Slide 1: May/June 2012 Proxy Discussion Say-On-Pay
May/June 2012 Proxy Discussion Say-On-Pay May/June 2012 Proxy Discussion Say-On-Pay
Slide 2: Summary Agenda
Summary Agenda FCX Overview and Summary of 2011 Performance Feedback on 2011 Say-On-Pay Vote Modifications to Our Executive Compensation Program Summary of 2011 Executive Compensation Questions/Discussion
Slide 3: FCX Overview
FCX Overview World’s Largest Publicly Traded Copper Company World’s Largest Producer of Molybdenum & Significant Gold Producer World Class, Long-Lived, Geographically Diverse Operations Environmentally and Socially Responsible Financially Strong #135 in the 2012 Fortune 500 Rankings Long Track Recor
Slide 4: 2011 Highlights
2011 Highlights Excellent Financial Performance – Exceeded 2010 Records Solid Operating Performance Impacted by Labor Disruptions New Labor Agreements at Grasberg, Cerro Verde & El Abra Advanced Growth Projects to Increase Copper Production by ~25% Over Next Several Years Significant Exploration Dri
Slide 5: Total Shareholder Returns 1-Year 3-Year 5-Year
Total Shareholder Returns 1-Year 3-Year 5-Year FCX -36.8% 216.7% 60.0% Peer Group Median -33.6% 97.0% 43.2% Peer Group 75 th % -22.2% 176.4% 73.1% S&P 500 2.1% 48.6% 1.1% 1-Year 3-Year 5-Year The Peer Group consists of the following companies: Alcoa Inc. Anglo American plc Antofagasta plc Barrick Go
Slide 6: Feedback on 2011 Say-on-Pay Vote
Feedback on 2011 Say-on-Pay Vote FCX’s Institutional Shareholders • Recognized Strong Performance • Cited Pay Magnitude as Primary Reason for Negative Vote • Commented on 6% Return on Investment (ROI) Measure in Annual Incentive Plan (AIP) – Lacked Rigor • Wanted More Disclosure of Qualitative Facto
Slide 7: Feedback on 2011 Say-on-Pay Vote
Feedback on 2011 Say-on-Pay Vote Proxy Advisory Firms • Recognized Strong Performance • Cited Pay Magnitude as Primary Reason for Negative Vote • Other Factors Noted: - AIP Design 6% ROI Measure – Lack of Rigor Lack of Reasonable Upper Limit - Significant Perquisites - No Clawback Policy
Slide 8: Goals of Changing Executive Compensation Program
Goals of Changing Executive Compensation Program Maintain Entrepreneurial Culture of the Company Continue to Align Compensation with Interests of Stockholders Maintain Strong Pay-for-Performance Link • Emphasize Performance-Based Compensation • Tie to Key Measures Used in Assessing Company Value Add
Slide 9: Modifications to Program
Modifications to Program “Umbrella” Cap: AIP + Equity-Based = $20 million per year Reduced AIP Limits • Reduced Total Cap from 8X to 6X Salary • Reduced Cash Component Cap from 4X to 3X Salary Performance RSUs – Two-Fold Performance-Based Hurdles • st Performance-Based Hurdle Maintained: - Amount Gr
Slide 10: Modifications to Program (cont'd)
Modifications to Program (cont ’ d) Average Copper Price per Pound 2x 3x 4x 5x 6x Salary Multiples – Annual ROI Thresholds AIP Performance Measures • Maintained Incentive Pool Based on Cash Flow • Increased Rigor of the ROI Performance Measure in AIP - Maintained Current Five-Year ROI of 6% - Added
Slide 11: Modifications to Program (cont'd)
Modifications to Program (cont ’ d) Revised Stock Option Methodology • Option Grants Subject to “Umbrella” Cap • Stock Options Valued Under Black-Scholes (Rather than Fixed Share Basis) • Stock Options and RSUs Would Vest Following a Change of Control Only If Employee Terminated from Employment With
Slide 12: Total Direct Compensation 2010 and 2011
Total Direct Compensation 2010 and 2011 ($ millions) Chairman CEO $30.6 $18.5 $30.6 $18.5 40% Reduction 40% Reduction Stock Options AIP - RSUs AIP - Cash Salary
Slide 13: Overview of Executive Compensation Awarded for 2011
Overview of Executive Compensation Awarded for 2011 2011 Was an Outstanding Year for FCX Resulting in the Best Financial Results in Company’s History In Awarding 2011 Incentive Compensation (AIP Awards and Stock Options), Our Corporate Personnel Committee Considered: • Strong Company Performance in
Slide 14: 2011 Component Mix of Total Direct Compensation
2011 Component Mix of Total Direct Compensation Equity-Based Salary AIP Cash Cash AIP RSUs Fixed 13% 32% 27% 28% Options 13% 87% 45% 55% Performance-based Components of Compensation Performance-Based/Fixed Compensation Equity/Cash Compensation
Slide 15: Total Black-Scholes Value of Options Granted to NEOs
Total Black-Scholes Value of Options Granted to NEOs 2.54MM Options as Adjusted for Stock Split 1.27MM Options 0.87MM Options ($ millions) 2.54MM Options as Adjusted for Stock Split 1.27MM Options 0.87MM Options 50% Reduction $39.2 $26.2 $13.1 $0 $10 $20 $30 $40
Slide 16: Executive Compensation – Last Two Years
Executive Compensation – Last Two Years Year Salary Cash RSUs ¹ Stock Options ¹ Total Direct Retirement Benefits ² All Other Total AIP Awards Reflects the year of performance for which the RSUs and stock options were awarded even though granted in February of the following year (differs from amounts
Slide 17: Performance-Based Compensation vs Stock Performance
Performance-Based Compensation vs Stock Performance Options RSUs Cash $19.2 $79.3 $70.6 $41.1 $0 $15 $30 $45 $60 $75 $0 $20 $40 $60 $80 $100 Stock Price
Slide 18: Questions/Discussion
Questions/ Discussion Questions/ Discussion