2008 Dow Proxy Statement

COMPENSATION TABLES AND NARRATIVES


Summary Compensation Table
All Other Compensation
Grants of Plan-Based Awards Table
Outstanding Equity Awards at Fiscal Year-End
Option Exercises and Stock Vested Table
Pension Benefits Table
Non-Qualified Deferred Compensation
Potential Payments Upon Termination or Change-in-Control
Involuntary Termination Or Change-In-Control Values
Director Compensation For 2007
2003 Non-Employee Directors’ Stock Incentive Plan
Non-Employee Director Deferred Compensation Plan
Compensation of Non-Management Employee Directors
Business Travel Accident Insurance for Non-Employee Directors

Scroll down to see Compensation Tables and Narratives below.


The following table summarizes the compensation of the principal executive officer (CEO), principal financial officer (CFO), and the Company’s three most highly compensated officers for the fiscal year ended December 31, 2007. The amounts shown in the stock and option awards columns in the table below reflect the expense reported for grants made in 2007 and for grants made in 2003-2006, which were previously reported.

SUMMARY COMPENSATION TABLE FOR 2007 [top]

Name and Principal Position
Year
Salary ($)
Bonus
($) (a)
Stock
Awards
($) (b)
Option
Awards
($) (b) (c)
Non-Equity
Incentive
Plan
Compensation
($) (d)
Change in
Pension Value
and
Non‑qualified
Deferred
Compensation
Earnings
($) (e)
All Other
Compensation
($) (f)
Total ($)
Andrew Liveris, CEO & Chairman 2007
1,583,333
216,000    
7,723,496
5,188,756
3,240,000
1,811
146,704
18,100,100
2006
1,433,333
—    
7,811,118
5,117,892
2,207,250
119,916
149,710
16,839,219
Geoffery Merszei, CFO & Exec. VP 2007
812,360
607,520(g)
3,064,233
2,815,491
1,075,717
363,163
53,387
8,791,871
2006
746,902
533,334(g)
2,316,950
2,283,034
739,000
450,804
152,468
7,222,492
Michael Gambrell, Exec. VP 2007
721,346
66,019    
2,639,263
2,084,953
990,290
88
163,676
6,665,635
2006
648,220
—    
2,308,827
1,669,497
648,000
102,912
137,970
5,515,426
William Banholzer, Exec. VP 2007
616,990
46,828    
2,507,267
1,406,854
679,005
3,421
26,115
5,286,480
2006
570,066
—    
1,977,001
971,373
475,000
330,563
38,475
4,362,478
David Kepler, Exec. VP 2007
562,310
42,776    
2,043,243
1,316,376
620,253
429
87,440
4,672,827
2006
511,128
—    
2,144,940
1,134,127
427,000
50,716
83,308
4,351,219
 
(a) On March 1, 2007, a special award was given to all salaried employees as recognition for outstanding efforts in achieving consecutive years of sustained earnings performance.
(b) Amounts recognized for financial statement reporting purposes for the fiscal year ended December 31, 2007, in accordance with SFAS 123R for awards pursuant to the Company’s award and option plans and may include amounts from awards granted in and prior to 2007. Assumptions used in the calculation of amounts related to equity awards are included in Note N of the Company’s audited financial statements for the fiscal year ended December 31, 2007, which are included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on February 19, 2008. Assumptions used in the calculation of these programs related to grants awarded prior to 2004 are included in Note O of the Company’s audited financial statements for the fiscal year ended December 31, 2004 which are included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on February 18, 2005.
(c) Dow’s SFAS 123R valuation uses the widely accepted lattice‑binomial model which calculated an option value of $9.81 (grant date of February 16, 2007). The exercise price is the average of the  high and low Dow stock price on the date of grant. The exercise price was $43.59 for 2007 grants.
(d) Annual Performance Award as described in the Compensation Elements section of the Compensation Discussion and Analysis
(e) 2007 above‑market non-qualified deferred compensation earnings: Liveris $1,811, Merszei $0, Gambrell $88, Banholzer $3,421, Kepler $429. 2006 above‑market non-qualified deferred compensation earnings: Liveris $2,950, Merszei $0, Gambrell $97, Banholzer $5,458, Kepler $567. The actual change in pension value for 2007 was negative for Messrs. Liveris, Gambrell, Banholzer and Kepler due to a change in the discount rate used in determining the present value of accumulated benefits. This is included as zero in the Summary Compensation Table.
(f) Details related to all other compensation can be found in the All Other Compensation table.
(g) In order to replace forfeited incentive compensation that Mr. Merszei would have received from his previous employer, Mr. Merszei was granted a new hire cash award of $1,600,000 in 2005, payable in three installments on his anniversary date in 2006, 2007, and 2008.

The following table provides additional details for the compensation information found in the Summary Compensation Table under the All Other Compensation column.

ALL OTHER COMPENSATION FOR 2007 [top]

Name Year Relocation
($)
Life
Insurance
($) (a)
Aviation
($) (b)
Savings Plans
Company
Contributions
($) (c)
Financial
Planning
($) (d)
Home
Security
($) (e)
Other
Perquisites
($) (f)
Total ($)
Andrew Liveris 2007
3,012
60,620
17,250
53,204
1,242
11,376
146,704
2006
2,676
71,500
17,200
39,445
787
18,102
149,710
Geoffery Merszei 2007
9,000
6,275
20,890
17,222
53,387
2006
114,872(g)
8,800
19,394
577
8,825
152,468
Michael Gambrell 2007
112,985
5,120
17,250
16,078
668
11,575
163,676
2006
99,525
17,200
10,996
1,365
8,884
137,970
William Banholzer 2007
9,000
12,000
575
4,540
26,115
2006
17,200
12,000
575
8,700
38,475
David Kepler 2007
55,406
17,250
10,059
990
3,735
87,440
2006
47,996
17,200
9,511
1,172
7,429
83,308
 
(a) Tax gross-up payment for unanticipated tax liabilities resulting from participation in the Key Employee Insurance Program and the Company’s termination of the Executive Split Dollar Life Insurance Plan.
(b) Mr. Liveris is required by the Board of Directors to use the Company aircraft for personal use for security and immediate availability purposes. Incremental cost to the Company of personal use of Company aircraft is calculated based on the variable operating costs to the Company including fuel, landing, catering, handling, aircraft maintenance, and pilot travel costs. Fixed costs, which do not change based upon usage, such as pilot salaries or depreciation of the aircraft or maintenance costs not related to personal travel, are excluded.
(c) Employee Savings Plan company match, ESOP contribution, and Nonqualified Deferred Compensation Plan company contribution.
(d) Reimbursement of costs paid for financial and tax planning support.
(e) Reimbursement of costs paid for home security.
(f) Market value of automobile lease, executive physical examinations, and Executive Excess Umbrella Liability Insurance.
(g) Costs associated with Mr. Merszei’s relocation to Midland, MI.

The following table provides additional information about plan-based compensation disclosed in the Summary Compensation Table. This table includes both equity and non-equity awards.

GRANTS OF PLAN-BASED AWARDS FOR 2007 [top]

 Name
Grant Date
Date of Action by the Compensation Committee
Estimated Future Payouts Under Non-Equity Incentive Plan Awards
Estimated Future Payouts  Under Equity Incentive Plan Awards
All Other Stock Awards: Number of Shares of Stock or Units (#) (c)
All Other Option Awards: Number of Securities Underlying Options (#) (d)
Exercise or Base Price of Option Awards ($/Sh)
Grant Date Fair Value of Stock and Option Awards ($)
Threshold ($) (a)
Target ($) (a)
Maximum ($) (a)
Threshold (#) (b)
Target (#) (b)
Maximum (#) (b)
Andrew Liveris
2/14/2007
2/14/2007
0
2,160,000
4,860,000
 
 
 
 
 
 
 
2/16/2007
2/14/2007
 
 
 
0
60,000
150,000
 
 
 
2,615,400
2/16/2007
2/14/2007
 
 
 
 
 
 
60,000
 
 
2,615,400
2/16/2007
2/14/2007
 
 
 
 
 
 
 
460,000
43.59
4,512,600
Geoffery Merszei
2/14/2007
2/14/2007
0
741,874
1,669,216
 
 
 
 
 
 
 
2/16/2007
2/14/2007
 
 
 
0
25,200
63,000
 
 
 
1,098,468
2/16/2007
2/14/2007
 
 
 
 
 
 
25,200
 
 
1,098,468
2/16/2007
2/14/2007
 
 
 
 
 
 
 
196,000
43.59
1,922,760
Michael Gambrell
2/14/2007
2/14/2007
0
660,193
1,485,435
 
 
 
 
 
 
 
2/16/2007
2/14/2007
 
 
 
0
25,200
63,000
 
 
 
1,098,468
2/16/2007
2/14/2007
 
 
 
 
 
 
25,200
 
 
1,098,468
2/16/2007
2/14/2007
 
 
 
 
 
 
 
196,000
43.59
1,922,760
William Banholzer
2/14/2007
2/14/2007
0
468,279
1,053,628
 
 
 
 
 
 
 
2/16/2007
2/14/2007
 
 
 
0
14,700
36,750
 
 
 
640,773
2/16/2007
2/14/2007
 
 
 
 
 
 
14,700
 
 
640,773
2/16/2007
2/14/2007
 
 
 
 
 
 
 
117,500
43.59
1,152,675
David Kepler
2/14/2007
2/14/2007
0
427,761
962,462
 
 
 
 
 
 
 
2/16/2007
2/14/2007
 
 
 
0
14,700
36,750
 
 
 
640,773
2/16/2007
2/14/2007
 
 
 
 
 
 
14,700
 
 
640,773
2/16/2007
2/14/2007
 
 
 
 
 
 
 
117,500
43.59
1,152,675
 
(a) Performance Award as described in the Compensation Elements section of the Compensation Discussion and Analysis.
(b) Performance Shares as described in the Compensation Elements section of the Compensation Discussion and Analysis.
(c)  Deferred Stock awards as described in the Compensation Elements section of the Compensation Discussion and Analysis.
(d)  Stock Option awards as described in the Compensation Elements section of the Compensation Discussion and Analysis.

The following table lists outstanding equity grants for each NEO as of December 31, 2007. The table includes outstanding equity grants from past years as well as the current year.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END [top]

Name 
Grant Date 
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(a)
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(a)
Option
Exercise
Price
($)
Option
Expiration
Date
Number of
Shares or
Units of
Stock
That Have
Not Vested
(#) (c)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)
(b) (c)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
(#) (d)
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($)
(b) (d)
Andrew Liveris (e) 02/16/2000
66,000
36.02
02/16/2010
n/a
n/a
n/a
n/a
03/02/2001
31,700
33.94
03/02/2011
n/a
n/a
n/a
n/a
02/15/2002
38,300
30.43
02/15/2012
n/a
n/a
19,687
776,062
02/14/2003
62,500
27.40
02/14/2013
n/a
n/a
59,938
2,362,756
02/13/2004
90,000
43.49
02/13/2014
30,000
1,182,600
20,183
795,614
02/18/2005
120,000
60,000
53.53
02/18/2015
55,000
2,168,100
71,700
2,826,414
03/01/2006
133,333
266,667
43.68
03/01/2016
50,000
1,971,000
50,000
1,971,000
02/16/2007
460,000
43.59
02/16/2017
60,000
2,365,200
60,000
2,365,200
Geoffery Merszei 07/01/2005
207,559
103,781
44.74
07/01/2015
16,580
653,584
23,766
936,856
07/01/2005
n/a
n/a
n/a
n/a
30,000
1,182,600
n/a
n/a
03/01/2006
44,950
89,900
43.68
03/01/2016
16,380
645,700
16,380
645,700
02/16/2007
196,000
43.59
02/16/2017
25,200
993,384
25,200
993,384
Michael Gambrell (e) 02/16/2000
9,000
36.02
02/16/2010
n/a
n/a
n/a
n/a
03/02/2001
13,300
33.94
03/02/2011
n/a
n/a
n/a
n/a
02/15/2002
13,300
30.43
02/15/2012
n/a
n/a
6,837
269,515
02/14/2003
21,000
27.40
02/14/2013
n/a
n/a
20,139
793,879
02/13/2004
33,340
43.49
02/13/2014
11,120
438,350
7,477
294,743
02/18/2005
27,780
13,890
53.53
02/18/2015
10,940
431,255
15,698
618,815
03/01/2006
44,950
89,900
43.68
03/01/2016
16,380
645,700
16,380
645,700
02/16/2007
196,000
43.59
02/16/2017
25,200
993,384
25,200
993,384
William Banholzer 07/14/2005
36,666
18,334
47.00
07/14/2015
87,500
3,449,250
3,346
131,899
07/14/2005
5,500
2,750
47.00
07/14/2015
n/a
n/a
n/a
n/a
03/01/2006
26,970
53,940
43.68
03/01/2016
9,830
387,499
9,830
387,499
02/16/2007
117,500
43.59
02/16/2017
14,700
579,474
14,700
579,474
David Kepler (e) 02/16/2000
48,000
36.02
02/16/2010
n/a
n/a
n/a
n/a
03/02/2001
21,700
33.94
03/02/2011
n/a
n/a
n/a
n/a
02/15/2002
27,500
30.43
02/15/2012
n/a
n/a
14,135
557,202
02/14/2003
46,250
27.40
02/14/2013
n/a
n/a
44,354
1,748,435
02/13/2004
36,670
43.49
02/13/2014
12,230
482,107
8,226
324,269
02/18/2005
27,780
13,890
53.53
02/18/2015
10,940
431,255
15,678
618,027
03/01/2006
26,970
53,940
43.68
03/01/2016
9,830
387,499
9,830
387,499
02/16/2007
117,500
43.59
02/16/2017
14,700
579,474
14,700
579,474
 
(a)  Stock Option award grants vest in three equal installments on the first, second and third anniversaries of the grant date shown in the table.
(b)  Market values based on the 12/31/2007 closing stock price of $39.42 per share.
(c) Deferred Shares vest and are delivered three years after the grant date. Prior to January 1, 2008, Deferred Shares vested over a five-year period. Mr. Merszei’s grant of 16,580 deferred shares on 7/1/2005 will vest on 7/1/2010 and his grant of 30,000 deferred shares granted on 7/1/2005 will vest on 8/29/2008.
(d) Performance Shares granted on 2/15/2002 and 2/13/2004 will vest and be delivered on 4/16/2008. Performance Shares granted 2/14/2003, 2/18/2005, 3/1/2006 and 2/16/2007 will vest and be delivered April 16 or 17 of the year following the end of the performance period. Mr. Merszei’s grant of 24,860 Performance Shares granted 7/1/2005 will vest and be delivered on 4/17/2008. Performance Shares granted in 2006-2007 are shown at the target level of performance. The actual number of shares to be delivered will be determined at the end of the three-year performance period.
(e)  In addition to the equity grants described above, Mr. Liveris, Mr. Gambrell, and Mr. Kepler received dividend unit grants on 3/9/1988 of 846 shares, 1,125 shares and 846 shares, respectively, which generate a quarterly payment equal to the dividend paid on equivalent shares of Dow Common Stock. These grants will expire on 3/9/2013.

The following table summarizes the value received from stock option exercises and stock grants vested during 2007.

OPTION EXERCISES AND STOCK VESTED FOR 2007 [top]

Name 
Option Awards
Stock Awards
Number of Shares
Acquired on
Exercise (#)
Value Realized
on Exercise
($)
Number of Shares
Acquired on
Vesting (#)
Value Realized
on Vesting ($)
Andrew Liveris
n/a
n/a
77,207
3,531,123(a)
Geoffery Merszei
n/a
n/a
n/a
n/a    
Michael Gambrell
30,000
299,676
28,023
1,281,631(a)
William Banholzer
n/a
n/a
n/a
n/a    
David Kepler
28,200
332,218
41,699
1,907,538(a)
 
(a)  Performance Shares from grants on: 3/21/2001, 2/15/2002, 2/13/2004, and 5/24/2004.

The following table lists the pension program participation and actuarial present value of each NEOs defined benefit pension at December 31, 2007.

PENSION BENEFITS AS OF 12/31/07 [top]

Name
Plan Name
Number of
Years
Credited
Service (#)
Present
Value of
Accumulated
Benefit ($)
(a)
Andrew Liveris Dow Employees’ Pension Plan
12
549,502
Dow Executives’ Supplemental Retirement Plan (b)
32
7,535,041
 Total
8,084,543
Geoffery Merszei Dow Employees’ Pension Plan
3
102,794
Dow Executives’ Supplemental Retirement Plan (c)
30
4,238,036
 Total
4,340,830
Michael Gambrell Dow Employees’ Pension Plan
32
1,075,928
Dow Executives’ Supplemental Retirement Plan (d)
32
2,527,373
 Total
3,603,301
William Banholzer Dow Employees’ Pension Plan
3
111,439
Dow Executives’ Supplemental Retirement Plan (e)
25
2,027,029
 Total
2,138,468
David Kepler Dow Employees’ Pension Plan
33
1,093,512
Dow Executives’ Supplemental Retirement Plan (d)
33
2,886,752
 Total
3,980,264
 
(a) Unless otherwise noted, all present values reflect accrued age 65 benefits. The form of payment, discount rate (6.8%) and mortality (UP94G) are based upon SFAS 87 assumptions as reflected in the Company’s 2007 audited financial statements.
(b) The present value for Mr. Liveris reflects benefits payable at the unreduced retirement date of 12/31/2007. It also reflects an offset for his Australian Superannuation Fund (“Australian Fund”) account of $829,624 USD ($943,397 AUD converted using 12/31/2007 internal Dow exchange rate of $1 AUD = $.8794 USD) for 2007 and $710,466 USD ($898,869 AUD converted using 12/31/2006 internal Dow exchange rate of $1 AUD = $.7904 USD) for 2006. Mr. Liveris was asked by the Company to permanently transfer to the United States in 1995 and, at that time, began participation in the Dow Employees’ Pension Plan (“DEPP”) and ceased contributions to the Australian Fund. In order to equitably determine a retirement benefit bridging the two plans, Mr. Liveris’ retirement benefit will be determined by the following formula: at the time of retirement, the pension amount would equal the amount payable under the DEPP formula, with the benefit being paid from the DEPP and the Executives’ Supplemental Retirement Plan (“ESRP”) (based on Mr. Liveris’ highest consecutive three-year average compensation (“HC3A”) and Mr. Liveris’ years of credited service as if a U.S. employee his entire Dow career) less the value of the accrued benefit in the Australian Fund. If legally permissible, Mr. Liveris will be required to waive any retirement benefits payable from the Australian Fund. If not legally permissible, the value of any retirement benefits received from the Australian Fund shall be deducted from any ESRP benefit due.
(c) The present value for Mr. Merszei reflects benefits payable at the unreduced retirement date of 01/31/2009. Mr. Merszei was a participant in the Dow Personalvorsorgestiftung Schweiz (“Swiss Plan”) from 1978 through 2001 and received a portable benefit upon his termination from Dow Europe. Under the terms of his employment contract, Mr. Merszei will have his final benefit prorated under the formulas of the defined benefit plans in which he participated for the period of time spent under each plan using pensionable pay and service. As a U.S. employee, Mr. Merszei is now a participant in the DEPP and ESRP. Mr. Merszei will get credit for the years of service he spent at his previous employer in the ESRP, with the amount of such previous employer’s benefit and his previously paid portable benefit carved out of the ultimate benefit.
(d) The present value for Messrs. Gambrell and Kepler reflect benefits payable at the unreduced retirement date of 12/31/2007. ESRP benefits will be offset by benefits obtained under the Key Employee Insurance Program (“KEIP”).
(e) Under the terms of his employment contract, Dr. Banholzer will get credit for the years of service he spent at his previous employer in the ESRP. The present value for Dr. Banholzer reflects an offset for the age 65 benefit from his previous employer of $63,217.

The NEOs participate in one or more of the following retirement plans:

The Dow Employees’ Pension Plan

The Company provides the Dow Employees’ Pension Plan (“DEPP”) for its employees and for employees of some of its wholly owned U.S. subsidiaries. DEPP has two active formulas: the DEPP formula, for employees hired prior to January 1, 2008, and the Personal Pension Account formula for employees hired January 1, 2008 and beyond. Upon retirement, a participant receives an annual pension under the DEPP formula subject to a statutory limitation. The benefit is paid in the form of a monthly annuity and is calculated based on the sum of the employee’s yearly basic and supplemental accruals up to a maximum of 425% for basic accruals and 120% for supplemental accruals. Basic accruals equal the employee’s highest consecutive three-year compensation (“HC3A”) multiplied by a percentage ranging from 4% to 18% dependent on the employee’s age in the years earned. Supplemental accruals are for compensation in excess of a rolling 36-month average of the Social Security wage base. Supplemental accruals range from 1% to 4%, based on the age of the employee in the years earned. The sum of the basic and supplemental accruals is divided by a conversion factor to calculate an immediate monthly benefit. If the employee terminates employment before age 65 and defers payment of the benefit, the account balance calculated under this formula will be credited with interest. This benefit is known as the DEPP formula benefit.

Certain U.S. plan participants who were hired prior to January 1996 may have a greater benefit calculated under the previous pension plan formula which was frozen as of December 31, 2005. This benefit is equal to 1.6% of the employee’s HC3A as of December 31, 2005, multiplied by the employee’s years of credited service as of December 31, 2005, using full credited service up to 35 years, and half of the years of credited service in excess of 35 years. No actuarial reductions are taken if the employee is at least age 50 and has combined age and years of service equal to 85 or greater. This formula also contains a provision for an offset of the employee’s estimated primary Social Security benefit, calculated using the method specified in the Tax Reform Act of 1986. Employees may receive either the DEPP formula benefit or the 1.6 formula benefit.

The Executives’ Supplemental Retirement Plan

Because the U.S. Internal Revenue Code limits the benefits otherwise provided by DEPP, the Board of Directors adopted the Executives’ Supplemental Retirement Plan (“ESRP”) in 1992 to provide certain management employees who participate in the DEPP with supplemental benefits. The benefits are calculated under the same formulas described above.

The Key Employee Insurance Program

Messrs. Gambrell and Kepler elected to have their ESRP benefit secured by enrolling in the Key Employee Insurance Program (“KEIP”) in 1999 and 1998, respectively. KEIP is a life insurance program which secured benefits otherwise available under ESRP, offered to certain management employees as an alternative to the ESRP. Dow has not offered KEIP to employees since 1999. The Company has no plans to reinstate this program for new participants.

Dow Savings Plan – 401(k)

The Company provides all U.S. salaried employees the opportunity to participate in a 401(k) plan (The Dow Chemical Company Employees’ Savings Plan). In 2007, if employees contributed 6% of annual salary, Dow provided a maximum matching contribution of 3% of salary and an additional automatic ESOP contribution of 1% of salary. Under the revised 401(k) plan which is effective for 2008 and beyond, for salaried employees who contribute 2% of annual salary, Dow provides a matching contribution of 100% of the employee’s contribution. For salaried employees who contribute up to an additional 4%, Dow provides a 50% match. The NEOs participate in the 401(k) plan on the same terms as other eligible employees.

The following table provides information on compensation the NEOs have elected to defer as described in the narrative that follows.

NON-QUALIFIED DEFERRED COMPENSATION FOR 2007 [top]

Name
Executive
Contributions
in Last Fiscal
Year ($) (a)
Company
Contributions
in Last Fiscal
Year ($)
Aggregate
Earnings
in Last
Fiscal
Year ($)
Aggregate
Withdrawals /
Distributions
($)</