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Section 1: DEF 14A (DEF 14A)


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SCHEDULE 14A INFORMATION

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

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Preliminary Proxy Statement

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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material under §240.14a-12

 

    CF Industries Holdings, Inc.

(Name of Registrant as Specified In Its Charter)
   

 

 



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Proxy Statement


2019 Annual Meeting of
Shareholders



LOGO


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LOGO

March 27, 2019

To Our Shareholders:

On behalf of your board of directors, it is our privilege to invite you to attend the 2019 annual meeting of shareholders of CF Industries Holdings, Inc. The annual meeting will be held on Wednesday, May 8, 2019, at 10:00 a.m., local time, at the Hyatt Regency Tulsa, 100 East Second Street, Tulsa, Oklahoma 74103. At the annual meeting, shareholders will vote on the matters set forth in the accompanying Notice of Annual Meeting and Proxy Statement and any other business matters properly brought before the annual meeting. Whether or not you are able to attend the meeting, we encourage you to read the enclosed materials and submit your proxy.

Outstanding Progress in 2018

We will meet to discuss our progress on executing our strategy – progress that allows us to fulfill our mission to feed the crops that feed the world efficiently and sustainably, as we create long-term shareholder value.

Our ability to do this starts with the commitment and dedication of 3,000 CF employees. In 2018, they worked safely, ran our plants well, and successfully navigated unfavorable weather that significantly shortened the spring fertilizer application season. Their execution, along with a strengthening global nitrogen market and less expensive natural gas, led to strong operational and financial results. We are positioned at the low end of the global cost curve due to our access to low-cost and plentiful North American natural gas. During 2018, we invested in this structural advantage by exercising our right to purchase all of the publicly traded common units of Terra Nitrogen Company, L.P. for $388 million. We also continued our track record of returning excess cash to shareholders, in line with our long-standing capital allocation philosophy. We announced and completed a $500 million share repurchase program during the year, which reduced our shares outstanding as of the beginning of 2018 by approximately five percent.

Sustainable for the Long-Term

Our commitment to sustainability remains a key focus for your company in our efforts to create long-term shareholder value. Indeed, sustainability is inherent to our business. Because 23 percent of global greenhouse gas emissions are estimated from land use, a sustainable future requires the world to use less land to feed its people. Deforestation for new crop land not only releases carbon into the atmosphere but destroys carbon-sequestering trees. We estimate that fertilizer helps save the world nearly 5 gigatonnes of CO2-equivalent emissions each year by allowing farmers to grow more food on less land, saving trees in the process.

While our products support a more sustainable future, we also continue to drive improvement in the sustainability of our operations. We operate some of the world's most energy-efficient nitrogen production facilities. As we've expanded our plants, our new natural gas-based facilities have displaced inefficient coal-based nitrogen facilities in China, reducing net greenhouse gas emissions by the fertilizer industry. We also continue to increase our Global Reporting Initiative disclosures as part of our annual Corporate Sustainability Report. Notably, we documented our water use intensity for the first time this year. We invite you to


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learn more about the positive impact we have on global sustainability at https://www.cfindustries.com/sustainability-at-cf-industries.

Continued Strong Corporate Governance

Finally, we want to welcome two new members of the board of directors, Javed Ahmed and Celso L. White, who were elected in 2018. Javed and Celso bring tremendous leadership, experience and insight to the board. They will truly be an asset as we continue to focus on strong corporate governance in order to deliver long-term value to you.

We are proud of the progress we have made as a company and look forward to reviewing what we have achieved and the opportunities ahead at the annual meeting. Thank you for your continued trust in CF Industries and we hope to see you on May 8, 2019.

Sincerely,

GRAPHIC   GRAPHIC

                                                                                         Stephen A. Furbacher

 

W. Anthony Will
Chairman of the Board   President and Chief Executive Officer

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LOGO

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

Date and Time:   Wednesday, May 8, 2019, at 10:00 a.m., local time

Place:

 

Hyatt Regency Tulsa
100 East Second Street
Tulsa, Oklahoma 74103

Items of Business:

 

At the Annual Meeting, shareholders will be asked to:
    1.   Elect the twelve directors named in this Proxy Statement;
    2.   Consider and approve an advisory resolution regarding the compensation of our named executive officers;
    3.   Ratify the selection of KPMG LLP as our independent registered public accounting firm for 2019;
    4.   act upon one shareholder proposal regarding the right to act by written consent, if properly presented at the Annual Meeting; and
    5.   Consider any other business properly brought before the Annual Meeting.

Record Date:

 

You may vote at the Annual Meeting if you were a shareholder of record of our company as of the close of business on March 15, 2019

Internet Availability of Proxy Materials

 

Important Notice Regarding the Availability of Proxy Materials for the 2019Annual Meeting of Shareholders to be held on Wednesday, May 8, 2019: Our Proxy Statement and 2018 Annual Report are available free of charge at www.proxyvote.com.

Your vote is important. Please vote your shares promptly so that your shares will be represented whether or not you attend the Annual Meeting. To vote your shares, you may use the Internet as described on your Notice of Internet Availability of Proxy Materials and proxy card, call the toll-free telephone number listed on your proxy card or complete, sign, date, and return your proxy card.

By order of the board of directors,

GRAPHIC

Douglas C. Barnard
Senior Vice President, General Counsel, and Secretary
March 27, 2019


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PROXY STATEMENT SUMMARY

  1

PROPOSAL 1: ELECTION OF DIRECTORS

 

9

Director Nominees

  9

Director Succession Planning and Nomination Process

  9

Criteria for Board Membership

  12

Board Recommendation

  15

Director Nominee Biographies

  16

CORPORATE GOVERNANCE

 

22

Corporate Governance Guidelines

  22

Director Independence

  22

Leadership of the Board

  22

Committees of the Board

  24

Attendance of Directors at Meetings

  25

Board Oversight of Strategy and Risk Management

  25

Shareholder Engagement

  28

Communications with Directors

  28

Corporate Responsibility And Sustainability

  28

Director Compensation

  30

COMMON STOCK OWNERSHIP

 

33

Common Stock Ownership of Certain Beneficial Owners

  33

Common Stock Ownership of Directors and Management

  35

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

36

POLICY REGARDING RELATED PERSON TRANSACTIONS

 

36

PROPOSAL 2: ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS ("SAY ON PAY")

 

39

EXECUTIVE OFFICERS

  41

COMPENSATION DISCUSSION AND ANALYSIS

 

43

COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT

 

78

EXECUTIVE COMPENSATION

 

79

PROPOSAL 3: RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR FOR 2019

 

92

Board Recommendation

  92

Audit and Non-Audit Fees

  92

Pre-Approval of Audit and Non-Audit Services

  93

Auditor Independence

  93

AUDIT COMMITTEE REPORT

 

95

PROPOSAL 4: SHAREHOLDER PROPOSAL REGARDING THE RIGHT TO ACT BY WRITTEN CONSENT

 

96

The Board's Statement in Opposition

  97

ANNUAL MEETING INFORMATION

 

99

Questions and Answers about the Annual Meeting and Voting

  99

Important Additional Information

  102

Deadlines for Submission of Future Shareholder Proposals, Shareholder Nominated Director Candidates and Other Business of Shareholders

  103

OTHER MATTERS

 

104

APPENDIX A: NON-GAAP RECONCILIATION

 

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PROXY STATEMENT SUMMARY

This summary provides certain key information about CF Industries' business and strategy and highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. These proxy materials were first sent or made available to shareholders on or about March 27, 2019.

2019 ANNUAL MEETING OF SHAREHOLDERS INFORMATION

Date and Time:   Wednesday, May 8, 2019, at 10:00 a.m. (local time)
Place:   Hyatt Regency Tulsa
100 East Second Street
Tulsa, Oklahoma 74103
Record Date:   March 15, 2019

VOTING MATTERS

Proposals
  Board
Recommendation
 
  Page
Number for
Additional
Information
 
1.   Election of Directors   FOR   9
2.   Advisory Vote on Executive Compensation ("Say on Pay")   FOR   39
3.   Ratification of Selection of Independent Auditor for 2019   FOR   92
4.   Shareholder Proposal Regarding the Right to Act by Written Consent, if properly presented at the Annual Meeting   AGAINST   96

OUR BUSINESS

CF Industries is a leading global fertilizer and chemical company with outstanding operational capabilities and a cost-advantaged production and distribution platform. Our 3,000 employees operate world-class manufacturing complexes in Canada, the United Kingdom and the United States. Our customers include both agricultural and industrial users of our products. Our principal nitrogen products are ammonia, granular urea, urea ammonium nitrate solution, and ammonium nitrate. We also manufacture diesel exhaust fluid, urea liquor, nitric acid, and aqua ammonia, which are sold primarily to industrial customers, and compound fertilizer products, which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus, and potassium. We serve our customers in North America through an unparalleled production, storage, transportation and distribution network. We also reach a global customer base with exports from our Donaldsonville, Louisiana, plant, the world's largest and most flexible nitrogen complex. Additionally, we move product to international destinations from our Verdigris, Oklahoma, facility, our Yazoo City, Mississippi, facility, our Billingham and Ince facilities in the United Kingdom, and a joint venture ammonia facility in the Republic of Trinidad and Tobago in which we own a 50 percent interest.

For more information on our business, see "Item 1. —Business" and "Item 7.—Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2018 Annual Report.

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OUR STRATEGY

Our vision, given the cyclical nature of our business, is to deliver superior shareholder returns over the cycle. Our strategy, in support of our vision, is built upon a foundation of distinct core capabilities and core values that we live each and every day. We leverage our capabilities to drive business results that create long-term value for our shareholders. Our strategy is reviewed and endorsed annually by our Board and the Board plays an active role in measuring our ability to successfully execute it.

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Our Strategy Is Aligned with Our Mission and Corporate Responsibility

Our strategy for creating long-term shareholder value is directly aligned with our mission: We feed the crops that feed the world and produce the building blocks for a better life, and we do so efficiently and sustainably. Fertilizer is responsible for helping to grow the crops that comprise about half of the world's food supply, which makes life possible for billions of people. Fertilizer also supports sustainable food production because it increases yield per acre, which means farmers need less land to grow the food the world's population needs to survive. By increasing crop yields, we help limit the conversion of carbon-sequestering forests into farmland. We also manufacture products that reduce greenhouse gas emissions from industrial processes. In addition, our diesel exhaust fluid product helps reduce nitrous oxide emissions of heavy-duty trucks. For further discussion of our corporate responsibility and sustainability practices, see "Corporate Governance -Corporate Responsibility and Sustainability."

Manufacturing chemical products responsibly requires a focus on safety. At CF Industries, safety is more than just a requirement – it is a point of pride and ingrained in our corporate culture and values. This commitment is illustrated by our industry leading safety statistics. At CF Industries, we believe that our strong safety record is a result of our focus on behavioral safety practices. During 2018, we further demonstrated our commitment to operational excellence and safety by incorporating an operational metric into our annual incentive plan

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which was based on our achievement of ammonia production goals, subject to first achieving a gating level of performance on behavioral safety practices. See "Compensation Discussion and Analysis" for further information.

Strong Shareholder Returns Over the Cycle

We firmly believe that, due to the cyclical nature of the commodity chemical industry in which we operate, it is important to view performance over a longer time horizon than just one year. Our execution of initiatives aligned with our strategy helped us achieve our vision – delivering superior shareholder returns over the cycle. The following table shows the cumulative total shareholder return, assuming the reinvestment of dividends, for our common stock and a peer group index for the 1, 3, 5, 7, and 10-year periods ended December 31, 2018. In constructing the peer group index, we have selected Agrium Inc. (Agrium), Potash Corporation of Saskatchewan Inc. (PotashCorp) and The Mosaic Company (Mosaic), all of which were publicly traded manufacturers of agricultural chemical fertilizers with headquarters in North America during the periods. On January 2, 2018, Agrium and PotashCorp completed a merger of equals transaction to form Nutrien Ltd. (Nutrien). See the notes following the table for the methodology used to measure TSR.

Total Shareholder Return (TSR)    

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Prior to January 2, 2018, common shares of each of Agrium and PotashCorp traded on the New York Stock Exchange (NYSE). On January 2, 2018, Agrium and PotashCorp completed a merger of equals transaction to form Nutrien. Nutrien common shares began trading on the NYSE on January 2, 2018 and trading of common shares of Agrium and PotashCorp was concurrently halted. In the merger of equals transaction, each common share of PotashCorp was exchanged for 0.40 common shares of Nutrien and each common share of Agrium was exchanged for 2.23 common shares of Nutrien.

For purposes of calculating the TSR of CF Industries and the peer group index for the 1-year period ending December 31, 2018, the peer group was composed of Nutrien and Mosaic and the beginning stock price for each company was established by its respective closing price on January 2, 2018 (the first trading day for Nutrien shares). The returns of the peer group companies were weighted according to their respective market capitalizations as of January 2, 2018.

For purposes of calculating the TSR of CF Industries and the peer group index for the 3, 5, 7, and 10-year periods ending December 31, 2018, the peer group at the beginning of the measurement period was composed of Mosaic, Agrium, and PotashCorp and the beginning stock price for each company was established by its respective closing price on the last trading day immediately preceding January 1 of the first fiscal year of the applicable measurement period. The returns of the peer group companies were weighted according to their respective market capitalizations as of the date used to establish the beginning stock price. The cumulative investment in each of Agrium and PotashCorp, assuming dividend reinvestments up to December 31, 2017, was converted into shares of Nutrien on January 2, 2018 using the exchange ratio in the merger of equals transaction consummated on that date.

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2018 PERFORMANCE HIGHLIGHTS

Operating Results

    Net Earnings
Attributable to
Common Stockholders
      Earnings Per
Diluted Share
      EBITDA(1)       Net Cash Provided by
Operating Activities
   
   
$290 Million
     
$1.24
     
$1.4 Billion
     
$1.5 Billion
   

Annual Incentive Plan Performance Metrics

    Adjusted EBITDA       Behavioral Safety
Gate Threshold
      Gross Ammonia
Production
   
   
$1.4 Billion
     
Achieved
98.6%
     
9.8 Million Tons
   
    Target: $825 Million       Threshold: ³95%(2)       Target: 9.6 Million Tons    

Higher global nitrogen prices and lower natural gas costs drove the company's financial performance in 2018 compared to the year's target. Producers in Asia and Europe experienced significantly higher-than-expected increases in feedstock costs during 2018. The average annual price per MMBtu of natural gas at the Dutch TTF trading hub was 35 percent higher in 2018 compared to 2017; the average annual price per MMBtu for liquefied natural gas in Asia was 43 percent higher; and the price per metric ton of anthracite coal in China was 25 percent higher. These higher feedstock costs, along with continued enforcement of environmental regulations in China, resulted in lower production in these regions, tightening the global supply and demand balance and increasing global nitrogen prices significantly compared to 2017. At the same time, CF's natural gas cost per MMBtu in cost of sales for 2018 was five percent lower than in 2017, supporting significantly higher margins for the company during the year.

Additionally, the company continued to deliver against its strategic priorities and create long-term shareholder value.

    Safety       As of December 31, 2018, the company's 12-month rolling average recordable incident rate was 0.60 incidents per 200,000 work hours despite increased turnaround and maintenance activity compared to 2017    
    Growth       Completed purchase of all publicly traded common units of Terra Nitrogen Company, L.P. on April 2, 2018 for an aggregate purchase price of $388 million    
    Return to Shareholders       Returned $780 million to shareholders through $500 million in share repurchases and $280 million in dividend payments    
    Operational Excellence       Long-term asset utilization-and-production is approximately 10 percent higher than the average utilization rate of our North American competitors    
    Efficiency       SG&A costs as a percent of sales remain among the lowest in both the chemicals and fertilizer industries    

(1)         EBITDA is defined as net earnings attributable to common stockholders plus interest expense-net, income taxes and depreciation and amortization. See Appendix A for a reconciliation of EBITDA to the most directly comparable GAAP measure.

(2)         The Secondary Metric, Tons of Ammonia Produced, has a behavioral safety gate threshold. If at least 95% of the aggregated safety grades of all employees at manufacturing sites were a "B" or better for the year, the safety performance gating requirement would be achieved. If the safety performance gating requirement was not achieved, there would be no payout under the Secondary Metric.

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OUR DIRECTOR NOMINEES

Our corporate governance and nominating committee regularly reviews the overall composition of our Board and its committees to assess whether each reflects the appropriate mix of experience, qualifications, attributes, and skills that are relevant to CF Industries' current and future global strategy, business, and governance.

GRAPHIC


(1)
AC = Audit Committee

CC = Compensation and Management Development Committee

GC = Corporate Governance and Nominating Committee

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CORPORATE GOVERNANCE HIGHLIGHTS

We are committed to implementing sound corporate governance practices that enhance the effectiveness of the Board and our management and that serve the interests of our shareholders. Highlights of our governance practices include:

​         Governance Practice

  For More Information
           
​    
Board Structure
and Governance


 

All of director nominees are independent, except for our CEO. All of our standing Board committees are 100 percent independent.

We have an independent Chairman of the Board and separate Chief Executive Officer.

Our directors are elected annually based on a majority voting standard for uncontested elections. We have a resignation policy if a director fails to receive a majority of votes cast.

All of our directors attended 100% of Board and committee meetings in 2018.

Our non-management directors meet in executive session, without management present, following each regularly scheduled meeting.

Annual Board and committee self-assessments and peer evaluations monitor the performance and effectiveness of the Board and its committees and directors.

The Chairman of the Board and chair of the governance committee lead an active process to regularly assess Board composition and attributes and consider succession planning.

We consider diversity of background, including experience and skills as well as personal characteristics such as race, gender and age, in identifying nominees for director and incorporate recruitment protocols in our candidate searches that seek to identify candidates with these diversity characteristics.

Board plays an active role in reviewing and approving our strategy, and in measuring our ability to successfully execute it.

Diligent Board oversight of risk management, including climate change, is a cornerstone of the company's risk management program.

      P. 22-25

P. 22-23

P. 9



P. 25

P. 23

P. 23

P. 10

P. 12




P. 25-26

P. 25-28

   
   
​    
Stock
Ownership


 

We have strong stock ownership guidelines for our executive officers and directors.

We prohibit hedging and pledging of our common stock by directors and executive officers.

We have a robust clawback policy covering incentive awards.

      P. 75-76

P. 76

P. 76

   
   
​    
Corporate
Responsibility


 

Our ethics program includes a strong Code of Corporate Conduct for all of our directors, officers and employees.

We discuss Corporate Responsibility on our website and in our Corporate Sustainability Report, including our values and "Do It Right" culture, our commitment to our stakeholders and communities, and strong corporate commitment to respect the dignity and human rights of others.

We provide disclosure of charitable contributions and corporate political contributions and trade associate dues in semi-annual reports.

      P. 28-29

www.cfindustries.com/ who-we-are/ sustainability-at-cf-industries

www.cfindustries.com/reports

   
   
​    
Shareholder
Rights


 

Eligible shareholders can utilize the proxy access provisions of our bylaws to include their own nominees for director in our proxy materials along with Board-nominated candidates.

We do not have a shareholder rights plan, or poison pill. Our Board has adopted a policy whereby any rights plan adopted without shareholder approval must be submitted to shareholders for ratification, or the plan must expire, within one year of such adoption.

Our shareholders have the right to call a special meeting of shareholders.

All supermajority voting provisions have been eliminated from our certificate of incorporation and our bylaws.

      P. 11; Bylaws





Bylaws

Charter and Bylaws

   
   

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SHAREHOLDER ENGAGEMENT

We believe that building positive relationships with our shareholders is critical to CF Industries' success. We value the views of, and regularly communicate with, our shareholders on a variety of topics, such as our financial performance, corporate governance, executive compensation, and related matters. Management shares the feedback received from shareholders with the Board. Our chairman or other members of the Board may also be available to participate in meetings with shareholders as appropriate. Requests for such a meeting are considered on a case-by-case basis. Our engagement activities have resulted in valuable feedback that has contributed to our decision-making with respect to these matters.

We conduct shareholder outreach campaigns in the spring and in the fall. Our engagements in the spring are primarily focused on ballot items on which shareholders will vote at our annual meeting. Our engagements in the fall generally focus on voting outcomes from our prior annual meeting – including direct shareholder feedback on how they voted on ballot items – as well as potential corporate governance or executive compensation changes the Board and its committees are considering. The fall engagement also presents an opportunity to discuss with shareholders developments in their methodologies and analyses and potential future areas of focus.

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In the first half of 2018 leading up to our 2018 annual meeting, we contacted shareholders comprising approximately 75% of our outstanding shares to invite them to speak with members of our senior management and the chair of our compensation and management development committee. Combined, management and our compensation committee chair met with shareholders representing approximately 60% of our outstanding shares in advance of our 2018 annual meeting, discussing with these shareholders our compensation program, special meeting right, and other governance focused matters.

During the second half of 2018 following our 2018 annual meeting, we contacted shareholders comprising approximately 70% of our outstanding shares inviting them to speak with members of our senior management. We held meetings with shareholders accounting for 45% of our outstanding shares, discussing with these shareholders the voting outcome from our 2018

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annual meeting as well as general governance, compensation, corporate responsibility and sustainability matters.

COMPENSATION PROGRAM HIGHLIGHTS

Our compensation philosophy at CF Industries seeks to align the interests of our employees and our shareholders through focusing on the total compensation (base salary, short-term incentives, long-term incentives, and benefits) of our employees, including our executive officers. We seek to benefit from this strategy by attracting key talent, retaining strong performers, increasing productivity, and maximizing operational and financial results, while also implementing compensation programs that are cost effective, market competitive, and sustainable across business cycles.

Compensation Policies and Practices

Our executive compensation practices are overseen and administered by the compensation and management development committee. Key compensation governance policies and practices that govern the committee's approach include:

GRAPHIC   Strong pay-for-performance alignment   GRAPHIC   No employment agreements

GRAPHIC

 

Robust clawback policy covering incentive awards

 

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No repriced stock options

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Stock ownership guidelines

 

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Minimal perquisites

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Annual bonus is 100% formulaic, based on objective and transparent criteria

 

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Executive officers are prohibited from hedging or pledging our stock

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A majority of compensation for CEO and other executive officers is performance-based and paid in equity

 

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No new excise tax gross-ups after 2011 (CEO and CFO have no such gross-up)

2018 Target Total Compensation Mix

The compensation and management development committee believes the majority of compensation should be composed of awards that are performance-based – both by direct ties to the company and individual employee performance. The significant majority of each named executive officer's target compensation is at-risk based on company performance.

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AIP: Annual Incentive Plan (annual bonus), cash settled
LTIP: Long-Term Incentive Plan, denominated in equity

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PROPOSAL 1: ELECTION OF DIRECTORS

DIRECTOR NOMINEES

Our directors are elected each year for one-year terms expiring at the next annual meeting of shareholders. The Board has nominated the twelve current directors for re-election at the 2019 Annual Meeting. Each director elected at the 2019 Annual Meeting will serve a one-year term and until his or her successor is duly elected and qualified.

Each nominee has consented to being named in this Proxy Statement and to serve if elected. If any nominee becomes unavailable to serve, an event that the Board does not presently expect, we will vote the shares represented by proxies for the election of directors for the election of such other person as the Board may recommend. Unless otherwise instructed, we will vote all proxies we receive FOR the directors listed below.

Majority Vote Standard for Election of Directors

Our directors are elected by a majority of the votes cast in uncontested elections (the number of shares voted "for" a director nominee must exceed the number of votes cast "against" that director nominee). An "uncontested election of directors" means an election of directors in which, as of the date that is fourteen days in advance of the date we file our definitive proxy statement with the Securities and Exchange Commission ("SEC"), the number of nominees for election does not exceed the number of directors to be elected by the shareholders at that election. In a contested election (a situation where the number of nominees for election exceeds the number of directors to be elected), the standard for election would be a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors.

Director Resignation Policy

In accordance with procedures set forth in the company's corporate governance guidelines, any incumbent director (including the twelve nominees standing for election at the Annual Meeting) who fails to receive a majority of votes cast in an uncontested election will be required to tender his or her resignation for consideration by the company's corporate governance and nominating committee. The corporate governance and nominating committee will consider the resignation and, within 45 days following the date of the applicable annual meeting, make a recommendation to the Board concerning the acceptance or rejection of the resignation. The Board will then take formal action on the corporate governance and nominating committee's recommendation no later than 90 days following the date of the annual meeting. Following the Board's decision on the committee's recommendation, we will publicly disclose the Board's decision, together with an explanation of the process by which the decision was made and, if applicable, the Board's reason or reasons for rejecting the tendered resignation.

DIRECTOR SUCCESSION PLANNING AND NOMINATION PROCESS

The Board is responsible for nominating members for election to the Board and for filling vacancies on the Board that may occur between annual meetings of shareholders. The corporate governance and nominating committee is responsible for identifying, screening, and recommending candidates to the Board for Board membership.

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Regular Assessment of our Board Composition and Succession Planning

The chairman of the board and chair of the corporate governance and nominating committee lead an active process to regularly review the overall composition of the Board and each Board committee and assess whether each reflects the appropriate mix of experience, qualifications, attributes, and skills that are relevant to CF Industries' current and future global strategy, business, and governance. Board composition and succession planning is a standing item on the agenda for each regular corporate governance and nominating committee meeting. The review process incorporates the results of the annual Board and committee performance and skills self-assessment processes described under the heading "Corporate Governance — Annual Board and Committee Self-Evaluations and Director Peer Evaluations" in assessing and determining whether any gaps in experience, qualifications, attributes, and skills exist and the characteristics and critical skills required of prospective candidates for election to the Board.

In order to maintain a Board with an appropriate mix of experience and qualifications and to permit time for orientation, the succession planning process generally considers the development of the Board over the next five year time horizon. In the case of an anticipated change in the composition of the Board, whether as a result of a retirement consistent with our general aged-based retirement policy described below or otherwise, the Board generally prefers to recruit and add new directors such that there is time for the new directors to learn in detail our strategy, business, and governance sufficiently in advance of expected departures. The Board has also concluded that the appropriate number of directors is generally no fewer than eight nor more than twelve. The Board believes this range permits diversity of experience without hindering effective discussion or diminishing individual accountability. Therefore, the Board attempts to coordinate director additions and departures to maintain this size while allowing orientation time for new members as discussed above. Consistent with this process, the Board has added six new independent members over the past five years (Ms. Wagler in 2014, Ms. Noonan in 2015, Messrs. Eaves and Tolle in 2017, and Messrs. Ahmed and White in 2018), and two independent directors (Messrs. Robert G. Kuhbach and Edward A. Schmitt) retired as of the date of the 2018 annual meeting. Given our general aged-based retirement policy described below, at least three of our current directors are expected to retire within the next four years. In order to coordinate this refreshment in accordance with the Board's intention to allow orientation time for new directors while maintaining the benefit of departing director's experience, the Board expects these three current directors will retire over the course of the next three annual meetings. During this time, if one or more new directors are elected to the Board, the number of directors may exceed the preferred range of eight to twelve. At the end of this process, however, the Board expects the number of directors to be within that range.

Identifying and Evaluating Candidates for Director

The corporate governance and nominating committee generally identifies potential nominees by engaging third party search firms that specialize in identifying director candidates. Current directors and executive officers may also notify the committee if they become aware of potential candidates, and the committee refers such persons to the third party search firm to first evaluate whether the candidate meets the criteria for Board membership discussed below. The committee will also consider candidates recommended by shareholders as described below.

Once a person has been identified by the corporate governance and nominating committee as a potential candidate, the committee may collect and review publicly available information regarding the person to assess whether the person should be considered further. If the corporate governance and nominating committee determines that the candidate warrants further consideration, the committee chair or another member of the committee will contact

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the person. Generally, if the person expresses a willingness to be considered and to serve on the Board, the corporate governance and nominating committee will request information from the candidate, review the person's accomplishments and qualifications, including in light of any other candidates that the committee might be considering, and conduct one or more interviews with the candidate. In certain instances, committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons who may have greater first-hand knowledge of the candidate's accomplishments. The committee's evaluation process will not vary based on whether or not a candidate is recommended by a shareholder, although, as stated below, the committee may take into consideration the number of shares held by the recommending shareholder and the length of time that such shares have been held.

Recent Director Searches

As a result of our active succession planning and candidate evaluation processes, directors Ahmed, Eaves, Noonan, Toelle, Wagler and White were identified as candidates and added to the Board over the last five years. Each of these independent directors brings important skills and experience to our company that have further strengthened and complemented our Board. Each of these six individuals was recommended for consideration to the corporate governance and nominating committee by a third party search firm, and none of these six individuals was known to our chairman of the board or chief executive officer prior to the candidate evaluation process.

Shareholder Recommendations of Director Candidates

The corporate governance and nominating committee will consider director candidates recommended by shareholders. In considering candidates submitted by shareholders, the committee will take into consideration the needs of the Board and the qualifications of the candidate. To have a candidate considered by the committee, a shareholder must submit the recommendation in writing and include the following information:

the name of the shareholder and evidence of the person's ownership of our stock, including the number of shares owned and the length of time of ownership; and

the name of the candidate, the candidate's resume or a listing of his or her qualifications to be a director of CF Industries, and the person's consent to be named as a director if selected by the committee and nominated by the Board.

The shareholder recommendation and information described above must be sent c/o the corporate secretary to our principal executive offices at the address on the Notice of Annual Meeting accompanying this Proxy Statement and must be received by the corporate secretary not less than 120 days prior to the anniversary date of our most recent annual meeting of shareholders.

Proxy Access

Our bylaws allow eligible shareholders to include their own nominees for director in our proxy materials along with the Board-nominated candidates. Subject to applicable procedural and other requirements under our bylaws, the proxy access provisions of our bylaws permit any shareholder or group of up to 20 shareholders who have maintained continuous qualifying ownership of 3% or more of our outstanding common stock for at least the previous three years to nominate and include in our proxy materials director nominees constituting not more than 25% of the number of the directors in office at the time of the nomination.

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CRITERIA FOR BOARD MEMBERSHIP

Director Qualifications and Attributes

The corporate governance and nominating committee takes into consideration a number of factors and criteria in reviewing candidates for potential nomination to the Board. The corporate governance and nominating committee believes that the minimum qualifications for serving as a director of CF Industries are that a nominee demonstrate, by significant accomplishment in his or her field, an ability to make a meaningful contribution to the Board's oversight of our business and affairs and have an impeccable record and reputation for honest and ethical conduct in both his or her professional and personal activities.

In addition, the committee will examine a candidate's specific experiences and skills, relevant industry background and knowledge, time availability in light of other commitments, potential conflicts of interest, material relationships with CF Industries, and independence from management and the company.

Diversity

Our corporate governance guidelines and corporate governance and nominating committee charter reflect the intention of the Board that the board of directors represent a diversity of backgrounds. In accordance with the corporate governance and nominating committee charter and our corporate governance guidelines, the corporate governance and nominating committee considers diversity in identifying nominees for director, including personal characteristics such as race, gender and age, and the experiences and skills relevant to the Board's performance of its responsibilities in the oversight of the company. In furtherance of this objective, the corporate governance and nominating committee has determined that it will incorporate recruitment protocols that seek to identify candidates in any future director search who meet these diversity characteristics. As discussed above, six new independent directors have joined our Board over the last five years. These directors' experience and skills backgrounds include senior executive leadership (two sitting and one retired chief executive officers, a sitting chief financial officer, and a global supply chain executive) and two directors with expertise in agriculture. In terms of personal characteristics, these directors include two women, an African American, and a director of Asian origin who lives in Europe and has dual citizenship in the US and UK.

Retirement Age

As set forth in the company's corporate governance guidelines, it is the general policy of the company that no director having attained the age of 74 years shall be nominated for re-election or reappointment to the Board. However, the Board may determine to waive this policy in individual cases.

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Director Tenure

To ensure that the Board maintains an appropriate balance of experience, continuity, and an openness to new ideas and a willingness to critically re-examine the status quo, the corporate governance and nominating committee considers the issue of continuing director tenure in connection with each director nomination recommendation.

Four director nominees, comprising 33% of the nominees, have served more than 10 years and two director nominees, comprising 17% of the nominees, have served between 5 and 10 years. These directors bring a wealth of experience and knowledge concerning CF Industries.

The remaining six director nominees, comprising 50% of the nominees, have joined the Board over the past five years and bring fresh perspective to Board deliberations.

Service on Other Public Company Boards

CF Industries does not have a policy limiting the number of other public company boards of directors upon which a director may sit, in general. However, the corporate governance and nominating committee considers the number of other public company boards and other boards (or comparable governing bodies) of which a prospective nominee is a member.

Although we do not impose a limit on outside directorships, we do recognize the substantial time commitments attendant to Board membership and expect that the members of our Board be fully committed to devoting all such time as is necessary to fulfill their Board responsibilities, in terms of both preparation for and attendance and participation at meetings.

In addition, in recognition of the enhanced time commitments associated with membership on a public company's audit committee, the Board has adopted a policy that no member of the audit committee may serve simultaneously on the audit committees of more than two other public companies unless the Board determines that such simultaneous service would not impair the ability of such director to effectively serve on the company's audit committee.

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Summary of Director Core Competencies

We consider the depth and diversity of experience on our Board a key strength. Our twelve director nominees offer a diverse set of qualifications and perspectives and possess a wealth of leadership and professional experience. As discussed under the heading "Corporate Governance — Annual Board and Committee Self-Evaluations and Director Peer Evaluations," the chair of our corporate governance and nominating committee sponsors an annual self-assessment of director skills and experience in which each director ranks the importance of various business experiences, qualifications, attributes, and skills and rates the director's competency level in the skills. The following table summarizes experiences and skills that we have identified as key to our current and future global strategy, business, and governance.


Public Company Governance


 

A deep understanding of the Board's duties and responsibilities enhances board effectiveness and ensures independent oversight that is aligned with shareholder interests.


Senior Executive Leadership


 

We believe that directors who have served as CEOs or senior executives are in a position to challenge management and contribute practical insight into business strategy and operations.


Operations


 

As a global manufacturing and distribution company, we benefit from the experience of our directors who have served in senior executive roles of global manufacturing companies.


Accounting and Finance Expertise


 

A strong understanding of accounting and finance is important for ensuring the integrity of our financial reporting and critically evaluating our performance. Our directors have significant accounting experience and corporate finance expertise.


Industry Focus


 

As one of the world's largest manufacturers and distributors of nitrogen fertilizer and other nitrogen products, we seek directors who are knowledgeable about the chemical, energy, and agriculture industries. These directors help guide the company in assessing trends and external forces in these industries.


International Business


 

Directors with international business experience help us as we develop and grow our international manufacturing operations and global product distribution.


Strategic Initiatives


 

Experience with major strategic initiatives, including mergers and acquisitions, divestitures, joint ventures and partnerships, substantial capital projects, and integration helps our company identify, pursue and consummate the right major initiatives that achieve our strategic objectives and realize synergies and optimal growth.


Risk Management


 

Directors with significant risk oversight and management experience provide valuable insight as we make decisions on our strategic plan.


Environmental & Safety


 

As core values, we put safety first and act as stewards for the environment. We take guidance from our directors who have served in executive or operating positions at industrial manufacturing companies.

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The following chart summarizes the competencies represented by our director nominees; the details of each director's competencies are included in each director's biography.

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BOARD RECOMMENDATION

In connection with the Annual Meeting and in accordance with the above guidelines, the corporate governance and nominating committee recommended that the Board nominate the twelve directors named in this Proxy Statement for re-election to the Board. The Board believes these nominees provide CF Industries with the combined depth and breadth of skills, experience and qualities required to contribute to an effective and well-functioning Board. Our twelve director nominees offer a diverse set of qualifications and perspectives and possess a wealth of leadership and professional experience in areas relevant to our current and future global strategy, business, and governance.

The Board unanimously recommends that you vote FOR the election of the nominees presented in Proposal 1.

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DIRECTOR NOMINEE BIOGRAPHIES

The following biographical information about each of our director nominees highlights the particular experiences, qualifications, attributes, and skills possessed by each director nominee that led the Board to determine that he or she is qualified to serve as a public company director and that he or she should serve as member of our Board. All director nominee biographical information is as of March 27, 2019.


​  

 

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Javed Ahmed

Javed Ahmed served as chief executive officer of Tate & Lyle PLC, a British-headquartered, global provider of solutions and ingredients for food, beverage and industrial markets with facilities and offices in over 30 locations worldwide and whose products are sold or distributed in over 120 countries, from October 2009 until April 2018. Prior to this role, he spent 17 years with Benckiser NV (later Reckitt Benckiser Group plc), a leading consumer products group, in a number of senior roles. He began his career with Procter & Gamble before spending five years with Bain & Co.

Qualifications

As the former chief executive officer of Tate & Lyle PLC, Mr. Ahmed brings public company initiative, governance, agriculture and food industry focus, international business, strategic risk management and environmental and safety expertise to the Board.

Other Public Company Directorships (within the past 5 years)

Tate & Lyle PLC (October 2009 – April 2018)


 

 
       
    Age

59



  Tenure

1



       
       
​     CF Committees

Corporate governance and nominating

         
       
​     Qualifications

CEO

Public Company Governance

Agriculture and Food Industry

International Business

Strategic Initiatives

Risk Management

Environmental & Safety

         

 


​  

 

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Robert C. Arzbaecher

Robert C. Arzbaecher served as chief executive officer of Actuant Corporation, a diversified manufacturer and marketer of industrial products and systems with operations in more than 30 countries, from 2000 until January 2014 and as interim president and chief executive officer of Actuant from August 2015 until March 2016. He served as a director of Actuant from 2000 until January 2017 and as chairman of the board of Actuant from 2001 until March 2016. From 1992 until 2000, he held various financial positions with Applied Power, Inc., Actuant's predecessor, the most recent of which was chief financial officer. Prior to 1992, Mr. Arzbaecher held various financial positions with Grabill Aerospace, Farley Industries, and Grant Thornton, a public accounting firm. Mr. Arzbaecher is a certified public accountant and he is also a director of Fiduciary Management, Inc. mutual funds.

Qualifications

As the former chairman and chief executive officer of Actuant, Mr. Arzbaecher brings public company governance, international business, strategic initiative, and risk management expertise to the Board. As a certified public accountant who has served as a financial executive, he is an "audit committee financial expert" within the meaning of SEC rules.


 

 
       
    Age

59



  Tenure

13



  Other Public Company Directorships (within the past 5 years)

Actuant Corporation (2000 – Jan. 2017) (Chairman from 2001 – Mar. 2016)

   
       
​     CF Committees

Audit

Corporate governance and nominating (Chair)

         
       
​     Qualifications

Public Company Governance

CEO

Accounting and Finance Expertise

International Business

Strategic Initiatives

Risk Management

         

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William Davisson

William Davisson served as the chief executive officer of GROWMARK, Inc., a large agricultural cooperative system providing agronomy, energy, facility planning, and logistics products and services, as well as grain marketing and risk management services, in the United States and Canada, from 1998 through 2010. He worked in the GROWMARK system his entire career, from 1970 through 2010, and the positions he held prior to becoming to chief executive officer included chief financial officer and vice president, member services. GROWMARK was an owner of our predecessor company before our initial public offering ("IPO") in August 2005, and GROWMARK remains one of our largest customers. From 1998 to 2005, Mr. Davisson served as a director of our predecessor company and as chairman of its board from 2002 to 2004. Mr. Davisson is a certified public accountant.

Qualifications

As the former chief executive officer and chief financial officer of GROWMARK, Mr. Davisson brings accounting and finance, agriculture industry, and strategic initiative expertise to the Board. Mr. Davisson has a deep understanding of our business, as demonstrated by his more than 20 year association with our company. Mr. Davisson is a certified public accountant with substantial executive experience in risk management and he is


 

 
       
    Age

71



  Tenure

13



 

an "audit committee financial expert" within the meaning of SEC rules.

   
       
​     CF Committees

Audit

   

Other Public Company Directorships (within the past 5 years)

None

   
       
​     Qualifications

CEO

Accounting and Finance Expertise

Agriculture Industry

Strategic Initiatives

Risk Management

         

 


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John W. Eaves

John W. Eaves has served as president and chief executive officer of Arch Coal, Inc., a top coal producer for the global steel and power generation industries, since 2012 and has been a member of its board of directors since 2006. He has more than 30 years of experience in the coal industry. During his tenure with Arch Coal, he has held positions of president and chief operating officer; senior vice president of marketing; and vice president of marketing and president of Arch Coal Sales, the company's marketing subsidiary. Mr. Eaves joined Arch Coal in 1987 after serving in various marketing-related positions at Diamond Shamrock Coal Company and Natomas Coal Company. He serves on the boards of the National Association of Manufacturers and the National Mining Association. On January 11, 2016, Arch Coal filed a voluntary petition for reorganization under the provisions of Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Missouri. On October 5, 2016, Arch Coal's reorganization plan became effective and it emerged from Chapter 11.

Qualifications

As the president and chief executive officer and former chief operating and marketing officer of Arch Coal, Mr. Eaves brings substantial energy industry, operations, strategic initiative, and environmental and safety expertise to the Board. Mr. Eaves has extensive experience in risk


 

 
       
    Age

61



  Tenure

2



 

management and accounting and finance expertise through his active supervision of those performing financial accounting and reporting at Arch Coal.

   
       
​     CF Committees

Audit

Corporate governance and nominating

   

Other Public Company Directorships (within the past 5 years)

Arch Coal (2006 – present)

   
       
​     Qualifications

Public Company Governance

CEO

Operations

Accounting and Finance Expertise

Energy Industry

Strategic Initiatives

Risk Management

Environmental & Safety

         

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Stephen A. Furbacher

Stephen A. Furbacher served as president and chief operating officer of Dynegy Inc., a provider of wholesale power, capacity, and ancillary services to utilities, cooperatives, municipalities, and other energy companies, from August 2005 until December 2007. Prior to that, he served as executive vice president of Dynegy's previously owned natural gas liquids business segment, which was engaged in the gathering and processing of natural gas and the fractionation, storage, transportation, and marketing of natural gas liquids, from September 1996 to August 2005. Mr. Furbacher joined Dynegy in May 1996, just prior to Dynegy's acquisition of Chevron's midstream business. Before joining Dynegy, he served as president of Warren Petroleum Company, the natural gas liquids division of Chevron U.S.A. Mr. Furbacher began his career with Chevron in August 1973 and served in positions of increasing responsibility before being named president of Warren Petroleum Company in July 1994. Mr. Furbacher serves as chief executive officer and president of GTBC, LLC, which operates Grand Teton Brewing Company.

Qualifications

Mr. Furbacher brings substantial senior executive leadership, refinery and petro-chemical operations, energy industry, and strategic initiative expertise to the Board as a result of his


 

 
       
    Age

71



  Tenure

11



 

leadership positions at Dynegy, Warren Petroleum, and Chevron. Mr. Furbacher has extensive experience with risk management and environmental and safety matters.

   
       
​     Chairman of the Board and Lead Independent Director    

Other Public Company Directorships (within the past 5 years)

None

   
       
​     CF Committees

Corporate governance and nominating

         
       
​     Qualifications

Public Company Governance

None

COO

Operations

Energy Industry

Strategic Initiatives

Risk Management

Environmental & Safety

         

 


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Stephen J. Hagge

Stephen J. Hagge served as the president and chief executive officer of AptarGroup, Inc., a leading global supplier of a broad range of innovative dispensing systems for the beauty, personal care, home care, prescription drug, consumer health care, injectables, food and beverage markets with manufacturing facilities in North America, Europe, Asia and Latin America, from 2012 until January 2017 and as special advisor to the chief executive officer from February 2017 to March 2017. He served as chief operating officer of AptarGroup from 2008 to 2011, as chief financial officer of AptarGroup from 1993 to 2011 and as an executive vice president and secretary of AptarGroup from 1993 to 2011. Mr. Hagge has served as a director of AptarGroup since 2001.

Qualifications

Through his experience as a director, chief executive officer, chief financial officer, and chief operating officer of AptarGroup, Mr. Hagge brings substantial public company governance, operations, international business, strategic initiative, and risk management expertise to the Board. Mr. Hagge has served as a financial executive and is an "audit committee financial expert" within the meaning of SEC rules.


 

 
       
    Age

67



  Tenure

8



  Other Public Company Directorships (within the past 5 years)

AptarGroup (2001 – Present)

   
       
​     CF Committees

Audit

Compensation and management development (Chair)

         
       
​     Qualifications

Public Company Governance

CEO

Operations

Accounting and Finance Expertise

International Business

Strategic Initiatives

Risk Management

         

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John D. Johnson

John D. Johnson served as the president and chief executive officer of CHS Inc. ("CHS"), a Fortune 100 company and leading global agribusiness that is diversified in energy, grains, and foods, from 2000 through 2010. CHS was an owner of our predecessor company before our IPO in August 2005 and remains one of our largest customers. From 2000 to 2005, Mr. Johnson served as a director of our predecessor company and as chairman of its board from 2004 to 2005. Mr. Johnson joined Harvest States Cooperative in 1976, and served as president and chief executive officer of Harvest States from 1995 until it merged with Cenex, Inc. to form CHS in 1998. From 1998 to 2000, Mr. Johnson served as general manager and president of CHS. Mr. Johnson served as a director of Gold Kist Holdings Inc., which operated a fully integrated chicken production business, from 2004 until its acquisition by Pilgrim's Pride Corp. in 2007.

Qualifications

As the former president and chief executive officer of CHS and its predecessor company, Mr. Johnson brings substantial operations, agriculture industry, energy industry, international business, strategic initiative, risk management, and environmental and safety expertise to the


 

 
       
    Age

70



  Tenure

13



 

Board. Mr. Johnson has a deep understanding of CF Industries' business, as demonstrated by his 18 year association with our company.

   
       
​     CF Committees

Compensation and management development

   

Other Public Company Directorships (within the past 5 years)

None

   
       
​     Qualifications

CEO

Operations

Agriculture Industry

Energy Industry

International Business

Strategic Initiatives

Risk Management

Environmental & Safety

         

 


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Anne P. Noonan

Anne P. Noonan has served as president and chief executive officer and as a director of OMNOVA Solutions, a global provider of emulsion polymers, specialty chemicals, and engineered surfaces for a variety of commercial, industrial, and residential end uses with manufacturing, technical, and other facilities located in North America, Europe, China, and Thailand, since December 2016. She previously served as OMNOVA's president, performance chemicals, from 2014 until December 2016. Ms. Noonan previously held several positions of increasing responsibility with Chemtura Corporation, a global specialty chemicals company, from 1987 through 2014, including most recently as senior vice president and president of Chemtura's Industrial Engineered Products business and Corporate Development function. She serves on the boards of the American Chemistry Council and the Greater Cleveland Partnership.

Qualifications

As the president and chief executive officer of OMNOVA Solutions and previous executive operating positions at both OMNOVA Solutions and Chemtura Corp., Ms. Noonan brings public company governance, operations, chemical industry, international business, strategic initiative, and environmental and safety expertise to the Board. Ms. Noonan has extensive experience in risk


 

 
       
    Age

55



  Tenure

3



 

management and accounting and finance expertise through her active supervision of those performing financial accounting and reporting at OMNOVA Solutions.

   
       
​     CF Committees

Compensation and management development

Corporate governance and nominating

   

Other Public Company Directorships (within the past 5 years)

OMNOVA Solutions (Dec. 2016 – Present)

   
       

 

 

Qualifications

Public Company Governance

CEO

Operations

Accounting and Finance Expertise

Chemical Industry

International Business

Strategic Initiatives

Risk Management

Environmental & Safety

 
       

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Michael J. Toelle

Michael J. Toelle is the owner of T & T Farms, a diversified farming company. He has been a member of the board of Nationwide Mutual Insurance Company, one of the largest insurance and financial services companies in the world, since 2013. He is a former board chairman and longtime board member of CHS. He also served as a board member for Cenex, Inc., before it merged with Harvest States Cooperatives to create CHS in 1998. Mr. Toelle is past chairman of the CHS Foundation and previously served as a director for the Agricultural Council of America and Country Partners Cooperative. He is a member of the National Association of Corporate Directors.

Qualifications

As the owner and operator of a major diversified farming company, a director of Nationwide Mutual Insurance Co. and former chairman and director of CHS, Mr. Toelle brings agricultural industry, operations, strategic initiative, risk management, and environmental and safety expertise to the Board.

Other Public Company Directorships (within the past 5 years)

None


 

 
       
    Age

56



  Tenure

2



       
       
​     CF Committees

Compensation and management development

Corporate governance and nominating

         
       
​     Qualifications

Operations

Agriculture Industry

Strategic Initiatives

Risk Management

Environmental & Safety

         

 


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Theresa E. Wagler

Theresa E. Wagler has served as chief financial officer and executive vice president of Steel Dynamics, Inc., one of the largest domestic steel producers and metals recyclers in the United States, since 2007 and 2009, respectively. She also serves as Steel Dynamics' principal accounting officer. She has held various positions of increasing responsibility since joining Steel Dynamics in 1998. Prior to joining Steel Dynamics, she served as assistant corporate controller for Fort Wayne National Bank and as a certified public accountant with Ernst & Young LLP.

Qualifications

As the chief financial officer of Steel Dynamics, Ms. Wagler brings substantial public company governance, accounting and finance, strategic initiative, and risk management expertise to the Board. Ms. Wagler is a certified public accountant and an "audit committee financial expert" within the meaning of SEC rules.

Other Public Company Directorships (within the past 5 years)

None


 

 
       

 

Age

48



  Tenure

4



       
       
​     CF Committees

Audit (Chair)

         
       
​     Qualifications

Public Company Governance

CFO

Accounting and Finance Expertise

Strategic Initiatives

Risk Management

         

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Celso L. White

Celso L. White has served as the global chief supply chain officer at Molson Coors Brewing Company, one of the largest global brewers with breweries in the United States, Canada, Europe and India and worldwide distribution, since January 2013. From September 2010 to January 2013, he was the company's vice president of international supply chain. Prior to joining Molson Coors, he was Pepsi Cola's vice president and general manager of Concentrate Operations, responsible for the Americas and parts of Asia from 2004 to 2010. Mr. White serves on the board of Colorado UpLift based in Denver, Colorado.

Qualifications

As the global chief supply chain officer at Molson Coors Brewing Company, Mr. White is responsible for all aspects of the supply chain from grain fields to finished product retailer distribution, including procurement; operations; planning; logistics and distribution; environmental health and safety; engineering; and technical innovation. Mr. White brings operational, agricultural industry, international business, strategic initiative, risk management and environmental and safety expertise to the Board.


 

 
       

 

Age

57



  Tenure

1



 

Other Public Company Directorships (within the past 5 years)

None

   
       
​     CF Committees

Compensation and management development

         
       
​     Qualifications

Global Chief Supply Chain Officer

Operations

Industry Focus

International Business

Strategic Initiatives

Risk Management

Environmental & Safety

         

 


​  

 

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W. Anthony Will

W. Anthony Will has served as our president and chief executive officer and as a member of the Board since January 2014. He was previously our senior vice president, manufacturing and distribution, from January 2012 to January 2014, our vice president, manufacturing and distribution, from March 2009 to December 2011, and our vice president, corporate development, from April 2007 to March 2009. Mr. Will has also served in the comparable officer positions with Terra Nitrogen GP Inc. ("TNGP") as he held with CF Industries from April 2010 to April 2018. TNGP was our indirect, wholly-owned subsidiary and the sole general partner of Terra Nitrogen Company, L.P., a publicly-traded producer of nitrogen fertilizer products. In April 2018, we purchased all of the publicly traded common units of Terra Nitrogen Company, L.P. Mr. Will served as a director of TNGP from June 2010 until February 2016 and as chairman of the board of TNGP from January 2014 to February 2016. Before joining CF Industries, Mr. Will was a partner at Accenture Ltd., a global management consulting, technology services, and outsourcing company. Earlier in his career, he held positions as vice president, business development at Sears, Roebuck and Company and vice president, strategy and corporate development at Fort James Corporation. Prior to that, Mr. Will was a manager with the Boston Consulting Group, a global management consulting firm.


 

 
       
    Age

53



  Tenure

4



 

Qualifications

As the president and chief executive officer of CF Industries and with his previous executive

   
       
​     CF Committees

None

    operations and corporate development positions, Mr. Will brings public company governance, operations, fertilizer and chemical industry, international business, strategic initiative, and environmental and safety expertise to the Board. Mr. Will has extensive experience in risk    
       
​     Qualifications

Public Company Governance

CEO

Operations

Accounting and Finance Expertise

Fertilizer / Chemical Industry

International Business

Strategic Initiatives

Risk Management

Environmental & Safety

    management and accounting and finance expertise through his active supervision of those performing those functions at CF Industries.

Other Public Company Directorships (within the past 5 years)

Terra Nitrogen Company, L.P. (2010 – Jan. 2017)
(Chairman from 2001 – Mar. 2016)

   

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CORPORATE GOVERNANCE

CF Industries is committed to implementing sound corporate governance practices that enhance the effectiveness of the Board and our management and that serve the interests of our shareholders. Our corporate governance and nominating committee periodically reviews corporate governance developments and best practices along with our policies and business strategies. The committee advises the Board and management in an effort to strengthen existing governance practices and develop new policies that make CF Industries a better company. We are proud of the steps we have taken and the progress we have made to further strengthen our corporate governance practices and demonstrate our responsiveness to shareholder concerns.

CORPORATE GOVERNANCE GUIDELINES

The Board has adopted corporate governance guidelines to document its overall management governance philosophy. According to these guidelines, the business and affairs of CF Industries shall be managed by or under the direction of the Board. The Board's goal is to build long-term value for our shareholders and assure the vitality of the company for our customers and employees and the other individuals and organizations who depend on us. A copy of our corporate governance guidelines is available to shareholders at our corporate website, www.cfindustries.com, or by writing to our corporate secretary at the address of our principal executive offices on the Notice of Annual Meeting accompanying this Proxy Statement.

DIRECTOR INDEPENDENCE

The experience and diversity of our directors has been, and continues to be, critical to our success. Our corporate governance guidelines require that the Board be composed of at least a majority of directors who qualify as independent directors under the listing standards of the New York Stock Exchange (the "NYSE"). Additionally, in accordance with NYSE listing standards, the members of our audit, compensation, and corporate governance and nominating committees must be independent. The Board has made an affirmative determination that all eleven of our non-employee directors have no material relationship with CF Industries or any of its subsidiaries (other than being a director and shareholder of CF Industries) and, accordingly, meet the applicable requirements for "independence" set forth in the NYSE's listing standards.

LEADERSHIP OF THE BOARD

Separate Independent Board Chairman and Chief Executive Officer

The Board has determined that the most effective leadership structure is to maintain an independent Board chair role separate from the chief executive officer. In making this determination, the Board takes into account a number of factors, including (1) that separating these positions allows our Board chairman to focus on the Board's role of providing advice to, and independent oversight of, management and (2) the time and effort our chief executive officer needs to devote to the management and operation of CF Industries and the development and implementation of our business strategies. Although our governance documents provide the Board with the flexibility to select the leadership structure in the way that it deems best for CF Industries at any given point in time, it is the Board's intention to continue to maintain an independent Board chair separate from the chief executive officer. In addition, according to our corporate governance guidelines, if the chairman of the Board is not an independent director, our independent directors will designate one of their number to

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serve as a lead independent director. Otherwise, if the chairman of the Board is an independent director, he or she will serve as the lead independent director.

Stephen A. Furbacher has served as our lead independent director since 2010 and as Board chairman since May 2014. Mr. Furbacher was selected to serve as chairman because of his contributions to the leadership of the Board through his position as our lead independent director prior to becoming chairman. Because Mr. Furbacher is an independent director, he continues to serve as our lead independent director. The lead independent director's duties include coordinating the activities of the independent directors, coordinating the agenda for and moderating sessions of the independent directors, and facilitating communications between the other members of the Board. Unless otherwise provided in a short-term succession plan approved by the Board:

in each case, until the Board has the opportunity to consider the situation and take action.

Executive Sessions

At each regularly scheduled meeting, the Board conducts executive sessions, which are discussions that involve only the non-employee directors. Our corporate governance guidelines state that the lead independent director or, in such director's absence, another independent director designated by the lead independent director will preside at the executive sessions of the Board.

Annual Board and Committee Self-Evaluations and Director Peer Evaluations

Our corporate governance and nominating committee sponsors an annual self-assessment of the Board's performance and the performance of each committee of the Board as well as director peer evaluations. The assessment includes a review of any areas in which the Board or management believes the Board can make a better contribution to CF Industries. In addition, the chair of the corporate governance and nominating committee sponsors an annual self-assessment of director skills and experience. The assessment asks each director to rank the importance of various business experiences, qualifications, attributes, and skills to our current and future global strategy, business, and governance and to rate the director's competency level in the skills. The results of the assessments are discussed with the full Board and each committee. The corporate governance and nominating committee considers the results of these self-evaluation processes as applicable in assessing and determining the characteristics and critical skills required of prospective candidates for election to the Board and making recommendations to the Board with respect to assignments of Board members to various committees.

Management Development and Succession Planning

Our Board plays an integral oversight role in talent development by recognizing the importance of succession planning for the CEO and other key executives at CF Industries. To assist the Board, the chief executive officer prepares and distributes to the Board an annual

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report on succession planning for all senior officers of the company with an assessment of senior managers and their potential to succeed the chief executive officer and other senior management positions. In addition, the chief executive officer prepares, on a continuing basis, a short-term succession plan which delineates a temporary delegation of authority to certain officers of the company, if all or a portion of the senior officers should unexpectedly become unable to perform their duties.

COMMITTEES OF THE BOARD

The Board has established three separate standing committees: the audit committee, the compensation and management development committee, and the corporate governance and nominating committee. The Board has adopted written charters for each of these committees and copies of these charters are available to shareholders at our corporate website, www.cfindustries.com, or by writing to our corporate secretary at the address of our principal executive offices on the Notice of Annual Meeting accompanying this Proxy Statement.

Audit Committee. Our audit committee is a separately designated standing committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The committee currently consists of Theresa E. Wagler (chair), Robert C. Arzbaecher, William Davisson, John W. Eaves, and Stephen J. Hagge. During 2018, the audit committee members were Theresa E. Wagler (chair), Robert C. Arzbaecher, William Davisson, John W. Eaves, Stephen J. Hagge, and Robert G. Kuhbach (from January to May 2018). The Board has affirmatively determined that all of the directors who served on the audit committee during 2018 and who presently serve on the committee are independent under the corporate governance standards of the NYSE applicable to audit committee members. The Board has also determined all of these directors are "audit committee financial experts," as defined by the SEC. The audit committee assists the Board in fulfilling its oversight responsibility for (1) the integrity of our financial statements and financial reporting process and our systems of internal accounting and financial controls, (2) the performance of our internal audit function, (3) the annual independent integrated audit of our consolidated financial statements and internal control over financial reporting, and (4) our compliance with legal and regulatory requirements, including our disclosure controls and procedures. The duties and responsibilities of the audit committee include the engagement of our independent registered public accounting firm and the evaluation of our accounting firm's qualifications, independence, and performance. The audit committee's report to shareholders appears elsewhere in this Proxy Statement.

Compensation and Management Development Committee. Our compensation and management development committee currently consists of Stephen J. Hagge (chair), John D. Johnson, Anne P. Noonan, Michael J. Toelle, and Celso L. White. During 2018, the compensation and management development committee members were Stephen J. Hagge (chair), Stephen A. Furbacher (from January to May 2018), John D. Johnson, Anne P. Noonan, Edward A. Schmitt (from January to May 2018), Michael J. Toelle, Theresa E. Wagler (from January to May 2018) and Celso L. White (effective October 2018). The Board has affirmatively determined that all of the directors who served on the compensation and management development committee during 2018 and who presently serve on the committee are independent under the corporate governance standards of the NYSE applicable to compensation committee members. The Board has also determined that all of the members of the committee qualify as "non-employee directors," within the meaning of Rule 16b-3 promulgated under the Exchange Act, and "outside directors," within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). The compensation and management development committee oversees our compensation and employee benefit plans and practices, including our executive compensation plans, director compensation plans, and incentive-compensation and equity-based plans. In

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addition, the compensation and management development committee supports the full Board with succession plans for the CEO, while overseeing and reviewing management's development, retention and succession planning for other key executives and senior management. The compensation and management development committee's report to shareholders appears elsewhere in this Proxy Statement. Additional information regarding the processes and procedures of the compensation and management development committee in recommending and determining compensation for our directors and executive officers is set forth below under the heading "Compensation Discussion and Analysis.

Corporate Governance and Nominating Committee. Our corporate governance and nominating committee currently consists of Robert C. Arzbaecher (chair), Javed Ahmed, John W. Eaves, Stephen A. Furbacher, Anne P. Noonan, and Michael J. Toelle. During 2018, the corporate governance and nominating committee members were Robert C. Arzbaecher (chair), Javed Ahmed (effective December 2018), William Davisson (from January to May 2018), John W. Eaves, Stephen A. Furbacher, John D. Johnson (from January to May 2018), Robert G. Kuhbach (from January to May 2018), Anne P. Noonan, Edward A. Schmitt (from January to May 2018), and Michael J. Toelle. The Board has affirmatively determined that all of the directors who served on the corporate governance and nominating committee during 2018 and who presently serve on the committee are independent under the corporate governance standards of the NYSE. The corporate governance and nominating committee's responsibilities include identifying and recommending to the Board individuals qualified to serve as directors and on committees of the Board; advising the directors with respect to the Board's composition, procedures, and committees; developing and recommending to the Board a set of corporate governance principles; and overseeing the evaluation of the Board and the president and chief executive officer.

ATTENDANCE OF DIRECTORS AT MEETINGS

Directors are expected to attend meetings of the Board and the committees on which they serve, as well as our annual meeting of shareholders. A director who is unable to attend a meeting (which it is understood will occur on occasion) is expected to notify the chairman of the Board or the chair of the appropriate committee in advance of such meeting.

During 2018, the Board held seven meetings, our audit committee held nine meetings, our compensation and management development committee held five meetings, and our corporate governance and nominating committee held five meetings. In 2018, each of our directors attended 100% of the meetings of the Board held during the period for which he or she was serving as a director and 100% of the meetings of those committees on which he or she served held during the periods that he or she served. All ten of our directors then in office attended the 2018 annual meeting, which was held on May 10, 2018.

BOARD OVERSIGHT OF STRATEGY AND RISK MANAGEMENT

Shareholders elect the Board to oversee management and to serve shareholders' long-term interests. Management is responsible for delivering on our strategy, creating our culture, establishing accountability, and managing risk. The Board and its committees work closely with management to balance and align strategy, risk, corporate social responsibility, and other areas while considering feedback from shareholders. Essential to the Board's oversight role is a transparent and active dialogue between the Board and its committees, and management. To support that dialogue, the Board and its committees have access to, receive presentations from, and conduct regular meetings with our executive officers, other internal business and function leaders and subject matter experts, as well as external experts and advisors.

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Board Oversight of Strategy

One of the Board's primary responsibilities is reviewing and approving the strategy established by management and measuring our ability to successfully execute it. Throughout the year, the Board and its committees provide oversight and guidance to management regarding our strategy, operating plans, and overall performance. While elements of strategy are embedded in every regularly-scheduled meeting of the Board, the Board also dedicates at least one full day meeting each year to focus on our long-term business strategic planning. At all of these reviews, the Board engages with our executive officers and other business leaders regarding business objectives, the competitive landscape, economic trends, and regulatory developments. At meetings occurring throughout the year, the Board also assesses mergers and acquisitions, our budget and capital allocation plans, and performance for alignment to our strategy.

Board Oversight of Risk Management

Our management is responsible for establishing and maintaining systems to assess and manage the company's risk exposure, and the Board provides oversight in connection with those efforts. In fulfilling its risk oversight role, the Board focuses on the adequacy of our risk management process and the effectiveness of our overall risk management system. In addition, the Board routinely assesses policies and procedures in critical areas to ensure that the responsibilities and authority delegated to senior management are appropriate from an operational and risk management perspective. The Board also receives regular reports from senior management addressing financial and operational risk exposure and execution, including monthly scorecards and quarterly dashboards that include financial metrics and safety and environmental statistics.

Our management has established an enterprise risk management ("ERM") program that includes an annual assessment process that is designed to identify risks that could affect us and the achievement of our objectives; to understand, assess, and prioritize those risks; and to facilitate the implementation of risk management strategies and processes across the company that are responsive to the company's risk profile, business strategies, and specific material risk exposures. The ERM program seeks to integrate consideration of risk and risk management into business decision-making throughout the company, including through the implementation of policies and procedures intended to ensure that necessary information with respect to material risks is transmitted to senior executives and, as appropriate, to the Board or relevant committees.

The Board administers its risk oversight function as a whole and through its committees. In accordance with its charter, the audit committee supports the Board in its oversight of the company's risk management system and process by reviewing and discussing with the key members of management responsible for management of risk the guidelines and policies governing the ERM process, the key risks identified in the ERM process, as well as the likelihood of occurrence and the potential impact assigned to those risks by management, and the risk mitigation strategies in each instance.

In addition, the audit committee receives regular reports on the efficacy of our information security and technology risks (including cybersecurity) and related policies and procedures from our chief information officer and other members of senior management who are tasked with monitoring cybersecurity risks.

The other standing committees of the Board oversee management of risks relating to their respective areas of responsibility. The compensation and management development committee reviews risks associated with the design and implementation of our compensation plans and arrangements (see "Compensation Discussion and Analysis—Compensation and Benefits Risk

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Analysis" below). The nominating and corporate governance committee reviews risks related to our governance structures and processes.

All Board members are invited to attend every committee meeting, and Board members who do not attend a committee meeting receive information about committee activities and deliberations.

Spotlight: Assessing the risks and opportunities associated with climate change

While the potential impacts of climate change are difficult to predict, we believe climate change presents our company with both risks and opportunities.

The implications of climate change also present us and our industry with opportunities. We believe the synthetic fertilizers we manufacture are part of the solution to reducing GHG emissions that contribute to climate change. As we discuss further below under the heading "Corporate Governance - Corporate Responsibility and Sustainability," fertilizer is responsible for helping to grow the crops that comprise about half of the world's food supply, which makes life possible for billions of people. Fertilizer also supports sustainable food production because it increases yield per acre, which means farmers need less land to grow the food the world's population needs to survive. By increasing crop yields, our products help limit the conversion of carbon-sequestering forests into farmland. We also manufacture products that reduce GHG emissions from industrial processes and our diesel exhaust fluid product helps reduce nitrous oxide emissions of heavy-duty trucks.

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Our Board and its committees are actively involved in the oversight of our strategy and processes to identify, assess, and address the risks and opportunities to our company associated with climate change. Management provides the Board regular updates on these issues, including during the discussions at the full day Board meeting focused on our long-term business strategic plan and as part of management's review of the enterprise risk management process.

SHAREHOLDER ENGAGEMENT

We believe that building positive relationships with our shareholders is critical to CF Industries' success. We value the views of, and regularly communicate with, our shareholders on a variety of topics, such as our financial performance, corporate governance, executive compensation, corporate responsibility and sustainability, and related matters. As discussed in "Compensation Discussion and Analysis – Shareholder Engagement," we conduct shareholder outreach campaigns in the spring and fall. Management shares the feedback received from shareholders with the Board. Our chairman or other members of the Board may also be available to participate in meetings with shareholders as appropriate. Requests for such a meeting are considered on a case-by-case basis. Our engagement activities have resulted in valuable feedback that has contributed to our decision-making with respect to these matters. We welcome your input and feedback and look forward to continued engagement with our shareholders.

COMMUNICATIONS WITH DIRECTORS

The Board has established a process to receive communications from shareholders and other interested parties. Shareholders and other interested parties may contact any member (or all members) of the Board, any Board committee, or any chair of any such committee by mail. To communicate with the Board, any individual director, or any group or committee of directors, correspondence should be addressed to the Board or any such individual director or group or committee of directors by either name or title. All such correspondence should be sent c/o the corporate secretary to our principal executive offices at the address on the Notice of Annual Meeting accompanying this Proxy Statement.

All communications received as set forth in the preceding paragraph will be opened by the office of our general counsel for the sole purpose of determining whether the contents represent a message to one or more of our directors and then forwarded promptly to each addressee. In the case of communications to the Board or any group or committee of directors, the office of the general counsel will distribute copies of the contents to each director who is a member of the Board or of the group or committee to which the envelope or correspondence is addressed.

CORPORATE RESPONSIBILITY AND SUSTAINABILITY

Corporate responsibility and sustainability are inherent to our values and our "Do It Right" culture and an intrinsic part of our commitment to the communities in which we live and work.

Code of Corporate Conduct

Our commitment to ethical behavior is captured in our code of corporate conduct, which was adopted by our Board. The code is applicable to all of our directors, officers, and employees, all of whom must acknowledge receiving and reading the code annually. We provide annual code of corporate conduct and anti-corruption training to all employees.

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A copy of our code of corporate conduct is available at our corporate website, www.cfindustries.com, or by writing to our corporate secretary at the address of our principal executive offices on the Notice of Annual Meeting accompanying this Proxy Statement. We intend to disclose on our corporate website any amendment to any provision of the code that relates to any element of the definition of "code of ethics" enumerated in Item 406(b) of Regulation S-K under the Exchange Act, and any waiver from any such provision granted to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.

Political Contributions Report

We prepare a semiannual Political Contributions Report listing CF Industries' political contributions. Each Political Contributions Report is posted on our corporate website, www.cfindustries.com, and presented to the corporate governance and nominating committee. Additionally, the Political Contributions Reports set forth the United States trade associations and other similar non-profit organizations to which the company annually pays dues of $20,000 or more and identify the portion of such dues that is used for advocacy and/or political activities by those associations. The most recent Political Contributions Report and our code of corporate conduct, containing our corporate policies related to political activities and contributions, lobbying and related matters, are currently available on our corporate website.

Charitable Contributions Report

We also prepare a semiannual Charitable Contributions Report listing CF Industries' charitable contributions that exceed $20,000. Each Charitable Contributions Report is posted on our corporate website, www.cfindustries.com. Most of our philanthropic and social outreach initiatives are locally based. This enables each of our facilities to address the unique needs and opportunities in their respective communities.

Sustainability

CF Industries is a leader in an industry whose mission is fundamental to human survival: putting food on the world's table. By providing plant nutrients to farmers, we feed the crops that feed the world and produce building blocks for a better life. We are proud of the role our company plays in fulfilling this increasingly challenging mission. We also believe our company has an important role to play in addressing some of the most critical challenges of our time. As a company, we are confronting issues such as energy efficiency, resource use, and economic growth. We prepare annual Corporate Sustainability Reports, each of which is posted on our corporate website, www.cfindustries.com, and presented to the corporate governance and nominating committee.

Our most recent Corporate Sustainability Report communicates our performance across fundamental environmental, health and safety, social, and other considerations. Our report includes information regarding our carbon dioxide (CO2) equivalent emissions, which we report every year. It also discusses how we estimate that our products actually prevent and reduce more CO2 equivalent emissions than we generate. For example, land use is the leading cause of CO2 emissions in agriculture. Because our products increase yields substantially, farmers need less land to grow the food the world population needs to survive. By increasing crop yields, we help limit the conversion of carbon-sequestering forests into farmland. Our products also reduce greenhouse gas emissions from industrial processes. In addition, our diesel exhaust fluid (DEF) product helps substantially reduce nitrous oxide emissions of heavy-duty trucks while also improving fuel efficiency.

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Our most recent Corporate Sustainability Report also discusses our partnership with The Nature Conservatory through which we seek to help improve soil health across the state of Iowa. The program, called 4R Plus, is designed to increase awareness and understanding among Iowa's farmers and crop advisers of two important farming practices: (1) 4R Nutrient Stewardship, and (2) conservation. 4R Nutrient Stewardship refers to the concept of applying the right nutrient source at the right rate, right time, and right place. The "Plus" in 4R Plus refers to a suite of in-field and edge-of-field conservation practices that increase soil resiliency and help to keep nutrients on fields and out of adjacent water bodies. When implemented effectively, 4R Plus practices will not only improve soil health and water quality, but also increase farmers' yields and bottom lines.

To help spread 4R Plus awareness and understanding, CF and The Nature Conservancy developed a range of marketing materials and tools to spread the message as far as possible. Those materials are based on extensive qualitative and quantitative research that showed that the key drivers to increased 4R Plus adoption by farmers moving forward are the economic benefits that come with 4R Plus practices and farmers' desire to leave their land in the best condition for the next generation. Nearly 40 partners have joined the initiative as of its formal launch in 2018, including state commodity groups, agribusinesses, conservation organizations, government agencies, universities and others.

DIRECTOR COMPENSATION

Non-employee directors receive compensation, including fees and reimbursements of expenses, for their service and dedication to our company. We recognize the substantial time and effort required to serve as director of a large public company like ours. We believe that compensation for non-employee directors should be competitive and should encourage increased ownership of CF Industries stock through the payment of a portion of director compensation in shares of our stock. In order to further align the interests of our directors with the interests of our shareholders, our non-employee directors are required to achieve and maintain stock ownership with a market value equal to five times their annual cash retainer.

Our compensation and management development committee is responsible for reviewing director compensation and making recommendations to the Board. The committee reviews the compensation of our non-employee directors annually. In connection with its annual review of the compensation of our non-employee directors, the committee also authorizes its compensation consultant, Exequity, to work with our human resources department to compare the compensation of our non-employee directors with compensation paid to comparable directors at peer companies and the overall market based on the 2016-2017 National Association of Corporate Directors survey on director compensation. (See "Compensation Discussion and Analysis—Role of the Compensation Consultant.") This information showed the additional annual cash retainer amounts paid to the chairman of the Board and the chairs of the Board committees and the value of the annual restricted stock grant to directors were below median. Based on this review, in May 2018 the compensation and management development committee recommended to the Board and the Board approved an increase in the amount of the additional annual cash retainers paid to the chairman of the Board and the chairs of the Board committees and the value of the annual restricted stock grant to directors to the amounts set forth below. Although the non-employee director compensation program is reviewed annually, this was the first change to the amount of cash or equity compensation paid to directors who are not the chairman of the Board since 2013 and the first change to the cash or equity compensation paid to the chairman of the Board since Mr. Furbacher was first elected chairman in 2014.

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Annual Cash Retainer

Each non-employee director is entitled to an annual cash retainer of $100,000, payable quarterly. We do not pay meeting fees to our directors. The chairman of the Board and the chairs of the Board committees receive additional annual cash retainers in the following amounts, payable quarterly:

Chairman of the Board   $ 80,000  
Audit committee chair   $ 20,000  
Compensation and management development committee chair   $ 15,000  
Corporate governance and nominating committee chair   $ 15,000  

Annual Restricted Stock Grant

Each non-employee director will receive, upon joining the Board, a restricted stock grant with a fair market value of $130,000 (or, in the case of the chairman of the Board, $230,000), rounded to the nearest whole share. Thereafter, each continuing non-employee director will receive an annual restricted stock grant with a fair market value of $130,000 (or, in the case of the chairman of the Board, $230,000), rounded to the nearest whole share, on the date of each annual meeting of the shareholders. Assuming continuing service as a non-employee director, all shares of restricted stock will vest on the earlier of (x) the date of the first annual meeting of the shareholders following the date of grant or (y) the first anniversary of the date of grant.

2018 Total Director Compensation

The following table sets forth cash and non-cash compensation with respect to the year ended December 31, 2018, for our non-employee directors. Mr. Will receives no additional compensation for his service as a director.

 Name 
  Fees Earned
or Paid
in Cash(1)
($)
  Stock
Awards(2)
($)
  All Other
Compensation(3)
($)
  Total
($)

Javed Ahmed(4)

    25,000     130,003         155,003

Robert C. Arzbaecher

    113,750     130,014     4,313     248,077

William Davisson

    100,000     130,014     4,313     234,327

John W. Eaves

    100,000     130,014     4,160     234,174

Stephen A. Furbacher

    175,000     229,997     7,493     412,490

Stephen J. Hagge

    113,750     130,014     4,313     248,077

John D. Johnson

    100,000     130,014     4,313     234,327

Robert G. Kuhbach(5)

    25,000         29,313     54,313

Anne P. Noonan

    100,000     130,014     4,313     234,327

Edward A. Schmitt(5)

    25,000         29,313     54,313

Michael J. Toelle

    100,000     130,014     4,160     234,174

Theresa E. Wagler

    118,750     130,014     4,313     253,077

Celso L. White(4)

    50,000     130,024     763     180,787

(1)
Amounts in this column represent the annual cash retainers that our non-employee directors earned during 2018.

(2)
Amounts in this column represent the grant date fair value computed in accordance with FASB ASC Topic 718 of the restricted stock awards that we granted to the non-employee directors during 2018 pursuant to our 2014 Equity and Incentive Plan. Our assumptions with respect to the FASB ASC Topic 718 valuation of these equity awards are described in the footnotes to our audited financial statements as of and for the year ended December 31, 2018. Additional information with respect to these restricted stock awards is set forth above under the heading "Annual Restricted Stock Grant." Outstanding unvested restricted stock awards as of December 31, 2018 were

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(3)
Amounts in this column represent dividends on restricted stock. Amounts in this column for Messrs. Kuhbach and Schmitt also include a $25,000 donation to a charity designated by each of Messrs. Kuhbach and Schmitt in connection with each's retirement from the Board and in recognition of their many years of service.

(4)
Mr. White and Mr. Ahmed were elected to the Board in October 2018 and December 2018, respectively, and, therefore, their fee amounts reflect the partial year they served on the Board.

(5)
Messrs. Kuhbach and Schmitt retired from the Board effective as of the 2018 annual meeting of shareholders.

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COMMON STOCK OWNERSHIP

COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth information, as of March 15, 2019, concerning the beneficial ownership of each person known to us to beneficially own more than 5% of our common stock. The information in the table and the related notes is based on statements filed by the respective beneficial owners with the SEC pursuant to Sections 13(d) and 13(g) under the Exchange Act.

 Name and Address of Beneficial Owner 
  Amount and Nature
of
Beneficial
Ownership(1)
  Percent of
Class(2)

BlackRock, Inc. 

    20,782,498 (3)     9.3%

55 East 52nd Street
New York, New York 10055

           

FMR LLC

    13,525,207 (4)     6.1%

245 Summer Street
Boston, Massachusetts 02210

           

T. Rowe Price Associates, Inc. 

    12,590,251 (5)     5.7%

100 E. Pratt Street
Baltimore, Maryland 21202

           

The Vanguard Group, Inc. 

    29,179,589 (6)     13.1%

100 Vanguard Blvd.
Malvern, Pennsylvania 19355

           

(1)
Unless otherwise indicated, beneficial ownership consists of sole power to vote or direct the vote and sole power to dispose or direct the disposition of the shares listed.
(2)
Unless otherwise indicated, percentages calculated based upon common stock outstanding as of March 15, 2019 and beneficial ownership of common stock as set forth in the statements on Schedule 13G filed by the respective beneficial owners with the SEC.
(3)
Based solely on a Schedule 13G (Amendment No. 11), dated February 4, 2019 and filed with the SEC on February 4, 2019, by BlackRock, Inc. ("BlackRock"). BlackRock reports beneficial ownership of shares by its direct and indirect subsidiaries, including BlackRock Life Limited, BlackRock International Limited, BlackRock Advisors, LLC, BlackRock (Netherlands) B.V., BlackRock Institutional Trust Company, National Association, BlackRock Asset Management Ireland Limited, BlackRock Financial Management, Inc., BlackRock Japan Co., Ltd., BlackRock Asset Management Schweiz AG, BlackRock Investment Management, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock Asset Management Deutschland AG, BlackRock (Luxembourg) S.A., BlackRock Investment Management (Australia) Limited, BlackRock Advisors (UK) Limited, BlackRock Fund Advisors, BlackRock Asset Management North Asia Limited, BlackRock (Singapore) Limited, and BlackRock Fund Managers Ltd. These BlackRock entities have sole power to vote or to direct the vote of 19,017,708 shares of common stock and sole power to dispose or to direct the disposition of 20,782,498 shares of common stock.
(4)
Based solely on a Schedule 13G (Amendment No. 7), dated February 13, 2019 and filed with the SEC on February 13, 2019, by FMR LLC ("FMR") and Abigail P. Johnson, a Director, the Chairman, and the Chief Executive Officer of FMR. FMR reports beneficial ownership of shares by its direct and indirect subsidiaries,

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(5)
Based solely on a Schedule 13G (Amendment No. 3), dated February 14, 2019 and filed with the SEC on February 14, 2019, by T. Rowe Price Associates, Inc. ("T. Rowe Price"). T. Rowe Price has sole power to vote or to direct the vote of 5,243,536 shares of common stock and sole power to dispose or to direct the disposition of 12,554,051 shares of common stock.
(6)
Based solely on a Schedule 13G (Amendment No. 9), dated February 11, 2019 and filed with the SEC on February 11, 2019, by The Vanguard Group, Inc. ("Vanguard"). Vanguard reports beneficial ownership of shares of itself, Vanguard Fiduciary Trust Company, a wholly-owned subsidiary, and Vanguard Investments Australia, Ltd., a wholly-owned subsidiary. These Vanguard entities have sole power to vote or to direct the vote of 266,447 shares of common stock, shared power to vote or to direct the vote of 53,968 shares of common stock, sole power to dispose or to direct the disposition of 28,871,193 shares of common stock, and shared power to dispose or to direct the disposition of 308,396 shares of common stock.

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COMMON STOCK OWNERSHIP OF DIRECTORS AND MANAGEMENT

The following table sets forth information, as of March 15, 2019, concerning the beneficial ownership of our common stock by:

 
  Amount and Nature of
Beneficial Ownership(1)
   
 Name of Beneficial Owner   Shares of
Common Stock
Owned
Directly or
Indirectly(2)
  Shares of
Common Stock
that can be
Acquired within
60 Days(3)
  Total Shares of
Common Stock
  Percent
of
Class

Javed Ahmed

    3,099         3,099     *

Robert C. Arzbaecher(4)

    117,438         117,438     *

William Davisson

    38,358         38,358     *

John W. Eaves

    7,270         7,270     *

Stephen A. Furbacher

    50,190         50,190     *

Stephen J. Hagge

    36,338         36,338     *

John D. Johnson

    79,718         79,718     *

Anne P. Noonan

    16,986         16,986     *

Michael J. Toelle

    7,270         7,270     *

Theresa E. Wagler

    16,398         16,398     *

Celso L. White

    2,543         2,543     *

W. Anthony Will(5)

    276,592     987,714     1,264,306     *

Dennis P. Kelleher

    41,693     409,491     451,184     *

Douglas C. Barnard(5)

    63,654     373,149     436,803     *

Christopher D. Bohn

    30,944     201,601     232,545     *

Bert A. Frost

    44,601     403,888     448,489     *

All directors and executive officers as a group (20 persons)

    903,958     2,706,593     3,610,551     2%

*
Less than 1%
(1)
Unless otherwise indicated, beneficial ownership consists of sole power to vote or direct the vote and sole power to dispose or direct the disposition of the shares listed, either individually or jointly or in common with the individual's spouse, subject to community property laws where applicable.
(2)
The shares indicated include 3,299 shares for each of directors Arzbaecher, Davisson, Eaves, Hagge, Johnson, Noonan, Toelle, and Wagler; 3,099 shares for Mr. Ahmed, 2,543 shares for Mr. White; and 5,836 shares for Chairman Furbacher, in each case granted under our 2014 Equity and Incentive Plan, that have not yet vested. These shares of restricted stock can be voted during the vesting period. The table does not include restricted stock units or performance vesting restricted stock units granted to our executive officers under our 2014 Equity and Incentive Plan, as these awards cannot be voted during the vesting period.
(3)
The shares indicated in this column represent shares underlying stock options granted under an equity and incentive plan that have already vested or that will vest within 60 days. The shares underlying these stock options cannot be voted.
(4)
The shares indicated include 18,565 shares held by the Arzbaecher Family Foundation and 275 shares held by Mr. Arzbaecher's children, for which Mr. Arzbaecher disclaims beneficial ownership.
(5)
Messrs. Will and Barnard each also hold, respectively, 22,062 and 13,369 additional "phantom" shares as a deemed investment under our Supplemental Benefit and Deferral Plan (a non-qualified benefits restoration and deferred compensation plan). These phantom shares cannot be voted.

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our directors and officers and persons who own more than 10% of our common stock to file reports of ownership and changes in ownership with the SEC and the NYSE, and to furnish us with copies of the reports. Specific due dates for these reports have been established and we are required to report in this Proxy Statement any failure by directors, officers, and ten percent holders to file such reports on a timely basis. Based on our review of such reports and written representations from our directors and officers, we believe that all such filing requirements were timely met during 2018.

POLICY REGARDING RELATED PERSON TRANSACTIONS

We recognize that transactions with related persons can present potential or actual conflicts of interest and create the appearance that our decisions are based on considerations other than the best interests of the company and its shareholders. Accordingly, as a general matter, it is our preference to avoid such transactions.

Nevertheless, we recognize that there are situations where related person transactions may be in, or not inconsistent with, the best interests of the company and its shareholders, including but not limited to situations where we may obtain products or services of a nature, quantity, or quality, or on other terms, that are not readily available from alternative sources, or when we provide products or services to related persons on an arm's length basis on terms comparable to those provided to unrelated third parties or on terms comparable to those provided to employees generally.

In order to deal with the potential conflicts inherent in such transactions, our audit committee has adopted a written policy regarding related person transactions. For the purposes of this policy, a "related person transaction" is a transaction, arrangement, or relationship (or any series of similar transactions, arrangements, or relationships) in which the company was, is, or will be a participant and the amount involved exceeds $120,000, and in which any related person had, has, or will have a direct or indirect material interest, other than (a) transactions where the rates or charges involved in the transaction are determined by competitive bids, or the transaction involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority; (b) transactions involving services as a bank depositary of funds, transfer agent, registrar, or trustee under a trust indenture, or similar services; (c) transactions in which the interest of the related person derives solely from his or her service as a director of another entity that is a party to the transaction; or (d) transactions in which the interest of the related person derives solely from his or her ownership of less than 10% of the equity interest in another entity (other than a general partnership interest) which is a party to the transaction.

In addition, transactions involving the purchase of products or services (other than personal or professional services) from an entity for which a director of the company or an immediate family member of a director serves as an executive officer shall not be considered to involve a material interest on the part of such director (and therefore shall not be considered related person transactions) if (i) the director did not participate in the decision on the part of the company to enter into such transactions, (ii) the transactions are made in the ordinary course of business and on substantially the same terms as those prevailing at the time for transactions with other unrelated third parties, and (iii) the amount paid in all transactions with any such entity in a twelve-month period is less than the greater of $500,000 or 1% of

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such entity's consolidated gross revenues for the most recently completed fiscal year for which data is publicly available.

For purposes of the policy, a "related person" means:

any person who is, or at any time since the beginning of our last fiscal year was, a director or executive officer of the company or a nominee to become a director of the company;

any person who is known to be the beneficial owner of more than 5% of any class of our voting securities;

any immediate family member of any of the foregoing persons; and

any firm, corporation, or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest.

Except as described below with respect to certain commercial transactions in the ordinary course of business, any proposed transaction with a related person shall be consummated or amended only if the following steps are taken:

The general counsel will assess whether the proposed transaction is a related person transaction for purposes of this policy.

If the general counsel determines that the proposed transaction is a related person transaction, the proposed transaction shall be submitted to the audit committee for consideration at the next committee meeting or, in those instances in which the general counsel, in consultation with the chief executive officer or the chief financial officer, determines that it is not practicable or desirable for us to wait until the next committee meeting, to the chair of the audit committee (who has been delegated authority to act between committee meetings).

The audit committee, or where submitted to the chair of the committee, the chair, shall consider all of the relevant facts and circumstances available to the committee or the chair, including (if applicable) but not limited to: (i) the benefits to the company; (ii) the impact on a director's independence in the event the related person is a director, an immediate family member of a director, or an entity in which a director is a partner, shareholder, or executive officer; (iii) the availability of other suppliers or customers for comparable products or services; (iv) the terms of the transaction; and (v) the terms available to unrelated third parties or to employees generally.

The audit committee (or the audit committee chair) shall approve only those related person transactions that are in, or are not inconsistent with, the best interests of the company and its shareholders, as the committee (or the audit committee chair) determines in good faith.

The audit committee or the audit committee chair, as applicable, shall convey the decision to the general counsel, who shall convey the decision to the appropriate persons within the company.

At the audit committee's first meeting of each fiscal year, the committee shall review any previously approved related person transactions that remain ongoing and have a remaining term of more than six months or remaining amounts payable to or receivable from the company of more than $120,000. Based on all relevant facts and circumstances, taking into

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consideration the company's contractual obligations, the committee shall determine if it is in the best interests of the company and its shareholders to continue, modify, or terminate the related person transaction.

FMR and certain of its direct and indirect subsidiaries (collectively, "Fidelity") own in the aggregate more than 5% of our outstanding common stock and, therefore, are considered related persons under our policy regarding related person transactions. We have agreements in place for Fidelity to provide administrative and trustee services for the company's 401(k) and deferred compensation plans. During 2018, Fidelity earned approximately $108,000 from us and approximately $101,000 from plan participants for these services. At its first meeting in 2019, the audit committee reviewed and approved the transactions with, and ongoing administrative services from, Fidelity in accordance with our policy.

No member of the audit committee shall participate in any review, consideration, or approval of any related person transaction with respect to which such member or any of his or her immediate family members is the related person.

Sales of our products and services to related persons in the ordinary course of business, at prices and on terms consistent with those offered to similarly situated customers in our industry in transactions between unaffiliated parties will generally not be subject to the approval procedures described above; provided, however, that any (i) modification or amendment of a multi-year supply contract or (ii) entry into, modification, or amendment of a similar long-term supply contract with any related person will be subject to the same procedures under this policy as are applicable to any other related person transactions.

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PROPOSAL 2: ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS ("SAY ON PAY")

Pursuant to Section 14A of the Exchange Act, our shareholders are entitled to an advisory (non-binding) vote to approve the compensation of our named executive officers as disclosed in this Proxy Statement, including in the Compensation Discussion and Analysis (CD&A) beginning on page 43 and the Executive Compensation tables and accompanying narrative discussion beginning on page 79. This proposal is commonly referred to as a "Say on Pay" proposal.

The Board and the compensation and management development committee believe that the compensation of the executive officers named in this Proxy Statement is appropriate for the company and in the best interests of our shareholders over the long term. As discussed in more detail in the CD&A beginning on page 43, our compensation programs are intended to:

While still nearly 80%, we were disappointed that our 2018 say-on-pay vote yielded lower shareholder support than previous years when support levels exceeded 90%. As discussed in our CD&A under the heading "Executive Summary - Shareholder Engagement," we conducted extensive shareholder outreach both before and after our 2018 annual meeting. In these conversations, the overwhelming majority of shareholders supported the design of our ongoing compensation program.

We have stock ownership guidelines and an incentive compensation "clawback" policy to encourage appropriate levels of risk taking by our management. We continue to provide for significant levels of "at risk" performance-based compensation, which further aligns executive and shareholder interests. As discussed in our CD&A under the heading "Executive Compensation Program Changes for 2018," the compensation and management development committee approved several significant changes to our executive compensation program for 2018 that further strengthen the pay-for-performance alignment of our programs and focus our executives on metrics that are directly correlated to value creation for shareholders. For example, beginning with 2018 grants for named executive officers, the compensation committee increased the percentage of the total long-term incentive award value allocated to performance-vesting restricted stock units ("PRSUs") to 60%, increased the percentage allocated to time-vesting restricted stock units ("RSUs") to 40% and eliminated stock option awards.

We will continue to regularly review (along with outside compensation consultants) our executive compensation programs to ensure alignment with our compensation philosophy, and we are committed to continuing our dialogue with shareholders so that we can be proactive in responding to emerging industry trends and be responsive to shareholder dialogue.

Accordingly, we are asking you to vote FOR the adoption of the following resolution:

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As an advisory vote, this proposal is not binding on the company. Although the vote is non-binding, the Board and the compensation and management development committee value the opinions of our shareholders and will consider the outcome of the vote when making future compensation decisions for our named executive officers.

We currently hold our advisory "Say on Pay" proposal every year. Therefore, the next advisory "Say on Pay" proposal would be held at our 2020 annual meeting. Shareholders will have an opportunity to cast an advisory vote on the frequency of "Say on Pay" proposals at least every six years. We currently expect that the next advisory vote on the frequency of the "Say on Pay" proposals will occur at the 2023 annual meeting of shareholders.

Board Recommendation

The Board unanimously recommends that you vote FOR the Say on Pay proposal.

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EXECUTIVE OFFICERS

Set forth below is certain biographical information for our executive officers other than Mr. Will (whose biographical information appears above under the heading "Director Nominee Biographies"). Each of our executive officers, other than Mr. Hopkins, also served in the comparable officer positions with TNGP as he or she has held with CF Industries from April 2010 until April 2018. TNGP was our indirect, wholly-owned subsidiary and the sole general partner of Terra Nitrogen Company, L.P., a publicly-traded producer of nitrogen fertilizer products. In April 2018, we purchased all of the publicly traded common units of Terra Nitrogen Company, L.P. The ages of our executive officers are as of March 27, 2019.

Douglas C. Barnard (age 60) has served as our senior vice president, general counsel, and secretary since January 2012 and was previously our vice president, general counsel, and secretary from January 2004 to December 2011. Mr. Barnard served as a director of TNGP from June 2010 to April 2018 and as chairman of the board of TNGP from February 2016 to April 2018. Prior to joining CF Industries in January 2004, Mr. Barnard had been an executive vice president and general counsel of Bcom3 Group, Inc., an advertising and marketing communication services group. Earlier in his career Mr. Barnard was a partner in the law firm of Kirkland & Ellis LLP and, prior to that, was vice president, general counsel, and secretary of LifeStyle Furnishings International Ltd., a manufacturer and distributor of residential furniture and decorative fabrics. He holds a B.S. degree from the Massachusetts Institute of Technology ("M.I.T"), a J.D. degree from the University of Minnesota, and an M.B.A. degree from the University of Chicago. Mr. Barnard has also taught as a lecturer at the University of Chicago Law School, and serves as a member of the M.I.T Corporation Development Committee.

Christopher D. Bohn (age 51) has served as our senior vice president, manufacturing and distribution, since May 2016. He was previously our senior vice president, manufacturing, from January 2016 to May 2016, our senior vice president, supply chain, from January 2015 to December 2015, our vice president, supply chain, from January 2014 to December 2014, our vice president, corporate planning, from October 2010 to January 2014 and our director, corporate planning and analysis, from September 2009 to October 2010. Mr. Bohn served as a director of TNGP from February 2016 to April 2018. Prior to joining CF Industries, Mr. Bohn served as chief financial officer for Hess Print Solutions from August 2007 to September 2009. Earlier in his career, Mr. Bohn was vice president global financial planning and analysis for Merisant Worldwide, Inc. He holds a B.S. degree in finance from Indiana University and an M.M. degree (M.B.A.) from the Kellogg Graduate School of Management at Northwestern University.

Bert A. Frost (age 54) has served as our senior vice president, sales, market development, and supply chain, since May 2016. He was previously our senior vice president, sales, distribution, and market development, from May 2014 to May 2016, our senior vice president, sales and market development, from January 2012 to May 2014, and our vice president, sales and market development, from January 2009 to December 2011. Before joining CF Industries in November 2008, Mr. Frost spent over 13 years with Archer Daniels Midland Company, where he served most recently as Managing Director—International Fertilizer/Inputs from June 2008 to November 2008 and Director—Fertilizer, Logistics and Ports Divisions, ADM—Brazil from April 2000 to June 2008. Earlier in his career, Mr. Frost held positions of increasing responsibility at Archer Daniels Midland and Koch Industries, Inc. He holds a B.S. degree from Kansas State University and he is a graduate of the Harvard Business School's Advanced Management Program.

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Richard A. Hoker (age 54) has served as our vice president and corporate controller since November 2007. Mr. Hoker served as a director of TNGP from January 2014 to April 2018 and previously served as a director of TNGP from September 2010 to August 2011. Before joining CF Industries, Mr. Hoker spent over 11 years with Sara Lee Corporation, where he served most recently as vice president and controller from January 2007 to November 2007 and principal accounting officer from July 2007 to November 2007. Prior to being named controller, Mr. Hoker held other financial management positions of increasing responsibility at Sara Lee. Prior to joining Sara Lee, Mr. Hoker was a member of the financial advisory services consulting group at Coopers & Lybrand LLP in Chicago (now PricewaterhouseCoopers) and previously led teams in the firm's audit practice. Mr. Hoker holds a B.S. degree in accounting from DePaul University and an M.B.A. degree in finance and accounting from the University of Chicago. He is a certified public accountant.

David P. Hopkins (age 62) has served as our managing director, CF Fertilisers UK, since October 2015. He was previously our director, sales, from July 2010 to October 2015. Mr. Hopkins was director of sales for Terra Industries, which was acquired by CF Industries, from September 2006 to July 2010 and director of industrial sales at Terra Nitrogen, UK from January 1999 to September 2006. Mr. Hopkins has a degree in Agriculture from Reading University and a Diploma in Company Direction from the Institute of Directors in London.

Dennis P. Kelleher (age 55) has served as our senior vice president and chief financial officer since August 2011. Mr. Kelleher served as a director of TNGP from August 2011 to April 2018. Before joining CF Industries, Mr. Kelleher served as vice president, portfolio and strategy for BP plc's upstream business. From 2007 to 2010, Mr. Kelleher served as chief financial officer for Pan American Energy LLC. From 2005 to 2007, Mr. Kelleher served as vice president, planning and performance management for BP plc's upstream business. Mr. Kelleher was employed as a senior accountant at Arthur Andersen & Co. early in his career. He holds a B.S. degree in accountancy from the University of Illinois and an M.M. degree (M.B.A.) from the Kellogg Graduate School of Management at Northwestern University. He is a certified public accountant.

Susan L. Menzel (age 53) has served as our senior vice president, human resources, since October 2017. Prior to joining CF Industries, Ms. Menzel served as executive vice president, human resources, for CNO Financial Group, Inc. from May 2005 to October 2017. Prior to CNO Financial Group, she served as senior vice president, human resources for APAC Customer Services, Inc., and in roles of increasing responsibility for Sears, Roebuck & Company and Montgomery Ward, Inc. Ms. Menzel holds a bachelor's degree in business administration and economics from Augustana College.

Rosemary O'Brien (age 67) has served as our vice president, public affairs, since 1984, following key management roles in CF Industries' public affairs area. Ms. O'Brien joined the company in 1978, following service with the National Council of Farmer Cooperatives. She holds a B.A. degree in Education/History from the University of New Hampshire and an M.B.A. from American University.

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis discussion provides you with a detailed description of our compensation program for our named executive officers (NEOs) for 2018. It also provides an overview of our compensation philosophy and our policies and programs, which are designed to achieve our compensation objectives.

NAMED EXECUTIVE OFFICERS

Our NEOs for 2018 were:

Name

Title
W. Anthony Will   President and Chief Executive Officer
Dennis P. Kelleher   Senior Vice President and Chief Financial Officer
Douglas C. Barnard   Senior Vice President, General Counsel, and Secretary
Christopher D. Bohn   Senior Vice President, Manufacturing and Distribution
Bert A. Frost   Senior Vice President, Sales, Market Development, and Supply Chain


TABLE OF CONTENTS

EXECUTIVE SUMMARY

  44

Business Overview

  44

Corporate Strategy

  44

2018 Performance Highlights

  47

Shareholder Engagement

  50

Compensation Program Overview

  51

Executive Compensation Program Changes for 2018

  52

2018 Target Total Compensation

  53

Compensation Governance Practices

  54

COMPENSATION DISCUSSION AND ANALYSIS: IN DETAIL

 

55

Compensation Philosophy

  55

Key Elements of Compensation Program

  56

Evolution of Compensation Program

  58

The Compensation Process

  60

Review and Approval of 2018 Cash Compensation

  61

Review and Approval of 2018 Long-Term Incentives

  66

2019 Compensation Actions

  70

Change of Control, Severance, and Retirement Benefits

  71

Use of Industry Reference Group

  74

Other Compensation Governance Practices and Considerations

  74

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EXECUTIVE SUMMARY

Business Overview

CF Industries is a leading global fertilizer and chemical company with outstanding operational capabilities and a cost-advantaged production and distribution platform. Our 3,000 employees operate world-class manufacturing complexes in Canada, the United Kingdom and the United States. Our customers include both agricultural and industrial users of our products. Our principal nitrogen products are ammonia, granular urea, urea ammonium nitrate solution, and ammonium nitrate. We also manufacture diesel exhaust fluid, urea liquor, nitric acid, and aqua ammonia, which are sold primarily to industrial customers, and compound fertilizer products, which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus, and potassium. We serve our customers in North America through an unparalleled production, storage, transportation and distribution network. We also reach a global customer base with exports from our Donaldsonville, Louisiana, plant, the world's largest and most flexible nitrogen complex. Additionally, we move product to international destinations from our Verdigris, Oklahoma, facility, our Yazoo City, Mississippi, facility, our Billingham and Ince facilities in the United Kingdom, and a joint venture ammonia facility in the Republic of Trinidad and Tobago in which we own a 50 percent interest.

For more information on our business, see "Item 1. —Business" and Item 7. —Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2018 Annual Report.

Corporate Strategy

Our vision, given the cyclical nature of our business, is to deliver superior shareholder returns over the cycle. Our strategy, in support of our vision, is built upon a foundation of distinct core capabilities and core values that we live each and every day. We leverage our capabilities to drive business results that create long-term value for our shareholders.

GRAPHIC

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Roadmap for Sustainable, Profitable Growth through the cycle

We are well positioned to seize opportunities and meet challenges through the cycle because of our unique combination of enduring structural and operational advantages.

Consistent Demand Growth

 

Nitrogen historic global demand growth ~2% per year annually

Agricultural demand driven by population growth and increased protein consumption per capita

Industrial demand driven by global GDP growth, increased adoption of emission control, industrial intermediates and recovering mining sector

Tightening Global Supply and Demand Balance

 

Net new nitrogen capacity growth (new construction minus capacity closures) is below historic global demand growth for the foreseeable future: approximately four years based on time required to build new capacity, tightening the global supply and demand balance

Advantaged Position on Global Cost Curve

 

We are on the low end of the global cost curve due to our access to low-cost and plentiful North American natural gas

Global price driven by marginal producers tied to higher-priced liquefied natural gas, oil-linked natural gas and Chinese anthracite coal

Primarily Operate in Import-Dependent Region

 

North America is dependent on nitrogen imports to meet demand

Price is set by the last imported ton bid into the region

Our manufacturing and distribution network, along with our logistics capabilities, allow us to capture the significant margin between our cost and that of the global high-cost producer

Inputs, Manufacturing and Select Product Overview

Modern nitrogen production begins with the production of ammonia through the Haber-Bosch chemical process. Ammonia is the most concentrated nitrogen fertilizer product as it contains 82% nitrogen and is the "basic" nitrogen product that we upgrade into other nitrogen products such as granular urea, UAN and AN. We produce ammonia at all of our nitrogen manufacturing complexes using natural gas as the feedstock.

GRAPHIC

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Recent Investments Positioning Us for Profitable Growth

Beginning in 2012, the company underwent a major capital expansion program, adding capacity at two of our facilities. Both projects began ammonia production in the second half of 2016 and have now achieved consistent, stable operations with production above expectations. In total, the two expansions have increased our nitrogen production capacity by more than 25%. In addition, we acquired the 50% equity interest in our UK facilities not previously owned by us in 2015. Taking operational control allowed us to increase its asset utilization nearly 20% by 2017. During 2018, we invested in our production capacity by exercising our right to purchase all of the publicly traded common units of Terra Nitrogen Company, L.P. The following chart illustrates the growth in our gross ammonia capacity and actual production over the past five years.

GRAPHIC

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Financial Results are Impacted by Highly Cyclical Commodity Prices

Our financial results are significantly impacted by the pronounced effects of highly volatile commodity prices for fertilizer products. In 2015 and 2016, nitrogen product prices were lower and stayed at depressed levels longer than expected. Product prices remained volatile throughout 2017, and the year ended with a meaningful decline in the pricing environment. As a result, our financial performance and corresponding incentive compensation programs were negatively impacted during 2015, 2016, and 2017. Going into 2018, we expected price volatility to continue through 2018, followed by a sustained price recovery driven by a tightening supply demand balance.

Nitrogen Fertilizer Historical Price Volatility
Annual Pricing vs. 10-Year Average1

GRAPHIC

1 Reflects Urea Barge Price per ton at New Orleans; Source: Fertecon

2018 Performance Highlights

Management prepares the company's annual business plan and reviews it in detail with the Board. To develop the annual plan, management utilizes a combination of factors, including its view of current conditions, recent historical performance, internal forecasts, as well as external public market indicators such as natural gas futures. The compensation and management development committee utilizes the annual business plan in connection with setting goals and targets for our incentive compensation programs at the end of each calendar year.

Actual results in 2018 differed from the company's forecasts as product prices improved more rapidly than anticipated – contributing to higher revenue and margins. At the same time, the cost of our principle feedstock, natural gas, declined compared to the market expectations reflected in forward market curves when setting our budget. During 2018, we also exceeded our production goals. This combination of a more advantageous pricing environment, lower natural gas costs, and efficient production contributed to the strong financial results illustrated below.

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Operating Results

    Net Earnings
Attributable to
Common Stockholders
      Earnings Per
Diluted Share
      EBITDA(1)       Net Cash Provided by
Operating Activities
   
    $290 Million       $1.24       $1.4 Billion       $1.5 Billion    

Annual Incentive Plan Performance Metrics

    Adjusted EBITDA       Behavioral Safety
Gate Threshold
      Gross Ammonia
Production
   
    $1.4 Billion       Achieved
98.6%
      9.8 Million Tons    
    Target: $825 Million       Threshold: ³95%(2)       Target: 9.6 Million Tons    

Higher global nitrogen prices and lower natural gas costs drove the company's financial performance in 2018 compared to the year's target. Producers in Asia and Europe experienced significantly higher-than-expected increases in feedstock costs during 2018. The average annual price per MMBtu of natural gas at the Dutch TTF trading hub was 35 percent higher in 2018 compared to 2017; the average annual price per MMBtu for liquefied natural gas in Asia was 43 percent higher; and the price per metric ton of anthracite coal in China was 25 percent higher. These higher feedstock costs, along with continued enforcement of environmental regulations in China, resulted in lower production in these regions, tightening the global supply and demand balance and increasing global nitrogen prices significantly compared to 2017. At the same time, CF's natural gas cost per MMBtu in cost of sales for 2018 was five percent lower than in 2017, supporting significantly higher margins for the company during the year.

Additionally, the company continued to deliver against its strategic priorities and create long-term shareholder value.

    Safety       As of December 31, 2018, the company's 12-month rolling average recordable incident rate was 0.60 incidents per 200,000 work hours despite increased turnaround and maintenance activity compared to 2017    
    Growth       Completed purchase of all publicly traded common units of Terra Nitrogen Company, L.P. on April 2, 2018 for an aggregate purchase price of $388 million    
    Return to Shareholders       Returned $780 million to shareholders through $500 million in share repurchases and $280 million in dividend payments    
    Operational Excellence       Long-term asset utilization-and-production is approximately 10 percent higher than the average utilization rate of our North American competitors    
    Efficiency       SG&A costs as a percent of sales remain among the lowest in both the chemicals and fertilizer industries    

(1)             EBITDA is defined as net earnings attributable to common stockholders plus interest expense-net, income taxes and depreciation and amortization. See Appendix A for a reconciliation of EBITDA to the most directly comparable GAAP measure.

(2)             The Secondary Metric, Tons of Ammonia Produced, has a behavioral safety gate threshold. If at least 95% of the aggregated safety grades of all employees at manufacturing sites were a "B" or better for the year, the safety performance gating requirement would be achieved. If the safety performance gating requirement was not achieved, there would be no payout under the Secondary Metric.

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Total Shareholder Return

We firmly believe that, due to the cyclical nature of the commodity chemical industry in which we operate, it is important to view performance over a longer time horizon than just one year. Our execution of initiatives aligned with our strategy helped us achieve our vision – delivering superior shareholder returns over the cycle. The following table shows the cumulative total shareholder return, assuming the reinvestment of dividends, for our common stock and a peer group index for the 1, 3, 5, 7, and 10-year periods ended December 31, 2018. In constructing the peer group index, we have selected Agrium Inc. (Agrium), Potash Corporation of Saskatchewan Inc. (PotashCorp) and The Mosaic Company (Mosaic), all of which were publicly traded manufacturers of agricultural chemical fertilizers with headquarters in North America during the periods. On January 2, 2018, Agrium and PotashCorp completed a merger of equals transaction to form Nutrien Ltd. (Nutrien). See the notes following the table for the methodology used to measure TSR.

Total Shareholder Return (TSR)    

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Prior to January 2, 2018, common shares of each of Agrium and PotashCorp traded on the New York Stock Exchange (NYSE). On January 2, 2018, Agrium and PotashCorp completed a merger of equals transaction to form Nutrien. Nutrien common shares began trading on the NYSE on January 2, 2018 and trading of common shares of Agrium and PotashCorp was concurrently halted. In the merger of equals transaction, each common share of PotashCorp was exchanged for 0.40 common shares of Nutrien and each common share of Agrium was exchanged for 2.23 common shares of Nutrien.

For purposes of calculating the TSR of CF Industries and the peer group index for the 1-year period ending December 31, 2018, the peer group was composed of Nutrien and Mosaic and the beginning stock price for each company was established by its respective closing price on January 2, 2018 (the first trading day for Nutrien shares). The returns of the peer group companies were weighted according to their respective market capitalizations as of January 2, 2018.

For purposes of calculating the TSR of CF Industries and the peer group index for the 3, 5, 7, and 10-year periods ending December 31, 2018, the peer group at the beginning of the measurement period was composed of Mosaic, Agrium, and PotashCorp and the beginning stock price for each company was established by its respective closing price on the last trading day immediately preceding January 1 of the first fiscal year of the applicable measurement period. The returns of the peer group companies were weighted according to their respective market capitalizations as of the date used to establish the beginning stock price. The cumulative investment in each of Agrium and PotashCorp, assuming dividend reinvestments up to December 31, 2017, was converted into

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shares of Nutrien on January 2, 2018 using the exchange ratio in the merger of equals transaction consummated on that date.

Shareholder Engagement

We believe that building positive relationships with our shareholders is critical to CF Industries' success. We value the views of and regularly communicate with our shareholders on a variety of topics, including corporate governance, executive compensation and related matters. Management shares the feedback received from shareholders with the Board. Our chairman and other members of the Board are available to participate in meetings with shareholders as appropriate. Requests for such meetings are considered on a case-by-case basis. Our engagement activities have resulted in valuable feedback that has contributed to our decision-making with respect to these matters. We welcome your input and feedback and look forward to continued engagement with our shareholders.

We conduct shareholder outreach campaigns in the spring and in the fall. Our engagements in the spring are primarily focused on ballot items on which shareholders will vote at our annual meeting. Our engagements in the fall generally focus on voting outcomes from our prior annual meeting – including direct shareholder feedback on how they voted on ballot items – as well as potential corporate governance or executive compensation changes the Board and its committees are considering. The fall engagement also presents an opportunity to discuss with shareholders developments in their methodologies and analyses and potential future areas of focus.

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2018 Shareholder Engagement Campaign

In the first half of 2018 leading up to our 2018 annual meeting, we contacted our top 30 shareholders comprising approximately 75% of our outstanding shares to invite them to speak with members of our senior management and the chair of our compensation and management development committee. Combined, management and our compensation and management development committee chair met with 15 shareholders representing approximately 60% of our outstanding shares in advance of our 2018 annual meeting, discussing with these shareholders our compensation program, special meeting right, and other governance focused matters. In these conversations, the overwhelming majority of shareholders supported the design of our ongoing compensation program (as evidenced by the nearly 80% of votes cast in favor of our say-on-pay vote). This feedback was relayed to the compensation and management development committee and full Board.

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Responsiveness to 2018 Say-on-Pay Vote

While still nearly 80%, we were disappointed that our 2018 say-on-pay vote yielded lower shareholder support than previous years when support levels exceeded 90%. As part of our fall shareholder engagement campaign, the compensation and management development committee requested management engage with shareholders on this topic specifically to better understand why some investors opposed our say-on-pay proposal.

During the second half of 2018 following our 2018 annual meeting, we contacted 19 shareholders comprising approximately 70% of our outstanding shares inviting them to speak with members of our senior management. We held meetings with 13 shareholders representing approximately 45% of our outstanding shares. While a minority of shareholders expressed concerns regarding the supplemental shareholder alignment award the compensation and management development committee granted in 2017 – which was a rare action taken by the committee in unique circumstances – the overwhelming majority of shareholders supported the design of our compensation program (as evidenced by the nearly 80% of votes cast in favor of our say-on-pay vote). This feedback was relayed to the compensation and management development committee and the full Board.

As discussed below under the heading "Executive Compensation Program Changes for 2018," the compensation and management development committee approved several significant changes to our executive compensation program for 2018 that further strengthen the pay-for-performance alignment of our programs and focus our executives on metrics that are directly correlated to value creation for shareholders. Based on shareholder feedback received in 2018, the compensation and management development committee determined that no significant additional changes to our executive compensation program are warranted for 2019.

We will continue to regularly review (along with outside compensation consultants) our executive compensation programs to ensure alignment with our compensation philosophy, and we are committed to continuing our dialogue with shareholders so that we can be proactive in responding to emerging industry trends and be responsive to shareholder dialogue.

Compensation Program Overview

Our total direct compensation is targeted at the 50th percentile of our peer group. The compensation and management development committee considers skills, performance, capabilities, experience, criticality of the role, and the future potential of each executive in setting actual compensation, therefore total direct compensation can be above or below the 50th percentile for different individuals.

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The following compensation elements support the needs of the business, our shareholders, and our employees:

Component   Key Characteristics
Salary   Paid in line with individual performance and contribution to company goals and aligned to competitive market data
Annual Cash Incentives   Subject to achievement of a specified threshold level of EBITDA*, the amount of the actual incentive earned is determined based on our level of achievement of two performance metrics:
   

75%: level of achievement of Adjusted EBITDA** (Primary Metric)

   

25%: level of achievement of ammonia production goals, subject to first achieving a gating level of performance on behavioral safety practices (Secondary Metric)

Long-Term Equity Incentives   A specified cash value amount is split among two different equity award types:
   

60%: PRSUs (3-year cliff vesting based on average return on net assets (RONA)*** over three one-year periods, and a TSR modifier that can decrease or increase payout by up to 20%)

   

40%: RSUs (3-year ratable vesting)

*         EBITDA is computed as the sum of (i) net earnings attributable to common stockholders plus (ii) interest expense (income)—net plus (iii) income taxes plus (iv) depreciation, depletion, and amortization less (v) loan fee amortization.

**       Adjusted EBITDA is computed as the sum of (i) EBITDA (described above) plus (ii) unrealized mark to market losses (gains) on hedges plus (iii) restructuring, exit, impairments, system implementation costs or similar types of costs plus (viii) non-capitalized expansion project costs plus (ix) losses (gains) recognized due to the acquisition or disposal of a business or group of assets that represents a major portion of the business less (x) profits (losses) associated with acquisitions or divestitures completed during the year.

***     Average Return on Net Assets (RONA) is determined by reference to the ratio (expressed as a percentage) of adjusted EBITDA (as defined for purposes of our 2018 annual incentive plan) divided by average operational assets. The "average operational assets" denominator of this metric is essentially the simple average of the beginning and year-end values for the sum of (i) total assets less (ii) cash and cash equivalents less (iii) restricted cash less (iv) short-term investments less (v) investments in marketable equity securities less (vi) prepaid income taxes less (vii) total current liabilities less (viii) long-term deferred income taxes less (ix) other noncurrent liabilities less (x) assets associated with major capital projects (as approved by the compensation committee) less (xi) net assets associated with acquisitions and divestitures completed during the year plus (xii) short-term debt or notes payable included in current liabilities.

Executive Compensation Program Changes for 2018

In December 2017, the compensation and management development committee approved several significant changes to our executive compensation program for 2018 that further strengthen the pay-for-performance alignment of our programs and focus our executives on metrics that are directly correlated to value creation for shareholders.

Annual Incentive Program Changes

Subject to the achievement of a threshold EBITDA performance metric, actual annual incentive payments for 2018 were determined based on primary and secondary performance metrics. The Primary Metric of Adjusted EBITDA and its 75% weighting were unchanged from 2017. The Secondary Metric in the annual incentive program for 2018 was based on our achievement of ammonia production goals, subject to first achieving a gating level of

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performance on safety practices. The production metric and safety "gate" demonstrate our focus on excellence in terms of operational execution and underscore our commitment to driving workplace safety.

Long-Term Incentive Program Changes

In the long-term incentive program, changes approved by the compensation and management development committee increased the portion of equity awards that are explicitly linked to long-term company performance:

In addition to increasing the portion of equity awards explicitly linked to long-term performance, the compensation and management development committee also approved changes to the metrics used for measuring performance with respect to the PRSUs:

In deciding to measure RONA annually for three years, the compensation and management development committee considered the difficulty in establishing appropriate long-term performance measures for the company given the inherent cyclicality in our industry as well as the pronounced effects of highly volatile commodity prices for raw materials and fertilizer products upon our operating results.

The target TSR performance level for the modifier in the 2018 PRSUs was set to reflect a compound annual TSR equal to 7%, which is the approximate average annual real total return for the S&P 500 Index since inception. Maximum performance was set at a level well above the average, and threshold performance was set at a level below which a maximum reduction was appropriate. In structuring the TSR modifier, the compensation and management development committee determined not to use a relative TSR benchmark because there are not enough similarly sized companies with comparable business lines in which the committee could assemble a peer group for meaningful TSR performance purposes, and the committee considered that basing the TSR modifier on a broad market comparison (e.g., the S&P 500) over a three-year period would not be appropriate given the cyclicality of our business.

2018 Target Total Compensation

The compensation and management development committee believes the majority of compensation should be composed of awards that are performance-based – with direct ties to the Company and individual employee performance. The significant majority of each NEO's target compensation is at-risk based on company performance.

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2018 Target Total Direct Compensation Mix

The following graphs illustrate the mix of total target direct compensation for our chief executive officer and for the other NEOs for 2018.

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AIP: Annual Incentive Plan (annual bonus), cash settled
LTIP: Long-Term Incentive Plan, denominated in equity

2018 CEO Target Total Compensation

The compensation and management development committee determined that our CEO's base salary and the target value of his incentive awards for 2018 should remain unchanged from those in effect in 2016 and 2017 due to target compensation continuing to be in line with our Industry Reference Group (described in greater detail below) and the overall general industry survey data and in recognition of industry market conditions at the time. The committee believes this underscores that our executive compensation program is working, that payouts are appropriately aligned with performance, and that salaries and the target value for incentive awards are appropriately benchmarked.

 

Pay Element

 
2018


2017


% Change

 

Salary

  $ 1,150,000   $ 1,150,000     0 %  

 

Target Annual Incentive

  $ 1,552,500   $ 1,552,500     0 %  

 

Target Long-Term Incentive

  $ 5,300,000   $ 5,300,000     0 %  

 

Total

  $ 8,002,500   $ 8,002,500     0 %  

Compensation Governance Practices

Our executive compensation practices are overseen and administered by the compensation and management development committee, which is comprised exclusively of independent directors. The committee is responsible for designing an executive compensation program – including approving any changes to it – that effectively incentivizes our executives to create

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long-term value. Key compensation governance practices that govern the committee's approach to these responsibilities are described below:

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Strong pay-for-performance alignment

Robust clawback policy covering incentive awards

Stock ownership guidelines

Annual bonus is 100% formulaic, based on objective and transparent criteria

A majority of compensation for CEO and other executive officers is performance-based and paid in equity

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No employment agreements

No repriced stock options

Minimal perquisites

Executive officers are prohibited from hedging or pledging our stock

No new excise tax gross-ups after 2011 (CEO and CFO have no such gross-up)

COMPENSATION DISCUSSION AND ANALYSIS: IN DETAIL

Compensation Philosophy

Our compensation and management development committee has adopted a compensation philosophy that seeks to align the interests of our employees and our shareholders through focusing on the total compensation (base salary, short-term incentives, long-term incentives, and benefits) of our employees, including our NEOs. We seek to benefit from this strategy by attracting key talent, retaining strong performers, increasing productivity, and maximizing operational and financial results, while also implementing compensation programs that are cost effective, market competitive, and sustainable across business cycles.

Our executive compensation program is designed to reward executives for their contributions to our short-term and long-term results. Annual cash incentive compensation is based on the achievement of annual performance goals – both financial and operating objectives – while the majority of executives' long-term incentive opportunity is based on performance against criteria that are correlated with both annual and long-term shareholder value.

Our goal is to provide direct compensation to our NEOs that is market competitive with other comparable companies. To obtain a general understanding of current compensation practices, the compensation and management development committee received in 2018 a market assessment from its independent outside compensation consultant, Exequity LLP ("Exequity"), that was derived from published survey compensation data, which Exequity adjusted for variations in revenue among the included companies. To further gauge the competitiveness of our total compensation offering, we also compare ourselves against our Industry Reference Group, which is a group of 18 similar companies in related industries. Additional information regarding this group of companies is set forth below under the heading "Use of Industry Reference Group."

Our total direct compensation for our NEOs is targeted at the 50th percentile of our peer group. The compensation and management development committee considers skills, performance, capabilities, experience, criticality of the role, and the future potential of each executive in setting actual compensation, therefore total direct compensation can be above or below the 50th percentile for different individuals.

Incentive opportunities are structured in a way that recognizes our cyclicality and emphasis on a team-based culture.

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Key Elements of NEO Compensation Program

Component   Key Characteristics and Rationale

Salary

 

We seek to pay salaries in line with individual performance and contribution to company goals.

 

In the aggregate, base salaries of our NEOs are targeted at the median of the peer group companies in our Industry Reference Group and the overall general industry market data from the outside compensation consultant's market assessment. Individual performance and potential, relative criticality of the individual position in relation to achievement of the company's goals, and business affordability are also considered in determining base salaries.

 

To maintain our desired market position, we conduct annual salary reviews.

Short-Term Incentives

 

Variable compensation component that provides executive officers and other employees with the opportunity to earn additional annual cash compensation beyond base salary.

 

The role of short-term incentives is to reward and encourage the achievement of annual financial results and other specified corporate performance goals.

 

Short-term incentives are also targeted at the market median, and achievement of these awards depends on attaining corporate performance goals.

 

For 2018, the short-term incentive was subject to achievement of a specified threshold level of EBITDA. If the threshold level of EBITDA was achieved, then the amount of the actual incentive earned would be determined based on our level of achievement of the following primary and secondary performance metrics: 75% based on our level of achievement of Adjusted EBITDA and 25% based upon our level of achievement of specified ammonia production goals, subject to first achieving a gating level of performance of behavioral safety practices goals ("safety gate").

Long-Term Incentives

 

Variable compensation component that focuses on enterprise value creation and employee retention. Long-term incentives are provided through annual stock-based awards.

 

Participation is extended to executive officers and other key employees. Eligibility guidelines with award ranges reflecting position responsibility levels and competitive market practices are updated annually. The guidelines allow for individual variation in long-term incentives based on performance level, potential contribution, and value to the business.

 

In general, long-term incentives for our executive officers are targeted at the market median with the opportunity to receive above market awards for excellent performance.

 

Long-term incentive awards granted to our NEOs in connection with setting target compensation for 2018 were based on a specified cash value, which amount was split among two different award types—60% PRSUs and 40% RSUs.

 

PRSUs awards are subject to three-year vesting criteria based on:

 

o

Average return on net assets (RONA) over three one-year periods

 

o

A modifier pursuant to which the number of shares earned based on RONA performance may be increased or decreased by up to 20% based on our three-year TSR performance against a threshold, target, and maximum level of performance

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Compensation Metrics Tie to Business Strategy

The compensation and management development committee selects performance metrics for our incentive compensation programs that align executive interests with those of our shareholders. Executives are focused on achieving top performance across metrics that are directly tied to shareholder value creation and our core strategic objectives, as indicated below:

Annual Incentives
     
    Metric   Alignment

 
    EBITDA/Adjusted EBITDA   EBITDA/Adjusted EBITDA is the primary metric by which we measure our profitability and by which investors measure our performance    
    Behavioral Safety Practices   The "safety gate" underscores our commitment to CF's "Do It Right" culture and our constant efforts to drive workplace safety    
    Ammonia
Production
  Focus on operational excellence in terms of operational execution and asset utilization will help create value and aligns with recent investments in our production capabilities    

 

Long-Term Incentives
     
    Metric   Alignment

 
    Return on
Net Assets (RONA)
  RONA is typically correlated with long-term TSR performance and is viewed as an indicator of the results of management's operating decisions    
    Total Shareholder Return   Explicitly links executive incentives with shareholder value creation    

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Evolution of Compensation Program

The compensation and management development committee seeks to ensure that the compensation program aligns with the company's strategic objectives. Over time, the committee has refined the program, notably the incentive plan metrics, to align executives' focus areas with strategic imperatives that have evolved along with market conditions and our operations. Our primary metric for each of the last three years has been Adjusted EBITDA at a weighting of 50% to 75%.

Annual Incentive Program Changes

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Changes to our secondary metric demonstrate our commitment to safety and the "Do It Right" culture. Operating in a safe and responsible manner is a core value and an integral part of what sets CF Industries apart to all our stakeholders. Our safety strategy permeates our business in three key ways:

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Our commitment to safety never takes a day off, and we have demonstrated that our focus on this priority is yielding positive results.

2018 Long-Term Incentive Program Changes

In the long-term incentive program applicable to our NEOs, changes approved by the compensation and management development committee increased the portion of equity awards that are explicitly linked to long-term company performance:

In addition to increasing the portion of equity awards explicitly linked to long-term performance, the compensation and management development committee also approved changes to the metrics used for measuring performance with respect to the PRSUs:

In deciding to measure RONA annually for three years, the compensation and management development committee considered the difficulty in establishing appropriate long-term performance measures for the company given the inherent cyclicality in our industry as well as the pronounced effects of highly volatile commodity prices for raw materials and fertilizer products upon our operating results.

The target TSR performance level for the modifier in the 2018 PRSUs was set to reflect a compound annual TSR equal to 7%, which is the approximate average annual real total return for the S&P 500 Index since inception. Maximum performance was set at a level well above the average, and threshold performance was set at a level below which a maximum reduction was appropriate. In structuring the TSR modifier, the compensation and management development committee determined not to use a relative TSR benchmark because there are not enough similarly sized companies with comparable business lines in which the committee could assemble a peer group for meaningful TSR performance purposes, and the committee considered that basing the TSR modifier on a broad market comparison (e.g., the S&P 500) over a three-year period would not be appropriate given the cyclicality of our business.

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The Compensation Process

Allocation of Compensation Elements

We provide a mixture of cash compensation and non-cash compensation to our NEOs. The cash portion consists primarily of base salaries and short-term incentive awards. The non-cash portion consists primarily of stock-based long-term incentive awards.

Our allocation among base salary, short-term incentives, and long-term incentives varies significantly by management level, reflecting individual responsibility levels and competitive market practices. In general, our more senior executive officers receive a greater percentage of their total expected compensation in the form of incentives (particularly long-term incentives) and a correspondingly lower percentage in the form of salary.

In addition to using benchmark survey data, we also consider internal factors that may cause us to adjust particular elements of an individual executive officer's compensation. These factors may include an individual's operating responsibilities, management level, tenure, and performance in the position.

To assist in its evaluation, our compensation and management development committee reviews the details of an executive's historical and proposed compensation as described below, including a review of our NEOs' existing base salaries and target annual incentive levels in connection with the approval of their new base salaries and target annual incentive levels for the following year.

In addition, four times per year the compensation and management development committee reviews reports regarding our NEOs' holdings and transactions involving our stock, including our NEOs' holdings of stock and long-term stock-based incentive awards, stock option exercises, purchases, sales and gifts of stock, and surrenders of vested shares of restricted stock in order to satisfy withholding tax requirements, as applicable.

Compensation Benchmarking

Our total direct compensation is targeted at the 50th percentile of our Industry Reference Group. The compensation and management development committee considers skills, performance, capabilities, experience, criticality of the role, and the future potential of each NEO in setting actual compensation; therefore, total direct compensation can be above or below the 50th percentile for different NEOs.

Committee Process for Incentive Target-Setting

Our industry is inherently cyclical, with ±50% swings in product pricing not uncommon, impacting significantly our financial results. When setting performance hurdles for our incentive compensation programs, the compensation and management development committee considers historical performance and management's outlook. This outlook is built through a rigorous process incorporating current and futures prices for commodities and other external indicators relevant to our business.

The timing – in terms of calendar – of the compensation and management development committee's decision-making process around target-setting for our incentive compensation programs is particularly important to understanding its limited visibility into certain external

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factors that have the potential to significantly impact our financial and operating results, including natural gas prices, international trade policies, weather, etc.

Illustrative Timeline for Compensation and Management Development Committee Process
               
    May

    October

    December

 
   

Review of current compensation trends and issues

Independent Compensation Consultant provides an analysis of current and potential peers based on strategy, business structure, and industry

         

Evaluation of STI and LTI program outcomes against overall program design, stated goals, and alignment with strategy

Review of current/future compensation program objectives, design, and goals

Review of proxy peer analysis and overall general industry benchmark market data against our NEOs

STI and LTI metrics for upcoming year established

         

Completion of internal budget forecasting, incorporating supply-demand forecasts with external market prices such as natural gas futures strips

Setting STI and LTI performance targets and ranges to align with finalized corporate plan

   

Review and Approval of 2018 Cash Compensation

In setting cash compensation levels for 2018, the compensation and management development committee reviewed the base salaries and target annual and long-term incentives for our NEOs that had been in effect for 2017 and, in December 2017, approved levels for 2018 that were unchanged from those in effect for 2017.

In connection with its review of the existing cash compensation levels that had been in effect for 2017, the compensation and management development committee reviewed a report from its outside compensation consultant, Exequity, to obtain a general understanding of current compensation practices. In performing its market assessment, Exequity used published survey compensation data, and adjusted for variations in revenue among the included companies.

In addition, the compensation and management development committee reviewed information provided by the compensation consultant regarding the publicly reported cash compensation of NEOs of the group of companies in our Industry Reference Group, which is comprised of 18 companies in related industries. Additional information regarding this group of companies is set forth below under the heading "Use of Industry Reference Group."

The compensation and management development committee also considered cash compensation recommendations from our chief executive officer for each of the NEOs other than himself. These recommendations took into account the chief executive officer's assessment of each individual's operating responsibilities, management level, tenure and performance in the position, and potential.

Review of Base Salary Compensation

During its review of NEO's base salaries, the compensation and management development committee considered all of this information in the context of the goals and objectives of our

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executive compensation plans. As noted above, we seek to pay salaries in line with individual performance and contribution to company goals.

Review of the Short-term Incentive Program

During its review of our short-term incentive program, the compensation and management development committee considered the following general goals:

The compensation and management development committee also considered the following factors specific to our company:

In addition, the compensation and management development committee reviewed a report from Exequity, the committee's outside compensation consultant, regarding competitive market practices with respect to the use of short-term incentives.

The compensation committee considered all of this information in the context of the goals and objectives of our executive compensation plans. As noted above, we use short-term incentives to provide executive officers and other employees with the opportunity to earn additional annual compensation beyond base salary. The role of short-term incentives is to reward and encourage the achievement of annual financial results and other specified corporate performance goals. In the aggregate our short-term incentive awards are targeted at the median of the peer group companies in our Industry Reference Group and the overall

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general industry market data from the outside compensation consultant's market assessment. Additional information regarding these goals and objectives is set forth above under the headings "Compensation Philosophy" and "Components of Compensation."

Selection of Threshold EBITDA Performance Metric for 2018

Based on its review and the other factors discussed above, the compensation and management development committee determined that the annual incentive awards to our NEOs for 2018 would be subject to the attainment of a threshold EBITDA performance metric of $300 million for the company's 2018 fiscal year. If that level of EBITDA was achieved for 2018, each NEO would become eligible for an annual incentive award with respect to 2018 of up to $3 million, which amount would be subject to reduction in the discretion of the compensation and management development committee (sometimes referred to as "negative discretion"). If the threshold EBITDA performance metric had not been attained, no annual incentive awards would be made to the NEOs.

The compensation and management development committee determined that the use of a threshold EBITDA performance metric, combined with the committee's right to use negative discretion, provided the maximum level of flexibility to reward and encourage the achievement of annual financial results and other specified corporate performance goals while retaining the ability to pay incentive awards to executive officers which were deductible under Section 162(m) of the Internal Revenue Code.

Selection of Primary and Secondary Performance Metrics for 2018

If the threshold EBITDA performance metric was attained, it was the compensation committee's intention to use its negative discretion to pay 2018 annual bonuses based upon our level of achievement of the following primary and secondary performance metrics:

The compensation and management development committee established the following performance levels and corresponding percentages of target opportunity earned with respect to the Primary Metric for 2018:

Performance Level

  Primary Metric

Adjusted EBITDA Achieved


 
Percentage of
Primary Metric
Target Award Earned


 
 

Below Threshold

  Less than $600 million   0%    

Threshold

  $600 million   50%    

Target

  $825 million   100%    

Maximum

  $1.25 billion   200%    

Straight line interpolation is used to determine the achievement percentage for the Primary Metric between threshold and target and between target and maximum performance levels.

For the Secondary Metric, each of our production and distribution facilities develops and implements specific behavioral safety objectives that are pertinent and meaningful to each work group at the site. Each employee is involved in developing and taking ownership for

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completing objectives that make their workplace safer and effect a positive change in the safety culture.

Each quarter, evaluations are conducted and an overall achievement grade (A through F) for each hourly group and individual manager is assigned. Under the Secondary Metric, the quarterly grades issued to all site employees were aggregated. If at least 95% of the grades were "B" or better for the year, the safety performance gating requirement would be achieved. If the safety performance gating requirement was not achieved, there would be no payout under the Secondary Metric.

The compensation and management development committee established the following ammonia production performance levels and corresponding percentages of target opportunity earned with respect to the Secondary Metric for 2018, subject to first achieving the safety performance gating requirement:

Performance Level

  Secondary Metric

Tons of Ammonia Produced


 
Percentage of
Secondary Metric
Target Award Earned


 
 

Below Threshold

  Less than 9.1 million tons   0%    

Threshold

  9.1 million tons   50%    

Target

  9.6 million tons   100%    

Maximum

  10.1 million tons   200%    

Straight line interpolation is used to determine the achievement percentage for the Secondary Metric between threshold and target and between target and maximum performance levels.

The ammonia production performance levels were set by the compensation and management development committee based on the company's 2018 business plan, which was prepared taking into account a number of factors, including historical performance and planned maintenance and turnaround activity at production facilities. During 2018, more of the company's ammonia units were scheduled for downtime for turnaround and maintenance activity than in 2017, resulting in an expected decrease in production levels on a year-over-year basis and performance levels were set accordingly.

The compensation and management development committee retained discretion to adjust the performance levels to address circumstances that impact our ability to meet production expectations, such as market-based curtailments, severe weather events or other events of force majeure that result in production outages, and other adjustments approved by the compensation and management development committee.

Target-Setting Considerations for the Short-Term Incentive Program

When setting performance levels for the short-term incentive program, the compensation and management development committee takes into account historical performance and management's outlook. Measured over an extended period, the objective of the committee is to select financial performance levels such that we have a roughly (i) 80% probability of exceeding the threshold level, (ii) 50% probability of exceeding the target level, and (iii) 20% probability of exceeding the maximum level.

Although the compensation and management development committee considers management's outlook as one of several factors in evaluating financial performance levels each year, the committee also recognizes that the outlook for any particular year represents

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only a single scenario from among a broad range of plausible alternatives, given the pronounced effects of highly volatile commodity prices upon our operating results.

In general, the compensation and management development committee aims to achieve a larger payout under the program for years when our performance is superior by long-term industry standards, and a smaller payout (or none at all) for years when our performance is relatively weak, while creating incentives for improved performance under all conditions given the inherent cyclicality in our industry.

When considering appropriate performance metrics for the short-term incentive program, the compensation and management development committee also considers alternative metrics for measuring company performance, such as achievement of operating efficiency goals, continued emphasis on the establishment of a behavioral-based safety culture, progress towards strategic objectives, or performance relative to a variable budget, as well as alternative plan designs that emphasize the personal accomplishment of individual or shared goals. The objective in each case is to incentivize strong operational performance in an inherently cyclical business.

The compensation and management development committee determined for 2018 that objective measures of company performance measured on an absolute basis would align the interests of our executive officers with the interests of our shareholders and reflect our team-based culture. For the Primary Metric (Adjusted EBITDA) and the ammonia production portion of the Secondary Metric, target performance was set at a level consistent with the company forecast for 2018. Maximum performance was set at a level judged to be difficult to achieve and threshold performance was set at the lowest level that would justify a payout. The committee determined to condition payout on the Secondary Metric to first achieving the "safety gate" to underscore the company's commitment to our "Do It Right" culture and complement our efforts to drive workplace safety.

Approval of Base Salaries and Target Annual Incentive Awards for 2018

Based on its review of the general, company-specific, and competitive considerations described above, in December 2017, the compensation and management development committee made the decision that our NEOs' base salaries and target annual incentive awards for 2018 would remain unchanged from those in effect for 2017 due to target compensation being in line with our Industry Reference Group and the overall general industry survey data and in recognition of current industry market conditions.

The table below shows the base salaries and target annual incentive levels for our NEOs for 2018 and 2017:

 

 

  Base Salary

    Target Annual
Incentive Level


 
                   

 

Name

  2017

2018

Increase

    2017

2018

Increase

 

 

W. Anthony Will

  $1,150,000   $1,150,000   0%           135%   135%   0%    

 

Dennis P. Kelleher

  $625,000   $625,000   0%           90%   90%   0%    

 

Douglas C. Barnard

  $530,000   $530,000   0%           80%   80%   0%    

 

Christopher D. Bohn

  $500,000   $500,000   0%           70%   70%   0%    

 

Bert A. Frost

  $575,000   $575,000   0%           80%   80%   0%    

Approval of Annual Incentive Payments for 2018

Following the end of 2018, management prepared a report on our level of achievement of the threshold EBITDA performance metric, the Primary Metric (Adjusted EBITDA), the

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threshold gate of behavioral safety performance, and the Secondary Metric (Production of Ammonia Tons) under the short-term incentive plan. The compensation and management development committee reviewed the report and approved final performance results. Based on the results, the committee determined that each of our NEOs earned 185% of the executive's target opportunity with respect to the executive's annual incentive award for 2018. This result is based on our attainment of EBITDA of $1,429 million exceeding the threshold EBITDA performance metric. Our attainment of Adjusted EBITDA of $1,371 million resulted in a payout percentage for the Primary Metric of 200% and, after first achieving the gating level of performance of behavioral safety practices goals, our production of 9,805,000 ammonia tons equated to a payout percentage for the Secondary Metric of 141%.

Review and Approval of 2018 Long-Term Incentives

The compensation and management development committee reviewed our long-term incentive program during 2017 and granted long-term stock-based incentive awards to our NEOs in January 2018.

During its review of our long-term incentive program, the compensation and management development committee considered the following general factors:

The compensation and management development committee also considered the difficulty in establishing appropriate long-term performance measures for the company, other than stock price appreciation and total shareholder return (including dividends), given the inherent cyclicality in our industry as well as the pronounced effects of highly volatile commodity prices for raw materials and fertilizer products upon our operating results.

In addition, the compensation and management development committee reviewed a report from Exequity, the committee's outside compensation consultant, regarding competitive market practices with respect to the use of long-term incentives.

The compensation and management development committee considered all of this information in the context of the goals and objectives of our executive compensation plans. As noted above, our long-term incentives focus on enterprise value creation and employee retention. Long-term incentives are provided through annual awards that vest over a period of subsequent years. Our 2014 Equity and Incentive Plan allows the use of stock options, full-value shares, and cash-based awards. Eligibility is extended to executive officers and other key employees. Eligibility guidelines with award ranges related to position responsibilities levels are updated annually. In consideration of these guidelines, there is individual variation in long-term incentives based on performance level, potential contribution, and value to the business.

Design of Target Awards for 2018

Based on its review of general, company-specific, and competitive considerations, the compensation and management development committee determined that the long-term incentive awards granted to our NEOs for 2018 would be composed of 60% PRSUs and 40% RSUs. From 2014 until the grants in 2018, the long-term incentive awards granted to our

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NEOs in connection with setting the officers' target compensation was composed of 60% stock options, 20% PRSUs, and 20% RSUs. The committee determined to change the mix of long-term incentive awards in 2018 to further align pay with long-term performance and to reflect trends in executive compensation generally. In addition, in selecting a mixture of PRSUs and RSUs for our target long-term incentive awards and eliminating stock options, the compensation and management development committee noted that:

How We Determine the Number of PRSUs Earned

The number of PRSUs earned is determined based the company's average RONA performance over three one-year periods and subject to a three-year TSR modifier, as follows:

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2018-2020 Target PRSUs
         
Performance Period

Annual Payout Percentage
Based on Achievement
Against RONA Target*



  TSR Modifier and
Calculated Payout
Year 1: 2018 =
(RONA Performance Levels
Set Beginning 2018)
                            200%

Actual RONA: 13.6%

Threshold: 5.9%

Target: 8.2%

Maximum: At or Above 12.4%

      Final PRSU Payout: --



To determine the final payout percentage, the 3-year
average payout percentage will be determined and
multiplied by a percentage ranging from 80% to 120%
Year 2: 2019 =
(RONA Performance Levels
Set Beginning 2019; To Be
Disclosed in 2020 Proxy
Statement)
                            --
Actual RONA:
--
Threshold:
--
Target:
--
Maximum:
--
      based on our three-year TSR performance as follows:
                TSR Modifier    
Year 3: 2020 =
(RONA Performance Levels
Set Beginning 2020; To Be
Disclosed in 2021 Proxy
Statement)
                            --
Actual RONA:
--
Threshold:
--
Target:
--
Maximum:
--
      TSR Performance Level

Threshold: Less than 9.8%

Target: 22.5%

Max: At or Above 29.5%

  Percentage**

80%

100%

120%

   
*
Payout percentages based on RONA performance are set at 0% for below threshold performance, 50% for threshold performance, 100% for target performance, and 200% for maximum performance, with straight line interpolation used to determine the applicable percentage between those levels.
**
Straight line interpolation is used to determine the applicable modifier percentage between threshold and target and between target and maximum performance levels.

Approval of Target Awards for 2018

On January 2, 2018, the compensation and management development committee approved long-term incentive awards for our NEOs for 2018 as set forth in the table below.

        Target Performance RSUs

    Time Vesting RSUs

   


Total
Target
Grant



 
                     
    Name   Number

Grant Value

    Number

Grant Value

   
Value

 
    W. Anthony Will   78,889   $3,180,000           52,592   $2,120,000           $ 5,300,000    
    Dennis P. Kelleher   19,350   $780,000           12,900   $520,000           $ 1,300,000    
    Douglas C. Barnard   14,885   $600,000           9,923   $400,000           $ 1,000,000    
    Christopher D. Bohn   14,885   $600,000           9,923   $400,000           $ 1,000,000    
    Bert A. Frost   19,350   $780,000           12,900   $520,000           $ 1,300,000    

On the grant date, the compensation and management development committee approved dollar-denominated RSU and PRSU awards for each of our individual NEOs. In setting the dollar-denominated values of the individual awards, the committee considered our Industry Reference Group and the competitive general industry survey data presented by Exequity, the committee's outside compensation consultant.

The committee also considered the recommendations from our chief executive officer for the long-term incentive awards to each of the NEOs other than himself. These recommendations took into account the chief executive officer's assessment of each individual's operating responsibilities, management level, tenure and performance in the position, and potential.

After the close of business on the grant date, the dollar-denominated awards were translated into an actual number of RSUs and PRSUs using the unweighted average of the NYSE closing price for the twenty (20) trading days preceding the grant date. The number of PRSUs

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represented 60% of the total value on the grant date and the number of RSUs represented 40%.

Target Values versus Accounting Values

Because of the accounting rules governing preparation of the Summary Compensation Table on page 79, the grant date value for RSUs and PRSUs awarded in 2018 as reported in the Summary Compensation Table are different than the target award values set forth in the table above. As discussed above, the compensation and management development committee approves dollar-denominated target award values, which are translated into an actual number of RSUs and PRSUs using the unweighted average of the NYSE closing price for the twenty (20) trading days preceding the grant date. With respect to RSUs, the values reflected in the Summary Compensation Table are computed as the product of the number of RSUs awarded multiplied by the closing stock price on the date of grant. As described above with respect to PRSUs, at the beginning of each year of the PRSUs' three-year performance period, the compensation and management development committee establishes RONA performance levels for such year. Under the applicable accounting rules, the Summary Compensation Table only reflects the value of grants made during the year for which applicable performance goals have been set. Only the RONA performance goals for the 2018 fiscal year were approved at the time the PRSUs were awarded in 2018. As a result, for the 2018 PRSUs, the Summary Compensation Table does not include the value of the PRSUs based on the annual RONA goals for fiscal 2019 or fiscal 2020. Such amounts will be included as equity compensation in the Summary Compensation Table for fiscal 2019 and fiscal 2020, respectively, when the RONA goals are established. The target grant values set forth in the table above reflect the value of the entire 2018 PRSUs, without regard for when the performance goals are established.

Vesting and Other Terms of RSUs and PRSUs

The target RSUs granted to our NEOs in 2018 will vest in three equal annual installments following the date of grant, subject to earlier forfeiture or accelerated vesting (as described below). Until vested, the RSUs may not be sold, assigned, transferred, donated, pledged, or otherwise disposed of (except by will or the laws of descent and distribution). At the vesting dates, the RSUs give the holder the right to receive one share of common stock with respect to each vested RSU. We will pay dividend equivalents in cash with respect to the RSUs to our NEOs during the vesting period.

The PRSUs granted to our NEOs in 2018 will vest upon the certification by the compensation and management development committee of the attainment of the performance goals following the end of the three-year performance period, subject to earlier forfeiture or accelerated vesting (as described below). The PRSUs are settled in shares of our common stock. The PRSUs accrue dividend equivalents during the performance and vesting period. Upon vesting, holders of PRSUs will be paid a cash equivalent of the dividends paid on our common stock during the performance and vesting period based on the number of shares of stock, if any, delivered in settlement of the PRSUs.

As discussed below under the heading "Change in Control, Severance, and Retirement Benefits," upon a change in control, the restrictions, limitations, and conditions applicable to RSUs and PRSUs will lapse, the performance goals with respect to the PRSUs will be deemed fully achieved at the greater of target or actual performance to-date, and all of the awards will become fully vested. Upon death or disability, RSUs become fully vested and the PRSUs become fully vested at the target level of performance. The RSUs and PRSUs will vest on a pro rata basis upon retirement in the case of those NEOs who have reached the age of 60 with at least five years of service at the time of retirement and who provide us with at least six months' notice.

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Additional information with respect to the compensation and management development committee's grants of RSUs and PRSUs to our NEOs during 2018 is set forth below under the heading "Executive Compensation—Grants of Plan-based Awards."

Determination of 2016-2018 Performance Period PRSU Awards

The three-year performance period for PRSU awards granted in 2016 ended on December 31, 2018. The performance metrics for PRSUs granted in 2016 were our three-year TSR compared against the S&P 500 Index and a modifier pursuant to which the number of shares earned based on our TSR relative to the S&P 500 Index could be increased or decreased by up to 20% based on our TSR compared against a select fertilizer peer group comprised of Agrium Inc., CVR Partners LP, Incitec Pivot Ltd, LSB Industries, Inc., The Mosaic Company, Potash Corporation of Saskatchewan Inc., and Yara International ASA. Our final TSR for the three-year period was at the 28th percentile of the S&P 500 Index and ranked 4th out of the eight companies (including us) in the select fertilizer peer group used as a modifier. As a result, in accordance with the terms of the awards, the committee approved a payout of 57.14% of the PRSUs from these grants.

     
Original 2016 PRSU Grant

   
PRSUs Earned

 
               
    Name  
Target #

Value at Grant

   
#

Value(1)

 
    W. Anthony Will     25,110   $1,020,000             14,347   $606,591    
    Dennis P. Kelleher     6,890   $280,000             3,936   $166,414    
    Douglas C. Barnard     4,430   $180,000             2,531   $107,011    
    Christopher D. Bohn     3,690   $150,000             2,108   $89,126    
    Bert A. Frost     4,920   $200,000             2,811   $118,849    
(1)
This column represents the value of the shares earned based on a stock price of $42.28, which was the closing price on the last trading day prior to the vesting date of March 3, 2019.

2019 Compensation Actions

In December 2018, the compensation and management development committee approved base salaries and target annual incentive awards for our NEOs for calendar year 2019. In addition, on January 2, 2019, the compensation and management development committee approved long-term incentive awards for our NEOs for 2019. In setting compensation levels for 2019, the compensation and management development committee considered a competitive market assessment performed by Exequity, the committee's outside compensation consultant, and the goals and objectives of our executive compensation plans. The following table shows the base salaries, target annual incentives, and long-term incentive awards for our named executive officers for 2019.

           
    Name   Base Salary

Target Annual
Incentive Level




Target
PRSUs



RSUs

 
    W. Anthony Will   $1,150,000   135%     84,461     56,307    
    Dennis P. Kelleher   $625,000   90%     19,326     12,884    
    Douglas C. Barnard   $540,000   80%     15,747     10,498    
    Christopher D. Bohn   $550,000   80%     17,178     11,452    
    Bert A. Frost   $600,000   80%     20,042     13,361    

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Performance Metrics for Annual Incentive Payments for 2019

The annual incentive awards to our NEOs for 2019 will again be determined based upon our level of achievement of the following performance metrics:

These two performance metrics are unchanged from our 2018 annual incentive program. In setting the performance metrics for 2018 and years prior to the modifications to Section 162(m) of the Internal Revenue Code by the Tax Cuts and Jobs Act of 2017, the annual incentive program incorporated a threshold EBITDA performance metric as described above. If the threshold EBITDA performance metric was achieved, actual incentive payments were approved by the compensation and management committee utilizing its negative discretion based on performance against the primary and secondary performance metrics (i.e., for 2018, the Primary Metric and the Secondary Metric as described above.) The annual incentive program's performance metric structure, combined with the committee's right to use negative discretion, provided flexibility to reward and encourage the achievement of annual financial results and other specified corporate performance goals while retaining the ability to pay incentive awards to executive officers which were deductible under Section 162(m) of the Internal Revenue Code. The Tax Cuts and Jobs Act modified Section 162(m) to remove the performance-based compensation exception, and, as a result, compensation paid to our covered employees in excess of $1,000,000 will generally not be deductible. Because of these changes to Section 162(m), the compensation and management development committee streamlined the structure of the annual incentive plan performance metrics to eliminate the threshold EBITDA performance metric for 2019.

The performance levels and corresponding percentages of target opportunity earned with respect to the 2019 Primary Metric and 2019 Secondary Metric established by the compensation and management development committee will be disclosed in the proxy statement for our 2020 annual meeting.

Performance Metrics for PRSUs Granted in 2019

The performance metrics for the PRSUs granted in 2019 are structured in the same manner as the PRSUs granted in 2018. The number of PRSUs earned under the PRSUs granted in 2019 will be determined based the company's average RONA performance over three one-year periods and subject to a three-year TSR modifier. The RONA performance levels for fiscal 2019 and corresponding payout percentages for the year established by the compensation and management development committee will be disclosed in the proxy statement for our 2020 annual meeting.

Change in Control, Severance, and Retirement Benefits

The compensation and management development committee reviewed our change in control, severance, and retirement benefits during 2018 as described below. Based on its review, and after considering the factors noted below, the compensation and management development committee determined that our change in control, severance, and retirement benefits continue to serve the best interests of the company and our shareholders and are consistent with competitive market practices.

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Change in Control Benefits

With respect to our change in control benefits, the compensation and management development committee noted that we have change in control agreements with our executive officers, as well as certain change in control benefits for all of the participants (including the executive officers) under our 2009 Equity and Incentive Plan and 2014 Equity and Incentive Plan. Additional information regarding these benefits is set forth below under the heading "Executive Compensation—Potential Payments Upon Termination or Change in Control."

In connection with its review, the compensation and management development committee noted that the change in control agreements with our executive officers are:

The compensation and management development committee also noted that our change in control agreements require both (i) a change in control and (ii) a qualifying termination of the executive officer's employment (sometimes referred to as a "double trigger"), before any benefits will be owing to the executive officer under the agreement.

In addition, the compensation and management development committee noted that our 2009 Equity and Incentive Plan and 2014 Equity and Incentive Plan provide that all plan-based awards will be deemed fully vested and fully exercisable and any performance conditions will be deemed fully achieved upon a change in control (sometimes referred to as a "single trigger"), unless the committee determines otherwise with respect to a particular award at the time of grant and reflects this determination in the applicable award agreement. In this regard, the compensation and management development committee noted it would be difficult to preserve the original performance and vesting goals in our plan-based awards following a change in control, given the fundamental changes in our organization, capital structure, and operations that would typically result from such a transaction. Accordingly, all of our plan-based awards have included this change in control provision for the benefit of our executive officers and the other participants.

As part of its review, the compensation and management development committee reviewed "tally sheets," estimating these benefits for our chief executive officer and the other NEOs under various assumptions and scenarios.

Based on its review, and the other factors noted above, the compensation and management development committee determined that our change in control benefits serve the best interests of the company and our shareholders and are consistent with competitive market practices.

Excise Tax Gross-Ups

In December 2014, the Board adopted a policy whereby the company will not in the future enter into any new agreements with its NEOs that include Internal Revenue Code Section 280G excise tax "gross-up" provisions with respect to payments contingent on a change in control of the company.

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Severance Benefits

With respect to our severance benefits, the compensation and management development committee noted that none of our executive officers has any employment or severance agreement, and none of our executive officers is entitled to receive any other severance benefits, except for (i) the change in control agreements and change in control benefits discussed above, (ii) such severance benefits as we may provide under our standard policies applicable to all employees, (iii) such severance benefits as we may be required to pay under applicable law in certain jurisdictions, and (iv) such additional severance benefits as our compensation and management development committee may approve in certain instances. Based on its review, and the other factors noted above, the compensation and management development committee determined that our severance benefits serve the best interests of the company and our shareholders and are consistent with competitive market practices.

Retirement Benefits

With respect to our retirement benefits, the compensation and management development committee noted that we maintain tax-qualified and nonqualified defined benefit, defined contribution, and deferred compensation plans. Additional information regarding these benefits is set forth below under the headings "Executive Compensation—Pension Benefits" and "Executive Compensation—Nonqualified Deferred Compensation."

We maintain a defined benefit pension plan named the CF Industries Holdings, Inc. Pension Plan (the "Pension Plan"). The Pension Plan includes three components. Supplement A of the Pension Plan, which we refer to herein as the New Retirement Plan, is a defined benefit pension plan that became effective on January 1, 2013, under which all domestic employees (including executive officers) became eligible to participate as of January 1, 2013, except for those employees who participate in Supplement B of the Pension Plan. Supplement B of the Pension Plan is our historic defined benefit pension plan, which we refer to herein as the Old Retirement Plan and which was closed to new participants on December 31, 2003. Employees who joined the company after that date, which includes all of the NEOs, are ineligible to receive any pension benefits under the Old Retirement Plan, but are eligible for benefits under the New Retirement Plan. Under the New Retirement Plan, we credit the account of each participating employee an amount between 4% and 7% (depending on years of service) of the participant's eligible compensation. For our NEOs, eligible compensation is limited to base salary. Each participant's account will earn an annual return based on the greater of (i) the annual yield on 10-year treasury nominal securities and (ii) 3% annual interest. The third component of the Pension Plan is Supplement C, which was formerly known as the Terra Industries Inc. Employees' Retirement Plan and covers employees who commenced employment with Terra Industries, or any other entity that was an employer under the former plan, prior to August 1, 2003. None of our NEOs are participants in Supplement C of the Pension Plan.

The compensation and management development committee also reviewed "tally sheets," estimating these benefits for our chief executive officer and the other NEOs under various assu