NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

To Visteon Stockholders,

 

We invite you to attend our 2009 Annual Meeting of Stockholders at the Hotel du Pont. At this meeting, you and the other stockholders will be able to vote on the following proposals, together with any other business that may properly come before the meeting:

 

 

You may vote on these proposals in person or by proxy. If you cannot attend the meeting, we urge you to vote by proxy, so that your shares will be represented and voted at the meeting in accordance with your instructions. Instructions on how to vote by proxy are contained in the Proxy Statement and in the Notice of Internet Availability of Proxy Materials. Only stockholders of record at the close of business on April 20, 2009 will be entitled to vote at the meeting or any adjournment thereof.

 

By order of the Board of Directors

 

Heidi A. Sepanik

Secretary

 

Van Buren Township, Michigan

April 30, 2009

CONTENTS

 

VISTEON CORPORATION
One Village Center Drive
Van Buren Township, Michigan 48111

 

 

 

 

PROXY STATEMENT

 

 

 

 

April 30, 2009

 

The Board of Directors of Visteon Corporation (“Visteon,” the “Company,” “we,” “us” or “our”) is soliciting your proxy to encourage your participation in the voting at the Annual Meeting of Stockholders. You are invited to attend the Annual Meeting and vote your shares directly. However, even if you do not attend, you may vote by proxy. As shown in the Notice of Annual Meeting, the Annual Meeting will be held on Wednesday, June 10, 2009, at the Hotel du Pont in Wilmington, Delaware. Directions to the Hotel du Pont can be found in Appendix B.

 

Our Notice of Annual Meeting and Proxy Statement, Annual Report to Stockholders, electronic proxy card and other annual meeting materials are available on the Internet at www.proxyvote.com, together with any amendments to any of these materials that are required to be furnished to stockholders.  The Securities and Exchange Commission, or SEC, has adopted rules that allow us to change the way we make our proxy statement and other annual meeting materials available to you. The rules require that we mail a notice to our stockholders advising that our proxy statement, annual report to stockholders, electronic proxy card and related materials are available for viewing, free of charge, on the Internet. Stockholders may then access these materials and vote over the Internet or request delivery of a full set of materials by mail or email. We have elected to utilize this process for the 2009 Annual Meeting. We intend to begin mailing the required notice, called Notice of Internet Availability of Proxy Materials, to stockholders on or about April 30, 2009. At that time, we will also begin mailing paper copies of our proxy materials to stockholders who requested them in advance. If you receive a Notice, you will not receive a paper or email copy of the proxy materials unless you request one in the manner set forth in the Notice. These rules give us the opportunity to serve you more efficiently by making the proxy materials available quickly online and reducing costs associated with printing and postage.

 

The Notice of Internet Availability of Proxy Materials contains important information, including instructions on how to access and review the proxy materials online and how to vote your shares over the Internet or by telephone.

 

How to Vote Your Shares

 

If you are a registered stockholder, you can vote at the meeting any shares that were registered in your name as the stockholder of record as of the record date. If your shares are held in “street name” through a broker, bank or other nominee, you are not a holder of record of those shares and cannot vote them at the Annual Meeting unless you have a legal proxy from the holder of record. If you plan to attend and vote your street-name shares at the Annual Meeting, you should request a legal proxy from your broker, bank or holder of record and bring it with you to the meeting.

 

Whether or not you plan to attend the meeting, we strongly encourage you to vote by proxy prior to the meeting. You may vote your shares prior to the meeting by following the instructions provided on the Notice of Internet Availability of Proxy Materials, this proxy statement and the voter website, www.proxyvote.com. If you requested a paper copy of the proxy materials, voting instructions are also contained on the proxy card enclosed with those materials.

If you are a registered stockholder, there are three ways to vote your shares before the meeting:

 

 

If your shares are held in street name, your broker, bank or other holder of record may provide you with a Notice of Internet Availability of Proxy Materials. Follow the instructions on the Notice to access our proxy materials and vote online or to request a paper or email copy of our proxy materials. If you received these materials in paper form, the materials included a voting instruction card so you can instruct your broker, bank or other holder of record how to vote your shares.

 

You should provide voting instructions for all proposals appearing on the proxy/voting instruction card. The persons named as proxies on the proxy card will vote your shares according to your instructions. However, if you do not provide voting instructions with your proxy, then the designated proxies will vote your shares for the election of the nominated directors, for the ratification of the Company’s independent registered public accounting firm, and against the shareholder proposals. If any nominee for election to the Board is unable to serve, which is not anticipated, or if any other matters properly come before the meeting, then the designated proxies will vote your shares in accordance with their best judgment.

 

How to Revoke Your Proxy

 

If you are a registered stockholder, you can revoke your proxy and change your vote at any time prior to the Annual Meeting by:

 

 

If your shares are held in street name, you should contact your broker, bank or other holder of record about revoking your voting instructions and changing your vote prior to the meeting.

 

If you are eligible to vote at the Annual Meeting, you also can revoke your proxy or voting instructions and change your vote at the Annual Meeting by submitting a written ballot before the polls close.

 

Stockholders Entitled to Vote and Ownership

 

You are entitled to one vote at the Annual Meeting for each share of the Company’s common stock that you owned of record at the close of business on April 20, 2009. As of April 15, 2009, the Company had issued and outstanding 130,570,116 shares of common stock. Information regarding the holdings of the Company’s stock by directors, executive officers and certain other beneficial owners can be found beginning on page 9.

A list of the stockholders of record entitled to vote at the Annual Meeting will be available for review by any stockholder, for any purpose related to the meeting, between 9:00 a.m. and 5:00 p.m. at the principal offices of the Company, located at One Village Center Drive, Van Buren Township, Michigan 48111, for ten days before the meeting.

 

Required Vote to Approve the Proposals

 

The Company’s By-Laws require that a majority of the Company’s common stock be represented at the Annual Meeting, whether in person or by proxy, for the quorum that is needed to transact any business.

 

Election of Directors.  The affirmative vote of a plurality of the votes cast at the meeting is required for the election of directors. A properly executed proxy marked to withhold authority with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for purposes of determining whether there is a quorum.

 

Other Proposals.  For each proposal other than the election of directors, the affirmative vote of the holders of a majority of the shares represented in person or by proxy and entitled to vote on the item will be required for approval. A properly executed proxy marked “Abstain” with respect to any such matter will not be voted, although it will be counted for purposes of determining whether there is a quorum. Accordingly, an abstention will have the effect of a negative vote.

 

If you hold your shares in street name through a broker or other nominee and you do not give voting instructions at least ten days before the meeting to your broker or other nominee, then your broker or other nominee may exercise voting discretion only with respect to matters considered to be “routine” by the New York Stock Exchange, such as the election of directors and the ratification of the appointment of the independent registered public accounting firm. On non-routine matters, such as the shareholder proposals, the brokers or other nominees cannot vote your shares absent voting instructions from the beneficial holder, resulting in so-called “broker non-votes.” Broker non-votes are not deemed to be votes cast, and as a result have no effect on the outcome of any matters presented, but will be counted in determining whether there is a quorum.

 

Where to Find Voting Results

 

The Company will publish the voting results in its quarterly report on Form 10-Q for the second quarter of 2009, which we plan to file with the Securities and Exchange Commission on or prior to August 10, 2009. You will also find the results in the investor information section of the Company’s website (www.visteon.com/investors).

 

Cost of Solicitation

 

The Company will pay for soliciting these proxies. The Company’s directors, officers and employees may solicit proxies in person or by telephone, mail, email, telecopy or letter. The Company has also retained Georgeson Inc. to assist it in distributing proxy solicitation materials and soliciting proxies at a cost of approximately $10,000, plus reasonable out-of-pocket expenses. The Company will reimburse brokers and other nominees for their reasonable out-of-pocket expenses for forwarding proxy materials to beneficial owners.

 

The first proposal on the agenda for the Annual Meeting will be electing ten directors to hold office until the Annual Meeting of Stockholders to be held in 2010. We expect each nominee for election as a director to be able to serve if elected. If any nominee is not able to serve, proxies will be voted in favor of the remainder of those nominated and may be voted for substitute nominees, unless the Board chooses to reduce the number of directors serving on the Board. The nominees receiving the greatest number of votes cast will be elected. All of the nominees are current directors who have been elected by stockholders at previous annual meetings, other than Mr. Stebbins.

 

The Board of Directors Recommends that You Vote FOR the Election of William H. Gray, III, Steven K. Hamp, Patricia L. Higgins, Karl J. Krapek, Alex J. Mandl, Charles L. Schaffer, Donald J. Stebbins, Richard J. Taggart, James D. Thornton and Kenneth B. Woodrow as Directors.

Nominees for Directors

 

William H. Gray, III is 67 years old, and he has been a director of the Company since June 2000. Mr. Gray has been Chairman of the Amani Group, a consulting and advisory firm, since August 2004. Prior to that he was President and Chief Executive Officer of the United Negro College Fund from September 1991 to March 2004. Mr. Gray served as a Congressman from the Second District of Pennsylvania from 1979 to 1991, and at various times during his tenure, served as Budget Committee Chair and House Majority Whip. He also serves as a director of Dell Inc., J.P. Morgan Chase & Co., Pfizer, Inc., and Prudential Financial, Inc.

 

Steven K. Hamp is 60 years old, and he has been a director of the Company since March 2008. Mr. Hamp is the former Vice President and Chief of Staff of Ford Motor Company, a global automotive vehicle manufacturer, a position he held from November 2005 to October 2006. Prior to that, he was President of The Henry Ford, a non-profit organization sponsoring historic exhibits, located in Dearborn, Michigan. Mr. Hamp previously served as a Director of the Company from January 2001 to November 2005.

 

Patricia L. Higgins is 59 years old, and she has been a director of the Company since September 2004. Ms. Higgins is the former President and CEO of Switch and Data, a leading neutral interconnection and collocation provider, a position she held from September 2000 to February 2004. Prior to that, she was Chairman and CEO of The Research Board, a business unit of the Gartner Group, for which she also served as an Executive Vice President since January 1999. Ms. Higgins also serves on the board of directors of Barnes & Noble, Inc., Dycom Industries, Inc., Internap Network Services Corporation, and The Travelers Companies, Inc.

 

Karl J. Krapek is 60 years old, and he has been a director of the Company since February 2003. Mr. Krapek is the former President and Chief Operating Officer of United Technologies Corporation, a global supplier of aerospace and building systems products, a position he held from April 1999 to January 2002. Prior to that he served as President of United Technologies’ Pratt and Whitney division since 1992. Mr. Krapek also serves as a director of Northrop Grumman Corporation, Prudential Financial, Inc. and The Connecticut Bank and Trust Company.

 

Alex J. Mandl is 65 years old and has been a director of the company since March 2008. Mr. Mandl is currently the non-Executive Chairman of Gemalto, a company resulting from the merger of Axalto Holding N.V. and Gemplus International S.A. From June 2006 until December 2007, Mr. Mandl served as Executive Chairman of Gemalto. Before June 2006, Mr. Mandl was President, Chief Executive Officer and a member of the Board of Directors of Gemplus, positions he held since August 2002. He also serves on the boards of Gemalto N.V., Dell Inc., Hewitt Associates, Inc. and Horizon Lines, Inc.

 

Charles L. Schaffer is 63 years old, and he has been a director of the Company since January 2001. Mr. Schaffer is the former Chief Operating Officer of United Parcel Service, Inc., a global provider of package delivery services.

 

Donald J. Stebbins is 51 years old, and he has been Visteon’s Chairman, President and Chief Executive Officer since December 1, 2008 and a member of the Board of Directors since December 2006. Prior to that, he was President and Chief Executive Officer since June 2008 and President and Chief Operating Officer since joining the Company in May 2005. Before joining Visteon, Mr. Stebbins served as President and Chief Operating Officer of operations in Europe, Asia and Africa for Lear Corporation since August 2004 and prior to that he was President and Chief Operating Officer of Lear’s operations in the Americas since September 2001. Mr. Stebbins is also a director of WABCO Holdings Inc.

 

Richard J. Taggart is 66 years old and he has been a director of the Company since December 2006. Mr. Taggart is the former Executive Vice President and Chief Financial Officer of Weyerhaeuser Company, a forest products company, a position he held from April 2003 to June 2007. Prior to that, Mr. Taggart served as Weyerhaeuser’s Vice President, Finance since October 2001. He also serves as a director of 3TIER.

 

James D. Thornton is 60 years old, and he has been a director of the Company since September 2004. Mr. Thornton is the former Senior Executive Vice President and Director of Diversity, Recruitment and People Services for MBNA America Bank, N.A., a credit card lending company. Since joining MBNA in 1997, he has held various leadership positions including Director of Quality Assurance and Director of Sports Marketing, Regional Director — Mid-Atlantic Region.

Kenneth B. Woodrow is 64 years old, and he has been a director of the Company since October 2004. Mr. Woodrow is the former Vice Chairman of Target Corporation, a retail sales company, a position he held from 1999 until his retirement in December 2000. Prior to that, he was the President of Target Stores since 1994. Mr. Woodrow is also a director of Delta Air Lines, Inc.

 

Meetings

 

During 2008, the Board of Directors held eight regularly scheduled and special meetings. Under the Company’s Corporate Governance Guidelines, directors are expected to attend all scheduled Board and committee meetings as well as the Company’s Annual Meeting of Stockholders. No director attended less than 75% of the aggregate number of meetings of the Board and Board committees on which he or she served during 2008. All directors, except Mr. Mandl who had a commitment prior to joining the Board, attended the 2008 Annual Meeting of Stockholders.

 

Pursuant to the Corporate Governance Guidelines, the non-employee directors meet without management at the end of every regularly scheduled Board meeting, and the independent directors meet without management at least once per year. The presiding director at these meetings is the most tenured independent director in attendance.

 

Director Independence

 

The Corporate Governance Guidelines adopted by the Board of Directors provide that a majority of the members of the Board, and each member of the Audit, Organization and Compensation, and Corporate Governance and Nominating committees, must meet the independence criteria of the listing standards of the New York Stock Exchange and other applicable law. For a director to be considered independent, the Board must determine that the director does not have any direct or indirect material relationship with the Company. To assist it in determining director independence, the Board of Directors has adopted the Visteon Director Independence Guidelines, which are set forth as Exhibit A to this Proxy Statement. The Visteon Director Independence Guidelines contain categorical standards of independence which conform to, or are more exacting than, the independence definitions in the New York Stock Exchange listing standards. In addition to applying its guidelines, the Board will consider all relevant facts and circumstances that it is aware of in making an independence determination.

 

The Board undertook its annual review of director independence in February 2009, and, based on the listing standards of the New York Stock Exchange and the Visteon Director Independence Guidelines, the Board has affirmatively determined that all but one of the non-employee directors, namely Ms. Higgins and Messrs. Gray, Krapek, Mandl, Schaffer, Taggart, Thornton and Woodrow, are independent. None of these non-employee directors had any relationship with the Company (other than as a director or stockholder). Mr. Stebbins is not independent due to his employment as a senior executive of the Company, and Mr. Hamp is also not independent because his brother-in-law is an executive officer of a significant customer of the Company.

 

Committees

 

The Board has established five standing committees. The principal functions of each committee are briefly described on the following pages.

Audit Committee

 

The Board has a standing Audit Committee, currently consisting of Charles L. Schaffer (Chair), Karl J. Krapek, Alex J. Mandl, Richard J. Taggart and Kenneth B. Woodrow, all of whom are considered independent under the New York Stock Exchange listing standards, the rules and regulations of the Securities and Exchange Commission and the Visteon Director Independence Guidelines. The Board has determined that each of the current members of the Audit Committee is qualified as an “audit committee financial expert” within the meaning of the rules and regulations of the Securities and Exchange Commission, and has “accounting and related financial management expertise” within the meaning of the listing standards of the New York Stock Exchange. During 2008, the Audit Committee held eight regularly scheduled and special meetings. The duties of the Audit Committee are generally:

 

 

The charter of the Audit Committee, as well as any future revisions to such charter, is available on the Company’s website at www.visteon.com/investors. The Audit Committee Report can be found beginning on page 40.

 

Organization and Compensation Committee

 

The Board also has a standing Organization and Compensation Committee, consisting of Karl J. Krapek (Chair), William H. Gray, III, Patricia L. Higgins, Charles L. Schaffer and James D. Thornton, all of whom are considered independent under the New York Stock Exchange listing standards and the Visteon Director Independence Guidelines. During 2008, the Organization and Compensation Committee held six regularly scheduled and special meetings and took action by written consent one time in lieu of additional meetings.

 

The Organization and Compensation Committee oversees the Company’s programs for compensating executive officers and other key management employees, including the administration of the Company’s equity-based compensation plans, and approves the salaries, bonuses and other awards to executive officers. Other duties of the Organization and Compensation Committee are generally:

 

 

The Chairman and Chief Executive Officer of the Company, with the consultation of the Senior Vice President, Human Resources, provides recommendations to the committee on the amount and forms of executive compensation, and assists in the preparation of committee meeting agendas. Pursuant to the Company’s 2004 Incentive Plan, the committee may delegate its power and duties under such plan to a committee consisting of two or more officers of the Company except in respect of individuals subject to the reporting or liability provisions of Section 16 of the Securities Exchange Act of 1934, as amended. The committee has authorized the Senior Vice President, Human Resources, together with the Vice President and Treasurer, to approve awards of up to 50,000 stock options and/or stock appreciation rights (subject to an annual limit of 500,000 stock options and/or stock appreciation rights) and up to 25,000 shares of restricted stock and/or restricted stock units (subject to an annual limit of 250,000 shares of restricted stock and/or restricted stock units) to individuals the Company desires to hire or retain, except any individual who is or upon commencing employment will be subject to the liability provisions of Section 16 of the Securities Exchange Act of 1934, as amended.

 

Further, the committee has the authority to retain, approve the fees and other terms of, and terminate any compensation consultant, outside counsel or other advisors to assist the committee in fulfilling its duties. For additional information regarding the roles and processes involved in the consideration and determination of executive compensation, including the role of compensation consultants, see “Compensation Discussion and Analysis.” The charter of the Organization and Compensation Committee, as well as any future revisions to such charter, is available on the Company’s website at www.visteon.com/investors. The Compensation Committee Report can be found beginning on page 11.

 

Corporate Governance and Nominating Committee

 

The Board also has a standing Corporate Governance and Nominating Committee, consisting of William H. Gray, III (Chair), Karl J. Krapek, James D. Thornton and Kenneth B. Woodrow, all of whom are considered independent under the New York Stock Exchange listing standards and the Visteon Director Independence Guidelines. During 2008, the Corporate Governance and Nominating Committee held five regularly scheduled and special meetings. The duties of the Corporate Governance and Nominating Committee are generally:

 

 

The charter of the Corporate Governance and Nominating Committee, as well as any future revisions to such charter, is available on the Company’s website at www.visteon.com/investors.

 

Corporate Responsibility Committee

 

The Board has a standing Corporate Responsibility Committee, consisting of James D. Thornton (Chair), Steven K. Hamp and Patricia L. Higgins. During 2008, the Corporate Responsibility Committee held three regularly scheduled meetings. The duties of the Corporate Responsibility Committee are generally:

 

 

The charter of the Corporate Responsibility Committee, as well as any future revisions to such charter, is available on the Company’s website at www.visteon.com/investors.

Finance Committee

 

The Board has a standing Finance Committee, consisting of Patricia L. Higgins (Chair), Steven K. Hamp, Alex J. Mandl, Richard J. Taggart and Kenneth B. Woodrow. During 2008, the Finance Committee held four regularly scheduled and special meetings. The duties of the Finance Committee generally are:

 

 

The charter of the Finance Committee, as well as any future revisions to such charter, is available on the Company’s website at www.visteon.com/investors.

 

Director Nomination Process

 

The Corporate Governance and Nominating Committee assesses all director candidates, whether submitted by management or a stockholder, and recommends nominees for election to the Board. Recommendations for election are based upon the nominee’s intelligence, judgment, foresight, personal character, experience and achievements, and diversity of background and expertise as compared to the present make-up of the Board. The Corporate Governance and Nominating Committee has the authority to retain consultants to assist with director recruitment. During 2008, the Corporate Governance and Nominating Committee did not retain any consultants.

 

Each year, the Corporate Governance and Nominating Committee reviews all eligible director candidates, including incumbents. The committee then decides, based upon the pool of eligible candidates and the number of vacancies to be filled, whom to recommend to the Board to be nominated for election that year. The full Board reviews the committee’s recommendations and approves the individuals to stand for election. This is the process that was used to identify and evaluate the current nominees standing for election that appear in this proxy statement.

 

The Corporate Governance and Nominating Committee welcomes stockholder recommendations of director candidates. Stockholders may suggest candidates for the consideration of the committee by submitting their suggestions in writing to the Company’s Secretary, including the agreement of the nominee to serve as a director. In addition, the Company’s By-Laws contain a procedure for the direct nomination of director candidates by stockholders (see page 46), and any such nomination will also be automatically submitted to the Corporate Governance and Nominating Committee for consideration. No individuals were proposed as director candidates for this Annual Meeting by any stockholder.

 

Communications with the Board of Directors

 

Stockholders and other persons interested in communicating directly with a committee chairperson or with the non-management directors as a group may do so as described on the Company’s website (www.visteon.com/investors), or by writing to the chairperson or non-management directors c/o of the Company Secretary, One Village Center Drive, Van Buren Township, Michigan 48111.

 

The following contains information regarding the stock ownership of the nominees for election as directors, the directors continuing in office, the Company’s executive officers and beneficial owners of more than five percent of the Company’s voting securities.

 

Ownership of the Company’s common stock is shown in terms of “beneficial ownership.” A person generally “beneficially owns” shares if he or she has either the right to vote those shares or dispose of them, and more than one person may be considered to beneficially own the same shares.

 

In this proxy statement, unless otherwise noted, a person has sole voting and dispositive power for those shares shown as beneficially owned by him or her. The percentages shown in this proxy statement compare the person’s beneficially owned shares with the total number of shares of the Company’s common stock outstanding on April 15, 2009 (130,570,116 shares).

 

Nominees, Continuing Directors and Executive Officers

 

The following table contains stockholding information for the nominees for election as directors and the Company’s executive officers, as well as stock units credited to their accounts under various compensation and benefit plans as of April 15, 2009. No shares have been pledged as collateral for loans or other obligations by any director or executive officer listed below.

 

 

 

 

 

Other Beneficial Owners

 

The Company believes that the following table is an accurate representation of beneficial owners of more than 5% of any class of the Company’s voting securities as of April 15, 2009. The table is based upon reports on Schedules 13G and 13D and Forms 4 filed with the Securities and Exchange Commission or other information believed to be reliable.

 

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s executive officers, directors and greater than 10% stockholders to file certain reports (“Section 16 Reports”) with respect to their beneficial ownership of the Company’s equity securities. Based solely on a review of copies of reports furnished to the Company, or written representations that no reports were required, the Company believes a Form 4 for Dorothy Stephenson related the withholding of 3,850 shares upon the vesting of a restricted stock award was filed eighteen days late due to an administrative error.

 

Our Ethics and Integrity Policy instructs all employees of Visteon, including the Named Executive Officers, to avoid conflicts between personal interests and the interests of Visteon, as well as any action that has the potential for impacting the Company adversely or interfering with the employee’s objectivity. The policy also requires any employee having a financial interest in, or a consulting, managerial or employment relationship with, a competitor, customer, supplier or other entity doing business with Visteon to disclose the situation to their manager or to the legal or human resources departments of the Company. The Company’s compliance group implements the Ethics and Integrity Policy and related policies and annually requires all management employees, including the Named Executive Officers, to complete a questionnaire disclosing potential conflicts of interest transactions. In addition, the Audit Committee is responsible for overseeing our ethics and compliance program, including compliance with the Ethics and Integrity Policy, and all members of the Board are responsible for complying with such policy. The Corporate Governance and Nominating Committee reviews the professional occupations and associations of board nominees, and annually reviews transactions between Visteon and other companies with which our Board members and executive officers are affiliated to the extent reported in response to our directors and officers questionnaire. Our Ethics and Integrity Policy is in writing. See page 46 of this proxy statement under “Miscellaneous” for instructions on how to obtain a copy.

In early 2005, purported class and stockholder derivative actions were filed in federal and state courts in Michigan against the Company, the non-employee directors and certain Named Executive Officers. These actions include: (i) a purported class action alleging that the Company, certain of its current and former officers and its independent registered public accounting firm violated federal securities laws by making materially misleading statements; (ii) purported stockholder derivative actions alleging that certain of the Company’s current and former officers and directors breached their fiduciary duties in connection with the matters alleged in the securities class action discussed immediately above; and (iii) purported class actions alleging that certain current and former employees, officers and directors breached their fiduciary duties under the Employee Retirement Income Security Act (“ERISA”) by, among other things, continuing to offer the Company’s stock as an investment alternative under the Visteon Investment Plan and the Visteon Savings Plan for Hourly Employees and/or failing to disclose complete and accurate information regarding the prudence of investing in the Company’s stock. The parties have reached settlements of the ERISA and purported stockholder derivative matters and the purported federal securities laws class action was dismissed, and such dismissal was affirmed on appeal. Pursuant to the indemnification provision contained in the Company’s Amended and Restated By-laws, the Company is paying the expenses (including attorneys’ fees) incurred by the defendants in defending these actions where not covered by insurance policies.

 

Mr. Hamp is the brother-in-law of William Clay Ford, Jr., the Executive Chairman of Ford Motor Company. Ford is currently the Company’s largest customer and Ford and the Company have engaged, and are expected to engage, in a number of commercial and other transactions having values in excess of $120,000 in the ordinary course of their businesses. The Corporate Governance and Nominating Committee reviewed this relationship in connection with Mr. Hamp’s election to the Board.

 

The Organization and Compensation Committee of the Board of Directors (hereafter referred to as the “Committee”) oversees the Company’s programs for compensating executive officers and other key management employees, including the administration of the Company’s equity-based compensation plans, and approves the salaries, bonuses and other awards to executive officers. The Committee has reviewed and discussed the Compensation Discussion and Analysis below with management of the Company, and, based on such review and discussion, the Committee has recommended to the Board of Directors that the compensation discussion and analysis so stated be included in this Proxy Statement.

 

Organization and Compensation Committee
Karl J. Krapek (Chairman)
William H. Gray, III
Patricia L. Higgins
Charles L. Schaffer
James D. Thornton

 

Compensation Discussion and Analysis

 

  Executive Compensation Program Objectives

 

Overview

 

The Company believes that an experienced, motivated and effective executive team is critical to the long-term success of its business. Thus, the primary objectives of the Company’s executive compensation program are to recruit, motivate and retain highly qualified executives. In meeting its primary objectives, the Company has structured its executive compensation program to support the Company’s strategic plans and objectives, including compensation program costs, and provides strong alignment of the interests of its executives with the creation of stockholder value.

 

The mix and total amount of compensation in any year reflects market competitive practices, the realities of the Company’s financial position and its industry. The Company believes that the proportion of variable, or “at risk”, compensation should increase as an employee’s level of responsibility increases.

 

In light of economic conditions which continued to deteriorate through 2008 and into 2009, the Company took a number of actions to reduce the Company’s compensation expense. These actions were intended to produce immediate cash savings and included reduction in salaries associated with reduced work weeks as well as temporary salary reductions, suspension of the Company match in the 401(k) savings plan and the elimination of the car allowance.

 

Benchmarking Considerations

 

The Company and the Committee use competitive market data to inform their decision-making processes on elements of the Company’s compensation and benefits programs. Although the Company and the Committee use the market-based ranges derived from surveys and studies compiled by compensation consultants, and other available market data, neither the Company nor the Committee attempts to set all compensation elements for all executives within a particular market-based range. Rather, the Company and the Committee evaluate additional factors, such as individual experience and performance, organizational level (internal relationships) and critical need for the position when executives have been recruited externally.

 

For executive level positions, pay ranges have been developed using Towers Perrin’s U.S. Compensation Data Bank (CBD) General Industry Executive Database (approximately 1,000 companies) and Hewitt Associates’ Total Compensation Measurement^tm (TCM) database (approximately 600 companies).

 

The firm of Frederic W. Cook & Co., Inc., an independent executive compensation consulting firm, advises the Committee on competitive market practices and trends as well as on specific executive compensation matters as requested by the Committee. The Company maintains no other direct or indirect business relationships with this firm.

 

Roles and Processes

 

The Committee oversees the Company’s programs for compensating executive officers and other key management employees, including the administration of the Company’s equity-based compensation plans, and approving the salaries, incentive awards and other compensation paid to executive officers. The Chief Executive Officer and Senior Vice President, Human Resources develop and present executive compensation program recommendations to the Committee, including summaries of the results of survey data provided by the Company’s compensation consultants.

The Committee reviews and approves the determination of final incentive awards for preceding periods and the salary and incentive awards (including equity-based awards) for the current year generally during its regularly-scheduled meeting or meetings in the first quarter. The process is designed to link annual performance reviews with the determination of base salaries and incentive awards. The annual review of long-term incentives and equity grants occurs during the Committee’s regularly scheduled meetings in the first quarter of the each year. Stock option and stock appreciation right exercise prices are set at the fair market value of our stock on the date of grant, which under the terms of the Company’s incentive plan is the average of the high and low price of Visteon stock on such date. The Committee may also make individual grants from time to time. The Committee does not time the grant of equity-based awards to take advantage of material non-public information nor does the Committee take into account the prevailing trading prices of the Company’s common stock on the timing of awards in any way.

 

The Company’s annual and long-term incentive programs are administered by the Committee pursuant to the terms of the Visteon Corporation 2004 Incentive Plan. During the first quarter of each year, the Committee approves the mix of compensation elements and metrics for the performance-based elements, including target and threshold levels, with the advice and assistance of management. The Committee retains discretion to modify or adjust metrics to take into account the disposition of businesses and/or facilities and other factors. After the completion of the performance period, the Committee reviews actual performance against each metric and determines the final payout, if any, based on performance relative to each metric. The Committee has discretionary authority to lower and, except in the case of certain covered executives (including the Named Executive Officers as defined below), raise final awards.

 

  Primary Elements of Compensation for Named Executive Officers

 

To meet the Company’s goals for executive compensation, the Company provides:

 

 

 

 

Base Salary

 

Overview and Purpose

 

Base salaries, combined with general welfare benefits, provide basic security for our employees at levels necessary to attract and retain a highly qualified and effective salaried workforce. Base salaries are determined taking into account market data as well as an individual’s position, responsibilities, experience and value to the Company. The base salaries for the executive officers are reviewed on an annual basis for merit-based increases, as well as at the time of a promotion or other significant change in responsibilities. The Committee reviews “tally sheets” that summarize each executive’s total compensation for the past three years. The Chief Executive Officer and the Senior Vice President, Human Resources review the performance for the Company’s executive officers, other than the Chairman or Chief Executive Officer, and make base salary recommendations to the Committee. The Committee, in its sole discretion, determines the salary and amount of any changes for the Chairman or Chief Executive Officer and approves any significant changes recommended for the entire executive team.

2008 Actions

 

Due to the financial challenges facing the Company and the automotive industry, the Company suspended its annual merit-based increase program. As a result, only those Named Executive Officers who were promoted or were given additional responsibilities received base salary increases during 2008. In connection with his promotion to Chief Executive Officer effective in June of 2008, Mr. Stebbins’ base salary was increased by 30% to $1,200,000. This amount was chosen by the Committee, based on the recommendation of the former Chairman, after a review of benchmark data compiled by Hewitt Associates and Towers Perrin of chief executive officer compensation at public companies with revenues of at least $10 billion. The Committee targeted a base salary at the weighted, regressed 50th percentile of this data. The Committee also reviewed for reference purposes the compensation paid to chief executive officers of the Company’s industry competitors, namely American Axle & Manufacturing, Inc., ArvinMeritor, Inc., Autoliv Inc., BorgWarner Inc., Dana Holding Corporation, Delphi Corporation, Eaton Corporation, Federal-Mogul Corporation, Hayes Lemmerz International, Inc., Johnson Controls, Inc., Lear Corporation, Tenneco Inc. and TRW Automotive Holdings Corp.

 

Since 2005, the role of the Company’s vice presidents in charge of the Company’s core product groups has evolved from primarily an engineering and manufacturing oversight role to one of greater accountability and responsibility for the profitability and operational performance of the product groups. Upon the recommendation of the Chief Executive Officer and the Senior Vice President, Human Resources, the Committee approved the implementation of the new organizational level of product group president to recognize this evolution. It was also determined that the annual base salaries of these product group presidents was below the market range for persons having similar responsibilities, based on data compiled by Towers Perrin and Hewitt Associates. As a result of this analysis, in October of 2008 Mr. Gohl was promoted to the title of corporate Vice President and President, Interiors and Lighting Product Groups, and his base salary was increased by 12% to $475,000.

 

The actual salaries paid to each Named Executive Officer for 2008 are presented in the “Summary Compensation Table” below.

 

Annual Incentive Award

 

Overview and Purpose

 

The Company’s Annual Incentive program provides for an annual cash incentive opportunity that is linked to company and individual performance. This program is designed to compensate key salaried employees for the achievement of specified goals that correlate with the Company’s financial and operational objectives. The target incentive opportunities are expressed as a percentage of base salary. In determining the incentive opportunities, the Committee considers the potential impact on the business of each role, the relationships among the roles and market competitive levels for such positions.

 

The program is administered by the Committee pursuant to the terms of the Visteon Corporation 2004 Incentive Plan, which has been approved by the Company’s stockholders. During the first quarter of each year, the Committee approves one or more performance-based metrics, including target and threshold levels, with the advice and assistance of management. After the end of the performance period, the Committee reviews actual performance against each metric and determines the final payout, if any, based on such performance relative to each metric, which may be adjusted downward at the discretion of the Committee.

2008 Actions

 

The Company provides the same award opportunity expressed as a percentage of base salary to executive officers at comparable management levels within the Company. Also, as noted above, the Company believes that the proportion of variable, or “at risk”, compensation, including the annual incentive opportunity, should increase as an employee’s level of responsibility increases. A participant’s opportunity is based on their organizational level and base salary as of December 31st (or the date of retirement) of the year of the award, and were as follows for 2008:

 

 

The target percentage opportunities by level have not changed since 2006, except that the Company created a new level for its product group presidents, as discussed above. In 2008, in conjunction with his promotion to chief executive officer, the Committee increased Mr. Stebbins’ target annual incentive opportunity to the amount in the table above from a previous level of 90%. The incentive opportunity for Mr. Stebbins was set taking into account the data described above relating to his salary increase.

 

The Committee chose from a mix of the following financial and operational metrics to motivate and reward participating employees’ achievement of objectives that are key to the Company’s long-term sustainability goals: free cash flow, on a consolidated basis as well as the contribution of each of the Company’s product groups; and product quality, expressed as the improvement in parts per million defective over 2007, on a corporate-wide basis as well as by each of the Company’s product groups. Improvement in product quality is critical to the Company’s ability to attract and retain customers, which is fundamental to the Company’s long-term success, while free cash flow is an important metric that is intended to represent cash available to pursue opportunities that enhance stockholder value and is tracked by the financial community as one measure of a company’s ability to generate profits and returns. For each of Messrs. Stebbins, Johnston, Quigley and Donofrio and Ms. Stephenson, 75% of their opportunity was based on achievement of the consolidated free cash flow metric and 25% was based on the achievement of the corporate product quality metric, as detailed below. For Mr. Gohl, 37.5% of his opportunity was based on achievement of the consolidated free cash flow metric, 12.5% was based on the achievement of the corporate product quality metric, 37.5%, was based on the achievement of the metrics relating to the free cash flow contribution of the Interiors and Lighting product groups, and 12.5% was based on the achievement of the metrics relating to the product quality of the Interiors and Lighting product groups, as detailed in the table below.

 

 

 

The threshold levels for the free cash flow metrics were not achieved by the Company on a consolidated basis or for three of the four product groups. Although the threshold level for Interiors Product Group free cash flow contribution was achieved, the Committee, based on the recommendation of the Chief Executive Officer, elected not to make payouts in respect of this metric because of the Company’s overall negative consolidated free cash flow performance as well as general economic and financial conditions.

 

Product quality metrics under the annual incentive program were achieved above threshold levels as indicated in the table above. The Committee elected to make bonus payments relating to the achievement of these product quality milestones because of the critical role quality improvement plays in the Company’s ability to attract and retain customers of the business. However, in light of current economic and financial conditions, and based on the recommendation of the Chief Executive Officer, the Committee elected to reduce the annual incentive award payouts by 25% for each of the Named Executive Officers other than Mr. Johnston. Mr. Johnston’s payout was not reduced in order to comply with pre-existing contractual obligations.

 

The actual 2008 annual incentive bonuses paid to each Named Executive Officer for 2008 are presented in the “Summary Compensation Table” below under the “Non-Equity Incentive Plan Compensation” column. The potential range of incentive award opportunities, by Named Executive Officer, are presented below in the “Grants of Plan-Based Awards in 2008” table.

 

Long-Term Incentive Awards

 

Overview and Purpose

 

The Company’s Long-Term Incentive program provides for an annual award of a performance-based cash bonus earned over a long-term measurement period, usually a three-year period, stock appreciation rights and stock options, which are subject to time-based vesting requirements, and restricted stock or restricted stock units, which may be subject to either time-based and/or performance-based vesting requirements. This program is designed to compensate salaried employees on the achievement of specified goals that are intended to correlate with the Company’s long-term financial and strategic objectives, to align the delivery of incentive value with increases in the Company’s stock price and to retain key employees. Retention of key employees has been an important consideration in the delivery of the Company’s long-term incentive opportunity, especially during the Company’s restructuring program. To that end, the long-term program has incorporated compensation elements that are time-based, such as restricted stock units and retention bonuses, to retain key employees. The total targeted award opportunity, expressed as a percentage or multiple of base salary is determined by organization level.

 

2008-2010 Long-Term Incentive Opportunity

 

The Company provides the same targeted incentive award opportunity expressed as a percentage of base salary to executive officers at the same organizational level, which were unchanged from 2007. As noted above, the Company believes that the proportion of variable, or “at risk”, compensation, including the long-term incentive opportunity, should increase as an employee’s level of responsibility increases.

 

To provide significant alignment with the interests of stockholders, 75% of the total 2008-2010 Long-Term Incentive opportunity was delivered through the grant of equity-based awards, as shown below.

 

 

Payment of the cash bonus is based on the achievement of successive annual metrics that are established each year The final bonus amount payable following the conclusion of the three-year performance period is based upon the number of annual metrics achieved, with the achievement of each annual metric or set of metrics representing one-third of the total target award. For the first year of the 2008-2010 Long-Term Incentive, the metric was based on reducing administrative and engineering staff costs by at least 10.6% in 2008 compared to 2007. The Committee has the discretion to modify or adjust the metrics to take into account currency fluctuation and other factors. For 2008, the metric was achieved. The potential range of awards for the full 2008-2010 cycle, by Named Executive Officer, is presented below in the “Grants of Plan-Based Awards in 2008” table.

 

Previous Long-Term Incentive Opportunities

 

The Company paid a cash bonus under the 2006-2008 long-term incentive cycle based on achievement of a product quality metric — JD Power survey results, which represented 25% of the total cash incentive opportunity. 75% of the opportunity was based on the achievement of a return on assets in 2008 of at least 1.0%, which was not achieved. The JD Power survey improvement goal targeted a 20% improvement over a three year period in problems per 100 vehicles at three months in service on components and systems supplied by Visteon to its customers. The Company achieved product quality performance at 194% of the targeted metric. However, the Committee, based on the recommendation of the Chief Executive Officer, elected to make final payments assuming achievement at 175% of the targeted metric. This level was chosen to better reflect that the baseline year should have been adjusted to eliminate certain products that were produced by operations of the Company that were sold in 2005. In addition, the Company achieved one of the two metrics established for the 2008 portion of the 2007-2009 long-term incentive cycle; the Company targeted restructuring actions involving at least seven facilities, which was accomplished. The goal of new business wins of at least $750 million in 2008 was not achieved. Actual payouts and earned amounts under these programs are presented in the “Summary Compensation Table,” under the column “Non-Equity Incentive Plan Compensation.”

 

  Special Incentive Awards

 

Achievement of strong free cash flow is critical to the operation of our business. To create an unwavering focus on cash flow and to provide a significant award for exceeding targets relative to budget for free cash flow, the Committee provided the opportunity for a special cash award if the Company achieved a Free Cash Flow of at least $200 million in 2009. If the objective is achieved, Messrs. Stebbins, Quigley and Donofrio and Ms. Stephenson are eligible for a cash bonus equal to their annual base salary. Mr. Gohl was eligible for a cash bonus equal to twice his annual base salary.

 

In conjunction with his promotion to Chief Executive Officer, the Committee made a special grant of 250,000 stock appreciation rights and 250,000 restricted stock units to Mr. Stebbins. To incentivize Mr. Johnston to complete planned restructuring actions, Mr. Johnston also received a special grant of 100,000 stock options during February of 2008.

  Amendment to Employment Agreement of Mr. Johnston

 

Mr. Johnston and the Company entered into an amendment to Mr. Johnston’s amended and restated employment agreement to reflect the change in his role to the Company’s executive Chairman and to allow for a smooth transition of the new Chief Executive Officer. The amendment provided that Mr. Johnston would receive the $2.5 million transition bonus contemplated by his original agreement, subject to the obligation to refund a prorated portion of such bonus if he voluntarily resigned or was terminated for cause prior to December 31, 2008. The amendment clarified that all of Mr. Johnston’s outstanding stock options, restricted stock units and stock appreciation rights would become fully vested on the earlier of: (i) his date of death or disability; (ii) his termination without cause, (iii) his termination of employment by mutual agreement of the parties, (iv) a change in control as defined in the applicable change in control severance agreement; or (v) December 31, 2008.

 

In addition, the Committee approved an amendment to the Visteon Corporation Supplemental Executive Retirement Plan, a nonqualified, unfunded pension benefit plan. The amendment provided that Mr. Johnston’s benefits under the plan would be calculated assuming that he had continued his employment through December 31, 2008 and that his monthly base salary for December of 2008 was equal to his monthly salary as of November 30, 2008.

 

  Other Elements of Compensation for Named Executive Officers

 

Executive officers participate in the Company’s retirement and savings and health and welfare plans on the same basis as other similarly situated employees, except for the supplemental pension, retiree health care, and other arrangements described below under “Retirement Benefits”. In addition, executive officers received a monthly cash car allowance, annual physical and a flexible perquisite account that may be used for certain discretionary purposes as well as other perquisites from time to time approved by the Committee. The Company provides these benefits to its executives when necessary to compete for, and retain, executive talent. In December the Company eliminated the car allowance benefit for Named Executive Officers.

 

The Company maintains an Executive Security Program that requires the Chief Executive Officer to use corporate provided aircraft for personal and business travel, and provides the benefit of various personal health and safety protections.

 

  Severance and Change-in-Control Arrangements

 

In 2005, the Company adopted the Visteon Executive Severance Plan (the “Severance Plan”). The Severance Plan provides for severance benefits to officers elected by the Board of Directors and certain senior management employees of the Company whose employment is subsequently involuntarily terminated, without cause, subject to certain exceptions. If eligible under the Company’s retirement plans, an executive may retire concurrent with a severance-eligible termination under the Severance Plan. The plan was adopted to provide uniform, market-based severance to executives as the Company restructured its businesses.

 

To compete for and attract skilled executives, the Company also enters into individual employment agreements from time to time with executives that contain additional or alternative severance benefits. A description of individual agreements for certain Named Executive Officers is set forth below.

 

The Company has entered into change-in-control agreements with each of Messrs. Stebbins, Quigley, Donofrio, Gohl and Ms. Stephenson, as well as other officers. Pursuant to these agreements, each participant will receive certain benefits upon the occurrence of specified triggering events following a change of control of the Company. The level of benefits varies based on whether the executive is a senior vice president and higher or a vice president. Such arrangements are necessary to encourage highly-sought after executives to remain with the Company during periods leading up to and following a change of control transaction. The agreements were originally offered to encourage executives to join the Company at the time of its spin off from Ford Motor Company in 2000, recognizing the uncertainty that accompanies a newly independent company. The Company and the Committee revisit these arrangements from time to time, including most recently in 2005, to confirm that they are consistent with market practices.

A further description of post-termination benefits and projected amounts under various scenarios for Named Executive Officers is set forth below under “Potential Payments Upon Termination or Change-in-Control.”

 

  Stock Ownership

 

The Company has adopted stock ownership goals for all elected officers of the Company. The goal for these officers is to own common stock worth a multiple of salary, ranging from one times salary up to five times salary for the Chief Executive Officer, within five years from their date of hire or election, if later. All of the Named Executive Officers employed by the Company for five years or more are in compliance with the stock ownership guidelines.

 

For the purpose of determining compliance with the stock ownership guidelines, the calculation includes stock owned directly, restricted stock, restricted stock units and stock units held in the Company’s Deferred Compensation Plan.

 

Visteon’s Stock Ownership guidelines are as follows:

 

 

In light of significant changes in the trading value of the Company’s stock and other economic conditions, the stock ownership guidelines are expected to be reevaluated by the Committee to determine if they continue to be appropriate.

 

  Tax and Accounting Considerations

 

The Committee has considered the Company’s ability to deduct from taxable income certain performance based compensation under section 162(m) of the Code. For the Company’s top five executives (other than the chief financial officer), salaries in excess of $1 million and non-performance-based bonuses, restricted stock or restricted stock units will not be exempt from section 162(m) of the Code. The Company’s current U.S. tax position does not make tax deductibility of compensation a determinative factor in the design of its compensation program.

 

The stock appreciation rights and restricted stock units of the 2008 long-term incentive awards granted to Named Executive Officers are accounted for as liability awards with the Company’s ultimate expense equal to the value earned by employees. The liability classification is due in large part to the cash settlement feature of the stock appreciation rights and restricted stock units awarded in 2008. These awards were structured to limit the use of shares of the Company’s common stock due to low availability levels under the Company’s incentive plans.

 

  Clawback and Risk Considerations

 

The Company does not currently have a specific policy regarding the adjustment or recovery of awards or payments if the relevant performance measures upon which they are based are restated or otherwise adjusted in a manner that reduces the size of such award or payment. The Committee and the Company are currently considering whether to adopt a specific policy regarding such circumstances. Until such policy is adopted, the Committee and the Company expect to review the specific circumstances of any such adjustment or restatement to determine whether to request reimbursement of any award paid to an employee.

 

The Company believes that its incentive compensation programs do not encourage executives to take unnecessary and excessive risks that threaten the long-term value of the Company. Rather, the Company’s incentive compensation programs are comprised of multiple elements designed to encourage improvement in areas, such as restructuring, cost reduction, cash flow and product quality, that are critical to enhancing the Company’s long-term financial performance and stockholder value.

Changes for 2009

 

In addition to those actions noted above, the Company continues to take actions during 2009 to reduce the cost of its compensatory programs in light of the current economic and industry conditions. Base salaries for the month of January 2009 were reduced by 20% for all the Named Executive Officers. Also, effective February 1, 2009 through June 30, 2009, the base salary for the Chief Executive Officer was reduced by 10% from his December 31 rate and the base salaries for the remaining Named Executive Officers were reduced by 7.5%.

 

Summary Compensation Table

 

The following table summarizes the compensation that was earned by, or paid or awarded to, the Named Executive Officers. The “Named Executive Officers” are the Company’s Chief Executive Officer, the Company’s Chief Financial Officer and the three other most highly compensated executive officers serving as such as of December 31, 2008, determined based on the individual’s total compensation for the year ended December 31, 2008 as reported in the table below, other than amounts reported as above-market earnings on deferred compensation and the actuarial increase in pension benefit accruals. The Named Executive Officers also includes the Company’s former Chief Executive Officer.

 

 

 

 

 

 

 

Employment Arrangements

 

Agreement with Mr. Johnston.  In 2000, the Company entered into an employment agreement with Michael F. Johnston that provided certain terms of his initial employment. On February 27, 2007, the Company and Mr. Johnston amended and restated his employment agreement. The agreement provided that Mr. Johnston would serve as the Company’s Chairman and Chief Executive Officer for the term of the agreement. The agreement was further amended on May 14, 2008, to reflect Mr. Johnston’s resignation from the position of Chief Executive Officer effective as of May 31, 2008. The term of the amended agreement commenced as of March 1, 2007 and continued through December 31, 2008, unless the parties mutually agreed to end the term earlier. The agreement also provided for his initial base salary and his participation in the health, welfare, retirement, incentive and other benefit programs available to executives, including the flexible perquisite program. Mr. Johnston also was to continue to receive two years of service credit for every year of credited service under the Company’s pension plans. The Company also agreed that Mr. Johnston would be entitled to 66% of his target cash bonus under the 2007-2009 long-term incentive program and 33% of his target cash bonus under the 2008-2010 long-term incentive program if he continued his employment through December 31, 2008 or if his employment is terminated earlier without cause. Mr. Johnston was also entitled to stock options, restricted stock and other equity-based awards as and when such awards are made to other officers generally on at least the same basis as such awards are made to other officers.

The agreement was terminable by Mr. Johnston upon 90 days notice to the Company, or by the Company for “cause”. The term “cause” means that the executive has been guilty of (i) material, willful dishonesty, (ii) material, willful misconduct, (iii) willful and substantial nonperformance of assigned duties, (iv) indicted for a felony or a misdemeanor involving moral turpitude, or (v) has otherwise breached the terms of the agreement. In the event Mr. Johnston was terminated by the Company without cause prior to December 31, 2008, Mr. Johnston was entitled to immediate and full vesting of all outstanding equity awards granted to him by the Company, and (iii) accrued and unpaid salary through the date of termination. The 2008 amendment provided that Mr. Johnston would receive a $2.5 million transition bonus, subject to the obligation to refund a prorated portion of such bonus if he voluntarily resigned or was terminated for cause prior to December 31, 2008. The agreement also imposes non-competition and confidentiality obligations on Mr. Johnston.

 

Mr. Johnston retired from the Company effective as of November 30, 2008. His retirement was treated as a termination without cause under his employment agreement, which entitled him to retain the $2,500,000 transition bonus paid to him on June 1, 2008, and all outstanding equity awards granted to him by the Company became fully vested as of November 30, 2008.

 

Agreement with Mr. Stebbins.  The Company entered into an employment agreement effective as of May 23, 2005 (the “Effective Date”), with Mr. Stebbins that provided for the initial terms of his employment as President and Chief Operating Officer. The employment agreement provides for his initial annual base salary and an initial payment of $3,000,000, which may be refundable on a pro rata basis if his employment is terminated for “Cause” or without “Good Reason” (each as defined therein) prior to May 23, 2008. Mr. Stebbins is also entitled to participate in the Company’s annual incentive performance cash bonus program and the Company’s long-term incentive program.

 

Mr. Stebbins will be credited with two years of benefit service for each one year of actual benefit service through the Supplemental Executive Retirement Plan. In addition, the Company credited Mr. Stebbins with an opening balance in the Supplemental Executive Retirement Plan of $1,200,000. Mr. Stebbins’ aggregate accrued benefit payable from all qualified and nonqualified retirement plans upon retirement from the Company will not be less than the greater of the actuarial equivalent value of (a) the aggregate benefit payable to him under the Visteon Pension Plan, the Supplemental Executive Retirement Plan, and the Pension Parity Plan minus the $1,200,000 opening balance and interest credits attributable thereto or (b) the $1,200,000 Supplemental Executive Retirement Plan opening balance plus interest credits accrued to the date of retirement. Mr. Stebbins will forfeit the aforementioned benefits if, prior to his fifth anniversary with the Company he is terminated by the Company for Cause (other than due to his death or “Disability”, which shall have the meaning set forth in the long term disability benefit plan of the Company in which Mr. Stebbins participates), or he terminates employment with the Company for other than Good Reason.

 

The employment agreement has a term of two years, with the agreement automatically renewable for successive one-year terms unless either party gives written notice not less than 90 days prior to expiration that it/he does not wish to renew. If the Company gives such notice prior to Mr. Stebbins’ tenth anniversary with the Company, Mr. Stebbins shall be entitled to severance benefits upon termination of employment on the same basis as provided for a termination without “Cause” or resignation for “Good Reason” during the term of the agreement. If the Company gives such notice after Mr. Stebbins’ tenth anniversary with the Company, Mr. Stebbins shall not be entitled to such severance. Mr. Stebbins retains the right to resign at any time for any reason, just as Company retains the right to sever the employment relationship at any time, with or without Cause. However, if Mr. Stebbins is terminated by the Company without Cause or he resigns from the Company’s employ for Good Reason during the term of the employment agreement, Mr. Stebbins will be entitled to the benefits of the Executive Severance Plan (provided Mr. Stebbins signs a release of all claims against the Company and its representatives).

Perquisites and Allowance Programs

 

Visteon provides Named Executive Officers with a flexible perquisite allowance program. The flexible perquisite allowance is a fixed amount that is paid to each eligible executive in quarterly installments and is designed to cover his or her expenses related to club membership dues, legal and financial counseling, excess liability insurance premiums, tax preparation, and airfare for spouse or partner accompanying employee on business travel, among other items. For Named Executive Officers, the amount of the allowance varies by management level, with a range of between $15,000 to $60,000 per year. The amount paid to the Named Executive Officers in 2008 pursuant to the flexible perquisite allowance program is set forth in the “All Other Compensation” column of the “Summary Compensation Table.”

 

During 2008, Visteon also provided U.S.-based Named Executive Officers with a monthly vehicle allowance, which may be used at the discretion of the executive. For Named Executive Officers, the amount of the allowance varies by management level, with a range of between $800 to $1,200 per month. This vehicle allowance was suspended effective as of January 1, 2009 for the U.S.-based Named Executive Officers and other officers of the Company.

 

The following table summarizes all incentive plan awards that were made to the Named Executive Officers during 2008.

 

Grants of Plan-Based Awards in 2008

 

 

 

 

 

Visteon Corporation 2004 Incentive Plan

 

The Visteon Corporation 2004 Incentive Plan permits grants of stock options, stock appreciation rights, restricted stock, restricted stock units and other rights relating to our common stock, as well as performance and time-based cash bonuses. In 2008, the Company implemented a long-term incentive program for the 2008-2010 performance period and a 2008 annual incentive program for eligible employees, including the Named Executive Officers. The Company also implemented a special performance-based bonus program for certain critical employees, including the Named Executive Officers. These programs are discussed further under “Compensation Discussion and Analysis,” above. Except under certain circumstances such as retirement or involuntary termination, an executive must be employed in good standing with the Company at the conclusion of a performance period to be entitled to a bonus payment. The Committee retains discretion under the 2004 Incentive Plan to modify or adjust any award at any time.

 

The stock appreciation rights awarded under the 2008-2010 long-term incentive program vest ratably on January 1 over three years and are exercisable for a cash payment or common stock of the Company, at the election of the Company. The additional stock appreciation rights awarded in 2008 vest ratably over three years from the date of grant and are for a cash payment or common stock of the Company, at the election of the Company. The stock options awarded in 2008 vested on November 30, 2008. The exercise prices of the stock options and stock appreciation rights are the average of the high and low selling prices of our common stock on the New York Stock Exchange on the date of grant. Any unexercised stock options or stock appreciation rights will expire after seven years. If a holder of a stock option or stock appreciation right retires, becomes disabled, or dies, his or her stock options and/or stock appreciation rights continue to be exercisable up to the normal expiration date. See “Potential Payments Upon Termination or Change-in-Control,” below. The stock options and stock appreciation rights are subject to certain conditions, including not engaging in competitive activity, and generally cannot be transferred. The restricted stock units awarded under the 2008-2010 long-term incentive program will vest on December 31, 2010 and will be paid in cash based on the average of the high and low selling prices of our common stock on the New York Stock Exchange on such vesting date or common stock, at the election of the Company. The additional restricted stock units awarded in 2008 will vest on June 1, 2011 and will be paid in cash based on the average of the high and low selling prices of our common stock on such vesting date or settled in stock, at the election of the Company. Holders of restricted stock units may receive the same cash dividend equivalents as other stockholders owning common stock. No dividends were paid in 2008.

The following table sets forth information on outstanding stock option and stock awards held by the Named Executive Officers at December 31, 2008, including the number of shares underlying both exercisable and unexercisable portions of each stock option or stock appreciation right as well as the exercise price and expiration date of each outstanding option and right.

 

Outstanding Equity Awards at 2008 Fiscal Year-End

 

 

 

 

The following table sets forth information regarding each exercise of stock options and/or stock appreciation rights and vesting of restricted stock and/or restricted stock units during 2008 for each of the Named Executive Officers on an aggregated basis.

 

Option Exercises and Stock Vested in 2008

 

 

 

 

The following table summarizes information as of December 31, 2008 relating to Visteon’s equity compensation plans pursuant to which grants of stock options, stock appreciation rights, stock rights, restricted stock, restricted stock units and other rights to acquire shares of its common stock may be made from time to time.

 

Equity Compensation Plan Information

 

 

 

 

Retirement Benefits

 

Defined Benefit Plans

 

The following table sets forth the actuarial present value of each Named Executive Officer’s accumulated benefit under each defined benefit plan, assuming benefits are paid at normal retirement age based on current levels of compensation. The table also shows the number of years of credited service under each such plan, computed as of the same pension plan measurement date used in the Company’s audited financial statements for the year ended December 31, 2008. The table also reports any pension benefits paid to each Named Executive Officer during the year.

 

Pension Benefits for 2008