NOTICE OF 2019 ANNUAL MEETING OF STOCKHOLDERS

 

Date:

Wednesday, June 12, 2019

 

Time:

10:00 a.m. Eastern Time

 

Place:

Hotel du Pont, 42 West 11th Street, Wilmington, Delaware 19801. You can obtain directions to the Hotel du Pont on the hotel’s website at hoteldupont.com/en/contact-en.html.

 

Purpose:

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Elect five directors;

•

Ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019;

•

Approve, on an advisory basis, the compensation of our named executive officers; and

•

Transact such other business as may properly come before the annual meeting.

 

Record Date:

Only stockholders of record as of the close of business on April 15, 2019, are entitled to notice of and to attend or vote at the annual meeting.

 

Identification:

If you plan to attend the annual meeting in person, please bring proper identification and, if your shares of our common stock are held in “street name,” meaning a bank, broker, trustee or other nominee is the stockholder of record of your shares, please also bring acceptable proof of ownership, which is either an account statement or a letter from your bank, broker, trustee or other nominee confirming that you beneficially owned shares of Freeport-McMoRan Inc. common stock on the record date.

 

Proxy Voting:

Your vote is very important. Regardless of whether you plan to attend the annual meeting in person, please promptly submit your proxy and voting instructions via the internet or phone, or sign, date and return a proxy card. Your cooperation is appreciated.

 

 

TABLE OF CONTENTS

 

Proxy Summary			1
2019 Annual Meeting of Stockholders			1
Agenda and Voting Recommendations			1
Performance Highlights			1
Stockholder and Stakeholder Engagement Highlights			2
Executive Compensation Highlights			2
Board Refreshment Update			2
Director Nominee Highlights			3
Corporate Governance Highlights			3
Stockholder and Stakeholder Engagement			4
History of Responsiveness to Stockholders			4
Ongoing Dialogue Regarding Social and Environmental Sustainability			5
Commitment to Responsible Tailings Management			5
Sustainability Program Highlights			6
Board and Corporate Responsibility Committee Oversight			7
Corporate Governance			8
Corporate Governance Guidelines; Principles of Business Conduct			8
Board Composition and Refreshment			8
Director Nominations and Qualifications			8
Board Leadership Structure			9
Board’s Role in Oversight of Risk Management			9
Succession Planning for Senior Executives			11
Director and Executive Officer Stock Ownership Guidelines			11
Board Evaluation Process			11
Board Committees			12
Board and Committee Meeting Attendance			12
Board and Committee Independence; Audit Committee Financial Expert			13
Compensation Committee Procedures			13
Compensation Committee Interlocks and Insider Participation			14
Director Candidates Submitted by Stockholders			14
Communications with the Board			15
Proposal No. 1: Election of Directors			16
Information About Director Nominees			17

 

Freeport-McMoRan    |   2019 Proxy Statement      i

Executive Officer Compensation			21
Compensation Discussion and Analysis			21
Executive Summary			22
Executive Compensation Philosophy			24
Overview of Principal Components of Executive Compensation			25
Post-Termination Compensation			31
Compensation Processes and Policies			33
Compensation Committee Report			35
Executive Compensation Tables			36
Summary Compensation Table			36
2018 Grants of Plan-Based Awards			38
Outstanding Equity Awards at December 31, 2018			39
2018 Stock Vested			41
Retirement Benefit Programs			41
Potential Payments Upon Termination or Change of Control			44
CEO Pay Ratio			47
Audit Committee Report			49
Independent Registered Public Accounting Firm			50
Proposal No. 2: Ratification of the Appointment of Ernst  & Young LLP as our Independent Registered Public Accounting Firm for 2019			51
Proposal No.  3: Advisory Vote on the Compensation of Our Named Executive Officers			52
Certain Transactions			53
Director Compensation			53
Director Compensation Philosophy			53
Process of Setting Director Compensation			53
Cash Compensation			54
Equity-Based Compensation			54
Frozen and Terminated Retirement Plan			54
Director Compensation Table			55
Stock Ownership of Directors and Executive Officers			56
Section 16(a) Beneficial Ownership Reporting Compliance			58
Stock Ownership of Certain Beneficial Owners			58
Questions and Answers About the Proxy Materials, Annual Meeting and Voting			59
2020 Stockholder Proposals			63
Annex A – Adjusted EBITDA Reconciliation			A-1

 

ii     Freeport-McMoRan    |   2019 Proxy Statement

PROXY SUMMARY

This summary highlights selected information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. For more complete information regarding our 2018 performance, please review our 2018 annual report to stockholders (2018 annual report). The 2018 annual report, including financial statements, is being made available to stockholders together with these proxy materials on or about April 25, 2019.

2019 Annual Meeting of Stockholders

 

Time and Date:		10:00 a.m. Eastern Time, Wednesday, June 12, 2019
Place:		Hotel du Pont, 42 West 11th Street, Wilmington, Delaware 19801
Record Date:		Monday, April 15, 2019
Voting:		Stockholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director position and one vote for each of the other proposals to be considered at our annual meeting.

Agenda and Voting Recommendations

 

Item		Description		Board Vote Recommendation		Page
No. 1		Election of five directors		FOR  each nominee		16
No. 2		Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019		FOR		51
No. 3		Approval, on an advisory basis, of the compensation of our named executive officers		FOR		52

Performance Highlights (page 22)

 

 

Freeport-McMoRan    |   2019 Proxy Statement      1

Stockholder and Stakeholder Engagement Highlights (page 4)

 

Executive Compensation Highlights (page 21)

 

•

Majority of our executives’ target direct compensation is at risk and requires measurable performance and increases in stock price under our annual and LTI programs.

 

•

Payout of annual incentive awards for 2018 at 89.4% of target based on achievement of company performance metrics.

 

•

Payout of 2016 PSUs in early 2019 at 92.0% of target based on achievement of company performance metrics.

 

•

In direct response to stockholder feedback, we revised our LTI program in February 2018 to:

 

•

Incorporate ROI as the primary metric of our PSU awards (representing 50% of the LTI awards), while maintaining the total stockholder return (TSR) modifier, and measure performance under the PSU awards over a full three-year period .

 

•

Deliver the time-based portion of the LTI program in equal values of stock options and RSUs (instead of all stock options).

Board Refreshment Update (page 8)

 

In accordance with our corporate governance guidelines, our nominating and corporate governance committee reviews annually the composition and size of the board, recognizing the importance of refreshment in order to maintain a balance of tenure, diversity, skill sets and experience. Over the past 15 months, the board’s composition has changed with the passing of Jon Madonna in May 2018 and the resignations of Andrew Langham and Courtney Mather. Messrs. Langham and Mather were originally appointed to the board pursuant to a nomination and standstill agreement between the company and the Icahn group and resigned in accordance with that agreement following a decrease in the Icahn group’s share ownership. With these transitions, board refreshment is a priority and our nominating and corporate governance committee is currently considering potential director candidates who can contribute to the company’s success.

 

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Director Nominee Highlights (page 17)

 

Name		Age		Director Since		Principal Occupation		Independent		Board Committees
Richard C. Adkerson Vice Chairman of the Board, President and Chief Executive Officer		72		2006		Vice Chairman of the Board, President and Chief Executive Officer Freeport-McMoRan Inc.		No		None
Gerald J. Ford Non-Executive Chairman		74		2000		Chairman of the Board Hilltop Holdings Inc.		✓		•  Audit ( Chair ) •  Nominating and Corporate Governance ( Chair )
Lydia H. Kennard		64		2013		President and Chief Executive Officer KDG Construction Consulting		✓		•  Audit •  Corporate Responsibility •  Nominating and Corporate Governance
Dustan E. McCoy		69		2007		Retired Chairman and Chief Executive Officer Brunswick Corporation		✓		•  Compensation ( Chair ) •  Audit •  Corporate Responsibility
Frances Fragos Townsend		57		2013		Executive Vice President of Worldwide Government, Legal and Business Affairs MacAndrews & Forbes Incorporated		✓		•  Corporate Responsibility ( Chair ) •  Compensation

Corporate Governance Highlights (page 8)

 

 

Freeport-McMoRan    |   2019 Proxy Statement      3

STOCKHOLDER AND STAKEHOLDER ENGAGEMENT

We have an extensive stockholder outreach program through which we seek ongoing input regarding our governance practices and executive compensation program and we implement changes based on this input. We value stockholder views and insights and we believe that constructive and meaningful dialogue builds informed relationships that promote transparency and accountability. We integrate the full scope of investor perspectives gathered through these engagements into our board’s decision-making processes on issues ranging from strategy to governance, compensation and sustainability. Since 2013, our non-executive chairman, who served as our lead independent director prior to 2016, has participated in these engagements.

During 2018 and early 2019, our board and management continued dialogue with stockholders. We sought meetings with 15 stockholders representing over 35% of our outstanding common stock, ultimately engaging with 10 stockholders representing over 28% of our outstanding common stock. Our non-executive chairman participated in many of these discussions along with our deputy general counsel and corporate secretary. These efforts were in addition to our extensive stakeholder engagement on our sustainability programs and performance. Our senior management team also participated in several engagement sessions with stockholders in early 2019 regarding our tailings management program. See “Ongoing Dialogue Regarding Social and Environmental Sustainability” and “Commitment to Responsible Tailings Management” for a more detailed discussion.

History of Responsiveness to Stockholders

We are committed to being responsive to our stockholders and our board values the open communication we have established and maintained with our stockholders. The table below highlights many of the changes to our governance and compensation structures implemented over the last several years that have been directly informed by views and insights gathered through our engagements and outreach efforts.

 

2014 Comprehensively restructured our executive compensation program to improve alignment with performance and reduce payouts to senior executives.
2015 Reconstituted and reduced size of the board. Streamlined executive management by eliminating Office of the Chairman structure.
2016 Appointed former lead independent director Gerald J. Ford as non-executive chairman of the board.
Revised director compensation program to eliminate meeting attendance fees and reduce the value of annual equity awards.
Amended by-laws to provide for a proxy access right developed and guided by stockholder input and overwhelmingly approved by stockholders at 2016 annual meeting following a majority-supported proxy access stockholder proposal in 2015.
2017-2018 Adopted a new LTI program structure for 2018. Considering stockholder feedback and current market practices, the compensation committee revised our PSU award structure to incorporate an ROI metric measured over the full three-year performance period, retaining the relative TSR modifier, and replaced a portion of stock options with RSUs that vest over a three-year period.

 

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Ongoing Dialogue Regarding Social and Environmental Sustainability

Many stakeholders share our view that we should serve a social purpose and bring positive contributions to society for the long-term. We also recognize that, as a mining company, our work impacts the environment and communities surrounding our operations. We inform, consult and involve communities and partners in order to develop and improve our policies, programs, projects and initiatives. Consistent dialogue allows us to work alongside community members to avoid and mitigate impacts through the development of infrastructure, supporting health, safety and education efforts, and providing local employment and business development opportunities, as well as to capture opportunities to implement projects that drive sustainability. In addition to engagement regarding governance and compensation, we have a robust stakeholder communication program addressing sustainable development. We work regularly with our stockholders and other stakeholders via in-person meetings and site visits, teleconferences, inquiries via email and through multi-stakeholder initiatives. Through these engagements, our corporate sustainable development team and senior personnel address key industry topics, including:

 

•

health, safety and fatality prevention

 

•

programs to respect human rights

 

•

responsible production and sourcing of materials

 

•

tailings management

 

•

community development

 

•

environmental management

 

•

climate-related impacts

 

•

transparency of government payments

 

•

labor relations

In 2018, our corporate team engaged with over 100 investor organizations, sustainability analyst firms, banking institutions, non-governmental organizations, and multi-sector company sustainability teams regarding our sustainability programs and performance. Many of these organizations include multiple members or affiliations, thus expanding the reach of our engagement program. In addition, our operational-level teams regularly engage locally with community stakeholders, development institutions and civil society organizations. Our corporate team also works closely with our commodity sales departments to engage both downstream customers and international governmental agencies on sustainability programs and address specific environmental and social areas of interest that could affect access to markets for our various products within the value chain. Annually, hundreds of entities are engaged via community foundations, formal grievance systems, community liaison officer interactions, workshops, participatory group panels, town hall meetings and specific surveys. We believe that effective stakeholder engagement can help reduce sustainability-related risks and enable us to continue to deliver positive contributions to society.

Commitment to Responsible Tailings Management

In 2019, there has been increased interest from various organizations on our tailings management program, including the types of impoundments we manage within our portfolio. Our senior management team participated in several engagement sessions with stockholders in early 2019 regarding our tailings management program. Affiliates of our company currently operate 19 tailings storage facilities (17 in the United States (U.S.) and 2 in Peru) and manage 55 (all in the U.S.) that are inactive or reclaimed. Our subsidiary, PT Freeport Indonesia (PT-FI), operates a controlled riverine tailings management system, which is the best site-specific management alternative given the challenging physical and environmental conditions of the project area, which include steep mountainous terrain in a remote area of Indonesia that receives considerable rainfall. Through our tailings management and stewardship program, we employ substantial engineering expertise, technological monitoring, as well as local and corporate management oversight to ensure that these facilities are designed, built, operated and monitored to minimize risk to employees, neighboring communities and the environment. These safeguards generally fall within four categories: (1) engineering and design, (2) rigorous adherence to construction and operational parameters through monitoring, (3) multi-tiered oversight and (4) adherence to practices grounded in continuous improvement and learning from past experiences, including industry failures. We have a strong commitment from our board and executive management team to commit the necessary resources to protect safety.

 

Freeport-McMoRan    |   2019 Proxy Statement      5

SUSTAINABILITY PROGRAM HIGHLIGHTS

Our sustainable development program is integral to our business objectives and facilitates our ability to deliver positive, long-term contributions to society. Our program was founded to promote and enhance the following objectives:

 

•

Maintaining acceptance to operate at the local level in order to reinvest in our existing properties, as well as new ventures, thus increasing the production of metals needed for a lower carbon economy .

 

•

Meeting society’s and our customers’ responsible sourcing objectives in order to place our products into the global marketplace today and into the future.

 

•

Operating safely and respecting human rights by conducting our operations consistent with the Universal Declaration of Human Rights and the United Nations Guiding Principles on Business and Human Rights.

 

•

Engaging openly and transparently with internal and external stakeholders on the fundamental environmental, social and economic aspects of our business.

 

•

Embedding community engagement and investment in our company’s culture. Since 2007, we have invested approximately $2 billion in social projects and programs.

 

•

Implementing the International Council on Mining and Metals Sustainable Development Framework (which will be amended in 2019 to include implementation of performance expectations that are designed to set a benchmark for environmental and social performance) at all operating sites in our portfolio, which includes:

 

¡

Maintaining site-specific sustainable development risk registers to identify priority issues and implement action plans for those issues, and

 

¡

Implementing annual site and corporate-level external assurance programs on our sustainability performance and external reporting.

Key focus areas identified and managed through our sustainability program include:

 

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Biodiversity – We own, lease and operate large land holdings, some of which are in and adjacent to areas of high biodiversity value. Our operations are managed to identify potential impacts and, where practicable, implement actions that conserve and enhance biodiversity, including during reclamation activities.

 

•

Climate-Related Impacts and Opportunities – Carbon-based energy is a significant input to our operations and increased regulation of greenhouse gas emissions may directly or indirectly increase our costs. We continue to model multiple carbon tax scenarios to understand the range of potential increases to our operating costs. The potential physical impacts of climate change on our operations and supporting infrastructure are highly uncertain and episodic; however, we are reviewing potential adaptation measures.

 

•

Community Engagement and Development – Our social and economic development programs are designed to be responsive to issues raised by communities, including vulnerable groups and indigenous peoples, and to help us maintain good relations and avoid disruptions of operations. Nevertheless, social and political instability in the areas of our operations may adversely impact our operations.

 

•

Anti-Corruption – We maintain a robust anti-corruption training and reporting program. As a U.S.-based mining company with substantial assets located outside of the U.S., we recognize that our business may be adversely affected by issues related to corruption. Any violation of the U.S. Foreign Corrupt Practices Act and similar anti-corruption laws of jurisdictions in which we operate could result in significant criminal or civil fines and penalties, litigation, and loss of operating licenses or permits. We educate our employees about this risk as part of our program.

 

•

Human Rights – Respect for human rights is a core value and we continue to integrate the United Nations Guiding Principles on Business and Human Rights into our business systems, while advancing human rights impact assessments. Our operations may be adversely affected by impacts from security risks stemming from events or activities including political instability, labor strikes and civil strife. The Voluntary Principles on Security and Human Rights also serve as guidelines for our security and human rights programs.

 

6     Freeport-McMoRan    |   2019 Proxy Statement

•

Labor Relations – We respect our employees’ right to freedom of association and collective bargaining. As of December 31, 2018, approximately 37% of our global labor force was covered by collective bargaining agreements and approximately 21% of our global labor force was covered by agreements that have expired and are currently being negotiated or will expire during 2019. We engage openly with our employees and union leadership to successfully negotiate and uphold labor agreements, recognizing that prolonged strikes or other work stoppages at our operations can adversely affect our business, our workforce and regional stakeholders.

 

•

Product Stewardship – Our product stewardship team engages downstream customers, industry associations and international governmental agencies on operational and product-specific sustainability issues. We believe that proactive engagement on product stewardship issues is mandatory to address risks associated with market access.

 

•

Safety and Health – The safety of our global workforce is our highest priority. Through the implementation of our Fatal Risk Management Program, we aim to completely eliminate fatalities by identifying and implementing critical controls and delivering multi-faceted training and enhanced communications throughout the workforce.

 

•

Tailings – Through our tailings management and stewardship program, we employ substantial engineering expertise, technological monitoring, as well as local and corporate management oversight to ensure that these facilities are designed, built, operated and monitored to minimize risk to employees, neighboring communities and the environment. These safeguards generally fall within four categories: (1) engineering and design, (2) rigorous adherence to construction and operational parameters through monitoring, (3) multi-tiered oversight and (4) adherence to practices grounded in continuous improvement and learning from past experiences, including industry failures. We have a strong commitment from our board and executive management team to commit the necessary resources to protect safety.

 

•

Water Supply and Management – We recognize the importance of responsibly managing water resources. While all of our mining operations require secure and reliable quantities of water for mining and ore processing, most of our operations are located in arid regions of North America and South America. We maintain a global water management program designed to increase water use efficiency in our processes while minimizing the use of fresh water.

Board and Corporate Responsibility Committee Oversight

The corporate responsibility committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks associated with our safety and health policies and programs, environmental policy and programs, human rights policy and practices, community and public health programs, community policy and practices, governmental and stakeholder relations, sustainable development programs, programs to evaluate and address climate-related impacts and opportunities, charitable contributions, and political activity and spending practices. During 2018, management engaged with the chair of the corporate responsibility committee at various times, and the corporate responsibility committee received various reports and considered numerous items with a particular focus on the safety reporting processes at all of our operations, the results of the human rights impact assessments conducted at our operations in Peru and New Mexico, environmental matters at our Indonesia operations, and our political activity and spending practices.

 

Freeport-McMoRan    |   2019 Proxy Statement      7

CORPORATE GOVERNANCE

Corporate Governance Guidelines; Principles of Business Conduct

We are committed to effective corporate governance that is informed by our stockholders, promotes the long-term interests of our stockholders, strengthens board and management accountability, and engenders public trust in our company. Our corporate governance guidelines, along with the charters of our principal board committees, provide the framework for the governance of our company and reflect the board’s commitment to monitor the effectiveness of policy and decision-making at both the board and management levels.

We are committed to the highest level of ethical and legal conduct in all of our business operations. Our principles of business conduct highlight the core values on which our company has built its reputation – safety, respect, integrity, excellence and commitment. Our principles of business conduct provide guidance for the application of these values to our business and define the expected behavior of all of our employees and our board.

Our corporate governance guidelines and principles of business conduct are available at fcx.com under “About Us – Corporate Governance – Governance Documents” and are available in print to any stockholder who requests a copy. Amendments to or waivers of our principles of business conduct granted to any of our directors or executive officers will be published promptly on our website.

Board Composition and Refreshment

In accordance with our corporate governance guidelines, our nominating and corporate governance committee reviews annually the composition and size of the board, recognizing the importance of refreshment to maintain a balance of tenure, diversity, skill sets and experience on our board. Our board currently consists of five members, four of whom the board has affirmatively determined are independent. The average age of our independent directors is 66, and the average tenure of our independent directors is 10.3 years. In addition, 40% of the members of our board are women. Each of our current board members has been nominated to stand for re-election at our 2019 annual meeting.

Over the past 15 months, our board has experienced departures of three of its directors. Jon C. Madonna, a long-time independent director of the company, served on the board until he passed away on May 30, 2018. On March 5, 2018 and on March 12, 2019, Andrew Langham and Courtney Mather resigned from the board, respectively. Messrs. Langham and Mather were originally appointed to the board in October 2015 pursuant to a nomination and standstill agreement between the company and the Icahn group ⁽ * ⁾ . The resignations were tendered in accordance with the terms of the agreement following a decrease in the Icahn group’s share ownership. The Icahn group no longer has any designees on our board. As a result of these transitions, board refreshment is a priority and our nominating and corporate governance committee is currently considering potential board candidates who can contribute to the company’s success. Potential board candidates are being considered in accordance with the criteria set forth in our corporate governance guidelines described in the following section.

Director Nominations and Qualifications

Our nominating and corporate governance committee seeks to have a board that represents a diverse range of perspectives and experiences relevant to our company. In evaluating nominees for membership on the board, our nominating and corporate governance committee applies the board membership criteria set forth in our corporate governance guidelines. Under these criteria, the committee takes into account many factors, including the following:

 

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personal and professional integrity,

 

•

general understanding of our industry,

 

 

( * )

Includes Carl C. Icahn, High River Limited Partnership, Hopper Investments LLC, Barberry Corp., Icahn Partners Master Fund LP, Icahn Offshore LP, Icahn Partners LP, Icahn Onshore LP, Icahn Capital LP, IPH GP LLC, Icahn Enterprises Holdings L.P., Icahn Enterprises G.P. Inc., Beckton Corp., and Messrs. Langham and Mather.

 

8     Freeport-McMoRan    |   2019 Proxy Statement

•

corporate finance and other matters relevant to the successful management of a large publicly-traded company in today’s business environment,

 

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educational and professional background,

 

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independence,

 

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diversity, and

 

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the ability and willingness to work cooperatively with other members of the board and with senior management.

The committee also evaluates each individual in the context of the board as a whole, with the objective of recommending nominees who can best advance the long-term success of the business, be effective directors in conjunction with the full board, and represent stockholder interests through the exercise of sound judgment using their diversity of experience in these various areas.

In the event that vacancies on our board are anticipated or otherwise arise, the committee will consider various potential candidates who may come to the attention of the committee through current board members, professional search firms, stockholders or other persons. Each candidate brought to the attention of the committee, regardless of who recommended such candidate, will be considered on the basis of the criteria set forth above.

Board Leadership Structure

The board believes that the decision to combine or separate the positions of chairman of the board and chief executive officer is highly dependent on the strengths and personalities of the individuals involved. In addition, the decision must take into account current business conditions and the environment in which the company operates. While our by-laws and corporate governance guidelines do not require our chairman of the board and chief executive officer positions to be separate, these positions are separate at our company, and the board believes that having separate positions continues to be the appropriate leadership structure for the company at this time. The responsibilities of our non-executive chairman of the board include:

 

•

presiding at meetings of the board, including all executive sessions of the independent directors;

 

•

overseeing the management, development and functioning of the board; and

 

•

in consultation with the chief executive officer, planning and organizing the schedule and establishing the agendas for board meetings.

The board believes this structure provides an effective balance between strong company leadership and appropriate safeguards and oversight by independent directors.

Board’s Role in Oversight of Risk Management

The board takes an active role in risk oversight. The board as a whole is responsible for risk oversight at the company, with reviews of certain areas being conducted by the relevant board committees that regularly report to the full board. In its risk oversight role, the board reviews, evaluates and discusses with appropriate members of management whether the risk management processes designed and implemented by management are adequate in identifying, assessing, managing and mitigating material risks facing the company, including financial, international, operational, and environmental risks.

The board believes that full and open communication between senior management and the board is essential to effective risk oversight. Our non-executive chairman regularly meets and discusses with our chief executive officer a variety of matters, including business strategies, opportunities, key challenges and risks facing the company, as well as management’s risk mitigation strategies. Senior management attends all regularly-scheduled board meetings where they conduct presentations on various strategic matters involving our operations and are available to address any questions or concerns raised by the board on risk management-related or any other matters. The board oversees the strategic direction of the company, and in doing so considers the potential rewards and risks of our business opportunities and challenges, and monitors the development and management of risks that impact our strategic goals.

 

Freeport-McMoRan    |   2019 Proxy Statement      9

The chart below provides an overview of the allocation of risk management responsibilities among the board committees.

 

Board of Directors
Responsible for risk oversight at the companyBoard Committees
Assist the board in fulfilling its oversight responsibilities with respect to certain areas of risk. Each committee regularly reports on these matters to the full board.
Audit Committee
Responsible for reviewing and discussing with management, our internal audit firm and our independent registered public accounting firm any guidelines and policies relating to risk assessment and risk management, and the steps management has taken to monitor, control and minimize the companys major financial risk exposures
Assists the board in fulfilling its oversight responsibilities relating to the effectiveness of the companys internal control over financial reporting, and the companys compliance with legal and regulatory requirements
Meets periodically with internal audit firm and independent registered public accounting firm in executive session
Discusses with the independent registered public accounting firm and internal audit firm the results of their processes to assess risk in the context of their respective audit engagements
Responsible for reviewing periodically the adequacy and effectiveness of the companys information and technology security policies and the internal controls regarding information technology security and cybersecurity
Compensation Committee
Responsible for overseeing the companys assessment of whether its compensation policies and practices are likely to expose the company to material risks Responsible, in consultation with management, for overseeing the companys compliance with regulations governing executive and director compensation
Nominating and Corporate Governance Committee
Assists the board in fulfilling its oversight responsibilities with respect to the management of risks associated with the companys board leadership structure and corporate governance matters
Corporate Responsibility Committee
Assists the board in fulfilling its oversight responsibilities with respect to the management of risks associated with our safety and health policies and programs, environmental policy and implementation programs, human rights policy and practices, community health programs and related public health and medical matters, community policy and practices, governmental and stakeholder relations and social investment and sustainable development programs, programs to evaluate and address climate-related impacts and opportunities, charitable contributions and political activity and spending practices

 

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Succession Planning for Senior Executives

The board is focused on ensuring that the company has an emergency and long-term succession plan in place for key senior executive positions. In the event of an unexpected executive departure, the emergency succession plan allows for smooth transfer of responsibilities to an individual who may or may not be permanently tasked with the new role. In the event of a senior executive’s departure, both internal and external candidates may be considered for permanent appointment to a given role.

The long-term succession plan is intended to develop a pipeline of qualified talent for key roles. The company’s short and long-term business strategy will be considered when evaluating candidates and their skills. The planning process includes a discussion of succession candidates, assessment of relevant skills and planning for professional development where necessary. Multiple internal succession candidates may be identified for an individual role and provided with relevant growth opportunities. The board gains insight through direct exposure to internal succession candidates from their presentations to the board, work with individual directors or board committees, and participation in board activities.

The independent directors oversee the succession planning process for our chief executive officer and other key senior executives and annually review the company’s succession plans for all key senior executives with input from the chief executive officer. In 2018, all of the independent directors met in executive session to review the company’s succession plan. In the event that the succession plan is triggered for any of these roles, the full board would participate in the discussion and consideration of any action with a final decision to be made by the independent directors of the board.

Director and Executive Officer Stock Ownership Guidelines

The nominating and corporate governance committee adopted stock ownership guidelines applicable to our non-management directors. The compensation committee adopted stock ownership guidelines applicable to our executive officers. Under the guidelines, each non-management director is expected to maintain ownership of company stock having a value equal to at least five times his or her annual retainer, which retainer is currently $75,000. Our chief executive officer is expected to maintain ownership of company stock valued at six times his base salary. Each of our other executive officers is expected to maintain ownership of company stock valued at three times his or her base salary. The value of the stock ownership is calculated based on the one-year and five-year trailing average monthly stock price.

Shares of our common stock currently owned and not pledged, including shares issuable upon the vesting of outstanding time-vested RSUs and shares held in employee benefit plans and individual retirement accounts, count as stock owned for purposes of the stock ownership guidelines. Shares held in trust may also be included; however, due to the complexities of the trust laws, the decision to include the shares is made on a case-by-case basis after reviewing the nature of the specific trust involved and considering whether the individual has maintained a pecuniary interest in the shares. Performance share units (PSUs) and shares owned on behalf of a spouse or children are not counted towards the target level. Stock ownership levels should be achieved by each non-management director and executive officer as soon as practicable or within four years of being appointed or elected to the board or becoming an executive officer. As of April 15, 2019, all of our non-management directors and all of our executive officers exceeded their target ownership levels.

Board Evaluation Process

The nominating and corporate governance committee oversees the annual performance evaluation of the board as a whole and each committee of the board. Annually, each director completes an evaluation of the full board and of each committee on which the director serves. The evaluations are intended to provide the board and each committee with an opportunity to evaluate performance for the purpose of improving board and committee processes and effectiveness. The detailed questionnaires seek quantitative ratings and subjective comments in key areas of board practices, and ask each director to evaluate how well the board and committees operate and to make suggestions for improvements. The nominating and corporate governance committee reviews the results and the assessment of board performance is presented to the full board. The results of each committee evaluation are delivered to the respective chair of each committee. The results can then be leveraged by the board or relevant committee when considering issues such as board refreshment, committee operations, or board procedures.

 

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Board Committees

The board has four primary standing committees: an audit committee, a compensation committee, a nominating and corporate governance committee, and a corporate responsibility committee, each of which is composed entirely of independent directors. Each committee operates under a written charter adopted by the board. All of the committee charters are available on our website at fcx.com under “About Us – Corporate Governance – Board Committees and Charters” and are available in print upon request. The following table identifies the current committee members.

 

Name of Director		Audit Committee		Compensation Committee		Nominating and Corporate Governance Committee		Corporate Responsibility Committee
Gerald J. Ford		Chair				Chair
Lydia H. Kennard		✓				✓		✓
Dustan E. McCoy		✓		Chair				✓
Frances Fragos Townsend				✓				Chair

Audit Committee . The audit committee assists the board in fulfilling its oversight responsibilities relating to: (1) the effectiveness of the company’s internal control over financial reporting; (2) the integrity of the company’s financial statements; (3) the company’s compliance with legal and regulatory requirements; (4) the qualifications and independence of the company’s independent registered public accounting firm; and (5) the performance of the company’s independent registered public accounting firm and internal audit firm. For more information on the audit committee, see the section titled “Audit Committee Report.” The audit committee held four meetings in 2018.

Compensation Committee . The compensation committee assists the board in fulfilling its oversight responsibilities by (1) discharging the board’s responsibilities relating to compensation of the company’s executive officers; (2) overseeing the form and amount of director compensation; and (3) administering the company’s cash-based and equity-based incentive compensation plans. For more information on the compensation committee, see the section titled “Corporate Governance – Compensation Committee Procedures.” The compensation committee held four meetings in 2018 (three regular and one special).

Nominating and Corporate Governance Committee . The nominating and corporate governance committee assists the board in fulfilling its oversight responsibilities by (1) identifying and formally considering and recommending to the board, candidates to be nominated for election or re-election to the board at each annual meeting of stockholders or as necessary to fill vacancies and newly-created directorships; (2) monitoring the composition of the board and its committees and making formal recommendations to the board on membership of the committees; (3) overseeing the company’s corporate governance practices and procedures, including identifying best practices and reviewing and recommending to the board for approval any changes to the documents, policies and procedures in the company’s corporate governance framework, including maintaining the company’s corporate governance guidelines and recommending to the board any desirable changes; (4) reviewing and, as necessary, making recommendations to the board with respect to stockholder proposals; and (5) evaluating the effectiveness of the board, its committees and management. The nominating and corporate governance committee held two meetings in 2018.

Corporate Responsibility Committee . The corporate responsibility committee assists the board in fulfilling its oversight responsibilities with respect to the company’s (1) environmental policy and implementation programs; (2) human rights policy and practices; (3) safety and health policies and programs; (4) community health programs and related public health and medical matters; (5) community policy and practices, governmental and stakeholder relations, and social investment and sustainable development programs; (6) programs to evaluate and address climate-related impacts and opportunities; (7) charitable contributions; and (8) political activity and spending practices. The corporate responsibility committee held three meetings in 2018.

Board and Committee Meeting Attendance

The board had a total of ten meetings during 2018 (four regular meetings and six special meetings). During 2018, each of our directors participated in 100% of the total number of meetings of the board and meetings held by each

 

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committee of the board on which each director served. Directors are invited, but not required, to attend annual meetings of our stockholders. Mr. Adkerson attended our 2018 annual meeting of stockholders.

Board and Committee Independence; Audit Committee Financial Expert

In accordance with the rules of the New York Stock Exchange (NYSE), the board must make an affirmative determination that a director has no material relationship with the company and management for such director to be deemed independent. To assist the board in making determinations of independence, the nominating and corporate governance committee established director independence standards, which meet, and in some respects exceed, the independence requirements of the NYSE. In addition, members of the audit and compensation committees must meet heightened standards of independence in accordance with the requirements of the NYSE corporate governance listing standards and U.S. Securities and Exchange Commission (SEC) rules and regulations. The director independence standards are set forth in Appendix A to our corporate governance guidelines, which are available at fcx.com under “About Us – Corporate Governance – Governance Documents.”

On the basis of information solicited from each director, and upon the advice and recommendation of the nominating and corporate governance committee, the board has affirmatively determined that each of Messrs. Ford and McCoy and each of Mses. Kennard and Townsend has no material relationship with the company and is independent within the meaning of our director independence standards. In making this determination, the nominating and corporate governance committee, with assistance from the company’s legal counsel, evaluated responses to a questionnaire completed annually by each director regarding relationships and possible conflicts of interest between each director, the company and management. In its review of director independence, the committee considered the commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships any director may have with the company or management. The nominating and corporate governance committee recommended to the board that the four directors named above be considered independent, which the board approved.

The board also has determined that each of the members of the audit, compensation, nominating and corporate governance, and corporate responsibility committees has no material relationship with the company and satisfies the independence criteria (including the enhanced criteria with respect to members of the audit committee and compensation committee) set forth in the applicable NYSE listing standards and SEC rules. In addition, the board has determined that Mr. Ford qualifies as an “audit committee financial expert,” as such term is defined by the rules of the SEC.

Compensation Committee Procedures

The compensation committee has the sole authority to set compensation for our executive officers, including annual compensation amounts and annual and LTI program criteria, evaluate the performance of our executive officers, and make awards to our executive officers under our stock incentive plan. The compensation committee also reviews, approves and recommends to the board any proposed plan or arrangement providing for incentive, retirement or other compensation to our executive officers and oversees our assessment of whether our compensation practices are likely to expose the company to material risks. In addition, the compensation committee annually recommends to the board the slate of officers for the company, periodically reviews the functions of our executive officers, and makes recommendations to the board concerning those functions.

To the extent equity awards are granted in a given year, the compensation committee’s historical practice has been to grant such awards at its first meeting of that year, which is usually held in January or February. Each July or August, the board establishes a meeting schedule for itself and its committees for the next calendar year. Thus, the first meeting of each year is scheduled approximately six months in advance and is scheduled to fall within the window period following the release of the company’s earnings for the fourth quarter of the previous year. The compensation committee has a written policy stating that it will approve all regular equity-based awards at its first or second regular meeting of each fiscal year, and that to the extent the committee approves any out-of-cycle awards at other times during the year, such awards will be made during an open window period during which our executive officers and directors are permitted to trade company securities.

 

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The terms of our stock incentive plan provide that the exercise price of each stock option cannot be less than the fair market value of a share of our common stock on the grant date. Pursuant to the compensation committee’s policies, for purposes of our stock incentive plan, the fair market value of our common stock will be determined by reference to the closing quoted per share sale price of our common stock on the composite tape for NYSE-listed stocks on the grant date. In addition, our stock incentive plan permits the committee to delegate to appropriate personnel its authority to make awards to employees other than those subject to Section 16 of the Securities Exchange Act of 1934, as amended.

Our current equity grant policy provides that each of our chief executive officer, chief financial officer and chief administrative officer has authority to make or modify grants to such employees, subject to the following conditions:

 

•

No grant may relate to more than 20,000 shares of our common stock;

 

•

Such grants must be approved during an open window period and must be approved in writing by such officer, the grant date being the date of such written approval or such later date set forth in the grant instrument;

 

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The exercise price of any options granted may not be less than the fair market value of our common stock on the date of grant; and

 

•

Any such grants must be reported to the committee at its next meeting.

The compensation committee is also responsible for the oversight of director compensation, including the authority to grant equity-based awards, and conducts an annual review and assessment of all compensation, cash and equity-based, paid to our non-management directors under our director compensation program. For more information regarding director compensation philosophy and procedures, see the section titled “Director Compensation” on page 53.

The compensation committee engages an independent executive compensation consultant to advise the compensation committee on matters related to executive and director compensation. Please refer to the section titled “Compensation Discussion and Analysis” for more information related to the independent executive compensation consultant. In addition, the board has its own independent legal counsel, with whom the compensation committee consults on an as needed basis.

Compensation Committee Interlocks and Insider Participation

The current members of our compensation committee are Mr. McCoy and Ms. Townsend. In 2018, none of our executive officers served as a member of the compensation committee of another entity, or as a director of another entity, one of whose executive officers served on our compensation committee or as one of our directors.

Our insider trading policy prohibits our executives and directors from entering into any hedging arrangements with respect to our securities and limits the ability of our executives and directors to pledge our securities. For more information, see the section titled “Executive Officer Compensation – Compensation Discussion and Analysis” beginning on page 21.

Director Candidates Submitted by Stockholders

Non-Proxy Access Nominations

Our nominating and corporate governance committee will consider candidates proposed for nomination by our stockholders. Stockholders may propose candidates by submitting the names and supporting information to: Corporate Secretary, Freeport-McMoRan Inc., 333 North Central Avenue, Phoenix, Arizona 85004. Supporting information should include (a) the name and address of the candidate and the proposing stockholder; (b) a comprehensive biography of the candidate and an explanation of why the candidate is qualified to serve as a director taking into account the criteria identified in our corporate governance guidelines; (c) proof of ownership, the class and number of shares, and the length of time that the shares of our voting securities have been beneficially owned by each of the candidate and the proposing stockholder; and (d) a letter from the candidate stating his or her willingness to serve, if elected.

 

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In addition, our by-laws permit stockholders to nominate candidates directly for consideration at next year’s annual meeting of stockholders. Any non-proxy access nomination must be in writing and received by our corporate secretary at our principal executive office no later than April 13, 2020. If the date of next year’s annual meeting is moved to a date more than 90 days after or 30 days before the anniversary of this year’s annual meeting, the nomination must be received no later than the later of 60 days prior to the date of the 2020 annual meeting or 10 days following the public announcement of the date of the 2020 annual meeting. Any stockholder submitting a non-proxy access nomination under our by-law procedures must include (a) all information relating to the nominee that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (b) the name and address (as they appear on the company’s books) of the nominating stockholder and number of shares directly or indirectly beneficially owned by such stockholder, and (c) all other information required by our by-laws. Nominations should be addressed to: Corporate Secretary, Freeport-McMoRan Inc., 333 North Central Avenue, Phoenix, Arizona 85004.

Proxy Access Nominations

Our by-laws also contain a proxy access provision approved by our stockholders in 2016 that permits a stockholder, or a group of up to 20 stockholders, owning 3% or more shares of our common stock continuously for the three years prior to the date of submission of a notice nominating a candidate for director and continuing up to the date of the annual meeting, to nominate and include in the company’s proxy materials stockholder nominees for election to the board constituting the greater of (a) two stockholder nominees or (b) 20% of the total number of directors in office as of the last day nominations of stockholder nominees may be submitted, rounded down to the nearest whole number, provided that the nominating stockholder(s) and the nominee(s) satisfy the requirements specified in our by-laws.

Any director nomination pursuant to our proxy access by-law must be in writing and received by our corporate secretary at our principal executive office no later than December 27, 2019. If the date of next year’s annual meeting is moved to a date more than 30 days after or 30 days before the anniversary of this year’s annual meeting, the nomination must be received no later than the later of 180 days prior to the date of the 2020 annual meeting or 10 days following the public announcement of the date of the 2020 annual meeting. Any stockholder submitting a nomination under our proxy access by-law procedures must comply with the procedure, notice and information requirements in Article IV, Section 12 of our by-laws. Nominations made pursuant to our proxy access by-law should be addressed to: Corporate Secretary, Freeport-McMoRan Inc., 333 North Central Avenue, Phoenix, Arizona 85004.

Communications with the Board

The board believes that senior management speaks for the company. Individual board members may, from time to time, meet or otherwise communicate with the company’s stakeholders at the request of the board or senior management. Stockholders or other interested parties may communicate directly with one or more members of the board, or the independent directors as a group, by writing to the director or directors at the following address: Freeport-McMoRan Inc., Attn: Board of Directors (or the name of the individual director or directors), 333 North Central Avenue, Phoenix, Arizona 85004. The communication will be forwarded to the non-executive chairman of the board or the appropriate director or directors for response.

 

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