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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Cleveland Cliffs Inc | NYSE:CLF | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.43 | 2.49% | 17.71 | 17.66 | 17.305 | 17.44 | 6,880,940 | 01:00:00 |
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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 Pursuant to §240.14a-12
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Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1) Title of each class of securities to which transaction applies: ____________
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(2) Aggregate number of securities to which transaction applies: ____________
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(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11
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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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(1) Amount Previously Paid: ____________
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(2) Form, Schedule or Registration Statement No.: ____________
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(3) Filing Party: ____________
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(4) Date Filed: ____________
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LETTER TO OUR SHAREHOLDERS
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Sincerely,
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Lourenco Goncalves
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Chairman, President and Chief Executive Officer
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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1.
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To elect eleven directors to act until the next Annual Meeting of Shareholders or until their respective successors are duly elected and qualified;
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2.
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To approve, on an advisory basis, our named executive officers' compensation;
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3.
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To ratify the appointment of Deloitte & Touche LLP as Cliffs' independent registered public accounting firm to serve for the
2019
fiscal year; and
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4.
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To transact such other business, if any, as may properly come before the
2019
Annual Meeting or any adjournment thereof.
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YOUR VOTE IS IMPORTANT.
YOU MAY VOTE BY MAILING THE ENCLOSED PROXY CARD, BY TELEPHONE, BY INTERNET,
OR BY BALLOT IN PERSON AT THE 2019 ANNUAL MEETING.
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The proxy statement and Cliffs’ 2018 Annual Report for the 2018 fiscal year are available at
www.proxyvote.com.
These materials also are available on Cliffs’ Investor Relations website at
www.clevelandcliffs.com/investors
under “Financial Information." If your shares are not registered in your own name, please follow the voting instructions from your bank, broker, trustee, nominee or other shareholder of record to vote your shares and, if you would like to attend the 2019 Annual Meeting, please bring evidence of your share ownership with you. You should be able to obtain evidence of your share ownership from the bank, broker, trustee, nominee or other shareholder of record that holds the shares on your behalf.
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PROXY STATEMENT TABLE OF CONTENTS
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COMPENSATION DISCUSSION AND ANALYSIS
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Executive Summary
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Executive Compensation Philosophy and Core Principles
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Oversight of Executive Compensation
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Key Components of Executive Compensation
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Retirement and Deferred Compensation Benefits
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Supplementary Compensation Policies
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COMPENSATION COMMITTEE REPORT
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
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COMPENSATION-RELATED RISK ASSESSMENT
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EXECUTIVE COMPENSATION
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Executive Compensation Tables and Narratives
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Potential Payments Upon Termination or Change in Control
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CEO Pay Ratio
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PROPOSAL 2 – APPROVAL, ON AN ADVISORY BASIS, OF OUR NAMED EXECUTIVE OFFICERS' COMPENSATION
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AUDIT COMMITTEE REPORT
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PROPOSAL 3 – RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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INFORMATION ABOUT SHAREHOLDER PROPOSALS AND COMPANY DOCUMENTS
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OTHER INFORMATION
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ANNEX – USE OF NON-GAAP FINANCIAL MEASURES
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PROXY STATEMENT SUMMARY
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2019 ANNUAL MEETING OF SHAREHOLDERS
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(PAGE
4
)
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DATE AND TIME:
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Wednesday, April 24, 2019, at 11:30 a.m. EDT
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PLACE:
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North Point, 901 Lakeside Avenue, Cleveland, Ohio 44114
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RECORD DATE:
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February 25, 2019
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VOTING:
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Shareholders of record are entitled to vote by completing and returning the enclosed proxy card by mail; telephone at
1-800-690-6903
; by Internet at
www.proxyvote.com
; or attending the 2019 Annual Meeting of Shareholders (the "2019 Annual Meeting") in person (beneficial holders must obtain a legal proxy from their broker, banker, trustee, nominee or other shareholder of record granting the right to vote).
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MAILING:
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This proxy statement, the accompanying proxy card and our 2018 Annual Report will be mailed on or about March 12,
2019 to certain shareholders of record as of the Record Date.
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VOTING MATTERS
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BOARD VOTE RECOMMENDATION
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PAGE REFERENCE (for more detail)
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Proposal 1 – Election of Directors
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FOR each Director Nominee
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Proposal 2 – Approval, on an Advisory Basis, of Our Named Executive Officers' Compensation ("Say-on-Pay")
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FOR
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Proposal 3 – Ratification of Independent Registered Public Accounting Firm
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FOR
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DIRECTOR NOMINEES RECOMMENDED BY THE CLIFFS BOARD OF DIRECTORS
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(PAGE
13
)
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NAME
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AGE
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DIRECTOR SINCE
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POSITION
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COMMITTEE MEMBERSHIPS (1)
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Lourenco Goncalves
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61
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2014
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Chairman, President and Chief Executive Officer
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Strategy*
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Douglas C. Taylor
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54
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2014
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Lead Director
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Compensation*
Strategy
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John T. Baldwin
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62
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2014
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Director
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Audit*
Compensation
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Robert P. Fisher, Jr.
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64
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2014
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Director
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Audit
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Susan M. Green
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59
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2007
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Director
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Governance
Strategy
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M. Ann Harlan
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59
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2019
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Director
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Audit
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Janet L. Miller
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65
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2019
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Director
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Governance
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Joseph A. Rutkowski, Jr.
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64
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2014
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Director
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Governance*
Strategy
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Eric M. Rychel
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45
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2016
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Director
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Audit
Compensation
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Michael D. Siegal
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66
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2014
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Director
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Governance
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Gabriel Stoliar
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64
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2014
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Director
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Compensation
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* Denotes committee chair
(1) Full committee names are: Audit – Audit Committee; Compensation – Compensation and Organization Committee; Governance – Governance and Nominating Committee; Strategy – Strategy Committee.
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2019 Proxy Statement
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1
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SHAREHOLDER ENGAGEMENT AND SAY-ON-PAY HIGHLIGHTS (summary)
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(PAGE
22
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Cliffs maintains open communication with the investment community. During 2018 and early 2019, we reached out to our top 25 shareholders representing approximately 55% of our outstanding shares to discuss compensation matters. See the section entitled "2018 Say-on-Pay Results and Board Responsiveness to Shareholder Feedback" in the Compensation Discussion and Analysis section for more detail as to what we heard and how we responded.
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EXECUTIVE COMPENSATION PHILOSOPHY AND CORE PRINCIPLES
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(PAGE
24
)
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Our guiding compensation principles, as established by the Compensation and Organization Committee for 2018, were as follows:
•
Align short-term and long-term incentives with results delivered to shareholders;
•
Be transparent, and ensure that executives and shareholders understand our executive compensation programs, including the objectives, mechanics, and compensation levels and opportunities provided;
•
Design an incentive program that focuses on performance objectives tied to our business plan (including profitability-related and cost control objectives), relative performance objectives tied to market conditions (including relative total shareholder return, measured by share price appreciation plus dividends, if any), and performance against other key objectives tied to our business strategy (including safety, reduced debt and decreased overall spending);
•
Provide competitive fixed compensation elements over the short-term (base salary) and long-term (equity and retirement benefits) to encourage long-term retention of our key executives; and
•
Continue to structure programs as in prior years to align with corporate governance best practices (such as not providing "gross-ups" related to change in control payments, using "double-trigger" vesting in connection with a change in control for equity awards, using Share Ownership Guidelines and maintaining a clawback policy related to incentive compensation for our executive officers).
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2018 EXECUTIVE COMPENSATION SUMMARY
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(PAGE
44
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The numbers in the following table showing the 2018 compensation of our named executive officers (the "NEOs") were determined in the same manner as the numbers in the corresponding columns in the 2018 Summary Compensation Table (the "SCT") (provided later in this proxy statement); however, they do not include information regarding changes in pension value and non-qualified deferred compensation earnings and information regarding all other compensation, each as required to be presented in the 2018 SCT under the rules of the U.S. Securities and Exchange Commission (the "SEC"). As such, this table should not be viewed as a substitute for the 2018 SCT:
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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(PAGE
57
)
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As a matter of good corporate governance, we are asking our shareholders to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for 2019.
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FORWARD-LOOKING STATEMENTS
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This proxy statement contains statements that constitute "forward-looking statements" within the meaning of the federal securities laws. As a general matter, forward-looking statements relate to anticipated trends and expectations rather than historical matters. Forward-looking statements are subject to uncertainties and factors relating to Cliffs’ operations and business environment that are difficult to predict and may be beyond our control. Such uncertainties and factors may cause actual results to differ materially from those expressed or implied by the forward-looking statements. Certain of such risks and uncertainties are described in Cliffs' Annual Report on Form 10-K for the year ended December 31, 2018. Cliffs does not undertake to update the forward-looking statements included in the proxy statement to reflect the impact of circumstances or events that may arise after the date the forward-looking statements were made.
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2019 Proxy Statement
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2
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QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING
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•
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FOR ALL of the eleven individuals nominated by the Board for election as directors;
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•
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FOR the approval, on an advisory basis, of Cliffs' NEOs' compensation; and
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•
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FOR the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm to serve for the
2019
fiscal year.
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•
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By mail
. If you received a paper copy of the proxy card by mail, after reading the proxy materials, you may mark, sign and date your proxy card and return it in the prepaid and addressed envelope provided.
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•
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By telephone
. After reading the proxy materials and with your proxy card in front of you, you may call the toll-free number appearing on the proxy card, using a touch-tone telephone. You will be prompted to enter your control number from your proxy card. This number will identify you as a shareholder of record. Follow the simple instructions that will be given to you to record your vote.
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•
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Over the Internet
. After reading the proxy materials and with your proxy card in front of you, you may use a computer to access the website
www.proxyvote.com
. You will be prompted to enter your control number from your proxy card. This number will identify you as a shareholder of record. Follow the simple instructions that will be given to you to record your vote.
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2019 Proxy Statement
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3
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MEETING INFORMATION
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2019 Proxy Statement
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4
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2019 Proxy Statement
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5
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CORPORATE GOVERNANCE
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2019 Proxy Statement
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6
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AUDIT COMMITTEE
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MEMBERS: 4
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INDEPENDENT: 4
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AUDIT COMMITTEE FINANCIAL EXPERTS: 2
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2018 MEETINGS: 10
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RESPONSIBILITIES:
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▪
Reviews with our management, the internal auditors and the independent registered public accounting firm, the adequacy and effectiveness of our system of internal control over financial reporting
▪
Reviews significant accounting matters
▪
Reviews quarterly unaudited financial information prior to public release
▪
Approves the audited financial statements prior to public distribution
▪
Approves our assertions related to internal controls prior to public distribution
▪
Reviews any significant changes in our accounting principles or financial reporting practices
▪
Evaluates our independent registered public accounting firm; discusses with the independent registered public accounting firm their independence and considers the compatibility of non-audit services with such independence
▪
Annually selects and retains our independent registered public accounting firm to examine our financial statements and reviews, approves and retains the services performed by our independent registered public accounting firm
▪
Approves management’s appointment, termination or replacement of the head of Internal Audit
▪
Conducts a legal compliance review at least annually
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CHAIR: John T. Baldwin
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MEMBERS: Robert P. Fisher, Jr., M. Ann Harlan, and Eric M. Rychel
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COMPENSATION AND ORGANIZATION COMMITTEE
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MEMBERS: 4
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INDEPENDENT: 4
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2018 MEETINGS: 7
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RESPONSIBILITIES:
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•
Oversees development and implementation of Cliffs' compensation policies and programs for executive officers
•
Ensures that criteria for awards under incentive plans relate to Cliffs' strategic plan and operating performance objectives and approves equity-based awards
•
Reviews and evaluates CEO and executive officer performance and approves compensation (with the CEO's compensation being subject to ratification by the independent members of the Board)
•
Recommends to the Board the election of officers
•
Assists with management development and succession planning
•
Reviews employment and severance arrangements and oversees regulatory compliance regarding compensation matters and related party transactions
•
Obtains the advice of outside experts with regard to compensation matters
•
May, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee and may delegate certain equity award grant authority to officers of Cliffs, subject to applicable law
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CHAIR
:
Douglas C. Taylor
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MEMBERS: John T. Baldwin, Eric M. Rychel and Gabriel Stoliar
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2019 Proxy Statement
|
7
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STRATEGY COMMITTEE
|
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MEMBERS: 4
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INDEPENDENT: 3
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2018 MEETINGS: 5
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RESPONSIBILITIES:
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•
Oversees Cliffs’ strategic plan, annual management objectives and operations and monitors risks relevant to management's strategy
•
Provides advice and assistance with developing our current and future strategy
•
Provides follow up oversight with respect to the comparison of actual results with estimates for major projects and post-deal integration
•
Ensures that Cliffs has appropriate strategies for managing exposures to economic and hazard risks
•
Assesses Cliffs’ overall capital structure and its capital allocation priorities
•
Assists management in determining the resources necessary to implement Cliffs’ strategic and financial plans
•
Monitors the progress and implementation of Cliffs' strategy
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CHAIR
:
Lourenco Goncalves
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MEMBERS: Susan M. Green, Joseph A. Rutkowski, Jr. and Douglas C. Taylor
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2019 Proxy Statement
|
8
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2019 Proxy Statement
|
9
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2019 Proxy Statement
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10
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DIRECTOR COMPENSATION
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BOARD FORM OF CASH COMPENSATION
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2018 ($)
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Annual Retainer
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120,000
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Lead Director Annual Retainer
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48,000
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Audit Committee Chair Annual Retainer
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24,000
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Compensation Committee Chair Annual Retainer
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15,000
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Governance Committee Chair Annual Retainer
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12,000
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2019 Proxy Statement
|
11
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NAME
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FEES EARNED OR PAID IN CASH ($)(1)
|
STOCK AWARDS ($)(2)
|
ALL OTHER COMPENSATION ($)
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TOTAL ($)
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J. T. Baldwin
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144,000
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99,998
|
—
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243,998
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R.P. Fisher, Jr.
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127,500
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99,998
|
—
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227,498
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S. M. Green
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120,000
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99,998
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—
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219,998
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J.A. Rutkowski, Jr.
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126,000
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99,998
|
—
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225,998
|
E.M. Rychel
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120,000
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99,998
|
—
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219,998
|
M. D. Siegal
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120,000
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99,998
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—
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219,998
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G. Stoliar
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120,000
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99,998
|
—
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219,998
|
D. C. Taylor
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181,500
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99,998
|
—
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281,498
|
(1)
|
The amounts listed in this column reflect the aggregate cash dollar value of all earnings in
2018
for annual retainer fees and chair retainers.
|
(2)
|
The amounts reported in this column reflect the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718 for the nonemployee directors’ restricted share awards granted during
2018
, which awards are further described above, and whether or not deferred by the director. The grant date fair value of the nonemployee directors’ restricted share award of
27,567
shares on
April 24, 2018
was $
7.28
per share (approximately $100,000). Messrs. Rychel and Siegal elected to defer all or a portion of their restricted share award under the Directors' Plan. As of December 31,
2018
, the aggregate number of restricted shares subject to forfeiture held by each nonemployee director was as follows: Mr. Baldwin -
13,736
; Mr. Fisher -
13,736
; Ms. Green -
13,736
; Mr. Rutkowski -
13,736
; Mr. Siegal -
10,302
; Mr. Stoliar -
13,736
; and Mr. Taylor -
13,736
. As of December 31,
2018
, the aggregate number of unvested deferred share units allocated to the deferred share accounts of Messrs. Rychel and Siegal under the Directors' Plan were
27,567
and
25,169
, respectively.
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2019 Proxy Statement
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12
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PROPOSAL 1
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ELECTION OF DIRECTORS
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þ
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THE BOARD RECOMMENDS A VOTE
FOR
EACH OF THE NOMINEES LISTED ON THE FOLLOWING PAGES.
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2019 Proxy Statement
|
13
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||||
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||||
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JOHN T. BALDWIN
Age: 62
Director since 2014
Other Current Public Directorships:
None
Former Public Directorships:
Metals USA Holdings Corp. (2006 - 2013)
The Genlyte Group Incorporated (2003 - 2008)
|
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Specific qualifications, experience, skills and expertise:
▪
Former Audit Committee Chairman
▪
Retired Chief Financial Officer with over twenty-five years of increasing financial responsibility
▪
Broad experience structuring and negotiating complicated financial M&A transactions
|
Former Director and Chairman of the Audit Committee of Metals USA Holdings Corp.
, a provider of a wide range of products and services in the heavy carbon steel, flat-rolled steel, specialty metals, and building products markets, from January 2006 to April 2013; Senior Vice President and Chief Financial Officer of Graphic Packaging Corporation, 2003 to 2005. Mr. Baldwin holds a Bachelor of Science degree from the University of Houston and J.D. from the University of Texas School of Law.
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2019 Proxy Statement
|
14
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SUSAN M. GREEN
Age: 59
Director since 2007
Other Current Public Directorships:
None
Former Public Directorships:
Cleveland-Cliffs Inc. (2007 - 2014)
|
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Specific qualifications, experience, skills and expertise:
▪
Experienced law and policy advocate in the public and private sectors
▪
Served as both a labor organizer and as an attorney representing employees, labor unions, and employee benefit plans
▪
Brings her diverse experiences as labor attorney and an alternative point of view to our Board
|
Former Deputy General Counsel, U.S. Congress Office of Compliance
, which enforces the labor and employment laws for the Legislative Branch, from November 2007 through September 2013. Prior to that position, Ms. Green held several appointments in the U.S. Department of Labor during the Administration of President Bill Clinton (1999-2001), and served as Chief Labor Counsel for then-Senator Edward M. Kennedy (1996-1999). Ms. Green was originally proposed as a nominee for the Board by the USW pursuant to the terms of our 2004 labor agreement. Ms. Green received her J.D. from Yale Law School and an A.B. from Harvard College.
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2019 Proxy Statement
|
15
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JOSEPH A. RUTKOWSKI, JR.
Age: 64
Director since 2014
Other Current Public Directorships:
Insteel Industries, Inc. (since 2015)
Cenergy Holdings SA (since 2016)
Former Public Directorships:
None
|
|
Specific qualifications, experience, skills and expertise:
▪
Over 30 years of experience in the steel industry, including 12 years of service as executive vice president of Nucor
▪
Expertise in M&A, strategy, and iron and steelmaking technology
|
Principal of Winyah Advisors LLC
, a management consulting firm, since 2010; former Executive Vice President of Nucor Corporation (“Nucor”), the largest steel producer in the United States, from 1998 to 2010; various previous capacities at Nucor that included: Manager of Melting and Casting at the Nucor steel division from 1991 to 1992; General Manager from 1992 to 1998; Vice President from 1993 to 1998. Mr. Rutkowski holds a Bachelor's of Science in Mechanics and Materials Science from Johns Hopkins University.
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2019 Proxy Statement
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16
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GABRIEL STOLIAR
Age: 64
Director since 2014
Other Current Public Directorships:
Tupy S.A. (since 2009)
Former Public Directorships:
None
|
|
Specific qualifications, experience, skills and expertise:
▪
Vast experience in and relating to the metals and mining industries
▪
Extensive experience serving on various boards of directors
|
Managing Partner of Studio Investimentos
, an asset management firm focused on Brazilian equities, since 2009; Chairman of the board of directors of Tupy S.A., a foundry and casting company, since 2009; board of directors of LogZ Logistica Brasil S.A., a ports logistic company, from 2011 to 2018; Chief Financial Officer and Head of Investor Relations and subsequently as Executive Director of Planning and Business Development at Vale S.A., a Brazilian multinational diversified metals and mining company, from 1997 to 2008. Mr. Stoliar holds a Bachelor’s of Science in Industrial Engineering from the Universidade Federal do Rio de Janeiro, a post graduate degree in Production Engineering with focus in Industrial Projects and Transportation from the Universidade Federal do Rio de Janeiro and an Executive MBA from PDG-SDE/RJ.
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2019 Proxy Statement
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17
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OWNERSHIP OF EQUITY SECURITIES OF THE COMPANY
|
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2019 Proxy Statement
|
18
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EQUITY COMPENSATION PLAN INFORMATION
|
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PLAN CATEGORY
|
NUMBER OF SECURITIES TO BE
ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS,
WARRANTS AND RIGHTS (a)
|
WEIGHTED AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS WARRANTS AND RIGHTS (b)
|
NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUANCE UNDER EQUITY COMPENSATION PLANS (EXCLUDING SECURITIES REFLECTED IN COLUMN (a)) (c)
|
|||||
Equity Compensation Plans Approved by Security Holders
|
8,772,891
|
|
(1)
|
$11.11
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(2)
|
27,218,652
|
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(3)
|
Equity Compensation Plans Not Approved by Security Holders
|
—
|
|
|
__
|
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—
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Total
|
8,772,891
|
|
|
|
|
27,218,652
|
|
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(1)
|
Includes the following securities to be issued upon exercise or vesting of:
|
•
|
1,004,508
performance share awards from the 2015 Equity Plan and
1,844,938
performance share awards from the A&R 2015 Equity Plan, which assumes a maximum payout of 200% upon meeting certain performance targets (as a result, this aggregate reported number may overstate actual dilution);
|
•
|
4,694,360
restricted stock units for employees under both employee plans;
|
•
|
563,230
stock options that are vested and exercisable as of December 31, 2018; and
|
•
|
0 shares from the ESPP.
|
(2)
|
Restricted stock units and performance-based awards are not taken into account in the weighted-average exercise price as such awards have no exercise price.
|
(3)
|
Includes the following securities:
|
•
|
12,949,420
common shares remaining available under the A&R 2015 Equity Plan that may be issued in respect of stock options, SARs, restricted shares, restricted stock units, deferred shares, performance shares, performance units, retention units and dividends or dividend equivalents;
|
•
|
502,378
common shares remaining available under the Directors’ Plan that may be issued in respect of restricted shares, restricted stock units, deferred shares and other awards that may be denominated or payable in, valued by or reference to or based on common shares or factors that may influence the value of the common shares; and
|
•
|
10,000,000
common shares authorized for purchase under the ESPP.
|
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
|
||
|
|
|
|
|
|
|
|
|
2019 Proxy Statement
|
19
|
COMPENSATION DISCUSSION AND ANALYSIS
|
|
|
CD&A TABLE OF CONTENTS
|
|
|
|
|
|
Executive Summary
|
|
Executive Compensation Philosophy and Core Principles
|
|
Oversight of Executive Compensation
|
|
Key Components of Executive Compensation
|
|
Retirement and Deferred Compensation Benefits
|
|
Supplementary Compensation Policies
|
|
Executive Compensation Tables and Narratives
|
|
|
|
2019 Proxy Statement
|
20
|
|
We continued
to make remarkable progress in
transforming Cliffs
by executing our strategic initiatives and achieving outstanding financial results in 2018.
|
||
|
|
|
|
Once again,
we delivered
real value
to our shareholders.
|
|
||
|
*Amounts for 2015-2017 are as reported in our 2017 Form 10-K, which includes all active operations at that time. See Annex for an explanation of non-GAAP financial measures.
|
||
|
|
|
|
ü
Focused on our core iron ore mining and pelletizing business;
ü
Provided accelerating profitability growth each year since 2015;
ü
Developed new pellet products to meet ever-evolving market demands;
ü
Maximized profitability by securing sales volume certainty in multiple new supply agreements with steelmakers throughout the Great Lakes region;
ü
Improved operating reliability by making plant improvements;
ü
Secured and extended for a four-year term labor agreements with the USW at four of our Mining and Pelletizing operations;
ü
Retired all tranches of our debt maturing in 2020;
ü
Lead the push toward global environmental stewardship; and
ü
Mitigated our costs as we exited the Asia Pacific Iron Ore operations.
|
|
|
|
|
2019 Proxy Statement
|
21
|
|
|
|
|
|
$1.1 billion
2018 Net Income
v. $363 million in 2017
|
|
$2.3 billion
2018 Consolidated Revenues
v. $1.9 billion in 2017
|
|
20.6 million
2018 Sales of Pellet Tons v. 18.7 million in 2017 |
|
ü
ü
|
In 2018, we reached a level of comfort with our financial position to begin a program to return capital to shareholders:
•
We first instituted a quarterly dividend of $0.05 per share, announced in October;
•
In addition, our Board authorized a program to repurchase outstanding common shares, up to a maximum of $200 million; and
•
During 2018, we repurchased 5.4 million common shares at a cost of approximately $48 million in aggregate, or an average price of approximately $8.78 per share.
In addition to returning capital, we continued in our debt reduction endeavors. In 2018, we redeemed in full all of our outstanding 5.90% 2020 Senior Notes and 4.80% 2020 Senior Notes and purchased certain other outstanding senior notes. The total aggregate principal amount of debt redeemed and purchased, including premiums, during 2018 was $235 million.
|
|
|
|
|
2019 Proxy Statement
|
22
|
ü
|
No special or one-time equity awards granted to any of the NEOs. The Compensation Committee agreed that these types of awards will not be granted except for under unusual circumstances;
|
ü
|
Increased the portion of the annual incentive program based on a financial performance metric. Beginning in 2019, the annual incentive program will be based 50% on financial performance, 10% on safety scorecard and 40% on strategic initiatives; and
|
ü
|
We have improved annual incentive program disclosures. We have improved our discussion of how and why we set our annual performance measures and levels of performance with emphasis on robust strategic initiative disclosure.
|
•
|
Support the execution of our business strategy and long-term financial objectives;
|
•
|
Attract, motivate and retain highly talented executives who will promote the short- and long-term growth of Cliffs;
|
•
|
Create shareholder value and returns to align the long-term interests of our NEOs with those of our shareholders; and
|
•
|
Reward executives for contributions at a level reflecting Cliffs' performance as well as their individual performance.
|
|
|
|
2019 Proxy Statement
|
23
|
•
|
2018 Annual Incentive Program
– Awards paid out at 200% of target, reflecting the results for the three metrics utilized by the Compensation Committee:
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA"), a description of which is provided in the Annex
, safety and strategic initiatives; and
|
•
|
2016-2018 Long-Term Incentive Program
– In January 2019, the Compensation Committee determined that, for the three-year performance period ended December 31, 2018, we achieved relative total shareholder return ("TSR") performance above maximum goal (100
th
percentile) compared to our comparator group and 2018 Adjusted EBITDA above maximum goal, resulting in a payout level of 200% for performance-based cash awards.
|
•
|
Align short-term and long-term incentives with results delivered to shareholders;
|
•
|
Be transparent, ensure that executives and shareholders understand our executive compensation programs, including the objectives, mechanics, and compensation levels and opportunities provided;
|
•
|
Design an incentive plan that focuses on performance objectives tied to our business plan (including profitability-related and cost control objectives), relative performance objectives tied to market conditions (including relative TSR, measured by share price appreciation plus dividends, if any) and performance against other key objectives tied to our business strategy (including safety, reduced debt, and decreased overall spending);
|
•
|
Provide competitive fixed compensation elements over the short-term (base salary) and long-term (equity and retirement benefits) to encourage long-term retention of our key executives; and
|
•
|
Continue to structure programs as in prior years to align with corporate governance best practices (such as not providing "gross-ups" related to change in control payments, using "double-trigger" vesting in connection with a change in control for equity awards, using Share Ownership Guidelines and maintaining a clawback policy related to incentive compensation for our executive officers).
|
|
|
|
2019 Proxy Statement
|
24
|
2018 AT–RISK COMPENSATION
|
||
|
|
|
|
WHY WE PAY THIS ELEMENT
|
KEY CHARACTERISTICS
|
ANNUAL INCENTIVE PROGRAM: CASH
|
ü
Motivate and reward executives for performance on key strategic, operational and financial measures during the year.
|
ü
Earned annual cash incentive based on achieving Adjusted EBITDA, Safety and Strategic Initiatives.
ü
The EMPI Plan included a minimum Adjusted EBITDA condition, which means the annual cash incentive would not be paid if our Adjusted EBITDA had been less than $100 million.
|
PERFORMANCE CASH AND SHARES
|
ü
Motivate and reward executives for performance on key long-term performance metrics.
ü
Align the interests of executives with long-term shareholder value.
ü
Retain executives.
|
ü
The cash and shares are earned based on achieving relative TSR, as compared to comparator companies' returns in the metals and mining industry.
|
RESTRICTED STOCK UNITS
|
ü
Align the interests of executives with long-term shareholder value.
ü
Retain executives.
|
ü
Generally earned based on continued employment over a period of three years.
|
|
|
|
2019 Proxy Statement
|
25
|
•
|
Annual Incentive Program: We again selected Adjusted EBITDA and safety as the performance metrics for the Executive Management Performance Incentive Plan (the "EMPI Plan") for our NEOs for 2018. In addition, we incorporated the following features:
|
◦
|
Strategic initiatives:
|
▪
|
Advancing the HBI Project on schedule and within budget;
|
▪
|
Advancing the Northshore Low Silica Project on schedule and within budget;
|
▪
|
Protecting and enhancing Cliffs' competitive position in the U.S. iron ore market;
|
▪
|
Effectively managing Cliffs' Australian assets to best economic outcome for the Company;
|
▪
|
Resigning as managing agent of Hibbing Taconite Company Joint Venture; and
|
▪
|
Other initiatives the Compensation Committee deemed significant to advance the Company. Additional discussion about these goals and achievements can be found in this CD&A section under the "Analysis of 2018 Compensation Decisions - Annual Incentive Program".
|
◦
|
The Compensation Committee established weightings of 40% financial, 10% safety and 50% strategic initiative goals;
|
◦
|
We included a minimum Adjusted EBITDA condition in our EMPI Plan for 2018, which means that no annual cash incentives would be payable under our EMPI Plan if our Adjusted EBITDA was less than $100 million; and
|
◦
|
The Compensation Committee was permitted (solely by exercising negative discretion) to set the final EMPI Plan payout based on its evaluation of an individual's performance for 2018.
|
•
|
Long-Term Incentive Program: We granted long-term performance cash and performance shares opportunities that are tied to our relative TSR performance against the SPDR S&P Metals and Mining Exchange Traded Fund over a three-year performance period. We chose relative TSR as the sole metric for our performance cash and share program. In addition, we granted service-based restricted stock units that vest at the end of a three-year period.
|
|
|
|
2019 Proxy Statement
|
26
|
WHAT WE DO...
|
|
|
|
ü
|
Provide a considerable proportion of NEO compensation in the form of performance-based compensation
|
ü
|
Use double-trigger vesting in connection with a change in control with respect to our long-term equity awards
|
ü
|
Maintain an incentive compensation clawback policy
|
ü
|
Include caps on individual payouts in incentive plans
|
ü
|
Conduct an annual Say-on-Pay advisory vote
|
ü
|
Set significant share ownership guidelines for our NEOs
|
ü
|
Retain an independent executive compensation consultant to advise the Compensation Committee
|
ü
|
Conduct annual compensation-related risk reviews
|
ü
|
Maintain an insider trading policy that prohibits any officer from pledging Cliffs securities
|
WHAT WE DON'T DO...
|
|
|
|
X
|
No employment agreements for executive officers
|
X
|
No highly leveraged incentive plans that encourage excess risk taking
|
X
|
No tax "gross-ups" on change in control payments related to excise taxes and cash paid in lieu of health and welfare benefits
|
X
|
No service credits for prior employment related to the supplemental retirement plan benefit for all future hires
|
X
|
No repricing or backdating of stock options
|
|
|
|
2019 Proxy Statement
|
27
|
PROCESS STEP / ANALYSIS
|
RESPONSIBILITY
|
PURPOSE
|
CONDUCTED
|
|
|
|
|
REVIEW OF ANNUAL AND LONG-TERM INCENTIVE PROGRAMS
|
▪
Compensation Committee
▪
Executive Management
|
Aligning incentive compensation with business plans
|
December – February
|
INDIVIDUAL PERFORMANCE ASSESSMENTS
|
▪
Board of Directors
▪
Compensation Committee
▪
Executive Management
|
Evaluating individual performance of CEO and Executive Management
|
December – February
|
COMPANY ACHIEVEMENT OF PERFORMANCE GOALS
|
▪
Compensation Committee
▪
Executive Management
|
Determining award payments based on Company performance in completed performance periods
|
January – February
|
ASSESSMENT OF COMPENSATION RISK PROGRAMS
|
▪
Compensation Committee
▪
Executive Management
|
Determining if risks related to the Company’s incentive compensation plans are appropriately mitigated such that there is no reasonable likelihood of a material adverse impact to the Company
|
October
|
ADDRESS MARKET TRENDS
|
▪
Compensation Committee
▪
Executive Management
|
Developing a strategy to respond to trends in line with our business goals and provide evidence to inform decision making
|
October
|
YEAR-TO-DATE PERFORMANCE REVIEW OF ANNUAL AND LONG-TERM INCENTIVE PLANS
|
▪
Compensation Committee
▪
Executive Management
|
Evaluating the performance of the incentive programs that were established in February
|
Ongoing
|
SHAREHOLDER OUTREACH
|
▪
Board of Directors
▪
Executive Management
|
Obtaining shareholder feedback on concerns and questions relating to compensation program design and performance
|
Ongoing
|
SHARE OWNERSHIP REQUIREMENTS
|
▪
Compensation Committee
|
To ensure that Executive Management have a meaningful direct ownership stake in Cliffs and that the interest of executives are aligned with shareholders
|
Ongoing
|
|
|
|
2019 Proxy Statement
|
28
|
WHAT WE HEARD...
|
|
HOW WE RESPONDED...
|
|
|
|
|
|
Shareholders appreciated the outreach and improvements we’ve made to the CD&A.
|
|
ü
|
We will continue to ask for input and improve the CD&A.
|
Shareholders were critical of our past discussion of strategic initiatives in the CD&A. While they understood why we chose strategic initiatives, they wanted more information on how each of them is evaluated. There was concern that our strategic initiatives create the appearance of discretion.
|
|
ü
ü
|
We have significantly expanded our discussion of our strategic initiatives.
Beginning in 2019 we have reduced the portion of the annual incentive based on strategic initiatives.
|
Shareholders were complimentary of our outstanding shareholder returns. While there was concern regarding how to evaluate our strategic initiatives, shareholders understood that they were an important reason shareholder returns have been so strong.
|
|
ü
ü
ü
ü
|
We continue to emphasize strategic initiatives and compensate management for achieving and exceeding them.
We have taken into consideration our shareholder’s concerns about our strategic initiatives by ensuring that the Compensation Committee establishes robust evaluation processes.
Strategic initiatives by their very nature are somewhat qualitative. However, certain of our strategic initiatives are so material to our future success (such as the HBI project) that they must be considered when evaluating the compensation of our executives.
The Compensation Committee believes that paying our executives for a combination of annual financial performance and strategic initiatives has delivered outstanding one- and three-year shareholder returns and is critical to the Company’s future.
|
Shareholders discouraged us from making one-time equity grants.
|
|
ü
ü
|
We discussed with shareholders the reasoning behind the 2017 grants and agree that similar grants should not be repeated.
We have committed that we will no longer make one-time equity grants except for under unusual circumstances.
|
•
|
Oversee development and implementation of Cliffs’ compensation policies and programs for executive officers;
|
•
|
Ensure that the criteria for awards under the EMPI Plan and the
A&R 2015 Equity Plan
(or its successors) are appropriately related to Cliffs’ strategic plan and operating performance objectives; and
|
•
|
Make recommendations to the Board with respect to the approval, adoption and amendment of all cash- and equity-based incentive compensation plans in which any executive officer of Cliffs participates.
|
•
|
At least annually, evaluate the performance of the executive officers and determine and approve such executive officers’ compensation levels, except for the CEO;
|
•
|
Approve the compensation level of the CEO, subject to ratification by the independent members of the Board;
|
•
|
Determine and measure achievement of corporate and individual goals and objectives for the executive officers under our incentive compensation plans; and
|
•
|
Approve equity-based awards granted to employees.
|
•
|
Review and recommend to the Board candidates for election as executive officers, and review and approve offers of employment with such officers;
|
•
|
Review and approve severance or retention plans and any severance or other termination payments proposed to be made to executive officers; and
|
•
|
Assist the Board with respect to management development and succession planning.
|
•
|
Proposed performance measures and levels for our annual and long-term incentive programs after reviewing our operational forecasts,
|
|
|
|
2019 Proxy Statement
|
29
|
•
|
Proposed performance measures that they believed to be most important and meaningful to the achievement of our strategic goals; and
|
•
|
Proposed what they believed to be the appropriate weighting for each factor in the calculation of overall incentive awards and threshold, target and maximum payout levels appropriate for each of the performance measures we chose.
|
•
|
Commenting on the competitiveness of our executive compensation programs;
|
•
|
Providing information about market trends in executive pay practices;
|
•
|
Advising on compensation program design and structure;
|
•
|
Reviewing the relationship between executive compensation and Company performance;
|
•
|
Assisting in the preparation of our proxy statement; and
|
•
|
Identified a mining industry and general industry comparator group to use to assess the appropriateness and competitiveness of our executive compensation programs.
|
•
|
The executive compensation consultant provides no other services to the Company (it provides only executive and director compensation advisory services to the Compensation Committee and Governance Committee, respectively);
|
•
|
The executive compensation consultant maintains a conflicts policy to prevent a conflict of interest or other independence issues;
|
•
|
None of the individuals on the executive compensation consultant's team assigned to the engagement has any business or personal relationship with members of the Compensation Committee outside of the engagement;
|
•
|
Neither the individuals on the executive compensation consultant's team assigned to the engagement, nor to our knowledge the executive compensation firm, has any business or personal relationship with any of our executive officers outside of the engagement;
|
•
|
None of the individuals on the executive compensation consultant's team assigned to the engagement maintains any direct individual position in our shares;
|
•
|
The executive compensation consultant has regular discussions with only the members of the Compensation Committee (or select members of the Compensation Committee) present and when it interacts with management, it is at the Compensation Committee chair’s request and/or with the chair’s knowledge and approval;
|
•
|
None of the individuals on the executive compensation consultant's team assigned to the engagement has provided any gifts, benefits, or donations to us, nor have they received any gifts, benefits, or donations from us; and
|
•
|
The executive compensation consultant is bound by strict confidentiality and information sharing protocols.
|
|
|
|
2019 Proxy Statement
|
30
|
COMPANY NAME
|
APPLICABLE FYE
|
REVENUES
($MMs)
|
MARKET CAP.
($MMs)
|
INDUSTRY
|
|
|
|
|
|
Agnico Eagle Mines Limited
|
12/31/2017
|
2,243
|
10,630
|
Gold
|
AK Steel Holding Corporation
|
12/31/2017
|
6,081
|
1,782
|
Steel
|
Allegheny Technologies Incorporated
|
12/31/2017
|
3,525
|
2,628
|
Steel
|
Carpenter Technology Corporation
|
6/30/2018
|
2,158
|
2,467
|
Steel
|
CF Industries Holdings, Inc.
|
12/31/2017
|
4,130
|
9,923
|
Fertilizers and Agricultural Chemicals
|
Commercial Metals Company
|
8/31/2018
|
4,644
|
2,528
|
Steel
|
Compass Minerals International, Inc.
|
12/31/2017
|
1,364
|
2,444
|
Diversified Metals and Mining
|
Ferro Corporation
|
12/31/2017
|
1,397
|
1,978
|
Specialty Chemicals
|
FMC Corporation
|
12/31/2017
|
2,879
|
12,709
|
Fertilizers and Agricultural Chemicals
|
Goldcorp Inc.
|
12/31/2017
|
3,423
|
11,057
|
Gold
|
Kinross Gold Corporation
|
12/31/2017
|
3,303
|
5,376
|
Gold
|
Schnitzer Steel Industries, Inc.
|
8/31/2018
|
2,365
|
688
|
Steel
|
Scotts Miracle-Gro Company
|
9/30/2018
|
2,663
|
4,364
|
Fertilizers and Agricultural Chemicals
|
Tronox Limited
|
12/31/2017
|
1,698
|
2,453
|
Commodity Chemicals
|
U.S. Concrete, Inc.
|
12/31/2017
|
1,336
|
1,326
|
Construction Materials
|
Vulcan Materials Company
|
12/31/2017
|
3,890
|
16,981
|
Construction Materials
|
Worthington Industries
|
5/31/2018
|
3,582
|
2,908
|
Steel
|
|
|
|
|
|
25
th
Percentile
|
|
2,158
|
2,444
|
|
Median
|
|
2,879
|
2,628
|
|
75
th
Percentile
|
|
3,582
|
9,923
|
|
|
|
|
|
|
CLEVELAND-CLIFFS INC.
|
12/31/2018
|
2,332
|
2,250
|
STEEL
|
|
|
|
2019 Proxy Statement
|
31
|
|
BASE SALARY
|
ANNUAL INCENTIVE
|
LONG-TERM INCENTIVE
|
||
|
PERFORMANCE CASH
|
PERFORMANCE SHARES
|
RESTRICTED STOCK UNITS
|
||
Primary Objective
|
Attraction and retention
|
Motivate the achievement of short-term strategic and financial objectives
|
Attraction and retention as well as promotion of long-term strategic and financial objectives
|
||
Who Receives
|
All NEOs
|
All NEOs
|
|||
Timing
|
Reviewed annually
|
Granted annually and paid in February of the following year
|
Granted annually
|
||
Form of Delivery
|
Cash
|
Cash
|
Shares
|
||
Performance Type
|
Short-term emphasis
|
Long-term emphasis
|
|||
Performance Period
|
Ongoing
|
1 year
|
3 years
|
||
How Payout Is Determined
|
Compensation Committee judgment, with CEO input
|
Formulaic and Compensation Committee judgment
|
Formulaic, approved by Compensation Committee
|
Continued employment with Cliffs
|
|
Performance Measures
|
N/A
|
Company and individual performance factors
|
Relative TSR
|
N/A
|
•
|
Range, scope and complexity of each NEO's role;
|
•
|
Comparability with the external (market median) and internal marketplace (roles of similar responsibilities, experience and organizational impact);
|
•
|
Individual performance;
|
•
|
Tenure and experience; and
|
•
|
Retention considerations.
|
|
ANNUALIZED BASE SALARY
|
|
|
|
2017 ($)
|
2018 ($)
|
INCREASE (%)
|
Goncalves
|
1,300,000
|
1,350,000
|
3.8
|
Flanagan
|
400,000
|
412,000
|
3.0
|
Harapiak
|
400,000
|
426,000
|
6.5
|
Fedor
|
414,000
|
426,000
|
2.9
|
Smith
|
414,000
|
426,000
|
2.9
|
|
|
|
2019 Proxy Statement
|
32
|
Base Salary ($)
|
X
|
Target Award Level (%)
|
X
|
2018 Funding (%)
|
=
|
EMPI Award ($)
|
EMPI PLAN AWARD OPPORTUNITIES
|
||||
|
|
|
|
|
|
2018 BASE SALARY
|
THRESHOLD
|
TARGET
|
MAXIMUM
|
Goncalves
|
1,350,000
|
100%
|
200%
|
400%
|
Flanagan
|
412,000
|
50%
|
100%
|
200%
|
Harapiak
|
426,000
|
50%
|
100%
|
200%
|
Fedor
|
426,000
|
50%
|
100%
|
200%
|
Smith
|
426,000
|
50%
|
100%
|
200%
|
|
|
|
2019 Proxy Statement
|
33
|
|
|
|
2019 Proxy Statement
|
34
|
|
2018 RATES
|
COMPARED TO 2017
|
TRIR (1)
|
1.20
|
9% decrease (1.32 in 2017); historically lowest in over 10 years
|
LOST TIME INJURY RATE
|
0.42
|
17% increase (0.36 in 2017)
|
LOST TIME INCIDENTS
|
17 (14 employees and 3 contractors)
|
16 in 2017 (15 employees and 1 contractor)
|
LOST DAY SEVERITY RATE (2)
|
6.38
|
10% decrease (7.12 in 2017)
|
LOST DAYS
|
413 (210 employees and 203 contractors)
|
295 in 2017 (276 employees and 19 contractors)
|
(1)
Calculated by multiplying the number of recordable cases by 200,000, and then dividing that number by the number of labor hours worked.
(2)
Lost Day Severity Rate does not include contractors.
|
ADVANCING THE HBI PROJECT ON SCHEDULE AND WITHIN BUDGET
|
||
|
|
|
üü
|
Description of Initiative and Achievements
:
By 2020, we expect to be the sole producer of HBI in the Great Lakes region with the development of our first production plant in Toledo, Ohio. In 2017, we raised capital to fully fund the then-estimated $700 million needed for the Toledo HBI Project. With the capital structure in place to support our future growth, the focus in 2018 was on execution of the project. The ground clearing, foundation development and remaining construction were executed on schedule. During 2018, we had cash outflows, including deposits, of approximately $180 million on development of the HBI production plant. The Toledo HBI Project spend expectation for 2018 was reduced by $25 million to $175 million due to further development and refined timing of the project spending plan.
Result
:
HBI is on schedule to achieve production in 2020.
|
|
ADVANCING THE NORTHSHORE LOW SILICA PROJECT ON SCHEDULE AND WITHIN BUDGET
|
||
|
|
|
üü
|
Description of Initiative and Achievements
:
The Northshore Low Silica Project is an upgrade to the Northshore plant to replace up to 3.5 million long tons of blast furnace pellet production with DR-grade pellet production that could be sold commercially or used as feedstock for the Toledo HBI Project. We expect to spend approximately $90 million for upgrades at the Northshore plant to enable it to produce significantly increased levels of DR-grade pellets. During 2018, we had cash outflows, including deposits, of approximately $50 million on the upgrades at the Northshore mine.
Result
:
Northshore's Low Silica Project is well underway.
|
|
|
|
|
|
|
2019 Proxy Statement
|
35
|
PROTECTING AND ENCHANCING CLIFFS' COMPETITIVE POSITION IN THE US IRON MARKET
|
||
|
|
|
üü
|
Description of Initiative and Achievements
:
During the first quarter of 2018, we amended and restated our syndicated facility agreement ("ABL"), extending its maturity to the earlier of February 28, 2023 or 60 days prior to the maturity of certain other material debt, and introducing several improvements from the previous facility, which was put into place in 2015. The changes were introduced in alignment with our vastly improved financial condition since the initial facility was adopted, while continuing to provide us with the financial flexibility needed to operate our business and execute our strategic initiatives. In the amended and restated ABL, the overall size of the credit facility was reduced from $550 million to $450 million and borrowing costs and unused commitment fees were also reduced.
|
|
üü
|
In late 2017, we acquired certain real estate interests located in Nashwauk, Minnesota. During 2018, we have defended our property interests and executed an initial exploratory drill program on the Nashwauk property.
|
|
üü
|
In October, we redeemed the entirety of our outstanding Senior Notes Due 2020. The aggregate principal amount outstanding of the Senior Notes Due 2020 was approximately $211 million. Pursuant to the terms of the indenture governing the Senior Notes Due 2020, approximately $218 million in the aggregate, including make-whole premiums and accrued and unpaid interest to, but not including, the redemption date, was paid to holders of the Senior Notes Due 2020. In addition, we repurchased $14 million of Senior Notes Due 2021 and $2 million of Senior Notes Due 2025.
|
|
Result
:
We protected and enhanced our position in the U.S. iron ore market by focusing on our mining and pelletizing business.
|
||
EFFECTIVELY MANAGING CLIFFS' AUSTRALIAN ASSETS TO BEST ECONOMIC OUTCOME FOR THE COMPANY
|
||
|
|
|
üü
|
Description of Initiative and Achievements
:
We executed a strategy to mitigate our costs as we exited the Asia Pacific Iron Ore operations, including the completion of two sales of substantially all remaining assets of the operations. As a result of the transaction with Mineral Resources, our previously disclosed costs of closing the Australian operations (approximately $140 to $170 million) were reduced by approximately $85 million. In addition, as a result of the liquidation of substantially all of the Australian subsidiaries' net assets, the historical changes in foreign currency translation of $228 million was reclassified and recognized as a gain.
Result
:
We successfully exited Australia and returned to our roots as a supplier of high-grade iron units to the Great Lakes steel industry.
|
|
RESIGNING AS MANAGING AGENT OF HIBBING TACONITE JOINT VENTURE
|
||
|
|
|
üü
|
Description of Initiative and Achievements
:
In 2018, Cliffs tendered its resignation as the mine manager of the Hibbing mine and plans to transition this role to the majority owner in August 2019.
Result
:
Cliffs will focus on its wholly-owned Minnesota iron ore operations.
|
|
OTHER INITIATIVES THE COMPENSATION COMMITTEE DEEMED SIGNIFICANT TO ADVANCE THE COMPANY
|
||
|
|
|
üü
|
Description of Initiative and Achievements
:
During March 2018, we entered into a restructuring term sheet with the Bloom Lake Group and the Wabush Group, which documents the proposed terms of a plan of compromise or arrangement in the Canadian Companies' Creditors Arrangement Act proceedings (the “Proposed Plan”) to be sponsored by us as negotiated between us and the Monitor. This Proposed Plan received both creditor and court approval on June 29, 2018.
|
|
üü
|
We reached an agreement with the USW for a new four-year labor contract that is effective as of October 1, 2018. The new contract will cover approximately 1,800 of our USW-represented workers at the Tilden and Empire mines in Michigan, and the United Taconite and Hibbing Taconite mines in Minnesota. The new labor contract was ratified on October 11, 2018.
|
|
üü
|
In October, the Board of Directors declared a quarterly cash dividend on our common shares of $0.05 per share. The cash dividend was paid on January 15, 2019.
|
|
Result
:
We made significant financial improvements year-over-year while maintaining near-zero turnover in a competitive employment market and operating in a safe and sustainable manner.
|
|
|
|
2019 Proxy Statement
|
36
|
|
BASE SALARY ($)
|
|
TARGET AWARD LEVEL (%)
|
|
2018 EMPI FUNDING (%)
|
|
EMPI PLAN PAYOUT ($)
|
|
Goncalves
|
1,350,000
|
|
200
|
%
|
200
|
%
|
5,400,000
|
|
Flanagan
|
412,000
|
|
100
|
%
|
200
|
%
|
824,000
|
|
Fedor
|
426,000
|
|
100
|
%
|
200
|
%
|
852,000
|
|
Harapiak
|
426,000
|
|
100
|
%
|
200
|
%
|
852,000
|
|
Smith
|
426,000
|
|
100
|
%
|
200
|
%
|
852,000
|
|
•
|
Help ensure the NEOs’ financial interests are aligned with our shareholders’ interests;
|
•
|
Motivate decision making that improves financial performance over the long-term;
|
•
|
Recognize and reward superior financial performance of our Company;
|
•
|
Provide a retention element to our compensation program; and
|
•
|
Promote compliance with the Share Ownership Guidelines for executives.
|
|
|
PERFORMANCE LEVEL
|
|||
PERFORMANCE FACTOR
|
WEIGHT
|
BELOW THRESHOLD
|
THRESHOLD
|
TARGET
|
MAXIMUM
|
Relative TSR
|
100%
|
Below 25
th
Percentile
|
25
th
Percentile
|
50
th
Percentile
|
75
th
Percentile
|
Payout
|
|
—%
|
50%
|
100%
|
200%
|
|
|
|
2019 Proxy Statement
|
37
|
AK Steel Holding Corporation
|
Freeport-McMoRan Inc.
|
Royal Gold, Inc.
|
Alcoa Corporation
|
Haynes International, Inc.
|
Schnitzer Steel Industries, Inc.
|
Allegheny Technologies Inc.
|
Hecla Mining Company
|
Steel Dynamics, Inc.
|
Arch Coal Inc.
|
Kaiser Aluminum Corporation
|
SunCoke Energy Inc.
|
Carpenter Technology Corporation
|
Materion Corporation
|
TimkenSteel Corporation
|
Century Aluminum Company
|
McEwen Mining Inc.
|
United States Steel Corporation
|
Coeur Mining, Inc.
|
Newmont Mining Corporation
|
Warrior Met Coal Inc.
|
Commercial Metals Company
|
Nucor Corporation
|
Worthington Industries, Inc.
|
Compass Minerals International, Inc.
|
Peabody Energy Corporation
|
|
CONSOL Energy Inc.
|
Reliance Steel & Aluminum Co.
|
|
|
TARGET %
|
|
TOTAL GRANT VALUE ($)
|
TARGET PERFORMANCE CASH INCENTIVE AWARDS ($)
|
TARGET PERFORMANCE SHARE AWARDS (#)
|
RESTRICTED STOCK UNITS (#)
|
Goncalves
|
400
|
%
|
5,532,552
|
1,836,000
|
245,455
|
245,455
|
Flanagan
|
175
|
%
|
738,701
|
245,140
|
32,773
|
32,773
|
Fedor
|
175
|
%
|
763,793
|
253,470
|
33,886
|
33,886
|
Harapiak
|
175
|
%
|
763,793
|
253,470
|
33,886
|
33,886
|
Smith
|
175
|
%
|
763,793
|
253,470
|
33,886
|
33,886
|
|
|
|
2019 Proxy Statement
|
38
|
|
|
PERFORMANCE LEVEL
|
|||
PERFORMANCE FACTOR
|
WEIGHT
|
BELOW THRESHOLD
|
THRESHOLD
|
TARGET
|
MAXIMUM
|
Relative TSR
|
50%
|
Below 25
th
Percentile
|
25
th
Percentile
|
50
th
Percentile
|
75
th
Percentile
|
2016 Annual Adjusted EBITDA (USD $ in millions)
|
50%
|
Below 75.0
|
75.0
|
125.0
|
175.0
|
2017 Annual Adjusted EBITDA (USD $ in millions)
|
Below 350.0
|
350.0
|
500.0
|
650.0
|
|
2018 Annual Adjusted EBITDA (USD $ in millions)
|
Below 400.0
|
400.0
|
500.0
|
600.0
|
|
Payout
|
|
—%
|
50%
|
100%
|
200%
|
|
RELATIVE TSR - PERFORMANCE CASH INCENTIVE AWARD EARNED ($) AT 200% OF TARGET
|
2016 ANNUAL ADJUSTED EBITDA PERFORMANCE CASH INCENTIVE AWARD EARNED ($) AT 200% OF TARGET
|
2017 ANNUAL ADJUSTED EBITDA PERFORMANCE CASH INCENTIVE AWARD EARNED ($) AT 103.3% OF TARGET
|
2018 ANNUAL ADJUSTED EBITDA PERFORMANCE CASH INCENTIVE AWARD EARNED ($) AT 200% OF TARGET
|
Goncalves
|
2,160,000
|
720,000
|
371,880
|
720,000
|
Flanagan
|
143,100
|
47,700
|
24,637
|
47,700
|
Fedor
|
317,600
|
105,868
|
54,680
|
105,866
|
Harapiak
|
293,900
|
97,968
|
50,599
|
97,966
|
Smith
|
317,600
|
105,868
|
54,680
|
105,866
|
|
|
|
2019 Proxy Statement
|
39
|
|
MULTIPLE OF BASE PAY
|
CEO
|
6x
|
Executive / Senior Vice President
|
3x
|
Vice President
|
1.5x
|
•
|
shares owned directly; and
|
•
|
unvested restricted shares or restricted stock units.
|
|
|
|
2019 Proxy Statement
|
40
|
|
VALUE OF SHARES OWNED DIRECTLY ($)
|
VALUE OF RESTRICTED STOCK UNITS ($)
|
TOTAL SHARE VALUE ($)
|
|
REQUIRED MULTIPLE OF BASE SALARY
|
REQUIRED VALUE ($)
|
APPROXIMATE OWNERSHIP RELATIVE BASE SALARY AS OF DECEBMER 31, 2018 (1)
|
|
# OF SHARES OWNED DIRECTLY
|
# OF RESTRICTED STOCK UNITS
|
# OF TOTAL SHARES
|
||||
Goncalves
|
$12,604,954
|
$19,325,279
|
$31,930,233
|
|
6x
|
$8,100,000
|
23.7x
|
1,411,529
|
2,164,085
|
3,575,614
|
|
|
|
|
|
Flanagan
|
$625,645
|
$1,223,249
|
$1,848,894
|
|
3x
|
$1,236,000
|
4.5x
|
70,061
|
136,982
|
207,043
|
|
|
|
|
|
Fedor
|
$911,405
|
$2,111,320
|
$3,022,725
|
|
3x
|
$1,278,000
|
7.1x
|
102,061
|
236,430
|
338,491
|
|
|
|
|
|
Harapiak
|
$847,850
|
$1,985,505
|
$2,833,355
|
|
3x
|
$1,278,000
|
6.7x
|
94,944
|
222,341
|
317,285
|
|
|
|
|
|
Smith
|
$1,151,997
|
$2,111,320
|
$3,263,317
|
|
3x
|
$1,278,000
|
7.7x
|
129,003
|
236,430
|
365,433
|
|
|
|
|
|
(1) Value is calculated based on the one-year average closing price per share of our shares on December 31, 2018, which was $8.93
.
|
•
|
Depending on position, two or three times annual base salary and target annual incentive as severance upon termination within 24 months following the change in control, a payment for two or three years of continued SERP benefits, up to $10,000 in outplacement services in the case of Messrs. Flanagan, Fedor, Harapiak, and Smith and up to 15% of Mr. Goncalves' base salary, up to $12,000 per year for tax and financial planning services for two or three years and, under certain circumstances, continuation of welfare benefits for two or three years, depending on position; and
|
•
|
Non-competition, confidentiality and non-solicitation restrictions on NEOs who receive severance payments following the change in control.
|
•
|
Annual incentive awards paid under our annual cash incentive compensation program;
|
•
|
Equity-based awards under our long-term incentive equity program; and
|
•
|
Any other incentive-based compensation paid or granted pursuant to an incentive plan.
|
|
|
|
2019 Proxy Statement
|
41
|
|
|
|
2019 Proxy Statement
|
42
|
COMPENSATION COMMITTEE REPORT
|
|
|
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
|
|
|
COMPENSATION-RELATED RISK ASSESSMENT
|
|
|
|
|
|
2019 Proxy Statement
|
43
|
EXECUTIVE COMPENSATION
|
|
|
NAME AND PRINCIPAL POSITION (a)
|
YEAR (b)
|
SALARY ($)
(1)(2) (c)
|
|
BONUS ($) (d)
|
|
STOCK AWARDS ($) (3) (e)
|
|
OPTION AWARDS
($)(f)
|
|
NON-EQUITY INCENTIVE PLAN COMPENSATION ($) (1)(4) (g)
|
|
CHANGE IN PENSION VALUE AND NONQUALIFIED DEFERRED COMPENSATION EARNINGS
($) (5) (h)
|
|
ALL OTHER COMPENSATION ($) (6) (i)
|
|
TOTAL ($) (j)
|
|
Lourenco Goncalves
Chairman, President and CEO
|
2018
|
1,350,000
|
|
—
|
|
4,776,554
|
|
—
|
|
8,280,000
|
|
340,021
|
|
697,352
|
|
15,443,927
|
|
2017
|
1,300,000
|
|
4,650,000
|
|
11,858,417
|
|
—
|
|
4,565,940
|
|
650,202
|
|
536,946
|
|
23,561,505
|
|
|
2016
|
1,200,000
|
|
—
|
|
2,184,134
|
|
—
|
|
5,520,000
|
|
314,528
|
|
317,819
|
|
9,536,481
|
|
|
Timothy K. Flanagan
EVP, CFO
|
2018
|
412,000
|
|
—
|
|
637,763
|
|
—
|
|
1,014,800
|
|
—
|
|
31,435
|
|
2,095,998
|
|
2017
|
400,000
|
|
318,000
|
|
760,951
|
|
—
|
|
540,829
|
|
144,000
|
|
30,553
|
|
2,194,333
|
|
|
2016
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Terry G. Fedor
EVP, United States Iron Ore
|
2018
|
426,000
|
|
—
|
|
659,422
|
|
—
|
|
1,275,466
|
|
8,600
|
|
36,442
|
|
2,405,930
|
|
2017
|
414,000
|
|
673,350
|
|
787,575
|
|
—
|
|
588,939
|
|
139,800
|
|
24,258
|
|
2,627,922
|
|
|
2016
|
402,000
|
|
—
|
|
321,148
|
|
—
|
|
749,068
|
|
121,300
|
|
27,558
|
|
1,621,074
|
|
|
Maurice D. Harapiak
EVP, HR & Chief Administration Officer
|
2018
|
426,000
|
|
—
|
|
659,422
|
|
—
|
|
1,243,866
|
|
41,772
|
|
40,680
|
|
2,411,740
|
|
2017
|
400,000
|
|
623,100
|
|
760,951
|
|
—
|
|
566,791
|
|
65
|
|
39,124
|
|
2,390,031
|
|
|
2016
|
372,000
|
|
—
|
|
297,184
|
|
—
|
|
693,168
|
|
72,941
|
|
40,406
|
|
1,475,699
|
|
|
Clifford T. Smith
EVP, Business Development
|
2018
|
426,000
|
|
—
|
|
659,422
|
|
—
|
|
1,275,466
|
|
—
|
|
31,455
|
|
2,392,343
|
|
2017
|
414,000
|
|
673,350
|
|
787,575
|
|
—
|
|
588,939
|
|
157,800
|
|
36,888
|
|
2,658,552
|
|
|
2016
|
402,000
|
|
—
|
|
321,148
|
|
—
|
|
749,068
|
|
155,500
|
|
37,867
|
|
1,665,583
|
|
|
(1) 2018 amounts in columns (c) and (g) reflect the salary and non-equity incentive plan compensation for each NEO, respectively, before pre-tax reductions for contributions to the 401(k) Savings Plan, the 2012 NQDC Plan and certain other benefit plans.
|
|||||||||||||||||
(2) The 2018 salary for each of the NEOs includes his base salary before the employees’ contributions to the 401(k) Savings Plan. The following table summarizes salary contributions for the 401(k) Savings Plan for NEOs in 2018:
|
(3)
|
The 2018 amounts in column (e) reflect the aggregate grant date fair value, computed in accordance with FASB ASC 718, for performance share awards and restricted stock units granted during 2018. For performance shares granted during 2018, the amounts reported are based on the target payout level. For additional information, refer to Note 9 in our Annual Report on Form 10-K for the year ended December 31, 2018. These types of awards are discussed in further detail in “Compensation Discussion and Analysis–Analysis of 2018 Compensation Decisions", under the sub-headings “2018–2020 Performance Cash Incentive Awards, Performance Share Awards, and Restricted Stock Unit Grants”.
|
(4)
|
The 2018 amounts in column (g) reflect the incentive awards earned in 2018 under the EMPI Plan and Long-Term Incentive Program (performance cash), which are discussed in further detail in “Compensation Discussion and Analysis–Analysis of 2018 Compensation Decisions" under the sub-headings “Annual Incentive Program” and "Long–Term Incentive Program." The 2018 metrics were achieved at or above 200% levels and, therefore, the earned amounts are reported for 2018 in the Non-Equity Incentive Plan Compensation column of the 2018 Summary Compensation Table.
|
|
|
|
2019 Proxy Statement
|
44
|
(5)
|
The 2018 amounts in column (h) reflect the actuarial increase in the present value of the NEO’s benefits under the Pension Plan and the SERP, both of which are discussed in “Compensation Discussion and Analysis–Retirement and Deferred Compensation Benefits” under the sub-heading “Defined Benefit Pension Plan,” determined using interest rate and mortality assumptions consistent with those used in our financial statements and may include amounts in which the NEO is not fully vested. The present value of accumulated pension benefits for the NEOs generally increased from December 31, 2017 to December 31, 2018. This is primarily the result of the one additional year of benefit accruals earned under the qualified and nonqualified pension plans. This column also includes amounts for above-market interest for the NEOs’ balances in the 2012 NQDC Plan.
|
(6)
|
The 2018 amounts in column (i) reflect the combined value of the NEOs' perquisites or the benefits attributable to our paid parking, fitness reimbursement program, executive physical, financial services, matching contributions made on behalf of the executives under the 401(k) Savings Plan and the 2012 NQDC Plan and commuter expenses.
|
|
|
|
2019 Proxy Statement
|
45
|
|
|
|
ESTIMATED FUTURE PAYOUTS UNDER NON-EQUITY INCENTIVE PLAN AWARDS ($)
(1)
|
|
|
ESTIMATED FUTURE PAYOUTS UNDER EQUITY INCENTIVE PLAN AWARDS (#)
(2)
|
|
ALL OTHER STOCK AWARDS: NUMBER OF SHARES OF STOCK OR UNITS (#) (j)
|
|
GRANT DATE FAIR VALUE OF STOCK AND OPTION AWARDS ($) (k)
|
|
||||||||
NAME (a)
|
AWARD TYPE (b)
|
GRANT DATE (c)
|
Threshold ($) (d)
|
Target ($) (e)
|
Maximum ($) (f)
|
|
Threshold (#) (g)
|
Target (#) (h)
|
Maximum (#) (i)
|
||||||||||
Goncalves
|
Annual Incentive Program
|
2/21/2018
|
1,350,000
|
|
2,700,000
|
|
5,400,000
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
LTI Program - 2018 Adjusted EBITDA
(3)
|
2/21/2018
|
180,000
|
|
360,000
|
|
720,000
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
LTI Program - Relative TSR
|
2/21/2018
|
918,000
|
|
1,836,000
|
|
3,672,000
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
LTI Program - Performance Shares
|
2/21/2018
|
—
|
|
—
|
|
—
|
|
|
122,728
|
|
245,455
|
|
490,910
|
|
—
|
|
2,928,278
|
|
|
LTI Program - RSU
|
2/21/2018
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
245,455
|
|
1,848,276
|
|
|
Flanagan
|
Annual Incentive Program
|
2/21/2018
|
206,000
|
|
412,000
|
|
824,000
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
LTI Program - 2018 Adjusted EBITDA
(3)
|
2/21/2018
|
11,925
|
|
23,850
|
|
47,700
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
LTI Program - Relative TSR
|
2/21/2018
|
122,570
|
|
245,140
|
|
490,280
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
LTI Program - Performance Shares
|
2/21/2018
|
—
|
|
—
|
|
—
|
|
|
16,387
|
|
32,773
|
|
65,546
|
|
—
|
|
390,982
|
|
|
LTI Program - RSU
|
2/21/2018
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
32,773
|
|
246,781
|
|
|
Fedor
|
Annual Incentive Program
|
2/21/2018
|
213,000
|
|
426,000
|
|
852,000
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
LTI Program - 2018 Adjusted EBITDA
(3)
|
2/21/2018
|
26,467
|
|
52,933
|
|
105,866
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
LTI Program - Relative TSR
|
2/21/2018
|
126,735
|
|
253,470
|
|
506,940
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
LTI Program - Performance Shares
|
2/21/2018
|
—
|
|
—
|
|
—
|
|
|
16,943
|
|
33,886
|
|
67,772
|
|
—
|
|
404,260
|
|
|
LTI Program - RSU
|
2/21/2018
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
33,886
|
|
255,162
|
|
|
Harapiak
|
Annual Incentive Program
|
2/21/2018
|
213,000
|
|
426,000
|
|
852,000
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
LTI Program - 2018 Adjusted EBITDA
(3)
|
2/21/2018
|
24,492
|
|
48,983
|
|
97,966
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
LTI Program - Relative TSR
|
2/21/2018
|
126,735
|
|
253,470
|
|
506,940
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
LTI Program - Performance Shares
|
2/21/2018
|
—
|
|
—
|
|
—
|
|
|
16,943
|
|
33,886
|
|
67,772
|
|
—
|
|
404,260
|
|
|
LTI Program - RSU
|
2/21/2018
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
33,886
|
|
255,162
|
|
|
Smith
|
Annual Incentive Program
|
2/21/2018
|
213,000
|
|
426,000
|
|
852,000
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
LTI Program - 2018 Adjusted EBITDA
(3)
|
2/21/2018
|
26,467
|
|
52,933
|
|
105,866
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
LTI Program - Relative TSR
|
2/21/2018
|
126,735
|
|
253,470
|
|
506,940
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
LTI Program - Performance Shares
|
2/21/2018
|
—
|
|
—
|
|
—
|
|
|
16,943
|
|
33,886
|
|
67,772
|
|
—
|
|
404,260
|
|
|
LTI Program - RSU
|
2/21/2018
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
33,886
|
|
255,162
|
|
|
(1) Reflects the Company's annual incentive program and two long-term incentive program components for 2018. The amounts in column (d) reflect the threshold payout level which is 50% of the target amount shown in column (e); and the amounts shown in column (f) represent 200% of such target amounts.
|
|||||||||||||||||||
(2) Reflects the performance shares component of the Company's long-term incentive program. The amounts in column (g) reflect the threshold payout level of the 2018 – 2020 performance shares, which is 50% of the target amount shown in column (h); and the amounts shown in column (i) represent 200% of such target amounts.
|
|||||||||||||||||||
(3) Represents the 2016–2018 performance cash incentive award to be earned by achieving the 2018 Adjusted EBITDA metric; if the metric for this final year during the three-year performance period was achieved, the 2018 portion of the award was considered earned and was paid in cash.
|
|
|
|
2019 Proxy Statement
|
46
|
|
|
|
2019 Proxy Statement
|
47
|
|
STOCK AWARDS
|
|||||
NAME (a)
|
AWARD TYPE (b)
|
NUMBER OF SHARES ACQUIRED ON VESTING (#) (c)
|
VALUE REALIZED ON VESTING ($) (d)
|
|
||
Goncalves
|
2016 LTI Program - RSU
|
1,206,704
|
|
(1)
|
9,279,554
|
|
Flanagan
|
2016 LTI Program - RSU
|
79,944
|
|
(1)
|
614,769
|
|
2015 Special Retention Program
|
20,000
|
|
(2)
|
164,600
|
|
|
Fedor
|
2016 LTI Program - RSU
|
177,430
|
|
(1)
|
1,364,437
|
|
Harapiak
|
2016 LTI Program - RSU
|
164,190
|
|
(1)
|
1,262,621
|
|
Smith
|
2016 LTI Program - RSU
|
177,430
|
|
(1)
|
1,364,437
|
|
(1) Represents an award of restricted stock units granted during 2016 for the 2016 – 2018 vesting period. The value realized was determined based on the closing price of our common shares on December 31, 2018 of $7.69
|
||||||
(2) Represents a retention grant of restricted stock units in May 2015. The restricted stock units vested in full on May 26, 2018 (the value realized was determined based on the closing price of our common shares on May 25, 2018 of $8.23).
|
NAME (a)
|
PLAN NAME(b)
|
NUMBER OF YEARS CREDITED SERVICE (#) (c)
|
PRESENT VALUE OF ACCUMULATED BENEFIT ($) (d)
|
PAYMENTS DURING LAST FISCAL YEAR ($) (e)
|
Goncalves
|
Salaried Pension Plan
|
4.4
|
116,400
|
—
|
SERP
|
4.4
|
1,321,300
|
—
|
|
Flanagan
|
Salaried Pension Plan
|
10.7
|
265,500
|
—
|
SERP
|
10.7
|
195,600
|
—
|
|
Fedor
|
Salaried Pension Plan
|
7.9
|
198,600
|
—
|
SERP
|
7.9
|
277,100
|
—
|
|
Harapiak
|
Salaried Pension Plan
|
4.6
|
111,900
|
—
|
SERP
|
4.6
|
176,200
|
—
|
|
Smith
|
Salaried Pension Plan
|
14.7
|
397,300
|
—
|
SERP
|
14.7
|
375,500
|
—
|
|
|
|
2019 Proxy Statement
|
48
|
•
|
Salary through the date of termination;
|
•
|
Unused vacation pay;
|
•
|
Accrued and vested benefits under the Pension Plan, SERP, 401(k) Savings Plan and 2012 NQDC Plan, if applicable; and
|
|
|
|
2019 Proxy Statement
|
49
|
•
|
Undistributed but earned performance shares, performance cash and vested restricted stock units for completed performance periods.
|
•
|
Severance payments;
|
•
|
Continued health insurance benefits;
|
•
|
Outplacement services;
|
•
|
Pursuant to the terms of our Amended 2015 Equity Plan and A&R 2015 Equity Plan, a pro rata portion, of his performance shares, performance cash, and restricted stock units. Such prorated performance shares, performance cash and restricted stock units will be paid when such shares and units would otherwise be paid. Stock options generally have a exercisable period of one-year from date of termination; and
|
•
|
Financial services.
|
•
|
A pro rata portion of the annual incentive award under the EMPI Plan for the year in which he retires unless otherwise determined by the Compensation Committee;
|
•
|
Any unpaid annual incentive award under the EMPI Plan for the year prior to the year of retirement; and
|
•
|
A pro rata portion, of his performance shares, performance cash and restricted stock units. Such performance share awards, performance cash awards, and restricted stock units will be paid when such performance shares, performance cash and restricted stock units would otherwise be paid. Stock options generally have a exercisable period of one-year from date of retirement.
|
•
|
Any one person, or more than one person acting as a group, acquires ownership of Cliffs common shares possessing 35% or more of the total voting power of Cliffs common shares or the then-outstanding shares (subject to certain exceptions);
|
•
|
A majority of members of the Cliffs Board is replaced by directors whose appointment or election is not endorsed by a majority of the Cliffs Board prior to the date of the appointment or election;
|
•
|
Cliffs closes a reorganization, merger, consolidation or significant sale of assets resulting in a substantial change in its ownership or leadership; or
|
•
|
Approval by Cliffs’ shareholders of a complete liquidation or dissolution of Cliffs.
|
•
|
Owners of Cliffs common shares immediately prior to the business transaction own more than 50% of the entity resulting from the business transaction in substantially the same proportions as their pre-business transaction ownership of Cliffs common shares;
|
•
|
No one person, or more than one person acting as a group (subject to certain exceptions), owns 35% or more of the combined voting power of the entity resulting from the business transaction or the outstanding common shares of such resulting entity; and
|
•
|
At least a majority of the members of the Board of the entity resulting from the business transaction were members of the incumbent Board of Cliffs when the business transaction agreement was signed or approved by the Cliffs' Board. For purposes of this exception, the incumbent Board of Cliffs generally means those directors who were serving as of August 11, 2008 or April 7, 2015 (as applicable)(or a prior date in the case of certain pre-2007 equity awards) or whose appointment or election was endorsed by a majority of the incumbent members prior to the date of such appointment or election.
|
|
|
|
2019 Proxy Statement
|
50
|
•
|
A lump sum payment in an amount equal to three times (in the case of Messrs. Goncalves and Harapiak) or two times (in the case of Messrs. Flanagan, Fedor and Smith) the sum of: (1) base salary (at the highest rate in effect during the five-year period prior to the termination date) and (2) annual incentive pay at the target level for the year of separation, year prior to the change in control or year of the change in control, whichever is greater.
|
•
|
COBRA continuation coverage for a period of 36 months (in the case of Messrs. Goncalves and Harapiak) or 24 months (in the case of Messrs. Flanagan, Fedor and Smith) following the termination date, for health, life insurance and disability benefits.
|
•
|
A lump sum payment in an amount equal to the sum of the additional future pension benefits that the NEO would have been entitled to receive for a period of 36 months (in the case of Messrs. Goncalves and Harapiak) or 24 months (in the case of Messrs. Flanagan, Fedor and Smith) following the termination date under the SERP.
|
•
|
Incentive pay at target levels for the year in which the termination date occurs.
|
•
|
Outplacement services in an amount up to 15% of the NEO’s base salary (in the case of Mr. Goncalves) or $10,000 (in the case of Messrs. Flanagan, Fedor, Harapiak and Smith).
|
•
|
The NEO will be provided perquisites of financial planning and healthcare coverage for a period of 36 months (in the case of Messrs. Goncalves and Harapiak) or 24 months (in the case of Messrs. Flanagan, Fedor and Smith), comparable to the perquisites he was receiving before the termination of his employment or the change in control, whichever is greater.
|
•
|
a material diminution in the NEO’s base pay;
|
•
|
a material diminution in the NEO’s authority, duties or responsibilities;
|
•
|
a material change (in excess of 50 miles) in the geographic location at which the NEO must perform services;
|
•
|
a material reduction in the NEO’s incentive pay opportunity; or
|
•
|
breach of employment agreement, if any, under which the NEO provides services.
|
|
|
|
2019 Proxy Statement
|
51
|
LOURENCO GONCALVES
|
||||||||||||||
|
|
|
|
|
|
|
|
|||||||
BENEFIT
|
DEATH ($)
|
|
DISABILITY ($)
|
|
RETIREMENT ($)
|
|
VOLUNTARY TERMINATION ($)
|
|
INVOLUNTARY (WITHOUT CAUSE) TERMINATION ($)
|
|
CHANGE IN CONTROL WITHOUT TERMINATION ($)
|
|
TERMINATION WITHOUT CAUSE AFTER CHANGE IN CONTROL ($)
|
|
Cash Severance
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
12,150,000
|
|
Non-Equity Incentive Plan Compensation
|
1,790,667
|
|
1,790,667
|
|
—
|
|
—
|
|
1,790,667
|
|
—
|
|
6,304,000
|
|
Equity
|
6,709,069
|
|
6,709,069
|
|
—
|
|
—
|
|
6,709,069
|
|
—
|
|
12,551,572
|
|
Retirement Benefits
|
1,356,104
|
|
1,356,104
|
|
—
|
|
1,437,701
|
|
1,437,701
|
|
—
|
|
2,431,609
|
|
Non-Qualified Deferred Compensation
|
69,809
|
|
69,809
|
|
—
|
|
69,809
|
|
69,809
|
|
69,809
|
|
69,809
|
|
Other (Health & Welfare, Outplacement, Perquisites)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
350,293
|
|
TOTAL
|
9,925,649
|
|
9,925,649
|
|
—
|
|
1,507,510
|
|
10,007,246
|
|
69,809
|
|
33,857,283
|
|
TIMOTHY K. FLANAGAN
|
||||||||||||||
|
|
|
|
|
|
|
|
|||||||
BENEFIT
|
DEATH ($)
|
|
DISABILITY ($)
|
|
RETIREMENT ($)
|
|
VOLUNTARY TERMINATION ($)
|
|
INVOLUNTARY (WITHOUT CAUSE) TERMINATION ($)
|
|
CHANGE IN CONTROL WITHOUT TERMINATION ($)
|
|
TERMINATION WITHOUT CAUSE AFTER CHANGE IN CONTROL ($)
|
|
Cash Severance
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,648,000
|
|
Non-Equity Incentive Plan Compensation
|
240,380
|
|
240,380
|
|
—
|
|
—
|
|
240,380
|
|
—
|
|
895,140
|
|
Equity
|
416,814
|
|
416,814
|
|
—
|
|
—
|
|
416,814
|
|
—
|
|
877,244
|
|
Retirement Benefits
|
307,415
|
|
307,415
|
|
—
|
|
461,076
|
|
461,076
|
|
—
|
|
627,713
|
|
Non-Qualified Deferred Compensation
|
44,742
|
|
44,742
|
|
—
|
|
44,742
|
|
44,742
|
|
44,742
|
|
44,742
|
|
Other (Health & Welfare, Outplacement, Perquisites)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
68,297
|
|
TOTAL
|
1,009,351
|
|
1,009,351
|
|
—
|
|
505,818
|
|
1,163,012
|
|
44,742
|
|
4,161,136
|
|
TERRY G. FEDOR
|
||||||||||||||
|
|
|
|
|
|
|
|
|||||||
BENEFIT
|
DEATH ($)
|
|
DISABILITY ($)
|
|
RETIREMENT ($)
|
|
VOLUNTARY TERMINATION ($)
|
|
INVOLUNTARY (WITHOUT CAUSE) TERMINATION ($)
|
|
CHANGE IN CONTROL WITHOUT TERMINATION ($)
|
|
TERMINATION WITHOUT CAUSE AFTER CHANGE IN CONTROL ($)
|
|
Cash Severance
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,704,000
|
|
Non-Equity Incentive Plan Compensation
|
248,710
|
|
248,710
|
|
—
|
|
—
|
|
248,710
|
|
—
|
|
925,800
|
|
Equity
|
431,224
|
|
431,224
|
|
—
|
|
—
|
|
431,224
|
|
—
|
|
907,420
|
|
Retirement Benefits
|
399,575
|
|
399,575
|
|
—
|
|
475,676
|
|
475,676
|
|
—
|
|
631,223
|
|
Non-Qualified Deferred Compensation
|
29,859
|
|
29,859
|
|
—
|
|
29,859
|
|
29,859
|
|
29,859
|
|
29,859
|
|
Other (Health & Welfare, Outplacement, Perquisites)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
68,747
|
|
TOTAL
|
1,109,368
|
|
1,109,368
|
|
—
|
|
505,535
|
|
1,185,469
|
|
29,859
|
|
4,267,049
|
|
|
|
|
2019 Proxy Statement
|
52
|
MAURICE D. HARAPIAK
|
||||||||||||||
|
|
|
|
|
|
|
|
|||||||
BENEFIT
|
DEATH ($)
|
|
DISABILITY ($)
|
|
RETIREMENT ($)
|
|
VOLUNTARY TERMINATION ($)
|
|
INVOLUNTARY (WITHOUT CAUSE) TERMINATION ($)
|
|
CHANGE IN CONTROL WITHOUT TERMINATION ($)
|
|
TERMINATION WITHOUT CAUSE AFTER CHANGE IN CONTROL ($)
|
|
Cash Severance
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,556,000
|
|
Non-Equity Incentive Plan Compensation
|
243,157
|
|
243,157
|
|
—
|
|
—
|
|
243,157
|
|
—
|
|
917,470
|
|
Equity
|
422,520
|
|
422,520
|
|
—
|
|
—
|
|
422,520
|
|
—
|
|
894,362
|
|
Retirement Benefits
|
257,197
|
|
257,197
|
|
—
|
|
288,061
|
|
288,061
|
|
—
|
|
508,000
|
|
Non-Qualified Deferred Compensation
|
20,864
|
|
20,864
|
|
—
|
|
20,864
|
|
20,864
|
|
20,864
|
|
20,864
|
|
Other (Health & Welfare, Outplacement, Perquisites)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
96,952
|
|
TOTAL
|
943,738
|
|
943,738
|
|
—
|
|
308,925
|
|
974,602
|
|
20,864
|
|
4,993,648
|
|
CLIFFORD T. SMITH
|
||||||||||||||
|
|
|
|
|
|
|
|
|||||||
BENEFIT
|
DEATH ($)
|
|
DISABILITY ($)
|
|
RETIREMENT ($)
|
|
VOLUNTARY TERMINATION ($)
|
|
INVOLUNTARY (WITHOUT CAUSE) TERMINATION ($)
|
|
CHANGE IN CONTROL WITHOUT TERMINATION ($)
|
|
TERMINATION WITHOUT CAUSE AFTER CHANGE IN CONTROL ($)
|
|
Cash Severance
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,704,000
|
|
Non-Equity Incentive Plan Compensation
|
248,710
|
|
248,710
|
|
1,100,710
|
|
—
|
|
248,710
|
|
—
|
|
925,800
|
|
Equity
|
431,224
|
|
431,224
|
|
431,224
|
|
—
|
|
431,224
|
|
—
|
|
907,420
|
|
Retirement Benefits
|
708,510
|
|
708,510
|
|
—
|
|
772,787
|
|
772,787
|
|
—
|
|
933,379
|
|
Non-Qualified Deferred Compensation
|
30,476
|
|
30,476
|
|
30,476
|
|
30,476
|
|
30,476
|
|
30,476
|
|
30,476
|
|
Other (Health & Welfare, Outplacement, Perquisites)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
68,747
|
|
TOTAL
|
1,418,920
|
|
1,418,920
|
|
1,562,410
|
|
803,263
|
|
1,483,197
|
|
30,476
|
|
4,569,822
|
|
CEO PAY RATIO
|
|
||
Median Employee Annual Total Compensation
|
$
|
125,067
|
|
CEO Annual Total Compensation
|
$
|
15,443,927
|
|
CEO to Median Employee Pay Ratio
|
123:1
|
|
|
|
|
2019 Proxy Statement
|
53
|
|
|
|
2019 Proxy Statement
|
54
|
PROPOSAL 2
|
APPROVAL, ON AN ADVISORY BASIS, OF OUR NAMED EXECUTIVE OFFICERS' COMPENSATION
|
|
|
|
|
þ
|
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
FOR
PROPOSAL 2 TO APPROVE, ON AN ADVISORY BASIS, OUR NAMED EXECUTIVE OFFICERS' COMPENSATION.
|
|
|
|
2019 Proxy Statement
|
55
|
AUDIT COMMITTEE REPORT
|
|
|
|
|
|
2019 Proxy Statement
|
56
|
PROPOSAL 3
|
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
|
|
|
|
þ
|
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR
PROPOSAL 3 FOR THE RATIFICATION OF THE APPOINTMENT OF DELOITTE AS OUR INDEPENDENT PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019.
|
|
|
|
2019 Proxy Statement
|
57
|
INFORMATION ABOUT SHAREHOLDER PROPOSALS AND COMPANY DOCUMENTS
|
|
|
OTHER INFORMATION
|
|
|
|
|
|
2019 Proxy Statement
|
58
|
ANNEX
|
USE OF NON-GAAP FINANCIAL MEASURES
|
|
|
|
|
|
|
|
|
|
2019 Proxy Statement
|
A-1
|
1 Year Cleveland Cliffs Chart |
1 Month Cleveland Cliffs Chart |
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