UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
(Rule 14a-101)

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

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Honeywell International Inc.

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WHAT ARE THE HONEYWELL ENABLERS?

 

The Honeywell Enablers are our foundational business process initiatives that drive productivity and growth. As part of our “One Honeywell” strategy, we rigorously deploy the Honeywell Enablers across the portfolio.

 

Honeywell Operating System drives sustainable improvements in our manufacturing operations to generate exceptional performance in safety, quality, delivery, cost, and inventory management.

 

Honeywell User Experience is a design philosophy based on an understanding of the needs of our users, customers and employees so that we design intuitive, desirable and differentiated end-to-end experiences whether in customer products, services or internal Company systems.

 

Velocity Product Development is a process which brings together all of the functions necessary to successfully launch new products — R&D, manufacturing, marketing and sales — to increase the probability that in commercializing new technologies, we deliver the right products at the right price.

 

Functional Transformation is the Honeywell Operating System for our administrative functions — Finance, Legal, HR, IT and Purchasing — standardizing the way we work, reducing costs and improving service quality. Functional Transformation initiatives enabled a reduction in functional costs of 380 basis points to 5.8% of sales in 2013.

 

 

March 13, 2014

 

To Our Shareowners:

 

You are cordially invited to attend the Annual Meeting of Shareowners of Honeywell, which will be held at 10:30 a.m. on Monday, April 28, 2014 at our headquarters, 101 Columbia Road, Morris Township, New Jersey.

 

The accompanying notice of meeting and proxy statement describe the matters to be voted on at the meeting. At this year’s meeting, you will be asked to elect directors, approve the appointment of the independent accountants, cast an advisory vote to approve executive compensation and consider four shareowner proposals. The Board of Directors recommends that you vote FOR Proposals 1, 2, and 3 and AGAINST Proposals 4, 5, 6 and 7.

 

YOUR VOTE IS IMPORTANT. We encourage you to read the proxy statement and vote your shares as soon as possible. Shareowners may vote via the Internet, by telephone, by completing and returning a proxy card or by scanning the QR code provided on the next page in the Notice of Annual Meeting of Shareowners or on the proxy card. Specific voting instructions are set forth in the proxy statement and on both the Notice of Internet Availability of Proxy Materials and proxy card.

 

On behalf of the Board of Directors, I want to thank you for your continued support of Honeywell.

 

Sincerely,
David M. Cote
Chairman and Chief Executive Officer

 

 

NOTICE OF ANNUAL MEETING OF SHAREOWNERS

 

 

DATE Monday, April 28, 2014

 

TIME 10:30 a.m. local time

 

LOCATION Honeywell’s Headquarters, 101 Columbia Road, Morris Township, New Jersey

 

RECORD DATE Close of business on February 28, 2014

 

 

March 13, 2014

 

Meeting Agenda:

 

•	Election of the twelve nominees listed in the accompanying proxy statement to the Board of Directors.
•	Approval of the appointment of PricewaterhouseCoopers LLP as independent accountants for 2014.
•	An advisory vote to approve executive compensation.
•	If properly raised, four shareowner proposals described on pages 74-82 of the proxy statement.
•	Transact any other business that may properly come before the meeting.

 

Important Notice of Internet Availability of Proxy Materials

 

The Securities and Exchange Commission’s “Notice and Access” rule enables Honeywell to deliver a Notice of Internet Availability of Proxy Materials to shareowners in lieu of a paper copy of the proxy statement, related materials and the Company’s Annual Report to Shareowners. It contains instructions on how to access our proxy statement and 2013 annual report and how to vote online.

 

Shares cannot be voted by marking, writing on and/or returning the Notice of Internet Availability. Any Notices of Internet Availability that are returned will not be counted as votes.

 

We encourage shareowners to vote promptly as this will save the expense of additional proxy solicitation. Shareowners of record on the Record Date are entitled to vote at the meeting or in the following ways:

 

By Telephone		By Internet		By Mail		By Scanning
In the U.S. or Canada, you can vote your shares by calling +1 (800) 690-6903.		You can vote your shares online at www.proxyvote.com. You will need the 12 digit control number on the Notice of Internet Availability or proxy card.		You can vote by mail by marking, dating and signing your proxy card or voting instruction form and returning it in the postage-paid envelope.		You can vote your shares online by scanning the QR code above. You will need the 12-digit control number on the Notice of Internet Availability or proxy card. Additional software may need to be downloaded.

 

This Notice of Annual Meeting of Shareowners and related Proxy Materials are being distributed or made available to shareowners beginning on or about March 13, 2014.

 

By Order of the Board of Directors,
Jeffrey N. Neuman
Vice President and Corporate Secretary

PROXY SUMMARY

 

This proxy summary is intended to provide a broad overview of the items that you will find elsewhere in this proxy statement. As this is only a summary, we encourage you to read the entire proxy statement for more information about these topics prior to voting.

 

ANNUAL MEETING OF SHAREOWNERS

 

TIME AND DATE April 28, 2014, 10:30 a.m.

 

PLACE Honeywell’s Headquarters, 101 Columbia Road, Morris Township, New Jersey.

 

RECORD DATE Shareowners as of February 28, 2014 are entitled to vote.

 

ADMISSION Please follow the advance registration instructions on page 85.

 

MEETING AGENDA AND VOTING MATTERS

 

			Board’s Voting		Page References
Proposal			Recommendation		(for more detail)
No. 1	Election of Directors		FOR (each nominee)		pp. 1-6
No. 2	Approval of Independent Accountants		FOR		pp. 72
No. 3	Advisory Vote To Approve Executive Compensation		FOR		pp. 73-74
No. 4	Shareowner Proposal: Independent Board Chairman		AGAINST		pp. 74-76
No. 5	Shareowner Proposal: Right To Act By Written Consent		AGAINST		pp. 77-78
No. 6	Shareowner Proposal: Eliminate Accelerated Vesting In A Change In Control		AGAINST		pp. 79-80
No. 7	Shareowner Proposal: Political Lobbying and Contributions		AGAINST		pp. 81-82

 

2013 PERFORMANCE HIGHLIGHTS

 

Record Year of Profitable Growth

 

•	Sales up 4% to $39.1 billion.
•	Segment profit up 8%, with 70 basis points of margin expansion.
•	Proforma Earnings Per Share (“EPS”)(1) up 11% to $4.97.
•	Free cash flow (“FCF”)(2) of $3.8 billion, reflecting 96% FCF conversion (excludes the impact of any pension mark-to-market adjustment on net income).

 

Creating Shareowner Value

 

 

(1)	Proforma, V% exclude pension mark-to-market adjustment.
(2)	Free cash flow (cash flow from operations less capital expenditures) and free cash flow conversion prior to any cash pension contributions, NARCO Trust establishment payments and cash taxes relating to the sale of available for sale investments.

 

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Proxy Summary > Alignment of Pay With Performance

 

•	Dividends: Dividend rate was increased by 10%, effective in the fourth quarter of 2013, the ninth increase of at least 10% in the last ten years.
•	Share Repurchases: Repurchased 13.5 million shares in 2013 in order to return additional money to shareowners.
•	Total Shareowner Return (“TSR”): 47% for 2013, representing a solid return for investors. Outperformed the broader market and Honeywell’s compensation peer group on a multi-year basis.

 

ALIGNMENT OF PAY WITH PERFORMANCE

 

Compensation decisions made for 2013 were aligned with Honeywell’s strong operational performance and reflect continued emphasis on variable, at-risk compensation paid out over the long-term. Compensation decisions are intended to reinforce our focus on consistent performance and sustained, profitable growth that translate into stock price appreciation.

 

The graph below demonstrates the alignment over the past five years of shareowner value creation with CEO total annual direct compensation (“Total ADC”).

 

Indexed Total Shareowner Return vs. CEO Total Annual Direct Compensation

 

(1) TSR reflects the year-to-year performance indexed to 2008 base year TSR at 100. Prior year TSR is shown in order to correspond with the timing of compensation decisions during the first quarter of each year.   (2) CEO Total ADC consists of base salary, annual incentive compensation award, annual stock option grant, and annualized Growth Plan award.

 

2013 Total Annual Direct Compensation For Each Named Executive Officer (NEOs).
								Annualized		2013 Total Annual
Named Executive Officer		Base Salary		Annual Bonus		Stock Options		Growth Plan Award		Direct Compensation
David M. Cote		$1,800,000		$5,200,000		$8,880,000		$4,512,500		$20,392,500
David J. Anderson		$900,000		$1,225,000		$2,368,000		$1,306,250		$5,799,250
Roger Fradin		$1,050,000		$1,200,000		$2,664,000		$1,058,750		$5,972,750
Timothy O. Mahoney		$825,000		$800,000		$2,368,000		$1,186,500		$5,179,500
Andreas C. Kramvis		$700,000		$950,000		$1,776,000		$936,250		$4,362,250

 

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Proxy Summary > Corporate Governance and Executive Compensation Practices

 

2013 Total Annual Direct Compensation Actions

 

 

(1)	Proforma, excludes pension mark-to-market adjustment.
(2)	Free cash flow (cash flow from operations less capital expenditures) prior to any cash pension contributions, NARCO Trust establishment payments and cash taxes relating to the sale of available for sale investments.

 

CORPORATE GOVERNANCE AND EXECUTIVE COMPENSATION PRACTICES

 

Our Board of Directors oversees management performance on behalf of the shareowners, to ensure that the long-term interests of the shareowners are being served, to monitor adherence to Honeywell standards and policies, and to promote the exercise of responsible corporate citizenship.

 

 

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Proposal No. 1: Election of Directors > Director Nominations Skills and Criteria

 

PROXY STATEMENT

 

This proxy statement is being provided to shareowners in connection with the solicitation of proxies by the Board of Directors for use at the Annual Meeting of Shareowners of Honeywell International Inc. (“Honeywell” or the “Company”) to be held on Monday, April 28, 2014.

 

PROPOSAL NO. 1: ELECTION OF DIRECTORS

 

Honeywell’s directors are elected at each Annual Meeting of Shareowners and hold office for one-year terms or until their successors are duly elected and qualified. Honeywell’s By-Laws provide that in any uncontested election of directors (an election in which the number of nominees does not exceed the number of directors to be elected), any nominee who receives a greater number of votes cast “FOR” his or her election than votes cast “AGAINST” his or her election will be elected to the Board of Directors.

 

The Board has nominated twelve candidates for election as directors. If any nominee should become unavailable to serve prior to the Annual Meeting, the shares represented by a properly signed and returned proxy card or voted by telephone, via the Internet or by scanning the QR code will be voted for the election of such other person as may be designated by the Board. The Board may also determine to leave the vacancy temporarily unfilled or reduce the authorized number of directors in accordance with the By-Laws.

 

 

DIRECTOR NOMINATIONS SKILLS AND CRITERIA

 

The CGRC is responsible for nominating a slate of director nominees who collectively have the complementary experience, qualifications, skills and attributes to guide the Company and function effectively as a Board. The CGRC believes that each of the nominees has key personal attributes that are important to an effective board: integrity, candor, analytical skills, the willingness to engage management and each other in a constructive and collaborative fashion, and the ability and commitment to devote significant time and energy to service on the Board and its Committees.

 

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Proposal No. 1: Election of Directors > Director Nominations Skills and Criteria

 

Listed below are other key experiences, qualifications and skills of our director nominees that are relevant and important in light of Honeywell’s businesses and structure.

 

 

Each of the nominees, other than Mr. Cote, is also independent of the Company and management. See “Director Independence” on page 12 of this proxy statement.

 

The CGRC also considered the specific experience described in the biographical details that follow in determining to nominate the individuals below for election as directors.

 

The Board of Directors unanimously recommends a vote FOR the election of each of the director nominees.

 

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Proposal No. 1: Election of Directors > Nominees for Election

 

NOMINEES FOR ELECTION

 

DAVID M. COTE, Chairman and Chief Executive Officer of Honeywell International Inc.
	Years of Service: 12   Age: 61		President of General Electric Company and President and Chief Executive Officer of GE Appliances from June 1996 to November 1999. Mr. Cote is a director of the Federal Reserve Bank of New York.   Specific Qualifications, Attributes, Skills and Experience   ·  Senior leadership roles in global, multi industry organizations   ·  Ability to drive a consistent One Honeywell approach across a large multinational organization   ·  Detailed knowledge and unique perspective and insights regarding the strategic and operational opportunities and challenges, economic and industry trends, and competitive and financial positioning of the Company and its businesses   ·  Significant public policy experience, including service on the bipartisan National Commission of Fiscal Responsibility and Reform, the Bipartisan Policy Center—Energy Project, and the U.S.—India CEO Forum (co-Chair)
Mr. Cote has been Chairman and Chief Executive Officer since July 2002. He joined Honeywell as President and Chief Executive Officer in February 2002. Prior to joining Honeywell, he served as Chairman, President and Chief Executive Officer of TRW Inc., a provider of products and services for the aerospace, information systems and automotive markets, from August 2001 to February 2002. From February 2001 to July 2001, he served as TRW’s President and Chief Executive Officer and from November 1999 to January 2001 he served as its President and Chief Operating Officer. Mr. Cote was Senior Vice

 

GORDON M. BETHUNE • Retired Chairman and Chief Executive Officer of Continental Airlines, Inc.
	Years of Service: 14   Age: 72   Board Committees:   ·  Corporate Governance & Responsibility   ·  Management Development & Compensation		Braniff Airlines. He is licensed as a commercial pilot, type rated on the B757 and B767 airplanes and the DC-3 and is a licensed airframe and power plant mechanic. Mr. Bethune is also a director of Prudential Financial Inc. and Sprint Nextel Corporation. He previously served as a director of Willis Group Holdings Ltd. (2004-2008). Mr. Bethune was a director of Honeywell Inc. from April 1999 to December 1999.   Specific Qualifications, Attributes, Skills and Experience   ·  Extensive management expertise gained through various executive positions, including senior leadership roles, at Continental Airlines and the Boeing Company   ·  Wealth of experience in airline industry, including aircraft manufacturing, financial services, marketing, branding, cost control and restructuring, international operations and government regulations   ·  Deep knowledge of corporate governance as a Fortune 500 company director
Mr. Bethune is the retired Chairman of the Board and Chief Executive Officer of Continental Airlines, Inc., an international commercial airline company. Mr. Bethune joined Continental Airlines, Inc. in February 1994 as President and Chief Operating Officer. He was elected President and Chief Executive Officer in November 1994 and Chairman of the Board and Chief Executive Officer in 1996, in which positions he served until his retirement in December of 2004. Prior to joining Continental, Mr. Bethune held senior management positions with the Boeing Company (where, among other things, he was responsible for the manufacture and design of the B757 and B737 aircraft programs), Piedmont Airlines, Inc., Western Airlines, Inc. and

 

KEVIN BURKE • Non-Executive Chairman of Consolidated Edison, Inc. (Con Edison)
	Years of Service: 4   Age: 63   Board Committees:   ·  Audit   ·  Retirement Plans		Officer in 2005. Mr. Burke served as President and Chief Executive Officer of Con Edison from 2005 through 2013, and elected Chairman in 2006. Mr. Burke became non-executive Chairman of Con Edison in December 2013. In addition, Mr. Burke is Chairman of the Board of Trustees of Consolidated Edison of New York, Inc. which is an affiliate of Con Edison.   Specific Qualifications, Attributes, Skills and Experience   ·  Extensive management expertise gained through various executive positions, including senior leadership roles, at Con Edison   ·  Wealth of experience in energy production and distribution, energy efficiency, alternative energy sources, engineering and construction, government regulation and development of new service offerings   ·  Deep knowledge of corporate governance and regulatory issues facing the energy, utility and service industry
Mr. Burke joined Con Edison, a utility provider of electric, gas and steam services, in 1973 and has held positions of increasing responsibility in system planning, engineering, law, nuclear power, construction, and corporate planning. He served as Senior Vice President from July 1998 to July 1999, with responsibility for customer service and for Con Edison’s electric transmission and distribution systems. In 1999, Mr. Burke was elected President of Orange & Rockland Utilities, Inc., a subsidiary of Con Edison. He was elected President and Chief Operating Officer of Consolidated Edison Company of New York, Inc. in 2000 and elected Chief Executive

 

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Proposal No. 1: Election of Directors > Nominees for Election

 

JAIME CHICO PARDO, President and Chief Executive Officer, ENESA, S.A. de C.V. (ENESA)
	Years of Service: 14   Age: 64   Board Committees:   ·  Retirement Plans Committee Chairperson   ·  Corporate Governance & Responsibility		President and Chief Executive Officer of Grupo Condumex, S.A. de C.V. and Euzkadi/General Tire de Mexico, manufacturers of products for the construction, automotive and telecommunications industries. Mr. Chico Pardo has also spent a number of years in the international and investment banking business. Mr. Chico Pardo is a director of AT&T, Inc. He previously served as a director of Grupo Carso, S.A. de C.V. and several of its affiliates (1991-2013) three mutual funds in the American Funds family of mutual funds (2011-2013) and Honeywell Inc. from September 1998 to December 1999.   Specific Qualifications, Attributes, Skills and Expertise   ·  Broad international exposure through senior leadership roles in Latin American companies in the telecommunications, automotive, manufacturing, engineering and construction industries   ·  Expertise in the management of infrastructure assets and international business, operations and finance focused on Latin America   ·  Enhanced perspectives on corporate governance, risk management and other issues applicable to public companies
Mr. Chico Pardo has been President and Chief Executive Officer of ENESA, a private fund investing in the Mexican energy and health care sectors since March 2010. He previously served as Co-Chairman of the Board of Telefonos de Mexico, S.A.B. de C.V. (TELMEX), a telecommunications company based in Mexico City, from April 2009 until April 2010 and as its Chairman from October 2006 to April 2009 and its Vice Chairman and Chief Executive Officer from 1995 until 2006. Mr. Chico Pardo was Co-Chairman of the Board of Impulsora del Desarrollo y el Empleo en América Latina, S.A. de C.V., a publicly listed company in Mexico engaged in investment in and management of infrastructure assets in Latin America, from 2006 until 2010. He was also Chairman of Carso Global Telecom, S.A. de C.V. from 1996 until 2010. Prior to joining TELMEX, Mr. Chico Pardo served as

 

D. SCOTT DAVIS, Chairman and Chief Executive Officer of United Parcel Service, Inc. (UPS)
	Years of Service: 8   Age: 62   Board Committees:   ·  Management Development & Compensation Committee Chairperson   ·  Audit		a developer of general aviation and marine navigation instruments. Mr. Davis is a Certified Public Accountant. He previously served on the Board of the Federal Reserve Bank of Atlanta (2003-2009), serving as Chairman in 2009.   Specific Qualifications, Attributes, Skills and Experience   ·  Significant expertise in management, strategy, finance and operations gained over 25 years at UPS including through senior leadership roles   ·  Financial management expertise, including financial reporting, accounting and controls   ·  Strong banking experience and a deep understanding of public policy and global economic indicators   ·  Extensive experience in the transportation and logistics services industry
Mr. Davis joined UPS, a leading global provider of package delivery, specialized transportation and logistics services in 1986, and has served as Chairman and Chief Executive Officer since January 1, 2008. Prior to this, he served as Vice Chairman since December 2006 and as Senior Vice President, Chief Financial Officer and Treasurer since January 2001. Previously, Mr. Davis held various leadership positions with UPS, primarily in the finance and accounting areas. Prior to joining UPS, he was Chief Executive Officer of II Morrow Inc.,

 

LINNET F. DEILY, former Deputy U.S. Trade Representative and Ambassador
	Years of Service: 8   Age: 68   Board Committees:   ·  Corporate Governance & Responsibility Committee Chairperson   ·  Audit		director of Chevron Corporation. Ms. Deily previously served as a director of Alcatel-Lucent (2006-2008) and Lucent Technologies, Inc. (2005-2006).   Specific Qualifications, Attributes, Skills and Experience   ·  Unique global and governmental perspectives regarding international trade, capital markets, public policy, telecommunications, information services, corporate finance, refinery and petrochemical industries   ·  Extensive experience leading international trade negotiations and detailed knowledge and insight into challenges and opportunities related to government relations   ·  Significant financial experience through senior leadership roles in banking, brokerage and financial services companies   ·  Substantial experience as a Fortune 500 company director
Ms. Deily was Deputy U.S. Trade Representative and U.S. Ambassador to the World Trade Organization from 2001 to 2005. From 2000 until 2001, she was Vice Chairman of The Charles Schwab Corp. Ms. Deily served as President of the Schwab Retail Group from 1998 until 2000 and President of Schwab Institutional—Services for Investment Managers from 1996 to 1998. Prior to joining Schwab, she was the Chairman of the Board, Chief Executive Officer and President of First Interstate Bank of Texas from 1990 until 1996. She is also a

 

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Proposal No. 1: Election of Directors > Nominees for Election

 

JUDD GREGG, former U.S. Senator from New Hampshire
	Years of Service: 3   Age: 67   Board Committees:   ·  Corporate Governance & Responsibility   ·  Audit		as a chief negotiator of the Emergency Economic Stabilization Act of 2008 and was the lead sponsor of the Deficit Reduction Act of 2005, and, along with the late Senator Ted Kennedy, co-authored the No Child Left Behind Act of 2001. In March 2010, Senator Gregg was appointed to President Obama’s bipartisan National Commission on Fiscal Responsibility and Reform. From 1989 to 1993, Senator Gregg was the Governor of New Hampshire and prior to that was a U.S. Representative from 1981 to 1989. He previously served as a director of Intercontinental Exchange, Inc. from March 2011 to October 2013.   Specific Qualifications, Attributes, Skills and Experience   ·  Deep understanding and experience in local, state, national and international issues   ·  Extensive experience in government, public policy, financial regulatory reform, banking, tax, capital markets, science, renewable technology and research, environmental protection and conservation, healthcare and foreign policy   ·  Significant insight into fiscal affairs, governmental relations, legislative and regulatory issues
Senator Gregg has spent over three decades in public office, most recently serving as the United States Senator from the State of New Hampshire from January 1993 until January 2011. During his tenure in the Senate, Senator Gregg served on a number of key Senate Committees including Budget; Appropriations; Government Affairs; Banking, Housing and Urban Affairs; Commerce, Science and Transportation; Foreign Relations; and Health, Education, Labor and Pensions. He has served as the Chairman and Ranking Member of the Health, Education, Labor and Pensions Committee and the Chairman and Ranking Member of the Senate Budget Committee as well as chairman of various sub-committees. Senator Gregg served

 

CLIVE HOLLICK, former Chief Executive Officer of United Business Media
	Years of Service:10   Age: 68   Board Committees:   ·  Management Development & Compensation   ·  Retirement Plans		the Advisory Board of Jefferies Inc. He previously served as a director of The Nielsen Company B.V. (2006-2009), Diageo plc (2001-2011), TRW Inc. (2000-2002) and BAE Systems (1992-1997).   Specific Qualifications, Attributes, Skills and Experience   ·  Management expertise and diverse perspective on international and media experience gained through over 30 years as the leader of United Business Media   ·  Deep knowledge of public policy and trends in the UK and European markets   ·  In-depth understanding of the operating environment in the UK and Europe particularly with respect to information and financial services, broadcasting, publishing and online media, marketing and branding, technology and innovation   ·  Substantial experience in mergers and acquisitions in the media and financial services sectors, including in a private equity context
Lord Hollick was Chief Executive Officer of United Business Media and its predecessor companies from 1974 to 2005. United was a London-based, international information, broadcasting, financial services and publishing group. From 2005 to 2010, he was a partner, managing director and adviser to Kohlberg Kravis Roberts & Co., a private equity firm focusing on businesses in the media and financial services sectors. Lord Hollick is a partner of GP Bullhound LLP, a director of ProSiebenSat.1 Media AG and Gogo Inc., and a member of

 

GRACE D. LIEBLEIN, Vice President—Global Purchasing and Supply Chain of General Motors Corporation (GM)
	Years of Service: 1   Age: 53   Board Committees:   ·  Corporate Governance & Responsibility   ·  Management Development & Compensation		Director from January 2009 until June 2011 and Vehicle Chief Engineer from October 2004 to January 2009. Ms. Lieblein joined GM in 1978 as a co-op student at the General Motors Assembly Division in Los Angeles and has held a variety of leadership positions at GM in engineering, product development and manufacturing.   Specific Qualifications, Attributes, Skills and Experience   ·  Wide-ranging management and operating experience gained through various executive positions in an extensive career at GM   ·  Significant expertise in supply chain management, global manufacturing, engineering, product design and development   ·  International business, operations and finance experience gained through senior leadership positions in Brazil and Mexico
Ms. Lieblein has served as Vice President, Global Purchasing and Supply Chain of GM, a company that designs, manufactures and markets cars, crossovers, trucks, and automobile parts worldwide, since December 2012. Prior to her current role, Ms. Lieblein served as the GM Brazil President and Managing Director from June 2011 until December 2012, the GM Mexico President and Managing

 

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Proposal No. 1: Election of Directors > Nominees for Election

 

GEORGE PAZ, Chairman and Chief Executive Officer of Express Scripts Holding Company
	Years of Service: 5   Age: 58   Board Committees:   ·  Corporate Governance & Responsibility   ·  Audit Committee Chairperson		Express Scripts as Senior Vice President and Chief Financial Officer in January 1998 and continued to serve as its Chief Financial Officer following his election as President until April 2004. Mr. Paz is a Certified Public Accountant.   Specific Qualifications, Attributes, Skills and Experience   ·  Significant management and finance experience gained through senior leadership positions at Express Scripts   ·  Financial expertise, including in tax, financial reporting, accounting and controls   ·  Extensive experience in corporate finance, insurance and risk management, mergers and acquisitions, capital markets, government regulation and employee health benefits
Mr. Paz has served as Chairman of the Board of Express Scripts Holding Company, a pharmacy benefit management company, since May 2006, as Chief Executive Officer since April 2005 and as President from October 2003 to February 2014. He has served as a director of Express Scripts since January 2004. Mr. Paz joined

 

BRADLEY T. SHEARES, former Chief Executive Officer of Reliant Pharmaceuticals, Inc.
	Years of Service: 9   Age: 57   Board Committees:   ·  Management Development & Compensation   ·  Retirement Plans		the Merck Research Laboratories and held a wide range of positions within Merck, in business development, sales, and marketing, before becoming Vice President in 1996. He is also a director of The Progressive Corporation, Covance Inc., and Henry Schein, Inc. Dr. Sheares previously served as a director of IMS Health Incorporated (2009-2010).   Specific Qualifications, Attributes, Skills and Experience   ·  Significant management, sales and marketing expertise gained over 25 years in senior leadership roles   ·  Extensive experience in healthcare, sales and marketing, advertising and promotion, brand management, research and development, and mergers and acquisitions   ·  Deep knowledge of corporate governance issues, complex regulatory and legal issues, and risk management facing public companies in the healthcare, automobile insurance and contract research industries
Dr. Sheares served as Chief Executive Officer of Reliant Pharmaceuticals, Inc., a pharmaceutical company with integrated sales, marketing and development expertise that marketed a portfolio of branded cardiovascular pharmaceutical products, from January 2007 through its acquisition by GlaxoSmithKline plc in December 2007. Prior to joining Reliant, Dr. Sheares served as President of U.S. Human Health, Merck & Co., Inc. from March of 2001 until July 2006. Prior to that time, he served as Vice President, Hospital Marketing and Sales for Merck’s U.S. Human Health business. Dr. Sheares joined Merck in 1987 as a research fellow in

 

ROBIN L. WASHINGTON, Executive Vice President and Chief Financial Officer of Gilead Sciences, Inc. (Gilead)
	Years of Service:1   Age: 51   Board Committees:   ·  Audit   ·  Retirement Plans		spent nearly 10 years at PeopleSoft, a provider of enterprise application software, where she served in a number of executive positions, most recently in the role of Senior Vice President and Corporate Controller. Ms. Washington is a Certified Public Accountant. She is a director of Salesforce.com Inc. and previously served as a director of Tektronix, Inc. (acquired by Danaher Corporation) (2005-2007) and MIPS Technologies, Inc. (acquired by Imagination Technologies Group PLC) (2008-2013).   Specific Qualifications, Attributes, Skills and Experience   ·  Extensive management, operational and accounting experience in the healthcare and information technology industries   ·  Financial expertise, including in tax, financial reporting, accounting and controls, corporate finance, mergers and acquisitions and capital markets   ·  Broad experience on corporate governance issues gained through public company directorships
Ms. Washington joined Gilead, a research-based biopharmaceutical company, as Senior Vice President and Chief Financial Officer in May 2008. In her current role as Executive Vice President and Chief Financial Officer, she oversees Gilead’s Global Finance, Investor Relations and Information Technology organizations. From 2006-2007, Ms. Washington served as Chief Financial Officer of Hyperion Solutions, an enterprise software company that was acquired by Oracle Corporation in March 2007. Prior to that, Ms. Washington

 

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Proxy and Notice of Annual Meeting of Shareowners     |     2014

Corporate Governance > Board of Directors

 

CORPORATE GOVERNANCE

 

Honeywell is committed to strong corporate governance policies, practices and procedures designed to make the Board more effective in exercising its oversight role. The following sections provide an overview of our corporate governance structure, including the independence and other criteria we use in selecting Director nominees; our Board leadership structure; and the responsibilities of the Board and each of its Committees. Our Corporate Governance Guidelines, among other key governance materials, help guide our Board and management in the performance of their duties and are regularly reviewed by the Board. Our outreach to shareowners on a variety of corporate governance-related topics is also discussed below.

 

 

These documents are available free of charge on our website or by writing to Honeywell, 101 Columbia Road, Morris Township, NJ 07962, c/o Vice President and Corporate Secretary.

 

Honeywell’s Code of Business Conduct applies to all directors, officers (including the Chief Executive Officer, Chief Financial Officer and Controller) and employees. Amendments to or waivers of the Code of Business Conduct granted to any of the Honeywell’s directors or executive officers will be published on our website.

 

BOARD OF DIRECTORS

 

The primary functions of Honeywell’s Board of Directors are:

 

•	To oversee management performance on behalf of shareowners;
•	To ensure that the long-term interests of the shareowners are being served;
•	To monitor adherence to Honeywell standards and policies;
•	To promote the exercise of responsible corporate citizenship; and
•	To perform the duties and responsibilities assigned to the Board by the laws of Delaware, Honeywell’s state of incorporation.

 

Board Meetings

 

The Board of Directors held seven meetings during 2013. The average attendance at meetings of the Board and Board Committees during 2013 was 95%. During this period, all of the directors attended or participated in at least 75% of the aggregate of the total number of meetings of the Board of Directors and the total number of meetings held by all Committees of the Board of Directors on which each such director served.

 

Board Leadership Structure

 

The Board of Directors believes that Mr. Cote’s service as both Chairman of the Board and CEO is in the best interest of the Company and its shareowners. Mr. Cote possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing the Company and its businesses. Considering the size and complexity of the Company, Mr. Cote is best positioned to develop agendas that ensure that the Board’s time and attention are focused on the most critical matters for the Company and its shareowners.

 

Mr. Cote’s combined role enables decisive leadership, ensures clear accountability, and enhances the Company’s ability to communicate its message and strategy clearly and consistently to the Company’s shareowners, employees, customers and suppliers, particularly during periods of volatile economic and industry conditions. Mr. Cote has been instrumental in developing the “Honeywell Enablers”, important internal business processes which drive efficiency and service quality, bringing world-class products and services to markets faster and more cost-effectively for our customers. This has been beneficial in driving a unified “One Honeywell” approach to core operating processes across a global, multi-industry organization of approximately 131,000 employees.

 

Director Independence—Presiding Director Role

 

Each of the directors other than Mr. Cote is independent and the Board believes that the independent directors provide effective oversight of management, including the CEO. Honeywell utilizes a “Presiding Director” position which rotates on a meeting-by-meeting basis in accordance with years of service on the Board. The Presiding Director leads executive sessions of the independent, non-employee directors at each meeting of the Board. Following each executive session, the Presiding

 

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Corporate Governance > Board Committees

 

Director meets with the Chairman to provide feedback on matters discussed in the executive session and input regarding future agenda items, information requests or other suggestions for future Board and Committee meetings. The Board believes that its Presiding Director system combined with the Board practices and procedures described below, rather than selection of a single individual to fill the role of “Lead Director”, encourages full engagement of all of the independent directors in the executive sessions, avoids unnecessary hierarchy, and appropriately and effectively balances the combined Chairman/CEO role.

 

Board Practices and Procedures

 

•	The Board’s Committees—Audit, Corporate Governance and Responsibility, Management Development and Compensation, and Retirement Plans—undertake extensive analysis and review of the Company’s activities in key areas such as financial reporting, internal controls, compliance, corporate governance, succession planning and executive compensation.
•	The Board and its Committees perform an annual review of the agenda and subjects to be considered for each meeting. During that review, each Board and Committee member is free to raise subjects that are not on the agenda at any meeting and to suggest items for inclusion on future agendas.
•	Each Director is provided in advance written material to be considered at every meeting of the Board and has the opportunity to provide comments and suggestions.
•	The Board and its Committees provide feedback to management and management is required to answer questions raised by the directors during Board and Committee meetings.
•	The Chair of the Corporate Governance and Responsibility Committee is permanently empowered and authorized to call special meetings of the Board at any time and for any reason (instituted in 2012 in response to shareowner feedback).
•	The Chair of the Corporate Governance and Responsibility Committee has been designated as a point of contact for shareowner communications (instituted in 2013 in response to shareowner feedback).

 

Although the Company believes that the combination of the Chairman and CEO roles is appropriate in the current circumstances, Honeywell’s Corporate Governance Guidelines do not establish this approach as a fixed rule but as a matter that is best considered as part of the CEO succession planning process.

 

BOARD COMMITTEES

 

The Board currently has the following Committees: Audit; Corporate Governance and Responsibility; Management Development and Compensation; and Retirement Plans. Each Committee consists entirely of independent, non-employee directors. Each Committee operates under a written charter which is available on our website www.honeywell.com (see “Investors/Corporate Governance/Board Committees”).

 

Committee Membership

 

The table below lists the current membership of each Committee and the number of Committee meetings held in 2013.

 

Name		Audit		Corporate Governance and Responsibility		Management Development and Compensation		Retirement Plans
Mr. Bethune				X		X
Mr. Burke		X						X
Mr. Chico Pardo				X				X*
Mr. Davis		X				X*
Ms. Deily		X		X*
Mr. Gregg		X		X
Mr. Hollick						X		X
Ms. Lieblein				X		X
Mr. Paz		X*		X
Dr. Sheares						X		X
Ms. Washington		X						X
2013 Meetings		9		4		6		3

 

*  Committee Chairperson

 

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Corporate Governance > Board Committees and Responsibilities

 

BOARD COMMITTEES AND RESPONSIBILITIES

 

The primary functions of each of the Board Committees are described below.

 

Board Committees		Responsibilities
AUDIT COMMITTEE   All Members Independent   The Audit Committee has oversight responsibility for our independent accountants.   See further detailed information following this chart.		•  Appoint (subject to shareowner approval), and be directly responsible for, the compensation, retention and oversight of, the firm that will serve as independent accountants to audit our financial statements and to perform services related to the audit; this includes resolving disagreements between management and the independent accountants regarding financial reporting;   •  Review the scope and results of the audit with the independent accountants;   •  Review with management and the independent accountants, prior to filing, the annual and interim financial results (including Management’s Discussion and Analysis) to be included in Forms 10-K and 10-Q;   •  Consider the adequacy and effectiveness of our internal accounting controls and auditing procedures;   •  Review, approve and establish procedures for the receipt, retention and treatment of complaints received by Honeywell regarding accounting, internal accounting controls or auditing matters and for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters;   •  Review material legal and compliance matters and the effectiveness of the Company’s integrity and compliance program; and   •  Consider the accountants’ independence.
CORPORATE GOVERNANCE AND RESPONSIBILITY COMMITTEE   All Members Independent   This committee also serves as the Nominating Committee.		•  Identify and evaluate potential Director candidates and recommend to the Board the nominees to be proposed by the Company for election to the Board;   •  Review and make a recommendation to the Board regarding whether to accept a resignation tendered by a Board nominee who does not receive a majority of votes cast for his or her election in an uncontested election of directors;   •  Review annually and recommend changes to the Corporate Governance Guidelines;   •  Lead the Board in its annual review of the performance of the Board and its Committees;   •  Review policies and make recommendations to the Board concerning the size and composition of the Board, the qualifications and criteria for election to the Board, retirement from the Board, compensation and benefits of non-employee directors, the conduct of business between Honeywell and any person or entity affiliated with a director, and the structure and composition of Board Committees; and   •  Review Honeywell’s policies and programs relating to health, safety and environmental matters, equal employment opportunity and such other matters, including the Company’s Code of Business Conduct, as may be brought to the attention of the Committee regarding Honeywell’s role as a responsible corporate citizen.
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE   All Members Independent   The Management Development and Compensation Committee administers Honeywell’s executive compensation program.   See further detailed information following this chart.		•  Evaluate and approve executive compensation plans, policies and programs, including review and approval of executive compensation-related corporate goals and objectives;   •  Sole authority to retain and terminate a compensation consultant to assist in the evaluation of CEO or senior executive compensation;   •  Review and approve the individual goals and objectives of the Company’s executive officers;   •  Evaluate the CEO’s performance relative to established goals and objectives and, together with the other independent directors, determine and approve the CEO’s compensation level;   •  Review and determine the annual salary and other remuneration (including under incentive compensation and equity-based plans) of all other officers;   •  Review and discuss with management, the Compensation Discussion and Analysis and other executive compensation disclosure included in this proxy statement;   •  Produce the annual Committee Report included in this proxy statement;   •  Review the management development program, including executive succession plans; and   •  Review or take such other action as may be required in connection with the bonus, stock and other benefit plans of Honeywell and its subsidiaries.

 

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Corporate Governance > Board Committees and Responsibilities

 

Board Committees		Responsibilities
RETIREMENT PLANS COMMITTEE   All Members Independent		•  Appoint the trustees for funds of the employee pension benefit plans of Honeywell and certain subsidiaries;   •  Review funding strategies;   •  Review investment policy for fund assets; and   •  Oversee members of the committees that direct the investment of pension fund assets.

 

Board Committee Oversight of Independent Accountants

 

The Audit Committee seeks to ensure the exercise of appropriate professional skepticism by the independent accountants by reviewing and discussing, among other things, management and auditor reports regarding significant estimates and judgments and the results of peer quality review and PCAOB inspections of the independent accountants. They also review and pre-approve all audit and non-audit services provided to Honeywell by the independent accountants in order to determine that such services would not adversely impact auditor independence and objectivity. The Committee also holds separate executive sessions at each in-person meeting with representatives of PricewaterhouseCoopers LLP, our independent accountants, and with Honeywell’s Chief Financial Officer and Vice President—Corporate Audit. The Board has determined that Mr. Paz, Mr. Burke, Mr. Davis, Ms. Deily and Mrs. Washington satisfy the “accounting or related financial management expertise” requirements set forth in the NYSE listing standards, and has designated Mr. Paz as the NYSE defined “audit committee financial expert.”

 

Board Committee Oversight of Executive Compensation and Outside Compensation Consultant

 

The Management Development and Compensation Committee has sole authority to retain a compensation consultant to assist the Committee in the evaluation of director, CEO or senior executive compensation, but only after considering all factors relevant to the consultant’s independence from management. In addition, the Committee is directly responsible for approving the consultant’s compensation, evaluating its performance, terminating its engagement. Under the Committee’s established policy, its consultant cannot provide any other services to Honeywell. Since October 2009, the Committee has retained Pearl Meyer & Partners (“PM&P”) as its independent compensation consultant.

 

The Committee regularly reviews the services provided by its outside consultants and performs an annual assessment on the independence of its compensation consultant to determine whether the compensation consultant is independent. The Committee conducted a specific review of its relationship with PM&P in 2013, and determined that PM&P is independent in providing Honeywell with executive compensation consulting services and that PM&P’s work for the Committee did not raise any conflicts of interest, consistent with Securities and Exchange Commission (“SEC”) rules and NYSE listing standards.

 

In making this determination, the Committee reviewed information provided by PM&P on the following factors:

 

•	Any other services provided to Honeywell by PM&P;
•	Fees received by PM&P from Honeywell as a percentage of PM&P’s total revenue;
•	Policies or procedures maintained by PM&P to prevent a conflict of interest;
•	Any business or personal relationship between the individual PM&P consultants assigned to the Honeywell relationship and any Committee member;
•	Any business or personal relationship between the individual PM&P consultants assigned to the Honeywell relationship, or PM&P itself, and Honeywell’s executive officers; and
•	Any Honeywell stock owned by PM&P or the individual PM&P consultants assigned to the Honeywell relationship.

 

In particular, the Committee noted that PM&P did not provide any services to the Company or its management other than service to the Committee, and its services were limited to executive compensation consulting. Specifically it does not provide, directly or indirectly through affiliates, any non-executive compensation services, including, but not limited to, pension consulting or human resources outsourcing. The Committee continues to monitor the independence of its compensation consultant on a periodic basis.

 

PM&P compiles information and provides advice regarding the components and mix (short-term/long-term; fixed/variable; cash/equity) of the executive compensation programs of Honeywell and its “Compensation Peer Group” (see pages 32-33 of this proxy statement for further detail regarding the Compensation Peer Group) and analyzes the relative performance of Honeywell and the Compensation Peer Group with respect to stock performance and the financial metrics generally used in the programs. PM&P also provides information regarding emerging trends and best practices in executive compensation. In addition to information compiled by PM&P, the Committee also reviews general survey data compiled and published by third parties; neither the Committee nor Honeywell has any input into the scope of or the companies included in these third-party surveys.

 

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Corporate Governance > Board’s Role in Risk Oversight

 

While the Committee reviews information provided by PM&P regarding compensation paid by the Compensation Peer Group, as well as third-party survey data, as a general indicator of relevant market conditions, the Committee does not target a specific competitive position relative to the market in making its compensation determination.

 

PM&P reports to the Committee Chair, has direct access to Committee members, attends Committee meetings either in person or by telephone, and meets with the Committee in executive session without management present.

 

Compensation Input From Senior Management

 

The Management Development and Compensation Committee considers input from senior management in making determinations regarding the overall executive compensation program and the individual compensation of the executive officers.

 

As part of Honeywell’s annual planning process, the CEO, CFO and Senior Vice President—Human Resources, Procurement and Communications develop targets for Honeywell’s incentive compensation programs and present them to the Committee. These targets are reviewed by the Committee to ensure alignment with our strategic and annual operating plans, taking into account the targeted year-over-year and multi-year improvements as well as identified opportunities and risks. The CEO recommends base salary adjustments and cash and equity incentive award levels for Honeywell’s other executive officers. These recommendations are based on performance appraisals (including an assessment of the achievement of pre-established financial and non-financial management objectives) together with a review of supplemental performance measures and prior compensation levels relative to performance.

 

Each year, the CEO presents to the Committee and the full Board his evaluation of each executive officer’s contribution and performance over the past year, strengths and development needs and actions, and reviews succession plans for each of the executive officers.

 

BOARD’S ROLE IN RISK OVERSIGHT

 

While senior management has primary responsibility for managing risk, the Board as a whole has responsibility for risk oversight. Relevant Board Committees review certain risk areas and report on their deliberations to the Board. The Board works with senior management to develop a broad portfolio view that considers and balances risk-taking for sustainable growth and competitive advantage in a manner consistent with Honeywell’s long-term strategic plan—with actions necessary to preserve assets and protect against losses. The oversight responsibility of the Board and its Committees is enabled by management reporting processes that are designed to provide visibility to the Board about the identification, assessment and management of critical risks and management’s risk mitigation strategies. This enables informed decision-making and intelligent risk-taking. The areas of risk focus include strategic, competitive, economic, operational, financial (accounting, credit, liquidity, and tax), legal, regulatory compliance, health, safety and environment, political, and reputational risks.

 

The Board and the Audit Committee review Honeywell’s enterprise risk management program at least annually. Throughout the year, management regularly communicates with the Board and its Committees regarding the identification, assessment and mitigation of specific risks. The Board and its Committees oversee risks associated with their respective principal areas of focus, as summarized below. Each Committee meets in executive session with key management personnel and representatives of outside advisors (for example, the Vice President—Corporate Audit meets in executive session with the Audit Committee).

 

Board/Committee		Primary Areas of Risk Oversight
Full Board		Strategic, financial and execution risks and exposures associated with the annual operating plan, and five-year strategic plan (including matters affecting capital allocation); major litigation and regulatory exposures and other current matters that may present material risk to Honeywell’s operations, plans, prospects or reputation; acquisitions and divestitures (including through post-closing reviews); senior management succession planning.
Audit Committee		Risks and exposures associated with financial reporting, tax, accounting, disclosure, internal control over financial reporting, financial policies, investment guidelines, credit and liquidity and legal and compliance matters.
Corporate Governance and Responsibility Committee		Risks and exposures relating to Honeywell’s programs and policies relating to corporate governance; director succession planning; diversity; health, safety, and environment.
Management Development and Compensation Committee		Risks and exposures associated with leadership assessment, management succession planning, and executive compensation programs and arrangements, including incentive plans.
Retirement Plans Committee		Risks and exposures associated with Honeywell’s employee pension and savings plans, including their relative investment performance, asset allocation strategies and funded status.

 

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Corporate Governance > Director Independence

 

DIRECTOR INDEPENDENCE

 

Our Corporate Governance Guidelines state that the “Board intends that, at all times, a substantial majority of its directors will be considered independent under relevant NYSE and SEC guidelines.” The Corporate Governance and Responsibility Committee conducts an annual review of the independence of the directors and reports its findings to the full Board.

 

Based on the report and recommendation of the Corporate Governance and Responsibility Committee. The Board has determined that each of the non-employee nominees standing for election to the Board at the Annual Meeting—Messrs. Bethune, Burke, Chico Pardo, Davis, Gregg, Hollick, Paz, and Sheares and Mses. Deily, Lieblein and Washington—satisfies the independence criteria in the applicable NYSE listing standards and SEC rules (including the enhanced criteria with respect to members of the Audit Committee and Management Development and Compensation Committee). Each Board Committee member qualifies as a non-employee director within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

For a director to be considered independent, the Board must determine that the director does not have any material relationships with Honeywell, either directly as a partner, shareholder or officer of an organization that has a relationship with Honeywell, other than as a director and shareowner. Material relationships can include vendor, supplier, consulting, legal, banking, accounting, charitable and family relationships, among others.

 

Criteria for Director Independence

 

The Board considered all relevant facts and circumstances in making its determinations, including the following:

 

•	No non-employee director or nominee receives any direct compensation from Honeywell other than under the director compensation program described on pages 14-15 of this proxy statement.
•	No immediate family member (within the meaning of the NYSE listing standards) of any non-employee director or nominee is an employee of Honeywell or otherwise receives direct compensation from Honeywell.
•	No non-employee director or nominee is affiliated with Honeywell or any of its subsidiaries or affiliates.
•	No non-employee director or nominee is an employee of Honeywell’s independent accountants and no non-employee director or nominee (or any of their respective immediate family members) is a current partner of Honeywell’s independent accountants, or was within the last three years, a partner or employee of Honeywell’s independent accountants and personally worked on Honeywell’s audit.
•	No non-employee director or nominee is a member, partner, or principal of any law firm, accounting firm or investment banking firm that receives any consulting, advisory or other fees from Honeywell.
•	No Honeywell executive officer is on the compensation committee of the board of directors of a company that employs any of our non-employee directors or nominees (or any of their respective immediate family members) as an executive officer.
•	No non-employee director or nominee (or any of their respective immediate family members) is indebted to Honeywell, nor is Honeywell indebted to any non-employee director or nominee (or any of their respective immediate family members).
•	No non-employee director or nominee serves as an executive officer of a charitable or other tax-exempt organization that received contributions from Honeywell.
•	Honeywell has commercial relationships (purchase and/or sale of products and services) with companies at which our directors serve as officers (Mr. Davis – UPS, Mr. Paz – Express Scripts and Ms. Lieblein – General Motors). In each case:
	(i)	The relevant products and services were provided on terms and conditions determined on an arm’s-length basis and consistent with those provided by or to similarly situated customers and suppliers;
	(ii)	The relevant director did not initiate or negotiate the relevant transaction, each of which was in the ordinary course of business of both companies; and
	(iii)	The combined amount of such purchases and sales was less than 1% of the consolidated gross revenues of each of Honeywell and the other company in each of the last three completed fiscal years. This level is significantly below the requirements of the NYSE listing standards for director independence, which uses a 2% of total revenue threshold and applies it to each of purchases and sales rather than the combination of the two.
•	While a non-employee director’s or nominee’s service as an outside director of another company with which Honeywell does business would generally not be expected to raise independence issues, the Board also considered those relationships and confirmed the absence of any material commercial relationships with any such company. Specifically, those commercial relationships were in the ordinary course of business for Honeywell and the other companies involved and were on terms and conditions available to similarly situated customers and suppliers.

 

The above information was derived from Honeywell’s books and records and responses to questionnaires completed by the director nominees in connection with the preparation of this proxy statement.

 

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Corporate Governance > Identification and Evaluation of Director Candidates

 

IDENTIFICATION AND EVALUATION OF DIRECTOR CANDIDATES

 

The Corporate Governance and Responsibility Committee also serves as the Board’s Nominating Committee. The Committee consists entirely of independent directors under applicable SEC rules and NYSE listing standards. In this role, they seek individuals qualified to become directors, evaluate the qualifications of individuals suggested or nominated by third parties, including shareowners (and recommend actions if needed), and recommend to the Board the nominees to be proposed by Honeywell for election to the Board. The Committee considers director candidates in anticipation of upcoming director elections and other potential or expected Board vacancies.

 

The Committee considers director candidates suggested by its members, other directors, senior management and shareowners. The Committee has retained, at Honeywell expense, a search firm to identify potential director candidates. The Committee is also authorized to retain other external advisors for specific purposes, including performing background reviews of potential candidates. The search firm retained by the Committee has been provided guidance as to the particular experience, skills and other characteristics that the Board is seeking. The Committee has delegated responsibility for day-to-day management and oversight of the search firm engagement to Honeywell’s Senior Vice President—Human Resources, Procurement and Communications.

 

Preliminary interviews of director candidates are conducted by either the Chairman of the Committee or, at his or her request, any other member of the Committee, the Chairman of the Board and/or a representative of the retained search firm. Background material about the director candidates is distributed to the Committee members for their review. Director candidates that are determined to merit further consideration are interviewed by other Committee members, directors and key senior management personnel as determined by the Committee Chairman. The Committee then considers these interview results in its deliberations.

 

The Committee annually reviews with the Board the requisite skills and characteristics of Board members, as well as the composition of the Board as a whole. This assessment includes a consideration of independence, diversity, age, skills, experience and industry backgrounds in the context of the needs of the Board and the Company, as well as the ability of current and prospective directors to devote sufficient time to performing their duties in an effective manner. Directors are expected to exemplify the highest standards of personal and professional integrity, and to constructively challenge management through their active participation and questioning. In particular, the Committee seeks directors with established strong professional reputations and expertise in areas relevant to the strategy and operations of Honeywell’s businesses. The Committee conducts regular reviews of current directors in light of the considerations described above and past contributions to the Board.

 

 

Shareowners wishing to recommend a director candidate to the Committee for its consideration should write to the Committee, in care of Vice President and Corporate Secretary, Honeywell, 101 Columbia Road, Morris Township, New Jersey 07962. To receive meaningful consideration, a recommendation should include the candidate’s name, biographical data, and a description of his or her qualifications in light of the above criteria. Shareowners wishing to nominate a director should follow the procedures set forth in the Company’s By-Laws and described under “Director Nominations” on page 86 of this proxy statement.

 

Honeywell did not receive any recommendation of a director candidate from a shareowner, or group of shareowners, that beneficially owned more than 5% of Honeywell’s common stock (“Common Stock”) for at least one year as of the date of recommendation.

 

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Corporate Governance > Director Orientation and Continuing Education

 

DIRECTOR ORIENTATION AND CONTINUING EDUCATION

 

As part of Honeywell’s director orientation program, new directors participate in one-on-one introductory meetings with Honeywell business and functional leaders and are given presentations by members of senior management on Honeywell’s strategic plans, financial statements and key issues, policies and practices. Directors may enroll in director continuing education programs at Honeywell’s expense on corporate governance and critical issues associated with a director’s service on a public company board. Our senior management meets regularly with the Board and meets annually to review with the Board the operating plan of the Company and each of our strategic business groups. The Board also periodically participates in site visits to Honeywell’s facilities.

 

DIRECTOR ATTENDANCE AT ANNUAL MEETINGS

 

Honeywell has no specific policy regarding director attendance at its Annual Meeting of Shareowners. Generally, however, Board and Committee meetings are held immediately preceding and following the Annual Meeting of Shareowners, with directors attending the Annual Meeting. All of the directors attended last year’s Annual Meeting of Shareowners.

 

DIRECTOR COMPENSATION

 

The Corporate Governance and Responsibility Committee reviews and makes recommendations to the Board regarding the form and amount of compensation for non-employee directors. Directors who are employees of Honeywell receive no compensation for service on the Board. Honeywell’s director compensation program is designed to enable continued attraction and retention of highly qualified directors and is designed to address the time, effort, expertise and accountability required of active Board membership.

 

ANNUAL COMPENSATION

 

In general, the Corporate Governance and Responsibility Committee and the Board believe that annual compensation for non-employee directors should consist of both a cash component, designed to compensate members for their service on the Board and its Committees, and an equity component, designed to align the interests of directors and shareowners and, by vesting over time, to create an incentive for continued service on the Board.

 

Board of Directors’ Annual Compensation

 

Board Retainer	$80,000
Board Meeting and Attendance	$2,500 for each board meeting attended.
Board Committee Membership While no fees are generally paid for attending Committee meetings, a $1,000 cash fee is paid for attendance at a Committee meeting, or other extraordinary meeting related to Board business, which occurs apart from a regularly scheduled Board meeting.	$10,000 for each committee board membership ($15,000 for members of the Audit Committee).   Board Committee Chairs receive an additional cash retainer of $10,000 ($15,000 for the Audit Committee chair).
Common Stock Equivalents These amounts are credited annually but payment is deferred until termination of Board service. Payments are made in cash, as either a lump sum or in equal annual installments.	At the commencement of each year, $60,000 in Common Stock equivalents is automatically credited to each director’s account in the Deferred Compensation Plan for Non-Employee Directors. Dividend equivalents are credited with respect to these amounts.
Annual Equity Grants Stock options vest in equal annual installments over the four years following the grant date. The options also become fully vested at the earliest of the director’s retirement from the Board on or after the mandatory retirement age set by the Board and in effect on the date of grant (currently age 72), death, disability or change in control, as set forth in the 2006 Stock Plan for Non-Employee Directors of Honeywell (the “Non-Employee Director Plan”) and the relevant award agreements.   The RSUs will vest on the earliest of the third anniversary of the date of grant, the director’s death or disability, or change in control.	Beginning in 2012, each non-employee director received an annual equity grant with a target value of $75,000 consisting of 50% restricted stock units (“RSUs”) and 50% options to purchase shares of Common Stock at a price per share equal to the fair market value of a share of Common Stock on the date of grant, which is the date of the Annual Meeting of Shareowners.   Prior to 2012, non-employee directors received options to purchase a fixed number of shares (5,000) rather than a target value equity grant split between options and RSUs.

 

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Corporate Governance > Deferred Compensation

 

DEFERRED COMPENSATION

 

A non-employee director may elect to defer all or any portion of his or her annual cash retainers and fees, until a specified calendar year or termination of Board service. Compensation is credited to their account in the Deferred Compensation Plan for Non-Employee Directors. Amounts credited either accrue interest (2.90% for 2013 and set at 4.09% for 2014) or are valued as if invested in a Honeywell Common Stock fund or one of the other funds available to participants in our employee savings plan. The unit price of the Honeywell Common Stock fund is increased to take dividends into account. In addition to payments at the termination of Board service, upon a change of control, as defined in the Non-Employee Director Plan, a director may receive, pursuant to a prior election, a lump-sum payment for amounts deferred before 2006.

 

Messrs. Bethune and Chico Pardo participate in the legacy Honeywell Inc. Non-Employee Directors Fee and Stock Unit Plan. The last fee deferral under this plan occurred on December 1, 1999. Since that date, deferred amounts are increased only by dividend equivalents. Payment will be made to a participating director in whole shares of Common Stock following the earlier of a change in control or the director’s termination of Board service for any reason, in one payment or annual installments, as elected by the director.

 

OTHER BENEFITS

 

Non-employee directors are also provided with $350,000 in business travel accident insurance. They are also eligible to elect to receive $100,000 in term life insurance and medical and dental coverage, for themselves and their eligible dependents, which is consistent with similar coverage offered to Honeywell’s active salaried employees. In September 2008, the Board determined that new directors would be responsible for paying premiums for term life insurance and medical and dental coverage which they elected to receive. Honeywell also matches, dollar for dollar, any charitable contribution made by a director to any qualifying educational institution or charity, up to a maximum of $25,000 in the aggregate per director, per calendar year. In addition, directors may utilize available Company aircraft for travel to and from Board and Committee meetings.

 

RESTRICTED STOCK UNIT GRANT UPON ELECTION TO BOARD

 

New non-employee directors receive a one-time grant of 3,000 RSUs upon their election to the Board that vest on the earliest of the fifth anniversary of continuous Board service, death, disability or change in control. During this period, the director will receive dividend equivalents that will be automatically reinvested into additional RSUs which vest according to the same schedule as the underlying RSUs to which they relate. The director may defer the receipt of the RSUs on substantially the same terms and conditions as Honeywell officers with respect to new grants of RSUs.

 

STOCK OWNERSHIP GUIDELINES

 

Director stock ownership guidelines have been adopted under which each non-employee director, while serving as a director of Honeywell, must hold Common Stock (including restricted shares and RSUs and/or Common Stock equivalents) with a market value of at least five times the annual cash retainer (or $400,000; up from the previous requirement of $300,000 in 2011). They must hold net gain shares from option exercises for one year. “Net gain shares” means the number of shares obtained by exercising the option, less the number of shares the director sells to cover the exercise price of the options and pay applicable taxes. Directors have five years from election to the Board to attain the prescribed ownership threshold. All current directors other than Ms. Lieblein and Ms. Washington who joined the Board in December 2012 and April 2013, respectively, have attained the prescribed ownership threshold.

 

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Corporate Governance > Director Compensation—Fiscal Year 2013

 

DIRECTOR COMPENSATION—FISCAL YEAR 2013

 

Director Name		Fees Earned or Paid Cash($)(1)		Stock Awards($)(2)(3)		Option Awards($)(2)(4)		Change in Pension Value and Nonqualified Deferred Compensation Earnings($)(5)		All Other Compensation($)(6)		Total($)
Gordon Bethune		$178,500		$37,528		$37,495		$43,394		$4		$296,921
Kevin Burke		$186,500		$37,528		$37,495		—		$25,004		$286,527
Jaime Chico Pardo		$185,000		$37,528		$37,495		—		$26,535		$286,558
D. Scott Davis		$196,500		$37,528		$37,495		$4,407		$1,319		$277,249
Linnet Deily		$197,500		$37,528		$37,495		—		$32,667		$305,190
Judd Gregg		$185,500		$37,528		$37,495		—		$5,004		$265,527
Clive Hollick		$178,500		$37,528		$37,495		$4,757		$39,772		$298,052
Grace Lieblein		$177,500		$37,528		$37,495		—		$4		$252,527
George Paz		$202,500		$37,528		$37,495		—		$25,004		$302,527
Bradley Sheares		$178,500		$37,528		$37,495		$8,936		$25,862		$288,321
Robin Washington		$133,875		$260,908	(7)	$37,495		—		$25,004		$457,282

 

(1)	Includes all fees earned, whether paid in cash or deferred under the Deferred Compensation Plan for Non-Employee Directors (including amounts treated as deferred in the Honeywell common stock fund).
(2)	The table below reflects all outstanding stock awards and option awards held at December 31, 2013 by each of the listed individuals.

 

Director Name			Outstanding Stock Awards at 12/31/13			Outstanding Option Awards at 12/31/13
Mr. Bethune				1,175				45,928
Mr. Burke				4,490				15,928
Mr. Chico Pardo				1,175				45,928
Mr. Davis				1,175				35,928
Ms. Deily				1,175				35,928
Mr. Gregg				4,382				10,928
Mr. Hollick				1,175				45,928
Ms. Lieblein				3,575				3,002
Mr. Paz				1,490				20,928
Dr. Sheares				1,175				30,928
Ms. Washington				3,558				3,002

 

(3)	The amounts set forth in this column represent the aggregate grant date fair value of stock awards computed in accordance with FASB ASC Topic 718. The fair value of each stock award is estimated on the date of grant by averaging the high and low of the Company’s stock price on the day of grant. Stock awards of 504 shares were made to Non-Employee Directors in April 2013 with a value of $74.46 per share. A more detailed discussion of the assumptions used in the valuation of stock awards made in fiscal year 2013 may be found in Note 20 of the Notes to the Financial Statements in the Company’s Form 10-K for the year ended December 31, 2013.
(4)	The amounts set forth in this column represent the aggregate grant date fair value of option awards computed in accordance with FASB ASC Topic 718. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. Option awards of 3,002 shares were made to non-employee directors in April 2013 with a Black-Scholes value of $12.49 per share. A more detailed discussion of the assumptions used in the valuation of option awards made in fiscal year 2013 may be found in Note 20 of the Notes to the Financial Statements in the Company’s Form 10-K for the year ended December 31, 2013.
(5)	Amounts included in this column reflect above-market earnings on deferred compensation. Amounts invested in cash under the Deferred Compensation Plan for Non-Employee Directors are credited with the same rate of interest that applies to executives under the Honeywell Salary and Incentive Award Deferral Plan for Selected Employees. Deferrals for the 2006 plan year and later earn a rate of interest, compounded daily, based on the Company’s 15-year cost of borrowing. The rate is subject to change annually. For 2013, this rate was 2.90%, and is set at 4.09% for 2014. Deferrals for the 2005 plan year earn a rate of interest, compounded daily, which was set at an above-market rate before the beginning of the plan year and is subject to change annually. Deferrals for the 2004 plan year and prior plan years earn a rate of interest, compounded daily, that was set at an above-market rate before the beginning of each plan year and fixed until the deferral is distributed.

 

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Corporate Governance > Certain Relationships and Related Transactions

 

(6)	See “Director Compensation—Other Benefits” above for a description of the benefit items included in the All Other Compensation column for 2013. Honeywell matched charitable contributions in the amounts of:

 

Director Name		Matched Charitable Contributions
Mr. Burke		$25,000
Mr. Chico Pardo		$25,000
Ms. Deily		$25,000
Mr. Gregg		$5,000
Mr. Hollick		$25,000
Mr. Paz		$25,000
Dr. Sheares		$25,000
Ms. Washington		$25,000

 

(7)	Includes 3,000 RSUs granted to Ms. Washington upon her election to the Board in April 2013 with a value of $74.46 per share.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

Applicable Policies and Procedures

 

Honeywell has written policies and procedures for approval or ratification of related person transactions. Article EIGHTH of Honeywell’s Amended and Restated Certificate of Incorporation provides that a related or interested party transaction shall not be void or voidable if such transaction is duly authorized or ratified by a majority of the disinterested members of the Board of Directors. Consistent with SEC rules, a related or interested party transaction includes a transaction between the Company and a director, director nominee or executive officer of the Company or a beneficial owner of more than 5% of the Company’s Common Stock or any of their respective immediate family members. Furthermore, the Honeywell Code of Business Conduct requires that each director and executive officer report to the Board of Directors on an ongoing basis any relationship or transaction that may create or appear to create a conflict between the personal interests of those individuals (or their immediate family members) and the interests of the Company. A conflict, or appearance of a conflict, might arise, for example, by accepting gifts or loans from a current or potential customer, supplier or competitor, owning a financial interest in, or serving in a business capacity with, an outside enterprise that competes with or does or wishes to do business with, the Company, serving as an intermediary for the benefit of a third party in transactions involving the Company or using confidential Company information or other corporate assets for personal profit.

 

If a conflict of interest or related party transaction is of a type or a nature that falls within the scope of oversight of a particular Board Committee, it is referred to that Committee for review. The Board or the responsible Committee must review any potential conflict and determine whether any action is required. This includes whether to authorize, ratify or direct the unwinding of the relationship or transaction under consideration, as well as ensure that appropriate controls are in place to protect Honeywell and its shareowners. In making that determination, the Board or responsible Committee considers all relevant facts and circumstances, such as:

 

•	the benefits of the transaction to Honeywell;
•	the terms of the transaction and whether they are arm’s-length and in the ordinary course of the Company’s business;
•	the direct or indirect nature of the related person’s interest in the transaction;
•	the size and expected term of the transaction; and
•	other facts and circumstances that bear on the materiality of the related person transaction under applicable law and listing standards.

 

Each director and officer also completes and signs a questionnaire at the end of each fiscal year to confirm that there are no material relationships or related person transactions between such individuals and the Company other than those previously disclosed to Honeywell. This ensures that all material relationships and related person transactions are identified, reviewed and disclosed in accordance with applicable policies, procedures and regulations.

 

RELATED PERSON TRANSACTION

 

The Honeywell ADI business leases its administrative office building in Melville, New York at a current rent of approximately $1,023,000 per year. After ADI entered into this lease, the property was acquired by a partnership known as “New Island Holdings.” There have been no material amendments to the lease since the property was acquired by New Island Holdings. Both Mr. Fradin, President and Chief Executive Officer, Honeywell Automation and Control Solutions and Mr. Kramvis, President and Chief Executive Officer, Honeywell Performance Materials and Technologies, are limited partners in New Island Holdings, holding 12% and 9% ownership interests, respectively. The limited partners of New Island Holdings receive distributions based on total lease payments generated from the portfolio of buildings that the partnership owns, less applicable mortgage and other expenses.

 

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Stock Ownership Information > Five Percent Owners of Company Stock

 

STOCK OWNERSHIP INFORMATION

 

FIVE PERCENT OWNERS OF COMPANY STOCK

 

The following table lists information about those holders known to Honeywell to be the beneficial owners of 5% or more of the outstanding shares of Common Stock as of December 31, 2013. State Street Corporation is listed in the table below because one of its subsidiaries (State Street Bank and Trust Company) holds 5.2% of our outstanding Common Stock as trustee for certain Honeywell savings plans. See notes below for additional details.

 

Name and Complete Mailing Address		Number of Shares			Percent of Common Stock Outstanding
State Street Corporation		72,488,401	(1)		9.2%	(2)
State Street Financial Center, One Lincoln Street, Boston, MA 02111
BlackRock, Inc.		44,346,550	(3)		5.7%
40 East 52nd Street, New York, NY 10022
Massachusetts Financial Services Company		42,404,593	(4)		5.4%
111 Huntington Avenue, Boston, MA 02199

 

(1)	State Street Corporation has shared voting power and shared dispositive power in each case in respect of the 72,488,401 shares listed above. State Street Bank and Trust Company, a subsidiary of State Street Corporation, has shared voting power and shared dispositive power in each case in respect of 53,914,382 shares included above.
(2)	State Street Bank and Trust Company holds 5.2% of our outstanding Common Stock as trustee for certain Honeywell savings plans. Under the terms of the plans, State Street is required to vote shares attributable to any participant in accordance with instructions received from the participant. They must also vote all shares for which it does not receive instructions in the same ratio as the shares for which instructions were received.
(3)	BlackRock, Inc. has sole voting power in respect of 37,124,630 shares and sole dispositive power in respect of 44,333,753 shares.
(4)	Massachusetts Financial Services Company and certain related entities have sole voting power in respect of 35,194,077 shares and sole dispositive power in respect of all 42,404,593 shares.

 

STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

 

The following table lists information as of February 28, 2014 about the beneficial ownership of Common Stock by each director or director nominee, each executive officer named in the Summary Compensation Table, and by all directors (including nominees) and executive officers of Honeywell as a group. Except as otherwise noted, the individuals listed in the following table have the sole power to vote or transfer the shares reflected in the table.

 

		Components of Beneficial Ownership (Number of Shares)
Name(1)		Total Number of Shares(2)		Common Stock Beneficially Owned		Right To Acquire(3)		Other Stock-Based Holdings(4)
Gordon M. Bethune		66,689		8,077		35,962		22,650
Kevin Burke		24,596		8,000		10,962		5,634
Jaime Chico Pardo		87,533		24,418		35,962		27,153
David M. Cote		7,332,736		791,996		5,668,750		871,990
D. Scott Davis		55,229		11,000		30,962		13,267
Linnet F. Deily		42,598		0		30,962		11,636
Judd Gregg		18,190		3,000		5,962		9,228
Clive Hollick		52,378		3,000		30,962		18,416
Grace D. Lieblein		2,577		0		750		1,827
George Paz		28,186		4,315		15,962		7,909
Bradley T. Sheares		45,674		4,542		25,962		15,170
Robin L. Washington		1,985		0		750		1,235
David J. Anderson		1,763,961		128,497		1,316,250		319,214
Roger Fradin		1,196,232		279,106		797,500		119,626
Timothy Mahoney		630,544		31,740		572,500		26,304
Andreas Kramvis		612,643		79,104		502,250		31,289
All directors, nominees and executive officers as a group, including the above-named persons (22 people)		13,874,934		1,721,780		10,642,283		1,510,871

 

(1)	c/o Honeywell International Inc., 101 Columbia Road, Morris Township, New Jersey 07962.
(2)	The total beneficial ownership for any individual is less than 1% and the total for the group is approximately 1.78% of the shares of Common Stock outstanding.

 

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Stock Ownership Information > Section 16(a) Beneficial Ownership Reporting Compliance

 

(3)	Includes shares which the named individual or group has the right to acquire through the exercise of vested stock options, and shares which the named individual or group has the right to acquire through the vesting of performance shares, RSUs and stock options within 60 days of February 28, 2014.
(4)	Includes shares and/or share-equivalents in deferred accounts, as to which no voting or investment power exists.

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires our directors, executive officers, and persons who own more than 10% of our Common Stock to file reports of ownership and changes in ownership of our Common Stock with the SEC. The broker of Linnet Deily purchased and sold 25 shares of our Common Stock on Ms. Deily’s behalf in 2010 and 2011, which transactions were contrary to Ms. Deily’s instructions and not disclosed to the Company until June 2013. The appropriate Form 4 filing for Ms. Deily was made on June 14, 2013. Based on the information available to us during fiscal year 2013, we believe that all applicable Section 16(a) filing requirements were met on a timely basis, other than the transactions made for Ms. Deily.

 

SEC FILINGS AND REPORTS

 

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, current Reports on Form 8-K, and any amendments to those reports, are available free of charge on our website at www.honeywell.com under the heading “Investor Relations” (see “SEC Filings & Reports”) immediately after they are filed with or furnished to the SEC.

 

SUSTAINABILITY AND CORPORATE RESPONSIBILITY

 

Honeywell takes seriously its commitment to corporate social responsibility, protection of our environment, and creation of Sustainable Opportunity everywhere it operates.

 

Honeywell’s Sustainable Opportunity policy is based on the principle that by integrating health, safety, and environmental considerations into all aspects of its business, Honeywell:

 

•	protects its people and the environment;
•	achieves sustainable growth and accelerated productivity;
•	drives compliance with all applicable regulations; and
•	develops the technologies that expand the sustainable capacity of our world.

 

Nearly 50% of Honeywell’s product portfolio is linked to energy efficiency, and the United States could reduce its energy consumption 20-25% by immediately and comprehensively adopting existing Honeywell technologies.

 

HIGHLIGHTS OF OUR ENVIRONMENTAL AND SAFETY GOALS AND ACHIEVEMENTS

 

Program	Achievements
Greenhouse Gas Reduction and Energy Efficiency   Honeywell reports on its global greenhouse gas emissions publicly through the Carbon Disclosure Project and through reports submitted to the U.S. Environmental Protection Agency and the United Kingdom Environmental Agency. A qualified third party has verified Honeywell’s 2011 and 2012 greenhouse gas emission inventories.	•  In 2007, the Company established five-year greenhouse gas and energy efficiency objectives for its internal operations for the period 2007-2011.   •  By the end of 2011, Honeywell reduced its greenhouse gas emissions by more than 30%, and increased its energy efficiency by more than 20%, in each case, from a 2004 baseline year.   •  To sustain this progress, Honeywell has set an additional public commitment to reduce its greenhouse gas emissions per dollar of revenue from our 2011 level by an additional 15% by 2017.
Water   Honeywell has developed a global inventory of water usage in its manufacturing operations.	•  In 2013, the Company implemented water conservation projects at sites that are significant water consumers in areas that are experiencing “water stress” as defined by the World Resources Institute.   •  The Company will implement additional water conservation projects in these areas in 2014.

 

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Stock Ownership Information > Highlights of Our Environmental and Safety Goals and Achievements

 

Program	Achievements
Safety   Honeywell has received worker safety awards from governments around the world.	•  We maintain a Company-wide global Total Case Incident Rate (the number of occupational injuries and illnesses per 100 employees) of less than half of the combined U.S. averages of the industries in which we operate, based on data from the Bureau of Labor Statistics.

 

Health, Safety, and Environment Management System

 

Honeywell’s Heath, Safety, Environmental and Sustainability matters are managed by a global team of trained professionals with extensive knowledge and hundreds of years of collective experience in occupational health, chemistry, hydrology, geology, engineering, safety, industrial hygiene, materials management and energy efficiency.

 

Honeywell utilizes a comprehensive Health, Safety, Environment and Sustainability (“HSES”) Management System based on recognized third-party standards, including ISO 14001 and OHSAS 18001, and industry best practices. The management system is fully integrated into the Honeywell Operating System, which drives continuous sustainable operational improvement. Compliance with standards and regulatory requirements is monitored through a Company-wide, HSES-led audit process. The timely development and implementation of process improvements and corrective action plans are closely monitored.

 

Honeywell’s Vice President of HSES reports to the Company’s Senior Vice President and General Counsel and has overall responsibility for HSES programs. A Corporate Energy & Sustainability Team, led by the Vice President of HSES and the Vice President of Global Real Estate and the Director of Sustainability, helps drive the Company’s greenhouse gas and energy efficiency goals. Progress on these goals is reported to Honeywell’s CEO on a monthly basis and is reviewed with the Board’s Corporate Governance and Responsibility Committee at least annually.

 

Honeywell’s Integrity and Compliance program

 

Honeywell’s Integrity and Compliance program reflects our vision and values and helps our employees, representatives, contractors, consultants, and suppliers comply with a high standard of business conduct globally. At the core of the Integrity and Compliance program is the Company’s Code of Business Conduct (the “Code”) that applies across the Company in all businesses and in all countries.

 

The Code is a baseline set of requirements that enables employees to recognize and be aware of how to report integrity, compliance, and legal issues. In addition, the Code outlines our pledge to recognize the dignity of each individual, respect each employee, provide compensation and benefits that are competitive, promote self-development through training that broadens work-related skills, and value diversity of perspectives and ideas. In our continuing effort to have a world class Integrity and Compliance program, in 2011, the Company revised the Code to improve readability and to address emerging areas. The updated Code has included additional guidance on a number of topics, including data privacy, respect for human rights, and the appropriate use of information technology and social media.

 

Honeywell Hometown Solutions

 

Honeywell demonstrates its commitment to corporate social responsibility and community involvement through Honeywell Hometown Solutions, which focuses on five important societal needs that align with Honeywell’s culture, products and people: safety and security, housing and shelter, math and science education, habitat and conservation, and humanitarian relief.

 

These programs have delivered results in communities around the world, including:

 

•	Teaching children potentially life-saving lessons to help prevent abduction and common childhood accidents;
•	Repairing homes and community centers for low-income families, the elderly and the disabled;
•	Offering academic opportunities that inspire students to pursue careers in science, technology, engineering and math (STEM), and that give teachers new techniques in STEM education;
•	Partnering with environmental organizations to provide students with unique learning opportunities and teaching tools for educators to promote science in the classroom, and
•	Helping Honeywell employees and communities recover from natural disasters such as Hurricane Sandy, the Colorado Springs wildfires, the Great Japan Earthquake and Tsunami and the Mexicali, Haitian and Sichuan earthquakes.

 

For more information about our sustainability and corporate citizenship programs, please visit our website, www.honeywell.com, and Corporate Citizenship http://citizenship.honeywell.com/.

 

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Stock Ownership Information > Political Contributions and Activities

 

POLITICAL CONTRIBUTIONS AND ACTIVITIES

 

Engagement in the political process is critical to our success. Our future growth depends on forward-thinking legislation and regulation that makes society safer and more energy efficient and improves public infrastructure. We strive to always engage responsibly in the political process and to ensure that our participation is fully consistent with all applicable laws and regulations, our principles of good governance, and our high standards of ethical conduct.

 

We have developed a strong team of government relations professionals based in Washington, D.C. that drive our lobbying programs and initiatives. Our government relations organization is led by a Senior Vice President, Global Government Relations. Members of the government relations organization work from a global network of offices.

 

Management and Board Oversight

 

The law department oversees our lobbying activities. The Senior Vice President, Global Government Relations reports to the Company’s Senior Vice President and General Counsel (“General Counsel”) and also works closely with the Vice President, Global Compliance whose organization ensures compliance with our political spending policy. The General Counsel, Senior Vice President, Global Government Relations and Vice President, Global Compliance meet regularly with the Chairman and Chief Executive Officer and his leadership team about legislative, regulatory and political developments.

 

With respect to Board of Directors oversight, our public policy efforts, including all lobbying activities, political contributions and payments to trade associations and other tax-exempt organizations, is the responsibility of the Corporate Governance and Responsibility Committee (“CGRC”), which consists entirely of independent, non-employee directors. Each year the CGRC receives an annual report on the Company’s policies and practices regarding political contributions. The CGRC’s oversight of our political activities ensures compliance with applicable law and alignment with our policies and our Code of Business Conduct. In addition, each year the Senior Vice President, Global Government Relations reports to the full Board of Directors on our global lobbying and government relations program.

 

Political Contributions

 

We have not made any political contributions using corporate funds since at least 2009 and have no intention of making such political contributions in the near future. Even before 2009, any such contributions were extremely rare and for de minimis amounts of less than $5,000. Any and all contributions we make in support of federal and state political candidates is through the non-partisan Honeywell International Political Action Committee, which is funded exclusively through voluntary contributions from eligible U.S.-based employees, which are not reimbursed by Honeywell.

 

2014 Updated Political Contributions Disclosure

 

For 2014, we have revised and expanded our disclosure on our policy and procedures for political activity and contributions. This disclosure is available on Honeywell’s website at www.honeywell.com (see “Investors/Corporate Governance/Political Contributions”).

 

SHAREOWNER OUTREACH AND ENGAGEMENT

 

Honeywell’s relationship with its shareowners is a critical part of our corporate governance profile, and we recognize the value of taking their views into account. Engaging with our shareowners helps us to understand how they view us, to set goals and expectations for our performance, and to identify emerging issues that may affect our strategies, corporate governance, compensation practices or other aspects of our operations.

 

Our shareowner and investor outreach includes investor road shows, analyst meetings, and investor conferences. We also communicate with shareowners and other stakeholders through various media, including our annual report and SEC filings, proxy statement, news releases, and our website. Our conference calls for quarterly earnings releases and major corporate developments are open to all. These calls are available in real time and as archived webcasts on our website.

 

Our Chairman and CEO, Chief Financial Officer, Vice President of Investor Relations and other senior management meet with investors to discuss Honeywell’s strategy, financial and business performance and to update investors on key developments.

 

We also seek our shareowners’ views on governance and compensation matters throughout the year. Given our large shareowner base, we concentrate our shareowner outreach efforts on our largest 25 – 30 shareowners that represent approximately 50% - 53% of our ownership. In the third quarter of 2013, we extended an invitation to meet with each of these shareowners to solicit their views on a range of issues.

 

Among the specific matters we discussed with our largest shareowners was the following:

 

•	Shareowner views on the separation of Chairman of the Board and Chief Executive Officer role. See “Proposal No. 4 – Independent Board Chairman.”

 

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Stock Ownership Information > Shareowner Outreach and Engagement

 

•	The amendment to our Stock Incentive Plan to eliminate automatic (single-trigger) accelerated vesting of equity awards upon a change in control. See “Proposal No. 6 – Eliminate Accelerated Vesting in a Change in Control.”
•	Our executive compensation program and disclosures. See “Proposal No. 3 – Advisory Vote to Approve Executive Compensation” and “Compensation Discussion and Analysis.”
•	The advisability of providing shareowners with the ability to act by written consent. See “Proposal No. 5 – Right to Act By Written Consent.”
•	The adequacy of our disclosure on political contributions and lobbying. See “Proposal No. 7 –Political Lobbying and Contributions.”
•	The adequacy of our disclosure on environmental, sustainability and governance (ESG) matters. See “Sustainability and Corporate Responsibility” on page 19 of this proxy statement or visit our website www.honeywell.com for updated information on all these programs.
•	Shareowner views on an exclusive forum By-Law amendment enacted in September 2013. See “2013 By-Law Amendment” below.

 

 

COMMUNICATING WITH BOARD MEMBERS   Shareowners, as well as other interested parties, may communicate directly with the Chair of the Corporate Governance and Responsibility Committee, the presiding director for an upcoming meeting, the non-employee directors as a group, or individual directors by writing to:   Honeywell c/o Vice President and Corporate Secretary 101 Columbia Road Morris Township, NJ 07962   Honeywell’s Corporate Secretary reviews and promptly forwards communications to the appropriate director(s).

COMMUNICATING WITH MANAGEMENT AND IR   Our Investor Relations department is the primary point of contact for shareowner interaction with Honeywell. Shareowners should write to or call:   Elena Doom Vice President, Investor Relations Honeywell 101 Columbia Road, Morris Township, NJ 07692 Phone: +1 (973) 455-2222   Visit our website www.honeywell.com   We encourage our shareowners to visit the investors section of our website for more information on our investor relations and corporate governance programs.

 

 

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Executive Compensation > Executive Summary

 

 

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Executive Compensation > Executive Summary

 

 

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Executive Compensation > 2013 Honeywell Performance

 

 

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Executive Compensation > 2013 Honeywell Performance

 

 

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Executive Compensation > 2013 Honeywell Performance

 

 

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Executive Compensation > 2013 Honeywell Performance

 

 

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Executive Compensation > Our Compensation Philosophy

 

•	Continued execution on previously funded projects to improve our cost structure; $347 million of restructuring projects still ongoing that will yield benefits in 2014 and beyond.

 

New 2018 Long-Term Targets

 

New 2018 long-term targets were communicated in March 2014 that reflect our commitment to sustained growth and continued value generation for our shareowners.

 

 

OUR COMPENSATION PHILOSOPHY

 

HOW COMPENSATION IS DETERMINED

 

Decisions about executive compensation are made by the Management Development and Compensation Committee of the Honeywell Board of Directors (the “Committee”). The Committee believes that a well designed, consistently applied compensation program for senior executives is fundamental to the long-term creation of shareowner value. In carrying out their responsibilities, the Committee considers a number of factors:

 

•	the competition for top-tier executive talent across our diverse range of businesses spanning the aerospace, automation and control, chemical and refining, and automotive industries;
•	the global nature of our businesses and the importance of growth outside of the United States for future success; and
•	the need to retain or attract executives with a proven track record of delivering consistent short-term financial results and driving “seed-planting” initiatives that will create long-term shareowner value and success.

 

Each year, the Committee reviews each NEO’s three-year compensation history in total and for each element of total annual direct compensation. They also review projected payouts under Honeywell’s retirement and deferred compensation plans, and any prior, non-recurring types of awards or grants such as performance-adjusted RSU awards issued for retention and/or succession planning purposes. This enables the Committee to understand how each element of compensation interacts with the other elements and to see how current compensation decisions may affect future wealth accumulation and executive retention. The Committee considers historical awards and/or grant levels when determining individual annual ICP awards and option grants, as well as the value and vesting dates of unvested equity holdings.

 

		Our executive compensation programs support creation of shareowner value through four key objectives:
		Attract and Retain World-Class Leadership Talent with the leadership abilities and experience necessary to develop and execute business strategies, drive superior results, meet diverse challenges and build long-term shareowner value in an enterprise with our scale, breadth, complexity and global footprint;
		Pay for Superior Results and Sustainable Growth by rewarding and differentiating among executives based on the achievement of Company, SBG and functional objectives;
		Drive Performance that Creates Shareowner Value by emphasizing variable, at-risk compensation with an appropriate balance of near-term and long-term objectives that align executive and shareowner interests; and
		Manage Risk through Oversight and Compensation Design features and practices that balance short-term and long-term incentives, are not overly leveraged and cap maximum payments.

 

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Executive Compensation > Our Compensation Philosophy

 

 

MIX OF COMPENSATION ELEMENTS

 

In setting total compensation, the Committee seeks to achieve the optimal balance between:

 

•	fixed and variable (or “at-risk”) pay elements;
•	short- and long-term pay elements; and
•	cash and equity-based elements.

 

Our executive compensation programs emphasize variable pay that aligns compensation with performance and shareowner value. The mix of compensation elements for NEOs is heavily leveraged toward variable, performance-based compensation. The CEO, in particular, has a greater emphasis on variable compensation than all other executives because his actions can have a greater influence on the performance of the Company.

 

 

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Executive Compensation > Our Compensation Philosophy

 

OUR COMPETITIVE MARKET — COMPENSATION PEER GROUP

 

The Committee believes it is important to understand the relevant market for executive talent to ensure that Honeywell’s executive compensation program supports the attraction and retention of highly-qualified leaders. However, the Committee does not target a specific competitive position relative to the market for executive compensation.

 

They annually assess market conditions through a review of compensation data compiled by the Committee’s independent compensation consultant regarding a peer group of companies (the “Compensation Peer Group”) with whom Honeywell competes for talent and which have one or more of the following attributes:

 

•	business operations in the industries and markets in which Honeywell participates;
•	similar revenue and market capitalization;
•	similar breadth of portfolio and complexity;
•	global scope of operations and/or diversified product lines; and
•	demonstrated competitor for executive talent.

 

The Committee believes that Honeywell executives are potentially attractive candidates for such companies because of their performance and visibility at Honeywell, and the depth of experience and management skill sets required to manage a global company of Honeywell’s scope and complexity. The Committee regularly reviews the appropriateness of the Compensation Peer Group and the purposes for which it is used. The Committee did not make any changes to the Compensation Peer Group in 2013.

 

 

 

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Executive Compensation > Our Compensation Philosophy

 

For each Company in the Compensation Peer Group, the Committee reviews data including base salary, actual annual cash incentive awards, total annual cash compensation, long-term incentive compensation and total annual direct compensation of the NEOs. The Committee also reviews general industry survey data published by third parties as a general indicator of relevant market conditions and pay practices. This also serves as a broader reference point for specific business units where the breadth and relevance of Compensation Peer Group data may not be as comprehensive as desired. Neither the Committee nor the Company has any input into the scope of, or the companies included in, these general industry surveys.

 

SUCCESSION PLANNING

 

The Committee recognizes that retention of highly-qualified leadership talent is critical to the Company’s continued performance and to successful succession planning. The Committee annually considers, and reviews with the full Board, succession candidates for the CEO and other senior leadership positions under both near-term and long-term planning scenarios, taking into account demonstrated performance, leadership qualities and potential to take on more complex responsibilities. As part of this process, the Committee considers the potential retention risk regarding incumbent senior executives and the identified succession candidates, the competitive landscape for executive talent, the specific succession planning time horizon for each senior executive position, and the extent of disruption likely to be caused by unplanned attrition. Since January 2004, all of the Company’s open executive officer positions have been filled with executives promoted from within Honeywell.

 

Due to the sustained improvement in key performance metrics, strong long-term relative TSR outperformance and the breadth of our business operations, Honeywell’s senior executives are recognized as industry leaders with backgrounds and experience that are highly attractive to competitors. The Committee believes that these leaders may be presented with other career opportunities given the scope and complexity of the Company and each of its business segments.

 

Where the Committee believes it to be necessary, it will take appropriate compensation actions to reinforce the succession plan and to guard against competitive activity. These retention actions are designed to:

 

•	motivate the executive to forego outside career opportunities;
•	generate value for the recipient only if he or she remains employed by the Company for the period of time deemed optimal for succession planning purposes; and
•	strengthen restrictive covenants (e.g., non-competition, non-solicitation) and/or provide for transition periods that will guard against competitive harm to the Company at the time of the executive’s departure from Honeywell.

 

In 2013, the Committee awarded Mr. Kramvis 10,000 performance-adjusted RSU’s with a vesting period intended to reinforce his retention and recognize his strong performance and accomplishments in stabilizing and strengthening the PMT portfolio, and positioning the SBG for future growth.

 

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Executive Compensation > Compensation Programs

 

COMPENSATION PROGRAMS

 

ELEMENTS OF TOTAL ANNUAL DIRECT COMPENSATION

 

In this section, we describe the three elements of our compensation programs that make up “total annual direct compensation” or “Total ADC” for the NEOs. These three elements and their relative weighting in the total compensation mix are summarized in this table:

 

Compensation Element			Type of Compensation		Key Objectives
Base Salary			Fixed Annual Cash		Attract and compensate high-performing and experienced leaders at a competitive level of cash compensation.
Short-Term Incentive Awards
•	Annual Incentive Compensation Plan (ICP)		Variable Annual Cash		Motivate and reward executives for achieving annual corporate, SBG and functional goals in key areas of financial and operational performance.
Long-Term Incentive (LTI) Awards
•	Growth Plan Units		Variable, Performance Cash		The Growth Plan drives the achievement of specific, quantified two-year financial performance goals directly aligned with our operating and strategic plans.
•	Stock Options		Equity		Stock options only have realizable value for executives if the operating performance driven by the annual ICP and Growth Plan results in stock price appreciation.

 

Target Weighting of Total Annual Direct Compensation Elements

 

For 2013, the target weighting of each of the elements of total annual direct compensation for the CEO and other NEOs was as follows:

 

 

The percentages above are based on target Total ADC. The 2013 portion of the 2012-2013 Growth Plan award is included assuming that the Company achieves the target financial metrics over the course of the 2012-2013 measurement period. This does not correspond to, and is not a substitute for, percentages derived from the amounts required to be disclosed in the Summary Compensation Table and supplemental tables.

 

Base Salary

 

Base salaries are determined based on scope of responsibility and years of experience. In 2013, base salary was 10% of the CEO’s total annual direct compensation and approximately 17% of total annual direct compensation for the other NEOs. Neither the CEO nor any of the other NEOs received a base salary increase in 2013.

 

Annual Incentive Compensation Plan (“ICP”)

 

Each NEO has an annual ICP target opportunity expressed as a percentage of base salary. The CEO’s target opportunity is 175% of base salary, while the other NEOs have target opportunities equal to 100% of base salary. The maximum ICP award that can be paid to each NEO is 200% of their annual ICP target opportunity.

 

The aggregate annual ICP payout for all senior executive employees, including the NEOs, is limited to 2% of the Company’s consolidated earnings (“Funding Cap”), as such term is defined in the Incentive Compensation Plan approved by shareowners in 2011. Consolidated earnings exclude unusual or infrequently occurring events or transactions, the effects of extraordinary items, gain or loss on the disposal of a business segment, the effects of changes in accounting principles and the effects of any annual pension mark-to-market adjustment that recognizes net actuarial gains and losses outside the corridor (calculated as 10% of the greater of plan assets or projected benefit obligation).

 

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Executive Compensation > Compensation Programs

 

Process for Determining Annual ICP Award:

 

STEP 1   Set ICP Goals		At the beginning of each year, the Committee sets specific annual corporate financial objectives (“Pre-Established ICP Goals”) consistent with our annual operating plan and external guidance that reflects then-current assumptions regarding macro-economic and key end-market conditions.
STEP 2   Determine Funding Cap		At the end of the year, the Committee first reviews our consolidated earnings performance for the year, and determines funding caps as defined in the Incentive Compensation Plan approved by shareowners.
STEP 3   Determine Overall ICP Pool Funding		Next, the Committee determines and approves ICP pool funding at a level below the aggregate plan Funding Cap, based on achievement of the annual Pre-Established ICP Goals, as well as an evaluation of other key performance measures and relevant factors necessary to ensure that the results against the Pre-Established ICP Goals are viewed in the proper context (“Supplemental Criteria”).
STEP 4   Determine and Approve Individual ICP Awards		Finally, the Committee determines individual awards for each NEO based on an assessment of their individual performance and behaviors, their application of the Honeywell Enablers, the performance of their respective business units and other relevant factors. The Committee also reviews and approves ICP awards for other participating executives, as proposed by the CEO. Awards to the NEOs are limited by individual funding caps, as defined by the plan, and the aggregate value of awards for the NEOs and other executives may not exceed the overall approved ICP pool funding amount.

 

The Pre-Established ICP Goals are based on the following metrics:

 

Earnings Per Share (“EPS”)(1)	Measures delivery of shareowner value at the Corporate level
Free Cash Flow (“FCF”)(2)	Measures our ability to generate cash from operations that may be reinvested in our businesses, used to make acquisitions, or returned to shareowners in the form of dividends or share repurchases
Working Capital Turns (“WCT”)(3)	Measures efficiency and effectiveness of our business operations

 

(1)	Proforma, excludes pension mark-to-market adjustment.
(2)	Free cash flow (cash flow from operations less capital expenditures) prior to any cash pension contributions, NARCO Trust establishment payments and cash taxes relating to the sale of available for sale investments.
(3)	Defined as sales divided by working capital, which is trade accounts receivable plus inventory less accounts payable and customer advances.

 

The Committee believes that over-reliance on narrow financial metrics for determination of ICP payments is not in the best interest of shareowners. Therefore, in addition to the pre-established financial metrics, the Committee also uses the Supplemental Criteria to further correlate ICP awards to our short- and long-term success.

 

Supplemental Criteria include:

 

•	Other key performance measures which assess both the strength and degree of difficulty of actual corporate and SBG performance, such as:

 

	–	Year-over-year variance in revenue, segment profit and margin expansion;
	–	Performance at new record levels for the Company;
	–	Quality of earnings;
	–	Relative performance among our SBGs, or business units within each SBG;
	–	Relevant industry and economic conditions;
	–	Performance compared to companies in the Compensation Peer Group; and
	–	Degree of stretch in annual targets.

 

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Executive Compensation > Compensation Programs

 

•	Level of ICP awards relative to award levels and performance in prior years; and
•	Results against certain specific business unit and individual objectives.

 

While emphasis is placed on the achievement of the EPS⁽¹⁾ target, the Committee does not assign specific weights to the Pre-Established ICP Goals or Supplemental Criteria but looks at annual performance (absolute and relative) across all relevant metrics within the context of the overall strength or weakness of the economic environment and the Company’s end markets.

 

(1)	Proforma, excludes pension mark-to-market adjustment.

 

Long-Term Incentive Compensation (“LTI”)

 

All long-term incentive awards to officers are approved by the Committee (and by all of the independent directors in the case of the CEO). Target annual LTI awards are comprised of a mix of annual stock option grants and performance-contingent, cash-based Growth Plan Units, with Growth Plan Units issued only in the first year of each two-year performance cycle (i.e. 2012 for the 2012-2013 Growth Plan).

 

In addition to the annual consideration of LTI awards, the Committee periodically considers discretionary performance-adjusted RSU awards when deemed necessary for retention and succession planning purposes.

 

Stock Options

 

Annual stock option awards are long-term incentives intended to motivate and reward executives for making strategic decisions and taking actions that drive year-over-year improvements in company performance that translate into future increases in stock price. Stock options are directly aligned with the interests of our shareowners because executives only realize value if the stock price appreciates. This alignment is further strengthened by the our Stock Ownership Guidelines that require executives to hold net gain shares from option exercises for at least a year after exercise. The one-year holding period increases the likelihood that any stock price appreciation will be sustainable because the executive must wait a year after exercise to realize value.

 

Annual stock option grants are made in February of each year during an open trading window period following the release of financial results for the preceding fiscal year. Equity grants are subject to vesting restrictions that require executives to remain employed with the Company to receive value. For the NEOs, Stock Options represent approximately two-thirds of their target total annual LTI opportunity.

 

Stock options are granted with an exercise price which is set equal to the fair market value of our Common Stock on the grant date and only have value to recipients if the stock price increases over the exercise price. Options granted to NEOs vest in equal 25% increments over a four-year period. The Committee considers both the estimated grant date fair value of stock options and the number of stock options in determining award size, as well as vested and unvested equity held by the NEOs.

 

Growth Plan Units (“GPUs”)

 

The Growth Plan provides performance-contingent, cash-based, longer-term incentive awards to focus executives on achievement of objective, two-year financial metrics that are aligned with business fundamentals. It is intended as a complement to stock options that reward stock price appreciation. The Growth Plan is designed to reward sustainable, profitable growth, consistent with the Honeywell Initiative on Growth and our strategic plans. GPUs are awarded in February of the first year of a two-year performance cycle and the two-year performance cycles do not overlap. Thus, in 2013, there was no Growth Plan award because the 2012-2013 performance cycle was still in progress. For the NEOs, the Growth Plan represents approximately one-third of their target total annual LTI opportunity.

 

The Committee believes that a two-year performance cycle provides the necessary line of sight to set realistic targets aligned with our objectives. Non-overlapping cycles avoid the potential confusion associated with different targets on the same metric in the same year. In order to promote retention, 50% of an earned award is paid in the first quarter of the year following the completion of a performance cycle and the remaining 50% is paid a year later (3.2 years after the commencement of the performance cycle), with each payment contingent on the executive being employed with Honeywell on the date the payment is made.

 

 

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Executive Compensation > Compensation Programs

 

Growth Plan performance goals complement the primary corporate financial objectives used for annual incentive compensation purposes and are consistent with the Growth Plan’s focus on sustainable improvement. Performance targets for each goal are set at the beginning of the two-year performance cycle.

 

The 2012-2013 Growth Plan metrics were determined in February 2012. Each of the three metrics is equally weighted.

 

•	Total revenue (excluding the impact of acquisitions and divestitures);

 

•	Average return on investment (“ROI”); and

 

•	Segment margin expansion.

 

Total Revenue (1/3 weight)		•	Revenue goal (two-year total) was set above the Company’s annual operating plan for 2012 and strategic plan targets for 2013.
		•	Reflects aggressive growth rates for the SBGs based on then-current projections of growth in our end markets.
		•	Excludes the impact of acquisitions and divestitures
Average Return on Investment (1/3 weight)		•	ROI goal was set based on the two-year revenue targets and the projected income using 2012 annual operating plan and historical rates of incremental sales conversion of income for 2013.
		•	Net investment values were projected taking into account anticipated working capital improvements over the two-year period.
Segment Margin Expansion (1/3 weight)		•	New performance metric added to the Growth Plan in 2012 to address shareowner concerns over our ability to achieve the 2014 segment margin improvement targets set out in our long-term plan.
		•	Focused executives on driving continued operational improvements directly aligned with our 2014 Long-Term Targets.
		•	Segment margin expansion goal was set to achieve the mid-point of the range of our 2014 segment margin expansion target.

 

At the end of a performance cycle, Growth Plan payouts are determined on a purely formulaic basis. Each Growth Plan unit has a target value of $100 ($50 when annualized), with performance goals weighted equally in determining final payout. For each performance goal, a minimum level of achievement (i.e. threshold) must be met before the plan will fund an award for that goal. In addition, no awards will be funded if we do not achieve 1.25% compound annual growth in EPS⁽¹⁾ for the 2012-2013 period (excluding pension income/expenses).

 

Plan payouts are capped at 200% of target to the extent plan maximums are met or exceeded. For SBG executives (Messrs. Kramvis, Fradin, and Mahoney), 50% of their potential payout for the 2012-2013 performance cycle will be based on achievement of total Company metrics, and the remaining 50% will be based on achievement of corresponding SBG objectives for their respective SBG. For Corporate executives (Messrs. Cote and Anderson), payouts will be based solely on the achievement of total Company-level metrics.

 

(1)	Proforma, excludes pension mark-to-market adjustment.

 

Performance-Adjusted Restricted Stock Units (“RSUs”)

 

Performance-adjusted RSUs represent a right to receive Company stock only if certain conditions are met (e.g., the attainment of pre-established performance conditions and/or continued employment through a specific date). The Committee awards RSUs from time-to-time on a discretionary basis. They are not considered a component of a NEO’s target total annual direct compensation, as they are not granted on an annual basis and there is no target award level.

 

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Executive Compensation > 2013 Compensation Decisions

 

2013 COMPENSATION DECISIONS

 

Compensation decisions made for 2013 were aligned with our strong operational performance and reflected continued emphasis on variable, at-risk compensation. The Committee also continued to place greater emphasis on long-term incentives, especially stock options, to focus our executives on executing strategies aimed at creating sustained long-term value for shareowners.

 

The Committee took the following key compensation actions in 2013:

 

BASE SALARIES

 

Neither the CEO nor any of the other NEOs received base salary increases in 2013. The base salaries of Messrs. Cote, Anderson and Fradin have not been increased in any of the last five years.

 

2013 ICP — DISCUSSION, ANALYSIS AND AWARDS

 

The following section describes the analysis and decisions regarding 2013 ICP awards.

 

2013 Pre-Established ICP Goals: Robust Targets and Results

 

Annual ICP targets are set to drive meaningful, sustainable improvement in key metrics on a year-over-year basis and to ensure progress toward attaining Honeywell’s five-year plan goals. To fully assess results vs. target, the Committee considers both the absolute results and the strength of the comparable prior year results.

 

Consistent with the Company’s planning and external guidance, the EPS target and EPS actual results below exclude the impact of any pension mark-to-market adjustment. The free cash flow (FCF) target and FCF actual results are shown prior to any cash pension contributions, NARCO Trust establishment payments, and cash taxes relating to the sale of available for sale investments.

 

PERFORMANCE VS. ICP TARGETS (T = TARGET; A = ACTUAL)

 

		2012 A			2013 T		2013 A		Metrics shown are at the Honeywell Corporate level. Each SBG also has corresponding objectives, with net income being used in lieu of EPS(1); unusual, infrequently occurring items, extraordinary items, the effect of changes in accounting methods and any pension mark-to-market adjustment are excluded in determining achievement of Corporate and SBG objectives.
EPS(1)		$4.48			$4.75 – $4.95		$4.97
Free Cash Flow(2)		$3.7 billion			$3.7 billion		$3.8 billion
Working Capital Turns		7.0 turns			7.3 turns		7.0 turns

 

 

(1)	Proforma, V% exclude pension market-to-market adjustment.
(2)	Free cash flow (cash flow from operations less capital expenditures) and free cash flow conversion prior to any cash pension contributions, NARCO Trust establishment payments and cash taxes relating to the sale of available for sale investments.

 

Supplemental Criteria

 

In addition to the Company’s performance versus the three financial metrics. Other key performance measures and factors considered by the Committee in determining ICP awards were:

 

•	8% segment profit improvement;
•	Segment margin expansion of 70 basis points to a record 16.3%;
•	2% organic sales growth driven by new product introductions, geographic expansion and commercial excellence;
•	Outperformance compared with peer group median on key operational metrics and multi-year TSR;
•	Successful attainment of the 2014 Long-Term Target for margin expansion one year early; and
•	The performance of the SBGs relative to each other and prior year.

 

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Executive Compensation > 2013 Compensation Decisions

 

Individual ICP Awards

 

Based on 2013 business results against the Pre-Established ICP Goals and the Supplemental Criteria discussed above, the Committee (and the independent members of the Board in the case of the CEO), in the first quarter of 2014, awarded annual ICP payouts to the CEO and other NEOs in the following amounts:

 

Mr. Cote		$ 5,200,000
Mr. Anderson		$ 1,225,000
Mr. Fradin		$ 1,200,000
Mr. Mahoney		$ 800,000
Mr. Kramvis		$ 950,000

 

In determining Mr. Cote’s ICP award, the Committee considered Honeywell’s strong 2013 operating results, the relative performance of the Company versus its peers, continued investments made to position the Company for continued growth, his individual performance and other factors discussed in this Compensation Discussion and Analysis. In determining 2013 ICP awards for the other NEOs, the Committee considered overall Honeywell and individual performance, as well as the relevant SBG performance for Messrs. Fradin, Mahoney and Kramvis. See “Named Executive Officers — 2013 Performance & Total Annual Direct Compensation Tables” for further discussion of individual performance highlights for each NEO.

 

2013 LTI AWARDS — DISCUSSION, ANALYSIS AND AWARDS

 

In light of our performance and in an effort to reinforce our goals of motivation and retention, the NEOs participated in the following LTI awards in 2013: Stock Options and GPUs.

 

Stock Options: Stock option grants to the NEOs in 2013 represented the most significant component of each officer’s target total annual LTI opportunity (approximately two-thirds). While option grant values varied (up for some, down for others), the aggregate value of stock options granted to the NEOs in 2013 was flat to 2012. In determining the stock option awards, the Committee considered the aggregate amount of vested and unvested equity held by the NEOs, as well as the annualized target value of the 2013 portion of the 2012-2013 two-year Growth Plan award made in February 2012, in the context of market compensation data. All stock options vest ratably over four years.

 

CEO: In reviewing the LTI component of the CEO’s Total ADC in February of each year, the Committee considers the Company’s operational performance and relative total shareowner returns as of the end of the prior fiscal year, the value of similar incentive awards to chief executive officers at Compensation Peer Group companies, and awards previously made to Mr. Cote. In 2013, the Committee also considered the Company’s sustained growth and consistent improvement over the course of Mr. Cote’s tenure, the amount of vested and unvested equity he holds, the grant date fair value of any proposed award compared to prior years and the annualized target value of the 2013 portion of the 2012-2013 two-year Growth Plan award made in 2012. Based on these considerations, in February 2013, the Committee granted Mr. Cote stock options, subject to vesting requirements, to acquire 750,000 shares in recognition of his anticipated leadership in driving sustained financial and operational performance.

 

Other NEOs: For each of the other NEOs, the Committee considers the executive officer’s performance in the prior fiscal year, his impact on overall Company performance and his potential to contribute to the future performance of the Company. In addition, the Committee considers the amount of vested and unvested equity each executive holds, the grant date fair value of any proposed award compared to prior years, the annualized target value of the 2013 portion of the 2012-2013 two-year Growth Plan award made in 2012, and the value of similar incentive awards to comparable named executive officers at Compensation Peer Group companies.

 

Based on these considerations, in February 2013, the Committee granted each of the other NEOs a number of stock options as follows:

 

Mr. Anderson		200,000
Mr. Fradin		225,000
Mr. Mahoney		200,000
Mr. Kramvis		150,000

 

Growth Plan Units or “GPU’s”

 

At target, Growth Plan awards represent approximately one-third of an officer’s target total annual LTI opportunity. In order to promote retention, awards earned under the 2012-2013 Growth Plan are paid in two installments, 50% in the first quarter of 2014 and 50% in the first quarter of 2015, with each payment contingent on the executive being employed with the Company on the date payment is made.

 

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Executive Compensation > 2013 Compensation Decisions

 

The following table presents the 2012-2013 Growth Plan performance goals and actual performance for the completed 2012-2013 cycle at the total Company level:

 

 

For the 2012-2013 performance cycle, NEOs earned awards ranging from 77% to 113% of their target award value, as the Company significantly outperformed its ROI and segment profit goals, but fell just short of attaining the threshold level of total organic revenue ($75.71 billion actual vs. $76.31 billion threshold, excluding the impact of acquisitions and divestitures).

 

When applied to the number of GPUs granted in February 2012, the annualized value of the Growth Plan award earned by each NEO is as follows:

 

	GPUs	Annualized
	Awarded	Award Value			*
Mr. Cote	95,000		$	4,512,500		*	Total earned Growth Plan award for 2-year cycle annualized (i.e. divided by 2) to recognize non-overlapping cycles consistent with how the Committee plans target compensation.
Mr. Anderson	27,500		$	1,306,250
Mr. Fradin	27,500		$	1,058,750
Mr. Mahoney	21,000		$	1,186,500
Mr. Kramvis	17,500		$	936,250

 

Note on Annualized Award Values vs. amounts reflected on the Summary Compensation Table: SEC reporting rules require that the full amount of the Growth Plan payout earned over the performance cycle be reflected in the Summary Compensation Table as Non-Equity Incentive Compensation in the second year of the performance cycle (in this case, for 2013), regardless of the length of the related performance or payout cycles. This is inconsistent with the Committee’s view when planning NEO compensation and setting the Growth Plan targets, which considers the Growth Plan as being earned 50% in the first year of the performance cycle and 50% in the second year of the cycle. The amounts above and the supplemental tables in the “NEOs—2013 Performance & Total

 

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Executive Compensation > 2013 Compensation Decisions

 

Annual Direct Compensation Tables” section (see pages 42-47 below) reflect the Committee’s view of the annualized value of the 2012-2013 Growth Plan payout.

 

Total Shareowner Value Generated over the 2012-2013 Growth Plan Cycle

 

Over the 2012-2013 period corresponding with the Growth Plan performance cycle, shareowners experienced increased value as Honeywell’s market capitalization increased by almost $30 billion (71%), share price appreciated by 68% and cumulative TSR was 76%. The following reflects TSR performance over this period against our Compensation Peer Group and the broader market.

 

Discretionary Performance-Adjusted Restricted Stock Unit Award

 

In 2013, the Committee awarded Mr. Kramvis 10,000 performance-adjusted RSU’s with a vesting period intended to reinforce his retention and recognize his strong performance and accomplishments in stabilizing and strengthening the PMT portfolio, and positioning the SBG for future growth. No other NEOs were awarded RSUs in 2013. These RSUs are subject to a performance adjustment with the target grant subject to a 30% upward or downward adjustment based on Honeywell’s relative TSR performance ranking against its Compensation Peer Group over both a one-year (ending December 31, 2014) and 36-month period (ending December 31, 2016).

 

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Executive Compensation > Named Executive Officers

 

NAMED EXECUTIVE OFFICERS

 

2013 PERFORMANCE & TOTAL ANNUAL DIRECT COMPENSATION TABLES

 

Here we review the compensation actions for each NEO, reflecting how the Committee viewed their 2013 performance. Included is a table summarizing the Committee’s 2013 Total Annual Direct Compensation (“Total ADC”) actions for each NEO. The tables in this section differ from, and are not a substitute for, the Summary Compensation Table, which presents similar information in the format required by the SEC.

 

In deciding upon the direct compensation of the NEOs, the Committee gave consideration to Honeywell’s solid operational performance in 2012 (for compensation decisions made in February 2013) and 2013 (for ICP decisions made in February 2014), on both an absolute and relative basis. The Committee also recognized that consistency in strategy, a focus on execution and smart decisions enabled Honeywell to attain our 2014 segment margin goal one year early. Moreover, the Committee has confidence that the leadership team is striking the right balance between delivering quarter-on-quarter financial results, on the one hand, and making thoughtful “seed planting” investments, on the other hand, that will enable Honeywell to achieve the financial targets set out in the 2018 financial plan communicated to Shareowners in March 2014.

 

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Executive Compensation > Named Executive Officers

 

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Executive Compensation > Named Executive Officers

 

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Executive Compensation > Named Executive Officers

 

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Executive Compensation > Named Executive Officers

 

 

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Executive Compensation > Other Compensation & Benefit Programs

 

OTHER COMPENSATION & BENEFIT PROGRAMS

 

Retirement Plans. We offer certain retirement benefits to our NEOs. Specifically, NEOs may participate in broad-based plans including a defined benefit pension plan and a 401(k) savings plan that provides matching Company contributions. We also maintain an unfunded supplemental retirement plan to replace the portion of an executive’s pension benefit that cannot be paid under the broad-based plans because of Internal Revenue Service (“IRS”) limitations. In addition, certain NEOs, including the CEO, are entitled to supplemental retirement benefits that were provided under separate arrangements deemed necessary to either recruit the executive at the time of their hiring or retain the executive as circumstances demanded. These plans are explained in detail beginning on page 59.

 

The 2013 Change in Pension Value reflected on the Summary Compensation Table for Mr. Fradin is not the result of a pension enhancement action taken by the Committee in 2013. Rather, it relates to a previously disclosed retention action taken in 2010 to address immediate retention and succession planning needs and to retain Mr. Fradin’s services for the Company. The benefit from that action was contingent on Mr. Fradin remaining employed until attaining the age of 60. As Mr. Fradin reached the age of 60 in 2013, that condition has been met and the full value of the pension-related retention action is now earned and reportable as a single figure for 2013 even though it relates to his employment over the past four years. In connection with the prior retention actions, Mr. Fradin agreed to certain restrictive covenants, including an extension of his non-competition and non-solicitation obligations to the later of age 65 or two years following the termination of his employment, and his agreement to provide a transition period of a least 12 months prior to his retirement (may be reduced to 6 months under certain limited circumstances).

 

Nonqualified Deferred Compensation Plans. Executive officers (including the NEOs) may choose to participate in certain nonqualified deferred compensation plans to permit retirement savings in a tax-efficient manner. Executive officers can elect to defer up to 100% of their annual ICP awards. In addition, executive officers may also participate in the Honeywell Supplemental Savings Plan maintained in order to permit deferral of base salary that cannot be contributed to the Company’s 401(k) savings plan due to IRS limitations. These amounts are matched by the Company only to the extent required to make up for a shortfall in the available match under the 401(k) savings plan due to such IRS limitations. Deferred compensation balances earn interest at a fixed rate based on the Company’s 15-year cost of borrowing, which is subject to change on an annual basis (2.9% in 2013). Consistent with the long-term focus of the executive compensation program, matching contributions are treated as if invested in Company Common Stock. These plans are explained in detail beginning on page 62.

 

Benefits and Perquisites. Our NEOs are entitled to participate in Honeywell-wide benefits such as life, medical, dental, accidental death and disability insurance that are competitive with other similarly-sized companies. The NEOs participate in these programs on the same basis as the rest of our salaried employees. We maintain excess liability coverage for management personnel, including the NEOs. The CEO also receives additional life insurance benefits agreed at his time of hire in 2002 to replace lost benefits from his prior employer. Our security policy requires the CEO to use Honeywell aircraft for all air travel (business or personal) to ensure the personal security of the CEO and protect the confidentiality of our business, and to have home security and back-up power systems. From time to time, we also permit other executive officers to use Honeywell aircraft for personal or business use.

 

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Executive Compensation > Compensation Practices and Policies

 

COMPENSATION PRACTICES AND POLICIES

 

Best Practices

 

The Committee regularly reviews best practices in governance and executive compensation and has revised Honeywell’s policies and practices over time. Here is a summary of our current policies and practices.

 

 

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Executive Compensation > Compensation Practices and Policies

 

Risk Oversight Considerations

 

The Committee believes that balancing the various elements of Honeywell’s executive compensation program:

 

•	Supports the achievement of competitive revenue, earnings and cash performance in variable economic and industry conditions without undue risk; and
•	Mitigates the potential to reward risk-taking that may produce short-term results that appear in isolation to be favorable, but that may undermine the successful execution of the Company’s long-term business strategy and destroy shareowner value.

 

Here is a summary of our risk oversight and compensation design features that guard against unnecessary or excessive risk-taking:

 

 

Based upon the Committee’s risk oversight and compensation policies, we believe that the risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on Honeywell’s operations or results. For a full discussion of the role of the Board of Directors in the risk oversight process see page 11 of this proxy statement.

 

Stock Ownership Guidelines

 

The Committee believes that our executives will more effectively pursue our shareowners’ long-term interests if our executives hold substantial amounts of stock. Accordingly, the Committee adopted minimum stock ownership guidelines in May 2003 for all executive officers.

 

Under these guidelines, the CEO must hold shares of Common Stock equal in value to six times his current annual base salary. Other executive officers are required to own shares equal in value to four times their current base salary. Shares used in determining whether these guidelines are met include shares held personally, share equivalents held in qualified and nonqualified retirement accounts, and RSUs. Executive officers have five years to meet these guidelines. Each of the NEOs has attained the prescribed ownership threshold.

 

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Executive Compensation > Compensation Practices and Policies

 

In addition, the stock ownership guidelines require officers to hold for at least one year the “net shares” from an RSU vesting or the “net gain shares” of Common Stock that they receive by exercising stock options. “Net shares” means the number of shares obtained from an RSU vesting, less the number of shares withheld or sold to pay applicable taxes. “Net gain shares” means the number of shares obtained by exercising the option, less the number of shares the officer sells to cover the exercise price of the options and pay applicable taxes.

 

After the one-year holding period, officers may sell net shares or net gain shares, provided that, following any sale, they continue to hold shares of Common Stock in excess of the prescribed minimum stock ownership level.

 

Recoupment

 

Our Corporate Governance Guidelines provide for the recoupment (or “clawback”) of incentive compensation paid to senior executives in the event of a significant restatement of financial results (a “Restatement”). Under the guidelines, the Board can seek recoupment if and to the extent that:

 

(i)	the amount of incentive compensation was calculated based upon the achievement of financial results that were subsequently reduced due to a Restatement;
(ii)	the senior executive engaged in misconduct, and
(iii)	the amount of incentive compensation that would have been awarded to the senior executive had the financial results been properly reported would have been lower than the amount actually awarded.

 

The complete text of the Corporate Governance Guidelines is posted on our website at www.honeywell.com (see “Investors/Corporate Governance/Guidelines”).

 

If during the two-year period following an executive officer’s termination of employment with Honeywell, he or she commences employment with, or otherwise provides services to a Honeywell competitor without the Committee’s prior approval, then the Company reserves the right, for awards issued under the 2003, 2006 and 2011 Stock Incentive Plans, to:

 

•	cancel all unexercised options; and
•	recover any gains attributable to options that were exercised, and any value attributable to GPUs and RSUs that were paid, during the period beginning six months before and ending two years after the executive officer’s termination of employment.

 

In addition, we have entered into non-competition agreements with our executive officers that preclude them from going to work for a competitor for up to two years after termination of employment. The list of competitors and the duration of the non-competition covenant has been tailored, in each case, to the executive officer’s position and the competitive threat this represents. Because money damages cannot adequately compensate Honeywell for violations of these non-competition covenants, we have a full range of equitable remedies at our disposal to enforce these agreements, including the ability to seek injunctive relief.

 

Tax Deductibility of Executive Compensation

 

Section 162(m) of the Internal Revenue Code restricts deductibility for federal income tax purposes of annual individual compensation in excess of $1 million to the NEOs (excluding the Chief Financial Officer) if certain conditions are not satisfied. Honeywell intends, to the extent practicable, to preserve deductibility of compensation paid to its NEOs while maintaining compensation programs that effectively attract, motivate and retain exceptional executives in a highly competitive environment.

 

We believe that our annual and long-term cash incentive and stock option awards qualify for full deductibility. The plans under which these awards are made have been approved by the shareowners and provide for awards that are eligible for deductibility as performance-based compensation. The Committee may use its discretion to set actual compensation below the maximum amount calculated by application of the relevant performance criteria. The Committee intended that all annual ICP payments earned by the NEOs for 2013 and all Growth Plan payments earned by the NEOs for 2012-2013 would be deductible for federal income tax purposes.

 

The Committee does not believe, however, that it would be in the best interests of Honeywell or its shareowners to restrict the Committee’s discretion and flexibility (an integral part of our compensation philosophy) to design compensation plans and arrangements that may result in non-deductible compensation expenses. Accordingly, the Committee from time to time has approved elements of compensation for certain NEOs that were consistent with the objectives of the Company’s executive compensation program, but that were not fully deductible (which includes, among other things, a portion of the CEO’s base salary for 2013).

 

Pledging and Hedging Transactions in Company Securities

 

It is our policy that pledging Honeywell’s securities or using Honeywell’s securities to support margin debt by executive officers and directors is prohibited. All other employees must exercise extreme caution in pledging Honeywell’s securities or using Honeywell’s securities to support margin debt.

 

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Executive Compensation > Compensation Practices and Policies

 

Hedging by directors, executive officers and employees on our restricted trading list is prohibited and is strongly discouraged for all other employees. For this purpose, hedging means purchasing financial instruments (including forward sale contracts, swaps, collars and interests in exchange funds) that are designed to offset any decrease in the market value of Company stock held, directly or indirectly by them, whether the stock was acquired pursuant to a compensation arrangement or otherwise.

 

Employees and directors are prohibited from engaging in short sales of Honeywell securities. Also, selling or purchasing puts or calls or otherwise trading in or writing options on Honeywell’s securities by employees, officers and directors is also prohibited.

 

MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE REPORT

 

The Management Development and Compensation Committee reviewed and discussed Honeywell’s Compensation Discussion and Analysis with management. Based on this review and discussion, the Committee recommended that the Board of Directors include the Compensation Discussion and Analysis in this proxy statement and the Form 10-K for the year ended December 31, 2013.

 

The Management Development and Compensation Committee

 

D. Scott Davis, Chair
Gordon M. Bethune
Clive Hollick
Grace D. Lieblein
Bradley T. Sheares

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

During fiscal year 2013, all of the members of the Management Development and Compensation Committee were independent directors, and no member was an employee or former employee of Honeywell. No Committee member had any relationship requiring disclosure under “Certain Relationships and Related Transactions” on page 17 of this proxy statement. During fiscal year 2013, none of our executive officers served on the compensation committee (or its equivalent) or board of directors of another entity whose executive officer served on the Management Development and Compensation Committee.

 

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Executive Compensation > Summary Compensation Table

 

SUMMARY COMPENSATION TABLE

 

Named Executive Officer and Principal Position		Year		Salary($)(1)		Bonus($)(2)		Stock Awards($)(3)		Option Awards($)(4)		Non-Equity Incentive Plan Compensation($)(5)		Change in Pension Value and Nonqualified Deferred Compen- sation Earnings($)(6)		All Other Compensation($)(7)		Total
David M. Cote Chairman of the Board and Chief Executive Officer		2013		$1,800,000		$5,200,000		$0		$8,880,000		$9,025,000		$532,288		$535,958		$25,973,246
		2012		$1,800,000		$4,800,000		$0		$9,289,000		$0		$16,968,206		$389,972		$33,247,178
		2011		$1,800,000		$4,300,000		$0		$9,849,750		$19,000,000		$2,464,474		$428,499		$37,842,723
David J. Anderson Senior Vice President, Chief Financial Officer		2013		$900,000		$1,225,000		$0		$2,368,000		$2,612,500		$203,603		$55,000		$7,364,103
		2012		$900,000		$1,225,000		$2,789,160		$2,654,000		$0		$1,299,579		$50,500		$8,918,239
		2011		$900,000		$1,225,000		$0		$3,451,250		$5,500,000		$1,907,615		$96,360		$13,080,225
Roger Fradin President & Chief Executive Officer, Automation and Control Solutions		2013		$1,050,000		$1,200,000		$0		$2,664,000		$2,117,500		$14,965,962		$64,000		$22,061,462
		2012		$1,050,000		$1,200,000		$3,359,670		$2,654,000		$0		$659,129		$153,339		$9,076,138
		2011		$1,050,000		$1,300,000		$0		$3,451,250		$5,472,500		$484,143		$66,200		$11,824,093
Timothy O. Mahoney President & Chief Executive Officer, Aerospace		2013		$825,000		$800,000		$0		$2,368,000		$2,373,000		$720,953		$50,500		$7,137,453
		2012		$818,750		$900,000		$2,852,550		$1,990,500		$0		$1,508,898		$46,039		$8,116,737
		2011		$763,385		$800,000		$0		$2,635,500		$3,192,000		$955,005		$35,153		$8,381,043
Andreas C. Kramvis President & Chief Executive Officer, Performance Materials and Technologies		2013		$700,000		$950,000		$878,100		$1,776,000		$1,872,500		$171,448		$59,506		$6,407,554
		2012		$687,500		$950,000		$2,535,600		$1,658,750		$0		$270,862		$58,882		$6,161,594
		2011		$623,846		$875,000		$0		$2,196,250		$3,500,000		$205,825		$58,540		$7,459,461

 

(1)	None of the NEOs received merit increases in 2013.
(2)	Amounts reflect annual ICP awards.
(3)	Mr. Cote did not receive a stock award in 2013, 2012 or 2011. For the other Named Executive Officers, the amounts reflect the aggregate grant date fair value of performance-adjusted RSU awards, computed in accordance with FASB ASC Topic 718. For RSU awards made in 2013 (Mr. Kramvis only) and 2012, the grant date fair value per share includes an assumption with respect to the achievement of the performance adjustment attached to the award which is based on Honeywell’s TSR relative to the Compensation Peer Group (refer to footnotes to the Outstanding Equity Awards table for a description of the performance adjustment). Specifically, the grant date fair values of the performance-adjusted RSUs granted in December 2013 and July 2012 were $87.81 and $63.39 per share, respectively, calculated in accordance with FASB ASC Topic 718 based on a multifactor Monte Carlo model which simulates Honeywell’s stock price and TSR relative to each of the other companies in the Compensation Peer Group.
(4)	Amounts reflect the aggregate grant date fair value of stock option awards computed in accordance with FASB ASC Topic 718, using the Black-Scholes option-pricing model at the time of grant, with the expected-term input derived from a risk-adjusted Monte Carlo simulation model that considers historical exercise behavior and probability-weighted movements in Honeywell’s stock price over time. 2013 option awards were made on February 27, 2013 with a Black-Scholes value of $11.84 per share. A discussion of the assumptions used in the valuation of option awards made in fiscal year 2013 may be found in Note 20 of the Notes to the Financial Statements in the Company’s Form 10-K for the year ended December 31, 2013.
(5)	2013 Non-Equity Incentive Plan Compensation values reflect the full earned amount under the Growth Plan with respect to the 2012-2013 performance cycle, reported in a single year as required by applicable SEC rules. Actual payments of earned Growth Plan awards are made in two equal installments following the performance period and contingent on continued active employment on each applicable payment date. The first payment for the 2012-2013 Growth Plan performance cycle award was made in March 2014 and the second is scheduled to be made in March 2015.

(6)

2013 values represent (a) the aggregate change in the present value of each Named Executive Officer’s accumulated benefit under the Company’s pension plans from December 31, 2012 to December 31, 2013 (as disclosed in the Pension Benefits table on page 59 of this proxy statement) and (b) interest earned in 2013 on deferred compensation that is considered “above-market interest” under SEC rules (as discussed beginning on page 63 of this proxy statement). Each of these components is shown in the following table:

 

 

(a)

The present value of Mr. Cote’s aggregate pension value declined by $3,020,666 in 2013. This reduction was due to his prior attainment of full retirement age under a pension formula that does not grow with additional service, and the impact of an increase in the discount rate required to be used to determine his reportable pension value as of December 31, 2013 (the rate increased from 4.06% at December 31, 2012 to 4.89% at December 31, 2013). SEC rules do not permit the recording of a negative value in the Summary Compensation Table.

 

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Executive Compensation > Summary Compensation Table

 

	(b)	The present value of Mr. Anderson’s aggregate pension value declined by $46,167 in 2013. This reduction was due to his attainment of his fully subsidized retirement age in 2012 and an increase in the discount rate required to be used to determine his reportable pension value as of December 31, 2013 (the rate increased from 4.06% at December 31, 2012 to 4.89% at December 31, 2013). SEC rules do not permit the recording of a negative value in the Summary Compensation Table.
	(c)	The increase in the aggregate present value of Mr. Fradin’s pension in 2013 was primarily due to him reaching age 60 in 2013 while remaining in his current role, the age and continued service requirements associated with a succession planning and retention action taken by the Committee in 2010, which set a minimum pension annuity value of $1.4 million and was also contingent on his agreement to certain restrictive covenants and a transition period of at least 12 months prior to his retirement (see discussion under Retirement Plans on page 48).

 

(7)	For 2013, all other compensation consists of the following:

 

Item		Mr. Cote				Mr. Anderson				Mr. Fradin				Mr. Mahoney				Mr. Kramvis
Excess liability insurance(a)		$	1,000			$	1,000			$	1,000			$	1,000			$	1,000
Executive life insurance(b)		$	62,000				—				—				—				—
Matching Contributions(c)		$	108,000			$	54,000			$	63,000			$	49,500			$	42,000
Personal use of Company aircraft(d)		$	325,665				—				—				—			$	16,506
Security Systems(e)		$	24,927				—				—				—				—
Transportation/ Other(f)		$	14,366				—				—				—				—
Totals		$	535,958			$	55,000			$	64,000			$	50,500			$	59,506

 

	(a)	Represents the annual premiums paid by the Company to purchase excess liability insurance coverage for each Named Executive Officer.
	(b)	Under the terms of Mr. Cote’s 2002 employment agreement, which was entered into upon his joining the Company, the Company is obligated to provide Mr. Cote with $10 million in life insurance coverage at the Company’s cost. The Company reimbursed Mr. Cote a total of $62,000 for life insurance premiums paid by him in 2013.
	(c)	Represents total Company contributions to each Named Executive Officer’s accounts in the tax-qualified Honeywell Savings and Ownership Plan and the non-tax-qualified Supplemental Savings Plan.
	(d)	For security reasons, Mr. Cote is required by Company policy to use Company aircraft for all business and personal travel. The amount shown for each Named Executive Officer represents the aggregate incremental cost of personal travel by the Named Executive Officer. This amount is calculated by multiplying the total number of personal flight hours times the average direct variable operating costs (expenses for aviation employees, business meals, aircraft maintenance, telecommunications, transportation charges, including but not limited to hangar and landing fees, aviation fuel, and commissaries) per flight hour for Company aircraft. Use of Company aircraft saves substantial time and allows the CEO better access to employees and customers around the world. Over 98% of the use of Company aircraft is for business purposes.
	(e)	In accordance with the Company’s CEO security plan, represents the total cost paid by the Company in 2013 for equipment and expenses relating to personal home security systems provided to Mr. Cote.
	(f)	Represents personal transportation costs and the invoice cost of Honeywell products and services provided for personal use. Mr. Cote was imputed for income related to these costs (no tax gross-up).

 

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Executive Compensation > Grants of Plan-Based Awards—Fiscal Year 2013

 

GRANTS OF PLAN-BASED AWARDS—FISCAL YEAR 2013

 

						Estimated Future Payouts Under Equity Incentive Plan Awards(2)												All Other Option Awards: Number of Securities Underlying				Exercise or Base Price of Option				Closing Price on Date of Grant of Option				Grant Date Fair Value of Stock
Named Executive Officer		Award Type(1)		Grant Date		Threshold (#)				Target (#)				Maximum (#)				Options (#)(3)				Awards ($/Sh)				Awards ($/Sh)				and Option Awards(4)
David M. Cote		NQSO		2/27/13			—				—				—				750,000			$	69.77			$	70.35			$	8,880,000
David J. Anderson		NQSO		2/27/13			—				—				—				200,000			$	69.77			$	70.35			$	2,368,000
Roger Fradin		NQSO		2/27/13			—				—				—				225,000			$	69.77			$	70.35			$	2,664,000
Timothy O. Mahoney		NQSO		2/27/13			—				—				—				200,000			$	69.77			$	70.35			$	2,368,000
Andreas C. Kramvis		NQSO		2/27/13			—				—				—				150,000			$	69.77			$	70.35			$	1,776,000
		RSU		12/12/13			7,000				10,000				13,000				—				—				—			$	878,100

 

(1)	Award Type: NQSO = Nonqualified Stock Option RSU = Performance-Adjusted Restricted Stock Unit
(2)	The amount in the Target column represents the number of RSUs granted to the Named Executive Officer on the grant date under the 2011 SIP. The RSUs granted to Mr. Kramvis vest 100% on June 12, 2017 and are subject to a 30% increase or decrease based on 1-year and 36-month relative TSR versus Honeywell’s Compensation Peer Group beginning January 1, 2014. This grant is eligible to receive dividend equivalents in the form of additional shares which vest in accordance with the vesting schedule of the underlying RSUs.
(3)	Represents annual stock options granted to the Named Executive Officers on the grant date. The stock options vest in equal annual installments over a period of four years.
(4)	The grant date fair value of each stock option was $11.84 calculated in accordance with FASB ASC Topic 718, using the Black-Scholes option valuation model at the time of grant, with the expected-term input derived from a risk-adjusted Monte Carlo simulation model that considers historical exercise behavior and probability-weighted movements in Honeywell’s stock price over time. The grant date fair value of the performance-adjusted RSU award was $87.81 per share, calculated in accordance with FASB ASC Topic 718 based on a multifactor Monte Carlo model which simulates Honeywell’s stock price and TSR relative to each of the other companies in the Compensation Peer Group.

 

DESCRIPTION OF PLAN-BASED AWARDS

 

All NQSO and RSU awards granted to the Named Executive Officers in fiscal year 2013 were granted under Honeywell’s 2011 Stock Incentive Plan and are governed by and subject to the terms and conditions of the 2011 Stock Incentive Plan and the relevant award agreements. A detailed discussion of stock options and RSUs can be found beginning on page 36 of this proxy statement.

 

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Executive Compensation > Outstanding Equity Awards at 2013 Fiscal Year-End

 

OUTSTANDING EQUITY AWARDS AT 2013 FISCAL YEAR-END

 

				Option Awards									Stock Awards
Named Executive Officer		Grant Year	Number of Securities Underlying Unexercised Options(#) Exercisable			Number of Securities Underlying Unexercised Options(#) Unexercisable			Option Exercise Price($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested(#)			Market Value of Shares or Units of Stock That Have Not Vested($)(1)
David M. Cote		2013		—		750,000	(2)		$69.77		2/26/23		—			—
		2012		175,000		525,000	(3)		$59.87		2/28/22		—			—
		2011		387,500		387,500	(4)		$57.05		2/24/21		—			—
		2010		712,500		237,500	(5)		$40.17		2/25/20		—			—
		2009		950,000		—			$28.35		2/23/19		—			—
		2008		650,000		—			$58.48		2/25/18		—			—
		2007		700,000		—			$47.38		2/25/17		—			—
		2006		700,000		—			$42.32		2/16/16		—			—
		2005		600,000		—			$36.51		2/1/15		—			—
		Total		4,875,000		1,900,000							0			$0
David J. Anderson		2013		—		200,000	(2)		$69.77		2/26/23		—			—
		2012		50,000		150,000	(3)		$59.87		2/28/22		45,503	(6)		$4,157,609
		2011		137,500		137,500	(4)		$57.05		2/24/21		—			—
		2010		206,250		68,750	(5)		$40.17		2/25/20		42,178	(7)		$3,853,804
		2009		175,000		—			$28.35		2/23/19		—			—
		2008		160,000		—			$58.48		2/25/18		—			—
		2007		175,000		—			$47.38		2/25/17		—			—
		2006		175,000		—			$42.32		2/16/16		—			—
		Total		1,078,750		556,250							87,681			$8,011,413
Roger Fradin		2013		—		225,000	(2)		$69.77		2/26/23		—			—
		2012		—		—							18,615	(8)		$1,700,853
		2012		50,000		150,000	(3)		$59.87		2/28/22		36,196	(6)		$3,307,229
		2011		137,500		137,500	(4)		$57.05		2/24/21		—			—
		2010		206,250		68,750	(5)		$40.17		2/25/20		84,279	(9)		$7,700,572
		2008		160,000		—			$58.48		2/25/18		—			—
		2007		175,000		—			$47.38		2/25/17		—			—
		Total		728,750		581,250							139,090			$12,708,654
Timothy O. Mahoney		2013		—		200,000	(2)		$69.77		2/26/23		—			—
		2012		37,500		112,500	(3)		$59.87		2/28/22		46,537	(10)		$4,252,086
		2011		105,000		105,000	(4)		$57.05		2/24/21		—			—
		2010		157,500		52,500	(5)		$40.17		2/25/20		43,476	(11)		$3,972,402
		2009		—		—							8,269	(12)		$755,539
		2009		40,000		—			$28.35		2/23/19		—			—
		2008		—		—							7,992	(13)		$730,229
		2008		20,000		—			$58.48		2/25/18		—			—
		2007		20,000		—			$47.38		2/25/17		—			—
		Total		380,000		470,000							106,274			$9,710,256
Andreas C. Kramvis		2013		—		150,000	(2)		$69.77		2/26/23		10,000	(14)		$913,700
		2012		31,250		93,750	(3)		$59.87		2/28/22		41,366	(15)		$3,779,611
		2011		87,500		87,500	(4)		$57.05		2/24/21		—			—
		2010		131,250		43,750	(5)		$40.17		2/25/20		108,151	(16)		$9,881,757
		2010		—		—							25,932	(17)		$2,369,407
		2008		66,000		—			$56.35		3/31/18		19,776	(18)		$1,806,933
		2008		14,000		—			$58.48		2/25/18		—			—
		2007		16,000		—			$47.38		2/25/17		—			—
		Total		346,000		375,000							205,225			$18,751,408

 

56     |

Proxy and Notice of Annual Meeting of Shareowners     |     2014

Executive Compensation > Outstanding Equity Awards at 2013 Fiscal Year-End

 

(1)		Market value determined using the closing market price of $91.37 per share of Common Stock on December 31, 2013.
(2)		2013 option grants vest in four annual installments at the rate of 25% per year. Installments vest on February 27, 2014, February 27, 2015, February 27, 2016 and February 27, 2017.
(3)		2012 option grants vest in four annual installments at the rate of 25% per year. The first installment vested on March 1, 2013. The remaining installments will vest on March 1, 2014, March 1, 2015 and March 1, 2016.
(4)		2011 option grants vest in four annual installments at the rate of 25% per year. The first two installments vested on February 25, 2012 and February 25, 2013. The remaining installments will vest on February 25, 2014 and February 25, 2015.
(5)		2010 option grants vest in four annual installments at the rate of 25% per year. The first three installments vested on February 26, 2011, February 26, 2012 and February 26, 2013. The remaining installment will vest on February 26, 2014.
(6)		These RSUs will vest 100% on July 25, 2015. RSUs reflected here include dividend equivalents granted through December 31, 2013 which were reinvested as additional unvested RSUs that will vest based on the same vesting schedule of the RSUs to which they relate. These RSUs are subject to a performance adjustment with the target grant subject to a 30% upward or downward adjustment based on Honeywell’s relative TSR performance ranking against its Compensation Peer Group over both a one-year period (ended July 31, 2013) and 30-month period (ending December 31, 2014).
(7)		50% of these RSUs vested on October 6, 2013. The remaining 50% will vest on October 6, 2014. RSUs reflected here include dividend equivalents granted through December 31, 2013 which were reinvested as additional unvested RSUs that will vest based on the same vesting schedule of the RSUs to which they relate. These outstanding RSUs reflect the impact of a positive 20% performance adjustment as a result of Honeywell’s relative TSR performance ranking against its Compensation Peer Group being in the top third over both the one-year period ended June 30, 2011 (Honeywell ranked #3 of 15) and 30-month period ended December 31, 2012 (Honeywell ranked #1 of 15).
(8)		These RSUs will vest 100% on July 26, 2018. RSUs reflected here include dividend equivalents granted through December 31, 2013 which were reinvested as additional unvested RSUs that will vest based on the same vesting schedule of the RSUs to which they relate. These RSUs are subject to a performance adjustment with the target grant subject to a 30% upward or downward adjustment based on Honeywell’s relative TSR performance ranking against its Compensation Peer Group over both a one-year period (ended July 31, 2013) and 30-month period (ending December 31, 2014).
(9)		These RSUs will vest 100% on October 7, 2014. RSUs reflected here include dividend equivalents granted through December 31, 2013 which were reinvested as additional unvested RSUs that will vest based on the same vesting schedule of the RSUs to which they relate. These outstanding RSUs reflect the impact of a positive 20% performance adjustment as a result of Honeywell’s relative TSR performance ranking against its Compensation Peer Group being in the top third over both the one-year period ended June 30, 2011 (Honeywell ranked #3 of 15) and 30-month period ended December 31, 2012 (Honeywell ranked #1 of 15).
(10)		These RSUs will vest 33% on each of July 25, 2015 and July 25, 2017, with the remaining RSUs vesting on July 25, 2019. RSUs reflected here include dividend equivalents granted through December 31, 2013 which were reinvested as additional unvested RSUs that will vest based on the same vesting schedule of the RSUs to which they relate. These RSUs are subject to a performance adjustment with the target grant subject to a 30% upward or downward adjustment based on Honeywell’s relative TSR performance ranking against its Compensation Peer Group over both a one-year period (ended July 31, 2013) and 30-month period (ending December 31, 2014).
(11)		33% of these RSUs vested on October 6, 2013. 33% will vest on October 6, 2015, with the remaining RSUs vesting on October 6, 2017. RSUs reflected here include dividend equivalents granted through December 31, 2013 which were reinvested as additional unvested RSUs that will vest based on the same vesting schedule of the RSUs to which they relate. These outstanding RSUs reflect the impact of a positive 20% performance adjustment as a result of Honeywell’s relative TSR performance ranking against its Compensation Peer Group being in the top third over both the one-year period ended June 30, 2011 (Honeywell ranked #3 of 15) and 30-month period ended December 31, 2012 (Honeywell ranked #1 of 15).
(12)		49% of these RSUs will vest on July 31, 2014, with the remaining RSUs vesting on July 31, 2016. RSUs reflected here include dividend equivalents granted through December 31, 2013 which were reinvested as additional unvested RSUs that will vest based on the same vesting schedule of the RSUs to which they relate.
(13)		49% of these RSUs vested on February 26, 2013. The remaining RSUs will vest on February 26, 2015. RSUs reflected here include dividend equivalents granted through December 31, 2013 which were reinvested as additional unvested RSUs that will vest based on the same vesting schedule of the RSUs to which they relate.
(14)		100% of these RSUs will vest on June 12, 2017. These RSUs are subject to a performance adjustment with the target grant subject to a 30% upward or downward adjustment based on Honeywell’s relative TSR performance ranking against its Compensation Peer Group over both a one-year period (ending December 31, 2014) and 36-month period (ending December 31, 2016).
(15)		These RSUs will vest 50% on each of July 25, 2016 and July 25, 2017. RSUs reflected here include dividend equivalents granted through December 31, 2013 which were reinvested as additional unvested RSUs that will vest based on the same vesting schedule of the RSUs to which they relate. These RSUs are subject to a performance adjustment with the target grant subject to a 30% upward or downward adjustment based on Honeywell’s relative TSR performance ranking against its Compensation Peer Group over both a one-year period (ended July 31, 2013) and 30-month period (ending December 31, 2014).
(16)		These RSUs will vest 100% on October 26, 2014. RSUs reflected here include dividend equivalents granted through December 31, 2013 which were reinvested as additional unvested RSUs that will vest based on the same vesting schedule of the RSUs to which they relate. These RSUs are subject to a performance adjustment with the target grant subject to a 25% upward or downward adjustment based on Honeywell’s relative TSR performance ranking against its Compensation Peer Group over a four-year period ending September 30, 2014.
(17)		50% of these RSUs vested on October 7, 2013. The remaining 50% will vest on October 7, 2015. RSUs reflected here include dividend equivalents granted through December 31, 2013 which were reinvested as additional unvested RSUs that will vest based on the same vesting schedule of the RSUs to which they relate. These outstanding RSUs reflect the impact of a positive 20% performance adjust-

 

2014     |     Proxy and Notice of Annual Meeting of Shareowners

|     57

Executive Compensation > Option Exercises and Stock Vested—Fiscal Year 2013

 

		ment as a result of Honeywell’s relative TSR performance ranking against its Compensation Peer Group being in the top third over both the one-year period ended June 30, 2011 (Honeywell ranked #3 of 15) and 30-month period ended December 31, 2012 (Honeywell ranked #1 of 15).
(18)		49% of these RSUs vested on July 25, 2013. The remaining RSUs will vest on July 25, 2015. RSUs reflected here include dividend equivalents granted through December 31, 2013 which were reinvested as additional unvested RSUs that will vest based on the same vesting schedule of the RSUs to which they relate.

 

OPTION EXERCISES AND STOCK VESTED—FISCAL YEAR 2013

 

		Option Awards					Stock Awards
Named Executive Officer		Number of Shares Acquired on Exercise(#)(1)			Value Realized on Exercise($)(2)		Number of Shares Acquired on Vesting(#)(3)			Value Realized on Vesting($)(4)
David M. Cote		600,000	(5)		$30,310,260		—			—
David J. Anderson		250,000	(6)		$11,627,680		41,964	(7)		$3,444,427
Roger Fradin		600,000	(8)		$28,402,090		—			—
Timothy O. Mahoney		43,500	(9)		$2,098,936		34,678	(10)		$2,735,111
Andreas Kramvis		205,000	(11)		$9,386,295		44,800	(12)		$3,694,831

 

(1)		Represents the total number of stock options exercised during 2013 before the sale of option shares to cover the option exercise price, transaction costs and applicable taxes.
(2)		Represents “in the money” value of stock options at exercise calculated as: the difference between the market price at exercise and the exercise price, multiplied by the total number of options exercised. The individual totals may include multiple exercise transactions during the year. Under Honeywell’s Stock Ownership Guidelines, an officer must hold after-tax net gain shares from an options exercise for at least one year before they can be sold.
(3)		Represents the total number of RSUs that vested during 2013 before share withholding for taxes and transaction costs, and without considering prior deferral elections.
(4)		Represents the total value of RSUs at the vesting date calculated the average of the high and low share price of one share of Common Stock on the day of vesting multiplied by the total number of RSUs that vested. The individual totals may include multiple vesting transactions during the year. Under Honeywell’s Stock Ownership Guidelines, an officer must hold after-tax net shares from an RSU vesting for at least one year before they can be sold.
(5)		Relates to options originally granted in February 2004 with a 10-year term. In connection with the stock option exercise, shares were sold to cover the payment of the exercise price and the applicable taxes due upon exercise with Mr. Cote retaining a total of 181,479 net gain shares. Net gain shares must be held at least one year before they can be sold.
(6)		In connection with these stock option exercises, shares were sold to cover the payment of the exercise price and the applicable taxes due upon exercise with Mr. Anderson retaining a total of 74,457 net gain shares. Net gain shares must be held at least one year before they can be sold.
(7)		Payout of the 41,964 shares acquired upon the vesting of these RSUs has been deferred and will be paid to Mr. Anderson in five equal annual installments commencing the year following his separation of service from Honeywell.
(8)		In connection with these stock option exercises, shares were sold to cover the payment of the exercise price and the applicable taxes due upon exercise with Mr. Fradin retaining a total of 167,044 net gain shares. Net gain shares must be held at least one year before they can be sold.
(9)		In connection with this stock option exercise, shares were sold to cover the payment of the exercise price and the applicable taxes due upon exercise with Mr. Mahoney retaining a total of 12,702 net gain shares. Net gain shares must be held at least one year before they can be sold.
(10)		Payout of 21,305 shares acquired upon the vesting of these RSUs has been deferred and will be paid to Mr. Mahoney in five equal annual installments beginning the year following his separation of service from Honeywell. Of the remaining 13,373 RSUs not subject to a prior deferral election, after withholding shares sufficient to cover applicable taxes and fees due upon vesting, Mr. Mahoney retained a total of 8,330 net shares. Net shares must be held at least one year before they can be sold.
(11)		In connection with these stock option exercises, shares were sold to cover the payment of the exercise price and the applicable taxes due upon exercise with Mr. Kramvis retaining a total of 59,743 net gain shares. Net gain shares must be held at least one year before they can be sold.
(13)		Payout of 25,800 shares acquired upon the vesting of these RSUs has been deferred and will be paid to Mr. Kramvis in a single installment in the year following his separation of service from Honeywell. Of the remaining 19,000 RSUs not subject to a prior deferral election, after withholding shares sufficient to cover applicable taxes and fees due upon vesting. Mr. Kramvis retained a total of 9,210 net shares. Net shares must be held at least one year before they can be sold.

 

58     |

Proxy and Notice of Annual Meeting of Shareowners     |     2014

Executive Compensation > Pension Benefits

 

PENSION BENEFITS

 

The following table provides summary information about the pension benefits that have been earned by our Named Executive Officers under two pension plans, the Honeywell International Inc. Supplemental Executive Retirement Plan (the “SERP”) and the Honeywell International Inc. Retirement Earnings Plan (the “REP”). The SERP and REP benefits depend on the length of each Named Executive Officer’s employment with us (and companies that have been acquired by us and, with respect to Mr. Anderson, service with certain prior employers). This information is provided in the table below under the column entitled “Number of years of credited service.” The column in the table below entitled “Present value of accumulated benefit” represents a financial calculation that estimates the cash value today of the full pension benefit that has been earned by each Named Executive Officer. It is based on various assumptions, including assumptions about how long each Named Executive Officer will live and future interest rates. Additional details about the pension benefits for each Named Executive Officer follow the table.

 

Pension Benefits—Fiscal Year 2013

 

Named Executive Officer		Plan Name		Number of Years of Credited Service(#)			Present Value of Accumulated Benefits($)(2)
David M. Cote		REP		11.9			$113,958
		SERP		11.9			$49,515,159
		Total		—			$49,629,117
David J. Anderson		REP		10.5	(1)		$159,830
		SERP		14.1	(1)		$9,095,734
		Total		—			$9,255,564
Roger Fradin		REP		37.6			$993,302
		SERP		37.6			$16,463,543
		Total		—			$17,456,845
Timothy O. Mahoney		REP		16.1			$577,063
		SERP		16.1			$4,274,044
		Total		—			$4,851,107
Andreas C. Kramvis		REP		26.2			$601,744
		SERP		26.2			$610,390
		Total		—			$1,212,134

 

(1)		The service taken into account in calculating Mr. Anderson’s SERP benefit includes 3.6 years of employment with his former employer. The portion of the present value of the accumulated SERP benefit attributable to these additional years of service is $1,837,567.
(2)		The present value of the accumulated retirement benefit for each Named Executive Officer is calculated using a 4.89% discount rate, the RP-2000 mortality table using scale BB and a retirement age of 61 for Mr. Cote, 62 for Mr. Mahoney, 64 for Mr. Anderson, and 65 for Messrs. Fradin and Kramvis, the earliest ages at which the Named Executive Officer can retire without an early retirement benefit reduction.

 

SUMMARY INFORMATION

 

•	The REP is a tax-qualified pension plan in which substantially all of our U.S. employees participate.
•	The REP complies with tax requirements applicable to broad-based pension plans, which impose dollar limits on the amount of benefits that can be provided. As a result, the pensions that can be paid under the REP for higher-paid employees represent a much smaller fraction of current income than the pensions that can be paid to less highly paid employees. We make up for this difference, in part, by providing supplemental pensions through the SERP.
•	In addition, Messrs. Cote, Fradin and Anderson are entitled to additional supplemental pension benefits which are described under the Contractual formula below. These additional supplemental pension benefits are also provided by the SERP.
•	All SERP and Contractual benefits other than Mr. Anderson’s Contractual benefit will be paid on the first day of the first month that begins following the 105th day after the later of the officer’s separation from service (as that term is defined in Internal Revenue Code Section 409A) or his earliest retirement date.

 

2014     |     Proxy and Notice of Annual Meeting of Shareowners

|     59

Executive Compensation > Pension Benefit Calculation Formulas

 

PENSION BENEFIT CALCULATION FORMULAS

 

Within the REP and the SERP, a variety of formulas are used to determine pension benefits. Different benefit formulas apply for different groups of employees for historical reasons. Generally, as we have grown through acquisitions, we have in many cases retained the benefit formulas under pension plans that were maintained by the companies that we acquired, in order to provide continuity for employees. The differences in the benefit formulas for our Named Executive Officers reflect this history. The explanation below describes the formulas that are used to determine the amount of pension benefits for each of our Named Executive Officers under the REP and the SERP.

 

Name of Formula	Benefit Calculation
REP	Lump sum equal to (1) 6% of final average compensation (annual average compensation for the five calendar years out of the previous ten calendar years that produces highest average) times (2) credited service.
Allied Salaried	Single life annuity equal to (1)(A) 2% of final average compensation (average of compensation for the 60 consecutive months out of prior 120 months that produces highest average) times (B) credited service (up to 25 years), minus (2) 64% of estimated Social Security benefits.
Signal	Single life annuity equal to (1)(A) 1.5% of final average compensation (average compensation for the 60 consecutive months out of the last 120 that produces the highest average) times (B) credited service (with no limit on service) minus (2)(A) 1.5% of estimated Social Security times (B) credited service up to 33 1/3 years.
Pittway	Single life annuity equal to (1) 1.2% of eligible compensation each year, up to the average of the Social Security wage bases, plus (2) 1.85% of eligible compensation in excess of such average.
Contractual	For Mr. Cote, single life annuity at age 60 equal to 60% of the average of final three years of base salary and bonus (with his bonus for 2012 limited to $4,300,000).   For Mr. Anderson, an annual amount equal to $175,000 payable in the form of a single life annuity if he retires, his termination occurs as a result of an involuntary termination without cause, or a change in control occurs.   For Mr. Fradin, single life annuity at the termination of employment equal to 50% of the average of final three years of base salary and bonus, subject to a $1,400,000 minimum annual benefit in most cases.

 

For each formula listed in the chart above, compensation taken into account in calculating pension benefits includes base pay, short-term incentive compensation, payroll-based rewards and recognition and lump sum incentives. Calculations for pension formulas other than the REP formula include the annual incentive compensation in the year earned. The REP formula includes annual incentive compensation in the year paid. The amount of compensation taken into account under the REP is limited by tax rules. The amount of compensation taken into account under the SERP and under the Contractual formula is not limited by tax rules, except SERP compensation under the Pittway formula is limited to $300,000. Compensation taken into account in calculating pension benefits under the SERP for 2009 (other than for the CEO) includes the greater of annual incentive compensation earned in 2009 (paid in 2010) or paid in 2009 (earned in 2008).

 

The benefit formulas above describe the pension benefits in terms of a lump sum cash payment (for the REP formula) or a single life annuity (for the other formulas). Participants are entitled to receive their benefits in other payment forms, including, for example joint and survivor annuities, period certain annuities and level income payments. However, the value of each available payment form is the same. Based on prior elections, Messrs. Cote, Fradin and Kramvis will receive their SERP benefits and any Contractual benefits in the form of a lump sum, and Messrs. Anderson and Mahoney will receive their SERP benefits and Contractual benefits in the form of an annuity.

 

The Allied Salaried formula also provides for early retirement benefits. A participant is eligible for early retirement if the participant’s age and years of service equal or exceed 60 and the participant has attained age 50 with at least five years of service or if the participant’s age and years of service equal or exceed 80 regardless of the participant’s age. If the participant retires early, the participant’s benefit at normal retirement age is reduced by ¼ of 1% for each month payments begin before age 62 (3% per year). In addition, the Social Security benefit reduction portion of the formula is reduced by 1/180 for each month benefits are paid between ages 60 and 65, and 1/360 for each month benefits are paid before the participant’s 60th birthday.

 

The Pittway formula provides for early retirement benefits. A participant is eligible for early retirement if the participant has attained age 55 with at least ten years of service. If the participant retires early, the participant’s benefit at normal retirement age is reduced by 1/180 for each of the first 60 months and 1/360 for each of the next 60 months by which the commencement of the payment of the retirement income precedes the participant’s normal retirement date.

 

60     |

Proxy and Notice of Annual Meeting of Shareowners     |     2014

Executive Compensation > Pension Benefit Calculation Formulas

 

As stated above, the pension formula used to determine the amount of pension benefits under each of the plans for our Named Executive Officers differs for historical reasons. Also, additional contractual pension benefits have been provided to certain Named Executive Officers as deemed necessary and appropriate at the time of their recruitment to the Company or to retain the executive. The table below describes which formulas are applicable to each of our Named Executive Officers.

 

Name	Description of Total Pension Benefits
Mr. Cote	•	Mr. Cote’s total pension benefits are equal to his Contractual formula benefits. The amount payable under the Contractual formula is reduced by amounts calculated under the REP formula and payable under the REP and the SERP plans. Mr. Cote’s Contractual formula benefits are also reduced by amounts he will receive from the retirement plans of his former employer, General Electric Company.
	•	Mr. Cote is currently eligible for retirement benefits payable under his Contractual formula without reduction or subsidy.
	•	Since Mr. Cote is currently unmarried, his Contractual formula benefits included in the table reflect the present value of a single life annuity with no surviving spouse benefit.
	•	Mr. Cote is entitled to a monthly pension benefit from his former employer, General Electric Company, in an amount of $5,649.
Mr. Anderson	•	Mr. Anderson’s total pension benefits are equal to the sum of his Allied Salaried formula benefits and his Contractual formula benefits.
	•	Mr. Anderson’s Allied Salaried formula benefits are determined by including his years of employment with a former employer, ITT Industries (3.6 years). Mr. Anderson is currently eligible for early retirement benefits payable under the Allied Salaried formula without subsidy.
	•	Mr. Anderson’s Contractual formula benefits are payable only if he retires from the Company, he is terminated by the Company for reasons other than cause or there is a change in control of the Company.
	•	Mr. Anderson’s pension benefits under the REP and a portion of his SERP benefits are determined under the REP formula. These amounts are part of, not in addition to, his Allied Salaried formula benefits.
Mr. Fradin	•	Mr. Fradin’s total pension benefits are equal to the sum of his Pittway formula benefits, his REP formula benefits and his Contractual formula benefits.
	•	Mr. Fradin’s 26.5 years of service before July 1, 2003 will be used for his Pittway formula benefits.
	•	Mr. Fradin’s years of service after June 30, 2003 will be used for his REP formula benefits.
	•	Mr. Fradin is currently eligible for early retirement benefits payable under the Pittway formula. Mr. Fradin’s Contractual formula benefit will be at least $1,400,000 per year. Due to subsidized early retirement, the value of his benefit payable on December 31, 2013 exceeds the benefit shown in the table above by $5,040,978.
	•	If Mr. Fradin dies before he has received a lump sum of his Contractual formula benefits, his surviving spouse will receive an annual benefit of 50% of the Contractual formula benefits.
Mr. Mahoney	•	Mr. Mahoney’s total pension benefits are equal to his Allied Salaried formula benefits.
	•	Mr. Mahoney is currently eligible for early retirement benefits payable under the Allied Salaried formula. Due to subsidized early retirement, the value of his benefit payable on December 31, 2013 exceeds the benefit shown in the table above by $375,917.
	•	A portion of Mr. Mahoney’s pension benefits under the REP and a portion of his SERP benefits are determined under the Signal formula. These amounts are part of, not in addition to, his Allied Salaried formula benefits.
Mr. Kramvis	•	Mr. Kramvis’ total pension benefits are equal to the sum of his Pittway formula benefits and his REP formula benefits.
	•	Mr. Kramvis’ 17.2 years of service before January 1, 2005 will be used for his Pittway formula benefits.
	•	Mr. Kramvis’ years of service after December 31, 2004 will be used for his REP formula benefits.
	•	Mr. Kramvis is currently eligible for early retirement benefits under the Pittway formula without subsidy.

 

2014     |     Proxy and Notice of Annual Meeting of Shareowners

|     61

Executive Compensation > Nonqualified Deferred Compensation—Fiscal Year 2013

 

NONQUALIFIED DEFERRED COMPENSATION—FISCAL YEAR 2013

 

Since 2005, Honeywell has taken steps to limit deferred compensation amounts owed to executives by reducing the overall interest rate earned on new deferrals and accelerating the payout of deferred amounts, thereby limiting the period over which interest is earned. These include changing the interest rate accruing on new deferrals under the Honeywell Supplemental Savings Plan (the “SS Plan”) and the Honeywell Salary and Incentive Award Deferral Plan for Selected Employees (the “DIC Plan”) from a fixed above-market rate to a rate that changes annually based on the Company’s 15-year cost of borrowing; and requiring payment of new SS Plan or DIC deferrals to begin shortly after termination of employment in a lump sum unless the participant leaves the Company after reaching retirement (age 55 with ten years of service). In addition, cash dividend equivalents on vested deferred RSUs cannot be deferred and dividend equivalents on unvested RSUs are reinvested in additional RSUs and subject to the same vesting schedule as the underlying RSUs.

 

Executive

Registrant

Aggregate

Aggregate

Contributions

Contributions

Earnings

Aggregate

Balance

in last

in last

in last

Withdrawals/

at last

Named Executive Officer

Plan

FY($)(2)

FY($)(2)

FY($)(2)

Distributions($)

FYE($)(2)

David M. Cote

SS Plan

$126,500

$94,875

$719,092

—

$4,123,092