CELANESE CORPORATION

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

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

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to §240.14a-12

 

CELANESE CORPORATION

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CELANESE CORPORATION
1601 West Lyndon B. Johnson Freeway
Dallas, Texas 75234

 

March 11, 2009

 

Dear Fellow Stockholders:

 

On behalf of your board of directors, I am pleased to invite you to attend the 2009 Annual Meeting of Stockholders of Celanese Corporation. The meeting will be held at 7:30 a.m. (Dallas time) on Thursday, April 23, 2009, at The Crescent Club, 200 Crescent Court — 17th Floor, Dallas, Texas 75201.

 

The accompanying Proxy Statement describes the items to be considered and acted upon by the stockholders at the Annual Meeting.

 

To ensure that your shares are represented at the meeting, we urge you to cast your vote as promptly as possible. We encourage you to vote via the Internet. It is convenient and saves us significant postage and processing costs. You may vote by proxy via the Internet or telephone, or, if you received paper copies of the proxy materials via mail, you can also vote by mail by following the instructions on the proxy card or voting instruction card.

 

Sincerely,

 

David N. Weidman

Chairman and

Chief Executive Officer

TABLE OF CONTENTS

 

CELANESE CORPORATION
1601 West Lyndon B. Johnson Freeway
Dallas, Texas 75234

 

 

Our Proxy Statement follows. Financial and other information about Celanese Corporation is contained in our Annual Report to Stockholders for the fiscal year ended December 31, 2008.

 

To ensure that your shares are represented at the meeting, we urge you to cast your vote as promptly as possible. You may vote by proxy via the Internet or telephone, or, if you received paper copies of the proxy materials by mail, you can also vote via mail by following the instructions on the proxy card or voting instruction card. We encourage you to vote via the Internet. It is convenient and saves us significant postage and processing costs.

 

By Order of the Board of Directors of

Celanese Corporation

 

Curtis S. Shaw

Executive Vice President, General Counsel

and Corporate Secretary

 

Dallas, Texas

March 11, 2009

CELANESE CORPORATION
1601 West Lyndon B. Johnson Freeway
Dallas, Texas 75234

 

For the Annual Meeting of Stockholders To Be Held on
April 23, 2009

 

The board of directors (the “board of directors” or the “board”) of Celanese Corporation, a Delaware corporation (“Celanese,” “us,” “Company,” “we” or “our”), solicits the enclosed proxy for use at our 2009 Annual Meeting of Stockholders to be held at 7:30 a.m. (Central Daylight Time) on Thursday, April 23, 2009, at The Crescent Club, 200 Crescent Court — 17th Floor, Dallas, Texas 75201. This Proxy Statement contains information about the matters to be voted on at the meeting and the voting process, as well as information about our directors (each, a “director” or collectively, the “directors”) and executive officers. We will bear the expense of soliciting the proxies for the Annual Meeting.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON

 

APRIL 23, 2009

 

Celanese Corporation’s Notice of Annual Meeting and Proxy Statement, Annual Report
and other proxy materials are available at www.proxyvote.com

 

Pursuant to U.S. Securities and Exchange Commission rules, we have elected to furnish proxy materials to our stockholders over the Internet instead of mailing printed copies of those materials to each stockholder. If you received a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”) by mail, you will not receive a printed copy of the proxy materials unless you request one. Instead, the Notice of Internet Availability will instruct you as to how you may access and review the proxy materials and cast your vote on the Internet. If you received a Notice of Internet Availability by mail and would like to receive a printed copy of our proxy materials, please follow the instructions included in the Notice of Internet Availability. Stockholders who requested paper copies of proxy materials or previously elected to receive proxy materials electronically did not receive the Notice of Internet Availability and will receive the proxy materials in the format requested. This Proxy Statement and our 2008 Annual Report to Stockholders (as defined below) also are available at our website, www.celanese.com/index/ir_index/ir_reports.htm.

 

The Notice of Internet Availability and, for stockholders who previously requested electronic or paper delivery, the proxy materials are first being made available on or about March 11, 2009, to stockholders of record and beneficial owners who owned shares of the Company’s series A common stock (the “Common Stock”) at the close of business on March 2, 2009.

 

Our principal executive offices are located at 1601 West Lyndon B. Johnson Freeway, Dallas, Texas 75234.

 

What is the purpose of the Annual Meeting?

 

At our Annual Meeting, stockholders will vote upon several important Company matters. In addition, our management will report on the Company’s performance over the last fiscal year and, following the meeting, respond to questions from stockholders.

What is included in the proxy materials?

 

The proxy materials include:

 

 

If you requested a paper copy of these materials by mail, the proxy materials also include a proxy card or a voting instruction card for the Annual Meeting.

 

What information is contained in this Proxy Statement?

 

The information in this Proxy Statement relates to the proposals to be voted on at the Annual Meeting, the voting process, the Company’s board of directors and board committees, the compensation of the Company’s directors and certain executive officers for fiscal year 2008 and other required information.

 

How can I access the proxy materials over the Internet?

 

Your Notice of Internet Availability, proxy card or voting instruction card (as applicable) contains instructions on how to:

 

 

Our proxy materials are also available on our website at www.celanese.com/index/ir_index/ir_reports.htm.

 

Your Notice of Internet Availability, proxy card or voting instruction card contains instructions on how you may request to access proxy materials electronically on an ongoing basis. Choosing to access your future proxy materials electronically will help us conserve natural resources and reduce the costs of printing and distributing our proxy materials. If you choose to access future proxy materials electronically, you will receive an e-mail with instructions containing a link to the website where those materials are available and a link to the proxy voting website. Your election to access proxy materials by e-mail will remain in effect until you terminate it.

 

Who may attend the Annual Meeting?

 

The board of directors set March 2, 2009 as the record date for the Annual Meeting. All stockholders of record and beneficial owners of shares of Common Stock at the close of business on March 2, 2009, or their duly appointed proxies, may attend and vote at the Annual Meeting and any adjournments or postponements thereof. For verification of beneficial ownership at the Annual Meeting, you will need to bring personal identification and a copy of your brokerage statement reflecting your share ownership as of March 2, 2009 and check in at the registration desk.

 

Who may vote at the Annual Meeting?

 

Each stockholder who owned Common Stock at the close of business on March 2, 2009 is entitled to one vote for each share of Common Stock held on all matters to be voted on. At the close of business on the record date, there were 143,507,870 shares of our Series A common stock outstanding and there were no shares of our Series B common stock outstanding. Our Preferred Stock does not have voting rights at the Annual Meeting.

 

What constitutes a quorum to conduct business at the Annual Meeting?

 

The required quorum for the transaction of business at the Annual Meeting is the presence of, in person or by proxy, the holders of a majority of the voting power of the outstanding shares of Common Stock entitled to vote at the Annual Meeting.

How many votes are required to approve each item?

 

The affirmative vote of a majority of the voting power of the shares of Common Stock present in person or represented by proxy and entitled to vote at the Annual Meeting is required for all proposals other than the election of directors. The affirmative vote of a majority of the actual votes cast is required for the election of each director nominee (the number of shares voted “FOR” a director nominee must exceed the number of votes cast “AGAINST” that nominee). Shares not present at the meeting and shares voting “ABSTAIN” have no effect on the election of directors. You may not cumulate your votes in the election of directors. In addition, stockholders holding a majority of the shares entitled to vote as of the record date must cast votes on each of approval of the 2009 Global Incentive Plan and approval of the 2009 Employee Stock Purchase Plan.

 

How are abstentions and broker non-votes treated?

 

Abstentions and broker non-votes will be counted toward calculating a quorum. Other than in the election of directors, abstentions will have the same effect as a vote against the proposal as to which the abstention is made. Broker non-votes will not have any effect on the outcome of the voting on any matter.

 

How does the Board recommend I vote on the proposals?

 

The board recommends votes:

 

 

What does it mean to vote by proxy?

 

By giving your proxy, you give someone else the right to vote your shares in accordance with your instructions. In this way, you assure that your vote will be counted even if you are unable to attend the Annual Meeting. If you give your proxy but do not include specific instructions on how to vote, the Proxyholders (defined below) will vote your shares FOR the election of the board’s nominees, FOR the ratification of the selection of KPMG as our independent registered public accounting firm, FOR approval of the 2009 Global Incentive Plan and FOR approval of the 2009 Employee Stock Purchase Plan.

 

What is the difference between holding and voting shares as a stockholder of record and as a beneficial owner?

 

Most Celanese stockholders hold their shares through a stockbroker, bank or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.

 

Stockholder of Record.  If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A. (“Computershare”), you are considered, with respect to those shares, the stockholder of record. As the stockholder of record, you have the right to grant your voting proxy directly to Mr. Steven M. Sterin, our Senior Vice President and Chief Financial Officer and Mr. Robert L. Villaseñor, our Associate General Counsel and Assistant Secretary, collectively (the “Proxyholders”) or to vote in person at the Annual Meeting.

 

Beneficial Owner.  If your shares are held in a stock brokerage account or by a bank or other nominee (the “Record Holder”), you are considered the beneficial owner of shares held in “street name,” and these proxy materials are being forwarded to you by your Record Holder, which is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker or nominee how to vote and are also invited to attend the Annual Meeting. HOWEVER, SINCE YOU ARE NOT THE STOCKHOLDER OF

RECORD, YOU MAY NOT VOTE THESE SHARES IN PERSON AT THE ANNUAL MEETING UNLESS YOU OBTAIN A SIGNED LEGAL PROXY FROM THE RECORD HOLDER GIVING YOU THE RIGHT TO VOTE THE SHARES. Your Record Holder has provided you with instructions on how to vote your shares.

 

What should I do if I receive more than one notice or e-mail about the Internet availability of the proxy materials or more than one copy of the printed proxy materials?

 

You may receive more than one notice or more than one e-mail about the Internet availability of the proxy materials or more than one copy of the printed proxy materials. For example, if you hold your shares in more than one brokerage account, you may receive a separate notice, a separate e-mail or a separate mailing for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you may receive more than one notice, e-mail or mailing. Please vote all of your shares.

 

How do I cast my vote?

 

Each stockholder is entitled to one vote for each share of Common Stock on all matters presented at the Annual Meeting. Stockholders do not have the right to cumulate their votes for the election of directors. Celanese is offering the following methods of voting:

 

Voting In-Person

 

Stockholders of Record. Shares held directly in your name as the stockholder of record may be voted in person at the Annual Meeting. If you choose to vote in person at the Annual Meeting, please bring the Notice of Internet Availability of Proxy Materials or proof of identification.

 

Beneficial Owners. Shares held in street name may be voted in person by you only if you obtain a legal proxy from the Record Holder giving you the right to vote the shares.

 

Voting via the Internet

 

Shares may be voted via the Internet at www.proxyvote.com. Your voting instructions will be accepted up until 11:59 P.M. Eastern Time on April 22, 2009. Have your Notice of Internet Availability in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

 

Voting via Telephone

 

Shares may be voted via any touch-tone telephone at 1-800-690-6903. Your voting instructions will be accepted up until 11:59 P.M. Eastern Time on April 22, 2009. Have your Notice of Internet Availability in hand when you call and then follow the instructions given.

 

Voting via Mail

 

If you requested a paper proxy card, your shares may be voted via mail by marking, signing and dating your proxy card and returning it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

 

EVEN IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING, WE RECOMMEND THAT YOU ALSO SUBMIT YOUR PROXY AS DESCRIBED ABOVE SO THAT YOUR VOTE WILL BE COUNTED IF YOU LATER DECIDE NOT TO ATTEND THE MEETING. SUBMITTING YOUR PROXY VIA INTERNET, TELEPHONE OR MAIL DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON AT THE ANNUAL MEETING.

 

What happens if additional proposals are presented at the Annual Meeting?

 

Other than the election of directors, the ratification of the selection of KPMG as the independent registered public accounting firm and the approval of the 2009 Global Incentive Plan and the 2009 Employee Stock Purchase Plan, we do not expect any matters to be presented for a vote at the Annual Meeting. If you grant a proxy, the persons named as Proxyholders will have the discretion to vote your shares on any additional matters properly presented for

a vote at the Annual Meeting. Under our By-laws, the deadline for notifying us of any additional proposals to be presented at the Annual Meeting has passed and, accordingly, stockholders may not present proposals at the Annual Meeting.

 

Can I change my vote or revoke my proxy?

 

If your shares are held in street name through a broker, bank or other nominee, you should contact the holder of your shares regarding how to revoke your proxy.

 

If you are a stockholder of record, you may change your vote at any time before the polls close at the Annual Meeting. You may do this by:

 

 

Your attendance at the Annual Meeting will not have the effect of revoking a proxy unless you notify our Corporate Secretary in writing before the polls close that you wish to revoke a previous proxy. You may revoke your proxy at any time before the proxy has been voted at the Annual Meeting by taking one of the actions described above.

 

Who will count the votes?

 

Representatives of Carl Hagberg & Associates will count the votes and will serve as the independent inspector of the election.

 

What if I execute my proxy but do not provide voting instructions?

 

If you provide specific voting instructions, your shares will be voted as you instruct. If you execute a proxy but do not specify how your shares are to be voted, the Proxyholders will vote your shares in accordance with the recommendations of the board provided above.

 

Will my shares be voted if I do not provide my proxy?

 

Your shares may be voted if they are held in the name of a brokerage firm, even if you do not provide the brokerage firm with voting instructions. Brokerage firms have the authority under the New York Stock Exchange (“NYSE”) rules to cast votes on certain “routine” matters if they do not receive instructions from their customers. The election of directors and ratification of the independent registered accounting firm are considered routine matters for which brokerage firms may vote unvoted shares. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a “broker non-vote.” The proposals to approve the 2009 Global Incentive Plan and the 2009 Employee Stock Purchase Plan are deemed to be “non-routine” matters for which brokerage firms may not vote unvoted shares.

 

Who will bear the cost of soliciting votes for the Annual Meeting?

 

The cost of preparing, assembling, printing and mailing this Proxy Statement and related proxy materials and the cost of soliciting proxies related to the Annual Meeting will be borne by the Company. The Company will request banks and brokers to solicit their customers who are beneficial owners of shares of Common Stock listed of record in names of nominees, and will reimburse those banks and brokers for the reasonable out-of-pocket expenses of the solicitation. The original solicitation of proxies by mail may be supplemented by telephone, telegram and personal solicitation by officers and other regular employees of the Company and its subsidiaries, but no additional compensation will be paid to those individuals on account of their activities. In addition, the Company has retained

Georgeson Inc. to assist in the solicitation of proxies, for which it will be paid a fee of $9,000 plus reimbursement of reasonable out-of-pocket expenses. We estimate that the total fees and out-of-pocket expenses to be paid by the Company to Georgeson in connection with their services will be approximately $15,000.

 

How can I request free copies of the proxy materials or information?

 

You may contact Broadridge:

 

 

What is “householding”?

 

We may send a single Notice of Internet Availability or set of proxy materials and other stockholder communications to any address shared by two or more stockholders. This process is called “householding.” This reduces duplicate mailings, saves printing and postage costs and conserves natural resources. We will deliver promptly upon written or oral request a separate copy of the Notice of Internet Availability, 2008 Annual Report to Stockholders or this Proxy Statement to a stockholder at a shared address to which a single copy of the documents was delivered.

 

To receive a separate copy or to stop receiving multiple copies sent to stockholders of record sharing an address:

 

 

What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders?

 

You may submit proposals for consideration at future stockholder meetings. For a stockholder proposal to be considered for inclusion in the Company’s proxy statement for the 2010 annual meeting, the Company’s Corporate Secretary must receive the written proposal at our principal executive offices no later than the close of business on November 11, 2009. Such proposals also must comply with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:

 

Corporate Secretary
Celanese Corporation
1601 West Lyndon B. Johnson Freeway
Dallas, Texas 75234

 

For a stockholder proposal that is not intended to be included in the Company’s Proxy Statement under Rule 14a-8, the stockholder must provide the information required by the Company’s By-laws and give timely notice to the Company in accordance with the Company’s By-laws, which, in general, require that the notice be received by the by the Company’s Secretary:

 

 

If the date of the stockholder meeting is moved more than 30 days before the anniversary of the Company’s Annual Meeting for the prior year, then notice of a stockholder proposal that is not intended to be included in the Company’s Proxy Statement under Rule 14a-8 must be received no earlier than the close of business 120 days prior to the meeting and not later than the close of business on the later of the following two dates:

 

 

How may I recommend or nominate individuals to serve as directors?

 

You may recommend director candidates for consideration by the board’s nominating & corporate governance committee as described later in this Proxy Statement under “Corporate Governance — Candidates for the Board.” Generally, recommended candidates are considered at the first or second board meeting prior to the annual meeting.

 

In addition, the Company’s By-laws permit stockholders to nominate directors for election at an annual stockholder meeting. To nominate a director, the stockholder must deliver the information required by the Company’s Bylaws. To nominate an individual for election at an annual stockholder meeting, the stockholder must give timely notice to the Company’s Corporate Secretary in accordance with the Company’s By-laws, which, in general, require that the notice be received by the Company’s Secretary between the close of business on December 24, 2009 and the close of business on January 23, 2010, unless the annual meeting is moved by more than 30 days before the anniversary of the prior year’s annual meeting, in which case the deadline will be as described in the question above.

 

How may I obtain a copy of the Company’s By-law provisions regarding stockholder proposals and director nominations?

 

You may contact the Company’s Secretary at our principal executive offices for a copy of the relevant Bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates. The Company’s By-laws also are available on the Company’s website at www.celanese.com/index/ir_index/ir_corp_governance.htm.

 

Date of our fiscal year end

 

This Proxy Statement provides information about the matters to be voted on at the Annual Meeting and also additional information about Celanese, its officers and directors. Some of the information is stated as of the end of fiscal year 2008, and some information is provided as of a more current date. Our fiscal year ends on December 31.

 

Under the Company’s By-laws, a director nominee must receive the affirmative of a majority of the votes cast at the Company’s Annual Meeting of Stockholders in order to be elected. The board believes this majority vote standard appropriately gives stockholders a greater voice in the election of directors than plurality voting does. Under Delaware law, an incumbent director who fails to receive the required vote “holds over,” or continues to serve as a director, until his or her successor is elected and qualified. In order to address this “holdover” issue, board policy requires an incumbent nominee who fails to receive the required vote to tender his or her resignation. Following receipt of such a resignation, the board will act on it within 90 days of the certification of the vote. In considering whether to accept or reject the resignation, the board will consider all factors it deems relevant, including the underlying reason for the vote result, the director’s contributions to the Company during his or her tenure, and the director’s qualifications. The board may accept or reject the resignation. Only independent directors will participate in the deliberations regarding a tendered resignation.

 

Our board of directors is divided into three classes serving staggered three-year terms. At the Annual Meeting you will elect three directors to serve for three years. Our board of directors has nominated Mr. James E. Barlett, Mr. David F. Hoffmeister and Mr. Paul H. O’Neill to be elected as Class II directors at the Annual Meeting of Stockholders. The director nominees, Messrs. Barlett, Hoffmeister and O’Neill, have consented to be elected to serve as directors for the term of the Class II directors. Unless otherwise instructed, the Proxyholders will vote the proxies received by them for Celanese’s three nominees named below. If any nominee of Celanese is unable or declines to serve as a director as of the time of the Annual Meeting, the board may designate a substitute nominee or reduce the size of the board. Proxies will be voted for any nominee who shall be designated by the present board of directors to fill the vacancy. If elected, Messrs. Barlett, Hoffmeister and O’Neill will serve until the 2012 Annual Meeting of Stockholders or until their successors are elected and qualified. The names of the nominees and certain information about them, as of March 2, 2009, are set forth below:

 

 

Each director must receive a majority of votes cast in favor of his election.

 

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE

“FOR” THE NOMINEES LISTED ABOVE.

 

Class III Directors — Term Expires in 2010

 

Class I Directors — Term Expires in 2011

 

 

The Company uses both cash and stock-based compensation to attract and retain qualified directors to serve on our board of directors. In setting the compensation levels, the nominating & corporate governance committee considered the extent of time and the expertise required to serve on our board. Each non-management director is entitled to (i) an annual cash retainer of $85,000 (paid quarterly) and (ii) an annual equity retainer of $85,000 in restricted stock units (granted at the first regular board meeting following the Annual Meeting). In addition, the chair of the nominating & corporate governance committee, compensation committee and environmental, health & safety committee receives an annual fee of $10,000 and the chair of the audit committee receives an annual fee of $20,000.

 

The table below is a summary of compensation paid and stock options and restricted stock units granted by the Company to non-management directors for the fiscal year ending December 31, 2008. David N. Weidman is not included in this table since he is an employee of the Company and receives no compensation for his services as director.

 

 

 

 

The audit committee of the board of directors has selected KPMG LLP to audit our consolidated financial statements. During fiscal 2008, KPMG served as our independent registered public accounting firm and also provided other audit-related and non-audit services which were approved by the audit committee.

 

Representatives of KPMG will be present at the Annual Meeting and will have the opportunity to make a statement if they desire and will be available to respond to appropriate questions from stockholders.

 

We are asking our stockholders to ratify the selection of KPMG as our independent registered public accounting firm. Although ratification is not required by our By-laws or otherwise, the board is submitting the audit committee’s selection of KPMG to our stockholders for ratification as a matter of good corporate practice. Even if the selection is ratified, the audit committee in its discretion may select a different registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders. If the appointment of KPMG is not ratified, the audit committee will evaluate the basis for the stockholders’ vote when determining whether to continue the firm’s engagement.

 

Aggregate fees billed to the Company during the years ended December 31, 2008 and 2007 by its principal accounting firm KPMG and KPMG affiliates as follows:

 

 

 

 

The audit committee is responsible for appointing, retaining and pre-approving the fees of the independent registered public accounting firm. The audit committee has adopted a Policy for Pre-Approval of Independent Auditor Services (“Pre-Approval Policy”) pursuant to which proposed services may be pre-approved through the application of detailed policies and procedures (“general pre-approval”) or by specific review of each service (“specific pre-approval”). The audit committee has provided general pre-approval for certain specific types of audit, audit-related and tax services that do not exceed $100,000 per project and $1,000,000 per year in the aggregate and gives detailed guidance to management as to the specific services that are eligible for general pre-approval. The audit committee is to be informed on a timely basis of any services performed by the independent auditor pursuant to general pre-approval. Unless a type of service is included in this general pre-approval, it will require specific pre-approval. The annual audit services engagement terms and fees must be specifically pre-approved by the audit committee. Requests to provide services that require specific pre-approval must be submitted to the audit committee by both the independent registered public accounting firm and the chief financial officer or controller, and must include detailed back-up documentation and a joint statement as to whether the request or application is consistent with the SEC’s rule on auditor independence.

The audit committee may delegate its pre-approval authority to one or more of its members. The member or members to whom such authority is delegated must report any pre-approval decisions to the audit committee at its next scheduled meeting.

 

All services performed by our independent auditor in 2008 were pre-approved by the audit committee.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE “FOR” THE RATIFICATION OF OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR FISCAL YEAR 2009.

 

General

 

Our board of directors proposes and recommends that stockholders approve and adopt the Celanese Corporation 2009 Global Incentive Plan (the “2009 GIP”) which provides for the issuance of approximately 5,350,000 shares of Company securities to plan participants. See “Stock Subject to 2009 GIP” below. The 2009 GIP was approved by the board of directors on March 6, 2009. The board of directors and the Company’s management believe that the adoption of the 2009 GIP is in the best interests of the Company and necessary (i) to attract, retain and motivate employees, non-management directors and service providers of the Company by providing for or increasing the proprietary interests of such individuals in the Company, and (ii) to further such individuals’ interests with those of the stockholders of the Company by providing for or increasing the proprietary interests in the Company of such individuals. The affirmative vote of a majority of the holders of shares of our Common Stock cast on the proposal will be required for the approval and adoption of the 2009 GIP.

 

In the following paragraphs we summarize the principal features of the 2009 GIP as it is proposed to be adopted. This summary is qualified in its entirety by reference to the full text of the 2009 GIP, which is set forth as an appendix to this Proxy Statement. Stockholders are urged to read the 2009 GIP in its entirety. Any capitalized terms used in this summary description but not defined here or elsewhere in this Proxy Statement have the meanings assigned to them in the 2009 GIP.

 

On March 6, 2009, the Company’s board of directors adopted the 2009 GIP and reserved approximately 5,350,000 shares of Common Stock for issuance thereunder. See “Stock Subject to 2009 GIP” below. The 2009 GIP enables the compensation committee to award incentive and nonqualified stock options, stock appreciation rights, shares of Common Stock, restricted stock, restricted stock units and incentive bonuses (which may be paid in cash or stock or a combination thereof), any of which may be performance-based, with vesting and other award provisions that provide effective incentives to Company employees (including officers), non-management directors and other service providers.

 

Currently, our equity-based compensation programs are administered under the Celanese Corporation 2004 Stock Incentive Plan (the “Prior Plan”). This proposal seeks stockholder approval of a new equity-based compensation plan. If approved, the 2009 GIP will replace the Prior Plan and will become the sole plan for providing equity-based incentive compensation to eligible employees, non-employee directors and service providers. No further awards will be granted under the Prior Plan from and after the date of stockholder approval of the 2009 GIP.

 

The following is a list of some of the 2009 GIP features that the board of directors believes are consistent with the interests of stockholders and sound corporate governance practices.

 

 

The board of directors believes that it is in the best interests of the Company and its stockholders to continue to provide for an equity incentive plan under which equity-based compensation awards made to the Company’s named executive officers (other than the chief financial officer) can qualify for deductibility by the Company for federal income tax purposes. Accordingly, the 2009 GIP has been structured in a manner such that awards under it can satisfy the requirements for “performance-based” compensation within the meaning of Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986, as amended (the “Code”). In general, under Section 162(m), in order for us to be able to deduct compensation in excess of $1 million paid in any one year to our named executive officers listed on page 37 (other than the chief financial officer), such compensation must qualify as “performance-based.” One of the requirements of “performance-based” compensation for purposes of Section 162(m) is that the material terms of the performance goals under which compensation may be paid be disclosed to and approved by the Company’s stockholders. For purposes of Section 162(m) the material terms include:

 

 

With respect to awards under the plan, each of these aspects is discussed below, and stockholder approval of the plan is intended to constitute approval of each of these aspects of the 2009 GIP for purposes of the approval requirements of Section 162(m).

 

Purpose of the 2009 GIP

 

The purpose of the 2009 GIP is to provide employees (including executive officers), non-management directors and other service providers with incentives for the future performance of services that are linked to the profitability of the Company’s businesses and to the interests of the Company’s stockholders. Certain aspects of the 2009 GIP are also intended to encourage employees (including executive officers), non-management directors and other service providers to own Common Stock, so that they may establish or increase their proprietary interest in the Company and align their interests with the interests of the stockholders.

 

Types of Awards Under the 2009 GIP

 

The plan provides for the following types of awards:

 

 

Administration of the 2009 GIP

 

The 2009 GIP is administered by the compensation committee of the board of directors. The compensation committee has broad authority, subject to the provisions of the plan, to administer and interpret the plan, including, without limitation, the authority to:

 

 

 

All decisions and actions of the compensation committee are final and binding on all participants in the 2009 GIP. The compensation committee does not have the authority to reduce the exercise price for any stock option or stock appreciation right by repricing or replacing that stock option or stock appreciation right unless the Company has obtained the prior consent of its stockholders. Subject to certain limitations, the compensation committee may authorize one or more officers of the Company to perform any or all things the compensation committee is authorized and empowered to do or perform under the plan. In addition, the compensation committee may delegate any or all aspects of the day-to-day administration of the 2009 GIP to one or more officers or employees of the Company or any subsidiary, and/or to one or more agents.

 

Eligibility

 

Employees (including executive officers), non-management directors and service providers of the Company and its subsidiaries and affiliates are eligible for grants under the 2009 GIP. The board of directors has identified these classes of individuals as those whose services are linked most directly to the profitability of our businesses and to the interests of our stockholders. In determining the persons to whom grants will be awarded and the number of shares to be covered by each grant, the compensation committee may take into account, among other things, the duties of the respective persons, their present and potential contributions to the success of the Company and such other factors as the compensation committee deems relevant in connection with accomplishing the purpose of the plan. Because awards are established at the discretion of the compensation committee, subject to the limits described above, the number of shares that may be granted to any participant under the 2009 GIP cannot be determined. As of the record date, there were approximately 1,500 eligible employees and 8 eligible non-management directors.

 

Stock Subject to 2009 GIP

 

The maximum number of shares that may be issued under the 2009 GIP is equal to 5,350,000 shares plus (a) any shares of Common Stock that remain available for issuance under the Prior Plan (not including any shares of Common Stock that are subject to outstanding awards under the Prior Plan or any shares of Common Stock that were issued pursuant to awards under the Prior Plan) and (b) any awards under the Prior Plan that remain outstanding that cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the award to the extent that such award is exercised for or settled in vested and non-forfeitable shares). As of March 2, 2009, a total of 348,218 shares remained available for awards under the Prior Plan, and a total of 7,985,395 shares were subject to outstanding awards under the Prior Plan. Of the 6,978,637 shares subject to outstanding option awards, the weighted average remaining contractual term was 6.6 years with a weighted average exercise price of $19.35.

 

Shares of Common Stock issued under the 2009 GIP may be either authorized and unissued shares or previously issued shares acquired by the Company, including shares purchased on the open market. On termination or expiration of an unexercised option, SAR or other stock-based award under the plan (including cancelled or otherwise terminated options under the Prior Plan), in whole or in part, the number of shares of Common Stock subject to such award will become available for grant again under the 2009 GIP. In addition, shares of Common Stock underlying awards that do not result in the issuance of Common Stock is connection with the payment or settlement of such award shall again become available order the 2009 GIP. With respect to awards other than options

and stock appreciation rights, the number of shares available for awards under the 2009 GIP is reduced by 1.59 shares for each share covered by such award or with respect to which such award relates. Under the 2009 GIP, no single participant may be granted awards covering more than 1,000,000 shares of Common Stock in any fiscal year. The maximum number of shares of Common Stock that may be issued pursuant to stock options intended to be incentive stock options is approximately 5,350,000 shares.

 

In the event of any change in capitalization of the Company, such as a stock split, corporate transaction, merger, consolidation, separation, spin off, or other distribution of stock or property of the Company, any reorganization, any partial or complete liquidation of the Company or any extraordinary cash or stock dividend, the compensation committee will make appropriate substitutions or adjustments in the aggregate number and kind of shares reserved for issuance under the plan, in the share limitations for awards set forth in the plan and in the number of shares subject to and exercise price of outstanding awards, or will make such other equitable substitution or adjustments as it may determine to be appropriate.

 

Terms and Conditions of Stock Options

 

Stock options granted to participants may be granted alone or in addition to other awards granted under the 2009 GIP and may be of two types: (i) incentive stock options within the meaning of Section 422 of the Code (“ISOs”); or (ii) non-qualified stock options, which are not intended to be incentive stock options (“NSOs”). All stock options granted under the plan will be evidenced by a written agreement between the Company and the participant. Each agreement will provide, among other things, whether it is intended to be an agreement for an incentive stock option or a non-qualified stock option, the number of shares subject to the option, the exercise price, exercisability (or vesting), the term of the option (which may not exceed 7 years), and other terms and conditions.

 

Subject to the express provisions of the 2009 GIP, options generally may be exercised over such period, in installments or otherwise, as the compensation committee may determine. If the compensation committee provides that any stock option is exercisable only in installments, the compensation committee may at any time waive such installment exercise provisions, in whole or in part, based on such factors as it, in its sole discretion, deems appropriate, and the compensation committee may at any time accelerate the exercisability of any stock option. Dividend equivalents may not be granted with respect to shares underlying stock options.

 

The exercise price for any stock option granted may not be less than the fair market value of the Common Stock subject to that option on the grant date; provided, however, that the exercise price per share with respect to an option that is granted in connection with a merger or other acquisition as a substitute or replacement award for options held by optionees of the acquired entity may be less than 100% of the fair market value on the grant date if such exercise price is based on a formula set forth in the terms of the options held by such optionees or in the terms of the agreement providing for such merger or other acquisition. The exercise price may be paid in shares, cash or a combination thereof, as determined by the compensation committee, including an irrevocable commitment by a broker to pay over such amount from a sale of the shares issuable under an option, the delivery of previously owned shares and withholding of shares deliverable upon exercise.

 

Stock options granted under the 2009 GIP may not be transferred except by will or by the laws of descent and distribution, and each option shall be exercisable only by the participant during his or her lifetime, except that a participant may transfer an award for no consideration to the participant’s “family members” as defined in Form S-8 under the Securities Act of 1933. In no event are awards transferable for value or consideration.

 

Following termination of employment, the participant’s right to exercise an option then held shall be determined by the compensation committee and set forth in an award agreement. In all cases, individual option agreements may provide for different terms, and in no case may an option be exercised after the expiration of its term.

 

Terms and Conditions of Stock Appreciation Rights

 

Stock Appreciation Rights may be granted alone (“freestanding SARs”) or in conjunction with all or part of a stock option (“tandem SARs”). Upon exercising an SAR, the participant is entitled to receive the amount by which the fair market value of the Common Stock at the time of exercise exceeds the strike price of the SAR. The strike

price of a freestanding SAR will be specified in the award agreement and is subject to the same limitations as the exercise price of an option. The strike price of a tandem SAR is the same as the exercise price of the related option. This amount is payable in Common Stock, cash, or a combination of Common Stock and cash, at the compensation committee’s discretion. The other terms and conditions that apply to stock options, including the provisions that apply in the event of a participant’s termination of employment and the prohibition on repricings, also generally apply to freestanding SARs.

 

A participant may exercise a freestanding SAR in the manner determined by the compensation committee and specified in the award agreement, but may only exercise a tandem SAR if the related stock option is also exercisable. A participant’s tandem SAR will not be exercisable if the participant has already exercised the related stock option, or if that option has terminated. See “Terms and Conditions of Stock Options” for details. Similarly, once a participant exercises a tandem SAR, the related stock options will no longer be exercisable. Dividend equivalents may not be paid with respect to shares underlying stock appreciation rights.

 

Terms and Conditions of Grants of Restricted Stock and RSUs

 

A restricted stock award is an award of Common Stock with restrictions that lapse in installments over a vesting period following the grant date. A restricted stock unit, or RSU, provides for the issuance of Common Stock following the vesting date or dates associated with the award. The plan also allows for restricted stock or restricted stock units to be treated as a performance award, under which the grant, issuance or vesting of such award would be based on satisfaction of pre-established objective performance criteria over a performance period of at least one year.

 

Shares of restricted stock and RSUs may be awarded either alone or in addition to other awards granted under the 2009 GIP. The compensation committee will determine the eligible individuals to whom grants will be awarded, and the terms and conditions of the grants, subject to the limitations contained in the 2009 GIP.

 

Except in the event of a change in control of the Company or the death or disability of the participant, restricted stock and RSUs will vest no more quickly than over (i) one year following the date of grant to the extent such vesting is subject to the satisfaction of performance criteria, or (ii) three years following the date of grant to the extent subject only to time-based vesting criteria.

 

Unless otherwise determined by the compensation committee, the recipient of a restricted stock award will have, with respect to the shares of such restricted stock, all of the rights of a stockholder of the Company, including, if applicable, the right to vote the shares and receive any cash dividends (which may be deferred by the compensation committee and reinvested in additional shares of restricted stock). Holders of RSUs are not entitled to voting rights in the shares of Common Stock underlying their RSUs until the underlying shares are actually reflected as issued and outstanding shares on the Company’s stock ledger. Common Stock underlying the RSUs shall not have rights to receive dividends or dividend equivalents.

 

Terms and Conditions of Incentive Bonuses

 

An incentive bonus is an opportunity for a participant to earn a future payment tied to the level of achievement with respect to one or more performance criteria established for a performance period of not less than one year. The maximum cash amount payable pursuant to that portion of an incentive bonus granted in any calendar year to any participant that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code shall not exceed $20,000,000. The terms of any incentive bonus will be set forth in an award agreement that will include provisions regarding (i) the target and maximum amount payable to the participant, (ii) the performance criteria and level of achievement versus these criteria that shall determine the amount of such payment, (iii) the term of the performance period as to which performance shall be measured for determining the amount of any payment, (iv) the timing of any payment earned by virtue of performance, (v) restrictions on the alienation or transfer of the incentive bonus prior to actual payment, (vi) forfeiture provisions and (vii) such further terms and conditions as determined by the compensation committee.

 

The compensation committee shall establish the performance criteria and level of achievement versus these criteria that shall determine the threshold, target and maximum amount payable under an incentive bonus, which

criteria may be based on financial performance and/or personal performance evaluations. The compensation committee may specify the percentage of the target incentive bonus that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code, in which case the performance criteria will be determined as specified below under “Performance Goals May Apply to Stock Options, Stock Appreciation Rights, Restricted Stock, RSUs and Incentive Bonuses.” The compensation committee shall certify the extent to which any performance criteria have been satisfied, and the amount payable as a result thereof, prior to payment of any incentive bonus that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code.

 

In addition, in order to preserve the tax deductibility of amounts paid to the Company’s named executive officers, the 2009 GIP provides that the compensation committee shall determine the maximum funding for incentive bonus awards to such named executive officers based on a percentage of Operating EBITDA. For the purpose of annual bonus awards, the maximum bonus pool available for named executive officers shall be 5% percent of Operating EBITDA. Within this limit, annual bonus awards earned by named executive officers shall be determined based on the attainment of established objectives. Such objectives may be qualitative or quantitative in nature. Further, no reduction in the annual bonus award for one named executive officer shall result in an increased bonus award to any other named executive officer or any other employee.

 

The compensation committee shall determine the timing of payment of any incentive bonus. Payment of the amount due under an incentive bonus may be made in cash or in shares of Common Stock, as determined by the compensation committee.

 

Performance Goals May Apply to Stock Options, Stock Appreciation Rights, Restricted Stock, RSUs and Incentive Bonuses

 

The compensation committee may specify certain performance criteria, which must be satisfied before stock options, stock appreciation rights, restricted stock and RSUs will be granted or will vest or incentive bonuses will become payable.

 

“Performance goals” means the specific objectives that may be established by the compensation committee, from time to time, with respect to an award. These objectives may be based on the attainment of specified levels of one or more of the following measures, applied to either the Company as a whole or to a business unit or a subsidiary or division, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, as applicable: (i) cash flow (before or after dividends), (ii) earnings or earnings per share (including earnings before interest, taxes, depreciation and amortization), (iii) stock price, (iv) return on equity, (v) total stockholder return, (vi) return on capital or investment (including return on total capital, return on invested capital, or return on investment), (vii) return on assets or net assets, (viii) market capitalization, (ix) economic value added, (x) debt leverage (debt to capital), (xi) revenue, (xii) income or net income, (xiii) operating income, (xiv) operating profit or net operating profit, (xv) operating margin or profit margin, (xvi) return on operating revenue, (xvii) cash from operations, (xviii) operating ratio, (xix) operating revenue, (xx) bookings, (xxi) backlog, (xxii) customer service, (xxiii) trade working capital, and/or (xxiv) environmental, health and/or safety goals.

 

Under the 2009 GIP and to the extent consistent with Section 162(m) of the Code, the compensation committee (i) shall appropriately adjust any evaluation of performance to eliminate the effects of charges for restructurings, discontinued operations, extraordinary items and all items of gain, loss or expense determined to be extraordinary or unusual in nature or related to the acquisition or disposal of a segment of a business or related to a change in accounting principle all as determined in accordance with generally accepted accounting principles in the United States of America or identified in the Company’s financial statements or notes to the financial statements, and (ii) may appropriately adjust any evaluation of performance to exclude any of the following events that occurs during a performance period: asset write-downs; litigation, claims, judgments or settlements; the effect of changes in tax law or other such laws or provisions affecting reported results; and accruals for reorganization and restructuring programs.

With respect to awards made to our named executive officers (other than the chief financial officer), the vesting or payment of which are to be made subject to performance goals, the compensation committee may design such awards or a portion thereof to comply with the applicable provisions of Section 162(m) of the Internal Revenue Code, including, without limitation, those provisions relating to the pre-establishment and certification of performance goals. With respect to awards not intended to comply with Section 162(m), performance goals may also include such individual or subjective performance criteria as the compensation committee may, from time to time, establish. Performance goals applicable to any award may include a threshold level of performance below which no portion of the award will become vested or payable, and levels of performance at which specified percentages of such award will become vested or payable.

 

Change in Control

 

The compensation committee may provide in any award agreement provisions relating to the treatment of awards in the event of a change in control.

 

Amendment and Termination of the 2009 GIP

 

The board of directors may amend, alter or discontinue the 2009 GIP and the compensation committee may amend or alter any agreement or other document evidencing an award made under the plan, but no such amendment shall, without the approval of the Company’s stockholders, reduce the exercise price of outstanding options or SARs; reduce the price at which options or SARs may be granted; increase the benefits accrued to any participant; increase the number of shares available for issuance under the plan; modify the eligible classes of participants under the plan; eliminate the minimum vesting requirements applicable to restricted stock and RSUs described above or allow the compensation committee to waive such requirements; or otherwise amend the plan in any manner requiring stockholder approval by law or under applicable listing requirements. No amendment or alteration to the 2009 GIP or an award shall be made which would impair the rights of a participant, without the participant’s consent, provided that no such consent shall be required if the compensation committee determines in its sole discretion and prior to the date of any change in control that such amendment or alteration either is required or advisable in order for the Company, the 2009 GIP or the award to satisfy any law or regulation or to meet the requirements of or avoid adverse financial accounting consequences under any accounting standard. If approved by stockholders, unless earlier terminated by the board of directors, the plan will continue in effect until March 6, 2019.

 

Repricings

 

The 2009 GIP prohibits the repricing of stock options and SARs without the approval of the stockholders. This provision applies to both direct repricings (lowering the exercise price or strike price of a stock option or stock appreciation right) as well as indirect repricings (canceling an outstanding stock option or stock appreciation right and granting a replacement stock option or stock appreciation right with a lower exercise price or strike price).

 

Deferral of Gains

 

The compensation committee may provide for the deferred delivery of shares upon settlement, vesting or other events with respect to restricted stock or RSUs, or in payment or satisfaction of an incentive bonus, to the extent consistent with Section 409A of the Code.

 

U.S. Federal Income Tax Consequences

 

The following tax discussion is a general summary of the U.S. federal income tax consequences to the Company and the participants in the 2009 GIP as of the date of this Proxy Statement. The discussion is intended solely for general information and does not make specific representations to any award recipient. The discussion does not address state, local or foreign income tax rules or other U.S. tax provisions, such as estate or gift taxes. A recipient’s particular situation may be such that some variation of the basic rules is applicable to him or her. In addition, the federal income tax laws and regulations frequently have been revised and may be changed again at any time. Therefore, each recipient is urged to consult a tax advisor before exercising any award or before disposing of

any shares acquired under the plan both with respect to federal income tax consequences as well as any foreign, state or local tax consequences.

 

Stock Options.  The grant of a NSO is not a taxable event for the optionee and the Company obtains no deduction from the grant of the NSO. Upon the exercise of a NSO, the amount by which the fair market value of the shares on the date of exercise exceeds the exercise price will be taxed to the optionee as ordinary income. In general, the Company will be entitled to a deduction in the same amount. In general, the optionee’s tax basis in the shares acquired by exercising a NSO is equal to the fair market value of such shares on the date of exercise. Upon a subsequent sale of any such shares in a taxable transaction, the optionee will realize capital gain or loss (long-term or short-term, depending on how long the shares were held before the sale) in an amount equal to the difference between his or her basis in the shares and the sale price.

 

Special rules apply if an optionee pays the exercise price upon exercise of NSOs with previously acquired shares of stock. Such a transaction is treated as a tax-free exchange of the old shares for the same number of new shares. To that extent, the optionee’s basis in a portion of the new shares will be the same as his or her basis in the old shares, and the capital gain holding period runs without interruption from the date when the old shares were acquired. The optionee will be taxed for ordinary income on the amount of the difference between (a) the value of any new shares received and (b) the fair market value of any old shares surrendered plus any cash the optionee pays for the new shares. The optionee’s basis in the additional shares (i.e., the shares acquired upon exercise of the option in excess of the shares surrendered) is equal to the fair market value of such shares on the date the shares were transferred, and the capital gain holding period commences on the same date. The effect of these rules is to defer the date when any gain in the old shares that are used to buy new shares must be recognized for tax purposes. Stated differently, these rules allow an optionee to finance the exercise of a NSO by using shares of stock that he or she already owns, without paying current tax on any unrealized appreciation in those old shares.

 

In general, no taxable income is realized by an optionee upon the grant of an ISO. If shares of Common Stock are issued to a participant pursuant to the exercise of an ISO granted under the plan and the participant does not dispose of such shares within the two-year period after the date of grant or within one year after the exercise of the ISO (a “disqualifying disposition”), then, generally (a) the participant will not realize ordinary income upon exercise and (b) upon sale of such shares, any amount realized in excess of the exercise price paid for the shares will be taxed to such participant as capital gain (or loss). The amount by which the fair market value of the Common Stock on the exercise date of an incentive stock option exceeds the purchase price generally will constitute an item that increases the participant’s “alternative minimum taxable income.” The Company will not be entitled to a deduction if the participant disposes of the shares other than in a disqualifying disposition.

 

If shares acquired upon the exercise of an ISO are disposed of in a disqualifying disposition, the participant generally would include in ordinary income in the year of disposition an amount equal to the excess of the fair market value of the shares at the time of exercise (or, if less, the amount realized on the disposition of the shares), over the exercise price paid for the shares. In general, the Company will be entitled to a deduction generally equal to the amount of the ordinary income recognized by the participant.

 

Subject to certain exceptions, an ISO generally will not be treated as an ISO if it is exercised more than three months following termination of employment. If an ISO is exercised at a time when it no longer qualifies as an ISO, such option will be treated as a non-qualified stock option as discussed above.

 

Stock Appreciation Rights.  The grant of a stock appreciation right is generally not a taxable event for a participant. Upon exercise of the stock appreciation right, the participant will generally recognize ordinary income equal to the cash or the fair market value of any shares received. The participant will be subject to income tax withholding at the time when the ordinary income is recognized. The Company will generally be entitled to a tax deduction at the same time for the same amount. The participant’s subsequent sale of any shares received upon exercise of a stock appreciation right generally will give rise to capital gain or loss equal to the difference between the sale price and the ordinary income recognized when the participant received the shares, and these capital gains or losses will be taxable as capital gains (long-term or short-term, depending on how long the shares were held before the sale).

Restricted Stock and Restricted Stock Units.  Grantees of restricted stock or restricted stock units do not recognize income at the time of the grant of such restricted stock or restricted stock units. However, when the restricted stock or restricted stock units vest or are paid, as applicable, grantees generally recognize ordinary income in an amount equal to the fair market value of the stock or units at such time, and the Company will generally receive a corresponding deduction.

 

A participant could, within 30 days after the date of an award of restricted stock (but not an award of restricted stock units), elect under Section 83(b) of the Code to report compensation income for the tax year in which the award of restricted stock occurs. If the participant makes such an election, the amount of compensation income would be the value of the restricted stock at the time of grant. Any later appreciation in the value of the restricted stock would be treated as capital gain and realized only upon the sale of the stock subject to the award of restricted stock. If, however, restricted stock is forfeited after the participant makes such an election, the participant would not be allowed any deduction for the amount earlier taken into income. Upon the sale of shares subject to the restricted stock, a participant would realize capital gain (or loss) in the amount of the difference between the sale price and the value of the shares previously reported by the participant as compensation income.

 

In connection with awards under the plan, the Company may withhold from any cash otherwise payable to a participant or require a participant to remit to the Company an amount sufficient to satisfy federal, state, local and foreign withholding taxes. Tax withholding obligations could be satisfied by withholding shares to be received upon exercise of an option or stock appreciation right, the vesting of restricted stock, or the payment of a restricted stock unit or performance award unit or by delivery to the Company of previously owned shares of Common Stock subject to certain holding period requirements.

 

Incentive Bonuses.  In general, a participant will be taxed at the time of payment of any incentive bonus. the amount subject to tax will be the amount of cash paid and, if applicable, the fair market value of any shares transferred to the participant. The Company will generally be entitled to a tax deduction at the same time for the same amount. The participant’s subsequent sale of any shares transferred in payment of an incentive bonus generally will give rise to capital gain or loss equal to the difference between the sale price and the ordinary income recognized when the participant received the shares, and these capital gains or losses will be taxable as capital gains (long-term or short-term, depending on how long the shares were held before the sale).

 

Potential Limitation on Company Deductions.  As described above, Section 162(m) denies a deduction to any publicly held corporation for compensation paid to certain employees in a taxable year to the extent that compensation exceeds $1,000,000 for a covered employee. It is possible that compensation attributable to awards under the plan, either on their own or when combined with all other types of compensation received by a covered employee from the Company, may cause this limitation to be exceeded in any particular year.

 

Certain kinds of compensation, including qualified “performance-based compensation,” are disregarded for purposes of the deduction limitation. The 2009 GIP is designed to allow grants of awards that are “performance based” within this definition.

 

New Plan Benefits

 

Because benefits under the plan will depend on the compensation committee’s actions and the fair market value of the Common Stock at various future dates, it is not possible to determine the benefits that will be received by directors, executive officers and other employees if the plan is approved by stockholders. As of March 2, 2009, the closing price of our Common Stock was $7.72 per share.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE “FOR” APPROVAL OF THE 2009 GLOBAL INCENTIVE PLAN.

 

General

 

Our board of directors proposes and recommends that stockholders approve and adopt the Celanese Corporation 2009 Employee Stock Purchase Plan (the “2009 ESPP”). The 2009 ESPP was approved by the board of directors on March 6, 2009. The board of directors and the Company’s management believe that the adoption of the 2009 ESPP is in the best interests of the Company and necessary to provide eligible employees with a convenient method for acquiring an equity interest in the Company, enhance their sense of participation in the Company’s business and provide an incentive for continued employment. The affirmative vote of a majority of the holders of shares of our Common Stock cast on the proposal will be required for the approval and adoption of the 2009 ESPP.

 

In the following paragraphs we summarize the principal features of the 2009 ESPP as it is proposed to be adopted. This summary is qualified in its entirety by reference to the full text of the 2009 ESPP, which is set forth as an appendix to this Proxy Statement. Stockholders are urged to read the 2009 ESPP in its entirety. Any capitalized terms used in this summary description but not defined here or elsewhere in this Proxy Statement have the meanings assigned to them in the 2009 ESPP.

 

On March 6, 2009, the Company’s board of directors adopted the 2009 ESPP and reserved 14,000,000 shares of Common Stock for issuance thereunder. The 2009 ESPP, including the right of participants to make purchases under the 2009 ESPP, is intended to qualify as an “Employee Stock Purchase Plan” under the provisions of Section 423 of the Code. The 2009 ESPP is not a qualified deferred compensation plan under Section 401(a) of the Code, and is not subject to the provisions of ERISA.

 

Purpose of the 2009 ESPP

 

The purpose of the 2009 ESPP is to provide employees, including the employees of any subsidiaries designated by the board of directors, with a convenient means to acquire an equity interest in the Company through payroll deductions, to enhance those employees’ sense of participation in our business, and to provide an incentive for continued employment.

 

Administration of the 2009 ESPP

 

The 2009 ESPP is administered by the compensation committee of the board of directors. All questions of interpretation or application of the 2009 ESPP are determined by the compensation committee and its decisions are binding upon all participants in the 2009 ESPP. The compensation committee may delegate any or all aspects of the day-to-day administration of the 2009 ESPP to one or more officers or employees of the Company or any subsidiary, and/or to one or more agents.

 

Eligibility

 

Employees of the Company and its majority-owned subsidiaries to which participation in the 2009 ESPP is extended by the compensation committee are eligible to participate in the 2009 ESPP. Unless otherwise determined by the compensation committee, the following classes of employees shall be excluded from participation in an offering under the 2009 ESPP: (i) employees who have been employed less than two years; (ii) employees whose customary employment is 20 hours or less per week; and (iii) employees whose customary employment is for not more than five months in any calendar year. In addition, highly compensated employees may be excluded from participation in an offering under the 2009 ESPP at the discretion of the compensation committee.

 

As of the record date, approximately 2,700 employees were eligible to participate in the 2009 ESPP.

Offering Periods

 

The length of an offering period shall be as determined by the compensation committee, but in no event shall exceed 27 months. It is currently anticipated that offering periods will be calendar quarters, and the first offering period is anticipated to be the quarter commencing October 1, 2009.

 

An eligible employee may begin participating in the 2009 ESPP effective at the beginning of an offering period. Once enrolled in the 2009 ESPP, a participant is able to purchase shares of the Company’s Common Stock with payroll deductions at the end of the applicable offering period. Once an offering period ends, a participant is automatically enrolled in the next offering period unless the participant chooses to withdraw from the 2009 ESPP.

 

Purchase Price

 

The price at which shares are purchased under the 2009 ESPP will not be less than 85% of the fair market value of a share of Common Stock on the last day of the offering period. For purposes of the 2009 ESPP, fair market value means the average of the high and low trading prices of the stock during normal trading hours.

 

Payment of the Purchase Price; Payroll Deductions

 

A participant may designate payroll deductions to be used to purchase shares equal to a percentage of the participant’s eligible compensation that does not exceed 20%. A participant may not change the percentage of eligible compensation that is deducted to purchase shares under the 2009 ESPP during an offering period. However, if the participant reduces that percentage to 0%, the participant will be deemed to have withdrawn from the offering if required by a third party administrator’s procedures. A participant may withdraw from the 2009 ESPP at any time, and in that event all accumulated payroll deductions will be refunded to the participant.

 

At the end of each offering period, unless the participant has withdrawn from the 2009 ESPP, payroll deductions are applied automatically to purchase Common Stock at the price described above. The number of shares purchased is determined by dividing the payroll deductions by the applicable purchase price. Fractional shares will be issued, so no funds will be carried over to the next offering period. In no event may a participant purchase more than 25,000 shares in any offering period.

 

Adjustments and Limitations

 

In the event of a merger, consolidation, reorganization, recapitalization, stock dividend, stock split, reverse stock split, exchange of shares, issuance of rights to subscribe or other change in capital structure, the compensation committee will appropriately adjust the number of shares available under the 2009 ESPP.

 

A participant is not permitted to purchase shares under the 2009 ESPP if the participant would own shares of Common Stock possessing 5% or more of the total combined voting power or value of all series of our common stock. A participant is also not permitted to purchase Common Stock with a fair market value in excess of $25,000 in any one calendar year. A participant does not have the rights of a stockholder until the shares are actually owned by the participant.

 

Nonassignability

 

Rights to purchase Common Stock under the 2009 ESPP may not be transferred by a participant and may be exercised during a participant’s lifetime only by the participant.

 

Amendment and Termination of the 2009 ESPP

 

The 2009 ESPP may be amended at any time by the compensation committee, subject to the approval of the Company’s stockholders to the extent required by Section 423 of the Code, applicable law, or stock exchange listing standards.

U.S. Federal Income Tax Consequences

 

The following tax discussion is a general summary of current U.S. federal income tax law consequences to participants in the 2009 ESPP as of the date of this Proxy Statement. The discussion is intended solely for general information and does not make specific representations to 2009 ESPP participants. The discussion does not address state, local or foreign income tax rules or other U.S. tax provisions, such as estate or gift taxes. A participant’s particular situation may be such that some variation of the basic rules is applicable to him or her. In addition, the federal income tax laws and regulations frequently have been revised and may be changed again at any time. Therefore, each recipient is urged to consult a tax advisor before exercising any award or before disposing of any shares acquired under the plan both with respect to federal income tax consequences as well as any foreign, state or local tax consequences.

 

No income will be taxable to a participant at the time of the grant of the right to purchase shares or the actual purchase of the shares. Upon disposition of the shares, the participant will generally be subject to tax and the amount of the tax will depend upon the participant’s holding period. Payroll deductions under the 2009 ESPP will be subject to income tax and the normal tax withholding rules.

 

If the shares have been held by the participant for more than two years after the date of option grant (i.e., the beginning of the applicable offering period), the lesser of (a) the excess of the fair market value of the shares at the time of such disposition over the purchase price for the shares or (b) the excess of the fair market value of the shares at the time the option was granted over the purchase price for the shares (determined based on the fair market value of the shares on that date) will be treated as ordinary income, and any further gain will be treated as long-term capital gain. If the shares are disposed of before the expiration of this holding period, the excess of the fair market value of the shares on the exercise date over the purchase price will be treated as ordinary income, and any further gain or loss on such disposition will be long-term or short-term capital gain or loss, depending on the holding period.

 

We are not entitled to a deduction for amounts taxed as ordinary income or capital gain to a participant except to the extent of ordinary income reported by participants upon disposition of shares within two years from the beginning of the applicable offering period.

 

New Plan Benefits

 

Eligible employees participate in the 2009 ESPP voluntarily and each such employee determines his or her level of payroll deductions within the guidelines fixed by the 2009 ESPP. Accordingly, future purchases under the 2009 ESPP are not determinable at this time. Non-management directors are not eligible to participate in the 2009 ESPP. Therefore, such awards have not been included in a table in this Proxy Statement. As of March 2, 2009, the closing price of Common Stock was $7.72 per share.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE “FOR” APPROVAL OF THE 2009 EMPLOYEE STOCK PURCHASE PLAN.

 

The following table summarizes information about our equity compensation plans by type as of December 31, 2008:

 

 

Our executive officers are elected by the board of directors and hold office for such terms as determined by the board of directors. Set forth below is information regarding the current executive officers of the Company who are not also serving as directors:

 

Jim Alder, 60, has served as our Senior Vice President, Operations and Technical since February 2008. In this capacity he oversees our global manufacturing operations, as well as the Company’s overall productivity efforts, including Six Sigma and operational excellence. Mr. Alder previously served as our Vice President, Operations and Technical from 2000 to February 2008. Prior to 2000, Mr. Alder held various roles within the Company’s manufacturing, research and development, and business management operations. He joined Celanese in 1974 as a process engineer and received a Bachelor of Science degree in Chemical Engineering from MIT in 1970.

 

John J. Gallagher, III, 44, has served as our Executive Vice President and President, Acetyl Intermediates and Celanese Asia since July 2007. On February 25, 2009, the Company announced that Mr. Gallagher would be leaving the Company on March 31, 2009. Mr. Gallagher previously served as our Executive Vice President and Chief Financial Officer from August 2005 to July 2007. Prior to joining Celanese, Mr. Gallagher was Chief Executive Officer of Great Lakes Chemical Corporation since November 2004. He began his career with Great Lakes Chemical as Senior Vice President and Chief Financial Officer in May 2001. In 2003 and 2004, he was also responsible for the company’s global supply chain. Before joining Great Lakes Chemical, he was Vice President and Chief Financial Officer of UOP LLC, a leading manufacturer of catalysts and licensor of petroleum refining and petrochemical processes, since 1999. Mr. Gallagher started his career in the manufacturing industry at AlliedSignal as director of Finance, Mergers and Acquisitions, in February 1995, and became Chief Financial Officer of the AlliedSignal Bendix Vehicle Systems Division in September 1998. Before joining AlliedSignal, he was an M&A consultant at Price Waterhouse LLP. Mr. Gallagher received a Bachelor of Science degree in accounting from the University of Delaware in 1986 and is a Certified Public Accountant. He is a member of the American Institute of Certified Public Accountants.

 

Christopher W. Jensen, 42, has served as our Vice President and Corporate Controller since March 2, 2009. From May 1, 2008 to March 2, 2009, he served as Vice President of Finance and Treasurer. In such capacity he had global responsibility for corporate finance, treasury operations, insurance risk management, pensions, technical accounting, and general ledger accounting. Mr. Jensen was previously the Assistant Corporate Controller from March 2007 through April 2008, where he was responsible for SEC reporting, internal reporting, and technical accounting. In his initial role at Celanese from October 2005 through March 2007, he built and directed the company’s technical accounting function. From August 2004 to October 2005, Mr. Jensen worked in the inspections and registration division of the Public Company Accounting Oversight Board. He spent 13 years of his career at PricewaterhouseCoopers LLP in various positions in both the auditing and mergers & acquisitions groups. Mr. Jensen earned master’s and bachelor’s degrees in accounting from Brigham Young University and is a Certified Public Accountant.

 

Sandra Beach Lin, 50, has served as Corporate Executive Vice President with responsibility for the Company’s Advanced Engineered Materials and Consumer Specialties segments since February 2009. She was the Executive Vice President and President, Ticona from July 2007 through February 2009. From 2002 to 2007, Ms. Lin was group Vice President, Specialty Materials and Converting, at Avery Dennison Corporation. She has also held global leadership positions at Closure Systems International, a division of Alcoa, and at Honeywell International, including as president of Bendix Commercial Vehicle Systems. Ms. Lin currently serves as a member of the board of directors and the audit committee and nominating & governance committee of WESCO International, Inc. Ms. Lin received a Bachelor of Arts degree in business administration from the University of Toledo in 1980 and an MBA from the University of Michigan in 1982.

 

Douglas M. Madden, 56, has served as Corporate Executive Vice President with responsibility for the Company’s Acetyl Intermediates and Industrial Specialties Segments since February 2009. He was the Executive Vice President, and President, Acetate, AT Plastics and Emulsions & PVOH from 2006 through February 2009. Mr. Madden previously served as President of Celanese Acetate from October 2003 to 2006. Prior to assuming leadership for Celanese Acetate, Mr. Madden served as Vice President and General Manager of the acrylates business and head of global supply chain for Celanese Chemicals from 2000 to October 2003. Prior to 2000,

Mr. Madden held various vice president level positions in finance, global procurement, and business support with the Hoechst Celanese Life Sciences Group, Celanese Fibers and Celanese Chemicals businesses. In 1990, he served as business director for Ticona’s GUR business and held prior responsibilities as director of quality management for Specialty Products. Madden started his career with American Hoechst Corporation in 1984 as manager of corporate distribution. His prior experience included operational and distribution management with Warner-Lambert and Johnson & Johnson. Mr. Madden received a Bachelor of Science degree in business administration from the University of Illinois.

 

John A. O’Dwyer, 56, has served as our Executive Vice President, Supply Management since February 2008. Mr. O’Dwyer previously served as our Executive Vice President and President, Acetyl Intermediates from July 2005 to July 2007 and Vice President, Strategic Procurement and Service Management from 2004 to July 2005. Prior to 2004, Mr. O’Dwyer held various leadership roles with the Company, including director of the acetyl intermediate business line, director for the ethylene oxide/ethylene glycol business line and general sales manager for Asia. From 1987 to 1990, he was based in Frankfurt, Germany where he served as a global solvents marketing manager for two years and in the Hoechst Corporate Strategy Group for one year. Mr. O’Dwyer joined Celanese in 1981 as a sales representative. Mr. O’Dwyer received a Bachelor of Science degree in biology from Loyola University of Chicago and an MBA from Northwestern University.

 

Curtis S. Shaw, 60, has been our Executive Vice President, General Counsel and Corporate Secretary since October 2005. On September 26, 2008, Mr. Shaw announced his retirement from this position, effective March 31, 2009. Mr. Shaw previously served as Executive Vice President, General Counsel (Americas) and Corporate Secretary from April 2005 to October 2005. Prior to joining Celanese, Mr. Shaw was Executive Vice President, General Counsel and Secretary of Charter Communications, Inc. from 2003 to 2005 and Senior Vice President, General Counsel and Secretary of Charter Communications, Inc. from 1997 to 2003. Mr. Shaw served as Corporate Counsel to NYNEX Corporation from 1988 to 1996. Mr. Shaw is a corporate lawyer, specializing in mergers and acquisitions, joint ventures, financings, securities and antitrust law. Mr. Shaw received a Bachelor of Arts degree with honors in economics from Trinity College in 1970 and a juris doctor degree from Columbia University School of Law in 1973.

 

Steven M. Sterin, 37, has served as our Senior Vice President and Chief Financial Officer since July 2007. Mr. Sterin previously served as our Vice President, Controller and Principal Accounting Officer from September 2005 to July 2007 and Director of Finance for Celanese Chemicals from 2003 to 2005 and Controller of Celanese Chemicals from 2004 to 2005. Prior to joining Celanese, Mr. Sterin worked for Reichhold, Inc., a subsidiary of Dainnippon Ink and Chemicals, Incorporated, beginning in 1997. There he held a variety of leadership positions in the finance organization before serving as Treasurer from 2000 to 2001 and later as Vice President of Finance, Coating Resins from 2001 to 2003. Mr. Sterin began his career at Price Waterhouse LLP, currently known as PricewaterhouseCoopers LLP. Mr. Sterin, a Certified Public Accountant, graduated from the University of Texas at Austin in May 1995, receiving both a Bachelor of Arts degree in business and a Masters degree in professional accounting.

 

Michael L. Summers, 53, has served as our Senior Vice President of Human Resources since June 2008. Prior to joining Celanese, Mr. Summers worked for Dell, Inc., beginning in 2000. There he held a variety of leadership positions in the human resources organization before serving as Vice President, Global Talent Management from 2005 to 2007 and later as Vice President, Human Resources, Americas from 2007 to 2008. Prior to Dell, Mr. Summers worked for Honeywell, Inc. (previously AlliedSignal) in a variety of human resource leadership positions before serving as Vice President, Human Resources, Engines and Systems from 1998 to 2000. Mr. Summers began his career in human resources at Newport News Shipbuilding, spending time in a variety of human resources assignments there before continuing his career at the Quaker Oats Company and Nabisco Brands. Mr. Summers received a Bachelor of Science degree in Industrial Psychology from Fairmount State University and a Master of Science degree in Industrial Relations from West Virginia University.

 

Jay C. Townsend, 50, has served as our Senior Vice President, Business Development & Strategy since 2007. Mr. Townsend previously served as our Vice President of Business Strategy and Development from 2005 to 2006. Mr. Townsend joined Celanese in 1986 as a Business Analyst and has held several roles of increasing responsibility

within the US and Europe. Mr. Townsend received his Bachelor of Science degree in international finance from Widener University in 1980.

 

Related Party Transaction Policies and Procedures

 

The board of directors of the Company has adopted a written policy that all “interested transactions” with “related parties” are subject to approval or ratification in accordance with the procedures set forth in the Related Party Transaction Policies and Procedures (the “Related Party Transaction Policy”). An interested transaction is a transaction or relationship in which the aggregate amount involved may be expected to exceed $120,000 since the beginning of the Company’s last fiscal year, the Company or any of its subsidiaries is a participant, and any related party will have a direct or indirect interest (other than solely as a result of being a director or a less than 10 percent beneficial owner of an equity interest in another entity). A related party is any person who is or was since the beginning of the last fiscal year an executive officer, director or nominee for election as a director; a greater than 5 percent beneficial owner of the Company’s Common Stock; or an immediate family member of any of these.

 

The audit committee reviews the material facts of all interested transactions that require the audit committee’s approval and either approves or disapproves of the entry into the interested transaction. In determining whether to approve or ratify an interested transaction, the audit committee takes into account, among other factors it deems appropriate, whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction.

 

The audit committee has considered certain limited types of interested transactions with related persons that meet specified criteria that may arise and determined that each of them is deemed to be pre-approved under the terms of the Related Party Transaction Policy, including transactions with companies and charitable contributions to organizations at which a related party’s only relationship is as an employee, if the amount of the transaction or contribution generally is less than $1,000,000 and transactions involving competitive bids, regulated transactions and routine banking services. In addition, the audit committee has delegated to the Chair of the audit committee the authority to pre-approve or ratify (as applicable) any interested transaction with a related party in which the aggregate amount involved is expected to be less than $2,000,000. In connection with each regularly scheduled meeting of the audit committee, the Company’s chief financial officer generally is to provide the audit committee for its review a summary of each new interested transaction that has been deemed to be pre-approved pursuant to the Related Party Transaction Policy or that was pre-approved by the Chair of the audit committee. No director may participate in any discussion or approval of an interested transaction for which he or she is a related party, except that the director is to provide all material information concerning the interested transaction to the audit committee.

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers to file with the SEC reports of their ownership and changes in their ownership of Common Stock. We received written representations from each such person that no Form 5 was due for 2008. To the best of our knowledge, in 2008, we believe that all required forms were filed on time with the SEC, with the exception of two Forms 4 filed by the Company on behalf of each of Daniel S. Sanders and Paul H. O’Neill reporting 1 transaction each and one Form 4 filed by the Company on behalf of Mark C. Rohr reporting 1 transaction, which were inadvertently filed late.

 

The business and affairs of the Company are managed under the direction of the board of directors. The board believes that good corporate governance is a critical factor in achieving business success and in fulfilling the board’s responsibilities to stockholders. The board believes that its practices align management and stockholder interests. Highlights of our corporate governance practices are described below.

Strong corporate governance is an integral part of Celanese’s core values. Our Company’s corporate governance policies and procedures are available on the corporate governance portal of the Company’s investor relations website, www.celanese.com/index/ir_index/ir_corp_governance.htm. The corporate governance portal includes the Company’s Corporate Governance Guidelines, Board Committee Charters, Global Business Conduct Policy, Financial Code of Ethics, and Stockholders’ Communications with the Board Policy. Printed copies of these documents are available without charge upon request. Any future modification or amendments to our Financial Code of Ethics, or any waiver of our Financial Code of Ethics, which applies to our Chief Executive Officer, Chief Financial Officer or Controller (Principal Accounting Officer) will be posted on the same website. We provide below specific information regarding certain corporate governance practices.

 

Our board of directors is divided into three classes. The members of each class serve for a three-year term, expiring at the Annual Meeting of Stockholders in the year shown below.

 

 

 

 

The Company’s Certificate of Designations of 4.25% Convertible Perpetual Preferred Stock dated January 25, 2005 provides that whenever (i) dividends on any shares of the 4.25% convertible perpetual preferred stock of the Company (“Preferred Stock”) or any other class or series of stock ranking on a parity with the Preferred Stock with respect to the payment of dividends shall be in arrears for dividend periods, whether or not consecutive, containing in the aggregate a number of days equivalent to six calendar quarters, or (ii) Celanese fails to pay the redemption price on the date shares of Preferred Stock are called for redemption (whether the redemption is pursuant to the optional redemption provisions or the redemption is in connection with a designated event) then, immediately prior to the next annual meeting of stockholders, the total number of directors constituting the entire board will automatically be increased by two and, in each case, the holders of shares of Preferred Stock (voting separately as a class with all other series of other Preferred Stock on parity with the Preferred Stock upon which like voting rights have been conferred and are exercisable) will be entitled to vote for the election of such two additional directors at the next annual meeting of stockholders and each subsequent meeting until the redemption price or all dividends accumulated on the Preferred Stock have been fully paid or set aside for payment. Directors elected by the holders of the Preferred Stock shall not be divided into the classes of the board of directors and the term of office of all directors elected by the holders of Preferred Stock will terminate immediately upon the termination of the right of the holders of Preferred Stock to vote for directors and upon such termination the total number of directors constituting the entire board will automatically be reduced by two.

 

The board of directors has adopted a standard of independence for directors. This standard incorporates all of the requirements for director independence contained in the NYSE listing standards. The listing standards of the NYSE require companies listed on the NYSE to have a majority of “independent” directors. The NYSE listing standards generally provide that a director is independent if the board affirmatively determines that the director has no material relationship with the Company directly or as a partner, stockholder or officer of an organization that has a relationship with the Company. In addition, a director is not independent if (1) the director is, or has been within the last three years, an employee of the Company, or an immediate family member is, or has been within the last three years, an executive officer of the Company; (2) the director or a member of the director’s immediate family has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation

from the Company other than for service as a director and pension or other forms of deferred compensation for prior service to the Company; (3) (a) the director is a partner or employee of the Company’s independent auditor, (b) the director has an immediate family member who is a current employee of such firm, (c) the director has an immediate family member who is a current employee of the Company’s independent auditor and who personally works on the firm’s audit, or (d) the director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on the Company’s audit within that time; (4) the director or a member of the director’s immediate family is, or has been within the last three years, employed as an executive officer of another company where an executive officer of the Company serves or served on that company’s compensation committee; or (5) the director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000, or 2% of such other Company’s consolidated gross revenues.

 

In addition, NYSE listing standards requires that we have a compensation committee and a nominating & corporate governance committee that are each composed of entirely independent directors with written charters addressing the committee’s purpose and responsibilities and that we evaluate annually the performance of these committees.

 

The Company reviews each of the directors against the Company’s Corporate Governance Guidelines, adopted by the board, and the independence requirements of the SEC and the NYSE to determine independence. The full text of the Guidelines can be found on the Company’s website, www.celanese.com/index/ir_index/ir_corp_governance.htm. The Company’s independence standards applicable to directors are attached to this Proxy Statement as an appendix. The board considers transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates.

 

The board has affirmatively determined that Messrs. Barlett, Hoffmeister, McGuinn, O’Neill, Rohr, Sanders and Wulff and Ms. Walters are independent of the Company and its management under the NYSE listing standards and the Company’s director independence standards.

 

Each of our directors is expected to devote sufficient time and attention to his or her duties and to attend all board, committee and stockholders’ meetings. The board of directors held six meetings during 2008. All directors attended at least 75% of the meetings of the board and of the committees on which they served during the fiscal year ended December 31, 2008. While we do not have a formal policy requiring then to do so, we encourage our directors to attend the Annual Meeting and expect that they will do so. All of our directors attended the Annual Meeting of Stockholders in 2008.

 

The non-management directors convene executive sessions at least quarterly. The director responsible for presiding over the meetings of non-management directors during the period from the 2008 Annual Meeting of Stockholders through the 2009 Annual Meeting of Stockholders (the “Presiding Director”) is Mr. Wulff. Under the Company’s current procedure, the role of Presiding Director rotates annually among the chairs of the standing board committees at the first meeting of the board of directors following the Annual Meeting of Stockholders.

 

The board of directors has standing audit; compensation; nominating & corporate governance; and environmental, health & safety committees.

 

The Company’s audit committee is comprised of Messrs. Hoffmeister (Chairman), Barlett and McGuinn, all of whom the board has affirmatively determined are independent of the Company and its management under the rules of the NYSE and the SEC. The board has also determined that all members of the audit committee are independent

and “audit committee financial experts” as the term is defined in Item 407(d)(5) of Regulation S-K. The Audit Committee held five formal meetings during 2008. The board of directors revised the Audit Committee Charter on October 23, 2008. The complete text of the Audit Committee Charter can be downloaded from the Company’s investor relations website, www.celanese.com/index/ir_index/ir_corp_governance and is attached to this Proxy Statement as an appendix.

 

The audit committee is directly responsible for the appointment, compensation and oversight of the work of the Company’s independent auditors. The independent auditors report directly to the audit committee. The principal purposes of the audit committee are to oversee:

 

 

The audit committee of the board of directors assists the board in fulfilling its oversight responsibilities with respect to the external reporting process and the adequacy of the Company’s internal controls. Specific responsibilities of the audit committee are set forth in the revised Audit Committee Charter adopted by the board on October 23, 2008.

 

Company management is responsible for the Company’s internal controls and the financial reporting process. The independent registered public accounting firm KPMG is responsible for performing an independent audit of the Company’s consolidated financial statements and issuing an opinion on the conformity of those audited financial statements with generally accepted accounting principles in the United States of America. The audit committee monitors the Company’s financial reporting process and reports to the board of directors on its findings.

 

The audit committee reviewed and discussed with Company management and KPMG the audited financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. The audit committee also discussed with KPMG the matters required to be discussed by Statement on Auditing Standards No. 61 (Communications with Audit Committees), as amended. The audit committee has received from KPMG the written disclosures required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with KPMG its independence.

 

The audit committee has also considered whether the provision to the Company by KPMG of limited non-audit services is compatible with maintaining the independence of KPMG. The audit committee has satisfied itself as to the independence of KPMG.

 

Based on the audit committee’s review of the audited consolidated financial statements of the Company, and on the audit committee’s discussion with Company management and with KPMG, the audit committee recommended to the board of directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

 

This report was submitted by the audit committee,

 

David F. Hoffmeister, Chairman

Martin G. McGuinn

James E. Barlett

 

The Company’s compensation committee is comprised of Mr. Wulff (Chairman), Mr. Rohr, and Ms. Walters. The board has determined that all members of the compensation committee are independent. The compensation committee held nine formal meetings during 2008. The board of directors adopted the revised Compensation Committee Charter on October 23, 2008. The complete text of the Compensation Committee Charter can be viewed and downloaded from the Company’s investor relations website, www.celanese.com/index/ir_index/ir_corp_governance. A description of the compensation committee’s processes and procedures for determining executive compensation is more fully described in “Executive Compensation Discussion and Analysis.”

 

The principal purposes of the compensation committee are to:

 

 

No member of the compensation committee was at any time during 2008 employed as an employee or officer of the Company or had any relationship with the Company requiring disclosure as a related-party transaction.

 

In addition, no executive officer of the Company has served on the board of directors or compensation committee of any other entity that has one or more executive officers who served as a member of our board of directors or compensation committee during 2008.

 

The Company’s nominating & corporate governance committee is comprised of Messrs. Sanders (Chairman), Rohr and O’Neill. The board has determined that all members of the nominating & corporate governance committee are independent. The nominating & corporate governance committee held one formal meetings during 2008. The board of directors adopted the revised Nominating & Corporate Governance Charter on February 5, 2009, and the complete text can be viewed and downloaded from the Company’s investor relations website, www.celanese.com/index/ir_index/ir_corp_governance.

 

The principal purposes of the nominating and corporate governance committee are:

 

 

The Company’s environmental, health & safety committee is comprised of Messrs. O’Neill (Chairman), Sanders and Weidman. The environmental, health & safety committee assists the board in fulfilling its oversight duties, while Company management retains responsibility for assuring compliance with applicable environmental, health and safety laws and regulations. The environmental, health & safety committee held two formal meetings during 2008. The board of directors adopted the Environmental, Health & Safety Committee Charter on November 2, 2006, and the complete text can be viewed and downloaded from the Company’s investor relations website, www.celanese.com/index/ir_index/ir_corp_governance.

The principal purposes of the environmental, health & safety committee are to:

 

 

The board of directors and the nominating & corporate governance committee consider candidates for board membership suggested by the board or nominating & corporate governance committee members, as well as by management and stockholders. The Nominating and Corporate Governance Committee Charter provides that it may retain legal, accounting or other consultants or experts it deems necessary to identify candidates from time to time.

 

The nominating & corporate governance committee’s assessment of a proposed candidate will include a review of the person’s judgment, experience, independence, understanding of the Company’s business or other related industries and such other factors as the nominating & corporate governance committee determines are relevant in light of the needs of the board of directors. The nominating & corporate governance committee believes that its nominees should reflect a diversity of experience, gender, race, ethnicity and age. The nominating & corporate governance committee also considers such other relevant factors as it deems appropriate, including the current composition of the board, the balance of management and independent directors, the need for audit committee expertise and the evaluations of other prospective nominees.

 

The nominating & corporate governance committee will consider recommendations for director nominees made by stockholders. Stockholder recommendations should be sent to:

 

Celanese Corporation

Board of Directors

1601 West Lyndon B. Johnson Freeway

Dallas, Texas 75234

Attn: Corporate Secretary

 

Generally, recommended candidates are considered at the first or second board meeting prior to the annual meeting.

 

The nominating & corporate governance committee considers individuals recommended by stockholders in the same manner and to the same extent as it considers director nominees identified by other means. The Chairman of the nominating & corporate governance committee will make exploratory contacts with those nominees whose skills, experiences, qualifications and personal attributes satisfy those that the nominating & corporate governance committee has identified as essential for a nominee to possess, as described above. Then, an opportunity will be arranged for the members of the nominating & corporate governance committee or as many members as can do so to meet the potential nominees. The nominating & corporate governance committee will then select a nominee to recommend to the board of directors for consideration and appointment. board members appointed in this manner will serve, absent unusual circumstances, until their election by our stockholders at the next annual meeting of stockholders. The board and the nominating & corporate governance committee have not received director nominations from any stockholders outside the board or the nominating & corporate governance committee.

 

The board of directors has adopted the following procedure in accordance with the requirements of the SEC for stockholders to communicate with the board and its members. Stockholders and other parties interested in communicating directly with the non-management directors as a group or the board may do so by sending their communications to:

 

Celanese Corporation

Board of Directors

1601 West Lyndon B. Johnson Freeway

Dallas, Texas 75234

Attn: Corporate Secretary

 

All stockholder communications received by the Corporate Secretary will be delivered to one or more members of the board as appropriate, as determined by the Corporate Secretary. Notwithstanding the foregoing, the Corporate Secretary will maintain for the benefit of the board, for a period of two years following the receipt of any communication, a record of all stockholder communications received in compliance with this policy.

 

Members of the board may review this record of stockholder communications upon their request to the Corporate Secretary. In addition, the receipt of any accounting, internal controls or audit-related complaints or concerns will be directed to the Chairman of the audit committee.

 

Introduction

 

The following section is our Compensation Discussion and Analysis (“CD&A”). This section provides an overview of the Company’s compensation programs and how pay is determined for our CEO and the other executive officers named in the Summary Compensation Table (collectively, our “named executive officers”). Our named executive officers for 2008 were:

 

 

The Company’s current executive compensation program for the named executive officers consists primarily of (i) long-term equity compensation in the form of both time-based and performance-based restricted stock units (“RSUs”), and (ii) cash compensation in the form of base salary, annual performance bonus awards and performance-based cash incentive awards. Each year, the compensation committee, which is made up entirely of independent directors, determines the total amount and appropriate mix of compensation for the Company’s executive officers, including the named executive officers.

 

The compensation committee has a strong philosophy of paying for performance and strives to implement programs that are aligned with Company and individual goals. To attract and retain top talent, target compensation is set around the median of the Company’s peer group (as discussed in “Section 3: Performance Assessment and Individual Compensation Decisions — Setting Total Compensation”), and a significant portion of total direct compensation is dependent upon both the Company’s and an individual officer’s actual performance as measured against annual and long-term performance goals approved by the board of directors.

 

The Company’s Operating EBITDA fell from $1.294 billion in 2007 to $1.164 billion in 2008. As a result of the Company’s performance, the annual performance bonus plan paid at 65% of target for our CEO and named executive officers. Based on business unit performance as well as individual performance, individual annual performance bonus awards were adjusted up or down accordingly.

 

Due in large part to the overall economic slowdown, in 2008 the share price of the Company’s Common Stock declined significantly and the Company’s total stockholder return (“TSR”) fell from the top quartile to the bottom quartile of our peer group. As a result of the low share price, at the end of 2008 and also as of March 2, 2009, previously granted stock options, which have historically been a significant historical component of our overall compensation structure, were “underwater” (i.e. — the exercise price is greater than the market price of the Company’s Common Stock) and therefore have become ineffective as tools for retaining our executive officers. Because of this loss in retentive value, the compensation committee chose to grant to our executive officers a combination of performance-vesting RSUs and time-vesting cash in December of 2008.

 

Benefits provided to the named executive officers are generally consistent with those provided to other salaried employees of the Company including health plans and retirement benefits.

 

We have organized our CD&A into the following sections:

 

This section describes the respective roles and responsibilities of the compensation committee, the compensation committee’s independent compensation consultant and our management in determining the types of programs that the Company maintains for executive officers. This section also describes who has responsibility for making individual executive pay decisions.

 

This section describes the principles that guide our compensation programs, including how competitive pay ranges and individual target compensation levels are established and how our executive compensation programs work. This section includes our rationale for maintaining competitive, performance-based compensation programs and how each element of compensation is linked to our compensation philosophy.

 

This section describes how individual compensation decisions are made. Specifically, this section describes how annual performance bonus award and target long-term incentive award values are determined for the CEO and the other named executive officers.

 

This section includes an overview of other important executive compensation programs and policies, including employment agreements, change-in-control agreements, and the Company’s stock ownership guidelines.

Section 1: Oversight of the Executive Compensation Process

 

The compensation committee is responsible for determining the compensation programs that the Company offers, and for determining both target and actual pay levels for our CEO and other named executive officers. Our compensation committee is comprised entirely of independent directors (as defined under NYSE Listing Standards).

 

As more fully described in its charter, the compensation committee has responsibility for: (i) the review and approval of corporate and business unit goals and objectives relevant to the compensation of our CEO and other executive officers, (ii) the evaluation of the performance of our CEO and other executive officers in light of his or her goals and objectives; (iii) the review and final approval of the compensation of our CEO and other executive officers; (iv) the review and approval of incentive and equity-based compensation plans and all grants of awards under such plans, and (v) the oversight of the succession plans for the CEO and other key employees. The compensation committee’s full charter is available online at www.celanese.com/celanese_compensation_committee_charter.pdf.

 

The Role of the Compensation Consultant in Making Decisions

 

The compensation committee has retained Mercer LLC (“Mercer”) as its independent outside compensation consultant to advise it in connection with executive compensation matters. During 2008, Mercer regularly attended compensation committee meetings as requested by its chair, Mr. Wulff, and reported directly and exclusively to the compensation committee on matters relating to compensation for the Company’s named executive officers. During 2008, the compensation committee requested that Mercer:

 

 

In carrying out these tasks on behalf of the compensation committee, Mercer consulted with certain executives, including the CEO and the Senior Vice President, Human Resources, as necessary and appropriate. Mercer does not provide any material services to the Company or its senior management other than those provided in connection with its engagement by the compensation committee.

 

The Role of Management in Making Decisions

 

The compensation committee regularly meets with the CEO and the Senior Vice President of Human Resources to receive reports and recommendations regarding the compensation of our executive officers other than the CEO. In particular, at the commencement of 2008 the CEO submitted recommendations to the compensation committee on the base salary to be offered to each executive officer for 2008. These recommendations were developed in consultation with the Senior Vice President, Human Resources and accompanied by market data prepared by our compensation consultant. In addition, in February 2009, Mr. Weidman submitted recommendations to the compensation committee on the actual payout percentage of the 2008 annual performance bonus award for each of the other executive officers. Such recommendations were based on Mr. Weidman’s assessment of (i) such executive officer’s contribution to the achievement of the Company’s goals and objectives and (ii) such officer’s achievement of his or her individual goals and objectives. Mr. Weidman does not make any recommendations to the compensation committee regarding his own compensation. Although the compensation committee considered Mr. Weidman’s recommendations, the final decisions regarding both the base salary and the actual payout percentage of the annual performance bonus award of each executive officer were made by the compensation committee.

Section 2: Compensation Philosophy and Elements of Pay

 

Company in Transition.  Since our initial public offering in 2005, our compensation programs have changed significantly, and they continue to evolve to meet the needs of a public company. As illustrated in the chart below, our pre-IPO compensation programs were focused on delivering higher cash compensation and a more highly leveraged long-term compensation model (i.e. – greater use of stock options) than is typically seen in a public company. As the Company has evolved, we have managed our programs towards an approach that is more typical among comparable public companies; performance-based restricted stock units have generally taken the place of stock options, and annual grant programs have replaced plans that were “event driven” (e.g. – those that paid out upon successful completion of a public offering).

 

 

Compensation Philosophy.  Our focus as a company is to deliver continued earnings growth and superior value creation for our stockholders. To that end, we believe that a balanced offering of competitive base salary, annual performance-based incentives and long-term incentives that incorporate a mix of performance goals and retention value present an overall pay package that is both attractive to executives and aligned with the best interests of our stockholders.

 

Compensation Objectives.  Our compensation programs are designed to provide significant variability based on individual and Company performance. At the same time, these programs are intended to be sufficiently competitive with our peer companies so as to attract and retain highly qualified personnel. The key components of our compensation programs may be best understood by reviewing the objectives they address. At the highest level, our objectives are to be:

 

 

 

To further increase the alignment of management and stockholder interests, named executive officers and other senior level executives are required to reach and maintain a minimum level of equity ownership in the Company over time. These ownership requirements are presented in more detail in Section 4 under “Executive Stock Ownership Requirements.”

 

Elements of Compensation.  The table below summarizes the current elements of our compensation programs and how each element supports the Company’s compensation objectives:

 

 

Base Salary

 

The compensation committee has determined that it is not in the best interests of the Company to enter into employment agreements with the CEO or any other executive officer of the Company. Instead, the CEO and the other executive officers are considered “at-will” employees and the compensation committee annually reviews and approves the base salaries for the CEO and each of the other executive officers. In making a determination of the appropriate level of an executive officer’s base salary, the compensation committee considers a number of factors, including (i) the scope, complexity, and financial or business impact of the executive’s position, (ii) the executive’s

level or expertise, experience and individual performance, (iii) how the executive’s base salary compares to that of the Company’s other executives, and (iv) how the executive’s base salary compares to the base salary of similarly situated executives at companies in our peer group. As further discussed in “Section 3: Performance Assessment and Individual Compensation Decisions — Setting Total Compensation — Total Compensation”, for any given executive, we generally target the median of base salaries paid to similarly situated executives at companies in our peer group; however, as a result of the factors mentioned above, base salaries may actually be set higher or lower than the median when appropriate.

 

Annual Performance Bonus Awards

 

A target annual performance bonus award, expressed as a percentage of annual base salary, is set for each executive officer based upon his or her salary grade level. Annual bonus targets range from 100% of annual base pay for the CEO to 80% for Salary Level 1 officers (Messrs. Gallagher and Shaw and Ms. Lin) and 70% for Salary Level 2 officers (Mr. Sterin). The actual annual performance bonus award that an executive officer receives is based upon: (1) the achievement by the Company (and in the case of business unit heads, the achievement by such business unit) of certain business, financial and safety performance targets and (2) the achievement by the executive officer of personal objectives established for him or her at the beginning of the year.

 

An executive officer is eligible to receive an annual performance bonus award ranging from 0% – 200% of his or her target annual performance bonus award (e.g. – up to 200% of base salary in the case of the CEO) depending on the Company’s achievement of its performance targets (as described below). Once an executive officer’s eligible performance bonus award is determined in accordance with the Company’s achievement of its performance targets, the actual payout of such bonus award can range from 0% – 200% of the eligible amount (e.g. – 400% of base salary in the case of the CEO), based upon such executive officer’s achievement of personal objectives and a qualitative assessment of the executive officer’s overall performance by our CEO (or, in the case of the CEO, by the compensation committee). The actual payout percentage for each executive officer (other than the CEO) is recommended to the compensation committee by Mr. Weidman, based on Mr. Weidman’s assessment of the satisfactory completion of the various personal objectives and can range from 0% – 400% of the target performance bonus award for such executive.

 

Company Goals and Objectives.  The annual performance bonus awards for 2008 are based upon the Company’s achievement of incremental levels of Operating EBITDA, Trade Working Capital (Accounts Receivable + Inventory – Accounts Payable), and environmental, health and safety (EHS) goals. In each of these performance target areas, there are three incremental performance levels, which levels are referred to internally as threshold, target and stretch levels. No bonus will be paid unless the Company meets or exceeds the threshold level of Operating EBITDA. During 2008 the target annual performance bonus awards and the measurement level for each of the named executive officers were as follows:

 

For purposes of calculating annual performance bonus awards, these terms are defined as follows:

 

 

The 2008 target levels, as well as the actual levels, for our performance measures were:

 

 

The 2008 target levels for the Acetyl Intermediates business unit (applicable to Mr. Gallagher) and the Advanced Engineered Materials business unit (applicable to Ms. Lin), as well as the actual levels, for our performance measures were:

 

 

The targets are based on the operating budget approved by the compensation committee, as adjusted from time to time during fiscal year 2008 for acquisitions and divestitures.

 

Individual Goals and Objectives.  The compensation committee believes that individual performance goals are appropriate instruments for measuring individual contributions to strategic corporate initiatives. Each named executive officer eligible for an annual performance bonus award had individual performance goals relating to one or more of the following areas:

 

 

An executive’s behaviors and results in relation to his or her individual goals are measured through an extensive appraisal process and each executive is assigned a personal bonus modifier based on the CEO’s assessment of the executive’s achievement of those goals. The compensation committee reviews and approves

the modifiers recommended by the CEO. The compensation committee determines the personal bonus modifier assigned to the CEO in executive session.

 

As a result of the Company’s achievement of its business, financial and safety performance targets and each executive’s individual performance, the target payout, the eligible payout and the actual payout (as determined by the compensation committee) for each executive officer was as follows:

 

 

The rationale for awarding each named executive officer the actual annual performance bonus award set forth opposite his or her name, and the achievement of such executive officer’s personal goals, is described in greater detail in “Section 3: Performance Assessment and Individual Compensation Decisions — Analysis of Compensation Decisions.”

 

Long Term Incentive Compensation

 

Our long-term incentive compensation programs are designed to align the interests of our executive officers with those of our stockholders, drive long-term performance and retain our executive officers. Executive officers who were employed by the Company at the time of the IPO were eligible to participate in certain programs implemented at that time by Blackstone to reward such executive officers for the successful organizational restructuring of the Company and for the Company’s financial performance prior to Blackstone’s exit. These plans generally expire by 2009 and, as a result, we have implemented other long-term incentive programs to ensure the continued success of the Company and the retention of key officers.

 

The Company has in effect several long-term incentive plans, each of which was established to support our compensation principles and objectives. The following table summarizes the Company’s long-term incentive plans, the general eligibility guidelines, the types of awards granted thereunder and the status of these plans:

 

 

2004 Stock Incentive Plan

 

In December 2004, following the Blackstone acquisition of Celanese AG and prior to our IPO, we adopted a stock incentive plan (the “2004 SIP”). We believe this plan is a valuable element of our compensation program because, to the extent that our executive officers hold significant ownership in the Company, their interests will remain aligned with those of our stockholders, and they will be appropriately motivated to enhance the Company’s performance and stockholder value.

 

As of March 2, 2009 there were 348,218 shares available for grants under the 2004 SIP, which amount includes stock options previously granted and subsequently forfeited by terminated executives and other employees. The

compensation committee and the board of directors have recommended that stockholders approve a new stock incentive plan that will provide for the issuance of approximately 5,350,000 shares of our securities to our directors, executives and other employees. See “Item 3: Approval of 2009 Global Incentive Plan — Stock Subject to 2009 GIP.” Such new plan, if approved, will allow the compensation committee to continue to utilize equity grants as an element of our compensation program and thereby motivate executives to enhance stockholder value.

 

2008 Long-Term Incentive Program

 

As noted above, our executive compensation program is currently in a period of transition. We are seeking to balance the competitive value of executive awards with the contemporaneous needs for retention and stockholder alignment. We are currently seeking stockholder approval of our 2009 Global Incentive Plan which will allow us execute our long term compensation strategy and offer a compensation mix that provides appropriate incentives to meet our objectives of providing competitive pay packages for talented executives, delivering compensation that is performance-based and aligning management’s interests with those of stockholders. In particular, the 2009 GIP has been designed to provide for a mix of (i) performance-based RSUs and (ii) time-vesting RSUs.

 

As an interim measure prior to the approval of the 2009 GIP, in December 2008, the compensation committee approved a Long-term Incentive Program under the 2004 SIP, pursuant to which the Company made awards of Performance-based Restricted Stock Units and time-vested Cash. Generally, the awards granted in 2008 were made in accordance with the following targets:

 

 

The aggregate value of all awards made under the 2008 Long-Term Incentive Plan in December 2008 was $29.5 million.

 

Performance-based RSUs.  Each award of RSUs vests on October 14, 2010 based upon the achievement of target levels of (i) Operating EBITDA during the 2009 and 2010 fiscal years and (ii) “Total Stockholder Return” as compared to peer companies during the period from December 1, 2008 through September 30, 2011, according to the following schedule:

 

 

Time-vesting Cash Incentive Awards.  During the last fiscal year the significant decline in our stock price negatively impacted our ability to execute our long-term grant strategy of granting a mix of performance-based RSUs and time-vesting RSUs. Since we determine equity awards based on competitive grant value and not an absolute number of shares, the decline in our stock price meant that we would have needed to grant more shares to deliver the same competitive award value. At the time the compensation committee approved the awards, there were not enough shares available under our 2004 SIP to make all-RSU grants and deliver the value that the compensation committee believed was both competitive and appropriate. Accordingly, the Company included time-vesting cash incentive awards in the place of performance-vesting RSU awards.

 

Each award of cash vests 30% on October 14, 2009, 30% on October 14, 2010 and 40% on October 14, 2011. The compensation committee may elect at any time to convert all or any portion of the cash award into time-vesting restricted stock units. If the compensation committee elects to convert the cash award, the Awardee shall receive a number of time-vesting restricted stock units equal to (i) the value of the unvested portion of the cash award being converted divided by (ii) the average of the high and low sale price of the Company’s Common Stock on the day of such election.

2007 Long-Term Performance Program

 

In March 2007, in order to ensure the retention of key employees, our compensation committee approved a Long-Term Performance Program under the 2004 SIP, pursuant to which the Company made awards of performance-based RSUs. Each award of RSUs generally vests based upon the achievement of “Total Stockholder Return” performance targets as compared to peer companies during the period from April 1, 2007 through December 31, 2010, according to the following schedule:

 

 

During the period from April 1, 2007 through December 31, 2008, our stock price fell 59.9%. If measured at that time an executive would have vested in 55% of his target RSU award.

 

In February 2008, the compensation committee determined that it would be appropriate in certain cases to award time-vesting RSUs in addition to, or in the place of, performance-based RSUs already authorized under the 2007 Long-Term Performance Program. The particular composition of any award is determined by the compensation committee at the time of the award based up on a variety of factors, including the executive’s long-term potential with the Company, the value of grants made to similarly situated executives at companies in our peer group, and the value of prior awards to such executive.

 

Stock Option Grant Program

 

From the time of our IPO until mid-2007, the Company granted stock options in order to attract, motivate and retain executive officers and other key employees. Generally, we have granted our executive officers a combination of pure time-vesting and performance-accelerated time-vesting options. All of the options that have been granted to date have an exercise period of 10 years from the date of grant. Time-vesting options generally vest and become exercisable ratably over a period of 4 or 5 years (as determined by the compensation committee). Performance-accelerating options fully vest and become exercisable on the eighth anniversary of the date of grant, but may vest and become exercisable on an accelerated basis upon the achievement by the Company of annual performance targets, which targets are the same as those used for our 2004 Deferred Compensation Plan (described below).

 

2007 Revised Deferred Compensation Plan

 

In March 2007, to ensure the retention of key employees following the end of the 2004 Deferred Compensation Plan (described below), our compensation committee and board of directors approved a Revised Deferred Compensation Plan. Under this revised program, participants in the 2004 Deferred Compensation Plan were provided with an election to relinquish their 2007-2009 potential payouts and to substitute a deferred cash compensation award in an amount equal to 90 percent of the maximum potential payout, which deferred cash compensation award would vest and become payable at the end of 2010 based solely on continued employment, rather than performance targets. The award is subject to periodic adjustments to reflect gains and losses, as applicable, on certain notional investment options available to each participant.

 

Each electing participant also received an award of performance-based RSUs, with an initial target value equal to 25 percent of the new deferred cash compensation award. Each award of RSUs generally vests based upon the

achievement of “Total Stockholder Return” performance targets as compared to peer companies during the period from April 1, 2007 through December 31, 2010, according to the following schedule:

 

 

During the period from April 1, 2007 through December 31, 2008, our stock price fell 59.9%. If measured at that time an executive would have vested in 83% of his target RSU award.

 

2004 Deferred Compensation Plan

 

In December 2004 we adopted a deferred compensation plan for certain executive officers, including the named executive officers. This plan is a non-equity based long-term incentive plan, providing time-based and performance-based compensation for the executive officers and other key employees. It was implemented during the period between the Blackstone acquisition of Celanese AG and our IPO. This plan was designed to reward our senior management for our successful pre-IPO organizational restructuring of the Company, to retain and compensate senior management for the loss of compensation programs previously provided by Celanese AG and to incentivize management to increase profitability and stockholder value in the future.

 

Three distinct types of awards were made to each participant in the 2004 Deferred Compensation Plan:

 

 

The following table describes the adjusted performance targets for the 2004 Deferred Compensation Plan for 2008:

 

 

For purposes of calculating payments under the 2004 Deferred Compensation Plan the following terms are defined as follows:

 

 

 

Of our named executive officers, Messrs. Weidman, Gallagher and Shaw were granted awards under the 2004 Deferred Compensation Plan. Ms. Lin joined the Company over two years after our IPO and as a result did not receive an award under this plan. In March 2007, Messrs. Weidman and Shaw elected to participate in the 2007 Revised Deferred Compensation Plan (described above) and forfeit their awards under this plan. Mr. Gallagher did not elect to participate in the 2007 Revised Deferred Compensation Plan and continued to participate in this plan.

Section 3: Performance Assessment and Individual Compensation Decisions

 

Setting Total Compensation

 

Our compensation setting process consists of establishing overall target total compensation for each executive officer and then allocating that compensation between base salary, annual performance bonus awards and long-term incentive award compensation. Generally, each of these components is compared to competitive market levels to establish the proportion of each in the overall mix. A significant portion of the total compensation of our CEO and other named executive officers is performance-based and, therefore, “at risk.” Compensation opportunities are designed to create incentives for target and above-target performance, as well as significant consequences for below-target performance, and as a result, actual compensation will be determined by Company and individual performance against pre-established objectives.

 

Our Compensation Peer Group

 

In determining target total compensation levels for each of our executive officers in 2008, the compensation committee considered the analysis provided by its independent consultant, Mercer, which outlined compensation data and practices from a targeted group of peer companies in the chemical industry. The compensation committee, with the assistance of Mercer, identified the companies to be included in our peer group based primarily on industry, market capitalization, revenue and total stockholder return. In some cases the compensation committee also considered other criteria such as the number of employees at a potential peer company, the complexity of a potential peer company’s business, and whether the role and responsibilities of a potential peer company’s executive officers were comparable to those of our executive officers.

 

In assessing overall compensation for 2008, the compensation committee determined that the same peer group that was utilized in 2007 remained the appropriate peer group. Accordingly, the following group of 11 companies constitutes the current peer group for the Company for purposes of benchmarking executive officer compensation:

 

 

In assessing the appropriate peer group for grants under the 2008 Long-Term Incentive Plan, the compensation committee determined that a broader peer group than the one used for comparison of overall compensation was appropriate. Generally, the compensation committee believes that the Company competes economically and for talented leaders with a broader range of competitors that those represented by the 2007 peer group. The compensation committee’s other key considerations included (i) the potential higher volatility of results produced by a smaller peer group in a plan of this type, (ii) the desire to establish a peer group that is more accessible to investors (Dow Jones Chemical Companies Index), and (iii) the benefits of selecting a peer group that will be “self-adjusting” and updated by a third party from year to year. The following group of 36 companies constitutes the peer group for the Company for purposes of measuring relative TSR under the 2008 Long-Term Incentive Plan:

 

 

The Company plans to continue to use the larger group of companies as its peer group for grants long-term, performance-based equity plans for the foreseeable future, but will continue to use the smaller group of companies as its peer group for establishing target total compensation for executive officers.

 

Total Compensation

 

We strongly believe that our executive officers should be paid for performance. The compensation committee compares the level of total compensation of similarly situated executive officers at companies in the peer group to amounts paid to our executive officers. If the Company achieves its annual performance targets, as set by the board, and an executive officer meets individual performance objectives, the compensation committee’s philosophy is to target his or her compensation at or near the 50th percentile of the peer group for total annual cash (base salary plus annual performance bonus award) and total annual compensation (total cash plus long-term incentive awards). To the extent that the Company exceeds its annual performance targets and an executive officer significantly exceeds individual performance objectives, our compensation program is designed to reward such executive officer by paying total compensation in the top quartile of the peer group. To the extent that the Company does not achieve its annual performance targets or an executive officer’s individual performance does not meet expectations, our compensation program is designed to reduce the amount of total compensation received by such executive officer.

 

For 2008, the base salary, target annual performance bonus awards, and total compensation of each named executive officer deviated from the median of the peer group as follows:

 

 

 

Although the compensation committee strives to set executive compensation at levels that are competitive with the companies in the peer group, it does not rigidly adhere to a particular target in determining executive compensation. Any executive officer’s total compensation may vary from the targets due to various other factors, including exceptionally strong or weak Company or business unit performance over the prior year and particularly strong or weak individual performance over the prior year. The compensation committee also takes into account additional individual factors when establishing total executive compensation levels, including an executive’s position within the Company, level of experience, tenure and need for retention.

 

Setting compensation targets based on market comparison data is intended to ensure that our compensation practices are competitive in terms of attracting, rewarding and retaining executives. No specific formula is used to determine the allocation between cash and equity-based compensation. In addition, because a named executive officer’s compensation target is set by reference to persons with similar duties at our peer group, the compensation committee does not establish any fixed relationship between the compensation of the CEO and that of any other named executive officer.

 

Risk Assessment Analysis

 

As a result of the general stock market decline in 2008, and the corresponding decline in the price of the Company’s stock, the stock options and other equity awards granted to our executives since the IPO have become significantly less valuable. As a result, the compensation committee determined to significantly reduce the amount of “market risk” in our executive compensation program. In connection with this decision, in December 2008 the compensation committee granted performance-based RSU awards and time-vesting cash awards in order to retain executives. The committee took into account the drop in the Company’s Stock price during 2008 and the resulting loss of executive retentive value in granting these awards. In addition, the compensation committee determined that reducing the amount of “market risk” in our executive compensation program in this manner would discourage excessive risk-taking by the Company’s management.

 

Tally Sheets

 

From time-to-time, the compensation committee reviews a summary report, or “tally sheet,” prepared by Mercer or management for each named executive officer. The purpose of a tally sheet is to show the total dollar value of the executive’s annual compensation. This includes the executive’s base salary, annual performance bonus award, equity-based compensation, perquisites, pension benefit accruals and other compensation. The tally sheet also shows holdings of the Company’s Common Stock and equivalents, and accumulated value and unrealized gains under prior equity-based compensation awards. In addition, the tally sheet shows amounts payable to the named executive officer upon termination of the executive’s employment under various circumstances, including retirement or a change in control. The compensation committee uses tally sheets to estimate the total annual compensation of the named executive officers, and to provide perspective on the value accumulated by the named executive officers from our compensation programs and the potential payouts to them under a range of termination scenarios.

 

Compensation Mix

 

The compensation committee believes that, to strengthen the alignment of management’s interests with those of stockholders, a significant portion of each executive’s compensation should consist of pay that is “at risk.” Accordingly, performance-based annual and long-term incentive awards are weighted more heavily than base salary in the executive’s overall mix of compensation. The compensation committee also believes that, consistent with market practice, the CEO’s compensation should be more “at risk” than that of the other executive officers.

 

Analysis of Compensation Decisions

 

For the fiscal year ended December 31, 2008, the principal elements of compensation for each of our named executive officers were base salary, annual performance bonus awards, long-term deferred compensation, non-equity incentive plan payouts, restricted stock unit awards and retirement benefits. Each of these elements of our compensation program was reviewed by the compensation committee and, where it had the authority to do so, the compensation committee assessed each element in relation to the other elements paid to each executive when making compensation decisions, as more fully described below.

David N. Weidman

 

During fiscal year 2008, David N. Weidman received the following compensation:

 

 

For fiscal year 2008, Mr. Weidman’s base salary was $900,000, which placed him below the 25^th percentile among CEOs of companies in our compensation peer group. Mr. Weidman’s base salary was below the median because the compensation committee felt that a greater proportion of his compensation should be “at risk” since he had overall responsibility for the Company. Mr. Weidman did not receive an increase in his base salary for fiscal year 2009 because the compensation committee felt that his current base salary was appropriate in light of market data provided by our compensation consultant, the overall performance of the Company during 2008 and the global economic environment.

 

For fiscal year 2008, Mr. Weidman received an annual performance bonus award payout of $755,703. Mr. Weidman’s total annual cash compensation (base salary plus annual performance bonus) just above the 25th percentile of peer CEOs total annual cash compensation as a result of the Company’s performance in the achievement of its operating goals and his performance in the achievement of his individual goals. Mr. Weidman’s individual goals for 2008 included:

 

 

The compensation committee believes that overall Mr. Weidman performed well in 2008 with respect to his individual goals. During 2008, the company’s relative TSR fell from the top quartile to the bottom quartile of the Company’s peer group. Nevertheless, Mr. Weidman was able to drive the company to $115 million in budgeted productivity gains and $48 million of stretch productivity gains. In addition, under Mr. Weidman’s leadership, the company made progress toward achieving its 2008 goal of $123 million of incremental EBITDA despite lower revenues in 2008 as compared to 2007.

 

During 2008, Mr. Weidman was a key force in executing sustainability plans in the areas of safety, environmental release and energy uses. In 2008 we met our 2010 goals for OIR and LTIR in the safety area and we are on track to exceed our 2010 goals for VOC, greenhouse gases, and waste releases in the environmental release and energy usage areas. In addition during 2008, Mr. Weidman was able to develop and gain approval for a strategic plan that will drive the company through 2015.

 

Mr. Weidman also had a successful year developing and retaining leaders throughout the company and assisted the nominating & corporate governance committee in identifying potential future members of the board of directors.

 

As a result of the above factors, the compensation committee decided to exercise positive discretion and increase Mr. Weidman’s annual performance bonus award by 30% from an eligible payout of $581,310 to an actual payout of $755,703.

 

In December 2008, Mr. Weidman received a $1,000,000 time-vesting cash award and a target award of 200,000 performance units under the 2008 Long-Term Incentive Program. Except as described in this paragraph, the terms of Mr. Weidman’s performance units are the same as those of the performance-based RSUs granted to the Company’s other executives under the 2008 LTIP as described above in “Section 2: Compensation Philosophy and Elements of Pay — 2008 Long Term Incentive Program.” The value of each of Mr. Weidman’s performance unit is

equivalent to the value of one share of the Company’s Common Stock and any amounts that may vest are to be settled in cash, rather than shares.

 

Our independent compensation consultant determined that the total value of annual long-term incentive awards for CEOs at comparable public companies at the 50^th percentile was $3 million. In light of Mr. Weidman’s performance during 2008 the compensation committee decided to grant Mr. Weidman an award under the 2008 LTIP with a total award value of $3.5 million on the date of grant.

 

Steven M. Sterin

 

During fiscal year 2008, Steven M. Sterin received the following compensation:

 

 

For fiscal year 2007 and the first part of 2008, Mr. Sterin’s base salary was $330,000. In June 2008, the compensation committee, upon the recommendation of the CEO, approved an increase in Mr. Sterin’s base salary to $375,000 which places him below the 25^th percentile among CFOs of companies in our peer group. The compensation committee believes that this level of base salary is appropriate for Mr. Sterin at this time, principally because his total compensation places him closer to the median in our peer group.

 

For fiscal year 2008, Mr. Sterin received an annual performance bonus award payout of $257,506. Mr. Sterin’s annual performance bonus award was based on the Company’s performance in the achievement of its operating goals and was adjusted upward as a result of his above target performance in the achievement of his individual goals. Mr. Sterin’s individual goals for 2008 included developing and implementing cost and efficiency redesigns of the treasury, tax, internal audit and business planning functions of the Company. The compensation committee determined that Mr. Sterin performed well in 2008 with respect to his individual goals. During the year Mr. Sterin was able to achieve significant progress towards redesigning each of these functions. In addition, he oversaw the centralization of the Company’s Asia financial services at our facility in Nanjing, China and the continued transition of our global financial shared services to our facility in Budapest, Hungary.

 

During 2008, Mr. Sterin’s leadership was vital in successfully guiding the Company through the financial crisis that affected the capital markets. Mr. Sterin was also instrumental in our efforts to modernize the Company’s pension investment strategy and process which resulted in significantly improved asset diversification, less long-term volatility, and an estimated $150 million in benefits.

 

As a result of the above factors, the compensation committee decided to exercise positive discretion and increase Mr. Sterin’s annual performance bonus award by 60% from an eligible payout of $160,941 to an actual payout of $257,506.

 

In December 2008, Mr. Sterin received a $1,800,000 time-vesting cash award and a target award of 13,400 performance-based RSUs under the 2008 Long-Term Incentive Program. The terms of these awards are set forth above in “Section 2: Compensation Philosophy and Elements of Pay — 2008 Long Term Incentive Program.”

 

The target long-term incentive award value for an officer of Mr. Sterin’s salary level (SL2) based on benchmarking data was $500,000. Notwithstanding, the CEO recommended and the compensation committee approved a total award value for Mr. Sterin of $1.97 million (cash and equity) on the date of grant. The target cash grant for an officer of Mr. Sterin’s level was $375,000 and he received an actual time-vesting cash grant of $1,800,000. The CEO and compensation committee felt that this higher grant amount was appropriate in light of Mr. Sterin’s important contributions to the Company in his role as CFO, and in order to ensure his retention in a challenging economic environment. In addition, the company granted Mr. Sterin 13,400 performance-based RSUs at target.

Mr. Sterin’s base salary and bonus targets for fiscal 2008 were low in relation to our other named executive officers due largely to his relatively short tenure with the Company as Chief Financial Officer.

 

John J. Gallagher, III

 

During fiscal year 2008, John J. Gallagher, III received the following compensation:

 

 

For fiscal year 2008, Mr. Gallagher’s base salary was $675,000, which placed him above the 75^th percentile among similarly situated executives at companies in our peer group. Unlike our other executive officers, Mr. Gallagher’s base salary is determined by reference to the employment agreement between him and the company.

 

The amount of Mr. Gallagher’s bonus for 2008 was determined pursuant to his separation agreement discussed below. Pursuant to the terms of that agreement, Mr. Gallagher received a bonus for 2008 in the amount of $360,194, which was based on Company performance without modification.

 

On February 25, 2009, Mr. Gallagher notified the Company that he would be resigning effective March 31, 2009. On March 4, 2009, the Company entered into an Agreement and General Release, pursuant to which Mr. Gallagher is entitled to receive in connection with his resignation, among other things, (i) an amount equal to his current annual base salary and target annual performance bonus award, (ii) an annual performance bonus award for 2008 and a prorated annual performance bonus award for 2009, such awards to be based upon the Company’s performance without modification for individual performance, and (iii) reimbursement of COBRA premiums for a period of twelve months following his resignation, after which he would be eligible (at his cost) for health and medical coverage under the Company’s medical plan for active employees for himself and his eligible dependents until the age of 65.

 

In light of Mr. Gallagher’s resignation and the terms of the Agreement and General Release entered into between Mr. Gallagher and the Company, the compensation committee did not assess whether Mr. Gallagher had or had not achieved his individual goals for 2008. Mr. Gallagher’s annual performance bonus award for 2008 was 53.4% of his annual salary as a result the Company’s performance without modification for his individual performance.

 

In December 2008, Mr. Gallagher was offered a $975,000 time-vesting cash award and a target award of 21,700 performance-based RSUs under the 2008 Long-Term Incentive Program, however, he chose to not accept the awards or the accompanying long-term incentive clawback agreement. During 2008, the Company achieved the Tier II Stretch targets under the 2004 Deferred Compensation Plan and Mr. Gallagher became entitled to a payment of $1,822,000 under that legacy compensation program. This 2008 payment was based solely on the achievement of pre-determined Company performance goals.

 

Sandra Beach Lin

 

During fiscal year 2008, Sandra Beach Lin received the following compensation:

 

 

 

For fiscal year 2008, Ms. Lin’s base salary was $550,000, which placed her above the 75^th percentile among similarly situated executives at companies in our peer group. Ms. Lin did not receive an increase in base salary in 2008 because the compensation committee felt that her current base salary was sufficient considering the market data provided by our compensation consultant.

 

For fiscal year 2008, Ms. Lin received an annual performance bonus award payout of $163,590. Ms. Lin’s annual performance bonus award was below the median as a result of the Company’s performance in the achievement of its operating goals and her performance in the achievement of her individual goals. Ms. Lin’s individual goals for 2008 included:

 

 

During 2008, Ms. Lin was able to drive the Advanced Engineered Materials business unit to $13.7 million in budgeted productivity gains. Despite this, the Advanced Engineered Materials business unit missed its Operating EBITDA and Working Capital targets. Ms. Lin also made significant progress in hiring, developing and retaining leaders in her business unit.

 

As a result of the above factors, the compensation committee decided not to modify the eligible amount of Ms. Lin’s annual performance bonus award and awarded her an actual payout of $163,590.

 

In February 2008, the compensation committee granted 12,000 RSUs to Ms. Lin to ensure her continued retention.

 

In December 2008, Ms. Lin received a $1,675,000 time-vesting cash award and a target award of 21,700 performance-based RSUs under the 2008 Long-Term Incentive Program. The terms of these awards are set forth above in “Section 2: Compensation Philosophy and Elements of Pay — 2008 Long Term Incentive Program.”

 

The total long-term incentive award value for an officer of Ms. Lin’s salary level (SL1) based on benchmarking data was $1,300,000. Notwithstanding, the CEO recommended and the compensation committee approved a total award value of $1.95 million (cash and equity) at the date of grant. The target cash grant for an officer of Ms. Lin’s level was $975,000 and she received an actual cash grant of $1,675,000. She also received an award of 21,700 performance-based RSUs at target. The CEO and compensation committee felt that the higher cash grant amount was appropriate in light of Ms. Lin’s strong leadership during a challenging period in her business segment and the need to provide her with additional retentive value.

 

Curtis S. Shaw

 

During fiscal year 2008, Curtis S. Shaw received the following compensation:

 

 

For fiscal year 2008, Mr. Shaw’s base salary was $575,000, which placed him above the 75^th percentile among similarly situated executives at companies in our peer group. Mr. Shaw did not receive an increase in base salary in 2008 because the compensation committee felt that his current base salary was sufficient considering the market data provided by our compensation consultant.

 

The amount of Mr. Shaw’s bonus for 2008 was determined pursuant to his separation agreement discussed below. Pursuant to the terms of that agreement, Mr. Shaw received a bonus for 2008 in the amount of $297,114, which was based on Company performance without modification.

On September 26, 2008, Mr. Shaw announced his retirement, effective March 31, 2009, as the Company’s Executive Vice President, General Counsel and Corporate Secretary. On September 25, 2008, the Company and Mr. Shaw executed an Agreement and General Release pursuant to which Mr. Shaw is entitled to receive in connection with his retirement, among other things, (i) an amount equal to his current annual base salary and target annual performance bonus award, (ii) an annual performance bonus award for 2008 and a prorated annual performance bonus award for 2009, such awards to be based upon the Company’s performance without modification for individual performance, and (iii) reimbursement of COBRA premiums for a period of twelve months following his resignation, after which he would be eligible (at his cost) for medical and dental coverage under the Company’s medical plan for active employees for himself and his eligible dependents until the age of 65.

 

In light of Mr. Shaw’s retirement and the terms of the Agreement and General Release entered into between Mr. Shaw and the company, the compensation committee did not assess whether Mr. Shaw had or had not achieved his individual goals for 2008. Mr. Shaw’s annual performance bonus award for 2008 was 51.7% of his annual salary as a result the Company’s performance without modification for his achievement of his individual goals. In light of Mr. Shaw’s announced departure, the Company did not offer Mr. Shaw an award under the 2008 LTIP.

Section 4: Additional Information Regarding Executive Compensation

 

Following are descriptions of other plans and policies that are integral to a stockholder’s understanding of the Company’s overall executive compensation program structure.

 

Executive Stock Ownership Requirements

 

In 2007 the compensation committee adopted a stock ownership policy for senior management. Ownership includes (i) shares of Celanese stock held outright, whether individually or through beneficial ownership in a trust and (ii) RSUs that have not vested. Stock options do not count towards the executive’s ownership requirements. As of December 31, 2008, executive officers are expected to own the following amount of stock in the Company (expressed as a percentage of base salary) by 2012 (or, if longer, five years from the date of hire):

 

 

 

 

At the time of filing, Mr. Weidman has already achieved the required level of ownership in Company Stock. Mr. Sterin and Ms. Lin are on track to meet their requirements by 2012 (i.e. - they have accumulated Company stock at a minimum rate of 20% of their total required ownership level for each year since the requirements were established).

 

Employment Arrangements and Agreements

 

The compensation committee has determined that it is not in the best interests of the Company to enter into employment agreements with the CEO or any other executive officer of the Company. The compensation committee believes that the primary benefits to the Company of employment agreements are the non-competition and non-solicitation provisions found therein. In order to achieve the benefit of these provisions without incurring the generally negative obligations associated with employment agreements, we entered into change in control agreements during 2008 with our executive officers. Mr. Gallagher was offered the form of change in control agreement that was offered to the other executives, but elected not to enter into the agreement with the Company.

 

Change-in-Control Agreements

 

On April 1, 2008, we entered into change in control agreements with all of the named executive officers (except Mr. Gallagher) and certain other senior members of management. Each change in control agreement has a two-year term that is automatically renewed for successive two-year terms unless 90 days notice of non-renewal is given by either party to the agreement. The change in control agreements provide for a payment to be made to the named executive officers following a termination of employment by the Company without “cause” or by the officer with “good reason” within 2 years following a “change in control” (as each term is defined in the change in control agreements) or following the first public announcement of a potential change in control transaction, provided

certain conditions are satisfied (See “Potential Payments Upon Termination and Change in Control” for a more detailed discussion of the terms of such agreements).

 

In approving the change in control agreements, the compensation committee considered the prevalence of such agreements among similarly situated executives at our peer companies based on data collected by the Company. The compensation committee also determined that the uniform non-compete and non-solicit clauses contained in such agreements provide a significant benefit to the Company. Specifically, the change in control agreements prohibit the executive officer from soliciting customers of, or competing against, the Company for a period of 1 year following the date of termination if such termination occurs following the announcement of a change in control event and 2 years following the date of termination if such termination occurs after a change in control event.

 

2008 Deferred Compensation Plan

 

In December 2007, we adopted a deferred compensation plan whereby we offered certain of our senior employees and directors the opportunity to defer a portion of their compensation in exchange for a future payment amount equal to their deferments plus or minus certain amounts based upon the market-performance of specified measurement funds selected by the participant. Participants were required to make deferral elections under the plan in December 2007, and such deferrals of 2008 compensation would have been withheld during the year ending December 31, 2008. Ms. Lin is the only named executive officer who elected to defer compensation under the plan in 2008.

 

Benefits and Other Perquisites

 

The health, dental and insurance benefits for executives are comparable with those provided by our peer companies and are generally the same benefits available to our other employees. In addition, we provide retirement benefits through several different plans. We believe all of these plans have proven useful and, in many cases, necessary for recruiting and retention purposes. All of our named executive officers participate in the same tax-qualified retirement plan, the Celanese Americas Retirement Pension Plan, but because of different hire dates, their participation formulas differ, as more specifically detailed in the narrative following the Pension Benefits table below.

 

Celanese Americas Retirement Savings Plan — The Celanese Americas Retirement Savings Plan, or CARSP, is a tax-qualified defined contribution plan sponsored by Celanese Americas Corporation, one of our wholly owned subsidiaries. This plan covers substantially all of our U.S. employees. The plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, or ERISA. It allows employee salary reduction contributions on a non-taxable basis, and we match these contributions 100% up to the first 5%. Pursuant to Internal Revenue Code rules, in 2008 only compensation up to $230,000 could be taken into account. All of our named executive officers participated in this plan in 2008.

 

Celanese Long-Term Disability Program — Celanese offers an insured welfare benefit plan that provides a percentage of predisability income to covered employees if they incur a disability and are unable to work for an extended period of time. This program covers substantially all of our U.S. employees. Basic coverage provides a benefit of 50% of predisability income and enhanced coverage provides a benefit of 662/3% of predisability income. Any disability benefit paid is offset by other sources of income such as Social Security disability or retirement benefits, retirement pay, and earnings for work while disabled. Compensation considered under the general policy is limited, so executive management employees are provided additional coverage through a policy amendment in order to return a disability benefit that is closer to the enhanced benefit level of 662/3%. All of the named executive officers are covered by the policy amendment.

 

We offer a minimal amount of cash perquisites to our executive officers as discussed in detail in the footnotes to the Summary Compensation Table.

 

Tax and Accounting Considerations

 

Tax Deductibility of Compensation Expense.  Section 162(m) of the Code places a limit of $1,000,000 on the amount of compensation to certain officers that may be deducted by the Company as a business expense in any tax

year unless, among other things, the compensation is performance-based and has been approved by the stockholders. Salaries for the named executive officers do not qualify as performance-based compensation. Although the Company’s annual performance bonus program is performance-based compensation it does not qualify for an exemption under Section 162(m) because the program was not approved by our stockholders. Likewise, RSUs granted by the Company do not qualify for an exemption under Section 162(m). The cash awards issued under the 2008 Long-term Incentive Program and the Special Cash Retention Awards do not qualify as performance-based compensation for purposes of Section 162(m) because vesting is based on continued employment rather than specific performance goals.

 

The compensation committee believes that in establishing incentive compensation programs for our named executive officers, the potential deductibility of the compensation payable should be only one of several factors taken into consideration and not the sole governing factor. For that reason, the compensation committee may deem it appropriate to continue to provide one or more executive officers with the opportunity to earn incentive compensation that may be in excess of the amount deductible by reason of Section 162(m) or other provisions of the Code.

 

Tax Implications for Officers.  Section 409A of the Code imposes additional income taxes on executive officers for certain types of deferred compensation that do not comply with Section 409A. Because the Company does not generally provide deferred compensation to the named executive officers, this limitation has no impact on the structure of the compensation program for the officers. Section 280G of the Code imposes an excise tax on payments to executives of severance or change in control compensation that exceed the levels specified in Section 280G. The named executive officers could receive the amounts shown on the table in the section entitled “Potential Payments Upon Termination or Change in Control” below as severance or change in control payments, but the compensation committee does not consider their potential impact in setting total annual compensation.

 

Accounting Considerations.  The compensation committee also considers the accounting and cash flow implications of various forms of executive compensation. In its financial statements, the Company records salaries and non-equity performance-based compensation incentives as expenses in the amount paid, or to be paid, to the named executive officers. Accounting rules also require the Company to record an expense in its financial statements for equity awards, even though equity awards are not paid as cash to employees. The accounting expense of equity awards to employees is calculated in accordance with Financial Accounting Standards Board Statement No. 123(R), Share-Based Payment. The compensation committee believes, however, that the many advantages of equity compensation, as discussed above, more than compensate for the non-cash accounting expense associated with them.

 

Executive Compensation Recoupment Policy

 

In connection with the 2008 LTIP and the acceptance of the awards of performance-based RSUs, performance units and cash thereunder, each awardee was required to execute a long-term incentive award clawback agreement. The clawback agreements contain provisions prohibiting the awardee from (i) disclosing confidential or proprietary information and (ii) soliciting customers of, or competing with, the Company for a period of one year following the termination of the Participant’s employment with the Company for any reason.

 

If the awardee violates any of the provisions of the clawback agreement, the awardee will (i) cease vesting and forfeit any rights or interest in cash LTI awards, restricted stock units, stock options or any other form of equity award that was granted on or after December 11, 2008 and that vested during the period one year prior to the earlier of (a) the awardee’s violation of the terms of the clawback agreement and (b) the termination of the awardee’s employment with the Company and (ii) be required to deliver to the Company any amount received under any cash LTI award or gain realized on any stock option exercises or any other transaction relating to an equity grant by the Company on or after December 11, 2008 that were consummated during the period one year prior to the earlier of (x) the awardee’s violation of the terms of the clawback agreement and (y) the termination of the awardee’s employment with the Company.

 

In addition, pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, if we are required to restate our financials due to material noncompliance with any financial reporting requirements as a result of misconduct, the CEO and CFO will be required to reimburse us for (i) any bonus or other incentive-based or equity-based

compensation received during the 12 months following the first public issuance of the non-complying document, and (ii) any profits realized from the sale of securities of the Company during those 12 months.

 

The compensation committee has reviewed and discussed the foregoing CD&A with management and, based upon its review and discussion, the compensation committee recommended to the board of directors that the CD&A be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and this Proxy Statement.

 

This report was submitted by the compensation committee,

 

John K. Wulff, Chair

Mark C. Rohr

Farah M. Walters

 

The following table summarizes the total compensation of each of the named executive officers for the fiscal years ended December 31, 2008, 2007 and 2006.