UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

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E. I. du Pont de Nemours and Company

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Annual Meeting — April 29, 2009

 

March 20, 2009

 

Dear Stockholder:

 

You are invited to attend the Company’s 2009 Annual Meeting on Wednesday, April 29, 2009, at 10:30 a.m. local time in the DuPont Theatre, DuPont Building, Wilmington, Delaware.

 

The enclosed Notice of Annual Meeting and Proxy Statement provide information about the governance of our Company and describe the various matters to be acted upon during the meeting. In addition, there will be a report on the state of the Company’s business and an opportunity for you to express your views on subjects related to the Company’s operations.

 

To make it easier for you to vote your shares, you have the choice of voting over the Internet, by telephone, or by completing and returning the enclosed proxy card. The proxy card describes your voting options in more detail.

 

This year, we are excited to implement the Securities and Exchange Commission’s Notice and Access rules, allowing us to deliver proxy materials via the Internet. These rules give the Company a lower cost way to furnish stockholders with their proxy materials. On March 20, we began mailing to certain stockholders of record a “Notice Regarding the Availability of Proxy Materials” with instructions on how to access the proxy materials via the Internet (or request a paper copy) and how to vote online.

 

If you are a registered stockholder or if you hold DuPont Common Stock through a Company savings plan, your admission ticket for the Annual Meeting is included on your proxy card. A registered stockholder may also use the Notice Regarding the Availability of Proxy Materials, received in the mail, as his or her admission ticket. If you hold shares in a brokerage account, please refer to page 1 of the Proxy Statement for information on how to attend the meeting. If you need special assistance, please contact the DuPont Stockholder Relations Office at 302-774-3034.

 

The past year was a time of unprecedented challenge and change. In the face of global economic developments, the people of DuPont relied on the core values and business strengths of our market-driven science Company. We responded by focusing on the things within our control, emphasizing speed and agility. We continued to advance the products in our R&D pipeline, made gains in productivity, and stayed close to our customers to understand their needs and concerns in the current economic turmoil.

 

The Annual Meeting gives us an opportunity to review our progress. We appreciate your ownership of DuPont, and I hope you will be able to join us on April 29.

 

Sincerely,

 

C. O. Holliday, Jr.

 

E. I. du Pont de Nemours and Company

March 20, 2009                    

 

 

To the Holders of Common Stock of

E. I. du Pont de Nemours and Company

 

 

NOTICE OF ANNUAL MEETING

 

The Annual Meeting of Stockholders of E. I. DU PONT DE NEMOURS AND COMPANY will be held on Wednesday, April 29, 2009, at 10:30 a.m. local time, in the DuPont Theatre in the DuPont Building, 1007 Market Street, Wilmington, Delaware. The meeting will be held to consider and act upon the election of directors, the ratification of the Company’s independent registered public accounting firm, one stockholder proposal described in the Proxy Statement and such other business as may properly come before the meeting.

 

Holders of record of DuPont Common Stock at the close of business on March 4, 2009, are entitled to vote at the meeting.

 

This notice and the accompanying proxy materials are sent to you by order of the Board of Directors.

 

Mary E. Bowler

Secretary

 

 

 

The DuPont 2008 Annual Review will also be available at the above website.

 

Stockholders may request their proxy materials be delivered to them electronically in 2010 by visiting http://enroll.icsdelivery.com/dd.

 

 

 

2009 ANNUAL MEETING OF STOCKHOLDERS

Proxy Statement

 

 

Proxy Statement

 

The enclosed proxy materials are being sent to shareholders at the request of the Board of Directors of E. I. du Pont de Nemours and Company to encourage you to vote your shares at the Annual Meeting of Stockholders to be held April 29, 2009. This Proxy Statement contains information on matters that will be presented at the meeting and is provided to assist you in voting your shares.

 

The Company’s 2008 Annual Report on Form 10-K, containing management’s discussion and analysis of financial condition and results of operations of the Company and the audited financial statements, and this Proxy Statement were distributed together beginning March 20, 2009.

 

 

Who May Vote

 

All holders of record of DuPont Common Stock as of the close of business on March 4, 2009 (the record date) are entitled to vote at the meeting. Each share of stock is entitled to one vote. As of the record date, 903,499,428 shares of DuPont Common Stock were outstanding. A majority of the shares voted in person or by proxy is required for the approval of each of the proposals described in this Proxy Statement. Abstentions and broker nonvotes are not counted in the vote. At least a majority of the holders of shares of DuPont Common Stock as of the record date must be present either in person or by proxy at the meeting in order for a quorum to be present.

 

 

How to Vote

 

Even if you plan to attend the meeting you are encouraged to vote by proxy. You may vote by proxy in one of the following ways:

 

 

When you vote by proxy, your shares will be voted according to your instructions. If you sign your proxy card but do not specify how you want your shares to be voted, they will be voted as the Board of Directors recommends. You can change or revoke your proxy by Internet, telephone or mail at any time before the polls close at the Annual Meeting.

 

 

How to Attend the Annual Meeting

 

If you are a registered shareholder or if you hold stock through one of the savings plans listed below, your admission ticket is attached to your proxy card. A registered shareholder may also use the Proxy Notice as his or her admission ticket. You will need to bring your admission ticket, along with picture identification, to the meeting. If you own shares in street name, please bring your most recent brokerage statement, along with picture identification, to the meeting. The Company will use your brokerage statement to verify your ownership of DuPont Common Stock and admit you to the meeting.

 

Please note that cameras, sound or video recording equipment, or other similar equipment, electronic devices, large bags or packages will not be permitted in the DuPont Theatre.

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Shares Held In Savings Plans

 

If you participate in one of the following plans, your voting instruction card will include the shares you hold in the plan:

 

 

The plan trustees will vote according to the instructions received on your proxy. If proxies for shares in savings plans are not received by Internet, telephone or mail, those shares will be voted by the trustees as directed by the plan sponsor or by an independent fiduciary selected by the plan sponsor.

 

Proxy Statement Proposals

 

At each annual meeting stockholders are asked to elect directors to serve on the Board of Directors and to ratify the appointment of the Company’s independent registered public accounting firm for the year. Other proposals may be submitted by the Board of Directors or stockholders to be included in the proxy statement. To be considered for inclusion in the 2010 Annual Meeting Proxy Statement, stockholder proposals must be received by the Company no later than November 20, 2009.

 

For any proposal that is not submitted for inclusion in next year’s proxy statement, but is instead sought to be considered as timely and presented directly at the 2010 Annual Meeting, Securities and Exchange Commission rules permit management to vote proxies in its discretion if the Company: (1) receives notice of the proposal before the close of business on February 3, 2010 and advises stockholders in the 2010 Annual Meeting Proxy Statement about the nature of the matter and how management intends to vote on such matter; or (2) does not receive notice of the proposal prior to the close of business on February 3, 2010.

 

Stockholder Nominations for Election of Directors

 

The Corporate Governance Committee recommends nominees to the Board of Directors for election as directors at each annual meeting. The Committee will consider nominations submitted by stockholders of record and received by the Corporate Secretary by the first Monday in December. Nominations must include a statement by the nominee indicating a willingness to serve if elected and disclosing principal occupations or employment for the past five years.

 

Proxy Committee

 

The Proxy Committee is composed of directors of the Company who vote as instructed the shares of DuPont Common Stock for which they receive proxies. Proxies also confer upon the Proxy Committee discretionary authority to vote the shares on any matter which was not known to the Board of Directors a reasonable time before solicitation of proxies, but which is properly presented for action at the meeting.

 

Solicitation of Proxies

 

The Company will pay all costs relating to the solicitation of proxies. Innisfree M&A Incorporated has been retained to assist in soliciting proxies at a cost of $10,000 plus reasonable expenses. Proxies may be solicited by officers, directors and employees of the Company personally, by mail, or by telephone or other electronic means. The Company will also reimburse brokers, custodians, nominees and fiduciaries for reasonable expenses in forwarding proxy materials to beneficial owners of DuPont Common Stock.

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Secrecy in Voting

 

As a matter of policy, proxies, ballots and voting tabulations that identify individual stockholders are held confidential by the Company. Such documents are available for examination only by the independent tabulation agents, the independent inspectors of election and certain employees associated with tabulation of the vote. The identity of the vote of any stockholder is not disclosed except as may be necessary to meet legal requirements.

 

 

Strong corporate governance is an integral part of the Company’s core values, supporting the Company’s sustainable growth mission. DuPont is committed to having sound corporate governance principles and practices. Please visit the Company’s website at www.dupont.com, under the “Investor Center” caption, for the Board’s Corporate Governance Guidelines, the Board-approved Charters for the Audit, Compensation and Corporate Governance Committees and related information. These Guidelines and Charters may also be obtained free of charge by writing to the Corporate Secretary.

 

 

DUPONT BOARD OF DIRECTORS

 

CORPORATE GOVERNANCE GUIDELINES

Orientation and Continuing Education

 

New directors participate in an orientation process to become familiar with the Company and its strategic plans and businesses, significant financial matters, core values including ethics, compliance programs, corporate governance practices and other key policies and practices through a review of background materials, meetings with senior executives and visits to Company facilities. The Corporate Governance Committee is responsible for providing guidance on directors’ continuing education.

 

Compensation

 

The Board believes that compensation for outside directors should be competitive. DuPont Common Stock is a key component with payment of a portion of director compensation as DuPont stock, options or similar form of equity-based compensation, combined with stock ownership guidelines requiring all outside directors to hold DuPont stock equal to at least two times the annual retainer within five years. The Compensation Committee reviews periodically the level and form of director compensation and, if appropriate, proposes changes for consideration by the full Board.

 

Annual Self-Evaluation

 

The Board and each Committee make an annual self-evaluation of its performance with a particular focus on overall effectiveness. The Corporate Governance Committee is responsible for overseeing the self-evaluation process.

 

Access to Management and Advisors

 

Directors have access to the Company’s management and, in addition, are encouraged to visit the Company’s facilities. As necessary and appropriate, the Board and its Committees may retain outside legal, financial or other advisors.

 

Board Meetings

 

Selection of Agenda Items

 

The Chair establishes the agenda for Board meetings, in conjunction with Chairs of the Committees. Directors are encouraged to suggest items for inclusion on the agenda and may raise subjects not specifically on the agenda.

 

Attendance of Senior Executives

 

The Board welcomes regular attendance of senior executives to be available to participate in discussions. Presentation of matters to be considered by the Board are generally made by the responsible executive.

 

Executive Sessions

 

Regularly scheduled Board meetings include a session of all directors and the CEO. In addition, the Board meets in regularly scheduled executive sessions without the participation of the CEO or other senior executives. The Presiding Director is generally the Chair of the Corporate Governance Committee, unless there is a matter within the responsibility of another Committee, such as CEO evaluation and compensation, when the Chair of that Committee presides.

 

Leadership Assessment

 

Succession Planning

 

The Board plans for succession to the position of CEO. The Compensation Committee oversees the succession planning process. To assist the Board, the CEO periodically provides the Board with an assessment of senior executives and their potential to succeed to the position of CEO, as well as perspective on potential candidates from outside the Company. The Board has available on a continuing basis the CEO’s recommendation should he/she be unexpectedly unable to serve. The CEO also provides the Board with an assessment of potential successors to key positions.

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	1.	Regardless of other circumstances, a Board member will not be deemed independent if he/she does not meet the independence standards adopted by the New York Stock Exchange (see below), or any applicable legal requirement.
	2.	Except in special circumstances, as determined by a majority of the independent members of the Board, the following relationships will be considered not to be material relationships that would affect a Board member’s independence:

	(a)	If the Board member is an executive officer or employee, or any member of his/her immediate family is an executive officer, of a bank to which the Company is indebted, and the total amount of the indebtedness does not exceed one percent of the total assets of the bank for any of the past three years.
	(b)	If the Board member or any member of his/her immediate family serves as an officer, director or trustee of a charitable or educational organization, and contributions by the Company do not exceed the greater of $1,000,000 or two percent of such organization’s annual consolidated gross revenues, including annual charitable contributions, for any of the past three years.

	3.	If a Board member has a relationship that exceeds the thresholds described in Section 2 above, or another significant relationship with the Company or its management that is not described in Section 2 above, then the Board will determine by a majority of the independent members whether that member’s relationship would affect the Board member’s independence.
	4.	The Board will consider all relevant facts and circumstances in determining independence.
	5.	Any determinations of independence made pursuant to Section 3 above will be disclosed in the Company’s annual meeting proxy statement.

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Current New York Stock Exchange standards state that a director will not be independent:

 

 

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1

 

 

The following chart shows the current committee membership and the number of meetings that each committee held in 2008.

 

     C = Chair

 

Directors fulfill their responsibilities not only by attending Board and committee meetings but also through communication with the Chair and CEO and other members of management relative to matters of mutual interest and concern to the Company.

 

In 2008, eight meetings of the Board were held. With the exception of Masahisa Naitoh, who retired from the Board in April 2008, each director attended at least 86% of the aggregate number of meetings of the Board and the committees of the Board on which the director served. Attendance at these meetings averaged 94% among all directors in 2008. Mr. Naitoh attended 50% of the aggregate number of meetings of the Board and the committees of the Board on which he served. Mr. Naitoh’s absences from Board and committee meetings were due to illness.

 

As provided in the Board’s Corporate Governance Guidelines, directors are expected to attend the Company’s Annual Meeting of Stockholders. All directors but Mr. Naitoh attended the 2008 Annual Meeting.

 

The Board of Directors has adopted written policies and procedures relating to the approval or ratification of “Related Person Transactions.” Under the policies and procedures, the Corporate Governance Committee

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(“Governance Committee”) (or its Chair, under some circumstances) reviews the relevant facts of all proposed Related Person Transactions and either approves or disapproves of the entry into the Related Person Transaction, by taking into account, among other factors it deems appropriate:

 

 

No director may participate in any discussion or approval of a Related Person Transaction for which he/she or any of his/her immediate family members is the Related Person. Related Person Transactions are approved or ratified only if they are determined to be in the best interests of DuPont and its stockholders.

 

If a Related Person Transaction that has not been previously approved or previously ratified is discovered, the Related Person Transaction will be presented to the Governance Committee for ratification. If such Related Person Transaction is not ratified by the Governance Committee, then the Company shall either ensure all appropriate disclosures regarding the transaction are made or, if appropriate, take all reasonable actions to attempt to terminate the Company’s participation in such transaction.

 

Under the Company’s policies and procedures, a “Related Person Transaction” is generally any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships in which: (i) DuPont was, is or will be a participant; (ii) the aggregate amount involved exceeds $120,000 in any fiscal year; and (iii) any Related Person had, has or will have a direct or indirect material interest. A “Related Person” is generally any person who is, or at any time since the beginning of DuPont’s last fiscal year was: (i) a director or an executive officer of DuPont or a nominee to become a director of DuPont; (ii) any person who is known to be the beneficial owner of more than five percent of any class of DuPont’s outstanding Common Stock; or (iii) any immediate family member of any of the foregoing persons.

 

Certain Relationships and Related Transactions

 

As discussed above, the Governance Committee is charged with reviewing issues involving independence and all Related Person Transactions. DuPont and its subsidiaries purchase products and services from and/or sell products and services to companies of which certain of the directors of DuPont, or their immediate family members, are executive officers. The Governance Committee and the Board have reviewed such transactions and relationships and do not consider the amounts involved in such transactions material. Such purchases from and sales to each company involve less than either $1,000,000 or two percent of the consolidated gross revenues of each of the purchaser and the seller and all such transactions are in the ordinary course of business. Some such transactions are continuing and it is anticipated that similar transactions will occur from time to time. The spouse of Ms. Kullman, Chief Executive Officer, is Director-Corporate Marketing at DuPont and received total compensation in 2008 valued at $315,000, which is commensurate with that of his peers and reflects the Company-wide reduction in short-term incentive awards.

 

As of December 31, 2008, State Street Bank and Trust Company was the beneficial owner of 5.8% of DuPont Common Stock. DuPont Capital Management Corporation (“DCM”), a subsidiary of DuPont, has an unconsolidated joint venture with State Street Global Advisors, Inc. (“SSgA”), called Wilton Asset Management, LLC (“Wilton”), which offers private equity investment advisory services to institutional and high net worth investors. Wilton manages a private equity fund from which DCM earned $202,800 in subadvisory fees during 2008. SSgA earned the same amount for marketing, administrative and accounting services. For 2008, unaudited net income of the joint venture was $475,856, which was shared equally between DCM and SSgA. In addition, DCM and SSgA each received a cash dividend during 2008 of $465,000 which related to prior year earnings. State Street is also trustee of the DuPont Pension Trust Fund (covering the principal U.S. pension plan and the pension plan of a subsidiary) and custodian for DuPont UK’s pension plan. Trade commissions and fees related to brokerage services totaling $277,700 were paid to State Street during 2008, of which $277,000 was paid by the DuPont UK pension plan and the remainder from other DuPont pension

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plans. DCM also paid State Street $48,700 in transaction and maintenance fees for a product that links investment managers to custodians.

 

Stockholders and other parties interested in communicating directly with the Board, Chair, Presiding Director or other outside director may do so by writing in care of the Corporate Secretary, DuPont Company, 1007 Market Street, D9058, Wilmington, DE 19898. The Board’s independent directors have approved procedures for handling correspondence received by the Company and addressed to the Board, Chair, Presiding Director or other outside director. Concerns relating to accounting, internal controls or auditing matters are immediately brought to the attention of the Company’s internal audit function and handled in accordance with procedures established by the Audit Committee with respect to such matters, which include an anonymous toll-free hotline (1-800-476-3016) and a website through which to report issues (https://reportanissue.com/dupont/welcome).

 

The Board has adopted a Code of Business Conduct and Ethics for Directors with provisions specifically applicable to directors. In addition, the Company has a Code of Conduct applicable to all employees of the Company, including executive officers, and a Code of Ethics for the Chief Executive Officer, Chief Financial Officer and Controller. The Code of Business Conduct and Ethics for the DuPont Board of Directors, the DuPont Code of Conduct, and Code of Ethics for the Chief Executive Officer, Chief Financial Officer and Controller are available on the Company’s website (www.dupont.com) under Investor Center, Corporate Governance. Copies of these documents may also be obtained free of charge by writing to the Corporate Secretary.

 

The Office of the Chief Executive (OCE) has responsibility for the overall direction and operations of all the businesses of the Company and broad corporate responsibility in such areas as corporate financial performance, environmental leadership and safety, development of global talent, research and development and global effectiveness. All seven members are executive officers.

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The Audit Committee of the Board of Directors (the “Committee”) assists the Board in fulfilling its oversight responsibilities with respect to the external reporting process and the adequacy of the Company’s internal controls. Specific responsibilities of the Committee are set forth in the Audit Committee Charter adopted by the Board and last amended and restated effective March 4, 2009. The Charter is available on the Company’s website (www.dupont.com) under Investor Center, Corporate Governance.

 

The Committee is comprised of five directors, all of whom meet the standards of independence adopted by the New York Stock Exchange and the Securities and Exchange Commission. Subject to stockholder ratification, the Committee appoints the Company’s independent registered public accounting firm. The Committee approves in advance all services to be performed by the Company’s independent registered public accounting firm in accordance with the Committee’s Policy on Pre-approval of Services Performed by the Independent Registered Public Accounting Firm. A summary of the Policy is included with this Proxy Statement as part of the proposal seeking ratification of the independent registered public accounting firm.

 

Management is responsible for the Company’s financial statements and reporting process, for establishing and maintaining an adequate system of internal control over financial reporting, and for assessing the effectiveness of the Company’s internal control over financial reporting. PricewaterhouseCoopers LLP (PwC), the Company’s independent registered public accounting firm, is responsible for auditing the Company’s Consolidated Financial Statements and for assessing the effectiveness of internal control over financial reporting. The Committee has reviewed and discussed the Company’s 2008 Annual Report on Form 10-K, including the audited Consolidated Financial Statements of the Company and Management’s Report on Internal Control over Financial Reporting, for the year ended December 31, 2008 with management and with representatives of PwC.

 

The Committee has also discussed with PwC matters required to be discussed by Statement on Auditing Standards No. 61 (Communications with Audit Committees), as amended. The Committee has received from PwC the written disclosures 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 PwC its independence.

 

The Committee has considered whether the provision to the Company by PwC of limited nonaudit services is compatible with maintaining the independence of PwC. The Committee has satisfied itself as to the independence of PwC.

 

Based on the Committee’s review of the audited Consolidated Financial Statements of the Company, and on the Committee’s discussions with management of the Company and with PwC, the Committee recommended to the Board of Directors that the audited Consolidated Financial Statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

 

AUDIT COMMITTEE

 

Lois D. Juliber, Chair

Curtis J. Crawford

John T. Dillon

Eleuthère I. du Pont

Marillyn A. Hewson

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Nonemployee directors receive compensation for Board service, which is designed to fairly compensate directors for their Board responsibilities and align their interests with the long-term interests of stockholders. An employee director receives no additional compensation for Board service.

 

The Compensation Committee, which consists solely of independent directors, has the primary responsibility to review and consider any revisions to directors’ compensation. The process for setting director pay is guided by the following principles:

 

 

 

 

 

With the assistance of Frederic W. Cook & Co., Inc., the independent compensation consultant retained by the Compensation Committee, the Committee closely monitors trends in director compensation in the marketplace.

 

The compensation program for nonemployee directors for 2008 and 2009 is described in detail in the chart below:

 

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The Company does not pay meeting fees, but does pay for or reimburse directors for reasonable travel expenses related to attending Board, committee, educational, and Company business meetings. Spouses are invited occasionally to accompany directors to Board-related events. In such situations, the Company pays or reimburses travel expenses for spouses. These travel expenses are imputed as income to the directors and are grossed up to cover taxes. Details are reflected in the following 2008 Directors’ Compensation table:

 

2008 DIRECTORS’ COMPENSATION

 

 

 

		Outstanding Stock Awards				Outstanding Option Awards
Name		at December 31, 2008(a)				at December 31, 2008
R. H. Brown			5,399				20,000
R. A. Brown			4,293				—
B. P. Collomb			4,293				—
C. J. Crawford			5,399				20,000
A. M. Cutler			2,223				—
J. T. Dillon			5,399				8,700
E. I. du Pont			5,399				—
M. A. Hewson			4,446				—
L. D. Juliber			5,399				20,000
W. K. Reilly			5,399				20,000
Former Directors
M. Naitoh(b)			2,709				20,000
S. O’Keefe			5,399				—

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Stock Ownership Guidelines

 

Stock ownership guidelines require each nonemployee director to hold DuPont Common Stock equal to a multiple of two times the annual retainer. Directors have up to five years from date of election to achieve the required ownership. As of the end of 2008, four of ten directors met or exceeded the ownership requirements. The six remaining directors are on track to achieve the ownership goal within the five-year period established.

 

Deferred Compensation

 

Under the DuPont Stock Accumulation and Deferred Compensation Plan for Directors, a director may defer all or part of the Board retainer and committee fees in cash or stock units until a specified year, until retirement as a director, or until death. Interest accrues on deferred cash payments and dividend equivalents accrue on deferred stock units. This deferred compensation is an unsecured obligation of the Company.

 

Retirement Income Plan

 

The Company’s retirement income plan for nonemployee directors was discontinued in 1998. Nonemployee directors who began their service on the Board before the plan’s elimination continue to be eligible to receive benefits under the plan. Annual benefits payable under the plan equal one-half of the annual Board retainer (exclusive of any committee compensation and stock, RSU or option grants) in effect at the director’s retirement. Benefits are payable for the lesser of life or ten years.

 

Directors’ Charitable Gift Plan

 

Effective October 29, 2008, the Company discontinued its Charitable Gift Plan with respect to future directors. The Directors’ Charitable Gift Plan was established in 1993. After the death of a director, the Company will donate five consecutive annual installments of up to $200,000 each to tax-exempt educational institutions or charitable organizations recommended by the director and approved by the Company.

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A director is fully vested in the plan after five years of service as a director or upon death or disability. The plan is unfunded; the Company does not purchase insurance policies to satisfy its obligations under the plan. The directors do not receive any personal financial or tax benefit from this program because any charitable, tax-deductible donations accrue solely to the benefit of the Company. Employee directors may participate in the plan if they pay their allocable cost.

 

Accidental Death and Disability Insurance

 

The Company also maintains $300,000 accidental death and disability insurance on nonemployee directors.

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The 13 nominees for election as directors are identified on pages 17 through 20. With the exception of Mr. Bodman, all nominees are now members of the Board of Directors.

 

The Board has determined that, except for C. O. Holliday, Jr., the Chair, and E. J. Kullman, the Chief Executive Officer, each of the nominees and each other person who served as director during 2008 is or was, as the case may be, independent within the independence requirements of the New York Stock Exchange listing standards and in accordance with the Guidelines for Determining the Independence of DuPont Directors set forth in the Board’s Corporate Governance Guidelines. See pages 6-7.

 

The Board knows of no reason why any nominee would be unable to serve as a director. If any nominee should for any reason become unable to serve, the shares represented by all valid proxies will be voted for the election of such other person as the Board of Directors may designate following recommendation by the Corporate Governance Committee, or the Board may reduce the number of directors to eliminate the vacancy.

 

The following material contains information concerning the nominees, including their period of service as director, their recent employment, other directorships, and age as of the 2009 Annual Meeting.

 

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Set forth below is certain information, as of December 31, 2008, concerning beneficial owners known to DuPont of more than five percent of DuPont’s outstanding Common Stock:

 

		Number of Shares				Percent of Shares
Name and Address of Beneficial Owner		Beneficially Owned				Outstanding
Capital World Investors			47,455,620(1)				5.3%(1)
333 South Hope Street
Los Angeles, CA 90071
State Street Bank and Trust Company			52,189,280(2)				5.8%(2)
State Street Financial Center
One Lincoln Street
Boston, MA 02111

 

The following table includes shares of DuPont Common Stock beneficially owned by each director and nominee, by each executive officer named in the 2008 Summary Compensation Table on page 37 of this Proxy Statement and by all directors and executive officers as a group as of December 31, 2008 (unless otherwise noted).

 

Under rules of the Securities and Exchange Commission, “beneficial ownership” includes shares for which the individual, directly or indirectly, has or shares voting or investment power, whether or not the shares are held for the individual’s benefit.

 

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Section 16(a) Beneficial Ownership Reporting Compliance

 

Directors and executive officers are required to file reports of ownership and changes in ownership of DuPont Common Stock with the Securities and Exchange Commission. In 2008, one report for J. L. Keefer covering one transaction was filed one day late because of an administrative error.

 

No member of the Compensation Committee was at any time during 2008 an officer or employee of DuPont or any of the Company’s subsidiaries nor was any such person a former officer of DuPont or any of the Company’s subsidiaries. In addition, no Compensation Committee member is an executive officer of another entity at which one of the Company’s executive officers serves on the board of directors.

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The Compensation Committee of the Board of Directors has reviewed the Compensation Discussion and Analysis (“CD&A”) section included in this Proxy Statement.

 

The Compensation Committee has also reviewed and discussed the CD&A with management.

 

Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the CD&A be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 and in this Proxy Statement.

 

The members of the Compensation Committee of the Board of Directors have provided this report.

 

COMPENSATION COMMITTEE

 

John T. Dillon, Chair
Richard H. Brown
Curtis J. Crawford
Alexander M. Cutler
Eleuthère I. du Pont

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At DuPont, we are focused on accomplishing our mission of sustainable growth, which we define as increasing stockholder and societal value while decreasing our environmental footprint throughout the value chains in which we operate. We strive to accomplish growth and innovation within our core values, which include safety and health, environmental stewardship, highest ethical behavior, and respect for people. The executive compensation programs at DuPont are designed to attract, motivate, reward and retain the high quality executives necessary for the leadership of the Company and accomplishment of its strategies. The following principles guide the design and administration of those compensation programs:

 

 

An important aspect of the Compensation Committee’s annual work relates to the determination of compensation for the Company’s Named Executive Officers (“NEOs”) and other Section 16 officers. The NEOs are the Company’s Chief Executive Officer (“CEO”), Chief Financial Officer, and three other most highly compensated executive officers ranked by their total compensation (reduced by the amount of change in pension value and nonqualified deferred compensation earnings) in the 2008 Summary Compensation Table on Page 37 of this Proxy Statement. In 2008, the Compensation Committee (the “Committee” for purposes of this CD&A) retained Frederic W. Cook & Co., Inc. (“Cook”) to serve as an independent compensation consultant to the Committee on executive compensation matters. Cook performs work at the direction and under the supervision of the Committee, and provides advice, research and analytical services on a variety of subjects, including compensation of NEOs, nonemployee director compensation, and executive compensation trends. Cook provided no services to DuPont other than those provided to the Committee.

 

Base salary, short-term incentive (“STIP”) awards under the cash-based component of the Company’s Equity and Incentive Plan (“EIP”) and long-term incentive (“LTI”) awards issued under the EIP for the CEO are reviewed and recommended by the Committee and approved by the Board of Directors. Base salary, STIP and LTI awards for the other NEOs (and other Section 16 officers) are reviewed and recommended by the CEO and approved by the Committee.

 

Competitive Analysis

 

All compensation elements are assessed primarily against published compensation surveys that represent large companies with median revenue comparable to DuPont’s (“Market”), including surveys by Towers Perrin, Mercer, Hewitt, Watson Wyatt Data Services and Hay Group. We believe that this approach assures a complete and robust picture of the overall compensation environment and assures consistent comparisons for the CEO and other NEOs.

 

We also use a select group of peer companies (“Peer Group”) to: (i) benchmark pay design (mix, performance criteria, etc.); (ii) measure financial performance; and (iii) test the link between pay and performance. Because of the number of Peer Group companies, we occasionally find information to be inconsistent year over year. For this reason, we use Peer Group information only to validate the results of our competitive Market analysis.

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The Peer Group represents the multiple markets in which we compete — including markets for executive talent, customers and capital — and is comprised of large, high-performing U.S.-based companies with a strong scientific focus and/or research intensity and a strong international presence.

 

The Peer Group includes the following companies:

 

3M Company			Ingersoll-Rand Company Limited
Abbott Laboratories			Johnson & Johnson
Air Products & Chemicals, Inc.			Johnson Controls, Inc.
Baxter International Inc.			Kimberly-Clark Corporation
The Boeing Company			Merck & Co., Inc.
Caterpillar Inc.			Monsanto Company
Eastman Kodak Company			Motorola, Inc.
Emerson Electric Company			Procter & Gamble Company
Hewlett-Packard Company			Rohm and Haas Company
Honeywell International Inc.			United Technologies Corporation

 

Total Compensation Review

 

In addition to reviewing external compensation practices, the Committee reviews all components (including perquisites) of the current and historic compensation of the NEOs. That review includes a comprehensive analysis of past compensation actions and the development of detailed tally sheets for the NEOs. Tally sheets permit the Committee to bring together, in one place, all of the elements of actual and potential future compensation of the NEOs, as well as information about wealth accumulation, so that the Committee may analyze both individual elements of compensation (including mix) as well as total actual and projected compensation.

 

Tally sheets include the following information: current base salary, current short and long-term incentives, cash compensation history (including short-term incentives), equity award history (with potential and realized values), cash flow history and stock option exercise history, as well as a review of the benefits that would become payable upon various termination scenarios.

 

Pay Equity Multiple

 

To assure that NEOs are paid appropriately relative to each other and that we appropriately manage the pay differential between the CEO and other NEOs we apply a pay equity multiple of two to three times average total cash compensation (“TCC” — base salary plus STIP awards) of the other NEOs and three to four times average total direct compensation (“TDC’’ — TCC plus LTI awards) of the other NEOs.

 

Using NEOs as the comparison group provides for a stable group not dependent on titles and gives us the further advantages of transparency and the ability to compare to the Peer Group or other companies.

 

* * *

 

The Committee has reviewed all components of each NEO’s compensation and utilized Market and Peer Group data to perform a competitive compensation analysis. Based on this review, the Committee determined that the NEOs’ compensation is consistent with the Market, the Company’s financial performance and each individual’s performance. The Compensation Committee believes that the NEOs’ total compensation in the aggregate is reasonable, competitive and not excessive.

 

 

Our compensation programs support our business strategies by providing incentives to grow the business, increase earnings, generate and preserve cash, improve return on investments, and grow stockholder value, all in a manner consistent with our core values. In addition to aligning the NEOs’ interests with those of our stockholders, we recognize the individual and team performance of each NEO in meeting our business objectives.

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We believe that a performance-oriented program, which provides competitive compensation, maintains internal equity and is cost effective, allows us to attract and retain superior executive talent and remain true to our executive compensation philosophy and core values.

 

Our executive compensation program consists of the following components:

 

 

Significant Events and Impact on the Executive Compensation Program

 

The Company and the Committee have closely monitored the recent economic volatility and its impact on our executive compensation programs. Our business units were on track for above target performance on our annual plan through the third quarter 2008. Early in the fourth quarter 2008 a financial crisis spreading globally triggered unprecedented market volatility and depressed economic growth. The fourth quarter of 2008 was the clear pivot point in the economic environment with a steep decline in demand becoming pervasive across a broader range of end markets and geographies. The industry-wide decrease in volume in the fourth quarter was so significant that it resulted in final STIP payouts that were 12% below target opportunity and 18% below 2007 payout factors.

 

The Committee reviewed the STIP design for 2009 to confirm that our performance measures are appropriate in this environment. Further, to assure that the plan reflects our focus on cash management, the Committee doubled the cash flow weighting in the 2009 STIP to 20% (from 10%). In addition, individual STIP target amounts were not increased from 2008 and the Company decided to forgo merit salary increases for 2009.

 

For 2009, the Committee also reduced annual LTI awards for NEOs by 20% versus 2008 levels. In doing so, the Committee considered the change in stock price, the resulting increase in the number of awarded stock options, RSUs and PSUs, the impact of the lower stock price on previous LTI awards, and emerging market trends. Final payout values under the 2005 PSU program (payable in 2008) and the 2006 PSU program (payable in 2009) were zero percent and 35%, respectively.

 

The Committee believes that these are responsible actions in this environment which balance the many stakeholder interests and the objectives of our executive compensation program.

 

Pay Mix at Target

 

The Committee does not define a set pay mix for the executive officers. However, as outlined above, our programs include a strong link between pay and performance by placing a significant portion of compensation “at risk.” As such, our programs are structured so that less emphasis is placed on base salary and more than two-thirds of targeted TDC is contingent upon performance and, therefore, fluctuates with our financial results and share price. We believe this is fundamental to closely aligning executive pay with the creation of value for our stockholders.

 

For the CEO, 86% of TDC is at risk. Approximately 25% of pay at risk is tied to achievement of annual incentive goals, and 75% is tied to achievement of share price or financial goals over a longer period. This allows us to motivate and reward in the short-term, while reinforcing the importance of maintaining the long-term perspective that has served our Company for over 205 years.

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The targeted pay mix for NEOs in 2008 is displayed below.

 

 

Base Salary

 

Base salaries serve as the foundation of our compensation program. Base salary provides a regular source of income for NEOs. The majority of other executive compensation elements, including annual short-term incentives, long-term incentives, and retirement benefits are driven from base salary or the midpoint of the salary structure. Consistent with our policy for all employees, base salaries for the NEOs (including the CEO) are targeted at the Market median.

 

The Committee reviews CEO Market and Peer Group data provided by Cook and, in executive session without management present, develops a recommended base salary increase for the CEO, based on performance, competitiveness, tally sheet review and internal equity. Final compensation actions for the CEO are approved by the independent Board members.

 

Management establishes salary rates and develops recommended salary increases for NEOs based on performance, responsibilities, experience, Market competitiveness, tally sheet review and internal equity. The Committee reviews management’s recommendations and approves base salary changes for each NEO.

 

The 2008 base salary merit increase was 3.75% for the CEO and averaged 4.7% for the other NEOs. The increases fell within the Company’s merit budget guidelines for all employees, reflected market adjustments as well as expansions of roles and responsibilities, and resulted in competitive positioning versus the Market at approximately the Market median.

 

For 2009, the merit budget was set at zero, and no merit increases were given to NEOs.

 

Annual Short-Term Incentives

 

NEOs are also eligible for STIP awards designed to align participants with our annual goals and objectives and stockholders’ interests by creating a direct link to our financial and operational performance for the year. STIP targets are set as a percent of the salary structure midpoint.

 

At the beginning of each performance year, the STIP target percent for the CEO is reviewed by the Committee and approved by the independent Board members based on competitive Market data provided by Cook. At the conclusion of each performance period, the CEO’s STIP award is calculated based on financial results, reviewed by the Committee and approved by the independent Board members. Further, the Committee approves STIP targets for all participants, including the other NEOs, based on competitive Market data.

 

At the beginning of each fiscal year, the Committee approves the performance measures and weightings assigned to each measure. These performance measures were selected to drive sustainable, profitable growth and return on investment in the business markets in which the Company competes.

For 2008, the STIP awards were determined based on the following formula, measures and weightings:

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Target STIP = Salary Level Midpoint X Target STIP Percent

 

 

The measures of EPS and business unit ATOI that are used for calculation of STIP awards exclude significant items, as defined for our internal reporting purposes. Although not in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”), we believe that these non-GAAP measures are appropriate because they provide a better view of the operating performance of our individual business units for items directly under their control.

 

Performance against the measures outlined above exceeded target through the third quarter of 2008. However, the significant decrease in volume in the fourth quarter resulted in final STIP payout factors that were 12% below target opportunity and 18% below 2007 payout factors. In approving the final 2008 STIP payout pool, the Committee did not deviate from the formula. In finalizing the individual performance range of 100% to 150%, the Committee took into consideration the senior leadership team’s speed in responding to the economic downturn with specific focus on cash management, which mitigated the effects of the economic decline. For the CEO and other NEOs, the final payout determination for 2008 is outlined below.

 

		Weight				Payout Factor
EPS — year over year (excl. significant items) 2008 EPS: $2.78(1) versus 2007 EPS: $3.28(1)			20	%		80%
Weighted Average Business Unit Factor			60	%		86%
Individual Performance — Range of NEOs’ performance against critical operating tasks			20	%		100 — 150%

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		2007				2008
EPS (excluding significant items)			$3.28				$2.78
Significant Items			(0.06	)*			(0.58	)**
Reported EPS			$3.22				$2.20

 

Total annual STIP award payout is limited to 20% of consolidated net income before significant items after deducting six percent of net capital employed. Each year the Committee reviews operating results, excluding all significant items, in determining the overall limit on STIP awards. This ensures that the amount available for STIP awards fluctuates in relation to the Company’s operating results. Over the past ten years, the Committee has approved payments on average of 47% of the maximum available, ranging from 31% to 87%. The final 2008 STIP award payout pool of $140 million was 33% of this maximum available amount.

 

STIP Changes for 2009

 

For 2009, STIP awards will be based on the same metrics as 2008. However, greater emphasis will be placed on the cash flow metric in response to the importance of managing cash in the current economic environment.

 

 

Long-Term Incentives

 

Objectives

 

NEOs are also eligible for LTI awards designed to accomplish the following objectives:

 

 

 

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Award Practices

 

All equity-based awards must be approved by the independent members of the Board or the appropriate Board committee. LTI awards are established as a dollar value, which is translated into an equal mix, by fair value on the date of grant, of stock options, RSUs and PSUs.

 

Annual grants to all employees including executives are made at a pre-established Committee meeting in early February. This allows sufficient time for the market to absorb announcement of annual earnings, which is typically made during the fourth week of January. We do not time equity grants in coordination with the release of material nonpublic information. The grant price is the closing price on the date of grant.

 

Any occasional special grants to employees who are not executive officers are approved by the Special Stock Performance Committee (consisting of the Chairs of the Board and the Compensation Committee), to which the Board of Directors has delegated the authority to approve special equity grants. Grants are effective on the date of approval by the Special Stock Performance Committee.

 

Equity Vehicle Mix

 

To achieve the various long-term incentive objectives outlined above, our LTI program for NEOs consists of one-third each stock options, PSUs and RSUs.

 

This balanced program allows us to reinforce specific business objectives, address business circumstances, talent needs and philosophical considerations and support our culture. The following table summarizes the performance drivers, mix and objectives for the various LTI components as they relate to NEOs:

 

		Stock Options		PSUs		RSUs
LTI Mix		1/3		1/3		1/3
Performance Drivers		•   Stock price appreciation (longer-term)		•   TSR •   Revenue growth (intermediate-term)		•   Stock price appreciation (intermediate-term)
Objectives		•   Stockholder alignment and alignment with long-term business objectives		•   Stockholder alignment and focus on business priorities such as revenue growth and TSR		•   Capital accumulation •   Retention •   Stock ownership
		•   Stock ownership •   Lead/support business strategy as it changes •   Retention		•   Drive operating and financial performance •   Specific alignment with objectives for balanced growth, profitability and capital management •   Retention •   Measure performance relative to our Peer Group

 

Award Target

 

The Committee establishes LTI targets for each NEO at approximately the competitive Market median. Actual grants can range from 0% to 200% of the target. The range reflects current contributions to future strategic value creation as well as future potential to create strategic value for the Company, including the achievement of longer-term critical operating tasks such as driving research productivity, developing sales capability and growing sales in emerging markets. Generally, individual LTI awards for NEOs range from 90% to 110% of target.

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Stock Options

 

Nonqualified stock option grants are typically made annually at the closing price on the date of grant, vest in one-third increments over three years and, starting in 2009, carry a term of seven years (increased from six-year term for previous awards), which we believe creates a strong performance and retention incentive.

 

Beginning with grants made in 2003, the Company has expensed stock options. We do not reprice stock options. A reload feature is available for options granted from 1997 through 2003 to facilitate stock ownership by management. Effective with options granted in 2004, option grants do not include a reload feature and we do not intend to add this feature in the future.

 

RSUs and PSUs

 

RSUs offer a retentive feature to our LTI program and also provide further alignment with stockholders through increased ownership levels. RSUs are typically granted annually and vest over a three-year period.

 

The PSU program ensures both stockholder alignment and focus on business priorities, by clearly communicating what is most important in driving business performance and ultimately creating stockholder value. Typically, PSUs are awarded to each NEO at the beginning of a three-year performance cycle. At the conclusion of the performance cycle, payouts can range from 0% to 200% of the target grant based on pre-established, performance-based corporate objectives. For awards granted in 2008, those objectives are revenue growth and total shareholder return (“TSR”) (both on a relative basis versus the Peer Group) over the three-year performance period. The payout on PSUs granted in 2008 will be determined based on the table below.

 

Performance Targets (2008 — 2010 Performance Period)

 

Revenue Growth Payout % x Target Award x 50%

+

TSR Payout % x Target Award x 50%

=

Final Award

 

DuPont Revenue Growth or TSR vs.
Peer Group			Revenue Growth Payout % or TSR Payout %
Below 25th percentile*				0	%
At 25th percentile*				25	%
At 50th percentile*				100	%
At or above 75th percentile*				200	%
*Interim points are interpolated

 

2005 PSU Payout (payable in 2008)

 

The performance period for PSUs granted in 2005 ended on December 31, 2007. The final number of shares earned was based on Revenue Growth relative to the Peer Group (at the time of award), Return on Invested Capital (“ROIC”) relative to the Peer Group for performance years 2005 and 2006 and an absolute ROIC target for performance year 2007. The final payout determination was made in March of 2008 after a review of the Company’s performance relative to the Peer Group. ROIC performance fell at the 46th percentile rank versus the peer group at that time for 2005 and 2006. For 2007, ROIC results were approximately on target at 16.2%. However, three-year Revenue Growth performance relative to the 2005 peer group fell in the bottom quartile, which resulted in a zero payout overall.

 

The target PSU numbers and 2007 year-end values are included in the 2007 Outstanding Equity Awards table in the 2008 Proxy Statement.

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2006 PSU Payout (payable in 2009)

 

The performance period for PSUs granted in 2006 ended on December 31, 2008. The final number of shares earned was based on Revenue Growth relative to the Peer Group (at the time of award), ROIC relative to the Peer Group for performance year 2006 and an absolute ROIC target for performance years 2007 and 2008. The final payout determination was made in March of 2009 after a review of the Company’s performance relative to the Peer Group and internal targets. The Committee approved a final PSU payout at 35% of target based on the following assessment.

 

 

Further details are provided in the 2008 Option Exercises and Stock Vested Table. The target PSU numbers and 2008 year-end values are also included in the Outstanding Equity Awards table.

 

Payout levels at zero and at 35% for the 2005 and the 2006 PSU programs, respectively, demonstrate the strong alignment of pay to long-term performance.

 

LTI Changes for 2009

 

LTI awards made to NEOs and other executives in February 2009 were reduced by 20% from 2008 values. The term for stock options was increased from six years to seven years. In arriving at this decision, the Committee took into consideration anticipated fundamental changes to the competitive Market, while addressing the Company’s objectives to motivate and retain employees for the long-term, link pay to performance and appropriately align our program with shareholder interests.

 

Benefits

 

Our global benefit philosophy for employees, including the NEOs and other executive officers, is to provide a package of benefits consistent with local practices and competitive within individual markets.

 

NEOs participate in the same health and welfare and retirement programs on the same terms and conditions as other employees. For U.S. parent company employees, this offering consists of the following:

 

 

The Pension and Retirement Plan is a tax-qualified defined benefit plan under which benefits are based primarily on an employee’s years of service and final average pay. Employees hired after December 31, 2006 do not participate in the plan. Employees hired after December 31, 2006 participate in the RSP. All others participated in the SIP. Effective January 1, 2009, the SIP and RSP were merged into one plan named the RSP. The SIP, like the RSP, was a tax-qualified defined contribution plan with a 401(k) feature.

 

In addition to these tax-qualified retirement plans, executive officers may participate in nonqualified retirement plans we offer that restore those benefits that cannot be paid as a result of Internal Revenue Code (“IRC”) limits applicable to tax-qualified retirement plans, including:

 

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These plans, generally, apply to all eligible employees who exceed the IRC limits. Retirement benefits in excess of these limits are paid from our operating cash flows.

 

In 2009, NEOs will also be eligible to participate in the DuPont Management Deferred Compensation Plan (“MDCP”), which allows eligible participants to defer base salary, STIP awards and LTI awards. Under the MDCP, eligible employees were also permitted to defer STIP awards earned during 2008 and payable in 2009.

 

Perquisites and Personal Benefits

 

As a matter of business philosophy, we provide very limited perquisites or personal benefits to NEOs. All employees who receive LTI awards are provided financial education services such as seminars, which are focused on assisting employees to achieve the highest value from our compensation and benefits programs. In addition, personal financial counseling (excluding tax counseling) is provided to senior leaders, including NEOs. The cost of such financial counseling is generally less than $10,000 per NEO.

 

Company Aircraft

 

The Company aircraft are dedicated primarily to senior management support and are intended for business travel only. An exception is provided for the CEO, who is required, under our personal security policy, to use Company aircraft for all air travel needs, including nonbusiness air travel. Costs associated with nonbusiness travel are treated as personal benefits for Mr. Holliday and are disclosed as such in the “All Other Compensation” column in the 2008 Summary Compensation Table.

 

Our policy regarding use of the Company aircraft by executive officers is driven by business efficiency considerations and security concerns. The policy is reviewed periodically in light of emerging developments concerning those areas. Changes in levels of security risks in certain countries could, for example, result in modifications regarding use of Company aircraft to those destinations.

 

The evaluation of the CEO is one of the fundamental duties of the Board of Directors. Following a self-assessment by the CEO the independent Board members review the CEO’s performance in executive sessions.

 

In addition to independent Board members’ assessment of performance, the Board considers competitive Market information and reviews the compensation of CEOs of the Peer Group. The Board also reviews pay equity multiples and tally sheets prior to finalizing CEO pay decisions.

 

Mr. Holliday

 

In evaluating Mr. Holliday’s performance, the Board considered the Company’s overall financial, strategic and operational performance for 2008, given a highly challenging environment. Other factors included the transformation of the Company during his tenure, Mr. Holliday’s visionary global focus, talent development and succession management (demonstrated through the transition to Ms. Kullman), and Mr. Holliday’s swift reaction to the economic downturn.

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Mr. Holliday became nonemployee Chair of the Board effective February 1, 2009.

 

 

For 2008, the Board approved a 3.75% increase in salary to $1,369,500. This increase maintained Mr. Holliday’s competitive position slightly below the Market median and was consistent with the salary budget set for U.S. professional employees.

 

Consistent with the treatment of all employees, Mr. Holliday did not receive a merit salary increase for 2009. Mr. Holliday retired from the Company effective January 31, 2009.

 

 

Mr. Holliday’s STIP award for 2008 was $1.732 million, reflecting the final payout factors based on corporate and business unit financial results (80% and 86%, respectively), and an IPA (representing individual performance) of 110%. This resulted in a STIP award that was 78% of the 2007 STIP award.

 

 

After careful review of the Market data, the Board approved a 2008 LTI award of $6.5 million, which was approximately 25% below the Market median. The LTI award was delivered in the form of 408,806 stock options (at a Black Scholes value of $5.30), 48,428 RSUs and 48,428 PSUs (both at the closing price on grant date of $44.74). The award was consistent with the Board’s long-standing goal of rewarding and retaining executives at levels that (i) reflect past performance and future potential and (ii) maintain internal consistency.

 

With Mr. Holliday’s transition to nonemployee Chair of the Board effective February 1, 2009, he was eligible only for LTI awards issued to nonemployee Board members. As such, for 2009, he received 4,940 RSUs with a grant date value of $115,000.

 

Total Compensation Review

 

The tally sheet review confirmed that decisions made by the Committee in the past resulted in compensation aligned with our performance and external benchmarks (including Market and Peer Group comparisons). The analysis also confirmed that there were no unexpected consequences flowing from past compensation decisions.

 

Pay Equity Multiple (“PEM”)

 

To further validate its compensation decisions, the Board reviewed CEO pay equity multiples relative to the other NEOs and found them to be on the low end of the established range for total direct compensation. The final 2008 multiples and the target 2009 multiples are as follows:

 

Element (PEM
Multiple Range)			Target 2008*					Actual 2008*					Target 2009**
TCC (2 - 3 times NEO)				2.5					2.3					2.5
TDC (3 - 4 times NEO)				3.1					3.0					3.1

 

 

The following provides a summary of Mr. Holliday’s TDC for 2008.

 

CEO		Base Salary				STIP				LTI				TDC
C.O. Holliday, Jr.		$	1,369,500			$	1,732,000			$	6,500,009			$	9,601,509

 

Ms. Kullman

 

In September 2008, the Board named Ms. Kullman President (effective October 1, 2008) and CEO (effective January 1, 2009). At that time, the Board approved an increase in Ms. Kullman’s base salary to $900,000,

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effective October 1, 2008. At that time, the Board also approved a further increase, to $1.2 million effective January 1, 2009, in recognition of Ms. Kullman’s appointment as CEO. The new salary was targeted at the Market 25th percentile for CEO and Chair, reflecting Ms. Kullman’s tenure in the role of CEO and the absence of responsibilities as Chair of the Board.

 

In addition, the Board approved a 2009 LTI award of $5.2 million, which was below the 25th percentile of the Market for CEO and Chair, and reflects the Committee’s decision to reduce LTI values by 20% for all executives. The LTI award was delivered in the form of 646,767 stock options (at a Black Scholes value of $2.68), 74,456 RSUs and 74,456 PSUs (both at the closing price on grant date of $23.28).

 

The Committee approves compensation actions for the NEOs, excluding the CEO. The Committee’s decisions are based on a review of an individual NEO’s contributions during the year as well as on an analysis of the ability of the individual to contribute to the success of the Company in the future. In making its determinations regarding compensation for NEOs in 2008, the Committee reviewed such factors as achievement of cost goals, preservation and generation of cash and reduction in working capital as well as performance on the Company’s core values.

 

The table below provides a more concise overview of the Committee’s analysis and decisions and is not a substitute for the information provided in the 2008 Summary Compensation Table or 2008 Grants of Plan-Based Awards table required by the Securities and Exchange Commission (“SEC”), both of which are included in this Proxy Statement on pages 37 and 40, respectively. The LTI values in the table below (and in the table above for the CEO) indicate the total value of LTI awards granted in 2008, as of the grant date. These values differ from the values shown in the 2008 Summary Compensation Table, which is prepared under the SEC’s proxy statement disclosure rules and represents the total accounting expense recognized in 2008 under SFAS 123(R) with respect to LTI awards. They also differ from the values shown in the 2008 Grants of Plan-Based Awards table in that the PSUs below are valued as of the closing price on date of grant, and not based on the Monte Carlo model as required under the SFAS 123(R) rules. In finalizing equity awards, the Committee took into consideration the grant date value of the award and not the accounting expense for 2008.

 

 

 

A comprehensive review for each NEO confirmed that the compensation reflected in the table above is aligned with performance and Market comparisons. The tally sheet analysis also confirmed that there were no unexpected consequences flowing from past compensation decisions.

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DuPont generally does not enter into employment agreements (including severance agreements) with executives. The Company’s Career Transition Financial Assistance Plan (“CTP”) currently provides termination benefits equal to one month’s pay for each two years of service, with a maximum of twelve months’ pay. For purposes of the CTP, pay equals base salary plus last actual STIP award. The program applies to substantially all U.S. parent company employees terminated for lack of work, including executives. On occasion, the Company may negotiate individual arrangements for senior executives and has entered into an agreement with R. R. Goodmanson. For details of this agreement, see Retention Agreement on page 36 of this Proxy Statement.

 

DuPont does not currently have Change in Control Arrangements in place. As part of the overall review of compensation policies and programs, this subject is periodically reviewed against market place practices and business necessity.

 

The federal tax laws impose requirements in order for compensation payable to the CEO and certain executive officers to be fully deductible. The Company believes it has taken appropriate actions to maximize its income tax deduction.

 

Internal Revenue Code (“IRC”) Section 162(m) generally precludes a public corporation from taking a deduction for compensation in excess of $1,000,000 for its CEO or any of its three other highest-paid executive officers (other than the CEO or Chief Financial Officer), unless certain specific and detailed criteria are satisfied.

 

Annually, the Company reviews all compensation programs and payments to determine the tax impact on the Company as well as on the executive officers. In addition, the Company reviews the impact of its programs against other considerations, such as accounting impact, stockholder alignment, market competitiveness, effectiveness and perceived value to employees. Because many different factors influence a well-rounded, comprehensive executive compensation program, some compensation may not be deductible under IRC Section 162(m).

 

The Company will continue to monitor developments and assess alternatives for preserving the deductibility of compensation payments and benefits to the extent reasonably practicable, consistent with its compensation policies and as determined to be in the best interests of DuPont and its stockholders.

 

The Company believes NEOs and senior executives should have a significant equity position in the Company. Stock ownership guidelines are in place to align NEOs and other senior executives with the interests of stockholders and to encourage a longer-term focus in managing the Company. The guidelines require that NEOs and other senior executives accumulate and hold, within three years of the date of achieving the various executive levels, shares of DuPont Common Stock with a value equal to a specified multiple of base pay. The multiples for specific executive levels are set forth below:

 

Chief Executive Officer			5x
Executive Vice President			4x
Senior Vice President / Group Vice President			3x
Vice President			1.5x

 

An annual review is conducted to assess compliance with the guidelines. The CEO and other NEOs exceed the ownership guidelines.

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DuPont stock may be held in various forms to achieve the applicable ownership guidelines, including: direct ownership, shares held in the SIP or RSP, stock units held in the SDSRP or RSRP, deferred stock units and RSUs. Unexercised stock options, including vested options, as well as PSUs are not included in determining whether an executive has achieved the ownership levels.

 

The EIP contains a “clawback” provision under which: (1) a grantee forfeits the right to receive future awards under the EIP; and (2) the Company may demand repayment of awards if the grantee engages in misconduct, including grantee’s conduct that (a) results in termination for cause (as defined in the plan), (b) breaches a noncompete or confidentiality clause between the Company and grantee or (c) results in the Company restating financial statements due to material noncompliance and the grantee either (i) had knowledge of the material noncompliance or the circumstances that gave rise to such noncompliance and failed to take reasonable steps to bring it to the attention of appropriate individuals within the Company or (ii) personally and knowingly engaged in practices which materially contributed to the circumstances that enabled a material noncompliance to occur. A grantee is entitled to a hearing before the full Committee at which the grantee may be represented by counsel. Consistent with the standard applicable to other Board and Committee actions, the decision of the Committee is effective if approved by the majority of the Committee’s members.

 

Awards granted under the Stock Performance Plan are subject to forfeiture if the Committee determines, after a hearing, that the grantee willfully engaged in any activity harmful to the interest of the Company. The Stock Performance Plan does not define specific instances of misconduct. Rather, what constitutes “activity harmful to the interest of the Company” is a determination made by the Committee based on the facts and circumstances in the situation at issue.

 

R. R. Goodmanson

 

In April 1999, the Company entered into a retention agreement with R. R. Goodmanson. Mr. Goodmanson joined the Company as an external executive hire in the position of Executive Vice President. In 2008, the agreement was further revised to bring it into compliance with IRC Section 409A. No changes were made to the main provisions of the agreement.

 

Mr. Goodmanson’s agreement provides for a severance payment of two years’ pay (salary plus target STIP) in the event of termination by the Company on or before May 1, 2009.

 

If Mr. Goodmanson remains with the Company through May 1, 2009 or is terminated by the Company (other than for cause) before that date, he will be entitled to a special award of $1,000,000. Mr. Goodmanson will be eligible for retiree medical, dental and life insurance coverage regardless of the age at which he retires from the Company.

 

In consideration of these benefits, Mr. Goodmanson is subject to a noncompete agreement for one year following employment termination and requirements that he not disparage the Company or, for one year following employment termination, solicit Company employees or customers. He is also subject to a confidentiality agreement covering Company trade secrets and proprietary information.

 

Further, to ensure Mr. Goodmanson’s active participation on behalf of the Company in ongoing litigation and other business matters, in 2008, the Committee approved the Company’s entry into a three-year consulting agreement with Mr. Goodmanson, effective as of his retirement, pursuant to which he will be paid a $200,000 annual retainer plus a $2,000 per diem payment when actively involved in litigation support and business projects on behalf of the Company. The agreement with Mr. Goodmanson will contain customary provisions, including a restriction on his ability to take on any work that may create a conflict of interest, protection of confidential information and reimbursement of all expenses associated with his performance under the agreement.

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The following table summarizes the compensation of the Named Executive Officers (“NEOs”) for the fiscal year ending December 31, 2008. The NEOs are the Company’s Chief Executive Officer (“CEO”), Chief Financial Officer, and three other most highly compensated executive officers ranked by their total compensation in the table below (reduced by the amount of change in pension value and nonqualified deferred compensation earnings). For a complete understanding of the table, refer to the narrative discussion that follows.