Washington, D.C. 20549
(Amendment No. )
Notice of 2020 Annual General Meeting of Shareholders and Proxy Statement Making our world more productive
Director Compensation
Director Compensation
Director Compensation Program
The Board adopted the Director Compensation Program based in part on an extensive director compensation study and analysis performed in 2018 by F. W. Cook, a recognized expert compensation consultant. This report included data, analysis and advice, a report on director compensation trends and benchmarking of director compensation against groups of large U.S. and European public companies.
The Company paid the amounts reported in the 2019 Director Compensation table below pursuant to its Director Compensation Program in effect for 2019. The Company does not pay any director who is a Company employee (Mr. Angel in 2019) for serving as a member of the Board of Directors or any committee of the Board of Directors. The Nomination and Governance Committee of the Board determines non-management director compensation consistent with the Directors’ Compensation principles set forth in the Corporate Governance Guidelines. The Director Compensation Program in effect for 2019 is described below.
Cash Compensation
Cash compensation comprises 60% of the entire annual Board compensation, as follows:
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A $420,000 annual retainer paid quarterly to the Chairman of the Board.
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A $180,000 annual retainer paid quarterly to all other directors.
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An additional $100,000 annual retainer paid quarterly to the Chairman of the Audit Committee.
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An additional $50,000 annual retainer paid quarterly to each chairman of the Compensation Committee and the Nomination and Governance Committee.
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Equity Compensation
In addition to the cash compensation set forth above, each non-management Director receives an annual equity stock compensation grant equal to 40% of the value of the entire annual Board compensation. In 2019, an equity grant valued at
$280,000 was made to the Chairman of the Board, and an equity grant valued at $120,000 was made to each other director for their services in 2019.
The number of restricted stock units granted to deliver the $280,000 and $120,000 values, respectively, as of the February 26, 2019 grant date was based upon the average of the closing prices of the Company’s Ordinary Shares for the 61 trading days after the closing of the Business Combination from November 1, 2018-January 31, 2019. Because the closing price of the Company’s Ordinary Shares on February 26, 2019 was higher than this 61-day average, the full grant date fair market value of the restricted stock units granted on February 26, 2019 and reported in the 2019 Director Compensation Table below was $307,821 for the Chairman of the Board, and $131,998 for each other director.
The Nomination and Governance Committee selected restricted stock units as the sole form of equity for the 2019 grant. The restricted stock units are fully vested (non-forfeitable) after one-year from the date of grant, but a prorated portion will be paid out if a director’s service on the Board terminates before the one year anniversary of the grant unless the director is removed by the shareholders or is removed for cause, in which case the grant will be forfeited. Restricted stock units will be paid out as soon as practicable after the vesting in Linde plc ordinary shares on a one-for-one basis.
Expenses
The Company pays or reimburses directors for travel, lodging and related expenses incurred in connection with attending board and committee meetings, the Annual General Meeting and other Company business-related events (including the expenses related to the attendance of spouses if they are specifically invited for appropriate business purposes), and may provide use of Company chartered aircraft. From time to time, the Company may reimburse a director’s expenses for his or her participation in third party-supplied continuing education related to the director’s board or committee service.
Linde plc | 19
Corporate Governance and Board Matters
Director Compensation
The table below shows the fees that the Company’s non-management directors earned in 2019.
2019 Director Compensation Table
Name
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Fees Earned
or
Paid in Cash
($)
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Stock
Awards
($)(1)
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Option
Awards
($)
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Non-Equity
Incentive
Plan
Compensation
($)
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Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
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All Other
Compensation
($)(2)
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Total
($)
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Prof. Dr. Wolfgang H. Reitzle
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420,000
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307,821
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0
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0
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0
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0
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727,821
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Prof. DDr. Ann-Kristin Achleitner
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180,000
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131,998
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0
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0
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0
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0
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311,998
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Prof. Dr. Clemens A. H. Börsig
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280,000
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131,998
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0
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0
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0
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0
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411,998
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Dr. Nance K. Dicciani
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180,000
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131,998
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0
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0
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0
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15,000
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326,998
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Dr. Thomas Enders
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180,000
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131,998
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0
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0
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0
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0
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311,998
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Franz Fehrenbach
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180,000
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131,998
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0
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0
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0
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0
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311,998
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Edward G. Galante
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230,000
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131,998
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0
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0
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0
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0
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361,998
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Larry D. McVay
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180,000
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131,998
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0
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0
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0
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1,000
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312,998
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Dr. Victoria E. Ossadnik
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180,000
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131,998
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0
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0
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|
|
|
0
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0
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311,998
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Prof. Dr. Martin H. Richenhagen
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180,000
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131,998
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0
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0
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0
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0
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311,998
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Robert L. Wood
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230,000
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131,998
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0
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0
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|
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|
0
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|
0
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361,998
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(1)
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Full grant date fair value of restricted stock units granted to each director on February 26, 2019 as determined under accounting standards related to share-based compensation.
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(2)
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Amounts in this column do not represent compensation paid to the directors. These amounts are the Company’s 2019 matching contributions for the directors’ eligible charitable donations. SEC rules require disclosure of these amounts in this table. In 2019, Linde matched personal donations to eligible charitable institutions up to a $15,000 maximum per year per donor. This matching gift program is available to Company employees and non-management directors on the same basis.
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20 | Linde plc
Corporate Governance and Board Matters
Director Nominees
Director Nominees
Experience and Qualifications of
All Nominees
Twelve persons have been nominated for reelection to the Board to serve for a one-year term concluding on the later of (a) the 2021 annual general meeting or shareholders and (b) the election and qualification of his or her successor. The Nomination and Governance Committee has nominated each current director of the Board for reelection at the Annual General Meeting. The Nomination and Governance Committee believes that each director nominee has an established record of accomplishment in areas relevant to Linde’s business and objectives and possesses the characteristics identified in Linde’s Corporate Governance Guidelines as essential to a well-functioning and deliberative governing body, including integrity, independence and commitment.
Each of the director nominees listed below has experience as a senior executive of a public company or comparable business organization. Each nominee also is serving or has served as a director of one or more public companies and on a variety of board committees. As such, each has executive management and director oversight experience in most, if not all, of the following areas which are critical to the conduct of the Company’s business, including: strategy development and implementation, risk assessment and management, financial accounting and reporting, internal controls, corporate finance, capital project evaluation, the evaluation, compensation, motivation and retention of senior executive talent, public policies as they affect global industrial corporations, compliance, corporate governance, productivity management, safety management, project management, sustainable development and, in most cases, global operations. Many of the nominees also bring particular insights into specific end-markets and foreign markets that are important to the Company. These nominees collectively provide a range of perspectives, experiences and competencies well-suited to providing advice and counsel to management and to overseeing the Company’s business and operations. In addition to these qualifications that are shared by all of the nominees, more specific information about each of their individual experience and qualifications is included below.
The following pages include information about those persons currently serving on Linde’s Board of Directors who have been nominated for reelection to serve for a one-year term concluding on the later of (a) the 2021 annual general meeting of shareholders or (b) the election and qualification of his or her successor. The graph below shows the number of directors who have certain of the skills, qualifications and experience in key areas that are important for the Board’s oversight of the Company’s business.
Director Meeting Attendance
During 2019, the Board held five meetings. The nominees for reelection to the Board collectively attended 93% of all Board meetings and meetings of committees of which they are members.
Linde plc | 21
Corporate Governance and Board Matters
Director Nominees
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Prof. Dr. Wolfgang H. Reitzle
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Chairman of Linde plc
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Age
Director Since
Other Public Company
Directorships
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71
2018
Axel Springer SE
Continental AG (Chairman)
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Qualification Highlights
• Industry
• Linde End-Markets
• Linde Foreign Markets
• Operations
• International Business
• Technology
• Risk Management
• Public Company Board
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Biography
Prof. Dr. Wolfgang Reitzle became the Chairman of the Board of Linde plc in October 2018, in connection with the Business Combination between Praxair, Inc. and Linde AG. He is the former President and Chief Executive Officer of Linde AG and former Chairman of the Supervisory Board of Linde AG. In 2002, he joined the Executive Board of Linde AG and served as Chief Executive Officer from 2003 to 2014. Prof. Dr. Reitzle began his career at BMW where, in 1986, he was appointed a regular member of the Board of Management, responsible for research and development. In 1999, he was appointed Chief Executive Officer of the Premier Automotive Group and Vice President of United States car manufacturer, Ford Motor Company.
Prof. Dr. Wolfgang Reitzle is Chairman of the Supervisory Board of Continental AG in Hanover, Germany. He is also a member of the Supervisory Board of Ivoclar Vivadent AG in Schaan, Principality of Liechtenstein, and a member of the Supervisory Board of Axel Springer SE in Berlin, Germany. Prof. Dr. Wolfgang Reitzle served as Chairman of the Board of Directors of LafargeHolcim Ltd in Jona, Switzerland until May 2016, and as member of the Supervisory Board of Hawesko Holding AG in Hamburg, Germany until June 2017.
Experience and Qualifications
As the former President and Chief Executive Officer of Linde AG, the former Chairman of the Supervisory Board of Linde AG, and as a former senior operating executive at BMW and Ford Motor Company, Prof. Dr. Reitzle contributes the senior executive experience and skills described above. His years of leading Linde AG provides him with substantial experience and deep insight into the industrial gases industry and the engineering business segment of Linde which is critical for the Board. In addition, Prof. Dr. Reitzle’s prior experience as Chairman of the Linde AG Supervisory Board and the Board of Directors of LafargeHolcim, plus his current role as Chairman of the Supervisory Board of Continental AG, provides him with the skills and background necessary to lead Linde’s Board.
22 I Linde plc
Corporate Governance and Board Matters
Director Nominees
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Stephen F. Angel
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Chief Executive Officer of Linde plc
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Age
Director Since
Other Public Company
Directorships
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64
2018
PPG Industries, Inc.
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Qualification Highlights
• Industry
• Linde End-Markets
• Linde Foreign Markets
• Operations
• International Business
• Technology
• Risk Management
• Public Company Board
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Biography
Mr. Stephen Angel became the Chief Executive Officer of Linde plc in October, 2018, in connection with the Business Combination between Praxair, Inc. and Linde AG. Prior to that, Mr. Angel was Chairman, President and Chief Executive Officer of Praxair, Inc. since 2007. Mr. Angel joined Praxair in 2001 as an Executive Vice President and was named President and Chief Operating Officer in February 2006. Prior to joining Praxair, Angel spent 22 years in a variety of management positions with General Electric.
Mr. Angel serves on the board of directors of PPG Industries, where he serves on the Officers-Directors Compensation Committee and the Technology and Environment Committee, and the board of the U.S.-China Business Council. He is also a member of The Business Council.
Experience and Qualifications
As the Chief Executive Officer of Linde, as the former Chairman and Chief Executive Officer of Praxair, and as a former senior operating executive at General Electric, a global diversified manufacturing company, Mr. Angel brings the senior executive experience and skills described above. He also has a deep insight into the industrial gases industry and the needs, challenges and global opportunities of Linde in particular. Mr. Angel utilizes his deep operating experience and knowledge of the industry and the Company in performing his role as CEO to, among other things, drive capital discipline. In collaboration with the Chairman, Mr. Angel also helps to facilitate Board discussions and keep the Board apprised of significant developments in the Company’s business.
Linde plc | 23
Corporate Governance and Board Matters
Director Nominees
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Prof. DDr. Ann-Kristin Achleitner
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Professor at the Technical University Munich (TUM)
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Age
Director Since
Other Public Company
Directorships
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54
2018
Deutsche Börse AG
Münchener Rückversicherungs-Gesellschaft AG
ENGIE SA
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Qualification Highlights
• Linde Foreign Markets
• International Business
• Financial Expertise
• Risk Management
• Public Company Board
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Biography
Prof. DDr. Ann-Kristin Achleitner has served as Holder of Chair for Entrepreneurial Finance since 2001 and, since 2003, as Scientific Co-Director of the Center for Entrepreneurial and Financial Studies at Technical University Munich, Germany. She began her career with MS Management Service AG in St. Gallen, Switzerland in 1991. In 1992, she began as a university lecturer in Finance and External Auditing at the University of St. Gallen (HSG) in Switzerland. In 1994, she became a consultant at McKinsey & Company, Inc, in Frankfurt, Germany. In 1995, she became Holder of the Endowed Chair for Banking and Finance and Chair of the Board of the Institute for Financial Management at the European Business School (International University Schloß Reichartshausen) in Oestrich-Winkel, Germany.
Prof. DDr. Achleitner is: a member of the Supervisory Board of Deutsche Börse AG in Frankfurt am Main, Germany (until May 2019); a member of the Supervisory Board of Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in Munich, Germany; and a member of the Board of Directors of ENGIE SA in Paris, France, until May 2019. Prof. DDr. Achleitner was a member of the Supervisory Board of Linde AG from 2011-2019. She also served as a member of the Supervisory Board of Metro AG in Düsseldorf, Germany, until February 2017, and as a member of the Board of Directors of Vontobel Holding AG and Vontobel Bank AG in Zurich, Switzerland.
Experience and Qualifications
Prof. DDr. Achleitner is a Doctor of Business Administration and a Doctor of Law. Her educational background, along with her research and studies in the area of entrepreneurial finance, provides the Board with substantial financial expertise. She brings experience in international public company boards, audit, ethics, environment and sustainable development committees. Her years as a member of the Supervisory Board of Linde AG and service on the audit and nomination committees of Linde AG provides her with substantial experience and insight into the business segments of Linde and the financial performance of the Company.
24 | Linde plc
Corporate Governance and Board Matters
Director Nominees
|
Prof. Dr. Clemens A. H. Börsig
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Former Chief Financial Officer and Chairman of the Supervisory Board of Deutsche Bank AG
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Age
Director Since
Other Public Company
Directorships
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71
2018
Daimler AG
Emerson Electric Company
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Qualification Highlights
• Linde End-Markets
• Linde Foreign Markets
• Financial Expertise
• Operations
• International Business
• Risk Management
• Public Company Board
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Biography
Prof. Dr. Clemens Börsig served as Chairman of the Supervisory Board of Deutsche Bank AG from 2006 until his retirement from that position in 2012. In 1999, he joined Deutsche Bank AG in Frankfurt am Main, Germany, as Executive Vice President and Chief Financial Officer and, in 2001, he was appointed a member of the Executive Board. Prof. Dr. Börsig began his career at Mannesmann Group, Düsseldorf, Germany in 1977 and, in 1984, he was appointed Chief Financial and Administrative Officer at Mannesmann-Tally. In 1985, he joined Robert Bosch GmbH in Stuttgart, Germany, where, in 1990, he was appointed Managing Director and a member of the Board of Management. In 1997, he joined RWE AG in Essen, Germany, where he was appointed Chief Financial Officer and a member of the Executive Board.
Prof. Dr. Börsig is also a member of the Supervisory Board of Daimler AG in Stuttgart, Germany, where he is the Chairman of the Audit Committee and the Chairman of the Legal Advisory Council. He is also a member of the Supervisory Board of Daimler Truck AG in Stuttgart, Germany. He is a member of the Board of Directors of Emerson Electric Company in St. Louis, Missouri, United States, where he is the Lead Independent Director and the Chairman of the Compensation Committee. He was a member of the Supervisory Board and Chairman of the Audit Committee of Linde AG from 2006 until 2019.
Prof. Dr. Börsig was Chairman of the Board of Directors of the Deutsche Bank Foundation in Berlin and Frankfurt am Main, Germany, until 2017. He was also a member of the Supervisory Board of Bayer AG in Leverkusen, Germany until April 2017, and a member of the Board of Superintendence of the Istituto per le Opere Religione (IOR) in Rome, Italy until May 2016.
Experience and Qualifications
As a former senior executive and member of the management boards of Mannesman Group, Robert Bosch GmbH and RWE AG, global industrial products and energy companies, Prof. Dr. Börsig brings the senior executive experience and skills described above. As the former Chief Financial Officer and member of the Executive Board of Deutsche Bank AG, and as the former Chairman of the Supervisory Board of Deutsche Bank AG, he also has a substantial financial expertise and a detailed understanding of finance, financial controls, auditing as well as risk management. His international board experience also enables him to provide the Board with valuable insight and counsel.
Linde plc | 25
Corporate Governance and Board Matters
Director Nominees
|
Dr. Nance K. Dicciani
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Former President & Chief Executive Officer of Honeywell Specialty Materials
|
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Age
Director Since
Other Public Company
Directorships
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72
2018
AgroFresh Solutions, Inc.
Halliburton Company
LyondellBasell Industries
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Qualification Highlights
• Industry
• Linde End-Markets
• Linde Foreign Markets
• Operations
• International Business
• Technology
• Risk Management
• Public Company Board
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Biography
Dr. Nance Dicciani was President & Chief Executive Officer of Honeywell Specialty Materials, a strategic business group of Honeywell International, Inc., from 2001 until her retirement in 2008. Dr. Dicciani joined Honeywell from Rohm and Haas Company where she was Senior Vice President and Business Group Executive of Chemical Specialties and Director of the European Region. In this role she was responsible for business strategy and worldwide operations of five business units, and for operations and infrastructure in Europe, the Middle East and Africa. Previously, she served as Rohm and Haas’ Vice President and General Manager of the Petroleum Chemicals division and headed the company’s worldwide Monomers business.
In 2006, President George W. Bush appointed Dr. Dicciani to the President’s Council of Advisors on Science and Technology. She has served on the Board of Directors and Executive Committee of the American Chemistry Council and chaired its Research Committee. She currently serves on the Board of Directors of AgroFresh Solutions, Inc., where she is non-executive Chair and a member of the Compensation Committee. Dr. Dicciani is also a member of the Board of Directors of Halliburton Company, where she sits on the Audit Committee; and is the Chairperson of the Health, Safety and Environment Committee; and LyondellBasell Industries, where she is a member of the Finance Committee and Chairperson of the Compensation Committee. During the past five years, Dr. Dicciani served as a director of Praxair, Inc. from 2008 until the Business Combination of Praxair, Inc. and Linde AG in October, 2018. Immediately prior to the Business Combination she was the Chairperson of the Technology, Safety and Sustainability Committee of the Praxair Board of Directors. She has also served on the Board of Directors of Rockwood Holdings, Inc., where she was the Lead Director, a member of the Compensation Committee, and was the Chairperson of the Corporate Governance and Nominating Committee. She is the Co-Chair of the Advisory Board of the Governance Institute of Drexel University, and has served on the Board of Trustees of Villanova University.
Experience and Qualifications
As a former senior operating executive at Honeywell, a global industrial and consumer products manufacturing company, and at Rohm and Haas, a global chemicals company, Dr. Dicciani brings the senior executive experience and skills described above. She also has a substantial understanding of technology policy, management and markets. Her technical expertise in the chemical industry, an important end-market for Linde, and her international operations experience, also enable her to provide the Board and management with valuable insight and counsel.
26 | Linde plc
Corporate Governance and Board Matters
Director Nominees
|
Dr. Thomas Enders
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Former Chief Executive Officer of Airbus SE
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Age
Director Since
Other Public Company
Directorships
|
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61
2018
|
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Qualification Highlights
• Linde End-Markets
• Linde Foreign Markets
• Operations
• International Business
• Technology
• Risk Management
• Public Company Board
|
Biography
Dr. Thomas Enders served on the Executive Committee and the Board of Directors of EADS NV and its successor Airbus SE in various functions from 2000 to 2019. Between 2005 and 2019 he worked as Chief Executive Officer of EADS/Airbus.
He joined the aerospace industry in 1991. Before that he worked in the German Bundestag, the German Ministry of Defense and in various foreign policy think tanks.
Dr. Enders was a member of the Supervisory Board of Linde AG from 2017 until 2019. He is also President (non-executive) of the German Council on Foreign Relations (DGAP) in Berlin.
On April 26, 2017, the Vienna, Austria public prosecutor’s office confirmed that Dr. Enders, as part of a group of 16 former and current Airbus Defence and Space GmbH (“Airbus DS”) and Eurofighter Jagdflugzeug GmbH (“EF GmbH”) executives, is being investigated in connection with the alleged deception relating to the Republic of Austria’s purchase of 18 Eurofighter aircraft from EF GmbH in 2003 (reduced to 15 aircraft in 2007). The negotiations on behalf of the Eurofighter Consortium were supported by former EADS-D (now called Airbus DS). Both Airbus DS and Dr. Enders have advised Linde plc that they are convinced these allegations are without merit and that they intend to vigorously defend themselves against any allegations or claims related to the Eurofighter sales in 2003 and 2007.
Experience and Qualifications
As the former Chief Executive Officer and member of the Executive Committee of Airbus SE, one of the largest aerospace companies in the world and a large international manufacturer, Dr. Enders contributes the senior executive experience and skills described above. In particular, his background includes extensive international, operational and manufacturing experience. As Airbus SE operates in many of the foreign markets in which the Company operates, Dr. Enders also brings his understanding of these large markets where the Company has a significant presence.
Linde plc | 27
Corporate Governance and Board Matters
Director Nominees
|
Franz Fehrenbach
|
Chairman of the Supervisory Board of Robert Bosch GmbH and Managing Partner of Robert Bosch Industrietreuhand KG
|
|
Age
Director Since
Other Public Company
Directorships
|
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70
2018
Robert Bosch GmbH
STIHL AG
BASF SE
|
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Qualification Highlights
• Linde End-Markets
• Linde Foreign Markets
• Operations
• International Business
• Technology
• Risk Management
• Public Company Board
|
Biography
Mr. Franz Fehrenbach has served as Managing Partner of Robert Bosch Industrietreuhand KG and Chairman of the Supervisory Board of Robert Bosch GmbH since 2012. He began his career with the Robert Bosch Group, Germany, in 1975. In 1999, he was appointed a member of the Board of Management of Robert Bosch GmbH and, in 2003, was appointed Chairman of the Board of Management of Robert Bosch GmbH.
Mr. Fehrenbach is Chairman of the Supervisory Board of Robert Bosch GmbH in Stuttgart, Germany. He is also Deputy Chairman of the Supervisory Board of STIHL AG in Waiblingen, Germany, and a member of the Supervisory Board of BASF SE in Ludwigshafen, Germany. He was a member of the Board of Directors of Robert Bosch North America Corp. until July 2014. Mr. Fehrenbach was the Second Deputy Chairman of the Supervisory Board of Linde AG and was a member of the Supervisory Board of Linde AG from 2013 until 2019.
Experience and Qualifications
As Managing Partner of Robert Bosch Industrietreuhand KG and as the former Chairman of the Board of Management of Robert Bosch GmbH, Mr. Fehrenbach brings the senior executive experience and skills described above from this international diversified manufacturer and technology and service provider. His background includes extensive international, operational and manufacturing experience and an understanding of many of the large markets where Linde has significant operations.
28 | Linde plc
Corporate Governance and Board Matters
Director Nominees
|
Edward G. Galante
|
Former Senior Vice President of ExxonMobil Corporation
|
|
Age
Director Since
Other Public Company
Directorships
|
|
69
2018
Celanese Corporation
Clean Harbors, Inc.
Marathon Petroleum
|
|
Qualification Highlights
• Linde End-Markets
• Linde Foreign Markets
• Operations
• International Business
• Technology
• Risk Management
• Public Company Board
|
Biography
Mr. Edward Galante is a former Senior Vice President and was member of the Management Committee of ExxonMobil Corporation from 2001 until his retirement in 2006. His principal responsibilities included the worldwide downstream business: refining & supply, fuels marketing, lubricants and specialties, and research and engineering. Immediately prior to that, Mr. Galante was Executive Vice President of ExxonMobil Chemical Company.
Mr. Galante is the Lead Independent Director of Celanese Corporation, where he serves on the Compensation and Management Development Committee and the Governance and Nominating Committee, and a director of Clean Harbors, Inc., where he is Chairman of the Environmental, Safety and Health Committee and serves on the Governance Committee and the Compensation Committee. He is also a director of Marathon Petroleum Corporation, and a member of the Compensation Committee and the Sustainability Committee. Mr. Galante sits on the Board of the United Way Foundation of Metropolitan Dallas, and is the Vice Chairman of the Board of Trustees of Northeastern University. During the past five years, Mr. Galante served as a director of Praxair, Inc. from 2007 until the Business Combination of Praxair, Inc. and Linde AG in October, 2018. Immediately prior to the Business Combination he was the Chairman of the Compensation & Management Development Committee of the Board of Directors of Praxair, Inc. Mr. Galante was also a director of Foster Wheeler Ltd., where he served on the Audit Committee and was the Chairman of the Compensation and Executive Development Committee. He was a member of the Board of Directors of Andeavor Corporation (formerly Tesoro Corporation), where he served on the Compensation Committee and the Environmental, Health and Safety Committee until the company merged into Marathon Petroleum in October 2018.
Experience and Qualifications
As a former senior operating executive at ExxonMobil, one of the largest global energy companies, Mr. Galante brings the senior executive experience and skills described above and has significant experience in the operations and management of a large, global business. He has substantial experience in the oil, gas, refining and chemical sectors of the energy industry, all of which are important end-markets for the Company. He also has an in-depth understanding of engineering management, operations and technology, which are important in the execution of many of the Company’s large capital projects.
Linde plc | 29
Corporate Governance and Board Matters
Director Nominees
|
Larry D. McVay
|
Principal of Edgewater Energy, LLC
|
|
Age
Director Since
Other Public Company
Directorships
|
|
72
2018
Callon Petroleum
Company
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Qualification Highlights
• Linde End-Markets
• Linde Foreign Markets
• Operations
• International Business
• Technology
• Risk Management
• Public Company Board
|
Biography
Mr. Larry McVay is a Principal of Edgewater Energy, LLC, an oil and gas industry investment firm. Mr. McVay served as the Chief Operating Officer of TNK-BP Holding from 2003 until his retirement in 2006. TNK-BP Holding, based in Moscow, Russia, was a vertically integrated oil company 50%-owned by BP plc. Mr. McVay’s responsibilities at TNK-BP included executive leadership for the upstream, downstream, oil field services, technology and supply chain management. He previously served as Technology Vice President of Operations and Vice President of Health Safety Environment for BP’s Exploration and Production operations from 2000 to 2003. Prior to joining BP, Mr. McVay held numerous positions at Amoco, including engineering management and senior operating leadership positions.
Mr. McVay is a director of Callon Petroleum Company where he serves on the Audit Committee, the Nominating and Governance Committee and is Chairman of the Strategic Planning and Reserves Committee. During the past five years, Mr. McVay served as a director of Praxair, Inc. from 2008 until the Business Combination of Praxair, Inc. and Linde AG in October, 2018. Immediately prior to the Business Combination he was the Chairman of the Finance & Pension Committee of the Board of Directors of Praxair, Inc. Mr. McVay also was a director of Chicago Bridge& Iron Company (CB&I) until the merger between CB&I and McDermott in May 2018.
Experience and Qualifications
As a former senior operating executive at BP, one of the largest global energy companies, Mr. McVay brings the senior executive experience and skills described above. He has an in-depth understanding of engineering management and of worldwide energy markets, operations and technology, all of which are important to the Company’s operations, particularly those involving large capital project investments. He also has practical experience in operating in Russia and the Middle East, both of which are important markets for the Company.
30 | Linde plc
Corporate Governance and Board Matters
Director Nominees
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Dr. Victoria E. Ossadnik
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Chief Executive Officer of E.ON Energie Deutschland GmbH and E.ON Energie Holding GmbH
|
|
Age
Director Since
Other Public Company Directorships
|
|
51
2018
Commerzbank AG
innogy SE
|
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Qualification Highlights
• Linde Foreign Markets
• Operations
• International Business
• Technology
• Risk Management
• Public Company Board
|
Biography
Dr. Victoria Ossadnik has served as Chief Executive Officer of E.ON Energie Deutschland GmbH and E.ON Energie Deutschland Holding GmbH in Munich, Germany since April, 2018. Prior to this, in 2011, she joined Microsoft Deutschland GmbH and was appointed as a member of the Board of Management from 2011 to 2016 and also served as Vice President, Enterprise Services Delivery from 2016 to 2018. Dr. Ossadnik began her career with SCANLAB GmbH, Germany, in 1996. From 1999 to 2003, she served as CEO of the CSC Ploenzke AG, Germany, joint venture CSC/Dachser. In 2003, she joined Oracle Deutschland GmbH, serving as Head of Technology Consulting (Northern Europe) and, in 2007, was appointed a member of the Board of Management.
Dr. Ossadnik has served as a member of the Supervisory Board of Commerzbank AG since May 2018, and she was a member of the Supervisory Board of Linde AG from 2016 until 2019. Since 2019, she is also a member of the Supervisory Board of innogy SE.
Experience and Qualifications
As the Chief Executive Officer of E.ON Energie, one of the four largest electricity supply companies in Germany, Dr. Ossadnik brings the senior executive experience and skills described above. In addition, given her substantial senior management experience at both Microsoft and Oracle in Germany, she contributes key insights and counsel as to Linde’s use of technology and further development of digitization in its business operations.
Linde plc | 31
Corporate Governance and Board Matters
Director Nominees
|
Prof. Dr. Martin H. Richenhagen
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Chairman, President and Chief Executive Officer of AGCO Corporation
|
|
Age
Director Since
Other Public Company
Directorships
|
|
67
2018
AGCO Corporation
PPG Industries, Inc.
|
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Qualification Highlights
• Linde End-Markets
• Linde Foreign Markets
• Operations
• International Business
• Risk Management
• Public Company Board
|
Biography
Prof. Dr. Martin Richenhagen has served as the President and Chief Executive Officer of AGCO Corporation, a global manufacturer and distributor of agricultural equipment, since 2004, and Chairman of the Board of Directors since 2006. From 2003 until 2004, Prof. Dr. Richenhagen was Executive Vice President of Forbo International SA, a flooring material company headquartered in Switzerland. He also served as Group President for CLAAS KGaA mbH, a global agricultural equipment manufacturer and distributor headquartered in Germany, from 1998 until 2002. Prof. Dr. Richenhagen was the Senior Executive Vice President for Schindler Deutschland Holdings GmbH, Germany, a worldwide manufacturer and distributor of elevators and escalators, from 1995 until 1998.
Prof. Dr. Richenhagen is a director of PPG Industries, a leading coatings and specialty products and services company, where he is Chairman of the Audit Committee and serves on the Officers-Directors Compensation Committee. He was the Chairman of the German American Chambers of Commerce of the United States and he is a member of the U.S. Chamber of Commerce Board of Directors. Prof. Dr. Richenhagen has served as Chairman of the Board of the Association of Equipment Manufacturers (AEM) and is a Life Honorary Director of AEM. During the past five years, Prof. Dr. Richenhagen served as a director of Praxair, Inc. from 2015 until the Business Combination of Praxair, Inc. and Linde AG in October 2018.
Experience and Qualifications
As Chairman, President and Chief Executive Officer of AGCO Corporation, a large international manufacturer and distributor of agricultural equipment, Prof. Dr. Richenhagen brings the senior executive experience and skills described above. In particular, his background includes extensive international, operational and manufacturing experience. In addition, AGCO Corporation operates in many of the markets in which Linde operates, including Europe and South America, and Prof. Dr. Richenhagen adds his understanding of these large markets where the Company has a significant presence.
32 | Linde plc
Corporate Governance and Board Matters
Director Nominees
|
Robert L. Wood
|
Former Chairman, President & Chief Executive Officer of Chemtura Corporation
|
|
Age
Director Since
Other Public Company
Directorships
|
|
66
2018
MRC Global Inc.
Univar Inc.
|
|
Qualification Highlights
• Industry
• Linde End-Markets
• Operations
• Risk Management
• Public Company Board
|
Biography
Mr. Robert Wood is a Partner in the consulting firm The McChrystal Group, specializing in leadership development for business organizations. He was also the Chairman, President & Chief Executive Officer of Chemtura Corporation, a specialty chemicals company, from 2004 until 2008. Prior to joining Chemtura, Mr. Wood served in various senior management positions at Dow Chemical Company, most recently as business group president for Thermosets and Dow Automotive from November 2000.
Mr. Wood is a director of MRC Global Inc., where he is Chairman of the Compensation Committee and a member of the Governance Committee, and a director of Univar Inc., where he chairs the Compensation Committee and sits on the Audit Committee. During the past five years, Mr. Wood was a director of Praxair, Inc. from 2004 until the Business Combination of Praxair, Inc. and Linde AG in October 2018. Immediately prior to the Business Combination he was the Lead Director and the Chairman of the Nomination and Governance Committee of the Board of Directors of Praxair, Inc. He also was a director of Jarden Corporation, where he was a member of the Nominating and Policies Committee and Chairman of the Audit Committee. He was Chairman of the American Plastics Council and the American Chemistry Council and is a member of the United States Olympic Committee.
Experience and Qualifications
As a former Chief Executive Officer of Chemtura Corporation, a global specialty chemicals company, and a former senior executive of Dow, a global chemicals company, Mr. Wood brings the senior executive experience and skills described above. He also has a deep understanding of the specific challenges and opportunities facing a global basic materials company. Mr. Wood’s knowledge of the chemicals industry, an important end-market for the Company, provides valuable insight to the Board and management.
Linde plc | 33
Proposal 1: Re-appointment of Directors
Proposal 1: Re-appointment of Directors
Twelve director nominees have been nominated for re-appointment to serve for a one-year term concluding on the later of (a) the 2021 annual general meeting of shareholders and (b) the election and qualification of their respective successors. The Nomination and Governance Committee has recommended to the Board, and the Board has approved and recommends, that Prof. Dr. Wolfgang H. Reitzle, Stephen F. Angel, Prof. DDr. Ann-Kristin Achleitner, Prof. Dr. Clemens A. H. Börsig, Dr. Nance K. Dicciani, Dr. Thomas Enders, Franz Fehrenbach, Edward G. Galante, Larry D. McVay, Dr. Victoria E. Ossadnik, Prof. Dr. Martin H. Richenhagen, and Robert L. Wood, each be re‑appointed to serve for a one-year term concluding on the later of (a) the 2021 annual general meeting of shareholders and (b) the election and qualification of their respective successors. Each nominee has agreed to be named in this Proxy Statement and to serve if elected. Qualifications and biographical data for each of these nominees is presented above. If one or more of the nominees becomes unavailable for election or service as a director, the proxy holders will vote your shares for one or more substitutes designated by the Board of Directors, or the size of the Board of Directors will be reduced.
As required under Irish law, the resolution in respect of Proposal 1 is an ordinary resolution that requires the affirmative vote of a simple majority of the votes cast with respect to each director nominee (meaning that the number of shares voted “FOR” a nominee must exceed the number of shares voted “AGAINST” such nominee).
The text of the resolution in respect of Proposal 1 is as follows:
“By separate resolutions, to re-appoint the following twelve directors: Prof. Dr. Wolfgang H. Reitzle; Stephen F. Angel; Prof. DDr. Ann-Kristin Achleitner; Prof. Dr. Clemens A. H. Börsig; Dr. Nance K. Dicciani; Dr. Thomas Enders; Franz Fehrenbach; Edward G. Galante; Larry D. McVay; Dr. Victoria E. Ossadnik; Prof. Dr. Martin H. Richenhagen; and Robert L. Wood.”
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The Board recommends you vote “FOR” the re-appointment of each of the Board’s director nominees listed above.
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34 | Linde plc
Audit Matters
Independent Auditor Selection Process
Audit Matters
Independent Auditor Selection Process
The Audit Committee is directly responsible for the appointment, compensation (including approval of audit and non-audit fees), retention and oversight of the independent registered public accounting firm that audits Linde plc’s financial statements and its internal control over financial reporting. The Audit Committee has selected PricewaterhouseCoopers (“PwC”) as Linde plc’s independent auditor for 2020. PwC also served as Linde plc’s independent auditor in 2019 and in 2018 (prior to the closing of the Praxair-Linde AG Business Combination in 2018). Representatives of PwC are expected to be present at the Annual General Meeting to be available to respond to appropriate questions and to make a statement if they desire.
2020 Auditor Selection Process
During 2019, the Audit Committee conducted a comprehensive, competitive formal tender process to consider, and ultimately to recommend to the Board, the selection of an independent auditor for the 2020 financial year in accordance with applicable rules of the European Union. The Audit Committee considered and evaluated internationally recognized independent registered public accounting firms, including PwC, based upon a thorough set of criteria that the Audit Committee adopted. After conducting this process, the Audit Committee recommended to the Board, and the Board approved, the selection of PwC as the independent auditor for 2020.
The Audit Committee will annually review the independence and performance of any potential independent auditor in deciding whether to select any given firm as the independent auditor. The Audit Committee considers, among other things, a firm’s:
• Recent performance on the Linde audit, if applicable;
• Capability and expertise in providing audit and related services to companies with the breadth and complexity of Linde’s worldwide operations;
• An analysis of the firm’s known legal risks and any significant legal or regulatory proceedings in which it is involved;
• External data on audit quality and performance, including recent Public Company Accounting Oversight Board (“PCAOB”) reports on the firm’s and its peer firms;
|
• The appropriateness of the firm’s proposed fees for audit and non-audit services;
• the firm’s independence (discussed below); and
• if applicable, the firm’s tenure as Linde’s independent auditor, including the benefits of having a tenured auditor and controls and processes that help ensure the firm’s independence.
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Linde plc | 35
Audit Matters
Auditor Independence
Auditor Independence
As noted in the Audit Committee Charter and in the Audit Committee Report presented below, the independent auditor reports directly to the Audit Committee and the Audit Committee is charged with evaluating its independence. The Audit Committee has adopted the policies and procedures discussed below that are designed to ensure that PwC is independent. Based on this evaluation and representations from PwC, the Audit Committee believes that PwC is independent and that it is in the best interest of Linde and its shareholders to have PwC as the Company’s independent auditor for 2020.
Non-Audit Engagement Services Pre-Approval Policy
The Audit Committee has utilized PwC (along with other accounting firms) to provide non-audit services in 2020. Linde understands the need for PwC to maintain objectivity and independence as the auditor of the Company’s financial statements and its internal control over financial reporting. Accordingly, the Audit Committee has established a policy whereby all non-audit fees of the independent auditor must be approved in advance by the Audit Committee or its Chairman, and has adopted a guideline that, absent special
circumstances, the aggregate cost of non-audit engagements in a year should not exceed the audit fees for that year. The non-audit fees that are incurred are typically far less than this limit and, as noted below in the report on independent auditor fees, such non-audit fees were approximately 7.7% of audit fees in 2019. All the Audit-Related Fees, Tax Fees and All Other Fees disclosed below were approved by the Audit Committee.
Audit Partner and Audit Firm Rotation
The Audit Committee’s policy and applicable regulations require that the lead audit engagement partner of the independent auditor must rotate off the Company’s account at least every five years. Under Irish and EU law, as a “public interest entity,” Linde plc is required to replace its audit firm at least once every ten years and is required to conduct an audit tender procedure in accordance with such applicable laws to identify the replacement auditor and submit its choice to shareholders at a general meeting. Apart from these requirements, the Audit Committee believes that it is inappropriate to establish a fixed limit on the tenure of the independent auditor. Continuity and the resulting in-depth knowledge of the Company strengthens the audit. Moreover, the mandatory partner rotation policy expressed
above, normal turnover of audit personnel, the Audit Committee’s policy regarding the hiring of auditor personnel as described below, and the Audit Committee’s practices restricting non-audit engagements of the independent auditor as described above, all mitigate against any loss of objectivity that theoretically could arise from a long-term relationship. As provided in the Audit Committee’s Charter and as further described above, the Audit Committee continuously evaluates the independence and effectiveness of the independent auditor and its personnel, and the cost and quality of its audit services in order to ensure that the Audit Committee and the Company’s shareholders are receiving the best audit services available.
Hiring Policy – Auditor Employees
The Audit Committee has established a policy whereby no former employee of the independent auditor may be elected or appointed as an officer of the Company earlier than two years after termination of the engagement or employment.
36 | Linde plc
Audit Matters
Fees Paid to the Independent Auditor
Fees Paid to the Independent Auditor
The Audit Committee authorizes and oversees the fees paid to PwC for audit and non-audit services. The aggregate fees billed by PwC in 2019 and 2018 for its services are set forth in the table below, followed by a description of the fees. The 2018 fees include those for services rendered to Linde plc and to Praxair, Inc., which was deemed the accounting acquiror in the Praxair-Linde AG Business Combination.
Types of Fees
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Audit
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Audit - Related
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Tax
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All Other
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Total
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Non-Audit Fees
% of Total Audit
Fees
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2019
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18,750,000
|
|
|
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30,000
|
|
|
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1,390,000
|
|
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20,000
|
|
|
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20,190,000
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7.7%
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2018
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|
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16,217,000
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|
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2,011,000
|
|
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2,341,000
|
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515,000
|
|
|
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21,084,000
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23.1%
|
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Audit Fees. These are fees paid for the audit of Linde plc’s annual U.S. GAAP and IFRS financial statements, the reviews of the financial statements included in Linde plc’s and Praxair’s reports on Form 10-Q, the half-year IFRS report, the opinion regarding Linde plc’s and Praxair’s internal controls over financial reporting as required by §404 of the Sarbanes-Oxley Act of 2002, and services that are normally provided by the independent auditor in connection with statutory audits in foreign jurisdictions and regulatory filings or engagements for those fiscal years.
Audit-Related Fees. These are fees paid for assurance and related services rendered that are reasonably related to the performance of the audit or review of Linde plc’s and Praxair’s financial statements other than the fees disclosed in the foregoing paragraph. These fees consist of
employee benefit plan audits and during 2018, included those related to audits of financial statements related to asset dispositions required by antitrust regulators in connection with the Business Combination.
Tax Fees. These are fees paid for professional services rendered primarily for preparation of expatriate employee tax returns, preparation of tax returns in non-U.S. jurisdictions and assistance with tax audits..
All Other Fees. These are fees paid for services rendered other than those described in the foregoing paragraphs. These services related primarily to consulting and advice in regard to local country accounting issues for non-U.S. subsidiaries.
Linde plc | 37
Audit Matters
Report of the Compensation Committee
The Company’s Compensation Committee reviewed and discussed with management the “Compensation Discussion and Analysis” and recommended to the Board that it be included herein. The Compensation Committee has represented to management that, to the extent that the “Compensation Discussion and Analysis” discloses the Compensation Committee’s deliberations and thinking in making executive compensation policies and decisions, it is accurate and materially complete.
The Compensation Committee
Edward G. Galante, Chairman
Dr. Nance K. Dicciani
Prof. DDr. Ann-Kristin Achleitner
Franz Fehrenbach
Dr. Victoria E. Ossadnik
Prof. Dr. Martin H. Richenhagen
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (“CD&A”) provides context for the policies and decisions underlying the 2019 compensation reported in the executive compensation tables included herein for the Company’s Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and the three other executive officers who had the highest total compensation
for 2019, as set forth in the “Summary Compensation Table” (these five executive officers are collectively referred to as the “Named Executive Officers” or the “NEOs”). The Compensation Committee is responsible for policies and decisions regarding the compensation and benefits for the Company’s NEOs.
Executive Compensation Highlights
2019 Company Performance: High Quality Results
2019 was the first full year of combined operations for the Company. Linde delivered strong financial results in its first year as an integrated company despite softening of economic conditions, including foreign currency headwinds of 4%. The underlying sales growth of the Company was 4%(a), half price and half volume of which the volume growth was primarily led by resilient end markets including healthcare, food and beverage. Operating margins climbed 160 basis points to 18.7% and
EPS grew 19%.(a) The Company generated strong cash flow, especially in the second half of the year. Linde also reached a record backlog of projects: $4.4 billion for sale of gas and $5.7 billion for third-party engineering, a total of $10 billion. Overall, the 80,000 employees at Linde successfully integrated two high-quality companies in a relatively short period of time while delivering on its commitments to shareholders.
(a) Adjusted pro forma sales, operating profit margins, and earnings per share are non-GAAP measures prepared on a basis consistent with Article 11 and include certain non-GAAP adjustments. Amounts are reconciled to reported amounts in the “Supplemental Pro Forma Income Statement Information” and “Non-GAAP Financial Measures” Section in Item 7 of the Linde plc 2019 Form 10-K.
Linde plc | 41
Executive Compensation Matters
Compensation Discussion and Analysis
Alignment of Executive Compensation Programs with Company Business Objectives
The Compensation Committee seeks to achieve its executive compensation objectives by aligning the design of the Company’s executive compensation programs with the Company’s business objectives ensuring a balance between financial and strategic non-financial goals.
FINANCIAL BUSINESS OBJECTIVE: Achieve sustained growth in profitability and shareholder return resulting in a robust cash flow to fund capital investment growth opportunities, dividend payments and share repurchases.
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•
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Annual performance-based variable compensation earned by meeting or exceeding pre-established financial goals.
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•
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Annual grants of performance share units that vest based upon performance results over three years.
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•
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Annual grants of stock options, the value of which is directly linked to the growth in the Company’s stock price.
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•
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Annual grants of restricted stock units with three-year cliff vesting and value based on the Company’s stock price.
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STRATEGIC BUSINESS OBJECTIVES: Maintain world-class standards in safety, environmental responsibility, global compliance, strategic positioning, productivity, talent management, and financial controls.
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•
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Annual payout of variable compensation is impacted by performance in these strategic and non-financial objectives.
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Attract and retain executives who thrive in a sustainable performance-driven culture.
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A competitive compensation and benefits program regularly benchmarked against peer companies of similar size in market cap, revenue and other financial metrics and business attributes.
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•
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Realized compensation that varies with Company performance, with downside risk and upside opportunity.
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Best Practices Supporting Executive Compensation Objectives
What We Do:
✓Link a substantial portion of total compensation to Company performance:
✓Annual variable compensation awards based principally upon performance against objective, pre-established financial goals
✓Equity grants consisting largely of performance share units and stock options, focused on longer term shareholder value creation
✓Set compensation within competitive market ranges
✓Require substantial stock ownership and stock retention requirements for officers
✓Limit perquisites and personal benefits
✓Have a clawback (“recapture”) policy that applies to performance-based cash awards and equity grants, including gains realized through exercise or sale of equity securities
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What We Do Not Do:
X Guarantee bonuses for executive officers
X Allow pledging or hedging of Company stock held by officers
X Pay tax “gross-ups” on perquisites and personal benefits unless related to international assignment benefits that are available to employees generally
X Include the same metrics in the short- and long-term incentive programs
X Allow backdating or repricing of stock option awards
X Pay or accrue dividends or dividend equivalents on unvested PSU and RSU awards
X Include an excise tax “gross-up” provision in any change-in-control arrangements
X Accelerate equity award vesting upon change-in-control except for one-time equity awards made to legacy Linde AG NEOs following the Squeeze Out
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42 | Linde plc
Executive Compensation Matters
Compensation Discussion and Analysis
Linde plc 2019 Executive Compensation Program
Executive Compensation Philosophy
The Company’s Compensation Committee established its compensation philosophy to serve as the basis for designing executive compensation programs.
Key Objectives
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•
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Attract and retain talented executives
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•
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Motivate executives to deliver strong business results in line with shareholder expectations
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•
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Build and support a performance-driven culture
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•
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Encourage executives to earn and own Company stock, aligning their interests with those of shareholders.
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Markets for Executive Talent
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•
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Comparator groups should reflect talent markets, customer segments and investment markets and will be adjusted to meet changes in these elements
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•
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Executives who are the Company‘s international leaders will have compensation that is aligned with international companies traded on the U.S. stock exchanges.
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Components of Pay and Competitive Positioning
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Target total direct compensation will include a fixed base pay component plus variable short- and long-term incentives
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•
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Total target direct compensation will be focused at the median (50th percentile) of the competitive market
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•
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The relationship between pay and performance will be leveraged with high performance rewarded with pay above market median and low performance reducing incentive payments substantially, to as low as zero for failing to meet threshold performance levels.
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Performance Standards and Measures
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•
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Performance considerations will balance the need for management to deliver annual results and to grow and succeed in the years ahead
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•
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Challenging but achievable performance goals to be established with performance levels defined as “maximum” representing truly exceptional, outstanding performance and a carefully and objectively established threshold level of performance, below which no incentives will be earned
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•
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Financial results are most important to shareholders and will be heavily weighted in the compensation design
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•
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Selected key strategic and non-financial outcomes will be included to recognize that these are also critical to measuring the businesses’ health and the potential for future success.
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Equity and Stock Ownership
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Long-term incentives should mainly be in the form of equity, which focuses executives on total Company performance in the eyes of shareholders and rewards executives when shareholders are rewarded
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•
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Share ownership guidelines will support the principle that executives be long-term owners of the Company, aligning their interests with those of all shareholders.
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Communication
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The executive compensation program should be fair, transparent and easily understood
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•
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The rationale and terms and conditions of each element of the executive compensation program should be clearly communicated to executives and shareholders to ensure they fully understand how the program works and how it aligns with the overall approach to managing the business.
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Linde plc | 43
Executive Compensation Matters
Compensation Discussion and Analysis
Determining Compensation Opportunity for 2019
In order to align executive compensation with Company performance, the Compensation Committee considers a variety of factors, including the degree to which executive compensation is “at risk.”
At Risk Pay
Between 71% and 76% of the NEOs’ target total direct compensation opportunity for 2019 was in the form of performance-based variable compensation and equity grants, motivating
them to deliver strong business performance and drive shareholder value. The performance-based compensation is “at risk” and dependent upon the Company’s achievement of pre-established financial and other business goals set by the Compensation Committee and, for equity incentives, also the Company’s stock price performance. The annual variable compensation payout and the ultimate value of the performance-based equity compensation awards could be zero if the Company does not perform.
CEO Pay Mix
Performance-based equity compensation is valued at the “grant-date fair value” of each award as determined under accounting standards related to share-based compensation.
Aggregate Compensation
In establishing the 2019 target compensation opportunity for each NEO, the Compensation Committee considered whether the value of each NEO’s aggregate compensation package was consistent with its objectives for Linde’s executive compensation program. It evaluated the following factors when determining compensation levels for NEOs:
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•
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market median data of international companies traded on the U.S. stock exchanges
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•
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expected contribution to results, and exhibition of values, competencies and behaviors critical to the success of the Company
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•
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internal equity: respective role, responsibilities and reporting relationships
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•
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experience and time in similar roles
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•
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legacy company pay practices and pay opportunity
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44 | Linde plc
Executive Compensation Matters
Compensation Discussion and Analysis
The Compensation Committee did not have a set formula for determining target compensation opportunity, however it referred to the median benchmark data during its review. Additionally, the Compensation Committee acknowledged that its general practice will be to establish total pay opportunity towards the lower end of a competitive market range for an executive officer who is newer to his or her role. Conversely, a longer tenured executive officer with a history of strong performance will have target compensation levels set higher in the competitive range.
As part of the review, the Compensation Committee compared the CEO’s target pay to that of the other NEOs. The CEO’s pay as a multiple of the next highest paid NEO was determined to be appropriate, as the organization does not have a Chief Operating Officer.
Perquisites and Personal Benefits
The Compensation Committee reviewed and approved items that could be construed as perquisites or personal benefits for each NEO for 2019 to ensure they are consistent with local country market practice or otherwise are provided for limited and specifically defined business purposes. Some items that must be classified as perquisites relate to support
provided to certain NEOs while on international assignment. The international assignment benefits are fundamentally the same as available to other employees who are on similar international assignments. International assignment compensation is tax equalized and no “tax gross-up” is permitted for any executive officer unless such gross-up is available to employees generally.
2019 Compensation Peer Group
The Compensation Committee established a Compensation Peer Group to be used to assess competitive market compensation ranges for its top officers. Elements considered by the Committee when choosing companies for peers included market capitalization, revenue, net income, industry, global operations, location of headquarters and stock markets where publicly traded. The Committee intends to review the peer group on an annual basis, though will only make changes when appropriate as it values year-over-year consistency going forward. Below are the companies comprising the Compensation Peer Group that was used for making pay decisions for calendar year 2019.
Linde plc | 45
Executive Compensation Matters
Compensation Discussion and Analysis
Role of the Compensation Consultant
The Compensation Committee engages a third-party compensation consultant to assist in analysis to inform and support the Compensation Committee’s decisions on executive compensation. For its consideration of 2019 executive compensation, the Compensation Committee engaged Deloitte Consulting LLP (“Deloitte Consulting”).
The scope of Deloitte Consulting’s engagement includes:
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•
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Review of compensation programs and preparation and presentation to the Compensation Committee of reports on
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executive compensation trends and other various materials
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•
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Review of the peer group analysis and compensation benchmarking studies prepared by management and review of other independent compensation data
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Advice on the determination of NEO’s compensation, the consultant’s view of the CEO’s recommendations for other NEO compensation, as well as input on the CEO’s compensation
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•
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Review of and advice on compensation program design proposals presented by management for the Compensation Committee’s consideration.
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Pay Design and Decisions
Direct Compensation for Executive Officers
Salary
The salary level for each NEO was established by the Compensation Committee after its consideration of multiple factors including positioning to market, CEO input (other than for himself) and advice from Deloitte Consulting. Salary increases, if applicable, were effective March 1, 2019.
lead Sciences Halliburton Company Honeywell Intl InBev Johnson Controls Kraft Heinz LyondellBasell tronic Micron Technology Merck & Co. Mondelez Intl PPG Industries Raytheon Roche SAP Sherwin-Williams Thermo Fisher United Technologies
Annual Performance-Based Variable Compensation
The Compensation Committee established an annual performance-based variable compensation program for the 2019 calendar year that focuses executives on the key objectives that position Linde for sustained growth, and the creation of shareholder value,
without compromising long-term business objectives or encouraging excessive risk-taking.
As part of its design process, the Compensation Committee reviewed the short-term incentive programs of the legacy companies and discussed design ideas with its compensation consultant as well as with management. The resulting annual variable compensation program is comprised of three main components: financial performance, strategic and non-financial performance and
46 | Linde plc
Executive Compensation Matters
Compensation Discussion and Analysis
individual performance. This program is designed to deliver pay commensurate with performance wherein results that are greater than target goals are rewarded with above target
payout levels, and performance not meeting minimum threshold expectations reduces the payout to zero.
Financial Performance Goals
Awards under the annual variable compensation program are determined based on Company performance against challenging, pre-established financial goals. This component is weighted 75% of the total financial and non-financial payout, and payouts related to this component can range from zero to 200% of target variable compensation (for up to 150 percentage points). Top line sales growth is important to the Company and 25% of the financial performance goal is based on sales. Recognizing the importance of profitability and cash flow to the Company, 50% of the financial performance goal is based on net income and the remaining 25% on operating cash flow.
To establish the goals related to the financial component of the program, the Compensation Committee considers many factors including the degree of control senior management may have over certain factors that affect financial performance. Goals are established with the expectation that executives will be rewarded with higher payouts if actual performance exceeds targets. Factors considered in setting the threshold, target and maximum financial performance goals for each financial measure include:
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synergy goals and expectations,
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management’s operating plan, including expected year-over-year challenges in performance,
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macro-economic trends and outlooks in each of the countries in which the Company operates,
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foreign exchange rate trends and outlook,
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expected industrial gases industry peer performance and that of the broader S&P 500 and leading European companies,
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shifts in key customer markets, and
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expected contribution from contracts already awarded and decisions or actions already made or taken.
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Strategic and Non-Financial Performance Goals
In alignment with the Company’s compensation philosophy, the design of the annual variable compensation program balances the need for management to deliver annual results with the desire to meet multi-year growth expectations. Selected key strategic and non-financial performance objectives are included to recognize these critical measures of the Company’s health and potential for future success.
When establishing the 2019 program design, the Compensation Committee identified the strategic and non-financial elements that were considered
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Executive Compensation Matters
Compensation Discussion and Analysis
most important to long-term sustainable success and established annual goals with respect to those elements. Most of the strategic and non-financial goals are linked to quantitative and measurable objectives, although the Compensation Committee uses its judgment when determining the value awarded for goal
achievement after a rigorous review of the results. This component is weighted 25% of the total financial and non-financial payout, and payouts related to this component can range from zero to 200% of target variable compensation (for up to 50 percentage points). The 2019 strategic and non-financial performance goals are as follows:
GOAL
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ADDITIONAL DETAIL
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Safety, Environmental Performance and Sustainability:
• Zero fatalities with fatality potential event reduction
• No significant process safety or environmental events
• Best in class recordable injury, lost workday case and vehicle accident rates
• Superior performance in sustainable development including environmental stewardship
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• Providing employees with a safe operating environment through investing in state of the art technology and by driving a culture in which safety is a top priority
• Rigorous processes and procedures to ensure compliance with all applicable environmental regulations, to meet sustainable development performance targets and to continuously reduce the environmental impact of the Company’s operations in the communities in which it operates
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People Development:
• Strengthen leadership pipeline, including globally diverse talent, through a single succession planning and performance management approach across the enterprise
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• Attraction, retention and development of a diverse and engaged workforce through a robust succession planning process
• Employee value proposition includes providing strong, dynamic leadership, a challenging work environment, industry-leading performance, competitive pay and benefits, and rewards and recognition for outstanding performance
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Compliance:
• A strong global compliance program and culture focusing on policies, procedures, training, reporting, accountability and verification via audit
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• Create and maintain a strong ethical culture in every country where Linde operates
• All employees accountable for ensuring that business results are achieved in compliance with local laws and regulations and the Company’s Code of Business Integrity
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Strategy:
• Position the business for long-term performance
• Successful integration – harmonize key policies and practices
• Value capture (cost, capex, and growth synergies)
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• Deliver excellent results in the short-term and over a longer, sustainable period of time
• Rigorously assess the quality and future impact of actions taken, as benefits may not be recognized for several years
• Monitor the “health” of the organization through pulse surveys
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Project Selection and Execution:
• Industry-leading performance; meet project execution goals
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• Maintain a thorough capital allocation process to ensure careful selection of projects
• Focus on meeting schedules and cost estimates, starting-up plants reliably and efficiently, and supporting plant availability
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Productivity:
• Implement a robust and measurable productivity initiative
• Enhance organizational capabilities in tools, processes and practices
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• Deliver value through continuous innovation to help Linde’s customers enhance their product quality, service, reliability, productivity, safety, and environmental performance
• Work across disciplines, industries and sectors, with employees, customers, suppliers and a range of other stakeholders to get more output utilizing fewer resources and with less environmental impact
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Relative Performance:
• Strong performance relative to peer companies
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• Continue to be the best performing industrial gases company in the world
• Assess how well we anticipate and manage adversity to optimize results
• Determine if management’s actions appear more or less effective than those of Linde’s peers
• Appropriately respond to macroeconomic or other external factors unknown at the time financial goals were established
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Individual Performance
To reinforce a culture where pay is directly linked to performance and to recognize the contributions of individuals to overall Company results, an individual performance component is included in the annual variable compensation design. Excluding the CEO, the Compensation Committee may make a positive, negative or no adjustment to each NEO’s performance-based variable compensation based on its evaluation of his individual performance. For the CEO, the Compensation Committee may make a negative or no adjustment to his annual variable compensation payment to reflect his performance.
In evaluating if an individual performance adjustment was appropriate, the Compensation Committee will consider various qualitative factors, such as the NEO’s:
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performance in his or her principal area of responsibility,
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degree of success in leading the Company to meet its strategic objectives, and
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championing of the values and competencies that are important to the success of the Company.
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48 | Linde plc
Executive Compensation Matters
Compensation Discussion and Analysis
Annual Performance-Based Variable Compensation Opportunity for 2019
The Compensation Committee established the 2019 variable compensation target for each NEO (expressed as a percent of salary that would be earned for 100% achievement of the performance goals). The target level for each NEO ranged from 100% to 165% of base salary.
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2020 ANNUAL VARIABLE COMPENSATION DESIGN: The Compensation Committee has determined to maintain the same design of the Company’s annual performance-based variable compensation program in 2020.
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2019 Annual Performance-Based Variable Compensation Results and Payout
Financial Business Results
As noted above, financial goals are set considering multiple factors with the recognition that there are some items that cannot be easily predicted, and over which management has less control, such as foreign exchange rates and certain raw materials price changes. As part of the variable compensation plan design, certain pre-determined adjustments may be made by the Compensation Committee to actual financial results in order to account for these elements. The Compensation Committee may also conclude that additional adjustments are appropriate based upon unforeseen factors it deems extraordinary, non-recurring or otherwise material.
The chart below shows for each financial performance measure, the 2019 Corporate
financial targets set by the Compensation Committee and the actual performance achieved. The overall Corporate payout factor for financial performance was 144.7% of target variable compensation.
The payouts for Messrs. Angel and White are based on Linde plc Corporate results. However, the financial payout factors for Messrs. Menezes, Lamba and Bruch are based on a blend of the business segment results for their respective business segment (weighted 75%) and Corporate results (weighted 25%). The overall weighted average payout factors for financial performance for Messrs. Menezes, Lamba and Bruch were 123.4%, 152.5%, and 165.8% respectively.
Financial
Measure
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Target
($ millions)
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Actual
($ millions)
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Weight
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Achievement
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Payout
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Sales*
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28,803
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28,473
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25
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%
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93
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%
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23.4
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%
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Net Income*
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3,817
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4,045
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50
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%
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143
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%
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71.3
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%
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Operating Cash Flow
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5,528
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6,119
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25
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%
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200
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%
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50.0
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%
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* For the annual variable compensation program, sales and net income are measured in accordance with GAAP subject to certain adjustments that the Compensation Committee approves.
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Executive Compensation Matters
Compensation Discussion and Analysis
strategic Non-financial Business Results
Coupled with its assessment of performance related to financial goals, the Compensation Committee reviewed the strategic actions taken by management that focused on long term sustainable success. After the end of the year, management presented to the Compensation Committee the degree of achievement in meeting each goal, and for each element, provided its view of the relative degree of importance to long term success.
Based on the results, the Compensation Committee determined that the Company’s performance with respect to the strategic and non-financial goals was favorable and set the Corporate strategic and non-financial payout factor at 160% of target variable compensation (relative to a 200% maximum). The Compensation Committee noted the following as examples of actions that support the Company’s strategic objectives in determining 2019 variable compensation payouts:
• Maintained world class safety performance with a 17% reduction in commercial vehicle incident rate
• Continued with successful merger integration with completion of Linde AG cash merger squeeze-out and all regions operating as a single business
• Harmonized global policies and practices under integration
• Maintained strong compliance culture; new Code of Business Integrity implemented across combined Company
• Maintained industry leading project execution
• Delivered productivity fully in line with business strategic objectives (total productivity ~$767 M)
• Implemented a global productivity reporting tool and conducted several “best practice” forums
• Increased technology impact: digitalization team delivered ~$32 M of savings
• Increased total value of backlog to $4.7 billion; won $1.4 billion Exxon project in Singapore
• Continued to develop a diverse pipeline of future senior leaders
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Received Public Recognition:
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Dow Jones Sustainability World Index: ranked in the 97th percentile in the chemicals sector
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Consistently listed on major Diversity and Inclusion indices: Bloomberg’s Gender Equality Index, Forbes Best Employer for Diversity, Financial Times Diversity Leaders and Human Rights Campaign Corporate Equality Index
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Subsidiary Praxair, Inc. named a “Top 25 Noteworthy Company” by DiversityInc for the fourth consecutive year
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Individual Performance Adjustments
Excluding the CEO, the Compensation Committee may make a positive, negative or no adjustment to each NEO’s performance-based variable compensation based on its evaluation of individual performance. In evaluating if an individual performance adjustment was appropriate, the Compensation Committee considered various qualitative factors, such as the NEO’s:
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performance in his or her principal area of responsibility,
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championing of the values and competencies that are important to the success of the Company.
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Adjustments were made to the payouts of each NEO based upon individual performance in 2019. The Compensation Committee did not find it practical, nor did it attempt, to assign relative weights to any individual factors or subject them to pre-defined, rigid formulas, or set financial or other objective goals related to personal performance, and the importance and relevance of specific factors varied for each NEO. None of the adjustments made were material to annual performance-based variable compensation payments.
Set forth below is the calculation of the CEO’s 2019 variable compensation payout determined in accordance with the criteria set forth above.
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Executive Compensation Matters
Compensation Discussion and Analysis
2019 Equity Awards Design
Equity awards are the largest portion of each NEO’s target compensation. This weighting helps ensure a strong alignment of NEOs’ and shareholders’ long-term interests. Annual grants of equity awards are made to incent and reward sustained performance.
Equity awards are granted as a mix of stock options, performance share units (PSUs) and restricted stock units (RSUs). The mix and type
of equity awards granted to the CEO and other NEOs is the same as those granted to all eligible executives of the Company. Fully aligning the leadership team, from mid-management to officers, helps sustain the Company’s pay for performance culture by incenting and rewarding all participants with the same goals and performance results.
Performance Share Units (50% of award target value)
The Compensation Committee includes PSUs in its award mix as this vehicle focuses executives on the Company’s mid-term performance objectives. A three-year performance period is believed to be an appropriate balance between the one-year performance-based variable compensation goals and the longer-term stock option share price growth goals. Additionally, the overlapping three-year performance periods that result from regular annual grants promote retention and encourage management to focus on sustainable growth and shareholder returns. Key features of the PSUs include:
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Vest if pre-established multi-year performance goals are attained and forfeited if threshold goals are not met.
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Pay no dividends nor accrue dividend equivalents prior to vesting.
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Require NEOs to hold all after-tax shares derived from vested awards until their respective stock ownership requirement is met.
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The Committee determined that using a Return on Capital (ROC) performance goal would be appropriate as it encourages and rewards the executive team for focusing decisions and taking actions that drive long term ROC performance.
A relative Total Shareholder Return (TSR) goal was also considered appropriate as this portion of the equity award will further strengthen alignment of management payouts with shareholder returns. In order to align with the Company’s global shareholder base, it was determined that TSR performance would be measured against a blended group of companies that is comprised of those that are listed on the S&P 500, excluding the Financial sector, plus those that are designated as Eurofirst 300 at January 1, 2019.
Stock Options (30% of award target value)
The Compensation Committee believes that stock options present an appropriate balance of
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Executive Compensation Matters
Compensation Discussion and Analysis
risk and reward in that the options have no value unless the Company’s stock price increases above the option exercise price and that the opportunity to realize value from growth in shareholder value over the ten-year grant term encourages long term decision-making. The Compensation Committee notes that the Company’s executives place a high value on stock options as a compensation vehicle. Key features of the stock options include:
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Exercise price is fixed at 100% of the closing market price on date of grant.
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Vest in equal annual tranches over three years and expire after ten years.
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No repricing without shareholder approval.
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Require NEOs to hold all shares obtained from exercise, net of taxes and exercise price, until their respective stock ownership requirement is met.
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Restricted Stock Units (20% of award target value)
The Compensation Committee recognizes that RSUs can provide appropriate rewards to executives through alignment with the Company’s stock price. The RSUs are the smallest component of the equity award mix, and cliff vest three years after their grant date to aid NEO retention. RSUs can also mitigate some of the impact of an economic downturn on the PSU and stock option components of the annual awards. Key features of the RSUs include:
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Pay no dividends nor accrue dividend equivalents prior to vesting.
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Require NEOs to hold all after-tax shares derived from vested awards until their respective stock ownership requirement is met
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2019 Equity Award Grants
The Compensation Committee established the target dollar value of 2019 equity awards for each NEO. The Compensation Committee examined relative responsibility of the NEOs and each NEO’s position to market with consideration of how long he or she had been in the current role. Particular emphasis was placed on the importance of providing NEOs incentive and appropriate reward for taking high quality actions to support sustainable long-term growth.
ROC-measured performance share units
The ROC goal for the PSU awards covering fiscal years 2019 - 2021 was determined after the Compensation Committee examined prior-year ROC results, industry ROC averages, capital expenditure projections and the Company’s weighted average cost of capital. The payout schedule was set with the intent of encouraging and rewarding the executive team for taking actions that result in industry-leading ROC performance.
The May 2019 awards are measured against the following ROC goals:
2019-2021
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Average Annual ROC
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Payout*
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Below Threshold
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<10.2%
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0%
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Threshold
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10.2%
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50%
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Target
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11.5%
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100%
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Maximum
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≥12.5%
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200%
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*Interpolated for results between threshold and maximum.
ROC is the Company’s after-tax return on capital as reported in its quarterly and annual Consolidated Financial Statements, adjusted to eliminate the after-tax effect of any acquisition occurring during the Performance Period that was not known at the time the goals were set.
Relative TSR-measured performance share units
The May 2019 Relative TSR awards are measured against a blended group of companies that is comprised of those that are listed on the S&P 500, excluding the Financial sector, plus those that are designated as Eurofirst 300 at January 1, 2019, and payouts will be determined based on the following schedule:
2019-2021
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TSR Rank
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Payout*
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Below Threshold
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<25%ile
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0%
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Threshold
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25%ile
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25%
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Target
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50%ile
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100%
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Maximum
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≥75%ile
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200%
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*Interpolated for results between threshold and maximum.
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2020 EQUITY AWARD DESIGN: The Compensation Committee has determined to maintain the same design of the Company’s equity award program in 2020.
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52 | Linde plc
Executive Compensation Matters
Compensation Discussion and Analysis
Legacy Linde AG 2019 Equity Award Payouts and Grants
In accordance with the Business Combination Agreement and in line with the Linde AG LTIP 2012, the outstanding options and rights to matching shares at the time of merger for the legacy Linde AG NEOs terminated after certain restructuring measures between the Company and Linde AG became effective on April 8, 2019 (the “Squeeze Out”).
Following the Squeeze Out, on April 24, 2019, the legacy Linde AG options and matching share rights were terminated with a prorated cash payout provided to the legacy Linde AG NEOs. The amount of the cash payment made for each Linde AG stock option was defined in accordance with the Linde AG LTIP 2012 taking into account (i) the extent to which the success targets set out in the plan had been reached at the time the merger was consummated, (ii) the qualifying period for the Linde LTIP tranches that had elapsed since the grant date, and (iii) the expected market capitalization and business outlook of Linde AG (in each case without taking the merger and its completion into account).
The outstanding Linde AG stock option grants had performance targets of Earnings Per Share (EPS) and Relative Total Shareholder Return (RTSR), each weighted 50% towards the
determination of the number of rights that could be exercised.
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EPS GOALS. The minimum EPS performance target, with payout at 12.5%, would be attained when adjusted diluted EPS for the applicable four-year measurement period reached a compounded average growth rate (CAGR) of six percent annually, and the performance matching the stretch target of 11% annual CAGR would pay out at 50%.
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RTSR GOALS. The 12.5% minimum payout for the RTSR for the applicable four-year performance period would be reached if the legacy Linde AG TSR exceeded the median TSR for the reference group of DAX 30 companies, excluding Linde AG. The maximum payout of 50% would be made if the legacy Linde AG TSR exceeded the upper quartile of the reference group.
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Prior to the merger date performance of Linde AG was reviewed against the goals, and for the outstanding option rights, the following performance and qualifying periods were determined for use in calculating the prorated cash payouts for legacy Linde AG executives:
Legacy Linde Outstanding Awards
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EPS
Performance
Determination
at Merger
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Relative TSR
Performance
Determination
at Merger
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Qualifying Period
(based on months
elapsed since
Grant Date)
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2015 option rights
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26.0%
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38.4%
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85.4%
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2016 option rights
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30.2%
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39.7%
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60.4%
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2017 option rights
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17.7%
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33.2%
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35.4%
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Actual EPS results are interpolated on a straight-line basis from threshold to maximum. RTSR payout determined based on linear division for results that fall between threshold and maximum.
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