Table of Contents

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. )

Filed by the Registrant Filed by a Party other than the Registrant      

CHECK THE APPROPRIATE BOX:
  Preliminary Proxy Statement
Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
  Definitive Additional Materials
Soliciting Material Under Rule 14a-12

3M Company

(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
  No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
Fee paid previously with preliminary materials:
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:


Table of Contents


Table of Contents

A letter to our stockholders
 

Inge G. Thulin       Michael F. Roman
Executive Chairman of the Board Chief Executive Officer

Dear Stockholder:

We are pleased to invite you to attend 3M’s Annual Meeting of Stockholders, which will be held on Tuesday, May 14, 2019, at 8:30 a.m., Eastern Daylight Time at the Conrad Indianapolis, 50 West Washington Street, Indianapolis, Indiana 46204. Details regarding admission to the meeting and the business to be conducted are provided in the accompanying Notice of Annual Meeting and Proxy Statement. We will report on Company operations and discuss our future plans. There will also be time for your questions and comments.

We sincerely hope you will be able to join us at the Annual Meeting. For information on how to attend the Annual Meeting, or listen to the live webcast, please read “Annual Meeting Admission” on page 88 of the accompanying Proxy Statement. Your vote is important. Whether or not you plan to attend the Annual Meeting, please vote as soon as possible. You may vote your proxy on the Internet, by telephone, or, if this Proxy Statement was mailed to you, by completing and mailing the enclosed traditional proxy card. Please review the instructions on the proxy card or the electronic proxy material delivery notice regarding each of these voting options.

Thank you for your ongoing support of 3M.

Sincerely,

     

March 27, 2019

2         3M Company


Table of Contents

Notice of 2019 Annual Meeting
of Stockholders
 

   

Time and Date
8:30 a.m., Eastern Daylight Time
Tuesday, May 14, 2019

   

Place
Conrad Indianapolis
50 West Washington Street
Indianapolis, Indiana 46204

 

How to Vote

Whether or not you plan to attend the meeting, please provide your proxy by either using the Internet or telephone as further explained in this Proxy Statement or filling in, signing, dating, and promptly mailing a proxy card.

By Telephone
In the U.S. or Canada, you can vote your shares toll-free by calling 1-800-690-6903.

By Internet
You can vote your shares online at www.proxyvote.com.

By Mail
You can vote by mail by marking, dating, and signing your proxy card or voting instruction form and returning it in the postage-paid envelope.

Attending the Meeting
If you wish to attend the Annual Meeting in person, you will need to RSVP and print your admission ticket at www.proxyvote.com. An admission ticket together with a valid government issued photo identification must be presented in order to be admitted to the Annual Meeting. Please refer to the section entitled “Annual Meeting Admission” on page 88 of the Proxy Statement for further details.

Items of Business

    Board
Recommendation
1. Elect the twelve directors identified in the Proxy Statement, each for a term of one year.  “FOR” 
2. Ratify the appointment of PricewaterhouseCoopers LLP as 3M’s independent registered public accounting firm for 2019. “FOR” 
3. Approve, on an advisory basis, the compensation of our Named Executive Officers. “FOR” 
4. Stockholder proposal on setting target amounts for CEO compensation, if properly presented at the meeting. “AGAINST” 
5. Transact such other business as may properly come before the Annual Meeting and any adjournment or postponement.

Record Date

You are entitled to vote if you were a stockholder of record at the close of business on Tuesday, March 19, 2019.

Adjournments and Postponements

Any action on the items of business described above may be considered at the Annual Meeting at the time and on the date specified above or at any time and date to which the Annual Meeting may be properly adjourned or postponed.

Annual Report

Our 2018 Annual Report, which is not part of the proxy soliciting materials, is enclosed if the proxy materials were mailed to you. The Annual Report is accessible on the Internet by visiting www.proxyvote.com, if you have received the Notice of Internet Availability of Proxy Materials, or previously consented to the electronic delivery of proxy materials.

By Order of the Board of Directors,


Gregg M. Larson
Vice President, Deputy General Counsel and Secretary

3M Company
3M Center, St. Paul, Minnesota 55144

Important Notice regarding the availability of proxy materials for the Annual Meeting of Stockholders to be held on May 14, 2019.

The Notice of Annual Meeting, Proxy Statement, and 2018 Annual Report are available at www.proxyvote.com. Enter the 16-digit control number located in the box next to the arrow on the Notice of Internet Availability of Proxy Materials or proxy card to view these materials.

THIS PROXY STATEMENT AND PROXY CARD, OR THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS, ARE BEING DISTRIBUTED TO STOCKHOLDERS ON OR ABOUT MARCH 27, 2019.


2019 Proxy Statement         3


Table of Contents

Table of contents
 

Message from our Executive Chairman and Chief Executive Officer       2
Notice of 2019 Annual meeting of stockholders 3
Proxy highlights 6
Director nominees 6
Corporate governance highlights 7
Significant Corporate Governance Actions 8
Executive compensation 9
2018 Financial Performance and Business Highlights 9
Elements of Target 2018 Total Direct Compensation 11
Compensation Policies and Practices 11
Noteworthy Compensation Actions for 2018 12
Corporate governance at 3M 13
 Proposal No. 1  Elect the Twelve Directors Identified in this Proxy Statement 13
Nominees for director 14
Board membership criteria 20
Director Nominees – Diversity of Skills and Experience 20
Diversity 21
Identification, Evaluation, and Selection of Nominees 21
Director Independence 21
Nominees Proposed by Stockholders 22
Stockholder Nominations - Advance Notice Bylaw 22
Proxy Access Nominations 22
Role of the Nominating and Governance Committee 23
Corporate governance overview 23
Corporate Governance Highlights 23
Corporate Governance Guidelines 27
Board’s Role in the Company’s Long-Term Strategy 27
Board’s Role in Risk Oversight 28
Management Succession Planning 29
Communication with Directors 29
Compliance 30
3M’s Codes of Conduct 30
Public Policy Engagement 30
Commitment to the Environment and Sustainability 30
Related Person Transaction Policy and Procedures 31
Policy on Adoption of a Rights Plan 32
Board structure and processes 32
Board’s Leadership Structure 32
Independent Lead Director 33
Executive Sessions 33
Board committees 34
Board, Committees, and Director Evaluations 34
Board and Committee Information 34
Audit Committee 35
Compensation Committee 36
Finance Committee 37
Nominating and Governance Committee 38
Director compensation and stock ownership guidelines 39
Director Compensation Philosophy and Elements 39
2018 Director Compensation Table 40
Reasonableness of Non-Employee Director Compensation 41
Stock Ownership Guidelines 41
Hedging and Pledging Policies 41
Audit committee matters 42
 Proposal No. 2  Ratification of the Appointment of Independent Registered Public Accounting Firm for 2019 42
Audit Committee Report 43
Audit Committee Policy on Pre-Approval of Audit and Permissible Non-Audit Services of the Independent Accounting Firm 44
Fees of the Independent Accounting Firm 44
Audit Committee Restrictions on Hiring Employees of the Independent Accounting Firm 45

4         3M Company


Table of Contents

Table of contents

Executive compensation       46
 Proposal No. 3  Advisory Approval of Executive Compensation 46
Compensation discussion and analysis 47
Section I: Executive Summary 47
Section II: How We Determine Compensation 52
Section III: How We Paid Our Named Executive Officers in 2018 59
Section IV: Ways in Which We Address Risk and Governance 65
Compensation committee report 67
Compensation committee interlocks and insider participation 67
Executive compensation tables 68
2018 Summary Compensation Table 68
2018 All Other Compensation Table 69
Grants of Plan-Based Awards 70
2018 Outstanding Equity Awards at Fiscal Year-End Table 72
2018 Option Exercises and Stock Vested Table 75
Pension Benefits 76
Nonqualified Deferred Compensation 77
Potential Payments Upon Termination or Change in Control 79
Pay ratio 82
Stockholder proposal 83
 Proposal No. 4  Stockholder Proposal on Setting Target Amounts for CEO Compensation 83
Board’s Statement Opposing the Proposal 84
Stock ownership information 85
Security ownership of management 85
Common Stock and Total Stock-Based Holdings 85
Security ownership of certain beneficial owners 86
Section 16(a) beneficial ownership reporting compliance 87
Other information       88
Proxy statement 88
Purpose of the Annual Meeting 88
Annual Meeting Admission 88
Information About the Notice of Internet Availability of Proxy Materials 89
Stockholders Entitled to Vote 90
Proposals you are Asked to Vote on and the Board’s Voting Recommendations 91
Voting Requirements to Elect Directors and Approve Each of the Proposals Described in This Proxy Statement 91
Voting Methods 92
Changing your Vote 93
Counting the Vote 94
Confidentiality 94
Results of the Vote 94
Delivery of Documents to Stockholders Sharing an Address 94
List of Stockholders 94
Cost of Proxy Solicitation 95
Transfer Agent 95
Requirements for submission of stockholder proposals for next year’s Annual Meeting 95
Appendix A - supplemental consolidated statement of income information 96

2019 Proxy Statement         5


Table of Contents

Proxy highlights
 

PROPOSAL

Elect the Twelve Directors Identified in this Proxy Statement
Elect the twelve directors identified in this Proxy Statement, each for a term of one year.
Our nominees are distinguished leaders who bring a mix of skills and qualifications to the Board and can represent the interests of all stockholders.

"FOR" each nominee to the Board

Page 13

Director nominees

Age Director
Since
Other Current Public Boards 3M Committees
Director Nominee and Occupation A C F N&G
Thomas “Tony” K. Brown    Independent
Retired Group Vice President,
Global Purchasing, Ford Motor Company
    63   2013  
ConAgra Foods, Inc.
Tower International, Inc. (non-executive chair)
       
Pamela J. Craig    Independent
Retired Chief Financial Officer, Accenture plc
62 New
Nominee
Akamai Technologies
Merck & Co.
Progressive Corporation
David B. Dillon    Independent
Retired Chairman of the Board and Chief Executive
Officer, The Kroger Co.
67 2015
Union Pacific Corporation
Michael L. Eskew    Independent Lead Director
Retired Chairman of the Board and Chief Executive
Officer, United Parcel Service, Inc.
69 2003
The Allstate Corporation
Eli Lilly and Company
International Business Machines Corporation (presiding director)
Herbert L. Henkel    Independent
Retired Chairman of the Board and Chief Executive
Officer, Ingersoll-Rand plc
70 2007
Herc Holdings, Inc. (non-executive chair)
Amy E. Hood    Independent
Executive Vice President and Chief Financial Officer,
Microsoft Corporation
47 2017
Muhtar Kent    Independent
Chairman of the Board and former Chief Executive
Officer, The Coca-Cola Company
66 2013
The Coca-Cola Company
Edward M. Liddy    Independent
Retired Chairman of the Board and Chief Executive
Officer, The Allstate Corporation
73 2000
Abbott Laboratories
AbbVie, Inc.
The Boeing Company
Dambisa F. Moyo    Independent
Founder and CEO, Mildstorm, LLC
50 2018
Barclays PLC
Chevron Corporation
Gregory R. Page    Independent
Retired Chairman of the Board and Chief Executive
Officer, Cargill
67 2016
Deere & Company
Eaton Corporation plc
Michael F. Roman
Chief Executive Officer, 3M Company
59 2018
Patricia A. Woertz    Independent
Retired Chairman of the Board and Chief Executive
Officer, Archer-Daniels-Midland Company
66 2016
The Procter & Gamble Company
 Chair       A: Audit       F: Finance
 Member       C: Compensation       N&G: Nominating and Governance

6         3M Company


Table of Contents

Proxy highlights Corporate governance highlights

Corporate governance highlights

DIRECTOR TENURE   DIRECTOR AGE   GENDER DIVERSITY

6.5
years

62.9
years

31%
Women
Directors


BOARD SIZE AND
INDEPENDENCE
  INDEPENDENT LEAD
DIRECTOR
  MEETING ATTENDANCE   OTHER PUBLIC
COMPANY BOARDS
11/13

Directors are
independent

97% 1.4 Average
Board Positions
Independent Lead Director with robust authority
Separate Chairman and CEO positions
Overall attendance at Board and committee meetings
There were EIGHT Board meetings in 2018

The Corporate Governance Highlights above reflect the Board’s current 13 directors. Among them, Sondra L. Barbour is not seeking re-election and will end her service on the 3M Board on May 14, 2019, when her term expires. Inge G. Thulin, Executive Chairman of the Board, announced his intention not to stand for re-election and to retire from the Company on June 1, 2019.

The Qualifications and Attributes, and Demographic Background information below reflect the twelve Director Nominees for this Annual Meeting.

Qualifications and Attributes                        
Leadership
Manufacturing
Supply Chain
Technology
Finance
Global
Risk Management
Marketing
Demographic Background
Tenure (Years) 6 0 4 16 12 2 6 19 1 3 1 3
Age (Years) 63 62 67 69 70 47 66 73 50 67 59 66
Gender (Male/Female) M F M M M F M M F M M F
Race/Ethnicity
African American/Black
Caucasian/White

2019 Proxy Statement         7


Table of Contents

Proxy highlights Corporate governance highlights

DIRECTOR NOMINEES – DIVERSITY OF SKILLS AND EXPERIENCE

The Nominating and Governance Committee identifies, reviews, and recommends nominees to the Board for approval. The Committee seeks individuals with distinguished records of leadership and success and who will make substantial contributions to Board operations and effectively represent the interests of all stockholders. The Committee considers a wide range of factors and experiences, including ensuring an experienced, qualified Board with expertise in the following key areas most relevant to 3M. The numbers indicated in the diagram below represent the number of director nominees who the Committee believes possess each of the skills and experiences.

Leadership
Significant leadership experience with understanding of complex global organizations, strategy, risk management, and how to drive change and growth.
     
Manufacturing
As a vertically integrated Company, manufacturing experience is important to understanding the operations and capital needs of the Company.
     
Supply Chain
Directors with expertise in the management of the upstream and downstream relationships with suppliers and customers provide important perspectives on achieving efficient operations.
     
Technology
As a diversified technology, science-based Company, directors with technology backgrounds understand 3M's 46 technology platforms and the importance of investing in new technologies for future growth.
Finance
Financial metrics measures our performance. All directors must understand finance and financial reporting processes. All, but one, Audit Committee members qualify as “audit committee financial experts”.
 
Global
Global business experience is critical to 3M's international growth with 60 percent of sales from outside the U.S. in 2018.
 
Risk Management
Directors with experience in risk management and oversight, including cybersecurity, play an important role in the Board's oversight of risks.
 
Marketing
Organic growth is one of 3M's financial metrics and directors with marketing expertise provide important perspectives on developing new markets.

Significant Corporate Governance Actions

We recently implemented several changes that demonstrate our ongoing commitment to strong corporate governance practices:

Board Refreshment

We regularly add directors to infuse new ideas and fresh perspectives into the boardroom. In the past five years, six new independent directors have joined our Board. In recruiting directors, we focus on how the experience and skill set of each individual complements those of their fellow directors to create a balanced board with diverse viewpoints and backgrounds, deep expertise, and strong leadership experience. At the Annual Meeting, two nominees will be standing for election to the board for the first time. Dr. Dambisa Moyo, who joined the Board in August 2018, holds a doctorate in economics from the University of Oxford and has expertise in examining the interplay of international business and the global economy. Her background includes advising companies in their investment decisions, capital allocation and risk management. Prior to founding Mildstorm LLC, she worked at Goldman Sachs in various roles, including as an economist, and at the World Bank in Washington, D.C. The combination of her banking and financial services industry experience along with her extensive knowledge of macroeconomics, geopolitics and global markets brings valuable insight to the 3M Board. A new nominee, Pamela J. Craig, is the retired Chief Financial Officer of Accenture plc, a global management consulting, technology services and outsourcing company. She served as Accenture's CFO from 2006 through 2013, following her many other leadership roles at Accenture during her 34 years with the company. Her experience as CFO at a global Fortune 500 company, and her skills in financial, audit, risk management, and governance matters, adds valuable expertise to the 3M Board.

8         3M Company


Table of Contents

Proxy highlights Executive compensation

Stockholder Outreach and Engagement

Stockholder engagement is fundamental to our commitment to good governance and essential to maintaining our strong corporate governance practices. We engage regularly with our global investors to gain valuable insights into the governance issues about which they care most. We aim to seek a collaborative and mutually beneficial approach to issues of importance to investors that affect our business, and to ensure that our corporate governance practices remain industry-leading from their perspectives.

During 2018, members of senior management met with a cross-section of stockholders owning approximately 36 percent of our outstanding shares or approximately 55 percent of our institutional stockholders. The meetings included an overview of the Company and a discussion of the Company’s practices on corporate governance, including board refreshment and diversity, director evaluation, directors’ skills matrix, sustainability, succession planning, and board leadership structure. In general, investors viewed the Company’s governance practices favorably, including the Board’s leadership structure, the mix of tenure and overall diversity, and the disclosure regarding the Directors’ skill sets and qualifications. The feedback from these meetings was shared with the Board of Directors and helped inform the Board on corporate governance practices and trends. Although stockholder engagement is primarily a function of management, our lead independent director and executive chairman attended some of these meetings.

PROPOSAL

Ratification of the Appointment of Independent Registered Public Accounting Firm for 2019
Ratify the appointment of PricewaterhouseCoopers LLP as 3M’s independent registered public accounting firm for 2019.
Based on its assessment of the qualifications and performance of PricewaterhouseCoopers LLP (“PwC”), the Audit Committee believes that it is in the best interests of the Company and its stockholders to retain PwC.

"FOR"

Page 42

Executive compensation

PROPOSAL

Advisory Approval of Executive Compensation
Approve, on an advisory basis, the compensation of our Named Executive Officers.
Our executive compensation program appropriately aligns our executives’ compensation with the performance of the Company and its business units as well as their individual performance.

"FOR"

Page 46

2018 Financial Performance and Business Highlights

3M’s 2018 financial performance was achieved through growth and disciplined execution. Given the impact that certain events had on the Company’s 2018 financial performance, our results are shown below both as determined in accordance with GAAP (to the extent applicable) and excluding the following: (1) a charge primarily related to the remeasurement of a transition tax under the Tax Cuts and Jobs Act of 2017 (referred to as the “TCJA”) on previously unremitted earnings of non-U.S. subsidiaries, net of remeasurement of 3M’s deferred tax assets and liabilities considering the TCJA’s newly enacted tax rates and other impacts

2019 Proxy Statement         9


Table of Contents

Proxy highlights Executive compensation

(referred to as the “Net TCJA Transition Tax”), (2) an $897 million ($770 million after-tax) charge related to the settlement of the previously disclosed Nature Resource Damages (NRD) lawsuit, including (a) $850 million for a grant to the State of Minnesota for a special “3M Grant for Water Quality and Sustainability Fund,” and (b) certain legal fees and other related obligations, and (3) the gains from the divestiture of substantially all of our Communication Markets Division, net of related actions (referred to as the “Net CMD Divestiture Gains”).

   Results Determined
in Accordance
with GAAP (to the
Extent Applicable)
   Results Excluding
Impact of U.S. Tax
Reform, the Net CMD
Divestiture Gains and
the Water Quality and
Sustainability Grant
  
 
Earnings Per
Share Growth
+12.1% +8.6%*
Excluding the impact of the Net TCJA Transition Tax, the Net CMD Divestiture Gains and the Water Quality and Sustainability Grant, earnings per share grew from $9.17 in 2017 to $9.96 in 2018.
Excluding the impact of the Water Quality and Sustainability Grant and the Net CMD Divestiture Gains, full-year underlying operating margin performance was 23.6% in 2018.
 
 
Organic Local Currency
Sales Growth
+3.2% +3.2%
Positive organic growth across all Business Groups and geographic areas.
 
 
Return on
Invested Capital
22.2%* 24.6%*
Efficiently deploying capital across the business.
 
 
Free Cash
Flow Conversion
90.9%* 92.8%*
Continued strong free cash flow generation.
2018 free cash flow of $4.9 billion.
 

* See Appendix A to this Proxy Statement for a reconciliation of earnings per share, operating margin performance, free cash flow and free cash flow conversion to our results for the most directly comparable financial measures as reported under generally accepted accounting principles in the United States, and the calculation of return on invested capital.

We believe that our ability to deliver consistent results over time is reflected in our total stockholder return, which was in the top half of our executive compensation peer group for the three- and five-year periods ending on December 31, 2018. For additional information, see “Total Stockholder Return” on page 50 of this Proxy Statement.

Other noteworthy accomplishments include the following:

Announced the acquisition of M*Modal to strengthen our Health Information Systems portfolio and complement organic growth;

Awarded a record total of 4,208 patents from patent offices around the world in 2018, including 688 patents granted to 3M by the United States Patent and Trademark Office, which brings to more than 117,000 the total number of patents awarded to 3M in its corporate history;

Strengthened our portfolio going forward by completing the divestiture of substantially all of our Communication Markets Division;

Successfully completed the rollout of the enterprise resource planning (ERP) system in the United States – approximately 70 percent of global revenues are now on the new ERP system;

Over 100 consecutive years of paying dividends to stockholders and 60 consecutive years of annual increases;

Returned $8.1 billion to stockholders via dividends and gross share repurchases; and

Recognized by Ethisphere® as one of the World’s Most™ Ethical Companies® for the sixth consecutive year.


10         3M Company


Table of Contents

Proxy highlights Executive compensation

Elements of Target 2018 Total Direct Compensation

The illustration below and the discussion that follows show how the target Total Direct Compensation of the Named Executive Officers (excluding our Executive Chairman) was apportioned among base salary, annual incentives, performance share awards and stock options for 2018, and how these elements relate to the strategic business goals of the Company.

CEO*                           OTHER NEOs (AVERAGE)**

Abbreviations: AIP = Annual incentive pay; PSAs = Performance share awards.
* Amounts shown represent the apportionment of Total Direct Compensation for Mr. Roman.
** Amounts shown reflect the average apportionment for all Named Executive Officers other than Mr. Roman and Mr. Thulin. Including Mr. Thulin, the average apportionment for the other Named Executive Officers would be as follows: base salary — 13 percent; AIP — 14 percent; stock options — 40 percent; performance shares — 34 percent; and performance-based pay — 85 percent. Note: Numbers do not add to 100 percent due to rounding.

Compensation Policies and Practices

Our compensation program is designed to provide appropriate performance incentives and avoid compensation practices that do not promote the interests of our stockholders.

Maintain a strong alignment between corporate performance and our executive officers’ compensation by having a majority of Total Direct Compensation consist of performance-based compensation.
Conduct an annual assessment for the purpose of identifying and mitigating significant economic and reputational risks in the design of our incentive compensation programs.
Have a comprehensive clawback policy that covers both cash and equity compensation and includes provisions addressing reputational and financial risk as well as risk management failures.
Use an independent compensation consultant retained by, and reporting directly to, the Committee.
Limit the number and amount of executive perquisites.
Prohibit our executive officers from hedging or pledging 3M common stock.
Maintain robust stock ownership guidelines applicable to all of our executive officers.
Conduct competitive benchmarking to align executive compensation with the market.
 
Have employment, severance, or change in control agreements with any of our executive officers.
Provide tax gross-ups on executive perquisites.
Have agreements that would provide automatic “single-trigger” accelerated vesting of equity compensation or excise tax gross-up payments to any of our executive officers upon a change in control.
Pay dividends or dividend equivalents on unearned equity awards.
Reprice stock options without the approval of 3M stockholders, except for “anti-dilution” adjustments (such as adjustments in connection with a stock split, spinoff, etc.)

2019 Proxy Statement         11


Table of Contents

Proxy highlights Executive compensation

Noteworthy Compensation Actions for 2018

During 2018, 3M and the Committee took the noteworthy actions described below as part of the Company’s executive compensation program.

Approved new compensation terms for Michael F. Roman in connection with his appointment as Chief Executive Officer, including an annual base salary of $1,200,000 and target annual incentive compensation of $3,120,000, each of which were prorated for 2018. The Compensation Committee (with ratification by the independent members of the Board) will determine the target value of Mr. Roman’s annual long-term incentive grants each year based on market data and his individual performance. Mr. Roman also received special promotion performance share and stock option awards granted at the time of his appointment as Chief Executive Officer that had an aggregate target grant value of $2,500,000, (as described in more detail on page 62). Consistent with the Company’s compensation philosophy, Mr. Roman does not have an employment agreement, severance agreement or change in control agreement.

Approved new compensation terms for Inge G. Thulin in connection with his appointment as Executive Chairman, including an annual base salary of $1,000,000 and target annual incentive compensation of $1,500,000 (each prorated for 2018), which represent decreases of approximately 35 percent and 39 percent, respectively. The Compensation Committee (with ratification by the independent members of the Board) will determine the target value of Mr. Thulin’s annual long-term incentive grants each year based on market data and his individual performance. In anticipation of his transition to Executive Chairman in 2018, the aggregate target compensation value for Mr. Thulin’s 2018 long-term incentive compensation awards was reduced by $3,000,000 from the target compensation value established for such awards granted to him in 2017. Mr. Thulin also received a performance share award granted at the time of his appointment as Executive Chairman that had a target grant value of $750,000 (as described in more detailed on page 62). Mr. Thulin’s new compensation terms were approved by the Committee (with ratification by the independent members of the Board) consistent with the recommendation of its independent compensation consultant based on peer and other market data.

Expanded the scope of our clawback policy to address situations involving significant financial or reputational harm. For additional information concerning our updated policy, please refer to the section entitled “Clawback Policy” on page 66 of this Proxy Statement.


PROPOSAL

Stockholder Proposal on Setting Target Amounts for CEO Compensation
Stockholder proposal on setting target amounts for CEO compensation, if properly presented at the meeting.
See the Board’s opposition statement.

“AGAINST”

Page 83


12         3M Company


Table of Contents

Corporate governance at 3M
 

PROPOSAL

Elect the Twelve Directors Identified in this Proxy Statement
Elect the twelve directors identified in this Proxy Statement, each for a term of one year.
Our nominees are distinguished leaders who bring a mix of skills and qualifications to the Board and can represent the interests of all stockholders.

At the 2019 Annual Meeting, twelve directors are to be elected to hold office until the 2020 Annual Meeting of Stockholders and until their successors have been elected and qualified. All nominees are presently 3M directors who were elected by stockholders at the 2018 Annual Meeting, except for Dr. Dambisa Moyo, who joined the Board on August 12, 2018, and Pamela J. Craig, a new nominee, who are standing for election for the first time. The Nominating and Governance Committee, with the assistance of an outside search firm, and input from the independent directors and the Chairman of the Board and Chief Executive Officer, identified Ms. Craig and recommended her to the Board. We expect each nominee for election as a director to be able to serve if elected. If any nominee is not able to serve, proxies will be voted in favor of the remainder of those nominated and may be voted for substitute nominees, unless the Board chooses to reduce the number of directors serving on the Board. Each nominee elected as a director will continue in office until his or her successor has been elected and qualified, or until his or her earlier death, resignation, or retirement. Sondra L. Barbour is not seeking re-election and will end her service on the 3M Board on May 14, 2019, when her term expires. Inge G. Thulin, Executive Chairman of the Board of Directors, announced his intention not to stand for re-election and to retire from the Company on June 1, 2019. Mr. Thulin will remain as Executive Chairman of the Board through the Annual Stockholder Meeting on May 14, 2019. We thank both Ms. Barbour and Mr. Thulin for their many contributions to the Board and to the Company.

The Nominating and Governance Committee reviewed the Board Membership Criteria (described on page 20) and the specific experience, qualifications, attributes, and skills of each nominee, including membership(s) on the boards of directors of other public companies. The following pages contain biographical and other information about the nominees. Following each nominee’s biographical information, we have provided information concerning the particular experience, qualifications, attributes, and skills that are deemed most critical to 3M’s long-term success and led the Nominating and Governance Committee and the Board to determine that each nominee should serve as a director. In addition, the majority of our directors serve or have served on boards and board committees (including as committee chairs) of other public companies, which the Board believes provides them with additional board leadership and governance experience, exposure to best practices, and substantial knowledge and skills that further enhance the functioning of our Board.

2019 Proxy Statement         13


Table of Contents

Corporate governance at 3M Nominees for director

Nominees for director

THOMAS “TONY” K. BROWN Independent

Director since 2013

Age 63

Professional Highlights
Mr. Brown is the Retired Group Vice President, Global Purchasing, Ford Motor Company, a global automotive industry leader. Mr. Brown served in various leadership capacities in global purchasing since joining Ford in 1999. In 2008, he became Ford’s Group Vice President, Global Purchasing, with responsibility for approximately $90 billion of production and non-production procurement for Ford operations worldwide. He retired from Ford on August 1, 2013. From 1997 to 1999 he served in leadership positions at United Technologies Corporation, including its Vice President, Supply Management. From 1991 to 1997 he served as Executive Director, Purchasing and Transportation at QMS Inc. From 1976 to 1991 he served in various managerial roles at Digital Equipment Corporation.

Nominee Qualifications
Mr. Brown’s Bachelor’s of Business Administration degree from American International College in Springfield, Massachusetts, his leadership roles, including his experience serving as a director of the public companies listed, and his knowledge of and extensive experiences in global purchasing, management, and supply chain at Ford Motor Company and other companies, qualify him to serve as a director of 3M.

Retired Group Vice President, Global Purchasing, Ford Motor Company
Other current directorships
ConAgra Foods, Inc.,
Tower International, Inc. (non-executive chair)
3M Board committee(s)
Audit and Nominating and Governance Committees

PAMELA J. CRAIG Independent

Director since NEW

Age 62

Professional Highlights
Ms. Craig is the Retired Chief Financial Officer, Accenture plc., a global management consulting, technology services and outsourcing company. She served as Accenture's CFO from 2006 through 2013, following her many other leadership roles in line management, consulting and operations at Accenture during her 34 years with the company. She is also actively involved in charitable organizations, focused on education and on the advancement of women in business, including The Committee of 200, The Women’s Forum of New York, Junior Achievement of New Jersey, and the C200 Foundation. She chairs the Board of Comprehensive Development, Inc., a non-profit that provides academic and social service support to at-risk New York City high school students.

Nominee Qualifications
Ms. Craig's undergraduate degree from Smith College and MBA degree from New York University Stern School, her decades of executive leadership roles and experiences at Accenture, including serving as its CFO, and her finance, management, business operations and services, global business, and technology expertise, her skills in financial, audit, compensation and governance matters, and her experiences as a director at the other public companies listed, qualify her to serve as a director of 3M.

Retired Chief Financial Officer, Accenture plc
Other current directorships
Akamai Technologies, Inc.
Merck & Co., Inc.
Progressive (Insurance) Corporation
3M Board committee(s)
Audit and Finance Committees
Directorships within the past five years
VMware, Inc.
Wal-Mart Stores, Inc.

14         3M Company


Table of Contents

Corporate governance at 3M Nominees for director

DAVID B. DILLON Independent

Director since 2015

Age 67

Professional Highlights
Mr. Dillon is the Retired Chairman of the Board and Chief Executive Officer, The Kroger Co., a large retailer that operates retail food and drug stores, multi-department stores, jewelry stores, and convenience stores throughout the U.S. Mr. Dillon retired on December 31, 2014 as Chairman of the Board of Kroger, where he was Chairman since 2004 and was the Chief Executive Officer from 2003 through 2013. Mr. Dillon served as President of Kroger from 1995 to 2003 and was elected Executive Vice President in 1990. Mr. Dillon served as Director of the Kroger Co. from 1995 through 2014. Mr. Dillon began his retailing career at Dillon Companies, Inc. (later a subsidiary of The Kroger Co.) in 1976 and advanced through various management positions, including its President from 1986-1995.

Nominee Qualifications
Mr. Dillon’s degree in business from the University of Kansas and his law degree from Southern Methodist University, his leadership roles and experiences at The Kroger Co., including serving as Chairman of the Board and Chief Executive Officer, his knowledge of and extensive experiences in leading one of the world’s largest retailers, his experiences in Kroger’s successful $13 billion merger with Fred Meyer, Inc., his leadership in sustainability, his skills in financial and audit matters, and his experiences as a director at the public companies listed, qualify him to serve as a director of 3M.

Retired Chairman of the Board and Chief Executive Officer, The Kroger Co.
Other current directorships
Union Pacific Corporation
3M Board committee(s)
Audit (Chair) and Nominating and Governance Committees
Directorships within the past five years
The Kroger Co.
Convergys Corporation
DirecTV

MICHAEL L. ESKEW Independent

Director since 2003

Age 69

Professional Highlights
Mr. Eskew is the Retired Chairman of the Board and Chief Executive Officer, United Parcel Service, Inc., a provider of specialized transportation and logistics services. Mr. Eskew was appointed Executive Vice President in 1999 and Vice Chairman in 2000 before becoming Chairman and Chief Executive Officer of UPS in January 2002. He retired as Chairman of the Board and Chief Executive Officer at the end of 2007 but remained as a director of UPS until December 31, 2014.

Nominee Qualifications
Mr. Eskew’s degree in Industrial Engineering from Purdue University, his leadership roles and experiences at United Parcel Service, including serving as Chairman of the Board and Chief Executive Officer, his knowledge of and extensive experiences in global logistics, his skills in financial and audit matters, and his experiences as a director at the public companies listed, qualify him to serve as a director of 3M. Mr. Eskew is Lead Director.

 

Retired Chairman of the Board and Chief Executive Officer, United Parcel Service, Inc.
Other current directorships
The Allstate Corporation
Eli Lilly and Company
International Business Machines Corporation (presiding director)
3M Board committee(s)
Compensation and Nominating and Governance (Chair) Committees
Directorships within the past five years
United Parcel Service, Inc.

2019 Proxy Statement         15


Table of Contents

Corporate governance at 3M Nominees for director

HERBERT L. HENKEL Independent

Director since 2007

Age 70

Professional Highlights
Mr. Henkel is the Retired Chairman of the Board and Chief Executive Officer, Ingersoll-Rand plc, a manufacturer of industrial products and components. Mr. Henkel retired as Ingersoll-Rand’s Chief Executive Officer, a position he held since October 1999, on February 4, 2010, and retired as Chairman of the Board on June 3, 2010. Mr. Henkel served as President and Chief Operating Officer of Ingersoll-Rand from April 1999 to October 1999. Mr. Henkel served in various leadership roles at Textron, Inc., including its President and Chief Operating Officer from 1998-1999.

Nominee Qualifications
Mr. Henkel’s Bachelor’s and Master’s degrees in Engineering from Polytechnic University of New York and Master’s of Business Administration from the Lubin School at Pace University, his leadership roles and experiences at Textron, Inc. and Ingersoll-Rand, including serving as Chairman of the Board and Chief Executive Officer of Ingersoll-Rand, his knowledge of and extensive experiences in engineering, manufacturing, management, sales and marketing in a variety of industries, his skills in financial and audit matters, and his experiences as a director at the public companies listed, qualify him to serve as a director of 3M.

Retired Chairman of the Board and Chief Executive Officer, Ingersoll-Rand plc
Other current directorships
Herc Holdings, Inc. (non-executive chair)
3M Board committee(s)
Compensation (Chair) and Nominating and Governance Committees
Directorships within the past five years
The Allstate Corporation
C. R. Bard, Inc.
Visteon Corporation

AMY E. HOOD Independent

Director since 2017

Age 47

Professional Highlights
Ms. Hood is Executive Vice President and Chief Financial Officer of Microsoft Corporation, a worldwide provider of software, services and solutions. As chief financial officer, Ms. Hood is responsible for leading Microsoft’s worldwide finance organization, including acquisitions, treasury activities, tax planning, accounting and reporting, and internal audit and investor relations. Prior to this role, Ms. Hood was chief financial officer of Microsoft’s Business Division, responsible for the company’s productivity applications and services including Microsoft Office 365, Office, SharePoint, Exchange, Dynamics ERP and Dynamics CRM. During her time in the Business Division, Ms. Hood helped lead the transition to the company’s Office 365 service, and she was deeply involved in the strategy development and overall execution of the company’s successful acquisitions of Skype and Yammer. Ms. Hood joined Microsoft in 2002 and previously held positions in the Server and Tools Business as well as the corporate finance organization. Prior to 2002, she worked at Goldman Sachs & Co. in various investment banking and capital markets groups roles.

Nominee Qualifications
Ms. Hood’s Bachelor’s degree in economics from Duke University and Master’s degree in business administration from Harvard University, her extensive leadership roles and experiences at Microsoft Corporation, especially in strategic business development, finance, and digitization, qualify her to serve as a director of 3M.

Executive Vice President and Chief Financial Officer, Microsoft Corporation
Other current directorships
None
3M Board committee(s)
Compensation and Finance Committees

16         3M Company


Table of Contents

Corporate governance at 3M Nominees for director

MUHTAR KENT Independent

Director since 2013

Age 66

Professional Highlights
Mr. Kent is the Chairman of the Board of The Coca-Cola Company, the world’s largest beverage company. Mr. Kent has held the position of Chairman of the Board of The Coca-Cola Company from April 23, 2009, until his announced retirement in April 2019. He held the position of Chief Executive Officer from July 1, 2008 until May 2017. From December 2006 through June 2008, Mr. Kent served as President and Chief Operating Officer of The Coca-Cola Company. From January 2006 through December 2006, Mr. Kent served as President of Coca-Cola International and was elected Executive Vice President of The Coca-Cola Company in February 2006. From May 2005 through January 2006, he was President and Chief Operating Officer of The Coca-Cola Company’s North Asia, Eurasia and Middle East Group, an organization serving a broad and diverse region that included China, Japan, and Russia.

Nominee Qualifications
Mr. Kent’s Bachelor’s of Science degree in Economics from the University of Hull, England, and Master’s of Science degree in Administrative Sciences from City University London, his extensive leadership roles and experiences at The Coca-Cola Company across multiple geographies, and his extensive international experience at The Coca-Cola Company qualify him to serve as a director of 3M.

Chairman of the Board and former Chief Executive Officer, The Coca-Cola Company
Other current directorships
The Coca-Cola Company
3M Board committee(s)
Compensation and Finance (Chair) Committees

EDWARD M. LIDDY Independent

Director since 2000

Age 73

Professional Highlights
Mr. Liddy is the Retired Chairman of the Board and Chief Executive Officer, The Allstate Corporation, and former Partner at Clayton, Dubilier & Rice, LLC, a private equity investment firm. Mr. Liddy served as a partner of Clayton, Dubilier & Rice, LLC from January 2010 to December 2015. At the request of the Secretary of the U.S. Department of the Treasury, Mr. Liddy served as Interim Chairman of the Board and Chief Executive Officer of American International Group, Inc. (AIG), a global insurance and financial services holding company, from September 2008 until August 2009. Mr. Liddy served as Chairman of the Board of The Allstate Corporation, a personal lines insurer, from January 1999 to April 2008, and as its Chief Executive Officer from January 1999 to December 2006, and as President and Chief Operating Officer from August 1994 to December 1998.

Nominee Qualifications
Mr. Liddy earned an undergraduate degree from Catholic University and a Master's of Business Administration from George Washington University. He brings to our Board the benefits of his substantial experience as a senior executive and board member of several Fortune 100 companies across a range of industries. Mr. Liddy’s extensive executive leadership experience at Allstate and American International Group enables him to provide our Board with valuable insights on corporate strategy, risk management, corporate governance, and many other issues facing large, global enterprises. Additionally, as a former Chief Financial Officer of Sears, Roebuck and Co., chair of the audit committee of Goldman Sachs, and partner at Clayton, Dubilier & Rice, LLC, Mr. Liddy provides our Board with significant knowledge and understanding of corporate finance, capital markets, and financial reporting and accounting matters, which qualifies him to serve as a director of 3M.

Retired Chairman of the Board and Chief Executive Officer, The Allstate Corporation
Other current directorships
Abbott Laboratories
AbbVie, Inc.
The Boeing Company
3M Board committee(s)
Compensation and Nominating and Governance Committees

2019 Proxy Statement         17


Table of Contents

Corporate governance at 3M Nominees for director

DAMBISA F. MOYO Independent

Director since 2018

Age 50

Professional Highlights
Dr. Moyo has been the Chief Executive Officer of Mildstorm LLC since she founded it in 2015. She is a global economist and commentator, analyzing the macroeconomy and international affairs. From 2001 to 2008, she worked at Goldman Sachs in various roles, including as an economist. Prior to that she worked at the World Bank in Washington, D.C. 1993-1995. A New York Times bestsellers’ author, Dr. Moyo’s writing regularly appears in economic and finance-related publications.

Nominee Qualifications
Dr. Moyo’s doctorate in economics from the University of Oxford, her Master’s of Business Administration in finance from the American University, and her Master’s in Public Administration from Harvard Kennedy School, her leadership roles and experience in the banking and financial services industry, her extensive knowledge of macroeconomics, geopolitics and global markets, and her experience as a director at the public companies listed, qualify her to serve as a director of 3M.

Founder and CEO, Mildstorm LLC
Other current directorships
Barclays PLC
Chevron Corporation
3M Board committee(s)
Audit and Finance Committees
Directorships within the past five years
Barrick Gold Corporation
SABMiller PLC
Seagate Technology Public Limited Company

GREGORY R. PAGE Independent

Director since 2016

Age 67

Professional Highlights
Mr. Page is the Retired Chairman of the Board and Chief Executive Officer, Cargill, an international marketer, processor and distributor of agricultural, food, financial and industrial products and services. Mr. Page was named Corporate Vice President & Sector President, Financial Markets and Red Meat Group of Cargill in 1998, Corporate Executive Vice President, Financial Markets and Red Meat Group in 1999, President and Chief Operating Officer in 2000, and became Chairman of the Board and Chief Executive Officer in 2007. He served as Executive Chairman of the Board of Cargill from December 2013 until his retirement from Cargill in September 2015, and Executive Director of Cargill from September 2015 to September 2016. Mr. Page is a director and past non-executive Chair of the Board of Big Brothers Big Sisters of America. He is past President and board member of the Northern Star Council of the Boy Scouts of America.

Nominee Qualifications
Mr. Page’s undergraduate degree in economics from the University of North Dakota, his leadership roles and experiences while serving as Chairman of the Board and Chief Executive Officer at Cargill, his expertise and knowledge of financial and audit matters and corporate governance, and his experiences as a director at the public companies listed, qualify him to serve as a director of 3M.

Retired Chairman of the Board and Chief Executive Officer, Cargill
Other current directorships
Deere & Company
Eaton Corporation plc
3M Board committee(s)
Audit and Nominating and Governance Committees
Directorships within the past five years
Cargill
Carlson Companies

18         3M Company


Table of Contents

Corporate governance at 3M Nominees for director

MICHAEL F. ROMAN 

Director since 2018

Age 59

Professional Highlights
Mr. Roman is the Chief Executive Officer of 3M Company since July 2018. Mr. Roman previously served as Chief Operating Officer and Executive Vice President of 3M Company from July 1, 2017 to June 30, 2018 with direct responsibilities for 3M’s five business groups and the Company’s international operations. Mr. Roman previously served as Executive Vice President, Industrial Business Group, of 3M Company from June 2014 to July 2017. Mr. Roman served as the Company’s Senior Vice President, Business Development, from May 2013 to June 2014. Prior to that, he was Vice President and General Manager of Industrial Adhesives and Tapes Division from September 2011 to May 2013. Mr. Roman also has lived in and led 3M businesses around the world, including the United States, Europe and Asia.

Nominee Qualifications
Mr. Roman’s Bachelor’s and Master’s degrees in Electrical Engineering from the University of Minnesota and the University of Southern California, his distinguished 3M career over 30 years with leadership roles across multiple geographies and businesses, his experience in managing 3M’s five business groups and international operations, his knowledge and skills in key areas such as manufacturing, supply chain, technology, finance, and risk management, and his accomplishments in sales growth, operational efficiency and value creation across a wide range of global businesses, qualify him to serve as a director of 3M.

Chief Executive Officer, 3M Company
Other current directorships
None
3M Board committee(s)
None

PATRICIA A. WOERTZ Independent

Director since 2016

Age 66

Professional Highlights
Ms. Woertz is the Retired Chairman of the Board and Chief Executive Officer, Archer-Daniels-Midland Company (“ADM”), an agricultural processor and food ingredient provider. Ms. Woertz joined ADM as Chief Executive Officer and President in April 2006, and was named Chairman of the Board in February 2007. She served as Chief Executive Officer until December 2014, and Chairman of the Board until December 2015. Before joining ADM, Ms. Woertz held positions of increasing importance at Chevron Corporation and its predecessor companies. Ms. Woertz served on the President’s Export Council from 2010-2015 and chaired the U.S. section of the U.S.-Brazil CEO Forum 2013-2015.

Nominee Qualifications
Ms. Woertz’s undergraduate degree from Pennsylvania State University in accounting, her experiences as a Certified Public Accountant at Ernst & Young, her experiences in finance, auditing, strategic planning, and marketing at Gulf Oil Corporation, her experiences in the financial aspects of the mergers between Gulf Oil and Chevron and Texaco and Chevron, her extensive leadership roles and experiences at ChevronTexaco Corporation as Executive Vice President, Global Downstream from 2001-2006, her expertise and knowledge of financial and audit matters and corporate governance, and her experiences as a director at the public companies listed, qualify her to serve as a director of 3M.

Retired Chairman of the Board and Chief Executive Officer, Archer-Daniels-Midland Company
Other current directorships
The Procter & Gamble Company
3M Board committee(s)
Compensation and Finance Committees
Directorships within the past five years
Royal Dutch Shell plc

RECOMMENDATION OF THE BOARD

The Board of Directors unanimously recommends a vote  “FOR”  the election of these nominees as directors. Proxies solicited by the Board of Directors will be voted  “FOR”  these nominees unless a stockholder indicates otherwise in voting the proxy.


2019 Proxy Statement         19


Table of Contents

Corporate governance at 3M Board membership criteria

Board membership criteria

3M’s Corporate Governance Guidelines contain Board Membership Criteria which include a list of key skills and characteristics deemed critical to serve 3M’s long-term business strategy and expected to be represented on 3M’s Board. The Nominating and Governance Committee periodically reviews with the Board the appropriate skills and characteristics required of Board members given the current Board composition. It is the intent of the Board that the Board, itself, will be a high performance organization creating competitive advantage for the Company. To perform as such, the Board will be composed of individuals who have distinguished records of leadership and success in their arena of activity and who will make substantial contributions to Board operations and effectively represent the interests of all stockholders. The Committee’s and the Board’s assessment of Board candidates includes, but is not limited to, consideration of:

Roles in and contributions valuable to the business community;
Personal qualities of leadership, character, judgment, and whether the candidate possesses and maintains throughout service on the Board a reputation in the community at large of integrity, trust, respect, competence, and adherence to the highest ethical standards;
Relevant knowledge and diversity of background and experience in business, manufacturing, technology, finance and accounting, marketing, international business, government, and other areas; and
Whether the candidate is free of conflicts and has the time required for preparation, participation, and attendance at all meetings.

In addition to these minimum requirements, the Committee will also evaluate whether the nominee’s skills are complementary to the existing Board members’ skills, the Board’s needs for particular expertise in certain areas, and will assess the nominee’s impact on Board dynamics, effectiveness, and diversity of experience and perspectives.

Director Nominees – Diversity of Skills and Experience

The diagram below summarizes the director nominees’ key skills and experiences in the areas that are most relevant to 3M and shows the number of director nominees who possess each of the skills and experiences:

Leadership
Significant leadership experience with understanding of complex global organizations, strategy, risk management, and how to drive change and growth.
     
Manufacturing
As a vertically integrated Company, manufacturing experience is important to understanding the operations and capital needs of the Company.
     
Supply Chain
Directors with expertise in the management of the upstream and downstream relationships with suppliers and customers provide important perspectives on achieving efficient operations.
     
Technology
As a diversified technology, science-based Company, directors with technology backgrounds understand 3M's 46 technology platforms and the importance of investing in new technologies for future growth.
Finance
Financial metrics measures our performance. All directors must understand finance and financial reporting processes. All, but one, Audit Committee members qualify as “audit committee financial experts”.
 
Global
Global business experience is critical to 3M's international growth with 60 percent of sales from outside the U.S. in 2018.
 
Risk Management
Directors with experience in risk management and oversight, including cybersecurity, play an important role in the Board's oversight of risks.
 
Marketing
Organic growth is one of 3M's financial metrics and directors with marketing expertise provide important perspectives on developing new markets.


20         3M Company


Table of Contents

Corporate governance at 3M Board membership criteria

Diversity

For 3M, diversity, in its myriad manifestations, is fundamental to innovation, performance, and relevancy. 3M employees reflect that diversity. The Board of Directors regards diversity as an important factor in selecting board nominees to serve on the board. Although the Board has no specific diversity policy, when selecting nominees, it actively considers diversity in recruitment and nomination of directors, such as gender, race, and national origin. The current composition of our Board reflects those efforts and the importance of diversity to the Board.

Identification, Evaluation, and Selection of Nominees

The Committee periodically reviews the appropriate size and composition of the Board and anticipates future vacancies and needs of the Board. In the event the Committee recommends an increase in the size of the Board or a vacancy occurs, the Committee considers qualified nominees from several sources, including current Board members and nominees recommended by stockholders and other persons.

The Committee may from time to time retain a director search firm to help the Committee identify qualified director nominees for consideration by the Committee.

The Committee retained Spencer Stuart in 2018 to help identify future Board candidates.

The Committee evaluates qualified director nominees at regular or special Committee meetings against the Board Membership Criteria described above then in effect and reviews qualified director nominees with the Board. The Committee and the Chairman of the Board interview candidates that meet the Board Membership Criteria and the Committee selects nominees that best suit the Board’s current needs and recommends one or more of such individuals for election to the Board.

Director Independence

The Board has adopted a formal set of Director Independence Guidelines with respect to the determination of director independence, which either conform to or are more exacting than the independence requirements of the New York Stock Exchange (“NYSE”) listing standards, and the full text of which is available on our website at www.3M.com, under Investor Relations — Governance. In accordance with these Guidelines, a director or nominee for director must be determined to have no material relationship with the Company other than as a director. The Guidelines specify the criteria by which the independence of our directors will be determined, including strict guidelines for directors and their immediate family members with respect to past employment or affiliation with the Company or its independent registered public accounting firm. The Guidelines also prohibit Audit and Compensation Committee members from having any direct or indirect financial relationship with the Company, and restrict both commercial and not-for-profit relationships of all directors with the Company. Directors may not be given personal loans or extensions of credit by the Company, and all directors are required to deal at arm’s length with the Company and its subsidiaries, and to disclose any circumstance that might be perceived as a conflict of interest.

In accordance with these Guidelines, the Board undertook its annual review of director independence. During this review, the Board considered transactions and relationships between each director, or any member of his or her immediate family and the Company and its subsidiaries and affiliates in each of the most recent three completed fiscal years. The Board also considered whether there were any transactions or relationships between the Company and a director or any members of a director’s immediate family (or any entity of which a director or an immediate family member is an executive officer, general partner, or significant equity holder). The Board considered that in the ordinary course of business, transactions may occur between the Company and its subsidiaries and companies at which some of our directors are or have been officers. In particular, the Board considered the annual amount of sales to 3M for each of the most recent three completed fiscal years by each of the companies where directors serve or have served as an executive officer, as well as purchases by those companies from 3M. The Board determined that the amount of sales and purchases in each fiscal year was below one percent of the annual revenues of each of those companies, the threshold set forth in the Director Independence Guidelines. The Board also considered charitable contributions to not-for-profit organizations with which our directors or immediate family members are affiliated, none of which approached the threshold set forth in our Director Independence Guidelines.

2019 Proxy Statement         21


Table of Contents

Corporate governance at 3M Board membership criteria

As a result of this review, the Board affirmatively determined that the following directors and director nominee are independent under these Guidelines: Sondra L. Barbour, Thomas “Tony” K. Brown, Pamela J. Craig (new nominee), David B. Dillon, Michael L. Eskew, Herbert L. Henkel, Amy E. Hood, Muhtar Kent, Edward M. Liddy, Dr. Dambisa F. Moyo, Gregory R. Page, and Patricia A. Woertz. The Board has also determined that members of the Audit Committee and Compensation Committee received no compensation from the Company other than for service as a director. Inge G. Thulin, Executive Chairman of the Board, and Michael F. Roman, Chief Executive Officer, are considered to not be independent because of their employment by the Company.

Nominees Proposed by Stockholders

The Committee has a policy to consider properly submitted stockholder recommendations for candidates for membership on the Board of Directors. Stockholders proposing individuals for consideration by the Committee must include at least the following information about the proposed nominee: the proposed nominee’s name, age, business or residence address, principal occupation or employment, and whether such person has given written consent to being named in the Proxy Statement as a nominee and to serving as a director if elected. Stockholders should send the required information about the proposed nominee to:

    

Corporate Secretary
3M Company
3M Center
Building 220-13E-26A
St. Paul, MN 55144-1000

In order for an individual proposed by a stockholder to be considered by the Committee for recommendation as a Board nominee for the 2020 Annual Meeting, the Corporate Secretary must receive the proposal by November 28, 2019. Such proposals must be sent via registered, certified, or express mail (or other means that allows the stockholder to determine when the proposal was received by the Company). The Corporate Secretary will send properly submitted stockholder proposed nominations to the Committee Chair for consideration at a future Committee meeting. Individuals proposed by stockholders in accordance with these procedures will receive the same consideration received by individuals identified to the Committee through other means.

Stockholder Nominations - Advance Notice Bylaw

In addition, 3M’s Bylaws permit stockholders to nominate directors at an annual meeting of stockholders or at a special meeting at which directors are to be elected in accordance with the notice of meeting. Stockholders intending to nominate a person for election as a director must comply with the requirements set forth in the Company’s Bylaws. With respect to nominations to be acted upon at our 2020 Annual Meeting, our Bylaws would require, among other things, that the Corporate Secretary receive written notice from the record stockholder no earlier than November 28, 2019, and no later than December 28, 2019. The notice must contain the information required by the Bylaws, a copy of which is available on our website at www.3M.com, under Investor Relations — Governance. Nominations received after December 28, 2019, will not be acted upon at the 2020 Annual Meeting.

Proxy Access Nominations

Further, pursuant to the proxy access Bylaw adopted by the Board in November 2015, a stockholder, or a group of up to 20 stockholders, continuously owning for three years at least three percent of our outstanding common shares may nominate and include in our proxy materials up to the greater of two directors and 20 percent of the number of directors currently serving, if the stockholder(s) and nominee(s) satisfy the Bylaw requirements. For eligible stockholders to include in our proxy materials nominees for the 2020 Annual Meeting, proxy access nomination notices must be received by the Company no earlier than November 28, 2019, and no later than December 28, 2019. The notice must contain the information required by the Bylaws.

22         3M Company


Table of Contents

Corporate governance at 3M Corporate governance overview

Role of the Nominating and Governance Committee

The Nominating and Governance Committee identifies individuals who the Committee believes are qualified to become Board members in accordance with the Board Membership Criteria set forth above, and recommends selected individuals to the Board for nomination to stand for election at the next meeting of stockholders of the Company in which directors will be elected. In the event there is a vacancy on the Board between meetings of stockholders, the Committee seeks to identify individuals who the Committee believes are qualified to become Board members in accordance with the Board Membership Criteria, and may recommend one or more of such individuals for appointment to the Board. The Nominating and Governance Committee also focuses on overall Board-level succession planning at the director level.

Corporate governance overview

The Company believes that good corporate governance practices serve the long-term interests of stockholders, strengthen the Board and management, and further enhance the public trust 3M has earned from more than a century of operating with uncompromising integrity and doing business the right way. The following sections provide an overview of 3M’s corporate governance practices, which are published on the Company’s website, including the Corporate Governance Guidelines, the Board’s leadership structure and the responsibilities of the independent Lead Director, communication with directors, director independence, the director nomination process, the Board’s role in risk oversight, the Codes of Conduct for directors and employees, public policy engagement, and the Company’s commitment to the environment and sustainability.

Corporate Governance Highlights

DIRECTOR TENURE   DIRECTOR AGE   GENDER DIVERSITY

6.5
years

62.9
years

31%
Women
Directors


BOARD SIZE AND
INDEPENDENCE
  INDEPENDENT LEAD
DIRECTOR
  MEETING ATTENDANCE   OTHER PUBLIC
COMPANY BOARDS
11/13

Directors are
independent

97% 1.4 Average
Board Positions
Independent Lead Director with robust authority
Separate Chairman and CEO positions
Overall attendance at Board and committee meetings
There were EIGHT Board meetings in 2018

The Corporate Governance Highlights above reflect the Board’s current 13 directors. Among them, Sondra L. Barbour is not seeking re-election and will end her service on the 3M Board on May 14, 2019, when her term expires. Inge G. Thulin, Executive Chairman of the Board, has announced his intention not to stand for re-election and to retire from the Company on June 1, 2019.

Board Independence

Substantial majority of our directors – eleven of our thirteen directors are independent of the Company and management – and all are highly qualified.

Independent directors regularly meet in executive sessions without management.
Independent directors have complete access to management and employees.
Regularly refresh Board; added six new independent directors in past five years; average director tenure is 6.5 years.

2019 Proxy Statement         23


Table of Contents

Corporate governance at 3M Corporate governance overview

Board Committee Independence and Expertise
Only independent directors serve on the Board’s committees with independent committee chairs empowered to establish committee agendas.
Committee executive sessions – at each regularly scheduled meeting, members of the Audit Committee, Compensation Committee, Finance Committee, and Nominating and Governance Committee meet in executive session.
Financial expertise – all members of the Audit Committee meet the NYSE listing standards for financial expertise, and three of the four members are “audit committee financial experts” under SEC rules.

Stockholder Rights
The Board has taken numerous actions – including those proposed by stockholders – to promote effective corporate governance and accountability to stockholders.
Annual election of all directors.
Majority voting for directors in uncontested elections. Incumbent director not receiving majority votes tenders resignation, subject to the Board recommendation for action.
Proxy access – a stockholder, or a group of up to 20 stockholders, continuously owning for three years at least three percent of our outstanding common shares may nominate and include in our proxy materials up to the greater of two directors and 20 percent of the number of directors currently serving, if the stockholder(s) and nominee(s) satisfy the Bylaw requirements.
Established policies and criteria for director nominations, including candidates recommended by stockholders.
No supermajority voting provisions in Bylaws or Certificate of Incorporation.
Stockholders holding 25 percent of the outstanding shares have the right to call a special meeting.
No stockholders’ rights plan (also known as a “poison pill”).
Established protocol for stockholders and other interested parties to communicate with the independent Lead Director, the chairs of the Audit, Compensation, Finance, and Nominating and Governance Committees of the Board, any of the other independent directors or all of the independent directors as a group or the full Board.

Stockholder Outreach and Engagement
We maintain a vigorous stockholder engagement program.
Stockholder engagement is fundamental to our commitment to good governance and essential to maintaining our strong corporate governance practices. We engage regularly with our global investors to gain valuable insights into the governance issues about which they care most. We aim to seek a collaborative and mutually beneficial approach to issues of importance to investors that affect our business, and to ensure that our corporate governance practices remain industry-leading from their perspectives.
During 2018, members of senior management met with a cross-section of stockholders owning approximately 36 percent of our outstanding shares or approximately 55 percent of our institutional stockholders. The meetings included an overview of the Company and a discussion of the Company’s practices on corporate governance, including board refreshment and diversity, director evaluation, directors’ skills matrix, sustainability, succession planning, and board leadership structure. In general, investors viewed the Company’s governance practices favorably, including the Board’s leadership structure, the mix of tenure and overall diversity, and the disclosure regarding the Directors’ skill sets and qualifications. The feedback from these meetings was shared with the Board of Directors and helped inform the Board on corporate governance practices and trends.
Both our independent Lead Director and Executive Chairman met with major stockholders during 2018.

24         3M Company


 

Corporate governance at 3M Corporate governance overview

Risk Oversight
The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a whole Board and through its committees.
At least annually, the Board reviews enterprise risks facing the Company and certain of its businesses. Other important categories of risk are assigned to designated Board committees (which are comprised solely of independent directors) that report back to the full Board. The Board has delegated to the Audit Committee through its charter the primary responsibility for the oversight of risks facing the Company including cybersecurity. The Audit Committee’s charter provides that the Audit Committee shall “discuss policies and procedures with respect to risk assessment and risk management, the Company’s major risk exposures and the steps management has taken to monitor and mitigate such exposures.”

Board Approved Long-Term Strategic Plans and Capital Allocation Strategies
Each year management presents to the Board, and the Board discusses and approves, detailed long-term strategic plans for the Company.
Each year management presents to the Board, and the Board discusses and approves, detailed long-term strategic plans for the Company. In addition to the overall strategic plan for the Company and the business groups, the discussions in 2018 also focused on breakout sessions with the directors on strategic corporate-wide themes of portfolio management, innovation, commercial transformation, manufacturing and supply chain transformation, and people and culture.
The Board also approves the long-term capital structure of the Company to ensure that there is sufficient capital to invest for future growth.
The Company is committed to investing in organic growth, most notably through capital expenditures and research and development. The Company has invested over $16.3 billion in capital expenditures and research and development to support and fund organic growth over the past five years. 3M has opened six customer technical centers around the world, and a new, state-of-the-art research and development laboratory in the United States.
The capital allocation plans have flexibility to respond quickly to strategic acquisition opportunities that can strengthen the Company’s portfolio. Over the past five years, 3M has invested approximately $5.0 billion in strategic acquisitions to build upon and strengthen its business portfolio for continued future growth.
The Company has a long history of returning cash to stockholders, having paid approximately $13.45 billion in dividends over the past five years.
Finally, share repurchases represent the last component of 3M’s capital allocation plans. Over the past five years, 3M has returned approximately $21.6 billion to stockholders via share repurchases.

Director Orientation and Continuing Education
Our orientation programs familiarize new directors with the company and their role, and our continuing education programs assist directors in maintaining skills and knowledge necessary to perform their duties.
Director orientation – our orientation programs familiarize new directors with 3M’s businesses, strategic plans, and policies, and for their role on their assigned committees.
Continuing education programs assist directors in maintaining skills and knowledge necessary for the performance of their duties. These programs may be part of regular Board and Committee meetings or provided by academic or other qualified third parties.

2019 Proxy Statement         25


Table of Contents

Corporate governance at 3M Corporate governance overview

Board, Committee, and Director Evaluations
The Nominating and Governance Committee conducts an annual evaluation of the performance of the Board, each of its committees, and individual directors.
The results of the annual evaluations of the board and its committees are shared with the Board and help identify areas in which the Board and its committees could improve performance.
Before the November Board meeting, the Chairman/CEO, Lead Director, and chair of the Nominating and Governance Committee meet to discuss the performance and contributions of each director.
As part of the nomination process, the Nominating and Governance Committee considers the performance and contributions of each director and evaluates each of the directors to ensure our directors continue to possess the necessary skills and experience to effectively oversee the Company. On occasion, the Nominating and Governance Committee has not renominated a director based on this individual director evaluation process.

Compliance
For the sixth year in a row, 3M has been recognized by Ethisphere® as one of the World’s Most™ Ethical Companies.®
Code of Business Conduct and Ethics for directors.
Code of Conduct for all employees, including our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer.
Chief Compliance Officer, who has direct reporting obligations to the Audit Committee, provides regular updates to the Audit Committee on compliance with the Company’s Code of Conduct, and at least annually, on the implementation and effectiveness of the Company’s compliance and ethics program.
Disclosure committee as part of the Company’s disclosure controls and procedures for financial reporting.
Disclosure of public policy engagement on our Investor Relations website, under Governance — Governance Documents — “Political Activities and Issue Advocacy,” including disclosure of political contributions and membership in key trade associations where membership dues allocated for lobbying purposes exceed $25,000.

Environmental Stewardship and Sustainability
Long-standing commitment to environmental stewardship and sustainability.
2025 Sustainability Goals for raw materials, water, and energy and climate, including increasing wind and solar renewable energy to 25 percent of total electricity use by 2025.
Our Sustainability Report and 2025 Sustainability Goals are available on our website at www.3M.com, under About 3M — Sustainability.
In December 2018, 3M announced that starting in 2019 every new product will be required to have a Sustainability Value Commitment that builds on 3M’s history of creating products that emphasize reuse, recycling, and reduced resource use for 3M’s operations and for our customers.
As of March 1, 2019, 3M’s global headquarters in St. Paul – which is home to our largest employee base – will be powered by 100% renewable energy. We are also committing to move our entire global operations to 100% renewable energy, with an interim target of 50% by 2025. As part of this initiative 3M will be joining RE100, an influential group of companies committed to 100% renewable energy.

Executive Compensation
Annual advisory approval of executive compensation with approximately 93 percent of the votes cast in favor of the Company’s executive compensation program in 2018.
Strong pay-for-performance philosophy.
Incentive compensation subject to clawback policy that includes provisions addressing reputational and financial risk as well as risk management failures.
Robust stock ownership guidelines for executive officers and stock retention policy for directors.
Prohibition of hedging or pledging 3M stock by directors and executive officers.
No employment, severance, or change in control agreements with any senior executives, including the CEO.
Long-term incentive compensation linked to financial objectives of earnings per share growth, relative organic volume growth, return on invested capital, and free cash flow conversion.

26         3M Company


Table of Contents

Corporate governance at 3M Corporate governance overview

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines which provide a framework for the effective governance of the Company. The guidelines address matters such as the respective roles and responsibilities of the Board and management, the Board’s leadership structure, the responsibilities of the independent Lead Director, director independence, the Board Membership Criteria, Board committees, and Board and management evaluation. The Board’s Nominating and Governance Committee is responsible for overseeing and reviewing the Guidelines at least annually and recommending any proposed changes to the Board for approval. The Corporate Governance Guidelines, the Certificate of Incorporation and Bylaws, the charters of the Board committees, the Director Independence Guidelines, and the Codes of Conduct provide the framework for the governance of the Company and are available on our website at www.3M.com, under Investor Relations — Governance.

Board’s Role in the Company’s Long-Term Strategy

Each year management presents to the Board, and the Board discusses and approves, detailed long-term strategic plans for the Company. In addition to the overall strategic plan for the Company and the business groups, the discussions also focused on breakout sessions with the directors on strategic corporate-wide themes of portfolio management, innovation, commercial transformation, manufacturing and supply chain transformation, and people and culture.

Our Company’s long-term strategy is outlined in the 3M Value Model.

3M VALUE MODEL

The 3M Value Model is what differentiates our company in the marketplace. It’s how we create extraordinary value for customers, and premium returns for shareholders. The model is built around four elements: our vision, our strengths, our priorities, and our values.

2019 Proxy Statement         27


Table of Contents

Corporate governance at 3M Corporate governance overview

Our Vision

Our vision drives everything we do: 3M Technology Advancing Every Company, 3M Products Enhancing Every Home, 3M Innovation Improving Every Life. It is aspirational and authentic to 3M, and is an important part of the purpose that drives us as an enterprise.

Our Strengths

Our strengths help us continually innovate to create differentiated value for customers at above-market growth rates. They also enable us to take advantages of the changes in customers, technology and commercial channels.

In our Customer Inspired Innovation approach, we combine close engagement with customers, deep domain expertise in markets and the science behind our technology platforms to develop unique insights into the critical needs of our customers.

We then leverage our fundamental strengths. In technology, we leverage our deep intellectual property and broad range of technology platforms. In manufacturing, we leverage our unique capabilities in process engineering. Our global capabilities enable us to take that technology and manufacturing strength and deliver through our go-to-market models to serve customers around the world. And finally, our brand adds value in each of our businesses.

We do this while maintaining a focus on our customers – the end users of our solutions. Most of our sales are specified or designed into customer applications. While the channel to our end user may change over time, our global commerce strategy is to connect directly with end users while leveraging the go-to-market model that will deliver where, when and how the end user wants.

Our Priorities

We have four priorities that are positioning us for long-term growth and value creation: Portfolio, Transformation, Innovation, and People & Culture. The first three are levers that have been proven to create extraordinary value over time. They form the foundation of our priorities moving forward. They depend on our efforts to advance people and culture. Our focus on advancing people and culture supports the entire value model.

Our Values

Our values bind us together as one 3M – across business groups and geographies. They include our leadership behaviors – how we want our leaders to act to drive performance, develop others, and continue to win in the marketplace. Then our Code of Conduct; great companies are built on trust from customers, shareholders, employees, communities. We’ve earned that trust and our reputation for integrity over many decades. No one at 3M is free to compromise it. We also have four values that will be a priority moving forward. We are working to make 3M the most inclusive enterprise we can be. This will help us become even more diverse and enable us to become an even more creative and innovative company. We have long been a leader in sustainability and we will continue to advance this across the company. Finally, we will do even more to encourage and challenge every 3M employee to be their best.

Board’s Role in Risk Oversight

The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a whole Board and through its committees. At least annually, the Board reviews enterprise risks facing the Company and certain of its businesses. Other important categories of risk are assigned to designated Board committees (which are comprised solely of independent directors) that report back to the full Board. The Board has delegated to the Audit Committee through its charter the primary responsibility for the oversight of risks facing the Company including cybersecurity. The Audit Committee’s charter provides that the Audit Committee shall “discuss policies and procedures with respect to risk assessment and risk management, the Company’s major risk exposures and the steps management has taken to monitor and mitigate such exposures.”

28         3M Company


Table of Contents

Corporate governance at 3M Corporate governance overview

The Vice President and General Auditor, Corporate Auditing (the “Auditor”), whose appointment and performance is reviewed and evaluated by the Audit Committee and who has direct reporting obligations to the Committee, is responsible for leading the formal risk assessment and management process within the Company. The Auditor, through consultation with the Company’s senior management, periodically assesses the major risks facing the Company and works with those executives responsible for managing each specific risk. The Auditor periodically reviews with the Audit Committee the major risks facing the Company and the steps management has taken to monitor and mitigate those risks. The Auditor’s risk management report, which is provided in advance of the meeting, is reviewed with the entire Board by either the chair of the Audit Committee or the Auditor. The executive responsible for managing a particular risk may also report to the full Board on how the risk is being managed and mitigated.

The Board has delegated to other committees the oversight of risks within their areas of responsibility and expertise. For example, the Compensation Committee oversees risks associated with the Company’s compensation practices, including by performing an annual review of the Company’s risk assessment of its compensation policies and practices for its employees. The Finance Committee oversees risks associated with the Company’s capital structure, credit ratings and cost of capital, long-term benefit obligations, and use of or investment in financial products, such as derivatives to manage risk related to foreign currencies, commodities, and interest rates. The Nominating and Governance Committee oversees risks associated with the Company’s overall governance and its succession planning process to ensure that the Company has a slate of future, qualified candidates for key management positions.

The Board believes that its oversight of risks, primarily through delegation to the Audit Committee, but also through delegation to other committees to oversee specific risks within their areas of responsibility and expertise, and the sharing of information with the full Board, is appropriate for a diversified technology and manufacturing company like 3M. The chair of each committee that oversees risk provides a summary of the matters discussed with the committee to the full Board following each committee meeting. The minutes of each committee meeting are also provided to all Board members. The Board also believes its oversight of risk is enhanced by its current leadership structure (further discussed below) because the Executive Chairman, who served as our CEO and was ultimately responsible for the Company’s management of risk, also chairs regular Board meetings. Given his in-depth knowledge and understanding of the Company, the Executive Chairman is best able to bring key business issues and risks to the Board’s attention.

Management Succession Planning

The Board plans the succession to the position of Chairman, CEO and other senior management positions. To assist the Board, the Chairman, CEO and Senior Vice President of Human Resources annually assess senior managers and their succession potential for the position of Chairman/CEO and other senior management positions. As a result of a thorough and thoughtful succession planning process, on March 5, 2018, the Board appointed Michael F. Roman CEO, effective July 1, 2018, succeeding Inge G. Thulin.

Communication with Directors

The Board of Directors has adopted the following process for stockholders and other interested parties to send communications to members of the Board. Stockholders and other interested parties may communicate with the Lead Director, the chairs of the Audit, Compensation, Finance, and Nominating and Governance Committees of the Board, or with any of our other independent directors, or all of them as a group, by sending a letter to the following address: Corporate Secretary, 3M Company, 3M Center, Building 220-13E-26A, St. Paul, MN 55144-1000. The Corporate Secretary reviews communications to the independent directors and forwards those communications to the independent directors as discussed below. Communications involving substantive accounting or auditing matters will be immediately forwarded to the Chair of the Audit Committee and the Company’s Chief Compliance Officer consistent with time frames established by the Audit Committee for the receipt of communications dealing with these matters. Communications that pertain to non-financial matters will be forwarded promptly. Items that are unrelated to the duties and responsibilities of the Board will not be forwarded, such as: business solicitation or advertisements; product-related inquiries; junk mail or mass mailings; resumes or other job-related inquiries; and spam.

2019 Proxy Statement         29


Table of Contents

Corporate governance at 3M Compliance

Compliance

3M’s Codes of Conduct

More than a century of operating with uncompromising integrity has earned 3M trust from our customers, credibility with our communities, and dedication from our employees. All of our employees, including our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, are required to abide by 3M’s Code of Conduct to ensure that our business is conducted in a consistently legal and ethical manner. These policies form the foundation of a comprehensive process that includes compliance with corporate policies and procedures and a Company-wide focus on uncompromising integrity in every aspect of our operations. Our Code of Conduct covers many topics, including antitrust and competition law, conflicts of interest, financial reporting, protection of confidential information, and compliance with all laws and regulations applicable to the conduct of our business.

Employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of the Code of Conduct. The Audit Committee has adopted procedures to receive, retain, and treat complaints received regarding accounting, internal accounting controls, or auditing matters, and to allow for the confidential and anonymous submission by employees or others of concerns regarding questionable accounting or auditing matters. Information on how to submit any such communications can be found on 3M’s Investor Relations website, under Governance — Governance Documents — Employee Business Conduct Policies — “Report a concern or ask a question.” Our Chief Compliance Officer, who has direct reporting obligations to the Audit Committee, periodically reports to the Audit Committee on compliance with the Company’s Code of Conduct, including the effectiveness of the Company’s compliance program.

The Board also has adopted a Code of Business Conduct and Ethics for Directors of the Company. This Code incorporates long-standing principles of conduct the Company and the Board follow to ensure the Company’s business and the activities of the Board are conducted with integrity and adherence to the highest ethical standards, and in compliance with the law. The Company’s Code of Conduct for employees and the Code of Business Conduct and Ethics for Directors are available on our website at www.3M.com under Investor Relations — Governance — Governance Documents.

Public Policy Engagement

The Company believes that transparency with respect to the consideration, processes, and oversight of our engagement with lawmakers is important to our stockholders, and continuously makes efforts to give our stockholders useful information about our public policy engagement. Since 2007, the Company has voluntarily published a detailed explanation of the Company’s political activities which is available on our website at www.3M.com under Investor Relations — Governance — Governance Documents — “Political Activities and Issue Advocacy.” There, the Company sets out in detail its positions on important public policy issues, the factors we consider when making political contributions, and the processes we use for legal, financial, executive, and Board oversight of our political activities and contributions. We also provide links to the reports the 3M Political Action Committee files monthly with the Federal Election Commission and the Company’s quarterly Lobbying Disclosure reports, as well as a detailed list of our contributions to state candidates and political parties, and contributions to “527” political organizations. The Company also discloses on its website the trade associations the Company joined where $25,000 or more of the dues are allocated for lobbying purposes by the trade association. The Company believes that these disclosures on our website, which exceed the disclosures required by law, offer transparency respecting the Company’s public policy engagement and political activities.

Commitment to the Environment and Sustainability

At 3M, we are working hard to advance every company, enhance every home, and improve every life. We apply our expertise, and technology to solve problems collaboratively, and with a focus on long term, sustainable solutions that demonstrate our commitment and societal purpose. Sustainability is fundamental to our business — from sustainability-inspired innovation to product stewardship to sustainability in our operations. As we seek to improve every life, we see partnerships to help our customers and communities achieve their sustainability goals as key to that ambition.

30         3M Company


Table of Contents

Corporate governance at 3M Compliance

For more than 40 years, 3M has been a leader among global corporations in sustainability actions and measures, beginning with the creation of its groundbreaking Pollution Prevention Pays (3P) Program in 1975. As a global corporation, we believe that we have a significant responsibility to society globally, and responsibility to the local communities in which we live and work. Our corporate vision states: “3M technology advancing every company... 3M products enhancing every home... and 3M innovation improving every life.” It is that vision — carried out in collaboration with our customers, communities, and partners — that guides our sustainability strategies and goals and aspirations. Our sustainability efforts improve 3M operations and the operations of our customers. Our product solutions help customers manage their environmental footprint - from paint systems that reduce the need for cleaning solvents to window films that ease energy consumption. Our life cycle management process enables teams to select more sustainable components and encourage more sustainable processes. In addition, our philanthropic and social sustainability programs support the workforce of the future – both in Science, Technology, Engineering and Math (STEM), as well as the skilled trades. For example, our skills-based volunteering programs for employees encourage sustainability thinking inside the company while supporting the environmental and social needs in our local communities. Our 2025 sustainability goals provide us with a holistic approach to driving sustainability in our own operations, in our communities, and for the needs of our customers.

In January 2013, our CEO elevated the company’s focus on sustainability, with emphasis in two areas: (1) developing and commercializing products which help our customers solve their sustainability challenges; and, (2) driving sustainability within 3M operations and supply chain. Sustainability is now embedded across the company with dedicated teams in R&D, Supply Chain, business groups, and regions across the globe. Our Science, Technology, and Sustainability Executive Committee provides leadership, oversight, and strategy to encourage and ensure sustainability opportunities are recognized and strong policies and procedures are in place. Our Chief Technology Officer and our Chief Sustainability Officer report annually to the Board’s Nominating and Governance Committee on our sustainability efforts. In addition, our Corporate EHS and Business Conduct Committee ensures our sustainability principles are embedded throughout the company. In December 2018, 3M announced that starting in 2019 every new product will be required to have a Sustainability Value Commitment that builds on 3M’s history of creating products that emphasize reuse, recycling, and reduced resource use for 3M’s operations and for our customers. As of March 1, 2019, 3M's global headquarters in St. Paul – which is home to our largest employee base – will be powered by 100% renewable energy. We are also committing to move our entire global operations to 100% renewable energy, with an interim target of 50% by 2025. As part of this initiative 3M will be joining RE100, an influential group of companies committed to 100% renewable energy.

As part of our sustainability efforts, we are a signatory to the United Nations Global Compact on Human Rights — a policy initiative for businesses to demonstrate their commitment to ten principles in the areas of human rights, labor, environment, and anti-corruption. We also align our goals and programs to the United Nations Sustainable Development Goals. We report annually on these efforts in our Sustainability Report. To learn more, please visit www.3M.com/Sustainability.

Related Person Transaction Policy and Procedures

The Board of Directors has adopted a written Related Person Transaction Policy and Procedures which is administered by the Nominating and Governance Committee. This Policy applies to any transaction or series of transactions in which the Company or a subsidiary is a participant, the amount involved exceeds $120,000, and a Related Person (as that term is defined in the Policy) has a direct or indirect material interest and which is required to be disclosed under Item 404(a) of Regulation S-K. Transactions that fall within this definition are referred to the Committee for approval, ratification, or other action. Based on its consideration of all of the relevant facts and circumstances, the Committee decides whether or not to approve a transaction and approves only those transactions that are in the best interests of the Company. In the course of its review and approval or ratification of a transaction, the Committee considers:

The nature of the Related Person’s interest in the transaction;
The material terms of the transaction, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances;
The significance of the transaction to the Related Person;
The significance of the transaction to the Company;
Whether the transaction would impair the judgment of a director or executive officer to act in the best interest of the Company; and
Any other matters the Committee deems appropriate.

2019 Proxy Statement         31


Table of Contents

Corporate governance at 3M Board structure and processes

Any Committee member who is a Related Person with respect to a transaction under review may not participate in the deliberations or vote respecting such approval or ratification, except that such a director may be counted in determining the presence of a quorum at a meeting at which the Committee considers the transaction. There were no Related Person Transactions that were referred to the Committee in 2018.

Policy on Adoption of a Rights Plan

In 2002 and 2003, a 3M stockholder submitted a stockholder proposal to 3M regarding the approval process for adopting a stockholders’ rights plan (also known as a “poison pill”). 3M does not have a rights plan and is not currently considering adopting one. The Board continues to believe, however, that there may be circumstances under which adoption of a rights plan would give the Board the negotiating power and leverage necessary to obtain the best result for 3M stockholders in the context of a takeover effort.

Following consideration of the favorable vote the stockholder proposal received and in light of this belief, the Board adopted and has reaffirmed a statement of policy on this topic. The Board’s policy is that it will only adopt a rights plan if either: (1) stockholders have approved adoption of the rights plan; or (2) the Board (including a majority of the independent members of the Board), in its exercise of its fiduciary responsibilities, makes a determination that, under the circumstances existing at the time, it is in the best interests of 3M’s stockholders to adopt a rights plan without the delay in adoption resulting from seeking stockholder approval.

The Board has directed the Nominating and Governance Committee to review this policy statement on an annual basis and to report to the Board on any recommendations it may have concerning the policy. The terms of the policy, as in effect, are included in 3M’s published Corporate Governance Guidelines and its Proxy Statement.

Board structure and processes

Board’s Leadership Structure

On March 5, 2018, the Board announced that Michael F. Roman would succeed Inge G. Thulin as Chief Executive Officer effective July 1, 2018. To help ensure a smooth transition, the Board asked Mr. Thulin to continue to serve as Executive Chairman of the Board, also effective on July 1, 2018. According to the Board’s Corporate Governance Guidelines, the Board has the authority to decide whether the positions of Chairman and CEO should be held by the same person and determine the best arrangement for the Company and its shareholders considering all relevant and changing circumstances. On February 6, 2019, the Board announced that CEO Michael Roman will be nominated to serve as Chairman of the Board following the Company’s Annual Meeting of Stockholders on May 14, 2019. Inge Thulin, 3M’s current Executive Chairman, announced his intention not to stand for re-election and to retire from the Company on June 1, 2019.

Following the Company’s Annual Meeting of Stockholders, the Board’s leadership structure will consist of:

A combined Chairman of the Board and CEO;
A strong, independent, and highly experienced Lead Director with well-defined responsibilities that support the Board’s oversight responsibilities;
A robust committee structure consisting entirely of independent directors with oversight of various types of risks; and
An engaged and independent Board.

The Board of Directors believes that this leadership structure provides independent board leadership and engagement while deriving the benefits of having our CEO also serve as Chairman of the Board. As the individual with primary responsibility for managing the Company’s day-to-day operations and with in-depth knowledge and understanding of the Company, the CEO is best positioned to chair regular Board meetings as the directors discuss key business and strategic issues. Coupled with an independent Lead Director, this combined structure provides independent oversight while avoiding unnecessary confusion regarding the Board’s oversight responsibilities and the day-to-day management of business operations.

The Board believes that adopting a rigid policy on whether to separate or combine the positions of Chairman of the Board and CEO would inhibit the Board’s ability to provide for a leadership structure that would best serve stockholders. As a result, the Board has rejected adopting a policy permanently separating or combining the positions of Chairman and CEO in its Corporate Governance Guidelines, which are reviewed at least annually and available on our website at www.3M.com, under Investor Relations — Governance. Instead, the Board adopted an approach that allows it, in representing the stockholders’ best interests, to decide who should serve as Chairman or CEO, or both, under present or anticipated future circumstances.

32         3M Company


Table of Contents

Corporate governance at 3M Board structure and processes

The Board believes that combining the roles of CEO and Chairman contributes to an efficient and effective Board. The Board believes that to drive change and continuous improvement within the Company, tempered by respect for 3M’s traditions and values, the CEO must have maximum authority. The CEO is primarily responsible for effectively leading significant change, improving operational efficiency, driving growth, managing the Company’s day-to-day business, managing the various risks facing the Company, and reinforcing the expectation for all employees of continuing to build on 3M’s century-old tradition of uncompromising integrity and doing business the right way.

The Board believes that the Company’s corporate governance measures ensure that strong, independent directors continue to effectively oversee the Company’s management and key issues related to executive compensation, CEO evaluation and succession planning, strategy, risk, and integrity. The Corporate Governance Guidelines provide, in part, that:

Independent directors comprise a substantial majority of the Board;
Directors are elected annually by a majority vote in uncontested director elections;
Only independent directors serve on the Audit, Compensation, Finance, and Nominating and Governance Committees;
The committee chairs establish their respective agendas;
The Board and committees may retain their own advisors;
The independent directors have complete access to management and employees;
The independent directors meet in executive session without the CEO or other employees during each regular Board meeting; and
The Board and each committee regularly conduct a self-evaluation to determine whether it and its committees function effectively.

The Board has also designated one of its members to serve as Lead Director, with responsibilities (described in the next section) that are similar to those typically performed by an independent chairman.

Independent Lead Director

The Board has designated one of its members to serve as a Lead Director, with responsibilities that are similar to those typically performed by an independent chairman (“Lead Director”). Michael L. Eskew was appointed Lead Director by the independent directors effective November 12, 2012, succeeding Dr. Vance Coffman who had served as Lead Director since 2006. Michael Eskew is a highly experienced director, currently serving on the boards of The Allstate Corporation, Eli Lilly and Company, and International Business Machines Corporation, and is the former Chairman and CEO of United Parcel Service, Inc. His responsibilities include, but are not limited to, the following:

Presides at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;
Acts as a key liaison between the Chairman/CEO and the independent directors;
Approves the meeting agendas for the Board, and approves the meeting schedules to assure that there is sufficient time for discussion of all agenda items;
Has the authority to approve the materials to be delivered to the directors in advance of each Board meeting and provides feedback regarding the quality, quantity, and timeliness of those materials (this duty not only gives the Lead Director approval authority with respect to materials to be delivered to the directors in advance of each Board meeting but also provides a feedback mechanism so that the materials may be improved for future meetings);
Has the authority to call meetings of the independent directors;
Communicates Board member feedback to the Chairman/CEO (except that the chair of the Compensation Committee leads the discussion of the Chairman/CEO’s performance and communicates the Board’s evaluation of that performance to the Chairman/CEO);
If requested by major stockholders, ensures that he is available, when appropriate, for consultation and direct communication; and
Performs such other duties as requested by the independent directors.

Executive Sessions

As an agenda item for every regularly scheduled Board and committee meeting, independent directors regularly meet in executive session, without the Chairman/CEO or other members of management present, to consider such matters as they deem appropriate. The Lead Director presides over the Board’s executive sessions.

2019 Proxy Statement         33


Table of Contents

Corporate governance at 3M Board committees

Board committees

Board, Committees, and Director Evaluations

The Board conducts an annual self-evaluation to determine whether it and its committees are functioning effectively and consider opportunities for continual enhancement. The Nominating and Governance Committee solicits and receives comments from all directors and shares those comments with the Board. Based on the comments and further discussion and reflection, the Board makes an assessment reviewing areas in which the Board believes improvements could be made to increase the effectiveness of the Board and its committees as well as identifying existing practices which have contributed to high effectiveness and accordingly should be continued. Self-evaluation items requiring follow-up and/or the development and execution of implementation and action plans are monitored on a going-forward basis by the full Board, as well as by individual committees and the chairs thereof, as applicable. While this formal self-evaluation is conducted on an annual basis, directors share perspectives, feedback, and suggestions year-round. The Board and each committee conducted an evaluation of its performance in 2018.

Before the November Board meeting, the Chairman/CEO, Lead Director, and chair of the Nominating and Governance Committee meet to discuss the performance and contributions of each director. As part of the nomination process, the Nominating and Governance Committee considers the performance and contributions of each director and evaluates each of the directors to ensure our directors continue to possess the necessary skills and experience to effectively oversee the Company. On occasion, the Nominating and Governance Committee has not renominated a director based on this individual director evaluation process.

Board and Committee Information

The Board currently has thirteen directors and the following four committees: Audit, Compensation, Finance, and Nominating and Governance. The membership and the function of each committee are described below.

During 2018, the Board of Directors held five regularly scheduled meetings and three telephonic meetings. Overall attendance at Board and committee meetings was 97 percent. During 2018, all of our directors attended at least 75 percent of all Board and Committee meetings on which they served.

The Company has a long-standing policy that directors are expected to attend the Annual Meeting of Stockholders unless extenuating circumstances prevent them from attending. All directors who were members of the Board as of May 2018 attended last year's Annual Meeting of Stockholders, except one director was unable to attend due to illness. Dr. Vance Coffman was also not present at the meeting as he was no longer eligible to stand for re-election to the Board, having reached the mandatory retirement age under the Board's Corporate Governance Guidelines.

Name of Non-employee Director Audit Compensation Finance Nominating
and
Governance
Sondra L. Barbour        
Thomas “Tony” K. Brown                                              
Vance D. Coffman
(retired from the Board, effective May 8, 2018)
                      
David B. Dillon                       
Michael L. Eskew
Herbert L. Henkel
Amy E. Hood
Muhtar Kent
Edward M. Liddy
Dambisa F. Moyo
Gregory R. Page
Patricia A. Woertz
= Committee Member; = Chair

34         3M Company


Table of Contents

Corporate governance at 3M Board committees

AUDIT COMMITTEE

Members
Sondra L. Barbour
Thomas “Tony” K. Brown
David B. Dillon (chair)
Dambisa F. Moyo
Gregory R. Page

Meetings in 2018 13

The Board of Directors has determined that all Audit Committee members are “independent” and “financially literate” under the NYSE listing standards and that members of the Audit Committee received no compensation from the Company other than for service as a director.

The Board has also determined that the following Audit Committee members — David B. Dillon (chair), Sondra L. Barbour, Dambisa F. Moyo and Gregory R. Page — have “accounting or related financial management expertise” under the NYSE listing standards and are “audit committee financial experts” as that term is defined by applicable Securities and Exchange Commission regulations.

The Audit Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities.

Audit Committee Charter
www.3M.com > Investor
Relations > Governance >
Governance Documents >
Committee Charters

Introduction
The Audit Committee assists the Board in its oversight of the integrity of the Company’s financial statements, compliance with legal and regulatory requirements, the qualifications, independence, and performance of the Company’s independent registered public accounting firm (the “Independent Accounting Firm”), the performance of the Company’s internal auditing department, and furnishes a report for inclusion in the Company’s Proxy Statement.

Roles and Responsibilities
Reviews the Company’s annual audited and quarterly consolidated financial statements and internal controls over financial reporting;
Reviews the Company’s financial reporting process and internal controls over financial reporting, including any major issues regarding accounting principles and financial statement presentation, and critical accounting policies to be used in the consolidated financial statements;
Reviews and discusses with management and the Independent Accounting Firm the Company’s report on internal controls over financial reporting and the Independent Accounting Firm’s audit of internal controls over financial reporting;
Reviews earnings press releases prior to issuance;
Appoints, oversees, and approves compensation of the Independent Accounting Firm;
Reviews with the Independent Accounting Firm the scope of the annual audit, including fees and staffing, and approves all audit and permissible non-audit services provided by the Independent Accounting Firm;
Reviews findings and recommendations of the Independent Accounting Firm and management’s response to the recommendations of the Independent Accounting Firm;
Discusses policies with respect to risk assessment and risk management, the Company’s major risk exposures, and the steps management has taken to monitor and mitigate such exposures;
Periodically obtain reports from senior management, including the Chief Information Officer, regarding the progress on the phased implementation of the global enterprise resource planning system, information technology networks and systems, and the adequacy and effectiveness of the Company’s information security policies and internal controls regarding information security;
Periodically obtains reports from the Company’s senior internal auditing executive, who has direct reporting obligations to the Committee, on the annual audit plan, scope of work, and the results of internal audits and management’s response thereto;
Periodically obtains reports from the Company’s Chief Compliance Officer, who has direct reporting obligations to the Committee, on compliance with the Company’s Code of Conduct, and at least annually, on the implementation and effectiveness of the Company’s compliance and ethics program;
Reviews with the Company’s General Counsel legal matters that may have a material impact on the consolidated financial statements and any material reports or inquiries received from regulators or government agencies regarding compliance; and
Establishes procedures for (i) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and (ii) the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters and periodically review with the Chief Compliance Officer and the Company’s senior internal auditing executive these procedures and any significant complaints received.

2019 Proxy Statement         35


Table of Contents

Corporate governance at 3M Board committees

COMPENSATION COMMITTEE

Members
Michael L. Eskew (chair in 2018)
Herbert L. Henkel (chair 1/1/2019)
Amy Hood
Muhtar Kent
Edward M. Liddy
Patricia A. Woertz

Meetings in 2018 4

The Board of Directors has determined that all Compensation Committee members are “independent” under the NYSE listing standards, including the listing standards applicable to compensation committee members.

The Board has also determined that each Compensation Committee member qualifies as a “Non-Employee Director” under Rule 16b-3 of the Securities Exchange Act of 1934, and that each member qualifies as an “outside director” under Section 162(m) of the Internal Revenue Code.

The Compensation Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities.

Compensation Committee Charter
www.3M.com > Investor
Relations > Governance >
Governance Documents >
Committee Charters

Introduction
The Compensation Committee reviews the Company’s compensation practices and policies, annually reviews and approves (subject to ratification by the independent directors of the Board) the compensation for the CEO, annually reviews and approves the compensation for the other senior executives, evaluates CEO performance, reviews and discusses with management of the Company the Compensation Discussion and Analysis prepared in accordance with the Securities and Exchange Commission’s disclosure rules for executive compensation, and furnishes a report for inclusion in the Company’s Proxy Statement.

Roles and Responsibilities
Reviews disclosures in the Company’s Proxy Statement regarding advisory votes on executive compensation and the frequency of such votes;
Approves the adoption, amendment, and termination of incentive compensation and deferred compensation programs for employees of the Company;
Approves the adoption, amendment, or termination of equity compensation programs or, if stockholder approval would be required, recommends such actions to the Board;
Approves, subject to ratification by the independent directors of the Board, employment agreements and severance arrangements for the CEO, as appropriate;
Approves employment agreements and severance arrangements for the senior executives of the Company (other than the CEO), as appropriate;
Oversees the administration of the Company’s stock and long-term incentive compensation programs, and determines the employees who receive awards and the size of their awards under such programs;
Approves the adoption and amendment of Company guidelines covering ownership of Company common stock by executives, and annually reviews compliance with these guidelines;
Reviews and makes recommendations to the Board of Directors concerning any amendment to a retirement benefit plan that would require Board approval;
Annually reviews a risk assessment of the Company’s compensation policies and practices for its employees;
Periodically reviews and discusses with the Company’s management matters relating to internal pay equity;
Reviews stockholder proposals relating to executive compensation matters and makes recommendations to the Board regarding responses;
Periodically reviews human resource issues relating to the Company’s policies and practices with respect to workforce diversity and equal employment opportunities; and
Has the authority to retain compensation consultants, counsel, or other advisors as it deems appropriate, including the authority to approve such advisors’ fees and retention terms.

36         3M Company


Table of Contents

Corporate governance at 3M Board committees

FINANCE COMMITTEE

Members
Sondra L. Barbour
Amy E. Hood
Muhtar Kent (chair)
Dambisa F. Moyo
Patricia A. Woertz

Meetings in 2018 5

The Board of Directors has determined that all Finance Committee members are “independent” under the NYSE listing standards.

The Finance Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities.

Finance Committee Charter
www.3M.com > Investor
Relations > Governance >
Governance Documents >
Committee Charters

Introduction
The Finance Committee assists the Board with its oversight of the Company’s financial structure, including its overall capital structure, sources and uses of funds and related cash and financing plans, the Company’s financial condition and capital strategy, and financial risk management.

Roles and Responsibilities
Reviews and recommends for approval by the Board the dividend policy and the declaration of dividends or other forms of distributions on the Company’s stock, such as stock splits in the form of a stock dividend;
Reviews and recommends for approval by the Board the authorization for repurchase of the Company’s stock and periodically reviews repurchase activities;
Reviews and recommends for approval by the Board the Company’s authorization limit for cumulative short- and long-term borrowings;
Reviews and recommends for approval by the Board the registration and issuance of the Company’s debt or equity securities, except in the case of the issuance of debt or equity securities in connection with a merger or acquisition transaction which is presented to the Board;
Periodically reviews the Company’s capital allocation and capital structure strategies and related metrics from a credit rating agency and investor perspective;
Reviews and recommends for approval by the Board an annual capital expenditure budget and revisions to that budget;
Reviews and recommends for approval by the Board capital expenditures in excess of $75,000,000;
Periodically reviews the Company’s global treasury and tax planning activities;
Reviews and evaluates risks associated with the Company’s policies and activities related to cash investments, counterparty risks, and use of derivatives as part of hedging programs to manage risk related to foreign currencies, commodity prices, and interest rates;
Periodically reviews and approves the Company’s decision to enter into derivative swaps, including swaps exempt from an otherwise applicable clearing or trading mandate, and other governance matters related to derivatives trading;
Periodically reviews the Company’s insurance coverage;
Periodically reviews the funding, asset performance, and strategies for the Company’s pension and other postretirement benefit plans; and
Periodically reviews the Company’s funding and liquidity strategies for achievement of financing objectives.

2019 Proxy Statement         37


Table of Contents

Corporate governance at 3M Board committees

NOMINATING AND GOVERNANCE COMMITTEE

Members
Thomas “Tony” K. Brown
David B. Dillon
Michael L. Eskew (chair 1/1/2019)
Herbert L. Henkel
Edward M. Liddy (chair in 2018)
Gregory R. Page

Meetings in 2018 5

The Board of Directors has determined that all Nominating and Governance Committee members are “independent” under the NYSE listing standards.

The Nominating and Governance Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities.

Nominating and Governance Committee Charter
www.3M.com > Investor
Relations > Governance >
Governance Documents >
Committee Charters

Introduction
The Nominating and Governance Committee establishes the Board Membership Criteria, assists the Board by identifying individuals qualified to become Board members, recommends to the Board matters of corporate governance, facilitates the annual review of the performance of the Board and its committees, and periodically reviews CEO and management succession plans.

Roles and Responsibilities
Selects and recommends director candidates to the Board of Directors, in light of the Board Membership Criteria adopted by the Board, either to be submitted for election at the Annual Meeting or to fill any vacancies on the Board, including consideration of any stockholder nominees for director (submitted in accordance with the Company’s Bylaws);
Reviews and makes recommendations to the Board of Directors concerning the composition and size of the Board and its committees, the Board membership criteria, frequency of meetings, and changes in compensation for non-employee directors;
Reviews the Company’s Corporate Governance Guidelines at least annually, and recommends any proposed changes to the Board for approval;
Develops and recommends to the Board standards to be applied in making determinations on the types of relationships that constitute material relationships between the Company and a director for purposes of determining director independence;
Reviews and approves or ratifies any transaction between the Company and any related person, which is required to be disclosed under the rules of the Securities and Exchange Commission;
Develops and recommends to the Board for its approval an annual self-assessment process of the Board and its committees and oversees the process;
Reviews periodically with the Chairman/CEO succession plans relating to positions held by elected corporate officers, and makes recommendations to the Board with respect to the selection of individuals to occupy these positions;
Periodically reviews the corporate contribution program (3Mgives) and the contribution activities of the 3M Foundation, which is funded by the Company; and
Periodically reviews the Company’s positions and engagement on important public policy issues affecting its business, including Sustainability and the political contributions of 3M and its Political Action Committee.

38         3M Company


Table of Contents

Corporate governance at 3M Director compensation and stock ownership guidelines

Director compensation and stock ownership guidelines

Director Compensation Philosophy and Elements

The Nominating and Governance Committee periodically receives reports on the status of Board compensation in relation to other large U.S. companies and is responsible for recommending to the Board changes in compensation for non-employee directors. In developing its recommendations, the Committee is guided by the following goals:

Compensation should fairly pay directors for work required in a company of 3M’s size and scope;
A significant portion of the total compensation should be paid in common stock to align directors’ interests with the long-term interests of stockholders; and
The structure of the compensation should be simple and transparent.

The Nominating and Governance Committee works with an independent compensation consultant to support its objectives of maintaining a reasonable and appropriate program. For 2018, Frederic W. Cook & Co., Inc. (“FW Cook”) provided the Committee with expert advice on the compensation of non-employee directors, in addition to analyzing market data on director compensation at the same peer group of 17 companies approved by the Compensation Committee for evaluating Named Executive Officer compensation. Neither the Company nor the Nominating and Governance Committee has any arrangement with any other compensation consultant who has a role in determining or recommending the amount or form of director compensation.

Our director program is comprised of a mix of cash and equity that is intended to approximate the peer-group median mix. Our directors’ overall target total direct compensation is consistent with 3M’s size and market-capitalization value relative to its peers. In addition, our hold-until-termination requirement on the annual stock retainer is rigorous relative to the holding requirement of our peers. For more information on the peer group, please see the section entitled “Executive Peer Group” beginning on page 56 of this Proxy Statement. Non-employee directors’ compensation includes the following compensation elements:

Annual Compensation — In May 2018, the Nominating and Governance Committee considered a board compensation study prepared by FW Cook. After reviewing that study, the Committee recommended and the Board approved an increase of $10,000 in the annual compensation for non-employee directors from $295,000 to $305,000, effective January 1, 2018. The annual cash retainer was increased $5,000 (from $130,000 to $135,000). The annual stock retainer was also increased $5,000 (from $165,000 to $170,000). Approximately 44 percent of the annual compensation (or $135,000) is payable in cash in four quarterly installments and approximately 56 percent of the annual compensation (or $170,000) is payable in common stock after the Annual Meeting. In addition, the chair of the Audit Committee receives an additional annual fee of $25,000 and the chairs of the Compensation, Finance and Nominating and Governance Committees each receive an additional annual fee of $20,000. The additional annual fee for the Lead Director also was increased from $30,000 to $35,000, effective January 1, 2018. There are no meeting fees. In lieu of the cash fees, a director may elect to receive common stock of the Company. Non-employee directors may also voluntarily defer all or part of their annual cash fees or stock awards until they cease to be members of the Board.

Deferred Stock — For directors who elect to receive all or a portion of their annual stock retainer or annual cash retainer in deferred stock, the Company credits their accounts with a number of 3M common stock equivalents (“Deferred Stock Units”) equal to the number of actual shares (including fractional shares) of 3M common stock that could have been purchased with such deferred amounts on the first day of the calendar quarter, using the closing sales price of 3M common stock on the NYSE for the last business day immediately preceding such date. In addition, on each payment date for dividends on 3M common stock, the Company credits the directors’ accounts with an additional number of Deferred Stock Units having a value equal to the aggregate dividends that otherwise would have been paid on the shares underlying the Deferred Stock Units credited to their accounts on the relevant dividend record date, using the closing sales price of 3M common stock on the NYSE for the sixth business day preceding the dividend record date. The Deferred Stock Units are fully vested upon grant but do not have voting rights. Appropriate adjustments to the number of Deferred Stock Units credited to each director’s account will be made for stock splits, stock dividends, mergers, consolidations, payments of dividends other than in cash, and similar circumstances affecting 3M common stock. The shares of 3M common stock underlying the Deferred Stock Units will be distributed in a single lump sum during the month of January in the first year after the director leaves the Board, unless the non-employee director elects an alternative distribution schedule prior to the beginning of the year in which the fees are earned. Non-employee directors may elect to receive distribution of the shares of 3M common stock underlying his or her Deferred Stock Units for a year in either a lump sum

2019 Proxy Statement         39


Table of Contents

Corporate governance at 3M Director compensation and stock ownership guidelines

payment on the first business day of any of the first through tenth years following the year in which the non-employee director leaves the Board or in a number of annual installments (not to exceed ten) beginning on the first business day of the year following the year in which he or she leaves the Board.

The Board amended and restated the 3M Compensation Plan for Nonemployee Directors, effective January 1, 2019, in order to implement certain changes in the day-to-day administration of the plan and improve conformity to certain market practices. Under the terms of the plan, as amended and restated, all deferred amounts and dividends will be converted to Deferred Stock Units using the closing sales price for a share of 3M common stock on the NYSE for the last trading day immediately preceding the date such amounts otherwise would have been paid if not deferred. The number of distribution alternatives available to non-employee directors also was reduced. For plan years beginning on or after January 1, 2019, non-employee directors may now elect to receive distribution of the shares of 3M common stock underlying their Deferred Stock Units only in a single lump sum during the month of January in the first or second year following the year in which they leave the Board or in a series of three, five, or ten annual installments beginning on the first business day of January in the first year following their termination of Board service.

All Other Compensation — The column below showing “All Other Compensation” includes the incremental cost of complimentary products and matching gifts. The non-employee directors are eligible to participate in the Company’s matching gift program on the same terms as 3M employees. Under this program, the 3M Foundation will match up to a total of $5,000 a year in contributions by the director to eligible institutions of higher education.

2018 Director Compensation Table

The total 2018 compensation of our non-employee directors is shown in the following table:

Non-Employee Directors   

Fees Earned or
Paid in Cash
($)(1)

   Stock
Awards
($)(2)
   All Other
Compensation
($)(3)
   Total
($)
Sondra L. Barbour 135,000 170,000 337 305,337
Thomas “Tony” K. Brown 135,000 170,000 305,000
Vance D. Coffman (retired from the Board, effective May 8, 2018)** 47,843 59,616 107,459
David B. Dillon* 160,000 170,000 571 330,571
Michael L. Eskew* 190,000 170,000 270 360,270
Herbert L. Henkel 135,000 170,000 621 305,621
Amy E. Hood 135,000 170,000 763 305,763
Muhtar Kent* 155,000 170,000 711 325,711
Edward M. Liddy* 155,000 170,000 325,000
Dambisa F. Moyo (appointed to the Board, effective August 12, 2018)** 52,092 66,134 436 118,662
Gregory R. Page 135,000 170,000 440 305,440
Patricia A. Woertz 135,000 170,000 394 305,394
*

Committee Chair (during 2018)

**

Director compensation prorated according to effective date of appointment or retirement.

(1)

This column represents the amount of all fees earned or paid in cash for services as a director.

(2)

This column represents the grant date fair value of the stock awards made in 2018, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation. The Company does not grant stock options to non-employee directors. Since all stock awards vest on the grant date, there are no unvested stock awards outstanding at year end.

(3)

This column includes the incremental cost of complimentary products and matching gifts. Non-employee directors are eligible to participate in the Company’s matching gift program on the same terms as 3M employees. Under this program, the 3M Foundation will match up to a total of $5,000 a year in contributions by the director to eligible institutions of higher education.


40         3M Company


Table of Contents

Corporate governance at 3M Director compensation and stock ownership guidelines

Reasonableness of Non-Employee Director Compensation

As described above, our philosophy on director compensation is to pay directors fairly for work required in a company of our size and complexity, make a significant portion of the total compensation equity based to align directors’ interests with those of our stockholders and structure compensation in a simple and transparent manner. We believe that the application of this philosophy has resulted in a non-employee director compensation program that reflects best-in-class design with the following provisions:

Retainer-only cash compensation with no fees for attending meetings that are an expected part of board service.
Additional retainers for special roles having greater responsibilities, such as Lead Director and committee chairs, to recognize the incremental additional time and effort required.
Equity delivered in the form of full-value shares, where annual grants are based on a competitive fixed-value formula and immediate vesting helps avoid director entrenchment.
A requirement to retain the stock retainer portion of annual compensation issued on or after October 1, 2007, until termination from Board service, which includes net after-tax shares attributable to current payments and pre-tax shares attributable to deferrals.
Flexible voluntary deferral provisions and no material benefits or perquisites.
Our 2016 Long-Term Incentive Plan, approved by shareholders at the 2016 Annual Meeting, includes a $600,000 annual compensation limit on all forms of compensation for non-employee directors.

Stock Ownership Guidelines

The Board requires that each director retain the stock retainer portion (currently valued at $170,000) of the annual compensation issued on or after October 1, 2007, until the director leaves the Board. Information regarding accumulated stock and deferred stock units is set forth in the section entitled “Security Ownership of Management” beginning on page 85 of this Proxy Statement.

Hedging and Pledging Policies

The Company’s stock trading policies prohibit directors and the Company’s executive officers from (i) purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of the Company’s common stock, including prepaid variable forward contracts, equity swaps, collars and exchange funds; (ii) engaging in short sales related to the Company’s common stock; (iii) placing standing orders; (iv) maintaining margin accounts; and (v) pledging 3M securities as collateral for a loan. All transactions in 3M securities by directors and executive officers must be pre-cleared with the Deputy General Counsel.

2019 Proxy Statement         41


Table of Contents

Audit committee matters
 

PROPOSAL

Ratification of the Appointment of Independent Registered Public Accounting Firm for 2019
Ratify the appointment of PricewaterhouseCoopers LLP as 3M’s independent registered public accounting firm for 2019.
Based on its assessment of the qualifications and performance of PricewaterhouseCoopers LLP (“PwC”) the Audit Committee believes that it is in the best interests of the Company and its stockholders to retain PwC.

The Audit Committee is directly responsible for the appointment, compensation (including approval of all fees), retention, and oversight of the Company’s independent registered public accounting firm (“Independent Accounting Firm”) retained to perform the audit of our financial statements and our internal control over financial reporting.

The Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) to serve as 3M’s Independent Accounting Firm for 2019. PwC has been 3M’s Independent Accounting Firm since 1998. Prior to that, 3M’s Independent Accounting Firm was Coopers & Lybrand from 1975 until its merger with Price Waterhouse in 1998. In accordance with SEC rules and PwC policy, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide service to our Company. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years. The process for selection of the Company’s lead audit partner pursuant to this rotation policy involves a meeting between the Chair of the Audit Committee and the candidate for the role, as well as discussion by the full Committee and with management.

The Audit Committee annually reviews PwC’s independence and performance in connection with the Audit Committee’s determination of whether to retain PwC or engage another firm as our Independent Accounting Firm. In the course of these reviews, the Audit Committee considers, among other things:

PwC’s historical and recent performance on the 3M audit, including input from those 3M employees with substantial contact with PwC throughout the year about PwC’s quality of service provided, and the independence, objectivity, and professional skepticism demonstrated throughout the engagement by PwC and its audit team;
an analysis of PwC’s known legal risks and significant proceedings;
external data relating to audit quality and performance, including recent Public Company Accounting Oversight Board (“PCAOB”) reports on PwC and its peer firms;
PwC’s independence;
the appropriateness of PwC’s fees, on both an absolute basis and as compared to its peer firms;
PwC’s tenure as our independent auditor and its familiarity with our global operations and businesses, accounting policies and practices and internal control over financial reporting; and
PwC’s capability and expertise in handling the breadth and complexity of our global operations, including the Company’s phased implementation of an enterprise resource planning system on a worldwide basis over the next several years.

Based on this evaluation, the Audit Committee believes that PwC is independent and that it is in the best interests of the Company and our stockholders to retain PwC to serve as our Independent Accounting Firm for 2019.

We are asking our stockholders to ratify the selection of PwC as our Independent Accounting Firm for 2019. Although ratification is not required by our Bylaws or otherwise, the Board is submitting the selection of PwC to our stockholders for ratification as a matter of good corporate governance. If the selection of PwC is not ratified, the Audit Committee will consider whether it is appropriate to select another Independent Accounting Firm. Even if the selection is ratified, the Audit Committee may in its discretion select a different Independent Accounting Firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.

42         3M Company


Table of Contents

Audit committee matters Proposal 2

PwC representatives are expected to attend the Annual Meeting where they will be available to respond to appropriate questions and, if they desire, to make a statement.

RECOMMENDATION OF THE AUDIT COMMITTEE

The Audit Committee of the Board of Directors unanimously recommends a vote  “FOR”  the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2019. Proxies solicited by the Board of Directors will be voted  “FOR”  ratification unless a stockholder indicates otherwise in voting the proxy.

Audit Committee Report

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. The management of the Company is responsible for (i) the preparation of complete and accurate annual and quarterly consolidated financial statements (“financial statements”) in accordance with generally accepted accounting principles in the United States, (ii) maintaining appropriate accounting and financial reporting principles and policies and internal controls designed to assure compliance with accounting standards and laws and regulations, and (iii) an assessment of the effectiveness of internal control over financial reporting. The Independent Accounting Firm is responsible for planning and conducting in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”) an audit of the Company’s annual consolidated financial statements and a review of the Company’s quarterly financial statements and expressing opinions on the Company’s financial statements and internal control over financial reporting based on the integrated audits.

In this context, the Audit Committee has met and held discussions with management and the Independent Accounting Firm regarding the fair and complete presentation of the Company’s results and the assessment of the Company’s internal control over financial reporting. The Audit Committee has discussed significant accounting policies applied by the Company in its financial statements,as well as alternative treatments. Management has represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States, and the Audit Committee has reviewed and discussed the consolidated audited financial statements with management and the Independent Accounting Firm. The Audit Committee has discussed with the Independent Accounting Firm matters required to be discussed pursuant to the PCAOB’s Auditing Standards on Communications with Audit Committees, as currently in effect.

In addition, the Audit Committee has reviewed and discussed with the Independent Accounting Firm the auditor’s independence from the Company and its management. As part of that review, the Audit Committee has received the written disclosures and the letters required by applicable requirements of the PCAOB regarding the Independent Accounting Firm’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed the Independent Accounting Firm’s independence from the Company.

The Audit Committee also has considered whether the Independent Accounting Firm’s provision of non-audit services to the Company is compatible with the auditor’s independence. The Audit Committee has concluded that the Independent Accounting Firm is independent from the Company and its management.

The Audit Committee has discussed with the Company’s Internal Audit Department and Independent Accounting Firm the overall scope of and plans for their respective audits. The Audit Committee meets with the Internal Auditor, Chief Compliance Officer, the General Counsel, and representatives of the Independent Accounting Firm in regular and executive sessions, to discuss the results of their examinations, the evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting and compliance programs.

In reliance on the reviews and discussions referred to above, the Audit Committee has recommended to the Board of Directors, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, for filing with the SEC.

Submitted by the Audit Committee

David B. Dillon, Chair
Sondra L. Barbour
Thomas “Tony” K. Brown
Dambisa F. Moyo
Gregory R. Page

2019 Proxy Statement         43


Table of Contents

Audit committee matters Proposal 2

Audit Committee Policy on Pre-Approval of Audit and Permissible Non-Audit Services of the Independent Accounting Firm

The Audit Committee is responsible for appointing and overseeing the work of the Independent Accounting Firm. The Audit Committee has established a policy requiring its pre-approval of all audit and permissible non-audit services provided by the Independent Accounting Firm.

The policy identifies the guiding principles that must be considered by the Audit Committee in approving services to ensure that the Independent Accounting Firm’s independence is not impaired; describes the Audit, Audit-Related, Tax and All Other services that may be provided and the non-audit services that may not be performed; and sets forth the pre-approval requirements for all permitted services. The policy provides for the general pre-approval of specific types of Audit, Audit-Related and Tax services and a limited fee estimate range for such services on an annual basis as set forth in the engagement letter with the Independent Accounting Firm. The policy requires specific pre-approval of all other permitted services. The Independent Accounting Firm is required to report periodically to the Audit Committee regarding the extent of services provided in accordance with their pre-approval and the fees for the services performed to date.

The Audit Committee’s policy delegates to its Chair the authority to address requests for pre-approval of services in certain limited circumstances between Audit Committee meetings. The chair, in his discretion, must either seek immediate approval by e-mail from the other Audit Committee members, or report any pre-approval decisions to the Audit Committee for its approval at its next scheduled meeting.

The Audit Committee may not delegate to management the Audit Committee’s responsibility to pre-approve permitted services of the Independent Accounting Firm.

All Audit, Audit-Related, Tax and All Other services described below were approved by the Audit Committee before services were rendered.

Fees of the Independent Accounting Firm

The following table represents fees billed for professional services rendered by PricewaterhouseCoopers LLP (“PwC”) for the audit of the Company’s consolidated financial statements for the years ended December 31, 2017 and 2018, and fees billed for other services rendered by PwC during those periods.

AUDIT AND NON-AUDIT FEES ($ IN MILLIONS)

2017 2018  
Audit Fees:     $ 17.4         $18.6    
Audit-Related Fees: 1.2 1.3
Tax Fees: 0.9 0.7
All Other Fees: 0.1 0.2
Total $ 19.7 $20.8
 

In the above table, in accordance with SEC rules, “Audit” fees consisted of audit work and review services, as well as work generally only the independent registered public accounting firm can reasonably be expected to provide, such as statutory audits, comfort letters, consents, and review of documents filed with the Securities and Exchange Commission. “Audit-related” fees consisted principally of procedures related to the adoption of new accounting standards in future years, internal control and system audit procedures for periods prior to the rollout of the ERP system, agreed-upon procedures, employee benefit plan audits, and other attestation services. “Tax” fees consisted principally of tax compliance services in foreign jurisdictions, assistance with transfer pricing documentation, assistance with excise tax filings, and advice on foreign and domestic tax related matters. “All Other” fees consisted of information security vendor assessments, licenses for accounting software, and other permissible services that do not fall into the three categories listed above.

44         3M Company


Table of Contents

Audit committee matters Proposal 2

Audit Committee Restrictions on Hiring Employees of the Independent Accounting Firm

The Audit Committee has adopted restrictions on the hiring by the Company of any PwC partner, director, manager, staff, reviewing actuary, reviewing tax professional, and any other persons having responsibility for providing audit assurance on any aspect of PwC’s certification of the Company’s financial statements. Audit assurance includes all work that results in the expression of an opinion on financial statements, including audits of statutory accounts.

2019 Proxy Statement         45


Table of Contents

Executive compensation
 

PROPOSAL

Advisory Approval of Executive Compensation
Approve, on an advisory basis, the compensation of our Named Executive Officers.
Our executive compensation program appropriately aligns our executives’ compensation with the performance of the Company and its business units as well as their individual performance.

Section 14A of the Securities Exchange Act provides our stockholders with the opportunity to approve, on an advisory basis, the compensation of our named executive officers as described in this Proxy Statement. This is the eighth year that the Company is asking stockholders to vote on this type of proposal, known as a “say-on-pay” proposal.

We believe that our executive compensation program is consistent with our core compensation principles and is structured to assure that those principles are implemented. At the Annual Meeting of Stockholders held on May 8, 2018, approximately 93 percent of the votes cast on this issue voted to approve the compensation of the Company’s named executive officers as disclosed in last year’s Proxy Statement. Although the vote was non-binding, the Compensation Committee believes this level of approval percentage indicates that our stockholders strongly support our core compensation principles and our executive compensation program, and we believe our stockholders as a whole should support them as well.

Thus, the Company is submitting to stockholders the following resolution for their consideration and approval:

“RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission (including in the Compensation Discussion and Analysis, the accompanying compensation tables and related narrative).”

We encourage you to read the entire Compensation Discussion and Analysis portion of this Proxy Statement to learn more about our executive compensation program and the impact that our financial performance has on the annual and long-term incentive compensation earned by our leadership team.

While the Board of Directors and the Compensation Committee intend to carefully consider the results of the voting on this proposal when making future decisions regarding executive compensation, the vote is not binding on the Company or the Board and is advisory in nature. The Company currently holds advisory votes on the compensation of named executive officers annually. Accordingly, the next such advisory vote is expected to occur at the 2020 Annual Meeting.

RECOMMENDATION OF THE BOARD

The Board of Directors unanimously recommends a vote  “FOR”  this proposal for the reasons discussed above. Proxies solicited by the Board of Directors will be voted  “FOR”  this proposal unless a stockholder indicates otherwise in voting the proxy.


46         3M Company


Table of Contents

Executive compensation Compensation discussion and analysis

Compensation discussion and analysis

This Compensation Discussion and Analysis describes 3M’s executive compensation program, explains how 3M’s Compensation Committee oversees and implements this program, and reviews the 2018 compensation for the executive officers identified below. Throughout this Compensation Discussion and Analysis and elsewhere in this Proxy Statement, we refer to this group of individuals as the “Named Executive Officers.”

Name     Title
Michael F. Roman Chief Executive Officer
Inge G. Thulin Executive Chairman of the Board
Nicholas C. Gangestad Senior Vice President and Chief Financial Officer
Hak Cheol Shin Former Vice Chair and Executive Vice President
Julie L. Bushman Executive Vice President, International Operations
Frank R. Little Former Executive Vice President, Safety and Graphics Business Group
James L. Bauman Executive Vice President, Industrial Business Group

The table above reflects the title of each Named Executive Officer as of March 1, 2019. As part of the Board’s ongoing leadership succession planning process, two of the Named Executive Officers held multiple positions during the course of the year.

Mr. Roman was appointed Chief Executive Officer, effective July 1, 2018. Prior to that, Mr. Roman served as the Company’s Executive Vice President and Chief Operating Officer from 2017 to 2018, Executive Vice President, Industrial Business Group, from 2014 to 2017, and Senior Vice President, Business Development, from 2013 to 2014. As announced on February 6, 2019, the Board will nominate Mr. Roman, who also is a member of the Board, to serve as Chairman of the Board effective May 14, 2019, following his election for a one-year term as a director by stockholders at the 2019 Annual Stockholder Meeting. Unless otherwise noted, all references to our “Chief Executive Officer” or “CEO” in this Compensation Discussion and Analysis refer to Mr. Roman.
Mr. Thulin was appointed Executive Chairman of the Board, effective July 1, 2018. In this role, Mr. Thulin continues to chair 3M’s Board of Directors and works closely with Mr. Roman on long-term strategic initiatives for the Company. Mr. Thulin served as 3M’s Chairman of the Board, President and Chief Executive Officer from 2012 to his appointment as Executive Chairman in 2018. Mr. Thulin has announced his intention not to stand for re-election as a director and to retire from employment with the Company on June 1, 2019.

As previously announced, Mr. Shin and Mr. Little left employment with the Company, effective January 1, 2019, and July 1, 2018, respectively.

To enable quicker navigation of the information provided, this Compensation Discussion and Analysis is organized into four distinct sections:

Section I: Executive Summary     47
Section II: How We Determine Compensation 52
Section III: How We Paid our Named Executive Officers in 2018 59
Section IV: Ways in Which We Address Risk and Governance 65

For the meaning of certain capitalized terms used throughout this Compensation Discussion and Analysis, see “Meaning of Certain Terms” on page 58 of this Proxy Statement.

Section I: Executive Summary

Selected 2018 Financial Performance and Business Highlights

3M’s 2018 financial performance was achieved through growth and disciplined execution. Given the impact that the Net TCJA Transition Tax, the Water Quality and Sustainability Grant, and the Net CMD Divestiture Gains, had on the Company’s 2018 financial performance, our results are shown below both as determined in accordance with GAAP (to the extent applicable) and excluding these three impacts.

2019 Proxy Statement         47


Table of Contents

Executive compensation Compensation discussion and analysis

   

Results Determined
in Accordance
with GAAP (to the
Extent Applicable)

   

Results Excluding
Impact of U.S. Tax
Reform, the Net CMD
Divestiture Gains and
the Water Quality and
Sustainability Grant

   
 

Earnings Per Share Growth

+12.1% 

+8.6%*

Excluding the impact of the Net TCJA Transition Tax, the Net CMD Divestiture Gains and the Water Quality and Sustainability Grant, earnings per share grew from $9.17 in 2017 to $9.96 in 2018.
Excluding the impact of the Water Quality and Sustainability Grant and the Net CMD Divestiture Gains, full-year underlying operating margin performance was 23.6% in 2018.
 
 

Organic Local Currency Sales Growth

+3.2% 

+3.2% 

Positive organic growth across all Business Groups and geographic areas.
 
 

Return on Invested Capital

22.2%*

24.6%*

Efficiently deploying capital across the business.
 
 

Free Cash Flow Conversion

90.9%*

92.8%*

Continued strong free cash flow generation.
2018 free cash flow of $4.9 billion.

 


*

See Appendix A to this Proxy Statement for a reconciliation of earnings per share, operating margin performance, free cash flow and free cash flow conversion to our results for the most directly comparable financial measures as reported under generally accepted accounting principles in the United States, and the calculation of return on invested capital.

We believe that our ability to deliver consistent results over time is reflected in our total stockholder return, which was in the top half of our executive compensation peer group for the three- and five-year periods ending on December 31, 2018. For additional information, see “Total Stockholder Return” on page 50 of this Proxy Statement.

Other noteworthy accomplishments include the following:

Announced the acquisition of M*Modal to strengthen our Health Information Systems portfolio and complement organic growth;

Awarded a record total of 4,208 patents from patent offices around the world in 2018, including 688 patents granted to 3M by the United States Patent and Trademark Office, which brings to more than 117,000 the total number of patents awarded to 3M in its corporate history;

Strengthened our portfolio going forward by completing the divestiture of substantially all of our Communication Markets Division;

Successfully completed the rollout of the enterprise resource planning (ERP) system in the United States – approximately 70 percent of global revenues are now on the new ERP system;

Over 100 consecutive years of paying dividends to stockholders and 60 consecutive years of annual increases;

Returned $8.1 billion to stockholders via dividends and gross share repurchases; and

Recognized by Ethisphere® as one of the World’s Most™ Ethical Companies® for the sixth consecutive year.

Factors Creating Alignment Between Pay and Performance

3M’s executive compensation program is designed to maintain a strong alignment between corporate performance and executive compensation by tying incentive compensation to the achievement of performance metrics that we believe increase the Company’s long-term value. For 2018, highlights of the program include:

A large portion of each executive’s target Total Direct Compensation (cash plus long-term incentives) is performance-based, varying from 89 percent for Chief Executive Officer Michael Roman to a range of 82-91 percent for the other Named Executive Officers; and

The incentive compensation opportunities provided to the Named Executive Officers utilize multiple performance-based metrics focused primarily on revenue and earnings performance, increase in 3M’s common stock price, efficient use of capital, and free cash flow conversion.


48         3M Company


Table of Contents

Executive compensation Compensation discussion and analysis

Impact of Company Performance on Incentive Compensation and Real Pay Delivery

One objective of our incentive compensation program is to align our Named Executive Officers’ real pay delivery with performance. The Company’s performance directly impacted incentive compensation pay outcomes for our Named Executive Officers as follows:

2018 Annual Incentive Compensation

For the Named Executive Officers paid on the basis of the Company’s overall performance, the 2018 annual incentive compensation payout (before any adjustment for individual performance) was 95 percent of the target amount. The payouts reflect our performance against the goals established for 2018 (as shown below) and were calculated excluding the impact of the Net TCJA Transition Tax and a related $600 million pension contribution made in 2017, the Net CMD Divestiture Gains and the Water Quality and Sustainability Grant.

Local currency sales achieved 98 percent of plan;
3M economic profit achieved 96 percent of plan; and
3M’s 2018 economic profit represented 103 percent of its 2017 results.

Performance Share Awards (Long-Term Incentive Compensation)

Based on the results described below, the number of shares (excluding dividend equivalents) delivered pursuant to the performance share awards issued to the Named Executive Officers for the 2016-2018 performance period equaled 105 percent of the target number of shares awarded. After considering the appreciation in the price of 3M’s common stock over the three-year performance period and the additional shares delivered pursuant to the dividend equivalent rights granted as part of the awards, the value of the total number of 3M shares delivered to the Named Executive Officers in settlement of these awards (determined using the closing price of a share of 3M common stock on the NYSE for December 31, 2018) equaled 134 percent of the value of the target number of performance shares subject to such awards (determined using the closing price of a share of 3M common stock on the NYSE for March 1, 2016, the initial grant date of 2016 performance share awards).

EARNINGS PER
SHARE GROWTH
(2
0% WEIGHTING)
RELATIVE ORGANIC
VOLUME GROWTH
(
40% WEIGHTING)
RETURN ON
INVESTED CAPITAL
(
20% WEIGHTING)
FREE CASH
FLOW CONVERSION
(
20% WEIGHTING)
              
2018 performance excludes the impact of the 3M Grant for Water Quality and Sustainability Fund and the Net CMD Divestiture Gains
2017 and 2018 performance exclude the impact of the Net TCJA Transition Tax
2017 performance exceeded the maximum level established for these awards
2018 performance achieved the minimum threshold attainment
2017 performance achieved the maximum level established for these awards
No shares were earned based on 2016 performance for this metric
2017 and 2018 performance achieved the maximum level established for these awards
Numbers shown exclude the impact of acquisitions in the year of the transaction
2017 and 2018 performance exclude the impact of the Net TCJA Transition Tax
2018 performance excludes the impact of the 3M Grant for Water Quality and Sustainability Fund and the Net CMD Divestiture Gains
No shares were earned based on 2018 performance for this metric
2017 and 2018 performance exclude the impact of the Net TCJA Transition Tax
2018 performance excludes the impact of the 3M Grant for Water Quality and Sustainability Fund and the Net CMD Divestiture Gains

2019 Proxy Statement         49


Table of Contents

Executive compensation Compensation discussion and analysis

Stock and Long-Term Incentive Compensation

The performance of 3M’s stock has a material impact on the amount of compensation actually realized by our Named Executive Officers. Our stock ownership guidelines require covered executives, including the Named Executive Officers, to own amounts of Company stock having a value exceeding a specified multiple of their base salary. If the market price of 3M’s stock declines, so does the value of the stock they own.

Similarly, stock options and other long-term incentive awards held by our Named Executive Officers increase or decrease in value along with increases and decreases in the value of 3M’s common stock. The stock options and other long-term incentive compensation granted to our Named Executive Officers in years prior to 2018 decreased in value during 2018 as the closing price for a share of the Company’s common stock on the NYSE decreased from $235.37 on December 29, 2017, to $190.54 on December 31, 2018.

Total Stockholder Return

The graphs below illustrate 3M’s stock performance relative to the stock performance of the S&P 500 and the peer companies included in the Company’s executive peer group, as described under “Competitive Pay” beginning on page 55 of this Proxy Statement.

ANNUALIZED TOTAL STOCKHOLDER RETURN PERFORMANCE
5-year period 3-year period 1-year period

TSR = Share Price Appreciation + Dividend Yield (annualized)

Note: 5-Year Return = Five years ending 12/31/18; 3-Year Return = Three years ending 12/31/18; 1-Year Return = One year ending 12/31/18 Source: Bloomberg.

2018 Say on Pay

In 2018, approximately 93 percent of the votes cast on our say-on-pay proposal approved the compensation of our Named Executive Officers as disclosed in last year’s Proxy Statement. Although the vote was non-binding, the Committee believes this level of approval indicates that stockholders strongly support our executive compensation programs and policies. The Committee will consider the results of this year’s say-on-pay proposal, as well as feedback from our stockholders, when making future executive compensation decisions.

For information concerning our investor outreach efforts, please refer to the section entitled “Stockholder Outreach and Engagement” on page 9 of this Proxy Statement.

50         3M Company


Table of Contents

Executive compensation Compensation discussion and analysis

Noteworthy Compensation Program Actions for 2018

During 2018, 3M and the Committee took the noteworthy actions described below as part of the Company’s executive compensation program.

Approved new compensation terms for Michael F. Roman in connection with his appointment as Chief Executive Officer, including an annual base salary of $1,200,000 and target annual incentive compensation of $3,120,000, each of which were prorated for 2018. The Compensation Committee (with ratification by the independent members of the Board) will determine the target value of Mr. Roman’s annual long-term incentive grants each year based on market data and his individual performance. Mr. Roman also received special promotion performance share and stock option awards granted at the time of his appointment as Chief Executive Officer that had an aggregate target grant value of $2,500,000, as described in more detail on page 62). Consistent with the Company’s compensation philosophy, Mr. Roman does not have an employment agreement, severance agreement or change in control agreement.
Approved new compensation terms for Inge G. Thulin in connection with his appointment as Executive Chairman, including an annual base salary of $1,000,000 and target annual incentive compensation of $1,500,000 (each prorated for 2018), which represent decreases of approximately 35 percent and 39 percent, respectively. The Compensation Committee (with ratification by the independent members of the Board) will determine the target value of Mr. Thulin’s annual long-term incentive grants each year based on market data and his individual performance. In anticipation of his transition to Executive Chairman in 2018, the aggregate target compensation value for Mr. Thulin’s 2018 long-term incentive compensation awards was reduced by $3,000,000 from the target compensation value established for such awards granted to him in 2017. Mr. Thulin also received a performance share award granted at the time of his appointment as Executive Chairman that had a target grant value of $750,000 (as described in more detailed on page 62). Mr. Thulin’s new compensation terms were approved by the Committee (with ratification by the independent members of the Board) consistent with the recommendation of its independent compensation consultant based on peer and other market data.
Expanded the scope of our clawback policy to address situations involving significant financial or reputational harm. For additional information concerning our updated policy, please refer to the section entitled “Clawback Policy” on page 66 of this Proxy Statement.

Compensation Policies and Practices

Our compensation program is designed to provide appropriate performance incentives and avoid compensation practices that do not promote the interests of our stockholders.

Maintain a strong alignment between corporate performance and our executive officers’ compensation by having a majority of Total Direct Compensation consist of performance-based compensation.
Conduct an annual assessment for the purpose of identifying and mitigating significant economic and reputational risks in the design of our incentive compensation programs.
Have a comprehensive clawback policy that covers both cash and equity compensation and includes provisions addressing reputational and financial risk as well as risk management failures.
Use an independent compensation consultant retained by, and reporting directly to, the Committee.
Limit the number and amount of executive perquisites.
Prohibit our executive officers from hedging or pledging 3M common stock.
Maintain robust stock ownership guidelines applicable to all of our executive officers.
Conduct competitive benchmarking to align executive compensation with the market.

Have employment, severance, or change in control agreements with any of our executive officers.
Provide tax gross-ups on executive perquisites.
Have agreements that would provide automatic “single-trigger” accelerated vesting of equity compensation or excise tax gross-up payments to any of our executive officers upon a change in control.
Pay dividends or dividend equivalents on unearned equity awards.
Reprice stock options without the approval of 3M stockholders, except for “anti-dilution” adjustments (such as adjustments in connection with a stock split, spinoff, etc.)

2019 Proxy Statement         51


Table of Contents

Executive compensation Compensation discussion and analysis

Section II: How We Determine Executive Compensation

Principles

The Company maintains global compensation principles that are intended to ensure that its compensation practices are fair and reasonable as applied to both executive and non-executive employees. These principles align with the Company’s vision and strategies, balance both individual and enterprise-wide performance and seek to provide competitive wages and benefits with consistent positioning in the median range of the most-relevant markets to employees based on roles, responsibilities, skills and performance. 3M also believes that the compensation of its executives should be closely tied to the performance of the Company, so that their interests are aligned with the interests of long-term 3M stockholders. Consistent with this philosophy, the following core principles provide a framework for the Company’s executive compensation program:

Total Direct Compensation should be competitive to attract the best talent to 3M, motivate executives to perform at their highest levels, reward individual contributions that improve the Company’s ability to deliver outstanding performance, and retain those executives with the leadership abilities and skills necessary for building long-term stockholder value;
The portion of Total Direct Compensation that is performance-based and is, therefore, at risk should increase with the level of an individual’s responsibility;
The program should balance incentives for delivering outstanding long-term, sustainable performance against the potential to encourage inappropriate risk-taking;
The metrics and targets for earning performance-based incentives should be consistent with, and aligned to, increasing stockholder value over the long term; and
A significant portion of each executive’s personal net worth should be tied to the value of 3M common stock as further motivation to build long-term stockholder value and mitigate the risk of inappropriate risk-taking.

To monitor and support the effectiveness of this program, the Committee periodically reviews the compensation principles used for setting annual total cash compensation for the Company’s global workforce and approves the methodology for determining annual long-term incentive target grant values for employees eligible to receive such awards. The Company also periodically compares its pay components to those of other premier companies and adjusts them as necessary to stay competitive and attract, retain and motivate a highly qualified, diverse workforce at all levels throughout the organization, not just for its executives.

Roles and Responsibilities

The Company believes that a collaborative process best ensures that compensation decisions reflect the principles of our executive compensation program. Set forth below is a summary of the roles and responsibilities of the key participants that were involved in making decisions relating to the compensation that our Named Executive Officers earned in 2018.

RESPONSIBLE PARTY

PRIMARY ROLES AND RESPONSIBILITIES RELATING TO COMPENSATION DECISIONS
Compensation Committee
(Composed solely of independent, non-employee directors and reports to the Board)
Reviews the design of, and risks associated with, the Company’s compensation policies and practices;
Approves the compensation of our Chief Executive Officer and Executive Chairman (including performance metrics and goals for performance-based long-term and short-term incentive compensation), subject to ratification by the independent members of the Board of Directors;
Approves annual performance goals and objectives for our Chief Executive Officer and Executive Chairman;
Acting through the Committee’s Chairman, conducts an annual evaluation of our Chief Executive Officer’s and Executive Chairman’s performance and reviews such evaluation with the independent members of the Board of Directors;
Approves the compensation of our other Named Executive Officers (including performance metrics and goals for performance-based long-term and short-term incentive compensation); and
Approves all changes to the composition of the executive peer group.
 
Independent Non-employee Members of the Board of Directors
Considers the Committee’s annual evaluation of our Chief Executive Officer’s and Executive Chairman’s performance; and
Considers the Committee’s recommendations regarding the compensation of our Chief Executive Officer and Executive Chairman and, if deemed appropriate, approves such compensation.
 

52         3M Company


Table of Contents

Executive compensation Compensation discussion and analysis

RESPONSIBLE PARTY PRIMARY ROLES AND RESPONSIBILITIES RELATING TO COMPENSATION DECISIONS
Independent Consultant to the Compensation Committee*
(Frederic W. Cook & Co., Inc.)
Provides the Committee with advice regarding the design of all elements of the Company’s executive compensation program;
Reviews and provides an assessment of the material economic and reputational risks associated with the Company’s incentive compensation programs;
Reviews and provides an independent assessment of materials provided to the Committee by management of the Company;
Provides advice and recommendations to the Committee regarding the composition of the compensation peer groups;
Provides expert knowledge of regulatory developments, marketplace trends and best practices relating to executive compensation and competitive pay levels;
Makes recommendations regarding the compensation of the Named Executive Officers (including our Chief Executive Officer and Executive Chairman); and
Regularly attends and actively participates in meetings of the Committee, including executive sessions.
   
Chief Executive Officer
(Assisted by our Senior Vice President, Human Resources and other Company employees)
Approves annual performance goals and objectives for the Named Executive Officers (other than himself and our Executive Chairman);
Conducts an annual performance evaluation for each of the Named Executive Officers (other than himself and our Executive Chairman) and presents the results to the Committee; and
Makes recommendations to the Committee with respect to the compensation of the Named Executive Officers (other than himself and our Executive Chairman) based on the final assessment of their performance.
 

* During 2018, the Committee was assisted by its independent compensation consultant, George B. Paulin of Frederic W. Cook & Co., Inc. (“FW Cook”). Other than the support that it provided to the Committee, FW Cook provided no other services to the Company or 3M management, with the exception of independent advisory support to the Nominating and Governance Committee on the compensation of 3M’s non-employee directors so that valuation methodologies and peer groups are consistent with those used for executives and other employees. During the year, the Committee considered an evaluation of the independence of Mr. Paulin and his firm based on the relevant regulations of the Securities and Exchange Commission and the NYSE listing standards. The Committee concluded that the services performed by Mr. Paulin and his firm did not raise any noteworthy conflicts of interest.

Elements of Target 2018 Total Direct Compensation

The illustration below and the discussion that follows show how the target Total Direct Compensation of the Named Executive Officers (excluding our Executive Chairman) was apportioned among base salary, annual incentives, performance share awards and stock options for 2018, and how these elements relate to the strategic business goals of the Company.

CEO*              OTHER NEOs (AVERAGE)**


Abbreviations: AIP = Annual incentive pay; PSAs = Performance share awards.

*

Amounts shown represent the apportionment of Total Direct Compensation for Mr. Roman.

**

Amounts shown reflect the average apportionment for all Named Executive Officers other than Mr. Roman and Mr. Thulin. Including Mr. Thulin, the average apportionment for the other Named Executive Officers would be as follows: base salary — 13 percent; AIP — 14 percent; stock options — 40 percent; performance shares — 34 percent; and performance-based pay — 85 percent. Note: Numbers do not add to 100 percent due to rounding.


2019 Proxy Statement         53


Table of Contents

Executive compensation Compensation discussion and analysis

BASE SALARY

Percentage of Target 2018 Total Direct Compensation:    
CEO – 11%
 
Other NEOs – 15%
 

3M pays each of its executives a base salary in cash on a monthly basis. The amount of this base salary is reviewed at least annually and does not vary with the performance of the Company. Base salaries are designed to compensate the executives for their normal day-to-day responsibilities, and it is the only component of their compensation that is considered to be fixed rather than variable in nature.

ANNUAL INCENTIVE

Percentage of Target 2018 Total Direct Compensation:     Performance Metrics and Weighting:
CEO – 15%
Other NEOs – 13%
50% Local Currency Sales (of 3M or a business unit, as applicable) vs. Plan
20% Economic Profit (of 3M or a business unit, as applicable) vs. Plan
30% Economic Profit of 3M vs. Prior Year

3M provides its executives with annual incentive compensation through plans that are intended to align a significant portion of their Total Cash Compensation with the financial performance of the Company and its business units. Each executive is assigned a target amount of annual incentive compensation as part of his or her target Total Cash Compensation, but the amount of annual incentive compensation actually paid depends on the performance of 3M and its relevant business units as well as each executive’s individual performance.

3M’s AIP offers eligible employees an opportunity to earn short-term incentive compensation based on three performance metrics, which were weighted for 2018 as indicated above. All 2018 performance targets for our Corporate AIP plan were set at or above 2017 results.

The actual amount paid to an eligible employee for a particular year may range from 0 percent to 200 percent of the employee’s target amount for that year, depending on the performance of the Company and its business units compared to the performance goals approved by the Compensation Committee. The amount of annual incentive compensation paid to an eligible employee also may be increased (up to 30 percent), reduced or eliminated entirely based on the employee’s individual performance during that year. Individual performance takes into account both quantitative (financial results, for example) and qualitative (market and economic circumstances, for example) factors. In no event, however, may the total amount paid to an eligible employee exceed 200 percent of the employee’s target amount for the year.

In determining the amount of annual incentive compensation paid to a Named Executive Officer, the Named Executive Officer’s individual performance is considered based upon the annual performance evaluation that Mr. Roman, assisted by 3M’s Senior Vice President, Human Resources, and other Company employees, completed for each Named Executive Officer (other than himself and Mr. Thulin) and the annual performance evaluation that the Compensation Committee (acting through its Chairman) completed for each of Mr. Roman and Mr. Thulin. These performance evaluations are done according to 3M’s overall performance assessment and management processes, which involve setting annual financial and non-financial goals and objectives for each individual and then assessing the individual’s overall performance against these goals and objectives at the end of the year. While the annual incentive compensation earned by eligible 3M employees generally is determined under the AIP, the annual incentive compensation earned during 2018 by the senior executives whose compensation is decided by the Committee (including all of the Named Executive Officers) was determined under the Executive Plan approved by 3M’s stockholders at the 2007 Annual Meeting. A total of 19 senior executives participated in this Executive Plan during 2018. The Company utilizes the Executive Plan to provide performance-based compensation that is intended to be exempt from the $1 million annual deduction limit of state tax laws that are similar to Section 162(m) of the Internal Revenue Code, as in effect prior to the Tax Cuts and Jobs Act of 2017.

Assuming the Company meets the Adjusted Net Income goal, the Executive Plan provides the Committee with discretion to determine the amount of annual incentive compensation paid to 3M’s Named Executive Officers and its other senior executives. The Executive Plan establishes a maximum amount of annual incentive compensation that may be earned by each covered executive for a year (a percentage of the Company’s Adjusted Net Income for such year) and then the Committee utilizes this discretion to pay each covered executive less than this maximum amount based on such factors as it deems relevant. Since the Executive Plan was first adopted in 2007, the Committee has rarely used this discretion to pay a covered executive (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the broad-based AIP (including the individual performance multiplier).

54         3M Company


Table of Contents

Executive compensation Compensation discussion and analysis

LONG-TERM INCENTIVES

Percentage of Target 2018 Total Direct Compensation:     Performance Metrics and Weighting:
CEO – 37% Stock Options
20% Earnings per Share Growth
37% Performance Shares
40% Relative Organic Volume Growth
Other NEOs – 36% Stock Options
20% Return on Invested Capital
36% Performance Shares
20% Free Cash Flow Conversion

3M provides long-term incentive compensation to its executives through an incentive plan approved by the Company’s stockholders. This is a typical omnibus-type plan that authorizes the Committee to grant stock options, restricted stock, restricted stock units, stock appreciation rights, performance shares, and other stock awards to employees of the Company and its subsidiaries. The Company provides its executives with this long-term incentive compensation based on 3M common stock in order to effectively motivate such executives to build long-term stockholder value.

In determining the performance-adjusted target grant value of the stock options and performance shares provided to our Named Executive Officers, the Compensation Committee considers the individual performance of our Named Executive Officers using the performance evaluations described under “Annual Incentive” above.

Our Named Executive Officers also may receive special equity awards on an ad hoc basis as new hires or for recognition and retention, promotions, or other purposes.

Benefits and Perquisites

The Company’s Named Executive Officers participate in the same health care, disability, life insurance, pension, and 401(k) benefit plans available to most of the Company’s U.S. employees. They also are eligible to receive certain additional benefits and perquisites that are provided for the convenience (financial planning assistance and meals when attending to 3M business, for example), financial security (nonqualified deferred compensation plans and premiums for additional life insurance coverage, for example), personal security (home security equipment/monitoring, for example) or personal health (on-site exercise facilities and physical exams, for example) of the executives. Our Named Executive Officers and other employees also may receive Company tickets for sporting or other events. The Company believes that the benefits and perquisites offered generally are similar to those of our peers and assist in attracting and retaining executives. In some cases, there is no incremental cost to the Company associated with providing these additional benefits and perquisites (physical exams and certain tickets to events, for example) or the executives pay all or a substantial portion of the incremental costs incurred by the Company (on-site exercise facilities, for example).

3M generally provides these additional benefits and perquisites to a group of approximately 90 of our most senior U.S. employees on a consistent basis, although enhanced personal security equipment and monitoring is provided only to our Chief Executive Officer and the type of additional life insurance coverage provided varies based on the date the executive was first appointed to an executive position. Individuals first appointed to an executive position on or before August 31, 2003, receive additional life insurance coverage that is provided through a universal life insurance policy. Individuals first appointed on or after September 1, 2003, including our Chief Executive Officer, receive group term life insurance coverage.

The Company also operates aircraft that are used by our senior officers and other employees to conduct company business. For personal security reasons, the Board of Directors requires our Chief Executive Officer to use the Company’s aircraft for all air travel, both business and personal. Our Chief Executive Officer’s spouse and other guests also may accompany him on flights.

The incremental cost to the Company of providing these additional benefits to the Named Executive Officers is reflected in the All Other Compensation Table. No tax gross-ups are provided on any of these additional benefits and perquisites. Except as described above, the entire program applied to approximately 90 members of our U.S. senior management during 2018, including all of the Named Executive Officers.

Competitive Pay

We compete for executive talent in a global market. In order to ensure that we are providing Total Direct Compensation that is competitive, the Committee annually conducts a rigorous benchmarking process with the help of its independent compensation consultant, FW Cook. During this process, the Committee generally considers available pay data for two peer groups: an executive peer group and a survey peer group.

2019 Proxy Statement         55


Table of Contents

Executive compensation Compensation discussion and analysis

Executive Peer Group

For 2018, the executive peer group consisted of the companies identified below (which remained the same as in the previous year), as recommended by the Committee’s independent compensation consultant and approved by the Committee. The companies in this executive peer group were selected because (1) their performance was monitored regularly by the same market analysts who monitor the performance of 3M (investment peers), and/or (2) they met criteria based on similarity of their business and pay models, market capitalization (based on an eight-quarter rolling average), and annual revenues and compete with 3M for talent or capital.

(Dollars in millions)
Latest Four Quarters
Revenues
        Trailing Eight-Quarter
Average Market Capitalization
   
General Electric Company $121,615 Johnson & Johnson $353,823
DowDuPont Inc. $85,977 The Procter & Gamble Company $220,986
Johnson & Johnson $81,581 General Electric Company $145,807
The Procter & Gamble Company $66,912 DowDuPont Inc. $135,613
United Technologies Corporation $66,501 3M Company $123,887
Caterpillar Inc. $54,722 Medtronic plc $117,005
Honeywell International, Inc. $41,802 Honeywell International, Inc. $109,366
Deere & Company $38,388 United Technologies Corporation $100,653
3M Company $32,765 Caterpillar Inc. $80,576
Johnson Controls International plc $31,559 Danaher Corporation $69,876
Medtronic plc $30,555 Illinois Tool Works Inc. $49,285
Eaton Corporation plc $21,609 Deere & Company $46,794
Danaher Corporation $19,893 Emerson Electric Co. $42,188
Kimberly-Clark Corporation $18,486 Kimberly-Clark Corporation $40,550
Emerson Electric Co. $17,739 Johnson Controls International plc $34,075
Illinois Tool Works Inc. $14,768 Eaton Corporation plc $33,621
TE Connectivity Ltd. $13,999 TE Connectivity Ltd. $30,214
Corning Incorporated $11,290 Corning Incorporated $26,124
75th Percentile $66,501 75th Percentile $117,005
Mean $43,376 Mean $96,268
Median $31,559 Median $69,876
25th Percentile $18,486 25th Percentile $40,550
3M Percentile Rank 51% 3M Percentile Rank 77%

All data shown was obtained from Standard & Poor’s Capital IQ. Revenues are stated in millions for the latest four quarters disclosed as of February 28, 2019. Market Capitalizations are stated in millions as of February 28, 2019. Market capitalization for DowDuPont represents a seven-quarter average due to lack of market financial data over the complete eight-quarter period.

The Committee, with assistance from its independent compensation consultant, periodically reviews the composition of the executive peer group to determine whether any changes are appropriate. Following its review in 2018, the Committee determined that no changes were needed at that time.

The Company receives pay data and information on the executive compensation practices at the companies in 3M’s executive peer group from Aon and FW Cook.

Survey Peer Group

For 2018, there were approximately 200 comparator companies in the survey peer group. Although the number and identity of the companies varies from year to year and from survey to survey, each of the companies included in the survey peer group had annual revenue exceeding $10 billion. All of the companies in the survey peer group also participate in one or more executive compensation surveys obtained from three consulting firms (Aon, FW Cook, and Willis Towers Watson). Pay data for the survey peer group is statistically regressed to recognize the different sizes of the comparator companies (based on annual revenues) as compared to the size of 3M. The Committee does not review the identity of the companies in the survey peer group.

56         3M Company


Table of Contents

Executive compensation Compensation discussion and analysis

How the Committee Establishes Target Compensation Levels Using Competitive Pay Data

The Committee considers the pay data from the Peer Groups as a reference point when establishing the target Total Cash Compensation and the initial target value of long-term incentive compensation to be provided to our executives in any given year before consideration of individual performance. For each Named Executive Officer, the Committee generally tries to set such amounts between 80 and 120 percent of the median for the corresponding items of compensation provided to similarly situated executives in the executive peer group. In situations where the Committee believes that there is insufficient market data for one or more positions, the Committee starts with the median amount for a similar position and adjusts that amount up or down (generally not more than 15 percent) to arrive at a number that it uses as the “median” for that position. The final target amounts established by the Committee for each executive may vary based on individual circumstances. When setting the target amounts for any individual executive, the Committee may consider the breadth and complexity of the executive’s duties and responsibilities, the scores assigned to the executive for his or her leadership behaviors (e.g., customer focus, strategic mindset, operational leadership), the financial and operational performance of the business activities for which the executive is responsible, experience and time in their current position, internal pay equity, individual performance, and such other factors as the Committee determines to be appropriate. The pay data for the survey peer group is used by the Committee to assess the reasonableness of the benchmarking results for each executive position benchmarked, helping to ensure that the Company’s compensation objectives are being met.

The Committee also uses information on the executive compensation practices at companies in the executive peer group when considering design changes to the Company’s executive compensation program. Overall, the Company believes that use of this information from the Peer Groups enables the Committee to create better alignment between executive pay and performance and to help ensure that 3M can attract and retain high-performing executive leaders.

Tally Sheets

The Committee periodically reviews a report comparing the amounts of compensation actually received by the Company’s Named Executive Officers to the amounts reported in its annual proxy statement and summarizing the compensation that would be owed to such individuals in the event of the termination of their employment under various circumstances. Reviewing this report helps the Committee better understand the Company’s potential obligations to the Named Executive Officers following the termination of their employment. It also helps the Committee better assess the risk of any of the Named Executive Officers leaving the Company prematurely because the Company is not providing sufficient retention incentives.

Tax Considerations

Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”), disallows a tax deduction to public companies for compensation paid in excess of $1 million to “covered employees” (generally, a company’s chief executive officer and its three other highest paid executive officers other than its chief financial officer). Prior to enactment of the TCJA, there was an exception to this $1 million limitation for performance-based compensation if certain requirements set forth in Section 162(m) and the applicable regulations were met. The Committee has historically designed its compensation programs based on its belief that a substantial portion of the compensation payable to NEOs should be based on the achievement of performance-based targets or otherwise be designed with the intent that such compensation qualifies as deductible performance-based compensation under Section 162(m). As a result, annual incentive compensation and certain equity-based compensation arrangements granted to our covered employees in prior years were intended to qualify as performance-based compensation under Section 162(m).

Effective for taxable years beginning after December 31, 2017, the TCJA amended Section 162(m) to eliminate the exception for performance-based compensation and expand the definition of “covered employee” to include a company’s chief financial officer and certain individuals who were covered employees in years other than the then-current taxable year. Interpretations of and changes in applicable tax laws and regulations as well as other factors beyond the control of the Committee can affect deductibility of compensation, and there can be no assurance that compensation paid to our executive officers who are considered covered employees for purposes of Section 162(m) will be deductible.

The Committee will continue to consider tax implications (including the potential lack of deductibility under Section 162(m)) when making compensation decisions but reserves the right to make compensation decisions based on other factors if the Committee believes it is in the best interests of the Company and its stockholders to do so. The Committee also reserves the right to make changes or amendments to existing compensation programs, including changes or amendments that are intended to modify or eliminate aspects of such arrangements that were intended to take advantage of the former exception to Section 162(m) for performance-based compensation but that the Committee no longer believes are in the best interests of the Company and its stockholders.

2019 Proxy Statement         57


Table of Contents

Executive compensation Compensation discussion and analysis

Meaning of Certain Terms

Except as otherwise noted, capitalized terms used in this Compensation Discussion and Analysis have the meaning specified below.

Adjusted Net Income     means the net income of 3M as reported in its Consolidated Statement of Income, as adjusted to exclude special items.
AIP means the broad-based Annual Incentive Plan by which the Company provides annual incentive compensation to approximately 35,000 eligible employees.
Committee means the Compensation Committee of the Board of Directors of 3M Company.
Economic Profit means the adjusted net income of 3M (net income including non-controlling interest plus after-tax interest expense, as reported in its Consolidated Statement of Income) or a business unit operating income, plus interest income and minus income taxes, adjusted to exclude special items and the impact of acquisitions or divestitures in the year each acquisition or divestiture is completed (unless such acquisition or divestiture is included in the operating plan for the business unit), less a charge (10 percent in 2018) for the capital used to generate such operating income. The Economic Profit metric measured versus 3M’s prior year results is calculated using total Company average invested capital (equity plus debt, as reported in its Consolidated Balance Sheet), while the Economic Profit metric measured versus plan is calculated using only accounts receivable and inventories of such business unit as capital.
Earnings per Share (EPS)
Growth
means the percentage increase or decrease in 3M’s diluted earnings per share attributable to 3M common stockholders (as reported in its Consolidated Statement of Income) for a year as compared to the previous year, in each case, as adjusted to exclude special items.
Executive Plan means the Executive Annual Incentive Plan by which the Company provides annual incentive compensation to the Named Executive Officers as well as certain other executives.
Free Cash Flow Conversion means the sum of 3M’s operating cash flows minus capital expenditures, divided by net income, as adjusted to exclude special items.
GAAP means generally accepted accounting principles in the United States.
Local Currency Sales means the net sales of 3M (as reported in its Consolidated Statement of Income) or a business unit, in local currency, adjusted to exclude the impact of acquisitions or divestitures in the year each acquisition or divestiture is completed (unless such acquisition or divestiture is included in the operating plan for the business unit).
Organic Local Currency
Sales Growth
means the percentage amount by which 3M’s net sales (as reported in its Consolidated Statement of Income) for a year increase or decrease as compared to the previous year, in each case, adjusted to exclude the sales attributable to acquisitions or divestitures for the 12 months following the date each acquisition or divestiture is completed and to exclude currency effects.
Peer Groups means both 3M’s executive peer group and the survey peer group, each as described in the “Competitive Pay” section of this Compensation Discussion and Analysis.
Relative Organic Volume
Growth
means the amount by which the percentage increase or decrease in 3M’s net sales (as reported in its Consolidated Statement of Income) for a year as compared to the previous year exceeds the percentage increase or decrease in Worldwide real sales growth over the same period, as reflected in the Worldwide Industrial Production Index published by Global Insight. For this purpose, 3M’s net sales are adjusted to exclude price and currency effects and, during the 12-month period following the date of each acquisition or divestiture, the sales attributable to such acquired or divested business or products.
Return On Invested Capital means the operating income of 3M (as reported in its Consolidated Statement of Income), plus interest income and minus income taxes, adjusted to exclude special items and the impact of acquisitions in the year each acquisition is completed, divided by the average invested capital (equity plus debt, as reported in its Consolidated Balance Sheet).
Total Cash Compensation means the total of an individual’s base salary and annual incentive compensation.
Total Direct Compensation means the total of an individual’s Total Cash Compensation plus the compensation value of their annual long-term incentive compensation awards (which is based on their grant date fair value as measured under accounting standards).

58         3M Company


Table of Contents

Executive compensation Compensation discussion and analysis

Section III: How We Paid Our Named Executive Officers in 2018

2018 Base Salary and Target Total Cash Compensation

The Committee considers changes in the base salaries and target Total Cash Compensation of the Named Executive Officers at least annually. As part of its normal process to progress senior executives to a level of compensation that is commensurate with their responsibilities, the Committee also periodically considers adjustments to the base salaries and target Total Cash Compensation of senior executives whose rate of pay is set below the market median. All adjustments are made only after considering the most recent compensation data available to the Committee for executives with similar responsibilities at companies in the Peer Groups, each individual’s place in the salary range for his or her position, and the individual’s job performance.

In February 2018, the Committee approved the increases in the base salaries and target Total Cash Compensation shown below for the Named Executive Officers following completion of their annual performance evaluations. No changes were made to Mr. Roman’s or Mr. Thulin’s base salary or target Total Cash Compensation at that time.

Name   Previous
Base Salary
($)
  New
Base Salary
Effective
4/1/18
($)
  %
Increase
  Previous Target
Total Cash
Compensation
($)
  New Target
Total Cash
Compensation
Effective
4/1/18
($)
  %
Increase
Nicholas C. Gangestad 799,495 841,495 5% 1,598,990 1,682,989 5%
Hak Cheol Shin 875,000 892,500 2% 1,750,000 1,785,000 2%
Julie L. Bushman 769,672 800,502 4% 1,424,000 1,481,040 4%
Frank R. Little 697,409 739,952 6% 1,290,304 1,369,015 6%
James L. Bauman 731,188 760,477 4% 1,352,800 1,406,988 4%

As a result of these increases, the target Total Cash Compensation of these Named Executive Officers ranged from 97 percent to 108 percent of the median value of the corresponding compensation provided to executives with similar responsibilities at companies in the executive peer group.

In May 2018, the Committee approved the adjustments in base salary and target Total Cash Compensation shown below in connection with Mr. Roman’s appointment to Chief Executive Officer and Mr. Thulin’s appointment to Executive Chairman. The adjustments were intended to better align the target Total Cash Compensation of each executive with the breadth of the responsibilities that accompany their new roles.

Name   Previous
Base Salary
($)
  New
Base Salary
Effective
7/1/18
($)
  %
Increase
  Previous Target
Total Cash
Compensation
($)
  New Target
Total Cash
Compensation
Effective
7/1/18
($)
  %
Increase
Michael F. Roman 900,000 1,199,952 33% 2,000,000 3,120,000 56%
Inge G. Thulin 1,538,400 1,000,000 -35% 4,000,000 2,500,000 -38%

As a result of these adjustments, Mr. Roman’s target Total Cash Compensation was approximately 83 percent of the median value of the corresponding compensation provided to executives with similar responsibilities at companies in the executive peer group. Mr. Thulin’s adjustment to target Total Cash Compensation reflects a decrease of 38 percent from his final compensation as Chief Executive Officer, which the Committee’s independent compensation consultant recommended to align with median market practice.

2019 Proxy Statement         59


Table of Contents

Executive compensation Compensation discussion and analysis

2018 Annual Incentive

During 2018, the Committee provided the Named Executive Officers with the opportunity to earn short-term incentive compensation under the Executive Plan. Each Named Executive Officer’s target annual incentive for the year was equal to the difference between his or her target Total Cash Compensation and annual base salary. Each of the Named Executive Officers was assigned to an appropriate business unit (the entire Company, in some cases) established under the AIP for the purpose of measuring business performance during 2018 and converting that performance into a payout determined in accordance with the terms of the AIP. While none of the Named Executive Officers are covered by the AIP, the Committee rarely uses its discretion under the Executive Plan to pay the covered executives (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the AIP (including the individual performance multiplier).

The amounts payable under the AIP for 2018 were based on the following performance results for the Company and, as applicable, the respective business units to which the Named Executive Officers were assigned for all or part of the year:

Local Currency Sales
(50
%)
Economic Profit
(20
%)
Total 3M Economic
Profit vs. Prior Year
(30
%)
Weighted
Average
Payout %
Based On
Payout
Curv
e
(Dollar Amounts in Millions)
Business Unit
  Plan   Actual   Actual
vs.
Plan
  Plan   Actual   Actual
vs.
Plan
  Prior
Year
  Actual   Actual
vs.
Prior Year
 
Total Company 33,514 32,869 98% 5,590 5,348 96% 3,648 3,752 103% 95%
International Operations 20,374 20,009 98% 3,539 3,507 99% 3,648 3,752 103% 96%
Safety and Graphics Business Group 6,889 6,830 99% 1,264 1,217 96% 3,648 3,752 103% 97%
Industrial Business Group 12,428 12,232 98% 2,053 1,876 91% 3,648 3,752 103% 92%

Since the Company satisfied the Executive Plan’s performance objective by earning Adjusted Net Income of $6.0 billion for 2018, the plan authorized the Committee to approve payments of annual incentive compensation to each Named Executive Officer equal to a maximum of one-quarter of one percent of such Adjusted Net Income ($15 million), subject to the Committee’s negative discretion to pay each covered executive any amount less than this maximum based on such factors as it deems relevant, including the goals set forth under the AIP. At its meeting in February 2019 and consistent with its past practice, the Committee approved (and with respect to Mr. Roman and Mr. Thulin, the independent members of the Board of Directors ratified) a payment to each executive equal to the amount such executive would have received had he been participating in the broad-based AIP (including the individual performance multiplier).

Name   Target 2018
Annual
Incentive*
($)
  Actual 2018
Annual
Incentive
($)
  Payout
as a %
of Target
Michael F. Roman 1,510,024 1,431,503 95%
Inge G. Thulin 1,980,800 1,877,798 95%
Nicholas C. Gangestad 830,995 787,783 95%
Hak Cheol Shin 888,125 841,943 95%
Julie L. Bushman 673,985 649,048 96%
Frank R. Little 305,489 294,804 97%
James L. Bauman 640,286 590,984 92%

* These amounts are prorated to reflect the increases in Total Cash Compensation described above that resulted in corresponding increases in each individual’s target annual incentive compensation.

60         3M Company


Table of Contents

Executive compensation Compensation discussion and analysis

Long-Term Incentives — 2018 Annual Grants

After considering the most recent long-term incentive compensation data available from companies in the Peer Groups and after taking into account its evaluation of their individual performance during 2017 and Mr. Thulin’s anticipated transition to Executive Chairman during the second half of 2018, the Committee approved (and in the case of Mr. Thulin, the independent members of the Board of Directors ratified) the following performance-adjusted target compensation values for the Named Executive Officers’ 2018 long-term incentive compensation awards. For ease of comparison, the table below also shows the performance-adjusted target compensation values of the Named Executive Officers’ 2017 long-term incentive compensation awards.

Name   Performance-
Adjusted
Target Grant
Value of 2017
Annual Awards
($)
  Performance-
Adjusted
Target Grant
Value of 2018
Annual Awards
($)
Michael F. Roman     2,455,580         4,720,000    
Inge G. Thulin   12,000,000     9,000,000  
Nicholas C. Gangestad   3,677,700     4,673,500  
Hak Cheol Shin   2,393,150     3,954,500  
Julie L. Bushman   1,847,830     2,913,400  
Frank R. Little   2,913,400     3,496,080  
James L. Bauman   2,268,290     2,836,403  

Consistent with market practices at companies in the Peer Groups, during 2018, the Committee chose to deliver one-half of the performance-adjusted target grant value of the annual long-term incentive compensation awards provided to 3M’s Named Executive Officers (other than Mr. Thulin) in the form of stock options and the remaining one-half in the form of performance shares. Mr. Thulin’s awards were delivered approximately 67 percent in the form of stock options and 33 percent in the form of performance shares in light of the anticipated changes in his duties and responsibilities.

2018 Stock Options

Stock options granted to the Named Executive Officers in 2018 as part of their long-term incentive compensation have the following features:

an exercise price equal to the closing price of a share of 3M common stock on the NYSE for the date of grant;
a ratable three-year vesting schedule; and
a maximum term of 10 years.

2018 Performance Share Awards

Performance shares awarded in 2018 will result in the issuance of actual shares of 3M common stock to 3M’s Named Executive Officers if the Company achieves certain financial goals over the years 2018, 2019, and 2020. The number of shares of 3M common stock that will be issued for each 2018 performance share is linked to the Company’s performance as measured by the criteria of Earnings per Share Growth (20 percent weighting), Relative Organic Volume Growth (40 percent weighting), Return on Invested Capital (20 percent weighting), and Free Cash Flow Conversion (20 percent weighting). These performance criteria were selected because they are aligned with 3M’s operating plan and the financial objectives communicated to stockholders and the Committee believes that they are important drivers of long-term stockholder value. Attainment of these four independent performance criteria is measured separately for each calendar year during the three-year measurement period, with each year weighted as follows: 2018 — 50 percent; 2019 — 30 percent; and 2020 — 20 percent. However, the formulas by which the Company’s performance is measured do not change over the three-year performance period.

2019 Proxy Statement         61


Table of Contents

Executive compensation Compensation discussion and analysis

The actual number of shares of 3M common stock that will be delivered at the end of the three-year performance period ending on December 31, 2020, may be anywhere from 0 percent to 200 percent of the target number of performance shares awarded, depending on the performance of the Company during the performance period. However, an executive may forfeit all or a portion of such shares if he or she does not remain employed by the Company throughout the three-year performance period.

For awards tied to the achievement of performance goals over the years 2018, 2019, and 2020, the Committee approved the following formulas for determining the number of shares of 3M common stock to be delivered for each performance share awarded, with the total number of shares actually delivered being the sum of the number of shares earned as a result of the Company’s achievement of each of the four financial goals. In the event that the Company’s performance as measured by any of these performance criteria falls between any of the percentages listed below, the number of shares of 3M common stock earned will be determined by linear interpolation.

EPS
Growth
 

% of
Performance
S
hares

  Relative
Organic
Volume
Growth
  % of
Performance
S
hares
  Return on
Invested
Capital
  % of
Performance
S
hares
  FCF
Conversion
  % of
Performance
S
hares
  Total % of
Performance
Shares
below 4.0%        0%        below -1.0%        0%        below 18.0%        0%        below 95.0%        0%               0%       
4.0% 4% -1.0% 8% 18.0% 4% 95.0% 4% 20%
8.0% 20% 0.5% 40% 20.0% 20% 100.0% 20% 100%
12.0% or 40% 2.0% or 80% 23.0% or 40% 105.0% or 40% 200%
higher higher higher higher

The above formulas are not a prediction of how 3M will perform during the years 2018 through 2020 or any other period in the future. The sole purpose of these formulas, which were approved by the Committee in February 2018, is to establish a method for determining the number of shares of 3M common stock to be delivered for the performance share awards described above. 3M is not providing any guidance, nor updating any prior guidance, of its future performance with the disclosure of these formulas, and you are cautioned not to rely on these formulas as a prediction of 3M’s future performance.

Long-Term Incentives — Other Grants

In connection with the changes in Mr. Roman’s and Mr. Thulin’s roles and responsibilities and after consulting with its independent compensation consultant and considering each executive’s existing compensation packages and other factors, the Committee approved (and the independent members of the Board of Directors ratified) a performance share award for each of Mr. Roman and Mr. Thulin with a target grant value of $1,250,000 and $750,000, respectively, and a stock option grant for Mr. Roman with a target grant value of $1,250,000, in each case, effective as of July 1, 2018. The terms and conditions of the grants were the same as those of the 2018 annual grants described in the section entitled “Long-Term Incentives — 2018 Annual Grants” beginning on page 61 of this Proxy Statement.

Long-Term Incentives — All Outstanding Performance Share Awards

The Company’s annual award cycle and three-year performance periods result in an overlap of awards. For example, the performance goals for 2018 performance share awards relate to the years 2018, 2019, and 2020. Similarly, the performance goals for 2017 performance share awards relate to the years 2017, 2018, and 2019, and so on, as shown below. Performance against the goals established for each award are measured separately for each calendar year during the measurement period, with each year weighted as shown below in parenthesis. The Committee believes this structure reduces motivation to maximize performance in any one period by providing the highest-level rewards only by building sustainable long-term results.

Award   2016   2017     2018     2019   2020
2016 PSA Year 1 (50%) Year 2 (30%) Year 3 (20%)
2017 PSA Year 1 (50%) Year 2 (30%) Year 3 (20%)
2018 PSA Year 1 (50%) Year 2 (30%) Year 3 (20%)
 

62         3M Company


Table of Contents

Executive compensation Compensation discussion and analysis

Status of Outstanding Performance Share Awards

The Committee periodically reviews the Company’s performance against the goals established for each performance share award throughout the duration of its applicable measurement period. The table below summarizes the status of the different performance share awards held by the Named Executive Officers as of December 31, 2018.

Award and
Measurement
Period
Performance
Measures and
Weighting
  Performance Levels   % of Shares Accrued
per Performance
Share at Specified
P
erformance Levels
    Actual
Performance
Level
Achieved*, **
    Shares Accrued
per Performance
Share Based
on Actual
Performance***
    Threshold     Target     Maximum     Threshold     Target     Maximum
2018 PSA Earnings per 4.0% 8.0% 12.0% 4% 20% 40% 8.6% (2018) 0.115 (2018)
Share Growth
2018-2020 Relative Organic -1.0% 0.5% 2.0% 8% 40% 80% -1.0% (2018) 0.040 (2018)
Measurement  Volume Growth
Period Return on 18.0% 20.0% 23.0% 4% 20% 40% 24.6% (2018) 0.200 (2018)
Invested Capital
Free Cash Flow 95.0% 100.0% 105.0% 4% 20% 40% 92.8% (2018) 0.000 (2018)
Conversion
2018 PSA Total (as of December 31, 2018) 0.355 shares
2017 PSA Earnings per 4.0% 8.0% 12.0% 4% 20% 40% 8.6% (2018) 0.069 (2018)
Share Growth 12.4% (2017) 0.200 (2017)
2017-2019 Relative Organic -1.0% 0.5% 2.0% 8% 40% 80% -1.0% (2018) 0.024 (2018)
Measurement Volume Growth 2.0% (2017) 0.400 (2017)
Period Return on 18.0% 20.0% 23.0% 4% 20% 40% 24.6% (2018) 0.120 (2018)
Invested Capital 25.2% (2017) 0.200 (2017)
Free Cash Flow 95.0% 100.0% 105.0% 4% 20% 40% 92.8% (2018) 0.000 (2018)
Conversion 97.3% (2017) 0.057 (2017)
2017 PSA Total (as of December 31, 2018) 1.070 shares
2016 PSA Earnings per 7.0% 9.0% 12.0% 4% 20% 40% 8.6% (2018) 0.033 (2018)
Share Growth 12.4% (2017) 0.120 (2017)
7.7% (2016) 0.048 (2016)
2016-2018 Relative Organic -1.0% 0.5% 2.0% 8% 40% 80% -1.0% (2018) 0.016 (2018)
Measurement Volume Growth 2.0% (2017) 0.240 (2017)
Period -2.1% (2016) 0.000 (2016)
Return on 18.0% 20.0% 23.0% 4% 20% 40% 24.6% (2018) 0.080 (2018)
Invested Capital 25.2% (2017) 0.120 (2017)
22.6% (2016) 0.187 (2016)
Free Cash Flow 95.0% 100.0% 105.0% 4% 20% 40% 92.8% (2018) 0.000 (2018)
Conversion 97.3% (2017) 0.034 (2017)
103.8% (2016) 0.176 (2016)
2016 PSA Total (as of December 31, 2018) 1.054 shares

* The reported level of performance achieved for Relative Organic Volume Growth has been determined, in part, using Worldwide IPI for each relevant period, as reported by Global Insights on January 15, 2019. The final performance level achieved may vary based on changes in reported Worldwide IPI for the relevant period.
** For purposes of calculating Earnings per Share Growth with respect to the 2018 fiscal year, earnings per share for the Company’s 2017 fiscal year was deemed to equal $9.17, which represents the earnings per diluted share for the Company’s 2017 fiscal year, as determined in accordance with GAAP (to the extent applicable) and excluding the impact of the Net TCJA Transition Tax.
*** The number of shares of 3M common stock accrued with respect to each performance share subject to a performance share award is determined based on the Company’s performance against the specified goals established for each performance measure taking into account the weighting for the applicable performance year. In the event that the Company’s performance for any given performance measure falls between any two performance levels, the number of shares of 3M common stock accrued is determined by linear interpolation.

2019 Proxy Statement         63


Table of Contents

Executive compensation Compensation discussion and analysis

Performance Share Accruals Based on 2018 Performance

The table below shows the number of shares of 3M common stock that were accrued (excluding dividend equivalents) for the outstanding performance share awards held by each Named Executive Officer based on the Company’s performance during 2018.

Name Performance
Share Award
Target
Number of
Performance
Shares
Shares Accrued Per
Target Performance
Share Based on
2018
Performance
Total Shares
Accrued
Based on 2018
Performance*
Market Value of
Shares Accrued
Based on 2018
Performance**
($)
Michael F. Roman       2018 PSA             16,596             0.355             5,892                   1,122,582      
2017 PSA 6,467 0.213 1,377 262,450
2016 PSA 6,778 0.129 879 167,425
Total 1,552,457
Inge G. Thulin 2018 PSA 16,804 0.355 5,965 1,136,651
2017 PSA 31,603 0.213 6,731 1,282,487
2016 PSA 34,464 0.129 4,467 851,078
Total 3,270,216
Nicholas C. Gangestad 2018 PSA 10,101 0.355 3,586 683,181
2017 PSA 9,686 0.213 2,063 392,998
2016 PSA 9,788 0.129 1,269 241,754
Total 1,317,933
Hak Cheol Shin 2018 PSA 8,547 0.355 3,034 578,066
2017 PSA 6,303 0.213 1,342 255,686
2016 PSA 6,601 0.129 856 163,104
Total 996,856
Julie L. Bushman 2018 PSA 6,297 0.355 2,235 425,872
2017 PSA 4,867 0.213 1,037 197,514
2016 PSA 5,790 0.129 750 142,978
Total 766,364
Frank R. Little*** 2018 PSA 3,779 0.355 1,341 255,550
2017 PSA 7,673 0.213 1,634 311,287
2016 PSA 6,424 0.129 833 158,659
Total 725,496
James L. Bauman 2018 PSA 6,131 0.355 2,176 414,644
2017 PSA 5,974 0.213 1,272 242,428
2016 PSA 6,071 0.129 787 150,016
Total 807,088

* The amounts in this column reflect the number of shares accrued (excluding dividend equivalents) based on, among other things, Worldwide IPI for the 2018 calendar year, as reported by Global Insights on January 15, 2019, and a deemed earnings per share for 2017 equal to $9.17, which represents the earnings per diluted share for the Company’s 2017 fiscal year, as determined in accordance with GAAP and excluding the impact of the Net TCJA Transition Tax. The final number of shares accrued may vary in the event of changes in Worldwide IPI reported by Global Insights or, in the case of 2017 performance share awards, the use of a different earnings per share number for the Company’s 2017 fiscal year. Due to rounding, the numbers shown in this column may not equal the result obtained by multiplying the Performance Shares Awarded by the Shares Accrued Per Performance Share Based on 2018 Performance.
** Represents the closing price of a share of 3M common stock on the NYSE for December 31, 2018 ($190.54), multiplied by the actual number of shares accrued (before rounding and excluding dividend equivalents) based on the Company’s 2018 performance.
*** In accordance with the terms of the award, the target number of performance shares subject to Mr. Little’s 2018 performance share award were reduced based on his July 1, 2018, retirement. Prior to this reduction, the target number of performance shares subject to Mr. Little’s 2018 performance share award was 7,557.

Although shares of 3M common stock are accrued annually for each outstanding performance share award, an executive may forfeit all or a portion of the shares otherwise issuable pursuant to his or her award if he or she does not remain employed by the Company throughout the entire three-year performance period.

64         3M Company


Table of Contents

Executive compensation Compensation discussion and analysis

For additional information concerning the manner in which the compensation of the Named Executive Officers is determined and the role of the Compensation Committee and its advisors, see Section II of this Compensation Discussion and Analysis beginning on page 52.

Section IV: Ways in Which We Address Risk and Governance

Stock Ownership Guidelines

The Company maintains robust stock ownership guidelines that apply to all Section 16 officers of the Company and are designed to increase an executive’s equity stake in 3M and more closely align his or her financial interests with those of 3M’s stockholders. The table below shows the stock ownership guideline for each Named Executive Officer (other than Mr. Little and Mr. Shin) and their compliance status as of December 31, 2018. As former employees, Mr. Little and Mr. Shin are no longer subject to the Company’s stock ownership guidelines.

Name Multiple of Measurement Date
Base Sala
ry Required
Compliance Status
as of December 31, 2018*

Percentage of Named Executive Officers in compliance with the Company’s stock ownership guidelines as of December 31, 2018:

100%

Michael F. Roman**   6x   In compliance  
Inge G. Thulin 6x In compliance
Nicholas C. Gangestad 3x In compliance
Julie L. Bushman 3x In compliance
James L. Bauman 3x In compliance

* In accordance with the terms of the stock ownership guidelines, the number of shares required to be beneficially owned by each Named Executive Officer (other than Mr. Roman) in order to maintain compliance was most recently recalculated as of December 31, 2016, using the closing price of a share of 3M common stock on the NYSE for December 30, 2016. Although each such Named Executive Officer has until December 31, 2019, to acquire beneficial ownership of any additional shares required as a result of the recalculation, each individual beneficially owned a sufficient number of shares on December 31, 2018, to comply with the new ownership levels required.
** As a result of his appointment to the position of Chief Executive Officer, Mr. Roman’s required level of ownership increased, effective July 1, 2018, from a multiple of three times his annual base salary to a multiple of six times his annual base salary. Although Mr. Roman has until June 30, 2023, to acquire beneficial ownership of any additional shares required as a result of the recalculation, he beneficially owned a sufficient number of shares on December 31, 2018, to comply with the new ownership level required.

The stock ownership guidelines provide that the number of shares required to be beneficially owned by each covered executive will be calculated using such executive’s annual base salary at the time of his or her initial appointment to a Section 16 position and again at the time of a position change from one multiple level to another multiple level, and the fair market value of 3M common stock at that time. The guidelines also provide that the number of shares required to be beneficially owned by each executive will be recalculated every three years using his or her annual base salary and the fair market value of 3M common stock at the recalculation date. Pursuant to the terms of the guidelines, the next periodic recalculation date is scheduled to occur on December 31, 2019.

Each covered executive is expected to attain beneficial ownership of the number of shares of 3M stock determined by the guidelines within five years of his or her initial appointment to a position covered by the guidelines or a position change from one multiple level to another multiple level. The guidelines also provide that each covered executive whose required level of ownership increases as a result of a periodic recalculation will have three years from the recalculation date (or the balance of the five-year period since the date of their initial appointment or latest position change, if longer) to acquire beneficial ownership of any additional shares required as a result of the recalculation. However, if a covered executive is not making adequate progress to meet the required level of ownership within the applicable time period, the guidelines provide that he or she will be required to hold and not sell a sufficient number of the after-tax 3M shares received upon the next payout of performance shares to be on track to satisfy the required ownership level.

For purposes of these guidelines, shares owned directly by a covered executive or by members of the covered executive’s immediate family, shares owned indirectly through a covered executive’s account in the Company’s 401(k) plan or another deferred compensation plan, outstanding shares of restricted stock owned by a covered executive, and shares represented by outstanding restricted stock units granted to a covered executive are all considered to be beneficially owned by the covered executive and are counted in determining attainment of the required beneficial ownership level.

2019 Proxy Statement         65


Table of Contents

Executive compensation Compensation discussion and analysis

For more information concerning the 3M stock ownership of the Named Executive Officers, see the section entitled “Security Ownership of Management” beginning on page 85 of this Proxy Statement.

Prohibition of Hedging and Pledging

The Company’s stock trading policies prohibit the Company’s executive officers from (1) purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of the Company’s common stock, including prepaid variable forward contracts, equity swaps, collars, and exchange funds; (2) engaging in short sales related to the Company’s common stock; (3) placing standing orders; (4) maintaining margin accounts; and (5) pledging 3M securities as collateral for a loan. All transactions in 3M securities by directors and executive officers must be pre-cleared with the Company’s Deputy General Counsel.

Clawback Policy

In 2018, the Board of Directors updated the Company’s clawback policy to address situations involving significant financial or reputational harm. Pursuant to the terms of the revised policy, the Board of Directors is authorized to require reimbursement of certain cash and equity compensation provided to an executive if (1) 3M is required to make a material restatement of its financial statements, whether or not the result of misconduct by the executive of any other individual, (2) the executive commits an act of misconduct that has or might reasonably be expected to cause significant financial or reputational harm to the Company or (3) the executive fails to identify, escalate, monitor or manage, in a timely manner and as reasonably expected, risks material to the Company, which have or might reasonably be expected to cause significant financial or reputational harm to the Company. The policy also authorizes the Company to require reimbursement of any profits the executive realizes on the sale of Company securities during the 12-month period following the issuance by the Company of a financial report that, due to the misconduct of the executive, is materially noncompliant with Federal securities laws. This policy applies to all senior executives of the Company, including all of the Named Executive Officers.

The Board of Directors continues to monitor regulatory developments relating to recoupment of incentive-based compensation and intends to further amend this policy, if necessary, to comply with any final regulations issued for the purpose of implementing the requirements of the Dodd-Frank Act.

Assessment of Risk Related to Compensation Programs

Following completion of a recent compensation risk assessment, the Company concluded that none of its compensation policies and practices is reasonably likely to have a material adverse effect on the Company. In connection with this assessment, the Company completed an inventory of its executive and non-executive compensation programs globally, with particular emphasis on incentive compensation plans or programs. The scope of the fiscal 2018 risk assessment generally was consistent with that of past years, except that we continued to respond to external market events by giving heightened attention to plan design, and whether the design, oversight, and controls in place have potential to create not only financial risk, but reputational risk as well. Based on this assessment, the Company evaluated the primary components of its compensation plans and practices to identify whether those components, either alone or in combination, properly balanced compensation opportunities and risk.

The Company believes that our overall cash versus equity pay mix, balance of shorter-term versus longer-term performance focus, balance of revenue versus profit focused performance measures, stock ownership guidelines, and “clawback” policy all work together to provide our employees and executives with incentives to deliver outstanding performance to build long-term stockholder value, while taking only necessary and prudent risks. In this regard, the Company’s strong ethics and its corporate compliance systems, which are overseen by the Audit Committee, further mitigate against excessive or inappropriate risk taking. In addition, our employee sales plans are designed under global guidelines, where oversight of plan terms, administration, and operation is stronger and governance roles are segregated.

The Compensation Committee, with assistance from its independent compensation consultant, George B. Paulin of FW Cook, reviewed a risk assessment that Mr. Paulin conducted for the Committee on the Company’s executive compensation policies and practices. Based on its consideration of these assessments, the Committee concurred with the Company’s determination that none of its compensation policies and practices is reasonably likely to have a material adverse effect on the Company.

66         3M Company


Table of Contents

Executive compensation Compensation committee report

Compensation committee report

In accordance with the Securities and Exchange Commission’s disclosure requirements for executive compensation, the Compensation Committee of the Board of Directors of 3M Company (the “Committee”) has reviewed and discussed with 3M Management the Compensation Discussion and Analysis. Based on this review and these discussions with 3M Management, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the 2019 Proxy Statement of 3M Company and 3M Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Submitted by the Compensation Committee

Herbert L. Henkel, Chair
Michael L. Eskew
Amy E. Hood
Muhtar Kent
Edward M. Liddy
Patricia A. Woertz

Compensation committee interlocks and insider participation

The members of the Compensation Committee are named in the section titled “Compensation Committee” on page 36 of this Proxy Statement. No members of the Compensation Committee were officers or employees of 3M or any of its subsidiaries during the year, were formerly 3M officers, or had any relationship otherwise requiring disclosure.

2019 Proxy Statement         67


Table of Contents

Executive compensation Executive compensation tables

Executive compensation tables

2018 Summary Compensation Table

The following table shows the compensation earned or received during 2018, 2017, and 2016 by each of 3M’s Named Executive Officers (as determined pursuant to the Securities and Exchange Commission’s disclosure requirements for executive compensation in Item 402 of Regulation S-K).

Name and
Principal Position
    Year     Salary
($)
    Stock
Awards
($)(1)
    Option
Awards
($)(2)
    Non-Equity
Incentive Plan
Compensation
($)(3)
    Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(4)
    All Other
Compensation
($)(5)
    Total
($)
Michael F. Roman
Chief Executive Officer
2018 1,049,976 3,610,286 3,610,217      1,431,503           3,020,986           141,771      12,864,739
2017 839,575 1,227,825 1,228,374 1,090,797 2,347,859 70,788 6,805,218
2016 747,022 1,081,701 1,082,225 602,433 1,444,650 59,463 5,017,494
Inge G. Thulin
Executive Chairman
of the Board
2018 1,269,200 3,750,032 6,000,564 1,877,798 632,492 13,530,086
2017 1,526,595 6,000,146 6,002,785 4,121,830 2,175,108 708,729 20,535,193
2016 1,483,929 5,500,110 5,502,854 2,303,678 1,319,993 559,515 16,670,079
Nicholas C. Gangestad
Senior Vice President
and Chief Financial Officer
2018 830,995 2,336,765 2,336,984 787,783 1,384,479