Huntsman CORP
For the period ended May 2, 2024. Filed Mar 22, 2024.
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What shareholders are asked to vote on at a company's meeting. It is where to find what directors and top executives are paid, and who owns the most shares.
May 2, 2024 · Filed Mar 22, 2024
Contents
Compensation Program Highlights
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EXECUTIVE SUMMARY
The Compensation Committee believes that the design of our executive compensation program achieves its primary objective of aligning the financial interests of our NEOs with the creation of long-term stockholder value, as reflected by the pay outcomes in 2023.
The remainder of this CD&A provides additional information about the performance-based design of our executive compensation program, and how the Compensation Committee makes decisions to achieve our program objectives.
COMPENSATION PROGRAM HIGHLIGHTS
| | COMPANY PERFORMANCE HIGHLIGHTS | | | | COMPENSATION STRUCTURE AND DECISIONS | |
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| | 2023 was a challenging year for our Company due to weak global markets and continued chemical industry destocking. Within this environment, we delivered a solid performance on key financial, strategic, and ESG initiatives. Points of emphasis include: • Financial: Delivered $472 million of adjusted EBITDA and $21 million in free cash; realized $297 million in cost improvement through our Optimization Program; maintained investment grade credit ratings with Moody’s, S&P and Fitch; and returned approximately $520 million to stockholders through dividends and share repurchases • Total Shareholder Return: Achieved a cumulative TSR of 8.7% for the three-year period ended December 31, 2023, which ranked at the 50th percentile among our 2021 Performance Peers(1); completed $350 million in share repurchases, building on the approximately $1.8 billion of share repurchases we completed between 2018 and 2022; and increased the dividend by 12% • Strategic: Completed the sale of our Textile Effects Division consistent with our focus on portfolio enhancement; expanded our global business services centers (GBS) in Latin America and Eastern Europe • ESG: Published our 12th annual sustainability report showcasing disclosures in line with TCFD, CDP, SASB and GRI reporting standards; improved our Sustainalytics, MCSI and CDP ratings year-over-year; greenhouse gases and water usage validated by a third party-limited assurance; and outperformed both personal and process safety goals | | | | The primary objective of our executive compensation program is to align the financial interests of our NEOs with the creation of long-term stockholder value. Key features of the program include: • Annual and long-term incentive plans designed to align executives’ pay with Company and share price performance • Robust compensation benchmarking against a peer group • Comprehensive policies and practices intended to create a sound compensation governance process and support well-informed decision-making During 2023, the Compensation Committee focused on responding appropriately to the challenging global economic environment consistent with our pay-for-performance philosophy. Key decisions included: • Comprehensive assessment and realignment of our CEO’s target compensation mix to have more pay at risk and better aligned with peer group practices. For our CEO, this resulted in the following actions: • Reducing his base salary by 23.5% from prior year • Increasing the target value of his long-term stock incentives by 19% • Increasing his cash performance award maximum potential from 2.0 to 2.5 times target • Exercise of Committee discretion to reduce our executive officers’ annual cash performance awards in 2023: • The Company did not attain the threshold goals for EBITDA and free cash flow but exceeded its target on the Optimization Program. In response, the Committee exercised its discretion to reduce the payout of the 2023 annual cash performance awards to our executive officers by half the amount that would have been payable under the preset goals and capped any such award at $250,000. • With these actions, the Committee reduced our CEO’s cash award to 14% of his target and our other NEOs’ awards were reduced to between 29% and 42% of their respective targets. | |
(1)
For additional discussion of our three-year cumulative TSR achievement and our 2021 Performance Peers, see “Executive Compensation Decisions—Long-Term Equity Compensation—Payout of 2021 Performance Share Unit Awards.”
Our Response to Stockholder Feedback
We engage in a continuous dialogue with our stockholders and have made numerous changes over the years in response to stockholder feedback.
At our 2023 annual meeting, the say-on-pay proposal received the support of approximately 97% of the stockholders casting their votes. This demonstrates our stockholders’ overall support of our compensation programs. Both looking forward and back, the Compensation Committee carefully considers the say-on-pay results and the stockholder feedback we received in determining executive compensation.
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In response to stockholder feedback, the Compensation Committee has consistently implemented improvements that further align incentive payouts with the creation of stockholder value. Specifically, the weighting of performance share units has doubled from 30% of equity-based incentives in 2019 to 60% in 2023.
Also at our 2023 annual meeting, stockholders were asked to vote on the frequency of say-on-pay. In line with stockholder preference, the Board has approved the continuation of annual say-on-pay until the next say-on-pay frequency vote in 2029.
VAST MAJORITY OF 2023 NEO PAY REMAINS AT RISK(1)
Our executive compensation program is designed to ensure that a significant portion of each officer’s total target direct compensation is performance-based. As the charts below illustrate, for 2023, 90% of the CEO’s total target direct compensation was at risk of being tied to annual performance against preset goals and/or the performance of our stock. Comparably, 74% of total target direct compensation of our other NEOs in 2023, on average, was at risk.(2)
(1)
NEO pay refers to “total target direct compensation” which consists of (i) annual base salary, (ii) the target annual cash performance award opportunity for 2022, and (iii) the aggregate grant date fair value of long-term equity incentive awards granted in 2023. The amounts actually realized by our NEOs with respect to the annual cash performance awards and long-term equity incentive awards granted in 2023 depend, as applicable, on the level of attainment of the relevant performance goals and the value of our common stock when the awards vest or are exercised.
(2)
We consider compensation to be “at risk” if it is subject to performance-based payment vesting conditions or if its value depends on actual stock price appreciation or returns relative to peers.
REALIZABLE PAY ANALYSIS
Analyses of realizable pay provides the Compensation Committee with a tool to validate the alignment of our NEOs’ compensation with the creation of stockholder value. Realizable pay reflects the earned value of annual cash performance awards and, and the tangible incentive value of equity awards based on changes in market value. When determining the annual equity grants to our NEOs in February of each year, the Compensation Committee believes it is important to take into account not only the grant date values reported in our Summary Compensation Table, but also to consider the effect of the year-end value of our stock on those awards over time. This analysis is intended a supplement to the “Pay versus Performance” section beginning on page 69 of the proxy statement.
The chart below reflects our CEO’s total target direct compensation and realizable pay(1) for 2021, 2022, and 2023. In each of the past three years, there has been a strong positive correlation between the realizable value of our CEO’s compensation and our cumulative TSR.(2)
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(1)
Realizable pay for each year is defined as the sum of: (1) base salary, (2) annual cash performance award payout, and (3) the value of equity incentive awards granted in that year (i.e., performance share units, restricted stock and the “in the money” value of stock options) calculated using our stock price, in all cases, as of December 29, 2023 (the last trading day of fiscal year 2023).
(2)
Cumulative TSR measured using the closing stock price at the beginning and end of the performance period and slightly differs from cumulative TSR we use to determine RSU payouts since such calculation is measured using a 20-trading day stock price average at the beginning and end of the performance period to smooth out volatility.
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