Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
Check the appropriate box:
| ☐ | Preliminary Proxy Statement | |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| ☒ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material under § 240.14a-12 | |
International Flavors & Fragrances Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| ☒ | No fee required. | |||
| ☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
| (1) | Title of each class of securities to which transaction applies:
| |||
| (2) | Aggregate number of securities to which transaction applies:
| |||
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
| |||
| (4) | Proposed maximum aggregate value of transaction:
| |||
| (5) | Total fee paid:
| |||
| ☐ | Fee paid previously with preliminary materials. | |||
| ☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
| (1) | Amount Previously Paid:
| |||
| (2) | Form, Schedule or Registration Statement No.:
| |||
| (3) | Filing Party:
| |||
| (4) | Date Filed:
| |||
Table of Contents
FINANCIAL REPORT 2016 Proxy Statement for 2017 Annual Meeting of Shareholders
Table of Contents
OUR PURPOSE We are the catalyst for discoveries that spark the senses and transform the everyday OUR STRATEGIC PILLARS Innovating Firsts We seek to strengthen our position and drive differentiation in priority R&D platforms. Winning Where We Compete Our ambition is to achieve a #1 or #2 market leadership position in key markets and categories and with specific customers. Becoming Our Customers’ Partner of Choice Our goal is to attain commercial excellence by providing our customers with in-depth local consumer understanding, industry-leading innovation, outstanding service and the highest quality products. Strengthening and Expanding the Portfolio We actively pursue value-creation through partnerships, collaborations, and acquisitions within flavors, fragrances and adjacencies. OUR VALUES We are passionate We are creative We are experts at what we do We are empowered
Table of Contents
Dear Fellow Shareholders:
Table of Contents
Notice of 2017 Annual Meeting of Shareholders
| Date and Time
Wednesday, May 3, 2017 10:00 a.m. Eastern Daylight Time
Place
International Flavors & Fragrances Inc. 533 W. 57th Street, 9th Floor New York, New York 10019
Items to be Voted On
Record Date
Only shareholders of record as of the close of business on March 8, 2017 may vote at the 2017 Annual Meeting
Sincerely,
Andreas Fibig Chairman and Chief Executive Officer March 20, 2017 |
Live Audio Webcast
A live audio webcast of our 2017 Annual Meeting will be available on our website, www.iff.com, starting at 10:00 a.m. Eastern Daylight Time and a replay will also be available on our website.
Proxy Voting
It is important that your shares be represented at the 2017 Annual Meeting, regardless of the number of shares you may hold. Whether or not you plan to attend, please vote using the Internet, by telephone or by mail, in each case by following the instructions in our proxy statement. Doing so will not prevent you from voting your shares in person if you are present.
Advance Voting Methods
|
|||||||||
|
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 3, 2017:
Our Notice, Proxy Statement and 2016 Annual Report are available at www.proxyvote.com.
We are making the Proxy Statement and the form of proxy first available on or about March 20, 2017.
|
||||||||||
| ||||||||||
Elect eleven members of the Board of Directors for a one-year term expiring at the 2018 Annual Meeting of Shareholders.
Ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the 2017 fiscal year.
Approve, on an advisory basis, the compensation of our named executive officers in 2016.
Vote, on an advisory basis, on the frequency of votes on executive compensation.
Approve a French Sub-Plan under the 2015 Stock Award and Incentive Plan.
Transact such other business as may properly come before the 2017 Annual Meeting and any adjournment or postponement of the 2017 Annual Meeting.
Table of Contents
PROXY STATEMENT SUMMARY
Proxy Statement Summary
|
We provide below highlights of certain information in this Proxy Statement. As it is only a summary, please refer to the complete Proxy Statement and 2016 Annual Report before you vote. |
2016 Highlights
We Continued to Make Strategic and Financial Progress
In 2016, we continued to make strategic and financial progress. As shown below, while reported results were mixed, we achieved currency neutral growth in all of our key metrics.
| 2016 Financial Metric (GAAP) | (Dollars in Millions Except Earnings Per Share Amounts) |
Change vs. Prior Year | ||
|
Net Sales
|
$3,116
|
3%
| ||
|
Operating Profit
|
$567
|
(4)%
| ||
|
Diluted Net Earnings Per Share
|
$5.05
|
(2)%
|
We Returned an Increasing Payout to Our Shareholders
| During 2016, we accelerated the total payout ratio as a percentage of adjusted net income.
Ø Dividends – Increased dividend by 15% to provide a more competitive yield while balancing growth objectives.
Ø Share Repurchases – Executed against existing repurchase program to supplement dividend payout.
Ø Total Payout Ratio – The combination of dividend and share repurchases totaled 71% in 2016, above our targeted range of 50% to 60% of adjusted net income.* |
|
* See reconciliation of GAAP to Non-GAAP financial measures in Exhibit A to this proxy statement.
IFF | 2017 PROXY STATEMENT i
Table of Contents
PROXY STATEMENT SUMMARY
Vision 2020 Strategy
In 2015, we announced our Vision 2020 strategy, which focuses on building differentiation and accelerating profitable growth. During 2016, we continued to execute on the four pillars of this strategy with the following achievements:
| Pillar
|
2016 Achievements
| |
|
Innovating Firsts |
• Achieved growth in encapsulation-related and modulation portfolio sales
• Launched and commercialized four flavor modulators
• Commercialized four captive fragrance ingredients
| |
|
Win Where We Compete |
• Achieved growth in North America Consumer Fragrance
• Strengthened our position in Flavors North America with the acquisition of David Michael
| |
|
Become Our Customers’ Partner of Choice |
• Expanded business access through core list status with two multinational customers
• Deployed an industry-first, wind turbine at our Tilburg, Netherlands facility
• Achieved CDP “A” List rating for second consecutive year
| |
|
Strengthen and Expand our Portfolio |
• Announced the purchase of Fragrance Resources – closed in January 2017 – to further improve our market position in specialty fine fragrances
• Acquired David Michael to reinforce our differentiated service model for US middle-market customers
|
Corporate Governance Highlights
|
Our Corporate Governance Policies Reflect Best Practices
| ||
| Ø 10 of our 11 Directors are Independent
Ø Annual Election of Directors
|
Ø Annual Board and Committee Assessments
Ø Proxy Access By-Law Provisions
| |
| Ø Majority Voting and Director Resignation Policy in Uncontested Elections
|
Ø No Limitation on Shareholder Litigation | |
| Ø Diverse Board Brings Balance of Skills, Professional Experience and Perspectives
|
Ø Prohibit Short Sales or Hedging of Our Stock By Our Employees, Officers and Directors | |
| Ø 100% Attendance at Board Meetings by Incumbent Directors
|
Ø Executive Officers and Directors are Subject to Rigorous Stock Retention Guidelines | |
| Ø 93% Overall Attendance at Committee Meetings by Incumbent Directors |
Ø Independent Lead Director Facilitates and Strengthens the Board’s Independent Oversight | |
|
Ø No Exclusive Forum or Fee-Shifting Provisions |
Ø Comprehensive Executive Clawback Policy
Ø Long-Standing Commitment to Sustainability | |
|
Ø No Shareholder Rights Plan (“Poison Pill”)
|
Ø Formal Succession Planning | |
ii IFF | 2017 PROXY STATEMENT
Table of Contents
PROXY STATEMENT SUMMARY
|
Proposal 1
Election of 11 Director Nominees |
|
The Board recommends a vote FOR the election of all Director Nominees
Our Nominating and Governance Committee and our Board have determined that each of the nominees possesses the skills and qualifications to collectively comprise a highly effective Board
| ||
|
See “Proposal 1–Election of Directors” beginning on page 1 of this Proxy Statement | |||
Director Nominees
| Committee Membership
| ||||||||||||
| Name and Primary Occupation
|
Joined
|
Age
|
Indep.
|
Audit
|
Comp.
|
Nom.& Gov.
| ||||||
| Marcello V. Bottoli Partner, Es Vedra Capital Advisors LLP
|
2007
|
55
|
•
|
|
||||||||
| Dr. Linda Buck Full Member, Fred Hutchinson Cancer Research Center
|
2007
|
70
|
•
|
•
| ||||||||
| Michael L. Ducker President and CEO, FedEx Freight
|
2014
|
63
|
•
|
•
|
||||||||
| David R. Epstein Executive Partner, Flagship Pioneering and Chairman of Rubius Therapeutics
|
2016
|
55
|
•
|
|
||||||||
| Roger W. Ferguson, Jr. President and CEO, TIAA
|
2010
|
65
|
•
|
|
||||||||
| John F. Ferraro Former Global COO, Ernst & Young
|
2015
|
61
|
•
|
|
||||||||
| Andreas Fibig Chairman and CEO, IFF
|
2011
|
55
|
||||||||||
| Christina Gold Former CEO, The Western Union Company
|
2013
|
69
|
•
|
•
|
| |||||||
| Henry W. Howell, Jr. Retired J.P. Morgan Executive
|
2004
|
75
|
•
|
|
•
| |||||||
| Katherine M. Hudson Former CEO, Brady Corporation
|
2008
|
70
|
•
|
•
|
||||||||
| Dale F. Morrison (Lead Director) Founding Partner of TriPointe Capital Partners
|
2011
|
68
|
•
|
|
•
|
•
| ||||||
Committee Chair
Financial Expert
Skills and Qualifications
|
Our Board continuously evaluates desired attributes in light of the Company’s strategy and needs. Skills, qualifications and experience currently maintained on the Board include: |
|
IFF | 2017 PROXY STATEMENT iii
Table of Contents
PROXY STATEMENT SUMMARY
| Proposal 2
Ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the 2017 fiscal year
|
|
The Board recommends a vote FOR this proposal
Our Board recommends that shareholders vote “FOR” the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the 2017 fiscal year
| ||
|
|
See “Proposal 2 — Ratification of Independent Registered Public Accounting Firm” beginning on page 34 of this Proxy Statement
|
| Proposal 3
Approve, on an advisory basis, the compensation of our named executive officers in 2016
|
|
The Board recommends a vote FOR this proposal
Our Board recommends a vote “FOR” the advisory vote to approve executive compensation for the 2016 performance year
| ||
|
|
See “Proposal 3 — Advisory Vote on Executive Compensation” on page 64 of this Proxy Statement and “Compensation Discussion and Analysis” beginning on page 38 of this Proxy Statement
|
| Proposal 4
Vote, on an advisory basis, on the frequency of votes on executive compensation |
|
The Board recommends a vote for the option of every one year for this proposal
Our Board recommends a vote for the option of every one year for the advisory vote on the frequency of votes on executive compensation
| ||
|
|
See “Proposal 4 — Advisory Vote on the Frequency of Votes on Executive Compensation” on page 65 of this Proxy Statement
|
| Proposal 5
Approve a French Sub-Plan under the 2015 Stock Award and Incentive Plan |
|
The Board recommends a vote FOR this proposal
Our Board recommends a vote “FOR” the approval of a French Sub-Plan under the 2015 Stock Award and Incentive Plan
| ||
|
|
See “Proposal 5 — Approval of a French Sub-Plan under the 2015 Stock Award and Incentive Plan” on page 90 of this Proxy Statement
|
iv IFF | 2017 PROXY STATEMENT
Table of Contents
PROXY STATEMENT SUMMARY
Compensation Governance
Our pay-for-performance compensation program is reflected in the strong compensation governance that we have adopted.
| What We Do |
|
A significant portion of the compensation for our NEOs in the form of at-risk variable compensation | ||
|
|
Variable compensation based on multiple performance metrics to encourage balanced incentives | |||
|
|
Appropriate mix of fixed and variable compensation to reward company, business unit and individual performance | |||
|
|
Majority of variable compensation awarded as equity-based awards | |||
|
|
Executive clawback policies to recoup cash and equity compensation upon certain triggering events | |||
|
|
Executives required to meet share retention guidelines | |||
|
|
Independent compensation consultant | |||
|
|
Annual risk assessment of compensation programs
| |||
| What We Don’t Do |
|
No tax gross-ups for NEOs for severance payments | ||
|
|
No single-trigger vesting of cash or equity-based awards upon change in control | |||
|
|
No short-sales, hedging or pledging of our stock by our employees, officers or directors | |||
|
|
No fixed-duration employment agreements with executive officers | |||
|
|
No stock option/SAR repricing or exchange of underwater options or SARs for cash without shareholder approval
|
IFF | 2017 PROXY STATEMENT v
Table of Contents
PROXY STATEMENT SUMMARY
vi IFF | 2017 PROXY STATEMENT
Table of Contents
Our Board of Directors (“Board”) currently has eleven members. Upon the recommendation of the Nominating and Governance Committee, our Board has nominated the following current directors for election at the 2017 Annual Meeting, each for a one-year term that expires at the 2018 Annual Meeting:
|
Andreas Fibig (Chairman)
|
Dale F. Morrison (Lead Director)
| |||||
|
Marcello V. Bottoli |
David R. Epstein |
Christina Gold | ||||
|
Dr. Linda Buck |
Roger W. Ferguson, Jr. |
Henry W. Howell, Jr. | ||||
|
Michael L. Ducker
|
John F. Ferraro
|
Katherine M. Hudson
| ||||
Pursuant to our Corporate Governance Guidelines, a person that has previously served for twelve consecutive full annual terms on the Board cannot continue to serve as a director following the subsequent annual meeting of shareholders, unless such person is one of our employees or the Board has made a determination that the nomination of such person would be in the best interests of our Company and our shareholders. Mr. Howell’s twelfth consecutive annual term of service as a director will expire at the 2017 Annual Meeting. Pursuant to the recommendation of the Nominating and Governance Committee, the Board has determined that it is in the best interests of the Company and our shareholders to re-nominate Mr. Howell for an additional term in light of his extensive business development, finance and international management experience which serves us well in conjunction with his service on our Nominating and Governance and Audit Committees.
Director and Nominee Experience and Qualifications
Board Membership Criteria and Selection
Our Certificate of Incorporation provides that we have at least six but not more than fifteen directors. To ensure independence and to provide the breadth of needed expertise and diversity of our Board, the Board periodically reviews its size and makes appropriate adjustments pursuant to our By-Laws. Our Nominating and Governance Committee, together with other Board members, from time to time, as appropriate, identifies the need for new Board members.
Board candidates are considered based on various criteria which may change over time and as the composition of the Board changes. At a minimum, our Nominating and Governance Committee considers the following factors as part of its review of all director candidates and in recommending potential director candidates:
| • | judgment, character, expertise, skills and knowledge useful to the oversight of our business; |
| • | diversity of viewpoints, backgrounds, experiences and other demographics; |
| • | business or other relevant experience; and |
| • | the extent to which the interplay of the candidate’s expertise, skills, knowledge and experience with that of other Board members will build a Board that is effective, collegial and responsive to our needs and to the requirements and standards of the New York Stock Exchange (“NYSE”) and the Securities and Exchange Commission (“SEC”). |
IFF | 2017 PROXY STATEMENT 1
Proposal 1 — Election of Directors
Table of Contents
PROPOSAL 1 — ELECTION OF DIRECTORS
Proposed director candidates who satisfy the criteria and who otherwise qualify for membership on the Board are identified by the Nominating and Governance Committee. In identifying candidates, the Nominating and Governance Committee seeks input and participation from other Board members and other appropriate sources so that all points of view are considered and the best possible candidates identified. The Nominating and Governance Committee also has engaged a search firm to assist it in identifying potential candidates. Members of the Nominating and Governance Committee and other Board members, as appropriate, interview selected director candidates, evaluate the director candidates and determine which candidates are to be recommended by the Nominating and Governance Committee to the Board. Our Nominating and Governance Committee evaluates the suitability of potential candidates nominated by shareholders in the same manner as other candidates recommended to the Nominating and Governance Committee.
We believe that each of our nominees has the experience, skills and qualities to fully perform his or her duties as a director and to contribute to our success. Each of our nominees is being nominated because he or she adheres to the highest standards of personal integrity and possesses excellent interpersonal and communication skills, is highly accomplished in his or her field, has an understanding of the interests and issues that are important to our shareholders and is able to dedicate sufficient time to fulfilling his or her obligations as a director. Our nominees as a group complement each other and each other’s respective experiences, skills and qualities.
Diversity and Tenure
Diversity is one of the factors that the Nominating and Governance Committee considers in identifying and selecting director nominees. As part of this process, the Nominating and Governance Committee evaluates how a particular candidate would strengthen and increase the diversity of the Board in terms of how that candidate may contribute to the Board’s overall balance of perspectives, backgrounds, knowledge, experience, skill sets and expertise in substantive matters pertaining to our business.
We Strive for a Balanced and Diverse Board
| Women and Minorities |
Tenure | Executive Leadership Experience | ||||
| < 4 Yrs | > 8 Yrs | |||||
|
|
|
| ||||
|
4 to 8 Yrs |
||||||
|
4 of our 11 Current Directors are Women or a Minority |
64% of our Current Directors’ tenure is 8 years or less on our Board |
91% of our Current Directors have Senior Executive Leadership Experience | ||||
2 IFF | 2017 PROXY STATEMENT
Table of Contents
PROPOSAL 1 — ELECTION OF DIRECTORS
Shareholder Nominations and Proxy Access
Under our By-Laws, if a shareholder wishes to submit a director candidate for consideration by the Nominating and Governance Committee, or wishes a director nomination to be included in the Company’s proxy statement for an annual meeting pursuant to our proxy access by-law, the shareholder must deliver or mail notice of the request to the Company’s Corporate Secretary, in writing, so that it is received not less than 90 days nor more than 120 days prior to the anniversary date of the prior year’s annual meeting of shareholders. However, if the annual meeting is not within 30 days of the anniversary date of the prior year’s annual meeting, such notice must be received by the Corporate Secretary no later than 10 days following the mailing of notice of the annual meeting or public disclosure of the annual meeting date, whichever occurs first. The notice must be accompanied by the information concerning the director candidate and nominating shareholder described in Article I, Section 3 and Section 4 of our By-Laws. The Nominating and Governance Committee may also request any additional background or other information from any director candidate or recommending shareholder as it may deem appropriate. Our proxy access by-law permits an eligible shareholder (or group of up to 20 eligible shareholders) who owns shares representing at least 3% of our outstanding shares, and has held the shares for at least 3 years, to nominate and include in our proxy materials for an annual meeting director candidates constituting up to 20% of our Board.
Continued Service
The Nominating and Governance Committee also annually reviews each current Board member’s suitability for continued service as a member of our Board and recommends to the Board whether such member should be re-nominated. In addition, each director is required to promptly tender his or her resignation to the Chair of the Nominating and Governance Committee if, during his or her tenure as a director, such director:
| • | has a material change in employment, |
| • | has a significant change in personal circumstances which may adversely affect his or her reputation, or the reputation of the Company, or |
| • | intends to join the board of another for-profit company, |
so that the Nominating and Governance Committee can review the change and make a recommendation to the full Board regarding the director’s continued service. Such resignation becomes effective only upon acceptance by the Board.
|
Ö
YOUR BOARD RECOMMENDS A VOTE
“FOR” THE ELECTION OF
|
IFF | 2017 PROXY STATEMENT 3
Table of Contents
PROPOSAL 1 — ELECTION OF DIRECTORS
Marcello V. Bottoli
|
Director Since: 2007
Committees: • Audit
Age: 55
|
Business Experience
An Italian national with extensive international experience, Mr. Bottoli is a Partner at Es Vedra Capital Advisors LLP, an advisory and investment firm dedicated to Venture Capital and Growth Equity. Previously, Mr. Bottoli was an Operating Partner at Boston-based Advent International, a global private equity firm, between 2010 and 2015. Mr. Bottoli also served as Interim Chief Executive Officer of Pandora A/S, a designer, manufacturer and marketer of hand-finished and modern jewelry, from August 2011 until March 2012. Mr. Bottoli served as President and Chief Executive Officer of Samsonite Inc., a luggage manufacturer and distributor, from March 2004 through January 2009, and President and Chief Executive Officer of Louis Vuitton Malletier, a manufacturer and retailer of luxury handbags and accessories, from 2001 through 2002. Previously, Mr. Bottoli held a number of roles with Benckiser N.V., and then Reckitt Benckiser plc, a home, health and personal care products company, following the merger of Benckiser with Reckitt & Colman Ltd. |
Public Board Memberships
• True Religion Apparel, Inc., a California-based fashion jeans, sportswear and accessory manufacturer and retailer, from 2009 to 2013
Additional Accomplishments and Memberships
• Chairman of the Board of Pharmafortune S.A., a pharmaceuticals and biotechnology manufacturer • Advisory Board of Aldo Group, a Canadian footwear retailer • Board of Desigual, an international fashion retailer based in Spain • Board of Pelostop S.A., a beauty services retailer based in Spain • Board of Il Bisonte S.p.A., a leather goods retailer based in Italy • Board of FaceGym Ltd., a beauty services retailer based in London • Board of Pandora A/S from 2010 to 2014 • Board of Ratti Spa, an Italian manufacturer of high-end fabrics and textiles for the fashion industry from 2003 to 2010 • Board of Blushington LLC, a California-based makeup and beauty services retailer from 2011 to 2014
Qualifications
Mr. Bottoli brings to our Board his experience as a chief executive and as an investor, with an emphasis on consumer products, strategic insights and marketing. In addition, his experience with strategic transactions and M&A has enabled Mr. Bottoli to provide many insights and contributions to our Board. |
4 IFF | 2017 PROXY STATEMENT
Table of Contents
PROPOSAL 1 — ELECTION OF DIRECTORS
Dr. Linda Buck
|
Director Since: 2007
Committees: • Nominating and Governance
Age: 70
|
Business Experience
Dr. Linda Buck has been a Full Member of the Fred Hutchinson Cancer Research Center since 2002. In addition, Dr. Buck has been an Affiliate Professor of Physiology and Biophysics at the University of Washington since 2003. She was previously Full Professor of Neurobiology at Harvard Medical School. Dr. Buck’s research has provided key insights into the mechanisms that underlie the sense of smell and she has been the recipient of numerous awards, including The Nobel Prize in Physiology or Medicine in 2004. |
Public Board Memberships
• DeCode Genetics Inc., a biotechnology company, from 2005 to 2009
Additional Accomplishments and Memberships
• Scientific Advisory Board of The Picower Institute for Learning and Memory at Massachusetts Institute of Technology • Member of the International Advisory Panel of the Knut and Alice Wallenberg Foundation, the largest private foundation promoting scientific research in Sweden • President’s Council of the New York Academy of Sciences • Elected Member of the National Academy of Sciences, the National Academy of Medicine, the American Academy of Arts & Sciences, the European Academy of Sciences, and the Royal Society, the United Kingdom’s national academy of science • Previous Member of the Medical Advisory Board of The Gairdner Foundation, a Canadian non-profit organization devoted to the recognition of outstanding achievement in biomedical research worldwide
Qualifications
Dr. Buck’s scientific knowledge is important to our research and development efforts in both flavors and fragrances, as is her technical and advisory board experience in evaluating a host of issues that are relevant to our innovation and research and development activities. |
IFF | 2017 PROXY STATEMENT 5
Table of Contents
PROPOSAL 1 — ELECTION OF DIRECTORS
Michael L. Ducker
|
Director Since: 2014
Committees: • Compensation
Age: 63
|
Business Experience
Mr. Ducker has been President and Chief Executive Officer of FedEx Freight since January 2015. In that role, he provides strategic direction for FedEx’s less-than-truckload (LTL) companies throughout North America and for FedEx Custom Critical, a leading carrier of time sensitive, critical shipments. Mr. Ducker was formerly the Chief Operating Officer and President of International for FedEx Express, where he led all customer-facing aspects of the company’s U.S. operations and its international business, spanning more than 220 countries and territories across the globe. Mr. Ducker also oversaw FedEx Trade Networks and FedEx Supply Chain. During his FedEx career, which began in 1975, Mr. Ducker has also served as president of FedEx Express Asia Pacific in Hong Kong and led the Southeast Asia and Middle East regions from Singapore, as well as Southern Europe from Milan, Italy. |
Additional Accomplishments and Memberships
• Chairman of the Executive Committee of the U.S. Chamber of Commerce • Board of Amway Corporation • National Advisory Board of the Salvation Army • Executive Committee of the American Trucking Association • Board of the American Transportation Research Institute
Qualifications
Mr. Ducker’s significant senior executive and international experience coupled with his extensive expertise in complex operations and logistics complements the strength of our Board. Mr. Ducker’s current position as Chief Executive Officer of FedEx Freight provides him with knowledge of a number of important areas, including leadership, risk assessment and operational issues. |
6 IFF | 2017 PROXY STATEMENT
Table of Contents
PROPOSAL 1 — ELECTION OF DIRECTORS
David R. Epstein
|
Director Since: 2016
Committees: • Audit
Age: 55
|
Business Experience
Mr. Epstein is an Executive Partner at Flagship Pioneering, a venture capital firm focused on life sciences companies. Previously, Mr. Epstein served as Division Head and CEO of Novartis Pharmaceuticals, a division of Novartis AG, a Swiss multinational pharmaceutical company, from January 2010 until July 2016. In addition, Mr. Epstein was a member of Novartis’s Executive Committee. From September 2000 to February 2010, Mr. Epstein served as President and Chief Executive Officer of Novartis Oncology division. He joined Sandoz, the predecessor of Novartis, in 1989 and held various leadership positions of increasing responsibility, including Chief Operating Officer of Novartis Pharmaceuticals Corporation in the United States and Global Head of Novartis Specialty Medicines until August 2000. Before joining Sandoz, Mr. Epstein was an associate in the strategy practice of Booz Allen Hamilton, a consulting firm. |
Additional Accomplishments and Memberships
• Non-Executive Chairman of the Board of Rubius Therapeutics, a Flagship company focused on the development of red blood cell therapeutics • Board of Evelo Biosciences, a leading immuno-microbiome company • Board of Novartis Oncology and Molecular Diagnostics from 1999 to 2010 • Novartis Representative on the CEO Roundtable on Cancer, a non-profit organization working to make continual progress toward the elimination of cancer from 2001 to 2008 • Named by FierceBiotech to be among “The 25 most influential in Biopharma”
Qualifications
Mr. Epstein’s extensive global business experience, deep understanding of life sciences and understanding of research and development initiatives provides valuable insights to our Board. We benefit from Mr. Epstein’s senior leadership experience and achievement in both business and the life sciences. |
IFF | 2017 PROXY STATEMENT 7
Table of Contents
PROPOSAL 1 — ELECTION OF DIRECTORS
Roger W. Ferguson, Jr.
|
Director Since: 2010
Committees: • Compensation (Chair)
Age: 65
|
Business Experience
Mr. Ferguson has been the President and Chief Executive Officer of TIAA (formerly TIAA-CREF), a major financial services company, since 2008. Prior to joining TIAA, Mr. Ferguson served as Chairman of Swiss Re America Holding Corporation, a global insurance company, from 2006 to 2008. Mr. Ferguson served as Vice Chairman of the Board of Governors of the U.S. Federal Reserve System from 1999 to 2006. He represented the Federal Reserve on several international policy groups, including Payment System Oversight, Reserve Bank Operations and Supervision and Regulation. In addition, Mr. Ferguson led the Fed’s initial response on 9/11. From 1984 to 1997, Mr. Ferguson was an associate and partner at McKinsey & Company. Mr. Ferguson holds a B.A. and a Ph.D. in Economics and a J.D., all from Harvard University. |
Public Board Memberships
• General Mills, Inc., a manufacturer and marketer of branded consumer foods • Alphabet Inc., the parent holding company of Google Inc.
Additional Accomplishments and Memberships
• Boards of a number of charitable and non-governmental organizations, including the Institute for Advanced Study and Memorial Sloan Kettering Cancer Center • Chairman of The Conference Board • EconomicClub of New York • Councilon Foreign Relations • Groupof Thirty • Fellowof the American Academy of Arts and Sciences, and Co-Chair of the Academy’s Commission on the Future of Undergraduate Education • AmericanPhilosophical Society • PreviousChairman and Executive Committee Member of the Business-Higher Education Forum
Qualifications
Mr. Ferguson brings to our Board his sound business judgment, extensive knowledge of the financial services industry and regulatory experience. We benefit from Mr. Ferguson’s service as Chief Executive Officer of TIAA and his experience as a member of other public company boards, which provides him an enhanced perspective on issues applicable to public companies.
|
8 IFF | 2017 PROXY STATEMENT
Table of Contents
PROPOSAL 1 — ELECTION OF DIRECTORS
John F. Ferraro
|
Director Since: 2015
Committees: • Audit (Chair)
Age: 61
|
Business Experience
Mr. Ferraro was the global chief operating officer of Ernst & Young, a leading professional services firm, from 2007 to January 2015. In that role, he was responsible for the overall operations and services of Ernst & Young worldwide. Prior to the COO role, Mr. Ferraro served in several leadership positions, including as Global Vice Chair of Audit and as the senior advisory partner on some of the firm’s largest accounts. Mr. Ferraro began his career with Ernst & Young Milwaukee in 1976 and has served a variety of global companies. He has worked in Europe (London and Rome), throughout the Midwest (Chicago, Cleveland and Kansas City) and New York. |
Public Board Memberships
• Advance Auto Parts, Inc., an automotive aftermarket parts provider • ManpowerGroup Inc., a global workforce solution and service provider
Additional Accomplishments and Memberships
• Founded the Audit Committee Leadership Network in 2003 • Board of Trustees of Boston College High School • CPA and a member of the American Institute of Certified Public Accountants • Chair of the Board of Trustees of Marquette University
Qualifications
Mr. Ferraro brings to our Board his extensive executive, auditing and accounting experience working with large and global corporations. We benefit from his extensive understanding of global business operations and markets. |
IFF | 2017 PROXY STATEMENT 9
Table of Contents
PROPOSAL 1 — ELECTION OF DIRECTORS
Andreas Fibig
|
Director Since: 2011
Chairman of the Board
Age: 55
|
Business Experience
Mr. Fibig joined our Board in 2011 and has been our Chairman since December 2014 and Chief Executive Officer since September 2014. Previously, he served as President and Chairman of the Board of Management of Bayer HealthCare Pharmaceuticals, the pharmaceutical division of Bayer AG, from September 2008 to September 2014. Prior to that position, Mr. Fibig held a number of positions of increasing responsibility at Pfizer Inc., a research-based pharmaceutical company, including as Senior Vice President of the US Pharmaceutical Operations group from 2007 through 2008 and as President, Latin America, Africa and Middle East from 2006 through 2007. |
Public Board Memberships
• Bunge Limited, a leading agribusiness and food company with integrated operations
Additional Accomplishments and Memberships
• Chairman of the Board of Trustees of the Max Planck Institute for Infection Biology • Executive Committee of the World Business Council for Sustainable Development, a CEO-led organization focused on creating a sustainable future for business, society and the environment
Qualifications
Mr. Fibig’s prior work experience with pharmaceutical companies has provided him with extensive experience in international business, product development and strategic planning, which are directly translatable to his work as our Chairman and CEO. |
10 IFF | 2017 PROXY STATEMENT
Table of Contents
PROPOSAL 1 — ELECTION OF DIRECTORS
Christina Gold
|
Director Since: 2013
Committees: • Compensation • Nominating and Governance (Chair)
Age: 69
|
Business Experience
From September 2006 until September 2010, Ms. Gold was Chief Executive Officer, President and a director of The Western Union Company, a leader in global money movement and payment services. She was President of Western Union Financial Services, Inc. and Senior Executive Vice President of First Data Corporation, former parent company of The Western Union Company and provider of electronic commerce and payment solutions, from May 2002 to September 2006. Prior to that, Ms. Gold served as Vice Chairman and Chief Executive Officer of Excel Communications, Inc., a former telecommunications and e-commerce services provider, from October 1999 to May 2002. From 1998 to 1999, Ms. Gold served as President and CEO of Beaconsfield Group, Inc., a direct selling advisory firm that she founded. Prior to founding Beaconsfield Group, Ms. Gold spent 28 years (from 1970 to 1998) with Avon Products, Inc., a leading global beauty company, in a variety of positions, including as Executive Vice President, Global Direct Selling Development, Senior Vice President and later President of Avon North America, and Senior Vice President & CEO of Avon Canada. |
Public Board Memberships
• ITT Corporation, a manufacturer of highly engineered components and technology solutions for industrial markets • Korn/Ferry International, a leadership and talent management organization • Exelis, Inc., a diversified, global aerospace, defense and information solutions company, from October 2011 to May 2013
Additional Accomplishments and Memberships
• Board of New York Life Insurance, a private mutual life insurance company • Board of Safe Water Network, a non-profit organization working to develop locally owned, sustainable solutions to provide safe drinking water • Board of Governors of Carleton University in Ottawa, Canada
Qualifications
Ms. Gold brings a number of valuable characteristics to our Board, including her extensive international and domestic business experience, her familiarity with the Company’s customer base, her financial expertise and her prior experience as a chief executive officer. |
IFF | 2017 PROXY STATEMENT 11
Table of Contents
PROPOSAL 1 — ELECTION OF DIRECTORS
Henry W. Howell, Jr.
|
Director Since: 2004
Committees: • Audit • Nominating and Governance
Age: 75
|
Business Experience
Until 2000, Mr. Howell served in various positions during his 34 years with J.P. Morgan, a global financial services firm. While at J.P. Morgan, Mr. Howell held several overseas positions including head of banking operations in Germany and Chief Executive Officer of J.P. Morgan’s Australian merchant banking affiliate, which was publicly listed. Both of these assignments enhanced his ability to analyze complex international business and financial matters. |
Additional Accomplishments and Memberships
• Chairman of the board of trustees of the Norton Museum of Art • Life trustee of the Chicago History Museum
Qualifications
Mr. Howell’s extensive business development, finance and international management experience while at J.P. Morgan enables him to provide both a public and a private sector perspective on corporate finance, corporate governance and mergers and acquisitions. This experience also serves us well in conjunction with his service on our Nominating and Governance and Audit Committees. |
12 IFF | 2017 PROXY STATEMENT
Table of Contents
PROPOSAL 1 — ELECTION OF DIRECTORS
Katherine M. Hudson
|
Director Since: 2008
Committees: • Compensation
Age: 70
|
Business Experience
As Chairperson, President and Chief Executive Officer of Brady Corporation, a global manufacturer of identification solutions and specialty industrial products, from 1994 until 2004, Ms. Hudson oversaw a doubling of annual revenues. Her prior experience during 24 years with Eastman Kodak, an imaging technology products provider, covered various areas of responsibility, including systems analysis, supply chain, finance and information technology. Her general management experience spans both commercial and consumer product lines. |
Public Board Memberships
• Charming Shoppes, Inc., a woman’s specialty retailer from 2000 to 2012 • CNH Global NV, a manufacturer of agricultural and construction equipment, from 1999 to 2006. • Apple Computer Corporation, a designer and manufacturer of consumer electronics and software products, from 1994 to 1997
Qualifications
Ms. Hudson’s executive experience in supply chain, finance and information technology at Eastman Kodak and Brady Corporation and her governance leadership on other boards have translated to sound guidance to our Board on supply chain and information technology. |
IFF | 2017 PROXY STATEMENT 13
Table of Contents
PROPOSAL 1 — ELECTION OF DIRECTORS
Dale F. Morrison
|
Director Since: 2011
Committees: • Audit • Compensation • Nominating and Governance
Lead Director
Age: 68
|
Business Experience
Mr. Morrison has been a founding partner of TriPointe Capital Partners, a private equity firm, since 2011. Prior to TriPointe, he served from 2004 until 2011 as the President and Chief Executive Officer of McCain Foods Limited, an international leader in the frozen food industry. A food industry veteran, his experience includes service as Chief Executive Officer and President of Campbell Soup Company, various roles at General Foods and PepsiCo and as an operating partner of Fenway Partners, a private equity firm. |
Public Board Memberships
• InterContinental Hotels Group, an international hotel company • Trane Inc. from 2005 to 2008
Additional Accomplishments and Memberships
• Non-Executive Chairman of the Center of Innovation at the University of North Dakota • Non-Executive Chairman of Young’s, a frozen foods company • Board of Harvest, a food distribution company
Qualifications
Mr. Morrison is a seasoned executive with strong consumer marketing, sales and international credentials and his knowledge of our customer base is very valuable to our Board. His experience in private equity and mergers and acquisitions is also an important asset for our Board. |
14 IFF | 2017 PROXY STATEMENT
Table of Contents
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to all of our employees, including our Chief Executive Officer (“CEO”), our Chief Financial Officer (“CFO”) and our Chief Accounting Officer (“CAO”). We also have adopted a Code of Conduct for Directors and a Code of Conduct for Executive Officers (together with the Code of Ethics, the “Codes”). The Codes are available through the Investor—Leadership & Governance—Governance link on our website, www.iff.com.
Only the Board or the Audit Committee may grant a waiver from any provision of our Codes in favor of a director or executive officer, and any such waiver and any amendments to the Codes will be publicly disclosed on our website, www.iff.com.
We regularly engage with our shareholders to better understand their perspectives on our Company, including our strategies, performance, matters of corporate governance and executive compensation. This dialogue has helped inform the Board’s decision-making and ensure our interests remain well-aligned with those of our shareholders. During 2016, we interacted with our largest active shareholders, representing approximately two-thirds of our outstanding shares. We believe that all of these engagements provide valuable feedback and this feedback is shared regularly with our Board and its relevant committees. As a result of the feedback we received from our shareholders in the past few years, we have, among other things, raised our annual dividend, executed our share purchase program, pursued value-creating acquisitions, completed a perception study on capital allocation preferences, and increased our investor relations exposure with enhanced marketing in key European countries.
| Our sustainability strategy involves both social and environmental improvements—from the raw materials we source responsibly to our eco-efficient manufacturing facilities |
| |
| and carefully designed products that consider critical sustainability attributes. Increasingly, customers and consumers are demanding responsible products from conscientious companies throughout the supply chain. We think this is a good thing and we are doing our part by focusing on important sustainability issues such as global climate change and health and wellness. This year we also announced a new sustainability vision: to lead positive transformational changes toward a regenerative, healthy and abundant world. Embedded in this new vision are three main strategies that form the basis for our future sustainability work—positive principles, regenerative products and sensational people. | ||
Corporate Governance
IFF | 2017 PROXY STATEMENT 15
Table of Contents
CORPORATE GOVERNANCE
In 2016, we were recognized by the CDP as a leader in carbon management by achieving the Climate “A” list, which puts us in the top 9% of companies participating in CDP’s climate change program worldwide. In addition, we achieved three pioneering firsts:
| • | the industry’s first on-site wind turbine, at our Tilburg, Netherlands manufacturing facility; |
| • | the launch of PuraVita™, the world’s first-ever Cradle to Cradle Certified™ fragrance; and |
| • | Vetiver Together, a unique partnership to enhance the livelihoods of farmers in Haiti, while securing our supply chain. |
Through implementation of our sustainability vision and strategy, we will continue our efforts to further embed sustainability throughout our company.
Corporate Governance Guidelines
Our Board is responsible for overseeing the management of our Company. The Board has adopted Corporate Governance Guidelines which set forth our governance principles relating to, among other things:
| • | director independence; |
| • | director qualifications and responsibilities; |
| • | board structure and meetings; |
| • | management succession; and |
| • | the CEO evaluation and succession process. |
Pursuant to our Corporate Governance Guidelines, a person that has served for twelve consecutive, full annual terms on our Board cannot continue to serve as a director following the twelfth year of service, unless:
| • | such person is one of our employees; or |
| • | our Board has made a determination that the nomination of such person would be in the best interests of our Company and our shareholders. |
A director’s first full annual term begins on the date he or she is first elected at an annual meeting of shareholders and continues until the next annual meeting of shareholders. Unless a director is an employee of our Company, prior to the conclusion of the twelfth full annual term, the director shall submit his or her resignation as a director effective immediately prior to that year’s annual meeting of shareholders.
The Nominating and Governance Committee reviews our Corporate Governance Guidelines annually, and recommends changes to the Board as appropriate. A copy of our Corporate Governance Guidelines is available through the Investor—Leadership & Governance—Governance link on our website, www.iff.com.
Pursuant to our Corporate Governance Guidelines, the Board undertakes an annual review of director independence, which includes a review of each director’s responses to questionnaires asking about any relationships with us. This review is designed to identify and evaluate any transactions or relationships between a director or any member of his or her immediate family and the Company or members of our senior management.
16 IFF | 2017 PROXY STATEMENT
Table of Contents
CORPORATE GOVERNANCE
The Board has affirmatively determined that each of our current directors (other than Mr. Fibig, our CEO) meets our independence requirements and those of the NYSE’s corporate governance listing standards:
|
Independent Directors
| ||
| Marcello V. Bottoli | Roger W. Ferguson, Jr | |
| Dr. Linda Buck | Christina Gold | |
| Michael L. Ducker | Henry W. Howell, Jr. | |
| David R. Epstein | Katherine M. Hudson | |
| John F. Ferraro
|
Dale F. Morrison
| |
In the ordinary course of business, transactions may occur between the Company and entities with which some of our directors are or have been affiliated. During 2016, in connection with its evaluation of director independence, our Board reviewed transactions between the Company and any company that has any of our directors or family members of our directors serving as executive officers. Specifically, Mr. Ducker serves as President and Chief Executive Officer of FedEx Freight, a shipping company that provides services to the Company. We reviewed this commercial relationship and found that all transactions between the Company and FedEx were made in the ordinary course of business and were negotiated at arm’s length. As a result, our Board determined that this commercial relationship did not impair Mr. Ducker’s independence.
As stated in our Corporate Governance Guidelines, the Board does not have a policy that requires a separation of the Chairman of the Board (“Chairman”) and CEO positions. The Board believes that it is important to have the flexibility to make this determination from time to time based on the particular facts and circumstances then affecting our business.
Currently, we combine the positions of Chairman and CEO. We believe that the CEO, as the Company’s chief executive, is in the best position to fulfill the Chairman’s responsibilities, including those related to identifying emerging issues facing our Company, and communicating essential information to the Board about our performance and strategies. We also believe that the combined role of Chairman and CEO provides us with a distinct leader and allows us to present a single, uniform voice to our customers, business partners, shareholders and employees. If at any point in time the Board feels that its current leadership structure may be better served by separating the roles of Chairman and CEO, it may then determine to separate these positions.
In order to mitigate potential disadvantages of a combined Chairman and CEO, the Board has created the position of Lead Director to facilitate and strengthen the Board’s independent oversight of our performance, strategy and succession planning and to promote effective governance standards. The independent directors of the Board elect a Lead Director from among the independent directors. Our current Lead Director is Mr. Morrison.
IFF | 2017 PROXY STATEMENT 17
Table of Contents
CORPORATE GOVERNANCE
|
Duties of our Lead Director
|
|
Ø Presides at all meetings of the Board at which the Chairman and CEO is not present, including executive sessions of the independent directors, and provides prompt feedback regarding those meetings to the Chairman and CEO; |
|
Ø Approves and provides suggestions for Board meeting agendas, with the involvement of the Chairman and CEO and input from other directors; |
|
Ø Serves as liaison between the Chairman and CEO and the independent directors; |
|
Ø Monitors significant issues occurring between Board meetings and assures Board involvement when appropriate; and |
|
Ø Ensures, in consultation with the Chairman and CEO, the adequate and timely exchange of information between the management team and the Board.
|
Our Board has an Audit Committee, a Compensation Committee and a Nominating and Governance Committee, each of which operates under a written charter adopted by the Board. Each Committee reviews its charter at least annually and recommends charter changes to the Board as appropriate. In December 2016, each of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee reviewed its charter, and amended it where appropriate. Each Committee charter provides that the Committee will annually review its performance. A current copy of each of the Audit Committee, Compensation Committee and Nominating and Governance Committee charters is available through the Investor—Leadership & Governance—Governance link on our website, www.iff.com.
The table below provides the current and expected membership and chairperson for each of our Committees and identifies our current Lead Director.
| Name | Audit | Compensation | Nominating and Governance |
Lead Director | ||||
| Marcello V. Bottoli |
● | |||||||
| Dr. Linda Buck |
● | |||||||
| Michael L. Ducker |
● | |||||||
| David R. Epstein |
● | |||||||
| Roger W. Ferguson, Jr. |
|
|||||||
| John F. Ferraro |
|
|||||||
| Christina Gold |
● |
|
||||||
| Henry W. Howell, Jr. |
● | ● | ||||||
| Katherine M. Hudson |
● | |||||||
|
Dale F. Morrison |
● | ● | ● | ● | ||||
= Committee Chair
18 IFF | 2017 PROXY STATEMENT
Table of Contents
CORPORATE GOVERNANCE
Our Board held six meetings during 2016. The Audit Committee held eight meetings, the Compensation Committee held five meetings and the Nominating and Governance Committee held five meetings during 2016. During 2016, overall attendance was 100% of Board meetings and 93% of total Committee meetings. All incumbent directors attended at least 75% of the total Board and Committee meetings on which he or she served during 2016. All of our directors who were serving on the day of last year’s annual meeting of shareholders attended that meeting. Under our Corporate Governance Guidelines, unless there are mitigating circumstances, such as medical, family or business emergencies, Board members should endeavor to participate in all Board meetings and all Committee meetings of which the director is a member and to attend our annual meeting of shareholders. Our non-employee directors, all of whom are currently independent, meet in executive session, without the presence of any corporate officer or member of management, in conjunction with regular meetings of the Board and Committees. During 2016, our non-employee directors met in executive session as part of every regularly scheduled Board and Committee meeting.
IFF | 2017 PROXY STATEMENT 19
Table of Contents
CORPORATE GOVERNANCE
| Current Members: | Responsibilities | |
| Marcello V. Bottoli David R. Epstein John F. Ferraro (Chair) Henry W. Howell, Jr. Dale F. Morrison
Meetings in 2016: 8 |
The Audit Committee’s responsibilities include overseeing and reviewing:
• the financial reporting process and the integrity of our financial statements, capital structure and related financial information;
• our internal control environment, systems and performance;
• the audit process followed by our independent accountant and our internal auditors;
• the appointment, compensation, retention and oversight of our independent accountant and our internal auditors;
• our independent accountant’s and internal auditors’ qualifications, performance and independence, and whether our independent accountant and internal auditors should be rotated, considering the advisability and potential impact of selecting a different independent accountant or internal auditor; and
• the procedures for monitoring compliance with laws and regulations and with our Code of Business Conduct and Ethics.
Additional responsibilities. Additional responsibilities include assisting the Board in overseeing and reviewing enterprise-wide risks and the policies and practices established to manage such risks, in particular as they relate to financial risk.
Under procedures adopted by the Audit Committee, the Audit Committee reviews and pre-approves all audit and non-audit services performed by our independent accountant. The Audit Committee may, when it deems appropriate, delegate certain of its responsibilities to one or more Audit Committee members or subcommittees.
Independence and Financial Expertise
The Board reviewed the background, experience and independence of the current Audit Committee members and based on this review, the Board determined that each member of the Audit Committee:
• meets the independence requirements of the NYSE’s corporate governance listing standards;
• meets the enhanced independence standards for audit committee members required by the SEC;
• is financially literate, knowledgeable and qualified to review financial statements; and
• qualifies as an “audit committee financial expert” under the SEC rules. | |
20 IFF | 2017 PROXY STATEMENT
Table of Contents
CORPORATE GOVERNANCE
| Current Members: | Responsibilities | |
| Michael Ducker Roger W. Ferguson, Jr. (Chair) Christina Gold Katherine M. Hudson Dale F. Morrison
Meetings in 2016: 5 |
The Compensation Committee’s responsibilities include:
• determining, subject to approval by the independent directors of the Board, the CEO’s compensation;
• reviewing and making determinations regarding compensation of executive officers (other than the CEO) and other members of senior management;
• reviewing, adopting and recommending to the Board, or shareholders as required, general compensation and benefits policies, plans and programs, and overseeing the administration of such policies, plans and programs;
• reviewing and discussing with management each year the Compensation Discussion and Analysis included in our annual proxy statement or annual report on Form 10-K;
• recommending to the Board any changes to the compensation and benefits of non-employee directors; and
• conducting a risk assessment of our overall compensation policies and practices.
Authority and Delegation. Under its charter, the Compensation Committee is responsible for assisting the Board in ensuring that long-term and short-term compensation provide performance incentives to management, and that compensation plans are appropriate and competitive and reflect the goals and performance of management and our Company. As discussed in more detail in this proxy statement under the heading “Compensation Discussion and Analysis,” the Compensation Committee considers Company-wide performance against applicable annual and long-term performance goals pre-established by the Compensation Committee, taking into account economic and business conditions, and comparative compensation and benefit performance levels. If the Compensation Committee deems it appropriate, it may delegate certain of its responsibilities to one or more Compensation Committee members or subcommittees.
Independence
The Board reviewed the background, experience and independence of the Compensation Committee members and, based on this review, the Board determined that each member of the Compensation Committee:
• meets the independence requirements of the NYSE’s corporate governance listing standards;
• is an “outside director” pursuant to the criteria established by the Internal Revenue Service; and
• is a “non-employee” director within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
| |
IFF | 2017 PROXY STATEMENT 21
Table of Contents
CORPORATE GOVERNANCE
| Role of Compensation Consultant. The Compensation Committee has the sole authority to retain compensation consultants or advisors to assist it in evaluating CEO, senior executive and non-employee director compensation. From time to time, management also retains its own outside compensation consultants. In 2016, the Committee directly engaged FW Cook & Co., Inc. (“FW Cook”) as its independent compensation consultant. FW Cook’s work with the Committee included analyses, advice, guidance and recommendations on executive compensation levels versus peers, market trends and incentive plan designs. In addition, FW Cook provided the Committee with advice and recommendations regarding compensation provided to Ms. Suarez-Gonzalez in connection with her hiring as well as compensation provided to Mr. Richard O’Leary in connection with his promotion to CFO. In November 2016, FW Cook provided the Committee with advice and a review of director compensation. FW Cook will continue to work with the Committee to provide it with analyses, advice, guidance and recommendations on executive compensation levels versus peers, market trends and incentive plan designs. FW Cook was engaged exclusively by the Committee on executive and director compensation matters and does not have any other consulting arrangements with the Company. The Compensation Committee considered the independence of FW Cook and determined that no conflicts of interest exist.
Role of Management. Our Compensation Committee relies on management for legal, tax, compliance, finance and human resource recommendations, and data and analysis for the design and administration of the compensation, benefits and perquisite programs for our senior executives. The Compensation Committee combines this information with the recommendations and information from its independent compensation consultant.
Our CEO, our Executive Vice President, Chief Human Resources Officer (“CHRO”) and our Executive Vice President, General Counsel and Corporate Secretary (“General Counsel”) generally attend Compensation Committee meetings. CEO performance and compensation are discussed by the Compensation Committee in executive session, with advice and participation from the Compensation Committee’s independent compensation consultant as requested by the Compensation Committee. Our CEO and CHRO, without the presence of any other members of senior management, actively participate in the compensation discussions of our senior executives, including making recommendations to the Compensation Committee as to the amount and form of compensation (other than their own).
Compensation Committee Interlocks and Insider Participation. None of the members of the Compensation Committee was at any time during 2016 or at any other time an officer or employee of our Company. None of our executive officers serves as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Compensation Committee. |
22 IFF | 2017 PROXY STATEMENT
Table of Contents
CORPORATE GOVERNANCE
Nominating and Governance Committee
| Current Members: | Responsibilities | |
| Linda Buck Christina Gold (Chair) Henry W. Howell, Jr. Dale F. Morrison
Meetings in 2016: 5 |
The Nominating and Governance Committee’s responsibilities include:
• developing and reviewing criteria for the selection of directors, and making recommendations to the Board with respect thereto;
• identifying qualified individuals to serve on the Board, reviewing the qualifications of director candidates and recommending to the Board the nominees to be proposed by the Board for election as directors at the annual meeting of shareholders;
• reviewing the suitability of directors for continued service, including in case of a resignation tendered by a director following a change in employment or anticipated board memberships, and making recommendations to the Board with respect to their continued service;
• reviewing director candidates recommended by shareholders for election;
• establishing and reviewing policies pertaining to roles, responsibilities, tenure and removal of directors;
• overseeing CEO succession plans;
• developing and reviewing the Board and Board committee evaluation process;
• overseeing the annual CEO evaluation process;
• reviewing and recommending changes to our Corporate Governance Guidelines and monitoring corporate governance issues; and
• reviewing and, if appropriate, approving transactions with related parties.
Delegation. The Nominating and Governance Committee may, when it deems appropriate, delegate certain of its responsibilities to one or more Nominating and Governance Committee members or subcommittees.
Independence
The Board reviewed the background, experience and independence of the Nominating and Governance Committee members, and based on this review, the Board determined that each member of the Nominating and Governance Committee meets the independence requirements of the NYSE’s corporate governance listing standards. | |
IFF | 2017 PROXY STATEMENT 23
Table of Contents
CORPORATE GOVERNANCE
Board and Committee Assessment Process
Each year, the Nominating & Governance Committee leads an evaluation of the effectiveness of the Board and each of its Committees. Each member of the Board and each member of the Board committees responds to an anonymous survey regarding the effectiveness of the Board, its committees and their leadership, and the dynamics between the Board and management. In 2016, the Board supplemented this process through the use of in-person director interviews. The Lead Director and the Chair of the Nominating & Governance Committee interviewed each director to obtain his or her assessment of director performance, Board dynamics and the effectiveness of the Board and its committees. After consulting with each other, the Lead Director and Chair of the Nominating & Governance Committee summarized and reviewed the results with the Board and each Board committee.
Our Board recognizes that one of its most important duties is to ensure excellence and continuity in our senior leadership by overseeing the development of executive talent and planning for the effective succession of our Chairman and CEO and other senior members of executive management. As part of this process, our CEO and members of our Executive Committee are required to prepare a detailed development and succession plan for themselves and for their direct reports on an annual basis. The Board engages in detailed discussions with the CEO and CHRO regarding these plans, with a focus on key positions at the senior officer level, as well as the talent pipeline for specific critical roles. The Company’s executives regularly attend Board meetings and maintain an ongoing dialogue with Board members, which is critical to the Company’s succession planning. In addition, the Nominating and Governance Committee also agrees upon and recommends to the Board a succession plan for our CEO, including in emergency situations. Our Board is committed to being prepared for a planned or unplanned change in our leadership in order to ensure our stability.
Board Role in Overseeing Risk
Our Board is actively involved in the oversight of risks that could affect our Company and is responsible for overseeing and reviewing with management the Company’s enterprise-wide risks and the policies and practices established to manage such risks. It is the responsibility of the CEO and other senior management to manage the Company’s day-to-day business risks and its risk management process. We believe this division of responsibility is the most effective approach for addressing risk management.
Management maintains an enterprise risk management (“ERM”) program which is designed to identify and assess our global risks and to develop steps to mitigate and manage risks. The Board receives regular reports on the ERM process. The full Board and the Audit Committee focus on operational risk, financial risk, regulatory risk, litigation risk, cybersecurity and information security risk, tax risk, credit risk, and liquidity risk, as well as our general risk management strategy, and how these risks are being managed. The Audit Committee is primarily responsible for assisting the Board in its responsibility to oversee and review with management our enterprise-wide risks and the policies and practices established to manage such risks, in particular as they relate to financial risk. The Compensation Committee is primarily responsible for overseeing the management of risks associated with compensation policies and practice, our compensation plans (including equity compensation plans and programs), severance, change in control and other employment-related matters.
Compensation Risks
In the fourth quarter of 2016, the Compensation Committee, working with its independent compensation consultant, conducted a risk assessment of our executive compensation programs. The goal of this assessment was to determine whether the general structure of our executive compensation policies and
24 IFF | 2017 PROXY STATEMENT
Table of Contents
CORPORATE GOVERNANCE
programs, annual and long-term performance goals or the administration of the programs posed any material risks to our Company. In addition, with the input of our CHRO, the Compensation Committee reviewed compensation programs and policies below the executive level in a Company-wide risk assessment. The Compensation Committee shared the results of this review with our full Board.
The Compensation Committee determined, based on the reviews of its independent compensation consultant and management’s input and other factors, that the compensation policies and practices for the Company’s employees in 2016, including the established performance goals and incentive plan structures, did not result in excessive risk taking or the implementation of inappropriate business decisions or strategies by the Company’s senior executives or employees generally, and that there are no risks arising from our compensation policies and practices for our employees that are reasonably likely to have a material adverse effect on the Company.
Related Person Transactions and Other Information
Transactions with Related Persons
In 2016, there were no transactions and there are no currently proposed transactions in excess of $120,000 in which the Company was or will be a participant and in which any director or executive officer of the Company, any known 5% or greater shareholder of the Company or any immediate family member of any of the foregoing persons had or will have a direct or indirect material interest as defined in Item 404(a) of Regulation S-K.
Related Person Transactions Policy
In accordance with SEC rules, our Board has adopted a written policy for the review and the approval of related person transactions. This policy is available through the Investor-Corporate Governance link on our website, www.iff.com. Under the policy, a “related person” is specifically defined as an executive officer, a director, a director nominee, a beneficial owner of more than 5% of any class of voting securities, an immediate family member of any of the foregoing, or a controlled entity, which is defined as an entity owned or controlled by any of the foregoing or in which any such person serves as an officer or partner, or together with all of the foregoing persons, owns 5% or more equity interests. The policy defines a “related person transaction” as a transaction or series of transactions involving a related person and the Company, excluding employment arrangements involving an executive officer or other senior officer or employee of the Company and director compensation arrangements. The policy requires that any such transaction be approved or ratified by the Nominating and Governance Committee. If accounting issues are involved in the transaction, the Nominating and Governance Committee will consult with the Audit Committee if deemed appropriate.
Pursuant to the policy, a related person transaction will be approved or ratified only if the Nominating and Governance Committee determines that it is being entered into in good faith and on fair and reasonable terms which are in the best interest of our Company and our shareholders. In determining whether to approve or ratify a transaction, the Nominating and Governance Committee considers the following factors, to the extent relevant:
| • | the related person’s relationship to the Company and interest in the transaction; |
| • | the material facts of the transaction; |
| • | the benefits to the Company; |
| • | the availability of alternate sources of comparable products or services and the terms of such alternative; and |
| • | an assessment as to whether the transaction is on terms comparable to the terms available to an unrelated third party or to employees generally. |
IFF | 2017 PROXY STATEMENT 25
Table of Contents
CORPORATE GOVERNANCE
No related person may participate in the review of a transaction in which he or she may have an interest. In addition, except for non-discretionary contributions made pursuant to our matching contributions program, a charitable contribution by our Company to an organization in which a related person is known to be an officer, director or trustee, is subject to approval by the Nominating and Governance Committee.
Other Information
On August 5, 2008, the SEC approved a settlement with Ernst & Young LLP and two of its partners, including Mr. Ferraro, relating to auditor independence issues arising out of business relationships between Ernst & Young LLP and an individual who was also a member of the board of directors of three of its audit clients. The matter arose out of actions taken by Mr. Ferraro in 2002 in his role as Vice Chairman of Ernst & Young LLP. Ernst & Young LLP and Mr. Ferraro resolved that matter by way of a negotiated settlement in which the respondents neither admitted nor denied the underlying allegations and accepted an administrative cease and desist order. The negotiated resolution did not involve any suspension, fines or other sanctions against Mr. Ferraro. Mr. Ferraro thereafter remained a partner in good standing at Ernst & Young LLP through January 2015. Our Board took into consideration all factors regarding Mr. Ferraro’s character and experience and believes that he is a significant asset to the Board.
We encourage our executives and directors to own our common stock so that they share the same long-term investment risk as our shareholders. Our Share Retention Policy provides executives and directors flexibility in personal financial planning, yet requires them to maintain ongoing and substantial investment in our common stock.
Under our Share Retention Policy, each executive and director must retain shares of Company common stock at a targeted ownership level. There is no deadline by which an executive or director must meet his or her targeted ownership level. The targeted ownership level for directors is five times the cash portion of the annual retainer (not including any retainer for service as a committee chairperson or lead director). The targeted ownership levels for executives are:
| • | the lesser of shares equal in value to five times base salary or 120,000 shares for our CEO, |
| • | the lesser of shares equal in value to three times base salary or 35,000 shares for our CFO and Group Presidents, and |
| • | the lesser of shares equal in value to two times base salary or 20,000 shares for our General Counsel. |
If an executive or director does not meet the targeted ownership level, the executive or director may not sell or transfer any shares held in an equity, deferred compensation or retirement plan account managed by us, and the executive or director must retain such shares in such accounts until the targeted ownership level is met. For executives, until the retention requirement is met, the executive must also retain a portion (50%, in the case of our named executive officers) of any shares of common stock acquired from the exercise of a stock settled appreciation right (“SSAR”) or the vesting of restricted stock or a restricted stock unit (“RSU”) (after payment of any exercise price and taxes).
As of March 8, 2017, all of our named executive officers and directors were in compliance with their individual retention requirements. Additional detail regarding ownership of our common stock by our executives and directors is included in this proxy statement under the heading “Securities Ownership of Management, Directors and Certain Other Persons.”
26 IFF | 2017 PROXY STATEMENT
Table of Contents
CORPORATE GOVERNANCE
The Compensation Committee has adopted an equity grant policy with respect to the issuance of equity awards under our equity plans. Under the equity grant policy, the Compensation Committee approves all equity awards to our executives except awards to our CEO and to our non-employee directors, which are approved by our Board. The grant date for annual awards to all employees and for annual awards to our non-employee directors is the date of the Company’s annual meeting of shareholders. The grant date for awards under our Long-Term Incentive Plan (“LTIP”) is the date that the Compensation Committee (or Board in the case of our CEO) approves the applicable LTIP metrics. In addition to the annual grants, equity awards may be granted “off-cycle” at other times during the year to new hires, employees receiving promotions, director appointments and in other special circumstances. The grant price of equity awards (other than LTIP awards) is the closing price of our common stock on the NYSE on the date of the grant or, if the grant date is not a business day, the closing price on the NYSE on the following business day. The grant price for LTIP awards is the 20-day trailing average price of our common stock on the NYSE as of the first trading day of the applicable LTIP performance cycle.
Policy Regarding Derivatives, Short Sales, Hedging and Pledges
Under our insider trading policy, directors and all employees, including our executive officers and named executive officers, are prohibited from entering into transactions designed to hedge against economic risks associated with an investment in our common stock. These individuals may not trade in derivatives in our securities (such as put and call options), effect “short sales” of our common stock, or enter into monetization transactions or similar arrangements (such as prepaid variable forwards, equity swaps, collars or exchange funds) relating to our securities. These individuals are also prohibited from holding shares of our common stock in margin accounts or pledging shares of our common stock as collateral for a loan.
IFF | 2017 PROXY STATEMENT 27
Table of Contents
Annual Director Cash and Equity Compensation
Under our non-employee director compensation program, for the service year from the 2016 Annual Meeting of Shareholders (the “2016 Annual Meeting”) to the 2017 Annual Meeting, each non-employee director received an annual retainer of $225,000, of which $112,500 was paid in cash in November 2016 and $112,500 was paid in RSUs issued under our 2015 Stock Award and Incentive Plan (“2015 SAIP”) on the date of the 2016 Annual Meeting. These RSUs vest one year from the grant date and are subject to accelerated vesting upon a change in control. The 938 RSUs granted to each director on the date of the 2016 Annual Meeting was calculated using the closing market price of our common stock on the grant date. Any director who is an employee of our Company does not receive any additional compensation for his or her service as a director.
Compensation for our Lead Director and Committee Chairs
For the service year from the 2016 Annual Meeting to the 2017 Annual Meeting, the Lead Director received an additional annual cash retainer of $20,000, the Chair of each of the Audit Committee and Compensation Committee received an additional annual cash retainer of $15,000 and the Chair of the Nominating and Governance Committee received an additional annual cash retainer of $10,000.
Participation in our Deferred Compensation Plan
Non-employee directors are eligible to participate in our Deferred Compensation Plan (“DCP”). A non- employee director may defer all or a portion of his or her cash compensation as well as any RSUs granted to him or her, subject to tax law requirements. Additional details regarding our DCP may be found in this proxy statement under the heading “Executive Compensation—Non-Qualified Deferred Compensation.” Non-employee directors are not entitled to matching contributions or the 25% premium on deferrals into our common stock fund that are applicable to employees under the DCP.
Additional Benefits
We reimburse our non-employee directors for travel and lodging expenses incurred in connection with their attendance at Board and Committee meetings, our shareholder meetings and other Company-related activities. In addition, our current directors are eligible to participate in our Matching Gift Program. Under this program, we match, on a dollar for dollar basis, contributions made by directors to qualifying charitable organizations up to a maximum of $10,000 per person per year.
Changes for 2017
In November 2016, our Board approved changes to our non-employee director compensation program for the service year beginning with the 2017 Annual Meeting. Beginning in 2017, the annual retainer paid to our non-employee directors will be increased to $235,000, of which $112,500 will be paid in cash and $122,500 will be paid in RSUs. In addition, the annual retainer for each of the Chair of the Audit Committee and Chair of the Nominating and Governance Committee will be increased to $17,500 and $12,500, respectively.
Directors’ Compensation
28 IFF | 2017 PROXY STATEMENT
Table of Contents
DIRECTORS’ COMPENSATION
The following table details the compensation paid to or earned by our non-employee directors for the year ended December 31, 2016.
| Name | Fees Earned or Paid in Cash($)(1) |
Stock Awards ($)(2)(3)(4) |
All Other Compensation ($)(5) |
Total ($) | ||||||||||
| Marcello V. Bottoli |
112,618 | 110,290 | 5,000 | 227,908 | ||||||||||
| Dr. Linda Buck |
112,500 | 110,290 | — | 222,790 | ||||||||||
| Michael L. Ducker |
112,500 | 110,290 | — | 222,790 | ||||||||||
| David R. Epstein |
112,500 | 147,367 | 5,000 | 264,867 | ||||||||||
| Roger W. Ferguson, Jr. |
127,500 | 110,290 | — | 237,790 | ||||||||||
| John F. Ferraro |
127,500 | 110,290 | 10,000 | 247,790 | ||||||||||
| Christina Gold |
112,618 | 110,290 | 10,000 | 232,908 | ||||||||||
| Henry W. Howell, Jr. |
122,500 | 110,290 | 10,000 | 242,790 | ||||||||||
| Katherine M. Hudson |
112,500 | 110,290 | 8,000 | 230,790 | ||||||||||
| Dale F. Morrison |
132,500 | 110,290 | 10,000 | 252,790 | ||||||||||
| (1) | The amounts in this column include (i) the annual cash retainer for service as a non-employee director, (ii) for certain directors, the annual cash retainer for service as Lead Director or as chairperson of a Board committee during 2016, and (iii) nominal amounts of cash paid in lieu of fractional shares of common stock. Of the amounts in this column, the following amounts were deferred in 2016 under our DCP: Dr. Buck - $112,500; Mr. Ducker - $112,500; Mr. Epstein - $112,500; Mr. Ferguson - $127,500; Mr. Ferraro - $127,500; Mr. Howell - $122,500; Ms. Hudson - $112,500; and Mr. Morrison - $132,500. Earnings in our DCP were not above-market or preferential and thus are not reported in this table. |
| (2) | The amounts in this column represent the aggregate grant date fair value of equity awards granted during the fiscal year ended December 31, 2016, computed in accordance with FASB ASC Topic 718. Details on and assumptions used in calculating the grant date fair value of RSUs may be found in Note 12 to our audited financial statements for the year ended December 31, 2016 included in our Annual Report on Form 10-K filed with the SEC on February 28, 2017. |
| (3) | Each director received a grant on May 2, 2016 of 938 RSUs under our 2015 SAIP. Mr. Epstein, who joined our Board during 2016, received an additional grant of 319 RSUs on February 1, 2016, which represents his prorated annual share retainer. None of our directors forfeited any RSUs or shares of deferred stock during 2016. |
| (4) | As of December 31, 2016, the following directors held the number of unvested RSUs and shares of deferred common stock indicated. |
| Director | RSUs | Deferred Stock |
||||||
| Marcello V. Bottoli |
938 | 15,469 | ||||||
| Dr. Linda Buck |
938 | 16,647 | ||||||
| Michael L. Ducker |
938 | 3,215 | ||||||
| David R. Epstein |
1,257 | 583 | ||||||
| Roger W. Ferguson, Jr. |
938 | 8,922 | ||||||
| John F. Ferraro |
938 | 961 | ||||||
| Christina Gold |
938 | 1,307 | ||||||
| Henry W. Howell, Jr. |
938 | 43,813 | ||||||
| Katherine M. Hudson |
938 | 17,287 | ||||||
| Dale F. Morrison |
938 | 12,526 | ||||||
IFF | 2017 PROXY STATEMENT 29
Table of Contents
DIRECTORS’ COMPENSATION
The deferred shares, which are held under the DCP, result from deferral of vested equity grants, voluntary deferral of retainer fees or the crediting of additional share units as a result of reinvestment of dividend equivalents. Deferred shares will be settled by delivery of common stock upon the director’s separation from service on the Board, or as otherwise elected by the director. All of the deferred shares are included for each director in the Beneficial Ownership Table.
| (5) | The amounts in this column are contributions made by us under our Matching Gift Program to eligible charitable organizations matching contributions of the director to those charitable organizations during 2016. |
30 IFF | 2017 PROXY STATEMENT
Table of Contents
Directors and Executive Officers
The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 8, 2017, by each current director, each director nominee, the persons named in the Summary Compensation Table in this proxy statement and all current directors and executive officers as a group. To our knowledge, except as otherwise indicated, beneficial ownership includes sole voting and dispositive power with respect to all shares.
| Name and Address of Beneficial Owner (1)
|
Shares of Common Stock Beneficially Owned (2)(3)
|
Percent of Class**
| ||||
| Marcello V. Bottoli |
18,652 | (4) | * | |||
| Dr. Linda Buck |
17,585 | (5) | * | |||
| Anne Chwat |
57,458 | (6) | * | |||
| Alison A. Cornell |
6,270 | (7) | * | |||
| Michael L. Ducker |
4,153 | (8) | * | |||
| David R. Epstein |
1,840 | (9) | * | |||
| Roger W. Ferguson, Jr. |
9,860 | (10) | * | |||
| John F. Ferraro |
1,899 | (11) | * | |||
| Andreas Fibig |
53,771 | (12) | * | |||
| Christina Gold |
4,342 | (13) | * | |||
| Matthias Haeni |
23,356 | (14) | * | |||
| Henry W. Howell, Jr. |
43,976 | (15) | * | |||
| Katherine M. Hudson |
20,725 | (16) | * | |||
| Nicolas Mirzayantz |
59,102 | (17) | * | |||
| Dale F. Morrison |
13,464 | (18) | * | |||
| Richard O’ Leary |
20,557 | (19) | * | |||
| All Directors and Executive Officers as a Group (18 persons) |
382,468 | (20) | * | |||
| * | Less than 1%. |
| ** | Based on 78,972,864 shares of common stock outstanding as of March 8, 2017. |
| (1) | Except as otherwise indicated, the address of each person named in the table is c/o International Flavors & Fragrances Inc., 521 West 57th Street, New York, New York 10019. |
| (2) | This column includes (i) shares held by our executive officers in our 401(k) Retirement Investment Fund Plan and (ii) shares of Purchased Restricted Stock (“PRS”) held by our executive officers. Shares of PRS are subject to vesting and may be forfeited if the executive’s employment is terminated. |
| (3) | In determining the number and percentage of shares beneficially owned by each person, shares that may be acquired by such person within 60 days after March 8, 2017 are deemed outstanding for purposes of determining the total number of outstanding shares for such person and are not deemed outstanding for such purpose for all other shareholders. Certain stock equivalent units held in the IFF Stock Fund under our DCP are premium stock equivalent units paid to executives that are subject to vesting and may be forfeited if the executive’s employment is terminated. To our knowledge, except as otherwise indicated, beneficial ownership includes sole voting and dispositive power with respect to all shares. |
| (4) | Includes (i) 1,100 shares held indirectly by a trust for which Mr. Bottoli is the settlor/grantor and Mr. Bottoli and two immediate family members are the beneficiaries, (ii) 15,469 stock equivalent units held in the IFF Stock Fund under our DCP and (iii) 938 shares issuable pursuant to RSUs that vest within 60 days after March 8, 2017 which Mr. Bottoli has elected to defer to our DCP. |
IFF | 2017 PROXY STATEMENT 31
Securities Ownership
Table of Contents
SECURITIES OWNERSHIP
| (5) | Represents (i) 16,647 stock equivalent units held in the IFF Stock Fund under our DCP and (ii) 938 shares issuable pursuant to RSUs that vest within 60 days after March 8, 2017 which Ms. Buck has elected to defer to our DCP. |
| (6) | Includes (i) 8,122 stock equivalent units held in the IFF Stock Fund under our DCP and (ii) 1,753 shares earned under the completed 2014-2016 LTIP cycle that will be issued within 60 days after March 8, 2017. |
| (7) | Includes 848 shares earned under the completed 2014-2016 LTIP cycle that will be issued within 60 days after March 8, 2017. |
| (8) | Represents (i) 3,215 stock equivalent units held in the IFF Stock Fund under our DCP and (ii) 938 shares pursuant to RSUs that will vest within 60 days after March 8, 2017 which Mr. Ducker has elected to defer to our DCP. |
| (9) | Represents (i) 902 stock equivalent units held in the IFF Stock Fund under our DCP and (ii) 938 shares pursuant to RSUs that will vest within 60 days after March 8, 2017 which Mr. Epstein has elected to defer to our DCP. |
| (10) | Represents (i) 8,922 stock equivalent units held in the IFF Stock Fund under our DCP and (ii) 938 shares issuable pursuant to RSUs that vest within 60 days after March 8, 2017 which Mr. Ferguson has elected to defer to our DCP. |
| (11) | Represents (i) 961 stock equivalent units held in the IFF Stock Fund under our DCP and (ii) 938 shares issuable pursuant to RSUs that will vest within 60 days after March 8, 2017 which Mr. Ferraro has elected to defer to our DCP. |
| (12) | Includes (i) 9,140 stock equivalent units held in the IFF Stock Fund under our DCP, (ii) 7,967 shares issuable pursuant to RSUs that vest within 60 days after March 8, 2017 and (iii) 7,868 shares earned under the completed 2014-2016 LTIP cycle that will be issued within 60 days after March 8, 2017. |
| (13) | Includes (i) 1,307 stock equivalent units held in the IFF Stock Fund under our DCP and (ii) 938 shares issuable pursuant to RSUs that will vest within 60 days after March 8, 2017. |
| (14) | Includes 3,145 shares earned under the completed 2014-2016 LTIP cycle that will be issued within 60 days after March 8, 2017. |
| (15) | Includes (i) 41,840 stock equivalent units held in the IFF Stock Fund under our DCP and (ii) 938 shares issuable pursuant to RSUs that vest within 60 days after March 8, 2017 which Mr. Howell has elected to defer to our DCP. |
| (16) | Includes (i) 17,287 stock equivalent units held in the IFF Stock Fund under our DCP and (ii) 938 shares issuable pursuant to RSUs that vest within 60 days after March 8, 2017 which Ms. Hudson has elected to defer to our DCP. |
| (17) | Includes (i) 1,831 stock equivalent units held in the IFF Stock Fund under our DCP and (ii) 3,145 shares earned under the completed 2014-2016 LTIP cycle that will be issued within 60 days after March 8, 2017. |
| (18) | Includes (i) 12,526 stock equivalent units held in the IFF Stock Fund under our DCP and (ii) 938 shares issuable pursuant to RSUs that vest within 60 days after March 8, 2017 which Mr. Morrison has elected to defer to our DCP. |
| (19) | Includes (i) 1,705 stock equivalent units held in the IFF Stock Fund under our DCP and (ii) 944 shares earned under the completed 2014-2016 LTIP cycle that will be issued within 60 days after March 8, 2017. |
| (20) | Includes an aggregate of (i) 139,874 stock equivalent units held in the IFF Stock Fund under our DCP, (ii) 17,347 shares issuable pursuant to RSUs that vest within 60 days after March 8, 2017, and (iii) 19,054 shares earned under the completed 2014-2016 LTIP cycle that will be issued within 60 days after March 8, 2017. |
32 IFF | 2017 PROXY STATEMENT
Table of Contents
SECURITIES OWNERSHIP
The following table sets forth information regarding each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, as of March 8, 2017 unless otherwise indicated, based on a review of filings with the SEC. Unless otherwise indicated, beneficial ownership is direct.
|
Name and Address of Beneficial Owner
|
Number of Shares and Nature of Beneficial Ownership
|
Percent of Class*
|
||||||
| Winder Investment Pte Ltd #03-00 8 Robinson Road, ASO Building Singapore 048544
|
8,345,653 | (1) | 10.6% | |||||
| The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355
|
7,943,024 | (2) | 10.1% | |||||
| Capital Research Global Investors 333 South Hope Street Los Angeles, CA 90071
|
5,988,445 | (3) | 7.6% | |||||
|
BlackRock, Inc. 55 East 52nd Street New York, NY 10055
|
4,850,104 | (4) | 6.1% | |||||
| * | Based on 78,972,864 shares of common stock outstanding as of March 8, 2017. |
| (1) | This amount is based solely on Amendment No. 2 to Schedule 13G filed with the SEC on March 10, 2017 and a Form 4 filed with the SEC on March 14, 2017 by Winder Investment Pte Ltd. Winder Investment has the sole power to vote or direct the vote and the sole power to dispose of or direct the disposition of these shares. |
| (2) | This amount is based solely on Amendment No. 8 to Schedule 13G filed with the SEC on March 10, 2017 by The Vanguard Group. Of these shares, The Vanguard Group has the (i) sole power to vote or direct the vote with respect to 125,632 of these shares, (ii) shared power to vote or direct the vote with respect to 16,424 of these shares, (iii) sole power to dispose of or direct the disposition of 7,802,370 of these shares, and (iv) shared power to dispose of or direct the disposition of 140,654 of these shares. |
| (3) | This amount is based solely on Amendment No. 4 to Schedule 13G filed with the SEC on February 13, 2017 by Capital Research Global Investors, a division of Capital Research and Management Company. Capital Research has the sole power to vote or direct the vote and the sole power to dispose of or direct the disposition of these shares. |
| (4) | This amount is based solely on Amendment No. 7 to Schedule 13G filed with the SEC on January 25, 2017 by BlackRock, Inc. Of these shares, BlackRock has the sole power to vote or direct the vote with respect to 4,129,250 of these shares and sole power to dispose of or direct the disposition of 4,850,104 of these shares. |
IFF | 2017 PROXY STATEMENT 33
Table of Contents
Selection of our Independent Registered Public Accounting Firm
The Audit Committee of our Board is directly responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm. To execute this responsibility, the Audit Committee engages in a comprehensive annual evaluation of the independent registered public accounting firm’s qualifications, performance and independence to determine whether the independent registered public accounting firm should be rotated, and considers the advisability and potential impact of selecting a different independent registered public accounting firm.
The Audit Committee has selected PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm for 2017, and our Board has directed that our management submit that selection for ratification by our shareholders at the 2017 Annual Meeting. PwC has been retained as our external auditor continuously since 1957. In connection with the selection of PwC, the Audit Committee annually reviews and negotiates the terms of the engagement letter entered into with PwC. This letter sets forth important terms regarding the scope of the engagement, associated fees, payment terms, responsibilities of each party and the election of the parties to be subject to binding arbitration in the case of any dispute.
In accordance with SEC rules and PwC policies, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide audit service to our Company. For lead and quality review audit partners, the maximum number of consecutive years of service in that capacity is five years. The process for selection of our lead audit partner pursuant to this rotation policy involves a meeting between the Chair of the Audit Committee and the candidate for the role, as well as discussion by the full Audit Committee and management.
The Audit Committee and the Board believe that the continued retention of PwC as our independent registered public accounting firm is in the best interest of the Company and our shareholders, and we are asking our shareholders to ratify the selection of PwC as our independent registered public accounting firm for 2017. Although ratification is not required by our By-Laws or otherwise, we are submitting the selection of PwC to our shareholders for ratification because we value our shareholders’ views on our Company’s independent registered public accounting firm and as a matter of good corporate governance. The Audit Committee will consider the outcome of our shareholders’ vote in connection with the Audit Committee’s selection of our independent registered public accounting firm in the next fiscal year, but is not bound by the shareholders’ vote. Even if the selection is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time if it determines that a change would be in the best interests of our Company and our shareholders.
Representatives of PwC are expected to attend the 2017 Annual Meeting, where they will be available to respond to questions and, if they desire, to make a statement.
Proposal 2 — Ratification of Independent Registered Public Accounting Firm
34 IFF | 2017 PROXY STATEMENT
Table of Contents
PROPOSAL 2 — RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Principal Accountant Fees and Services
The following table provides detail about fees for professional services rendered by PwC for the years ended December 31, 2016 and December 31, 2015.
| 2016
|
2015
|
|||||||
| Audit Fees (1)
|
$
|
5,269,019
|
|
$
|
4,674,019
|
| ||
| Audit-Related Fees (2)
|
$
|
133,035
|
|
$
|
60,006
|
| ||
| Tax Fees (3)
|
||||||||
| Tax Compliance
|
$
|
12,000
|
|
$
|
554,447
|
| ||
| Other Tax Services
|
$
|
500,000
|
|
$
|
90,786
|
| ||
| All Other Fees (4)
|
$
|
11,781
|
|
$
|
67,849
|
| ||
|
Total
|
$
|
5,925,835
|
|
$
|
5,447,107
|
| ||
| (1) | Audit Fees were for professional services rendered for audits of our consolidated financial statements and statutory and subsidiary audits, consents and review of reports filed with the SEC and consultations concerning financial accounting and reporting standards. Audit Fees also included the fees associated with an annual audit of our internal control over financial reporting, as required by Section 404 of the Sarbanes- Oxley Act of 2002, integrated with the audit of our annual financial statements. |
| (2) | Audit-Related Fees were for services related to review of certain governance, risk and compliance procedures and other local statutory requirements. |
| (3) | Tax Compliance services consisted of fees related to the preparation of tax returns, assistance with tax audits and appeals, indirect taxes, expatriate tax compliance services and transfer pricing services. Other Tax Services consisted of tax planning and tax advisory services. |
| (4) | All Other Fees were for software licenses and other professional services. |
Pre-Approval Policies and Procedures for Audit and Permitted Non-Audit Services
Consistent with requirements of the SEC and the Public Company Accounting Oversight Board (PCAOB) regarding auditor independence, the Audit Committee has responsibility for:
| • | appointing, |
| • | negotiating, and setting the compensation of, and |
| • | overseeing the performance of, the independent registered public accounting firm. |
In recognition of this responsibility, the Audit Committee has established policies and procedures to pre-approve all audit and non-audit services to be provided by the independent registered public accounting firm to our Company by category, including audit-related services, tax services and other permitted non-audit services. Under the policy, the Audit Committee pre-approves all services obtained from our independent registered public accounting firm by category of service, including a review of specific services to be performed, fees expected to be incurred within each category of service and the potential impact of such services on auditor independence. The term of any pre-approval is for the financial year, unless the Audit Committee specifically provides for a different period in the pre-approval. If it becomes necessary to engage the independent registered public accounting firm for additional
IFF | 2017 PROXY STATEMENT 35
Table of Contents
PROPOSAL 2 — RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
services not contemplated in the original pre-approval, the Audit Committee requires separate pre-approval before engaging the independent registered public accounting firm. To facilitate the process, the policy delegates pre-approval authority to the Audit Committee chairperson to pre-approve services up to $20,000, and the Audit Committee may also delegate authority to one or more of its members to pre-approve services. The Audit Committee member to whom such authority is delegated must report, for informational purposes, any pre-approval decisions to the Audit Committee at its next scheduled meeting.
All services rendered by PwC to our Company are permissible under applicable laws and regulations. During 2016, all services performed by PwC which were subject to the SEC’s pre-approval requirements were approved by the Audit Committee in accordance with the Audit Committee’s pre-approval policy in effect during 2016.
The Audit Committee (“we,” “us” or the “Committee”) operates in accordance with a written charter, which was adopted by the Board. A copy of that charter is available through the Investor—Leadership & Governance—Governance link on the Company’s website at www.iff.com. The Committee comprises five directors whom the Board has determined are “independent,” as required by the applicable listing standards of the NYSE and the rules of the SEC, and whom qualify as “audit committee financial experts” as defined by the rules of the SEC.
Management has the primary responsibility for the financial statements and the reporting process, including internal control over financial reporting and disclosure controls and procedures designed to ensure compliance with accounting standards and applicable laws and regulations. The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP (“PwC”), is responsible for performing an integrated audit of the Company’s financial statements and internal control over financial reporting in accordance with the auditing standards of the Public Company Accounting Oversight Board (“PCAOB”).
The Committee oversees the Company’s financial reporting process and internal control structure on behalf of the Board. We met eight times during 2016, including meeting regularly with PwC and the Company’s internal auditor, both privately and with management present. For 2016, we have reviewed and discussed the Company’s audited financial statements with management. We have reviewed and discussed with management its process for preparing its report on its assessment of the Company’s internal control over financial reporting, and at regular intervals we received updates on the status of this process and actions taken by management to respond to issues and deficiencies identified. We discussed with PwC its audit of the financial statements and of the Company’s internal control over financial reporting. We discussed with PwC and the Company’s internal auditors the overall scope and plans for their respective audits.
We have discussed with PwC the matters required to be discussed by PCAOB Auditing Standard No. 1301, Communications with Audit Committees. We also received the written disclosures and the letter from PwC as required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence, and discussed with PwC its independence. We concluded that PwC’s independence was not adversely affected by the non-audit services provided by PwC, the majority of which consisted of audit-related and tax compliance services.
Based on the reviews and discussions referred to above, we recommended to the Board (and the Board subsequently approved our recommendation) that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for filing with the SEC.
36 IFF | 2017 PROXY STATEMENT
Table of Contents
PROPOSAL 2 — RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
In determining whether to retain PwC as the Company’s independent registered public accounting firm for the 2017 fiscal year, we took into consideration a number of factors, including:
| • | the quality and effectiveness of PwC’s historical and recent performance on the Company’s audit; |
| • | the length of PwC’s tenure as the Company’s independent registered public accounting firm, and its familiarity with our business, accounting policies and practices, and internal control over financial reporting; |
| • | PwC’s capability, understanding and expertise in handling the breadth and complexity of our global operations; |
| • | the appropriateness of PwC’s fees and payment terms; and |
| • | PwC’s independence. |
Based on this evaluation, we believe that it is in the best interests of the Company and its shareholders to retain PwC as the Company’s independent registered public accounting firm for 2017, which the shareholders will be asked to ratify at the 2017 Annual Meeting of Shareholders.
Audit Committee
John F. Ferraro (Chair)
Marcello V. Bottoli
David R. Epstein
Henry W. Howell, Jr.
Dale F. Morrison
|
Ö
YOUR BOARD RECOMMENDS A VOTE “FOR” RATIFICATION OF PWC AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2017
|
IFF | 2017 PROXY STATEMENT 37
Table of Contents
Reference Guide to our CD&A
This Compensation Discussion and Analysis, or CD&A, describes and analyzes our executive compensation philosophy and program in the context of the compensation paid during the last fiscal year to our chief executive officer, our chief financial officer, each of our three most highly compensated executive officers during 2016, and our former chief financial officer (collectively referred to as our NEOs). This CD&A is organized as follows:
As discussed in Proposal 3, we are conducting our annual Say on Pay vote that requests your approval of the compensation of our NEOs as described in this section and in the tables and accompanying narrative contained below under “Executive Compensation.” To assist you with this vote, please review our compensation philosophies, the design of our executive compensation programs and how, we believe, these programs have contributed to and are aligned with our performance.
Named Executive Officers
For 2016 our NEOs were:
| Name |
Title | |
| Andreas Fibig |
Chairman and CEO | |
| Richard O’Leary |
CFO | |
| Nicolas Mirzayantz |
Group President, Fragrances | |
| Matthias Haeni |
Group President, Flavors | |
| Anne Chwat |
General Counsel | |
|
Alison A. Cornell |
Former CFO |
Executive Officer Transition
In October 2016, Ms. Cornell, our former CFO, left us to pursue other opportunities and Mr. O’Leary was appointed EVP and CFO. Prior to his appointment, Mr. O’Leary served as our SVP, Controller and Chief Accounting Officer from July 2015 to October 2016. Ms. Cornell served as our CFO from July 2015 to October 2016. In connection with Mr. O’Leary’s appointment as EVP and CFO, the Compensation Committee (the “Committee”) approved a new compensation package for Mr. O’Leary, which is discussed below under “Employment Agreements or Arrangements”. In connection with her separation, Ms. Cornell entered into a separation agreement with us. For more information regarding Ms. Cornell’s separation agreement please see the section entitled Payments and Benefits Upon a Change in Control and Various Types of Terminations.
Compensation Discussion and Analysis
38 IFF | 2017 PROXY STATEMENT
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
The core of our executive compensation philosophy is that our executives’ compensation should be linked to achievement of financial and operating performance metrics that build shareholder value over both the short- and long-term. As such, we consistently focus on the following key drivers of shareholder value maximization:
We designed our compensation program to focus on elements that we believe will contribute to these shareholder value drivers. Our compensation program:
IFF | 2017 PROXY STATEMENT 39
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
The design of our executive compensation program reflects our belief that our executive compensation should be (1) aligned with the achievement of financial and operational metrics for both our company and the respective business function in which the executive serves and (2) tied to the total shareholder return delivered to our shareholders. The following illustrates how our 2016 executive compensation program met these design objectives:
Our 2016 NEO Compensation Reflects Our Overall 2016 Performance
During 2016, our financial results were affected by mix and manufacturing performance as well as increases in research, selling and administrative costs, including planned strategic investments. For the year, on a currency neutral basis, we achieved 5% sales growth, 4% adjusted operating profit growth, and 6% adjusted earnings per share growth. In addition, we delivered a three-year Total Shareholder Return at the 66th percentile relative to the S&P 500. As a result of our financial and operational results, (1) our AIP achievement levels were approximately 73% for those executive officers evaluated at the corporate level, 62% for our Group President, Fragrances and 80% for our Group President, Flavors and (2) our 2014-2016 LTIP payout was approximately 107.6% of target.
40 IFF | 2017 PROXY STATEMENT
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Our Vision 2020 strategy, which was adopted in 2015, focuses on four pillars to build differentiation, accelerate profitable growth, and increase shareholder value.
Vision 2020 Strategy
|
Innovating Firsts
|
Win Where We Compete |
Become Our Customers’ Partner of Choice |
Strengthen and Expand the Portfolio | |||||||||
|
Ø Drive differentiation in key technologies
Ø Develop responsible products to meet the future needs of our customers and consumers
|
Ø Lead in key markets
Ø Close gaps across value enhancing categories
Ø Achieve #1 position with targeted customers |
Ø Actively support our customers’ success
Ø Achieve commercial excellence and service leadership |
Ø Strengthen the Flavors and Fragrances core
Ø Stretch into adjacencies
Ø Pursue partnerships and collaborations |
During 2016, we made significant progress on our Vision 2020 strategic objectives including:
| • | Achieved growth in encapsulation-related and modulation portfolio sales; |
| • | Launched and commercialized four flavor modulators; |
| • | Commercialized four captive fragrance ingredients; |
| • | Achieved growth in North America Consumer Fragrances; |
| • | Strengthened our position in Flavors North America with the acquisition of David Michael and reinforced our differentiated service model for US middle-market customers; |
| • | Expanded business access through core list status with two multinational customers; |
| • | Deployed an industry-first, wind turbine at our Tilburg, Netherlands facility; |
| • | Became the first flavor and fragrance company to join the World Economic Forum; |
| • | Achieved CDP “A” List rating for second consecutive year; and |
| • | Announced the purchase of Fragrance Resources – closed in January 2017 – to further improve our market position in specialty fine fragrances. |
During 2016, we continued to make strategic and financial progress, despite a challenging global environment. Both the Flavors and Fragrances business units successfully delivered solid top and bottom-line growth. During 2016, we paid $184.9 million in dividends to our shareholders, increased our quarterly dividend by 15% to $0.64 per share in August 2016 and repurchased approximately 1.1 million shares of common stock for $127 million. The total payout ratio (total cash returned to shareholders in dividend payments and share repurchases compared to adjusted net income) was 71% of adjusted net income, exceeding our target range of 50% to 60%.
IFF | 2017 PROXY STATEMENT 41
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
To ensure continued alignment of compensation with Company performance and the creation of shareholder value on a long term, sustainable basis, we maintain strong compensation-related corporate governance policies.
|
What We Do |
What We Don’t Do | |||||||
|
|
Pay for performance. A significant portion of the compensation for our NEOs is in the form of at-risk variable compensation
|
|
No tax gross-ups for NEOs for severance payments. | |||||
|
|
Base variable compensation on multiple performance metrics to encourage balanced incentives
|
|
No single-trigger vesting of cash or equity-based awards upon change in control | |||||
|
|
Provide appropriate mix of fixed and variable compensation to reward company, business unit and individual performance
|
|
No short-sales, hedging or pledging of our stock by our employees, officers or directors | |||||
|
|
Award a majority of variable compensation as equity-based awards
|
|
No fixed-duration employment agreements with executive officers
| |||||
|
|
Have executive clawback policies to recoup cash and equity compensation upon certain triggering events
|
|
No stock option/SAR repricing or exchange of underwater options or SARs for cash
| |||||
|
|
Require our executives to meet share retention guidelines
|
|||||||
|
|
Engage an independent compensation consultant
|
|||||||
|
|
Engage in an annual risk assessment of our compensation programs
|
|||||||
42 IFF | 2017 PROXY STATEMENT
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Elements and Targeted Mix
Our executive compensation program includes direct and indirect compensation elements.
We believe that direct compensation should be the principal form of compensation. The table below provides a brief description of the principal elements of direct compensation, whether such compensation is fixed or variable, and the compensation program objectives served by each element. From time to time, the Committee may also approve discretionary awards to executives in connection with their initial employment or for extraordinary individual performance, a significant contribution to the Company’s strategic objectives or retention purposes. In connection with his promotion to CFO, the Committee approved a one-time special retention RSU award to Mr. O’Leary equal in value to $1,000,000, which vests four years from the date of grant.
| Element | Fixed or Variable | Primary Objective | ||
| Base Salary |
Fixed Short-Term Cash |
• To attract and retain executives by offering salary that is competitive with market opportunities and that recognizes each executive’s position, role, responsibility and experience.
| ||
| AIP award |
Variable Short-Term Cash |
• To motivate and reward the achievement of our annual performance objectives, including currency neutral sales growth, operating profit, gross margin, working capital, and individual objectives.
| ||
| LTIP award |
Variable Long-Term Equity and Cash |
• To motivate and reward efficient capital allocation and annual profitability performance, measured by annual economic profit, and long-term shareholder value creation, measured by the cumulative relative TSR performance over rolling three-year periods.
• To align executives’ interests with those of shareholders by paying 50% of the earned award in shares of our common stock (with the remaining 50% settled in cash) and including relative TSR as a key measure of long-term performance.
| ||
| ECP award |
Variable Long-Term Equity |
• To align executives’ interests with the interests of shareholders through equity-based compensation.
• To encourage direct investment in our Company.
• To serve as an important retention tool.
• To recognize individual contributions.
|
The Committee periodically reviews the mix between variable and fixed and short-term and long-term incentive compensation opportunities and between cash and equity opportunities based on (1) benchmarking and other external data provided by our independent compensation consultant, (2) recommendations from our independent compensation consultant and (3) recommendations from our CEO and CHRO.
Our indirect compensation elements consist of (1) our Deferred Compensation Program and 401(k) savings plan, (2) a perquisite program, (3) severance and other benefits under our Executive Severance Policy, (4) benefits under an Executive Death Benefit Plan and (5) long-term disability coverage. The Committee regularly reviews the costs and benefits of these programs.
IFF | 2017 PROXY STATEMENT 43
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
The Committee reviews the salaries of our NEOs annually, and adjusts salaries periodically. In February 2016, the Committee reviewed the base salaries of its NEOs after consultation with its independent compensation consultant. Mr. Fibig’s base salary was increased by 8.3% pursuant to the terms of his offer letter. Mr. Haeni’s and Ms. Chwat’s base salaries were increased by 5% and 2.2%, respectively, following a review of external market data and based upon the recommendations of the CEO. The base salaries of Mr. Mirzayantz and Ms. Cornell remained unchanged. Mr. O’Leary, who was appointed EVP and CFO in October 2016, received a salary increase from $400,000 to $500,000 in connection with his promotion.
During 2016, our AIP continued to compensate our executive officers based on the achievement of certain levels of (1) Company financial performance and (2) individual performance, in each case against pre-defined, challenging performance targets. Financial performance metrics are measured (A) at the consolidated corporate level for our CEO, CFO, former CFO and General Counsel and (B) at both the consolidated corporate level and the business unit level for the Group Presidents of Fragrances and Flavors. Individual performance is measured in the key areas of leadership, succession planning and people development as we believe that the strength of our employees will be key to our ability to build differentiation and accelerate growth.
The 2016 weightings for our NEOs at both the consolidated corporate level and the business unit level remained unchanged and continued to assign greater weight to currency neutral sales growth and operating profit than gross margin and working capital because the Committee believes that these two performance metrics are the most relevant measures of overall annual Company performance and are key to driving sustained long-term growth.
The performance metrics for the 2016 AIP and their assigned weightings were as follows:
Annual Incentive Program
|
Currency neutral sales growth |
Operating profit |
Gross Margin |
Working Capital |
Individual Performance Metric |
Total Weighting |
|||||||||||||||||||||||||||||||||
| All NEOs Except Group Presidents Corporate Weighting |
|
40% | 25% | 15% | 10% | 10% | 100% | |||||||||||||||||||||||||||||||
|
Currency neutral sales growth |
Operating profit |
Gross Margin |
Working Capital |
Individual Performance Metric |
Total Weighting |
|||||||||||||||||||||||||||||||||
| Group Presidents Corporate Weighting |
|
20% | 12.5% | 0% | 10% | 0% | 100% | |||||||||||||||||||||||||||||||
|
Group Presidents Business Unit Weighting |
|
20% | 12.5% | 15% | 0% | 10% | ||||||||||||||||||||||||||||||||
44 IFF | 2017 PROXY STATEMENT
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Each year the Committee sets an AIP target (stated as a percentage of base salary) for each NEO. For 2016, the Committee maintained the AIP percentage targets at the same level as 2015.
| 2016 Salary |
Target AIP as % Base Salary |
AIP Target | ||||||||
| Andreas Fibig |
$ | 1,300,000 | 120% | $ | 1,560,000 | |||||
| Richard O’Leary (1) |
$ | 422,131 | 58% | $ | 244,262 | |||||
| Nicolas Mirzayantz |
$ | 600,000 | 80% | $ | 480,000 | |||||
| Matthias Haeni |
$ | 525,000 | 80% | $ | 420,000 | |||||
| Anne Chwat |
$ | 475,000 | 60% | $ | 285,000 | |||||
|
Alison A. Cornell |
$ | 560,000 | 80% |
$ | 448,000 | |||||
| (1) | Reflects Mr. O’Leary’s salary, target AIP percentage and AIP target on a pro rata basis, based on his salary ($400,000) and target AIP percentage (50%) as SVP, Controller and Chief Accounting Officer from January 2016 through October 2016 and his salary ($500,000) and target AIP percentage (80%) as EVP and CFO from October 2016 through December 2016. |
Performance Metrics and Capped AIP Payouts: Based on a review of the annual and long-term financial goals, operational plans, strategic initiatives and the prior year’s actual results, the Committee annually sets the financial performance metrics for our Company and the respective business units that it will use to measure performance as well as the relative weighting that will be assigned to each metric. The Committee then approves threshold, target and maximum performance levels for each performance metric. Upon achievement of the relative performance level, an executive has the opportunity to earn threshold (25%), target (100%) and maximum (200%) amounts. The Committee seeks to establish corporate performance goals that are challenging yet attainable.
As discussed above, for 2016 AIP awards, the Committee approved the following four financial performance metrics and the individual performance objectives for the reasons noted below:
| 2016 AIP Performance Metrics | Reasons for Selection | |||
| Financial | Currency neutral sales growth |
• Reflects both increases in market share and sales expansion, which drives increases in gross profit. By measuring achievement exclusive of currency fluctuations, this goal helps to ensure that we are rewarding actual incremental growth. | ||
| Operating profit | • An increase in operating profit (in dollar terms) encourages the management of gross profit dollars against operating expenses. Achieving this goal helps provide us with the funding to reinvest in the business to drive future growth. | |||
| Gross margin percentage |
• Improvement in gross margin percentage is an important measure for analyzing our ability to effectively recover increases in the cost of raw materials, cost discipline and operating efficiencies.
• Gross margin also promotes greater focus on R&D and innovation. | |||
| Working capital percentage |
• Reductions in working capital drive better operating cash flow generation. For this purpose, we define working capital as inventories and trade accounts receivable less trade accounts payable.
| |||
|
Individual |
Individual performance objectives
|
• Reflects our focus on continuing to develop the people of our organization and ensuring strong leadership and robust succession planning.
| ||
IFF | 2017 PROXY STATEMENT 45
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Determination of 2016 Performance Levels: In determining our 2016 AIP performance threshold, target and maximum levels, the Committee considered our annual targets for 2016, our 2015 actual results and payout trends over the prior three-year and five-year periods. The performance target levels for the financial metrics were set in line with our 2016 budget and above our 2015 actual results.
2016 Corporate and Business Unit AIP Performance: Our actual performance against our 2016 AIP corporate financial metrics is set forth in the tables below. In establishing AIP financial performance metrics and in determining actual achievement against performance metrics, we eliminated the net impact of certain non-core expenses and non-core gains in order to reflect our fundamental operating results. 2016 LTIP and AIP target performance levels and actual achievement against the target performance levels excluded costs or income associated with (i) adjustments related to operational improvement initiative costs and restructuring charges, and reversal of certain severance accruals, (ii) tax adjustments related to imputed interest income received on amounts previously deposited for loss provision, (iii) acquisition related items, (iv) an increase in the loss provision related to the ZoomEssence litigation, and (v) with respect to the operating profit metric of the 2016 AIP only, unbudgeted mark-to-market adjustments related to our Deferred Compensation Plan (together, the “2016 non-core items”). Similarly, we excluded the effects of incentive compensation provisions in calculating gross margin performance in order to better focus on the underlying operating performance of our product portfolio. The Committee believes that the necessary self-funding of incentive compensation payments is covered in the operating profit component of the AIP program.
Corporate Performance
The table below reflects the 2016 AIP metrics, their respective targets and the payouts earned for each metric and overall by each of Messrs. Fibig and O’Leary and Mmes. Chwat and Cornell, who were all evaluated solely on corporate performance.
Corporate Level
As indicated above, during 2016, our corporate performance was between target and threshold for each financial performance metric. The actual dollar amount earned by each NEO is set forth below under “2016 Individual AIP Payouts.” With respect to the individual objectives component, the Committee reviewed each NEO’s performance in 2016 against his or her leadership and execution of strategic and organizational individual objectives established by the Committee. The Committee determined that each NEO had met his or her individual objectives for 2016.
46 IFF | 2017 PROXY STATEMENT
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Fragrances Business Unit Performance
The table below reflects the 2016 AIP metrics, their respective targets and the payouts earned for each metric and overall by Mr. Mirzayantz, our Group President, Fragrances.
Fragrances Business Unit
As indicated above, during 2016, our Fragrances business unit performance was between threshold and target for each financial performance metric. The actual dollar amount earned by our Group President, Fragrances is set forth below under “2016 Individual AIP Payouts.”
IFF | 2017 PROXY STATEMENT 47
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Flavors Business Unit Performance
The table below reflects the 2016 AIP metrics, their respective targets and the payouts earned for each metric and overall by Mr. Haeni, our Group President, Flavors.
Flavors Business Unit
During 2016, our Flavors business unit performance was between target and maximum for the business unit component of operating profit and working capital performance metrics, and between threshold and target for the currency neutral sales growth, the corporate component of operating profit and gross margin performance metrics. The actual dollar amount earned by our Group President, Flavors is set forth below under “2016 Individual AIP Payouts.”
2016 Individual AIP Payouts
The AIP payout for 2016 for the NEOs, based on the actual achievement of each of the performance metrics, is included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table in this proxy statement. Based on the Corporate and Business Unit performance outlined in the tables above, 2016 AIP payouts were as follows:
| 2016 AIP Target ($) |
2016 Payout | |||||||||||
|
Executive |
As % of Target | Award ($) | ||||||||||
| Andreas Fibig |
$ | 1,560,000 | 73% | $ | 1,134,120 | |||||||
| Richard O’Leary (1) |
$ | 244,262 | 73% | $ | 177,579 | |||||||
| Nicolas Mirzayantz |
$ | 480,000 | 62% | $ | 297,600 | |||||||
| Matthias Haeni |
$ | 420,000 | 80% | $ | 336,840 | |||||||
| Anne Chwat |
$ | 285,000 | 73% | $ | 207,195 | |||||||
|
Alison Cornell (2) |
$ | 448,000 | 73% | $ | 253,616 | |||||||
48 IFF | 2017 PROXY STATEMENT
Threshold Target Maximum Award Payout as a % of Target
2.7% 5.4% 8.1% 16.1% Currency Neutral Sales Growth (Business Unit) Actual 4.7%
2.5% 5.2% 7.9%
14.4% Currency Neutral Sales Growth (Corporate) Actual 4.2%
$322M $337M $362M 13.8% Operating Profit (Business Unit) Actual $339.5M
$599M $631M $663M 9.4% Operating Profit (Corporate) Actual $620M
43.9% 45.4% 46.9% 10.5% Gross
Margin (Business Unit) Actual 44.8%
26.6% 25.3% 24.0% 6.0% Working Capital (Corporate) Actual 24.7%
100% 10.0% Individual Actual 100%
Overall Payout for Group President, Flavors 80.2%
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
| (1) | Reflects Mr. O’Leary’s AIP target on a pro rata basis, based on his AIP target of 50% of salary as SVP, Controller and Chief Accounting Officer from January 2016 through October 2016 and his AIP target of 80% of salary as EVP and CFO from October 2016 through December 2016. |
| (2) | Ms. Cornell’s actual 2016 AIP payout was calculated on a pro rata basis to reflect her departure effective as of October 11, 2016. |
We believe that LTIP awards reward our executive officers, including our NEOs, for financial results and align their interests with the interests of our shareholders. Annually, the Committee reviews the LTIP to determine (1) the metrics that should be used to encourage long-term success, (2) the weightings that should be applied to such metrics and (3) the annual and cumulative targets for such metrics. The Committee believes that commencing a new three-year LTIP cycle each year:
| • | provides a regular opportunity to re-evaluate long-term metrics, |
| • | aligns goals with the ongoing strategic planning process, and |
| • | reflects our evolving business priorities and market factors. |
The Committee also annually sets a total LTIP target award for each NEO, which reflects the total LTIP award a NEO has the opportunity to receive at the end of the three-year cycle if we meet all of our targets. Depending upon our actual performance relative to financial and relative total shareholder return goals, the actual payout to the NEO could be greater or less than the total LTIP target award.
Performance Segments. Given the difficulty in setting long-term goals in current volatile global economic environments, the Committee believes that the LTIP should continue to comprise four performance segments: Year 1, Year 2, Year 3 (each an “annual performance segment”) and cumulative performance over the three-year period (the “cumulative performance segment”).
Performance Metrics. For the 2014-2016 LTIP and the 2015-2017 LTIP, each annual performance segment is measured equally against Economic Profit (“EP”) (12.5%) and Relative Total Shareholder Return (“Relative TSR”) (12.5%). The Committee replaced the annual Relative TSR performance segments with a cumulative, 3-year Relative TSR performance metric as the sole financial metric for the cumulative performance segment beginning with the 2016-2018 LTIP. The Committee believes that the cumulative, 3-year performance period for Relative TSR better aligns its compensation objectives with the interests of our shareholders and our focus on long-term growth initiatives. The table below reflects the performance metrics for the outstanding LTIP cycles and their assigned weightings:
Long-Term Incentive Program
| Segment | EP | Relative TSR | ||||||||||
|
2014-2016 and 2015-2017 LTIP performance cycles |
|
Year 1
|
12.5%
|
12.5%
|
||||||||
|
Year 2
|
12.5%
|
12.5%
|
||||||||||
|
Year 3
|
12.5%
|
12.5%
|
||||||||||
|
Cumulative Segment
|
0%
|
25%
|
||||||||||
|
Total
|
37.5%
|
62.5%
|
100%
|
IFF | 2017 PROXY STATEMENT 49
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
| Segment | EP | Relative TSR | ||||||||||
|
2016-2018 LTIP performance cycle |
|
Year 1
|
12.5%
|
0%
|
||||||||
|
Year 2
|
12.5%
|
0%
|
||||||||||
|
Year 3
|
12.5%
|
0%
|
||||||||||
|
Cumulative Segment
|
0%
|
62.5%
|
||||||||||
|
Total
|
37.5%
|
62.5%
|
100%
|
We believe EP is a key factor in identifying the sources and drivers of value across our businesses and that EP growth is closely linked to the creation of long-term shareholder value. EP measures operating profitability after considering (1) all our revenues and operating costs, (2) income taxes and (3) a charge for the capital employed in the business. Capital employed primarily consists of working capital, property, plant and equipment, and intangible assets. The capital charge is determined by applying the estimated weighted average cost of capital (“WACC”) to the adjusted average invested capital employed (including changes and/or loss provisions associated with non-operating events such as restructurings and tax or litigation settlements) during the relevant period. The estimated WACC rate is the weighted average cost of our debt and equity capital. In determining the EP target for the 2016-2018 LTIP, the Committee considered our annual targets for 2016, our 2015 actual results and payout trends over the prior three-year and five-year periods and the pro-forma impact of recent acquisitions.
The Committee believes that three-year Relative TSR, as compared to other public companies in which shareholders may choose to invest, is a good indicator of our overall long-term performance, and directly ties our executives’ compensation opportunity to our share price appreciation and dividend payments relative to a major large-cap index. Relative TSR is calculated by measuring the change in the market price of stock plus dividends paid (assuming the dividends are reinvested) for our Company and the S&P 500 companies over the performance period. The market price for purposes of calculating the Relative TSR of our Company and the S&P 500 on each cycle-end date is determined based on the average closing price per share of each company’s common stock over the period of 20 consecutive trading days preceding that date, as reported by S&P Capital IQ.
Our EP goal for the annual performance segments of each of our current LTIP cycles is set at the beginning of each annual performance segment. The Relative TSR goal for the annual performance segments of the 2014-2016 and 2015-2017 LTIP cycles is set at the beginning of each annual performance segment. The Relative TSR goal for the cumulative performance segment of each of our current LTIP cycles is set at the beginning of the three-year cycle.
At the end of each year, the Committee reviews our annual performance and cumulative performance for the newly completed three-year cycle. To the extent that our annual performance has met or exceeded the threshold annual EP goal, and for LTIP performance cycles prior to the 2016-2018 LTIP cycle, the threshold annual Relative TSR goal, the Committee approves “banking” the credit that will be applied to the payout at the end of the three-year cycle. For the completed three-year cycle, the Committee approves the total payout, taking into consideration the performance for each of the prior annual performance segments.
50 IFF | 2017 PROXY STATEMENT
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
2016-2018 LTIP Target Awards
In early 2016, the Committee approved the following total LTIP target awards to each of our NEOs for the 2016-2018 LTIP:
|
NEO |
Total LTIP Target Award |
|||||
| Andreas Fibig |
$2,000,000 | |||||
| Richard O’Leary (1) |
$200,000 | |||||
| Nicolas Mirzayantz |
$500,000 | |||||
| Matthias Haeni |
$500,000 | |||||
| Anne Chwat |
$285,000 | |||||
| Alison Cornell (2) |
$500,000 | |||||
| (1) | Mr. O’Leary’s LTIP target award for 2016 was set based on his position as SVP, Controller and Chief Accounting Officer; for 2017, Mr. O’Leary’s LTIP target award was changed to $500,000. |
| (2) | Reflects Ms. Cornell’s LTIP target on an annualized basis. Ms. Cornell’s actual LTIP award will be prorated to reflect her partial year of employment pursuant to her separation agreement. |
The Committee set the cumulative three-year Relative TSR goal for the 2016-2018 LTIP cycle at the same level that had been set for the prior year’s LTIP cycle. For the 2016-2018 LTIP cycle, the Committee determined that 50% of the value of any payouts would be denominated and paid in cash and 50% would be denominated and paid in shares, consistent with the 2014-2016 and 2015-2017 LTIP cycles. The Committee believes that paying 50% of the LTIP value in shares creates a stronger alignment between executives and shareholders, and provides additional incentive for executives to achieve superior Company performance and to produce share price appreciation over the three-year performance cycle. The number of shares of our common stock for the 50% portion that would be paid in stock is determined based on the market price of the common stock at the beginning of the cycle. For the 2016 cycle, it was based on $119.27 per share, the average closing market price for the twenty trading days prior to January 1, 2016, the first stock trading day of the cycle. At the conclusion of each of the first two annual performance segments, the dollar value and number of shares will be “banked” based on the performance of each such segment. When the final performance segment and the cumulative Relative TSR three-year cycle are concluded and the LTIP payouts are approved by the Committee, the cumulative dollar value and cumulative number of shares will be paid to the executive.
2016 LTIP Performance
For the 2016 segment of each of the existing LTIP cycles, our EP of $247 million, as adjusted for 2016 non-core items, was between threshold and target performance level. As a result, our NEOs earned approximately 77% of the EP goal for the year. Our Relative TSR for 2016 was below threshold at the 26th percentile versus the S&P 500, and as a result, our NEOs did not earn any awards based on the Relative TSR goal for the 2016 segments of the 2014-2016 and 2015-2017 LTIP cycles. The LTIP award earned and “banked” for the 2016 segment of the 2015-2017 and 2016-2018 LTIP cycles was therefore equal to approximately 38.4% of target. As previously discussed, for the 2016-2018 LTIP grant cycle, the three annual Relative TSR performance segments were replaced with the cumulative, 3-year Relative TSR segment.
IFF | 2017 PROXY STATEMENT 51
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
2016 LTIP Results
2014-2016 LTIP Payout
As noted above, our NEOs earned approximately 77% of the EP goal for 2016, and our Relative TSR for 2016 was below threshold at the 26th percentile. As a result, our NEOs did not earn any award based on the Relative TSR goal for the 2016 segment. Our cumulative Relative TSR was positioned at approximately the 66th percentile versus the S&P 500, which equates to a payout of 152.5% of target.
The overall payout for the 2014-2016 LTIP cycle was approximately 108% of target, based on the following EP and Relative TSR results against objectives, as determined by the Committee.
| Segment | Segment Weighted EP Result |
Segment Weighted TSR Result |
Combined Segment |
Segment Weighting |
Overall Result | |||||||||||||||||||||||||
| 2014 | 133% | 112 | % | 122.4 | % | 25.00 | % | 30.6 | % | |||||||||||||||||||||
| 2015 | 34% | 200 | % | 117.0 | % | 25.00 | % | 29.2 | % | |||||||||||||||||||||
| 2016 | 77% | 0 | % | 38.4 | % | 25.00 | % | 9.6 | % | |||||||||||||||||||||
| Cumulative | — | 152.5 | % | 152.5 | % | 25.00 | % | 38.1 | % | |||||||||||||||||||||
| Total |
|
100.00
|
%
|
|
107.60
|
%
| ||||||||||||||||||||||||
The LTIP payout for the 2014-2016 performance cycle for the NEOs, based on the actual achievement of quantitative objectives, is discussed in greater detail following the Grants of Plan-Based Awards Table.
For the LTIP performance cycles that concluded in the five-year period from 2012 to 2016, the actual overall corporate percentage payout under the LTIP against those long-term cycle performance goals ranged from approximately 107.6% to 149.9%, with an average payout of 130.3%.
52 IFF | 2017 PROXY STATEMENT
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
We believe that equity is a key component of our long-term incentive compensation as it (1) provides participants with a meaningful stake in our Company, thereby aligning their interests more closely with shareholders, (2) encourages participants to focus on long-term success, (3) helps to attract and retain top talent and (4) recognizes individual contributions. We believe that our ECP is an effective vehicle to encourage ownership as it provides participants the flexibility to allocate their award among three types of equity.
Under the ECP, participants, including all of our NEOs, may choose from three types of equity award grants. For ECP awards in 2016, these three types were (1) Purchased Restricted Stock Units (“PRSUs”), (2) stock settled appreciation rights (“SSARs”), and (3) Restricted Stock Units (“RSUs”). PRSUs are assigned an adjustment factor of 120% to provide incentive to participants to invest in and accumulate shares to promote retention and increase alignment of participants’ interests with those of our shareholders. Elections are made in 5% increments. Based on the participant’s election, a participant’s dollar award value is converted into PRSUs, SSARs or RSUs on the grant date based on the market price of our common stock on such date.
The table below sets forth each of the three types of equity awards offered and their adjustment factor. During 2016, ECP participants, including all of our NEOs, made choices based on the different equity award types described below.
|
Types of Equity
|
Description of Equity Type
|
Adjustment Factor
| ||||
|
PRSUs |
PRSUs are restricted stock units that are granted as a match against shares of Company stock purchased at full value by an ECP participant on the grant date. As an incentive to promote share accumulation and direct investment in our stock, there is a 20% adjustment upward of the award value if PRSUs are elected. If an ECP participant chooses PRSUs, then he or she must deliver funds (or shares with an equivalent value) equal to the dollar amount of the ECP award (including the 20% adjustment). Upon receipt of the funds by the Company, the ECP participant receives a matching number of PRSUs.
PRSU holders have no voting rights during the vesting period but accrue dividend equivalents on their PRSUs. PRSUs vest approximately three years from the date of grant. PRSUs are the most rapid way for participants to accumulate and build share ownership based on the participant’s direct investment in Company stock.
|
120% | ||||
|
SSARs |
SSARs are a contractual right to receive the value, in shares of Company stock, of the appreciation in stock price from the SSAR grant date to the date the SSAR is exercised by the participant. Participants receive a number of SSARs equivalent to 4.5 times (i.e. the approximate binomial value of the SSARs) the elected SSAR award value divided by the grant price. SSARs provide upside potential for share accumulation and greater alignment with shareholders because SSARS only have value if the stock price increases after the grant date. The adjustment factor for SSARs is 1.0.
SSARs become exercisable on a stated vesting date, which is approximately three years from the grant date, and expire on the seventh anniversary of the grant date. SSARs do not require a financial investment by the SSAR grantee.
|
100% | ||||
|
RSUs |
RSUs are our promise to issue unrestricted shares of our stock on the stated vesting date, which is approximately three years from the grant date. The adjustment factor for RSUs is 1.0. RSUs do not require a financial investment by the RSU grantee.
|
100% |
IFF | 2017 PROXY STATEMENT 53
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Our Committee annually determines the dollar range of ECP awards for each level of participating executive based on peer group and long-term incentive practices survey data, a review of the competitiveness of the combined value of the ECP awards and LTIP awards with market practices and other factors that it deems appropriate. For 2016, these ranges were as follows:
|
Lower Limit |
Upper Limit | |||||
| CEO |
$ | 1,000,000 | $ 3,500,000 | |||
| Group Presidents and CFO |
$ | 250,000 | $ 750,000 | |||
|
General Counsel |
$ | 175,000 | $ 525,000 | |||
The Committee then approves the actual dollar award to be granted to each NEO other than the CEO, and recommends to the independent members of the Board for approval the actual dollar award for the CEO. All ECP awards are generally subject to a vesting period of approximately three years. The Committee believes the ECP is an attractive tool for recruiting, motivating and retaining executive talent and encourages alignment with shareholders by reinforcing investment and ownership in our Company by our executives.
As an example of the value that may be delivered by the ECP to the participant based on the three election types, the following table shows the number of shares and value to the participant at vesting for an ECP award of $500,000. For all three choices, vesting occurs approximately three years from the grant date:
|
Assumes a Common Share Value of $100.00 at Award (1) |
||||||||||||
| PRSU (2) | RSUs | SSARs (3) | ||||||||||
| Award Value | $ | 500,000 | $ | 500,000 | $ | 500,000 | ||||||
| Adjustment Factor | 1.2 | 1.0 | 1.0 | |||||||||
| Post-Factor Value | $ | 600,000 | $ | 500,000 | $ | 500,000 | ||||||
| Participant Required Investment | $ | 600,000 | — | — | ||||||||
| Award Shares/SSARs At Grant Date | 6,000 Shares | 5,000 Shares | 22,500 SSARs | |||||||||
| Dollar Value of Award At Vesting/Exercise (Assuming 8% Compounded Annual Stock Price Increase) (2) | $ | 755,827 | $ | 629,856 | $ | 584,352 | ||||||
| Dollar Value of Award At Vesting/Exercise (Assuming 8% Compounded Annual Stock Price Decrease)
|
$
|
476,299
|
|
$
|
396,916
|
|
|
—
|
| |||
(1) Dollar values of awards are used in this table for illustrative purposes only and are not intended as forecasts of future stock price performance. All values shown are before tax withholding.
(2) PRSU values exclude dividend equivalents.
(3) Participants may choose to hold their SSARs longer than the three-year vesting period (up to the full seven-year contractual term) and continue to participate in future stock price appreciation, if any.
2016 Equity Choice Program Awards
In February 2016, the Committee approved the 2016 ECP values awarded to each executive, including our NEOs, with an effective grant date of May 2, 2016. The period of time between approval of ECP values and the actual grant date gives ECP participants time to make their irrevocable ECP elections and to arrange for the purchase of shares from the Company if PRSUs are elected. The Committee determined that the 2016 ECP grants would vest on April 2, 2019, which is slightly less than three years from the grant date, to enable participants to use shares vesting in 2019 to acquire new shares in 2019 if they elect PRSUs for their 2019 ECP award.
54 IFF | 2017 PROXY STATEMENT
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Similar to prior years, the actual amount of each ECP awarded to each NEO in 2016 was based on an evaluation of the NEO’s individual performance, long-term potential, market factors and retention considerations. The actual value of these awards will depend on future stock price performance.
The following table shows the ECP dollar award value approved by the Committee for each NEO during 2016 and the percentage and adjusted dollar value after application of the adjustment factor of each type of award elected by each NEO. None of the NEOs elected SSARs in 2016.
|
PRSU Election |
RSU Election |
|||||||||||||||||||
| 2016 Unadjusted ECP Award |
Percent Election |
Adjusted Value |
Percent Election |
Adjusted Value |
||||||||||||||||
| Adjustment Factor | 120 % | 100% | ||||||||||||||||||
| Andreas Fibig | $ | 2,000,000 | 30% | $ | 720,000 | 70% | $ | 1,400,000 | ||||||||||||
| Richard O’Leary (1) | $ | 275,000 | 100% | $ | 330,000 | — | — | |||||||||||||
| Nicolas Mirzayantz | $ | 650,000 | 100% | $ | 780,000 | — | — | |||||||||||||
| Matthias Haeni | $ | 500,000 | 100% | $ | 600,000 | — | — | |||||||||||||
| Anne Chwat | $ | 525,000 | 100% | $ | 630,000 | — | — | |||||||||||||
| Alison Cornell | $ | 500,000 | 50% | $ | 300,000 | 50% | $ | 250,000 | ||||||||||||
| (1) | For 2016, Mr. O’Leary’s ECP award was based on his position as SVP, Controller and Chief Accounting Officer. Effective for 2017, in connection with his appointment as EVP and CFO, his ECP award will be based on his position as EVP and CFO. |
The actual equity award grants to each NEO, based on the above elections, are identified in the Grants of Plan-Based Awards Table. Information on prior ECP awards that were exercised or vested in 2016 can be found in the Stock Vested Table.
As part of our compensation program, we offer U.S.-based executives and other senior employees an opportunity to participate in our DCP. Pursuant to the terms of the DCP, we provide the same level of matching contributions to our executive officers that are available to other employees under our 401(k) savings plan. We also use the DCP to encourage executives to acquire shares of our common stock that are economically equivalent to ownership of our common stock but on a tax-deferred basis. We do this to encourage executives to be long-term owners of a significant equity stake in our Company and to enhance the alignment between the interests of executives and those of our shareholders.
Our costs in offering the DCP consist of the time-value of money costs, the cost of the matching contribution that supplements the 401(k) savings plan, administrative costs and a 25% premium for amounts deferred into the IFF Share Fund in an executive’s DCP account. The premium on amounts deferred into the IFF Share Fund typically do not vest until approximately two years after the deferral is made, as the premium is contingent on the executive remaining employed by us (other than for retirement) for the full calendar year following the year when such deferral is made. If notional investments within the DCP increase in value, the amount of our payment obligation will increase. The time-value of money cost results from the delay in the time at which we can take tax deductions for compensation payable to a participating executive.
Additional information about the DCP and supplemental matching contributions and premiums on cash deferrals under the DCP made for NEOs may be found below under “2016 Non-Qualified Deferred Compensation.”
IFF | 2017 PROXY STATEMENT 55
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
The ESP provides severance and other benefits to executives, including NEOs, whose employment is terminated by the Company without cause or in the event of a termination by the executive for good reason in connection with a change in control of the Company. Additionally, the ESP provides severance and other benefits in the case of NEOs whose employment is terminated by the Company for good reason not in connection with a change in control. This policy helps us in competing with other companies in recruiting and retaining qualified executives. When recruiting an executive from another company, the executive in most cases will seek contract terms that provide compensation if his or her employment is terminated by us in cases in which the executive has not engaged in misconduct. The level of severance pay under the ESP is based on a tier system and each executive’s assigned tier is based on the executive’s grade level. All of our NEOs are in Tier I. The specific severance pay by tier was developed with the assistance of our independent compensation consultant and determined by the Committee. We believe that the ESP provides a level of severance pay and benefits that is within a range of competitive practice of our peer group companies.
A discussion of our ESP and the payments that each of our NEOs would have been eligible to receive had a covered termination occurred as of December 31, 2016 is set forth below under “Potential Payments upon Termination or Change in Control.”
Perquisite Program
Our NEO perquisite program offers non-monetary benefits that are within the range of market practice as determined through a market study conducted by our independent compensation consultant. Under the perquisite program, our NEOs are generally eligible to receive certain benefits including:
| • | Company car; |
| • | Annual physical exam; |
| • | Financial planning and tax preparation (up to $10,000 per year); |
| • | Estate planning (up to $4,000 over a three-year period); and |
| • | Fitness dues or membership (up to $3,000 annually). |
We may provide additional or modified perquisites to our NEOs in connection with their employment arrangements. As part of the terms of his employment, Mr. Haeni is also entitled to certain transitional assistance associated with his tax, housing and retirement savings for a limited period with such benefits declining annually. In addition, Mr. Fibig is provided a Company car and a Company driver, and an annual financial planning and tax preparation allowance of $25,000.
In August 2016, the Committee reviewed our perquisite program with its independent compensation consultant and determined that the total value of our perquisite program is within the range of market practice. Additional details concerning perquisites are included in the footnotes to the All Other Compensation Table.
56 IFF | 2017 PROXY STATEMENT
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Supplemental Long Term Disability
We offer our U.S.-based employees Long Term Disability (“LTD”) coverage at Company expense, which provides a benefit, calculated as a percentage of base salary, in the case of full disability. Under our group plan, the maximum base salary is $300,000, and the maximum monthly benefit is $15,000. We also offer Supplemental LTD insurance to provide a maximum monthly benefit of $25,000 for U.S.-based employees, including our NEOs, who earn a base salary plus bonus in excess of the maximum base salary of $300,000 under our group plan. The Supplemental LTD insurance premium, like our basic group LTD policy, is fully paid by us and is taxable income to employees upon receipt of the benefit.
Executive Death Benefit Plan
Our Executive Death Benefit Plan provides participants, including each of the NEOs, with a pre-retirement death benefit equal to twice the participant’s annual base salary less $50,000 (the death benefit provided by our basic group term life insurance plan for employees and retirees). The plan also provides a death benefit post-retirement, or pre-retirement after attaining age 70, equal to the participant’s base salary for the year in which the participant retires or reaches the age of 70, assuming the participant was an executive officer, less $12,500 of group coverage for retired participants and less $50,000 for senior participants (those who have attained the age of 70 and remain employed with us).
IFF | 2017 PROXY STATEMENT 57
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Roles and Responsibilities
|
Compensation Committee |
The Committee is responsible for overseeing the determination, implementation and administration of executive compensation (including equity awards, benefits and perquisites). The Committee recommends CEO compensation to the independent directors of the Board for their approval and approves the compensation of all the other NEOs. | |||
|
Compensation Consultant |
Frederic W. Cook & Co., Inc. (“FW Cook”) is engaged as the Committee’s independent compensation consultant. Since August 2015, FW Cook has worked with the Committee to provide it with analyses, advice, guidance and recommendations on executive compensation levels versus peers, market trends and incentive plan designs. FW Cook is engaged exclusively by the Committee on executive and non-employee director compensation matters and does not have other consulting arrangements with us. The Committee considers the independence of FW Cook on an annual basis, and in 2016 it determined FW Cook was independent and that no conflicts of interest existed. | |||
|
Management |
Our CEO and CHRO evaluate the individual performance and, with input from the Committee’s independent compensation consultant, the competitive pay positioning for senior management members that report directly to the CEO, including our NEOs, and make recommendations to the Committee concerning each such executive’s target compensation. Our CEO follows the same process with regard to the target compensation for our CHRO, without her input, and the Committee follows the same process with regard to the target compensation for our CEO, without his input. | |||
Shareholder Advisory Vote
As part of its compensation setting process, the Committee also considers the results of the prior year’s shareholder advisory vote on our executive compensation. The Committee believes these voting results provide useful insight as to whether shareholders agree that the Committee is achieving its goal of designing and administering an executive compensation program that promotes the best interests of our Company and our shareholders by providing its executives with appropriate compensation and meaningful incentives to deliver strong financial performance and increase shareholder value. As part of its 2016 compensation setting process, the Committee reviewed the results of the 2015 shareholder advisory vote, in which 94.6% of the votes cast were voted in favor of our executive compensation program.
58 IFF | 2017 PROXY STATEMENT
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
On an annual basis, the Committee reviews and approves the compensation of our NEOs. We use a global grading structure for our NEOs, with compensation ranges for each grade. Our NEOs are placed in a particular grade based on internal factors (including scope of responsibilities and job complexity) and an external market evaluation. The external market evaluation is based on published third party general survey information and a review of similar positions within our selected peer groups described below. This process is referred to as “market benchmarking.”
Market Benchmarking
The Committee reviews its external market benchmarking and peer group data annually. The Committee’s goals are to position (1) target total cash compensation at median or slightly above and (2) target total direct compensation (salary, annual incentive compensation and long-term incentive compensation) between the median to 75th percentile of relevant market benchmarks. This philosophy reflects the Committee’s approach to setting stretch goals that require above median performance to generate target payouts. In August 2015, the Committee reviewed peer group data with our independent compensation consultant for purposes of determining the appropriate peer group for setting 2016 compensation levels and opportunities.
The Committee’s independent compensation consultant provides the 25th percentile, median and 75th percentile “market reference” data for each executive position based on the average of the two relevant compensation benchmarks, as further explained below under “Peer Groups—CEO, CFO and Group Presidents”. This data is used to analyze the external competitiveness of each NEO’s base salary, target total cash compensation and target total direct compensation. This analysis is reviewed with the Committee and, in the case of the compensation of NEOs other than the CEO, with the CEO as well. In determining target total direct compensation for each executive in 2016, the Committee considered the consultant’s market reference analysis. In addition, the Committee considered a number of other important factors, including each executive’s:
| • | individual experience and performance; |
| • | scope of responsibilities; |
| • | relative responsibilities compared with other senior Company executives; |
| • | contribution relative to overall Company performance; |
| • | compensation relative to his or her peers within the organization; and |
| • | long-term potential. |
The Committee uses the market reference range in order to establish a starting point for the compensation levels that the Committee believes would provide our NEOs with competitive compensation. However, the actual target total direct compensation approved by the Committee may be above or below the market reference range based on the Committee’s review of market compensation levels, its desire to create internal pay equity among our executives and the individual factors set forth above.
For 2016, the Committee awarded target total direct compensation to Messrs. Fibig, Haeni, Mirzayantz and Mmes. Chwat and Cornell, and to Mr. O’Leary following his promotion, that was generally within the competitive range of the targeted median to 75th percentile. The total actual compensation paid for the year, as compared to target compensation approved at the beginning of the year, may differ depending on Company and individual performance. Consequently, the actual compensation received by a NEO may be higher or lower than his or her market reference range.
IFF | 2017 PROXY STATEMENT 59
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Peer Groups—CEO, CFO and Group Presidents
For 2016 compensation decisions regarding (1) the CEO, (2) the current and former CFO (which was evaluated at the beginning of the year prior to her departure) and (3) each of the Group Presidents, the Committee benchmarked compensation against the average of the following two groups:
| Peer Group | Selection Criteria |
Ø U.S. publicly traded companies of comparable size with manufacturing operations (generally based on revenue of $1B - $7B and market capitalization of $1B - $14B)
Ø Strong in-house R&D activities
Ø Global scope with significant international presence (international operations generally accounting for at least 25% of total revenues)
Ø Growth orientation, with positive sales and earnings growth over the three years prior to the review and selection of the peer group
Ø Companies with which we compete for executive talent
Ø Progressive companies with positive reputations
| ||||
| Component Companies |
Ø Church & Dwight Co, Inc.
Ø The Clorox Company
Ø Coty, Inc.
Ø Edgewell Personal Care
Ø Elizabeth Arden, Inc.
Ø The Estee Lauder Companies Inc.
Ø Herbalife Ltd.
Ø The Hershey Company |
Ø Hormel Foods Corporation
Ø Jarden Corporation
Ø McCormick & Company, Inc.
Ø Newell Rubbermaid Inc.
Ø Nu Skin Enterprises, Inc.
Ø Revlon, Inc.
Ø Sensient Technologies Corporation
Ø Tupperware Brands Corporation
| ||||
| Position in Group |
Ø Approximately the 38th percentile of revenue and 51st percentile of market capitalization
| |||||
|
Size- Appropriate Cut of the Towers Watson General Industry Survey
|
Selection Criteria |
Ø 126 companies
Ø $1 billion to $7 billion in reported revenues
Ø Revenues interpolated to our 2015 trailing four-quarter revenue size:
• $3.1 billion for corporate positions
• $1.6 billion for Fragrances
• $1.5 billion for Flavors | ||||
There were six companies in the Peer Group that did not meet all of the desired criteria-Clorox, Elizabeth Arden, Estee Lauder, Hershey, Hormel Foods and Jarden. Each of Clorox, Estee Lauder, Hershey, Hormel Foods and Jarden were slightly above either the revenue or market capitalization criteria, while Elizabeth Arden was slightly below the revenue and market capitalization criteria. The Committee decided to keep these companies in the Peer Group (1) based on the significant comparability of these businesses to one of our two business units and (2) to allow for year-over-year consistency in the peer group.
Changes to 2017 Peer Group
In August 2016, the Committee reviewed its Peer Group with FW Cook for purposes of its upcoming 2017 target compensation setting process and determined that, for 2017, Elizabeth Arden, Hormel Foods, Jarden Corporation and Newell Brands (formerly Newell Rubbermaid) would be removed from the Peer Group.
60 IFF | 2017 PROXY STATEMENT
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Elizabeth Arden was removed because it entered into an agreement to be acquired by Revlon in June 2016. Hormel was removed because of differences in revenue size as well as relatively low comparability in terms of R&D focus and multinational presence compared to us. Jarden and Newell were removed because of their 2016 merger which resulted in a post-merger revenue size that was above the desired range.
The Committee also added four companies to the Peer Group for 2017. The Committee added Dr. Pepper Snapple Group, Inc., Hain Celestial Group and Mead Johnson Nutrition because they primarily manufacture and distribute food/beverage products and fall within desired revenue and market capitalization size ranges. In addition, the Committee added Spectrum Brands Holdings because it manufactures and distributes a range of consumer products and falls within the desired size range.
Peer Group—Other Executive Officers
Based on recommendations by its independent compensation consultant, the Committee determined that the Peer Group did not publicly disclose comparative data for the other executive officer positions that were reviewed by the Committee. Consequently, for all other executive officer positions, including the General Counsel, instead of using the Peer Group, the Committee used the aggregate data available from a select cut of the Towers Watson General Industry Survey that (1) identified themselves as belonging to the consumer products or the food and beverage industry and (2) had revenues between $1 billion and $7 billion (the “Consumer Products Select Cut”). The Committee averaged (1) the Consumer Products Select Cut and (2) the Towers Watson General Industry Survey to obtain the 25th percentile, median and 75th percentile target compensation for market reference data.
The companies included in the Consumer Products Select Cut in 2016 were as follows:
| Consumer Products Select Cut | Selection Criteria |
Ø 22 companies (including three companies that are also part of the 2016 Peer Group)
Ø $1 billion to $7 billion in reported revenues, with median revenues of $3.8 billion
| ||||
| Component Companies |
Ø Ansell Limited
Ø Bemis Company, Inc.
Ø Bob Evans Farms, Inc.
Ø Cott Corporation
Ø Dole Food Company
Ø Dr. Pepper Snapple Group, Inc.
Ø Flowers Foods, Inc.
Ø Hanesbrands Inc.
Ø Hasbro, Inc.
Ø The J.M. Smucker Company
Ø Jack In The Box Inc.
|
Ø Kerry Group plc
Ø Keurig Green Mountain, Inc.
Ø Molson Coors Brewing Company
Ø Nu Skin Enterprises
Ø Parmalat S.p.A
Ø Quad/Graphics, Inc.
Ø Revlon, Inc.
Ø The Scotts Miracle-Gro Company
Ø Tempur Sealy International, Inc.
Ø Tupperware Brands Corporation
Ø The WhiteWave Foods Company
| ||||
IFF | 2017 PROXY STATEMENT 61
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
The triggers for recovery of compensation under our compensation recoupment and clawback policies include:
| • | accounting restatements; |
| • | financial misstatements (without regard to fault); |
| • | an employee’s willful misconduct; |
| • | violation of a Company policy that is materially detrimental to our Company; or |
| • | an employee’s violation of non-competition, non-solicitation, confidentiality and similar covenants. |
All compensation under our 2010 Stock Award and Incentive Plan and our 2015 Stock Award and Incentive Plan, including AIP, LTIP, ECP and other cash and equity awards, as well as payments made under our ESP, are subject to clawback.
We generally attempt to structure executive compensation to be tax deductible. However, the Committee also believes that under some circumstances, such as to attract or to retain key executives, to recognize outstanding performance or to take into account the external business environment, it may be important to compensate one or more key executives above tax deductible limits.
In November 2016, the Compensation Committee approved changes to our AIP applicable to our NEOs effective for the 2017 fiscal year, including (i) that in order to fund any payouts under the AIP, the new corporate operating profit threshold must be met and (ii) eliminating the 10% individual performance component for NEOs, and correspondingly increasing by 5% the weighting of each of the currency sales growth component and operating profit component. In the event the Company does not achieve the corporate operating profit threshold, no AIP payouts will be awarded to the participants, including the NEOs.
This Compensation Discussion and Analysis includes the following non-GAAP financial measures: currency neutral sales, adjusted operating profit and adjusted earnings per share. Please see Exhibit A of this proxy statement for a reconciliation of such metrics.
62 IFF | 2017 PROXY STATEMENT
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy statement. Based on those reviews and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement for filing with the Securities and Exchange Commission and incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
Compensation Committee
Roger W. Ferguson, Jr. (Chair)
Michael Ducker
Christina Gold
Katherine M. Hudson
Dale F. Morrison
IFF | 2017 PROXY STATEMENT 63
Table of Contents
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (known as the “Dodd-Frank Act”) requires us to provide our shareholders with the opportunity to approve, on a nonbinding, advisory basis, the compensation of our NEOs as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC, often referred to as “Say on Pay.”
The core of our executive compensation philosophy is that our executives’ compensation should be linked to achievement of financial and operating performance metrics that build shareholder value over both the short- and long-term. We have designed our compensation program to focus on elements that we believe will contribute to these shareholder value drivers. As such, our compensation program:
| • | includes a significant equity component, |
| • | is variable and tied to value-creating performance metrics, |
| • | reflects each executive’s level of responsibility, and |
| • | rewards individual performance and contributions. |
In 2016, approximately 93% of the votes cast on our say-on-pay proposal relating to 2015 executive compensation voted for the proposal. In deciding how to cast your vote on this proposal, the Board requests that you consider the structure of the Company’s executive compensation program, which is more fully discussed in this proxy statement under the heading “Compensation Discussion and Analysis.”
This vote is non-binding; however, we value the opinions of our shareholders and accordingly the Board and the Compensation Committee will consider the outcome of this advisory vote in connection with future executive compensation decisions.
For reasons set forth above, the Board recommends that you vote for the compensation paid to the NEOs in 2016.
Accordingly, we will ask our shareholders to vote on the following resolution at the 2017 Annual Meeting:
“RESOLVED, that, the compensation paid to the Company’s NEOs in 2016, as disclosed in this proxy statement for our 2017 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and related narrative disclosure, is hereby approved.”
|
Ö
YOUR BOARD RECOMMENDS A VOTE “FOR” THE COMPENSATION PAID TO OUR NEOS IN 2016
|
Proposal 3 — Advisory Vote On Executive Compensation
64 IFF | 2017 PROXY STATEMENT
Table of Contents
The Dodd-Frank Act requires us to provide our shareholders with the opportunity to vote, on an advisory, non-binding basis, for their preference as to whether votes on the compensation of our NEOs should occur every one, two or three years.
At our 2011 annual meeting, our shareholders voted to hold an annual advisory vote on our executive compensation program. Accordingly, we have submitted Say on Pay proposals on the compensation of our NEOs at every subsequent annual meeting.
We are required to hold a vote on the frequency of Say on Pay proposals every six years. As a result, we are again asking you to vote on whether you would prefer an advisory vote every one, two or three years or you may abstain.
After careful consideration, our Board recommends that we continue to conduct an annual advisory vote on executive compensation.
When voting on this proposal, you may indicate whether you would prefer an advisory vote every one, two or three years, or you may abstain from voting.
If a majority of the votes cast do not favor one of the three frequencies, the frequency that receives the most votes will be considered to be the frequency favored by shareholders.
|
Ö
YOUR BOARD RECOMMENDS A VOTE FOR AN ANNUAL ADVISORY VOTE ON EXECUTIVE COMPENSATION
|
Proposal 4 — Advisory Vote on Frequency of Votes on Executive Compensation
IFF | 2017 PROXY STATEMENT 65
Table of Contents
The following table sets forth the compensation for:
| • | our current CEO; |
| • | our current CFO and former CFO; and |
| • | our three other most highly compensated executive officers who were serving as executive officers as of December 31, 2016. |
We refer to the executive officers included in the Summary Compensation Table as our NEOs. A detailed description of the plans and programs under which our NEOs received the following compensation can be found in this proxy statement under the heading “Compensation Discussion and Analysis.”
|
Name and Principal Position |
Year | Salary ($)(1) |
Bonus ($) |
Stock Awards ($)(2)(3) |
Non-Equity Incentive Plan Compensation ($)(4)(5) |
Change in |
All Other Compensation ($)(7) |
Total ($) |
||||||||||||||||||||||||||
| Andreas Fibig |
2016 | 1,275,000 | — | 2,963,837 | 1,670,801 | — | 300,595 | 6,210,233 | ||||||||||||||||||||||||||
| Chairman and CEO |
2015 | 1,200,000 | — | 3,173,165 | 1,702,478 | — | 133,099 | 6,208,742 | ||||||||||||||||||||||||||
| 2014 | 400,000 | 1,000,000 | 2,244,414 | 760,534 | — | 134,027 | 4,538,975 | |||||||||||||||||||||||||||
| Richard O’Leary |
2016 | 422,131 | — | 1,346,578 | 227,620 | — | 112,537 | 2,108,866 | ||||||||||||||||||||||||||
| CFO |
2015 | 445,311 | — | 541,687 | 200,542 | — | 78,053 | 1,265,593 | ||||||||||||||||||||||||||
| 2014 | 302,872 | — | 349,635 | 225,148 | — | 86,897 | 964,552 | |||||||||||||||||||||||||||
| Nicolas Mirzayantz |
2016 | 600,000 | — | 1,010,428 | 452,834 | 43,291 | 153,913 | 2,260,466 | ||||||||||||||||||||||||||
| Group President, Fragrances |
2015 | 585,000 | — | 1,088,973 | 506,351 | — | 169,083 | 2,349,407 | ||||||||||||||||||||||||||
| 2014 | 532,500 | — | 2,998,513 | 762,039 | 303,665 | 163,172 | 4,759,889 | |||||||||||||||||||||||||||
| Matthias Haeni |
2016 | 518,750 | — | 830,353 | 492,074 | — | 1,537,189 | 3,378,366 | ||||||||||||||||||||||||||
| Group President, Flavors |
2015 | 490,000 | — | 729,004 | 375,043 | — | 782,736 | 2,376,783 | ||||||||||||||||||||||||||
| 2014 | 445,653 | — | 624,912 | 407,888 | — | 485,920 | 1,964,373 | |||||||||||||||||||||||||||
| Anne Chwat |
2016 | 472,500 | — | 761,326 | 293,960 | — | 183,826 | 1,711,612 | ||||||||||||||||||||||||||
| General Counsel |
2015 | 465,000 | — | 738,915 | 308,330 | — | 155,487 | 1,667,732 | ||||||||||||||||||||||||||
| 2014 | 465,000 | — | 708,594 | 419,022 | — | 562,425 | 2,155,041 | |||||||||||||||||||||||||||
| Alison A. Cornell |
2016 | 436,067 | — | 766,479 | 340,537 | — | 1,461,973 | 3,005,056 | ||||||||||||||||||||||||||
| Former CFO |
2015 | 271,562 | 250,000 | 506,228 | 217,787 | — | 32,996 | 1,278,573 | ||||||||||||||||||||||||||
| (1) | The 2016 amounts in this column include (i) the following amounts deferred under the DCP: Mr. Fibig -- $318,750; Mr. O’Leary -- $33,767; Mr. Mirzayantz — $30,000; Ms. Chwat — $236,250; and Ms. Cornell — $152,277, and (ii) the following amounts deferred under the Retirement Investment Fund Plan (401(k)): Mr. Fibig — $24,000; Mr. O’Leary — $24,000; Mr. Mirzayantz — $24,000; Ms. Chwat — $18,900; and Ms. Cornell -- $24,000. |
| (2) | The amounts in the Stock Awards column represent the aggregate grant date fair value of equity awards granted during each respective fiscal year, calculated in accordance with FASB ASC Topic 718. Details on and assumptions used in calculating the grant date fair value of RSUs, PRSUs, SSARs and LTIP equity incentive compensation may be found in Note 12 to our audited financial statements for the fiscal year ended December 31, 2016 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. The grant date fair value attributable to the 2016-2018 LTIP cycle |
Executive Compensation
66 IFF | 2017 PROXY STATEMENT
Table of Contents
EXECUTIVE COMPENSATION
| awards pertains to the 50% portion of those awards that will be payable in our common stock if the performance conditions are satisfied and is based on the probable outcome of such conditions. The value of these awards at the grant date if the maximum level of performance conditions were to be achieved is as follows: Mr. Fibig — $1,843,716; Ms. Cornell -- $460,929; Mr. O’Leary — $184,372; Mr. Mirzayantz — $460,929; Mr. Haeni — $460,929; and Ms. Chwat — $262,730. The actual number of shares earned by the NEOs for the completed 2014-2016 LTIP cycle and for the 2016 segment of each of the 2015-2017 LTIP cycle and 2016-2018 LTIP cycle can be found in the narrative following the Grants of Plan-Based Awards Table under the heading “Long-Term Incentive Plan.” |
| (3) | The grant date fair value attributable to PRS awards included in the Stock Awards column pertains to the value of the matching portion of the award. Not reflected in this column is the value of shares delivered or cash paid by NEOs to purchase shares in fiscal year 2016 for the participant’s portion of the PRS award. As discussed in the Compensation Discussion and Analysis, participants in our ECP are permitted to satisfy the purchase price of PRS shares by tendering shares of our common stock or paying cash. The following NEOs purchased or tendered the number of shares indicated in fiscal year 2016, in each case at a price per share equal to the closing stock price on the date of grant: Mr. Fibig — $719,938 for 6,009 shares; Mr. O’Leary — $329,957 for 2,754 shares; Mr. Mirzayantz — $779,963 for 6,510 shares; Mr. Haeni — $599,889 for 5,007 shares; Ms. Chwat — $629,961 for 5,258 shares; and Ms. Cornell — $300,004 for 2,503 shares. |
| (4) | The 2016 amounts in this column include the following amounts earned under the 2016 AIP: Mr. Fibig - $1,134,120; Mr. O’Leary - $177,579; Mr. Mirzayantz — $297,600; Mr. Haeni - $336,840; Ms. Chwat — $207,195; and Ms. Cornell — $253,616. |
| (5) | LTIP cycles have four performance segments related to each year in the three-year LTIP cycle and the cumulative results for the full three-year cycle. Any amounts earned under a performance segment are credited on behalf of the executive at the end of the relevant segment, but such credited amounts are not paid until the completion of the three-year LTIP cycle. Upon completion, one-half of any award earned for a completed LTIP cycle is paid in cash and the remaining half is paid in shares of our common stock. The cash portion of the NEOs’ credited awards is reported in this column for the year in which such amount was earned, rather than in the year in which such award is actually paid. The amounts in this column related to 2016 include the amounts earned and credited for the 2016 segment of the 2015-2017 and 2016-2018 LTIP cycles and the following amounts earned for the 2016 and cumulative segments under the completed 2014-2016 LTIP cycle: Mr. Fibig - $392,869; Mr. O’Leary — $35,881; Mr. Mirzayantz - $119,281; Mr. Haeni — $119,281; Ms. Chwat — $66,559; and Ms. Cornell — $58,925. |
| (6) | The amounts in this column represent the aggregate change in the actuarial present value of the NEO’s accumulated benefit under our U.S. Pension Plan (our qualified defined benefit plan) and our Supplemental Retirement Plan (our non-qualified defined benefit plan). Earnings in the interest bearing account in the DCP were not above-market, and earnings in other investment choices under the DCP were not preferential, and therefore are not included. |
| (7) | Details of the 2016 amounts set forth in this column are included in the All Other Compensation Table. |
IFF | 2017 PROXY STATEMENT 67
Table of Contents
EXECUTIVE COMPENSATION
| Dividends on Stock Awards ($)(1) |
Company Contributions to Savings and Defined Contribution Plans ($)(2) |
Auto ($)(3) |
Financial/ ($) |
Executive Death Benefit Program ($)(4) |
Matching Charitable Contributions ($) |
Relocation Expenses ($)(5) |
Tax Equalization/ Assistance ($)(6) |
Severance ($)(7) |
Other ($)(8) |
Total ($) |
||||||||||||||||||||||||||||||||||||
| Andreas Fibig |
24,155 | 199,906 | 60,270 | 9,225 | — | — | — | — | — | 7,039 | 300,595 | |||||||||||||||||||||||||||||||||||
| Richard O’Leary |
25,857 | 48,525 | 13,350 | 7,500 | 11,714 | — | — | — | — | 5,591 | 112,537 | |||||||||||||||||||||||||||||||||||
| Nicolas Mirzayantz |
58,390 | 49,746 | 6,947 | 9,225 | 12,688 | 5,000 | — | — | — | 11,917 | 153,913 | |||||||||||||||||||||||||||||||||||
| Matthias Haeni |
24,947 | 82,249 | (9) | 16,954 | — | 4,353 | — | 107,899 | (9) | 1,296,480 | (9) | — | 4,307 | 1,537,189 | ||||||||||||||||||||||||||||||||
| Anne Chwat |
39,459 | 83,734 | 14,158 | 14,000 | 10,436 | 10,000 | — | — | — | 12,039 | 183,826 | |||||||||||||||||||||||||||||||||||
| Alison A. Cornell |
6,192 | 49,859 | 25,025 | 9,879 | 2,738 | — | — | — | 1,364,160 | 4,120 | 1,461,973 | |||||||||||||||||||||||||||||||||||
| (1) | The amounts in this column represent dividend equivalents paid during 2016 on shares of PRS and PRSUs. |
| (2) | The amounts in this column represent: (i) matching amounts paid under our Retirement Investment Fund Plan (401(k)); (ii) amounts matched or set aside by our Company under our DCP (which are matching contributions that would otherwise be made under our 401(k) plan but for limitations under U.S. tax law); (iii) the dollar value of premium shares credited to the accounts of participants in the DCP who elect to defer their cash compensation into the IFF Stock Fund; and (iv), for Mr. Haeni, $23,344 contributed to his European retirement plan in lieu of participation in the Company’s savings plans and an additional savings allowance of $58,905. The premium shares may be forfeited if the executive does not remain employed by our Company for the full calendar year following the year during which such shares are credited. Dividend equivalents are credited on shares (including premium shares) held in accounts of participants who defer into the IFF Stock Fund. Dividend equivalents are included in the Aggregate Earnings in Last Fiscal Year column of the Non-Qualified Deferred Compensation Table and are not included in the amounts represented in this column. |
| (3) | The amounts in this column represent the personal use of automobiles provided by our Company. The value of such use was determined by using standard IRS vehicle value tables and multiplying that value by the percent of personal use. The value of fuel was determined by multiplying the overall fuel cost by the percent of personal use. In both cases personal use percentages were determined on a mileage basis. The amounts in this column also include the cost paid by us for use of our Company driver. |
| (4) | The amounts in this column represent costs for the corporate-owned life insurance coverage we have purchased to offset liabilities that may be incurred under our Executive Death Benefit Program. No participant in this program has or will have any direct interest in the cash surrender value of the underlying insurance policy. |
| (5) | The amounts in this column represent a credit of $101 for relocation expenses and an additional $108,000 of living allowance. |
| (6) | The amounts in this column represent for Mr. Haeni, a tax gross up credit on his relocation expenses, a tax equalization payment of $96,623, and a tax gross up of $290,872 on the tax equalization payment. These tax gross up and tax equalization payments will continue through 2017 and then terminate. |
| (7) | Represents cash severance to be paid to Ms. Cornell under the ESP following her separation from the Company in October 2016. |
| (8) | The amounts in this column represent (i) health club membership, (ii) annual physical examination, (iii) amounts paid under our Supplemental Long-Term Disability Plan and (iv) visa/immigration related expenses. |
| (9) | In connection with his relocation to the United States, we agreed to provide Mr. Haeni an alternate savings program and certain transitional assistance for the four years following his relocation. In lieu of his |
68 IFF | 2017 PROXY STATEMENT
Table of Contents
EXECUTIVE COMPENSATION
| participation in our 401(k) plan and DCP, the Company provided Mr. Haeni an annual savings allowance equal to 11% of his annual base salary as an employer contribution to the Swiss pension plan of his choosing. In addition, the Company provided (i) a monthly living allowance during 2016 of $9,000, which will decrease to $6,000 in 2017, (ii) tax equalization payments (subject to gross-up) during 2016 equal to 50% of the difference in income taxation between Singapore and New York City, which will decrease by 25% in 2017, and (iii) an additional savings allowance during 2016 equal to 50% of the difference between the annual savings allowance and his previous pension payments, which will decrease by 25% in 2017. These payouts will terminate after 2017. |
Employment Agreements or Arrangements
Mr. Fibig
Pursuant to the terms of a letter agreement dated May 26, 2014 between our Company and Mr. Fibig, he became our CEO effective September 1, 2014 and Chairman of the Board as of December 1, 2014.
Under this agreement, Mr. Fibig’s employment is on an at-will basis until terminated by either party. Mr. Fibig is entitled to the following compensation under the agreement:
| • | Minimum annual base salary of $1,300,000 in 2016; |
| • | A target AIP bonus of 120% of his base salary and a potential maximum annual bonus of 240% of his base salary; |
| • | An LTIP target of $2,000,000 and a maximum of up to 200% of the LTIP target; and |
| • | Participation in the ECP program. |
The letter agreement provides for non-competition, non-solicitation, non-disclosure, cooperation and non-disparagement covenants.
Mr. Fibig’s letter agreement grants him certain rights upon termination of his employment. These rights are described in this proxy statement under the heading “Termination of Employment and Change in Control Arrangements - Other Separation Arrangements.”
Other NEOs
The compensation of our other NEOs is approved by the Compensation Committee and is generally determined by the terms of the various compensation plans in which they are participants and which are described in this proxy statement more fully above in the Compensation Discussion and Analysis, in the narrative following the Grants of Plan-Based Awards Table and under the heading “Termination of Employment and Change in Control Arrangements.” In addition, their salary is reviewed, determined and approved on an annual basis by our Compensation Committee. Executives also may be entitled to certain compensation arrangements provided or negotiated in connection with their commencement of employment with our Company.
In connection with Mr. O’Leary’s appointment as EVP and CFO on October 11, 2016, the Compensation Committee approved changes in Mr. O’Leary’s compensation. As CFO, Mr. O’Leary receives a base salary of $500,000 and continues to be eligible to participate in our AIP, with a target AIP bonus of 80% of his base salary, and our LTIP, with a target annual LTIP value of $500,000 commencing in 2017. In addition, he continues to participate in our ECP program with a target award of $500,000 for 2017. The Compensation Committee also approved a special retention restricted stock unit grant to Mr. O’Leary with a value of $1 million that vests on the fourth anniversary of the date of grant.
IFF | 2017 PROXY STATEMENT 69
Table of Contents
EXECUTIVE COMPENSATION
2016 Grants of Plan-Based Awards
The following table provides information regarding grants of plan-based awards to our NEOs during 2016. The amounts reported in the table under “Estimated Future Payouts under Non-Equity Incentive Plan Awards” and “Estimated Future Payouts under Equity Incentive Plan Awards” represent the threshold, target and maximum awards under our AIP and LTIP programs. The performance conditions applicable to the AIP and LTIP are described in the Compensation Discussion and Analysis.
With regard to the AIP, the percentage of each NEO’s target award that was actually achieved for 2016 based on satisfaction of the AIP performance conditions is discussed in the Compensation Discussion and Analysis. The amount actually paid to each NEO in 2017 based on 2016 performance under the AIP is included in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.
With regard to the LTIP, the amounts of each NEO’s award that were actually achieved for 2014-2016 based on satisfaction of the performance conditions for the 2014-2016 LTIP and the 2016 segment of each of the 2015-2017 LTIP and 2016-2018 LTIP cycles are set forth following the Grants of Plan-Based Awards Table. In addition, cash amounts earned by each NEO for the cumulative and 2016 segment of the 2014-2016 LTIP cycle and the 2016 segments of the 2015-2017 LTIP and 2016-2018 LTIP cycles are also included in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. However, any cash or shares credited to a NEO based on achievement of performance conditions during a segment will not be paid until completion of the full LTIP cycle and could be forfeited if a NEO leaves the Company prior to the payment date.
|
Name |
Type of Award (1) |
Grant Date (2) |
Date of Compensation Committee Approval |
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards (3) |
Estimated Future Payouts Under Equity Incentive Plan Awards (4) |
All Other |
Grant Date Fair Value of Stock Awards ($) (6) |
|||||||||||||||||||||||||||||||||||||||
| Threshold ($) |
Target ($) |
Maximum ($) |
Threshold ($) |
Target ($) |
Maximum ($) |
|||||||||||||||||||||||||||||||||||||||||
| Andreas Fibig |
AIP | 2/7/2016 | 2/7/2016 | 390,000 | 1,560,000 | 3,120,000 | ||||||||||||||||||||||||||||||||||||||||
| 2016 LTIP | 2/7/2016 | 2/7/2016 | 250,000 | 1,000,000 | 2,000,000 | 250,000 | 1,000,000 | 2,000,000 | 921,858 | |||||||||||||||||||||||||||||||||||||
| PRSU | 5/2/2016 | 2/7/2016 | 6,009 | 719,938 | ||||||||||||||||||||||||||||||||||||||||||
| RSU | 5/2/2016 | 2/7/2016 | 11,685 | 1,322,041 | ||||||||||||||||||||||||||||||||||||||||||
| Richard O’Leary |
AIP | 2/7/2016 | 2/7/2016 | 61,066 | 244,262 | 488,525 | ||||||||||||||||||||||||||||||||||||||||
| 2016 LTIP | 2/7/2016 | 2/7/2016 | 25,000 | 100,000 | 200,000 | 25,000 | 100,000 | 200,000 | 92,186 | |||||||||||||||||||||||||||||||||||||
| PRSU | 5/2/2016 | 2/7/2016 | 2,754 | 329,957 | ||||||||||||||||||||||||||||||||||||||||||
| RSU | 11/1/2016 | 11/1/2016 | (7) | 7,472 | 924,436 | |||||||||||||||||||||||||||||||||||||||||
| Nicolas Mirzayantz |
AIP | 2/7/2016 | 2/7/2016 | 120,000 | 480,000 | 960,000 | ||||||||||||||||||||||||||||||||||||||||
| 2016 LTIP | 2/7/2016 | 2/7/2016 | 62,500 | 250,000 | 500,000 | 62,500 | 250,000 | 500,000 | 230,464 | |||||||||||||||||||||||||||||||||||||
| PRSU | 5/2/2016 | 2/7/2016 | 6,510 | 779,963 | ||||||||||||||||||||||||||||||||||||||||||
| Matthias Haeni |
AIP | 2/7/2016 | 2/7/2016 | 105,000 | 420,000 | 840,000 | ||||||||||||||||||||||||||||||||||||||||
| 2016 LTIP | 2/7/2016 | 2/7/2016 | 62,500 | 250,000 | 500,000 | 62,500 | 250,000 | 500,000 | 230,464 | |||||||||||||||||||||||||||||||||||||
| PRSU | 5/2/2016 | 2/7/2016 | 5,007 | 599,889 | ||||||||||||||||||||||||||||||||||||||||||
| Anne Chwat |
AIP | 2/7/2016 | 2/7/2016 | 71,250 | 285,000 | 570,000 | ||||||||||||||||||||||||||||||||||||||||
| 2016 LTIP | 2/7/2016 | 2/7/2016 | 35,625 | 142,500 | 285,000 | 35,625 | 142,500 | 285,000 | 131,365 | |||||||||||||||||||||||||||||||||||||
| PRSU | 5/2/2016 | 2/7/2016 | 5,258 | 629,961 | ||||||||||||||||||||||||||||||||||||||||||
| Alison A. Cornell |
AIP | 2/7/2016 | 2/7/2016 | 112,000 | 448,000 | 896,000 | ||||||||||||||||||||||||||||||||||||||||
| 2016 LTIP | 2/7/2016 | 2/7/2016 | 62,500 | 250,000 | 500,000 | 62,500 | 250,000 | 500,000 | 230,464 | |||||||||||||||||||||||||||||||||||||
| PRSU | 5/2/2016 | 2/7/2016 | 2,504 | 300,004 | ||||||||||||||||||||||||||||||||||||||||||
| RSU | 5/2/2016 | 2/7/2016 | 2,086 | 236,010 | ||||||||||||||||||||||||||||||||||||||||||
| (1) | AIP = 2016 AIP |
2016 LTIP = 2016-2018 Long-Term Incentive Plan Cycle
RSU = Restricted Stock Unit
PRSU = Purchased Restricted Stock Unit
70 IFF | 2017 PROXY STATEMENT
Table of Contents
EXECUTIVE COMPENSATION
| (2) | All equity, AIP and LTIP grants were made under our 2015 SAIP. The material terms of these types of awards are described in this proxy statement under the heading “Compensation Discussion and Analysis.” |
| (3) | AIP amounts in this column are the threshold, target and maximum dollar values under our 2016 AIP. 2016 LTIP amounts in this column are the threshold, target and maximum dollar values of the 50% portion of our 2016-2018 LTIP cycle that would be payable in cash if the performance conditions are satisfied. |
| (4) | 2016 LTIP amounts in this column are the threshold, target and maximum dollar values of the 50% portion of our 2016-2018 LTIP cycle that would be payable in stock if the performance conditions are satisfied. The number of shares of our common stock for the 50% portion payable in stock was determined at the beginning of the 2016 LTIP cycle, based on $119.27 per share, the average closing market price of a share of our common stock for the 20 trading days preceding January 1, 2016, the first trading day of the 2016-2018 LTIP cycle. However, the actual value to be realized may vary depending on the closing market price of a share of our common stock on the payout date of 2016 LTIP awards. |
| (5) | Except for the RSU award granted to Mr. O’Leary in November 2016 in connection with his promotion to CFO, the amounts in this column represent the number of PRSUs and RSUs granted under the ECP. Dividend equivalents are paid on PRSUs. Footnote 4 to the Summary Compensation Table states the dollar amount delivered by our NEOs (in tendered shares or cash) for these PRSU awards. The material terms of the ECP awards are described in this proxy statement under the heading “Compensation Discussion & Analysis.” See footnote 7 regarding Mr. O’Leary’s November 2016 grant. |
| (6) | The amounts in this column represent the aggregate grant date fair value of equity awards granted to our NEOs during the fiscal year ended December 31, 2016, calculated in accordance with FASB ASC Topic 718. The grant date fair value of LTIP awards pertains to the 50% portion of those awards that will be payable in shares of our common stock if the performance conditions are satisfied, and is based on the probable outcome of such conditions. |
| (7) | Mr. O’Leary was granted a special RSU award in connection with his promotion to CFO in November 2016. |
IFF | 2017 PROXY STATEMENT 71
Table of Contents
EXECUTIVE COMPENSATION
2014-2016 LTIP Payout
The following table sets forth the total amount earned by each NEO based on achievement of the corporate performance goals for each segment under the 2014-2016 LTIP cycle and based on each executive’s target amount (or reduced target amount for each NEO who was not employed in his current role for the entire three-year cycle). The amount reported in the “Total” column is the amount being paid out to the NEOs in 2017 following completion of the 2014-2016 LTIP cycle.
|
Segment 1 (2014) |
Segment 2 (2015) |
Segment 3 (2016) |
Cumulative (2014 – 2016) |
Total | ||||||||||||||||||||||||||||||||||||
| Cash ($) |
Shares (#) |
Cash ($) |
Shares (#) |
Cash ($) |
Shares (#) |
Cash ($) |
Shares (#) |
Cash ($) |
Shares (#) |
|||||||||||||||||||||||||||||||
| Andreas Fibig (1) |
102,265 | 1,021 | 292,500 | 2,921 | 95,875 | 958 | 296,994 | 2,968 | 787,634 | 7,868 | ||||||||||||||||||||||||||||||
| Richard O’Leary |
23,010 | 269 | 21,995 | 257 | 7,209 | 84 | 28,672 | 334 | 80,886 | 944 | ||||||||||||||||||||||||||||||
| Nicolas Mirzayantz |
76,500 | 895 | 73,125 | 855 | 23,969 | 280 | 95,313 | 1,115 | 268,907 | 3,145 | ||||||||||||||||||||||||||||||
| Matthias Haeni |
76,500 | 895 | 73,125 | 855 | 23,969 | 280 | 95,313 | 1,115 | 268,907 | 3,145 | ||||||||||||||||||||||||||||||
| Anne Chwat |
42,687 | 499 | 40,804 | 477 | 13,375 | 156 | 53,184 | 621 | 150,050 | 1,753 | ||||||||||||||||||||||||||||||
|
Alison A. Cornell (2) |
— | — | 35,458 | 319 | 18,665 | 168 | 40,260 | 361 | 94,383 | 848 | ||||||||||||||||||||||||||||||
| (1) | Amount related to 2014 is prorated based on Mr. Fibig’s appointment as CEO in September 2014. |
| (2) | Amount related to 2015 is prorated based on Ms. Cornell’s appointment as CFO in July 2015. The amount related to 2016 is prorated based on Ms. Cornell’s separation from the Company in October 2016. |
2015-2017 LTIP Credit
Based on our achievement of the corporate performance goals for the 2016 segment (the second segment) of the 2015-2017 LTIP cycle and the executive’s target amount, the following cash amounts and number of shares of our stock have been credited on behalf of the executive:
|
Segment 2 (2016) |
||||||||
| Cash ($) |
Shares (#) |
|||||||
| Andreas Fibig |
$ | 95,875 | 939 | |||||
| Richard O’Leary |
$ | 9,367 | 92 | |||||
| Nicolas Mirzayantz |
$ | 23,969 | 235 | |||||
| Matthias Haeni |
$ | 23,969 | 235 | |||||
| Anne Chwat |
$ | 13,375 | 131 | |||||
|
Alison A. Cornell (1) |
$ | 18,665 | 168 | |||||
| (1) | The amount related to 2015 is prorated based on Ms. Cornell’s appointment as CFO in July 2015. The amount related to 2016 is prorated based on Ms. Cornell’s separation from the Company in October 2016. |
72 IFF | 2017 PROXY STATEMENT
Table of Contents
EXECUTIVE COMPENSATION
2016-2018 LTIP Credit
Based on our achievement of the corporate performance goals for the 2016 segment (the first segment) of the 2016-2018 LTIP cycle and the executive’s target amount, the following cash amounts and number of shares of our stock have been credited on behalf of the executive:
|
Segment 1 (2016)
|
||||||||||||
| Cash ($) |
Shares (#) |
|||||||||||
| Andreas Fibig |
47,938 | 402 | ||||||||||
| Richard O’Leary |
4,794 | 40 | ||||||||||
| Nicolas Mirzayantz |
11,984 | 100 | ||||||||||
| Matthias Haeni |
11,984 | 100 | ||||||||||
| Anne Chwat |
6,831 | 57 | ||||||||||
|
Alison A. Cornell (1) |
9,332 | 78 | ||||||||||
| (1) | The amount related to 2016 is prorated based on Ms. Cornell’s separation from the Company in October 2016. |
IFF | 2017 PROXY STATEMENT 73
Table of Contents
EXECUTIVE COMPENSATION
Equity Compensation Plan Information
We currently grant equity awards under our 2015 SAIP only, which replaced our 2010 Stock Award and Incentive Plan (the “2010 SAIP”). The following table provides information regarding our common stock which may be issued under our equity compensation plans as of December 31, 2016.
|
Plan Category |
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted-average exercise price of outstanding options, warrants and rights |
Number of |
|||||||||||||||||||||
| (a) | (b) | (c) | ||||||||||||||||||||||
| Equity compensation plans approved by security holders (1) |
615,897 | (2) | $ | 59.14 | (3) | 2,498,543 | ||||||||||||||||||
| Equity compensation plans not approved by security holders (4) |
237,850 | $ | 59.14 | (3) | 217,380 | (5) | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total |
853,746 | $ | 59.14 | (3) | 2,715,923 | |||||||||||||||||||
| (1) | Represents the 2015 Stock Award and Incentive Plan (the “2015 SAIP”). The 2015 Plan replaced the Company’s 2010 Stock Award and Incentive Plan (the “2010 Plan”) and provides the source for future deferrals of cash into deferred stock under the Company’s Deferred Compensation Plan (with the Deferred Compensation Plan being deemed a sub-plan under the 2010 Plan for the sole purpose of funding deferrals under the IFF Share Fund). |
| (2) | Includes options, RSUs, SSARs, the number of shares to be issued under the 2014-2016 LTIP cycle based on actual performance, and the maximum number of shares that may be issued under the 2014-2016 and 2015-2017 LTIP cycles if the performance conditions for each of those cycles are satisfied at the maximum level. The number of SSARs that may be issued upon exercise was calculated by dividing (i) the product of (a) the excess of the closing market price of our common stock on the last trading day of 2016 over the exercise price, and (b) the number of SSARs outstanding by (ii) the closing market price on the last trading day of 2016. Excludes outstanding shares of PRS under the 2010 SAIP and 2000 SAIP. |
| (3) | Weighted average exercise price of outstanding options and SSARs. Excludes RSUs, shares credited to accounts of participants in the DCP and shares that may be issued under the 2015-2017 and 2016-2018 LTIP cycles. |
| (4) | We currently have two equity compensation plans that have not been approved by our shareholders: (i) the DCP, which is described on page 79 and (ii) a pool of shares that may be used for annual awards of 1,000 shares to each non-employee director. Although we are no longer granting these annual 1,000 share stock awards to directors, the pool of shares remains authorized. |
| (5) | Includes 173,630 shares remaining available for issuance under the DCP and 43,750 shares remaining available for issuance from a pool of shares that may be used for annual awards of 1,000 shares to each non-employee director. |
74 IFF | 2017 PROXY STATEMENT
Table of Contents
EXECUTIVE COMPENSATION
2016 Outstanding Equity Awards at Fiscal Year-End
The following table provides information regarding outstanding equity awards held by our NEOs at December 31, 2016.
| Name | Grant Date |
Grant Type (1) |
Number of (#) |
Market Value of ($)(2) |
Equity Incentive Or Other Rights That Have Not Vested (#) |
Equity Incentive ($)(2) |
||||||||||||||||
| Andreas Fibig |
10/15/2014 | RSU | 7,967 | (3) | 938,752 | |||||||||||||||||
| 2/11/2015 | 2015 LTIP | 5,498 | (4) | 647,854 | 9,788 (5) | 1,153,320 | ||||||||||||||||
| 5/6/2015 | RSU | 7,620 | (6) | 897,865 | ||||||||||||||||||
| 5/6/2015 | PRS | 11,176 | (6) | 1,316,868 | ||||||||||||||||||
| 2/8/2016 | 2016 LTIP | 1,128 | (7) | 132,871 | 3,668 (8) | 432,200 | ||||||||||||||||
| 5/2/2016 | PRSU | 6,009 | (9) | 708,040 | ||||||||||||||||||
| 5/2/2016 | RSU | 11,685 | (9) | 1,376,844 | ||||||||||||||||||
| Richard O’Leary |
5/13/2014 | PRS | 2,749 | (3) | 323,915 | |||||||||||||||||
| 1/2/2015 | RSU | 1,487 | (10) | 175,213 | ||||||||||||||||||
| 2/11/2015 | 2015 LTIP | 537 | (4) | 63,250 | 958 (5) | 112,881 | ||||||||||||||||
| 5/6/2015 | PRS | 2,540 | (6) | 299,288 | ||||||||||||||||||
| 2/8/2016 | 2016 LTIP | 113 | (7) | 13,312 | 1,466 (8) | 172,739 | ||||||||||||||||
| 5/2/2016 | PRSU | 2,754 | (9) | 324,504 | ||||||||||||||||||
| 11/1/2016 | RSU | 7,472 | (11) | 880,426 | ||||||||||||||||||
| Nicolas Mirzayantz |
5/13/2014 | PRS | 7,943 | (3) | 935,924 | |||||||||||||||||
| 2/11/2015 | 2015 LTIP | 1,375 | (4) | 161,963 | 2,448 (5) | 288,448 | ||||||||||||||||
| 5/6/2015 | PRS | 7,112 | (6) | 838,007 | ||||||||||||||||||
| 2/8/2016 | 2016 LTIP | 282 | (7) | 33,218 | 3,668 (8) | 432,200 | ||||||||||||||||
| 5/2/2016 | PRSU | 6,510 | (9) | 767,073 | ||||||||||||||||||
| Matthias Haeni |
5/13/2014 | PRS | 3,666 | (3) | 431,965 | |||||||||||||||||
| 2/11/2015 | 2015 LTIP | 1,375 | (4) | 161,963 | 2,448 (5) | 288,448 | ||||||||||||||||
| 5/6/2015 | PRS | 4,064 | (6) | 478,861 | ||||||||||||||||||
| 2/8/2016 | 2016 LTIP | 282 | (7) | 33,218 | 3,668 (8) | 432,200 | ||||||||||||||||
| 5/2/2016 | PRSU | 5,007 | (9) | 589,975 | ||||||||||||||||||
| Anne Chwat |
5/13/2014 | PRS | 5,499 | (3) | 647,947 | |||||||||||||||||
| 2/11/2015 | 2015 LTIP | 766 | (4) | 90,244 | 1,368 (5) | 161,191 | ||||||||||||||||
| 5/6/2015 | PRS | 5,080 | (6) | 598,576 | ||||||||||||||||||
| 2/8/2016 | 2016 LTIP | 160 | (7) | 18,891 | 2,092 (8) | 246,500 | ||||||||||||||||
| 5/2/2016 | PRSU | 5,258 | (9) | 619,550 | ||||||||||||||||||
| Alison A. Cornell |
7/8/2015 | 2015 LTIP | 791 | (12) | 93,168 | 474 (4) | 55,851 | |||||||||||||||
| 8/17/2015 | PRSU | 1,032 | (12) | 121,601 | ||||||||||||||||||
| 2/8/2016 | 2016 LTIP | 220 | (12) | 25,864 | 682 (6) | 80,360 | ||||||||||||||||
| 5/2/2016 | PRSU | 383 | (12) | 45,129 | ||||||||||||||||||
| 5/2/2016 | RSU | 319 | (12) | 37,588 | ||||||||||||||||||
| (1) | 2015 LTIP = 2015-2017 Long-Term Incentive Plan Cycle |
2016 LTIP = 2016-2018 Long-Term Incentive Plan Cycle
PRS = Purchased Restricted Stock
RSU = Restricted Stock Unit
PRSU = Purchased Restricted Stock Unit
| (2) | The market value was determined based on the closing price of our common stock on December 30, 2016. For PRS and PRSU awards, the amounts in this column do not reflect the purchase price paid by the NEO for PRS shares under the ECP as described in the Compensation Discussion and Analysis. |
| (3) | This award vests on April 13, 2017. |
| (4) | This amount represents the number of shares of stock that have been credited for the 2015 and 2016 segment of the 2015-2017 LTIP cycle. The shares will not be paid out until the completion of the full three-year cycle. |
IFF | 2017 PROXY STATEMENT 75
Table of Contents
EXECUTIVE COMPENSATION
| (5) | This amount represents the maximum number of shares of stock that remain subject to the achievement of specified performance objectives over the remaining two open segments of the 2015-2017 LTIP cycle. Shares earned during any segment of the 2015-2017 LTIP cycle will remain unvested until the completion of the full three-year c |