International Paper Company
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DEF 14A
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
SCHEDULE 14A
(Rule
14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
 
 
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Definitive Proxy Statement
 
Definitive Additional Materials
 
Soliciting Material Pursuant to
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International Paper Company
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LOGO


Dear Shareowner,

 

LOGO

 

 

 

      

We invite you to join us for our 2024 Annual Meeting of Shareowners on May 13, 2024. This year’s meeting will be held in person in Memphis, Tennessee. Whether or not you plan to attend, please review the enclosed materials and vote your shares. This Proxy Statement includes a summary that highlights policy updates and provides an overview of key performance metrics.

 

Also enclosed is a copy of the International Paper 2023 Annual Report, which highlights our key accomplishments.

 

Looking back on 2023, the macro-economic environment generated considerable challenges, including lower demand for our products and significant cost inflation. We worked closely with our customers to use the scale, scope and geographic reach of our extensive manufacturing system to innovate, create value and serve their needs. Our teams navigated these conditions, aggressively pursuing cost reduction actions. Through our Building a Better IP initiatives, we delivered $260 million of earnings benefits in 2023, exceeding our targets and demonstrating the commercial and operational excellence mindset embedded in our culture.

 

In September, we completed the sale of our ownership interest in the Ilim joint venture in Russia. We also invested in our packaging system and achieved mix and margin improvements through our strong segment-based value propositions. Our business leaders took strategic actions to structurally reduce fixed costs and optimize our mills. The impact of our commercial and operational improvement actions was diluted in 2023 due to the challenging economic cycle, but we believe these actions will contribute to our long-term strategic focus and future results.

   

 

In addition, in 2023, we preserved our solid balance sheet. We remained committed to our dividend policy and returned approximately $840 million to our shareowners. In terms of cash returned to shareholders through dividends and stock repurchases, this brings our five-year total to $6.4 billion.

 

As we previously announced, after serving as International Paper Company’s chief executive officer for the last decade and a 40-year career with the Company, I have decided to retire following completion of our chief executive officer succession plan. The Board conducted an extensive search, which considered both internal and external candidates for the CEO role. In March, the Board appointed Andrew (“Andy”) K. Silvernail as the Company’s new Chief Executive Officer effective May 1, 2024. Andy

 

LOGO


LOGO

 

joins International Paper with more than two decades of experience leading global manufacturing and technology-based companies. He has been a catalyst for creating value and strengthening engagement and is skilled at helping talented organizations achieve next-level performance. Our Board plans to elect Andy to our Board of Directors at the Board meeting following the Annual Meeting of Shareholders. I will continue my role as Chairman of the Board for a transition period. The Board and I have tremendous confidence that Andy’s unique experiences, paired with the industry expertise of our senior executives, will amplify the Company’s success going forward. Andy has a passion for leadership and for making a difference. He is the right leader for the Company’s next chapter and will be a great addition to our strong leadership team.

 

International Paper makes products that matter. We are a global producer of sustainable packaging, pulp and other fiber-based products, and one of the world’s largest recyclers. Our talented team members are dedicated to taking care of our customers, operating safely, giving back to the communities in which we operate, and advancing our Vision 2030 goals. Given our strategic customer relationships, world-class assets, and market expertise, we are positioned to maximize long-term value for all our stakeholders, and we intend to deliver.

 

On behalf of International Paper’s Board of Directors and our 39,000 employees, thank you for your continued support and ownership.

 

Sincerely,

 

 

LOGO

 

Mark S. Sutton

Chairman of the Board and Chief Executive Officer

    

A diverse and agile leadership team with a winning mindset is critical to guiding the company’s improvement efforts and driving our success. Effective May 1st , Andy Silvernail will become the Company’s new CEO. The following senior leaders took on new responsibilities in 2023 aligned with our commitment to leadership development:

 

Clay Ellis, Senior Vice President, Global Cellulose Fibers

 

Aimee Gregg, Senior Vice President, Supply Chain and Information Technology

 

Tom Hamic, Senior Vice President, North American Container and Chief Commercial Officer

 

Allison Magness, Senior Vice President, Manufacturing and Environment, Health and Safety

 

Tom Plath, Senior Vice President, Human Resources and Corporate Affairs

 

Jay Royalty, Senior Vice President, Containerboard and Recycling

 

Ksenia Sosnina, Senior Vice President, Europe, the Middle East and Africa

 

LOGO


Notice of Annual

Meeting of Shareowners

 

 

Date and Time

Monday, May 13, 2024,

at 11:00 a.m. CDT

 

Place

International Paper Company
Headquarters Tower IV
1740 International Drive Memphis, Tennessee 38197

 

 

 

Your vote is important!

 

LOGO

Vote on the Internet

Go to the website address shown in the Notice of Internet Availability or proxy card provided to you. You will need the 16-digit control number printed on the Notice of Internet Availability or proxy card.

 

LOGO

Vote by telephone

Dial the toll-free number shown in the Notice of Internet Availability or proxy card provided to you. You will need the 16-digit control number printed on the Notice of Internet Availability or proxy card.

 

LOGO

Vote by mail

 

Mark, sign and date your proxy card and return it in the postage-paid envelope that was included with the proxy card.

 

Items of Business    Board Recommendation
ITEM 1      Election of 9 Directors      FOR
ITEM 2      Ratify Deloitte & Touche LLP as our independent auditor for 2024      FOR
ITEM 3      Non-binding resolution to approve the compensation of our Named Executive Officers      FOR
ITEM 4       Approval of 2024 Long-Term Incentive Compensation Plan      FOR
ITEM 5      Shareowner Proposal Concerning Shareowner Opportunity to Vote on Excessive Golden Parachutes      AGAINST
ITEM 6      Shareowner Proposal Concerning a Report on the Company’s LGBTQ+ Equity and Inclusion Efforts      AGAINST
Consider any other business properly brought before the meeting

Record Date

Holders of record of International Paper common stock at the close of business on March 15, 2024, are entitled to vote at the meeting.

By order of the Board of Directors,

 

LOGO

Joseph R. Saab

Senior Vice President, General Counsel and Corporate Secretary

April 2, 2024

Important Notice Regarding the Availability of Proxy Materials for the Shareowner Meeting to Be Held on May 13, 2024:

The following materials are available for viewing and printing at materials.proxyvote.com/460146:

 

 

The Notice of Annual Meeting of Shareowners to be held on May 13, 2024;

 

 

International Paper’s 2024 Proxy Statement; and

 

 

International Paper’s 2023 Annual Report.

A Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) or the proxy statement, proxy card and annual report are first being sent to shareowners on or about April 2, 2024. Information contained in this Proxy Statement does not take into account changes effective after the mail date unless otherwise noted.

 

 

www.internationalpaper.com

  / 1


Table of Contents

 

   
Proxy Summary     4  
ITEM 1  Election of 9 Directors     13  
How We Build the Right Board for Our Company     14  
Our Nominees     17  
Corporate Governance     23  
How the Board Operates     23  
Board Oversight of the Company     30  
Independence of Directors     33  
Transactions with Related Persons     35  
Commitment to Sound Corporate Governance and Ethical Conduct     36  
Director Compensation     38  
ITEM 2 Ratify Deloitte & Touche LLP as Our Independent Auditor for 2024     42  
ITEM 3 Non-Binding Resolution to Approve the Compensation of Our Named Executive Officers     46  
Compensation Discussion & Analysis     47  
Executive Summary     49  
   
Executive Compensation Tables     78  

Summary Compensation Table

    78  

Other Grants of Plan-Based Awards During 2023

    80  

Outstanding Equity Awards at December 31, 2023

    82  

Stock Vested in 2023

    83  

Pension Benefits in 2023

    83  

Nonqualified Deferred Compensation in 2023

    86  

Post-Employment Termination Benefits

    87  
Pay Versus Performance     93  
CEO Pay Ratio     97  
ITEM 4 Approval of 2024 Long-Term Incentive Compensation Plan     99  
Ownership of Company Stock     109  
ITEM 5 Shareowner Proposal Concerning Shareowner Opportunity to Vote on Excessive Golden Parachutes     112  
ITEM 6 Shareowner Proposal Concerning a Report on the Company’s LGBTQ+ Equity and Inclusion Efforts     116  
Delinquent Section 16(a) Reports     119  
Information About the Annual Meeting     120  
Appendix A – 2024 Long-Term Incentive Compensation Plan     A-1  
Appendix B – Reconciliations of Non-GAAP Measures     B-1  
 

 

Index of Frequently Requested Information

 

Our Commitment to Sustainability      6  
Summary of Director Nominees’ Core Competencies      16  
Board Policies and Practices      24  
Proxy Access      30  
Information Security      32  
2023 Incentive Plan Design Overview With Metrics and Weightings      52  
How and Why We Choose Our Performance Metrics      61  
NEO Compensation      68  
Pay Versus Performance      93  
How do I attend the annual meeting?      120  
 

 

 

2 \  

International Paper 2024 Proxy Statement

 


Forward-Looking Statements. Certain statements in this proxy statement that are not historical in nature may be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects”, “anticipates”, “believes”, “estimates” and similar expressions identify forward-looking statements. These statements are not guarantees of future performance and reflect management’s current views and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements. Moreover, any targets or goals with respect to climate change or other ESG matters discussed herein or in our sustainability reports as noted below are forward-looking statements and may be aspirational. These targets or goals are not guarantees of future results, and involve assumptions and known and unknown risks and uncertainties, some of which are beyond our control. Such risks and other factors that may impact forward-looking statements are discussed in our filings with the SEC, including in Item 1A under the caption “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2023, filed on February 16, 2024, and the risks and uncertainties discussed in any subsequent reports that we file or furnish with the SEC from time to time. The information contained herein speaks as of the date hereof, and we do not have or undertake any obligation to update or revise our forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

No Incorporation by Reference. Information that is in our 2022 Sustainability Report, any information that will be in our 2023 Sustainability Report to be published later in 2024, and any other information on our website that we may refer to in this Proxy Statement is not incorporated by reference into, and does not form any part of, this Proxy Statement.

 

 

www.internationalpaper.com

  / 3


LOGO

 

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all the information you should consider, and you should read the entire Proxy Statement before voting.

Meeting Agenda and Voting Recommendations

 

Items        Board Recommendation     

ITEM 1

 

Election of 9 Directors

    FOR LOGO  
     

 

LOGO  See pages 13 – 22

   

ITEM 2

 

Ratify Deloitte & Touche LLP as the Company’s Independent Auditor for 2024

    FOR LOGO  
     

LOGO  See pages 42 – 45

 

   

ITEM 3

 

Non-Binding Resolution to Approve the Compensation of Our Named Executive Officers

    FOR LOGO  
     

LOGO  See page 46

 

   

ITEM 4

 

Approval of 2024 Long-Term Incentive Compensation Plan

    FOR LOGO  
      LOGO  See pages 99 – 108    

ITEM 5

 

Shareowner Proposal Concerning Shareowner Opportunity to Vote on Excessive Golden Parachutes

    AGAINST LOGO  
     

 

LOGO  See pages 112 – 115

 

   

ITEM 6

 

Shareowner Proposal Concerning a Report on the Company’s LGBTQ+ Equity and Inclusion Efforts

    AGAINST LOGO  
     

LOGO  See pages 116 – 118

 

   
Consider any other business properly brought before the meeting.            

 

4 \  

International Paper 2024 Proxy Statement

 

 


 

 Proxy Summary / 2023 Financial Performance Highlights 

 

 

2023 Financial Performance Highlights

 

 

LOGO

 

Solid Execution in a Challenging
Environment

 

We generated $382 million of Earnings from Continuing Operations Before Income Taxes and Equity Earnings (GAAP) and achieved $2.2 billion of Adjusted EBITDA1

LOGO  

Returned approximately $840 Million of

Cash to Shareowners

 

LOGO  

Maintained a Strong Balance Sheet

 

 

 

 

     
  1.  

          

 
  We advanced our strategies to improve profitability across our portfolio.  
  2.  

          

 
  We delivered $260 million of earnings benefits from our Build a Better IP initiatives.  
  3.  

          

 
  We executed on strategic actions, including investing in our packaging business and optimizing our mill system to reduce fixed costs.  

 

 

 

 
1 

Adjusted EBITDA is a non-GAAP financial measure. See Appendix B for a reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure.

 

 

www.internationalpaper.com

  / 5

 


 

 Proxy Summary / Our Commitment to Sustainability 

 

 

Our Commitment to Sustainability

For more than 125 years, International Paper has championed the sustainable management of natural resources. As part of our commitment to build a better future, we are working to advance our Vision 2030 goals and targets in order to deliver sustainable outcomes through our businesses. We believe that by using resources responsibly and efficiently, creating renewable fiber-based solutions, taking action to reduce our emissions and water consumption and investing in our people and our communities, we will ensure our business is safe, successful and sustainable for generations to come.

 

    

 

2023 Sustainability Highlights

 

    
 

43M

tons of forest-based fiber purchased

 

 

7M

tons of recovered fiber collected, consumed and marketed each year

 

 

70%

of our mill energy is derived from renewable biomass residuals

 

 
       
 

732,000

acres of significant forestland conserved and restored since 2020

 

48%

of manufacturing waste diverted was beneficially used

 

$20M

contributed to charitable organizations

 
       

Our approach to sustainability considers our entire value chain, from sourcing raw materials responsibly and working safely, to making renewable, recyclable products and providing a market for recovered products. To help focus our sustainability strategy and determine what areas to prioritize, we developed Vision 2030, a set of four enterprise-wide goals designed to ensure we remain the supplier of choice for customers, the company of choice for employees and the investment of choice for shareowners.

In 2023, we continued our focus on our Vision 2030 goals:

 

 

Healthy and Abundant Forests

 

Lead forest stewardship efforts globally

   

 

Renewable Solutions

 

Accelerate the transition to a low-carbon economy through innovative fiber-based products

   

 

Sustainable Operations

 

Improve our climate impact and advance water stewardship

   

 

Thriving People and Communities

 

Promote employee well-being by providing safe, caring and inclusive workplaces and strengthening the resilience of our communities

 

We believe that Vision 2030 is accelerating our progress toward achieving our vision of being among the most successful, sustainable, and responsible companies in the world.

 

 

6 \  

International Paper 2024 Proxy Statement

 

 


 

 Proxy Summary / Our Commitment to Sustainability 

 

 

We believe we can achieve these goals by doing things through The IP Way – by doing the right things, in the right ways, for the right reasons, all of the time. We are proud to have been included in FORTUNE Magazine’s World’s Most Admired Companies for 20 years and Ethisphere Institute’s World’s Most Ethical Companies for 18 consecutive years.

Our Approach to Climate

We recognize the impacts of climate change on people and our planet. To manage climate-related risks and opportunities, we are taking actions throughout our value chain to help advance a low-carbon circular economy.

We transform renewable resources into recyclable products that people depend on every day. This cycle begins with sourcing renewable fiber from responsibly managed forests and recovered materials. At the end of use, our low-carbon packaging is recycled into new products at a higher rate than any other base material.

We also use carbon-neutral biomass and manufacturing residuals (rather than fossil fuels) to generate much of the manufacturing energy at our mills. We believe our efforts to advance sustainable forest management and restore forest landscapes are an important lever for mitigating climate change through carbon storage in forests. Our Vision 2030 goals include a target to reduce our Scope 1, 2, and 3 GHG emissions by 35% in comparison to 2019 levels. The Science Based Targets initiative approved this target as aligned with the goals of the 2015 Paris Agreement. We will continue to evaluate our progress and implement improvements as we pursue our Vision 2030 GHG goal.

One way we are demonstrating our commitment to climate sustainability is by increased transparency. In 2023, we reported in accordance with the standards of the Global Reporting Initiative and the Sustainability Accounting Standards Board (SASB). In addition, in the 2023 reporting cycle, we aligned our annual sustainability reporting with the Task Force on Climate-Related Financial Disclosures. In addition, we have committed to be an inaugural early adopter for Taskforce on Nature-related Financial Disclosure (“TNFD”). We anticipate that we will start making disclosures aligned with the TNFD recommendations in our corporate reporting by financial year 2025. We recognize the importance of understanding and communicating our climate and nature risks to our stakeholders.

Additional information regarding climate change and our Company is available in our 2023 Sustainability Report, when published, available on our corporate website at www.internationalpaper.com/sustainability. The information in our 2023 Sustainability Report and all other content on our website is not incorporated by reference in, and does not form a part of this Proxy Statement.

Thriving People and Communities

Safety

Our top priority is the safety of our employees. Our stated Vision 2030 goal is to achieve zero serious injuries for employees and contractors. In 2023, 94% of our sites operated without a serious injury, which we define as a life-altering specific injury, to our employees.

Diversity and Inclusion

We believe in an inclusive workforce where diverse backgrounds are represented, engaged and empowered to inspire innovative ideas and decisions. To foster a more diverse and inclusive workplace, we are focused on promoting a culture of diversity and inclusion that leverages the talents of all employees, and implementing practices that attract, recruit, and retain a broad diversity of top talent. Our Vision 2030 goal is to achieve 30% overall representation of women and 50% women in salaried positions and to implement regional diversity plans by 2030, including 30% racial and ethnic minority representation in U.S. salaried positions.

Employee Engagement

We seek to foster employee well-being and performance through a people development process that includes engagement, health and wellness programs, training, and enterprise-wide employee-led networking circles. We know that a highly engaged culture leads to better safety and business success. Our evolving employee engagement seeks to gather real-time ongoing feedback about employee experiences to measure important factors that affect engagement — how employees feel about their work environment, the people they work with and the Company’s vision.

 

 

www.internationalpaper.com

  / 7

 


 

 Proxy Summary / Our Commitment to Sustainability 

 

 

Community Engagement

We encourage our employees to support the communities in which they live and in which the Company operates. Our community engagement efforts extend across the globe and support social and educational needs. To that end, in 2023 we invested $20 million to address critical needs in our local communities. Our Vision 2030 goal is to strengthen the resilience of our communities and improve the lives of 100 million people, including through supporting education, reducing hunger, promoting health and wellness, and supporting disaster relief.

Sustainability Oversight

Sustainability is a key element of corporate governance promoted by our Board of Directors (the “Board”), committees of the Board, and senior management.

 

LOGO

 

8 \  

International Paper 2024 Proxy Statement

 

 


 

 Proxy Summary / Board Nominees 

 

 

Board Nominees

All nominees are currently directors of International Paper. In addition, one of our existing directors, Ray G. Young, is not standing for re-election at this Annual Meeting. All directors are independent except Mark S. Sutton.

 

                Board Committees
Name   Primary Occupation    Age     Director Since    A&F   GOV   MDCC   PP&E

Christopher M. Connor*

Lead Director

 

Retired Chairman and Chief Executive

Officer, The Sherwin-Williams Company

  68   2017   LOGO   LOGO        

Ahmet C. Dorduncu

 

Retired Chief Executive Officer,

Akkök Group

  69   2011   LOGO           LOGO

Ilene S. Gordon

 

Retired Chairman, President and Chief

Executive Officer,

Ingredion Incorporated

  70   2012       LOGO   LOGO    

Anders Gustafsson*

 

Executive Chairman,

Zebra Technologies Corporation

  63   2019   LOGO           LOGO

Jacqueline C. Hinman

 

Chief Executive Officer,

Atlas Technical Consultants

  62   2017       LOGO   LOGO    

Clinton A. Lewis, Jr.

 

Chief Executive Officer,

AgroFresh Solutions, Inc.

  57   2017       LOGO   LOGO    

Kathryn D. Sullivan

 

Senior Fellow Potomac Institute for

Policy Studies; Ambassador-at-

Large, Smithsonian National Air &

Space Museum

  72   2017   LOGO           LOGO

Mark S. Sutton

 

Chairman and Chief Executive Officer,

International Paper Company

  62   2014                

Anton V. Vincent

 

President,

Mars Wrigley North America

  59   2021           LOGO   LOGO

 

A&F: Audit and Finance

GOV: Governance

  

MDCC: Management Development and Compensation

PP&E: Public Policy and Environment

   LOGO   Member

 

   LOGO   Committee Chair

 

*Denotes Audit Committee Financial Expert

 

 

www.internationalpaper.com

  / 9

 


 

 Proxy Summary / Board Nominees 

 

 

Board Nominees Snapshot

 

 

 

Tenure

 

LOGO

 

 

 

Background

 

LOGO

 

         
 

 

Independent Director Experience

       
 

 

75%

CEO Leadership Experience

 

63%

Environmental, Social & Governance

 

63%

Financial Expert

 

75%

International Operations

 

63%

Manufacturing

 

88%

Marketing

 

100%

Strategic Planning

 

63%

Supply Chain

 

38%

Technology/Cybersecurity

 

 

 

 

 

 

10 \  

International Paper 2024 Proxy Statement

 

 


 

 Proxy Summary / Governance Highlights 

 

 

Governance Highlights

We believe sound corporate governance is critical to achieving business success and serves the best interests of our shareowners. Highlights of our commitment to sound governance practices are shown below.

 

 

Shareowner

Rights

 

   

 

LOGO   Annual elections and majority voting for directors, with a director resignation policy

LOGO   Shareowner right to call special meetings

LOGO   Shareowner right to act by written consent

LOGO   Shareowner right to proxy access

         

 

Board Independence

 

   

 

LOGO   8 of 9 director nominees are independent

LOGO   Robust independent Lead Director role

LOGO   Executive sessions without management present at every Board meeting

LOGO   Focus on board composition and refreshment, with mandatory retirement policy

         

 

Other Governance Practices

 

   

 

LOGO   Robust engagement with our shareowners

LOGO   Strong anti-hedging and anti-pledging stock trading provisions and Clawback Policy

LOGO   Annual board, committee and individual director self-evaluations

LOGO   Strong stock ownership and retention requirements

LOGO   Gender and ethnically diverse Board

LOGO   Robust oversight of environmental, social and governance (“ESG”) considerations

   

2023 Executive Compensation Overview

Our executive compensation program is designed around two guiding principles:

1. Pay for Performance

We reward achievement of specific goals that improve our financial performance and drive strategic initiatives to ensure sustainable long-term profitability.

 

 

 

2023 Outcomes

 
              
   LOGO   Payouts under our Performance Share Plan (“PSP”) and Long-Term Incentive Plan (“LTIP”) are based predominantly on three-year Company performance. In 2023, we began incorporating 20% time-based restricted stock units to encourage retention.  
 
   LOGO   The CEO’s Short-Term Incentive (“STI”) award is based solely on Company performance; awards for other NEOs are subject to individual performance modifiers.  
 
   LOGO   Achievement against the Company metrics for our STI plan resulted in awards of 22.7% of target.  
 
   LOGO   2021-2023 performance-based awards under the PSP vested at 75.17% of target.  
      

 

 

www.internationalpaper.com

  / 11

 


 

 Proxy Summary / Governance Highlights 

 

 

2. Pay at Risk

We believe a significant portion of an executive’s compensation should be specifically tied to performance — both Company performance and individual performance. For 2023, 90% of our CEO’s target compensation and, on average, 80% of our other Named Executive Officers’ (“NEOs”) target compensation, was based on Company and/or stock performance and was therefore at risk, as shown below.

 

 

CEO Target Pay Mix

 

 

LOGO

 

 

Average Other NEOs Target Pay Mix

 

 

LOGO

 

 

 

 

ESG Modifier for STI and LTI Payouts

   
               
    Our ESG performance impacts our executive compensation as:

 

LOGO   A factor in measuring individual performance for modifying STI payouts (except with respect to the CEO),
and

 

LOGO   A driver of long-term shareowner value, which is measured by Total Shareholder Return (“TSR”) performance
in our LTIP.

   
                 

 

12 \  

International Paper 2024 Proxy Statement

 

 


LOGO

 

The Board of Directors currently consists of 10 members, each of whom (other than Ray G. Young) has been nominated by the Board for reelection by shareowners at the annual meeting. For information about each of these individuals, see “Board Nominees” below.

In addition, our Board plans to appoint Mr. Silvernail to the Board at its first regular meeting following this Annual Meeting of Shareowners. For background information regarding Mr. Silvernail and this appointment, please see our Current Report on Form 8-K filed on March 19, 2024.

All nominees, if elected, will hold office until our 2025 annual meeting or until a qualified successor has been elected, absent an earlier death, resignation or retirement. We know of no reason why any nominee would be unable or unwilling to serve if elected. If, prior to the election, a nominee becomes unable or unwilling to serve, the shares represented by all valid proxies will be voted for the election of such other person as the Board may nominate, or the Board may choose to reduce its size.

There are no other nominees competing for seats on the Board. Under our Amended and Restated Certificate of Incorporation and Amended and Restated By-Laws, directors in non-contested elections must receive an affirmative majority of votes cast. You may vote FOR or AGAINST a nominee, or you may abstain from voting with respect to a nominee. Abstentions and “broker non-votes” will have no effect on the results.

If you hold your shares in street name, your failure to provide voting instructions to your bank or broker will cause your shares to be considered “broker non-votes” not entitled to vote with respect to the proposal.

 

    

Our Board of Directors unanimously recommends that you

vote FOR each of the 9 nominees.

    

 

 

 

LOGO  FOR

 

 

 

    

 

 

www.internationalpaper.com

  / 13


 

 Item 1: Election of Directors / How We Build the Right Board for Our Company  

 

 

How We Build the Right Board for Our Company

Director Qualification Criteria

We seek director candidates with ample experience and a proven record of professional success, leadership and the highest level of personal and professional ethics, integrity and values.

Our Board has adopted Director Qualification Criteria and Independence Standards, which it uses to evaluate new director candidates and incumbent directors. The Governance Committee of our Board is responsible for recommending, screening, and evaluating qualified director nominees for election to the Board.

 

The Governance Committee also considers whether a candidate demonstrates the following:

 

   

The highest level of personal and professional ethics, reputation, integrity and values;

 

   

Commitment to the Company’s mission and purpose, and loyalty to the interests of the Company and its shareowners;

 

   

Ability to exercise objectivity and independence in making informed business decisions;

 

   

Willingness and commitment to devote the extensive time necessary to fulfill the duties of a director;

 

   

Ability to communicate effectively and collegially with other Board members and contribute to the diversity of perspectives that enhances Board and Committee deliberations and decision making; and

 

   

Skills, knowledge and expertise relevant to the Company’s business, including the “core competencies” described below.

The Governance Committee and the Board, through ongoing consideration of directors and nominees and through the Board’s annual self-evaluation process, ensure that all directors are qualified, and that other criteria and objectives are implemented and satisfied.

Shareowner Recommendations for Director Candidates

Shareowners may submit recommendations for director candidates to the Governance Committee by writing to the Corporate Secretary. Shareowners interested in nominating a director candidate must follow the procedures set forth in our By-Laws, including complying with the prescribed time periods. Recommended candidates should meet the director qualifications criteria described above. The Governance Committee applies the same criteria in evaluating candidates recommended by shareowners as it does for candidates from other sources. See “Information About the Annual Meeting” below for additional information. For information on our proxy access provision, see “Commitment to Sound Corporate Governance and Ethical Conduct” below.

 

14 \  

International Paper 2024 Proxy Statement

 


 

 Item 1: Election of Directors / How We Build the Right Board for Our Company       

 

 

Diversity of Our Directors

Our Board and the Governance Committee have assembled a Board comprised of experienced directors who are currently, or have recently been, leaders of major companies and institutions, are independent thinkers, and bring to the boardroom a diverse range of backgrounds, tenures and skills. The Board believes that such diversity enhances the quality of its deliberations and decisions.

 

Diversity of Background

The Governance Committee Charter specifically directs the Committee to seek qualified candidates with diverse backgrounds, including such factors as race, gender, and ethnicity. The Governance Committee actively considers diversity in the recruitment and nomination of directors. In this regard, when the Company engages third-party search firms to identify potential candidates, the Governance Committee emphasizes to such firms the importance of diversity and requests the inclusion of diverse candidates for consideration.

Our Board nominees reflect those efforts and the importance of diversity to our Board:

 

LOGO

 

Diversity of Tenure

The Board seeks to have a mix of tenures among its members so it can benefit from a blend of institutional knowledge and fresh perspectives. Refreshment efforts have resulted in an average tenure for our current directors of 8.4 years, and have brought more women and African-Americans to our Board.

 

7.4 years

 

average tenure for director nominees

range of tenures: from 3 year to 13 years

Diversity of Skills and Experience

Our Board believes that its membership should include individuals with diverse backgrounds, and is particularly interested in maintaining a mix of skills and experience that includes the following among our independent director nominees:

LOGO

 

 

 

www.internationalpaper.com

  / 15


 

 Item 1: Election of Directors / How We Build the Right Board for Our Company  

 

 

Summary of Independent Director Nominees’ Core Competencies

The following chart summarizes the core competencies that the Board considers valuable to effective governance and successful oversight of our corporate strategy and illustrates how our current non-management Board member nominees individually and collectively represent these key competencies. The lack of an indicator for a particular item does not mean the director does not possess that qualification, skill or experience, rather, the indicator represents that the item is a core competency of that director.

 

Skills and Experience        LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO
LOGO  

CEO Leadership Experience

Public company CEO leadership that contributes to the understanding and oversight of large complex organizations

                       
LOGO
 

Environmental, Social & Governance

Strengthens the Board’s oversight of climate risks and our environmental, safety and sustainability initiatives

                         
LOGO
 

Financial Expert

Meets the SEC and NYSE criteria as an independent “audit committee financial expert”

                         
LOGO
 

International Operations

Contributes to the understanding of operations and business strategy abroad

                       
LOGO
 

Manufacturing

Contributes to the understanding of the challenges of complex manufacturing

                         
LOGO
 

Marketing

Brings expertise in marketing and sales

at a global scale

                     
LOGO
 

Strategic Planning

Brings expertise in the process of setting goals and creating a blueprint for the Company’s future

                   
LOGO  

Supply Chain

Brings expertise in supply chain management

                         
LOGO
 

Technology/Cybersecurity

Contributes to the understanding and oversight of cybersecurity threats and digital transformation

                             
Other Board Demographics                                    
   

 

Caucasian/White

                       
   

 

African American/Black

                               
   

 

Gender (Male/Female)

      M   M   F   M   F   M   F   M
   

 

Age

      68   71   70   63   62   57   72   59
   

 

Tenure (Rounded years)

      6   13   11   5   6   6   7   3

 

16 \  

International Paper 2024 Proxy Statement

 


 

 Item 1: Election of Directors / Our Nominees 

 

 

Our Nominees

The following 9 individuals are nominated for election at the 2024 annual meeting to serve until 2025.

 

LOGO    

 

Christopher M. Connor

 

Mr. Connor retired as executive chairman of The Sherwin-Williams Company, a global manufacturer of paint, architectural coatings, industrial finishes, and associated supplies, in December 2016. Mr. Connor joined The Sherwin-Williams Company in 1983 and served as its chairman and chief executive officer from 2000 to December 2015.

 

Board Qualifications

 

Having served as CEO and executive chairman of The Sherwin-Williams Company, Mr. Connor brings significant senior management experience and strong financial expertise to the Board. He understands the various issues facing a large, global manufacturing company, including operational, financial, and strategic issues. His technical background and long tenure with The Sherwin-Williams Company bring industrial expertise, which further strengthens our Board.

 

Other Public Boards

 

Yum! Brands, Inc. (fast food) (NYSE:YUM)

 

Other Affiliations

 

Mr. Connor serves on the board of directors of the Rock & Roll Hall of Fame in Cleveland, Ohio.

 

Key Skills & Experience

 

LOGO LOGO LOGO LOGO LOGO LOGO

 

LOGO    

 

Ahmet C. Dorduncu

 

Mr. Dorduncu retired as chief executive officer of Akkök Group, a financial and industrial conglomerate located in Turkey, in December 2022, after serving in that position since 2013. Prior to that, Mr. Dorduncu served as chairman and chief executive officer of Sabanci Holding, another financial and industrial conglomerate located in Turkey, from 2005 to 2010. He also served from 2006 to 2010 as chairman of the board of Olmuksa, then an industrial packaging business joint venture between Sabanci Holding and International Paper. Sabanci Holding is the parent company of the Sabanci Group, a leading Turkish financial and industrial company.

 

Board Qualifications

 

As the retired CEO of Akkök Group and retired chairman and CEO of Sabanci Holding, two leading financial and industrial conglomerates, Mr. Dorduncu brings vast experience in international manufacturing operations and specific experience in industrial packaging. His knowledge of geographic regions of key importance to the Company brings even greater perspective to our Board.

 

Other Public Boards

 

None

 

Other Affiliations

 

Mr. Dorduncu is the Chair of the Turkish Network of the United Nations Global Compact.

 

Key Skills & Experience

 

LOGO LOGO LOGO LOGO LOGO LOGO

 

 

 

www.internationalpaper.com

  / 17


 

  Item 1: Election of Directors / Our Nominees 

 

 

LOGO    

 

Ilene S. Gordon

 

Ms. Gordon retired as executive chairman of Ingredion Incorporated (formerly Corn Products International, Inc.), a publicly traded global ingredient solutions company, in July 2018, after serving in that position since January 2018. Ms. Gordon served as chairman, president and chief executive officer of Ingredion from 2009 through 2017. She served as president and chief executive officer of Rio Tinto’s Alcan Packaging, a multinational company engaged in the production of flexible and specialty packaging, from 2007 until 2009, and in various senior executive roles at Alcan Packaging and its affiliate and predecessor companies from 1999 until 2007. Prior to 1999, Ms. Gordon was employed for 17 years with Tenneco Inc., a conglomerate, in a variety of management positions, including vice president and general manager, leading its folding carton business.

 

Board Qualifications

 

As the former chairman, CEO and president of Ingredion Incorporated, Ms. Gordon brings senior management expertise and leadership capabilities, as well as broad understanding of the operational, financial and strategic issues facing public companies. Her previous experience at Rio Tinto’s Alcan Packaging includes manufacturing, supply chain and marketing. She has experience with operations overseas, including South America, Asia Pacific and Europe. Ms. Gordon also brings strong financial expertise to our Board.

 

Other Public Boards

 

Lockheed Martin Corporation (global security and aerospace) (NYSE: LMT)

International Flavors & Fragrances (global food and fragrance ingredients) (formerly) (NYSE: IFF)

 

Other Affiliations

 

Ms. Gordon served on the board of trustees of The Conference Board from 2010 to 2021, previously served on the board of trustees of MIT (known as the Corporation) and is an emeritus member of the board of directors of the Economic Club of Chicago.

 

Key Skills & Experience

 

LOGO LOGO LOGO LOGO LOGO LOGO LOGO

 

LOGO    

 

Anders Gustafsson

 

Mr. Gustafsson has been executive chairman of Zebra Technologies Corporation, a publicly traded global leader in designing and marketing specialty printers, mobile computing, data capture, radio frequency identification products and real-time locating systems, since March 2023. From 2007 to 2023, Mr. Gustafsson served as chief executive officer of Zebra Technologies Corporation. Prior to that, Mr. Gustafsson served as chief executive officer of Spirent Communications plc, a publicly traded telecommunications company, from 2004 to 2007. Prior to Spirent, Mr. Gustafsson was a senior executive vice president, global business operations for Tellabs, Inc.

 

Board Qualifications

 

As executive chairman of Zebra Technologies Corporation and former chief executive officer of Zebra and Spirent Communications, Mr. Gustafsson brings significant international business experience and strong financial expertise to the Board. He provides a unique and valuable technology perspective, and his current and prior service on other public company boards further broadens his range of knowledge and allows him to draw on various perspectives and viewpoints.

 

Other Public Boards

 

Zebra Technologies (NASDAQ: ZBRA)

Dycom Industries (specialty contracting services throughout the U.S. and Canada) (formerly) (NYSE: DY)

NetApp (NASDAQ: NTAP) (a data infrastructure service provider)

 

Other Affiliations

 

Mr. Gustafsson serves as a trustee of the Shedd Aquarium.

 

Key Skills & Experience

 

LOGO LOGO LOGO LOGO LOGO LOGO LOGO

 

 

18 \  

International Paper 2024 Proxy Statement

 


 

 Item 1: Election of Directors / Our Nominees 

 

 

LOGO    

 

Jacqueline C. Hinman

 

Ms. Hinman has been Chief Executive Officer of Atlas Technical Consultants, a privately held company that provides professional testing, inspection, engineering, environmental and consulting services nationwide, since January 2024. Ms. Hinman previously served as chairman, president, and chief executive officer of CH2M HILL Companies, Ltd., a Fortune 500 engineering and consulting firm focused on delivering infrastructure, energy, environmental and industrial solutions for clients and communities around the world, until December 2017, when the firm was acquired by Jacobs Engineering. Prior to becoming chairman in September 2014 and president and chief executive officer in January 2014, Ms. Hinman served as president of CH2M’s International Division from 2011. She served on CH2M’s board of directors from 2008 through 2017.

 

Board Qualifications

 

As Chief Executive Officer of Atlas and having served as chairman, president, and chief executive officer of CH2M HILL Companies, Ms. Hinman brings senior management and leadership capabilities to the Board, as well as an understanding of global manufacturing companies. Her experience in a global engineering consulting business also gives her unique knowledge of environmental and sustainability issues globally, as well as international operations and strategic planning expertise.

 

Other Public Boards

 

Dow Inc. (multinational chemical corporation) (NYSE: DOW)

AECOM (infrastructure) (formerly) (NYSE: ACM)

 

Other Affiliations

 

Ms. Hinman previously served on the board of directors of Catalyst, a leading nonprofit organization accelerating progress for women through workplace inclusion. In addition, she previously served on the Executive Committee of the Business Roundtable, chairing its Infrastructure Committee, and was a member of the Business Council.

 

Key Skills & Experience

 

LOGO LOGO LOGO LOGO LOGO LOGO LOGO

 

 

www.internationalpaper.com

  / 19


 

  Item 1: Election of Directors / Our Nominees 

 

 

LOGO    

 

Clinton A. Lewis, Jr.

 

Mr. Lewis has been chief executive officer of AgroFresh Solutions, Inc., a global leader in produce freshness solutions, since April 2021. From 2015 until February 2020, he served as executive vice president and group president of international operations, commercial development, lifecycle innovations, global genetics and PHARMAQ at Zoetis Inc., a NYSE-listed global leader in the discovery, development, manufacture and commercialization of animal health medicines and vaccines that was spun off by Pfizer in 2013. Prior to assuming that role, Mr. Lewis served as president of U.S. operations at Zoetis from 2015 to 2018 and president of international operations at Zoetis from 2013 to 2015. He joined Pfizer in 1988 in the human health pharmaceutical segment and held positions of increasing responsibility in various commercial operations and general management roles.

 

Board Qualifications

 

Mr. Lewis’ current role at AgroFresh Solutions, and his former roles at Zoetis, give him critical business insight into large, diversified companies with global operations. He brings to the Board experience in international operations for a U.S. multinational company manufacturing globally, knowledge and strategic planning expertise, and knowledge of geographic regions of key importance to the Company.

 

Other Public Boards

 

None

 

Other Affiliations

 

Mr. Lewis serves on the Executive Committee of the Board of Directors and Treasurer of the International Fresh Produce Association (IFPA).

 

Key Skills & Experience

 

LOGO LOGO LOGO LOGO LOGO LOGO LOGO

 

 

20 \  

International Paper 2024 Proxy Statement

 


 

 Item 1: Election of Directors / Our Nominees 

 

 

LOGO    

 

Kathryn D. Sullivan

 

Dr. Sullivan is Ambassador-at-Large at the Smithsonian National Air and Space Museum, where she served as The Charles A. Lindbergh Fellow of Aerospace History from March 2017 through August 2017. Dr. Sullivan is also a Senior Fellow at the Potomac Institute for Policy Studies. She served in several roles in the U.S. Department of Commerce and the National Oceanic and Atmospheric Administration (“NOAA”) between 2011 and 2017, including as Under Secretary of Commerce for Oceans & Atmosphere and NOAA Administrator from 2014 until 2017. She served as a director for Ohio State University’s Battelle Center for Science, Engineering and Public Policy from 2006 through 2011. Between 1996 and 2005, Dr. Sullivan served as President and CEO of the Center of Science and Industry (“COSI”). Between 1978 and 1993, Dr. Sullivan was a Mission Specialist for NASA. She is a veteran of three shuttle missions with over 500 hours in space, and she was the first American woman to walk in space.

 

Board Qualifications

 

Dr. Sullivan’s service at NOAA brings a valuable perspective on current issues in sustainability, which is a critical issue to the Company. As a former NASA space shuttle astronaut, she also brings a strong technical background, leadership capabilities, and strategic planning experience. Dr. Sullivan’s service on other public company boards gives her experience with oversight of natural resource conservation and production as well as a broad range of strategic and tactical business matters. She also brings finance and budgeting experience, having served as president and chief executive officer of COSI and as a member of another public company’s audit and finance committee.

 

Other Public Boards

 

Dr. Sullivan served on the boards of directors of several public companies between 1997 and 2011.

 

Other Affiliations

 

Dr. Sullivan serves on the board of directors of Accenture Federal Services, LLC and the advisory board of Terra Alpha Investments, LLC. She is a member of the National Academy of Engineering, the American Academy of Arts and Sciences and the National Academy of Public Administration.

 

Key Skills & Experience

 

LOGO LOGO LOGO

 

 

LOGO    

 

Mark S. Sutton

 

Mr. Sutton has been Chairman of International Paper since January 1, 2015, and Chief Executive Officer since November 1, 2014. Mr. Sutton joined International Paper in 1984 and has served in roles including President & Chief Operating Officer (June 1, 2014 to October 31, 2014), Senior Vice President – Industrial Packaging (2011 to 2014), Senior Vice President – Printing and Communications Papers of the Americas (2010 to 2011), Senior Vice President – Supply Chain (2008 to 2009), Vice President – Supply Chain (2007 to 2008), and Vice President – Strategic Planning (2005 to 2007).

 

Board Qualifications

 

Mr. Sutton has been with International Paper nearly 40 years and served in various senior leadership roles, including President and Chief Operating Officer and Senior Vice President – Industrial Packaging, the Company’s largest business. He has also served as the senior leader of Printing and Communications Papers, supply chain, corporate strategic planning, and led packaging operations in Europe, Middle East and Africa. As a result, he brings deep experience and institutional knowledge to the Board and management in his roles as Chairman and CEO.

 

Other Public Boards

 

The Kroger Company (retail grocery company) (NYSE: KR)

 

Other Affiliations

 

Mr. Sutton is a member of The Business Council and the Business Roundtable and serves on the American Forest & Paper Association board of directors. He also serves on the board of directors of Memphis Tomorrow and the LSU Foundation.

 

 

www.internationalpaper.com

  / 21


 

  Item 1: Election of Directors / Our Nominees 

 

 

LOGO    

 

Anton V. Vincent

 

Mr. Vincent has been President of Mars Wrigley North America, part of Mars, Incorporated, a global family-owned business with $50 billion in annual revenue and a diverse and expanding portfolio of category leading snacking, food and petcare products and services, since 2019. Prior to joining Mars Wrigley in May 2019, Mr. Vincent served as chief executive officer at Greencore USA, a leading global manufacturer of convenience foods, from June through December 2018. Prior to Greencore, he spent much of his career with General Mills, holding various leadership roles including President of the Baking Division (2010 to 2012), President of the Frozen Frontier Division (2012 to 2014), and President of the U.S. Snacks Division (2014 to 2016).

 

Board Qualifications

 

As North America president for a large global company with over 20 years of senior leadership experience, Mr. Vincent brings a wealth of consumer insight, manufacturing perspectives, and branding and transformation knowledge to the Board, as well as deep enterprise leadership and marketing and strategic planning expertise.

 

Other Public Boards

 

None

 

Other Affiliations

 

None

 

Key Skills & Experience

 

LOGO LOGO LOGO LOGO LOGO LOGO LOGO

 

22 \  

International Paper 2024 Proxy Statement

 


LOGO

 

Governance Practices

Our Board believes that a shareowner-focused governance model is the right fit for the Company. The below table highlights our sound corporate governance practices.

 

 

Shareowner Rights

 

   

 

LOGO   Annual elections and majority voting for directors, with a director resignation policy

LOGO   Shareowner right to call special meetings

LOGO   Shareowner right to act by written consent

LOGO   Shareowner right to proxy access

         

 

Board Independence

 

   

 

LOGO   8 of the 9 director nominees are independent

LOGO   Robust independent Lead Director role

LOGO   Executive sessions without management present at every Board meeting

LOGO   Focus on Board composition and refreshment, with mandatory retirement policy

         

 

Other Governance Practices

 

   

 

LOGO   Robust engagement with our shareowners

LOGO   Strong anti-hedging and anti-pledging stock trading provisions and Clawback Policy

LOGO   Annual Board, committee, and individual director self-evaluations

LOGO   Strong stock ownership and retention requirements

LOGO   Gender and ethnically/racially diverse Board

LOGO   Robust oversight of ESG considerations

   

In each of these areas, we have embraced sound principles, policies, and procedures to ensure that our Board and our management goals are aligned with our shareowners’ interests.

How the Board Operates

Board Leadership Structure

Our Board believes that the Company and its shareowners are best served when the Board has the flexibility to determine the right leadership structure for the Company at any given point in time, taking into consideration the current business environment and shareowner landscape. We currently combine the role of Chairman and CEO and believe this is the most effective leadership structure for the Company at this time. When Mr. Sutton was appointed as CEO in 2014, and every year as part of its succession planning process, the Board considers whether continuing to combine the role of Chairman and CEO is in the best interests of the Company and the shareowners. The Board has concluded that maintaining the combined position of Chairman and CEO is appropriate to further strengthen the Company’s

 

 

www.internationalpaper.com

  / 23


 

 Corporate Governance / How the Board Operates 

 

 

governance structure by promoting unified leadership and direction for the Company, fostering accountability, and allowing for a single, clear focus for management to execute the Company’s strategy and business plans. Based on similar rationale, the Board plans to appoint Mr. Silvernail as Chairman of the Board following a transition period.

As a counterbalance, we have an independent Lead Director, Christopher M. Connor, whose role and responsibilities provide strong independent leadership in the boardroom. The authority and duties of our independent Lead Director are set forth in our Corporate Governance Guidelines and summarized below.

Role of the Lead Director

The Lead Director is elected each year by the independent directors for a term of not less than one year. Mr. Connor has served as Lead Director since February 2023. The duties of the Lead Director include:

 

 

Determining a schedule and agenda for regular executive sessions in which independent directors meet without management present, and presiding over these sessions;

 

 

Suggesting agenda items for Board meetings;

 

 

Presiding over meetings of the Board when the Chairman is not present;

 

 

Serving as liaison between the Chairman and independent directors;

 

 

Approving agendas of the Board and meeting schedules to ensure ample discussion time;

 

 

Approving information sent to the Board;

 

 

Organizing the process for evaluating the performance of the Chairman and CEO not less than annually, in consultation with the MDCC;

 

 

Assuring that a succession plan is in place for the Lead Director role;

 

 

Acting as a resource for, and counsel to, the Chairman and CEO;

 

 

Being available for consultation and direct communication if requested by major shareowners.

 

 

Retaining independent legal advisors or other independent consultants and advisors, as appropriate, who report directly to the Board on Board-related issues; and

 

 

Collaborating and consulting with Committee chairs concerning schedules, agendas and written materials.

The Board considers its own leadership structure as part of the Company’s succession planning process. The Board will continue to evaluate this structure going forward in light of factors and considerations prevailing at the time to determine whether a combined Chairman and CEO role is in the best interests of the Company and its shareowners.

Board Policies and Practices

Annual Board, Committee and Individual Director Self-Assessment

The Board is committed to a robust and constructive evaluation process designed to promote continuous improvement and overall Board effectiveness. To that end, the Board conducts an annual self-assessment of its own and its committees’ performance following a procedure established by the Governance Committee.

As directed by the Governance Committee, the General Counsel conducts interviews with each of the directors based on a questionnaire. Topics covered include, among others:

 

 

Effectiveness of Board and committee leadership structure;

 

 

Board and committee skills, composition, diversity, and succession planning;

 

 

Effectiveness of each individual director’s performance and contributions to the Board;

 

 

Board culture and dynamics, including the effectiveness of discussion and debate at meetings; and

 

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 Corporate Governance / How the Board Operates 

 

 

 

Board and management dynamics, including the quality of management presentations and information provided to the Board.

The results of the interviews are conveyed to both the Governance Committee and to the Board.

Separately, the Governance Committee and the Chairman of the Board conduct an assessment of individual Board members before they are nominated for re-election by shareowners, in accordance with our Director Qualification Criteria and Independence Standards.

 

Meeting Attendance and Executive Sessions

 

The Board met eight times during 2023. The average board meeting attendance in 2023 was 99%.

 

After each regularly scheduled Board and committee meeting, the independent directors of our Board meet in executive session, without management present, chaired by the Lead Director or the respective committee chair.

 

As expected by our Corporate Governance Guidelines, all those who were directors at the time of the 2023 annual meeting were in attendance at that meeting.

   LOGO

The independent directors may engage, at the Company’s expense, independent legal, financial, accounting and other advisors as they may deem appropriate, without obtaining management’s approval.

Orientation and Continuing Education

Our new directors participate in a director orientation that includes written materials and presentations by Company employees who are subject-matter experts, as well as meetings with senior management, our independent auditor, and both the Company’s and the MDCC’s compensation consultants. New directors also visit several of our facilities and meet with employees.

Continuing education occurs at Board and committee meetings, with specific topics of interest covered by management or outside experts. Directors are encouraged to attend director education programs provided by third parties.

From time to time, directors attend meetings of Company officers, and, at each Board meeting, they meet informally and formally with senior leaders of the Company.

Mandatory Retirement Policies

Our Corporate Governance Guidelines provide that non-employee directors are required to retire from our Board effective December 31st of the year in which they turn 75. In addition, our mandatory retirement policy requires the CEO to retire effective on the first day after the month in which he or she turns 65. The Board does not have any term limits.

Resignation Policies

If a director’s principal occupation changes substantially, he or she must tender a resignation for consideration by the Governance Committee. The Governance Committee then recommends to the Board whether to accept the resignation using the Company’s Director Qualification Criteria and Independence Standards.

Under our By-Laws, any director nominee in a non-contested election who fails to receive the requisite majority of votes cast “for” his or her election must tender a resignation, and the Board, through its Governance Committee (excluding the nominee in question), will determine whether to accept the resignation at its next regularly scheduled meeting. In case the resignation is not accepted, the Board will disclose the reasoning behind its decision via a Current Report on Form 8-K.

 

 

 

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 Corporate Governance / How the Board Operates 

 

 

Overboarding Policy

The Board does not categorically restrict directors from serving on the boards of other public companies. However, because of the time commitment required for membership on the Board, directors are expected to consult with the Chairman of the Board and the Chair of the Governance Committee before accepting an invitation to serve on another public company board.

Board Committees

In order to fulfill its responsibilities, the Board has delegated certain authority to its committees. The Board has four standing committees: Audit and Finance; Governance; Management Development and Compensation; and Public Policy and Environment. The Board also has an Executive Committee, which meets only if Board action is required and a quorum of the full Board cannot be convened on a timely basis.

Each committee has a charter, which is reviewed annually to ensure compliance with applicable law and sound governance practices. Each committee reviews its own charter, except that the Governance Committee also assesses the Executive Committee’s charter. Committee charters are available at www.internationalpaper.com under the “Investors” tab at the top of the page followed by the “Governance” and “Board Committees” links. Paper copies of the charters are available at no cost by written request to the Corporate Secretary.

 

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 Corporate Governance / How the Board Operates 

 

 

Committee Assignments

Independent Board members are assigned to one or more committees. The Governance Committee recommends any changes in assignments to the entire Board. Committee chairs are rotated periodically, usually every three to five years.

 

 

 

Governance Committee

 

  

 

LOGO    

   

 

4

  

Meetings in 2023

 

  100%   

Attendance Rate

 

 

Current Members

 

Ilene S. Gordon (Chair)

Christopher M. Connor

Jaqueline C. Hinman

Clinton A. Lewis, Jr.

 

All Members are

 

INDEPENDENT

  

Meetings

 

Meeting agendas are developed by the Chair in consultation with committee members and senior leaders, who regularly attend the meetings.

 

Responsibilities

 

   Assuring the Company abides by sound corporate governance principles, including compliance with the Company’s Certificate of Incorporation, By-Laws, and Corporate Governance Guidelines, and reviewing conflicts of interest, including related person transactions under our Related Person Transactions Policy and Procedures.

 

   In its capacity as the Board’s nominating committee, identifying and recommending individuals qualified to become Board members and evaluating directors standing for re-election.

 

   Assuring that shareowner communications, including shareowner proposals, are addressed appropriately by the Board or Company management.

 

   Recommending non-employee director compensation and assisting the Board in its annual self-assessment.

 

 

 

Audit and Finance Committee

 

  

 

LOGO    

   

 

6

  

Meetings in 2023

 

  100%   

Attendance Rate

 

 

Current Members

 

Anders Gustafsson (Chair)*

Christopher. M. Connor*

Ahmet C. Dorduncu

Kathryn D. Sullivan

 

All Members are

 

INDEPENDENT

 

*The Board has determined that these directors qualify as Audit Committee financial experts.

  

Meetings

 

Meeting agendas are developed by the Chair in consultation with committee members and senior management, who regularly attend the meetings. At each meeting, the committee also holds executive sessions without members of management, and it also meets privately with representatives from our independent auditor, and separately with the Chief Financial Officer, General Counsel, chief audit executive, and Corporate Controller.

 

Responsibilities

 

   Assisting our Board in monitoring the integrity of our financial statements and financial reporting procedures.

 

   Reviewing the independent auditor’s qualifications and independence, as well as overseeing the performance of our internal audit function and the independent auditor.

 

   Coordinating our compliance with legal and regulatory requirements relating to the use and development of our financial resources, as well as ensuring that controls are in place to prevent, deter and detect financial fraud by management and monitoring the risk of such fraud.

 

   Review cybersecurity and information risk management programs and controls, including identification and reporting of material cybersecurity incidents.

 

In overseeing the performance of our internal audit function and independent auditor, the committee discusses the scope, significant risks and plans for the independent audit as well as the annual internal audit workplan. Throughout the year, at committee meetings and in private sessions, the committee discusses issues encountered or any changes in planned audit scopes. These meetings may include key members of the audit teams, subject matter experts, and key members of the management team.

 

 

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 Corporate Governance / How the Board Operates 

 

 

 

 

Public Policy and Environment Committee

 

  

 

LOGO     

   

 

5

 

Meetings
in 2023

 

    100%   

Attendance

Rate

 

 

Current Members

 

Kathryn D. Sullivan (Chair)

Ahmet C. Dorduncu

Anders Gustafsson

Anton V. Vincent

Ray G. Young

 

All Members are

 

INDEPENDENT

  

Meetings

 

Meeting agendas are developed by the Chair in consultation with committee members and senior leaders, who regularly attend the meetings.

 

Responsibilities

 

   Reviewing environmental, sustainability and social impact issues and risks (including climate change) and health and safety issues and risks potentially impacting the Company; contemporary and emerging public policy issues; and pertinent technology issues.

 

   Reviewing the Company’s health and safety policies, as well as environmental policies, to ensure continuous improvement and compliance.

 

   Reviewing the Company’s policies and procedures for complying with certain of its legal and regulatory obligations, including our Code of Conduct, and reviewing our charitable and political contributions.

 

 

 

Executive Committee        

 

  

 

LOGO     

   

 

0

  Meetings
in 2023

 

     NA       

Attendance

Rate

 

 

Current Members

Mark S. Sutton (Chair)

Christopher M. Connor

Ilene S. Gordon

Anders Gustafsson

Jacqueline C. Hinman

Kathryn D. Sullivan

  

   The Executive Committee may act for our Board, to the extent permitted by law, if Board action is required and a quorum of our full Board cannot be convened on a timely basis in person or telephonically.

 

   The Chairman of our Board, the independent Lead Director, and the chair of each Board committee are members of the Executive Committee.

 

 

 

Management Development and Compensation Committee

 

  

 

 

 

LOGO   

 

 

   

 

7

 

Meetings
in 2023

 

   100%     

Attendance

Rate

 

 

Current Members

Jacqueline C. Hinman (Chair)

Ilene S. Gordon

Clinton A. Lewis, Jr.

Anton V. Vincent

 

All Members are

 

INDEPENDENT

 

  

Meetings

 

Meeting agendas are developed by the Chair in consultation with committee members and senior leaders, who regularly attend the meetings. An executive session without management present is held at each meeting. The committee’s independent compensation consultant, Frederic W. Cook & Co., Inc. (“FW Cook”), regularly attends meetings.

 

Responsibilities

 

   Overseeing our overall compensation program and approving the compensation of our senior management (other than the CEO); conducting performance evaluations of the Chairman and CEO at least annually, in accordance with the process organized by the Lead Director; and recommending compensation of the CEO to the independent directors based on such evaluations and other considerations.

 

   Discussing with Company management the required disclosure under Item 407(e)(5) of Regulation S-K, including the Compensation Discussion & Analysis (“CD&A”) that is prepared as part of this Proxy Statement, and recommending that the CD&A be included in the Proxy Statement.

 

   Ensuring the Company has policies and programs for the development of senior leaders and succession planning.

 

   Overseeing our retirement and benefit plans for senior executives and approving any significant changes to our retirement and benefit plans for our employees. The committee may delegate its authority for day-to-day administration and interpretation of these plans, except as it may impact our senior leaders, including the CEO.

 

   Overseeing our succession planning and talent management strategies and programs, including with respect to diversity, equity and inclusion.

 

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 Corporate Governance / How the Board Operates 

 

 

Compensation Committee Interlocks and Insider Participation

During 2023, no member of the MDCC was an employee or a current or former officer of the Company, or has any relationship that would require disclosure under Item 404 of Regulation S-K. In addition, during 2023 no executive officer of the Company served as either a director or a member of the compensation committee (or its equivalent) of any entity that had one of its executive officers serving on our MDCC or our Board.

Shareowner Engagement

We believe that thoughtful shareowner engagement is important, and we have a long history of such engagement. We have an active shareowner engagement program, including through regular calls and meetings, which allows us to better understand our shareowners’ priorities, perspectives, and concerns, and enables the Company to effectively address issues that matter most to our shareowners.

2023 Shareowner Engagement Highlights

 

 

38

shareowners

 

 

  In 2023, we met with 38 institutional investors, representing 53 million shares or 15% of institutional shares.  

 

 

Topics we engaged on included:

Strategy and Portfolio

Capital Allocation

Build a Better IP Value Drivers

Performance

ESG & Vision 2030

In 2023, our discussions with investors on ESG-related topics included the following areas:

 

 

Decarbonization and our climate goals

 

 

Fiber sourcing and sustainable forestry

 

 

Nature impacts

 

 

Governance of sustainability issues

 

 

Executive compensation

 

 

Transparency in disclosure

Our conversations with investors helped inform the content of our annual reporting and have encouraged our increased disclosure on our climate goal and decarbonization roadmap; information regarding our ForSiteTM fiber traceability tool; enhanced disclosure regarding our governance and Board structure for sustainability; and increased disclosure detail on executive compensation as it relates to ESG metrics, and on alignment of lobbying activities with sustainability goals.

 

 

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 Corporate Governance / Commitment to Sound Corporate Governance and Ethical Conduct  

 

 

Proxy Access

 

Our proxy access By-Law permits stockholders owning 3 percent or more of our common stock for at least three years to nominate the greater of two directors or up to 20 percent of the Board and include these nominees in our proxy materials. The number of shareowners who may aggregate their shares to meet the ownership threshold is limited to 20. Nominations are subject to the eligibility, procedural and disclosure requirements set forth in the By-Laws.

    
  

 

LOGO

 

 

 

 

 

Our By-Laws are available at www.internationalpaper.com, under the “Investors” tab at the top of the page followed by the “Governance” and “Governance Documents” links. A paper copy is available at no cost by written request to the Corporate Secretary.

 

    

Board Oversight of the Company

The Board is responsible for ensuring appropriate alignment of its leadership structure and oversight of management with the interests of shareowners and the communities in which the Company operates. The Company’s Corporate Governance Guidelines provide the foundation upon which the Board oversees a working system of principled goal-setting and effective decision-making. The goal is to establish a vital, agile, and ethical corporate entity that provides value to the shareowners who invest in the Company, the communities in which we operate, and all of our stakeholders.

Oversight of Succession Planning and Talent Management

Our Board is actively engaged and involved in succession planning and talent management. Our Board oversees and annually reviews leadership development and assessment initiatives, as well as short- and long-term succession plans for our senior management. In addition, our Board regularly reviews our talent strategy to ensure that it supports our business strategy. The Board considers its own leadership structure as part of the succession planning process.

In connection with the previously announced final phase of the CEO succession process with respect to our current CEO, Andy Silvernail will succeed Mark Sutton as our CEO effective May 1, 2024.

 

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 Corporate Governance / Board Oversight of the Company 

 

 

Risk Oversight

Pursuant to delegated authority as permitted by the Company’s By-Laws, Corporate Governance Guidelines, and committee charters, the Board’s four standing committees oversee certain risks.

 

 

 

 

Full Board

 

The Board exercises oversight of the Company’s enterprise risk management (“ERM”) program, which includes strategic, operational and finance matters, as well as compliance, legal and information technology (“IT”)/cyber risks. Our Board and its committees receive regular reports from senior managers on areas of material risk and how those risks are managed.

 

    LOGO      LOGO   
 

Management/Enterprise Risk Management Council

 

The ERM Council is a management-level team comprised of senior vice presidents and other business leaders responsible for managing enterprise risks and planning and organizing the activities of our organization to minimize the effects of risk on the Company’s business and financial results. The ERM Council regularly reports to the Board on areas of risk and risk management. The Chief Financial Officer serves as the ERM Council Lead. The Chief Audit Executive serves as the ERM Council Process Owner.

 

    LOGO      LOGO   
 

Chief Information Security Officer

 

Our Chief Information Security Officer (“CISO”) presents to the Audit & Finance Committee and to the full Board of Directors, as part of the Board’s risk oversight responsibility. For example, the CISO provides reports to the Board and the Audit and Finance Committee on the analysis of emerging IT risks, as well as plans and strategies to mitigate those risks, and to senior management on a regular basis. These risks are also aggregated into the Company’s ERM program.

 

    LOGO      LOGO   
 

Audit and Finance Committee

 

The Audit and Finance Committee coordinates the risk oversight role exercised by other Board committees and management, and receives updates on risk management processes regularly. In addition, the Audit and Finance Committee:

 

  Oversees the integrity of the Company’s financial statements and other disclosures, the effectiveness of the internal control environment, the internal audit function and the external auditors, and compliance with legal and regulatory requirements to mitigate risk.

 

  Reviews risks related to management’s cybersecurity and information security risk management programs and controls, including processes for identification and reporting of material cybersecurity incidents.

 

  Monitors the risk of financial fraud involving management and ensuring that controls are in place to prevent, deter and detect fraud.

 

 

 

LOGO

    

 

LOGO

    

 

LOGO

 

Governance Committee

 

Oversees risks related to:

 

  Governance

 

  Director compensation

    

Management Development and Compensation Committee

 

Oversees risks related to:

 

  Organizational and resource allocation

 

  Talent management

 

  Succession planning

 

  Executive compensation

    

Public Policy and Environment Committee

 

Oversees risks related to:

 

  Litigation, government regulation and governmental enforcement

 

  Environment, health and safety

 

  Sustainability, including climate change

 

  Technology issues including information and operational technology, cybersecurity and data security

 

 

 

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 Corporate Governance / Board Oversight of the Company  

 

 

Oversight of Compliance

The Global Ethics and Compliance officer oversees our compliance program. Employees can report violations through our Helpline or through other reporting channels. All Helpline reports are immediately forwarded to the Global Ethics and Compliance office for further action and for a response to the person reporting, unless he or she has chosen to remain anonymous. A report made through any of our other reporting channels that involves an impropriety relating to our accounting, internal controls or other financial or audit matters is also forwarded immediately to the Global Ethics and Compliance office. That office has responsibility for investigating all such matters, and will report certain of those matters, unfiltered, to the chair of our Audit and Finance Committee in accordance with the procedures established by the Audit and Finance Committee to ensure compliance with the Sarbanes-Oxley Act of 2002, as amended.

Oversight of Compensation-Related Risk

The MDCC is committed to completing an annual risk assessment to evaluate the Company’s compensation plans and practices. In 2023, at the committee’s request, its independent consultant Frederic W. Cook & Co. (“FW Cook”). conducted a risk assessment with the objective of identifying any compensation plans and practices that may encourage employees to take unnecessary or excessive risks that could threaten the Company. No such plans or practices were identified. The results of this 2023 evaluation indicated, and the MDCC thus concluded, that there are no significant compensation-related risk areas at the Company, and that our compensation plans and practices do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a material adverse effect on the Company. Also, based on this evaluation, the committee concluded that the Company’s executive compensation program appropriately aligns compensation with long-term shareowner value creation and avoids short-term rewards for decisions that could pose long-term risks to the Company. These conclusions were based on the following factors:

 

 

Our compensation mix is appropriately balanced and incentive compensation is not overly weighted toward short-term performance at the expense of long-term value creation;

 

 

Our short-term incentive compensation award pool is appropriately capped, thereby limiting payout potential;

 

 

Our performance is measured against both absolute and relative metrics to ensure quality and sustainability of Company performance;

 

 

We have adopted several programs that serve to mitigate potential risk, including officer stock ownership requirements, a Clawback Policy and clawback provisions in our administrative guidelines of our incentive compensation programs, and Non-Compete and Non-Solicitation Agreements to deter behavior that could be harmful to the Company either during or after employment; and

 

 

The committee maintains strict controls over the Company’s equity granting practices, and our incentive compensation plan prohibits option re-pricing without shareowner approval.

Oversight of Information Security and Cybersecurity

The Company places the utmost importance on information security and privacy which are key components of our governance and risk management framework. We value maintaining the trust and confidence of our customers, employees and other stakeholders.

The Board has primary oversight of our ERM program, which includes information security and cybersecurity. The Board of Directors is supported in its oversight by the Audit and Finance Committee and PPE Committee, which share oversight responsibilities related to the Company’s information security program, as noted above. The Board, Audit and Finance Committee and PPE Committee each receives periodic updates from management, including our CISO, and outside experts, covering the Company’s programs for managing information security risks, including data privacy and data protection risks. The Company has adopted the National Institute of Standards and Technology Cybersecurity Framework framework to assess the maturity of its cybersecurity programs and guide continual improvement.

 

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 Corporate Governance / Oversight of Compensation-Related Risk  

 

 

Key aspects of the Company’s cybersecurity program include the following:

 

 

layered technical protective capabilities and detective surveillance controls;

 

 

utilizing independent third-parties to assess the Company’s practices related to, and provide expertise and assistance with, various aspects of information security, as further described below;

 

 

courses and awareness training on information security for employees with Company email or access to Company devices, including phishing, social engineering and other cybersecurity training as well as targeted training for specific roles based on responsibilities and risk level;

 

 

global security and privacy policies; and

 

 

business continuity, incident response and disaster recovery procedures, including tabletop exercises involving senior leaders.

Our management regularly monitors best practices in this area and seeks to implement changes to the Company’s security programs as needed to ensure that the Company maintains a robust data and privacy program. In addition, the Company maintains cyber insurance which provides coverage in connection with cybersecurity breaches. For more information in our cybersecurity, risk identification and management program, see Item 1C of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed on February 16, 2024.

Independence of Directors

Director Independence Standards

It is the policy of our Board that, in accordance with the rules of the New York Stock Exchange (“NYSE”), a majority of its members be independent from the Company, its management and its independent auditor. Based on the Governance Committee’s review of our current directors, our Board has determined that all of our non-employee directors are independent. We have one employee-director, our Chairman, Mark S. Sutton, who is not independent. Each standing committee of the Board is comprised entirely of independent directors.

Further, the Governance Committee has concluded and recommended to our Board, and our Board has determined, that each of our non-employee directors meets the independence requirements for service on our Audit and Finance Committee, the Management Development and Compensation Committee, and the Governance Committee.

Director Independence Determination Process and Standards

Annually, our Board determines the independence of directors based on a review conducted by the Governance Committee and the Company’s General Counsel. The Governance Committee and the Board evaluate and determine each director’s independence under the NYSE’s independence standards for listed companies and the Company’s Director Qualification Criteria and Independence Standards, which are consistent with, but more rigorous than, the NYSE standards. The Board also considers independence standards applicable to service on particular committees of the Board under SEC and NYSE rules.

Under SEC rules, the Governance Committee is required to analyze and describe any transactions, relationships or arrangements not specifically disclosed as a related party transaction in this Proxy Statement that were considered in determining our directors’ independence. To facilitate this process, the Governance Committee reviews directors’ responses to our annual Directors’ and Officers’ Questionnaire, which requires disclosure of each director’s and his or her immediate family’s relationships to the Company, as well as any potential conflicts of interest.

 

 

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 Corporate Governance / Independence of Directors  

 

 

In this context, the Governance Committee considered the relationships described below. Based on its analysis of these relationships and our independence standards, the Governance Committee concluded and recommended to our Board that none of these relationships impaired the independence of any non-employee director. Among other things, none of our directors serve as an executive officer of any organization to which we make charitable contributions. In addition, recognizing that several of our directors serve as an executive officer at a company with which we may do business, the Governance Committee determined that commercial relationships involving routine, arms-length purchases and sales transactions between International Paper and these companies were not material under our independence standards. These standards provide that payments that the Company makes to, or receives from, a company at which a member of our Board serves as an executive officer do not create a material relationship that would impair the director’s independence if they are for property or services valued at less than the greater of $750,000 or 1.75 percent of such other company’s consolidated gross revenue. We provide additional details about these relationships in the following table.

Transactions Considered in Analysis of Director Independence

 

Director    Name of Employer   Business Relationship
(including affiliated
companies)
   Dollar Amount of Routine Sales
Transactions (approximate)
   Does amount exceed
greater of $750,000
or 1.75% of other
company’s gross
revenue?
Anton V. Vincent    Mars, Inc.   Routine
sales to
Mars
   $30 million in total, representing less than 0.16% of International Paper’s net revenue in 2023    No
         Routine
purchases
from Mars
   $26.5 million in total, representing less than 0.06% of Mars’s gross revenue in 2023    No
Ray G. Young   

Archer-Daniels- Midland Company

(through December 2022)

  Routine
sales to
ADM
   $3.2 million in total, representing less than 0.02% of International Paper’s gross revenue in 2023    No
         Routine
purchases
from
ADM
   $78.9 million in total, representing less than 0.42% of ADM’s gross revenue in 2023    No

 

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 Corporate Governance / Transactions with Related Persons       

 

 

Transactions with Related Persons

Related Person Transactions Policy and Procedures. Our Board has adopted a Related Person Transactions Policy and Procedures for the review and approval or ratification of transactions involving the Company and “related persons” (directors, director nominees and executive officers and their immediate family members, or shareowners owning 5% or greater of our outstanding common stock and their immediate family members). The policy covers any related person transaction or currently proposed transaction in which the Company was a participant or is to be a participant and (i) the amount involved exceeds or is expected to exceed $120,000 in any fiscal year, and (ii) a related person had or will have a direct or indirect material interest. The policy also sets forth certain clarifications and exceptions with respect to the policy’s application to certain types of transactions.

The policy works in tandem and as a supplement to our Code of Conduct and Conflicts of Interest Policy.

Identifying Related Persons. Our directors and executive officers complete and sign a questionnaire at the end of each fiscal year to confirm that there are no material relationships or related person transactions between those individuals and the Company other than those previously disclosed.

Additionally, the Company reviews public filings on Schedules 13D and 13G to identify our 5% beneficial owners.

Transaction Review Procedures. Prior to entering into a related person transaction (as defined in our policy), a related person must provide the details of the transaction to the General Counsel, including the relationship of the person to the Company, the dollar amount involved, and whether the related person or his or her family member has or will have a direct or indirect interest in the transaction. The General Counsel then evaluates the transaction to determine if the Company or the related person has a direct or indirect material interest in the transaction and whether the policy otherwise applies to such transaction. If such determination is made, the General Counsel submits the details of the transaction to the Governance Committee for review. The Governance Committee approves a related person transaction if the Committee determines that the transaction is not inconsistent with the interests of the Company and its shareowners and does not violate the Company’s Code of Conduct or Conflicts of Interest Policy. Our policy also sets forth procedures whereby, if the Company becomes aware of a completed related person transaction that is subject to the policy and which inadvertently was not previously approved, the Governance Committee must either (i) ratify the transaction, or (ii) require the related person to terminate the transaction. In addition, the Governance Committee evaluates existing related person transactions on a periodic basis to determine whether the related person transaction should continue.

Transactions With Related Persons. Except as otherwise noted below, since January 1, 2023, the Company has not been a participant in any transaction, and is not a participant in any currently proposed transaction, in which any related party had or will have a direct or indirect material interest that would require disclosure under Item 404(a) of Regulation S-K.

Beneficial Owners of More Than Five Percent of Voting Securities. Since January 1, 2023 entities or affiliates that are the beneficial owner of more than 5% of our outstanding common stock have provided, and are contemplated to provide, certain services to the Company in the ordinary course of business. The nature and value of these services provided by these 5% shareowners and their affiliates is described below.

An affiliate of BlackRock Inc. (“BlackRock”), a 5% shareowner, has provided investment management services related to certain benefit plans of the Company. In 2023 BlackRock received fees totaling approximately $1.5 million for providing these services.

Additionally, State Street Corporation (“State Street”), a 5% shareowner, has provided trustee and similar services to the Company serving as the trustee of the Company’s Defined Contribution Plans Master Trust, Retirement Plan Master Trust, Commingled Investment Group Trust, and Retiree Medical Savings Plan Trust, and as an independent monitoring fiduciary with respect to the Company Stock Fund in the Savings plan. During 2023, the Company paid approximately $3.3 million to State Street for these trustee and similar services. Additionally, there is currently a proposed transaction

 

 

www.internationalpaper.com

  / 35


 

 Corporate Governance / Transactions with Related Persons  

 

 

with State Street pursuant to which State Street would provide management services under several new target date and index fund in the Company’s Savings (401(k)) plan. This currently proposed transaction is scheduled to be finalized later in 2024 and in the first year is expected to involve payments by us to State Street in excess of $460,000.

The agreements with BlackRock and State Street are negotiated arms-length transactions in the ordinary course of business. Additionally, we believe the agreements represent standard terms and conditions for investment management and trustee services.

In compliance with our policy, the Governance Committee has approved the currently proposed State Street investment management services transaction and approved and ratified both existing State Street and BlackRock transactions.

Our Related Person Transaction Policy and Procedures is available at www.internationalpaper.com under the “Investors” tab at the top of the page followed by the “Governance” link and then under the “Governance Documents” link. A paper copy is available at no cost by written request to the Corporate Secretary.

Commitment to Sound Corporate Governance and Ethical Conduct

We believe good corporate governance is critical to achieving business success and serves the best interests of our shareowners. We value the perspectives of our shareowners and other stakeholders, including our employees and the communities in which we operate, and take steps to address their concerns where warranted.

 

36 \  

International Paper 2024 Proxy Statement

 


 

 Corporate Governance / Commitment to Sound Corporate Governance and Ethical Conduct 

 

 

Our Corporate Governance Guidelines. Our Board has adopted Corporate Governance Guidelines that reflect its commitment to sound governance practices. In addition, each of our Board committees has its own charter to ensure that our Board fully discharges its responsibilities to our shareowners. Our Board reviews its Corporate Governance Guidelines and committee charters at least annually and makes changes from time to time to reflect developments in the law and corporate governance practices.

 

Our Code of Conduct. Our Board has adopted a Code of Conduct that applies to our directors, officers, and all employees to ensure we conduct business in a legal and ethical manner.

 

Our Global Ethics and Compliance office is located at our global headquarters in Memphis, Tennessee. If an employee, customer, vendor, or shareowner has a concern about ethics or business practices of the Company or any of its employees or representatives, that individual may contact the Global Ethics and Compliance office in person, via e-mail or telephone. The Code of Conduct describes multiple channels by which employees may report a concern, such as through their managers, a human resources professional, legal counsel or our internal audit department.

 

Our Helpline is also available 24 hours a day, seven days a week, to receive calls from anyone wishing to report a concern or complaint, whether anonymous or otherwise.

 

Our Helpline contact information can be found at www.internationalpaper.com, under the “Company” tab at the top of the page, then under “Ethics & Compliance.”

 

Our Corporate Governance Guidelines, Code of Conduct and Board committee charters are available at www.internationalpaper.com under the “Investors” tab. Paper copies are also available by written request to the Corporate Secretary at the address below.

 

 

Communicating with the Board

Shareowners or other interested parties may communicate with our entire Board, the Chairman, the independent directors as a group, the Lead Director, or any one of the directors by writing to the Senior Vice President, General Counsel, and Corporate Secretary, at the address set forth below. Our Corporate Secretary will forward all communications relating to International Paper’s interests, other than business solicitations, advertisements, job inquiries or similar communications, directly to the appropriate director(s).

In addition, as described in detail under “Corporate Governance – Commitment to Sound Governance and Ethical Conduct” our Global Ethics and Compliance office has a Helpline that is available 24 hours a day, seven days a week, to receive calls, emails, and letters to report a concern or complaint, anonymous or otherwise.

 

LOGO

Direct all Board correspondence to:

Corporate Secretary

International Paper Company

6400 Poplar Avenue

Memphis, TN 38197

 

 

www.internationalpaper.com

  / 37


LOGO

 

Compensation Philosophy

We believe our compensation program for non-employee directors should:

 

 

Provide total compensation comprising both cash and equity elements that targets the median level of compensation paid by our Compensation Comparator Group (“CCG”), which is described in the Compensation Discussion & Analysis section of this Proxy Statement;

 

 

Align the interests of our directors with the interests of our shareowners;

 

 

Attract and retain top director talent; and

 

 

Be flexible enough to meet the needs of a diverse group of directors.

Each element of director compensation discussed below is recommended by the Governance Committee and approved by our Board. Mr. Sutton does not receive compensation for his service as a director.

On at least a biennial basis, we evaluate the reasonableness and appropriateness of the total compensation paid to our directors in comparison to peer companies who comprise our CCG. We target our total director compensation at the median of our CCG.

We believe our director compensation program appropriately compensates our directors for their time and commitment to the Company, and is consistent with our compensation philosophy, as shown in the following table.

 

Our Director Pay Principles    Our 2023 Director Pay Policies and Practices

 

LOGO

  Target compensation at median of CCG   

  Maintained mix of cash and equity in line with cross-section of similar companies (CCG), which total compensation was at the median level of companies included in our CCG

 

LOGO

  Align the interests of our directors with the interests of our shareowners   

  Paid 58% of regular board fees in the form of equity to ensure that directors, like shareowners, have a personal stake in the Company’s financial performance

 

LOGO

  Attract and retain top director talent   

  Compensated directors competitively, based on a cross-section of similar companies (CCG)

 

LOGO

  Maintain flexibility to meet the needs of a diverse group of directors   

  Continued to allow directors to elect to take equity in place of cash and to elect to defer their fees until retirement

 

38 \  

International Paper 2024 Proxy Statement

 


 

 Director Compensation / Elements of Our Director Compensation Program 

 

 

Elements of Our Director Compensation Program

For the May 2023 to April 2024 service year, compensation for our non-employee directors consists of:

 

 

An annual retainer that is a mix of cash and equity;

 

 

Additional retainers for committee chairs, the Lead Director, and members of the Audit and Finance Committee, as applicable; and

 

 

Life insurance, business travel accident insurance, and liability insurance.

There were no changes made to the fees payable to our non-employee directors for the May 2023 to April 2024 service year in comparison to the prior service year.

 

Type of Fee    2023-2024
Fee Amount
($)
 
Board Fees         
Cash Retainer      120,000  
Equity Retainer      163,000  
Committee Fees         
Audit and Finance Committee Chair      25,000  
Audit and Finance Committee Non-Chair Member      10,000  
Management Development and Compensation Committee Chair      20,000  
Governance Committee Chair      20,000  
Public Policy and Environment Chair      20,000  
Lead Director      27,500  

Annual Retainer

The annual retainer is $283,000, of which $120,000 (42 percent) is payable in cash in monthly installments and $163,000 (58 percent) is payable in equity. A director may elect to convert all or 50 percent of his or her cash retainer (plus any committee fees and Lead Director fees, as discussed below) into shares of restricted stock. To encourage director stock ownership, a director who makes this election receives a 20 percent premium of this converted cash award in additional shares of restricted stock. Eight of the 10 non-employee directors serving during 2023 elected to receive stock in lieu of all or 50 percent of the cash award and are receiving the applicable premium. Restrictions on shares awarded to our directors under our current compensation plan lapse one year from the date of grant, and then the shares are freely transferable, subject to our director stock ownership requirement and securities regulations.

Directors may also elect to defer receipt of some or all of their equity retainer. Directors who make this election receive restricted stock units (“RSUs”) in lieu of restricted stock. RSUs are not transferable until a director’s retirement from the Board, death or disability. The cash value of RSUs is paid in January following retirement, death or disability. Four of the 10 non-employee directors serving during 2023 elected to defer payment of all or a portion of their equity compensation until retirement, death or disability. Elections with regard to form of payment and deferrals are made in December preceding each service year.

We use the closing market price of the Company’s common stock on the day preceding our annual meeting in May to calculate the equivalent number of shares for the $163,000 equity retainer and any restricted stock elected by our directors in lieu of their cash retainer. RSUs are settled in cash based on the closing price of the Company’s common stock as of December 31st of the year of the director’s retirement, death or disability.

Directors earn dividends on their shares of stock and RSUs, which they may elect to receive either as cash or in the form of additional shares of restricted stock or RSUs. Dividends are paid to the director at the time the underlying award is vested or settled.

 

 

www.internationalpaper.com

  / 39


 

 Director Compensation / Elements of our Director Compensation Program 

 

 

Fees for Committee Service

In addition, as referenced above, each committee chair receives a fee for his or her service in such role. For 2023, Mr. Young and Mses. Gordon, Hinman and Sullivan each received a committee chair fee. Members of our Audit and Finance Committee also receive an additional fee for their services on this committee. For 2023, Messrs. Dorduncu, Gustafsson, Vincent and Young and Dr. Sullivan each received an Audit and Finance Committee member fee. As Lead Director, Mr. Connor received a fee for 2023.

Insurance and Indemnification Contracts

We provide life insurance in the amount of $10,500 to each of our non-employee directors, and travel accident insurance in the amount of $500,000 that covers a director if he or she dies or suffers certain injuries while traveling on Company business.

We provide liability insurance for our directors, officers, and certain other employees at an annual cost of approximately $3 million. The primary underwriters of coverage, which extends to April 1, 2025, are XL Specialty Insurance Company and ACE American Insurance Company.

Our By-Laws provide for standard indemnification of our directors and officers in accordance with New York law. We also have contractual arrangements with our directors that indemnify them in certain circumstances for costs and liabilities incurred in actions brought against them while acting as our directors.

Stock Ownership Requirements

Our director stock ownership policy requires our directors to hold equity of the Company valued at two times the total annual Board retainer, which, through April 30, 2024, is equivalent to 4.7 times the annual cash retainer (and requires ownership of Company stock equivalent to $566,000). We believe this requirement helps align the interests of our directors with the interests of our shareowners. New directors have four years from the date of their election to meet the ownership requirement. As of December 31, 2023, all directors who were required to meet the ownership levels held the requisite amount of equity.

 

40 \  

International Paper 2024 Proxy Statement

 


 

 Director Compensation / Non-employee Director Compensation Table 

 

 

Non-employee Director Compensation Table

The following table provides information on 2023 compensation for non-employee directors who served during 2023. It shows fiscal year 2023 compensation based on the SEC’s compensation disclosure requirements, though we pay our directors on a May to April service year. Amounts in the table show differences among directors because (i) each director makes an individual election to receive his or her fees in cash and/or equity in the manner described above; (ii) certain directors receive committee chair fees, a Lead Director fee, and/or Audit and Finance Committee member fees; and (iii) directors may join our Board on different dates, so their compensation is prorated for the year.

 

Name of Director    Fees Earned
or Paid in
Cash ($)(1)
       Stock
Awards
($)(2)
       Total
($)
 
Christopher M. Connor                 334,499          334,499  
Ahmet C. Dorduncu      132,837          163,012          295,849  
Ilene S. Gordon                 326,994          326,994  
Anders Gustafsson                 316,998          316,998  
Jacqueline C. Hinman                 326,994          326,994  
Clinton A. Lewis, Jr.                 307,002          307,002  
DG Macpherson*                 307,002          307,002  
Kathryn D. Sullivan      72,917          250,033          322,950  
Anton V. Vincent                 316,998          316,998  
Ray G. Young                 332,008          332,008  

 

(1)

As described above, certain directors elected to receive shares of restricted stock in lieu of cash and therefore had no cash compensation during 2023.

 

(2)

The value of stock awards shown in the “Stock Awards” column is based on grant date fair value calculated under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. The grant date fair value of the equity awards shown in the “Stock Awards” column is based on the closing price of the Company’s common stock on the last business day immediately preceding the date of grant, which was May 5, 2023. Directors who elect to defer their equity retainer fee receive RSUs rather than restricted stock. Restrictions on shares awarded to our directors under our current compensation plan lapse one year from the date of grant, and then the shares are freely transferable, subject to our director stock ownership requirement and securities regulations. RSUs are not transferable until a director’s retirement from the Board, death or disability. The cash value of RSUs is paid in January following retirement, death or disability.

 

*

Mr. Macpherson resigned from the Board effective February 13, 2024.

The following table shows the aggregate number of unvested shares of restricted stock and RSUs outstanding as of December 31, 2023, for each non-employee director who served as of that date.

 

Name of Director    Aggregate Number of Shares
Outstanding That Have Not
Vested and RSUs
(#)
 
Christopher M. Connor      59, 132  
Ahmet C. Dorduncu      5,039  
Ilene S. Gordon      10,108  
Anders Gustafsson      9,799  
Jacqueline C. Hinman      12,053  
Clinton A. Lewis, Jr.      53,961  
DG Macpherson*      20,950  
Kathryn D. Sullivan      9,298  
Anton V. Vincent      24,847  
Ray G. Young      85,956  
Total      291,143  

 

*

Mr. Macpherson resigned from the Board effective February 13, 2024.

 

 

www.internationalpaper.com

  / 41


LOGO

 

Our Audit and Finance Committee has selected Deloitte & Touche LLP (“Deloitte & Touche”) to serve as the Company’s independent auditor for 2024. Although shareowner ratification is not required by our By-Laws or otherwise, the Board is submitting the selection of Deloitte & Touche to our shareowners because we value your views on the Company’s independent auditor. Our Audit and Finance Committee will consider, but is not bound by, the outcome of this vote. Even if the selection of Deloitte & Touche is ratified, the Audit and Finance Committee may change the appointment at any time if it determines that a change would be in the best interests of the Company and our shareowners.

To ratify the selection of our independent auditor, the affirmative vote of a majority of a quorum at the annual meeting is required. You may vote FOR or AGAINST the ratification of the selection of our independent auditor, or you may abstain from voting. Abstentions will have the same effect as votes against this proposal because they are considered votes present for purposes of a quorum on the vote.

We do not expect there to be any “broker non-votes” associated with this proposal. If your shares are held in street name and you do not give your bank or broker instructions on how to vote, your shares may be voted by the broker in its discretion.

 

 

Our Board of Directors unanimously recommends that you vote FOR the ratification of Deloitte & Touche as the Company’s independent auditor for 2024.

     LOGO  FOR

 

 

42 \  

International Paper 2024 Proxy Statement

 


 

 Item 2: Ratify Deloitte & Touche as Our Independent Auditor for 2024 / Background on our Independent Auditor  

 

 

Background on our Independent Auditor

The Audit and Finance Committee is responsible for the appointment, compensation, retention, and oversight of the independent external audit firm retained to audit the Company’s financial statements. The committee has evaluated the qualifications, performance, and independence of Deloitte & Touche, including discussions regarding Public Company Accounting Oversight Board (“PCAOB”) inspection results, peer reviews and any other internal inspection results and trends in their internal system of quality controls, and appointed Deloitte & Touche as the Company’s independent external auditor for the fiscal year 2024.

Deloitte & Touche has served as International Paper’s independent external auditor continuously since 2002. In order to ensure continuing auditor independence, the Audit and Finance Committee periodically considers whether there should be a rotation of the independent external audit firm. The members of the Audit and Finance Committee and the Board believe the continued retention of Deloitte & Touche to serve as the Company’s independent external auditor is in the best interests of International Paper and its shareowners. In making this determination, the Audit and Finance Committee and Board have considered Deloitte & Touche’s significant institutional knowledge of our business, operations, accounting policies and financial systems, and internal controls framework, as well as Deloitte’s global capabilities, technical expertise, depth of resources, quality, efficiency of services, quality of communications with the Audit and Finance Committee and management, and independence. In addition, in accordance with applicable rules on partner rotation, Deloitte & Touche rotates its lead audit engagement partner not less than every five years. The Audit and Finance Committee is involved in considering the selection of Deloitte & Touche’s primary engagement partner when there is a rotation.

Deloitte & Touche’s reports on the consolidated financial statements for each of the three fiscal years in the period ended December 31, 2023, which were included in the Company’s 2023 Annual Report on Form 10-K, did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. Representatives of Deloitte & Touche will be present at the 2024 annual meeting to answer questions, and they also will have the opportunity to make a statement if they desire to do so.

Independent Auditor Fees

The Audit and Finance Committee engaged Deloitte & Touche to perform an annual integrated audit of the Company’s financial statements, which includes an audit of the Company’s internal controls over financial reporting, for the years ended December 31, 2022, and December 31, 2023. The total fees and expenses paid to Deloitte & Touche are as follows:

 

     2023        2022  
      ($, in thousands)        ($, in thousands)  
Audit Fees      12,091          11,752  
Audit-Related Fees      355          470  
Tax Fees      4,194          1,865  
All Other Fees      345          286  
Total Fees      16,985          14,373  

 

 

www.internationalpaper.com

  / 43


 

 Item 2: Ratify Deloitte & Touche as Our Independent Auditor for 2024 / Services Provided by the Independent Auditor  

 

 

Services Provided by the Independent Auditor

All services rendered by Deloitte & Touche are permissible under applicable laws and regulations and are pre-approved by the Audit and Finance Committee. For a complete copy of International Paper’s “Guidelines of International Paper Company Audit and Finance Committee for Pre-Approval of Independent Auditor Services,” please write to the Corporate Secretary, or visit us on our website, www.internationalpaper.com, under “Contact Us.”

Pursuant to rules adopted by the SEC, the fees paid to Deloitte & Touche for services provided are presented in the table above under the following categories:

 

1.

Audit Fees – Fees for professional services performed by Deloitte & Touche for the audit and review of our annual financial statements, the review of our financial statements included in our quarterly reports on Form 10-Q, and those services that are normally provided by an independent auditor in connection with statutory and regulatory filings or engagements for the fiscal year, such as comfort letters, consents and other services related to SEC matters. Audit fees in both years include amounts related to the audit of the effectiveness of internal controls over financial reporting.

 

2.

Audit-Related Fees – Fees for assurance and related services performed by Deloitte & Touche that are reasonably related to the performance of the audit or review of our financial statements. This includes employee benefit and compensation plan audits, accounting consultations on divestitures and acquisitions, attestations by Deloitte & Touche that are not required by statute or regulation, consulting on financial accounting and reporting standards, and attestations on internal controls and quality assurance audit procedures related to new or changed systems or work processes.

 

3.

Tax Fees – Fees for professional services performed by Deloitte & Touche with respect to tax compliance, tax advice and tax planning. This includes consultations on preparation of original and amended tax returns for the Company and its consolidated subsidiaries, refund claims, and tax audit assistance. Deloitte & Touche has not provided any services related to tax shelter transactions, nor has Deloitte & Touche provided any services under contingent fee arrangements.

 

4.

All Other Fees – Fees for other permissible work performed by Deloitte & Touche that do not meet the above category descriptions. These services relate to various consultations that are permissible under applicable laws and regulations, which are primarily related to engagements to provide advice, observations, and recommendations regarding operations, infrastructure and distribution to be considered by the Company.

 

44 \  

International Paper 2024 Proxy Statement

 


 

 Item 2: Ratify Deloitte & Touche as Our Independent Auditor for 2024 / Audit and Finance Committee Report 

 

 

 

Audit and Finance Committee Report

 

The following is the report of the Audit and Finance Committee with respect to the Company’s audited financial statements for the fiscal year ended December 31, 2023.

 

The Audit and Finance Committee assists the Board of Directors in its oversight of the Company’s financial reporting process and implementation and maintenance of effective controls to prevent, deter and detect fraud by management. The Audit and Finance Committee’s responsibilities are more fully described in its charter, which is accessible on the Company’s website at www.internationalpaper.com under the “Investors” tab and then under the “Governance” link and the “Board Committees” section. Paper copies of the Audit and Finance Committee charter may be obtained, without cost, by written request to Mr. Joseph R. Saab, Corporate Secretary, International Paper Company, 6400 Poplar Avenue, Memphis, TN 38197.

 

In fulfilling its oversight responsibilities, the Audit and Finance Committee has reviewed and discussed the Company’s annual audited consolidated financial statements for the 2023 fiscal year with management and Deloitte & Touche LLP (“Deloitte & Touche”), the Company’s independent registered public accounting firm, including discussions related to significant accounting policies and critical accounting estimates and their related disclosures. In addition, the Audit and Finance Committee has reviewed, and discussed with management and Deloitte & Touche, management’s assessment of the effectiveness of the Company’s internal control over financial reporting, and the evaluation by Deloitte & Touche of the Company’s internal control over financial reporting. The Audit and Finance Committee has discussed with Deloitte & Touche the matters required to be discussed under the applicable requirements of the Public Company Accounting Oversight Board (United States) and the Securities and Exchange Commission (“SEC”). The Audit and Finance Committee has received the written disclosures and the letter from Deloitte & Touche required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with Deloitte & Touche its independence from the Company and its management. The Audit and Finance Committee has also considered whether the provision of non-audit services by Deloitte & Touche is compatible with maintaining the firm’s independence.

 

The Board has determined that the following members of the Audit and Finance Committee are audit committee financial experts as defined in Item 407(d)(5)(ii) of Regulation S-K: Anders Gustafsson and Christopher M. Connor. The Board has determined that each member of the Audit and Finance Committee meets the independence and financial literacy requirements for audit committee members set forth under the listing standards of the New York Stock Exchange and our independence standards, as well as applicable independence requirements under SEC rules.

 

Based on the review and discussions referred to above, the Audit and Finance Committee recommended to the Company’s Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

 

The Audit and Finance Committee has approved and selected, and the Board of Directors has ratified, Deloitte & Touche as the Company’s independent registered public accounting firm for 2024.

 

 

Audit and Finance Committee

LOGO

 

LOGO

  

Anders Gustafsson, Chair

 

Christopher M. Connor

  
LOGO   LOGO   
Ahmet C. Dorduncu   Kathryn D. Sullivan   

 

 

www.internationalpaper.com

  / 45


LOGO

 

Our Board of Directors seeks your approval of the compensation of our Named Executive Officers (“NEOs”), who are listed in the Summary Compensation Table of this Proxy Statement. Information describing the compensation of our NEOs is disclosed in the Compensation Discussion & Analysis section, the accompanying tables and narrative contained in this Proxy Statement pursuant to Item 402 of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This vote is being provided as required pursuant to Section 14A of the Exchange Act and is non-binding.

Shareowners are asked to approve the following non-binding advisory resolution:

“Resolved, that the compensation paid to the Company’s Named Executive Officers, as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K under the Exchange Act, including in the Compensation Discussion & Analysis, the related compensation tables and narrative disclosure, is hereby approved.”

To approve this proposal, commonly referred to as a “Say-on-Pay” proposal, the affirmative vote of a majority of a quorum at the annual meeting is required. You may vote FOR or AGAINST this non-binding proposal, or you may abstain from voting. Abstentions will have the same effect as votes against this proposal because they are considered votes present for purposes of a quorum on the vote.

If you hold your shares in street name, your failure to indicate voting instructions to your bank or broker will cause your shares to be considered “broker non-votes” not entitled to vote with respect to Item 3. Broker non-votes will have the same effect as votes against this proposal because they are considered votes present for purposes of a quorum on the vote.

 

 

Our Board of Directors unanimously recommends that you vote FOR the approval of the compensation of our Named Executive Officers as
disclosed pursuant to Item 402 of Regulation S-K under the Exchange Act.

     LOGO  FOR

 

 

46 \  

International Paper 2024 Proxy Statement

 


LOGO

 

Introduction

This Compensation Discussion & Analysis (“CD&A”) describes our compensation program that applies to all of our executive officers, including our CEO and Senior Vice Presidents, whom we refer to as our Senior Leadership Team (“SLT”) or executive officers. It is designed to provide shareowners with an understanding of our compensation philosophy, core design principles and decision-making process. This narrative also explains how our Management Development and Compensation Committee (“MDCC”) oversees and designs the compensation program and explains the 2023 compensation of our Named Executive Officers (“NEOs”).

 

2023 Named Executive Officers (NEOs)

 

Mark S. Sutton   Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
Timothy S. Nicholls   Senior Vice President and Chief Financial Officer (Principal Financial Officer)
W. Thomas Hamic   Senior Vice President, North American Container and Chief Commercial Officer
Joseph R. Saab   Senior Vice President, General Counsel and Corporate Secretary
Thomas J. Plath   Senior Vice President, Human Resources and Corporate Affairs
Gregory T. Wanta   Former Senior Vice President

Mr. Wanta retired from the Company effective September 30, 2023, after a long and successful career spanning 32 years.

 

Compensation Committee Report

On behalf of the Board of Directors, the MDCC oversees the Company’s compensation programs. In fulfilling its oversight responsibilities, the MDCC has reviewed and discussed the CD&A included in this Proxy Statement with the Company’s management.

Based on the review and discussions referred to above, the MDCC recommended to the Board of Directors that the CD&A be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and its Proxy Statement on Schedule 14A filed in connection with the Company’s 2024 Annual Meeting of Shareowners.

 

Management Development and Compensation Committee

 

LOGO

 

LOGO

 

LOGO

Jacqueline C. Hinman (Chair)

 

Ilene S. Gordon

 

Clinton A. Lewis, Jr.

LOGO

   

Anton V. Vincent

   

 

 

www.internationalpaper.com

  / 47

 


 

 Compensation Discussion & Analysis (CD&A) / Overview of Our CD&A 

 

 

Overview of Our CD&A

 

 

Introduction     47  
2023 Named Executive Officers     47  
Compensation Committee Report     47  
1/ Executive Summary     49  
2023 Financial Highlights     49  
2023 Executive Compensation Highlights     49  
Responsiveness to Shareowners —
Say-on-Pay Consideration
    53  
Compensation Governance Best Practices     54  
2/ How We Design Our Executive Compensation Program to Pay for Performance     55  
Executive Compensation Philosophy     55  
Pay-for-Performance — CCG Analysis     55  
Peer Group Benchmarking     57  
3/ How We Make Compensation Decisions     58  
Role of the Management Development
and Compensation Committee
    58  
Role of Management     58  
Role of Compensation Consultants     58  

4/ Elements of Our Executive

Compensation Program Overview

    59  
Overview     59  
Base Salary     60  
Performance-Based Compensation     60  
How and Why We Chose Our Performance Metrics     61  
Why We Use Different Peer Groups     62  

 

Short-Term Incentive     63  
Annual Incentive Plan (“AIP”)     63  
Long-Term Incentive     64  
Long-Term Incentive Plan (“LTIP”)     64  
Other Equity Awards     66  
Other Compensation Elements     66  
Retirement and Benefit Plans     66  
Change-in-Control (“CIC”) Agreements     67  
Perquisites     67  
5/ NEO Compensation     68  
Overview     68  
2023 Actual Realized Compensation Compared to
2023 Targeted Compensation
    68  

6/ Other Matters Related to

Governance and Compensation

    75  
Insider Trading and Anti-Hedging/Anti-Pledging Policies     75  
Officer Stock Ownership and Retention Requirements     75  
Board Policy on Personal Use of Company Aircraft     75  
Board Policy on Non-CIC Severance
Agreements with Senior Executives
    76  
Clawback or Forfeiture of Incentive Awards     76  
Non-Competition and Non-Solicitation Agreements     76  
Prohibition on Repricing; No Stock Option Grants     76  
Equity Grant Practices     76  
Deductibility of Executive Compensation     77  
Accounting for Stock-Based Compensation     77  
 
 

 

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       Compensation Discussion & Analysis (CD&A) / 1/Executive Summary 

 

 

1/ Executive Summary

 

 

2023 Financial Highlights

International Paper delivered solid execution in a challenging environment and accomplished strategic actions while returning cash to shareowners.

 

$2.2B

We achieved Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization

(“Adjusted EBITDA”) of $ 2.2 billion. (1)

  

$382M

We generated $382 million of Earnings from Continuing Operations Before Income Taxes and Equity Earnings (GAAP).

  

$840M

We maintained our annual dividend of $1.85 per share and returned $840 million of cash to shareowners through dividends and stock repurchases.

  

$1.8B

We generated $1.8 billion of net cash

provided by operations (GAAP) and

$0.7 billion of free cash flow (FCF).(2)

 

  (1)

Adjusted EBITDA is a non-GAAP financial measure that is used as a performance metric in our short-term incentive compensation plan, the Annual Incentive Plan (or AIP). See Section 4 or information regarding how Adjusted EBITDA is calculated and Appendix B for a reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure.

 

  (2)

Free cash flow is a non-GAAP financial measure. See Appendix B for information regarding how free cash flow is calculated and a reconciliation of free cash flow to the most directly comparable GAAP measure, as well as for information regarding why we believe that free cash flow presents useful information to investors.

2023 Executive Compensation Highlights

The following section briefly highlights the current structure of our program, the MDCC’s key compensation decisions for 2023 and our performance achievement attained in our incentive compensation plans. These decisions were made with the support of the MDCC’s independent consultant, Frederic W. Cook & Co. (“FW Cook”) (see section titled “Role of Compensation Consultants”). This information is discussed in greater detail elsewhere in this CD&A.

Key Highlights for 2023

 

We have robust compensation governance policies, practices and processes (see Section 6).

 

We continue to have strong pay-for-performance correlation (see Section 2).

 

No increase was made to our CEO’s target direct compensation (base salary, STI and LTI) in 2023.

 

Environmental, social and governance (“ESG”) performance impacts our executive compensation as a:

 

LOGO   factor in measuring individual performance for modifying STI payouts (see page 64 for more details), and

 

LOGO   factor in our shareowners’ decision to invest in our stock which influences TSR performance in our LTI plan.

Based on a comprehensive review in 2022 of both the short- and long-term incentive compensation plans, the following changes were made to our 2023 incentive plans:

 

Short-term incentive plan (see pages 63-64)

  Expanded eligibility

  Changed name to Annual Incentive Plan (AIP)

  Adjusted the metric weightings

Long-term incentive plan (see pages 64-66)

  Changed name to Long-Term Incentive Plan (LTIP)

  Added RSUs, on a tiered basis, with the SLT awards tiered at 80% PSUs and 20% RSUs

 

For 2023, our SLT’s LTI Plan consists of 80% PSUs which are based solely on achievement of Company performance metrics—no individual performance modifiers are applied (see page 64-66).

 

 

 

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 Compensation Discussion & Analysis (CD&A) / 1/Executive Summary       

 

 

Changes to Our 2023 Incentive Compensation Plans

We recognize that incentive plans evolve over time and should respond to the changing needs and strategies of the Company. At a minimum of every five years, the Company conducts a comprehensive review of both the short-term and long-term incentive compensation plans to confirm our plans are competitive, while also ensuring the plan design aligns with the strategic goals of the business. The 2022 review included an analysis of best market practices for elements of both design and administration for each of the plans. Management conducted an assessment utilizing studies performed by three consulting firms: WTW (formerly Willis Towers Watson), Exequity and FW Cook. Additionally, internal teams conducted extensive back-testing (testing design changes using historical data to understand implications).

Following a robust review by the MDCC, the changes described below went into effect in January 2023, with the exception of the expansion of the short-term incentive plan which was implemented effective July 1, 2022. As described in last year’s proxy statement, the MDCC reviewed the detailed findings of the various studies prior to adopting the changes in October 2022. The MDCC also discussed and fine-tuned the design and administration elements for each plan.

2023 Incentive Compensation Plan Changes

 

     Change    Rationale    Effective Date
Short-Term Incentive Plan   Expanded Eligibility    Expanded eligibility to ensure market competitiveness and help with our recruitment and retention efforts; added approximately 4,750 employees    July 1, 2022
  Name Change    Renamed Annual Incentive Plan (“AIP”) to more accurately describe the eligible population    January 1, 2023
  Adjustment of Metric Weightings   

  Increased the weighting of the Revenue metric from 15% to 20% and decreased the weighting of the Cash Conversion metric from 15% to 10% to strengthen the focus on top-line profitable growth

  The Adjusted EBITDA metric remains unchanged at a 70% weighting, maintaining a heavy emphasis on margin and improving profitable growth

   January 1, 2023
Long-Term Incentive Plan   Name Change    Renamed Long-Term Incentive Plan (“LTIP”) to more accurately describe equity vehicles offered    January 1, 2023
  Add RSUs and Tiering of Vehicle Mix Between PSUs and RSUs   

  Incorporated time-based RSU awards, in addition to the existing performance-based PSU awards, to provide a more competitive offering through better alignment with market, which we believe will help with our recruitment and retention efforts

  Use of RSUs is tiered with a much heavier performance orientation at senior management levels. This appropriately places a higher risk/reward ratio on senior executives while increasing focus on retention deeper in the organization.

  LTIP awards to senior executives, including the NEOs, consists of 80% PSUs and 20% RSUs

   January 1, 2023

 

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 Compensation Discussion & Analysis (CD&A) / 1/Executive Summary 

 

 

2023 Total Target Compensation Mix

The chart below demonstrates our commitment to paying for performance, with a significant amount at-risk. For 2023, 90% of our CEO’s target compensation and, on average, 80% of our other NEOs’ target compensation was based on Company and/or stock performance. Importantly, base salary comprises a relatively small portion of our NEOs’ compensation and is the only component of their target Total Direct Compensation (“TDC”) not tied to Company and/or stock performance.

 

 

CEO Target Pay Mix

 

 

LOGO

 

 

Average Other NEOs Target Pay Mix

 

 

LOGO

 

2023 Base Salary Changes

The Committee elected to increase Mr. Hamic’s base salary by 14.3% and Mr. Plath’s base salary by 2.7% effective January 1, 2023. Mr. Hamic’s adjustment was made in recognition of his appointment to Senior Vice President – North American Container, our largest business. Mr. Plath’s adjustment was made in recognition of his increased responsibilities overseeing Corporate Affairs. The Committee also elected to increase Mr. Saab’s base salary by 10.0% effective March 1, 2023, to reflect his development in the role and to more closely align with the market median. Neither our CEO nor any of the other NEOs received an increase in base salary in 2023.

 

 

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 Compensation Discussion & Analysis (CD&A) / 1/Executive Summary 

 

 

2023 Incentive Plan Design Overview with Metrics and Weightings

 

 

2023 Short-Term Incentive Plan

Annual Incentive Plan (AIP)

Component Weightings

 

LOGO

Annual Incentive Plan Payout Scale

 

All Metrics:

Below Threshold (0% Payout)

Threshold (50% Payout)

Target (100% Payout)

Maximum (200% Payout)

 

 

2023-2025 Long-Term Incentive Plan

Long-Term Incentive Plan (LTIP) Award

 

LOGO

Performance Stock Units (PSUs)

Component Weightings

 

LOGO

Performance Stock Units Payout Scale

 

ROIC (50%)

Below Threshold (0% Payout)

Threshold (50% Payout)

Target (100% Payout)

Maximum (200% Payout)

Relative TSR (50%)

Below 25th percentile (0% Payout)

25th percentile (25% Payout)

50th percentile (100% Payout)

At or above 75th percentile (200% Payout)

 

* See page 62 for definitions.

 

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       Compensation Discussion & Analysis (CD&A) / 1/Executive Summary 

 

 

2023 STI Performance Achievement

 

Performance Metric

  Target          Actual     % of Target
Award Earned
  Metric Weight   Weighted % of
Target Award Earned
 

Adjusted EBITDA*

  $ 2.968B     $ 2.234B     0.0%   70.0%     0.0%  

Revenue

  $ 20.983B     $ 18.916B     50.8%   20.0%     10.2%  

Cash Conversion*

    58.6%       60.1%     125.6%   10.0%     12.5%  

Total

                      100.0%     22.7%  

 

*

Adjusted EBITDA and Cash Conversion are non-GAAP financial measures. See Section 4 for information regarding how these non-GAAP financial measures are calculated. See Appendix B for non-GAAP financial measure definitions and a reconciliation of Adjusted EBITDA and components of Cash Conversion to the most directly comparable GAAP measures.

2021-2023 LTI Performance Achievement

 

Performance Metric

  Target          Actual     % of Target
Award Earned
  Metric Weight   Weighted % of
Target Award Earned
 

3-Year Adjusted ROIC*

    8.0     9.51   150.33%   50.0%     75.17%  

Relative TSR

    50th Percentile       13th Percentile     0.0%   50.0%     0.0%  

Total

                      100.0%     75.17%  

 

*

Adjusted ROIC is a non-GAAP financial measure. See Section 4 for information regarding how Adjusted ROIC is calculated. See Appendix B for non-GAAP financial measure definitions and a reconciliation of components of Adjusted ROIC to the most directly comparable GAAP measure.

 

Responsiveness to Shareowners—Say-on-Pay Consideration

 

In May 2023, our shareowners again approved our annual Say-on-Pay proposal with support from approximately 96% of votes cast (excluding broker non-votes).

 

Over the last ten years, we have received, on average, 96% support of our NEO compensation. The MDCC views this consistently strong level of support as continued affirmation of the design and direction of our executive compensation programs. While mindful of this level of support, the MDCC and management remain firmly committed to strengthening our pay-for-performance alignment, and assessing the overall architecture of our executive compensation program.

 

The MDCC and management will continue to use the annual “Say-on-Pay” vote as a guidepost for shareowner sentiment and will continue to engage with our shareowners and respond to feedback.

  

 

LOGO

 

 

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 Compensation Discussion & Analysis (CD&A) / 1/Executive Summary 

 

 

Compensation Governance Best Practices

 

 

 

 

LOGO

 

 

  Pay-for-Performance. 100% of incentive pay is performance-based and/or stock performance based.

 

 

 

LOGO

 

 

  Change-in-Control Benefits. Change-in-control severance benefits are two times (2x) target cash compensation for our SLT (excluding the CEO) elected after 2012.

 

 

 

LOGO

 

 

  Double Trigger Change-in-Control Equity Vesting. Equity incentive awards have a double trigger if replacement awards are provided. Awards will not vest upon a change in control unless there is also a qualifying termination of employment.

 

 

 

LOGO

 

 

  Limit on Cash Severance for SLT. Aggregate severance payments to an executive officer may not exceed two times (2x) the sum of the officer’s base salary plus target cash bonus unless there is a change in control or shareowner preapproval.

 

 

 

LOGO

 

 

  Robust Equity Ownership and Retention Requirements. All officers are required to own IP shares equal to a multiple of their base salary and to retain 50% of after-tax equity payouts until the ownership requirement is met. The CEO’s requirement is a rigorous six times (6x) base salary.

 

 

 

LOGO

 

 

  Clawback of Incentive Compensation If Restatement. Mandatory cash and equity incentive compensation awards to current and former executive officers are subject to clawback in the event of a restatement.

 

 

 

LOGO

 

 

  Non-Competition and Non-Solicitation Agreements. We require our leaders to enter into Non-Competition Agreements and Non-Solicitation Agreements, the violation of which may result in clawback or forfeiture of incentive compensation awards.

 

 

 

LOGO

 

 

  Cap on CEO’s Personal Use of Company Aircraft. While our CEO is authorized to use the Company aircraft for personal travel, he is required to reimburse the Company for the incremental cost of such personal use above $75,000.

 

 

 

LOGO

 

 

  Multiple Performance Metrics. Short-term incentive compensation and long-term incentive compensation performance is based on multiple metrics, without any overlap, to encourage balanced initiatives.

 

 

 

LOGO

 

 

 

Peer Groups. We use relevant compensation benchmarking and relative TSR peer groups.

 

 

 

 

LOGO

 

 

  No Employment Agreements for SLT. Our U.S.-based executive officers are at-will employees
with no employment contracts.

 

 

 

LOGO

 

 

  No Tax Gross-Ups. We do not gross up compensation payments to account for taxes.

 

 

 

LOGO

 

 

  No Guaranteed Annual Salary Increases or Bonuses. For the NEOs, annual salary increases are based on individual performance and market competitiveness, while their annual cash incentives are tied to corporate and individual performance.

 

 

 

LOGO

 

 

  No Plans that Encourage Excessive Risk-Taking. Based on the MDCC’s annual review, it was determined that the Company’s compensation practices are appropriately structured and provide no incentives to encourage employees to engage in unnecessary or excessive risk-taking.

 

 

 

LOGO

 

 

  No Stock Options; Thus no Repricing or
Exchange of Underwater Stock Options by Policy.
We discontinued granting stock options almost 20 years ago. All outstanding stock options have expired, and we have never granted stock appreciation rights (“SARs”). Our Incentive Compensation Plan does not permit repricing or exchange of underwater options or SARs without shareowner approval.

 

 

 

LOGO

 

 

 

No Hedging or Pledging of Company Securities. Officers and directors are strictly prohibited from hedging IP securities. Directors, executive officers and other senior executives are strictly prohibited from pledging Company securities as collateral or holding securities in a margin account.

 

 

 

LOGO

 

 

  No Inclusion of Equity Awards in Pension Calculations. Equity awards are not included as pensionable compensation.

 

 

 

LOGO

 

 

  No Excessive Benefits. We offer only limited executive benefits as required to remain competitive and to attract and retain highly talented executives.

 

 

 

LOGO

 

 

 

No Active Defined Benefit Retirement Programs. Participation in our Unfunded Supplemental Retirement Plan for Senior Managers (“SERP”) was frozen at the end of 2011 and all salaried pension plan benefits were frozen at the end of 2018. Only defined contribution retirement benefits are available.

 

 

 

 

 

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    Compensation Discussion & Analysis (CD&A) / 2/How We Design Our Executive Compensation Program to Pay for Performance 

 

 

2/ How We Design Our Executive Compensation Program to Pay for Performance

Executive Compensation Philosophy

Our executive compensation program is designed to attract, retain and motivate our SLT to deliver Company performance that builds long-term shareowner value. To achieve our objectives, our program is designed around two guiding principles:

 

Pay for Performance

 

We reward achievement of specific goals that improve our financial performance and drive strategic initiatives to ensure sustainable long-term profitability.

 

      

Pay at Risk

 

We believe a significant portion of an executive’s compensation should be specifically tied to performance—both Company and individual performance.

Pay for Performance — CCG Analysis

The MDCC reviews our CEO’s pay in relation to the Company’s performance to ensure alignment. We conduct this review against our Compensation Comparator Group (“CCG”). Our CCG is one of two reference points against which we target pay and it is the primary reference against which we benchmark our program design. (For information on the CCG, see “Peer Group Benchmarking” on page 57.)

Historical CEO Pay-for-Performance Alignment

The following table demonstrates the close alignment between our CEO’s realizable pay and the Company’s performance over the past five three-year performance periods as compared to our CCG.

 

Three-Year Performance Period    Our CEO’s Realizable Pay Rank
(percentile of CCG)
  

Our Company’s TSR Rank

(percentile of CCG)

2020-2022    22nd    17th
2019-2021    12th    18th
2018-2020    37th    26th
2017-2019    33rd    29th
2016-2018    60th    45th

 

 

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 Compensation Discussion & Analysis (CD&A) / 2/How We Design Our Executive Compensation Program to Pay for Performance       

 

 

Current CEO Pay-for-Performance Alignment

Each point on the graph below represents a CCG CEO’s three-year realizable compensation (the cash compensation actually paid plus the economic value of equity-based grants) relative to their company’s three-year TSR performance over the period 2020-2022.

Compared to our CCG, our CEO’s realizable compensation was at the 22nd percentile of our peer group while the Company delivered TSR at the 17th percentile. The MDCC believes this graph clearly illustrates a strong pay-for-performance alignment, especially when compared year over year (as shown in the table on the previous page).

 

 

CEO Realizable Pay vs. TSR Performance (2020-2022)

 

 

LOGO

 

 

The graph reflects CEO compensation for each company regardless of who actually served in the CEO role. This allows us to compare CEO compensation for a full three-year period for each company and focuses on the CEO position rather than specific individuals.

 

 

This graph is based on the 2023 proxy statements filed by our CCG.

 

 

Total Shareholder Return reflects share price appreciation, adjusted for dividends and stock splits.

 

 

Realizable pay consists of:

 

  1.

actual base salary paid over the three-year period,

 

  2.

actual STI payouts over the three-year period, and

 

  3.

LTI determined as shown below, with equity awards based on December 31, 2022 market value for each company;

 

  a.

in-the-money value of stock options granted over the three-year period;

 

  b.

service-based restricted stock awards granted over the three-year period;

 

  c.

performance share awards:

 

  i.

actual shares earned using actual performance achievement for grant cycles beginning and ending between 2020 and 2022; and

 

  ii.

target shares granted over the three-year period assuming target performance, for performance cycles that have not yet been completed.

 

  d.

performance cash awards:

 

  i.

actual cash paid using actual performance achievement for grant cycles beginning and ending between 2020 and 2022; and

 

  ii.

target cash levels provided over the three-year period assuming target performance, for performance cycles that have not yet been completed

 

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 Compensation Discussion & Analysis (CD&A) / 2/How We Design Our Executive Compensation Program to Pay for Performance 

 

 

Peer Group Benchmarking

Consistent with the Company’s compensation philosophy, the MDCC generally targets each component of Total Direct Compensation (“TDC”) at the median level (50th percentile) of our primary reference point. Target compensation positioning for individual SLT members will vary from the market median based on factors such as:

 

·   

Position scope and responsibilities, as well as experience within the role;

 

·   

Individual performance; and

 

·   

Internal equity.

The MDCC, with the assistance of FW Cook, its independent compensation consultant, uses two sources of market data, to ensure our pay remains competitive:

 

·   

Primary market reference point (used for all SLT positions)

We use published survey data as our primary market reference point to ensure a robust sample size of organizations, thereby reducing year-over-year volatility in pay comparison. This survey data represents the average of two large, general industry surveys administered by WTW (formerly Willis Towers Watson) and Aon and reflects the revenue responsibility of each executive.

 

·   

Secondary market reference point (used for CEO, CFO, and other SLT positions where enough data points are available)

We use CCG proxy data as our secondary market reference point. This data is limited to publicly available data of the top five paid executives at each of the 18 CCG companies.

 

How Our CCG Is Selected

 

We look for companies that meet the following criteria:

 

LOGO   Compete with us for executive talent;

 

LOGO   Comparable annual revenue (approximately one-half to two times), with comparable market capitalization used as a governor;

 

LOGO   Global geographic presence;

 

LOGO   Similar complexity of business operations; and

 

LOGO   Available compensation data.

   

How We Use Our CCG

 

LOGO   As a secondary reference point in establishing base salary ranges, short- and long-term incentive targets, and assessing competitiveness of total direct compensation awarded to our SLT;

 

LOGO   To benchmark equity vehicle and incentive plan metrics;

 

LOGO   To benchmark officer stock ownership guidelines and other executive compensation practices and policies; and

 

LOGO   To evaluate share utilization, overhang levels and annual aggregate grant value.

 

2023 Compensation Comparator Group (CCG)

·  Ball Corporation

 

·  Berry Global Group, Inc.

 

·  Bunge Limited

 

·  Carrier Global Corporation

 

·  Crown Holdings, Inc.

 

·  Eastman Chemical Company

 

·  Eaton Corporation

  

·  Emerson Electric Company

 

·  General Dynamics Corporation

 

·  Goodyear Tire & Rubber Company

 

·  Johnson Controls International plc

 

·  Northrop Grumman Corporation

 

·  Nucor Corporation

  

·  Packaging Corporation of America (PCA)

 

·  Parker-Hannifin Corporation

 

·  PPG Industries, Inc.

 

·  Schlumberger Limited

 

·  WestRock Company

 International Paper vs. CCG Revenue1

 

IP’s Targeted TDC = CCG Median (50th percentile)

 

1   Based on the most recently reported four quarters as of September 2022, used in late 2022 to benchmark pay for 2023

  

LOGO

 

 

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 Compensation Discussion & Analysis (CD&A) / 3/How We Make Compensation Decisions       

 

 

3/ How We Make Compensation Decisions

Role of the Management Development and Compensation Committee

The MDCC is responsible for the Company’s executive compensation program design and decision-making process for SLT compensation. The MDCC:

 

·   

Approves our compensation benchmarking process, as well as the companies used for comparison (our CCG) to ensure reasonableness and stability;

 

·   

Assesses the overall effectiveness of our executive compensation program to ensure the design achieves our objectives;

 

·   

Approves performance metrics, goals, and their respective weightings, as well as the companies against which we compare our relative performance;

 

·   

Determines SLT compensation, based on recommendations from the CEO regarding executives other than the CEO; and

 

·   

Conducts an annual evaluation of risk as it pertains to our Company-wide compensation plans and programs.

In addition, in a process established by the Lead Director, the MDCC during Executive Session:

 

·   

Approves the CEO’s annual objectives and conducts semi-annual performance reviews; and

 

·   

Recommends to the full Board for approval: the CEO’s base salary, target incentive opportunities (STI and LTI) and annual incentive award payment based on its assessment of the CEO’s performance.

All elements of CEO pay are approved by the independent directors of the Board.

Role of Management

The CEO makes recommendations to the MDCC concerning the strategic direction of our executive compensation program. Our Senior Vice President, Human Resources and Corporate Affairs, is responsible for making recommendations to the MDCC concerning program design and administration, and our General Counsel provides legal advice to the MDCC concerning disclosure obligations, governance and its oversight responsibilities.

The CEO reviews the performance of SLT members against their annual, individual pre-established performance objectives and discusses his individual performance with the MDCC. In consultation with our Senior Vice President, Human Resources and Corporate Affairs, the CEO makes individual recommendations on base salary, incentive plan opportunities, and annual incentive award payments for members of the SLT. The MDCC reviews these recommendations, and with input from its compensation consultant, discusses, modifies and approves, each SLT member’s compensation.

The CEO does not participate in any MDCC or Board deliberations that involve the CEO’s own compensation.

Role of Compensation Consultants

The MDCC continued to engage Frederic W. Cook & Co. Inc. (“FW Cook”) in 2023 to serve as its independent, external compensation consultant. FW Cook has served as the MDCC’s independent, compensation consultant since 2011. The MDCC has sole authority for retaining or terminating FW Cook, as well as approving the terms of engagement, including fees. The MDCC relies on FW Cook to advise on its compensation decision-making process and has sole authority to retain and terminate the relationship, as well as to approve the terms of engagement, including fees. FW Cook works exclusively for the MDCC and provides no services to the Company, other than services provided in the firm’s capacity as the MDCC’s consultant. Accordingly, the MDCC has determined that FW Cook is independent from the Company. Separately, FW Cook has attested in writing as to its independence from the Company.

The Company retains Exequity and WTW as its primary compensation consultants to advise on program design, provide and analyze benchmarking data, apprise management of evolving practices and trends, and perform other consulting services as needed. From time to time, the Company engages other consultants for special projects as needed.

 

MDCC’s Consultant:

 

Frederic W. Cook & Co., Inc.

 

  

Management’s Consultants:

 

Exequity LLP

WTW

 

 

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 Compensation Discussion & Analysis (CD&A) / 4/Elements of Our Executive Compensation Program 

 

 

4/ Elements of Our Executive Compensation Program

Overview

The primary elements of our executive compensation program are:

 

 

base salary,

 

 

short-term (annual) cash-based incentive compensation under our Annual Incentive Plan (“AIP”),

 

 

long-term equity-based incentive compensation under our Long-Term Incentive Plan (“LTIP”) which is awarded in performance-based restricted stock units and time-based restricted stock units, and

 

 

other ad hoc equity awards and limited executive benefits.

Total Direct Compensation (“TDC”) is the combination of fixed and variable compensation. Other compensation elements, such as our limited executive benefits, are not part of TDC, but the MDCC also reviews these elements.

 

LOGO

 

 

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 Compensation Discussion & Analysis (CD&A) / 4/Elements of Our Executive Compensation Program 

 

 

Base Salary

Base salary is the only fixed element of TDC. The MDCC considers base salary increases annually based on individual performance, while taking into account whether market-based adjustments are necessary. Annual merit increases for most salaried employees across the globe, including the NEOs, are effective March 1st.

The Committee increased both Mr. Hamic’s and Mr. Plath’s base salary effective January 1, 2023, as a result of organizational changes. Mr. Hamic’s base salary was increased by 14.3% in recognition of his appointment to Senior Vice President – North American Container, our largest business. Mr. Plath’s base salary was increased by 2.7% in recognition of his increased responsibilities overseeing Corporate Affairs. Effective March 1, 2023, Mr. Saab’s base salary was increased by 10.0% to reflect his development in the role and to more closely align with market median. The 2024 increases shown below in March are the result of market adjustments made effective March 1, 2024. The following table shows the annual base salary in effect during 2023 and currently for each NEO.

 

Name   

Base
Salary
(Jan-Feb)

($)

    

March
2023
Increase

($)

   

Base

Salary
(Mar-Dec)

($)

    

March
2024
Increase

($)

 

Current
Base
Salary

($)

 

M.S. Sutton (CEO)

     1,450,000        n/a       1,450,000      n/a     1,450,000  

T.S. Nicholls (CFO)

     775,000        n/a       775,000      4.1%     806,500  

W.T. Hamic

     600,000        n/a       600,000      8.3%     650,000  

J.R. Saab

     500,000        10.0     550,000      9.1%     600,000  

T.J. Plath

     565,000        n/a       565,000      7.1%     605,000  

G.T. Wanta(1)

     550,000        n/a       550,000      n/a     n/a  

 

(1)

Represents base salary rate through retirement date of September 30, 2023

Performance-Based Compensation

We do not have guaranteed bonuses. Performance-based compensation is pay at risk and is tied directly to Company and/or stock performance. Company performance is based on the achievement of specific financial goals, as described below. Individual performance is rewarded upon achievement of specific pre-established objectives or priorities.

 

Element

  IP Incentive Plan / Program   2023 Performance Metrics   Metric
Weight
     Individual
Performance
Modifier
 

 

Short-Term Incentive Plan

 

 

Annual Incentive Plan (AIP)

 

  Adjusted EBITDA1

  70%        Yes  
 

  Revenue

  20%     
       

  Cash Conversion1

 

  10%

 

          

 

Long-Term Incentive Plan

  Performance Stock Units (PSUs)  

 

  Adjusted ROIC1

 

 

50%

    

 

 

 

No

 

 

 

 

  Relative TSR

 

 

50%

          
    Restricted Stock Units (RSUs)  

 

  Stock price performance

 

 

n/a

    

 

 

 

No

 

 

 

 

  Continued employment through vesting

 

 

n/a

 

(1)

See Appendix B for non-GAAP financial measure definitions and reconciliation of Adjusted EBITDA, components of Cash Conversion and Adjusted ROIC to the most directly comparable GAAP measures.

Other equity awards, including awards of stock and time-based restricted stock/units, may be granted from time to time under limited circumstances to address specific recruitment, retention or other recognition efforts. All SLT compensation, including any such equity awards, must be approved by the MDCC. No such awards were made to the NEOs or any other member of the SLT in 2023.

 

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How and Why We Chose Our Performance Metrics

Our incentive compensation plan design is based upon achievement of pre-established performance objectives that we believe will drive improved financial performance of the Company. Each year the MDCC assesses the appropriateness of the performance metrics, and periodically makes adjustments based on the financial objectives most critical to the Company’s success. No changes were made to our 2023 performance metrics in comparison to those used for our 2022 incentive compensation plans.

We explain below why the MDCC chose the performance metrics used for our 2023 incentive compensation plans. See the following page for more details on each metric.

2023 Annual Incentive Plan Metrics

 

Adjusted EBITDA

 

Adjusted EBITDA1 is commonly used as a proxy for a company’s operating profitability. We believe that driving earnings growth is currently the best way to drive shareowner value. Within the Company, we set goals for Adjusted EBITDA performance at the business level to establish an ongoing line of sight to our performance. Adjusted EBITDA represents a significant driver of cash flow, as it is the single largest component of Cash Flow from Operations. In addition, we use Adjusted EBITDA in assessing the Company’s consolidated results of operations and operational performance and in comparing the Company’s results of operations between periods. As a result, we believe that Adjusted EBITDA is a significant indicator of the Company’s ongoing operational strength.

 

Revenue

 

Revenue2 is a complementary measure to Adjusted EBITDA that helps focus participants on top-line growth. We believe that using Revenue also helps focus participants on commercial and operational improvement initiatives.

 

Cash Conversion

 

Cash Conversion3 drives capital efficiency and also is a complementary measure to Adjusted EBITDA. Employees can influence this measure by managing inventories, leveraging working capital, and delivering better capital project planning and execution.

 

 

 

2023-2025 Long-Term Incentive Plan – PSU Metrics

 

Adjusted ROIC

 

Adjusted ROIC4 measures a company’s returns versus plan, while also considering the cost of capital. The Company focuses on Adjusted ROIC as it relates to our cost of capital to create long-term value for our shareowners. We consider Adjusted ROIC to be a meaningful indicator of our operating performance, and we evaluate this metric because it measures how effectively and efficiently we use the capital invested in our business.

 

Relative TSR

 

TSR5 reflects share price appreciation and dividends paid. TSR is regularly used to compare the performance of companies’ stocks over time, and we measure our relative TSR position over a three-year period against our TSR Peer Group. This is a key performance measure that aligns our long-term incentive pay with the value we create for our shareowners, as compared to other companies with which we compete for investment dollars.

 

 

 

 

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The footnotes below explain the details of our performance metric calculations for purposes of our incentive compensation plans:

 

1 

Adjusted EBITDA, a non-GAAP financial measure, is defined as Earnings from Continuing Operations Before Income Taxes and Equity Earnings and before the impact of special items and non-operating pension expense plus Net Interest Expense and Depreciation, Amortization and Cost of Timber Harvested. Adjusted EBITDA may be adjusted, in the MDCC’s discretion, for any impact of acquisitions, divestitures, and/or the effect of changes in tax laws, accounting principles or other laws or provisions affecting reported results, and/or to reflect the impact of any significant, one-time events, including, but not limited to, epidemics/pandemics, wars/invasions/hostilities (whether war is declared or not), natural disasters with significant impact on our operations, or any other significant, one-time events the MDCC deems appropriate for an adjustment. For additional information regarding Adjusted EBITDA, including a detailed calculation and reconciliation to the most comparable GAAP measure, see Appendix B. Additional detail regarding the special items included in the definition of Adjusted EBITDA is set forth on page 35 of our Annual Report on Form 10-K for our fiscal year ended December 31, 2023, filed with the U.S. Securities and Exchange Commission (“SEC”) on February 16, 2024.

 

2 

Revenue means “Net Sales” as reported on the Consolidated Statement of Operations in the Company’s financial statements included in our periodic filings with the SEC. Revenue may be adjusted, in the MDCC’s discretion, for any impact of acquisitions, divestitures, and/or the effect of changes in tax laws, accounting principles or other laws or provisions affecting reported results.

 

3 

Cash Conversion, a non-GAAP financial measure, means Adjusted EBITDA (as defined above) less Maintenance and Regulatory Capital Spending plus/minus changes in Operating Working Capital, divided by Adjusted EBITDA. “Maintenance and Regulatory Capital Spending” means “Invested in Capital Projects” as reported on the Consolidated Statement of Cash Flows in the Company’s financial statements included in our periodic filings with the SEC, less capital spending from projects intended to improve market position or customer service/satisfaction, but including volume increases and performance or quality improvements. “Operating Working Capital” means Trade Accounts and Notes Receivables plus Contract Assets plus Inventories less Trade Accounts Payable as reported on the Consolidated Balance Sheet under GAAP, excluding Corporate Operating Working Capital and other adjustments. Maintenance and Regulatory Capital Spending and changes in Operating Working Capital may be adjusted, in the MDCC’s discretion, for any impact of acquisitions, divestitures, and/or the effect of changes in tax laws, accounting principles or other laws or provisions affecting reported results. For additional information regarding Cash Conversion, including a further description and reconciliations of its components, see Appendix B.

 

4 

Adjusted ROIC, a non-GAAP financial measure, is calculated as Adjusted Operating Earnings Before Net Interest Expense (a non-GAAP financial measure defined in Appendix B), divided by average invested capital. Invested capital is total equity (adjusted to remove pension-related amounts, including prior service costs and net actuarial gains/losses, that are included in Accumulated Other Comprehensive Income (Loss)) plus interest-bearing debt. The Company’s Weighted Average Cost of Capital (“WACC”) was used in 2023 as the minimum threshold for Adjusted ROIC performance. In 2023, target Adjusted ROIC performance was set at 125 basis points (“bp”) above WACC, and maximum Adjusted ROIC performance was set at 325 bp above WACC. The Company’s WACC equals Cost of Equity X (Equity/ Capital) + Cost of Debt X (Debt/ Capital). The Company’s WACC is calculated prior to the beginning of each grant year and stays fixed for the three-year PSU performance period. WACC may be adjusted, in the Committee’s discretion, for any impact of acquisitions, divestitures, and/or the effect of changes in tax laws, accounting principles or other laws or provisions affecting reported results. For additional information regarding Adjusted ROIC, including a reconciliation of Adjusted Operating Earnings Before Net Interest Expense to the most comparable GAAP measure, see Appendix B.

 

5 

TSR is calculated as the change in the Company’s common stock price during the performance period plus the impact of any dividends paid and reinvested in Company stock (including the dividends paid on stock obtained by reinvesting dividends) during the performance period. For all companies in our TSR Peer Group, both the beginning and ending common stock prices used are the average closing price of the 20 trading days immediately preceding the beginning and end of the performance period. We calculate the Company’s TSR and our peer companies’ TSR using the same methodology.

Why We Use Different Peer Groups

In the chart below, we explain why we use different peer groups for compensation benchmarking and for measuring the Company’s TSR performance in our incentive plans.

 

Peer Group    Composition    Rationale

CCG

   Includes 18 companies from multiple industries (Companies range in size from approximately 0.5 to 2.0 times IP’s revenue, which positions IP near the median; see page 57 for a complete listing of CCG companies)    These are the companies against which we are likely to compete for executive talent. They are of comparable size and scope of operations to the Company, which is critical for evaluating target TDC levels.

TSR

   Broader cross-section of 21 companies engaged in global manufacturing and capital-intensive businesses.    These are the companies against which we compete for investment dollars, as detailed in the indices described below.

Our Peer Group for TSR Performance

The TSR Peer Group was selected using a formulaic process. The 2023 TSR Peer Group includes member companies from the following indices:

 

 

S&P 500 Materials Index (Ticker S5MATR) – excluding companies identified as metals and mining, fertilizer and/or agricultural companies and Albemarle Corporation

 

 

S&P 500 Index (Ticker SPX) – including only paper packaging companies

 

 

S&P 400 MidCap Index (Ticker MID) – including only paper packaging companies, plus Crown Holdings, Inc. and Graphic Packaging (which were both added to the index in June 2023)

 

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The goal is to select closely correlated peers to minimize the influence of market factors outside of IP’s control on our relative performance achievement. Since the share prices of the companies selected are impacted by many of the same macroeconomic and industry factors that impact IP, external/market factors have less bearing on relative performance.

 

   

 

2023 TSR Peer Group*

             
 

Air Products and Chemicals, Inc.

Amcor plc

Avery Dennison Corporation

Ball Corporation

CelaneseCorporation

Crown Holdings, Inc.

Dow Inc.

DuPont de Nemours, Inc.

 

 

Eastman Chemical Company

Ecolab Inc.

Graphic Packaging Holding Company

International Flavors & Fragrances Inc.

Linde plc

LyondellBasell Industries N.V.

Martin Marietta Materials Inc.

 

Packaging Corporation of America

PPG Industries, Inc.

Sealed Air Corporation

Sonoco Products Company

The Sherwin-Williams Company

Vulcan Materials Company

WestRock Company

 

 

*

Companies in bolded text are also part of our 2023 CCG.

Short-Term Incentive

Annual Incentive Plan (AIP)

Overview

The AIP is our annual, cash-based incentive compensation plan designed to motivate employees to achieve our most critical short-term financial goals. The 2023 AIP award pool was paid to approximately 8,500 employees globally including our Senior Leadership Team.

2023 Performance Metrics and Performance Achievement

The MDCC believes our AIP performance targets should motivate management to achieve results that will drive superior investor returns.

The chart below shows the specific design elements and how the award was earned.

 

2023 AIP
Performance Metrics
   Metric
Weight
     Threshold
Performance
Payout 50%
     Target
Performance
Payout 100%
     Maximum
Performance
Payout 200%
     Actual      % of Target
Award Earned
     Weighted
% of Target
Award Earned
 

Adjusted EBITDA(1)

     70%      $ 2.374B      $ 2.968B      $ 3.265B      $ 2.234B        0.0%        0.0%  

Revenue

     20%      $ 18.885B      $ 20.983B      $ 22.032B      $ 18.916B        50.8%        10.2%  

Cash Conversion(1)

     10%        46.9%        58.6%        64.5%        60.1%        125.6%        12.5%  

Total

     100%                                                     22.7%  

 

(1)

See Appendix B for non-GAAP financial measure definitions and a reconciliation to the most directly comparable GAAP measures.

As shown in the chart above, if our actual year-end result in any one of the metrics falls below the established threshold performance, no payment was earned for that portion of the award. In the event that our actual year-end result in any one of the metrics above falls between the threshold and target performance levels, or between the target and maximum performance levels, the payment earned was calculated on a straight-line interpolated basis.

 

 

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2023 Award Pool Calculation for Senior Leadership Team (“SLT”)

The Company’s AIP target award pool for the SLT is equal to the sum of each SLT member’s target award. To calculate the actual award pool for the SLT, the target award pool was multiplied by the Company’s 2023 total performance achievement of 22.7%, resulting in an award pool of approximately $1.4 million. The award paid to each of our NEOs is described in Section 5.

The MDCC has discretion to decrease the award pool to zero and has chosen to decrease it in the past. Consistent with our philosophy that management should be rewarded for delivering outstanding financial results, the MDCC also has discretion to increase the award pool by up to 25%, provided the total final award pool does not exceed the maximum amount permitted, which is 200% of target. The MDCC did not exercise its discretion to decrease or increase the 2023 AIP award pool for our SLT.

Individual AIP Awards

Awards for all AIP-eligible employees are based on Company performance, then modified for individual performance achievement as determined by each employee’s direct manager.

We consider the following ESG metrics for members of our SLT when determining their individual payout under the AIP:

 

 

Health & Safety,

 

 

Environment & Sustainability,

 

 

Human Capital & Culture,

 

 

Governance, and

 

 

Diversity & Inclusion.

 

 

For 2023, Mr. Sutton’s AIP award was not modified for individual performance and thus was based solely on the Company’s financial performance percentage of 22.7%. (See Section 5.)

 

CEO Awards

The CEO has discretion to recommend an additional award outside the AIP called a CEO Award, in recognition of exceptional individual performance beyond what is captured in annual individual objectives. For 2023, none of our NEOs received a CEO Award.

Long-Term Incentive

Long-Term Incentive Plan (LTIP)

Overview

The LTIP is our long-term, equity-based incentive compensation plan designed to motivate employees to create long-term shareowner value. Under the LTIP, a mix of both performance-based stock units (PSUs) and time-based restricted stock units (RSUs) are granted globally to approximately 1,200 management-level employees based on position in the Company and satisfactory performance. The allocation of PSUs and RSUs is tiered based on the participant’s role within the Company. LTIP participants in higher position levels within the Company have a higher percentage of their LTIP award granted in PSUs, reflecting a heavier risk/reward ratio on their LTIP awards since they have a greater responsibility for the Company’s performance.

For each member of our SLT, including the NEOs, LTIP awards are weighted 80% PSUs and 20% RSUs.

 

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Performance Stock Units

PSUs are earned over a three-year performance period based solely on the Company’s performance achievement in Adjusted ROIC and relative TSR. Awards are settled in shares of Company stock (except in Asia and Morocco) in early February, following the Committee’s approval of achievement of performance metrics. The number of shares ultimately paid may include the reinvestment of dividends earned on shares actually paid at the end of the three-year performance period.

The MDCC does not have discretion to increase the Company’s performance achievement, but may decrease it in the event the Company experiences negative Adjusted ROIC or negative TSR. In addition, if the Company’s absolute TSR over the three-year performance period is negative, performance achievement for the TSR portion of the PSU award may not exceed 100%.

 

    Earned over 3-year Performance Period and Paid in early February
     2021   2022   2023   2024   2025   2026

2021 PSP Grant

  3-year Performance Measurement Period   Paid*        

2022 PSP Grant

      3-year Performance Measurement Period   Paid*    

2023 LTIP Grant (PSUs)

          3-year Performance Measurement Period   Paid*

 

*

Assuming threshold performance objective is achieved.

Restricted Stock Units

RSUs are time-based and therefore earned based on the passage of time and, in most cases, dependent on continued employment with the Company. The amount ultimately earned may include the reinvestment of dividends earned on shares actually paid upon vesting and is dependent on the Company’s stock price on the vest date. RSUs vest annually in equal, one-third tranches over the three-year grant period on each February 1st commencing after the first anniversary of the grant. The Company makes an off-cycle grant to newly-hired and newly-eligible participants annually each November 1st, which are subject to the same terms and conditions.

 

     Payment Date
      Feb 1, 2024    Feb 1, 2025    Feb 1, 2026

2023 LTIP Grant (RSUs)

   1/3    1/3    1/3

Performance Metrics and Objectives

The PSU portion of the 2023 LTIP grant is based on the same metrics as the former Performance Share Plan (“PSP”); Adjusted ROIC and relative TSR, as detailed below. Some key components of our design for the PSU portion of the 2023 LTIP are:

 

 

Both metrics (Adjusted ROIC and relative TSR) are weighted at 50% each for all LTIP participants;

 

 

Our threshold goal on Adjusted ROIC is based on exceeding our weighted average cost of capital (WACC); and

 

 

To determine our performance achievement under the relative TSR metric, we use a percentile ranking for comparison to our broad, highly correlated TSR Peer Group (see Section 4, “Why We Use Different Peer Groups”).

 

           Performance Objective  

2023-2025 LTIP – PSU portion

Performance Metrics

   Metric Weight     Threshold
ROIC – Payout 50%
TSR – Payout 25%
    Target
Payout 100%
    Maximum
Payout 200%
 

Adjusted ROIC

     50     8.0     9.25     11.25

Relative TSR

     50     25th percentile       50th percentile       75th percentile  

If our actual three-year performance period ending result in either metric falls below the established threshold performance level (as shown in the chart above), no payment is earned (vested) for that portion of the award. The award

 

 

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earned for results in either metric that fall between the threshold and target performance levels, or between the target and maximum performance levels, is calculated on a straight-line interpolated basis.

Payout Calculation

Based on market data, each LTIP participant is granted a target award based on the participant’s position. The actual number of shares paid at the end of the three-year performance period may be higher or lower than the target award, based solely on the Company’s performance achievement. Possible payouts under the 2023 LTIP range from 0 percent to 200 percent of the target award.

2021-2023 Performance Share Plan (PSP) Payout

For the 2021-2023 PSP, the performance achievement approved by the MDCC in February 2024 is shown in the chart below. The award paid to each of our NEOs is described in Section 5.

 

           Performance Achievement  

2021-2023 Performance Metrics

   Target     Actual
Achievement
    % of Target
Award Earned
    Metric
Weight
    Weighted % of Target
Award Earned
 

Adjusted ROIC

     8.0     9.51     150.33     50.0     75.17%  

Relative TSR(1)

     50th Percentile       13th Percentile (1)      0.0     50.0     0.0%  

Total 2021-2023 PSP Payout

                                     75.17%  

 

(1) 

Domtar Corporation was removed from the TSR peer group due to its acquisition by Karta Halten B.V.

Other Equity Awards

We use equity awards, such as grants of stock, restricted stock awards (“RSAs”) or restricted stock units (“RSUs”), for purposes of recruitment, retention or recognition, referred to as Recognition Awards. Vesting provisions for these service-based Recognition Awards vary on a case-by-case basis, but under regular terms and conditions are forfeited if the participant voluntarily terminates employment prior to vesting. During 2023, there were no equity awards other than LTIP awards granted to any SLT member.

Other Compensation Elements

Retirement and Benefit Plans

U.S.-based members of the SLT participate in the same health, welfare and retirement programs that are available to most of the Company’s U.S. salaried employees. Additionally, our unfunded, nonqualified plans — the Pension Restoration Plan and the Deferred Compensation Savings Plan (“DCSP”) — are available to eligible salaried U.S. employees, including the NEOs, whose compensation is higher than the limits set by the Internal Revenue Service (“IRS”) for tax-qualified plans. Absent these plans, these employees would not achieve a retirement benefit commensurate with their earnings during the course of their careers with the Company. Finally, while the Unfunded Supplemental Retirement Plan for Senior Managers (“SERP”) was closed to new participants effective January 1, 2012, two current SLT members (Messrs. Sutton and Nicholls) are the only remaining legacy participants in this plan.

 

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Name

   CEO      SLT     Other
Officers
and Eligible
Managers
  U.S.
Salaried
Employees
           

Health and Welfare Plans

                     

 

The Company froze credited service and compensation in the Retirement Plan, Pension Restoration Plan and SERP for all service on or after January 1, 2019.

For service after this date, affected employees now receive Retirement Savings Account contributions (“RSAc”).

 

Qualified Retirement (Pension)
Plan / RSAc(1)

                  

Pension Restoration Plan / RSAc(1)

                    

SERP(2)

   (2)    (2)           

Qualified Salaried Savings Plan – 401(k)

                  

DCSP(1)

                    

 

 

Eligible to participate.

 

(1) 

See the Executive Compensation Tables starting on page 78 below for additional information on this benefit.

 

(2) 

This executive benefit was closed to new participants effective January 1, 2012.

Change-in-Control (“CIC”) Agreements

The Company has entered into CIC agreements with certain executives, including all members of the SLT. These agreements provide cash severance and other benefits, including acceleration of equity-award vesting, in the event of a double trigger, which requires both a CIC of the Company and a qualifying termination of employment (i.e., involuntary termination without cause or departure for good reason). We believe these potential benefits align executive and shareowner interests by enabling leaders of the Company to focus on the interests of shareowners and other constituents when considering a potential CIC, without undue concern for their own financial and employment security. No benefits are provided upon a CIC alone (i.e., without also experiencing an accompanying qualifying termination of employment) so long as the acquiring company provides replacement awards as substitution for outstanding equity awards. Moreover, in no event will the Company gross up or pay for excise taxes relating to any CIC benefits. For more detail on these CIC agreements and benefits, see “Post-Employment Termination Benefits” on page 87.

Perquisites

We do not offer perquisites to our NEOs that are not generally available to all U.S. employees other than the following: the CEO’s limited personal use of Company aircraft and benefits granted to a limited number of legacy participants in our discontinued Executive Supplemental Life Insurance Program. Our NEOs would be entitled to the same standard benefits under our Global Mobility Policy as any employee serving the Company on an expatriate assignment.

 

 

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5/ NEO Compensation

Overview

The compensation benchmarking review used to establish NEO target Total Direct Compensation (“TDC”) levels for 2023 indicated that our CEO’s 2023 target TDC was 101.9% of the projected 2023 market median. The 2023 target TDC levels for all other NEOs were, in aggregate, 95.5% of the projected 2023 market median.

We do not have, nor do we believe we need, a policy that dictates a specific ratio of CEO compensation to other NEOs or the SLT. Generally, we base our compensation decisions on principles of internal equity and external market competitiveness. The difference that exists between our CEO’s compensation and the compensation of our other NEOs is based on the complexity of the CEO’s leadership responsibilities for the global enterprise.

2023 Actual Realized Compensation Compared to 2023 Targeted Compensation

In this section, we describe the 2023 compensation actually realized by each NEO, as well as the rationale for each compensation element and amount. We also illustrate target versus actual compensation in the individual graphs for each NEO.

The Target amount includes:

 

  (i)

2023 actual base salary paid;

 

  (ii)

2023 target AIP;

 

  (iii)

the target value of the 2021-2023 PSP granted in 2021; and

 

  (iv)

the target value of Recognition Awards that vested during 2023, if any.

The Actual amount represents what we believe is the appropriate way to illustrate 2023 actual pay earned, and includes:

 

  (i)

2023 actual base salary paid;

 

  (ii)

2023 AIP paid in February 2024;

 

  (iii)

the actual value of the 2021-2023 PSP paid in February 2024; and

 

  (iv)

the actual value of Recognition Awards that vested during 2023, if any.

The value shown for the equity awards on the following chart differs from the value shown in the Summary Compensation Table. Equity awards granted in 2023 are shown in the Summary Compensation Table, while the following charts show PSP awards valued and paid in 2024 for the performance period ending in 2023 (and, if applicable, Recognition Award grants that vested during 2023). The equity awards for the 2021-2023 PSP in the following charts were valued based on the closing price of $35.26 for the Company’s common stock on February 9, 2024, which is the trading day immediately preceding the date the MDCC approved the payout.

 

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LOGO

   

 

Mark S. Sutton

 

Chairman of the Board and Chief Executive Officer

 

Mark Sutton has 39 years of service with the Company and was appointed CEO effective November 2014 and Chairman of the Board effective January 2015. Mr. Sutton served as President and Chief Operating Officer from June through October 2014, prior to which he was Senior Vice President, Industrial Packaging, a role he assumed in November 2011. Prior to that role, he led our Printing and Communication Papers business since January 2010. He previously served as Senior Vice President, Supply Chain from March 2008 through 2009, Vice President, Supply Chain from June 2007 through February 2008, and Vice President, Strategic Planning from January 2005 through May 2007.

2023 Realized Compensation

 

Element of Compensation

   Compensation Amount    Rationale

2023 Base Salary

  

$1,450,000

 

(no base salary increase in 2023)

   No adjustment was made to Mr. Sutton’s base salary as it was determined by the Board of Directors to be within our targeted market range.

2023 AIP Award

  

$493,700

 

 

(22.7% combined Company and individual performance achievement)

   Mr. Sutton’s AIP payment was awarded at 22.7% of target (reflecting 100% for individual performance) and thus was based solely on the Company’s performance achievement.

2021-2023 PSP Payout

  

178,816 shares, including reinvested dividends and an anti-dilution adjustment (related to the spin-off of Sylvamo)

 

(valued at $6,305,065 including a fractional share)

   PSP payout of 75.17% was based solely on the Company’s performance achievement in Adjusted ROIC and relative TSR described in Section 4.

The chart below compares Mr. Sutton’s 2023 actual compensation paid against targeted compensation amounts.

 

 

LOGO

Target LTI is based on 196,683 target shares valued at $52.75, using the 20-day average stock price as of December 31, 2020.

Actual LTI is based on 178,816 shares, which includes the original target shares plus reinvested dividends and an anti-dilution adjustment related to the spin-off of Sylvamo, multiplied by 75.17% performance achievement and valued at $35.26, the Company’s closing share price on February 9, 2024.

 

 

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LOGO

   

 

Timothy S. Nicholls

 

Senior Vice President and Chief Financial Officer

 

Tim Nicholls has 32 years of service with the Company. Effective June 2018, he was appointed CFO, a position he previously held from December 2007 through November 2011. In addition to his role in finance, Mr. Nicholls also has oversight for the Company’s corporate development and capital effectiveness. He previously served as Senior Vice President, Industrial Packaging the Americas, a position he held since November 2014, immediately prior to which he served as Senior Vice President, Printing & Communications Papers the Americas from November 2011. In 1991, he joined Union Camp Corporation, which was acquired by the Company in 1999.

2023 Realized Compensation

 

Element of Compensation

   Compensation Amount    Rationale

2023 Base Salary

  

$775,000

 

(no base salary increase in 2023)

   No adjustment was made to Mr. Nicholls’ base salary as it was determined by the MDCC to be within our targeted market range.

2023 AIP Award

  

$181,400

 

 

(22.7% combined Company and individual performance achievement)

   Mr. Nicholls’ AIP payment was awarded at 22.7% of target (reflecting 100% for individual performance) and thus was based solely on the Company’s performance achievement.

2021-2023 PSP Payout

  

48,261 shares, including reinvested dividends and an anti-dilution adjustment (related to the spin-off of Sylvamo)

 

(valued at $1,701,678, including a fractional share)

   PSP payout of 75.17% was based solely on the Company’s performance achievement in Adjusted ROIC and relative TSR described in Section 4.

The chart below compares Mr. Nicholls’ 2023 actual compensation paid against targeted compensation amounts.

 

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Target LTI is based on 53,081 target shares valued at $52.75 using the 20-day average stock price as of December 31, 2020.

Actual LTI is based on 48,261 shares, which includes the original target shares plus reinvested dividends and an anti-dilution adjustment related to the spin-off of Sylvamo, multiplied by 75.17% performance achievement and valued at $35.26, the Company’s closing share price on February 9, 2024.

 

70 \  

International Paper 2024 Proxy Statement

 


 

 Compensation Discussion & Analysis (CD&A) / 5/NEO Compensation 

 

 

 

LOGO

   

 

W. Thomas Hamic

 

Senior Vice President, North American Container and
Chief Commercial Officer

 

Tom Hamic has a total of 31 years of service with the Company. On January 1, 2023, Mr. Hamic assumed his current role. In 2020, Mr. Hamic was named Senior Vice President, Global Cellulose Fibers, IP Asia and Enterprise Commercial Excellence and served in this role until December 2022. Mr. Hamic was elected Senior Vice President, Containerboard and Enterprise Commercial Excellence in 2019. He moved into the role of Vice President, Containerboard and Recycling in 2015, after serving as Vice President, Finance and Strategy since 2013. In 2009, Mr. Hamic was named Vice President and General Manager, Container the Americas. Mr. Hamic joined the Company in 1992.

2023 Realized Compensation

 

Element of Compensation

   Compensation Amount    Rationale

2023 Base Salary

  

$600,000

 

(incorporates a 14.3% increase effective January 1, 2023)

   Mr. Hamic’s salary increase was made based on position to market and in recognition of his appointment to Senior Vice President – North American Container, our largest business.

2023 AIP Award

  

$113,300

 

(22.7% combined