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Notice of 2017 Annual Meeting and Proxy Statement |
|
|
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Deere &
Company World Headquarters |
Who we are | ||
John Deere is a world leader in providing advanced products and services and is committed to the success of customers whose work is linked to the land those who cultivate, harvest, transform, enrich, and build upon the land to meet the worlds dramatically increasing need for food, fuel, shelter, and infrastructure. | ||
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OUR COMMITMENT We are committed to those linked to the land. We believe that by serving them we support improving the quality of life for people around the world. Through the excellence of our products and services, we help our customers meet two of the biggest challenges in the world: feeding a population growing in size and affluence and developing the infrastructure required to support growing urbanization. John Deere, with agricultural and construction equipment businesses, is uniquely positioned to help our customers meet those challenges. |
OUR CORE VALUES In conducting our business, we are guided by four core values that company founder John Deere was known for integrity, quality, commitment, and innovation. We apply those values in creating our products and services, maintaining our relationships, and operating our factories. | |
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January 13,
2017 DEAR FELLOW STOCKHOLDERS, On behalf of the Board of Directors and the senior management team, we cordially invite you to attend Deere & Companys Annual Meeting of Stockholders, which will be held on Wednesday, February 22, 2017, at 10:00 a.m. Central Standard Time at Deere & Company World Headquarters, One John Deere Place, Moline, Illinois, 61265. At this meeting, you will have a chance to vote on the matters set forth in the accompanying Notice of Annual Meeting and Proxy Statement, and we will share a report on our operations. Your vote is important. Even if you plan to attend the Annual Meeting, please vote by internet, telephone, or mail as soon as possible to ensure your vote is recorded promptly. The instructions set forth in the Proxy Statement and on the proxy card explain how to vote your shares. On behalf of the Board of Directors, thank you for your ongoing support of Deere & Company. Sincerely, | |||
Samuel R. Allen | Vance D. Coffman | ||
Chairman and CEO | Presiding Director | ||
Notice of 2017 Annual
Meeting
of Stockholders
Your opinion is very important. Please vote on the matters described in the accompanying Proxy Statement as soon as possible, even if you plan to attend the Annual Meeting. You can find voting instructions on page 82. In addition to the Proxy Statement, we are also sending you our Annual Report, which includes our fiscal 2016 financial statements. If you wish to receive future proxy statements and annual reports electronically rather than receiving paper copies in the mail, please turn to the section entitled Electronic Delivery of Proxy Statement and Annual Report on page 85 for instructions. | ||||||
DATE TIME PLACE |
At the 2017 Annual Meeting of Stockholders (the Annual Meeting), stockholders will be asked to: | |||||
1. Elect the twelve
director nominees named in the Proxy Statement (see page 7).
2. Approve the
compensation of Deeres named executives on an advisory basis
(say-on-pay) (see page 27).
3. Vote, on an
advisory basis, on the frequency of future advisory votes regarding
Deeres executive compensation (see page 76). |
4. Ratify the
appointment of Deloitte & Touche LLP as Deeres independent registered
public accounting firm for fiscal 2017 (see page 77).
5. Vote on the
stockholder proposal, if properly presented at the meeting (see pages
80).
6. Consider any
other business properly brought before the meeting. | |||||
PLEASE VOTE YOUR SHARES If you were a Deere stockholder of record at the close of business on December 30, 2016, we encourage you to vote promptly in one of the following ways: |
BY TELEPHONE
|
BY
INTERNET | ||||
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON FEBRUARY 22, 2017: The Proxy Statement and Annual Report are available on our website at www. deere.com/stock. |
BY MAIL |
IN PERSON | ||||
On behalf of the Board of Directors, I thank you for exercising your right to vote your shares. | ||||||
For the Board of Directors, | ||||||
Todd E. Davies,
Corporate Secretary |
This Proxy Statement is issued in connection with the solicitation of proxies by the Board of Directors of Deere & Company for use at the Annual Meeting and at any adjournment or postponement thereof. On or about January 13, 2017, we will begin distributing print or electronic materials regarding the Annual Meeting to each stockholder entitled to vote at the meeting. Shares represented by a properly executed proxy will be voted in accordance with instructions provided by the stockholder. |
1 | DEERE & COMPANY | 2017 PROXY STATEMENT |
This summary highlights selected information contained in this Proxy Statement, but it does not contain all the information you should consider. We urge you to read the whole Proxy Statement before you vote. You also may wish to review Deeres Annual Report on Form 10-K for the fiscal year ended October 31,2016.
Meeting Agenda and Voting Recommendations
Item | Voting Standard | Vote Recommendation | Page Reference | |||||
1. | Annual election of directors | Majority of votes cast | FOR each nominee |
7 | ||||
2. | Advisory vote on executive compensation | Majority of votes
present in person or by proxy |
FOR | 27 | ||||
3. | Advisory vote on frequency of future advisory votes on executive compensation | Majority of votes
present in person or by proxy |
FOR a
frequency of 1 YEAR |
76 | ||||
4. | Ratification of independent registered public accounting firm | Majority of votes
present in person or by proxy |
FOR | 77 to 79 | ||||
5. | Stockholder proposal | Majority of votes
present in person or by proxy |
AGAINST the proposal |
80 to 81 |
Director
Nominees
Every member of our Board of Directors is
elected annually. You are being asked to vote on the election of these twelve
nominees, all of whom currently serve as directors.
All directors other than Samuel R. Allen are INDEPENDENT.
Committee Memberships | ||||||||||||||
Name | Age | Director Since |
Executive | Audit Review |
Compensation | Corporate Governance |
Finance | |||||||
Samuel R.
Allen Chairman and CEO, Deere & Company |
63 | 2009 | CHAIR | |||||||||||
Crandall C.
Bowles Chairman Emeritus, The Springs Company |
69 | 19901994, since1999 |
■ | ■ | CHAIR | |||||||||
Vance D.
Coffman Retired Chairman, Lockheed Martin |
72 | 2004 | ■ | CHAIR | ■ | |||||||||
Alan C.
Heuberger Senior Manager, BMGI |
43 | 2016 | ■ | ■ | ||||||||||
Dipak C.
Jain Director, Sasin Graduate Institute of Business Administration |
59 | 2002 | ■ | ■ | ||||||||||
Michael O.
Johanns Retired United States Senator from Nebraska |
66 | 2015 | ■ | ■ | ||||||||||
Clayton M.
Jones Retired Chairman, Rockwell Collins |
67 | 2007 | ■ | ■ | ||||||||||
Brian M.
Krzanich CEO, Intel |
56 | 2016 | ■ | ■ | ||||||||||
Gregory R.
Page Retired Executive Director, Chairman and CEO, Cargill |
65 | 2013 | ■ | ■ | CHAIR | |||||||||
Sherry M.
Smith Former Executive VP and CFO, Supervalu |
55 | 2011 | ■ | CHAIR | ■ | |||||||||
Dmitri L.
Stockton Special Advisor to Chairman and Senior VP, GE and Chairman, President, and CEO, GE Asset Management |
52 | 2015 | ■ | ■ | ||||||||||
Sheila G.
Talton President and CEO, Gray Matter Analytics |
64 | 2015 | ■ | ■ |
2 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Proxy Summary
Governance and Compensation Changes
Annual Meeting of Stockholders
You are entitled to vote at the meeting if you were a holder of record of our common stock at the close of business on December 30, 2016. Please see page 82 for instructions on how to vote your shares and other important annual meeting information. If you wish to attend the meeting in person, we encourage you to register on or prior to Tuesday, February 21, 2017, in order to obtain an admission ticket. See page 84 for additional instructions.
Governance and Compensation
Changes
One thing we have learned
during our nearly 180-year history is the importance of change, which is why we
regularly assess what we do to determine how we can adapt and improve. This
approach applies to our corporate governance and compensation plans as much as
it does to our manufacturing processes and product innovation. Here is a summary
of the changes we have made since our last annual meeting.
CORPORATE GOVERNANCE |
COMPENSATION Prior to 2015, we had received strong stockholder support on the say-on- pay advisory vote, averaging more than 90% approval from 2011 through 2015. Last year, approximately 61% (71% excluding abstentions) of our stockholders voted in favor of our executive compensation programs. Following the February 2016 Annual Meeting of Stockholders, we invited our top 20 stockholders to discuss specific governance and compensation matters so we could understand the factors that lead to the decline in the say-on-pay vote. The outreach to stockholders was conducted by Deere management, both in person and by phone. We discussed the most recent revisions to our compensation plans and the proxy access by-law amendments with 17 of our top 20 stockholders, representing about 48% of our then outstanding shares. The feedback from these conversations regarding compensation plans was reported to the Compensation Committee and considered in their deliberations on subsequent compensation decisions. As a result of the feedback received from stockholders, we implemented a number of changes to our compensation program to ensure continued focus on returning value to our stockholders. See the Executive Summary of the Compensation Discussion & Analysis (CD&A) for details. | ||
We adopted a by-law in 2016 allowing stockholders meeting certain
requirements to nominate directors and have such nominees included in the
proxy statementcommonly referred to as proxy access.
We increased the retirement age for
board members to 75 to reflect recent industry trends and to provide
stability in the composition of our board. |
Fiscal 2016 Performance
Highlights For more information regarding our fiscal year 2016 financial performance, please see our Annual Report, which is available at www.proxyvote.com. |
Other highlights include: | ||
|
Equipment operations benefited from
improved price realization and lower production
costs | ||
|
Selling, administrative, and general
expenses were reduced by $110 million | ||
|
Company invested nearly $1.4 billion
in research and development | ||
|
Company completed strategic
acquisition of Monosem and secured controlling interest in Hagie
Manufacturing Company to expand Deeres agricultural product
portfolio | ||
|
Deere returned nearly $1 billion to stockholders in the form of dividends and share repurchases |
3 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Proxy Summary
Fiscal 2016 Performance Highlights
NET SALES AND REVENUES (Millions) |
NET INCOME (Millions) |
EARNINGS PER SHARE (Diluted) |
DEERE SHARE PRICE (at Oct. 31) | |||
Worldwide net sales and revenues decreased 8% in 2016 vs. 2015. Net sales for worldwide Equipment Operations declined 9% in 2016 vs. 2015, which was two points lower than guidance provided to investors early in fiscal 2016. |
Net income* was down 21% to $1,524 million, though still represented the 10th highest total in our history. Net income exceeded guidance of $1,400 million given to investors early in fiscal 2016. Employees controlled costs (e.g., reducing selling, administrative, and general costs by almost $100 million) yet still produced award-winning advanced products and services and invested in future growth. |
Earnings per share fell 17% vs. 2015, less than the decline in net income*, due to fewer shares outstanding. |
Investors acknowledged the companys ability to operate profitably despite extremely difficult conditions. Share price appreciation plus dividends gave Deere stockholders a total return of about 17% for the year, compared with a gain of about 5% for the overall U.S. equity market. | |||
*Net income attributable |
CASH FLOW FROM OPERATING
ACTIVITIES (Millions) | ||
Consolidated cash flow from |
4 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Proxy Summary
Fiscal 2016 Performance Highlights
PERFORMANCE IN RECENT DOWNTURNS | ||
Our Equipment Operations are |
NET SALES AND EARNINGS PER SHARE (DILUTED) Since 2002, Deere has maintained positive diluted EPS performance despite downturns in net sales. As discussed in the CD&A elsewhere in this proxy, we believe our compensation program contributes to these favorable results by encouraging executives to focus on metrics that create sustained value for stockholders. |
5 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Proxy Summary
Fiscal 2016 Executive Compensation Highlights
Fiscal 2016 Executive
Compensation Highlights
Our compensation programs and practices are designed to
create incentive opportunities for advancing our stockholders long-term interests. We use metrics that align with
our business strategy and motivate our executives to create value for stockholders at all points in the business cycle. We
have three separate variable pay components (described below) Short-Term
Incentive (STI), Mid-Term Incentive (MTI) and Long-Term Incentive (LTI) which
stimulate complementary behaviors.
This Metric | For this type of compensation | Contributes to this goal |
Operating return on operating assets (OROA)* | Annual cash bonus (known within Deere as STI) |
exceptional operating performance for Equipment Operations |
Return on equity (ROE)* | exceptional operating performance for Financial Services | |
Shareholder value added (SVA) | Long-term cash (known within Deere as MTI) |
sustainable, profitable growth |
Revenue growth | Long-term equity (known within Deere as LTI) |
sustainable growth |
Total shareholder return (TSR) | LTI and MTI |
exceptional equity appreciation |
*The Equipment Operations OROA calculation excludes the assets from our captive financial services. ROE is based solely on the Financial Services segment. See appendix B for details.
For information about the metrics we use to measure compensation and the resulting payouts, see the Executive Summary of the CD&A on page 29.
The table below highlights the 2016 compensation for the CEO and, on average, for the named executive officers (NEOs) as disclosed in the summary compensation table on page 60. The table also shows how much compensation was delivered in cash (versus equity) and the significant portion that is performance-based, and therefore at risk.
Summary Compensation Table Elements |
Salary | STI | MTI | Performance Stock Units |
Restricted Stock Units and Stock Options |
Retirement and Other Compensation |
Total |
CEO | |||||||
Compensation | $1,500,000 | $2,573,063 | $1,919,363 | $4,156,919 | $5,016,272 | $3,477,254 | $18,642,871 |
% of Total | 8% | 14% | 10% | 22% | 27% | 19% | 100% |
Cash vs. Equity | Total Cash 32% | Total Equity 49% | Other 19% | 100% | |||
Short-Term vs. Long-Term | Short-Term 22% | Long-Term 78% | 100% | ||||
Fixed vs. Performance Based | Fixed 8% | Performance Based 73% | Other 19% | 100% | |||
Average NEO | |||||||
Compensation | $649,384 | $757,477 | $551,672 | $785,432 | $947,900 | $772,600 | $4,464,465 |
% of Total | 15% | 17% | 12% | 18% | 21% | 17% | 100% |
Cash vs. Equity | Total Cash 44% | Total Equity 39% | Other 17% | 100% | |||
Short-Term vs. Long-Term | Short-Term 32% | Long-Term 68% | 100% | ||||
Fixed vs. Performance Based | Fixed 15% | Performance Based 68% | Other 17% | 100% |
6 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors |
Item 1 - Election of Directors |
How We Identify and Evaluate
Director Nominees
The Corporate
Governance Committee of the Board is responsible for screening candidates and
recommending director nominees to the full Board. The Board nominates the slate
of directors for election at each annual meeting of stockholders, and also
elects directors to fill vacancies or newly-created Board seats.
The Corporate Governance Committee considers candidates recommended by stockholders, directors, officers, and third-party search firms. If you wish to nominate a director, please review the procedures described under 2018 Stockholder Proposals and Nominations on page 86 of this Proxy Statement. The Corporate Governance Committee evaluates all candidates in the same manner, regardless of the source of the recommendation.
Deeres Corporate Governance Policies, which are described in the Corporate Governance section of this Proxy Statement, establish the general criteria and framework for assessing director candidates. In particular, the Corporate Governance Committee considers each nominees skills, experience, international versus domestic background, and age, as well as legal and regulatory requirements and the particular needs of the Board at the time. In addition, the Board assesses the diversity of its members and nominees as part of an annual performance evaluation by considering, among other factors, diversity in expertise, experience, background, ethnicity, and gender. We believe a Board composed of members with complementary skills, qualifications, experiences, and attributes is best equipped to satisfy its responsibilities effectively.
Any director who experiences a material change in occupation, career, or principal business activity, including retirement, must tender a resignation from the Board. Upon recommendation from the Corporate Governance Committee, the Board may decline to accept any such resignation. Directors must retire from the Board upon the first annual meeting of stockholders after reaching the age of 75, except as approved by the Board under rare circumstances.
Director
Nominees
The Corporate Governance
Committee has recommended, and the Board has nominated, each of Samuel R. Allen,
Crandall C. Bowles, Vance D. Coffman, Alan C. Heuberger, Dipak C. Jain, Michael
O. Johanns, Clayton M. Jones, Brian M. Krzanich, Gregory R. Page, Sherry M.
Smith, Dmitri L. Stockton, and Sheila G. Talton to be elected for terms expiring
at the annual meeting in 2018. All of the nominees are current members of the
Board, but Deeres Certificate of Incorporation and good governance practices
require all members of the Board to be elected annually.
We have confidence that this talented slate of nominees will lead Deere capably in the year ahead. We discuss the nominees professional backgrounds and qualifications in the short biographies that follow.
The board of directors recommends that you vote FOR all twelve nominees. |
7 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Item1
Election of Directors
Board
Diversity
The Corporate Governance
Committee recognizes that our Board is most effective when it embodies a diverse
set of viewpoints and practical experiences. To that end, the Corporate
Governance Committee considers how each nominees particular background,
experience, qualifications, attributes, and skills will contribute to Deeres
success. As shown below, the members of our Board have a range of viewpoints,
backgrounds, and expertise.
GENDER | |
TENURE |
BOARD MEMBER SKILLS
Executive | Manufacturing | International | Academic | Government | Law | Finance | Risk Management |
Corporate Governance | |
Samuel R. Allen | ■ | ■ | ■ | ||||||
Crandall C. Bowles | ■ | ■ | ■ | ||||||
Vance D. Coffman | ■ | ■ | ■ | ■ | |||||
Alan C. Heuberger | ■ | ■ | ■ | ||||||
Dipak C. Jain | ■ | ■ | ■ | ||||||
Michael O. Johanns | ■ | ■ | ■ | ■ | |||||
Clayton M. Jones | ■ | ■ | ■ | ■ | |||||
Brian M. Krzanich | ■ | ■ | ■ | ||||||
Gregory R. Page | ■ | ■ | ■ | ■ | ■ | ||||
Sherry M. Smith | ■ | ■ | |||||||
Dmitri L. Stockton | ■ | ■ | ■ | ■ | ■ | ||||
Sheila G. Talton | ■ | ■ | ■ | ■ |
■ Audit committee financial expert under Securities and Exchange Commission (SEC) rules
8 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Item
1 – Election of Directors
Samuel R. Allen | Chairman and Chief Executive Officer of Deere |
AGE: DIRECTOR SINCE: COMMITTEES: |
Current and Past Positions Positions at Deere: Chairman and Chief Executive Officer since February
2010
President and Chief Executive Officer August 2009 to
February 2010
President and Chief Operating Officer June 2009 to
August 2009
President, Worldwide Construction & Forestry
Division and John Deere Power Systems March 2005 to June
2009
President, Global Financial Services, John Deere Power
Systems, and Corporate Human Resources November 2003 to March
2005
Other Current Directorships Whirlpool Corporation (since
2010) |
Key Qualifications, Experiences, In addition to his professional background and prior Deere Board experience, the following qualifications led the Board to conclude that Mr. Allen should serve on Deeres Board of Directors: his leadership experience as an officer of Deere since 2001; the breadth of his management experiences within, and knowledge of, each of Deeres major global operations; and his subject matter knowledge in the areas of engineering, manufacturing, and industrial management. |
Crandall C. Bowles | Chairman Emeritus of The Springs Company |
AGE: DIRECTOR FROM: COMMITTEES: |
Current and Past Positions Chairman Emeritus of The Springs Company (asset
management) since April 2015
Chairman of The Springs Company August 2007 to April
2015
Chairman of Springs Industries, Inc. (Springs Window
Fashions) January 2006 to June 2013
Co-Chairman and Co-Chief Executive Officer of Springs
Global US, Inc. and Springs Global Participacoes S.A. January 2006 to
June 2007
Chairman and Chief Executive Officer of Springs
Industries, Inc. April 1998 to January 2006
Other Current Directorships JPMorgan Chase & Co. (since 2006)
Previous Directorships Sara Lee Corporation |
Key Qualifications, Experiences, In addition to her professional background and prior Deere Board experience, the following qualifications led the Board to conclude that Ms. Bowles should serve on Deeres Board of Directors: her leadership qualities developed from her service as Chairman and Chief Executive Officer of Springs Industries; the breadth of her experiences in risk management and other areas of oversight while serving as a member of the boards of directors of other global corporations; and her subject matter knowledge in the areas of economics and sales and marketing of consumer products. |
9 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Item
1 – Election of Directors
Vance D. Coffman | Retired Chairman of Lockheed Martin Corporation |
AGE: DIRECTOR SINCE: COMMITTEES: PRESIDING DIRECTOR SINCE
2016 |
Current and Past Positions Positions at Lockheed Martin Corporation (aerospace, defense, and information technology): Chairman April 1998 to April
2005
Chief Executive Officer August 1997 to August 2004
Other Current Directorships 3M Company (since 2002)
Amgen Inc. (since 2007) |
Key Qualifications, Experiences, In addition to his professional background and prior Deere Board experience, the following qualifications led the Board to conclude that Mr. Coffman should serve on Deeres Board of Directors: his leadership qualities developed from his service as Chairman and Chief Executive Officer of Lockheed Martin; the breadth of his experiences in corporate governance and other areas of oversight while serving as a member of the boards of directors of other global corporations; and his subject matter knowledge in the areas of engineering, manufacturing, and finance. |
Alan C. Heuberger | Senior Manager, BMGI |
AGE: DIRECTOR SINCE: COMMITTEES: |
Current and Past Positions Positions at BMGI (private investment management): Senior Manager since 2004
Investment Analyst 1996 to 2004
Previous Directorships GAMCO Investors, Inc. |
Key Qualifications, Experiences, In addition to his professional background, the following qualifications led the Board to conclude that Mr. Heuberger should serve on Deeres Board of Directors: his leadership qualities developed from his service as Senior Manager of BMGI, the breadth of his experience in governance, strategy and other areas of oversight while serving as a member of the boards of directors and advisors of various asset management entities and privately-held corporations and his subject matter knowledge in the areas of agriculture industry investments, asset management, finance, and economics. |
10 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Item
1 – Election of Directors
Dipak C. Jain | Director, Sasin Graduate Institute of Business Administration |
AGE: DIRECTOR SINCE: COMMITTEES: |
Current and Past Positions Director, Sasin Graduate Institute of Business
Administration (international graduate business school) since August
2014
Chaired Professor of Marketing, INSEAD (international graduate business school) March 2013 to
August 2014
Dean, INSEAD May 2011 to March
2013
Dean, Kellogg School of Management, Northwestern
University July 2001 to September 2009
Associate Dean for Academic Affairs, Kellogg School of
Management, Northwestern University 1996 to 2001
Sandy and Morton Goldman Professor of Entrepreneurial
Studies and Professor of Marketing, Kellogg School of Management,
Northwestern University 1994 to 2001 and since 2009
Other Current Directorships Northern Trust Corporation (since
2004)
Reliance Industries Limited, India (since
2005) Global Logistics Properties Limited, Singapore (since
2010) |
Key Qualifications, Experiences, In addition to his professional background and prior Deere Board experience, the following qualifications led the Board to conclude that Mr. Jain should serve on Deeres Board of Directors: his leadership qualities developed from his experiences while serving as Director or Dean at several prominent graduate business schools and as a foreign affairs advisor for the Prime Minister of Thailand; the breadth of his experiences in compensation, corporate governance, and other areas of oversight while serving as a member of the boards of directors of other global corporations; and his subject matter knowledge in the areas of marketing, global product diffusion, and new product forecasting and development. |
Michael O. Johanns | Retired United States Senator from Nebraska |
AGE: DIRECTOR SINCE: COMMITTEES: |
Current and Past Positions United States Senator from Nebraska January 2009 to
January 2015
United States Secretary of Agriculture January 2005 to
September 2007
Governor of Nebraska 1999 to 2005
Other Current Directorships Burlington Capital Group, LLC. (since
2016) |
Key Qualifications, Experiences, In addition to his professional background and prior Deere Board experience, the following qualifications led the Board to conclude that Mr. Johanns should serve on Deeres Board of Directors: his leadership qualities developed from his service in state and federal government, including serving as Governor of Nebraska; the breadth of his experiences in law, governance, and other areas of oversight while serving as a partner of a law firm and a member of the U.S. Senate and various Senate committees; and his subject matter knowledge in the areas of agriculture, banking, commerce, and foreign trade. |
11 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Item
1 – Election of Directors
Clayton M. Jones | Retired Chairman of Rockwell Collins, Inc. |
AGE: DIRECTOR SINCE: COMMITTEES: |
Current and Past Positions Positions at Rockwell Collins, Inc. (aviation electronics and communications): Chairman - July 2013 to July 2014
Chairman and Chief Executive Officer September 2012 to
July 2013
Chairman, President, and Chief Executive Officer June
2002 to September 2012
Other Current Directorships Cardinal Health, Inc. (since
2012)
Motorola Solutions, Inc. (since 2015) |
Key Qualifications, Experiences, In addition to his professional background and prior Deere Board experience, the following qualifications led the Board to conclude that Mr. Jones should serve on Deeres Board of Directors: his leadership qualities developed from his service as Chairman and Chief Executive Officer of Rockwell Collins; the breadth of his experiences in finance, compensation, and other areas of oversight while serving as a member of the boards of directors of other global corporations; and his subject matter knowledge in the areas of government affairs and marketing. |
Brian M. Krzanich | Chief Executive Officer of Intel Corporation |
AGE: DIRECTOR SINCE: COMMITTEES: |
Current and Past Positions Positions at Intel Corporation (advanced integrated digital technology platforms): Chief Executive Officer since May
2013
Executive Vice President and Chief Operating Officer
2012 to May 2013
Senior Vice President and General Manager of
Manufacturing and Supply Chain 2010 to 2012
Vice President and General Manager of Worldwide
Manufacturing and Systems 2007 to 2010
Other Current Directorships Intel Corporation (since 2013) |
Key Qualifications, Experiences, In addition to his professional background and prior Deere Board experience, the following qualifications led the Board to conclude that Mr. Krzanich should serve on Deeres Board of Directors: his leadership qualities developed from his service as Chief Executive Officer and Chief Operating Officer of Intel; the breadth of his experiences in corporate governance, strategy, and other areas of oversight while serving as a member of the boards of directors of Intel and the Semiconductor Industry Association; and his subject matter knowledge in the areas of manufacturing, operations, information technology, human resources, and supply chain management. |
12 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Item
1 – Election of Directors
Gregory R. Page | Retired Executive Director of Cargill, Incorporated |
AGE: DIRECTOR SINCE: COMMITTEES: |
Current and Past Positions Positions at Cargill, Incorporated (agricultural, food, financial, and industrial products and services): Executive Director September 2015 to August
2016
Executive Chairman December 2013 to September
2015
Chairman and Chief Executive Officer 2011 to December
2013
Chairman,
Chief Executive Officer, and President 2007 to 2011
President and Chief Operating Officer 2000 to
2007
Other Current Directorships Eaton Corporation plc (since 2003)
3M Company (since 2016)
Previous Directorships Carlson, Inc.
Cargill, Incorporated |
Key Qualifications, Experiences, and Attributes In addition to his professional background and prior Deere Board experience, the following qualifications led the Board to conclude that Mr. Page should serve on Deeres Board of Directors: his leadership qualities developed from his experiences while serving as Chairman and Chief Executive Officer of Cargill; the breadth of his experiences in auditing, corporate governance, and other areas of oversight while serving as a member of the boards of directors of other global corporations; and his subject matter knowledge in the areas of commodities, agriculture, operating processes, finance, and economics. |
Sherry M. Smith | Former Executive Vice President and Chief Financial Officer of Supervalu Inc. |
AGE: DIRECTOR SINCE: COMMITTEES: |
Current and Past Positions Positions at Supervalu Inc. (retail and wholesale grocery and retail general merchandise products): Executive Vice President and Chief Financial Officer
December 2010 to August 2013
Senior Vice President, Finance 2005 to
2010
Senior Vice President, Finance and Treasurer 2002 to
2005
Other Current Directorships Piper Jaffray Companies (since 2016)
Realogy Holdings Corp. (since 2014)
Tuesday Morning Corporation (since 2014) |
Key Qualifications, Experiences, In addition to her professional background and prior Deere Board experience, the following qualifications led the Board to conclude that Ms. Smith should serve on Deeres Board of Directors: her leadership qualities developed from her experience while serving as a senior executive and as Chief Financial Officer of Supervalu; the breadth of her experiences in auditing, finance, accounting, compensation, strategic planning, and other areas of oversight while serving as a member of the boards of directors of other public corporations; her family farming background; and her subject matter knowledge in the areas of finance, accounting, and food and supply chain management. |
13 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Item
1 – Election of Directors
Dmitri L. Stockton | Special Advisor to Chairman and Senior Vice President of General Electric Company and Chairman, President, and Chief Executive Officer of GE Asset Management Incorporated |
AGE: DIRECTOR SINCE: COMMITTEES: |
Current and Past Positions Special Advisor to the Chairman and Senior Vice
President of General Electric Company (power and water, aviation, oil and
gas, healthcare, appliances and lighting, energy management,
transportation and financial services) since July 2016
Chairman, President, and Chief Executive Officer of GE
Asset Management Incorporated (global investments) and Senior Vice
President of General Electric Company since 2011
President and Chief Executive Officer of GE Capital
Global Banking and Senior Vice President of GE London - 2008 to
2011
President and Chief Executive Officer of GE Consumer
Finance, Central & Eastern Europe - 2005 to 2008
Previous Directorships GE Asset Management Incorporated
General Electric RSP U.S. Equity Fund and General
Electric RSP Income Fund
Elfun Funds (six directorships)
Synchrony Financial |
Key Qualifications, Experiences, In addition to his professional background and prior Deere Board experience, the following qualifications led the Board to conclude that Mr. Stockton should serve on Deeres Board of Directors: his leadership qualities developed from his service as Chairman, President, and Chief Executive Officer of GE Asset Management and as a senior officer of other global operations; the breadth of his experiences in risk management, governance, regulatory compliance, and other areas of oversight while serving as a member of the boards of directors and trustees of global asset management, investment, and employee benefit entities; and his subject matter knowledge in the areas of finance, banking, and asset management. |
Sheila G. Talton | President and Chief Executive Officer of Gray Matter Analytics |
AGE: DIRECTOR SINCE: COMMITTEES: |
Current and Past Positions President and Chief Executive Officer of Gray Matter
Analytics (data analytics consulting services for financial services and
healthcare industries) since 2013
President and Chief Executive Officer of SGT Ltd.
(strategy and technology consulting services) 2011 to 2013
Vice President of Cisco Systems, Inc. (information
technology and solutions) 2008 to 2011
Other Current Directorships OGE Energy Corporation (since 2013)
Wintrust Financial Corporation (since 2012)
Previous Directorships Acco Brands Corporation |
Key Qualifications, Experiences, and Attributes In addition to her professional background and prior Deere Board experience, the following qualifications led the Board to conclude that Ms. Talton should serve on Deeres Board of Directors: her leadership qualities developed from her service as President and Chief Executive Officer of Gray Matter Analytics and as an officer of other global technology and consulting firms; the breadth of her experiences in compensation, governance, risk management, and other areas of oversight while serving as a member of the boards of directors of other public corporations; and her subject matter knowledge in the areas of technology, data analytics, and global strategies. |
14 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Corporate
Governance
Corporate Governance |
Corporate Governance Highlights
At
Deere, we recognize that good corporate governance contributes to long-term stockholder value. We are committed to sound governance
practices, including those shown below:
INDEPENDENCE | BEST PRACTICES | |
All of our director nominees are
independent except for our CEO
The independent Presiding
Director has a strong role with significant governance
responsibilities
All standing Board committees
other than the Executive Committee are composed wholly of independent
directors
Independent directors meet
regularly in executive session without management
present |
Directors may not stand for
reelection after their 75th birthdays, absent Board approval under rare circumstances
Our recoupment policy requires
an executive to return any incentive compensation found to have been
awarded erroneously due to the accounting
misconduct
Directors and executives are
subject to stock ownership requirements
Directors and executives are
prohibited from hedging or pledging their Deere
stock |
ACCOUNTABILITY | RISK OVERSIGHT | |
All directors are elected
annually
In uncontested elections,
directors are elected by majority vote
The Board and each Board
committee conducts an annual performance
self-evaluation
Stockholders have the ability to
include nominees in our proxy statement (so-called proxy access
rights) |
The Board oversees Deeres
overall risk management structure
Individual Board committees
oversee certain risks related to their specific areas of
responsibility
We have robust risk management
processes across the company |
Our Values
At Deere, our actions are guided by our core values of integrity,
quality, commitment, and innovation. We strive to live up to these values in
everything we donot just because it is good business, but because it is the
right thing to do. We are committed to strong corporate governance as a means of
upholding these values and ensuring that we are accountable to our
stockholders.
Director Independence
aThe Board has adopted categorical standards (attached as Appendix A to this Proxy Statement) that help us evaluate each
directors independence. Specifically, these standards are intended to assist the Board in determining whether certain
relationships between our directors and Deere or its affiliates are material relationships for purposes of the New York
Stock Exchange (NYSE) independence standards. The categorical standards establish thresholds, short of which any such
relationships are deemed not to be material. In addition, each directors independence is evaluated under our Related Person
Transactions Approval Policy, as discussed in the Review and Approval of Related Person Transactions section below. Deeres independence standards meet or exceed the NYSEs independence requirements.
15 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Corporate
Governance
In November 2016, we reviewed the independence of each then-sitting director applying the independence standards set forth in our Corporate Governance Policies. The reviews considered relationships and transactions between each director (and the directors immediate family and affiliates) and each of Deere, Deeres management, and Deeres independent registered public accounting firm. Based on this review, the Board affirmatively determined at its regular December 2016 meeting that no director other than Mr. Allen has a material relationship with Deere and its affiliates and that each director other than Mr. Allen is independent as defined in our Corporate Governance Policies and the NYSEs listing standards. Mr. Allen is not an independent director because of his employment relationship with Deere.
Board Leadership
Structure
The Chairman of the Board
also serves as Deeres Chief Executive Officer. The Board believes that
combining the Chairman and Chief Executive Officer roles is the most appropriate
structure for Deere at this time for three reasons:
1. | This structure has served our stockholders well through many economic cycles, business challenges, and leadership successions. | ||
2. | The Boards governance processes preserve Board independence by ensuring discussion among independent directors and independent evaluation of and communication with members of senior management. | ||
3. | The enhanced role of the independent Presiding Director provides a strong counterbalance to the combined Chairman and Chief Executive Officer roles. |
Presiding
Director
Vance D. Coffman has served
as our independent Presiding Director since the 2016 annual meeting.
The Presiding Director is elected by a majority of the independent directors upon a recommendation from the Corporate Governance Committee. The Presiding Director is appointed for a one-year term beginning upon election and expiring upon the selection of a successor.
The Board has assigned the Presiding Director the following duties and responsibilities:
|
Preside at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors; | ||
|
Serve as liaison between the Chairman and the independent directors; | ||
|
In consultation with the Chairman, review and approve the schedule of meetings of the Board, the proposed agendas, and the materials to be sent to the Board; | ||
|
Call meetings of the independent directors when necessary; and | ||
|
Remain available for consultation and direct communication with Deeres stockholders. |
The Board believes the role of the Presiding Director exemplifies Deeres continuing commitment to strong corporate governance and Board independence.
Board
Meetings
Under Deeres by-laws,
regular meetings of the Board are held at least quarterly. Our typical practice
is to schedule at least one Board meeting per year at a company location other
than our World Headquarters so directors have an opportunity to observe
different aspects of our business first-hand. The Board met five times during
fiscal 2016.
Directors are expected to attend Board meetings, meetings of committees on which they serve, and stockholder meetings. More to the point, directors are expected to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities. During fiscal 2016, all incumbent directors attended 75% or more of the meetings of the Board and committees on which they served. Overall attendance at Board and committee meetings was 100%. All directors then in office attended the Annual Meeting of Stockholders in February 2016.
16 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Corporate
Governance
Each Board meeting normally begins or ends with a session between the CEO and the independent directors. This provides a platform for discussions outside the presence of the non-Board management attendees. The independent directors may meet in executive session, without the CEO, at any time, but such non-management executive sessions are scheduled (and typically occur) at each regular Board meeting. The Presiding Director presides over these executive sessions.
Board Committees
The Board has delegated some of its
authority to five committees: the Executive Committee, the Audit Review
Committee, the Compensation Committee, the Corporate Governance Committee, and
the Finance Committee. The Finance Committee, which replaced the Pension Plan
Oversight Committee in February 2016, focuses and enhances the Boards oversight
of Deeres financial affairs.
In addition to creating a new committee, the Board approved the rotation of certain directors committee memberships effective February 2016. The Board believes that committee rotation is generally desirable to ensure that committees regularly benefit from new perspectives.
Each of our Board committees has adopted a charter that complies with current NYSE rules relating to corporate governance matters. Copies of the committee charters are available at www.deere.com/corpgov and may also be obtained upon request to the Deere & Company Stockholder Relations Department. Each committee (other than the Executive Committee, which did not meet in 2016 and of which Mr. Allen serves as chair) is composed solely of independent directors.
The committee structure and memberships described below reflect the changes that became effective in February 2016. Every committee other than the Executive Committee regularly reports on its activities to the full Board.
EXECUTIVE
COMMITTEE |
Acts on
matters requiring Board action between meetings of the full
Board
Has authority to act on certain significant
matters, limited by our by-laws and applicable law All
members, other than Mr. Allen, are independent | |
AUDIT REVIEW COMMITTEE 2016 meetings: 5
|
Oversees the independent registered public
accounting firms qualifications, independence, and performance
Assists the Board in overseeing the integrity of
our financial statements, compliance with legal requirements, and the
performance of our internal auditors
Pre-approves all audit and allowable non-audit services by the independent
registered public accounting firm With the
assistance of management, approves the selection of the independent
registered public accounting firms lead engagement partner All
members have been determined to be independent and financially literate
under current NYSE listing standards The Board
has determined that Ms. Smith, Mr. Heuberger and Mr. Page are audit
committee financial experts as defined by the SEC and that each has
accounting or related financial management expertise as required by NYSE
listing standards |
17 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Corporate
Governance
COMPENSATION COMMITTEE 2016 meetings: 6
|
Makes recommendations to the Board regarding
incentive and equity-based compensation plans Evaluates and approves the compensation of our executive officers (except for the compensation of our CEO, which is approved by the full Board), including reviewing and approving the performance goals and objectives that will affect that compensation Evaluates and approves compensation granted pursuant to Deeres
equity-based and incentive compensation plans, policies, and
programs Retains, oversees, and assesses the independence of compensation
consultants and other advisors Oversees our policies on structuring compensation programs for
executive officers to preserve tax deductibility Reviews and discusses the CD&A with management and determines
whether to recommend to the Board that the CD&A be included in our
filings with the SEC All members have been determined to be independent under current
NYSE listing standards, including those standards applicable specifically
to compensation committee members | |
CORPORATE GOVERNANCE 2016 meetings: |
Monitors corporate governance policies and oversees our Center for
Global Business Conduct
Reviews senior management succession plans and identifies and
recommends to the Board individuals to be nominated as
directors
Makes recommendations concerning the size, composition, committee
structure, and fees for the Board
Reviews and reports to the Board on the performance and
effectiveness of the Board
Oversees the evaluation of our management
All members have been determined to be independent under current
NYSE listing standards
| |
FINANCE COMMITTEE 2016 meetings: 3
|
Reviews the policies, practices, strategies, and risks relating to
Deeres financial affairs
Exercises oversight of the business of Deeres
Financial Services segment Formulates our pension funding policies
Oversees our pension plans
All members have been determined to be independent under current
NYSE listing standards |
18 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Corporate
Governance
Board Oversight of Risk
Management
The Board believes that strong and
effective internal controls and risk management processes are essential for
achieving long-term stockholder value. The Board, directly and through its
committees, is responsible for overseeing risks that may affect
Deere.
RISK
MANAGEMENT APPROACH
We maintain a structured risk management
approach to facilitate our strategic business objectives. To that end, we
identify and categorize risks, and then escalate them as needed. Our internal
risk management structure is administered by a Management Risk Committee
consisting of the CEO and his direct reports. This committee provides periodic
reports to the Board regarding Deeres risk management processes and reviews
with the Board high-priority areas of enterprise risk.
Dedicated risk management reports typically take place at regularly-scheduled Board meetings each February and August, and risk management topics are discussed as needed at other Board and committee meetings.
BOARD AND
COMMITTEE RISK OVERSIGHT RESPONSIBILITIES
Each Board committee is responsible for
oversight of risk categories related to the committees specific area of focus,
while the full Board exercises ultimate responsibility for overseeing the risk
management function as a whole.
The areas of risk oversight exercised by the Board and its committees are as follows:
Who is responsible? | Primary areas of risk oversight | |
Full Board |
Oversees overall risk management function, and regularly receives and evaluates reports and presentations from the chairs of the individual Board committees on risk-related matters falling within each committees oversight responsibilities. | |
Audit Review Committee |
Monitors operational, strategic, and legal and regulatory risks by regularly reviewing reports and presentations given by management, including our Senior Vice President and General Counsel, Senior Vice President and Chief Financial Officer, and Vice President, Internal Audit, as well as other operational personnel. Regularly reviews our risk management practices and risk-related policies (for example, Deeres risk management and insurance portfolio, and legal and regulatory reviews) and evaluates potential risks related to internal control over financial reporting. | |
Compensation Committee |
Monitors potential risks related to the design and administration of our compensation plans, policies, and programs, including our performance-based compensation programs, to promote appropriate incentives that do not encourage executive officers or employees to take unnecessary and excessive risks. | |
Corporate Governance Committee |
Monitors potential risks related to our governance practices by, among other things, reviewing succession plans and performance evaluations of the Board and CEO, monitoring legal developments and trends regarding corporate governance practices, the Code of Business Conduct and evaluating potential related person transactions. Monitors risks relating to environmental factors, as well as product safety and other compliance matters. | |
Finance Committee |
Monitors operational and strategic risks related to Deeres financial affairs, including capital structure and liquidity risks, and reviews the policies and strategies for managing financial exposure and contingent liabilities. Monitors potential risks related to funding our U.S. qualified pension plans (other than the defined contribution savings and investment plans) and monitors compliance with applicable laws and internal policies and objectives. |
19 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Corporate
Governance
Stockholder
Outreach
In order to ensure the continued
delivery of sustainable, long-term value to our stockholders, we engage in
regular dialogue with our stockholders. During 2016, we discussed governance,
executive compensation, and other issues with stockholders representing more
than 48% of our outstanding shares. The Board considers feedback from these
conversations during its deliberations, and we regularly review and adjust our
corporate governance structure and executive compensation policies and practices
in response to comments from our stockholders.
Communication with the
Board
If you wish to communicate with the
Board you may send correspondence to: Corporate Secretary, Deere & Company,
One John Deere Place, Moline, Illinois 61265-8098. The Corporate Secretary will
submit your correspondence to the Board or the appropriate committee, as
applicable.
You may communicate directly with the Presiding Director by sending correspondence to: Presiding Director, Board of Directors, Deere & Company, Department A, One John Deere Place, Moline, Illinois 61265-8098.
Corporate Governance
Policies
Because we believe corporate governance is integral to creating
long-term stockholder value, our Board of Directors has adopted company-wide
Corporate Governance Policies, which are periodically reviewed and revised as
appropriate to ensure that they reflect the Boards corporate governance
objectives.
Please visit the Corporate Governance portion of our website (www.deere.com/corpgov) to learn more about our corporate governance practices and to access the following materials:
|
Corporate Governance Policies | ||
|
Code of Ethics | ||
|
Guiding Principles | ||
|
Global Conflict Minerals Policy | ||
|
Charters for our Board Committees | ||
|
Code of Business Conduct | ||
|
Supplier Code of Conduct |
Political
Contributions
To promote transparency and good corporate citizenship, since 2012
we have provided voluntary disclosure relating to the political contribution
activities of Deere and its political action committee. This information is
publicly available at www.deere.com/politicalcontributions.
20 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Compensation of Directors
Compensation of Directors |
We have structured the compensation of our nonemployee directors with the following objectives in mind:
|
Recognize the substantial investment of time and expertise necessary for the directors to discharge their duties to oversee Deeres global affairs | ||
|
Align the directors interests with the long-term interests of our stockholders | ||
|
Ensure that compensation is easy to understand and is regarded positively by our stockholders and employees |
We pay nonemployee directors an annual retainer. In addition, committee chairpersons and the Presiding Director receive fees for assuming those responsibilities. Directors who are employees receive no additional compensation for serving on the Board. We do not pay committee member retainers or meeting fees, but we do reimburse directors for expenses related to meeting attendance.
To supplement their cash compensation and align their interests with those of our stockholders, nonemployee directors are awarded restricted stock units (RSUs) after each annual meeting. A person who serves a partial term as a nonemployee director will receive a prorated retainer and a prorated RSU award.
Compensation for nonemployee directors is reviewed annually by the Corporate Governance Committee. At its December 2016 meeting, the Board approved increases as noted below for nonemployee directors as recommended by the Corporate Governance Committee. The cash components became effective on January 1, 2017 and the equity component is effective for the equity award following the annual stockholder meeting in February 2017.
The following chart describes amounts we pay and the value of awards we grant to nonemployee directors:
Date
Approved by Corporate Governance Committee: Effective Date of Annual Amounts: |
August
2013 January 2014 |
December
2016 January & March 2017 | ||||
Retainer | $ | 120,000 | $ | 125,000 | ||
Equity Award | $ | 120,000 | $ | 145,000 | ||
Presiding Director Fee | $ | 20,000 | $ | 25,000 | ||
Audit Review Committee Chair Fee | $ | 20,000 | $ | 25,000 | ||
Compensation Committee Chair Fee | $ | 20,000 | $ | 20,000 | ||
Corporate Governance Committee Chair Fee | $ | 15,000 | $ | 15,000 | ||
Finance Committee Chair Fee | $ | 15,000 | $ | 15,000 |
Under our Nonemployee Director Deferred Compensation Plan, directors may choose to defer some or all of their annual retainers until they retire from the Board. For deferral elections up through December 2016, a director could elect to have these deferrals invested in either an interest-bearing account or an account with a return equivalent to an investment in Deere common stock. For deferrals effective in January 2017 and later, directors may choose from a list of investment options, none of which yield an above-market earnings rate.
Our stock ownership guidelines require each nonemployee director to own Deere common stock equivalent in value to at least three times the directors annual cash retainer. This ownership level must be achieved within five years of the date the director joins the Board. Restricted shares (regularly granted to nonemployee directors prior to 2008), RSUs, and any common stock held personally by the nonemployee director are included in determining whether the applicable ownership threshold has been reached. Other than Mr. Johanns, Mr. Stockton, and Ms. Talton, who were first elected to the Board in 2015, and Mr. Krzanich and Mr. Heuberger, who were first elected to the Board in January and December of 2016, respectively, each nonemployee director has achieved stockholdings in excess of the applicable multiple as of the date of this Proxy Statement.
21 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Compensation of Directors
We require nonemployee directors to hold all equity awards until the occurrence of one of the following triggering events: retirement from the Board, total and permanent disability, death, or a change in control of Deere combined with a qualifying termination of the director. Directors may not sell, gift, or otherwise dispose of their equity awards before the occurrence of a triggering event. While the restrictions are in effect, nonemployee directors may vote their restricted shares (but not shares underlying RSUs) and receive dividends on the restricted shares and dividend equivalents on the RSUs.
In fiscal 2016, we provided the following compensation to our nonemployee directors:
Name* | Fees
Earned or Paid in Cash (1) |
Stock Awards (2) |
Non-Qualified Deferred Compensation Earnings (3) |
Total | ||||||||
Crandall C. Bowles | $ | 135,000 | $ | 119,991 | $ | | $ | 254,991 | ||||
Vance D. Coffman | $ | 155,000 | $ | 119,991 | $ | | $ | 274,991 | ||||
Charles O. Holliday, Jr. (5) | $ | 53,333 | $ | | $ | | $ | 53,333 | ||||
Dipak C. Jain | $ | 120,000 | $ | 119,991 | $ | 26,292 | $ | 266,283 | ||||
Michael O. Johanns | $ | 120,000 | $ | 119,991 | $ | | $ | 239,991 | ||||
Clayton M. Jones | $ | 120,000 | $ | 119,991 | $ | | $ | 239,991 | ||||
Brian M. Krzanich (4) | $ | 100,000 | $ | 133,378 | $ | 607 | $ | 233,985 | ||||
Joachim Milberg (5) | $ | 40,000 | $ | | $ | | $ | 40,000 | ||||
Richard B. Myers (5) | $ | 40,000 | $ | | $ | | $ | 40,000 | ||||
Gregory R. Page | $ | 131,250 | $ | 119,991 | $ | 878 | $ | 252,119 | ||||
Thomas H. Patrick (5) | $ | 43,332 | $ | | $ | | $ | 43,332 | ||||
Sherry M. Smith | $ | 135,000 | $ | 119,991 | $ | 2,441 | $ | 257,433 | ||||
Dmitri L. Stockton | $ | 120,000 | $ | 119,991 | $ | | $ | 239,991 | ||||
Sheila G. Talton | $ | 120,000 | $ | 119,991 | $ | | $ | 239,991 |
* | Alan C. Heuberger did not receive any compensation in Fiscal 2016 and is not included in this table. |
(1) | All fees earned in fiscal 2016 for services as a director, including committee chairperson and Presiding Director fees, whether paid in cash or deferred under the Nonemployee Director Deferred Compensation Plan, are included in this column. |
(2) | Represents the aggregate grant date fair value of RSUs computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation Stock Compensation, and does not correspond to the actual value that will be realized by the nonemployee directors. The values in this column exclude the effect of estimated forfeitures. All grants are fully expensed in the fiscal year granted based on the grant price (the average of the high and low price for Deere common stock on the grant date). For fiscal 2016, the grant date was March 2, 2016, and the grant price was $81.13. |
The nonemployee director grant date is seven calendar days after the Annual Meeting. The assumptions made in valuing the RSUs reported in this column are discussed in Note 24, Stock Option and Restricted Stock Awards, of our consolidated financial statements filed with the SEC as part of our Annual Report on Form 10-K for the fiscal year ended October 31, 2016. The following table lists the cumulative restricted shares and RSUs held by the nonemployee directors as of October 31, 2016: |
Director Name* | Restricted Stock | RSUs | Director Name | Restricted Stock | RSUs | ||||||
Crandall C. Bowles | 19,916 | 14,724 | Brian M. Krzanich (4) | | 1,656 | ||||||
Vance D. Coffman | 6,532 | 14,724 | Gregory R. Page | | 5,176 | ||||||
Dipak C. Jain | 13,234 | 14,724 | Sherry M. Smith | | 7,326 | ||||||
Michael O. Johanns | | 2,986 | Dmitri L. Stockton | | 2,470 | ||||||
Clayton M. Jones | 824 | 14,724 | Sheila G. Talton | | 2,470 |
* | Alan C. Heuberger was elected to the Board effective December 20, 2016. He did not hold any restricted shares or RSUs as of October 31, 2016, and is not included in this table. |
22 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Security Ownership of Certain Beneficial Owners and
Management
(3) | Directors are eligible to participate in the Nonemployee Director Deferred Compensation Plan. Under this plan, participants may defer part or all of their annual cash compensation. Through fiscal 2016, two investment choices were available for these deferrals: | |
| an interest-bearing alternative that pays interest at the end of each calendar quarter (i) for amounts deferred between fiscal 2010 and fiscal 2016, at a rate based on the Moodys A-rated Corporate Bond Rate, and (ii) for amounts deferred prior to fiscal 2010, at a rate based on the prime rate as determined by the Federal Reserve Statistical Release plus 2% | |
| an equity alternative denominated in units of Deere common stock that earns additional shares each quarter at the quarterly dividend rate on Deere common stock | |
Amounts included in this column represent the above-market earnings on any amounts deferred under the Nonemployee Director Deferred Compensation Plan. Above-market earnings represent the difference between the interest rate used to calculate earnings under the applicable investment choice and 120% of the applicable federal long-term rate. | ||
(4) | Mr. Krzanich was elected to the Board effective January 6, 2016. His compensation amounts reflect a pro-rated retainer fee for the period from January 2016 through October 2016, a pro-rated RSU award for the period from January 6, 2016, through the February 2016 annual meeting, and a full RSU award granted in March 2016. | |
(5) | Mr. Holliday, Mr. Milberg, Mr. Meyers, and Mr. Patrick retired from the Board effective with the 2016 annual meeting (February 24, 2016). The compensation amounts reflect a pro-rated retainer fee covering the portion of fiscal 2016 during which they served as directors. |
Security Ownership of Certain Beneficial Owners and Management |
The following table shows the number of shares of Deere common stock beneficially owned as of December 31, 2016 (unless otherwise indicated) by:
| each person who, to our knowledge, beneficially owns more than 5% of our common stock |
| each individual who was serving as a nonemployee director as of December 31, 2016 |
| each of the named executive officers listed in the Summary Compensation Table of this Proxy Statement |
| all individuals who served as directors or executive officers on December 31, 2016, as a group |
A beneficial owner of stock (represented in column (a)) is a person who has sole or shared voting power (meaning the power to control voting decisions) or sole or shared investment power (meaning the power to cause the sale or other disposition of the stock). A person also is considered the beneficial owner of shares to which that person has the right to acquire beneficial ownership (within the meaning of the preceding sentence) within 60 days. For this reason, the following table includes exercisable stock options (represented in column (b)), restricted shares, and RSUs that could become exercisable or be settled within 60 days of December 31, 2016, at the discretion of an individual identified in the table (represented in column (c)).
23 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Security Ownership of Certain Beneficial Owners and
Management
All individuals listed in the table have sole voting and investment power over the shares unless otherwise noted.
As of December 31, 2016, Deere had no preferred stock issued or outstanding.
Shares
Beneficially Owned And Held (a) |
Exercisable
Options (b) |
Options,
Restricted Shares, and RSUs Available Within 60 Days (c) |
Total | Percent
of Shares Outstanding | |||||||
Greater Than 5% Owners | |||||||||||
Cascade Investment, L.L.C. (1) | |||||||||||
2365 Carillon Point | |||||||||||
Kirkland, WA 98033 | 31,423,573 | | | 31,423,573 | 9.9 | % | |||||
The Vanguard Group, Inc.(2) | |||||||||||
100 Vanguard Blvd. | |||||||||||
Malvern, PA 19355 | 19,892,663 | | | 19,892,663 | 6.2 | % | |||||
Non-Employee Directors (3) | |||||||||||
Crandall C. Bowles | 2,800 | | 34,640 | 37,440 | * | ||||||
Vance D. Coffman | | | 21,256 | 21,256 | * | ||||||
Alan C. Heuberger | 100 | | 259 | 359 | * | ||||||
Dipak C. Jain | | | 27,958 | 27,958 | * | ||||||
Michael O. Johanns | | | 2,986 | 2,986 | * | ||||||
Clayton M. Jones | | | 15,548 | 15,548 | * | ||||||
Brian M. Krzanich | | | 1,656 | 1,656 | * | ||||||
Gregory R. Page | 1,100 | | 5,176 | 6,276 | * | ||||||
Sherry M. Smith | | | 7,326 | 7,326 | * | ||||||
Dmitri L. Stockton | | | 2,470 | 2,470 | * | ||||||
Sheila G. Talton | | | 2,470 | 2,470 | * | ||||||
Named Executive Officers (4) | |||||||||||
Samuel R. Allen | 176,467 | 1,013,115 | 159,055 | 1,348,637 | * | ||||||
James M. Field | 33,090 | 98,466 | 0 | 131,556 | * | ||||||
Rajesh Kalathur | 18,147 | 116,985 | 0 | 135,132 | * | ||||||
Michael J. Mack, Jr.(5) | 45,744 | 144,436 | 30,414 | 220,594 | * | ||||||
John C. May | 10,041 | 77,864 | 0 | 87,905 | * | ||||||
All directors and executive officers as a group | |||||||||||
(22 persons)(6) | 378,568 | 1,939,728 | 374,708 | 2,693,004 | * | ||||||
* Less than 1% of the outstanding shares of Deere common stock. | |
(1) | The ownership information for Cascade Investment, L.L.C. is based on information supplied by Cascade in a statement on Form 4 filed with the SEC on August 16, 2016. All shares of common stock held by Cascade may be deemed beneficially owned by William H. Gates III as the sole member of Cascade. Cascade has sole voting power and sole dispositive power over 31,423,573 shares owned. |
(2) | The ownership information for The Vanguard Group, Inc. is based on information supplied by Vanguard in a statement on Schedule 13G filed with the SEC on February 10, 2016. Vanguard holds the shares in its capacity as a registered investment advisor on behalf of numerous investment advisory clients, none of which is known to own more than five percent of Deeres shares. Vanguard has sole voting power over 581,732 shares owned and sole dispositive power over 19,272,592 shares owned. |
24 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Security Ownership of Certain Beneficial Owners
and Management
(3) | The table includes restricted shares and RSUs awarded to directors under the Deere & Company Nonemployee Director Stock Ownership Plan (see footnote (2) to the Fiscal 2016 Director Compensation Table). Restricted shares and RSUs may not be transferred prior to retirement as a director. RSUs are payable only in Deere common stock following retirement and have no voting rights until they are settled in shares of stock. In addition, directors own the following number of deferred stock units, which are payable solely in cash under the terms of the Nonemployee Director Deferred Compensation Plan: |
Director | Deferred Units | |
Crandall C. Bowles | 41,645 | |
Vance D. Coffman | 26,130 | |
Dipak C. Jain | 8,490 | |
Michael O. Johanns | 2,927 | |
Gregory R. Page | 3,818 | |
Dmitri L. Stockton | 2,352 |
(4) | See the Outstanding Equity Awards at Fiscal 2016 Year-End table for additional information regarding equity ownership for NEOs as of October 31, 2016. |
(5) | Mr. Mack retired effective November 1, 2016. Figures shown are as of October 31, 2016. |
(6) | The number of shares shown for all directors and executive officers as a group includes 130,292 shares owned jointly with family members over which the directors and executive officers share voting and investment power |
25 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Election of Directors
Review and Approval of Related Person Transactions
Review and Approval of Related Person Transactions |
The Board has adopted a Related Person Transactions Approval Policy, which assigns our Corporate Governance Committee the responsibility for reviewing, approving, or ratifying all related person transactions.
The Related Person Transactions Approval Policy is concerned with three types of related persons:
(1) executive officers and directors of Deere
(2) any holder of 5% or more of Deeres voting securities
(3) immediate family members of anyone in category (1) or (2)
Each year, our directors and executive officers complete questionnaires designed to elicit information about potential related person transactions. In addition, the directors and officers must promptly advise our Corporate Secretary if there are any changes to the information they previously provided. After consultation with our General Counsel, management, and outside counsel, as appropriate, our Corporate Secretary determines whether any transaction is reasonably likely to be a related person transaction. Transactions deemed reasonably likely to be related person transactions are submitted to the Corporate Governance Committee for consideration at its next meeting, unless action is required sooner. In such a case, the transaction would be submitted to the Chairperson of the Corporate Governance Committee, whose determination would be reported to the full committee at its next meeting.
When evaluating potential related person transactions, the Corporate Governance Committee or its Chairperson, as applicable, considers all reasonably available relevant facts and circumstances and approves only those related person transactions determined in good faith to be in compliance with or not inconsistent with our Code of Ethics and Code of Business Conduct, and in the best interests of our stockholders.
Section 16(a) Beneficial Ownership Reporting Compliance |
Section 16(a) of the Securities Exchange Act of 1934 (the Exchange Act) and related regulations require our directors, certain of our officers, and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC and to provide copies of those reports to Deere.
To assist with these required reports, we have established procedures whereby directors and officers provide us with the relevant information regarding their transactions in Deere shares and we prepare and file the ownership reports on their behalf. In addition, our directors and officers have provided written statements regarding their Deere stock ownership and reports. Based solely upon a review of these statements and reports, we believe that all Section 16(a) filing requirements applicable to our insiders were complied with during fiscal 2016.
26 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on
Executive Compensation |
Item 2 Advisory Vote on Executive Compensation |
In accordance with Section 14A of the Exchange Act, we are asking our stockholders to approve, on an advisory basis, the compensation of the executives named in the Summary Compensation Table of this Proxy Statement. Deeres practice, which was approved by our stockholders at the 2011 annual meeting, is to conduct this non-binding vote annually.
Supporting Statement
PAY FOR
PERFORMANCE
Deeres compensation
philosophy is to pay for performance, support Deeres business strategies, and
offer competitive compensation. Our compensation programs consist of
complementary elements that reward achievement of both short-term and long-term
objectives. The metrics used for our incentive programs are either associated
with operating performance or are based upon a function of Deeres stock price
with linkage to revenue growth and total shareholder return (TSR). See Review
of Pay for Performance Relative to Peer Group (see page 37) in the CD&A,
which highlights our success in aligning executive compensation with Deeres
financial performance.
PROGRAM DESIGN
The CD&A offers a detailed description of our
compensation programs and philosophy. Our compensation approach is supported by
the following principles, among others, as fully described in the
CD&A:
| We strive to attract, retain, and motivate high-caliber executives |
| As executives assume more responsibility, we increase the portion of their total compensation that is at-risk and that is tied to long-term incentives |
| We recognize the cyclical nature of our equipment businesses and the need to manage value throughout the business cycle |
| We provide opportunities for NEOs to be long-term stockholders of Deere |
| We structure our compensation program to be regarded positively by our stockholders and employees |
At our 2016 Annual Meeting, we held a stockholder advisory vote on executive compensation in which stockholders approved the advisory vote on the compensation of our NEOs. However, in our evaluation of our executive compensation program in light of the percentage vote received in 2016 and in response to our stockholder feedback initiative following the 2016 Annual Meeting, the Compensation Committee took several actions to enhance the program by making the changes discussed in the CD&A.
The Board believes that the executive compensation as disclosed in the CD&A, the accompanying tables, and other disclosures in this Proxy Statement is consistent with our compensation philosophy and aligns with the pay practices of our peer group.
FOR THE REASONS STATED, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE FOLLOWING NON-BINDING RESOLUTION: |
27 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive
Compensation
Compensation Discussion & Analysis
RESOLVED, that the stockholders approve the compensation of the NEOs as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC, including the CD&A, tabular disclosures, and other narrative executive compensation disclosures.
Effect of
Proposal
The say-on-pay resolution is non-binding,
but the Board values your opinion as expressed through your votes and other
communications. Therefore, the Board and the Compensation Committee will
carefully consider the outcome of the advisory vote and those opinions when
making future compensation decisions. However, the Board believes that the
Compensation Committee is in the best position to consider the extensive
information and factors necessary to make independent, objective, and
competitive compensation recommendations and decisions that are in the best
interests of Deere and its stockholders. Thus, the
final decision regarding the compensation and benefits of our executive officers, and whether and how to address
stockholder concerns, remains with the Board and the Compensation
Committee.
Compensation Discussion & Analysis |
In this section, we provide a detailed description of our compensation programs, including the underlying philosophy and strategy, the individual elements, the methodology and processes used by the Board and the Compensation Committee (the “Committee”) to make compensation decisions, and the relationship between Deere’s performance and compensation delivered in fiscal 2016. The discussion in this CD&A focuses on the compensation of our CEO, CFO, and the next three most highly compensated executive officers for the fiscal year ended October 31, 2016. These individuals, referred to as Deere’s named executive officers (or “NEOs”), were:
Name | Title | |
Samuel R. Allen | Chairman and Chief Executive Officer | |
Rajesh Kalathur | Senior Vice President and Chief Financial Officer | |
James M. Field | President, Agricultural Equipment Operations | |
Michael J. Mack Jr.* | Group President, John Deere Financial Services, Global Human | |
Resources, and Public Affairs | ||
John C. May | President, Agricultural Solutions and Chief Information Officer | |
*Mr. Mack retired effective November 1, 2016. |
28 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Our business strategy emphasizes superior financial performance: maintaining aggressive goals for operating margin and asset turns and realizing sustainable Shareholder Value Added growth through disciplined expansion. Deeres compensation program is designed to motivate NEOs to execute this strategy. In 2016, despite a global farm recession and weak construction equipment markets, we achieved net sales & revenue ($26,644 million) and net income ($1,524 million) that are among the 10 best in Deere & Companys history.
These results reflect the success of our strategy. Employees controlled costs (e.g., reducing selling, administrative, and general costs by almost $100 million) and increased the productivity of our assets, yet still produced award-winning advanced products and services and invested in future growth. The results also reflect the benefits of our broad business lineup including smaller tractors, turf equipment, forestry products, and service parts, as well as Financial Services which partially offset continuing weakness in the agricultural and construction markets.
Since aligning the metrics of our compensation program with our strategy in 2002, we have operated profitably at every point in the business cycle.
Snapshot of Compensation
Elements
The components of our 2016
compensation program are as follows:
Total Direct Compensation |
Total Indirect Compensation | |||
Short-Term Compensation | Long-Term Compensation | Other Compensation and Benefits | ||
Base Salary | STI | MTI | LTI | |
Fixed cash component |
Annual cash award for profitability and efficient operations during the fiscal year |
Cash award for sustained profitable growth during a three-year period |
Equity award for
creating stockholder value as reflected by Deeres stock price, revenue
growth, and TSR |
Perquisites; retirement benefits;deferred compensation benefits;additional benefits payable upon a change in control |
Metrics: |
Metric: |
Metrics: |
*The Equipment Operations OROA calculation excludes the assets from our captive financial services. ROE is based solely on the Financial Services segment. See appendix B for details.
Our incentive program design reflects the long-term, cyclical nature of our industry and provides a framework for both executive and broad-based, non-executive programs to ensure that all employees pursue the same financial and operational goals. The STI drives focus on near-term results, while a two-tiered long-term incentive programMTI and LTIreward growth and sustainable profitability over a longer period. Introduced in 2004, the cash-based MTI rewards sustained profitable growth and replaced an equity program that was costly and dilutive to stockholders. MTI differs from LTI in that it motivates actionable behavior for long-term profitability and asset management. Given the long-term, cyclical nature of our industry, the STI and MTI metrics create different, yet complementary, incentives. In the years since the Board adopted these two incentive plans, we have demonstrated the ability to manage through various business and market conditions more profitably and to consistently generate operating cash flow, (especially as compared to peer group companies; see the OROA chart on page 42 and the Return on Invested Capital (“ROIC”) chart on page 51.) The current combination of cash- and equity-based long-term compensation reflects the current peer group practice with about 50% maintaining a similar mix.
29 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive
Compensation
Executive Summary
To align compensation with our business strategy of exceptional operating performance, we historically have used OROA and ROE as the metrics for our STI plan. These metrics are designed to inspire the efficient use of assets and capital. STI goals are determined each year based on where we are in the business cycle to ensure that goals are uniformly challenging in all economic conditions. Beginning in fiscal 2017, we will use two additional metricsnet sales & revenue and net incometo determine STI awards. These new metrics reflect the importance of near-term financial execution.
To align compensation with disciplined growth, we use SVA as the metric for our MTI plan. SVA measures our success in delivering sustained growth in economic profitability over a three-year performance period.
To align compensation with exceptional equity appreciation and to motivate and reward sustained outperformance, our Long-Term Incentive (LTI) plan uses stock options and restricted stock units (RSUs), whose ultimate values are tied to Deeres stock price, and performance stock units (PSUs), which are earned (or not) based on Deeres relative revenue growth and TSR as compared to the S&P Industrial Sector.
Here are some of the key drivers that affect the STI, MTI and LTI metrics on a short and long-term basis.
DRIVERS OF ONE-YEAR | DRIVERS OF THREE-YEAR | DRIVERS OF REVENUE | ||
OROA AND ROE (STI) | SVA (MTI) | GROWTH AND TSR (LTI) | ||
Operating cost management
Disciplined asset management
Efficient use of equity
Near-term business execution |
Cost management decisions with a long-term
focus
Efficient use of long-term assets
Long-term investment decisions for capital and
R&D
World-class distribution systems
Technology innovation |
Market conditions
Market share
Successful execution of business strategy
Stock price appreciation over the long-term |
Financial Performance and
Compensation Metrics
As outlined
above, the metrics Deere uses to measure success in its business strategy are
the same used in our compensation programs to ensure that employees are working
as a high-performance team. Further details below illustrate how the companys
compensation plans are sensitive to fluctuations in business conditions. For
example, payouts for STI and MTI are significantly lower for 2016 than for 2015,
in line with lower metric outcomes. However, the payouts are above target,
reflecting the level of difficulty in achieving the results during severe,
extended downturns in global agricultural and construction markets. Deeres
goals for OROA remain above those of its major competitors.
2015 | 2016 | % Change | |||||
OROA | 15.7% | 14.4% | -9% | ||||
STI | ROE | 13.6% | 10.4% | -24% | |||
Payout | 199% | 137% | -31% | ||||
MTI | SVA | $744 | $338 | -55% | |||
Payout | 200% | 106% | -53% | ||||
LTI-Revenue | Net Sales & Revenue | $28,863 million | $26,644 million | -8% | |||
Growth | PSU Payout | 0% | 0% | n/a | |||
Stock Price as of 31 Oct | $78.00 | $88.30 | 13% | ||||
LTI-TSR | 3-Year TSR as of 31 Oct | -0.5% | 5.4% | +5.9 pts | |||
PSU Payout | 0% | 67% | +67 pts |
30 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive
Compensation
Executive
Summary
After our fiscal 2016 earnings release on November 23, 2016, our investors recognized this performance and our stock price increased to $100.20 as of November 30, 2016a 13% increase that was sustained through the end of December 2016.
Stockholder
Outreach
Prior to 2016, we
consistently received strong stockholder support on the say-on-pay advisory
vote, averaging more than 90% approval from 2011 through 2015. In 2016,
approximately 61% (71% excluding abstentions) of our stockholders voted in favor
of our executive compensation programs.
Following the 2016 annual meeting, we invited our top 20 stockholders to participate in discussions regarding our executive compensation programs. During June to August, we met with 17 of our top 20 stockholders, representing about 48% of our then outstanding shares to discuss specific governance and compensation matters to better understand what drove the decline in the say-on-pay vote. The outreach was conducted by senior members of Human Resources (HR), including the then President and Vice President of HR, Investor Relations and Legal, both in person and by phone. We discussed our approach to executive compensation programs, stockholder views on the program design and the most recent revisions to our compensation plans and the proxy access by-law amendments. Here are some things we learned during these meetings.
WHAT WE HEARD | HOW WE RESPONDED | ||||||||||
Most stockholders understand the cyclicality of our business and that one- or three-year TSR may not align to operating performance for any one given year. As long-term stockholders, they believe the STI and MTI metrics motivate employees to focus on actions and decisions within our control regardless of varied and changing business conditions. Our stockholders understand how OROA, ROE and SVA are linked to successful operating performance. They believe the STI and MTI programs and associated financial metrics contribute to successful operating performance, drive the right employee behavior, provide long-term focus, and promote the creation of long-term value. |
To further reinforce the alignment of the incentive programs with the cyclical nature of our business, the Committee revised our STI and MTI programs as described in this chart and detailed under Recent Changes to Deeres Executive Compensation Plans. The Performance in Recent Downturns graph in the Proxy Summary demonstrates that Deere has performed much better in this downturn compared to those in the past. We believe this success is due to the employees deep understanding of OROA, ROE and SVA. These will continue to be the primary metrics for our STI and MTI programs, respectively. |
||||||||||
STI: | STI: | ||||||||||
Maximum or near-maximum STI payouts in most of the recent fiscal years is not typical as compared to other companies, especially given the recent downturn in Deeres business conditions. Stockholders generally agreed it was appropriate to increase OROA goals based on improved performance. The Committee believes that additional metrics linked to our annual business plan would reflect the importance of near-term financial execution and foster accountability to short-term results. |
In last years proxy, we announced higher OROA goals for 2016, primarily at mid-cycle and the peak of the business cycle to incentivize additional improvements in our operating performance. To further enhance the rigor of the performance goals, the Committee increased OROA goals for 2017 at the trough and mid-cycle of the business cycle. These increased OROA goals were applied to the NEOs beginning in fiscal 2016. The cumulative increases to OROA goals since 2015 are as follows (see details on page 43): | ||||||||||
Cumulative Increase in OROA Goals since 2015 (as applied to NEOs) | |||||||||||
Trough | Mid-Cycle | Peak | |||||||||
Maximum | 33% | 30% | 29% | ||||||||
Target | 50% | 58% | 30% | ||||||||
Threshold | 100% | 50% | 33% | ||||||||
Starting in fiscal 2017, we have added two financial metricsnet sales & revenue and net incometo encourage executives (representing approximately 120 top level employees) to focus on near-term financial execution and foster accountability to short-term results. |
31 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive
Compensation
Executive
Summary
WHAT WE HEARD | HOW WE RESPONDED | ||||||||||
MTI: |
MTI: |
||||||||||
Stockholders strongly support the executive leadership team and our executive compensation programs generally. They believe Deere has strong alignment between business strategy and compensation design, though our proxy statements have not demonstrated that connection. |
We focused on improving our disclosure by simplifying the language and using graphics to improve communications. |
We regularly analyze our practices to ensure that we remain a leader in executive compensation best practices and remain aware of stockholder concerns. We will continue with regular stockholder engagement activities to understand firsthand their perspectives.
Recent Changes to Deeres Executive Compensation Plans
The Committee regularly reviews our compensation programs and strives to enhance the connection with both company performance and stockholder interests. To that end, based upon feedback from our stockholders (obtained after the annual meeting) and in consultation with our independent compensation consultant, the Committee has adopted several changes to Deeres executive compensation program. The table below summarizes those changes and indicates where you can find a complete discussion.
Compensation Element | Description of change | Page
to find more information |
STI | Fiscal 2016: Increased goals for OROA, one of the two metrics for Deeres STI, from the mid-cycle to the peak of the business cycle. These changes reflect more focus on Deeres absolute results rather than relative peer benchmarks. | 42 |
STI | Fiscal 2016 for executives and Fiscal 2017 for all other employees increased OROA goals at the trough and mid-cycle of the business cycle to supplement the previously announced changes to OROA goals. | 43 |
STI | Fiscal 2017: Added two metricsnet sales & revenue and net incometo reflect the importance of near-term financial execution. | 46 |
MTI | Fiscal 2017: Added a TSR Modifier to MTI Payouts (approved in December 2014). | 48 |
LTI | Fiscal 2017: Added a cap on the payout for Performance Stock Units linked to TSR performance. | 53 |
LTI | Fiscal 2017: Increased the CEO stock ownership requirement from five to six times base salary to align with industry trends. | 55 |
Deferred Compensation- Above-Market Earnings |
Modified the investment options available under the Defined Contribution Restoration Plan (Fiscal 2016), Nonemployee Director Deferred Compensation Plan and the Voluntary Deferred Compensation Plan (Fiscal 2017) to ensure participants cannot earn above-market returns on new deferrals. | 57 |
32 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive
Compensation
2016 Compensation
Overview
Deere is committed to a longstanding compensation philosophy that incorporates the principles of paying for performance, supporting business strategies, and paying competitively. The Committee believes this philosophy continues to drive our NEOs and salaried employees to produce sustainable, positive results for Deere and our stockholders.
Snapshot of Compensation Governance
To
ensure that our compensation program meets Deeres business objectives without compromising our core values, we regularly
compare our compensation practices and governance against market best practices. Here are some of the best practices we have implemented.
WE DO THIS: |
WE DONT DO THIS: |
|||||
▲ use a combination of short-term
and long-term incentives to ensure a strong connection between Deeres
operating performance and actual compensation delivered
▲
regularly evaluate our peer group and pay
positioning under a range of performance scenarios
▲
annually review all our compensation plans,
policies, and significant practices
▲
annually review risks
associated with compensation
▲
include a double-trigger change in control
provision in our executive Change in Control Severance Program, as well as
our current equity plan, so participants will receive severance benefits
only if both a change in control and a qualifying termination
occur
▲
annually review and
limit executive perquisites
▲
retain an independent compensation consultant that
does not perform other significant services for Deere
▲
have an Executive Incentive Compensation
Recoupment Policy to ensure accountability in the presentation of our
financial statements
▲
enforce stock ownership requirements to ensure
that directors and executives have common interests with our
stockholders
▲
provide executive
officers with benefits (such as health care, life insurance, disability,
and retirement plans) on the same basis as other full-time Deere
employees |
▼
offer
employment agreements to our U.S.-based executives
▼
provide tax
gross-ups for executives, except for those available to all employees
generally
▼
provide excise
tax gross-ups upon a change in control to any
employees
▼
offer
above-market earnings on new contributions to deferred compensation
accounts
▼
grant stock
options with an exercise price less than the fair market value of Deeres
common stock on the date of grant
▼
re-price stock
options without the prior approval of our
stockholders
▼
cash out
underwater stock options
▼
include reload
provisions in any stock option grant
▼
permit directors or employees, or their respective
related persons, to engage in short sales of Deeres stock or to trade in
instruments designed to hedge against price declines in Deeres
stock
▼
permit
directors or officers to hold Deere securities in margin accounts or to
pledge Deere securities as collateral for loans or other
obligations
|
33 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive
Compensation
2016
Compensation Overview
Compensation Elements
The primary elements of our compensation program are
summarized in the table below:
Component | Purpose | Characteristics | Fiscal 2016 Actions and Results | |||
Base salary | Based on level of responsibility, experience, and sustained individual performance | Fixed cash component generally targeted at the peer group median | Mr. Allen did not receive an increase to base salary for 2016; the other NEOs received increases of 3-12% based on market median | |||
Short-Term Incentive (STI) |
Reward for achieving higher profitability through operating efficiencies and asset management during the fiscal year
|
Awarded in cash, a target STI award is designed to contribute to annual cash compensation and overall compensation at the peer group median | Due to continued strong OROA and ROE results, the STI payout was 137% of target, resulting in an award of $2.6 million for the CEO and awards ranging from $0.7 million to $0.8 million for the other NEOs | |||
Mid-Term
Incentive (MTI) |
Reward for achieving sustained profitable growth over a three-year performance period | Awarded in cash, a target MTI award is designed to contribute to overall compensation at the peer group median | The MTI payout declined from 200% in fiscal 2015 to 106% of target in fiscal 2016, resulting in an MTI award of $1.9 million for the CEO and awards of approximately $0.6 million each for the other NEOs. | |||
Long-Term
Incentive (LTI) |
Reward for creating stockholder value | Awarded in a combination of PSUs, RSUs, and stock options, a base-level LTI award is designed to contribute to overall compensation at the peer group median; LTI awards can be increased by up to 20% to recognize individual performance | In December 2015, the CEO received an LTI award valued at $8.4 million, a 10% increase over the base-level award; LTI awards for the other NEOs were increased an average of 8% ranging from $1.5 to $1.7 million; adjustments reflect strong operating performance and rapid response to challenging business conditions. | |||
Perquisites |
Provide our executives with benefits comparable to those provided to executives at our peer group companies |
Benefits like medical exams and financial planning services that personally benefit the employee, are not related to job performance, and are available to a select group of employees | There were no changes to perquisites in fiscal 2016. We modified the investment options available under deferred compensation plans to ensure participants cannot earn abovemarket returns on new deferrals. | |||
Retirement benefits | Provide income upon retirement | Defined benefit pension plans plus a 401(k) plan with a variable company match | There were no changes to retirement benefits in fiscal 2016. |
As this table suggests, we compare
each component of compensation to the median level for that component awarded by
our peers. In addition, we strive to have each NEOs total annual cash
compensation and overall compensation at target compare favorably to the median
levels for comparable executives. For example, in fiscal 2016, our CEOs base
salary and STI was 25% of his overall compensation, compared to an average of
22% for CEOs in our peer group.
34 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive
Compensation
Compensation Methodology and
Process
2016 Target Direct
Compensation Mix
Pay for performance is an essential
element of our compensation philosophy. We believe compensation should motivate
our executives to substantially contributeboth individually and
collaborativelyto Deeres long-term, sustainable growth. To that end, our
performance-based compensation program consists of three components (STI, MTI,
and LTI), all driven by metrics that align with Deeres business strategy and
reflect the cyclical nature of the industries in which Deere
operates.
To enhance the connection between pay and performance, as our NEOs assume greater responsibility, we award a larger portion of their total compensation in the form of at risk incentive awards, and a larger portion of their incentive awards in the form of equity. This practice is apparent in the following charts, which illustrate the allocation of all fiscal 2016 Direct Compensation components at target for our CEO and for our other NEOs as a group.
CEO TARGET COMPENSATION MIX |
NEO TARGET COMPENSATION MIX | |
* at risk implies awards that are subject to performance conditions and stock price performance
Independent Review and
Approval of Executive Compensation
The Committee is responsible for reviewing and approving goals and
objectives related to incentive compensation for the majority of salaried
employees. In particular, the Committee evaluates the NEOs performance in
relation to established goals and ultimately approves compensation for the NEOs
(except for the CEO). All substantive responsibilities related to the
compensation of the NEOs are undertaken exclusively by the members of the
Committee, all of whom are independent under current NYSE listing
standards.
The Committee periodically reviews the components of our compensation program to ensure the program is aligned with our business strategy, Deeres performance, and the interests of our employees and stockholders. In addition, the Committee regularly reviews market practices for all significant elements of executive compensation and approves necessary adjustments to ensure Deere remains competitive.
35 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive
Compensation
Compensation Methodology and
Process
Generally, at the Board meeting in August, the full Board (in executive session without the CEO present) evaluates the CEOs performance. The Committee considers the results of that evaluation when providing recommendations to the independent members of the Board for the CEOs compensation, which they then approve. The CEO does not play a role in, and is not present during, discussions regarding his own compensation.
The CEO plays a significant role in setting the compensation for the other NEOs. At the Committee meeting in December, the CEO evaluates each NEOs individual performance, and also recommends changes to the NEOs base salaries and LTI awards. (The CEO is not involved in setting the STI and MTI awards because they are calculated using predetermined factors.) The Committee has the discretion to accept, reject, or modify the CEOs recommendations.
The Role of the Compensation
Consultant
The Committee has
retained Pearl Meyer, LLC (Pearl Meyer) as its compensation consultant. Pearl
Meyer reviews our executive compensation program design and assesses our
compensation approach relative to our performance and the market. The Committee
has sole responsibility for setting and modifying the fees paid to Pearl Meyer,
determining the nature and scope of its services, evaluating its performance,
and can terminate Pearl Meyers engagement or hire another compensation
consultant at any time.
Pearl Meyer periodically meets independently with the Chair of the Committee, and regularly participates in executive sessions with the Committee (without any Deere personnel or executives present) to review compensation data and discuss compensation matters. While the Committee values this expert advice, ultimately the Committees decisions reflect many factors and considerations. Management works with Pearl Meyer at the Committees direction to develop materials and analysis, such as competitive market assessments and summaries of current legal and regulatory developments, which are essential to the Committees compensation determinations.
During fiscal 2016, Pearl Meyer performed the following specific services:
|
Provided information on executive compensation trends and external developments, including regulatory changes |
|
Provided a competitive evaluation of total compensation for the NEOs, as well as overall compensation program share usage, dilution, and LTI expense |
|
Reviewed the peer group used for market analyses |
|
Reviewed the competitiveness of actual pay delivered in relation to performance as compared against the peer group, as further discussed below |
|
Provided recommendations on CEO total compensation |
|
Reviewed our CEOs compensation recommendations with respect to the other NEOs |
|
Reviewed Committee agendas and supporting materials in advance of each meeting, and raised questions or issues with management and the Committee Chair, as appropriate |
|
Provided guidance and recommendations on incentive plan design, including rigor of metrics and goals |
|
Reviewed drafts and commented on this CD&A and the related compensation tables |
Pearl Meyer does not provide other significant services to Deere and has no other direct or indirect business relationships with Deere or any of its affiliates. Taking these and other factors into account, the Committee has determined that the work performed by Pearl Meyer does not raise any conflicts of interest. Additionally, based on its analysis of the factors identified in the Committees charter as being relevant to compensation consultant independence, the Committee has concluded that Pearl Meyer is independent of Deeres management.
36 | DEERE & COMPANY | 2017 PROXY STATEMENT |
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Compensation
Methodology and Process
Market
Analysis
PEER
GROUP
The companies in the peer group for our
fiscal 2016 market analysis process, listed in the chart below, are similar to
Deere in terms of sales volume, products, services, market capitalization, and
global presence.
Company | Fiscal year | Employees* | Revenue* ($MM) |
Market Value
10/31/16 ($MM) | |||||
3M Company | Dec-15 | 89,446 | $ | 30,274 | $ | 99,422 | |||
Alcoa Corp. | Dec-15 | 16,000 | $ | 11,199 | $ | 12,593 | |||
Boeing Company | Dec-15 | 161,400 | $ | 96,114 | $ | 87,903 | |||
Caterpillar Inc. | Dec-15 | 105,700 | $ | 47,011 | $ | 48,830 | |||
Cummins Inc. | Dec-15 | 55,200 | $ | 19,130 | $ | 21,556 | |||
E. I. du Pont de Nemours and Company | Dec-15 | 52,000 | $ | 25,268 | $ | 59,802 | |||
Eaton Corp. Plc | Dec-15 | 97,000 | $ | 20,855 | $ | 28,996 | |||
Emerson Electric Co. | Sep-16 | 74,500 | $ | 14,522 | $ | 32,576 | |||
General Dynamics Corporation | Dec-15 | 99,900 | $ | 31,469 | $ | 45,903 | |||
Honeywell International Inc. | Dec-15 | 129,000 | $ | 38,581 | $ | 83,590 | |||
Illinois Tool Works Inc. | Dec-15 | 48,000 | $ | 13,405 | $ | 39,864 | |||
Johnson Controls International plc | Sep-16 | 209,000 | $ | 37,674 | $ | 37,768 | |||
Lockheed Martin Corporation | Dec-15 | 126,000 | $ | 46,132 | $ | 72,184 | |||
Northrop Grumman Corporation | Dec-15 | 65,000 | $ | 23,526 | $ | 40,364 | |||
PACCAR Inc. | Dec-15 | 23,000 | $ | 19,115 | $ | 19,255 | |||
Raytheon Company | Dec-15 | 61,000 | $ | 23,247 | $ | 40,115 | |||
United Technologies Corporation | Dec-15 | 197,200 | $ | 56,450 | $ | 84,152 | |||
Whirlpool Corporation | Dec-15 | 97,000 | $ | 20,891 | $ | 11,253 | |||
Xerox Corporation | Dec-15 | 143,600 | $ | 18,161 | $9,905 | ||||
75th Percentile | 126,750 | $ | 37,901 | $ | 62,897 | ||||
Median | 93,223 | $ | 24,397 | $ | 39,989 | ||||
25th Percentile | 56,400 | $ | 19,126 | $ | 26,212 | ||||
Deere & Company | Oct 16 | 56,800 | $ | 26,644 | $ | 27,764 | |||
Deere Percentile | 26th | 58th | 26th |
Source: Factset Research Systems, Inc.
* Reflects employees and revenues for last
reported fiscal year
Compensation paid by our peer group is representative of the compensation we believe is required to attract, retain, and motivate executive talent. The Committee, in consultation with Pearl Meyer, periodically reviews the peer group to confirm that it remains an appropriate point of reference for NEO compensation. No changes were made to the peer group for fiscal 2016.
REVIEW OF PAY FOR
PERFORMANCE RELATIVE TO PEER GROUP
To ensure that total compensation for our
NEOs aligns with the market, we compared our compensation and performance
against the companies in our peer group. As part of this comparison, we evaluate
our peers mix of cash versus equity and short-term versus long-term
components.
In addition, we reviewed the relationship between total realizable compensation and our performance for the three fiscal years ended October 31, 2015the most recent fiscal year-end for which we can obtain corresponding compensation information for our peer companies. This review, helps the Committee understand whether total compensation delivered to our NEOs aligns with our performance relative to our peer group. For purposes of this review, we use TSR to measure performance.
37 | DEERE & COMPANY | 2017 PROXY STATEMENT |
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Compensation
Methodology and Process
The analysis, as shown in the graphs
below, reveals that realizable pay for Deeres CEO and Other NEOs was reasonably
aligned with Deeres relative TSR over the relevant time period. Deere had the
second lowest TSR in the peer group, and our NEOs realizable pay levels were
between the 25th and 50th percentiles. Based on these results and the results of
similar past comparisons of pay and performance alignment, we believe our pay
programs ensure that compensation for our executives is aligned with performance
and market norms.
DEERE 3-YEAR PAY FOR PERFORMANCE AS OF OCTOBER 31,
2015
REALIZABLE PAY VS. TOTAL SHAREHOLDER
RETURN
CEO | OTHER NEOS |
1. | Actual base salaries paid over the three-year period from 2014 to 2016 | |
2. | Actual STI awards paid over the three-year period | |
3. | Actual MTI awards paid over the three-year period | |
4. | The Black-Scholes value as of October 31, 2015, of any stock options granted over the three-year period | |
5. | The value as of October 31, 2015, of RSUs granted over the three-year period | |
6. | The value as of October 31, 2015, of PSUs (reflecting actual performance for the 2013-2015 performance cycle and the in-process 2014-2016 and 2015-2017 performance cycles) |
For peer companies, total realizable pay includes cash- and equity-based long-term incentive plan and performance share plan payouts for performance cycles that are completed within the three-year period. Award values are then multiplied by a factor that reflects grant frequency and long-term incentive vehicle mix.
38 | DEERE & COMPANY | 2017 PROXY STATEMENT |
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Direct
Compensation Elements
Direct Compensation Elements |
The following information describes each direct compensation element, including the applicable performance metrics.
Base Salary
In determining salary levels for each of our NEOs, the Committee considers factors such as the financial and operational performance, leadership, development of people, time in position, internal equity, and potential. The Committee also considers each NEOs current salary as compared to the salary range and median salary practices of our peer group.
After considering all relevant information, the Board determined that the CEOs base salary for fiscal 2016 should remain unchanged. The other NEOs received increases ranging from 3% to 12%. Mr. Kalathur and Mr. May received higher-than-average increases because their base salaries have been significantly below market since they became senior officers in 2012. The NEOs salary levels remain below the market median for similar positions.
Officer | Base Salary as
of Dec. 1, 2014 |
Salary Increase % |
Base Salary as
of Dec. 1, 2015 | ||||
Samuel R. Allen | $ | 1,500,000 | 0% | $ | 1,500,000 | ||
Rajesh Kalathur | $ | 554,328 | 12% | $ | 620,856 | ||
James M. Field | $ | 667,896 | 3% | $ | 687,936 | ||
Michael J. Mack Jr. | $ | 677,484 | 3% | $ | 697,812 | ||
John C. May | $ | 554,124 | 9% | $ | 603,995 |
Short-Term Incentive (STI)
PERFORMANCE METRICS FOR STI
The Committee believes that operating margins and efficient deployment of Deeres assets (both fixed and working capital) are key drivers in creating long-term stockholder value. For this reason, the Committee has designed the STI program to motivate Deeres executives and most other salaried employees to focus on reducing costs and optimizing asset and capital efficiency no matter where we are in the business cycle each fiscal year. By consistently managing OROA results through all points in the business cycle, Deere has been able to return more than two-thirds of cash flow from our operations to investors through dividends and net share repurchases since 2004.
In fiscal 2016, we used two distinct metrics to motivate employees; reflecting key differences between our manufacturing and financing businesses. For the two businesses that make up our Equipment Operations segment Agriculture and Turf Operations and Construction and Forestry Operationsthe metric is OROA. For our Financial Services segment, the metric is ROE. As described below, the performance results for these metrics are combined to determine STI awards.
For fiscal 2016, the various business results were weighted to calculate STI as follows:
Equipment Operations OROA | 50% |
Agriculture and Turf Operations OROA | 25% |
Construction and Forestry Operations OROA | 15% |
Financial Services ROE | 10% |
The emphasis on the OROA performance of the Equipment Operations and its constituent divisions in calculating STI reflects the critical position these operations have as drivers of Deeres business: Equipment Operations net sales accounted for 89% of Deeres net sales & revenues in fiscal 2016. The 50% weighting for the combined Equipment Operations reflects the importance of employees aligning with the overall business strategies and not optimizing within a business segment.
We explain the metrics and the reasons behind them in this section. You can see how OROA and ROE were calculated for fiscal 2016 in Appendix B, Deere & Company Reconciliation of Non-GAAP Measures.
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Compensation Elements
OROA
Deere is primarily a manufacturing company with high investment in fixed
assets, such as buildings and machinery, and significant expenses with longer
term payoffs, such as research and development. Over the past few decades,
Deeres Equipment Operations businesses have weathered many business cycles.
Among other things, this segment is affected by economic factors such as prices
for commodities (like corn and other crops) and the health of the housing and
infrastructure sectors because we make the equipment that farmers and
contractors rely on. When commodity prices are low or the housing and
infrastructure sectors are weak, our customers delay equipment purchases and
upgrades.
In 2004, Deere adopted a strategy designed to enable management to respond quickly and purposefully to changing business conditions in order to drive sustained operational results across volatile business cycles. A focus on OROA performance was, and continues to be, a key component of this strategy. The Committee believes OROA effectively measures the efficient use of the Equipment Operations assets and the ability to manage operating margins under varying business conditions, and is an appropriate metric for STI awards. Using OROA as an STI performance metric aligns employee decisions with our strategic approach to sound investment of capital and asset utilization. Because business conditions can quickly change, the Committee sets a range of OROA goals for a range of potential conditions rather than for a static forecast. This allows us to be agile and encourages us to prepare in advance for a variety of business conditions so we are ready for any scenario.
Foundational to understanding how we determine the OROA goals for a given fiscal year is the concept of mid-cycle sales. We calculate mid-cycle sales annually by gathering historical information on the size of the industry (for example, the total number of tractors sold in the U.S. market) and Deeres market share for every product line (in this example, the number of tractors sold by Deere). This information helps us understand the cyclical nature, from peak to trough, of our business. Mid-cycle sales are determined for each product line which could be in varying business cycles within the same performance period. This allows us to set meaningful operating performance goals at the product line level while maintaining a unified incentive program for the salaried employee population. For most of our Agricultural and Turf products, a typical business cycle is around seven years. For the Construction and Forestry products, the cycle tends to be a bit shorter. As shown in the graph below, we use that historical information to determine mid-cycle sales essentially our best estimate of what normal looks like.
WHAT IS MID-CYCLE?
Generally speaking, at the peak of a typical business cycle, actual sales constitute 120% of mid-cycle sales; at the trough, actual sales constitute 80% of mid-cycle sales. OROA goals vary each year to reflect where we are on this spectrum. We have relied on the process of analyzing mid-cycle sales for decades to make decisions related to measuring the achievement of long-term business strategies, allocating manufacturing capacity and workforce, and determining standard costs.
Mid-cycle goals. The Committee first established OROA goals for STI purposes by comparing Deeres OROA performance to that of the companies in the peer group. The median OROA for the peer group is in the range of 10-15% (see OROA Deere vs. Peers 1997-2016 on next page). Accordingly, Deeres original target OROA at mid-cycle (the normal part of a business cycle) was set at 12%. That goal provided a reasonable approximation of Deeres cost of capital, and aligned with our compensation strategy of awarding median pay for median performance. The Committee then set OROA goals for threshold and maximum
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STI payouts at mid-cycle to approximate 25th and 75th percentile performance, respectively, relative to the peer group. The Committee has reviewed and approved the goals each year but because peer group OROA performance has essentially remained consistent, the OROA goals at mid-cycle also remained unchanged until recently, as discussed below. The OROA goals are the same for Equipment Operations, Agriculture & Turf Operations and Construction and Forestry Operations.
Goals for peak and trough conditions. To maintain the rigor of the program, the Committee cannot just set goals for mid-cycle, normal conditions. If OROA goals were consistent regardless of where we are in a business cycle, our employees would be unduly rewarded when the economy is strong and penalized for poor economic conditions that have a ripple effect on our sales. Thus, the Committee fixes threshold, target, and maximum OROA goals that are more ambitious at the peak of a business cycle, when it is easier to cover fixed costs and achieve a high asset turnover (and thus a better OROA), and less ambitious at the trough. This model encourages us to quickly make necessary structural changes, such as those related to cost reduction, capacity, and assets (especially inventory), as business conditions change during the year.
As shown in the following graph, the goals for a given year are determined based on where we are in the business cycle.
How do OROA goals work?
For an example of how our multi-tiered OROA goals work in
practice, assume we determined that mid-cycle sales are $30 billion. If
actual sales for the year are $27 billion, that means we are at 90% of mid-cycle
(27 ÷ 30 = .90). In that case, OROA goals would be lower than the goals
for mid-cycle. On the other hand, if actual sales are $33 billion, that
means we are at 110% of mid-cycle (33 ÷ 30 =1.1). In that case, OROA goals
would be greater than the goals for mid-cycle. Both scenarios are illustrated
below:
EXAMPLE
41 | DEERE & COMPANY | 2017 PROXY STATEMENT |
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Compensation Elements
Recent changes in the OROA goals. In the years since we adopted OROA as an enterprise-wide performance metric, Deere has significantly restructured its Equipment Operations to enable more rapid responses to changing business conditions. As a result, for over a decade Deeres OROA results have consistently outpaced the peer group, as depicted in the following graph.
OROA DEERE VS. PEERS 19972016*
*Peer group data for 2016 is not yet available. OROA calculations for Deere and the peers exclude assets for any captive financial services (if applicable).
The products we sell are subject to cycles that differ from our peers. To put these cycles in perspective, the table shows our OROA and net sales over this same period of time. Note that since the adoption of OROA as an enterprise-wide metric in 2004, our OROA performance has exceeded the peer group even we experienced volatile business conditions (as indicated by net sales):
1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||||||||
OROA | 18% | 17% | 3% | 8% | -1% | 6% | 10% | 26% | 22% | 22% | 25% | 27% | 13% | 28% | 30% | 29% | 32% | 28% | 16% | 14% | ||||||||||||||||||||
Net Sales | $11 | $12 | $10 | $11 | $11 | $12 | $13 | $18 | $19 | $20 | $21 | $26 | $21 | $24 | $29 | $34 | $35 | $33 | $26 | $23 | ||||||||||||||||||||
(billions) |
Deeres sustained success in delivering OROA performance under varying business conditions has resulted in maximum or near-maximum STI payouts in recent fiscal years. To further incentivize stronger operational performance and seize the benefits of Deeres structural transformation, the Committee recently raised OROA goals for STI purposes. In making this decision, the Committee determined that we should no longer set Deeres OROA goals solely by looking at our performance relative to the peer group. Instead, the Committee believes Deere should be measured relative to its own capabilities and aspirations. For this reason, the OROA goals in effect beginning with fiscal 2016 were significantly more rigorous at mid-cycle and peak than they have been in the past, as shown in the chart on the following page. The Committee made only minor increases to the goals at trough since our experience at that part of the business cycle was limited and had not yet proven to be sustainable.
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Compensation Elements
OROA GOAL INCREASES
As challenging business conditions continued into fiscal 2016 and Deeres OROA remained strong, the Committee determined that additional increases in the OROA goals were warranted. Feedback from stockholders confirmed that increased goals for the bottom of our business cycle were appropriate. The Committee approved the following OROA goal increases in August 2016. The more rigorous goals were applied to the NEOs and other senior executives immediately, and they will be effective for all employees starting in fiscal 2017.
ADDITIONAL OROA GOAL INCREASES
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The following table displays the cumulative OROA goal increases since fiscal 2015 which are significant:
2015 OROA Goals | 2016 OROA Goals | Revised 2016 OROA Goals | Cumulative Increase (as a %) since 2015 | |||||||||
Trough | Mid-Cycle | Peak | Trough | Mid-Cycle | Peak | Trough | Mid-Cycle | Peak | Trough | Mid-Cycle | Peak | |
Maximum | 12% | 20% | 28% | 13% | 24% | 36% | 16% | 26% | 36% | 33% | 30% | 29% |
Target | 8% | 12% | 20% | 10% | 18% | 26% | 12% | 19% | 26% | 50% | 58% | 30% |
Threshold | 4% | 8% | 12% | 8% | 12% | 16% | 8% | 12% | 16% | 100% | 50% | 33% |
ROE
ROE is the STI performance metric for Financial Services. The
Financial Services business is a key differentiator for how Deere delivers value
to our dealers and customers, so we think it is important to consider Financial
Services performance as part of STI. The Committee believes ROE effectively
measures the efficient use of the segments equity and it is commonly used in
the financial services industry for that purpose. We have two distinct business
models within Financial Services, and we use different ROE goals for
each.
Historically, approximately 65% of Financial Services business is subsidized. Under the subsidized business model, the Equipment Operations provide subsidies to Financial Services to reduce the interest rates that our customers and dealers would otherwise pay on financial products. These subsidies were created to facilitate sales by the Equipment Operations, not to maximize Financial Services profitability. For this reason, the ROE goal for the subsidized business10%is the same regardless of the business cycle and is based on the implied after-tax cost of equity for Financial Services. Analysis shows that our threshold ROE goal of 10% represents upper quartile performance as compared to other financial institutions.
The remaining Financial Services offerings are referred to as the non-subsidized business. The objective of the non- subsidized business is to efficiently utilize equity in order to earn a profitable return. Consequently, this business has more traditional (and progressively more challenging) goals for threshold, target, and maximum ROE. The Committee establishes goal levels based on benchmarking against ROEs attained by similar financial services businesses with similar debt-to-equity leverages, and by evaluating cost of equity financial models. The threshold goal equals the implied after-tax cost of equity for Financial Services; the target and maximum ROE goals are set at progressively higher levels to encourage management and employees to efficiently utilize equity relative to industry norms and market conditions while facilitating sales by the Equipment Operations. The ROE goals of 13% at target and 16% at maximum represent an even greater level of stretch such that the difficulty attain target payouts is rigorous. We regularly review the ROE of other financial institutions to ensure the appropriate level of stretch.
ROE goals are weighted based on the actual mix of subsidized versus non-subsidized business in a fiscal year. The Committee approved the following ROE goals at the beginning of fiscal 2016:
Fiscal 2016 ROE Goals | Subsidized business | Non-subsidized business | Weighted Goals | ||||
% of Business | 66% | 34% | |||||
Maximum | 16% | 12% | |||||
Target | 10% | 13% | 11% | ||||
Threshold | 10% | 10% |
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APPROVAL OF
STI AWARD RATES
At the
beginning of the fiscal year, after review and consideration of Deeres peer
group data for target cash bonuses, the Committee approves target STI rates as a
percentage of each NEOs base salary. The target STI rates for fiscal 2016 are
as follows:
Target Rate | |
CEO | 125% |
Other NEOs | 85% |
Regardless of the award amount reached by applying this formula, no individual award under the STI plan may exceed $5 million or 200% of target. Payouts at 200% of target can only be achieved when our businesses meet or exceed the maximum performance goal for each component of the weighted STI performance formula.
FISCAL 2016
PERFORMANCE RESULTS FOR STI
The chart below shows OROA results for the Agriculture and Turf
Operations, the Construction and Forestry Operations, and Equipment Operations
as a whole based on actual sales volumes:
Those results, together with ROE for Financial Services, are weighted to determine STI, as follows:
Fiscal 2016 Performance Results for STI | Fiscal 2016 Performance Results |
Performance as % of Target |
Fiscal 2016 Award Weighting |
Weighted Award Results | |||
Equipment Operations OROA | 14.4% | 160% | 50% | 80% | |||
Agriculture and Turf Operations OROA | 17.6% | 200% | 25% | 50% | |||
Construction and Forestry Operations OROA | 5.3% | 0% | 15% | 0% | |||
Financial Services ROE | 10.4% | 71% | 10% | 7% | |||
Actual Performance as % of Target 137% |
The Equipment Operations OROA calculation excludes the assets from our captive financial services. ROE is based solely on the Financial Services segment. See appendix B for details.
45 | DEERE & COMPANY | 2017 PROXY STATEMENT |
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Elements
The amount of the STI award paid to an NEO is calculated as follows:
STI AWARD CALCULATIONS
Base salary for the fiscal year |
✕ | Target STI rate | ✕ | Actual performance as a percent of target |
= | STI award amount |
Actual STI awards paid to NEOs are shown in the table to the right, and detailed in the Fiscal 2016 Summary Compensation Table under footnote (4).
The STI plan and the results for fiscal 2016 described above are also used to determine the STI awards paid to most other salaried employees worldwide. For fiscal 2016, STI awards paid to the NEOs consisted of approximately 1.4% of the total amount of STI awards paid to all eligible employees.
Officer | Fiscal 2016 STI award | |
Samuel R. Allen | $ | 2,573,063 |
Rajesh Kalathur | $ | 717,734 |
James M. Field | $ | 800,499 |
Michael J. Mack, Jr. | $ | 811,990 |
John C. May | $ | 699,686 |
The STI plan is periodically approved by our stockholders and was last approved at the annual meeting in February 2015.
REVISED
PERFORMANCE METRICS STARTING FISCAL 2017
In response to the say-on-pay vote outcomes and discussions
with stockholders that followed, the Committee added two financial metricsnet
sales & revenue and net incometo the STI calculation for senior executives
starting in fiscal 2017. The Committee selected
these metrics to tie annual incentive compensation to measures of our financial
performance that are both meaningful and readily accessible to our stockholders
and to reflect the importance of near-term financial execution. Moreover, basing
annual incentive awards on a larger set of metrics ensures that executives take
a comprehensive view of our business.
The Committee will set target goals for net sales & revenue and net income at the beginning of each fiscal year based upon input from management regarding our expected performance in the upcoming year. As shown in the chart below, the goal for a target payout for each metric will match the number established in our annual operating budget forecastwhat we call the Original Budget. net sales & revenue that falls more than 10% below target, and net income that falls more than 15% below target, will result in no payout for those metrics. Conversely, net sales & revenue that exceeds target by at least 10%, and net income that exceeds target by at least 15%, will result in a maximum (200%) payout for those metrics. The metric spread for net income is wider because there are more factors that affect net income than there are for net sales & revenue.
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NEW PERFORMANCE METRICS FOR FISCAL 2017
Beginning in fiscal 2017, the various business results will be weighted to calculate STI as follows:
Equipment Operations OROA | 25.0% |
Agriculture and Turf Operations OROA | 12.5% |
Construction and Forestry Operations OROA | 7.5% |
Financial Services ROE | 5.0% |
Net Sales & Revenue | 25.0% |
Net Income | 25.0% |
Mid-Term Incentive (MTI)
MTI is a long-term cash award based on Deeres performance
against ambitious goals for Shareholder Value Added (SVA) over a three-year
performance period.
SHAREHOLDER
VALUE ADDED PERFORMANCE METRIC
The MTI plan is designed to motivate executives and other salaried
employees to consistently create lasting value. To that end, since the MTI plan
was first implemented, the performance metric has been Deeres SVA, which
essentially measures earnings in excess of our cost of capital.
SVA was selected as the MTI performance metric because the Committee believes Deere should:
|
earn, at a minimum, its weighted average cost of capital each year |
|
ensure that investments in capital and research and development earn their cost of capital |
|
ensure that acquisitions do not deteriorate stockholder value |
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Put another way, we believe Deere can realize sustainable improvement in SVA through a combination of revenue growth and high returns on invested capital. SVA incorporates both of these concepts, and therefore serves as a barometer of long-term value.
SVA is measured on an enterprise-wide level. As a result, the MTI plan encourages teamwork across all of our business units. How do we know it works? In fiscal years 1994 through 2003 (the ten years before we implemented the MTI plan), accumulated SVA was negative $1.4 billion. In the ten most recent fiscal years, accumulated SVA rose to $17.8 billion. This demonstrates that management has become adept at investing for the future while still delivering consistent stockholder returns.
We demonstrate how SVA is calculated in Appendix B, Deere & Company Reconciliation of Non-GAAP Measures.
MODIFICATION OF AWARDS BASED ON RELATIVE
TSR
In an effort to further align executive
compensation with stockholder interests, the Committee added a relative TSR
modifier to potential MTI payouts for our NEOs and certain other executive
officers. Starting with the performance period that began in fiscal 2015, we
compare Deeres TSR for the performance period to TSR for the S&P Industrial
Sector during the same time frame. The Committee chose the S&P Industrial
Sector as a benchmark because it is an independently selected comparator group
that includes a majority of our peer group companies. This index is also used to
measure relative performance for PSUs under our long-term incentive plan. If
Deeres TSR is at or below the 25th percentile of the index, the final MTI
payout for our senior executives will be reduced
by 25%. If Deeres TSR is between the 25th and 50th percentiles, the final MTI
payout for our senior executives will be reduced by up to 25%, as shown in the
graph below. The TSR modifier ensures that senior executives will not get the
full MTI award unless Deeres TSR is at least at the median of the index. There
is no upside for outperforming the 50th percentile.
TSR MODIFIER FOR MTI PAYMENTS
THREE-YEAR PERFORMANCE
PERIODS
The Committee
approved three-year performance periods for MTI awards to emphasize the
importance of consistent, sustained operating performance. We believe employees
are motivated to achieve consistently strong SVA results because, as we
illustrate below under Historical Accumulated SVA, MTI Goals and MTI Payouts,
each year affects award calculations in three separate rolling performance
periods. Whether positive or negative, SVA results for each year become part of
the MTI award calculation for that year and the next two years. Consequently,
negative SVA in one year can offset positive SVA in another. A single year of
strong performance will not result in a high MTI payout if it follows one or two
years of weak performance. Conversely, MTI payouts will not necessarily be low
after a year of weak performance if results in the two preceding years were
strong.
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SETTING SVA
GOALS
Each year, two principles guide the
Committee in fixing the accumulated maximum SVA goal for the next three-year
performance period. First, the goal for a maximum payout reflects return on
invested capital performance in the top 25% relative to our peer group. Second,
the goal for a maximum payout is calculated based on estimated enterprise SVA at
mid-cycle sales levels (described above under Performance Metrics for STI) for
the first year of the performance period. We cannot confidently forecast SVA for
the second and third years of the performance period. Instead, we assume a
compounded 7% annual growth rate (a number that corresponds to Deeres
historical sales growth rate) for each of those remaining two years to arrive at
a cumulative three-year SVA goal. Once set, the goal is a fixed amount for the
performance period.
As mentioned above, the maximum SVA goal represents top quartile invested capital performance, which is an aggressive stretch under normal business conditions. Accordingly, the target SVA goal is set at half of that amount. A threshold MTI award for the performance period that just ended required $1 million of accumulated SVA. The threshold accumulated SVA goal was raised to $5 million starting with the performance period that began in fiscal 2015. The threshold goal was increased to avoid nominal payouts to eligible participants.
The chart below details the threshold, target, and maximum accumulated SVA goals for each performance period that includes fiscal 2016. The SVA goals grew significantly more challenging for the performance periods ending in 2016 and 2017: sales volumes for agricultural equipment increased in recent years, which led to a substantial increase in mid-cycle sales and increased expectations for SVA. As the recent business downturn has become part of the business cycle, mid-cycle volumes have decreased resulting in a lower mid-cycle SVA for the performance period ending in 2018. Although the SVA goals have decreased, the same level of goal rigor exists due to the downturn in business conditions. The SVA goals have increased 273% since the MTI plan was introduced in 2004 (a compounded annual growth rate of 14%).
SVA Goals for MTI | Fiscal
2014 through Fiscal 2016 |
Fiscal
2015 through Fiscal 2017 |
Fiscal
2016 through Fiscal 2018 | ||
Threshold SVA Required for Payout | $1 million | $5 million | $5 million | ||
SVA Goal for Target Payout | $3,605 million | $4,495 million | $4,200 million | ||
SVA Goal for Maximum Payout | $7,210 million | $8,990 million | $8,400 million |
APPROVAL OF MTI AWARD
RATES
At the beginning of each performance
period, after considering data for our peer group, the Committee approves target
MTI award rates as a percentage of the median salary for each NEOs salary
grade. The following table shows the target payout rates approved by the
Committee for the performance period ended October 31, 2016:
Target Rate | |
CEO | 121% |
Other NEOs | 93% |
Regardless of the amount calculated for each award using these payout rates, no employee can receive an award under the MTI plan that exceeds $4.5 million or 200% of target.
49 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive
Compensation
Direct Compensation
Elements
FISCAL 2016
PERFORMANCE RESULTS FOR MTI
The
following table shows Deeres accumulated SVA, calculated as described in
Appendix B, for the three-year performance period ended October 31, 2016, which
resulted in a payout of 106%.
The payout percentage for fiscal 2016 was calculated as follows:
Fiscal Year | SVA (in millions) | |
2014 | $ | 2,694 |
2015 | $ | 774 |
2016 | $ | 344 |
Accumulated SVA for 20142016 performance period | $ | 3,812 |
SVA Goal for Target Payout | $ | 3,605 |
Actual Performance as % of Target | 106% |
The following table shows historical MTI information and how SVA for fiscal 2016 will affect MTI awards for the performance periods ending October 31, 2016, 2017, and 2018. Note that continued downturn business conditions will likely result in below-target payouts for the performance periods ending in 2017 and 2018.
HISTORICAL ACCUMULATED SVA, MTI GOALS AND MTI PAYOUTS
As noted above, a maximum MTI payout requires Deere to achieve superior return on invested capital performance relative to our peer group over a three-year period. The payout awarded to our employees for the performance period that just ended adheres to that requirement. As the graph below demonstrates, Deeres ROIC results have consistently exceeded 75th percentile performance relative to our peers.
50 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive Compensation
Direct Compensation Elements
ROIC DEERE VS. PEERS 19972015
*Peer group data for 2016 is not yet available. ROIC is adjusted for captive financial services for Deere and peers.
CALCULATION OF MTI
AWARDS
The amount of the MTI award paid
to an NEO is calculated as follows:
Median of actual |
× | Target MTI rate | × | Actual performance as a percent of target |
= | MTI award amount |
(a) | Median (or midpoint) is the basis of the MTI calculation for all employees so that within a given salary structure and level, the employees receive the same MTI payout. |
Actual MTI awards paid to the NEOs are shown in the table to the right, and detailed in the Fiscal 2016 Summary Compensation Table under footnote (4).
The results for the performance period ended in fiscal 2016 are also used to determine the MTI awards for other eligible employees worldwide. MTI awards paid to the NEOs for fiscal 2016 consisted of approximately 4.1% of the total amount of MTI awards paid to all eligible employees.
Officer | Fiscal
2016 MTI award | ||
Samuel R. Allen | $ | 1,919,363 | |
Rajesh Kalathur | $ | 551,672 | |
James M. Field | $ | 551,672 | |
Michael J. Mack, Jr. | $ | 551,672 | |
John C. May | $ | 551,672 |
The MTI plan is periodically approved by our stockholders, most recently at the annual meeting in February 2013.
Long-Term Incentive
(LTI)
The LTI is designed to reward the NEOs
for creating sustained stockholder value, to encourage ownership of Deere stock,
to foster teamwork, and to retain and motivate high-caliber executives while
aligning their interests with those of our stockholders. LTI awards consist of
three components: restricted stock units (RSUs), market-priced stock options,
and performance stock units (PSUs), all awarded annually under the John Deere
Omnibus Equity and Incentive Plan (Omnibus Plan). The Omnibus Plan is
periodically approved by our stockholders and was last approved at the annual
meeting in February 2015.
51 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive Compensation
Direct Compensation Elements
FISCAL YEAR 2016 LTI AWARD OVERVIEW FOR NEOS
PSUs | RSUs | Stock Options | ||||
LTI Mix |
||||||
Performance measurements |
50% revenue growth* and 50% TSR relative to the S&P Industrial Sector over a three-year performance period |
Stock price appreciation |
Stock price appreciation | |||
Vesting period |
Cliff vest on the third anniversary of the grant date |
Cliff vest on the third anniversary of the grant date |
Vest in approximately equal annual installments over three years | |||
Conversion/ expiration |
Converted to Deere common stock upon vesting |
Converted to Deere common stock upon vesting |
Expire ten years from the grant date | |||
Objective |
Motivate and reward relative outperformance |
Encourage ownership and retention while providing immediate alignment with stockholders |
Reward for stock price appreciation |
*Based on Deeres compound annual growth rate
APPROVAL OF LTI AWARD
VALUES
The Committee established LTI
grants for the NEOs based on the following criteria: level of responsibility,
individual performance, current market practice, peer group data, and the number
of shares available under the Omnibus Plan. Awards granted in previous years are
not a factor in determining the current years LTI award; nor is potential accumulated wealth.
At the first Committee meeting of each fiscal year, after consideration of peer group data on median values for long-term incentives, the Committee approves a dollar value for a base-level LTI award and the mix of awards to be delivered. The grant price for all LTI awards prior to February 25, 2015 is the average of the high and low common stock price on the grant date as reported on the NYSE. For awards made thereafter, the grant price is the closing price of Deere common stock on the NYSE on the grant date. The grant price is used to determine the number of PSUs, RSUs, and stock options to be awarded.
As has been the practice for several years, the Committee can increase (up to 20%) or decrease (down to $0) an individual NEOs base-level award to distinguish that executives performance, deliver a particular LTI value, or reflect other adjustments as the Committee deems appropriate. For fiscal 2016, the Committee approved adjustments to base-level award values ranging up to 20% to recognize the accomplishments of the individual NEOs. LTI awards were approved for the NEOs as follows:
Adjusted Award Values* | |||
Samuel R. Allen | $ | 8,360,000 | |
Rajesh Kalathur | $ | 1,562,000 | |
James M. Field | $ | 1,562,000 | |
Michael J. Mack, Jr. | $ | 1,491,000 | |
John C. May | $ | 1,704,000 |
*The amounts shown include PSUs valued at the grant price on the date of grant. These amounts differ from the value of equity awards shown in the Fiscal Year 2016 Summary Compensation Table and Grants of Plan-Based Awards table because those tables reflect the probable outcome of the performance metrics for PSUs.
52 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive Compensation
Direct Compensation Elements
See the Fiscal 2016 Grants of Plan-Based Awards table and footnotes for more information on LTI awards delivered, as well as the terms of the awards.
For fiscal 2016, the number of RSUs and PSUs granted to the NEOs represented 50% of all RSUs and PSUs granted to eligible salaried employees; the number of stock options granted to the NEOs represented approximately 8% of all stock options granted to eligible salaried employees.
CHANGE TO LTI AWARD
VALUE FOR FISCAL 2017
After
consideration of peer group data on target long-term incentives, the Committee
approved an increase in the base-level LTI award for the NEOs (excluding the
CEO) from $1,420,000 to $1,560,000 for fiscal 2017. As compared to the peer
group, the equity award values for the NEOs have been below market median for
several years.
CONVERSION OF PSUs TO
DEERE STOCK
For PSUs granted in fiscal
2016, the actual number of shares to be issued upon conversion will be based
equally on Deeres revenue growth and TSR for the three-year performance period
ending in 2019. Deeres performance will be measured relative to the companies
in the S&P Industrial Sector as of the end of the performance period. The
Committee chose the S&P Industrial Sector as a benchmark because it is an
independently selected comparator group that includes a majority of our peer
group companies.
PERFORMANCE TARGETS (PERFORMANCE PERIOD ENDING IN 2019)
Revenue Growth Payout % × 50% of PSUs Awarded |
+ | TSR Payout % × 50% of PSUs Awarded |
= | Final Award |
The number of PSUs that vest and convert to shares can range from 0% to 200% of the number of PSUs awarded, depending on Deeres relative performance during the performance period, as illustrated in the following table:
Deeres Revenue Growth and TSR Relative to the S&P Industrial Sector |
% of Target Shares Earned (Payout %) * | |
Below 25th percentile | 0% | |
At 25th percentile | 25% | |
At 50th percentile | 100% | |
At or above 75th percentile | 200% | |
* Interim points are interpolated |
These performance targets reflect the Committees belief that median levels of relative performance should lead to median levels of compensation.
PAYOUT CAP ON
PSUs
In response to stockholder
concerns, beginning with the PSUs that vest at the end of fiscal 2019, the
payout will be capped at target if Deeres TSR is negative, regardless of how
Deere compares to its peers.
53 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive Compensation
Direct Compensation Elements
2014-2016
PSUs
The performance period for PSUs
granted in fiscal year 2014 ended on October 31, 2016. The final number of
shares earned was based on Deeres revenue growth and TSR relative to the
S&P Industrial Sector over the three-year performance period. The Committee
made its final payout determination in December 2016 following a review of the
relative performances of Deere and the S&P Industrial Sector. Deeres
revenue growth and TSR were comparable to the 3rd and 39th percentiles,
respectively. This resulted in an overall payout of 33.5% of target.
Deeres Revenue Growth and TSR Relative to the S&P Industrial Sector |
3rd Year Results |
Performance Results for Performance Period Relative to S&P Industrial Sector |
% of
Target Shares Earned |
Award Weighting |
Weighted Payout % | |||||
Revenue Growth |
-11.1% |
3rd percentile |
0% |
50% | 0% | |||||
TSR |
5.4% |
39th percentile |
67% |
50% | 33.5% | |||||
Final Payout as % of Target | 33.5% |
LTI REPORTED VERSUS REALIZABLE VALUE
The values for Stock and Option Awards included on the Summary Compensation Table on page 60 are presented in accordance with SEC requirements. Although this allows for comparison across companies, the Committee feels the prescribed calculation does not fully represent the Committees annual decision and does not support a valid CEO pay-for-performance assessment. The following chart compares the LTI values reported on the Summary Compensation Table to Mr. Allens realizable LTI value for each of the grants in 2014, 2015 and 2016. The 3-year TSR as of October 31, 2016 is 5.4%.
REPORTED VS. REALIZABLE LTI VALUE
(a) | See footnotes (2) and (3) to the Summary Compensation Table for an explanation of these valuations. |
(b) | Realizable LTI is calculated as: |
– |
The Black-Scholes value as of October 31, 2016, of the stock options granted in 2014, 2015, and 2016 | |
– |
The value as of October 31, 2016, of RSUs granted in 2014, 2015, and 2016 | |
– |
The value as of October 31, 2016, of PSUs granted in 2014, 2015, and 2016 (reflecting actual performance for the 2014–2016 performance cycle and the in-process 2015–2017 and 2016–2018 performance cycles) |
Summary of Direct
Compensation
The Committee believes each pay
element included in Direct Compensation is consistent with our compensation
philosophy. The Committee reviews Direct Compensation for the NEOs in the
aggregate (excluding the CEO) as well as for each NEO individually, and compares
this compensation to the market position data of our peer group. This market
position data takes into account the level of responsibility (including the
level of sales volume) for each NEOs respective operations.
A key element of these individual performance evaluations is a careful analysis of each NEOs collaboration and contribution to the success of a high-performing team. Thus, while the market data for each position is a factor in reviewing Direct Compensation, the Committee also considers individual fulfillment of duties, teamwork, development, time in position, experience, and internal equity among NEOs (other than the CEO). The Committee recognizes individual performance through adjustments to base salary and LTI.
54 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive Compensation
Direct Compensation Elements
Direct Compensation for the CEO is higher than for the other NEOs due to the CEOs breadth of executive and operating responsibilities for the entire global enterprise. The Committee does not target CEO compensation as a certain multiple of the compensation of the other NEOs. The relationship between the CEOs compensation and that of the other NEOs is influenced by our organizational structure, which does not currently include a chief operating officer. The ratio of Mr. Allens Direct Compensation to that of the other NEOs is generally comparable to that found among the companies in our peer group.
Other Compensation Matters
RULES RELATED TO STOCK
OWNERSHIP, HOLDING REQUIREMENTS, AND ANTI-HEDGING AND ANTI-PLEDGING
POLICIES
NEOs are required to hold a
certain amount of Deere stock. The CEO is expected to hold stock equivalent to 5
times base salary (a level that will rise to 6 times base salary next year), and
the other NEOs are expected to hold stock equivalent to 3.5 times base salary.
These ownership levels must be achieved within five years of the date the NEO is
first appointed as CEO or as an executive officer. NEOs who have not achieved
the requisite ownership level may not transfer any of the stock they acquire
through our equity incentive plan. Only vested RSUs and any common stock held
personally by an NEO are included in determining whether the applicable
ownership requirement has been met. Once an NEO achieves the appropriate
ownership level, the number of shares held at that time becomes that
individuals fixed stock ownership requirement for three years, even if base
salary increases or Deeres stock price decreases. Other than Mr. Kalathur and
Mr. May, who were first appointed senior officers in September, 2012, each NEO
has achieved stockholdings in excess of the applicable multiple as of the date
of this Proxy Statement.
Our Insider Trading Policy precludes all directors and employees, including our NEOs, and their related persons from engaging in short sales of Deeres stock or trading in instruments designed to hedge against or offset price declines by any Deere securities. Our Insider Trading Policy also prohibits our directors and officers from holding Deere stock in margin accounts or pledging Deere stock as collateral for loans or other obligations.
LIMITATIONS ON
DEDUCTIBILITY OF COMPENSATION
Section
162(m) of the Internal Revenue Code generally limits to $1 million the U.S.
federal income tax deductibility of compensation paid in one year to a companys
CEO or any of its three next-highest-paid executive officers (other than its
Chief Financial Officer). Performance-based compensation is not subject to this
limit on deductibility so long as such compensation meets certain requirements,
including stockholder approval of material terms. The Committee strives to
provide the NEOs with incentive compensation programs that will preserve the tax
deductibility of compensation paid by Deere, to the extent reasonably
practicable and consistent with Deeres other compensation objectives. The
Committee believes, however, that stockholder interests are best served by not
restricting the Committees discretion and flexibility in structuring
compensation programs, even though such programs may result in non-deductible
compensation expenses.
RECOUPMENT OF
PREVIOUSLY PAID INCENTIVE COMPENSATION
Deeres Executive Incentive Compensation Recoupment Policy authorizes the
Committee to determine whether to require recoupment of cash and equity
incentive compensation paid to or deferred by certain executives under certain
conditions. Under the policy, the Committee may require recoupment if the
Committee determines an executive received incentive compensation that was
artificially inflated because the executive engaged in misconduct
that:
| contributed to the need for a restatement of all or a portion of Deeres financial statements filed with the SEC; or |
| contributed to an incorrect calculation of operating metrics that are used to determine incentive plan payouts |
The Committee is closely monitoring the proposed rules and rule amendments issued by the SEC to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to recoupment of incentive-based compensation and will amend the Recoupment Policy if necessary when the final rules are adopted.
55 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive Compensation
Indirect Compensation Elements
Indirect Compensation Elements |
Perquisites
We offer our NEOs various perquisites that the Committee believes are
reasonable in order to remain competitive. These perquisites, which are
described in footnote (6) to the Fiscal 2016 Summary Compensation Table,
constitute a small percentage of the NEOs total compensation. The Committee
conducts an annual review of the perquisites offered to the NEOs.
In addition to the items listed in footnote (6), NEOs, as well as other selected employees, are provided indoor parking and access to Deere-sponsored skyboxes at local venues for personal use when not occupied for business purposes, both at no incremental cost to Deere.
The Board requires the CEO to use company-owned aircraft for all business and personal travel because the ability to travel safely and efficiently provides substantial benefits that justify the cost. The geographic location of Deeres headquarters in the Midwest, outside of a major metropolitan area, makes personal and business travel challenging. Moreover, traveling by company aircraft allows the CEO to conduct business confidentially while in transit. Personal use of company aircraft by other NEOs is minimal and must be approved by the CEO. The Committee has limited the CEOs annual personal usage of company aircraft to approximately 100 hours.
Retirement Benefits
All NEOs are covered by the same defined benefit pension
plans, which include the same plan terms as apply to most qualifying U.S.
salaried employees. We also maintain two additional defined benefit pension
plans in which NEOs may participate: the Senior Supplementary Pension Benefit
Plan (the Senior Supplementary Plan) and the John Deere Supplemental Pension
Benefit Plan (the Deere Supplemental Plan).
The defined benefit pension plans have compensation limits imposed by the Internal Revenue Code. The Senior Supplementary Plan provides participants with the same benefit they would have received without those limits. This avoids the relative disadvantage that participants would experience compared to other qualified plan participants. The Deere Supplemental Plan is designed to reward career service at Deere above a specified grade level by utilizing a formula that takes into account only years of service above that grade level. We believe the defined benefit plans serve as important retention tools, provide a level of competitive income upon retirement, and reward long-term employment and service as an officer of Deere. In addition, the fact that the Senior Supplementary and Deere Supplemental Plans are unfunded (with benefit payments under these plans being made out of the general assets of Deere) and therefore at-risk (if Deere were to seek bankruptcy protection), creates a strong incentive for the NEOs to minimize risks that could jeopardize Deeres long-term financial health. For additional information, see the Fiscal 2016 Pension Benefits Table, along with the accompanying narrative and footnotes.
We also maintain a tax-qualified defined contribution plan, the John Deere Savings and Investment Plan (SIP), which is available to most of our U.S. employees, including the NEOs. We make matching contributions to participant SIP accounts on up to six percent of an employees pay. The actual amount of the company match varies based on two factors: the STI results for the most recently completed fiscal year (see the Fiscal 2016 Performance Results for STI section above), and the pension option in which the employee participates (see the narrative preceding the Fiscal 2016 Pension Benefits Table). The following table illustrates Deeres match for calendar 2016, which is reported for our NEOs under the All Other Compensation column of the Fiscal 2016 Summary Compensation Table:
Contemporary Option match on first 2% of eligible earnings: | 300% | |
Contemporary Option match on next 4% of eligible earnings: | 100% |
56 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive Compensation
Indirect Compensation Elements
Deferred Compensation
Benefits
We also maintain certain deferred
compensation plans that provide the NEOs with longer-term savings opportunities
on a tax-efficient basis. Similar deferred compensation benefits are commonly
offered by companies with which we compete for talent.
As of November 1, 2015 for the Defined Contribution Restoration Plan and as of November 1, 2016 for the Deferred Plan, the investment options now parallel the investment options offered under our 401(k) plan (with certain limited exceptions). Funds deferred prior to these effective dates may remain invested under the previous options, although participants also may move these funds into the new options. Additionally, participants may change investment options at any time. These changes effectively ensure that participants cannot earn above-market interest on new deferrals.
See the Nonqualified Deferred Compensation section below for additional details.
Potential Payments upon Change in
Control
Deeres Change in Control Severance
Program (the CIC Program) covers certain executives, including each of the
NEOs, and is intended to facilitate continuity of management in the event of a
change in control. The Committee believes the CIC Program:
|
encourages executives to act in the best interests of stockholders when evaluating transactions that, without a change in control arrangement, could be personally detrimental |
|
keeps executives focused on running the business in the face of real or rumored transactions |
|
protects Deeres value by retaining key talent despite potential corporate changes |
|
protects Deeres value after a change in control by including restrictive covenants (such as non-compete provisions) and a general release of claims in favor of Deere |
|
helps Deere attract and retain executives as a competitive practice |
For more information, see Fiscal 2016 Potential Payments upon Change in Control and the corresponding table.
Other Potential Post-Employment
Payments
Deeres various plans and policies
provide payments to NEOs upon certain types of employment terminations that are
not related to a change in control. These events and amounts are explained in
the section under Executive Compensation Tables entitled Fiscal 2016 Potential
Payments upon Termination of Employment Other than Following a Change in
Control.
57 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive
Compensation
Risk
Assessment of Compensation Policies and Practices
Risk Assessment of Compensation Policies and Practices |
As shown in the adjacent diagram, management conducted a comprehensive risk assessment of Deeres compensation policies and practices, as we have done each year since 2010.
The inquiries in the risk assessment questionnaire focus on: pay-for-performance comparison against our peer group; balance of compensation components; program design and pay leverage; program governance; and mitigating factors that offset program risks.
Based on its most recent review, the Risk Assessment Team concluded that Deeres compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the company. The Committee, along with its independent compensation consultant, reviewed the risk assessment and concurred with that conclusion. The Committee believes the following key factors support the Risk Assessment Teams conclusion:
|
the performance metrics for our STI and MTI incentive plans are based on enterprise publicly reported metrics with only minor adjustments and, therefore, are not easily susceptible to manipulation | ||
|
the metrics for our STI and MTI compensation (and the related potential payouts) are capped to reduce the risk that executives might be motivated to attain excessively high stretch goals in order to maximize payouts |
In addition, Deere maintains stock ownership requirements that are designed to motivate our management team to focus on Deeres long-term sustainable growth, and a Recoupment Policy designed to prevent misconduct relating to financial reporting.
Convened a Risk Assessment Team comprising management personnel representing relevant areas of oversight. |
ê |
Completed an inventory of Deeres compensation programs globally for both executive and non-executive employees. |
ê |
Updated our existing detailed risk assessment questionnaire to take account of any relevant changes in our compensation structure or philosophy. |
ê |
Applied the updated questionnaire to the compensation programs that, due to their size, potential payout, or structure, could potentially have a material adverse effect on Deere. |
58 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive Compensation
Compensation Committee Report
The reports of the Compensation Committee and the Audit Review Committee that follow do not constitute soliciting material and will not be deemed filed or incorporated by reference by any general statement incorporating by reference this Proxy Statement or future filings into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that Deere specifically incorporates the information by reference, and will not otherwise be deemed filed under these statutes.
Compensation Committee Report |
The Compensation Committee of the Board of Directors has reviewed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and discussed it with Deeres management. Based on the Compensation Committees review and discussions with management, the Compensation Committee recommends to the Board of Directors that the Compensation Discussion and Analysis be included in Deeres Proxy Statement.
Vance D. Coffman, Chair
Crandall C.
Bowles
Clayton M. Jones
Brian M. Krzanich
Dmitri L.
Stockton
59 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive
Compensation
Executive
Compensation Tables
Executive Compensation Tables |
In this section, we provide tabular and narrative information regarding the compensation of our NEOs for the fiscal year ended October 31, 2016. Fiscal 2016 is the first year Mr. May met the criteria for inclusion. Therefore only data for fiscal 2016 is included for Mr. May.
FISCAL 2016 SUMMARY COMPENSATION TABLE
Name & Position | Fiscal Year |
Salary (1) |
Stock
Awards (2) |
Option Awards (3) |
Non-Equity Incentive Plan Compensation (4) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings (5) |
All
Other Compensation (6) |
Total | |||||||||||||||
Samuel R. Allen | 2016 | $ | 1,500,000 | $ | 6,246,874 | $ | 2,926,317 | $ | 4,492,426 | $ | 3,005,568 | $ | 471,686 | $ | 18,642,871 | ||||||||
Chairman and | 2015 | $ | 1,500,000 | $ | 5,612,187 | $ | 2,660,623 | $ | 5,519,363 | $ | 2,931,274 | $ | 477,883 | $ | 18,701,330 | ||||||||
Chief Executive Officer | 2014 | $ | 1,495,204 | $ | 6,606,197 | $ | 3,058,680 | $ | 5,397,891 | $ | 3,137,079 | $ | 578,245 | $ | 20,273,296 | ||||||||
Rajesh Kalathur | 2016 | $ | 615,312 | $ | 1,167,110 | $ | 546,760 | $ | 1,269,406 | $ | 352,821 | $ | 155,296 | $ | 4,106,705 | ||||||||
Senior Vice President and | 2015 | $ | 552,128 | $ | 1,153,349 | $ | 546,826 | $ | 1,953,632 | $ | 284,820 | $ | 146,875 | $ | 4,637,630 | ||||||||
Chief Financial Officer | 2014 | $ | 525,437 | $ | 1,073,209 | $ | 496,928 | $ | 1,879,751 | $ | 190,760 | $ | 131,124 | $ | 4,297,209 | ||||||||
James M. Field | 2016 | $ | 686,266 | $ | 1,167,110 | $ | 546,760 | $ | 1,352,171 | $ | 632,142 | $ | 185,457 | $ | 4,569,906 | ||||||||
President, Agricultural | 2015 | $ | 666,274 | $ | 1,048,459 | $ | 497,120 | $ | 2,146,607 | $ | 506,345 | $ | 180,826 | $ | 5,045,631 | ||||||||
Equipment Operations | 2014 | $ | 646,353 | $ | 1,180,392 | $ | 546,630 | $ | 2,083,579 | $ | 459,197 | $ | 167,586 | $ | 5,083,737 | ||||||||
Michael J. Mack, Jr. | 2016 | $ | 696,118 | $ | 1,114,096 | $ | 521,896 | $ | 1,363,662 | $ | 1,027,382 | $ | 186,066 | $ | 4,909,220 | ||||||||
Group President, JD Financial, | 2015 | $ | 675,839 | $ | 1,258,151 | $ | 596,532 | $ | 2,162,777 | $ | 848,211 | $ | 182,619 | $ | 5,724,129 | ||||||||
Global HR & Public Affairs | 2014 | $ | 656,147 | $ | 1,212,742 | $ | 561,549 | $ | 2,100,089 | $ | 822,000 | $ | 185,218 | $ | 5,537,745 | ||||||||
John C. May | 2016 | $ | 599,840 | $ | 1,273,139 | $ | 596,455 | $ | 1,251,358 | $ | 388,506 | $ | 162,727 | $ | 4,272,025 | ||||||||
President, Ag Solutions | |||||||||||||||||||||||
Chief Information Officer |
(1) | Includes amounts deferred by the NEO under the John Deere Voluntary Deferred Compensation Plan. Salary amounts deferred in fiscal 2016 are included in the first column of the Fiscal 2016 Nonqualified Deferred Compensation Table. |
(2) |
Represents the aggregate grant date fair value of PSUs and RSUs computed in accordance with FASB ASC Topic 718. The values in this column exclude the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note 24, Stock Option and Restricted Stock Awards, of our consolidated financial statements filed with the SEC on Form 10-K for the fiscal year ended October 31, 2016 (2016 Form 10-K). For PSUs, the value at the grant date is based upon the probable outcome of the performance metrics over the three-year performance period. If the highest level of payout was achieved, the value of the PSU awards as of the grant date would be as follows: $8,313,838 (Allen); $1,553,230 (Kalathur); $1,553,230 (Field); $1,482,702 (Mack); and $1,694,290 (May). RSUs will vest three years after the grant date, at which time they may be settled in Deere common stock. Refer to the Fiscal 2016 Grants of Plan-Based Awards table and footnote (7) for a detailed description of the grant date fair value of stock awards. |
(3) | Represents the aggregate grant date fair value of stock options computed in accordance with FASB ASC Topic 718. The values in this column exclude the effect of estimated forfeitures. The assumptions made in valuing option awards reported in this column and a more detailed discussion of the binomial lattice option pricing model appear in Note 24, Stock Option and Restricted Stock Awards, of our consolidated financial statements filed with the SEC in the 2016 Form 10-K. Refer to the Fiscal 2016 Grants of Plan-Based Awards table and footnote (7) for a detailed description of the grant date fair value of option awards. |
(4) | Non-equity incentive plan compensation includes cash awards under the STI and MTI plans. Cash awards earned under the STI and MTI plans for the performance period ended in fiscal 2016 were paid to the NEOs on December 15, 2016, unless deferred under the Voluntary Deferred Compensation Plan. Deferred STI and MTI amounts are included in the first column of the Fiscal 2016 Nonqualified Deferred Compensation Table. |
60 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive
Compensation
Executive
Compensation Tables
The following table shows the awards earned under the STI and MTI plans:
STI (a) | MTI (b) | |||||||||||||||||
Name | Target Award as % of Salary |
Actual Performance as % of Target |
Award Amount |
Target Award as % of Salary |
Actual Performance as % of Target |
Award Amount |
Total Non-Equity Incentive Plan Compensation | |||||||||||
Samuel R. Allen | 125% | 137% | $ | 2,573,063 | 121% | 106% | $ | 1,919,363 | $ | 4,492,426 | ||||||||
Rajesh Kalathur | 85% | 137% | $ | 717,734 | 93% | 106% | $ | 551,672 | $ | 1,269,406 | ||||||||
James M. Field | 85% | 137% | $ | 800,499 | 93% | 106% | $ | 551,672 | $ | 1,352,171 | ||||||||
Michael J. Mack, Jr. | 85% | 137% | $ | 811,990 | 93% | 106% | $ | 551,672 | $ | 1,363,662 | ||||||||
John C. May | 85% | 137% | $ | 699,686 | 93% | 106% | $ | 551,672 | $ | 1,251,358 |
(a) | Based on actual performance, as discussed in the CD&A under Fiscal 2016 Performance Results for STI, the NEOs earned an STI award equal to 137% of the target opportunity. | |
(b) | Based on actual performance, as discussed in the CD&A under Fiscal 2016 Performance Results for MTI, the NEOs earned an MTI award equal to 106% of the target opportunity. |
(5) | The following table shows the change in pension value and above-market earnings on nonqualified deferred compensation during fiscal 2016. |
Name | Change in Pension Value (a) |
Nonqualified
Deferred Compensation Earnings (b) |
Total | |||||||
Samuel R. Allen | $ | 2,972,724 | $ | 32,844 | $ | 3,005,568 | ||||
Rajesh Kalathur | $ | 349,214 | $ | 3,607 | $ | 352,821 | ||||
James M. Field | $ | 620,967 | $ | 11,175 | $ | 632,142 | ||||
Michael J. Mack, Jr. | $ | 971,694 | $ | 55,688 | $ | 1,027,382 | ||||
John C. May | $ | 386,124 | $ | 2,382 | $ | 388,506 |
(a) | Represents the change in the actuarial present value of each NEOs accumulated benefit under all defined benefit plans from October 31, 2015, to October 31, 2016. The pension value calculations include the same assumptions as used in the pension plan valuations for financial reporting purposes. For more information on the assumptions, see footnote (4) under the Fiscal 2016 Pension Benefits Table. | |
(b) |
Represents above-market earnings on
compensation that is deferred by the NEOs under our nonqualified deferred
compensation plans. Above-market earnings represent the difference between
the interest rate used to calculate earnings under the applicable plan and
120% of the applicable federal long-term rate prescribed by the Internal
Revenue Code. See the Fiscal 2016 Nonqualified Deferred Compensation Table
for additional information.
Over the past two years, modifications have
been made for the investment options available under the Nonemployee
Director Deferred Compensation Plan and the Voluntary Deferred Compensation Plan for employees to ensure that participants cannot earn
above-market returns on new deferrals. Minimal amounts may be reported in
future years for prior years deferrals. |
(6) | The following table provides details about each component of the All Other Compensation column in the Fiscal 2016 Summary Compensation Table: |
Name | Personal Use of Company Aircraft (a) |
Financial Planning (b) |
Medical Exams (c) |
Misc Perquisites (d) |
Company Contributions to Defined ContributionPlans (e) |
Total
All Other Compensation | |||||||||||||
Samuel R. Allen | $ | 30,102 | $ | | $ | 9,488 | $ | 2,410 | $ | 429,686 | $ | 471,686 | |||||||
Rajesh Kalathur | $ | | $ | | $ | | $ | 422 | $ | 154,874 | $ | 155,296 | |||||||
James M. Field | $ | | $ | 2,185 | $ | | $ | 2,005 | $ | 181,267 | $ | 185,457 | |||||||
Michael J. Mack, Jr. | $ | | $ | | $ | 896 | $ | 1,301 | $ | 183,869 | $ | 186,066 | |||||||
John C. May | $ | | $ | 4,532 | $ | 4,315 | $ | 588 | $ | 153,292 | $ | 162,727 |
(a) | Per IRS regulations, the NEOs recognize imputed income on the personal use of Deeres aircraft. For SEC disclosure purposes, the cost of personal use of Deeres aircraft is calculated based on the incremental cost to Deere. To determine the incremental cost, we calculate the variable costs for fuel on a per mile basis, plus any direct trip expenses such as on-board catering, landing/ramp fees, and crew expenses. Fixed costs that do not change based on usage, such as pilot salaries, depreciation of aircraft, and maintenance costs, are excluded. Mr. Allens personal usage of company aircraft in fiscal 2016 amounted to approximately 23 hours of travel, which represents less than 0.5% of the total hours flown by company aircraft. | |
(b) |
This column contains amounts Deere paid for financial planning assistance to the NEOs. Each year, the CEO may receive up to $15,000 of assistance and the other NEOs may receive up to $10,000. | |
(c) |
This column contains the amounts Deere paid for annual medical exams for the NEOs. | |
(d) |
Miscellaneous perquisites include spousal attendance at company events. | |
(e) |
Deere makes contributions to the John Deere Savings and Investment Plan for all eligible employees. Deere also credits contributions to the John Deere Defined Contribution Restoration Plan for all employees covered by the Contemporary Option under our tax-qualified pension plan whose earnings exceed relevant IRS limits. All of our current NEOs are covered by the Contemporary Option. |
61 | DEERE & COMPANY | 2017 PROXY STATEMENT |
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Executive Compensation
Tables
The following table provides additional information regarding fiscal 2016 grants of RSU, PSU, and stock option awards under the Omnibus Plan, and the potential range of awards that were approved in fiscal 2016 under the STI and MTI plans for payout in future years. These awards are further described in the CD&A under Direct Compensation Elements.
FISCAL 2016 GRANTS OF PLAN-BASED AWARDS
Name | Grant Date (1) |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards (2) |
Estimated
Future Payouts Under Equity Incentive Plan Awards (3) |
All
Other Stock Awards: Number of Shares of Stock or Units (4) |
All
Other Option Awards: Number of Securities Underlying Options (5) |
Exercise or Base Price of Option Awards ($ / Sh) (6) |
Grant Date Fair Value of Stock and Option Awards (7) | ||||||||||||||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | ||||||||||||||||||||
Samuel R. Allen | 12/01/2015-STI | $ | | $ | 1,875,000 | $ | 3,750,000 | ||||||||||||||||||
12/01/2015-MTI | $ | 1,100 | $ | 1,815,000 | $ | 3,630,000 | |||||||||||||||||||
12/9/15 | 26,375 | $ | 2,089,955 | ||||||||||||||||||||||
12/9/15 | 10,550 | 42,200 | 84,400 | $ | 4,156,919 | ||||||||||||||||||||
12/9/15 | 173,360 | $ | 79.24 | $ | 2,926,317 | ||||||||||||||||||||
$ | 1,100 | $ | 3,690,000 | $ | 7,380,000 | 10,550 | 42,200 | 84,400 | 26,375 | 173,360 | $ | 9,173,191 | |||||||||||||
Rajesh Kalathur | 12/01/2015-STI | $ | | $ | 523,015 | $ | 1,046,030 | ||||||||||||||||||
12/01/2015-MTI | $ | 400 | $ | 576,370 | $ | 1,152,740 | |||||||||||||||||||
12/09/15 | 4,928 | $ | 390,495 | ||||||||||||||||||||||
12/09/15 | 1,971 | 7,884 | 15,768 | $ | 776,615 | ||||||||||||||||||||
12/09/15 | 32,391 | $ | 79.24 | $ | 546,760 | ||||||||||||||||||||
$ | 400 | $ | 1,099,385 | $ | 2,198,770 | 1,971 | 7,884 | 15,768 | 4,928 | 32,391 | $ | 1,713,870 | |||||||||||||
James M. Field | 12/01/2015-STI | $ | | $ | 583,326 | $ | 1,166,652 | ||||||||||||||||||
12/01/2015-MTI | $ | 400 | $ | 576,370 | $ | 1,152,740 | |||||||||||||||||||
12/09/15 | 4,928 | $ | 390,495 | ||||||||||||||||||||||
12/09/15 | 1,971 | 7,884 | 15,768 | $ | 776,615 | ||||||||||||||||||||
12/09/15 | 32,391 | $ | 79.24 | $ | 546,760 | ||||||||||||||||||||
$ | 400 | $ | 1,159,696 | $ | 2,319,392 | 1,971 | 7,884 | 15,768 | 4,928 | 32,391 | $ | 1,713,870 | |||||||||||||
Michael J. Mack, Jr. | 12/01/2015-STI | $ | | $ | 591,700 | $ | 1,183,400 | ||||||||||||||||||
12/01/2015-MTI | $ | 400 | $ | 576,370 | $ | 1,152,740 | |||||||||||||||||||
12/09/15 | 4,704 | $ | 372,745 | ||||||||||||||||||||||
12/09/15 | 1,881 | 7,526 | 15,052 | $ | 741,351 | ||||||||||||||||||||
12/09/15 | 30,918 | $ | 79.24 | $ | 521,896 | ||||||||||||||||||||
$ | 400 | $ | 1,168,070 | $ | 2,336,140 | 1,881 | 7,526 | 15,052 | 4,704 | 30,918 | $ | 1,635,992 | |||||||||||||
John C. May | 12/01/2015-STI | $ | | $ | 509,864 | $ | 1,019,728 | ||||||||||||||||||
12/01/2015-MTI | $ | 400 | $ | 576,370 | $ | 1,152,740 | |||||||||||||||||||
12/09/15 | 5,376 | $ | 425,994 | ||||||||||||||||||||||
12/09/15 | 2,150 | 8,600 | 17,200 | $ | 847,145 | ||||||||||||||||||||
12/09/15 | 35,335 | $ | 79.24 | $ | 596,455 | ||||||||||||||||||||
$ | 400 | $ | 1,086,234 | $ | 2,172,468 | 2,150 | 8,600 | 17,200 | 5,376 | 35,335 | $ | 1,869,594 |
(1) | For the non-equity incentive plan awards, the grant date is the date the Committee approved the range of estimated potential future payouts for the performance periods noted under footnote (2) below. For equity awards, the grant date is seven calendar days after the first regularly scheduled Board meeting of the fiscal year. |
(2) |
These columns show the range of potential payouts under the STI and MTI plans. The performance period for STI in this table covers November 1, 2015, through October 31, 2016. For actual performance between threshold, target, and maximum, the earned STI award will be prorated. |
The range of the MTI award covers the three-year performance period beginning in fiscal 2016 and ending in fiscal 2018. Awards will not be paid unless Deere generates at least $5 million of SVA for the performance period. The target MTI award will be earned if $4,200 million of SVA is accumulated and the maximum MTI award will be earned if $8,400 million or more of SVA is accumulated during the performance period. The MTI award will be reduced (i) by 25% if Deeres TSR for the performance period is at or below the 25th percentile relative to the companies in the S&P Industrial Sector and (ii) up to 25% if TSR falls between the 25th and 50th percentiles. The amounts shown in the table represent potential MTI awards based on the median salary of the NEOs respective salary grades as of September 30, 2015. The actual MTI awards will depend upon Deeres actual SVA performance, Deeres relative TSR performance, and the median salaries of the NEOs respective salary grades as of September 30, 2017. | |
(3) |
Represents the potential payout range of PSUs granted in December 2015. The number of shares that vest is equally based on TSR and revenue growth, both relative to companies in the S&P Industrial Sector. Performance and payouts are determined independently for each metric. At the end of the three-year performance period, the actual award, delivered as Deere common stock, can range from 0% to 200% of the original grant. |
62 | DEERE & COMPANY | 2017 PROXY STATEMENT |
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Compensation
Executive Compensation
Tables
(4) | Represents the number of RSUs granted in December 2015. RSUs will vest three years after the grant date, at which time they will be settled in Deere common stock. Prior to settlement, RSUs earn dividend equivalents in cash at the same time as dividends are paid on Deeres common stock. |
(5) |
Represents the number of options granted in December 2015. These options vest in three approximately equal annual installments on the first, second, and third anniversaries of the grant date. |
(6) |
The exercise price is the closing price of Deere common stock on the NYSE on the grant date. |
(7) |
Amounts shown represent the grant date fair value of equity awards granted to the NEOs in fiscal 2016 calculated in accordance with FASB ASC Topic 718. The values in this column exclude the effect of estimated forfeitures. For RSUs, fair value is the market value of the underlying stock on the grant date (which is the same as the exercise price in column (6) for stock options). For options, the fair value on the grant date was $16.88, which was calculated using the binomial lattice option pricing model. The grant date fair value of the PSUs subject to the TSR metric was $103.66 based on a lattice valuation model, excluding dividends. The grant date fair value of the PSUs subject to the revenue growth metric was $72.93 based on the market price of a share of underlying common stock, excluding dividends. |
For additional information on the valuation assumptions, refer to Note 24, Stock Option and Restricted Stock Awards, of Deeres consolidated financial statements filed with the SEC in the 2016 Form 10-K.
OUTSTANDING EQUITY AWARDS AT FISCAL 2016
YEAR-END
The following table itemizes outstanding
options, RSUs, and PSUs held by the NEOs as of October 31, 2016:
Option Awards | Stock Awards | |||||||||||||||||||||
Name | Number
of Securities Underlying Unexercised Options Exercisable (1) |
Number
of Securities Underlying Unexercised Options Unexercisable (1) |
Option Exercise Price |
Intrinsic
Value of Unexercised Options (2) |
Option Expiration Date (3) |
Number of Shares or Units of Stock That Have Not Vested (4) |
Market Value of Shares or Units of Stock That Have Not Vested (5) |
Equity
Incentive |
Equity Incentive Plan Awards: Market or Payout Value Unearned Shares, Units or Other Rights That Have Not Vested (7) | |||||||||||||
Samuel R. Allen | 28,808 | | $ | 88.82 | $ | | 12/05/17 | | $ | | | $ | | |||||||||
62,704 | | $ | 39.67 | $ | 3,049,609 | 12/17/18 | | $ | | | $ | | ||||||||||
269,353 | | $ | 52.25 | $ | 9,710,176 | 12/09/19 | | $ | | | $ | | ||||||||||
114,253 | | $ | 80.61 | $ | 878,606 | 12/08/20 | | $ | | | $ | | ||||||||||
135,897 | | $ | 74.24 | $ | 1,910,712 | 12/14/21 | | $ | | | $ | | ||||||||||
128,899 | | $ | 86.36 | $ | 250,064 | 12/12/22 | | $ | | | $ | | ||||||||||
82,834 | 40,799 | $ | 87.46 | $ | 103,852 | 12/11/23 | 38,372 | $ | 3,388,248 | | $ | | ||||||||||
45,989 | 89,274 | $ | 88.19 | $ | 15,555 | 12/10/24 | 21,545 | $ | 1,902,424 | 34,472 | $ | 3,043,878 | ||||||||||
| 173,360 | $ | 79.24 | $ | 1,570,642 | 12/09/25 | 26,375 | $ | 2,328,913 | 42,200 | $ | 3,726,260 | ||||||||||
868,737 | 303,433 | $ | 17,489,216 | 86,292 | $ | 7,619,585 | 76,672 | $ | 6,770,138 | |||||||||||||
Rajesh Kalathur | 5,816 | | $ | 48.38 | $ | 232,204 | 12/06/16 | | $ | | | $ | | |||||||||
4,519 | | $ | 88.82 | $ | | 12/05/17 | | $ | | | $ | | ||||||||||
11,133 | | $ | 39.67 | $ | 541,453 | 12/17/18 | | $ | | | $ | | ||||||||||
12,151 | | $ | 52.25 | $ | 438,044 | 12/09/19 | | $ | | | $ | | ||||||||||
7,379 | | $ | 80.61 | $ | 56,745 | 12/08/20 | | $ | | | $ | | ||||||||||
7,996 | | $ | 74.24 | $ | 112,424 | 12/14/21 | | $ | | | $ | | ||||||||||
24,083 | | $ | 86.36 | $ | 46,721 | 12/12/22 | | $ | | | $ | | ||||||||||
13,457 | 6,629 | $ | 87.46 | $ | 16,872 | 12/11/23 | 6,233 | $ | 550,374 | | $ | | ||||||||||
9,452 | 18,348 | $ | 88.19 | $ | 3,197 | 12/10/24 | 4,428 | $ | 390,992 | 7,084 | $ | 625,517 | ||||||||||
| 32,391 | $ | 79.24 | $ | 293,462 | 12/09/25 | 4,928 | $ | 435,142 | 7,884 | $ | 696,157 | ||||||||||
95,986 | 57,368 | $ | 1,741,122 | 15,589 | $ | 1,376,508 | 14,968 | $ | 1,321,674 |
63 | DEERE & COMPANY | 2017 PROXY STATEMENT |
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Compensation
Executive Compensation
Tables
Option Awards | Stock Awards | |||||||||||||||||||||
Name | Number
of Securities Underlying Unexercised Options Exercisable (1) |
Number
of Securities Underlying Unexercised Options Unexercisable (1) |
Option Exercise Price |
Intrinsic Value of Unexercised Options (2) |
Option Expiration Date (3) |
Number of Shares or Units of Stock That Have Not Vested (4) |
Market Value of Shares or Units of Stock That Have Not Vested (5) |
Equity
Incentive |
Equity Incentive Plan Awards: Market or Payout Value Unearned Shares, Units or Other Rights That Have Not Vested (7) | |||||||||||||
James M. Field | 28,229 | | $ | 52.25 | $ | 1,017,655 | 12/09/19 | | $ | | | $ | | |||||||||
21,735 | | $ | 80.61 | $ | 167,142 | 12/08/20 | | $ | | | $ | | ||||||||||
25,391 | | $ | 74.24 | $ | 356,997 | 12/14/21 | | $ | | | $ | | ||||||||||
23,036 | | $ | 86.36 | $ | 44,690 | 12/12/22 | | $ | | | $ | | ||||||||||
14,803 | 7,292 | $ | 87.46 | $ | 18,560 | 12/11/23 | 6,856 | $ | 605,385 | | $ | | ||||||||||
8,592 | 16,681 | $ | 88.19 | $ | 2,906 | 12/10/24 | 4,025 | $ | 355,408 | 6,440 | $ | 568,652 | ||||||||||
| 32,391 | $ | 79.24 | $ | 293,462 | 12/09/25 | 4,928 | $ | 435,142 | 7,884 | $ | 696,157 | ||||||||||
121,786 | 56,364 | $ | 1,901,412 | 15,809 | $ | 1,395,935 | 14,324 | $ | 1,264,809 | |||||||||||||
Michael J. Mack, Jr. | 24,388 | | $ | 88.82 | $ | | 12/05/17 | | $ | | | $ | | |||||||||
21,347 | | $ | 80.61 | $ | 164,158 | 12/08/20 | | $ | | | $ | | ||||||||||
23,183 | | $ | 74.24 | $ | 325,953 | 12/14/21 | | $ | | | $ | | ||||||||||
21,989 | | $ | 86.36 | $ | 42,659 | 12/12/22 | | $ | | | $ | | ||||||||||
15,207 | 7,491 | $ | 87.46 | $ | 19,066 | 12/11/23 | 7,044 | $ | 621,985 | | $ | | ||||||||||
10,311 | 20,016 | $ | 88.19 | $ | 3,488 | 12/10/24 | 4,830 | $ | 426,489 | 7,728 | $ | 682,382 | ||||||||||
| 30,918 | $ | 79.24 | $ | 280,117 | 12/09/25 | 4,704 | $ | 415,363 | 7,526 | $ | 664,546 | ||||||||||
116,425 | 58,425 | $ | 835,441 | 16,578 | $ | 1,463,837 | 15,254 | $ | 1,346,928 | |||||||||||||
John C. May | 7,606 | | $ | 88.82 | $ | | 12/05/17 | | $ | | | $ | | |||||||||
5,411 | | $ | 80.61 | $ | 41,611 | 12/08/20 | | $ | | | $ | | ||||||||||
5,597 | | $ | 74.24 | $ | 78,694 | 12/14/21 | | $ | | | $ | | ||||||||||
25,130 | | $ | 86.36 | $ | 48,752 | 12/12/22 | | $ | | | $ | | ||||||||||
14,803 | 7,292 | $ | 87.46 | $ | 18,560 | 12/11/23 | 6,856 | $ | 605,385 | | $ | | ||||||||||
9,452 | 18,348 | $ | 88.19 | $ | 3,197 | 12/10/24 | 4,428 | $ | 390,992 | 7,084 | $ | 625,517 | ||||||||||
| 35,335 | $ | 79.24 | $ | 320,135 | 12/09/25 | 5,376 | $ | 474,701 | 8,600 | $ | 759,380 | ||||||||||
67,999 | 60,975 | $ | 510,949 | 16,660 | $ | 1,471,078 | 15,684 | $ | 1,384,897 |
(1) | Options become vested and exercisable in three approximately equal annual installments on the first, second, and third anniversaries of the grant date. |
(2) |
The amount shown represents the number of options that have not been exercised (vested and unvested) multiplied by the difference between the closing price for Deere common stock on the NYSE on October 31, 2016, which was $88.30, and the option exercise price. No value is shown for underwater options. |
(3) |
Options expire ten years from the grant date. |
(4) |
RSUs vest three years after the grant date, at
which time they are settled in Deere common stock.
The three-year
performance period for PSUs granted in fiscal 2014 ended on October 31,
2016. The final payout determination was made by the Committee in December
2016 and was settled in Deere common stock on December 11, 2016 (the third
anniversary of the grant date). As discussed in the CD&A under
2014-2016 PSUs, the final payout under the award was equal to 33.5% of
the target opportunity. The number of shares earned by the applicable NEOs
were as follows: 13,390 (Allen), 2,175 (Kalathur), 2,392 (Field), 2,458
(Mack) and 2,392 (May). |
(5) |
The amount shown represents the number of RSUs that have not vested multiplied by the closing price for Deere common stock on the NYSE on October 31, 2016, which was $88.30. |
(6) |
The amount shown represents actual achievement of the PSUs granted in fiscal years 2015 and 2016 relative to the S&P Industrial Sector, assuming truncated performance measurement periods. The final number of shares earned, if any, will be based upon performance as determined by revenue growth and TSR relative to the S&P Industrial Sector at the end of the applicable performance period. |
PSU Grant Date | December 10, 2014 | December 9, 2015 | ||
Truncated performance period | 11/1/2014-10/31/2016 | 11/1/2015-10/31/2016 | ||
Actual performance period ending date | 10/31/17 | 10/31/18 | ||
Payout of shares (as a % of target) based on revenue growth | 0% | 0% | ||
Payout of shares (as a % of target) based on TSR | 116% | 200% | ||
Combined payout of shares (as a % of target) | 58% | 100% |
(7) | The amount shown represents the number of PSUs described in footnote (6) to this table multiplied by the closing price for Deere common stock on the NYSE on October 31, 2016, which was $88.30. |
64 | DEERE & COMPANY | 2017 PROXY STATEMENT |
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Executive Compensation Tables
FISCAL
2016 OPTION EXERCISES AND STOCK VESTED
The following table provides information
regarding option exercises and vesting of RSUs and PSUs during fiscal
2016. These options and stock awards were granted
in prior fiscal years and are not related to performance in fiscal
2016:
Option Awards | Stock Awards | ||||||||||||||||
Name | Number of Shares Acquired on Exercise (1) |
Value Realized on Exercise (2) |
Number of
Shares |
Value Realized on Vesting (4) |
|||||||||||||
Samuel R. Allen | | $ | | 25,301 | $ | 1,952,225 | |||||||||||
Rajesh Kalathur | 4,366 | $ | 196,813 | 4,727 | $ | 364,735 | |||||||||||
James M. Field | | $ | | 4,521 | $ | 348,840 | |||||||||||
Michael J. Mack, Jr. | | $ | | 4,316 | $ | 333,023 | |||||||||||
John C. May | | $ | | 4,932 | $ | 380,553 |
(1) | Represents the total number of shares that were exercised before any withholding of shares to pay the exercise price and taxes. |
(2) | Value realized on exercise is based on the market price upon exercise minus the exercise price (the grant price). |
(3) |
Represents the number of RSUs and PSUs that
vested during fiscal 2016, all of which were granted in fiscal
2013.
The three-year performance period for PSUs
granted in fiscal 2013, ended on October 31, 2015, and vested on December
12, 2015. The final number of shares earned was based on Deeres revenue
growth and TSR relative to the S&P Industrial Sector over the
performance period. The final payout determination, made by the Committee
in December 2016, reflects revenue growth and TSR comparable to the 3rd
and 8th percentiles, respectively, of the S&P Industrial Sector.
Accordingly, there were no payouts for these
PSUs. |
The following table shows the number of RSUs and PSUs that vested during fiscal 2016: | |||
Name | RSUs | PSUs | |
Samuel R. Allen | 25,301 | | |
Rajesh Kalathur | 4,727 | | |
James M. Field | 4,521 | | |
Michael J. Mack, Jr. | 4,316 | | |
John C. May | 4,932 | |
4) | Represents the number of RSUs and PSUs vested multiplied by the closing price ($77.16) of Deere common stock on the NYSE as of the vesting date. |
Pension Benefits
The NEOs are eligible to participate in pension plans that
provide benefits based on years of service and pay. Pension benefits are
provided under a qualified defined benefit pension plan called the John Deere
Pension Plan for Salaried Employees (the Salaried Plan) and two nonqualified
pension plans called the Senior Supplementary Pension Benefit Plan (the Senior
Supplementary Plan) and the John Deere Supplemental Pension Benefit Plan (the
Deere Supplemental Plan).
In 1996, we introduced a new pension option under the Salaried Plan known as the Contemporary Option. At that time, participants could elect to remain in the existing Salaried Plan option, known as the Traditional Option, or convert to the new Contemporary Option. New employees hired between January 1, 1997, and October 31, 2015, automatically participated in the Contemporary Option. For new employees hired on or after November 1, 2015, pension benefits under the Salaried Plan are calculated based on a cash balance methodology instead of the Traditional or Contemporary Option formulas. None of the NEOs participate in the Traditional or cash balance plan.
65 | DEERE & COMPANY | 2017 PROXY STATEMENT |
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Executive Compensation Tables
SALARIED
PLAN
The Salaried Plan is a qualified plan
subject to certain IRS limitations on benefits and is subject to the Employee
Retirement Income Security Act of 1974. Deere makes contributions to, and
benefits are paid from, a tax-exempt pension trust. Pension benefits provided by
the Salaried Plan under the Contemporary Option are summarized below.
Under the Contemporary Option, Career Average Pay is used in computing retirement benefits. Career Average Pay is calculated using salary plus STI (up to IRS limits). For participants hired before January 1, 1997, the transition to Career Average Pay includes salary and STI awards from 1992 until retirement. Deere makes contributions to the 401(k) retirement savings accounts of salaried employees participating in this option.
The formula for calculating benefits under the Contemporary Option is:
Career Average Pay | × | Years of Service | × | 1.5% | ||||
Early retirement eligibility under the Contemporary Option is the earlier of:
(1) | age 55 with ten or more years of service; or | |
(2) | age 65 with five or more years of service |
Pension payments are reduced by 4% for each year the employee is under the unreduced benefits age upon retirement. Mr. Mack is the only NEO currently eligible to retire early with reduced benefits under the Contemporary Option.
Eligibility to retire with unreduced benefits under the Contemporary Option occurs at age 67 for all participating employees who were hired on or after January 1, 1997. For participants hired before this date, the eligibility age to retire with unreduced benefits is based on years of service as of January 1, 1997, and ranges from ages 60 to 67. Mr. Allen is the only NEO currently eligible to retire with unreduced benefits under the Contemporary Option.
SENIOR
SUPPLEMENTARY PLAN
The Senior Supplementary Plan is an
unfunded, nonqualified excess defined benefit plan that provides additional
pension benefits in an amount comparable to those the participant would have
received under the Salaried Plan in the absence of IRS limitations. Benefit
payments for the Senior Supplementary Plan are made from the assets of Deere and
are at-risk in the event Deere seeks bankruptcy protection.
The Senior Supplementary Plan uses the same formula as the Salaried Plan to calculate the benefit payable, except that eligible earnings include only amounts above qualified plan limits.
DEERE SUPPLEMENTAL
PLAN
The Deere Supplemental Plan is an
unfunded, nonqualified supplemental retirement plan for certain employees,
including all the NEOs. Benefit payments for the Deere Supplemental Plan are
made from the assets of Deere and are at-risk in the event Deere seeks
bankruptcy protection. The Deere Supplemental Plan was closed to new
participants effective November 1, 2015, although benefits will continue to
accrue for employees who were already participating in the plan as of that
date.
The formula for calculating benefits is:
Career Average Pay | × | × | .05% | |||||
Years of Service | ||||||||
(at grade 13 and above since January 1, 1997) | ||||||||
66 | DEERE & COMPANY | 2017 PROXY STATEMENT |
Advisory Vote on Executive Compensation
Executive Compensation Tables
FISCAL 2016 PENSION BENEFITS TABLE
Name | Plan Name (1) |
Assumed Retirement Age (2) |
Number of Years of Credited Service (3) |
Present Value of Accumulated Benefit (4) | |||||
Samuel R. Allen | Salaried Plan | 63 | 41.4 | $ | 1,890,339 | ||||
Senior Supplementary Plan | 63 | 41.4 | $ | 14,093,736 | |||||
Deere Supplemental Plan | 63 | 19.8 | $ | 2,461,957 | |||||
TOTAL | $ | 18,446,032 | |||||||
Rajesh Kalathur | Salaried Plan | 65 | 19.4 | $ | 377,692 | ||||
Senior Supplementary Plan | 65 | 19.4 | $ | 599,146 | |||||
Deere Supplemental Plan | 65 | 10.8 | $ | 199,587 | |||||
TOTAL | $ | 1,176,425 | |||||||
James M. Field | Salaried Plan | 65 | 22.5 | $ | 545,969 | ||||
Senior Supplementary Plan | 65 | 22.5 | $ | 1,628,402 | |||||
Deere Supplemental Plan | 65 | 17.7 | $ | 600,518 | |||||
TOTAL | $ | 2,774,889 | |||||||
Michael J. Mack, Jr. | Salaried Plan | 65 | 30.3 | $ | 1,030,409 | ||||
Senior Supplementary Plan | 65 | 30.3 | $ | 3,433,714 | |||||
Deere Supplemental Plan | 65 | 19.8 | $ | 979,596 | |||||