8000 W. Florissant Avenue

St. Louis, MO 63136

Dear Fellow Shareholder:

I am pleased to invite you to join us at the 2019 Annual Meeting of Shareholders of Emerson Electric Co. to be held on Tuesday, February 5, 2019 at 10:00 a.m., Central Time, at the Emerson headquarters located at 8000 W. Florissant Avenue, St. Louis, Missouri 63136.   At this year’s meeting, we will vote on the election of three directors and the ratification of the selection of KPMG LLP as Emerson’s independent registered public accounting firm. We will also hold a non-binding advisory vote on the compensation of Emerson’s named executive officers. We will also report on our business and provide an opportunity for shareholders to ask questions.   Three years ago, we introduced a bold, new vision for the future of Emerson: two complementary platforms to focus our expertise around our core strengths – Automation Solutions and Commercial & Residential Solutions. We are seeing this vision come to life and celebrating the strategic wins our repositioning has made possible. Over the past year, Emerson experienced strong growth in sales, earnings and cash flow that reinforced our market leadership position. Our growth was led by U.S. markets, and we continue to experience strong performance in Asia, particularly in China. We are also seeing growth in Europe, where we've made acquisitions that will give us a stronger presence in key markets like Germany.

In 2018, we continued to invest for growth, enhance critical capabilities for our customers and increase shareholder value. We deployed $2.2 billion for bolt-on mergers and acquisitions to drive sales and EPS growth, and we repurchased $1 billion in shares. At the same time, we increased our M&A and share repurchase targets through 2021 and enabled the business to continue to deliver on dividend growth, as we have done for 62 years. This strategic, balanced approach to capital deployment is shaping a bright future and positioning the next generation of leadership for continued success. For more information on our 2018 results, please see our 2018 Annual Report to Shareholders that is being made available with this Proxy Statement.

Your vote is very important. I encourage you to complete, sign and return your proxy card, or use telephone or internet voting prior to the meeting, so that your shares will be represented and voted at the meeting even if you cannot attend. On behalf of the Board of Directors and all of us at Emerson, we thank our shareholders for your continued trust and support.

December 14, 2018

Sincerely,

DAVID N. FARR

Chairman and

Chief Executive Officer

Table of Contents

Proxy Statement Summary

This summary highlights information contained elsewhere in this Proxy Statement and does not contain all of the information you should consider. You should read the entire Proxy Statement before voting.

Annual Meeting

 

2019 ANNUAL MEETING INFORMATION

For additional information about our Annual Meeting, see Questions and Answers on page 55.

 

Meeting Date: Tuesday February 5, 2019		Meeting Place: Emerson Headquarters 8000 W. Florissant Ave. St. Louis, MO 63136		Meeting Time: 10:00 a.m. Central Time		Record Date: November 27, 2018

Voting Matters and Board Recommendations

 

Voting Matters		Recommendation		Vote Standard*		Page
Management Proposals
Item 1 Election of Directors		FOR each nominee		Majority present & entitled to vote		46
Item 2 Ratification of appointment of KPMG LLP as Independent Registered Public Accounting            Firm		FOR		Majority present & entitled to vote		51
Item 3 Approval of named executive officer compensation		FOR		Majority present & entitled to vote		52

 

*	For the election of Directors, you have the choice of voting “FOR” all or individual nominees or to “Withhold Authority” to vote for all or individual nominees. For the other proposals, you have the choice to vote “FOR”, “AGAINST” or “ABSTAIN”.

Casting Your Vote

Whether or not you plan to attend the meeting, please provide your proxy by internet, phone, or by filling in, signing, dating and promptly mailing your proxy card or voting instruction form.

 

By Internet: www.proxyvote.com				By Phone: 1-800-690-6903 (toll free within U.S. and Canada)				By Mail: Vote Processing c/o Broadridge 51 Mercedes Way Edgewood, NY 11717

Attending the Meeting

You may also vote at the meeting. All attendees must present government-issued photo identification, such as a driver’s license or passport. If you are a shareholder of record, please check the box on your proxy card and bring the tear-off admission ticket with you. If your shares are held by someone else (such as a broker) please bring a letter or account statement from that firm showing you were a beneficial holder on November 27, 2018. Failure to provide such identification may result in your exclusion from the meeting.

PROXY STATEMENT SUMMARY

Our Board of Directors

Nominees and Continuing Directors

The Emerson Board is divided into three classes. You are being asked to vote on the three Director nominees indicated below for the specified terms. The six continuing Directors were previously elected to three-year terms ending at the Annual Meeting specified. All Directors are independent, except Mr. Farr. Please see “Proxy Item No. 1 – Election of Directors” for more information.

 

AC  Audit Committee

CC  Compensation Committee

EC  Executive Committee

FC  Finance Committee

NC  Corporate Governance and Nominating Committee

 

 

Nominees For Terms Ending In 2022
Clemens A. H. Boersig Retired Chairman of the Supervisory Board, Deutsche Bank AG   Age: 70 Director Since 2009 Committees: CC, EC, FC				Joshua B. Bolten President and Chief Executive Officer, Business Roundtable   Age: 64 Director Since 2012 Committees: AC, EC, NC				Lori M. Lee Chief Executive Officer AT&T Latin America and Global Marketing Officer for AT&T, Inc.   Age: 53 Director Since 2018 Committees: AC, FC
To Continue In Office Until 2020
David N. Farr Chairman and Chief Executive Officer, Emerson   Age: 63 Director Since 2000 Committee: EC				Gloria A. Flach Retired Corporate Vice President and Chief Operating Officer, Northrop Grumman Corporation   Age: 59 Director Since 2017 Committees: CC, FC				Matthew S. Levatich President and Chief Executive Officer, Harley-Davidson, Inc.   Age: 53 Director Since 2012 Committees: AC, CC
To Continue In Office Until 2021
Arthur F. Golden Partner, Davis Polk and Wardwell   Age: 72 Director Since 2000 Committees: EC, FC				Candace Kendle Retired Chairman and Chief Executive Officer, Kendle International, Inc.   Age: 71 Director Since 2014 Committees: AC, NC				James S. Turley Retired Chairman and Chief Executive Officer, Ernst & Young LLP   Age: 63 Director Since 2013 Committees: AC, EC, NC

PROXY STATEMENT SUMMARY

PROXY STATEMENT SUMMARY

PROXY STATEMENT SUMMARY

From Lead Independent Director

Dear Fellow Shareholder:

When I took on the role of lead independent director for Emerson in April 2018, it was with excitement and a sense of opportunity. I’ve known Emerson for 30 years and have a great deal of respect for both the Company and David Farr as chairman and CEO. The Company’s principled management style and rigorous focus on governance are a testament to its sustained success – and to shareholders’ continued faith in this 128-year-old Company.

The role of lead independent director is an output of a disciplined Board focus. Independence among Board members is a critical tenet of strong governance that ensures the voice and interests of shareholders drive important decisions around strategy, capital allocation, compensation and succession planning. The lead independent director role acts as the Board’s liaison with the chairman, consulting regularly on company issues and meeting with shareholders, as needed.

As a Company with a strong culture of performance, having David serve as both chairman and CEO of Emerson drives long-term value creation for shareholders. At the same time, it ensures management and the Board are aligned in our view of opportunities and risks, while driving consistent focus on strategy and execution that support Emerson’s role as a technology leader and industry steward.

Through my role, I partner closely with David – serving as a check and balance and building critical controls into the governance process. The CEO as chair is best equipped to drive focus on the most impactful areas of the Company and promote responsible decision-making by the Board, due to his day-to-day knowledge of the business. My role – and the role of the Board – is to provide guidance on how daily decisions align with the Company’s strategy and direction.

Emerson’s Board culture is one of high engagement. We are both well-informed about the Company and interested in the industry, seeking to understand the latest trends. We employ a thorough annual planning cycle to set strategic priorities and evaluate risks. This process includes a multi-day strategy workshop and rigorous process, overseen by the audit committee, to identify and prioritize the most important financial and operational threats facing the Company.

Board diversity and experience are critical to our effectiveness. Our Board – with women making up one-third of our directors – has a wealth of experience that brings a balanced approach to strategy evaluation and important investment decisions. As a highly engaged Board, we provide insights that inform the Company’s strategy and its corporate social responsibility. In fact, this year we accelerated annual Corporate Social Responsibility (CSR) reporting by six months – providing shareholders and partners with additional line of sight into the Company’s latest focus areas. I invite you to read more in our full CSR Report on Emerson.com.

On behalf of the Board, thank you for your continued engagement and support.

Sincerely,

Clemens A.H. Boersig

Lead Independent Director, Emerson

Board and Committee Operations

Board and Corporate Governance

Board Responsibility

The primary responsibility of our Board is to foster our long-term success. In fulfilling this role, each Director must exercise good faith business judgment in the best interests of Emerson and our shareholders. Our Board has responsibility for establishing broad corporate policies, setting strategic direction and overseeing management. Management has responsibility for our day-to-day operations, implementing these policies and strategic direction, subject to Board oversight.

Governance Principles and Ethics Program

Our Board has adopted Corporate Governance Principles and Practices that govern the structure and operations of our Board, Board oversight of management and relations between the Board and our shareholders. In addition, our Board has adopted an ethics program that applies to all Emerson employees and our Directors, and includes an employee code of conduct, supplements that are specifically applicable to our Directors and executive officers, and an additional code of ethics applicable to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Controller.

The Company’s Corporate Governance Principles and each component of its ethics program are available on the Company’s website at www.Emerson.com, Investors, Corporate Governance, Business Ethics. Printed copies of these documents are available to shareholders upon written request to Emerson Electric Co., 8000 West Florissant Avenue, St. Louis, Missouri 63136, Attn: Secretary. The Company intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K by posting required information at the same location on its website.

The Board of Directors annually reviews its governance policies and practices, taking into account changes in applicable law, trends in corporate governance and input from shareholders.

Recent Corporate Governance Changes

Our Corporate Governance and Nominating Committee regularly considers a broad range of corporate governance issues and is committed to adopting governance practices that are the most beneficial to the Company and its shareholders. As part of its review process, the Board recently made changes to Emerson’s corporate governance polices:

We believe these actions are marks of good governance and enhance our accountability to shareholders.

BOARD AND COMMITTEE OPERATIONS

Board Meetings and Attendance

There were ten meetings of the Board during fiscal 2018. All Directors attended at least 75% of the meetings of the Board and committees on which they served. Directors are strongly encouraged to attend the Annual Meeting, although the Company has no policy requiring attendance. All of the Directors then in office attended the 2018 Annual Meeting.

Board Leadership Structure

The Board believes that it should have the flexibility to determine whether the same person should serve as both Chair and CEO based on what it believes will provide appropriate Company leadership. The Board believes that its current structure, with Mr. Farr serving as both Chair and CEO is appropriate given Mr. Farr’s past success and extensive experience in these roles, the efficiencies of having the CEO serve as Chair, the Company’s strong corporate governance structure, including Mr. Boersig’s strong leadership role as Lead Independent Director, and the Company’s financial performance under Mr. Farr’s leadership.

As part of its leadership structure review, in October 2016 the Board established the Lead Independent Director position to strengthen the independent leadership of the Board. The Lead Independent Director is elected from the independent Directors for a three-year term. Among other things, the Lead Independent Director chairs regularly scheduled meetings of non-management Directors, reviews Board agendas and information, calls meetings of the independent Directors, acts as the Board’s key liaison with the Chairman and serves on the Board’s executive committee. The Lead Independent Director is available for consultation with shareholders. The Chair and CEO consults periodically with the Lead Independent Director and the committee Chairs, all of whom are independent, on Board matters and on issues facing the Company.

Each year the Board, through its Corporate Governance and Nominating Committee, reviews its leadership structure including the combined Chair and CEO, to ensure that it remains appropriate for the Company.

Board Role in Risk Oversight

The Board has responsibility for oversight of the Company’s risk management process. This process is designed to provide to the Board timely visibility into the identification, assessment and management of critical risks. The Audit Committee assists the Board by annually reviewing and discussing with management this process and its functionality. The areas of critical risk include strategic, operational, compliance, environmental, financial and reputational. The full Board, or the appropriate committee, receives this information through updates from management to enable it to understand and monitor the Company’s risk management process.

Board Composition

Our Board consists of nine Directors divided into three classes, with the terms of office of each class ending in successive years. The Directors in one class are elected at each Annual Meeting to serve for a three-year term and until their successors are duly elected and qualified, subject to their earlier death, resignation or removal. Periodically, a Director is elected to a shorter term, or moved into a different class between meetings, to rebalance the classes as a result of the early departure of a Director.

Pursuant to the Company’s Bylaws, a Director may not stand for election after age 72. If our Board determines that continued service beyond this period is in the best interests of Emerson and our shareholders, our Board may amend the Bylaws to waive this requirement and allow election to additional one-year terms.

BOARD AND COMMITTEE OPERATIONS

We are committed to reviewing our Board’s composition to ensure that we continue to have the right mix of skills, diversity, background and tenure. The diversity and tenure composition of our Board is as follows:

Our Board’s membership represents a balanced approach to Director tenure, allowing our Board to benefit from the experience of longer-serving Directors as well as the fresh perspectives of newer Directors. The Board is continuously seeking out highly-qualified, diverse candidates to add to the range of skills and experiences represented on our Board.

Our Directors have a wide range of skills and experience in a variety of professions and industries, including:

The specific background, skills and experience of each of our Directors is detailed under Proposal 1 – Election of Directors.

The Corporate Governance and Nominating Committee has the primary responsibility for developing a Director succession plan. The Committee periodically reviews our Board composition and, as discussed above, identifies the appropriate mix of experiences, skills, attributes and tenure for our Board in light of our Company’s current and future business environment and strategic direction, all with the objective of recommending a group of Directors that can best continue our success and represent our shareholders’ interests. The Committee and our Board are committed to developing a diverse pool of potential candidates for future Board service. As part of this process, the Board recently added to the Board Lori Lee, CEO AT&T Latin America and Global Marketing Officer for AT&T, Inc. Among other attributes, Ms. Lee brings business insight and breadth of experience in international relations from her extensive experience in strategy, operations and marketing across several countries.

Other Key Governance Policies

We have adopted corporate governance policies which encourage significant long-term stock ownership and align the interests of our executives with our shareholders. These policies include:

BOARD AND COMMITTEE OPERATIONS

Review, Approval or Ratification of Transactions with Related Persons

We have developed and implemented processes to obtain and review all transactions and relationships in which the Company and any of our Directors, Director nominees or executive officers, or any of their immediate family members, are participants, and to determine whether any of these individuals have a direct or indirect material interest in any such transaction. Transactions that are determined to be material to a related person are disclosed as required. Pursuant to these processes, all Directors and executive officers annually complete a Director and Executive Officer Questionnaire and a Conflict of Interest Questionnaire that are designed to identify related person transactions and both actual and potential conflicts of interest. We also review the nature and extent of business between the Company and other companies affiliated with our Directors or executive officers. Under the Company’s ethics program, an executive officer is required to immediately disclose all the relevant facts and circumstances of any actual or potential conflict of interest to the Company’s Ethics Committee. If the Ethics Committee determines that there is a conflict, it will refer the matter to the Board of Directors. A Director is required to immediately disclose all the relevant facts and circumstances of any actual or potential conflict of interest to the Board. In each case, the Board will review the matter to make a final determination as to whether a conflict exists, and, if so, the appropriate resolution.

The Company has a written ethics program applicable to all Directors and executive officers of the Company that prohibits Directors and executive officers from entering into transactions, or having any relationships, that would result in a conflict of interest with the Company. Waivers of the ethics program requirements for Directors and executive officers may only be granted by the Board of Directors. The Company’s ethics program documents can be found on the Company’s website at www.Emerson.com, Investors, Corporate Governance, Business Ethics.

Certain Business Relationships and Related Party Transactions

Based on the review described above, there were no transactions from October 1, 2017 through the date of this proxy statement, and there are no currently proposed transactions, in which the Company was or is to be a participant, in which the amount involved exceeded $120,000 and in which any of the Company’s Directors or executive officers or any of their immediate family members, or any beneficial holder of more than 5% of our common stock, either had or will have a direct or indirect material interest.

Director Independence

The Board has determined that all current Directors, other than Mr. Farr, are independent, as defined under the general independence standards of the NYSE. R. L. Stephenson and J. W. Prueher resigned from the Board during fiscal 2018, but were determined to be independent while they served. All Directors identified as independent meet the Board adopted independence standards. These standards are included in Appendix A and are available on the Company’s website at www.Emerson.com, Investors, Corporate Governance, Principles & Practices.

In the course of the Board’s independence determinations, it considered any transactions, relationships and arrangements as required by the Company’s independence standards. In particular, with respect to each of the three most recently completed fiscal years, the Board considered for:

BOARD AND COMMITTEE OPERATIONS

Committees of Our Board of Directors

Our Board of Directors has delegated certain of its responsibilities to committees to provide for more efficient Board operations and allow Directors to engage in deeper analysis and oversight in specific areas of importance. The members and Committee Chairs are designated by the Board based on recommendations from the Corporate Governance and Nominating Committee. The Chair of each Committee helps develop the agenda for that Committee, and provides a report to our Board on Committee activities. Each Committee annually reviews the adequacy of its Charter and conducts an evaluation of its performance.

Our Board has adopted written Committee charters which are available on our website, www.emerson.com, Investors, Corporate Governance, Committee Charters. The primary responsibilities and membership of each Committee are below:

BOARD AND COMMITTEE OPERATIONS

Board and Committee Self-Evaluations

Our Board assesses annually its effectiveness and that of its Committees. All Directors complete a self-evaluation form for the Board and for each Committee on which they serve. These forms include numerical ratings for certain key metrics, as well as the opportunity for written comments. The comments provide key insights into the areas Directors believe the Board can improve or in which its performance is strong. The self-evaluation results are reported to the full Board, and each Committee is provided with its Committee evaluation results. The Corporate Governance and Nominating Committee oversees the process. Self-evaluation topics include number and length of meetings, topics covered and materials provided, Committee structure and activities, Board composition and expertise, succession planning, Director participation and interaction with management and promotion of ethical behavior. Our Board discusses the results of each annual self-evaluation and, as appropriate, implements enhancements and other modifications identified during the self-evaluation.

Corporate Governance and Nominating Committee

Nomination Process

The Corporate Governance and Nominating Committee regularly reviews the appropriate size and composition of the Board and anticipates vacancies and required expertise. The Committee reviews potential nominees from several sources, including Directors, management, shareholders or others. The Company may retain an independent search firm to assist in identifying and evaluating potential nominees. Ms. Lee, who is standing for election for the first time, was recommended by Messrs. Farr and Stephenson.

In evaluating potential nominees, the Committee considers the knowledge, experience, integrity and judgment of the candidates, their contribution to the diversity of backgrounds, experience and skills on the Board and their ability to devote sufficient time and effort to their duties as Directors. The Board considers the following experience particularly relevant: manufacturing, global business, in particular in emerging markets and China, business development, technology and innovation, legal, investment banking, acquisitions and finance, government, corporate governance and information technology, as well as experience on the boards of other major organizations. The Company’s Corporate Governance Principles set forth the minimum qualifications for nominees. The best candidates are then recommended by the Committee to the Board.

The Board’s policy is to seek the most qualified candidates without regard to race, gender, national origin, religion, disability, age or sexual orientation. However, in evaluating candidates the Committee will consider these diversity criteria. The Board seeks to maintain a balance of perspectives, qualities and skills on the Board to obtain a diversity of viewpoints to better understand the technical, economic, political and social environments in which the Company operates. Existing Board members and outside agencies recommend candidates to further these policy objectives. The Board’s success on these objectives is measured by the range of viewpoints represented on the Board.

The Committee will consider candidates recommended by shareholders if required biographical information is properly submitted as described in “Other Matters—Future Shareholder Proposals and Nominations” at page 58 below. Properly submitted shareholder recommendations are sent to the Committee and will receive the same consideration as others identified to the Committee.

The Company’s Bylaws permit shareholders to nominate Directors at an annual meeting of shareholders or at a special meeting at which Directors are to be elected. The procedures for making such nominations are discussed in “Other Matters—Future Shareholder Proposals and Nominations” beginning on page 58.

Proxy Access

In 2017, the Board amended the Company’s Bylaws to permit up to 20 shareholders owning in the aggregate at least 3% of the Company’s outstanding common stock continuously for at least three years to nominate and include in the Company’s proxy materials director nominees constituting up to the greater of two individuals or 20% of the Board, provided that the nominating holders and the

BOARD AND COMMITTEE OPERATIONS

nominees satisfy the requirements specified in the Bylaws, including providing the Company with advance notice of the nomination. For more information on how to submit a nominee for inclusion in Company proxy materials pursuant to these provisions, see “Other Matters—Future Shareholder Proposals and Nominations” on page 58 below.

Director Compensation

Processes and Procedures for Determination of Director Compensation

The Corporate Governance and Nominating Committee annually reviews compensation practices for the Company’s Directors and makes recommendations to the Board regarding the form and amount of compensation for determination by the Board. To assist the Committee in performing these duties, management engages an outside consultant to prepare a director compensation analysis and to make recommendations. Based on this analysis, management makes recommendations regarding Director compensation for the Committee’s consideration. Frederic W. Cook & Co. prepared this analysis for fiscal 2018. Changes were recommended by management and the Committee and made by the Board.

Director Compensation Program

Each non-management Director is paid an annual retainer in cash and/or restricted stock or restricted stock units (“RSUs”), as well as meeting fees and reimbursement of expenses. The Lead Independent Director and each Committee Chair receive an additional cash retainer. Mr. Farr does not receive any additional compensation for service on the Board. In fiscal 2018, the Director compensation program provided for the following payments:

Effective December 1, 2018, the cash portion of the annual retainer was increased to $115,000 and the restricted stock/RSUs portion of the annual retainer was increased to $150,000, payable February 5, 2019. Other retainers were increased to the following levels: Lead Independent Director—$30,000, Chairs of Audit and Compensation Committees—$25,000 and Chairs of Finance and Corporate Governance and Nominating Committees—$20,000. Board and Committee meeting fees were not increased.

Emerson’s Director Stock Ownership Policy generally requires non-management Directors to hold stock equal to five times annual cash compensation, subject to a phase-in policy for new Directors. Our non-management Directors are required to hold all restricted stock and RSUs until retirement from our Board. The awards generally do not vest until the last day of a Director’s term after the age of 72, or earlier death, disability or a change of control of the Company. If a Director’s tenure on the Board ends for any other reason, the vesting of the award is at the discretion of the Committee. If the restrictions on the awards do not lapse, the awards are forfeited to the Company. Restricted stock includes both dividend and voting rights. Dividend equivalents are paid on RSUs, which do not have voting rights.

Directors may defer all or a part of their cash compensation under the Company’s Deferred Compensation Plan for Non-Employee Directors. Directors may also defer payment of the dividend equivalents on RSUs. Deferred amounts are credited with interest quarterly at the Bank of America prime rate. Under SEC rules, interest on deferred amounts is considered above-market if the rate of interest exceeds 120% of the applicable federal long-term rate. During fiscal 2018, the applicable prime rate ranged from 4.25% to 5.0%, while 120% of the applicable federal long-term rate ranged from 2.96% to 3.57%. A. F. Golden and R. L. Stephenson participated in this deferral program during fiscal 2018 and above-market earnings on their deferred amounts are set forth in the Director Compensation Table. All deferred amounts are payable in cash.

As part of the Company’s charitable contributions practice, the Company may, in the Board’s discretion, make a charitable contribution in the names of Emerson and a Director (including management Directors) upon retirement from the Board (as determined by the Board), taking into account the Director’s Board tenure, accomplishments, and other relevant factors.

BOARD AND COMMITTEE OPERATIONS

The table below sets forth non-management Director compensation for fiscal 2018.

Director Compensation

Audit Committee

Report of the Audit Committee

The Audit Committee assists the Board in providing oversight of the systems and procedures relating to the integrity of the Company’s financial statements, the Company’s financial reporting process, its systems of internal accounting, financial and reporting controls, the internal audit process, risk management, the independent audit process of the Company’s annual financial statements and the Company’s compliance with legal and regulatory requirements. Management is responsible for these processes.

BOARD AND COMMITTEE OPERATIONS

The Audit Committee reviews with management the Company’s major financial risk exposures and the steps management has taken to monitor, mitigate and control such exposures. Management has the responsibility for the implementation of these activities. In fulfilling its oversight responsibilities, the Committee reviewed and discussed with management the audited financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018, including a discussion of the quality and the acceptability of the Company’s financial reporting and controls. The Committee also reviews the Company’s quarterly earnings press releases and reports on Form 10-Q prior to distribution and filing.

The Company’s independent registered public accounting firm is responsible for expressing an opinion on the conformity of those audited financial statements with U.S. generally accepted accounting principles and on the effectiveness of the Company’s internal control over financial reporting. The Committee reviewed with the independent registered public accounting firm the firm’s judgments as to the quality and the acceptability of the Company’s financial reporting and such other matters as are required to be discussed with the Committee under auditing standards of the Public Company Accounting Oversight Board (“PCAOB”), including the matters required to be discussed by PCAOB Interim Auditing Standard AU Section 380, Communication with Audit Committees. In addition, the Committee has discussed with the independent registered public accounting firm the firm’s independence from management and the Company, including the impact of non-audit related services provided to the Company and the matters in the independent registered public accounting firm’s written disclosures required by Rule 3526 of the PCAOB, as may be modified or supplemented.

The Committee also discussed with the Company’s internal auditors and the independent registered public accounting firm in advance the overall scope and plans for their respective audits, including timing, risk assessments, locations and coverage, and any reliance by the external auditors on work performed by the internal auditors. The Committee meets at least quarterly with the internal auditor and the independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s accounting and financial reporting.

The Committee is directly responsible for the appointment, oversight, qualification, independence, performance, compensation and retention of the Company’s independent registered public accounting firm, including audit fee negotiations and approval. The Committee has evaluated whether retaining KPMG as the Company’s independent auditor for the year is in the best interest of Emerson and its shareholders. The Committee considers whether KPMG’s known legal risks include involvement in proceedings that could impair their ability to perform the annual audit, and reviews historical and proposed KPMG fees charged to the Company.

In performing its review, the Committee also considers the quality, candor and effectiveness of KPMG’s communications with the Committee and management; how effectively KPMG maintained its independence as demonstrated by exercising judgment, objectivity and professional skepticism; reports of the PCAOB and other available data regarding the quality of work performed by KPMG; KPMG’s long tenure and experience as the Company’s auditor, and the geographic reach and expertise of KPMG to address the demands placed on an auditor by the global breadth and complexity of Emerson’s business in terms of quantity, quality and location of staff.

The Committee also considers whether, to assure continuing auditor independence, there should be rotation of the independent registered public accounting firm.

The Committee is responsible for the selection of the lead engagement partner, and as required by law, assures rotation of the lead partner every five years. When appropriate, KPMG provides a list of candidates for the role of lead engagement partner, who are then interviewed by members of senior management. The Committee considers their recommendations and those of KPMG leadership, evaluates the candidate’s qualifications, strengths and weaknesses and selects the lead engagement partner.

In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018 for filing with the Securities and Exchange Commission. In accordance with its Charter, the Committee has reappointed KPMG LLP as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for fiscal 2019, based on their overall qualifications, objectivity, significant experience and understanding of the Company’s operations, and their ability to deploy resources to match Emerson’s global operations.

BOARD AND COMMITTEE OPERATIONS

Fees Paid to KPMG LLP

Fees paid to KPMG LLP, the Company’s independent registered public accounting firm:

Audit Fees primarily represent the cost for the audit of the Company’s annual financial statements, reviews of quarterly SEC filings and statutory audits at non-U.S. locations.

Audit-Related Fees for 2018 and 2017 include $0 and $2.8 million, respectively, for audit procedures related to actual and potential divestitures. The remaining Audit-Related Fees are primarily attributable to other acquisition and divestiture due diligence, audits of employee benefit plans and statutory filings.

Tax Fees are related to tax compliance services.

The Audit Committee approved in advance all services provided by KPMG LLP. The Audit Committee’s pre-approval policies and procedures are included within the Audit Committee Charter, which can be found on the Company’s website at www.Emerson.com, Investors, Corporate Governance.

Compensation Committee

The Compensation Committee operates under a written charter that details the Committee’s authority, composition and procedures. The Committee may delegate authority with respect to specific matters to one or more members, provided that all decisions of any such members are presented to the full Committee at its next meeting. For a discussion of delegations of authority to the CEO, see “Equity Compensation Grant Practices” at page 32 below.

For fiscal 2018, the Compensation Committee reviewed management’s process for assessing risk in the Company’s compensation programs, policies and practices for its employees, including the Company’s executive compensation program and practices. The Committee accepted the result of these reviews that our compensation programs, policies and practices do not create risks that are reasonably likely to have a material adverse effect on our business. Please see “Our Compensation Best Practices” on page 22 and “Policies Supporting our Fundamental Principles” on page 30 for additional information.

Role of Executive Officers and the Compensation Consultant

Executive Officers

As described in “Compensation Discussion and Analysis — Setting Total Compensation” on page 24, our CEO makes recommendations to the Compensation Committee based on management input regarding total compensation of the other executive officers. Management also develops and presents to the Committee design recommendations for compensation programs.

The Compensation Committee has unrestricted access to management and may request the participation of management or the Committee’s independent consultant at any meeting or executive session. Committee meetings are regularly attended by the CEO, except for executive sessions and discussions of his own compensation, by the Vice President-Executive Compensation, who leads some of the discussions regarding the Company’s compensation programs, and the Committee’s independent consultant. The Committee regularly reports to the Board on compensation matters and annually reviews the CEO’s compensation with the Board in executive sessions of non-management Directors only.

Compensation Consultant

The Compensation Committee has sole discretion, at Company expense, to retain and terminate compensation consultants, independent legal counsel or other advisors, including sole authority to approve their fees and retention terms. Any Committee member may request the participation of independent advisors at any meeting. Management engages Frederic W. Cook & Co., Inc. from time to time to assist with executive compensation program design and competitive pay analysis. The Committee reviews this information in

BOARD AND COMMITTEE OPERATIONS

determining compensation for the NEOs. The Committee has engaged Exequity LLP as its independent consultant. Exequity reports directly to the Committee and performs services as directed by the Committee. In 2018, Exequity reviewed our comparator group companies, the compensation of our CEO and the other NEOs and a pay for performance analysis. Neither Exequity nor Frederic W. Cook & Co. provides any other services to the Company. See also “Competitive Market Information” on page 23.

Report of the Compensation Committee

The Compensation Committee of the Board of Directors acts on behalf of the Board to establish and oversee the Company’s executive compensation program in the interests of the Company and its shareholders. For a discussion of the Compensation Committee’s policies and procedures, see “Compensation” on page 12, “Compensation Committee” on page 17 and “Role of Our Compensation Committee” on page 21.

Management of the Company has prepared the Compensation Discussion and Analysis describing the Company’s compensation program for senior executives, including the NEOs. See “Compensation Discussion and Analysis” beginning on page 19. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis for fiscal 2018 with the Company’s management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement for its 2019 Annual Meeting of Shareholders.

Compensation Committee Interlocks and Insider Participation

The functions and members of the Compensation Committee are set forth above under “Compensation” on page 12. All Committee members are independent and none of the Committee members has served as an officer or employee of the Company or a subsidiary of the Company. During fiscal 2018, no member of the Committee and no other Director was an executive officer of another company on whose compensation committee or board any of our executive officers served.

Executive Compensation

Compensation Discussion and Analysis

This Compensation Discussion and Analysis describes the compensation programs and practices regarding our Named Executive Officers (“NEOs”) for the 2018 fiscal year. Our NEOs for fiscal 2018 included our Chief Executive Officer, Chief Financial Officer and the next three most highly compensated officers, as well as our former President who retired on October 1, 2018, listed below:

Executive Summary

At Emerson, our goal is to attract and retain talented executives who deliver value to our shareholders through the achievement of the Company’s specific business objectives, such as consistent, sustained growth in earnings per share and cash flow. Our executive compensation program and overall pay for performance philosophy align with that goal and our results.

Fiscal 2018 Performance Highlights

EXECUTIVE COMPENSATION

Focus on Values

As a unified company, we worked with thousands of employees worldwide to articulate our global values that have grounded Emerson for more than 128 years. These values guide how we interact with our employees, shareholders, customers and suppliers. We believe that this is an expectation not only of Emerson, but of our customers and the geographies where we do business.

Pay for Performance Fundamental Principles

Our executive compensation program is based on a consistent set of key principles that directs compensation decisions and communicates to participants the Company’s core values, critical business strategies and performance objectives. These principles guide the performance objectives that drive strong results to maximize shareholder value, make Emerson a good global citizen, enhance critical capabilities and encourage career-long commitments to the Company.

These fundamental compensation principles include:

Emerson’s shareholders again expressed strong support for our executive compensation program at our 2018 Annual Meeting. For each of the last eight Annual Meetings of Shareholders, over 90% of shares voted were in support of our executive compensation program.

EXECUTIVE COMPENSATION

Role of Our Compensation Committee

Our Compensation Committee acts on behalf of our Board to establish our compensation philosophy and oversee our executive compensation program. The current members of our Compensation Committee are Clemens A. H. Boersig (Chairman), Gloria A. Flach and Matthew S. Levatich. Pursuant to its Charter, which can be found on our website at www.emerson.com, our Committee is responsible for:

Compensation Mix

In determining the total compensation of each of our NEOs, the Compensation Committee balances the compensation mix considering the executive’s level of responsibilities, career potential, individual performance and service with the Company, with the objective of achieving a high and sustainable level of Company and individual performance. At-risk compensation generally increases as responsibilities increase. Total compensation is targeted to the median market range.

EXECUTIVE COMPENSATION

Key Compensation Decisions in Fiscal 2018

Our Compensation Best Practices

EXECUTIVE COMPENSATION

Competitive Market Information

How We Determine Our Comparator Group

The Compensation Committee annually reviews the comparator group that it uses to conduct market analysis and determine competitive pay ranges for our NEOs. As in prior years, the Committee reviewed a special study and screening prepared by Frederic W. Cook & Co. and selected comparator companies based upon one or more of the following criteria:

2018 Comparator Group Companies

For fiscal 2018, there were no changes made to the 23-company comparator group listed below:

Emerson vs. Comparator Group

EXECUTIVE COMPENSATION

Elements of Compensation

Setting Total Compensation

The Compensation Committee targets total compensation for our NEOs in the median market range of our comparator group. To determine the median range, the Committee uses a competitive pay (cash and long-term stock compensation) analysis for the proxy reported officer positions at the comparator group companies prepared by Frederic W. Cook & Co. The Committee also reviews and confirms the competitive market pay analysis with Exequity, its independent compensation consultant. The competitive pay analysis is not used to establish performance goals in the Company’s compensation programs.

The Committee does not set specific financial targets related to annual cash compensation and pay determinations are not based on any formula. Actual pay is dependent on Company and individual performance and based on the Committee’s informed judgment. The Committee does monitor the relative internal compensation relationships between the CEO and the other NEOs, however, no specific pay ratio is targeted.

The Committee meets in executive session to review and set the CEO’s compensation. The Committee considers a number of factors in making its decision, including: market data; compensation elements; Company performance; tenure and experience; retention; and the CEO’s individual performance, contributions to the Company and impact on results. The Committee also discusses the CEO’s compensation annually with the non-management Directors in executive session.

For the NEOs and other key executives, our CEO reviews with the Committee the individual performance and leadership potential of these key executives, along with the Company’s financial results, and makes individual pay recommendations to the Committee. The CEO’s recommendations are informed by our robust annual organizational review, compensation planning and performance rating processes.

EXECUTIVE COMPENSATION

Fiscal 2018 CEO and NEO Performance

CEO Performance. In determining the appropriate level of total compensation for the CEO, the Committee evaluated the Company’s strong financial performance in fiscal 2018 (summarized on page 19); his continued success in reshaping the Company into two global franchises; the Company’s significant growth and strategic merger and acquisition activity; his critical succession planning leadership; his tenure as CEO; his individual performance and contributions; and the retention of Mr. Farr. Considering these factors, the Committee determined that Mr. Farr’s increased 2018 total compensation positioned him appropriately in the median market range, following below median compensation in fiscal 2016 and flat total compensation in fiscal 2017, and reviewed alternatives for continued delivery of the appropriate level of total compensation for Mr. Farr. The Committee noted that Mr. Farr successfully led the Company through the 2018 fiscal year and highlighted the following significant accomplishments.

EXECUTIVE COMPENSATION

Other Named Executive Officer Performance. In setting compensation for the other NEOs, the Committee considered the Company’s strong fiscal 2018 financial performance, the continued successful execution of global repositioning and integration efforts and the actions taken to maintain strong profitability during a changing business environment, as well as Mr. Farr’s evaluation of each NEO’s individual performance and accomplishments. The Committee also evaluated the NEOs based on their interactions with and presentations to the Board.

NEO Fiscal 2018 Accomplishments
E. L. Monser				Completed the first full year of critical integration of the Valves & Controls acquisition ahead of schedule and under budget
				Captured required synergies in combining Valves & Controls into the Final Control business to create shareholder value
				Successfully transitioned his duties to his successor prior to his planned retirement date
				Continued to be a champion of Emerson’s core value of Integrity in all of our global efforts
F. J. Dellaquila				Managed the financial due diligence process and complex financial integration issues during the Company’s portfolio reposition activities
				Directed implementation of the Company’s capital allocation strategy to maintain financial liquidity
				Oversaw financial strategy to effectively position the Company to leverage opportunities resulting from the Tax Cuts and Jobs Act
				Continued to streamline internal functions to meet the needs of the repositioned Company and demonstrate our commitment to the Emerson core values of Continuous Improvement and Collaboration
M. H. Train				Delivered strong underlying growth for the Automation Solutions platform, including solid sales, profit margin and working capital improvement
				Led strong integration performance in the first full year of the Valves & Controls acquisition
				Expanded customer offerings through identification and completion of bolt-on acquisitions
				Continued focus on delivery of new technologies to differentiate Emerson from its competitors and demonstrate Emerson’s commitment to our core values of Innovation and Customer Focus
S. J. Pelch				Managed efforts to improve operational performance to contribute to strong sales and EPS growth in fiscal 2018 during significant portfolio repositioning activities and a changing business environment
				Maintained a strong focus on safety for our employees and customers
				Led Emerson’s efforts to advance our diversity and inclusion initiatives across the Company demonstrating our commitment to our core value of Supporting Our People
				Implemented the integration of Emerson’s human resource organization across Emerson’s two global platforms to help foster the Emerson business culture
R. T. Sharp				Delivered a strong year of sales growth and maintained strong profitability for the Commercial & Residential Solutions platform
				Completed the strategic acquisitions of the Tools & Test and Coopers Atkins businesses expanding our current customer offerings
				Captured early acquisition integration synergies to deliver strong incremental value to Emerson
				Achieved record levels of safety performance, demonstrating commitment to our core value of Safety and Quality

EXECUTIVE COMPENSATION

Fiscal 2018 Compensation Mix

We believe that our practice of setting a majority of our NEOs pay as “at-risk” pay underscores our commitment to our fundamental pay-for-performance principles. By tying a significant percentage of NEO compensation (cash and equity) to performance-based pay that is dependent on achievement of the Company’s performance goals as well as the consistent attainment of strong individual performance, we maximize the value we can deliver to shareholders. In fiscal 2018, 91% of our CEO’s pay and an average of 70.5% of the other NEOs’ pay was comprised of “at-risk” compensation (amounts do not include other forms of compensation shown in the Summary Compensation Table).

Annual Cash Compensation

The Committee targets total annual cash compensation in the median market range of total cash compensation, while placing more emphasis on performance-based annual cash bonus than on base salary. Base salary generally represents 10-20% of total NEO compensation and bonus generally represents 15-25%.

Base Salary. Fiscal 2018 base salary increases were based on the Committee’s review of the Company’s performance, individual performance and potential and competitive market compensation. The Committee also considered market survey data that indicated that the predicted merit increase, without promotions, for comparable executive positions averaged approximately 3%.

EXECUTIVE COMPENSATION

Bonus. In determining fiscal 2018 bonuses, the Compensation Committee reviewed the Company’s strong financial performance, the continued execution of the Company’s strategic repositioning to reshape the Company into two global franchises for Automation Solutions and Commercial & Residential Solutions, the efforts in the integration of recent acquisitions, actions to navigate a changing global business environment, as well as the individual performance and leadership of each NEO. The Committee used discretion and based its decisions on its informed judgment considering these factors collectively. No individual weightings were assigned to any of these factors. The fiscal 2018 bonus amounts were subject to the IRC Section 162(m) limitation previously established by the Committee (see “Regulatory Considerations” on page 31).

Long-Term Stock Compensation

As indicated above, the Committee targets total annual compensation for our NEOs in the median market range of our comparator group, placing more emphasis on performance-based equity compensation. We value our long-term stock compensation awards based on the fair value at grant; however, an executive may realize more or less than his or her targeted long-term compensation depending on Company and stock performance over the performance or restriction period.

Performance shares awards are the primary long-term compensation element and the cornerstone of our pay-for-performance philosophy. We believe that performance shares align the interests of our executives and shareholders and support the achievement of long-term goals of sustained growth in EPS and free cash flow. Restricted stock and stock options are also available for award under our long-term stock-based compensation program. Awards of restricted stock are highly selective and reserved for critical retention, recognition or succession planning purposes. Stock options have not been granted to NEOs since 2015. Annual grants, as opposed to grants every three years, provide the Committee with the flexibility to increase or decrease the amount of an award based on individual performance and target the median market range for total annual compensation.

Performance Shares. Beginning in fiscal 2016, the Committee moved to annual performance shares awards. Annual grants provide the Committee with more flexibility to increase or decrease the amount of an award based on individual performance and target the median market range for total annual compensation. Each annual performance shares program has a three-year performance period with defined performance targets set by the Committee at the beginning of the period. An award of performance shares under the program represents the right to receive shares of our common stock to the extent the identified performance objectives are met. Dividend equivalents may be paid, but only on earned awards at the end of the performance period. At the end of a performance period, the Committee reviews the Company’s financial results against the performance targets and certifies the level of achievement for payout of the awards. Payouts are made primarily in common stock, with a portion paid in cash to cover tax obligations. Awards include confidentiality, non-competition and non-solicitation obligations and clawback rights and are subject to a double-trigger change of control provision.

The Committee has authority to determine the targets for each three-year performance shares program from the various measures set forth in the Company’s Incentive Shares Plans. The measures specified in the 2015 Incentive Shares Plan are: sales, profit, operating profit, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization, pre-tax earnings, earnings, net earnings, any related margins, earnings per share, asset management, cash flow, operating cash flow, free cash flow, days sales outstanding, days payables outstanding, inventory turnover, return on total capital, return on equity, total shareholder return, share price, acquisition and divestiture performance, development and achievement of strategic business objectives, customer satisfaction, new product introductions and performance, cost reductions, manufacturing efficiency, delivery lead time performance, research and development achievements, market share, working capital and geographic expansion. Pursuant to these plans, the Committee may include or exclude from both targets and actual results specified items of an unusual, non-recurring or extraordinary nature.

EXECUTIVE COMPENSATION

The underlying performance metrics for our Fiscal 2018–2020 Performance Shares Program did not change from the prior year program and are as follows:

In making an individual annual award, the Committee considers the NEO’s: (1) ability to make a significant contribution to the Company’s financial results, (2) level of responsibility, (3) individual performance and (4) leadership potential. The annual performance shares award generally represents more than half of the NEO’s total compensation, depending on the NEO’s role and responsibilities.

For the Fiscal 2018 – 2020 Performance Shares Program, the following individual awards were made to the NEOs: D. N. Farr, 173,000 shares; E. L. Monser, 42,000 shares; F. J. Dellaquila, 42,000 shares; M. H. Train, 35,000 shares; S. J. Pelch, 42,000 shares; R. T. Sharp, 35,000 shares. Mr. Monser retired on October 1, 2018. For a discussion of the effect of his retirement on his performance shares and other stock awards, please see “Description of E. L. Monser Letter Agreement” on page 43.

The performance period for the Fiscal 2016 – 2018 Performance Shares Program ended on September 30, 2018. Targets were based on the 2015 base year with the EPS and Free Cash Flow performance determinations and weightings the same as described above but with the maximum payout at 125% for EPS and 100% for cumulative free cash flow, resulting in a maximum payout of 115%. The Committee determined that the target earnings per share was $3.37 and the target cumulative free cash flow was $6.44 billion. The Company’s performance results were appropriately adjusted to reflect the Company’s portfolio repositioning activities and the impact of tax reform. The Committee determined that the fiscal 2018 EPS after adjustments of $0.25 was $3.21, and cumulative free cash flow over the performance period was $6.58 billion from $6.54 billion after adjustments of $0.04 billion discussed above. This performance resulted in a 97% payout of the awarded performance shares. The impact from the adjustments resulted in a reduced payment under the formula. The payouts are reflected in the Option Exercises and Stock Vested table on page 38.

Restricted Stock. In limited circumstances, such as special retention, recognition and succession planning needs, the Committee may make a separate award of restricted stock. Awards of restricted stock are highly selective and may result in compensation above the median range. The Committee views this program as an important management succession planning and retention tool. The objective is to lock in top executives and their potential replacements identified through the succession planning process. Restricted stock provides participants with dividends and voting rights beginning on the award date. There is no set frequency of restricted stock awards, and they are granted with long-term cliff vesting periods of up to 10 years and no less than 3 years.

In fiscal 2018, the Committee granted shares of restricted stock as follows: F. J. Dellaquila, 10,000 shares; M. H. Train, 20,000 shares; S. J. Pelch, 10,000 shares; R. T. Sharp, 20,000 shares.

EXECUTIVE COMPENSATION

Stock Options. Stock option awards are still available for granting under our long-term incentive plans; however, no stock option awards have been made to any of the NEOs since 2015. When utilized, stock option awards are issued at no less than fair market value on the date of the award and generally vest over a period of three years. We do not pay dividend equivalents on stock options and do not “reprice” awards.

Policies Supporting Our Fundamental Principles

To support our pay-for-performance philosophy and underlying fundamental principles of our compensation programs, we have implemented certain policies regarding NEO ownership of and actions in connection with stock and other incentive compensation. In addition to our compensation programs, we believe that appropriate stock ownership guidelines and our stock trading, clawback and pledging and anti-hedging policies further align the interests of our executives with shareholders by encouraging long-term superior performance without encouraging excessive or unnecessary risk taking.

Severance, Executive Termination and Retirement

Emerson does not have employment agreements, severance agreements or golden parachute agreements with the NEOs. The terms of all executive terminations and retirements are determined by the Committee individually based on specific facts and circumstances and not on formulaic rules. We follow these general principles:

The Committee has adopted an Executive Officer Severance Policy which provides that the Company shall not implement individual severance or change of control agreements providing certain benefits (as described in the Policy) to any NEO in excess of 2.99 times the sum of the NEO’s then current base salary and most recent cash bonus without shareholder ratification. The policy is located at www.Emerson.com, Investors, Corporate Governance, Executive Officer Severance Policy. E. L. Monser, our former President, retired effective October 1, 2018. We entered into a letter agreement with Mr. Monser which, among other things, reaffirmed and extended his restrictive covenants. Please see “Description of E. L. Monser Letter Agreement” at page 43 below for a description of his retirement arrangements.

EXECUTIVE COMPENSATION

Change of Control

If a change of control occurs, we protect all employees who participate in long-term stock plans, the Savings Investment Restoration Plan and the Pension Restoration Plan as described under “Potential Payments Upon Termination or Change of Control” at page 40 below. Our 2011 Stock Option Plan and 2015 Incentive Shares Plan include a “double trigger” for vesting following a change of control, although stock awards under our prior stock option and incentive shares plans vest upon a change of control. When triggered, we would expect to accelerate vesting of stock awards and pay accrued benefits under the Savings Investment Restoration Plan and the Pension Restoration Plan. We do not credit additional years of service under any plans, or continue medical or other benefits. We do not make additional cash payments related to stock compensation plans. We do not increase payouts to cover payment of taxes and do not provide tax gross-ups.

Security and Perquisites

Due to increased security risks inherent in senior executive positions, we provide NEOs with residential security monitoring and personal security as needed. The Company’s security policy and the Board require that the Chairman and CEO use Company aircraft for all travel to promote business efficiency and safety. The Company provides limited personal use of Company aircraft to the other NEOs. All NEOs reimburse the Company at first class rates for personal use. The Company also provides NEOs with cars, club memberships, financial planning and an annual physical. These are long-standing perquisites that assist in retaining and attracting executives and that we believe are similar to those often provided at other similarly-sized companies. NEOs and other employees may receive Company tickets for sporting or other events. The Committee reviews these perquisites annually. Total perquisite costs and related information appear in the Summary Compensation Table on page 33. The Company does not provide any reimbursement for taxes on perquisites.

Other Benefits

The NEOs are eligible for Company-provided benefits that are generally available to all other employees, including a qualified 401(k) savings plan, a qualified defined-benefit pension plan, medical, life and disability insurance and a charitable matching gifts program, among others. The defined-benefit pension is being phased out, but a majority of U.S. employees, including the NEOs, continue to participate. The following additional benefits are also available to the NEOs:

Regulatory Considerations

IRC Section 162(m) imposes a $1 million limit on the Company’s deductions for compensation paid to specified executive officers (“Covered Employees”). For taxable years beginning before January 1, 2018, the Covered Employees consisted of a corporation’s chief executive officer and up to three other highly compensated executive officers (other than the chief financial officer), and qualifying “performance-based compensation” was not subject to this limitation if specified requirements were met (i.e., compensation paid only if performance meets pre-established objective goals based on performance criteria approved by shareholders).

Pursuant to the Tax Cuts and Jobs Act of 2017, for taxable years beginning after December 31, 2017, (i) the remuneration of a public corporation’s chief financial officer is now also subject to the deduction limit, (ii) once an individual is considered a Covered Employee with respect to a taxable year, he or she will be considered a Covered Employee for all future years, including after termination of employment or death, and (iii) the exemption from the deduction limit for “performance-based compensation” is no longer available. These changes do not apply to remuneration provided under a binding written contract in effect on November 2, 2017, which is not materially modified after that date. Consequently, for fiscal years beginning after December 31, 2017, no remuneration in excess of $1 million paid to a Covered Employee will be deductible unless such compensation is granted pursuant to a written binding contract that was in effect prior to November 2, 2017.

The Company’s incentive compensation plans are generally designed to ensure tax deductibility under Section 162(m). However, time-based restricted stock awards do not qualify under Section 162(m), and the Committee retains the flexibility to design and administer compensation programs that are in the best interests of Emerson and its shareholders.

NEO cash bonuses are discretionary, subject to maximum amounts based on the Section 162(m) performance objectives selected by the Committee annually from among the objectives identified in the annual incentive plan. The objectives are not communicated to

EXECUTIVE COMPENSATION

participants as targets. The 2018 performance objective was earnings per share. Based on fiscal 2018 performance, the maximum amount of bonus that could be paid to each covered NEO was as follows: D. N. Farr, $9.36 million; E. L. Monser, $4.68 million; F. J. Dellaquila, $3.51 million; M. H. Train, $3.51 million; S. J. Pelch, $3.51 million; and R. T. Sharp $3.51 million. The Committee may exercise “negative discretion” to reduce the award below these amounts based on an assessment of performance. Our compensation plans also comply with IRC Section 409A for nonqualified deferred compensation arrangements.

In accordance with FASB ASC Topic 718, for financial statement purposes we expense all equity-based awards over the period earned, or subsequently, based upon their estimated grant date fair value, depending on the terms of the award. FASB ASC Topic 718 has not resulted in any significant changes in our compensation program design.

Equity Compensation Grant Practices

The Committee approves all grants of equity compensation to executive officers, as defined in Section 16 of the Exchange Act. All elements of executive officer compensation are reviewed by the Committee annually at its October or November meetings. Generally, equity awards are made at those meetings, but may be made at other meetings. The Committee meeting date, or the next business day if the meeting is on a non-business day, is the grant date for equity awards. The Committee has delegated to the CEO authority to grant stock options (1) to employees other than corporate officers and business unit Presidents, subject to the Committee’s prior approval of the aggregate number awarded, and (2) in connection with retention, promotion and acquisitions, which he uses on an infrequent basis. This delegation of authority does not extend to executive officers or other officers who are subject to the Company’s trading blackout policy.

Summary Compensation Table Analysis

Mr. Farr’s total compensation for 2018 increased compared to 2017 primarily as result of an increase in performance shares awards and an increased bonus due to the Company’s outstanding financial performance and other factors discussed above. Mr. Farr’s total compensation as shown in the Summary Compensation Table also includes an amount for the actuarial change in his pension value. This amount was significantly higher in 2016 compared to 2017 and 2018 as a result of a lower applicable discount rate in 2016, over which the Committee has no control. No changes were made in the method of calculating NEO benefits.

Total compensation in the table for the other NEOs for 2018 was comparable to 2017. Mr. Pelch’s total compensation was increased due to his promotion effective December 31, 2017. Total compensation for certain NEOs was also impacted by changes in the discount rate used to calculate pension benefits.

Compensation Tables

Summary Compensation Table

The following information relates to compensation received or earned by our Chief Executive Officer, our Chief Financial Officer, and each of our next three most highly compensated executive officers for the last fiscal year, as well as our former President who retired on October 1, 2018 (the “named executive officers” or “NEOs”).

COMPENSATION TABLES