2018 Guide to Effective Proxies

2.17.11 Shareholder engagement | 487 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES DARLING INGREDIENTS, INC. DTE ENERGY COMPANY EBAY EXECUTIVE COMPENSATION CompensationDiscussionandAnalysis Thecommitteebelievesthatourexecutivecompensationprogrameffectivelyalignspaywithperformancebasedonthekeyfactorsdis- cussedabove,therebyaligningexecutivepaywithreturnstostockholdersandcreatingagrowth–oriented,long-termvalueproposition forourstockholders. SAYONPAYADVISORYVOTERESULTSANDSTOCKHOLDERENGAGEMENTPROCESS Wehaveconductedastockholderengagementprocessforthepastseveralyearsandroutinelyinteractwithstockholdersthroughout theyearaboutexecutivecompensationandothermatters.Stockholdersarealsoprovidedanannualopportunitytoprovidefeedback throughanadvisorysayonpayvoteonexecutivecompensation.For2016,ourexecutivecompensationprogramwassignificantly redesignedinresponsetostockholderfeedbackandsayonpayresults.Atour2017AnnualMeeting,approximately98.6%ofthevotes castwereinfavoroftheadvisoryvotetoapproveexecutivecompensation.Additionally,in2017,membersofthecommitteeandman- agementreachedouttostockholdersrepresentingover82%ofouroutstandingsharesandhelddirectconversationswitheverystock- holderwhorespondedtoourengagementrequest.Overall,wespokewithstockholdersrepresentingapproximately14%ofour outstandingshares,withthechairmanofourcompensationcommitteeleadingthediscussions.Inthepastthreeyears,aspartofour stockholderengagementprocess,thechairmanofourcompensationcommittee,togetherwithmembersofseniormanagement,has spokenwithstockholdersrepresentingapproximately62%ofouroutstandingshares,andhasspokenwithtwodifferentproxyadvisory firms.Thesediscussions,togetherwiththe2017sayonpayresults,indicatedstrongsupportforoursignificantlyredesignedexecutive compensationprogramandinfluencedthecommittee’sdecisiontomaintainaconsistentoverallapproachfor2017and2018.Stock- holderengagementandtheoutcomeofthesayonpayvoteresultswillcontinuetoinformfuturecompensationdecisions. BESTPRACTICESANDGOODGOVERNANCE CompensationProgramEnhancements Overthelastseveralyears,thecommitteeandourBoardsignificantlychangedourcompensationprogramafterreviewingtrendsin executivecompensationandpay-relatedgovernancepoliciesandinresponsetosayonpayresultsandstockholderfeedback.We believethatthesechanges,whichincludedthechangesshowninthechartbelow,significantlyenhancedourcompensationprogramby sharpeningalignmentbetweenexecutivecompensationandtheinterestsofourstockholders. Adopted separate metrics for our annual incentive bonus and LTI programs Adopted double-trigger vesting for change in control in our long-term equity awards Adjusted LTI value mix to 60%PSUs and 40% stock options Shifted from a backward-looking/ trailing perfromance measurement to a forward-looking performance measurement for our LTI plan Reduced the maximum annual incentive payout from 300% to 200% of target Added a relative total shareholder return metric in the LTI program Re-evaluated our peergroup to better align with our company 2018ProxyStatement 25 2 DTEENERGY 2018PROXYSTATEMENT Shareholder Engagement We have continued our shareholderengagementactivities this yearand, asa result of those discussions,we’ve learned a lotaboutwhat is important toour shareholders.TheShareholderengagement team consists ofmembers from theCorporateSecretary'soffice, theGeneralCounsel organization, InvestorRelations,Environmental Management,andCorporateCommunications.Shareholder engagement isa year-roundprocess for us. Every springwe reach out to large shareholders todiscuss issues related toproxy season and theproposals to be presentedatour annual meeting. In the fallwe conduct another roundof conversations to discuss generalgovernance issues and trends.Wealso discuss pressingmatters onan ad hocbasis. Our shareholderengagement activitieshelp us identify governanceand compensation policiesandpractices that are most important toour shareholders. The shareholderengagement team reports directly to the CorporateGovernance Committee andother committees as needed, conveying the feedback received from shareholders and proposing implementation of bestpractices. The committeesand the full BoardofDirectorsdeliberate over proposedgovernance changes,adoptbest practices andprovideguidance to the shareholderengagement team in their communicationswith shareholders. In2017, theCompanyhelddiscussionswith shareholderswho collectivelyownorexercise voting control over 33.7% of theCompany’s outstanding shares. Inaddition, theCompany routinely contacts shareholderswhohave submitted proposals for inclusion in ourannual proxy statement, inan effort to understand their concerns and to address,wherepossible, the issuesbehind theirproposals.Wewill continue to look foropportunities to provide more information about theCompany’s approachon topics of interest to shareholders,and to stimulatemore conversationswith shareholders. Governance Highlights TheBoard is committed to creating long-term value for our shareholderswhile operating inan ethical, legal, environmentally sensitive and socially responsiblemanner.TheBoard follows sound governance practices, someof which arehighlightedbelow.Formoredetail, see the “CorporateGovernance” sectionof thisProxyStatement. • Elevenof twelvedirectornominees, 92%, are independent;ourChairman&ChiefExecutiveOfficer ("CEO") is theonlymanagement director. • AllBoard committees are composedexclusivelyof independentdirectors. • We have implementeda proxyaccess provision,whichmakes itpossible foragroupof shareholdersmeeting certain criteria tonominateand include in theCompany’s proxymaterials a candidate for theBoard. • We have aLead IndependentDirector,elected by the independentmembersof theBoard.The Lead IndependentDirectormaintains final approval authorityoverBoard agendas,meetingmaterialsand schedules.The Lead IndependentDirector is alsoavailable for consultation anddirect communicationwith large shareholders. • Independentdirectorsmet inexecutive sessions chairedby the Lead IndependentDirector at sixof the seven 2017Boardmeetings. • All of ourdirectorsareelected annually. • We have amajority vote requirement foruncontested director elections. • TheBoardand its committees conductannual self-assessments. In addition, each independentdirectorwho has served forone year ormoreundergoesanannualpeer review. • Ourexecutiveofficers and directors areall subject to robust stockownership requirements. • We have institutedanti-hedging policies applicable toallCompany directors,officersand employees. CorporateGovernance • IndependentBoardLeadership–WehaveseparatedtherolesofChairmanoftheBoardandCEO.The ChairmanoftheBoardisanindependentdirector–asareallofthechairsofthecommitteesoftheBoard. • StockholderEngagement–StockholderscancommunicatedirectlywiththeBoardand/orindividual directors.(See“ContactingtheBoardorIndividualDirectors”below.)Inaddition,managementand membersoftheBoardregularlyengagewithstockholderstosolicittheirviewsonimportantissuessuch ascorporategovernanceandexecutivecompensation. StockholderEngagementonCorporateGovernanceandOurExecutiveCompensationProgram Wehaveapracticeofregularlyengagingwithstockholderstoseektheirfeedbackonourcorporate governancepracticesandourexecutivecompensationprogram.Afterwefileourproxystatement,we engagewithourlargeststockholdersaboutimportanttopicstobeaddressedatourannualmeeting.Inthe fall,weconductanadditionalcycleofstockholderengagementwherewefocusonourcorporate governancepracticesandexecutivecompensationprogram,aswellasanythingelseresultingfrommatters votedonatourannualmeeting.Followingeachroundofstockholderengagement,weprovideanoverview ofthediscussionsandfeedbacktotheapplicableBoardcommittees,whichisalsodiscussedwiththe Board. BOARD OF DIRECTORS 2017discussion topics included: Say-on-pay Short-termand long-term incentiveprogramdesign andperformancemetrics Diversityand Inclusion Boardandgovernance matters Cybersecurity Environmental,Socialand Governancematters Stockholderengagement: Regularengagementwith stockholdersonabroad rangeof topics Offeredover35meetings withstockholders representing ~ 55%of commonstockoutstanding throughout theyear Metwithstockholders representing ~ 37%of commonstockoutstanding GenderPayEquityandGlobalDiversity&Inclusion. Atour2016annualmeeting,stockholdersconsidereda stockholderproposaltopublishareportongenderpayequity.Priortoreceivingthisstockholderproposal, wehadbeguntheprocessofconductinganextensiveglobalstudyofgenderpayequitythatconsidered themaincomponentsofcompensation,includingsalary,bonusandstock.Whiletheproposaldidnotpass, itgarneredsignificantsupport.InOctober2016,wepubliclydisclosedkeyfindingsofourpayequitystudy, includingthatwomenearnthesameasmenintheU.S.intermsofsalary.InMarch2017,wepublishedour firstglobalDiversityandInclusion(“D&I”)Report,whichincludedbothquantitativeinformationaboutour globalgenderdiversityandU.S.racialandethnicdiversityalongwithdetailsaboutourstrategicapproach, programsandinitiatives.InearlyApril2018,wepublishedoursecondglobalD&IReport,aswellasthe findingsfromoursecondglobalstudyofgenderpayequity.Wefoundthat,intheU.S.,womenearn100%of whatmenearnintermsoftotalcompensationand,globally,womenearn100.1%ofwhatmenearnintermsof totalcompensation. 13