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. )
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Filed by the Registrant |
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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 Under Rule
14a-12 |
International Paper Company
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy
Statement, if Other Than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE
BOX): |
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No fee
required. |
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Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11. |
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Title of each class of securities to which transaction
applies: |
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Aggregate number of securities to which transaction applies: |
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3)
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4)
Proposed maximum aggregate value of transaction: |
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5) Total fee paid: |
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Fee paid previously with
preliminary materials: |
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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 schedule and the
date of its filing. |
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1)
Amount previously paid: |
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2)
Form, Schedule or Registration Statement No.: |
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3)
Filing Party: |
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4) Date
Filed: |
Table of Contents
April 2017
Dear Shareowner:
We invite you to join us for our
2017 Annual Meeting of Shareowners on May 8 in Memphis, Tennessee. Whether
or not you plan to attend, please review the enclosed materials and vote
your shares. Within this Proxy
Statement, we have included a summary
that highlights policy updates and provides a snapshot of key performance
metrics.
Also enclosed is a copy of the
International Paper 2016 Annual
Performance Review, which highlights
our key accomplishments. Last year, we continued to create long-term value
for our shareowners, achieving above cost-of-capital returns for the
seventh consecutive year, generating strong cash flow, and increasing our
annual dividend for the fifth consecutive year. In December, we completed
the acquisition of Weyerhaeusers pulp business and have integrated it
with our legacy pulp business to form Global Cellulose Fibers, the worlds
premier producer of fluff pulp. We will continue to focus on establishing
sustainable competitive positions in attractive, fiber-based markets to
create long-term value for all shareowners.
We have also included a copy of
The IP Way Forward, which describes our vision, mission and strategic
drivers:
○Sustaining Forests
○Investing in People
○Improving our Planet
○Creating Innovative Products
○Delivering Inspired Performance
The IP Way Forward is our strategic
framework to drive results, increase employee engagement, attract the next
generation of talent and strengthen our reputation as a responsible leader
in the packaging, pulp and paper industry.
Our directors are elected by our
shareowners and are committed to ensuring that company management acts in
the best interests of shareowners; the Boards governance and guidance
serve as the foundation of our ongoing success. Consistent with our
commitment to strong corporate governance practices, in 2016 International
Paper proactively adopted proxy access, allowing shareowners to have their
own nominees included in the Companys proxy materials.
This year, Dr. Kathryn D. Sullivan
joined our Board. Dr. Sullivan is the Charles A. Lindbergh Fellow of
Aerospace History at the Smithsonian National Air and Space Museum. She
served in several roles in the U.S. Department of Commerce and the
National Oceanic and Atmospheric Association between 2011 and 2017. Among
her many accomplishments, Dr. Sullivan is a veteran of three space shuttle
missions and is the first American woman to walk in space. Her extensive
environmental experience will lend a unique and valuable perspective to
our Board.
On behalf of the Board of Directors
and our 55,000 colleagues around the world, thank you for your continued
support as we continue to pursue our vision of being among the most
successful, sustainable and responsible companies in the world.
Sincerely,
Mark S. Sutton |
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Mark S. Sutton Chairman and Chief Executive Officer
The IP Way Forward is our
strategic framework to drive results, increase employee engagement,
attract the next generation of talent and strengthen our reputation as a
responsible leader in the packaging, pulp and paper
industry. |
www.ipannualmeeting.com |
03 |
Table of Contents
Notice of Annual Meeting of
Shareowners |
To the Owners of Common Stock of
International Paper Company:
Date and Time
Monday, May 8, 2017, at 11:00 a.m. CDT
Place
International Paper Company Headquarters
Tower IV, 1740 International
Drive
Memphis, Tennessee 38119
Items of Business
ITEM 1 |
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Elect the 12 nominees named in the
attached proxy statement as directors for a one-year term.
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ITEM 2 |
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Ratify the appointment of Deloitte
& Touche LLP as our independent registered public accounting firm for
2017. |
ITEM 3 |
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Vote on a non-binding resolution to
approve the compensation of our named executive officers, as disclosed
under the heading Compensation Discussion & Analysis.
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ITEM 4 |
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Cast a non-binding vote to approve
the frequency with which shareowners will vote on the compensation of our
named executive officers in future
years. |
ITEM 5 |
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Vote
on a shareowner proposal concerning a policy on accelerated vesting of
equity awards of senior executive officers upon a change in control, if
properly presented at the
meeting. |
Consider any other business properly
brought before the meeting.
Record Date
March 14, 2017. Holders of record of International Paper
common stock, par value $1.00 per share, at the close of business on that date,
are entitled to vote at the meeting.
By order of the Board of Directors,
Sharon
R. Ryan
Senior Vice President, General Counsel
and Corporate
Secretary
April 6, 2017
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Your vote is
important |
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Vote by
telephone
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If you choose to vote by telephone,
you may call the toll-free number on your proxy card. You will need to
have the 16-digit control number printed on your proxy card. |
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Vote on the
Internet
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If you choose to vote via the
Internet, follow the instructions for accessing the website on your proxy
card. You will need to have the 16-digit control number printed on your
proxy card. |
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Vote by mail
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If you choose to vote by mail,
simply mark, sign and date your proxy card and return it in the
postage-paid envelope that was included with the proxy card. |
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Important Notice Regarding the
Availability of Proxy Materials for the Shareowner Meeting to be Held on
May 8, 2017:
This proxy statement, a form of
proxy and our annual report are available for viewing and printing at the
following website: materials.proxyvote.com/460146 |
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04 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
This summary highlights information
contained elsewhere in this proxy statement. This summary does not contain all
of the information you should consider, and you should read the entire proxy
statement before voting.
Meeting Agenda and Voting
Recommendations
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ITEM
1
Company Proposal to Elect 12 Directors |
There are no other
nominees competing for seats on the Board. Under our Amended and Restated
Certificate of Incorporation, directors in non-contested elections are
elected by an affirmative majority of votes cast. You can vote for or against a nominee, or you may abstain
from voting with respect to a nominee. Abstentions and broker non-votes
will have no effect on the vote.
See page 15 for further
information. |
Our Board
of Directors unanimously recommends that you vote FOR each of the
nominees. |
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All nominees are currently directors of
International Paper. The following table lists the names, primary occupations,
and ages of the nominees as of the date of the Annual Meeting, the year each
first became a director of International Paper, and the Board committees on
which they serve.
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Director Since |
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Board
Committees |
Name |
Primary Occupation |
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Age |
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Independent |
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A&F |
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GOV |
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MDCC |
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PP&E |
David J.
Bronczek |
President and Chief Operating
Officer, FedEx Corporation |
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62 |
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2006 |
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William J.
Burns |
President, Carnegie Endowment for
International Peace |
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60 |
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2015 |
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Ahmet C. Dorduncu
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Chief Executive Officer, Akkök Group
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63 |
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2011 |
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Ilene S. Gordon |
Chairman, President and Chief
Executive Officer, Ingredion Incorporated |
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63 |
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2012 |
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Jay L. Johnson |
Retired Chairman and Chief Executive
Officer, General Dynamics Corporation |
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70 |
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2013 |
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Stacey J.
Mobley |
Retired Senior Vice President,
Chief Administrative Officer and General Counsel, DuPont
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71 |
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2008 |
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Kathryn D.
Sullivan |
Charles A. Lindbergh Fellow of
Aerospace History, Smithsonian National Air & Space Museum
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65 |
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2017 |
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Mark S. Sutton |
Chairman and Chief Executive
Officer, International Paper |
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55 |
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2014 |
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John L. Townsend, III
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Retired Managing Partner and Chief
Operating Officer, Tiger Management, LLC |
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61 |
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2006 |
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William G.
Walter |
Retired Chairman, FMC
Corporation |
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71 |
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2005 |
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J. Steven Whisler Presiding Director |
Retired Chairman and Chief Executive
Officer, Phelps Dodge Corporation |
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62 |
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2007 |
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Ray G. Young |
Executive Vice President and Chief
Financial Officer, Archer-Daniels-Midland Company |
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55 |
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2014 |
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A&F = Audit & Finance |
MDCC = Management Development and
Compensation |
● = Member |
GOV = Governance |
PP&E = Public Policy and
Environment |
= Committee
Chair |
www.ipannualmeeting.com |
05 |
Table of Contents
Proxy Summary Meeting Agenda and Voting
Recommendations |
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BOARD
SNAPSHOT |
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Our Boards Average
Tenure is 6.3 Years |
Diversity of Experience
and Background |
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Corporate Governance
Highlights |
We believe sound corporate governance is
critical to achieving business success and serves the best interests of our
shareowners. Highlights of our commitment to sound governance practices
include:
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Shareholder Rights |
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○Majority voting for directors, with a director
resignation policy
○Shareholder right to call special meetings
○Shareholder right to act by written consent
○Shareholder right to proxy access |
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Board
Independence |
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○11 of 12 directors are independent
○Robust independent Presiding Director role
○Executive sessions without management present at every
in-person Board meeting
○Focus on Board composition and
refreshment |
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Other Governance
Practices |
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○Strong anti-hedging and anti-pledging stock trading
provisions
○Annual Board and committee self-evaluations
○Strong stock ownership requirements |
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ITEM
2
Company Proposal to Ratify Deloitte & Touche LLP as the
Companys Independent Registered Public Accounting Firm for
2017 |
Our Board of Directors has ratified the
selection of Deloitte & Touche LLP (Deloitte & Touche) by our Audit and Finance Committee to serve as
the Companys independent registered public accounting firm for 2017. We are asking shareowners to ratify the selection
of Deloitte & Touche. To ratify the selection of our independent registered public accounting firm, the affirmative
vote of a majority of a quorum at the annual meeting is required.
See page 16 for further
information. |
Our Board
of Directors unanimously recommends that you vote FOR the ratification of
Deloitte & Touche as the Companys independent registered public
accounting firm for 2017. |
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06 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Proxy Summary Meeting
Agenda and Voting Recommendations |
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ITEM
3
Company Proposal to Vote on a Non-Binding Resolution to Approve the
Compensation of Our Named Executive Officers |
Our Board of Directors is seeking your
approval of the compensation of our Named Executive Officers (NEOs), as disclosed in this proxy statement pursuant
to Item 402 of Regulation S-K under the Securities Exchange Act of 1934, as amended (the Exchange Act), including
in the Compensation Discussion & Analysis, related compensation tables and narrative disclosure. This vote is non-binding.
To approve this proposal, the affirmative vote of a majority of a quorum at the annual meeting is required.
See page 17 for further
information. |
Our Board
of Directors unanimously recommends that you vote FOR the approval of the
compensation of our NEOs as disclosed pursuant to Item 402 of Regulation
S-K under the Exchange Act. |
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2016
Financial Performance Highlights |
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ROIC |
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TSR |
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7th consecutive year of Adjusted
Return on Invested Capital (Adjusted ROIC) above cost of
capital |
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47% 1-Year Total Shareholder Return
(TSR) |
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Dividend |
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Global Cellulose
Fibers |
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5th consecutive year of dividend
increase |
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Acquisition to become worlds
premier manufacturer of fluff and specialty pulp |
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Executive Compensation Philosophy and 2016 Compensation
Mix |
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Pay for
Performance |
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We reward achievement of specific
goals that improve our financial performance and drive strategic
initiatives to ensure sustainable long-term
profitability. |
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Pay at Risk |
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We believe a significant portion of
an executives compensation should be specifically tied to
performanceboth Company performance and individual
performance. |
CEO |
Other NEOs |
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www.ipannualmeeting.com |
07 |
Table of Contents
Proxy Summary Meeting Agenda and Voting
Recommendations |
2016 Executive Compensation
Highlights |
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Strong pay-for-performance
correlation |
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Robust compensation governance
practices |
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Long-Term Incentive (LTI) plan
based solely on three-year Company Performance no individual
modifier |
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No base salary increases in 2016 for
our executive officers |
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NEOs received same performance
achievement in Short-Term Incentive (STI) plan based solely on Company
performance |
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Modified STI performance metrics and
relative weightings for 2016 to drive earnings growth and operating
profitability |
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2016 outcome under STI plan resulted
in awards of 72% of target |
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2014-2016 awards under LTI plan
vested at 110% of target |
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ITEM
4
Company Proposal on a Non-Binding Vote on the Frequency with which
Shareowners Will Vote to Approve the Compensation of Our Named Executive
Officers in Future Years |
Our Board of Directors is requesting
that shareowners cast a non-binding vote as to whether an advisory vote on NEO compensation should occur every one, two
or three years in future years. To approve the selection of one of these three frequencies, the affirmative vote of a majority
of a quorum at the annual meeting is required. If this proposal does not receive the approval of a majority of a quorum
at the meeting, the Board will consider as the non-binding selection of the shareowners the frequency (every one, two or
three years) that receives the greatest number of votes.
See page 18 for further
information. |
Our Board
of Directors unanimously recommends that you vote FOR an ANNUAL vote to
approve the compensation of our NEOs in future years. |
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ITEM
5
Shareowner Proposal Concerning a Policy on Accelerated Vesting of
Equity Awards of Senior Executive Officers upon a Change in
Control |
The shareowner proposal will be approved if a majority of a quorum at the annual meeting is voted for the proposal. You may vote for or against the shareowner proposal, or you may abstain from voting. Abstentions will have the same effect as a vote against this shareowner proposal, because they are considered votes present for purposes of a quorum. If you hold your shares in street name, your failure to indicate voting instructions to your bank or broker will cause your shares to be considered broker non-votes not entitled to vote with respect to Item 5. Broker non-votes will have the same effect as a vote against this proposal.
See page 19 for further
information. |
Our Board
of Directors unanimously recommends that you vote AGAINST this proposal. |
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08 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
www.ipannualmeeting.com |
09 |
Table of Contents
PROXY
STATEMENT
2017 Annual Meeting
of Shareowners
Information About Annual
Meeting |
This proxy statement is furnished in
connection with the solicitation of proxies by International Paper Company on
behalf of the Board of Directors for the 2017 Annual Meeting of Shareowners.
Distribution of this proxy statement and proxy form is scheduled to begin on or
about April 6, 2017.
The 2017 annual meeting will be held on
Monday, May 8, 2017, at 11:00 a.m. CDT at International Paper Company
Headquarters, Tower IV, located at 1740 International Drive in Memphis,
Tennessee, 38119.
At the 2017 annual meeting, shareowners
will vote on the following matters, as well as any other business properly
brought before the meeting:
☐ |
Item One: Elect the 12 nominees
named in this proxy statement as directors for a one-year term. The Board
recommends a vote FOR each of the nominees. |
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Item Two: Ratify the appointment of Deloitte & Touche LLP as
our independent registered public accounting firm for 2017. The Board
recommends a vote FOR this proposal. |
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Item Three: Vote on a non-binding
resolution to approve the compensation of our named executive officers, as
disclosed under the heading Compensation Discussion & Analysis. The
Board recommends a vote FOR this proposal. |
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Item Four: Cast a non-binding
vote to approve the frequency with which shareowners will vote on the
compensation of our named executive officers in future years. The Board
recommends a vote to approve the compensation of our named executive
officers ANNUALLY. |
☐ |
Item Five: Vote on a shareowner
proposal concerning a policy on accelerated vesting of equity awards of
senior executive officers upon a change in control, if properly presented
at the meeting. The Board recommends a vote AGAINST this
proposal. |
Information about these items may be found
beginning on page 15 of this proxy statement.
Shareowners of record of International
Paper common stock at the close of business on March 14, 2017, the record date,
or their duly authorized proxy holders, are entitled to vote on each
matter submitted to a vote at the 2017 annual
meeting and at any adjournment or postponement of the annual meeting. There were
412,896,493 common shares outstanding on March 14, 2017. Each common share is
entitled to one vote on each matter to be voted on at the 2017 annual
meeting.
A list of shareowners as of the record
date will be available for inspection and review upon request of any shareowner
to the Corporate Secretary at the address on page 13 of this proxy statement. We
will also make the list available at the annual meeting.
Your vote is
important |
Vote by telephone
|
If you choose to vote by telephone,
you may call the toll-free number on your proxy card. You will need to
have the 16-digit control number printed on your proxy
card. |
|
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Vote on the Internet
|
If you choose to vote via the
Internet, follow the instructions for accessing the website on your proxy
card. You will need to have the 16-digit control number printed on your
proxy card. |
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Vote by mail
|
If you choose to vote by mail,
simply mark, sign and date your proxy card and return it in the
postage-paid envelope that was included with the proxy
card. |
Important Notice Regarding the Availability of Proxy
Materials for the Shareowner Meeting to be Held on May 8, 2017:
This proxy statement, a form of proxy and our annual report
are available for viewing and printing at the following website:
materials.proxyvote.com/460146 |
10 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Information About Annual
Meeting Voting Procedures and Annual Meeting
Attendance |
Voting Procedures and
Annual Meeting Attendance
How many votes must be
present to hold the annual meeting?
Holders of International Paper common
stock, present in person or represented by proxy, representing one-third of the
number of votes entitled to be cast upon any proposal to be considered at the
meeting (at least 137,632,165 votes) are required to hold the 2017 annual
meeting. If you properly vote on any proposal, your shares will be included in
the number of shares to establish a quorum for the annual meeting. Shares held
of record and represented by proxy cards marked abstain, or returned without voting
instructions, will be counted as present for the purpose of determining whether
the quorum for the annual meeting is satisfied. In addition, if you hold shares
through a bank or brokerage account, your shares will be counted as present for
the purpose of determining whether the quorum for the annual meeting is
satisfied, even if you do not provide voting instructions to your bank or
brokerage firm.
We urge you to vote by proxy even if you
plan to attend the meeting. That will help us know as soon as possible that we
have enough votes to hold the meeting. Returning your proxy card will not affect
your right to revoke your proxy or to attend the 2017 annual meeting and vote in
person.
How do I vote my
shares?
You may vote at the annual meeting by
proxy or in person.
If you are a holder of
record (that is, if your shares are
registered in your own name with our transfer agent), you have several options.
You may vote by telephone, on the Internet or by attending the meeting and
voting in person. In addition, you may vote by mail using the enclosed proxy
card.
If you hold your shares in street name (that is, if
you hold your shares through a broker, bank or other holder of record), you have
the right to direct your bank or broker how to vote your shares. If you do not
give instructions to your bank or brokerage firm, it will nevertheless be
entitled to vote your shares with respect to routine items, but it will not be
permitted to vote your shares with respect to non-routine items. In the case
of a non-routine item, your shares will be considered broker non-votes on that
proposal. If you want to vote in person at the annual meeting, you must obtain
and bring a power of attorney or proxy from your broker, bank or other holder of
record authorizing you to vote.
If I hold shares in the
International Paper Company Savings Plan, how do I vote my
shares?
If you hold shares in the International
Paper Company Savings Plan, you may instruct the trustee, State Street Bank and
Trust Company, to vote your shares in the Company Stock Fund by returning the
proxy/voting instruction card included with this mailing or by providing voting
instructions by telephone or on the Internet as explained on the voting
instruction card. If you do not return the proxy/voting instruction card or
provide voting instructions, or if your instructions are unclear or incomplete,
the trustee will vote your shares at its discretion.
How do I attend the annual
meeting?
All shareowners as of the record date,
March 14, 2017, or their duly authorized proxy holders, are welcome to attend
the annual meeting. If you are voting by mail, by telephone or via the Internet,
but still wish to attend the meeting, follow the instructions on your proxy card
or via the Internet (www.proxyvote.com) to tell us that you plan to attend. You
will be asked for photo identification in order to be admitted.
If you hold your shares in street name and
you decide to attend, you must bring to the annual meeting a copy of your bank
or brokerage statement evidencing your ownership of International Paper common
stock as of the record date.
Shareowners must bring proof of ownership
and valid photo identification in order to be admitted to the
meeting.
What happens if the annual
meeting is postponed or adjourned?
Your proxy will still be valid and may be
voted at the postponed or adjourned meeting. You will still be able to change or
revoke your proxy until it is voted.
www.ipannualmeeting.com |
11 |
Table of Contents
Information About Annual
Meeting Voting Procedures and Annual Meeting
Attendance |
Can I change or revoke my
proxy?
Yes, you may change your vote or revoke
your proxy at any time at or before the annual meeting. If you are a holder of
record, you may change your vote or revoke your proxy through any of the
following means:
○ |
by casting a new vote by telephone
or on the Internet prior to the annual meeting, or by properly completing
and signing another proxy card with a later date and returning the proxy
card prior to the annual meeting; |
○ |
giving written revocation to our
Corporate Secretary prior to the annual meeting directed to the address on
page 13 of this proxy statement, or at the meeting; or |
○ |
voting in person at the annual
meeting. |
You must obtain a ballot and vote at the
annual meeting to revoke your proxy.
If you hold your shares in street name,
you may change your voting instructions by contacting your broker, bank or other
holder of record prior to the annual meeting or by voting in person at the
annual meeting pursuant to a power of attorney or proxy from your bank or
broker.
What if I do not indicate my
vote for one or more of the matters on my proxy card?
If you are a registered shareowner and you
return a signed proxy card without indicating your vote, your shares will be
voted as follows:
○ |
for the Companys
proposal to elect the 12 nominees named in this proxy statement to the
Companys Board of Directors in Item 1; |
○ |
for the Companys proposal to ratify the appointment of the
Companys independent registered public accounting firm for 2017 in Item
2; |
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for the Companys proposal to approve the compensation of
our named executive officers in Item 3; |
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for annually as the preferred
frequency with which shareowners will vote on the compensation of our
named executive officers in future years in Item 4; and |
○ |
against the shareowner proposal concerning a policy on
accelerated vesting of equity awards of senior executive officers upon a
change in control in Item 5. |
If you are a registered shareowner and you
do not return a proxy card or vote at the annual meeting, your shares will not
be voted and will not count toward the quorum requirement to hold the annual
meeting.
If your shares are held in street name and
you do not give your bank or broker instructions on how to vote, your shares
will be counted toward the quorum requirement for the annual meeting. The
failure to instruct your bank or broker how to vote will have one of three
effects on the proposals for consideration at the annual meeting, depending upon
the type of proposal. For all voting items, other than Item 2 to ratify our
independent registered public accounting firm for 2017, absent instructions from
you, the bank or broker may not vote your shares at all and your shares will be
considered broker non-votes. For Item 2, however, the broker may vote your
shares at its discretion. For Items 1 and 4, a broker non-vote will have no
effect on the outcome of the proposal. For Items 3 and 5, a broker non-vote will
have the same effect as a vote against the proposal.
If you hold shares in the International
Paper Company Savings Plan and you do not provide voting instructions, the
trustee will vote your shares at its discretion.
Will my vote be
confidential?
Yes. Your vote is confidential and will
not be disclosed to our directors or employees, unless in accordance with
law.
Will our directors attend the
annual meeting?
Yes. The Companys Corporate Governance Guidelines state that directors are expected to attend our annual
meeting.
Who will be soliciting
proxies on our behalf?
The Company pays the cost of preparing
proxy materials and soliciting your vote. Proxies may be solicited on our behalf
by our directors, officers or employees by telephone, electronic or facsimile
transmission or in person, without compensation. We have hired Alliance
Advisors, LLC to solicit proxies for an estimated fee of approximately $25,000,
plus expenses.
What is
householding?
We have adopted householding, a
procedure by which shareowners of record who have the same address and last name
and do not receive proxy materials electronically will receive only one copy of
our annual report and proxy statement unless one or more of these shareowners
notifies us that they wish to continue receiving individual copies. This
procedure saves us printing and mailing costs. Shareowners will continue to
receive separate proxy cards.
12 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Information About Annual Meeting
Communicating with the Board |
We will deliver promptly, upon written or
oral request, a separate copy of this proxy statement and our 2016 annual report
to a shareowner at a shared address to which a single copy of the documents was
delivered. To request separate copies of our proxy statements or annual reports,
either now or in the future, please send your written request to Investor Relations, International Paper, 6400 Poplar Avenue,
Memphis, TN 38197, or call (866) 540-7095. You may also submit your request on our website,
www.internationalpaper.com, under the Investors tab at the top of the
page and then under the Financial Requests link.
How do I change future proxy
delivery options?
If you hold your shares in street name and
wish to receive separate copies of future annual reports and proxy statements or
if you currently receive multiple copies of our annual report and proxy
statement and would like to receive a single copy, please send your written
request to:
Broadridge Financial Solutions,
Inc.
Householding Dept.
51 Mercedes
Way
Edgewood, NY 11717
or call (800) 542-1061
Communicating with the
Board
How do I communicate with the
Board?
You may communicate with our entire Board,
the Chairman, the independent directors as a group, the Presiding Director, or
any one of the directors by writing to Ms. Sharon R. Ryan, Senior Vice
President, General Counsel, and Corporate Secretary, at the address set forth
below. Ms. Ryan will forward all communications relating to International
Papers interests, other than business solicitations, advertisements, job
inquiries or similar communications, directly to the appropriate director(s).
In
addition, as described in detail under Board Oversight of the Company, our
Global Ethics and Compliance office has a HelpLine that is available 24
hours a day, seven days a week, to receive calls, e-mails, and letters to report
a concern or complaint, anonymous or otherwise.
Direct all Board
correspondence to:
Corporate Secretary
International
Paper
6400 Poplar Avenue
Memphis, TN 38197
Allegations of impropriety relating to our
accounting, internal controls or other financial or audit matters are
immediately forwarded to the chair of our Audit and Finance Committee. Such
matters are investigated and responded to in accordance with the procedures
established by our Audit and Finance Committee.
What is the deadline for
consideration of shareowner proposals for the 2018 Annual Meeting of
Shareowners?
A shareowner who wishes to submit a
shareowner proposal to be included in the proxy statement for the 2018 Annual
Meeting of Shareowners must send the proposal to the Corporate Secretary at the
address to the left. We must receive the proposal in writing on or before
December 7, 2017, and the proposal must comply with SEC rules, including Rule
14a-8.
Does the Board consider
director nominees recommended by shareowners?
Yes. The Governance Committee of the Board
will review shareowner recommendations of possible nominees. Shareowner
recommendations should be submitted in writing to the Corporate Secretary at the
address to the left and should include a statement regarding the qualifications
and experience of the proposed nominee. Our By-Laws require that we receive such
nominations no earlier than January 8, 2018, and no later than February 7, 2018,
and any such nomination must include the information set forth in the By-Laws
and SEC rules.
Can shareowners include their
director nominees in the Companys proxy statement?
Yes. In 2016, the Company proactively
amended its By-Laws to allow proxy access as many of our shareowners consider
proxy access a fundamental right. The proxy access By-Law permits a shareowner,
or a group of up
www.ipannualmeeting.com |
13 |
Table of Contents
Information About Annual Meeting Communicating with
the Board |
to 20 shareowners, owning 3 percent or
more of the Companys outstanding common stock continuously for three years, to
nominate and include in the Companys proxy materials director nominees
constituting up to two individuals or 20 percent of the Board (whichever is
greater); provided that shareowners and nominees meet the additional
requirements set forth in the By-Laws. If a shareowner(s) wishes to include a
director nominee(s) in the Companys proxy materials, we must receive the notice
to nominate the director(s) using the Companys proxy materials no earlier than
November 7, 2017, and no later than December 7, 2017. The notice must contain
the information required by our By-Laws, and the shareowner(s) and nominee(s)
must comply with the additional requirements in our By-Laws.
Can I raise other business at
the 2018 Annual Shareowner Meeting?
Yes. Our By-Laws require that we receive
written notice of such other business no earlier than January 8, 2018, and no
later than February 7, 2018, and any such notice must include the information
set forth in the By-Laws and SEC rules.
Our By-Laws are
available at www.internationalpaper.com, under the Company tab at the top of the page followed by the
Leadership link and then the
Governance link. A paper copy is
available at no cost by written request to the Corporate
Secretary.
14 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Matters to be Acted upon at the 2017 Annual
Meeting |
|
|
ITEM
1
Company Proposal to Elect 12 Directors |
There are no other
nominees competing for seats on the Board. Under our Amended and Restated
Certificate of Incorporation, directors in non-contested elections are
elected by an affirmative majority of votes cast. You can
vote for or against a nominee, or you may abstain from voting with
respect to a nominee. Abstentions and broker non-votes will have no
effect on the vote. |
Our Board of
Directors unanimously recommends that you vote FOR each of the
nominees. |
|
The Board of Directors currently consists
of 12 members. Each of the 12 current directors has been nominated by the Board
for re-election by shareowners at the annual meeting. Information about these
nominees may be found in the Board of Directors section of this proxy
statement. All 12 nominees, if elected, will hold office until the earlier
of:
|
(i) |
our 2018 annual meeting and the
date a qualified successor has been elected, or |
|
|
|
(ii) |
death, resignation or
retirement. |
There are no other nominees competing for
seats on the Board. Under our Amended and Restated Certificate of Incorporation,
directors in non-contested elections are elected by an affirmative
majority of votes cast. You can vote for or against a nominee, or you may
abstain
from voting with respect to a nominee. Abstentions and broker non-votes will
have no effect on the vote.
Majority vote for
directors:
Each director must
receive a majority of votes cast for his or her election.
If a director does
not receive a majority of votes cast for his or her election, he or she
must submit a letter of resignation, and the Board, through its Governance
Committee, will decide whether to accept the
resignation. |
We do not know of any reason why any
nominee would be unable to, or for good cause would not, serve as a director if
elected. If, prior to the election, a nominee is unable or unwilling to serve,
the shares represented by all valid proxies will be voted for the election of
such other person as the Board may nominate, or the Board may reduce its
size.
|
|
|
|
|
Our Board of Directors unanimously
recommends that you vote FOR each of the following
nominees: |
|
|
|
|
|
○ |
David J. Bronczek |
○ |
Kathryn D. Sullivan |
|
|
○ |
William J. Burns |
○ |
Mark S. Sutton |
|
|
○ |
Ahmet C. Dorduncu |
○ |
John L. Townsend, III |
|
|
○ |
Ilene S. Gordon |
○ |
William G. Walter |
|
|
○ |
Jay L. Johnson |
○ |
J. Steven Whisler |
|
|
○ |
Stacey J. Mobley |
○ |
Ray G. Young |
|
|
|
|
|
|
|
www.ipannualmeeting.com |
15 |
Table of Contents
Matters to be Acted upon at the 2017
Annual Meeting Company Proposals |
|
|
ITEM
2
Company Proposal to Ratify Deloitte & Touche LLP as the
Companys Independent Registered Public Accounting Firm for
2017 |
Our Board of Directors
has ratified the selection of Deloitte & Touche LLP (Deloitte &
Touche) by our Audit and Finance Committee to serve as the Companys
independent registered public accounting firm for 2017. We are asking
shareowners to ratify the selection of Deloitte & Touche. To ratify
the selection of our independent registered public accounting firm, the
affirmative vote of a majority of a quorum at the annual
meeting is required. |
Our Board
of Directors unanimously recommends that you vote FOR the ratification of
Deloitte & Touche as the Companys independent registered public
accounting firm for 2017. |
|
Our Board of Directors has ratified the
selection of Deloitte & Touche by our Audit and Finance Committee to serve
as the Companys independent registered public accounting firm for 2017. We are
asking shareowners to ratify the selection of Deloitte & Touche. To ratify
the selection of our independent registered public accounting firm, the
affirmative vote of a majority of a quorum
at the annual meeting is required. You
may vote for or against the ratification of the selection of our independent
registered public accounting firm, or you may abstain from voting. Abstentions will have the
same effect as a vote against this proposal because they are considered votes
present for purposes of a quorum on the vote.
There will be no broker non-votes
associated with this proposal, as the ratification of our independent registered
public accounting firm is a routine matter. As a result, if your shares are held in street name and you do not give your bank
or broker instructions on how to vote, your shares will be voted by the broker
in its discretion.
Although ratification is not required by
our By-Laws or otherwise, the Board is submitting the selection of Deloitte
& Touche to our shareowners for ratification because we value our
shareowners views on the Companys independent registered public accounting
firm. Our Audit and Finance Committee will consider the outcome of this vote in
its decision to appoint an independent registered public accounting firm, but is
not bound by the shareowners vote. Even if the selection of Deloitte &
Touche is ratified, the Audit and Finance Committee may change the appointment
at any time during the year if it determines that a change would be in the best
interests of the Company and its shareowners.
Our Board of
Directors unanimously recommends that you vote FOR the ratification of
Deloitte & Touche as the Companys independent registered public
accounting firm for 2017. |
16 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Matters to be Acted upon
at the 2017 Annual Meeting Company
Proposals |
|
|
ITEM
3
Company Proposal to Vote on a Non-Binding Resolution to Approve the
Compensation of Our Named Executive Officers |
Our Board of Directors
is seeking your approval of the compensation of our Named Executive
Officers (NEOs), as disclosed in this proxy statement pursuant to Item
402 of Regulation S-K under the Securities Exchange Act of 1934, as
amended (the Exchange Act), including in the Compensation Discussion
& Analysis, related compensation tables and narrative disclosure. This
vote is non-binding. To approve this proposal, the affirmative vote of a
majority of a quorum at the annual meeting is required.
|
Our Board of Directors unanimously
recommends that you vote FOR the approval of the compensation of our NEOs as
disclosed pursuant to Item 402 of Regulation S-K under the Exchange Act. |
|
Our Board of Directors is seeking your
approval of the compensation of our NEOs as disclosed in this proxy statement
pursuant to Item 402 of Regulation S-K under the Exchange Act, including in the
Compensation Discussion & Analysis, related compensation tables and
narrative disclosure. This vote is non-binding. To approve this proposal, the
affirmative vote of a majority of a quorum
at the annual meeting is required.
You
may vote for or against this proposal, or you may abstain from voting. Abstentions will have the
same effect as a vote against this proposal because they are considered votes
present for purposes of a quorum on the vote.
If you hold your shares in street name,
your failure to indicate voting instructions to your bank or broker will cause
your shares to be considered broker non-votes not entitled to vote with respect
to Item 3. Broker non-votes will have the same effect as a vote against this
proposal.
Our Board seeks your approval of the
compensation of our NEOs, who are listed in the Summary Compensation Table of
this proxy statement. Information describing the compensation of our NEOs is
provided in the Compensation Discussion & Analysis section, the accompanying
tables and narrative contained in this proxy statement.
Our Board asks shareowners to approve the
following (non-binding) advisory resolution:
Resolved, that the compensation
paid to the Companys Named Executive Officers, disclosed in this proxy
statement pursuant to Item 402 of Regulation S-K under the Exchange Act,
including in the Compensation Discussion & Analysis, the related
compensation tables and narrative disclosure, is hereby approved.
Our Board of
Directors unanimously recommends that you vote FOR the approval of the
compensation of our Named Executive Officers as disclosed pursuant to Item
402 of Regulation S-K under the Exchange
Act. |
www.ipannualmeeting.com |
17 |
Table of Contents
Matters to be Acted upon
at the 2017 Annual Meeting Company
Proposals |
|
|
ITEM
4
Company Proposal on a Non-Binding Vote on the Frequency with which
Shareowners Will Vote to Approve the Compensation of Our Named Executive
Officers in Future Years |
Our Board of Directors
is requesting that shareowners cast a non-binding vote as to whether an
advisory vote on NEO compensation should occur every one, two or three
years in future years. To approve the selection of one of these three
frequencies, the affirmative vote of a majority of a quorum at the
annual meeting is required. If this proposal does not receive the
approval of a majority of a quorum at the meeting, the Board will consider
as the non-binding selection of the shareowners the frequency (every one,
two or three years) that receives the greatest number of votes.
|
Our Board of
Directors unanimously recommends that you vote FOR an ANNUAL vote to
approve the compensation of our NEOs in future years. |
|
Our Board of Directors is requesting that
shareowners cast a non-binding vote as to whether an advisory vote on NEO
compensation should occur every one, two or three years in future years. To
approve the selection of one of these three frequencies, the affirmative vote of
a majority of a quorum at the annual
meeting is required. If this proposal
does not receive the approval of a majority of a quorum at the meeting, the
Board will consider as the non-binding selection of the shareowners the
frequency (every one, two or three years) that receives the greatest number of
votes. You may vote for one of the three frequencies or you may abstain from voting.
Abstentions will have no effect on the outcome of this proposal.
If you hold your shares in street name,
your failure to indicate voting instructions to your bank or broker will cause
your shares to be considered broker non-votes not entitled to vote with respect
to Item 4. Broker non-votes will have no effect on the outcome of this
proposal.
We are required by the Dodd-Frank Act to
provide shareowners with a non-binding say-on-pay vote every one, two or three
years. The Dodd-Frank Act also requires that our shareowners vote at least once
every six years to express their preference as to the frequency of the
say-on-pay vote. Our prior and first such say-on-frequency vote occurred in
2011. At that years meeting, shareowners agreed with the Boards recommendation
that the say-on-pay vote should occur every year, and since then our
shareowners have had and currently have the opportunity to participate annually in
this advisory vote on NEO compensation. The Board believes that this annual
say-on-pay voting sets the correct, ongoing cadence for dialogue between the
Company and our shareowners on executive compensation matters. After careful
consideration of the various arguments supporting each frequency level, and
given the ongoing cadence of dialogue between the Company and our shareowners on
executive compensation matters, the Board believes that submitting the advisory
vote on executive compensation to shareowners on an annual basis remains
appropriate for the Company and its shareowners at this time and recommends that
shareowners again approve an annual vote. However, shareowners are not voting to
approve or disapprove the Boards recommendation, and shareowners may vote that
the say-on-pay vote should occur every one, two or three years in future years
or may abstain from voting.
Shareowner approval of a one, two, or
three-year frequency vote will not require the Company to implement the
frequency selected by the shareowners in future years. The final decision on the
frequency of the advisory vote on executive compensation remains with the Board
or its committees. The Board values the opinions of the Companys shareowners as
expressed through their votes and other communications. Although the resolution
is non-binding, the Board or its committees will carefully consider the outcome
of the frequency vote and other communications from shareowners when making
future decisions regarding the frequency of say-on-pay votes.
Our Board of
Directors unanimously recommends that you vote FOR an ANNUAL vote to
approve compensation of our named executive officers in future
years. |
18 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Matters to be Acted upon
at the 2017 Annual Meeting Shareowner
Proposals |
|
|
ITEM
5
Shareowner Proposal Concerning a Policy on Accelerated Vesting of
Equity Awards of Senior Executive Officers upon a Change in
Control |
The shareowner
proposal will be approved if a majority of a quorum at the annual
meeting is voted for the proposal. You may vote for or
against the shareowner proposal, or you may abstain from voting.
Abstentions will have the same effect as a vote against this shareowner
proposal, because they are considered votes present for purposes of a
quorum. If you hold your shares in street name, your failure to indicate
voting instructions to your bank or broker will cause your shares to be
considered broker non-votes not entitled to vote with respect to Item 5.
Broker non-votes will have the same effect as a vote against this
proposal.
|
Our Board
of Directors unanimously recommends that you vote AGAINST this proposal.
|
|
We expect the following shareowner
proposal to be presented at the annual meeting. Upon request, we will promptly
provide any shareowner with the name, address and number of shares held by the
shareowner making this proposal. The Company is not responsible for the contents
of this shareowner proposal or any supporting statement. The shareowner proposal
will be approved if a majority of a quorum
at the annual meeting is voted
for the
proposal. You may vote for or against the shareowner proposal, or
you may abstain from voting. Abstentions will have the same effect
as a vote against this shareowner proposal, because they are considered votes
present for purposes of a quorum. If you hold your shares in street name, your
failure to indicate voting instructions to your bank or broker will cause your
shares to be considered broker non-votes not entitled to vote with respect to
Item 5. Broker non-votes will have the same effect as a vote against this
proposal.
RESOLVED: The shareholders ask the
Board of Directors of International Paper Company
to adopt a policy that in the event of a change in control (as defined under any
applicable employment agreement, equity incentive plan or other plan), there
shall be no acceleration of vesting of any equity award granted to any senior
executive officer, provided, however, that the Boards Compensation Committee
may provide in an applicable grant or purchase agreement that any unvested award
will vest on a partial, pro
rata basis up to the time of the named
executive officers termination, with such qualifications for an award as the
Committee may determine.
For purposes of this Policy, equity
award means an award granted under an equity incentive plan as defined in Item
402 of the SECs Regulation S-K, which addresses elements of executive
compensation to be disclosed to shareholders.
This resolution shall be implemented so as not to affect any contractual rights
in existence on the date this proposal is adopted, and it shall apply only to
equity awards made under equity incentive plans or plan amendments that
shareholders approve after the date of the 2017 annual meeting.
SUPPORTING STATEMENT:
International Paper Company (Company)
allows senior executives to receive an accelerated award of unearned equity
under certain conditions after a change of control of the Company. We do not
question that some form of severance payments may be appropriate in that
situation. We are concerned, however, that current practices at the Company may
permit windfall awards that have nothing to do with an executives
performance.
According to last years proxy statement,
a termination of employment without cause (including by the NEO for good reason)
within two years following a change in control of the company on Dec. 31, 2015,
could have accelerated the vesting of $21.3 million, worth of long-term equity
to International Papers five senior executives, with Mark Sutton, the Chief
Executive Officer entitled to $9.6 million.
We are unpersuaded by the argument that
executives somehow deserve to receive unvested awards. To accelerate the
vesting of unearned equity on the theory that an executive was denied the
opportunity to earn those shares seems inconsistent with a pay for performance
philosophy worthy of the name.
We do believe, however, that an affected
executive should be eligible to receive an accelerated vesting of equity awards
on a pro rata basis as of his or her termination date, with the details of any
pro rata award to be determined by the Compensation Committee.
www.ipannualmeeting.com |
19 |
Table of Contents
Matters to be Acted upon
at the 2017 Annual Meeting Shareowner
Proposals |
Other major corporations, including; Apple, Chevron, ExxonMobil, IBM, Intel, Microsoft,
and Occidental Petroleum, have limitations on
accelerated vesting of unearned equity, such as providing pro rata awards or simply
forfeiting unearned awards. Research from James Reda & Associates found that
over one-third of the largest 200 companies now
pro rate, forfeit, or only partially vest performance shares upon a change of
control.
We urge you to vote FOR this
proposal.
[End of Shareowner
Proposal]
Position of Your Companys Board of
Directors |
The Board of Directors, with input from
its Governance and Management Development and Compensation Committees, has again
considered this proposal, as it did with substantially similar and unsuccessful
proposals in 2015 and 2013, and continues to believe that adoption of the entire
proposal as drafted would not be in the best interests of the Company or our
shareowners.
As described below and as further
described later in this proxy statement:
○ |
In 2013, the Board approved and the Company
implemented the concept of double-trigger acceleration of equity-award
vesting for the Companys senior executives by revising all existing and
future change-in-control agreements accordingly. |
○ |
In 2014, upon approval by the Board, the
Company revised its Amended and Restated 2009 Incentive Compensation Plan
to implement the same double-trigger-vesting provision for all future
equity awards for all plan participants. |
While the Board continues to oppose
implementation of this entire proposal as drafted, these recent changes adopted
the most important aspect of the proposal and addressed most of the proponents
concerns. The double-trigger feature requiring that there is both a change in
control and a qualifying termination of employment (i.e., involuntary termination without
cause or departure for good reason) in order for equity awards to accelerate
is widely recognized as a good governance practice, as it prevents senior
executives from receiving an automatic windfall in the event of a change in
control and serves as an incentive for the senior executives to continue with
the Company through and after a change in control in order to receive the
benefit of their unvested equity awards.
We also believe it is worth emphasizing
the support our shareowners have shown for our executive compensation program,
as indicated by approval of our Say-on-Pay proposal by over 96 percent of
votes cast by our shareowners in May 2016, 2015 and 2014. We believe this
overwhelming support affirms our responsiveness to shareowners through the many
executive compensation plan design changes we have made over the past number of years.
Many of these changes are described in the Compensation Discussion and
Analysis section of this proxy statement.
The Board, along with its Management
Development and Compensation Committee, will continue to review our executive
compensation policies in light of evolving practices. At this time, however, the
Board continues to oppose the proposal as drafted. We believe that it is in the
best interests of our shareowners to provide our senior executives with some
form of accelerated vesting of their equity awards, which are a fundamental
element of their remuneration, if they experience a qualifying termination after
a change in control. We believe that one of the essential purposes of providing
our executives with equity-based awards is to align their interests with those
of our shareowners. Providing our senior executives with the protection of some
form of acceleration of vesting of their equity awards in the event of their
qualifying termination after a change in control furthers this purpose by
enabling our executives to avoid distractions and potential conflicts of
interest that could otherwise arise when a potential change-in-control
transaction is being considered. We believe that the benefits of securing our
key employees compensation opportunity in the event of a qualifying termination
after a change in control outweigh the costs and concerns raised by the
proponent.
In sum, the Board believes that the
current structure of the Companys executive compensation program, especially
given the recent change to double-trigger acceleration of vesting of equity
awards, is appropriate and effective, aligning the interests of our executives
with those of the Companys shareowners. We believe that our executive
compensation program, as a whole, is consistent with market practice and
provides us with the ability to compete for, attract and retain talented
executives. Adoption of this proposal as drafted would disadvantage the Company
from a competitive standpoint, and would potentially impact our ability to
deliver maximum value to our shareowners.
For these reasons, we recommend that
you vote against this proposal.
Our Board of
Directors unanimously recommends that you vote AGAINST this
proposal. |
20 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Directors Standing for Election Term
Expiring in 2018
The following 12 individuals are nominated
for election at the 2017 annual meeting. Each of these nominees is standing for
election to serve a term that will expire in 2018. In addition to biographical
information for each director nominee, we describe the specific experience,
qualifications, attributes or skills that led our Board to conclude such person
should serve as a director in light of the Companys business.
|
|
|
David J. Bronczek Independent |
Age: 62 Director since:
2006 |
Committees:
○Public Policy and Environment (Chair)
○Management Development and
Compensation |
Biography
President and chief operating officer of FedEx Corporation, a
global provider of transportation, e-commerce and business services, since
February 2017. Mr. Bronczek served as president and chief executive officer of
FedEx Express, the worlds largest express transportation company and a
subsidiary of FedEx Corporation, from 2000 to February 2017. Mr. Bronczek began
his career with FedEx in 1976 and, prior to being named president, served as
executive vice president and chief operating officer of FedEx Express. A native
of Cleveland, Ohio, Mr. Bronczek graduated from Kent State University. Mr.
Bronczek was appointed by former President George W. Bush to the National
Infrastructure Advisory Council. He is a member of the Board of Governors of the
International Air Transport Association (IATA); a board member for Airlines for
America; a member of the Board of Governors for National Safe Kids Campaign; and
a board member for the Smithsonians National Air and Space Museum. He is also a
member of Memphis Tomorrow.
|
Board
Qualifications As president and COO of
FedEx Corporation and former CEO of its subsidiary FedEx Express, Mr.
Bronczek brings critical business insight to a large, diversified company
with international operations. Mr. Bronczek has served in many capacities
at FedEx Corporation, beginning his career in operations in 1976. His
experience includes serving as senior vice president of Europe, the Middle
East and Africa (EMEA), which is a region of strategic importance to
International Paper. |
|
|
|
|
|
Key
Skills & Experience |
|
|
○ |
Current COO |
|
○ |
Strategic Planning |
|
|
○ |
International Operations |
|
○ |
Supply Chain |
|
|
○ |
Environment,
Sustainability, |
|
○ |
Technology |
|
|
|
Public Policy |
|
○ |
Marketing |
|
|
|
|
|
|
|
|
|
|
|
William J. Burns Independent |
Age: 60 Director since:
2015 |
Committees:
○Governance
○Public Policy and
Environment |
Biography
President of the Carnegie Endowment for International Peace,
the oldest international affairs think tank in the United States, since February
2015. He served in the U.S. Department of State as Deputy Secretary of State
from July 2011 to November 2014, as Under Secretary for Political Affairs from
2008 to July 2011, and as Ambassador to Russia from 2005 to 2008, among many
other posts during his 33 years in the Foreign Service. He earned a bachelors
degree in history from LaSalle University and a masters degree and doctorate in
international relations from Oxford University, where he studied as a Marshall
Scholar. He speaks English, Russian, Arabic and French.
|
Board
Qualifications Ambassador Burns service
as Deputy Secretary of State in the U.S. State Department, Under Secretary
for Political Affairs and Ambassador to Russia, as well as numerous other
posts during his 33 years in the Foreign Service, brings a unique and
valuable perspective to the Board. His extensive public policy experience,
both domestic and international, is valuable particularly in considering a
broad range of strategic and tactical business matters. His current
position as president of the Carnegie Endowment for International Peace,
the oldest international affairs think tank, further strengthens his
international management and public policy expertise. |
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Key
Skills & Experience |
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○ |
Environment,
Sustainability, |
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○ |
Strategic Planning |
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Public Policy |
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○ |
International Operations |
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www.ipannualmeeting.com |
21 |
Table of Contents
Board of Directors Directors Standing
for Election Term Expiring in
2018 |
|
|
|
Ahmet C. Dorduncu Independent |
Age: 63 Director since:
2011 |
Committees:
○Audit & Finance
○Public Policy and
Environment |
Biography
Chief executive officer of Akkök Group, a financial and
industrial conglomerate located in Turkey, since January 2013. Mr. Dorduncu
served as chief executive officer of Sabanci Holding, another financial and
industrial conglomerate located in Turkey, from 2005 to 2010. He also served
from 2006 to 2010 as chairman of the board of Olmuksa, then an industrial
packaging business joint venture between Sabanci Holding and International
Paper. Sabanci Holding is the parent company of the Sabanci Group, a leading
Turkish financial and industrial company.
|
Board
Qualifications As CEO of Akkök Group and
retired chairman and CEO of Sabanci Holding, two leading financial and
industrial conglomerates, Mr. Dorduncu brings vast experience in
international operations for a non-U.S. manufacturing company. He also has
financial expertise that adds to the strength of our Board. His knowledge
of regions of key importance to the Company brings even greater
perspective to our Board. |
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Key Skills & Experience |
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○ |
Current CEO |
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○ |
Environment, |
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○ |
Manufacturing |
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Sustainability, |
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○ |
International
Operations |
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○ |
Public Policy |
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○ |
Finance,
Accounting |
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○ |
Supply Chain
|
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○ |
Strategic Planning |
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○ |
Technology |
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○ |
Diversity |
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○ |
Marketing |
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Ilene S. Gordon Independent |
Age: 63 Director since:
2012 |
Committees:
○Audit & Finance
○Management Development and
Compensation |
Biography
Chairman, president and chief executive officer of Ingredion
Incorporated (formerly Corn Products International, Inc.), a publicly traded
global ingredient solutions company, since May 2009. Ms. Gordon is also a member
of the board of directors of Ingredion Incorporated and World Business Chicago,
a not-for-profit economic development organization. Ms. Gordon previously served
as president and chief executive officer of Rio Tintos Alcan Packaging, a
multinational company engaged in the production of flexible and specialty
packaging, from 2007 until 2009, and in various senior executive roles at Alcan
Packaging and its affiliate and predecessor companies from 1999 until 2007.
Prior to 1999, Ms. Gordon was employed for 17 years with Tenneco Inc., a
conglomerate, in a variety of management positions, including vice president and
general manager leading its folding carton business. Ms. Gordon serves on the
board of directors of Lockheed Martin Corporation, a publicly traded global
security and aerospace company. Additionally, during the past five years, Ms.
Gordon served on the board of directors of Arthur J. Gallagher & Co., a
publicly traded international insurance brokerage and risk management
business.
|
Board
Qualifications As chairman, CEO and
president of Ingredion Incorporated, Ms. Gordon brings senior management
expertise and leadership capabilities, as well as broad understanding of
the operational, financial and strategic issues facing public companies.
Her previous experience at Rio Tintos Alcan Packaging includes
manufacturing, supply chain and marketing. She has experience with
operations overseas, including South America, Asia Pacific and Europe. Ms.
Gordon also brings strong financial expertise to our Board. |
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Key
Skills & Experience |
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○ |
Current CEO |
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○ |
Finance, Accounting |
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○ |
Manufacturing |
|
○ |
Strategic Planning |
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○ |
International
Operations |
|
○ |
Supply Chain |
|
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○ |
Diversity |
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○ |
Technology |
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○ |
Environment,
Sustainability, |
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Marketing |
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Public Policy |
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22 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Board of Directors
Directors Standing for Election Term Expiring in
2018 |
|
|
|
Jay L. Johnson Independent |
Age: 70 Director since:
2013 |
Committees:
○Audit & Finance
○Governance |
Biography
Retired as chairman and chief executive officer of General
Dynamics Corporation, a publicly traded manufacturer of worldwide defense,
aerospace, and other technology products, in December 2012. He served as its
chairman from May 2010 and as its chief executive officer from July 2009. He
served on its board of directors from 2003 to December 2012. From 2000 to 2008,
he served in various senior executive roles at Dominion Resources Inc., a
publicly traded energy company, including as chief executive officer of Dominion
Virginia Power. Prior to 2000, he had a distinguished 32-year career in the U.S.
Navy. He retired as an admiral in July 2000, after serving as chief of naval
operations and a member of the Joint Chiefs of Staff since 1996. He is a
director of Wynn Resorts, Limited, the USAA, the U.S. Naval Academy Foundation,
and The Peregrine Fund.
|
Board
Qualifications Having served as chairman
and CEO of General Dynamics Corporation and CEO of Dominion Virginia
Power, Admiral Johnson is an experienced business leader who brings strong
financial expertise and global business acumen to our Board. He also
brings strong leadership and management skills as a result of his
distinguished 32-year military career. In addition, Admiral Johnsons
prior positions as a public company director provide him with a deep
understanding of public company governance and other significant issues
facing public companies. |
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Key
Skills & Experience |
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○ |
Former CEO |
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○ |
Finance, Accounting |
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○ |
Manufacturing |
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○ |
Strategic Planning |
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○ |
International
Operations |
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○ |
Technology |
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○ |
Environment,
Sustainability, |
|
○ |
Supply Chain |
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Public Policy |
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Stacey J. Mobley Independent |
Age: 71 Director since:
2008 |
Committees:
○Governance (Chair)
○Public Policy and
Environment |
Biography
Retired in June 2008 as senior vice president, chief
administrative officer and general counsel of DuPont, a global science company,
and a member of DuPonts office of the chief executive. Mr. Mobley was with
DuPont for 35 years and had senior management responsibility for legal and
governmental affairs. From November 2008 until June 2015, Mr. Mobley served as
senior counsel, Dickstein Shapiro LLP, a multi-service law firm. He is a
director of Nuclear Electric Insurance Ltd. and HP Inc. (formerly
Hewlett-Packard Company), and serves as chairman of the board of trustees of
Howard University. He previously served as a director of Hewitt Associates Inc.
(through October 2010) and Wilmington Trust Company (through April 2010).
|
Board
Qualifications Having served with DuPont
for 35 years, including senior management responsibility for legal and
government affairs, Mr. Mobley brings a deep understanding of legal
compliance and oversight of a diversified, publicly traded company. Mr.
Mobleys service on other public company boards allows him to bring
current insight into governance and other significant issues facing public
companies. These experiences give Mr. Mobley a strong background upon
which to draw as a member of our Board. |
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Key
Skills & Experience |
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○ |
Manufacturing |
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○ |
Diversity |
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○ |
Legal |
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○ |
Strategic Planning |
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○ |
International
Operations |
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○ |
Supply Chain |
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○ |
Environment,
Sustainability, |
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Public Policy |
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www.ipannualmeeting.com |
23 |
Table of Contents
Board of Directors Directors Standing
for Election Term Expiring in 2018 |
|
|
|
Kathryn D. Sullivan Independent |
Age: 65 Director since:
2017 |
Committees:
○Governance
○Public Policy and
Environment |
Biography
The Charles A. Lindbergh Fellow of Aerospace History at the
Smithsonian National Air and Space Museum, since March 2017. Dr. Sullivan served
in several roles in the U.S. Department of Commerce and the National Oceanic and
Atmospheric Association Administration (NOAA) between May 2011 and January 2017,
including as Under Secretary of Commerce for Oceans & Atmosphere and NOAA
Administrator from March 2014 until January 2017. She served as a Director for
Ohio State Universitys Battelle Center for Mathematics and Science Education
Policy from 2006 through 2011. Between 1996 and 2005, Dr. Sullivan served as
President and CEO of the Center of Science and Industry (COSI), a hands-on
science education enterprise, serving nearly 900,000 people annually throughout
Ohio and surrounding states. Between 1978 and 1993, Dr. Sullivan was a Mission
Specialist for NASA. She is a veteran of three Shuttle missions with over 500
hours in space and she is the first American woman to walk in space. Dr.
Sullivan served on the boards of directors of several public companies between
1997 and 2011. She is a member of the National Academy of Engineering, and she
earned a bachelors degree in Earth Sciences from the University of California,
Santa Cruz and a doctorate in geology from Dalhousie University in Nova
Scotia.
|
Board
Qualifications Dr. Sullivans service as
Administrator for the National Oceanic and Atmospheric Association and
Under Secretary of Commerce for Oceans and Atmosphere brings a valuable
perspective on current issues in sustainability, which is a critical issue
to the Company. As a former NASA space shuttle astronaut, she also brings
a strong technical background, leadership capabilities, and strategic
planning experience. Dr. Sullivans service on other public company boards
gives her experience and oversight of natural resource conservation and
production as well as a broad range of strategic and tactical business
matters. She also brings finance and budgeting experience having served as
president and chief executive officer of COSI, as well as her service on a
public companys audit and finance committee. These experiences give Dr.
Sullivan a strong background upon which to draw as a member of our Public
Policy and Environment Committee and Governance Committee. |
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Key Skills & Experience |
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○ |
Environment,
Sustainability, |
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○ |
Marketing |
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Public Policy and |
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○ |
Diversity |
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Public Service |
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○ |
International |
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○ |
Technology |
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Operations |
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○ |
Strategic Planning |
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○ |
Finance,
Accounting |
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○ |
Supply Chain |
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Mark S. Sutton Chairman
& CEO |
Age: 55 Director since:
2014 |
|
Biography
Chairman (since January 1, 2015) & chief executive officer
(since November 1, 2014). Mr. Sutton previously served as president & chief
operating officer from June 1, 2014 to October 31, 2014, senior vice president -
industrial packaging from November 2011 to May 31, 2014, senior vice president -
printing and communications papers of the Americas from 2010 until 2011, senior
vice president - supply chain from 2008 to 2009, vice president - supply chain
from 2007 until 2008, and vice president - strategic planning from 2005 until
2007. Mr. Sutton joined International Paper in 1984. Mr. Sutton serves on the
board of directors of The Kroger Company. He is a member of The Business Council
and the Business Roundtable and serves on the American Forest & Paper
Association board of directors and the international advisory board of the
Moscow School of Management - Skolkovo. He was appointed chairman of the U.S.
Russian Business Council and was also appointed to the U.S. Section of the
U.S.-Brazil CEO Forum. He also serves on the board of directors of Memphis
Tomorrow and board of governors for New Memphis Institute.
|
Board
Qualifications Mr. Sutton has been with
International Paper his entire 30+-year career and served in various
senior leadership roles, most recently as president and chief operating
officer, as well as senior vice president - Industrial Packaging, the
Companys largest business. He has also served as the senior leader of
Printing and Communications Papers, supply chain, corporate strategic
planning, as well as leading packaging operations in Europe, Middle East
and Africa. As a result, Mr. Sutton was instrumental in the transformation
of the Company over the last decade. He brings deep experience and
institutional knowledge to the Board and management in his roles as
chairman and CEO. |
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Key
Skills & Experience |
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○ |
Current CEO |
|
○ |
Finance, Accounting |
|
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○ |
Manufacturing |
|
○ |
Strategic Planning |
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○ |
International
Operations |
|
○ |
Supply Chain |
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|
○ |
Environment,
Sustainability, |
|
○ |
Technology |
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Public Policy |
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○ |
Marketing |
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24 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Board of Directors Directors Standing
for Election Term Expiring in 2018 |
|
|
|
John L. Townsend, III Independent |
Age: 61 Director since:
2006 |
Committees:
○Audit & Finance
○Management Development and
Compensation |
Biography
Retired managing partner and chief operating officer of Tiger
Management, LLC, an investment management business, a position he held from 2010
to 2012. From 2012 to 2015, Mr. Townsend served as senior advisor to Tiger
Management, LLC. Mr. Townsend is also a member of the Riverstone Group, a
private investment fund. Mr. Townsend was previously employed by Goldman Sachs
& Co. from 1987 to 2002 and was a general partner from 1992 to 1999 and a
managing director from 1999 to 2002. Mr. Townsend is a director of The Heritage
Group, an industrial conglomerate. Additionally, during the past five years, Mr.
Townsend served on the board of directors of Belk, Inc., a department store
retailer.
|
Board
Qualifications Mr. Townsend brings
strong financial acumen to our Board with his recent experience working
with private investment funds, as well as his previous experience as
general partner and managing director for Goldman Sachs & Co. Mr.
Townsends financial background, experience with the investment community
and knowledge of financial markets make him well qualified to serve as a
member of our Board. |
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Key
Skills & Experience |
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○ |
Finance, Accounting |
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○ |
Strategic Planning |
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William G. Walter Independent |
Age: 71 Director since:
2005 |
Committees:
○Audit & Finance (Chair)
○Management Development and
Compensation |
Biography
Retired chairman of FMC Corporation, an agriculture, specialty
and industrial chemical company, a position he held from 2001 to September 2010.
Mr. Walter also served as FMCs president and chief executive officer from 2001
until December 2009. Mr. Walter served as executive vice president of FMC
Corporation from 2000 to 2001 and vice president and general manager of FMCs
Specialty Chemicals Group from 1997 to 2000. Mr. Walter is a member of the board
of the New York Life Insurance Company.
|
Board
Qualifications Mr. Walter is an
experienced business leader, having served from 2001 to 2009 as chairman
and CEO of FMC Corporation, a large, publicly traded, manufacturing
company with international operations. Mr. Walter continued to serve as
FMCs chairman through September 2010. Mr. Walter brings senior management
experience, leadership capabilities, strong financial knowledge and
business acumen to our Board. |
|
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Key
Skills & Experience |
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○ |
Former CEO |
|
○ |
Strategic Planning |
|
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○ |
Manufacturing |
|
○ |
Technology |
|
|
○ |
International
Operations |
|
○ |
Marketing |
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○ |
Finance, Accounting |
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|
www.ipannualmeeting.com |
25 |
Table of Contents
Board of Directors Directors Standing
for Election Term Expiring in 2018 |
|
|
|
J. Steven Whisler Independent Presiding Director |
Age: 62 Director since:
2007 |
Committees:
○Management Development and Compensation
(Chair)
○Governance |
Biography
Retired as chairman and chief executive officer of Phelps
Dodge Corporation, an international mining company, upon its merger with
Freeport-McMoRan Inc. in March 2007. Mr. Whisler served as chairman and chief
executive officer of Phelps Dodge Corporation from May 2000 until March 2007,
and served on the board of Phelps Dodge Corporation from 1995 through March
2007. Mr. Whisler is a director of CSX Corporation and the Brunswick
Corporation. He is also a director of the C.M. Russell Museum.
|
Board
Qualifications Mr. Whisler served as
chairman and CEO of Phelps Dodge Corporation, a large, publicly traded,
manufacturing company with international operations, prior to its
acquisition in March 2007. He also served as general counsel of Phelps
Dodge and, as a result, has a deep understanding of the governance,
compliance and regulatory issues facing public companies. His service on
other public company boards further augments his range of knowledge and
allows him to draw on various perspectives and viewpoints in his role as
our Presiding Director. |
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|
Key
Skills & Experience |
|
|
○ |
Former CEO |
|
○ |
Finance, Accounting |
|
|
○ |
Manufacturing |
|
○ |
Strategic Planning |
|
|
○ |
International
Operations |
|
○ |
Supply Chain |
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|
○ |
Environment,
Sustainability, |
|
○ |
Legal |
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Public Policy |
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Ray G. Young Independent |
Age: 55 Director since:
2014 |
Committees:
○Audit & Finance
○Public Policy and
Environment |
Biography
Executive vice president and chief financial officer of
Archer-Daniels-Midland Company (ADM), with responsibility for strategic
oversight of ADMs business in Asia. ADM is a publicly traded company and one of
the largest agricultural processers and food ingredients companies in the world,
and Mr. Young has been its chief financial officer since December 2010. Prior to
joining ADM, he was employed on four continents at General Motors Company
(GM), a publicly traded company and producer of vehicles throughout the world,
from 1986 to 2010. At GM and its affiliates, he served in various senior
executive roles, including as its president of the Mercosur Region from 2004 to
2007, its chief financial officer from 2008 to 2009 and its vice president,
International Operations, based in China, in 2010. He currently serves on the
boards of the U.S. China Business Council and the American Cancer Society
Lakeshore Division.
|
Board
Qualifications As executive vice
president and chief financial officer of Archer Daniels Midland (ADM), a
large, publicly traded company, Mr. Young brings strong financial
expertise and strategic acumen to the Board. In addition to his experience
at ADM, he also served in various executive roles at General Motors
Company for over twenty years, and as a result, has a deep knowledge of
global manufacturing operations. |
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|
Key
Skills & Experience |
|
|
○ |
Current CFO |
|
○ |
Strategic Planning |
|
|
○ |
Finance, Accounting |
|
○ |
Supply Chain |
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|
○ |
International
Operations |
|
○ |
Technology |
|
|
○ |
Diversity |
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○ |
Manufacturing |
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26 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Information About Corporate
Governance |
Director
Qualifications and Experience
|
|
Director Qualification
Criteria |
Our Board has adopted Director
Qualification Criteria and Independence Standards, which it uses to evaluate incumbent directors being considered for
re-election at each annual meeting, as well as to evaluate director candidates.
The Governance Committee of our Board is responsible for evaluating each
director candidate, and for recommending qualified director nominees for
election to the Board. We seek candidates with ample experience and a proven
record of professional success, leadership and the highest level of personal and
professional ethics, integrity and values. The Governance Committee also
considers whether each candidate demonstrates the following:
○ |
Commitment to the Companys mission
and purpose, and loyalty to the interests of the Company and its
shareowners; |
○ |
Ability to exercise objectivity and
independence in making informed business
decisions; |
○ |
Willingness and commitment to devote
the extensive time necessary to fulfill his/her
duties; |
○ |
Ability to communicate effectively
and collaboratively with other Board members to contribute effectively to
the diversity of perspectives that enhances Board and Committee
deliberations and decision-making; and |
○ |
Skills, knowledge and expertise
relevant to the Companys business. |
|
|
Director Nomination
Procedures |
Shareowners may submit recommendations for
director candidates to the Governance Committee by writing to the Corporate
Secretary. The candidates should meet the director qualifications criteria
described above. The Governance Committee applies the same criteria in
evaluating candidates recommended by shareowners as those from other sources. If a shareowner would like to nominate a
director candidate, the shareowner must follow the procedures set forth in our
By-Laws, including the deadline to make such nominations. See Communicating
with the Board above and Adoption of Proxy Access below.
|
|
Diversity of Our
Directors |
Our Board and the Governance Committee have assembled a Board comprised
of experienced directors who are currently, or have recently been, leaders of
major companies and institutions, are independent thinkers and have a diverse
range of expertise and skills that they bring to the boardroom. The Board,
through its Governance Committee, seeks directors with a mix of backgrounds,
experiences and tenure that will enhance the quality of its deliberations and
decisions, and provide a blend of institutional knowledge and fresh perspective. The criteria considered by the Board
and the Governance Committee include a persons skills, current and previous
occupations, other board memberships and professional experiences in the context
of the needs of the Board. The Governance Committee Charter specifically directs
the committee to seek qualified candidates with diverse backgrounds, including
but not limited to, such factors as race, gender, and ethnicity. The
satisfaction of these criteria is implemented and assessed through
www.ipannualmeeting.com |
27 |
Table of Contents
Information About Corporate Governance
Board Leadership & Corporate Governance
Practices |
ongoing consideration of directors and
nominees by the Governance Committee and the Board, as well as through the
Boards annual self-evaluation process. Our Board believes that its membership
should include individuals with a diverse
background in the broadest sense, and is particularly interested in maintaining
a mix of skills and experience that includes the following:
Our Director
Qualification Criteria and Independence Standards may be found at
www.internationalpaper. com under the Company tab at the top of the page followed by the
Leadership link and then under
the Governance
link.
Board Leadership &
Corporate Governance Practices
|
|
Board
Leadership Structure |
Our Board believes that the Company and
its shareowners are best served by having the flexibility to determine the right
leadership structure for the Company at any given point in time, taking into
consideration the current business environment and shareholder landscape. We
currently combine the role of Chairman and CEO and believe this is the most
effective leadership structure for the Company at this time. When Mr. Sutton was
appointed as CEO in 2014, the Board evaluated whether continuing to combine the
role of Chairman and CEO was in the best interests of the Company and the
shareowners. The Board concluded that maintaining the combined position of
Chairman and CEO is appropriate to further
strengthen the Companys governance structure by promoting unified leadership
and direction for the Company, fostering accountability and allowing for a
single, clear focus for management to execute the Companys strategy and
business plans.
As a counterbalance, we have an
independent Presiding Director, J. Steven Whisler, whose role and
responsibilities provide strong independent leadership in the boardroom. The
authority and duties of our independent Presiding Director are set forth in
the Corporate Governance Guidelines
and provided below.
|
|
Role
of the Presiding Director |
The Presiding Director is elected each
year by the independent directors for a term of not less than one year. The
Presiding Director has authority to call meetings of independent directors. He
may consult and directly communicate with certain shareowners if requested. The
duties of the Presiding Director include:
○ |
Determining a schedule and agenda
for regular executive sessions in which independent directors meet without
management present, and presiding over these
sessions; |
○ |
Presiding over meetings of the Board
in the event the Chairman is not
present; |
28 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Information About
Corporate Governance Board Leadership & Corporate Governance
Practices |
○ |
Serving as
liaison between the Chairman and independent directors; |
○ |
Approving
agendas of the Board and meeting schedules to assure there is ample discussion
time; |
○ |
Approving
information sent to the Board; and |
○ |
Organizing the process for evaluating the performance of the
Chairman and CEO not less than annually in consultation with the Management
Development and Compensation Committee. |
The Board considers its own leadership
structure as part of the Companys succession planning process. The Board will
continue to evaluate this structure going forward in light of factors and
considerations prevailing at the time to determine whether a combined CEO and
Chairman role is in the best interests of the Company and its
shareowners.
|
|
Commitment to Sound Corporate Governance
Principles |
We believe good corporate governance is
critical to achieving business success and serves the best interests of our
shareowners. Our Board has adopted Corporate
Governance Guidelines that reflect its
commitment to sound governance practices. In addition, each of our Board
committees has its own charter to assure that our Board fully discharges its
responsibilities to our shareowners. Our Board regularly reviews its
Corporate Governance Guidelines and committee charters and makes changes from time to time to reflect
developments in the law and the corporate governance area. Our Amended and
Restated Certificate of Incorporation permits the size of our Board to range
from nine to 18 members. Currently, the size of our Board is 12 members. Our
Board maintains four standing committees, as well as an Executive Committee,
which is comprised of the chairs of each of the standing committees.
On February 9, 2016, our Board of
Directors adopted a proxy access By-Law that permits stockholders owning 3
percent or more of our common stock for at least three years to nominate the
greater of two directors or up to 20 percent of the Board, and include these
nominees in our proxy materials. The number of shareowners who may aggregate
their shares to meet the ownership threshold is limited to 20. Nominations are
subject to the eligibility, procedural and disclosure requirements set forth in
the By-Laws.
Our By-Laws are available at www.internationalpaper.com,
under the Company tab at the top
of the page followed by the Leadership link and then
under the Governance link. A paper
copy is available at no cost by written request to the Corporate
Secretary. |
Our Board believes that a
shareowner-focused governance model is the right fit for International Paper.
The below table highlights our sound corporate governance practices:
|
|
|
|
|
|
Shareholder Rights |
|
○Majority voting for directors, with a director
resignation policy
○Shareholder right to call special meetings
○Shareholder right to act by written consent
○Shareholder right to proxy access |
|
|
|
|
|
|
|
Board
Independence |
|
○11 of 12 directors are independent
○Robust independent Presiding Director role
○Executive sessions without management present at every
in-person Board meeting
○Focus on Board composition and
refreshment |
|
|
|
|
|
|
|
Other Governance
Practices |
|
○Strong anti-hedging and anti-pledging stock trading
provisions
○Annual Board and committee self-evaluations
○Strong stock ownership requirements |
|
|
|
|
|
|
www.ipannualmeeting.com |
29 |
Table of Contents
Information About
Corporate Governance Board Leadership & Corporate Governance
Practices |
Our Corporate Governance Guidelines and
our Board committee charters are available at www.internationalpaper.com under
the Company tab at the top of the page followed by the Leadership link and then under the
Governance link. A paper copy is available at no cost by written request to the
Corporate Secretary at the address on page 13 of this proxy
statement.
In each of the areas discussed below, we
have embraced sound principles, policies and procedures to ensure that our Board
and our management goals are aligned with our shareowners interests.
|
|
Board
of Directors Policies and
Practices |
Annual Board and Committee Self Assessment
○ |
The
Board is committed to a robust and constructive evaluation process and
recognizes this process promotes continuous improvement and overall Board
effectiveness. |
○ |
Our Board conducts an annual self
assessment of its own and its committees performances, in accordance with
a procedure established by the Governance Committee. |
○ |
The General Counsel conducts
interviews with each of the directors based on a detailed questionnaire.
Topics covered include, among others: |
|
|
Effectiveness of Board and Committee
leadership structure; |
|
|
Board and Committee skills,
composition, diversity, and succession planning; |
|
|
Board culture and dynamics,
including the effectiveness of discussion and debate at meetings; and
|
|
|
Board and management dynamics,
including the quality of management presentations and information provided
to the Board. |
○ |
Separately, an assessment of individual Board members is conducted
by the Governance Committee and the Chairman of the Board prior to their
nomination for election by shareowners, in accordance with the
Director Qualification Criteria and
Independence Standards discussed
above. |
Board, Committee and Annual
Meeting Attendance
○ |
The
Board met nine times during 2016, with an average attendance rate of 98
percent. |
○ |
Each
director attended 75 percent or more of the aggregate number of meetings
of the Board and committees on which he or she served. |
○ |
As
expected by our Corporate Governance
Guidelines, all directors were in
attendance at the 2016 annual meeting. |
Executive Sessions of
Non-Management and Independent Directors
○ |
After
each regularly scheduled face-to-face meeting and, if needed, after
telephonic meetings, non-management and independent directors of our Board
meet in executive session, without management present, chaired by the
Presiding Director. |
○ |
If
non-management directors are not independent, then the Presiding Director
will also chair an executive session of independent directors at least
once annually. |
○ |
In
2016, executive sessions were held at every regularly scheduled
face-to-face Board meeting. |
○ |
Independent directors may engage, at the Companys expense,
independent legal, financial, accounting and other advisors as they may
deem appropriate, without obtaining managements
approval. |
Orientation and Continuing
Education
○ |
Our new directors participate in a director orientation that includes
written materials and presentations by Company employees who are
subject-matter experts, as well as meetings with senior management, our
independent registered public accounting firm and both the Companys and
the Management Development and Compensation Committees compensation
consultants. |
○ |
New directors visit several of our facilities
and meet with employees. |
○ |
Continuing education occurs at Board and
committee meetings, with specific topics of interest covered by management
or outside experts. |
○ |
Directors are also offered the opportunity to
attend director education programs provided by third parties. From time to
time, directors attend meetings of Company officers, and, at each Board
meeting, they meet informally and formally with senior leaders of the
Company. |
30 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Information About
Corporate Governance Board Oversight of the Company |
Mandatory Retirement
Policies
○ |
Our Board has a mandatory retirement policy for non-employee
directors, under which a non-employee director is required to retire from
our Board effective December 31 of the year in which he or she attains the
age of 72. |
|
|
Joan E. Spero, who had served on our Board since 2011,
retired under this policy in December 2016. |
|
|
Stacey J. Mobley and William G. Walter, who have served on
our Board since 2008 and 2005, respectively, will retire under this policy
in December 2017. |
○ |
In addition, we have a mandatory retirement policy for CEOs,
under which our CEO is required to retire as CEO effective on the first
day after the month in which he or she attains the age of
65. |
Resignation
Policies
○ |
We have two policies relating to director resignation. The
first applies when a director has a substantial change in his or her
principal occupation, and the second applies in relation to a director who
does not receive a majority of shares voted in favor of his or her
election. We describe each policy below. |
|
|
First, if a directors principal occupation changes
substantially, he or she is required to tender his or her resignation for
consideration by the Governance Committee. The Governance Committee then
recommends to the Board whether or not to accept the resignation using the
Director Qualification Criteria and Independence Standards. |
|
|
Second, our Amended and Restated Certificate of
Incorporation provides for majority voting of directors in non-contested
elections. Pursuant to our By-Laws, any director nominee in a
non-contested election who fails to receive the requisite majority of
votes cast for his or her election must tender his or her resignation,
and the Board, through its Governance Committee, will determine whether or
not to accept the resignation. |
Board Oversight of the
Company
As set forth in the Companys Corporate
Governance Guidelines, the Board exercises
oversight of the Companys strategic, operational and financial matters, as well
as compliance and legal risks. The Board is responsible for assuring appropriate
alignment of its leadership structure and oversight of management with the
interests of shareowners and the communities in which the Company operates.
Pursuant to delegated authority as permitted by the Companys By-Laws,
Corporate Governance Guidelines, and committee charters, the Boards four standing
committees oversee certain risks, and the Audit
and Finance Committee coordinates the risk oversight role exercised by various
committees and management. The Companys Corporate Governance Guidelines provide the foundation upon which the Board oversees a working system of
principled goal-setting and effective decision-making, with the objective of
establishing a vital, agile, and ethical corporate entity that provides value to
the shareowners who invest in the Company and to the communities in which it
operates.
Our Board has adopted a Code of Conduct
(the Code) that applies to our directors,
officers and all employees to ensure we conduct business in a legal and ethical
manner. The Code is available at www.internationalpaper.com, under the
Company
tab at the top of the page, then under Ethics. A paper copy is available at
no cost by written request to the Corporate Secretary.
Our Global Ethics and Compliance office is
located at our global headquarters in Memphis, Tennessee. If an employee,
customer, vendor or shareowner has a concern about ethics or business practices
of the Company or any of its employees or representatives, he or she may contact
the Global Ethics and Compliance office in
person, via mail, e-mail, facsimile or telephone. The Code describes multiple channels by
which employees may report a concern, such as through their managers, a human
resources professional, legal counsel or our internal audit
department.
Our HelpLine is also available 24 hours a
day, seven days a week, to receive calls from anyone wishing to report a concern
or complaint, whether anonymous or otherwise. Our HelpLine contact information
can be found at www.internationalpaper.com, under the Company tab at the top of
the page, then under Ethics and How Can We Help
You?
www.ipannualmeeting.com |
31 |
Table of Contents
Information About
Corporate Governance Independence of
Directors |
All HelpLine reports are immediately
forwarded to the Global Ethics and Compliance office for further action and for
a response to the person reporting, unless he or she has chosen to remain
anonymous. A report made through any of our other reporting channels that
involves an impropriety relating to our accounting, internal controls or other
financial or audit matters is also forwarded immediately to the Global
Ethics and Compliance office. That office has
responsibility for investigating all such matters, and will report certain of
those matters, unfiltered, to the chair of our Audit and Finance Committee in
accordance with the procedures established by the Audit and Finance Committee to
ensure compliance with the Sarbanes-Oxley Act of 2002.
Independence of
Directors
|
|
Director Independence
Standards |
It is the policy of our Board that a majority of its members be
independent from the Company, its management and its independent registered
public accounting firm. Based on the Governance Committees review of our
current directors, our Board has determined each of our non-employee directors
is independent: David J. Bronczek; William J. Burns; Ahmet C. Dorduncu; Ilene S.
Gordon; Jay L. Johnson; Stacey J. Mobley; Kathryn D. Sullivan, John L. Townsend,
III; William G. Walter; J. Steven Whisler; and Ray G. Young. We have one employee-director, our Chairman, Mr. Sutton, who is
not independent. Each standing committee of the Board is comprised entirely of
independent directors.
Further, the Governance Committee
concluded and recommended to our Board, and our Board determined, each of our
non-employee directors meets the independence requirements for service on our
Audit and Finance Committee, the Management Development and Compensation
Committee and the Governance Committee.
|
|
Director Independence Determination Process and
Standards |
Annually, our Board determines the
independence of directors based on a review conducted by the Governance
Committee and the General Counsel. The Governance Committee and the Board
evaluate and determine each directors independence under the NYSE Listed Company Manuals independence standards and the Companys Director Qualification Criteria and Independence
Standards, which are consistent with, but
more rigorous than, the NYSE standards.
Under SEC rules, the Governance Committee
is required to analyze and describe any transactions, relationships or
arrangements not specifically disclosed in this proxy statement that were
considered in determining our directors independence. To facilitate this
process, the Governance Committee reviews directors responses to our annual
Directors and Officers Questionnaire, which requires disclosure of each
directors and his or her immediate familys relationships to the Company, as
well as any potential conflicts of interest.
In this context, the Governance Committee
considered the relationships described below. Based on its analysis of the
relationships and our independence standards, the Governance Committee concluded and
recommended to our Board that none of these relationships impaired the
independence of any non-employee director, including:
○ |
Non-profit and charitable organization
affiliations of our directors. None of our directors serve as an executive
officer of any organization to which we make charitable
contributions. |
○ |
Service by several of our directors as an
executive officer at a company with whom we may do business. The
Governance Committee determined that the commercial relationships
involving routine, arms-length purchases and sales transactions between
International Paper and these companies were not material under our
independence standards. These standards provide that payments to or
payments from the Company to a company for which a director serves as an
executive officer, for property or services that are less than the greater
of $750,000 or 1.75 percent of such other companys consolidated gross
revenues, are not considered a material relationship that would impair the
directors independence. We provide additional details about these
relationships in the following table. |
32 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Information About
Corporate Governance Board
Committees |
|
|
Transactions Considered in Analysis of Director
Independence |
Director |
|
Name of Employer |
|
Business Relationship (including
affiliated companies) |
|
Dollar Amount of Routine Sales Transactions (approximate) |
|
Amount exceeds greater of $750,000 or
1.75% of other companys gross revenues? |
David J. Bronczek |
|
FedEx Corporation |
|
Routine sales to FedEx |
|
$435,929 in total, representing less than 0.003% of
International Papers gross revenues in 2016 |
|
No |
|
|
|
|
Routine purchases from FedEx |
|
$7,218,606 in total, representing less than 0.02% of
FedExs gross revenues in 2016 |
|
No |
Ilene S. Gordon |
|
Ingredion Incorporated |
|
Routine sales to Ingredion |
|
$46,388 in total, representing less than 0.0003% of
International Papers gross revenues in 2016 |
|
No |
|
|
|
|
Routine purchases from Ingredion |
|
$56,509,216 in total, representing less than 0.94% of
Ingredions gross revenues in 2016 |
|
No |
Ray G. Young |
|
Archer-Daniels-Midland Company |
|
Routine sales to ADM |
|
$4,123,922 in total, representing less than 0.02% of
International Papers gross revenues in 2016 |
|
No |
|
|
|
|
Routine purchases from ADM |
|
$57,354,762 in total, representing less than 0.10% of
ADMs gross revenues in 2016 |
|
No |
Board
Committees
As described above, in order to fulfill
its responsibilities, the Board has delegated certain authority to its
committees. The Board has four standing committees and one Executive Committee:
(i) Audit and Finance; (ii) Governance; (iii) Management Development and
Compensation; and (iv) Public Policy and Environment. The Executive Committee
meets only if a quorum of the full Board cannot be convened and there is an
urgent need to meet.
Each committee has its own charter, and
each charter is reviewed annually by each committee to assure ongoing compliance
with applicable law and sound governance practices. The Governance Committee
assesses the Executive Committee Charter. Committee charters are available at
www.internationalpaper.com under the Company tab at the top of the page
followed by the Leadership link and then under the Board Committees link. A paper copy
is available at no cost by written request to the Corporate
Secretary.
www.ipannualmeeting.com |
33 |
Table of Contents
Information About Corporate Governance
Board Committees |
Independent Board members are assigned to
one or more committees. The Governance Committee recommends any changes in
assignments to the entire Board. Committee chairs are rotated periodically,
usually every three to five years.
|
Governance Committee |
|
|
|
|
|
|
|
|
|
|
Current Members
○Stacey J. Mobley
(Chairman)
○William J. Burns
○Jay L. Johnson
○Kathryn D. Sullivan
○J. Steven
Whisler
All Members are
Independent
|
Meetings Meeting agendas are developed by the Governance
Committee chair in consultation with committee members and senior leaders,
who regularly attend the meetings.
Responsibilities The Governance
Committee is responsible for assuring the Company abides by sound
corporate governance principles, including compliance with the Companys
Certificate of Incorporation, By-Laws, and Corporate Governance Guidelines,
and reviewing conflicts of interest, including related person transactions
under our Related Person Transactions
Policy and Procedures. The committee
also serves as the Boards nominating committee, responsible for
identifying and recommending individuals qualified to become Board members
and for evaluating directors being considered for re-election. The
committee is also responsible for assuring that shareowner communications,
including shareowner proposals, are addressed appropriately by the Board
or Company management. The committee also recommends non-employee director
compensation, and assists the Board in its annual self
assessment. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit and Finance
Committee |
|
|
|
|
|
|
|
|
|
|
Current Members
○William G. Walter
(Chairman)
○Ahmet C. Dorduncu
○Ilene S. Gordon
○Jay L. Johnson
○John L. Townsend,
III
○Ray G. Young
All Members are
Independent
|
Meetings Meeting agendas are developed by the Audit and Finance
Committee chair in consultation with committee members and senior
management, who regularly attend the meetings. Each meeting, the committee
holds executive sessions without members of management, and it also meets
privately with representatives from our independent registered public
accounting firm, and separately with each of the Chief Financial Officer,
General Counsel, Vice President of Internal Audit and
Controller.
Responsibilities The Audit and
Finance Committee assists our Board in monitoring the integrity of our
financial statements and financial reporting procedures, reviewing the
independent registered public accounting firms qualifications and
independence, overseeing the performance of our internal audit function
and independent registered public accounting firm, coordinating our
compliance with legal and regulatory requirements relating to the use and
development of our financial resources, and monitoring the risk of
financial fraud involving management and ensuring that controls are in
place to prevent, deter and detect fraud by management. |
|
|
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|
|
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|
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|
|
|
34 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Information About Corporate Governance
Board Committees |
The Companys Independent Registered
Public Accounting Firm
The Audit & Finance Committee is
responsible for the appointment, compensation, retention and oversight of the
independent external audit firm retained to audit the Companys financial
statements. The committee has evaluated the qualifications, performance and
independence of Deloitte & Touche and appointed Deloitte & Touche as the
Companys independent external auditor for the fiscal year 2017. Deloitte &
Touche has served as International Papers independent external auditor
continuously since 2002. In order to assure continuing auditor independence, the
Audit & Finance Committee periodically considers whether there should be a
rotation of the independent external audit firm. Further, in conjunction with
the mandated rotation of the audit firms lead engagement partner for the period
beginning with the 2017 reporting year, the Audit & Finance Committee and
its chairperson were directly involved in the selection of Deloitte &
Touches new lead engagement partner. The members of the Audit & Finance
Committee and the Board believe the continued
retention of Deloitte & Touche to serve as the Companys independent
external auditor is in the best interests of International Paper and its
shareowners.
Deloitte & Touches reports on the
consolidated financial statements for each of the three fiscal years in the
period ended December 31, 2016, did not contain an adverse opinion or disclaimer
of opinion, nor were they qualified or modified as to uncertainty, audit scope
or accounting principles.
Independent Auditor Fees
The Audit and Finance Committee engaged
Deloitte & Touche to perform an annual integrated audit of the Companys
financial statements, which includes an audit of the Companys internal controls
over financial reporting, for the years ended December 31, 2015, and December
31, 2016. The total fees and expenses paid to Deloitte & Touche are as
follows:
|
2015 |
2016 |
|
($, in thousands) |
($, in thousands) |
Audit Fees |
15,146 |
14,769 |
Audit-Related Fees |
672 |
526 |
Tax
Fees |
2,851 |
1,020 |
All
Other Fees |
185 |
52 |
Total Fees |
18,854 |
16,367 |
Services Provided by the Independent
Auditors
All services rendered by Deloitte &
Touche are permissible under applicable laws and regulations, and are
pre-approved by the Audit and Finance Committee. For a complete copy of
International Papers Guidelines of International Paper Company Audit and
Finance Committee for Pre-Approval of Independent Auditor Services, please
write to the Corporate Secretary, or visit us on our website,
www.internationalpaper.com, under the Company tab, then the Governance
link.
Pursuant to rules adopted by the SEC, the
fees paid to Deloitte & Touche for services provided are presented in the
table above under the following categories:
1. |
Audit
Fees These are fees for professional services performed by
Deloitte & Touche for the audit and review of our annual financial
statements that are normally provided in connection with statutory and
regulatory filings or engagements, comfort letters, consents and other
services related to SEC matters. Audit fees in both years include amounts
related to the audit of the effectiveness of internal controls over
financial reporting. |
2. |
Audit-Related Fees
These are fees for assurance and
related services performed by Deloitte & Touche that are reasonably
related to the performance of the audit or review of our financial
statements. This includes employee benefit and compensation plan audits,
accounting consultations on divestitures and acquisitions, attestations by
Deloitte & Touche that are not required by statute or regulation,
consulting on financial accounting and reporting standards, and
consultations on internal controls and quality assurance audit procedures
related to new or changed systems or work
processes. |
3. |
Tax Fees These are fees for professional services performed by
Deloitte & Touche with respect to tax compliance, tax advice and tax
planning. This includes consultations on preparation of original and
amended tax returns for the Company and its consolidated subsidiaries,
refund claims, payment planning, and tax |
www.ipannualmeeting.com |
35 |
Table of Contents
Information About Corporate Governance
Board Committees |
|
audit assistance. Deloitte &
Touche has not provided any services related to tax shelter transactions,
nor has Deloitte & Touche provided any services under contingent fee
arrangements. |
4. |
All Other Fees
These are fees for other permissible
work performed by Deloitte & Touche that do not meet the above
category descriptions. The services relate to various consultations that
are permissible under applicable laws and regulations, which are primarily
related to engagements to provide advice, observations, and
recommendations regarding operations, infrastructure and distribution to
be considered by the Company. |
Audit and Finance Committee Report |
The following is the
report of the Audit and Finance Committee with respect to the Companys
audited financial statements for the fiscal year ended December 31,
2016.
The Audit and Finance
Committee assists the Board of Directors in its oversight of the Companys
financial reporting process and implementation and maintenance of
effective controls to prevent, deter and detect fraud by management. The
Audit and Finance Committees responsibilities are more fully described in
its charter, which is accessible on the Companys website at
www.internationalpaper.com under the Company tab at the top of the page
and then under the Leadership link and the Board Committees section.
Paper copies of the Audit and Finance Committee charter may be obtained,
without cost, by written request to Ms. Sharon R. Ryan, Corporate
Secretary, International Paper Company, 6400 Poplar Avenue, Memphis, TN
38197.
In fulfilling its
oversight responsibilities, the Audit and Finance Committee has reviewed
and discussed the Companys annual audited and quarterly consolidated
financial statements for the 2016 fiscal year with management and Deloitte
& Touche LLP (Deloitte & Touche), the Companys independent
registered public accounting firm. The Audit and Finance Committee has
discussed with Deloitte & Touche the matters required to be discussed
by Auditing Standard No. 1301, Communications with Audit Committees,
issued by the Public Company Accounting Oversight Board (United States).
The Audit and Finance Committee has received the written disclosures and
the letter from Deloitte & Touche required by applicable requirements
of the Public Company Accounting Oversight Board regarding the independent
accountants communications with the audit committee concerning
independence, and has discussed with Deloitte & Touche its
independence from the Company and its management. The Audit and Finance
Committee has also considered whether the provision of non-audit services
by Deloitte & Touche is compatible with maintaining the firms
independence.
The Board has
determined that the following members of the Audit and Finance Committee
are audit committee financial experts as defined in Item 407(d)(5)(ii) of
Regulation S-K: William G. Walter, Ilene S. Gordon, Jay L. Johnson, John
L. Townsend, III, and Ray G. Young. The Board has determined each member
of the Audit and Finance Committee meets the independence and financial
literacy requirements for audit committee members set forth under the
listing standards of the NYSE and our independence standards.
Based on the review
and discussions referred to above, the Audit and Finance Committee
recommended to the Companys Board of Directors that the Companys audited
financial statements be included in the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2016.
The Audit and Finance
Committee has approved and selected, and the Board of Directors has
ratified, Deloitte & Touche as the Companys independent registered
public accounting firm for 2017.
Audit and Finance
Committee |
|
|
|
William G. Walter,
Chairman |
Ilene S. Gordon |
John L. Townsend,
III |
|
|
|
Ahmet C. Dorduncu |
Jay L. Johnson |
Ray G.
Young |
36 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Information About Corporate Governance
Board Committees |
|
Public Policy and Environment Committee |
|
|
|
|
|
|
|
|
|
|
Current Members
○David J. Bronczek
(Chairman)
○William J. Burns
○Ahmet
C. Dorduncu
○Stacey J. Mobley
○Kathryn D.
Sullivan
○Ray G. Young
All Members are
Independent
|
Meetings Meeting agendas are developed by the Public Policy and Environment
Committee chair in consultation with committee
members and senior leaders, who regularly attend the meetings.
Responsibilities The Public
Policy and Environment Committee has overall responsibility for the review
of contemporary and emerging public policy issues, as well as technology
issues pertaining to the Company. The committee reviews the Companys
health and safety policies, as well as environmental policies, including
the Office of Sustainability policies, to ensure continuous improvement
and compliance. The committee also reviews the Companys policies and
procedures for complying with its legal and regulatory obligations,
including our Code, and charitable and political contributions. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Committee |
|
|
|
|
|
|
|
|
|
|
Current Members
○Mark S. Sutton
(Chairman)
○David J. Bronczek
○Stacey J.
Mobley
○William G. Walter
○J. Steven
Whisler
|
Executive
Committee The Executive Committee may
act for our Board, to the extent permitted by law, if Board action is
required and a quorum of our full Board cannot be convened on a timely
basis in person or telephonically. The Chairman of our Board and the chair
of each Board committee are members of the Executive
Committee. |
|
|
|
|
|
|
|
|
|
|
|
|
|
www.ipannualmeeting.com |
37 |
Table of Contents
Information About Corporate Governance
Board Committees |
|
Management Development and Compensation
Committee |
|
|
|
|
|
|
|
|
|
|
Current Members
○J. Steven Whisler
(Chairman)
○David J. Bronczek
○Ilene S.
Gordon
○John L. Townsend,
III
○William G.
Walter
All Members are Independent
|
Meetings Meeting agendas are developed by the Management Development and
Compensation Committee chair in consultation with committee members and
senior leaders, who regularly attend the meetings. An executive session
without management present is held at each meeting. The committees
independent compensation consultant is Frederic W. Cook & Co., Inc.
(Cook). Cook regularly attends the committees meetings.
Responsibilities The Management
Development and Compensation Committee is responsible for overseeing our
overall compensation program and approving the compensation of our senior
management (other than the CEO). The committee is responsible for
conducting performance evaluations of the Chairman and CEO not less than
annually, in accordance with the process organized by the Presiding
Director, and recommending compensation of the CEO to the independent
directors based on such evaluations.
The committee is also responsible
for discussing with Company management the required disclosure under Item
407(e)(5) of Regulation S-K, including the Compensation Discussion &
Analysis that is prepared as part of this proxy statement, and for
recommending that it be included in our proxy statement. The committee is
responsible for ensuring we have in place policies and programs for the
development of senior leaders and succession planning. The committee acts
as the oversight committee with respect to our retirement and benefit
plans for senior officers and must approve significant changes to the
retirement and benefit plans for our employees. With respect to those
plans, the committee may delegate authority for both day-to-day
administration and interpretation of the programs, except as it may impact
our senior leaders or the CEO. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Role of Independent Consultant.
The committee engaged Cook, commencing in
mid-2011, to serve as its independent, external compensation consultant. The
committee has sole authority for retaining or terminating Cook, as well as
approving the terms of engagement, including fees. Cook works exclusively for
the committee and provides no services to the Company. Cook is expected to
achieve the following objectives:
○ |
Attend meetings of the
Management Development and Compensation Committee as
requested; |
○ |
Acquire adequate
knowledge and understanding of our compensation philosophy and incentive
programs; |
○ |
Provide advice on
the direction and design of our executive and director compensation
programs; |
○ |
Provide insight into the
general direction of executive compensation within Fortune 500 companies;
and |
○ |
Facilitate open communication
between our management and the Management Development and Compensation
Committee, assuring both parties are aware and knowledgeable of ongoing
issues. |
Assessment and Management of
Compensation-Related Risk. The committee has
committed to completing an annual risk assessment to evaluate the Companys
compensation plans and programs. In 2016, at the committees request, Cook
conducted a risk assessment with the objective of identifying any compensation
policies and practices that may encourage employees to take unnecessary or
excessive risks that could threaten the Company. No such plans or practices were
identified. The results of this 2016 evaluation indicated, and the Committee
thus concluded, that there are no significant compensation-related risk areas at
the Company and that
38 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Information About Corporate Governance
Transactions with Related Persons |
our compensation policies and practices do
not encourage unnecessary or excessive risk-taking and do not create risks that
are reasonably likely to have a material adverse effect on the Company. Also,
based on this evaluation, the committee concluded that the Companys executive
compensation program appropriately aligns compensation with long-term shareowner
value creation and avoids short-term rewards for decisions that could pose
long-term risks to the Company. These conclusions were based on the following
factors:
○ |
Our compensation mix is
appropriately balanced and incentive compensation is not overly weighted
toward short-term performance at the expense of long-term value
creation; |
○ |
Our short-term incentive
compensation award pool is appropriately capped, thereby limiting payout
potential; |
○ |
Our long-term incentive
compensation is also capped and is based entirely on performance shares,
which are less leveraged than stock options and, unlike time-based
restricted stock awards, reward both Company performance and stock
price; |
○ |
Our performance is measured
against absolute and relative metrics to ensure quality and sustainability
of Company performance; |
○ |
We have adopted several
programs that serve to mitigate potential risk, including officer stock
ownership requirements, clawback policies in our incentive compensation
programs, and non-compete and non-solicitation agreements to deter
behavior that could be harmful to the Company either during or after
employment; and |
○ |
The committee maintains strict
controls over the Companys equity granting practices, and our incentive
compensation plan prohibits option re-pricing without shareowner
approval. |
Compensation Committee Interlocks and
Insider Participation
The members of the Management Development
and Compensation Committee during 2016 were Mr. J. Steven Whisler, Chairman, Mr.
David J. Bronczek, Ms. Ilene S. Gordon, Mr. John L. Townsend, III, and Mr.
William G. Walter. No member of the Management Development and Compensation
Committee was, during the fiscal year, an officer or employee of the Company or
was formerly an officer of the Company. Please refer to the discussion below
related to Transactions with Related Persons, for additional information
requiring disclosure by us under Item 404 of Regulation S-K under the Exchange
Act for members of the Companys Management Development and Compensation
Committee.
In addition, no executive officer of the
Company served as a member of the compensation committee (or its equivalent) of
another entity, or as a director of another entity, one of whose executive
officers served on our Management Development and Compensation Committee. No
executive officer of the Company served as a member of the compensation
committee (or its equivalent) of another entity, one of whose executive officers
served as one of our directors.
Transactions with Related
Persons
Transactions Covered. Our Board has adopted a written policy and procedures for
review and approval or ratification of transactions involving the Company and
related persons (directors and executive officers and their immediate family
members or shareowners owning 5 percent or greater of our outstanding common
stock and their immediate family members).The policy covers any related person
transaction that meets the minimum threshold for disclosure in the proxy
statement under the SECs rules (specifically, any transaction involving us in
which:
(i) |
the amount involved exceeded $120,000,
and |
(ii) |
a related person had a direct or
indirect material interest). |
Related Person Transaction Review
Procedures. Related person transactions are
approved in advance by the Governance Committee whenever possible, or must be
ratified as promptly as possible thereafter. We disclose in our proxy statement
any transactions that are found to be directly or indirectly material to a
related person.
Prior to entering into a transaction, a
related person must provide the details of the transaction to the General
Counsel, including the relationship of the person to the Company, the dollar
amount involved, and whether the related person or his or her family member has
or will have a direct or indirect interest in the transaction. The General
Counsel evaluates the transaction to determine if
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39 |
Table of Contents
Information About Corporate Governance
Section 16(a) Beneficial Ownership Reporting Compliance |
the Company or the related person has a
direct or indirect material interest in the transaction. If so, then the General
Counsel notifies the CEO and submits the facts of the transaction to the
Governance Committee for its review. The Governance Committee may approve a
transaction only if these review procedures have been followed, and the
Governance Committee determines that the transaction is not detrimental to the
Company and does not violate the Companys Conflict of Interest Policy.
Related Person Transactions.
Please see the table under the heading
Transactions Considered in Analysis of Director Independence for a description
of related person transactions during 2016.
Our Related Person Transaction
procedures are available at www.internationalpaper.com under the Company tab at the top of the page
followed by the Leadership link and then under the Governance link. A paper copy is
available at no cost by written request to the Corporate
Secretary. |
Section 16(a) Beneficial Ownership
Reporting Compliance
Section 16(a) of the Exchange Act requires
our directors and certain officers, as well as persons who own more than 10
percent of our common stock, to file with the SEC initial reports of beneficial
ownership on Form 3, and reports of subsequent changes in beneficial ownership
on Forms 4 or 5. Based solely on our review of these forms, and certifications from our executive officers and directors
that no other reports were required for such persons, we believe that all
directors and officers complied with the filing requirements applicable to them
for the fiscal year ended December 31, 2016.
40 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Philosophy
Our compensation program for non-employee
directors is guided by the following principles. We believe our director
compensation program should:
○ |
Provide total compensation comprising both
cash and equity that targets the median level of compensation paid by our
Compensation Comparator Group (CCG) listed in the Compensation Discussion
& Analysis section of this proxy statement; |
○ |
Align
the interests of our directors with the interests of our
shareowners; |
○ |
Attract and retain top director
talent; and |
○ |
Be flexible to meet the needs of a
diverse group of directors. |
Each element of director
compensation discussed below is recommended by the Governance Committee
and approved by our Board.
Stock
Ownership Requirements
Our director stock ownership policy
requires our directors to hold equity of the Company valued at two times the
annual Board retainer, which, through April 30, 2017, is equivalent to 4.9 times
the annual cash retainer (and requires ownership of Company stock equivalent to
$510,000). We believe this helps align the interests of our directors with the
interests of our shareowners. New directors have
four years from the date of their election to meet the ownership requirement. As
of December 31, 2016, all directors who were required to meet the ownership
levels held the requisite amount of equity.
Elements of
Our Director Compensation Program
For the May 2016 April 2017 service
year, compensation for our non-employee directors consists of:
○ |
An annual retainer fee that is a mix
of cash and equity; |
○ |
Committee chair fees, a Presiding
Director fee, and an Audit and Finance Committee member fee, as
applicable; and |
○ |
Life
insurance, business travel accident insurance, and liability
insurance. |
We evaluate the reasonableness and
appropriateness of the total compensation paid to our directors in comparison to
peer companies who comprise our CCG. We target our director compensation at the
median of our CCG.
Annual
Compensation
The annual retainer fees for the May 2016
April 2017 service year are shown in the table below. A directors annual
compensation is $255,000, approximately 41 percent of which is payable in cash
and 59 percent of which is payable in equity. A director may elect to convert
all or 50 percent of his or her cash retainer fee into shares of restricted
stock. In order to encourage director stock ownership, a director who makes this
election receives a 20 percent premium in additional shares of restricted stock.
Seven of the 11 non-employee directors who served during 2016 elected to receive
stock in lieu of all or 50 percent of the cash retainer fee and received the
applicable premium. Restrictions on shares awarded to our directors under our
current compensation plan lapse one year from the date of grant, and then the
shares are freely transferable, subject to our director stock ownership
requirement and securities regulations.
Directors may also elect to defer receipt
of their equity retainer fee. Directors who make this election receive
restricted stock units (RSUs) in lieu of restricted stock. RSUs are not
transferable until a directors retirement from the Board, death or disability.
The cash value of RSUs is paid in January following retirement, death or
disability. Seven of the 11 non-employee directors who served during 2016
elected to defer payment of all or a portion of their equity compensation until
retirement, death or disability. Elections with regard to form of payment and
deferrals are made in December preceding each service year.
We use the closing market price of the
Companys common stock on the day preceding our annual meeting in May to award
the equivalent number of shares for the $151,000 equity retainer and restricted
stock elected by our directors
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41 |
Table of Contents
Director Compensation Directors
Charitable Award Program |
in lieu of their cash retainer fee. RSUs
are settled in cash based on the closing price of the Companys common stock as
of December 31 of the year of the directors retirement.
Directors earn dividends on their shares
of stock and RSUs, which they may elect to receive either as cash or in the form
of additional shares of restricted stock or RSUs. Dividends are paid to the
director at the time the underlying award is vested or settled.
In addition, each committee chair receives
a fee for his or her service in such role. For 2016, Messrs. Bronczek, Mobley,
Walter and Whisler each received a committee chair fee. Members of our Audit and
Finance Committee also receive an additional fee for their services on this
committee. For 2016, Messrs. Dorduncu, Townsend and Young, Ms. Gordon and
Admiral Johnson each received an Audit and Finance Committee member fee. As
Presiding Director, Mr. Whisler also received a Presiding Director fee for
2016.
Type of Fee |
|
2016-2017 Fee Amount ($) |
Board Fees |
|
|
Cash Retainer |
|
104,000 |
Equity Retainer |
|
151,000 |
Committee
Fees |
|
|
Audit and Finance Committee Chair |
|
25,000 |
Audit and Finance Committee Member |
|
10,000 |
Management Development and Compensation Committee
Chair |
|
20,000 |
Governance Committee Chair |
|
20,000 |
Public Policy and Environment Chair |
|
20,000 |
Presiding Director Fee |
|
25,000 |
Directors
Charitable Award Program
Directors who joined our Board on or
before July 1, 2007, are eligible to participate in our charitable award
program. Under this program, the Company will make a charitable donation in the
aggregate amount of $1 million in the directors
name in 10 equal, annual installments following the directors death to the
eligible colleges or universities selected by the director. This program was
closed to new participants effective July 1, 2007.
Insurance
and Indemnification Contracts
We provide life insurance in the amount of
$10,500 to each of our non-employee directors, and travel accident insurance in
the amount of $500,000 that covers a director if he or she dies or suffers
certain injuries while traveling on Company business.
We provide liability insurance for our
directors, officers and certain other employees at an annual cost of
approximately $4 million. The primary underwriters of coverage, which
was renewed in 2016 and extends to July 1, 2017,
are XL Specialty Insurance Company and ACE American Insurance
Company.
Our By-Laws provide for standard
indemnification of our directors and officers in accordance with New York law.
We also have contractual arrangements with our directors that indemnify them in
certain circumstances for costs and liabilities incurred in actions brought
against them while acting as our directors.
42 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Director Compensation
Our Analysis |
Our
Analysis
We believe our director compensation
program appropriately compensates our directors for their time and commitment to
the Company and is consistent with our compensation philosophy as shown in the
following table.
Our Director Pay Principles |
|
Our 2016 Director Pay
Policies and Practices |
|
Target compensation at median of CCG |
|
○Maintained mix of cash and
equity in line with cross-section of similar companies
(CCG) |
|
Align the interests of our directors with the interests
of our shareowners |
|
○Paid 59 percent of
compensation in the form of equity to ensure that directors, like
shareowners, have a personal stake in the Companys financial
performance |
|
Attract and retain top director talent |
|
○Compensated directors
competitively, based on a cross-section of similar companies
(CCG) |
|
Maintain flexibility to meet the needs of a diverse
group of directors |
|
○Continued to allow
directors to choose between cash and equity and to elect to defer their
fees until retirement |
Non-Employee Director Compensation Table
The following table provides information
on 2016 compensation for non-employee directors. This table shows fiscal year
2016 compensation based on the SECs compensation disclosure requirements,
though we pay our directors on a May to April service year. The amounts in the
table below show differences among directors because (i) each director makes an individual election to receive his or her fees
in cash and/or equity; (ii) certain directors receive committee chair fees, a
Presiding Director fee, and/or member fees; and (iii) directors may join our
Board on different dates, so their compensation is prorated for the
year.
Name of Director |
Fees Earned or Paid
in Cash ($)(1) |
|
Stock Awards ($)(2) |
|
All
Other Compensation ($)(3) |
|
Total ($) |
David J. Bronczek |
62,000 |
|
223,425 |
|
26,076 |
|
311,501 |
William J. Burns |
|
|
275,797 |
|
|
|
275,797 |
Ahmet C. Dorduncu |
114,925 |
|
151,013 |
|
|
|
265,938 |
Ilene S. Gordon |
|
|
285,817 |
|
|
|
285,817 |
Jay L. Johnson |
|
|
285,817 |
|
|
|
285,817 |
Stacey J. Mobley |
124,000 |
|
151,013 |
|
|
|
275,013 |
Joan E. Spero (retired 12/31/2016) |
3,188 |
|
183,851 |
|
|
|
187,039 |
John L. Townsend, III |
114,000 |
|
151,013 |
|
5,795 |
|
270,808 |
William G. Walter |
129,000 |
|
151,013 |
|
|
|
280,013 |
J. Steven Whisler |
|
|
320,802 |
|
|
|
320,802 |
Ray G. Young |
|
|
285,817 |
|
|
|
285,817 |
(1) |
As described above, certain
directors elected to receive shares of restricted stock in lieu of cash
and therefore had no cash compensation during 2016. |
(2) |
The value of stock awards shown
in the Stock Awards column is based on grant date fair value calculated
under Financial Accounting Standards Board (FASB) Accounting Standards
Codification (ASC) Topic 718. The grant date fair value of the equity
awards shown in the Stock Awards column is based on the closing price of
the Companys common stock on the last business day immediately preceding
the date of grant. Directors who elect to defer their equity retainer fee
receive RSUs rather than restricted stock. Restrictions on shares awarded
to our directors under our current compensation plan lapse one year from
the date of grant, and then the shares are freely transferable, subject to
our director stock ownership requirement and securities regulations. RSUs
are not transferable until a directors retirement from the Board, death
or disability. The cash value of RSUs is paid in January following
retirement, death or disability. |
(3) |
Represents the annual expense of
our charitable award program. We determine the total annual expense to the
Company by using assumptions related to each current and retired director
who participates in the program. We take into account each directors age,
years of service on our Board, and mandatory retirement age. We make a
standard mortality assumption for all directors and use a discount rate of
6 percent. For directors who served in 2016, the aggregate accrued
liability increased by $31,871, which was allocated ratably to those
directors eligible to participate in the program based on the number of
months each served. Non-employee directors vest in the program upon the
earliest of (i) serving on our Board for at least 10 years, (ii) retiring
from our Board at the mandatory retirement age, or (iii) in the event of
disability or death. Directors derive no financial benefit from our
charitable award program. We finance the program in part through life
insurance policies, of which we are the beneficiary. We expect to receive
an income tax deduction when we make the designated charitable awards. The
amounts shown do not include the cost for each director of a $10,500 life
insurance policy and a $500,000 business travel accident policy, the cost
of which is less than $10,000 for each
director. |
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43 |
Table of Contents
Director Compensation Non-Employee
Director Compensation Table |
The following table shows the aggregate
number of unvested shares of restricted stock and RSUs outstanding as of
December 31, 2016, for each non-employee director.
Name of Director |
|
Aggregate Number of
Shares Outstanding That Have Not Vested and
RSUs (#) |
David J. Bronczek |
|
10,381 |
William J. Burns |
|
13,763 |
Ahmet C. Dorduncu |
|
3,587 |
Ilene S. Gordon |
|
6,789 |
Jay L. Johnson |
|
22,608 |
Stacey J. Mobley |
|
3,690 |
John L. Townsend, III |
|
3,587 |
William G. Walter |
|
102,073 |
J. Steven Whisler |
|
97,604 |
Ray G. Young |
|
16,284 |
Total |
|
280,366 |
44 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion & Analysis
(CD&A) |
Introduction
This CD&A describes our compensation
program that applies to all of our executive officers, including our CEO and
Senior Vice Presidents, whom we refer to as our Senior Leadership Team (SLT).
It is designed to provide shareowners with an understanding of our compensation
philosophy, core design principles, and decision-making process. This narrative further explains how our
Management Development and Compensation Committee (MDCC) oversees and designs
the program and reviewed the 2016 compensation of our Named Executive Officers
(NEOs) as shown below:
Mark S.
Sutton |
|
CEO & Chairman of the Board (Principal
Executive Officer) |
Carol L. Roberts |
|
Former Senior Vice President and Chief Financial Officer
(Principal Financial Officer throughout 2016) |
Timothy S. Nicholls |
|
Senior Vice President Industrial Packaging the
Americas |
Tommy S. Joseph |
|
Senior Vice President Manufacturing, Technology,
EH&S & Global Sourcing |
Sharon R. Ryan |
|
Senior Vice President, General Counsel and Corporate
Secretary |
Ms. Roberts retired from the Company
effective March 31, 2017, and served as the Companys CFO and Principal
Financial Officer through February 22, 2017, the date of the filing of our 2016
Annual Report on Form 10-K.
Glenn R. Landau was appointed Senior Vice
President and Chief Financial Officer of the Company, effective February 22,
2017. He served as Senior Vice President Finance from January 1, 2017 until
his appointment.
Overview of
Our CD&A
www.ipannualmeeting.com |
45 |
Table of Contents
Compensation Discussion & Analysis
(CD&A) Executive Summary |
Compensation Committee
Report |
On behalf of the Board
of Directors, the Management Development and Compensation Committee of the
Board of Directors, referred to as the MDCC, oversees the Companys
compensation programs. In fulfilling its oversight responsibilities, the
MDCC has reviewed and discussed the Compensation Discussion and Analysis
included in this proxy statement with the Companys management.
Based on the review
and discussions referred to above, the MDCC recommended to the Board of
Directors that the Compensation Discussion and Analysis be included in the
Companys Annual Report on Form 10-K for the fiscal year ended December
31, 2016, and its proxy statement on Schedule 14A filed in connection with
the Companys 2017 Annual Meeting of Shareowners.
Management
Development and Compensation Committee |
|
|
|
|
|
|
J. Steven Whisler,
Chairman |
David J.
Bronczek |
Ilene S.
Gordon |
|
|
|
|
|
|
John L. Townsend, III |
William G. Walter |
|
|
|
|
|
Executive Summary |
|
|
2016
Financial Highlights |
Despite a tough global environment, International Paper delivered another year of solid performance in
2016:
|
|
We continued to generate strong cash
flow and for the 7th
consecutive year an adjusted return
on invested capital in excess of our cost of capital. |
|
|
|
|
|
We acquired Weyerhaeusers pulp
business and converted a machine at our Riegelwood, NC mill to produce
fluff pulp. As a result, through our new Global Cellulose Fibers business,
we are the worlds premier manufacturer
of fluff and specialty pulp. In
addition, we acquired a mill in Madrid, Spain, which will produce
containerboard to support our corrugated packaging business in EMEA.
|
|
|
|
|
|
We increased our dividend by 5% in
2016, our fifth-consecutive year of
dividend increases. |
|
|
|
|
|
We continue to repay debt and make
strategic investments in long-term projects as part of our global strategy
to position the Company for future
profitable growth. |
|
|
|
|
|
As a reflection of our success and
potential, our TSR was 47% in 2016, 22% over the last three years, and
115% over the last five
years. |
46 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion
& Analysis (CD&A) Executive
Summary |
|
|
2016
Executive Compensation Highlights |
The following section briefly highlights
the MDCCs key compensation decisions for 2016 as well as our performance
achievement attained in our incentive compensation plans. These decisions were
made with the advice of the MDCCs independent consultant, Frederic W. Cook
& Co. (see section titled Role of Compensation Consultant), and this
information is discussed in greater detail elsewhere in this
CD&A.
Key
Highlights for 2016
○ |
We
have exceptionally strong pay-for
performance correlation (see Section
2). |
○ |
We
have robust compensation
governance (see Section
6). |
○ |
Our LTI Plan is based solely on
Company Performance achievement for ALL
participants no individual performance
modifiers are applied. |
○ |
For
2016, all members of the SLT received
the same performance achievement in our STI plan based solely on Company performance at 72% of their targeted award.
|
○ |
In
our 2016 STI plan, as an example of continually strengthening the link
between pay and performance, we modified
the performance metrics and their respective weightings as shown below. We shifted to Adjusted EBITDA and
increased its weighting in the STI Plan for the following
reasons: |
|
Achieving earnings growth is
important to the Companys ongoing success and attractiveness to
investors, and Adjusted EBITDA is widely used by our investors to measure
the Companys performance. |
|
Shifting the STI metric to Adjusted
EBITDA and increasing the weighting to 70% incentivizes the
approximately 3,700 employees who
participate in the STI Plan to enhance our focus on the things we can
control that positively impact our earnings growth and operating
profitability. |
|
Adjusted EBITDA is the single
largest driver of Cash Flow from Operations and thus serves as a proxy for
cash flow, enabling us to continue to maintain our focus on strong cash
generation. |
Short-Term
Incentive Metrics and
Weightings |
PRIOR DESIGN |
2016 CHANGES |
|
|
|
|
www.ipannualmeeting.com |
47 |
Table of Contents
Compensation Discussion & Analysis
(CD&A) Executive Summary |
2016 Total Target Compensation
Mix
CEO |
|
|
|
|
LTI opportunity based solely on
Company performance |
|
|
|
12% Base Salary |
18% STI
Target |
70% LTI
Target |
|
|
|
|
88% Pay at
Risk |
|
Other NEOs |
|
|
|
|
LTI opportunity based solely
on Company performance |
|
|
|
23% Base Salary |
19% STI
Target |
58% LTI
Target |
|
|
|
|
77% Pay at
Risk |
|
2016 Base Salary
Changes
No SLT member received a merit-based
increase in 2016, reflecting market competitiveness and in light of the
Companys financial performance in 2015.
2016 STI Performance
Achievement
|
|
Description |
|
Weight |
|
Target |
|
Actual |
|
Target
Award Earned |
|
Weighted Target Award
Earned |
Absolute Adjusted EBITDA |
|
To
achieve EBITDA of $4.0B |
|
70% |
|
$4.0B |
|
$3.495B |
|
74.8% |
|
52.3% |
Absolute Adjusted ROIC |
|
To
achieve ROIC of 12.0% |
|
30% |
|
12.0% |
|
9.93% |
|
65.5% |
|
19.7% |
Overall Corporate Weighting: |
|
|
|
100.0% |
|
|
|
|
|
|
|
72.0% |
2014-2016 LTI Performance
Achievement
|
|
|
|
|
|
Non-Officers |
|
Officers |
Performance Metric |
|
Achievement Rank Against
Peers |
|
%Target
Award Earned |
|
Metric Weight |
|
Weighted Target Award
Earned |
|
Metric Weight |
|
Weighted Target Award
Earned |
ROIC to Peers |
|
3
of 11 |
|
145% |
|
75.0% |
|
108.8% |
|
50.0% |
|
72.5% |
TSR to Peers |
|
10
of 17 |
|
75% |
|
25.0% |
|
18.7% |
|
50.0% |
|
37.5% |
2014 LTI Grant Performance Achievement |
|
|
|
|
|
|
|
127.5% |
|
|
|
110.0% |
Other NEO Compensation
Decisions
Carol L.
Roberts
○ |
In
October 2016, the MDCC approved the acceleration of vesting of 20,000
restricted shares of Company stock held that were originally scheduled to
vest on August 1, 2018, in recognition of Ms. Roberts long and dedicated
service to the Company and her
retirement. |
Tommy S.
Joseph
○ |
Mr.
Joseph received an RSA grant of 20,000 shares, effective November 1, 2016,
and vesting on October 31, 2020, for the purpose of retention to ensure
leadership of critical operational initiatives over the next four
years. |
48 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion
& Analysis (CD&A) Executive
Summary |
|
|
Responsiveness to Shareowners Say-on-Pay
Consideration |
|
In May 2016, our shareowners again
approved our Say-on-Pay proposal
with support from more than 96 percent
of votes cast.
The MDCC interpreted this
consistently strong level of support as continued affirmation of the
current design and direction of our executive compensation program. While
the program was approved by nearly all shares voted in each of the past
five years, the MDCC and management remain firmly committed to continuing
to strengthen our pay-for-performance correlation, as well as the overall
architecture of our executive compensation program.
The MDCC and management will
continue to use the annual Say-on-Pay vote as a guidepost for shareowner
sentiment and will continue to engage with our shareowners and respond to
their feedback. |
|
|
Reduced Change-in-Control
Benefits. Change-in-control severance
benefits reduced from three to two times target cash compensation for
future non-CEO executive officers
beginning in 2012. |
|
|
Double Trigger in the Event of a
Change in Control. Effective 2013, equity
incentive awards have a double trigger assuming replacement awards are
provided; that is, they will not vest in the event of a change in control
unless also accompanied by a qualifying termination of
employment. |
|
|
Robust Equity Ownership and
Retention Requirements. All officers are
required to own IP shares equal to a multiple of their base salary and to
retain 50% of equity payouts until the ownership requirement is
met. |
|
|
Clawback of Incentive Compensation
if Restatement. Incentive compensation
awards are subject to clawback in specified
circumstances. |
|
|
Limit on Severance for Executive
Officers. Aggregate severance payments to
an executive officer may not exceed two times the officers base salary
plus target cash bonus in the absence of a change in control or shareowner
preapproval. |
|
|
Non-Competition and Non-Solicitation
Agreements. We require our leaders to enter
into Non-Competition Agreements and Non-Solicitation Agreements, the
violation of which may result in clawback or forfeiture of incentive
compensation awards. |
|
|
Personal Use of Company Aircraft by
CEO is Subject to Cap. While our CEO is
authorized to use the Company aircraft for personal travel, he is required
to reimburse the Company for the incremental cost of such use above
$75,000. |
|
|
|
|
|
|
|
|
No Employment Agreements for
Executive Officers. Our executive officers
are at-will employees with no employment contracts. |
|
|
No Guaranteed Annual Salary
Increases or Bonuses. For the named
executives, annual salary increases are based on evaluations of individual
performance and market competitiveness, while their annual cash incentives
are tied to corporate and individual performance. |
|
|
No Tax Gross Ups. No tax gross ups are provided. |
|
|
No Repricing or Exchange of
Underwater Stock Options. Our equity
incentive plan does not permit repricing or exchange of underwater stock
options or stock appreciation rights without shareowner
approval. |
|
|
No Plans that Encourage Excessive
Risk-Taking. Based on the annual review, it
was determined that the companys compensation practices are appropriately
structured and avoid incenting employees to engage in unnecessary and
excessive risk-taking. |
|
|
No Hedging or Pledging of
International Paper Securities. Officers,
directors, and employees are strictly prohibited from hedging IP
securities. Directors, executive officers and other senior executives are
strictly prohibited from pledging IP securities as collateral or holding
securities in a margin account. |
|
|
No Inclusion of Equity Awards in
Pension Calculations. |
|
|
No Excessive Benefits. We offer only limited executive benefits as
required to remain competitive and to attract and retain highly
talented executives. |
www.ipannualmeeting.com |
49 |
Table of Contents
Compensation Discussion
& Analysis (CD&A) How We Design Our Executive Compensation
Program to Pay for Performance |
|
How
We Design Our Executive Compensation Program to Pay for
Performance |
|
|
Executive Compensation
Philosophy |
Our executive compensation program
continues to be designed to attract, retain and motivate our SLT to deliver
Company performance that builds long-term shareowner value. To achieve our
objectives, our program is designed around two guiding principles:
|
Pay for
Performance |
|
We reward
achievement of specific goals that improve our financial performance and
drive strategic initiatives to ensure sustainable long-term
profitability. |
|
|
|
|
|
Pay at
Risk |
|
We believe a
significant portion of an executives compensation should be specifically
tied to performanceboth Company performance and individual
performance. |
|
|
Pay
for Performance CCG Analysis |
The MDCC reviews our CEOs pay in relation
to the Companys performance to ensure alignment. We conduct this review against
our Compensation Comparator Group (CCG) because it is the same group against
which we benchmark our program design and targeted pay amounts.
Historical CEO
Pay-for-Performance Alignment
The following table demonstrates the close
correlation between our CEOs realizable pay and the Companys performance over
the past five three-year performance periods as compared to our CCG.
Three-Year Performance Period |
|
Our CEOs Realizable Pay Rank (percentile of
CCG) |
|
Our Companys TSR Rank (percentile of
CCG) |
2013 - 2015 |
|
20th |
|
20th |
2012 - 2014 |
|
65th |
|
60th |
2011 - 2013 |
|
50th |
|
80th |
2010 - 2012 |
|
85th |
|
80th |
2009 - 2011 |
|
60th |
|
100th |
50 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion
& Analysis (CD&A) How We Design Our Executive Compensation
Program to Pay for Performance |
Current CEO
Pay-for-Performance Alignment
Each point on the graph below represents a
CCG CEOs three-year realizable compensation (the cash
compensation actually paid plus the economic value of equity-based grants)
relative to his or her companys three-year performance in TSR over the period
2013-2015.
Compared to our CCG, our CEO earned
compensation at the 20th percentile while the Company delivered TSR at the 20th
percentile of our peer group. The MDCC
continues to believe this graph clearly illustrates a strong pay-for-performance
correlation, especially when compared year over year (as shown in the table on the previous page).
CEO Realizable Pay vs. TSR
Performance (2013-2015) |
○ |
This graph is based on the 2016
proxy filings of our CCG. |
○ |
Total Shareholder Return reflects
share price appreciation, adjusted for dividends and stock
splits. |
○ |
Realizable pay consists
of: |
1. |
actual base
salary paid over the three-year period, |
2. |
actual STI
payouts over the three-year period, and |
3. |
LTI
determined as shown below, with equity awards based on December 31, 2015
market value for each company: |
|
a. |
in-the-money
value of stock options granted over the three-year period; |
|
b. |
service-based restricted stock awards granted over the three-year
period; |
|
c. |
performance
share awards: |
|
|
i. |
actual shares earned
using actual performance achievement for grant cycles beginning and ending
between 2013 and 2015; and |
|
|
ii. |
target shares granted
over the three-year period assuming target performance, for performance
cycles that have not yet been completed; and |
|
d. |
performance
cash awards: |
|
|
i. |
actual cash paid using
actual performance achievement for grant cycles beginning and ending
between 2013 and 2015; and |
|
|
ii. |
target cash amounts
provided over the three-year period assuming target performance, for
performance cycles that have not yet been
completed. |
○ |
The graph reflects CEO compensation
for each company regardless of who actually served in the CEO role. This
allows us to compare CEO compensation for a full three-year period for
each company and focuses on the CEO position rather than specific
individuals. |
○ |
For 2015, the graph reflects
compensation for our current CEO Mark S. Sutton, who was appointed CEO
effective November 1, 2014. For 2013 and 2014, however, the graph reflects
compensation for our former CEO John V. Faraci, who served as our CEO
during those two years. Mr. Faraci retired as CEO effective October 31,
2014, but remained an executive officer and an employee until February 28,
2015. |
www.ipannualmeeting.com |
51 |
Table of Contents
Compensation Discussion
& Analysis (CD&A) How We Design Our Executive Compensation
Program to Pay for Performance |
|
|
Pay
at Risk 2016 Total Target Compensation
Mix |
The chart in Section 1 under the heading
Total Target Compensation Mix demonstrates our commitment to pay at risk. For
2016, 88% of our CEOs target compensation and, on average, 77% of our other
NEOs target compensation was based on Company performance and was therefore at risk. Importantly, base salary comprises a
relatively small portion of our NEOs compensation and is the only component of
their Total Direct Compensation (defined below and known as TDC) that is not
tied to Company performance.
We use our CCG of companies when making
compensation decisions to assure our pay remains competitive. We strive for
consistency by retaining as many of the same companies in this group as
appropriate from year to year. Changes are made to assure sufficient or
appropriate data on which to base compensation decisions. Our CCG consists of 20
publicly traded companies selected by the MDCC from the Willis Towers Watson
General Industry Executive Compensation Survey database.
|
How Our CCG Companies Were
Selected |
|
|
How We Use the
CCG |
|
|
|
|
|
|
|
|
|
○As an input for developing base salary
ranges, short- and long-term incentive targets;
○To assess competitiveness of total direct
compensation awarded to the SLT;
○To benchmark equity vehicle and incentive
plan metrics;
○To benchmark officer stock ownership
guidelines; and
○To evaluate share utilization, overhang
levels and annual value-based run rate |
|
○Competition for executive
talent;
○Comparable annual revenue, with market
capitalization used as a modifier (as appropriate);
○Global geographic presence;
○Complexity of business operations;
and
○Available compensation
data |
|
|
|
|
The MDCC targets TDC, in aggregate, at the
median level (50th percentile) of our CCG. In our 2015 review, our SLT had
target TDC amounts that were 86% of the CCG survey median. Cooks analysis
indicated that the CEO and recently retired CFO had target TDC levels that were
72% and 93% of the CCG survey median, respectively.
The MDCC, in conjunction with its
consultant, uses this analysis as a frame of reference when setting target
compensation. Actual compensation paid to our SLT will vary from benchmark
medians based on factors such as:
○ |
Position scope and
responsibilities; |
○ |
Individual performance;
and |
○ |
Internal
comparisons. |
2016 Compensation Comparator Group
("CCG")
3M Company |
Kimberly-Clark Corp. |
Arconic Inc. (former Alcoa Inc.) |
L-3 Communications Holdings |
E.I. DuPont de Nemours |
Lockheed Martin Corp. |
Eaton Corp. |
Northrop Grumman Corp. |
Emerson Electric Company |
Parker-Hannifin Corp. |
FedEx Corp. |
PPG Industries, Inc. |
Goodyear Tire & Rubber |
Schlumberger Limited |
Company |
United States Steel Corp. |
Hess Corp. |
Whirlpool Corp. |
Honeywell International Inc. |
Xerox Corp. |
Johnson Controls, Inc. |
|
International Paper vs. CCG
Revenues1
IPs Targeted TDC = CCG Median (50th percentile)
(1) |
Revenues reported 12 months as of August 31, 2015, used in late
2015 to benchmark pay for 2016
|
52 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion
& Analysis (CD&A) How We Make Compensation
Decisions |
|
How
We Make Compensation Decisions |
|
|
|
|
|
|
|
|
|
|
The MDCC is responsible for the
Companys executive compensation program design and decision-making
process for SLT compensation. The MDCC approves:
○Our compensation benchmarking process, as well as the
companies used for comparison (our CCG) to ensure reasonableness and
stability;
○Overall effectiveness of our executive compensation
program to ensure the design achieves our objectives;
○Performance metrics and their respective weightings, as
well as the companies against which we compare our relative
performance;
○Non-CEO SLT compensation, based on recommendations from
the CEO; and
○An annual evaluation of risk as it pertains to our
Company-wide compensation plans and programs.
In addition, in a process directed
by the Presiding Director in Executive Session, the MDCC:
○Approves the CEOs annual objectives and semi-annually
reviews his performance achievement; and
○Recommends the CEOs base salary increase and annual
incentive award payment to the Board based on its assessment of the CEOs
performance achievement, as well as the CEO's long-term incentive
compensation.
All elements of CEO pay are
approved by the independent directors of the
Board.
|
|
The CEO makes recommendations
concerning the strategic direction of our executive compensation program
to the MDCC. Our Senior Vice President, Human Resources, is responsible
for making recommendations to the MDCC concerning program design and
administration, and our General Counsel provides legal advice to the MDCC
concerning disclosure obligations, governance and its oversight
responsibilities.
The CEO reviews the performance of
SLT members against their annual, individual, pre-established performance
objectives and discusses his assessment with the MDCC. In consultation
with our Senior Vice President, Human Resources, the CEO makes individual
recommendations on base salary and annual incentive award payment. The
MDCC reviews these recommendations, and then considering input from its
compensation consultant, discusses, modifies and approves, as appropriate,
each SLT members compensation. The CEO does not participate in any MDCC
or Board deliberations that involve his own compensation
matters. |
|
The MDCC continued to engage Cook in
2016 to serve as its independent, external compensation consultant. The
MDCC relies on Cook to advise on its decision-making process and has sole
authority for retaining and terminating the relationship, as well as
approving the terms of engagement, including fees. Cook works exclusively
for the MDCC and provides no services to the Company. Accordingly, the
MDCC has determined the firm to be independent from the Company.
Separately, Cook has attested in writing as to its independence from the
Company.
The Company retains Exequity and
Willis Towers Watson as its primary compensation consultants to advise on
program design, provide and analyze benchmarking data, apprise management
of evolving practices and trends, and perform other consulting services as
needed. From time to time, the Company engages other consultants for
special projects as needed.
Boards
Consultant: Frederic W. Cook & Co.,
Inc.
Managements
Consultants: Exequity
LLP Willis Towers Watson
PLC |
www.ipannualmeeting.com |
53 |
Table of Contents
Compensation Discussion
& Analysis (CD&A) Elements of Our Executive Compensation
Program |
|
Elements of Our Executive Compensation
Program |
The primary elements of our executive
compensation program are base salary, short-term (annual) incentive compensation
under our Management Incentive Plan (MIP), long-term incentive compensation
under our Performance Share Plan (PSP), ad hoc equity awards, and benefits.
Total Direct Compensation (TDC) is the combination of fixed and variable
compensation. Other compensation elements, such as our limited executive
benefits, are not part of TDC, but the MDCC also reviews these
elements.
Elements of Executive
Compensation |
|
Base salary is the only fixed element of
TDC. The MDCC considers base salary merit increases annually based on individual
performance, while taking into account whether market-based adjustments are
necessary. Annual merit increases for most employees across the globe, including
the NEOs, are effective March 1. The following table shows the annual base salary in effect during 2016 and currently for
each NEO. No SLT member received a merit increase in 2016, reflecting market
competitiveness, and in light of the Companys financial performance in 2015.
Mr. Sutton received a market-based salary adjustment in 2017. No other NEO has
received a base salary adjustment in 2017.
Name |
|
Annual Base Salary (Jan. - Feb.) |
|
March 2016 Increase |
|
Annual Base Salary (December 31, 2016) |
|
March 2017 Increase |
|
|
Current Annual Base Salary |
|
Mr. Sutton (CEO) |
|
$ |
1,200,000 |
|
0.0% |
|
$ |
1,200,000 |
|
12.5%* |
|
|
$ |
1,350,000* |
|
Ms. Roberts (Retired CFO) |
|
$ |
750,000 |
|
0.0% |
|
$ |
750,000 |
|
0.0% |
|
|
|
n/a |
|
Mr. Nicholls |
|
$ |
710,000 |
|
0.0% |
|
$ |
710,000 |
|
0.0% |
|
|
$ |
710,000 |
|
Mr. Joseph |
|
$ |
600,000 |
|
0.0% |
|
$ |
600,000 |
|
0.0% |
|
|
$ |
600,000 |
|
Ms. Ryan |
|
$ |
602,000 |
|
0.0% |
|
$ |
602,000 |
|
0.0% |
|
|
$ |
602,000 |
|
* |
Positions CEOs base salary slightly
above 25th percentile of the CCG |
|
|
Variable Compensation: Overview and How We Assess
Performance |
We do not have guaranteed bonuses.
Variable compensation is pay at risk and it is tied directly to performance.
Company performance is based on the achievement of specific financial goals described below. Individual performance is
rewarded upon achievement of specific pre-established objectives or
priorities.
Element |
|
IP
Incentive Plan / Program |
|
2016 Performance Metrics |
|
Individual Performance Modifier |
Short-term
Incentive Plan |
|
Management
Incentive Plan (MIP) |
|
- Absolute
Adjusted EBITDA |
|
Yes |
|
|
|
|
- Absolute Adjusted ROIC |
|
|
Long-term
Incentive Plan |
|
Performance
Share Plan (PSP) |
|
- Adjusted ROIC
Relative to Peers |
|
No |
|
|
|
|
- TSR Relative to Peers |
|
|
Other equity awards, including awards of
stock and service-based restricted stock/units, may be granted from time to time
under limited circumstances to address specific recruitment, retention or other
recognition efforts. All SLT compensation, including any such equity awards,
must be approved by the MDCC.
54 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion
& Analysis (CD&A) Elements of Our Executive Compensation
Program |
|
|
How
and Why We Chose Our Performance
Metrics |
Our incentive compensation plan design is
based upon achievement of pre-established performance objectives that will drive
improved financial performance of the Company. Each year the MDCC assesses the
appropriateness of the performance metrics, and
periodically makes adjustments based on the financial objectives most critical
to the Companys success.
We explain below why the MDCC chose the
performance metrics we used for our 2016 incentive compensation
plans.
Adjusted EBITDA |
|
Adjusted ROIC |
|
TSR |
Adjusted
EBITDA1 is commonly used as a proxy for a companys operating
profitability. Adjusted EBITDA measures how much operating profit the
Company makes with its present assets and operations. Driving earnings
growth is currently the best way to drive shareowner value. Within the
Company, we set goals for, and periodically track and discuss, Adjusted
EBITDA performance at the business level to establish a readily
transparent and ongoing line of sight to our performance. Adjusted EBITDA
also serves as an approximation for cash flow, as it is the single largest
driver of Cash Flow from Operations. As a result, Adjusted EBITDA is a
major indicator of the on-going operational strength of the
Company. |
|
Adjusted Return on Invested Capital
(Adjusted ROIC)2
measures a companys returns and can be
compared to the cost of capital. Earning an Adjusted ROIC target that is
equal to or greater than our cost of capital is necessary for the Company
to create long-term value for our shareowners. |
|
Total Shareholder Return
(TSR)3 reflects share price appreciation and dividends paid.
TSR can be used to compare the performance of companies stocks over time,
and we measure our relative TSR position over a three-year period against
our TSR Peer Group. This is a key performance measure that aligns our
long-term incentive pay with the value we create for our
shareowners. |
The footnotes below explain the
details of our performance metric calculations. |
|
|
¹ |
For purposes of the incentive
compensation plans discussed here, Adjusted EBITDA is defined as Earnings
from Continuing Operations Before Interest, Income Taxes and Equity
Earnings and before the impact of special items and non-operating pension
expense plus Depreciation, Amortization and Cost of Timber
Harvested. |
|
|
² |
For purposes of the incentive
compensation plans discussed here, Adjusted ROIC is calculated as
operating earnings before interest (including earnings from continuing and
discontinued operations up through the date of sale), and before the
impact of special items and non-operating pension expense, divided by
average invested capital. Invested capital is total equity (adjusted to
remove pension-related amounts, including prior service costs and net
actuarial gains/losses, that are included in Accumulated Other
Comprehensive Income (Loss)) plus interest bearing liabilities. We
calculate International Papers Adjusted ROIC and our peer companies
Adjusted ROIC using the same methodology. |
|
|
³ |
For purposes of the incentive
compensation plans discussed here, TSR is calculated as the change in the
Companys common stock price during the performance period plus the impact
of any dividends paid and reinvested in Company stock (including the
dividends paid on stock obtained by reinvesting dividends) during the
performance period. For all companies in our TSR Peer Group, both the
beginning and ending common stock prices used are the average closing
price of the 20 trading days immediately preceding the beginning and
ending of the performance period. We calculate International Papers TSR
and our peer companies TSR using the same
methodology. |
www.ipannualmeeting.com |
55 |
Table of Contents
Compensation Discussion
& Analysis (CD&A) Elements of Our Executive Compensation
Program |
|
|
Why
We Use Different Peer Groups |
In the chart below, we explain why we use
different peer groups for compensation benchmarking and measuring Company
performance in our incentive plans.
Peer Group |
|
Composition |
|
Rationale |
CCG |
|
Includes 20 companies from multiple
industries (Companies range in size
from approximately 0.5 to 2.0 times IPs revenue, which puts us in the
mid-range) |
|
These are the companies against
which we are likely to compete for executive talent. They are of
comparable size and scope of operations to the Company, which is critical
for benchmarking target TDC amounts. |
ROIC Peers |
|
Includes global industry
competitors |
|
These are the companies against
which we compete for customer business. |
TSR Peers |
|
Broader cross-section of basic
materials companies engaged in global manufacturing and capital-intensive
businesses, including two indices |
|
These are the companies against
which we compete for investment dollars; and we include two indices: the
S&P 100 and the S&P Basic Materials Index, which are commonly used
for comparative purposes when analyzing
investments. |
2016 ADJUSTED ROIC PEER
GROUP |
|
2016 TSR PEER
GROUP |
|
|
|
|
|
|
|
Domtar Inc. Fibria Celulose S.A. Graphic Packaging Corp. Klabin S.A. Metsa Board (formerly M-real Corp.) Mondi Group Packaging
Corporation of America Smurfit Kappa Group Stora Enso
Corp. UPM-Kymmene Corp. WestRock Company* |
|
Arconic Inc. (former Alcoa Inc.)
Domtar Inc. Dow Chemical Company
E.I. DuPont de Nemours & Co. Fibria Celulose
S.A. Graphic Packaging Corp. Klabin
S.A. Mondi Group Packaging Corporation of
America PPG Industries S&P
100 Index |
|
S&P Basic Materials Index
Sappi Limited Smurfit Kappa Group Stora Enso
Corp. United States Steel Corp.
UPM-Kymmene Corp. WestRock
Company* |
*MeadWestvaco Corp. and Rock-Tenn Company
merged in July 2015, forming WestRock Company.
56 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion
& Analysis (CD&A) Elements of Our Executive Compensation
Program |
|
|
Management Incentive Plan
(MIP) |
Overview
The MIP is our annual, cash-based
incentive compensation plan designed to motivate employees to achieve our most
critical short-term financial goals. In 2016, the MIP award pool, described
below, was distributed among approximately 3,700 employees globally.
2016 Company Performance Metrics and Performance
Achievement
The Company used Absolute Adjusted EBITDA
and Absolute Adjusted ROIC in determining 2016 MIP awards. The chart below
describes the specific design elements.
2016 MIP Performance Metrics |
|
Metric Weight |
|
Threshold Performance Payout
50% |
|
Target Performance Payout 100% |
|
Maximum Performance Payout
200% |
Absolute Adjusted
EBITDA |
|
70% |
|
Achieve $3.0B |
|
Achieve $4.0B |
|
Achieve $4.8B |
Absolute Adjusted
ROIC |
|
30% |
|
9.0% ROIC |
|
12.0% ROIC |
|
15.6% ROIC |
|
|
|
|
|
|
|
|
|
The MDCC believes our MIP
performance targets should motivate management to achieve results that
will drive superior investor returns. |
|
|
|
|
|
|
|
|
|
2016 MIP Performance Metrics |
|
Metric Weight |
|
Actual Performance Attainment |
|
Award Earned (% of Target) |
|
Weighted Award Earned (% of Target) |
Absolute Adjusted
EBITDA |
|
70% |
|
$3.495B |
|
74.8% |
|
52.3% |
Absolute Adjusted ROIC |
|
30% |
|
9.93% ROIC |
|
65.5% |
|
19.7% |
Total Company Payout
Percent |
|
|
|
|
|
|
|
72.0% |
2016 Award Pool Calculation
The Companys MIP target award pool is
equal to the sum of each MIP-eligible employees target award, based on his or
her position in the Company. To calculate the actual award pool, the target
award pool is multiplied by the Companys 2016 total payout percent of 72.0
percent, resulting in an award pool of approximately $76.0 million. This pool
was distributed among all employee participants.
The MDCC has the discretion to decrease
the award pool and has done so in the past. Additionally, consistent with our
philosophy that management should be rewarded for delivering outstanding
financial results, the MDCC has discretion to increase the award pool by up to
25%, provided the total final award pool does not exceed the maximum amount
permitted under the 2016 MIP, which is 200% of target. The MDCC did not exercise
its discretion to decrease or increase the 2016 MIP award pool.
Individual MIP Awards
For all MIP-eligible employees, their
respective awards are based on Company performance, but then modified by their
individual performance achievement as determined by their direct manager. The
CEO has discretion to recommend an award above the calculated award, called a
CEO Award, in recognition of exceptional individual performance beyond what is
captured in explicit individual objectives. Additionally, individual MIP awards
made to the SLT are capped at $10 million because they are made pursuant to a
plan approved by our shareowners for the purpose of qualifying as
performance-based compensation under Internal Revenue Code (IRC) Section
162(m).
As described in Section 5, for 2016,
each SLT members MIP award was not modified for individual performance and thus
was based solely on the Companys financial performance percentage of 72.0%.
www.ipannualmeeting.com |
57 |
Table of Contents
Compensation Discussion
& Analysis (CD&A) Elements of Our Executive Compensation
Program |
|
|
Performance Share Plan
(PSP) |
Overview
The PSP is our long-term, equity-based
incentive compensation plan designed to motivate employees to create long-term
shareowner value. PSP awards are granted in performance-based restricted stock
units annually to approximately 1,300 management-level employees globally based
on position in the Company and satisfactory performance evaluations. PSP awards
are earned over a three-year performance period based on the Companys
performance achievement in relative Adjusted ROIC and relative TSR. Awards are
paid in shares of Company stock. The number of shares ultimately paid may
include additional shares for prorated PSP grants due to promotion during the
grant year and includes the reinvestment of dividends earned on such shares
during the three-year performance period.
The MDCC does not have discretion to
increase the performance achievement, but may decrease it in the event the
Company experiences negative Adjusted ROIC or negative TSR. In addition, in
December 2014, the MDCC approved a cap on performance achievement in the event
of negative TSR. Beginning with the 2015 PSP grant, if the Companys TSR over
the three-year performance period is negative, performance achievement for the
TSR portion of the PSP award may not exceed 100%.
|
|
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2014 Grant |
|
3-year
Performance Measurement Period |
|
Paid |
|
|
|
|
|
|
|
2015 Grant |
|
|
|
|
3-year
Performance Measurement Period |
|
Paid |
|
|
|
|
2016 Grant |
|
|
|
|
|
|
|
3-year
Performance Measurement Period |
|
Paid |
|
Company Performance Metrics and
Objectives
In 2016, the PSP continued to focus on
relative performance in Adjusted ROIC and TSR as shown below. Our officers
awards are more heavily weighted to TSR, as compared to other employees awards.
We believe our most senior leaders, who more directly influence the strategic
direction of the Company, should have a greater percentage of their PSP awards
tied to TSR, as it better aligns their pay with the long-term interests of the
Company and our shareowners.
|
|
Metric Weight |
|
Performance Objective |
2016-2018 PSP Performance Metrics |
|
Officers |
|
Non-Officers |
|
Threshold Payout
25% |
|
Target Payout
100% |
|
Maximum Payout
200% |
Adjusted ROIC Relative to Peers |
|
50% |
|
75% |
|
Rank 9 of 12 |
|
Rank 6 of 12 |
|
Rank 1 of 12 |
TSR
Relative to Peers |
|
50% |
|
25% |
|
Rank 13 of 19 |
|
Rank 9 of 19 |
|
Rank 1 of 19 |
Payout Calculation
Based on market data, each PSP participant
has a target award based on his or her position. The actual number of shares
paid may be higher or lower than the target award, based solely on the Companys
performance achievement. Possible payouts under the 2016 PSP range from 0
percent to 200 percent of the target award.
2014 2016 PSP Payout
For the 2014 2016 PSP, the performance
achievement approved by the MDCC in February 2017 is shown in the chart below,
and the award paid to each of our NEOs is described in Section 5.
20142016 PSP Performance Metrics |
|
Metric Weight
for Officers |
|
2014-2016
Performance Results and Award
Earned |
Adjusted ROIC Relative to Peers |
|
50% |
|
Ranked 3 of 11A 72.5% |
TSR Relative to Peers |
|
50% |
|
Ranked 10 of 17A 37.5% |
Total 2014-2016 PSP Payout for Officers |
|
|
|
110.0% |
A |
MeadWestvaco Corp and Rock-Tenn
Company merged in July 2015, forming WestRock
Company. |
58 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion
& Analysis (CD&A) Elements of Our Executive Compensation
Program |
Other types of equity awards, such as
grants of stock, restricted stock awards (RSAs) or restricted stock units
(RSUs), are used for purposes of recruitment, retention or recognition.
Vesting provisions for these awards vary on a case-by-case basis, but are
forfeited if the participant voluntarily terminates employment prior to vesting.
Mr. Joseph received an RSA grant of 20,000 shares, effective November 1, 2016,
and vesting on October 31, 2020, for the
purpose of retention to ensure leadership of
critical operational initiatives over the next four years.
|
|
Retirement and Benefit
Plans |
Members of the SLT participate in the same
health, welfare and retirement programs available to most of the Companys
salaried U.S. employees. Additionally, our unfunded, non-qualified plans the
Pension Restoration Plan and the Deferred Compensation Savings Plan (DCSP) -
are available to eligible U.S. salaried employees, including the NEOs, whose
compensation is higher than the limits set by the Internal Revenue Service
(IRS) for tax-qualified plans. Absent these plans, these employees would not
achieve a retirement benefit commensurate with their earnings during the course
of their careers with us. Finally, some SLT members, including all five of our
NEOs, have been grandfathered participation in an additional SLT benefit the
Unfunded Supplemental Retirement Plan for Senior Managers
(SERP).
Benefit |
|
CEO |
|
SLT |
|
Other
Officers and Eligible Managers |
|
U.S.
Salaried Employees |
|
Health and Welfare
Plans |
|
|
X |
|
|
|
X |
|
|
X |
|
X |
|
Qualified Retirement (Pension)
Plan / RSAc(2) |
|
|
X |
|
|
|
X |
|
|
X |
|
X |
|
Pension Restoration Plan /
RSAc(2) |
|
|
X |
|
|
|
X |
|
|
X |
|
|
SERP(2) |
|
|
X |
(1) |
|
|
X |
(1) |
|
|
|
|
Qualified Salaried Savings Plan
- 401(k) |
|
|
X |
|
|
|
X |
|
|
X |
|
X |
|
DCSP(2) |
|
|
X |
|
|
|
X |
|
|
X |
|
|
|
(1) |
This executive benefit was closed
to new participants effective January 1, 2012. |
(2) |
See Section 7 for additional
information on this benefit. |
|
|
Change-in-Control
Agreements |
The Company will freeze
participation (including credited service and compensation) in the
Retirement Plan, Pension Restoration Plan and SERP for all service on or
after January 1, 2019.
For service after this date,
affected employees will receive Retirement Savings Account contributions
(RSAc). |
The Company has entered into
change-in-control agreements with certain executives, including the SLT, that
provide severance and other benefits, including acceleration of equity-award
vesting, in the event of a double trigger: both a change in control of the
Company and a qualifying termination of employment (i.e., involuntary termination without
cause or departure for good reason). We believe these potential benefits align
executive and shareowner interests by enabling leaders of the Company to focus
on the interests of shareowners and other constituents when considering a
potential change in control, without undue concern for their own financial and
employment security. No benefits are provided to our NEOs upon a change in
control alone without termination so long as the acquiring company provides
replacement awards as substitution for outstanding equity awards. Moreover, in
no event will the Company gross up or pay for excise taxes relating to any
change-incontrol benefits. For more detail on these change-in-control agreements
and benefits, see Section 7.
As disclosed in Section 7, we do not offer
perquisites to our SLT other than: the CEOs limited personal use of Company
aircraft; benefits granted to grandfathered participants in our Executive
Supplemental Life Insurance Program; and tax preparation related to board
service at the Companys Ilim joint venture in Russia at the Companys
request.
www.ipannualmeeting.com |
59 |
Table of Contents
Compensation Discussion
& Analysis (CD&A) NEO
Compensation |
|
NEO
Compensation |
The compensation benchmarking review used
to establish NEO target TDC amounts for 2016 indicated that our CEOs target TDC
was 72% of the market median and the target TDC amounts of all other NEOs, in
aggregate, were 96% of the market median.
We do not, nor do we believe it is
necessary to, have a policy that dictates a specific ratio of CEO compensation
to other NEOs or the SLT. Generally, we base our compensation decisions on
principles of internal equity and external market competitiveness. The
difference that exists between our CEOs compensation and our other NEOs is
based on the complexity of the CEOs leadership responsibilities for the global
enterprise.
|
|
2016
Actual Realized Compensation and Comparison to 2016 Targeted
Compensation |
In this section, we describe the 2016
compensation actually realized by each NEO, as well as the rationale for each
such compensation element and amount. We also illustrate 2016 targeted versus
actual compensation in the individual graphs for each NEO.
The Target column includes:
|
(i) |
2016 actual base salary
paid; |
|
|
|
(ii) |
2016 target MIP; |
|
|
|
(iii) |
the target value of the 2014-2016
PSP granted in 2014; and |
|
|
|
(iv) |
the target value of the RSA
grants that vested during 2016. |
The Actual column represents what we
believe is the appropriate way to illustrate 2016 actual pay earned, and
includes:
|
(i) |
2016 actual base salary
paid; |
|
|
|
(ii) |
2016 MIP paid in February
2017; |
|
|
|
(iii) |
the actual value of the 2014-2016
PSP paid (including reinvested dividends) in February 2017;
and |
|
|
|
(iv) |
the actual value of the RSA
grants that vested (including reinvested dividends) during
2016. |
In comparing the following charts to the
Summary Compensation Table, you will see the value shown for the equity awards
differs. Equity awards granted in 2016 are shown in the Summary Compensation Table, while
the following charts show PSP awards valued and paid in 2017 for performance periods
ending in 2016 (and RSA grants that vested during 2016). The equity awards
for the 2014-2016 PSP in the following charts were valued based on the closing
price ($52.89) of the Companys common stock on February 10, 2017, which is the
trading day immediately preceding the date the MDCC approved payout of the
2014-2016 PSP award.
60 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of
Contents
Compensation Discussion
& Analysis (CD&A) NEO
Compensation |
Mark S.
Sutton Chairman of the
Board and Chief Executive Officer |
|
|
Mark Sutton has over 32 years of
service with the Company and was appointed CEO effective November 2014 and
Chairman of the Board effective January 2015. Mr. Sutton served as
President and Chief Operating Officer from June through October 2014,
prior to which he was Senior Vice President, Industrial Packaging, a role
he assumed in November 2011. Prior to that role, he led our Printing and
Communication Papers business since January 2010. He previously served as
Senior Vice President - Supply Chain from March 2008 through 2009, Vice
President - Supply Chain from June 2007 through February 2008, and Vice
President - Strategic Planning from January 2005 through May
2007. |
2016 Realized Compensation |
|
|
Element of Compensation |
|
Compensation Amount |
|
Rationale |
2016 Base Salary |
|
$1,200,000
(no base salary increase in
2016) |
|
No SLT member received a merit
increase in 2016, reflecting market competitiveness and in light of the
Companys financial performance in 2015.
|
2016 MIP Award |
|
$1,296,000 |
|
As with each member of the SLT, Mr.
Suttons MIP award was not modified for individual performance and thus
was based solely on the Companys financial performance achievement
percentage of 72.0%. |
2014 - 2016 PSP Payout |
|
138,817 shares, including reinvested
dividends and anti-dilution adjustment (related to xpedx/Unisource
business combination)
(valued at
$7,342,031) |
|
PSP payout of 110% is based solely
on the Companys performance achievement in relative Adjusted ROIC and
relative TSR described in Section 4. |
The chart below compares Mr. Suttons 2016
actual compensation paid against targeted compensation amounts.
Target LTI is based on 115,952 target shares valued at $48.62
using the 20-day avg stock price as of 12/31/2013
Actual LTI is based on 138,817 shares, which includes the original
target shares plus reinvested dividends, multiplied by 110.0% performance
achievement and valued at $52.89, IPs closing share price on
2/10/2017 |
Note: |
Mr. Suttons target and actual
compensation for 2016 (illustrated above) reflects the target and actual
values of an equity-based LTI (PSP) award granted in 2014, including a
prorated grant reflecting his promotion to CEO for the last two years of
the three-year performance period. |
www.ipannualmeeting.com |
61 |
Table of Contents
Compensation Discussion & Analysis
(CD&A) NEO Compensation |
Carol L.
Roberts Former Senior
Vice President and Chief Financial Officer |
|
|
Carol Roberts retired effective
March 31, 2017 (and as CFO in February 2017) after over 35 years of
service with the Company. She had served as our CFO since November 2011.
Prior to this, she led our Industrial Packaging Group (IPG) business,
which represents a significant part of the Companys overall business. Ms.
Roberts began her career with International Paper in 1981 as an Associate
Engineer at a mill in Mobile, Alabama. Ms. Roberts was named Vice
President of our Industrial Packaging business in 2000 and was named
Senior Vice President in late 2005. |
2016 Realized Compensation |
|
|
Element of Compensation |
|
Compensation Amount |
|
Rationale |
2016 Base Salary |
|
$750,000
(no base salary increase in
2016) |
|
No SLT member received a merit
increase in 2016, reflecting market competitiveness and in light of the
Companys financial performance in 2015. |
2016 MIP Award |
|
$540,000 |
|
As with each member of the SLT, Ms.
Roberts MIP award was not modified for individual performance and thus
was based solely on the Companys financial performance achievement
percentage of 72.0%. |
2014 - 2016 PSP Payout |
|
50,773 shares, including reinvested
dividends and anti-dilution adjustment (related to xpedx/Unisource
business combination)
(valued at
$2,685,384) |
|
PSP payout of 110% is based solely
on the Companys performance achievement in relative Adjusted ROIC and
relative TSR described in Section 4. |
2014 Restricted Stock
Award* |
|
21,695 shares vested on November 1,
2016, representing 100% of 2014 grant and including reinvested
dividends
(valued at
$976,926) |
|
This RSA grant of 20,000 shares was
made August 1, 2014, for recognition and retention purposes. The shares
were originally scheduled to vest on August 1, 2018, but in October 2016,
the MDCC approved the acceleration of the vesting in light of Ms. Roberts
announced retirement and in recognition of her long and dedicated service
to the Company. |
The chart below compares Ms. Roberts 2016
actual compensation paid against targeted compensation amounts.
Target LTI is based on 41,574 target shares valued at $48.62 using
the 20-day avg stock price as of 12/31/2013
Actual LTI is based on 50,773 shares, which includes the original
target shares plus reinvested dividends, multiplied by 110.0% performance
achievement and valued at $52.89, IPs closing share price on
2/10/2017 |
62 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion
& Analysis (CD&A) NEO
Compensation |
Timothy S.
Nicholls Senior Vice
President - Industrial Packaging the Americas |
|
|
Tim Nicholls has over 25 years of
service with the Company. In November 2014, Mr. Nicholls assumed
responsibility for our Industrial Packaging Group (IPG) business. He
served as our CFO from December 2007 through November 2011, when he
assumed responsibility of our Printing and Communication Papers and Latin
American businesses, a role he held for three years. Mr. Nicholls
previously served as Vice President and Executive Project Leader of IP
Europe during 2007, and Vice President and CFO of IP Europe from 2005 to
2007. He was also President of Weldwood (formerly a wholly owned
subsidiary of International Paper headquartered in Vancouver, Canada) from
2002 to 2005. |
2016 Realized Compensation |
|
|
Element of Compensation |
|
Compensation Amount |
|
Rationale |
2016 Base Salary |
|
$710,000
(no base salary increase in
2016) |
|
No SLT member received a merit
increase in 2016, reflecting market competitiveness and in light of the
Companys financial performance in 2015. |
2016 MIP Award |
|
$460,800 |
|
As with each member of the SLT, Mr.
Nicholls MIP award was not modified for individual performance and thus
was based solely on the Companys financial performance achievement
percentage of 72.0%. |
2014 - 2016 PSP Payout |
|
50,773 shares, including reinvested
dividends and anti-dilution adjustment (related to xpedx/Unisource
business combination)
(valued at
$2,685,384) |
|
PSP payout of 110% is based solely
on the Companys performance achievement in relative Adjusted ROIC and
relative TSR described in Section 4. |
The chart below compares Mr. Nicholls
2016 actual compensation paid against targeted compensation amounts.
Target LTI is based on 41,574 target shares valued at $48.62 using
the 20-day avg stock price as of 12/31/2013
Actual LTI is based on 50,773 shares, which includes the
original target shares plus reinvested dividends, multiplied by 110.0%
performance achievement and valued at $52.89, IPs closing share price on
2/10/2017 |
www.ipannualmeeting.com |
63 |
Table of Contents
Compensation Discussion & Analysis
(CD&A) NEO Compensation |
Tommy S.
Joseph Senior Vice
President - Manufacturing, Technology, EH&S & Global
Sourcing |
|
|
Tommy S. Joseph has over 34 years of
service with the Company. He has served as Senior Vice President -
Manufacturing, Technology, EH&S and Global Sourcing since January
2010. He previously served as Senior Vice President - Manufacturing,
Technology, EHS&S from February 2009 until December 2009, and Vice
President - Technology from 2005 until February 2009. Mr. Joseph is a
director of Ilim Holding S.A., a Swiss Holding Company in which
International Paper holds a 50% interest, and of its subsidiary, Ilim
Group. |
2016 Realized Compensation |
|
|
Element of Compensation |
|
Compensation Amount |
|
Rationale |
2016 Base Salary |
|
$600,000
(no base salary increase in
2016) |
|
No SLT member received a merit
increase in 2016, reflecting market competitiveness and in light of the
Companys financial performance in 2015. |
2016 MIP Award |
|
$306,000 |
|
As with each member of the SLT, Mr.
Josephs MIP award was not modified for individual performance and thus
was based solely on the Companys financial performance achievement
percentage of 72.0%. |
2014 - 2016 PSP Payout |
|
34,131 shares, including reinvested
dividends and anti-dilution adjustment (related to xpedx/Unisource
business combination)
(valued at
$1,805,189) |
|
PSP payout of 110% is based solely
on the Companys performance achievement in relative Adjusted ROIC and
relative TSR described in Section 4. |
2013 Restricted Stock
Award* |
|
3,725 shares vested on March 1,
2016, representing 33% of 2013 grant and including reinvested dividends
and anti-dilution adjustment (related to xpedx/Unisource business
combination)
(valued at
$132,983) |
|
This RSA grant of 10,000 shares was
made March 1, 2013, for recognition and retention purposes, and vested
ratably over the three-year period ending March 1,
2016. |
The chart below compares Mr. Josephs 2016
actual compensation paid against targeted compensation amounts.
Target LTI is based on 27,947 target shares valued at $48.62 using
the 20-day avg stock price as of 12/31/2013
Actual LTI is based on 34,131 shares, which includes the
original target shares plus reinvested dividends, multiplied by 110.0%
performance achievement and valued at $52.89, IPs closing share price on
2/10/2017 |
64 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion
& Analysis (CD&A) NEO
Compensation |
Sharon R.
Ryan Senior Vice
President, General Counsel and Corporate Secretary |
|
|
Sharon R. Ryan has over 29 years of
service with the Company. Ms. Ryan was appointed to the position of Senior
Vice President, General Counsel and Corporate Secretary in November 2011,
following her service as Acting General Counsel and Corporate Secretary
since May 2011 and Vice President since February 2011. Ms. Ryan previously
served in a variety of legal roles, including as Chief Ethics and
Compliance Officer (beginning in 2009), Associate General Counsel -
Corporate Law, and General Counsel of various business divisions within
the Company. |
2016 Realized Compensation |
|
|
Element of Compensation |
|
Compensation Amount |
|
Rationale |
2016 Base Salary |
|
$602,000
(no base salary increase in
2016) |
|
No SLT member received a merit
increase in 2016, reflecting market competitiveness and in light of the
Companys financial performance in 2015. |
2016 MIP Award |
|
$346,800 |
|
As with each member of the SLT, Ms.
Ryans MIP award was not modified for individual performance and thus was
based solely on the Companys financial performance achievement percentage
of 72.0%. |
2014 - 2016 PSP Payout |
|
34,131 shares, including reinvested
dividends and anti-dilution adjustment (related to xpedx/Unisource
business combination)
(valued at
$1,805,189) |
|
PSP payout of 110% is based solely
on the Companys performance achievement in relative Adjusted ROIC and
relative TSR described in Section 4. |
The chart below compares Ms. Ryans 2016
actual compensation paid against targeted compensation amounts.
Target LTI is based on 27,947 target shares valued at $48.62 using
the 20-day avg stock price as of 12/31/2013
Actual LTI is based on 34,131 shares, which includes the original
target shares plus reinvested dividends, multiplied by 110.0% performance
achievement and valued at $52.89, IPs closing share price on
2/10/2017 |
www.ipannualmeeting.com |
65 |
Table of Contents
Compensation Discussion & Analysis
(CD&A) Other Governance and Compensation Related
Matters |
|
Other
Governance and Compensation Related
Matters |
|
|
Insider Trading and Anti-Hedging/Anti-Pledging
Policies |
The Company has adopted comprehensive and
detailed policies that regulate trading in Company securities by our insiders,
including the SLT and Board members. These policies include information
regarding trading blackout periods and explain when transactions in Company
securities are permitted. The policies strictly prohibit our SLT and Board
members (as well as our corporate controller) from holding Company securities in
a margin account or pledging them as collateral for a loan and prohibit all
Company officers and Board members from engaging in any of the following
short-term or speculative transactions involving Company securities: short
sales; publicly traded options, such as puts, calls or other derivative
instruments; hedging and monetization transactions, such as zero-cost collars,
forward-sale contracts, equity swaps and exchange funds.
|
|
Officer Stock Ownership and Retention
Requirements |
All of our officers are expected to own
shares of our common stock with a minimum market value based on a multiple of
base pay. This policy is intended to align our officers interests with those of
our shareowners and encourage long-term shareowner value creation by requiring
officers to have a significant equity stake in the Company. Our stock ownership
requirements are based on position:
Position |
|
Current Ownership
Requirement |
Chief Executive Officer |
|
6x base pay |
Senior Vice President |
|
3x base pay |
Vice President |
|
1x base pay |
The following are counted toward meeting
the ownership requirement: freely held shares (whether purchased on open market
or fully
earned through Company plan or program);
beneficial shares held indirectly by a
trust or family member; and share equivalents held in the Salaried Savings Plan
and Deferred Compensation Savings Plan. However, unvested restricted shares
(e.g., PSP
awards and RSAs) are not counted toward meeting the ownership requirement.
Officers are required to retain 50 percent
of their net shares paid under any Company long-term incentive plan or program,
such as shares paid out under the PSP and vested RSA shares, until their
ownership requirements are satisfied. SLT stock ownership is reviewed annually
by the MDCC to assure compliance. As of our last annual evaluation, all SLT
members were in compliance with our policy.
|
|
Board
Policy on Personal Use of Company
Aircraft |
The Board encourages the CEO to use
Company aircraft for business continuity and efficiency purposes, where
appropriate. Use of the Company aircraft allows the CEO to be available at all
times for business needs, whether on business or personal travel. Pursuant to
Board resolutions and his Time Sharing Agreement, Mr. Sutton is authorized to
use the Company aircraft for personal travel and is required to reimburse the
Company for the incremental cost of personal use of the aircraft above $75,000.
The value of such use is imputed income to him, and is not grossed up for
taxes.
|
|
Clawback or Forfeiture of Incentive
Awards |
Both MIP and PSP awards are subject to a
clawback provision contained in our plan documents. Under this clawback
provision, if the Companys financial statements are restated as a result of
errors, omission, or fraud, the MDCC may, at its discretion, based on the facts
and circumstances surrounding the restatement, require some or all participants
to return all or a portion of their awards to the Company. In addition, both MIP and
PSP awards may be forfeited in the event a participant engages in conduct that
is detrimental to the business interest or reputation of the Company.
Additionally, an SLT member who does not provide one-years notice of retirement
may forfeit his or her MIP and PSP awards.
66 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion
& Analysis (CD&A) Other Governance and Compensation Related
Matters |
|
|
Non-Competition and Non-Solicitation
Agreements |
The Company maintains Non-Competition and
Non-Solicitation Agreements with leaders of the Company, including our SLT, to
prohibit such leaders from engaging in certain competitive activities and to
protect confidential information and trade secrets from unauthorized use or
disclosure. Violation of these agreements may result in clawback or forfeiture
of incentive compensation awards.
|
|
Board
Policy on (Non-CIC) Severance Agreements with Senior
Officers |
A supplemental severance payment to the
CEO must be approved by the independent directors of the Board. A supplemental
severance payment to any other executive officer must be approved by the MDCC.
Moreover, pursuant to a 2005 Board policy, in the absence of a change in
control, the supplemental severance, plus severance under the Salaried Employee
Severance Plan, may not exceed two times base salary plus target MIP for the
year in which the termination occurs. Any severance amount greater than the
amount described above must be approved in advance by our
shareowners.
We do not backdate or reprice equity
grants. Our incentive compensation plan provides that stock options may not be
repriced, directly or indirectly, without the prior consent of the Companys
shareowners. As previously mentioned, the Company discontinued granting stock
options in 2005 and all outstanding stock options expired in 2015.
The Company does not have any program,
plan or practice to time, and has not timed, equity grants in coordination with
the release of material non-public information. Annual equity grants (including
pro rata
grants for promotions and employees hired in the prior year) under the PSP are
approved at the MDCCs meeting in December. Having a predetermined annual grant
date minimizes any concern that grant dates could be selectively chosen based
upon market price at any given time.
Service-based restricted stock awards are
used from time to time, and may be granted anytime during the year by our Senior
Vice President, Human Resources (as delegated by the Board), within parameters
approved by the MDCC. An award to an SLT member requires approval by the MDCC
(or by the Board for an award to the CEO).
|
|
Deductibility of Executive
Compensation |
The goal of the MDCC is to comply with the
provisions of IRC Section 162(m), which allows the Company to take an income tax
deduction for compensation up to $1 million and for certain compensation
exceeding $1 million paid in any taxable year to a covered employee as that
term is defined in the IRC. We generally structure incentive compensation plans
with the objective that amounts paid under those plans will be tax deductible,
and the plans must be approved by the Companys shareowners. However, the MDCC
may elect to provide incentive compensation outside the requirements of Section
162(m) when necessary to achieve its compensation objectives. Each element of
incentive compensation earned by our NEOs in 2016 qualified as performance-based
compensation under Section 162(m).
|
|
Accounting for Stock-Based
Compensation |
The accounting treatment of stock-based
compensation is not determinative of the type, timing, or amount of any
particular grant made to our employees.
www.ipannualmeeting.com |
67 |
Table of Contents
Compensation Discussion & Analysis
(CD&A) Additional Information About Our Executive
Compensation |
|
Additional Information About Our Executive
Compensation |
The following tables in this Section
provide detailed information regarding compensation for our NEOs.
|
|
Summary Compensation
Table |
The table below shows base salary, stock
awards under our PSP and, if applicable, RSA program, cash awards under our MIP,
the change in pension value, and all other compensation to our NEOs for the
years ended December 31, 2016, 2015, and 2014.
Name and Principal Position |
Year |
|
Salary ($) |
|
Stock Awards ($)(1) |
|
Non-Equity Incentive
Plan Compensation ($)(2) |
|
Change in Pension Value ($)(3) |
|
All Other Compensation ($)(4) |
|
Total ($) |
Mark S. Sutton |
2016 |
|
1,200,000 |
|
6,867,889 |
|
1,296,000 |
|
3,750,758 |
|
185,661 |
|
13,300,308 |
CEO & Chairman of the Board |
2015 |
|
1,200,000 |
|
10,901,741 |
|
1,681,200 |
|
2,886,189 |
|
173,292 |
|
16,842,422 |
(Principal Executive Officer) |
2014 |
|
880,708 |
|
1,784,032 |
|
911,400 |
|
3,044,519 |
|
74,740 |
|
6,695,399 |
Carol L. Roberts |
2016 |
|
750,000 |
|
1,962,264 |
|
540,000 |
|
1,524,138 |
|
98,448 |
|
4,874,850 |
Former Senior Vice President |
2015 |
|
750,000 |
|
1,980,477 |
|
743,900 |
|
238,998 |
|
95,441 |
|
3,808,816 |
and Chief Financial Officer
(Principal |
2014 |
|
742,500 |
|
2,992,703 |
|
653,100 |
|
2,464,636 |
|
95,375 |
|
6,948,314 |
Financial Officer throughout 2016
)(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy S. Nicholls |
2016 |
|
710,000 |
|
1,962,264 |
|
460,800 |
|
1,000,639 |
|
64,546 |
|
4,198,249 |
Senior Vice President, Industrial |
2015 |
|
710,000 |
|
1,980,477 |
|
616,300 |
|
214,017 |
|
64,060 |
|
3,584,854 |
Packaging the Americas |
2014 |
|
710,000 |
|
2,992,703 |
|
653,100 |
|
1,499,862 |
|
64,353 |
|
5,920,018 |
Tommy S. Joseph |
2016 |
|
600,000 |
|
2,225,123 |
|
306,000 |
|
953,196 |
|
22,514 |
|
4,106,833 |
Senior Vice President,
Manufacturing, |
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology, EH&S & Global Sourcing |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sharon R. Ryan |
2016 |
|
602,000 |
|
1,471,717 |
|
346,800 |
|
1,102,136 |
|
56,543 |
|
3,579,196 |
Senior Vice President, General
Counsel |
|
|
|
|
|
|
|
|
|
|
|
|
|
& Corporate Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The amounts reported in this
column reflect the aggregate grant date fair value of stock awards under
our PSP and RSA programs granted to the NEOs during each year, computed in
accordance with FASB ASC Topic 718. A discussion of the assumptions used
in calculating these values for the 2016 fiscal year may be found in Note
18 to our audited financial statements beginning on page 78 of our 2016
Annual Report on Form 10-K, which was filed with the Securities and
Exchange Commission on February 22, 2017. The value shown for 2016
includes the aggregate grant date fair value of each NEOs 2016-2018 PSP
award and, for Mr. Joseph, the grant date fair value of a restricted stock
award he received in November 2016. The maximum value of the 2016-2018 PSP
awards based on achieving maximum Company performance is as follows: Mr.
Sutton: $13,735,778; Ms. Roberts: $3,924,529; Mr. Nicholls: $3,924,529;
Mr. Joseph: $2,649,046; and Ms. Ryan: $2,943,433. |
(2) |
Represents the amount earned
under the MIP based on Company and individual performance during the year
shown, which is paid in February of the following year. |
(3) |
Amounts shown in this column
represent the change in accruals under our Retirement Plan, Pension
Restoration Plan, and SERP as shown in the Pension Benefits table.
Importantly, the change in pension value is not currently paid to an
executive as compensation, but is a measurement of the change in value of
the pension from the prior year. Changes in value arise from, among other
things, additional benefit accruals for another year of service, changes
in pensionable compensation, the decrease in the discount period and the
impact of a change in the discount rate from the prior years measurement,
and changes in mortality rate assumptions. The discount rate used is the
same as the rate used by the Company for financial statement disclosure as
of the end of the fiscal year. This rate is based on economic conditions
at year end. The NEOs do not receive preferential or above market
earnings on non-qualified deferred compensation. Accordingly, there is no
amount included in this column for this type of earnings
credit. |
(4) |
A breakdown of the All Other
Compensation amounts for 2016 is shown in the following
table: |
Name |
Company Matching Contribution ($)(a) |
|
Group Life Insurance ($)(b) |
|
ESIP ($)(c) |
|
Corporate Aircraft ($)(d) |
|
Company Matching Gift ($)(e) |
|
Tax Return Preparation ($)(f) |
|
Total ($)(g) |
M.
S. Sutton |
57,600 |
|
6,048 |
|
40,713 |
|
75,000 |
|
6,300 |
|
|
|
185,661 |
C.
L. Roberts |
71,707 |
|
3,780 |
|
14,765 |
|
|
|
6,048 |
|
2,148 |
|
98,448 |
T.
S. Nicholls |
35,262 |
|
3,581 |
|
16,098 |
|
|
|
9,605 |
|
|
|
64,546 |
T.
S. Joseph |
12,720 |
|
3,024 |
|
|
|
|
|
3,600 |
|
3,170 |
|
22,514 |
S.
R. Ryan |
51,826 |
|
3,037 |
|
|
|
|
|
1,680 |
|
|
|
56,543 |
(a) |
Represents the Company match to
the NEOs contribution to the Salaried Savings Plan and Deferred
Compensation Savings Plan, as shown in the Non-Qualified Deferred
Compensation Plan table. |
(b) |
Represents the Companys annual
premium payment for the NEOs group life insurance
benefit. |
68 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion
& Analysis (CD&A) Additional Information About Our
Executive Compensation |
|
(c) |
Represents the amount paid by the
Company for the NEOs executive supplemental life insurance program
(ESIP). This SLT benefit was closed to new participants effective
January 1, 2008, and thus Mr. Joseph and Ms. Ryan do not receive this
benefit provided to our other NEOs. The ESIP provides an individually
owned, permanent life insurance policy with a pre-retirement death benefit
equal to two times annual base salary and a cash value accumulation
designed to provide a post-retirement death benefit equal to one times
final salary. The Company pays the full premium cost, and participants are
responsible for the income tax due on the premiums. |
|
(d) |
Represents the aggregate
incremental cost to the Company of Mr. Suttons personal travel on Company
aircraft. Pursuant to Board resolutions and his Time Sharing Agreement,
Mr. Sutton is required to reimburse the Company for the incremental cost
of personal use of the aircraft above $75,000. For 2016, this reimbursable
amount was $760. We calculate the incremental cost of personal use of the
Company aircraft based upon the per mile variable cost of operating the
aircraft multiplied by the number of miles flown for personal travel by
Mr. Sutton. The variable operating costs include fuel, maintenance, airway
fees, user fees, communication, crew expenses, supplies and catering. We
impute into Mr. Suttons income the value of personal use of the aircraft
in accordance with IRS regulations, minus any amounts he reimbursed during
the calendar year. Mr. Sutton receives no tax gross-up on this imputed
income. |
|
(e) |
Represents the Companys
60-percent match of each NEOs donation to the United Way of America as
part of a Company-wide campaign. |
|
(f) |
Represents payment of fees for
the preparation of Ms. Roberts and Mr. Josephs individual income tax
returns per Company policy due to their service on the board of directors
of the Companys Ilim joint venture in Russia at the Companys
request. |
|
(g) |
Represents the sum of columns (a)
through (f). |
|
|
|
(5) |
Ms. Roberts retired
from the Company effective March 31, 2017, and served as the Companys
Principal Financial Officer through February 22, 2017, the date of the
filing with the Securities and Exchange Commission of the Companys 2016
Annual Report on Form 10-K. |
|
|
Grants of Plan-Based Awards During
2016 |
The table below shows payout ranges for
our NEOs under the 2016 MIP and 2016-2018 PSP, as well as a restricted stock
award granted to one NEO in 2016, as described in our CD&A. There were no
other plan-based cash or equity awards granted to our NEOs in 2016.
|
|
|
|
|
|
Estimated Possible
Payouts Under Non-Equity Incentive Plan Awards |
|
Estimated Future Payouts
Under Equity Incentive Plan Awards |
|
All
Other Stock Awards: Number of Shares of
Stock (#)(3) |
|
Grant Date Fair Value
of Stock
and Option Awards ($)(4) |
Name |
|
Committee Action Date(1) |
|
Grant Date |
|
Threshold ($) |
|
Target ($) |
|
Maximum ($)(2) |
|
Threshold (#) |
|
Target (#) |
|
Maximum (#) |
|
|
M. S. Sutton |
|
|
|
|
|
270,000 |
|
1,800,000 |
|
3,600,000 |
|
|
|
|
|
|
|
|
|
|
|
12/7/2015 |
|
1/1/2016 |
|
|
|
|
|
|
|
23,598 |
|
188,782 |
|
377,564 |
|
|
|
6,867,889 |
C. L. Roberts |
|
|
|
|
|
112,500 |
|
750,000 |
|
1,500,000 |
|
|
|
|
|
|
|
|
|
|
|
12/7/2015 |
|
1/1/2016 |
|
|
|
|
|
|
|
6,742 |
|
53,938 |
|
107,876 |
|
|
|
1,962,264 |
T. S. Nicholls |
|
|
|
|
|
96,000 |
|
640,000 |
|
1,280,000 |
|
|
|
|
|
|
|
|
|
|
|
12/7/2015 |
|
1/1/2016 |
|
|
|
|
|
|
|
6,742 |
|
53,938 |
|
107,876 |
|
|
|
1,962,264 |
T. S. Joseph |
|
|
|
|
|
63,750 |
|
425,000 |
|
850,000 |
|
|
|
|
|
|
|
|
|
|
|
12/7/2015 |
|
1/1/2016 |
|
|
|
|
|
|
|
4,551 |
|
36,408 |
|
72,816 |
|
|
|
1,324,523 |
|
10/10/2016 |
|
11/1/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
900,600 |
S. R. Ryan |
|
|
|
|
|
72,240 |
|
481,600 |
|
963,200 |
|
|
|
|
|
|
|
|
|
|
|
12/7/2015 |
|
1/1/2016 |
|
|
|
|
|
|
|
5,057 |
|
40,454 |
|
80,908 |
|
|
|
1,471,717 |
(1) |
The 2016-2018 PSP grant was
approved by the MDCC for all NEOs (except Mr. Sutton, whose grant was
approved by the full Board) at its December 2015 meeting, effective the
first business day of the following calendar year. |
(2) |
Non-equity incentive plan awards
are intended to qualify as performance-based compensation under IRC
Section 162(m) and are awarded pursuant to the Amended and Restated 2009
Incentive Compensation Plan approved by our shareowners. The maximum
individual award under the Section 162(m) plan is capped at $10
million. |
(3) |
The amounts shown in this column
reflect a restricted stock award granted to Mr. Joseph for the purpose of
retention to ensure leadership of critical operational initiatives over
the next four years. The award will cliff vest, after a four-year period,
on October 31, 2020. |
(4) |
The amounts shown in this column
reflect the grant date fair value of the PSP awards computed in accordance
with FASB ASC Topic 718 based on the probable satisfaction of the
performance conditions at January 1, 2016 for such awards (i.e., 100 percent of
target), as explained in further detail in the narrative following this
table. The grant date fair value of the restricted stock awards are based
on the closing price of the Companys common stock on the date immediately
preceding the effective date of the grant. |
www.ipannualmeeting.com |
69 |
Table of Contents
Compensation Discussion & Analysis
(CD&A) Additional Information About Our Executive
Compensation |
|
|
Narrative to the Grants of Plan-Based
Awards Table |
Estimated Possible Payouts
under Non-Equity Incentive Plan Awards
These columns show the threshold, target
and maximum payouts under the 2016 MIP. The actual amount paid is shown in the
Summary Compensation Table.
The amount shown in the Threshold column
was the amount that would have been paid under the 2016 MIP if the Company had
achieved only the minimum performance level required in only one performance
metric: Absolute Adjusted ROIC or Absolute Adjusted EBITDA. Since ROIC is
weighted at 30 percent, a threshold payout at 30 percent would result in
weighted performance achievement of 15 percent (or one-half of 30 percent).
Minimum performance in at least one objective is required to fund an MIP award
pool.
The amount shown in the Maximum column
was the possible payout for each NEO based on maximum Company performance
achievement of 200 percent.
Estimated Future Payouts
under Equity Incentive Plan Awards
These columns show the threshold, target
and maximum payouts under the 2016-2018 PSP.
The amount shown in the Threshold column
is the number of shares each NEO would receive if the Company achieved only the
minimum performance level in either Relative Adjusted ROIC or Relative TSR to
achieve a payout of 12.5 percent (which represents a 25 percent threshold for
either metric, each weighted at 50 percent).
The amount shown in the Maximum column
is the possible number of shares each NEO would receive based on maximum Company
performance of 200 percent.
Grant Date Fair Value of
Stock Awards
With the exception of Mr. Josephs
restricted stock award, the amounts shown in this column reflect the grant date
fair value of the awards granted to each NEO under the 2016-2018 PSP computed in
accordance with FASB ASC Topic 718 based on the probable satisfaction of the
performance conditions at January 1, 2016 for such awards (i.e., 100 percent of
target). For the Relative Adjusted ROIC component of the awards, the grant date
fair value is based on the closing price of our common stock on the trading day
immediately preceding the grant date. Valuing Relative TSR is more complicated
because the value must take into account the probable payout of the 2016-2018
PSP based on our expected future performance relative to the other companies in
our TSR Peer Group. The market value of the TSR component is based on a Monte
Carlo simulation as prescribed by FASB ASC Topic 718.
The amount ultimately paid to PSP
participants may or may not be the same amount as the value shown in the table
due to two factors: (1) the ultimate number of shares paid to our PSP
participants will vary based on the relative performance of the Company to the
other companies in our TSR and ROIC Peer Groups; and (2) the value of the PSP
award received by each participant is based on the fair value of the Companys
stock as of the effective date of the payment.
70 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion
& Analysis (CD&A) Additional Information About Our
Executive Compensation |
|
|
Outstanding Equity Awards at December
31, 2016 |
The following table shows the outstanding
equity awards held by our NEOs as of December 31, 2016.
|
Stock Awards |
Name |
Equity Incentive Plan
Awards: Number of Unearned Shares, Units or Other Rights That
Have Not Vested (#) |
|
Equity Incentive Plan
Awards: Market or Payout Value of Unearned Shares, Units or
Other Rights That Have Not
Vested ($)(1) |
M. S. Sutton |
461,797(2) |
|
24,502,949 |
C. L. Roberts |
142,045(3) |
|
7,536,908 |
T. S. Nicholls |
163,927(4) |
|
8,697,967 |
T. S. Joseph |
115,926(5) |
|
6,151,034 |
S. R. Ryan |
102,944(6) |
|
5,462,209 |
(1) |
The market value is
calculated based on the closing price of our common stock on December 31,
2016, of $53.06. |
(2) |
The amount shown
includes the following units of restricted stock that remained subject to
open PSP performance periods as of December 31, 2016: (i) 115,430 units
awarded under the 2014-2016 PSP, (ii) 129,152 units awarded under the
2015-2017 PSP, (iii) 188,782 units awarded under the 2016-2018 PSP, (iv)
522 units for an anti-dilution adjustment related to the xpedx/Unisource
business combination, and (v) 27,911 reinvested dividends on those
units. |
(3) |
The amount shown
includes the following units of restricted stock that remained subject to
open PSP performance periods as of December 31, 2016: (i) 40,977 units
awarded under the 2014-2016 PSP, (ii) 36,901 units awarded under the
2015-2017 PSP, (iii) 53,938 units awarded under the 2016-2018 PSP, (iv)
597 units for an anti-dilution adjustment related to the xpedx/Unisource
business combination, and (v) 9,632 reinvested dividends on those
units. |
(4) |
The amount shown
includes the following units of restricted stock that remained subject to
open PSP performance periods as of December 31, 2016: (i) 40,977 units
awarded under the 2014-2016 PSP, (ii) 36,901 units awarded under the
2015-2017 PSP, (iii) 53,938 units awarded under the 2016-2018 PSP, (iv)
597 units for an anti-dilution adjustment related to the xpedx/Unisource
business combination, (v) 9,632 reinvested dividends on those units, and
(vi) 21,882 shares (including reinvested dividends) relating to a
restricted stock award that vests on August 1, 2018. |
(5) |
The amount shown
includes the following units of restricted stock that remained subject to
open PSP performance periods as of December 31, 2016: (i) 27,545 units
awarded under the 2014-2016 PSP, (ii) 24,908 units awarded under the
2015-2017 PSP, (iii) 36,408 units awarded under the 2016-2018 PSP, (iv)
402 units for an anti-dilution adjustment related to the xpedx/Unisource
business combination, (v) 6,489 reinvested dividends on those units, and
(vi) 20,174 shares (including reinvested dividends) relating to a
restricted stock award that vests on October 31, 2020. |
(6) |
The amount shown
includes the following units of restricted stock that remained subject to
open PSP performance periods as of December 31, 2016: (i) 27,545 units
awarded under the 2014-2016 PSP, (ii) 27,676 units awarded under the
2015-2017 PSP, (iii) 40,454 units awarded under the 2016-2018 PSP, (iv)
402 units for an anti-dilution adjustment related to the xpedx/Unisource
business combination, and (v) 6,867 reinvested dividends on those
units. |
The following table shows the value
received upon the vesting in 2016 of shares previously awarded under our PSP and
restricted stock programs as described in our CD&A.
|
Stock
Awards |
Name |
Number of Shares Acquired
on Vesting (#)(1) |
|
Value Realized
on Vesting ($)(2) |
M. S. Sutton |
39,924 |
|
1,396,142 |
C. L. Roberts |
67,411 |
|
2,575,615 |
T. S. Nicholls |
45,716 |
|
1,598,689 |
T. S. Joseph |
34,453 |
|
1,207,541 |
S. R. Ryan |
30,728 |
|
1,074,558 |
(1) |
Amounts shown represent shares
(including shares acquired in respect of reinvested dividends) under the
PSP awards that vested on February 8, 2016. Ms. Roberts and Mr. Josephs
amounts include shares relating to restricted stock awards that vested on
November 1, 2016 and March 1, 2016, respectively. |
(2) |
Represents the value of the
vested shares based on our closing stock price on the date immediately
preceding the vesting date of the award: $34.97 for each PSP share; and
$45.03 and $35.70 for Ms. Roberts and Mr. Josephs restricted stock award
shares, respectively. |
www.ipannualmeeting.com |
71 |
Table of Contents
Compensation Discussion
& Analysis (CD&A) Additional Information About Our
Executive Compensation |
The following table shows the present
value of benefits payable to our NEOs under our Retirement Plan, Pension
Restoration Plan, or SERP at December 31, 2015 and December 31, 2016. The change
in the present value of the accrued benefit is shown in the Change in Pension
Value column of the Summary Compensation Table for 2016.
All of our NEOs are eligible for a benefit
calculated under the Retirement Plan. The NEOs are also eligible for a benefit
that is calculated under the Pension Restoration Plan formula as well as a
benefit calculated under the SERP formula. We amended the SERP to comply with
IRC Section 409A, effective January 1, 2008. As
amended, the benefit under SERP Formula A is paid from the SERP, even if the
applicable formula that determines the benefit is the formula under the Pension
Restoration Plan. Under Formula B, the portion of the benefit that is earned
prior to SERP eligibility is paid under the Pension Restoration Plan, and the
portion earned following SERP eligibility is paid from the SERP. The pension
benefits shown for the NEOs are calculated under SERP Formula B, as each became
eligible for the SERP after July 1, 2004. No NEO received payments of a
retirement benefit in 2016.
Name |
|
Plan Name |
|
Number of Years of
Credited Service in 2016 (#) |
|
12/31/2015 Present Value of
Accumulated Benefit ($)(1) |
|
12/31/2016 Present Value of
Accumulated Benefit ($)(2) |
M. S.
Sutton |
|
Retirement Plan |
|
32.58 |
|
1,330,221 |
|
1,524,354 |
|
|
Pension Restoration Plan |
|
32.58 |
|
913,176 |
|
999,795 |
|
|
SERP |
|
32.58 |
|
9,134,171 |
|
12,604,177 |
|
|
Total |
|
|
|
11,377,568 |
|
15,128,326 |
C. L.
Roberts |
|
Retirement Plan |
|
35.50 |
|
1,635,168 |
|
1,864,493 |
|
|
Pension Restoration Plan |
|
35.50 |
|
853,134 |
|
931,833 |
|
|
SERP |
|
35.50 |
|
9,559,319 |
|
10,775,433 |
|
|
Total |
|
|
|
12,047,621 |
|
13,571,759 |
T. S.
Nicholls |
|
Retirement Plan |
|
25.25 |
|
1,002,788 |
|
1,159,494 |
|
|
Pension Restoration Plan |
|
25.25 |
|
587,626 |
|
643,365 |
|
|
SERP |
|
25.25 |
|
5,326,268 |
|
6,114,462 |
|
|
Total |
|
|
|
6,916,682 |
|
7,917,321 |
T. S.
Joseph |
|
Retirement Plan |
|
33.92 |
|
1,487,412 |
|
1,693,442 |
|
|
Pension Restoration Plan |
|
33.92 |
|
1,457,955 |
|
1,588,056 |
|
|
SERP |
|
33.92 |
|
4,598,873 |
|
5,215,938 |
|
|
Total |
|
|
|
7,544,240 |
|
8,497,436 |
S. R.
Ryan |
|
Retirement Plan |
|
28.50 |
|
1,322,872 |
|
1,514,980 |
|
|
Pension Restoration Plan |
|
28.50 |
|
685,514 |
|
746,917 |
|
|
SERP |
|
28.50 |
|
3,942,258 |
|
4,790,883 |
|
|
Total |
|
|
|
5,950,644 |
|
7,052,780 |
(1) |
The calculation of the present
value of accumulated benefits as of December 31, 2015, assumes a discount
rate of 4.40 percent for annuity payments and deferral periods and 1.90
percent for lump sum payments. The calculation further assumes benefit
commencement at the earliest age at which the NEO would be entitled to an
unreduced benefit (the earlier of age 61 and completion of 20 years of
service or age 62 and completion of 10 years of service). For individuals
who are already eligible for an unreduced benefit, we use their age as of
the end of the fiscal year. |
(2) |
The calculation of the present
value of accumulated benefits as of December 31, 2016, assumes a discount
rate of 4.10 percent for annuity payments and deferral periods and 1.60
percent for lump sum payments. The assumptions regarding the benefit
commencement date are the same as described in footnote
(1). |
72 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion
& Analysis (CD&A) Additional Information About Our
Executive Compensation |
|
|
Narrative to Pension Benefits
Table |
Retirement Plan of
International Paper Company
Our Retirement Plan is a funded,
tax-qualified plan that covers all U.S. salaried employees hired prior to July
1, 2004. U.S. employees hired on or after July 1, 2004, are eligible for a
Company-paid Retirement Savings Account contribution to our Salaried Savings
Plan and Deferred Compensation Savings Plan in lieu of participation in the
Retirement Plan. All of our NEOs were hired prior to July 1, 2004, and thus are
eligible to participate in the Retirement Plan.
We calculate the benefit under the
Retirement Plan at the rate of 1.67% of the participants average pensionable
earnings received over the highest five consecutive calendar years of the last
10 calendar years, multiplied by his or her years of service, then reduced by a
portion of Social Security benefits. We include as pensionable earnings the
participants base salary plus MIP awards that were not deferred, up to the
maximum limit set by the IRS.
International Paper Company
Pension Restoration Plan for Salaried Employees
Our supplemental retirement plan for our
salaried employees is an unfunded, non-qualified plan that covers all U.S.
salaried employees hired prior to July 1, 2004. This plan augments our
Retirement Plan by providing retirement benefits based on compensation that is
greater than the limits set by the IRS. We include as eligible compensation
under this plan the participants base salary plus MIP awards, including amounts
deferred. All of our NEOs were hired prior to July 1, 2004, and thus are
eligible to participate in the Pension Restoration Plan.
We calculate the benefit under the Pension
Restoration Plan in the same manner as the Retirement Plan and then reduce the
benefit by the amount payable under the Retirement Plan.
The International Paper
Company Unfunded Supplemental Retirement Plan for Senior
Managers
Our SERP is an alternative retirement plan
available to certain senior executives, including the NEOs. The SERP was closed
to new participants, effective January 1, 2012. SERP benefits vest once the
participant reaches age 55 and has completed five
years of service. The normal form of payment is a lump sum. We calculate
benefits under the SERP under one of two formulas based on the participants
date of eligibility for SERP participation. Benefits are payable under the SERP
on the later of the participants retirement date or the date six months
following separation from service. We define retirement date as the date the
participant reaches the earlier of age 55 with 10 years of service or age 65
with five years of service.
A participant who has announced retirement
at least 12 months in advance has the right to lock-in a discount rate used to
determine the amount of the lump sum payment based on the average for the month
in which they choose to lock-in. All NEOs have locked-in the discount rate under
this provision.
○ |
Participants eligible to participate prior to
July 1, 2004 (Formula A): |
|
We calculate benefits under this
formula as the greatest of (i) the sum of the benefits under our
Retirement Plan and Pension Restoration Plan; (ii) the lesser of 3.25% of
eligible compensation, defined below, multiplied by the participants
years of service or 50% of eligible compensation, with both amounts
reduced by a portion of Social Security benefits; or (iii) 25% of eligible
compensation. The benefit payable under the SERP is reduced by the
benefits payable under the Retirement Plan. In calculating benefits under
(ii) and (iii), we include as eligible compensation the sum of (a) the
participants highest annual base salary during any of the three
consecutive calendar years prior to retirement and (b) the participants
target MIP for the year of retirement.
In the event of termination for
cause, an executive whose SERP benefit is calculated under Formula A would
forfeit the right to receive a lump sum benefit under the SERP, and his or
her vested retirement benefits under the Retirement Plan and the Pension
Restoration Plan would be paid as an annuity. |
|
|
○ |
Participants eligible to participate on or
after July 1, 2004 (Formula B): |
|
We calculate benefits under this
formula at the same rate as our Retirement Plan and Pension Restoration
Plan. Participants are eligible to receive a lump sum payment of the
benefit earned for service after becoming eligible in the SERP; the
benefit earned prior to SERP eligibility remains payable as an annuity.
The benefit for all NEOs is calculated under SERP Formula
B. |
www.ipannualmeeting.com |
73 |
Table of Contents
Compensation Discussion
& Analysis (CD&A) Additional Information About Our
Executive Compensation |
Policies with Regard to
Granting Additional Years of Service
Our change-in-control agreements described
elsewhere in this proxy statement provide three years of age and service to be
added to the calculation of retirement benefits in the event of a qualifying
termination of each NEOs employment following a change in control.
Eligibility for Early
Retirement Benefits
Normal retirement under our Retirement
Plan and Pension Restoration Plan is age 65.
Participants, including the NEOs, are
eligible for early retirement under the Retirement Plan, the Pension Restoration
Plan and the SERP at age 55 with 10 years of service. However, a participants accrued benefit is reduced by 4% for
each year that the participant retires before reaching age 62. Eligible active
employees may receive an unreduced benefit once they reach age 61 and have
completed at least 20 years of service with us. Each NEO is eligible for early
retirement; each NEOs benefit would be reduced based on age and years of
service.
Pension
Change
In February 2014, the MDCC approved
changes to the Retirement Plan, the Pension Restoration Plan and the SERP such
that credited service and compensation will be capped effective December 31,
2018, for salaried employees, including the NEOs. For service after this date,
employees affected by the freeze will receive Retirement Savings Account
contributions.
|
|
Non-Qualified Deferred Compensation in
2016 |
The following table shows contributions
in 2016 by the Company and each of our NEOs to the DCSP, which is our
non-qualified deferred compensation plan, and each NEOs DCSP account balance as
of December 31, 2016. The account balance
includes amounts deferred by the NEO in December 2016, which were actually
credited to his or her account in January 2017.
Name |
|
Executive Contributions in Last
Fiscal Year ($)(1) |
|
Registrant Contributions in
Last Fiscal Year ($)(2) |
|
Aggregate Earnings in Last
Fiscal Year ($)(3) |
|
Aggregate Withdrawals/ Distributions in Last
Fiscal Year ($) |
|
Aggregate Balance at
Last Fiscal Year End ($)(4) |
M. S. Sutton |
|
80,000 |
|
48,000 |
|
144,771 |
|
|
|
1,777,800 |
C. L. Roberts |
|
98,312 |
|
58,987 |
|
159,562 |
|
|
|
2,182,368 |
T. S. Nicholls |
|
49,463 |
|
23,742 |
|
133,472 |
|
|
|
969,711 |
T. S. Joseph |
|
|
|
|
|
140,959 |
|
|
|
1,219,244 |
S. R. Ryan |
|
65,176 |
|
39,106 |
|
357,941 |
|
|
|
1,364,494 |
(1) |
These amounts are included in the
Salary column of the Summary Compensation Table for 2016 for each
NEO. |
(2) |
These amounts are included in the
All Other Compensation column of the Summary Compensation Table for 2016
for each NEO. |
(3) |
These amounts are not included in
the Summary Compensation Table because they are not preferential or
above-market earnings. |
(4) |
Of the amounts shown in this
column, the following amounts were included in the Salary column of the
Summary Compensation Table for prior years as follows: Mr. Sutton:
$271,203 was included for the periods 2011 and 2013-2015; Ms. Roberts:
$623,145 was included for the period 2008-2015; Mr. Nicholls: $335,573 was
included for the period 2010-2015; and Ms. Ryan: $52,800 was included for
2012. |
74 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion
& Analysis (CD&A) Additional Information About Our
Executive Compensation |
Narrative to Non-Qualified Deferred
CompensationTable
The DCSP allows participants to save for
retirement by deferring up to 85% of eligible cash compensation, which includes
base salary and MIP awards. Participants may contribute to the DCSP after
deferring either the maximum pre-tax amount or total pre-tax and after-tax
amount to the 401(k) plan or after reaching the IRS compensation limit for that
year. The Company credits matching contributions equal to 70% of the
participants contributions up to 4% of compensation, plus 50% of contributions
up to an additional 4% of compensation.
For 2016, NEO contribution amounts were as
follows: Mr. Sutton contributed 8% of base salary, Ms. Roberts contributed 8% of
all eligible cash compensation, Mr. Nicholls contributed 10% of his MIP award,
Mr. Joseph contributed 0% of all eligible cash compensation and Ms. Ryan
contributed 8% of all eligible cash compensation. As a result of the varying
contribution amounts, the actual amounts deferred and the Companys resulting
matching contribution will vary for each NEO.
Participant contributions are credited
with earnings (or losses) based on the participants choice of investment fund
equivalents. Investment fund equivalents match the investment returns of the
funds available in the 401(k) plan. Investment elections may be changed daily
subject to securities laws restrictions. Differences in earnings reported in the
Non-Qualified Deferred Compensation table above, are based on the individual
participants investment elections.
Participants are fully vested in their
contributions at all times. Amounts contributed by the Company become vested
upon completing three years of service, reaching age 65, death, disability,
termination of employment as a result of the permanent closing of the
participants facility, or eligibility for severance under the Salaried Employee
Severance Plan.
Participant accounts are divided into
contribution accounts for amounts deferred prior to January 1, 2005, and
contribution accounts for amounts deferred after January 1, 2005. Distributions
of amounts contributed on or after January 1, 2005, may only be made in the
event of termination of employment, death or disability. Participants must elect
their distribution form of payment in an initial deferral election, which may
only be changed under a subsequent distribution election that meets the
requirements under IRC Section 409A. In the event no election has been made, the
participant will receive a lump-sum form of payment. In-service withdrawals are
limited to unforeseeable emergencies.
|
|
Post EmploymentTermination
Benefits |
Potential Payments Upon Death
or Disability
The Company provides to our NEOs the
following benefits in the event of death or disability, which are also available
to all of our U.S. salaried employees. Upon reaching age 65, the disabled
individual is covered under our retirement programs, if eligible, as described
above. We provide the following disability benefits:
○ |
Long-term disability income benefit
equal to 60 percent of base salary plus the employees average MIP during
the last three calendar years; |
○ |
Continuation of medical and life insurance coverage;
and |
○ |
If eligible for the Retirement Plan,
continuation of pension benefit accruals. |
The Company provides the same benefits to
the beneficiary of an SLT member (including a NEO) upon death as are available
to our U.S. salaried employees, with two additional benefits:
○ |
Executive supplemental life
insurance, which is described earlier in this section 7 of this proxy
statement (this benefit was closed to new participants effective January
1, 2008, and thus nine SLT members (including two NEOs) do not have this
benefit); and |
○ |
If the SLT member is eligible for
the SERP and has completed five years of vesting service at the time of
death, an amount equal to 50% of the SLT members SERP benefit is payable
to a surviving spouse. |
In the event of disability or death, PSP
awards are prorated based upon the number of months the participant worked
during the performance period, and are paid at the end of the three-year
performance period based on actual Company performance. Service-based restricted
stock awards also become vested upon death or disability.
www.ipannualmeeting.com |
75 |
Table of Contents
Compensation Discussion & Analysis
(CD&A) Additional Information About Our Executive
Compensation |
Potential
Payments Upon Retirement
The following table presents the potential
payments to our NEOs, assuming that they retired at the end of 2016.
Name |
|
Retirement Plan
Annuity ($) |
|
Pension Restoration Plan
Annuity ($) |
|
TOTAL Annuity ($)(1) |
|
Lump
Sum Pension Payment ($)(2) |
|
Vesting
of Equity ($)(3) |
M. S. Sutton |
|
95,459 |
|
62,610 |
|
158,069 |
|
13,904,694 |
|
9,222,093 |
C. L. Roberts |
|
112,806 |
|
56,379 |
|
169,185 |
|
11,334,845 |
|
2,634,960 |
T. S. Nicholls |
|
72,612 |
|
40,289 |
|
112,901 |
|
6,745,361 |
|
2,634,960 |
T. S. Joseph |
|
108,610 |
|
101,852 |
|
210,462 |
|
5,356,648 |
|
1,778,571 |
S. R. Ryan |
|
92,493 |
|
45,601 |
|
138,094 |
|
4,632,403 |
|
1,976,273 |
(1) |
Amounts shown in this column are
the annual annuity benefits payable from the tax-qualified Retirement Plan
and from the Pension Restoration Plan as of December 31,
2016. |
(2) |
Lump sum payment calculations are
based on the lower of the December 2016 municipal bond rate of 2.45
percent, or the locked-in rate elected by the NEO, if applicable.
Additional information regarding the calculation of benefits may be found
following the Pension Benefits table. |
(3) |
Amounts shown in this column
reflect the dollar value, based on the closing price of our common stock
on December 31, 2016, of the prorated portions of the 2015-2017 PSP and
2016-2018 PSP, including reinvested dividends, that would be paid at the
end of the performance period. In addition, the NEO would receive the
2014-2016 PSP award, which has a performance period ending on December 31,
2016, which is not shown here because it would have already
vested. |
Potential
Payments Upon Involuntary Termination Without Cause
The following table represents all amounts
that would be payable to our NEOs in the event of involuntary termination
without cause, including earned pension amounts not payable as a result of the
termination.
Name |
|
Years
of Credited Service (#) |
|
Lump
Sum Severance Payment ($)(1) |
|
Lump
Sum Pension Payment ($)(2) |
|
TOTAL Benefit
at Termination ($)(3) |
|
Vesting
of Equity ($)(4) |
|
Value
of Continued Benefits ($)(5) |
|
TOTAL Pension Annuity ($)(6) |
M. S. Sutton |
|
33 |
|
3,105,231 |
|
13,904,694 |
|
17,009,925 |
|
9,222,093 |
|
126,455 |
|
158,069 |
C. L. Roberts |
|
36 |
|
1,757,308 |
|
11,334,845 |
|
13,092,153 |
|
2,634,960 |
|
81,455 |
|
169,185 |
T. S. Nicholls |
|
26 |
|
1,312,800 |
|
6,745,361 |
|
8,058,161 |
|
2,634,960 |
|
77,455 |
|
112,901 |
T. S Joseph |
|
34 |
|
1,233,692 |
|
5,356,648 |
|
6,590,340 |
|
1,778,571 |
|
66,455 |
|
210,462 |
S. R Ryan |
|
29 |
|
1,138,661 |
|
4,632,403 |
|
5,771,064 |
|
1,976,273 |
|
66,655 |
|
138,094 |
(1) |
The amounts shown in this column
reflect estimated amounts under the Salaried Employee Severance Plan
formula of two weeks salary for each year or partial year of service.
Amounts shown also include the following benefits to which the NEO would
be entitled: (i) unused current year vacation pay; (ii) 2017 earned
vacation pay; and (iii) MIP award for 2016. We do not gross-up standard
severance benefits. |
(2) |
Amounts shown in this column are
the lump sum benefit payable under the SERP. The methodology used to
calculate the lump sum benefit can be found in footnote 2 to the
Potential Payments Upon Retirement table above. |
(3) |
Amounts shown in this column
reflect the sum of the amounts in the previous two columns payable to the
NEO upon termination. |
(4) |
Amounts shown in this column
reflect the dollar value, based on the closing price of our common stock
on December 31, 2016, of the prorated portions of the 2015-2017 PSP and
2016-2018 PSP, including reinvested dividends, that would be paid at the
end of the performance period. |
|
In addition, the NEO would
receive the 2014-2016 PSP award, which has a performance period ending on
December 31, 2016, which is not shown here because it would have already
vested. |
(5) |
Amounts shown in this column
reflect the cost of (i) six months of continued dental and Employee
Assistance Program coverage and (ii) executive outplacement services. For
employees eligible for early retirement, the amounts also include a $3,000
Health Reimbursement Account contribution made by the company on behalf of
the employee and if applicable, an additional $3,000 for the spouse of the
employee. For employees not eligible for
early retirement, the amounts reflect the cost of six months of COBRA
premiums for medical coverage. |
(6) |
Amounts shown in this column are
the annual annuity benefits payable from the Retirement Plan and the
Pension Restoration Plan as of December 31,
2016. |
76 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion
& Analysis (CD&A) Additional Information About Our Executive
Compensation |
Potential
Payments Upon Involuntary Termination With Cause
An executive officer who is terminated
with cause would not be eligible for the severance benefits included in the
previous table, other than vacation pay. Further, the executive officer would
lose outstanding equity awards under the PSP or other restricted stock grants,
and not be eligible for payment of an MIP award.
Name |
|
Years of Credited
Service (#) |
|
Unused/Earned Vacation
Pay ($)(1) |
|
Lump
Sum Pension Payment ($)(2) |
|
TOTAL Benefit
at Termination ($)(3) |
|
Pension Annuity ($)(4) |
M. S. Sutton |
|
33 |
|
286,154 |
|
13,904,694 |
|
14,190,848 |
|
158,069 |
C. L. Roberts |
|
36 |
|
178,846 |
|
11,334,845 |
|
11,513,691 |
|
169,185 |
T. S. Nicholls |
|
26 |
|
142,000 |
|
6,745,361 |
|
6,887,361 |
|
112,901 |
T. S. Joseph |
|
34 |
|
143,077 |
|
5,356,648 |
|
5,499,725 |
|
210,462 |
S. R. Ryan |
|
29 |
|
120,400 |
|
4,632,403 |
|
4,752,803 |
|
138,094 |
(1) |
The amounts shown in this column
represent unused 2016 vacation pay and 2017 earned vacation
pay. |
(2) |
The amounts shown in this column
represent the lump sum benefit payable under the SERP. |
(3) |
Amounts shown in this column
represent the sum of columns (1) and (2) payable to the NEO upon
termination. |
(4) |
Amounts shown in this column are
the annual annuity benefits payable from the tax-qualified Retirement Plan
and from the Pension Restoration Plan as of December 31,
2016. |
Potential
Payments Upon Qualifying Termination After Change in Control
The following table represents amounts
that would be payable to our NEOs upon termination of employment without cause
(including by the NEO for good reason) within two years following a change in
control of the Company on December 31, 2016.
Name |
|
Lump
Sum Severance Payment ($)(1) |
|
Lump
Sum Pension Benefit ($)(2) |
|
Value
of Continued Benefits ($)(3) |
|
TOTAL Cash-Based Award ($) |
|
Accelerated Vesting
of Equity ($)(4) |
|
TOTAL Pre-Tax Benefit ($)(5) |
|
Pension Annuity ($)(6) |
M. S. Sutton |
|
9,000,000 |
|
18,673,763 |
|
23,940 |
|
27,697,703 |
|
17,806,957 |
|
45,504,660 |
|
158,069 |
C. L. Roberts |
|
4,500,000 |
|
15,074,759 |
|
23,940 |
|
19,598,699 |
|
5,087,742 |
|
24,686,441 |
|
169,186 |
T. S. Nicholls |
|
4,050,000 |
|
9,590,610 |
|
23,940 |
|
13,664,550 |
|
6,248,801 |
|
19,913,351 |
|
112,901 |
T. S. Joseph |
|
2,432,926 |
|
7,833,326 |
|
23,940 |
|
10,290,192 |
|
4,504,640 |
|
14,794,832 |
|
210,462 |
S. R. Ryan |
|
3,250,800 |
|
6,604,801 |
|
23,940 |
|
9,879,541 |
|
3,815,849 |
|
13,695,390 |
|
138,094 |
(1) |
Amounts shown in this column
reflect a change in control severance payment of three times the sum of
(i) base salary and (ii) target MIP for 2016, which would be paid in the
event of termination of employment without cause, including voluntary
termination for limited situations that meet the definition of good
reason, as described below. For Mr. Joseph, this amount has been reduced
to reflect application of the best net approach described following this
table. |
(2) |
The amount shown represents the
Pension Restoration Plan benefit formula earned after SERP participation
with an additional three years of age and service. |
(3) |
Amounts shown in this column
reflect the cost of continued medical and dental benefits for three years
following termination of employment. |
(4) |
Amounts shown in this column
reflect the dollar value, based on the closing price of our common stock
on December 31, 2016, of the vesting of (i) outstanding 2015-2017 PSP
awards, including reinvested dividends, based on actual Company
performance through December 31, 2016, (ii) outstanding 2016-2018 PSP
awards including reinvested dividends, based on target performance, and
(iii) outstanding service-based restricted stock awards, if any. In
addition, the NEO would receive the 2014-2016 PSP award, which has a
performance period ending on December 31, 2016, but is not included in the
amount shown because it would have already vested. |
(5) |
Amounts shown in this column
represent the total of the cash amounts payable as well as the value of
accelerated vesting of equity. |
(6) |
Amounts shown in this column are
the annual benefits payable from the Retirement Plan and the Pension
Restoration Plan as of December 31, 2016. |
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77 |
Table of Contents
Compensation Discussion & Analysis
(CD&A) Narrative to Potential Payments Upon Qualifying
Termination After Change in Control Table |
Narrative
to Potential Payments Upon Qualifying Termination After Change in Control
Table
The Company has entered into
change-in-control agreements with certain executives that provide severance and
other benefits in the event of a change in control of the Company. Our Board
believes that maintaining change-in-control agreements is a sound business
practice that protects shareowner value prior to, during and after a change in
control, and allows us to recruit and retain top executive talent. Our program
is available only to the SLT, except for those vice presidents grandfathered in
the program as of February 2008.
We believe this program aligns executive
and shareowner interests by enabling leaders of the Company to focus on the
interests of shareowners and other constituents when considering a potential
change in control, without undue concern for their own financial and employment
security.
As part of its ongoing oversight of this
program, the Board modified it in 2010 to eliminate the excise tax gross-up
provision, replacing it with a best net calculation. Under this best net
approach, the Company will, prior to making any payments, perform a calculation
comparing:
○ |
the net benefit after payment of
excise tax by the executive that would be applied, and |
○ |
the net benefit if the payment had
been limited to the extent necessary to avoid the imposition of an excise
tax. |
This comparison will determine the higher
net benefit payable under the agreement. Benefits are not payable unless an
irrevocable release of any employment-related claims is signed. This change
reflects a best practice in the marketplace. In no event will the Company pay for excise taxes.
In 2013, the MDCC and the Board approved
and required our officers to sign amended change-in-control agreements. The new
agreements provide for double-trigger acceleration of equity-award vesting upon
a change in control when the acquiring company provides replacement awards as
substitution for outstanding equity awards. Previously, the agreements provided
for single-trigger equity-award vesting upon a change in control in all
circumstances. The double trigger requires both a change in control and a
qualifying termination of employment (i.e., involuntary termination without
cause or departure for good reason) for the vesting of equity awards to
accelerate. This treatment is widely recognized as a good governance practice,
as it prevents officers from receiving an
automatic windfall in the event of a change in control. It also serves as an
incentive for the officers to continue with the Company through and after a
change in control in order to receive the benefit of their unvested equity
awards.
As shown in greater detail in the above
table, our change-in-control agreements provide the following benefits to NEOs
only if there has been both a change in control of the Company and a qualifying
termination of employment, i.e., they are terminated without
cause by the new employer or the employee departs for good reason within two
years of the change in control (double-trigger benefits):
○ |
Cash severance payment equal to
three times the sum of base salary plus target MIP; |
○ |
Prorated MIP for the year of
termination of employment (based on target achievement if the employee is
terminated in the same year as the change in control, or based on actual
achievement if the employee is terminated in the year following the change
in control and the MIP payment has not yet been made); |
○ |
SERP participants whose benefit is
calculated under Formula A (see description above the Pension Benefits
table in this Section 7) will receive a benefit equal to the higher of (i)
50 percent of compensation, or (ii) the SERP Benefit that would be paid absent a change in control but with
three additional years of service and age. SERP participants whose benefit
is calculated under Formula B (see description above the Pension
Benefits table in Section 7) will receive their benefit calculated under
the Pension Restoration Plan that would be paid absent a change in
control, but with three additional years of service and age; |
○ |
Medical and dental insurance for
three years; and |
○ |
Where replacement awards are
provided in substitution for outstanding equity awards upon the change in
control, all such replacement awards vest and become
unrestricted. |
Beginning in 2012, for change-in-control
agreements with future non-CEO SLT members, the cash severance payment multiple
has been reduced to two times (from three times) the sum of base salary plus
target MIP, and the additional years of pension credit and the benefit
continuation period have been reduced to two years (from three
years).
78 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Compensation Discussion & Analysis
(CD&A) Narrative to Potential Payments Upon Qualifying
Termination After Change in Control Table |
A change in control is defined in our
agreements as any of the following events:
○ |
Acquisition of 30 percent or more of
the Companys stock; |
○ |
Change in the majority of the Board
of Directors within two consecutive years, unless two-thirds of the
directors in office at the beginning of the period approved the nomination
or election of the new directors; |
○ |
Merger or similar business
combination; |
○ |
Sale of substantially all of the
Companys assets; or |
○ |
Approval by our shareowners of a
complete liquidation or dissolution of the
Company. |
The lump sum cash severance benefit shown
above is payable only in the event of termination of employment without cause
within two years following a change in control. This includes voluntary
resignation only in limited situations that meet the definition of good
reason, listed below. Under no circumstance will an executive receive a cash
severance benefit under the agreement if he or she leaves voluntarily other than
for good reason, which is defined as:
○ |
The assignment to the executive of
duties inconsistent with his or her position or a substantial decrease in
responsibilities; |
○ |
Reduced annual base
salary; |
○ |
Elimination of a material
compensation plan (including the MIP, PSP or SERP) or a change in the
executives participation on substantially the same basis; |
○ |
Elimination of substantially similar
pension or welfare plans (except for across-the-board reductions of such
benefits for executives), or a material reduction of any fringe benefit,
or failure to provide the same number of vacation days; |
○ |
Failure by the Company to secure an
agreement by the successor to assume the change in control
agreement; |
○ |
Any other termination without
sufficient notice; or |
○ |
Relocation more than 50 miles from
place of work. |
Currently, the following benefits are
payable upon a change in control and do not require termination of
employment:
○ |
Where replacement awards (as defined
in the change-incontrol agreements) are not provided in substitution for
outstanding equity awards upon the change in control, all equity awards
vest and become unrestricted, as
follows: |
1. |
All PSP shares vest and the full
value of all PSP awards is paid for all performance periods (including
those not yet completed) based on (a) target performance if the change in
control occurs during the first year of the performance period, and (b)
actual performance measured through the date of the change in control if
it occurs on or after the first year of the performance period;
|
2. |
Service-based restricted stock
awards vest and become unrestricted; and
|
○ |
SERP participants whose benefit is
calculated under Formula A will vest in their benefit and the minimum
benefit will increase from 25 percent of compensation to 50 percent of
compensation. |
We have offered these limited
single-trigger benefits for the purpose of:
○ |
Maintaining our competitiveness in
attracting and retaining executive talent; |
○ |
Ensuring that our executives receive
the benefit of their efforts prior to a change in control and are not
penalized with a loss of equity compensation; and
|
○ |
Further aligning the interests of
our executives with our shareowners, since the risk of losing equity
compensation could create a conflict of interest for our executives if the
Company were pursuing a change-incontrol
transaction. |
In light of the difficulty in determining
relative performance achievement in our PSP following a change in control of the
Company, we provide for payment of PSP awards as described above. Further, in
light of the seniority of our covered executives, and their proximity to
retirement age, we believe that increasing their pension protection provides
appropriate retirement security in their employment following a change in
control.
www.ipannualmeeting.com |
79 |
Table of Contents
Ownership of Company Stock
|
Security
Ownership of Certain Beneficial Owners
The following table sets forth information
concerning beneficial ownership of our common stock by persons known to us to
own more than 5 percent of our common stock outstanding as of March 14, 2017,
the record date for our 2017 annual meeting.
Name and Address of Beneficial Owner |
|
Shares of Stock Beneficially Owned (#) |
|
Percentage of Common
Stock Outstanding (%) |
BlackRock, Inc.(1) |
|
37,744,035 |
|
9.14 |
The
Vanguard Group(2) |
|
28,186,805 |
|
6.83 |
Wellington Management Company, LLP(3) |
|
28,078,687 |
|
6.80 |
State Street Corporation(4) |
|
26,167,296 |
|
6.34 |
(1) |
The address of BlackRock, Inc. is 55 East 52nd Street,
New York, NY 10055. We have relied upon information supplied by BlackRock,
Inc. in a Schedule 13G furnished to us reporting information as of
December 31, 2016. According to the Schedule 13G, BlackRock, Inc. had sole
voting power over 34,126,446 shares, shared voting and dispositive power
over 21,605 shares, and sole dispositive power over 37,722,430
shares. |
(2) |
The address of The Vanguard Group (Vanguard) is 100
Vanguard Blvd., Malvern, PA 19355. We have relied upon information
supplied by Vanguard in a Schedule 13G furnished to us reporting
information as of December 31, 2016. According to the Schedule 13G,
Vanguard had sole voting power over 634,471 shares, shared voting power
over 68,836 shares, sole dispositive power over 27,486,039 shares and
shared dispositive power over 700,766 shares. |
(3) |
The address of Wellington Management Company, LLP
(Wellington) is 280 Congress Street, Boston, MA 02210. We have relied
upon information supplied by Wellington in a Schedule 13G furnished to us
reporting information as of December 31, 2016. According to the Schedule
13G, Wellington had shared voting power over 11,390,064 shares and shared
dispositive power over 28,078,687 shares. |
(4) |
The address of State Street Corporation (State Street)
is State Street Financial Center, One Lincoln Street, Boston, MA 02111. We
have relied upon information supplied by State Street in a Schedule 13G
furnished to us reporting information as of December 31, 2016. According
to the Schedule 13G, State Street had shared voting and dispositive power
over 26,167,296 shares. State Street held shares of common stock of the
Company as independent trustee in trust funds for employee savings, thrift
and similar employee benefit plans of the Company and its subsidiaries
(Company Trust Funds). In addition, State Street is trustee for various
third party trusts and employee benefit plans. The common stock held by
the Company Trust Funds is allocated to participants accounts and such
stock or the cash equivalent will be distributed to participants upon
termination of employment or pursuant to withdrawal rights. For purposes
of the reporting requirements of the Exchange Act, State Street is deemed
to be a beneficial owner of such securities; however, State Street
expressly disclaims that it is, in fact, the beneficial owner of such
securities. |
80 |
INTERNATIONAL PAPER
2017 Proxy
Statement |
Table of Contents
Ownership of Company Stock Security Ownership of Management
|
Security Ownership of
Management
The following table sets forth the number
of shares of our common stock beneficially owned by each of our directors and
NEOs, and by all of our directors and executive officers as a group, as of March
14, 2017, the record date for our 2017 annual meeting. Share and unit numbers
are rounded.
|
|
Amount and Nature of Beneficial
Ownership |
Name of Beneficial Owner |
|
Shares of Common Stock Held (#)(1) |
|
Stock Units Owned (#)(2) |
|
Percentage of Class (%) |
Non-Employee Directors |
|
|
|
|
|
|
David J. Bronczek |
|
63,208 |
|
5,074 |
|
* |
William J. Burns |
|
|
|
13,762 |
|
* |
Ahmet C. Dorduncu |
|
16,223 |
|
|
|
* |
Ilene S. Gordon |
|
29,228 |
|
|
|
* |
Jay
L. Johnson |
|
|
|
22,609 |
|
* |
Stacey J. Mobley |
|
47,728 |
|
3,691 |
|
* |
Kathryn D. Sullivan |
|
845 |
|
|
|
* |
John L. Townsend, III |
|
46,201 |
|
|
|
* |
William G. Walter |
|
2,857 |
|
102,065 |
|
* |
J.
Steven Whisler |
|
1,000 |
|
97,599 |
|
* |
Ray
G. Young |
|
2,000 |
|
16,284 |
|
* |
Named Executive Officers |
|
|
|
|
|
|
Mark S. Sutton |
|
681,005 |
|
2,313 |
|
* |
Carol L. Roberts (retired March 31, 2017) |
|
223,899 |
|
2,544 |
|
* |
Timothy S. Nicholls |
|
245,009 |
|
4,254 |
|
* |
Tommy S. Joseph |
|
147,935 |
|
1,818 |
|
* |
Sharon R. Ryan |
|
150,364 |
|
24,739 |
|
* |
All directors and executive officers as a group (24
persons) |
|
2,241,738 |
|
361,428 |
|
* |
* |
Indicates less than 1 percent of the
class of equity securities. |
|
(1) |
Includes securities over which the individual has, or,
with another shares, directly or indirectly, voting or investment power,
including ownership by certain relatives and ownership by trusts for the
benefit of such relatives, as well as target share payout amounts for
outstanding PSP awards. |
|
(2) |
Represents stock equivalent units owned by our NEOs
under the International Paper Company Deferred Compensation Savings Plan
or by our directors under the Restricted Stock and Deferred Compensation
Plan for Non-Employee Directors. These units will be paid out in cash and
are not convertible into shares of common stock. Accordingly, these units
are not included as shares of common stock beneficially
owned. |
Equity Compensation Plan
Information
The following table provides information
as of December 31, 2016, regarding compensation plans under which our equity
securities are authorized for issuance.
Plan Category |
|
Number of securities to be issued upon exercise of
outstanding options, warrants and rights (#) |
|
Weighted-average exercise price of outstanding
options, warrants and rights ($) |
|
Number of securities
remaining available for future issuance under equity
compensation plans (excluding securities reflected in first
column) (#) |
Equity compensation plans approved
by |
|
|
|
|
|
|
security holders |
|
|
|
|
|
14,330,514 |
Equity compensation plans not
approved |
|
|
|
|
|
|
by
security holders |
|
|
|
|
|
|
Total |
|
|
|
|
|
14,330,514 |
www.ipannualmeeting.com |
81 |
Table of Contents
|
INTERNATIONAL PAPER COMPANY C/O |
COMPUTERSHARE |
P.O. BOX
43004 |
PROVIDENCE, RI
02940-3004 |
VOTE BY INTERNET -
www.proxyvote.com
You may use the Internet to transmit
your voting instructions and for electronic delivery of information up until
11:59 P.M. EDT May 7, 2017, except that participants in the International Paper
Company Salaried Savings Plan or International Paper Company Hourly Savings Plan
must provide voting instructions on or before 11:59 P.M. EDT May 3, 2017. Have
your proxy card in hand when you access the web site and follow the instructions
on that site.
ELECTRONIC DELIVERY OF FUTURE
SHAREOWNER COMMUNICATIONS
If you would like to reduce the costs
incurred by International Paper Company in mailing proxy materials, you can
consent to receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery,
please follow the instructions above to vote using the Internet and, when
prompted, indicate that you agree to receive or access shareowner communications
electronically in future years.
VOTE BY PHONE
1-800-690-6903
You may use any touch-tone telephone to
transmit your voting instructions up until 11:59 P.M. EDT May 7, 2017, except
that participants in the International Paper Company Salaried Savings Plan or
International Paper Company Hourly Savings Plan must provide voting instructions
on or before 11:59 P.M. EDT May 3, 2017. Have your proxy card in hand when you
call and then follow the instructions the "Vote Voice" provides
you.
VOTE BY MAIL
Please mark, sign and date your proxy
card and return it in the postage-paid envelope we have provided or return it to
International Paper Company, c/o Broadridge Financial Solutions, Inc., 51 Mercedes Way, Edgewood, NY 11717 so that it is
received by May 7, 2017. Voting instructions provided by participants in the
International Paper Company Salaried Savings Plan or International Paper Company
Hourly Savings Plan must be received by May 3, 2017.
If you or your duly appointed proxy
holder are planning to attend the annual meeting of shareowners on May 8, 2017,
please check the box in the space indicated on the proxy card below, or so
indicate when you vote by Internet or phone. If you wish to attend the annual
meeting and vote the shares in person, please see How do I attend the annual
meeting? in the proxy statement. Shareowners
must bring proof of ownership and valid photo identification in order to be
admitted to the meeting.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK
INK AS FOLLOWS: |
|
E21724-P86440 |
KEEP THIS PORTION FOR YOUR RECORDS |
|
DETACH AND RETURN THIS PORTION
ONLY |
THIS
PROXY/VOTING INSTRUCTION CARD IS VALID ONLY WHEN SIGNED AND
DATED. |
INTERNATIONAL
PAPER COMPANY
|
The Board of Directors recommends a
vote "FOR" each of the nominees listed under Item 1. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 1 Election of Directors (one-year
term) |
|
|
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For |
|
Against |
|
Abstain |
|
|
Nominees: |
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|
|
|
|
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|
|
|
|
|
|
|
|
1a. |
|
David J.
Bronczek |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
|
|
|
|
|
|
1b. |
|
William J. Burns |
|
☐ |
|
☐ |
|
☐ |
|
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|
|
|
|
|
|
|
|
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|
1c. |
|
Ahmet C.
Dorduncu |
|
☐ |
|
☐ |
|
☐ |
|
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|
|
|
|
|
|
|
|
|
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|
1d. |
|
Ilene S. Gordon |
|
☐ |
|
☐ |
|
☐ |
|
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|
1e. |
|
Jay L. Johnson |
|
☐ |
|
☐ |
|
☐ |
|
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|
1f. |
|
Stacey J. Mobley |
|
☐ |
|
☐ |
|
☐ |
|
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|
|
|
|
|
|
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|
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|
1g. |
|
Kathryn D.
Sullivan |
|
☐ |
|
☐ |
|
☐ |
|
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|
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|
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|
1h. |
|
Mark S. Sutton |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
|
|
|
|
|
|
1i. |
|
John L. Townsend,
III |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
|
|
|
|
|
|
1j. |
|
William G.
Walter |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
For address changes and/or
comments, please check this box and write them on the back where
indicated. |
|
☐ |
|
|
|
|
|
|
|
|
|
Please indicate if you plan to attend this
meeting. |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Yes |
|
No |
|
|
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For |
|
Against |
|
Abstain |
|
|
|
|
|
|
|
|
|
1k. |
|
J. Steven
Whisler |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
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|
1l. |
|
Ray G. Young |
|
☐ |
|
☐ |
|
☐ |
|
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|
The Board of Directors
recommends a vote "FOR" Items 2 & 3. |
|
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|
|
|
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|
|
|
|
|
|
Item
2 |
|
|
|
Ratification
of Deloitte & Touche LLP as the Companys Independent Registered
Public Accounting Firm for 2017 |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
|
|
|
|
Item
3 |
|
|
|
A Non-Binding
Resolution to Approve the Compensation of the Companys Named Executive
Officers, as Disclosed Under the Heading" Compensation Discussion &
Analysis" |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
|
|
The Board of Directors
recommends a vote for "ONE YEAR" in Item
4. |
|
1
Year |
|
2
Years |
|
3
Years |
|
Abstain |
|
|
|
|
|
|
|
|
|
|
|
|
|
Item
4 |
|
|
|
A Non-Binding Vote on
the Frequency with which Shareowners Will Approve the Compensation of the
Companys Named Executive Officers in Future Years |
|
☐ |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
The
Board of Directors recommends a vote "AGAINST" Item 5. |
|
For |
|
Against |
|
Abstain |
|
|
|
|
|
|
|
|
|
|
|
Item
5 |
|
|
|
Shareowner
Proposal Concerning a Policy on Accelerated Vesting of Equity Awards of
Senior Executive Officers upon a Change in Control |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
|
|
|
|
In their discretion, the proxies are
authorized to vote upon such other business as may properly come before
the meeting. This proxy/voting instruction card, when properly executed,
will be voted in the manner directed herein by the undersigned
shareowner. If no direction is made,
this proxy/ voting instruction card will be voted FOR all of the nominees
in Item 1, FOR the Proposals in Items 2 and 3, FOR "One Year" in Item 4,
and AGAINST the Proposal in Item 5. If you are a participant in one or
more of the plans shown on the reverse side of this proxy/voting
instruction card, the shares will be voted by the Trustee in its
discretion. |
Please sign exactly as your name appears
on this proxy. When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
your full title. If a corporation, please sign in full corporate name by
authorized officer. If a partnership or LLC, please sign in firm name by
authorized partner or member.
|
|
|
|
|
|
Signature [PLEASE SIGN WITHIN BOX]
/ |
Date |
|
Signature (Joint Owners)
/ |
Date |
|
Table of Contents
Important Notice Regarding the
Availability of Proxy Materials for the Shareowner Meeting To Be Held on May 8,
2017:
A Form of Proxy, the Proxy Statement
and the Annual Report are Available at
http://materials.proxyvote.com/460146
INTERNATIONAL PAPER
COMPANY
SHAREOWNER PROXY AND CONFIDENTIAL
VOTING INSTRUCTION CARD ANNUAL
MEETING OF SHAREOWNERS MONDAY, MAY 8,
2017
THIS PROXY/VOTING INSTRUCTION CARD IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INTERNATIONAL PAPER COMPANY AND
BY THE TRUSTEES OF THE PLANS LISTED BELOW. THIS MAY ONLY BE USED AT THE ANNUAL MEETING OF SHAREOWNERS, TO BE HELD ON
MAY 8, 2017, AT 11 A.M. CDT AT THE INTERNATIONAL PAPER COMPANY HEADQUARTERS,
TOWER IV, LOCATED AT 1740 INTERNATIONAL DRIVE IN MEMPHIS, TENNESSEE 38119, AND
AT ANY ADJOURNMENT THEREOF.
If you are a registered shareowner, by
submitting this proxy you are appointing Mark S. Sutton, Glenn R. Landau and
Sharon R. Ryan, jointly or individually, as proxies with power of substitution,
to vote all shares you are entitled to vote at the Annual Meeting of Shareowners
on May 8, 2017, and any adjournment thereof. If no direction is made on the
reverse side, this proxy will be voted FOR all nominees in Item 1, FOR Items 2
and 3, FOR "One Year" in Item 4, and AGAINST Item 5. The proxies are authorized
to vote upon such other business as may properly come before the
meeting.
If you are a participant in either the
International Paper Salaried Savings Plan or the International Paper Hourly
Savings Plan, by signing this proxy/voting instruction card, you are instructing
the Trustee to vote the shares of common stock in accordance with your voting
instructions. The Company has authorized Broadridge as the agent to tabulate the
votes under each of the plans. Any shares held by the Trustee for which it has
not received voting instructions by Internet, phone or mail by 11:59 P.M. EDT
May 3, 2017, will be voted by the Trustee in its discretion. Plan participants
may attend the meeting but may only vote these shares by submitting voting
instructions by Internet, phone or mail by 11:59 P.M. EDT May 3,
2017.
The proxies are instructed to vote as
indicated on the reverse side. This proxy revokes all prior proxies given by
you. Please sign on the reverse side exactly as your name or names appear(s)
there. When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If a corporation, please sign in full corporate name by authorized
officer. If a partnership or LLC, please sign in firm name by authorized partner
or member.
|
|
|
|
|
Address
Changes/Comments: |
|
|
|
|
|
|
|
|
|
(If you noted any address
changes/comments, please mark the corresponding box on the reverse
side.) |
|
This regulatory filing also includes additional resources:
ipc_courtesy-pdf.pdf
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