Annual Meeting : April 14, 2022

Jim Fitterling, Chairman and Chief Executive Officer’s total compensation for 2021 was $24,858,892. Every element of his compensation – salary, stock awards, stock options, and bonus – increased somewhat. None of the increases were at a particularly high rate, but cumulatively (and with a pension value increase of more than $4 million) they resulted in a 12 percent increase at a company with an already highly paid CEO. 

I want to call particular attention to an element of the annual bonus. The 2021 Performance Award is equal to an individual’s target award (in the case of the CEO 175% of salary) multiplied by the performance related to Operating EBIT, Free Cash Flow and ESG metrics. The payout is adjusted by the individual performance factor.

This year’s total bonus payout of 177 percent may reflect targets that were likely set too low. During 2020 the company failed to meet some of these goals. There was no payout for the operating EBIT portion of the bonus where target bonus was $4.5 billion and action operating EBIT was $2.7 billion. This year, the target was set lower than the prior target at $3.5 billion. Dow, like many companies, had a good performance year and actual operating EBIT was $9.53 billion. That component of the 2021 bonuses paid out at 200 percent. But shareholders and board members alike should ask themselves if it truly was that the executives performed better than they were expected to or whether the economy and industry did better than expected. In cases where it was the latter, then paying bonus above target is neither necessary nor appropriate.

Shareholders will also vote on a proposal at the company calling for the positions of CEO and Chair to be separate. In general, such proposals have seen support grow over the past few years, and the company also has filed a proxy supplement urging shareholders to vote against it. Part of the reason shareholders support the separation of these functions is to create effective oversight of the CEO, including the CEO’s compensation. An ISS study on board structure and CEO pay found that “The fact that, on average, a CEO's pay is generally higher when that post is held in conjunction with the board chair role or with an insider chairman provides some confirmation to suspicions that insiders are not the best monitors of shareholder interests in the board room, at least as measured by CEO pay.”

Voting for this shareholder proposal and against the compensation proposals would both be ways to address the excessive pay at Dow.