Dow is governed by its Board of Directors, which is responsible for broad corporate policy and overall performance of the company through oversight of management and stewardship. Among other duties, the Board appoints the company’s officers, assigns to them responsibility for management of the company’s operations and reviews their performance.
The Board adopted Corporate Governance Guidelines designed to assist Dow and the Board in implementing effective corporate governance practices. The guidelines are reviewed regularly by the Corporate Governance Committee in order to continue serving the best interests of Dow and its stockholders. Among other things, these guidelines delineate the Board’s responsibilities, independence, leadership structure, qualifications, election, annual self-evaluation and access to management and advisors. The Corporate Governance Guidelines, practices and policies are available on Dow’s website at investors.dow.com.
Committees of the Board are another key component of Dow Governance. The responsibilities of each committee are stated in the bylaws and in their respective committee charters. The Board currently has four committees, each with responsibilities related to economic, environmental and social topics:
Additionally, the non-employee directors meet in executive session in connection with each regularly scheduled meeting of the Board, and at other times as they may determine appropriate. During 2020, there were six executive sessions of the Dow Board led by the non-executive chairman until April 9, 2020, when the lead director was appointed and assumed the responsibility for leading the executive sessions. The committees typically meet in executive session in connection with every committee meeting.
A detailed review of Dow’s governance structure can be found in the Corporate Governance section of the 2021 Proxy Statement that was filed with the SEC on March 5, 2021.
Dow employs a systematic delegation of authority structure from the Board of Directors to the Dow leadership team and then through the company by role and responsibility in the organization. This structure enables leaders to manage the day-to-day affairs of the company and make business decisions, while allowing the Board of Directors to retain oversight and focus on Dow’s overall business strategy. This authority includes decision-making on economic, environmental and social topics.
Responsibility for economic, environmental and social topics are held by the Dow Leadership Team and the Dow Operations Team including the president and chief financial officer, chief sustainability officer, chief human resources and inclusion officer, vice president of Public Affairs, and general counsel and corporate secretary.
Stakeholders may communicate with the full Board, the chairman, the independent directors as a group or individually by mail addressed to Dow Inc., c/o Office of the Corporate Secretary, 2211 H.H. Dow Way, Midland, Michigan 48674 as described in the company’s Corporate Governance Guidelines.
An overview of Dow’s engagement efforts and review by the Board and management team can be found on Page 17 of the 2021 Proxy Statement filed with the SEC on March 5, 2021. See additional information under Stockholder Engagement.
As of June 1, 2021
1 Reflects cumulative years served as a Dow Inc. director, The Dow Chemical Company-designated director serving as a DowDuPont Inc. director, a member of the DowDuPont Inc. Materials Advisory Committee, or The Dow Chemical Company director as applicable.
The composition of the Board of Directors and its committees are available on Dow’s website at investors.dow.com. A detailed summary of the Board’s composition and qualifications can be found in the Agenda Item 1: Election of Directors section of the 2021 Proxy Statement filed with the SEC on March 5, 2021.
The Board recognizes that the leadership structure and combination or separation of the chief executive officer and chairman roles are driven by the needs of the company. As a result, no policy exists requiring combination or separation of leadership roles. Currently, the roles of chief executive officer and chairman are combined. Jim Fitterling was appointed executive chairman on April 9, 2020. Mr. Fitterling’s 37-year tenure and multiple roles with the company makes him uniquely suited to facilitate the Board’s oversight of strategy and safe and effective business operation. Mr. Fitterling is the only member of executive management who is also a director and the only director who is not independent.
Richard K. Davis was appointed as lead director on April 15, 2021, succeeding Jeff M. Fettig in the role. In accordance with best practices and the company’s Corporate Governance Guidelines, the independent directors elect a director from among their membership to serve as lead director. The lead director, who is elected annually, has clearly defined leadership authority and responsibilities. To be selected to serve as the independent lead director, an individual must have served at least one full year on the Board, effectively communicate and engage with the other independent directors, and possess public company and corporate governance experience. The election of a separate lead director and supporting governance practices such as the use of executive sessions, the Board of Directors’ robust committee structure and substantial majority of independent directors ensure a strong and independent board.
A detailed review of the process for nomination and selection of directors to serve on the Board can be found in the Corporate Governance section of the 2021 Proxy Statement filed with the SEC on March 5, 2021.
The Corporate Governance Committee has responsibility for reviewing the composition of the Board and recommending refreshment to meet the evolving needs of the company and maintain an appropriate balance of 1) qualifications and experience, 2) ethnic and gender diversity, and 3) tenure of longer-serving directors with continuity and depth of company knowledge and new directors with fresh perspective. The Corporate Governance Committee reviews the annual Board and committee self-evaluations to identify additional director qualifications, skills, experience, attributes and diversity that would enhance overall Board effectiveness. Age-based retirement practices also help the Board prepare for turnover and engage in succession planning.
The Board has responsibility for overseeing the strategic planning process and annual review of the corporate and business plan. The Board is responsible for overseeing the overall risk management process for the company, including review and approval of the enterprise risk management model and process implemented by management to identify, assess, manage and mitigate risk. The Board delegates the day-to-day management of the company, including setting the values and mission of the company and execution of strategic priorities, to Dow’s chief executive officer and other senior executives and provides guidance to and oversight of management.
Board committees provide oversight and risk management
In addition to diverse and highly skilled members with relevant expertise, Dow’s Board has well-defined committees that actively oversee the company’s ESG goals and performance.
Refer to Composition of the Highest Governance Body and its Committee for details about the experience and expertise of the Board.
Directors are active and engaged, starting with onboarding. All new directors participate in a robust orientation to familiarize them with the company’s plans, its significant financial, accounting and risk management issues, its policies and compliance processes, including the Code of Conduct and its strategic priorities. On an ongoing basis, directors receive materials or briefing sessions regarding the operations of the company, key initiatives and risks. Each regularly scheduled Board meeting includes a key business spotlight, where senior management presents the details of their business, including updates on financial results, geographic footprint, human capital and key innovations.
Outside experts, including in the areas of the environmental, social and governance matters and country risk, are invited to make in-depth presentations to directors during the Board’s regular meeting cycle. While some inperson activities have been paused during the COVID-19 pandemic, site and facility tours are frequently arranged and will resume once health and safety guidelines permit.
The Board and each of its committees conduct an annual self-evaluation of its performance with a particular focus on overall effectiveness. The self-evaluation process is an effective tool in ensuring sound corporate governance practices, which are important to the success of Dow’s business and in advancing stockholder interests. The self-evaluation process provides valuable insight regarding areas of effectiveness and opportunities for improvement. For example, feedback on the composition of the Board supported recent refreshment efforts and prompted corresponding updates in the company’s Corporate Governance Guidelines in 2020. The process is outlined below.
Dow held six Board meetings and the committees of the Board collectively held 25 meetings for a total of 31 meetings in 2020 during which economic, environmental and social topics were discussed. The Audit Committee held 10 meetings in 2020, and the other committees held five each.
The Board actively engages with management in oversight and stewardship of the company’s strategy, risk management and overall performance. Committees composed of independent directors assist the Board in carrying out its responsibilities. Committees operate pursuant to a written charter with clearly defined areas of responsibility and risk oversight as outlined below.
Although each committee is responsible for its key areas of risk and oversight, the full Board is regularly informed by a report of each committee’s chair on the topics discussed and actions taken at each committee meeting. This enables the Board and the committees to coordinate oversight and the relationships among the various objectives and risks faced by Dow.
Throughout the year, management reviews any critical concerns and actual results compared to the strategic plan with the Board and relevant committee(s). In 2020, there were no critical concerns communicated to the board outside of the regular communications related to corporate risks, eight of which are described here. Executive management also regularly reviews and is available to discuss company strategy, plans, results and issues with the committees and the Board. The independent directors meet in executive session in connection with each regularly scheduled meeting of the Board, and at other times as they may determine appropriate, and the committees typically meet in executive session in connection with every committee meeting. In addition, the Audit Committee holds separate executive sessions with the lead client service partner of the independent registered public accounting firm, internal auditor, general counsel and other management as appropriate.
Throughout the year, members of the management team and in some cases members of the Board continued extensive outreach to stockholders, engaging with investors who collectively held approximately 75% of outstanding shares of common stock of the company. Through this outreach, the management team updated investors on a range of topics, and also gained an understanding of the perspectives and concerns of each investor. The Board and management team carefully considers the feedback from these meetings, as well as stockholder support for our most recent advisory vote on executive compensation, when reviewing the business, corporate governance and executive compensation profiles. The company continually evaluates enhancements to our corporate governance, ESG and executive compensation practices, and appreciates engaging key stakeholders – including our stockholders – in the evaluation of these enhancements.
A detailed review of Dow’s remuneration policies and the process for determining remuneration can be found in the Compensation Discussion and Analysis section of the 2021 Proxy Statement filed with the SEC on March 5, 2021.
Below are key governance characteristics and practices related to the Executive Compensation programs in which the executive officers participate.
Annually, the company asks stockholders for an advisory vote on compensation for management. At the 2020 Annual Meeting of Stockholders, 88% of the votes cast by stockholders supported Dow’s executive compensation programs. Furthermore, at the 2021 Annual Meeting of Stockholders, 94% of the votes cast by stockholders supported Dow’s executive compensation programs.
The company continually evaluates enhancements to our corporate governance, ESG and executive compensation practices and appreciates engaging key stakeholders – including our stockholders in the evaluation of these enhancements. For example, we made the decision to add ESG metrics in our Executive Compensation and employee Performance Award programs to support ESG accountability across the company. See here for details.
Driving ESG accountability
Dow expanded ESG accountability across the company by adding ESG metrics to our Executive Compensation and employee Performance Award programs.