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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Preliminary Proxy Statement |
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Definitive Proxy Statement |
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Definitive Additional
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Soliciting Material Under Rule
14a-12 |

Air Products and Chemicals, Inc.
(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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Fee computed on table below per
Exchange Act Rules 14a-6(i)(1) and 0-11. |
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which transaction applies: |
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which transaction applies: |
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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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Fee paid previously with preliminary
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Check box if any part of the fee is
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the previous filing by registration statement number, or the form
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Table
of Contents

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Proxy Statement
for
2021
Annual Meeting of Shareholders
Thursday,
January 28, 2021
2:00 p.m. (Eastern Time)
Virtual
Meeting Website: www.virtualshareholdermeeting.com/APD2021
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Table
of Contents
Proxy Statement
We have provided you this Notice of Annual Meeting and
proxy statement because the Board of Directors (the “Board”) of Air
Products and Chemicals, Inc. (the “Company” or “Air Products”) is
soliciting your proxy to vote at the Company’s 2021 Annual Meeting
of Shareholders on January 28, 2021 (the “Annual Meeting”). This
proxy statement contains information about the items to be voted on
at the Annual Meeting and information about the Company.
Instructions on how to access this proxy statement and our 2020
Annual Report to Shareholders on the Internet or paper copies of
the proxy statement and Annual Report are first being sent to
shareholders on or about December 9, 2020.
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Table
of Contents
Message to Our
Shareholders |
December 9,
2020
On behalf
of the Board of Directors, I am pleased to invite you to attend the
2021 Annual Meeting of Shareholders of Air Products and Chemicals,
Inc. to be held on Thursday January 28, 2021 at 2:00 p.m. (Eastern
Time). This year’s Annual Meeting will be held in a virtual format
through a live audio webcast, which can be accessed at
www.virtualshareholdermeeting.com/APD2021. Shareholders participating in the meeting will have
the ability to submit questions during the live audio
webcast.
Attached
you will find a Notice of Annual Meeting and proxy statement that
contain additional information, including the items of business and
methods you can use to vote your proxy, such as the telephone or
Internet. Your vote is important. I encourage you to sign and return your proxy card or use
Internet, mobile device or telephone voting prior to the meeting,
so that your shares of common stock will be represented and voted
at the meeting, even if you cannot attend.
Over the
past six years, we have transformed Air Products into the best
performing industrial gas company in the world. As we continue to
execute our strategic Five-Point Plan, we are creating sustainable
growth opportunities to deliver value to our shareholders,
customers, employees and communities around the world.
In 2020, we
were presented with unprecedented challenges due to the COVID-19
pandemic. I am very proud of how our team around the world rose to
the occasion demonstrating their commitment to keeping our 750
plants running, supplying customers with essential products,
winning new deals and improving our profitability. I would like to
thank our more than 19,000 employees for their unwavering
commitment to keeping Air Products operating successfully during
these difficult times.
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I am
excited about making our dreams of the future a reality. As we move
forward, we have significant opportunities to help solve the
world’s urgent energy and environmental needs through large-scale
gasification, carbon capture and hydrogen for mobility megaprojects
designed to move us towards a better future.
In fiscal
2020, we announced the $7 billion NEOM project, which will enable
Air Products to supply carbon-free hydrogen to power buses and
trucks by 2025 and eliminate three million tons-per-year of
CO2
emissions, smog-forming emissions and
other pollutants from the equivalent of more than 700,000 cars. We
also signed a long-term on-site contract for a world-scale
coal-to-methanol production facility in Indonesia, supporting
energy independence and enabling the production of nearly two
million tons-per-year of methanol. And, we announced our
largest-ever investment in the United States for the Gulf Coast
Ammonia project in Texas.
In addition
to delivering superior financial performance, our people know that
they are supporting a higher purpose in the work that they do every
day. Our higher purpose at Air Products is to bring people around
the world together, so that they can collaborate and develop
innovative solutions to some of the most significant energy and
environmental challenges we all face. That higher purpose inspires
our team and drives us every day.
There is
more to come, as we focus on creating and winning projects that
help customers and countries meet their growing needs.
I look
forward to speaking with fellow shareholders in January. Until
then, stay well and stay safe.
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“I am very proud of how our team
around the world rose to the occasion demonstrating their
commitment to keeping our 750 plants running, supplying customers
with essential products, winning new deals and improving our
profitability.”
All the
best,

Seifi
Ghasemi Chairman,
President and Chief Executive Officer
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Table
of Contents
Notice of Annual Meeting
of Shareholders |
Date and
Time
Thursday, January 28, 2021 2:00 p.m.
(Eastern Time)
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Virtual
Meeting
To support the health and well-being of
our employees and shareholders, the 2021 Annual Meeting of
Shareholders will be conducted virtually at:
www.virtualshareholdermeeting.com/APD2021.
Procedures
for attending and participating in the virtual meeting are
explained on page 68.
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Record
Date
Shareholders of record at the close of business on November
30, 2020 are entitled to receive this notice and to vote at the
meeting.
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Important Notice Regarding Internet Availability of Proxy
Materials for the Air Products and Chemicals, Inc. 2021 Annual
Meeting of Shareholders To Be Held on January 28,
2021:
Our
proxy statement and 2020 Annual Report to Shareholders are
available at www.proxyvote.com.
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Company Proposals |
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Board Vote
Recommendation |
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Votes Required |
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Proposal
1. Elect the
eight nominees proposed by the Board of Directors as directors for
a one-year term ending in 2021.
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FOR |
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Majority of
Votes Cast
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1
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Proposal
2. Conduct an
advisory vote on executive officer compensation.
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FOR |
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Majority of
Votes Cast
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19
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Proposal
3. Approve the Air
Products and Chemicals, Inc. 2021 Long-Term Incentive
Plan.
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FOR
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Majority of
Votes Cast
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51
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Proposal
4. Ratify the
appointment of Deloitte & Touche LLP as the Company’s
independent registered public accounting firm for the fiscal year
ending September 30, 2021.
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FOR
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Majority of
Votes Cast
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59
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Shareholders will also attend to such other business as may
properly come before the meeting or any postponement or adjournment
of the meeting.
Shareholders of Record (shares registered in your name
with the Company’s transfer agent) and Retirement Savings Plan
Participants:
Street
Name Holders (shares held
through a broker, bank or other nominee): Refer to the voting
instruction form provided by your broker, bank or other
nominee.
Whether you
plan to attend the meeting or not, please submit your proxy as soon
as possible in order to avoid additional soliciting expense to the
Company. The proxy is revocable and will not affect your right to
vote if you attend the meeting.
By order of
the Board of Directors,

Sean D.
Major
Executive Vice
President, General Counsel and Secretary
December 9, 2020
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Table
of Contents
Proxy Statement
Highlights |
This section summarizes information contained
elsewhere in the proxy statement. These highlights do not contain
all the information that you should consider before voting or
provide a complete description of the topics covered. Please read
the entire proxy statement before voting.
Fiscal 2020 Company
Performance Highlights
EARNINGS
PER SHARE |
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Increased 8%
over fiscal
2019. |
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ADJUSTED
EARNINGS PER SHARE1 |
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Increased 2%
over fiscal
2019. |
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NET
INCOME |
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Increased 7%
over fiscal
2019. |
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ADJUSTED
EBITDA1 |
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Increased 4%
over fiscal
2019. |
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Safety
Performance |
Although
our safety record improved in fiscal 2020, with a 63% improvement
in the employee lost time injury rate and a 31% improvement in the
employee recordable injury rate since fiscal 2014, the Company did
not achieve all of its safety objectives in fiscal
2020. |
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Operational Performance |
The
Company demonstrated its strength, character and compassion during
the COVID-19 pandemic by supporting its talented, dedicated
workforce, keeping plants running and supplying critical products,
winning significant new growth projects worldwide and supporting
local communities. The Company continued to execute its
gasification strategy and signed an agreement to produce
carbon-free hydrogen in Saudi Arabia and a long-term on-site
contract for a world scale coal-to-methanol production facility in
Indonesia. |
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Returns
to Shareholders |
The Company returned approximately $1.1
billion to shareholders through dividends, increasing dividends for
the 38th consecutive year. |
1 |
This is a financial measure not
calculated in accordance with United States generally accepted
accounting principles (“GAAP”). See Appendix A for a reconciliation
to the most directly comparable financial measure calculated under
GAAP. |
Table
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Sustainability at Air
Products
Providing innovative solutions through
deeply-rooted values
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Grow responsibly through
sustainability-driven opportunities that benefit our customers and
our world.
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Conserve resources and reduce
environmental footprints through cost-effective
improvements.
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Care for our employees,
customers and communities—protecting our ability to operate and
grow.
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We help
customers improve their sustainability performance through higher
productivity, better quality products, reduced energy use and lower
emissions.
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We set
aggressive environmental performance goals for greenhouse gas
emissions, energy, water and our fleet. We measure our progress to
continually improve our operations.
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We continue
to nurture a culture of safety, simplicity, speed and
self-confidence.
Our goal is
zero accidents and zero incidents. We are committed to developing
our people, supporting our communities, engaging suppliers and
upholding our integrity.
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The Company
was ranked 10th on Barron’s List of the 100 Most
Sustainable Companies in 2020 and named to the Dow Jones
Sustainability Index (North America), ISSoekom Prime, FTSE4Good
Index, Ethibel Sustainability Index (Excellence Global) and
Corporate Responsibility Magazine’s 100 Best Corporate Citizens and
received a gold rating from EcoVadis in 2019 and 2020. The Company
was selected as a Corporate Equality Index Best Place to Work for
LGBT Equality in 2019 and 2020 for its diversity and inclusion
initiatives.
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Table
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Voting Roadmap
PROPOSAL 1
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Elect the eight nominees proposed by the Board of
Directors as directors for a one-year term ending in
2022.
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The Board recommends a
vote “FOR”
each of the eight
nominees. |
» Page 1 |
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The
individuals nominated for election to the Board are all current
directors and possess a broad range of qualifications and skills
that facilitate strong oversight of Air Products’ management and
strategy. Our directors have diverse backgrounds and experiences
and have demonstrated a commitment to strong corporate governance,
shareholder engagement and sustainability.
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AF |
Audit and Finance |
CGN |
Corporate Governance and
Nominating |
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● Chair |
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E |
Executive |
MDC |
Management Development and
Compensation |
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Member |
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Table
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Independence 88% Independent
7
Independent 1 Not Independent
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Diversity 50% Diverse
4
Diverse 4 Other
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Tenure 6.6
years Average
Tenure
2
Newer Directors (5 years or
less) 6 Medium-Tenured
Directors (6 to 10 years)
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Director Qualifications and
Skills |
The Board
possesses a broad range of qualifications and skills that
facilitate strong oversight of Air Products’ management and
strategy. The following matrix identifies the primary skills that
the Corporate Governance and Nominating Committee and the Board
considered in connection with the re-nomination of the current
directors.*
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Carter |
Cogut |
Davis |
Deaton |
Ghasemi |
Ho |
Monser |
Paull |
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Accounting/Financial
Reporting |
● |
● |
● |
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Corporate Governance |
● |
● |
● |
● |
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Diverse Director |
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Executive Leadership |
● |
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● |
● |
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Finance and Capital
Management |
● |
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● |
● |
● |
● |
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Government Relations |
● |
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● |
● |
● |
● |
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Industry/Operations |
● |
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● |
● |
● |
● |
● |
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Information Technology |
● |
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International Experience |
● |
● |
● |
● |
● |
● |
● |
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Investor Relations |
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Large Industrial Projects |
● |
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● |
● |
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Legal Affairs |
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Logistics Experience |
● |
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● |
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Mergers & Acquisitions |
● |
● |
● |
● |
● |
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Oil and Gas Experience |
● |
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● |
● |
● |
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● |
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Technology |
● |
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● |
● |
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● |
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* |
The absence of a mark does not
necessarily indicate that the director does not possess that
qualification or skill. |
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Table
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The Board
believes that fostering long-term relationships with shareholders,
listening to their concerns and maintaining their trust and
goodwill is a prerequisite to good governance.
Management conducts extensive
engagements with key shareholders. |
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These engagements include discussions
about governance, compensation, sustainability and safety, as well
as financial and operational matters, to ensure that management and
the Board understand and address the issues that are important to
our shareholders. |
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The Board oversees the discharge by
management of shareholder communication and engagement and receives
regular reports on shareholder comments and feedback. The Board
encourages dialogue on issues of interest to
shareholders. |
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The Board also specifically seeks to
understand any significant voting trends regarding the Company’s
executive officer compensation program and other governance
matters. |
The Board
of Directors has accountability for oversight of our environmental
and safety performance, which it reviews at least quarterly. The
Corporate Governance and Nominating Committee has responsibility
for monitoring our response to important public policy issues,
including sustainability, which is reviewed on a routine basis.
Business ethics, climate change, diversity and talent management
are key subjects related to sustainability that are discussed by
the Board. The Board also reviews our progress against our new
“Third by ‘30” carbon intensity goal, which was established in 2020
for achievement by 2030. This new sustainability goal is focused on
reducing our carbon dioxide (CO2) emissions
intensity (kg/CO2/MM BTU) by
one-third by the year 2030 from a 2015 baseline. We set this new
target in 2020 after successfully attaining many of our 2020
Sustainability Goals. We also established new goals related to
diversity. We are dedicated to achieving at least 28% female
representation in the professional and managerial population
globally by 2025 as well as at least 20% minority representation in
the same population in the United States by 2025. We continue to
engage in developing sustainability goals in other areas related to
our Grow-Conserve-Care sustainability framework. In addition, the
Management Development and Compensation Committee has structured
our executive compensation program to balance financial results
with other Company values such as sustainability, safety, diversity
and ethical conduct. We also engage with our shareholders on
sustainability matters.
For
information about how we manage sustainability, including our 2020
Sustainability Goals, and to access our 2020 Sustainability Report,
please visit the sustainability page of our website.
 |
2020 Corporate Sustainability
Report*
www.airproducts.com/company/sustainability.aspx |
* |
The
information on the sustainability website is not incorporated by
reference into, and does not form part of, this proxy
statement. |
Table
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PROPOSAL 2
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Conduct an advisory vote on executive officer
compensation. |
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The
Board recommends a vote “FOR” this item. |
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Page 19 |
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As
described in the Compensation Discussion and Analysis, our
executive officer compensation program has been designed to support
our long-term business strategies and drive creation of shareholder
value. It is aligned with the competitive market for talent,
sensitive to Company performance and oriented to long-term
incentives to maintain and improve the Company’s long-term
profitability. We believe our program delivers reasonable pay that
is strongly linked to Company performance. |
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Fiscal
2020 Compensation Highlights |
● |
Median Pay
Program. The executive officer
compensation program is designed to deliver compensation that
approximates the median for one or more carefully selected peer
groups and that exceeds the median when performance exceeds
expectations. Based on Mr. Ghasemi’s superior performance across
his tenure with Air Products, the Management Development and
Compensation Committee positioned compensation of our Chief
Executive Officer (“CEO”) to approximate the 75th
percentile of the market. |
● |
Shareholder Focused Performance Metrics. Fiscal 2020 executive officer incentive
compensation performance metrics support the Company’s priorities
for creation of shareholder value. |
Say on Pay
Support
At the January 2020 Annual Meeting of Shareholders,
our shareholders supported the Company’s executive officer
compensation program with approximately 96.01% of votes cast in favor of approval.
Below is a
summary of the components of total direct compensation for fiscal
2020 delivered to our CEO and our other named executive
officers.
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Type |
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CEO Target |
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Other
Named Executive
Officer Target |
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Key Terms |
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Base Salary
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●Target at market
median with adjustment based on level of responsibility, experience
and individual performance
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Annual Incentive
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●Target payout
references market median
●Payout driven by
aggressive adjusted earnings per share (“EPS”) target
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Long-Term Incentives
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●Target value based on
market median for long-term incentives
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Performance Shares
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●Actual payout based
on relative total shareholder return (“TSR”) over three-year
performance period
●50th
percentile required for target payout
●Actual value
determined by shareholder returns during vesting
period
●Restricted Stock
Units vest over four-year period
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Restricted Stock Units
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Table
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Pay and
Performance Alignment |
Below is
the Equilar Inc. Pay for Performance Profile for the 2017-2019
reported periods comparing Air Products’ CEO compensation and TSR
to that of the members of the S&P 500 Basic Materials Sector
for the past three years (reflecting TSR calendar years 2017-2019
and Summary Compensation Table total compensation for CEOs and CEO
ISS Realizable Pay for fiscal years ending with or within calendar
years 2017-2019).
TSR |
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TSR |
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CEO Total
Compensation (Summary Compensation Table) |
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CEO Realizable
Pay |
Compensation Governance Best Practices |
The
Management Development and Compensation Committee recognizes that
shareholders want assurance that the processes for determining and
paying executive officer compensation reflect thoughtful
stewardship of the Company’s resources. The Committee has adopted
the following practices, among others, to demonstrate its
commitment to this principle:
COMPENSATION GOVERNANCE HIGHLIGHTS
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✓ |
Independent directors make final
compensation decisions pertaining to executive
officers. |
✓ |
The Committee is advised by an
independent compensation consultant. |
✓ |
Executive sessions are held at all
Board and Committee meetings. |
✓ |
Compensation is targeted at median for
similar industrial companies. |
✓ |
Stringent stock ownership guidelines
maintained for directors. |
✓ |
Executive officers are prohibited from
hedging or pledging Company stock. |
✓ |
Performance goals and formulas are
consistently administered. |
✓ |
Dilution and burn rate relative to
peers are reviewed annually. |
✓ |
Change in control arrangements require
double-trigger for vesting. |
✓ |
Clawback policy in place to deter
executive officer misconduct and reclaim certain awards and
incentives. |
Table
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PROPOSAL 3
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Approve the Air Products and Chemicals, Inc. 2021 Long-Term
Incentive Plan. |
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The
Board recommends a vote “FOR” this item. |
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Page 51 |
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Shareholders are being asked to approve the Air Products
and Chemicals, Inc. 2021 Long-Term Incentive Plan (the “Plan”),
which will be used to grant equity compensation awards to our
employees, including our executive officers, and directors as
described herein. After review, the Board, acting upon the
recommendation of the Management Development and Compensation
Committee, determined that it was in the best interests of the
Company to adopt a new plan to provide for the continued issuance
of equity compensation to our employees, officers and
directors. |
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This
proposal requests that our shareholders approve the Air Products
and Chemicals, Inc. 2021 Long-Term Incentive Plan. The Plan was
adopted by the Board in November 2020, subject to receipt of
shareholder approval. As described in the Compensation Discussion
and Analysis in this proxy statement, long-term incentives are an
important component of our executive compensation program. The Plan
contains a number of provisions that the Board believes are
consistent with our shareholders’ interests and sound corporate
governance practices. Shareholder approval of the Plan will allow
us to carry out our objectives of providing meaningful equity
compensation to align the interests of award recipients with our
shareholders and provide strong incentives for our employees to
execute our corporate strategy and positively influence our overall
performance. If our shareholders approve the Plan, it will take
effect immediately and replace our Long-Term Incentive Plan.
Outstanding awards granted under the Long-Term Incentive Plan will
remain in effect pursuant to their terms. The full text of the Plan
is attached hereto as Appendix B.
PROPOSAL 4
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Ratify the
appointment of Deloitte & Touche LLP as the Company’s
independent registered public accounting firm for the fiscal year
ending September 30, 2021. |
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The
Board recommends a vote “FOR” this item. |
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Page 59 |
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The
Audit and Finance Committee selected Deloitte & Touche LLP
(“Deloitte”) as our independent registered public accounting firm
for fiscal 2021. The Board believes that the engagement of Deloitte
as our independent registered public accounting firm for fiscal
2021 is in the best interests of the Company and is submitting the
appointment of Deloitte to our shareholders for ratification as a
matter of good corporate governance. |
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This
proposal requests that our shareholders ratify the Audit and
Finance Committee’s appointment of Deloitte as our independent
registered public accounting firm for the fiscal year ending
September 30, 2021. Deloitte has served as our independent
registered public accounting firm since our 2019 fiscal
year.
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Table
of Contents
Corporate Governance at Air
Products |
PROPOSAL 1
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Election of Directors
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The Board has nominated its eight
incumbent directors for election to the Board for terms expiring at
the 2022 Annual Meeting of Shareholders following the election and
qualification of their successors: Susan K. Carter, Charles I.
Cogut, Lisa A. Davis, Chadwick C. Deaton, Seifollah (“Seifi”)
Ghasemi, David H.Y. Ho, Edward L. Monser and Matthew H. Paull.
Biographical information on these nominees and a description of
their qualifications to serve as directors appear beginning on page
3. Each nominee elected as a director is expected to continue in
office until his or her term expires or until his or her earlier
retirement, resignation, removal or death.
Each of the nominees has consented
to be named in this proxy statement and has agreed to serve if
elected. If a nominee is unavailable for election at the time of
the Annual Meeting, the Company representatives named on the proxy
card will vote for another nominee proposed by the Board or, as an
alternative, the Board may reduce the number of directors on the
Board.
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The
Board recommends a vote “FOR”
the
election of Ms. Carter, Mr. Cogut, Ms. Davis, Mr. Deaton, Mr.
Ghasemi, Mr. Ho, Mr. Monser and Mr. Paull. |
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All of the
individuals nominated for election to the Board are current
directors and possess a broad range of qualifications and skills
that facilitate strong oversight of Air Products’ management and
strategy. Our directors have diverse backgrounds and experiences
and have demonstrated a commitment to strong corporate governance,
shareholder engagement and sustainability.
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The Board of
Directors
The Board
has established the following minimum qualifications for all
non-management directors:
✓Business
experience
✓Judgment
✓Independence
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✓Integrity
✓Ability to commit
sufficient time and attention to the activities of the
Board
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✓Absence of any
potential conflicts with the Company’s
interests
✓An ability to
represent the interests of all shareholders
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While the
Board has not adopted a formal policy on diversity, the Corporate
Governance Guidelines (the “Guidelines”) provide that, as a whole,
the Board should include individuals with a diverse range of
experiences to give the Board depth and breadth in the mix of
skills represented. The Board seeks to include an array of skills,
perspectives and experience in its overall composition. This
mandate is implemented by seeking to identify candidates that bring
diverse skill sets, backgrounds and experiences, including ethnic,
gender and geographic diversity, to the Board when director
candidates are needed. The Board believes its current members
reflect a diverse array of skills, perspectives and experience as
well as ethnic, gender and geographic diversity. For additional
information, please refer to our directors’ skills matrix on page
vi and the information on page 2.
Table
of Contents
The Board
is composed of a diverse group of leaders in their respective
fields. Our directors have leadership experience at major domestic
and international companies with operations inside and outside the
United States. Our directors also have experience on other
companies’ boards, which provides an understanding of different
business processes, challenges, strategies and approaches to
problem-solving. Our directors have substantial experience in key
aspects of our operations, finance and capital management and
government relations as well as in the market sectors we serve,
including the energy, electronics and chemicals industries. Our
directors also possess extensive experience in functional areas
that are important to the execution of their oversight
responsibilities, including corporate governance, accounting and
financial reporting, information technology, mergers and
acquisitions, investor relations and legal affairs. We believe all
of our directors have personal traits such as candor, integrity,
commitment and collegiality that are essential to effective
corporate governance.
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Independence
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Diversity
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Tenure
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88%
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50%
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6.6 years
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Independent
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Diverse
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Average
Tenure
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7
Independent
1
Not Independent
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4
Diverse
4
Other
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2 Newer
Directors (5 years or less)
6 Medium-Tenured Directors (6 to 10 years)
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Board Qualifications
and Skills
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The Board
believes that it is desirable that the following experience,
qualifications and skills be possessed by one or more of Air
Products’ Board members because of their particular relevance to
the Company’s business and strategy.
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Table
of Contents
Information
follows about the age and business experience of the director
nominees and the particular experience, qualifications, attributes
and skills that led the Board to conclude that each nominee should
continue to serve as a director. All of the nominees are currently
directors.
Age
62
Director
Since 2011
Committees Audit and Finance
Management
Development and
Compensation
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Susan K.
Carter Independent
Retired Senior Vice President and Chief
Financial Officer of Ingersoll-Rand Public Limited
Company
Background
Susan K.
Carter is the retired Senior Vice President and Chief Financial
Officer of Ingersoll-Rand Public Limited Company (renamed Trane
Technologies plc on February 29, 2020), a diversified industrial
company now known as Trane Technologies plc. She joined
Ingersoll-Rand in September 2013 and retired in April 2020. Prior
to joining Ingersoll-Rand, Ms. Carter served as Executive Vice
President and Chief Financial Officer of KBR, Inc. from 2009 to
2013, as Executive Vice President and Chief Financial Officer of
Lennox International Inc. from 2004 to 2009 and as Vice President
and Chief Accounting Officer of Cummins, Inc. from 2002 to 2004.
She also has held senior financial and accounting roles at
Honeywell International Inc., DeKalb Corporation and Crane Co. Ms.
Carter currently serves as a director of ON Semiconductor
Corporation. Ms. Carter received a Bachelor’s degree in Accounting
from Indiana University and received a Master’s degree in Business
Administration from Northern Illinois University. She is a
Certified Public Accountant.
Qualifications
Ms. Carter
has significant experience in financial reporting, information
technology, accounting, finance and capital management, investor
relations and international operations due to her experience as
chief financial officer for a series of global publicly held
corporations. Her background provides the Board with broad
expertise in international financial and operational issues as well
as significant understanding of financial reporting issues and
issues relating to acquisitions and divestitures.
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Age
73
Director
Since 2015
Committees Audit and Finance
Corporate
Governance and
Nominating
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Charles I.
Cogut Independent
Retired Partner, Simpson Thacher &
Bartlett LLP
Background
Charles
“Casey” Cogut is a retired partner of Simpson Thacher &
Bartlett LLP (“STB”). Mr. Cogut joined the New York-based law firm
in 1973 and served as partner in STB from 1980 to 2012 and as a
Senior Mergers and Acquisitions Counsel at STB from 2013 to 2016.
For many years he was a leading member of STB’s merger and
acquisitions and private equity practices. He specialized in
domestic, international and cross-border mergers and acquisitions,
the representation of special committees of boards of directors,
buyouts and other transactions involving private equity firms. In
addition, he regularly advised boards of directors with respect to
corporate governance matters and fiduciary responsibilities. From
1990 to 1993, he served as senior resident partner in the firm’s
London office. Mr. Cogut received his J.D. in 1973 from the
University of Pennsylvania Law School after graduating summa cum
laude from Lehigh University in 1969. He is a member of the Board
of Overseers of the University of Pennsylvania Carey Law School. He
also is a director of The Williams Companies, Inc. and a Vice Chair
of the Board of Trustees and a member of the Executive Committee of
Cold Spring Harbor Laboratory. He was formerly a director of
Patheon N.V.
Qualifications
Mr. Cogut
brings to the Board expertise in corporate governance and fiduciary
responsibilities of directors. He also has extensive experience in
multi-jurisdictional mergers and acquisitions and other complex
transactions. He has been recognized as one of the leading
corporate lawyers in the United States.
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Table
of Contents
Age
57
Director
Since 2020
Committees Corporate
Governance and
Nominating
Management
Development and
Compensation
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Lisa A. Davis
Independent
Former Member of the Managing Board for
Siemens AG and Former Chair and CEO of Siemens Corporation
USA.
Background
Lisa A.
Davis served from August 2014 to February 2020 as a member of the
Managing Board for Siemens AG with responsibility as CEO for
Siemens Gas and Power, which included Power Generation, Power
Services, Oil and Gas, Transmission and New Fuels, and operated in
over 80 countries. During her tenure at Siemens, she also served as
Chair and Chief Executive Officer of Siemens Corporation USA and as
a member of the Board of Directors of Siemens Gamesa Renewable
Energy SA.
From 2012
to August 2014, Ms. Davis served as Executive Vice President,
Strategy, Portfolio & Alternative Energy of Royal Dutch Shell,
UK. Prior to that, Ms. Davis served in various capacities and
leadership positions with Royal Dutch Shell, Texaco USA and Exxon
Corporation in upstream and downstream operations and project
development. Ms. Davis currently serves on the Board of Directors
of Penske Automotive Group, Inc., Kosmos Energy Ltd. and Phillips
66. Ms. Davis holds a Bachelor of Science degree in Chemical
Engineering from the University of California, Berkeley.
Qualifications
Ms. Davis
has significant experience leading large, multi-faceted
international businesses. She also has extensive experience leading
teams in developing world-scale energy and environmental projects
as well as experience with public company board service in the US
and Europe. Ms. Davis will provide the Board with a solid
understanding of these types of projects, which represent an
important and growing portion of our business.
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Age
68
Director
Since 2010
Committees Corporate
Governance and
Nominating
(Chair)
Executive
Management
Development and
Compensation
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Chadwick C.
Deaton Independent, Lead Director
Retired Chairman and Chief Executive
Officer of Baker Hughes Incorporated
Background
Chadwick
“Chad” Deaton is the retired Chairman of Baker Hughes Incorporated,
an oilfield services and products provider with operations in over
90 countries. He joined Baker Hughes in 2004 and served as Chairman
and Chief Executive Officer through 2011. He became Executive
Chairman in January 2012 and retired from that position in April
2013. Previously, Mr. Deaton was President and Chief Executive
Officer of Hanover Compressor Company (now Exterran Holdings, Inc.)
and Senior Advisor and Executive Vice President of Schlumberger
Oilfield Services. Mr. Deaton is a director of Marathon Oil
Corporation and Chairman of Transocean Ltd. He is also a former
director of CARBO Ceramics, Inc., Hanover Compression Company and
Baker Hughes. He is a director of Houston Achievement Place, a
member of the Society of Petroleum Engineers and the Governor of
Wyoming’s Engineering Task Force for the University of Wyoming. He
also serves as a director for the University of Wyoming Foundation.
Mr. Deaton earned a Bachelor’s degree in Geology from the
University of Wyoming.
Qualifications
As a former
chairman and chief executive officer of a public company with
global operations, Mr. Deaton brings to the Board international
business experience and executive leadership experience in
operations, technology, talent management and corporate governance.
In addition, his 30-year career in the petrochemicals and energy
businesses provides him with expertise in key customer segments for
the Company.
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Table
of Contents
Age
76
Director
Since 2013
Committees Executive (Chair)
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Seifollah (“Seifi”)
Ghasemi
Chairman, President and Chief Executive
Officer of the Company
Background
Prior to
joining Air Products, from 2001 to 2014, Mr. Ghasemi served as
Chairman and Chief Executive Officer of Rockwood Holdings, Inc., a
global leader in inorganic specialty chemicals and advanced
materials that was acquired by Albemarle Corporation in January
2015. From 1997 to 2001, he held leadership roles at GKN, a global
industrial company, including positions as director of the Main
Board of GKN, plc and Chairman and Chief Executive Officer of GKN
Sinter Metals, Inc. and Hoeganes Corporation. Earlier in his
career, Mr. Ghasemi spent nearly 20 years with The BOC Group (an
industrial gas company that is now part of Linde AG) in positions
including director of the Main Board of BOC Group, plc, President
of BOC Gases Americas and Chairman and Chief Executive Officer of
BOC Process Plants, Ltd. and Cryostar. He is a former director of
Rockwood Holdings, Inc. and EnerSys. Mr. Ghasemi also served as
non-executive Chairman of Versum Materials, Inc. (“Versum”) until
its acquisition by Merck KGaA in October 2019. Mr. Ghasemi earned
his undergraduate degree from Abadan Institute of Technology and
holds a Master’s degree in Mechanical Engineering from Stanford
University. Mr. Ghasemi also was awarded an honorary Doctor of
Science degree from Lafayette College.
Qualifications
Mr. Ghasemi
brings to the Board strong leadership and extensive management and
operating experience, including deep experience in the industrial
gases and specialty chemicals industries, and a solid understanding
of key end markets for the Company. His prior executive leadership
of an international chemical company also provides substantial
experience in governance and portfolio management, strategic
planning, talent management and international operations. He
provides the Board with candid insights into the Company’s
industry, operations, management team and strategic opportunities
and threats.
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Age
61
Director
Since 2013
Committees Audit and Finance
Management
Development and
Compensation
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David H.Y. Ho
Independent
Chairman and Founder of Kiina
Investment Ltd.
Background
David H.Y.
Ho is Chairman and Founder of Kiina Investment Ltd., a venture
capital firm that invests in startup companies in the technology,
media and telecommunications industries. Mr. Ho previously served
as Chairman of Greater China for Nokia Siemens Networks, President
of Greater China for Nokia Corporation and Senior Vice President of
the Nokia Networks Business Group. He has also held senior
leadership roles with Nortel Networks and Motorola in China and
Canada. Mr. Ho currently serves as a member of the board of
directors of Qorvo, Inc. He also serves as a member of the board of
directors of a state-owned enterprise in China, China COSCO
Shipping Corporation, and is on the board of directors of DBS Bank
Hong Kong Limited, the Hong Kong subsidiary of DBS Group Holdings.
Mr. Ho previously served as a director of nVent Electric plc,
Pentair plc and Triquent Semiconductor, Inc. prior to its merger
with R. F. Micro Devices to form Qorvo, Inc. He also served as a
director of China Ocean Shipping Company prior to its merger with
China Shipping Group. Mr. Ho also previously served as a director
of China Mobile Communications Corporation, Dong Fang Electric
Corporation and Owens Illinois, Inc. He holds a Bachelor’s degree
in Engineering and a Master’s degree in Management Sciences from
the University of Waterloo in Canada.
Qualifications
Mr. Ho has
extensive experience establishing and building businesses in China
and in international joint venture operations, government relations
and Asian operations and marketing. His background brings
significant value to the Company as we execute on our Asian
strategy. He also has executive leadership experience in the
electronics and technology industries, which are key customer
segments for the Company.
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Table
of Contents
Age
70
Director
Since 2013
Committees Audit and Finance
Executive
Management
Development and
Compensation
(Chair)
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Edward L.
Monser Independent
Retired President and Chief Operating
Officer of Emerson Electric Co.
Background
Mr. Monser
was the President of Emerson Electric Co., a global industrial
controls products company, from 2010 until his retirement in 2018.
At the time of his retirement, Mr. Monser had more than 30 years of
experience in senior operational positions at Emerson and played
key roles in globalizing the company, having held increasingly
senior positions, including Chief Operating Officer from 2001 to
2015 and President of its Rosemount Inc. subsidiary from 1996 to
2001 as well as holding various operations, new product
development, engineering and technology positions. Mr. Monser
currently serves as a director of Vertiv, a private company that
provides equipment and services for datacenters, and Canadian
Pacific Railway Ltd. He was Vice Chairman of the U.S.-India
Strategic Partnership Forum and a member of the Economic
Development Board for China’s Guangdong Province and a former
director and Vice Chairman of the U.S.-China Business Council. He
holds a Bachelor’s degree in Electrical Engineering from the
Illinois Institute of Technology and a Bachelor’s degree in
Education from Eastern Michigan University.
Qualifications
As former
president and chief operating officer of a premier global
industrial organization, Mr. Monser provides the Board with a solid
understanding of industrial operations, supply chain optimization
and continuous improvement, extensive experience in international
business operations, particularly in emerging markets, and a
demonstrated capability in strategic planning and organizational
development.
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Age
69
Director
Since 2013
Committees Audit and Finance
(Chair)
Corporate
Governance and
Nominating
Executive
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Matthew H.
Paull Independent
Retired Senior Executive Vice President
and Chief Financial Officer of McDonald’s Corporation
Background
Mr. Paull
was Senior Executive Vice President and Chief Financial Officer of
McDonald’s Corporation from 2001 until he retired from that
position in 2008. Prior to joining McDonald’s in 1993, he was a
partner at Ernst & Young where he managed a variety of
financial practices during his 18-year career and consulted with
many leading multinational corporations. Mr. Paull currently serves
as a director of Canadian Pacific Railway Ltd. He was formerly a
director of Chipotle Mexican Grill Inc., KapStone Paper and
Packaging Corporation, WMS Industries Inc. and the lead director of
Best Buy Co. He is a member of the Advisory Board of Pershing
Square Capital Management, L.P. He also served as an advisory
council member for the Federal Reserve Bank of Chicago. He holds a
Master’s degree in Accounting and a Bachelor’s degree from the
University of Illinois. He is a Certified Public
Accountant.
Qualifications
Mr. Paull
brings to the Board significant financial expertise with a deep
understanding of financial markets, corporate finance, accounting
and controls and investor relations. As a former chief financial
officer of a multinational corporation, he also has extensive
experience in international operations and marketing.
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Table
of Contents
The Board
has affirmatively determined that all of the Company’s directors,
except Mr. Ghasemi, qualify as independent under New York Stock
Exchange (“NYSE”) corporate governance listing standards. In
determining independence, the Board determines whether directors
have a material relationship with the Company that would interfere
with the exercise of independent judgment in carrying out the
responsibilities of directors. When assessing materiality, the
Board considers all relevant facts and circumstances, including
transactions between the Company and the director, family members
of directors or organizations with which the director is
affiliated. The Board further considers the frequency of and dollar
amounts associated with any of these transactions and whether the
transactions were in the ordinary course of business and were
consummated on terms and conditions similar to those with unrelated
parties.
In making
its independence determination, the Board considers the specific
tests for independence included in the NYSE listing standards. In
addition, the Guidelines provide standards to assist in determining
each director’s independence that meet or exceed the NYSE
independence requirements. The Guidelines provide that the
following categories of relationships are immaterial for purposes
of making an independence determination:
● |
sales or purchases of goods or services between the Company and a
director’s employer or an employer of a director’s family member,
which occurred more than three years prior to the independence
determination or involved less than 1% of such employer’s annual
consolidated gross revenues, took place on the same terms and
conditions offered to third parties or on terms and conditions
established by competitive bid and did not affect the director’s or
family member’s compensation; |
● |
charitable contributions by the Company to an organization for
which the director or his or her immediate family member serves as
an executive officer, director or trustee that occurred more than
three years prior to the independence determination, were made
pursuant to the Company’s matching contributions program or were
less than the greater of $1 million or 2% of the organization’s
gross revenues; |
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membership of a director in the same professional association,
social, fraternal or religious organization or club as an executive
officer of the Company; |
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a
director’s past matriculation at the same educational institution
as an executive officer of the Company; |
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a
director’s service on the board of directors of another public
company for which an executive officer of the Company also serves
as a director, except for prohibited compensation committee
interlocks; and |
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a director’s service as a director,
trustee or executive officer of a charitable or educational
organization for which an executive officer of the Company also
serves as a director or trustee. |
In
accordance with NYSE listing standards, in affirmatively
determining the independence of any director who will serve on the
Management Development and Compensation Committee, the Board also
specifically considers factors relevant to determining whether a
director has a relationship to the Company, which is material to
that director’s ability to be independent from management in making
judgments about the Company’s executive compensation, including
sources of the director’s compensation and relationships of the
director to the Company or senior management.
In
addition, the Guidelines provide that no director may serve on the
Audit and Finance Committee or Management Development and
Compensation Committee if he or she has received within the past or
preceding fiscal year any compensatory fee from the Company other
than for Board or committee service; and no director may serve on
the Management Development and Compensation Committee of the Board
unless the director qualifies as an “outside director” under U.S.
tax laws pertaining to deductibility of executive
compensation.
On an
annual basis, each member of the Board is required to complete a
questionnaire designed in part to provide information to assist the
Board in determining whether the director is independent under NYSE
rules and the Guidelines. In addition, each director or potential
director has an affirmative duty to disclose to the Corporate
Governance and Nominating Committee any relationship he or she has
(or any of his or her immediate family members have) with the
Company or the executive officers of the Company.
Table
of Contents
The
Corporate Governance and Nominating Committee reviews director
relationships and transactions for compliance with the standards
described above and makes a recommendation to the Board, which
makes the independence determination. For those directors
identified as independent, the Company and the Board are aware of
no relationships or transactions with the Company or management,
which would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. Routine purchases
and sales of products involving Ms. Carter’s former employer,
Ingersoll-Rand (amounted to less than 1% of the Company’s and of
Ingersoll-Rand’s consolidated annual revenues).
Ongoing Assessment of Board Composition
The qualities and skills necessary for
a specific director nominee are governed by the needs of the
Company at the time the Corporate Governance and Nominating
Committee determines to add a director to the Board. The specific
requirements of the Company are determined by the Committee and are
based on, among other things, the Company’s current business,
market, geographic and regulatory environments; the mix of
perspectives, experience, backgrounds and competencies currently
represented by the other Board members; diversity considerations;
and the CEO’s views as to areas in which management desires
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Board Tenure Policy
To enable
Board succession planning and refreshment, the Board has adopted a
policy that a non-employee director may not continue to serve on
the Board after the Annual Meeting following the earlier of his or
her completion of 15 full years of service on the Board or
attainment of age 75. The Board retains the flexibility to waive
this policy, including in response to events or recruiting
realities. At the time Mr. Ghasemi was recruited to become the
Company’s Chairman and CEO in 2014, the Board determined it would
waive the age limit for him to enable him to remain a director
during his employment. Margaret G. McGlynn completed her
15th year of service in 2020 and retired from the Board
on November 23, 2020.
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Identification of Candidates
When the
need to recruit a non-management director arises, the Corporate
Governance and Nominating Committee’s standard process is to
consult the other directors, the CEO and sometimes a third-party
recruiting firm to identify potential candidates. Once a candidate
is identified, the candidate screening process typically is
conducted initially through an interview by one or more members of
the Committee and the CEO.
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Candidate Selection
After
initial interviews, the candidate may be considered by the
Corporate Governance and Nominating Committee or directly by the
Board. Prior to nomination or election, an investigation is
conducted to verify the candidate’s reputation and background, the
candidate’s independence as measured by the Board’s independence
standards and other factors the Committee deems appropriate at the
time.
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Table
of Contents
The
Corporate Governance and Nominating Committee has adopted a policy
regarding its consideration of director candidates recommended by
shareholders for nomination by the Board at an Annual Meeting and a
procedure for submission of such candidates. The policy provides
that candidates recommended by shareholders will be considered by
the Committee. Submissions of candidates must be made in writing
and must be received not later than 120 days prior to the
anniversary date of the proxy statement for the prior annual
meeting. The submission must also provide certain information
concerning the candidate and the recommending shareholder(s), a
statement explaining why the candidate has the qualifications
required and consent of the candidate to be interviewed by the
Corporate Governance and Nominating Committee and to serve if
elected. A copy of the policy and procedure is available upon
request from the Corporate Secretary’s Office. Candidates
recommended by shareholders in accordance with these procedures
will be screened and evaluated by the Corporate Governance and
Nominating Committee in the same manner as other candidates
recommended by the Board.
In addition
to the foregoing procedures for shareholder nomination, in November
2019, the Board amended our Bylaws to implement “shareholder proxy
access”, which allows a shareholder or group of shareholders
meeting certain conditions to nominate director candidates for
election at annual meetings of shareholders using our proxy
statement. This provision allows a shareholder, or group of up to
20 shareholders, to nominate up to two director candidates or, if
greater, up to 20% of the number of directors then serving on our
Board. The shareholder or group must have owned continuously for at
least three years a number of shares equal to at least 3% of our
outstanding common stock measured as of the date we receive the
nomination. A proxy access nomination must be made not earlier than
150 days and not later than 120 days prior to the anniversary date
of the proxy statement for the prior annual meeting and contain
certain information described above concerning the candidate and
the nominating shareholder(s) as well as certain additional
information required by our proxy access bylaw. The number of
director candidates who may be nominated under our proxy access
bylaw will be reduced by the number of director nominations made
using the shareholder nomination process described
above.
Board Responsibilities
Our
business is managed by our employees under the direction and
oversight of the Board. Among other responsibilities discussed
below, the Board reviews, monitors and, where appropriate, approves
fundamental financial and business strategies and major corporate
actions. The Board is elected by shareholders to provide advice and
counsel to and oversee management to ensure that the interests of
the shareholders and other corporate constituents are being served
with a view toward maximizing our long-term value.
Directors
exercise their oversight responsibilities through discussions with
management, review of materials management provides to them, visits
to our offices and facilities and their participation in Board and
committee meetings.
Table
of Contents
The CEO
and other members of senior management are responsible for
assessing and managing the Company’s risk exposure, and the Board
and its committees provide oversight in connection with those
efforts.
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The
Board of Directors
Responsibility for risk oversight rests
with the Board. The Board formally reviews the Company’s risk
management processes and policies periodically, including
identification of key risks and associated monitoring, control and
mitigation activities. The Board primarily exercises its risk
oversight responsibility through meetings, discussions and review
of management reports and proposals. Evaluation of risk is inherent
in the Board’s consideration of the Company’s long-term strategies
and in the transactions and other matters presented to the Board,
including large capital expenditures, acquisitions and
divestitures, cybersecurity and safety, environmental and
compliance updates. Committees help the Board carry out this
responsibility by focusing on specific key areas of risk inherent
in our business. All Board members are invited to attend most
committee meetings, and Board members who do not attend committee
meetings receive information about committee activities and
deliberations.
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Audit and Finance Committee
The Audit and Finance
Committee oversees risks associated with financial and accounting
matters, including legal and regulatory compliance, financial
instruments, financial transactions, financial policies and
strategies, pension funding, capital structure and the Company’s
financial reporting and internal control systems. The Audit and
Finance Committee also has oversight of the Company’s risk
assessment and management process and associated monitoring,
control and mitigation activities.
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Corporate Governance and Nominating
Committee
The Corporate
Governance and Nominating Committee oversees risks associated with
corporate governance, including Board structure, director
succession planning and the allocation of authority between
management and the Board.
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Management Development and Compensation
Committee
The Management
Development and Compensation Committee helps ensure that the
Company’s executive compensation policies and practices support the
retention and development of executive talent with the experience
required to manage risks inherent to the business, while at the
same time not encouraging or rewarding excessive risk-taking by our
executives.
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Management
Management
is responsible for assessing and managing the Company’s various
risk exposures on a day-to-day basis, including the creation of
appropriate risk management programs and policies.
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Table
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Management Succession Planning |
The
Management Development and Compensation Committee of the Board, the
CEO and our Human Resources organization maintain an ongoing focus
on executive development and succession planning to prepare the
Company for future success. The Board reviews organization and
succession plans with our CEO at least annually. In addition, the
Company has an emergency succession procedure for the CEO that is
reviewed annually by the Board.
A comprehensive review of executive talent
determines readiness to take on additional leadership roles and
identifies developmental and coaching opportunities needed to
prepare our executives for greater responsibilities.
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In addition to preparing for CEO succession, the
succession planning process includes other senior management
positions.
|
|
|
|
|
|
|
|
|
Succession planning is a responsibility of the entire
Board, and all members participate in this process.
|
|
|
The CEO makes a formal succession planning presentation to
the Board annually.
|
Shareholder Communications |
Shareholders and other interested parties may communicate
with the independent directors by sending a written communication
in care of the Corporate Secretary to:
 |
Air Products and Chemicals, Inc.
7201
Hamilton Boulevard
Allentown, PA 18195-1501
|
The Board
has adopted a written procedure for collecting, organizing and
forwarding direct communications from shareholders and other
interested parties to the independent directors. A copy of the
procedure is available upon request from the Corporate Secretary’s
Office.
Board Structure
Board
Leadership Structure |
The Board
does not have a policy on whether the roles of Chairman of the
Board and CEO should be separate or whether the Chairman of the
Board should be independent. The Board determines which structure
is in the best interests of the Company at any given
time.
At present
Mr. Ghasemi serves as both CEO and Chairman of the Board, and the
Board also has an independent Lead Director. The Board decided to
combine the CEO and Chairman roles because it has a high level of
confidence in Mr. Ghasemi’s leadership and willingness to work
closely and transparently with the independent directors. The Board
believes the Company is best served at this time by unified
leadership of operations and oversight of the Company, which
ensures that the Board and management act with common purpose.
Finally, the Board is satisfied that the independent directors have
ample opportunities to execute their responsibilities independently
through numerous executive sessions held throughout the year at
both the Board and committee levels. The independent directors also
have substantial interactions with members of the management team
other than the CEO and operate under the leadership of the Lead
Director and the committee chairs. The responsibilities of the Lead
Director are described below.
Table
of Contents
The Lead
Director is elected annually by majority vote of the Board upon the
nomination of the Corporate Governance and Nominating
Committee.
Mr. Deaton
is serving as our Lead Director. In November 2020, the Board
elected Mr. Monser as Lead Director effective at the conclusion of
the Annual Meeting. Both Mr. Deaton and Mr. Monser are independent
directors.
The
Guidelines provide that the Lead Director’s responsibilities
include:
● |
presiding at executive sessions of the Board and any other time the
Chairman is not present and communicating feedback to the CEO; |
● |
determining the agenda for executive sessions of non-management
directors; and |
● |
possessing the principal authority to
convene a meeting of independent directors. |
The
independent directors regularly meet without the CEO or other
members of management in executive sessions that are scheduled to
occur at each Board meeting. In addition, the CEO’s performance
review is conducted in executive session and the Board committees
regularly meet in executive session. Board executive sessions are
led by the Lead Director.
Standing
Committees of the Board |
The Board
has three standing committees, which operate under written charters
approved by the Board: Audit and Finance; Corporate Governance and
Nominating; and Management Development and Compensation. In
accordance with NYSE listing standards, none of the directors who
serve on these committees have ever been employed by the Company,
and the Board has determined in its business judgment that all of
them are “independent” from the Company and its management in
accordance with the guidelines described above in “Director
Independence” as well as with additional NYSE listing criteria that
are applicable to members of the Audit and Finance and Management
Development and Compensation Committees. The Company’s Bylaws also
provide for an Executive Committee, which is described
below.
The
charters of the Audit and Finance Committee, the Corporate
Governance and Nominating Committee and the Management Development
and Compensation Committee can be viewed on the Company website
at www.airproducts.com/Company/governance/board-of-directors/commitee-descriptions-and-charters.aspx
and are available in print to any
shareholder upon request.
12 |
|
 |
Table
of Contents
Audit and Finance Committee
Members
●Matthew H. Paull
(Chair)
●Susan K.
Carter
●Charles I.
Cogut
●David H.Y.
Ho
●Edward L.
Monser
The Board
has determined that all of the Audit and Finance Committee members
are “financially literate” and that Ms. Carter and Mr. Paull
qualify as “audit committee financial experts” as defined by NYSE
listing standards and U.S. Securities and Exchange Commission
(“SEC”) regulations, respectively.
Effective
at the conclusion of the Annual Meeting, Edward L. Monser will no
longer serve as a member of the Audit and Finance
Committee.
FY2020
Meetings: 11
Committee
Report: Page
61
|
Primary
Responsibilities
●The Committee is
directly responsible for the appointment, compensation, retention
and oversight of the independent registered public accounting firm
retained to audit the Company’s financial statements.
●The Committee
provides oversight of the Company’s external financial reporting
process, all systems and processes relating to the integrity of
financial statements, internal audit process, programs for
compliance with laws and regulations and our Code of Conduct and
Business Ethics and enterprise processes for risk assessment and
management.
●The Committee
discusses with the Company’s Internal Audit function and
independent registered public accounting firm the overall scope and
plans for their respective audits. In addition, the Committee
regularly meets with Internal Audit and the independent registered
public accounting firm, with and without management present, to
discuss the results of their audits, their evaluations of the
Company’s internal controls and the overall quality of the
Company’s financial reporting.
Audit and Finance Committee
Charter
●The Audit and Finance
Committee operates under a written charter that is available on our
website at the address provided on page 12.
|
Corporate Governance and Nominating
Committee
Members
●Chadwick C. Deaton
(Chair)
●Charles I.
Cogut
●Lisa A.
Davis
●Matthew H.
Paull
Effective
at the conclusion of the Annual Meeting, Edward L. Monser will join
the Corporate Governance and Nominating Committee.
FY2020
Meetings: 3
|
Primary
Responsibilities
●The Committee
monitors and makes recommendations to the Board about corporate
governance matters, including the Guidelines, our Code of Conduct
and Business Ethics, Board structure and operation, Board policies
on director compensation and tenure, the meeting schedules of the
Board and its committees, the charters and composition of the
committees and the annual Board and committee performance
assessment process.
●The Committee has
primary responsibility for identifying, recommending and recruiting
nominees for election to the Board and recommending candidates for
election as Lead Director.
●The Committee also
reviews and monitors the Company’s crisis management procedures,
government relations activities and response to significant public
policy issues, including sustainability and other social
responsibility matters.
Corporate Governance and Nominating
Committee Charter
●The Corporate
Governance and Nominating Committee operates under a written
charter that is available on our website at the address provided on
page 12.
|
Table
of Contents
Management Development and Compensation
Committee
Members
●Edward L. Monser
(Chair)
●Susan K.
Carter
●Lisa A.
Davis
●Chadwick C.
Deaton
●David H.Y.
Ho
Effective
at the conclusion of the Annual Meeting, Lisa A. Davis will become
Chair of the Management Development and Compensation
Committee.
FY2020
Meetings: 3
Committee
Report: Page
20
|
Primary
Responsibilities
●The Committee
establishes the executive officer compensation philosophy, design
and strategy for the Company consistent with Company objectives and
shareholder interests, determining CEO compensation and approving
other executive officer compensation.
●The Committee
approves performance objectives relevant to the compensation of the
CEO, establishing the process for and leading the Board in
evaluation of the performance of the Company’s CEO and providing
oversight of the CEO’s evaluation of the performance of our other
executive officers.
●The Committee
oversees CEO succession planning and the development and evaluation
of potential candidates for other executive officer
positions.
●The Committee
oversees the Company’s overall management compensation program, the
design and administration of management incentive compensation
plans, including equity programs and the design and administration
of the Company’s retirement and welfare benefit plans.
The
Committee’s charter permits it to delegate all or a portion of the
authority granted to it by the Board to one or more Committee
members, senior executives or subcommittees to the extent
consistent with applicable laws, regulations and listing standards.
The Company’s Delegation of Authority Policy reserves for the Board
and the Committee all compensation and staffing decisions with
respect to executive officers except as specifically delegated. The
Committee charter also permits the Committee to retain a third
party compensation consultant as needed.
Management Development and
Compensation Committee Charter
●The Management
Development and Compensation Committee operates under a written
charter that is available on our website at the address provided on
page 12.
|
Executive Committee
Members
●Seifi Ghasemi
(Chair)
●Chadwick C.
Deaton
●Edward L.
Monser
●Matthew H.
Paull
Effective
at the conclusion of the Annual Meeting, Lisa A. Davis will become
a member of the Executive Committee.
FY2020
Meetings: 2
|
Primary
Responsibilities
●The Executive
Committee has the authority of the Board to act on most matters
during intervals between Board meetings and meets as needed for
this purpose.
●Actions taken by the
Executive Committee since the last meeting of the Board are
reported to the Board at its next meeting.
The
Executive Committee does not have a written charter. In fiscal
2020, the Executive Committee met to discuss various matters,
including progress on major projects.
|
14 |
|
 |
Table
of Contents
Board Practices,
Processes and Policies
Board Meetings and Attendance |
During
fiscal 2020, there were 13 meetings of the Board. No director
attended fewer than 75% of the combined total of meetings of the
Board and the committees on which he or she was serving during the
time in which they served as a director (including Lisa A. Davis
with respect to the eight meetings of the Board held during fiscal
2020 since she became a director of the Company). In accordance
with the Guidelines, all directors are expected to attend the
Annual Meeting unless they have an emergency or unavoidable
schedule conflict. All directors who were serving at the time
attended the 2020 Annual Meeting of Shareholders.
Board Performance Evaluation |
Each year
the Board and its committees conduct self-evaluations of their
performance. The evaluation format is established by the Corporate
Governance and Nominating Committee. In fiscal 2019, the Committee
introduced a new survey format for performing Board and committee
self-evaluations designed to generate improved performance
feedback. The surveys were tailored for the Board and each
committee and addressed, among other things, the responsibilities
set forth in our Corporate Governance Guidelines and the charters
of the respective committees. The results of these surveys were
discussed by the Board and committees, respectively. Individual
directors are evaluated by the Corporate Governance and Nominating
Committee at the time of nomination for re-election. This
evaluation is conducted by a member of the Corporate Governance and
Nominating Committee after soliciting input from other
directors.
Corporate Governance Guidelines |
The Board
has adopted Corporate Governance Guidelines for the Company in
order to establish and maintain practices to govern the Company in
accordance with the interests of our shareholders. The Guidelines
set forth the governance practices the Board follows, including
Board leadership, director independence and qualifications,
nomination and election of directors, director responsibilities,
access to management, authority to retain independent advisors,
director compensation and director orientation and education as
well as the CEO performance assessment, management succession
planning and assessment of Board and committee
performance.
The Board
regularly reviews corporate governance developments and modifies
the Guidelines as warranted.
The Guidelines are available on the Company’s website
at: www.airproducts.com/company/governance/board-of-directors/governance-guidelines.aspx
and are available in print upon
request.
|
The
Company’s Code of Conduct and Business Ethics (the “Code of
Conduct”) applies to all full and part-time employees of the
Company and its subsidiaries and other affiliates, including our
principal executive officer, principal financial officer and
principal accounting officer as well as our directors. The Code of
Conduct addresses such topics as conflicts of interest,
confidentiality, protection and proper use of Company assets and
compliance with laws and regulations. The Code of Conduct was
adopted in fiscal 2020 to replace prior codes of conduct in order
to improve readability and communicate more clearly the Company’s
expectations regarding ethical business conduct. The Code of
Conduct was also organized by subject matter to make it easier for
Company personnel to find and apply applicable guidance.
The Code of Conduct can be found on the Company's
website at www.airproducts.com/company/governance/commitment-ethical-business/employee-code-of-conduct.aspx
and is available in print upon
request.
|
Table
of Contents
Transactions with Related
Persons |
The Board
recognizes that transactions with related persons can present
actual or potential conflicts of interest and wants to ensure that
Company transactions are based solely on the best interests of the
Company. Accordingly, the Board has delegated responsibility to the
Audit and Finance Committee to review transactions between the
Company and related persons. The Audit and Finance Committee has
adopted a written policy establishing procedures for the review of
related person transactions.
A related
person transaction is a transaction between the Company and a
director, executive officer or 5% or more shareholder, any of their
respective immediate family members or a company or other entity in
which any of these persons have a direct or indirect material
interest. The policy specifically excludes certain types of
transactions, which the Audit and Finance Committee deems to be
immaterial. Pursuant to the Audit and Finance Committee policy,
related person transactions must be preapproved by the Committee
or, in the event of an inadvertent failure to bring the transaction
to the Committee for preapproval, ratified by the Committee. In
deciding whether to approve or ratify a related person transaction,
the Committee considers the benefits of the transaction to the
Company, the impact on a director’s independence if a director or a
director’s family member or affiliate is involved, the availability
of comparable sources for products and services, the terms of the
transaction and terms available to third parties for similar
transactions. The Audit and Finance Committee Chair is authorized
to approve related person transactions when it is impractical or
undesirable to wait until the next Committee meeting for approval.
Such Chair-approved transactions must be reported to the Committee
at the next meeting.
Compensation of Directors
In fiscal
2020, our directors received compensation as set forth in the chart
below.
Director Compensation
Program |
($) |
Annual Deferred Stock Award (made
immediately following annual meeting)(1) |
150,000 |
Annual Cash Retainer |
120,000 |
Lead Director Retainer |
25,000 |
Audit and Finance Committee Chair
Retainer |
25,000 |
Management Development and Compensation
Committee Chair Retainer |
20,000 |
Corporate Governance and Nominating
Committee Chair |
15,000 |
(1) |
Directors elected to the Board after an
annual meeting receive a prorated grant of deferred stock units
based on the number of months remaining until the next annual
meeting. |
16 |
|
 |
Table
of Contents
Our
Corporate Governance and Nominating Committee periodically
undertakes a review of non-employee director compensation. The most
recent review was completed in fiscal 2019 when the Committee
reviewed a competitive assessment of directors’ compensation levels
and practices among the Peer Reference Group described on pages
34-35 as well as a broader industry component and survey data of
companies with annual revenues between $2.5 billion and $10
billion. In connection with this review the Committee retained an
external compensation consultant, Pearl Meyer & Partners, LLC
(“Pearl Meyer”), to provide independent advice and benchmarking
with respect to director compensation practices.
Prior to
retaining Pearl Meyer, the Committee assessed its independence and
concluded that there were no conflicts of interest that would
prevent Pearl Meyer from independently advising the Committee. In
making this determination, the Committee considered, among other
things, the fees to be paid as a percentage of Pearl Meyer’s
consolidated revenues, policies and procedures established by Pearl
Meyer to mitigate conflicts of interest and the lack of business
and personal relationships between Pearl Meyer team members and the
Company’s executive officers or Committee members. Aggregate fees
paid to Pearl Meyer for director compensation consulting services
rendered in fiscal 2020 were $25,870.
As a
result of this compensation review, the Committee determined that
cash compensation, which was last adjusted in fiscal 2013, paid to
the Company’s directors was significantly below the median of the
Peer Reference Group on both an individual and aggregated basis and
that, as a result, total compensation was significantly below the
median as well. The Committee recommended, and the Board approved,
an increase in the directors’ annual cash retainer to $120,000,
beginning in fiscal 2020, which positions cash and total
compensation closer to, but below, the median of the Peer Reference
Group. This action is expected to maintain the competitiveness of
the Company’s director compensation program and accordingly
strengthen our ability to recruit and retain qualified
directors.
|
Directors
may voluntarily defer all or a part of their cash retainers under
the Deferred Compensation Program for Directors. At the election of
each director, voluntarily deferred amounts may be credited to
deferred stock units or to an account that is credited with
interest based on long-term corporate bond yields. Each deferred
stock unit entitles the director to receive one share of Company
stock upon payout, which generally occurs after the director’s
service on the Board is over. Deferred stock units earn “dividend
equivalents” equal to the dividends that would have been paid on
one share of stock for each deferred stock unit owned by the
director. Deferred retainers and dividend equivalents are credited
on the last day of the quarter based on the NYSE closing price of a
share of Company stock on the preceding trading day.
Directors
are reimbursed for expenses incurred in performing their duties as
directors. The Company covers directors under its directors and
officers liability insurance policies. Directors are also covered
by the business travel accident policy maintained by the Company
and are eligible to participate in the Company’s charitable
matching gift program. Under this program, for fiscal 2020 the
Company matched donations of up to $10,000 per year made by
employees and directors to qualifying non-profit
organizations.
To
emphasize the importance of directors’ long-term alignment with
shareholders, the Board has adopted director stock ownership
requirements. Directors are expected to own shares or share
equivalents with a value (based on the NYSE closing price) equal to
five times the annual cash retainer by the end of the fifth fiscal
year after joining the Board. Directors are expected to increase
their holdings to reflect an adjustment in the annual cash retainer
within a reasonable period of time following the adjustment. Once a
director has met the requirement, if there is a subsequent decline
in the Company’s share price that causes the director’s ownership
level to fall below this guideline, the director is not expected to
purchase additional shares to meet the guideline but is expected to
refrain from selling or transferring shares until the guideline is
again satisfied. All directors are currently in compliance with the
stock ownership guidelines for directors.
Table
of Contents
FISCAL 2020 DIRECTOR
COMPENSATION |
|
|
Name |
|
Annual
Retainers(1)
($) |
|
Stock
Awards(2)
($) |
|
All Other
Compensation(3)
($) |
|
Total
($) |
Susan K.
Carter |
|
120,000 |
|
150,000 |
|
— |
|
270,000 |
Charles I.
Cogut |
|
120,000 |
|
150,000 |
|
16,964 |
|
286,964 |
Lisa A.
Davis |
|
70,000 |
|
137,500 |
|
— |
|
207,500 |
Chadwick C.
Deaton |
|
160,000 |
|
150,000 |
|
5,000 |
|
315,000 |
David H.Y.
Ho |
|
120,000 |
|
150,000 |
|
— |
|
270,000 |
Margaret G.
McGlynn(4) |
|
120,000 |
|
150,000 |
|
10,000 |
|
280,000 |
Edward L.
Monser |
|
140,000 |
|
150,000 |
|
10,000 |
|
300,000 |
Matthew H.
Paull |
|
145,000 |
|
150,000 |
|
23,049 |
|
318,049 |
(1) |
This column includes annual retainers
and committee chair and lead director retainers. Certain directors
voluntarily elected to defer some or all of their cash retainers.
Any amounts that have been deferred are included in this
column. |
(2) |
This column shows the grant date fair
value of the annual deferred stock unit grant for 2020 calculated
in accordance with FASB ASC Topic 718. Deferred stock units earned
by directors are fully expensed on the Company’s financial
statements at the market value of a share of stock on the date of
grant. The annual deferred stock unit grant is prorated for
directors elected other than at the annual meeting. All deferred
stock units credited to directors are fully vested. |
(3) |
Amounts in this column reflect
charitable matching contributions under the Company’s charitable
matching gift program for Mr. Deaton, Ms. McGlynn and Mr. Monser.
For each of Mr. Cogut and Mr. Paull, the amount reflects a
charitable matching contribution of $10,000 and interest considered
to be above-market interest credited on his Deferred Compensation
Program balance. Interest is calculated for the Deferred
Compensation Program using a Moody’s A-rated Corporate Bond Rate
because this is comparable to the rate the Company pays its other
creditors on long-term obligations. When this rate exceeds 120% of
a rate set by the U.S. Internal Revenue Service for obligations of
similar maturity, it is treated as above-market interest even
though it is based on a market average for corporate
bonds. |
(4) |
Ms. McGlynn retired from the Board on November 23,
2020. |
18 |
|
 |
Table
of Contents
PROPOSAL
2
|
|
Advisory Vote on Executive Officer
Compensation
|
|
|
|
The Board is committed to excellence
in governance and recognizes the interest our shareholders have in
the Company’s executive compensation program. As a part of that
commitment, and in accordance with SEC rules, our shareholders are
asked to approve an advisory resolution on the compensation of our
named executive officers, as disclosed in the Compensation
Discussion and Analysis and accompanying executive compensation
tables and narrative. This proposal, commonly known as a “say on
pay” proposal, gives you the opportunity to endorse or not endorse
our fiscal 2020 executive compensation program by voting for or
against the following resolution:
RESOLVED, that the compensation of the named executive
officers as discussed and disclosed in the Compensation Discussion
and Analysis and the executive compensation tables and accompanying
narrative is approved.
Although the vote is non-binding,
the Board and the Management Development and Compensation Committee
will review the voting results. If there are a significant number
of negative votes, we will seek to understand the concerns that
influenced the vote and to address them in making future decisions
about executive compensation programs. The Company intends to
conduct an advisory vote on executive officer compensation
annually. The next such vote will be conducted at our 2022 Annual
Meeting of Shareholders.
|
|
 |
|
The
Board recommends a vote “FOR”
this
resolution. |
|
|
|
|
|
|
|
As
described in the Compensation Discussion and Analysis, our
executive officer compensation program has been designed to support
our long-term business strategies and drive creation of shareholder
value. It is aligned with the competitive market for talent,
sensitive to Company performance and oriented to long-term
incentives to maintain and improve the Company’s long-term
profitability. We believe the program delivers reasonable pay that
is strongly linked to Company performance.
|
|
Table
of Contents
Report
of the Management Development and Compensation Committee
The
Management Development and Compensation Committee has reviewed and
discussed with management the following Compensation Discussion and
Analysis. Based on its review and discussions, the Committee
recommended to the Board that the Compensation Discussion and
Analysis be included in the proxy statement for the Company’s 2021
Annual Meeting of Shareholders and incorporated by reference in the
Company’s Annual Report on Form 10-K for the fiscal year ended
September 30, 2020.
Management Development and Compensation
Committee
Edward L.
Monser, Chair
Susan K. Carter
Lisa A. Davis
Chadwick C. Deaton
David H.Y. Ho
Compensation Discussion
and Analysis
The
Compensation Discussion and Analysis describes and analyzes our
executive officer compensation program with emphasis on
compensation actions taken during fiscal 2020. For fiscal 2020, the
Company’s named executive officers were:
● |
Seifi
Ghasemi, Chairman, President
and Chief Executive Officer; |
● |
M. Scott
Crocco, Executive Vice
President and Chief Financial Officer (“CFO”); |
● |
Sean D.
Major, Executive Vice
President, General Counsel and Secretary; and |
● |
Dr. Samir J.
Serhan, Executive Vice
President and Chief Operating Officer (“COO”). |
The
Compensation Discussion and Analysis is organized into six
sections:
20 |
|
 |
Table
of Contents

|
Highlights of Fiscal 2020 Company Performance and
Compensation Actions |
Fiscal 2020 Performance and Strategic
Highlights
Financial Performance
EARNINGS PER SHARE |
|
|
NET
INCOME |
|
|
|
 |
|
 |
Increased 8% over fiscal 2019.
|
|
Increased 7% over fiscal 2019.
|
ADJUSTED EARNINGS PER SHARE1 |
|
|
ADJUSTED EBITDA1 |
|
|
|
 |
|
|
Increased 2% over fiscal 2019.
|
|
Increased 4% over fiscal 2019.
|
 |
Safety
Performance |
 |
Operational Performance |
 |
Returns to
Shareholders |
Although
our safety record improved in fiscal 2020, with a 63% improvement
in the employee lost time injury rate and a 31% improvement in the
employee recordable injury rate since fiscal year 2014, the Company
did not achieve its safety objectives in fiscal 2020.
|
The Company
demonstrated its strength, character and compassion during the
COVID-19 pandemic by supporting its talented, dedicated workforce,
keeping plants running and supplying critical products, winning
significant new growth projects worldwide and supporting local
communities. The Company continued to execute its gasification
strategy, including major projects in Saudi Arabia and China, and
signed an agreement to produce carbon-free hydrogen in Saudi Arabia
and a long-term on-site contract for a world scale coal-to-methanol
production facility in Indonesia.
|
The Company
returned approximately $1.1 billion to shareholders through
dividends, increasing dividends for the 38th consecutive
year.
|
We believe
our higher purpose is to bring people together to collaborate and
innovate solutions to the world’s most significant energy and
environmental sustainability challenges. Our goal is to be the
safest, most diverse and most profitable industrial gas company in
the world, providing excellent service to our customers.
In fiscal
2014, we established a Five-Point Plan that, when implemented,
successfully focused our efforts on our core industrial gas
business, restructured the organization, changed the culture,
controlled capital and costs and aligned our incentive compensation
structure. We subsequently evolved our Five-Point Plan to guide our
success over the coming years. Today, our strategic Five-Point Plan
focuses on the following objectives:
Sustain
The Lead |
 |
Deploy
Capital |
 |
Evolve
Portfolio |
 |
Change
Culture |
 |
Belong
and Matter |
 |
Safest, most diverse and most profitable
|
Strategically invest significant available
capacity
|
Grow on-site portion
|
Safety, Simplicity, Speed, Self-Confidence
|
Inclusion
|
Best-in-class performance
|
Win profitable growth projects globally
|
Energy, environment and emerging markets
|
Committed and motivated
|
Enjoyable work environment
|
Productivity
|
|
|
Positive attitudes and open minds
|
Proud to innovate and solve challenges
|
1 |
This is a non-GAAP financial measure.
See Appendix A for a reconciliation to the most directly comparable
financial measure calculated under GAAP. |
Table
of Contents
Fiscal 2020 Executive Compensation
Highlights
Target Total Direct Compensation
At the
beginning of the year, after benchmarking against peer companies as
discussed below, the Management Development and Compensation
Committee (within this Compensation Discussion and Analysis, the
“Committee”) established fiscal 2020 target total direct
compensation for the executive officers. Mr. Ghasemi’s compensation
was determined pursuant to his amended and restated employment
agreement, dated November 14, 2017 (as amended on May 21, 2020, the
“Employment Agreement”), which is described on page 26.
The table
below indicates the target total direct compensation opportunity
(base salary, annual incentive award target and target value of
long-term incentive awards) provided to our named executive
officers for fiscal 2020. Total direct compensation that is
actually paid to our named executive officers varies from the
information below based on the amount of annual incentive awards
that are achieved and any discretionary bonuses or severance that
is paid out during a fiscal year. This information regarding target
total direct compensation opportunity is intended to supplement,
but not replace, the Summary Compensation Table, which reports
fiscal 2020 compensation in the format required by SEC
rules.
Officer |
|
Base Salary
($) |
|
Annual
Incentive
Target
($) |
|
Grant Value of
Long-Term
Incentives
($) |
|
Target
Total Direct
Compensation
($) |
Seifi
Ghasemi |
|
1,350,000 |
|
2,025,000 |
|
10,000,000 |
|
13,375,000 |
M. Scott
Crocco |
|
650,000 |
|
552,500 |
|
1,700,000 |
|
2,902,500 |
Sean D.
Major |
|
550,000 |
|
467,500 |
|
1,400,000 |
|
2,417,500 |
Samir J.
Serhan |
|
650,000 |
|
552,500 |
|
1,700,000 |
|
2,902,500 |
For fiscal
2020, total direct compensation opportunities established by the
Committee positioned all executive officers competitively versus
market. Based on Mr. Ghasemi’s superior performance throughout his
tenure with Air Products, his fiscal 2020 pay was set to
approximate the 75th percentile of the
market.
Performance-Based Compensation
The
majority of compensation provided to the Company’s executive
officers is dependent upon total returns delivered to shareholders
and the achievement of performance objectives. Approximately 90% of
the CEO’s total direct compensation opportunity is
performance-based to ensure that compensation directly reflects the
creation of shareholder value.
CEO TARGET
COMPENSATION MIX |
|
|
OTHER EXECUTIVE OFFICER TARGET
COMPENSATION MIX
|
|
|
|
|
 |
|
 |
22 |
|
 |
Table
of Contents
Incentive Plan Metrics and Goals
In fiscal
2020, the Committee continued to grant incentive compensation
opportunities designed to support the Company’s
strategies.
The
Committee supports the Company’s strategies by focusing the
Company’s annual incentive program on achieving aggressive adjusted
earnings per share targets. For fiscal 2020, executive officers’
annual incentive awards were again based on adjusted earnings per
share, and the adjusted earnings per share targets were translated
to adjusted EBITDA targets for the business units below the
executive officer level to align rewards with value-creating
performance. Target level payouts for fiscal 2020 were conditioned
on meeting or exceeding the Company’s adjusted earnings per share
goal of approximately 14% growth. This goal was established early
in our 2020 fiscal year prior to the onset of the COVID-19
pandemic.
|
For fiscal
2020, the Committee also continued to grant 60% of long-term
incentives in performance shares tied to TSR relative to a Peer
Reference Group of industrial companies. Additional information
about the Peer Reference Group is provided on pages 34-35. This
metric reflects the growth in capital that would be experienced
from purchasing a share of Company or Peer Reference Group member
stock and holding it for the performance period while reinvesting
any dividends paid. The remaining 40% of long-term incentives was
granted in restricted stock units (“RSUs”) that vest over a
four-year period.
FISCAL 2020 INCENTIVE COMPENSATION |
|
|
Annual Incentive
Metric |
Adjusted Earnings Per Share |
Performance Shares
Metric |
Relative TSR |
Performance Shares
Weight |
60%
Long-Term Incentive Value |
Restricted Stock Units
Weight |
40%
Long-Term Incentive Value |
Pay and Performance Alignment
In fiscal
2020, the Company delivered positive financial results despite the
COVID-19 pandemic and continued to create and win large-scale
projects around the world that help our customers meet their most
pressing needs for cleaner energy and environmental solutions,
including the $7 billion NEOM carbon-free hydrogen project in Saudi
Arabia and a $2 billion coal-to-methanol project in Indonesia.
Following the end of the year, the Committee determined actual
annual incentive awards for the named executive officers. The
performance measure for the annual incentive awards was adjusted
earnings per share and the payout metrics and calculation
methodology are described on pages 27-28. Based on the Company’s
performance, the Committee approved an annual incentive award
payout factor of 152% for all named executive officers.
The
Committee also determined final payout levels for performance share
awards granted in fiscal 2018 with a performance cycle ending at
the end of fiscal 2020, which were conditioned on TSR performance
relative to a peer group of similar industrial companies. For the
three-year performance period, Air Products delivered a cumulative
TSR of 115% and the resultant TSR percentile rank was 92%. The
payout metrics and calculation methodology are described on page
30.
Shareholder Feedback
Following
the 2020 Annual Meeting of Shareholders, the Committee reviewed the
results of the shareholder advisory vote on executive officer
compensation. With approximately 96.01% of votes cast in favor of
approval, the Committee determined that the great majority of
shareholders were satisfied with our executive compensation
program.
Compensation Governance Best
Practices
In fiscal
2020, the Committee maintained strong compensation governance
practices. See page ix for additional information regarding our
corporate governance practices.
Table
of Contents

|
Fiscal
2020 Executive Officer Compensation Program Overview |
Our Compensation Philosophy
Overview. The
overall objective of our executive officer compensation program is
to attract and retain a talented management team and provide them
with the right incentives to execute our strategic objectives and
to maximize shareholder value. The same principles that govern the
compensation of all our salaried employees apply to the
compensation of our executive officers.
Tie compensation to
strategy, performance and delivering shareholder
value.
The
Company’s programs provide incentive compensation opportunities
that promote achievement of short- and long-term strategic and
financial objectives. Annual incentive compensation targets are
aligned with the Company’s adjusted earnings per share goals
communicated to shareholders so that executive officers only
receive target payouts if we meet shareholders’ expectations and if
we meet or exceed financial and non-financial targets. Long-term
incentives are granted in stock, the majority of which is tied to
Company TSR so that factors that impact the value of our
shareholders’ investment in the Company significantly impact our
management team’s compensation.
|
Provide competitive
compensation for competitive performance.
The
Company seeks to offer compensation opportunities that are
sufficient to attract talented and experienced managers and to
discourage them from seeking other employment
opportunities.
|
Foster non-financial
corporate goals.
While
financial results are the primary commitment the Company makes to
shareholders, the compensation program balances financial results
with other Company values such as safety, diversity, sustainability
and environmental stewardship. Certain components of the program
provide flexibility to adjust compensation upwards or downwards for
non-financial and strategic goals and to “claw back” compensation
in cases of misconduct or restatement of financial
results.
|
Support actions
needed to respond to changing business
environments.
The
Company has sought to provide some elements of compensation, such
as severance benefits, which give the management team or the Board
tools to facilitate decisions about succession planning,
divestitures and restructurings or other significant corporate
events that may impact the position or employment status of
executive officers.
|
Fiscal 2020 Total Direct
Compensation
The
Committee designed the executive officer compensation program to
provide our executive officers with target compensation that, on
average, is competitive with the relevant peer groups, with actual
compensation driven up or down based on the Company’s operating
performance, stock price and total shareholder return. Individual
components of compensation may be greater or less than the median,
and actual compensation delivered may vary significantly from the
target and the median based on Company or individual performance
and changes in our stock price.
24 |
|
 |
Table
of Contents
The table
below provides a brief description of the principal types of total
direct compensation, how performance factors into each type of
compensation and the compensation program objectives served by each
type. Detailed descriptions of the components of direct
compensation begin on page 26.
Component |
|
Description |
|
How Amount Determined/
Performance Considerations |
|
Objectives |
Base Salary |
|
Fixed cash payment. |
|
Targeted at market median with
adjustment based on level of responsibility, experience and
individual performance. |
|
Provide competitive foundational
pay. |
Annual Incentive |
|
Short-term incentive, cash
payment. |
|
Target payout references market median.
Actual payout driven by adjusted EPS. The Committee has discretion
to adjust the Annual Incentive Plan upward or downward for factors
such as safety, diversity, sustainability and environmental
performance. |
|
Promote achievement of short-term
financial and strategic objectives. |
Performance Shares |
|
Deferred stock units that pay out upon
achievement of performance targets. Delivered in shares of stock
with dividend equivalents also payable upon vesting. |
|
Target value based on market median for
long-term incentives. Actual payout based on relative TSR over
three-year performance period. |
|
Promote achievement of longer-term
financial objectives; encourage current decisions that promote
long-term value creation; align executive officers’ interests with
shareholder returns. |
Restricted Stock
Units |
|
Shares of stock that vest over a
four-year period and pay dividend equivalents on
vesting. |
|
Target value based on market median for
long-term incentives. Actual value determined by shareholder
returns during vesting period. |
|
Retain executive officers; align
executive officers’ interests with shareholder returns. |
The
Committee annually reviews and establishes the performance
measures, target goals and payout schedules used for our Annual
Incentive Plan and the performance share component of awards
granted under our Long-Term Incentive Plan. In determining actual
performance against these metrics, the Committee decides whether to
include or exclude the impact of items reported in the Company’s
financial statements that may not be reflective of underlying
operating results for the current or a prior year. Adjustments from
reported earnings are intended to avoid artificial inflation or
deflation of awards due to unusual or non-operational items in the
applicable period and align pay outcomes with how the Committee and
management view the performance of the business
holistically.
Setting Total Direct Compensation Levels for
Fiscal 2020
Overall,
the Committee sought to provide total direct compensation target
opportunity (base salary, target annual incentive award and
long-term incentive award value) for the executive officers that
approximated the projected median level for similar positions in
the Survey Reference Group. In the case of the CEO and CFO, the
projected median level is derived from two data sources—the Survey
Reference Group and the Peer Reference Group, each weighted
equally. Additional information regarding these peer groups is
provided on pages 34-35. Consistent with industry practice, the
Company considers total direct compensation within 15% of median to
be competitive with market. This margin allows for year-to-year
swings in data than can occur based on a number of factors
unrelated to underlying compensation strategy.
The Company
utilizes two peer groups for benchmarking CEO and CFO compensation
to ensure that the compensation is reasonably aligned with
compensation provided by companies we compete against for talent.
The Survey Reference Group is comprised of industrial companies
that are similar in revenue size to the Company to benchmark
specific pay levels. The Peer Reference Group is comprised of peer
chemical and industrial companies to determine the Company’s
relative TSR performance for purposes of performance share payouts.
Total direct compensation target opportunities may be established
at greater or lesser levels for individual executive officers based
on performance factors, experience in the position, retention and
succession planning considerations or year-to-year swings in the
market reference data.
Table
of Contents
For fiscal
2020, total direct compensation opportunities established by the
Committee for the named executive officers (excluding the CEO as
described below) approximated the market median. Within the total
direct compensation opportunity for each executive officer,
individual components of compensation may be greater or less than
the market median because the Committee is primarily concerned with
the competitiveness of the entire program versus any one element of
compensation. Compensation realized by each executive officer may
vary significantly from target opportunity based on Company or
individual performance and Company stock price
fluctuation.
As part of
the process for determining total direct compensation, the
Committee also reviews tally sheets, which detail the value,
earnings and accumulated potential payout of each element of an
executive officer’s compensation in various employment termination
scenarios. The tally sheets help the Committee consider the
retention value of an executive officer’s accumulated compensation
package, compare executive officers’ accumulated compensation and
understand the impact of compensation decisions on various
termination of employment scenarios.
Mr.
Ghasemi
Mr.
Ghasemi’s Employment Agreement was amended on May 21, 2020 to
extend its term from September 30, 2022 to September 30, 2025. In
addition, pursuant to the amendment, if Mr. Ghasemi’s employment
were to terminate after September 30, 2023 without “cause” or for
“good reason”, as each such term is defined in Employment
Agreement, any cash severance payment he is entitled to receive
would be prorated based on the number of days remaining from the
last day of his employment until September 30, 2025. The Amendment
does not otherwise affect the terms of Mr. Ghasemi’s employment
with the Company or his compensation. The Employment Agreement
provides that Mr. Ghasemi receive a minimum annual base salary of
$1,200,000 and participate in the Company’s Annual Incentive Plan
with a minimum target annual incentive award equal to 150% of his
base salary with actual awards to be determined by the Committee.
Under the Employment Agreement, Mr. Ghasemi also is entitled to
receive minimum annual equity compensation awards under the
Company’s Long-Term Incentive Plan with a grant date value
(determined under the Company’s normal valuation practices) of
$7,000,000 apportioned in a manner consistent with the allocation
for other executive officers.
At the
Committee’s direction, its independent compensation consultant,
Willis Towers Watson (“WTW”), performed a competitive assessment of
Mr. Ghasemi’s total direct compensation at the beginning of fiscal
2020 and determined that the target total direct compensation
should remain positioned at the 75th percentile for the
Peer Reference Group to reflect Mr. Ghasemi’s superior performance
during his tenure with Air Products.
|
 |
Fiscal 2020 Total
Direct Compensation Components |
Within the
competitive target value for an executive officer’s total direct
compensation established by the Committee, the Committee determines
the individual compensation components of the program.
Base Salary
Base salary
is generally targeted at the market median, with adjustment where
the Committee believes appropriate for proficiency, performance,
experience and the uniqueness of the responsibilities held by the
executive officers. Changes in base salaries for executive officers
become effective as of the first payroll period in the calendar
year; therefore, the amounts in the Summary Compensation Table
reflect the fiscal 2019 base salary rate for the first quarter of
fiscal 2020 and the fiscal 2020 base salary rate for the remainder
of fiscal 2020. Base salaries approved for the executive officers
for fiscal 2019 and fiscal 2020 were as follows:
Officer |
|
2019 Base
Salary Rate
($) |
|
2020 Base
Salary Rate
($) |
|
%
Increase |
Seifi
Ghasemi |
|
1,350,000 |
|
1,350,000 |
|
0 |
M. Scott
Crocco |
|
650,000 |
|
650,000 |
|
0 |
Sean D.
Major |
|
550,000 |
|
550,000 |
|
0 |
Samir J.
Serhan |
|
650,000 |
|
650,000 |
|
0 |
26 |
|
 |
Table
of Contents
Annual Incentive Plan
Target
annual incentive opportunities under the Annual Incentive Plan are
intended to be competitive with the market. Targets may be
established at greater or lesser levels for individual executive
officers based on performance factors, internal equity, experience
in the position or year-to-year swings in market data. Actual
annual incentive awards may be above or below target depending upon
the Company’s fiscal year performance as measured by the
performance measures and goals established by the Committee at the
beginning of the fiscal year. When performance exceeds the target
goals for the performance measures, annual incentive awards may
exceed target as well and may exceed market median payouts. Actual
annual incentive awards can range from 0% to 230% of target,
inclusive of up to 30 percentage points of positive discretion.
Over the previous five years, executive officer awards have ranged
from 120% to 200% of target.
Determination of annual incentive awards is a multi-step
process, which begins with establishing target opportunities. At
the beginning of the fiscal year, the Committee determines
executive officer target annual incentive awards as a percentage of
each executive officer’s base salary based on the Survey Reference
Group and, for the CEO and CFO, Peer Reference Group competitive
assessment. For all named executive officers, target bonus
opportunities remained the same for fiscal years 2019 and
2020.
Officer |
|
2019 Target
(% of Base Salary) |
|
2020 Target
(% of Base Salary) |
|
2020 Target
Value ($) |
Seifi
Ghasemi |
|
150 |
|
150 |
|
2,025,000 |
M. Scott
Crocco |
|
85 |
|
85 |
|
552,500 |
Sean D.
Major |
|
85 |
|
85 |
|
467,500 |
Samir J.
Serhan |
|
85 |
|
85 |
|
552,500 |
An
executive officer’s actual payout is determined by multiplying the
target award by his or her individual payout factor.
As a first
step in determining an executive officer’s individual payout
factor, the Committee determines an initial payout factor derived
from the Company’s performance against the payout schedules
established by the Committee at the beginning of the fiscal year.
As described above, for fiscal 2020, the Committee selected
rigorous adjusted earnings per share targets as the performance
measure for the Annual Incentive Plan to incentivize the executive
officers to execute the Company’s growth strategy. Target adjusted
earnings per share of $9.35 represented a 14% increase from fiscal
2019 adjusted earnings per share of $8.21.(1) These
targets were established at the beginning of the fiscal year prior
to the COVID-19 pandemic. The threshold, target and maximum factors
for the adjusted earnings per share measure are set out below.
(Factors are interpolated between points.)
2020 Adjusted
Earnings per Share(1) |
|
Initial Payout
Factor % |
<$8.21 |
|
0 |
$8.21 |
|
50 |
$9.35 |
|
100 |
$9.60 |
|
200 |
(1) |
Adjusted earnings per share is a
non-GAAP financial measure and is defined and reconciled to diluted
earnings per share on a GAAP basis in Appendix A. |
The
Committee also reserved the ability to exercise discretion to
adjust the payout within a range to reflect performance in areas
such as safety, sustainability, diversity, productivity, progress
on strategic objectives and other individual performance factors.
The actual payout factor can range from 30 percentage points below
the initial payout factor described above to 30 percentage points
above the initial payout factor based on this application of
discretion.
Table
of Contents
DETERMINATION OF
ANNUAL INCENTIVE PLAN PAYOUT |
|
|
Determine Target Award (beginning of
fiscal year) |
 |
Determine Payout Factor Range (after
fiscal year-end) |
 |
Consider Adjustments to Determine
Actual Payout Factor |
 |
Multiply Actual Payout Factor by Target
Award |
The
Committee determined that the initial scored Annual Incentive Plan
results—without any adjustment—were not a fair representation of
performance and financial achievement and that an adjustment was
necessary to ensure the executive officers received rewards
consistent with their extraordinary efforts in fiscal 2020. The
following were considered when determining the bonus
payout.
● |
Contribution to the Fight Against
the COVID-19 Pandemic: Air
Products kept our 750 plants operating during the pandemic so that
we could deliver essential products and services to our customers
and the markets and communities they serve around the
globe. |
● |
Shareholder Value:
Despite the impacts of the pandemic,
Air Products delivered strong total shareholder return that was up
37% (cumulative) for the fiscal year and in the top quartile
relative to peers. |
● |
Focus on Employee
Wellbeing: There were no
layoffs or salary reductions of the employee population. We
enhanced safety and protection measures for frontline workers. When
possible, employees are working from home to help maintain their
health and safety as well as business continuity. |
● |
Prudence on Executive
Pay: There were no special
awards—either for retention or other purposes—provided to
executives to shield them from the impact of the crisis. In
addition, there will be no changes made to long-term incentive mix
for fiscal 2021 relative to fiscal 2020. |
● |
Strategic Actions:
Air Products continued to create and
win mega-projects around the world to help customers meet their
most pressing needs for cleaner energy and environmental
solutions. |
We
continue to focus on a performance-oriented culture. Given the
factors described above, the Committee determined that providing an
actual payout above the calculated payout is consistent with a pay
for performance orientation. For fiscal 2020, adjusted EPS was
$8.38, which resulted in an initial payout factor of 58% versus the
$9.35 adjusted EPS goal that was established in November 2019,
prior to the COVID-19 pandemic. However, in recognition of the
factors described above relating to the impact of COVID-19, and the
fact that the pandemic and its consequences were not anticipated by
the Committee at the time performance targets were determined and
were generally outside of the executive officers’ control, the
Committee considered the $0.60 to $0.65 per share impact of
COVID-19 on our financial performance and the delay in the
completion of the Jazan Gas and Power Project. After careful
consideration of the impact of these factors and the strong
performance and pay-based factors described above, the Committee
determined to exclude the impact of these items from adjusted EPS
for the purpose of determining the payout factor, which resulted in
a payout factor of 152%. The Committee did not exercise further
discretion to adjust the payout factor upwards or
downwards.
Discretionary Bonuses
In
addition to amounts paid under the Annual Incentive Plan, we from
time to time pay discretionary cash bonuses as recruitment or
retention incentives or in recognition of outstanding performance.
No discretionary bonuses were paid to the Company’s named executive
officers for fiscal 2020.
28 |
|
 |
Table
of Contents
Long-Term Incentives
The
Committee believes long-term incentive compensation is the most
critical part of executive officer compensation because it creates
alignment with shareholders and promotes achievement of long-term
financial and strategic objectives. The success of the Company’s
business and resulting value for our shareholders is predominantly
built on stable, long-term relationships with customers and
substantial capital investments that reap returns over a long-term
time horizon through technological differentiation, cost control
and operational efficiencies. Reflecting this long-term business
model, the Committee emphasizes long-term incentive compensation
designed to ensure that the decisions being made today build value
for the long-term and reward sustainable growth, disciplined
capital investment, sustainable cost reduction and consistent
operational excellence. For fiscal 2020, the Committee selected two
components for the executive officer’s long-term incentives:
performance shares, which are conditioned on performance over a
three-year period (for fiscal 2020 grants, relative TSR for fiscal
2020-2022); and RSUs, which link executive officers’ interests to
shareholder returns and provide a retention incentive.
For fiscal
2020, the mix of intended long-term incentive value for executive
officers was 60% performance shares and 40% RSUs. The Committee
chose this mix to provide a balance of stock-based compensation to
encourage both above-market performance and talent retention.
Because both components of an executive officer’s long-term
incentive opportunity are delivered in stock-based awards, their
value is based on our stock price, which serves the Committee’s
objective of creating alignment with shareholders.
The
Committee determined the level of long-term incentive grants for
fiscal 2020 at the beginning of the fiscal year. Prior to making
the grants, the Committee established an intended long-term
incentive value for each executive officer. When setting these
intended values, the Committee considered the Survey and Peer
Reference Group competitive data and target total direct
compensation opportunities. It is the Committee’s intent that the
long-term incentive value and total direct compensation opportunity
for Mr. Ghasemi be at the 75th percentile of the Peer
Reference Group. It is the Committee’s intent that for executive
officers other than our CEO, the long-term incentive value
approximate the market median and the total direct compensation
opportunity for such executive officers approximate the market
median level when combined with base salary and target Annual
Incentive Plan awards.
Individual
performance or other factors may result in awards that are above or
below the market median. These factors include tenure and
experience, succession planning and retention, subjective
evaluations of performance, historical grant levels and other
recent compensation actions with respect to the individual such as
special retention awards. For fiscal 2020 all intended long-term
incentive values approximated the projected market median (except
for the CEO value, which remained positioned at the 75th
percentile). The actual value realized may differ significantly (up
or down) from the intended value due to Company stock price
performance over the life of the awards and the extent to which
performance goals are met in the case of performance
shares.
Officer |
|
Intended Long-Term
Incentive Value
($) |
Seifi
Ghasemi |
|
10,000,000 |
M. Scott
Crocco |
|
1,700,000 |
Sean D.
Major |
|
1,400,000 |
Samir J.
Serhan |
|
1,700,000 |
Table
of Contents
Performance Shares
FISCAL 2020 PERFORMANCE SHARE GRANTS |
|
|
In fiscal
2020, performance shares made up the majority of the long-term
incentives granted to our executive officers. Performance shares
entitle the recipient to one share of Company stock and accumulated
dividend equivalents for each performance share earned upon the
satisfaction of performance objectives and other conditions to
earning the award. Performance shares are granted each year with
overlapping three-year performance cycles. The awards are paid out
at the end of the three-year period based on the achievement of
specified performance goals. Payouts of performance shares range
from 0% to 200% of the target level of shares awarded. The target
level for fiscal 2020 grants (60% of the total intended long-term
incentive value for each executive officer) was converted to a
number of deferred stock units based on the average NYSE closing
stock price for the 10 trading days preceding the grant date. The
actual number of performance shares earned is determined by
multiplying the target number of shares by a payout factor, which
is subject to adjustment by the Committee within a narrow range
(+/- 15 percentage points) to address performance factors that may
not be reflected in relative TSR results.
Fiscal 2020
performance shares were granted conditioned upon the Company’s
three-year TSR percentile rank compared to the TSR of Peer
Reference Group members over the three-year performance period
(fiscal 2020-2022). The payout factor will be determined in
accordance with the following schedule (with payout factors
interpolated between levels):
Company’s TSR
Percentile Rank |
|
Payout
Factor* |
|
>75th %ile |
|
200 |
% |
50th %ile |
|
100 |
% |
30th %ile |
|
30 |
% |
<30th %ile |
|
0 |
% |
* |
The Committee may increase or decrease
the payout factor by up to 15 percentage points. |
The target
number of fiscal 2020 performance shares granted to each named
executive officer was as follows:
Officer |
|
Target
Performance
Shares |
Seifi
Ghasemi |
|
25,230 |
M. Scott
Crocco |
|
4,289 |
Sean D.
Major |
|
3,532 |
Samir J.
Serhan |
|
4,289 |
FISCAL 2018-2020 PERFORMANCE SHARES PAYOUT |
|
|
The
Committee determined final payout levels for performance share
awards granted in fiscal 2018 with a performance cycle ending at
the end of fiscal 2020. For the three-year performance period, our
TSR was 115% and the TSR percentile rank was 92%. This resulted in
a payout factor of 200% for the fiscal 2018-2020 performance cycle.
The Committee did not exercise its discretion to adjust the payout
factor for this performance cycle. The final payout for the fiscal
2018-2020 performance cycle is outlined in the following
table.
Officer |
|
Target
Performance
Shares Grant |
|
Performance
Shares Earned |
Seifi
Ghasemi |
|
31,489 |
|
62,978 |
M. Scott
Crocco |
|
6,297 |
|
12,594 |
Sean D.
Major |
|
3,704 |
|
7,408 |
Samir J.
Serhan |
|
3,704 |
|
7,408 |
30 |
|
 |
Table
of Contents
Restricted Stock Units
Each
restricted stock unit entitles the recipient to receive one share
of Company stock upon payout, generally at the end of a four-year
vesting period. RSUs are conditioned upon continued employment
during the vesting period but are subject to special vesting rules
for terminations due to death, disability or retirement or
terminations covered by the Executive Separation Program described
on pages 45-46. Upon vesting, RSUs also entitle the holder to
receive dividend equivalents equal to the amount of dividends paid
on a share of Company stock during the vesting period. The vesting
conditions provide an incentive for retention, and the value of
this compensation element increases or decreases in direct
proportion to our TSR. The value of RSUs granted to the executive
officers in fiscal 2020 is reflected in the Summary Compensation
Table and the Grants of Plan-Based Awards table. The target level
for fiscal 2020 grants (40% of the total intended long-term
incentive value for each executive officer) was converted to a
number of deferred stock units based on the average NYSE closing
stock price for the 10 trading days preceding the grant
date.
In fiscal
2020, we granted RSUs to our named executive officers as
follows:
Officer |
|
RSUs |
Seifi
Ghasemi |
|
16,820 |
M. Scott
Crocco |
|
2,859 |
Sean D.
Major |
|
2,354 |
Samir J.
Serhan |
|
2,859 |
 |
Employee Benefit
Plans and Other Compensation |
Our
employee benefit programs are offered and designed to be
competitive and to provide reasonable security for employees.
Welfare and retirement benefits are offered at essentially the same
level to all U.S. salaried employees, including executive
officers.
Retirement Benefits
Executive
officers participate in our generally available U.S. salaried
retirement programs. The Company maintains qualified retirement
programs for its salaried employees, including a defined benefit
Pension Plan for Salaried Employees (the “Salaried Pension Plan”),
which has been closed to new entrants since 2005, and the Air
Products and Chemicals, Inc. Retirement Savings Plan (a defined
contribution profit-sharing plan). The Company also maintains a
nonqualified pension plan, which has been closed to new entrants
since August 2014, and a nonqualified deferred compensation plan in
which certain executive officers and other eligible employees
participate. The plans are discussed in more detail below in the
narrative accompanying the Pension Benefits table and the
Nonqualified Deferred Compensation table.
Welfare Benefits
We provide
medical and dental coverage, life insurance and disability
insurance to executive officers under the same programs offered to
all salaried employees. All participating employees pay a portion
of the cost of these programs.
Severance and Change in Control
Arrangements
Executive
officer severance and change in control arrangements are provided
to support major corporate and management transitions. The
Committee believes these arrangements provide benefit to the
Company and its shareholders. The Committee periodically reviews
these arrangements in depth for market competitiveness and
appropriateness for the Company’s business.
Table
of Contents
Severance
All
executive officers participate in the Executive Separation Program.
This program is intended to facilitate changes in the leadership
team by establishing terms for the separation of an executive
officer in advance, allowing a smooth transition of
responsibilities when it is in the best interests of the Company.
The program provides severance benefits and vesting of certain
long-term incentives upon involuntary termination other than for
“cause” or voluntary termination for “good reason” (as each term is
defined in the applicable severance agreement) in exchange for
certain post-employment restrictions designed to protect the
Company. Details of the program are provided beginning on page
45.
Change in Control Arrangements
To enable
the management team to negotiate effectively for shareholders
without concern for their own future in the event of any actual or
threatened change in control of the Company, the Company has
entered individual change in control severance agreements for each
of the executive officers. Consistent with compensation governance
best practices, our change in control agreements are
“double-trigger”, which means that each executive officer will
receive specific rights and benefits if, following a change in
control, his or her employment is terminated by the Company without
“cause” or the executive officer terminates his or her employment
for “good reason” (as each term is defined in the applicable
severance agreement) in exchange for certain post-employment
restrictions designed to protect the Company. Details of these
agreements are described on pages 47-48.
Perquisites
The
Committee has approved Mr. Ghasemi’s and Dr. Serhan’s use of
corporate aircraft for personal travel in order to mitigate
security concerns, preserve confidentiality and maximize the time
they are able to spend on Company business. The Committee has also
approved Mr. Ghasemi’s personal use of a Company car and driver and
use of a car and driver by Mr. Ghasemi’s spouse on rare occasions
where security is a concern. Mr. Ghasemi uses commuting time for
performing his responsibilities to the Company. Mr. Ghasemi is
responsible for any taxes on his personal use and his spouse’s use
of corporate aircraft and cars, and Dr. Serhan is responsible for
any taxes on his personal use of corporate aircraft. Dr. Serhan is
on an international business assignment. In connection with this
assignment, Dr. Serhan receives certain allowances, including a
Company-provided apartment and utilities, a Company-provided car
and a daily living allowance. The Committee believes the benefits
of security, confidentiality and efficiency achieved by these
arrangements outweigh the expense to the Company.
 |
Executive
Compensation Decision-Making Process |
Roles of the Committee, Compensation
Consultant and Management in the Compensation Process
Committee Responsibilities
The
Committee is responsible to the Board and to shareholders for
establishment and oversight of the Company’s compensation program
for executive officers and for approving the compensation level of
the executive officers. The Committee establishes overall
compensation strategies and policies for the executive officers,
allocates compensation for executive officers among the various
components of compensation, evaluates and approves performance
measures and goals relevant to the incentive compensation of the
executive officers, evaluates the performance of the CEO with input
from the Board, determines total direct compensation levels for the
CEO and evaluates and approves direct compensation levels for other
executive officers. Each year, the Committee:
● |
reviews and evaluates the
appropriateness of the Company’s current executive officer
compensation program based on several factors, including
competitiveness of the program and alignment of compensation
delivered under the program with the Company’s strategies and
performance; |
● |
reviews whether the program design
encourages excessive risk-taking; |
● |
approves peer groups for market reference; |
32 |
|
 |
Table
of Contents
● |
reviews
dilution and burn rates associated with the Company’s equity
compensation; |
|
|
● |
evaluates
and approves changes to incentive compensation and benefit plans
when needed; |
|
|
● |
approves
incentive compensation payouts for the current year;
and |
|
|
● |
addresses
other specific issues regarding management development and
compensation as needed. |
Periodically, the Committee also undertakes an extensive
review of the competitiveness and appropriateness of certain pay
practices such as severance and change in control
arrangements.
Engagement of Compensation Consultant
The
Committee retains an external compensation consultant to provide
independent advice, information and analysis on executive
compensation. The Committee has established several practices to
ensure the external consultant’s independence, candor and
objectivity. The consultant is engaged by, has its compensation set
by and reports directly to the Committee, frequently meets
separately with the Committee (with no members of management
present) and consults with the Committee Chair in between meetings.
Management reports fees paid for executive compensation consulting
services performed by the consultant to the Committee at each
meeting, and the Committee approves in advance the executive
compensation consulting services to be performed.
The
Committee retained WTW as its external consultant for fiscal 2020.
Aggregate fees for WTW’s executive compensation consulting services
provided to the Committee were $241,000. During fiscal 2020, WTW
also performed global retirement plan actuarial, administrative and
consulting, health care exchange and aviation insurance brokering
services for the Company and provided “Talent & Rewards” data
surveys and proxy review services in addition to the work performed
for the Committee. The aggregate fees for those services were
$890,000. The Company selected WTW to perform global investment
consulting services in fiscal 2021 for its pension
plans.
The
decision to hire WTW for actuarial services was made over a decade
ago after an extensive bid process. WTW is one of the few firms
that is able to provide these services on a global basis. Decisions
to hire WTW for the health care exchange and insurance brokering
services were made by the responsible functional managers after a
competitive bidding process. The decision to hire WTW for the
global investment consulting services for its pension plans was
made by the Pension Investment Committee, members of Treasury and
Human Resources after a competitive bidding process.
During
fiscal 2020, WTW provided advice and analysis to the Committee on
total direct compensation for individual executive officers, peer
group composition, incentive plan performance measures,
compensation program design and external trends and developments.
WTW also provided an analysis of the alignment of pay delivered
under the Company’s executive officer compensation program with its
performance compared to peer group pay and performance, a
governance and regulatory update, a third party independent review
of the Company’s executive compensation disclosures and an
assessment of the potential relationship between the Company’s
compensation program and risk-taking by management. In addition,
WTW provided advice to the Company with respect to the design of
the 2021 Long-Term Incentive Plan, which is subject to shareholder
approval at the Annual Meeting as described in Proposal
3.
Independence
Assessment
The
Committee has assessed WTW’s independence and concluded that there
are no conflicts of interest that would prevent WTW from
independently advising the Committee. In making this determination,
the Committee considered, among other things, the fees paid for
services provided to management as a percentage of WTW’s
consolidated revenues, policies and procedures established by WTW
to mitigate conflicts of interest and the lack of business and
personal relationships between WTW team members and the Company’s
executive officers or Committee members.
|
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Management Input
While the
Committee determines overall compensation strategy and policies for
the executive officers and approves their compensation, it seeks
input from several executive officers and other management
employees with respect to both overall guidelines and discrete
compensation decisions. Specifically:
● |
Human
Resources staff work with the Committee to develop the design of
compensation programs and decision-making frameworks for
determining compensation levels; |
|
|
● |
the CEO
provides input to the Committee on the forms of incentive
compensation and performance measures that will best support his
strategic goals for the Company; |
|
|
● |
the CEO
provides the Committee perspective on the performance of the other
executive officers and develops and recommends compensation actions
for the other executive officers in consultation with Human
Resources and based on competitive market analysis; |
|
|
● |
the CFO
provides background to the Committee regarding the Company’s key
financial objectives and performance against them; and |
|
|
● |
the
Company’s Law and Human Resources staff provide technical advice
and other support to the Committee. |
The
executive officers and employees attend portions of the Committee
meetings; however, the Committee meets in executive session both
alone and with its external compensation consultant to reach final
decisions about CEO and other executive officers’
compensation.
Benchmarking
The
Committee believes that a threshold characteristic of reasonable
compensation is that it is aligned with compensation provided by
companies the Company competes against for talent. In preparation
for determining fiscal 2020 compensation, the Committee benchmarked
the executive officer compensation levels to evaluate the
competitiveness of the program and as a reference for establishing
compensation levels for fiscal 2020.
The
Committee uses two peer groups for benchmarking, which it reviews
and approves annually.
Name |
|
Criteria |
|
Purpose |
|
Source |
Survey Reference Group |
|
Broad group of industrial companies
with $7 – 13 billion in revenue |
|
Benchmark competitive executive officer
direct compensation levels at target |
|
WTW and Mercer surveys |
Peer Reference Group |
|
Chemical and industrial companies with
similar capital structure, asset intensity and profitability to
Company |
|
Benchmark competitive direct
compensation levels for CEO and CFO, pay practice and pay for
performance assessment, peer group used for performance share
relative TSR measure |
|
Compiled from proxy statement
filings |
For
purposes of assessing competitiveness and recommending compensation
levels for fiscal 2020, the Committee used survey data from WTW and
Mercer compensation databases on a group of industrial companies
with revenue of $7 to $13 billion (consistent with the Company’s
fiscal 2019 revenue of $8.9 billion) (the “Survey Reference
Group”). The Survey Reference Group is representative of the
companies the Company competes against for talent and is used by
the Company for various compensation benchmarking purposes, not
just executive officer compensation. A list of companies included
in the Survey Reference Group is provided in Appendix C.
Prior to
the beginning of the fiscal year, the Committee reviewed an
assessment of each named executive officer’s compensation level
relative to the Survey Reference Group based on similar functional
responsibilities. The assessment identified median, 25th
and 75th percentile levels for base salary, target
annual incentive, target long-term incentives and target total
direct compensation. Annual and long-term incentive levels
reflected a three-year average to reduce volatility in
results.
34 |
|
 |
Table
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The
Committee also reviewed proxy data compiled from a smaller group of
companies that are competitors of the Company or are similar to the
Company in that they are chemical or other industrial companies
with similar capital structures, asset intensity, operating margins
and business models (the “Peer Reference Group”). Peer Reference
Group companies are generally similar in revenue size to the
Company, however certain companies with higher revenues are
included based on proximity of business model. The Committee used
the Peer Reference Group for benchmarking specific pay practices
and for assessing alignment of pay with performance. In addition,
the Committee also uses the Peer Reference Group to assess
competitive compensation levels for CEO and CFO total direct
compensation. Because proxy data does not necessarily reflect
similar positions to the other executive officers, only the Survey
Reference Group is used to benchmark pay levels for them. The Peer
Reference Group is also used for determining the Company’s relative
TSR performance for purposes of performance share
payouts.
The fiscal
2020 Peer Reference Group consisted of the following
companies:
Celanese Corp. |
|
Ecolab Inc. |
|
Olin Corporation |
Chemours Company |
|
Huntsman Corp. |
|
Parker-Hannifin Corp. |
Dover Corp. |
|
Illinois Tool Works,
Inc. |
|
PPG Industries, Inc. |
DuPont De Nemours, Inc. |
|
Ingersoll-Rand plc |
|
Westlake Chemical Corp. |
Eastman Chemical Co. |
|
Linde plc. |
|
|
For fiscal
2020, the Peer Reference Group was updated to remove Danaher
Corporation (due to changes in the nature of its business to focus
on life sciences) and add DuPont De Nemours, Inc., a specialty
products and chemicals company, and Westlake Chemical Corporation,
a commodity chemicals company. Ingersoll-Rand plc (renamed Trane
Technologies plc) completed a spin-off of its industrial segment,
which merged with Gardner Denver Holdings on February 29, 2020 and
changed its name to Ingersoll Rand Inc. The Committee determined
that Ingersoll Rand Inc. will replace Ingersoll-Rand plc in the
Peer Reference Group for fiscal 2021.
Risk Assessment
During
fiscal 2020, the Committee, with assistance from WTW, conducted a
risk assessment of the Company’s executive officer compensation
program. The Committee concluded that the program is balanced and
does not provide an enticement for executives to take risks that
are likely to have an adverse effect on the Company due to the
following features:
● |
the
Company does not use highly leveraged short-term incentives that
drive risky investments at the expense of long-term Company
value; |
|
|
● |
the
Company’s compensation programs reward consistent, long-term
performance by heavily weighting compensation to long-term
incentives; |
|
|
● |
concentration of long-term incentive compensation in awards
based on relative TSR combined with overlapping grant cycles
strengthens executives’ incentive to foster stable, long-term
performance; |
|
|
● |
cash
incentive awards are capped at sustainable levels, and the
Committee has discretion to reduce awards, including for
non-financial considerations; |
|
|
● |
the
Company enforces substantial executive officer stock ownership and
holding requirements; and |
|
|
● |
the
Company has recovery policies (“clawbacks”) applicable to incentive
compensation that permit the Company to cancel awards and recoup
certain gains in the event of conduct detrimental to the
Company. |
In
addition, management conducted and reported to the Committee on its
evaluation of the Company’s overall compensation practices and
programs to assess whether any of these programs and practices
exposed the Company to excessive risk-taking, concluding there were
no such programs or practices.
Table
of Contents
 |
Key Compensation
Practices and Policies |
Executive Officer Stock
Ownership
The
Committee has approved ownership guidelines that require executive
officers to achieve an ownership stake in the Company that is
significant in comparison with the executive officer’s salary. The
ownership guidelines are six times base salary for the CEO and
three times base salary for the other executive officers. Each
executive officer is expected to achieve the specified ownership
level within five years of assuming his or her position. Executive
officers may count toward these requirements the value of shares
owned, share equivalents held in their Retirement Savings Plan
accounts, earned performance shares, restricted shares, unvested
RSUs and deferred stock units that are fully vested and held in the
Company’s nonqualified Deferred Compensation Plan. Stock options
and unearned performance shares are not counted. All executive
officers are currently in compliance with this policy.
Hedging and Pledging
Policy
It is the
policy of the Company that executive officers and directors may not
purchase or sell options on Company stock, engage in short sales
with respect to Company stock or trade in puts, calls, straddles,
equity swaps or other derivative securities that are directly
linked to Company stock. Executive officers and directors are also
prohibited from holding shares of Company stock in a margin account
or pledging shares of Company stock as collateral on a loan.
Employees, other than executive officers, are generally permitted
to engage in transactions that are designed to hedge or offset
market risk.
Clawback Policy
The
Company’s equity plans and agreements provide that awards may be
cancelled and that certain gains must be repaid to the Company (or
“clawed back”) if an executive officer engages in activity that is
detrimental to the Company, such as performing services for a
competitor, disclosing confidential information or violating
Company policies. The Committee has also adopted a policy allowing
the clawback of cash incentive payments and performance shares in
the event an executive officer’s conduct leads to a restatement of
the Company’s financial results. The Committee may, in its
discretion, seek to recoup any bonus or incentive compensation paid
to an executive officer if (i) the amount of such payment was based
on the achievement of certain financial results that were
subsequently the subject of a restatement, (ii) the Committee
determines that the executive officer engaged in misconduct that
resulted in the requirement to restate and (iii) a lower payment
would have been made to the executive officer based upon the
restated financial results.
Granting Practices
Equity
compensation awards are provided to executive officers and
approximately 230 other management employees under the Company’s
Long-Term Incentive Plan (except for off-cycle recruiting and
retention awards) and are granted as of the first NYSE business day
in the month of December. Recruiting grants are generally issued as
of the first day of employment. Off-cycle retention grants are made
occasionally in response to extraordinary retention
needs.
36 |
|
 |
Table
of Contents
Executive Compensation
Tables
Fiscal 2020 Summary Compensation
Table |
Officer and
Principal Position |
Year |
Salary
($) |
Bonus(1)
($) |
Stock
Awards(2)
($) |
Non-Equity
Incentive
Plan
Compensation(3)
($) |
Changes in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings(4)
($) |
All Other
Compensation(5)
($) |
Total
($) |
Seifi
Ghasemi,
Chairman, President and
Chief Executive Officer |
2020 |
1,350,000 |
|
10,827,959 |
3,078,000 |
16,617 |
324,800 |
15,597,376 |
2019 |
1,350,000 |
|
12,842,935 |
2,430,000 |
7,300 |
401,722 |
17,031,957 |
2018 |
1,309,615 |
|
9,788,563 |
2,571,750 |
6,181 |
265,398 |
13,941,507 |
M. Scott
Crocco,
Executive Vice President
and Chief Financial Officer |
2020 |
650,000 |
|
1,840,633 |
839,800 |
1,126,252 |
9,694 |
4,466,379 |
2019 |
634,615 |
|
2,183,142 |
663,000 |
1,270,253 |
10,005 |
4,761,015 |
2018 |
600,000 |
|
1,957,485 |
647,700 |
726,537 |
8,851 |
3,940,573 |
Sean D.
Major,
Executive Vice President,
General Counsel
and Secretary |
2020 |
550,000 |
|
1,515,674 |
710,600 |
2,249 |
56,876 |
2,835,400 |
2019 |
550,000 |
|
1,284,116 |
561,000 |
755 |
58,884 |
2,454,755 |
2018 |
550,000 |
|
1,151,372 |
523,875 |
187 |
45,140 |
2,270,574 |
|
|
|
|
|
|
|
|
Samir J.
Serhan,
Executive Vice President
and Chief Operating
Officer |
2020 |
650,000 |
|
1,840,633 |
839,800 |
2,502 |
278,389 |
3,611,324 |
2019 |
619,231 |
1,000,000 |
3,753,368 |
663,000 |
767 |
275,930 |
6,312,296 |
2018 |
550,000 |
770,000 |
1,151,372 |
593,725 |
472 |
61,418 |
3,126,987 |
|
|
|
|
|
|
|
|
(1) |
This column includes a discretionary
bonus paid to Dr. Serhan based on his 2019 performance in
recognition of his contribution to winning and executing the
largest and most complex projects in Air Products’ history and
driving transformation across our businesses as well as sign-on
bonuses paid to Dr. Serhan in his first month and first year
anniversary with the Company. |
(2) |
Amounts in this column represent the
grant date fair value of restricted stock units and performance
share awards granted in the fiscal year indicated, disregarding any
estimate of forfeitures related to time-based vesting. Generally,
the expense for these awards is recognized over the vesting or
performance period unless the recipient is eligible for retirement
and the award vests upon retirement, in which case the expense may
be required to be recognized entirely in the year of grant. The
valuation models and assumptions applicable to these grant date
fair values are set forth in Note 19, Share-Based
Compensation, to our audited financial statements included in
our Annual Report on Form 10-K for the fiscal year ended September
30, 2020, filed with the SEC on November 19, 2020. The amounts
shown may not correspond to the actual value that will be realized
by the executive officers. The grant date fair values of the
performance shares are based upon the grant date probable outcomes
of satisfying the performance conditions stipulated in the grants.
The maximum grant date values of performance share grants are
reflected in the table below. Maximum values use the NYSE closing
stock price on date of grant at the maximum calculated payout at
200% as well as the maximum discretion that could be applied at
15%. For additional information on awards made in fiscal 2020, see
the Grants of Plan-Based Awards Table and Outstanding Equity Awards
Table on pages 38 and 39, respectively. |
FISCAL 2020 PERFORMANCE SHARES GRANT DATE
VALUES |
|
|
|
Officer |
|
Value Included
($) |
|
Maximum Value
($) |
|
Seifi
Ghasemi |
|
6,943,044 |
|
12,528,852 |
|
M. Scott
Crocco |
|
1,180,290 |
|
2,129,855 |
|
Sean D.
Major |
|
971,971 |
|
1,753,940 |
|
Samir J.
Serhan |
|
1,180,290 |
|
2,129,855 |
(3) |
Amounts in this column reflect Annual
Incentive Plan awards. At their election, executive officers may
defer awards received under this Plan. |
(4) |
Amounts in this column reflect the annual change in the
actuarial present value of each executive officers’ accumulated
tax-qualified and nonqualified pension benefits and interest
considered to be above-market interest credited to their Deferred
Compensation Plan balances. Interest is calculated for the Deferred
Compensation Plan accounts using a Moody’s A-rated Corporate Bond
Rate because this is comparable to the rate the Company pays its
other creditors on long-term obligations. When this rate exceeds
120% of a rate set by the U.S. Internal Revenue Service, it is
treated as above-market interest, even though it is based on a
market average for corporate bonds. The amounts included as
above-market interest were as follows: |
Table
of Contents
|
Seifi
Ghasemi |
|
$ |
16,617 |
|
M. Scott
Crocco |
|
$ |
12,615 |
|
Sean D.
Major |
|
$ |
2,249 |
|
Samir J.
Serhan |
|
$ |
2,502 |
The pension accrual amounts represent the difference
between the September 30, 2020 and September 30, 2019 actuarial
present value of accumulated benefits under the Company’s
tax-qualified and nonqualified pension plans for those executive
officers who participate in the pension plans. No amounts are shown
in the Summary Compensation Table for negative changes in value.
The pension accrual amounts are as follows:
|
M. Scott
Crocco |
$ |
1,113,637 |
|
No changes were made to
pension benefit formulas for this year. Changes in pension value
can result from additional years of service, changes in pensionable
compensation and changes to discount and mortality rates.
Additional information on how these amounts are calculated is
included in the footnotes accompanying the Pension Benefits
table.
|
(5) |
Amounts shown in this column are detailed in the chart
below. |
|
Officer |
|
Contributions
Under Defined
Contribution Plans
($) |
|
Group Term
Life Insurance
Premiums
($) |
|
International
Assignments
Policy(i)
($) |
|
Perquisites or
Personal Benefits(ii)
($) |
|
Seifi
Ghasemi |
|
162,142 |
|
1,236 |
|
|
|
161,422 |
|
M. Scott
Crocco |
|
8,458 |
|
1,236 |
|
|
|
0 |
|
Sean D.
Major |
|
55,640 |
|
1,236 |
|
|
|
0 |
|
Samir J.
Serhan |
|
63,920 |
|
1,236 |
|
180,232 |
|
33,001 |
(i) |
Dr. Serhan was on temporary
international commuter assignment during fiscal 2019 and 2020 in
support of our operations and business development initiatives
worldwide. In connection with this assignment, the Company’s
standard International Assignment Policy provides reimbursement of
expenses over and above those Dr. Serhan would have incurred if he
had remained solely in the United States. For 2020 this amount
includes a housing allowance of $107,154; car lease of $55,376; and
other miscellaneous items of $17,702. |
(ii) |
The amount reported in this column for
Mr. Ghasemi reflects the incremental cost to the Company of
providing Mr. Ghasemi a car and driver for occasional personal use
of $8,914, including for occasional use by his spouse, and of
providing Mr. Ghasemi personal use of corporate aircraft of
$152,508. These benefits were provided to allow Mr. Ghasemi to
focus on Company business and to mitigate security concerns. The
incremental cost for the car and driver was calculated using the
IRS mileage rate based on the variable costs of operating a
vehicle. The variable cost rate is used rather than the standard
business rate as the Company uses the car and driver for Company
business, including to transport other passengers, when not being
used by Mr. Ghasemi, and would incur the fixed costs of operating
the vehicle and employing the driver whether or not Mr. Ghasemi was
provided the car and driver for commuting. In addition to the
mileage rate, which includes trips to and from Mr. Ghasemi’s
residence with no passengers, the amount calculated for use of the
car and driver includes toll and overtime compensation and
reimbursement for meals and lodging provided to the driver in
connection with Mr. Ghasemi’s use. Mr. Ghasemi pays all taxes
associated with personal use of the car and driver. The incremental
cost of corporate aircraft is calculated using an hourly rate for
each flight hour for variable operating costs (fuel and
maintenance) plus flight-specific costs, such as parking and
landing fees and crew expenses. The valuation also includes these
costs with respect to flights with no passengers that are
associated with Mr. Ghasemi’s personal travel. Fixed costs such as
pilot compensation and lease payments are not included as corporate
aircraft are primarily used for business purposes, and the Company
would incur these costs regardless of Mr. Ghasemi’s personal use.
Mr. Ghasemi’s family members traveled with Mr. Ghasemi on some of
the flights reflected; however, there was no incremental cost to
the Company for this accompanying travel. Mr. Ghasemi pays all
taxes associated with his personal use of corporate
aircraft. |
|
With respect to Dr. Serhan, the amount reflected relates to
Dr. Serhan’s personal use of corporate aircraft, including
accompanying travel by a family member of Dr. Serhan, although
there was no incremental cost to the Company for this accompanying
travel. The incremental cost of Dr. Serhan’s corporate aircraft use
was calculated in the same manner as for Mr. Ghasemi as stated
above. Dr. Serhan pays all taxes associated with his personal use
of corporate aircraft. |
38 |
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 |
Table
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Fiscal 2020 Grants of Plan-Based
Awards Table |
|
|
|
|
|
|
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards ($) |
|
Estimated Future
Payouts
Under Equity Incentive
Plan Awards (#) |
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units (#) |
|
Grant
Date Fair
Value of
Stock and
Option
Awards
($) |
Officer |
|
Award Type |
|
Grant Date |
|
Threshold |
|
Target |
|
Maximum |
|
Threshold |
|
Target |
|
Maximum |
|
Seifi
Ghasemi |
|
Annual
Incentive Plan |
|
|
|
0 |
|
2,025,000 |
|
4,000,000 |
|
|
|
|
|
|
|
|
|
|
|
Performance Shares |
|
12/2/2019 |
|
|
|
|
|
|
|
0 |
|
25,230 |
|
54,245 |
|
|
|
6,943,044 |
|
Restricted Stock Units |
|
12/2/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
16,820 |
|
3,884,915 |
M. Scott
Crocco |
|
Annual
Incentive Plan |
|
|
|
0 |
|
552,500 |
|
1,270,750 |
|
|
|
|
|
|
|
|
|
|
|
Performance Shares |
|
12/2/2019 |
|
|
|
|
|
|
|
0 |
|
4,289 |
|
9,221 |
|
|
|
1,180,290 |
|
Restricted Stock Units |
|
12/2/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,859 |
|
660,343 |
Sean D.
Major |
|
Annual
Incentive Plan |
|
|
|
0 |
|
467,500 |
|
1,075,250 |
|
|
|
|
|
|
|
|
|
|
|
Performance Shares |
|
12/2/2019 |
|
|
|
|
|
|
|
0 |
|
3,532 |
|
7,594 |
|
|
|
971,971 |
|
Restricted Stock Units |
|
12/2/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,354 |
|
543,703 |
Samir J.
Serhan |
|
Annual
Incentive Plan |
|
|
|
0 |
|
552,500 |
|
1,270,750 |
|
|
|
|
|
|
|
|
|
|
|
Performance Shares |
|
12/2/2019 |
|
|
|
|
|
|
|
0 |
|
4,289 |
|
9,221 |
|
|
|
1,180,290 |
|
Restricted Stock Units |
|
12/2/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,859 |
|
660,343 |
The Fiscal
2020 Grants of Plan-Based Awards Table reports the dollar value of
cash (non-equity) incentive awards and the number and value of
equity awards granted to each executive officer during fiscal 2020.
With regard to cash incentives, this table reports the range of
potential value that could have been obtained by the executive
officer; whereas the Summary Compensation Table reports the actual
value realized for fiscal 2020. Equity amounts represent the grant
date values of the awards determined under FASB ASC Topic 718 for
purposes of financial statement reporting, which are based on
probable outcomes.
Non-Equity Incentive Plan Awards — Annual
Incentive Plan
Annual
Incentive Plan awards are based on performance for the fiscal year.
The Committee approves performance measures and payout schedules
prior to or at the beginning of the fiscal year. Following the end
of the fiscal year, the Committee determines the range of actual
amounts that can be paid out under a formula that reflects the
Company’s performance against the approved performance measures.
Individual awards are determined by the Committee within the range,
based on individual performance. There is no minimum bonus under
the terms of the Plan, so the threshold amount is shown as $0. The
maximum bonus payable under this Plan is capped at $4,000,000. For
more information on fiscal 2020 targets and the award
determination, see pages 27-28.
Equity Incentive Plan Awards — Performance
Shares
The Equity
Incentive Plan Awards reflected in the table are performance
shares. Performance shares are deferred stock units whose payout is
conditioned on the Company’s TSR percentile relative to the Peer
Reference Group. Deferred stock units are an award type provided
under the Company’s Long-Term Incentive Plan that entitle the
holder of each unit to the value of one share of Company stock and
accumulated dividend equivalents upon satisfaction of performance
and/or time-based vesting conditions. Dividend equivalents are paid
in cash and equal the dividends that would have accrued on a share
of Company stock from the grant date of a deferred stock unit until
it is paid out. Dividend equivalents are not paid until the award
is vested. No dividend equivalents are paid on units that are
forfeited.
The
performance shares reflected in the table have a three-year
performance cycle that will be completed at the end of fiscal 2022.
The number of performance shares that will be paid out is based on
a schedule tied to the Company’s TSR percentile as described on
page 30. Performance shares are generally forfeited if the
executive officer voluntarily terminates employment during the
performance period; however, if an executive officer terminates due
to death, disability or retirement one year or more after the grant
date, he or she will receive a pro-rata portion of any performance
share payout upon completion of the performance period. Upon a
termination covered by the Executive Separation Program described
on pages 45-46, the terms of that Program regarding treatment of
equity compensation will apply.
Table
of Contents
Other Stock Awards — RSUs
The Other
Stock Awards reflected in the table are RSUs, which are deferred
stock units that have time-based vesting conditions. Most of the
RSUs granted to the named executive officers in fiscal 2020 are
subject to a four-year vesting period. If an executive officer’s
employment terminates due to death, disability or retirement one
year or more after the grant date, the units will vest. Pursuant to
his Employment Agreement, Mr. Ghasemi’s RSUs will not be forfeited
and will continue to vest if he is terminated at any time due to
death or disability, voluntarily for “good reason”, by the Company
without “cause” or at the conclusion of his Employment Agreement.
(See page 45 for the definitions of these terms under his
Employment Agreement.) If another executive officer’s employment
termination is covered by the Executive Separation Program
described on pages 45-46, the terms of that Program regarding
treatment of equity compensation will apply.
Outstanding Equity Awards at 2020
Fiscal Year-End Table |
|
|
Option
Awards(1) |
|
Stock
Awards |
|
|
Option
Grant Date |
|
Number of
Securities Underlying
Unexercised Options (#) |
|
Option
Exercise Price
($)
|
|
Option
Expiration
Date |
|
Number of
Shares
or Units
of Stock
Held that
have not
Vested
(#)(2) |
|
Market
Value of
Shares
or Units
of Stock
held that
have not
Vested
($)(3) |
|
Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights that have
not Vested
(#)(4) |
|
Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights That
Have Not Vested
($)(3) |
Officer |
|
Exercisable |
|
Unexercisable |
|
Seifi
Ghasemi |
|
|
|
|
|
|
|
|
|
|
|
87,121 |
|
25,949,861 |
|
198,272 |
|
59,057,298 |
|
7/1/2014 |
|
165,235 |
|
0 |
|
120.69 |
|
6/28/2024 |
|
|
|
|
|
|
|
|
|
|
12/1/2014 |
|
43,358 |
|
0 |
|
134.54 |
|
12/1/2024 |
|
|
|
|
|
|
|
|
M. Scott
Crocco |
|
|
|
|
|
|
|
|
|
|
|
15,595 |
|
4,645,127 |
|
35,592 |
|
10,601,433 |
|
12/1/2010 |
|
4,314 |
|
0 |
|
80.67 |
|
12/1/2020 |
|
|
|
|
|
|
|
|
|
12/1/2011 |
|
6,803 |
|
0 |
|
77.16 |
|
12/1/2021 |
|
|
|
|
|
|
|
|
|
12/3/2012 |
|
14,271 |
|
0 |
|
76.17 |
|
12/3/2022 |
|
|
|
|
|
|
|
|
|
12/2/2013 |
|
18,082 |
|
0 |
|
100.55 |
|
12/2/2023 |
|
|
|
|
|
|
|
|
|
|
12/1/2014 |
|
7,432 |
|
0 |
|
134.54 |
|
12/1/2024 |
|
|
|
|
|
|
|
|
Sean D.
Major |
|
|
|
|
|
|
|
|
|
|
|
7,336 |
|
2,185,101 |
|
23,105 |
|
6,882,055 |
Samir J.
Serhan |
|
|
|
|
|
|
|
|
|
|
|
18,728 |
|
5,578,322 |
|
30,406 |
|
9,056,731 |
(1) |
Grant dates for all stock options are
shown in the first column. All stock options have an exercise price
equal to the closing market value on the grant date and became
exercisable in three consecutive, equal installments on the first,
second and third anniversary of the grant date. They generally
remain exercisable until 10 years after the grant date; however,
except as described below, exercisable options generally expire 90
days after a voluntary termination of employment. Options granted
more than one year prior to an executive officer’s termination due
to death, disability or retirement continue to become and remain
exercisable for their full term. If an executive officer’s
termination is covered by the Executive Separation Program
described on pages 45-46, the terms of that Program regarding
treatment of equity compensation will apply. Mr. Ghasemi’s
Employment Agreement provides that, upon his death, disability,
involuntary termination without “cause”, voluntary termination for
“good reason” or the conclusion of the term of his Employment
Agreement, his options will not terminate but will continue to
become and be exercisable through the end of their term. (See page
45 for the definition of these terms under his Employment
Agreement). Stock options are subject to special vesting rules upon
a change in control of the Company as described on pages
47-48. |
(2) |
This column reflects unvested deferred
stock units which, upon vesting, entitle the holder to a share of
Company common stock and dividend equivalents accumulated since the
date of grant. |
|
The Company grants two types of deferred stock units:
restricted stock units and performance shares. Each deferred stock
unit is the equivalent in value to one share of Company common
stock and, subject to satisfaction of any applicable performance or
time-based conditions, entitles the executive officer to receive
from the Company at the end of the deferral period one share of
common stock for each restricted stock unit or earned performance
share. Restricted stock units typically have a four-year vesting
period. Performance shares have a three-year performance period.
This column reflects two kinds of deferred stock units: (i)
four-year restricted stock units granted to executive officers on
December 1, 2016, December 1, 2017, December 3, 2018 and December
2, 2019; and (ii) special recruiting and retention grants. All
deferred stock units are subject to special vesting rules for
terminations covered by the Executive Separation Program described
on pages 44-46 or upon a change in control as described on pages
47-48. |
40 |
|
 |
Table
of Contents
(i) |
Unvested restricted stock units granted
in fiscal 2017, 2018, 2019 and 2020 are as follows: |
|
Officer |
|
FY17 |
|
FY18 |
|
FY19 |
|
FY20 |
|
Total |
|
Seifi
Ghasemi |
|
24,178 |
|
20,992 |
|
25,131 |
|
16,820 |
|
87,121 |
|
M. Scott
Crocco |
|
4,266 |
|
4,198 |
|
4,272 |
|
2,859 |
|
15,595 |
|
Sean D.
Major* |
|
— |
|
2,469 |
|
2,513 |
|
2,354 |
|
7,336 |
|
Samir J.
Serhan |
|
2,845 |
|
2,469 |
|
4,272 |
|
2,859 |
|
12,445 |
* |
Mr. Major joined the Company in fiscal
2017 and became a named executive officer in fiscal
2018. |
(ii) |
This column also shows special
recruiting and retention grants as follows: |
|
Officer |
|
Number of Units |
|
Samir J.
Serhan* |
|
6,283 |
* |
9,424 three-year vesting restricted
stock units were granted December 3, 2018, of which 3,141 vested on
December 3, 2019, 3,141 vested on December 3, 2020 and the
remainder will vest on December 3, 2021. |
(3) |
These amounts are based on the 2020
fiscal year-end NYSE closing stock price of $297.86. |
(4) |
This column reflects performance shares
granted in fiscal 2018, fiscal 2019 and fiscal 2020. These shares
are conditioned upon performance during three-year cycles ending on
September 30, 2020, September 30, 2021 and September 30, 2022,
respectively. These awards will earn-out and be paid following the
end of the relevant performance period as indicated in the chart
below. The dollar values and share counts for fiscal year 2018 are
shown at the final payout factor of 200% as approved by the
Committee and paid out in December 2020. The dollar values and
share counts for fiscal year 2019 and fiscal year 2020 awards are
shown in the table at the 215% payout level (maximum payout
including full positive discretion) based on Company’s current
total shareholder return percentile rank compared to the Peer
Reference Group for the respective performance periods. |
|
|
|
Fiscal 2018-2020 Unearned
Performance Shares at End of
Performance Period |
|
Officer |
|
09/30/2020 |
|
09/30/2021 |
|
09/30/2022 |
|
Seifi
Ghasemi |
|
62,978 |
|
81,049 |
|
54,245 |
|
M. Scott
Crocco |
|
12,594 |
|
13,777 |
|
9,221 |
|
Sean D.
Major |
|
7,408 |
|
8,103 |
|
7,594 |
|
Samir J.
Serhan |
|
7,408 |
|
13,777 |
|
9,221 |
Fiscal
2020 Option Exercises and Stock Vested Table |
|
|
Option Awards |
|
Stock Awards |
Officer |
|
Number of Shares
Acquired on Exercise
(#) |
|
Value Realized
on Exercise
($) |
|
Number of Shares
Acquired on Vesting
(#)(1) |
|
Value Realized
on Vesting
($)(2) |
Seifi
Ghasemi |
|
— |
|
— |
|
82,504 |
|
19,211,273 |
M. Scott
Crocco |
|
4,443 |
|
703,194 |
|
14,746 |
|
3,433,294 |
Sean D.
Major |
|
— |
|
— |
|
— |
|
— |
Samir J.
Serhan |
|
— |
|
— |
|
13,681 |
|
3,182,156 |
(1) |
The shares in this column include
restricted stock granted to Mr. Ghasemi and Mr. Crocco in fiscal
year 2016 that vested in December 2019, performance shares granted
to Mr. Ghasemi, Mr. Crocco and Dr. Serhan in fiscal year 2017 that
vested in December 2019 and two special restricted stock unit
recruiting and retention grants to Dr. Serhan. The first RSU award
was granted in December 2016 and vested in December 2019. The
second RSU award was granted in December 2018 and the first
one-third of this award vested in December 2019. |
(2) |
The following dividend equivalents were
paid on the restricted stock units but are not included in the
Value Realized on vesting: |
|
Officer |
|
Dividend
Equivalents
Paid
($) |
|
Seifi
Ghasemi |
|
782,233 |
|
M. Scott
Crocco |
|
138,040 |
|
Samir J.
Serhan |
|
146,557 |
Table
of Contents
Fiscal
2020 Pension Benefits Table |
Officer |
|
Plan Name |
|
Number of
Years Credited
Service
(#) |
|
Present Value
of Accumulated
Benefit
($) |
M. Scott
Crocco |
|
Air
Products and Chemicals, Inc. |
|
30 |
|
1,724,778 |
|
|
Pension Plan for Salaried
Employees |
|
|
|
|
|
|
Air
Products and Chemicals, Inc. |
|
30 |
|
7,583,130 |
|
|
Supplementary Pension
Plan |
|
|
|
|
The table
above illustrates the actuarial present value of accrued pension
benefits for Mr. Crocco, who was the only executive officer who
participated in the Company’s defined benefit plans as of September
30, 2020. Actuarial present values are complex calculations that
rely on many assumptions. The Company has calculated the amounts
shown above generally using the same assumptions used in
determining the pension cost recognized in its financial
statements, which are described in Note 16, Retirement Benefits, to the financial statements and under “Critical
Accounting Policies and Estimates” in Management’s Discussion and
Analysis of Financial Condition and Results of Operations, both of
which are included in the Company’s Annual Report on Form 10-K for
the fiscal year ended September 30, 2020, filed with the SEC on
November 19, 2020. However, in accordance with SEC requirements,
the Company has calculated these values assuming payment begins the
earliest date the executive officer can receive an unreduced early
retirement benefit. The Company also has used actual fiscal 2020
annual incentive awards in the calculation; whereas the value in
the financial statements is based on estimated annual incentive
awards.
The
Salaried Pension Plan is a funded, tax-qualified defined benefit
plan funded entirely by the Company. Benefits under the Salaried
Pension Plan are paid after retirement in the form of a monthly
annuity or as a lump sum if the value of the benefit is less than
$100,000. Participants may select from monthly payments for their
lifetime or smaller monthly payments for their life and the life of
a beneficiary.
The amount
of the benefit under the Salaried Pension Plan is based on the
following formula:
1.184% x Years of Service x Average Monthly
Compensation (Up to the Average Social Security Maximum Taxable
Wage Base)
plus
1.5% x Years of Service x Average Monthly Compensation
(In excess of the Average Social Security Maximum Taxable Wage
Base).
“Average
Monthly Compensation” is the average monthly compensation for the
36 months (or 3 years) during which the participant’s compensation
was the highest during the 10 years preceding retirement;
generally, this is the participant’s average base salary for the
three years preceding retirement. The “Average Social Security
Maximum Taxable Wage Base” is the average of the U.S. Social
Security Wage Bases over a 35-year period.
Benefits
under the Salaried Pension Plan become vested after a participant
has completed five years of service. The normal retirement age
under the Salaried Pension Plan is age 65. A participant with at
least five years of service may retire after attaining age 55 and
receive a benefit reduced by 3% per year for the number of years
prior to attaining age 62. Benefits accrued as of January 1, 2005
are not reduced upon retirement at age 55 or later if the sum of
the participants age and credited service under the Plan equals 80
or more at the time of retirement.
Under U.S.
federal tax laws, benefits payable under the Salaried Pension Plan
and compensation that can be considered in calculating the benefits
are limited. The Supplementary Pension Plan (“Supplementary Plan”)
is a nonqualified, unfunded pension plan that provides benefits
that cannot be provided under the Salaried Pension Plan due to
these limits. Benefits under the Supplementary Plan are calculated
using the same formula as the Salaried Pension Plan, but there is
no limit on the amount of base salary that can be covered by the
pension formula, and Average Monthly Compensation under the
Supplementary Plan also includes Annual Incentive Plan
awards.
Supplementary Plan benefits are subject to the same vesting
and early retirement terms as the Salaried Pension Plan.
Supplementary Plan benefits are generally payable following
retirement in one of the annuity forms available under the Salaried
Pension Plan or, at the election of the participant, in a lump sum.
In the case of the executive officers and certain other executives,
distribution of benefits under the Supplementary Plan, whether in
annuity or lump sum form, is delayed for six months after
termination of employment to comply with U.S. federal tax
laws.
42 |
|
 |
Table
of Contents
Fiscal
2020 Nonqualified Deferred Compensation Table |
Amounts
shown in this table are provided under the Company’s nonqualified
Deferred Compensation Plan.
Officer |
|
Executive
Contributions
in Last FY(1)
($) |
|
Registrant
Contributions
in Last FY(2)
($) |
|
Aggregate
Earnings
in Last FY(3)
($) |
|
Aggregate
Withdrawals/
Distributions
($) |
|
Aggregate
Balance
at Last FYE(4)
($) |
Seifi
Ghasemi |
|
— |
|
139,800 |
|
41,271 |
|
— |
|
1,343,564 |
M. Scott
Crocco |
|
— |
|
— |
|
31,451 |
|
— |
|
989,662 |
Sean D.
Major |
|
2,962 |
|
33,040 |
|
5,603 |
|
— |
|
186,766 |
Samir J.
Serhan |
|
12,250 |
|
41,120 |
|
6,227 |
|
— |
|
210,987 |
(1) |
All amounts reported in this column
were voluntary deferrals of base salary by the executive officers.
These amounts are also reported in the Summary Compensation
Table. |
(2) |
Mr. Ghasemi, Mr. Major and Dr. Serhan
receive a Company contribution credit of their Annual Incentive
Plan awards because they receive their primary retirement benefit
under the Company’s defined contribution Retirement Savings Plan
(“RSP”) rather than the Salaried Pension Plan and Supplementary
Plan. Amounts reported in this column are also reported in the
Summary Compensation Table. |
(3) |
A portion of the earnings reflected in
this column are reported in the Summary Compensation Table as
above-market interest, as described in footnote 4 to such
table. |
(4) |
The following portion of these
accumulated balances has been previously reported as compensation
in the Summary Compensation Table of the Company’s proxy statements
for prior years: |
|
Officer |
|
Amount
Previously
Reported
($) |
|
Seifi
Ghasemi |
|
1,063,135 |
|
M. Scott
Crocco |
|
573,454 |
|
Sean D.
Major |
|
140,190 |
|
Samir J.
Serhan |
|
145,107 |
The Company
provides the tax-qualified RSP to all U.S.-based salaried and
certain hourly employees of the Company. Currently, U.S. tax laws
limit the amounts that may be contributed to tax-qualified savings
plans and the amount of compensation that can be taken into account
in computing benefits under the RSP. The Deferred Compensation Plan
was amended and restated effective January 1, 2018 to “unlink” the
RSP from the Deferred Compensation Plan. Prior to January 1, 2018,
elective deferrals to the RSP in excess of the U.S. tax law limits
would automatically be deferred into the Deferred Compensation
Plan. Effective January 1, 2018, once a participant reaches the
U.S. tax law limits in the RSP for elective deferrals such
deferrals cease and are not contributed to the Deferred
Compensation Plan; rather, Deferred Compensation Plan participants
may make a separate deferral election prior to the relevant
calendar year to defer amounts of base salary into the Deferred
Compensation Plan. The Deferred Compensation Plan is intended to
permit participants to defer an amount of base salary and to make
up, out of general assets of the Company, an amount substantially
equal to certain benefits an employee did not receive under the RSP
due to these limits. U.S. employees who participate in the Annual
Incentive Plan, including all executive officers, are eligible to
participate in the Deferred Compensation Plan. Participants can
elect to defer up to 50% of base salary on a before-tax basis and
up to 75% of Annual Incentive Plan awards.
The
Deferred Compensation Plan provides for a Company matching credit
for participants in the RSP, including all executive officers,
whose Company matching contribution in the RSP is limited by the
U.S. tax law limitations. The Deferred Compensation Plan provides
for a Company core credit on base salary when such core
contribution in the RSP is limited by U.S. tax law limitations and
on Annual Incentive Plan awards for employees who receive their
primary retirement benefit under the RSP rather than the Salaried
Pension Plan, including Mr. Ghasemi, Mr. Major and Dr.
Serhan.
Participants may elect to have their Deferred Compensation
Plan balances earn interest at a corporate bond rate or be deemed
to be invested in Company stock and earn dividend equivalents and
market appreciation on the stock. If a participant chooses the
Company stock alternative, his or her account balance will be
distributed in shares of Company stock except for dividend
equivalents that are distributed in cash.
Participants can elect to receive payments of their
Deferred Compensation Plan balances in service or in lump sum or in
one to 10 equal annual installments following termination from
service. The executive officers and certain other executives cannot
commence distribution until six months following termination to
comply with tax laws.
Table
of Contents
Potential Payments Upon
Termination
Potential
payments to executive officers upon termination vary depending on
the exact nature of the termination and, generally, whether the
executive officer is retirement eligible at the time of the
termination. Retirement eligibility for U.S. employees, including
the executive officers except Mr. Ghasemi, generally occurs upon
the attainment of age 55 after completing at least five years of
service to the Company. Mr. Ghasemi’s Employment Agreement provides
that he is eligible for retirement treatment under all equity,
equity derivative and incentive awards after three years of
employment with the Company. Accordingly, he became eligible for
retirement on July 1, 2017. The following discussion explains
potential payments to the executive officers under various
termination scenarios.
Voluntary Termination Other Than Retirement |
A voluntary
termination by Mr. Ghasemi and Mr. Crocco would be regarded as a
retirement, as discussed below. If Mr. Major or Dr. Serhan
voluntarily terminated employment with the Company prior to
retirement eligibility, like all salaried employees of the Company,
they would receive any unpaid salary and accrued vacation, vested
RSP balances and nonqualified deferred compensation shown in the
table on page 42 and the earnings thereon. Mr. Crocco may commence
accrued benefits under the qualified plan and will commence accrued
benefits under the nonqualified pension plan described on pages
41-42 on the same terms as all other participants under these plans
who were eligible for retirement at the time of
termination.
Executive
officers and other eligible employees generally must remain
employed until the last day of the fiscal year to receive an Annual
Incentive Plan award for the fiscal year. However, if an executive
officer is retirement eligible, upon voluntary termination his or
her bonus would be prorated at the discretion of the Committee. If
an executive officer voluntarily terminates, he or she would
forfeit any Annual Incentive Plan award for the fiscal year of
termination unless the termination is on the last day of such
fiscal year. If an executive officer voluntarily terminated on
September 30, 2020, he or she would have been eligible for a fiscal
2020 Annual Incentive Plan award in an amount, if any, determined
by the Committee in its discretion.
Most
outstanding awards under the Long-Term Incentive Plan would be
forfeited upon a voluntary termination prior to retirement
eligibility, including all unexercisable stock options, all
restricted stock, all RSUs and all performance shares, whether or
not earned. Exercisable stock options would continue to be
exercisable for 90 days following termination and then, if
unexercised, would be forfeited.
Upon
retirement, executive officers are entitled to unpaid salary and
accrued vacation, accrued qualified and nonqualified pension
benefits, vested RSP balances and deferred compensation described
above and retiree medical benefits, if they are eligible, on the
same terms as for all salaried employees meeting age and service
conditions. Retiring executive officers may also receive, in the
discretion of the Committee, an Annual Incentive Plan award for the
year of retirement. In addition, like all Long-Term Incentive Plan
participants, they receive the following treatment of their
outstanding long-term incentive awards:
● |
all outstanding stock options which were granted one year or more
prior to retirement will continue to be and become exercisable in
accordance with the normal schedule as if the executive officer
remained employed and will be exercisable for the normal term; |
● |
restricted stock and RSUs awarded at least one year prior to
retirement will vest immediately upon retirement and restricted
stock and RSUs granted less than one year prior to retirement are
forfeited; and |
● |
all earned performance shares and
dividend equivalents thereon will be paid on the normal schedule. A
pro-rata portion of unearned performance shares awarded at least
one year prior to retirement and associated dividend equivalents
will be paid in accordance with the normal schedule and at the
normal payout level if performance thresholds are met. Performance
shares awarded less than one year prior to retirement are
forfeited. |
44 |
|
 |
Table
of Contents
The table
below shows the value of Mr. Ghasemi and Mr. Crocco’s outstanding
long-term incentive awards that would have vested had each retired
as of September 30, 2020, and the value of awards that would have
been forfeited. Amounts are based on the closing price of a share
of Company stock as of September 30, 2020. Other executive officers
were not eligible for retirement on September 30, 2020.
Officer |
|
Unvested
Stock Options
($) |
|
Restricted
Stock
($) |
|
Restricted
Stock Units
($) |
|
Performance
Shares(1)
($) |
|
Value of
Awards
Forfeited
($) |
Seifi
Ghasemi |
|
— |
|
— |
|
21,813,463 |
|
27,253,783 |
|
16,535,097 |
M. Scott
Crocco |
|
— |
|
— |
|
3,952,581 |
|
5,219,243 |
|
2,810,766 |
(1) |
Actual payout amounts are shown for
Performance Shares granted in fiscal year 2018. Fiscal 2019 and
2020 Performance Shares are shown at the target payout level.
Amounts include accumulated dividend equivalents. The fiscal 2020
grant and prorated portion of the fiscal 2019 grant would be
forfeited. |
Executive Separation
Program
|
The
Committee established the Executive Separation Program (the
“Separation Program”) to facilitate changes in the leadership team
and recruiting of senior executives. All the executive officers are
covered by this Program. An executive officer becomes eligible for
program benefits upon involuntary termination of employment other
than for “cause” or upon voluntary termination for “good reason”. A
termination for “cause” occurs upon the executive officer’s failure
to substantially perform his or her duties after demand therefor,
willful misconduct, certain illegal acts, insubordination,
dishonesty or violation of the Code of Conduct. “Good reason”
includes:
● |
a material adverse change in the
executive officer’s position, material diminution of duties or
authority or assignment of duties or responsibilities inconsistent
with his or her status; |
● |
a decrease in the executive officer’s
salary or a material reduction in benefits or annual incentive
compensation opportunities if not similarly applied to other highly
compensated employees; or |
● |
a relocation of the executive officer’s principal
workplace more than 50 miles from the existing
location. |
Benefits
under the Separation Program are contingent upon the executive
officer’s continuing to perform the duties typically related to his
or her position (or such other position as the Board reasonably
requests) until termination, and assistance in the identification,
recruitment and transitioning of his or her successor. The
executive officer also is required to sign a general release of
claims against the Company and a two-year noncompetition,
nonsolicitation and nondisparagement agreement. If all these
requirements are met, the executive officer is entitled to cash
benefits as follows:
● |
a cash severance payment of one times
the executive officer’s annual base salary and the executive
officer’s target bonus for the fiscal year in which the termination
of employment occurs, provided that in the case of Mr. Ghasemi, the
cash severance will be two times such amount and, if the
termination occurs after September 30, 2023, the payment will be
prorated based on the remaining term of his Employment Agreement
through September 30, 2025; |
● |
a bonus for the year of termination
equal to a pro-rata portion of the executive officer’s target bonus
multiplied by the Annual Incentive Plan payout factor for the
fiscal year in which the termination of employment
occurs; |
● |
outplacement assistance; |
● |
in the case of Mr. Crocco, a cash
payment equal to the actuarial equivalent of pension benefits that
would have accrued based on one additional year of service and a
payment equal to the value of the early retirement subsidy that
would have been provided under the pension plans on the accumulated
benefit if age and service conditions were met, calculated with an
additional year of service; and |
● |
for the
other executive officers who receive their primary retirement
benefit under the RSP, a cash payment equal to the additional
(nonmatching) contributions and credits each would have received
under the RSP and the Deferred Compensation Plan, respectively, had
he remained employed an additional two years for Mr. Ghasemi and an
additional year for Mr. Major and Dr. Serhan, assuming base salary
remained the same and the Annual Incentive Plan award was the
higher of his most recent award or the average of the last three
awards. |
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of Contents
Noncash
benefits are also provided or maintained under the Separation
Program as follows:
● |
The Company pays the cost of continued
coverage under the Company’s medical and dental plans pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”) for executive officers and their dependents for one year
following termination. Executive officers eligible for retiree
medical participate in the medical plan on the same basis as other
eligible retirees at no incremental cost to the
Company. |
● |
Nonretirement eligible executive
officers forfeit unexercisable stock options. Their exercisable
options remain in effect for the normal term. Retirement provisions
described above apply to the stock options of retirement eligible
executive officers. |
● |
A pro-rata portion of four-year vesting
restricted stock, RSUs and recruiting and retention grants of RSUs
vest. The remaining RSUs are forfeited. However, retirement
provisions described above apply to outstanding restricted stock
and RSUs held by retirement eligible executive officers if more
favorable. |
● |
A pro-rata
portion of unearned performance shares based on actual performance
at the end of the performance period vest and are paid at the end
of the performance period and the remainder are forfeited. The
unforfeited shares are paid in accordance with the normal schedule
and at the normal payout level if performance thresholds are
met. |
Mr. Ghasemi’s
Employment Agreement
|
In addition
to the Separation Program, Mr. Ghasemi’s Employment Agreement
provides that, upon his termination by the Company other than for
“cause” or his voluntary termination for “good reason”, his
long-term incentive awards will continue to vest as if he remained
employed. For purposes of the Employment Agreement, “cause” is Mr.
Ghasemi’s willful failure to substantially perform his duties after
a demand for substantial performance is delivered, willful
misconduct that has caused or would reasonably be expected to
result in a material injury to the Company, criminal conviction of
(or a plea of nolo contendere) to a crime that constitutes a
felony, repeated acts of insubordination, an act of dishonesty
inconsistent with his position or material violation of the Code of
Conduct. Mr. Ghasemi has the right to resign for “good reason”
under the Agreement if: there is a material adverse change in his
position or office; a decrease in his salary, benefits or incentive
compensation if not applied to other highly compensated employees;
or a relocation of his principal workplace more than 50 miles from
the existing location. Mr. Ghasemi’s Employment Agreement was
amended on May 21, 2020 (within this subsection, the “Amendment”).
The Amendment extends the term of the Agreement from September 30,
2022 to September 30, 2025. In addition, pursuant to the Amendment
if Mr. Ghasemi’s employment were to terminate after September 30,
2023 without “cause” or for “good reason”, as each term is defined
in the Employment Agreement, any cash severance payment he is
entitled to receive would be prorated based on the number of days
remaining from the last day of his employment until September 30,
2025.
Estimated Payments
on Severance As of September 30, 2020
|
The table
below shows estimated cash payments that would have been made to
each executive officer upon an involuntary termination on September
30, 2020 covered under the Executive Separation Program and, in the
case of Mr. Ghasemi, his Employment Agreement, and the estimated
value of long-term incentive awards that would have vested upon
termination under the Program.
|
|
|
|
|
|
|
|
|
|
Long-Term Incentive
Plan |
Officer |
|
Severance
Benefit
($) |
|
Pro-rata
Bonus
($) |
|
Retirement
Plan
Payment(1)
($) |
|
Benefits(2)
($) |
|
Stock
Options
($) |
|
Restricted
Stock
($) |
|
Restricted
Stock Units(3)
($) |
|
Performance
Shares(4)
($) |
Seifi
Ghasemi(5) |
|
6,750,000 |
|
3,078,000 |
|
328,740 |
|
42,178 |
|
— |
|
— |
|
5,074,594 |
|
11,460,503 |
M. Scott
Crocco(5) |
|
1,202,500 |
|
839,800 |
|
328,605 |
|
15,734 |
|
— |
|
— |
|
179,700 |
|
431,330 |
Sean D.
Major |
|
1,017,500 |
|
710,600 |
|
44,440 |
|
36,769 |
|
— |
|
— |
|
1,043,808 |
|
3,425,187 |
Samir J.
Serhan |
|
1,202,500 |
|
839,800 |
|
52,520 |
|
36,769 |
|
— |
|
— |
|
4,103,594 |
|
4,015,109 |
(1) |
Includes payment in lieu of Company
contributions and credits under the RSP and Deferred Compensation
Plan for Mr. Ghasemi, Mr. Major and Dr. Serhan and the pension plan
make-up payment for Mr. Crocco. |
(2) |
Includes the value of outplacement benefits estimated based
on current arrangements for these services and the cost of COBRA
payments for the Company’s medical plan and dental
plans. |
46 |
|
 |
Table
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(3) |
These amounts reflect the value of RSUs
such as four-year RSUs and special recruiting and retention grants,
and dividend equivalents thereon. |
(4) |
Performance shares are reflected at the
actual payout level for fiscal year 2018 grants and at target
payout level for fiscal year 2019 and 2020 grants. Amounts include
accumulated dividend equivalents. |
(5) |
Values of Mr. Ghasemi’s and Mr. Crocco’s long-term
incentive awards that would have vested upon their voluntary
termination due to retirement eligibility are not
shown. |
Upon
involuntary termination for “cause”, executive officers receive
only unpaid salary and accrued vacation, qualified and nonqualified
pension and deferred compensation.
Termination Due to
Death or Disability
|
Upon
termination due to death or disability of an executive officer, in
addition to insurance, continuation of medical benefits and other
benefits provided to all salaried employees and their families to
help with these circumstances, the Long-Term Incentive Plan has
provisions that provide continued vesting or accelerated payout of
equity awards as follows:
● |
All stock options that have been
outstanding for at least a year at the time of termination continue
to be and become exercisable on the normal schedule as if the
employee had remained active. All other stock options are
forfeited. |
● |
All restrictions on restricted stock
outstanding for at least one year are removed. All other restricted
stock is forfeited. |
● |
All earned but deferred performance
shares, all career-vesting deferred stock units and retention and
recruiting grants of deferred stock units outstanding more than one
year are paid out. |
● |
A prorated portion of unearned
performance shares outstanding for at least one year continues to
earn out and be payable as if the employee had remained active. All
other unearned performance shares are forfeited. |
● |
Executive
officers or their beneficiaries may also receive an Annual
Incentive Plan award at the discretion of the
Committee. |
In
addition, Mr. Ghasemi’s Employment Agreement provides that upon his
termination of employment due to death or disability, his Long-Term
Incentive Plan awards will continue to vest as if he remained
employed and he will receive a prorated Annual Incentive
Award.
Change in Control
Arrangements
|
The
Company provides individual change in control severance agreements
for all of the executive officers. For purposes of the agreements,
a change in control occurs upon a 30% stock acquisition by a person
not controlled by the Company, a greater than 50% change in
membership on the Board during any two-year period unless approved
by two-thirds of directors still in office who were directors at
the beginning of the period, consummation of a business
reorganization, merger, consolidation or other corporate
transaction that results in the Company’s shareholders owning less
than 50% of the surviving entity, or shareholder approval of a plan
of liquidation or sale of substantially all of the Company’s
assets.
The
severance agreements give each executive officer specific rights
and certain benefits if, within two years after a change in
control, his or her employment is terminated by the Company without
“cause” or he or she terminates employment for “good reason” (as
each term is defined below). In such circumstances the executive
officer would be entitled to:
● |
a cash severance payment equal to two
(three for Mr. Ghasemi) times the sum of annual base salary and
target bonus under the Annual Incentive Plan; |
● |
a cash payment of a pro-rata target
bonus for the year; |
● |
for Mr.
Crocco, a cash payment equal to the additional actuarial present
value of the pension benefits he would have been entitled to
receive under the Company’s pension plans had he accumulated two
additional years of credited service after termination and a cash
payment equal to the actuarial present value of the early
retirement subsidy on the accumulated benefit, calculated with an
additional two years of credited service; |
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● |
a cash payment equal to two (three for
Mr. Ghasemi) times the value for the most recent fiscal year of the
Company’s matching contributions and/or credits for the executive
officer under the RSP and the Deferred Compensation
Plan; |
● |
for each of Mr. Ghasemi, Mr. Major and
Dr. Serhan, a cash payment equal to the additional primary
retirement benefit contributions and credits he would have received
under the RSP and the Deferred Compensation Plan, respectively, had
he remained employed for an additional three years in the case of
Mr. Ghasemi and two years in the case of Mr. Major and Dr. Serhan,
at the same base salary and the higher of the executive officer’s
most recent Annual Incentive Plan award or the average such award
for the three full fiscal years preceding the change in
control; |
● |
continuation of medical, dental, health
and accident disability and life insurance benefits for a period of
up to two years (three years in the case of Mr. Ghasemi), and
provision of outplacement services and certain legal fees;
and |
● |
indemnification if he becomes involved in litigation
because he is a party to the agreement. |
The
payments referenced in the first, third, fourth and fifth bullets
above will be reduced each month on a pro-rated basis when the
named executive officer, other than Mr. Ghasemi, is between the
ages of 63 and 65.
A
termination for “cause” occurs under the agreements upon the
executive officer’s continued willful failure to perform duties or
willful misconduct. “Good reason” includes:
● |
a material adverse change in the
executive officer’s position; |
● |
a decrease in the executive officer’s
salary, benefits or incentive compensation if not applied to other
highly compensated employees; or |
● |
relocation
of the executive officer’s principal workplace more than 50 miles
from the existing location. |
The table
below shows amounts that would be payable under the change in
control severance agreements if the executive officer had been
terminated on September 30, 2020 following a change in
control.
Officer |
|
Severance
Payment
($) |
|
Pro-rata
Bonus
($) |
|
Matching
Contribution
Payment
($) |
|
Retirement
Plan Payment(1)
($) |
|
Outplacement/
Financial
($) |
|
Benefits(2)
($) |
Seifi
Ghasemi |
|
10,157,827 |
|
2,025,000 |
|
0 |
|
493,110 |
|
14,500 |
|
38,508 |
M. Scott
Crocco |
|
2,421,915 |
|
552,500 |
|
0 |
|
657,214 |
|
14,500 |
|
6,254 |
Sean D.
Major |
|
2,057,400 |
|
467,500 |
|
0 |
|
88,880 |
|
14,500 |
|
39,744 |
Samir J.
Serhan |
|
2,427,800 |
|
552,500 |
|
0 |
|
105,040 |
|
14,500 |
|
39,744 |
(1) |
Includes payments in lieu of Company
core contributions and credits under the RSP and Deferred
Compensation Plan for Mr. Ghasemi, Mr. Major and Dr. Serhan and,
for Mr. Crocco, the pension payment. |
(2) |
Includes continuation of medical, dental, disability and
life insurance benefits. |
In addition
to the change in control severance agreements, the Company’s
Long-Term Incentive Plan provides change in control protection for
all participants. Awards granted on or after October 1, 2014 will
not automatically vest on an accelerated basis as a result of a
change in control if they are replaced by the surviving entity. For
these provisions to apply; the replacement awards must be issued by
a publicly listed company and preserve the value of, and be on
terms as favorable as the existing award; performance-conditioned
awards must be replaced by time-based vesting awards; and the
replacement awards must provide that if the participant is
terminated without “cause” or voluntarily terminates for “good
reason” within 24 months following the change in control, the award
will vest immediately upon termination. The Long-Term Incentive
Plan also provides that, pursuant to an agreement associated with a
change in control or in the discretion of the Board or an
appropriate committee thereof, awards may be settled for cash at
the change in control price.
48 |
|
 |
Table
of Contents
Long-Term
Incentive Plan awards granted in fiscal 2015 or later would not
automatically vest upon a change in control but would vest upon a
termination of the executive officer by the Company without “cause”
or a voluntary termination by the executive officer for “good
reason” within 24 months of the change in control. The table below
shows the estimated value of long-term incentive awards that would
have vested upon an eligible termination on September 30, 2020
following a change in control. These acceleration provisions apply
to all Long-Term Incentive Plan participants. In the case of Mr.
Ghasemi, who was retirement eligible on September 30, 2018, and Mr.
Crocco, who was retirement eligible on March 19, 2019, most of
these amounts would have vested on voluntary termination, but
payment or lapse of restrictions could be accelerated upon a change
in control. For the other executive officers, most of the amounts
shown would become vested or payable if his or her active
employment continued without a change in control, but payment,
lapse of restrictions would be accelerated upon a change in
control.
Officer |
|
Estimated
Value
($) |
Seifi
Ghasemi |
|
101,958,257 |
M. Scott
Crocco |
|
20,849,386 |
Sean D.
Major |
|
5,671,769 |
Samir J.
Serhan |
|
9,771,166 |
Finally,
accrued benefits under the nonqualified pension plan (described on
pages 41-42) would be paid out upon a change in control.
Table
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As
required by Section 953(b) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act and SEC regulation, we are providing the
following information about the ratio of the annual total
compensation of the median Air Products employee and the annual
total compensation of our CEO, Seifi Ghasemi, as of our fiscal
year-end, September 30, 2020.
The pay
ratio is a reasonable estimate calculated in a manner consistent
with SEC rules, using methodologies, reasonable assumptions and
adjustments as described below.
● |
The median employee annual total
compensation was $51,018. |
● |
The annual total compensation of our
CEO, as reported in the Summary Compensation Table of this proxy
statement, was $15,597,376. |
● |
Based on this information, the
estimated ratio of annual total compensation of our CEO to the
annual total compensation of our median employee was 306 to
1. |
● |
Our total employee population as of
fiscal year-end consisted of approximately 19,200 employees,
including 5,100 U.S. employees and 14,100 non-U.S. employees. We
employed the de
minimus exemption to exclude
two employees in Switzerland. |
● |
To identify the median employee from our employee
population, we used annual base salary as our consistently applied
compensation measure. For hourly employees, annual salary was
estimated by multiplying the hourly rate by the scheduled work
hours for each work location. |
After
identifying the median employee, the Company calculated annual
total compensation for both the median employee and the CEO in
accordance with SEC rules to determine the pay ratio.
Under the
SEC’s rules and guidance, companies are allowed to adopt numerous
ways to identify the median employee. In addition, other companies
have different employee demographics and compensation and benefit
practices. As a result, CEO pay ratios reported by other companies
may vary significantly and are likely not comparable to our CEO pay
ratio.
50 |
|
 |
Table
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Approval of the Air Products and
Chemicals, Inc. 2021 Long-Term Incentive Plan |
PROPOSAL 3
|
|
Approval of our 2021 Long-Term Incentive
Plan.
|
|
 |
|
The
Board recommends a vote “FOR”
the
approval of the Air Products and Chemicals, Inc. 2021 Long-Term
Incentive Plan. |
|
|
|
|
|
|
|
Shareholders are
being asked to approve the Air Products and Chemicals, Inc. 2021
Long-Term Incentive Plan (for purposes of this Proposal 3, the
“Plan”), which will be used to grant equity compensation awards to
our employees, including our executive officers, and directors as
described herein. After review, the Board, acting upon the
recommendation of the Management Development and Compensation
Committee, determined that it was in the best interests of the
Company to adopt a new plan to provide for the continued issuance
of equity compensation to our employees, officers and directors. As
described in the Compensation Discussion and Analysis in this proxy
statement, long-term incentives are an important component of our
executive compensation program. The Plan contains a number of
provisions that the Board believes are consistent with our
shareholders’ interests and sound corporate governance purposes.
Shareholder approval of the Plan will allow us to carry out our
objectives of providing meaningful equity compensation to align the
interests of award recipients with our shareholders and provide
strong incentives for our employees to execute our corporate
strategy and positively influence our overall
performance.
|
|
Overview
On November
19, 2020, the Board unanimously approved and adopted the Plan,
subject to the approval of the Company’s shareholders. At the
Annual Meeting, shareholders will be asked to approve the Plan. The
Plan is intended to replace the Air Products and Chemicals Inc.
Long-Term Incentive Plan, Amended and Restated as of October 1,
2014 (for purposes of this Proposal, the “Prior Plan”). If approved
by the Company’s shareholders, and subject to the treatment of
outstanding awards described below, the Prior Plan will be
terminated, replaced and superseded as of such date by the Plan.
Any awards granted under the Prior Plan prior to its termination
will remain in effect pursuant to their terms.
If approved
by our shareholders, the Plan will apply until terminated, amended
or suspended. We intend to file a Registration Statement on Form
S-8 under the Securities Act of 1933 to register the shares
available for issuance under the Plan. If shareholders do not
approve the Plan, we will continue to have the authority to, and
expect that we will, continue to grant awards under the Prior
Plan.
The table
below shows all shares reserved for issuance under awards
outstanding under all plans following our December 2020 annual
grants, as of December 1, 2020. The number of shares authorized
under the Prior Plan but not delivered pursuant to an award or
subject to an outstanding award as of the effective date of the
Plan will not be available for use under either the Plan or the
Prior Plan.
|
|
December
1, 2020 |
|
Unexercised options
outstanding |
|
911,092 |
|
Weighted average exercise price of
outstanding options |
|
$97.42 |
|
Weighted average remaining term of
outstanding options |
|
2.58 years |
|
Unvested RSUs and performance shares
outstanding |
|
1,107,089 |
(1) |
(1) |
Includes outstanding performance shares
based on maximum potential payout. |
Table
of Contents
In the
following paragraphs we summarize the principal features of the
Plan. This summary is qualified in its entirety be reference to the
full text of the Plan, which is set forth in Appendix B to this
proxy statement. Shareholders are urged to read the Plan in its
entirety.
Plan Highlights
and Certain Important Provisions
The Plan
contains a number of provisions that the Board believes are
consistent with the interests of shareholders and sound corporate
governing practice, including:
● |
Overall share
limit. The Plan authorizes a
pool of 1,500,000 shares of common stock, plus the number of shares
subject to awards granted under the Prior Plan and then outstanding
on January 28, 2021 which, on a later date, are not delivered
because the award expires, is forfeited or terminates unexercised.
The number of shares authorized under the Prior Plan but not
delivered pursuant to an award or subject to an outstanding award
as of the effective date of the Plan will not be available for use
under either the Plan or the Prior Plan. |
● |
Shareholder approval for additional
shares. The Plan does not
contain an “evergreen” provision pursuant to which shares
authorized for issuance may be automatically replenished.
Shareholder approval will be required to issue any additional
shares, and our shareholders will have direct input on any increase
in the numbers of shares of common stock issuable under the
Plan. |
● |
Prohibition against liberal share
recycling. Shares that are
delivered upon the exercise of stock options, withheld or otherwise
remitted to satisfy tax withholding obligations with respect to
Plan awards not issued or delivered as a result of a net exercise
of stock options or repurchased by the Company with the proceeds of
a stock option exercise may not be recycled back into the Plan’s
share reserve. Any stock appreciation right (“SAR”) award delivered
in common stock will be counted as use of a number of shares equal
to the number of SARs exercised rather than the number of shares
delivered. |
● |
Prohibition against discounted stock
options. Stock options may
not be granted with exercise prices lower than the fair market
value of the underlying shares on the grant date. |
● |
Prohibition against stock option or
SAR repricing. The Plan
generally prohibits the reduction of a purchase price of a stock
option or SAR or any other action that is treated as a “repricing”
under GAAP without shareholder approval. |
● |
Awards not subject to
dividends. Awards granted
under the Plan will not be eligible to receive dividends or
dividend equivalents until any restrictions or limitations on the
awards are satisfied. |
● |
Awards subject to
clawback. Awards under the
Plan may be subject to clawback or recoupment policies adopted by
us, including clawback or recoupment provisions in award
agreements. Among other things, we may require forfeiture of an
award, repayment of an award (or proceeds derived therefrom) or
recoupment from other payments otherwise due to the participant or
beneficiary. |
● |
Independent
Committee. Subject to its
right to delegate certain authority, employee awards under the plan
are administered by the Board’s Management Development and
Compensation Committee (the “Committee”), which is comprised of
independent directors. |
● |
Awards generally vest over at least
one year. With certain
exceptions, awards generally vest over a period of time not less
than one year after the date of grant. |
Summary of the 2021
Long-Term Incentive Plan
The
purposes of the Plan are: (i) to provide long-term incentives to
those executives and other key employees who are in a position to
contribute to the long-term success and growth of the Company and
our subsidiaries, who have high potential for assuming greater
levels of responsibility or who have demonstrated their critical
importance to the operation of their organizational unit; and (ii)
to assist the Company and our subsidiaries in attracting and
retaining directors, executives and other key employees with
experience and ability. The Plan is also intended to more closely
associate the interests of directors, executives and other key
employees with the interests of the Company’s
shareholders.
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The Plan is
administered by the Board with regard to awards to non-employee
directors and administered by the Committee with regard to awards
to employees. The Corporate Governance and Nominating Committee of
the Board will recommend to the Board the amount, type, timing,
terms and conditions of grants to non-employee
directors.
The Board
and Committee (each the “Administrator” in their respective
capacity) have broad discretionary authority, subject to the terms
of the Plan, to administer and interpret the Plan, including the
authority to:
● |
adopt such rules, regulations,
guidelines, agreements, practices and instruments for the
administration of the Plan as the Administrator deems necessary or
advisable; |
● |
select the individuals or determine
classes of individuals to be granted awards under the
Plan; |
● |
determine the number of awards to be
granted and the number of shares of common stock or dollar amount
to which an award will relate; |
● |
determine the timing, terms and
conditions of any award, including but not limited to, the exercise
price, grant price or purchase price, any restrictions or
limitations on the award and the vesting or performance conditions
applicable to the award; |
● |
establish performance goals applicable
to awards with performance criteria, evaluate the participant’s
and/or the Company’s or subsidiary’s performance in light of such
performance criteria and determine the number of shares of common
stock (or other applicable payment measures) granted to the
participant; |
● |
modify, amend or adjust the terms and
conditions of any award, at any time or from time to time,
including, but not limited to, the content of performance criteria,
vesting conditions, any schedule for lapse of forfeiture
restrictions or restrictions on the exercisability of an award, and
accelerations or waivers based in each case on such considerations
as the Administrator in its sole discretion determines; |
● |
determine and apply such policies,
procedures or award agreement or other governing document
provisions as it deems appropriate or as may be required by
applicable regulation or stock exchange listing standards to
provide for the clawback or recoupment of awards; |
● |
resolve any discrepancy or conflict
between the terms of the Plan or award agreement and any plan,
program (whether or not established under the Plan), policy or
contract with provisions that may impact an award; and |
● |
make all other decisions and determinations that may be
required under the Plan. |
The
Administrator’s interpretations of the Plan, awards and related
agreements are conclusive and binding on all interested
parties.
The
Administrator has the power to delegate its duties, including
administrative and award granting responsibilities. In general, the
Committee may delegate administrative responsibilities with respect
to employee awards and delegate all, or any portion, of its
responsibilities to grant employee awards. The Board may delegate
to appropriate Company officers or to a Committee of the Board
authority to administer the Plan and take all final action with
respect to awards to non-employee directors, including taking all
administrative action on behalf of the Company with respect to
vesting and payment of awards.
The
Committee has delegated responsibility to our CEO to select
eligible award recipients, to determine award amounts and to
subject such awards to applicable terms and conditions (other than
for persons who are our officers and directors).
Directors,
officers, executives and other key employees of the Company and its
subsidiaries are eligible for awards under the Plan (the
“participants”). Participants are selected on the basis of such
criteria as the Administrator may determine. As awards are
established at the discretion of the Administrator, subject to the
limitations and delegations described above, the number of shares
that may be granted to any participant under the Plan cannot be
determined at this time. As of September 30, 2020, there were
approximately 230 employees eligible for awards and nine eligible
non-employee directors. In addition, the Committee reserves shares
under the Plan for recognizing key talent below the director level.
There were approximately 900 additional employees in this
group.
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Shares
of Stock Subject to the Plan |
As of
January 28, 2021, the aggregate number of shares that may be
subject to awards granted under the Plan equals 1,500,000 shares of
common stock plus the number of shares subject to awards granted
under the Prior Plan and then outstanding on January 28, 2021,
which on a later date are not delivered because the award expires,
is forfeited or terminates unexercised (the “Prior Plan Shares”).
The number of shares authorized under the Prior Plan but not
delivered pursuant to an award or subject to an outstanding award
as of the effective date of the Plan will not be available for use
under either the Plan or the Prior Plan. Subject to any
anti-dilution adjustment, the aggregate number of shares that may
be delivered pursuant to Incentive stock options will be the sum of
(i) 1,500,000 shares of common stock, plus (ii) the Prior Plan
Shares.
Any share
subject to an award that is not delivered because the award
expires, is forfeited or terminates unexercised will not be
considered as having been issued or delivered for purposes of the
share limitations of the Plan and may again be subject to an award
subsequently granted under the Plan. Any stock appreciation right
SAR award delivered in common stock will be counted as use of a
number of shares equal to the number of SARs exercised rather than
the number of shares delivered. Shares tendered by participants as
full or partial payment to the Company of the purchase price of
shares subject to a stock option upon exercise of the option will
not become available for awards under the Plan. Shares withheld by
or otherwise remitted to the Company to satisfy a participant’s tax
withholding obligations with respect to awards under the Plan will
not become available for awards under the Plan. Shares subject to a
stock option, which would have been issued upon the exercise of the
stock option but are instead withheld to cover the exercise price
of the stock option in a net exercise will not become available for
awards under the Plan. Shares repurchased by the Company with the
proceeds of stock option exercises will not become available for
awards under the Plan.
The Plan
provides for the following types of awards, which may be granted
singly, in combination or in tandem as determined by the
Administrator:
● |
stock options; |
● |
stock appreciation rights; |
● |
restricted shares; |
● |
deferred stock units; |
● |
other stock awards; and |
● |
cash incentive awards or incentives that the Administrator
determines are consistent with the purposes of the Plan and the
interests of the Company. |
Stock
options granted to eligible employees under the Plan may be either:
incentive stock options (“ISOs”) or nonstatutory stock options
(“NSOs”), as determined by the Committee at the time of grant and
specified in the award agreement. All stock options granted to
non-employee directors under the Plan will be NSOs. To the extent
that any stock option is not designated as an ISO, or does not
qualify as an ISO on or subsequent to its date of grant, it will
constitute an NSO.
The
purchase price per share of common stock covered by each stock
option will be determined by the Administrator but will not be less
than 100% of the fair market value of a share of common stock on
the date of grant. For example, the closing price of our common
stock on November 30, 2020 was $280.14, so the purchase price per
share for a stock option granted on that date would be no less than
this amount. If an ISO is granted to an employee who owns stock
possessing more than 10% of the total combined voting power of all
outstanding classes of stock of the Company or any affiliate, the
purchase price per share under such ISO will be at least 110% of
the fair market value of a share of common stock on the date of
such ISO grant. The purchase price of shares to be purchased upon
exercise of any stock option shall be paid in full at the time of
exercise.
The
Administrator will fix the term during which each stock option may
be exercised, but no stock option will be exercisable 10 years
after the date of grant (or, with respect to ISOs granted to an
employee possessing more than 10% of the total combined voting
power of Company stock, five years after the date of grant). In
general, no employee stock option will be exercisable prior to one
year from its date of grant, except in the event vesting is
accelerated in connection with a change in control. Participants
will not have a right to dividends or dividend equivalents with
respect to stock options.
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Stock
Appreciation Rights |
The
Committee may grant SARs either alone or in conjunction with and
related to previously or concurrently granted awards. SARs will
entitle the participant to receive upon exercise, without any
payment to the Company, cash and/or a number of shares. The
Administrator will determine, absolutely or by formula, the number
of shares of common stock subject to each SAR. The exercise price
per share of common stock subject to a SAR will not be less than
the fair market value of the common stock on the date of grant
except in certain circumstances. No SAR will be exercisable 10
years after its date of grant.
The amount
of payment to be made upon exercise of SARs will be determined by
multiplying (i) the portion of the total number of shares as to
which the participant exercises the SARs award by (ii) the excess
of the fair market value of a share of common stock on the date of
exercise over the applicable exercise price. Payment may be made in
common stock, cash or partly in cash and partly in common stock. To
the extent that all or a portion of payment is made in common
stock, the number of shares to be paid will be determined by
dividing the amount of such payment by the fair market value of a
share of common stock on the exercise date. Participants will not
have a right to dividends or dividend equivalents with respect to
stock appreciation rights.
Restricted
share awards may be granted in such amounts and subject to such
terms and conditions as may be selected by the Committee and as
specified in the applicable award agreement. Such restrictions may
be based on the passage of time, satisfaction of performance
criteria or the occurrence of one or more events. Restricted shares
will have a restriction period of not less than three years (except
in limited circumstances such as death, disability or retirement);
provided that restricted shares will have a minimum restriction
period of one year if lapse of the restriction is based on
performance criteria.
Participants will not have the rights of a shareholder with
respect to restricted shares, including the right to receive
dividends or dividend equivalents, until such time as restrictions
are lifted with respect to shares of common stock.
The
Administrator may grant deferred stock units to participants in
such amounts and subject to such terms and conditions as may be
selected by the Committee. Award agreements may describe deferred
stock units as “Restricted Stock Units”, “Performance Shares” or
such other term.
Each
deferred stock unit will be equivalent in value to one share of
common stock. Deferred stock units may be subject to satisfaction
of any applicable time-vesting, performance conditions or criteria,
or other conditions, as set forth in the award agreement, the
satisfaction of which will entitle the participant to receive the
value of each unit from the Company at the end of the deferral
period (which, in general, must be at least a year in duration).
Except as otherwise determined by the Administrator, deferred stock
units will be granted without payment of cash or other
consideration to the Company but in consideration of services
performed for or for the benefit of the Company or a subsidiary.
Payment of the value of deferred stock units may be made by the
Company in shares of common stock, cash or both. Upon payment in
respect of a deferred stock unit, such unit will be
canceled.
Participants will not have the rights of a shareholder with
respect to deferred stock units, including the right to receive
dividends or dividend equivalents, until shares of common stock are
paid in settlement of the deferred stock unit.
The
Administrator has the authority to grant such other awards to
eligible participants that are denominated, valued or otherwise
based on or related to shares of common stock as deemed by the
Administrator to be consistent with the purposes of the Plan. Such
awards may include purchase rights, shares awarded without
restrictions or conditions or securities or other rights
convertible or exchangeable into shares of common stock.
Participants of these awards will not have the right to dividends
or dividend equivalents on such awards until any restrictions or
conditions on the awards are lifted or satisfied. The Administrator
may also grant cash incentive awards subject to the provisions of
the Plan.
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The
Committee has the discretionary authority to determine whether a
“change in control” (as such term is defined in the Plan) has
occurred and determine the effect of a change in control on
outstanding awards. Unless provided otherwise by the Committee, in
an award agreement or under an applicable document governing a
program under the Plan, upon the occurrence of a “change in
control”, outstanding awards generally either may be (i) subject to
accelerated vesting and cashed out or (ii) replaced with
replacement awards. In general, with respect to replacement awards,
if a participant’s employment is terminated without “cause” or if
the participant resigns for “good reason”, in either case within
two years after the effective date of the change in control,
then:
● |
all of a participant’s outstanding
stock options, SARs, restricted shares, deferred stock units and
other stock awards without performance conditions will become fully
vested; and |
● |
all of a participant’s performance conditioned restricted
shares, deferred stock units or other stock awards will become
vested and payable within 30 days of such termination of
employment. |
Other
Terms and Conditions |
Anti-Dilution.
In the event of any change in the outstanding shares of common
stock by reason of any stock dividend or split, recapitalization,
merger, consolidation, spin-off, combination, exchange of shares, a
rights offering to purchase common stock at a price substantially
below fair market value or other similar corporate change, an
equitable adjustment will be made so as to preserve, without
increasing or decreasing, the value of awards and authorizations or
make provision for a cash payment to the holder of an outstanding
award in consideration for the cancellation of such
award.
Transferability.
Except as the Administrator will otherwise determine in connection
with determining the terms of awards to be granted or in accordance
with procedures adopted by the Administrator, no award or any
rights or interests of the recipient will be assignable or
transferable by such recipient except upon death to his or her
designated beneficiary, and, during the lifetime of the recipient,
an award will be exercisable only by or payable only to such
recipient or his or her guardian or legal representative. In no
event may an award be transferable for consideration.
Stock
to be Used.
Distributions of shares of common stock upon exercise, in payment
or in respect of awards made under the Plan may be made either from
shares of authorized but unissued common stock reserved for such
purpose by the Board or from shares of authorized and issued common
stock reacquired by the Company and held in its treasury, as from
time to time determined by the Committee, the Board or pursuant to
delegations of authority from either. The obligation of the Company
to make delivery of awards in cash or common stock will be subject
to currency or other restrictions imposed by any
government.
Expenses of the Plan. The costs and expenses of administering the Plan will be
borne by the Company and not charged to any award or to any
employee, director or participant receiving an award. However, the
Company may charge the cost of any awards that are made to
employees of our subsidiaries, including administrative costs and
expenses related thereto, to the subsidiary that employs such
person.
Plan
Unfunded. The Plan will
be unfunded. The Company will not be required to establish any
special or separate fund or to make any other segregation of assets
to assure the payment of any award under the Plan, and payment of
awards will be subordinate to the claims of the Company’s general
creditors.
Clawbacks. The
Company or Administrator may establish policies and procedures as
each may deem appropriate or as may be required by applicable
regulation or stock exchange listing standards to provide for
clawback or recoupment of awards, and the Administrator may include
provisions requiring the clawback or recoupment of awards in award
agreements or other documents containing award provisions. Among
other things, the Company or the Administrator may require
forfeiture of an award, repayment of an award (or proceeds derived
therefrom) or recoupment from other payments otherwise due to the
participant or beneficiary.
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Future
benefits under the Plan cannot be determined at this time because
the grants are at the discretion of the Administrator and because
their value may be dependent upon the satisfaction of vesting
conditions and the future price of our common stock. No grants
under the Plan have at this time been awarded or promised to any
directors, employees or other eligible participants. However, if
adopted by our shareholders, we do not expect our equity grant
practices to differ in any material respect from our practices
under the Prior Plan. For information regarding securities
authorized under current equity compensation plans as of September
30, 2020, refer to “Equity Compensation Plan Information” on page
64.
Material United
States Federal Income Tax Consequences
|
The
following is a brief summary of the principal United States federal
income tax consequences applicable to participants and the Company.
This summary is based upon an interpretation of present federal tax
laws and regulations and may be inapplicable if such laws and
regulations are changed. This summary is not intended to be
exhaustive or constitute tax advice, nor does it describe state,
local or foreign tax consequences. The Plan is not subject the
Employee Retirement Income Security Act of 1974 and is not
qualified under Section 401(a) of Internal Revenue Code of 1986 (as
amended, the “Code”).
Incentive Stock Options. ISOs are stock options that meet the requirements set
forth in Section 422 of the Code. Generally, and in addition to
other requirements, an ISO can be granted only to employees, and
the aggregate value of shares subject to the award cannot be in
excess of $100,000 in the year in which the ISO is first
exercisable. Typically, there will be no federal income tax
consequences to us or to an individual upon the grant or exercise
of an ISO. If the individual holds the option shares for the
required holding period of at least two years after the date the
option was granted and one year after exercise, the difference
between the exercise price and the amount realized upon sale or
disposition of the option shares will be long-term capital gain or
loss, and we will not be entitled to a federal income tax
deduction. If the individual disposes of the option shares in a
sale, exchange or other disqualifying disposition before the
required holding period ends, he or she will recognize taxable
ordinary income in an amount equal to the excess of the fair market
value of the option shares at the time of exercise over the
exercise price, and we will be allowed a federal income tax
deduction equal to such amount. While the exercise of an ISO does
not result in current taxable income, the excess of the fair market
value of the option shares at the time of exercise over the
exercise price will be an item of adjustment for purposes of
determining the individual’s alternative minimum taxable
income.
Nonstatutory Stock Options. NSOs are stock options that do not qualify as an ISO.
There will be no federal income tax consequences to us or to an
individual upon the granting of an NSO. When an individual
exercises an NSO, however, he or she will recognize ordinary income
in an amount equal to the excess of the fair market value of the
common stock received upon exercise of the option at the time of
exercise over the exercise price, and we will be allowed a
corresponding deduction. Any gain that the individual realizes when
he or she later sells or disposes of the option shares will be
short-term or long-term capital gain, depending on how long the
shares were held.
Stock
Appreciation Rights. An
individual receiving a SAR under the Plan will not recognize
income, and we will not be allowed a tax deduction, at the time the
award is granted. When the individual exercises the SAR, the amount
of cash and the fair market value of any shares of common stock
received will be ordinary income to the individual, and we will be
allowed a corresponding federal income tax deduction at that
time.
Restricted Shares.
Provided that the award is nontransferable and is subject to a
substantial risk of forfeiture, an individual will not recognize
income upon the grant of a restricted share award, and we will not
be allowed a tax deduction if the individual does not elect to
accelerate recognition of the income to the date of grant. When the
restrictions lapse, the individual will recognize ordinary income
equal to the fair market value of the common stock as of that date
(less any amount he or she paid for the stock), and we will be
allowed a corresponding federal income tax deduction at that time
subject to any applicable limitations under the federal tax laws.
If the individual elects to accelerate recognition of the income to
the date of grant, he or she will recognize ordinary income at the
time of the grant in an amount equal to the fair market value of
the stock on that date (less any amount paid for the stock), and we
will be allowed a corresponding federal income tax deduction at
that time subject to any applicable limitations under the federal
tax laws. Any future appreciation in the stock will be taxable to
the individual at capital gains rates. However, if the stock is
later forfeited, the individual will not be able to recover the tax
previously paid pursuant to the acceleration.
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Deferred Stock Units. An individual will not recognize income upon the grant of
a deferred stock unit, and we will not be allowed a tax deduction.
Upon receipt of shares of common stock (or the equivalent value in
cash or other property) in settlement of a stock unit award, an
individual will recognize ordinary income equal to the fair market
value of the common stock or other property as of that date (less
any amount he or she paid for the stock or property), and we will
be allowed a corresponding federal income tax deduction at that
time, subject to any applicable limitations under federal tax
law.
Amendments,
Termination and Requisite Shareholder Approval
|
The Board
may at any time terminate or from time to time amend or suspend the
Plan in whole or in part as the Board deems to be in the best
interests of the Company or so that awards granted will conform to
any change in the law. No amendment of the Plan will be made
without shareholder approval if shareholder approval of the
amendment is at the time required by applicable law or by the rules
of the New York Stock Exchange or any stock exchange on which
common stock may be listed.
The Board
will have the power to amend the Plan in any manner deemed
necessary or advisable for awards granted under the Plan to qualify
for the exemption provided by Rule 16b-3 (or any successor
rule relating to exemption from Section 16(b) of the Exchange
Act) and such amendment will, to the extent deemed necessary or
advisable by the Board, be applicable to any outstanding awards
previously granted under the Plan notwithstanding any contrary
provisions contained in any award agreement.
The
Administrator may amend outstanding award agreements or otherwise
modify outstanding awards in a manner not inconsistent with the
terms of the Plan.
Repricing
of stock options or SARs will not be permitted without shareholder
approval except in connection with certain dilutive corporate
transactions. For this purpose, a “repricing” means any of the
following (or any other action that has the same effect as any of
the following): (i) changing the terms of a stock option or
SAR to lower its exercise price; (ii) any other action that is
treated as a “repricing” under GAAP; or (iii) repurchasing for
cash or canceling a stock option or SAR at a time when its exercise
price is greater than the fair market value of the underlying stock
in exchange for another award unless the cancellation and exchange
occurs in connection with an anti-dilution adjustment.
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Audit and Finance Committee
Matters |
PROPOSAL
4
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Ratification of Appointment of Independent
Auditors
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The Audit and Finance Committee is
directly responsible for the appointment, compensation, retention
and oversight of the independent registered public accounting firm
retained to audit the Company’s financial statements. The Audit and
Finance Committee appointed Deloitte & Touche LLP as our
independent registered public accounting firm for fiscal 2021. The
Board concurs with the appointment of Deloitte and, as a matter of
good corporate governance, requests that our shareholders ratify
the appointment of Deloitte even though ratification is not legally
required. If shareholders do not ratify this appointment, the Audit
and Finance Committee will consider such vote a recommendation to
consider the appointment of another public accounting firm for the
fiscal year ending September 30, 2022. Representatives of Deloitte
will attend the Annual Meeting. They will have the opportunity to
make a statement, if they desire to do so, and to respond to
appropriate questions.
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The
Board recommends a vote “FOR”
the
ratification of the appointment of Deloitte as the Company’s
independent registered public accounting firm for fiscal
2021. |
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As
discussed in more detail below, in fiscal 2018 the Audit and
Finance Committee conducted a competitive process to choose our
independent registered public accounting firm. Following the review
and evaluation of proposals, the Audit and Finance Committee
approved the engagement of Deloitte for fiscal 2019 and again in
fiscal 2020, and Deloitte recently completed its second audit of
our financial statements. The Audit and Finance Committee has again
appointed Deloitte as our independent registered public accounting
firm for fiscal 2021. The Board believes that the engagement of
Deloitte as our independent registered public accounting firm for
fiscal 2021 is in the best interests of the Company and is
submitting the appointment of Deloitte to our shareholders for
ratification as a matter of good corporate
governance.
|
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Ratification
of Independent Registered Public Accounting Firm
As
previously reported on the Company’s Current Report on Form 8-K,
dated July 26, 2018, the Audit and Finance Committee conducted a
competitive process in fiscal 2018 to choose the Company’s
independent registered public accounting firm for the Company’s
fiscal year ending September 30, 2019. The process included
consideration of, among other things, external auditor
independence, capability, effectiveness and efficiency of audit
services, the qualifications and experience of the lead engagement
partner and proposed team, results from management and Audit and
Finance Committee performance assessments, performance in Public
Company Accounting Oversight Board (“PCAOB”) assessments,
technological capabilities and the relative benefits of tenure
versus fresh perspective. Several independent registered public
accounting firms were invited to participate in this process,
including KPMG LLP (“KPMG”), which had served as our independent
registered public accounting firm since 2002. Following the review
and evaluation of proposals from the firms participating in that
process, and after careful consideration of each firm’s
demonstrated qualifications, on July 24, 2018 the Audit and Finance
Committee approved the engagement of Deloitte as our independent
registered public accounting firm for the Company’s fiscal year
ending September 30, 2019. KPMG was informed of this decision on
the same date and its dismissal took effect on November 20, 2018,
which was the date it issued its report on our consolidated
financial statements and internal control over financial reporting
for our fiscal year that ended September 30, 2018 that was included
in our Annual Report on Form 10-K for the year ended September 30,
2018. Deloitte completed its first audit for the Company for the
year ended September 30, 2019 and recently completed its second
audit of our financial statements for the year ended September 30,
2020. The Audit and Finance Committee has again appointed Deloitte
as our independent registered public accounting firm for our fiscal
year ending September 30, 2021. The Board believes that the
engagement of Deloitte as the Company’s independent registered
public accounting firm for fiscal 2021 is in the best interests of
the Company and has recommended that our shareholder ratify the
Audit and Finance Committee’s appointment.
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No Disagreements with Prior
Accountants
As
previously reported, KPMG’s audit reports on the Company’s
consolidated financial statements as of and for the fiscal years
ended September 30, 2016 and 2017 did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles.
The audit reports of KPMG on the effectiveness of internal control
over financial reporting as of September 30, 2016 and 2017 did not
contain an adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting
principles. During the fiscal years ended September 30, 2016 and
2017, and the subsequent interim periods through July 24, 2018,
there were (i) no disagreements between the Company and KPMG on any
matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, any of which, if not
resolved to KPMG’s satisfaction, would have caused KPMG to make
reference thereto in their reports and (ii) no “reportable events”
within the meaning of Item 304(a)(1)(v) of Regulation
S-K.
During the fiscal years ended 30 September 2017 and
2016, and the subsequent interim periods through July 24, 2018,
neither the Company nor anyone on its behalf consulted with
Deloitte regarding (i) the application of accounting principles to
a specific transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company’s financial
statements, and neither a written report nor oral advice was
provided to the Company that Deloitte concluded was an important
factor considered by the Company in reaching a decision as to any
accounting, auditing or financial reporting issue, (ii) any matter
that was the subject of a disagreement within the meaning of Item
304(a)(1)(iv) of Regulation S-K or (iii) any reportable event
within the meaning of Item 304(a)(1)(v) of Regulation
S-K.
We have
been advised by Deloitte that it will have a representative present
at the Annual Meeting. Deloitte’s representative will have the
ability to make a statement, if he or she desires, and will be
available to respond to appropriate questions.
Based on
its evaluation, the Audit and Finance Committee believes the
appointment of Deloitte is in the best interests of the Company.
The Board concurs and requests that our shareholders ratify the
appointment of Deloitte as the independent registered public
accounting firm for fiscal 2021.
Fees of
Independent Registered Public Accounting Firm
Consistent
with the Audit and Finance Committee’s responsibility for engaging
the Company’s independent registered public accounting firm, all
audit and permitted non-audit services performed by the Company’s
independent registered public accounting firm require preapproval
by the Audit and Finance Committee. The full Committee approves
projected services and fee estimates for these services and
establishes budgets for major categories of services at its first
meeting of the fiscal year. The Committee Chair has been designated
by the Committee to approve any services arising during the year
that were not preapproved by the Committee and services that were
preapproved if the associated fees will cause the budget
established for the type of service at issue to be exceeded by more
than 10%. Services approved by the Chair are communicated to the
full Committee at its next regular quarterly meeting, and the
Committee reviews actual and forecasted services and fees for the
fiscal year at each such meeting. During fiscal 2020, all services
performed by the independent registered public accounting firm were
preapproved.
Fees paid
to Deloitte in fiscal 2020 and in fiscal 2019 consisted of the
following amounts (in millions) for each category of services set
forth below:
Fees |
|
Deloitte Fees
2019
($) |
|
Deloitte Fees
2020
($) |
Audit Fees |
|
5.4 |
|
5.9 |
Audit-related Fees |
|
0.5 |
|
0.5 |
Tax Fees |
|
0.0 |
|
0.0 |
All Other Fees |
|
0.0 |
|
0.0 |
Total Fees |
|
5.9 |
|
6.4 |
60 |
|
 |
Table
of Contents
Audit fees
are fees for those professional services rendered in connection
with the audit of the Company’s consolidated financial statements
and the review of the Company’s quarterly consolidated financial
statements on Form 10-Q that are customary under the standards of
the PCAOB and in connection with statutory audits in foreign
jurisdictions. Audit-related services consisted primarily of
services rendered in connection with employee benefit plan audits,
SEC registration statements, due diligence assistance and
consultation on financial accounting and reporting standards. Tax
fees were primarily for preparation of tax returns in non-U.S.
jurisdictions, assistance with tax audits and appeals and
consulting on tax reform matters.
Audit and Finance Committee
Report
The Audit
and Finance Committee provides oversight of the Company’s financial
reporting process on behalf of the Board. Management bears primary
responsibility for the financial statements and the reporting
process, including the system of internal controls and disclosure
controls. The independent registered public accounting firm is
responsible for expressing an opinion on the conformity of the
audited consolidated financial statements with United States
generally accepted accounting principles.
In
fulfilling its responsibilities, the Audit and Finance Committee
has reviewed and discussed the audited consolidated financial
statements contained in the Company’s Annual Report on Form 10-K
for the fiscal year ended September 30, 2020 with the Company’s
management and Deloitte, which was the independent registered
public accounting firm that audited such financial statements. The
Committee has discussed with Deloitte the matters that are required
to be discussed under PCAOB standards governing communications with
audit committees, including the scope of Deloitte’s audit, the
Company’s critical accounting policies and estimates, new
accounting guidance and the critical audit matter addressed during
the audit. Deloitte has provided to the Committee the written
disclosures and the letter concerning independence required by
applicable requirements of the PCAOB regarding independent
registered public accounting firm communications with the Audit and
Finance Committee, and the Committee has discussed with Deloitte
the firm’s independence.
Based on
the reviews and discussions referred to above, the Committee
approved the audited consolidated financial statements and
recommended to the Board that they be included in the Company’s
Annual Report on Form 10-K for the fiscal year ended September 30,
2020.
Audit and Finance Committee
Matthew H.
Paull, Chair
Susan K. Carter
Charles I. Cogut
David H.Y. Ho
Edward L. Monser
Table
of Contents
Information About Stock
Ownership |
Persons Owning More
than 5% of Air Products Stock
Name and Address of Beneficial
Owner |
|
Amount and
Nature of
Beneficial
Ownership |
|
Percent
of Class(1) |
The Vanguard Group
(“Vanguard”)(2) 100
Vanguard Boulevard Malvern,
PA 19355 |
|
19,961,050 |
|
9.03% |
Black Rock, Inc.(3)
55 East 52nd Street
New York, NY 10055 |
|
16,373,746 |
|
7.41% |
State Farm Mutual Automobile Insurance
Company (“State Farm”)(4)
One State Farm Plaza
Bloomington, IL 61710 |
|
14,111,850 |
|
6.38% |
(1) |
Calculated based on 221,026,592 shares
of common stock outstanding as of October 31, 2020. |
(2) |
As reported in Amendment No. 9 to its
Schedule 13G filed with the SEC on February 12, 2020, Vanguard has
sole voting power over 329,006 shares, shared voting power over
70,752 shares, sole power to direct the disposition of 19,580,872
shares and shared power to direct disposition of 380,178
shares. |
(3) |
As reported in Amendment No. 4 to its
Schedule 13G filed with the SEC on February 5, 2020, Black Rock,
Inc. has sole voting power over 14,472,231 shares and sole power to
direct the disposition of 16,373,746 shares. |
(4) |
As reported on its Schedule 13G filed
with the SEC on January 27, 2020, in the aggregate, entities
affiliated with State Farm have sole voting power over 14,016,300
shares, shared voting power over 95,550 shares, sole power to
direct the disposition of 14,016,300 shares and shared power to
direct the disposition of 95,550 shares. |
62 |
|
 |
Table
of Contents
Air
Products Stock Beneficially Owned by Officers and
Directors
The table
below shows the number of shares of common stock beneficially owned
as of October 31, 2020 by each member of the Board and each named
executive officer as well as the number of shares owned by the
directors and all executive officers as a group. None of the
directors or executive officers own 1% or more of the Company’s
common stock, individually or in the aggregate.
Director Deferrals
As indicated in footnote 3 to the following table,
three of our directors, Mr. Ghasemi, Ms. Carter and Mr. Paull, hold
deferred stock units that are not reflected in this table because
they are not distributable within 60 days of the completion of
Board service. Because deferred stock units confer the same
economic rights as direct ownership of shares of our common stock,
ownership of deferred stock units is counted for purposes of
satisfying our stock ownership requirements for directors even
though such units do not constitute beneficial ownership of our
common stock under SEC rules.
Name of Beneficial
Owner |
|
Common
Stock(1) |
|
Right to
Acquire(2)(3) |
|
Total(4) |
Seifi
Ghasemi |
|
446,201 |
|
295,749 |
|
741,950 |
M. Scott
Crocco |
|
45,821 |
|
67,762 |
|
113,583 |
Sean D.
Major |
|
2,438 |
|
7,408 |
|
9,846 |
Samir J.
Serhan |
|
7,973 |
|
13,394 |
|
21,367 |
Susan K.
Carter |
|
0 |
|
0 |
|
0 |
Charles I.
Cogut |
|
1,200 |
|
5,303 |
|
6,503 |
Lisa A.
Davis |
|
0 |
|
608 |
|
608 |
Chadwick C.
Deaton |
|
0 |
|
14,205 |
|
14,205 |
David H.Y.
Ho |
|
0 |
|
15,655 |
|
15,655 |
Edward L.
Monser |
|
200 |
|
12,466 |
|
12,666 |
Matthew H.
Paull |
|
4,055 |
|
0 |
|
4,055 |
Directors and executive officers as a
group (11 persons) |
|
507,888 |
|
432,550 |
|
940,438 |
(1) |
This column
includes shares held by executive officers in the Company’s
Retirement Savings Plan. Participants have voting rights with
respect to such shares and can generally redirect their plan
investments.
|
(2) |
The
executive officers have the right to acquire this number of shares
within 60 days of October 31, 2020 by exercising outstanding
options granted under the Company’s Long-Term Incentive Plan or
through the vesting of performance shares or RSUs within 60 days of
October 31, 2020. In addition to these amounts, our executive
officers hold equity awards granted under the Company’s Long-Term
Incentive Plan that will not vest within 60 days of October 31,
2020. For additional information regarding such holdings, refer to
the Outstanding Equity Awards at 2020 Fiscal Year-End table on page
40. Directors hold deferred stock units shown in the table that are
distributable within 60 days upon a Director’s retirement or
resignation based upon the director’s payout elections under the
Deferred Compensation Program for Directors. The amounts reported
in this table include deferred stock units that were credited to
directors who held Versum Materials, Inc. deferred stock units
through the Deferred Compensation Plan for Directors on November
26, 2019 when such units were converted to Air Products deferred
stock units due to Versum’s acquisition by Merck KGaA in October
2019. Deferred stock units held by directors who have elected to
defer payout for longer periods are disclosed in footnote 3. Each
deferred stock unit entitles the holder to receive one share of
Company stock and accrued dividend equivalents. Deferred stock
units do not have voting rights.
|
(3) |
In addition
to the amounts reflected in this column, executive officers and
directors hold deferred stock units reflected in the table below,
which are not distributable within 60 days and which have been
earned out or acquired through deferrals of salary, annual
incentive awards or directors’ fees. Directors’ deferred stock
units shown below are not included in the table above solely
because the directors have elected to defer payout of these units
more than 60 days following the date of their retirement or
resignation.
|
Name of Beneficial
Owner |
|
Deferred Stock Units |
Seifi
Ghasemi |
|
3,020 |
Susan K.
Carter |
|
18,000 |
Matthew H.
Paull |
|
7,765 |
(4) |
Directors, nominees and executive
officers individually and as a group beneficially own less than 1%
of the Company’s outstanding common stock. |
Table
of Contents
Section 16(a)
Beneficial Ownership Reporting
Section
16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers to file reports of holdings and transactions
in Company stock and related securities with the SEC and NYSE.
Based on our records and other information, we believe that in
fiscal 2020 all of our directors and executive officers met all
applicable Section 16(a) filing requirements.
Equity Compensation Plan
Information
The
following table provides information as of 30 September
2020 about Company stock that may be issued upon the exercise
of options, warrants and rights granted to employees or members of
the Board under the Company’s existing equity compensation plans,
including plans approved by shareholders and plans that have not
been approved by shareholders in reliance on the NYSE’s former
treasury stock exception or other applicable exception to the
NYSE’s listing requirements.
EQUITY COMPENSATION
TABLE |
|
|
Plan Category |
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights (a) |
|
|
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 column (a)) |
|
Equity compensation plans approved by
security holders |
|
1,983,873 |
(1) |
|
$96.95 |
|
4,341,614 |
(2) |
Equity compensation plans not approved
by security holders |
|
44,920 |
(3) |
|
— |
|
— |
|
Total |
|
2,028,793 |
|
|
$96.95 |
|
4,341,614 |
|
(1) |
Represents
Long-Term Incentive Plan outstanding stock options and deferred
stock units that have been granted. Deferred stock units entitle
the recipient to one share of Company common stock upon vesting,
which is conditioned on continued employment during a deferral
period and may also be conditioned on earn-out against certain
performance targets. The amount presented assumes the maximum
potential payout.
|
(2) |
Represents
authorized shares that were available for future grants as of
30 September 2020. These shares may be used for options,
deferred stock units, restricted stock and other stock-based awards
to officers, directors and key employees. Full value awards such as
restricted stock are limited to 20% of cumulative awards after
1 October 2001.
|
(3) |
This number
represents deferred stock units issued under the Deferred
Compensation Plan, which are purchased for the fair value of the
underlying shares of stock with eligible deferred
compensation.
|
64 |
|
 |
Table
of Contents
Questions and
Answers on Voting and the Annual Meeting
 |
How many
shares can vote at the Annual Meeting? |
|
|
 |
As of the
record date, which was November 30, 2020, there were 221,049,063
shares of Company common stock issued and outstanding. Shares
outstanding on the record date are the only shares entitled to vote
at the Annual Meeting. Every owner of Company stock is entitled to
one vote for each share owned.
|
 |
Who
counts the votes? |
|
|
 |
A
representative of Broadridge Corporate Issuer Solutions, Inc. will
tabulate the votes and act as the independent inspector of
election.
|
 |
What is
a proxy? |
|
|
 |
A proxy is
your legal appointment of another person to vote the shares of
Company stock that you own in accordance with your instructions.
The person you appoint to vote your shares is also called a proxy.
You can find an electronic proxy card at www.proxyvote.com
that you can use to vote your shares
online or you can scan the QR code provided with your proxy
materials. If you received these proxy materials by mail, you can
also vote by mail or telephone using the proxy card enclosed with
these materials.
On the
proxy card, you will find the names of the persons designated by
the Company to act as proxies to vote your shares at the Annual
Meeting. The proxies are required to vote your shares in the manner
you instruct.
|
 |
What
shares are included on my proxy card? |
|
|
 |
If you are
a registered shareholder, your proxy card will show the shares of
Company stock registered in your name with our transfer agent,
Broadridge Corporate Issuer Solutions, Inc. on the record date,
including shares in the Direct Share Purchase and Sale Program
administered for Air Products’ shareholders by our transfer agent.
If you have shares registered in the name of a bank, broker or
other registered owner or nominee, they will not appear on your
proxy card.
|
 |
How do I
vote the shares on my proxy card? |
|
|
 |
If you
received a Notice of Availability of Proxy Materials and accessed
these proxy materials online, follow the instructions on the Notice
to obtain your records and vote electronically.
If you
received these proxy materials by mail, you may vote by signing and
dating your proxy card and returning it in the prepaid envelope.
You also can vote via mobile device, online or by using a toll-free
telephone number. Instructions about these ways to vote appear on
the proxy card. If you vote by telephone, please have your paper
proxy card and control number available. The sequence of numbers
appearing on your card is your control number, and your control
number is necessary to verify your vote.
If you
received these proxy materials via e-mail, the e-mail message
transmitting the link to these materials contains instructions on
how to vote your shares of Company stock and your control
number.
|
Table
of Contents
|
Whether
your proxy is submitted by mail, telephone, mobile device or
online, your shares will be voted in the manner you instruct. If
you do not specify in your proxy how you want your shares voted,
they will be voted according to the Board’s recommendations
below:
|
|
|
|
Item |
|
Board Recommendation |
|
1. |
Election of the
Board’s Eight Nominees as Directors |
|
FOR |
|
2. |
Advisory Vote on
Executive Officer Compensation |
|
FOR |
|
3. |
Approval of the Air
Products and Chemicals, Inc. 2021 Long-Term Incentive
Plan |
|
FOR |
|
4. |
Ratification of
Deloitte & Touche LLP as the Company’s Independent Registered
Public Accounting Firm |
|
FOR |
 |
How do I
vote shares held by my broker, bank or other nominee? |
|
|
 |
If a
broker, bank or other nominee holds shares of Company stock for
your benefit and the shares are not in your name on the transfer
agent’s records, then you are considered the “beneficial owner” of
those shares. If your shares are held this way, sometimes referred
to as being held in “street name”, your broker, bank or other
nominee will send you instructions on how to vote. If you have not
heard from the broker, bank or other nominee who holds your Company
stock, please contact them as soon as possible. If you plan to
attend the meeting and would like to vote your shares held by a
bank, broker or other nominee, you must obtain a legal proxy, as
described in the admission procedures section on page
68.
If you do
not give your broker instructions as to how to vote, under NYSE
rules, your broker has discretionary authority to vote your shares
for you on Item 4 to ratify the appointment of auditors. Your
broker may not vote for you without your instructions on the other
items of business. Shares not voted on these other matters by your
broker because you have not provided instructions are sometimes
referred to as “broker nonvotes”.
|
 |
May I
change my vote? |
|
|
 |
Yes. You
may revoke your proxy at any time before the Annual Meeting by
submitting a later dated proxy card, by a later telephone or online
vote, by notifying us that you have revoked your proxy or by
attending the Annual Meeting and following the voting instructions
provided on the meeting website.
|
 |
How is
Company stock in the Company’s Retirement Savings Plan
voted? |
|
|
 |
If you are
an employee who owns shares of Company stock under the Retirement
Savings Plan and you have regular access to a computer for
performing your job, you were sent an e-mail with instructions on
how to view the proxy materials and provide your voting
instructions. Other participants in the Retirement Savings Plan
will receive proxy materials and a proxy card in the mail. The
Trustee, Fidelity Management Trust Company, will vote shares of
Company stock allocated to your Plan account on the record date in
accordance with the directions you give on how to vote. The Trustee
will cast your vote in a manner that will protect your voting
privacy. If you do not give voting instructions or your
instructions are unclear, the Trustee will vote the shares in the
same proportions and manner as overall Retirement Savings Plan
participants instruct the Trustee to vote shares allocated to their
Plan accounts.
|
 |
What is
a “quorum”? |
|
|
 |
A quorum is
necessary to hold a valid meeting of shareholders. A quorum exists
if a majority of the outstanding shares of Company stock are
present at the Annual Meeting or represented there by proxy. If you
vote, including by Internet, telephone or proxy card, your shares
voted will be counted towards the quorum for the Annual Meeting.
Proxies marked as abstentions and broker discretionary votes are
also treated as present for purposes of determining a
quorum.
|
66 |
|
 |
Table
of Contents
 |
What
vote is necessary to pass the items of business at the Annual
Meeting? |
|
|
 |
Election of Directors. Our Bylaws provide
that if a quorum is present at the Annual Meeting and the number of
director nominees does not exceed the number of directors to be
elected (i.e., an uncontested election), director nominees will be
elected if they receive a majority of the votes cast at the meeting
in person or by proxy. This means that in uncontested elections the
nominees will be elected if the number of shares voted “for” the
nominee exceeds the number of shares voted “against” the nominee.
In a contested election, nominees would be elected by a plurality
of votes cast. Abstentions and broker nonvotes are not counted as
votes cast and therefore will have no effect.
Under our
Corporate Governance Guidelines, any incumbent director who is not
re-elected by a majority of the votes cast must tender his or her
resignation to the Corporate Governance and Nominating Committee of
the Board for its consideration. The Corporate Governance and
Nominating Committee then recommends to the Board whether to accept
the resignation. The director will continue to serve until the
Board decides whether to accept the resignation but will not
participate in the Committee’s recommendation or the Board’s action
regarding whether to accept the resignation. The Board will
publicly disclose its decision and rationale within 90 days after
certification of the election results by the inspector of election.
If the Board does not accept the director’s resignation, the
director will continue to serve.
All
Other Items. The other three
items of business will be approved if shares voted in favor of the
proposal exceed shares voted against the proposal. Abstentions and
broker nonvotes will not affect the outcome of the vote on these
proposals.
|
 |
How will
voting on any other business be conducted? |
|
|
 |
We do not
know of any business or proposals to be considered at the Annual
Meeting other than the items described in this proxy statement. If
any other business is proposed and the chairman of the Annual
Meeting permits it to be presented at the Annual Meeting, the
signed proxies received from you and other shareholders give the
persons voting the proxies the authority to vote on the matter
according to their judgment.
|
 |
When are
Shareholder proposals for the 2022 Annual Meeting due? |
|
|
 |
To be
considered for inclusion in next year’s proxy statement,
shareholder proposals must be delivered in writing to the Secretary
of the Company, Air Products and Chemicals, Inc., 7201 Hamilton
Boulevard, Allentown, PA 18195-1501 no later than August 11,
2021.
To be
presented at the 2022 Annual Meeting of Shareholders, our Bylaws
require that adequate written notice of a proposal to be presented
or nomination must be delivered in writing to the Secretary of the
Company in person or by mail at the address stated above on or
after September 30, 2021 but no later than October 30, 2021, and a
nomination pursuant to our proxy access bylaw must be delivered on
or after August 31, 2021 but no later than September 30, 2021. To
be considered adequate, the notice must contain other information
specified in the Bylaws about the matter to be presented at the
meeting and the shareholder proposing the matter. A copy of our
Bylaws can be found in the “Governance” section of our website
at www.airproducts.com.
Proposals and nominations received after the applicable deadlines
will be considered untimely and will not be entitled to be
presented at the meeting.
|
 |
What are
the costs of this proxy solicitation? |
|
|
 |
The Company
will bear all expenses of preparing, assembling, printing, mailing
and distributing these proxy materials and soliciting votes. We may
reimburse banks, brokers and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses for
forwarding proxy materials to you, because they hold title to
Company stock for you. In addition to using the mail, our
directors, officers and employees may solicit proxies by personal
interview, telephone, telegram or otherwise, although they will not
be paid any additional compensation.
|
Table
of Contents
 |
May I
inspect the shareholder list? |
|
|
 |
For a
period of 10 days prior to the Annual Meeting, a list of
shareholders registered on the books of our transfer agent as of
the record date will be available for examination by registered
shareholders during normal business hours at the Company’s
principal offices as long as the examination is for a purpose
germane to the meeting. The list of shareholders will also be
available for inspection by authenticated shareholders during the
Annual Meeting on the virtual meeting website,
www.virtualshareholdermeeting.com/APD2020.
|
 |
How can
I get materials for the Annual Meeting? |
|
|
 |
Under rules
adopted by the SEC, we are furnishing proxy materials to most of
our shareholders via the Internet instead of mailing printed copies
of those materials to each shareholder. On December 9, 2020, we
mailed to our shareholders (other than those who previously
requested electronic or paper delivery) a Notice of Availability of
Proxy Materials containing instructions on how to access our proxy
materials, including our proxy statement and our 2020 Annual Report
to Shareholders. The Notice of Availability of Proxy Materials also
instructs you on how to access your proxy card to vote through the
Internet.
This
process is designed to expedite shareholders’ receipt of proxy
materials, lower the cost of the Annual Meeting and help conserve
natural resources. However, if you would prefer to receive printed
proxy materials, please follow the instructions included in the
Notice of Availability of Proxy Materials. If you have previously
elected to receive our proxy materials electronically, you will
continue to receive these materials via e-mail unless you elect
otherwise.
If you are
an employee of the Company or an affiliate who is a participant in
the Retirement Savings Plan or who has outstanding stock options,
with an internal Company e-mail address as of the record date, you
should have received e-mail notice of electronic access to the
Notice of Annual Meeting, the proxy statement and the 2020 Annual
Report to Shareholders on or about December 9, 2020. You may
request a paper copy of these materials by contacting the Corporate
Secretary’s Office. If you do not have an internal Company e-mail
address, paper copies of these materials were mailed to your home.
Instructions on how to vote shares in your Plan account are
contained in the e-mail notice or accompany the paper proxy
materials mailed to you.
If you have
employee stock options awarded to you by the Company or an
affiliate but do not otherwise own any Company stock on the record
date, you are not eligible to vote and will not receive a proxy
card for voting. You are being furnished this proxy statement and
the 2020 Annual Report to Shareholders for your information and as
required by law.
|
 |
What are
the procedures for attending and participating in the Annual
Meeting? |
|
|
 |
The Annual
Meeting will be held virtually via a live audio webcast at
www.virtualshareholdermeeting.com/APD2021. To gain admission to and vote at the Annual Meeting,
you must enter the 16-digit control number found next to the label
“Control Number” on your Notice of Internet Availability, proxy
card or voting instruction form or in the email sending you this
proxy statement. If you are a beneficial shareholder, you may
contact the bank, broker or other institution where you hold your
account if you have questions about obtaining your control number
and voting at the virtual meeting.
The Annual
Meeting will include a question and answer session. Questions may
be submitted during the Annual Meeting through the virtual meeting
website, www.virtualshareholdermeeting.com/APD2021. If we receive substantially similar questions, we
may group such questions together and provide a single response to
avoid repetition and allow time for additional topics.
We
encourage shareholders to log in to the virtual meeting website and
access the webcast early, beginning approximately 15 minutes before
the Annual Meeting’s 2:00 p.m. (Eastern) start time. If you
experience technical difficulties, please contact the technical
support telephone number posted on www.virtualshareholdermeeting.com/APD2021.
Whether or
not you choose to participate in the Annual Meeting, it is
important that your shares be part of the voting process. In
addition, even if you plan to attend the Annual Meeting, we
encourage you to return your proxy card or provide your bank,
broker or other institution with voting instructions, before the
Annual Meeting in order to ensure that your shares are
represented.
|
68 |
|
 |
Table
of Contents
 |
How can
I reach the Company to request materials or information referred to
in these Questions and Answers? |
|
|
 |
You may order a copy of our Annual
Report on Form 10-K for the fiscal year ended September 30, 2020,
free of charge, or request other information by mail addressed
to: |
Corporate Secretary’s Office
Air Products and Chemicals, Inc.
7201 Hamilton Boulevard
Allentown, PA 18195-1501,
or by calling 610-481-4880. This information is also
available free of charge on the SEC’s website,
www.sec.gov, and our
website, www.airproducts.com.
Table
of Contents
Appendix
A
Reconciliation of
Non-GAAP Financial Measures
|
(Millions of dollars unless otherwise indicated, except for
per share data)
We present
certain financial measures, other than in accordance with United
States generally accepted accounting principles (“GAAP”), on an
“adjusted” or “non-GAAP” basis. These measures include adjusted
diluted earnings per share (“EPS”) and adjusted EBITDA. For each
non-GAAP financial measure, we present below a reconciliation to
the most directly comparable financial measure calculated in
accordance with GAAP.
Our
non-GAAP financial measures are not meant to be considered in
isolation or as a substitute for the most directly comparable
measure calculated in accordance with GAAP. We believe these
non-GAAP financial measures provide investors, potential investors,
securities analysts and others with useful information to evaluate
the performance of our business because such measures, when viewed
together with financial results computed in accordance with GAAP,
provide a more complete understanding of the factors and trends
affecting our historical financial performance and projected future
results.
In many
cases, non-GAAP financial measures are determined by adjusting the
most directly comparable GAAP measure to exclude certain disclosed
items, or “non-GAAP adjustments”, that we believe are not
representative of underlying business performance. For example, we
previously excluded certain expenses associated with cost reduction
actions, impairment charges and gains on disclosed transactions.
The reader should be aware that we may recognize similar losses or
gains in the future. Readers should also consider the limitations
associated with these non-GAAP financial measures, including the
potential lack of comparability of these measures from one company
to another.
The
following non-GAAP reconciliations are on a continuing operations
basis.
Adjusted Diluted Earnings per
Share
Adjusted
diluted EPS is calculated as net income from continuing operations
attributable to Air Products, excluding the impact of certain
disclosed items that we believe are not representative of
underlying business performance, divided by the weighted average
common shares reflecting the potential dilution that could occur if
stock options or other share-based awards were exercised or
converted into common stock. We view adjusted diluted EPS as a key
performance metric. Among other uses, we use adjusted diluted EPS
to assess performance under our incentive compensation
program.
Year Ended 30
September |
|
2020 |
|
|
2019 |
|
Diluted EPS |
|
$8.55 |
|
|
$7.94 |
|
Facility closure |
|
— |
|
|
0.10 |
|
Cost reduction actions |
|
— |
|
|
0.08 |
|
Gain on exchange of equity affiliate
investments |
|
— |
|
|
(0.13 |
) |
Company headquarters relocation
(income) expense |
|
(0.12 |
) |
|
— |
|
India Finance Act 2020 |
|
(0.06 |
) |
|
— |
|
Pension settlement loss |
|
— |
|
|
0.02 |
|
Tax reform repatriation |
|
— |
|
|
(0.06 |
) |
Tax reform adjustment related to deemed
foreign dividends |
|
— |
|
|
0.26 |
|
Adjusted Diluted EPS |
|
$8.38 |
|
|
$8.21 |
|
Change GAAP versus prior
year |
|
|
|
|
|
|
Diluted EPS $ change |
|
$0.61 |
|
|
|
|
Diluted EPS % change |
|
8 |
% |
|
|
|
Change Non-GAAP versus prior
year |
|
|
|
|
|
|
Adjusted diluted EPS $
change |
|
$0.17 |
|
|
|
|