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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material under §240.14a-12 |
TE CONNECTIVITY LTD. | ||||
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(4) | Proposed maximum aggregate value of transaction: |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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(2) | Form, Schedule or Registration Statement No.: |
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January ·, 2019
Dear Shareholder,
You are invited to attend the 2019 Annual General Meeting of Shareholders of TE Connectivity Ltd., to be held on Wednesday, March 13, 2019 at 2:00 p.m., Central European Time (9:00 a.m., Eastern Daylight Time), at the Park Hyatt Zürich, Beethoven-Strasse 21, 8002 Zürich, Switzerland. Details of the business to be presented at the meeting can be found in the accompanying Invitation to the Annual General Meeting of Shareholders and Proxy Statement.
If you cannot attend, you can ensure that your shares are represented at the meeting by casting your vote either electronically at your earliest convenience or by promptly completing, signing, dating and returning your proxy card.
We look forward to seeing you at the meeting.
Sincerely,
Thomas
J. Lynch
Chairman of the Board
TE
Connectivity Ltd.
Rheinstrasse 20
CH-8200 Schaffhausen, Switzerland
Tel:
+41 (0)52 633 66 61
Fax: +41 (0)52 633 66 99
2019 Annual General Meeting Proxy Statement i
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Where You Can Find More Information |
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Appendix APrimary Talent Market Peer Group |
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Agenda items to be voted upon at the meeting |
ii 2019 Annual General Meeting Proxy Statement
TE CONNECTIVITY LTD.
Rheinstrasse 20
CH-8200 Schaffhausen, Switzerland
Invitation to the Annual General Meeting of Shareholders
Time and Date: |
2:00 p.m., Central European Time (9:00 a.m., Eastern Daylight Time), on March 13, 2019 |
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Place: |
The Park Hyatt Zürich, Beethoven-Strasse 21, 8002 Zürich, Switzerland |
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Agenda Items: |
1. Election of twelve (12) director nominees proposed by the Board of Directors; |
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2. Election of the Chairman of the Board of Directors; |
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3. Election of the members of the Management Development and Compensation Committee; |
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4. Election of the Independent Proxy; |
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5. Approval of (i) the 2018 Annual Report of TE Connectivity Ltd. (excluding the statutory financial statements for the fiscal year ended September 28, 2018, the consolidated financial statements for the fiscal year ended September 28, 2018 and the Swiss Compensation Report for the fiscal year ended September 28, 2018), (ii) the statutory financial statements of TE Connectivity Ltd. for the fiscal year ended September 28, 2018, and (iii) the consolidated financial statements of TE Connectivity Ltd. for the fiscal year ended September 28, 2018; |
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6. Release of the members of the Board of Directors and executive officers of TE Connectivity for activities during the fiscal year ended September 28, 2018; |
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7. Election of (i) Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2019, (ii) Deloitte AG, Zurich, Switzerland, as our Swiss registered auditor until our next annual general meeting, and (iii) PricewaterhouseCoopers AG, Zurich, Switzerland, as our special auditor until our next annual general meeting; |
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8. Advisory Vote to Approve Named Executive Officer Compensation; |
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9. Binding vote to approve fiscal year 2020 maximum aggregate compensation amount for executive management; |
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10. Binding vote to approve fiscal year 2020 maximum aggregate compensation amount for the Board of Directors; |
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11. Carryforward of unappropriated accumulated earnings; |
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12. Declaration of dividend; |
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13. Authorization relating to share repurchase program; |
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14. Approval of share capital reduction for shares acquired under our share repurchase program; |
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15. Approval of any adjournments or postponements of the meeting. |
2019 Annual General Meeting Proxy Statement 1
Persons Who Will Receive Proxy Materials: |
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A copy of the proxy materials, including a proxy card, also will be sent to any additional shareholders who are registered in our share register as shareholders with voting rights, or who become beneficial owners through a nominee registered in our share register as a shareholder with voting rights, as of the close of business (Eastern Standard Time) on February 21, 2019. |
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Admission to Meeting and Persons Eligible to Vote: |
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Shareholders who hold their shares in the name of a bank, broker or other nominee ("Beneficial Owners") should follow the instructions provided by their bank, broker or nominee. Beneficial Owners who have not obtained a proxy from their bank, broker or nominee are not entitled to vote in person at the Annual General Meeting. |
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Granting of Proxy: |
Shareholders of record with voting rights who do not wish to attend the Annual General Meeting have the right to appoint Dr. René Schwarzenbach, Proxy Voting Services GmbH, as independent proxy, pursuant to article 9 of the Swiss Ordinance Against Excessive Compensation at Listed Corporations (the "Swiss Ordinance"), with full rights of substitution, by appointing the independent proxy and voting electronically or submitting a proxy card with your votes. The Swiss Ordinance prohibits from acting as proxies company officers (Organstimmrechtsvertretung) and institutions subject to the Swiss Federal Law on Banks and Savings Banks as well as professional asset managers that hold proxies for holders of record concerning deposited shares (Depotstimmrechtsvertretung). |
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The proxies granted to the independent proxy must be received no later than 5:00 p.m., Central European Time (12:00 p.m., Eastern Daylight Time) on March 12, 2019. A shareholder of record who gives a proxy may revoke it at any time before it is exercised by giving notice in person of the revocation and voting in person at the meeting, or, subject to timing limitations, by delivering a revocation letter and subsequent proxy card to the independent proxy. |
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With regard to the items listed on the agenda, or if new agenda items (other than those on the agenda) or new proposals or motions regarding agenda items set out in this Invitation to the Annual General Meeting are being put forth at the meeting, the independent proxy will vote in accordance with the specific instructions of the shareholder, or if selected by the shareholder in granting the proxy as a general instruction, in accordance with the recommendation of the company's Board of Directors at the meeting, or abstain from voting if the shareholder did not provide instructions. |
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Date of Availability: |
Our proxy materials are being made available on or about January 18, 2019 to each shareholder of record of TE Connectivity registered shares at the close of business (Eastern Standard Time) on January 9, 2019. |
By order of the Board of Directors,
Harold
G. Barksdale
Corporate Secretary
January ·, 2019
2019 Annual General Meeting Proxy Statement 3
PROXY STATEMENT
FOR THE ANNUAL GENERAL MEETING OF SHAREHOLDERS OF
TE CONNECTIVITY LTD.
TO BE HELD ON WEDNESDAY, MARCH 13, 2019
QUESTIONS AND ANSWERS ABOUT THIS PROXY STATEMENT AND VOTING
Why am I receiving these materials?
TE Connectivity's Board of Directors is soliciting your proxy to vote at the Annual General Meeting to be held at 2:00 p.m., Central European Time (9:00 a.m., Eastern Daylight Time), on March 13, 2019, at The Park Hyatt Zürich, Beethoven-Strasse 21, 8002 Zürich, Switzerland. The information provided in this proxy statement is for your use in determining how you will vote on the agenda items described within.
We have made available our proxy materials to each person who is registered as a holder of our shares in the register of shareholders (such owners are often referred to as "holders of record" or "record holders") as of the close of business (Eastern Standard Time) on January 9, 2019. We also will send a copy of the proxy materials, including the proxy card, to any holder of record who requests them in the manner set forth in the Notice and to any additional shareholders who become registered in our share register after the close of business (Eastern Standard Time) on January 9, 2019 and continue to be registered in our share register at the close of business (Eastern Standard Time) on February 21, 2019. Distribution to shareholders of the Notice of Internet Availability of Proxy Materials (the "Notice"), is scheduled to begin on or about January 18, 2019.
We have requested that banks, brokerage firms and other nominees who hold TE Connectivity shares on behalf of the owners of the shares (such owners are often referred to, and we refer to them below, as "beneficial owners," "beneficial shareholders" or "street name holders") as of the close of business (Eastern Standard Time) on January 9, 2019 forward the Notice to those beneficial shareholders and forward the proxy materials, along with a voting instruction card, for any additional beneficial owners who acquire their shares after January 9, 2019 and continue to hold them at the close of business (Eastern Standard Time) on February 21, 2019. We have agreed to pay the reasonable expenses of the banks, brokerage firms and other nominees for forwarding these materials. We also have provided for the proxy materials to be sent to persons who have interests in our shares through participation in our employee share purchase plans. These individuals are not eligible to vote directly at the Annual General Meeting, but they may instruct the trustees of these plans how to vote the shares represented by their interests. The proxy card also will serve as voting instructions for the trustees of the plans.
Are proxy materials available on the Internet?
Yes.
Important Notice Regarding the Availability of Proxy Materials for the Annual General Meeting to be Held on March 13, 2019.
Our proxy statement for the Annual General Meeting to be held on March 13, 2019, other proxy material and our annual report to shareholders for fiscal year 2018 is available at http://www.te.com/TEAnnualMeeting.
Under SEC rules, we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials to our shareholders registered in our share register as of the close of business (Eastern Standard Time) on January 9, 2019.
4 2019 Annual General Meeting Proxy Statement
All shareholders will have the ability to access the proxy materials on the website referred to in the Notice or to request to receive a printed set of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found in the Notice. The Notice also instructs you on how you may submit your proxy over the Internet or via mail. You will not receive a printed copy of the proxy materials unless you request one in the manner set forth in the Notice or you acquire your shares after January 9, 2019 and continue to be registered in our share register at the close of business (Eastern Standard Time) on February 21, 2019, in which case we will send you the proxy materials. This permits us to conserve natural resources and reduce our printing costs, while giving shareholders a convenient and efficient way to access our proxy materials and vote their shares. Our proxy materials are being made available on or about January 18, 2019.
What agenda items are scheduled to be voted on at the meeting?
The fifteen (15) agenda items scheduled for a vote are:
2019 Annual General Meeting Proxy Statement 5
fiscal quarter of 2019 and ending in the second fiscal quarter of 2020 pursuant to the terms of the dividend resolution;
What is the recommendation of the Board of Directors on each of the agenda items scheduled to be voted on at the meeting? How do the Board of Directors and executive officers intend to vote with respect to the agenda items?
TE Connectivity's Board of Directors recommends that you vote FOR each of the agenda items listed above as recommended by our Board of Directors. Our directors and executive officers have indicated that they intend to vote their shares in favor of each of the agenda items, except for Agenda Item No. 6 (Release of the Members of the Board of Directors and Executive Officers of TE Connectivity for Activities during the Fiscal Year ended September 28, 2018), where they are by law precluded from voting their shares. On January · , 2019, our directors and executive officers and their affiliates beneficially owned approximately · % of the outstanding shares.
What is the difference between being a shareholder of record and a beneficial owner?
If your shares are registered directly in your name in our share register operated by our stock transfer agent, you are considered the "shareholder of record" of those shares.
If your shares are held in a stock brokerage account or by a bank or other nominee on your behalf and the broker, bank or nominee is registered in our share register as a shareholder with voting rights, your broker, bank or other nominee is considered the shareholder of record and you are considered the "beneficial owner" or "street name holder" of those shares. In this case, the shareholder of record that is registered as a shareholder with voting rights has forwarded either the Notice or the proxy materials, as applicable, and separate voting instructions, to you. As the beneficial owner, you have the right to direct the shareholder of record how to vote your shares by following the voting instructions they have provided to you. Because you are not the shareholder of record, you may not vote your shares in person at the meeting unless you receive a valid proxy from your broker, bank or other nominee that holds your shares giving you the right to vote the shares in person at the meeting.
Shareholders of record
All shareholders registered in our share register at the close of business (Eastern Standard Time) on February 21, 2019 are entitled to vote on the matters set forth in this proxy statement and any other matter properly presented at the meeting for consideration, provided such shareholders become registered as shareholders with voting rights by that time. See "I am a shareholder of record. How do I become registered as a shareholder with voting rights?"
Beneficial owners
Beneficial owners whose banks, brokers or nominees are shareholders registered in our share register with respect to the beneficial owners' shares at the close of business (Eastern Standard Time) on February 21, 2019 are entitled to vote on the matters set forth in this proxy statement and any other matter properly presented at the meeting for consideration, provided such banks, brokers or nominees
6 2019 Annual General Meeting Proxy Statement
become registered as shareholders with voting rights. See "I am a shareholder of record. How do I become registered as a shareholder with voting rights?"
What if I am the record holder or beneficial owner of shares at the close of business (Eastern Standard Time) on January 9, 2019, but sell or otherwise transfer those shares before the close of business (Eastern Standard Time) on February 21, 2019?
Holders of record and beneficial owners will not be entitled to vote their shares or provide instructions to vote with respect to their shares if they hold shares at the close of business (Eastern Standard Time) on January 9, 2019 but sell or otherwise transfer those shares before the close of business (Eastern Standard Time) on February 21, 2019.
I am a shareholder of record. How do I become registered as a shareholder with voting rights?
If you are a shareholder of record, you have been registered as a shareholder with voting rights in our share register, unless in certain circumstances (such as failure to comply with particular disclosure requirements set forth in our articles of association) we have specifically advised you that you are registered as a shareholder without voting rights.
How do I attend the Annual General Meeting?
For admission to the meeting, shareholders and their authorized representatives must bring a valid government-issued photo identification, such as a driver's license or a passport. Shareholders of record with voting rights should bring the Notice or Admission Ticket they have received to the check-in area, where their ownership will be verified. Those who have beneficial ownership of registered shares held by a bank, brokerage firm or other nominee which has voting rights must bring to the check-in area a valid proxy from their banks, brokers or nominees showing that they own TE Connectivity registered shares as of the close of business (Eastern Standard Time) on February 21, 2019.
Registration at the meeting will begin at 1:00 p.m., Central European Time (8:00 a.m., Eastern Daylight Time) and close at 1:45 p.m., Central European Time (8:45 a.m., Eastern Daylight Time), and the meeting will begin at 2:00 p.m., Central European Time (9:00 a.m., Eastern Daylight Time). See "How do I vote if I am a shareholder of record?" and "How do I vote if I am a beneficial shareholder?" for a discussion of who is eligible and how to vote in person at the Annual General Meeting.
Security measures will be in place at the meeting to help ensure the safety of attendees. Cameras, sound recording devices, signs, photographs and visual displays are not permitted in the meeting without the prior permission of TE Connectivity. We reserve the right to inspect bags, backpacks, briefcases or other packages brought to the meeting. Cell phones and other sound transmitting devices must be turned off during the meeting.
How do I vote if I am a shareholder of record?
If you are a registered shareholder, you can vote in the following ways:
At the Annual General Meeting: If you are a shareholder of record with voting rights of TE Connectivity registered shares who plans to attend the Annual General Meeting and wishes to vote your shares in person, we will give you a ballot at the meeting.
Even if you plan to be present at the Annual General Meeting, we encourage you to vote by the Internet or complete and mail the proxy card to vote your shares by proxy. If you are a holder of record, you may still attend the Annual General Meeting and vote in person.
2019 Annual General Meeting Proxy Statement 7
By Internet: You can vote over the Internet at www.proxyvote.com by following the instructions in the Notice of Internet Availability of Proxy Materials previously sent to you or on the proxy card. By casting votes electronically, you will authorize the independent proxy, Dr. René Schwarzenbach, with full rights of substitution, to vote your shares on your behalf.
By Mail: You can vote by marking, dating and signing the proxy card (which will be sent to you at your request in accordance with instructions provided in the Notice) and returning it by mail for receipt by no later than indicated below. By marking, dating, signing and mailing the proxy card as instructed, you authorize the independent proxy, Dr. René Schwarzenbach, with full rights of substitution, to vote your shares on your behalf. If you vote by proxy card/mail, you will need to return via mail your completed proxy card to the independent proxy, Dr. René Schwarzenbach, Proxy Voting Services GmbH, in the postage pre-paid return envelope provided with the proxy card.
In order to assure that your votes are tabulated in time to be voted at the Annual General Meeting, you must vote electronically by 5:00 p.m., Central European Time (12:00 p.m., Eastern Daylight Time) on March 12, 2019, or submit your proxy card by mail so that it is received by 5:00 p.m., Central European Time (12:00 p.m., Eastern Daylight Time) on March 12, 2019.
If you have voted electronically or timely submitted a properly executed proxy card, your shares will be voted by the independent proxy as you have instructed. If any other matters are properly presented at the meeting, the independent proxy will either (i) vote the shares represented by your completed proxy in accordance with the specific instructions given by you, (ii) if selected by you in granting your proxy (as a general instruction), in accordance with the recommendation of the company's Board of Directors at the meeting, or (iii) if no instructions are given, abstain from voting your shares.
How do I vote if I am a beneficial shareholder?
General: If you hold your shares in street name, you should provide instructions to your bank or broker on how you wish your vote to be recorded by following the instructions on your voting instruction form supplied by your bank or broker with these proxy materials.
At the Annual General Meeting: If you are a shareholder who owns shares in street name, you are not entitled to vote in person at the Annual General Meeting unless you have a valid proxy, executed in your favor, from the bank, broker or nominee holder of record of your shares. We will then give you a ballot at the meeting.
Yes. If you are a shareholder of record, see the Internet voting instructions provided on the Notice or proxy card. If you are a beneficial owner, see the voting instruction card provided by your bank, broker or other nominee.
If you are a shareholder of record, you cannot vote by telephone. If you are a beneficial owner, see the voting instruction card provided by your broker, bank or other nominee for telephone voting instructions.
Can I appoint TE Connectivity officers as my proxy?
In accordance with Swiss regulations, shareholders may not appoint company officers as proxies.
8 2019 Annual General Meeting Proxy Statement
If my shares are held in "street name" by my broker, will my broker vote my shares for me?
We recommend that you contact your broker. Your broker can give you directions on how to instruct the broker to vote your shares. If you have not provided instructions to the broker, your broker will be able to vote your shares with respect to "routine" matters but not "non-routine" matters pursuant to New York Stock Exchange ("NYSE") rules. We believe the following agenda items will be considered non-routine under NYSE rules and therefore your broker will not be able to vote your shares with respect to these agenda items unless the broker receives appropriate instructions from you: Agenda Item No. 1 (Election of Directors), Agenda Item No. 2 (Election of Chairman of the Board), Agenda Item No. 3 (Election of Members of Management Development and Compensation Committee), Agenda Item No. 6 (Release of the Members of the Board of Directors and Executive Officers of TE Connectivity for Activities During the Fiscal Year Ended September 28, 2018), Agenda Item No. 8 (Advisory Vote to Approve Named Executive Officer Compensation), Agenda Item No. 9 (Binding Vote to Approve Fiscal Year 2020 Maximum Aggregate Compensation Amount for Executive Management), Agenda Item No. 10 (Binding Vote to Approve Fiscal Year 2020 Maximum Aggregate Compensation Amount for the Board of Directors).
What will happen if I don't vote my shares?
If you are a shareholder of record and you do not vote electronically or sign and return a proxy card with votes indicated, no votes will be cast on your behalf on any of the items of business at the meeting. If you are a shareholder of record and you return a signed proxy card but make no specific direction as to how your shares are to be voted, the independent proxy will vote your shares in accordance with the general instruction "FOR" each of the director nominees and "FOR" each of the other agenda items (including each subpart thereof) and in accordance with the recommendation of the Board of Directors.
If you are a beneficial shareholder and you do not provide voting instructions to your bank or broker, subject to any contractual arrangements, your bank or broker may vote your shares in its discretion on all agenda items except Agenda Item No. 1 (Election of Directors), Agenda Item No. 2 (Election of Chairman of the Board), Agenda Item No. 3 (Election of Members of Management Development and Compensation Committee), Agenda Item No. 6 (Release of the Members of the Board of Directors and Executive Officers of TE Connectivity for Activities During the Fiscal Year Ended September 28, 2018), Agenda Item No. 8 (Advisory Vote to Approve Named Executive Officer Compensation), Agenda Item No. 9 (Binding Vote to Approve Fiscal Year 2020 Maximum Aggregate Compensation Amount for Executive Management), Agenda Item No. 10 (Binding Vote to Approve Fiscal Year 2020 Maximum Aggregate Compensation Amount for the Board of Directors), and no votes will be cast on your behalf on Agenda Items No. 1, No. 2, No. 3, No. 6, No. 8, No. 9 and No. 10.
How many shares can vote at the Annual General Meeting?
Our registered shares are our only class of voting stock. As of January 9, 2019, there were · registered shares issued and outstanding and entitled to vote; however, shareholders who are not registered in our share register as shareholders or do not become registered as shareholders with voting rights as of the close of business (Eastern Standard Time) on February 21, 2019 will not be entitled to attend, vote at or grant proxies to vote at, the Annual General Meeting. See "I am a shareholder of record. How do I become registered as a shareholder with voting rights?" Shares duly represented at the Annual General Meeting will be entitled to one vote per share for each matter presented at the Annual General Meeting. Shareholders who are registered in our share register as of the close of business (Eastern Standard Time) on February 21, 2019 and who are registered with voting rights may vote in person at the Annual General Meeting as discussed under "How do I vote if I am a shareholder of record?At the Annual General Meeting."
2019 Annual General Meeting Proxy Statement 9
What quorum is required for the Annual General Meeting?
The presence, in person or by proxy, of at least the majority of the registered shares entitled to vote constitutes a quorum for the conduct of business at the Annual General Meeting.
What vote is required for approval of each agenda item and what is the effect of broker non-votes and abstentions?
The following agenda items require the affirmative vote of a majority of the votes cast at the Annual General Meeting, whether in person or by proxy. A majority means at least half plus one additional vote of the votes which are cast at a general meeting of shareholders.
10 2019 Annual General Meeting Proxy Statement
The following agenda item requires the affirmative vote of a majority of the votes cast at the Annual General Meeting, whether in person or by proxy, not counting the votes of any member of the Board of Directors or any executive officer of TE Connectivity.
Registered shares which are represented by broker non-votes (which occur when a broker holding shares for a beneficial owner does not vote on a particular agenda item because the broker does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner) and registered shares which are cast as abstentions on any matter, are counted towards the determination of a quorum but will not be counted as a vote cast and will be disregarded and have no effect on the proposal.
Who will count the votes and certify the results?
An independent vote tabulator will count the votes. Broadridge Financial Solutions has been appointed by the Board of Directors as the independent inspector of election and will determine the existence of a quorum, validity of proxies and ballots, and certify the results of the voting.
If I vote and then want to change or revoke my vote, may I?
If you are a shareholder of record and have (i) voted via the Internet, you may change your vote and revoke your proxy by submitting subsequent voting instructions via the Internet by the deadline for Internet voting; (ii) submitted a proxy card to the independent proxy, you may change or revoke your vote by submitting a revocation letter and new proxy card directly to the independent proxy so that it is received by no later than 5:00 p.m., Central European Time (12:00 p.m., Eastern Daylight Time) on March 12, 2019; or (iii) either voted via the Internet or submitted a proxy card to the independent proxy, you may appear in person at the meeting and give notice in person of the revocation of your prior vote by the applicable method and vote in person by ballot.
Written revocations to the independent proxy should be directed to the following address: Dr. René Schwarzenbach, Proxy Voting Services GmbH, Grossmunsterplatz 1, Postfach 173, CH-8024 Zurich, Switzerland.
Your presence without voting at the meeting will not automatically revoke your proxy, and any revocation during the meeting will not affect votes previously taken at the meeting.
If your shares are held in a stock brokerage account or by a bank or other nominee on your behalf, follow the voting instructions provided to you with these materials to determine how you may change your vote.
Can I sell my shares before the meeting if I have voted?
Yes. TE Connectivity does not block the transfer of shares before the meeting. However, unless you are a shareholder of record with voting rights at the close of business (Eastern Standard Time) on February 21, 2019, your vote will not be counted.
Are shareholders permitted to ask questions at the meeting?
During the Annual General Meeting, shareholders may ask questions or make comments relating to agenda items when permitted by the moderator.
2019 Annual General Meeting Proxy Statement 11
Whom may I contact for assistance?
You should contact D. F. King & Co., Inc., whom we have engaged as a proxy solicitor for the Annual General Meeting. The contact information for D. F. King is below:
D.
F. King & Co., Inc.
(800) 848-3402 (US callers only)
+1 (212) 269-5550
Email: TEL@dfking.com (reference TE Connectivity in the subject line)
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of outstanding shares of TE Connectivity beneficially owned as of December 11, 2018 by each current director and nominee, each executive officer named in the Summary Compensation table and all of our executive officers, directors and nominees as a group. The address of our executive officers, directors and nominees is c/o TE Connectivity, 1050 Westlakes Drive, Berwyn, Pennsylvania 19312.
Beneficial Owner
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Number of Shares Beneficially Owned(1) |
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Directors, Nominees and Executive Officers: |
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Terrence R. Curtin(2)(3)(4) |
610,284 | |||
John S. Jenkins, Jr.(2)(4) |
133,264 | |||
Steven T. Merkt(2)(4) |
179,207 | |||
Heath A. Mitts(2)(4) |
67,383 | |||
Kevin N. Rock(2)(4)(5) |
219,649 | |||
Pierre R. Brondeau(3) |
35,203 | |||
Carol A. ("John") Davidson(3) |
10,373 | |||
William A. Jeffrey(3) |
16,502 | |||
David M. Kerko(6) |
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Thomas J. Lynch(2)(3)(4)(8) |
695,214 | |||
Yong Nam(3) |
16,278 | |||
Daniel J. Phelan(3) |
33,356 | |||
Paula A. Sneed(3) |
36,333 | |||
Abhijit Y. Talwalkar(3) |
5,867 | |||
Mark C. Trudeau(3) |
6,773 | |||
John C. Van Scoter(7)(9) |
36,675 | |||
Laura H. Wright(3) |
10,725 | |||
All directors, nominees and executive officers as a group (23 persons)(4)(5)(8)(9) |
2,642,286 |
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Mr. Jenkins116,587; Mr. Merkt176,124; Mr. Mitts54,475; Mr. Rock177,149; Mr. Lynch547,650; all executive officers as a group2,048,605.
The following table sets forth the information indicated for persons or groups known to us to be beneficial owners of more than 5% of our outstanding shares beneficially owned as of December 11, 2018.
Name and Address of Beneficial Owner
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Number of Shares |
Percentage of Class |
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Harris Associates L.P.(1) |
25,536,233 | 7.4 | % | ||||
Dodge & Cox(2) |
24,697,064 |
7.2 |
% |
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The Vanguard Group(3) |
23,834,061 |
6.9 |
% |
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Capital World Investors(4) |
17,471,631 |
5.1 |
% |
14 2019 Annual General Meeting Proxy Statement
AGENDA ITEM NO. 1ELECTION OF DIRECTORS
Motion Proposed by the Board of Directors
At the Annual General Meeting, upon the recommendation of the Nominating, Governance and Compliance Committee, the Board of Directors proposes twelve (12) nominees for individual election as directors to hold office until the Annual General Meeting of shareholders in 2020. Eleven nominees are current directors of TE Connectivity Ltd., and one nominee, Mr. Kerko, is not a current director of TE Connectivity Ltd. All nominees are listed below with brief biographies.
Vote Requirement to Elect Directors
The approval of a majority of the votes cast at the meeting, whether in person or by proxy, is required for approval of the election of each of the twelve (12) nominees for director.
The Board of Directors recommends a vote "FOR" the election of each of the twelve (12) nominees for director.
Qualifications of Nominees Recommended by the Board of Directors
The board as a whole is constituted to be strong in its collective knowledge of and diversity of experience in accounting and finance, management and leadership, vision and strategy, business operations, business judgment, crisis management, risk assessment, industry knowledge, corporate governance and global markets. The Nominating, Governance and Compliance Committee designs searches for candidates to fill vacancies on the board and makes recommendations for director nominations to the board. When preparing to search for a new director, the committee takes into account the experience, qualifications, skills and expertise of the board's current members. The committee seeks candidates who have a history of achievement and leadership and are experienced in areas relevant to the company's business such as international trade, finance, technology, manufacturing processes and marketing. The committee also considers independence, as defined by applicable law, stock exchange listing standards and the categorical standards listed in the company's Board Governance Principles, which are set forth in the "Board Organization and Independence of its Members" section of the Principles, and which can be found on the company's website at https://www.te.com/usa-en/about-te/our-company/leadership.html.
The professional experience, qualifications, skills and expertise of each nominee is set forth below. The Board and the company believe that all nominees possess additional qualities, business knowledge and personal attributes valuable to their service on the Board and that all have demonstrated commitment to ethical and moral values and personal and professional integrity.
Pierre R. Brondeau, 61, joined our Board of Directors in June 2007, immediately following our separation from Tyco International Ltd. ("Tyco International") and has been Lead Independent Director of the board since March 2015. Dr. Brondeau has been President, Chief Executive Officer and a Director of FMC Corporation, a global chemical company, since January 2010 and has served as Chairman of its Board of Directors since October 2010. Prior to joining FMC Corporation, he was President and Chief Executive Officer of Dow Advanced Materials, a manufacturer of specialty materials and a wholly-owned subsidiary of the Dow Chemical Company, upon the April 2009 merger of Rohm & Haas Company and Dow Chemical Company, until September 2009. From 2008 to 2009, Dr. Brondeau served as President and Chief Operating Officer of Rohm & Haas Company and from 2006 to 2008, as Executive Vice President of electronics materials and specialty materials of Rohm & Haas Company. He also has served as Vice-President, Business Group Executive, Electronic Materials,
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President and Chief Executive Officer, Rohm & Haas Electronic Materials LLC, and Regional Director, Europe, from 2003 to 2006, and previously as Vice-President, Business Group Director, Electronic Materials, President and Chief Executive Officer, Shipley Company, LLC, from 1999 to 2003. Dr. Brondeau received a master's degree from Universite de Montpellier and a Doctorate from Institut National des Sciences appliquees de Toulouse. Dr. Brondeau served as a Director of Marathon Oil Corporation until March 2016. Dr. Brondeau serves as Chairman of the Board of Livent Corporation, which is among FMC Corporation's consolidated group of companies, since October 2018.
Dr. Brondeau has over 24 years of executive leadership experience, including 19 years of senior executive experience, at large multi-national public companies engaged in the specialty materials and chemicals industries. He has over 29 years of international business experience in the United States and Europe, and significant expertise in finance and mergers and acquisitions, as well as other areas of business.
Terrence R. Curtin, 50, joined our Board of Directors in March 2016. Mr. Curtin has served as the Chief Executive Officer of TE Connectivity since March 2017. Previously Mr. Curtin served as President of TE Connectivity from March 2015 and immediately prior to that served as Executive Vice President and President, Industrial Solutions since August 2012. Previously he served as Executive Vice President and Chief Financial Officer from October 2006 through July 2012. Mr. Curtin served on the TE Connectivity Board prior to our separation from Tyco International and was Vice President and Corporate Controller at Tyco Electronics since 2001. Prior to joining TE Connectivity, Mr. Curtin worked for Arthur Andersen LLP. He is a member of the U.S.-China Business Council since June 2018. Mr. Curtin has a Bachelor's degree in Accounting from Albright College.
Mr. Curtin has extensive knowledge of our company and executive leadership experience having served as an employee of ours since 2001 and in executive leadership positions at TE Connectivity since 2006 including having served as our Chief Executive Officer since March 2017. In his prior role as President, Mr. Curtin was responsible for all of TE's connectivity and sensor businesses and mergers and acquisitions activities. In his prior role as President, Industrial Solutions, Mr. Curtin was responsible for the operations and strategic direction of TE's Industrial, Energy, and Aerospace, Defense, Oil and Gas businesses. As TE's Executive Vice President and Chief Financial Officer, Mr. Curtin was responsible for developing and implementing the financial strategy for TE and for creating the financial infrastructure necessary to drive the company's financial direction, vision and compliance initiatives. Before joining TE, Mr. Curtin was employed by Arthur Andersen LLP where he served in the audit and accounting advisory services group with a focus on large multinational public companies. Mr. Curtin is also a Certified Public Accountant. Mr. Curtin's extensive background and knowledge of TE and his background in finance and accounting make him well suited to serve on the Board of Directors.
Carol A. ("John") Davidson, 63, joined our Board of Directors in March 2016. From January 2004 to September 2012, Mr. Davidson served as the Senior Vice President, Controller and Chief Accounting Officer of Tyco International Ltd., a provider of diversified industrial products and services. Between 1997 and 2004, Mr. Davidson held a variety of leadership roles at Dell Inc., a computer and technology services company, including the positions of Vice President, Audit, Risk and Compliance, and Vice President, Corporate Controller. From 1981 to 1997, Mr. Davidson held a variety of accounting and financial leadership roles at Eastman Kodak Company, a provider of imaging technology products and services. He holds a Bachelor of Science in Accounting from St. John Fisher College and an MBA from the University of Rochester. Mr. Davidson is a director of Legg Mason, Inc. and Allergan plc. Previously he was a director of DaVita Inc. until March 2018 and of Pentair plc until May 2018.
Mr. Davidson is a Certified Public Accountant with more than 35 years of leadership experience across multiple industries and brings a strong track record of building and leading global teams and
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implementing governance and controls processes. From January 2013 to August 2018 he served on the Board of Governors of the Financial Industry Regulatory Authority (FINRA), an independent regulator of securities firms. In addition, until December 2015, he was a member of the Board of Trustees of the Financial Accounting Foundation which oversees financial accounting and reporting standards setting processes for the United States. Mr. Davidson's significant experience with complex accounting and financial issues combined with his knowledge of public reporting requirements and processes bring accounting and financial management insight to the Board. Mr. Davidson meets the SEC definition of audit committee financial expert and brings eight years of public company directorship experience to the Board.
The Honorable Dr. William A. Jeffrey, 59, joined our Board of Directors in March 2012. Since September 2014, Dr. Jeffrey has been Chief Executive Officer of SRI International, a research and development organization serving government and industry. From September 2008 through August 2014, Dr. Jeffrey was Chief Executive Officer and President of HRL Laboratories, LLC, an automotive, aerospace and defense research and development laboratory. From 2007 through 2008, he was the Director of the Science and Technology Division of the Institute for Defense Analyses and prior to that he was Director of the National Institute of Standards and Technology from 2005. From 2002 to 2005, Dr. Jeffrey served in the White House as Senior Director of Homeland and National Security and Assistant Director of Space and Aeronautics in the Executive Office of the President, Office of Science and Technology Policy. He began his career at the Institute for Defense Analyses in 1988. Dr. Jeffrey holds a Ph.D. and master's degree in Astronomy from Harvard University and a bachelor of science degree in physics from Massachusetts Institute of Technology.
Dr. Jeffrey brings exceptional technical and scientific expertise and leadership experience to the Board as CEO of a private technology research organization with broad technical experience relevant to TE's major markets as well as in innovation strategies, particularly as related to research and development. He has almost 20 years of government executive experience and experience in U.S. public policy.
David M. Kerko, 45, is a nominee for director. From 2015 to 2017, he was Advisor to KKR & Co., L.P. From 2010 to 2015, Mr. Kerko was a Member at KKR and served as Co-head of the Technology Group from 2013 to 2015. Mr. Kerko joined KKR in 1998 and played an active role building the firm's technology platform from 2006 to 2015. At KKR, Mr. Kerko was involved in a broad range of investments, including but not limited to Broadcom Ltd. (NASDAQ: AVGO), a semiconductor manufacturer, Magic Leap, a virtual reality hardware manufacturer, Marvell Technology Group (NASDAQ: MRVL), a producer of storage, communications and consumer semiconductor products, NXP Semiconductors (NASDAQ: NXPI), a semiconductor manufacturer, and Sonos, Inc., a manufacturer of digital sound systems. From 2018, Mr. Kerko has served as a director of Global Foundries, a privately held semiconductor manufacturer. From 2018, Mr. Kerko has served as a director of Nebula Acquisition, a publicly traded special purpose acquisition company. From 2015, Mr. Kerko has served as a director of Transphorm, Inc., a designer and manufacturer of gallium nitride field effect transistors, and from 2014 he has served as a director of Savant Systems, LLC, a luxury smart home technology company. Mr. Kerko was a director of The Analytic Sciences Corporation (TASC), an engineering services company, from 2009 until 2015. From 2015, Mr. Kerko has served as a director of Engility Holdings, Inc., a publicly traded engineering services company. Prior to joining KKR, Mr. Kerko was with Gleacher NatWest Inc. where he was involved in mergers and acquisition transactions and financing work. Mr. Kerko holds a B.S. from the Wharton School at the University of Pennsylvania and a B.S.E., summa cum laude, from the School of Engineering and Applied Science at the University of Pennsylvania.
Mr. Kerko is well qualified to serve on our Board of Directors due to his significant experience advising emerging and established companies with respect to strategic planning, corporate finance, manufacturing and operations, global business management and public markets strategy, particularly in
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the technology industry, as well as his service on the boards of directors of several public and private companies.
Thomas J. Lynch, 64, was appointed Chairman of our Board of Directors on January 7, 2013 and has served on our Board of Directors since early 2007. Mr. Lynch has served as the Non-Executive Chairman of TE Connectivity since March 2018 and was Executive Chairman from March 2017. He served as Chief Executive Officer of TE Connectivity from January 2006 to March 2017. Previously, he was President of Tyco Engineered Products and Services since joining Tyco International in September 2004. Prior to joining Tyco International, Mr. Lynch was at Motorola where he was Executive Vice President and President and Chief Executive Officer, Personal Communications Sector from August 2002 to September 2004; Executive Vice President and President, Integrated Electronic Systems Sector from January 2001 to August 2002; Senior Vice President and General Manager, Satellite & Broadcast Network Systems, Broadband Communications Sector from February 2000 to January 2001; and Senior Vice President and General Manager, Satellite & Broadcast Network Systems, General Instrument Corporation from May 1998 to February 2000. Mr. Lynch holds a Bachelor of Science degree in commerce from Rider University. Mr. Lynch is a Director of Thermo Fisher Scientific Inc., Cummins Inc. and Automatic Data Processing, Inc. and is on the boards of trustees for The Franklin Institute, Philadelphia, PA, and Rider University, Lawrenceville, NJ.
Mr. Lynch has extensive executive leadership experience in the electronics industry, having served as our chief executive officer for eleven years and, before that, as lead executive of business units at the company's former parent. He has gained international expertise through management of the company's world-wide presence and as a member of the U.S.-China Business Council through June 2018. Mr. Lynch's education in accounting and commerce and experience on the audit, compensation and nominating committees of the boards of other large corporations provide him with valuable perspective for service on our Board.
Yong Nam, 70, joined our Board of Directors in March 2012. Since April 2013, Mr. Nam has served as an advisor to the chief executive officer of Daelim Industrial Co. Ltd., the engineering, construction and petrochemical operations affiliate of Daelim Group, a Korean company. From April 2011 until March 2015, he served as an advisor to LG Electronics, Inc., a global provider of consumer electronics, mobile communications and home appliances. From 2007 through March 2011, Mr. Nam served as Vice Chairman and Chief Executive Officer of LG Electronics. He previously served as President of LG Corp., the global conglomerate of the LG group of companies, from 2006 to 2007, and as Chief Executive Officer of LG Telecom from 1998 until 2006. Mr. Nam's 35 year career with LG began in 1976. Mr. Nam received a bachelor's degree in economics from Seoul National University. Mr. Nam was a Director of ADT Caps Korea, a commercial and residential security services provider, until September 2018 and previously served as a director of GS Retail, a South Korean retailer, until May 2014 and Pohang Iron and Steel Company (POSCO) until March 2013. Mr. Nam has over 39 years of international business experience in the United States and Asia with a global conglomerate where his responsibilities and focus have included strategy, marketing, information technology and operations.
Mr. Nam's experience in the corporate office, telecommunications and electronics industries includes 23 years of executive leadership, of which he spent 12 years in CEO positions and four years as vice chairman. Mr. Nam's global business perspective makes him a valuable contributor to the vision of the company.
Daniel J. Phelan, 69, joined our Board of Directors in June 2007, immediately following our separation from Tyco International. Mr. Phelan was Chief of Staff of GlaxoSmithKline, a manufacturer of pharmaceuticals, vaccines and consumer health-related products, from 2008 until his retirement in December 2012, following which he consulted for GlaxoSmithKline until the end of 2013. He was Senior Vice President of Human Resources of GlaxoSmithKline from 1994 to 2008. As Chief of Staff,
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Mr. Phelan was responsible for information technology, human resources, corporate strategy and development, worldwide real estate and facilities, environmental health and safety, and global security. Mr. Phelan received bachelor's and law degrees from Rutgers University and a master's degree from Ohio State University. Mr. Phelan is a Director of Indivior PLC and is chairman of its Remuneration Committee.
Mr. Phelan brings a range of valuable expertise to the Board. He was chief of staff of a large global health products and pharmaceuticals manufacturer and served for over 18 years in executive positions where his responsibilities have included information technology, human resource management, strategy, real estate, environmental concerns and global security. In addition, he holds a law degree and has experience advising chief executives, as well as experience in labor law and labor relations and employment law and practice, executive compensation, mergers, acquisitions and divestitures, succession planning, leadership development and education, international business and pension and benefits design and management.
Paula A. Sneed, 71, joined our Board of Directors in June 2007, immediately following our separation from Tyco International. Ms. Sneed is Chair and Chief Executive Officer of Phelps Prescott Group, LLC, a strategy and management consulting firm, since 2008. Previously, she was Executive Vice President of Global Marketing Resources and Initiatives for Kraft Foods, Inc., a worldwide producer of branded food and beverage products, until her retirement in December 2006. She served as Group Vice President and President of Electronic-Commerce and Marketing Services for Kraft Foods North America, part of Kraft Foods, Inc., from 2000 until 2004, and Senior Vice President, Global Marketing Resources and Initiatives from December 2004 to July 2005. She joined General Foods Corporation (which later merged with Kraft Foods) in 1977 and held a variety of marketing, general management and executive positions, including leading operating divisions and sectors. Ms. Sneed received a bachelor's degree from Simmons University and an MBA from Harvard Graduate School of Business. Ms. Sneed is a Director of Charles Schwab Corporation and Berry Global Group, Inc. and served as a Director of Airgas, Inc. until May 2016.
Ms. Sneed brings proven leadership in strategy development as CEO of a strategy and management consulting firm for eleven years, and previously as the executive vice president managing a global marketing function and several business divisions of a large public company for over 14 years. For over 25 years, in a global organization, she demonstrated expertise in all aspects of marketing and general management. She has over 40 years of experience in corporate and non-profit leadership roles. Ms. Sneed also has over 24 years of corporate director experience including service on audit, compensation and nominating and governance committees, bringing valuable insight to our Board, and has a master's degree in business administration.
Abhijit Y. Talwalkar, 54, joined our Board of Directors in March 2017. He is the former President and Chief Executive Officer of LSI Corporation, a leading provider of silicon, systems and software technologies for the storage and networking markets, a position he held from May 2005 until the completion of LSI's merger with Avago Technologies in May 2014. From 1993 to 2005, Mr. Talwalkar was employed by Intel Corporation, the largest semiconductor manufacturer in the industry. At Intel, he held a number of senior management positions, including Corporate Vice President and Co-General Manager of the Digital Enterprise Group, which was comprised of Intel's business client, server, storage and communications businesses, and as Vice President and General Manager for the Intel Enterprise Platform Group, where he focused on developing, marketing, and driving Intel business strategies for enterprise computing. Prior to joining Intel, Mr. Talwalkar held senior engineering and marketing positions at Sequent Computer Systems, a multiprocessing computer systems design and manufacturer that later became a part of IBM; Bipolar Integrated Technology, Inc., a VLSI bipolar semiconductor company; and Lattice Semiconductor Inc., a service driven developer of programmable design solutions widely used in electronic systems. Mr. Talwalkar has a B.S. degree in electrical engineering from Oregon State University. Mr. Talwalkar served as a member of the board of directors
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of LSI Corporation from May 2005 to May 2014 and the U.S. Semiconductor Industry Association, a semiconductor industry trade association from May 2005 to May 2014. He was additionally a member of the U.S. delegation for World Semiconductor Council proceedings. Since 2011, Mr. Talwalkar has served on the board of directors of Lam Research Corporation and became Lam's Lead Independent Director in August of 2015. He is the current chair of the Nominating and Governance committee and presided as Chair of the Compensation Committee from 2012 to 2015. Since May 2016, Mr. Talwalkar has been serving as the Chairman of the Board for iRhythm Technologies, a healthcare technology company that specializes in cardiac monitoring and the diagnoses of arrhythmias and is a director of Advanced Micro Devices, Inc., a global semiconductor company since June 2017.
Mr. Talwalkar brings experience as a public company executive officer and director, along with a proven record of executive leadership including ten years as a chief executive officer. His experience in marketing, mergers and acquisitions and other business and operations experience will bring relevant insight to the Board.
Mark C. Trudeau, 57, joined our Board of Directors in March 2016. Since June 2013, Mr. Trudeau has been President, Chief Executive Officer and a director of Mallinckrodt plc, a global business that develops, manufactures, markets and distributes specialty pharmaceuticals and therapies. Prior to that, Mr. Trudeau served as Senior Vice President and President of the Pharmaceuticals business of Covidien plc beginning in February 2012. He joined Covidien from Bayer HealthCare Pharmaceuticals LLC USA, the U.S. healthcare business of Bayer AG, where he served as Chief Executive Officer. He simultaneously served as President of Bayer HealthCare Pharmaceuticals, the U.S. organization of Bayer's global pharmaceuticals business. In addition, he served as Interim President of the global specialty medicine business unit from January to August 2010. Prior to joining Bayer in 2009, Mr. Trudeau headed the immuno-science Division at Bristol-Myers Squibb. During his 10-plus years at Bristol-Myers Squibb, he served in multiple senior roles, including President of the Asia/Pacific region, President and General Manager of Canada and General Manager/Managing Director in the United Kingdom. Mr. Trudeau also served in a variety of executive positions at Abbott Laboratories from 1988 to 1998. Mr. Trudeau holds a Bachelor's degree in Chemical Engineering and an MBA, both from the University of Michigan.
Mr. Trudeau brings experience as a public company executive officer and director, along with a proven record of executive leadership and strong global business expertise including in the areas of strategy, operations and management, as well as other areas of business. Mr. Trudeau has over 28 years of leadership positions at global companies which makes him well suited to provide valuable insight to our board and meets the SEC definition of an audit committee financial expert.
Laura H. Wright, 58, joined our Board of Directors in March 2014. Since her retirement in 2012 as Chief Financial Officer of Southwest Airlines, a provider of air transportation in the United States, she founded GSB Advisors, to provide strategic and financial consulting to growth and non-profit companies. During her 25 year career at Southwest, she served in a variety of financial roles including Chief Financial Officer, Senior Vice President Finance, Treasurer and Assistant Treasurer. She began her career at Arthur Young & Co. in 1982 as a member of their tax staff, following which she became a Tax Manager from 1986 through 1988. Ms. Wright holds bachelor and master of science degrees in accounting from the University of North Texas. Since February 2018 she has served as a director of Spirit AeroSystems Holdings, Inc., a manufacturer of large structural components for commercial and military aircraft and serves on the Board of CMS Energy, a publicly traded company and its subsidiary Consumers Energy, since February 2013. She is also a Trustee of Pebblebrook Hotel Trust, a publicly traded hotel and real estate investment trust since 2009.
Ms. Wright brings 26 years of large public company leadership experience, including nine as Chief Financial Officer and six as Treasurer. As a former Chief Financial Officer and Treasurer, she brings finance experience, including corporate financial reporting, risk management, capital markets, investor
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relations, tax, strategy, and mergers and acquisitions to the Board. She also brings nine years of public company directorship experience to the Board and meets the SEC definition of an audit committee financial expert. In accordance with the rules of the NYSE, the Board of Directors has determined that Ms. Wright's simultaneous service on the audit committees of Spirit AeroSystems Holdings, Inc., CMS Energy and Consumers Energy (a publicly traded subsidiary of CMS Energy) does not impair her ability to effectively serve also on our Audit Committee.
The Board of Directors has concluded that the experience, qualifications, skills and expertise described above qualify the nominees to serve as Directors of the company.
The Nominating, Governance and Compliance Committee regularly reviews the composition of the Board in light of the company's businesses, strategic plan, structure and the current global business and economic environment. The Board demands the highest standards of individual and corporate integrity and is dedicated to diversity, fair treatment, mutual respect and trust. Although the Board does not have a specific board diversity policy, it is constituted of individuals possessing diverse business experience, education, vision, and industry and global market knowledge.
The Nominating, Governance and Compliance Committee will consider all shareholder recommendations for candidates for the Board, which should be sent to the Nominating, Governance and Compliance Committee, c/o Harold G. Barksdale, Secretary, TE Connectivity, Rheinstrasse 20, CH-8200 Schaffhausen, Switzerland. In addition to considering candidates suggested by shareholders, the committee considers candidates recommended by current directors, company officers, employees and others. The committee screens all candidates in the same manner regardless of the source of the recommendation. The committee's review is typically based on any written materials provided with respect to the candidate. The committee determines whether the candidate meets the company's general qualifications and specific qualities and skills for directors (see "Qualifications of Nominees Recommended by the Board of Directors" above) and whether requesting additional information or an interview is appropriate.
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The company's Board Governance Principles, which include guidelines for determining director independence and qualifications for directors, can be found on the company's website at https://www.te.com/usa-en/about-te/our-company/leadership.html. Corporate governance developments are regularly reviewed by the Board in order to appropriately modify the Board Governance Principles, committee charters and policies.
To conduct its business the Board maintains three standing committees: Audit, Management Development and Compensation, and Nominating, Governance and Compliance, each of which are comprised entirely of independent directors. The Nominating, Governance and Compliance Committee recommends to shareholders, for election, the Chairman of the Board of Directors, and the directors assigned to the Management Development and Compensation Committee.
Assignment to, and the chair of, the Audit Committee, and the chair of the Management Development and Compensation Committee, are recommended by the Nominating, Governance and Compliance Committee for election by the Board. The independent directors as a group elect the members and the chair of the Nominating, Governance and Compliance Committee.
The Nominating, Governance and Compliance Committee reviews the Board's organization annually and recommends appropriate changes to the Board. The Board determines the appropriate leadership structure for the company, subject to shareholder approval of the Chairman of the Board.
Annually, the Nominating, Governance and Compliance Committee coordinates an evaluation and assessment of the Board's performance and procedures, including its organization, governance structure and effectiveness. As part of the Board leadership and succession planning completed for fiscal year 2012, the Board of Directors elected Thomas Lynch as Chairman of the Board and also created and elected a Lead Independent Director on January 7, 2013. Pierre Brondeau has served as our Lead Independent Director since December 2014.
In electing Dr. Brondeau as Lead Independent Director, the Board determined his depth of experience in industrial companies, global leadership abilities, tenure on the Board and grasp of the principal challenges and opportunities facing the company would facilitate the board's continued consideration and deliberation of matters most critical to the company, while maintaining the company's strong commitment to independent governance.
In order to provide an effective counterbalancing governance structure, the Board has appointed a Lead Independent Director, whose duties include:
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In fiscal year 2015, as part of the Board of Director's succession planning, Terrence Curtin was appointed President of the company and elected to the Board of Directors by shareholders at the annual shareholders meeting on March 2, 2016. On September 29, 2016, the Board of Directors appointed Mr. Curtin to succeed Mr. Lynch as Chief Executive Officer of TE Connectivity Ltd. and appointed Mr. Lynch to continue as the Executive Chairman of the Company effective March 8, 2017, thereby causing the positions of the Chairman of the Board and Chief Executive Officer to be split between Messrs. Lynch and Curtin. On December 14, 2017, Mr. Lynch announced his retirement as Executive Chairman of the Company effective March 14, 2018. Upon election by shareholders on March 14, 2018, Mr. Lynch has served as the Non-Executive Chairman of the Board of Directors.
In nominating Mr. Lynch to serve as Non-Executive Chairman of the Board of Directors, the Board determined his deep knowledge of the company's operations, strategy and risk management practices and appreciation of the principal challenges and opportunities facing the company best position him to serve as Chairman.
The Board is normally constituted of between ten and thirteen directors and is comprised of a substantial majority of independent directors. All directors are annually elected by a majority of share votes cast at the annual general meeting of shareholders.
Board Oversight of Risk Management
The Board of Directors is responsible for appraising the company's major risks and overseeing that appropriate risk management and control procedures are in place. The Board must understand the risks facing the company as a function of its strategy, provide oversight of the processes put in place to identify and manage risk and manage those risks (for example, in relation to executive compensation and succession) that only the Board is positioned to manage. The Board is responsible for determining that senior executives take the appropriate steps to manage all major risks. Management has day-to-day responsibility for assessing and managing the company's particular exposures to risk.
The Audit Committee of the Board meets to review and discuss, as determined to be appropriate, with management, the internal auditor and the independent registered public accounting firm the company's major financial and accounting risk exposures and related policies and practices to assess and control such exposures, overseeing risks related to privacy and cyber-security, and assist the Board in fulfilling its oversight responsibilities regarding the company's policies and guidelines with respect to risk assessment and risk management.
The Management Development and Compensation Committee reviews the company's risks related to chief executive officer succession and succession plans for senior executives, overall compensation structure, incentive compensation plans and equity-based plans, policies and programs, severance programs, change-of-control agreements and benefit programs. The committee meets, as appropriate, with the internal and/or external auditors to discuss management and employee compliance with the compensation, incentive, severance and other benefit programs and policies under the committee's jurisdiction.
The Nominating, Governance and Compliance Committee reviews the company's policies and risks related to related person transactions required to be disclosed pursuant to U.S. securities rules, the effectiveness of the company's environmental, health and safety management program, the company's enterprise-wide risk assessment processes and the company's compliance programs.
The Board's role in risk oversight of the company is consistent with the company's leadership structure, with the CEO and other members of senior management having responsibility for assessing and managing the company's risk exposure, and the Board and its committees providing oversight in connection with those efforts.
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The Board has determined that ten of the twelve director nominees are independent. For a director to be considered independent, the Board must make an affirmative determination that a director meets the stringent guidelines for independence set by the Board. These guidelines either meet or exceed the NYSE listing standards' independence requirements. The guidelines include a determination that the director has no current or prior material relationships with TE Connectivity (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company), aside from his or her directorship, that could affect his or her judgment.
The independence guidelines also include the determination that certain limits to annual sales to or purchases from entities for which a director serves as an executive officer, and limits on direct compensation from the company for directors and certain family members (other than fees paid for board or committee service), are not exceeded and other restrictions.
Based on the review and recommendation by the Nominating, Governance and Compliance Committee, the Board analyzed the independence of each director nominee and determined that the following director nominees meet the standards of independence under our director independence guidelines and applicable NYSE listing standards, and that each of them is free of any relationship that would interfere with his or her individual exercise of independent judgment: Pierre R. Brondeau, Carol A. ("John") Davidson, William A. Jeffrey, David M. Kerko, Yong Nam, Daniel J. Phelan, Paula A. Sneed, Abhijit Y. Talwalkar, Mark C. Trudeau and Laura H. Wright. The Board also previously reached this independence determination for John C. Van Scoter who is not standing for re-election.
Guide to Ethical Conduct
All directors, officers and employees of TE Connectivity are required to review and affirm that they understand and are in compliance with the policies and principles contained in TE Connectivity's code of ethical conduct set forth in the company's manual, "Connecting with our Values: TE Connectivity Guide to Ethical Conduct." The guide is published in the TE Corporate Responsibility section of TE Connectivity's website under "GovernanceCompliance" at http://www.te.com/usa-en/about-te/corporate-responsibility/governance/ombudsman/ethical-conduct.html.
Directors are required to promptly inform the chair of the Nominating, Governance and Compliance Committee of actual or potential conflicts of interest.
TE Connectivity has an Office of the Ombudsman established by our Audit Committee which ensures a direct, confidential and impartial avenue to raise any concern or issue with compliance or ethics, including concerns about the company's accounting, internal accounting controls or auditing matters, with the Board. The office is designed to field compliance concerns from external constituenciesinvestors, suppliers and customersas well as TE Connectivity employees.
Reporting directly to the Audit Committee of the Board of Directors, the Ombudsman's office is independent of functional management. It seeks the fair, timely and impartial resolution of all compliance and ethics issues. Employees have a number of vehicles to raise issues within TE Connectivity, including a confidential, toll-free phone number and a confidential submission system via the Internet. Concerns also may be sent directly to the Board by mail or by email.
All concerns are received and promptly reviewed by the Ombudsman and are responded to as quickly as possible. All accounting, audit or control concerns are sent to, and will be addressed by, the Board's Audit Committee.
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Communicating Concerns to Directors
Any shareholder or interested party who wishes to contact members of the TE Connectivity Board of Directors, including the chairman or the non-management directors as a group, may do so by mailing written communications to:
TE
Connectivity Board of Directors
Attn: Ombudsman
1050 Westlakes Drive
Berwyn, PA 19312
USA
Inquiries and concerns also can be submitted anonymously and confidentially through the Ombudsman to the TE Connectivity Board of Directors by email to directors@te.com or through the Internet at http://www.te.com/usa-en/about-te/corporate-responsibility/governance/ombudsman.html.
Voting Standards for the Election of Directors
Directors are elected by an affirmative vote of a majority of the votes cast, in person or by proxy, at a general meeting of shareholders and serve until the next annual general meeting of shareholders. In an uncontested election of directors, any nominee for director who does not receive at least half plus one additional vote of the share votes cast at the meeting is not elected to the Board.
Voting Standards for Amendments to the Articles of Association
The articles of association may be amended, in whole or in part, by the Board, subject to approval by the affirmative vote of the holders of record:
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THE BOARD OF DIRECTORS AND BOARD COMMITTEES
The Board of Directors currently consists of twelve directors, eleven (11) of whom are nominees for election. John C. Van Scoter has decided not to stand for re-election. The Board held five meetings in fiscal year 2018. All of our directors attended over 75% of the meetings of the Board and the committees on which they served in fiscal 2018. It is the policy of the Board that directors are expected to attend the annual general meeting of shareholders. All twelve of the directors then serving attended the 2018 annual general meeting of shareholders.
An annual performance evaluation is conducted by the Board and each of its committees to determine whether they are functioning effectively. The Nominating, Governance and Compliance Committee plans and recommends to the Board the method of evaluation. In 2018 the Company's General Counsel was appointed by the Board to gather information from directors through individual discussions and interviews and to report results back to the Nominating, Governance and Compliance Committee for consideration of actions to be taken as a result of the evaluation.
The Board has adopted written charters for each of its three standing committees: the Audit Committee, the Management Development and Compensation Committee and the Nominating, Governance and Compliance Committee. The charters can be found on the company's website at https://www.te.com/usa-en/about-te/our-company/leadership.html.. Each Board committee reports to the Board on their activities at each regular Board meeting.
The Board has determined that all members of the Audit, Management Development and Compensation, and Nominating, Governance and Compliance Committees are independent and satisfy the relevant SEC, NYSE and TE Connectivity additional independence requirements for the members of such committees.
Consistent with their respective charters, the Board and its committees may retain their own advisors as they determine necessary to carry out their responsibilities.
The members of the Audit Committee are directors Laura Wright, who chairs the committee, John Davidson, Abhijit Talwalker and Mark Trudeau. The Board has determined that each of Ms. Wright and Messrs. Davidson and Trudeau are "audit committee financial experts," as defined under SEC rules. The Audit Committee primarily is concerned with the quality and integrity of the company's annual and quarterly financial statements, including its financial and accounting principles, policies and practices, and its internal control over financial reporting; the qualifications, independence and performance of the company's independent registered public accounting firm and lead audit partner and the company's Swiss registered auditor; review and oversight of the company's internal audit function; compliance with legal and regulatory requirements; review of financial and accounting risk exposure; overseeing risks related to privacy and cyber-security; assisting the Board in fulfilling its oversight responsibilities regarding the company's financial and accounting policies and processes with respect to risk assessment and risk management; and procedures for handling complaints regarding accounting or auditing matters. The committee also oversees the company Ombudsman and the company's Guide to Ethical Conduct. The Audit Committee met eleven times in fiscal year 2018. The committee's report appears on pages 70 - 71.
26 2019 Annual General Meeting Proxy Statement
Management Development and Compensation Committee
The members of the Management Development and Compensation Committee are directors Daniel Phelan, who chairs the committee, Paula Sneed and John Van Scoter. This committee is responsible to ensure succession of senior leadership; review plans for the development of the organization; review and approve compensation, benefits and human resources policies and objectives and whether the company's officers, directors and employees are compensated in accordance with these policies and objectives; review and approve compensation of the company's executive officers other than the Chief Executive Officer and recommend the Chief Executive Officer's compensation for approval by the independent members of the Board; and review and approve management incentive compensation policies and programs and equity compensation programs for employees. This committee met five times in fiscal year 2018. The committee's report appears on page 53. Additional information on the committee's processes and procedures for consideration of executive compensation are addressed in "Compensation Discussion and Analysis" which follows.
Nominating, Governance and Compliance Committee
The members of the Nominating, Governance and Compliance Committee are directors Pierre Brondeau, who chairs the committee, William Jeffrey and Yong Nam. This committee's responsibilities include the selection of director nominees for the Board and the development and review of our Board Governance Principles. The committee annually reviews director compensation and benefits in conjunction with the Management Development and Compensation Committee; oversees the annual self-evaluations of the Board and its committees, as well as director performance; and makes recommendations to the Board concerning the structure and membership of the Board committees. The committee also oversees our environmental, health and safety management system and compliance programs. This committee held six meetings in fiscal year 2018.
Meetings of Non-Management Directors
The non-management directors met without any management directors or employees present four times in fiscal year 2018. Dr. Brondeau, as the Lead Independent Director, presided at these meetings.
Non-Management Directors' Compensation in Fiscal 2018
Non-management directors' compensation is established collaboratively by the Nominating, Governance and Compliance and the Management Development and Compensation Committees. Compensation of non-management directors in fiscal year 2018 is described under "Compensation of Non-Employee Directors."
Non-Management Directors' Stock Ownership
To help align Board and shareholder interests, directors are encouraged to own, at a minimum, TE Connectivity stock or stock units equal to five times the annual cash retainer (a total of $450,000, based on the $90,000 annual cash retainer) within five years of joining the Board. Once a director satisfies the minimum stock ownership recommendation, the director will remain qualified, regardless of market fluctuations, under the guidelines unless the director sells shares of stock that were considered in determining that the ownership amount was met. Each non-employee director receives TE Connectivity common shares as the equity component of their compensation. As of fiscal 2018 year-end, all of the directors met, or in the case of Mr. Talwalkar, are on track to meeting, their stock ownership requirements.
2019 Annual General Meeting Proxy Statement 27
AGENDA ITEM NO. 2ELECTION OF THE CHAIRMAN
OF THE BOARD OF DIRECTORS
Motion Proposed by the Board of Directors
At the Annual General Meeting, upon the recommendation of the Nominating, Governance and Compliance Committee, the Board of Directors proposes Thomas J. Lynch for election as Chairman of the Board to hold office until the annual general meeting of shareholders in 2020.
Swiss regulations provide that shareholders must elect the chair of the company's Board of Directors. Mr. Lynch is the current Chairman of TE Connectivity Ltd. His biography appears above, as well as an explanation as to why the Board of Directors considers Mr. Lynch to be the most appropriate person to serve as Chairman. Effective March 14, 2018 Mr. Lynch retired as Executive Chairman of the Company and currently serves as Non-Executive Chairman of the Board of Directors.
In the event of a negative vote on this agenda item by shareholders, the Board of Directors will call an extraordinary general meeting of shareholders for re-consideration of this agenda item by shareholders.
Vote Requirement to Elect Chairman
The approval of a majority of the votes cast at the meeting, whether in person or by proxy, is required for approval of the election of the Chairman of the Board of Directors.
The Board of Directors recommends a vote "FOR" the election of Thomas J. Lynch as Chairman of the Board of Directors.
28 2019 Annual General Meeting Proxy Statement
AGENDA ITEM NO. 3ELECTION OF THE MEMBERS OF THE
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
Motion Proposed by the Board of Directors
At the Annual General Meeting, upon the recommendation of the Nominating, Governance and Compliance Committee, the Board of Directors proposes the election of each of Daniel J. Phelan, Paula A. Sneed, Abhijit Y. Talwalkar and Mark C. Trudeau individually as members of the Management Development and Compensation Committee to hold office until the annual general meeting of shareholders in 2020.
Swiss regulations provide that shareholders must individually elect the members of the Management Development and Compensation Committee of the company's Board of Directors. All of the nominees are current directors of TE Connectivity Ltd. Mr. Phelan and Ms. Sneed currently serve on the committee. The brief biographies of all nominees are listed above.
In the event of a negative vote on this agenda item by shareholders, the Board of Directors will call an extraordinary general meeting of shareholders for re-consideration of this agenda item by shareholders.
Vote Requirement to Elect Committee Members
The approval of a majority of the votes cast at the meeting, whether in person or by proxy, is required for approval of the individual election of each of the members of the Management Development and Compensation Committee.
The Board of Directors recommends a vote "FOR" the election of each of Daniel J. Phelan, Paula A. Sneed, Abhijit Y. Talwalkar and Mark C. Trudeau to the Management Development and Compensation Committee.
2019 Annual General Meeting Proxy Statement 29
The following table presents information with respect to our executive officers as of January · , 2019.
Name
|
Age | Position(s) | |||
---|---|---|---|---|---|
Terrence R. Curtin* |
50 |
Chief Executive Officer and Director |
|||
Mario Calastri |
61 |
Senior Vice President and Treasurer |
|||
John S. Jenkins, Jr. |
53 |
Executive Vice President and General Counsel |
|||
Shad W. Kroeger |
50 |
President, Communications Solutions |
|||
Steven T. Merkt |
51 |
President, Transportation Solutions |
|||
Heath A. Mitts |
47 |
Executive Vice President and Chief Financial Officer |
|||
Timothy J. Murphy |
51 |
Senior Vice President and Chief Human Resource Officer, Global Human Resources |
|||
Robert J. Ott |
57 |
Senior Vice President and Corporate Controller |
|||
Eric J. Resch |
61 |
Senior Vice President and Chief Tax Officer |
|||
Kevin N. Rock |
61 |
President, Industrial Solutions |
|||
Joan E. Wainwright |
58 |
President, Channel and Customer Experience |
Mario Calastri has been Senior Vice President and Treasurer of TE Connectivity since our separation from Tyco International in June 2007 and he served on the TE Connectivity Board prior to the separation. He served as interim Chief Financial Officer of TE Connectivity from March 2016 to September 2016. Mr. Calastri was Vice President and Assistant Treasurer of Tyco International between 2005 and June 2007. Prior to joining Tyco International, Mr. Calastri was Vice President, Finance and Planning for IBM Global Financing EMEA in 2004 and Assistant Treasurer of IBM Corporation from 1999 to 2003.
John S. Jenkins, Jr. has been Executive Vice President and General Counsel at TE Connectivity since October 2012. Additionally, beginning in 2017 Mr. Jenkins assumed responsibility for bringing TE's industry-leading connectivity solutions, engineering, and operations to the emerging markets with focus on India, China, and South America. Previously he was Vice President, Corporate Secretary and International General Counsel for Tyco International from 2005 and prior to joining Tyco International in 2003, was a litigator with McGuireWoods, LLP.
Shad W. Kroeger has been President, Communications Solutions at TE Connectivity since November 2017. Mr. Kroeger previously served as the Senior Vice President and General Manager for the Appliances business unit at TE Connectivity since 2013. Since joining TE Connectivity in 1995, Mr. Kroeger has held leadership positions in general management, strategy, product management, sales and engineering and his roles have spanned the automotive, industrial and consumer markets.
Steven T. Merkt has been President, Transportation Solutions at TE Connectivity since August 2012. Mr. Merkt previously served as President of TE Connectivity's Automotive business since May 2011 and has held various leadership positions in general management, operations, engineering,
30 2019 Annual General Meeting Proxy Statement
marketing, supply chain and new product launches since joining TE Connectivity in 1989. Mr. Merkt serves as a Director for Livent Corporation.
Heath A. Mitts has been Executive Vice President and Chief Financial Officer at TE Connectivity since September 2016. Previously he was Senior Vice President and Chief Financial Officer at IDEX Corporation, a globally diversified company specializing in fluid, metering, health and science technologies, as well as fire, safety and other products, from March 2011 until September 2016. Mr. Mitts joined IDEX as Vice President, Corporate Finance in September 2005.
Timothy J. Murphy has been Senior Vice President and Chief Human Resource Officer, Global Human Resources at TE Connectivity since March 2016. Previously he was Vice President, Human Resources for the Transportation Solutions business segment from January 2015 to February 2016 and Vice President, Global Talent Management for TE Connectivity from November 2011 to December 2014. Prior to joining TE, Mr. Murphy held various business partner positions and served for three years in international human resource assignments over a nearly 20 year human resource career at Merck.
Robert J. Ott has been Senior Vice President and Corporate Controller of TE Connectivity since our separation from Tyco International in June 2007. Prior to that, he was Vice President, Corporate Audit of Tyco International from March 2003 to June 2007 and Vice President of FinanceCorporate Governance of Tyco International from August 2002 until March 2003. Prior to joining Tyco International, Mr. Ott was Chief Financial Officer of Multiplex, Inc. from 2001 to 2002 and Chief Financial Officer of SourceAlliance, Inc. from 2000 to 2001.
Eric J. Resch has been Senior Vice President and Chief Tax Officer of TE Connectivity since our separation from Tyco International in June 2007 and he served on the TE Connectivity Board prior to the separation. He was Vice President, Tax Reporting of Tyco International from 2003 until June 2007. Prior to joining Tyco International, Mr. Resch was Director, Tax Reporting for United Technologies Corporation from 2001 to 2003.
Kevin N. Rock has been President, Industrial Solutions at TE Connectivity since March 2015. Prior to that he was President of the Industrial Solutions segment's Aerospace, Defense and Marine business unit from August 2006. Mr. Rock joined TE Connectivity in January 1982 as Sales Engineer and was named Vice President, Americas Region, Consumer, Computer and Communications business unit in 2001.
Joan E. Wainwright has been President, Channel and Customer Experience at TE Connectivity since January 2013. Prior to that she was Senior Vice President, Channel, Marketing and Communications from May 2011. Ms. Wainwright joined TE Connectivity in June 2006 as Senior Vice President, Communications and Public Affairs and was named Senior Vice President, Marketing and Communications in February 2008. Previously, she served as Vice President, Public Affairs and Vice President, Corporate Communications for Merck & Co., Inc. from June 2000 to June 2006. Ms. Wainwright also served as Deputy Commissioner of Communications for the U.S. Social Security Administration and in the communications and public relations departments of the University Health System of New Jersey, the Children's Hospital of Philadelphia, the University of Delaware and Villanova University.
2019 Annual General Meeting Proxy Statement 31
COMPENSATION DISCUSSION AND ANALYSIS
Our Management Development and Compensation Committee (the "MDCC") is responsible for establishing and overseeing compensation programs that comply with TE Connectivity's executive compensation philosophy. As described in this Compensation Discussion and Analysis ("CD&A"), the MDCC follows a disciplined process for setting executive compensation. This process involves analyzing factors such as company performance, individual performance, strategic goals and competitive market data to arrive at each element of compensation. The Board must approve compensation decisions for the Chief Executive Officer, and the MDCC approves compensation decisions for all other executive officers. An independent compensation consultant helps the MDCC by providing advice, information, and an objective opinion.
This CD&A will focus on the compensation awarded to TE Connectivity's "named executive officers"the Chief Executive Officer, Chief Financial Officer, three other most highly compensated executive officers serving as executive officers at September 28, 2018, and the Company's former Executive Chairman who served as an executive officer during part of fiscal 2018. The following table shows the named executive officers and their primary compensation for fiscal year 2018. You can find more complete information about all elements of compensation for the named executive officers in the following discussion and in the Summary Compensation table that appears on page 54.
Name
|
Title | Base Salary | Annual Incentive (cash bonus) |
Long-Term Incentive (Options, PSUs and RSUs)(1) |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Terrence R. Curtin | Chief Executive Officer | $ | 1,136,539 | $ | 2,164,875 | $ | 6,477,688 | |||||
Thomas J. Lynch | Non-Executive Chairman; Former Executive Chairman | $ | 443,077 | $ | 765,971 | $ | 1,494,627 | |||||
Heath A. Mitts | EVP and Chief Financial Officer | $ | 628,277 | $ | 677,397 | $ | 2,042,895 | |||||
Steven T. Merkt | President, Transportation Solutions | $ | 627,361 | $ | 648,325 | $ | 2,241,941 | |||||
Kevin N. Rock | President, Industrial Solutions | $ | 500,000 | $ | 708,156 | $ | 2,129,922 | |||||
John S. Jenkins, Jr. | EVP and General Counsel | $ | 551,455 | $ | 588,264 | $ | 1,642,302 |
On December 14, 2017, Mr. Lynch announced his retirement as Executive Chairman of the Company effective March 14, 2018, at which time Mr. Lynch was elected, and continues to serve on, the Board of Directors of the Company as the Non-Executive Chairman of the Board of Directors.
Compensation actions related to the transition are discussed further in the Compensation Discussion and Analysis.
Fiscal 2018 Executive Compensation Highlights and Governance
This section identifies the most significant decisions and changes made regarding TE Connectivity's executive compensation in fiscal year 2018.
Shareholder Approval of Compensation
At the last annual general meeting held on March 14, 2018, shareholders expressed support for our executive compensation programs, with 93.84% of votes cast at the meeting voting to ratify the compensation of our named executive officers. Although the advisory shareholder vote on executive
32 2019 Annual General Meeting Proxy Statement
compensation is non binding, the MDCC has considered, and will continue to consider, the outcome of the vote and the sentiments of our shareholders when making future compensation decisions for the named executive officers. Based on the results from our last annual general meeting, the MDCC believes shareholders support the company's executive compensation philosophy and the compensation paid to the named executive officers.
Under Swiss law, shareholders also have the right to vote on the maximum aggregate compensation that will be paid to the Board of Directors and executive management. This requirement was effective with compensation paid or awarded starting in fiscal year 2016. At the 2018 annual general meeting shareholders approved the maximum aggregate compensation amounts to be paid to both the Board of Directors and executive management for fiscal year 2019, with 99.79% and 98.58% of votes cast respectively. At our 2019 annual general meeting the Company will request shareholder approval for the maximum aggregate compensation for fiscal year 2020 for both the Board of Directors and executive management. In addition, as is required under U.S. law, the company will request non-binding shareholder approval of the fiscal 2018 compensation of our named executive officers. Requests for shareholder approval can be found in Agenda Items No. 8, No. 9 and No. 10.
Fiscal Year 2018 Compensation Summary
We continue to use annual and long-term incentive awards to create an executive compensation program that is performance-driven. About 88% of total target direct compensation for our CEO and 77% of total target direct compensation for our other named executive officers is performance based. Our performance based compensation directly ties executive pay to financial results and stock performance. Currently, all long-term compensation is delivered in the form of equity awards, primarily stock options and performance stock units. These awards ensure that pay opportunities are linked to shareholder return and also maximize share ownership by our executive officers. See pages 41 -47 for the elements of our compensation programs and key fiscal year 2018 performance metrics.
2019 Annual General Meeting Proxy Statement 33
Compensation decisions made during fiscal year 2018 were aligned with our pay for performance philosophy and supported recent organizational changes. The following table provides highlights of recent compensation decisions affecting our named executive officers.
|
Pay Component |
|
2018 Actions |
|
For More Information, See Page: |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Base salaries Fixed cash compensation for core duties |
| Mr. Curtin received a 4.5% increase to base salary in fiscal year 2018 in an effort to align his base salary level closer to the 50th percentile of the peer group. | 41 | |||||||||||
| Mr. Mitts received a 4.1% increase and Mr. Merkt received a 4.7% increase to base salary in fiscal 2018 in an effort to align their base salary levels closer to the 50th percentile of the peer group | |||||||||||||
Annual incentives Variable cash incentives to reward executive officers for achieving pre-determined financial or strategic performance goals |
Calculated payouts ranged from 120.1% to 133.3% of target based on performance against goals for revenue, operating income, EPS and key performance indicator. | 44 - 45 | ||||||||||||
Annual long-term incentives Variable equity grants that recognize executives' contributions and align executives with shareholders in focusing on long-term growth and stock performance |
The planning values* for the annual grants ranged from $1,100,000 to $6,500,000 and were delivered primarily in the form of stock options (50%), and Performance Stock Units (PSUs) (50%). Fiscal year 2016 grants of PSUs with a three-year performance cycle vested in December 2018 above the target range based on our EPS growth relative to the Standard & Poor's 500 Non-Financial Companies Index. |
47 | ||||||||||||
| | | | | | | | | | | | | | |
34 2019 Annual General Meeting Proxy Statement
Governance
Key executive compensation practices are summarized below. We believe these practices promote good governance and serve the interests of our shareholders.
| | | | | | | | |
What We Do |
||||||||
| | | | | | | | |
ü | Link pay to performance with a high percentage of variable compensation |
ü | Include a "clawback" provision in all executive officer incentive award agreements (both annual and long-term) |
|||||
ü |
Perform annual say-on-pay advisory vote for shareholders |
ü |
Maintain robust stock ownership requirements for executives (6x CEO, 3x executive officers) |
|||||
ü |
Perform mandatory (under Swiss Law) say-on-pay vote for maximum aggregate compensation for Board of Directors and executive management |
ü |
Include performance criteria in incentive plans to maximize tax deductibility where applicable and appropriate |
|||||
ü |
Follow principles of executive compensation that are included in our articles of association and have been approved by shareholders |
ü |
Retain a fully independent external compensation consultant whose independence is reviewed annually by the MDCC |
|||||
ü |
Align executive compensation with shareholder returns through long-term incentives |
ü |
Provide only limited non-business aircraft usage to the CEO |
|||||
ü |
Design compensation programs to mitigate undue risk-taking |
ü |
Maintain an insider trading policy applicable to all executive officers and employees |
|||||
ü |
Cap incentive compensation payments for individuals including our CEO |
ü |
Review share utilization annually |
|||||
| | | | | | | | |
What We Do Not Do |
||||||||
| | | | | | | | |
x | Provide tax gross-ups for executive officers except under our relocation |
x | Provide tax gross-ups for personal aircraft use | |||||
program | x | Provide excise tax gross-ups | ||||||
x |
Provide perquisites for executive officers except for limited non-business aircraft usage for our |
x |
Re-price underwater stock options |
|||||
CEO | x | Allow hedging or pledging of TE securities | ||||||
| | | | | | | | |
Swiss Law RequirementsSwiss Ordinance
In 2013, a set of corporate governance and executive compensation rules were adopted by the Swiss government, specifically the Swiss Ordinance Against Excessive Compensation in Listed Stock Companies (and are referred to in the CD&A as the "Swiss Ordinance"). The rules under the Swiss Ordinance became effective on January 1, 2014 (subject to various transitional periods), and the company has taken a number of actions to comply with the rules.
Amendments to our articles of association were approved at our annual general meeting of shareholders on March 3, 2015. The Company amended its articles of association to describe certain corporate governance matters and executive compensation principles and to comply with the Swiss Ordinance. Among the items covered in the amended articles are:
2019 Annual General Meeting Proxy Statement 35
Executive Compensation Philosophy
Our executive compensation philosophy calls for competitive total compensation that will reward executives for achieving individual and corporate performance objectives and will attract, motivate and retain leaders who will drive the creation of shareholder value. The MDCC reviews and administers the compensation and benefit programs for executive officers, including the named executive officers, and
36 2019 Annual General Meeting Proxy Statement
performs an annual assessment of the company's executive compensation policy. In determining total compensation, the MDCC considers the objectives and attributes described below.
| | | | | | |
Executive Compensation Principles |
||||||
| | | | | | |
Shareholder alignment |
| Our executive compensation programs are designed to create shareholder value. | ||||
|
| Long-term incentive awards, delivered in the form of equity, make up a significant percentage of our executives' total compensation and closely align the interests of executives with the long-term interests of our shareholders. | ||||
Performance based |
|
Annual cash incentive awards are tied to overall corporate, segment or business unit measures that distinguish our highest from our lowest performing business units. |
||||
|
| The MDCC has limited discretion under the annual cash incentive program to recognize superior business unit or individual performance. | ||||
|
| Long-term incentive awards are designed to reward our executive officers for creating long-term shareholder value. Long-term incentive awards are granted primarily in the form of stock options and performance stock units. | ||||
Appropriate risk |
|
Our executive compensation programs are designed to encourage executive officers to take appropriate risks in managing their businesses to achieve optimal performance. |
||||
Competitive with external talent markets |
|
Our executive compensation programs are designed to be competitive within the relevant markets. |
||||
|
| We consider compensation for comparable executives within two peer groups: one broader group consisting of companies that compete with us for executive talent, and one narrower group consisting of companies in the electronics industry. Where appropriate we consider additional indices for unique positions. | ||||
Focus on executive stock ownership |
|
The TE Connectivity Stock Ownership and Retention Requirement Plan, together with long-term equity awards, drives executive stock ownership. |
||||
|
| The CEO is required to hold shares equal to six times his base salary, and the other named executive officers are required to hold shares equal to three times their respective base salaries. | ||||
Simple and transparent |
|
Our executive compensation programs are designed to be readily understood by our executives, and transparent to our investors. |
||||
| | | | | | |
Role of the Management Development and Compensation Committee
The MDCC has four primary responsibilities:
2019 Annual General Meeting Proxy Statement 37
The MDCC recommendations to the Board regarding Mr. Curtin are based on factors such as his performance, the company's performance, and competitive market data provided by the independent compensation consultant. The MDCC discusses and evaluates these recommendations in an executive session attended by the committee members, the compensation consultant, and TE Connectivity's Senior Vice President and Chief Human Resource Officer, who attends primarily to provide contextual information. Mr. Curtin does not attend these meetings.
All members of the MDCC meet the independence requirements of the NYSE. Each MDCC member also is a "non-employee director" for purposes of Rule 16b-3 of the Securities Exchange Act of 1934 and an "outside director" for purposes of Section 162(m) of the Internal Revenue Code.
Chief Executive Officer
Management does not have any role in developing the Chief Executive Officer's compensation other than providing data relating to their performance and compensation history. Management also had no role in developing Mr. Lynch's compensation for the period in fiscal year 2018 during which he served as Executive Chairman other than providing data relating to his performance and compensation history.
Other Named Executive Officer Compensation
The Chief Executive Officer makes recommendations to the MDCC relating to compensation actions for the other executive officers, including the other named executive officers. Recommendations are based on his assessment of each executive officer's performance and contributions to strategic initiatives, the competitive market data provided by the compensation consultant, and other factors deemed relevant. These factors may include differences in an executive's responsibilities versus the role reflected in the competitive market analysis, internal pay equity and relative importance of an executive's role with TE Connectivity, level of experience, and compensation history. The Senior Vice President and Chief Human Resource Officer is present when the MDCC and the Chief Executive Officer discuss compensation actions for the other named executive officers.
Role of the Compensation Consultant
Under its charter, the MDCC has authority to retain advisors to help the members perform their duties. During fiscal year 2018, the MDCC retained Pay Governance LLC to be its independent compensation consultant. Pay Governance reports directly to the MDCC, and only the MDCC has authority to terminate the consultant's services. Pay Governance is not permitted to provide any services to the company outside of its services to the MDCC except with prior approval of the MDCC chair. During fiscal year 2018, Pay Governance did not provide any additional services to the company.
Pay Governance supports the MDCC in designing the company's executive compensation programs, establishing executive pay levels, and generally advises on executive compensation issues and trends. In fiscal year 2018, the consultant performed the following services:
38 2019 Annual General Meeting Proxy Statement
In general, we use two distinct peer groups to benchmark market practices on compensation for executive officers. One peer group reflects the executive talent market generally; the other focuses on our industry. This two-pronged approach provides broad, yet highly relevant, information regarding executive compensation practices and trends. The MDCC reviews the peer group structure annually.
The primary talent market peer group comprises companies across a range of industries in which TE Connectivity competes for executive talent. Since we typically do not restrict executive recruiting solely to individuals working in the electronics industry, the MDCC believes it is appropriate to establish a benchmark peer group that covers an array of companies. The industries included in the primary talent market peer group are aerospace and defense; electronics, electrical and scientific equipment and components; and industrial manufacturing. The primary talent market peer group consists of 98 companies, listed in Appendix A, with publicly disclosed fiscal-annual revenues ranging from $350 million to $117 billion and a median of $4.8 billion. Data obtained from this group is adjusted to reflect the relative size (based on revenue) of TE Connectivity within the group.
The secondary peer group is comprised of companies within the electronics industry. We use the secondary peer group to identify any differences in compensation practices between our industry peers and the broader primary talent market peer companies. As part of the annual peer group review, we made changes to our fiscal year 2018 secondary peer group that reflects changes within our organization and in the electronics industry. As shown below, the fiscal year 2018 secondary industry peer group includes 13 companies, with publicly disclosed fiscal-annual revenues ranging from $3.2 billion to $39.3 billion and a median of $16.7 billion. EMC Corporation was removed from the group for fiscal year 2018 as a result of its acquisition by private company Dell EMC, and Fortive
2019 Annual General Meeting Proxy Statement 39
Corporation, a spin-off from Danaher Corporation, was deemed to be an appropriate addition to the group due to its size and industry similarities to TE.
3M Company | Fortive Corporation | |
Amphenol Corporation | General Dynamics Corporation | |
Borg Warner | Honeywell International Inc. | |
Danaher Corporation | Johnson Controls International plc | |
Delphi | Parker Hannifin Corporation | |
Eaton Corporation | Sensata Technologies | |
Emerson Electric Co. |
Benchmark data is compiled by the compensation consultant. As discussed below, the MDCC uses this information to ensure that our compensation levels and programs are competitive with the compensation paid by the companies we may compete with for executive talent, but the benchmark data is just one of the factors used in setting executive compensation levels.
Determining Executive Compensation
In determining the appropriate total compensation level for each executive officer, the MDCC considers the following items:
| | | | |
Factors We Consider |
||||
| | | | |
Role |
Responsibilities, scope, and complexity of the executive's role against the external benchmark data |
|||
|
Relative importance of the role within TE Connectivity |
|||
Comprehensive Market Analysis |
Market reference points, including the 50th and 75th percentiles of our primary talent market peer group, for the executive officer's specific role |
|||
|
Comprehensive analysis of current base salary, target annual incentive opportunity, target long-term incentive opportunity, target total cash compensation (base salary and target annual incentive), and target total direct compensation for each executive officer |
|||
Performance |
Executive's individual performance, level of experience and expected contribution to strategic initiatives and future results |
|||
Current Compensation |
A review of the executive's current total direct compensation including internal pay equity and compensation history |
|||
CEO |
The Chief Executive Officer's detailed performance assessments for the other executive officers and recommendations concerning compensation actions |
|||
| | | | |
The compensation assessment for each executive officer is presented on a tally sheet, which also summarizes the officer's compensation history, job responsibilities, tenure with the company and performance achievements. The tally sheets enable the MDCC to understand how each element of an executive officer's compensation compares to the market 50th and 75th percentiles and to the amounts awarded to other executive officers.
40 2019 Annual General Meeting Proxy Statement
With the information provided in the total compensation assessment as a reference, and with the input of the compensation consultant and the Chief Executive Officer, the MDCC makes compensation determinations for our executive officers. The MDCC and the Board follow a similar process to set compensation for the Chief Executive Officer. In some years, the MDCC may determine that total compensation (or one or more components of total compensation) for a particular executive should differ from the market reference point(s). Similarly, the MDCC may approve a total compensation package or individual compensation components that exceed the market reference point(s) for a critical management role in order to attract a highly qualified external candidate.
Broad-based employee benefit programs are provided to executive officers on the same basis as all other employees.
September 2018 Compensation Assessment
In September 2018, the MDCC, with the assistance of the compensation consultant, assessed each executive officer's fiscal year 2018 compensation, and determined that the total direct compensation levels for our named executive officers is within range of the applicable market reference points. The fiscal year 2018 total direct compensation level for Mr. Curtin was positioned below the 50th percentile. The fiscal year 2018 total direct compensation levels for Messrs. Mitts, Merkt, Rock and Jenkins were within a range of 15% below to 10% above the 50th percentile. The MDCC believes the variability of total direct compensation levels within the range of applicable market reference points is appropriate and consistent with our executive compensation philosophy and the factors that are considered (as outlined above) when determining total compensation levels for each executive officer.
As discussed in the next section, the results of the September 2018 competitive compensation assessment helped the MDCC to set base salaries, annual and long-term incentive targets and actual long-term incentive grant values for the executive officers for fiscal year 2019.
Compensation Paid or Awarded in Fiscal 2018
The company's total compensation package for executive officers consists of the following elements:
Base Salary
Base salary provides fixed compensation for performing the executive's core duties and responsibilities. As shown below, effective December 25, 2017, Messrs. Curtin, Mitts and Merkt had changes in base salary to maintain their competitive pay position in the marketplace and align their base salaries closer to the 50th percentile. Messrs. Lynch, Rock and Jenkins did not receive a base salary increase in fiscal year 2018.
|
Increase Amount |
From | To | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Mr. Curtin |
4.55 | % | $ | 1,100,000 | $ | 1,150,000 | ||||
Mr. Mitts |
4.10 | % | $ | 610,000 | $ | 635,010 | ||||
Mr. Merkt |
4.73 | % | $ | 606,399 | $ | 635,083 |
2019 Annual General Meeting Proxy Statement 41
Effective March 14, 2018 Mr. Lynch transitioned to the fee structure in place for directors who are not salaried employees of the Company. For 2019 Messrs. Curtin, Mitts, Merkt, Rock and Jenkins will receive base salary increases of 4.35%, 6.0%, 3.0%, 8.0% and 4.0% respectively.
Annual Incentive Awards
The annual incentive program is designed to reward executive officers for achieving fiscal year financial or strategic performance goals at the corporate or segment level, though awards may be modified to reflect the MDCC's assessment of individual performance. The MDCC intends the annual incentive award program to provide market competitive awards for performance at predetermined target levels.
Our annual incentive awards are structured as cash payments. Within ninety days of the start of each fiscal year, the MDCC establishes the applicable performance criteria, which include minimum performance thresholds required to earn any award, target performance goals required to earn a payment of 100%, and a higher performance level required to earn the maximum incentive permitted. At the same time, the MDCC establishes a target bonus percentage for each executive officer, which is expressed as a percentage of base salary. Executive officers will receive an award based on the target bonus percentage and the attained performance levels on the various metrics. No annual incentive payments are made if threshold performance levels are not achieved, absent extenuating circumstances that the MDCC believes merit an exception. Payouts change proportionately for achievement at levels between goals.
Target Bonus Percentages
The target bonus percentages for the named executive officers for fiscal years 2018 and 2019 are listed below:
|
Fiscal 2018 Target | Fiscal 2019 Target | ||
---|---|---|---|---|
Mr. Curtin |
150% | 150% | ||
Mr. Lynch |
150% | | ||
Mr. Mitts |
85% | 85% | ||
Mr. Merkt |
85% | 85% | ||
Mr. Rock |
85% | 85% | ||
Mr. Jenkins |
85% | 85% |
Performance Measures
Each year the MDCC reviews and approves the annual incentive measures for the business segments and the company as a whole. Measures are selected to support the objectives of each business and to provide appropriate balance and to avoid excessive risk. For fiscal year 2018, we maintained the number of measures at four.
Measures for corporate and the segments were revenue, operating income, and a key performance indicator identified at the business unit level to reflect growth, productivity, quality or customer delivery, as appropriate for the business unit's key initiatives for the year. Individual metric weightings were consistent with last year with revenue weighted 30%, operating income weighted 30% and key performance indicator weighted 20%. Each segment's results are the roll-up of its underlying business units' results, while corporate level results are the roll-up of all business units' results. The key performance indicator metric at the corporate level is the revenue-weighted average of the key performance indicator metric scores for the business segments.
The company-wide financial metric for corporate and the segments continued to be earnings per share (EPS), which was weighted 20%. In setting the target for the EPS metric, the MDCC uses the
42 2019 Annual General Meeting Proxy Statement
EPS target established for the Company in its annual financial plan, which incorporates various assumptions to delivering earnings growth including the effect of planned share repurchases by the Company. In determining the EPS metric achievement each year, the MDCC considers whether the various assumptions used to set the EPS target at the start of the fiscal year (including the effect of share repurchases) were materially accurate, and to the extent the achievement levels are not consistent with assumptions, the MDCC will make adjustments to the achievement level as deemed appropriate.
The performance measures and weightings for the corporate level, segment and businesses for the named executive officers are as follows:
2018 Metric
|
Corporate | Industrial Solutions |
Transportation Solutions |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Corporate |
||||||||||
Earnings per share |
20 | % | 20 | % | 20 | % | ||||
Business |
||||||||||
Revenue |
30 | % | 30 | % | 30 | % | ||||
Operating income |
30 | % | 30 | % | 30 | % | ||||
Key performance indicator |
20 | % | 20 | % | 20 | % |
For purposes of the annual incentive program, all of the financial metrics are adjusted financial measures (i.e., they do not conform to U.S. Generally Accepted Accounting Principles) that exclude the effects of events deemed not to reflect the actual performance of our employees. For fiscal year 2018, the adjustments to EPS, revenue and operating income, as applicable, were as follows (i) exclusion of acquisition related charges, (ii) exclusion of restructuring and other charges, (iii) exclusion of the impact of certain acquisitions, (iv) exclusion of the impact of changes resulting from foreign currency exchange rates (with respect to performance measures at the business unit level), (v) exclusion of certain corporate allocations (with respect to performance measures at the business unit level), and (vi) exclusion of net income tax benefits associated with the tax impacts of certain intercompany transactions and legal entity restructurings including an increase to the valuation allowance as well as income tax expense related to the tax impacts of the Tax Cuts and Jobs Act.
The table below shows the performance range for payouts under the fiscal year 2018 annual incentive program, as well as the payouts to be awarded for performance at each level.
Metric
|
Threshold | Target | Maximum* | Threshold payout (% of target) |
Target payout (% of target) |
Maximum payout* (% of target) |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
EPS |
90 | % | 100 | % | 110 | % | 50 | % | 100 | % | 200 | % | |||||||
Revenue |
95 | % | 100 | % | 105 | % | 50 | % | 100 | % | 200 | % | |||||||
Operating income |
90 | % | 100 | % | 110 | % | 50 | % | 100 | % | 200 | % | |||||||
Key performance indicator |
Varies by business unit | 50 | % | 100 | % | 200 | % |
No individual performance metrics were assigned to any executive officer under the fiscal year 2018 annual incentive program. The MDCC reserved the discretion to adjust individual or business unit award amounts up or down, by 0% to 200% based on its evaluation of the individual or business unit performance during the fiscal year. However, all discretionary adjustments must net out to zero, meaning that the overall annual incentive pool may not be increased as a result of individual or business unit performance adjustments. In addition, there is a reserve pool of approximately $9 million
2019 Annual General Meeting Proxy Statement 43
(10% of the total target annual incentive award pool amount) that, with the MDCC's approval, could be used to reward exceptional performance at either the business unit or individual level, regardless of performance results against the established financial measures. The MDCC did not use any of the reserve pool for the fiscal year 2018 annual incentive program. Notwithstanding MDCC adjustments, an individual employee's incentive cannot exceed 200% of the employee's target bonus percentage.
Annual Incentive Payments for Fiscal 2018
Fiscal year 2018 performance targets, actual attainment, and corresponding annual incentive award results at the corporate level and for the Industrial Solutions and the Transportation Solutions business segments were as follows:
Performance Measure (% weighting)
|
Target | Results | Performance % to Target |
Bonus Score** |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
EPS (20%) |
$5.20$5.35 | $ | 5.54 | 103.6 | % | 142.2 | % | |||||
Revenue (30%) |
$13,700$14,100 | $ | 14,574 | 103.4 | % | 194.8 | % | |||||
Operating Income (30%) |
$2,390$2,480 | $ | 2,461 | 100.0 | % | 100.0 | % | |||||
Key Performance Indicator Metric (20%) |
* | * | 43.2 | % | ||||||||
Corporate Level Earned Award: |
125.5 | % |
Performance Measure (% weighting)
|
Target | Results | Performance % to Target |
Bonus Score** |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
EPS (20%) |
$5.20$5.35 | $ | 5.54 | 103.6 | % | 142.2 | % | |||||
Business Unit Revenue (30%) |
$3,654$3,711 | $ | 3,781 | 101.9 | % | 144.6 | % | |||||
Business Unit Operating Income (30%) |
$575$593 | $ | 628 | 105.9 | % | 169.1 | % | |||||
Key Performance Indicator Metric (20%) |
* | * | 53.7 | % | ||||||||
Industrial Solutions Earned Award: |
133.3 | % |
Performance Measure (% weighting)
|
Target | Results | Performance % to Target |
Bonus Score** |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
EPS (20%) |
$5.20$5.35 | $ | 5.54 | 103.6 | % | 142.2 | % | |||||
Business Unit Revenue (30%) |
$7,619$7,805 | $ | 8,081 | 103.5 | % | 190.8 | % | |||||
Business Unit Operating Income (30%) |
$1,795$1,851 | $ | 1,837 | 100.0 | % | 100.0 | % | |||||
Key Performance Indicator Metric (20%) |
* | * | 22.2 | % | ||||||||
Transportation Solutions Earned Award: |
120.1 | % |
44 2019 Annual General Meeting Proxy Statement
the target performance levels and performance results for the key performance indicator metrics for Transportation Solutions, Industrial Solutions and corporate would result in competitive harm.
Messrs. Curtin, Lynch, Mitts and Jenkins received fiscal year 2018 annual incentive payouts based entirely on the corporate bonus score of 125.5%. Mr. Merkt's fiscal year 2018 annual incentive payout was based entirely on the Transportation Solutions bonus score of 120.1%. Mr. Rock's fiscal year 2018 annual incentive payout was based on the Industrial Solutions bonus score of 133.3% and an upward adjustment of the payout by 25% awarded by the MDCC to recognize Mr. Rock's exceptional performance in driving the growth of the segment and each of its businesses, the successful expansion of the segment's operating income margin and continued strengthening of the key talent throughout the segment and its businesses.
Annual Incentive Plan for Fiscal 2019
For fiscal year 2019, we will continue to use the same four performance measures as fiscal year 2018. Each business segment will use revenue, operating income and a revenue-weighted average of its business units' key performance indicators. The combined business segment metrics will be weighted 80%. The company-wide financial metric will continue to be earnings per share and will be weighted 20%.
For fiscal year 2019, the payout ranges described in the chart on page 43 are generally unchanged. The revenue metric will generally have a threshold level of 95% and a maximum level of 105% with some variation depending upon business unit. The performance range for operating income generally will have a threshold level of 90% and a maximum level of 110% with some variation depending upon business unit. The performance ranges for EPS are unchanged.
Long-Term Incentive Awards
The company uses long-term incentive awards in the form of stock options, restricted stock units ("RSUs") and performance stock units ("PSUs") to deliver competitive compensation that recognizes employees for their contributions and aligns executive officers with shareholders in focusing on long-term growth and stock performance. As part of the company's compensation philosophy, the MDCC concluded that annual grants of long-term incentive awards to executive officers typically should be competitive relative to our primary talent market peer group, but should deliver compensation at the high end of the market if our stock performs particularly well and at the low end of the market if our stock performance is weak.
Stock options have a ten-year term and vest ratably over a four-year period, beginning on the first anniversary of the grant date. RSUs typically vest ratably over four years starting on the first anniversary of the grant date. PSUs granted in fiscal 2016, fiscal 2017 and fiscal 2018 earn value at the end of the three-year performance period and vest in full upon the MDCC's certification of the performance results for the three-year period. We believe this vesting schedule encourages executives to remain with TE Connectivity and strive to continually improve shareholder value.
The company does not have a specific policy for allocating long-term equity incentive awards among the different forms of equity, but determines each year what is appropriate in light of the then-current circumstances as described below. However, consistent with our philosophy that a majority of an executive officer's compensation should be performance-based and aligned with shareholders' interest, our annual long-term equity incentive awards for executive officers consist primarily of stock options and PSUs.
2019 Annual General Meeting Proxy Statement 45
To determine the value of each executive officer's long-term equity incentive award in any year, the MDCC refers to the equity grant guidelines, assesses the executive's future potential, and also considers the same factors generally considered for other components of total compensationinternal pay equity, individual performance and contributions to strategic initiatives, level of experience and compensation history. As with the other components of total compensation, Mr. Curtin makes a recommendation regarding long-term equity incentive awards for each executive officer.
In determining its annual long-term equity incentive award recommendation for Mr. Curtin, the MDCC reviews the applicable market reference data, competitive compensation analysis, and any additional input from the compensation consultant, and also assesses individual performance. Based on this information, the MDCC presents a recommendation to the independent members of the full Board for consideration.
Performance Stock Unit (PSU) Program
PSUs provide the named executive officer the opportunity to earn shares of the company's stock based on the company's EPS growth relative to the Standard & Poor's 500 Non-Financial Companies Index over a three-year performance cycle. Beginning with our fiscal year 2016 PSU grant, shares can be earned and vested after the end of the three-year performance cycle. A three-year average EPS growth metric will be used to determine relative performance and calculate earned shares at the end of the three-year performance period. Target shares, or 100%, will only be earned for EPS growth at the 50th percentile. Maximum payout is 200% and is earned for EPS growth at the 75th percentile of the index. In order to earn any shares under the program a minimum threshold must be achieved. Specifically, EPS growth must be at the 25th percentile of the index. PSUs will be paid in the form of TE Connectivity common stock, together with dividend equivalent stock units that accrued commensurate with the portion of the PSUs that are vested. For purposes of the PSU program, EPS is calculated in the same manner as is used in the annual incentive program, as described in further detail on page 43.
Payout for Fiscal 2016 PSU Grant
Fiscal year 2018 was the third year of our fiscal year 2016 PSU grant and recipients earned shares for the period calculated at 177.21% of target which reflected the Company's performance relative to the index over the three-year period. Shares earned under the program vested on December 12, 2018 upon certification of the fiscal year 2018 results.
The table below shows the shares earned and vested under the fiscal year 2016 PSU grant for each of our named executive officers.
|
FY2016 Target PSUs |
Total FY2016 Vested Shares |
|||||
---|---|---|---|---|---|---|---|
Mr. Curtin |
23,500 | 44,498 | |||||
Mr. Lynch |
58,760 | 111,266 | |||||
Mr. Merkt |
14,100 | 26,699 | |||||
Mr. Rock |
8,620 | 16,322 | |||||
Mr. Jenkins |
10,970 | 20,772 |
Mr. Mitts did not receive a fiscal year 2016 PSU grant.
Fiscal 2018 Long-Term Incentive Awards
The MDCC granted long-term equity incentive awards in the first quarter of fiscal 2018. Fiscal year 2018 equity awards for named executive officers were made primarily in the form of stock options (50%) and PSUs (50%).
46 2019 Annual General Meeting Proxy Statement
As part of the annual award process, the MDCC reviewed the equity planning value ranges against updated market data and decided that no adjustments needed to be made in the fiscal year 2017 planning value ranges for fiscal year 2018. For the named executive officers other than Mr. Curtin, the equity planning value ranges for the fiscal year 2018 long-term equity incentive awards were as follows:
The equity award planning values approved by the MDCC for the named executive officers for fiscal year 2018 were as follows:
Mr. Curtin |
$ | 6,500,000 | ||
Mr. Lynch |
$ | 1,500,000 | ||
Mr. Mitts |
$ | 2,050,000 | ||
Mr. Merkt |
$ | 2,250,000 | ||
Mr. Rock |
$ | 1,100,000 | ||
Mr. Jenkins |
$ | 1,400,000 |
In recommending Mr. Curtin's award for approval by independent members of the Board, the MDCC considered Mr. Curtin's strong leadership of the company through another successful year in fiscal year 2017 and the competitive total direct compensation and long-term incentive benchmark data from the company's two peer groups. In recommending Mr. Lynch's award for approval by the independent members of the Board, the MDCC considered competitive market data for the executive chairman position and Mr. Lynch's ongoing duties as executive chairman of the company. Award planning values for the other named executive officers were in line with the values granted in fiscal year 2017, except that the award planning values for Messrs. Mitts and Merkt were increased by $150,000 each to recognize their exceptional accomplishments achieved in fiscal 2017 within their respective organizations.
In addition to the grant listed above, Mr. Jenkins received a special equity grant in fiscal year 2018 with a planning value of $250,000 to recognize his continued contributions in the management and oversight of TE's emerging markets opportunities. The award is in the form of RSUs and is scheduled to vest ratably over four years beginning with the first anniversary of the grant date. Mr. Rock received a special retention award in addition to his annual fiscal year 2018 award intended to promote retention and continuity of key leaders with a planning value of $1,000,000. The award is in the form of RSUs and has a two year cliff vesting.
Fiscal 2019 Long-Term Incentive Awards
The MDCC granted long-term equity incentive awards for fiscal year 2019 in November 2018. (These equity awards are not reflected in the Summary Compensation or Grants of Plan-Based Awards tables because those tables only cover fiscal year 2018.) The MDCC reviewed the equity planning value ranges against updated market data and determined that the equity planning value ranges for fiscal 2019 should remain the same as those for fiscal 2018.
2019 Annual General Meeting Proxy Statement 47
The fiscal year 2019 equity incentive awards for the named executive officers were in the form of stock options (50%) and PSUs (50%) except as noted below. The equity award planning values approved by the MDCC for the named executive officers for fiscal year 2019 were as follows:
Mr. Curtin |
$ | 7,250,000 | ||
Mr. Mitts |
$ | 2,550,000 | ||
Mr. Merkt |
$ | 2,250,000 | ||
Mr. Rock |
$ | 1,000,000 | ||
Mr. Jenkins |
$ | 1,400,000 |
Mr. Rock's award was made in the form of RSUs and has a two-year cliff vesting.
In recommending the fiscal 2019 awards for Mr. Curtin for approval by independent members of the Board, the MDCC considered several factors including individual performance and the competitive market analysis for the CEO.
Pay Mix
The company does not have a defined policy to dictate the allocation between fixed and performance-based compensation or between annual and long-term compensation. The pay mix for each named executive officer is driven largely by two concerns: to deliver compensation primarily through performance-based components that align the executives' interests with those of our shareholders, and to deliver a competitive pay mix relative to our peer benchmark companies. Management and the MDCC periodically review the pay mix to ensure that the allocation achieves those goals.
The following table shows our pay mix for fiscal year 2018, based on the data reported in the Summary Compensation Table. Performance-based incentives constituted at least 70%, and as much as 84%, of fiscal year 2018 compensation for the named executive officers. The allocations differ among the named executive officers because of market practice for their respective positions and actual performance on annual incentive plan payouts.
|
Base Salary Rate |
Long-Term Incentives(2) |
Annual Incentive |
Other Compensation |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mr. Curtin |
11 | % | 63 | % | 21 | % | 5 | % | |||||
Mr. Lynch |
14 | % | 47 | % | 24 | % | 15 | % | |||||
Mr. Mitts |
16 | % | 52 | % | 18 | % | 14 | % | |||||
Mr. Merkt(1) |
17 | % | 59 | % | 17 | % | 7 | % | |||||
Mr. Rock |
14 | % | 61 | % | 20 | % | 5 | % | |||||
Mr. Jenkins |
19 | % | 57 | % | 20 | % | 4 | % |
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code limits the tax deduction available to a public company for annual compensation paid to certain executive officers in excess of $1 million, unless the compensation qualifies as performance-based or is otherwise exempt from Section 162(m). Annual
48 2019 Annual General Meeting Proxy Statement
incentive bonuses, stock options and other performance-based awards made to executive officers under our 2007 Stock and Incentive Plan are intended to qualify as performance-based compensation.
In evaluating compensation programs covering our executive officers, the MDCC has considered the potential impact on the company of Section 162(m) and has intended, where appropriate, to maximize the deductibility of compensation under the exemptions currently available under Section 162(m). For our tax years starting on September 29, 2018, the exemption for performance-based compensation discussed above has been repealed under the Tax Cuts and Jobs Act of 2017, meaning that all compensation paid to certain executive officers in excess of $1 million will not be deductible unless the compensation qualifies for transition relief available to arrangements in place on November 2, 2017. Regardless of the tax deductibility of compensation paid to the executive officers, the MDCC reserves the discretion to approve nondeductible compensation where necessary to achieve our overall compensation objectives and to ensure the company makes appropriate payments to executive officers.
Risk Profile of Compensation Programs
The MDCC has structured our executive compensation programs to provide the appropriate level of incentives without encouraging executive officers to take excessive risks in managing their businesses.
We performed a two-part risk assessment of the company's compensation programs and practices in fiscal year 2018. We first conducted an inventory of our executive and non-executive incentive compensation programs globally, including all significant sales incentive programs. Then each program was evaluated to determine whether its primary components properly balanced compensation opportunities and risk. The compensation consultant facilitated this evaluation by preparing a compensation risk analysis checklist. Each program was evaluated against the checklist, the results were recorded, and risk levels were identified.
After considering the assessment results and the preliminary conclusions, the MDCC agreed that none of the company's compensation programs and practices in fiscal year 2018 were reasonably likely to have a material adverse effect on the company.
Retirement and Deferred Compensation Benefits
The company maintains various retirement plans to assist our executive officers with retirement income planning and to make the company more appealing to prospective employees.
The company provides a defined contribution plan, the TE Connectivity Retirement Savings and Investment Plan ("RSIP"), that is available to all eligible U.S.-based employees, and a nonqualified supplemental retirement plan, the TE Connectivity Supplemental Savings and Retirement Plan ("SSRP"), for U.S. based management and executive level employees.
Under the RSIP, the company match level is based on years of service and employee contribution, as follows:
Years of Service
|
Employee Contribution* | Company Contribution* | ||
---|---|---|---|---|
09 |
1% | 5% | ||
1019 |
2% | 6% | ||
2024 |
3% | 7% | ||
2529 |
4% | 8% | ||
30 or more |
5% | 9% |
2019 Annual General Meeting Proxy Statement 49
Under the SSRP, executive officers may defer up to 50% of their base salary and 100% of their annual incentive awards. The company provides matching contributions to the SSRP based on the executive officer's amount of deferred compensation at the same rate such officer is eligible to receive matching contributions under the RSIP and on any cash compensation (i.e., base salary and annual incentive awards) earned in excess of Internal Revenue Service limits. Once officers reach the annual contribution limit under the RSIP, they may continue to make deferrals in excess of qualified plan limits into the SSRP and receive matching contributions from the Company until compensation reaches the IRS maximum compensation limit. Participants then receive matching contributions called "Company Credits" on any eligible compensation earned beyond the IRS maximum compensation limit.
Company contributions for the named executive officers are shown in the "All Other Compensation" column of the Summary Compensation table that follows this CD&A. Participants, including executive officers, are fully vested in company matching contributions under the RSIP after three years of service, or upon reaching age 55. Prior to October 1, 2017, participants vested in company contributions under the SSRP after three years of service, or upon reaching age 55; however, effective October 1, 2017, participants who were actively employed on or after September 29, 2017 are 100% immediately vested in the past and future Company contributions.
All of the company's U.S. retirement, deferred compensation, incentive, and other executive and broad-based plans are intended to comply with Section 409A of the Internal Revenue Code.
Messrs. Merkt and Rock have accrued a benefit under a frozen tax-qualified defined benefit plan as described in the Pension Benefits for fiscal year 2018 table that follows this CD&A.
We provide welfare benefits to executive officers on the same basis as all other employees in the same geographic area. The various benefit plans are part of our overall total compensation and are intended to be competitive with peer companies.
For eligible U.S.-based employees, the company provides medical, dental and life insurance, and disability coverage. Outside of the United States, the company provides welfare benefits based on local country practices.
TE Connectivity uses corporate aircraft to allow our executive officers and other corporate and business leaders to travel safely and efficiently for business purposes. This corporate aircraft enables our employees to be more productive by providing a secure environment to conduct confidential business and avoid the scheduling constraints associated with commercial air travel. Under the TE Connectivity Corporate Aircraft Usage Policy, Messrs. Curtin and Lynch (until his transition to Non-Executive Chairman in March 2018), are permitted to use the corporate aircraft for non-business purposes, whenever practical and subject to annual limitations, to enable them to take advantage of these efficiencies. Limited non-business use of the corporate aircraft by other executive officers also is permitted with the approval of Mr. Curtin. The cost to the company of providing non-business use of the corporate aircraft to our named executive officers is disclosed in the All Other Compensation table following the Summary Compensation table and the disclosed value is the pre-tax incremental cost, including the direct variable cost to TE Connectivity associated with the non-business travel as further described in footnote (a) to the All Other Compensation table. The value of an executive's non-business use of the corporate aircraft may also be treated as taxable income in accordance with IRS regulations and if so, will not be grossed up. There are no other perquisites provided to named executive officers.
50 2019 Annual General Meeting Proxy Statement
Expatriate Assignment Benefits
As described in the Summary Compensation table that follows this CD&A, Mr. Merkt received certain benefits under the terms of an expatriate assignment policy made available to all employees who are asked to relocate from their home country in connection with their work assignments. Under the policy, eligible employees are reimbursed (or provided cash allowances) for items such as rent, goods and services, dependent tuition, home leave costs, language training, housing management fees, tax preparation services, utilities, storage costs, and miscellaneous living expenses. In addition, eligible employees are placed in a tax-equalization program that makes them whole (including tax gross-up payments, where necessary) for any additional taxes imposed in excess of the taxes they would have incurred in their home country. Mr. Merkt incurred expenses under our tax-equalization program in fiscal year 2018 in conjunction with his overseas assignment that concluded in fiscal year 2012 as explained in footnote (a) to the All Other Compensation table following the Summary Compensation table.
As described in the Summary Compensation Table that follows this CD&A, Mr. Mitts received certain benefits to compensate him for relocating to the company's offices in Berwyn, Pennsylvania. Some of these benefits are paid under the terms of the company's relocation assistance policy which is available to all employees who relocate their residence at the request of the company. Under the policy, eligible employees are reimbursed (or provided cash allowances) for items such as home sale/home purchase related fees, moving expenses, temporary living expenses, loss on home sale and other miscellaneous expenses. In addition, eligible employees are provided with tax gross-up payments to make them whole for the taxes imposed on benefits provided under the policy. Under the policy, benefits are provided at different levels of reimbursement, depending on the employee's organization level, and Mr. Mitts' benefits were provided under the level covering senior managers of the company. In connection with Mr. Mitts' employment with the company, the company agreed to reimburse Mr. Mitts for losses incurred on the sale of his home in Illinois that fell outside the terms and limits of the relocation policy, and this amount was provided in the form of an increase in the award planning value of his fiscal year 2019 long term incentive award, as further described in the footnotes to the Summary Compensation Table that follows this CD&A.
Under the Swiss Ordinance, members of executive management, including the named executive officers, are not eligible for severance benefits or change in control severance. The terms and conditions of employment for members of executive management, including the named executive officers, are contained in employment contracts which reflect the requirement of the Swiss Ordinance.
Under the employment contracts, executive officers whose employment is terminated involuntarily for any reason other than cause, permanent disability or death or who voluntarily resign their employment for "good reason" within 12 months of the occurrence of a change in control will have a notice period of up to 12 months. During the notice period the executive officer will continue to be treated as a regular, full-time employee and will continue to receive base salary, be eligible for a bonus subject to the terms and conditions of the applicable plan, continue to vest in outstanding equity awards under the terms and conditions of the applicable award agreements and continue to have health and welfare benefits.
At the end of the 12 month notice period the executive officer will receive twelve months' pay as consideration for non-compete and non-solicitation covenants in favor of the company.
2019 Annual General Meeting Proxy Statement 51
In the event of involuntary or "good reason" termination after a change in control under our 2007 TE Stock and Incentive Plan, outstanding equity will be treated as follows:
Termination treatment as described above and other benefits payable as a result of a qualifying termination after a change in control will be limited to the greater after-tax amount resulting from (i) payment of the full benefits, followed by the imposition of all taxes, including any applicable excise taxes under Internal Revenue Code Section 280G, or (ii) payment of the full benefits up to the Section 280G limit with no excise tax imposed. Termination and other benefits payable will not be grossed up to reflect Section 280G or any other taxes.
Executive Stock Ownership Requirements
The company maintains a Stock Ownership and Retention Requirement Plan applicable to all executive officers, including the named executive officers. The common share ownership requirement for the Chief Executive Officer is six times base salary. The other named executive officers are required to own shares equal to three times base salary. Share ownership requirements must be met within five years of the officer's date of employment. In the event stock ownership has not been met in the five year timeframe, the employee will be required to hold 100% of the shares of common stock they receive upon lapse of the restrictions on restricted stock/stock units and upon exercise of stock options (net of any shares utilized to pay for the exercise price of the option and tax withholding). The following shares count toward the ownership requirements: wholly-owned shares, shares in stock units or deferred compensation plans, employee stock ownership plans, unvested restricted stock, shares deemed earned under the provisions of performance stock unit grants, and shares held by immediate family members that are considered beneficially owned by the executive officer. As of fiscal 2018 year-end, all of the named executive officers met their stock ownership requirements.
Our named executive officers along with all of our employees are subject to our insider trading policy to ensure that employees worldwide comply with all applicable laws and regulations concerning securities trading. Among other things, our insider trading policy restricts the times during which executive officers can enter into trading transactions concerning our securities. Our named executive officers and employees are prohibited from engaging in any hedging transactions, including prepaid variable forward contracts, equity swaps, collars, exchange funds, puts, calls, options, short sales or similar rights, obligations or transactions that are designed to hedge or offset any decrease in the market value of TE Connectivity securities, other than the exercise of a company issued stock option.
Our insider trading policy was updated in fiscal year 2015 to include a prohibition against pledging. Executive officers and directors are prohibited from holding TE Connectivity securities in a margin account and from maintaining or entering into any arrangement that, directly or indirectly, involves the pledge of TE Connectivity securities or other use of TE Connectivity securities as collateral for a loan.
52 2019 Annual General Meeting Proxy Statement
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE REPORT
The Management Development and Compensation Committee has reviewed the Compensation Discussion and Analysis and has discussed the analysis with management. Based on its review and discussions with management, the Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in the company's Annual Report on Form 10-K for the fiscal year ended September 28, 2018 and in the company's proxy statement for the 2019 Annual General Meeting of Shareholders. This report is provided by the following independent directors, who comprise the Committee:
The Management Development and Compensation Committee:
Daniel
J. Phelan, Chair
Paula A. Sneed
John C. Van Scoter
December 12, 2018
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers serve as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of our Management Development and Compensation Committee. In addition, none of our executive officers serve as a member of the compensation committee of any entity that has one or more of its executive officers serving as a member of our Board of Directors.
2019 Annual General Meeting Proxy Statement 53
EXECUTIVE OFFICER COMPENSATION
The following table summarizes the compensation of the named executive officers for the fiscal years ended September 28, 2018 ("fiscal year 2018"), September 29, 2017 and September 30, 2016. The named executive officers are the Company's Chief Executive Officer, Chief Financial Officer, three other most highly compensated executives and the Company's former Executive Chairman who served as an executive officer during part of fiscal 2018.
Name and Principal Position
|
Year (b) |
Salary(1) ($) (c) |
Bonus ($) (d) |
Stock Awards(2) ($) (e) |
Option Awards(3) ($) (f) |
Non-Equity Incentive Plan Compensation(4) ($) (g) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings(5) ($) (h) |
All Other Compensation(6) ($) (i) |
Total ($) (j) |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
T errence R. Curtin |
2018 | $ | 1,136,539 | | $ | 3,359,093 | $ | 3,118,595 | $ | 2,164,875 | | $ | 457,909 | $ | 10,237,011 | |||||||||||||
Chief Executive Officer |
2017 | $ | 1,024,231 | | $ | 3,431,771 | $ | 3,461,614 | $ | 2,239,875 | | $ | 269,205 | $ | 10,426,696 | |||||||||||||
(PEO) |
2016 | $ | 825,000 | | $ | 1,549,825 | $ | 1,608,003 | $ | 789,525 | | $ | 178,378 | $ | 4,950,731 | |||||||||||||
Thomas J. Lynch(7) |
2018 | $ | 443,077 | | $ | 774,888 | $ | 719,739 | $ | 765,971 | | $ | 492,050 | $ | 3,195,725 | |||||||||||||
Former Executive |
2017 | $ | 1,041,923 | | $ | 1,980,176 | $ | 1,997,159 | $ | 2,565,675 | | $ | 653,290 | $ | 8,238,223 | |||||||||||||
Chairman |
2016 | $ | 1,200,000 | | $ | 3,875,222 | $ | 4,020,726 | $ | 1,722,600 | | $ | 557,736 | $ | 11,376,284 | |||||||||||||
Heath A. Mitts |
2018 | $ | 628,277 | | $ | 1,059,636 | $ | 983,259 | $ | 677,397 | | $ | 560,351 | $ | 3,908,920 | |||||||||||||
EVP & Chief Financial |
2017 | $ | 610,000 | | $ | 1,003,102 | $ | 1,011,689 | $ | 844,637 | | $ | 231,491 | $ | 3,700,919 | |||||||||||||
Officer (PFO) |
2016 | $ | 11,731 | $ | 4,661,853 | | | | $ | 4,675 | $ | 4,678,259 | ||||||||||||||||
Steven T. Merkt |
2018 | $ | 627,361 | | $ | 1,162,332 | $ | 1,079,609 | $ | 648,325 | | $ | 264,463 | $ | 3,782,090 | |||||||||||||
President, Transportation |
2017 | $ | 606,399 | | $ | 1,108,551 | $ | 1,118,486 | $ | 933,977 | | $ | 213,787 | $ | 3,981,200 | |||||||||||||
Solutions |
2016 | $ | 598,625 | | $ | 929,895 | $ | 964,946 | $ | 491,214 | $ | 19,129 | $ | 208,745 | $ | 3,212,554 | ||||||||||||
Kevin N. Rock |
2018 | $ | 500,000 | | $ | 1,602,058 | $ | 527,864 | $ | 708,156 | | $ | 162,944 | $ | 3,501,022 | |||||||||||||
President, Industrial Solutions |
||||||||||||||||||||||||||||
John S. Jenkins, Jr. |
2018 | $ | 551,455 | | $ | 970,326 | $ | 671,976 | $ | 588,264 | | $ | 127,297 | $ | 2,909,318 | |||||||||||||
EVP & General Counsel |
2017 | $ | 551,455 | | $ | 995,974 | $ | 745,657 | $ | 763,572 | | $ | 104,033 | $ | 3,160,691 |
Grant Date Fair Value of PSUs | |||||||
---|---|---|---|---|---|---|---|
Name
|
Target Value ($) |
Maximum Value ($) |
|||||
Mr. Curtin |
$ | 3,359,093 | $ | 6,718,186 | |||
Mr. Lynch |
$ | 774,888 | $ | 1,549,776 | |||
Mr. Mitts |
$ | 1,059,636 | $ | 2,119,272 | |||
Mr. Merkt |
$ | 1,162,332 | $ | 2,324,664 | |||
Mr. Rock |
$ | 568,562 | $ | 1,137,125 | |||
Mr. Jenkins |
$ | 723,540 | $ | 1,447,080 |
54 2019 Annual General Meeting Proxy Statement
Mitts, and Jenkins do not participate in a pension plan. There are no nonqualified deferred compensation earnings because the SSRP does not provide for "above-market" or preferential earnings as defined in applicable SEC rules.
Name
|
Year | Perquisites(a) ($) |
Dollar Value of Dividends not factored into Grant Date Fair Value(b) ($) |
ESPP Company Match(c) ($) |
Company Contributions to DC Plans(d) ($) |
Total All Other Compensation ($) |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Terrence R. Curtin |
2018 | $ | 52,570 | $ | 202,754 | | $ | 202,585 | $ | 457,909 | |||||||||
Thomas J. Lynch |
2018 | $ | 110,174 | $ | 201,351 | | $ | 180,525 | $ | 492,050 | |||||||||
Heath A. Mitts |
2018 | $ | 342,544 | $ | 144,161 | | $ | 73,646 | $ | 560,351 | |||||||||
Steven T. Merkt |
2018 | $ | 6,178 | $ | 131,428 | $ | 1,950 | $ | 124,907 | $ | 264,463 | ||||||||
Kevin N. Rock |
2018 | | $ | 63,001 | | $ | 99,943 | $ | 162,944 | ||||||||||
John S. Jenkins, Jr. |
2018 | | $ | 61,546 | | $ | 65,751 | $ | 127,297 |
Amounts
greater than $25,000 for Mr. Lynch totaling $110,174 include the incremental pre-tax cost to us of Mr. Lynch's non-business use of our aircraft. As described on page 50,
Mr. Lynch was permitted to use the aircraft for business and non-business purposes while he served as executive chairman. The incremental cost to us during fiscal year 2018 includes the direct
variable cost associated with Mr. Lynch's travel to attend Thermo Fisher Scientific Inc. and Cummins Inc. board meetings, as Mr. Lynch is a member of the board of directors
of both companies, and other occasional non-business use.
In
fiscal year 2018, the company reimbursed Mr. Mitts a total of $836,123 in relocation benefits, of which $267,003 was attributable to tax gross-ups. Of the total amount reimbursed, $336,123
was reimbursed either in cash or was paid by the company on his behalf under the terms of the company's relocation policy and is included in the amounts reflected in the table. The remaining amount of
the relocation benefits, $500,000, was provided pursuant to mutual agreement in the form of an increase in the award planning value of Mr. Mitts' fiscal year 2019 long term incentive award,
listed on pages 47 - 48, to recognize losses on the sale of his home in Illinois. Amounts in the table greater than $25,000 include: $219,886 for home sale/purchase related fees,
$29,904 for home goods/automobile transportation costs and $67,003 in tax gross-up payments. Amounts less than $25,000 include other relocation allowances including final moving expenses, temporary
living expenses and various miscellaneous fees related to his relocation and also include the incremental pre-tax cost to us of Mr. Mitts' non-business use of our aircraft. As described on
page 50, Mr. Mitts is permitted to use the aircraft for business and non-business purposes with the approval of Mr. Curtin.
Individual amounts less than $25,000 for Mr. Merkt are the net expenses paid by us for tax preparation fees and various miscellaneous fees and expenses pertaining to an expatriate assignment in Germany during fiscal years 2011 and 2012. In fiscal 2018, pursuant to the process of the company's tax equalization program, the company paid on behalf of Mr. Merkt, taxes in the amount of $5,750. The company also provided Mr. Merkt tax gross-up payments of $764 for calendar year 2017; gross-up amounts for calendar year 2018 are not determined until end of calendar year 2018. Due to the timing of payments in fiscal 2018, the following range of exchange rates were used to convert amounts reported or paid in EUR to U.S. dollars: $1.13-$1.25:EUR 1.
2019 Annual General Meeting Proxy Statement 55
Name
|
Year | Company Matching Contribution (Qualified Plan)(*) |
Company Contribution (Non-Qualified Plan) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Mr. Curtin |
2018 | $ | 16,500 | $ | 186,085 | |||||
Mr. Lynch |
2018 | $ | 2,914 | $ | 177,611 | |||||
Mr. Mitts |
2018 | $ | 13,750 | $ | 59,896 | |||||
Mr. Merkt |
2018 | $ | 19,429 | $ | 105,478 | |||||
Mr. Rock |
2018 | $ | 16,680 | $ | 83,263 | |||||
Mr. Jenkins |
2018 | $ | 5,667 | $ | 60,084 |
56 2019 Annual General Meeting Proxy Statement
Grants of Plan-Based Awards in Fiscal 2018
The following table discloses the potential payouts for fiscal year 2018 under the company's annual incentive program and actual numbers of stock option, restricted stock unit and performance stock unit awards granted during fiscal year 2018 and the grant date fair value of these awards.
|
Grant Date |
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) |
Estimated Possible Payouts Under Equity Incentive Plan Awards(2) |
All Other Stock Awards: Number of Shares of Stock or Units(3) |
All Other Option Awards: Number of Securities Underlying Options(4) |
Exercise or Base Price of Option Awards |
Grant Date Fair Value of Stock and Option Awards(5) |
|||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name (a)
|
(b) | Threshold ($) (c) |
Target ($) (d) |
Maximum ($) (e) |
Threshold (#) (f) |
Target (#) (g) |
Maximum (#) (h) |
(#) (i) |
(#) (j) |
($/Sh) (k) |
($) (l) |
|||||||||||||||||||||||
Terrence R. Curtin |
||||||||||||||||||||||||||||||||||
Annual Incentive Plan |
$ | 862,500 | $ | 1,725,000 | $ | 3,450,000 | ||||||||||||||||||||||||||||
Stock Option |
11/13/17 | 189,350 | $ | 93.36 | $ | 3,118,595 | ||||||||||||||||||||||||||||
RSU |
||||||||||||||||||||||||||||||||||
PSU |
11/13/17 | 17,990 | 35,980 | 71,960 | $ | 3,359,093 | ||||||||||||||||||||||||||||
Thomas J. Lynch |
||||||||||||||||||||||||||||||||||
Annual Incentive Plan |
$ | 305,168 | $ | 610,335 | $ | 1,220,670 | ||||||||||||||||||||||||||||
Stock Option |
11/13/17 | 43,700 | $ | 93.36 | $ | 719,739 | ||||||||||||||||||||||||||||
RSU |
||||||||||||||||||||||||||||||||||
PSU |
11/13/17 | 4,150 | 8,300 | 16,600 | $ | 774,888 | ||||||||||||||||||||||||||||
Heath A. Mitts |
||||||||||||||||||||||||||||||||||
Annual Incentive Plan |
$ | 269,880 | $ | 539,759 | $ | 1,079,518 | ||||||||||||||||||||||||||||
Stock Option |
11/13/17 | 59,700 | $ | 93.36 | $ | 983,259 | ||||||||||||||||||||||||||||
RSU |
||||||||||||||||||||||||||||||||||
PSU |
11/13/17 | 5,675 | 11,350 | 22,700 | $ | 1,059,636 | ||||||||||||||||||||||||||||
Steven T. Merkt |
||||||||||||||||||||||||||||||||||
Annual Incentive Plan |
$ | 269,911 | $ | 539,821 | $ | 1,079,642 | ||||||||||||||||||||||||||||
Stock Option |
11/13/17 | 65,550 | $ | 93.36 | $ | 1,079,609 | ||||||||||||||||||||||||||||
RSU |
||||||||||||||||||||||||||||||||||
PSU |
11/13/17 | 6,225 | 12,450 | 24,900 | $ | 1,162,332 | ||||||||||||||||||||||||||||
Kevin N. Rock |
||||||||||||||||||||||||||||||||||
Annual Incentive Plan |
$ | 212,500 | $ | 425,000 | $ | 850,000 | ||||||||||||||||||||||||||||
Stock Option |
11/13/17 | 32,050 | $ | 93.36 | $ | 527,864 | ||||||||||||||||||||||||||||
RSU |
11/13/17 | 11,070 | $ | 1,033,495 | ||||||||||||||||||||||||||||||
PSU |
11/13/17 | 3,045 | 6,090 | 12,180 | $ | 568,562 | ||||||||||||||||||||||||||||
John S. Jenkins, Jr. |
||||||||||||||||||||||||||||||||||
Annual Incentive Plan |
$ | 234,368 | $ | 468,737 | $ | 937,473 | ||||||||||||||||||||||||||||
Stock Option |
11/13/17 | 40,800 | $ | 93.36 | $ | 671,976 | ||||||||||||||||||||||||||||
RSU |
9/12/18 | 2,720 | $ | 246,786 | ||||||||||||||||||||||||||||||
PSU |
11/13/17 | 3,875 | 7,750 | 15,500 | $ | 723,540 |
2019 Annual General Meeting Proxy Statement 57
Outstanding Equity Awards at 2018 Fiscal Year-End
The following table shows the number of TE Connectivity shares covered by exercisable and unexercisable options, unvested RSUs and unvested PSUs held by the company's named executive officers on September 28, 2018. Each equity grant is shown separately for each named executive officer. The vesting schedule for each grant is shown following the table, based on the option, RSU or PSU award grant date.
|
|
Option Awards | Stock Awards | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
|
|
|
|
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(1)(2)(4) (#) (i) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(3) ($) (j) |
|||||||||||||||||||
|
|
|
|
|
|
|
Market Value of Shares or Units of Stock That Have Not Vested(3) ($) (h) |
|||||||||||||||||||||
|
|
|
|
|
|
Number of Shares or Units of Stock That Have Not Vested(1)(2) (#) (g) |
||||||||||||||||||||||
|
|
Number of Securities Underlying Unexercised Options |
|
|
||||||||||||||||||||||||
|
|
Option Exercise Price ($) (e) |
|
|||||||||||||||||||||||||
|
|
Option Expiration Date (f) |
||||||||||||||||||||||||||
Name (a)
|
Grant Date |
Exercisable (#) (b) |
Unexercisable(1) (#) (c) |
|||||||||||||||||||||||||
Terrence R. Curtin |
11/12/12 | 128,750 | | $ | 34.05 | 11/12/22 | ||||||||||||||||||||||
|
11/14/13 | 70,100 | | $ | 51.61 | 11/14/23 | ||||||||||||||||||||||
|
11/10/14 | 52,687 | 17,563 | $ | 61.50 | 11/10/24 | 2,281 | $ | 200,568 | |||||||||||||||||||
|
03/09/15 | 15,157 | 5,063 | $ | 72.13 | 03/08/25 | 567 | $ | 49,856 | |||||||||||||||||||
|
11/09/15 | 55,950 | 55,950 | $ | 65.95 | 11/09/25 | 24,962 | $ | 2,194,909 | |||||||||||||||||||
|
11/14/16 | 67,662 | 202,988 | $ | 66.74 | 11/14/26 | 53,389 | $ | 4,694,495 | |||||||||||||||||||
|
11/13/17 | | 189,350 | $ | 93.36 | 11/13/27 | 36,610 | $ | 3,219,117 | |||||||||||||||||||
Thomas J. Lynch |
11/10/14 | 186,600 | 62,200 | $ | 61.50 | 11/10/24 | 8,081 | $ | 710,562 | |||||||||||||||||||
|
11/09/15 | 139,900 | 139,900 | $ | 65.95 | 11/09/25 | 62,417 | $ | 5,488,327 | |||||||||||||||||||
|
11/14/16 | 39,037 | 117,113 | $ | 66.74 | 11/14/26 | 30,806 | $ | 2,708,772 | |||||||||||||||||||
|
11/13/17 | | 43,700 | $ | 93.36 | 11/13/27 | 8,445 | $ | 742,569 | |||||||||||||||||||
Heath A. Mitts |
09/14/16 | | | | | 39,792 | $ | 3,498,911 | ||||||||||||||||||||
|
11/14/16 | 19,775 | 59,325 | $ | 66.74 | 11/14/26 | 15,605 | $ | 1,372,148 | |||||||||||||||||||
|
11/13/17 | | 59,700 | $ | 93.36 | 11/13/27 | 11,548 | $ | 1,015,416 | |||||||||||||||||||
Steven T. Merkt |
11/14/13 | 12,950 | | $ | 51.61 | 11/14/23 | ||||||||||||||||||||||
|
11/10/14 | 39,525 | 13,175 | $ | 61.50 | 11/10/24 | ||||||||||||||||||||||
|
03/09/15 | | | | | 30,101 | $ | 2,646,781 | ||||||||||||||||||||
|
11/09/15 | 33,575 | 33,575 | $ | 65.95 | 11/09/25 | 14,977 | $ | 1,316,928 | |||||||||||||||||||
|
11/14/16 | 21,862 | 65,588 | $ | 66.74 | 11/14/26 | 17,246 | $ | 1,516,441 | |||||||||||||||||||
|
11/13/17 | | 65,550 | $ | 93.36 | 11/13/27 | 12,668 | $ | 1,113,897 | |||||||||||||||||||
Kevin N. Rock |
11/14/11 | 43,850 | | $ | 34.49 | 11/14/21 | ||||||||||||||||||||||
|
11/12/12 | 28,000 | | $ | 34.05 | 11/12/22 | ||||||||||||||||||||||
|
11/14/13 | 15,250 | | $ | 51.61 | 11/14/23 | ||||||||||||||||||||||
|
11/10/14 | 13,162 | 4,388 | $ | 61.50 | 11/10/24 | 571 | $ | 50,208 | |||||||||||||||||||
|
03/09/15 | 8,100 | 2,700 | $ | 72.13 | 03/08/25 | 302 | $ | 26,555 | |||||||||||||||||||
|
11/09/15 | 20,525 | 20,525 | $ | 65.95 | 11/09/25 | 9,156 | $ | 805,087 | |||||||||||||||||||
|
11/14/16 | 11,450 | 34,350 | $ | 66.74 | 11/14/26 | 9,033 | $ | 794,272 | |||||||||||||||||||
|
11/13/17 | | 32,050 | $ | 93.36 | 11/13/27 | 11,263 | $ | 990,356 | 6,196 | $ | 544,814 | ||||||||||||||||
John S. Jenkins, Jr. |
11/10/14 | 28,537 | 9,513 | $ | 61.50 | 11/10/24 | 1,236 | $ | 108,681 | |||||||||||||||||||
|
11/09/15 | 26,125 | 26,125 | $ | 65.95 | 11/09/25 | 11,652 | $ | 1,024,560 | |||||||||||||||||||
|
11/14/16 | 14,575 | 43,725 | $ | 66.74 | 11/14/26 | 11,504 | $ | 1,011,547 | |||||||||||||||||||
|
09/21/17 | 2,380 | $ | 209,273 | ||||||||||||||||||||||||
|
11/13/17 | | 40,800 | $ | 93.36 | 11/13/27 | 7,885 | $ | 693,328 | |||||||||||||||||||
|
09/12/18 | 2,720 | $ | 239,170 |
58 2019 Annual General Meeting Proxy Statement
Option Exercises and Stock Vested in Fiscal 2018
The following table sets forth certain information regarding TE Connectivity options and stock awards exercised and vested, respectively, during fiscal year 2018 for the named executive officers.
|
Option Awards | Stock Awards | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name
|
Number of Shares Acquired on Exercise (#) (b) |
Value Realized on Exercise(1) ($) (c) |
Number of Shares Acquired on Vesting(2) (#) (d) |
Value Realized on Vesting(3) ($) (e) |
|||||||||
Terrence R. Curtin |
142,450 | $ | 9,936,340 | 32,722 | $ | 3,119,079 | |||||||
Thomas J. Lynch |
620,400 | $ | 32,723,142 | 93,908 | $ | 8,931,517 | |||||||
Heath A. Mitts |
| | 19,897 | $ | 1,824,654 | ||||||||
Steven T. Merkt |
| | 19,993 | $ | 1,901,308 | ||||||||
Kevin N. Rock |
| | 9,800 | $ | 936,003 | ||||||||
John S. Jenkins, Jr. |
36,550 | $ | 1,891,192 | 15,212 | $ | 1,445,146 |
Pension Benefits for Fiscal 2018
The following table provides details regarding the present value of accumulated benefits under the plans described in "CD&ARetirement and Deferred Compensation Benefits" for the named executive officers in fiscal year 2018.
Name(1)
|
Plan Name (b) |
Number of Years Credited Service(2) (#) (c) |
Present Value of Accumulated Benefit(3) ($) (d) |
Payments During Last Fiscal Year ($) (e) |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Steven T. Merkt |
Tyco Electronics Pension PlanPart II AMP | 10.5 | $ | 91,418 | | |||||||
Kevin N. Rock |
Tyco Electronics Pension PlanPart II AMP | 18.0 | $ | 362,859 | |
2019 Annual General Meeting Proxy Statement 59
Nonqualified Deferred Compensation for Fiscal 2018
The following table discloses contributions and earnings credited to each of the named executive officers under the SSRP (Supplemental Savings and Retirement Plan) in fiscal year 2018 and balances at fiscal year-end. The SSRP is a nonqualified deferred compensation plan. See "CD&ARetirement and Deferred Compensation Benefits" for information regarding the plan. Pursuant to the SSRP, executive officers may defer up to 50% of their base salary, up to 100% of their annual bonus and elect to contribute "Spillover" deferrals. Spillover deferrals allow them to continue their pre-tax contributions into the SSRP once they reach the qualified plan annual pre-tax contribution limit under the Company's qualified 401(k) plan. We provide matching contributions based on the executive's deferred base salary and bonus, as well as on the eligible wages used to calculate their Spillover deferrals. Matching contributions called "Company Credits" are also provided on any eligible compensation earned in excess of the Internal Revenue Code Section 401(a)(17) limit ($275,000 in 2018). All employees become vested in the matching contributions once they complete three years of service, and matching contributions are calculated using the same matching percentage the executive officer is eligible to receive in the qualified plan (see pages 49-50 of the CD&A). The company match structure for the qualified plan is based on years of service as well as the employee's contributions.
Name
|
Executive Contributions in Last Fiscal Year(1) ($) (b) |
Registrant Contributions in Last Fiscal Year(2) ($) (c) |
Aggregate Earnings in Last Fiscal Year(3)(4) ($) (d) |
Aggregate Withdrawals/ Distributions ($) (e) |
Aggregate Balance at Last Fiscal Year End(4) ($) (f) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Terrence R. Curtin |
$ | 501,907 | $ | 186,085 | $ | 902,791 | $ | (13,812 | ) | $ | 8,599,025 | |||||
Thomas J. Lynch |
$ | 53,269 | $ | 177,611 | $ | 125,910 | | $ | 7,176,112 | |||||||
Heath A. Mitts |
$ | 71,875 | $ | 59,896 | $ | 16,278 | | $ | 168,451 | |||||||
Steven T. Merkt |
$ | 15,487 | $ | 105,478 | $ | 17,845 | | $ | 311,170 | |||||||
Kevin N. Rock |
$ | 487,764 | $ | 83,263 | $ | 394,501 | | $ | 4,641,789 | |||||||
John S. Jenkins Jr. |
$ | 439,868 | $ | 60,085 | $ | 217,521 | | $ | 2,122,436 |
Termination and Change in Control Payments
The table below outlines the potential payments to our Chief Executive Officer and other named executive officers upon the occurrence of certain termination triggering events. Messrs. Curtin, Lynch, Mitts, Merkt, Rock and Jenkins are not eligible for severance benefits or change in control severance
60 2019 Annual General Meeting Proxy Statement
and instead are subject to the termination terms and conditions outlined in their employment contracts (the "2016 Employment Contracts"). For the purpose of the table, below are definitions generally applicable for the various types of terminations under the 2016 Employment Contracts, TE Connectivity Severance Plan for U.S. Executives (referred to in this proxy statement as the "Severance Plan") and/or the TE Connectivity Change in Control Severance Plan for Certain U.S. Executives (referred to in this proxy statement as the "CIC Plan"). See "CD&ATermination Payments" for additional information.
(1) without the participant's written consent, the company (a) assigns or causes to be assigned to the participant any duties inconsistent in any material respect with his or her position as in effect immediately prior to the Change in Control, (b) makes or causes to be made any material adverse change in the participant's position (including titles and reporting relationships and level), authority, duties or responsibilities, or (c) takes or causes to be taken any other action which, in the reasonable judgment of the participant, would cause him or her to violate his or her ethical or professional obligations (after written notice of such judgment has been provided by the participant to the Management Development and Compensation Committee and the company has been given a 15-day period within which to cure such action), or which results in a significant diminution in such position, authority, duties or responsibilities;
(2) without the participant's written consent, the participant's being required to relocate to a principal place of employment more than 60 miles from his or her existing principal place of employment;
(3) without the participant's written consent, the company (a) reduces the participant's base salary or annual bonus, or (b) reduces the participant's retirement, welfare, stock incentive, perquisite and other benefits, taken as a whole; or
(4) the company fails to obtain a satisfactory agreement from any successor to assume and agree to perform the company's obligations to the participant under the CIC Plan.
2019 Annual General Meeting Proxy Statement 61
(1) any "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act), excluding for this purpose, (i) the company or any subsidiary company (wherever incorporated) of the company, or (ii) any employee benefit plan of the company or any such subsidiary company (or any person or entity organized, appointed or established by the company for or pursuant to the terms of any such plan that acquires beneficial ownership of voting securities of the company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act) directly or indirectly of securities of the company representing more than 30 percent of the combined voting power of the company's then outstanding securities; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the company;
(2) persons who, as of July 1, 2007 (the "effective date"), constitute the board (the "Incumbent Directors") cease for any reason (including without limitation, as a result of a tender offer, proxy contest, merger or similar transaction) to constitute at least a majority thereof, provided that any person becoming a director of the company subsequent to the effective date shall be considered an Incumbent Director if such person's election or nomination for election was approved by a vote of at least 50 percent of the Incumbent Directors; but provided further, that any such person whose initial assumption of office is in connection with an actual or threatened proxy contest relating to the election of members of the board or other actual or threatened solicitation of proxies or consents by or on behalf of a "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act) other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation, shall not be considered an Incumbent Director;
(3) consummation of a reorganization, merger or consolidation or sale or other disposition of at least 80 percent of the assets of the company (a "Business Combination"), in each case, unless, following such Business Combination, all or substantially all of the individuals and entities who were the beneficial owners of outstanding voting securities of the company immediately prior to such Business Combination beneficially own directly or indirectly more than 50 percent of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which, as a result of such transaction, owns the company or all or substantially all of the company's assets either directly or through one or more subsidiary companies (wherever incorporated) of the company) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the outstanding voting securities of the company; or
(4) consummation of a complete liquidation or dissolution of the company.
62 2019 Annual General Meeting Proxy Statement
No named executive officer is entitled to a payment in connection with an Involuntary Termination for Cause.
Executive Benefits and Payments Upon Termination
|
Retirement(7) | Total Permanent Disability or Death |
Involuntary Termination Not for Cause |
Involuntary Termination Change in Control(9) |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Terrence R. Curtin |
|||||||||||||
Compensation |
|||||||||||||
Consideration for restrictive covenants(8) |
$ | 2,875,000 | $ | 2,875,000 | |||||||||
Short-Term Incentive(1) |
$ | 2,164,875 | |||||||||||
Long-Term Incentives |
|||||||||||||
Stock Options (Unvested and Accelerated or Continued Vesting)(2) |
$ | 6,075,282 | $ | 6,075,282 | |||||||||
Restricted Stock Units (Unvested and Accelerated or Continued Vesting)(2) |
$ | 250,425 | $ | 250,425 | |||||||||
Performance Stock Units (Unvested and Accelerated or Continued Vesting)(3) |
$ | 8,042,166 | $ | 8,042,166 | |||||||||
Benefits and Perquisites(4) |
|||||||||||||
Health and Welfare Benefits Continuation(5) |
$ | 13,436 | $ | 13,436 | |||||||||
Outplacement(6) |
$ | 20,000 | $ | 20,000 | |||||||||
Thomas J. Lynch |
|||||||||||||
Compensation |
|||||||||||||
Consideration for restrictive covenants(8) |
|||||||||||||
Short-Term Incentive(1) |
|||||||||||||
Long-Term Incentives |
|||||||||||||
Stock Options (Unvested and Accelerated or Continued Vesting)(2) |
$ | 3,340,557 | $ | 7,200,572 | $ | 7,200,572 | |||||||
Restricted Stock Units (Unvested and Accelerated or Continued Vesting)(2) |
$ | 595,462 | $ | 710,562 | $ | 710,562 | |||||||
Performance Stock Units (Unvested and Accelerated or Continued Vesting)(3) |
$ | 3,030,332 | $ | 3,772,900 | $ | 3,772,900 | |||||||
Benefits and Perquisites(4) |
|||||||||||||
Health and Welfare Benefits Continuation(5) |
|||||||||||||
Outplacement(6) |
|||||||||||||
Heath A. Mitts |
|||||||||||||
Compensation |
|||||||||||||
Consideration for restrictive covenants(8) |
$ | 1,174,769 | $ | 1,174,769 | |||||||||
Short-Term Incentive(1) |
$ | 677,397 | |||||||||||
Long-Term Incentives |
|||||||||||||
Stock Options (Unvested and Accelerated or Continued Vesting)(2) |
$ | 1,257,097 | $ | 1,257,097 | |||||||||
Restricted Stock Units (Unvested and Accelerated or Continued Vesting)(2) |
$ | 3,498,911 | $ | 3,498,911 | |||||||||
Performance Stock Units (Unvested and Accelerated or Continued Vesting)(3) |
$ | 2,387,563 | $ | 2,387,563 | |||||||||
Benefits and Perquisites(4) |
|||||||||||||
Health and Welfare Benefits Continuation(5) |
$ | 13,436 | $ | 13,436 | |||||||||
Outplacement(6) |
$ | 20,000 | $ | 20,000 | |||||||||
Steven T. Merkt |
|||||||||||||
Compensation |
|||||||||||||
Consideration for restrictive covenants(8) |
$ | 1,174,904 | $ | 1,174,904 | |||||||||
Short-Term Incentive(1) |
$ | 648,324 | |||||||||||
Long-Term Incentives |
|||||||||||||
Stock Options (Unvested and Accelerated or Continued Vesting)(2) |
$ | 2,476,003 | $ | 2,476,003 | |||||||||
Restricted Stock Units (Unvested and Accelerated or Continued Vesting)(2) |
$ | 2,944,864 | $ | 2,944,864 | |||||||||
Performance Stock Units (Unvested and Accelerated or Continued Vesting)(3) |
$ | 3,947,266 | $ | 3,947,266 | |||||||||
Benefits and Perquisites(4) |
|||||||||||||
Health and Welfare Benefits Continuation(5) |
$ | 13,436 | $ | 13,436 | |||||||||
Outplacement(6) |
$ | 20,000 | $ | 20,000 |
2019 Annual General Meeting Proxy Statement 63
Executive Benefits and Payments Upon Termination
|
Retirement(7) | Total Permanent Disability or Death |
Involuntary Termination Not for Cause |
Involuntary Termination Change in Control(9) |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Kevin N. Rock |
|||||||||||||
Compensation |
|||||||||||||
Consideration for restrictive covenants(8) |
$ | 925,000 | $ | 925,000 | |||||||||
Short-Term Incentive(1) |
$ | 708,156 | $ | 708,156 | |||||||||
Long-Term Incentives |
|||||||||||||
Stock Options (Unvested and Accelerated or Continued Vesting)(2) |
$ | 508,152 | $ | 1,337,651 | $ | 1,337,651 | |||||||
Restricted Stock Units (Unvested and Accelerated or Continued Vesting)(2) |
$ | 55,748 | $ | 1,067,118 | $ | 1,067,118 | |||||||
Performance Stock Units (Unvested and Accelerated or Continued Vesting)(3) |
$ | 2,144,173 | $ | 2,144,173 | |||||||||
Benefits and Perquisites(4) |
|||||||||||||
Health and Welfare Benefits Continuation(5) |
$ | 13,436 | $ | 13,436 | |||||||||
Outplacement(6) |
$ | 20,000 | $ | 20,000 | |||||||||
John S. Jenkins, Jr. |
|||||||||||||
Compensation |
|||||||||||||
Consideration for restrictive covenants(8) |
$ | 1,020,192 | $ | 1,020,192 | |||||||||
Short-Term Incentive(1) |
$ | 588,264 | |||||||||||
Long-Term Incentives |
|||||||||||||
Stock Options (Unvested and Accelerated or Continued Vesting)(2) |
$ | 1,752,189 | $ | 1,752,189 | |||||||||
Restricted Stock Units (Unvested and Accelerated or Continued Vesting(2) |
$ | 383,814 | $ | 383,814 | |||||||||
Performance Stock Units (Unvested and Accelerated or Continued Vesting)(3) |
$ | 1,764,843 | $ | 1,764,843 | |||||||||
Benefits and Perquisites(4) |
|||||||||||||
Health and Welfare Benefits Continuation(5) |
$ | 13,436 | $ | 13,436 | |||||||||
Outplacement(6) |
$ | 20,000 | $ | 20,000 |
64 2019 Annual General Meeting Proxy Statement
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are disclosing the ratio of the median employee's annual total compensation to the annual total compensation of our CEO. Neither the Compensation Committee nor management of the Company used the pay ratio in making compensation decisions.
The identified median employee's fiscal year 2018 compensation package was $20,758 which included actual salary, bonus, and perquisites earned. The annual total compensation for our CEO, Mr. Curtin, was $10,237,011, as calculated in accordance with the "Summary Compensation Table" requirements. The median ratio of the annual total compensation of our CEO to the compensation of our median employee was 493:1. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee's annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. Therefore, the estimated pay ratio we report may not be comparable to the pay ratios reported by other companies.
Methodology
2019 Annual General Meeting Proxy Statement 65
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Compensation paid during fiscal 2018 to each director who is not our salaried employee or an employee of our subsidiaries was based on the following fee structure:
|
Fee Structure Effective October, 2017(1) |
||||||
---|---|---|---|---|---|---|---|
|
Cash | Equity | |||||
Annual retainer |
$ | 90,000 | $ | 185,000 | |||
Additional annual fees: |
|||||||
Non-Executive Chairman(2) |
$ | 170,000 | |||||
Lead Independent Director |
$ | 40,000 | |||||
Audit Committee Chair |
$ | 25,000 | |||||
Audit Committee Member |
$ | 10,000 | |||||
Nominating, Governance & Compliance Committee Chair |
$ | 15,000 | |||||
Management, Development & Compensation Committee Chair |
$ | 20,000 | |||||
Science Advisory Board Retainer |
$ | 10,000 |
Our board members are also reimbursed for expenses incurred in attending board and committee meetings or performing other services for us in their capacities as directors. Such expenses include food, lodging and transportation.
In addition to the compensation described above, our board governance principles encourage directors to attend certain continuing education courses that are related to their duties as directors and provide that we will reimburse the costs associated with attending one course every two years. TE Connectivity will also provide company matching gift contributions on behalf of certain directors under TE Connectivity's matching gift program up to a maximum of $10,000 per year.
Each non-employee director received the equity component of their compensation in the form of a grant of common shares of TE Connectivity Ltd. Under current U.S. tax law, our U.S.-based non-employee directors cannot defer any portion of their compensation, including DSUs, and therefore, they were issued common shares (which are immediately taxable) in lieu of DSUs.
66 2019 Annual General Meeting Proxy Statement
Fiscal year 2019 compensation for non-employee directors will be the same as fiscal year 2018.The following table discloses the cash and equity awards paid to each of our non-employee directors during the fiscal year ended September 28, 2018.
Name
|
Fees Earned or Paid in Cash(1) ($) (b) |
Stock Awards(2) ($) (c) |
All Other Compensation(3) ($) (g) |
Total ($) (h) |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Pierre R. Brondeau |
$ | 145,000 | $ | 191,201 | $ | 5,120 | $ | 341,321 | |||||
John Davidson |
$ | 100,000 | $ | 191,201 | $ | 5,000 | $ | 296,201 | |||||
William A. Jeffrey |
$ | 100,000 | $ | 191,201 | | $ | 291,201 | ||||||
Thomas J. Lynch |
$ | 151,667 | | | $ | 151,667 | |||||||
Yong Nam |
$ | 90,000 | $ | 191,201 | | $ | 281,201 | ||||||
Daniel J. Phelan |
$ | 110,000 | $ | 191,201 | $ | 12,620 | $ | 313,821 | |||||
Paula A. Sneed |
$ | 90,000 | $ | 191,201 | $ | 12,258 | $ | 293,459 | |||||
Abhijit Y. Talwalkar |
$ | 100,000 | $ | 191,201 | $ | 10,000 | $ | 301,201 | |||||
Mark C. Trudeau |
$ | 100,000 | $ | 191,201 | | $ | 291,201 | ||||||
John C. Van Scoter |
$ | 90,000 | $ | 191,201 | $ | 2,750 | $ | 283,951 | |||||
Laura H. Wright |
$ | 115,000 | $ | 191,201 | $ | 10,000 | $ | 316,201 |
Our Board Governance Principles require that the Nominating, Governance and Compliance Committee approve all charitable donations by TE Connectivity to organizations associated with a director. The amount of any such donation is limited to an amount annually that is less than the greater of $1 million or 2% of such tax exempt organization's consolidated gross revenues. Furthermore, charitable director matching gift donations by TE Connectivity are limited to matching donations in an amount no greater than the amount contributed by the Director, and consistent with TE Connectivity's employee matching gift program.
2019 Annual General Meeting Proxy Statement 67
TE Connectivity's Political Action Committee Charitable Match Program
TE Connectivity matches fifty cents for each dollar contributed by a director to the TE Connectivity Corporation Political Action Committee (TEPAC). This match may be designated by the director to an eligible public charity of their choice. Eligible organizations include, but are not limited to: colleges, private universities, private and public elementary and secondary schools, civic, arts and culture, health and human service agencies, and environmental organizations.
68 2019 Annual General Meeting Proxy Statement
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
All relationships and transactions in which the company and our directors and executive officers or their immediate family members are participants were reviewed to determine whether such persons have a direct or indirect material interest. As required under SEC rules, transactions that are determined to be directly or indirectly material to a related person are disclosed in the company's proxy statement. In addition, we have adopted a written policy with respect to related person transactions pursuant to which the Nominating, Governance and Compliance Committee reviews and approves or ratifies any related person transaction that is required to be disclosed. In the course of its review and approval or ratification of a disclosable related person transaction, the committee considers whether the transaction is fair and reasonable to the company and will take into account, among other factors it deems appropriate:
Any member of the committee who is a related person with respect to a transaction under review may not participate in the deliberations or vote respecting approval or ratification of the transaction, provided, however, that such director may be counted in determining the presence of a quorum at a meeting at which the committee considers the transaction.
Mark Trudeau, a director, is the President and Chief Executive Officer of Mallinckrodt plc to which TE Connectivity made $0.4 million million in sales during fiscal year 2018. Dr. Brondeau is the President and CEO, and Chairman of, FMC Corporation, with which TE Connectivity made sales totaling approximately $1.8 million during fiscal 2018. Such transactions were arms-length commercial dealings between the companies, none of which are material individually or in the aggregate. The committee has reviewed and approved or ratified these transactions.
2019 Annual General Meeting Proxy Statement 69
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires TE Connectivity's executive officers and directors and persons who beneficially own more than ten percent of TE Connectivity's common shares to file electronically reports of ownership and changes in ownership of such common shares with the SEC and NYSE. These persons are required by SEC regulations to furnish TE Connectivity with copies of all Section 16(a) forms they file. As a matter of practice, TE Connectivity's administrative staff assists TE Connectivity's executive officers and directors in preparing initial reports of ownership and reports of changes in ownership and files those reports on their behalf. Based on TE Connectivity's review of such forms, as well as information provided and representations made by the reporting persons, TE Connectivity believes that all of its executive officers, directors and beneficial owners of more than ten percent of its common shares complied with the reporting requirements of Section 16(a) during TE Connectivity's fiscal year ended September 28, 2018.
The information contained in the report below shall not be deemed to be "soliciting material" or to be "filed" with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the company specifically incorporates it by reference in such filing.
During our fiscal year ended September 28, 2018, the Audit Committee of the Board was comprised of four directors. Laura H. Wright served as chair for the full year. Carol A. Davidson, Abhijit Y. Talwalkar and Mark C. Trudeau served as members for the entire year. The Board of Directors determined that each of the members of the Audit Committee met the independence and experience requirements of the NYSE and applicable federal regulations. In addition, Ms. Wright and Messrs. Davidson and Trudeau were determined by the Board to be audit committee financial experts.
The Audit Committee operates under a charter approved by the Board of Directors. A summary description of the duties and powers of the Audit Committee can be found in "The Board of Directors and Board Committees" section of this proxy statement. The Audit Committee oversees the company's financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting process, assures that the company develops and maintains adequate financial controls and procedures, and monitors compliance with these processes. The company's independent registered public accounting firm (the "independent auditor") is responsible for performing an audit of the consolidated year-end financial statements in accordance with the standards of the Public Company Accounting Oversight Board ("PCAOB") (United States) to obtain reasonable assurance that the company's consolidated financial statements are free from material misstatement and expressing an opinion on the conformity of the financial statements with accounting principles generally accepted in the United States. The company's Swiss registered auditor is responsible for performing an audit of the statutory financial statements of TE Connectivity Ltd. prepared in accordance with Swiss law and the company's articles of association. The internal auditors are responsible to the Audit Committee and the Board for testing the integrity of the financial accounting and reporting control systems and such other matters as the Audit Committee and Board determine. The company's special auditor is responsible for delivering reports in accordance with Swiss law confirming that the receivables of the creditors of the company will be fully covered by assets after giving effect to any reductions of capital in connection with shareholders' approvals of distributions to shareholders in the form of capital reductions or under other circumstances.
In this context, the Audit Committee has reviewed the consolidated financial statements in TE Connectivity's Annual Report on Form 10-K for the fiscal year ended September 28, 2018. The Committee held discussions with management, the internal auditors, the independent auditor and the Swiss registered auditor concerning the consolidated financial statements, as well as the independent
70 2019 Annual General Meeting Proxy Statement
auditor's and Swiss registered auditor's opinions thereon. The Committee also discussed with management, the internal auditors and the independent auditor the report of management and the independent auditor's opinion regarding the company's internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002. Management represented to the Committee that the company's consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States. The Audit Committee reviewed and discussed the statutory financial statements of TE Connectivity Ltd. with management, the internal auditors and the Swiss registered auditor, as well as the Swiss registered auditor's opinion thereon. The Committee routinely reviewed and discussed with management and the Ombudsman any concerns from employees or external constituencies (including investors, suppliers and customers) about the company's accounting, internal accounting controls or auditing matters.
The Committee discussed with the independent auditor all communications required by auditing standards of the PCAOB (United States). In addition, the Committee discussed with the independent auditor the auditor's independence from TE Connectivity and its management, including the matters in the letter received from the independent auditor regarding the independent auditor's communications with the Audit Committee concerning independence.
Based upon the Committee's review and discussions referred to above, the Committee recommended that the Board include the company's audited consolidated financial statements in TE Connectivity's Annual Report on Form 10-K for the fiscal year ended September 28, 2018 filed with the Securities and Exchange Commission. The Committee further recommended that the audited statutory financial statements of TE Connectivity Ltd., together with the company's audited consolidated financial statements, be included in the company's Annual Report to Shareholders for the fiscal year ended September 28, 2018.
The Audit Committee:
Laura
H. Wright, Chair
Carol A. Davidson
Abhijit Y. Talwalkar
Mark C. Trudeau
December 12, 2018
2019 Annual General Meeting Proxy Statement 71
AGENDA ITEM NO. 4ELECTION OF THE INDEPENDENT PROXY
Motion Proposed by the Board of Directors
Our Board of Directors proposes that Dr. René Schwarzenbach, of Proxy Voting Services GmbH, or another individual representative of Proxy Voting Services GmbH if Dr. Schwarzenbach is unable to serve at the meeting, be elected to serve as the independent proxy at our 2020 annual general meeting of shareholders and also at any shareholder meeting that may be held prior to the 2020 annual general meeting.
Under Swiss law, our shareholders must elect an independent proxy to serve as a voting proxy at our shareholder meetings for shareholders who wish to vote at the meeting by proxy. The main task of the independent proxy is to vote shares held by shareholders of record at the shareholder meeting if instructed to do so by the shareholder. The independent proxy will vote the shares as instructed by the shareholder. If the shareholder authorized the independent proxy to vote the shareholders' shares without giving instructions, the independent proxy will abstain from voting the shares.
Vote Requirement to Approve Agenda Item
The approval of a majority of the votes cast at the meeting, whether in person or by proxy, is required for approval of Agenda Item No. 4.
The Board of Directors recommends a vote "FOR" approval of Agenda Item No. 4.
72 2019 Annual General Meeting Proxy Statement
AGENDA ITEM NO. 5APPROVAL OF THE ANNUAL REPORT AND
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 28, 2018
Agenda Item No. 5.1Approval of the 2018 Annual Report of TE Connectivity Ltd. (excluding the statutory financial statements for the fiscal year ended September 28, 2018, the consolidated financial statements for the fiscal year
ended September 28, 2018 and the Swiss Compensation Report for the fiscal year ended September 28, 2018)
Motion Proposed by the Board of Directors
Our Board of Directors proposes that the 2018 Annual Report of TE Connectivity Ltd. (excluding the statutory financial statements for the fiscal year ended September 28, 2018, the consolidated financial statements for the fiscal year ended September 28, 2018 and the Swiss Compensation Report for the fiscal year ended September 28, 2018) be approved.
Our 2018 Annual Report, which accompanies this proxy statement, includes the statutory financial statements of TE Connectivity Ltd. (which do not consolidate the results of operations for our subsidiaries) for the fiscal year ended September 28, 2018 and the TE Connectivity Ltd. consolidated financial statements for the fiscal year ended September 28, 2018, and contains the reports of our Swiss registered auditor and our independent registered public accounting firm, as well as information on our business and organization. Copies of our 2018 Annual Report and this proxy statement are available on the Internet at http://www.te.com/TEAnnualMeeting.
Under Swiss law, certain portions of our annual report must be submitted to shareholders for approval or disapproval at each annual general meeting. This agenda item must be submitted to shareholders for approval or disapproval in addition to the statutory financial statements and the consolidated financial statements, which are presented separately for approval as Agenda Items No. 5.2 and No. 5.3, respectively.
In the event of a negative vote on this agenda item by shareholders, the Board of Directors will call an extraordinary general meeting of shareholders for re-consideration of this agenda item by shareholders.
Vote Requirement to Approve Agenda Item
The approval of a majority of the votes cast at the meeting, whether in person or by proxy, is required for approval of Agenda Item No. 5.1.
The Board of Directors recommends a vote "FOR" approval of Agenda Item No. 5.1.
Agenda Item No. 5.2Approval of the statutory financial statements of TE Connectivity Ltd. for the fiscal year ended September 28, 2018
Motion Proposed by the Board of Directors
Our Board of Directors proposes that the statutory financial statements of TE Connectivity Ltd. for the fiscal year ended September 28, 2018 be approved.
TE Connectivity Ltd.'s statutory financial statements for the fiscal year ended September 28, 2018 are contained in our 2018 Annual Report, which accompanies this proxy statement. Our 2018 Annual
2019 Annual General Meeting Proxy Statement 73
Report also contains the report of our Swiss registered auditor with respect to the statutory financial statements of TE Connectivity Ltd.
Under Swiss law, our statutory financial statements must be submitted to shareholders for approval or disapproval at each annual general meeting.
In the event of a negative vote on this agenda item by shareholders, the Board of Directors will call an extraordinary general meeting of shareholders for re-consideration of this agenda item by shareholders.
Deloitte AG, Zurich, Switzerland, as our Swiss registered auditor, has issued an unqualified recommendation to the Annual General Meeting that the statutory financial statements of TE Connectivity Ltd. for the fiscal year ended September 28, 2018 be approved. As our Swiss registered auditor, Deloitte AG has expressed its opinion that the statutory financial statements for the fiscal year ended September 28, 2018 comply with Swiss law and our articles of association and has reported on other legal requirements. Representatives of Deloitte AG will attend the Annual General Meeting and will have an opportunity to make a statement if they wish. They also will be available to answer appropriate questions at the meeting.
Vote Requirement to Approve Agenda Item
The approval of a majority of the votes cast at the meeting, whether in person or by proxy, is required for approval of Agenda Item No. 5.2.
The Board of Directors recommends a vote "FOR" approval of Agenda Item No. 5.2.
Agenda Item No. 5.3Approval of the consolidated financial statements of TE Connectivity Ltd. for the fiscal year ended September 28, 2018
Motion Proposed by the Board of Directors
Our Board of Directors proposes that the consolidated financial statements of TE Connectivity Ltd. for the fiscal year ended September 28, 2018 be approved.
Our consolidated financial statements for the fiscal year ended September 28, 2018 are contained in our 2018 Annual Report, which accompanies this proxy statement. Our 2018 Annual Report also contains the report of our Swiss registered auditor with respect to the consolidated financial statements.
Under Swiss law, our consolidated financial statements must be submitted to shareholders for approval or disapproval at each annual general meeting.
In the event of a negative vote on this agenda item by shareholders, the Board of Directors will call an extraordinary general meeting of shareholders for re-consideration of this agenda item by shareholders.
Deloitte AG, Zurich, Switzerland, as our Swiss registered auditor, has issued an unqualified recommendation to the Annual General Meeting that the consolidated financial statements of TE Connectivity Ltd. for the fiscal year ended September 28, 2018 be approved. As our Swiss registered auditor, Deloitte AG has expressed its opinion that the consolidated financial statements present fairly, in all material respects, the financial position, the results of operations and the cash flows of TE Connectivity in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and comply with Swiss law and has reported on other legal requirements.
74 2019 Annual General Meeting Proxy Statement
Representatives of Deloitte AG will attend the Annual General Meeting and will have an opportunity to make a statement if they wish. They also will be available to answer appropriate questions at the meeting.
Vote Requirement to Approve Agenda Item
The approval of a majority of the votes cast at the meeting, whether in person or by proxy, is required for approval of Agenda Item No. 5.3.
The Board of Directors recommends a vote "FOR" approval of Agenda Item No. 5.3.
2019 Annual General Meeting Proxy Statement 75
AGENDA ITEM NO. 6RELEASE OF THE MEMBERS OF THE BOARD OF DIRECTORS AND
EXECUTIVE OFFICERS FOR ACTIVITIES DURING THE FISCAL YEAR ENDED
SEPTEMBER 28, 2018
Motion Proposed by the Board of Directors
Our Board of Directors proposes that shareholders release the members of the Board of Directors and executive officers of TE Connectivity from liability for their activities during the fiscal year ended September 28, 2018.
As is customary for Swiss corporations and in accordance with article 698, subsection 2, item 5 of the Swiss Code of Obligations (the "Swiss Code"), shareholders are requested to release the members of the Board of Directors and the executive officers of TE Connectivity from liability for their activities during the fiscal year ended September 28, 2018. This release from liability claims brought by TE Connectivity or its shareholders against members of the Board of Directors and executive officers of TE Connectivity for activities carried out during the fiscal year ended September 28, 2018 is only effective with respect to facts that have been disclosed to shareholders. This release binds shareholders who either voted in favor of the agenda item or who subsequently acquired shares with knowledge of the resolution. Registered shareholders that do not vote in favor of this agenda item are not bound by the result for a period ending six months after the vote.
Vote Requirement to Approve Agenda Item
The approval of a majority of the votes cast at the meeting, whether in person or by proxy, not counting the votes of any director or executive officer of TE Connectivity, is required for approval of Agenda Item No. 6.
The Board of Directors recommends a vote "FOR" approval of Agenda Item No. 6.
76 2019 Annual General Meeting Proxy Statement
AGENDA ITEM NO. 7ELECTION OF AUDITORS
Agenda Item No. 7.1Election of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 27, 2019
Motion Proposed by the Board of Directors
Our Board of Directors proposes that our shareholders elect Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 27, 2019.
The election of our independent registered public accounting firm is recommended by our Audit Committee to the Board of Directors for approval by our shareholders annually. The Audit Committee reviews both the audit scope and estimated fees for professional services for the coming year. The Audit Committee has recommended the ratification of the engagement of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 27, 2019.
Representatives of Deloitte & Touche LLP will attend the Annual General Meeting and will have an opportunity to make a statement if they wish. They also will be available to answer appropriate questions at the meeting.
Independent Auditor Fee Information
Aggregate fees for professional services rendered by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates as of and for the fiscal years ended September 28, 2018 and September 29, 2017 are set forth below. The aggregate fees included in the audit fees category are fees related to the fiscal years for the services described below, irrespective of when services are rendered. The aggregate fees included in each of the other categories are fees for services rendered in the fiscal years for the services described below. (All references to "$" below are to United States dollars.)
Fiscal Years 2018 and 2017 Fees
|
Fiscal Year 2018 | Fiscal Year 2017 | |||||
---|---|---|---|---|---|---|---|
Audit Fees |
$ | 12,158,000 | $ | 14,769,000 | |||
Audit-Related Fees |
2,113,000 | | |||||
Tax Fees |
117,000 | 476,000 | |||||
Other Fees |
84,000 | 78,000 | |||||
| | | | | | | |
Total |
$ | 14,472,000 | $ | 15,323,000 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Audit fees for the fiscal years ended September 28, 2018 and September 29, 2017 were for professional services rendered for the annual audits of the consolidated financial statements of the company including the audits of internal control over financial reporting, review of quarterly financial statements included in the company's quarterly reports on Form 10-Q, consents, registration statements, statutory audits and regulatory filings in foreign jurisdictions.
Audit-related fees for the fiscal year ended September 28, 2018 were primarily for audits of carve-out financial statements.
Tax fees for the fiscal years ended September 28, 2018 and September 29, 2017 were primarily for tax compliance services.
Other fees for the fiscal years ended September 28, 2018 and September 29, 2017 were for subscriptions and miscellaneous advisory services.
2019 Annual General Meeting Proxy Statement 77
None of the services described above were approved by the Audit Committee under the de minimis exception provided by Rule 2-01(c)(7)(i)(C) under Regulation S-X.
Policy for the Pre-Approval of Audit and Non-Audit Services
The Audit Committee adopted a pre-approval policy that provides guidelines for the audit, audit-related, tax and other permissible non-audit services that may be provided by the independent auditor. The policy identifies the principles that must be considered by the Audit Committee in approving services to ensure that the auditor's independence is not impaired. The policy provides that the Corporate Controller will support the Audit Committee by providing a list of proposed services to the Audit Committee, monitoring the services