NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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Date and Time:
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Wednesday, May 20, 2020, at 10:00 a.m., local time
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Place:
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Marriott Suites Deerfield
2 Parkway North
Deerfield, Illinois 60015
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Items of Business:
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At the Annual Meeting, shareholders will be asked to:
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1.
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Elect the eleven directors named in this Proxy Statement;
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2.
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Consider and approve an advisory resolution regarding the compensation of our named executive officers;
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3.
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Ratify the selection of KPMG LLP as our independent registered public accounting firm for 2020;
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4.
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Act upon one shareholder proposal regarding the right to act by written consent, if properly presented at the Annual Meeting; and
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5.
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Consider any other business properly brought before the Annual Meeting.
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Record Date:
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You may vote at the Annual Meeting if you were a shareholder of record of our company as of the close of business on March 27, 2020
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Internet Availability of Proxy Materials
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Important Notice Regarding the Availability of Proxy Materials for the 2020Annual Meeting of Shareholders to be held on Wednesday, May 20, 2020: Our Proxy
Statement and 2019 Annual Report are available free of charge at www.proxyvote.com.
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We
intend to hold our Annual Meeting in person. However, we are actively monitoring the coronavirus (COVID-19) situation. We are sensitive to the public health and travel concerns our shareholders may
have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold our Annual Meeting in person, we will announce alternative
arrangements in advance of the Annual Meeting, and details on how to participate will be issued by press release available on our website at https://www.cfindustries.com and filed with the Securities
and Exchange Commission.
Your
vote is important. Please vote your shares promptly so that your shares will be represented whether or not you attend the Annual Meeting. To vote your shares, you may use the Internet as
described on your Notice of Internet Availability of Proxy Materials and proxy card, call the toll-free telephone number listed on your proxy card or complete, sign, date, and return your proxy card.
By
order of the board of directors,
Douglas
C. Barnard
Senior Vice President, General Counsel, and Secretary
April 8, 2020
Table of Contents
Table of Contents
PROXY STATEMENT SUMMARY
This summary provides certain key information about CF Industries' business and strategy and highlights information contained elsewhere in
this Proxy Statement. This summary does not contain all of the information that you should consider, and you
should read the entire proxy statement carefully before voting. These proxy materials were first sent or made available to shareholders on or about April 8, 2020.
2020 ANNUAL MEETING OF SHAREHOLDERS INFORMATION
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Date and Time:
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Wednesday, May 20, 2020, at 10:00 a.m. (local time)
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Place:
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Marriott Suites Deerfield
2 Parkway North
Deerfield, Illinois 60015
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Record Date:
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March 27, 2020
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We
intend to hold our Annual Meeting in person. However, we are actively monitoring the coronavirus (COVID-19) situation. We are sensitive to the public health and travel concerns our shareholders may
have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold our Annual Meeting in person, we will announce alternative
arrangements in advance of the Annual Meeting, and details on how to participate will be issued by press release available on our website at https://www.cfindustries.com and filed with the Securities
and Exchange Commission.
VOTING MATTERS
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Proposals
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Board
Recommendation
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Page
Number for
Additional
Information
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1.
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Election of Directors
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FOR
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10
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2.
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Advisory Vote on Executive Compensation ("Say on Pay")
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FOR
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39
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3.
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Ratification of Selection of Independent Auditor for 2020
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FOR
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96
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4.
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Shareholder Proposal Regarding the Right to Act by Written Consent, if properly presented at the Annual Meeting
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AGAINST
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100
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OUR BUSINESS
CF Industries is a leading global fertilizer and chemical company with outstanding operational capabilities and a cost-advantaged production and distribution
platform. Our 3,000 employees operate world-class manufacturing complexes in Canada, the United Kingdom and the United States. Our customers include both agricultural and industrial users of our
products. Our principal nitrogen products are ammonia, granular urea, urea ammonium nitrate solution, and ammonium nitrate. We also manufacture diesel exhaust fluid, urea liquor, nitric acid, and aqua
ammonia, which are sold primarily to industrial customers, and compound fertilizer products, which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen,
phosphorus, and potassium. We serve our customers in North America through an unparalleled production, storage, transportation and distribution network. We also reach a global customer base with
exports from our Donaldsonville, Louisiana, plant, the world's largest and most flexible nitrogen complex. Additionally, we move product to international destinations from our Verdigris, Oklahoma,
facility, our Yazoo City, Mississippi, facility, our Billingham and Ince facilities in the United Kingdom, and a joint venture ammonia facility in the Republic of Trinidad and Tobago in which we own a
50 percent interest.
For
more information on our business, see "Item 1. Business" and "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our 2019 Annual Report.
1
Table of Contents
OUR STRATEGY
Our vision, given the cyclical nature of our business, is to deliver superior shareholder returns over the cycle. Our strategy, in support of our vision, is
built upon a foundation of distinct core capabilities and core values that we live each and every day. We leverage our capabilities to drive business results that create long-term value for our
shareholders. Our strategy is reviewed and endorsed annually by our Board and the Board plays an active role in measuring our ability to execute it successfully.
Our Strategy Is Aligned with Our Mission and Corporate Responsibility
Our strategy for creating long-term shareholder value is directly aligned with our mission: We feed the crops that feed the world and produce the building
blocks for a better life, and we do so efficiently, safely, and sustainably. Fertilizer is responsible for helping to grow the crops that comprise about half of the world's food supply, which makes
life possible for billions of people. Fertilizer also supports sustainable food production because it increases yield per acre, which means farmers need less land to grow the food the world's
population needs to survive. By increasing crop yields, we help limit the conversion of carbon-sequestering forests into farmland. We also manufacture products that reduce greenhouse gas emissions
from industrial processes. In addition, our diesel exhaust fluid product helps reduce nitrous oxide emissions of heavy-duty trucks and marine vessels. For further discussion of our corporate
responsibility and sustainability practices, see "Corporate Governance Corporate Responsibility and Sustainability."
Manufacturing
chemical products responsibly requires a focus on safety. At CF Industries, safety is more than just a requirement it is a point of pride and ingrained in our
corporate culture and values. This commitment is illustrated by our industry leading safety statistics. At CF Industries, we believe that our strong safety record is a result of our focus on
behavioral safety practices. During 2018 and 2019, we further demonstrated our commitment to
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Table of Contents
operational
excellence and safety by incorporating an operational metric into our annual incentive plan which was based on our achievement of ammonia production goals, subject to first achieving a
gating level of performance on behavioral safety practices. See "Compensation Discussion and Analysis" for further information.
Strong Shareholder Returns Over the Cycle
We firmly believe that, due to the cyclical nature of the commodity chemical industry in which we operate, it is important to view performance over a longer
time horizon than just one year. Our execution of initiatives aligned with our strategy helped us achieve our vision delivering superior shareholder returns over the cycle. The
following table shows the cumulative total shareholder return, assuming the reinvestment of dividends, for our common stock and a peer group index for the 1, 3, 5, 7, and 10-year periods ended
December 31, 2019.
Total Shareholder Return (TSR)
Each
of the peer group companies was a publicly traded manufacturer of agricultural chemical fertilizers. The companies comprising the peer group are:
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Agrium,
Inc.*
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The Mosaic
Company
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LSB Industries,
Inc.
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Incitec
Pivot Limited
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OCI N.V.**
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Potash Corporation of
Saskatchewan Inc.*
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Nutrien Ltd.*
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CVR
Partners LP**
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Yara International
ASA
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Agrium, Inc.
(Agrium) and Potash Corporation of Saskatchewan Inc. (Potash Corp) are included in the peer group companies from December 31, 2009
through December 31, 2017. On January 2, 2018, Agrium and Potash Corp completed a merger of equals transaction to form Nutrien, Ltd. The cumulative investment in each of Agrium
and Potash Corp, assuming dividend reinvestments up to December 31, 2017, was converted into shares of Nutrien, Ltd. on January 2, 2018 using the exchange ratio in the merger of
equals transaction consummated on that date. Nutrien, Ltd. was included in the peer group companies for the period from January 2, 2018 through December 31, 2019.
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**
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CVR
Partners LP and OCI N.V. were excluded from the calculation of the 10-year total shareholder return because they each had less than 10-years of
trading history.
For
purposes of calculating the TSR of CF Industries and the peer group index for the 1, 3, 5, 7, and 10-year periods ending December 31, 2019, the beginning stock price for each peer group
company was established by its respective closing price on the last trading day immediately preceding January 1 of the first fiscal year of the applicable measurement period. The returns of the
peer group companies were weighted according to their respective market capitalizations as of the date used to establish the beginning stock price. For Yara International ASA, Incitec
Pivot Limited and OCI N.V., we used their respective home exchange stock prices, converted into U.S. dollars for TSR calculation purposes.
3
Table of Contents
2019 PERFORMANCE HIGHLIGHTS
Operating Results
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Net Earnings
Attributable to
Common Stockholders
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Earnings Per
Diluted Share
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EBITDA(1)
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Net Cash Provided by
Operating Activities
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$493 Million
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$2.23
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$1.6 Billion
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$1.5 Billion
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Annual Incentive Plan Performance Metrics
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Adjusted EBITDA(2)
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Behavioral Safety
Gate Threshold
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Gross Ammonia
Production
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$1.6 Billion
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Achieved
98.7%
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10.2 Million Tons
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Target: $1.4 Billion
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Threshold: ³ 95%(3)
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Target: 10.0 Million Tons
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When
setting performance levels for the short-term incentive program, the compensation and management development committee considers the previous year's financial performance, market trends and the
company's annual business plan. Actual results in 2019 exceeded the company's plan as product prices improved more than anticipated contributing to higher revenue and margins.
During 2019, we also exceeded our production goals in part due to our best-in-class operational capabilities that enable us to produce more product than other comparable manufacturers. At the same
time, the cost of our principal feedstock, natural gas, declined compared to the prior year and much more than the market expectations reflected in forward market curves when setting our annual
business plan. This combination of a more advantageous pricing environment, lower natural gas cost, and efficient production contributed to the above-target financial results, and, therefore, an
above-target payout for the annual incentive program.
Additionally,
the company continued to deliver against its strategic priorities and create long-term shareholder value.
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Safety
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As of December 31, 2019, the company's 12-month rolling average recordable incident rate was 0.48 incidents per 200,000 work hours an industry leading result
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Operational Excellence
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Long-term asset utilization-and-production is approximately 12 percent higher than the average utilization rate of our North American competitors
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Efficiency
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SG&A costs as a percent of sales remain among the lowest in both the chemicals and fertilizer industries
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Return to Shareholders
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Returned $602 million to shareholders through $337 million in share repurchases and $265 million in dividend payments
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Reduced Debt and Fixed Charges
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During 2019, we retired $750 million of outstanding indebtedness, reducing annual cash interest expense in 2020 by $44 million compared to 2019
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(1) EBITDA
is defined as net earnings attributable to common stockholders plus interest expense-net, income taxes and depreciation and amortization. See Appendix A for a
reconciliation of EBITDA to the most directly comparable GAAP measure.
(2) See
"Compensation Discussion and Analysis Compensation Discussion and Analysis: In Detail Key Elements of NEO Compensation
Program Our Metrics Defined" for the definition of Adjusted EBITDA for purposes of our annual incentive plan.
(3) The
Secondary Metric, Tons of Ammonia Produced, has a behavioral safety gate threshold. If at least 95% of the aggregated safety grades of all employees at manufacturing sites were a
"B" or better for the year, the safety performance gating requirement would be achieved. If the safety performance gating requirement was not achieved, there would be no payout under the Secondary
Metric.
4
Table of Contents
OUR DIRECTOR NOMINEES
Our corporate governance and nominating committee regularly reviews the overall composition of our Board and its committees to assess whether each reflects
the appropriate mix of experience, qualifications, attributes, and skills that are relevant to CF Industries' current and future global strategy, business, and governance.
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(1)
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AC = Audit Committee
CC = Compensation and Management Development Committee
GC =
Corporate Governance and Nominating Committee
C =
Committee Chair
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Table of Contents
CORPORATE GOVERNANCE HIGHLIGHTS
We are committed to implementing sound corporate governance practices that enhance the effectiveness of the Board and our management and that serve the
interests of our shareholders. Highlights of our governance practices include:
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Governance Practice
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For More Information
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Board Structure
and Governance
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All of director nominees
are independent, except for our CEO. All of our standing Board committees are 100 percent independent.
We have an independent Chairman of the Board and separate Chief Executive Officer.
Our directors are elected
annually based on a majority voting standard for uncontested elections. We have a resignation policy if a director
fails to receive a majority of votes cast.
Each of our directors attended 75% or more of the combined total meetings of the full
Board and the committees on which he or she served during 2019.
Our non-management directors meet in executive session, without management present,
following each regularly scheduled Board meeting.
Annual Board and committee self-assessments and peer evaluations monitor the performance
and effectiveness of the Board and its committees and directors.
The Chairman of the Board and chair of the governance committee lead
an active process to regularly assess Board composition and attributes and consider succession planning.
We consider diversity of background, including experience and skills as well as personal characteristics such as race, gender and age, in identifying nominees for director and incorporate recruitment protocols in our
candidate searches that seek to identify candidates with these diversity characteristics.
Board plays an active role in reviewing and
approving our strategy, and in measuring our ability to execute it successfully.
Diligent Board oversight of risk
management, including climate change, is a cornerstone of the company's risk management program.
Board has an integral oversight role in human capital management and engages with senior management on a broad range of topics including culture, talent development, compensation, employee recruiting and retention, and diversity and
inclusion.
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P. 23-25
P. 23-24
P. 10
P. 26
P. 24
P. 24
P. 10-12
P. 13
P. 26-27
P. 26-28
P. 27-28
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We have strong
stock ownership guidelines for our executive officers and directors.
We prohibit hedging and
pledging of our common stock by directors and executive officers.
We have a robust clawback
policy covering incentive awards.
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P. 75-76
P. 77
P. 76-77
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Our ethics program includes a strong Code of Corporate Conduct for all of our directors, officers and employees.
We discuss Corporate
Responsibility on our website and in our Corporate Sustainability Report, including our values and "Do It Right" culture, our commitment to our stakeholders and
communities, and strong corporate commitment to respect the dignity and human rights of others.
We provide disclosure
of charitable contributions and corporate political contributions and trade associate dues in semi-annual reports.
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P. 29-30
www.cfindustries.com/ sustainability-at-cf-industries
www.cfindustries.com/reports
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Eligible shareholders can
utilize the proxy access provisions of our bylaws to include their own nominees for director in our proxy materials along with Board-nominated candidates.
We do not have a shareholder rights plan, or poison pill. Our Board has adopted a policy whereby any rights plan adopted
without shareholder approval must be submitted to shareholders for ratification, or the plan must expire, within one year of such adoption.
Our shareholders have the right
to call a special meeting of shareholders.
All supermajority voting provisions have
been eliminated from our certificate of incorporation and our bylaws.
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P. 12; Bylaws
Bylaws
Charter and Bylaws
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6
Table of Contents
SHAREHOLDER ENGAGEMENT
We believe that building positive relationships with our shareholders is critical to CF Industries' success. We value the views of, and regularly communicate
with, our shareholders on a variety of topics, such as our financial performance, corporate governance, executive compensation, and related matters. Management shares the feedback received from
shareholders with the Board. Our chairman, our committee chairs, and other members of the Board may also be available to participate in meetings with shareholders as appropriate. Requests for such a
meeting are considered on a case-by-case basis. Our engagement activities have resulted in valuable feedback that has contributed to our decision-making with respect to these matters.
We
conduct shareholder outreach campaigns in the spring and in the fall. Our engagements in the spring are primarily focused on ballot items on which shareholders will vote at our annual meeting. Our
engagements in the fall generally focus on voting outcomes from our prior annual meeting including direct shareholder feedback on how they voted on ballot
items as well as potential corporate governance or executive compensation changes the Board and its committees are considering. The fall engagement also presents an opportunity to
discuss with shareholders developments in their methodologies and analyses and potential future areas of focus.
In
the first half of 2019 leading up to our 2019 annual meeting, we contacted shareholders comprising approximately 75% of our outstanding shares to invite them to speak with members of our senior
management and the chair of our compensation and management development committee. Combined, management and our compensation and management development committee chair met with shareholders
representing approximately 23% of our outstanding shares in advance of our 2019 annual meeting, discussing with these shareholders the ballot items on which shareholders would be voting at our 2019
annual meeting, in particular our 2018 executive compensation program and the say-on-pay vote, and other governance focused matters.
During
the second half of 2019 following our 2019 annual meeting, we contacted shareholders comprising approximately 75% of our outstanding shares inviting them to speak with members of our senior
management. Combined, management and our compensation and management development committee chair held meetings with shareholders accounting for 42% of our
outstanding shares, discussing with these shareholders the voting outcome from our 2019 annual meeting as well as general governance, compensation, corporate responsibility and sustainability matters.
7
Table of Contents
COMPENSATION PROGRAM HIGHLIGHTS
Our executive compensation practices are overseen and administered by the compensation and management development committee, which is comprised exclusively of
independent directors. The committee is responsible for designing an executive compensation program including approving any changes to it that effectively incentivizes our
executives to create long-term value for our shareholders.
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Summary
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More Details
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Our compensation philosophy seeks to align the interests of our employees and our shareholders through focusing on the total compensation (base salary, short-term
incentives, long-term incentives, and benefits) of our employees, including our executive officers. We seek to benefit from this strategy by attracting key talent, retaining strong performers, increasing productivity, and
maximizing operational and financial results, while also implementing compensation programs that are cost effective, market competitive, and sustainable across business cycles.
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P. 54
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Key Elements of
Compensation Program
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Salary
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Paid in line with individual performance and contribution to company goals and aligned to competitive market data
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P. 55,59
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Annual Cash Incentives
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The amount of the actual incentive earned is determined based on our level of achievement of two performance metrics:
75%: level of achievement of Adjusted EBITDA* (Primary Metric)
25%: level of achievement of ammonia production goals, subject to first achieving a gating level of performance on behavioral safety practices (Secondary Metric)
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P. 55, 59-65
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Long-Term Equity Incentives
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A specified cash value amount is split among two different equity award types:
60%: PRSUs (3-year cliff vesting based on
average return on net assets (RONA)* over three one-year periods, and a TSR modifier that can decrease or increase payout by up to 20%)
40%: RSUs (3-year ratable vesting)
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P. 55, 65-69
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Rigorous Benchmarking and
Incentive Target Setting
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Bench-marking
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Our total direct compensation is targeted at the 50th percentile of our Industry Reference Group, which is comprised of 17 companies in related industries, and the
overall general industry market data.
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P. 57
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Incentive Metrics and Performance Levels
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We utilize performance
metrics for our incentive compensation programs that align executive interests with those of our shareholders
Executives are focused on
achieving top performance across metrics that are directly tied to shareholder value creation and our core strategic objectives
The compensation
and management development committee considers the previous year's financial performance, market trends and the company's annual business plan when setting goals and targets for our incentive
compensation programs
The performance metrics and target performance levels reflect the inherent cyclicality of our business
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P. 55-58,
60-64,
66-71
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Leading Compensation
Governance Practices
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Our leading compensation governance practices include:
✓
Strong pay-for-performance alignment
✓
Robust clawback policy covering incentive awards
✓
Stock ownership guidelines
✓
Performance metrics that align executive interests with interests of shareholders
✓
A majority of compensation for CEO and other executive officers is performance-based, at risk, and paid in equity
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✓
No employment agreements
✓
No repriced stock options
✓
Minimal perquisites
✓
Executive officers are prohibited from hedging or pledging our
stock
✓
No new excise tax gross-ups after 2011 (CEO, CFO and SVP-HR have no such gross-up)
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*
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For
the definitions of Adjusted EBITDA and RONA, see "Compensation Discussion and Analysis Compensation Discussion and Analysis: In
Detail Key Elements of NEO Compensation Program Our Metrics Defined."
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2019 Target Total Compensation
The compensation and management development committee believes the majority of compensation should be composed of awards that are
performance-based with direct ties to the Company and individual employee performance. The significant majority of the target compensation of each named executive officer ("NEO")
is at-risk based on company performance.
The
following graphs illustrate the mix of total target direct compensation for our chief executive officer and for our other named executive officers for 2019:
AIP:
Annual Incentive Plan (annual bonus), cash settled
LTIP:
Long-Term Incentive Plan, denominated in equity
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PROPOSAL 1: ELECTION OF DIRECTORS
DIRECTOR NOMINEES
Our directors are elected each year for one-year terms expiring at the next annual meeting of shareholders. The Board has nominated the eleven directors named
in this Proxy Statement for re-election at the 2020 Annual Meeting. John D. Johnson will retire from the Board effective as of the date of the 2020 Annual Meeting and will not stand for re-election.
Each director elected at the 2020 Annual Meeting will serve a one-year term and until his or her successor is duly elected and qualified.
Each
nominee has consented to being named in this Proxy Statement and to serve if elected. If any nominee becomes unavailable to serve, an event that the Board does not presently expect, we will vote
the shares represented by proxies for the election of directors for the election of such other person as the Board may recommend. Unless otherwise instructed, we will vote all proxies we receive FOR
the directors listed below.
Majority Vote Standard for Election of Directors
Our directors are elected by a majority of the votes cast in uncontested elections (the number of shares voted "for" a director nominee must exceed the number
of votes cast "against" that director nominee). An "uncontested election of directors" means an election of directors in which, as of the date that is fourteen days in advance of the date we file our
definitive proxy statement with the Securities and Exchange Commission ("SEC"), the number of nominees for election does not exceed the number of directors to be elected by the shareholders at that
election. In a contested election (a situation where the number of nominees for election exceeds the number of directors to be elected), the standard for election would be a plurality of the shares
represented in person or by proxy at any such meeting and entitled to vote on the election of directors.
Director Resignation Policy
In accordance with procedures set forth in the company's corporate governance guidelines, any incumbent director (including the eleven nominees standing for
election at the Annual Meeting) who fails to receive a majority of votes cast in an
uncontested election will be required to tender his or her resignation for consideration by the company's corporate governance and nominating committee. The corporate governance and nominating
committee will consider the resignation and, within 45 days following the date of the applicable annual meeting, make a recommendation to the Board concerning the acceptance or rejection of the
resignation. The Board will then take formal action on the corporate governance and nominating committee's recommendation no later than 90 days following the date of the annual meeting.
Following the Board's decision on the committee's recommendation, we will publicly disclose the Board's decision, together with an explanation of the process by which the decision was made and, if
applicable, the Board's reason or reasons for rejecting the tendered resignation.
DIRECTOR SUCCESSION PLANNING AND NOMINATION PROCESS
The Board is responsible for nominating members for election to the Board and for filling vacancies on the Board that may occur between annual meetings of
shareholders. The corporate governance and nominating committee is responsible for identifying, screening, and recommending candidates to the Board for Board membership.
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Regular Assessment of our Board Composition and Succession Planning
The chairman of the board and chair of the corporate governance and nominating committee lead an active process to regularly review the overall composition of
the Board and each Board committee and assess whether each reflects the appropriate mix of experience, qualifications, attributes, and skills that are relevant to CF Industries' current and future
global strategy, business, and governance. Board composition and succession planning is a standing item on the calendar for corporate governance and nominating committee meetings each year. The review
process incorporates the results of the annual Board and committee performance and skills self-assessment processes described under the heading "Corporate Governance Annual Board
and Committee Self-Evaluations and Director Peer Evaluations" in assessing and determining whether any gaps in experience, qualifications, attributes, and skills exist and the characteristics and
critical skills required of prospective candidates for election to the Board.
In
order to maintain a Board with an appropriate mix of experience and qualifications and to permit time for orientation, the succession planning process generally considers the development of the
Board over the next five year time horizon. In the case of an anticipated change in the composition of the Board, whether as a result of a retirement consistent with our general aged-based retirement
policy described below or otherwise, the Board generally prefers to recruit and add new directors such that there is time for the new directors to learn in detail our strategy, business, and
governance sufficiently in advance of expected departures. The Board has also concluded that the appropriate number of directors is generally no fewer than eight nor more than twelve. The Board
believes this range permits diversity of experience without hindering effective discussion or diminishing individual accountability. Therefore, the Board attempts to coordinate director additions and
departures to maintain this size while allowing orientation time for new members as discussed above. Consistent with this process, the Board has added six new independent members over the past six
years (Ms. Wagler in 2014, Ms. Noonan in 2015, Messrs. Eaves and Toelle in 2017, and Messrs. Ahmed and White in 2018), and three independent directors will retire or have
retired over the past three years (Mr. John D. Johnson will retire as of the date of the 2020 annual meeting and Messrs. Robert G. Kuhbach and Edward A. Schmitt retired in 2018). Given
our general aged-based retirement policy described below, in addition to Mr. Johnson, at least two more of our current directors are expected to retire within the next three years. In order to
coordinate this refreshment in accordance with the Board's intention to allow orientation time for new directors while maintaining the benefit of departing director's experience, the Board expects
these additional two current directors will retire over the course of the next two annual meetings.
Identifying and Evaluating Candidates for Director
The corporate governance and nominating committee generally identifies potential nominees by engaging third party search firms that specialize in identifying
director candidates. Current directors and executive officers may also notify the committee if they become aware of potential candidates, and the committee refers such persons to the third party
search firm to first evaluate whether the candidate meets the criteria for Board membership discussed below. The committee will also consider candidates recommended by shareholders as described below.
Once
a person has been identified by the corporate governance and nominating committee as a potential candidate, the committee may collect and review publicly available information regarding the
person to assess whether the person should be considered further. If the corporate governance and nominating committee determines that the candidate warrants further consideration, the committee chair
or another member of the committee will contact the person. Generally, if the person expresses a willingness to be considered and to serve on
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the
Board, the corporate governance and nominating committee will request information from the candidate, review the person's accomplishments and qualifications, including in light of any other
candidates that the committee might be considering, and conduct one or more interviews with the candidate. In certain instances, committee members may contact one or more references provided by the
candidate or may contact other members of the business community or other persons who may have greater first-hand knowledge of the candidate's accomplishments. The committee's evaluation process will
not vary based on whether or not a candidate is recommended by a shareholder, although, as stated below, the committee may take into consideration the number of shares held by the recommending
shareholder and the length of time that such shares have been held.
Recent Director Searches
As a result of our active succession planning and candidate evaluation processes, directors Ahmed, Eaves, Noonan, Toelle, Wagler and White were identified as
candidates and added to the Board over the last six years. Each of these independent directors brings important skills and experience to our company that have further strengthened and complemented our
Board. Each of these six individuals was recommended for consideration to the corporate governance and nominating committee by a third party search firm, and none of these six individuals was known to
our chairman of the board or chief executive officer prior to the candidate evaluation process.
Shareholder Recommendations of Director Candidates
The corporate governance and nominating committee will consider director candidates recommended by shareholders. In considering candidates submitted by
shareholders, the committee will take into consideration the needs of the Board and the qualifications of the candidate. To have a candidate considered by the committee, a shareholder must submit the
recommendation in writing and include the following information:
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the name of the shareholder and evidence of the person's ownership of our stock, including the number of shares owned and the length of time of
ownership; and
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the name of the candidate, the candidate's resume or a listing of his or her qualifications to be a director of CF Industries, and the person's
consent to be named as a director if selected by the committee and nominated by the Board.
The
shareholder recommendation and information described above must be sent c/o the corporate secretary to our principal executive offices at the address on the Notice of Annual Meeting accompanying
this Proxy Statement and must be received by the corporate secretary not less than 120 days prior to the anniversary date of our most recent annual meeting of shareholders.
Proxy Access
Our bylaws allow eligible shareholders to include their own nominees for director in our proxy materials along with the Board-nominated candidates. Subject to
applicable procedural and other requirements under our bylaws, the proxy access provisions of our bylaws permit any shareholder or group of up to 20 shareholders who have maintained continuous
qualifying ownership of 3% or more of our outstanding common stock for at least the previous three years to nominate and include in our proxy materials director nominees constituting not more than 25%
of the number of the directors in office at the time of the nomination.
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CRITERIA FOR BOARD MEMBERSHIP
Director Qualifications and Attributes
The corporate governance and nominating committee takes into consideration a number of factors and criteria in reviewing candidates for potential nomination
to the Board. The corporate governance and nominating committee believes that the minimum qualifications for serving as a director of CF Industries are that a nominee demonstrate, by significant
accomplishment in his or her field, an ability to make a meaningful contribution to the Board's oversight of our business and affairs and have an impeccable record and reputation for honest and
ethical conduct in both his or her professional and personal activities.
In
addition, the committee will examine a candidate's specific experiences and skills, relevant industry background and knowledge, time availability in light of other commitments, potential conflicts
of interest, material relationships with CF Industries, and independence from management and the company.
Diversity
Our corporate governance guidelines and corporate governance and nominating committee charter reflect the intention of the Board that the board of directors
represent a diversity of backgrounds. In accordance with the corporate governance and nominating committee charter and our corporate governance guidelines, the corporate governance and nominating
committee considers diversity in identifying nominees for director, including personal characteristics such as race, gender and age, and the experiences and skills relevant to the Board's performance
of its responsibilities in the oversight of the company. In furtherance of this objective, the corporate governance and nominating committee has determined that it will incorporate recruitment
protocols that seek to identify candidates in any future director search who meet these diversity characteristics. As discussed above, six new independent directors have joined our Board over the last
five years. These directors' experience and skills backgrounds include senior executive leadership (three sitting or retired chief executive officers, a sitting chief financial officer, and a global
supply chain executive) and two directors with expertise in agriculture. In terms of personal characteristics, these directors include two women, an African American, and a director of Asian origin
who lives in Europe and has dual citizenship in the US and UK.
Retirement Age
As set forth in the company's corporate governance guidelines, it is the general policy of the company that no director having attained the age of
74 years shall be nominated for re-election or reappointment to the Board. However, the Board may determine to waive this policy in individual cases.
Director Tenure
To ensure that the Board maintains an appropriate balance of experience, continuity, and an openness to new ideas and a willingness to critically re-examine
the status quo, the corporate governance and nominating committee considers the issue of continuing director tenure in connection with each director nomination recommendation.
Three
director nominees, comprising 27% of the nominees, have served more than 10 years and three director nominees, comprising 27% of the nominees, have served between 5 and 10 years.
These directors bring a wealth of experience and knowledge concerning CF Industries.
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The
remaining five director nominees, comprising 46% of the nominees, have joined the Board over the past five years and bring fresh perspective to Board deliberations.
Service on Other Public Company Boards
The company recognizes the substantial time commitments attendant to Board membership and expects that the members of our Board be fully committed to devoting
all such time as is necessary to fulfill their Board responsibilities, in terms of both preparation for and attendance and participation at meetings. Accordingly, directors should generally not serve
on more than three other public company boards. A director who also serves as the chief executive officer or named executive officer of a public company generally should not serve on the board of more
than one other public company.
In
addition, in recognition of the enhanced time commitments associated with membership on a public company's audit committee, the Board has adopted a policy that no member of the audit committee may
serve simultaneously on the audit committees of more than two other public companies unless the Board determines that such simultaneous service would not impair the ability of such director to
effectively serve on the company's audit committee.
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Summary of Director Core Competencies
We consider the depth and diversity of experience on our Board a key strength. Our eleven director nominees offer a diverse set of qualifications and
perspectives and possess a wealth of leadership and professional experience. As discussed under the heading "Corporate Governance Annual Board and Committee Self-Evaluations and
Director Peer Evaluations," the chair of our corporate governance and nominating committee sponsors an annual self-assessment of director skills and experience in which each director ranks the
importance of various business experiences, qualifications, attributes, and skills and rates the director's competency level in the skills. The following table summarizes experiences and skills that
we have identified as key to our current and future global strategy, business, and governance.
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Public Company Governance
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A deep understanding of the Board's duties and responsibilities enhances board effectiveness and ensures independent oversight that is aligned with shareholder interests.
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Senior Executive Leadership
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We believe that directors who have served as CEOs or senior executives are in a position to challenge management and contribute practical insight into business strategy and operations.
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Operations
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As a global manufacturing and distribution company, we benefit from the experience of our directors who have served in senior executive roles of global manufacturing companies.
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Accounting and Finance Expertise
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A strong understanding of accounting and finance is important for ensuring the integrity of our financial reporting and critically evaluating our performance. Our directors have significant accounting experience and
corporate finance expertise.
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Industry Focus
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As one of the world's largest manufacturers and distributors of nitrogen fertilizer and other nitrogen products, we seek directors who are knowledgeable about the chemical, energy, and agriculture industries. These
directors help guide the company in assessing trends and external forces in these industries.
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International Business
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Directors with international business experience help us as we develop and grow our international manufacturing operations and global product distribution.
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Strategic Initiatives
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Experience with major strategic initiatives, including mergers and acquisitions, divestitures, joint ventures and partnerships, substantial capital projects, and integration helps our company identify, pursue and
consummate the right major initiatives that achieve our strategic objectives and realize synergies and optimal growth.
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Risk Management
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Directors with significant risk oversight and management experience provide valuable insight as we make decisions on our strategic plan.
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Environmental & Safety
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As core values, we put safety first and act as stewards for the environment. We take guidance from our directors who have served in executive or operating positions at industrial manufacturing companies.
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The
following chart summarizes the competencies represented by our director nominees; the details of each director's competencies are included in each director's biography.
BOARD RECOMMENDATION
In connection with the Annual Meeting and in accordance with the above guidelines, the corporate governance and nominating committee recommended that the
Board nominate the eleven directors named in this Proxy Statement for re-election to the Board. The Board believes these nominees provide CF Industries with the combined depth and breadth of skills,
experience and qualities required to contribute to an effective and well-functioning Board. Our eleven director nominees offer a diverse set of qualifications and perspectives and possess a wealth of
leadership and professional experience in areas relevant to our current and future global strategy, business, and governance.
The Board unanimously recommends that you vote FOR the election of the nominees presented in Proposal 1.
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DIRECTOR NOMINEE BIOGRAPHIES
The following is biographical information about each of our director nominees, and highlights the particular experiences, qualifications, attributes, and
skills possessed by each director nominee that led the Board to determine that he or she is qualified to serve as a public company director and that he or she should serve as member of our Board. All
director nominee biographical information is as of April 8, 2020.
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Javed Ahmed
Javed Ahmed served as chief executive officer of Tate & Lyle PLC, a British-headquartered, global provider of solutions and
ingredients for food, beverage and industrial markets with facilities and offices in over 30 locations worldwide and whose products are sold or distributed in over 120 countries, from October 2009 until April 2018. Prior to this role, he spent
17 years with Benckiser NV (later Reckitt Benckiser Group plc), a leading consumer products group, in a number of senior roles. He began his career with Procter & Gamble before spending five years with Bain & Co.
Qualifications
As the former chief executive officer of Tate & Lyle PLC, Mr. Ahmed brings public company initiative, governance, agriculture and food industry focus, international business, strategic initiative, risk management and environmental
and safety expertise to the Board.
Other Public Company Directorships (within the past 5 years)
Tate & Lyle PLC (October 2009 April
2018)
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Age
60
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Tenure
2
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CF Committees
Corporate
governance and nominating
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Qualifications
Public
Company Governance
CEO
Agriculture and Food
Industry
International
Business
Strategic
Initiatives
Risk Management
Environmental &
Safety
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Robert C. Arzbaecher
Robert C. Arzbaecher served as chief executive officer of Actuant Corporation, a diversified manufacturer and marketer of
industrial products and systems with operations in more than 30 countries, from 2000 until January 2014 and as interim president and chief executive officer of Actuant from August 2015 until March 2016. He served as a director of Actuant from 2000
until January 2017 and as chairman of the board of Actuant from 2001 until March 2016. From 1992 until 2000, he held various financial positions with Applied Power, Inc., Actuant's predecessor, the most recent of which was chief financial
officer. Prior to 1992, Mr. Arzbaecher held various financial positions with Grabill Aerospace, Farley Industries, and Grant Thornton, a public accounting firm. Mr. Arzbaecher is a certified public accountant and he is also a director of
Fiduciary Management, Inc. mutual funds.
Qualifications
As the former chairman and chief executive officer of Actuant, Mr. Arzbaecher brings public company governance, international business, strategic initiative, and risk management expertise to the Board. As a certified public accountant who has
served as a financial executive, he is an "audit committee financial expert" within the meaning of SEC rules.
Other Public Company Directorships (within the past
5 years)
Actuant
Corporation (2000 Jan. 2017) (Chairman from 2001 Mar. 2016)
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Age
60
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Tenure
14
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CF Committees
Audit
Corporate governance and
nominating (Chair)
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Qualifications
Public
Company Governance
CEO
Accounting and Finance
Expertise
International
Business
Strategic
Initiatives
Risk
Management
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Table of Contents
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William Davisson
William Davisson served as chief executive officer of GROWMARK, Inc., a large agricultural cooperative system providing
agronomy, energy, facility planning, and logistics products and services, as well as grain marketing and risk management services, in the United States and Canada, from 1998 through 2010. He worked in the GROWMARK system his entire career, from 1970
through 2010, and the positions he held prior to becoming to chief executive officer included chief financial officer and vice president, member services. GROWMARK was an owner of our predecessor company before our initial public offering ("IPO") in
August 2005, and GROWMARK remains one of our largest customers. From 1998 to 2005, Mr. Davisson served as a director of our predecessor company and as chairman of its board from 2002 to 2004. Mr. Davisson is a certified public accountant.
Qualifications
As the former chief executive officer and chief financial officer of GROWMARK, Mr. Davisson brings accounting and finance, agriculture industry, strategic initiative and risk management expertise to the Board. Mr. Davisson has a deep
understanding of our business, as demonstrated by his more than 20 year association with our company. Mr. Davisson is a certified public accountant with substantial executive experience in risk management and he is an "audit committee
financial expert" within the meaning of SEC rules.
Other Public Company Directorships (within the past 5 years)
None
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Age
72
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Tenure
14
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CF Committees
Audit
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Qualifications
CEO
Accounting and Finance
Expertise
Agriculture
Industry
Strategic
Initiatives
Risk
Management
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John W. Eaves
John W. Eaves has served as president and chief executive officer of Arch Coal, Inc., a top coal producer for the global steel and
power generation industries, since 2012 and has been a member of its board of directors since 2006. He has more than 30 years of experience in the coal industry. During his tenure with Arch Coal, he has held positions of president and chief
operating officer; senior vice president of marketing; and vice president of marketing and president of Arch Coal Sales, the company's marketing subsidiary. Mr. Eaves joined Arch Coal in 1987 after serving in various marketing-related positions
at Diamond Shamrock Coal Company and Natomas Coal Company. He serves on the boards of the National Association of Manufacturers and the National Mining Association. On January 11, 2016, Arch Coal filed a voluntary petition for reorganization
under the provisions of Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Missouri. On October 5, 2016, Arch Coal's reorganization plan became effective and it emerged from
Chapter 11.
Qualifications
As the president and chief executive officer and former chief operating and marketing officer of Arch Coal, Mr. Eaves brings substantial energy industry, operations, strategic initiative, and environmental and safety expertise to the Board.
Mr. Eaves has extensive experience in riskmanagement and accounting and finance expertise through his active supervision of those performing financial accounting and reporting at Arch Coal and he is an "audit committee financial expert" within
the meaning of SEC rules.
Other Public Company Directorships (within the past 5 years)
Arch Coal (2006 present)
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Age
62
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Tenure
3
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CF Committees
Audit
Corporate governance and
nominating
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Qualifications
Public
Company Governance
CEO
Operations
Accounting and Finance Expertise
Energy Industry
Strategic Initiatives
Risk Management
Environmental &
Safety
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Stephen A. Furbacher
Stephen A. Furbacher served as president and chief operating officer of Dynegy Inc., a provider of wholesale power,
capacity, and ancillary services to utilities, cooperatives, municipalities, and other energy companies, from August 2005 until December 2007. Prior to that, he served as executive vice president of Dynegy's previously owned natural gas liquids
business segment, which was engaged in the gathering and processing of natural gas and the fractionation, storage, transportation, and marketing of natural gas liquids, from September 1996 to August 2005. Mr. Furbacher joined Dynegy in May 1996,
just prior to Dynegy's acquisition of Chevron's midstream business. Before joining Dynegy, he served as president of Warren Petroleum Company, the natural gas liquids division of Chevron U.S.A. Mr. Furbacher began his career with Chevron in
August 1973 and served in positions of increasing responsibility before being named president of Warren Petroleum Company in July 1994. Mr. Furbacher serves as chief executive officer and president of GTBC, LLC, which operates Grand Teton
Brewing Company.
Qualifications
Mr. Furbacher brings substantial senior executive leadership, refinery and petro-chemical operations, energy industry, public company governance and strategic initiative expertise to the Board as a result of his leadership positions at Dynegy,
Warren Petroleum, and Chevron.
Mr. Furbacher has extensive experience with risk management and environmental and safety matters.
Other Public Company Directorships (within the past 5 years)
None
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Age
72
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Tenure
12
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Chairman of the Board and Lead Independent Director
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CF Committees
Corporate
governance and nominating
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Qualifications
Public
Company Governance
COO
Operations
Energy Industry
Strategic Initiatives
Risk Management
Environmental & Safety
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Stephen J. Hagge
Stephen J. Hagge served as president and chief executive officer of AptarGroup, Inc., a leading global supplier of a broad
range of innovative dispensing systems for the beauty, personal care, home care, prescription drug, consumer health care, injectables, food and beverage markets with manufacturing facilities in North America, Europe, Asia and Latin America, from 2012
until January 2017 and as special advisor to the chief executive officer from February 2017 to March 2017. He served as chief operating officer of AptarGroup from 2008 to 2011, as chief financial officer of AptarGroup from 1993 to 2011 and as an
executive vice president and secretary of AptarGroup from 1993 to 2011. Mr. Hagge served as a director of AptarGroup from 2001 to 2019 and as a director of Crown Holdings Inc. since 2019. He is also a member of the board of directors of
Transcendia Topco Holdings, Inc., a privately held specialty package company, since 2018.
Qualifications
Through his experience as a director, chief executive officer, chief financial officer, and chief operating officer of AptarGroup, Mr. Hagge brings substantial public company governance, operations, international business, strategic initiative,
and risk management expertise to the Board. Mr. Hagge has served as a financial executive and is an "audit committee financial expert" within the meaning of SEC rules.
Other Public Company Directorships (within the past 5 years)
AptarGroup (2001 2019)
Crown Holdings Inc. (2019 Present)
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Age
68
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Tenure
9
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CF Committees
Audit
Compensation and management
development (Chair)
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Qualifications
Public
Company Governance
CEO
Operations
Accounting and Finance Expertise
International Business
Strategic Initiatives
Risk Management
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Table of Contents
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Anne P. Noonan
Anne P. Noonan has served as president and chief executive officer and as a director of OMNOVA Solutions Inc., a global provider of
emulsion polymers, specialty chemicals, and engineered surfaces for a variety of commercial, industrial, and residential end uses with manufacturing, technical, and other facilities located in North America, Europe, China, and Thailand, since
December 2016. She previously served as OMNOVA's president, performance chemicals, from 2014 until December 2016. Ms. Noonan previously held several positions of increasing responsibility with Chemtura Corporation, a global specialty chemicals
company, from 1987 through 2014, including most recently as senior vice president and president of Chemtura's Industrial Engineered Products business and Corporate Development function. She serves on the boards of the American Chemistry Council and
the Greater Cleveland Partnership.
Qualifications
As the president and chief executive officer of OMNOVA Solutions and previous executive operating positions at both OMNOVA Solutions and Chemtura Corp., Ms. Noonan brings public company governance, operations, chemical industry, international
business, strategic initiative, and environmental and safety expertise to the Board. Ms. Noonan has extensive experience in risk management and accounting and finance expertise through her active supervision of those performing financial
accounting and reporting at OMNOVA Solutions.
Other Public Company Directorships (within the past 5 years)
OMNOVA Solutions (Dec. 2016 Present)
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Age
56
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Tenure
4
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CF Committees
Compensation and management development
Corporate governance and nominating
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Qualifications
Public
Company Governance
CEO
Operations
Accounting and Finance Expertise
Chemical Industry
International Business
Strategic Initiatives
Risk Management
Environmental &
Safety
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Michael J. Toelle
Michael J. Toelle is the owner of T & T Farms, a diversified farming company. He has been a member of the board of
Nationwide Mutual Insurance Company, one of the largest insurance and financial services companies in the world, since 2013. He is a former board chairman and longtime board member of CHS. He also served as a board member for Cenex, Inc., before
it merged with Harvest States Cooperatives to create CHS in 1998. Mr. Toelle is past chairman of the CHS Foundation and previously served as a director for the Agricultural Council of America and Country Partners Cooperative. He is a member of
the National Association of Corporate Directors.
Qualifications
As the owner and operator of a major diversified farming company, a director of Nationwide Mutual Insurance Co. and former chairman and director of CHS, Mr. Toelle brings agricultural industry, operations, strategic initiative, risk
management, and environmental and safety expertise to the Board.
Other Public Company Directorships (within the past 5 years)
None
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Age
57
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Tenure
3
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CF Committees
Compensation and management development
Corporate governance and nominating
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Qualifications
Operations
Agriculture Industry
Strategic Initiatives
Risk Management
Environmental & Safety
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Table of Contents
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Theresa E. Wagler
Theresa E. Wagler has served as chief financial officer and executive vice president of Steel Dynamics, Inc., one of the
largest domestic steel producers and metals recyclers in the United States, since 2007 and 2009, respectively. She serves as Steel Dynamics' principal accounting officer and also has oversight responsibility for company-wide safety, human resources,
business development and strategy, and two operating joint ventures. She has held various positions of increasing responsibility since joining Steel Dynamics in 1998. Prior to joining Steel Dynamics, she served as assistant corporate controller for
Fort Wayne National Bank and as a certified public accountant with Ernst & Young LLP.
Qualifications
With her roles and responsibilities at Steel Dynamics, Ms. Wagler brings substantial public company governance, operations, accounting and finance, strategic initiative, risk management and environmental and safety expertise to the Board.
Ms. Wagler is a certified public accountant and an "audit committee financial expert" within the meaning of SEC rules.
Other Public Company Directorships (within the
past 5 years)
None
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Age
49
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Tenure
5
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CF Committees
Audit
(Chair)
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Qualifications
Public
Company Governance
CFO
Operations
Accounting and Finance Expertise
Strategic Initiatives
Risk Management
Environmental &
Safety
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Celso L. White
Celso L. White served as global chief supply chain officer at Molson Coors Brewing Company, one of the largest global brewers with
breweries in the United States, Canada, Europe and India and worldwide distribution, from January 2013 to December 2019. From September 2010 to January 2013, he was vice president of international supply chain at Molson Coors. Prior to joining Molson
Coors, he was Pepsi Cola's vice president and general manager of Concentrate Operations, responsible for the Americas and parts of Asia from 2004 to 2010. In January 2020, Mr. White co-founded Igniting Business Growth LLC, a consultancy
business. Mr. White serves on the board of Colorado UpLift based in Denver, Colorado and is a member of the Bradley University Board of Trustees.
Qualifications
As the global chief supply chain officer at Molson Coors Brewing Company, Mr. White was responsible for all aspects of the supply chain from grain fields to finished product retailer distribution, including procurement; operations; planning;
logistics and distribution; environmental health and safety; engineering; and technical innovation. Mr. White brings operational, agricultural industry, international business, strategic initiative, risk management and environmental and safety
expertise to the Board.
Other Public Company Directorships (within the past 5 years)
None
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Age
58
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Tenure
2
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CF Committees
Compensation and management development
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Qualifications
Global
Chief Supply Chain Officer
Operations
Agriculture Industry
International Business
Strategic Initiatives
Risk Management
Environmental & Safety
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Table of Contents
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W. Anthony Will
W. Anthony Will has served as our president and chief executive officer and as a member of the Board since January 2014. He was
previously our senior vice president, manufacturing and distribution, from January 2012 to January 2014, our vice president, manufacturing and distribution, from March 2009 to December 2011, and our vice president, corporate development, from April
2007 to March 2009. Mr. Will has also served in the comparable officer positions with Terra Nitrogen GP Inc. ("TNGP") as he held with CF Industries from April 2010 to April 2018. TNGP was our indirect, wholly-owned subsidiary and the
sole general partner of Terra Nitrogen Company, L.P., a publicly-traded producer of nitrogen fertilizer products. In April 2018, we purchased all of the publicly traded common units of Terra Nitrogen Company, L.P. Mr. Will served as a
director of TNGP from June 2010 until February 2016 and as chairman of the board of TNGP from January 2014 to February 2016. Before joining CF Industries, Mr. Will was a partner at Accenture Ltd., a global management consulting, technology
services, and outsourcing company. Earlier in his career, he held positions as vice president, business development at Sears, Roebuck and Company and vice president, strategy and corporate development at Fort James Corporation. Prior to that,
Mr. Will was a manager with the Boston Consulting Group, a global management consulting firm.
Qualifications
As the president and chief executive officer of CF Industries and with his previous executive operations and corporate development positions, Mr. Will brings public company governance, operations, fertilizer and chemical industry, international
business, strategic initiative, and environmental and safety expertise to the Board. Mr. Will has extensive experience in risk management and accounting and finance expertise through his active supervision of those performing those functions at
CF Industries.
Other Public Company Directorships (within the past 5 years)
Terra Nitrogen Company, L.P. (2010 Jan. 2017)
(Chairman from 2001 Mar. 2016)
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Age
54
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Tenure
6
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CF Committees
None
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Qualifications
Public
Company Governance
CEO
Operations
Accounting and Finance Expertise
Fertilizer / Chemical
Industry
International
Business
Strategic
Initiatives
Risk Management
Environmental &
Safety
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Table of Contents
CORPORATE GOVERNANCE
CF Industries is committed to implementing sound corporate governance practices that enhance the effectiveness of the Board and our management
and that serve the interests of our shareholders. Our corporate governance and nominating committee periodically reviews corporate governance developments and best practices along with our
policies and business strategies. The committee advises the Board and management in an effort to strengthen existing governance practices and develop new policies that make CF Industries a better
company. We are proud of the steps we have taken and the progress we have made to further strengthen our corporate governance practices and demonstrate our responsiveness to shareholder concerns.
CORPORATE GOVERNANCE GUIDELINES
The Board has adopted corporate governance guidelines to document its overall management governance philosophy. According to these guidelines, the business
and affairs of CF Industries shall be managed by or under the direction of the Board. The Board's goal is to build long-term value for our shareholders and assure the vitality of the company for our
customers and employees and the other individuals and organizations who depend on us. A copy of our corporate governance guidelines is available to shareholders at our corporate website, www.cfindustries.com, or by writing to our corporate secretary at the address of our principal executive offices on the Notice of Annual Meeting
accompanying this Proxy Statement.
DIRECTOR INDEPENDENCE
The experience and diversity of our directors has been, and continues to be, critical to our success. Our corporate governance guidelines require that the
Board be composed of at least a majority of directors who qualify as independent directors under the listing standards of the New York Stock Exchange (the "NYSE"). Additionally, in accordance with
NYSE listing standards, the members of our audit, compensation, and corporate governance and nominating committees must be independent. The Board has made an affirmative determination that all eleven
of our non-employee directors have no material relationship with CF Industries or any of its subsidiaries (other than being a director and shareholder of CF Industries) and, accordingly, meet the
applicable requirements for "independence" set forth in the NYSE's listing standards.
LEADERSHIP OF THE BOARD
Separate Independent Board Chairman and Chief Executive Officer
The Board has determined that the most effective leadership structure is to maintain an independent Board chair role separate from the chief executive
officer. In making this determination, the Board takes into account a number of factors, including (1) that separating these positions allows our Board chairman to focus on the Board's role of
providing advice to, and independent oversight of, management and (2) the time and effort our chief executive officer needs to devote to the management and operation of CF Industries and the
development and implementation of our business strategies. Although our governance documents provide the Board with the flexibility to select the leadership structure in the way that it deems best for
CF Industries at any given point in time, the Board intends to continue to maintain an independent Board chair separate from the chief executive officer. In addition, according to our corporate
governance guidelines, if the chairman of the Board is not an independent director, our independent directors will designate one of their number to serve
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Table of Contents
as
a lead independent director. Otherwise, if the chairman of the Board is an independent director, he or she will serve as the lead independent director.
Stephen
A. Furbacher has served as our lead independent director since 2010 and as Board chairman since May 2014. Mr. Furbacher was selected by the directors to serve as chairman because of his
contributions to the leadership of the Board. Because Mr. Furbacher is an independent director, he continues to serve as our lead independent director. The lead independent director's duties
include (i) coordinating the activities of the independent directors, (ii) coordinating the agenda for and moderating sessions of the independent directors, and (iii) facilitating
communications between the other members of the Board. Unless otherwise provided in a short-term succession plan approved by the Board:
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in the event that our chief executive officer should unexpectedly become unable to perform his or her duties, the chairman of the Board (if the
chairman is an independent director or else the lead independent director) shall allocate the duties of the chief executive officer among our other senior officers; and
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in the event that the chairman of the Board should unexpectedly become unable to perform his or her duties, the chief executive officer (if the
chairman of the Board is an independent director or else the lead independent director) shall temporarily assume the duties of the chairman of the Board,
in
each case, until the Board has the opportunity to consider the situation and take action.
Executive Sessions
At each regularly scheduled meeting, the Board conducts executive sessions, which are discussions that involve only the non-employee directors. Our corporate
governance guidelines state that the lead independent director or, in such director's absence, another independent director designated by the lead independent director will preside at the executive
sessions of the Board.
Annual Board and Committee Self-Evaluations and Director Peer Evaluations
Our corporate governance and nominating committee sponsors an annual self-assessment of the Board's performance and the performance of each committee of the
Board as well as director peer evaluations. The assessment includes a review of any areas in which the Board believes the Board can make a better contribution to CF Industries. In addition, the chair
of the corporate governance and nominating committee sponsors an annual self-assessment of director skills and experience. The assessment asks each director to rank the importance of various business
experiences, qualifications, attributes, and skills to our current and future global strategy, business, and governance and to rate the director's competency level in the skills. The results of the
assessments are discussed with the full Board and each committee. The corporate governance and nominating committee considers the results of these self-evaluation processes as applicable in assessing
and determining the characteristics and critical skills required of prospective candidates for election to the Board and making recommendations to the Board with respect to assignments of Board
members to various committees.
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COMMITTEES OF THE BOARD
The Board has established three separate standing committees: the audit committee, the compensation and management development committee, and the corporate
governance and nominating committee. The Board has adopted written charters for each of these committees and copies of these charters are available to shareholders at our corporate website, www.cfindustries.com, or by writing to our corporate secretary at the address of our principal executive offices on the Notice of Annual Meeting
accompanying this Proxy Statement.
Audit
Committee. Our audit committee is a separately designated standing committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). The committee currently consists of Theresa E. Wagler (chair), Robert C. Arzbaecher, William Davisson, John W. Eaves, and Stephen J. Hagge. The Board has
affirmatively determined that all of the directors on the committee are independent under the corporate governance standards of the NYSE applicable to audit committee members. The Board has also
determined all of these directors are "audit committee financial experts," as defined by the SEC. The audit committee assists the Board in fulfilling its oversight responsibility for (1) the
integrity of our financial statements and financial reporting process and our systems of internal accounting and financial controls, (2) the performance of our internal audit function,
(3) the annual independent integrated audit of our consolidated financial statements and internal control over financial reporting, and (4) our compliance with legal and regulatory
requirements, including our disclosure controls and procedures. The duties and responsibilities of the audit committee include the engagement of our independent registered public accounting firm and
the evaluation of our accounting firm's qualifications, independence, and performance. The audit committee's report to shareholders appears elsewhere in this Proxy Statement.
Compensation
and Management Development Committee. Our compensation and management development committee currently consists of Stephen J. Hagge (chair), John D. Johnson,
Anne P. Noonan, Michael J. Toelle, and Celso L. White. The Board has affirmatively determined that all of the directors on the committee are independent under the corporate governance standards of the
NYSE applicable to compensation committee members. The Board has also determined that all of the members of the committee qualify as "non-employee directors," within the meaning of Rule 16b-3
promulgated under the Exchange Act, and "outside directors," within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). The
compensation and management development committee oversees our compensation and employee benefit plans and practices, including our executive compensation plans, director compensation plans, and
incentive-compensation and equity-based plans. In addition, the compensation and
management development committee supports the full Board with succession plans for the CEO, while overseeing and reviewing management's development, retention and succession planning for other key
executives and senior management. The compensation and management development committee's report to shareholders appears elsewhere in this Proxy Statement. Additional information regarding the
processes and procedures of the compensation and management development committee in recommending and determining compensation for our directors and executive officers is set forth below under the
heading "Compensation Discussion and Analysis."
Corporate
Governance and Nominating Committee. Our corporate governance and nominating committee currently consists of Robert C. Arzbaecher (chair), Javed Ahmed,
John W. Eaves, Stephen A. Furbacher, Anne P. Noonan, and Michael J. Toelle. The Board has affirmatively determined that all of the directors on the committee are independent under the corporate
governance standards of the NYSE. The corporate governance and nominating committee's responsibilities include identifying and recommending to the Board individuals qualified to serve as directors and
on committees of the Board; advising the directors with respect to the Board's composition, procedures, and committees; developing and recommending to the Board a set of corporate governance
principles; and overseeing the evaluation of the Board and the president and chief executive officer.
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ATTENDANCE OF DIRECTORS AT MEETINGS
Directors are expected to attend meetings of the Board and the committees on which they serve, as well as our annual meeting of shareholders. A director who
is unable to attend a meeting (which it is understood will occur on occasion) is expected to notify the chairman of the Board or the chair of the appropriate committee in advance of such meeting.
During
2019, the Board held seven meetings, our audit committee held nine meetings, our compensation and management development committee held five meetings, and our corporate governance and
nominating committee held four meetings. Each of our directors attended 75% or more of the combined total meetings of the full Board and the committees on which he or she served during 2019. All
twelve of our directors then in office attended the 2019 annual meeting, which was held on May 8, 2019.
BOARD OVERSIGHT OF STRATEGY AND RISK MANAGEMENT
Shareholders elect the Board to oversee management and to serve shareholders' long-term interests. Management is responsible for delivering on our strategy,
creating our culture, establishing accountability, and managing risk. The Board and its committees work closely with management to balance and align strategy, risk, corporate social responsibility,
and other areas while considering feedback from shareholders. Essential to the Board's oversight role is a transparent and active dialogue between the Board and its committees, and management. To
support that dialogue, the Board and its committees have access to, receive presentations from, and conduct regular meetings with our executive officers, other internal business and function leaders
and subject matter experts, as well as external experts and advisors.
Board Oversight of Strategy
One of the Board's primary responsibilities is reviewing and approving the strategy established by management and measuring our ability to execute it
successfully. Throughout the year, the Board and its committees provide oversight and guidance to management regarding our strategy, operating plans, and overall performance. While elements of
strategy are embedded in every regularly-scheduled meeting of the Board, the Board also dedicates at least one full day meeting each year to focus on our long-term business strategic planning. At all
of these reviews, the Board engages with our executive officers and other business leaders regarding business objectives, the competitive landscape, economic trends, and regulatory developments. At
meetings occurring throughout the year, the Board also assesses strategic initiatives, our budget and capital allocation plans, and performance for alignment to our strategy.
Board Oversight of Risk Management
Our management is responsible for establishing and maintaining systems to assess and manage the company's risk exposure, and the Board provides oversight in
connection with those efforts. In fulfilling its risk oversight role, the Board focuses on the adequacy of our risk management process and the effectiveness of our overall risk management system. In
addition, the Board routinely assesses policies and procedures in critical areas to ensure that the responsibilities and authority delegated to senior management
are appropriate from an operational and risk management perspective. The Board also receives regular reports from senior management addressing financial and operational risk exposure, including
monthly scorecards and quarterly dashboards that include financial metrics and safety and environmental statistics.
Our
management has established an enterprise risk management ("ERM") program that includes an annual assessment process that is designed to identify risks that could affect us and the achievement of
our objectives; to understand, assess, and prioritize those risks; and to
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facilitate
the implementation of risk management strategies and processes across the company that are responsive to the company's risk profile, business strategies, and specific material risk
exposures. The ERM program seeks to integrate consideration of risk and risk management into business decision-making throughout the company, including through the implementation of policies and
procedures intended to ensure that necessary information with respect to material risks is transmitted to senior executives and, as appropriate, to the Board or relevant committees.
The
Board administers its risk oversight function as a whole and through its committees. In accordance with its charter, the audit committee supports the Board in its oversight of the company's risk
management system and process by reviewing and discussing with the key members of management responsible for management of risk the guidelines and policies governing the ERM process, the key risks
identified in the ERM process, as well as the likelihood of occurrence and the potential impact assigned to those risks by management, and the risk mitigation strategies in each instance.
Our
Board and its committees are actively involved in the oversight of our strategy and processes to identify, assess, and address the risks and opportunities to our company associated with climate
change. Management provides the Board regular updates on these issues, including during the discussions at the Board meetings dedicated to reviewing our long-term business strategic plan, and as part
of management's review of the enterprise risk management process.
In
addition, the audit committee receives regular reports on the efficacy of our information security and technology risks (including cybersecurity) and related policies and procedures from our chief
information officer and other members of senior management who are tasked with monitoring cybersecurity risks.
The
other standing committees of the Board oversee management of risks relating to their respective areas of responsibility. The compensation and management development committee reviews risks
associated with the design and implementation of our compensation plans and
arrangements (see "Compensation Discussion and AnalysisCompensation and Benefits Risk Analysis" below). The nominating and corporate governance committee reviews risks related to our
governance structures and processes.
All
Board members are invited to attend every committee meeting, and Board members who do not attend a committee meeting receive information about committee activities and deliberations.
Culture, Management Development and Succession Planning
A core aspect of our culture is our commitment to developing talent and future leaders. At CF, leadership is the quality that drives our values and sets us
apart. To help foster leadership, the company developed a new set of leadership competencies that provide a common language for how to demonstrate leadership at every level of the organization. We
invest in extensive assessment, training and professional development opportunities for our employees. We view these types of development opportunities as being a key part of succession planning,
allowing us to grow a stronger company, today and in the future.
The
compensation and management development committee of the Board engages with senior management and human resources executives across a broad range of human capital management topics including
culture, succession planning and development, compensation, employee recruiting and retention, and diversity and inclusion.
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Our
Board plays an integral oversight role in talent development by recognizing the importance of succession planning for the CEO and other key executives at CF Industries. To assist the Board, the
chief executive officer prepares and distributes to the Board an annual report on succession planning for all senior officers of the company with an assessment of senior managers and their potential
to succeed the chief executive officer and other senior management positions. In addition, the chief executive officer prepares, on a continuing basis, a short-term succession plan which delineates a
temporary delegation of authority to certain officers of the company, if all or a portion of the senior officers should unexpectedly become unable to perform their duties.
BEYOND THE BOARDROOM
On-Site Visits to Nitrogen Manufacturing Facilities
Most Board and committee meetings are held on-site at our headquarters or near other CF facilities. Over the last five years our Board has visited our
nitrogen manufacturing facilities in Verdigris, Oklahoma; Yazoo City, Mississippi; Port Neal, Iowa; Donaldsonville, Louisiana; and Ince, United Kingdom. Locating the Board and committee meetings
on-site or near our headquarters or manufacturing locations allows our directors to deepen their understanding of the company and interact with on-site employees.
Director Orientation
All new members of the Board participate in the company's new director orientation program led by members of senior management. The new director orientation
program enables new members of the Board to quickly become active, knowledgeable and effective Board members. Orientation includes a visit to the company's corporate headquarters for a personal
comprehensive briefing by senior management on our business, financial position, strategic plans, significant financial, accounting and risk management issues, compensation practices, corporate
governance and key policies and our principal officers and internal and independent auditors as well as the roles and responsibilities of our directors. In addition, within a few months of joining our
Board, new directors visit one of our nitrogen manufacturing facilities to see our operations in person and learn about our manufacturing processes.
Continuing Education
All directors are encouraged to participate in outside continuing education programs to increase their knowledge and understanding of the duties and
responsibilities of directors and the company, regulatory developments and best practices. The Board materials for every corporate governance and nominating committee meeting include a schedule and
summary of upcoming relevant continuing education programs, sponsored by leading universities or other organizations, with any associated expenses to be reimbursed by the company. Directors who have
participated in such programs share their lessons and insights with other members of the Board. The company also provides continuing director education through individual speakers who make relevant
presentations in connection with in-person Board meetings, for our directors to stay current and knowledgeable about the company's industry, market and overall environment. The company's senior
management also monitors pertinent developments in business, corporate governance and issues pertaining to the company and the industries in which it participates and regularly shares articles,
reports and current events with directors. The corporate governance and nominating committee reviews the director education process to ensure the continuing education provided remains relevant and
helpful.
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Individual Discussions and Mentoring Management
Each year one or more members of the Board participates in our annual leadership conference for mid and senior-level management. This presents another
opportunity for our directors to share their advice and experience with management and to engage with high-potential individuals as they grow into greater leadership roles. Additionally,
high-potential employees join members of the Board for dinners prior to on-site Board and committee meetings. These dinners are designed to give directors the opportunity to engage
with employees directly and afford employees an opportunity to ask questions and get to know our directors.
SHAREHOLDER ENGAGEMENT
We believe that building positive relationships with our shareholders is critical to CF Industries' success. We value the views of, and regularly communicate
with, our shareholders on a variety of topics, such as our financial performance, corporate governance, executive compensation, corporate responsibility and sustainability, and related matters. As
discussed in "Compensation Discussion and AnalysisShareholder Engagement," we conduct shareholder outreach campaigns in the spring and fall. Management shares the feedback received from
shareholders with the Board. Our chairman, our committee chairs, and other members of the Board are available to participate in meetings with shareholders as appropriate. Requests for such a meeting
are considered on a case-by-case basis. Our engagement activities have resulted in valuable feedback that has contributed to our decision-making with respect to these matters. We welcome input and
feedback and look forward to continued engagement with our shareholders.
COMMUNICATIONS WITH DIRECTORS
The Board has established a process to receive communications from shareholders and other interested parties. Shareholders and other interested parties may
contact any member (or all members) of the Board, any Board committee, or any chair of any such committee by mail. To communicate with the Board, any individual director, or any group or committee of
directors, correspondence should be addressed to the Board or any such individual director or group or committee of directors by either name or title. All such correspondence should be sent c/o the
corporate secretary to our principal executive offices at the address on the Notice of Annual Meeting accompanying this Proxy Statement.
All
communications received as set forth in the preceding paragraph will be opened by the office of our general counsel for the sole purpose of determining whether the contents represent a message to
one or more of our directors and then forwarded promptly to each addressee. In the case of communications to the Board or any group or committee of directors, the office of the general counsel will
distribute copies of the contents to each director who is a member of the Board or of the group or committee to which the envelope or correspondence is addressed.
CORPORATE RESPONSIBILITY AND SUSTAINABILITY
Corporate responsibility and sustainability are inherent to our values and our "Do It Right" culture and an intrinsic part of our commitment to the
communities in which we live and work.
Code of Corporate Conduct
Our commitment to ethical behavior is captured in our code of corporate conduct, which was adopted by our Board. The code is applicable to all of our
directors, officers, and employees,
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all
of whom must acknowledge receiving and reading the code annually. We provide annual code of corporate conduct and anti-corruption training to all employees.
A
copy of our code of corporate conduct is available at our corporate website, www.cfindustries.com, or by writing to our corporate secretary at the
address of our principal executive offices on the Notice of Annual Meeting accompanying this Proxy Statement. We intend to disclose on our corporate website any amendment to any provision of the code
that relates to any element of the definition of "code of ethics" enumerated in Item 406(b) of Regulation S-K under the Exchange Act, and any waiver from any such provision granted to
our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.
Political Contributions Report
We prepare a semiannual Political Contributions Report listing CF Industries' political contributions. Each Political Contributions Report is posted on our
corporate website, www.cfindustries.com, and presented to the corporate governance and nominating committee. Additionally, the Political Contributions
Reports set forth the United States trade associations and other similar non-profit organizations to which the company annually pays dues of $20,000 or more and identify the portion of such dues that
is used for advocacy and/or political activities by those associations. The most recent Political Contributions Report and our code of corporate conduct, containing our corporate policies related to
political activities and contributions, lobbying and related matters, are currently available on our corporate website.
Charitable Contributions Report
We also prepare a semiannual Charitable Contributions Report listing CF Industries' charitable contributions that exceed $20,000. Each Charitable
Contributions Report is posted on our corporate website, www.cfindustries.com. Most of our philanthropic and social outreach initiatives are locally
based. This enables each of our facilities to address the unique needs and opportunities in their respective communities. In addition, the company contributes to organizations that impact global
sustainability, including the One Acre Fund, which supports smallholder farmers in Africa. In December 2019, the company announced that it was donating $1 million to the One Acre Fund as part
of a multiyear commitment to the organization in support of its tree planting program, which benefits smallholder farmers by, among other things, contributing to farmer income and farm soil health
while also counteracting land degradation.
Sustainability
CF Industries is a leader in an industry whose mission is fundamental to human survival: putting food on the world's table. By providing plant nutrients to
farmers, we feed the crops that feed the world and produce building blocks for a better life. We are proud of the role our company plays in fulfilling this increasingly challenging mission. We also
believe our company has an important role to play in addressing some of the most critical challenges of our time. As a company, we are confronting issues such as energy efficiency, resource use, and
economic growth. We prepare annual Corporate Sustainability Reports,
each of which is posted on our corporate website, www.cfindustries.com, and presented to the corporate governance and nominating committee. In response
to increased interest from the investment community and our commitment to transparency, we have also published an all-inclusive Global Reporting Initiative (GRI) report and an Environmental,
Social & Governance (ESG) Supplement that consolidates performance data. In our 2018 GRI report we expanded our disclosure to report on all standards for the first time. In addition, we
accelerated the publication date of our sustainability reports so that, beginning in 2020, our sustainability
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reports
will be published in tandem with our annual report, to better align the timing of our sustainability reporting with our financial reporting and to further integrate our business and
sustainability strategies.
Our
most recent Corporate Sustainability Report communicates our performance across fundamental environmental, health and safety, social, and other considerations. Our report includes information
regarding our carbon dioxide (CO2) equivalent emissions, which we report every year. It also discusses how we estimate that our products actually prevent and reduce more CO2
equivalent emissions than we generate. For example, land use is the leading cause of CO2 emissions in agriculture. Because our products increase yields substantially, farmers need less
land to grow the food the world population needs to survive. By increasing crop yields, we help limit the conversion of carbon-sequestering forests into farmland. Our products also reduce greenhouse
gas emissions from industrial processes. In addition, our diesel exhaust fluid (DEF) product helps substantially reduce nitrous oxide emissions of heavy-duty trucks and marine vessels while also
improving fuel efficiency.
Our
most recent Corporate Sustainability Report also discusses our partnership with The Nature Conservatory through which we seek to help improve soil health across the state of Iowa. The program,
called 4R Plus, is designed to increase awareness and understanding among Iowa's farmers and crop advisers of two important farming practices: (1) 4R Nutrient Stewardship, and
(2) conservation. 4R Nutrient Stewardship refers to the concept of applying the right nutrient source at the right rate, right time, and right place. The "Plus" in 4R Plus refers to a suite of
in-field and edge-of-field conservation practices that increase soil resiliency and help to keep nutrients on fields and out of adjacent water bodies. When implemented effectively, 4R Plus practices
will not only improve soil health and water quality, but also increase farmers' yields and bottom lines.
To
help spread 4R Plus awareness and understanding, CF and The Nature Conservancy developed a range of marketing materials and tools to spread the message as far as possible. Those materials are based
on extensive qualitative and quantitative research that showed that the key drivers to increased 4R Plus adoption by farmers moving forward are the economic benefits that come with 4R Plus practices
and farmers' desire to leave their land in the best condition for the next generation. More than 50 partners have joined the initiative since its formal launch in 2018, including state commodity
groups, agribusinesses, conservation organizations, government agencies, universities and others. In 2019, CF announced a second
three-year grant to The Nature Conservancy to grow the 4R plus campaign in Iowa and beyond. By the end of 2019, we had reached 90% of Iowa's farmers with 4R Plus messaging at least seven times.
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PROPOSAL 2: ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS ("SAY ON PAY")
Pursuant to Section 14A of the Exchange Act, our shareholders are entitled to an advisory (non-binding) vote to approve the
compensation of our named executive officers as disclosed in this Proxy Statement, including in the Compensation Discussion and Analysis (CD&A) beginning on page 42 and the Executive Compensation
tables and accompanying narrative discussion beginning on page 79. This proposal is commonly referred to as a "Say on Pay" proposal.
The
Board and the compensation and management development committee believe that the compensation of the named executive officers is appropriate for the company and in the best interests of our
shareholders over the long term. As discussed in more detail in the CD&A beginning on page 42, our compensation programs are intended to:
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align the interests of our officers with those of our shareholders,
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permit the company to remain competitive in the market for
highly qualified management personnel,
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provide appropriate incentives for attainment of both our short-term and long-term goals; and
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retain strong performers.
As
discussed in our CD&A under the heading "Executive Summary - Shareholder Engagement," we conducted extensive shareholder outreach both before and after our 2019 annual meeting. In these
conversations, the overwhelming majority of shareholders supported the design of our ongoing compensation program. We will continue to regularly review (along with outside compensation consultants)
our executive compensation programs to ensure alignment with our compensation philosophy, and we are committed to continuing our dialogue with shareholders so that we can be proactive in responding to
emerging industry trends and be responsive to shareholder dialogue.
Accordingly,
we are asking you to vote FOR the adoption of the following resolution:
"RESOLVED,
that the shareholders of CF Industries Holdings, Inc. approve the compensation of the CF Industries Holdings, Inc.'s named executive officers, as disclosed pursuant to the
compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and related narrative discussion."
As
an advisory vote, this proposal is not binding on the company. Although the vote is non-binding, the Board and the compensation and management development committee value the opinions of our
shareholders and will consider the outcome of the vote when making future compensation decisions for our named executive officers.
We
currently hold our advisory "Say on Pay" proposal every year. Therefore, the next advisory "Say on Pay" proposal will be held at our 2021 annual meeting. Shareholders will have an opportunity to
cast an advisory vote on the frequency of "Say on Pay" proposals at least every six years. We currently expect that the next advisory vote on the frequency of the "Say on Pay" proposals will occur at
the 2023 annual meeting of shareholders.
Board Recommendation
The Board unanimously recommends that you vote FOR the Say on Pay proposal.
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EXECUTIVE OFFICERS
Set forth below is certain biographical information for our executive officers other than Mr. Will (whose biographical information
appears above under the heading "Director Nominee Biographies"). Each of our executive officers, other than Mr. Hopkins, also served in the comparable officer positions with Terra
Nitrogen GP Inc. ("TNGP") as he or she has held with CF Industries from April 2010 until April 2018. TNGP was our indirect, wholly-owned subsidiary and the sole general partner of Terra
Nitrogen Company, L.P., a publicly-traded producer of nitrogen fertilizer products. In April 2018, we purchased all of the publicly traded common units of Terra Nitrogen Company, L.P.
The ages of our executive officers are as of April 8, 2020.
Douglas
C. Barnard (age 61) has served as our senior vice president, general counsel, and secretary since January 2012 and was previously our vice president,
general counsel, and secretary from January 2004 to December 2011. Mr. Barnard served as a director of TNGP from June 2010 to April 2018 and as chairman of the board of TNGP from February 2016
to April 2018. Prior to joining CF Industries in January 2004, Mr. Barnard had been an executive vice president and general counsel of Bcom3 Group, Inc., an advertising and marketing
communication services group. Earlier in his career Mr. Barnard was a partner in the law firm of Kirkland & Ellis LLP and, prior to that, was vice president, general counsel, and
secretary of LifeStyle Furnishings International Ltd., a manufacturer and distributor of residential furniture and decorative fabrics. He holds a B.S. degree from the Massachusetts Institute of
Technology ("M.I.T"), a J.D. degree from the University of Minnesota, and an M.B.A. degree from the University of Chicago. Mr. Barnard has also taught as a lecturer at the University of Chicago
Law School, and serves as a member of the M.I.T Corporation Development Committee.
Christopher
D. Bohn (age 52) has served as our senior vice president and chief financial officer since September 2019. He was previously our senior vice president,
manufacturing and distribution, from May 2016 to September 2019, our senior vice president, manufacturing, from January 2016 to May 2016, our senior vice president, supply chain, from January 2015 to
December 2015, our vice president, supply chain, from January 2014 to December 2014, our vice president, corporate planning, from October 2010 to January 2014 and our director, corporate planning and
analysis, from September 2009 to October 2010. Mr. Bohn served as a director of TNGP from February 2016 to April 2018. Prior to joining CF Industries, Mr. Bohn served as chief financial
officer for Hess Print Solutions from August 2007 to September 2009. Earlier in his career, Mr. Bohn was vice president global financial planning and analysis for Merisant
Worldwide, Inc. He holds a B.S. degree in finance from Indiana University and an M.M. degree (M.B.A.) from the Kellogg Graduate School of Management at Northwestern University.
Linda
M. Dempsey (age 56) has served as our vice president, public affairs, since March 2020. Prior to joining CF Industries, Ms. Dempsey served as vice
president, international economic affairs, for the National Association of Manufacturers from September 2012 to February 2020 where she represented the manufacturing sector on international trade,
investment, intellectual property and regulatory policies, legislation and agreements. Prior to the National Association of Manufacturers, Ms. Dempsey served as vice president for Emergency
Committee for American Trade from December 2000 to August 2012. Ms. Dempsey holds a B.A. in political science from The Pennsylvania State University and a J.D. degree from Boalt Hall School of
Law, University of California at Berkeley.
Bert
A. Frost (age 55) has served as our senior vice president, sales, market development, and supply chain, since May 2016. He was previously our senior vice
president, sales, distribution, and market development, from May 2014 to May 2016, our senior vice president, sales and
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market
development, from January 2012 to May 2014, and our vice president, sales and market development, from January 2009 to December 2011. Before joining CF Industries in November 2008,
Mr. Frost spent over 13 years with Archer Daniels Midland Company, where he served most recently as Managing DirectorInternational Fertilizer/Inputs from June 2008 to
November 2008 and DirectorFertilizer, Logistics and Ports Divisions, ADMBrazil from April 2000 to June 2008. Earlier in his career, Mr. Frost held positions of
increasing responsibility at Archer Daniels Midland and Koch Industries, Inc. He holds a B.S. degree from Kansas State University and he is a graduate of the Harvard Business School's Advanced
Management Program.
Richard
A. Hoker (age 55) has served as our vice president and corporate controller since November 2007. Mr. Hoker served as a director of TNGP from January
2014 to April 2018 and previously served as a director of TNGP from September 2010 to August 2011. Before joining CF Industries, Mr. Hoker spent over 11 years with Sara Lee Corporation,
where he
served most recently as vice president and controller from January 2007 to November 2007 and principal accounting officer from July 2007 to November 2007. Prior to being named controller,
Mr. Hoker held other financial management positions of increasing responsibility at Sara Lee. Prior to joining Sara Lee, Mr. Hoker was a member of the financial advisory services
consulting group at Coopers & Lybrand LLP in Chicago (now PricewaterhouseCoopers) and previously led teams in the firm's audit practice. Mr. Hoker holds a B.S. degree in
accounting from DePaul University and an M.B.A. degree in finance and accounting from the University of Chicago. He is a certified public accountant.
David
P. Hopkins (age 63) has served as our managing director, CF Fertilisers UK, since October 2015. He was previously our director, sales, from July 2010 to
October 2015. Mr. Hopkins was director of sales for Terra Industries, which was acquired by CF Industries, from September 2006 to July 2010 and director of industrial sales at Terra Nitrogen,
UK from January 1999 to September 2006. Mr. Hopkins has a degree in Agriculture from Reading University and a Diploma in Company Direction from the Institute of Directors in London.
Ashraf
K. Malik (age 54) has served as our senior vice president, manufacturing and distribution, since September 2019. He was previously our Vice President, Site
Operations, from January 2012 to September 2019. Prior to joining CF Industries, Mr. Malik served as director of manufacturing for GrowHow UK Ltd from 2007 to 2012. Earlier in his
career, Mr. Malik held positions of increasing responsibility in engineering and plant operations management at Terra Industries Inc. and ICI Plc. Mr. Malik holds a BSc
degree in engineering from City, University of London.
Susan
L. Menzel (age 54) has served as our senior vice president, human resources, since October 2017. Prior to joining CF Industries, Ms. Menzel served as
executive vice president, human resources, for CNO Financial Group, Inc. from May 2005 to October 2017. Prior to CNO Financial Group, she served as senior vice president, human resources for
APAC Customer Services, Inc., and in roles of increasing responsibility for Sears, Roebuck & Company and Montgomery Ward, Inc. Ms. Menzel holds a bachelor's degree in
business administration and economics from Augustana College.
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COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis discussion provides you with a detailed description of our compensation program for our named
executive officers (NEOs) for 2019. It also provides an overview of our compensation philosophy and our policies and programs, which are designed to achieve our compensation objectives.
NAMED EXECUTIVE OFFICERS
Our NEOs for 2019 were:
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Name
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Title
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W. Anthony Will
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President and Chief Executive Officer
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Christopher D. Bohn
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Senior Vice President and Chief Financial Officer
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Douglas C. Barnard
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Senior Vice President, General Counsel, and Secretary
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Bert A. Frost
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Senior Vice President, Sales, Market Development, and Supply Chain
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Susan L. Menzel
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Senior Vice President, Human Resources
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Dennis P. Kelleher
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Former Senior Vice President and Chief Financial Officer
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TABLE OF CONTENTS
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OVERVIEW OF OUR BUSINESS AND STRATEGY
Business Overview
CF Industries is a leading global fertilizer and chemical company with outstanding operational capabilities and a cost-advantaged production and distribution
platform. Our 3,000 employees operate world-class manufacturing complexes in Canada, the United Kingdom and the United States. Our customers include both agricultural and industrial users of our
products. Our principal nitrogen products are ammonia, granular urea, urea ammonium nitrate solution, and ammonium nitrate. We also manufacture diesel exhaust fluid, urea liquor, nitric acid, and aqua
ammonia, which are sold primarily to industrial customers, and compound fertilizer products, which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen,
phosphorus, and potassium. We serve our customers in North America through an unparalleled production, storage, transportation and distribution network. We also reach a global customer base with
exports from our Donaldsonville, Louisiana, plant, the world's largest and most flexible nitrogen complex. Additionally, we move product to international destinations from our Verdigris, Oklahoma,
facility, our Yazoo City, Mississippi, facility, our Billingham and Ince facilities in the United Kingdom, and a joint venture ammonia facility in the Republic of Trinidad and Tobago in which we own a
50 percent interest.
For
more information on our business, see "Item 1. Business" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations"
in our 2019 Annual Report.
Corporate Strategy
Our vision, given the cyclical nature of our business, is to deliver superior shareholder returns over the cycle. Our strategy, in support of our vision, is
built upon a foundation of distinct core capabilities and core values that we live each and every day. We leverage our capabilities to drive business results that create long-term value for our
shareholders.
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Roadmap for Sustainable, Profitable Growth through the cycle
We are well positioned to seize opportunities and meet challenges through the cycle because of our unique combination of enduring structural and operational
advantages.
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Consistent Demand Growth
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Nitrogen demand growth
driven by:
population growth and increased protein consumption per capita for agricultural applications
global GDP plus growth in
emissions abatement for industrial applications
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Tightening Global Supply and Demand Balance
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Net new nitrogen capacity
growth (new construction minus capacity closures) is below projected global demand growth for the foreseeable future (approximately four years based on time required to build new capacity) tightening the global supply and demand balance
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Advantaged Position on Global Cost Curve
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We are on the low end of
the global cost curve due to our access to low-cost and plentiful North American natural gas
Global price driven by marginal producers tied to higher-priced
liquefied natural gas, oil-linked natural gas and Chinese anthracite coal
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Primarily Operate in Import-Dependent Region
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North America is
dependent on nitrogen imports to meet demand
Price is set by the last imported ton bid into the region
Our manufacturing and distribution network, along with our logistics
capabilities, allow us to capture the significant margin between our cost and that of the global high-cost producer (including logistics to move products into consumption region)
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Inputs, Manufacturing and Select Product Overview
Modern nitrogen production begins with the production of ammonia through the Haber-Bosch chemical process. Ammonia is the most concentrated nitrogen
fertilizer product as it contains 82% nitrogen and is the "basic" nitrogen product that we upgrade into other nitrogen products such as granular urea, urea ammonium nitrate solution (UAN), ammonium
nitrate (AN), nitric acid and diesel exhaust fluid (DEF). We produce ammonia at all of our nitrogen manufacturing complexes using natural gas as the feedstock.
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Growth and Superior Utilization of Capacity Demonstrate Significant Operational Advantage
Our corporate strategy is to leverage our core capabilities to optimize and grow the world's most advantaged nitrogen and chemicals platform to serve
customers, creating long-term shareholder value. Beginning in 2012, the company underwent a major capital expansion program, adding capacity at two of our facilities. Both projects began ammonia
production in the second half of 2016. In total, the two expansions have increased our nitrogen production capacity by approximately 25%. In addition, during 2015, we acquired the 50% equity interest
in our UK facilities not previously owned by us, and during 2018, we invested in our production capacity by exercising our right to purchase all of the publicly traded common units of Terra Nitrogen
Company, L.P. As a result of these investments, we have grown our gross ammonia capacity by over 33% over the past five years.
Our
superior capacity utilization compared to North American peers demonstrates the significant operational advantage we enjoy as a result of our exceptional process engineering, plant operations and
maintenance capabilities.
North America Ammonia Percent Capacity Utilization(1)
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(1)
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Data taken from the December 20, 2019 CRU Ammonia Database
(2)CF represents CF historical North American production and CRU's capacity estimates for CF
(3)North
America Excl. CF is calculated by removing CF's annual reported production and capacity from the CRU data for all North American ammonia production peer group
(4)~1.1
million tons represents the difference between CF's actual trailing 5 year average ammonia production of 8.8 million tons at 96% of capacity utilization and the 7.7 million tons
CF's would have produced if operated at the 84% CRU North American benchmark excluding CF
Note:CRU
North American peer group includes AdvanSix, Austin Powder (US Nitrogen), BASF & Yara International, Carbonair, CF Industries, Chevron, CVR Partners, Dakota Gasification Co,
Dyno Nobel, Fortigen, Incitec Pivot, Koch Industries, LSB Industries, LSB Industries/Cherokee Nitrogen, Mississippi Power, Mosiac, Nutrien,
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OCI
N.V., RenTech Nitrogen, Shemitt International corp, Shoreline Chemical, Simplot, and Yara International
Financial Results are Impacted by Highly Cyclical Commodity Prices
Our financial results are significantly impacted by the pronounced effects of highly volatile commodity prices for fertilizer products as well as natural gas,
which is our principal feedstock. In 2015 and 2016, nitrogen product prices were lower and stayed at depressed levels longer than expected. Product prices remained volatile throughout 2017, and the
year ended with a meaningful decline in the pricing environment. As a result, our financial performance and corresponding incentive compensation programs were negatively impacted during 2015, 2016,
and 2017. During 2018, higher energy costs in Asia and Europe, along with continued enforcement of environmental regulations in China, resulted in lower nitrogen production, tightening supply and
demand conditions. In addition, outages at several producers also impacted the nitrogen supply and demand balance. These factors collectively drove global nitrogen prices higher in 2018 more rapidly
than anticipated, which combined with lower North American natural gas costs and efficient production by us contributed to stronger than projected financial results for the year and corresponding
above-target payout for our annual incentive program. Going into 2019, we expected industry fundamentals to continue to be supportive of global nitrogen prices in the first half of the year.
Gulf Urea Barge Historical Price Volatility
Annual Pricing vs. 10-Year Average1
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2019 Performance Highlights
Safety Is Our Priority
For CF, safety is more than just a requirement it is a point of pride and ingrained in our corporate culture and values. We believe that
focusing on leading indicators, such as the behavioral safety practices we have incorporated into our annual incentive plan to drive and measure activities that prevent and control safety incidents,
results in our industry-leading safety record. During 2019, we set an important company record with our trailing 12 month recordable injury rate of 0.48 for the twelve months ended
December 31, 2019 the lowest year-end rate we have ever achieved as a company. Set forth below is our annual total recordable injury count, recordable incident rate, and
lost time incident rate from 2011 through 2019. In addition to these metrics shown below, we also achieved our lowest DART (days away restricted or transferred) incident rate of 0.21 injuries per
200,000 work hours in 2019.
All Facilities Annual Injuries and Injury Rates
12-month Injury Rate and Total Injury Count; Through December for Current Year
Rates = Number of injuries per 200,000 work hours
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Operating Results
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Net Earnings
Attributable to
Common Stockholders
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Earnings Per
Diluted Share
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EBITDA(1)
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Net Cash Provided by
Operating Activities
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$493 Million
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$2.23
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$1.6 Billion
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$1.5 Billion
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Annual Incentive Plan Performance Metrics
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Adjusted EBITDA(2)
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Behavioral Safety
Gate Threshold
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Gross Ammonia
Production
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$1.6 Billion
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Achieved 98.7%
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10.2 Million Tons
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Target: $1.4 Billion
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Threshold: ³95%(3)
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Target: 10.0 Million Tons
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The
compensation and management development committee considers the previous year's financial performance, market trends and the company's annual business plan when setting goals and targets for our
incentive compensation programs at the end of each calendar year. Management prepares the company's annual business plan and reviews it in detail with the Board. Management prepares the annual
business plan through a rigorous process utilizing a combination of factors, including management's view of current industry conditions, recent historical performance, internal forecasts, as well as
external public market indicators.
Actual
results in 2019 exceeded the company's forecasts as product prices improved more than anticipated contributing to higher revenue and margins. During 2019, we also exceeded
our production goals in part due to our best-in-class operational capabilities that enable us to produce more product than other comparable manufacturers. At the same time, the cost of our principal
feedstock, natural gas, declined compared to the prior year and much more than the market expectations reflected in forward market curves when setting our business plan. This combination of a more
advantageous pricing environment, lower natural gas cost, and efficient production contributed to the above-target financial results, and therefore an above-target payout for the annual incentive
program.
Additionally,
the company continued to deliver against its strategic priorities and create long-term shareholder value.
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Safety
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As of December 31, 2019, the company's 12-month rolling average recordable incident rate was 0.48 incidents per 200,000 work hours an industry leading result
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Operational Excellence
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Long-term asset utilization-and-production is approximately 12 percent higher than the average utilization rate of our North American competitors
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Efficiency
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SG&A costs as a percent of sales remain among the lowest in both the chemicals and fertilizer industries
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Return to Shareholders
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Returned $602 million to shareholders through $337 million in share repurchases and $265 million in dividend payments
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Reduced Debt and Fixed Charges
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During 2019, we retired $750 million of outstanding indebtedness, reducing annual cash interest expense in 2020 by $44 million compared to 2019
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(1) EBITDA
is defined as net earnings attributable to common stockholders plus interest expense-net, income taxes and depreciation and amortization. See Appendix A for a
reconciliation of EBITDA to the most directly comparable GAAP measure.
(2) See
" Compensation Discussion and Analysis: In Detail Key Elements of NEO Compensation Program Our Metrics Defined" for the
definition of Adjusted EBITDA for purposes of our annual incentive plan.
(3) The
Secondary Metric, Tons of Ammonia Produced, has a behavioral safety gate threshold. If at least 95% of the aggregated safety grades of all employees at manufacturing sites were a
"B" or better for the year, the safety performance gating requirement would be achieved. If the safety performance gating requirement was not achieved, there would be no payout under the Secondary
Metric.
48
Table of Contents
Total Shareholder Return
We firmly believe that, due to the cyclical nature of the commodity chemical industry in which we operate, it is important to view performance over a longer
time horizon than just one year. Our execution of initiatives aligned with our strategy helped us achieve our vision delivering superior shareholder returns over the cycle. The
following table shows the cumulative total shareholder return, assuming the reinvestment of dividends, for our common stock and a peer group index for the 1, 3, 5, 7, and 10-year periods ended
December 31, 2019.
Total Shareholder Return (TSR)
Each
of the peer group companies was a publicly traded manufacturer of agricultural chemical fertilizers. The companies comprising the peer group are:
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Agrium,
Inc.*
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The Mosaic
Company
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LSB Industries,
Inc.
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Incitec
Pivot Limited
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OCI N.V.**
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Potash Corporation of
Saskatchewan Inc.*
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Nutrien Ltd.*
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CVR
Partners LP**
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Yara International
ASA
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*
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Agrium, Inc.
(Agrium) and Potash Corporation of Saskatchewan Inc. (Potash Corp) are included in the peer group companies from December 31, 2009
through December 31, 2017. On January 2, 2018, Agrium and Potash Corp completed a merger of equals transaction to form Nutrien, Ltd. The cumulative investment in each of Agrium
and Potash Corp, assuming dividend reinvestments up to December 31, 2017, was converted into shares of Nutrien, Ltd. on January 2, 2018 using the exchange ratio in the merger of
equals transaction consummated on that date. Nutrien, Ltd. was included in the peer group companies for the period from January 2, 2018 through December 31, 2019.
-
**
-
CVR
Partners LP and OCI N.V. were excluded from the calculation of the 10-year total shareholder return because they each had less than 10-years of
trading history.
For
purposes of calculating the TSR of CF Industries and the peer group index for the 1, 3, 5, 7, and 10-year periods ending December 31, 2019, the beginning stock price for each peer group
company was established by its respective closing price on the last trading day immediately preceding January 1 of the first fiscal year of the applicable measurement period. The returns of the
peer group companies were weighted according to their respective market capitalizations as of the date used to establish the beginning stock price. For Yara International ASA, Incitec
Pivot Limited and OCI N.V., we used their respective home exchange stock prices, converted into U.S. dollars for TSR calculation purposes.
49
Table of Contents
COMPENSATION PROGRAM OVERVIEW
Compensation Program Highlights
Our executive compensation practices are overseen and administered by the compensation and management development committee, which is comprised exclusively of
independent directors. The committee is responsible for designing an executive compensation program including approving any changes to it that effectively
incentivizes our executives to create long-term value for our shareholders.
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Summary
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More Details
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Our compensation philosophy seeks to align the interests of our employees and our shareholders through focusing on the total compensation (base salary, short-term
incentives, long-term incentives, and benefits) of our employees, including our executive officers. We seek to benefit from this strategy by attracting key talent, retaining strong performers, increasing productivity, and
maximizing operational and financial results, while also implementing compensation programs that are cost effective, market competitive, and sustainable across business cycles.
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P. 54
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Key Elements of
Compensation Program
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Salary
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Paid in line with individual performance and contribution to company goals and aligned to competitive market data
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P. 55,59
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Annual Cash Incentives
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The amount of the actual incentive earned is determined based on our level of achievement of two performance metrics:
75%: level of achievement of Adjusted EBITDA* (Primary Metric)
25%: level of achievement of ammonia production goals, subject to first achieving a gating level of performance on behavioral safety practices (Secondary Metric)
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P. 55, 59-65
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Long-Term Equity Incentives
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A specified cash value amount is split among two different equity award types:
60%: PRSUs (3-year cliff vesting based on
average return on net assets (RONA)* over three one-year periods, and a TSR modifier that can decrease or increase payout by up to 20%)
40%: RSUs (3-year ratable vesting)
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P. 55, 65-69
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Rigorous Benchmarking and
Incentive Target Setting
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Bench-marking
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Our total direct compensation is targeted at the 50th percentile of our Industry Reference Group, which is comprised of 17 companies in related industries, and the
overall general industry market data.
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P. 57
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Incentive Metrics and Performance Levels
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We utilize performance
metrics for our incentive compensation programs that align executive interests with those of our shareholders
Executives are focused on
achieving top performance across metrics that are directly tied to shareholder value creation and our core strategic objectives
The compensation
and management development committee considers the previous year's financial performance, market trends and the company's annual business plan when setting goals and targets for our incentive
compensation programs
The performance metrics and target performance levels reflect the inherent cyclicality of our business
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P. 55-58,
60-64,
66-71
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Leading Compensation
Governance Practices
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Our leading compensation governance practices include:
✓
Strong pay-for-performance alignment
✓
Robust clawback policy covering incentive awards
✓
Stock ownership guidelines
✓
Performance metrics that align executive interests with interests of shareholders
✓
A majority of compensation for CEO and other executive officers is performance-based, at risk, and paid in equity
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✓
No employment agreements
✓
No repriced stock options
✓
Minimal perquisites
✓
Executive officers are prohibited from hedging or pledging our
stock
✓
No new excise tax gross-ups after 2011 (CEO, CFO and SVP-HR have no such gross-up)
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-
*
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For
the definitions of Adjusted EBITDA and RONA, see "Compensation Discussion and Analysis Compensation Discussion and Analysis: In
Detail Key Elements of NEO Compensation Program Our Metrics Defined."
50
Table of Contents
2019 Target Total Compensation
The compensation and management development committee believes the majority of compensation should be composed of awards that are
performance-based with direct ties to the Company and individual employee performance. The significant majority of each NEO's target compensation is at-risk based on company
performance.
2019 Target Total Direct Compensation Mix
The following graphs illustrate the mix of total target direct compensation for our chief executive officer and for the other NEOs for 2019:
AIP:
Annual Incentive Plan (annual bonus), cash settled
LTIP:
Long-Term Incentive Plan, denominated in equity
2019 CEO Target Total Compensation
The compensation and management development committee determined that our CEO's base salary and the target value of his annual incentive award for 2019 should
remain unchanged from those in effect in 2016, 2017 and 2018 due to target cash compensation continuing to be in line with our Industry Reference Group (described in greater detail below) and the
overall general industry survey data and in recognition of industry market conditions at the time. The committee increased our CEO's target long-term incentive award value for 2019 in line with our
Industry Reference Group and the overall general industry survey data. The committee believes the minimal changes over several years underscores that our executive compensation program is
appropriately aligned with performance, and that salaries and the target value for incentive awards are appropriately benchmarked.
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Pay Element
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2019
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2018
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% Change
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Salary
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$
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1,150,000
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$
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1,150,000
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0
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%
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Target Annual Incentive
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$
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1,552,500
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$
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1,552,500
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0
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%
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Target Long-Term Incentive
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$
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5,900,009
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$
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5,300,000
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11
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%
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Total
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$
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8,602,509
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$
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8,002,500
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7
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%
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51
Table of Contents
Shareholder Engagement
We believe that building positive relationships with our shareholders is critical to CF Industries' success. We value the views of and regularly communicate
with our shareholders on a variety of topics, including corporate governance, executive compensation and related matters. Management shares the feedback received from shareholders with the Board. Our
chairman, our committee chairs, and other members of the Board are available to participate in meetings with shareholders as appropriate. Requests for such meetings are considered on a case-by-case
basis. Our engagement activities have resulted in valuable feedback that has contributed to our decision-making with respect to these matters. We welcome input and feedback and look forward to
continued engagement with our shareholders.
We
conduct shareholder outreach campaigns in the spring and in the fall. Our engagements in the spring are primarily focused on ballot items on which shareholders will vote at our annual
meeting. Our engagements in the fall generally focus on voting outcomes from our prior annual meeting including direct shareholder feedback on how they voted on ballot
items as well as potential corporate governance or executive compensation changes the Board and its committees are considering. The fall engagement also presents an opportunity to
discuss with shareholders developments in their methodologies and analyses and potential future areas of focus.
Spring 2019 Shareholder Engagement Campaign
In the first half of 2019 leading up to our 2019 annual meeting, we contacted our top 40 shareholders comprising approximately 75% of our outstanding shares
to invite them to speak with members of our senior management and the chair of our compensation and management development committee. We held meetings with 7 shareholders (our compensation and
management development committee chair participated in two of these meetings) representing approximately 23% of our outstanding shares, discussing with these shareholders the ballot items on which
shareholders would be voting at our 2019 annual meeting, in particular our 2018 executive compensation program and the say-on-pay vote, and other governance focused matters. In these conversations,
the overwhelming majority of these shareholders expressed support for the design of our ongoing compensation program. A minority of these
52
Table of Contents
shareholders
expressed concern regarding the target level of adjusted EBITDA for our 2018 annual incentive program being set at the same level as 2017 despite performance above target in 2017. In
addition to reviewing with these shareholders the portions of our 2019 proxy statement that address our target setting process, we filed additional proxy materials summarizing these topics in advance
of the annual meeting. For 2019, the target level of both adjusted EBITDA (for our annual incentive plan) and RONA (for our long term incentive plan) exceed our 2018 performance. All of the feedback
from these meetings was relayed to the compensation and management development committee and full Board. Our 2019 say-on-pay vote received over 70% shareholder support at the 2019 annual meeting.
Fall 2019 Shareholder Engagement Campaign Responsiveness to 2019 Say-on-Pay Vote
During the second half of 2019 following our 2019 annual meeting, we contacted 46 shareholders comprising approximately 75% of our outstanding shares inviting
them to engage in dialogue regarding their voting decisions for the prior proxy and to discuss ESG topics broadly. We held meetings with 14 shareholders (our compensation and management development
committee chair participated in one of these meetings) representing approximately 42% of our outstanding shares. Shareholders who did not support our say-on-pay vote last year were most commonly
concerned with our decision to set the target level of adjusted EBITDA for our 2018 annual incentive program at the same level as 2017 despite performance above target in 2017. A large majority of
shareholders were supportive of the overall compensation structure. All of this feedback was relayed to the compensation and management development committee and the full Board.
In
response to shareholder feedback, we enhanced our disclosure in the proxy statement to further detail how the compensation and management development committee sets targets in the annual and
long-term incentive programs, the factors that contribute to the committee's decisions and to compare the historical payout percentages to target levels.
Based
on shareholder feedback received in 2019, the compensation and management development committee retained the current structure of our executive compensation program for 2020.
We
will continue to regularly review (along with outside compensation consultants) our executive compensation programs to ensure alignment with our compensation philosophy, and we are committed to
continuing our dialogue with shareholders so that we can be proactive in responding to emerging industry trends and be responsive to shareholder concerns.
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Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS: IN DETAIL
Compensation Philosophy
Our compensation and management development committee has adopted a compensation philosophy that seeks to align the interests of our employees and our
shareholders through focusing on the total compensation (base salary, short-term incentives, long-term incentives, and benefits) of our employees, including our NEOs. We seek to benefit from this
strategy by attracting key talent, retaining strong performers, increasing productivity, and maximizing operational and financial results, while also implementing compensation programs that are cost
effective, market competitive, and sustainable across business cycles.
Our
executive compensation program is designed to reward executives for their contributions to our short-term and long-term results. Annual cash incentive compensation is based on the achievement of
annual performance goals both financial and operating objectives while the majority of executives' long-term incentive opportunity is based on performance
against criteria that are correlated with both annual and long-term shareholder value.
Our
goal is to provide direct compensation to our NEOs that is market competitive with other comparable companies. To obtain a general understanding of current compensation practices, the compensation
and management development committee received in 2019 a market assessment from its independent outside compensation consultant, Exequity LLP ("Exequity"), that was derived from published survey
compensation data, which Exequity adjusted for variations in revenue among the included companies. To further gauge the competitiveness of our total compensation offering, we also compare ourselves
against our Industry Reference Group, which is a group of 17 similar companies in related industries. Additional information regarding this group of companies is set forth below under the heading "Use
of Industry Reference Group."
Incentive
opportunities are structured in a way that recognizes our cyclicality and emphasis on a team-based culture.
54
Table of Contents
Key Elements of NEO Compensation Program
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Component
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Key Characteristics and Rationale
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Salary
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We seek to pay salaries in
line with individual performance and contribution to company goals.
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In the aggregate, base
salaries of our NEOs are targeted at the median of the peer group companies in our Industry Reference Group and the overall general industry market data from the outside compensation consultant's market assessment. Individual performance and
potential, relative criticality of the individual position in relation to achievement of the company's goals, and business affordability are also considered in determining base salaries.
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To maintain our desired
market position, we conduct annual salary reviews.
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Short-Term Incentives
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Variable compensation
component that provides executive officers and other employees with the opportunity to earn additional annual cash compensation beyond base salary.
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The role of short-term
incentives is to reward and encourage the achievement of annual financial results and other specified corporate performance goals.
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Short-term incentives are
also targeted at the market median, and achievement of these awards depends on attaining corporate performance goals.
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For 2018 and 2019, the
short-term incentive earned was determined based on our level of achievement of the following primary and secondary performance metrics: 75% based on our level of achievement of Adjusted EBITDA and 25% based upon our level of achievement of specified
ammonia production goals, subject to first achieving a gating level of performance of behavioral safety practices goals ("safety gate").
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Long-Term Incentives
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Variable compensation
component that focuses on enterprise value creation and employee retention. Long-term incentives are provided through annual stock-based awards.
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Participation is extended
to executive officers and other key employees. Eligibility guidelines with award ranges reflecting position responsibility levels and competitive market practices are updated annually. The guidelines allow for individual variation in long-term
incentives based on performance level, potential contribution, and value to the business.
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In general, long-term
incentives for our executive officers are targeted at the market median with the opportunity to receive above market awards for excellent performance.
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Long-term incentive
awards granted to our NEOs in connection with setting target compensation for 2018 and 2019 were based on a specified cash value, which amount was split among two different award types60% PRSUs and 40% RSUs.
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PRSUs awards are subject
to three-year vesting criteria based on:
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o
Average return on net assets (RONA) over three one-year periods
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o
A modifier pursuant to which the number of shares earned based on RONA performance may be increased or decreased by up to 20% based on our three-year TSR performance against a
threshold, target, and maximum level of performance
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55
Table of Contents
Compensation Metrics Tie to Business Strategy
The compensation and management development committee selects performance metrics for our incentive compensation programs that align executive interests with
those of our shareholders. Executives are focused on achieving top performance across metrics that are directly tied to shareholder value creation and our core strategic objectives, as indicated
below:
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Annual Incentives
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Metric
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Alignment
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Adjusted EBITDA
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Adjusted EBITDA is the primary metric by which we measure our profitability and by which investors measure our performance
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Behavioral Safety Practices
|
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The "safety gate" underscores our commitment to CF's "Do It Right" culture and our constant efforts to drive workplace safety. Operating in a safe and responsible manner is a core value and an integral part of what sets
CF Industries apart to all our stakeholders.
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Ammonia
Production
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Focus on operational excellence in terms of operational execution and asset utilization will help create value and aligns with recent investments in our production capabilities
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Long-Term Incentives
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Metric
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Alignment
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Return on
Net Assets (RONA)
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RONA is typically correlated with long-term TSR performance and is viewed as an indicator of the results of management's operating decisions
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Total Shareholder Return
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Explicitly links executive incentives with shareholder value creation
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Our Metrics Defined
As described above, our annual incentive plan uses Adjusted EBITDA as its primary performance metric and our long-term incentive program uses average return
on net assets, or RONA, for the PRSU three-year performance criteria.
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EBITDA is defined as net earnings attributable to common stockholders plus interest expense-net, income taxes and depreciation and
amortization.
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Adjusted EBITDA is defined under the annual incentive plan as EBITDA as adjusted for certain items, including:(i) unrealized mark to market
losses (gains) on hedges; (ii) unrealized and realized losses (gains) associated with foreign exchange on intercompany loan, activity or foreign denominated intercompany payables and
receivables; (iii) acquisition or disposition related transaction costs or fees; (iv) integration costs for acquisitions; (v) losses (gains) on the disposition of equity
investments in joint ventures; (vi) restructuring, exit, impairments, system implementation costs or similar types of costs; (vii) non-capitalized expansion project costs;
(viii) losses (gains) recognized due to the acquisition or disposal of a business or group of assets, that represents a major portion of the business; (ix) losses (gains)
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Table of Contents
The Compensation Process
Allocation of Compensation Elements
We provide a mixture of cash compensation and non-cash compensation to our NEOs. The cash portion consists primarily of base salaries and short-term incentive
awards. The non-cash portion consists primarily of stock-based long-term incentive awards.
Our
allocation among base salary, short-term incentives, and long-term incentives varies significantly by management level, reflecting individual responsibility levels and competitive market
practices. In general, our more senior executive officers receive a greater percentage of their total expected compensation in the form of incentives (particularly long-term incentives) and a
correspondingly lower percentage in the form of salary.
In
addition to using benchmark survey data, we also consider internal factors that may cause us to adjust particular elements of an individual executive officer's compensation. These factors may
include an individual's operating responsibilities, management level, tenure, potential, and performance in the position.
To
assist in its evaluation, our compensation and management development committee reviews the details of an executive's historical and proposed compensation as described below, including a review of
our NEOs' existing base salaries and target annual incentive levels in connection with the approval of their new base salaries and target annual incentive levels for the following year.
In
addition, four times per year the compensation and management development committee reviews reports regarding our NEOs' holdings and transactions involving our stock, including our NEOs' holdings
of stock and long-term stock-based incentive awards, stock option exercises, purchases, sales and gifts of stock, and surrenders of vested shares of restricted stock in order to satisfy withholding
tax requirements, as applicable.
Compensation Benchmarking
Our total direct compensation is targeted at the 50th percentile of our Industry Reference Group and the overall general industry market data from the
outside compensation consultant's market assessment. The compensation and management development committee considers skills, performance, capabilities, experience, criticality of the role, and the
future potential of each NEO in setting actual compensation; therefore, total direct compensation can be above or below the 50th percentile for different NEOs.
57
Table of Contents
Committee Process for Incentive Target-Setting
The compensation and management development committee considers the previous year's financial performance, market trends and the company's annual business
plan when setting goals and targets for our incentive compensation programs at the end of each calendar year. Management prepares the company's annual business plan and reviews it in detail with the
Board. Management prepares the annual business plan through a rigorous process utilizing a combination of factors, including management's view of current industry conditions, recent historical
performance, internal forecasts, as well as external public market indicators.
Our
industry is inherently cyclical, and our financial results are significantly impacted by the pronounced effects of highly volatile commodity prices for both our fertilizer products as well as
natural gas, which is our principle feedstock. As a result, the industry conditions in existence during any given fiscal year can be dramatically different from, and have no significant bearing on,
the conditions that will exist in the following year. Accordingly, the target performance levels set by the compensation and management development committee for our annual incentive program for any
given year may be higher or lower or unchanged from the levels set in the prior year.
In
addition to cyclicality, the timing in terms of calendar of the compensation and management development committee's decision-making process around
target-setting for our incentive compensation programs is particularly important to understanding its limited visibility into certain external factors that have the potential to significantly impact
our financial and operating results, including natural gas prices, international trade policies, geopolitics, currency fluctuations, weather, etc.
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Illustrative Timeline for Compensation and Management Development Committee Process
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May
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October
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December
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Review of current
compensation trends and issues
Independent Compensation Consultant provides an analysis of current and potential peers based on strategy, business structure, and industry
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Evaluation of STI and LTI
program outcomes against overall program design, stated goals, and alignment with strategy
Review of current/future compensation program objectives, design, and
goals
Review of proxy peer analysis and overall general industry benchmark market data against our NEOs
STI and LTI metrics for
upcoming year established
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Completion of internal
budget forecasting, incorporating supply-demand forecasts with external market prices such as natural gas futures strips
Setting STI and LTI performance goals and targets taking into account
the previous year's financial performance, market trends and the company's annual business plan
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Review and Approval of 2019 Cash Compensation
In setting cash compensation levels for 2019, the compensation and management development committee reviewed the base salaries and target annual incentives
for our NEOs that had been in effect for 2018.
In
connection with its review, the compensation and management development committee reviewed several reports from its outside compensation consultant, Exequity, to obtain a general understanding of
current compensation practices. In performing its market assessment, Exequity used published survey compensation data, and adjusted for variations in revenue among the included companies.
In
addition, the compensation and management development committee reviewed information provided by the compensation consultant regarding the publicly reported cash compensation of NEOs of the group
of companies in our Industry Reference Group, which is comprised of 17 companies in related industries. Additional information regarding this group of companies is set forth below under the heading
"Use of Industry Reference Group."
The
compensation and management development committee also considered cash compensation recommendations from our chief executive officer for each of the NEOs other than himself. These recommendations
took into account the chief executive officer's assessment of each individual's operating responsibilities, management level, tenure and performance in the position, and potential.
Review of Base Salary Compensation
During its review of NEO's base salaries, the compensation and management development committee considered all of this information in the context of the goals
and objectives of our executive compensation plans. As noted above, we seek to pay salaries in line with individual performance and contribution to company goals.
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In the aggregate, base salaries are targeted at the median of the peer group companies in our Industry Reference Group and the overall general
industry market data from the outside compensation consultant's market assessment.
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Individual performance, relative criticality of the individual position in relation to achievement of
the company's goals, and business
affordability are also considered in determining base salaries.
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We conduct annual salary reviews and make salary adjustments as necessary to maintain our desired market position.
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Additional information regarding these goals and objectives is set forth above under the headings "Compensation Philosophy" and "Components of
Compensation."
Review of the Short-term Incentive Program
The compensation and management development committee seeks to ensure that the compensation program aligns with the company's strategic objectives. Over time,
the committee has refined the program, notably the incentive plan metrics, to align executives' focus areas with strategic imperatives that have evolved along with market conditions and our
operations. Our primary metric for each of the last four years has been Adjusted EBITDA at a weighting of 50% to 75%. For 2018, the compensation and management development committee introduced a new
secondary metric, a level of
achievement of an ammonia production goal, subject to achieving a gating level of performance of a behavioral safety practices goal. The committee believed a focus on operational excellence would
drive the company to safely maximize operational execution and asset utilization. The changes to our secondary metric for 2018 also demonstrated our commitment to safety and the "Do It Right" culture.
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During its review of our short-term incentive program, the compensation and management development committee considered the following general
goals:
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The use of properly structured short-term incentives in order to align the interests of management and shareholders, provide context for
management decisions, reward management for decisions that drive short-term results and support long-term strategy, and focus all members of management on the same corporate goals (financial,
operational, and strategic); and
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The need to create a framework for the program that can remain in effect for a significant period of time, while ensuring the compensation and
management development committee has the flexibility to revise the secondary metric to reflect our evolving strategic priorities. Accordingly, the compensation and management development committee
decided to maintain the secondary metric relating to our achievement of ammonia production goals, subject to first achieving a gating level of performance on safety practices, which reflects our focus
on safely operating our facilities and ammonia production. Notably, Adjusted EBITDA the primary metric we use and that is used by our investors to evaluate our
profitability has been our primary metric for the last four years.
The
compensation and management development committee also considered the following factors specific to our company:
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The difficulty in establishing appropriate short-term performance measures for CF Industries, given the inherent cyclicality in our industry as
well as the pronounced effects that highly volatile commodity prices for raw materials and fertilizer products have upon our operating results; and
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The outlook for our short-term
performance and the broad range of possible actual outcomes.
In
addition, the compensation and management development committee reviewed a report from Exequity, the committee's outside compensation consultant, regarding competitive market practices with respect
to the use of short-term incentives.
The
compensation and management development committee considered all of this information in the context of the goals and objectives of our executive compensation plans. As noted above, we use
short-term incentives to provide executive officers and other employees with the opportunity to earn additional annual compensation beyond base salary. The role of short-term incentives is to reward
and encourage the achievement of annual financial results and other specified corporate performance goals. In the aggregate our short-term incentive awards are targeted at the median of the peer group
companies in our Industry Reference Group and the overall general industry market data from the outside compensation consultant's market assessment. Additional information regarding these goals and
objectives is set forth above under the headings "Compensation Philosophy" and "Components of Compensation."
Selection of Primary and Secondary Performance Metrics for 2019
Based on its review and the other factors discussed above, the compensation and management development committee determined that the annual incentive awards
to our NEOs for 2019 would be based upon our level of achievement of the following primary and secondary performance metrics:
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75% of each executive's annual incentive payment opportunity was based upon our level of achievement of Adjusted EBITDA for 2019 (the "Primary
Metric"); and
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The remaining 25% was based upon our level of achievement of ammonia production, subject to first achieving a gating level of performance of
behavioral safety practices goals (the "Secondary Metric").
These
primary and secondary performance metrics and their 75% and 25% weightings, respectively, were unchanged from our 2018 annual incentive program. In setting the performance metrics for 2018 and
years prior to the modifications to Section 162(m) of the Internal Revenue Code by the Tax Cuts and Jobs Act of 2017, the annual incentive program incorporated a threshold EBITDA performance
metric. If the threshold EBITDA performance metric was achieved, actual incentive payments were approved by the compensation and management committee utilizing its negative discretion based on
performance against the primary and secondary performance metrics (i.e., for 2018, the Primary Metric and the Secondary Metric as described above.) The annual incentive program's performance
metric structure, combined with the committee's right to use negative discretion, provided flexibility to reward and encourage the achievement of annual financial results and other specified corporate
performance goals while retaining the ability to pay incentive awards to executive officers which were deductible under Section 162(m) of the Internal Revenue Code. The Tax Cuts and Jobs Act
modified Section 162(m) to remove the performance-based compensation exception, and, as a result, compensation paid to our covered employees in excess of $1,000,000 will generally not be
deductible. Because of these changes to Section 162(m), the compensation and management development committee streamlined the structure of the annual incentive plan performance metrics to
eliminate the threshold EBITDA performance metric for 2019.
Selection of Performance Levels for Primary Performance Metric for 2019
The compensation and management development committee established the following performance levels and corresponding percentages of target opportunity earned
with respect to the Primary Metric for 2019:
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Performance Level
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Primary Metric
Adjusted EBITDA Achieved
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Percentage of
Primary Metric
Target Award Earned
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Below Threshold
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Less than $1.0 billion
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0%
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Threshold
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$1.0 billion
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50%
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Target
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$1.4 billion
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100%
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Maximum
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$1.8 billion
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200%
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Straight
line interpolation is used to determine the achievement percentage for the Primary Metric between threshold and target and between target and maximum performance levels.
Selection of Performance Levels for Secondary Performance Metric for 2019
For the Secondary Metric, each of our production and distribution facilities develops and implements specific behavioral safety objectives that are pertinent
and meaningful to each work group at the site. Each employee is involved in developing and taking ownership for completing objectives that make their workplace safer and effect a positive change in
the safety culture.
Each
quarter, evaluations are conducted and an overall achievement grade (A through F) for each hourly group and individual manager is assigned. Under the Secondary Metric, the quarterly grades
issued to all site employees were aggregated. If at least 95% of the grades were "B" or better for the year, the safety performance gating requirement would be
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achieved.
If the safety performance gating requirement was not achieved, there would be no payout under the Secondary Metric.
The
compensation and management development committee established the following ammonia production performance levels and corresponding percentages of target opportunity earned with respect to the
Secondary Metric for 2019, subject to first achieving the safety performance gating requirement:
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Performance Level
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Secondary Metric
Tons of Ammonia Produced
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Percentage of
Secondary Metric
Target Award Earned
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Below Threshold
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Less than 9.3 million tons
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0%
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Threshold
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9.3 million tons
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50%
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Target
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10.0 million tons
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100%
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Maximum
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10.3 million tons
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200%
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Straight
line interpolation is used to determine the achievement percentage for the Secondary Metric between threshold and target and between target and maximum performance levels.
The
compensation and management development committee retained discretion to adjust the performance levels to address circumstances that impact our ability to meet production expectations, such as
market-based curtailments, severe weather events or other events of force majeure that result in production outages, and other adjustments approved by the compensation and management development
committee.
Additional Target-Setting Considerations for the Short-Term Incentive Program
As described above, when setting performance levels for the short-term incentive program, the compensation and management development committee considers the
previous year's financial performance, market trends and the company's annual business plan. Going into 2019, industry fundamentals were expected to continue to be supportive, with increasing global
nitrogen prices above those realized during 2018 and natural gas feedstock prices also forecast to be higher, based on market expectations reflected in forward market curves. In addition, fewer of the
company's ammonia units were scheduled for downtime for turnaround and maintenance activity than in 2018. As a result, the target performance levels for both the Primary Metric and Secondary Metric
set by the compensation and management development committee were higher than the target levels set and actual results achieved for both metrics in 2018. Maximum performance for both metrics was set
at a level judged to be difficult to achieve and threshold performance was set at the lowest level that would justify a payout.
Measured
over an extended period, the objective of the committee is to select financial performance levels such that we have a roughly (i) 80% probability of exceeding the threshold level,
(ii) 50% probability of exceeding the target level, and (iii) 20% probability of exceeding the maximum level.
Although
the compensation and management development committee considers management's outlook as one of several factors in evaluating financial performance levels each year, the committee also
recognizes that the outlook for any particular year represents only a single scenario from among a broad range of plausible alternatives, given the pronounced effects of highly volatile commodity
prices upon our operating results.
In
general, the compensation and management development committee aims to achieve a larger payout under the program for years when our performance is superior by long-term
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industry
standards, and a smaller payout (or none at all) for years when our performance is relatively weak, while creating incentives for improved performance under all conditions given the inherent
cyclicality in our industry.
Target
levels of Adjusted EBITDA associated with our annual incentive program and our actual performance relative to these targets are consistent with expectations for a cyclical company. We have a
track record of paying for performance and achieve this through setting
targets that are rigorous and challenging. The chart below of our Adjusted EBITDA targets, actual results and percentage payouts for 2014 through 2019 demonstrates our pay for performance linkage in
the annual incentive program.
Adjusted EBITDA Targets, Actual Results, and Percentage Payouts(1)
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(1)
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Reflects payout percentage on the annual incentive program metric associated with Adjusted EBITDA. For 2014-2015, Return on
Net Assets (RONA) was the sole metric in the annual incentive program. Adjusted EBITDA is a key factor in calculating RONA; accordingly the associated Adjusted EBITDA figures are represented here. For
2016-2019, Adjusted EBITDA was the primary metric under the company's annual incentive program (with a weighting of 50% in 2016 and 75% in 2017, 2018 and 2019).
When considering appropriate performance metrics for the short-term incentive program, the compensation and management development committee also considers
alternative metrics for measuring company performance, such as achievement of operating efficiency goals, continued emphasis on the establishment of a behavioral-based safety culture, progress towards
strategic objectives, or performance relative to a variable budget, as well as alternative plan designs that emphasize the personal accomplishment of individual or shared goals. The objective in each
case is to incentivize strong operational performance in an inherently cyclical business.
The
compensation and management development committee determined for 2019 that utilizing Adjusted EBITDA as the Primary Metric and ammonia production as the Secondary Metric would align the interests
of our executive officers with the interests of our shareholders and reflect our team-based culture. The committee determined to condition payout on the Secondary Metric to first achieving the "safety
gate" to underscore the company's commitment to our "Do It Right" culture and complement our efforts to drive workplace safety. Operating in a safe and responsible manner is a core value and an
integral
part of what sets CF Industries apart to all our stakeholders. Our safety culture permeates our business in three key ways:
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Engaged culture that empowers consistent behaviors that drive toward excellence.
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Robust systems that provide a clear, repeatable
direction toward excellence.
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Superior performance that aligns effective and efficient environmental, health, and safety activities with operations.
Our
commitment to safety never takes a day off, and we have demonstrated that our focus on this priority is yielding positive results. We believe that focusing on leading indicators such as the
behavioral safety practices we have incorporated into our annual incentive plan to drive and measure activities that prevent and control safety incidents, results in our industry-leading safety
record. During 2019, we set an important company record with our trailing 12 month recordable injury rate of 0.48 for the twelve months ended December 31, 2019the lowest
year-end rate we have ever achieved as a company.
Approval of Base Salaries and Target Annual Incentive Awards for 2019
Based on its review of the general, company-specific, and competitive considerations described above, in December 2018, the compensation and management
development committee approved base salaries and target annual incentive awards for our NEOs for calendar year 2019. In setting compensation levels for 2019, the compensation and management
development committee considered a competitive market assessment performed by Exequity, the committee's outside compensation consultant, and the goals and objectives for our executive compensation
plans. The base salaries and target annual incentive levels for Mr. Will, our chief executive officer, and Mr. Kelleher, our chief financial officer at the time,
remained unchanged from those in effect for 2018 due to target compensation being in line with our Industry Reference Group and the overall general industry survey data and in recognition of current
industry market conditions. The increases in base salaries for Mr. Bohn, Mr. Barnard and Mr. Frost are the first such increases to their base salaries since the 2016 fiscal year.
Mr. Kelleher
retired from CF Industries on September 1, 2019 and Mr. Bohn, who had been serving as our senior vice president, manufacturing and distribution, succeeded
Mr. Kelleher as chief financial officer upon his retirement.
The
table below shows the base salaries and target annual incentive levels for our NEOs for 2019 and 2018:
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Base Salary
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Target Annual
Incentive Level
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Name
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2018
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2019
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Increase
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2018
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2019
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Increase
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W. Anthony Will
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$1,150,000
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$1,150,000
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0%
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135%
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135%
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0%
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Christopher D. Bohn(1)
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$500,000
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$550,000
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10%
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70%
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80%
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14%
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Douglas C. Barnard
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$530,000
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$540,000
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2%
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80%
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80%
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0%
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Bert A. Frost
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$575,000
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$600,000
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4%
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80%
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80%
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0%
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Susan L. Menzel(2)
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$500,000
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70%
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Dennis P. Kelleher
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$625,000
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$625,000
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0%
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90%
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90%
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0%
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(1)
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In
connection with his appointment as chief financial officer, effective as of September 1, 2019, Mr. Bohn's annual base salary increased from $550,000
to $600,000. His target annual incentive level remained unchanged at 80% of his base salary.
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(2)
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Ms. Menzel
became a named executive officer in 2019. Ms. Menzel's base salary was increased during 2019 to $525,000 following her assumption of
additional responsibilities as the executive overseeing information technology. In addition, her target annual incentive level was increased to 75% in connection with her increased responsibilities.
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Approval of Annual Incentive Payments for 2019
Following the end of 2019, management prepared a report on our level of achievement of the Primary Metric (Adjusted EBITDA), the threshold gate of behavioral
safety performance, and the Secondary Metric (Production of Ammonia Tons) under the short-term incentive plan. The compensation and management development committee reviewed the report and approved
final performance results. Based on the results, the committee determined that each of our NEOs earned 160.3% of the executive's target opportunity with respect to the executive's annual incentive
award for 2019. This result is based on our attainment of Adjusted EBITDA of $1,612 million, which resulted in a payout percentage for the Primary Metric of 153% and, after first achieving the
gating level of performance of behavioral safety practices goals, our production of 10,246,000 ammonia tons equated to a payout percentage for the Secondary Metric of 182%.
Review and Approval of 2019 Long-Term Incentives
The compensation and management development committee reviewed our long-term incentive program during 2018 and granted long-term stock-based incentive awards
to our NEOs in January 2019.
During
its review of our long-term incentive program, the compensation and management development committee considered the following general factors:
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the use of properly structured long-term incentives in order to align the interests of senior management and shareholders;
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the
advantages and disadvantages of using stock options, shares of restricted stock, RSUs, and/or PRSUs for such purposes; and
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the array of available vesting parameters for each type of
long-term incentive award and the treatment of death, disability, retirement,
resignation, and termination, with or without cause.
The
compensation and management development committee also considered the difficulty in establishing appropriate long-term performance measures for the company, other than stock price appreciation and
total shareholder return (including dividends), given the inherent cyclicality in our industry as well as the pronounced effects of highly volatile commodity prices for raw materials and fertilizer
products upon our operating results.
In
addition, the compensation and management development committee reviewed a report from Exequity, the committee's outside compensation consultant, regarding competitive market practices with respect
to the use of long-term incentives.
The
compensation and management development committee considered all of this information in the context of the goals and objectives of our executive compensation plans. As noted above, our long-term
incentives focus on enterprise value creation and employee retention. Long-term incentives are provided through annual awards that vest over a period of subsequent years. Our 2014 Equity and Incentive
Plan allows the use of stock options, full-value shares, and cash-based awards. Eligibility is extended to executive officers and other key employees. Eligibility guidelines with award ranges related
to position responsibilities levels are updated annually. In consideration of these guidelines, there is individual variation in long-term incentives based on performance level, potential
contribution, and value to the business.
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Design of Target Awards for 2019
Based on its review of general, company-specific, and competitive considerations, the compensation and management development committee determined that,
consistent with 2018, the long-term incentive awards granted to our NEOs for 2019 would be composed of 60% PRSUs and 40% RSUs. In selecting a mixture of PRSUs and RSUs for our target long-term
incentive awards, the compensation and management development committee noted that:
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RSU and PRSU awards align the executive officers' interests with those of shareholders;
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RSU and PRSU awards provide value for
executive officers that fluctuates with total shareholder return (including dividends);
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RSU and PRSU awards foster stock ownership by executive officers; and
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RSU awards are subject to time vesting provisions
and therefore create an additional retention mechanism for executive officers.
The
compensation and management development committee also approved the metrics used for measuring performance with respect to the PRSUs granted in 2019:
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Return on net assets (RONA) measured over three one-year periods (with payouts determined based on the average of the three years); and
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TSR modifier adjusting the number of shares earned based on RONA up or down by 20% based on our three-year TSR performance against a threshold,
target and maximum level of performance.
These
metrics are consistent with the metrics measured for the PRSUs granted in 2018 and reflect the committee's view that RONA serves as an indicator of the results of management's operating
decisions and its expected correlation with long-term TSR performance.
The
target TSR performance level for the modifier in the 2019 PRSUs was set to reflect a compound annual TSR equal to 7%, which is the approximate average annual real total return for the
S&P 500 Index since inception. Maximum performance was set at a level well
above the average, and threshold performance was set at a level below which a maximum reduction was appropriate.
In
structuring the TSR modifier, the compensation and management development committee determined not to use a relative TSR benchmark because there are not enough similarly sized companies with
comparable business lines from which the committee could assemble a peer group for meaningful TSR performance purposes, and the committee considered that basing the TSR modifier on a broad market
comparison (e.g., the S&P 500) over a three-year period would not be appropriate given the pronounced cyclicality of our business.
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How We Determine the Number of PRSUs Earned
The number of PRSUs earned is determined based the company's average RONA performance over three one-year periods and subject to a three-year TSR modifier, as
follows:
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At the beginning of each year (e.g., 2019, 2020, and 2021) during the three-year performance period, the compensation and management
development committee establishes RONA performance levels for that year and the corresponding percentage payout of the target number of PRSUs based on our performance.
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The threshold,
target and maximum performance levels that are set will result in a payout percentage ranging from 0% to 200% of the target
number of PRSUs. RONA performance levels below the threshold performance level have a payout percentage of 0%.
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-
Following the completion of each fiscal year, the compensation and
management development committee will determine the payout percentage that
was attained for such year and following the completion of the third fiscal year, the committee will determine the 3-year average payout percentage attained for the three-year performance period. For
fiscal 2019, our actual RONA performance of 17.0% resulted in a 184% payout percentage. Our 2019 RONA target of 13.7% was higher than our 2018 RONA target of 8.2% and higher than our 2018 actual RONA
of 13.6%.
-
-
Once the total number of PRSUs earned based on our RONA performance is determined at the end of the third year, the total is multiplied by a
percentage ranging from 80% to 120% depending on our TSR performance for the three-year performance period.
-
-
The combined impact of these performance criteria is that the final payout
percentages range from 0% to 240% of target PRSUs.
The
number of PRSUs earned at the end of the three-year performance period will be determined as follows for the 2018 and 2019 PRSU awards:
-
(1)
-
The
TSR Modifier Percentage is determined in accordance with the following table:
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TSR Performance Level
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TSR Modifier
Percentage
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Threshold: Less than 15.5%
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80
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%
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Target: 22.5%
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100
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%
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Max: At or Above 29.5%
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120
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%
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Table of Contents
Approval of Target Awards for 2019
On January 2, 2019, the compensation and management development committee approved long-term incentive awards for our NEOs for 2019 as set forth in the
table below.
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Target Performance RSUs
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Time Vesting RSUs
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Total
Target
Grant
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Name
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Number
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Grant Value
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Number
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Grant Value
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Value
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W. Anthony Will
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84,461
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$3,540,000
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56,307
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$2,360,000
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$5,900,000
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Christopher D. Bohn
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17,178
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$720,000
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11,452
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$480,000
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$1,200,000
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Douglas C. Barnard
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15,747
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$660,000
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10,498
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$440,000
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$1,100,000
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Bert A. Frost
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20,042
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$840,000
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13,361
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$560,000
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$1,400,000
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Susan L. Menzel
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10,737
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$450,000
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7,158
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$300,000
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$750,000
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Dennis P. Kelleher
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19,326
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$810,000
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12,884
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$540,000
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$1,350,000
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On
the grant date, the compensation and management development committee approved dollar-denominated RSU and PRSU awards for each of our individual NEOs. In setting the dollar-denominated values of
the individual awards, the committee considered our Industry Reference Group and the competitive general industry survey data presented by Exequity, the committee's outside compensation consultant.
The
committee also considered the recommendations from our chief executive officer for the long-term incentive awards to each of the NEOs other than himself. These recommendations took into account
the chief executive officer's assessment of each individual's operating responsibilities, management level, tenure and performance in the position, and potential.
After
the close of business on the grant date, the dollar-denominated awards were translated into an actual number of RSUs and PRSUs using the unweighted average of the NYSE closing price for the
twenty (20) trading days preceding the grant date. The number of PRSUs represented 60% of the total value on the grant date and the number of RSUs represented 40%.
Target Values versus Accounting Values
Because of the accounting rules governing preparation of the Summary Compensation Table on 73, the grant date value for RSUs and PRSUs awarded in 2019 as
reported in the Summary Compensation Table are different than the target award values set forth in the table above. As discussed above, the compensation and management development committee approves
dollar-denominated target award values, which are translated into an actual number of RSUs and PRSUs using the unweighted average of the NYSE closing price for the twenty (20) trading days preceding
the grant date.
With
respect to RSUs, the values reflected in the Summary Compensation Table are computed as the product of the number of RSUs awarded multiplied by the closing stock price on the date of grant.
As
described above with respect to PRSUs, at the beginning of each year of the PRSUs' three-year performance period, the compensation and management development committee establishes RONA performance
levels for such year. The target grant values set forth in the table above reflect the value of the entire 2019 PRSUs, without regard for when the performance goals are established.
68
Table of Contents
Under
the applicable accounting rules, the Summary Compensation Table only reflects the value of grants made during the year for which applicable performance goals have been set. With respect to the
2019 PRSUs, only the RONA performance goals for the 2019 fiscal year, the first of three one-year periods, were approved at the time the PRSUs were awarded in 2019. As a result, for the 2019 PRSUs,
the Summary Compensation Table does not include the value of the PRSUs based on the annual RONA goals for fiscal 2020 or fiscal 2021. Such amounts will be included as equity compensation in the
Summary Compensation Table for fiscal 2020 and fiscal 2021, respectively, when the RONA goals are established. With respect to the 2018 PRSUs, the RONA performance goals for the 2019 fiscal year, the
second of three one-year periods, were also approved in 2019. As a result, for the 2018 PRSUs, the Summary Compensation Table also includes the value of the 2018 PRSUs based on the annual RONA goals
for the 2019 fiscal year.
Vesting and Other Terms of RSUs and PRSUs
The target RSUs granted to our NEOs in 2019 will vest in three equal annual installments following the date of grant, subject to earlier forfeiture or
accelerated vesting (as described below). Until vested, the RSUs may not be sold, assigned, transferred, donated, pledged, or otherwise disposed of (except by will or the laws of descent and
distribution). At the vesting dates, the RSUs give the holder the right to receive one share of common stock with respect to each vested RSU. We will pay dividend equivalents in cash with respect to
the RSUs to our NEOs during the vesting period.
The
PRSUs granted to our NEOs in 2019 will vest upon the certification by the compensation and management development committee of the attainment of the performance goals following the end of the
three-year performance period, subject to earlier forfeiture or
accelerated vesting (as described below). The PRSUs are settled in shares of our common stock. The PRSUs accrue dividend equivalents during the performance and vesting period. Upon vesting, holders of
PRSUs will be paid a cash equivalent of the dividends paid on our common stock during the performance and vesting period based on the number of shares of stock, if any, delivered in settlement of the
PRSUs.
As
discussed below under the heading "Change in Control, Severance, and Retirement Benefits," upon a change in control, the restrictions, limitations, and conditions applicable to RSUs and PRSUs will
lapse, the performance goals with respect to the PRSUs will be deemed fully achieved at the greater of target or actual performance to-date, and all of the awards will become fully vested. Upon death
or disability, RSUs become fully vested and the PRSUs become fully vested at the target level of performance. The RSUs and PRSUs will vest on a pro rata basis upon retirement in the case of those NEOs
who have reached the age of 60 with at least five years of service at the time of retirement and who provide us with at least six months' notice.
Additional
information with respect to the compensation and management development committee's grants of RSUs and PRSUs to our NEOs during 2019 is set forth below under the heading "Executive
CompensationGrants of Plan-based Awards."
Determination of 2017-2019 Performance Period PRSU Awards
The three-year performance period for PRSU awards granted in 2017 ended on December 31, 2019. The performance metrics for PRSUs granted in 2017 were
our three-year TSR compared against the S&P 500 Index and a modifier pursuant to which the number of shares earned based on our TSR relative to the S&P 500 Index could be increased or
decreased by up to 20% based on our TSR relative to a comparator group comprised of the 18 companies that were in our industry reference group in 2017. Our final TSR for the three-year period of 69.5%
was above the 75th percentile of the S&P 500 Index and ranked 3rd out of the
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Table of Contents
seventeen
companies (including us) in the comparator group used as a modifier. As a result, in accordance with the terms of the awards, the committee approved a payout of 220% of the PRSUs from these
grants.
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Original 2017 PRSU Grant
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PRSUs Earned
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Name(1)
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Target #
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Value at Grant
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#
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Value(2)
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W. Anthony Will
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23,360
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$1,060,000
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51,392
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$1,960,091
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Christopher D. Bohn
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3,750
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$170,000
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8,250
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$314,655
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Douglas C. Barnard
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4,410
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$200,000
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9,702
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$370,034
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Bert A. Frost
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5,070
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$230,000
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11,154
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$425,414
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Dennis P. Kelleher
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6,610
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$300,000
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14,542
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$554,632
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-
(1)
-
Ms. Menzel
was not an employee of the company at the time the 2017 PRSUs were granted and therefore was not granted any PRSUs in 2017.
-
(2)
-
This
column represents the value of the shares earned based on a stock price of $38.14, which was the closing price on the last trading day prior to the vesting date
of March 3, 2020.
Historical Payout of PRSUs
From 2014 until the grants in 2018, the PRSUs granted to our named executive officers vested solely based on the company's relative total shareholder return
over a three year performance period compared against the S&P 500 Index and a modifier pursuant to which the number of shares earned based on our TSR relative to the S&P 500 could be
increased or decreased by up to 20% based on our TSR compared against a peer group. The table below shows the percentage payout of the three-year PRSUs granted in each of 2014, 2015, 2016 and 2017.
For the PRSUs granted in 2014 and 2015, the compensation realized was 0% and for all four years (2014-2017) of PRSU grants, the average percentage payout was 69%, compared to a target payout
percentage of 100%.
Percentage Payout of 3-Year PRSUs
granted from 2014-2017
These
results are indicative of the difficulty in establishing appropriate long-term performance measures for the company, other than stock price appreciation and total shareholder return (including
dividends), given the inherent cyclicality in our industry as well as the pronounced effects of highly volatile commodity prices for raw materials and fertilizer products upon our
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Table of Contents
operating
results. As described above under the heading "Review and Approval of 2019 Long-Term Incentives" the committee changed the
performance metrics for the PRSUs granted in 2018 and 2019 to RONA measured over three one-year periods (with payouts determined based on the average of the three years) and a TSR modifier. The
compensation and management development committee added RONA as a performance metric for PRSUs because of its expected correlation with long-term TSR performance and the view that it serves as an
indicator of the results of management's operating decisions.
2020 Compensation Actions
In December 2019, the compensation and management development committee approved base salaries and target annual incentive awards for our NEOs for calendar
year 2020. In addition, on January 2, 2020, the compensation and management development committee approved long-term incentive awards for our NEOs for 2020. In setting compensation levels for
2020, the compensation and management development committee considered a competitive market assessment performed by Exequity, the committee's outside compensation consultant, and the goals and
objectives of our executive compensation plans. The following table shows the base salaries, target annual incentives, and long-term incentive awards for our named executive officers (other than
Mr. Kelleher, who retired effective September 1, 2019) for 2020.
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Name
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Base Salary
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|
Target Annual
Incentive Level
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Target
PRSUs
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RSUs
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W. Anthony Will
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$1,250,000
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|
135%
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77,769
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|
51,846
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Christopher D. Bohn
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$625,000
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80%
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16,850
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11,233
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Douglas C. Barnard
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$565,000
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80%
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14,258
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9,505
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Bert A. Frost
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$625,000
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80%
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18,146
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12,097
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Susan L. Menzel
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$525,000
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75%
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|
10,369
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6,913
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Performance Metrics for Annual Incentive Payments for 2020
The annual incentive awards to our NEOs for 2020 will again be determined based upon our level of achievement of the following performance
metrics:
-
-
75% of each executive's annual incentive payment opportunity is based upon our level of achievement of adjusted EBITDA for 2020; and
-
-
the remaining 25% is based upon our level of achievement of specified ammonia production goals, subject to first achieving a gating level of
performance of behavioral safety practices goals.
These
two performance metrics are unchanged from our 2018 and 2019 annual incentive program. The performance levels and corresponding percentages of target opportunity earned with respect to the 2020
performance metrics established by the compensation and management development committee will be disclosed in the proxy statement for our 2021 annual meeting.
Performance Metrics for PRSUs Granted in 2020
The performance metrics for the PRSUs granted in 2020 are structured in the same manner as the PRSUs granted in 2018 and 2019. The number of PRSUs earned
under the PRSUs granted in 2020 will be determined based on the company's average RONA performance over three one-year periods and subject to a three-year TSR modifier. The RONA performance levels for
fiscal 2020 and corresponding payout percentages for the year established by the
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Table of Contents
compensation
and management development committee will be disclosed in the proxy statement for our 2021 annual meeting.
Change in Control, Severance, and Retirement Benefits
The compensation and management development committee reviewed our change in control, severance, and retirement benefits during 2019 as described below. Based
on its review, and after considering the factors noted below, the compensation and management development committee determined that our change in control, severance, and retirement benefits continue
to serve the best interests of the company and our shareholders and are consistent with competitive market practices.
Change in Control Benefits
With respect to our change in control benefits, the compensation and management development committee noted that we have change in control agreements with our
executive officers, as well as certain change in control benefits for all of the participants (including the executive officers) under our 2009 Equity and Incentive Plan and 2014 Equity and Incentive
Plan. Additional information regarding these benefits is set forth below under the heading "Executive CompensationPotential Payments Upon Termination or Change in Control."
In
connection with its review, the compensation and management development committee noted that the change in control agreements with our executive officers are:
-
-
Intended to provide some level of income continuity for an executive officer should his or her employment be terminated by us without cause or
by him or her for good reason in connection with a change in control;
-
-
Designed to avoid unwanted management turnover in the event of a potential change in control; and
-
-
Designed to ensure that the executive officer's personal interests will remain aligned with the interests of our shareholders in the event of a
potential change in control.
The
compensation and management development committee also noted that our change in control agreements require both (i) a change in control and (ii) a qualifying termination of the
executive officer's employment (sometimes referred to as a "double trigger"), before any benefits will be owing to the executive officer under the agreement.
In
addition, the compensation and management development committee noted that our 2009 Equity and Incentive Plan and 2014 Equity and Incentive Plan provide that all plan-based awards will be deemed
fully vested and fully exercisable and any performance conditions will be deemed fully achieved upon a change in control (sometimes referred to as a "single trigger"), unless the committee determines
otherwise with respect to a particular award at the time of grant and reflects this determination in the applicable award agreement. In this regard, the compensation and management development
committee noted it would be difficult to preserve the original performance and vesting goals in our plan-based awards following a change in control, given the fundamental changes in our organization,
capital structure, and operations that would typically result from such a transaction. Accordingly, all of our plan-based awards have included this change in control provision for the benefit of our
executive officers and the other participants.
As
part of its review, the compensation and management development committee reviewed "tally sheets," estimating these benefits for our chief executive officer and the other NEOs under various
assumptions and scenarios.
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Based
on its review, and the other factors noted above, the compensation and management development committee determined that our change in control benefits serve the best interests of the company and
our shareholders and are consistent with competitive market practices.
Excise Tax Gross-Ups
In December 2014, the Board adopted a policy whereby the company will not in the future enter into any new agreements with its NEOs that include Internal
Revenue Code Section 280G excise tax "gross-up" provisions with respect to payments contingent on a change in control of the company.
Severance Benefits
With respect to our severance benefits, the compensation and management development committee noted that none of our executive officers has any employment or
severance agreement, and none of our executive officers is entitled to receive any other severance benefits, except for (i) the change in control agreements and change in control benefits
discussed above, (ii) such severance benefits as we may provide under our standard policies applicable to all employees, (iii) such severance benefits as we may be required to pay under
applicable law in certain jurisdictions, and (iv) such additional severance benefits as our compensation and management development committee may approve in certain instances. Based on its
review, and the other factors noted above, the compensation and management development committee determined that our severance benefits serve the best interests of the company and our shareholders and
are consistent with competitive market practices.
Retirement Benefits
With respect to our retirement benefits, the compensation and management development committee noted that we maintain tax-qualified and nonqualified defined
benefit, defined contribution, and deferred compensation plans. Additional information regarding these benefits is set forth below under the headings "Executive CompensationPension
Benefits" and "Executive CompensationNonqualified Deferred Compensation."
We
maintain a defined benefit pension plan named the CF Industries Holdings, Inc. Pension Plan (the "Pension Plan"). The Pension Plan includes three components. Supplement A of the Pension
Plan, which we refer to herein as the New Retirement Plan, is a defined benefit pension plan that became effective on January 1, 2013, under which all domestic employees (including executive
officers) became eligible to participate as of January 1, 2013, except for those employees who participate in Supplement B of the Pension Plan. Supplement B of the Pension Plan is our historic
defined benefit pension plan, which we refer to herein as the Old Retirement Plan and which was closed to new participants on December 31, 2003. Employees who joined the company after that
date, which includes all of the NEOs, are ineligible to receive any pension benefits under the Old Retirement Plan, but are eligible for benefits under the New Retirement Plan. Under the New
Retirement Plan, we credit the account of each participating employee an amount between 4% and 7% (depending on years of service) of the participant's eligible compensation. For our NEOs, eligible
compensation is limited to base salary. Each participant's account will earn an annual return based on the greater of (i) the annual yield on 10-year treasury nominal securities and
(ii) 3% annual interest. The
third component of the Pension Plan is Supplement C, which was formerly known as the Terra Industries Inc. Employees' Retirement Plan and covers employees who commenced employment with Terra
Industries, or any other entity that was an employer under the former plan, prior to August 1, 2003. None of our NEOs are participants in Supplement C of the Pension Plan.
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The compensation and management development committee also reviewed "tally sheets," estimating these benefits for our chief executive officer and the other NEOs under various
assumptions and scenarios.
Commencing
with equity grants made in 2014, employees, including our NEOs, who retire upon having reached age 60 with at least five years of service at the time of retirement will continue to vest in
their stock option awards that were granted at least one year prior to their termination date and will receive a pro-rated number of RSUs and PRSUs based on their length of service between the grant
date of such award and the executive's retirement date and, with respect to PRSUs, contingent upon the level of attainment of applicable performance goals, provided, that, in each case, the executive
has provided us with at least six months' notice prior to such retirement. In addition, such eligible retirees will have four years from their retirement date to exercise any vested options.
Based
on its review, and the other factors noted above, the compensation and management development committee determined that our retirement benefits serve the best interests of the company and our
shareholders and are consistent with competitive market practices.
Separation AgreementDennis Kelleher
On May 30, 2019, Dennis Kelleher resigned as chief financial officer of the company, effective as of September 1, 2019. In connection with
Mr. Kelleher's retirement, the company and Mr. Kelleher entered into a Transition and Separation Agreement, dated as of May 30, 2019. For the terms and conditions of the
Separation Agreement, including the severance arrangements, treatment of equity awards and restrictive covenants, see "Executive CompensationPotential Payments Upon Termination or Change
in ControlDennis Kelleher Retirement and Separation Agreement."
Use of Industry Reference Group
As noted above, the compensation and management development committee has adopted an Industry Reference Group for use in establishing compensation and
incentive levels. The compensation and management development committee's consultant, Exequity, leads a review of the companies in the peer group annually and proposes changes based on quantitative
and qualitative assessments of comparability. The only change from our 2018 Industry Reference Group is in the replacement of Agrium Inc. (Agrium) and Potash Corporation of
Saskatchewan Inc. (PotashCorp) with Nutrien Ltd., the company formed by the January 2,
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2018
merger of Agrium and Potash. The 17 companies in our Industry Reference Group for 2019 are listed in the following table:
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Global Industry Classification
Standard Subindustry Description
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Company Name
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Fertilizers and Agricultural Chemicals
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The Mosaic Company
Nutrien Ltd.
The Scotts Miracle-Gro Company
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Specialty Chemicals
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Albemarle Corporation
Ashland Global Holdings, Inc.
Celanese Corporation
Ecolab Inc.
International Flavors & Fragrances Inc.
PolyOne Corporation
RPM International Inc.
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Commodity Chemicals
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Cabot Corporation
Westlake Chemical Corporation
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Diversified Chemicals
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Eastman Chemical Company
FMC Corporation
Huntsman Corporation
Olin Corporation
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Industrial Gases
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Air Products and
Chemicals, Inc.
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Other Compensation Governance Practices and Considerations
Role of the Compensation Consultant
The compensation and management development committee has authority under its charter to retain, approve fees for, and terminate advisors, consultants, and
agents as it deems necessary to assist in the fulfillment of its responsibilities. Pursuant to this authority, the compensation and management development committee engaged Exequity, an independent
executive compensation consulting firm, to assist the committee in making recommendations and decisions regarding compensation for our directors and executive officers based on market and industry
practices. Exequity provides no other services to the company.
The
compensation consultant regularly attends meetings of our compensation and management development committee and meets regularly with the committee in executive sessions without management present.
The compensation and management development committee reviews the materials and recommendations provided by Exequity, but exercises independent judgment in determining the compensation payable to our
NEOs. Any recommendations of the compensation and management development committee with respect to non-employee director compensation are subject to approval by the Board.
The
compensation and management development committee has determined, after appropriate inquiry, including consideration of Exequity's independence in light of the factors set forth under
Rule 10C-1 of the Exchange Act, that no conflicts of interest exist with respect to the firm's engagement as the committee's independent compensation consultant.
Stock Ownership Guidelines
The Board believes that our directors and officers should be shareholders of CF Industries and, based on the recommendation of the compensation and management
development committee, has established guidelines for stock ownership.
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Directors will have five years from the date of their appointment or election to achieve stock ownership with a market value equal to five
times their annual cash retainer.
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Officers will have five years from their date of hire or promotion to achieve stock ownership with a market value equal to (i) five
times annual base salary in the case of the chief executive officer, (ii) two times annual base salary in the case of the other NEOs and several other executive officers, and (iii) one
times annual base salary in the case of the other officers.
As
of December 31, 2019, each of our directors and officers was in compliance with the stock ownership guideline requirements. Their financial interests are aligned with those of our
shareholders; they are incentivized to take actions that create sustainable value.
For
purposes of these guidelines, any of the following may be used to satisfy the ownership requirements: (i) shares purchased by the individual, (ii) shares retained upon the exercise
of a vested stock option, (iii) shares acquired upon the vesting of restricted shares or units, (iv) shares acquired upon the vesting of performance shares or units, (v) shares
(including
"phantom" shares) held within our qualified and non-qualified deferred compensation and retirement plans, (vi) shares purchased through an employee stock purchase plan, (vii) restricted
shares or units, (viii) earned performance shares or units (i.e., shares or units under a performance award for which the primary performance criteria has been achieved, but which remain
subject to time-based vesting requirements, without regard to any potential subsequent modification based on additional performance criteria such as a TSR modifier), and (ix) the difference in
value between the exercise price and current market price for vested but unexercised options, net of taxes at an assumed maximum tax rate. Non-vested stock options and unearned non-vested performance
shares or units are specifically excluded in meeting the ownership requirements.
It
is expected that an individual who is subject to the stock ownership guidelines will not sell any shares unless he or she has satisfied the ownership guidelines both before the sale and after
giving effect to the shares sold. An individual who has initially satisfied the guidelines but as a result of a subsequent decline in stock prices no longer meets the guidelines is precluded from
selling any shares until such time as he or she again satisfies the guidelines. Surrendering shares to the company in order to pay withholding or other taxes on compensation income or pay the exercise
price of stock options is not considered a sale of shares for purposes of the guidelines.
We
may facilitate stock ownership by directors and officers through grants of equity-based compensation under our 2014 Equity and Incentive Plan.
Clawback Policy
We have in place an executive compensation recoupment policy, or "clawback" policy, which applies to our executive officers (referred to as "covered
officers"), including the NEOs. Under the policy, in the event that the specified financial results upon which a cash or equity-based incentive award was predicated become the subject of a financial
restatement that is required because of material non-compliance with financial reporting requirements, the compensation and management development committee will conduct a review of awards covered by
the policy and will, to the extent permitted by governing law, have the sole and absolute authority to make adjustments to the awards to ensure that the ultimate payout gives retroactive effect to the
financial results as restated, including the authority to seek recoupment of any excess cash or equity that has already been paid to or received by a covered person. The policy covers any cash or
equity-based incentive compensation award that was paid, earned or granted to a covered officer during the last completed three fiscal years immediately preceding the date the financial restatement is
publicly announced. Our executive
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officers
have each signed a form acknowledging the applicability of the policy in order to enhance the enforceability of these provisions.
Trading, Hedging and Pledging Restrictions
We have a Policy on Insider Trading, which prohibits our directors, officers, and employees from engaging in speculative transactions in our securities.
Specifically, it is against our policy to trade in options, warrants, puts and calls, or similar derivatives on our stock, sell our stock "short," or hold our stock in margin accounts. In addition,
our policy prohibits our directors and executive officers from pledging our stock as collateral for a loan.
Compensation and Benefits Risk Analysis
The compensation and management development committee reviewed the potential effects of the various components of our compensation and benefits program for
2019 upon individual and collective behavior and, ultimately, upon our risk profile and our overall approach to risk management. The compensation and management development committee reviewed the
following relevant features of:
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Our annual incentive program, including (i) the selection of appropriate performance
metrics, (ii) the focus on collective rather than individual behaviors, (iii) the process by which the compensation and management development committee establishes target bonus
opportunities as well as threshold, target, and maximum performance levels, (iv) the consistency of our short-term incentive practices with the practices at comparable companies, (v) the
control environment within which business decisions are made, (vi) the periodic reporting to the compensation and management development committee regarding corporate performance,
(vii) the discretion the compensation and management development committee has retained to adjust annual incentive payments under appropriate circumstances, and (viii) the provisions of
our "clawback" policy;
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Our long-term incentive program, including (i) the levels of common stock ownership and
equity-based awards held by our executive officers, (ii) the use of RSUs and PRSUs in making stock-based awards to executive officers, (iii) the consistency of our long-term incentive
practices with the practices at comparable companies, and (iv) the limitations on trading, hedging, and pledging our stock imposed by our stock ownership guidelines and our Policy on Insider
Trading;
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Our change in control benefits, including the facts that the change in control agreements with
our executive officers are (i) intended to provide some level of income continuity for an executive officer should his or her employment be terminated by us without cause or by him or her for
good reason in connection with a change in control, (ii) designed to avoid unwanted management turnover in the event of a potential change in control, and (iii) designed to ensure that
the executive officer's personal interests will remain aligned with the interests of our shareholders in the event of a potential change in control; and
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Our other awards, plans,
programs, policies, and practices, including (i) the
appropriateness of the incentives created thereby, (ii) the focus on collective rather than individual behaviors, (iii) the control environment, and (iv) the absence of personal
objectives and direct financial incentives with respect to sales, raw materials procurement and transactions involving natural gas derivatives.
Based
on this review, the compensation and management development committee determined that the company's compensation and benefits program balances risk and potential reward in a manner that is
appropriate to the circumstances and in the best interests of the company's shareholders over the long term.
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Proposal 4 Shareholder Right to Act by Written Consent
Resolved, Shareholders request that our board of directors undertake such steps as may be necessary to permit written consent by shareholders entitled to cast
the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. This written consent is to be
consistent giving shareholders the fullest power to act by written consent consistent with applicable law. This includes shareholder ability to initiate any valid topic for written consent.
This
proposal topic won majority shareholder support at 13 major companies in a single year. This included 67%-support at both Allstate and Sprint. Hundreds of major companies enable shareholder
action by written consent. This proposal topic would have received a vote still higher than 67% at Allstate and Sprint if more shareholders at these 2 companies had access to independent proxy voting
advice.
This
proposal topic also won 44%-support at Capital One Financial in 2017 which then increased to 56%-support in 2019.
The
right for shareholders to act by written consent is gaining acceptance as a more important right than the right to call a special meeting. This seems to be the conclusion of the Intel Corporation
(INTC) shareholder vote at the 2019 Intel annual meeting.
The
directors at Intel apparently thought they could divert shareholder attention away from written consent by making it less difficult for shareholders to call a special meeting. However Intel
shareholders responded with greater support for written consent in 2019 compared to 2018.
Also
CF Industries may not have a meaningful right for shareholders to call a special meeting. The 25% long stock ownership threshold to call a special meeting can be a 50% long stock ownership
threshold to call a special meeting for all practical purposes after company attorneys do the screening out process. Plus our directors further restricted the original shareholder right to call a
special meeting in April 2018.
The
2019 CF Industries proxy hyped the "shareholder outreach campaigns" of CF Industries. Such campaigns apparently did not foresee that CF Industries executive pay would be rejected by 28% of shares
in 2019 when a 5% rejection is the norm for a well performing company. This 28% rejection also does not reflect well on Stephen Hagge who chaired the CF Industries executive pay committee.
The
expectation is that, once this proposal is adopted, shareholders would not need to make use of this right of written consent because its mere existence will act as a guardrail to help ensue that
our company is better overseen by our Directors. Our Directors will want to avoid shareholder action by written consent and will thus have more of an incentive to improve their oversight
responsibility.
Please
vote yes:
Shareholder Right to Act by Written Consent Proposal 4
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THE BOARD'S STATEMENT IN OPPOSITION
The Board unanimously recommends a vote AGAINST this proposal.
The Board has given careful consideration to the shareholder proposal regarding the right of shareholders to act by written consent and to the rejection by
the company's shareholders of a substantially similar proposal submitted by the same proponent at the 2015, 2016 and 2019 annual meetings of shareholders. The Board continues to believe that the
actions requested by the proponent are not in the best interests of the company and its shareholders. Moreover, the Board believes that implementation of the proposal is unnecessary given the ability
of holders of 25% or more of the company's outstanding common stock to call a special meeting of shareholders and in light of the company's responsiveness to shareholders on matters of corporate
governance.
The
company's certificate of incorporation requires actions that are subject to a vote of the company's shareholders to be considered at a meeting of shareholders. This requirement assures that all
shareholders receive advance notice of the proposed action and have an
opportunity to discuss it and consider all points of view. In contrast, the proposal calls for the Board to take steps necessary to permit shareholder action by written consent, which would allow
critical actions to be approved by holders of a bare majority of the company's outstanding common stock without notice to other shareholders and without an opportunity for discussion at a meeting of
shareholders. This proposal, if adopted, could therefore result in action being taken without the knowledge or participation of many shareholdersparticularly smaller
shareholdersthereby disenfranchising those shareholders, while enabling other short-term or special-interest investors to approve proposals that are not in the best interests of all
shareholders. Allowing shareholder actions by written consent could also result in duplicative or contradictory written consents being circulated at the same time, wasting resources, confusing
shareholders and hindering the ability of management and the Board to ensure the orderly and efficient conduct of the company's affairs. Because of such deficiencies, the Board believes that the
written consent process is not appropriate for a widely-held public company like CF Industries.
In
2014, the company amended its bylaws and, with shareholder approval, its certificate of incorporation to grant holders of not less than 25% of the company's outstanding common stock the right to
call a special meeting of shareholders. This right to call special meetings allows shareholders to propose actions without waiting for the company's next annual meeting. Shareholder action taken at a
special meeting is preferable to action by written consent, because a meeting allows all shareholders to participate in, and discuss the merits of, a proposed action, and allows the Board to make a
considered recommendation about the action. Shareholder action by means of a shareholder-initiated special meeting is thus better suited than shareholder action by written consent to a culture of
transparency and good corporate governance, and the ability of shareholders to call a special meeting makes unnecessary the written consent procedure contemplated by the proposal. The provisions of
the company's bylaws and certificate of incorporation, including the 25% ownership threshold, under which shareholders may call a special meeting (the "Special Meeting Provisions") are designed to
assure that shareholders have a meaningful right to call a special meeting while protecting against the risk that a small minority of shareholders with narrow or special interests could request one or
more special meetings that could impose unnecessary costs on the company and disrupt the company's business. In April 2018, the Board amended the Special Meeting Provisions under the company's bylaws
to expand the circumstances under which shareholders may require the company to call a special meeting of shareholders. Shareholders ratified the Special Meeting Provisions at the 2018 annual meeting
of shareholders in May 2018, with 73% of votes cast voting in favor of ratification.
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The
Board further believes that the company's strong corporate governance practices make adoption of this proposal unnecessary. In addition to giving shareholders the right to call special meetings,
the company's corporate governance practices already provide transparency and accountability of the Board to all of the company's shareholders. The company has demonstrated accountability and
responsiveness to the views and concerns of shareholders by
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maintaining an independent chairman of the Board and separate chief executive officer;
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declassifying the Board;
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implementing majority voting in uncontested elections of directors;
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adopting a "proxy access" right for nominating directors;
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eliminating all supermajority voting provisions from our certificate of incorporation and our bylaws;
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adopting a policy whereby, if the Board adopts a shareholder rights plan without prior shareholder approval, the Board will submit the
shareholder rights plan to the company's shareholders for ratification, or the shareholder rights plan must expire, within one year of such adoption; and
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establishing shareholders' existing right to call special meetings.
We
value the views of, and regularly communicate with, our shareholders on a variety of topics, such as our financial performance, corporate governance, executive compensation, and related matters.
The Board has established a process to receive communications from shareholders, whereby shareholders may contact any member (or all members) of the Board outside the annual meeting cycle. See
"Corporate Governance Communications with Directors." In addition, as discussed in the sections of this proxy statement under the headings "Proxy Statement
Summary Shareholder Engagement" and "Compensation Discussion and
Analysis - Shareholder Engagement," we conduct shareholder outreach campaigns in the spring and in the fall.
The
Board believes that the company's current governance structure strikes an appropriate balance between permitting shareholders to raise important matters at any time and ensuring that all
shareholders are afforded an opportunity for meaningful participation in a deliberative and democratic process based on accurate and complete public disclosure. Consistent with its current practice,
the Board will continue to evaluate appropriate corporate governance measures and changes to the company's governance structure, policies and practices that it believes will serve the best interests
of the company and its shareholders.
For these reasons, the Board unanimously recommends that you vote AGAINST the proposal.
THE PROPOSAL IS ADVISORY IN NATURE, AND APPROVAL OF THE PROPOSAL WOULD NOT IN ITSELF GIVE SHAREHOLDERS THE RIGHT TO ACT BY WRITTEN CONSENT. SUCH APPROVAL WOULD ONLY SERVE AS A
RECOMMENDATION TO THE BOARD. IF THE PROPOSAL IS NOT PROPERLY PRESENTED BY THE PROPONENT AT THE ANNUAL MEETING, IT WILL NOT BE VOTED UPON.
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ANNUAL MEETING INFORMATION
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Why did I receive these proxy materials?
We are providing these proxy materials in connection with the solicitation by the board of directors of CF Industries Holdings, Inc. of proxies to be
voted at our 2020 Annual Meeting of Shareholders and at any adjournment or postponement of such meeting.
You
are invited to attend the Annual Meeting on Wednesday, May 20, 2020, commencing at 10:00 a.m., local time. The Annual Meeting will be held at the Marriott Suites Deerfield,
2 Parkway North, Deerfield, Illinois 60015.
We
intend to hold our Annual Meeting in person. However, we are actively monitoring the coronavirus (COVID-19) situation. We are sensitive to the public health and travel concerns our shareholders may
have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold our Annual Meeting in person, we will announce alternative
arrangements in advance of the Annual Meeting, and details on how to participate will be issued by press release available on our website at https://www.cfindustries.com and filed with the Securities
and Exchange Commission.
Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?
Pursuant
to rules adopted by the SEC, the company has elected to provide access to its proxy materials via the Internet. Accordingly, the company is sending a Notice of Internet
Availability of Proxy Materials to the company's shareholders. All shareholders will have the ability to access the proxy materials on the website referred to in the notice or request a printed set of
the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found in the notice. In
addition, shareholders may request proxy materials in printed form by mail or electronically by email on an ongoing basis. The company encourages shareholders to take advantage of the availability of
the proxy materials on the Internet to help reduce the expenses incurred by the company with respect to its annual meetings.
How can I get electronic access to the proxy materials?
The Notice of Internet Availability of Proxy Materials will provide you with instructions regarding how to:
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view on the Internet the company's proxy materials for the Annual Meeting; and
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instruct the company to send future proxy materials to you by email.
Choosing
to receive future proxy materials by email will save the company the cost of printing and mailing documents to you. If you choose to receive future proxy materials by email, you will receive
an email message next year with instructions containing a link to those materials and a link to the proxy voting website. Your election to receive proxy materials by email will remain in effect until
you terminate it.
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What will be voted on at the Annual Meeting?
At the Annual Meeting, shareholders will be asked to:
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elect as directors the eleven nominees named in this Proxy Statement;
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consider and approve an advisory resolution regarding the compensation of our named executive officers;
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ratify the selection of KPMG LLP as our independent registered public accounting firm for 2020;
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act upon one shareholder proposal regarding the right to act by written consent, if properly presented at the Annual Meeting; and
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consider any other business properly brought before the Annual Meeting.
How many votes do I have?
You will have one vote for every share of CF Industries common stock you owned on March 27, 2020 (the record date). If you were a shareholder of record
as of the record date, you will retain your right to vote, even if you sell your shares after the record date.
How many votes can be cast by all shareholders?
The total number of votes that can be cast by all shareholders is 213,796,987, consisting of one vote for each share of common stock that was outstanding on
the record date. There is no cumulative voting.
How many votes must be present to hold the Annual Meeting?
A majority of the votes that can be cast must be present for us to hold the Annual Meeting. We urge you to vote by proxy even if you plan to attend the Annual
Meeting, so that we will know as soon as possible that enough votes will be present.
How do I vote?
You can vote either in person at the Annual Meeting or by proxy, whether or not you attend the Annual Meeting.
To
vote by proxy, you must either:
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if you request printed copies of the proxy materials, fill out the proxy card, date and sign it, and return it in the postage-paid envelope
included with the printed materials;
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use the Internet site listed on the Notice of Internet Availability of Proxy Materials and proxy card; or
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call the toll-free telephone number listed on the proxy card.
The
Internet and telephone voting procedures set forth on the Notice of Internet Availability of Proxy Materials and proxy card are designed to authenticate shareholders' identities, to allow
shareholders to provide their voting instructions, and to confirm that their instructions have been properly recorded. If you vote through the Internet or by telephone, you should not return your
proxy card.
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To
ensure that your vote is counted, please remember to submit your vote so that we receive it at least one business day prior to the Wednesday, May 20, 2020 Annual Meeting.
If
you hold your CF Industries common stock in "street name" with a bank, brokerage firm, dealer, trust company, or other nominee, only they can exercise your right to vote with respect to your
shares. Please follow the instructions provided to you by your bank, brokerage firm, dealer, trust company, or other nominee to authorize a proxy to vote your shares. If you want to vote in person at
the Annual Meeting and you hold your stock in street name, you must obtain a "legal" proxy from your broker and bring that proxy to the Annual Meeting.
Can I change my vote?
Yes. You may revoke your proxy at any time before it is voted at the annual meeting by either:
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sending a new proxy card with a later date;
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sending a written notice of revocation to our corporate secretary at the address of our principal executive offices on the Notice of Annual
Meeting accompanying this Proxy Statement;
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voting through the Internet or by telephone at a later date; or
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attending the Annual Meeting, requesting that your previously submitted proxy not be used, and voting in person.
What if I don't specify how my shares are to be voted?
Whether you vote by mail, telephone, or the Internet, your shares will be voted in accordance with your instructions. If you return a signed proxy card
without indicating your vote or when voting on the Internet or by telephone you indicate that you wish to vote as recommended by the Board, your shares will be
voted:
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FOR the election of the eleven director nominees named in this Proxy Statement,
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FOR the advisory resolution on the compensation of our named executive officers,
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FOR ratification of the selection of KPMG as our independent registered public accounting firm
for 2020, and
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AGAINST the shareholder proposal regarding the right to act by written consent.
How many votes are required to elect directors and to adopt the other proposals?
With respect to Proposal 1, directors receiving a majority of votes cast (number of shares voted "for" a director must exceed the number of shares voted
"against" that director) will be elected as a director.
For
each of Proposals 2, 3, and 4 and any other matter (other than Proposal 1) properly brought before the meeting, an affirmative vote of a majority of shares present in person or represented
by proxy at the Annual Meeting and entitled to vote thereon is required in order to approve such proposal.
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Can my shares be voted if I don't vote by proxy and don't attend the Annual Meeting?
If you are a shareholder of record, you can vote by proxy or by attending the Annual Meeting and voting in person. If you don't vote your shares held in
street name, your broker can vote your shares on the ratification of the selection of KPMG as our independent registered public accounting firm. Your broker is not permitted to vote your shares on the
election of the director nominees or any other matter on the agenda, other than the ratification of the selection of KPMG as our independent registered public accounting firm, without receiving
instructions from you. This is referred to as a "broker non-vote." If you hold your shares in your own name, you must vote such shares in person or by proxy or they will not be voted.
How are my votes counted?
With respect to Proposal 1, you may either vote for or against or you may abstain with respect to the election of each nominee for the Board. If you abstain
with respect to any nominee, your shares will be counted for purposes of establishing a quorum, but will not be counted as votes cast with respect to the election of such nominee and, accordingly,
will have no effect on the election of that nominee.
For
each of Proposals 2, 3, and 4, you may vote for or against or you may abstain with respect to the approval of the applicable proposal. If you abstain from voting on any of these proposals, your
shares will be counted as present for purposes of establishing a quorum, and the abstention will have the same effect as a vote against that proposal.
Broker
non-votes on any matter will be counted for purposes of establishing a quorum. Broker non-votes will have no effect on the outcome of the voting on Proposals 1, 2, 3, and 4.
Could other matters be decided at the Annual Meeting?
We don't know of any other matters that will be considered at the Annual Meeting. If any other matters arise at the Annual Meeting, the proxies will be voted
at the discretion of the persons named in the proxy.
What happens if the Annual Meeting is postponed, adjourned, or delayed?
Your proxy will still be good and may be voted at the postponed, adjourned or delayed meeting. You will still be able to change or revoke your proxy until it
is voted.
What procedures must I follow to attend the Annual Meeting?
You will need proof of ownership of CF Industries stock to enter the Annual Meeting. When you arrive at the Annual Meeting, you may be asked to present photo
identification, such as a driver's license. This will suffice if you hold your shares in your own name. If you hold your stock through a securities broker (that is, in street name), a recent brokerage
statement or letter from your broker is an example of proof that you are the beneficial owner of such shares. No large bags, briefcases, or packages will be permitted in the Annual Meeting and
shareholders will not be permitted to use any cameras (including cell phones with photographic capabilities), recording equipment or electronic devices at the meeting.
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IMPORTANT ADDITIONAL INFORMATION
Cost of Annual Meeting and Proxy Solicitation
We pay the cost of the Annual Meeting and the cost of soliciting proxies. In addition to soliciting proxies by mail, we may solicit proxies by personal
interview, telephone, and similar means. None of our directors, officers, and employees will be specially compensated for these activities. We also intend to request that brokers, banks, and other
nominees solicit proxies from their principals, and we will reimburse the brokers, banks, and other nominees for certain expenses they incur for such activities.
We
have also retained Innisfree M&A Incorporated ("Innisfree") for consulting and solicitation services in connection with the Annual Meeting, for which Innisfree is anticipated to receive a fee of
approximately $25,000. We have also agreed to reimburse Innisfree for out-of-pocket expenses and to indemnify Innisfree against certain liabilities and expenses, including legal fees and related
charges.
Available Information
CF Industries makes available free of charge on or through the Investor Relations section of its website, www.cfindustries.com, its Annual Reports to Shareholders, Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, Proxy Statements and forms of proxy and all amendments to those reports as soon as reasonably practicable after such material is filed electronically with, or furnished to, the SEC.
The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that
file electronically with the SEC.
CF
Industries will provide, without charge to any shareholder upon written request to our corporate secretary at the address of our principal executive offices on the Notice of Annual
Meeting accompanying this Proxy Statement, a copy of its Annual Reports to Shareholders, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
Proxy Statements and forms of proxy and all amendments to those reports.
DEADLINES FOR SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS, SHAREHOLDER NOMINATED DIRECTOR CANDIDATES AND OTHER BUSINESS OF SHAREHOLDERS
Proposals to be Considered for Inclusion in CF Industries' Proxy Materials
Under SEC rules, a shareholder who intends to present a proposal at the 2021 annual meeting of shareholders and who wishes the proposal to be included in our
proxy statement for that meeting pursuant to Rule 14a-8 under the Exchange Act must submit the proposal in writing to our corporate secretary at the address of our principal executive offices
on the Notice of Annual Meeting accompanying this Proxy Statement. The proposal must be received no later than December 9, 2020 (120 days before April 8, 2021, the one year
anniversary of the anticipated mailing date of this Proxy Statement).
Director Nominations for Inclusion in CF Industries' Proxy Materials (Proxy Access)
Under the proxy access provisions of our bylaws, certain shareholders and/or shareholder groups will be permitted to include shareholder nominated director
candidates in our proxy materials for the 2021 annual meeting of shareholders. Requests pursuant to such proxy access provisions to include shareholder nominated director candidates in our proxy
materials for an annual meeting in 2021 must be delivered to, or mailed to and received by, our corporate secretary at the address of our principal executive offices on the Notice of Annual
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Meeting
accompanying this Proxy Statement no earlier than November 9, 2020 (150 days before April 8, 2021, the one year anniversary of the anticipated mailing date of this Proxy
Statement) and no later than December 9, 2020 (120 days before April 8, 2021, the one year anniversary of the anticipated mailing date of this Proxy Statement). See the discussion
in Proposal 1 under the heading "Proxy Access" and refer to our bylaws for details about the process to include shareholder nominated director candidates in our proxy materials.
Other Shareholder Proposals and Director Nominations (Advance Notice Provisions)
Our bylaws require that written notice of (i) proposals intended to be presented by a shareholder at the next annual meeting, but that are not intended
for inclusion in our proxy statement for that meeting pursuant to Rule 14a-8, and (ii) nominees for the election of directors intended to be made by a shareholder at the next annual
meeting be delivered to our corporate secretary at the address of our principal executive offices on the Notice of Annual Meeting accompanying this Proxy Statement no earlier than January 20,
2021 and no later than February 19, 2021. Such advance notice deadline will also be the deadline for a proposal to be considered "timely" for purposes of Rule 14a-4(c) under the Exchange
Act. To be in proper written form, such a notice must set forth the information prescribed in our bylaws. You can obtain a copy of our bylaws by writing our corporate secretary at the address of our
principal executive offices on the Notice of Annual Meeting accompanying this Proxy Statement.