2018 Guide to Effective Proxies

2.5 Checklists | 105 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES GATX CORPORATION GENERAL DYNAMICS CORPORATION GENERAL MOTORS GOLDMAN SACHS GROUP, INC. COMPENSATIONDISCUSSIONANDANALYSIS GATX’s Executive Compensation Practices We regularly review and refine our executive compensation program to ensure that it continues to reflect practices and policies that are aligned with our pay-for-performance philosophy. We believe that our practices and policies set forth below are in line with current best practices for aligning executive and shareholder interests and sound corporate governance practices. What We Do What We Don’t Do ✓ PayforPerformance —Approximately71%ofour executives’totaldirectcompensationisperformance-based ✓ RobustStockOwnershipGuidelines —Wehavestock ownershipguidelinesforexecutiveofficersof5.0xbase salaryforCEOand2.5xbasesalaryforotherexecutive officers ✓ StockRetentionRequirements —Werequireourexecutive officerstoretain50%oftheafter-taxprofitsrealizedfrom theirGATXequityawardsuntilstockownershipguidelines aremet ✓ Annual“Say-on-Pay”Vote —Weseekanannual non-bindingadvisoryvotefromourshareholderstoapprove compensationpaidtoourNEOsasdisclosedinourproxy statement ✓ ClawbackPolicy —Ourpolicyprovidesfortherecoveryof equityawardsandincentivecompensationpaidto executiveofficersintheeventofamaterialrestatementof ourfinancialresults ✓ IndependentCompensationConsultant —The CompensationCommitteeretainsanindependent compensationconsultantandreassessesindependence annually ✓ AnnualReviewofCompensation —TheCompensation Committee,withinputfromitsindependentcompensation consultant,conductsanannualreviewofallofour compensationprogramsinlightofcurrentbestpractices ✓ AnnualCompensationRiskAssessment —Eachyearwe performanassessmentofanyrisksthatcouldresultfrom ourcompensationplansandprograms ✘ EmploymentAgreements —Wedonotprovideour executiveofficerswithemploymentagreements,otherthan severanceinconnectionwithachangeincontrol ✘ Hedging/PledgingofCompanyStock —Weprohibitour officers,directors,andemployeesfromhedging,margining, pledging,short-selling,orpubliclytradingoptionsinour stock ✘ TaxGross-Ups —Wedonotprovidetaxgross-ups,other thaninagreementsenteredintopriorto2009whichhave notbeenamended ✘ DividendsonUnvestedEquityAwards —Wedonotpay dividendsonunvestedequityawards,includingoptions, restrictedstock,andperformanceshares ✘ Perquisites —WedonotprovideperquisitestoourNEOs ✘ RepricingorExchangeofUnderwaterOptions —We prohibitsharerepricingwithoutshareholderapproval ✘ Single-TriggerChangeofControlVesting/Benefits —We donotallowforsingle-triggervestingorpaymentofbenefits uponachangeofcontrol.Rather,werequiredouble- trigger,orbothachangeofcontrolandterminationof executive’semployment,beforevestingisaccelerated GATXCORPORATION - 2017ProxyStatement 35 Proxy Summary Highlightsofourgovernancepracticesinclude: GovernancePractice FormoreInformation StockOwnership • Market-leadingstockownershiprequirements forourexecutiveofficersrequirethem to hold shares of our Common Stock worth eight to 15 times base salary. Director stock ownershipguidelinesprovidethatourdirectorsshouldholdsharesofourCommonStockhaving avalueofatleasteighttimestheannualretainer. P.40 • We prohibit hedging and pledging of our Common Stock by directors and executive officers. P.40 BoardStructure andGovernance • Nineofour10directornomineesare independent .AllofourstandingBoardcommitteesare chaired by independent directors. Our Audit, Compensation and Nominating and Corporate GovernanceCommitteesare100percentindependent. P.14 • An independentLeadDirector witharobustsetofresponsibilitiesiselectedannuallybythe Boardandprovidesadditionalindependentoversightofseniormanagementandboardmatters. P.13 • Ourdirectorsare electedannually basedona majorityvotingstandard foruncontested elections.Wehavea resignationpolicy ifadirectorfailstoreceiveamajorityofvotescast. P.60 • Our directors attended on average more than 98 percent of board and committee meetings in2017withnodirectorattendinglessthan85percent. P.15 • Our non-management directors meet in executive session , without management present, followingeachregularlyscheduledmeeting,presidedbytheLeadDirector. P.15 • Ourdirectorsarerestrictedinthenumberofotherboardsonwhichtheymayserveto prevent overboarding . CorporateGovernanceGuidelines* • Our related person transactions policy ensures appropriate Board review of related persontransactions. • Annual Board and committee self-assessments monitor the performance and effectivenessoftheBoardanditscommittees. • Diligent Board oversight of risk is a cornerstone of the company’s risk management program. P.19 P.18 P.17 Corporate Responsibility • Our ethicsprogram includesstrongCodesofEthicsforallemployeesglobally,withspecific codesforourdirectorsandfinancialprofessionals. StandardsofBusinessEthicsand Conduct** CodesofEthics** • We discuss Corporate Responsibility on our website and in our Corporate Sustainability Report, including our ethos, our commitment to our stakeholders and communities and our commitmenttodiversityandinclusion. www.gd.com/Responsibility • Disclosure of our corporate political contributions and our trade association dues describestheprocessandoversightweemployineacharea. www.gd.com/AdditionalDisclosure • Wehaveastrongcorporatecommitmenttorespectthedignity, humanrights andautonomy ofothers. CorporateSustainabilityReport** Shareholder Rights • Our shareholders have the ability to nominate director candidates and have those nominees included in our proxy statement, subject to meeting the requirements in our Bylaws, a shareholderrightknownas proxyaccess . Bylaws* • We donothaveashareholderrightsplan ,orpoisonpill.Anyfuturerightsplanmustbe submittedtoshareholders. • Ourshareholdershavetherighttorequesta specialmeeting ofshareholders. CorporateGovernanceGuidelines* Bylaws* * OurCorporateGovernanceGuidelinesandBylawsareavailableonourwebsiteatwww.gd.com/CorporateGovernance. ** Our Standards of Business Ethics and Conduct, Codes of Ethics and Corporate Sustainability Report are available on our website at www.gd.com/Responsibility. GeneralDynamics2018ProxyStatement 3 CompensationMatters |Non-EmployeeDirectorCompensationProgram Non-Employee Director Compensation Program DIRECTOR COMPENSATION OVERVIEW OurGovernanceCommitteeisfocusedonensuringthatourDirectorCompensationProgram: Isdesigned to attract and retain highlyqualified and diverse directors Appropriately values the significant time commitment requiredofour non-employeedirectors Effectively andmeaningfully aligns directors with long-term shareholder interests Recognizes the highly regulated and complexnatureofourglobal business Takes into account the focus onBoard governance andoversight at financialfirms Reflects the shared responsibility of alldirectors Significant Time Commitment By Directors In addition to preparation for and attendance at regular and specialmeetings (54 total in 2017), our directors are engaged in a variety of otherways, including: Receive postingson significantdevelopments and weekly informational packages Ongoing communication andmeetingswith each other, seniormanagement and key employees around theglobe Meetingswith our regulators Participation in firm and industry conferences and otherexternalengagements onbehalfof theBoard Engagementwith investors byour LeadDirector For additional information, see Corporate Governance — Structure ofourBoard and GovernancePractices—Commitment of ourBoard. KeyFeaturesofDirectorCompensationProgram WhatWeDo ✓ Emphasis on Equity Compensation: Theoverwhelmingmajorityofdirector compensationispaidinequity-basedawards (RSUs). Directorsmayreceive100%oftheir directorcompensationinRSUsattheirelection ✓ Hold-Past RetirementRequirement: d Non-employeedirectors must hold all RSUs grantedtothemduring theirentiretenure d SharesofCommonStockunderlyingtheRSUs do not deliveruntil wellafteradirector’s retirement ; thisperiodcanrangefrom6 monthstoupto18months,dependingupon thetimingofretirement ✓ Equity Ownership Requirements: Allnon-employeedirectorsarerequired,within threeyearsofbecomingadirector, toown at least5,000shares ofCommonStockorvested RSUs Remainder in CashCompensation Minimumof 83% EquityCompensation WhatWeDon’t Do ✘ Nofeesforattendingmeetings ✘ Nounduefocusonshort-termstockperformance– directorpayalignswithcompensationphilosophy, notshort-termfluctuationsinstockprice ✘ NohedgingorpledgingofRSUspermitted ✘ NohedgingofsharesofCommonStockpermitted ✘ NodirectorhassharesofCommonStocksubjectto apledge Foradditionalinformationregardingmatters relatingtoourDirectorCompensationProgram,seepage95. IsdesignedtoattractandretainhighlyqualifiedanddiversedirectorsAppropriatelyvaluesthesignificanttimecommitmentrequiredofournon-employeedirectorsEffectivelyandmeaningfullyalignsdirectorswithlong-termshareholderinterestsRecognizesthehighlyregulatedandcomplexnatureofourglobalbusinessTakesintoaccountthefocusonBoardgovernanceandoversightatfinancialfirmsReflectsthesharedresponsibilityofalldirectorsSignificantTimeCommitmentByDirectorsInadditiontopreparationforandattendanceatregularandspecialmeetings(54totalin2017),ourdirectorsareengagedinavarietyofotherways,including:ReceivepostingsonsignificantdevelopmentsandweeklyinformationalpackagesOngoingcommunicationandmeetingswitheachother,seniormanagementandkeyemployeesaroundtheglobeMeetingswithourregulatorsParticipationinfirmandindustryconferencesandotherexternalengagementsonbehalfoftheBoardEngagementwithinvestorsbyourLeadDirectorForadditionalinformation,seeCorporateGovernance—StructureofourBoardandGovernancePractices—Commitmentofour Board.RemainderinCashCompensationMinimumof83%EquityCompensation 78 GoldmanSachs | ProxyStatementforthe2018AnnualMeetingofShareholders $145.6BREVENUE$12.8BEBIT-ADJUSTED(1)All-TimeRecord$6.7BRETURNEDTOSHAREHOLDERS$5.2BADJUSTEDAUTOMOTIVEFREECASHFLOW(1)28.2%ROIC-ADJUSTED(1)22.5%TOTALSHAREHOLDERRETURN(2)$6.62EPS-DILUTED-ADJUSTED(1)All-TimeRecord8.8%EBIT-ADJUSTEDMARGINSAll-TimeRecordWeendedtheyearwith22.5%TSR.TheCompanycontinuedtoinvestinthefutureanddeliveronkeyfinancialmeasureswhilereturning$6.7billiontoourshareholders. EXECUTIVECOMPENSATION We ended 2017 with the following key financial results: Weended the yearwith22.5% TSR.The Company continued to invest in the future anddeliveronkey financialmeasures while returning $6.7billion toour shareholders. $6.62 EPS-DILUTED-ADJUSTED (1) All-TimeRecord $5.2 B ADJUSTEDAUTOMOTIVE FREECASHFLOW (1) $145.6 B REVENUE $12.8 B EBIT-ADJUSTED (1) 28.2 % ROIC-ADJUSTED (1) $6.7 B RETURNEDTO SHAREHOLDERS 22.5 % TOTALSHAREHOLDER RETURN (2) All-TimeRecord 8.8 % EBIT-ADJUSTED MARGIN RepeatsRecord Note:Thefinancialinformationaboverelatestoourcontinuingoperations. (1) Thesearenon-GAAPfinancialmeasures.RefertoItem7,Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperationsin ourAnnualReportonForm10-KforthefiscalyearendedDecember31,2017forareconciliationofROIC-adjustedtoitsclosestcomparableGAAP measure.RefertoAppendixAforareconciliationofEBIT-adjusted,EBIT-adjustedmargin,adjustedautomotivefreecashflow,andEPS-diluted- adjustedtotheirclosestcomparableGAAPmeasure. (2) Assumesdividendsarereinvestedincommonstock. Compensation Governance and Best Practices WHATWEDO ✔ Provideshort-termandlong-termincentiveplanswithperformancetargetsalignedtobusinessgoals ✔ Conductannualadvisoryvoteforshareholderstoapproveexecutivecompensation ✔ MaintainaCompensationCommitteecomposedentirelyofindependentdirectors ✔ Requirestockownershipforallseniorleaders ✔ Conductrigorousshareholderengagementbymanagementanddirectors,includingourExecutiveCompensationCommitteeand ourLeadIndependentDirector ✔ Includenon-competeandnon-solicitationtermsinallgrantagreementswithseniorleaders ✔ RetainanindependentexecutivecompensationconsultanttotheCompensationCommittee ✔ Maintain a Securities Trading Policy requiring directors, executive officers, and all other senior leaders to trade only during establishedwindowperiodsaftercontactingtheGMLegalStaffpriortoanysalesorpurchasesofcommonstock ✔ Requireequityawardstohaveadoubletrigger(terminationofemploymentandchangeincontrol)toinitiateprotectionprovisions ofoutstandingawards ✔ Completeincentivecompensationriskreviewsannually ✔ MaintainaclawbackpolicytoapplytoactionsthatdamageGM’sreputation WHATWEDON’TDO ✘ Providegross-uppaymentstocoverpersonalincometaxesorexcisetaxespertainingtoexecutiveorseverancebenefits ✘ AllowdirectorsorexecutivestoengageinhedgingorpledgingofGMsecurities ✘ Rewardexecutivesforexcessive,inappropriate,orunnecessaryrisk-taking ✘ Allowtherepricingorbackdatingofequityawards G E N E R A L M O T O R S 2018 PROXYSTATEMENT 37