2018 Guide to Effective Proxies

2.17.11 Shareholder engagement | 489 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES StockholderEngagementandContinuedEvolutionofOurExecutiveCompensationProgram Ourboardhasahistoryofseekingourstockholders’feedbackregardingourpractices,includingourcompensation program,andhighlyvaluestheinsightswereceivethroughthisopendialogue.Overthepastyear,theboardleda multi-stagestockholderengagementprogramtoensurethecontinuationofthisprocessofusingstockholder feedbacktoinformtheboard’sresponsetoareasofinquiry. Inthelead-uptothe2017annualmeeting, weengagedwith15ofourstockholderscollectivelyholdingover 45%ofouroutstandingcommonstock .Mostinvestorscommunicatedpositivefeedbackregarding management’sexecutionofourlong-termstrategytofocusonourworld-classcopperportfolioandexercise capitalandcostdiscipline.Althoughourstockholdersweregenerallysupportiveofourcompensationprogram’s structureandquantum,thereweretwoprimaryconcernsregardingourexecutivecompensationprogramthatwe soughttoaddress.First,theuseofspecialannualincentiveandequityawardsfor2016performanceandsecondly, theuseofannualmetricsinourlong-termincentivecompensationprogram.Thecommitteerecognizedtheneed for responsiveactionfollowingthedisappointingoutcomeofour2017annualmeetingvoteonour say-on-payproposal,whichpassedwith52%support . Afterour2017annualmeeting,ourcommitteeexecuted acomprehensiveengagementoutreachprogram togain additionalinsightintostockholders’viewsofourexecutivecompensationprogramanddiscusspotentialresponsive actions.Inthefallof2017,weengagedwithasignificantcross-sectionofourinstitutionalstockholderbaseandindicated ourintenttointegratestockholderfeedbackintothecommittee’sreviewoftheexecutivecompensationprogramaswe consideredchangesfor2018. Wesoughtmeetingswith15stockholdersrepresentingover40%ofouroutstanding commonstockandengagedwith10investorsrepresentingabout25%ofouroutstandingcommonstock .In ordertoestablishdirectdialoguewithourcommittee,thechairofthecommitteeparticipatedinmanyofthese discussions,alongwithournon-executivechairmanandourdeputygeneralcounselandcorporatesecretary. Weconductedadditionalengagementcallswithourlargeststockholders topreviewthemodificationstoour executivecompensationprogramandtoseekanyadditionalfeedback .Throughthisextensiveengagement process,wereceivedvaluableinputfromourstockholdersdetailedbelowunder“StockholderFeedback.”This feedbackdirectlyinformedtheincentivecompensationchangesmadefor2018detailedunder“AdoptedNew Long-TermIncentiveProgramStructurefor2018toReflectStockholderPerspectives”onpage28. WhatWeHeardandWhatWeDid CompensationElement StockholderFeedback DirectResponse PerformanceShare Units(PSUs) ( 50%ofLTIaward ) • Frequentlycitedreturnoninvestment (ROI)asalong-termmetrictoconsider • AdoptedROImetric • GenerallysupportedTSRmodifier • MaintainedrelativeTSRmodifier • Preferredametricthatappliedover three-yearperformanceperiod • Vestingbasedonmetricover three-yearperformanceperiod OtherEquityVehicles ( 50%ofLTIaward ) • Suggestedawardingrestrictedstock units(RSUs)inplaceofaportionof stockoptions • AdjustedprogramtoincludeRSUs (25%ofLTIaward)andstockoptions (now25%ofLTIawardinsteadof50%) SpecialAwards • Notedthat2017say-on-payvotes reflectedconcernsregardingthe specialawardstoexecutives,although manyunderstoodourrationale • Committedtonofuturespecialawards outsideofregularcompensation programexceptinextraordinary circumstances;didnotgrantany additionalspecialawardsin2018 Freeport-McMoRan ⎪ 2018ProxyStatement 25 Total of 02 pages in section Inthecourseof2017outreach,someshareholders requestedclearerandmoreprominentlyfeatured articulationsof: » Ourcompensationphilosophy(seepage53); » Howourcompensationprogramalignspaywith performance(seepage56); » Oursuccessionphilosophy(seepage4);and » Ourapproachtowardsinclusionanddiversity(see page42). Inconnectionwithourongoingshareholder engagementefforts,wecontinuetoseekwaysto maintainacompensationprogramthatisresponsive tobothshareholderprioritiesandconcernsandthe Bank’sBoard-approvedobjectivesasarticulatedin ourbusinessplan.Duringthecourseof2017 interactions,therewerenosubstantivechangestoour compensationphilosophyorprogrambroadly recommendedbyshareholders. Thefeedbackwereceivedwasgenerallyfavorable, withshareholderscommentingaffirmativelyonthe following: » Alignmentbetweenpayandperformanceas evidencedbyourtrackrecordofstrong,stable growth,highpercentageofcompensationtied directlytoresults,andstrongshareholdervalue creation; » Compensationincentiveswhichpromotesafety, soundness,andprofitability;and » Thoughtfultarget-settingwhichappropriately balancesperformancewithrisk. Someshareholdersexpressedthebeliefthat compensationhurdlescouldbemorerigorous.Please refertothediscussionofourexecutivecompensation philosophyandprogram,beginningonpage53, whichhasbeenexpandedinordertodirectlyaddress thisfeedback. RECORDOFTRANSLATINGINVESTORFEEDBACK INTOCOMPENSATIONPROGRAM ENHANCEMENTS Followingshareholderfeedbackreceivedin2017,for the2018program,theCompensationCommittee alsoaddedaclawbackprovisionforexecutiveofficer payrelatedtotheBank’soverallefficiencyratio.This provisionincentivizesourexecutiveofficersto properlybalanceongoinginvestmentsinsupporting theBank’sclientservicecapabilities,digital technologies,andscalableinfrastructurewith shareholderreturns. Additionally,theCompensationCommittee determinedthat50%ofeachNamedExecutive Officer’sannualincentiveawardfor2017willbepaid intheformofagrantofperformanceshareunits, vestingoverthreeyears,whichfurtherdemonstratesa continuedcommitmenttoshareholderalignment. Thisfurtherincreasestheemphasisinour compensationprogramforNamedExecutive Officersonlong-termincentivesandachieving strong,sustainedperformance. Asdiscussedin“2017SayonPayVoteResults”on page57,theCompensationCommitteehas consideredfeedbackfromshareholdersoverthepast severalyearsandhastakencontinuousactionsto strengthenelementsofourexecutivecompensation programstofurtheraligntheinterestsofour shareholdersandexecutives. Inadditiontoshareholderfeedbackreceivedin2017, theCompensationCommitteehasconsidered feedbackfromshareholdersoverthepastseveralyears andhastakenactionstostrengthenelementsofour executivecompensationprogramstofurtheralignthe interestsofourshareholdersandexecutives. CertainshareholdersalsodiscussedwiththeBankthe importanceofourclientservice-focusedbusiness modelanditsimpactonourlong-termresults,and suggestedincorporatingaclientservicemeasureinto ourexecutivecompensationprogram.TheBankhas used,forseveralyears,NetPromoterScore(“NPS”). Thismetric,generatedbyanindependentthirdparty throughcomprehensiveclientsurveys,measuresclient satisfaction,loyaltyandlikelihoodtoreferothersto theBank,whicharesignificantdriversofoursuccess. In2017,theCompensationCommitteeaddedan NPStargettoourcompensationprogramforNamed ExecutiveOfficers,andtheCommitteedetermined toalsousethemetricinour2018program.In CORPORATEGOVERNANCE 39 Total of 02 pages in section FIRST REPUBLIC BANK FREEPORT-MCMORAN, INC. Shareholder Engagement INVESTOROUTREACHPROGRAM Weengagewithmanyofourshareholdersthroughouttheyear,includinginadvanceofandfollowingour AnnualMeetingofShareholders.Webelievethataccountabilitytoandengagementwithshareholdersisa cornerstoneofgoodcorporategovernanceandwecontinuetoinvestinacomprehensiveandong ing shareholderengagementprogramtocommunicateanddiscussperformanceresultsandcorporat g vernance matters. Q1 Q2 Q4 Q3 Conductmeetingswith large investors togaugegovernance and compensation priorities amongour shareholderbase Engage independent thirdparty to review executionofprioryear’s program and identify current trends inglobalgovernance shareholder feedback and applies BoardofDirectors reflectson it to enhanceproxydisclosures andmake appropriategovernance and compensation adjustments Present learnings to the BoardofDirectors Conduct additional in-season shareholderoutreach asnecessary to engagewithbroader investorbase Management reviews any additional investor feedback received Communicate shareholder feedback to theBoardofDirectors CompensationCommittee and CorporateGovernance& NominatingCommittee for consideration HOWTHEBOARDRECEIVESFEEDBACKFROM MAJORINSTITUTIONALINVESTORS FirstRepublic’sshareholderengagementand governanceoutreachprogramformalizesthe feedbackloopbetweenmajorinstitutionalinvestors, theBank’smanagementteam,andtheBoard. MembersofFirstRepublic’smanagementteam conductgovernance-relatedoutreachtomajor institutionalshareholdersannually,occasionally includingBoardrepresentativesasappropriateor requested.Trendsandthemesinfeedbackreceived arepresentedtotheCompensationCommitteeand CorporateGovernanceandNominatingCommittee forconsideration. INVESTOROUTREACHANDOUR2017“SAYONPAY” VOTE Atour2017AnnualMeetingofShareholders,as requiredbytheExchangeAct,ourshareholderswere presentedanopportunitytovoteonanadvisorybasis withrespecttothecompensationofourNamed ExecutiveOfficers.Atthismeeting,theBank’s“say onpay”proposalforits2016compensationprogram receivedsupportof99%ofsharesvoted.Alsoatthis meetingandasrequiredundertheExchangeAct,our shareholdersvotedonthefrequencyofholdingthe Bank’sadvisory“sayonpay”vote.Asunanimously recommendedbyourBoard,ourshareholders approvedtheoptionofhavingtheadvisory“sayon pay”voteonceeveryyear. During2017,aspartofourongoingengagement efforts,weheldover200meetingsandphonecalls withshareholders,representingover65%ofour outstandingshares. 38 CORPORATEGOVERNANCE STOCKHOLDER ENGAGEMENT Wehaveanextensivestockholderoutreachprogramthroughwhichweseekongoinginputregardingour governancepracticesandexecutivecompensationprogramandimplementchangesbasedonthisinput.Wevalue stockholderviewsandinsightsandwebelievethatconstructiveandmeaningfuldialoguebuildsinformed relationshipsthatpromotetransparencyandaccountability.Weintegratethefullscopeofinvestorperspectives gatheredthroughtheseengagementsintoourboard’sdecision-makingprocessesonissuesrangingfromstrategy togovernance,compensationandsustainability. During2017,ourboardandmanagementconductedextensiveengagementwithstockholdersandperformed an in-depthreviewofourcompensationprogram.Wewantedtobetterunderstandstockholders’views,particularly withrespecttoexecutivecompensation,andprovidetheopportunityforstockholderstoofferdetailedfeedbackon potentialchangesbeforeimplementation.Inthefallof2017,wesoughtmeetingswith15stockholders representing over40%ofouroutstandingcommonstockandengagedwith10stockholdersrepresenting 25%of ouroutstandingcommonstock.Inordertoestablishadirectdialoguewithourcompensationcommittee,thechair ofourcompensationcommitteeparticipatedinmanyofthesediscussions,alongwithournon-executivechairman, andourdeputygeneralcounselandcorporatesecretary.Inresponsetostockholderfeedbackandbasedonmarket practices,thecompensationcommitteemadeseveralchangestoourcompensationprogramtofurtheralignour incentivestructurewithourstrategyandaddressconcernscitedbystockholders,asdiscussedunder“Executive OfficerCompensation–CompensationDiscussionandAnalysis–StockholderEngagementandContinued EvolutionofOurExecutiveCompensationProgram”onpage25. History of Responsiveness to Stockholders Ourboardvaluestheopencommunicationwehaveestablishedandmaintainedwithourstockholders.Manyofthe changestoourgovernanceandcompensationstructuresimplementedoverthelastseveralyearshavebeen directlyinformedbyviewsandinsightsgatheredthroughtheseengagementsandoutreachefforts.Since2013,our non-executivechairman,whoalsoservedasourleadindependentdirectorpriorto2016,hasparti ipat dinth se engagements.Wearecommittedtobeingresponsivetoourstockholdersasdemonstratedbychanges emade overtheyearsbasedonstockholderfeedback. 2017- 2018 Comprehensively restructuredour executive compensationprogram to improve alignmentwithperformance and reducepayouts to senior executives. Reconstitutedand reduced sizeof theboard. Streamlined executivemanagementby eliminatingOfficeof theChairman structure . Appointed former lead independentdirectorGerald J. Ford as non-executive chairmanof theboard . Reviseddirector compensationprogram to eliminatemeetingattendance feesand reduce the valueofannual equityawards . Amendedby-laws toprovide foraproxyaccess right developed andguidedby stockholder input andoverwhelmingly approvedby stockholders at 2016 annualmeeting following amajority-supportedproxy access stockholderproposal in 2015. Adoptedanew long-term incentiveprogram structure for2018 .Considering stockholder feedback and currentmarketpractices, the compensation committee revised ourPSU award structure to incorporate a returnon investmentmetricmeasuredover the full three-yearperformanceperiod, retaining the relative TSRmodifier, and replaced a portionof stockoptionswithRSUs that vestover a three-yearperiod. 2013 2014 2015 2016 Strengthened corporategovernance structure through appointmentof lead independent director and establishmentof executive committee. Freeport-McMoRan ⎪ 2018ProxyStatement 5