Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No.   )
Filed by the Registrant
X
Filed by a Party other than the Registrant
 
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Preliminary Proxy Statement
 
 
 
 
 
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Definitive Proxy Statement
 
 
 
 
 
Definitive Additional Materials
 
 
 
 
 
Soliciting Material Under Rule 14a-12
ALBEMARLE CORPORATION
(Name of registrant as specified in its charter)
 
(Name of person(s) filing proxy statement, if other than the registrant)
 
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
 
 
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing:
 
 
 
 
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that Albemarle Corporation’s 2019 Annual Meeting (the “Annual Meeting”) of Shareholders will be held at Albemarle Corporation, 4250 Congress Street, Charlotte, North Carolina 28209, on Tuesday, May 7, 2019, at 7:00 a.m., Eastern Time, for the following purposes:
1.
To consider and vote on a non-binding advisory resolution approving the compensation of our named executive officers;
2.
To elect the eleven nominees named in the accompanying Proxy Statement to the Board of Directors to serve for the ensuing year or until their successors are duly elected and qualified;
3.
To ratify the appointment of PricewaterhouseCoopers LLP ("PwC") as our independent registered public accounting firm for the fiscal year ending December 31, 2019; and
4.
To conduct any other business which may properly come before the Annual Meeting or any adjournments or postponements thereof.
Only shareholders of record at the close of business on Friday, March 8, 2019, are entitled to receive notice of and vote at the Annual Meeting.
To ensure your vote is counted, you are requested to vote your shares promptly, regardless of whether you expect to attend the Meeting. Voting by the internet or telephone is fast and convenient, and your vote is immediately tabulated. In addition, by using the Internet or telephone, you help reduce our postage and proxy tabulation costs. You may also vote by completing, signing, dating and returning by May 6, 2019 the proxy enclosed with paper copies of the materials in the postage-paid envelope provided.
This year, we are again electronically disseminating Annual Meeting materials to some of our shareholders, as permitted under the “Notice and Access” rules approved by the Securities and Exchange Commission. Shareholders to whom Notice and Access applies will receive a Notice of Internet Availability of Proxy Materials containing instructions on how to access Annual Meeting materials via the internet. The Notice also provides instructions on how to obtain paper copies if preferred.
If you are present at the Annual Meeting, you may vote in person even if you already have voted your proxy by internet, telephone or mail. Seating at the Annual Meeting will be on a first-come, first-served basis.
By Order of the Board of Directors
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Karen G. Narwold, Secretary
March 26, 2019

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TABLE OF CONTENTS


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PROXY STATEMENT SUMMARY
This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all information that you should consider, and you should read the entire Proxy Statement carefully before voting. Throughout the Proxy Statement, “we,” “us,” “our,” “the Company” and “Albemarle” refer to Albemarle Corporation, a Virginia corporation.
Annual Meeting
Date and Time:                    Place:
Tuesday, May 7, 2019                    Albemarle Corporation
7:00 a.m., Eastern Time                4250 Congress Street
Charlotte, North Carolina 28209
Voting Matters
The following table summarizes the proposals to be considered at the Annual Meeting and the Board’s voting recommendation with respect to each proposal.
Proposal
Board Vote Recommendation
#1
Advisory Vote to Approve the Compensation of our Named Executive Officers (Say-on-Pay)
FOR
#2
Election of Directors
FOR each Nominee
#3
Ratification of Appointment of Independent Registered Public Accounting Firm for Fiscal Year 2019
FOR

Our Business
Business Segments
Lithium
Bromine Specialties
Catalysts
   -- Energy Storage
-- Glasses and Ceramics
-- Greases and Lubricants
-- Pharmaceutical Synthesis

-- Flame retardants
-- Industrial water treatment
-- Completion fluids for oilfield
-- Plastic and synthetic rubber
-- C3Ag and pharma synthesis
-- Fluid Cracking Catalysts
-- Clean Fuels Technologies
-- Organometallics & Curatives


Our Strategy
Organically grow Lithium production capacity: 165,000 MT LCE by 2021
Expand Catalysts segment through targeted research and development
Support Lithium segment growth through strong cash flow from mature businesses
Support growth through productivity and operational excellence

4



2018 Company Performance
Our 3-year Total Shareholder Return for 2016-2018 of 73% positioned Albemarle at the 87th percentile of our peer group
Double-digit Net Sales, Adjusted EBITDA and Adjusted EPS growth compared to 2017, supported by nearly 20% growth in Lithium segment and double-digit Adjusted EBITDA growth in Bromine and Catalysts segments
Signed definitive agreement to form Lithium Hydroxide JV with Mineral Resources Limited
Completed two accelerated share repurchases in 2018 totaling $500 million in value

Governance Highlights
We believe good governance is integral to achieving long-term shareholder value. We are committed to governance policies and practices that best serve the interests of our Company and its shareholders. Our Board of Directors (the “Board of Directors” or the "Board") monitors developments in governance best practices to ensure it continues to meet its commitment to thoughtful and independent representation of shareholder interests. The following table summarizes certain corporate governance practices and certain facts about the Board:
Governance Practices
Annual Election of all Directors
Longstanding Commitment to Sustainability and Corporate  Responsibility
Policies Prohibiting Hedging, Short Sale and Pledging Company Stock by Directors and Employees
Resignation Policy for Directors Not Receiving Majority Approval
Board and Committee Authority to Retain Independent Advisors
No Shareholder Rights Plan (Poison Pill)
Policy Requiring Directors to Not Stand for Re-election in the Year in Which They Reach 72 Years of Age
Regular Executive Sessions of Independent Directors
Robust Stock Ownership Guidelines (6X Salary for CEO)
Compensation Recovery Policy (Clawback Policy)
Risk Oversight by Full Board and Committees
Annual Board and Committee Evaluation Process led by Lead Independent Director
 
Director Nominees: Key Facts
Less than 5 years average tenure
10 of 11 are independent
45% ethnic and gender diversity
45% have CEO or COO experience

CEO Compensation
Target Total Direct Compensation is 9% below the median of the peer group
Pay mix: 86% of CEO pay is based on company performance
CEO pay shows a strong correlation between 3 year relative realizable pay and 3 year relative total shareholder return

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COMPENSATION DISCUSSION AND ANALYSIS
The following pages describe Albemarle’s executive compensation program and the compensation decisions made by the Executive Compensation Committee (the “Committee”) for our Named Executive Officers ("NEOs") listed below.(1) 
NEO
Title
Luther C. Kissam IV
Chairman, President and Chief Executive Officer
Scott A. Tozier
Executive Vice President, Chief Financial Officer
Karen G. Narwold
Executive Vice President, Chief Administrative Officer and Corporate Secretary
Donald J. LaBauve, Jr.
Vice President, Corporate Controller and Chief Accounting Officer
Matthew K. Juneau
Former Executive Vice President, Corporate Strategy and Investor Relations
(1)Mr. Juneau retired in March 2018.


EXECUTIVE SUMMARY

Compensation Program Highlights

86% of CEO target total direct compensation is incentive-based
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CEO compensation over a three-year period shows a strong correlation between realizable pay and total shareholder return relative to our Peer Group, with our performance rank well aligned with our pay rank.
Performance metrics were aligned with our Peer Group and our company goals: annual Adjusted EBITDA(1) and Adjusted Cash Flow from Operations(1) and Relative Total Shareholder Return (“TSR”) measured over a 3-year performance period.(1) 
Focused Peer Group of similarly-sized companies.
___________________________________________________

(1) 
See pages 13-16 for a discussion of how Adjusted EBITDA, Adjusted Cash Flow from Operations and TSR are calculated.

Aligning Our Incentives With Our Strategy and Shareholder Interests
We seek to align our executive compensation program with shareholder interests and our business strategy. This means keeping the foundation of our program focused on performance-based pay that supports our strategy and the related metrics of relative TSR, Adjusted EBITDA and Adjusted Cash Flow from Operations.
Shareholder Alignment:  In May 2018, the Company held our annual shareholder advisory vote to approve the compensation paid to our NEOs in 2017, which resulted in approximately 92% of the votes cast approving such compensation.
In the fall of 2018 we continued our annual engagement with our shareholders. This engagement gave us a basis for further evaluation of our practices in executive compensation and corporate governance. This initiative was led by a group of senior officers of the Company, acting on behalf, and at the request, of the Committee, by reaching out to shareholders holding 64% of our outstanding shares. Out of those shareholders who elected to engage with us (representing approximately 36% of our outstanding shares), we organized follow-up calls. This outreach reflects our commitment to understand and address key issues of importance to our shareholders. In line with the high support for our executive compensation program as expressed in the 2018 annual shareholder advisory vote to approve our NEO compensation, shareholders continued their support for our compensation program and the changes made over the past few years.
In considering investor feedback, our evolving business needs, and in furtherance of our desire to continue to link executive pay to performance, the Committee approved the following changes to our executive compensation program for 2019.
Shareholder Feedback
Changes to our Executive Compensation Program
Shareholders expressed a preference to cap the payout opportunity at 100% for our performance-based equity awards based on total shareholder return where, in absolute terms, total shareholder return is negative.
Starting with grants issued in 2019, we include a payout cap of 100% on Relative Total Shareholder Return (RTSR) payouts if, in absolute terms, total shareholder return is negative.
Given our higher than historical investments in capital in support of our business strategy, shareholders have expressed a preference to include a return on capital performance metric in our equity incentive program.
Starting in 2019, our performance based equity will be equally split between RTSR and ROIC. ROIC was chosen as additional performance measure to ensure alignment between our expected return on capital (as we enter a period of higher investments) and long term payout opportunities for our executives.

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Pay for Performance: 2018 Compensation Outcomes
CEO Pay At-A-Glance: Realizable Pay Relative Degree of Alignment
We believe our CEO’s total compensation reflects a pay opportunity commensurate with median levels among our Peer Group and aligns payout opportunities with the company's long-term performance. Realizable Pay Relative Degree of Alignment (“RPRDA”) is an important measure the Committee uses to assess whether realizable pay is commensurate with the total shareholder return achieved by shareholders relative to our Peer Group.
The RPRDA compares the percentile ranks of the CEO’s three-year realizable pay and the Company’s three-year TSR performance relative to the Peer Group. The RPRDA is equal to the difference between the combined performance rank minus the combined pay rank.
Realizable pay captures the following elements of compensation for the three-year period:
Base salary in the year it is earned;
Annual incentive compensation paid for the year it is earned;
“In-the-money” value of outstanding equity awards granted during the period, calculated based on stock price at year-end rather than the grant date fair value. The use of an end-of-year stock price directly correlates the value of an executive’s equity with the return our shareholders receive from investing in our common stock over the same period;
Stock Options: calculated using intrinsic value (closing stock price less strike price);
Restricted Stock: calculated using face value (closing stock price);
Performance Stock Units for awards granted and earned during the period: calculated using face value based on actual performance;
Performance Stock Units for awards granted and not earned (due to incomplete performance periods): calculated using face value at target performance.
Albemarle has used relative TSR as its long-term performance measure since 2014. Since then we have consistently measured RPRDA. The following table shows Albemarle's percentile rank relative to the peer group for the 3-year periods starting in 2014. No compensation data is included for the 2016-2018 period as such data cannot be obtained until after peer group company proxies are available in 2019.
The following table shows Mr. Kissam’s RPRDA for the 3-year periods, with both relative TSR and CEO compensation ranked in the 4th quartile of the peer group, showing a strong alignment between realizable pay and TSR over the three-year periods.
3-Year Period
Realizable Pay
Relative Total Shareholder Return
Realizable Pay Relative Degree of Alignment
Percentile Ranking
Percentile Ranking
2016-2018
Not available yet
87%
Not available yet
2015-2017
88%
100%
12%
2014-2016
88%
81%
(7)%



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THE EXECUTIVE COMPENSATION PROGRAM IN DETAIL
Compensation principles
The Committee designs and oversees the Company’s compensation policies and approves compensation for our NEOs. Our overarching goal is to create executive compensation plans that incent and are aligned with the creation of sustained shareholder value. To accomplish this, our plans are designed to:
Support our Business Strategy – We align our programs with business strategies focused on long-term growth and sustained shareholder value. Our plans provide incentives to our NEOs to overcome challenges and exceed our Company goals.
Pay for Performance – A large portion of our executive pay is dependent upon the achievement of specific corporate, business unit and individual performance goals. We pay higher compensation when goals are exceeded and lower compensation when goals are not met.
Pay Competitively – We set target compensation to be at or around the market median relative to the companies that make up our Peer Group.
Discourage Excessive Risk-taking – Our compensation programs are balanced and designed to discourage excessive risk-taking.
Compensation principles are aligned with good governance practices and pay for performance
Below is a list of things that we do and don’t do in order to ensure that our program reflects good governance practices and pay for performance.
What We Do
 
What We Don’t Do
We balance short-term and long-term compensation, designed to discourage short-term risk taking at the expense of long-term results. 67% of our CEO total direct compensation is equity based.
 
No excessive perquisites are provided to any NEO.
We make performance-based compensation a significant component of each NEO’s total compensation. 57% of CEO long term equity is performance based.
 
No stock option re-pricing without shareholder approval or discounted stock options are permitted under our 2017 equity plan.
We employ longer than peer group median vesting periods in our annual LTIP grants, which encourage executive retention and a long-term perspective (see page 17).
 
No excise tax gross-ups for change of control payments are provided to any NEO.
We require above peer group median stock ownership for our NEOs.
 
No hedging and short selling of our shares by our NEOs or Directors. 
The Committee uses an independent executive compensation consultant who reports directly to the Committee.
 
 
We have a clawback policy for the recovery of cash and non-cash compensation in the event of NEO misconduct which results in a financial restatement.
 
 
We have an annual frequency of our advisory vote on executive compensation (say-on-pay).
 
 
We require a double trigger for equity to vest following a Change in Control (CIC).
 
 

9




The components of our executive compensation program
We provide our NEOs with the following components of compensation:
Annual
Annual base salary and annual cash incentive opportunities.
Long-Term
Long-term incentive awards for our NEOs comprise a combination of 50% Performance Stock Units (PSUs), 25% Restricted Stock Units (RSUs), and 25% stock options.
Benefits
Various health and welfare benefits, including health and life insurance, retirement benefits and savings plan that are generally available to all our employees.
Post-Termination Benefits
Severance and change in control benefits.
 
For each NEO, the Committee reviews and approves annually each component of compensation and the resulting total compensation. The Committee benchmarks the individual components of compensation and total compensation to our Peer Group. In setting the compensation for each NEO, the Committee also considers other factors, including the scope and complexity of his or her position, level of performance, skills and experience and contribution to the overall success of the Company. As a result, we do not set compensation for our NEOs in a formulaic manner.
Our compensation program is designed to focus our NEOs on long-term success
We design our compensation programs to keep our NEOs focused on the long-term success of our Company by making a substantial portion of their compensation subject to the achievement of specific performance measures, requiring NEOs to hold a significant amount of Company stock during the term of their employment and granting stock-based awards with multi-year vesting periods.
The performance period covered by our PSU grants is three years, with the vesting of any award earned occurring in two equal tranches – the first tranche after the end of the third year of the performance period and the second tranche on the first January 1 after the end of the performance period. PSUs issued in 2018 were based 100% on relative TSR as compared to our Peer Group. PSUs granted in 2019 were based on relative TSR as compared to our Peer Group and ROIC, each with equal weighting. The Committee chose these measures to provide a strong linkage between the rewards for our leaders and the returns experienced by our shareholders, and also because these measures were thought to be well aligned with the longer three-year performance period and the higher level of investments in capital for that period.
RSUs have a minimum vesting period of three years and also vest in two equal tranches – the first tranche at the third anniversary of the Grant Date and the second tranche at the fourth anniversary of the Grant Date.
Stock option grants made after 2015 cliff vest at the third anniversary of the Grant Date. These awards reinforce the focus of our NEOs on the long-term success of the Company by aligning their personal financial success with that of our shareholders.

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Competitive Compensation – Peer Group
The committee uses a peer group to align executive compensation with comparable positions within that peer group. We use the following criteria for selecting peer companies that we include in our compensation peer group.
Criteria for selecting peer companies
 
How we use the compensation peer group
Companies with the same eight-digit GICS code as Albemarle
 
As an input in designing compensation plans, benefits and perquisites
Comparable size based on revenue of approximately 0.5-2.0 times that of Albemarle
 
As an input in developing base salary ranges, annual incentive targets and long-term awards
Market capitalization of approximately 0.25-4.0 times that of Albemarle
 
To benchmark total direct compensation, including the pay mix

We use industry and revenue as our two main indicators for determining our peers. We believe that using an industry-specific group companies with similar revenue is appropriate because it provides us with the best comparisons for competitive compensation offered by publicly held companies with similar business challenges and the type of leadership talent needed to achieve success over the long-term. We consider market value as an important factor for peer selection, but believe that market value should be balanced with sales (which are less volatile and a better predictor of compensation levels).
In setting base salaries, target total cash compensation and target total direct compensation, the Committee generally focused on the median of the last reported data from the 2018 Peer Group. The Committee also referred to survey information from nationally recognized compensation surveys. 
For 2018, Albemarle used the same Peer Group that it used in 2017. Our selected 2018 Peer Group (the "2018 Peer Group") consists of 17 chemical companies.
2018 Peer Group
Ashland Inc.
Cabot Corporation
The Chemours Company
Celanese Corporation
CF Industries Holdings, Inc.
FMC Corporation
H. B. Fuller Company
W. R. Grace & Co.
International Flavors & Fragrances, Inc.
Koppers Holdings Inc.
The Mosaic Company
Minerals Technologies Inc.
Olin Corporation
PolyOne Corporation
RPM International Inc.
A. Schulman, Inc.
Scotts Miracle-Gro Company
 

NEO Target and Actual Compensation
The Committee does not rely exclusively on the Peer Group data or survey data in establishing target levels of compensation, or employ a rigid or formulaic process to set compensation levels. The Committee does utilize the Peer Group data and survey data as one of many tools. In setting compensation levels, the Committee considers the following factors:
The competitive data (Peer Group and other survey data), focusing on the median data as a starting point;
Each NEO’s performance;
Each NEO’s scope of responsibility and impact on the Company’s performance;
Internal equity – NEO’s compensation relative to his or her peers, direct reports and supervisors;

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The recommendations of the Board’s independent executive compensation consultant, Pearl Meyer, with respect to the NEOs; and
The CEO’s recommendations for his direct reports.
The Committee evaluates the performance of each NEO in light of our overall financial performance (as described in greater detail below) and non-financial performance goals and strategic objectives approved by the Committee and the Board of Directors. For 2018, as in past years, the Committee structured a compensation package for our NEOs comprised of base salary and benefits coupled with annual and long-term incentives, which we believe provides an appropriate mix of financial security, risk and reward.
2018 Base Salaries
Base salary provides our NEOs with a basic level of financial security and supports the Committee’s objectives in attracting and retaining top talent. Base salaries for our NEOs other than the CEO are recommended by our CEO and are reviewed and approved by the Committee. Base salary for our CEO is recommended and approved by the Committee. For 2018 the Committee decided to keep base salary for the CEO at the same level as in 2017.
Executive Officer
2017 Year-End Base Salary
2018 Increase in Annual Base Salary
2018 Annual Base Salary
Luther C. Kissam IV
 
 
 
Chairman, President and Chief Executive Officer
$
1,000,000

$

$
1,000,000

Scott A. Tozier
 
 
 
Executive Vice President, Chief Financial Officer
$
560,000

$
28,000

$
588,000

Karen G. Narwold
 
 
 
Executive Vice President, Chief Administrative Officer and Corporate Secretary
$
485,000

$
24,250

$
509,250

Donald J. LaBauve, Jr.
 
 
 
Vice President, Corporate Controller and Chief Accounting Officer
$
293,429

$
10,571

$
304,000

Matthew K. Juneau
 
 
 
Former Executive Vice President, Corporate Strategy and Investor Relations
$
427,000

$

$
427,000


2018 base salaries for each of the NEOs were determined in recognition of the responsibilities of their positions, their contributions to the success of the Company and their relative position to the peer group of companies. Salary increases went into effect on April 1, 2018. The Committee believes that each NEO’s salary was reasonable and appropriate.
Purpose and key features of the 2018 Annual Incentive Program (AIP)
The Committee designed the AIP to provide both an incentive to achieve, and a reward for achieving, our annual goals and objectives. Each year, the Committee and the Board approve the performance goals under the AIP. These performance goals are intended to ensure that our NEOs execute on short-term financial and strategic initiatives that drive our business strategy and long-term shareholder value.

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For 2018, the Committee established the following Company performance measures and weightings for the AIP:
Metrics
Weight
Adjusted EBITDA
60
%
Adjusted Cash Flow from Operations
30
%
Stewardship
10
%
Total
100
%
 
Rationale behind the performance metrics
The Committee chose these performance metrics to align the AIP with our 2018 goals and objectives. The Committee chose the relative weights of the performance measures based on the desire to emphasize financial results while maintaining a focus on non-financial objectives.
The Committee chose Adjusted EBITDA and Adjusted Cash Flow from Operations as the 2018 AIP metrics because they were considered the key measures of financial performance in the Company’s 2018 annual operating plan.
The level of Adjusted EBITDA aligned with the Target payout level was set by the Committee at the 2018 operating plan amount. Adjusted EBITDA is defined as total Albemarle earnings before interest, tax, depreciation and amortization, as adjusted for non-recurring, non-operating and special items.
The Committee focuses on Adjusted Cash Flow from Operations as a performance measure aligned with our objectives of generating cash for debt reduction and growth. The level of Adjusted Cash Flow from Operations aligned with the Target payout level was set by the Committee at the 2018 operating plan amount. Adjusted Cash Flow from Operations is defined as cash from Operations as reported on our Statement of Cash Flows, adjusted for pension contributions, joint venture earnings distribution timing, non-recurring and one-time or unusual items.
The superior performance levels for both of these metrics were set at levels by the Committee that were believed to be realistic, but only as the result of exceptional performance.
Stewardship metrics were included because they are critical to our license to operate and consistent with our values. These objectives were ambitious, as the Committee set a quantitative target and superior levels of performance for each of these metrics at levels that required year-over-year improvement, with no payout earned for any one individual Stewardship metric if target performance for that metric was not achieved.
The Committee may take into account extraordinary or infrequently occurring events, or significant corporate transactions in deciding to adjust the results used to determine whether or not the AIP objectives have been met. The Committee retains the right to exercise discretion in determining the final level of the awards paid, in order to ensure that the AIP remains consistent with its stated objectives. In the last 10 years the Committee has not used its discretion in determining the achievement of the company performance metrics.


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Individual performance modifiers
At the beginning of 2018, individual objectives were set for each NEO. Individual performance was evaluated by comparing actual performance to the pre-established leadership objectives and considering individual accomplishments not contemplated in the setting of the pre-established objectives. The Committee assessed the performance of the CEO, and the CEO presented his assessment of each other NEO to the Committee.
Performance goals typically include both leadership objectives and strategic business objectives. At the end of each fiscal year, an individual performance modifier is determined for each participant, and a judgment is then made as to the final bonus amount that takes into account both Company results and individual performance.
Performance against our 2018 AIP Metrics
The following table summarizes the threshold, target and superior performance levels set by the Committee and actual results for the Adjusted EBITDA and Adjusted Cash Flow from Operations metrics for 2018.
Performance at the threshold level paid out 0%, performance at the target level paid out 100% and performance at the superior (maximum) level paid out 200%. We used linear interpolation to determine awards for performance between the identified points. Bonus payouts, in the combination of the payout based on business performance and individual multiplier, are capped at 200%.
2018 Annual Incentive Plan (AIP) Metrics
AIP Metric
Weight
Threshold
 
Target
Superior
2018 Results
Achievement Against Target
Payout Based on Weight
Adjusted EBITDA
60
%
 
$
885

MM  
$
983

MM  
$
1,081

MM  
$
996

MM  
101.3
%
67.9
%
Adjusted Cash Flow from Operations
30
%
 
$
774

MM  
$
860

MM  
$
946

MM  
$
786

MM  
91.4
%
4.2
%
Stewardship
 

Score based on 3 Quantitative Stewardship Metrics:
0
%
0
%
4
%
Occupational Safety
0
%
 
 
 
3
%
Process Safety
0
%
 
 
3
%
Environment
0
%
 
 
 
 
72.1
%


The performance for the stewardship metrics (occupational safety, process safety and environmental responsibility) was determined by the Committee’s quantitative assessment of the level of achievement for the three different stewardship objectives. For each of the three stewardship metrics, we have set a target and superior performance level. Performance below target does not pay out. Occupational safety was measured as our lost time severity rate, which is calculated as the number of lost days x 200,000 and divided by the total man-hours worked; process safety was measured by severity score; and environmental responsibility was measured by the number of our environmental incidents. We believe in the importance of setting meaningful stewardship standards for our global organization. We did not meet the target stewardship levels for the 2018 performance year and have developed specific measures to improve performance in 2019.

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The following table illustrates the 2018 AIP payout against payout levels over the 4 previous years. We believe the fluctuations in payout confirm the correlation of pay to performance at Albemarle.
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AIP earning opportunity for our NEOs
Each of our current NEOs can earn a bonus under the AIP targeted at a certain percentage of his or her base salary. For 2018, our NEOs’ target bonus percentages were 125% (Mr. Kissam), 75% (Messrs. Tozier and Juneau and Ms. Narwold) and 40% (Mr. LaBauve) for achieving the target performance levels for the AIP Company metrics.
Mr. Kissam’s target total direct compensation positions him at 91% of the median of the 2018 Peer Group.
For Company performance that does not reach threshold level for any of the metrics, the NEOs will not earn their AIP for the corresponding metric. For performance at the target level for any of the metrics, the NEOs may earn the target level AIP for the corresponding metric. For Company performance at the Superior level, up to two times a target level award may be earned. For Company performance between threshold, target and superior, earned bonuses will be interpolated, with the exception of the Stewardship metrics that do not pay out for performance below the target level.
2018 Annual Incentive Plan (AIP) Payout
AIP Metric
Weight
Threshold
Target
Superior
Adjusted EBITDA
60
%
0
%
100
%
200
%
Adjusted Cash Flow from Operations
30
%
0
%
100
%
200
%
Stewardship
10
%
N/A

100
%
200
%
Individual performance can be used to modify the bonus amount up or down. The individual multiplier ranges from 0% to 150%. Under the AIP, the maximum annual incentive payments (the

15



combination of company performance and individual multiplier) are set in the first quarter of the calendar year and are capped to a payout of 200% of the target incentive level for each of the NEOs.
Actual earnings for our NEOs under the 2018 AIP
The Committee reviewed the Company’s 2018 performance and determined that the potential awards for the NEOs were funded consistent with the plan metrics set during the first quarter of the year. After this determination was made, Mr. Kissam engaged the Committee in a further discussion of the Company’s performance and of each NEO’s individual performance compared to their objectives. In light of the accomplishments by each NEO that were cited by Mr. Kissam to the Committee, it was recommended by Mr. Kissam and approved by the Committee that the individual performance modifier for each NEO be set as follows: Mr. Tozier 100%, Ms. Narwold 110% and Mr. LaBauve 100%. Due to his departure early 2018, Mr. Juneau did not qualify for a bonus payout.
In the case of Mr. Kissam, in early 2019 the Board assessed his performance against both quantitative metrics (stewardship and financial goals, as well as cash flow from operations) and qualitative objectives (capital expansions, operational excellence, strategy, people, and Board collaboration) and determined that an individual modifier of 95% was appropriate given performance against these measures, including the fact that the company did not achieve its stewardship targets.

When applied to and combined with the Company score, this yielded actual bonus payouts for each NEO shown in the table below.
2018 AIP Payouts
Name
Base Salary
X
Target
Bonus
%
=
Target
Bonus
Amount
X
Company
Performance
X
Individual
Performance
=
Actual
Bonus
Amount
Luther C. Kissam IV
$
1,000,000

x
125%
=
$
1,250,000

x
72.1%
x
95%
=
856,389

Scott A. Tozier
$
581,095

x
75%
=
$
435,821

x
72.1
x
100%
=
314,302

Karen G. Narwold
$
503,271

x
75%
=
$
377,453

x
72.1
x
110%
=
299,429

Donald J. LaBauve, Jr.
$
301,394

x
40%
=
$
120,558

x
72.1
x
100%
=
86,943

Purpose and key features of the Long Term Incentive Plan (LTIP)
We believe it is important to provide a long-term incentive opportunity to our NEOs charged with driving sustainable growth and long-term value creation for Albemarle, further aligning their interests with those of our shareholders. We do this through an annual LTIP grant, in 2018 comprised of PSUs, RSUs and stock options, designed to ensure an equity mix that is primarily performance-based and retentive in nature.
The Committee considers grant values and grant terms from both our Peer Group and survey information when establishing long-term incentives for management. While the Committee generally believes that median values and typical terms are competitive and provide an appropriate balance of opportunity and reward to management without heightened compensation-related risk, the Committee will authorize values above or below the median and different terms where it believes it is in the interest of the Company and its shareholders to do so in light of the factors mentioned above.
Our PSU grant performance measure is relative TSR as compared to our Peer Group for the three-year performance period. The relative TSR performance metric was selected to emphasize the linkage between our pay-for-performance philosophy and our shareholders’ interests, and is intended to focus Company leadership on superior value creation during the three-year performance period and beyond.

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The Committee believes that the PSU grant, when viewed in conjunction with annual grants of stock options and RSUs, results in an LTIP approach that aligns the pay for performance of our executives with the investment returns experienced by our long-term shareholders.
Vesting
We employ longer vesting periods than our peer group median.
 
Albemarle
Compensation Peer Group Median
PSUs
Earned PSU grants vest 50% at the end of the 3-year performance period, with the remaining 50% vesting at the beginning of year four.
Earned PSU grants vest in full after 3 years.
RSUs
RSUs vest 50% after 3 years, with the remaining 50% vesting after 4 years.
RSUs cliff vest after 3 years.
Stock Options
Stock Options cliff vest after 3 years.
Stock options step-vest over a 3-year period.

PSU results for the 2016-2018 performance period
Payouts under the 2016 PSU grants are earned based on the achievement of a TSR performance relative to the 2016 Peer Group over a three year measurement period. The 2016 Peer Group included 18 companies. Three companies were acquired by other companies throughout the performance period and are therefore not included in the relative TSR calculation. Our relative TSR for the period was strong. Our absolute TSR for that period was 73.1%, resulting in a relative performance at the 87th percentile relative to the 2016 Peer Group.
The following table illustrates threshold, target and superior relative performance levels and the percentage of the target grant earned for each performance level. Results between threshold and target, and target and superior performance, are interpolated. The table also includes the relative performance result and the percentage of grants earned as determined by the Committee.
 
2016 PSU Grant Metrics
Threshold
Target
Superior
Metric Result
Percentile performance relative to the 2016 Peer Group
25th

50th

75th

87th

% of Grants Earned
25
%
100
%
200
%
200
%
The following table shows the grants approved in February 2016 by the Committee for the NEOs. The table also includes the grant values approved by the Committee in February 2019 after it determined the 2016-2018 relative performance results.

17



 
2016 PSU Grants
2016 Earned PSUs
 
Number of Units at
Threshold
 Number of Units at
Target
Number of Units at
Superior
 
25%
100%
200%
Luther C. Kissam IV
8,841

35,361

70,722

70,722

 
Scott A. Tozier
1,990

7,957

15,914

15,914

 
Karen G. Narwold
1,548

6,189

12,378

12,378

 
Donald J. LaBauve, Jr.
332

1,327

2,654

2,654

 
Matthew K. Juneau
1,327

5,305

10,610

7,958

 

Half of the shares earned vested on February 26, 2019, when the Committee certified performance. The other half will vest on January 1, 2020, except for Mr. Juneau, whose PSUs all vest at the award date given his retirement in 2018. Mr. Juneau's earned PSUs are prorated based on his retirement in early 2018.
2018 LTIP grants
In February 2018, the Committee approved a total grant value for the NEOs under the LTIP. The values granted to each NEO are set forth below, as well as the approximate percentage apportioned in the form of PSUs, RSUs and Stock Options. Mr. Kissam’s equity grant reflects our emphasis on long-term incentives in our pay mix. Mr. Juneau did not receive a grant in 2018 given his retirement in early 2018.
 
2018 Grants
 
Value Granted
Stock Options
RSUs
PSUs
Luther C. Kissam IV
$
4,000,000

25
%
25
%
50
%
Scott A. Tozier
$
1,050,000

25
%
25
%
50
%
Karen G. Narwold
$
1,000,000

25
%
25
%
50
%
Donald J. LaBauve, Jr.
$
200,000

%
50
%
50
%
The number of units for the PSUs and RSUs was based on the stock closing price at the grant date. The number of stock options was determined using the Black Scholes value of the options.
PSU Grants
In February 2018, the Committee approved a grant of PSUs, based on the grant date closing stock price, to our NEOs, as follows:
 
2018 PSU Grants
 
Number of Units at Threshold 25%
    
Number of Units at 
Target 100%
    
Number of Units at 
Superior 200%
Luther C. Kissam IV
4,211

 
16,844

 
33,688

Scott A. Tozier
1,106

 
4,422

 
8,844

Karen G. Narwold
1,053

 
4,212

 
8,424

Donald J. LaBauve, Jr.
211

 
844

 
1,688

Consistent with the approach adopted since 2014, the 2018 PSU grant is based on the Company’s TSR relative to the 2018 Peer Group as measured over a three-year performance period.

18



The following table illustrates threshold, target and superior relative performance levels and the percentage of the target grant earned for each performance level. Results between threshold and target and target and superior performance will be interpolated.
Performance and payout opportunities as shown in the table reflect the dual character of the PSU grant:
The grant is performance-based to ensure payout opportunities are aligned with shareholder interests.
The grant is also competitive in nature and as such reflects performance and payout opportunities aligned with the Peer Group and the broader market in which we compete for talent.
 
2019 PSU Grant Metrics
 
Threshold
Target
Superior
Percentile performance relative to the 2018 Peer Group
 25th

 50th

 75th

% of Grants Earned
25
%
100
%
200
%
 
Half of any shares earned will vest in early 2021 at the time the Committee evaluates the three-year relative TSR performance. The other half will vest on January 1, 2022.
RSU Grants
In February 2018, the Committee approved RSU awards to our NEOs, as follows:
 
2018 Restricted Stock Units
Luther C. Kissam IV
8,422

Scott A. Tozier
2,212

Karen G. Narwold
2,106

Donald J. LaBauve, Jr.
844

 
Half of the RSUs will vest on each of the third and fourth anniversary of the grant date in 2021 and 2022.
Stock Option Grants
In February 2018, the Committee approved a grant of stock options to our NEOs, as follows:
 
2018 Stock Options
Luther C. Kissam IV
26,774

Scott A. Tozier
7,029

Karen G. Narwold
6,694

Donald J. LaBauve, Jr.
N/A

The options vest on the third anniversary of the grant date and expire ten years from the date of the grant.

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Other benefits the Company provides to NEOs
The Company provides NEOs with the same benefits provided to other Albemarle employees, including:
Health and dental insurance (Company pays a portion of costs);
Basic life insurance;
Long-term disability insurance;
Participation in the Albemarle Corporation Savings Plan (the “Savings Plan”), including Company matching and defined contribution pension contributions;
Participation in the Executive Deferred Compensation Plan;
Participation in Albemarle Corporation Pension Plan, defined below, for those executives hired prior to 2004 (Messrs. Kissam, Juneau and LaBauve only); and
Matching charitable contributions.
Executive Deferred Compensation Plan (“EDCP”)
We maintain a deferred compensation plan that covers executives, including the NEOs, who are limited in how much they can contribute to tax-qualified deferred compensation plans (such as our Savings Plan). We maintain this plan in order to be competitive and because we want to encourage executives to save for their retirement. A participant in the EDCP may defer up to 50% of base salary and/or up to 100% of cash incentive awards (net of FICA and Medicare taxes due). We also provide for employer contributions in the EDCP to provide executives with the same proportional benefits as are provided to all other employees, but that cannot be provided under our tax-qualified plan because of statutory limitations that apply under that plan. The EDCP also provides for a supplemental benefit of 5% of compensation in excess of amounts that may be recognized under the tax-qualified Savings Plan and of the cash incentive bonus award paid during the year.
Beginning on January 1, 2013, all our NEOs, regardless of hire date, participate in the same tax- qualified Savings Plan and EDCP. The new defined contribution plan design has provided all participating employees the opportunity to receive a Company contribution of 11% of their base and bonus earnings for the calendar year if they contribute at least 9% of their base and bonus earnings to the Savings Plan. Such Company contributions go into the tax-qualified Savings Plan up to the compensation and benefit limitations under the Internal Revenue Code (the "Code"), and after that are credited to an EDCP account.

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Defined Benefit Plan
We previously maintained a traditional tax-qualified defined benefit pension plan ("Pension Plan"), which was fully frozen as of December 31, 2014. In 2004, we implemented a new defined contribution pension benefit in our tax-qualified Savings Plan for all non-represented employees hired on or after April 1, 2004, and limited participation in the "Pension Plan" to then-current participants. Mr. Kissam, Mr. Juneau and Mr. LaBauve joined the Company prior to April 1, 2004, and, as such, participated in the Pension Plan. We also maintain a supplemental executive retirement plan (“SERP”) to provide participants with the difference between (i) the benefits they would actually accrue under the Pension Plan but for the maximum compensation and benefit limitations under the Code, and (ii) the benefits actually accrued under the Pension Plan, which are subject to the Code’s compensation and benefit limits. Certain provisions of the SERP also permitted the Committee to award key executives additional pension credits related to offset reduction in the Pension Plan plan as a mid-career hire. This provision was also limited to then-current participants in 2004 concurrent with the Pension Plan changes. The Company froze accruals in the Pension Plan and SERP effective December 31, 2014.
Perquisites
Our perquisites are intended to be limited in nature, and are focused in areas directly related to a business purpose, or in helping to foster the health, security and well-being of our senior executives for the benefit of the Company.
When an NEO is required to geographically relocate in order to join the Company, or is asked to relocate due to a change in their work location after joining the Company, we provide them with the same relocation package that is also offered to management and senior professional employees. Certain relocation expenses are grossed-up for taxes, as is the competitive practice within our Peer Group, and more broadly, in the general marketplace.
We also offer limited reimbursement for executive physical exams and financial planning. Our policy is to not provide tax gross-ups on such amounts to NEOs.
Post-termination payments
We believe that providing our executives, including our NEOs, with reasonable severance benefits aligns their interests with shareholders’ interests in the context of potential change in control transactions, and also believe that such benefits help facilitate our recruitment and retention of senior executive talent.
Consistent with this philosophy, we maintain a Severance Pay Plan (“SPP”) that provides severance payments to certain of our employees if we (a) terminate their employment without cause or request that they relocate and they elect not to do so after a change in control, or (b) eliminate their position or a change in our organizational structure with a similar effect absent a change in control. The SPP provides our NEOs with severance payments only in the absence of a change in control.
Between 2006 and 2017, we entered into severance compensation agreements (and related amendments) with each of our NEOs, providing for severance payments for a change in control-related termination. None of these severance compensation agreements include an excise tax gross-up.
The Committee periodically reviews our post-employment compensation arrangements taking best practices into consideration, and believes that these arrangements are generally consistent with arrangements currently being offered by our Peer Group. The Committee has determined that both the terms and payout levels are appropriate to accomplish our stated objectives. The Committee also considered the non-competition agreement that we would receive from the NEO in exchange for any

21



post-employment termination benefits. Based on these considerations, the Committee believes that such arrangements are appropriate and reasonable.
For additional information with respect to change in control arrangements, please see “Agreements with Executive Officers and Other Potential Payments upon Termination or a Change in Control” on page 36.
ADDITIONAL INFORMATION
We believe this additional information may assist you in better understanding our compensation practices and principles.
Role of the Committee and the CEO
The Committee, consisting entirely of independent Directors, is responsible for executive compensation. As part of the compensation-setting process each year, the Committee meets periodically with the CEO to review a list of corporate performance goals and receives comments from members of the Board of Directors. The CEO recommends to the Committee the compensation amounts for each of our NEOs, other than himself. The Committee has retained an independent compensation consultant, Pearl Meyer, to provide advice on best practices and market developments. The CEO, the Executive Vice President and Chief Administrative Officer, the Chief HR Officer, Human Resources staff members and the Committee’s consultant attend Committee meetings and make recommendations regarding plan design and levels of compensation.
While the Committee will ask for advice and recommendations from management and Pearl Meyer, the Committee is responsible for executive compensation and as such:
Sets NEO base salaries;
Reviews financial and operational goals, performance measures and strategic and operating plans for the Company;
Establishes specific goals, objectives and potential awards for the AIP and LTIP;
Reviews annual and long-term performance against goals and objectives and approves payment of any incentive earned;
Reviews contractual agreements and benefits, including supplemental retirement and any payments that may be earned upon termination, and makes changes as appropriate;
Reviews incentive plan designs and makes changes as appropriate; and
Reviews total compensation to ensure compensation earned by NEOs is fair and reasonable relative to corporate and individual performance.
Total compensation actions, annual and long-term performance goals and objectives, contractual agreements and benefits are discussed with and approved by the Board. The Incentive Plan governing short and long-term incentives is approved by the Board and subject to shareholder approval.
Role of Compensation Consultant
The Committee retained Pearl Meyer to provide independent advice to the Committee. Pearl Meyer gathers and analyzes data at the direction of the Committee, advises the Committee on compensation standards and trends, and assists in the development of policies and programs. The Committee directs, approves and evaluates Pearl Meyer’s work in relation to all executive compensation

22



matters. The Committee considers Pearl Meyer to be independent from our management pursuant to the U.S. Securities and Exchange Commission standards. Please see “Independence of the Executive Compensation Consultant” on page 48.
The Committee regularly meets with Pearl Meyer without management present. Pearl Meyer participates in Committee meetings throughout the year, reviews materials in advance, consults with the Chairperson of the Committee, provides to the Committee data on market trends and compensation design, assesses recommendations for base salary and annual incentive awards for our NEOs and periodically meets with management. Pearl Meyer may provide consulting advice to management outside the scope of executive compensation with the approval of the Committee. In 2018, Pearl Meyer did not provide consulting advice to management outside the scope of executive compensation. The Committee does not delegate authority to Pearl Meyer.
Clawbacks
In 2017 we adopted a Compensation Recoupment and Forfeiture Policy under the 2017 Incentive Plan. In the event misconduct by any employee results in a financial restatement as more specifically defined in the policy, the policy requires that our Chief Executive Officer and Chief Financial Officer reimburse us for (i) the gross amount of any bonus or other incentive-based or equity-based compensation received by such officer from the Company during the 12-month period following the date the document requiring the financial restatement was first publicly issued or filed (whichever occurs first) with the SEC, and (ii) any profits realized from the sale of securities of the Company during such 12-month period. The policy further requires any employee who engaged in such misconduct to reimburse the Company the same amounts set forth in (i) and (ii) above applicable to that employee, and requires any such employee whose employment is terminated for cause to forfeit all unpaid cash-based incentive compensation under our incentive plan (whether or not accrued and/or payable at such time) and all unvested equity-based awards (whether or not earned at such time), in each case as of the date such employee is notified of termination of his or her employment for cause (as defined under the policy).
In addition, in 2017 we disclosed that based on an internal investigation, we voluntarily self-reported potential issues relating to the use of third party sales representatives in our Refining Solutions business to the U.S. Department of Justice (the "DOJ") and the SEC and that we intended to cooperate with the DOJ and the SEC in their review of these matters. Our Board of Directors determined, as a prudent governance measure while the investigation is pending, to condition payment of each NEO’s cash incentive bonus for the fiscal year 2017 (the “2017 cash incentive”) on each NEO executing a clawback agreement applicable to the 2017 cash incentive. Accordingly, in February 2018, the Company entered into a clawback agreement with each of our NEOs and other executives at that time. The clawback agreements supplement the Company’s existing policy described above and provide that each NEO's 2017 cash incentive is subject to clawback by the Company in the event that the Committee determines that, with respect to the Company’s internal investigation or the government’s review of these matters following such self-report, the NEO: (1) engaged in unlawful conduct or misconduct; (2) failed to cooperate in any related investigation; (3) violated the Company’s Code of Conduct or any other Company policy; or (4) failed to exercise appropriate supervision or oversight.


23



EXECUTIVE COMPENSATION COMMITTEE REPORT
The Executive Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section of this Proxy Statement with management and, based on such review and discussion, recommended to the Board of Directors that it be included in this Proxy Statement.
EXECUTIVE COMPENSATION COMMITTEE

Alejandro D. Wolff, Chair
J. Kent Masters
Diarmuid B. O'Connell
Gerald A. Steiner
Harriett Tee Taggart
                            

March 26, 2019

24



COMPENSATION OF EXECUTIVE OFFICERS
Total Compensation of Our Named Executive Officers
The following table presents information for the fiscal years ended December 31, 2018, 2017 and 2016 relating to total compensation of our CEO, CFO, and the three other highest paid executive officers (the “NEOs”).
SUMMARY COMPENSATION TABLE
Summary Compensation Table
Name and Principal Position
Year
Salary(1)
Stock Awards(2)(3)
Option Awards(2)
Non-Equity Incentive Plan Compensation
Change in Pension Value and NQDC Earnings(4)
All Other Compensation(5)
Total
Luther C. Kissam IV
2018
$
1,000,000

$
3,579,097

$
1,000,009

$
856,389

$

$
230,899

$
6,666,394

Chairman, President and Chief Executive Officer
2017
970,500

3,465,777

1,000,005

1,857,250

857,015

346,188

8,496,735

2016
871,500

3,695,834

1,000,008

1,682,415

595,260

589,133

8,434,150

Scott A. Tozier
2018
$
581,000

939,722

262,533

314,302


112,817

2,210,374

Executive Vice President, Chief Financial Officer
2017
546,250

866,753

250,001

656,880


149,673

2,469,557

2016
505,000

831,705

225,001

700,000


215,035

2,476,741

Karen G. Narwold
2018
$
503,187

894,986

250,021

299,428


101,423

2,049,045

Executive Vice President, Chief Administrative Officer and Corporate Secretary
2017
478,750

780,029

225,015

568,905


129,442

2,182,141

2016
455,000

1,123,254

175,006

650,000


1,316,665

3,719,925

Donald J. LaBauve, Jr.
2018
$
301,358

227,306


86,942


52,131

667,737

Vice President, Corporate Controller and Chief Accounting Officer
2017
291,501

166,149


183,569

108,531

55,213

804,963

2016
279,896

173,890


174,400

63,917

86,518

778,621

Matthew K. Juneau
2018
$
106,750





31,039

137,789

Former Executive Vice President, Corporate Strategy and Investor Relations
2017
424,000

520,216

150,001

500,871

250,840

109,616

1,955,544

2016
411,250

554,532

150,000

620,000

172,700

117,155

2,025,637

___________________________________________________
(1) Salary amounts include cash compensation earned by each named executive officer during the applicable fiscal year, as well as any amounts earned in the applicable fiscal year but contributed into the Savings Plan and/or deferred at the election of the named executive officer into the EDCP. For a discussion of the deferred compensation program and amounts deferred by the named executive officers in fiscal year 2018, including earnings on amounts deferred, please see “Nonqualified Deferred Compensation” on page 35.
(2) The amount represents the aggregate grant date fair value of stock or option awards recognized in the fiscal year in accordance with FASB ASC Topic 718. This amount does not reflect our accounting expense for these award(s) during the year and does not correspond to the actual cash value that will be recognized by the named executive officer when received. For more information on the assumptions for these awards, please see Note 18 to our Consolidated Financial Statements filed on Form 10-K for the year ended December 31, 2018. Information on individual equity awards granted to each of the named executive officers in fiscal year 2018 is set forth in the section entitled “Grants of Plan-Based Awards” on page 27.
(3) Amounts for fiscal year 2018 include performance unit awards with a performance measure of Total Shareholder Return calculated at 100% of Target level, assuming a fair value per share of $155.6500 using the Monte Carlo valuation method. The maximum payable for Superior level performance on our 2018 PSU award is 200% of Target level. The aggregate grant date fair value at the Superior level of 200% for each of the named executive officers is: Mr. Kissam $5,243,537; Mr. Tozier $1,376,569; Ms. Narwold $1,311,196; and Mr. LaBauve $262,737. Also includes 2018 Restricted Stock Units assuming a fair value price per share of $113.67 with an aggregate grant date fair value for Mr. Kissam $957,329; Mr. Tozier $251,438; Ms. Narwold $239,389; and Mr. LaBauve $95,937.
(4) Includes the actuarial increases in the present values of the named executive officers’ benefits under our pension plans determined using interest rate and mortality rate assumptions consistent with those used in our financial statements. Messrs. Kissam, LaBauve, and Juneau had, respectively, a loss of $411,490, $58,105, and $84,685 in 2018. For a full description of the pension plan assumptions used by us for financial reporting purposes, see Note 15 to our Consolidated Financial Statements beginning on page 86 of the 2018 Annual Report.


25



(5) All other compensation amounts reported for 2018 include:
All Other Compensation
Name
Company
Contribution
to Albemarle
401K Plan
Company
Contributions
to Defined
Retirement
Benefit in
Savings Plan
Company
Contributions
to Nonqualified
Deferred
Compensation
Plan
Perquisites(1)
Total
Luther C. Kissam IV
13,375

13,750

176,503

27,271

230,899

Scott A. Tozier
13,375

13,750

71,297

14,395

112,817

Karen G. Narwold
13,375

13,750

61,033

13,265

101,423

Donald J. LaBauve, Jr.
13,375

13,750

25,006


52,131

Matthew K. Juneau
13,375

13,750

3,914


31,039

___________________________________________________

(1) 
Includes the following: personal financial consulting expenses paid by the Company on behalf of Messrs Kissam and Tozier and Ms. Narwold; annual credit card fees for Messrs Kissam and Tozier and Ms. Narwold; executive Wellness exam for Mr. Kissam; and personal use of Company aircraft for Mr. Kissam and Ms. Narwold. The aircraft fees are calculated based on a cost per hour that reflects the incremental cost to the company for operating the aircraft.

Compensation Risk Assessment
As part of its oversight of the Company’s executive compensation program, the Committee considers the impact of the Company’s executive compensation program and the incentives created by the compensation awards that it administers, on the Company’s risk profile. In addition, the Company reviews all employee compensation policies and procedures, including the incentives that they create and factors that may reduce the likelihood of excessive risk-taking, to determine whether they present a significant risk to the Company. At the Committee’s direction, our Executive Vice President, Chief Administrative Officer and Corporate Secretary and her staff, together with our Chief Risk and Compliance Officer and a member of our internal audit team, conducted a risk assessment of our compensation programs. This assessment included, but was not limited to, evaluation of each compensation program based on the following categories: (i) performance measures, (ii) funding, (iii) performance period, (iv) pay mix, (v) goal setting and leverage, and (vi) controls and processes.
The Committee reviewed the findings of the assessment and concluded that our compensation programs are designed with the appropriate balance of risk and reward in relation to our overall business strategy and that the balance of compensation elements discourages excessive risk-taking. The Committee therefore determined that the risks arising from our compensation policies and practices for employees are not reasonably likely to have a material adverse effect on the Company. In its discussions, the Committee considered the attributes of our programs, including:
The balance between annual and long-term performance opportunities;
Alignment of our programs with business strategies focused on long-term growth and sustained shareholder value;
Dependence upon the achievement of specific corporate and individual performance goals that are objectively determined with verifiable results;
The corporate goals include both financial and stewardship metrics (safety and environment) and have pre-established Threshold, Target and Maximum award limits;
The Executive Compensation Committee’s ability to consider non-financial and other qualitative performance factors in determining actual compensation payouts;

26



Stock ownership guidelines that are reasonable and align executives’ interests with those of our shareholders; and
Forfeiture and recoupment policy provisions for cash and equity awards.
Grants of Plan-Based Awards
The Albemarle Corporation 2017 Incentive Plan, serves as the core program for the performance-based compensation components of our named executive officers’ total compensation. This plan:
Defines the incentive arrangements for eligible participants;
Authorizes the granting of annual and long-term cash incentive awards, stock options, stock appreciation rights, performance shares, performance share units, restricted stock, RSUs and other incentive awards, all of which may be made subject to the attainment of performance goals recommended by management and approved by the Executive Compensation Committee;
Provides for the enumeration of the business criteria on which performance goals are to be based; and
Establishes the maximum share grants or awards (or, in the case of cash incentive awards, the maximum compensation) that can be paid to a participant under the Plan.
With the exception of significant promotions and new executive hires, grants generally are made at the first meeting of the Executive Compensation Committee each year following the availability of the financial results for the prior year. Awards to our named executive officers were made on February 23, 2018, for the 2018 LTIP. These awards consisted of stock options, PSUs and RSUs.
The awards of PSUs vest 50% at the time the Executive Compensation Committee determines the performance relative to the goals after the end of the three-year performance period, with the remaining 50% vesting on the following January 1.
The 2018 stock options fully vest on the third anniversary of the grant date.
The 2018 award of RSUs will vest 50% on the third anniversary of the grant date, while the remaining 50% will vest on the fourth anniversary of the grant date.
For additional information with respect to these awards, please see “Compensation Discussion and Analysis” beginning on page 6.
The following table presents information regarding grants of plan-based awards to our named executive officers during the fiscal year ended December 31, 2018.

27



GRANTS OF PLAN-BASED AWARDS
Grants of Plan-Based Awards(1)
Name
Grant Date
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
Estimated Future Payouts Under
Equity Incentive Plan Awards
All Other Stock Awards:
Number of Shares of Stock or Units
All Other Option Awards:
Number of Securities Underlying Options (#)
Base Price per Option Award(4)
Grant Date Aggregate Fair Value of Stock and Option Awards(2)(3)
$
Threshold
Target
Max
Threshold # of shares
Target # of shares
Max # of shares


$

$
1,250,000

$
2,500,000








Luther C. Kissam IV
2/23/2018










26,774

118.75

$
1,000,009


2/23/2018






8,422



$
957,329


2/23/2018



4,211

16,844

33,688






$
2,621,769



$

$
435,821

$
871,642








Scott A. Tozier
2/23/2018










7,029

118.75

$
262,533


2/23/2018






2,212



$
251,438


2/23/2018



1,106

4,422

8,844






$
688,284



$

$
377,453

$
754,906








Karen G. Narwold
2/23/2018










6,694

118.75

$
250,021


2/23/2018






2,106



$
239,389


2/23/2018



1,053

4,212

8,424




$
655,598



$

$
120,558

$
241,116








Donald J. LaBauve, Jr.
2/23/2018






844



$
95,937


2/23/2018



211

844

1,688




$
131,369

___________________________________________________
(1) 
For additional information with respect to the plan-based awards, please see “Compensation Discussion and Analysis” beginning on page 6.
(2) 
Reflects the full grant date fair market value of the PSU award made February 23, 2018, with a performance measure of TSR calculated at 100% of Target level that vests 50% in 2021 and 50% in 2022 if the performance metrics are met. Assumes a fair value per share of $155.65 using the Monte Carlo valuation method.
(3) 
Reflects the full grant date fair market values of the RSU award made February 23, 2018. The restricted stock units will vest in equal increments on the third and fourth anniversaries of the grant date.
(4) 
On February 23, 2018, the Committee approved grants of 26,774, 7,029, and 6,694 options to Mr. Kissam, Mr. Tozier, and Ms. Narwold, respectively, under the Plan. Assumes a fair value per share of $37.35 under the Black Scholes fair value model. The exercise price of each stock option is $118.75, which represents the closing price of our Common Stock as of the date of the grants. The options will cliff vest on the third anniversary of the date of grant, or February 23, 2021. The expiration date of the options is February 22, 2028, ten years from date of grant. If the individual terminates employment with us for any reason prior to the full vesting of such award, the unvested portions of such award will be forfeited. However, if the individual retires, becomes disabled, dies, or is terminated by the company without cause, then the individual will become vested in a pro-rata portion of the stock options.

28



OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table presents information concerning the number and value of unexercised options, non-vested stock (including restricted stock units or performance units) and incentive plan awards for the named executive officers outstanding as of the end of the fiscal year ended December 31, 2018.
 
Option Awards
Stock Awards
Name
Number of Securities Underlying Unexercised Options (#)Exercisable (1) 
Number of Securities Underlying Unexercised Options (#)Unexercisable(1) 
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 ($) (2) 

Equity Incentive Plan Awards: Number Of Unearned Shares, Units, Or Other Rights That Have Not Vested (#) 

Equity Incentive Plan Awards: Market Or Payout Value Of Unearned Shares, Units, Or Other Rights That Have Not Vested ($) (2) 
 
 
 
 
 
 
 
 
 
 
 
Luther C. Kissam IV
36,000


$
41.94

3/11/2020






40,000


$
56.16

1/30/2021






59,000


$
66.14

2/23/2022






82,390


$
65.00

2/21/2023






54,534

27,267

$
63.84

2/23/2024






33,065

66,130

$
56.08

2/23/2025







62,267

$
56.56

2/25/2026







35,740

$
92.93

2/23/2027







26,774

$
118.75

2/22/2028











17,682

$
1,362,752

(3) 








10,762

$
829,427

(5) 








8,422

$
649,084

(6) 











42,798

(7) 
$
3,298,442









35,361

(8) 
$
2,725,272









21,522

(9) 
$
1,658,701









16,844

(10) 
$
1,298,167

Scott A. Tozier
14,500


$
66.14

2/23/2022






16,478


$
65.00

2/21/2023






12,270

6,135

$
63.84

2/23/2024






7,440

14,880

$
56.08

2/23/2025








14,010

$
56.56

2/25/2026








8,935

$
92.93

2/23/2027








7,029

$
118.75

2/22/2028











3,980

$
306,739

(3) 








2,692

$
207,472

(5) 








2,212

$
170,479

(6) 











9,630

(7) 
$
742,184









7,957

(8) 
$
613,246









5,382

(9) 
$
414,791









4,422

(10) 
$
340,804


29



 
Option Awards
Stock Awards
Name
Number of Securities Underlying Unexercised Options (#)Exercisable (1) 
Number of Securities Underlying Unexercised Options (#)Unexercisable(1) 
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 ($) (2) 

Equity Incentive Plan Awards: Number Of Unearned Shares, Units, Or Other Rights That Have Not Vested (#) 

Equity Incentive Plan Awards: Market Or Payout Value Of Unearned Shares, Units, Or Other Rights That Have Not Vested ($) (2) 
Karen G. Narwold
12,500


$
66.14

2/23/2022






12,359


$
65.00

2/21/2023








8,180

4,090

$
63.84

2/23/2024








5,787

11,574

$
56.08

2/23/2025









10,897

$
56.56

2/25/2026









8,042

$
92.93

2/23/2027







6,694

$
118.75

2/22/2028












3,096

$
238,609

(3) 









6,591

$
507,968

(4) 









2,422

$
186,664

(5) 









2,106

$
162,309

(6) 



 
 
 
 
 
 
 
7,490

(7) 
$
577,254








6,189

(8) 
$
476,986








4,844

(9) 
$
373,327








4,212

(10) 
$
324,619

Donald J. LaBauve, Jr.
1,000



$
41.94

3/11/2020






1,866


$
56.16

1/30/2021








2,300


$
66.14

2/23/2022








3,090


$
65.00

2/21/2023








2,046

1,023

$
63.84

2/23/2024








1,240

2,480

$
56.08

2/23/2025












1,328

$
102,349

(3) 









808

$
62,273

(5) 









844

$
65,047

(6) 












1,606

(7) 
$
123,774








1,327

(8) 
$
102,272








808

(9) 
$
62,273








844

(10) 
$
65,047

Matthew K. Juneau
10,400


$
56.16

1/30/2021






9,700


$
66.14

2/23/2022






10,299


$
65.00

2/21/2023






10,051



$
63.84

2/23/2024






9,213



$
56.08

2/23/2025






6,487



$
56.56

2/25/2026






1,936


$
92.93

2/23/2027















3,979

(8) 
$
306,662








1,346

(9) 
$
103,736

____________________________________
(1) 
The vesting dates for the stock options outstanding are as follows per option grant date:

30



Grant Date
Vesting Schedule
3/12/2010
Vested in three equal increments on the first, second and third anniversaries of the grant date, or March 12, 2011, 2012 and 2013
1/31/2011
Vested in three equal increments on the first, second and third anniversaries of the grant date, or January 31, 2012, 2013 and 2014
2/24/2012
Vested in three equal increments on the first, second and third anniversaries of the grant date, or February 24, 2013, 2014 and 2015
2/22/2013
Vested in three equal increments on the third, fourth and fifth anniversaries of the grant date, or February 22, 2016, 2017 and 2018
2/24/2014
Vests  in three equal increments on the third, fourth and fifth anniversaries of the grant date, or February 24, 2017, 2018 and 2019
2/24/2015
Vests  in three equal increments on the third, fourth and fifth anniversaries of the grant date, or February 24, 2018, 2019 and 2020
2/26/2016
Cliff vests on the third anniversary of the grant date, or February 26, 2019
2/24/2017
Cliff vests on the third anniversary of the grant date, or February 24, 2020
2/23/2018
Cliff vests on the third anniversary of the grant date, or February 23, 2021

(2) 
Based on the closing price per share of Common Stock on December 31, 2018, which was $77.07.
(3) 
Reflects a RSU award granted in 2016 that will vest 50% in 2019 with the remaining 50% vesting in 2020. For further information on the RSU awards, please see “Compensation Discussion and Analysis.”  
(4) 
Reflects a RSU award granted in 2016 that cliff vests on the third anniversary date of the grant, May 12, 2019. For further information on the RSU awards, please see “Compensation Discussion and Analysis.”
(5) 
Reflects a RSU award granted in 2017 that will vest 50% in 2020 with the remaining 50% vesting in 2021. For further information on the RSU awards, please see “Compensation Discussion and Analysis.
(6) 
Reflects a RSU award granted in 2018 that will vest 50% in 2021 with the remaining 50% vesting in 2022. For further information on the RSU awards, please see “Compensation Discussion and Analysis.”  
(7) 
Reflects a PSU award granted in 2015 that vested 50% in 2018 with the remaining 50% having vested on January 1, 2019. Assumes 100% vesting of the award at the earned amount of 200% Superior level. For further information on the PSU awards, please see “Compensation Discussion and Analysis.”  
(8) 
Reflects a PSU award granted in 2016 that if earned will vest 50% in 2019 with the remaining 50% vesting on January 1, 2020. Assumes 100% vesting of the award at a 100% Target level. For further information on the PSU awards, please see “Compensation Discussion and Analysis.
(9) 
Reflects a PSU award granted in 2017 that if earned will vest 50% in 2020 with the remaining 50% vesting on January 1, 2021. Assumes 100% vesting of the award at a 100% Target level. For further information on the PSU awards, please see “Compensation Discussion and Analysis.”  
(10) 
Reflects a PSU award granted in 2018 that if earned will vest 50% in 2021 with the remaining 50% vesting on January 1, 2022. Assumes 100% vesting of the award at a 100% Target level. For further information on the PSU awards, please see “Compensation Discussion and Analysis.”  


31



Option Exercises and Stock Vested
The following table presents information concerning the exercise of stock options and the vesting of stock (including restricted stock units or performance units) for the named executive officers during the fiscal year ended December 31, 2018.
OPTION EXERCISES AND STOCK VESTED

Option Awards

Stock Awards

Name
Number of Shares Acquired on Exercise (#)
Value Realized on Exercise ($)
Number of Shares Acquired on Vesting (#)
Value Realized on Vesting ($)
Luther C. Kissam IV




42,798


$
5,082,263

(1)











Scott A. Tozier




9,630


$
1,143,563

(1)











Karen G. Narwold




7,490


$
889,438

(1)











Donald J. LaBauve, Jr.




1,606


$
190,713

(1)





2,375


$
237,761

(2)











Matthew K. Juneau




12,840


$
1,357,766

(1)





1,844


$
171,013

(3)





584


$
54,160

(4)
___________________________________________________

(1) 
A PSU award granted in 2015 vested on February 24, 2018. The value realized on vesting was calculated using a value of $118.75 per share, which was the closing price of our common stock on the New York Stock Exchange (“NYSE”) on February 24, 2018.
(2) 
A RSU award granted in 2015 vested on May 8, 2018. The value realized on vesting was calculated using a value of $100.11 per share, which was the closing price of our common stock on the NYSE on May 8, 2018.
(3) 
Reflects the pro-rata vesting of RSUs granted on February 26, 2016 for 1,844 units. The value realized on vesting was calculated using a value of $92.74 per share, which was the closing price of our common stock on the NYSE on April 1, 2018.
(4) 
Reflects the pro-rata vesting of RSUs granted on February 24, 2017 for 584 units. The value realized on vesting was calculated using a value of $92.74 per share, which was the closing price of our common stock on the NYSE on April 1, 2018.


32



Retirement Benefits
Pension Benefits Table
In 2004, we implemented a new defined contribution retirement pension benefit (“DCPB”) in the Savings Plan for all non-represented employees hired on or after April 1, 2004. Non-represented employees hired prior to that date continued to participate in our Pension Plan.
On October 1, 2012, the Board of Directors approved an amendment to our retirement plans to freeze accrued benefits in the Pension Plan and SERP effective December 31, 2014, and to provide for non-represented employees hired before April 1, 2004 who are participants in the Pension Plan to (i) become eligible for the DCPB in the Savings Plan effective January 1, 2013, and (ii) receive a one-time employer discretionary contribution in the Savings Plan in December 2012. In addition, the Board of Directors authorized application of a higher benefit formula for calculating accrued benefits in 2013 and 2014 only, as well as including an offset factor that would be applied to accrued benefits earned in 2013 and 2014.
The following table presents information concerning the Pension Plan and the SERP. The Pension Plan provides for payments or other benefits to our named executive officers at, following, or in connection with retirement. To the extent benefits under the Pension Plan exceed limits imposed under applicable provisions of the Code, they will be paid under the SERP.
Pension Benefits
Name
Plan Name
Number of Years
Credited Service (#)
 
Present Value of
Accumulated Benefit ($)
(2)(4)

Payments During Last
Fiscal Year
Luther C. Kissam IV
Pension Plan
11.3325

(1)
422,352

 
 --
 
SERP (3)
11.2500

(1)
7,083,006

 
 --
Scott A. Tozier
Pension Plan
 N/A

 
 N/A

 
 N/A
 
SERP
 N/A

 
 N/A

 
 N/A
Karen G. Narwold
Pension Plan
 N/A

 
 N/A

 
 N/A
 
SERP
 N/A

 
 N/A

 
 N/A
Donald J. LaBauve, Jr.
Pension Plan
24.3333

 
836,184

 
 --
 
SERP (3)
24.3333

 
42,226

 
 --
Matthew K. Juneau
Pension Plan
32.6650

 
1,499,508

 
 --
 
SERP (3)
32.6650

 
1,118,117

 
 --
(1) 
The differences in service between the qualified Pension Plan and the SERP are generally due to rounding differences. The qualified plan bases credited service on hours worked during the year, whereas the SERP special 4% pension benefit bases credited service on the completed years and months of employment. Credited Service for both plans froze as of 12/31/2014.
(2) 
For the qualified Pension Plan, pension earnings are limited by the 401(a)(17) pay limit. A temporary supplemental early retirement allowance of $5 per month per year of service is payable from the Pension Plan for participants who retire at age 60 with at least 15 years of service. SERP pay for the special 4% benefit includes 100% of cash incentive bonuses paid during the year.
(3) 
The named individuals are vested in their SERP benefits.
(4) 
The present value of accumulated benefits including supplements, if any, is based on the actuarial present value of benefits payable at age 60, the earliest age at which unreduced benefits are payable. The following assumptions were used to determine the above present values:
a.     Discount rates of 4.48%, 4.04%, and 4.59% as of December 31, 2016, 2017 and 2018, respectively;
b.     Payment form of a life annuity with a 60-month guarantee of payments from the qualified Pension Plan, and a lump sum from the SERP; and

33



c.     Mortality based on the RP2006 (revised in 2015) healthy annuitants with MP2017 generational projection scales and RP2006 (revised in 2015) healthy annuitants with MP2018 generational projection scales, respectively.
The benefit formula under the Pension Plan is based on the participant’s final average earnings, which are defined as the average of the highest three consecutive calendar years’ earnings (base pay plus 50% of incentive awards paid in any fiscal year) during the ten consecutive calendar years immediately preceding the date of determination. Benefits under the Pension Plan are computed on the basis of a life annuity with 60 months of guaranteed payments. The benefits listed in the above compensation table (other than short service benefits under the SERP) are not subject to deduction for Social Security or other offset payments.
Supplemental Executive Retirement Plan
The SERP is a nonqualified defined benefit pension plan that provides eligible individuals the difference between the benefits they would actually accrue under the qualified Pension Plan but for the maximum benefit and compensation limitations under the qualified plan and deferrals of their compensation under our EDCP, and the benefits they actually accrue under the qualified Pension Plan. SERP benefits are paid in a lump sum on the later of (i) age 55 (65 if the employee has not completed at least ten years of service with us) and (ii) the employee’s separation from service (except that for key employees, as defined under relevant law, not earlier than six months after the employee’s separation from service).
All benefits under the SERP will be immediately paid (except that for key employees as defined under relevant law, not earlier than six months after the employee’s separation from service) if, within 24 months following a change in control, a participant’s employment is terminated.
The SERP is administered by our Employee Relations Committee, which consists of employees appointed by the CEO and the Executive Vice President and Chief Administrative Officer. The Board or the Executive Compensation Committee of the Board may generally amend or terminate the SERP at any time. Certain amendments to the SERP may also be approved by the Employee Relations Committee.
In 2005, we amended and restated the SERP. Some of the amendments to the SERP were made to ensure compliance with Section 409A of the Code, enacted as part of the American Jobs Creation Act of 2004 (“Code Section 409A”), which imposes restrictions and requirements that must be satisfied in order to assure the deferred taxation of benefits as intended by the SERP. In 2012, the Board of Directors further amended the SERP (i) to remove the current provisions for freezing Final Average Compensation (as defined in the SERP) on and after December 31, 2012, and (ii) to freeze all benefits under the SERP as of December 31, 2014, which is consistent with the changes under our qualified Pension Plan.
In addition to the retirement benefits provided under the Pension Plan and the SERP, which are reflected in the table above, certain key employees may be granted special pension benefits equal to 4% of the employee’s average pay over the highest three consecutive years of service before the determination date, multiplied by the number of years of service up to 15 years, net of certain other benefits (including amounts received under the qualified and nonqualified plans). These benefits vest only after the employee has completed five years of service with us and are paid on the later of (i) age 55 (65 if the employee has not completed at least ten years of service with us) and (ii) the employee’s separation from service (except that for key employees as defined under relevant law, not earlier than six months after the employee’s separation from service). All such benefits shall be paid in one lump sum payment. These benefits have been granted to Mr. Kissam as the only NEO that was employed at Albermarle when these benefits were in effect.

34



Nonqualified Deferred Compensation
Executive Deferred Compensation Plan. Company contributions that cannot be made under our qualified Savings Plan because of limitations under the Code are credited under the EDCP. In addition to these Savings Plan’s make-up contributions, an EDCP participant may elect to defer up to 50% of base salary and/or 100% of each cash incentive award paid in a year (net of FICA and Medicare taxes due). Such amounts are deferred and will be paid at specified payment dates or upon retirement or other termination of employment. The EDCP also provides for a supplemental benefit of 5% of compensation in excess of amounts that may be recognized under the tax-qualified Savings Plan and of the cash incentive bonus award paid during the year.
Amounts credited under the EDCP are credited daily with investment gains and losses as if such amounts were invested in one or more of the Plan’s investment options. Accounts are generally paid at the time and in the form specified by participants when they make deferral elections, or upon a participant’s earlier death or disability.
The EDCP is administered by our Employee Relations Committee, which consists of employees appointed by the CEO and the Executive Vice President and Chief Administrative Officer. The Executive Compensation Committee of the Board may generally amend or terminate the EDCP at any time. Certain amendments to the EDCP may also be approved by the Employee Relations Committee.
The following table presents information concerning our named executive officers’ benefits under the EDCP.
NONQUALIFIED DEFERRED COMPENSATION(1) 
Nonqualified Deferred Compensation
Name
Executive
Contributions
in Last FY
($)
Company
Contributions
in Last FY
($)(2)
Net Aggregate
Earnings
in Last FY
($)(3)
Aggregate
Withdrawals/
Distributions
($)
Aggregate
Balance at
Last FYE
($)(4)(5)
Luther C. Kissam IV
$

$
291,756

$
(180,668
)
$

1,475,795

Scott A. Tozier

111,608

(30,951
)

582,644

Karen G. Narwold

93,028

(21,701
)

452,991

Donald J. LaBauve, Jr.

27,562

(1,484
)

108,024

Matthew K. Juneau
76,020

41,670

69,370

(1,236,446
)
40,101

___________________________________________________
(1) 
Amounts reflected are based on activities recorded by Merrill Lynch, the plan’s administrator, as of December 31, 2018.
(2) 
All amounts are reported as compensation to the named executive officers in the Summary Compensation Table.
(3) 
Amounts reflected are based on aggregate earnings and gain/loss in last FY.
(4)
Ending balances include Saving Plan’s make-up contributions and Company contributions on deferred base salary and/or cash incentive awards of the following amounts: Mr. Kissam: $160,560; Mr. Tozier: $62,298; Ms. Narwold: $52,163; Mr. LaBauve: $16,454 and Mr. Juneau: $24,150.
(5)
Executive contributions included in aggregate balance that are reported as compensation to the named executive officers in the Summary Compensation Table in 2015, 2016 and 2017 are as follows: Mr. Juneau: $76,020 (2018), $109,852 (2017), and $79,562 (2016).

35



Agreements with Executive Officers and Other Potential Payments Upon Termination or a Change in Control
Severance Pay Plan
We adopted our Severance Pay Plan (“SPP”) in December 2006 and amended the SPP in 2008. For our named executive officers, the SPP provides for severance payments if we terminate their employment without cause because the individual’s position is eliminated or the organizational structure of the Company is changed which results in a redesign of work process and responsibilities affecting at least two individuals. In addition to offering outplacement assistance benefits for one year, the SPP provides for severance payments to our named executive officers, consisting of (other than for Mr. Kissam) the sum of (x) one year of base salary in effect at the termination time, and (y) the employee’s target cash incentive award for the most recent year in which the employee participated in an annual bonus program. Mr. Kissam is eligible to receive 1.5 times the amount of his annual base salary in effect at the termination time plus 1.5 times his target cash bonus for the year in which the termination takes place (or the most recent year he participated in an annual bonus program if he is not participating in the year of the termination).
Under the SPP, Mr. Kissam is also eligible to receive the benefits described above in the event of a termination pursuant to a “good reason for resignation,” as defined in the SPP. The SPP defines “good reason for resignation” as (a) a material diminution in base compensation, authority, duties, responsibilities or the budget over which the officer retains authority, (b) a material change in the geographic location at which services must be performed, or (c) any other action or inaction that constitutes our material breach of any written employment arrangement between us and the officer.
Our named executive officers (each of whom, other than Mr. LaBauve, is a party to a severance compensation agreement as described below, but not an employment agreement) are eligible to receive payments under the SPP only if a change in control has not occurred. If their employment is terminated in the event of a change of control, they are only eligible to receive severance payments under their severance compensation agreements (described below), but not the SPP.
For Mr. LaBauve, who does not have a severance compensation agreement, the following benefits would be payable under the SPP if, within two years after a change in control, the Company terminates his employment without cause or he elects to not relocate pursuant to the Company’s relocation policy in the event his office is relocated: one year of outplacement assistance benefits and a lump sum payment equal to the sum of (i) the greater of his base salary immediately prior to his termination of employment or prior to the change in control, and (ii) the greater of his actual cash bonus for the year preceding the date on which the change in control occurs or his target bonus for the year of the change in control.
The SPP term is indefinite and may be amended or terminated at any time in the absence of a change in control. The SPP expires two years after any change in control, and after a change in control, an employee’s consent is required for an amendment or termination to be effective as to such employee. The term “change in control” has substantially the same meaning in the SPP and the severance compensation agreements described below.
Assuming the triggering event took place on December 31, 2018, each named executive officer would receive the following estimated payments and benefits under the SPP:

36



Estimated Payments and Benefits under the SPP
 
Estimated SPP Payments
Estimated Payments
Name
Pre-Change in Control
Post-Change in Control (1)
Luther C. Kissam IV
$
3,375,000


Scott A. Tozier
$
1,029,000


Karen G. Narwold
$
891,000


Donald J. LaBauve, Jr.
$
426,000

488,000

Matthew K. Juneau
$


___________________________________________________
(1) 
Post-change in control payments for executives other than Mr. LaBauve are provided only under the individual severance compensation agreements described below.
Severance Compensation Agreements
We have severance compensation agreements in place for our named executive officers (other than Mr. LaBauve). Our severance compensation agreements provide that if we terminate an executive’s employment other than for “cause” or the executive resigns due to a “good reason for resignation” on or before the second anniversary of a “change in control” (as such terms are defined in the agreements), or if the executive dies after we execute a definitive agreement that results in a change in control, the executive will be entitled to (i) base salary and vacation pay accrued through the termination date for the year in which the termination occurs, (ii) his or her annual cash incentive award accrued through the termination date, (iii) the elimination of certain offsets for short service benefits under our supplemental executive retirement plan (“SERP”), as applicable, (iv) continued Company-paid medical, dental, and vision insurance, as applicable, for 18 months (24 months for Mr. Kissam), (v) financial and outplacement counseling benefits, (vi) relocation benefits, as per the Company’s U.S. Domestic Executive Relocation Policy, but only for the executive to return to the state he or she relocated from within two years prior to the change in control, (vii) the lump sum severance payment described below, and (viii) special treatment of outstanding awards granted under our incentive plans in accordance with the terms of the notices granting such awards. None of our named executive officers is entitled to excise tax gross-ups for change in control payments.
In the event of a change in control and termination of employment as referenced above, the lump sum severance payment referenced in clause (vii) above consists of two times the sum of (a) the executive’s annual base salary immediately prior to termination or immediately before the change in control (whichever is greater) and (b) the executive’s target cash incentive award in place immediately before the termination date or immediately before the change in control (whichever is greater), except that for Mr. Kissam it is his target cash incentive award for the year in which the change in control occurs or his actual annual cash incentive award for the year preceding the change in control date (whichever is greater). The severance payment will be reduced dollar for dollar by the amount of the non-competition payment described below. If excise taxes would be levied against the amounts payable under the severance compensation agreements for the named executive officers, then the payments will be reduced so that excise taxes will not apply.
With respect to the impact of a change in control, equity awards issued prior to Jan 1, 2017 are treated differently than awards granted after Jan 1, 2017. For awards granted prior to January 1, 2017, accelerated vesting of time-based awards will apply, and performance awards will be treated as earned at 100% of target, regardless of whether the executive’s employment also terminates in connection with the change in control or whether the Company remains publicly traded. For awards granted after January 1, 2017, the award agreements provide that if a replacement award is issued or the award continues because the Company remains publicly traded after the change in control, there is no special treatment of the awards unless an executive is involuntarily terminated without “cause” or voluntarily terminates for “good reason” (as defined in the award agreements) within two years after the change in control, in which

37



event accelerated vesting of time-based awards will occur. For performance awards granted after January 1, 2017, if the Company is no longer publicly traded, awards will be immediately earned and payable on a pro-rata basis at the higher of target or actual performance as of the change in control.
The following table illustrates the difference in Change in Control ("CIC") impact on awards granted prior to and after Jan 1, 2017.
 
Situation
RSUs
Options
PSUs
Awards Granted prior to
January 1, 2017
All CIC events
Full and accelerated vesting upon CIC
Full and accelerated vesting upon CIC
Full and accelerated vesting at target unless performance period has been completed
 
Awards Granted after January 1,
2017
1. CIC + Termination of Employment (including good reason for resignation)
Full and accelerated vesting upon CIC + Termination of Employment
Full and accelerated vesting upon CIC + Termination of Employment
Prorated and accelerated vesting at higher of actual  or target upon CIC + termination
 
2. CIC + Continuation of Employment and Albemarle is no longer publicly traded
• Replace with an award with the same value but allows for full and accelerated vesting if not converted to the same value and conditions.
• If the executive is terminated without “cause” or terminates for “good reason” within two years of the CIC, accelerated vesting occurs.
Prorated vesting based on higher of actual or target performance upon CIC.
 
2. CIC + Continuation of Employment and Albemarle continues to be traded
• No change to the existing vesting schedule.
• If the executive is terminated without “cause” or terminates for “good reason” within two years of the CIC, accelerated vesting of time based equity occurs. PSUs will vest prorated based on the higher of actual or target performance.
Each severance compensation agreement provides that if the executive’s employment is terminated by reason of death, the executive’s benefits will be determined in accordance with the Company’s benefits and insurance programs then in effect, except that if the death occurs after the execution of a definitive agreement which results in a change in control, then the executive’s beneficiary will be entitled to the benefits under the severance compensation agreement as if the Company issued the executive a notice of termination 30 days after the change in control. If an executive is terminated for “cause” or voluntarily quits other than for “good reason for resignation” (as such terms are defined in the agreements), he or she is entitled to receive only a lump sum payment equal to his or her salary and benefits accrued through the termination date. If an executive is unable to perform full-time duties due to a qualifying disability, the executive shall continue to receive base salary and all other compensation and benefits provided under the Company benefit and disability plans. If an executive is terminated due to disability, he or she is entitled to receive the benefits determined in accordance with our retirement and insurance programs and other applicable programs in effect immediately prior to the change in control or the programs in effect at the time they are paid (whichever is greater).
Each severance compensation agreement’s term ends on December 31, subject to automatic one-year extensions unless either the executive or our Executive Compensation Committee notifies the other of its desire not to extend. If there is a change in control, the severance compensation agreement

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will remain in effect until the second anniversary of the change in control. In order to receive the benefits under the severance compensation agreements, each executive who is terminated following a change in control must agree not to compete with the Company from the date of termination of employment with the Company until the second anniversary thereof. In consideration of this agreement not to compete, the executive will receive a non-competition payment equal to the value of the non-compete agreement as determined by an unrelated third-party business retained by the Company that is in the business of valuing non-competition payments, with the intent that the non-competition payment should qualify as reasonable compensation for purposes of relevant tax law. Should any federal, state, or local taxing authority challenge the non-competition payment’s treatment as reasonable compensation, the Company shall engage legal and other professionals necessary to defend against any such challenge.
For purposes of the severance compensation agreements and the SPP, “change in control” means the occurrence of any of the following events:
Any person or group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934) becomes the direct or indirect beneficial owner of 20% or more of the combined voting power of our then-outstanding voting securities (other than as a result of an issuance of securities approved by Continuing Directors (as defined below) or open-market purchases approved by Continuing Directors at the time of purchase), unless (in the case of beneficial ownership that does not exceed 30% of such voting securities) at least two-thirds of Continuing Directors determine that such event does not constitute a “change in control”;
As a result of a reorganization, merger, share exchange or consolidation (each, a “Business Combination”), a contested election of Directors, or a combination thereof, the Continuing Directors cease to constitute a majority of our or any successor’s board of directors within two years of the last of such transaction(s); or
There is a shareholder-approved Business Combination unless (a) all or substantially all of our outstanding voting securities’ beneficial owners immediately prior to the Business Combination own more than 60% of the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of Directors resulting from the Business Combination (with no one person owning more than 30%), in substantially the same proportions as immediately before the Business Combination and (b) at least a majority of the post-Business Combination Directors are Continuing Directors.
In the event of a hypothetical occurrence of both a change in control and a termination of a named executive officer’s employment in accordance with such officer’s severance compensation agreement (other than for Mr. LaBauve, who does not have a severance compensation agreement) and applicable incentive award agreements, and assuming these events took place on December 31, 2018, with the closing market price of our Common Stock at $77.07 per share as of that date, each named executive officer would be entitled to the following estimated payments and accelerated vesting:
Estimated Payments and Benefits under the Severance Compensation Agreements (1)
Name
Lump-sum
severance
payment
and Non-
competition
agreement (2)
 Accelerated
value(s) of
time-based
equity
compensation (3)
Accelerated
value(s) of
performance
units
 Elimination of
offsets under
SERP
Counseling
and other
insurance
benefits (3)
Total
Luther C. Kissam IV
$
6,615,963

$
6,085,287

$
10,287,509

$
240,767

$
93,791

$
23,323,317

Scott A. Tozier
$
2,372,302

$
1,432,928

$
2,358,804

 N/A

$
79,952

$
6,243,986

Karen G. Narwold
$
2,054,583

$
1,691,710

$
1,888,318

 N/A

$
79,952

$
5,714,563

___________________________________________________
(1) 
We do not provide our executives with excise tax gross ups for change in control payments.

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(2) 
As described above, upon termination following a change in control, the named executive officer would be entitled to a lump-sum severance payment equal to two times annual base compensation and target annual variable compensation (except that Mr. Kissam would be entitled to two times annual base compensation and the higher of target variable compensation for the year the change in control occurs or the actual annual variable compensation for the year preceding the change in control), in all cases reduced by the non-competition payment amount as determined by a third-party in the business of valuing non-competition payments in return for an agreement not to compete for a two-year period post-termination. As the non-competition payment is not determinable at this time, only the total severance payment amount without the reduction, is reflected in the table.
(3) 
This amount includes (i) outplacement counseling and financial counseling, in each case not to exceed $25,000, (ii) estimated relocation benefits if the executive has relocated within two years prior to the change in control and is relocating back to his/her original location, and (iii) the value of medical, dental and vision benefits continuation for (a) two years post-termination for Mr. Kissam and (b) 18 months post-termination for Messrs. Tozier and Juneau and Ms. Narwold.



CEO Pay Ratio

The principles that guide us for our executive compensation program are not different than for the organization at large:

We use the market median as our reference point for our compensation and benefits program
The market median is specific for the country in which we compete for talent
The market median is also specific for the job level for each of our employees
The market median also determines the mix between base pay, short term incentive pay, long term equity and benefits; as the job level increases we typically see an increase on total compensation as well as an increase in that portion of total compensation that is equity based and the portion that is based on performance
We disclose below the ratio of our Chief Executive Officer’s (CEO’s) annual total compensation relative to the median annual total compensation of the median employee of the Company for the year ended December 31, 2018. As permitted or required by Item 402(u) of Regulation S-K, our process for determining the total employee population and the median employee annual total compensation included the following factors.

Employee population
We used our global system of record for all of our employees worldwide.
We included all employees, whether a salaried employee or an hourly worker, and whether employed on a full-time, part-time, or seasonal basis.
We used November 15, 2018 as our record date.
To allow for comparisons across international jurisdictions, we converted into U.S. dollars any base cash compensation amounts denominated in non-U.S. currencies.
We did not adjust for global cost of living differences.

Consistently applied compensation measure
We determined the median employee annual total compensation by using a consistently applied compensation measure, namely, base salary or wages (“base cash compensation”), for all individuals, excluding our CEO, who were employed by us on November 15, 2018.
For part-time workers, we did not adjust base cash compensation to the equivalent for a full time employee.
We annualized the compensation for all permanent employees (full or part-time) who were not employed by us for all of 2018.
For hourly employees base cash compensation is based on their hourly rate in combination with their standard hours of work.


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Applying these and other relevant factors, we identified a median employee with total compensation (calculated in accordance with Item 402(c)(2)(x) of Regulation S-K) of $78,867 for the year ended December 31, 2018. On the same basis, the total compensation for our CEO for the year ended December 31, 2018 was $6,581,558. Accordingly, for the year ended December 31, 2018, the ratio of our CEO’s total compensation to that of our median employee is 83:1.

Given the different methodologies that various public companies will use to determine an estimate of their CEO pay ratio, the ratio reported above should not be used as a basis for comparison between companies.

Equity Compensation Plan Information
The following table presents information as of December 31, 2018, with respect to compensation plans under which shares of our Common Stock are authorized for issuance.
Equity Compensation Plan Information
Equity Compensation Plans
Approved by Shareholders (1)
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights
Weighted Average Exercise Price of Outstanding Options, Warrants and Rights
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans
2008 Incentive Plan
1,781,779

(2) 
$
67.13

1,707,355

2017 Incentive Plan
101,509

(3) 
107.58

4,280,607

2013 Stock Plan for Non-Employee Directors
27,588

(4) 
-

388,179

Total
1,910,876

 
69.31

6,376,141

(1) 
We have no equity compensation plans that are not shareholder approved.
(2) 
Amount includes, in addition to outstanding options and restricted stock unit awards payable in shares, 68,010 units, 113,658 units, 72,652 units and 63,117 units of the 2015 - 2018 Performance Unit Awards at Target, respectively.
(3) 
Amount includes, in addition to outstanding options and restricted stock unit awards payable in shares, zero Performance Unit Awards at Target.
(4) 
Amount reflects 27,588 deferred units invested in phantom shares under the 2013 Directors Plan that are to be paid in shares at a future time under the terms of the Plan.

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PROPOSAL 1 – ADVISORY RESOLUTION APPROVING EXECUTIVE COMPENSATION
 
Shareholders have an opportunity to cast an advisory vote on compensation of our named executive officers as disclosed in this Proxy Statement. This proposal, commonly known as “Say-on-Pay,” gives shareholders the opportunity to approve, reject or abstain from voting on the proposed resolution regarding our fiscal year 2018 executive compensation program.
Our compensation philosophy policies are described in the Compensation Discussion and Analysis and the Compensation of Executive Officers sections, and the accompanying tables (including all footnotes) and narrative, beginning on page 6 of this Proxy Statement. The Committee designs our compensation policies for our named executive officers to create executive compensation arrangements linked to the creation of long-term growth, sustained shareholder value and individual and annual corporate performance, and to be competitive with peer companies of similar size, value and complexity, as well as encourage stock ownership by our senior management. Based on its review of the total compensation of our named executive officers for fiscal year 2018, the Committee believes that the total compensation for each of the named executive officers is reasonable and effectively achieves the designed objectives of driving superior business and financial performance, attracting, retaining and motivating our people, aligning our executives with shareholders’ long-term interests, focusing on the long-term and creating balanced program elements that discourage excessive risk-taking.
At our 2018 annual meeting of shareholders, we conducted our say-on-pay vote, regarding our 2017 executive compensation program. Approximately 92% of the shares voted at our 2018 annual meeting were cast in favor of our advisory vote on NEO compensation.  We initiated an extensive outreach effort with our largest shareholders in 2016 and 2017, which we continued in 2018, discussing their concerns and making changes to our executive compensation programs that we believe further align our compensation program with our business strategy and our shareholders’ interests. See “Aligning our Incentives with our Strategy and Shareholder Interests,” beginning on page 7 of this Proxy Statement, for more information as to significant changes and updates that the Executive Compensation Committee made in 2018.
The Committee values the opinions of our shareholders, and will consider the outcome of the vote when making future executive compensation decisions as it deems appropriate. The approval of the non-binding resolution approving the compensation of our named executive officers requires that the votes cast in favor of the proposal exceed the number of votes cast in opposition to the proposal. However, neither the approval nor the disapproval of this resolution will be binding on the Board of Directors or the Company nor construed as overruling a decision by the Board of Directors or the Company. Neither the approval nor the disapproval of this resolution will create or imply any change to our fiduciary duties or create or imply any additional fiduciary duties for the Board of Directors or the Company.

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THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE NON-BINDING ADVISORY RESOLUTION APPROVING THE COMPANY’S COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS:
“RESOLVED, that the Company’s shareholders APPROVE, on a non-binding advisory basis, the compensation paid to the Company’s named executive officers as disclosed in this Proxy Statement pursuant to the SEC’s compensation disclosure rules, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.”

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GOVERNANCE MATTERS
Our Board of Directors and management periodically review our Corporate Governance Guidelines and other corporate governance policies, principles and procedures, to determine whether they should be revised to address recent changes in regulatory requirements and evolving governance practices.
Our Corporate Governance Guidelines, including Director independence standards, our Code of Business Conduct and the charters of our Audit & Finance, Executive Compensation, Nominating & Governance, Capital Investment, and Health, Safety & Environment Committees are available on our website at www.albemarle.com (See Investors/Corporate Governance) and are available in print to any shareholder upon request by contacting our Investor Relations department.
Director Independence
The Board has determined that Directors Brlas, Hernandez, Maine, Masters, O’Brien, O'Connell, Seavers, Steiner, Taggart and Wolff are each “independent” as described by the NYSE listing standards and the independence standards of our Corporate Governance Guidelines.
In order for a Director or nominee to be considered “independent” by the Board, he or she must (i) be free of any relationship that, applying the rules of the NYSE, would preclude a finding of independence, and (ii) not have any material relationship (either directly or as a partner, shareholder or officer of an organization) with us or any of our affiliates or any of our executive officers or any of our affiliates’ executive officers. In evaluating the materiality of any such relationship, the Board takes into consideration whether disclosure of the relationship would be required by the proxy rules under the Exchange Act. If disclosure of the relationship is required, the Board must make a determination that the relationship is not material as a prerequisite to finding that the Director or nominee is “independent.”
Board Leadership Structure and Role in Risk Oversight
Leadership Structure
As part of our annual corporate governance and succession planning review, the Nominating & Governance Committee and the Board evaluate our board leadership structure to ensure that the structure in place is appropriate for the Company at the time.
The Company combined the roles of Chairman of the Board and CEO in November 2016. Given our current circumstances and operating strategies, we believe that having a combined Chairman of the Board and CEO is the appropriate structure for our shareholders and our Company. Mr. Masters serves as our Lead Independent Director. The Company continues to benefit from the leadership experience of our Lead Independent Director, Mr. Masters, and the strategic vi