annual proxy statement

annual proxy statement
Notice of 2015
Annual Meeting of
Shareholders
and
Proxy Statement
May 1, 2015 | Pittsburgh, Pennsylvania
March 19, 2015
Dear Alcoa Shareholders:
I cordially invite you to attend the 2015 Annual Meeting of Shareholders of Alcoa Inc. to
be held on Friday, May 1, 2015, at 9:30 a.m., Eastern Daylight Time, at the Fairmont
Hotel, 510 Market Street, Pittsburgh, Pennsylvania 15222.
At the meeting, shareholders will vote on the matters set forth in the accompanying
Notice of Annual Meeting and Proxy Statement. We will also review the Company’s
major developments of 2014 and answer your questions about Alcoa’s business and
operations.
Your vote is very important. Whether or not you will attend the meeting, we hope that
your shares are represented and voted. In advance of the meeting on May 1, please cast
your vote through the Internet, by telephone or by mail. Instructions on how to vote are
found in the section entitled “Proxy Summary—How to Cast Your Vote” on page 3.
This year’s proxy statement demonstrates our ongoing commitment to provide a clear and detailed discussion of
matters that will be addressed at the meeting. We have included a proxy summary starting on page 3 that provides
highlights of the detailed information included elsewhere in the proxy statement. The Compensation Discussion and
Analysis, which begins on page 40, provides a focused discussion of our executive compensation practices that
reinforce pay-for-performance and shareholder alignment.
Thank you for being a shareholder of Alcoa. We look forward to seeing you at the meeting.
Sincerely,
Klaus Kleinfeld
Chairman of the Board and Chief Executive Officer
Table of Contents
NOTICE OF 2015 ANNUAL MEETING OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PROXY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Proxy Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 1 Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Nominees to Serve for a Three-Year Term Expiring in 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors Whose Terms Expire in 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors Whose Terms Expire in 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nominating Board Candidates – Procedures and Director Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
10
12
14
Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Director Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Directors’ Alignment with Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2014 Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
The Structure and Role of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Leadership Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Board’s Role in Risk Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Qualifications, Board Diversity and Board Tenure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Meetings and Attendance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board, Committee and Director Evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Committees of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Majority Voting for Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications with Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Related Person Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Interlocks and Insider Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Consultants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Conduct Policies and Code of Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Governance Materials Available on Alcoa’s Website . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recovery of Incentive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21
21
22
23
24
24
24
26
26
27
27
28
28
29
29
29
30
Section 16(a) Beneficial Ownership Reporting Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Alcoa Stock Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Stock Ownership of Certain Beneficial Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Stock Ownership of Directors and Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Item 2 Ratification of Appointment of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . 35
Report of the Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Audit and Non-Audit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Item 3 Advisory Approval of Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Compensation Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Compensation Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Compensation Design and Philosophy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Analysis of 2014 Compensation Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
2014 Annual Cash Incentive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
2014 Equity Awards: Stock Options and Performance-Based Restricted Share Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Other Compensation Policies and Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
2014 Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
2014 Grants of Plan-Based Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
2014 Outstanding Equity Awards at Fiscal Year-End . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
2014 Option Exercises and Stock Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
2014 Pension Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
2014 Nonqualified Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Potential Payments Upon Termination or Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Questions and Answers About the Meeting and Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Attachments
Attachment A — Pre-Approval Policies and Procedures for Audit and Non-Audit Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Attachment B — Peer Group Companies for Market Information for 2014 Executive Compensation Decisions . . . . . . . . . . . . 77
Attachment C — Calculation of Financial Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
[THIS PAGE INTENTIONALLY LEFT BLANK]
Notice of 2015 Annual Meeting of Shareholders
Friday, May 1, 2015
9:30 a.m. Eastern Daylight Time
Fairmont Hotel
510 Market Street
Pittsburgh, PA 15222
The Annual Meeting of Shareholders of Alcoa Inc. (“Alcoa” or the “Company”) will be held on Friday, May 1, 2015
at 9:30 a.m., local time, at the Fairmont Hotel, 510 Market Street, Pittsburgh, PA 15222. Shareholders of record of
Alcoa common stock at the close of business on February 20, 2015 are entitled to vote at the meeting.
The purposes of the meeting are:
1. to elect the four directors identified in the accompanying proxy statement to serve three-year terms expiring at
the 2018 annual meeting of shareholders;
2. to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public
accounting firm for 2015;
3. to approve, on an advisory basis, executive compensation; and
4. to transact such other business as may properly come before the meeting or any adjournment or postponement
thereof.
You will need an admission ticket if you plan to attend the meeting. Please see the questions and answers section of
the proxy statement for instructions on how to obtain an admission ticket.
We will provide a live webcast of the meeting from our website at http://www.alcoa.com under “About—Corporate
Governance—Annual Meeting.”
On behalf of Alcoa’s Board of Directors,
Audrey Strauss
Executive Vice President, Chief Legal Officer and Secretary
March 19, 2015
1
390 Park Avenue
New York, NY 10022-4608
Proxy Statement
Important Notice Regarding the Availability of
Proxy Materials for the Annual Meeting of Shareholders
To Be Held on May 1, 2015
The Company’s Notice of 2015 Annual Meeting of Shareholders and Proxy Statement and
2014 Annual Report are available at www.ReadMaterial.com/AA.
The Board of Directors of Alcoa Inc. (“Alcoa” or the “Company”) is providing this proxy statement in connection with
Alcoa’s 2015 Annual Meeting of Shareholders to be held on Friday, May 1, 2015, at 9:30 a.m., local time, at the
Fairmont Hotel, 510 Market Street, Pittsburgh, PA 15222, and at any adjournment or postponement thereof.
Proxy materials or a Notice of Internet Availability of Proxy Materials (the “Notice”) are being first released to
shareholders on or about March 19, 2015. In accordance with rules and regulations adopted by the Securities and
Exchange Commission (the “SEC”), instead of mailing a printed copy of the Company’s proxy materials to each
shareholder of record, the Company may furnish proxy materials by providing access to those documents on the
Internet. The Notice contains instructions on how to access our proxy materials and vote online, or in the alternative,
request a paper copy of the proxy materials and a proxy card. Shareholders who do not receive the Notice will
continue to receive either a paper or an electronic copy of our proxy materials.
2
2015 PROXY STATEMENT
Proxy Summary
We provide below highlights of certain information in this Proxy Statement. As it is only a summary, please refer to
the complete Proxy Statement and Alcoa’s 2014 Annual Report before you vote.
2015 Annual Meeting of Shareholders
Time and Date:
9:30 a.m., Eastern Daylight Time, May 1, 2015
Place:
Fairmont Hotel, 510 Market Street, Pittsburgh, Pennsylvania 15222
Record Date:
February 20, 2015
Webcast:
We will provide a live webcast of the annual meeting from our website at http://www.alcoa.com
under “About—Corporate Governance—Annual Meeting.”
Voting:
Shareholders as of the record date are entitled to vote. Each share of common stock is
entitled to one vote for each director nominee and one vote for each of the other proposals to
be voted on.
Admission:
An admission ticket is required to enter Alcoa’s annual meeting. Please see Question 5 on
page 72 regarding how to obtain a ticket.
How to Cast Your Vote
Your vote is important! Please cast your vote and play a part in the future of Alcoa.
Shareholders of record, who hold shares registered in their names, can vote by:
Internet at
www.cesvote.com
QR code—scan
and vote with
your mobile device
calling 1-888-693-8683
toll-free from the
U.S. or Canada
mail
return the signed
proxy card
The deadline for voting online or by telephone is 6:00 a.m. EDT on May 1, 2015. If you vote by mail, your proxy card
must be received before the annual meeting. If you hold shares in an Alcoa savings plan, your voting instructions
must be received by 6:00 a.m. EDT on April 29, 2015.
Beneficial owners, who own shares through a bank, brokerage firm or other financial institution, can vote by
returning the voting instruction form, or by following the instructions for voting via telephone or the Internet, provided
by the bank, broker or other organization. If you own shares in different accounts or in more than one name, you
may receive different voting instructions for each type of ownership. Please vote all your shares.
If you are a shareholder of record or a beneficial owner who has a legal proxy to vote the shares, you may choose to
vote in person at the annual meeting. Even if you plan to attend our annual meeting in person, please cast your
vote as soon as possible.
See the “Questions and Answers About the Meeting and Voting” section beginning on page 71 for more details.
3
2015 PROXY STATEMENT
Proxy Summary
(continued)
Voting Matters and Board Recommendations
Voting Matters
Item 1.
Item 2.
Item 3.
Election of Four Director Nominees to Serve for a Three-Year
Term Expiring in 2018
Ratification of Appointment of PricewaterhouseCoopers LLP as the
Company’s Independent Registered Public Accounting Firm for
2015
Advisory Vote to Approve Executive Compensation
Board’s
Recommendation
Page Reference
(for more detail)
✔ FOR Each
Nominee
✔ FOR
7
35
✔ FOR
38
Board Nominees
(page 8)
Alcoa’s Board of Directors currently has 13 members divided into three classes. Directors are elected for three-year
terms. The following table provides summary information about each director nominee standing for re-election to the
Board for a three-year term expiring in 2018.
Age
Director
Since
Professional
Background
Kathryn S. Fuller
68
2002
Chair, Smithsonian’s
National Museum of
Natural History;
Former President and
Chief Executive
Officer, World Wildlife
Fund
Yes
Compensation and
Benefits;
Public Issues
L. Rafael Reif
64
2015
President of the
Massachusetts
Institute
of Technology
Yes
—
Schlumberger Limited
Patricia F. Russo
62
2008
Former Chief
Executive Officer,
Alcatel-Lucent
Yes
Compensation and
Benefits (Chair);
Executive;
Governance and
Nominating
General Motors
Company; HewlettPackard Company;
KKR Management LLC;
Merck & Co., Inc.
Ernesto Zedillo
63
2002
Director of the Yale
Center for the Study
of Globalization;
Former President of
Mexico
Yes
Audit; Public Issues
(Chair)
Citigroup Inc.; Promotora
de Informaciones, S.A.;
The Procter & Gamble
Company
Name
Independent
4
Committee
Memberships
Other Public
Company Boards
—
2015 PROXY STATEMENT
Proxy Summary
(continued)
Corporate Governance Highlights
(page 20)
The Company is committed to good corporate governance, which we believe is important to the success of our
business and in advancing shareholder interests. Our corporate governance practices are described in greater detail
in the “Corporate Governance” section. Highlights include:
• majority voting for directors
• 12 out of 13 Board members are independent
• independent Lead Director with substantial responsibilities
• diversity reflected in Board composition
• regular executive sessions of independent directors
• average Board attendance of 94% during 2014
• independent Audit, Compensation and Benefits, Governance and Nominating, and Public Issues Committees
• risk oversight by full Board and committees
• regular Board, committee and director nominee self-evaluations
• active shareholder engagement
• shareholder right to call special meetings
• shareholders’ ability to take action by written consent
• long-standing commitment toward sustainability
• policies prohibiting short sales, hedging, margin accounts and pledging
Financial and Operating Highlights
($ in millions, except per share
amounts)
Sales
Net income (loss)
After-tax operating income:
Alumina
Primary Metals
Global Rolled Products
Engineered Products and Solutions
Per common share data:
Basic
Diluted
Dividends paid
Total assets
Capital expenditures
Cash provided from operations
Book value per share*
Common stock outstanding, end
of year
*
$
$
2014 Sales: $23.9 Billion
2014
23,906
268
$
$
2013
23,032
(2,285)
BY SEGMENT
$0.2
$3.5
$
$
$
$
370
594
312
767
$
$
$
$
259
(20)
252
726
$
$
$
$
$
$
$
0.21
0.21
0.12
37,399
1,219
1,674
9.07
$
$
$
$
$
$
$
(2.14)
(2.14)
0.12
35,742
1,193
1,578
9.84
1,216,663,661
1,071,011,162
Book value per share = (total shareholders’ equity minus preferred stock) divided by
common stock outstanding, end of year
5
$7.4
$6.0
$6.8
Global Rolled Products
Primary Metals
Engineered Products and Solutions
Alumina
Other
2015 PROXY STATEMENT
Proxy Summary
(continued)
Executive Compensation Highlights
(page 40)
The Compensation Discussion and Analysis provides a focused discussion of how Alcoa’s executive compensation
philosophy drove strong operating and financial performance in 2014.
• Alcoa’s compensation philosophy and investor outreach guided the 2014 executive compensation plan.
• Alcoa’s priority for equity pay-for-performance has produced value for shareholders.
• Alcoa made significant progress in executing its transformation strategy and delivered exceptional
operational and financial performance in 2014.
• Alcoa set short- and long-term business plan targets that, in turn, formed the basis for its incentive
compensation and long-term incentive targets.
• Alcoa chose 2014 metrics that correlate to shareholder value and incentive compensation and long-term
incentive targets that drove exceptional performance.
• The Compensation and Benefits Committee made incentive compensation and long-term incentive awards
that reflected the strong performance of 2014 and that are intended to reward and retain exceptional talent
who delivered that performance.
WHAT WE DO
WHAT WE DON’T DO
✔ We pay for performance
✔ We consider peer groups in establishing
compensation
✘ We do not pay dividend equivalents on stock options
and unvested restricted share units
✘ We do not allow share recycling
✘ We do not allow repricing of underwater stock
options (including cash-outs)
✔ We review tally sheets
✔ We have robust stock ownership guidelines
✔ We schedule and price stock option grants to
promote transparency and consistency
✘ We do not allow hedging or pledging of Company
stock
✔ We have clawback policies incorporated into our
incentive plans
✘ We do not have excise tax gross-ups for new
participants in our Change in Control Severance Plan
✔ We have double-trigger equity vesting in the event of
a change-in-control
✘ We do not enter into multi-year employment
contracts
✔ We pay reasonable salaries to our senior executives
✔ We provide appropriate benefits to our senior
executives
✘ We do not provide significant perquisites
✔ We have a conservative compensation risk profile
✔ We consider tax deductibility when designing and
administering our incentive compensation
✔ The Compensation and Benefits Committee retains
an independent compensation consultant
6
2015 PROXY STATEMENT
Item 1 Election of Directors
As of the date of this proxy statement, Alcoa’s Board of Directors has 13 members divided into three classes.
Directors are elected for three-year terms. The terms for each class end in successive years.
The Board of Directors, upon the recommendation of the Governance and Nominating Committee, has nominated
four incumbent directors, Kathryn S. Fuller, L. Rafael Reif, Patricia F. Russo, and Ernesto Zedillo, to stand for reelection to the Board for a three-year term expiring in 2018. Ms. Gueron, whose term expires at the annual
shareholders meeting on May 1, 2015, will not be standing for re-election. In accordance with the directors’
retirement policy in the Company’s Corporate Governance Guidelines, Ms. Gueron has announced her intention to
retire from the Board effective May 1, 2015 as she would reach age 75 during a new three-year term. See “The
Structure and Role of the Board of Directors—Board Leadership Structure” for more information regarding
Ms. Gueron’s pending retirement.
Each of the director nominees was elected by the shareholders at the 2012 Annual Meeting of Shareholders except
L. Rafael Reif, who was appointed by the Board of Directors, upon the recommendation of the Governance and
Nominating Committee, effective March 2, 2015. Mr. Reif was recommended to the Governance and Nominating
Committee as a director candidate by the other members of the Board.
The Board of Directors has affirmatively determined that each of the four nominees qualifies for election under the
criteria for evaluation of directors (see “Minimum Qualifications for Director Nominees and Board Member
Attributes” on page 14 and “Board, Committee and Director Evaluations” on page 24). Included in each nominee’s
biography below is a description of the qualifications, experience, attributes and skills of such nominee. In addition,
the Board of Directors has determined that each nominee qualifies as an independent director under New York
Stock Exchange corporate governance listing standards and the Company’s Director Independence Standards. See
“Director Independence” on page 27.
If a nominee is unable to serve as a director, the Board may reduce its size or choose a substitute.
The Board of Directors recommends a vote “FOR” ITEM 1, the election of each of Kathryn S.
Fuller, L. Rafael Reif, Patricia F. Russo, and Ernesto Zedillo to the Board for a three-year term
expiring in 2018.
7
2015 PROXY STATEMENT
Item 1 Election of Directors
(continued)
Nominees to Serve for a Three-Year Term Expiring in 2018
Kathryn S. Fuller
L. Rafael Reif
Director since: 2002
Director since: March 2, 2015
Age: 68
Age: 64
Committees: Compensation and Benefits
Committee; Public Issues Committee
Other Current Public Directorships:
Schlumberger Limited
Career Highlights and Qualifications: Ms. Fuller is the Chair of
the Smithsonian’s National Museum of Natural History, the world’s
preeminent museum and research complex. She currently serves
on the board of, and chairs the Nominating and Governance
Committee at, The Robert Wood Johnson Foundation, a leading
philanthropy in the field of health and health care. Ms. Fuller is
also the Chair of the Institute at Brown for Environment & Society
(Brown University), which seeks to prepare leaders to understand
and holistically manage complex social and environmental
systems.
Career Highlights and Qualifications: Mr. Reif is president of the
Massachusetts Institute of Technology (MIT), the world-renowned
educational institution of science and technology. Prior to his
appointment as president of MIT in July 2012, he was MIT’s
Provost, Chief Academic Officer and Chief Budget Officer from
August 2005 to July 2012 and head of MIT’s Department of
Electrical Engineering and Computer Science from September
2004 to July 2005. Mr. Reif has been a faculty member of MIT for
more than 30 years.
Mr. Reif launched the MIT Innovation Initiative to enhance MIT’s own
innovation ecosystem and foster education, research and policy; and
recently began work on “MIT.nano,” a new facility on the campus
that will accelerate research and innovation at the nanoscale. In his
previous role as Provost of MIT, he held overarching responsibility for
MIT’s education and research programs, including spearheading the
development of MIT’s online learning initiatives, MITx and edX, and
oversight for Lincoln Laboratory, a federally funded research facility
that MIT operates for the U.S. Department of Defense. In his
leadership roles at MIT, Mr. Reif also launched environmental
initiatives to drive progress towards solutions around environment,
climate and sustainability. He also promoted a faculty-led effort to
address challenges around race and diversity.
Ms. Fuller retired as Chair of The Ford Foundation, a nonprofit
organization, in September 2010, after having served in that
position since May 2004.
Ms. Fuller retired as President and Chief Executive Officer of World
Wildlife Fund U.S. (WWF), one of the world’s largest nature
conservation organizations, in July 2005, after having served in
those positions since 1989. Ms. Fuller continues her affiliation with
WWF as President Emerita and an honorary member of the Board
of Directors.
Ms. Fuller was a Public Policy Scholar at the Woodrow Wilson
International Center for Scholars, a nonpartisan institute
established by Congress for advanced study of national and world
affairs, for a year beginning in October 2005.
Mr. Reif, at the request of the White House, served as co-chair of
the steering committee of the national Advanced Manufacturing
Partnership (AMP 2.0), an effort to secure U.S. leadership in
emerging technologies.
Ms. Fuller had various responsibilities with WWF and The
Conservation Foundation from 1982 to 1989, including executive
vice president, general counsel and director of WWF’s public
policy and wildlife trade monitoring programs. Before that, she
held several positions in the U.S. Department of Justice,
culminating as Chief, Wildlife and Marine Resources Section, in
1981 to 1982.
Mr. Reif is the inventor or co-inventor on 15 patents.
Other Current Affiliations: In addition to his public company
board memberships, Mr. Reif was named a fellow of the Institute
of Electrical and Electronics Engineers in 1993, and he received
the Aristotle Award in 2000 from the Semiconductor Research
Corporation. He is also an elected member of the American
Academy of Arts and Sciences, the National Academy of
Engineering and a trustee of the Carnegie Endowment for
International Peace.
Attributes and Skills: Ms. Fuller has led three internationally
recognized and respected organizations, having served as the
chief executive officer of WWF and Chair of The Ford Foundation
and currently serving as Chair of the Smithsonian’s National
Museum of Natural History. Her experience in managing worldclass organizations, combined with her proven leadership skills,
international experience and environmental focus have all
contributed to the diversity and richness of the Board’s
deliberations.
Attributes and Skills: In addition to leading MIT, an acclaimed
academic institution, Mr. Reif is a respected international authority
on innovative material science and advanced manufacturing
technologies. His scientific and technological expertise is a
valuable resource to the Company as the Company explores
investments in digitization, automation and robotics to enhance
the competitiveness of its expanding multi-material, value-add
business portfolio. In addition, Mr. Reif’s experience in
environmental initiatives provides a strong background from which
the Company can benefit.
The Company has long recognized the need to earn the right to
continue to do business in the communities in which it operates,
and as a result, the Board seeks the input of directors, such as
Ms. Fuller, who have a broad perspective on sustainable
development.
8
2015 PROXY STATEMENT
Item 1 Election of Directors
(continued)
Nominees to Serve for a Three-Year Term Expiring in 2018
Patricia F. Russo
Ernesto Zedillo
Director since: 2008
Director since: 2002
Age: 62
Age: 63
Committees: Compensation and Benefits
Committee (Chair); Executive Committee;
Governance and Nominating Committee
Committees: Audit Committee; Public
Issues Committee (Chair)
Other Current Public Directorships:
Citigroup Inc.; Promotora de
Informaciones, S.A.; The Procter &
Gamble Company
Other Current Public Directorships:
General Motors Company; HewlettPackard Company (Lead Director); KKR
Management LLC; Merck & Co., Inc.
Career Highlights and Qualifications: Ms. Russo is the former
Chief Executive Officer of Alcatel-Lucent, a communications
company, from December 2006 to September 2008. She served
as Chairman of Lucent Technologies Inc. from 2003 to 2006 and
as its Chief Executive Officer and President from 2002 to 2006.
Career Highlights and Qualifications: Dr. Zedillo has been at Yale
University since 2002, where he is the Frederick Iseman ’74 Director
of the Yale Center for the Study of Globalization; Professor in the Field
of International Economics and Politics; Professor of International and
Area Studies; and Professor Adjunct of Forestry and Environmental
Studies. He was a Distinguished Visiting Fellow at the London School
of Economics in 2001.
Ms. Russo was President and Chief Operating Officer of Eastman
Kodak Company from April 2001, and Director from July 2001,
until January 2002, and Chairman of Avaya Inc. from
December 2000, until she rejoined Lucent as Chief Executive
Officer in January 2002.
Dr. Zedillo was President of Mexico from December 1994 to
December 2000. He served in the Federal Government of Mexico
as Undersecretary of the Budget (1987-1988); as Secretary of
Economic Programming and the Budget and board member of
various state owned enterprises, including PEMEX, Mexico’s
national oil company (1988-1992); and as Secretary of Education
(1992-1993). From 1978 to 1987, he was with the central bank of
Mexico where he served as deputy manager of economic research
and deputy director. From 1983 to 1987, he was the founding
General Director of the Trust Fund for the Coverage of Exchange
Risks, a mechanism created to manage the rescheduling of the
foreign debt of the country’s private sector that involved
negotiations and complex financial operations with hundreds of
firms and international banks.
Ms. Russo was Executive Vice President and Chief Executive
Officer of the Service Provider Networks business of Lucent from
November 1999 to August 2000 and served as Executive Vice
President from 1996 to 1999. Prior to that, she held various
executive positions with Lucent and AT&T.
Other Current Affiliations: In addition to her public company
board memberships, Ms. Russo is Chairman of the Partnership for
a Drug-Free America, a national non-profit organization.
Previous Directorships: Ms. Russo served as a director of
Schering Plough Corp. from 1995 until 2009, when it merged with
Merck & Co. She was chair of Schering Plough’s Governance
Committee for six years and its Lead Director prior to the merger.
Dr. Zedillo earned his Bachelor’s degree from the School of
Economics of the National Polytechnic Institute in Mexico and his
M.A., M.Phil. and Ph.D. at Yale University. In Mexico, he taught
economics at the National Polytechnic Institute and El Colegio de
Mexico.
Attributes and Skills: Ms. Russo has proven business acumen,
having served in executive and board leadership capacities at a
number of significant, complex global organizations. As Chief
Executive Officer of Lucent, she successfully led the company
through the severe telecommunications industry downturn in 2002
and 2003, restoring the company to profitability and growth. She
then led its cross-border merger negotiations with Alcatel, a
French company, and became the newly merged organization’s
first chief executive, headquartered in France. In addition, her
directorships at other public companies provide her with broad
experience on issues facing public companies. Ms. Russo has
demonstrated a depth of business experience, knowledge of
compensation and benefits in her service on the Company’s
Compensation and Benefits Committee and as chair of Hewlett
Packard’s compensation committee, and an extensive knowledge
of governance practices and principles.
Other Current Affiliations: In addition to his public company board
memberships, Dr. Zedillo belongs to the international advisory
board of BP. He is a senior advisor to the Credit Suisse Research
Institute. His current service in non-profit institutions includes being
a member of the Foundation Board of the World Economic Forum.
Previous Directorships: Dr. Zedillo was a director of Electronic
Data Systems Corporation from 2007 to 2008 where he was a
member of its Governance Committee. He was a director of Union
Pacific Corporation from 2001 to 2006 where he served on the
Audit and Finance Committees.
Attributes and Skills: From his broad experience in government
and international politics and his prior service as President of
Mexico, Dr. Zedillo brings international perspective and insight to
matters such as governmental relations and public issues in the
various countries in which Alcoa operates. Dr. Zedillo also has
significant financial experience, having previously served on the
audit committee of Union Pacific and as the Secretary of Economic
Programming and the Budget for Mexico, as well as having held
various positions at Banco de México, the central bank of Mexico.
Dr. Zedillo qualifies as an audit committee financial expert.
9
2015 PROXY STATEMENT
Item 1 Election of Directors
(continued)
Directors Whose Terms Expire in 2016
Arthur D. Collins, Jr.
Carol L. Roberts
Director since: 2010
Director since: 2014
Age: 67
Age: 55
Committees: Audit Committee;
Compensation and Benefits Committee
Committees: Audit Committee
Other Current Public Directorships:
The Boeing Company; U.S. Bancorp (Lead
Director)
Career Highlights and Qualifications: Ms. Roberts is Senior
Vice President and Chief Financial Officer of International
Paper Company (IP), a global leader in packaging and paper
with manufacturing operations in 24 countries. Ms. Roberts
has over 30 years of industrial manufacturing experience,
having worked in multiple facilities and across various
functions at IP. Before being named CFO in 2011, Ms. Roberts
led IP’s largest business, the Industrial Packaging Group.
While in that role, she led IP’s acquisition of Weyerhaeuser’s
packaging business. Ms. Roberts has also served as IP’s Vice
President of People Development for three years, during which
she developed human resources programs that have had a
major impact on IP’s talent posture and employee
engagement. Ms. Roberts has served in a variety of operational
and technical roles since beginning her career with IP in 1981
as an associate engineer at the company’s Mobile, Alabama
mill.
Career Highlights and Qualifications: Mr. Collins was
Chairman of Medtronic, Inc., a leading medical device and
technology company, from April 2002 until his retirement in
August 2008, and Chief Executive Officer from May 2002 to
August 2007. He held a succession of other executive
leadership positions with Medtronic from 1992 until his
retirement, including as President and Chief Executive Officer,
President and Chief Operating Officer, and Chief Operating
Officer. He was Executive Vice President of Medtronic and
President of Medtronic International from June 1992 to
January 1994.
Prior to joining Medtronic, he was Corporate Vice President of
Abbott Laboratories (health care products) from October 1989
to May 1992 and Divisional Vice President of that company
from May 1984 to October 1989. He joined Abbott in 1978
after spending four years with Booz, Allen & Hamilton, a
management consulting firm.
Attributes and Skills: Ms. Roberts’ career spans engineering,
manufacturing, business management, human resources and
finance, bringing a strong set of cross-functional experiences
to the Board. Her current role as Chief Financial Officer of IP
also provides her with a strong foundation for valuable
contributions to Board discussions relating to financial and
strategic matters.
Other Current Affiliations: In addition to his public company
board memberships, Mr. Collins currently serves on the board
of privately held Cargill, Incorporated. He also serves as a
senior advisor to Oak Hill Capital Partners, L.P., a private
equity firm.
Previous Directorships: Mr. Collins was Chairman of Medtronic,
Inc. from 2002 to 2008.
Ms. Roberts qualifies as an audit committee financial expert.
Attributes and Skills: Mr. Collins’ extensive executive and
business experience, including his years of executive
leadership at Medtronic, allow Alcoa to benefit from his
experience managing the operations of a large, global
company. He also brings the perspective of a member of
several corporate boards, having served on the audit, finance,
compensation, governance and executive committees of
various boards. Mr. Collins is currently the lead director at U.S.
Bancorp, and he is the chair of the Compensation Committee
at Boeing and of the Human Resources Committee at Cargill.
Mr. Collins qualifies as an audit committee financial expert.
10
2015 PROXY STATEMENT
Item 1 Election of Directors
(continued)
Directors Whose Terms Expire in 2016
Michael G. Morris
E. Stanley O’Neal
Director since: 2008
Director since: 2008
Age: 68
Age: 63
Committees: Audit Committee;
Compensation and Benefits Committee;
Executive Committee; Governance and
Nominating Committee
Committees: Audit Committee; Executive
Committee; Governance and Nominating
Committee
Other Current Public Directorships:
Platform Specialty Products Corporation
Other Current Public Directorships:
L Brands, Inc.; The Hartford Financial
Services Group, Inc.; Spectra Energy Corp
Career Highlights and Qualifications: Mr. O’Neal served as
Chairman of the Board and Chief Executive Officer of
Merrill Lynch & Co., Inc. until October 2007. He became Chief
Executive Officer of Merrill Lynch in 2002 and was elected
Chairman of the Board in 2003. Mr. O’Neal was employed with
Merrill Lynch for 21 years, serving as President and Chief
Operating Officer from July 2001 to December 2002; President
of U.S. Private Client from February 2000 to July 2001; Chief
Financial Officer from 1998 to 2000; and Executive Vice
President and Co-head of Global Markets and Investment
Banking from 1997 to 1998.
Career Highlights and Qualifications: Mr. Morris was
Chairman of American Electric Power Company, Inc. (AEP),
one of the nation’s largest utility generators and owner of the
largest electricity transmission system in the United States,
from 2004 through 2013. He served as Chief Executive officer
of AEP and all of its major subsidiaries from 2004 until his
retirement in November 2011 and as President from 2004 to
2011. From 1997 to 2003, Mr. Morris was Chairman,
President and Chief Executive Officer of Northeast Utilities.
Prior to that, he held positions of increasing responsibility in
energy and natural gas businesses.
Before joining Merrill Lynch, Mr. O’Neal was employed at
General Motors Corporation where he held a number of
financial positions of increasing responsibility.
Other Current Affiliations: In addition to his public company
board memberships, Mr. Morris serves on the U.S.
Department of Energy’s Electricity Advisory Board, the National
Governors Association Task Force on Electricity Infrastructure,
the Institute of Nuclear Power Operations and the Business
Roundtable (chairing the Business Roundtable’s Energy Task
Force).
Mr. O’Neal’s other affiliations included service on the board of
the Memorial Sloan-Kettering Cancer Center, and membership
in the Council on Foreign Relations, the Center for Strategic
and International Studies and the Economic Club of New York.
Previous Directorships: Mr. O’Neal was a director of General
Motors Corporation from 2001 to 2006, chairman of the board
of Merrill Lynch & Co., Inc. from 2003 to 2007, and a director
of American Beacon Advisors, Inc. (investment advisor
registered with the Securities and Exchange Commission) from
2009 to September 2012.
Previous Directorships: Mr. Morris was Chairman of AEP from
2004 through 2013. From 1997 to 2003, Mr. Morris was
Chairman of Northeast Utilities. Mr. Morris was previously
chairman of the Edison Electric Institute.
Attributes and Skills: Mr. Morris has proven business
acumen, having served as the chief executive officer of
significant, complex organizations. Mr. Morris’ experience in
the energy field is a valuable resource to the Company as it
engages in renewing its energy supplies. The production of
aluminum requires large amounts of energy in an electrolytic
smelting process. In addition, Mr. Morris is a leader in
developing the carbon sequestration process, which is a
technology that may prove to be valuable to the aluminum
industry in reducing greenhouse gas emissions.
Attributes and Skills: Mr. O’Neal provides a valuable
perspective to the Audit Committee as the Company does not
have another director with a background in investment
banking. He also brings to the Audit Committee a strong
financial background in an industrial setting, having served in
various financial and leadership positions at General Motors
Corporation.
Mr. O’Neal qualifies as an audit committee financial expert.
Mr. Morris qualifies as an audit committee financial expert.
11
2015 PROXY STATEMENT
Item 1 Election of Directors
(continued)
Directors Whose Terms Expire in 2017
Klaus Kleinfeld
James W. Owens
Director since: 2003
Director since: 2005
Age: 57
Age: 69
Committees: Executive Committee (Chair);
International Committee (Chair)
Committee: Audit Committee (Chair)
Other Current Public Directorships:
International Business Machines
Corporation; Morgan Stanley
Other Current Public Directorships:
Hewlett-Packard Company; Morgan
Stanley
Career Highlights and Qualifications: Mr. Kleinfeld has been
Chairman and Chief Executive Officer of Alcoa since April
2010. He was President and Chief Executive Officer of Alcoa
from May 2008 to April 2010, and President and Chief
Operating Officer from October 2007 to May 2008.
Career Highlights and Qualifications: Mr. Owens served as
Chairman and Chief Executive Officer of Caterpillar Inc., a
leading manufacturer of construction and mining equipment,
diesel and natural gas engines and industrial gas turbines,
from February 2004 through June 2010. He was Executive
Chairman from June to October 2010, when he retired from
the company.
Before Alcoa, Mr. Kleinfeld had a 20-year career with Siemens,
the global electronics and industrial conglomerate, based in
the U.S. and Germany, where he served as Chief Executive
Officer of Siemens AG from January 2005 to June 2007.
During his tenure, Mr. Kleinfeld presided over a dramatic
transformation of that company, reshaping the company’s
portfolio around three high-growth areas, resulting in an
increase of revenues and a near doubling of market
capitalization. Mr. Kleinfeld was Deputy Chairman of the
Managing Board and Executive Vice President of Siemens AG
from 2004 to January 2005, and President and Chief Executive
Officer from 2002 to 2004 of Siemens Corporation, Siemens
AG’s subsidiary in the U.S., which represents the company’s
largest region.
Mr. Owens served as Vice Chairman of Caterpillar from
December 2003 to February 2004 and as Group President
from 1995 to 2003, responsible at various times for 13 of the
company’s 25 divisions. Mr. Owens joined Caterpillar in 1972
as a corporate economist and was named chief economist of
Caterpillar Overseas S.A. in Geneva, Switzerland in 1975. From
1980 until 1987, he held managerial positions in the
Accounting and Product Source Planning Departments. In
1987, he became managing director of P.T. Natra Raya,
Caterpillar’s joint venture in Indonesia. He held that position
until 1990, when he was elected a Corporate Vice President
and named President of Solar Turbines Incorporated, a
Caterpillar subsidiary in San Diego, California. In 1993, he was
elected Vice President and Chief Financial Officer.
Mr. Kleinfeld was born in Bremen, Germany, and educated at
the University of Goettingen and University of Wuerzburg. He
holds a Ph.D. in strategic management and a master’s degree
in business administration.
Other Current Affiliations: In addition to his public company
board memberships, Mr. Owens serves as a senior advisor to
Kohlberg Kravis Roberts & Co. L.P., a global asset manager
working in private equity and fixed income. His other major
affiliations include the Peterson Institute for International
Economics and the Council on Foreign Relations.
Other Current Affiliations: In addition to his public company
board memberships, Mr. Kleinfeld serves on the Brookings
Institution Board of Trustees. He is Chairman of the U.S.Russia Business Council, which is dedicated to promoting
trade and investment between the United States and Russia.
Previous Directorships: Mr. Owens was Chairman of
Caterpillar Inc. from 2004 to 2010. He was also former
Chairman and Executive Committee member of the Business
Council.
Previous Directorships: Mr. Kleinfeld served on the
Supervisory Board of Bayer AG for approximately nine years
until September 30, 2014. He was a director of Citigroup Inc.
from 2005 to 2007 and a member of the Managing Board of
Siemens AG from 2004 to 2007.
Attributes and Skills: Mr. Owens’ previous leadership positions,
including as Chief Executive Officer of a significant, complex
global industrial company, bring to the Board proven business
acumen, management experience and economics expertise. His
background as former Chief Financial Officer of Caterpillar also
provides a strong financial foundation for Alcoa’s Audit
Committee deliberations.
Attributes and Skills: As the only management representative
on the Company’s Board, Mr. Kleinfeld provides an insider’s
perspective in Board discussions about the business and
strategic direction of the Company. He brings to the Board his
knowledge of all aspects of Alcoa’s global business and his
extensive international and senior executive experience.
Mr. Owens qualifies as an audit committee financial expert.
12
2015 PROXY STATEMENT
Item 1 Election of Directors
(continued)
Directors Whose Terms Expire in 2017
Martin S. Sorrell
Ratan N. Tata
Director since: 2012
Director since: 2007
Age: 70
Age: 77
Committees: International Committee;
Public Issues Committee
Committees: International Committee;
Public Issues Committee
Other Current Public Directorships:
WPP plc
Other Current Public Directorships:
Mondelēz International, Inc.
Career Highlights and Qualifications: Sir Martin Sorrell
founded WPP plc (WPP), currently the world’s largest
advertising and marketing services group, in 1985, and has
been the Chief Executive Officer since that time. WPP
companies, which include some of the most eminent agencies
in the business, provide clients with advertising, media
investment management, data investment management,
public relations and public affairs, branding and identity,
healthcare communications, direct, interactive and Internet
marketing, and special communication services. Collectively,
WPP employs over 170,000 people in 110 countries.
Career Highlights and Qualifications: Mr. Tata served as
Chairman of Tata Sons Limited, the holding company of the Tata
Group, one of India’s largest business conglomerates, from 1991
through 2012. Mr. Tata was also Chairman of the major Tata
Group companies, including Tata Motors, Tata Steel, Tata
Consultancy and several other Tata companies, through 2012.
Mr. Tata joined the Tata Group in December 1962.
Mr. Tata received a Bachelor of Science degree in Architecture
with Structural Engineering from Cornell University in 1962
and completed the Advanced Management Program at
Harvard Business School in 1975. He is the recipient of
numerous awards and honors, including the Government of
India’s second highest civilian award, the Padma Vibhushan,
and the Deming Cup, awarded in October 2012 by Columbia
Business School’s W. Edwards Deming Center for quality,
productivity, and competitiveness.
Sir Martin actively supports the advancement of international
business schools, advising Harvard, IESE (Spain), the London
Business School, the Indian School of Business and the Judge
Institute at Cambridge University. He has been publicly
recognized with a number of awards, including the Harvard
Business School Alumni Achievement Award. Sir Martin
received a knighthood in January 2000.
Other Current Affiliations: In addition to his public company
board memberships, Mr. Tata is associated with various
organizations in India and overseas. He is the Chairman of two of
the largest private-sector philanthropic trusts in India. He is a
member of the Indian Prime Minister’s Council on Trade and
Industry. He is the President of the Court of the Indian Institute of
Science and Chairman of the Council of Management of the Tata
Institute of Fundamental Research. He also serves on the Board
of Trustees of Cornell University and the University of Southern
California. Mr. Tata is also on the international advisory boards of
Mitsubishi Corporation, JP Morgan Chase, Rolls-Royce, Temasek
Holdings and the Monetary Authority of Singapore.
Other Current Affiliations: In addition to his public company
board memberships, Sir Martin serves as a non-executive
director of Alpha Topco Limited, a privately held holding
company of the Formula One Group. He is a former Chairman
of the International Business Council of the World Economic
Forum and a member of the Business Council in the U.S. In
addition, Sir Martin serves on the board of directors of the
Bloomberg Family Foundation and is a member of the Advisory
Boards of global investment firm Stanhope Capital and private
equity firm Bowmark Capital.
Attributes and Skills: Sir Martin is an internationally
recognized business leader and brings to the Board his
experience in growing the WPP enterprise through innovation,
acquisitions and his extensive international business
relationships. His international experience and perspective in
leading a large multinational group of advertising and
marketing services companies provides Alcoa with invaluable
insight and guidance.
Previous Directorships: Mr. Tata was Chairman of Tata Sons
Limited and the major Tata Group companies until
December 2012. He was a director of Bombay Dyeing and
Manufacturing Company Limited from 1994 to February 2013
and Fiat S.p.A. from 2006 to April 2012.
Attributes and Skills: Mr. Tata brings to the Board significant
international business experience in a wide variety of industries.
His previous leadership positions, including as former Chairman
of the holding company for one of India’s largest business
conglomerates with revenues in excess of $100 billion and
former Chairman of major operating companies in various
industries, including automotive, consulting and steel, provide
him with extensive management and industry experience and
global perspective. His perspective adds valuable diversity to the
deliberations of the Board.
13
2015 PROXY STATEMENT
Item 1 Election of Directors
(continued)
Nominating Board Candidates – Procedures and Director Qualifications
Shareholder Recommendations for Director Nominees
Any shareholder wishing to recommend a candidate for director should submit the recommendation in writing to our
principal executive offices: Alcoa Inc., Governance and Nominating Committee, c/o Corporate Secretary’s Office,
390 Park Avenue, New York, NY 10022-4608. The written submission should comply with all requirements set forth
in the Company’s Articles of Incorporation and By-Laws. The committee will consider all candidates recommended
by shareholders who comply with the foregoing procedures and satisfy the minimum qualifications for director
nominees and Board member attributes.
Shareholder Nominations from the Floor of the Annual Meeting
The Company’s Articles of Incorporation provide that any shareholder entitled to vote at an annual shareholders’
meeting may nominate one or more director candidates for election at that annual meeting by following certain
prescribed procedures. Not later than 90 days before the anniversary date of the immediately preceding annual
meeting, the shareholder must provide to Alcoa’s Corporate Secretary written notice of the shareholder’s intent to
make such a nomination or nominations. The notice must contain all of the information required in the Company’s
Articles of Incorporation and By-Laws.
Any such notice must be sent to our principal executive offices: Alcoa Inc., Corporate Secretary’s Office,
390 Park Avenue, New York, NY 10022-4608. The deadline for receipt of any shareholder nominations for the 2016
annual meeting is February 1, 2016.
Minimum Qualifications for Director Nominees and Board Member Attributes
The Governance and Nominating Committee has adopted Criteria for Identification, Evaluation and Selection of
Directors:
1. Directors must have demonstrated the highest ethical behavior and must be committed to the Company’s
values.
2. Directors must be committed to seeking and balancing the legitimate long-term interests of all of the Company’s
shareholders, as well as its other stakeholders, including its customers, employees and the communities where
the Company has an impact. Directors must not be beholden primarily to any special interest group or
constituency.
3. It is the objective of the Board that all non-management directors be independent. In addition, no director
should have, or appear to have, a conflict of interest that would impair that director’s ability to make decisions
consistently in a fair and balanced manner.
4. Directors must be independent in thought and judgment. They must each have the ability to speak out on
difficult subjects; to ask tough questions and demand accurate, honest answers; to constructively challenge
management; and at the same time, act as an effective member of the team, engendering by his or her attitude
an atmosphere of collegiality and trust.
5. Each director must have demonstrated excellence in his or her area and must be able to deal effectively with
crises and to provide advice and counsel to the Chief Executive Officer and his or her peers.
6. Directors should have proven business acumen, serving or having served as a chief executive officer, chief
operating officer or chief financial officer of a significant, complex organization, or other senior leadership role in
a significant, complex organization; or serving or having served in a significant policy-making or leadership
position in a well respected, nationally or internationally recognized educational institution, not-for-profit
organization or governmental entity; or having achieved a widely recognized position of leadership in the
director’s field of endeavor, which adds substantial value to the oversight of material issues related to the
Company’s business.
7. Directors must be committed to understanding the Company and its industry; to regularly preparing for,
attending and actively participating in meetings of the Board and its committees; and to ensuring that existing
14
2015 PROXY STATEMENT
Item 1 Election of Directors
(continued)
and future individual commitments will not materially interfere with the director’s obligations to the Company.
The number of other board memberships, in light of the demands of a director nominee’s principal occupation,
should be considered, as well as travel demands for meeting attendance.
8. Directors must understand the legal responsibilities of board service and fiduciary obligations. All members of
the Board should be financially literate and have a sound understanding of business strategy, business
environment, corporate governance and board operations. At least one member of the Board must satisfy the
requirements of an “audit committee financial expert.”
9. Directors must be self-confident and willing and able to assume leadership and collaborative roles as needed.
They need to demonstrate maturity, valuing board and team performance over individual performance and
respect for others and their views.
10. New director nominees should be able to and committed to serve as a member of the Board for an extended
period of time.
11. While the diversity, the variety of experiences and viewpoints represented on the Board should always be
considered, a director nominee should not be chosen nor excluded solely or largely because of race, color,
gender, national origin or sexual orientation or identity. In selecting a director nominee, the committee will focus
on any special skills, expertise or background that would complement the existing Board, recognizing that the
Company’s businesses and operations are diverse and global in nature.
12. Directors should have reputations, both personal and professional, consistent with the Company’s image and
reputation.
Process of Evaluation of Director Candidates
The Governance and Nominating Committee makes a preliminary review of a prospective candidate’s background,
career experience and qualifications based on available information or information provided by an independent
search firm which identifies or provides an assessment of a candidate. If a consensus is reached by the committee
that a particular candidate would likely contribute positively to the Board’s mix of skills and experiences, and a
Board vacancy exists or is likely to occur, the candidate is contacted to confirm his or her interest and willingness to
serve. The committee conducts interviews and may invite other Board members or senior Alcoa executives to
interview the candidate to assess the candidate’s overall qualifications. The committee considers the candidate
against the criteria it has adopted in the context of the current composition and needs of the Board and its
committees.
At the conclusion of this process, the committee reaches a conclusion and reports the results of its review to the full
Board. The report includes a recommendation whether the candidate should be nominated for election to the
Board. This procedure is the same for all candidates, including director candidates identified by shareholders.
The Governance and Nominating Committee has retained the services of a search firm that specializes in identifying
and evaluating director candidates. Services provided by the search firm include identifying potential director
candidates meeting criteria established by the committee, verifying information about the prospective candidate’s
credentials, and obtaining a preliminary indication of interest and willingness to serve as a Board member.
15
2015 PROXY STATEMENT
Director Compensation
Our non-employee director compensation program is designed to attract and retain outstanding director candidates
who have the requisite experience and background as set forth in our Corporate Governance Guidelines, and to
recognize the substantial time and effort necessary to exercise oversight of a complex global organization like Alcoa
and fulfill the other responsibilities required of our directors. Mr. Kleinfeld, our sole employee director, does not
receive additional compensation for his Board service.
The Governance and Nominating Committee reviews director compensation periodically and recommends changes
to the Board when it deems appropriate. In late 2014, the committee engaged an independent compensation
consultant, Pearl Meyer & Partners, LLC, to conduct an independent review of our director compensation program.
Pearl Meyer & Partners assessed the structure of our director compensation program compared to competitive
market practices of similarly situated companies. Based on the market information and recommendations provided
to the committee by Pearl Meyer & Partners, and taking into account various factors, including the responsibilities of
the directors generally, the responsibilities of the Lead Director and committee chairs, and Company performance,
the committee recommended to the Board, and the full Board approved, a new compensation program for nonemployee directors, effective January 1, 2015.
Information regarding the retention of Pearl Meyer & Partners can be found under “Corporate Governance—
Compensation Consultants” beginning on page 28.
Director Fees
The table below describes the components of compensation for non-employee directors in effect during 2014 and
the new compensation program effective January 1, 2015:
Annual Compensation Element
Retainer for Non-Employee Directors
2014 Compensation Program
2015 Compensation Program
$230,000 comprising 50% in cash
and 50% to be deferred into Alcoa
share units or invested in Alcoa
stock until a director meets the
stock ownership requirement of
$400,000
$240,000 comprising 50% in cash
(“Cash Component”) and 50% to
be invested in Alcoa deferred share
units or in Alcoa stock until a
director meets the stock ownership
requirement of $750,000
(equivalent to 6.25x the Cash
Component)
Lead Director Fee
$ 11,000
$ 25,000
Audit Committee Chair Fee (includes Audit
Committee Member Fee)
$ 27,500
$ 27,500
Audit Committee Member Fee
$ 11,000
$ 11,000
Compensation and Benefits Committee
Chair Fee
$ 20,000
$ 20,000
Governance and Nominating Committee
Chair Fee
$ 16,500
$ 16,500
Public Issues Committee Chair Fee
$ 16,500
$ 16,500
None
None
$400,000
$750,000
Meeting Fees
Stock Ownership Requirement
16
2015 PROXY STATEMENT
Director Compensation
(continued)
Directors’ Alignment with Shareholders
Stock Ownership Guideline for Directors
In order to further align the interests of directors with the long-term interests of our shareholders, non-employee
directors are required to own, until retirement from the Board, at least $750,000 (this amount was increased from
$400,000 effective January 1, 2015) in Alcoa common stock. Compliance with the ownership value requirement is
measured annually and if the stock price declines in value, directors must continue to invest in Alcoa stock until the
stock ownership guideline is reached. To satisfy this requirement, directors must either invest in Alcoa deferred
share units under the Company’s 2005 Deferred Fee Plan for Directors or purchase shares in the open market.
Deferred share units issued to directors provide directors with the same economic interest as if they own Alcoa
common stock. Specifically, the deferred share units track the performance of our common stock and accrue
dividend equivalents that are equal in value to dividends paid on our common stock. Upon a director’s retirement
from the Board, the deferred share units are settled at a value equivalent to the then-prevailing market value of our
common stock. Accordingly, whether a director holds shares of Alcoa common stock or deferred share units,
directors have the same economic interest in the performance of the Company, which further aligns directors’
interests with those of our shareholders.
The following table shows the value of each non-employee director’s holdings in Alcoa common stock or deferred
share units as of March 2, 2015, based on the closing price of our common stock on the New York Stock Exchange
on that date.
Director
Since
Value of Alcoa Stock
or Deferred Share
Units
Arthur D. Collins, Jr.
2010
$1,504,940
Kathryn S. Fuller
2002
$ 667,441
Judith M. Gueron
1988
$ 855,240
Michael G. Morris
2008
$1,408,243
E. Stanley O’Neal
2008
$ 839,270
James W. Owens
2005
$ 964,431
L. Rafael Reif
2015
**
Carol L. Roberts
2014
$ 121,821
Patricia F. Russo
2008
$ 824,332
Martin S. Sorrell
2012
$ 324,550
Ratan N. Tata
2007
$ 713,554
Ernesto Zedillo
2002
$1,155,241
Non-Employee Directors
**Mr. Reif was appointed to the Board of Directors effective March 2, 2015.
Prohibitions against Short Sales, Hedging, Margin Accounts and Pledging
Company policy prohibits members of the Board of Directors from pledging, holding in margin accounts, or
engaging in short sales or hedging transactions with respect to any of their Company stock. The policy continues to
align the interest of our directors with those of our shareholders.
17
2015 PROXY STATEMENT
Director Compensation
(continued)
2014 Director Compensation
The following table sets forth the total compensation of the Company’s non-employee directors for the year ended
December 31, 2014.
Name1
(a)
Fees Earned or
Paid in Cash
($)
(b)
Change in Pension Value
and Nonqualified Deferred
Compensation
Earnings
($)
(f)
All Other
Compensation
($)
(g)
Total
($)
(h)
Arthur D. Collins, Jr.
$241,000
Kathryn S. Fuller
$230,000
$241,000
Judith M. Gueron
$257,500
Michael G. Morris
$241,000
E. Stanley O’Neal
$241,000
James W. Owens
$257,500
Carol L. Roberts
$241,000
$241,000
Patricia F. Russo
$250,000
$250,000
Martin S. Sorrell
$230,000
$230,000
Ratan N. Tata
$230,000
Ernesto Zedillo
$257,500
$ 4,391
$121,394
$234,391
$378,894
$241,000
$241,000
$14,643
$272,143
$230,000
$ 3,316
$260,816
1 Klaus Kleinfeld is a Company employee and receives no compensation for services as a director; his compensation is reflected in the
“2014 Summary Compensation Table” on page 61. L. Rafael Reif joined the Board effective March 2, 2015 and is not included in the
above table.
Explanation of information in the columns of the table:
Fees Earned or Paid in Cash (Column (b))
This column reflects the cash fees earned by directors for Board and committee service in 2014, whether or
not such fees were deferred.
Stock Awards, Option Awards, and Non-Equity Incentive Plan Compensation (Columns (c), (d) and (e))
In 2014, we did not issue any stock or option awards to directors, and we do not have a non-equity incentive
plan for directors. Accordingly, no such compensation is reported in the table, and we have omitted columns
(c), (d) and (e) from the table.
Change in Pension Value and Nonqualified Deferred Compensation Earnings (Column (f))
This column reflects the change in pension value for a legacy plan described below under “Fee Continuation
Plan for Non-Employee Directors.” The Company does not pay above-market or preferential earnings on fees
that are deferred. The 2005 Deferred Fee Plan for Directors and a predecessor plan have the same investment
options as the Company’s 401(k) tax-qualified savings plan for salaried employees. We therefore do not report
earnings on deferred fees in column (f).
All Other Compensation (Column (g))
The amounts shown in this column for Ms. Fuller and Messrs. Owens and Zedillo represent imputed income
related to a 2014 trip to Alcoa facilities by directors to review the Company’s operations. Spouses were invited
to attend this trip and imputed income was charged to those directors whose spouses attended. This imputed
income was primarily for air travel to and from New York and meals. Directors do not receive tax gross-ups for
imputed income.
Fee Continuation Plan for Non-Employee Directors
The Company does not provide retirement benefits to non-employee directors under any current program.
Ms. Gueron is the only current director entitled to receive retirement benefits under a legacy plan. She will receive
annual payments in cash for life upon retirement from the Board under the terms of the Fee Continuation Plan for
18
2015 PROXY STATEMENT
Director Compensation
(continued)
Non-Employee Directors, which was frozen in 1995. The plan was amended in 2006 to provide that all payments
would be made in cash rather than stock and cash, at the equivalent value of the payments plan participants would
have received in stock and cash. The amounts reflected in column (f) of the 2014 Director Compensation table
assume retirement with a present value of the accumulated stock-based portion of the award based on the 2014
year-end closing price of $15.79 per share as compared with a 2013 year-end closing price of $10.63 per share,
and with the present value of annual stock grant payments assuming an annual stock increase of 4.00% per year
consistent with Financial Accounting Standards Board’s Accounting Standards Codification Topic 715,
Compensation—Retirement Benefits accounting valuation assumptions.
19
2015 PROXY STATEMENT
Corporate Governance
Alcoa is a values-based company. Our values guide our behavior at every level and apply across the Company on a
global basis. The Board has adopted a number of policies to support our values and good corporate governance,
which we believe are important to the success of our business and in advancing shareholder interests.
Our values have been recognized by numerous awards:
Corporate Reputation and Leadership
• Most Admired Metals Company
Corporate Social Responsibility and Sustainability
• 100 Best Corporate Citizens for 2014
FORTUNE Magazine, 2015
•
Corporate Responsibility Magazine, 2014
CEO of the Year
•
Platts Global Metals Awards, 2014
•
Business Council for International
Understanding
Aluminum Industry Leader on Dow Jones
World Index
Dow Jones Sustainability Indexes, 2014
Dwight D. Eisenhower Global Award, 2014
Diversity
• Human Rights Campaign
Science and Technology
• Top Technology Innovations
Corporate Equality Award, 2015
R&D Magazine, 2014
In addition to the other policies and procedures described in this section, we highlight below certain of our corporate
governance practices:
Board Membership and Participation
• Directors who serve on our audit committee may serve on only two other public companies’ audit committees.
• Directors who serve as chief executive officers of public companies should not serve on more than two outside
public company boards in addition to Alcoa’s Board.
• Other directors should not serve on more than four outside public company boards in addition to Alcoa’s Board.
• Directors’ attendance at annual meetings is expected.
Prohibition against Short Sales, Hedging, Margin Accounts and Pledging
Our Insider Trading Policy contains restrictions that, among other things:
• prohibit short sales of Alcoa securities and derivative or speculative transactions in Alcoa securities;
• prohibit the use of financial instruments (including prepaid variable forward contracts, equity swaps, collars and
exchange funds) that are designed to hedge or offset any decrease in the market value of Alcoa securities; and
• prohibit directors and executive officers from holding Alcoa securities in margin accounts or pledging Alcoa
securities as collateral.
Shareholder Right to Call Special Meetings
Shareholders are permitted to call special meetings in accordance with the Company’s Articles of Incorporation and
By-Laws.
Shareholder Action by Written Consent
Shareholders may act by written consent in accordance with the Company’s Articles of Incorporation and By-Laws.
Board Oversight of Political Activities
The Public Issues Committee oversees the Company’s policies and practices relating to the Company’s political
activities. Additional information is available on our website at http://www.alcoa.com.
Commitment toward Sustainability
The Company is committed to operating sustainably in the communities in which we do business.
20
2015 PROXY STATEMENT
Corporate Governance
(continued)
The Structure and Role of the Board of Directors
Board Leadership Structure
The Company’s current Board leadership structure comprises a combined Chairman of the Board and Chief
Executive Officer, an independent director serving as the Lead Director and strong, active independent directors.
Alcoa has had a strong, independent Lead Director for a number of years. The Board believes this structure
provides a very well-functioning and effective balance between strong Company leadership and appropriate
safeguards and oversight by independent directors. A combined role of Chairman and Chief Executive Officer
confers advantages, including those listed below:
• By serving in both positions, the Chairman and Chief Executive Officer is able to draw on his detailed knowledge
of the Company to provide the Board, in coordination with the Lead Director, leadership in focusing its
discussions and review of the Company’s strategy.
• A combined role ensures that the Company presents its message and strategy to stakeholders with a unified
voice.
• The structure allows for efficient decision making and focused accountability.
The Board believes that it is in the best interest of the Company and its shareholders for Mr. Kleinfeld to serve as
Chairman and Chief Executive Officer, considering the strong role of our independent Lead Director and other
corporate governance practices providing independent oversight of management as set forth below.
Our
independent
Lead Director
has substantial
responsibilities.
Our Lead Director:
• Presides at all meetings of the Board at which the Chairman is not present, including
executive sessions of the independent directors;
• Responds directly to shareholder and other stakeholder questions and comments that
are directed to the Lead Director or to the independent directors as a group, with such
consultation with the Chairman or other directors as the Lead Director may deem
appropriate;
• Reviews and/or approves meeting agendas and schedules for the Board;
• Ensures personal availability for consultation and communication with independent
directors and with the Chairman, as appropriate;
• Calls executive sessions of the Board;
• Calls special meetings of the independent directors, as the Lead Directors may deem
to be appropriate; and
• In her capacity as Chair of the Governance and Nominating Committee, oversees the
Board’s self-evaluation process.
Judith M. Gueron is our current Lead Director. Ms. Gueron, whose term as a director expires at the annual
shareholders meeting on May 1, 2015, will not be standing for re-election. In accordance with the directors’
retirement policy in the Company’s Corporate Governance Guidelines, Ms. Gueron has announced her intention to
retire from the Board effective May 1, 2015 as she would reach age 75 during a new three-year term.
To ensure a smooth transition of the Lead Director role, the Board deliberated on a candidate to succeed
Ms. Gueron. Subject to her election by shareholders as a director for a new three-year term expiring in 2018,
Patricia F. Russo was elected by the Board to succeed Ms. Gueron as Lead Director. In making its decision, the
Board took into account factors such as Ms. Russo’s depth of experience in Board matters ranging from her service
on the Company’s Compensation and Benefits Committee (as Chair), Governance and Nominating Committee and
Executive Committee to her memberships on other company boards, Ms. Russo’s tireless and dedicated service as
a member of the Board and her demonstrated leadership abilities.
21
2015 PROXY STATEMENT
Corporate Governance
The Company’s
corporate
governance
practices and
policies are
designed to
protect
shareholders’
long-term
interests.
(continued)
Shareholders’ interests are protected by substantial effective and independent
oversight of management:
• 12 out of our 13 directors are independent as defined by the listing standards of the
New York Stock Exchange (“NYSE”) and the Company’s Director Independence
Standards.
• The Board’s key standing committees are composed solely of independent directors.
The Audit Committee, the Compensation and Benefits Committee, the Governance
and Nominating Committee and the Public Issues Committee are each composed
solely of independent directors. All members of the International Committee and the
Executive Committee are independent directors other than Mr. Kleinfeld.
• Our independent directors meet at every regular meeting in executive session
without management or the Chairman and Chief Executive Officer present. These
meetings are led by the Lead Director.
The Board’s Role in Risk Oversight
The Board of Directors is actively engaged in overseeing and reviewing the Company’s strategic direction and
objectives, taking into account (among other considerations) the Company’s risk profile and exposures. It is
management’s responsibility to manage risk and bring to the Board of Directors’ attention the most material risks to
the Company. The Board of Directors has oversight responsibility of the processes established to report and monitor
systems for material risks applicable to the Company. The Board annually reviews the Company’s enterprise risk
management and receives regular updates on risk exposures.
BOARD OF DIRECTORS
CEO Succession
Competitive Landscape
Strategy
AUDIT COMMITTEE
Commodities Risk
Management
Treasury
Financial/Accounting
Legal and
Compliance
Business Conditions
Capital Requirements
COMPENSATION &
BENEFITS
COMMITTEE
GOVERNANCE &
NOMINATING
COMMITTEE
INTERNATIONAL
COMMITTEE
PUBLIC ISSUES
COMMITTEE
Talent
Corporate Governance
Global Developments
Environmental and
Sustainability
Compensation Programs
Director Succession
Planning
Tax
Incentive Arrangements
Reputation
Environmental
Remediation
Cyber Security
Internal Controls
Health and Safety
Board Committee
Assignment
Investment
Management
Community/
Government Relations
The Board as a whole has responsibility for risk oversight, including succession planning relating to the Chief
Executive Officer (“CEO”) and risks relating to the competitive landscape, strategy, business conditions and capital
requirements. The committees of the Board also oversee the Company’s risk profile and exposures relating to
matters within the scope of their authority. The Board regularly receives detailed reports from the committees
regarding risk oversight in their areas of responsibility.
The Audit Committee regularly reviews treasury risks (including those relating to cash generation, liquidity,
insurance, credit, debt, interest rates and foreign currency exchange rates), financial and accounting risks, legal
and compliance risks, and risks relating to cyber security, tax matters, environmental remediation, and internal
controls. The Audit Committee also regularly reviews commodities risk management, which includes hedging
22
2015 PROXY STATEMENT
Corporate Governance
(continued)
policies and practices and the relationship between the commodity pricing of aluminum on the London Metal
Exchange and major cost inputs, including energy.
The Compensation and Benefits Committee considers risks related to the attraction and retention of talent, the
design of compensation programs and incentive arrangements, and the investment management of the Company’s
principal retirement and savings plans. The Company has determined that it is not reasonably likely that risks arising
from compensation and benefit plans would have a material adverse effect on the Company. See “Executive
Compensation—Compensation Discussion and Analysis—Other Compensation Policies and Practices—What We
Do—We Have a Conservative Compensation Risk Profile” on page 59.
The Governance and Nominating Committee considers risks related to corporate governance, and oversees
succession planning for the Board of Directors and the appropriate assignment of directors to the Board committees
for risk oversight and other areas of responsibilities.
The International Committee considers risks posed by global developments.
The Public Issues Committee considers risks related to the Company’s reputation, and risks relating to
environmental and sustainability matters, health and safety issues, and community/government relations.
The Company believes that the Board leadership structure supports its role in risk oversight. There is open
communication between management and directors, and all directors are actively involved in the risk oversight
function.
Director Qualifications, Board Diversity and Board Tenure
Our directors have a broad range of experience that spans different industries, encompassing the business,
philanthropic, academic and governmental sectors. Directors bring to our Board a variety of skills, qualifications and
viewpoints that strengthen their ability to carry out their oversight role on behalf of our shareholders. As described in
the director biographies in “Item 1 Election of Directors,” directors bring to our Board attributes and skills that
include those listed below:
Director Attributes and Skills
•
•
•
•
•
•
Leadership Experience
Global/International Experience
Finance Experience
Economics Expertise
Investment Banking Experience
Academia
• Risk Management Expertise
• Manufacturing/Industrial
Experience
• Energy Industry Experience
• Government Relations Experience
• Environmental and Sustainability
Experience
23
•
•
•
•
•
Engineering Experience
Technology/Innovation Expertise
Marketing and Branding Expertise
Corporate Governance Expertise
Human Resources Experience
2015 PROXY STATEMENT
Corporate Governance
(continued)
Our policy on Board diversity relates to the selection of
nominees for the Board. Our policy provides that while
diversity and variety of experiences and viewpoints
represented on the Board should always be considered,
a director nominee should not be chosen nor excluded
solely or largely because of race, color, gender, national
origin or sexual orientation or identity. In selecting a
director nominee, the Governance and Nominating
Committee focuses on skills, expertise and background
that would complement the existing Board, recognizing
that the Company’s businesses and operations are
diverse and global in nature. Reflecting the global nature
of our business, our directors are citizens of the United
States, Germany, India, Mexico and the United
Kingdom. We have four women directors as of the date
of this proxy statement.
The following chart shows the tenure of the directors on
our Board following the 2015 Annual Meeting of
Shareholders, assuming that all director nominees are
elected to new terms. The directors’ tenure is well
distributed to create a balanced Board, which contributes
to a rich dialogue representing a range of perspectives.
Number of Directors
4
Average
7.2 years
3
2
1
0
0-3
4-6
7-10
11-14
Years as Director
Board Meetings and Attendance
The Board met eight times in 2014. Attendance by directors at Board and committee meetings averaged 94%. Each
director attended 75% or more of the aggregate of all meetings of the Board and the committees on which he or she
served during 2014.
Under Alcoa’s Corporate Governance Guidelines, all directors are expected to attend the annual meeting of
shareholders. All members of the Board attended the Company’s 2014 annual meeting other than Mr. Tata. In
addition to Board meetings, directors annually visit Alcoa business operations to deepen their understanding of the
Company and interact with on-site employees. In 2014, the Board visited the business units of Alcoa’s Engineered
Products and Solutions group in the United Kingdom and France. In addition, new directors receive an orientation
that includes meetings with key management and visits to Company facilities.
Board, Committee and Director Evaluations
The Board of Directors annually assesses the effectiveness of the full Board, the operations of its committees and
the contributions of director nominees. The Governance and Nominating Committee oversees the evaluation of the
Board as a whole and its committees, as well as individual evaluations of those directors who are being considered
for possible re-nomination to the Board.
Committees of the Board
There are six standing committees of the Board. The Board has adopted written charters for each committee, which
are available on our website at http://www.alcoa.com under “About—Corporate Governance—Committees.”
Each of the Audit, Compensation and Benefits, Governance and Nominating and Public Issues Committees consists solely of
directors who have been determined by the Board of Directors to be independent in accordance with Securities and
Exchange Commission (“SEC”) regulations, NYSE listing standards and the Company’s Director Independence Standards
(including the heightened independence standards for members of the Audit and Compensation and Benefits Committees).
24
2015 PROXY STATEMENT
Corporate Governance
(continued)
The following table sets forth the Board committees and the current members of each of the committees:
Arthur D. Collins, Jr.*
Kathryn S. Fuller*
Judith M. Gueron*
Klaus Kleinfeld
Michael G. Morris*
E. Stanley O’Neal*
James W. Owens*
L. Rafael Reif*1
Carol L. Roberts*
Patricia F. Russo*
Martin S. Sorrell*
Ratan N. Tata*
Ernesto Zedillo*
2014 Meetings
Audit
X
X
X
Chair
Compensation
and Benefits
X
X
Governance and
Nominating
Public Issues
Chair
X
X
Executive
X
X
X
X
Chair
X
X
Chair
X
X
International
Chair
X
X
8
6
62
X
X
Chair
5
X
X
33
4
* Independent Director
1 Mr. Reif was appointed to the Board of Directors effective March 2, 2015, and will be appointed to serve on a Board committee at a
later date.
2 Compensation and Benefits Committee took action by unanimous written consent once.
3 Executive Committee took action by unanimous written consent twice.
COMMITTEE
Audit Committee
RESPONSIBILITIES
• Oversees the integrity of the financial statements and internal controls, including review of the scope
and the results of the audits of the internal and independent auditors
• Appoints the independent auditors and evaluates their independence and performance
• Reviews the organization, performance and adequacy of the internal audit function
• Pre-approves all audit, audit-related, tax and other services to be provided by the independent auditors
• Oversees the Company’s compliance with legal, ethical and regulatory requirements
• Discusses with management and the auditors the policies with respect to risk assessment and risk
management, including major financial risk exposures
Each member of the Audit Committee is financially literate, and the Board of Directors has determined that each member
qualifies as an “audit committee financial expert” under applicable SEC rules. No committee member currently sits on more
than one other public company’s audit committee.
Compensation and • Establishes the Chief Executive Officer’s compensation based upon an evaluation of performance in
Benefits Committee
light of approved goals and objectives
• Reviews and approves the compensation of the Company’s officers
• Oversees the implementation and administration of the Company’s compensation and benefits plans,
including pension, savings, incentive compensation and equity-based plans
• Reviews and approves general compensation and benefit policies
• Approves the Compensation Discussion and Analysis for inclusion in the proxy statement
• Has the sole authority to retain and terminate a compensation consultant, as well as to approve the
consultant’s fees and other terms of engagement (see “Compensation Consultants” beginning on
page 28 regarding the committee’s engagement of a compensation consultant)
The Compensation and Benefits Committee may form and delegate its authority to subcommittees when appropriate (including
subcommittees of management). Executive officers do not determine the amount or form of executive or director compensation
although the Chief Executive Officer provides recommendations to the Compensation and Benefits Committee regarding
compensation changes and incentive compensation for executive officers other than himself. For more information on the
responsibilities and activities of the committee, including its processes for determining executive compensation, see the
“Compensation Discussion and Analysis” section.
25
2015 PROXY STATEMENT
Corporate Governance
(continued)
COMMITTEE
RESPONSIBILITIES
Executive
Committee
• Has the authority to act on behalf of the Board
Governance and
Nominating
Committee
• Identifies individuals qualified to become Board members and recommends them to the full Board for
consideration, including evaluating all potential candidates, whether initially recommended by
management, other Board members or shareholders
• Makes recommendations to the Board regarding Board committee assignments
• Develops and annually reviews corporate governance guidelines for the Company, and oversees other
corporate governance matters
• Reviews related person transactions
• Coordinates an annual performance review of the Board, Board committees and individual director
nominees
• Periodically reviews and makes recommendations to the Board regarding director compensation
International
Committee
• Provides a forum for additional discussion and input on international markets, business conditions and
political developments
Public Issues
Committee
• Provides guidance on matters relating to the Company’s corporate social responsibility, including good
corporate citizenship, environmental sustainability, health and safety and social issues
• Oversees and monitors the Company’s policies and practices to ensure alignment with the Company’s
vision and values
• Advises on significant public issues that are pertinent to the Company and its stakeholders
• Considers, and brings to the attention of the Board as appropriate, political, social and environmental
trends and major global legislative and regulatory developments or other public policy issues
• Oversees the Company’s policies and practices relating to the Company’s political activities, diversity
and charitable contributions
• Monitors the Company’s reputation and environmental sustainability progress
All Board members are invited to the meetings of the Public Issues Committee, and most directors typically attend.
Majority Voting for Directors
Alcoa’s Articles of Incorporation and By-Laws provide a majority voting standard for election of directors in uncontested
elections. If an incumbent director nominee receives a greater number of votes cast against his or her election than in
favor of his or her election (excluding abstentions) in an uncontested election, the nominee must immediately tender
his or her resignation, and the Board will decide, through a process managed by the Governance and Nominating
Committee and excluding the nominee, whether to accept the resignation at its next regularly scheduled Board
meeting. The Board’s explanation of its decision will be promptly disclosed in accordance with SEC rules and
regulations. An election of directors is considered to be contested if there are more nominees for election than positions
on the Board to be filled by election at the meeting of shareholders. Any director nominee not already serving on the
Board who fails to receive a majority of votes cast in an uncontested election will not be elected to the Board.
Communications with Directors
The Board of Directors welcomes input and suggestions. Shareholders and other interested parties wishing to
contact the Lead Director or the non-management directors as a group may do so by sending a written
communication to the attention of the Lead Director c/o Alcoa Inc., Corporate Secretary’s Office, 390 Park Avenue,
New York, NY 10022-4608. To communicate issues or complaints regarding questionable accounting, internal
accounting controls or auditing matters, send a written communication to the Audit Committee c/o Alcoa Inc.,
Corporate Secretary’s Office, 390 Park Avenue, New York, NY 10022-4608. Alternatively, you may place an
anonymous, confidential, toll free call in the United States to Alcoa’s Integrity Line at 1 800 346-7319. For a listing
of Integrity Line telephone numbers outside the United States, go to http://www.alcoa.com “About Alcoa—Corporate
Governance—Ethics and Compliance.”
Communications addressed to the Board or to a Board member are distributed to the Board or to any individual
director or directors as appropriate, depending upon the facts and circumstances outlined in the communication.
26
2015 PROXY STATEMENT
Corporate Governance
(continued)
The Board of Directors has asked the Corporate Secretary’s Office to submit to the Board all communications
received, excluding only those items that are not related to Board duties and responsibilities, such as junk mail and
mass mailings; product complaints and product inquiries; new product or technology suggestions; job inquiries and
resumes; advertisements or solicitations; and surveys.
Director Independence
In its Corporate Governance Guidelines, the Board recognizes that independence depends not only on directors’
individual relationships, but also on the directors’ overall attitude. Providing objective, independent judgment is at
the core of the Board’s oversight function. Under the Company’s Director Independence Standards, which conform
to the corporate governance listing standards of the New York Stock Exchange, a director is not considered
“independent” unless the Board affirmatively determines that the director has no material relationship with the
Company or any subsidiary in the consolidated group. The Director Independence Standards comprise a list of all
categories of material relationships affecting the determination of a director’s independence. Any relationship that
falls below a threshold set forth in the Director Independence Standards, or is not otherwise listed in the Director
Independence Standards, and is not required to be disclosed under Item 404(a) of SEC Regulation S-K, is deemed
to be an immaterial relationship.
The Board has affirmatively determined that all the directors are independent except Mr. Kleinfeld, who is employed
by the Company (and therefore does not meet the independence standards set forth in the Director Independence
Standards). In the course of its determination regarding independence, the Board did not find any material
relationships between the Company and any of the directors, other than Mr. Kleinfeld’s employment.
Related Person Transactions
Review, Approval and Ratification of Transactions with Related Persons
The Company has a written Related Person Transaction Approval Policy regarding the review, approval and
ratification of transactions between the Company and related persons. The policy applies to any transaction in which
the Company or a Company subsidiary is a participant, the amount involved exceeds $120,000 and a related person
has a direct or indirect material interest. A related person means any director or executive officer of the Company,
any nominee for director, any shareholder known to the Company to be the beneficial owner of more than 5% of any
class of the Company’s voting securities, and any immediate family member of any such person.
Under this policy, reviews are conducted by management to determine which transactions or relationships should
be referred to the Governance and Nominating Committee for consideration. The Governance and Nominating
Committee then reviews the material facts and circumstances regarding a transaction and determines whether to
approve, ratify, revise or reject a related person transaction, or to refer it to the full Board or another committee of
the Board for consideration. The Company’s Related Person Transaction Approval Policy operates in conjunction
with other aspects of the Company’s compliance program, including its Business Conduct Policies which require
that all directors, officers and employees have a duty to be free from the influence of any conflict of interest when
they represent the Company in negotiations or make recommendations with respect to dealings with third parties, or
otherwise carry out their duties with respect to the Company.
The Board has considered the following types of potential related person transactions and pre-approved them under
the Company’s Related Person Transaction Approval Policy as not presenting material conflicts of interest:
(i)
employment of executive officers (except employment of an executive officer that is an immediate family
member of another executive officer, director, or nominee for director) as long as the Compensation and
Benefits Committee has approved the executive officers’ compensation;
(ii) director compensation that the Board has approved;
27
2015 PROXY STATEMENT
Corporate Governance
(continued)
(iii)
any transaction with another entity in which the aggregate amount involved does not exceed the greater of
$1,000,000 or 2% of the other entity’s total annual revenues, if a related person’s interest arises only from:
(a) such person’s position as an employee or executive officer of the other entity; or
(b) such person’s position as a director of the other entity; or
(c) the ownership by such person, together with his or her immediate family members, of less than a 10%
equity interest in the aggregate in the other entity (other than a partnership); or
(d) both such position as a director and ownership as described in (b) and (c) above; or
(e) such person’s position as a limited partner in a partnership in which the person, together with his or her
immediate family members, have an interest of less than 10%;
(iv) charitable contributions in which a related person’s only relationship is as an employee (other than an
executive officer), or a director or trustee, if the aggregate amount involved does not exceed the greater of
$250,000 or 2% of the charitable organization’s total annual receipts;
(v) transactions, such as the receipt of dividends, in which all shareholders receive proportional benefits;
(vi) transactions involving competitive bids;
(vii) transactions involving the rendering of services as a common or contract carrier, or public utility, at rates or
charges fixed in conformity with law or governmental authority; and
(viii) transactions with a related person involving services as a bank depositary of funds, transfer agent, registrar,
trustee under a trust indenture, or similar services.
Transactions with Related Persons in 2014
Based on information provided by the directors, the executive officers, and the legal department, the Governance
and Nominating Committee determined that there are no material related person transactions to be reported in this
proxy statement. We indemnify our directors and officers to the fullest extent permitted by law against personal
liability in connection with their service to the Company. This indemnity is required under the Company’s Articles of
Incorporation and the By-Laws, and we have entered into agreements with these individuals contractually obligating
us to provide this indemnification to them.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation and Benefits Committee has served as one of our officers or employees at any
time. None of our executive officers serves as a member of the compensation committee of any other company that
has an executive officer serving as a member of our Board. None of our executive officers serves as a member of
the board of directors of any other company that has an executive officer serving as a member of our Compensation
and Benefits Committee.
Compensation Consultants
During 2014, the Compensation and Benefits Committee continued its retention of Pay Governance LLC as its
independent compensation consultant. See “Compensation Discussion and Analysis—Other Compensation Policies
and Practices—What We Do—The Compensation Committee Retains an Independent Compensation Consultant” on
page 59. The committee assessed Pay Governance’s independence and found no conflict of interest. In its
assessment, the committee took into account the following factors:
• Pay Governance provides no other services to the Company;
• the amount of fees received from the Company by Pay Governance as a percentage of Pay Governance’s total
revenue;
• the policies and procedures that Pay Governance has in place to prevent conflicts of interest;
• any business or personal relationships between the consultant(s) at Pay Governance performing consulting
services and any Compensation and Benefits Committee members or any executive officer; and
• any ownership of Company stock by the consultant(s).
28
2015 PROXY STATEMENT
Corporate Governance
(continued)
During 2014, the Governance and Nominating Committee continued to retain Pearl Meyer & Partners to provide
consultation services regarding non-employee director compensation. The committee did not find any conflict of
interest with Pearl Meyer and considered the following factors in its determination:
• Pearl Meyer provides no other services to the Company;
• the amount of fees received from the Company by Pearl Meyer as a percentage of Pearl Meyer’s total revenue;
• the policies and procedures that Pearl Meyer has in place to prevent conflicts of interest;
• any business or personal relationships between the consultant(s) at Pearl Meyer performing consulting services
and any Board members or any executive officer; and
• any ownership of Company stock by the consultant(s).
Business Conduct Policies and Code of Ethics
The Company’s Business Conduct Policies, which have been in place for many years, apply equally to the directors
and to all officers and employees of the Company, as well as those of our controlled subsidiaries, affiliates and joint
ventures. The directors and employees in positions to make discretionary decisions are surveyed annually regarding
their compliance with the policies.
The Company also has a Code of Ethics applicable to the CEO, CFO and other financial professionals, including the
principal accounting officer, and those subject to it are surveyed annually for compliance with it. Only the Audit
Committee can amend or grant waivers from the provisions of the Company’s Code of Ethics, and any such
amendments or waivers will be posted promptly at http://www.alcoa.com . To date, no such amendments have been
made or waivers granted.
Corporate Governance Materials Available on Alcoa’s Website
The following documents, as well as additional corporate governance information and materials, are available on our
website at http://www.alcoa.com under “About—Corporate Governance”:
• Articles of Incorporation
• By-Laws
• Corporate Governance Guidelines
• Business Conduct Policies
• Code of Ethics for the CEO, CFO and Other Financial Professionals
• Director Independence Standards
• Related Person Transaction Approval Policy
• Charters of each of our Board committees
• Insider Trading Policy
Copies of these documents are also available in print form at no charge by sending a request to Alcoa Inc.,
Corporate Communications, 201 Isabella Street, Pittsburgh, PA 15212-5858.
Information on our website is not, and will not be deemed to be, a part of this proxy statement or incorporated into
any of our other filings with the SEC.
Recovery of Incentive Compensation
The Board of Directors adopted the following policy in 2006:
If the Board learns of any misconduct by an executive officer that contributed to the Company having to restate all or
a portion of its financial statements, it shall take such action as it deems necessary to remedy the misconduct,
prevent its recurrence and, if appropriate, based on all relevant facts and circumstances, take remedial action
against the wrongdoer in a manner it deems appropriate. In determining what remedies to pursue, the Board shall
take into account all relevant factors, including whether the restatement was the result of negligent, intentional or
gross misconduct. The Board will, to the full extent permitted by governing law, in all appropriate cases, require
reimbursement of any bonus or incentive compensation awarded to an executive officer or effect the cancellation of
29
2015 PROXY STATEMENT
Corporate Governance
(continued)
unvested restricted or deferred stock awards previously granted to the executive officer if: a) the amount of the
bonus or incentive compensation was calculated based upon the achievement of certain financial results that were
subsequently the subject of a restatement, b) the executive engaged in intentional misconduct that caused or
partially caused the need for the restatement, and c) the amount of the bonus or incentive compensation that would
have been awarded to the executive had the financial results been properly reported would have been lower than
the amount actually awarded. In addition, the Board may dismiss the executive officer, authorize legal action for
breach of fiduciary duty or take such other action to enforce the executive’s obligations to Alcoa Inc. as the Board
determines fit the facts surrounding the particular case. The Board may, in determining appropriate remedial action,
take into account penalties or punishments imposed by third parties, such as law enforcement agencies, regulators
or other authorities. The Board’s power to determine the appropriate punishment for the wrongdoer is in addition to,
and not in replacement of, remedies imposed by such entities.
The Incentive Compensation Plan was amended in 2006 to incorporate this policy. This plan governs annual
incentive compensation awards to a large number of executives and managers. The 2009 Alcoa Stock Incentive
Plan, Alcoa’s Section 162(m) Compliant Annual Cash Incentive Compensation Plan and the 2013 Alcoa Stock
Incentive Plan, which were approved by shareholders in 2009, 2011 and 2013, respectively, also incorporate this
policy.
Other Matters
Litigation Proceedings Involving Directors or Officers
As previously reported in the Company’s other SEC filings, three shareholder derivative actions were brought against
certain officers or employees and directors of Alcoa claiming breach of fiduciary duty and other violations and were
based on the allegations made in the previously disclosed civil litigation brought by Aluminium Bahrain B.S.C
(“Alba”) against Alcoa, Alcoa World Alumina LLC, Victor Dahdaleh, and others, and the subsequent investigations of
Alcoa by the United States Department of Justice and the SEC with respect to Alba’s claims.
On July 21, 2008, the Teamsters Local #500 Severance Fund and the Southeastern Pennsylvania Transportation
Authority (collectively, “Teamsters”) filed a shareholder derivative suit in the civil division of the Court of Common
Pleas of Allegheny County, Pennsylvania (the “Court”). On October 12, 2009, the Court stayed this action until
further order of the Court.
On March 6, 2009, the Philadelphia Gas Works Retirement Fund (“Philadelphia Gas”) filed a separate shareholder
derivative suit in the civil division of the Court of Common Pleas of Philadelphia County, Pennsylvania. On
September 18, 2009, pursuant to an unopposed motion of certain defendants to coordinate the case with the
Teamsters suit described above, the Court transferred the Philadelphia Gas case to Allegheny County from
Philadelphia County. The Teamsters and Philadelphia Gas derivative actions claimed that the defendants caused or
failed to prevent the matters alleged in the Alba lawsuit.
On June 19, 2012, Catherine Rubery (“Rubery”) filed a separate shareholder derivative suit in the United States
District Court for the Western District of Pennsylvania. The Rubery derivative action claimed that the defendants
caused or failed to prevent illegal bribes of foreign officials, failed to implement an internal controls system to
prevent bribes from occurring and wasted corporate assets by paying improper bribes and incurring substantial
legal liability. Furthermore, the plaintiff sought an order of contribution and indemnification from defendants.
On October 1, 2014, the Board of Directors approved a settlement-in-principle of the three pending derivative
actions described above. The settlement of the derivative actions was preliminarily approved by the Court on
October 22, 2014. On January 20, 2015, following a hearing, the Court formally approved the settlement, entering
its order of judgment approving the resolution and noting its findings in its conference notes. This settlement, which
provided for compliance program improvements and plaintiffs’ legal fees in an immaterial amount, resolves all
derivative claims against the current and former officers and members of the Alcoa Board of Directors named as
defendants, as well as William Rice, stemming from the Alba allegations.
30
2015 PROXY STATEMENT
Corporate Governance
(continued)
The three derivative suits are more fully described in Alcoa’s Annual Report on Form 10-K for the year ended
December 31, 2014 in Part 1, Item 3 “Legal Proceedings.”
Pursuant to the indemnification described under “Director Independence and Related Person Transactions” above,
the Company paid the expenses, including attorneys’ fees, incurred by certain officers and directors of Alcoa in
defending these actions. Each of these individuals provided an undertaking to repay all amounts advanced if it was
ultimately determined that he or she was not entitled to be indemnified.
31
2015 PROXY STATEMENT
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors and executive
officers, and persons who beneficially own more than ten percent of a registered class of the Company’s equity
securities, to file initial reports of ownership and reports of changes in ownership of the Company’s common stock
and other equity securities with the SEC within specified periods. Due to the complexity of the reporting rules, the
Company undertakes to file such reports on behalf of its directors and executive officers and has instituted
procedures to assist them with these obligations. Based solely on a review of filings with the SEC and written
representations from the Company’s directors and executive officers, the Company believes that in 2014 all of its
directors and executive officers filed the required reports on a timely basis under Section 16(a).
Alcoa Stock Ownership
Stock Ownership of Certain Beneficial Owners
The following shareholders reported to the Securities and Exchange Commission that they beneficially owned more
than 5% of Alcoa common stock as of December 31, 2014.
Title of Class
Amount and Nature of
Beneficial Ownership (#)
The Vanguard Group
100 Vanguard Boulevard
Malvern, PA 19355
Common Stock
94,210,5661
7.7%
BlackRock Inc.
55 East 52nd Street
New York, NY 10022
Common Stock
71,836,5042
6.1%
JPMorgan Chase & Co.
270 Park Avenue
New York, NY 10017
Common Stock
68,451,6683
5.6%
Name and Address of Beneficial Owner
Percent
of Class
1 As reported in a Schedule 13G amendment dated February 9, 2015. The Vanguard Group, an investment adviser, reported that it had
sole power to vote 2,014,239 shares, sole power to dispose of 92,330,971 shares, shared power to vote none of the reported shares, and
shared power to dispose of 1,879,595 shares.
2 As reported in a Schedule 13G amendment dated January 12, 2015. BlackRock Inc., a parent holding company, reported that it had sole
power to vote 60,838,987 shares, sole power to dispose of 71,754,688 shares, and shared power to vote and dispose of 81,816 shares.
3 As reported in a Schedule 13G dated January 23, 2015. JPMorgan Chase & Co., a parent holding company, reported that it had sole
power to vote 60,322,801 shares, sole power to dispose of 67,730,576 shares, shared power to vote 606,695 shares, and shared power
to dispose of 721,092 shares.
32
2015 PROXY STATEMENT
Alcoa Stock Ownership
(continued)
Stock Ownership of Directors and Executive Officers
The following table shows the ownership of Alcoa common stock, as of March 2, 2015, by each director, each of the
named executive officers, and all directors and executive officers (serving as of March 2, 2015) as a group.
Mr. Kleinfeld is required to own shares of Alcoa common stock equal in value to six times his annual salary and each of
the other named executive officers is required to own shares of Alcoa common stock equal in value to three times his
or her annual salary. These officers are required to maintain that investment until retirement from the Company.
Non-employee directors are required to own, until retirement from the Board, at least $750,000 (this amount was
increased from $400,000 effective January 1, 2015) in Alcoa common stock. Compliance with the ownership value
requirement is measured annually and if the stock price declines in value, directors must continue to invest in Alcoa
stock until the stock ownership guideline is reached. To satisfy this requirement, directors must either invest in
Alcoa deferred share units under the Company’s 2005 Deferred Fee Plan for Directors or purchase shares in the
open market. Deferred share units provide directors with the same economic interest as if they own Alcoa common
stock. The deferred share units track the performance of our common stock and accrue dividend equivalents that
are equal in value to dividends paid on our common stock.
Name of Beneficial Owner
Directors
Arthur D. Collins, Jr.
Kathryn S. Fuller
Judith M. Gueron
Michael G. Morris
E. Stanley O’Neal
James W. Owens
L. Rafael Reif
Carol L. Roberts
Patricia F. Russo
Martin S. Sorrell
Ratan N. Tata
Ernesto Zedillo
Named Executive Officers
Klaus Kleinfeld *
William F. Oplinger
Olivier M. Jarrault
Audrey Strauss
Robert G. Wilt
All Directors and Executive Officers as a Group (20 individuals)
Shares of
Common Stock1
—
—
15,941
30,120
—
15,0253
— 4
—
10,0005
21,709
47,729
—
3,547,630
285,472
445,115
149,653
162,898
5,243,982
Deferred
Share
Units2
101,104
44,840
41,446
64,357
56,384
49,702
— 4
8,184
45,336
—
—
77,611
37,067
2,763
—
3,041
—
532,657
Total
101,104
44,840
57,387
94,477
56,384
64,727
— 4
8,184
55,336
21,709
47,729
77,611
3,584,697
288,235
445,115
152,694
162,898
5,776,639
* Also serves as a director
1 This column shows beneficial ownership of Alcoa common stock as calculated under SEC rules. Unless otherwise noted, each director
and named executive officer has sole voting and investment power over the shares of Alcoa common stock reported. None of the shares
are subject to pledge. This column includes shares held of record, shares held by a bank, broker or nominee for the person’s account,
shares held through family trust arrangements, and for executive officers, share equivalent units held in the Alcoa Retirement Savings
Plan which confer voting rights through the plan trustee with respect to shares of Alcoa common stock. This column also includes
shares of Alcoa common stock that may be acquired under employee stock options that are exercisable as of March 2, 2015 or will
become exercisable within 60 days after March 2, 2015 as follows: Mr. Kleinfeld (2,450,467); Mr. Oplinger (218,137); Mr. Jarrault
(292,057); Ms. Strauss (146,084); and Mr. Wilt (141,594); and all executive officers as a group (3,647,064). No awards of stock options
have been made to non-employee directors. As of March 2, 2015, individual directors and executive officers, as well as all directors and
executive officers as a group, beneficially owned less than 1% of the outstanding shares of common stock.
33
2015 PROXY STATEMENT
Alcoa Stock Ownership
(continued)
2 This column lists (i) for executive officers, deferred share equivalent units held under the Alcoa Deferred Compensation Plan, and
(ii) for directors, deferred share equivalent units held under the 2005 Deferred Fee Plan for Directors and the Deferred Fee Plan for
Directors (in effect before 2005). Each deferred share equivalent unit tracks the economic performance of one share of Alcoa common
stock and is fully vested upon grant, but does not have voting rights.
3 Held by a trust of which Mr. Owens and his spouse are trustees and beneficiaries.
4 Mr. Reif was appointed to the Board of Directors effective March 2, 2015. The initial disbursement of his director compensation will be
made on April 1, 2015. Under Alcoa’s director compensation program effective January 1, 2015, Mr. Reif will receive an annual retainer
of $240,000 comprising 50% in cash and 50% invested in Alcoa deferred share units under the 2005 Deferred Fee Plan for Directors or
invested in Alcoa stock purchased on the open market until he meets the stock ownership requirement of $750,000.
5 Held by a trust of which Ms. Russo is the trustee and a beneficiary.
34
2015 PROXY STATEMENT
Item 2 Ratification of Appointment of
Independent Registered Public Accounting Firm
Under its written charter, the Audit Committee of the Board of Directors has sole authority and is directly responsible
for the appointment, retention, compensation, oversight, evaluation and termination of the independent registered
public accounting firm retained to audit the Company’s financial statements.
The Audit Committee annually evaluates the qualifications, performance and independence of the Company’s
independent auditors. Based on its evaluation, the Audit Committee has appointed PricewaterhouseCoopers LLP as
the Company’s independent registered public accounting firm for 2015. PricewaterhouseCoopers LLP or its
predecessor, Coopers & Lybrand, has served continuously as the Company’s independent auditors since 1973. The
Audit Committee and the Board believe that the continued retention of PricewaterhouseCoopers LLP to serve as the
Company’s independent registered public accounting firm is in the best interests of the Company and its
shareholders.
The Audit Committee is responsible for the approval of the engagement fees and terms associated with the retention
of PricewaterhouseCoopers LLP. In addition to assuring the regular rotation of the lead audit partner as required by
law, the Audit Committee is involved in the selection and evaluation of the lead audit partner and considers whether,
in order to assure continuing auditor independence, there should be a regular rotation of the independent registered
public accounting firm.
Although the Company’s By-Laws do not require that we seek shareholder ratification of the appointment of
PricewaterhouseCoopers LLP as our independent registered public accounting firm, we are doing so as a matter of
good corporate governance. If the shareholders do not ratify the appointment, the Audit Committee will reconsider
whether or not to retain PricewaterhouseCoopers LLP.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the annual meeting, will have the
opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions by
shareholders.
The Board of Directors recommends a vote “FOR” ITEM 2, to ratify the appointment of
PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for
2015.
35
2015 PROXY STATEMENT
Item 2 Ratification of Appointment of Independent Registered Public Accounting Firm
(continued)
Report of the Audit Committee
In accordance with its written charter, the Audit Committee of the Board of Directors is responsible for assisting the
Board to fulfill its oversight of:
• the integrity of the Company’s financial statements and internal controls,
• the Company’s compliance with legal and regulatory requirements,
• the independent auditors’ qualifications and independence, and
• the performance of the Company’s internal audit function and independent auditors.
It is the responsibility of the Company’s management to prepare the Company’s financial statements and to develop
and maintain adequate systems of internal accounting and financial controls. The Company’s internal auditors are
responsible for conducting internal audits intended to evaluate the adequacy and effectiveness of the Company’s
financial and operating internal control systems.
PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm for 2014 (the
independent auditors), is responsible for performing independent audits of the Company’s consolidated financial
statements and internal control over financial reporting and issuing an opinion on the conformity of those audited
financial statements with accounting principles generally accepted in the United States of America (GAAP) and on
the effectiveness of the Company’s internal control over financial reporting. The independent auditors also review
the Company’s interim financial statements in accordance with applicable auditing standards.
In evaluating the independence of PricewaterhouseCoopers LLP, the Audit Committee has (i) received the written
disclosures and the letter from PricewaterhouseCoopers LLP required by applicable requirements of the Public
Company Accounting Oversight Board (PCAOB) regarding the audit firm’s communications with the Audit
Committee concerning independence, (ii) discussed with PricewaterhouseCoopers LLP the firm’s independence
from the Company and management and (iii) considered whether PricewaterhouseCoopers LLP’s provision of nonaudit services to the Company is compatible with the auditors’ independence. In addition, the Audit Committee has
assured that the lead audit partner is rotated at least every five years in accordance with Securities and Exchange
Commission and PCAOB requirements, and considered whether there should be a regular rotation of the audit firm
itself in order to assure the continuing independence of the outside auditors. The Audit Committee has concluded
that PricewaterhouseCoopers LLP is independent from the Company and its management.
The Audit Committee has reviewed with the independent auditors and the Company’s internal auditors the overall
scope and specific plans for their respective audits, and the Audit Committee regularly monitored the progress of
both in assessing the Company’s compliance with Section 404 of the Sarbanes-Oxley Act, including their findings,
required resources and progress to date.
At every regular meeting, the Audit Committee meets separately, and without management present, with the
independent auditors and the Company’s Vice President—Internal Audit to review the results of their examinations,
their evaluations of the Company’s internal controls, and the overall quality of the Company’s accounting and
financial reporting. The Audit Committee also meets separately at its regular meetings with the Chief Financial
Officer and the Chief Legal Officer, and meets separately twice a year with the Chief Ethics and Compliance Officer.
The Audit Committee has met and discussed with management and the independent auditors the fair and complete
presentation of the Company’s financial statements. The Audit Committee has also discussed and reviewed with the
independent auditors all communications required by GAAP, including those described in Auditing Standards
No. 16, “Communication with Audit Committees”, as adopted by the PCAOB. The Audit Committee has discussed
significant accounting policies applied in the financial statements, as well as alternative treatments. Management
has represented that the consolidated financial statements have been prepared in accordance with GAAP, and the
Audit Committee has reviewed and discussed the audited consolidated financial statements with both management
and the independent auditors.
36
2015 PROXY STATEMENT
Item 2 Ratification of Appointment of Independent Registered Public Accounting Firm
(continued)
Relying on the foregoing reviews and discussions, the Audit Committee recommended to the Board of Directors, and
the Board approved, inclusion of the audited consolidated financial statements in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2014, for filing with the Securities and Exchange Commission. In
addition, the Audit Committee has approved, subject to shareholder ratification, the selection of
PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2015.
The Audit Committee
James W. Owens, Chair
Arthur D. Collins, Jr.
Michael G. Morris
E. Stanley O’Neal
Carol L. Roberts
Ernesto Zedillo
February 19, 2015
Audit and Non-Audit Fees
The following table shows fees for professional services rendered by PricewaterhouseCoopers LLP for the past two
fiscal years ended December 31 (in millions):
2014
2013
Audit Fees
$13.7
$13.5
Audit-Related Fees
$ 0.6
$ 0.6
Tax Fees
$ 0.6
$ 0.1
All Other Fees
$ 0.1
$ 0.1
The Audit Committee has adopted policies and procedures for pre-approval of audit, audit-related, tax and other
services, and for pre-approval of fee levels for such services. See Attachment A, “Pre-Approval Policies and
Procedures for Audit and Non-Audit Services.” All services set forth in the table above were approved by the Audit
Committee before being rendered.
Audit Fees include the base audit fee, effects of foreign currency exchange rates on the base audit fee, scope
adjustments to the base audit requirements, and accounting and audit advisory services. The increase in audit fees
from 2013 to 2014 was principally due to scope increases to accommodate the Firth Rixson acquisition.
Audit-Related Fees include due diligence services for acquisitions and divestitures, audits of employee benefit
plans, agreed-upon or expanded audit procedures for accounting or regulatory requirements, information system
controls procedures, and review or verification of reported sustainability information.
Tax Fees include U.S. federal, state and local tax support and international tax support. The increase in tax fees
from 2013 to 2014 was principally due to additional tax support in connection with the Firth Rixson acquisition.
All Other Fees include services to review the Company’s actuarial calculations for its captive insurance company.
37
2015 PROXY STATEMENT
Item 3 Advisory Approval of Executive
Compensation
As required pursuant to Section 14A of the Securities Exchange Act of 1934, the Board of Directors is asking you to
approve, on an advisory basis, the executive compensation programs and policies and the resulting 2014
compensation of the individuals listed in the “2014 Summary Compensation Table” on page 61 (our “named
executive officers”), as described in this proxy statement.
Because the vote is advisory, the result will not be binding on the Compensation and Benefits Committee and it will
not affect, limit or augment any existing compensation or awards. The Compensation and Benefits Committee will,
however, take into account the outcome of the vote when considering future compensation arrangements.
The Board has approved an annual frequency for advisory shareholder votes to approve executive officer
compensation. As a result, unless the Board determines otherwise, the next such vote will be held at the Company’s
2016 annual meeting.
We believe you should read the Compensation Discussion and Analysis and the compensation tables in determining
whether to approve this proposal.
The Board of Directors recommends approval of the following resolution:
RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to
Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the executive compensation
tables and the related narrative discussion, is hereby APPROVED.
The Board of Directors recommends a vote “FOR” ITEM 3, to approve, on an advisory basis, the
compensation of the Company’s named executive officers, as stated in the above resolution.
38
2015 PROXY STATEMENT
Item 3 Advisory Approval of Executive Compensation
(continued)
Compensation Committee Report
The Compensation and Benefits Committee (the “Committee”) has:
1. reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy
statement; and
2. based on the review and discussions referred to in paragraph (1) above, the Committee recommended to the
Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy
statement relating to the 2015 annual meeting of shareholders.
The Compensation and Benefits Committee
Patricia F. Russo, Chair
Arthur D. Collins, Jr.
Kathryn S. Fuller
Michael G. Morris
February 19, 2015
39
2015 PROXY STATEMENT
Executive Compensation
Compensation Discussion and Analysis
Executive Summary
Alcoa’s Executive Compensation Philosophy Drove Strong Operating and Financial Performance in 2014
Global Environment: As a global leader in lightweight metals technology, engineering and manufacturing, Alcoa is
investing in its value-add, multi-material businesses while increasing the long-term global competitiveness of its
commodity businesses. Since external factors influencing the aluminum market create volatility and uncertainty,
Alcoa has undertaken this portfolio transformation in a challenging environment. Despite these challenges, Alcoa’s
management has achieved productivity gains and profitable growth that have contributed to Alcoa’s strong stock
performance.
Alcoa’s executive compensation philosophy: To incentivize outstanding management performance, the Alcoa
Board of Directors’ Compensation and Benefits Committee (“Compensation Committee” or “Committee”) has
structured executive pay programs that place a strong emphasis on equity incentives; are explicitly designed to
attract, motivate, align and retain key executives; and generate superior operating results that support improvements
in Alcoa’s Total Shareholder Return (TSR). Integrated with Alcoa’s strategy, structure and values, our compensation
programs have enabled Alcoa to assemble a highly-focused leadership team that takes accountability for
achieving—and exceeding—targets in the most difficult environments. Our pay-for-performance culture has been
instrumental in Alcoa’s success in delivering shareholder value that is sustainable in the long term.
Shareholder Alignment was supported and motivated by the strong equity mix in the compensation of the CEO and
other Alcoa executives.
• Alcoa’s one-year TSR (+49.8%) in 2014 outperformed the Standard & Poor’s (“S&P”) 500® Materials Index
(+6.9%), the Dow Jones Industrial Average Index (“DJIA”) (+10%) and the average 2014 TSR of the
Company’s competitor peers (+41.6%).
• Alcoa’s three-year TSR (+89.2%) outperformed the three-year S&P 500® Materials Index (+54.4%), the
three-year DJIA (+57.3%) and the average three-year TSR of the Company’s competitor peers (+22.5%).
• Alcoa’s CEO alignment with shareholders is reinforced by the CEO’s pay mix: 89% is performance-based,
and 65% is equity-based.
Pay-for-Performance incentivized management performance that contributed to strong 2014 operating, financial
and TSR results.
• Alcoa made major progress in achieving transformation goals in 2014. We augmented our value-add
businesses with the acquisition of Firth Rixson, dramatically increasing our capability in the high-growth
aircraft-engine sector. In our commodity businesses, we continued moving down the alumina cost curve and
reduced high-cost smelting capacity by 549,000 metric tons in 2014, which has resulted in a 31% decrease
in total smelting operating capacity since 2007.
• Compared to 2013, Alcoa’s adjusted net income more than tripled and free cash flow* improved by
$70 million.
• Alcoa achieved productivity improvements of $1.2 billion in 2014 for a total of $7.9 billion over the past
6 years.
• To drive management behavior that maximizes financial performance and value, Alcoa holds managers fully
accountable for factors they can directly control. As a result, the Company makes incentive plan adjustments
(normalization) for fluctuations in the price of primary aluminum on the London Metal Exchange (LME), for
foreign currency exchange rates, and for certain unplanned events. In 2014, normalization and adjustments
resulted in a substantial decrease in incentive compensation (IC) and long-term incentive (LTI) award
payouts compared to the 2014 formula awards.
40
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | Executive Summary
•
•
(continued)
We set aggressive 2014 IC and LTI targets based on a forecast of higher costs and pension payments, lower
regional premiums and the need to expand inventory to prepare for the ramp-up of our expanded automotive
business. We exceeded those targets, contributing to an IC payout of 135.9% and an LTI payout of 136.2%.
The return on that over-achievement was significant. For every dollar in additional IC paid to management for
above-target performance, Alcoa earned $45 of profit before tax and $36 of free cash flow.
Investor Outreach offered an opportunity to obtain investor comments and insights related to the investors’ policies
and practices on compensation and governance matters as we developed the 2014 compensation plan.
• We had compensation-related discussions during numerous meetings with investors, including 71 meetings
and calls with governance and compensation investor professionals.
• In this Compensation Discussion and Analysis, we discuss the actions we have undertaken as a result of
counsel from our investors.
The remainder of this section reviews how:
A. Alcoa’s Compensation Philosophy and Investor Outreach Guided the 2014 Executive Compensation Plan
B. Alcoa’s Priority for Equity Pay-for-Performance has Produced Value for Shareholders
C. Alcoa Made Significant Progress in Executing Its Transformation Strategy and Delivered Exceptional
Operational and Financial Performance in 2014
D. Alcoa Set Short- and Long-Term Business Plan Targets That, in Turn, Formed the Basis For Its IC and LTI
Targets
E. Alcoa Chose 2014 Metrics that Correlate to Shareholder Value and IC and LTI Targets That Drove
Exceptional Performance
F. The Compensation Committee Made IC and LTI Awards That Reflected the Strong Performance of 2014 and
That Are Intended to Reward and Retain Exceptional Talent Who Delivered That Performance
See “Attachment C—Calculation of Financial Measures” for the reconciliations to the most directly comparable
GAAP (accounting principles generally accepted in the United States of America) measures and management’s
rationale for the non-GAAP financial measures used in this Compensation Discussion and Analysis, including
adjusted income, adjusted EBITDA, free cash flow, days working capital and net debt.
* For the reconciliation of free cash flow to the most directly comparable GAAP measure, cash from operations, see
“Attachment C—Calculation of Financial Measures.”
41
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | Compensation Design and Philosophy
Compensation Design and Philosophy
In 2014, Alcoa delivered another solid year of financial performance and business growth, marked by actions that
are transforming the Company to deliver strong long-term, sustainable value to its shareholders. The market
recognized this and our Company’s TSR increased 50% for the year. To sustain this strong performance over time,
Alcoa designs its compensation system to motivate, reward and retain high-performing leaders and to closely align
their incentives with the interests of shareholders.
A. Alcoa’s Compensation Philosophy and Investor Outreach Guided the 2014 Executive Compensation Plan
Alcoa’s Executive Compensation Philosophy is based on four guiding principles to drive pay-for-performance and
shareholder alignment:
1. Make equity the most dominant portion of total compensation for senior executives and managers,
increasing the portion of performance-based equity with the level of responsibility.
2. Choose IC and LTI metrics that focus management’s actions on achieving the greatest positive impact on
Alcoa’s financial performance.
3. Set IC and LTI targets that challenge management to achieve continuous improvement in performance and
deliver long-term growth.
4. Target salary compensation at median, while using IC and LTI to reward exceptional performance and to
attract and retain exceptional talent.
Our 2014 executive compensation plan reflects our continued investor outreach efforts. In passing our 2014 sayon-pay proposal with a 93% favorable vote, our investors reinforced their support of our compensation philosophy
and plan. Alcoa conducted numerous investor meetings in 2013 and 2014, including 71 meetings with investor
governance professionals. In developing the 2014 executive compensation plan and subsequent year-end
compensation decisions, we considered feedback from these meetings and discussions in which our institutional
investors discussed their priorities and policies with regard to executive compensation and governance topics. We
gave consideration to the following areas where some investors provided counsel, and in most instances adopted
changes in response:
• In response to suggestions that we consider supplementing our Free Cash Flow (FCF) metric with additional
IC financial metrics, we added a profit metric, which accounted for the largest portion (40%) of the 2014 IC
target, and a Days Working Capital (DWC) metric. For details, see page 50.
• Responding to requests by a few investors for more discussion of our LTI plan target-setting process, we
have provided an expanded discussion about the target-setting process starting on page 47.
• After some investors asked us to consider the performance period for the performance restricted share units,
we undertook an extensive review and determined that the current practice of a three-year LTI plan with oneyear performance periods best incentivizes the right behavior of management to drive shareholder value and
performance. For further discussion, see page 47.
• In response to comments of some investors in 2013 that the comparator peer group Alcoa used to help
determine total direct compensation for the CEO was too broad, we developed a more focused peer group,
which we disclosed in our 2014 proxy statement for use beginning in 2015. That new peer group consists of
20 Materials and Industrials companies that are more relevant and better aligned to Alcoa’s businesses. The
companies are listed on page 53.
42
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | Compensation Design and Philosophy (continued)
B. Alcoa’s Priority For Equity Pay-For-Performance Has Produced Value For Shareholders
100%
The emphasis on equity compensation and pay-forperformance begins with the CEO, whose 2014 total
direct compensation included 89% pay at risk. To
validate Alcoa’s pay-for-performance alignment with
shareholders, the Compensation Committee requested
that management conduct a peer-comparison CEO
realizable pay study for 2011 to 2013. Using a
methodology developed by Pay Governance LLC, the
Compensation Committee’s independent compensation
consultants, the study demonstrated very strong
shareholder alignment. Pay Governance reviewed and
approved the study.
Performance Restricted Share Units
Stock Options
65%
equity
based
52%
89%
performance
based
Annual Cash Incentive Compensation
Salary
13%
24%
11%
2014 CEO Pay Mix
The 2014 total compensation for the other named executive officers covered in this document also had a strong
emphasis on equity:
% of Target
Compensation
Type of Compensation
Salary
16% to 18%
Annual Cash Incentive Compensation
25% to 30%
Performance shares (representing 80% of LTI granted and vested after three years)
43% to 47%
Stock Options (representing 20% of LTI granted and vesting over three years)
11% to 13%
The focus on equity pay-for-performance is achieving shareholder alignment. As the following charts demonstrate,
Alcoa’s financial performance and transformation progress had a dramatic impact on the return to our shareholders
in 2014 as well as on a three-year basis. For a one-year period, Alcoa has performed better than its competitor index
and major market indices. Over three years, Alcoa has shown significant value creation above all comparator
indices.
Alcoa’s one-year TSR outperformed the DJIA and S&P indices as well as its competitor peers
One-year TSR through December 31, 2014
75%
Aluminum
Peers
Alcoa 49.8%
Aluminum Peers1 67.7%
Competitor Peers 2 41.6%
S&P 500® Materials 6.9%
DJIA 10.0%
60%
45%
Alcoa
Competitor
Peers
30%
15%
DJIA
S&P 500
Materials
0%
2
14
14
20
20
1/
/3
12
11
/3
0/
20
10
/3
1/
/2
30
9/
/2
31
8/
14
4
01
4
01
4
31
7/
/2
30
6/
/2
01
01
4
4
5/
31
/2
01
4/
30
/2
/2
31
3/
01
4
4
01
4
2/
28
/2
01
1/
31
/2
20
1/
/3
12
1
01
4
13
−15%
Aluminum peers: Aluminum Corporation of China Limited, United Company RUSAL, Norsk Hydro ASA, Alumina Limited, National Aluminium Company Limited and
Shandong Nanshan Aluminum Co., Ltd.
Competitor peers: Aluminum peers plus Precision Castparts Corp., Kaiser Aluminum Corporation, Accuride Corporation, Constellium N.V.
43
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | Compensation Design and Philosophy (continued)
Alcoa’s three-year TSR outperformed the DJIA and S&P indices as well as its aluminum and competitor peers
Three-year TSR through December 31, 2014
115%
90%
65%
Alcoa 89.2%
Aluminum Peers1 28.5%
Competitor Peers 2 22.5%
S&P 500® Materials 54.4%
DJIA 57.3%
Alcoa
DJIA
S&P 500
Materials
Aluminum
Peers
Competitor
Peers
40%
15%
-10%
2
*
14
4
20
12
/3
1/
/2
31
8/
/2
30
4/
/3
12
01
4
01
13
20
1/
/2
31
8/
4/
30
/2
01
01
3
3
12
1/
/3
12
8/
31
/2
20
01
01
4/
30
/2
20
1/
/3
12
1
2
2
11
-35%
Aluminum peers: Aluminum Corporation of China Limited, United Company RUSAL, Norsk Hydro ASA, Alumina Limited, National Aluminum Company Limited and
Shandong Nanshan Aluminum Co., Ltd.
Competitor peers: Aluminum peers plus Precision Castparts Corp., Kaiser Aluminum Corporation, Accuride Corporation, Constellium N.V.*
Constellium N.V. was not publicly traded until mid-2013, so its trading is reflected only for the 2014 calendar year
C. Alcoa Made Significant Progress in Executing its Transformation Strategy and Delivered Exceptional
Operational And Financial Performance in 2014
In 2014, Alcoa accelerated the transformation of its value-add and commodity portfolios. Alcoa’s resolution of a
long-standing legacy issue in early 2014 enabled management to accelerate implementation of its transformation
strategy. In support of Alcoa’s goal to grow its value-add portfolio, we acquired Firth Rixson (completed in November
2014) and Tital (completed in March 2015), two global leaders within the jet-engine components industry. In
addition to more than doubling Alcoa content on key new generation jet-engine programs, these acquisitions expand
Alcoa’s multi-material portfolio and add growth capabilities in an aerospace market that is predicted to grow at an
annual compounded rate of 5-6% through the next five years. As described in the discussion of our Global Primary
Products business below, Alcoa also made significant progress in restructuring its Alumina and Primary Metals
segments to achieve its goal of creating a globally competitive commodity portfolio.
Each of Alcoa’s business groups delivered strong performance in 2014.
• Our Engineered Products and Solutions segment increased after-tax operating income by 6% from
$726 million in 2013 to $767 million in 2014, and adjusted EBITDA* margins continued to grow from a
historic high of 21.5% in 2013 to 21.9% in 2014. The continued focus on innovation and share gains
delivered $192 million, excluding acquisitions, of incremental revenue in 2014.
• Our Global Rolled Products segment, although impacted by the decline in the packaging sector, delivered
adjusted EBITDA* per metric ton (MT) of $339 in 2014, exceeding the previous historical average
(2001-2010) of $233 and comparable to the current historical average (2010-2012) of $344. This segment
has demonstrated a focus on profitable growth by generating incremental revenue of $245 million in 2014
and has prepared for the explosive growth in the automotive sector by completing a major expansion of its
Davenport, Iowa facility.
* For the reconciliation of the segments’ adjusted EBITDA to the most directly comparable GAAP measure, aftertax operating income, see “Attachment C—Calculation of Financial Measures.”
44
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | Compensation Design and Philosophy
Engineered Products and Solutions
Adjusted EBITDA Margin %
Global Rolled Products
Adjusted EBITDA/MT
380
21.9
21.5
19.1
17.8
16.8
10.5
9.2
8.2
332 321
273 272 261 276
14.6
11.8 12.9 13.1 13.3
11.4
292 284
339
301
184
83
2
2
2
2
2
2
2
2
2
2
2
2
2
01 002 003 004 005 006 007 008 009 010 011 012 013 014
20
•
(continued)
69
2
2
2
2
2
2
2
2
2
2
2
2
2
01 002 003 004 005 006 007 008 009 010 011 012 013 014
20
In our Global Primary Products business, we took decisive actions in 2014 toward the goal of moving our
Alumina and Primary Metals segments down their respective cost curves. With the reduction of 549,000
metric tons of high-cost smelting capacity in 2014, we have lowered our total production capacity by 31%
since 2007 through divestitures, curtailments and closures of our highest-cost assets. While delivering
significant productivity improvements in its remaining smelting operations, the business also benefitted from
higher regional premiums as market forces, such as supply and demand, increased the realized price of
aluminum in regional markets. We continued to de-link alumina pricing from the London Metal Exchange
(LME) price by expanding the use of the Alumina Price Index (API) to sell smelter-grade alumina at prices
that represent alumina market fundamentals rather than LME-linked alumina pricing. In 2014, 68% of total
third-party smelter-grade alumina sales were based on API/spot market pricing, up from 55% in
2013. Continuing our emphasis on value-add products in our Primary Metals segment, 65% of total 2014
shipments were differentiated, value-add products cast in forms customized for the needs of customers, a
five-point increase over 2013.
ALUMINA:
5% point movement down the cost curve since 2010
S/MT
500
27th
2014:
25th Percentile
450
400
ALUMINUM:
8% point movement down the cost curve since 2010
S/MT
3,000
2013:
Percentile
2010:
51st Percentile
2,500
350
2013:
43rd Percentile
2,000
300
250
1,500
200
2016:
21st Percentile
150
100
2010:
30th Percentile
2014:
43rd Percentile
2016:
38th Percentile
1,000
500
50
Source: CRU and Alcoa analysis
0
0
10
20
30
40
50
60
70
Source: CRU and Alcoa analysis
0
80
90
100
110
120
130
0
5
10
15
20
25
30
35
40
45
Production (MMT)
Production (MMT)
45
50
55
60
65
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | Compensation Design and Philosophy
(continued)
As a result of the operational and financial performance of Alcoa’s businesses, earnings excluding special items
more than tripled in 2014. The following bridge shows 2013 adjusted net income* at $357 million rising in 2014 to
$1,116 million, primarily driven by performance of $1,113 million that overcame $461 million in cost headwinds:
Earnings Rise Year-over-Year
(Net Income Excluding Special Items)
($ Millions)
757
357
16
123
64
2013
LME
Currency
Volume
+$107 MARKET
31
48
540
1,116
292
Price/Mix
Productivity
+$1,113 PERFORMANCE
Energy
Raw
Cost Increases/
Materials Other
2014
-$461 COST HEADWINDS
* For the reconciliation of adjusted net income to the most directly comparable GAAP measure, net income/(loss),
see “Attachment C—Calculation of Financial Measures.”
Performance improvements and disciplined capital management drove strong cash flow generation. In 2014, the
Company achieved its cash sustainability targets for the sixth straight year and delivered on its FCF target,
generating positive FCF of $455 million (cash from operations of $1,674 million).
• In 2014, Alcoa’s productivity gains consisted of $657 million from procurement savings, $415 million from
process improvements and labor productivity and $122 million from reductions in overhead spend. Alcoa
has been able to achieve consistently high productivity cost savings through our Degrees of Implementation
system, which facilitates the creation, deployment and tracking of savings ideas throughout the
organization. In 2014, about 15,000 ideas contributed to gross productivity savings of $1.2 billion, resulting
in $757 million of after-tax and after non-controlling interest productivity savings that dropped to the bottom
line of net income, as reflected in the bridge above.
• We took a disciplined approach to capital investment, aggressively managing sustaining capital while
investing in the value-add businesses. The combined capital spend for 2014 was consistent with our target
of $1.25 billion.
• As construction of our Saudi Arabia joint venture nears completion, the project is well within budget and on
schedule.
The Company’s FCF improved $70 million and average year-to-date DWC* held steady at 30 days compared to 2013,
despite significant portfolio changes that increased the portion of businesses with higher inventory requirements. The
DWC metric has declined by 17 days compared to 2009. At the end of 2014, the Company had $1.9 billion cash on
hand.
* For the reconciliation of days working capital to the most directly comparable GAAP measure, see
“Attachment C—Calculation of Financial Measures.”
46
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | Compensation Design and Philosophy
Productivity Savings
($ Millions)
2,410
(continued)
Average Year-to-Date DWC
$7.9B* of
productivity in
2009-2014
1,291
1,194
1,117
1,099
Engineered Products
& Solutions (28%)
17 Days;
$1.1 Billion of Cash
47
338
41
279
Global Rolled Products
(23%)
512
Global Primary
Products** (43%)
742
65
34
2010
2011
2012
2013
30
30
2013
2014
Other (6%)
2009
2009
39
2010
2011
2012
2014
* All figures are pretax and pre-minority interest. 2009-2010 represent
net productivity; 2011-2014 represent gross productivity.
** Represents the Alumina and Primary Metals segments combined.
Cash, Debt and Net Debt* Position
($ Millions)
Cash
Net Debt
Debt-to-Capital %
10,578
762
9,819
1,481
9,165
9,371
1,543
1,939
8,829
1,861
8,319
1,437
8,852
1,877
42.6%
38.7%
9,816
2008
34.8%
8,338
2009
35.3%
34.8%
7,622
7,432
6,968
2010
2011
2012
38.1%
37.4%
6,882
6,975
2013
2014
* For the reconciliation of net debt to the most directly comparable GAAP measure, total debt, see “Attachment
C—Calculation of Financial Measures.”
D. Alcoa Set Short- and Long-Term Business Plan Targets That, In Turn, Formed The Basis For Its IC and LTI
Targets
Supporting the IC and LTI targets that Alcoa sets each year is a comprehensive approach for establishing business
plan targets, which are publicly disclosed. The business plan targets are consistent with Alcoa’s overall strategy to
build a globally competitive commodity business while profitably growing our value-add businesses.
In 2010, the Company began the process of setting three-year targets. In January 2014, the Company initiated the
second set of three-year targets to be reached in 2016. (Alcoa does not set new three-year targets each year.)
Because of the diversity of our businesses, these three-year targets have taken varying forms for the upstream,
midstream and downstream businesses. For example, because the upstream business largely competes in
commodity markets, the focus has been on lowering costs, and the targets are set to lower Alcoa’s position on the
industry cost curves by the year in which the targets end. In the midstream and downstream businesses, targets for
47
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | Compensation Design and Philosophy
(continued)
profitable growth are established, including a profitability target (adjusted EBITDA/MT in the midstream and
adjusted EBITDA Margin Percentage in the downstream) and a revenue growth target. The three-year targets are set
with the following parameters considered:
1. Market/competitive positioning, both current and projected;
2. Competitor financial benchmarking;
3. Market conditions, both current and projected; and
4. Historical performance.
Annually, the Company conducts a rigorous, iterative operational planning process that, due to the differences
among the businesses, considers a series of factors:
1. Progress toward attainment of three-year targets;
2. Current and projected market conditions, which are based on assumptions about key financial parameters,
such as foreign currency exchange rates (“FX”) and prices of metal, energy and raw materials;
3. Capital and operational projects to be completed during the year that increase our competitiveness, open
new markets or drive additional profitability; and
4. Historical performance and each business’ ability to overcome headwinds through ongoing productivity
improvements.
Each business plan is evaluated using a number of financial and non-financial metrics, including revenue growth,
gross and net productivity, overhead expenditures, capital efficiency (both working capital and capital expenditures),
overall profitability, cash generation (both cash from operations and FCF), safety, quality and customer metrics.
The summation of these group plans then is compared with the financial position of the Company in aggregate to
determine whether the targets meet our financial ratio and cash requirements. The final result is the annual Alcoa
Business Plan.
This rigorous process allows Alcoa to establish one-year and three-year business plan goals on which to base its IC
and LTI targets. The LTI target is structured so that the Company can monitor and incentivize progress each year of
the three-year plan, an important consideration given the volatility of the pricing of the aluminum commodity and of
overall business conditions.
The consistent progress toward achieving the three-year business plan goals demonstrates that the annual
business plans on which the IC and LTI targets are based consistently drive long-term value for Alcoa’s
shareholders. The tangible evidence of this can be found in the multi-year productivity gains, reductions in days
working capital and increases in profitable growth, which have facilitated the Company’s transformation strategy,
detailed in “C. Alcoa Made Significant Progress in Executing its Transformation Strategy and Delivered Exceptional
Operational and Financial Performance in 2014,” above at page 44.
E. Alcoa Chose 2014 Metrics That Correlate to Shareholder Value and IC and LTI Targets That Drove
Exceptional Performance
Our choice of metrics is directly related to the major priorities of our businesses and is aligned with our shareholders.
• Financial metrics represent 80% of the total IC and 100% of the LTI targets. Alcoa has consistently
chosen IC metrics that motivate high performance in the current environment and LTI metrics that are
aligned with its long-term strategy. Since liquidity became the major concern for Alcoa during the economic
downturn, FCF was a major financial IC metric since 2009. While this IC metric addressed immediate cash
requirements, Alcoa continued to apply LTI metrics, consisting of 75% for EBITDA margin growth and 25%
for revenue growth, to reinforce its long-term objective of profitable growth in our value-add businesses.
• Changes in IC financial metrics in 2014 reflect the shift to profitable growth. Recognizing improvement in
the Company’s liquidity and the opportunity to respond to investor interest in profitable growth, in 2014, Alcoa
added a 40% IC metric for after-tax earnings. This shift directly aligns with investor feedback and shareholder
value. The FCF metric was reduced from 80% to 33% to accommodate this shift in emphasis toward profitable
growth. However, a separate metric was added, namely Average Year-to-Date DWC, for 7%. By creating this
separate DWC metric, Alcoa will drive continual improvement in the practices that have allowed the Company
to achieve historically low levels of DWC since the economic downturn by managing working capital down
48
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | Compensation Design and Philosophy
•
(continued)
through the entirety of the year. This, in turn, is expected to lower financing costs. Taken as a whole, these
changes to the metrics maintain the Company’s focus on generating FCF and efficient use of capital (40% total
for FCF and DWC) while providing new emphasis on profitable growth (40%).
Non-financial metrics represent 20% of the IC target. Safety, environmental stewardship and diversity are
intrinsic to Alcoa’s values and have an impact on Alcoa’s business performance. The safety metric focuses
on reducing the number of serious injuries. Our environmental metric drives reduction of carbon dioxide
emissions, strengthening Alcoa’s energy efficiency. Our diversity metric tracks representation of women
globally and minorities in the United States, reinforcing our goal to draw on every talent pool to attract the
best and brightest to Alcoa and to build on diverse viewpoints.
To drive management behavior that maximizes financial performance and value, Alcoa holds managers fully
accountable for factors they can directly control. Because Alcoa’s compensation philosophy is not to reward or
punish management for factors that are outside their control, we normalize for those factors. As part of the financial
planning process for an upcoming year, we establish assumptions for the LME price of aluminum and FX, both of
which can have significant effects on financial results and neither of which management performance can impact.
Without normalization, in years when the LME rises, IC and LTI would be less effective as a performance incentive
because management would receive an unearned benefit. In recent years, when the LME price of aluminum fell
dramatically, failure to normalize could have de-motivated employees by putting any IC and LTI awards out of reach for
reasons beyond their control. Instead, Alcoa’s use of normalization enabled the Company to drive operational and
financial performance, particularly in recent years of volatile LME aluminum prices. While normalization reinforces
management accountability and pay-for-performance, the significant equity portion of executive compensation
reinforces management’s alignment with our shareholders’ experience as investors in the Company.
Since Alcoa’s revenues are largely U.S. dollar-denominated, while costs in non-U.S. locations are largely denominated in
local currency, the volatility of FX also has had a significant impact on Alcoa’s upstream earnings. As our commodities are
traded in U.S. dollars, we have typically seen an inverse correlation to FX. Therefore, to avoid double counting, the
normalization for the commodity price swings needs to be corrected by concurrent normalization of FX. Because Alcoa
generally does not hedge FX or LME fluctuations, normalization is a practice that Alcoa has been following for many years.
As a result, our management has remained highly focused on achieving and surpassing operational and strategic goals
that benefit our top- and bottom-line performance. Discussion of the application of normalization and other adjustments to
the 2014 results is presented below on page 51 in the section entitled “F. The Compensation Committee Made IC and LTI
Awards That Reflected the Strong Performance of 2014 and That Are Intended to Reward and Retain Exceptional Talent
Who Delivered That Performance.”
Alcoa set 2014 financial targets that drive long-term shareholder value. As described on page 47, Alcoa has a
rigorous process to develop the financial targets on which it bases its IC and LTI targets. Given the impact of a
variety of external factors affecting Alcoa’s financial performance, the target-setting process must take into account
the complexities of the business and the multiple external factors that impact it. As the Company has successfully
addressed the challenging situation facing the aluminum industry during the past six years, its incentive targets have
played a major role in driving Alcoa’s year-over-year improvements in underlying operational fundamentals and
financial performance. The 2014 IC and LTI financial targets were established to continue that progress. Following
the review of Alcoa’s 2014 financial plan by the Board of Directors in January 2014, the Compensation Committee
approved the metrics and targets after assessing the relevancy of the metrics to Alcoa’s strategy and value creation
and the difficulty and appropriateness of the targets to drive performance.
Comparison of 2014 incentive targets to 2013 targets and results. As discussed above, in its compensation plan,
Alcoa normalizes for the impact of fluctuations in the LME price of aluminum and FX due to the volatility and
magnitude of their effect on key metrics. To provide comparability across years of the financial targets and results,
underlying LME aluminum price and FX assumptions need to be consistent in the comparison years.
The 2013 targets as reported in the 2014 proxy statement were set in January 2013 based on LME and FX
assumptions in the 2013 financial plan. The 2013 results were also normalized to the 2013 plan assumptions. To
compare the 2014 targets to the 2013 targets and results, as presented in the table below, we have normalized the
2013 targets and results to the LME and FX assumptions in the 2014 financial plan.
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2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | Compensation Design and Philosophy
(continued)
It is important to remember that the plan assumptions for LME and FX do not make the targets harder or easier
because the results are normalized back to the plan assumptions. Whether actual LME or FX exceed or fall short of
plan assumptions utilized in setting targets, those impacts are normalized out of the results in the compensation
plan. In 2014, when actual LME or FX differed substantially from plan assumptions, that impact was normalized out
of the result, lowering it for purposes of IC and LTI awards. See “F. The Compensation Committee Made IC and LTI
Awards That Reflected the Strong Performance of 2014 and That Are Intended To Reward and Retain Exceptional
Talent Who Delivered That Performance” on page 51.
Annual Incentive Metrics
Adjusted Free
Cash Flow1
Adjusted
Net Income2
Average
YTD DWC
Long-Term Incentive Metrics
Adjusted
Revenue
EBITDA
Growth
Margin2
2013 Target
As reported in 2014 Proxy
Statement
-$ 123M
2.6%
12.0%
Normalized for 2014 Plan LME/FX
-$395M
N/A
N/A
2.7%
9.4%
2013 Result
As reported in 2014 Proxy
Statement
$ 455M
N/A
N/A
1.9%
13.7%
Normalized for 2014 Plan LME/FX
$ 184M
$316M
29.9
2.2%
11.4%
2014 Target3
-$210M
$317M
28.9
2.7%
11.6%
1 Includes Saudi Arabia joint venture investment. For definition of Adjusted Free Cash Flow and the reconciliation to the most directly comparable GAAP
measure, cash from operations, see “Attachment C—Calculation of Financial Measures.”
2 For definition of Adjusted Net Income and Adjusted EBITDA and the reconciliation to the most directly comparable GAAP measure, net income/(loss),
see “Attachment C—Calculation of Financial Measures.”
3 Adjusted Net Income and Average YTD DWC were new metrics in 2014
The annual targets for the IC and LTI metrics interact with Alcoa’s 3-year business plan. The targets take into
account the three-year targets for the businesses and market conditions, as described under “D. Alcoa Set Shortand Long-Term Business Plan Targets That, In Turn, Formed the Basis For Its IC and LTI Targets” on page 47.
• The 2014 Adjusted Free Cash Flow target was set above the 2013 target and was also more challenging than
the 2013 result when taking into account three extraordinary circumstances:
1. Growth. We planned an increase in working capital to build for the increased use of aluminum in the U.S.
automotive industry. In 2014, Alcoa ramped up rolling-mill stocks to support the launch of the new
aluminum-intensive Ford F-150, which is reportedly the highest-selling vehicle in the United States for over
30 years. In addition, certain of our businesses in the Engineered Products and Solutions Segment planned
to build working capital to support the growth in the aerospace industry.
2. Pension. Due to curtailment of some of our high-cost facilities and a lower U.S. discount rate, we planned for
higher pension-funding requirements.
3. Legacy Resolution. Our 2014 target anticipated a settlement payment to the U.S. government for a legacy issue.
Excluding these extraordinary circumstances, the 2014 target would have slightly exceeded the 2013 result of
$184 million. In fact, the 2014 FCF target was a stretch in light of projected lower aluminum regional premiums,
higher energy costs and expected cash outflows associated with the extraordinary items described above.
Largely driven by the out-performance in adjusted net income (due to the factors listed in the following section)
and partially offset by cash used to support higher working-capital requirements, management overachieved this
target in 2014. With management’s recommendation and Compensation Committee approval, the benefit of
lower actual cash requirements due to pension relief enacted in 2014 (under the Highway and Transportation
Funding Act) was eliminated for IC award purposes.
• The 2014 Adjusted Net Income target, a new metric in 2014, was flat to the 2013 result despite expectations
of lower regional premiums and higher energy, raw materials and other costs. To maintain 2013 levels, the plan
required management to achieve significant improvements in sales volume and productivity. Although most
industry analysts forecasted regional premiums to decline in 2014, they increased. Alcoa’s energy and other
costs did in fact increase in 2014, but were offset by productivity improvements that far exceeded expectations
as Alcoans delivered $1.2 billion in pre-tax productivity gains against a goal of $850 million.
50
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | Compensation Design and Philosophy
•
•
•
(continued)
The 2014 Average Year-to-Date DWC target, new in 2014, was highly aggressive relative to the 2014 financial
plan to increase management’s focus on this important metric to help drive FCF. The target was set as an
improvement of one day of working capital compared to the 2013 actual result, which was a record low. Due to
the aggressiveness of the target and previously discussed higher inventory requirements as the portfolio shifted
toward high-growth, value-add businesses, the Company missed the DWC target, and this metric did not
contribute to the 2014 IC payout. Nonetheless, the 2014 result was in line with the record low 2013 result.
The 2014 Revenue Growth target was set above the result achieved in 2013. This target was especially
challenging given the revenue headwinds associated with the curtailment of facilities in the upstream business
and the projected lower revenue associated with expected lower regional premiums. Driven by the growth of our
value-add businesses and strong achievement by the Alumina and Primary Metals segments, this target was
met in 2014, with 100.8% attainment.
The 2014 Adjusted EBITDA Margin target represents an improvement over both the 2013 target and 2013
result (when both are normalized to the 2014 plan), especially in light of the planned headwinds discussed in
the adjusted net income section above. This target was exceeded in 2014 with 148% attainment largely due to
higher-than-planned levels of productivity and energy sales.
In addition to setting challenging targets, Alcoa sets thresholds and maximums to motivate high performance. To
disincentivize below-target performance, we set thresholds that eliminate payouts for missing targets by more than a
small margin. While the reduced payout slope from target to minimum is steep, we establish payout multiples for overachievement that can be earned only with significant upside performance. The positive payout multiples are aligned
with achievement levels that ensure a strong return on the additional incentive compensation paid (see page 44 for
2014 results). Given restrictions on base salary increases to control overhead expenses and the demanding leadership
challenges confronting the aluminum industry in recent years, the prospect of an upside in IC has proven to be a major
retention factor and has had a demonstrable impact on motivating managers to achieve continued productivity
improvements and overcome the obstacles associated with accelerating Alcoa’s transformation.
F. The Compensation Committee Made IC and LTI Awards That Reflected the Strong Performance of 2014 and
That Are Intended to Reward and Retain Exceptional Talent Who Delivered That Performance
In 2014, Alcoa out-performed its financial and incentive targets. As described starting on page 44, management
achieved strong operational and financial performance and transformation progress in 2014. As a result of that
performance and after addressing adjustments, the Compensation Committee approved a 135.9% payout against
the annual financial and non-financial IC targets and a 136.2% payout against the LTI targets for the first year of our
2014 three-year performance share awards. For every dollar in additional IC paid to management for above-target
performance, Alcoa earned $45 of profit before tax and $36 of free cash flow.
51
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | Compensation Design and Philosophy
(continued)
In determining the IC and LTI payouts, the Committee applied the principles of normalization, described above
on page 49, and also approved certain adjustments recommended by management for items or assumptions not
anticipated in the plan. For 2014, on a net basis, the normalizations and adjustments reduced IC awards by 27.9%
points and LTI awards by 51.2% points compared to formula results before the normalizations and adjustments.
Following are the normalizations and adjustments to the 2014 financial results for incentive purposes:
Annual Incentive Metrics* ($M)
Adjusted Free
Adjusted Net
Cash Flow**
Income***
Preliminary Result
Long-Term Incentive
Metrics ($M)
Adjusted
Revenue
EBITDA***
$363
$1,116
$23,906
$3,556
1. LME & FX1
($192)
($188)
($246)
($281)
Premiums2
Normalizations & Adjustments
($216)
($238)
($395)
($349)
3. Special items3
$198
($63)
$162
$128
relief4
($100)
N/A
N/A
N/A
($32)
N/A
N/A
N/A
$21
$627
$23,427
$3,054
2.
4. Pension
5. Deferred equity contribution5
Final Result
* Average year-to-date DWC is not included in this table because normalizations and adjustments do not impact it
** Includes Saudi Arabia joint venture investment. For definition of Adjusted Free Cash Flow and the reconciliation to the most directly
comparable GAAP measure, cash from operations, see “Attachment C—Calculation of Financial Measures.”
*** For definition of Adjusted Net Income and Adjusted EBITDA and the reconciliation to the most directly comparable GAAP measure, net
income/(loss), see “Attachment C—Calculation of Financial Measures.”
1 The impact of the LME and FX fluctuations in 2014 against plan was a benefit to the Company’s financial results. Under the practice
described above on page 49, there was a negative normalization applied to results for each of the four metrics.
2 Because realized aluminum premiums came in well above plan assumptions, management recommended, and the Compensation
Committee approved, a negative adjustment to all four metrics.
3 Management recommended, and the Compensation Committee approved, adjustments for certain special items. For details, see
“Attachment C—Calculation of Financial Measures.”
4 The Company received unplanned pension relief in 2014 under the Highway and Transportation Funding Act, which was adjusted out
of the FCF results. This pension relief had no impact on the results of the other three metrics.
5 The Company deferred some Saudi Arabia joint venture equity contributions in 2014, which were adjusted out of the FCF results. The
deferred contributions had no impact on the results for the other three metrics.
In determining these normalizations and other adjustments, the Compensation Committee made every effort to
assure that the incentives are designed to motivate management to maximize performance on factors they can
control and that IC and LTI payouts are adjusted—up and down—for uncontrolled and unplanned impacts, such as
LME and FX changes. In doing so, the Committee maintained its focus on incentivizing and rewarding exceptional
performance that delivers value to Alcoa’s shareholders over time.
In summary, the fundamentals of Alcoa’s executive compensation policies incentivize performance while
maintaining alignment with shareholder interests. In 2014, Alcoa’s consistent financial and operational
performance amidst unpredictable market forces and the increasing impact of its transformation were major factors
in the strong performance of Alcoa’s 2014 and three-year stock price compared to the performance of the Dow
Jones Industrial Average, the Standard & Poor’s 500® Materials Index and Alcoa’s competitors. The 2014 incentive
awards, combining a mix of short- and long-term performance incentives, validated the effectiveness of Alcoa’s
executive compensation design in ensuring pay-for-performance and shareholder alignment.
52
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | Analysis of 2014 Compensation Decisions
Analysis of 2014 Compensation Decisions
The Compensation Committee uses its business judgment to determine the appropriate compensation targets and
awards for the named executive officers, in addition to assessing several factors that include:
• Individual, Group, and Corporate performance;
• Market positioning based on peer group data (described below);
• Complexity and importance of the role and responsibilities; and
• Leadership and growth potential.
Comparator Peer Groups
For 2014, we developed a more focused peer group to help determine total direct compensation for the CEO. The
new peer group consists of 10 Materials and 10 Industrials companies that are relevant to and aligned with Alcoa’s
upstream (materials) and mid/downstream (industrials) businesses. We plan to use this peer group going forward to
achieve greater consistency of year-to-year compensation data, as disclosed in proxy statements, than could be
attained utilizing the previous peer group based on Towers Watson’s broad-based survey. Pay Governance, the
Compensation Committee’s independent compensation consultant, has reviewed and endorses this peer group. The
companies in the CEO peer group are:
Materials Companies
•
•
•
•
•
•
•
•
•
•
Industrials Companies
Dow Chemical
DuPont
Freeport McMoran
Huntsman
International Paper
LyondellBasell
PPG
Newmont Mining
Nucor
United States Steel
•
•
•
•
•
•
•
•
•
•
3M
Cummins
Danaher
Deere
Eaton
Emerson
General Dynamics
L-3 Communications
Northrop Grumman
Raytheon
For other executive level positions, we continued to use Towers Watson survey data for companies with revenues
between $15 billion and $50 billion (excluding financial companies) to help estimate competitive compensation. We
continued to use this peer group because it reflects the broad-based group of companies with which we compete for
non-CEO executive talent, and the data for such positions is more robust within published surveys such as the Towers
Watson survey. The Compensation Committee’s independent compensation consultant has reviewed and endorses this
peer group. For 2014, 114 companies met the revenue and industry criteria and were used to compare compensation
for all of the executive level positions, except the CEO position, see “Attachment B” on page 77.
The data from each of these peer groups described above is considered in establishing executive compensation and
to ensure that Alcoa provides and maintains compensation levels in line with the market, including similar
companies, and to attract, retain and motivate employees.
Performance-Based Pay Decisions
Chairman and Chief Executive Officer—Mr. Kleinfeld. In January 2014, the Compensation Committee awarded
Mr. Kleinfeld performance share awards and stock options with a total grant-date value of $8,700,069, which is in line
with the market median of the CEO peer group, as described above. Eighty percent of the award ($6,960,058) was
granted as performance stock awards, and 20% of the award ($1,740,011) was granted as stock options. In making
this decision, the Compensation Committee considered the operational performance of the Company in 2013, the
performance of the Company’s stock during 2013, and the median level of equity as reported for the CEO peer group.
Mr. Kleinfeld’s annual incentive compensation award for 2014 of $3,228,984 was above the target award due to the
incentive compensation plan result and his strong performance review for 2014. The award was based on the
corporate incentive compensation plan result of 135.9%, as described on page 51, and an individual multiplier of
110%. The Compensation Committee’s decision to award an individual multiplier was based on Mr. Kleinfeld’s
53
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | Analysis of 2014 Compensation Decisions (continued)
extraordinary strategic leadership of the Company’s continuing transformation from a commodity-focused to a
combined value-add and globally-competitive commodity enterprise while, at the same time, driving year-over-year
operational performance in an extremely challenging environment. In determining the individual multiplier, the
Compensation Committee also considered the relative competitiveness of the CEO package and the mix of equity and
cash incentives.
Executive Vice President and Chief Financial Officer—Mr. Oplinger. In January 2014, Mr. Oplinger was granted
performance stock awards valued at $1,288,037 and stock options valued at $322,028, which was above the target
award due to his strong performance in 2013, which was his first year as Chief Financial Officer. Mr. Oplinger’s
annual incentive compensation award for 2014 of $849,375 was above the target award due to the incentive
compensation plan result and his strong performance review for 2014. The award was based on the corporate
incentive compensation plan result of 135.9%, as described on page 51, and an individual multiplier of 125%.
Mr. Oplinger received an 11% salary increase effective January 1, 2014 based on his performance in his new role
and to bring his salary closer to the median of the peer group.
Executive Vice President and Group President, Engineered Products and Solutions—Mr. Jarrault. In
January 2014, Mr. Jarrault was granted performance stock awards valued at $1,600,027 and stock options valued
at $400,014, which was above the target award based on his strong performance review in 2013. Mr. Jarrault’s
annual incentive compensation award for 2014 of $845,625 was above the target award due to the incentive
compensation plan result and his strong performance review for 2014. The award was based 50% on the corporate
incentive compensation plan result of 135.9%, as described on page 51, 50% on the incentive compensation plan
results for the Engineered Products and Solutions (EPS) group, which he leads, and an individual multiplier of
125%. The EPS group’s incentive compensation plan for 2014 had a similar design as the corporate plan and
similar financial metrics, except that the EPS IC plan also contained a revenue growth metric designed to incent
growth in the value-add businesses. The EPS group’s incentive compensation plan result for 2014 was 110% based
on the group’s strong contribution to the overall corporate results (see “Engineered Products and Solutions”
discussion on page 44) and the Compensation Committee’s exercise of discretion to increase the result from 58.3%
in recognition of the difficulty of the group’s targets in 2014 and its disciplined execution in improving its financial
performance year-over-year, while successfully working to acquire Firth Rixson and execute the initial phases of the
post-merger integration. Mr. Jarrault received a 10% salary increase effective January 1, 2014 based on his
performance and to bring his salary closer to the median of the peer group.
Executive Vice President, Chief Legal Officer and Secretary—Ms. Strauss. In January 2014, Ms. Strauss was
granted performance stock awards valued at $1,408,042 and stock options valued at $352,018, which was above
the target award due to her strong performance review in 2013. Ms. Strauss’ annual incentive compensation award
for 2014 of $844,618 was above the target award due to the incentive compensation plan result and her strong
performance review for 2014. The award was based on the corporate incentive compensation plan result of
135.9%, as described on page 51, and an individual multiplier of 110%.
Executive Vice President and Group President, Global Primary Products—Mr. Wilt. In January 2014, Mr. Wilt was
granted performance stock awards valued at $1,232,064 and stock options valued at $308,026, which was above the
target award based on his strong performance review in 2013. Mr. Wilt’s annual incentive compensation award for 2014
of $880,663 was above the target award due to the incentive compensation plan result and his strong performance in
2014, his first year as a Group President. The award was based 50% on the corporate incentive compensation plan result
of 135.9%, as described on page 51, 50% on the incentive compensation plan results for the Global Primary Products
(GPP) group, which he leads, and an individual multiplier of 125%. The GPP group’s incentive compensation plan for
2014 had the same design as the corporate plan and similar financial metrics. The GPP group’s incentive compensation
plan result for 2014 was 163.8% based on the group’s strong contribution to the overall corporate results (see “Global
Primary Products” discussion on page 45). Mr. Wilt received an 18% salary increase effective January 1, 2014 based on
his performance in his new role and to bring his salary closer to the median of the peer group.
54
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | 2014 Annual Cash Incentive Compensation
2014 Annual Cash Incentive Compensation
The corporate annual cash incentive compensation plan for 2014 was designed to achieve operating goals set at the
beginning of the year.
• 80% of the cash incentive formula was based on achieving financial targets for adjusted free cash flow
(33%), adjusted net income (40%) and average year-to-date DWC (7%); and
• 20% of the formula was based on achieving safety, environmental and diversity targets.
The formula award at the corporate level reflected a 135.9% achievement against these financial and nonfinancial goals. After establishing the targets for the financial measures, the payout ranges were set above and
below the target as shown in the table below:
• The steep curve to achieve 100% performance is intended to drive maximum effort.
• The payouts above target are aligned with achievement levels that ensure a strong return on the additional
incentive compensation paid.
• We believe this design helped drive our employees to exceed our performance goals in 2014.
2014 Annual Cash Incentive Compensation Plan Design, Targets and Results
Metric
($ in millions)
Financial Adjusted Free Cash Flow
Measures1
Defined Corporate Level Payout
Percentage
100%
0%
50% (Target) 150% 200%
$(500) $(350) $(210) $337
Formula
Result IC Result Weighting Awlard
$1,094
$21
121%
33%
40.0%
Adjusted Net Income
$(35)
$141
$317 $493
$669
$627
188%
40%
75.2%
29.9
29.4
28.9 27.9
26.9
30.2
0%
7%
0%
115.2%
0.323
0.320
200%
5%
5.0%2
454,000 362,800
141%
5%
7.0%
Average Year-to-Date DWC
NonFinancial
Measures Safety2
DART
Environment3
CO2 metric tons reduction
Diversity4
Executive level women, global
Executive level minorities, U.S.
Professional level women, global
Professional level minorities,
U.S.
0.340
0.332
181,000 300,000
21.0%
15.8%
26.4%
21.3%
16.1%
26.7%
22.3% 21.8%
17.1% 16.4%
27.7% 26.5%
150%
130%
67%
2.5%
2.5%
2.5%
3.7%
3.3%
1.7%
18.2%
18.5%
19.5% 18.1%
0%
2.5%
0%
8.7%
135.9%
TOTAL
100%
Foreign currency exchange rates and the price of aluminum on the LME were normalized to plan rates and prices to eliminate the effects of
fluctuation in such rates and prices, both of which are factors outside management’s control. See “Attachment C—Calculation of
Financial Measures” for calculation of financial measures and for the definition of Adjusted Free Cash Flow and Adjusted Net Income. The
threshold payout is 0% for the financial metrics and 50% for the non-financial metrics. The maximum payout for each metric is 200%. For
performance between defined levels, the payout is interpolated.
1 80% of the cash incentive formula was based on achieving financial targets for adjusted free cash flow, adjusted net income and
average year-to-date DWC. We achieved a payout of 115.2% for financial metrics in 2014. For more information on the target setting
for the financial metrics, see page 48.
55
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | 2014 Annual Cash Incentive Compensation (continued)
2 Safety targets included a reduction in the DART (Days Away, Restricted and Transfer) rate, which measures injuries and illnesses that
involve one or more days away from work per 100 full-time workers and days in which work is restricted or employees are transferred to
another job due to injury per 100 full-time workers. Performance against this metric exceeded the maximum, but the payout was
reduced by 50% because of a work-related fatality during the year.
3 The environmental target highlights our commitment to reduce CO2 emissions in 2014 and make progress against our 2030
environmental goals. Performance against this metric was 141% of target in 2014.
4 Diversity targets were established to increase the representation of executive and professional women on a global basis and to increase
the representation of minority executives and professionals in the United States. In 2014, we exceeded the representation targets at the
executive level but fell short of the targets at the professional level.
Calculation of Annual Cash Incentive Compensation for Each Named Executive Officer. The calculation of annual
cash incentive compensation awards for the named executive officers is shown in the following table and described
below.
Target
Award ($)
Officer
Plan
Payout
(%)
Individual
Performance
Multiplier (%)
Formula
Award ($)
Klaus Kleinfeld
$2,160,000
135.9%
110%
$3,228,984
William F. Oplinger
$ 500,000
135.9%
125%
$ 849,375
Olivier M. Jarrault
$ 550,000
123.0%
125%
$ 845,625
Audrey Strauss
$ 565,000
135.9%
110%
$ 844,618
Robert G. Wilt
$ 470,000
149.9%
125%
$ 880,663
Target Award: Mr. Kleinfeld’s 2014 target award was calculated at 150% of his salary, and the other named
executive officers’ awards were targeted at 100% of their salaries.
Plan Payout: Mr. Kleinfeld’s, Mr. Oplinger’s and Ms. Strauss’ respective plan payouts were based 100% on
corporate performance; the plan payout for Mr. Jarrault was based 50% on corporate performance and 50% on the
Engineered Products and Solutions group performance; and the plan payout for Mr. Wilt was based 50% on
corporate performance and 50% on the Global Primary Products group performance.
Individual Performance Multiplier: All of the named executive officers received above-target multipliers based on
strong performance reviews in 2014.
Formula Award is the product of the target award, the plan payout, and the individual multiplier.
2014 Equity Awards: Stock Options and Performance-Based Restricted Share Units
Long-term stock incentives are performance-based. We grant long-term stock awards to align executives’ interests
with those of shareholders, link compensation to stock price appreciation over a multi-year period and support the
retention of our management team. In January 2014, stock awards were made to all the named executive officers.
We provide two types of annual equity awards to the named executive officers:
• 20% of the value of equity awards for each of our named executive officers is granted in the form of stock
options. We believe that stock options further align management’s interests with those of our shareholders
because the options have no value unless the stock price increases. Stock options vest ratably over a threeyear period (one-third vests each year on the anniversary of the grant date) and if unexercised, will expire the
earlier of ten years from the date of grant or five years after retirement.
• 80% of the value of equity awards for each of our named executive officers is granted in the form of
performance-based restricted share units. Performance is measured as the three-year average achievement
against annual targets for revenue growth and adjusted EBITDA margin. As long as the aluminum industry
continues to be affected by the volatility of aluminum prices based on the LME, the Compensation
Committee believes that setting annual targets within the three-year LTI plan, which is derived from the
Company’s plan for long-term profitable growth (which includes three-year targets that have been
56
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | 2014 Equity Awards (continued)
announced publicly for each of the business groups), best holds management accountable for what they can
control. Earned performance-based restricted share units will be converted into shares of Alcoa common
stock three years from the date of the grant if the executive is still actively employed by the Company.
Performance-based restricted share units are not convertible into Alcoa shares if an executive leaves the
Company (other than to retire) before the units vest.
Performance-based restricted share units support longer-term operational targets, which differ from the financial
metrics in our annual cash incentive plan. The named executive officers plus 34 other executives were eligible in
2014 to receive performance-based long-term stock incentives because they are in positions to have the most
influence over the Company’s financial performance.
The number of performance-based restricted share units earned at the end of the three-year plan has been and will
be determined as follows, based on the average of the annual payout percentages over the three-year period:
• 1/3 of the award was based on performance against the 2014 targets, which was earned at 136.2% (see
table below),
• 1/3 of the award will be based on performance against the targets to be established for 2015, and
• 1/3 of the award will be based on performance against the targets to be established for 2016.
2014-2016 Performance-Based Equity Design and Results for 2014*
Payout Percentage
100%
50%
(Target)
150%
Performance Measure
(%)
0%
Revenue Growth
0.5%
1.6%
2.7%
4.5%
8.1%
2.73%
100.8%
Adjusted EBITDA Margin
8.3%
9.9%
11.6%
13.1%
14.7%
13.04%
148.0%
200%
TOTAL
2014
Result
Plan
Result
Weighting
25%
% of 1/3 of
Target Award
earned in 2014
25.2%
75%
111.0%
100%
136.2%
* The figures in the “2014 Result” and “Plan Result” columns were rounded to one decimal place for the purposes of the table
presentation. However, the figures in the “% of 1/3 of Target Award earned in 2014” column were calculated based on the unrounded
figures.
For each year, a minimum performance level will also be established. For performance below that level, the portion
of the award subject to performance criteria in that year will be forfeited and will not carry over into any future
performance period.
As with the annual cash IC plan, we use a steep curve to achieve 100% performance, which is intended to drive
maximum effort. We believe this design helped us to exceed our performance goals in 2014.
Other Compensation Policies and Practices
We highlight below certain executive compensation practices, both the practices we have implemented to incentivize
performance and certain other practices that we have not implemented because we do not believe they would serve
shareholders’ long-term interests.
What We Do
We Pay for Performance. We link our executives’ compensation to measured performance in key financial and nonfinancial areas. As noted above, performance against rigorous adjusted free cash flow, average year-to-date DWC,
adjusted net income, adjusted EBITDA margin, revenue growth, safety, environmental, and workplace diversity
targets is measured in determining compensation. These metrics, coupled with the individual performance
multipliers, incentivize individual, business group, and corporate performance. The Company’s strategic priorities
are reflected in these compensation metrics.
We Consider Peer Groups in Establishing Compensation. Our aluminum industry peers do not provide an adequate
basis for compensation comparison purposes because there are too few of them, they are all located outside of the
United States and they do not disclose sufficient comparative compensation data. As previously stated under the
57
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | Other Compensation Policies and Practices (continued)
section “Analysis Of 2014 Compensation Decisions,” we developed a more focused peer group for 2014, consisting
of 20 Materials and Industrials companies that are relevant to and aligned with Alcoa’s upstream (materials) and
midstream and downstream (industrials) businesses to help set target total direct compensation for the CEO. We
continued to use Towers Watson’s broad-based survey data for companies with revenues between $15 billion and
$50 billion (excluding financial companies) to help estimate competitive compensation for other executive level
positions. We target our compensation structure at the median of each of these groups of companies.
We Review Tally Sheets. The Compensation Committee reviews tally sheets that summarize various elements of
historic and current compensation for each named executive officer in connection with making annual
compensation decisions. This information includes compensation opportunity, actual compensation realized and
wealth accumulation. We have found that the tally sheets help us synthesize the various components of our
compensation program in making decisions.
We Have Robust Stock Ownership Guidelines. Our stock ownership requirements further align the interests of
management with those of our shareholders by requiring executives to hold substantial equity in Alcoa until
retirement. Our stock ownership guidelines require that the CEO retain equity equal in value to six times his base
salary and that each of the other named executive officers retain equity equal in value to three times salary. These
guidelines reinforce management’s focus on long-term shareholder value and commitment to the Company. Until
the stock ownership requirements are met, each executive is required to retain until retirement 50% of shares
acquired upon vesting of restricted share units or upon exercise of stock options that vest after March 1, 2011, after
deducting shares used to pay for the option exercise price and taxes. Unvested restricted share units, unexercised
stock options and any stock appreciation rights do not count towards meeting the stock ownership requirement.
Those who have been named executive officers since 2011, when this policy was last amended, namely Messrs.
Kleinfeld and Jarrault, met the guidelines as of January 31, 2015. Messrs. Oplinger and Wilt and Ms. Strauss, who
were appointed to their current positions within the past three years, have not yet met the guidelines.
We Schedule and Price Stock Option Grants to Promote Transparency and Consistency. Alcoa grants stock
options to named executive officers at a fixed time every year—generally the date of the Board and Committee
meetings in January. Such meetings occur after we release earnings for the prior year and the performance of the
Company for that year is publicly disclosed. The exercise price of employee stock options is the closing price of our
stock on the grant date, as reported on the New York Stock Exchange.
We Have Clawback Policies Incorporated into Our Incentive Plans. The 2009 and 2013 Alcoa Stock Incentive
Plans, the Incentive Compensation Plan for annual cash incentives and the Alcoa Internal Revenue Code
Section 162(m) Compliant Annual Cash Incentive Compensation Plan each contain provisions permitting recovery of
performance-based compensation. These provisions are explained in “Corporate Governance—Recovery of
Incentive Compensation on page 29.”
We Have Double-Trigger Equity Vesting in the Event of a Change in Control. Awards granted under the 2009
Alcoa Stock Incentive Plan after February 15, 2011 and all awards granted under the 2013 Alcoa Stock Incentive
Plan do not immediately vest upon a change in control if a replacement award is provided. The replacement award
will vest immediately if, within a two-year period following a change in control, a plan participant is terminated
without cause or leaves for good reason. Performance-based stock awards will be converted to time-vested stock
awards upon a change in control under the following terms: (i) if 50% or more of the performance period has been
completed as of the date on which the change in control has occurred, then the number of shares or the value of
the award will be based on actual performance completed as of the date of the change in control; or (ii) if less than
50% of the performance period has been completed as of the date on which the change in control has occurred,
then the number of shares or the value of the award will be based on the target number or value.
We Pay Reasonable Salaries to Our Senior Executives. Each named executive officer receives a salary that is
determined after consideration of the median of the peer group for his or her position (as explained above and in
Attachment B), performance and other factors. We pay salaries to the named executive officers to ensure an
58
2015 PROXY STATEMENT
Executive Compensation | Compensation Discussion and Analysis | Other Compensation Policies and Practices (continued)
appropriate level of fixed compensation that enables the attraction and retention of highly skilled executives and
mitigates the incentive to assume highly risky business strategies to maximize annual cash incentive compensation.
We Provide Appropriate Benefits to Our Senior Executives. The named executive officers participate in the same
benefit plans as our salaried employees. We provide retirement and benefit plans to senior executives for the same
reasons we provide them to employees—to provide a competitive compensation package that offers an opportunity
for retirement, savings and health and welfare benefits. Retirement plans for senior executives generally pay the
same formula amount as retirement plans for salaried employees, other than for Mr. Kleinfeld. Mr. Kleinfeld has an
individual arrangement offset by retirement benefits provided by a prior employer. See discussion relating to “2014
Pension Benefits” on page 66.
We Have a Conservative Compensation Risk Profile. The Compensation Committee evaluates the risk profile of our
compensation programs when establishing policies and approving plan design, and the Board of Directors annually
considers risks related to compensation in its oversight of enterprise risk management. These evaluations noted
numerous ways in which compensation risk is effectively managed or mitigated, including the following factors:
•
•
•
•
•
•
•
•
•
A balance of corporate and business unit weighting in incentive compensation plans;
A balanced mix between short-term and long-term incentives;
Caps on incentives;
Use of multiple performance measures in the annual cash incentive compensation plan and the equity
incentive plan, with a focus on operational targets to drive free cash flow and profitability;
Discretion retained by the Compensation Committee to adjust individual awards;
Stock ownership guidelines requiring holding substantial equity in the Company until retirement;
Clawback policies applicable to all forms of incentive compensation;
Anti-hedging provisions in the Insider Trading Policy; and
Restricting stock options to 20% of the value of equity awards to senior officers.
In addition, (i) no business unit has a compensation structure significantly different from that of other units or that
deviates significantly from the Company’s overall risk and reward structure; (ii) unlike financial institutions involved
in the financial crisis, where leverage exceeded capital by many multiples, the Company has a conservative leverage
policy with a target of keeping the debt-to-capital ratio in the range of 30% to 35%; and (iii) compensation
incentives are not based on the results of speculative trading. In 1994, the Board of Directors adopted resolutions
creating the Strategic Risk Management Committee with oversight of hedging and derivative risks and a mandate to
use such instruments to manage risk and not for speculative purposes. As a result of these evaluations, we have
determined that it is not reasonably likely that risks arising from our compensation and benefit plans would have a
material adverse effect on the Company. See discussion related to “The Board’s Role in Risk Oversight” on page 22.
We Consider Tax Deductibility When Designing and Administering Our Incentive Compensation. Section 162(m)
of the Internal Revenue Code limits deductibility of certain compensation to $1.0 million per year for the Company’s
Chief Executive Officer and each of the three other most highly compensated executive officers (other than the Chief
Financial Officer) who are employed at year-end. If certain conditions are met, performance-based compensation
may be excluded from this limitation. Our shareholder-approved incentive compensation plans are designed with the
intention that performance-based compensation paid under them may be eligible to qualify for deductibility under
Section 162(m) and, in making compensation decisions, the Compensation Committee considers the potential
deductibility of the proposed compensation. However, the Compensation Committee retains flexibility in
administering our compensation programs and may exercise discretion to authorize awards or payments that it
deems to be in the best interests of the Company and its shareholders which may not qualify for tax deductibility.
The Compensation Committee Retains an Independent Compensation Consultant. The Compensation Committee
has authority under its charter to retain its own advisors, including compensation consultants. In 2014, the
Committee directly retained Pay Governance LLC, which is independent and without conflicts of interest with the
Company. See “Corporate Governance—Compensation Consultants” on page 28. Pay Governance LLC provided
advice as requested by the Committee, on the amount and form of certain executive compensation components,
59
2015 PROXY STATEMENT
Executive Compensation
(continued)
including, among other things, executive compensation best practices, insights concerning SEC and say-on-pay
policies, analysis and review of the Company’s compensation plans for executives and advice on setting the CEO’s
compensation. Pay Governance LLC also provided advice on the Compensation Discussion and Analysis in this
proxy statement. Pay Governance LLC did not provide any services to the Company other than the services provided
directly to the Compensation Committee. We use comparative compensation data from the proxy statements of the
CEO peer group of 20 companies and survey data from Towers Watson to help evaluate whether our compensation
programs are competitive with the market. The latter is not customized based on parameters developed by Towers
Watson. Towers Watson does not provide any advice or recommendations to the Compensation Committee on the
amount or form of executive or director compensation.
What We Don’t Do
We Do Not Pay Dividend Equivalents on Stock Options and Unvested Restricted Share Units. Dividend
equivalents are not paid currently on any restricted share units (including performance share units), but are accrued
and paid only if the award vests. Dividend equivalents that accrue on restricted share units will be calculated at the
same rate as dividends paid on the common stock of the Company. Dividend equivalents are not paid on stock
options.
We Do Not Allow Share Recycling. The 2009 and 2013 Alcoa Stock Incentive Plans prohibit share recycling.
Shares tendered in payment of the purchase price of a stock option award or withheld to pay taxes may not be
added back to the available pool of shares.
We Do Not Allow Repricing of Underwater Stock Options (including cash-outs). The 2009 and 2013 Alcoa Stock
Incentive Plans prohibit repricing, including cash-outs.
We Do Not Allow Hedging or Pledging of Company Stock. Short sales of Alcoa securities (a sale of securities which
are not then owned) and derivative or speculative transactions in Alcoa securities by our directors, officers and
employees are prohibited. No director, officer or employee or any designee of such director, officer or employee is
permitted to purchase or use financial instruments (including prepaid variable forward contracts, equity swaps,
collars, and exchange funds) that are designed to hedge or offset any decrease in the market value of Alcoa
securities. Directors and officers subject to Section 16 of the Securities Exchange Act of 1934 are prohibited from
holding Alcoa securities in margin accounts, pledging Alcoa securities as collateral, or maintaining an automatic
rebalance feature in savings plans, deferred compensation or deferred fee plans.
We Do Not Have Excise Tax Gross-Ups for New Participants in Our Change in Control Severance Plan. The
Change in Control Severance Plan provides that no excise or other tax gross-ups will be paid, and severance
benefits will be available only upon termination of employment for “good reason” by an officer or without cause by
the Company, with regard to any new plan participants after January 1, 2010. For a discussion of the Change in
Control Severance Plan, see “Potential Payments Upon Termination or Change in Control” on page 68.
We Do Not Enter into Multi-Year Employment Contracts. It is the policy of the Compensation Committee not to
enter into multi-year employment contracts with senior executives providing for guaranteed payments of cash or
equity compensation.
We Do Not Provide Significant Perquisites. Consistent with our executive compensation philosophy and our
commitment to emphasize performance-based pay, we limit the perquisites that we provide to our executive officers,
including the named executive officers, to perquisites that serve reasonable business purposes. (For the named
executive officers, see “Notes to 2014 Summary Compensation Table—Column (i)—All Other Compensation” on
page 63.) For the Chief Executive Officer only, the Company provides for his personal use of Company aircraft and a
Company car. The transportation benefits provided to the Chief Executive Officer are for security and efficiency
reasons and to focus as much of his personal time on Company business as possible. No tax gross-ups are provided
on these perquisites.
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2015 PROXY STATEMENT
Executive Compensation | 2014 Summary Compensation Table
2014 Summary Compensation Table
Name and
Principal Position
(a)
Year
(b)
Salary
($)
(c)
Bonus
($)
(d)
Stock
Awards
($)
(e)
Option
Awards
($)
(f)
Change in
Pension Value
and NonNon-Equity
Qualified
Incentive
Deferred
Plan
Compensation
All Other
Compensation
Earnings
Compensation
($)
($)
($)
(g)
(h)
(i)
Total
($)
(j)
Klaus Kleinfeld
Chairman and Chief
Executive Officer
2014 $1,440,000 $
0 $6,960,058 $1,740,011
$3,228,984
$4,568,900
$220,569
$18,158,522
2013 $ 1,440,000 $
0 $ 6,560,011 $ 1,640,016
$ 3,177,360
$ 1,788,146
$ 220,273
$ 14,825,806
2012 $ 1,440,000 $
0 $ 6,080,033 $ 1,520,013
$ 2,484,000
$ 2,599,289
$ 203,566
$ 14,326,901
William F. Oplinger
Executive Vice
President and
Chief Financial
Officer
2014 $ 500,000 $
2013 $ 436,875 $
0 $1,288,037 $ 322,028
0 $ 800,088 $ 202,138
$ 849,375
$ 650,557
$ 413,526
$
90,220
$ 30,000
$ 26,213
$ 3,402,966
$ 2,206,091
Olivier M. Jarrault
Executive Vice
President and
Group President,
Engineered
Products
and Solutions
2014 $ 550,000 $
2013 $ 500,000 $
2012 $ 500,000 $
0 $1,600,027 $ 400,014
0 $ 1,472,038 $ 368,010
0 $ 1,408,037 $ 352,021
$ 845,625
$ 848,900
$ 677,400
$ 510,445
$ 114,162
$ 343,887
$ 25,600
$ 15,300
$ 20,000
$ 3,931,711
$ 3,318,410
$ 3,301,345
Audrey Strauss
Executive Vice
President, Chief
Legal Officer and
Secretary
2014 $ 565,000 $
0 $1,408,042 $ 352,018
2013 $ 565,000 $
0 $ 1,408,013 $ 352,016
2012 $ 376,667 $1,500,000 $
0 $
0
$ 844,618
$ 914,227
$ 475,240
$
$
$
0
0
0
$ 78,277
$ 65,107
$ 33,900
$ 3,247,955
$ 3,304,363
$ 2,385,807
Robert G. Wilt
Executive Vice
President and
Group President,
Global Primary
Products
2014 $ 470,000 $
$ 880,663
$ 492,492
$ 15,600
$ 3,398,845
0 $1,232,064 $ 308,026
Notes to 2014 Summary Compensation Table
Column (a)—Named Executive Officers. The named executive officers include the chief executive officer, the chief financial
officer, and the three other most highly compensated executives who were serving as executive officers at December 31,
2014. Under applicable SEC rules, we have excluded Mr. Wilt’s compensation for 2012 and 2013 and Mr. Oplinger’s
compensation for 2012, as they were not named executive officers in those years. Ms. Strauss joined the Company in May
2012. For purposes of determining the most highly compensated executive officers, the amounts shown in column (h) were
excluded.
Column (c)—Salary. This column represents each of the named executive officer’s annual base salary. Effective January 1,
2014, the Compensation Committee approved salary increases for Messrs. Oplinger, Jarrault and Wilt based on their strong
performance in the previous year and to bring their salaries closer to market. Further details are included in the “Analysis of
2014 Compensation Decisions” section on page 53.
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2015 PROXY STATEMENT
Executive Compensation | 2014 Summary Compensation Table
(continued)
Columns (e) and (f)—Stock Awards and Option Awards. The value of stock awards in column (e) and stock options in column
(f) equals the grant date fair value, which is calculated in accordance with the Financial Accounting Standards Board’s
Accounting Standards Codification Topic 718, Compensation—Stock Compensation. Performance share awards granted in
January 2014 are shown at 100% of target. The fair value of the performance awards on the date of grant was as follows:
Grant Date Value of
Performance Award
At Target
At Maximum
$6,960,058
$13,920,116
$1,288,037
$ 2,576,074
$1,600,027
$ 3,200,054
$1,408,042
$ 2,816,084
$1,232,064
$ 2,464,128
Name
Klaus Kleinfeld
William F. Oplinger
Olivier M. Jarrault
Audrey Strauss
Robert G. Wilt
Stock awards are valued at the market price of a share of stock on the date of grant as determined by the closing
price of Alcoa’s common stock. At the date of grant on January 16, 2014, the closing price of our common stock
was $11.04. At December 31, 2014, the closing price of our common stock was $15.79.
For a discussion of the assumptions used to estimate the fair value of stock awards and stock options, please refer to the
following sections in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014: “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—
Stock-based Compensation” on pages 84 to 85 and the disclosures on “Stock-Based Compensation” in Notes A and R to
the Consolidated Financial Statements on pages 99 and 137 to 138, respectively.
Column (g)—Non-Equity Incentive Plan Compensation. Reflects cash payments made under the annual Incentive
Compensation Plan for 2014 performance. See the “2014 Annual Cash Incentive Compensation” section starting on
page 55.
Column (h)—Change in Pension Value and Nonqualified Deferred Compensation Earnings. The amount shown
reflects the aggregate change in the actuarial present value of each named executive officer’s accumulated benefit
under all defined benefit and actuarial plans, including supplemental plans, from December 31, 2013 to
December 31, 2014. Approximately 38% of the increase in Mr. Kleinfeld’s pension value was attributable to
changes in the discount rate, mortality and exchange rate assumptions used for measurement of pension
obligations from 2013 to 2014. Ms. Strauss has no change in pension value because she is not eligible to participate
in the defined benefit pension plan, which was closed to employees hired after March 1, 2006.
Earnings on deferred compensation are not reflected in this column because the return on earnings is calculated in the
same manner and at the same rate as earnings on externally managed investments of salaried employees participating in
the tax-qualified 401(k) plan, and dividends on Company stock are paid at the same rate as dividends paid to shareholders.
62
2015 PROXY STATEMENT
Executive Compensation | 2014 Summary Compensation Table
(continued)
Column (i)—All Other Compensation.
Company Contributions to Savings Plans. The named executive officers are eligible to participate in the Alcoa
Retirement Savings Plan and the Deferred Compensation Plan for U.S. salaried employees. Under our 401(k) taxqualified retirement savings plan, participating employees may contribute up to 25% of base pay on a pre-tax
basis and up to 10% on an after-tax basis. Alcoa matches 100% of employee pre-tax contributions up to 6% of
base pay. If a named executive officer’s contributions to the savings plan exceed the limit on contributions
imposed by the Internal Revenue Code, the executive may elect to have the amount over the limit “spill over” into
the nonqualified Deferred Compensation Plan. For U.S. salaried employees hired after March 1, 2006, including
Mr. Kleinfeld and Ms. Strauss, the Company also makes an Employer Retirement Income Contribution in an
amount equal to 3% of salary and annual incentive compensation eligible for contribution to the Alcoa Retirement
Savings Plan. In 2014, the Company’s contributions were as follows:
Name
Klaus Kleinfeld
William F. Oplinger
Olivier M. Jarrault
Audrey Strauss
Robert G. Wilt
Company Matching
Contribution
Savings
Def. Comp.
Plan
Plan
$15,600
$70,800
$15,600
$14,400
$15,600
$
0
$15,600
$18,300
$15,600
$
0
3% Retirement
Contribution
Savings
Def. Comp.
Plan
Plan
$7,800
$
0
$
0
$
0
$
0
$
0
$7,800
$36,577
$
0
$
0
Total
Company
Contribution
$94,200
$30,000
$15,600
$78,277
$15,600
Company aircraft, car service and security. In 2014, the incremental cost of Mr. Kleinfeld’s personal use of
Company aircraft was valued at $47,623. The incremental cost for the use of the Company aircraft is calculated
based on the variable costs to the Company, including fuel costs, mileage, trip-related maintenance, universal
weather monitoring costs, on-board catering, landing and ramp fees and other miscellaneous variable costs.
Fixed costs, which do not change based on usage, such as pilot salaries, the lease costs of the Company aircraft
and the cost of maintenance not related to trips, are excluded. Also in 2014, Mr. Kleinfeld had personal use of a
Company car and driver valued at $66,142. Personal use of a Company car includes Mr. Kleinfeld’s commute to
and from his home in Westchester County, New York and Alcoa’s office in New York City. Additionally, in 2014,
an independent security review determined that there was a bona fide business-related security concern
regarding the safety and security of our CEO. Based on the recommendations of this assessment, the Company
upgraded some security features of the CEO’s personal residence at a cost of $12,604 in 2014.
Charitable Contributions. In 2014, the Alcoa Foundation matched $10,000 in contributions made by Mr. Jarrault
in 2013 and 2014 to an approved charitable organization on which he serves as an advisory board member,
pursuant to the Foundation’s nonprofit board placement program, which supports thought leadership and skillsbased volunteerism by Alcoa employees.
63
2015 PROXY STATEMENT
Executive Compensation
(continued)
2014 Grants of Plan-Based Awards
Name
(a)
Grant
Date
(b)
Klaus Kleinfeld
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards1
Threshold
Target Maximum4
($)
($)
($)
(c)
(d)
(e)
All Other
Stock
Awards:
Estimated Future Payouts
Number
Under Equity Incentive Plan of Shares
Awards2
of Stock
Threshold Target Maximum or Units
(#)
(#)
(#)
(#)
(f)
(g)
(h)
(i)
All Other
Option
Awards:
Number of
Securities
Underlying
Options3
(#)
(j)
Exercise
or Base
Price of
Option
Awards
($/sh)
(k)
2014
Grant
Date Fair
Value of
Stock and
Option
Awards
($)
(l)
$1,080,000 $2,160,000 $6,480,000
1/16/2014
William F. Oplinger
0
630,440 1,260,880
612,680
$11.04 $8,700,069
0
116,670
233,340
113,390
$11.04 $1,610,065
0
144,930
289,860
140,850
$11.04 $2,000,041
0
127,540
255,080
123,950
$11.04 $1,760,060
0
111,600
223,200
108,460
$11.04 $1,540,090
$ 250,000 $ 500,000 $1,500,000
1/16/2014
Olivier M. Jarrault
$ 275,000 $ 550,000 $1,650,000
1/16/2014
Audrey Strauss
$ 282,500 $ 565,000 $1,695,000
1/16/2014
Robert G. Wilt
$ 235,000 $ 470,000 $1,410,000
1/16/2014
1 2014 annual cash incentive awards made under the Incentive Compensation Plan, see “Compensation Discussion and Analysis—2014
Annual Cash Incentive Compensation” on page 55.
2 Performance equity awards, in the form of restricted share units, granted under the 2013 Alcoa Stock Incentive Plan. See “Compensation
Discussion and Analysis—2014 Equity Awards: Stock Options and Performance-Based Restricted Share Units” on page 56.
3 Time-vested stock options granted under the 2013 Alcoa Stock Incentive Plan, which vest ratably over a 3-year period and terminate
the earlier of 10 years after grant or 5 years after retirement.
4 The maximum award under the 2014 cash incentive compensation plan formula is 200% of target. However, the Compensation and
Benefits Committee has retained discretion to reduce the calculated award to zero or increase the calculated award by up to 150% of
the calculated amount. The maximum amount of the award shown in this column is 150% of 200% to show the maximum discretionary
amount that could possibly be awarded.
Grants of Plan-Based Awards (Actual Awards)
The Grants of Plan-Based Awards table sets forth the 2014 cash incentive and equity incentive opportunity for the
named executive officers. The 2014 awards targets and performance are discussed in “Compensation Discussion
and Analysis” beginning on page 40.
Mr. Kleinfeld. On January 16, 2014, Mr. Kleinfeld received an annual grant of 612,680 stock options and a grant of
performance equity with a target amount of 630,440 restricted share units. The earned amount of the first third of
the performance equity award was 286,221 restricted share units. He was paid cash incentive compensation for
2014 in the amount of $3,228,984.
Mr. Oplinger. On January 16, 2014, Mr. Oplinger received an annual grant of 113,390 stock options and a grant of
performance equity with a target amount of 116,670 restricted share units. The earned amount of the first third of
the performance equity award was 52,969 restricted share units. He was paid cash incentive compensation for
2014 in the amount of $849,375.
Mr. Jarrault. On January 16, 2014, Mr. Jarrault received an annual grant of 140,850 stock options and a grant of
performance equity with a target amount of 144,930 restricted share units. The earned amount of the first third of
the performance equity award was 65,799 restricted share units. He was paid cash incentive compensation for
2014 in the amount of $845,625.
Ms. Strauss. On January 16, 2014, Ms. Strauss received an annual grant of 123,950 stock options and a grant of
performance equity with a target amount of 127,540 restricted share units. The earned amount of the first third of
the performance equity award was 57,905 restricted share units. She was paid cash incentive compensation for
2014 in the amount of $844,618.
64
2015 PROXY STATEMENT
Executive Compensation | 2014 Grants of Plan-Based Awards
(continued)
Mr. Wilt. On January 16, 2014, Mr. Wilt received an annual grant of 108,460 stock options and a grant of
performance equity with a target amount of 111,600 restricted share units. The earned amount of the first third of
the performance equity award was 50,667 restricted share units. He was paid cash incentive compensation for
2014 in the amount of $880,663.
2014 Outstanding Equity Awards at Fiscal Year-End
Option Awards
Name
(a)
Stock Awards
Equity
Incentive
Plan
Equity
Awards:
Incentive
Number of
Plan
Unearned
Awards:
Shares,
Number of
Number of
Number of
Number of Market Value Units or
Securities of
Securities
Securities
Shares or of Shares or
Other
Underlying
Underlying
Underlying
Units of
Units of
Rights
Unexercised
Unexercised Unexercised Option
Stock That Stock That That Have
Options
Options
Unearned Exercise Option
Have Not
Have Not
Not
(Exercisable) (Unexercisable)
Options
Price Expiration
Vested
Vested
Vested
(#)
(#)
(#)
($)
Date
(#)
($)
(#)
(b)
(c)
(d)
(e)
(f)
—
—
$13.54
$8.33
1/26/2020
1/23/2015
(g)
(h)
(i)
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights That
Have Not Vested
($)
(j)
Klaus Kleinfeld
Stock Awards1
761,553
Performance
Options
886,320
400,000
—
—
Time-Vested
Options2
—
244,050
325,833
383,070
400,000
612,680
488,100
162,917
—
—
—
—
—
—
—
$11.04
$8.88
$10.17
$16.24
$8.33
1/16/2024
1/16/2023
1/20/2022
1/25/2021
1/23/2015
—
30,080
66,400
5,340
15,240
16,867
113,390
60,160
33,200
—
—
—
—
—
—
—
—
—
$11.04
$8.88
$10.17
$16.24
$13.54
$8.33
1/16/2024
1/16/2023
1/20/2022
1/25/2021
1/26/2020
1/23/2015
—
764
75,460
40,330
36,060
140,850
109,526
37,730
—
—
—
—
—
—
—
$11.04
$8.88
$10.17
$16.24
$13.54
1/16/2024
1/16/2023
1/20/2022
1/25/2021
1/26/2020
—
52,384
123,950
104,766
—
—
$11.04
$8.88
1/16/2024
1/16/2023
—
45,440
37,280
108,460
22,720
—
—
—
—
$11.04
$10.17
$13.54
1/16/2024
1/20/2022
1/26/2020
$12,024,922* 1,322,213
$20,877,743*
William F. Oplinger
Stock Awards1
Time-Vested
Options2
61,417
$969,774*
187,802
$2,965,394*
174,296
$2,752,134*
301,593
$4,762,153*
61,787
$975,617*
233,246
$3,682,954*
92,551
$1,461,380*
126,640
$1,999,646*
Olivier M. Jarrault
Stock Awards1
Time-Vested
Options2
Audrey Strauss
Stock Awards1
Time-Vested
Options2
Robert G. Wilt
Stock Awards1
Time-Vested
Options2
* The closing price of the company’s common stock on December 31, 2014 was $15.79.
1 Stock awards in column (g) include earned performance share awards and time-vested share awards. Stock awards in column (i) include
unearned performance share awards at the target amount. In January 2015, the payout for the second one-third of performance share
awards granted in January 2013 and the first one-third of performance share awards granted in January 2014 was determined to be
65
2015 PROXY STATEMENT
Executive Compensation | 2014 Outstanding Equity Awards at Fiscal Year-End
(continued)
136.2%. These amounts are shown at target in column (i) above. The full earned amount will be shown in column (g) in next year’s proxy
statement. All stock awards are in the form of restricted share units that vest three years from the date of grant and are paid in common
stock when they vest.
2 Time-vested and performance options include stock options granted at the regular annual grant date when the Compensation and
Benefits Committee meets in January. Options granted in 2009 have a term of six years. Options granted since 2009 have a term of ten
years. Options granted from 2009 vest over three years (1/3 each year).
2014 Option Exercises and Stock Vested
This table sets forth the actual value received by the named executive officers upon exercise of stock options or
vesting of stock awards in 2014.
Name
(a)
Option Awards
Number of
Shares
Value
Acquired
Realized on
on Exercise
Exercise
(#)
($)
(b)
(c)
Klaus Kleinfeld
1,600,000
William F. Oplinger
—
Olivier M. Jarrault
89,000
Audrey Strauss
—
Robert G. Wilt
16,867
11,004,320
—
310,885
—
147,418
Stock Awards
Number
of Shares
Value
Acquired
Realized
on Vesting
on Vesting
(#)
($)
(d)
(e)
561,590
6,536,908
13,886
161,633
59,125
688,215
—
14,240
—
165,754
2014 Pension Benefits
Name1
Klaus Kleinfeld
William F. Oplinger
Years of
Credited
Service
7.25
14.78
Plan Name(s)
Individual Agreement
Alcoa Retirement Plan
Excess Benefits Plan C
Total
Olivier M. Jarrault
Alcoa Retirement Plan
Excess Benefits Plan C
12.08
Total
Robert G. Wilt
Alcoa Retirement Plan
Excess Benefits Plan C
15.49
Total
Present Value
of
Accumulated
Benefits
$12,689,190
$ 337,594
$ 595,039
$ 932,633
$ 349,052
$ 1,279,201
$ 1,628,253
$ 440,714
$ 673,299
$ 1,114,013
Payments
During
Last
Fiscal
Year
N/A
N/A
N/A
N/A
1 Ms. Strauss does not appear in the table as she is not eligible to participate in the defined benefit pension plan, which was closed to
employees hired on or after March 1, 2006.
Valuation and Assumptions: For a discussion of the valuation method and assumptions applied in quantifying the
present value of the accumulated benefit, please refer to the following sections in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2014: “Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Critical Accounting Policies and Estimates—Pension and Other Postretirement Benefits”
on pages 83 to 84 and Note W to the Consolidated Financial Statements on pages 144 to 152.
Qualified Defined Benefit Plan. In 2014, Messrs. Oplinger, Jarrault and Wilt participated in the Alcoa Retirement
Plan. The Alcoa Retirement Plan is a funded, tax-qualified, non-contributory defined benefit pension plan that
66
2015 PROXY STATEMENT
Executive Compensation | 2014 Pension Benefits
(continued)
covers a majority of U.S. salaried employees. Benefits under the plan are based upon years of service and final
average earnings. Final average earnings include salary plus 100% of annual cash incentive compensation, and are
calculated using the average of the highest five of the last ten years of earnings (high consecutive five for Messrs.
Oplinger and Jarrault). The Alcoa Retirement Plan reflects compensation limits imposed by the U.S. tax code, which
was $260,000 for 2014. The base benefit payable at age 65 is 1.1% of final average earnings up to the Social
Security covered compensation limit plus 1.475% of final average earnings above the Social Security covered
compensation limit, times years of service. Benefits are payable as a single life annuity, a reduced 50% joint and
survivor annuity, or a reduced 75% joint and survivor annuity upon retirement.
Nonqualified Defined Benefit Plans. Messrs. Oplinger, Jarrault and Wilt participate in the Excess Benefits Plan C.
This plan is a nonqualified plan which provides for benefits that exceed the limits on compensation imposed by the
U.S. tax code. The benefit formula is identical to the Alcoa Retirement Plan formula. Benefits under the nonqualified
plan are payable as a reduced 50% joint and survivor annuity if the executive is married. Otherwise, the benefit is
payable as a single life annuity.
Individual Agreements. Mr. Kleinfeld is entitled to a supplemental retirement benefit payable annually after
retirement equal to the excess of the product of 4.35% multiplied by years of service multiplied by average final
compensation, over a retirement pension payable by Siemens AG (Mr. Kleinfeld’s previous employer).
Alcoa Retirement Savings Plan. For U.S. salaried employees hired on or after March 1, 2006, including
Mr. Kleinfeld and Ms. Strauss, the Company makes an Employer Retirement Income Contribution (ERIC) in an
amount equal to 3% of salary and annual incentive eligible for contribution to the Alcoa Retirement Savings Plan as
a pension contribution in lieu of a defined benefit pension plan, which was available to employees hired before
March 1, 2006. The Company contributed $7,800 to the accounts of Mr. Kleinfeld and Ms. Strauss in 2014. In
addition, all U.S. salaried employees, including the named executive officers, are eligible to receive a Company
matching contribution of 100% up to the first 6% of deferred salary. In 2014, the Company matching contribution
amount was $15,600 each for Messrs. Kleinfeld, Oplinger, Jarrault and Wilt and Ms. Strauss. These amounts are
included in the column “All Other Compensation” in the “2014 Summary Compensation Table” on page 61.
2014 Nonqualified Deferred Compensation
Name
(a)
Klaus Kleinfeld
William F. Oplinger
Olivier M. Jarrault
Audrey Strauss
Robert G. Wilt
Executive
Contributions
in 2014
($)
(b)
Registrant
Contributions
in 2014
($)
(c)
$70,800
$70,800
$89,400
$14,400
—
$18,300
—
—
$54,877
—
Aggregate
Earnings
in 2014
(d)
$201,574 E
$ 3,884 D
$ 25,457 E
$
320 D
—
$ 19,487 E
$
352 D
—
Aggregate
Withdrawals/
Distributions
($)
(e)
Aggregate Balance
at 12/31/2014
FYE
($)
(f)
—
$1,309,001
—
$ 303,387
—
—
—
—
$ 179,588
—
E—Earnings
D—Dividends on Alcoa common stock or share equivalents
The investment options under the nonqualified Deferred Compensation Plan are the same choices available to all
salaried employees under the Alcoa Retirement Savings Plan, and the named executive officers do not receive
preferential earnings on their investments. The named executive officers may defer up to 25% of their salaries in
total to the Alcoa Retirement Savings Plan and Deferred Compensation Plan and up to 100% of their annual cash
incentive compensation to the Deferred Compensation Plan.
67
2015 PROXY STATEMENT
Executive Compensation | 2014 Nonqualified Deferred Compensation
(continued)
To the extent the executive elects, the Company contributes matching contributions on employee base salary
deferrals that exceed the limits on compensation imposed by the U.S. tax code. In 2014, the Company matching
contribution amount was $70,800 for Mr. Kleinfeld, $14,400 for Mr. Oplinger and $18,300 for Ms. Strauss.
In addition, when the U.S. tax code limits on Employer Retirement Income Contributions (ERIC) to the Alcoa
Retirement Savings Plan are reached, the ERIC contributions are made into the Deferred Compensation Plan. In 2014,
the Company contributed $36,577 for Ms. Strauss. Mr. Kleinfeld does not receive these deferred compensation
contributions due to his individual pension agreement. Messrs. Oplinger, Jarrault and Wilt do not receive these
deferred compensation contributions because they participate in the Company’s defined benefit pension plan.
These amounts are included in the column “All Other Compensation” in the “2014 Summary Compensation Table”
on page 61.
The principal benefit to executives of the Deferred Compensation Plan is that U.S. taxes are deferred until the
investment is withdrawn, so that savings accumulate on a pre-tax basis. The Company also benefits from this
arrangement because it does not use its cash to pay the salaries or incentive compensation of the individuals who
have deferred receipt of these amounts. The Company may use this cash for other purposes until the deferred
account is paid to the individual upon termination of employment. All nonqualified pension and deferred
compensation are general unsecured assets of the Company until paid. Upon termination of employment, deferred
compensation will be paid in cash as a lump sum or in up to ten annual installments, depending on the individual’s
election, account balance and retirement eligibility.
Potential Payments Upon Termination or Change in Control
Executive Severance Agreements
Alcoa has entered into severance agreements with certain executives to facilitate transitioning key positions to suit
the timing needs of the Company. The agreements provide for higher severance benefits than the Alcoa severance
plan for salaried employees, but these agreements also require the executives to agree to a two-year noncompetition and non-solicitation provision. Messrs. Oplinger, Jarrault and Wilt and Ms. Strauss have executive
severance agreements, which provide that, if their employment is terminated without cause, they will receive two
years’ salary, continued health care benefits for a two-year period, and two additional years of pension accrual. They
will also receive a lump sum severance payment of $50,000 upon execution of a general release of legal claims
against the Company prior to the scheduled payment date. No severance payments will be made under these
agreements unless the general release is signed. Mr. Kleinfeld has a similar severance agreement containing the
terms described above except that it provides for two years’ salary and annual cash incentive at the target amount. If
severance payments or benefits are payable under the Change in Control Severance Plan, described below, no
payments will be paid under the executive severance agreements.
Estimated
net present
value of cash
severance
payments
Estimated
net present
value of
additional
pension
credits
Estimated
net present
value of
continued
health care
benefits
Total
Klaus Kleinfeld
$7,087,143
$3,081,547
$38,317
$10,207,007
William F. Oplinger
$1,027,381
$
83,800
$37,805
$ 1,148,986
Olivier M. Jarrault
$1,125,119
$ 207,200
$38,317
$ 1,370,636
Audrey Strauss
$1,154,440
$
66,266
$
693
$ 1,221,399
Robert G. Wilt
$ 968,738
$
98,500
$35,716
$ 1,102,954
Name
68
2015 PROXY STATEMENT
Executive Compensation | Potential Payments Upon Termination or Change in Control
(continued)
Potential Payments upon a Change in Control
In 2002, the Board of Directors approved a Change in Control Severance Plan for officers and other key executives
designated by the Compensation and Benefits Committee. The plan is designed to retain key executives during the
period that a transaction is being negotiated or during a period in which a hostile takeover is being attempted and to
ensure the impartiality of the key negotiators for the Company. The Change in Control Severance Plan provides each
of the named executive officers with termination compensation if their employment is terminated without cause or
terminated by them in certain circumstances, in either case within three years after a change in control of the
Company. Mr. Kleinfeld, who is in a key position to negotiate or handle a change in control transaction, may elect, if
he has not been terminated or left for good reason sooner, to leave the Company during a window period of 30 days
which begins six months after a change in control. The Compensation and Benefits Committee froze this provision of
the Change in Control Severance Plan as of January 1, 2010, and no additional employees will be entitled to this
provision of the plan, but rather must be terminated or leave for good reason to be eligible to receive a payment
under the plan. Messrs. Oplinger, Jarrault and Wilt and Ms. Strauss are currently subject to this requirement.
Compensation provided by the plan includes: a cash payment equal to three times annual salary plus target annual
cash incentive compensation; continuation of health care benefits for three years; growth on pension credits for
three years; reimbursement of excise taxes; reimbursement for additional tax liability resulting from reimbursement
of excise taxes; and six months outplacement.
The Compensation and Benefits Committee determined to freeze the reimbursement of excise taxes and the
reimbursement for additional tax liability resulting from reimbursement of excise taxes effective for new plan
participants on and after January 1, 2010. Mr. Oplinger, who became an officer in 2013, Ms. Strauss, who was
hired in 2012, and Mr. Wilt, who became an officer in 2013, are not eligible to receive these benefits.
The Compensation and Benefits Committee periodically reviews market data, which indicate that most companies
have such plans or adopt such plans when a change in control is imminent. The amounts shown in the table below
include the estimated net present value of accelerated vesting of stock options and stock awards. All awards made
since February 2011 do not vest immediately upon a change of control if a replacement award is provided.
Change in Control Severance Benefits
Name
Estimated net
present value of
change in control
severance and benefits
Potential excise tax
liability and gross-up
for excise taxes
Total
Klaus Kleinfeld
$20,823,754
$ 8,540,143
$29,363,897
William F. Oplinger
$ 4,346,208
$ Not eligible
$ 4,346,208
Olivier M. Jarrault
$ 5,008,418
$ 1,980,141
$ 6,988,559
Audrey Strauss
$ 6,275,555
Not eligible
$ 6,275,555
Robert G. Wilt
$ 3,993,479
Not eligible
$ 3,993,479
69
2015 PROXY STATEMENT
Executive Compensation | Potential Payments Upon Termination or Change in Control
(continued)
Retirement Benefits
If Mr. Kleinfeld had voluntarily terminated employment as of December 31, 2014, it is estimated that his
supplemental executive retirement pension would have paid an annual annuity of $874,009 starting at age 60. If
Messrs. Oplinger, Jarrault or Wilt had voluntarily terminated employment as of December 31, 2014, it is estimated
that their pensions would have been paid an annual annuity as follows:
Annuity
Starting at Age
William F. Oplinger
$ 55,879
55
Olivier M. Jarrault
$ 77,041
55
Robert G. Wilt
$134,334
62
Ms. Strauss is not eligible to participate in the defined benefit pension plan, which was closed to employees hired on
or after March 1, 2006.
70
2015 PROXY STATEMENT
Questions and Answers
About the Meeting and Voting
1.
Who is entitled to vote and how many votes do I have?
If you were a holder of record of Alcoa common stock, par value $1.00 per share (the “common stock”), at
the close of business on February 20, 2015, you are eligible to vote at the annual meeting. For each matter
presented for vote, you have one vote for each share you own.
2.
What is the difference between holding shares as a shareholder of record/registered shareholder and as a
beneficial owner of shares?
Shareholder of Record or Registered Shareholder. If your shares of common stock are registered directly in
your name with our transfer agent, Computershare, you are considered a “shareholder of record” or a
“registered shareholder” of those shares.
Beneficial Owner of Shares. If your shares are held in an account at a bank, brokerage firm or other similar
organization, then you are a beneficial owner of shares held in street name. In that case, you will have
received these proxy materials from the bank, brokerage firm or other similar organization holding your
account and, as a beneficial owner, you have the right to direct your bank, brokerage firm or similar
organization as to how to vote the shares held in your account.
3.
How do I vote if I am a shareholder of record?
By Telephone or Internet. All shareholders of record can vote by touchtone telephone within the U.S., U.S.
territories and Canada, using the toll-free telephone number on the proxy card, or through the Internet, using the
procedures and instructions described on the proxy card. The telephone and Internet voting procedures are
designed to authenticate shareholders’ identities, to allow shareholders to vote their shares and to confirm that their
instructions have been recorded properly.
By Written Proxy. All shareholders of record can also vote by written proxy card. If you are a shareholder of
record and receive a Notice of Internet Availability of Proxy Materials (“Notice”), you may request a written
proxy card by following the instructions included in the Notice. If you sign and return your proxy card but do
not mark any selections giving specific voting instructions, your shares represented by that proxy will be voted
as recommended by the Board of Directors.
In Person. All shareholders of record may vote in person at the meeting. See Question 5 below regarding how
to obtain an admission ticket to the annual meeting.
Whether you plan to attend the meeting or not, we encourage you to vote by proxy as soon as possible. The
proxy committee will vote your shares according to your directions.
4.
How do I vote if I am a beneficial owner of shares?
Your broker is not permitted to vote on your behalf on the election of directors and other matters to be
considered at the annual meeting (except on ratification of the selection of PricewaterhouseCoopers LLP as
auditors for 2015), unless you provide specific instructions by completing and returning the voting instruction
form from your broker, bank or other financial institution or following the instructions provided to you for voting
your shares via telephone or the Internet. For your vote to be counted, you will need to communicate your
voting decisions to your broker, bank or other financial institution before the date of the annual meeting. If you
wish to vote your shares at the meeting, you must obtain a legal proxy from that entity and bring it with you to
hand in with your ballot. See Question 5 below regarding how to obtain an admission ticket to the annual
meeting.
71
2015 PROXY STATEMENT
Questions and Answers About the Meeting and Voting
5.
(continued)
How do I get an admission ticket to attend the annual meeting?
You may attend the meeting if you were a shareholder as of the close of business on February 20, 2015. If you
plan to attend the meeting, you will need an admission ticket. If you are a registered shareholder, have your
Notice available and call 1 866 804-9594 or visit www.AlcoaAdmissionTicket.com and follow the instructions
provided. If a broker, bank or other financial institution holds your shares and you would like to attend
the meeting, please write to: Alcoa Inc., 201 Isabella Street, Pittsburgh, PA 15212-5858, Attention:
Diane Thumma or email to diane.thumma@alcoa.com. Please include a copy of your brokerage account
statement or a legal proxy (which you can obtain from your broker, bank or other financial institution), and we
will send you an admission ticket.
6.
What does it mean if I receive more than one Notice?
If you are a shareholder of record or participate in Alcoa’s Dividend Reinvestment and Stock Purchase Plan or
employee savings plans, you will receive one Notice (or if you are an employee with an Alcoa email address,
an email proxy form) for all shares of common stock held in or credited to your accounts as of the record date,
if the account names are exactly the same. If your shares are registered differently and are in more than one
account, you will receive more than one Notice or email proxy form, and in that case, you can and are
urged to vote all of your shares, which will require you to vote more than once. To avoid this situation in the
future, we encourage you to have all accounts registered in the same name and address whenever
possible. You can do this by contacting our transfer agent, Computershare, at 1 888 985-2058 (in the
U.S. and Canada) or 1 201 680-6578 (all other locations) or through the Computershare website,
www.computershare.com.
7.
How do I vote if I participate in one of the employee savings plans?
You must provide the trustee of the employee savings plan with your voting instructions in advance of the
meeting. You may do so by returning your voting instructions by mail, or submitting them by telephone or
electronically using the Internet. You cannot vote your shares in person at the annual meeting; the trustee is
the only one who can vote your shares. The trustee will vote your shares as you have instructed. If the trustee
does not receive your instructions, your shares generally will be voted in proportion to the way the other plan
participants voted. To allow sufficient time for voting by the trustee, your voting instructions must be received
by 6:00 a.m., Eastern Daylight Time (EDT), on April 29, 2015.
8.
Can I change my vote?
There are several ways in which you may revoke your proxy or change your voting instructions before the time
of voting at the meeting (please note that, in order to be counted, the revocation or change must be received
by 6:00 a.m. EDT on May 1, 2015, or by 6:00 a.m. EDT on April 29, 2015 in the case of instructions to the
trustee of an employee savings plan):
•
•
•
•
•
Vote again by telephone or at the Internet website.
Mail a revised proxy card or voting instruction form that is dated later than the prior one.
Shareholders of record may vote in person at the annual meeting.
Shareholders of record may notify Alcoa’s Corporate Secretary in writing that a prior proxy is revoked.
Employee savings plan participants may notify the plan trustee in writing that prior voting instructions
are revoked or are changed.
72
2015 PROXY STATEMENT
Questions and Answers About the Meeting and Voting
9.
(continued)
Is my vote confidential?
Yes. Proxy cards, ballots and voting tabulations that identify shareholders are kept confidential except:
• as necessary to meet applicable legal requirements and to assert or defend claims for or against the
Company;
• in the case of a contested proxy solicitation;
• if a shareholder makes a written comment on the proxy card or otherwise communicates his or her
vote to management; or
• to allow the independent judge of election to certify the results of the vote.
Corporate Election Services, Inc., the independent proxy tabulator used by Alcoa, counts the votes and acts as
the judge of election for the meeting.
10. What is a Broker Non-Vote?
A “broker non-vote” occurs when a broker submits a proxy for the meeting with respect to a discretionary
matter but does not vote on non-discretionary matters because the beneficial owner did not provide voting
instructions on those matters. Under NYSE rules, the proposal to ratify the appointment of independent
auditors (Item 2) is considered a “discretionary” item. This means that brokerage firms may vote in their
discretion on behalf of clients (beneficial owners) who have not furnished voting instructions at least 15 days
before the date of the annual meeting. In contrast, all of the other proposals set forth in this proxy statement
are “non-discretionary” items—brokerage firms that have not received voting instructions from their clients on
these matters may not vote on these proposals.
11. What constitutes a “quorum” for the meeting?
A quorum consists of a majority of the outstanding shares, present at the meeting or represented by proxy. A
quorum is necessary to conduct business at the annual meeting. You are part of the quorum if you have voted
by proxy. Abstentions and broker non-votes count as “shares present” at the meeting for purposes of
determining a quorum. If you vote to abstain on one or more proposals, your shares will be counted as present
for purposes of determining the presence of a quorum unless you vote to abstain on all proposals.
12. What is the voting requirement to approve each of the proposals, and how are votes counted?
At the close of business on February 20, 2015, the record date for the meeting, Alcoa had outstanding
1,222,263,198 shares of common stock (excluding treasury shares). Each share of common stock
outstanding on the record date is entitled to one vote for each director nominee and one vote for each of the
other proposals to be voted on. Treasury shares are not voted.
Under Pennsylvania corporation law, the approval of any corporate action taken at the annual meeting is based
on votes cast. For all proposals to be considered at the annual meeting, shareholder approval occurs if the votes
cast in favor of the proposal exceed the votes cast against the proposal. “Votes cast” on these proposals means
votes “for” or “against” a particular proposal, whether by proxy or in person. Abstentions and broker non-votes
are not considered “votes cast” on these proposals and therefore have no effect on the outcome of these
proposals. In uncontested elections, directors are elected by a majority of votes cast. As described in more detail
on page 26 under “Corporate Governance—Majority Voting for Directors,” Alcoa’s Articles of Incorporation and
By-Laws require any incumbent director nominee who receives more “against” than “for” votes to tender his or
her resignation for consideration by the Governance and Nominating Committee. Item 3 (advisory approval of
executive compensation) is an advisory vote requiring further action by the Company to implement any changes.
13. Who pays for the solicitation of proxies?
Alcoa pays the cost of soliciting proxies. Proxies will be solicited on behalf of the Board of Directors by mail,
telephone, other electronic means or in person. We have retained Morrow & Co., LLC, 470 West Avenue,
Stamford, CT 06902, to assist with the solicitation for an estimated fee of $13,000, plus expenses. We will
reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for sending proxy materials to shareholders and obtaining their votes.
73
2015 PROXY STATEMENT
Questions and Answers About the Meeting and Voting
(continued)
14. How do I comment on Company business?
Your comments are collected when you vote using the Internet. We also collect comments from the proxy card
if you vote by mailing the proxy card. You may also send your comments to us in care of the Corporate
Secretary: Alcoa Inc., Corporate Secretary’s Office, 390 Park Avenue, New York, NY 10022-4608. Although it
is not possible to respond to each shareholder, your comments help us to understand your concerns.
15. May I nominate someone to be a director of Alcoa?
Yes, please see “Nominating Board Candidates—Procedures and Director Qualifications” on page 14 for
details on the procedures for shareholder nominations of director candidates.
16. When are the 2016 shareholder proposals due?
To be considered for inclusion in the Company’s 2016 proxy statement, shareholder proposals submitted in
accordance with SEC Rule 14a-8 must be received in writing at our principal executive offices no later than
November 20, 2015. Address all shareholder proposals to: Alcoa Inc., Corporate Secretary’s Office, 390 Park
Avenue, New York, NY 10022-4608. For any proposal that is not submitted for inclusion in next year’s proxy
statement, but is instead sought to be presented directly at the 2016 annual meeting, notice of intention to
present the proposal, including all information required to be provided by the shareholder in accordance with
the Company’s By-Laws, must be received in writing at our principal executive offices by February 1, 2016.
Address all notices of intention to present proposals at the 2016 annual meeting to: Alcoa Inc., Corporate
Secretary’s Office, 390 Park Avenue, New York, NY 10022-4608.
17. Will the annual meeting be webcast?
Yes, our annual meeting will be webcast on May 1, 2015. You are invited to visit http://www.alcoa.com under
“About—Corporate Governance—Annual Meeting” at 9:30 a.m. Eastern Daylight Time on May 1, 2015, to
access the webcast of the meeting. Registration for the webcast is required. Pre-registration will be available
beginning on April 20, 2015. An archived copy of the webcast also will be available on our website.
18. What is “householding”?
Shareholders of record who have the same last name and address and who request paper copies of the proxy
materials will receive only one copy unless one or more of them notifies us that they wish to receive individual
copies. This method of delivery, known as “householding,” will help ensure that shareholder households do
not receive multiple copies of the same document, helping to reduce our printing and postage costs, as well
as saving natural resources. Householding will not in any way affect dividend check mailings.
We will deliver promptly upon written or oral request a separate copy of the Annual Report, proxy statement, or
Notice of Internet Availability of Proxy Materials, as applicable, to a security holder at a shared address to
which a single copy of the document was delivered. Please direct such requests to Diane Thumma at
Alcoa Inc., 201 Isabella Street, Pittsburgh, PA 15212-5858, Attention: Diane Thumma, or email to
diane.thumma@alcoa.com or call 1 412 553-1245.
Shareholders of record may request to begin or to discontinue householding in the future by contacting our
transfer agent, Computershare, at 1 888 985-2058 (in the U.S. and Canada), 1 201 680-6578 (all other
locations), by mail to Computershare, P.O. Box 30170, College Station, TX 77842-3170 or through the
Computershare website, www.computershare.com. Shareholders owning their shares through a bank, broker
or other nominee may request to begin or to discontinue householding by contacting their bank, broker or
other nominee.
19. How may I obtain a copy of Alcoa’s Annual Report on Form 10-K?
The Company will provide by mail, without charge, a copy of its Annual Report on Form 10-K for the year ended
December 31, 2014 (not including exhibits and documents incorporated by reference), at your request. Please direct
all requests to Alcoa Inc., Corporate Communications, 201 Isabella Street, Pittsburgh, PA 15212-5858.
74
2015 PROXY STATEMENT
Attachment A
Pre-Approval Policies and Procedures for Audit and Non-Audit Services
I. Statement of Policy
The Audit Committee is required to pre-approve the audit and non-audit services performed by the independent
auditor in order to assure that the provision of such services does not impair the auditor’s independence. Unless a
type of service to be provided by the independent auditor has received pre-approval under this policy, it will require
specific pre-approval by the Audit Committee before the service is provided. Any proposed services exceeding preapproved cost levels under this policy will require specific pre-approval by the Audit Committee before the service is
provided.
The term of any pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically
provides for a different period. The Audit Committee will periodically revise the list of pre-approved services, based
on subsequent determinations.
II. Delegation
The Audit Committee delegates pre-approval authority to the Chairman of the Committee. In addition, the Chairman
may delegate pre-approval authority to one or more of the other members of the Audit Committee. The Chairman or
member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit
Committee at its next scheduled meeting. The Audit Committee does not delegate its responsibilities to pre-approve
services performed by the independent auditor to management.
III. Audit Services
The annual Audit services engagement terms and fees will be subject to the specific pre-approval of the Audit
Committee. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting
from changes in audit scope, company structure or other matters.
In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may
grant pre-approval for other Audit services, which are those services that only the independent auditor reasonably
can provide.
IV. Audit-Related Services
Audit-related services are assurance and related services that are reasonably related to the performance of the audit
or review of the Company’s financial statements and that are traditionally performed by the independent auditor.
The Audit Committee believes that the provision of Audit-related services does not impair the independence of the
auditor.
V. Tax Services
The Audit Committee believes that the independent auditor can provide Tax services to the Company such as tax
compliance and support, without impairing the auditor’s independence. However, the Audit Committee will not
permit the retention of the independent auditor in connection with a transaction initially recommended by the
independent auditor, the sole purpose of which may be tax avoidance and the tax treatment of which may not be
supported in the Internal Revenue Code and related regulations.
VI. All Other Services
The Audit Committee may grant pre-approval to those permissible non-audit services classified as All Other services
that it believes are routine and recurring services, and would not impair the independence of the auditor.
VII. Pre-Approval Fee Levels
Pre-approval fee levels for all services to be provided by the independent auditor will be established periodically by
the Audit Committee. Any proposed services exceeding these levels will require specific pre-approval by the Audit
Committee.
75
2015 PROXY STATEMENT
Attachment A
(continued)
VIII. Supporting Documentation
With respect to each proposed pre-approved service, the independent auditor has provided detailed descriptions
regarding the specific services to be provided. Upon completion of services, the independent auditor will provide to
management detailed back-up documentation, including hours, personnel and task description relating to the
specific services provided.
IX. Procedures
Requests or applications to provide services that require separate approval by the Audit Committee will be submitted
to the Audit Committee by both the independent auditor and the Chief Financial Officer and must include a joint
statement as to whether, in their view, the request or application is consistent with the Securities and Exchange
Commission’s rules on auditor independence.
76
2015 PROXY STATEMENT
Attachment B
Peer Group Companies for Market Information for 2014 Executive Compensation Decisions
(CEO peer group listed on page 53)
3M
ABB
AbbVie
Accenture
ACH Food
Adecco
AES Corporation
Agrium
Altria Group
American Electric Power
Amgen
Apache
Arrow Electronics
AstraZeneca
BAE Systems
Baxter
Bechtel Systems & Infrastructure
Beckman Coulter
Best Buy
Boehringer Ingelheim
Bristol-Myers Squibb
Carnival
Chesapeake Energy
CHS
Cisco Systems
Coca-Cola
Compass
ConAgra Foods
Continental Automotive Systems
Cox Enterprises
Cumberland Gulf Group
Danaher
Dannon
Deere & Company
Delhaize America
Dell
Delta Air Lines
Diageo North America
Dignity Health
DIRECTV Group
Duke Energy
DuPont
Eaton
eBay
Eli Lilly
EMC
EMD Millipore
Emerson Electric
Energy Transfer Partners
Ericsson
Exelon
Fluor
Fujitsu
Gap
Gavilon
General Dynamics
General Mills
GlaxoSmithKline
HBO
HCA Healthcare
Hess
Hilton
HollyFrontier Corporation
Honeywell
Iberdrola Renewables
International Paper
Johnson Controls
Kimberly-Clark
Kohl’s
Kraft Foods
Lafarge North America
Lehigh Hanson
L’Oréal
LyondellBasell
Magna Seating
McDonald’s
77
Medtronic
Merck & Co.
Mondelez
MorphoTrak
NextEra Energy Inc.
Nike
Nokia Corporation
Northrop Grumman
Novo Nordisk Pharmaceuticals
Occidental Petroleum
Pacific Gas & Electric
Reynolds Packaging
Ricoh Americas
Robertshaw Controls
Rolls-Royce North America
Safeway
Sanofi
Schlumberger
Sears
Southern Company Services
Southwest Airlines
Sprint Nextel
Staples
SuperValu Stores
Takeda Pharmaceuticals
Tech Data
Tesoro
Teva Pharmaceutical
Time Warner
T-Mobile USA
TRW Automotive
Tyson Foods
United States Steel
United Water
Ventura Foods
Walt Disney
Whirlpool
Xerox
2015 PROXY STATEMENT
Attachment C
Calculation of Financial Measures
RECONCILIATION OF ADJUSTED INCOME
Year ended
December 31,
2014
2013
(in millions)
Net income (loss) attributable to Alcoa
$
Restructuring and other charges
Discrete tax
268
$
703
items1
Other special items2
Net income attributable to Alcoa – as adjusted
Adjustments for incentive compensation3
585
33
360
112
1,697
1,116
357
(489)
Net income attributable to Alcoa – as adjusted for incentive compensation
$
(2,285)
–
627
357
Adjustments for comparative purposes4
(41)
Net income attributable to Alcoa – as further adjusted for comparative purposes
$
316
Net income attributable to Alcoa – as adjusted is a non-GAAP financial measure. Management believes that this measure is meaningful to investors
because management reviews the operating results of Alcoa excluding the impacts of restructuring and other charges, discrete tax items, and other special
items (collectively, “special items”). There can be no assurances that additional special items will not occur in future periods. To compensate for this
limitation, management believes that it is appropriate to consider both Net income (loss) attributable to Alcoa determined under GAAP as well as Net
income attributable to Alcoa – as adjusted.
1 Discrete tax items include the following:
• for the year ended December 31, 2014, a charge for the remeasurement of certain deferred tax assets of a subsidiary in Brazil due to a tax rate
change ($31), a charge for the remeasurement of certain deferred tax assets of a subsidiary in Spain due to a tax rate change ($16), and a net
benefit for a number of other items ($14); and
• for the year ended December 31, 2013, a charge for valuation allowances related to certain Spain and U.S. deferred tax assets ($372), a benefit
related to the reinstatement under the American Taxpayer Relief Act of 2012 of two tax provisions that were applied in 2013 to Alcoa’s U.S. income
tax return for calendar year 2012 ($18), a charge related to prior year taxes in Spain and Australia ($9), and a net benefit for other miscellaneous
items ($3).
2 Other special items include the following:
• for the year ended December 31, 2014, a write-down of inventory related to the permanent closure of a smelter in Italy, a smelter and two rolling
mills in Australia, and a smelter in the United States ($47), costs associated with current and future acquisitions of aerospace businesses ($47), a
gain on the sale of both a mining interest in Suriname and an equity investment in a China rolling mill ($20), an unfavorable impact related to the
restart of one potline at the joint venture in Saudi Arabia that was previously shut down due to a period of pot instability ($19), costs associated
with preparation for and ratification of a new labor agreement with the United Steelworkers ($11), a net unfavorable change in certain mark-tomarket energy derivative contracts ($6), and a loss on the write-down of an asset to fair value ($2); and
• for the year ended December 31, 2013, an impairment of goodwill ($1,719), a net insurance recovery related to the March 2012 cast house fire at the
Massena, NY location ($22), a net favorable change in certain mark-to-market energy derivative contracts ($15), an unfavorable impact related to a
temporary shutdown of one of the two smelter potlines at the joint venture in Saudi Arabia due to a period of pot instability ($9), and a write-down of
inventory related to the permanent closure of two potlines at a smelter in Canada and a smelter in Italy ($6).
3 Adjustments for incentive compensation include the following for the year ended December 31, 2014: a negative amount ($188) for the normalization of
London Metal Exchange aluminum prices and foreign currency exchange rates realized in 2014 results to those contemplated in Alcoa’s 2014 Plan; a
negative amount ($238) to partially adjust for higher regional premiums realized in Alcoa’s average realized price of primary aluminum in 2014
compared to those contemplated in Alcoa’s 2014 Plan; and a net negative amount ($63) to reverse the add-back included in Restructuring and other
charges in the above table related to curtailment actions in Brazil as the benefits realized from the sale of unused energy in Brazil are included in Net
income attributable to Alcoa, to include the amounts reflected in Alcoa’s 2014 Plan related to the Saudi Arabia potline issue and United Steelworkers
labor agreement, both of which were added-back on an actual basis in the Other special items line in the above table, and to exclude the results of an
aerospace business (Firth Rixson) from the acquisition date (November 19, 2014) through December 31, 2014 that was not reflected in Alcoa’s 2014
Plan. All of these adjustments were made for incentive compensation purposes only. There were no incentive compensation adjustments for the year
ended December 31, 2013 as adjusted income was not an incentive compensation metric.
4 This amount represents the necessary adjustments to normalize the London Metal Exchange aluminum prices and foreign currency exchange rates
realized in 2013 results to those contemplated in Alcoa’s 2014 Plan (this adjustment was reflected in the above table for comparative purposes only).
78
2015 PROXY STATEMENT
Attachment C
(continued)
RECONCILIATION OF ADJUSTED EBITDA
Year ended
December 31,
2014
2013
$
268
$ (2,285)
($ in millions)
Net income (loss) attributable to Alcoa
Add:
Net (loss) income attributable to noncontrolling interests
Provision for income taxes
Other expenses (income), net
Interest expense
Restructuring and other charges
Impairment of goodwill
Provision for depreciation, depletion, and amortization
Adjusted EBITDA
Add: adjustments for incentive compensation1
Adjusted EBITDA – as adjusted for incentive compensation
Add: adjustments for comparative purposes2
Adjusted EBITDA – as further adjusted for comparative purposes
$
(91)
320
47
473
1,168
–
1,371
3,556
(502)
3,054
$
Sales
Add: adjustments for incentive compensation3
Sales – as adjusted for incentive compensation
Add: adjustments for comparative purposes2
Sales – as further adjusted for comparative purposes
$
23,906
(479)
$ 23,427
$
$
Adjusted EBITDA Margin
Adjusted EBITDA Margin – as adjusted for incentive compensation
Adjusted EBITDA Margin – as further adjusted for comparative purposes
14.9%
13.0%
41
428
(25)
453
782
1,731
1,421
2,546
825
3,371
(762)
2,609
23,032
1,582
24,614
(1,636)
22,978
11.1%
13.7%
11.4%
Alcoa’s definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation, depletion,
and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; Research
and development expenses; and Provision for depreciation, depletion, and amortization. Adjusted EBITDA is a non-GAAP financial measure. Management believes
that this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Alcoa’s operating performance and the
Company’s ability to meet its financial obligations. The Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies.
1 Adjustments for incentive compensation related to Adjusted EBITDA include the following:
• for the year ended December 31, 2014, a negative amount ($281) for the normalization of London Metal Exchange aluminum prices and foreign
currency exchange rates realized in 2014 results to those contemplated in Alcoa’s 2014 Plan; a negative amount ($349) to partially adjust for higher
regional premiums realized in Alcoa’s average realized price of primary aluminum in 2014 compared to those contemplated in Alcoa’s 2014 Plan;
and a positive amount ($128) to exclude both the difference between the amounts in 2014 results and those contemplated in Alcoa’s 2014 Plan for
special items (see Reconciliation of Adjusted Income) reflected in Adjusted EBITDA on a pretax basis (write-down of inventory, acquisition costs, and
costs related to a new labor agreement) and the results of an aerospace business (Firth Rixson) from the acquisition date (November 19, 2014)
through December 31, 2014 that were not reflected in Alcoa’s 2014 Plan; and
• for the year ended December 31, 2013, a net positive amount ($851) for the normalization of London Metal Exchange aluminum prices and foreign
currency exchange rates realized in 2013 results to those contemplated in Alcoa’s 2013 Plan and a net negative amount ($26) to exclude special items
(see Reconciliation of Adjusted Income) reflected in Adjusted EBITDA on a pretax basis (net insurance recovery and write-down of inventory) that were
not reflected in Alcoa’s 2013 Plan.
All of these adjustments were made for incentive compensation (under the long-term incentive plan, or LTI) purposes only.
2 These amounts represent the necessary adjustments to normalize the London Metal Exchange aluminum prices and foreign currency exchange rates reflected
in Alcoa’s 2013 Plan to those contemplated in Alcoa’s 2014 Plan (these adjustments were reflected in the above table for comparative purposes only).
3 Adjustments for incentive compensation related to Sales include the following:
• for the year ended December 31, 2014, a net negative amount ($246) for the normalization of London Metal Exchange aluminum prices and foreign
currency exchange rates realized in 2014 results to those contemplated in Alcoa’s 2014 Plan; a negative amount ($395) to adjust for higher regional
premiums realized in Alcoa’s average realized price of primary aluminum in 2014 to those contemplated in Alcoa’s 2014 Plan; and a net positive
amount ($162) to include revenue reflected in Alcoa’s 2014 Plan that was not realized in 2014 due to decisions to permanently shut down smelter
capacity and to exclude revenue of an aerospace business (Firth Rixson) from the acquisition date (November 19, 2014) through December 31, 2014
that was not reflected in Alcoa’s 2014 Plan; and
• for the year ended December 31, 2013, a net positive amount ($1,402) for the normalization of London Metal Exchange aluminum prices and foreign
currency exchange rates realized in 2013 results to those contemplated in Alcoa’s 2013 Plan and a positive amount ($180) to include revenue
reflected in Alcoa’s 2013 Plan that was not realized in 2013 due to decisions to permanently shut down and/or temporarily curtail smelter capacity.
All of these adjustments were made for incentive compensation (under the long-term incentive plan, or LTI) purposes only.
79
2015 PROXY STATEMENT
Attachment C
(continued)
RECONCILIATION OF ALUMINA ADJUSTED EBITDA
Year ended December 31,
($ in millions, except
per metric ton amounts)
After-tax operating income
(ATOI)
2014
$
2013
2012
370 $
259 $
90 $
387
426
29
4
(5)
Income taxes
153
66
Other
(28)
(6)
2011
2010
607
$
2009
2008
2007
2006
2005
2004
2003
2002
2001
301 $
112 $
727 $
956 $ 1,050 $
682 $
632 $
415 $
315 $
471
444
406
292
268
267
192
172
153
147
139
144
(25)
(10)
(8)
2
–
(27)
179
60
(22)
277
428
246
(8)
(44)
(5)
(92)
(26)
Add:
Depreciation, depletion,
and amortization
Equity loss (income)
Adjusted EBITDA
$
Production (thousand metric
tons) (kmt)
Adjusted EBITDA/Production
($ per metric ton)
911 $
16,606
$
55 $
749 $
16,618
45 $
455
505 $ 1,161
16,342
31 $
$
16,486
70
752 $
15,922
$
(7)
(1)
340
2
(6)
(1)
(8)
282 $ 1,239 $ 1,564 $ 1,666 $ 1,092 $
14,265
47 $
20 $
15,256
81 $
15,084
15,128
104 $
110 $
14,598
(1)
(1)
240
161
130
184
(46)
(55)
(14)
(17)
978 $
668 $
569 $
781
14,343
75 $
–
13,841
68 $
13,027
48 $
12,527
44 $
62
RECONCILIATION OF PRIMARY METALS ADJUSTED EBITDA
Year ended December 31,
($ in millions, except
per metric ton amounts)
ATOI
2014
$
2013
2012
2011
2010
$
2009
594 $
(20) $
309 $
481
488 $
(612) $
494
526
532
556
34
51
27
7
(1)
26
203
(74)
106
92
96
(365)
(8)
(422)
2
(7)
(176)
2008
2007
2006
2005
2004
2003
2002
2001
931 $ 1,445 $ 1,760 $
822 $
808 $
657 $
650 $
905
503
327
Add:
Depreciation, depletion,
and amortization
Equity loss (income)
Income taxes
Other
Adjusted EBITDA
(6)
$ 1,319 $
Production (thousand metric
tons) (kmt)
Adjusted EBITDA/Production
($ per metric ton)
3,125
$
422 $
475 $
3,550
134 $
552 $ 1,138
3,742
148 $
571
$ 1,147 $
3,775
301
560
3,586
$
395
368
326
310
300
(57)
(82)
12
(58)
(55)
(44)
(52)
172
542
726
307
314
256
266
434
(32)
(27)
(13)
(96)
20
12
(47)
(8)
(567) $ 1,572 $ 2,313 $ 2,786 $ 1,413 $ 1,410 $ 1,180 $ 1,125 $ 1,606
3,564
320 $
410
(2)
(159) $
80
4,007
392 $
3,693
626 $
3,552
784 $
3,554
398 $
3,376
418 $
3,508
336 $
3,500
321 $
3,488
460
2015 PROXY STATEMENT
Attachment C
(continued)
RECONCILIATION OF GLOBAL ROLLED PRODUCTS ADJUSTED EBITDA
Year ended December 31,
($ in millions, except
per metric ton amounts)
ATOI
2014
$
2013
20121
20111
20101,2
20092
$
241
$ (106) $
237
238
3
–
98
103
1
1
312 $
252 $
346 $
260
235
226
229
27
13
6
124
108
159
20082
20042
20032
20022
20012
(41) $
20072
151 $
20062
317 $
20052
300
$ 290
$ 232
$ 223
$ 232
227
216
227
223
220
200
190
184
167
–
–
–
2
–
1
1
4
2
12
14
77
113
135
97
77
90
112
(2)
6
1
20
1
1
(5)
(8)
131 $
195 $
456 $
656
$ 589
$ 495
$ 493
$ 508
2,250
2,136
1,893
1,814
1,863
292
$ 276
$ 261
$ 272
$ 273
Add:
Depreciation, depletion,
and amortization
Equity loss
Income taxes
Other
Adjusted EBITDA
$
Total shipments (thousand
metric tons) (kmt)
(1)
–
(2)
697 $
599 $
738 $
2,056
Adjusted EBITDA/Total
shipments ($ per metric ton) $
1,989
339 $
1,943
301 $
599
$
1,866
380 $
321
583
$
1,755
$
332
1,888
$
69 $
2,361
83 $
2,482
184 $
675 $
2,376
284 $
(5)
RECONCILIATION OF ENGINEERED PRODUCTS AND SOLUTIONS ADJUSTED EBITDA
($ in millions)
20143
ATOI
$
20134
2012
2011
767 $
726 $
612 $
537
173
159
158
158
2010
$
419
Year ended December 31,
2009
2008
2007
2006
$
2004
2003
2002
2001
311 $
522 $
423 $
382 $
2005
276
$ 161
$ 126
$
61
$ 188
177
165
163
152
160
168
166
150
186
Add:
Depreciation, depletion,
and amortization
Equity (income) loss
Income taxes
Other
–
–
–
374
348
297
–
(2)
(9)
(1)
(1)
$ 1,314 $ 1,231 $ 1,058 $
Third-party sales
$ 6,006 $ 5,733 $ 5,525 $ 5,345
21.9%
21.5%
19.1%
(2)
258
Adjusted EBITDA
Adjusted EBITDA Margin
154
951
17.8%
$
–
–
6
–
–
–
–
–
198
138
215
184
164
120
70
57
39
61
–
1
2
(7)
(2)
(11)
106
11
35
–
625 $
904 $
763 $
702 $
545
$ 505
$ 360
$ 285
$ 435
$ 4,689 $ 6,199 $ 5,834 $ 5,428 $ 4,773
$4,283
$3,905
$3,492
$4,141
11.8%
9.2%
8.2%
10.5%
769
$ 4,584
16.8%
(2)
$
13.3%
14.6%
13.1%
12.9%
11.4%
Alcoa’s definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation, depletion,
and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; Research
and development expenses; and Provision for depreciation, depletion, and amortization. The Other line in the tables above includes gains/losses on asset sales and
other nonoperating items. Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because Adjusted
EBITDA provides additional information with respect to Alcoa’s operating performance and the Company’s ability to meet its financial obligations. The Adjusted
EBITDA presented may not be comparable to similarly titled measures of other companies.
1 The average Adjusted EBITDA per metric ton of these three years equals $344 and represents the average historical high for the Global Rolled Products
segment. Alcoa has a 2016 target to meet or exceed this average historical high.
2 The average Adjusted EBITDA per metric ton of these 11 years equals $233 and represents the previous average historical high for the Global Rolled Products segment.
3 In the year ended December 31, 2014, the Third-party sales and Adjusted EBITDA of Engineered Products and Solutions includes $81 and $(10), respectively, related to
the acquisition of an aerospace business, Firth Rixson. Excluding these amounts, EBITDA Margin was 22.3% for the year ended December 31, 2014.
4 The Adjusted EBITDA Margin for the year ended December 31, 2013 represents the historical high for the Engineered Products and Solutions segment. Alcoa has a 2016
target to exceed this historical high.
81
2015 PROXY STATEMENT
Attachment C
(continued)
RECONCILIATION OF FREE CASH FLOW
Year ended
December 31,
2014
2013
(in millions)
Cash from operations
$
Capital expenditures
1,674
$
(1,219)
Free cash flow
Adjustments for incentive compensation1
Free cash flow – as adjusted for incentive compensation
$
1,578
(1,193)
455
385
(434)
70
21
455
Adjustments for comparative purposes2
(271)
Free cash flow – as further adjusted for comparative purposes
$
184
Free Cash Flow is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews cash
flows generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered necessary to
maintain and expand Alcoa’s asset base and are expected to generate future cash flows from operations. It is important to note that Free Cash Flow does
not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service
requirements, are not deducted from the measure.
1 Adjustments for incentive compensation include the following:
• for the year ended December 31, 2014, a negative amount ($91) for the equity contributions made to the joint venture in Saudi Arabia; a negative
amount ($192) for the normalization of London Metal Exchange aluminum prices and foreign currency exchange rates realized in 2014 results to
those contemplated in Alcoa’s 2014 Plan; a negative amount ($216) to partially adjust for higher regional premiums realized in Alcoa’s average
realized price of primary aluminum in 2014 compared to those contemplated in Alcoa’s 2014 Plan; a net positive amount ($198) to exclude both the
difference between the amounts in 2014 results and those contemplated in Alcoa’s 2014 Plan for special items (see Reconciliation of Adjusted
Income) reflected in Cash from operations (restructuring and other charges (excluding cash payments related to curtailment actions in Brazil - see
footnote 3 in the Reconciliation of Adjusted Income), acquisition costs, and costs related to a new labor agreement) and the free cash flow of an
aerospace business (Firth Rixson) from the acquisition date (November 19, 2014) through December 31, 2014 that was not reflected in Alcoa’s 2014
Plan; a negative amount ($100) to reverse the realized benefit of lower pension contributions in 2014, resulting from the provisions of the Highway
and Transportation Funding Act, that was not contemplated in Alcoa’s 2014 Plan; and a negative amount ($32) to reflect additional equity
contributions to the joint venture in Saudi Arabia contemplated in Alcoa’s 2014 Plan but deferred until 2015; and
• for the year ended December 31, 2013, a negative amount ($159) for the equity contributions made to the joint venture in Saudi Arabia; a net
positive amount ($397) for the normalization of London Metal Exchange aluminum prices and foreign currency exchange rates realized in 2013
results to those contemplated in Alcoa’s 2013 Plan; a negative amount ($112) to reflect additional equity contributions to the joint venture in Saudi
Arabia contemplated in Alcoa’s 2013 Plan but deferred until 2014; a negative amount ($54) to reflect additional growth capital expenditures
contemplated in Alcoa’s 2013 Plan but deferred until 2014; and a net negative amount ($2) to exclude special items (see Reconciliation of Adjusted
Income) reflected in Cash from operations (net insurance recovery and restructuring and other charges) that were not reflected in Alcoa’s 2013 Plan.
All of these adjustments were made for incentive compensation purposes only.
2 This amount represents the necessary adjustments to normalize the London Metal Exchange aluminum prices and foreign currency exchange rates
reflected in Alcoa’s 2013 Plan to those contemplated in Alcoa’s 2014 Plan (this adjustment was reflected in the above table for comparative purposes
only).
82
2015 PROXY STATEMENT
Attachment C
(continued)
DAYS WORKING CAPITAL
($ in millions)
2014
Quarter ended
December 31,
2013
Receivables from customers, less allowances
$1,513
$1,383
$1,573
$ 1,457
395
339
53
361
240
Receivables from customers, less allowances, as adjusted
1,908
1,722
1,626
1,818
1,739
Add: Inventories
3,064
2,783
2,894
3,108
2,906
Add: Deferred purchase price receivable1
Less: Accounts payable, trade
Working capital2
2012
Year ended
December 31,
2014
2013
$ 1,499
3,021
2,816
2,587
2,932
2,759
$1,951
$1,689
$1,933
$ 1,994
$ 1,886
Adjustments for incentive compensation3
(23)
Working capital – as adjusted for incentive compensation
$ 1,971
Sales
$6,377
$5,585
$5,898
$23,906
Adjustments for incentive compensation3
$23,032
(81)
Working capital – as adjusted for incentive compensation
$23,825
Days working capital
28
28
30
30.2
29.9
Days Working Capital = Working Capital divided by (Sales/number of days in the period).
1 The deferred purchase price receivable relates to an arrangement to sell certain customer receivables to several financial institutions on a recurring
basis. Alcoa is adding back this receivable for the purposes of the Days Working Capital calculation.
2 Beginning January 1, 2014, management changed the manner in which Working Capital is measured by moving from an end of period Working Capital
to an average period Working Capital. This change will now reflect the capital tied up during a given period. As such, the components of Working Capital
for each period presented represent the average of the ending balances in each of the months during the respective period.
3 Adjustments for incentive compensation for the year ended December 31, 2014 exclude the proportional average working capital and sales of an
aerospace business (Firth Rixson) from the acquisition date (November 19, 2014) through December 31, 2014 that were not reflected in Alcoa’s 2014
Plan. These adjustments were made for incentive compensation purposes only. There were no incentive compensation adjustments for the year ended
December 31, 2013 as Days Working Capital was not an incentive compensation metric.
RECONCILIATION OF NET DEBT
(in millions)
2014
Short-term borrowings
$
Commercial paper
Long-term debt due within one year
54
–
2013
$
57
–
2012
$
53
–
December 31,
2011
2010
$
62
224
$
2009
92
$ 176
–
–
2008
$
478
1,535
29
655
465
445
231
669
56
Long-term debt, less amount due within one year
8,769
7,607
8,311
8,640
8,842
8,974
8,509
Total debt
8,852
8,319
8,829
9,371
9,165
9,819
10,578
Less: Cash and cash equivalents
1,877
1,437
1,861
1,939
1,543
1,481
762
$6,975
$6,882
$6,968
$7,432
$7,622
$8,338
$ 9,816
Net debt
Net Debt is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management assesses Alcoa’s
leverage position after factoring in available cash that could be used to repay outstanding debt.
83
[THIS PAGE INTENTIONALLY LEFT BLANK]
Alcoa Inc.
390 Park Avenue
New York, NY 10022-4608
www.alcoa.com
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