Good morning, ladies and gentlemen. Welcome to the 2020 Annual Shareholder Meeting of 3M Company. Now I will turn the meeting over to Mr. Bruce Jermeland of 3M. Mr. Jermeland?
Thank you. Good morning, everyone, and welcome to our 2020 virtual annual shareholder meeting. With me today are Mike Roman, 3M's Chairman of the Board and Chief Executive Officer, and Ivan Fong, our General Counsel and Corporate Secretary. Let me begin with a few opening remarks, and then I'll turn the meeting over to Mike. First, the polls are now open. Although we do not expect any technical difficulties today, in the unlikely event we lose audio or webcast connection, please stand by and allow us time to resolve the issue and resume the meeting or otherwise provide an update about the meeting. If a technical disruption prevents us from continuing the meeting and the meeting is not adjourned, the polls will be closed immediately. In that situation, votes received prior to the time the polls were closed will be counted.
The meeting will not be reconvened. In any event, the final voting results will be announced publicly later, later this week. Next, please note that during today's meeting, we'll make certain predictive statements that reflect our current views about 3M's future performance and financial results. These statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Item 1A of our most recent Form 10-Q lists some of the most important risk factors that could cause actual results to differ from our predictions. The forward-looking statements are also included in today's meeting agenda, shown at the bottom right corner of the webcast screen. Finally, shareholders may submit questions electronically during the meeting by typing your question in the box located at the bottom left corner of the webcast screen.
Shareholders also have had the opportunity to submit questions via proxy vote website in advance of the meeting. We will respond to these questions following the conclusion of the meeting business items in accordance with the procedural rules. We also intend to address questions pertinent to the meeting that are not answered today, either by direct response or postings online at our investor relations website. Now, let me introduce 3M's Chairman of the Board and Chief Executive Officer, Mike Roman, to begin the meeting. Mike?
Thank you, Bruce. Good morning, everyone, and welcome to 3M's Annual Meeting of Shareholders. Ivan Fong, our Corporate Secretary, advises me that a quorum is present and that all shareholders of record have been sent a notice of this meeting. On the record date of March 17, 2020, there were approximately 575 million shares of common stock issued and outstanding. 83% are represented here today, online or by proxy. Therefore, I call this meeting to order. As noted, the polls are open. To vote, click on the Vote Here button on the bottom right-hand corner of the webcast screen. The polls will remain open until the conclusion of the matters to be voted on portion of this meeting. We have four business items on the agenda for today, which Ivan will conduct. Following the business items, I will make some brief remarks.
Then we will address shareholders' questions and comments. It is now my privilege to introduce our board of directors, who are attending today's meeting through this live webcast, in addition to myself. Tony Brown, Retired Group Vice President, Global Purchasing, Ford Motor Company. Pam Craig, Retired Chief Financial Officer, Accenture. Dave Dillon, Retired Chairman of the Board and Chief Executive Officer, The Kroger Company. Mike Eskew, Retired Chairman of the Board and Chief Executive Officer, United Parcel Service. Herb Henkel, Retired Chairman of the Board and Chief Executive Officer, Ingersoll Rand. Amy Hood, Executive Vice President and Chief Financial Officer, Microsoft Corporation. Muhtar Kent, Retired Chairman of the Board and Chief Executive Officer, The Coca-Cola Company. Dambisa Moyo, Founder and Chief Executive Officer, Mildstorm. Greg Page, Retired Chairman of the Board and Chief Executive Officer, Cargill. And Pat Wertz, Retired Chairman of the Board and Chief Executive Officer, ADM Company.
Before turning the call over to Ivan, I would like to take this opportunity to recognize and thank Ed Liddy, who has reached the mandatory retirement age for our board members and is no longer eligible to stand for re-election. Ed's leadership, guidance, and counsel have been invaluable throughout his 20 years as a 3M director. I thank him for his many contributions to our board and the company. I wish Ed and his family a happy and healthy future. Thank you, and I will now turn the program over to Ivan. Ivan?
Thank you, Mike, and good morning, everyone. Before discussing the business items, please note that both the meeting agenda and the rules of conduct and procedures are posted at the bottom right-hand corner of the webcast screen. The rules and procedures are summarized on the screen here. They help ensure that we have a fair and orderly meeting. As noted, the polls are open. If you've not already voted your shares or wish to change your vote, you may do so by clicking on the Vote Here button at the bottom right-hand corner of the webcast screen. The polls will remain open until the conclusion of the matters to be voted on portion of the meeting. Our Board appointed Broadridge Financial Solutions to act as the Inspector of Election to the meeting. PricewaterhouseCoopers, our independent auditors, are also attending today's meeting through this live webcast.
We will now review the matters to be voted on. Under the company's bylaws, the only matters properly before our shareholders today are those set forth in the notice of annual meeting and proxy statement. As the agenda indicates, the board of directors is presenting three proposals, and a shareholder is presenting one proposal, all of which are described in the proxy statement. No other items of business will be considered at the meeting. The first proposal is to elect 11 directors for a one-year term that expires at the 2021 annual meeting. The board's nominees are Tony Brown, Pam Craig, Dave Dillon, Mike Eskew, Herb Henkel, Amy Hood, Muhtar Kent, Dambisa Moyo, Greg Page, Mike Roman, and Pat Wertz. All nominees are standing for reelection to the board.
The second proposal is to ratify the Audit Committee's appointment of PricewaterhouseCoopers as 3M's independent registered public accounting firm for 2020. The third proposal is to approve, on an advisory basis, our executives' compensation as described in the proxy statement. The board recommends a vote for each nominee and for each of these proposals. We will now consider the shareholder proposal on setting target amounts for CEO compensation. Katrina Fitzgerald represents the proponent and may make a brief three-minute statement on the merits of the proposal. Ms. Fitzgerald?
Thanks, Ivan. Good morning, all. My name is Katrina Fitzgerald, and on behalf of the United Steelworkers, I hereby move Proposal Four, which asks our company to consider pay grades and salary ranges of all 3M employees when setting target amounts for CEO compensation. Studies have shown that using peer group benchmarks to set CEO compensation can lead to pay inflation. Without taking into account the pay grades or salary ranges of all company employees, CEO pay tends to outpace the pay of average employees. Our company claims that it maintains global business practices to ensure that its compensation practices are fair and reasonable for both executive and non-executive employees. But the reality is, in 2019, annual total compensation for our CEO was above $18.3 million, while our median employee made $57,494.
The CEO and median employee ratio in 2019 was 319 to 1, which is even higher than the ratio of 309 to 1 last year. At 3M's manufacturing facilities in St. Paul and Fairmont, Minnesota, in Midwestern United States, where 3M's median employee pay was pulled from, the essential workers received a 2.4% wage increase from 2018 to 2019, while our CEO base salary and total compensation increased by 8%. The pay disparity is even wider in a longer time span. From 2015 to 2019, pay increase for production workers in Minnesota was in the range of 6.9%-9.8%, while the CEO pay increased by 29.9%.
The current pay system of determining CEO compensation without taking into account the pay average of company employees has led to a glaring inequality between executives who sit at the top and essential workers who make the company what it is today and report to work during this trying time. 3M's Code of Conduct says our core business conduct principles are to be good, to be honest, and to be fair. These are principles for all 3M employees. We need to take a step to realize the values that our company seeks to achieve. I urge you to vote for Proposal Four. Thank you.
Thank you for your views, Ms. Fitzgerald. The board opposes your proposal for the following reasons: The company uses global compensation practices to ensure fair and reasonable employee compensation. We benchmark pay components to those of other premier companies and adjust them as necessary to attract, retain, and motivate employees at all levels throughout the company. We then disclose the process by which our board's Compensation Committee, which consists entirely of independent directors, sets CEO compensation for all shareholders to review and assess. For the last five years, our advisory Say on Pay proposal has received an average of over 94% of votes cast by our shareholders in support of the compensation of our CEO and other named executive officers.
Finally, the actions requested in the proposal to consider the pay grades and salary ranges of 96,000 employees when setting CEO compensation, would impose significant implementation costs and burden company resources without discernible benefit. For these reasons, the board recommends voting against this proposal. This concludes the review of the matters to be voted on. The polls are now closed. I will now turn the meeting back to our chairman. Mike?
Thank you, Ivan. I've been advised that the ballots have been counted, and subject to a final tabulation, I can give you the preliminary results provided by the inspector of election. Our shareholders have elected all board nominees for a one-year term. You have ratified PricewaterhouseCoopers as 3M's independent public accounting firm for 2020. You have approved the compensation of our executives. Finally, the one shareholder proposal was not approved. The final voting results will become part of the record of the meeting and will be reported in a Form 8-K, to be filed in connection with the matters voted upon at this meeting. All business items have been completed, and the meeting is now adjourned. Before Q&A, I will make some brief comments about everything we are doing to help lead the response to COVID-19.
In this unprecedented time, I could not be more proud of how our team has stepped up to help lead the fight against this pandemic. Our response throughout COVID-19 has been guided by our purpose and shaped by three principles. First, an uncompromising commitment to the safety of our employees. Second, attacking the pandemic with urgency from all angles, including protecting healthcare workers and first responders. And third, maintaining business continuity, executing actions to deliver for our customers and shareholders, and to lead out of the economic slowdown. In January, we mobilized 3M's Crisis Action Team to coordinate our response to COVID-19, which, as I mentioned, starts with protecting our people. We moved quickly to implement remote work where possible, and we have instituted robust safety and cleaning protocols in our plants, distribution centers, and other facilities.
For 3Mers personally affected, we've established pandemic support policies to help protect their pay and benefits and allow them to take care of themselves and their families. As we protect our employees, we continue to work urgently to protect the public, including heroic nurses, doctors, and first responders. Beginning in January, we doubled our global output of N95 respirators to 1.1 billion per year, or about 100 million per month, including 35 million per month in the U.S.. We've made additional investments and are working with the Department of Defense to double annual production once again to 2 billion by the end of this year. As we expand our capacity, we are also prioritizing supplies to the most critical needs.
Within days of regulatory approval, we redirected more than 90% of our respirators into healthcare, with the rest deployed to other critical industries such as energy and food. In addition, as the pandemic unfolds globally, we are working with governments to address trade restrictions and regulatory standards so we can redirect supplies around the world. For example, in April, 3M and the U.S. government announced a plan to import 166 million respirators, primarily from our China plant, and I thank the administration for their partnership. At the same time, we continue to aggressively fight fraud, price gouging, and other unethical activity. 3M has published our prices for N95 respirators, created a fraud hotline, and filed multiple lawsuits, and we're working with law enforcement to pursue and deter unscrupulous behavior.
3M is leading from a position of strength, and in this crisis, the benefits of our business model, including our global capabilities, have never been clearer. Our greatest capabilities are here in the U.S., where we have nearly 80 manufacturing plants and distribution centers across 29 states. Globally, we have plants and distribution centers in 54 countries to be close to customers and better serve the unique needs of regional markets. This model has enabled us to respond to COVID-19 with agility and at scale, while maintaining business continuity and strong customer service. The majority of our plants and distribution centers around the world remain operational, and we've maintained a consistent and reliable supply of raw materials, enabling us to continue to serve customers across our businesses and geographies.
And to support 3Mers impacted by shutdowns due to weak demand or government mandates, we have implemented a short-term paid furlough program. We are also executing financial actions to deliver 2020, and set us up for success in 2021. We're maintaining critical investments in organic growth through R&D, including in personal safety, and we remain committed to our dividend as a high priority for capital allocation.... At the same time, we have implemented sharp spending reductions, suspended our share repurchase program, and adjusted our CapEx plans to align with the external environment. To wrap up, the fundamentals of 3M are strong, and our four priorities, portfolio, transformation, innovation, and people and culture, have positioned us to lead through this fast-changing situation.
This will enable us to continue to deliver for all of our stakeholders during the pandemic and emerge even stronger as the economy recovers. I thank all 3Mers for your tremendous work, and going forward, we'll continue to do all we can to protect our people, protect our enterprise, and help the world get through this crisis. That concludes my remarks, and I will now turn it over to Bruce to help facilitate the Q&A. Bruce?
Thank you, Mike. Our first question is from a shareholder, and it's in regards to: Has 3M management identified any single country source of supply for essential materials that could threaten one or more product lines in other countries if the supply of that material is interrupted?
Yeah, thank you for the question. During the pandemic, the benefits of our global business model have never been clearer. Our strategy has been to have local and regional capabilities close to customers and markets around the world. We have a very diverse basket of raw materials, and we spend approximately $8 billion annually. No one raw material in that basket makes up more than $a few hundred million. Our global sourcing team is continuously managing our raw materials, so sources of supply on both a local or regional level and a global level. This includes having multiple sources of supply for critical raw materials. During this pandemic, we have not seen any significant issues sourcing raw materials to date. Looking ahead, we continue to expect and plan to manage our sources of supply. Thank you for your question.
Yeah, Mike, our next question comes from several shareholders, including a Mr. Searles, a Mr. Ehrman, and the Carpenters Union Pension Fund. And it's in regards to disruption to the company's manufacturing operations, particularly in China, due to geopolitical risks related to the pandemic, and what is 3M doing to shift our source of supply chains out of China to lessen our dependence on them as a key manufacturing source?
Well, as I said, our business model is to build capabilities close to customers and markets. As an example, we invest in local or regional manufacturing and supply chains to serve those local customers. This strategy has really served us well, particularly important now as we supply healthcare workers and first responders, along with other important markets and customers. The U.S. is where we have our greatest capability. More than half of our global manufacturing capacity is in the U.S., and we are an exporter of over $5 billion annually to the rest of the world. Relative to the question around China, this is the second-largest economy in the world, and we entered China in 1984 to serve local customers, not to export.
Our manufacturing capability in China is for customers located in China, and more than 90% of our revenue in China is to customers located in China. We source raw materials locally as well. This is a model that will continue to serve us well as we grow in China. There's one notable exception to our local focus of our China operations, and that is the export of personal protective equipment or N95 respirators that is taking place under the Defense Production Act. And this is a very strong working partnership between the U.S. government, the Chinese government, and 3M Company. And we are working very well with FEMA and their air bridge to ship product from our manufacturing in China into the U.S. market at this time of critical need.
So it's one exception, very focused on responding and really doing all we can to respond to the pandemic.
Yeah, Mike, our next question came online this morning during the meeting from a Mr. Hodgkins. His question relates to: How is 3M handling personal protective equipment problems related with its resellers?
Well, as I've talked about it, we are attacking the pandemic from all angles, and this includes doing all we can to stop illegal and unethical activity that's causing real and serious harm in the middle of this pandemic. We are working with law enforcement agencies around the world to pursue those seeking to take advantage of this pandemic. And we have millions of people that have come to rely on our respirators and trust our brand, so it's critical that we ensure that the unauthorized resellers that are representing 3M are addressed aggressively, and we are vigorously protecting our brand. This is key to ensuring our customers and other end users know that they are using authentic 3M products.
Mike, our next question is from Mr. Robert Smith. His question is in regards to a pension increase for retirees. You know, many of them, as he notes, are living on a fixed pension for a long time, and he was wondering if there'd be an increase in the pension.
Well, thank you, Mr. Smith, for your question. BlackRock, State Street, and Vanguard, I would like to thank all of our retirees. We are a great company due to the leadership, contributions, and hard work of the many people who have worked at 3M throughout our history. Overall, our pension plans continue to be well-funded around the world. Over the last five years, 3M has contributed $2.2 billion to our pension funds globally, and we continue to prudently manage our global retirement obligations, and we are not planning any discretionary pension increases at this time.
Mike, our next question comes from a Ms. Hayman. She's asking: Given 3M should be selling many products during the coronavirus, how is the company, and will it gain from the situation, sustain growth in our share price for the months and years to come? And how are we marketing to meet the technology demands that are taking place in today's market?
Thank you, Ms. Hayman, for your question. 3M continues to transform how it operates and build a more customer-driven and streamlined organization for our future with our new business group-led global operating model. This new operating model will create several benefits, including more powerful global innovation, benefiting from an elevation of marketing and commercial capabilities. We also formed a global corporate affairs organization, which is helping us to advance and protect our brand in this critical time. Our personal safety business is a great example of a business that is very customer and technology-driven, focused on the safety needs of our customers. We are a recognized global leader in respiratory protection, and this is an extremely important business in the midst of COVID pandemic. We are doing all we can to support the healthcare workers and first responders and meet their needs at this critical time.
Mike, our next question comes online this morning from a Mr. Lonsky. His question is: Mr. Chairman, the recent dramatic growth in the size of passive mutual funds, corporate ownership interest in U.S. corporations, raises important public policy and corporate governance issues. Currently, BlackRock, Vanguard, and State Street each hold in excess of 7% of the company's outstanding shares. Each provides investment management services to the company's retirement plan. Does the board see this growing ownership concentration as a positive or negative development as regards long-term corporate planning and performance? And also, are there potential conflicts of interest when a 5% holder in managing company retirement plan assets?
Thank you for your question, Mr. Lonsky. BlackRock, State Street, and Vanguard, who you cited, manage certain index funds. They are passive managers of those funds. They do not actively decide to invest in 3M. Our retirement plans are managed separately by a separate part of these funds. In fact, our 401(k) plans are managed currently by Fidelity. We are committed to avoiding any conflict of interest or perceptions of conflicts, and we welcome your comment, and we will respond separately on our investor relations website.
Mike, we have another question from Ms. Hayman. Her question is: Now that sticky notes are becoming a thing of the past, given technology changes moving to digital, how is 3M embracing and planning to change products to meet the needs of a world driven by technology?
Yeah, this. We are committed to R&D, which fuels our innovation, core to 3M and one of our four strategic priorities. This goes to the purpose of who we are, solving problems and improving lives. Our R&D investment is close to $10 billion over the last five years, with $1.9 billion in 2019, and our focus continues to be on creating and commercializing new platforms, particularly priority growth platforms that we have highlighted for their strong innovation capabilities. Also, expanding our technology capabilities, especially in the areas of digital and data science, is critical in areas such as population health and connected safety, two of these priority growth platforms. These platforms serve emerging and fast-growing markets.
They're focused on healthcare, transportation, safety, and infrastructure, and we are showing strong results here owing to this strategy, with those priority growth platforms up more than 10%.
Mike, our next question comes from Mr. Searles. He was asking if you could please comment on the stability of the dividend.
We are committed to our dividend, and it remains a high priority for our capital allocation. Our long-term capital allocation priorities have, are, remain unchanged. Our first priority continues to be investing in organic growth through R&D and CapEx. Our second priority is paying a dividend. Our dividends have been paid for more than 100 consecutive years, with 62 consecutive years of an increase, and we remain committed to this as a high priority going forward.
Mike, our next question comes: When giving our results, can we please include the percent of voting in favor for each proxy member for directors in a range that's a range and a percent that's sufficient for shareholders to understand the voting?
Yeah, I can answer that directly based on the results that we have. Our range for directors is in a range of 90%-99% in favor of four directors. And our shareholder-
PwC.
PwC ratification is at 94%, and the Say on Pay at 92%, and our shareholder proposal received a share of 10.7%.
Our final question for this morning, Mike, comes from a Mr. Phil Brown. He's wondering: How big is our mask business to overall 3M sales?
We shared some of this on our recent earnings call. Our N95 mask production represents around $600 million in 2019. We are seeing growth through the Q1 that represents 100-150 basis points of the total 3M Company. So we see this business on track to potentially double as we go through the Q2.