additional compensation for serving on the Board or its
committees. Compensation for nonemployee
directors is reviewed annually by the Corporate Governance Committee. No changes
to nonemployee director compensation were approved in fiscal 2015. The following
chart describes amounts we pay and the value of awards we grant to nonemployee
directors:
Date Approved by Corporate |
|
|
Governance Committee: |
August 2013 |
Effective Date of Annual Amounts: |
January 2014 |
Retainer |
$ |
120,000 |
Equity Award |
$ |
120,000 |
Presiding Director
Fee |
$ |
20,000 |
Audit Review Committee Chair Fee |
$ |
20,000 |
Compensation Committee
Chair Fee |
$ |
20,000 |
Corporate Governance Committee Chair
Fee |
$ |
15,000 |
Finance Committee Chair Fee* |
$ |
15,000 |
* The Finance Committee chair fee was
approved by the Corporate Governance Committee and the full Board in December
2015 in connection with the formation of the Finance Committee and will be paid
to the chair of the Finance Committee in fiscal 2016. The chair fee for the
Pension Plan Oversight Committee, the dissolution of which will become effective
in February 2016, was $10,000 per year.
Under our Nonemployee Director Deferred
Compensation Plan, directors may choose to defer some or all of their annual
retainers until their retirement as a director. A director may elect to have
these deferrals invested in either an interest-bearing account or an account
with a return equivalent to an investment in Deere common stock.
Prior to fiscal 2008, nonemployee
directors received their equity awards in the form of restricted shares. Since
fiscal 2008, directors have received their equity awards in the form of RSUs. In
fiscal 2012, the Board adopted stock ownership guidelines requiring each
nonemployee director to own Company common stock equivalent in value to at least
three times the directors annual cash retainer. This ownership level must be
achieved within five years of the date the director joins the Board. Restricted
shares, RSUs, and any common stock held personally by the nonemployee director
are included in determining whether the applicable ownership requirement has
been achieved. Other than Mr. Johanns, who was first elected to the Board in
January 2015, Mr. Stockton and Ms. Talton, who were first elected to the Board
in May 2015, and Mr. Krzanich, who was
first elected to the Board in January
2016, each nonemployee director has achieved stockholdings in excess of the
applicable multiple as of the date of this Proxy Statement. Additionally, we
require nonemployee directors to hold all equity awards until the occurrence of
one of the following triggering events: retirement from the Board, total and
permanent disability, death, or a change in control of Deere combined with a
qualifying termination of the director. The directors are prohibited from
selling, gifting, or otherwise disposing of their equity awards prior to the
occurrence of a triggering event. While the restrictions are in effect, the
nonemployee directors may vote the restricted shares (but not shares underlying
RSUs) and receive dividends on the restricted shares and dividend equivalents on
the RSUs.
In fiscal 2015, we provided the following
compensation to our nonemployee directors:
|
|
|
|
|
|
Nonqualified |
|
|
|
|
Fees Earned |
|
|
|
|
Deferred |
|
|
|
|
or Paid in |
|
Stock |
|
Compensation |
|
|
|
Name* |
Cash (1) |
|
Awards (2) |
|
Earnings
(3) |
|
Total |
Crandall C.
Bowles |
$ |
135,000 |
|
|
$ |
119,966 |
|
$ |
|
|
|
$ |
254,966 |
Vance D. Coffman |
$ |
140,000 |
|
|
$ |
119,966 |
|
$ |
|
|
|
$ |
259,966 |
Charles O. Holliday,
Jr. |
$ |
160,000 |
|
|
$ |
119,966 |
|
$ |
|
|
|
$ |
279,966 |
Dipak C. Jain |
$ |
120,000 |
|
|
$ |
119,966 |
|
$ |
20,610 |
|
|
$ |
260,576 |
Michael O. Johanns
(4) |
$ |
100,000 |
|
|
$ |
135,637 |
|
$ |
|
|
|
$ |
235,637 |
Clayton M. Jones |
$ |
120,000 |
|
|
$ |
119,966 |
|
$ |
|
|
|
$ |
239,966 |
Joachim Milberg |
$ |
120,000 |
|
|
$ |
119,966 |
|
$ |
|
|
|
$ |
239,966 |
Richard B. Myers |
$ |
120,000 |
|
|
$ |
119,966 |
|
$ |
|
|
|
$ |
239,966 |
Gregory R. Page |
$ |
120,000 |
|
|
$ |
119,966 |
|
$ |
843 |
|
|
$ |
240,809 |
Thomas H. Patrick (5) |
$ |
130,000 |
|
|
$ |
119,966 |
|
$ |
|
|
|
$ |
249,966 |
Sherry M. Smith |
$ |
120,000 |
|
|
$ |
119,966 |
|
$ |
2,122 |
|
|
$ |
242,088 |
Dmitri L. Stockton (6) |
$ |
50,000 |
|
|
$ |
93,441 |
|
$ |
|
|
|
$ |
143,441 |
Sheila G. Talton
(6) |
$ |
50,000 |
|
|
$ |
93,441 |
|
$ |
|
|
|
$ |
143,441 |
* Brian M. Krzanich did not receive any
compensation in fiscal 2015 and as such is not included in this
table.
(1) All fees earned in fiscal 2015 for
services as a director, including Committee Chairperson and Presiding Director
fees, whether paid in cash or deferred under the Nonemployee Director Deferred
Compensation Plan, are included in this column.
(2) Represents the aggregate grant date
fair value of RSUs computed in accordance with Financial Accounting Standards
Board (FASB) Accounting Standards Codification (ASC) Topic 718, Compensation
Stock Compensation, and does not correspond to the actual value that will be
realized by the nonemployee directors. The values in this column exclude the
effect of estimated forfeitures. All grants are fully expensed in the fiscal
year granted based on the grant price (the average of the high and low price for
Deere common stock on the grant date). For fiscal 2015, the grant date was March
4, 2015, and the grant price was $90.54.
16
Table of Contents
|
Security Ownership of Certain
Beneficial Owners and
Management |
The nonemployee director grant date is
seven calendar days after the Annual Meeting. The assumptions made in valuing
the RSUs reported in this column are discussed in Note 24, Stock Option and
Restricted Stock Awards, of our consolidated financial statements filed with
the SEC on Form 10-K for the fiscal year ended October 31, 2015. The following
table lists the cumulative restricted shares and RSUs held by the nonemployee
directors as of October 31, 2015:
|
Restricted |
|
|
Director Name* |
Stock |
|
RSUs |
Crandall C.
Bowles |
19,916 |
|
13,245 |
Vance D. Coffman |
6,532 |
|
13,245 |
Charles O. Holliday,
Jr. |
1,160 |
|
13,245 |
Dipak C. Jain |
13,234 |
|
13,245 |
Michael O.
Johanns |
|
|
1,507 |
Clayton M. Jones |
824 |
|
13,245 |
Joachim Milberg |
10,708 |
|
13,245 |
Richard B. Myers |
3,176 |
|
13,245 |
Gregory R. Page |
|
|
3,697 |
Thomas H. Patrick |
19,252 |
|
13,245 |
Sherry M. Smith |
|
|
5,847 |
Dmitri L. Stockton |
|
|
991 |
Sheila G. Talton |
|
|
991 |
* Brian M. Krzanich did not hold any
restricted shares or RSUs as of October 31, 2015 and as such is not included in
this table.
(3) Directors are eligible to participate
in the Nonemployee Director Deferred Compensation Plan. Under this plan,
participants may defer part or all of their annual cash compensation. For these
deferrals, two investment choices are available:
● |
an interest-bearing alternative that
pays interest at the end of each calendar quarter (i) for amounts deferred
during or after fiscal 2010 at a rate based on the Moodys A-rated
Corporate Bond Rate and (ii) for amounts deferred prior to fiscal 2010 at
a rate based on the prime rate as determined by the Federal Reserve
Statistical Release plus 2%; or |
● |
an equity alternative denominated in
units of Deere common stock that earns additional shares each quarter at
the quarterly dividend rate on Deere common
stock. |
Amounts included in this column represent
the above-market earnings on any amounts deferred under the Nonemployee Director
Deferred Compensation Plan. Above-market earnings represent the difference
between the interest rate used to calculate earnings under the applicable
investment choice and 120% of the applicable federal long-term
rate.
(4) Mr. Johanns was elected to the Board
effective January 8, 2015. His compensation amounts reflect a partial year award
for the retainer fees for the period from January 2015 through October 2015, a
pro-rated RSU award for the period from January 8, 2015 through the February
2015 annual meeting, and a full RSU award granted in March 2015.
(5) The amount set forth in the Fees
Earned or Paid in Cash column for Mr. Patrick includes the $10,000 fee Mr.
Patrick received in fiscal 2015 for his services as Chair of the Pension Plan
Oversight Committee, which will be dissolved effective February 2016.
(6) Mr. Stockton and Ms. Talton were
elected to the Board effective May 27, 2015. Their compensation amounts reflect
a partial year award for the retainer fees for the period from June 2015 through
October 2015 and a pro-rated RSU award for the period from May 27, 2015 through
the February 2016 annual meeting.
Security Ownership of
Certain Beneficial Owners and Management
The following table shows the number of
shares of Deere common stock beneficially owned as of December 31, 2015 (unless
otherwise indicated) by:
● |
each person who, to our knowledge,
beneficially owns more than 5% of our common
stock; |
● |
each individual who was serving as a
nonemployee director as of December 31, 2015; |
● |
each of the named executive officers
listed in the Summary Compensation Table of this Proxy Statement;
and |
● |
all individuals who served as
directors or executive officers on December 31, 2015, as a
group. |
A beneficial owner of stock is a person
who has sole or shared voting power, meaning the power to control voting
decisions, or sole or shared investment power, meaning the power to cause the
sale or other disposition of the stock (represented in column (a) below). A
person is also considered the beneficial owner of shares to which that person
has the right to acquire beneficial ownership (within the meaning of the
preceding sentence) within 60 days. For this reason, the following table
includes exercisable stock options (represented in column (b) below) and
options, restricted shares, and RSUs that would become exercisable or be settled
within 60 days of December 31, 2015 at the discretion of an individual
identified in the table (for example, upon retirement) (represented in column
(c) below).
17
Table of Contents
Security
Ownership of Certain Beneficial Owners and
Management |
All individuals listed in the table have
sole voting and investment power over the shares unless otherwise noted. As of
December 31, 2015, Deere had no preferred stock issued or
outstanding.
|
|
Shares |
|
|
|
Options, Restricted |
|
|
|
|
|
|
|
|
|
|
Beneficially |
|
|
|
Shares, and RSUs |
|
|
|
|
|
|
|
|
|
|
Owned |
|
Exercisable |
|
Available |
|
|
|
|
|
Percent of |
|
|
And Held |
|
Options |
|
Within 60 Days |
|
|
|
|
|
Shares |
|
|
(a) |
|
(b) |
|
(c) |
|
Total |
|
Outstanding |
Greater Than
5% Owners |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cascade Investment, L.L.C. (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2365 Carillon Point |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kirkland, WA 98033 |
|
30,508,573 |
|
|
|
|
|
|
|
|
30,508,573 |
|
|
|
9.6 |
% |
The Vanguard
Group, Inc. (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 Vanguard
Blvd. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Malvern, PA 19355 |
|
20,955,862 |
|
|
|
|
|
|
|
|
20,955,862 |
|
|
|
6.6 |
% |
|
Non-Employee
Directors (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crandall C. Bowles |
|
2,800 |
|
|
|
|
33,161 |
|
|
|
35,961 |
|
|
|
* |
|
Vance D.
Coffman |
|
|
|
|
|
|
19,777 |
|
|
|
19,777 |
|
|
|
* |
|
Charles O. Holliday, Jr. |
|
|
|
|
|
|
14,405 |
|
|
|
14,405 |
|
|
|
* |
|
Dipak C.
Jain |
|
|
|
|
|
|
26,479 |
|
|
|
26,479 |
|
|
|
* |
|
Michael O. Johanns |
|
|
|
|
|
|
1,507 |
|
|
|
1,507 |
|
|
|
* |
|
Clayton M.
Jones |
|
|
|
|
|
|
14,069 |
|
|
|
14,069 |
|
|
|
* |
|
Joachim Milberg |
|
|
|
|
|
|
23,953 |
|
|
|
23,953 |
|
|
|
* |
|
Richard B.
Myers |
|
|
|
|
|
|
16,421 |
|
|
|
16,421 |
|
|
|
* |
|
Gregory R. Page |
|
3,750 |
|
|
|
|
3,697 |
|
|
|
7,447 |
|
|
|
* |
|
Thomas H.
Patrick |
|
|
|
|
|
|
32,497 |
|
|
|
32,497 |
|
|
|
* |
|
Sherry M. Smith |
|
|
|
|
|
|
5,847 |
|
|
|
5,847 |
|
|
|
* |
|
Dmitri L.
Stockton |
|
|
|
|
|
|
991 |
|
|
|
991 |
|
|
|
* |
|
Sheila G. Talton |
|
|
|
|
|
|
991 |
|
|
|
991 |
|
|
|
* |
|
|
Named
Executive Officers (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel R. Allen |
|
141,174 |
|
868,737 |
|
|
130,073 |
|
|
|
1,139,984 |
|
|
|
* |
|
James M.
Field |
|
26,657 |
|
121,786 |
|
|
|
|
|
|
148,443 |
|
|
|
* |
|
Jean H. Gilles |
|
26,633 |
|
148,840 |
|
|
25,905 |
|
|
|
201,378 |
|
|
|
* |
|
Rajesh
Kalathur |
|
9,085 |
|
95,986 |
|
|
|
|
|
|
105,071 |
|
|
|
* |
|
Michael J. Mack, Jr. |
|
45,744 |
|
116,425 |
|
|
27,507 |
|
|
|
189,676 |
|
|
|
* |
|
|
All directors and executive
officers as a group (22 persons) (5) |
|
308,323 |
|
1,663,008 |
|
|
402,739 |
|
|
|
2,374,070 |
|
|
|
* |
|
* Less than 1% of the outstanding shares
of Deere common stock.
(1) The ownership information for Cascade Investment,
L.L.C. (Cascade) is based on information supplied by Cascade in a statement on
Schedule 13D filed with the SEC on June 1, 2015. All shares of common stock held
by Cascade may be deemed beneficially owned by William H. Gates III as the sole
member of Cascade. Cascade has sole voting power and sole dispositive power over
30,508,573 shares owned.
(2) The ownership information for The
Vanguard Group, Inc. (Vanguard) is based on information supplied by Vanguard
in a statement on Schedule 13G filed with the SEC on February 10, 2015. Vanguard
holds the shares in its capacity as a registered investment advisor on behalf of
numerous investment advisory clients, none of which is known to own more than
five percent of Deeres shares. Vanguard has sole voting power over 613,320
shares owned and sole dispositive power over 20,370,403 shares
owned.
18
Table of Contents
Review and
Approval of Related Person
Transactions |
(3) The table includes restricted shares
and RSUs awarded to directors under the Deere & Company Nonemployee Director
Stock Ownership Plan (see footnote (2) to the Fiscal 2015 Director Compensation
Table). Restricted shares and RSUs may not be transferred prior to retirement as
a director. RSUs are payable only in Deere common stock following retirement and
have no voting rights until they are settled in shares of stock. In addition,
directors own the following number of deferred stock units, which are payable
solely in cash under the terms of the Nonemployee Director Deferred Compensation
Plan:
Director |
|
Deferred Units |
Crandall C.
Bowles |
|
|
38,890 |
|
Vance D. Coffman |
|
|
23,559 |
|
Dipak C. Jain |
|
|
6,867 |
|
Michael O. Johanns |
|
|
1,464 |
|
Gregory R. Page |
|
|
2,174 |
|
Thomas H. Patrick |
|
|
14,195 |
|
Dmitri L.
Stockton |
|
|
906 |
|
(4) See the Outstanding Equity Awards at
Fiscal 2015 Year-End table for additional information regarding equity ownership
for NEOs as of October 31, 2015.
(5) The number of shares shown for all
directors and executive officers as a group includes 124,982 shares owned
jointly with family members over which the directors and executive officers
share voting and investment power.
Review and Approval of
Related Person Transactions
The Board has adopted a Related Person
Transactions Approval Policy (the Related Person Policy). Under the Related
Person Policy, our Corporate Governance Committee is responsible for reviewing,
approving, and/or ratifying all related person transactions.
The following are considered to be
related persons under the Related Person Policy:
(1) executive officers and
directors of Deere;
(2) any holder of 5% or more of Deeres voting securities;
and
(3) immediate family members of anyone in categories (1) or (2).
A related
person transaction is a transaction, relationship, or arrangement between a
related person and Deere where:
● |
the amount involved exceeds $120,000; and |
● |
any related person (as defined
above) has or will have a direct or indirect material interest in the
transaction. |
Each year, our directors and executive
officers complete questionnaires designed to elicit information about potential
related person transactions. In addition, the directors and officers must
promptly advise our Corporate Secretary if there are any changes to the
information they previously provided. After consultation with our General
Counsel, management, and outside counsel, as appropriate, our Corporate
Secretary determines whether the transaction is reasonably likely to be a
related person transaction. Transactions deemed reasonably likely to be related
person transactions are submitted to the Corporate Governance Committee for
consideration at its next meeting. If action is required prior to the next
meeting, the transaction is submitted to the Chairperson of the Corporate
Governance Committee (the Chairperson) and the Chairpersons determination is
then reported to the Corporate Governance Committee at its next
meeting.
When evaluating potential related person
transactions, the Corporate Governance Committee
or the Chairperson, as applicable, considers all reasonably available relevant
facts and circumstances and approves only those related person transactions
determined in good faith to be in compliance with or not inconsistent with our
Code of Ethics, Code of Business Conduct, and the best interests of our
stockholders.
Patrick E. Mack, formerly an employee in
the Companys Financial Services division, is the brother of Michael J. Mack,
Jr., the Group President of that division. Patrick E. Mack retired in fiscal
2015. Prior to retirement, Patrick E. Mack received $637,577 in direct cash
compensation in fiscal 2015, along with stock options valued at $275,065 at the
time of grant (33% of which were forfeited based on the timing of Mr. Macks
retirement see footnote (5) to Fiscal 2015 Potential Payments upon Termination
of Employment Other than Following a Change in Control for further information
regarding forfeiture of stock options in the event of retirement). Patrick E.
Macks fiscal 2015 compensation was consistent with that of other employees at
the same grade level. Because Patrick E. Mack was no longer an active employee
at the end of the fiscal year and because his employment relationship had
previously been approved by the Corporate Governance Committee, this transaction
was not required to be submitted to the Corporate Governance Committee for
approval pursuant to the Related Person Policy.
19
Table of Contents
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange
Act of 1934, as amended (the Exchange Act), requires our directors, certain of
our officers, and persons who own more than 10% of a registered class of our
equity securities to file reports of ownership and changes in ownership with the
SEC. These individuals are required by SEC regulations to furnish Deere with
copies of all such Section 16(a) forms.
We help our directors and officers prepare
and file the required reports. We have established procedures where the
directors and officers (and others on their behalf) provide us with the relevant
information regarding their transactions in Deere shares. Based on this
information, we prepare and file the required ownership reports on behalf of the
directors and officers. We have reviewed the reports we prepared and filed. In
addition, our directors and officers have made written statements to us
regarding their Deere stock ownership and reports. Based solely upon a review of
these statements and reports, we believe that all Section 16(a) filing
requirements applicable to our insiders were complied with during
2015.
20
Table of Contents
Item 2 Advisory Vote
on
Executive Compensation
In accordance with Section 14A of the
Exchange Act, we are asking our stockholders to approve, on an advisory basis,
the compensation of the executives named in the Summary Compensation Table of
this Proxy Statement (the Named Executive Officers or NEOs) as disclosed in
the Compensation Discussion & Analysis (CD&A) and tabular and
narrative executive compensation disclosures of this Proxy Statement. The
Companys practice, which was approved by its stockholders at the 2011 annual
meeting, is to conduct this non-binding vote on an annual basis.
SUPPORTING STATEMENT
Pay for
Performance
Deeres compensation
philosophy is to pay for performance, support Deeres business strategies, and
offer competitive compensation arrangements. Our compensation programs consist
of elements designed to complement one another and reward achievement of
short-term and long-term objectives. The metrics used for our incentive programs
are associated with operating performance or based upon a function of the
Companys stock price with linkage to revenue growth and total shareholder
return (TSR). See the Pay for Performance
for Three Years Ended October 31, 2014 graph
in the Executive Summary of the CD&A, which highlights our success in
aligning executive compensation with the Companys financial
performance.
Program
Design
In the CD&A, we provide
stockholders with a detailed description of our compensation programs and
philosophy. Our compensation approach is supported by the following principles,
among others, as fully described in the CD&A:
● |
Attracting, retaining, and motivating high-caliber
executives |
● |
With greater responsibility, placing a larger portion of total
compensation at-risk with a larger portion tied to long-term
incentives |
● |
Recognizing the cyclical nature of our equipment businesses and
the need to manage value throughout the business cycle |
● |
Providing opportunity for NEOs to be long-term stockholders of
Deere |
● |
Structuring compensation
programs to be regarded positively by our stockholders and
employees |
The Board believes that the executive
compensation as disclosed in the CD&A, tabular disclosures, and other
narrative executive compensation disclosures in this Proxy Statement is
consistent with our compensation philosophy and aligns with the pay practices of
our peer group.
FOR THE REASONS STATED, THE BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE FOLLOWING NON-BINDING
RESOLUTION: RESOLVED, that the stockholders approve the compensation of
the NEOs as disclosed in this Proxy Statement pursuant to the compensation
disclosure rules of the SEC, including the CD&A, tabular disclosures,
and other narrative executive compensation
disclosures. |
Effect of
Proposal
The say-on-pay resolution
is non-binding. The approval or disapproval of this proposal by stockholders
will not require the Board or the Compensation Committee to take any action
regarding the Companys executive compensation practices. The final decision on
the compensation and benefits of our NEOs and on whether, and if so, how, to
address stockholder disapproval remains with the Board and the Compensation
Committee. The Board believes that the Compensation Committee is in the best
position to consider the extensive information and factors necessary to make
independent, objective, and competitive compensation recommendations and
decisions that are in the best interests of the Company and its
stockholders.
The Board values the opinions of the
Companys stockholders as expressed through their votes and other
communications. Although the resolution is non-binding, the Board and the
Compensation Committee will carefully consider the outcome of the advisory vote
and those opinions when making future compensation
decisions.
21
Table of Contents
Compensation
Discussion & Analysis
In this section, we provide a detailed
description of our compensation programs, including the philosophy and strategy
underpinning the programs, the individual elements of the programs, the
methodology and processes used by the Board and the Compensation Committee (the
Committee) to make compensation decisions, and the relationship between
Company performance and compensation delivered in fiscal 2015. The discussion in
this CD&A focuses on the compensation of our CEO, CFO, and the next three
most highly compensated executive officers (the NEOs) for the fiscal year
ended October 31, 2015, who were:
Name |
|
Title |
Samuel R. Allen |
|
Chairman and Chief Executive Officer |
Rajesh Kalathur |
|
Senior Vice President and Chief Financial Officer |
James M. Field |
|
President, Agricultural Equipment
Operations |
Jean
H. Gilles |
|
Senior Vice
President, John Deere Power Systems, Worldwide Parts Services, Advanced
Technology and Engineering, and Global Supply Management and
Logistics |
Michael J. Mack, Jr. |
|
Group President, John Deere Financial Services, Global
Human Resources, and Public
Affairs |
Executive
Summary
Our compensation strategy
is designed to motivate our NEOs and salaried employees to execute our business
strategy and strive for higher Company performance while maintaining our core
values of quality, innovation, integrity, and commitment. In order to ensure
that our compensation strategy aligns with our core values and drives
performance across the Company, we regularly compare our compensation practices
and governance against market best practices. Here are some of the best
practices we have incorporated into our compensation programs:
● |
We use a combination of short-term and long-term incentives to
ensure a strong connection between Deeres performance and actual
compensation delivered. |
● |
We do not enter into employment agreements with our executives
except where legally required. |
● |
Burn rate and dilution associated with our equity incentive
program are reviewed annually by the Committee and have historically been
competitive within our peer group. |
● |
Our equity incentive plan prohibits us from: (i) granting stock
options with an exercise price less than the fair market value of the
Companys common stock on the date of grant; (ii) re-pricing stock options
without the prior approval of our stockholders; (iii) cashing out
underwater stock options; and (iv) including reload provisions in any
stock option grant. |
● |
We annually conduct a review of all our compensation plans,
policies, and significant practices as well as a comprehensive review of
risks associated with compensation. |
● |
Our executive officers
(including the NEOs) participate in Company
benefits programs (including health care, life insurance, disability, and
retirement plans) on the same basis as other full-time employees of the
Company. |
● |
We do not provide tax gross ups for executives except for those
available to all employees generally. We do not provide excise tax gross
ups upon a change in control to any employees. |
● |
We include a double-trigger change in control provision in
our executive Change in Control Severance Program as well as our current
equity plan, under which participants will receive severance benefits only
if both a change in control and qualifying termination occur. |
● |
Executive perquisites are limited and reviewed annually by the
Committee. |
● |
The Committee and Company management regularly evaluate our
peer group and pay positioning under a range of performance
scenarios. |
● |
The Committee is advised by an independent compensation
consultant that does not perform other significant services for the
Company. |
● |
We have adopted an Executive Incentive Compensation
Recoupment Policy to ensure accountability in the
presentation of our financial statements. |
● |
We have established stock ownership requirements to ensure the
retention of stock by our directors and executives and strengthen the
relationship between compensation and performance. |
● |
We prohibit all directors and employees, including our
executive officers, and their related persons from engaging in short sales
of the Companys stock or trading in instruments designed to hedge against
price declines by the Companys stock. |
● |
We prohibit our directors
and officers from holding Company securities in margin accounts or
pledging Company securities as collateral for loans or other
obligations. |
In addition to the practices described
above, we have raised the primary performance goals under our Short-Term
Incentive (STI) plan starting in fiscal 2016. We have also modified the
investment options available under our Defined Contribution Restoration Plan
(which allows
22
Table of Contents
Compensation Discussion
& Analysis: Executive
Summary |
certain executives to defer 401(k)
contributions that would otherwise be limited by the U.S. Internal Revenue Code
(IRC)), effectively eliminating the ability of participants to achieve
above-market returns on new deferrals. These actions exemplify the commitment of
the Company and the Committee to continually review and modify our compensation
programs to enhance the relationship between pay and performance and ensure
alignment with our business strategy.
Pay for Performance Review and
Analysis
Pay for performance is an
essential component of our longstanding compensation philosophy. Our
compensation approach is designed to motivate our executives, including our
NEOs, to substantially contribute individually and collaboratively to the
Companys long-term, sustainable growth and help us achieve our aspiration to
distinctively serve our customers those linked to the land through a great
business. To achieve this aspiration, our business strategy is grounded in the
following core success factors:
● |
Exceptional operating performance; |
● |
Disciplined growth of shareholder value added (SVA);
and |
● |
Aligned high-performance
teamwork. |
We continue to demonstrate our commitment
to stockholders through our performance-based compensation programs using
metrics that align with our business strategy:
● |
To align compensation
with exceptional
operating performance, we use Operating Return on Operating Assets
(OROA) and Return on Equity (ROE) as the metrics for our STI plan.
These metrics are designed to incentivize the efficient use of assets and
capital. STI goals are adjusted based on the Companys position within the
business cycle to ensure the level of difficulty of earning STI awards
will be comparable for a range of sales volumes and capacity utilization
levels. |
2015 OROA Performance
● |
To align compensation with
disciplined growth, we use SVA as the metric for our Mid-Term Incentive
(MTI) plan. SVA measures our success in delivering sustained growth in
economic profitability. |
Deere Enterprise SVA
● |
To align compensation with
stockholder experience, our Long-Term Incentive (LTI) plan utilizes
stock options and restricted stock units (RSUs), whose ultimate values
are tied to the Companys stock price, and performance stock units
(PSUs), the ultimate value of which also depends on relative revenue
growth and TSR as compared to the S&P Industrial
Sector. |
PSU Performance Metrics for 3-Year
Period Ended 10/31/15
23
Table of Contents
Compensation Discussion
& Analysis: Executive
Summary |
The following chart describes the direct
and indirect components of our compensation strategy:
COMPENSATION STRATEGY
TOTAL DIRECT COMPENSATION |
TOTAL INDIRECT COMPENSATION |
Short-Term Compensation |
Long-Term Compensation |
Other Compensation and
Benefits |
Base Salary |
STI |
MTI |
LTI |
Fixed cash component |
Annual cash award for
profitability and efficient operations during the fiscal year |
Cash award for sustained
profitable growth during a multi-year period |
Equity award for creation of
stockholder value, as reflected by the Companys stock price, with linkage
to revenue growth and TSR |
Perquisites; Retirement Benefits;
Deferred Compensation Benefits; Additional Benefits Payable upon a
Change-in-Control Event |
As our NEOs assume greater responsibility,
our pay for performance approach provides that: (1) a larger portion of their
total compensation should be at-risk in the form of short-term, mid-term, and
long-term incentive awards; and (2) a larger proportion of their incentive
awards should be in the form of long-term
awards, in order to drive sustainable
growth of stockholder value. The following chart illustrates the allocation of
all fiscal 2015 Total Direct Compensation components at target for our CEO and
for our other NEOs as a group. This chart highlights the Companys emphasis on
long-term and at-risk compensation.
2015 Target Direct Compensation Mix
for Named Executive Officers
24
Table of Contents
Compensation Discussion & Analysis: Executive
Summary |
The Committee believes that the Companys
Total Direct Compensation program is strongly aligned with stockholders
interests. Each performance metric is rigorously reviewed for alignment with
stockholder value creation and performance goals are consistently calibrated to
deliver meaningful value to stockholders. Even though financial results may not
always align with relative TSR results in the short run, the Committee believes
that the stockholders interests are best served over time by a balanced
compensation program that takes a long-term, holistic view of the Companys
business strategy and recognizes the cyclicality of the industries in which the
Company operates while also tying certain elements of compensation directly to
relative TSR results.
In addition, in light of recent stock
price performance as well as in recognition of current challenging business
conditions in the agriculture and construction industries, and in spite of
strong financial performance against performance goals previously established
under the STI and MTI programs, Mr. Allen has requested that the Board reduce
his cash incentive plan compensation for fiscal 2015. The Board considered Mr.
Allens request and agreed to exercise its discretion to reduce his cash
incentive awards by 25%, resulting in total payments under these awards of $1.8
million less than the amounts he would have otherwise earned based on
previously-approved plan metrics and goals and actual performance results (see
footnote (4) to the Fiscal 2015 Summary Compensation Table).
Consultant Review of Pay for
Performance Relative to Peer Group
In
the course of reviewing our overall executive compensation program, the
Committees consultant, Pearl Meyer, LLC (Pearl Meyer), reviewed the
relationship between total realizable compensation and our performance for the
three fiscal years ended October 31, 2014. This approach was selected because
this is the most recent time period coinciding with our fiscal year-end for
which corresponding compensation information is available for our peer
companies. The review was conducted to understand the degree of alignment
between total compensation delivered to our NEOs during the period and our
performance relative to our peer group as identified in the Market Analysis section
below. For purposes of this review, company performance is defined as TSR.
Total realizable compensation for Deeres NEOs is defined as the sum of the
following components:
1. Actual base salaries paid over the three-year period;
2. Actual STI awards paid over the three-year period;
3. The Black-Scholes value
as of October 31, 2014 of any stock options granted over the three-year
period;
4. The value as of October 31, 2014 of
RSUs granted over the three-year period;
5. The value as of October 31, 2014 of
PSUs reflecting actual performance for (i) the 2012-2014 performance cycle and
(ii) the in-process 2013-2015 and 2014-2016 performance cycles; and
6. The value of actual MTI payouts made
over the three-year period.
For peer company long-term incentives,
realizable pay includes cash- and equity-based long-term incentive plan and
performance share plan payouts for performance cycles fully contained within the
3-year period with award values multiplied by a factor that reflects grant
frequency and long-term incentive vehicle mix.
Pearl Meyers analysis, as shown in the
graph below, reveals that realizable pay for our CEO and the other NEOs was
reasonably aligned with Deeres relative TSR over the relevant time period.
Deere had the second lowest TSR in the peer group over that period while
realizable pay levels were between the 25th and 50th
percentiles for our CEO and well below the 25th percentile for our
other NEOs. Based on these results, combined with the results of past
comparisons of pay and performance alignment as discussed in our proxy
statements for previous years, we believe that our pay programs are effective at
ensuring that pay levels for our executives are aligned with
performance.
Pay for Performance for Three Years
Ended
October 31, 2014
Relative Total Shareholder
Return
vs. Peers
The Company works closely with the
Committee and the Committees outside consultant to continually review its
compensation programs to ensure that they meet the objectives of the Companys
compensation philosophy.
25
Table of Contents
Compensation Discussion &
Analysis: 2015 Compensation
Overview |
2015 Compensation
Overview
At Deere, we remain committed to
our longstanding compensation philosophy, which incorporates the principles of
paying for performance, supporting business strategies, and paying
competitively. The Committee believes this philosophy continues to drive our
NEOs and salaried employees to produce sustainable, positive results for the
Company and our stockholders.
Compensation Strategy and
Objectives
Our compensation strategy
includes Total Direct Compensation (base salary, short-term, mid-term, and
long-term incentive compensation) and Total Indirect Compensation (other
compensation and benefits). The award ranges and values for each of the
incentive compensation components are tied to our performance through
association with operating metrics or as a function of our stock price. As
discussed above, we have chosen financial metrics that align compensation with
our business strategy and our stockholders interests. This alignment is further
accomplished by keeping our metrics simple, transparent, and consistently
communicated from year to year. SVA, for example, has been published in our
annual report every year since 2002 in the section following the Chairmans
message.
Although this compensation strategy
applies to most salaried employees, this Proxy Statement focuses on its
applicability to our NEOs based on the following principles:
● |
Attract, retain, and motivate
high-caliber executives |
● |
With greater responsibility, place a
larger portion of total compensation at-risk with a larger portion tied
to long-term incentives |
● |
Provide the appropriate level of
reward for performance (below median total compensation for substandard
Company performance; median total compensation for median levels of
performance; and upper quartile total compensation for sustained upper
quartile performance) |
● |
Recognize the cyclical nature of our
equipment businesses and the need to manage value throughout the business
cycle |
● |
Provide opportunity for NEOs to be
long-term stockholders of the Company |
● |
Structure compensation programs to
meet the tax deductibility criteria of the IRC where
practicable |
● |
Structure compensation programs to
be regarded positively by our stockholders and
employees |
Compensation
Elements
The elements of our
compensation program are summarized in the table below:
Component |
Purpose |
Characteristics |
Fiscal 2015 Actions and Results |
Base Salary |
Reward for level of responsibility,
experience, and sustained individual performance |
Fixed cash component targeted at our
peer group median; Base salary can vary from the market due to individual
performance, experience, time in position, and internal equity
considerations |
Mr. Allen did not receive an
increase to base salary for 2015, while the other NEOs received increases
of 3-5% |
Discretionary Bonus Awards |
To recognize outstanding individual
achievement |
A cash award that may not exceed 20%
of base salary, except in unusual circumstances |
No discretionary bonuses were
awarded in fiscal 2015 to our NEOs |
Short-Term Incentive
(STI) |
Reward for the achievement of higher
profitability through operating efficiencies and asset management during
the fiscal year |
A target STI award is designed to
provide median annual cash compensation compared with our peer group when
combined with base salary and median overall compensation compared with
our peer group when combined with base salary, a target MTI award, and a
base-level LTI award |
Due to continued strong OROA and ROE
results, the STI payout was 199% of target, resulting in an STI award of
$2.8 million* for the CEO and awards ranging from $0.9 million to $1.1
million for the other NEOs |
Mid-Term Incentive
(MTI) |
Reward for the achievement of
sustained profitable growth over a multi-year performance
period |
Cash portion of long-term
compensation; A target MTI award is designed to provide median
compensation compared with our peer group in combination with base salary,
a target STI award, and a base-level LTI award |
Due to strong SVA results in the
first two years of the performance period, the MTI payout was 200% of
target, resulting in an MTI award of $2.7 million* for the CEO and awards
of approximately $1 million each for the other
NEOs |
* Reflects voluntary 25% reduction to CEO
cash incentive awards, as discussed elsewhere in this Proxy Statement
26
Table of Contents
Compensation Discussion &
Analysis: Compensation Methodology and Process |
Component |
Purpose |
Characteristics |
Fiscal 2015 Actions and Results |
Long-Term Incentive (LTI) |
Reward for the creation of
stockholder value as reflected by our stock price with linkage to revenue
growth and TSR |
Equity-based portion of long-term
compensation; A base-level LTI award is designed to provide median
compensation compared with our peer group when combined with base salary
and target STI and MTI awards and can be increased (up to 20%) or
decreased (down to $0) at the Committees discretion; Award is delivered
through a combination of PSUs, RSUs, and stock options; Ultimate value of
award depends on our stock price and operating performance |
In December 2014 the CEO received a
base-level LTI award valued at $7.6 million while the other NEOs LTI
awards were increased an average of 10% over base-level and ranged from
$1.4-$1.7 million |
Perquisites |
Provide our executives with selected
benefits commensurate with those provided to executives at our peer group
companies |
Types of compensation that
personally benefit an employee, are not related to job performance, and
are available to a select group of employees |
There were no changes to perquisites
in fiscal 2015 that affected our NEOs |
Retirement Benefits |
Provide income upon
retirement |
Defined benefit pension plans plus a
401(k) plan; Our matches to the 401(k) plan are based on the applicable
pension option and Company performance |
There were no changes to retirement
benefits in fiscal 2015 that affected our NEOs |
Deferred Compensation Benefits |
Allow executives to defer
compensation on a tax-efficient basis |
Executives can elect to defer base
salary, STI, or MTI into the Voluntary Deferred Compensation Plan;
Executives participating in the Contemporary pension option can defer
employee contributions and receive matching employer contributions under
the Defined Contribution Restoration Plan; RSUs may also be
deferred |
We modified the investment options
available under the Defined Contribution Restoration Plan, effectively
eliminating the ability of participants to achieve above-market returns on
new deferrals |
Potential Payments upon Change
in Control |
Encourage executives to operate in
the best interests of stockholders both before and after a Change in
Control event |
Contingent in nature; Most elements
are payable only if an NEOs employment is terminated as specified under
various plans |
There were no changes in fiscal 2015
that affected our NEOs |
Other
Potential Post-Employment Payments |
Provide potential payments under the
scenarios of death, disability, retirement, termination without cause or
for cause, and voluntary separation |
Contingent in nature; Amounts are
payable only if an NEOs employment is terminated as specified under the
arrangements of various plans |
There were no changes in fiscal 2015
that affected our NEOs |
Compensation Methodology and
Process
Independent Review and
Approval of Executive Compensation
The
Committee, all the members of which are independent under current NYSE listing
standards, is responsible for reviewing and approving goals and objectives
related to incentive compensation
for the majority of salaried employees.
The Committee evaluates the NEOs performances in relation to established goals
and ultimately approves the compensation for the NEOs (except for the CEO). See
the Board Committees section of this Proxy Statement for a detailed listing of
Committee responsibilities and members.
27
Table of Contents
Compensation Discussion &
Analysis: Compensation Methodology and Process |
The Committee does not delegate any
substantive responsibilities related to the compensation of NEOs and exercises
its independent judgment when approving executive compensation. No member of the
Committee is a former or current officer of Deere or any of its
subsidiaries.
The Committee periodically reviews
compensation delivery to ensure its alignment with our business strategy, the
Companys performance, and the interests of our employees and stockholders. In
addition, the Committee periodically reviews market practices for all
significant elements of executive compensation and approves necessary
adjustments to remain competitive.
The Corporate Governance Committee of the
Board directs an annual evaluation process of the CEO. Generally, at the Board
meeting in August of each year, the full Board (in executive session without the
CEO present) evaluates the CEOs performance. The Committee considers the
Boards evaluation when providing recommendations to the Board for the CEOs
compensation. The Committees recommendations for the CEOs compensation are
presented to and approved by the independent members of the Board. The CEO does
not play a role in and is not present during discussions regarding his own
compensation.
The CEO plays a significant role in
setting the compensation for the other NEOs. The CEO presents an evaluation of
each NEOs individual performance. The CEO also provides recommendations for
changes to the NEOs base salaries and LTI awards. Since the STI and MTI awards
are calculated using predetermined factors, the CEO does not provide
recommendations for changes to the other NEOs STI and MTI awards. The Committee
has the discretion to accept, reject, or modify the CEOs recommendations. The
other NEOs are not present during these discussions.
As part of its process for making
compensation decisions, the Committee reviews the results of the Companys most
recent annual advisory say-on-pay vote. A substantial majority (approximately
93%) of our stockholders who voted on the say-on-pay proposal in our fiscal
2014 proxy statement approved our executive compensation as described in the
CD&A and tabular and narrative disclosures. The Committee took account of
this strong level of stockholder support, among other things, in determining to
apply the same effective principles and philosophy in structuring our executive
compensation program for fiscal 2015.
The Role of the Compensation
Consultant
The Committee has retained
Pearl Meyer as its compensation consultant. Pearl Meyer reviews our executive
compensation program design and assesses our compensation approach relative to
our performance and the market. The Committee has sole responsibility for
setting and modifying Pearl Meyers compensation, determining the nature and
scope of its services, evaluating its performance, and terminating its
engagement and/or hiring another compensation consultant at any time.
Pearl Meyer attends Committee meetings,
reviews compensation data with the Committee, and participates in general
discussions regarding executive compensation issues. While the Committee
considers input from Pearl Meyer, ultimately the Committees decisions reflect
many factors and considerations. Management works with Pearl Meyer at the
Committees direction to develop materials and analysis essential to the
Committees compensation evaluations and determinations. Such materials include
competitive market assessments and summaries of current legal and regulatory
developments.
During fiscal 2015, Pearl Meyer performed
the following specific services:
● |
Provided information throughout the
fiscal year on executive compensation trends and external developments,
including regulatory changes |
● |
Provided an annual competitive
evaluation of total compensation for the NEOs, as well as overall
compensation program share usage, dilution, and fair value
expense |
● |
Reviewed the competitiveness of
actual pay delivered in relation to performance as compared against the
peer group |
● |
Provided recommendations on CEO
total compensation to the Committee at its December meeting, without prior
review by our CEO |
● |
Reviewed our CEOs compensation
recommendations with respect to the other NEOs |
● |
Reviewed Committee agendas and
supporting materials in advance of each meeting, and raised
questions/issues with management and the Committee Chair, as
appropriate |
● |
Provided guidance and
recommendations on incentive plan design, including rigor of metrics and
goals |
● |
Reviewed drafts and commented on the
CD&A and related compensation tables in the proxy
statement |
● |
Reviewed the peer group used for
market analyses and recommended no changes for fiscal
2015 |
Pearl Meyer periodically meets
independently with the Chair of the Committee to discuss compensation matters.
In addition, Pearl Meyer regularly participates in executive sessions with the
Committee (without any of the Companys personnel or executives present) to
discuss compensation matters. Pearl Meyer does not provide other significant
services to Deere and has no other direct or indirect business relationships
with Deere or any of its affiliates. Taking these and other factors into
account, the Committee has determined that the work performed by Pearl Meyer
does not raise any conflicts of interest. Additionally, based on its analysis of
the factors identified in the Committees charter as being relevant to
compensation consultant independence, the Committee has concluded that Pearl
Meyer is independent of the Companys management.
28
Table of Contents
Compensation Discussion &
Analysis: Fiscal 2015 Executive Compensation Peer Group |
Market
Analysis
To ensure that total
compensation for our NEOs aligns with the market, we compared our compensation
and performance against the companies in our executive compensation peer group.
This comparison includes an evaluation of the mix of cash versus equity
and short-term versus long-term
components. The companies in the peer group that we used in our fiscal 2015
market analysis process, listed in the chart below, are similar to Deere in
terms of sales volume, products, services, market capitalization, and/or global
presence.
Fiscal 2015 Executive Compensation Peer
Group
|
|
|
|
|
|
|
|
|
|
Revenues * |
|
Market Value 10/31/2015 |
Company |
|
Fiscal Year |
|
Employees * |
|
($MM) |
|
($MM) |
3M Company |
|
|
Dec 14 |
|
|
|
89,800 |
|
|
|
$31,821 |
|
|
|
$96,796 |
|
Alcoa Inc. |
|
|
Dec 14 |
|
|
|
59,000 |
|
|
|
$23,906 |
|
|
|
$11,699 |
|
The Boeing
Company |
|
|
Dec 14 |
|
|
|
165,500 |
|
|
|
$90,762 |
|
|
|
$99,205 |
|
Caterpillar Inc. |
|
|
Dec 14 |
|
|
|
114,233 |
|
|
|
$55,184 |
|
|
|
$42,497 |
|
Cummins Inc. |
|
|
Dec 14 |
|
|
|
54,600 |
|
|
|
$19,255 |
|
|
|
$18,386 |
|
E.I. du Pont de Nemours and
Company |
|
|
Dec 14 |
|
|
|
63,000 |
|
|
|
$34,906 |
|
|
|
$55,564 |
|
Eaton Corp. Plc |
|
|
Dec 14 |
|
|
|
102,000 |
|
|
|
$22,552 |
|
|
|
$25,875 |
|
Emerson Electric Co. |
|
|
Sep 15 |
|
|
|
110,800 |
|
|
|
$22,304 |
|
|
|
$31,037 |
|
General Dynamics
Corporation |
|
|
Dec 14 |
|
|
|
99,500 |
|
|
|
$30,852 |
|
|
|
$46,970 |
|
Honeywell International Inc. |
|
|
Dec 14 |
|
|
|
127,000 |
|
|
|
$40,306 |
|
|
|
$79,597 |
|
Illinois Tool Works
Inc. |
|
|
Dec 14 |
|
|
|
49,000 |
|
|
|
$14,484 |
|
|
|
$33,419 |
|
Johnson Controls, Inc. |
|
|
Sep 15 |
|
|
|
139,000 |
|
|
|
$37,179 |
|
|
|
$29,250 |
|
Lockheed Martin
Corporation |
|
|
Dec 14 |
|
|
|
112,000 |
|
|
|
$45,600 |
|
|
|
$67,553 |
|
Northrop Grumman Corporation |
|
|
Dec 14 |
|
|
|
64,300 |
|
|
|
$23,904 |
|
|
|
$34,242 |
|
PACCAR Inc |
|
|
Dec 14 |
|
|
|
23,300 |
|
|
|
$18,997 |
|
|
|
$18,691 |
|
Raytheon Company |
|
|
Dec 14 |
|
|
|
61,000 |
|
|
|
$22,826 |
|
|
|
$35,349 |
|
United Technologies
Corporation |
|
|
Dec 14 |
|
|
|
211,500 |
|
|
|
$64,270 |
|
|
|
$87,292 |
|
Whirlpool Corporation |
|
|
Dec 14 |
|
|
|
100,000 |
|
|
|
$19,872 |
|
|
|
$12,522 |
|
Xerox
Corporation |
|
|
Dec 14 |
|
|
|
147,500 |
|
|
|
$19,540 |
|
|
|
$ 9,506 |
|
|
|
75th Percentile |
|
|
|
|
|
|
117,425 |
|
|
|
$37,961 |
|
|
|
$58,561 |
|
Median |
|
|
|
|
|
|
99,750 |
|
|
|
$26,385 |
|
|
|
$33,831 |
|
25th Percentile |
|
|
|
|
|
|
60,500 |
|
|
|
$21,696 |
|
|
|
$23,870 |
|
|
|
Deere &
Company |
|
|
Oct 15 |
|
|
|
57,200 |
|
|
|
$28,863 |
|
|
|
$25,597 |
|
Deere Percentile |
|
|
|
|
|
|
16th |
|
|
|
53rd |
|
|
|
26th |
|
Source: Factset Research Systems,
Inc.
* Reflects employees and revenues
for last reported fiscal year
Compensation paid by our peer group is
representative of the compensation we believe is required to attract, retain,
and motivate executive talent. The Committee, in consultation with Pearl Meyer,
periodically reviews the peer group list to confirm that it continues to be an
appropriate point of reference for NEO compensation. No changes were made to the
peer group for fiscal 2015.
Total Direct Compensation
Elements
The following information
describes each direct compensation element, including discussion of performance
metrics where applicable.
Base Salary
In determining salary levels for each of our NEOs, the
Committee takes into consideration factors such as fulfillment of job
responsibilities, the financial and operational performance of the activities
directed by the NEO, experience, time in position, internal equity, and
potential. The Committee also considers each NEOs current salary as compared to
the salary range and the median salary practices of our peer group.
After considering the aforementioned
factors, the Board determined that the CEOs base salary for fiscal 2015 should
remain unchanged, while the Committee approved increases ranging from 3-5% for
the other NEOs. The resulting salary levels align with the market median for
similar positions except for Mr. Kalathur, whose base salary is below the market
median due to his relatively short time in the CFO position.
29
Table of Contents
Compensation Discussion &
Analysis: Total Direct Compensation Elements |
Short-Term Incentive
(STI)
Performance Metrics for
STI
The Committee believes that efficient
deployment of the Companys assets (both fixed and working capital) is a key
driver in creating long-term stockholder value. For this reason, the Committee
has designed the STI program to incentivize Deeres executives and most other
salaried employees to optimize asset efficiency throughout the business
cycle.
There are two metrics used in the
calculation of STI:
● |
OROA (Operating Return on Operating
Assets) for the Equipment Operations
(consisting of our worldwide Agriculture and Turf Operations and
Construction and Forestry Operations) |
● |
ROE (Return on Equity) for our
Financial Services segment |
The Committees rationale for using these
metrics and setting the performance goals for each metric are described in more
detail below.
OROA
Deere is primarily a manufacturing company with high investment in fixed
assets, such as buildings and machinery, and significant expenses with longer
term payoffs, such as research and development. Over the past decades, Deere has
experienced varying degrees of cyclicality in its Equipment Operations, which
are primarily tied to economic factors such as commodity prices (for example,
the price of corn and other crops) as well as the health of the housing and
infrastructure sectors. In 2004, Deere adopted a new strategy designed to enable
Deeres management to respond quickly and strategically to changing business
conditions and in turn drive sustained operational results across these volatile
cycles. A focus on OROA performance was and continues to be a key component of
this strategy. Because of this strategic alignment and because the Committee
believes OROA effectively measures the efficient use of the Equipment
Operations assets under varying business conditions, the Committee has selected
OROA as the STI performance metric for the Equipment
Operations.
OROA goals are determined based on actual
sales volumes for a fiscal year measured relative to mid-volume sales.
Mid-volume sales is calculated prior to the beginning of each fiscal year using
historical sales volumes, industry growth rates, and market share data, among
other considerations, and represents our view of the midpoint of a business
cycle. The mid-volume sales calculation is used not only for STI purposes, but
has also for more than 30 years served as a basis for measuring our achievement
of long-term business strategies, making decisions regarding manufacturing
capacity, and determining standard costs.
At the beginning of each fiscal year, the
Committee establishes OROA goals for minimum, target, and maximum STI payouts at
low volume, mid-volume, and high volume sales levels. These goals are
interpolated for sales volumes between low and mid-volume and between mid-volume
and high volume. By adjusting OROA goals to reflect operating leverage as sales
volumes change, the Committee believes the level of difficulty in attaining
targeted performance will be comparable for a range of sales volumes and
capacity utilization levels:
● |
When sales volumes and capacity
utilization are low compared to mid-volume, it is more difficult to cover
fixed costs and achieve high asset turnover; therefore, OROA goals are
lower; and |
● |
When sales volumes and capacity utilization are high
compared to mid-volume, it is easier to cover fixed costs and achieve high
asset turnover; therefore, OROA goals are higher. |
Using OROA as an STI performance metric
aligns employee decisions with our strategic approach to sound investment of
capital and asset utilization. This model encourages our management team to make
necessary structural changes, such as those related to capacity, margin
enhancements, and asset turnover for a given volume level.
For fiscal 2015, the Committee approved
the following OROA goals for the Equipment Operations:
2015 OROA Goals
% of Mid-Volume = Actual Sales /
Mid-Volume Sales
30
Table of Contents
Compensation Discussion &
Analysis: Total Direct Compensation Elements |
The Committee originally established OROA
goals for STI purposes for fiscal 2004 by comparing Deeres OROA performance to
that of the executive compensation peer group. The median OROA for the peer
group at that time was in the range of 10-15%. As such, Deeres target OROA at
mid-volume was set at 12%, which provides a reasonable approximation of Deeres
cost of capital and aligns with Deeres compensation strategy of median pay for
median levels of performance. OROA goals for minimum and maximum STI payouts
were set correspondingly to approximate 25th and 75th
percentile performance, respectively, relative to the peer group. Because peer
group OROA performance has essentially remained unchanged since 2004, the OROA
goals for the Equipment Operations described in the chart above have (except for
minor adjustments) been in place since that time.
ROE
ROE was selected as the STI performance metric for Financial Services
because the Committee believes it effectively measures the efficient use of the
segments equity. ROE is a standard metric used in the financial services
industry to measure levels of profitability relative to equity, and reflects the
fact that our Financial Services segment experiences different cash flow risk
characteristics and operates with significantly different debt-to-equity
leverage than the Equipment Operations. There are two distinct business models
within Financial Services, and we use different ROE goals for each:
● |
Under the subsidized business
model, the Equipment Operations provide
subsidies to Financial Services to reduce the interest rates that would
otherwise be paid by our customers and dealers on financial products. The
objective of this business is to facilitate sales by the Equipment
Operations, not to maximize Financial Services profitability. For this
reason, the ROE goal of 10% for the subsidized business is based on the
implied after-tax cost of equity for Financial Services, and is the same
for minimum, target, and maximum payout. We call this an SVA-neutral
return, as ROE at this level neither detracts from nor adds to aggregate
enterprise SVA (which, as discussed below in the Mid-Term Incentive (MTI) section, is a key measure of our economic
performance). |
● |
The term non-subsidized business
describes all Financial Services offerings that are not subsidized by the
Equipment Operations. The objective of this model is to efficiently
utilize equity in order to earn a profitable return. Consequently, the ROE
goals for this business become progressively more challenging to achieve
minimum, target, and maximum payout levels, respectively. The Committee
establishes goal levels based on financial services industry benchmarking
with similar financial services businesses ROEs at similar debt-to-equity
leverages and by evaluating cost of equity financial models. The minimum
goal equals the implied after-tax cost of equity for
|
Financial Services (which, as discussed
above, represents an SVA-neutral return), while the target and maximum ROE goals
are set at progressively higher levels to encourage management and employees to
efficiently utilize equity relative to industry standards and market conditions
while facilitating sales by the Equipment Operations.
ROE goals are adjusted based on the actual
mix of subsidized versus non-subsidized business in a fiscal year. Historically,
approximately 65-70% of Financial Services business is subsidized.
The Committee approved the following ROE
goals at the beginning of fiscal 2015:
Fiscal 2015 ROE Goals |
Minimum |
Target |
Maximum |
Subsidized Business |
10% |
10% |
10% |
Non-Subsidized Business |
10% |
13% |
16% |
These ROE goals have not changed since
fiscal 2011.
See Appendix B, Deere & Company Reconciliation of Non-GAAP
Measures, for additional information
regarding the calculation of OROA and ROE for fiscal 2015.
Revised Performance Metrics for Fiscal
2016
Since the adoption of OROA as an
enterprise-wide performance metric in 2004, Deere has significantly restructured
its Equipment Operations to enable more rapid responses to changing business
conditions. Business plans are rigorously reviewed and OROA is measured at the
enterprise and product-line levels to drive day-to-day decisions while also
maintaining focus on long-term business growth. As a result, over the past ten
years plus, Deeres OROA results have risen dramatically and been sustained at
above-upper quartile levels (relative to the peer group), even in trough
conditions, as depicted in the following graph (peer group data for 2015 is not
yet available):
OROA Deere vs. Peers
19972015
31
Table of Contents
Compensation Discussion &
Analysis: Total Direct Compensation Elements |
Because of Deeres sustained success in
delivering OROA performance under varying business conditions, and in
recognition of the fact that this performance has resulted in maximum or
near-maximum STI payouts in several recent fiscal years, the Committee has
concluded that it is appropriate to raise OROA goals for STI purposes. In
reaching this conclusion, the Committee has determined that relative peer group
performance (which, as
described in the graph above, has remained
essentially unchanged over time) should no longer be the primary benchmark for
setting Deeres OROA goals but rather that Deere should be measured relative to
its own capabilities and aspirations. With this in mind, the Committee has
approved the following significant increases to the OROA goals starting in
fiscal 2016 to reflect Deeres sustained business
transformation:
2016 OROA Goal Increases
% of Mid-Volume = Actual Sales /
Mid-Volume Sales
Performance
Weighting
For fiscal 2015, the various
business results were weighted to calculate STI as follows (which weighting has
not changed since fiscal 2011):
Equipment Operations
OROA |
50% |
Agriculture and Turf
Operations OROA |
25% |
Construction and Forestry
Operations OROA |
15% |
Financial Services
ROE |
10% |
Awards under the STI plan are capped at
200% of target rates. Payouts at this level can only be achieved when the
maximum performance goal for each component of the weighted STI performance
formula is met or exceeded.
The emphasis on the OROA performance of
the Equipment Operations and its constituent divisions in calculating STI
reflects the critical position these operations have as drivers of Deeres
business, with Equipment Operations net sales accounting for 89% of Deeres net
sales and revenues in fiscal 2015.
Approval of STI Rates
At the beginning of the fiscal year, after
review and consideration of Deeres peer group data for target cash bonuses, the
Committee approves target STI rates as a percentage of the NEOs base salary. A
target STI award is designed to provide median annual cash compensation compared
with our peer group when combined with base salary and median overall
compensation compared with our peer group when combined with base salary, a
target MTI award, and a base-level LTI award. In December 2014, the Committee
approved STI rates for fiscal 2015 as follows:
Target STI Rates: |
|
|
CEO |
125 |
% |
Other NEOs |
85 |
% |
Fiscal 2015 Performance Results for
STI
The charts below detail:
● |
The OROA performances of the
Agriculture and Turf Operations, the Construction and Forestry Operations,
and the overall Equipment Operations based on actual sales volumes;
and |
● |
Actual OROA and ROE performance
results in the context of the weighted STI
calculation. |
32
Table of Contents
Compensation Discussion &
Analysis: Total Direct Compensation Elements |
Fiscal 2015 Performance Results for
STI
% of Mid-Volume = Actual Sales/
Mid-Cycle Sales
|
|
|
|
|
|
|
|
|
|
|
|
A&T OROA:
16.2% Percent of Mid-Volume: 76% Result: Maximum (200% of
Target) |
|
|
C&F OROA:
14.4% Percent of Mid-Volume: 87% Result: Between Target and Maximum (193% of Target) |
|
|
Equipment Operations OROA: 15.7% Percent of Mid-Volume: 78% Result: Maximum (200% of
Target) |
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2015 |
|
Performance |
|
Fiscal 2015 Award |
|
|
|
|
Fiscal 2015 Performance Results for
STI |
Performance Results |
|
as % of Target |
|
Weighting |
|
Weighted Award
Results |
Equipment
Operations OROA |
15.7% |
|
200% |
|
50% |
|
|
100% |
|
Agriculture and
Turf Operations OROA |
16.2% |
|
200% |
|
25% |
|
|
50% |
|
Construction and
Forestry Operations OROA |
14.4% |
|
193% |
|
15% |
|
|
29% |
|
Financial
Services ROE (1) |
13.6% |
|
200% |
|
10% |
|
|
20% |
|
Actual Performance as % of
Target 199% (2) |
|
(1) Based on the actual ROE mix for the
subsidized (65%) versus non-subsidized (35%) business
(2) Had the higher OROA goals recently
approved for fiscal 2016 been in place for fiscal 2015, the final payout
percentage for fiscal 2015 would have been 191% of target
The amount of the STI award paid to an NEO
is calculated as follows:
Base salary for the fiscal year
x
Target STI rate (as described above)
x Actual performance as a percent of
target (up to a maximum of 200%)
= STI award amount
STI awards paid to NEOs are detailed in
the Fiscal 2015 Summary Compensation Table under footnote (4). At the request of
the CEO, the Board agreed to exercise its discretion to reduce the CEOs STI
compensation by 25% below the amount he would have otherwise earned for fiscal
2015 based on previously-approved plan metrics
and goals and actual performance results.
The Committee did not exercise its authority to decrease or eliminate the STI
awards for the other NEOs.
The STI plan and the results for fiscal
2015 described above are also used to determine the STI awards paid to most
other salaried employees worldwide. For fiscal 2015, STI awards paid to the NEOs
consisted of approximately 1.4% of the total amount of STI awards paid to all
eligible employees. Individual awards under the STI plan are capped at $5
million per performance period. The STI plan is periodically approved by our
stockholders and was last approved at the annual meeting in February
2015.
33
Table of Contents
Compensation Discussion &
Analysis: Total Direct
Compensation Elements |
Long-Term
Compensation
Long-term compensation
includes a combination of MTI and LTI. MTI is paid in cash and is considered
part of long-term compensation because multiple fiscal years are included in the
performance period. LTI, the equity-based portion of long-term compensation,
consisted of RSUs, PSUs, and stock options in fiscal 2015.
Mid-Term Incentive
(MTI)
Performance Metrics for
MTI
The MTI plan is designed to
incentivize executives and other salaried employees to create value over a
multi-year time period. The Committee believes that SVA (which essentially
represents pretax profit remaining after subtracting an implied cost of capital)
measures Deeres success in delivering sustained profitable growth. The
Committee selected SVA as the MTI performance metric because the Committee
believes that Deere should:
● |
earn, at a minimum, its weighted
average cost of capital each year; |
● |
ensure that investments in capital
and research and development earn their cost of capital;
and |
● |
ensure that acquisitions do not
dissipate stockholder value. |
SVA is fundamental to how Deere operates
its business at the corporate and business unit level, and has served as the MTI
performance metric since the plans inception in 2003. We believe that sustained
growth for Deere can be accomplished through a combination of revenue growth and
high returns on invested capital, both of which are reflected in SVA. To
illustrate this point, in the ten years preceding the implementation of MTI,
fiscal years 1994 through 2003, accumulated SVA, as reported, was negative $1.4
billion as compared to accumulated positive SVA of $17.8 billion in the ten most
recent fiscal years. Since it is based on enterprise-wide SVA, MTI encourages
teamwork across all units of our business. In addition, providing Deere
employees the opportunity to share in a portion of SVA fosters and reinforces a
culture of
ownership and alignment with stockholders,
which has been critical to Deeres long-term success. For fiscal 2015, the MTI
payout for all employees amounted to about 8% of average annual SVA over the
three-year performance period. See Appendix B, Deere & Company Reconciliation of Non-GAAP Measures, for an explanation regarding the calculation of
SVA.
The Committee has approved three-year
performance periods for MTI to emphasize and reward consistent, sustained
operating performance. The Committee conducts annual reviews of target and
maximum SVA goals. The accumulated maximum SVA goal for a three-year performance
period is (1) set at a level that reflects upper quartile return on invested
capital performance relative to our executive compensation peer group and (2)
calculated based on enterprise SVA at mid-volume sales levels for the first year
of that performance period plus compounded 7% annual growth for the remaining
two years. As explained in the Short-Term
Incentive (STI) section above, the
calculation of mid-volume sales levels is reviewed and adjusted annually using
historical sales volumes, industry growth rates, and market share data, among
other considerations. The target SVA goal is set at half of the maximum SVA
goal. A minimum MTI award will not be paid unless accumulated SVA for a
performance period is positive, reflecting the Committees belief that employees
should not receive compensation under the MTI program unless Company performance
is contributing to positive stockholder value. Deeres businesses are cyclical
and our mid-volume sales calculations reflect long-range trends over periods of
time. The SVA goals for MTI reflect this long-range planning cycle.
The chart below details the minimum,
target, and maximum accumulated SVA goals for each performance period that
includes fiscal 2015. The SVA goals have grown significantly more challenging
for the performance periods ending in 2016 and 2017. This primarily reflects a
substantial increase in our calculation of mid-volume sales largely driven by an
increase in sales volumes for agricultural equipment in recent
years.
|
Fiscal 2013 |
Fiscal 2014 |
Fiscal 2015 |
|
through |
through |
through |
SVA
Goals for MTI |
Fiscal 2015 |
Fiscal 2016 |
Fiscal 2017 |
SVA Goal for Minimum Payout |
$1 million |
$1 million |
$5 million |
SVA Goal for Target Payout |
$2,755 million |
$3,605 million |
$4,495 million |
SVA Goal for Maximum Payout |
$5,510 million |
$7,210 million |
$8,990 million |
Payable in |
Dec 2015 |
Dec 2016 |
Dec 2017 |
Approved by Committee |
Dec 2012 |
Dec 2013 |
Dec
2014 |
Inherent in the MTI plan is a lagging,
three-year impact of SVA. Whether positive or negative, SVA results for a given
year become part of the MTI award calculation for that year and the
subsequent
two years. Negative SVA in a given year
can offset positive SVA earned in a prior or future year. Thus, MTI plan payouts
in a strong-performance year, following a number of weak-performance
years,
34
Table of Contents
Compensation Discussion &
Analysis: Total Direct
Compensation Elements |
will be lower than the financial results
that the strong-performance year alone would justify. The opposite is also true:
MTI plan payouts in a weak-performance year, following several
strong-performance years, will be higher than the financial results that the
weak-performance year alone would justify (the fiscal 2015 payout is an example
of this scenario). Employees are motivated to achieve strong SVA performance
each year because each year is included in three separate rolling performance
periods.
In an effort to further align executive
compensation with stockholder interests, in August 2014 the Committee approved
the addition of a relative TSR modifier to potential MTI payouts for our
executive officers (including each of the NEOs). Starting with the performance
period that ends in fiscal 2017, the TSR modifier is triggered if Deeres TSR
relative to the S&P Industrial Sector (the same index used to measure
relative performance for PSU purposes) is below median for the performance
period. For TSR at or below the 25th percentile, the final MTI payout will be
reduced 25%. For TSR between the 25th and 50th percentiles, the final MTI payout
will be reduced between 0-25% on a linear basis as shown in the following
graph:
Approval of MTI
Rates
At the beginning of each performance
period, after review and consideration of compensation data for our peer group,
the Committee approves target MTI rates as a percentage of the median salary of
the NEOs salary grade. A target MTI award is designed to provide median
compensation compared with our peer group in combination with base salary, a
target STI award, and a base-level LTI award. In December 2012, the Committee
approved the following target MTI rates for the performance period ended October
31, 2015. When maximum SVA goals are met or exceeded, 200% of target rates are
paid.
Target MTI Rates: |
|
CEO |
121% |
Other NEOs |
93% |
Fiscal 2015 Performance Results for
MTI
Deeres accumulated SVA, calculated in
accordance with the MTI performance metrics as described in Appendix B, is
reported in the following table for the three-year performance period ended
October 31, 2015:
Accumulated SVA for 3-Year Performance
Period Ended 10/31/15
Fiscal Year |
SVA
(in millions) |
2013 |
|
$ |
3,390 |
|
2014 |
|
$ |
2,694 |
|
2015 |
|
$ |
774 |
|
Accumulated SVA |
|
$ |
6,858 |
|
|
SVA Goal for Target Payout: |
|
$ |
2,755 |
|
SVA Goal for Maximum Payout: |
|
$ |
5,510 |
|
Actual Performance as %
of Target |
|
|
200% |
|
A maximum payout for this performance
period is consistent with the MTI performance metric design philosophy that a
maximum SVA goal should reflect upper quartile return on invested capital
performance relative to our executive compensation peer group over a multi-year
period. As depicted in the following graph, Deeres return on invested capital
results have consistently exceeded 75th percentile performance
relative to the peer group over the last 10 plus years, including in the first
two years contained in the performance period ended October 31, 2015 (peer group
data for 2015 is not yet available):
35
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Compensation Discussion &
Analysis: Total Direct
Compensation Elements |
The amount of the MTI award paid to an NEO
is calculated as follows:
Median of actual salaries for the relevant
salary grade
x |
Target MTI rate (as described
above) |
x |
Actual performance as a percent of
target (up to a maximum of 200%) |
= |
MTI award
amount |
MTI awards paid to NEOs are detailed in
the Fiscal 2015 Summary Compensation Table under footnote (4). At the request of
the CEO, the Board agreed to exercise its discretion to reduce the CEOs MTI
compensation by 25% below the amount he would have otherwise earned for fiscal
2015 based on previously-approved plan metrics and goals and actual performance
results. The Committee did not exercise its authority to decrease or eliminate
the MTI awards for the other NEOs.
The MTI plan and the results for the
performance period ended in fiscal 2015 described above are also used to
determine the MTI awards paid to other eligible employees worldwide. MTI awards
paid to the NEOs for fiscal 2015 consisted of approximately 3.6% of the MTI
payout to all eligible employees. Individual awards under the MTI plan are
capped at $4.5 million per performance period. The MTI plan is periodically
approved by our stockholders and was last approved at the annual meeting in
February 2013.
Long-Term Incentive
(LTI)
The purpose of LTI is to
reward the NEOs for the creation of sustained stockholder value, encourage
ownership of Deere stock, foster teamwork, and retain and motivate high-caliber
executives while aligning their interests with those of our stockholders.
Historically, LTI awards consisted of annual grants of restricted stock or RSUs,
along with market-priced stock options, under the John Deere Omnibus Equity and
Incentive Plan (Omnibus Plan). In fiscal 2011, the Committee introduced PSUs
as an element of the annual award mix in order to strengthen the incentive
features of LTI awards and create stronger alignment between ultimate payouts
and Company performance. The Omnibus Plan is periodically approved by our
stockholders and was last approved at the annual meeting in February
2015.
The Committee established LTI grants to
the NEOs based on the following criteria: level of responsibility, individual
performance, current market practice, peer group data, and the number of shares
available under the Omnibus Plan. Awards granted in previous years are not a
factor in determining the current years LTI award, and potential accumulated
wealth is not viewed as being relevant.
The following table summarizes the mix,
performance measurements, general terms, and objectives of each form of equity
awarded to the NEOs for fiscal year 2015:
Fiscal Year 2015 LTI Award Overview for
NEOs |
|
|
PSUs |
|
RSUs |
|
Stock Options |
LTI Mix |
|
40% |
|
25% |
|
35% |
Performance Measurements |
|
50% revenue growth* and 50% TSR
relative to the S&P Industrial Sector over a three-year performance
period |
|
Stock price appreciation |
|
Stock price
appreciation |
Vesting
Period |
|
Cliff vest on the third anniversary
of the grant date |
|
Cliff vest on the third anniversary
of the grant date |
|
Vest in approximately equal annual
installments over three years |
Conversion/ Expiration |
|
Converted to Deere common stock upon
vesting |
|
Converted to Deere common stock upon
vesting |
|
Expire ten years from the grant
date |
Objective |
|
Directly link pay to performance (in
terms of relative TSR and revenue growth) over a three-year
period |
|
Encourage ownership and retention
while providing immediate alignment with stockholders |
|
Reward for stock price
appreciation |
* Based on the Companys compound annual
growth rate
Approval of LTI Award
Values
At the beginning of the fiscal
year, after review and consideration of peer group data on target long-term
incentives, the Committee approves a dollar value for a base-level LTI award and
the mix of awards to be delivered. A base-level LTI award is designed to provide
median compensation compared with our peer group when combined with base salary
and target STI and MTI awards. The Committee determines LTI awards at the first
Committee meeting at the beginning of the fiscal year. The Committee has the
ability to increase (up to 20%) or decrease (down to $0) the base-level award to
distinguish an individuals level of performance, deliver a particular LTI
value, or reflect other adjustments as the Committee deems necessary. For fiscal
2015, adjustments to base-level award
36
Table of Contents
Compensation Discussion &
Analysis: Total Direct
Compensation Elements |
values ranging up to 20% were approved in
recognition of the individual performances of the NEOs. LTI awards were approved
for the NEOs as follows:
Adjusted Award Values*: |
|
|
Samuel R. Allen |
$ |
7,600,000 |
Rajesh Kalathur |
$ |
1,562,000 |
James M. Field |
$ |
1,420,000 |
Jean H. Gilles |
$ |
1,562,000 |
Michael J. Mack, Jr. |
$ |
1,704,000 |
* Amounts differ from the value of equity
awards shown in the Fiscal Year 2015 Summary Compensation Table and Grants of
Plan-Based Awards table because those tables reflect the probable outcome of the
performance metrics for PSUs. The amounts shown here include PSUs valued at the
grant price on the date of grant, reflecting the value the Committee considered
when granting the LTI awards for fiscal 2015.
See the Fiscal 2015 Grants of Plan-Based
Awards table and footnotes for more information on LTI awards delivered as well
as the terms of the awards.
For fiscal 2015, the number of RSUs and
PSUs granted to the NEOs represented 50% of all RSUs and PSUs granted to
eligible salaried employees, while the number of stock options granted to the
NEOs represented approximately 8% of all stock options granted to eligible
salaried employees. These proportions are consistent with our philosophy that as
NEOs assume greater responsibility, a larger portion of their incentive
compensation should be focused on long-term awards.
PSUs Granted in Fiscal Year
2015
For PSUs granted in fiscal 2015, the
actual number of shares to be issued upon conversion will be based equally on
Deeres revenue growth and TSR for the three-year performance period ending in
2017. The Companys performance will be measured relative to the companies in
the S&P Industrial Sector as of the end of the performance
period.
Performance Targets (Performance Period Ending in
2017) |
( |
Revenue Growth Payout % × 50%
of PSUs Awarded |
) |
+ |
( |
TSR Payout % × 50% of PSUs
Awarded |
) |
= |
Final Award |
The number of PSUs that vest and convert
to shares can range from 0% to 200% of the number of PSUs awarded depending on
the Companys relative performance during the performance period as illustrated
in the following table:
|
%
of Target Shares |
Deeres Revenue Growth or TSR |
Earned |
Relative to the S&P Industrial Sector |
(Payout %) * |
Below 25th percentile |
0% |
At 25th percentile |
25% |
At 50th percentile |
100% |
At or above 75th percentile |
200% |
* Interim points are
interpolated
These performance targets reflect the
Committees belief that median levels of relative performance should lead to
median levels of compensation.
2013-2015 PSU Program (Payable in
Fiscal 2016)
The performance period for
PSUs granted in fiscal year 2013 ended on October 31, 2015. The final number of
shares earned was based on Deeres revenue growth and TSR relative to the
S&P Industrial Sector over the three-year performance period. The final
payout determination was made by the Committee in December 2015 following a
review of the relative performances of the Company and the S&P Industrial
Sector. Revenue growth and TSR were comparable to the 3rd and
8th percentiles, respectively, of the S&P Industrial Sector. As a
result, no payouts of Company common stock were made under these PSUs, as
described in the following calculation:
|
|
Performance |
|
|
|
|
|
|
|
|
Results for |
|
|
|
|
|
|
|
|
Performance |
|
|
|
|
|
|
|
|
Period Relative |
|
% of Target |
|
|
|
|
|
|
to S&P Industrial |
|
Shares |
|
Award |
|
Weighted |
Metric |
|
Sector |
|
Earned |
|
Weighting |
|
Payout % |
Revenue Growth |
|
3rd percentile |
|
0% |
|
50% |
|
0% |
TSR |
|
8th percentile |
|
0% |
|
50% |
|
0% |
|
|
Final Payout
as % of Target |
|
0% |
The number of units that are or would be
payable based on actual achievement relative to the S&P Industrial Sector
and year-end values for PSUs granted in fiscal years 2013 through 2015 are
included in the Outstanding Equity Awards at Fiscal 2015 Year-End
table.
37
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Compensation Discussion &
Analysis: Total Direct
Compensation Elements |
LTI Grant Practices
For more than 20 years, the Committee has authorized the
annual LTI awards for all eligible employees on a single date each year. The
grant date is seven calendar days after the first Board meeting of the fiscal
year. This timing allows for stock price stabilization after the release of
year-end financial results and Board meeting announcements. The grant price for
all LTI awards granted prior to February 25, 2015 is the average of the high and
low common stock price on the grant date as reported on the NYSE. For awards
made after February 25, 2015, the grant price is the closing price of Deere
common stock on the NYSE on the grant date. The grant price is also used to
determine the number of PSUs, RSUs, and stock options to be awarded.
Stock Ownership
Requirements
Stock ownership requirements
apply to NEOs to ensure the retention of stock acquired through our equity
incentive plan. The required levels of ownership are five times base salary for
the CEO and 3.5 times base salary for the other NEOs, to be achieved within five
years of the date the NEO is first appointed as CEO or as an executive officer,
as applicable. Only vested RSUs and any common stock held personally by the NEOs
are included in determining whether the applicable ownership requirement has
been met. Once an NEO achieves the appropriate ownership level, the number of
shares held at that time becomes the fixed stock ownership requirement for the
NEO for three years, even if base salary increases or stock price decreases.
Other than Mr. Kalathur, who was first appointed Senior Vice President and Chief
Financial Officer on September 1, 2012, each NEO has achieved stockholdings in excess
of the applicable multiple as of the date of this Proxy Statement.
Our Insider Trading Policy precludes all
directors and employees, including our NEOs, and their related persons from
engaging in short sales of the Companys stock or trading in instruments
designed to hedge against or offset price declines by any securities issued by
the Company. Our Insider Trading Policy also prohibits our directors and
officers (including NEOs) from holding Company stock in margin accounts or
pledging Company stock as collateral for loans or other obligations.
Summary of Total Direct
Compensation
The Committee believes
each pay element included in Total Direct Compensation is consistent with our
compensation philosophy. The Committee reviews Total Direct Compensation in the
aggregate for the NEOs (excluding the CEO) as well as for each NEO individually
and compares this compensation to the market position data of our peer group.
This market position data takes into account the level of responsibility
(including the level of sales volume) for each NEOs
respective operations. We have a practice
of rotating individuals among the executive officer positions. As described
above, a primary part of our strategy is aligned high-performance teamwork.
A substantial portion of the evaluation of
individual performance is a careful analysis of each NEOs collaboration and
contribution to the success of a high-performing team. Thus, while the market
data for each position is a factor in reviewing Total Direct Compensation, the
Committee also considers individual fulfillment of duties, teamwork,
development, time in position, experience, and internal equity among NEOs (other
than the CEO). The Committee recognizes individual performance through
adjustments to base salary and LTI.
Total Direct Compensation for the CEO is
higher than the other NEOs due to the CEOs breadth of executive and operating
responsibilities for the entire global enterprise. The Committee does not target
CEO compensation as a certain multiple of the compensation of the other NEOs.
The relationship between the CEOs compensation and that of the other NEOs is
influenced by our organizational structure, which does not currently include a
chief operating officer. The ratio of Mr. Allens Total Direct Compensation
relative to that of the other NEOs is generally comparable to that of the
companies in our peer group.
In light of recent stock price performance
as well as in recognition of current challenging business conditions in the
agriculture and construction industries, and in spite of strong financial
performance against performance goals previously established under the STI and
MTI programs, Mr. Allen has requested that the Board reduce his cash incentive
plan compensation for fiscal 2015. The Board considered Mr. Allens request and
agreed to exercise its discretion to reduce his cash incentive awards by 25%,
resulting in total payments under these awards of $1.8 million less than the
amounts he would have otherwise earned based on previously-approved plan metrics
and goals and actual performance results (see footnote (4) to the Fiscal 2015
Summary Compensation Table).
Limitations on Deductibility of
Compensation
Section 162(m) of the IRC
generally limits to $1 million the U.S. federal income tax deductibility of
compensation paid in one year to a companys CEO or any of its three
next-highest-paid executive officers (other than its Chief Financial Officer).
Performance-based compensation is not subject to the limits on deductibility of
Section 162(m), provided such compensation meets certain requirements, including
stockholder approval of material terms of compensation. The Committee strives to
provide NEOs with incentive compensation programs that will preserve the tax
deductibility of compensation paid by Deere, to the extent reasonably
practicable and consistent with Deeres other compensation objectives. The
Committee
38
Table of Contents
Compensation Discussion &
Analysis: Total Direct
Compensation Elements |
believes, however, that stockholder
interests are best served by not restricting the Committees discretion and
flexibility in structuring compensation programs, even though such programs may
result in certain non-deductible compensation expenses.
Recoupment of Previously Paid
Incentive Compensation
In November
2007, the Committee adopted the Executive Incentive Compensation Recoupment
Policy (Recoupment Policy). The Recoupment Policy authorizes the Committee to
determine whether to require recoupment of incentive compensation paid to or
deferred by certain executives (including the NEOs) if certain conditions are
met. The Committee may require recoupment if the executive engaged in misconduct
that:
● |
contributed to the need for a
restatement of all or a portion of Deeres financial statements filed with
the SEC; or |
● |
contributed to inaccurate operating
metrics being used to calculate incentive
compensation; |
and, in either case, the Committee
determines that the executives incentive compensation would have been less had
the misconduct not occurred.
The Committee is closely monitoring the
proposed rules and rule amendments issued by the SEC to implement provisions of
the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to
recoupment of incentive-based compensation and will review and, if necessary,
amend the Recoupment Policy as appropriate following the adoption of final
rules.
Total Indirect Compensation
Elements
The following sections describe
each Total Indirect Compensation element:
Perquisites
We offer our NEOs various perquisites that the Committee
believes are reasonable in order to remain competitive. These perquisites
constitute a small percentage of the NEOs total compensation. The Committee
conducts an annual review of the perquisites offered to the NEOs. For more
information on the perquisites provided and to whom they apply, see footnote (6)
to the Fiscal 2015 Summary Compensation Table. In addition to the items listed
in the aforementioned footnote, NEOs, as well as other selected employees, are
provided indoor parking and access to Deere-sponsored skyboxes at local venues
for personal use when not occupied for business purposes, both at no incremental
cost to the Company. All security services provided by the Company are
reimbursed by the NEOs.
In August 2006, the Board voted to require
the CEO to use the Companys aircraft for all business and personal travel,
believing that the ability to travel safely and efficiently provides substantial
benefits that justify the cost. The
geographic location of Deeres headquarters in the Midwest, outside of a major
metropolitan area, makes personal and business travel challenging. Traveling by
company aircraft for business and personal reasons allows the CEO to conduct
business confidentially while in transit. Since the CEO travels extensively,
inefficient travel is costly to the Company. Personal use of company aircraft by
other NEOs is minimal. Any personal travel on Deere aircraft by the other NEOs,
individually or accompanied by family members, must be approved by the CEO. The
Committee has limited the CEOs annual personal usage of company aircraft to
approximately 100 hours.
Retirement
Benefits
Each of our NEOs is currently
covered by the same defined benefit pension plans, which include the same plan
terms, as most qualifying U.S. salaried employees. We also maintain two
additional defined benefit pension plans in which NEOs may participate, the
Senior Supplementary Pension Benefit Plan (the Supplementary Plan) and the
John Deere Supplemental Pension Benefit Plan (the Supplemental
Plan).
The defined benefit pension plans have
compensation limits imposed by the IRC. The Supplementary Plan provides
participants with the same benefit they would have received without these
limits. This avoids the relative disadvantage that participants would experience
compared to other qualified plan participants. The Supplemental Plan is designed
to reward career service at Deere above a specified grade level by utilizing a
formula that takes into account only years of service above that grade level. We
believe that the defined benefit plans serve as important retention tools,
provide a level of competitive income upon retirement, and reward long-term
employment and service as an officer of Deere. In addition, the fact that the
Supplementary and Supplemental Plans are unfunded (with benefit payments under
these plans being made out of the general assets of Deere) and therefore at-risk
in the event of the Companys bankruptcy creates a strong incentive for the NEOs
to minimize risks that could jeopardize Deeres long-term financial health. For
additional information, see the Fiscal 2015 Pension Benefits Table, along with
the accompanying narrative and footnotes.
We also maintain a tax-qualified defined
contribution plan, the John Deere Savings and Investment Plan (SIP), which is
available to the majority of U.S. employees, including the NEOs. We make
matching contributions on up to six percent of an employees pay to participant
SIP accounts. The STI results for the previous fiscal year (see the
Fiscal 2015 Performance Results for
STI section above) are used to determine the
level of actual Company match for the following calendar year. The level of
Company match also depends on the pension option in which the employee
participates, as explained in the narrative preceding the Fiscal 2015 Pension
39
Table of Contents
Compensation Discussion &
Analysis: Risk Assessment of Compensation
Policies and Practices |
Benefits Table. The following table
illustrates the Companys match for calendar 2015, which is reported for our
NEOs under the All Other Compensation column of the Fiscal 2015 Summary
Compensation Table:
Traditional Option match on 1-6% of eligible
earnings |
100% |
Contemporary Option match on first 2% of
eligible earnings |
300% |
Contemporary Option match on next 4% of
eligible earnings |
100% |
Deferred Compensation
Benefits
We also maintain certain
deferred compensation plans that provide the NEOs with longer-term savings
opportunities on a tax-efficient basis. All deferred compensation benefits are
designed to attract, retain, and motivate employees. Similar deferred
compensation benefits are commonly offered by companies with whom we compete for
talent. See the Nonqualified Deferred
Compensation section below for additional
details.
Potential Payments upon Change in
Control and Other Potential Post-Employment Payments
Potential Payments upon Change in Control
In August 2009, the Committee approved a Change in Control
Severance Program (the CIC Program) to replace the change in control
agreements that had been in place since 2000. The CIC Program covers certain
executive officers, including each of the NEOs, and is intended to facilitate
continuity of management in the event of a change in control. The Committee
believes that the CIC Program serves the following purposes:
● |
Encourages executives to act in the
best interests of stockholders in evaluating transactions that, without a
change in control arrangement, could be personally
detrimental; |
● |
Keeps executives focused on running
the business in the face of real or rumored
transactions; |
● |
Protects Deeres value by retaining
key talent in the face of corporate changes; |
● |
Protects Deeres value after a
change in control by including restrictive covenants (such as non-compete
provisions) and a general release of claims in favor of Deere;
and |
● |
Assists in the attraction and
retention of executives as a competitive
practice. |
For more information, see Fiscal 2015 Potential Payments upon Change in
Control and the corresponding
tables.
Other Potential Post Employment
Payments
The Companys various plans and
policies provide payments to NEOs upon certain types of employment terminations
that are not related to a change in control. These events and amounts are
explained in the section below entitled Fiscal 2015 Potential Payments upon Termination of Employment Other than
Following a Change in Control.
Risk Assessment of Compensation
Policies and Practices
During fiscal 2015,
Deeres management conducted a comprehensive risk assessment of the Companys
compensation policies and practices, as we have done each year since 2010. The
risk assessment process included the following:
(1) Convened a Compensation Risk
Assessment Team (Management Team) comprised of management personnel
representing relevant areas of oversight;
(2) Completed an inventory of the
Companys compensation programs globally for both executive and non-executive
employees; and
(3) Updated our existing detailed risk
assessment questionnaire to take account of any relevant changes in our
compensation structure or philosophy and applied it to the compensation programs
that, due to their size, potential payout, and/or structure, could potentially
have a material adverse effect on the Company.
The inquiries in the risk assessment
questionnaire focused on the following issues: (a) pay-for-performance
comparison against the Companys peer group; (b) balance of compensation
components; (c) program design and pay leverage; (d) program governance; and (e)
mitigating factors that offset program risks.
After review, the Management Team
concluded that the Companys compensation policies and practices do not create
risks that are reasonably likely to have a material adverse effect on the
Company. The Committee, along with its independent compensation consultant,
Pearl Meyer, reviewed the risk assessment and concurred with the Management
Teams conclusion. Specifically, the Committee believes the following key
factors support the Management Teams conclusion: (i) the performance metrics
for determining STI (OROA and ROE) and MTI (SVA) are based on worldwide,
publicly reported metrics with only minor adjustments and, therefore, are not
easily susceptible to manipulation; (ii) the variety of performance metrics
incorporated in our compensation plans discourage excessive risk taking by
removing the incentive to focus on a single performance goal or performance over
the course of a single year to the detriment of the Company; (iii) the metrics
for STI are capped at maximum levels of OROA and ROE performance, thereby
reducing the risk that executives might be motivated to attain excessively high
stretch goals in order to maximize short-term payouts; and (iv) the metrics
for MTI are capped at a maximum level of SVA performance, thereby reducing the
risk that executives might be motivated to attain excessively high stretch
goals in order to maximize mid-term payouts. In addition, Deere maintains stock
ownership requirements that are designed to incentivize our management team to
focus on the Companys long-term, sustainable growth. Finally, Deere has a
Recoupment Policy (described above) designed to prevent misconduct relating to
financial reporting.
40
Table of Contents
Compensation Committee Report
The reports of the Compensation
Committee and the Audit Review Committee that follow do not constitute
soliciting material and will not be deemed filed or incorporated by reference by
any general statement incorporating by reference this Proxy Statement or future
filings into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended, except to the extent that Deere
specifically incorporates the information by reference, and will not otherwise
be deemed filed under these Acts. In addition, these reports include the names
of the members of the Compensation Committee and Audit Review Committee,
respectively, at the time of the reports adoptions and do not reflect the new
committee memberships approved by the Board in January 2016, which will become
effective in February 2016.
The Compensation Committee of the Board of
Directors has reviewed the Compensation Discussion and Analysis required by Item
402(b) of Regulation S-K and discussed it with Deeres management. Based on the
Compensation Committees review and discussions with management, the
Compensation Committee recommends to the Board of Directors that the
Compensation Discussion and Analysis be included in Deeres Proxy Statement.
Vance D. Coffman, Chair
Crandall C.
Bowles
Clayton M. Jones
Richard B. Myers
Dmitri L. Stockton
41
Table of Contents
Executive
Compensation Tables
In this section, we provide tabular and
narrative information regarding the compensation of our NEOs for the fiscal year
ended October 31, 2015.
Fiscal 2015 Summary
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Nonqualified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
Deferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan |
|
Compensation |
|
All
Other |
|
|
|
|
|
Fiscal |
|
Salary |
|
Stock Awards |
|
Option Awards |
|
Compensation |
|
Earnings |
|
Compensation |
|
|
|
Name & Position |
|
Year |
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
(5) |
|
(6) |
|
Total |
Samuel R. Allen |
|
2015 |
|
$ |
1,500,000 |
|
$ |
5,612,187 |
|
|
$ |
2,660,623 |
|
|
|
$ |
5,519,363 |
|
|
|
$ |
2,931,274 |
|
|
|
$ |
477,883 |
|
|
$ |
18,701,330 |
Chairman and |
|
2014 |
|
$ |
1,495,204 |
|
$ |
6,606,197 |
|
|
$ |
3,058,680 |
|
|
|
$ |
5,397,891 |
|
|
|
$ |
3,137,079 |
|
|
|
$ |
578,245 |
|
|
$ |
20,273,296 |
Chief Executive
Officer |
|
2013 |
|
$ |
1,435,644 |
|
$ |
6,241,025 |
|
|
$ |
3,058,773 |
|
|
|
$ |
6,705,518 |
|
|
|
$ |
1,187,712 |
|
|
|
$ |
520,067 |
|
|
$ |
19,148,739 |
Rajesh Kalathur |
|
2015 |
|
$ |
552,128 |
|
$ |
1,153,349 |
|
|
$ |
546,826 |
|
|
|
$ |
1,953,632 |
|
|
|
$ |
284,820 |
|
|
|
$ |
146,875 |
|
|
$ |
4,637,630 |
Senior Vice President and |
|
2014 |
|
$ |
525,437 |
|
$ |
1,073,209 |
|
|
$ |
496,928 |
|
|
|
$ |
1,879,751 |
|
|
|
$ |
190,760 |
|
|
|
$ |
131,124 |
|
|
$ |
4,297,209 |
Chief Financial Officer |
|
2013 |
|
$ |
465,552 |
|
$ |
1,165,925 |
|
|
$ |
571,490 |
|
|
|
$ |
1,718,594 |
|
|
|
$ |
9,061 |
|
|
|
$ |
330,621 |
|
|
$ |
4,261,243 |
James M. Field |
|
2015 |
|
$ |
666,274 |
|
$ |
1,048,459 |
|
|
$ |
497,120 |
|
|
|
$ |
2,146,607 |
|
|
|
$ |
506,345 |
|
|
|
$ |
180,826 |
|
|
$ |
5,045,631 |
President,
Agricultural |
|
2014 |
|
$ |
646,353 |
|
$ |
1,180,392 |
|
|
$ |
546,630 |
|
|
|
$ |
2,083,579 |
|
|
|
$ |
459,197 |
|
|
|
$ |
167,586 |
|
|
$ |
5,083,737 |
Equipment
Operations |
|
2013 |
|
$ |
620,543 |
|
$ |
1,115,269 |
|
|
$ |
546,644 |
|
|
|
$ |
1,969,106 |
|
|
|
$ |
28,796 |
|
|
|
$ |
159,379 |
|
|
$ |
4,439,737 |
Jean H. Gilles |
|
2015 |
|
$ |
614,823 |
|
$ |
1,153,349 |
|
|
$ |
546,826 |
|
|
|
$ |
2,059,624 |
|
|
|
$ |
992,519 |
|
|
|
$ |
162,684 |
|
|
$ |
5,529,825 |
Senior Vice President |
|
2014 |
|
$ |
590,722 |
|
$ |
1,223,406 |
|
|
$ |
566,521 |
|
|
|
$ |
1,989,802 |
|
|
|
$ |
942,341 |
|
|
|
$ |
154,290 |
|
|
$ |
5,467,082 |
JDPS/Adv Tech & Eng |
|
2013 |
|
$ |
561,341 |
|
$ |
1,165,925 |
|
|
$ |
571,490 |
|
|
|
$ |
1,873,417 |
|
|
|
$ |
27,622 |
|
|
|
$ |
152,991 |
|
|
$ |
4,352,786 |
Michael J. Mack,
Jr. |
|
2015 |
|
$ |
675,839 |
|
$ |
1,258,151 |
|
|
$ |
596,532 |
|
|
|
$ |
2,162,777 |
|
|
|
$ |
848,211 |
|
|
|
$ |
182,619 |
|
|
$ |
5,724,129 |
Group President, JD
Financial, |
|
2014 |
|
$ |
656,147 |
|
$ |
1,212,742 |
|
|
$ |
561,549 |
|
|
|
$ |
2,100,089 |
|
|
|
$ |
822,000 |
|
|
|
$ |
185,218 |
|
|
$ |
5,537,745 |
Global HR & Public
Affairs |
|
2013 |
|
$ |
637,536 |
|
$ |
1,064,500 |
|
|
$ |
521,799 |
|
|
|
$ |
1,996,571 |
|
|
|
$ |
85,771 |
|
|
|
$ |
171,229 |
|
|
$ |
4,477,406 |
(1) Includes amounts deferred by the NEO
under the John Deere Voluntary Deferred Compensation Plan. Salary amounts
deferred in fiscal 2015 are included in the first column of the Fiscal 2015
Nonqualified Deferred Compensation Table corresponding with Deferred Plan.
(2) Represents the aggregate grant date
fair value of PSUs and RSUs computed in accordance with FASB ASC Topic 718. The
values in this column exclude the effect of estimated forfeitures. Assumptions
made in the calculation of these amounts are included in Note 24, Stock Option
and Restricted Stock Awards, of our consolidated financial statements filed
with the SEC on Form 10-K for the fiscal year ended October 31, 2015. For PSUs,
the value at the grant date is based upon the probable outcome of the
performance metrics over the three-year performance period. If the highest level
of payout was achieved, the value of the award as of the grant date for PSUs
would be as follows: $7,424,000 (Allen); $1,526,000 (Kalathur); $1,387,000
(Field); $1,526,000 (Gilles); and $1,664,000 (Mack). RSUs will vest three years
after the grant date, at which time they may be settled in Deere common stock.
Refer to the Fiscal 2015 Grants of Plan-Based Awards table and footnote (7)
thereto for a detailed description of the grant date fair value of stock
awards.
(3) Represents the aggregate grant date
fair value of stock options computed in accordance with FASB ASC Topic 718. The
values in this column exclude the effect of estimated forfeitures. The
assumptions made in valuing option awards reported in this column and a more
detailed discussion of the binomial lattice option pricing model are described
in Note 24, Stock Option and Restricted Stock Awards, of our consolidated
financial statements filed with the SEC on Form 10-K for the fiscal year ended
October 31, 2015. Refer to the Fiscal 2015 Grants of Plan-Based Awards table and
footnote (7) thereto for a detailed description of the grant date fair value of
option awards.
(4) Non-equity incentive plan compensation
includes cash awards under the STI and MTI plans. Cash awards earned under the
STI and MTI plans for the performance period ended in fiscal 2015 were paid to
NEOs on December 15, 2015 unless deferred under the Voluntary Deferred
Compensation Plan. Deferred STI and MTI amounts are included in the first column
of the Fiscal 2015 Nonqualified Deferred Compensation Table corresponding with
Deferred Plan.
42
Table of Contents
Executive
Compensation Tables: |
Fiscal 2015 Summary
Compensation Table |
The following table shows the awards
earned under the STI and MTI plans:
|
|
|
|
|
|
|
STI (a) |
|
|
|
|
|
|
|
|
|
|
MTI (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target |
|
|
|
|
|
|
|
|
|
|
|
|
Target |
|
Actual |
|
|
|
|
|
Award as % |
|
Actual |
|
|
|
|
|
Total
Non-Equity |
|
|
Award as % |
|
Performance |
|
Award |
|
|
of Median |
|
Performance |
|
Award |
|
|
Incentive
Plan |
Name |
|
of Salary |
|
as % of Target |
|
Amount |
|
|
Salary |
|
as % of Target |
|
Amount |
|
|
Compensation |
Samuel R. Allen
(c) |
|
|
125 |
% |
|
|
199% |
|
$ |
2,796,863 |
|
|
|
121 |
% |
|
|
200% |
|
$ |
2,722,500 |
|
|
$ |
5,519,363 |
|
Rajesh Kalathur |
|
|
85 |
% |
|
|
199% |
|
$ |
933,428 |
|
|
|
93 |
% |
|
|
200% |
|
$ |
1,020,204 |
|
|
$ |
1,953,632 |
|
James M. Field |
|
|
85 |
% |
|
|
199% |
|
$ |
1,126,403 |
|
|
|
93 |
% |
|
|
200% |
|
$ |
1,020,204 |
|
|
$ |
2,146,607 |
|
Jean H. Gilles |
|
|
85 |
% |
|
|
199% |
|
$ |
1,039,420 |
|
|
|
93 |
% |
|
|
200% |
|
$ |
1,020,204 |
|
|
$ |
2,059,624 |
|
Michael J. Mack,
Jr. |
|
|
85 |
% |
|
|
199% |
|
$ |
1,142,573 |
|
|
|
93 |
% |
|
|
200% |
|
$ |
1,020,204 |
|
|
$ |
2,162,777 |
|
(a) Based on actual performance, as
discussed in the CD&A under Fiscal 2015
Performance Results for STI, the NEOs earned
an STI award equal to 199% of the target opportunity.
(b) Based on actual performance, as
discussed in the CD&A under Fiscal 2015
Performance Results for MTI, the NEOs earned
an MTI award equal to 200% of the target opportunity.
(c) At Mr. Allens request, the Board
agreed to exercise its discretion to reduce his non-equity incentive plan
compensation by 25% below the amount he would have otherwise earned for fiscal
2015 based on previously-approved plan metrics and goals and actual performance
results. The amounts included for Mr. Allen in the table above reflect these
reductions. See Pay for Performance Review
and Analysis in the Executive Summary of the
CD&A.
(5) The following table shows the change
in pension value and above-market earnings on nonqualified deferred compensation
during fiscal 2015:
|
|
Change in |
|
Nonqualified Deferred |
|
|
|
|
|
Name |
|
Pension Value (a) |
|
Compensation Earnings (b) |
|
Total |
Samuel R. Allen |
|
|
$ |
2,815,953 |
|
|
|
$ |
115,321 |
|
|
|
$ |
2,931,274 |
|
Rajesh Kalathur |
|
|
$ |
272,718 |
|
|
|
$ |
12,102 |
|
|
|
$ |
284,820 |
|
James M. Field |
|
|
$ |
468,053 |
|
|
|
$ |
38,292 |
|
|
|
$ |
506,345 |
|
Jean H. Gilles |
|
|
$ |
947,810 |
|
|
|
$ |
44,709 |
|
|
|
$ |
992,519 |
|
Michael J. Mack,
Jr. |
|
|
$ |
789,691 |
|
|
|
$ |
58,520 |
|
|
|
$ |
848,211 |
|
(a) Represents the change in the actuarial
present value of each NEOs accumulated benefit under all defined benefit plans
from October 31, 2014 to October 31, 2015. The pension value calculations
include the same assumptions as used in the pension plan valuations for
financial reporting purposes. For more information on the assumptions, see
footnote (4) under the Fiscal 2015 Pension Benefits Table.
(b) Represents above-market earnings on
compensation that is deferred by the NEOs under our nonqualified deferred
compensation plans. Above-market earnings represent the difference between the
interest rate used to calculate earnings under the applicable plan and 120% of
the applicable federal long-term rate prescribed by the IRC. See the Fiscal 2015
Nonqualified Deferred Compensation Table for additional information.
43
Table of Contents
Executive
Compensation Tables: |
Fiscal 2015 Summary
Compensation Table |
(6) The following table provides details
about each component of the All Other Compensation column in the Fiscal 2015
Summary Compensation Table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
|
|
|
|
|
Personal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions |
|
|
|
|
|
|
|
Use
of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to
Defined |
|
|
|
|
|
|
|
Company |
|
Financial |
|
Medical |
|
Misc |
|
Contribution |
|
Total All |
|
|
Aircraft |
|
Planning |
|
Exams |
|
Perquisites |
|
Plans |
|
Other |
Name |
|
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
Compensation |
Samuel R. Allen |
|
|
$ |
43,482 |
|
|
|
$ |
|
|
|
|
$ |
3,742 |
|
|
|
$ |
2,674 |
|
|
|
$ |
427,985 |
|
|
|
$ |
477,883 |
|
Rajesh Kalathur |
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
2,545 |
|
|
|
$ |
544 |
|
|
|
$ |
143,786 |
|
|
|
$ |
146,875 |
|
James M. Field |
|
|
$ |
|
|
|
|
$ |
2,715 |
|
|
|
$ |
|
|
|
|
$ |
2,528 |
|
|
|
$ |
175,583 |
|
|
|
$ |
180,826 |
|
Jean H. Gilles |
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
1,020 |
|
|
|
$ |
604 |
|
|
|
$ |
161,060 |
|
|
|
$ |
162,684 |
|
Michael J. Mack, Jr. |
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
3,095 |
|
|
|
$ |
1,333 |
|
|
|
$ |
178,191 |
|
|
|
$ |
182,619 |
|
(a) Per Internal Revenue Service (IRS)
regulations, the NEOs recognize imputed income on the personal use of Deeres
aircraft at rates established by the IRS. For SEC disclosure purposes, the cost
of personal use of Deeres aircraft is calculated based on the incremental cost
to Deere. To determine the incremental cost, Deere calculates the variable costs
for fuel on a per mile basis, plus any direct trip expenses such as on-board
catering, landing/ramp fees, and crew expenses. Fixed costs that do not change
based on usage, such as pilot salaries, depreciation of aircraft, and
maintenance costs, are excluded. Mr. Allens personal usage of Company aircraft
in fiscal 2015 amounted to approximately 25 hours of travel, which represents
less than 1% of the total hours flown by Company aircraft.
(b) This column contains amounts Deere
paid for financial planning assistance on behalf of the NEOs. The CEO may
annually receive up to $15,000 of assistance and the other NEOs may receive up
to $10,000 annually.
(c) This column contains the amounts Deere
paid for annual medical exams for NEOs.
(d) Miscellaneous perquisites include
spousal attendance at company events.
(e) Deere makes contributions to the John
Deere Savings and Investment Plan (SIP) for all eligible employees. Deere also
credits contributions to the John Deere Defined Contribution Restoration Plan
for all employees covered by the Contemporary Option under our tax-qualified
pension plan whose earnings exceed relevant IRS limits. All of our current NEOs
are covered by the Contemporary Option.
44
Table of Contents
Executive
Compensation Tables: |
Fiscal 2015 Grants of
Plan-Based Awards |
Fiscal 2015 Grants of Plan-Based
Awards
The following table provides
additional information regarding fiscal 2015 grants of RSU, PSU, and stock
option awards under the Omnibus Plan, and the potential range of awards that
were approved in fiscal 2015 under the STI and MTI plans for payout in future
years. These awards are further described in the CD&A under Total Direct Compensation Elements.
|
|
|
|
|
|
|
|
All Other |
All Other |
|
|
|
|
|
|
|
|
|
|
Stock |
Option |
Exercise |
|
|
|
|
|
Awards: |
Awards: |
or Base |
Grant Date |
|
|
Estimated Future Payouts |
Estimated Future Payouts |
Number of |
Number of |
Price of |
Fair Value |
|
|
Under Non-Equity Incentive
Plan |
Under Equity Incentive Plan |
Shares of |
Securities |
Option |
of Stock |
|
|
Awards |
Awards |
Stock or |
Underlying |
Awards |
and Option |
|
Grant Date |
(2) |
(3) |
Units |
Options |
($ / Sh) |
Awards |
Name |
(1) |
Threshold |
Target |
Maximum |
Threshold |
Target |
Maximum |
(4) |
(5) |
(6) |
(7) |
Samuel R. Allen |
12/2/2014-STI |
$ |
$1,875,000 |
$3,750,000 |
|
|
|
|
|
|
|
|
12/2/2014-MTI |
$1,100 |
$1,815,000 |
$3,630,000 |
|
|
|
|
|
|
|
|
12/10/2014 |
|
|
|
|
|
|
21,545 |
|
|
$1,899,946 |
|
12/10/2014 |
|
|
|
8,618 |
34,472 |
68,944 |
|
|
|
$3,712,241 |
|
12/10/2014 |
|
|
|
|
|
|
|
135,263 |
$88.19 |
$2,660,623 |
|
|
$1,100 |
$3,690,000 |
$7,380,000 |
8,618 |
34,472 |
68,944 |
21,545 |
135,263 |
|
$8,272,810 |
Rajesh
Kalathur |
12/2/2014-STI |
$ |
$469,309 |
$938,618 |
|
|
|
|
|
|
|
|
12/2/2014-MTI |
$400 |
$521,675 |
$1,043,350 |
|
|
|
|
|
|
|
|
12/10/2014 |
|
|
|
|
|
|
4,428 |
|
|
$390,483 |
|
12/10/2014 |
|
|
|
1,771 |
7,084 |
14,168 |
|
|
|
$762,866 |
|
12/10/2014 |
|
|
|
|
|
|
|
27,800 |
$88.19 |
$546,826 |
|
|
$400 |
$990,984 |
$1,981,968 |
1,771 |
7,084 |
14,168 |
4,428 |
27,800 |
|
$1,700,175 |
James M. Field |
12/2/2014-STI |
$ |
$566,333 |
$1,132,666 |
|
|
|
|
|
|
|
|
12/2/2014-MTI |
$400 |
$521,675 |
$1,043,350 |
|
|
|
|
|
|
|
|
12/10/2014 |
|
|
|
|
|
|
4,025 |
|
|
$354,945 |
|
12/10/2014 |
|
|
|
1,610 |
6,440 |
12,880 |
|
|
|
$693,514 |
|
12/10/2014 |
|
|
|
|
|
|
|
25,273 |
$88.19 |
$497,120 |
|
|
$400 |
$1,088,008 |
$2,176,016 |
1,610 |
6,440 |
12,880 |
4,025 |
25,273 |
|
$1,545,579 |
Jean H.
Gilles |
12/2/2014-STI |
$ |
$522,600 |
$1,045,200 |
|
|
|
|
|
|
|
|
12/2/2014-MTI |
$400 |
$521,675 |
$1,043,350 |
|
|
|
|
|
|
|
|
12/10/2014 |
|
|
|
|
|
|
4,428 |
|
|
$390,483 |
|
12/10/2014 |
|
|
|
1,771 |
7,084 |
14,168 |
|
|
|
$762,866 |
|
12/10/2014 |
|
|
|
|
|
|
|
27,800 |
$88.19 |
$546,826 |
|
|
$400 |
$1,044,275 |
$2,088,550 |
1,771 |
7,084 |
14,168 |
4,428 |
27,800 |
|
$1,700,175 |
Michael J. Mack, Jr. |
12/2/2014-STI |
$ |
$574,463 |
$1,148,926 |
|
|
|
|
|
|
|
|
12/2/2014-MTI |
$400 |
$521,675 |
$1,043,350 |
|
|
|
|
|
|
|
|
12/10/2014 |
|
|
|
|
|
|
4,830 |
|
|
$425,934 |
|
12/10/2014 |
|
|
|
1,932 |
7,728 |
15,456 |
|
|
|
$832,217 |
|
12/10/2014 |
|
|
|
|
|
|
|
30,327 |
$88.19 |
$596,532 |
|
|
$400 |
$1,096,138 |
$2,192,276 |
1,932 |
7,728 |
15,456 |
4,830 |
30,327 |
|
$1,854,683 |
(1) For the non-equity incentive plan
awards, the grant date is the date the Committee approved the range of estimated
potential future payouts for the performance periods noted under footnote (2)
below. For equity awards, the grant date is seven calendar days after the first
regularly scheduled Board meeting of the fiscal year.
(2) These columns show the range of
potential payouts under the STI and MTI plans. The performance period for STI in
this table covers November 1, 2014 through October 31, 2015. For actual
performance between threshold, target, and maximum, the earned STI award is
prorated.
45
Table of Contents
Executive
Compensation Tables: |
Outstanding Equity Awards at Fiscal 2015
Year-End |
The range of the MTI award covers the
three-year performance period beginning in fiscal 2015 and ending in fiscal
2017. Awards will not be paid unless Deere generates at least $5 million of SVA
for the performance period. The target MTI award will be earned if $4,495
million of SVA is accumulated and the maximum MTI award will be earned if $8,990
million or more is accumulated during the performance period. The MTI award will
be reduced (i) by 25% if Deeres TSR for the performance period is at or below
the 25th percentile relative to the companies in the S&P Industrial Sector
and (ii) between 0-25% (on a linear basis) if TSR falls between the 25th and
50th percentiles. The amounts shown in the table represent potential MTI awards
based on the median salary of the NEOs salary grades as of September 30, 2015.
The actual MTI awards will depend upon Deeres actual SVA performance, Deeres
relative TSR performance, and the median salaries of the NEOs salary grades as
of September 30, 2016.
(3) Represents the potential payout range
of PSUs granted in fiscal 2015 (in December 2014). The number of shares that
vest is equally based on TSR and revenue growth, both relative to companies in
the S&P Industrial Sector. Performance and payouts are determined
independently for each metric. At the end of the three-year performance period,
the actual award, delivered as Deere common stock, can range from 0% to 200% of
the original grant.
(4) Represents the number of RSUs granted
during fiscal 2015 (in December 2014). RSUs will vest three years after the
grant date, at which time they may be settled in Deere common stock. Prior to
settlement, each RSU entitles the individual to receive dividend equivalents in
cash at the same time as dividends are paid on Deeres common stock.
(5) Represents the number of options
granted during fiscal 2015 (in December 2014). These options vest in three
approximately equal annual installments on the first, second, and third
anniversaries of the grant date.
(6) The exercise price is the average of
the high and low price of Deere common stock on the NYSE on the grant
date.
(7) Amounts shown represent the grant date
fair value of equity awards granted to the NEOs in fiscal 2015 calculated in
accordance with FASB ASC Topic 718. The values in this column exclude the effect
of estimated forfeitures. For RSUs, fair value is the market value of the
underlying stock on the grant date (which is the same as the exercise price in
column (6) for stock options). For options, the fair value on the grant date was
$19.67, which was calculated using the binomial lattice option pricing model.
The grant date fair value of the PSUs subject to the TSR metric was $113.97
based on a lattice valuation model excluding dividends. The grant date fair
value of the PSUs subject to the revenue growth metric was $81.78 based on the
market price of a share of underlying common stock excluding
dividends.
For additional information on the
valuation assumptions, refer to Note 24, Stock Option and Restricted Stock
Awards, of Deeres consolidated financial statements filed with the SEC on Form
10-K for the fiscal year ended October 31, 2015.
Outstanding Equity Awards at Fiscal
2015 Year-End
The following table itemizes
outstanding options, RSUs, and PSUs held by the NEOs as of October 31,
2015:
|
Option
Awards |
Stock
Awards |
Name |
Number
of Securities Underlying Unexercised Options Exercisable (1) |
Number
of Securities Underlying Unexercised Options Unexercisable (1) |
Option Exercise Price |
Intrinsic
Value of
Unexercised Options (2) |
Option Expiration Date (3) |
Number of Shares or Units of Stock That Have
Not Vested (4) |
Market Value of Shares or Units of Stock That Have
Not Vested (5) |
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or
Other Rights That Have Not Vested (6) |
Equity
Incentive Plan Awards: Market or Payout Value Unearned Shares,
Units or Other Rights That Have Not Vested (7) |
Samuel R. Allen |
|
28,808 |
|
|
|
|
$ |
88.82 |
|
$ |
|
|
|
12/5/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,704 |
|
|
|
|
$ |
39.67 |
|
$ |
2,403,758 |
|
|
12/17/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
269,353 |
|
|
|
|
$ |
52.25 |
|
$ |
6,935,840 |
|
|
12/9/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114,253 |
|
|
|
|
$ |
80.61 |
|
$ |
|
|
|
12/8/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135,897 |
|
|
|
|
$ |
74.24 |
|
$ |
510,973 |
|
|
12/14/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,362 |
|
|
42,537 |
|
$ |
86.36 |
|
$ |
|
|
|
12/12/2022 |
|
|
25,301 |
|
$ |
1,973,478 |
|
|
|
|
|
|
|
|
|
42,035 |
|
|
81,598 |
|
$ |
87.46 |
|
$ |
|
|
|
12/11/2023 |
|
|
24,982 |
|
$ |
1,948,596 |
|
|
7,994 |
|
$ |
623,532 |
|
|
|
|
|
|
135,263 |
|
$ |
88.19 |
|
$ |
|
|
|
12/10/2024 |
|
|
21,545 |
|
$ |
1,680,510 |
|
|
9,479 |
|
$ |
739,362 |
|
|
|
739,412 |
|
|
259,398 |
|
|
|
|
$ |
9,850,571 |
|
|
|
|
|
71,828 |
|
$ |
5,602,584 |
|
|
17,473 |
|
$ |
1,362,894 |
|
46
Table of Contents
Executive
Compensation Tables: |
Outstanding Equity Awards at
Fiscal 2015 Year-End |
|
Option
Awards |
Stock
Awards |
Name |
Number
of Securities Underlying Unexercised Options Exercisable (1) |
Number
of Securities Underlying Unexercised Options Unexercisable (1) |
Option Exercise Price |
Intrinsic Value of Unexercised Options (2) |
Option Expiration Date (3) |
Number of Shares or Units of Stock That Have
Not Vested (4) |
Market Value of Shares or Units of Stock That Have
Not Vested (5) |
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or
Other Rights That Have Not Vested (6) |
Equity
Incentive Plan Awards: Market or Payout Value Unearned Shares,
Units or Other Rights That Have Not Vested (7) |
Rajesh
Kalathur |
|
4,366 |
|
|
|
|
$ |
34.44 |
|
$ |
190,183 |
|
|
12/7/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,816 |
|
|
|
|
$ |
48.38 |
|
$ |
172,299 |
|
|
12/6/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,519 |
|
|
|
|
$ |
88.82 |
|
$ |
|
|
|
12/5/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,133 |
|
|
|
|
$ |
39.67 |
|
$ |
426,784 |
|
|
12/17/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,151 |
|
|
|
|
$ |
52.25 |
|
$ |
312,888 |
|
|
12/9/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,379 |
|
|
|
|
$ |
80.61 |
|
$ |
|
|
|
12/8/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,996 |
|
|
|
|
$ |
74.24 |
|
$ |
30,065 |
|
|
12/14/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,135 |
|
|
7,948 |
|
$ |
86.36 |
|
$ |
|
|
|
12/12/2022 |
|
|
4,727 |
|
$ |
368,706 |
|
|
|
|
|
|
|
|
|
6,829 |
|
|
13,257 |
|
$ |
87.46 |
|
$ |
|
|
|
12/11/2023 |
|
|
4,058 |
|
$ |
316,524 |
|
|
1,298 |
|
$ |
101,244 |
|
|
|
|
|
|
27,800 |
|
$ |
88.19 |
|
$ |
|
|
|
12/10/2024 |
|
|
4,428 |
|
$ |
345,384 |
|
|
1,948 |
|
$ |
151,944 |
|
|
|
76,324 |
|
|
49,005 |
|
|
|
|
$ |
1,132,219 |
|
|
|
|
|
13,213 |
|
$ |
1,030,614 |
|
|
3,246 |
|
$ |
253,188 |
|
James M. Field |
|
28,229 |
|
|
|
|
$ |
52.25 |
|
$ |
726,897 |
|
|
12/9/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,735 |
|
|
|
|
$ |
80.61 |
|
$ |
|
|
|
12/8/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,391 |
|
|
|
|
$ |
74.24 |
|
$ |
95,470 |
|
|
12/14/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,434 |
|
|
7,602 |
|
$ |
86.36 |
|
$ |
|
|
|
12/12/2022 |
|
|
4,521 |
|
$ |
352,638 |
|
|
|
|
|
|
|
|
|
7,512 |
|
|
14,583 |
|
$ |
87.46 |
|
$ |
|
|
|
12/11/2023 |
|
|
4,464 |
|
$ |
348,192 |
|
|
1,428 |
|
$ |
111,384 |
|
|
|
|
|
|
25,273 |
|
$ |
88.19 |
|
$ |
|
|
|
12/10/2024 |
|
|
4,025 |
|
$ |
313,950 |
|
|
1,771 |
|
$ |
138,138 |
|
|
|
98,301 |
|
|
47,458 |
|
|
|
|
$ |
822,367 |
|
|
|
|
|
13,010 |
|
$ |
1,014,780 |
|
|
3,199 |
|
$ |
249,522 |
|
Jean H.
Gilles |
|
10,704 |
|
|
|
|
$ |
88.82 |
|
$ |
|
|
|
12/5/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,700 |
|
|
|
|
$ |
52.25 |
|
$ |
1,176,775 |
|
|
12/9/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,376 |
|
|
|
|
$ |
80.61 |
|
$ |
|
|
|
12/8/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,183 |
|
|
|
|
$ |
74.24 |
|
$ |
87,168 |
|
|
12/14/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,135 |
|
|
7,948 |
|
$ |
86.36 |
|
$ |
|
|
|
12/12/2022 |
|
|
4,727 |
|
$ |
368,706 |
|
|
|
|
|
|
|
|
|
7,785 |
|
|
15,114 |
|
$ |
87.46 |
|
$ |
|
|
|
12/11/2023 |
|
|
4,627 |
|
$ |
360,906 |
|
|
1,480 |
|
$ |
115,440 |
|
|
|
|
|
|
27,800 |
|
$ |
88.19 |
|
$ |
|
|
|
12/10/2024 |
|
|
4,428 |
|
$ |
345,384 |
|
|
1,948 |
|
$ |
151,944 |
|
|
|
123,883 |
|
|
50,862 |
|
|
|
|
$ |
1,263,943 |
|
|
|
|
|
13,782 |
|
$ |
1,074,996 |
|
|
3,428 |
|
$ |
267,384 |
|
Michael J. Mack, Jr. |
|
24,388 |
|
|
|
|
$ |
88.82 |
|
$ |
|
|
|
12/5/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,347 |
|
|
|
|
$ |
80.61 |
|
$ |
|
|
|
12/8/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,183 |
|
|
|
|
$ |
74.24 |
|
$ |
87,168 |
|
|
12/14/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,732 |
|
|
7,257 |
|
$ |
86.36 |
|
$ |
|
|
|
12/12/2022 |
|
|
4,316 |
|
$ |
336,648 |
|
|
|
|
|
|
|
|
|
7,717 |
|
|
14,981 |
|
$ |
87.46 |
|
$ |
|
|
|
12/11/2023 |
|
|
4,586 |
|
$ |
357,708 |
|
|
1,467 |
|
$ |
114,426 |
|
|
|
|
|
|
30,327 |
|
$ |
88.19 |
|
$ |
|
|
|
12/10/2024 |
|
|
4,830 |
|
$ |
376,740 |
|
|
2,125 |
|
$ |
165,750 |
|
|
|
91,367 |
|
|
52,565 |
|
|
|
|
$ |
87,168 |
|
|
|
|
|
13,732 |
|
$ |
1,071,096 |
|
|
3,592 |
|
$ |
280,176 |
|
(1) Options become vested and exercisable
in three approximately equal annual installments on the first, second, and third
anniversaries of the grant date.
(2) The amount shown represents the number
of options that have not been exercised (vested and unvested) multiplied by the
difference between the closing price for Deere common stock on the NYSE on
October 31, 2015, which was $78.00, and the option exercise price. No value is
shown for underwater options.
(3) Options expire ten years from the
grant date.
(4) RSUs vest three years after the grant
date, at which time they are settled in Deere common stock.
47
Table of Contents
Executive
Compensation Tables: |
Fiscal 2015 Option Exercises
and Stock Vested |
The three-year performance period for PSUs
granted in fiscal 2013 ended on October 31, 2015. The final payout determination
was made by the Committee in December 2015. As discussed in the CD&A under
2013-2015 PSU Program (Payable in Fiscal
2016), because the minimum revenue growth
and TSR performance goals were not achieved, no payouts of Company common stock
were made under these awards.
(5) The amount shown represents the number
of RSUs that have not vested multiplied by the closing price for Deere common
stock on the NYSE on October 31, 2015, which was $78.00.
(6) The amount shown represents actual
achievement of the PSUs granted in fiscal years 2014 and 2015 relative to the
S&P Industrial Sector assuming truncated performance measurement periods.
The final number of shares earned, if any, will be based upon performance as
determined by revenue growth and TSR relative to the S&P Industrial Sector
at the end of the applicable performance period.
PSU Grant Date |
December 11, 2013 |
|
December 10, 2014 |
Truncated performance period |
11/1/2013 - 10/31/2015 |
|
11/1/2014 - 10/31/2015 |
Actual performance period ending
date |
10/31/2016 |
|
10/31/2017 |
Payout of shares (as a % of target) based on
revenue growth |
0% |
|
0% |
Payout of shares (as a % of target) based on
TSR |
40% |
|
55% |
Combined payout of shares (as a % of
target) |
20% |
|
27.5% |
(7) The amount shown represents the number
of PSUs described in footnote (6) to this table multiplied by the closing price
for Deere common stock on the NYSE on October 31, 2015, which was
$78.00.
Fiscal 2015 Option Exercises and Stock
Vested
The following table provides
information regarding option exercises and vesting of RSUs and PSUs during
fiscal 2015. These options and stock awards were granted in prior fiscal years
and are not related to performance in fiscal 2015.
|
Option Awards |
Stock Awards |
|
Number of Shares |
Value Realized |
Number of Shares |
Value Realized |
|
Acquired on Exercise |
on Exercise |
Acquired on Vesting |
on Vesting |
Name |
(1) |
(2) |
(3) |
(4) |
Samuel R. Allen |
|
|
|
$ |
|
|
|
52,269 |
|
$ |
4,516,564 |
|
Rajesh Kalathur |
|
|
|
$ |
|
|
|
|
|
$ |
|
|
James M. Field |
|
88,086 |
|
$ |
3,505,971 |
|
|
9,766 |
|
$ |
843,880 |
|
Jean H. Gilles |
|
4,463 |
|
$ |
205,099 |
|
|
8,915 |
|
$ |
770,345 |
|
Michael J. Mack,
Jr. |
|
|
|
$ |
|
|
|
8,915 |
|
$ |
770,345 |
|
(1) Represents the total number of shares
that were exercised before any withholding of shares to pay the exercise price
and taxes.
(2) Value realized on exercise is based on
the market price upon exercise minus the exercise price (the grant
price).
(3) Represents the number of RSUs and PSUs
that vested during fiscal 2015. The RSUs were granted on December 14, 2011 and
vested on December 14, 2014. Although they are vested, these RSUs will not be
settled in Deere common stock until five years after the grant date (in December
2016).
The three-year performance period for PSUs
granted in fiscal 2012 ended on October 31, 2014. The final number of shares
earned was based on Deeres revenue growth and TSR relative to the S&P
Industrial Sector over the performance period. The final payout determination
was made by the Committee in December 2014 following a review of the relative
performances of the Company and the S&P Industrial Sector, and the award was
settled in Deere common stock on December 14, 2014 (the third anniversary of the
grant date). The final payout under the award was equal to 48.5% of the target
opportunity, as disclosed in the CD&A in last years proxy
statement.
48
Table of Contents
Executive
Compensation Tables: |
Pension
Benefits |
The following table shows the number of
RSUs and PSUs that vested during fiscal 2015:
Name |
RSUs |
|
PSUs |
Samuel R. Allen |
29,431 |
|
22,838 |
James M. Field |
5,499 |
|
4,267 |
Jean H. Gilles |
5,020 |
|
3,895 |
Michael J. Mack, Jr. |
5,020 |
|
3,895 |
(4) Represents the number of RSUs and PSUs
vested multiplied by the closing price ($86.41) of Deere common stock on the
NYSE as of the vesting date.
Pension Benefits
The NEOs are eligible to participate in pension plans that
provide benefits based on years of service and pay. Pension benefits are
provided under a qualified defined benefit pension plan called the John Deere
Pension Plan for Salaried Employees (the Salaried Plan) and two nonqualified
pension plans called the Senior Supplementary Pension Benefit Plan (the
Supplementary Plan) and the John Deere Supplemental Pension Benefit Plan (the
Supplemental Plan).
In 1996, we introduced a new pension
option under the Salaried Plan known as the Contemporary Option. At that time,
participants were given the choice between remaining in the existing Salaried
Plan option, known as the Traditional Option, or choosing the new Contemporary
Option. New employees hired between January 1, 1997 and October 31, 2014
automatically participated in the Contemporary Option. For new employees hired
on or after November 1, 2014, pension benefits under the Salaried Plan are
calculated based on a cash balance methodology instead of the Traditional or
Contemporary Option formulas discussed below. None of the NEOs participate in
the cash balance plan.
Salaried Plan
The Salaried Plan is a qualified plan subject to certain IRC
limitations on benefits and is subject to the Employee Retirement Income
Security Act of 1974. Deere makes contributions to, and benefits are paid from,
a tax-exempt pension trust. Pension benefits provided by the Salaried Plan under
the Traditional and Contemporary Options are summarized as follows:
Traditional Option
The Traditional Option pension benefit is based on a formula
that calculates a retirement benefit using service credit, Final Average Pay
as defined below, and a multiplier. Generally, Final Average Pay is the
participants aggregate salary (up to IRC limits) for the last 60 months prior
to retirement divided by 60, unless the last 60 months does not represent the
participants highest earnings. In that case, Final Average Pay would be
calculated using the participants five highest consecutive anniversary years of
earnings.
The formula for calculating monthly
pension benefits under the qualified Traditional Option is:
Final Average Pay (up to IRC limits)
x
Years of Service
x 1.5%
Eligibility to retire with unreduced
pension benefits under the Traditional Option is based on age and years of
service. Participants who are age 60 with ten or more years of service, or who
are age 65 with five or more years of service, receive unreduced pension
benefits.
Under the Traditional Option, early
retirement eligibility occurs upon the earliest of:
(1) having 30 years of service; or
(2) the sum of the participants years of
service and age equaling 80 or more.
Pension amounts are reduced 4% for each
year that retirement benefits are received before age 60. None of our current
NEOs participate in the Traditional Option.
Contemporary Option
Under the Contemporary Option, Career Average Pay replaces
Final Average Pay in computing retirement benefits. Career Average Pay is
calculated using salary plus STI (up to IRC limits). For participants hired
prior to January 1, 1997, the transition to Career Average Pay includes salary
and STI awards from 1992 until retirement. Deere makes enhanced contributions to
the 401(k) retirement savings accounts of salaried employees participating in
this option.
The formula for calculating benefits under
the qualified Contemporary Option is:
Career Average Pay (up to IRC limits)
x
Years of Service
x 1.5%
49
Table of Contents
Executive
Compensation Tables: Fiscal 2015 Pension Benefits
Table |
Eligibility to
retire with unreduced benefits under the Contemporary Option occurs at age 67
for all participating employees that were hired on or after January 1, 1997. For
participants hired before this date, the eligibility age for retiring with
unreduced benefits is based on years of service as of January 1, 1997 and ranges
from ages 60 to 67. None of our NEOs are currently eligible to retire with
unreduced benefits under the Contemporary Option.
For
participating employees hired before January 1, 1997 who were not eligible to
retire on January 1, 1997, and for participants that were hired on or after
January 1, 1997, early retirement eligibility under the Contemporary Option is
the earlier of:
(1) age 55 with
ten or more years of service; or
(2) age 65 with five or more years of
service.
Pension payments are reduced 4% for each
year the employee is under the unreduced benefits age upon retirement. Messrs.
Allen, Gilles, and Mack are the only NEOs currently eligible to retire early
with reduced benefits under the Contemporary Option.
Supplementary Plan
The Supplementary Plan is an unfunded, nonqualified excess
defined benefit plan that provides additional pension benefits in a comparable
amount to those benefits the participant would have received under the Salaried
Plan in the absence of IRC limitations. Benefit payments for the Supplementary
Plan are made from the assets of Deere and are at-risk in the event of the
Companys bankruptcy.
The Supplementary Plan uses the same
formula as the Salaried Plan to calculate the benefit payable, except that
eligible earnings include only amounts above IRC qualified plan
limits.
Supplemental Plan
The Supplemental Plan is an unfunded, nonqualified
supplemental retirement plan for certain employees, including all the NEOs.
Benefit payments for the Supplemental Plan are made from the assets of Deere and
are at-risk in the event of the Companys bankruptcy. The Supplemental Plan was
closed to new participants effective November 1, 2014, although benefits will
continue to accrue for employees who were already participating in the plan as
of such date.
The formulas for calculating benefits
under the Supplemental Plan for the Contemporary and Traditional Options can be
summarized as follows:
Contemporary
Option
Career Average
Pay
x |
Years of Service at grade 13 and above beginning January 1, 1997 |
x 0.5%
Traditional
Option
The Supplemental Plan benefit under
the Traditional Option is derived by subtracting the value of the Traditional
Option (Salaried Plan plus Supplementary Plan) from the value of the
Contemporary Option (Salaried Plan, Supplementary Plan, plus Supplemental Plan)
had it been chosen. If this amount is positive, the NEO will receive this
additional amount as a Supplemental Plan benefit.
Fiscal 2015 Pension
Benefits Table
|
|
|
|
Assumed |
|
Number of Years |
|
Present Value of |
Name |
|
Plan Name (1) |
|
Retirement Age
(2) |
|
of
Credited Service (3) |
|
Accumulated Benefit (4) |
Samuel R. Allen |
|
Salaried Plan |
|
63 |
|
|
40.4 |
|
|
|
$ |
1,707,954 |
|
Contemporary
Option |
|
Supplementary Plan |
|
63 |
|
|
40.4 |
|
|
|
$ |
11,748,787 |
|
|
|
Supplemental Plan |
|
63 |
|
|
18.8 |
|
|
|
$ |
2,016,567 |
|
|
|
Total |
|
|
|
|
|
|
|
|
$ |
15,473,308 |
|
|
|
Rajesh Kalathur |
|
Salaried Plan |
|
65 |
|
|
18.4 |
|
|
|
$ |
306,463 |
|
Contemporary
Option |
|
Supplementary Plan |
|
65 |
|
|
18.4 |
|
|
|
$ |
385,029 |
|
|
|
Supplemental Plan |
|
65 |
|
|
9.8 |
|
|
|
$ |
135,719 |
|
|
|
Total |
|
|
|
|
|
|
|
|
$ |
827,211 |
|
|
|
James M. Field |
|
Salaried Plan |
|
65 |
|
|
21.5 |
|
|
|
$ |
457,145 |
|
Contemporary
Option |
|
Supplementary Plan |
|
65 |
|
|
21.5 |
|
|
|
$ |
1,234,970 |
|
|
|
Supplemental Plan |
|
65 |
|
|
16.7 |
|
|
|
$ |
461,807 |
|
|
|
Total |
|
|
|
|
|
|
|
|
$ |
2,153,922 |
|
50
Table of Contents
Executive
Compensation Tables: Fiscal 2015 Pension Benefits
Table |
|
|
|
|
Assumed |
|
Number of Years |
|
Present Value of |
Name |
|
Plan Name (1) |
|
Retirement Age (2) |
|
of Credited Service (3) |
|
Accumulated Benefit (4) |
Jean H. Gilles |
|
Salaried Plan |
|
64 |
|
27.6 |
|
|
$ |
1,018,796 |
|
Contemporary
Option |
|
Supplementary Plan |
|
64 |
|
27.6 |
|
|
$ |
3,437,271 |
|
|
|
Supplemental Plan |
|
64 |
|
18.8 |
|
|
$ |
1,026,125 |
|
|
|
Total |
|
|
|
|
|
|
$ |
5,482,192 |
|
|
|
Michael J. Mack,
Jr. |
|
Salaried Plan |
|
65 |
|
29.3 |
|
|
$ |
895,598 |
|
Contemporary Option |
|
Supplementary
Plan |
|
65 |
|
29.3 |
|
|
$ |
2,783,755 |
|
|
|
Supplemental
Plan |
|
65 |
|
18.8 |
|
|
$ |
792,672 |
|
|
|
Total |
|
|
|
|
|
|
$ |
4,472,025 |
|
(1) Benefits are provided under the
Salaried Plan, the Supplementary Plan, and the Supplemental Plan as described in
the narrative preceding the table. A portion of Mr. Gilles benefits will be
provided by certain German pension plans in which he participated during his
period of employment at Deeres European Office in Germany. Any benefits
received from these German plans will offset benefits that would have otherwise
been provided under the Salaried Plan. Mr. Gilles total pension benefits are
calculated for all purposes as if he had been a participant in the U.S. pension
plans his entire career.
(2) The assumed retirement age is the
earliest age at which the NEO could retire without any benefit reduction due to
age or normal retirement age, if earlier. The assumed retirement age may vary
depending on whether the NEO is covered by the Traditional Option or the
Contemporary Option, as explained in the narrative preceding the
table.
(3) Years and months of service credit
under each plan as of October 31, 2015. The years of credited service are equal
to years of eligible service with Deere for the Salaried and Supplementary Plan.
Service credit under the Supplemental Plan is based on service at grade 13 or
above, beginning January 1, 1997.
(4) The actuarial present value of the
accumulated benefit is shown as of October 31, 2015, and is provided as a
straight-life annuity for the qualified pension plan and a lump sum for
nonqualified pension plan benefits. Pension benefits are not reduced for any
social security benefits or other offset amounts that the NEO may receive. A
portion of the benefit for Mr. Gilles will be provided under certain German
pension plans as described in footnote (1) above.
The actuarial present value is calculated
by estimating expected future payments starting at an assumed retirement age,
weighting the estimated payments by the estimated probability of surviving to
each post-retirement age, and discounting the weighted payments at an assumed
discount rate to reflect the time value of money. The actuarial present value
represents an estimate of the amount which, if invested today at the discount
rate, would be sufficient on an average basis to provide estimated future
payments based on the current accumulated benefit. Actual benefit present values
will vary from these estimates depending on many factors, including actual
retirement age.
The following assumptions were used to
calculate the present value of the accumulated benefit:
● |
Each of the NEOs continues as an
executive until the earliest age at which he could retire without any
benefit reduction due to age or normal retirement age, whichever is
earlier, as defined in the Salaried Plan; |
● |
Present value amounts were
determined based on financial accounting discount rates equal to 4.42% for
the Salaried Plan, 3.89% for the Supplementary Plan, and 3.74% for the
Supplemental Plan; |
● |
Benefits subject to a lump sum
distribution were determined using an interest rate of
2.95%; |
● |
The mortality table used for the
Salaried Plan was the RP2015WC table (with mortality projection scale
MP2015, as published by the Society of Actuaries), while the mortality table used for the Supplementary
and Supplemental Plans was the RP 2022 table, each table as published by
the IRS; and |
● |
Pensionable earnings are calculated
for the most recently completed fiscal year using base pay as an estimate
(assuming one base pay increase of 3.5% - 4.5% depending on age) with no
future increase and the STI bonus at target. Pensionable earnings for
prior years are calculated based on actual base pay and actual STI earned
for prior years. |
51
Table of Contents
Executive
Compensation Tables: Nonqualified Deferred Compensation |
Nonqualified Deferred
Compensation
The Fiscal 2015 Nonqualified
Deferred Compensation Table below shows information about four programs:
(1) the John Deere Voluntary Deferred
Compensation Plan (Deferred Plan), a nonqualified deferred compensation plan;
(2) the Deere & Company European
Office Vorsorgeplan 2001 (German Deferral Plan), a voluntary deferral plan;
(3) the John Deere Defined Contribution
Restoration Plan (DCRP), a nonqualified savings plan; and
(4) deferred RSUs.
Deferred Plan
Under the Deferred Plan, through fiscal 2008, NEOs could defer
their base salary, STI, and/or MTI in 5% increments up to 95%. For deferrals
elected after 2008, up to 70% of base salary can be deferred while STI and MTI
awards can be deferred up to 95%. On the first day of each calendar quarter, the
balance in each account under the Deferred Plan is credited with interest. For
deferrals made through calendar 2009, interest is credited at the prime rate (as
determined by the Federal Reserve Statistical Release for the prior month) plus
2% as of the last day of the preceding quarter. For deferrals made after
December 31, 2009, the deferred amounts earn interest based on the Moodys A
rated Corporate Bond Rate. During fiscal 2015, amounts deferred under the
Deferred Plan were credited with interest at the following rates:
Earnings Under Deferred
Plan |
|
|
Deferrals through |
|
Deferrals after 2009 |
|
|
calendar 2009 |
|
Moodys A Corporate |
|
|
Prime plus 2% |
|
Bond Rate |
November-14 |
|
5.25% |
|
4.18% |
February-15 |
|
5.25% |
|
3.81% |
May-15 |
|
5.25% |
|
4.24% |
August-15 |
|
5.25% |
|
4.32% |
An election to defer salary must be made
prior to the beginning of the calendar year in which deferral occurs. An
election to defer STI must be made prior to the beginning of the fiscal year
upon which the award is based. An election to defer MTI must be made prior to
the close of the fiscal year preceding the calendar year of payment.
Participants may elect to receive the deferred funds in a lump sum or in equal
annual installments not to exceed ten years. Distribution must be completed
within ten years following retirement. All deferral elections and associated
distribution schedules are irrevocable. This plan is unfunded and participant
accounts are at-risk in the event of the Companys bankruptcy.
German Deferral
Plan
Mr. Gilles participated in the German
Deferral Plan during his period of employment at Deeres European Office in
Germany. The German Deferral Plan was available to all salaried employees in
Germany and permitted participants to defer up to 100% of their base salary,
STI, and/or MTI. Interest on deferrals is determined on the basis of
transforming factors specified in the plan documentation. All distributions
are paid in a lump sum in the January following the year in which the
participant retires or, if the participant retires prior to age 65, no later
than the January following the year the participant turns 65.
DCRP
The DCRP is designed to allow executives participating in our
Contemporary Option to defer employee contributions and receive employer
matching contributions on up to 6% of eligible earnings that are otherwise
limited by the IRC. For DCRP purposes, eligible earnings include base salary,
STI, and commission compensation. None of the NEOs receive commission
compensation. The 401(k) deferral percentage selected by the employee in place
each October 31st is used during the following calendar year to calculate the
DCRP employee contribution. This plan is unfunded and participant accounts are
at-risk in the event of the Companys bankruptcy.
Two investment options were
available under the DCRP during fiscal 2015: the prime rate (as determined by
the Federal Reserve Statistical Release for the prior month) plus 2%; or a rate
of return based on the S&P 500 Index for the prior month. Participants could
choose either investment option for any portion of their account, and could
change investment options between the 1st and 10th day of any month. During
fiscal 2015, the annualized rates of return under the two options were as
follows:
Earnings For DCRP |
|
|
Prime plus 2% |
|
S&P 500 Index |
November-14 |
|
5.25% |
|
|
-33.69 |
% |
|
December-14 |
|
5.25% |
|
|
66.46 |
% |
|
January-15 |
|
5.25% |
|
|
5.69 |
% |
|
February-15 |
|
5.25% |
|
|
-15.24 |
% |
|
March-15 |
|
5.25% |
|
|
31.96 |
% |
|
April-15 |
|
5.25% |
|
|
-1.27 |
% |
|
May-15 |
|
5.25% |
|
|
8.58 |
% |
|
June-15 |
|
5.25% |
|
|
9.78 |
% |
|
July-15 |
|
5.25% |
|
|
-7.19 |
% |
|
August-15 |
|
5.25% |
|
|
-2.94 |
% |
|
September-15 |
|
5.25% |
|
|
-31.10 |
% |
|
October-15 |
|
5.25% |
|
|
-56.16 |
% |
|
52
Table of Contents
Executive
Compensation Tables: Fiscal 2015 Nonqualified Deferred Compensation Table |
As of November 1, 2015, the investment
options described above are no longer available for new deferrals under the
DCRP. Instead, the investment options under the DCRP now parallel the investment
options offered under our 401(k) plan (with certain limited exceptions). Funds
deferred prior to November 1, 2015 may remain invested under the previous
options, although participants may also move these funds into the new options.
Additionally, as of November 1, 2015 participants are permitted to change
investment options at any time. These changes effectively eliminate the ability
of DCRP participants to earn above-market interest on new deferrals.
Distribution options under the DCRP
consist of a lump sum distribution one year following the date of separation,
or, in the case of retirement, five annual installments beginning one year
following the retirement date.
Deferred RSUs
There are two scenarios under which deferred RSUs can appear
in the Fiscal 2015 Nonqualified Deferred Compensation Table:
● |
Certain RSUs are required to be held
for a defined period of time after they vest three years from the grant
date. The following tranches of RSUs have vested but remain subject to
mandatory restriction as described in the following
chart: |
Grant Date |
|
Date Vested |
|
Restriction Period |
December 2002 |
|
December 2005 |
|
Until retirement or no
longer active
employee |
December 2007 |
|
December 2010 |
|
Until retirement or no longer active
employee |
December 2008 |
|
December 2011 |
|
Until retirement or no
longer active
employee |
December 2009 |
|
December 2012 |
|
Until retirement or no longer active
employee |
December 2010 |
|
December 2013 |
|
5 years (until December
2015) |
December 2011 |
|
December 2014 |
|
5 years (until December
2016) |
● |
For RSUs granted starting in
December 2003, NEOs may elect deferral of settlement for a minimum of five
years. If a deferral election is made, the RSUs will be settled in shares
of Deere common stock five or more years after the originally scheduled
conversion date. |
Deferred RSUs will not be settled in Deere
common stock until either the election period or the restriction period
expires.
Fiscal 2015 Nonqualified
Deferred Compensation Table
|
|
|
|
Executive |
|
Registrant |
|
Aggregate |
|
|
|
|
|
|
|
|
|
Contributions |
|
Contributions |
|
Earnings in Last |
|
Aggregate Balance at |
|
|
|
|
in
Last FY |
|
in
Last FY |
|
Fiscal Year |
|
Last FYE |
Name |
|
Plan |
|
(1) |
|
(2) |
|
(3) |
|
(4) |
Samuel R. Allen |
|
DCRP |
|
|
$ |
241,191 |
|
|
|
$ |
401,985 |
|
|
|
$ |
272,158 |
|
|
|
|
$ |
5,504,538 |
|
|
|
Deferred RSUs |
|
|
$ |
|
|
|
|
$ |
2,543,133 |
|
|
|
$ |
(992,060 |
) |
|
|
|
$ |
9,997,806 |
|
|
|
Total |
|
|
$ |
241,191 |
|
|
|
$ |
2,945,117 |
|
|
|
$ |
(719,902 |
) |
|
|
|
$ |
15,502,344 |
|
Rajesh Kalathur |
|
DCRP |
|
|
$ |
70,671 |
|
|
|
$ |
117,786 |
|
|
|
$ |
28,469 |
|
|
|
|
$ |
604,591 |
|
|
|
Total |
|
|
$ |
70,671 |
|
|
|
$ |
117,786 |
|
|
|
$ |
28,469 |
|
|
|
|
$ |
604,591 |
|
James M. Field |
|
DCRP |
|
|
$ |
89,750 |
|
|
|
$ |
149,583 |
|
|
|
$ |
90,308 |
|
|
|
|
$ |
1,831,920 |
|
|
|
Deferred RSUs |
|
|
$ |
|
|
|
|
$ |
475,169 |
|
|
|
$ |
(276,609 |
) |
|
|
|
$ |
2,811,978 |
|
|
|
Total |
|
|
$ |
89,750 |
|
|
|
$ |
624,752 |
|
|
|
$ |
(186,301 |
) |
|
|
|
$ |
4,643,898 |
|
Jean H. Gilles |
|
German Deferral Plan |
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
17,794 |
|
|
|
|
$ |
279,748 |
|
|
|
DCRP |
|
|
$ |
81,036 |
|
|
|
$ |
135,060 |
|
|
|
$ |
82,562 |
|
|
|
|
$ |
1,673,270 |
|
|
|
Deferred RSUs |
|
|
$ |
|
|
|
|
$ |
433,778 |
|
|
|
$ |
(198,884 |
) |
|
|
|
$ |
2,012,244 |
|
|
|
Total |
|
|
$ |
81,036 |
|
|
|
$ |
568,839 |
|
|
|
$ |
(98,529 |
) |
|
|
|
$ |
3,965,262 |
|
Michael J. Mack,
Jr. |
|
Deferred Plan |
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
98,424 |
|
|
|
|
$ |
1,936,661 |
|
|
|
DCRP |
|
|
$ |
91,314 |
|
|
|
$ |
152,191 |
|
|
|
$ |
(13,445 |
) |
|
|
|
$ |
2,585,724 |
|
|
|
Deferred RSUs |
|
|
$ |
|
|
|
|
$ |
433,778 |
|
|
|
$ |
(318,793 |
) |
|
|
|
$ |
3,252,678 |
|
|
|
Total |
|
|
$ |
91,314 |
|
|
|
$ |
585,969 |
|
|
|
$ |
(233,814 |
) |
|
|
|
$ |
7,775,063 |
|
(1) The amounts in this column represent
employee compensation deferrals that are included in the Fiscal 2015 Summary
Compensation Table under the Salary and Non-Equity Incentive Plan
Compensation columns.
53
Table of Contents
Executive
Compensation Tables: Fiscal 2015 Potential Payments upon Change in Control |
(2) The amounts in this column associated
with the DCRP represent Deeres contributions during the fiscal year as included
in the Fiscal 2015 Summary Compensation Table under the All Other Compensation
column. The amounts in this column associated with deferred RSUs represent RSUs
that vested in the current fiscal year but have not been converted into Deere
common stock, and are included in the Fiscal 2015 Option Exercises and Stock
Vested table under the column Value Realized on Vesting.
(3) For rates of return on account
balances under the Deferred Plan and DCRP, see the applicable earnings charts in
the narrative preceding this table. The notional rate of return on amounts
deferred by Mr. Gilles under the German Deferral Plan was 6.79%. For the
deferred RSU accounts, the earnings represent the change in the intrinsic value
of the RSUs. The above-market portions of the amounts shown in this column are
reported in the Fiscal 2015 Summary Compensation Table under the Change in
Pension Value and Nonqualified Deferred Compensation Earnings column and are
quantified in footnote (5) to that table.
(4) Of the aggregate balance, the
following amounts were reported as compensation to each respective NEO in the
Summary Compensation Table in prior years: $9,663,424 (Allen); $191,656
(Kalathur); $2,315,076 (Field); $790,281 (Gilles); and $4,836,562
(Mack).
Fiscal 2015 Potential Payments upon
Change in Control
The CIC Program includes
a double trigger approach, under which participants will receive severance
benefits only if both a change in control and qualifying termination occur. A
qualifying termination is either:
● |
Deeres termination of an executives
employment within the six months preceding or within 24 months following a
change in control for reasons other than death, disability, or cause (defined
as an executives willful and continued nonperformance of duties after written
demand; willful conduct that is demonstrably and materially injurious to Deere;
or illegal activity); or |
● |
An executives termination of his or her
own employment for good reason (defined as material reductions or alterations
in an executives authorities, duties, or responsibilities; change in office
location of at least 50 miles from current residence; material reductions in an
executives participation in certain Deere compensation plans; or certain other
breaches of the covenants in the CIC Program) within 24 months following a
change in control. |
The CIC Program defines the following as
change in control events:
● |
any person, as defined in the Exchange
Act (with certain exceptions), acquires 30% or more of Deeres voting
securities; |
● |
a majority of Deeres directors are
replaced without the approval of at least two-thirds of the existing directors
or directors previously approved by the then-existing directors; |
● |
any merger or business combination of
Deere and another company, unless the outstanding voting securities of Deere
prior to the transaction continue to represent at least 60% of the voting
securities of the new company; or |
● |
Deere is completely liquidated or all,
or substantially all, of Deeres assets are sold or disposed.
|
Benefits provided under the CIC program
and other benefit plans are described in the footnotes to the table. Although
not reflected in the table, the CIC Program provides that Deere will pay the
executives reasonable legal fees and expenses if the executive must enforce the
program terms. Under the CIC Program, the executives agree: (a) not to disclose
or use for their own purposes confidential and proprietary Deere information;
and (b) for a period of two years following termination of employment, not to
induce Deere employees to leave Deere, or to interfere with Deeres business.
In addition, the Omnibus Plan, the MTI
plan, and the Deferred Plan each contain change in control provisions that may
trigger payments under these plans. Under the Omnibus Plan, unless the Board or
the Committee determines otherwise, and regardless of whether or not the
employee is terminated, all then-outstanding equity awards that were granted
before February 24, 2010 would vest and restriction periods would end upon a
change in control. All outstanding RSUs would be cashed out as of the date of
the change in control and the employee would have the right to exercise all
outstanding options. Such potential payments are disclosed in the table below
adjacent to Change in Control only. For awards made under the Omnibus Plan on
and after February 24, 2010, the foregoing provisions will apply only if there
is both a change in control and the employee experiences a qualifying
termination. The MTI plan provides for payment upon a change in control based on
actual performance results to date for all performance periods then in progress.
Under the Deferred Plan, in the event of certain changes in control, the
Committee may elect to terminate the plan within 12 months following the change
in control and distribute all account balances, or the Committee may decide to
keep the Deferred Plan in effect and modify it to reflect the impact of the
change in control.
54
Table of Contents
Executive
Compensation Tables: Fiscal 2015 Potential Payments upon Change in Control |
The following table includes estimated
potential payments that would have been due to each NEO if a change in control
event had occurred and, if applicable, the NEO experienced a qualifying
termination as of October 31, 2015. Although the calculations are intended to
provide reasonable estimates of the potential payments, they are based on
numerous assumptions, as described in the footnotes, and may not represent the
actual amount each NEO would receive if a change in control occurred. As
explained in the footnotes, the payments listed represent the incremental
amounts due to NEOs beyond what the NEOs would have received
without the change in control. Not
included in this table are the following payments to which the NEOs are already
entitled and which are reported in previous sections of this Proxy
Statement:
● |
amounts already earned under the STI
and MTI plans as of October 31, 2015 (reported in the Fiscal 2015 Summary
Compensation Table); |
● |
the exercise of outstanding vested
options (reported in the Outstanding Equity Awards at Fiscal 2015 Year-End
table); and |
● |
distribution of nonqualified
deferred compensation (reported in the Fiscal 2015 Nonqualified Deferred
Compensation Table). |
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Stock |
|
Welfare |
|
Defined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards |
|
Options |
|
Benefits |
|
Contribution |
|
Total |
Name |
|
Salary (1) |
|
STI (2) |
|
MTI (3) |
|
(4) |
|
(5) |
|
(6) |
|
Plans (7) |
|
Payments |
Samuel R. Allen |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
~Change in Control only |
|
$ |
|
|
$ |
|
|
$ |
2,058,472 |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
|
$ |
2,058,472 |
~Change in Control and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualifying
Termination |
|
$ |
4,500,000 |
|
$ |
5,625,000 |
|
$ |
2,058,472 |
|
$ |
8,964,072 |
|
$ |
|
$ |
36,342 |
|
$ |
1,283,955 |
|
$ |
22,467,841 |
Rajesh Kalathur |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
~Change in
Control only |
|
$ |
|
|
$ |
|
|
$ |
591,655 |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
|
$ |
591,655 |
~Change in
Control and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualifying Termination |
|
$ |
1,662,984 |
|
$ |
1,407,926 |
|
$ |
591,655 |
|
$ |
2,679,534 |
|
$ |
|
$ |
41,411 |
|
$ |
431,358 |
|
$ |
6,814,868 |
James M. Field |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
~Change in Control only |
|
$ |
|
|
$ |
|
|
$ |
591,655 |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
|
$ |
591,655 |
~Change in Control and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualifying
Termination |
|
$ |
2,003,688 |
|
$ |
1,698,999 |
|
$ |
591,655 |
|
$ |
2,638,428 |
|
$ |
|
$ |
42,179 |
|
$ |
526,749 |
|
$ |
7,501,698 |
Jean H. Gilles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
~Change in
Control only |
|
$ |
|
|
$ |
|
|
$ |
591,655 |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
|
$ |
591,655 |
~Change in
Control and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualifying Termination |
|
$ |
1,850,400 |
|
$ |
1,567,799 |
|
$ |
591,655 |
|
$ |
1,719,744 |
|
$ |
|
$ |
40,859 |
|
$ |
545,458 |
|
$ |
6,315,915 |
Michael J. Mack,
Jr. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
~Change in Control only |
|
$ |
|
|
$ |
|
|
$ |
591,655 |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
|
$ |
591,655 |
~Change in Control and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualifying
Termination |
|
$ |
2,032,452 |
|
$ |
1,723,389 |
|
$ |
591,655 |
|
$ |
1,713,660 |
|
$ |
|
$ |
42,244 |
|
$ |
534,573 |
|
$ |
6,637,973 |
(1) In the event of a change in control
and qualifying termination, the CIC Program provides for a lump sum payment of
three times the annual base salary.
(2) In the event of a change in control
and qualifying termination, the CIC Program provides for a lump sum payment of
three times the target STI bonus amount for the fiscal year in which the
termination occurs. In addition, the NEO is entitled to a prorated STI award for
the current year. Since the change in control calculations in this table are
made as of the end of the fiscal year, the prorated award for the current year
is equal to the STI earned for the current fiscal year as reported in the Fiscal
2015 Summary Compensation Table under the column Non-Equity Incentive Plan
Compensation and is not duplicated in this table.
55
Table of Contents
Executive
Compensation Tables: Fiscal 2015 Potential Payments upon Termination of Employment Other
than Following a Change in
Control |
(3) The MTI plan contains a change in
control provision that entitles participants, as of the date of a change in
control, to a lump sum MTI payment based on actual performance results to date
for all performance periods then in progress. The payout for the three-year
performance period ended October 31, 2015 is reported in the Fiscal 2015 Summary
Compensation Table under the column Non-Equity Incentive Plan Compensation and
is not duplicated in this table. For each of the NEOs, the amount shown in this
table represents the payout for the two remaining performance
periods.
(4) Vesting of unvested RSUs and PSUs does
not accelerate in the event of a change in control only. In the event of a
change in control and qualifying termination:
● |
For unvested RSUs, the vesting and
restriction requirements no longer apply and the awards are cashed out;
and |
● |
For unvested PSUs, the vesting and
restriction requirements no longer apply and the awards are cashed out at
a target award level. |
For purposes of the table, all unvested
PSUs and RSUs are valued based on the closing price for Deere common stock on
the NYSE on October 31, 2015, which was $78.00. Since Messrs. Allen, Gilles, and
Mack are eligible for retirement and all currently unvested RSUs would vest
immediately on the date of such event, there is no incremental benefit of the
accelerated vesting for these individuals. Vested RSUs are not included since
they have been earned and are included on the Fiscal 2015 Nonqualified Deferred
Compensation Table. Unvested PSUs and RSUs are included in the Outstanding
Equity Awards at Fiscal 2015 Year-End table.
(5) Vesting of outstanding stock options
does not accelerate in the event of a change in control only. Instead,
outstanding stock options will continue to vest over the three-year vesting
period, subject to continued employment conditions.
In the event of a change in control and
qualifying termination, all outstanding stock options vest and can be exercised
immediately. Since Messrs. Allen, Gilles, and Mack are eligible for retirement
and all currently unvested stock options would vest immediately on the date of
such event, there is no incremental benefit of the accelerated vesting for these
individuals. For Messrs. Kalathur and Field, who are not eligible for
retirement, the amount represents the number of outstanding, unexercisable
options multiplied by the difference between the closing price for Deere common
stock on the NYSE on October 31, 2015, which was $78.00, and the option exercise
prices. These amounts are included in the Outstanding Equity Awards at Fiscal
2015 Year-End table.
(6) In the event of a change in control
and qualifying termination, the CIC Program provides for continuation of health
care, life, accidental death and dismemberment, and disability insurance for
three full years at the same premium cost and coverage. This benefit will be
discontinued if the NEO receives similar benefits from a subsequent employer
during this three-year period.
(7) In the event of a change in control
and qualifying termination, the CIC Program includes cash payment equal to three
times Deeres contributions on behalf of each of the NEOs under our defined
contribution plans for the plan year preceding termination (or, if greater, for
the plan year immediately preceding the change in control). The amount reported
for Mr. Gilles also includes the amount by which the value of his account
balance under the German Deferral Plan would have increased had he remained
employed for an additional three years following a change in control and his
qualifying termination.
Fiscal 2015 Potential
Payments upon Termination of Employment Other than Following a Change in
Control
The following table summarizes the
estimated payments to be made to the NEOs under our plans or established
practices in the event of termination of employment for death, disability,
retirement, termination without cause, termination for cause, and voluntary
separation. Although the calculations are intended to provide reasonable
estimates of the potential payments, they are
based on numerous assumptions, as
described in the footnotes, and may not represent the actual amounts the NEOs
would receive in the event of an eligible termination.
The amounts shown assume the termination
event occurred on, and the NEO was actively employed until, October 31,
2015.
56
Table of Contents
Executive
Compensation Tables: Fiscal 2015 Potential Payments upon Termination of Employment Other
than Following a Change in
Control |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred |
|
Pension |
|
|
|
|
|
Salary |
|
STI |
|
MTI |
|
Stock Awards |
|
Stock Options |
|
Compensation |
|
Benefit |
|
Total |
Name |
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
(5) |
|
(6) |
|
(7) |
|
Payments |
Samuel R. Allen |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death |
|
$ |
|
|
$ |
2,796,863 |
|
$ |
2,722,500 |
|
$ |
16,963,284 |
|
$ |
9,850,571 |
|
$ |
5,504,538 |
|
$ |
9,635,220 |
|
$ |
47,472,976 |
Disability |
|
$ |
13,076,110 |
|
$ |
2,796,863 |
|
$ |
2,722,500 |
|
$ |
16,963,284 |
|
$ |
9,850,571 |
|
$ |
5,504,538 |
|
$ |
17,033,597 |
|
$ |
67,947,463 |
Retirement |
|
$ |
|
|
$ |
2,796,863 |
|
$ |
2,722,500 |
|
$ |
16,963,284 |
|
$ |
9,850,571 |
|
$ |
5,504,538 |
|
$ |
17,493,608 |
|
$ |
55,331,364 |
Termination Without Cause |
|
$ |
1,500,000 |
|
$ |
2,796,863 |
|
$ |
2,722,500 |
|
$ |
9,997,806 |
|
$ |
|
|
$ |
5,504,538 |
|
$ |
17,493,608 |
|
$ |
40,015,315 |
Termination For Cause |
|
$ |
|
|
$ |
2,796,863 |
|
$ |
2,722,500 |
|
$ |
9,997,806 |
|
$ |
|
|
$ |
5,504,538 |
|
$ |
17,493,608 |
|
$ |
38,515,315 |
Voluntary Separation (8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rajesh Kalathur |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death |
|
$ |
|
|
$ |
933,428 |
|
$ |
1,020,204 |
|
$ |
1,283,802 |
|
$ |
1,132,219 |
|
$ |
604,591 |
|
$ |
535,292 |
|
$ |
5,509,536 |
Disability |
|
$ |
12,158,185 |
|
$ |
933,428 |
|
$ |
1,020,204 |
|
$ |
1,283,802 |
|
$ |
1,132,219 |
|
$ |
604,591 |
|
$ |
2,286,353 |
|
$ |
19,418,782 |
Retirement
(9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination Without
Cause |
|
$ |
415,746 |
|
$ |
933,428 |
|
$ |
1,020,204 |
|
$ |
|
|
$ |
|
|
$ |
604,591 |
|
$ |
982,602 |
|
$ |
3,956,571 |
Termination For
Cause |
|
$ |
|
|
$ |
933,428 |
|
$ |
1,020,204 |
|
$ |
|
|
$ |
|
|
$ |
604,591 |
|
$ |
982,602 |
|
$ |
3,540,825 |
Voluntary
Separation |
|
$ |
|
|
$ |
933,428 |
|
$ |
1,020,204 |
|
$ |
|
|
$ |
|
|
$ |
604,591 |
|
$ |
982,602 |
|
$ |
3,540,825 |
James M. Field |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death |
|
$ |
|
|
$ |
1,126,403 |
|
$ |
1,020,204 |
|
$ |
4,076,280 |
|
$ |
822,367 |
|
$ |
1,831,920 |
|
$ |
1,287,246 |
|
$ |
10,164,420 |
Disability |
|
$ |
13,435,349 |
|
$ |
1,126,403 |
|
$ |
1,020,204 |
|
$ |
4,076,280 |
|
$ |
822,367 |
|
$ |
1,831,920 |
|
$ |
4,174,065 |
|
$ |
26,486,588 |
Retirement (9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination Without Cause |
|
$ |
584,409 |
|
$ |
1,126,403 |
|
$ |
1,020,204 |
|
$ |
2,811,978 |
|
$ |
|
|
$ |
1,831,920 |
|
$ |
2,353,847 |
|
$ |
9,728,761 |
Termination For Cause |
|
$ |
|
|
$ |
1,126,403 |
|
$ |
1,020,204 |
|
$ |
2,811,978 |
|
$ |
|
|
$ |
1,831,920 |
|
$ |
2,353,847 |
|
$ |
9,144,352 |
Voluntary Separation |
|
$ |
|
|
$ |
1,126,403 |
|
$ |
1,020,204 |
|
$ |
2,811,978 |
|
$ |
|
|
$ |
1,831,920 |
|
$ |
2,353,847 |
|
$ |
9,144,352 |
Jean H. Gilles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death |
|
$ |
|
|
$ |
1,039,420 |
|
$ |
1,020,204 |
|
$ |
3,354,624 |
|
$ |
1,263,943 |
|
$ |
2,003,857 |
|
$ |
3,614,279 |
|
$ |
12,296,327 |
Disability |
|
$ |
7,536,919 |
|
$ |
1,039,420 |
|
$ |
1,020,204 |
|
$ |
3,354,624 |
|
$ |
1,263,943 |
|
$ |
1,953,018 |
|
$ |
7,405,739 |
|
$ |
23,573,867 |
Retirement |
|
$ |
|
|
$ |
1,039,420 |
|
$ |
1,020,204 |
|
$ |
3,354,624 |
|
$ |
1,263,943 |
|
$ |
1,953,018 |
|
$ |
6,582,190 |
|
$ |
15,213,399 |
Termination Without
Cause |
|
$ |
616,800 |
|
$ |
1,039,420 |
|
$ |
1,020,204 |
|
$ |
2,012,244 |
|
$ |
|
|
$ |
1,953,018 |
|
$ |
6,582,190 |
|
$ |
13,223,876 |
Termination For
Cause |
|
$ |
|
|
$ |
1,039,420 |
|
$ |
1,020,204 |
|
$ |
2,012,244 |
|
$ |
|
|
$ |
1,953,018 |
|
$ |
6,582,190 |
|
$ |
12,607,076 |
Voluntary
Separation (8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Mack,
Jr. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death |
|
$ |
|
|
$ |
1,142,573 |
|
$ |
1,020,204 |
|
$ |
4,603,950 |
|
$ |
87,168 |
|
$ |
4,522,385 |
|
$ |
2,951,488 |
|
$ |
14,327,768 |
Disability |
|
$ |
7,636,888 |
|
$ |
1,142,573 |
|
$ |
1,020,204 |
|
$ |
4,603,950 |
|
$ |
87,168 |
|
$ |
4,522,385 |
|
$ |
6,102,515 |
|
$ |
25,115,683 |
Retirement |
|
$ |
|
|
$ |
1,142,573 |
|
$ |
1,020,204 |
|
$ |
4,603,950 |
|
$ |
87,168 |
|
$ |
4,522,385 |
|
$ |
5,373,453 |
|
$ |
16,749,733 |
Termination Without Cause |
|
$ |
677,484 |
|
$ |
1,142,573 |
|
$ |
1,020,204 |
|
$ |
3,252,678 |
|
$ |
|
|
$ |
4,522,385 |
|
$ |
5,373,453 |
|
$ |
15,988,777 |
Termination For Cause |
|
$ |
|
|
$ |
1,142,573 |
|
$ |
1,020,204 |
|
$ |
3,252,678 |
|
$ |
|
|
$ |
4,522,385 |
|
$ |
5,373,453 |
|
$ |
15,311,293 |
Voluntary Separation (8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Our NEOs do not have employment
agreements. However, we have severance guidelines that provide compensation if
termination is initiated by Deere for reasons other than cause. Our severance
guidelines provide for payment of one-half month of salary for each complete
year of employment, up to a maximum of one years salary. We may elect to pay
severance in either a lump sum or via salary continuance, unless the amount of
severance exceeds two times the applicable limit under Section 401(a)(17) of the
IRC, in which case severance will be paid in a lump sum.
Under our Long-Term Disability Plan, if
disabled before age 62, NEOs receive monthly benefits until age 65 equal to 60%
of their salary plus the average of the three STI awards received immediately
prior to the start of disability. The amount shown for disability represents the
present value of the monthly benefit from the time of the disability, assumed to
be October 31, 2015, until the time the NEO attains age 65.
57
Table of Contents
Executive Compensation
Tables: Fiscal 2015 Potential Payments upon
Termination of Employment Other than Following a Change in
Control |
(2) Under all termination events, the
amount of STI earned for the fiscal year ended October 31, 2015 would be payable
in a lump sum generally within two months after the end of the fiscal year, but
in no event later than March 15th of the calendar year following the end of the
fiscal year. This amount is also reported in the Fiscal 2015 Summary
Compensation Table under the column Non-Equity Incentive Plan
Compensation.
(3) Under all termination events, the
amount of MTI earned for the performance period ended October 31, 2015 would be
payable in a lump sum generally within two months after the end of the fiscal
year, but in no event later than March 15th of the calendar year following the
end of the fiscal year. This amount is also reported in the Fiscal 2015 Summary
Compensation Table under the column Non-Equity Incentive Plan
Compensation.
(4) In the event of death, disability, or
retirement, the most recent RSU and PSU awards are prorated based on the number
of months the NEOs remain active in the year of grant, meaning that the NEOs
retain 1/12th of the RSUs and PSUs awarded during the year for each month of
active employment. The remaining units are forfeited. All unvested and
non-forfeited RSUs will vest on the date of separation from service, while PSUs
that are not forfeited will continue to convert to shares at the end of the
three-year performance period based on the performance metrics. Upon lapse of
the applicable restrictions, vested RSUs will be converted to shares of common
stock. Restrictions on vested RSUs will lapse as provided in the following
table:
Type of Separation from
Service |
|
Fiscal Year of RSU Award |
|
Lapse of Restrictions |
Death |
|
2010 and
prior |
|
First business
day of January following death |
|
|
2011 and
2012 |
|
First business
day in the later of January or July following death |
|
|
After
2012 |
|
Third
anniversary of grant date |
Disability or Retirement |
|
2012
and prior |
|
First business day in
the later of January or July following separation from
service |
|
|
After
2012 |
|
Third
anniversary of grant date |
In the event of termination with or
without cause or voluntary separation, any vested RSUs will be cashed out. All
unvested PSUs and RSUs will be forfeited. The amounts shown in the table
correspond to vested RSUs (including RSUs that vest as a result of the
termination of employment).
The value of PSUs for each outstanding
tranche represents actual achievement relative to the S&P Industrial Sector
assuming, in the case of PSUs granted in fiscal years 2014 and 2015, truncated
performance measurement periods. The performance period for PSUs granted in
fiscal year 2013 ended on October 31, 2015. The final number of shares earned,
if any, will be based upon performance as determined by revenue growth and TSR
relative to the S&P Industrial Sector at the end of the applicable
performance period. See footnotes (4) and (6) to the Outstanding Equity Awards
at Fiscal 2015 Year-End table for performance information relating to each
outstanding tranche of PSUs.
All amounts shown in the table are based
on the closing price for Deere common stock on the NYSE on October 31, 2015,
which was $78.00.
(5) In the event of death, all outstanding
stock options vest immediately. In the event of disability or retirement,
vesting accelerates for all outstanding stock options but occurs no sooner than
six months following the grant date. In the case of death, the heirs have one
year to exercise options. In the case of disability or retirement, options
expire within five years. In the event of retirement, the most recent stock
option awards granted to the NEOs are prorated based on the number of months the
NEOs remain active in the year of grant, meaning that the NEOs retain 1/12th of
the options awarded during the year for each month of active employment. The
remaining options are forfeited. The amount shown in this table represents the
number of stock options multiplied by the difference between the closing price
for Deere common stock on the NYSE on October 31, 2015, which was $78.00, and
the option exercise prices. These outstanding stock options are reported in the
Outstanding Equity Awards at Fiscal 2015 Year-End table. In the event of a
termination other than for death, disability, or retirement, all outstanding
stock options are forfeited.
(6) In all cases, balances held in the
U.S. nonqualified deferred compensation plans and the German Deferral Plan are
payable to the employee. These amounts are reported in the Fiscal 2015
Nonqualified Deferred Compensation Table under Deferred Plan, German Deferral
Plan, and DCRP. Under the German Deferral Plan, the amount payable in the event
of death differs from the amount payable under the other scenarios based on the
application of the transforming factors specified in the plan documentation.
The deferred RSUs reported in the Fiscal 2015 Nonqualified Deferred Compensation
Table are reported in this table under the column Stock Awards.
(7) The present value of the accumulated
pension benefit was calculated using the following assumptions:
● |
present value amounts were
determined based on a discount rate of 4.42% for the Salaried Plan, 3.89%
for the Supplementary Plan, and 3.74% for the Supplemental
Plan; |
|
|
● |
lump sum distribution amounts were
determined using an interest rate of 2.95% for the Supplementary and
Supplemental Plans; |
|
|
● |
the mortality table used for the
Salaried Plan was RP2015WC with mortality projection scale
MP2015; |
● |
the mortality table used for the
Supplementary and Supplemental Plans was RP2022; and |
|
|
● |
pensionable earnings earned were
based on actual base salary and forecasted STI for fiscal
2015. |
58
Table of Contents
Executive
Compensation Tables: Fiscal 2015 Potential
Payments upon Termination of Employment Other than Following a Change in
Control |
Following are additional explanations
related to the various scenarios:
● |
Death: This amount represents the
present value of the accrued survivor benefit as of October 31,
2015. |
|
|
● |
Disability: This amount assumes
service through age 65 and includes service credit for time on long-term
disability. |
|
|
● |
Retirement: For the NEOs eligible to
retire, this amount represents the present value of the accrued benefits
if they were to retire as of October 31,
2015. |
● |
Termination Without Cause,
Termination For Cause, and Voluntary Separation: This amount represents the present value of the
accrued benefit as of October 31,
2015. |
(8) Since Messrs. Allen, Gilles, and Mack
are eligible for early retirement, the scenario for Voluntary Separation is not
applicable. Under this scenario, these NEOs would retire.
(9) Since Messrs. Kalathur and Field are
not eligible for normal or early retirement, this scenario is not
applicable.
59
Table of Contents
Equity Compensation
Plan Information
The following table shows the total number
of outstanding options and shares available for future issuances under our
equity compensation plans as of October 31, 2015:
|
Number of |
|
Weighted- |
|
Number of Securities |
|
Securities |
|
Average |
|
Remaining Available |
|
to be Issued Upon |
|
Exercise Price of |
|
for Future Issuance |
|
Exercise of |
|
Outstanding |
|
Under Equity |
|
Outstanding |
|
Options, |
|
Compensation Plans |
|
Options, Warrants, |
|
Warrants, and |
|
(excluding securities |
|
and Rights |
|
Rights |
|
reflected in column (a)) |
Plan Category |
(a) |
|
|
(b) |
|
(c) |
|
Equity
Compensation Plans Approved by Security Holders |
15,951,725 |
(1) |
|
|
$77.39 |
|
|
16,856,138 |
(2) |
Equity
Compensation Plans Not Approved by Security Holders |
|
|
|
|
|
|
|
|
(3) |
Total |
15,951,725 |
|
|
|
$77.39 |
|
|
16,856,138 |
|
(1) This amount includes 1,038,187 PSUs
and RSUs awarded under the Omnibus Plan and 118,993 RSUs awarded under the
Nonemployee Director Stock Ownership Plan. Under the Omnibus Plan, the PSUs are
payable only in stock after the three-year performance period is ended and the
RSUs are payable only in stock three to five years after the award is granted or
upon retirement. Under the Nonemployee Director Stock Ownership Plan, RSUs are
payable only in stock upon retirement. The weighted-average exercise price
information in column (b) does not include these units.
(2) This amount includes 438,464 shares
available under the Nonemployee Director Stock Ownership Plan for future awards
of restricted stock or RSUs and 16,417,674 shares available under the Omnibus
Plan. Under the Omnibus Plan, Deere may award shares in connection with stock
options and stock appreciation rights, performance awards, restricted stock or
restricted stock equivalents, or other awards consistent with the purposes of
such plan as determined by the Committee. In addition, shares covered by
outstanding awards become available for new awards if the award is forfeited or
expires before delivery of the shares.
(3) Deere currently has no equity
compensation plans that have not been approved by stockholders.
60
Table of Contents
Item 3 Ratification
of Independent
Registered Public Accounting
Firm
The Audit Review Committee is directly
responsible for the appointment, oversight, compensation, and retention of the
independent registered public accounting firm that audits our financial
statements and our internal control over financial reporting. The Audit Review
Committee has approved the selection of Deloitte & Touche LLP to serve as
the independent registered public accounting firm for fiscal 2016. The Audit
Review Committee and the Board are requesting that stockholders ratify this
appointment as a means of soliciting stockholders opinions and as a matter of
good corporate practice.
The affirmative vote of a majority of the
shares present in person or by proxy and entitled to vote at the meeting is
required to ratify the selection of Deloitte & Touche LLP. If the
stockholders do not ratify the selection, the Audit Review Committee will
consider any information submitted by the stockholders in connection with the
selection of the independent registered public accounting firm for the next
fiscal year. Even if the selection is ratified, the Audit Review Committee, in
its discretion, may direct the appointment of a different independent registered
public accounting firm at any time during the year if the Audit Review Committee
believes such a change would be in the best interests of the Company and its
stockholders.
We expect that a representative of
Deloitte & Touche LLP will be in attendance at the Annual Meeting. This
representative will have an opportunity to make a statement and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR THE RATIFICATION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM.
Pre-approval of
Services by the Independent Registered Public Accounting Firm
The
Audit Review Committee has adopted a policy for pre-approval of audit and
permitted non-audit services provided by Deeres independent registered public
accounting firm. The Audit Review Committee will consider annually and, if
appropriate, approve the provision of audit services by its independent
registered public accounting firm and consider and, if appropriate, pre-approve
the provision of certain defined audit and non-audit services. The Audit Review
Committee will also consider on a case-by-case basis and, if appropriate,
approve specific services that are not otherwise pre-approved.
Any proposed engagement that does not fit
the definition of a pre-approved service may be presented to the Audit Review
Committee for consideration at its next regular meeting or, if earlier
consideration is required, to the Audit Review Committee or one or more of its
members between regular meetings. The member or members to whom authority is
delegated to approve such services between regular meetings will report any
specific approvals of services to the Audit Review Committee at its next regular
meeting. The Audit Review Committee regularly reviews summary reports detailing
all services being provided to Deere by its independent registered public
accounting firm.
Fees Paid to the
Independent
Registered Public Accounting
Firm
The following table summarizes
the aggregate fees billed for professional services by Deloitte & Touche
LLP, the member firms of Deloitte Touche Tohmatsu, Limited, and their respective
affiliates (collectively, Deloitte & Touche), for the fiscal years ended
October 31, 2015 and 2014:
|
2015 |
|
2014 |
Audit Fees (1) |
$ |
14,626,000 |
|
$ |
15,759,000 |
Audit-Related Fees (2) |
$ |
773,000 |
|
$ |
771,000 |
Tax Fees |
|
|
|
|
|
All Other Fees |
|
|
|
|
|
Total Fees |
$ |
15,399,000 |
|
$ |
16,530,000 |
(1) Audit fees include amounts charged in
connection with the audit of Deeres annual financial statements and reviews of
the financial statements included in Deeres Quarterly Reports on Form 10-Q,
including services related thereto such as comfort letters, statutory audits,
attest services, consents, and accounting consultations.
(2) Audit-related fees reflect fees
charged for assurance and related services that are reasonably related to the
performance of the audit of our financial statements. These services included
audits of financial statements of employee benefit plans, various attestation
services, and other consultations.
61
Table of Contents
Audit Review Committee
Report
To the Board of
Directors:
The Audit Review
Committee consists of the following members of the Board of
Directors:
Charles O. Holliday, Jr. (Chair), Dipak C.
Jain, Joachim Milberg, Gregory R. Page, Thomas H. Patrick, Sherry M. Smith, and
Sheila G. Talton. Each of the members is independent as defined under the rules
of the New York Stock Exchange (NYSE). The Audit Review Committee is responsible
for assisting the Board of Directors in fulfilling its oversight
responsibilities pertaining to the accounting, auditing, and financial reporting
processes of Deere. Management is responsible for establishing and maintaining
Deeres internal control over financial reporting and for preparing financial
statements in accordance with accounting principles generally accepted in the
United States of America. The Audit Review Committee is directly responsible for
the appointment, oversight, compensation, and retention of Deloitte & Touche
LLP, the independent registered public accounting firm for Deere. Deloitte &
Touche LLP is responsible for performing an independent audit of Deeres annual
consolidated financial statements and internal control over financial reporting
and expressing opinions on (i) the conformity of Deeres financial statements
with accounting principles generally accepted in the United States of America
and (ii) Deeres internal control over financial reporting.
All members of the Audit Review Committee
are financially literate under the applicable NYSE rules, and the following
members of the Audit Review Committee Mr. Holliday, Mr. Page, Mr. Patrick, and
Ms. Smith are audit committee financial experts within the meaning of that
term as defined by the Securities and Exchange Commission (SEC) in Regulation
S-K under the Securities Exchange Act of 1934, as amended. The Audit Review
Committee has a written charter describing its responsibilities, which has been
approved by the Board of Directors and is available on Deeres website at
www.deere.com/corpgov. The Audit Review Committees responsibility is one of
oversight. Members of the Audit Review Committee rely on the information
provided and the representations made to them by management, which has primary
responsibility for establishing and maintaining appropriate internal control
over financial reporting and for Deeres financial statements and reports, and
by the independent registered public accounting firm, which is responsible for
performing an audit in accordance with Standards of the Public Company
Accounting Oversight Board (United States) (PCAOB) and expressing opinions on
(i) the
conformity of Deeres financial statements
with accounting principles generally accepted in the United States and (ii)
Deeres internal control over financial reporting.
In this context, we have reviewed and
discussed with management Deeres audited financial statements as of and for the
fiscal year ended October 31, 2015. We have discussed with Deloitte & Touche
LLP, the independent registered public accounting firm for Deere, the matters
required to be discussed by PCAOB Auditing Standard No. 16, Communications with
Audit Committees.
On at least a quarterly basis, the Audit
Review Committee meets in executive session with Deere management and the Deere
internal audit staff, as well as separately with Deloitte & Touche LLP.
We
have received and reviewed the written disclosures and the letter from Deloitte
& Touche LLP required by applicable requirements of the PCAOB regarding the
independent registered public accounting firms communications with the Audit
Review Committee concerning independence and have discussed with them their
independence. We have concluded that Deloitte & Touche LLPs provision of
audit and non-audit services to Deere is compatible with their
independence.
Based on the reviews and discussions
referred to above and exercising our business judgment, we recommend to the
Board of Directors that the financial statements referred to above be included
in Deeres Annual Report on Form 10-K for the fiscal year ended October 31, 2015
for filing with the SEC. We have selected Deloitte & Touche LLP as Deere
& Companys independent registered public accounting firm for fiscal 2016
and have approved submitting the selection of the independent registered public
accounting firm for ratification by the stockholders.
Audit Review Committee
Charles O. Holliday, Jr. (Chair)
Dipak
C. Jain
Joachim Milberg
Gregory R. Page
Thomas H. Patrick
Sherry M.
Smith
Sheila G. Talton
62
Table of Contents
Item 4 Stockholder
Proposals
We expect the following proposals to be
presented by stockholders at the annual meeting, although if the proposals are
not properly presented by or on behalf of the proponents, they will not be voted
on. Following SEC rules, other than minor formatting changes, we are reprinting
the proposals and supporting statements as they were submitted to us, and we
take no responsibility for their content. Upon request to our Corporate
Secretary at the address listed under the 2017 Stockholder Proposals and Nominations section below, we will provide the names, addresses, and shareholdings
of the sponsors of these proposals, as well as the names, addresses, and
shareholdings of any co-sponsors.
Stockholder
Proposal #1Proxy Access
A
stockholder has submitted the following proposal:
Proposal 1 Proxy Access for Shareholders
RESOLVED: Shareholders ask the board of
directors to adopt, and present for shareholder approval, a proxy access
bylaw. Such a bylaw shall require the Company to include in proxy materials
prepared for a shareholder meeting at which directors are to be elected the
name, Disclosure and Statement (as defined here) of any person nominated for
election to the board by a shareholder or an unrestricted number of shareholders
forming a group (the Nominator) that meets the criteria established below. The
Company shall allow shareholders to vote on such nominee on the Companys proxy
card.
The number of shareholder-nominated
candidates appearing in proxy materials shall not exceed 25% of the directors
then serving or two, whichever is greater. This bylaw shall supplement existing
rights under Company bylaws, providing that a Nominator must: (a) have
beneficially owned 3% or more of the Companys outstanding common stock,
including recallable loaned stock, continuously for at least 3-years before
submitting the nomination; (b) give the Company, within the time period
identified in its bylaws, written notice of the information required by the
bylaws and any Securities and Exchange Commission (SEC) rules about (i) the
nominee, including consent to being named in proxy materials and to serving as
director if elected; and (ii) the Nominator, including proof it owns the
required shares (the Disclosure); and (c) certify that (i) it will assume
liability stemming from any legal or regulatory violation arising out of the
Nominators communications with the Company shareholders, including the
Disclosure and Statement; (ii) it will comply with all applicable laws and
regulations if it uses soliciting material other than the Companys proxy
materials; and (iii) to the best of its knowledge, the required shares were
acquired in the ordinary course of business, not to change or influence control
at the Company.
The Nominator may submit with the
Disclosure a statement not exceeding 500 words in support of the nominee (the
Statement). The Board shall adopt procedures for promptly resolving disputes
over whether notice of a nomination was timely, whether the Disclosure and
Statement satisfy the bylaw and applicable federal regulations, and the priority
given to multiple nominations exceeding the 25% limit. No additional
restrictions shall be placed on re-nominations.
The Security and Exchange Commissions
universal proxy access Rule 14a-11 was vacated after a court decision regarding
the SECs cost-benefit analysis. Therefore, proxy access rights must be
established on a company-by-company basis.
Subsequently, Proxy Access in the United States: Revisiting the Proposed SEC
Rule), a cost-benefit analysis by CFA Institute,
found proxy access would benefit both the markets and corporate boardrooms,
with little cost or disruption, raising US market capitalization by up to $140
billion.
Please vote to enhance shareholder
value: Proxy Access for Shareholders
Proposal 1
Deeres Response
Statement of Opposition to Stockholder Proposal #1
THE BOARD RECOMMENDS THAT YOU VOTE
AGAINST THE PROPOSAL TO ADOPT PROXY ACCESS FOR THE FOLLOWING
REASONS:
The Board has given careful consideration
to this proposal and has concluded for the reasons described below that the
adoption of this resolution is unnecessary and is not in the best interests of
Deere and its stockholders.
The Board takes its accountability to
stockholders very seriously. As the Board continues to monitor the corporate
governance landscape for U.S. public companies, the Board has learned that while
many investors have strong views on proxy access, those views vary widely and
continue to evolve. In particular, while the Board recognizes that some
institutional investors now view proxy access as an important stockholder right,
there remain differences among those investors as to the appropriate thresholds
and rules governing proxy access. In addition, other large investors continue to
oppose the concept of proxy access altogether.
In light of the divergent views on proxy
access, the Board believes that the need for proxy access should be evaluated in
the context of Deeres overall corporate governance practices. Those practices
provide stockholders with the opportunity to have meaningful input into the
director nomination and election process and ensure
63
Table of Contents
Item 4
Stockholder Proposals: Deeres Response
Statement of Opposition to Stockholder Proposal
#1 |
that the Board has the independence,
skills, expertise, experience, diversity, and commitment to effectively oversee
managements performance and act in the best interests of all stockholders.
The
Board believes that the current director nomination process, in which the
Corporate Governance Committee evaluates all potential director nominees,
including individuals recommended by stockholders, is the most appropriate
process to ensure that only the highest quality director candidates are
nominated for election. The Corporate Governance Committee, which is composed
solely of independent directors who owe fiduciary duties to act in the best
interests of all stockholders, is in the best position to review and recommend
director nominees (i) who possess the skills and qualifications to enhance the
effectiveness of the Board, (ii) who are free from conflicts of interest and
(iii) will represent the interests of all stockholders, not just those with
special interests. As part of its evaluation of each candidate, the Corporate
Governance Committee takes into account how that candidates particular skills,
qualifications, experiences, and attributes, when combined with those of other
prospective candidates, would allow the Board to satisfy its oversight
responsibilities effectively.
In addition, the Board has implemented
numerous corporate governance policies to provide Deere stockholders with a
meaningful voice in the nomination and election of directors, as well as the
ability to communicate with directors and promote the consideration of
stockholder views. In particular, those policies offer the following:
● |
The opportunity to elect all
directors annually using a majority voting standard in uncontested
elections; |
|
|
● |
The ability to recommend director
candidates to the Corporate Governance Committee, which considers those
recommendations in the same manner as recommendations received from other
sources (as discussed above under Identification and Evaluation of Director Nominees); |
|
|
● |
The option to directly nominate
director candidates and solicit proxies for the election of those
candidates in accordance with the Companys bylaws and the federal
securities laws; |
|
|
● |
The right to submit proposals for
inclusion in the Companys proxy statement for
consideration at an annual meeting, subject to the rules and regulations
of the SEC; |
|
|
● |
The opportunity to communicate
directly with members of the Board, the Chairman, any Board committee, or
the independent Presiding Director (described above under Communication with the Board); |
● |
The opportunity to vote annually in
the say-on-pay vote to express their views on executive compensation;
and |
|
|
● |
The right for stockholders to call
special meetings. |
Apart from a lack of necessity, the Board
also believes that the proposal carries with it the risk of significant adverse
consequences, including the following:
Expense and
Distraction. Proxy access puts in place a
process that facilitates proxy contests that can be expensive and disruptive and
creates an uneven playing field in which Deere would incur substantial expense
while the nominating stockholder would be required to incur little expense to
promote its candidate. For instance, Deere would bear the expense of filing and
distributing proxy materials that would contain the stockholder nominee, and the
Board may feel compelled by its fiduciary duties to undertake an additional and
expensive campaign to inform stockholders of the reasons the stockholder
nominee(s) should not be elected. It is worth noting in this regard that the
United States Court of Appeals for the District of Columbia overturned the SECs
proxy access rule precisely because it determined that the SEC had not
adequately assessed the expense and distraction proxy contests would
entail.
In the absence of proxy access, the
playing field is leveled, as a nominating stockholder would need to undertake
the expense of soliciting proxies on the nominees behalf. The desire to avoid
this expense has sometimes been cited as a reason for proxy access, but there is no
reason that stockholders with the means to purchase and hold 3% or more of
Deeres outstanding shares should not, if they have a legitimate interest, bear
the expense of soliciting proxies.
Influence of Special
Interests. Proxy access allows a
stockholder with a special interest to use the proxy process to promote a
self-interested agenda rather than one that considers the interests of all
stockholders, creating the risk of politicizing the Board election process at
virtually no cost to the proponent. The proposal would enable an unrestricted
number of shareholders that, together, have owned for 3 years as little as 3%
of Deeres outstanding shares to include a director nominee in Deeres proxy
statement. This ownership requirement does not represent a sufficiently
substantial, long-term interest in Deere to justify the significant costs and
disruption that would result from regular proxy contests made possible by
adoption of the proxy access proposal. In addition, a nomination made through
the proposed method of proxy access would convert each Board election into a
contested election such that the proposed nominee need only win a plurality of
votes to be elected. Given this intersection between proxy access and plurality
voting, at little or no cost to itself, a stockholder with a narrow interest
need only gain the support of a limited number of
64
Table of Contents
Item 4 Stockholder Proposals: |
Stockholder Proposal #2Greenhouse Gas
Emissions |
stockholders to potentially destabilize
the Companys governance. Such a result would not be in the best interests of
stockholders as a whole.
Board Disruption.
The Board is united in its objective to maximize
long-term stockholder value. The election of a stockholder nominee, particularly
one representing a narrow interest, risks disrupting the Board and preventing
the Board from effectively promoting the long-term interests of all
stockholders. A director who does not possess the mix of skills and experience
the Board seeks would at best fail to contribute to the work of the Board and
would at worst disrupt the effective functioning of the Board, particularly if
the director advocates narrow interests that are not shared by all stockholders.
Moreover, a director elected by one stockholder group in one year may face
successful opposition from a director nominated by another stockholder group in
a subsequent year, setting up ongoing instability on the Board. Deeres success
is owed in large part to its consistent application of a strategy that focuses
on long-term value creation. Disruption of the Boards functioning could disrupt
the ongoing pursuit of this successful strategy and put stockholder value at
risk.
Given Deeres overall corporate governance
practices and the potentially negative effects proxy access could have on the
ability of Deeres Board to effectively promote the long-term interests of all
stockholders, the Board does not believe that adoption of this proxy access
proposal is either the right approach to ensuring optimal Board composition or
necessary for Deere or its stockholders to achieve long-term value.
FOR THE REASONS STATED, DEERES BOARD OF
DIRECTORS RECOMMENDS A VOTE AGAINST THE PROPOSAL TO ADOPT A PROXY ACCESS
BYLAW.
Stockholder
Proposal #2Greenhouse Gas Emissions
A stockholder has submitted the following proposal:
Net-Zero Greenhouse Gas Emissions by 2030
Whereas:
It is widely reported that greenhouse
gases from human activities are the most significant driver of observed climate
change since the mid-20th century;
Nearly every national government has
recognized the need to address climate change and agreed (under the terms of the
UN Framework Convention on Climate Change) that deep cuts in greenhouse gas
(GHG) emissions are required ... to hold the increase, in global average
temperature below 2 degrees Celsius above pre-industrial
levels....
The Intergovernmental Panel on Climate
Change (IPCC) states that to limit global warming to two degrees, carbon dioxide
emissions need to fall to zero by between 2040 and 2070, falling below zero
thereafter;
On Feb. 5, 2015, leaders of The B Team, a
coalition of business leaders concerned about climate change, called upon world
leaders to commit to a global goal of net-zero GHG emissions, and urged business
leaders to match this ambition by committing to bold long-term
targets;
The B Team Leaders believe that committing
to net-zero GHG emissions will demonstrate that we are unequivocally setting the
world on a clear, low-carbon trajectory. Other businesses will respond by
embedding bold climate action into their strategies - unleashing innovation,
driving investment in clean energy, scaling-up low carbons solutions, creating
jobs and supporting economic growth;
Shareholders laud Deere & Co. (Deere
or the Company) for committing to focus[ing] on energy efficiency and
greenhouse gas (GHG) emission reduction ... Since beginning its formal energy
and GHG programs, the Company has made commendable progress, evidenced by the
26% reduction of GHG emissions per ton of production from 2005 to 2012, however
shareholders believe that setting more aggressive goals for GHG emission
reductions is crucial for environmental safety as well as long-term shareholder
value.
Resolved: Shareholders request that the Board of Directors generate a feasible plan
for the Company to reach a net-zero greenhouse gas emission status by the year
2030 for all aspects of the business which are directly owned by the Company,
including but not limited to manufacturing and distribution, research
facilities, corporate offices, and employee travel, and to report the plan to
shareholders at reasonable expense, excluding confidential information, by June
2016.
Supporting Statement: For the purposes of this proposal, the proponent suggests that
net-zero greenhouse gas emissions be defined as reduction of Company GHG
emissions to a target annual level, and offsetting the remaining GHG emissions
by negative emissions strategies which result in a documented reduction equal to
or greater than the companys GHG emissions during the same year. As explained
by the IPCC, these negative emissions solutions can range from tree-planting to
technological solutions that draw carbon from the air. In calculating net zero
GHG emissions, the positive and negative GHG impacts of different types of
emissions and activities can be considered using GHG equivalencies. See, for
example, http://www.epa.gov/cleanenergy/energy-resources/
calculator.html.
65
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Item 4 Stockholder Proposals: |
Deeres
Response Statement of Opposition to Stockholder Proposal
#2 |
Deeres Response
Statement of Opposition to Stockholder Proposal #2
THE BOARD RECOMMENDS THAT YOU VOTE
AGAINST THE PROPOSAL FOR THE BOARD TO GENERATE A PLAN FOR THE COMPANY TO
ACHIEVE NET-ZERO GREENHOUSE GAS EMISSIONS BY 2030 FOR THE FOLLOWING
REASONS:
The Board has given careful consideration
to this proposal and has concluded for the reasons described below that the
adoption of this resolution is unnecessary and is not in the best interests of
Deere and its stockholders.
To reduce greenhouse gas (GHG) emissions
from its operations, Deere will continue to aggressively pursue energy
efficiency and implement renewable sources of supply where cost-effective and
reliable. A goal of achieving net-zero GHG emissions by 2030, however, is
neither reasonable nor feasible. Currently, there is no known adequate electric
storage technology to make the electric grid 100% renewable or carbon free, nor
is there a credible renewable replacement supply for the natural gas or other
thermal/process fuels required for manufacturing operations. Setting a net-zero
GHG emissions goal by 2030 and expecting the use of offsets to cover electric
and manufacturing thermal load that cannot be replaced by zero-carbon sources
would result in prohibitive costs to the Company and be detrimental to the
reliability of Deeres production. Indeed, even the B Team Leaders referenced in
the proposal above have asked businesses to target net-zero GHG emissions only
by 2050, not by 2030 as the proposal requests.
Although the Board does not support this
particular proposal, the Board recognizes the importance of addressing the
environmental and social impact of Deeres business. Deere is committed to
serving those who are linked to the landthose who cultivate and harvest,
transform, and enrich the land. Consistent with this commitment, Deere strives
to reduce its environmental impact at each of its manufacturing facilities by
setting goals annually based on an evaluation of its progress and a review of
environmental risks and associated impacts.
Deere has a long track record of being a
good steward of the environment, with a particular focus on reducing its GHG
emissions. Between 1972 and 2006, Deeres energy conservation programs reduced
its total worldwide GHG emissions by 63% per ton of production. In 2007, Deere
joined the U.S. Environmental Protection Agencys Climate Leaders program to
help develop long-term comprehensive climate change strategies. Motivated in
part by its membership in this voluntary program, from 2005 to 2012 Deere
achieved a 17% reduction in GHG emissions per dollar of adjusted revenue, with
over 40% of its facilities reducing their GHG emissions by 25% or more per
dollar of adjusted revenue. As referenced in the proposal above, during the same
period Deere reduced GHG emissions 26% per ton of production and 41% per dollar
of reported revenue.
In addition to Deeres past achievements,
Deeres current efforts address the proposals call for aggressive GHG emission
reductions. As outlined in our 2018 Enterprise Eco-Efficiency Goals, which are
published on the Company website, Deere has set a goal of reducing its GHG
emissions and its energy consumption per ton of production by 15% from 2012
through 2018. In support of this goal, Deere continues to aggressively seek ways
to reduce its energy use. Those ways include:
● |
Continuously improving the
environmental performance of our worldwide operations by implementing
sustainable practices and/or switching to cleaner fuel sources. For
example, Deere switched from coal to natural gas as a fuel source at its
construction and forestry equipment factory in Dubuque, Iowa, reducing
total energy use by 33%, GHG emissions by 42%, and air emissions by 87%
while also reducing water use by 67% and waste generation by
71%. |
|
|
● |
Designing new facilities with an eye
toward minimizing their environmental impact. For example, in 2014 we
constructed a new assembly building at our factory near Des Moines, Iowa,
that incorporates concepts that will reduce energy consumption by 25% and
includes storm water and chemical management controls. |
|
|
● |
Implementing renewable sources of
energy supply where cost-effective and reliable. For example, in 2014
Deere integrated a solar power system into its manufacturing and parts
distribution campus in Bruchsal, Germany, which provides approximately 10%
of the required power and reduces GHG emissions by approximately 1,000
tons annually. |
As demonstrated above, Deere takes its
commitment to responsible environmental stewardship very seriously.
Indeed, for the ninth consecutive year, Deere has been recognized by the
Ethisphere Institute as one of the worlds most ethical companies, a recognition
based on a companys promotion of ethical business standards and practices in
areas that include environmental stewardship. Deere was also recently added to
the FTSE4Good Index Series, which identifies companies that demonstrate strong
Environmental, Social, and Governance (ESG) practices measured against globally
recognized standards.
In addition, Deere is dedicated to
transparency and believes that its public disclosures provide ample information
concerning its environmental practices. Deere publishes on its website an annual
Global Citizenship Report, which describes the Companys environmental
sustainability goals and initiatives, including those discussed above. Deeres
website also includes annual GHG emissions data that Deere submits to an
international third-party organization that assists companies with the
measurement of their GHG
66
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Item 4 Stockholder Proposals: Stockholder Proposal
#3Political Spending Congruency
Analysis |
emissions. The Board believes that these
disclosures demonstrate Deeres commitment to reducing its GHG emissions and
that no additional disclosures or requirements are needed at this
time.
The Board recognizes the importance of
preserving and protecting the environment and the ability to achieve cost
savings through investments in more efficient practices that reduce emissions.
The Board also believes, however, that the interests of our stockholders are
better served by Deeres current environmental initiatives and disclosures than
they would be by the adoption of the proposed resolution. Accordingly, the Board
believes that adoption of this resolution is unnecessary and is not in the best
interests of Deere and its stockholders.
FOR THE REASONS STATED, DEERES BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THE PROPOSAL TO GENERATE A PLAN TO
ACHIEVE NET-ZERO GHG STATUS BY 2030.
Stockholder Proposal #3Political
Spending Congruency Analysis
A stockholder has submitted the following
proposal:
Alignment Between Corporate Values and
Political and Policy Activity
Whereas:
The Proponent believes John Deere should
establish policies that minimize risk to the firms reputation and
brand.
Political contributions and policy
activities of the Company include inconsistencies between Company actions
(specifically some of its expenditures for electioneering communications) and
stated corporate values.
Deere believes in policies and
advocate[s] for public policy that enables us to compete fairly in the
marketplace is of vital importance to all of our stakeholders. The Company also
states that its PAC contributes to candidates who broadly share the companys
pro-business outlook and support of the free enterprise system.1
However, many of Deeres political donations and policy activities run
counter to these stated corporate values.
For example, Deeres PAC donated to multiple
politicians that voted in favor of the Affordable Care Act - a law that embodies
the antithesis of a free enterprise system as it relates to health
care.2
Deere was also a member of the U.S.
Climate Action Partnership - a group that advocated for cap-and-trade
legislation on carbon dioxide emissions despite the fact that such a program
would increase government, increase energy prices and decrease economic
growth.3
Deeres PAC also contributed to multiple
politicians that supported the anti-free-market Dodd-Frank law that is hampering
the small business and the loan markets.4
Furthermore, despite the fact that the
American Legislative Exchange Council (ALEC) works to foster a low-regulation
business-friendly environment, the Company publicly ended its affiliation with
ALEC in 2012 at a time when anti-free-market activists were perpetuating
falsehoods about ALEC and its activities.
Resolved:
The Proponent requests that the Board of
Directors report to shareholders annually at reasonable expense, excluding any
proprietary information, a congruency analysis between corporate values as
defined by Deeres stated policies (including Deeres Our Guiding Principles
and U.S. Political Contributions and Advocacy) and Company and John Deere
Political Action Committee (JDPAC) political and electioneering contributions
and policy activities, including a list of any such contributions or actions
occurring during the prior year which raise an issue of misalignment with
corporate values, and stating the justification for such exceptions.
Supporting Statement:
The Proponent recommends that management
develop coherent criteria for determining congruency, such as identifying some
legislative initiatives that are considered most germane to core Company values,
and that the report include an analysis of risks to our Companys brand,
reputation, or shareholder value, as well as acts of stewardship by the Company
to inform funds recipients of Company values, and the recipients divergence
from those values, at the time contributions are made.
Expenditures for electioneering
communications means spending directly, or through a third party, at any time
during the year, on printed, Internet or broadcast communications, which are
reasonably susceptible to interpretation as in support of or opposition to a
specific candidate.
1
https://www.deere.com/en_US/corporate/our_company/citizenship/reporting/political_
contributions_and_advocacy.page?
2
https://www.deere.com/en_US/docs/Corporate/citizenship/political_contributions_advocacy/2014-jdpac-annual-report.pdf
3
http://qctimes.com/ad-campaign-criticizes-deere-for-support-of-cap-and-trade/article_
fab69f66-4388-11df-80cc-001cc4c002e0.html
4
https://www.deere.com/en_US/docs/Corporate/citizenship/political_contributions_
advocacy/2014-jdpac-annual-report.pdf
67
Table of Contents
Item 4 Stockholder Proposals: Deeres Response
Statement of Opposition to Stockholder Proposal
#3 |
Deeres Response Statement of
Opposition to Stockholder Proposal #3
THE BOARD RECOMMENDS THAT YOU VOTE
AGAINST THE PROPOSAL FOR THE BOARD TO ANNUALLY REPORT TO STOCKHOLDERS A
CONGRUENCY ANALYSIS BETWEEN DEERES CORPORATE VALUES AND THE CONTRIBUTIONS AND
POLICY ACTIVITIES OF DEERE AND THE JOHN DEERE POLITICAL ACTION COMMITTEE
(JDPAC) FOR THE FOLLOWING REASONS:
The Board has given careful consideration
to this proposal and has concluded for the reasons described below that the
adoption of this resolution is unnecessary and is not in the best interests of
Deere and its stockholders.
Deere believes that its participation in
the democratic political process to advocate public policy that enables Deere to
compete fairly and freely in the marketplace is of vital importance to its
stockholders, employees, and customers. For this reason, Deere and its employees
engage in political advocacy in a variety of ways, which Deere describes, along
with related policies, in detail on its website at
https://www.deere.com/politicalcontributions.
For example, like most major corporations,
Deere belongs to a number of trade and industry associations and pays regular
dues to these groups. Deere is a member of trade associations in part to join
other like-minded companies in engaging in public education and advocacy efforts
regarding major issues of common concern to Deeres industries. Deere publicly
discloses and updates annually a list of those trade associations to which it
pays dues or makes other contributions of $50,000 or more, as well as the
portion of such dues or payments that are not deductible under Section 162(e)(1) of the IRC.
Deere also administers JDPAC, a voluntary,
non-partisan group funded, with the exception of administrative expenses, by
Deeres U.S. employees via voluntary donations. While JDPAC takes no stance on
legislative matters and does not engage in lobbying on specific issues, it does
contribute to candidates who broadly share Deeres pro-business outlook and
support of the free enterprise system. JDPAC fully discloses all contributions
made and received through reports filed with the Federal Election Commission and
various state ethics commissions. In addition, Deere posts an annual report to
its website summarizing JDPACs contributions in the most recent calendar year
or election cycle, categorized by state, candidate, and amount. JDPACs
political contribution activities are independently overseen by its board of
directors,
which currently consists of 13 John Deere
employees from throughout the Companys various business units, and, as required
by applicable law, are not directed by Company management.
In whatever form it
might take, Deeres engagement in the political process is grounded in and
guided by Deeres firm commitment to strong corporate governance and global
corporate citizenship. For example, contrary to the assertions made in the
proposal, Deere does not pay for any independent expenditures or electioneering
communications, as those terms are defined by applicable law. In addition, even
when permitted by applicable law, Deeres corporate assets are not typically
used to support or oppose any candidate for political office or ballot measure,
such as in connection with certain state and local elections. In the interests
of transparency, Deere publicly discloses on its website and updates annually
its political contributions out of corporate assets, if any.
In general, while Deere recognizes that it
will not always agree with all of the positions taken by associations of which
it is a member, Deere believes that engagement on policy issues through groups
like these is important to help ensure that Deeres voice is heard. Similarly,
Deere recognizes that political candidates who receive contributions from JDPAC
may from time to time support policies with which Deere does not necessarily
agree. Nonetheless, Deere believes that supporting organizations and candidates
who take positions on a wide array of issues to broadly help advance the best
interests of Deere and its stockholders, customers, and employees contributes to
Deeres ability to produce strong financial returns and is consistent with
Deeres corporate values.
Given the complexity of the political
process and the level of detail already publicly disclosed by Deere with respect
to its and JDPACs involvement in that process, the Board believes that
providing the report and adopting the criteria requested by the proposal are
unnecessary, would be unduly burdensome, and would undermine Deeres ability to
help shape public policy in a manner consistent with Deeres corporate values.
Accordingly, the Board believes that adoption of this resolution is unnecessary
and is not in the best interests of Deere and its stockholders.
FOR THE REASONS STATED, DEERES BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THE PROPOSAL TO ANNUALLY REPORT
TO STOCKHOLDERS A CONGRUENCY ANALYSIS BETWEEN DEERES CORPORATE VALUES AND THE
CONTRIBUTIONS AND POLICY ACTIVITIES OF DEERE AND JDPAC.
68
Table of Contents
Other Matters
We do not know of any other matters that
will be considered at the Annual Meeting. If, however, any other appropriate
business should properly come before the meeting, the Board will have
discretionary authority to vote according to its best judgment.
2017 Stockholder Proposals and
Nominations
Next years annual meeting of stockholders
will be held on February 22, 2017. If you intend to present a proposal at next
years annual meeting and you wish to have the proposal included in the proxy
statement for that meeting, you must submit the proposal in writing to the
Corporate Secretary at the address below. The Secretary must receive this
proposal no later than September 15, 2016.
If you would like to present a proposal at
next years annual meeting or if you would like to nominate one or more
directors without inclusion in the proxy statement, you must provide written
notice to the Corporate Secretary at the address below. The Secretary must
receive this notice not earlier than October 27, 2016, and not later than
November 26, 2016. Nominations of directors may be made at the annual meeting of
stockholders only by or at the direction of or authorization by the Board (or
any authorized committee of the Board) or by any stockholder entitled to vote at
the meeting who complies with the notice procedure described above.
Notice of a proposal must include for each
matter: (1) a brief description of the business to be brought before the
meeting; (2) the reasons for bringing the matter before the meeting; (3) your
name and address; (4) the class and number of Deeres shares owned beneficially
or of record by you; (5) whether and the extent to which any derivative or other
instrument, transaction, agreement, or arrangement has been entered into by you
or on your behalf with respect to Deeres stock; (6) any material interest you
may have in the proposal; and (7) any other information related to you that is
required to be disclosed in connection with the solicitation of proxies with
respect to such business under federal securities laws, as amended from time to
time.
Notice of a nomination must include: (1)
your name and address; (2) the name, age, business address, residence address,
and principal occupation of the nominee; (3) the class, series, and number of
Deeres shares owned beneficially or of record by you and the nominee; (4)
whether and the extent to which any derivative or other instrument, transaction,
agreement, or arrangement has been entered into by you or on your behalf with
respect to Deeres stock; (5) a description of all agreements or arrangements
between you and the nominee regarding the nomination; (6) the nominees consent
to be elected and to serve; and (7) any other information related to you that is
required to be disclosed in the solicitation of proxies for election of
directors under federal securities laws, as amended from time to time. We may
require any nominee to furnish any other information, within reason, that may be
needed to determine the eligibility of the nominee.
Proponents must submit stockholder
proposals and recommendations for nomination as a director in writing to the
following address:
Corporate Secretary
Deere &
Company
One John Deere Place
Moline, Illinois 61265-8098
The Secretary will forward the proposals
and recommendations to the Corporate Governance Committee for
consideration.
69
Table of Contents
Cost of Solicitation
The Company pays for the Annual Meeting
and the solicitation of proxies. In addition to soliciting proxies by mail, the
Company has made arrangements with banks, brokers, and other holders of record
to send proxy materials to you and the Company will reimburse them for their
expenses in doing so.
We have retained Georgeson Inc., a proxy
soliciting firm, to assist in the solicitation of proxies, for an estimated fee
of $20,000 plus reimbursement of certain out-of-pocket expenses. In addition to
their usual duties, directors, officers, and certain other
employees of Deere may solicit proxies
personally or by telephone, fax, or e-mail. They will not receive special
compensation for these services.
For the Board of Directors,
Todd E. Davies
Secretary
Moline, Illinois
January 13,
2016
70
Table of Contents
Appendix A
Director Independence Categorical
Standards of Deere & Company Corporate Governance Policies
NYSE Standards of
Independence
A director may not be
considered independent if the director does not meet the criteria for
independence established by the New York Stock Exchange (NYSE) and applicable
law. A director is considered independent under the NYSE criteria if the Board
finds that the director has no material relationship with the Company. Under the
NYSE rules, a director will not be considered independent if, within the past
three years:
● |
the director has been employed by
Deere, either directly or through a personal or professional services
agreement; |
● |
an immediate family member of the
director was employed by Deere as an executive
officer; |
● |
the director receives more than
$120,000 during any twelvemonth period in direct compensation from Deere,
other than for service as an interim chairman or CEO and other than
director and committee fees and pension or other forms of deferred
compensation for prior service (provided such compensation is not
contingent in any way on continued service); |
● |
an immediate family member of the
director receives more than $120,000 during any twelve-month period in
direct compensation from Deere, other than for service as a non-executive
employee and other than director and committee fees and pension or other
forms of deferred compensation for prior service (provided such
compensation is not contingent in any way on continued
service); |
● |
the director was affiliated with or
employed by Deeres independent auditor; |
● |
an immediate family member of the
director was a partner of Deeres independent auditor, or was affiliated
with or employed in a professional capacity by Deeres independent auditor
and personally worked on Deeres audit; |
● |
a Deere executive officer has served
on the compensation committee of a company that, at the same time,
employed the director or an immediate family member of the director as an
executive officer; or |
● |
the director is employed, or an
immediate family member of a director is employed, as an executive officer
of another company and the annual payments to or received from Deere
exceed in any single fiscal year the greater of $1 million or 2% of such
other companys consolidated gross annual
revenues. |
In addition, in determining the
independence of any director who will serve on the Compensation Committee, the
Board must consider all factors specifically relevant to determining
whether
the director has a relationship to Deere
which is material to that directors ability to be independent from management
in connection with the duties of a Compensation Committee member, including but
not limited to:
● |
the source of compensation of such
director, including any consulting, advisory, or other compensatory fee
paid by Deere to such director; and |
● |
whether such director is affiliated
with Deere or an affiliate of
Deere. |
Categorical Standards of
Independence
The Board has established the
following additional categorical standards of independence to assist it in
making independence determinations:
Business Relationships. Any payments by Deere to a business employing, or 10% or more
owned by, a director or an immediate family member of a director for goods or
services, or other contractual arrangements, must be made in the ordinary course
of business and on substantially the same terms as those prevailing at the time
for comparable transactions with non-affiliated persons. The following
relationships are not considered material relationships that would impair a
directors independence:
● |
if a director (or an immediate
family member of the director) is an officer of another company that does
business with Deere and the annual sales to, or purchases from, Deere
during such companys preceding fiscal year are less than one percent of
the gross annual revenues of such company; |
● |
if a director is a partner of or of
counsel to a law firm, the director (or an immediate family member of the
director) does not personally perform any legal services for Deere, and
the annual fees paid to the firm by Deere during such firms preceding
fiscal year do not exceed $100,000; and |
● |
if a director is a partner, officer,
or employee of an investment bank or consulting firm, the director (or an
immediate family member of the director) does not personally perform any
investment banking or consulting services for Deere, and the annual fees
paid to the firm by Deere during such firms preceding fiscal year do not
exceed $100,000. |
Relationships with Not-for-Profit
Entities. A directors independence will not
be considered impaired solely for the reason that the director or an immediate
family member is an officer, director, or trustee of a foundation, university,
or other not-for-profit organization that receives from Deere or its foundation
during any of the prior three fiscal years contributions in an amount not
exceeding the greater of $1 million or two percent of the not-for profit
organizations aggregate annual charitable receipts during
A-1
Table of Contents
Appendix A: Director Independence
Categorical Standards of Deere & Company Corporate Governance Policies
|
the entitys fiscal year. (Any automatic
matching of employee charitable contributions by Deere or its foundation is not
included in Deeres contributions for this purpose.) All contributions by Deere
in excess of $100,000 to not-for-profit entities with which the director is
affiliated shall be reported to the Corporate Governance Committee and may be
considered in making independence determinations.
For purposes of these standards, Deere
shall mean Deere & Company and its direct and indirect subsidiaries, and
immediate family member shall have the meaning set forth in the NYSE
independence rules, as may be amended from time to time.
A-2
Table of Contents
Appendix B
Deere & Company Reconciliation of
Non-GAAP Measures
Short-Term
Incentive:
As described in the CD&A
under Short-Term Incentive
(STI), Operating Return on Operating
Assets (OROA) and Return on Equity (ROE) are the metrics used to measure
performance for the STI program. The Compensation Committee believes OROA and
ROE are appropriate measures for the performance of the businesses over a
short-term period. The OROA and ROE calculations for the fiscal year ended
October 31, 2015 can be summarized as follows:
|
|
|
|
|
|
Agriculture |
|
Construction |
(Millions of $) |
|
Equipment |
|
and Turf |
|
and Forestry |
OROA Calculation for Equipment Operations: |
|
Operations |
|
Operations |
|
Operations |
Operating Profit |
|
$ |
2,177 |
|
|
$ |
1,649 |
|
|
$ |
528 |
|
Average Identifiable Assets With Inventories at Standard Cost
(1) |
|
$ |
13,840 |
|
|
$ |
10,173 |
|
|
$ |
3,667 |
|
Operating Return On Assets With Inventories
at Standard Cost (1) |
|
|
15.7 |
% |
|
|
16.2 |
% |
|
|
14.4 |
% |
|
ROE
Calculation for Financial Services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Deere &
Company |
|
$ |
633 |
|
|
|
|
|
|
|
|
|
Average Equity (1) |
|
$ |
4,655 |
|
|
|
|
|
|
|
|
|
Return on Equity |
|
|
13.6 |
% |
|
|
|
|
|
|
|
|
(1) In the event of an acquisition where
goodwill exceeds $50 million, goodwill is excluded for two years to allow time
for integration of the new business. There was no adjustment for goodwill for
STI purposes for the fiscal year ended October 31, 2015. Average Identifiable
Assets with Inventories at LIFO were $12,491, $9,056, and $3,435 for Equipment
Operations, Agriculture and Turf Operations, and Construction and Forestry
Operations, respectively. OROA with Inventories at LIFO was 17.4%, 18.2%, and
15.4% for Equipment Operations, Agriculture and Turf Operations, and
Construction and Forestry Operations, respectively.
B-1
Table of Contents
Appendix B: Deere & Company
Reconciliation of Non-GAAP
Measures |
Mid-Term Incentive:
As described in the CD&A under Mid-Term Incentive (MTI),
Shareholder Value Added (SVA) is the metric used to measure performance for
the MTI program. The Compensation Committee believes SVA is an appropriate
measure for the performance of the businesses over a mid-term period. The
computation of SVA can be summarized as follows for the performance period ended
October 31, 2015:
|
|
Fiscal Year |
|
Fiscal Year |
|
Fiscal Year |
(Millions of $) |
|
2013 |
|
2014 |
|
2015 |
SVA Calculation for Equipment
Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit |
|
$ |
5,058 |
|
|
$ |
4,297 |
|
|
$ |
2,177 |
|
Average Identifiable Assets |
|
|
|
|
|
|
|
|
|
|
|
|
With Inventories at
LIFO |
|
$ |
14,569 |
|
|
$ |
14,113 |
|
|
$ |
12,491 |
|
With
Inventories at Standard Cost |
|
$ |
15,924 |
|
|
$ |
15,493 |
|
|
$ |
13,840 |
|
Less Estimated Cost of Assets (1) (3) |
|
$ |
(1,911 |
) |
|
$ |
(1,860 |
) |
|
$ |
(1,661 |
) |
SVA |
|
$ |
3,147 |
|
|
$ |
2,437 |
|
|
$ |
516 |
|
|
SVA Calculation for Financial
Services: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Deere &
Company |
|
$ |
565 |
|
|
$ |
624 |
|
|
$ |
633 |
|
Operating Profit |
|
$ |
870 |
|
|
$ |
921 |
|
|
$ |
963 |
|
Average Equity (3) |
|
$ |
4,073 |
|
|
$ |
4,575 |
|
|
$ |
4,655 |
|
Less Cost of Equity (2) |
|
$ |
(627 |
) |
|
$ |
(664 |
) |
|
$ |
(705 |
) |
SVA |
|
$ |
243 |
|
|
$ |
257 |
|
|
$ |
258 |
|
|
Deere Enterprise
SVA |
|
$ |
3,390 |
|
|
$ |
2,694 |
|
|
$ |
774 |
|
Total SVA for
Three-Year Performance Period Ending 2015 |
|
|
|
|
|
|
|
|
|
$ |
6,858 |
|
(1) For purposes of determining SVA, the
equipment segments are assessed a pretax cost of assets that on an annual basis
is generally 12% of the segments average identifiable operating assets during
the applicable period with inventory at standard cost (believed to more closely
approximate the current cost of inventory and the Companys investment in the
asset).
(2) For SVA, Financial Services is
assessed an annual pretax cost of average equity of approximately
15%.
(3) In the event of an acquisition where
goodwill exceeds $50 million, goodwill is excluded for two years to allow time
for integration of the new business. There was no adjustment for goodwill for
MTI purposes for the fiscal years ended October 31, 2013, 2014, or
2015.
B-2
Table of Contents
Directions to the Deere &
Company
World Headquarters
One John Deere Place,
Moline, Illinois
61265-8098
The annual meeting of stockholders on
Wednesday, February 24, 2016 will be held at 10 a.m. Central Standard Time in
the auditorium at Deere & Company World Headquarters, which is located at
One John Deere Place, Moline, Illinois. John Deere Place intersects the north
side of John Deere Road east of 70th Street, Moline. The entrance to World
Headquarters and parking are on the east side of the building.
From Chicago (or the
east)
Take I-290 (Eisenhower Expressway)
west to I-88 West (East-West Tollway), which turns into IL5/John Deere Road.
Follow IL5/John Deere Road to John Deere Place. Turn right onto John Deere
Place. Follow for about 1/4 mile. Turn left onto World Headquarters grounds.
Follow the signs to parking on the east side of the building.
From Des Moines (or the
west)
Take I-80 east to exit 298. Exit
onto I-74 east. Follow for about 9-1/4 miles to
the IL5 East/John Deere Road exit (exit 4B). Exit onto IL5 East/John Deere Road.
Follow IL5/John Deere Road east for 3.3 miles to John Deere Place. Turn left
onto John Deere Place. Follow for about 1/4 mile. Turn left onto World
Headquarters grounds. Follow the signs to parking on the east side of the
building.
From Peoria (or the
south)
Take I-74 west to the I-280 West
exit. Exit onto I-280 West. Follow for about 10 miles to exit 18A. Exit onto
I-74 West. Follow for about 1/2 mile to the IL5 East/John Deere Road exit (exit
4B). Exit onto IL5 East/John Deere Road. Follow IL5/John Deere Road east for 3.3
miles to John Deere Place. Turn left onto John Deere Place. Follow for 1/4 mile.
Turn left onto World Headquarters grounds. Follow the signs to parking on the
east side of the building.
Print Information (YY-MM)
Table of Contents
DEERE & COMPANY
STOCKHOLDER RELATIONS
ONE JOHN DEERE
PLACE
MOLINE, IL 61265
YOUR VOTE IS IMPORTANT.
THANK YOU
FOR VOTING!
VOTE BY TELEPHONE AND INTERNET
24
HOURS A DAY, 7 DAYS A WEEK
VOTE BY TELEPHONE -
1-800-690-6903
Use any touch-tone
telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time
the day before the meeting date. Have your proxy card in hand when you call and
then follow the instructions.
VOTE BY INTERNET -
www.proxyvote.com
Use the Internet to
transmit your voting instructions and for electronic delivery of information up
until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy
card in hand when you access the web site and follow the instructions to obtain
your records and to create an electronic voting instruction form.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the
postage-paid envelope we have provided or return it to Deere & Company, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
Your telephone or Internet vote
authorizes the named proxies to vote in the same manner as if you marked,
signed, and returned the proxy card.
If you have submitted your proxy
by telephone or the Internet there is no need for you to mail back your
proxy card. |
VOTE IN PERSON
Submit your voting instructions at the meeting by filling out
a ballot which, upon request, will be provided to you during the
meeting.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK
INK AS FOLLOWS: |
|
M97609-P70660 |
KEEP THIS PORTION FOR YOUR
RECORDS |
DETACH AND RETURN THIS PORTION
ONLY |
THIS PROXY CARD IS VALID
ONLY WHEN SIGNED AND DATED. |
DEERE & COMPANY
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Vote on Directors |
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The Board of Directors recommends a vote FOR all
Nominees. |
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For |
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Against
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Abstain |
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1a. |
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Election of Director: Samuel R.
Allen |
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☐ |
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☐ |
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☐ |
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1b. |
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Election of Director: Crandall C.
Bowles |
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☐ |
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☐ |
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☐ |
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1c. |
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Election of Director: Vance D.
Coffman |
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☐ |
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☐ |
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☐ |
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1d. |
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Election of Director: Dipak C.
Jain |
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☐ |
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☐ |
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☐ |
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1e. |
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Election of Director: Michael O.
Johanns |
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☐ |
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☐ |
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☐ |
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1f. |
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Election of Director: Clayton M.
Jones |
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☐ |
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☐ |
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☐ |
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1g. |
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Election of Director: Brian M.
Krzanich |
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☐ |
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☐ |
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☐ |
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1h. |
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Election of Director: Gregory R.
Page |
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☐ |
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☐ |
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☐ |
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1i. |
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Election of Director: Sherry M.
Smith |
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☐ |
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☐ |
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☐ |
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1j. |
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Election of Director: Dmitri L.
Stockton |
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☐ |
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☐ |
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☐ |
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1k. |
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Election of Director: Sheila G.
Talton |
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☐ |
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☐ |
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☐ |
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Vote on Proposals |
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The Board of
Directors recommends a vote FOR the following Proposals: |
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For |
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Against |
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Abstain |
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2. |
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Advisory vote on executive
compensation |
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☐ |
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☐ |
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☐ |
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3. |
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Ratification of the appointment of
Deloitte & Touche LLP as Deere's independent registered public
accounting firm for fiscal 2016 |
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☐ |
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☐ |
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☐ |
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The Board of
Directors recommends a vote AGAINST the following Proposals: |
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For |
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Against |
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Abstain |
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4a. |
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Stockholder Proposal #1 - Proxy
Access |
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☐ |
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☐ |
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☐ |
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4b. |
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Stockholder Proposal #2 - Greenhouse
Gas Emissions |
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☐ |
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☐ |
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☐ |
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4c. |
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Stockholder Proposal #3 - Political
Spending Congruency Analysis |
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☐ |
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☐ |
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☐ |
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For address changes and/or
comments, please check this box and write them on the back where
indicated. |
|
☐ |
(Please sign, date, and return this
proxy in the enclosed postage prepaid envelope.)
To receive your materials
electronically in the future, please enroll at
www.proxyvote.com.
|
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Signature
[PLEASE SIGN WITHIN BOX] |
Date |
|
Signature (Joint
Owners) |
Date |
|
Table of Contents
Dear Stockholders:
It is a pleasure to invite you to the
2016 Annual Meeting of Stockholders of Deere & Company. The meeting will be
held at 10 A.M. Central Time on Wednesday, February 24, 2016, at the Deere &
Company World Headquarters, One John Deere Place, Moline, Illinois.
The enclosed Notice of Meeting and
Proxy Statement covers the formal business of the meeting, which includes
election of the named directors, two company proposals, including the
ratification of the independent registered public accounting firm for fiscal
2016, three
stockholder proposals, and any other business that properly comes before the
meeting. The rules of conduct for the meeting include the following:
|
1. |
|
No cell phones, cameras, sound
equipment, or recording devices may be brought into the
auditorium. |
|
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|
2. |
|
There will be a discussion period
at the end of the meeting. If you wish to present a question or comment,
please wait for an attendant to provide a microphone, then begin by
stating your name, indicating the city and state where you reside, and
confirming that you are a stockholder. |
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3. |
|
The Chairman is authorized to
impose reasonable time limits on the remarks of individual stockholders
and has discretion to rule on any matters that arise during the meeting.
Personal grievances or claims are not appropriate subjects for the
meeting. |
|
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|
4. |
|
Voting results announced at the
meeting by the Inspectors of Voting are preliminary. Voting results will
be included in a Form 8-K filed with the Securities and Exchange
Commission on or around February 29, 2016. |
|
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5. |
|
Pagers and similar devices should
be silenced. |
|
The Notice of the 2016 Annual Meeting,
the Fiscal 2015 Proxy Statement, Form of Proxy, and the Fiscal 2015
Annual
Report are available on Deere's Internet site at
www.JohnDeere.com/stock.
Detach Proxy Card
Here ▼ ▼ |
|
|
M97610-P70660 |
DEERE &
COMPANY
PROXY - ANNUAL MEETING /
FEBRUARY 24, 2016
Solicited by the Board of Directors for
use at the Annual Meeting of Stockholders of Deere & Company on February 24,
2016.
The undersigned appoints each of Samuel
R. Allen and Todd E. Davies, attorney and proxy, with full power of
substitution, on behalf of the undersigned, and with all powers the undersigned
would possess if personally present, to vote all shares of Common Stock of Deere
& Company that the undersigned would be entitled to vote at the above Annual
Meeting and any adjournment thereof.
The shares represented by this proxy
will be voted as specified and, in the discretion of the proxies, on all other
matters. The proxies will vote as the Board of Directors recommends where a
choice is not specified.
Please mark, date, and sign your name
exactly as it appears on this proxy and return this proxy in the enclosed
envelope. When signing as attorney, executor, administrator, trustee, guardian,
or officer of a corporation, please give your full title as such. For joint
accounts, each joint owner should sign.
THIS PROXY IS CONTINUED ON THE
REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN
PROMPTLY.
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Address
Changes/Comments: |
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(If you noted any Address
Changes/Comments above, please mark corresponding box on the reverse
side.)
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