3M CO
For the period ended May 12, 2026. Filed Mar 25, 2026.
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May 12, 2026 · Filed Mar 25, 2026
Contents
Consistent and shareholder-aligned framework to assess performance metric adjustments
Consistent and shareholder-aligned framework to assess performance
metric adjustments
When reviewing and approving performance metric adjustments, the Committee is guided by the principles reflected in the
Annual Incentive & Performance Share Exclusion Policy (referred to as the “Exclusion Policy”), which was last updated by
the Committee in 2021. The Committee reviews potential adjustments periodically throughout the year, consistent with the
Exclusion Policy.
In approving incentive program payouts based on 2025 performance, the Committee considered various items, including
write-downs and losses on sale related to the divestiture of the precision grinding and finishing business and fused silica
business; costs associated with 3M's transformation program, intended as a structural redesign of longer-term
manufacturing, distribution, and business process services and locations; certain significant litigation matters; changes in
the value of 3M’s remaining ownership in Solventum; the impact of new tariffs enacted in 2025; and 3M’s decision to exit
PFAS manufacturing by the end of 2025.
As part of assessing the appropriateness of the type and magnitude of the 2025 adjustments and the resulting
performance attainments and payouts, the Committee considered a range of factors, including the following:
| Factor | Committee’s Perspective | ||
| Consistency with financial reporting results and the Company’s financial performance | The Exclusion Policy was applied to align our 2025 financial performance results used for compensation purposes with the non-GAAP performance results used in our financial reporting, earnings guidance, and other investor communications. Both our 2025 performance targets and results excluded special items that the Committee deemed unrelated to the Company’s operational performance for the corresponding measurement period. These exclusions included the impact of net costs from significant litigation. While such items may be anticipated, the Committee excludes them from both the performance goals and results, as they do not reflect the Company’s core operating performance in a given year, nor its ongoing business operations. This approach holds the management team accountable for performance results that accurately reflect the Company’s performance, while avoiding unjust rewards or penalties for outcomes that are beyond the management team’s control. | ||
| Alignment with shareholders | The Committee also considered that the litigation charges were largely already reflected in the Company’s stock price performance, which significantly impacted the realizable compensation of certain executives for multiple years. | ||
| Positive incentives | Failure to exclude litigation settlements and make other adjustments, such as those associated with the PFAS manufacturing exit, could disincentivize management from taking action when it is in the best interests of shareholders but would adversely impact their incentive compensation payouts. | ||
| Relationship with decision-making of the current executives | The litigation adjustments were the result of multi-year lawsuits that stem from events taking place many years, even decades prior, unrelated to decision-making of the current management team, including Mr. Brown, Mr. Maheshwari, and Ms. Bauer, each of whom joined 3M in 2024. | ||
| Retention of executive leadership team | The Committee determined that it was critical to continue to appropriately incentivize and retain the recently refreshed executive leadership and broader senior management team to drive the Company’s transformation strategy, without penalizing pay with legacy manufacturing and litigation impacts while continuing to encourage long-term shareholder value creation. |
In completing its assessment of potential 2025 adjustments, the Committee accepted management’s recommendation not
to exclude the impact of new tariffs enacted in 2025. In January 2026, the Committee then reviewed and approved the
exclusion ofthe following special items for purposes of the 2025 AIP and performance share award payout calculations:
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Executive compensation
Write-down and loss on sale related to divestiture of the precision grinding and finishing business and fused silica
business;
Costs associated with 3M's transformation program, intended as a structural redesign of longer-term manufacturing,
distribution, and business process services and locations;
Net costs for significant litigation related to 3M's respirator mask/asbestos (which include Aearo and non-Aearo items),
PFAS-related other environmental, and Combat Arms Earplugs matters;
Gains in the value of 3M’s remaining ownership in Solventum; and
PFAS manufacturing exit impacts.
The approved adjustments to 2025 performance results increased the AIP payout (before any adjustment for individual
performance or application of the Strategic and Sustainability Modifier) from 46.7 percent to 108.9 percent for the Named
Executive Officers whose payout was calculated on the basis of the Company’s overall performance and increased the
percent of target shares to be paid out on the 2023 performance share awards from 99.8 percent to 118.4 percent.
The Committee believes its approach to performance adjustments and its application of adjustments to the 2025
performance results is balanced, aligned with our shareholder interests and experience, in line with market practice
related to adjustment policies for litigation settlement charges and other special items, and essential to supporting the
Company’s value creation strategy and efforts to reduce risk and uncertainty, while incentivizing the management team to
continue advancing the long-term shareholder value creation strategy.
Status of performance share awards
The Company’s legacy approach to measuring long-term results associated with performance shares issued in 2023 and
2024 resulted in an overlap of performance periods. For example, the performance goals for 2023 performance share
awards relate to the years 2023, 2024, and 2025. Similarly, the performance goals for 2024 performance share awards
relate to the years 2024,2025, and 2026, as shown below. Performance against the goals established for the 2023 and
2024 performance share awards is measured separately for each calendar year during the measurement period, with
each year weighted as shown below in parenthesis. This structure was intended to reduce motivation to maximize
performance in any one period by providing the highest-level rewards only by building sustainable long-term results.
In response to shareholder feedback, the Committee revised the design of the 2025 performance share awards to use a
single measurement period for the entire three-year performance period spanning 2025, 2026, and 2027, with results
measured cumulatively.
| 2023 | 2024 | 2025 | 2026 | 2027 | |
| 2023 PSA | Year 1 (50%) | Year 2 (30%) | Year 3 (20%) | ||
|---|---|---|---|---|---|
| 2024 PSA | Year 1 (50%) | Year 2 (30%) | Year 3 (20%) | ||
| 2025 PSA | 2025-2027 3-year Performance Period (100%) | ||||
The Committee periodically reviews the Company’s performance against the goals established throughout the applicable
measurement period. The graphics and tables below summarize the status of the 2023 and 2024 performance share
awards held by the Named Executive Officers, as of December 31,2025. Given the three-year cumulative goals set for
the 2025 performance share awards, information regarding performance against the goals set for those awards will be
provided following completion of the three-year performance period.
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Executive compensation
Percent of target performance shares accrued by year*
2023 performance
share awards
118.4% Total (actual)
2024 performance
share awards
*Amounts shown reflect the percent of target shares accrued based on the performance results for the specified year. The sum of the
percentages accrued for each year during the performance period may differ slightly from the final total payout reported due to
rounding.
The final payout percentage for each performance share award issued in 2023 and 2024 equals the sum of the payout percentages for each year during the performance period based on the Company’s performance against the financial goals approved by the Committee at the beginning of the performance period.For performance shares issued in 2025, the performance results will be measured upon completion of the full three-year performance cycle, ending on December 31, 2027, without interim performance measurement opportunities.
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2023 PSA (2023-2025 measurement period)
| Payoutlevel(% oftarget) · Performanceyear andweighting · Actualresult(1) · Percent of target performance shares accrued | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Performance levels for... | ||||||||||
| 2023 · 2024 · 2025 | ||||||||||
| Earnings per Share Growth | Threshold(2) | -6.0% | 10.0% | 2.0% | 6.7% | Year 1 – 50% | -0.4% | 16.7% | ||
| Target | -4%-0% | 14.0% | 5.0% | 33.3% | Year 2 – 30% | 20.0% | 20.0% | |||
| Maximum | 1.0% | 18.0% | 8.0% | 66.7% | Year 3 – 20% | 11.2% | 13.3% | |||
| Relative Organic Sales Growth(4) | Threshold(2) | -2.9% | -1.5% | -1.5% | 6.7% | Year 1 – 50% | -2.8% | 4.2% | ||
| Target | -1.4%-0% | —% | —% | 33.3% | Year 2 – 30% | 0.9% | 16.0% | |||
| Maximum | 0.5% | 1.5% | 1.5% | 66.7% | Year 3 – 20% | -0.4% | 5.2% | |||
| Free Cash Flow Growth | Threshold(2) | -2.0% | 2.0% | 2.0% | 6.7% | Year 1 – 50% | 30.3% | 33.3% | ||
| Target | 3.0% | 5.0% | 5.0% | 33.3% | Year 2 – 30% | 4.9% | 9.7% | |||
| Maximum | 8.0% | 8.0% | 8.0% | 66.7% | Year 3 – 20% | 1.5% | —% | |||
| Total | 118.4% | |||||||||
2024 PSA (2024-2026 measurement period)(1)
| Payoutlevel(% oftarget) · Performanceyear andweighting · Actualresult(1) · Percent of target performance shares accrued | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Performance levels for... | |||||||||
| 2024(3) | 2025/2026(4) | ||||||||
| Earnings per Share Growth | Threshold(2) | 10.0% | 1.0% | 6.7% | Year 1 – 50% | 20.0% | 33.3% | ||
| Target | 14.0% | 3.25% | 33.3% | Year 2 – 30% | 11.2% | 20.0% | |||
| Maximum | 18.0% | 5.5% | 66.7% | Year 3 – 20% | |||||
| Relative Organic Sales Growth(5) | Threshold(2) | -1.0% | -1.0% | 6.7% | Year 1 – 50% | 0.9% | 31.7% | ||
| Target | —% | —% | 33.3% | Year 2 – 30% | -0.4% | 6.8% | |||
| Maximum | 1.0% | 1.0% | 66.7% | Year 3 – 20% | |||||
| Free Cash Flow Growth | Threshold(2) | $3,430 | 1.0% | 6.7% | Year 1 – 50% | $4,309 | 33.3% | ||
| Target | $3,810 | 3.25% | 33.3% | Year 2 – 30% | 1.5% | 3.8% | |||
| Maximum | $4,195 | 5.5% | 66.7% | Year 3 – 20% | |||||
| Total | 128.9% | ||||||||
(1)Results reflect certain adjustments that the Committee believed were appropriate to better reflect the Company’s performance during
the performance period, including to reflect the 2024 separation of the Health Care business. See “Consistent and shareholder-
aligned framework to assess performance metric adjustments” beginning on page 69 for a discussion of the factors reviewed by the
Committee when considering adjustments to the Company’s 2025 performance results. See Appendix A to this Proxy Statement for a
reconciliation of Earnings per Share Growth, Organic Sales Growth, Free Cash Flow, and Free Cash Flow Growth used for
compensation purposes to our results for the most directly comparable GAAP financial measures. For purposes of calculating growth
for any given fiscal year, performance for the fiscal year is compared to the prior year’s actual attainment, except that, for purposes of
calculating growth results for 2024, adjustments were made to the prior year’s actual attainments to reflect the separation of our
Health Care business in April 2024.
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Executive compensation
(2)No payout is provided for below threshold performance.
(3)2024 PSA goals were set to align Relative Organic Sales Growth in line with macroeconomic indicators at the start of 2024, with
double digit growth in earnings in year 1 and free-cash flow targets reflecting historical trends. Thereafter, earnings and free cash flow
were expected to grow in line with the Company’s long-term planning outlook.
(4)For 2025 and 2026, performance hurdles reflect year-over-year growth rate from the prior year’s actual attainment.
(5)The reported level of performance for Relative Organic Sales Growth has been determined, in part, using a weighted blend of
Worldwide IPI and Worldwide GDP, as reported by S&P Global Market Intelligence on or about January 15 of the year following
completion of the applicable performance year.
Benefits and perquisites
The Company’s Named Executive Officers participate in the same health care, disability, life insurance, pension, and
401(k) benefit plans available to most of the Company’s U.S. employees. They also are eligible to receive certain
additional benefits and perquisites that are provided for the executives’ convenience (relocation assistance for moves
required by 3M, financial planning assistance, and meals when attending to 3M business, for example), financial security
(nonqualified deferred compensation plans and additional group term life insurance coverage, for example), personal
security (home security equipment/monitoring, for example) or personal health (physical exams and on-site exercise
facilities, for example). Our Named Executive Officers and other employees, as well as their spouses and significant
others, also may receive Company tickets for sporting or other events and 3M-branded merchandise. The Company
believes that the benefits and perquisites offered generally are similar to those of our peers and assist in attracting and
retaining executives. In some cases, there is no incremental cost to the Company associated with providing these
additional benefits and perquisites (certain tickets to events, for example) or the executives pay all or a substantial portion
of the incremental costs incurred by the Company (on-site exercise facilities, for example).
These additional benefits and perquisites generally are provided on a consistent basis only to a limited group of our most
senior U.S. employees (including all of the Named Executive Officers), although the need for enhanced personal security
equipment and monitoring is assessed and equipment/services provided, if appropriate, only to our Chief Executive
Officer.
The Company also operates aircraft that are used by our senior officers and other employees to conduct Company
business. For personal security reasons, the Board of Directors requires our Chief Executive Officer to use private aircraft
chartered, leased, or owned by the Company (referred to as “3M Aircraft”), or other private aircraft preapproved by 3M
Security, for all air travel, both business and personal. When our Chief Executive Officer travels on 3M Aircraft, his spouse
and other guests also may accompany him.
The incremental cost to the Company of providing these additional benefits to the Named Executive Officers is reflected in
the All Other Compensation Table. No tax gross-ups are provided on any of these additional benefits and perquisites other
than taxable relocation benefits.
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