DEFA14A


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

SCHEDULE 14A
(RULE 14a-101)

INFORMATION REQUIRED IN
PROXY STATEMENT

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ________)
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Preliminary Proxy Statement
 
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Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
 
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Definitive Proxy Statement
 
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Definitive Additional Materials
 
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Soliciting Material Pursuant to §240.14a-12
 

CLIFFS NATURAL RESOURCES INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
 
x
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
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(set forth the amount on which the filing fee is calculated and state how it was determined):
 
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March 11, 2016
Dear Fellow Shareholder,
2015 was a momentous year for Cliffs Natural Resources Inc. We made several crucial decisions aimed at strengthening the Company, our balance sheet and our core U.S. iron ore business. We have not veered from our U.S. based strategy which is predicated on one fundamental fact: China’s steel demand is actually shrinking, not growing. During one of the most demanding environments for global iron and domestic steel in over a decade, we accomplished all that we set out to do.
We are entering 2016 as a new and improved company. Our roadmap to our future financial success is simple and actionable. We will maintain our non-stop focus on cost reduction; use our technical expertise and strong market position in the United States to increase our product offering and foster improved profitability; and continue to pursue debt reduction opportunities.
As stewards of the company and its assets, we are fully committed to acting in the best interests of all Cliffs’ shareholders. I would like to take this opportunity to thank all of you, our fellow shareholders, for your unwavering support as we took the bold steps necessary in pursuit of our strategy. We know we have more work to do. I am grateful for your far-sighted investment in our great company and continued trust in Cliffs.
Thank you very much for your great support.
Sincerely,
Lourenco Goncalves
Chairman, President & Chief Executive Officer




 
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
 
 

To Be Held on April 27, 2016
11:30 a.m. EDT
North Point, 901 Lakeside Avenue, Cleveland, Ohio 44114

To the Shareholders of Cliffs Natural Resources Inc.:
The 2016 Annual Meeting of Shareholders of Cliffs Natural Resources Inc., or "Cliffs", will be held at North Point, 901 Lakeside Avenue, Cleveland, Ohio 44114 at 11:30 a.m., EDT, on Wednesday, April 27, 2016 for the following purposes:
1.
To elect nine directors to act until the next Annual Meeting of Shareholders or until their respective successors are duly elected and qualified;
2.
To approve the Amended and Restated 2014 Nonemployee Directors' Compensation Plan;
3.
To approve, on an advisory basis, our named executive officers' compensation;
4.
To consider the shareholder proposal regarding majority voting in director elections;
5.
To ratify the appointment of Deloitte & Touche LLP as Cliffs' independent registered public accounting firm to serve for the 2016 fiscal year; and
6.
To transact such other business, if any, as may properly come before the 2016 Annual Meeting or any adjournment thereof.
In order to vote on the matters brought before the 2016 Annual Meeting, you may complete and mail the proxy card, vote by telephone or vote via the Internet, as explained on the proxy card. Holders of record of Cliffs' common shares at the close of business on February 29, 2016 are entitled to notice of, and to vote at, the 2016 Annual Meeting or any adjournments thereof.
By Order of the Board of Directors
James D. Graham
Executive Vice President, Chief Legal Officer & Secretary

March 11, 2016
Cleveland, Ohio
YOUR VOTE IS IMPORTANT. YOU CAN VOTE BY TELEPHONE, BY INTERNET,
BY MAILING THE ENCLOSED PROXY CARD OR BY BALLOT IN PERSON AT THE 2016 ANNUAL MEETING.
The proxy statement and Cliffs’ 2015 Annual Report for the 2015 fiscal year are available at
www.proxyvote.com
These materials also are available on Cliffs’ Investor Relations website at
http://ir.cliffsnaturalresources.com under “Financial Information,” then “Financial Highlights" then under the heading "Latest Proxy Statement.” If your shares are not registered in your own name, please follow the voting instructions from your bank, broker, trustee, nominee or other shareholder of record to vote your shares and, if you would like to attend the 2016 Annual Meeting, please bring evidence of your share ownership with you. You should be able to obtain evidence of your share ownership from the bank, broker, trustee, nominee or other shareholder of record that holds the shares on your behalf.




 
PROXY STATEMENT TABLE OF CONTENTS
 
 
PROXY SUMMARY
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING
MEETING INFORMATION
CORPORATE GOVERNANCE
Board Leadership Structure
Board’s Role in Risk Oversight
Board Meetings and Committees
Identification and Evaluation of Director Candidates
Communications With Directors
Business Ethics Policy
Independence and Related Party Transactions
DIRECTOR COMPENSATION
Director Compensation for 2015
PROPOSAL 1 - ELECTION OF DIRECTORS
Information Concerning Director Nominees
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
OWNERSHIP OF EQUITY SECURITIES OF THE COMPANY
PROPOSAL 2 - APPROVAL OF THE AMENDED AND RESTATED 2014 NONEMPLOYEE DIRECTORS' COMPENSATION PLAN
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
2015 Leadership Transitions
2015 Business Results
Executive Compensation Philosophy and Core Principles
Oversight of Executive Compensation
Analysis of 2015 Compensation Decisions




Retirement and Deferred Compensation Benefits
Supplementary Compensation Policies
COMPENSATION COMMITTEE REPORT
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
COMPENSATION-RELATED RISK ASSESSMENT
EXECUTIVE COMPENSATION
Executive Compensation Tables
Potential Payments Upon Termination or Change in Control
PROPOSAL 3 - APPROVAL OF, ON AN ADVISORY BASIS, OUR NAMED EXECUTIVE OFFICERS' COMPENSATION
EQUITY COMPENSATION PLAN INFORMATION
PROPOSAL 4 - SHAREHOLDER PROPOSAL
AUDIT COMMITTEE REPORT
PROPOSAL 5 - RATIFICATION OF INDEPENDENT REGISTERED ACCOUNTING FIRM
INFORMATION ABOUT SHAREHOLDER PROPOSALS AND COMPANY DOCUMENTS
OTHER INFORMATION
ANNEXES
 
ANNEX A - Amended and Restated 2014 Nonemployee Directors' Compensation Plan
ANNEX B - Use of Non-GAAP Financial Measures





 
PROXY SUMMARY
 
 
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. Page references are supplied to help you find further information.
2016 ANNUAL MEETING OF SHAREHOLDERS (page 5)
Date and Time:
Wednesday, April 27, 2016 at 11:30 a.m. EDT
Place:
North Point, 901 Lakeside Avenue, Cleveland, Ohio 44114
Record Date:
February 29, 2016
Voting:
Shareholders of record are entitled to vote by Internet at www.proxyvote.com; telephone at 1-800-690-6903; completing and returning the enclosed proxy card by mail; or attending the 2016 Annual Meeting of Shareholders (the "2016 Annual Meeting") in person (beneficial holders must obtain a legal proxy from their broker, banker, trustee, nominee or other shareholder of record granting the right to vote).

Mailing:
This proxy statement, the accompanying proxy card and our 2015 Annual Report will be mailed on or about March 11, 2016 to our shareholders of record as of the Record Date.
VOTING MATTERS (page 5)
Board Vote
Recommendation
Page Reference (for more detail)
Election of Directors
FOR each Director Nominee
Approval of the Amended and Restated 2014 Nonemployee Directors' Compensation Plan
FOR
Approval of, on an Advisory Basis, our Named Executive Officers' Compensation
FOR
Consideration of the shareholder proposal regarding majority voting in director elections
AGAINST
Ratification of Independent Registered Public Accounting Firm
FOR
DIRECTOR NOMINEES RECOMMENDED BY THE CLIFFS BOARD OF DIRECTORS (page 14)
Name
Age
Director Since
Experience/ Qualification
Independent
(Yes / No)
Committee Memberships (1)
Other Current Public Directorships
John T. Baldwin
59
2014
Former Chairman of Audit Committee & CFO
Yes
Audit*
 
Robert P. Fisher, Jr.
61
2014
President & CEO
Yes
Audit
Compensation*
 
Lourenco Goncalves
58
2014
Chairman, President & CEO
No
Strategy*
American Iron and Steel Institute
Susan M. Green
57
2007
Deputy General Counsel, U.S. Congressional Office of Compliance
Yes
Governance
 
Joseph A. Rutkowski, Jr.
61
2014
Principal & Former Executive Vice President
Yes
Compensation
Strategy
Insteel Industries, Inc.
James S. Sawyer
59
2014
Former CFO
Yes
Audit
 
Michael D. Siegal
64
2014
Chairman & CEO
Yes
Governance
Olympic Steel, Inc.
Gabriel Stoliar
62
2014
Managing Partner & Chairman
Yes
Governance
Strategy
Audit
Tupy S.A.
Douglas C. Taylor
52
2014
Managing Partner
Yes
Governance*
Compensation
 
* denotes committee chair
(1) Full committee names are: Audit - Audit Committee; Compensation - Compensation and Organization Committee; Governance - Governance and Nominating Committee; Strategy - Strategy Committee.

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 1



EXECUTIVE COMPENSATION PHILOSOPHY AND CORE PRINCIPLES (page 28)
Our guiding compensation principles, as established by the Compensation and Organization Committee for 2015, were as follows:
Align short-term and long-term incentives with results delivered to shareholders;
Design a simple and transparent incentive plan that focuses on absolute performance objectives tied to our business plan (including profitability-related and cost control objectives), relative performance objectives tied to market conditions (including relative total shareholder return, measured by share price appreciation plus dividends, if any), and performance against other key objectives tied to our business strategy (including safety, protection of our core assets and Selling, General and Administrative cost control).
Provide competitive fixed compensation elements over the short-term (base salary) and long-term (equity and retirement benefits) to encourage long-term retention of our key executives; and
Continue to structure programs as in prior years to align with corporate governance best practices (for example, elimination of "gross-ups" related to change in control payments, use of "double-trigger" change in control equity vesting provisions for future equity awards, use of Share Ownership Guidelines and operation of a clawback policy related to incentive compensation for our executive officers).
2015 EXECUTIVE COMPENSATION SUMMARY (page 41)
The numbers in the following table showing the 2015 compensation of our named executive officers were determined in the same manner as the numbers in the corresponding columns in the 2015 Summary Compensation Table (provided later in this proxy statement); however, they do not include information regarding changes in pension value and non-qualified deferred compensation earnings and information regarding all other compensation, each as required to be presented in the 2015 Summary Compensation Table under the rules of the U.S. Securities and Exchange Commission (the "SEC"). As such, this table should not be viewed as a substitute for the 2015 Summary Compensation Table:
Name
Principal Position (as of December 31, 2015)
Salary
($)

Bonus
($)

Stock
Awards
($)

Option Awards ($)

Non-Equity
Incentive Plan
Compensation
($)

Total (1)
($)

Lourenco Goncalves
Chairman, President & CEO
1,200,000


6,177,499

1,440,947

2,073,600

10,892,046

P. Kelly Tompkins
Executive Vice President & Chief Financial Officer
537,000


1,243,092

282,128

371,174

2,433,394

Terry G. Fedor
Executive Vice President, United States Iron Ore
402,000


930,587

211,211

277,862

1,821,660

Maurice D. Harapiak
Executive Vice President, Human Resources
372,000


861,137

195,457

257,126

1,685,720

Clifford T. Smith
Executive Vice President, Business Development
402,000


930,587

211,211

277,862

1,821,660

Terrance M. Paradie
Former Executive Vice President, Chief Financial Officer & Treasurer
131,746


681,997

272,657


1,086,400

David L. Webb
Former Executive Vice President, Global Coal
335,000


528,302

211,211


1,074,513

(1) The amounts for Messrs. Paradie and Webb reflect their actual length of service during 2015; however, this table does not include severance-related payments.
CEO REPORTED PAY VS. REALIZED PAY (page 41)
It is important to note that the grant date fair value of the stock and option awards (both time-based and performance-based vesting) as set forth in our 2015 Summary Compensation Table is for accounting and SEC disclosure purposes and is not realized pay for the indicated year. The table below shows the pay Mr. Goncalves realized for the past two years in contrast to the reported pay presented in the 2015 Summary Compensation Table. The difference between reported pay and realized pay reinforces the concept that a significant portion of Mr. Goncalves' compensation is at risk of forfeiture and dependent on the performance of the Company.
Name
Year of Compensation
Reported Pay
($)(1)
Realized Pay
($)(2)
Realized Pay as a Percentage of Reported Pay (%)
Lourenco Goncalves
2015
10,892,046
3,503,828
32.17%
 
2014
9,383,808
1,682,308
17.93%
(1)    Reported Pay includes salary, bonus, stock and option awards, and non-equity incentive compensation.
(2)
Realized Pay is compensation actually received by Mr. Goncalves during the indicated fiscal year, consisting of salary, bonus, annual incentive received, net spread on stock option exercises, and market value at vesting of previously granted stock and option awards. Excludes the value of any unearned and unvested stock and option awards, including performance shares, which will not actually be received, if earned, until a future date.

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 2



SAY-ON-PAY IMPLICATIONS (page 54)
At our 2015 Annual Meeting of Shareholders, 90.7% of our voting shareholders voted in favor of our annual advisory vote on our named executive officers' compensation, commonly referred to as “Say-on-Pay”. This compared to only 56.1% of our voting shareholders voting in favor of Say-on-Pay in 2014.
SHAREHOLDER PROPOSAL REGARDING MAJORITY VOTING IN DIRECTOR ELECTIONS (page 56)
Cliffs' Board recommends a vote AGAINST Proposal No. 4 regarding majority voting in director elections. Like many other public companies, Cliffs uses a plurality voting standard in the election of directors, which is the default standard under Ohio law. Under a plurality voting standard, the director nominees who receive the most affirmative votes are elected to the Board. Ohio law provides for cumulative voting in the election of directors, which is applicable to Cliffs. We believe that majority voting in the election of directors is incompatible with cumulative voting, as have other states that allow for majority voting only when cumulative voting does not apply. Finally, Cliffs already has a director resignation policy in place for directors who fail to receive the majority of votes cast in an uncontested election when cumulative voting is not invoked.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (page 59)
As a matter of good corporate governance, we are asking our shareholders to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for 2016.



CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 3


 
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING
 
 
1.    What proposals are to be presented at the 2016 Annual Meeting?
The purpose of the 2016 Annual Meeting is to: (1) elect nine directors; (2) approve the Amended and Restated 2014 Nonemployee Directors' Compensation Plan; (3) approve, on an advisory basis, Cliffs’ named executive officers' compensation; (4) consider the shareholder proposal regarding majority voting in director elections; (5) ratify the appointment of Deloitte & Touche LLP as Cliffs’ independent registered public accounting firm to serve for the 2016 fiscal year; and (6) conduct such other business as may properly come before the 2016 Annual Meeting.
2.
What is the difference between a “shareholder of record” and a “beneficial owner"?
These terms describe the manner in which your shares are held. If your shares are registered directly in your name through Wells Fargo Shareowner Services, our transfer agent, you are a “shareholder of record” or registered holder. If your shares are held through a bank, broker, nominee or other shareholder of record, you are considered the “beneficial owner” of those shares.
3.    How does the Cliffs Board recommend that I vote?
The Cliffs' Board of Directors (the "Board") unanimously recommends that you vote:
FOR ALL of the nine individuals nominated by the Cliffs' Board for election as directors;
FOR the approval of the Amended and Restated 2014 Nonemployee Directors' Compensation Plan;
FOR the approval, on an advisory basis, of Cliffs' named executive officers' compensation;
AGAINST the shareholder proposal regarding majority voting in director elections; and
FOR the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm to serve for the 2016 fiscal year.
4.    Who is entitled to vote at the 2016 Annual Meeting?
The Record Date for the 2016 Annual Meeting is February 29, 2016. On that date, we had outstanding 180,109,771 common shares, $0.125 par value. All common shareholders are entitled to vote. In this proxy statement, we refer to our common shares as our "shares" and the holders of such shares as our "shareholders."
5.    How do I vote?
You may vote using any of the following methods:
Shareholders of Record. If your shares are registered in your name, you may vote in person or by proxy. If you decide to vote by proxy, you may do so over the Internet, by telephone or by mail.
Over the Internet. After reading the proxy materials and with your proxy card in front of you, you may use a computer to access the website www.proxyvote.com. You will be prompted to enter your control number from your proxy card. This number will identify you as a shareholder of record. Follow the simple instructions that will be given to you to record your vote.
By telephone. After reading the proxy materials and with your proxy card in front of you, you may call the toll-free number appearing on the proxy card, using a touch-tone telephone. You will be prompted to enter your control number from your proxy card. This number will identify you as a shareholder of record. Follow the simple instructions that will be given to you to record your vote.
By mail. If you received a paper copy of the proxy card by mail, after reading the proxy materials, you may mark, sign and date your proxy card and return it in the prepaid and addressed envelope provided.
The Internet and telephone voting procedures have been set up for your convenience and have been designed to authenticate your identity, allow you to submit voting instructions and confirm that those instructions have been recorded properly.
Shares Held by Bank or Broker. If your shares are held by a bank, broker, depositary, trustee or some other nominee, that entity will provide separate voting instructions. All nominee share interests may view the proxy materials using the link www.proxyvote.com.
If your shares are held in the name of a brokerage firm, your shares may be voted even if you do not provide the brokerage firm with voting instructions. Brokerage firms have the authority under applicable rules to vote shares for which their customers do not provide voting instructions on certain “routine” matters. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is referred to as

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 4

QUESTIONS & ANSWERS

a “broker non-vote.” The ratification of Deloitte & Touche LLP as our registered independent public accounting firm is the only routine matter for which the brokerage firm that holds your shares may vote your shares without your instructions.
6.     What can I do if I change my mind after I vote?
You may revoke your proxy at any time before the vote by (i) executing and submitting a revised proxy bearing a later date; (ii) providing a written revocation to the Secretary of Cliffs; or (iii) voting in person at the 2016 Annual Meeting. If you do not hold your shares directly, you should follow the instructions provided by your broker, bank or nominee to revoke your previously voted proxy.
7.     What vote is required to approve each proposal?
With respect to Proposal 1, the nominees receiving a plurality vote of the shares will be elected. However, under our majority voting policy (adopted by the Board) in an uncontested election, any director-nominee that is elected by a plurality vote but fails to receive a majority of votes cast (which excludes abstentions and broker non-votes) is expected to tender his or her resignation, which resignation will be considered by the Governance and Nominating Committee and our Board.
With respect to Proposal 2, the approval of the Amended and Restated 2014 Nonemployee Directors' Compensation Plan will pass with the affirmative vote of a majority of the shares present, in person or represented by proxy, at the 2016 Annual Meeting and entitled to vote on the proposal.
With respect to Proposal 3, approval, on an advisory basis, of our named executive officers' compensation requires the affirmative vote of a majority of the shares present, in person or represented by proxy, at the 2016 Annual Meeting and entitled to vote on the proposal.
With respect to Proposal 4, the shareholder proposal regarding majority voting in director elections will pass with the affirmative vote of a majority of the shares present, in person or represented by proxy, at the 2016 Annual Meeting and entitled to vote on the proposal.
With respect to Proposal 5, the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for the 2016 fiscal year will pass with the affirmative vote of a majority of the shares present, in person or represented by proxy, at the 2016 Annual Meeting and entitled to vote on the proposal.
 
MEETING INFORMATION
 
 
The accompanying proxy is solicited by the Board of Directors of Cliffs Natural Resources Inc. ("Cliffs" or the "Company"), for use at the Annual Meeting of Shareholders to be held on April 27, 2016, (the "2016 Annual Meeting"), and any adjournments or postponements thereof. This proxy statement, the accompanying proxy card and our 2015 Annual Report will be mailed on or about March 11, 2016 to our shareholders of record as of the Record Date.
PROXY MATERIALS
Notice of Internet Availability of Proxy Materials
In accordance with rules adopted by the SEC, we are using the Internet as our primary means of furnishing proxy materials to our shareholders. Accordingly, most shareholders will not receive paper copies of our proxy materials.
We will instead send our shareholders a Notice of Internet Availability of Proxy Materials with instructions for accessing the proxy materials and voting electronically over the Internet or by telephone, also known as Notice and Access. The notice also provides information on how shareholders may request paper copies of our proxy materials. We believe electronic delivery of our proxy materials will help us reduce the environmental impact and costs of printing and distributing paper copies and improve the speed and efficiency by which our shareholders can access these materials.
On or about March 11, 2016, the Company will mail to each shareholder (other than those shareholders who previously had requested paper delivery of proxy materials) a Notice of Internet Availability of Proxy Materials containing instructions on how to access and review the proxy materials, including the Company’s 2016 Proxy Statement and the 2015 Annual Report on Form 10-K filed with the SEC, on the Internet and how to access a proxy card to vote via the Internet or by telephone.
The close of business on February 29, 2016 has been fixed as the record date of the 2016 Annual Meeting, and only shareholders of record at that time will be entitled to vote.
The Notice of Internet Availability will contain a 16-digit control number that recipients will need to access the proxy materials, to request paper or email copies of the proxy materials, and to vote their shares via the Internet or by telephone.

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 5

MEETING INFORMATION

Householding
We are permitted to send a single set of proxy materials to shareholders who share the same last name and address. This procedure is called “householding” and is designed to reduce our printing and postage costs. If you are the beneficial owner, but not the record holder, of Cliffs shares, your broker, bank or other nominee may only deliver one set of proxy materials and, as applicable, any other proxy materials that are delivered until such time as you or other shareholders sharing an address notify your nominee that you want to receive separate copies. A shareholder who wishes to receive a separate copy of the proxy statement and annual report, either now or in the future, should submit this request by writing to our Secretary at Cliffs Natural Resources Inc., 200 Public Square, Suite 3300, Cleveland, Ohio 44114, or calling our Investor Relations department at (800) 214-0739, and they will be delivered promptly. Beneficial owners sharing an address who are receiving multiple copies of proxy materials and annual reports and who wish to receive a single copy of such materials in the future will need to contact their broker, bank or other nominee to request that only a single copy of each document be mailed to all shareowners at the shared address in the future.
Proxy Solicitation
Cliffs will bear the cost of solicitation of proxies. We have engaged Okapi Partners LLC to assist in the solicitation of proxies for fees and disbursements not expected to exceed $13,000 in the aggregate. In addition, employees and representatives of the Company may solicit proxies, and we will request that banks and brokers or other similar agents or fiduciaries transmit the proxy materials to beneficial owners for their voting instructions and we will reimburse them for their expenses in so doing.
Voting Rights
Shareholders of record on the Record Date are entitled to vote at the 2016 Annual Meeting. On the Record Date, there were outstanding 180,109,771 common shares entitled to vote at the 2016 Annual Meeting. A majority of the common shares entitled to vote must be represented at the 2016 Annual Meeting, in person or by proxy, to constitute a quorum and to transact business. Each outstanding share is entitled to one vote in connection with each item to be acted upon at the 2016 Annual Meeting. You may submit a proxy by electronic transmission via the Internet, by telephone or by mail, as explained on your proxy card.
Voting of Proxies
The common shares represented by properly authorized proxies will be voted as specified. It is intended that the shares represented by proxies on which no specification has been made will be voted: FOR ALL of the nine nominees for director named herein or such substitute nominees as the Board may designate; FOR the Amended and Restated 2014 Nonemployee Directors' Compensation Plan; FOR the approval, on an advisory basis, of our named executive officers' compensation; AGAINST the shareholder proposal regarding majority voting in director elections; FOR the ratification of Deloitte & Touche LLP as our independent registered public accounting firm to serve for the 2016 fiscal year; and, at the discretion of the persons named as proxies, on all other matters that may properly come before the 2016 Annual Meeting.
Cumulative Voting for Election of Directors
If notice in writing shall be given by any shareholder to the President, an Executive Vice President or the Secretary of the Company, not less than 48 hours before the time fixed for the holding of the 2016 Annual Meeting, that such shareholder desires that the voting for the election of directors shall be cumulative, and if an announcement of the giving of such notice is made upon the convening of the 2016 Annual Meeting by the Chairman or Secretary or by or on behalf of the shareholder giving such notice, each shareholder shall have the right to cumulate such voting power as he or she possesses at such election. Under cumulative voting, a shareholder may cast for any one nominee as many votes as shall equal the number of directors to be elected, multiplied by the number of his or her shares. All such votes may be cast for a single nominee or may be distributed among any two or more nominees as he or she may desire. If cumulative voting is invoked, and unless contrary instructions are given by a shareholder who signs a proxy, all votes represented by such proxy will be cast in such manner and in accordance with the discretion of the person acting as proxy as will result in the election of as many of Cliffs’ Board’s nominees as is possible.
Counting Votes
The results of shareholder voting will be tabulated by the inspector of elections appointed for the 2016 Annual Meeting. We intend to treat properly authorized proxies as “present” for purposes of determining whether a quorum has been achieved at the 2016 Annual Meeting.
Abstentions and broker non-votes will have no effect with respect to the election of directors. Abstentions will have the effect of votes against, and broker non-votes will have no effect, with respect to the advisory vote regarding the compensation of our named executive officers and with respect to the proposal to approve the Amended and Restated 2014 Nonemployee Directors' Compensation Plan. Abstentions will have the effect of votes against with respect to the ratification of Deloitte & Touche LLP as our independent registered public accounting firm.

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 6


 
CORPORATE GOVERNANCE
 
 
BOARD LEADERSHIP STRUCTURE
The Chairman of our Board is Lourenco Goncalves, who is also our Chief Executive Officer ("CEO"), and President. Pursuant to our Corporate Governance Guidelines, when the positions of Chairman and CEO are held by one individual or if the Chairman is a Cliffs’ executive, then the Governance and Nominating Committee (the "Governance Committee") recommends to the Board a Lead Director. Douglas C. Taylor currently serves as our Lead Director. The Board believes that this leadership structure is the optimal structure to guide our Company and to maintain the focus to achieve our business goals and represents our shareholders' interests.
Under this leadership structure, Mr. Goncalves, as Chairman, is responsible for overseeing and facilitating communications between our management and the Board, for setting the meeting schedules and agendas, and leading Board discussions during Board meetings. In his combined role, Mr. Goncalves has the benefit of Cliffs’ personnel to help with extensive meeting preparation, responsibility for the process of recordkeeping of all Board deliberations, and the benefit of direct daily contact with management and the internal audit department. The Chairman works closely with the Lead Director in setting meeting agendas and in ensuring that essential information is communicated effectively to the Board.
The Lead Director’s responsibilities include: chairing executive session meetings of the independent directors; leading the Board’s processes for evaluating the CEO; presiding at all meetings of the Board at which the Chairman is not present; serving as a liaison between the Chairman and the independent directors; and meeting separately at least annually with each director.
This leadership structure provides our Chairman with the readily available resources to manage the affairs of the Board while allowing our Lead Director to provide effective and timely advice and guidance. Our governance process is based on our Corporate Governance Guidelines, which are available on our website at http://www.cliffsnaturalresources.com.
In accordance with the New York Stock Exchange’s (the "NYSE") corporate governance listing standards, our non-management directors meet at regularly scheduled executive sessions without management present.
BOARD'S ROLE IN RISK OVERSIGHT
The Board as a whole oversees our enterprise risk management ("ERM") process. The Board executes its risk oversight role in a variety of manners. The full Board regularly discusses the key strategic risks facing Cliffs, and the Board has an annual meeting devoted to strategic planning, including discussion of Cliffs’ principal strategic risks.
In addition, the Board delegates oversight responsibility for certain areas of risk to its committees. Generally, each committee oversees risks that are associated with the purpose of and responsibilities delegated to that committee. For example, the Audit Committee oversees risks related to accounting and financial reporting. In addition, pursuant to its charter, the Audit Committee periodically reviews our ERM process. The Compensation Committee monitors risks related to development and succession planning for executive officers, and compensation and related policies and programs for executive and non-executive officers and management. The Governance Committee handles risks with respect to board organization, membership and structure, director succession planning and corporate governance matters. As appropriate, the respective committees’ Chairpersons provide reports to the full Board.
Through the ERM process, management is responsible for the day-to-day management of Cliffs’ risks. The ERM process includes the involvement of management in the identification, assessment, mitigation and monitoring of a wide array of potential risks from strategic to operational to compliance related risks throughout the Company. Executive management regularly reports to the Board or relevant committees regarding Cliffs’ key risks and the actions being taken to manage these risks.
The Company believes that its leadership structure supports the risk oversight function of the Board. Except for the Strategy Committee, independent directors chair our committees, which are each involved with risk oversight, and all directors actively participate in the Board’s risk oversight function.
BOARD MEETINGS AND COMMITTEES
Our directors discharge their responsibilities in a variety of ways, including reviewing reports to directors, visiting our facilities, corresponding with the Chairman, President and CEO, and conducting telephone conferences with the Chairman, President and CEO and directors regarding matters of interest and concern to Cliffs. In addition, directors have regular access to senior management of Cliffs. All committees regularly report their activities, actions and recommendations to the Cliffs Board.

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 7

CORPORATE GOVERNANCE

During 2015, our Board held 7 in person meetings and 4 telephonic meetings. Each director attended, either in person or by telephone conference, at least 99% of the Board and committee meetings held while serving as a director or committee member in 2015. Pursuant to Board policy, all serving directors are expected to attend all Board and committee meetings, as well as our annual meetings of shareholders. All of our directors who were standing for re-election and were incumbent directors at the time of the 2015 Annual Meeting attended the meeting.
The Board of Directors currently has four standing committees: an Audit Committee, a Compensation and Organization Committee (the "Compensation Committee"), a Governance Committee and a Strategy Committee. The Audit Committee, Compensation Committee and Governance Committee each have a charter that can be found on our website at http://ir.cliffsnaturalresources.com under “Corporate Governance” then “Committees”. A biographical overview of the members of our committees can be found beginning on page 15.
Board Committees
AUDIT COMMITTEE
Members: 4
Independent: 4
Audit Committee Financial Experts: 2
2015 Meetings: 10
Responsibilities:
Reviews with our management, the internal auditors and the independent registered public accounting firm, the adequacy and effectiveness of our system of internal control over financial reporting
Reviews significant accounting matters
Reviews quarterly unaudited financial information prior to public release
Approves the audited financial statements prior to public distribution
Approves our assertions related to internal controls prior to public distribution
Reviews any significant changes in our accounting principles or financial reporting practices; reviews, approves and retains the services performed by our independent registered public accounting firm
Has the authority and responsibility to evaluate our independent registered public accounting firm; discusses with the independent registered public accounting firm their independence and considers the compatibility of non-audit services with such independence
Annually selects and retains our independent registered public accounting firm to examine our financial statements
Approves management’s appointment, termination or replacement of the head of Internal Audit
Conducts a legal compliance review at least annually
Chairman: John T. Baldwin
Members: Robert P. Fisher, Jr., James S. Sawyer and Gabriel Stoliar
COMPENSATION & ORGANIZATION COMMITTEE
Members: 3
Independent: 3
2015 Meetings: 7
Responsibilities:
Oversees development and implementation of Cliffs' compensation policies and programs for executive officers
Ensures that criteria for awards under incentive plans relate to Cliffs' strategic plan and operating performance objectives and approves equity-based awards
Reviews and evaluates CEO and executive officer performance and approves compensation (with the CEO's compensation being subject to ratification by the independent members of the Board)
Recommends to the Cliffs' Board the election and compensation of officers
Assists with management development and succession planning
Reviews employment and severance plans and oversees regulatory compliance of compensation matters and related party transactions
Obtains the advice of outside experts with regard to compensation matters
May, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee
Chairman: Robert P. Fisher, Jr.
Members: Joseph A. Rutkowski, Jr. and Douglas C. Taylor


CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 8

CORPORATE GOVERNANCE

GOVERNANCE & NOMINATING COMMITTEE
Members: 4
Independent: 4
2015 Meetings: 4
Responsibilities:
Oversees annual review of our Corporate Governance Guidelines and our Guidelines for Selection of Nonemployee Directors and periodic review of external developments in corporate governance matters generally
Periodically reviews and makes recommendations regarding the CEO's authorized levels for corporate expenditures
Establish and maintains, with the Audit Committee, procedures for review of related party transactions
Monitors the Board governance process and provides counsel to the CEO on Board governance and other matters
Recommends changes in membership and responsibility of Board committees
Acts as the Board’s Nominating Committee and Proxy Committee in the election of directors
Annually reviews and administers our director compensation plans and benefits, and makes recommendations to the Board with respect to compensation plans and equity-based plans for directors
Other responsibilities include oversight of annual evaluation of the Board and CEO and monitoring risks associated with Board organization, membership, structure and succession planning
Chairman: Douglas C. Taylor
Members: Susan M. Green, Michael D. Siegal and Gabriel Stoliar

STRATEGY COMMITTEE
Members: 3
Independent: 2
2015 Meetings: 3
Responsibilities:
Oversees Cliffs’ strategic plan, annual management objectives and operations and to oversee and monitor risks relevant to its strategy
Provides advice and assistance with developing our current and future strategy
Provides follow up oversight with respect to the comparison of actual results with estimates for major projects and post-deal integration
Ensures that Cliffs has appropriate strategies for managing exposures to economic and hazard risks
Assesses Cliffs’ overall capital structure and its capital allocation priorities
Assists management in determining the resources necessary to implement Cliffs’ strategic and financial plans; monitors the progress and implementation of Cliffs' strategy
Chairman: Lourenco Goncalves
Members: Joseph A. Rutkowski, Jr. and Gabriel Stoliar


CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 9

CORPORATE GOVERNANCE

IDENTIFICATION AND EVALUATION OF DIRECTOR CANDIDATES
Shareholder Nominees
The policy of the Governance Committee is to consider properly submitted shareholder nominations for candidates for membership on the Board as described below under “Identifying and Evaluating Nominees for Directors.” In evaluating nominations, the Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Cliffs Board and to address the membership criteria set forth below under “Board Diversity and Director Qualifications.” Any shareholder nominations proposed for consideration by the Governance Committee should include: (i) complete information as to the identity and qualifications of the proposed nominee, including name, address, present and prior business and/or professional affiliations, education and experience, and particular fields of expertise; (ii) an indication of the nominee’s consent to serve as a director if elected; and (iii) the reasons why, in the opinion of the recommending shareholder, the proposed nominee is qualified and suited to be a director. Shareholder nominations should be addressed to Cliffs Natural Resources Inc., 200 Public Square, Suite 3300, Cleveland, Ohio 44114-2315, Attention: Secretary. Our Regulations provide that at any meeting of shareholders at which directors are to be elected, only persons nominated as candidates will be eligible for election.
Board Diversity and Director Qualifications
Although there is no specific board diversity policy in place presently, the Governance Committee does consider such factors as it deems appropriate and consistent with our Corporate Governance Guidelines, the charter of the Governance Committee and other criteria established by the Cliffs Board, which includes diversity. The Governance Committee’s goal in selecting directors for nomination to the Cliffs Board generally is to seek to create a well-balanced team that combines diverse experience, skill and intellect of seasoned directors in order to enable us to pursue our strategic objectives. The Governance Committee has not reduced the qualifications for service on the Cliffs Board to a checklist of specific standards or minimum qualifications, skills or qualities. Rather, the Governance Committee seeks, consistent with the vacancies existing on the Cliffs Board at any particular time and the interplay of a particular candidate’s experience with the experience of other directors, to select individuals whose business experience, knowledge, skills, diversity and integrity would be considered a desirable addition to our Board and any committees thereof. In addition, the Governance Committee annually conducts a review of incumbent directors in order to determine whether a director should be nominated for re-election to the Cliffs Board.
Identifying and Evaluating Nominees for Directors
The Governance Committee utilizes a variety of methods for identifying and evaluating nominees for director. The Governance Committee regularly reviews the appropriate size of the Cliffs Board and whether any vacancies on the Cliffs Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Governance Committee considers various potential candidates for director. Applicable considerations include: whether the current composition of the Cliffs Board is consistent with the criteria described in our Corporate Governance Guidelines; whether the candidate submitted possesses the qualifications that generally are the basis for selection of candidates to the Cliffs Board; and whether the candidate would be considered independent under the rules of the NYSE and our standards with respect to director independence. Candidates may come to the attention of the Governance Committee through current Board members, professional search firms, shareholders or other persons. As described above, the Governance Committee considers properly submitted nominations for candidates for the Cliffs Board. Following verification of the recommending shareholder’s status, recommendations are considered by the Governance Committee at its next regularly scheduled meeting. Final approval of any candidate is determined by the full Cliffs Board.
COMMUNICATIONS WITH DIRECTORS
Shareholders and interested parties may communicate with the Lead Director, our non-management directors as a group or the Cliffs Board by writing to the Lead Director at Cliffs Natural Resources Inc., 200 Public Square, Suite 3300, Cleveland, Ohio 44114-2315. As set forth in the Corporate Governance Guidelines, the Lead Director will report to the full Board any communications that are directed at all members of the Cliffs Board. The Secretary routinely filters communications that are solicitations or complaints, unrelated to Cliffs or Cliffs' business or determined to pose a possible security risk to the addressee.
BUSINESS ETHICS POLICY
We have adopted a Code of Business Conduct and Ethics (the "Ethics Code"), which applies to all of our directors, officers and employees. The Ethics Code is available on our website at http://cliffsnaturalresources.com in the Corporate Governance section under "Investors." We intend to post amendments to or waivers from our Ethics Code (to the extent applicable to our principal executive officer, principal financial officer or principal accounting officer) on our website. Reference to our website and the contents thereof do not constitute incorporation by reference of the information contained on our website, and such information is not part of this proxy statement.


CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 10

CORPORATE GOVERNANCE

INDEPENDENCE AND RELATED PARTY TRANSACTIONS
Our Board has determined that each of the current directors standing for re-election, other than Mr. Goncalves, and all of the current members of the Audit, Governance , and Compensation Committees, have no material relationship with us (either directly or as a partner, shareholder or officer of an organization that has a relationship with us) and is independent within the NYSE director independence standards. Mr. Goncalves is our Chairman, President & CEO, and, as such, is not considered independent.
Since January 1, 2015, there have been no transactions or currently proposed transactions, in which Cliffs was or is to be a participant and the amount exceeds $120,000, and in which any related person had or will have a direct or material interest. We recognize that transactions between us and any of our directors or executive officers can present potential or actual conflicts of interest and create the appearance that our decisions are based on considerations other than the best interests of our shareholders.
We have a written Related Party Transactions Policy, pursuant to which we only will enter into related party transactions if our CEO and Chief Legal Officer determine that the transaction is comparable to those that could be obtained in arm’s length dealings with an unrelated third party. If the transaction is approved by our CEO and Chief Legal Officer, then the transaction also must be approved by the disinterested members of our Audit Committee. For purposes of our policy, we define a related person as any person who is a director, executive officer, nominee for director or an immediate family member of a director, an executive officer or a nominee for director. We define a related party transaction as a transaction, agreement or relationship in which Cliffs was, is or will be a participant, the amount of the transaction exceeds $120,000, and a related person has or will have a direct or indirect material interest. However, compensation paid by Cliffs for service as a director or executive officer of the Company is not deemed to be a related party transaction, even if the aggregate amount involved exceeds $120,000. Under our policy, any related party transactions are reviewed by the Audit Committee at each quarterly committee meeting.
We have entered into indemnification agreements with each current member of the Board. The form and execution of the indemnification agreements were approved by our shareholders at the Annual Meeting convened on April 29, 1987. The indemnification agreements essentially provide that, to the extent permitted by Ohio law, we will indemnify the indemnitee against all expenses, costs, liabilities and losses (including attorneys’ fees, judgments, fines or settlements) incurred or suffered by the indemnitee in connection with any suit in which the indemnitee is a party or otherwise involved as a result of his or her service as a member of the Board. In connection with the indemnification agreements, we have a trust agreement with KeyBank National Association pursuant to which the parties to the indemnification agreements may be reimbursed with respect to enforcing their respective rights under the indemnification agreements.
In 2004, we reached an agreement with the United Steelworkers, or USW pursuant to which the USW may designate a member to the Board provided that the individual is acceptable to the Chairman, is recommended by the Board Affairs Committee (now known as the Governance and Nominating Committee), and is then approved by the full Board to be considered a director nominee. In 2007, Susan Green was first proposed by the USW, elected to the Board by Cliffs’ shareholders in July 2007, and re-elected in each of the years 2008 through 2013. As a result of the proxy contest in 2014, Ms. Green was not re-elected but was asked by the reconstituted Board to re-join the Board and was subsequently appointed on October 15, 2014 and re-elected in 2015.


CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 11


 
DIRECTOR COMPENSATION
 
 
Our 2014 Nonemployee Directors' Compensation Plan (the "Directors' Plan"), which is further described below, provides for a combination of cash and equity compensation for our nonemployee directors.
Cash Compensation
Under the Directors' Plan, each nonemployee director is entitled to receive the following cash payments, paid in equal quarterly amounts, for his or her Board retainer and committee assignments.
Board Form of Cash Compensation
2015 ($)
Annual Retainer
100,000
Lead Director Annual Retainer
40,000
Audit Committee Chair Annual Retainer
20,000
Compensation and Organization Committee Chair Annual Retainer
12,500
Annual Retainers for Chairs of Governance and Nominating Committee
and the former Strategy and Sustainability Committee
10,000
In addition, customary expenses for attending Board and committee meetings are reimbursed. Employee directors receive no additional compensation for their service as directors. The Company does not fund any type of retirement or pension plan for nonemployee directors.
Retainer Share Election Program
Starting in July, 2015, the Governance Committee recommended and the Board adopted a Nonemployee Director Retainer Share Election Program pursuant to which nonemployee directors may elect to receive all or certain portions of their annual retainer and any other fees earned in cash in Cliffs' common shares. Election is voluntary and irrevocable for the applicable election period and shares issued under this program must be held for six months from the issuance date. The number of shares received each quarter are calculated by dividing the value of the quarterly cash retainer amount by the closing market price of the date of payment. Three of our eight nonemployee directors participated in this program during the 2015 election period.
Equity Grants
During 2015 our nonemployee directors were entitled to receive restricted share awards under the Directors’ Plan. For 2015, nonemployee directors were granted a number of restricted shares, with a value equal to $85,000, based on the closing price of the Company’s common shares on the NYSE, on May 19, 2015, the date of the Company’s annual meeting of shareholders in 2015, subject to any deferral election and pursuant to the terms of the Directors’ Plan and an award agreement, effective on May 19, 2015.
Directors receive dividends, if any, on their restricted share awards and may elect that all cash dividends with respect to restricted shares be deferred and reinvested in additional common shares. Those additional common shares are subject to the same restrictions as the underlying award. Cash dividends not subject to a deferral election will be paid to the director without restriction.
Share Ownership Guidelines
We have established Director Share Ownership Guidelines and assess each director’s compliance with the guidelines in December of each year. The Director Share Ownership Guidelines provide that each director hold or acquire common shares having a market value of at least $250,000 within five years of becoming a director. As of December 31, 2015, Messrs. Stoliar and Taylor were the only directors who were in compliance with the guidelines, but we note that all directors are within the applicable timeframe to reach compliance.
Deferrals
The Directors’ Plan gives nonemployee directors the opportunity to defer all or a portion of their awards that are denominated or payable solely in shares. Deferred share accounts earn dividend equivalents at the end of each quarter based on any cash dividends we pay during the quarter, which dividend equivalents are credited to the accounts in the form of additional deferred shares. The amounts in the director’s deferral account together with any deferred dividends, will be paid to the director in the form elected after such director’s termination of service, death, or a change in control of Cliffs.
Cliffs has a trust agreement with KeyBank National Association relating to the Directors’ Plan in order to fund and pay our deferred compensation obligations under the Directors' Plan.

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 12

DIRECTOR COMPENSATION

DIRECTOR COMPENSATION FOR 2015
The following table, supported by the accompanying footnotes and the narrative above, sets forth for fiscal year 2015 all compensation earned by the individuals who served as our nonemployee directors at any time during 2015.
Name
Fees Earned or Paid in Cash ($) (1)
Stock Awards ($) (2)
All Other Compensation ($)
Total ($)
J. T. Baldwin
120,000
85,000
205,000
R.P. Fisher, Jr.
112,500
85,000
197,500
S. M. Green
100,000
85,000
185,000
J.A. Rutkowski, Jr.
100,000
85,000
185,000
J. S. Sawyer
100,000
85,000
185,000
M. D. Siegal
100,000
85,000
185,000
G. Stoliar
100,000
85,000
185,000
D. C. Taylor
150,000
85,000
235,000
(1)
The amounts listed in this column reflect the aggregate cash dollar value of all earnings in 2015 for annual retainer fees and chair retainers.
(2)
The amounts reported in this column reflect the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718 for the nonemployee directors’ restricted share awards granted during 2015, which awards are further described above, and whether or not deferred by the director. The grant date fair value of the nonemployee directors’ restricted share award on May 19, 2015 was $5.05 per share ($85,000). Messrs. Sawyer and Siegal elected to defer all or a portion of their restricted share award under the Directors' Plan. As of December 31, 2015, the aggregate number of restricted shares subject to forfeiture held by each nonemployee director was as follows: Mr. Baldwin - 25,638; Mr. Fisher - 26,514; Ms. Green - 24,657; Mr. Rutkowski - 26,514; Mr. Sawyer - 9,682; Mr. Siegal - 17,010; Mr. Stoliar - 26,514; and Mr. Taylor - 26,514. As of December 31, 2015, the aggregate number of unvested deferred shares allocated to the deferred share accounts of Messrs. Sawyer and Siegal under the Directors' Plan were 16,832 and 8,416, respectively.



CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 13



 
PROPOSAL 1
 
ELECTION OF DIRECTORS
 
 
The Board has nominated John T. Baldwin, Robert P. Fisher, Jr., Lourenco Goncalves, Susan M. Green, Joseph A. Rutkowski, Jr., James S. Sawyer, Michael D. Siegal, Gabriel Stoliar and Douglas C. Taylor to serve until the next Annual Meeting of Shareholders or until their successors shall be elected. All of the nominees are independent under the NYSE corporate governance rules, except for Mr. Goncalves. All of the nominees were elected by the shareholders at the Annual Meeting of Shareholders held on May 19, 2015.
Each of the director nominees has consented to his or her name being submitted by Cliffs as a nominee for election as a member of the Cliffs Board. Each such nominee has further consented to serve as a member of the Cliffs Board if elected. Should any nominee decline or be unable to accept such nomination to serve as a director, an event that we currently do not anticipate, the persons named as proxies reserve the right, in their discretion, to vote for a lesser number of nominees or for substitute nominees designated by the directors, to the extent consistent with our Regulations.
The members and nominees for the Cliffs Board have diversified professional experience in general management, steel manufacturing and processing, mining, metallurgical engineering, operations, finance, investment banking, labor, law and other fields. There is no family relationship among any of our nominees and executive officers. The average age of the nominees currently serving on the Cliffs Board is 59, ranging from ages 52 to 64. The average years of service of the nominees currently serving on the Cliffs Board is 2.3 years, ranging from less than 2 years to over 9 years of service.
In the election of directors, the nominees receiving a plurality vote of the shares will be elected. However, under our current majority voting policy, any director-nominee that is elected in an uncontested election but fails to receive a majority of votes cast (which excludes abstentions and broker non-votes) is expected to tender his or her resignation, which resignation will be considered by the Governance Committee and our Board.
Under Ohio law, shareholders have the right to exercise cumulative voting in the election of directors as described under “Cumulative Voting” on page 6. If cumulative voting rights are in effect for the election of directors, which we currently do not anticipate to be the case, you may allocate among the director nominees, as you see fit, the total number of votes equal to the number of director positions to be filled multiplied by the number of shares you hold.
The Board recommends a vote FOR each of the nominees listed on the following pages.


CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 14

PROPOSAL 1 ELECTION OF DIRECTORS

INFORMATION CONCERNING DIRECTOR NOMINEES
JOHN T. BALDWIN
 
 
Former director and chairman of the Audit Committee of Metals USA, a provider of a wide range of products and services in the heavy carbon steel, flat-rolled steel, specialty metals, and building products markets, from January 2006 to April 2013; senior vice president and chief financial officer of Graphic Packaging Corporation, 2003 to 2005.
 
Qualifications:  Mr. Baldwin's experience as a former Audit Committee Chairman and retired Chief Financial Officer with over twenty-five years of increasing financial responsibility. Mr. Baldwin holds a Bachelor of Science degree from the University of Houston and J.D. from the University of Texas School of Law. Mr. Baldwin has worked abroad for several years and has a broad range of experience structuring and negotiating complicated financial and M&A transactions.
Director Since: 2014
 
 
Other Current Public Directorships:  None
Age:  59
 
 
Former Directorships:
 
 
 
Metals USA Holdings Corp. (2006 - 2013)
 
 
 
The Genlyte Group Incorporated (2003 - 2008)

 
ROBERT P. FISHER, JR.
 
 
 
President and chief executive officer of George F. Fisher, Inc., a private investment company that manages a portfolio of public and private investments, since 2002. Mr. Fisher served in various positions with Goldman, Sachs & Co., an American multinational investment banking firm, from 1982 until 2001, eventually serving as Managing Director and head of its Canadian Corporate Finance and Canadian Investment Banking units for eight years and then as head of Goldman Sachs Investment Banking Mining Group.
 
Qualifications: During Mr. Fisher's tenure at Goldman, Sachs & Co., he worked extensively with many of the leading North American metals and minings companies, and also served as the head of Goldman's Investment Banking Mining Group. Mr. Fisher has vast experience in the investment and finance industries which included advising the boards of numerous public companies. Mr. Fisher has served on the Audit Committee, the Nominating and Corporate Governance Committee and as chair of the Human Resources Committee of CML Healthcare, Inc. Mr. Fisher holds a Bachelor of Arts degree from Dartmouth College and a Master of Arts degree in Law and Diplomacy from Tufts University.
 
 
Director Since: 2014
 
 
Other Current Public Directorships:  None
 
Age: 61
 
 
Former Directorships:
 
 
 
 
CML Healthcare, Inc. (2010 - 2013)

 
LOURENCO GONCALVES
 
 
 
Chairman of the Board, President and Chief Executive Officer of the Company since August 2014; chairman, president and chief executive officer of Metals USA Holdings Corp., an American manufacturer and processor of steel and other metals from May 2006 through April 2013; president, chief executive officer and a director of Metals USA Inc. from February 2003 through April 2006. Prior to Metals USA, Mr. Goncalves served as president and chief executive officer of California Steel Industries, Inc. from March 1998 to February 2003.
 
Qualifications:  Mr. Goncalves brings more than 30 years of experience in the metals and mining industries, as well as extensive board experience, in the United States and abroad. Mr. Goncalves earned a Masters of Science degree in Metallurgical Engineering from the Federal University of Minas Gerais in Belo Horizonte, Brazil and a Bachelor's degree in Metallurgical Engineering from the Military Institute of Engineering in Rio de Janeiro, Brazil
 
 
Director Since: 2014
 
 
Other Current Public Directorships:
 
Age: 58
 
 
American Iron and Steel Institute (2014)
 
 
 
 
Former Directorships:
 
 
 
 
Ascometal SAS (2011 - 2014)
 
 
 
 
Metals USA Holdings Corp. (2006 - 2013)
 
 
 
 
Metals USA Inc. (2003 - 2006)

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 15

PROPOSAL 1 ELECTION OF DIRECTORS

 
SUSAN M. GREEN
 
 
 
Served as Deputy General Counsel, U.S. Congress Office of Compliance, which enforces the labor and employment laws for the Legislative Branch, from November 2007 through September 2013. Prior to that position, Ms. Green held several appointments in the U.S. Department of Labor during the Administration of President Bill Clinton (1999-2001), and served as Chief Labor Counsel for then-Senator Edward M. Kennedy (1996-1999).
 
Qualifications: Ms. Green was originally proposed as a nominee for the Board by the USW pursuant to the terms of our 2004 labor agreement. Ms. Green has served as both a labor organizer and as an attorney representing organized labor. Ms. Green brings her diverse experiences as labor attorney and an alternative point of view to our Board. Ms. Green received her J.D. from Yale Law School and an A.B. from Harvard College.
 
 
Director Since: 2007
 
 
Other Current Public Directorships:  None
 
Age: 56
 
 
Former Directorships:
 
 
 
 
Cliffs Natural Resources Inc.

 
JOSEPH A. RUTKOWSKI, JR.
 
 
 
Principal of Winyah Advisors LLC, a management consulting firm, since 2010; former executive vice president of Nucor Corporation (“Nucor”), the largest steel producer in the United States, from 1998 to 2010; various previous capacities at Nucor that included: manager of melting and casting at the Nucor steel division from 1991 to 1992; general manager from 1992 to 1998; vice president from 1993 to 1998.
 
Qualifications:  Mr. Rutkowski has over 30 years of experience in the steel industry, including 12 years of service as executive vice president of Nucor. Mr. Rutkowski holds a Bachelor's of Science in Mechanics and Materials Science from Johns Hopkins University.
 
 
Director Since: 2014
 
 
Other Current Public Directorships: 
 
Age: 61
 
 
Insteel Industries, Inc. (2015)
 
 
 
 
Former Directorships:  None

 
JAMES S. SAWYER
 
 
 
Former chief financial officer of Praxair Inc., the largest industrial gases company in North and South America, from 2000 to 2013; executive vice president of Praxair Inc., from November 2006 to December 2013.
 
Qualifications:  Mr. Sawyer was listed as one of the 25 best Chief Financial Officers of 2012 by the Wall Street Journal; he was also named Senior Financial Officer of the year by Chemical Week magazine in 2003 and received the Institutional Investor Chief Financial Officer of the Year award in 2004. Mr. Sawyer holds an undergraduate degree from Wesleyan University and a master’s degree from the Sloan School of Management at the Massachusetts Institute of Technology.
 
 
Director Since: 2014
 
 
Other Current Public Directorships:  None
 
Age: 59
 
 
Former Directorships:  None


CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 16

PROPOSAL 1 ELECTION OF DIRECTORS

 
MICHAEL D. SIEGAL
 
 
 
Chairman and chief executive officer of Olympic Steel, Inc., a publicly traded company since 1994, focused on the value-added processing of flat rolled and tubing metal products, since 1984.
 
Qualifications: Under Mr. Siegal’s leadership, Olympic Steel Inc. experienced consistent growth and has been transformed from a family-owned steel distributor to a publicly traded fully integrated, value added processor and supply chain manager serving the outsourcing needs of America’s largest manufacturers. Olympic Steel, Inc. has grown from $35 million to more than $1 billion in revenues. Mr. Siegal received his Bachelor of Science degree from Miami University.
 
 
Director Since: 2014
 
 
Other Current Public Directorships:
 
Age: 63
 
 
Olympic Steel, Inc. (1994)
 
 
 
 
Former Directorships:  None

 
GABRIEL STOLIAR
 
 
 
Managing partner of Studio Investimentos, an asset management firm focused on Brazilian equities, since 2009; chairman of the board of directors of Tupy S.A., a foundry and casting companies, since 2009; board of directors of Knijnik Engenharia Integrada, an engineering company, since 2013; board of directors of LogZ Logistica Brasil S.A., a ports logistic company, since 2011; chief financial officer and head of investor relations and subsequently as Executive Director of Planning and Business Development at Vale S.A., a Brazilian multinational diversified metals and mining company, from 1997 to 2008.
 
Qualifications: Mr. Stoliar brings to the Board his vast experience in and relating to the metals and mining industries along with his extensive experience serving on various boards of directors. Mr. Stoliar holds a Bachelor’s of Science in Industrial Engineering from the Universdade Federal do Rio de Janeiro, a post graduate degree in Production Engineering with focus in Industrial Projects and Transportation from the Universdade Federal do Rio de Janeiro and an Executive MBA from PDG-SDE/RJ.
 
 
Director Since: 2014
 
 
Other Current Public Directorships:
 
Age: 61
 
 
Tupy S.A. (2009)
 
 
 
 
Former Directorships: None

 
DOUGLAS C. TAYLOR
 
 
 
Lead Director of the Board since August, 2014. Managing Partner of Casablanca Capital LP, a hedge fund, since 2010; managing director at Lazard Freres, a leading financial advisory and asset management firm, from 2002 to 2010; chief financial officer and director at Sapphire Industrials Corp., from 2008 to 2010.
 
Qualifications: Mr. Taylor's extensive financial and strategic advisory investment experience, including advising public companies, is invaluable to Cliffs. Mr. Taylor holds a Bachelor of Arts degree in Economics from McGill University and a Master of Arts degree in International Affairs from Columbia University School of International and Public Affairs.
 
 
Director Since: 2014
 
 
Other Current Public Directorships:  None
 
Age: 51
 
 
Former Public Directorships:
 
 
 
 
Sapphire Industrials Corp. (2008 - 2010)

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 17



 
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
 
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires our directors and officers and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. Directors, officers and greater than 10% shareholders are required by SEC regulations to furnish us with copies of all Forms 3, 4 and 5 they file.
Based solely on our review of the copies of such forms we have received, and written representations by such persons, we believe that, except as otherwise noted below, all of our directors, officers and greater than 10% shareholders complied with all filing requirements applicable to them with respect to transactions in our equity securities during the fiscal year ended December 31, 2015: on January 4, 2016, one Form 4 for P. Kelly Tompkins reporting one transaction related to the surrender of shares in payment of tax liability for restricted shares that vested on November 11, 2015 was filed late due to an administrative oversight.

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 18


 
OWNERSHIP OF EQUITY SECURITIES OF THE COMPANY
 
 
The following table sets forth the amount and percent of common shares that, as of February 29, 2016 (except as otherwise indicated), are deemed under the rules of the SEC to be “beneficially owned” by each director named in this proxy statement, by our CEO, CFO and the other named executive officers as identified in the 2015 Summary Compensation Table below by such persons, individually and collectively by the directors named in this proxy statement and the other executive officers as a group, and by any person or “group” (as the term is used in the Exchange Act) known to us as of that date to be a “beneficial owner” of more than five percent or more of the outstanding common shares. None of the the shares owned by our directors, director nominees or executive officers are pledged as security.
Name of Beneficial Owner
Amount and Nature of “Beneficial Ownership” (1)
Beneficial Ownership

Investment Power
 
Voting Power
 
Percent of Class (2)

Sole

Shared

 
Sole

Shared

 
Directors
 
 
 
 
 
 
 
 
John T. Baldwin
38,438

38,438


 
38,438


 

Robert P. Fisher, Jr.
32,514

32,514


 
32,514


 

Susan M. Green
36,338

36,338


 
36,338


 

Joseph A. Rutkowski, Jr.
42,514

42,514


 
42,514


 

James S. Sawyer
34,682

34,682


 
34,682

 
 

Michael D. Siegal
42,577

42,577


 
42,577


 

Gabriel Stoliar
67,266

67,266


 
67,266


 

Douglas C. Taylor
7,292,246

60,726

7,231,520

(3)

7,231,520

(3)
4.05

Named Executive Officers
 
 
 
 
 
 
 
 
Lourenco Goncalves
409,780

409,780


 
409,780


 

P. Kelly Tompkins
48,362

48,362


 
48,362


 

Terry G. Fedor
20,587

20,587


 
20,587


 

Maurice D. Harapiak
5,682

5,682


 
5,682


 

Clifford T. Smith
43,988

43,988


 
43,988


 

Terrance M. Paradie
26,033

26,033


 
26,033


 

David L. Webb
11,601

11,601


 
11,601


 

All Current Directors and Executive Officers as a group
(16 Persons)
8,144,775

913,255

7,231,520

(4)
852,529

7,231,520

(4)
4.52

Other Persons
 
 
 
 
 
 
 
 
George W. Connell (5)
Three Radnor Corporate Center, #450
Radnor, PA 19087
14,300,000

14,300,000


 
14,300,000


 
7.94

BlackRock Inc. (6)
40 East 52nd Street
New York, NY 10022
9,615,708

9,054,623


 
9,615,708


 
5.34

The Vanguard Group, Inc. (7)
100 Vanguard Blvd.
Malvern, PA 19355
9,200,749

9,023,468

177,281

 
187,781


 
5.11

(1)
Under the rules of the SEC, “beneficial ownership” includes having or sharing with others the power to vote or direct the investment of securities. Accordingly, a person having or sharing the power to vote or direct the investment of securities is deemed to “beneficially own” the securities even if he or she has no right to receive any part of the dividends on or the proceeds from the sale of the securities. Also, because “beneficial ownership” extends to persons, such as co-trustees under a trust, who share power to vote or control the disposition of the securities, the very same securities may be deemed “beneficially owned” by two or more persons shown in the table. Information with respect to “beneficial ownership” shown in the table above is based upon information supplied by our directors, nominees and executive officers and filings made with the SEC or furnished to us by any shareholder.
(2)
Less than one percent, except as otherwise indicated.
(3)
Casablanca Capital LP serves as investment advisor to certain investment funds or managed accounts (collectively, the "Accounts"), and may be deemed to have beneficial ownership over the common shares held for such Accounts. Mr. Taylor, as a co-managing member of Casablanca GP, is in a position to indirectly determine the voting and investment decisions regarding 7,231,520 common shares held by the Accounts and may be deemed to “beneficially own” such common shares.
(4)
Casablanca Capital LP serves as investment advisor to the Accounts, and may be deemed to have beneficial ownership over the common shares held for such Accounts. Mr. Taylor, as a co-managing member of Casablanca GP, is in a position to indirectly determine the voting and investment decisions regarding 7,231,520 common shares held by the Accounts and may be deemed to “beneficially own” such common shares.
(5)
George W. Connell reported his ownership on Amendment No. 1 to Schedule 13G filed with the SEC on January 29, 2016.
(6)
BlackRock Inc. reported its ownership on Amendment No. 6 to Schedule 13G filed with the SEC on February 10, 2016.
(7)
The Vanguard Group, Inc. reported its ownership on Amendment No. 4 to Schedule 13G filed with the SEC on February 11, 2016.

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 19


 
 
 
 
 
PROPOSAL 2
 
APPROVAL OF AMENDED & RESTATED 2014 NONEMPLOYEE DIRECTORS' COMPENSATION PLAN
 
 
On February 10, 2016, upon the recommendation of the Governance Committee, the Cliffs Board unanimously approved and adopted the Amended and Restated 2014 Nonemployee Directors’ Compensation Plan (the "Amended Director Plan") subject to the approval of our shareholders at the 2016 Annual Meeting. If approved by our shareholders, the Amended Director Plan will replace our existing 2014 Nonemployee Directors’ Compensation Plan (which we refer to as the "Current Director Plan").
The Amended Director Plan amends and restates in its entirety the Current Director Plan. If the Amended Director Plan is approved by our shareholders, it will be effective as of April 27, 2016. Outstanding awards under the Current Director Plan will continue in effect in accordance with their terms. If the Amended Director Plan is not approved by our shareholders, no awards will be made under the Amended Director Plan.
Our principal reason for amending and restating the Current Director Plan is to increase the number of common shares available for issuance. The Amended Director Plan will increase the maximum number of shares available for awards from 300,000 to 1,050,000, an increase of 750,000 common shares (or 0.58% of our outstanding common shares as of February 29, 2016).
Other than the increase in the aggregate number of common shares available for issuance, the Amended Director Plan does not include any substantive changes to the terms of the Current Director Plan.
The actual text of the Amended Director Plan is attached to this proxy statement as Annex A. The following description of the Amended Director Plan is only a summary of its principal terms and provisions and is qualified by reference to the actual text as set forth in Annex A.
Why We Recommend That You Vote for Proposal 2
The Amended Director Plan authorizes the Governance Committee to provide equity-based compensation in the form of restricted shares, restricted stock units, deferred shares, dividend equivalents and certain other awards denominated or payable in, or otherwise based on Cliffs common shares or factors that may influence the value of our shares. The purpose of the Amended Director Plan is to allow for payment to Cliffs' nonemployee directors of a portion of the compensation earned by them for services as directors in common shares or other share-based awards in order to further align the interests of such directors with Cliffs' shareholders and thereby promote our long-term success and growth. In addition, the Amended Director Plan is intended to provide directors with opportunities to defer receipt of any or all of such compensation.
We believe our future success depends in part on our ability to attract, motivate and retain highly qualified nonemployee directors. The ability to provide equity-based awards under the Amended Director Plan is a critical component to achieving this success. We would be at a distinct competitive disadvantage if we could not use equity-based awards to recruit, motivate and retain nonemployee directors.
We also believe that equity compensation motivates nonemployee directors to appropriately focus on actions that enhance shareholder value because they will share in that value enhancement through improved share price performance. Our equity compensation also effectively retains our nonemployee directors and promotes a focus on sustained enhancement of shareholder value because our equity compensation awards can be subject to vesting.
As of February 29, 2016, only 91,299 common shares remained available for issuance under the Current Director Plan. If the Amended Director Plan is not approved, we may be compelled to significantly increase the cash component of our nonemployee director compensation, which may not necessarily align nonemployee director interests with the investment interests of our shareholders as well as the alignment provided by equity-based awards. Replacing equity awards with cash would also increase cash compensation expense and divert cash away from more impactful uses, such as investment in our business operations.
The following includes aggregated information regarding the potential overhang or dilution associated with the Amended Director Plan and the potential overhang or dilution that would result if the Amended Director Plan is approved. The information below is as of February 29, 2016. As of that date, there were approximately 180,109,771 of our common shares outstanding.
Under the Current Director Plan:
Total common shares subject to outstanding awards: 208,291 common shares (0.10% of our outstanding common shares);
Total common shares available for future awards under the Current Director Plan: 91,299 shares (0.05% of our outstanding common shares);
The total number of common shares subject to outstanding awards under the Current Director Plan (208,291 shares), plus the total number of shares available for future awards under the Current Director Plan (91,299 shares), represents a current overhang or dilution to our shareholders of approximately 0.17%.

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 20

PROPOSAL 2 APPROVE AMENDED AND RESTATED 2014 NONEMPLOYEE DIRECTORS' COMPENSATION PLAN

Under the Amended Director Plan:
Proposed additional common shares available for future issuance under the Amended Director Plan: 750,000 common shares (0.42% of our outstanding common shares - this percentage reflects the simple dilution of our shareholders that would occur if the Amended Director Plan is approved).
Total potential overhang or dilution under the Amended Director Plan:
The total common shares subject to outstanding awards as of February 29, 2016 (208,291 shares), plus the total common shares available for future awards under the Current Director Plan as of that date (91,299 shares), plus the proposed additional common shares available for future issuance under the Amended Director Plan (750,000), represent a total fully-diluted overhang of 1,049,590 shares (0.58%) under the Amended Director Plan.
Based on the closing price on the NYSE for our common shares on February 29, 2016 of $2.16 per share, the aggregate market value as of February 29, 2016 of the 750,000 shares requested for issuance under the Amended Director Plan was $1,620,000.00. In 2013, we granted awards under the Nonemployee Directors' Compensation Plan, amended and restated as of December 31, 2008 (the "Predecessor Plan") covering 43,461 shares. In 2014, we granted awards under the Predecessor Plan and the Current Director Plan covering 73,635 shares. In 2015, we granted awards under the Current Director Plan covering 134,656 shares. Based on our basic weighted average common shares outstanding for those three years of 151,725,928, 153,098,005 and 153,230,072, respectively, for the three-year period 2013-2015, our average burn rate, not taking into account forfeitures, was 0.05% (our individual years’ burn rates were 0.03% for 2013, 0.05% for 2014 and 0.09% for 2015).
In determining the number of shares to request for approval under the Amended Director Plan, our management team worked with the Governance Committee to evaluate a number of factors including our recent share usage and criteria expected to be utilized by institutional proxy advisory firms in evaluating our proposal for the Amended Director Plan.
If the Amended Director Plan is approved, we intend to utilize the shares authorized under the Amended Director Plan to continue our practice of incentivizing nonemployee directors through annual equity grants. We currently anticipate that the shares requested in connection with the approval of the Amended Director Plan will last for about 2 years, based on our historic grant rates and the approximate current stock price, but could last for a longer or shorter period of time if actual practice does not match historic rates or our stock price changes materially. As noted in “Amended Director Plan Highlights” and elsewhere below, our Governance Committee would retain full discretion under the Amended Director Plan to determine the number and amount of awards to be granted under the Amended Director Plan, subject to the terms of the Amended Director Plan, and future benefits that may be received by participants under the Amended Director Plan are not determinable at this time.
We believe that we have demonstrated a commitment to thoughtful and responsible equity compensation practices. We recognize that equity compensation awards dilute shareholder equity, so we have carefully managed our equity incentive compensation. Our equity compensation practices are intended to be competitive and consistent with market practices, and we believe our historical share usage has been disciplined and mindful of shareholder interests.
In evaluating this Proposal 2, shareholders should consider all of the information in this Proposal 2.
Amended Director Plan Highlights
Administration. The Amended Director Plan will be administered by the Governance Committee. The Governance Committee may delegate its authority under the Amended Director Plan to a subcommittee.
Reasonable Amended Director Plan Limits. Subject to adjustment as described in the Amended Director Plan, total awards under the Amended Director Plan are limited to 1,050,000 common shares (less one common share for every common share that was issued or transferred on or after January 1, 2014 under the Predecessor Plan), plus any common shares recycled into the Amended Director Plan as described below. These common shares may be shares of original issuance or treasury shares or a combination of the foregoing.
The Amended Director Plan also provides that no participant will be granted in any calendar year common shares or other share-based awards having an aggregate value at the date of grant(s) in excess of $1,000,000.
Limited Share Recycling Provisions. Common shares covered by an award granted under the Amended Director Plan will not be counted as used unless and until they are actually issued and delivered, but the total number of common shares available under the Amended Director Plan as of a given date will not be reduced by any common shares relating to prior awards granted under the Amended Director Plan that have expired or have been forfeited or cancelled. Upon payment in cash of the benefit provided by any award granted under the Amended Director Plan, any common shares that were covered by the applicable portion of such award will again be available for issue or transfer under the Amended Director Plan. If a participant elects to give up the right to receive compensation in exchange for common shares based on fair market value, such common shares will not count against the aggregate share limit under the Amended Director Plan.

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 21

PROPOSAL 2 APPROVE AMENDED AND RESTATED 2014 NONEMPLOYEE DIRECTORS' COMPENSATION PLAN

Change in Control Definition. The Amended Director Plan includes a definition of “change in control.” Generally, unless otherwise prescribed by the Governance Committee in an evidence of award, a change in control will be deemed to have occurred if:
a person or group (excluding certain acquisitions directly from Cliffs, any acquisition by Cliffs, any acquisition by any employee benefit plan or related trust sponsored by Cliffs or an affiliate, or certain acquisitions that do not result in a significant change in ownership or leadership of Cliffs, as further described in the Amended Director Plan) becomes the beneficial owner of 35% or more of either our then outstanding shares of common stock or the combined voting power of our then outstanding securities entitled to vote generally in the election of directors;
individuals who as of the effective date of the Amended Director Plan constituted the entire Cliffs Board cease to constitute at least a majority of the Cliffs Board, unless their replacements are approved as described in the Amended Director Plan;
we consummate a reorganization, merger, statutory share exchange, consolidation or similar transaction, or a sale or other disposition of all or substantially all of our assets, or the acquisition of the assets or securities of another corporation, unless the transaction does not result in a significant change in the ownership or leadership of Cliffs, as further described in the Amended Director Plan; or
our shareholders approve a complete liquidation or dissolution of Cliffs.
Summary of Other Material Terms of the Amended Director Plan
Shares Available Under the Amended Director Plan. Subject to adjustment as provided in the Amended Director Plan, the number of common shares that may be issued or transferred:
as restricted shares and released from substantial risks of forfeiture,
in payment of restricted stock units,
as other awards as provided in the Plan,
in settlement of deferred shares, or
in payment of dividend equivalents
will not exceed in the aggregate 1,050,000 common shares (less one common share for every common share that was issued or transferred on or after January 1, 2014 under the Predecessor Plan), plus any common shares recycled into the Amended Director Plan as described above. These common shares may be shares of original issuance or treasury shares or a combination of the foregoing. As of February 29, 2016, the closing price for our common shares on the New York Stock Exchange was $2.16.
Eligibility. Our nonemployee directors (8 persons as of February 29, 2016) may be granted awards under the Amended Director Plan by the Governance Committee.
Restricted Shares. A grant of restricted shares involves the immediate transfer by us to a participant of ownership of a specific number of common shares in consideration of the performance of services. The participant is entitled immediately to voting, dividend and other ownership rights in such shares, but subject to a substantial risk of forfeiture and restrictions on transfer as described below. The transfer may be made without additional consideration or in consideration of a payment by the participant that is less than fair market value at the date of grant, as the Governance Committee may determine.
Restricted shares must be subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Internal Revenue Code, or the Code, for a period no shorter than one year. Each such grant or sale of restricted shares will provide that during or after the period for which such substantial risk of forfeiture is to continue, the transferability of the restricted shares will be prohibited or restricted in the manner and to the extent prescribed by the Governance Committee at the date of grant. A grant or sale of restricted shares may provide for earlier termination of the restrictions on such restricted shares, including in the event of the termination of service (as described in the Amended Director Plan), death or disability of a participant or in the event of a change in control of Cliffs.
Grants of restricted shares will be evidenced by an evidence of award containing such terms and provisions, consistent with the Amended Director Plan, as the Governance Committee may approve. For purposes of the Amended Director Plan, an “evidence of award” is an agreement, certificate, resolution or other type or form of writing or other evidence approved by the Governance Committee that sets forth the terms and conditions of an award granted under the Amended Director Plan. An evidence of award may be in an electronic medium, may be limited to a notation on the books and records of Cliffs and, unless otherwise determined by the Governance Committee, need not be signed by a representative of Cliffs or the participant. Any grant or sale of restricted shares may require that any or all dividends or other distributions paid with respect to the restricted shares during the period of restriction be automatically deferred and reinvested in additional restricted shares, which may be subject to the same restrictions as the underlying award.
Restricted Stock Units ("RSUs"). A grant of RSUs constitutes an agreement by us to deliver common shares, cash or a combination of common shares and cash to the participant in the future in consideration of the performance of services, but subject to the fulfillment of such conditions during the restriction period as the Governance Committee may specify. During the applicable restriction period, the participant will have no right to transfer any rights under his or her award, no rights of ownership in the common shares deliverable upon payment of the RSUs,

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 22

PROPOSAL 2 APPROVE AMENDED AND RESTATED 2014 NONEMPLOYEE DIRECTORS' COMPENSATION PLAN

and no right to vote such shares. The Governance Committee may, at the date of grant, authorize the payment of dividend equivalents on RSUs on a current, deferred or contingent basis, either in cash or in additional common shares.
RSUs will have a restriction period of at least one year. However, a grant or sale of RSUs may provide for the earlier lapse or other modification of the restriction period, including in the event of a termination of service, death or disability of a participant, or a change in control of Cliffs.
RSUs will be evidenced by an evidence of award containing such terms and provisions, consistent with the Amended Director Plan, as the Governance Committee may approve. Each grant or sale of RSUs may be made without additional consideration or in consideration of a payment by such participant that is less than the fair market value per share of common shares at the date of grant. Each grant or sale of RSUs will also specify the time and manner of payment of the RSUs that have been earned and will specify that the amount payable with respect to such grant will be paid by us in common shares or cash, or a combination of the two.
Other Awards. The Governance Committee may, subject to limitations under applicable law, grant to any participant such other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, common shares or factors that may influence the value of such shares, including, without limitation:
convertible or exchangeable debt securities;
other rights convertible or exchangeable into common shares;
purchase rights for shares;
awards with value and payment contingent upon any other factors designated by the Governance Committee; and
awards valued by reference to the book value of common shares or other Cliffs securities.
The Governance Committee will determine the terms and conditions of the other awards. Shares delivered pursuant to an award in the nature of a purchase right will be purchased for such consideration, paid for at such time, by such methods, and in such forms, including, without limitation, shares, other awards, notes or other property, as the Governance Committee will determine. Cash awards, as an element of or supplement to any other award granted under the Amended Director Plan, may also be granted.
The Governance Committee may grant shares or other awards in lieu of obligations of Cliffs or any of its subsidiaries to pay cash or deliver other property under the Amended Director Plan or under other plans or compensatory arrangements, subject to terms as determined by the Governance Committee in compliance with Section 409A of the Code. Any grant of an other award may provide for the vesting of, or earlier elimination of restrictions applicable to, such award in certain circumstances, including in the event of the termination of Service, death, or disability of the participant, or a change in control of Cliffs.
Deferral Benefits. A participant may elect to defer all or a portion of his or her awards (subject to certain restrictions) by filing a deferral commitment (as described in the Amended Director Plan) with the Governance Committee. By filing such a commitment, the applicable award under the Amended Director Plan will be automatically converted into a number of deferred shares equal to the number of shares subject to the award that the participant has elected to defer, and will be credited to his or her deferred share account (as described in the Amended Director Plan) as of the date on which the award is granted. Until such shares are issued to the participant, he or she will have no voting, dividend, or other ownership rights. Each deferred share account will be credited on each calendar quarter with additional deferred shares equal in value to the amount of cash dividends paid by us during such quarter on a corresponding number of common shares, calculated in accordance with the Amended Director Plan.
A participant will vest in the deferred shares credited to his or her deferred share account, and in any dividends credited under such account that are attributable to those deferred shares, in accordance with the vesting schedule and terms and conditions set forth in the evidence of award documenting the grant of the applicable award that was deferred.
A participant (or in the event of the participant’s death, his or her beneficiary), will be entitled to receive the deferred shares credited to the participant’s deferred share account that are vested on the “settlement date” provided under the Amended Director Plan (generally, the earliest of the participant’s termination of service, the participant’s death, or a qualifying change in control of Cliffs) in a lump sum. However, a participant may elect (at the time the applicable award is initially deferred) to receive such deferred shares in up to three installments in the event that settlement is triggered by termination of service. Any deferred shares that are not vested on the settlement date will be forfeited and the participant will cease to have any rights to such forfeited amount.
At the discretion of the Governance Committee, a participant’s vested deferred shares may be paid in cash in lieu of shares.
Administration. The interpretation and construction by the Governance Committee of any provision of the Amended Director Plan or of any agreement, notification or document evidencing the awards and any determination by the Governance Committee will be final and conclusive. In addition, the Governance Committee is authorized to take any action it determines in its sole discretion to be appropriate subject only to the express limitations contained in the Amended Director Plan, and no authorization in any provision of the Amended Director Plan is intended or may be deemed to constitute a limitation on the authority of the Governance Committee.

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 23

PROPOSAL 2 APPROVE AMENDED AND RESTATED 2014 NONEMPLOYEE DIRECTORS' COMPENSATION PLAN

To the extent permitted by Ohio law, the Governance Committee may delegate to one or more of its members or to one or more of our officers or to one or more agents or advisors, such administrative duties or powers as it may deem advisable, and the Governance Committee, the subcommittee, or any person to whom duties or powers have been delegated, may employ advisers to render advice with respect to any responsibility the Governance Committee, the subcommittee or such person may have under the Amended Director Plan.
Amendments. The Cliffs Board may at any time and from time to time amend the Amended Director Plan in whole or in part. However, if an amendment to the Amended Director Plan:
would materially increase the benefits accruing to participants under the Amended Director Plan,
would materially increase the number of securities which may be issued under the Amended Director Plan,
would materially modify the requirements for participation in the Amended Director Plan, or
must otherwise be approved by our shareholders in order to comply with applicable law or the rules of the New York Stock Exchange (or our applicable securities exchange),
then such amendment will be subject to shareholder approval and will not be effective until such approval has been obtained.
If permitted by Section 409A of the Code, but subject to the terms as described below, including in the case of termination of service as director by reason of death, disability or termination of service (as described in the Amended Director Plan), or in the event of a change in control of Cliffs, if a participant holds:
any restricted shares as to which the substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed,
any RSUs as to which the applicable restriction period has not been completed,
any other awards subject to any vesting schedule or transfer restriction, or
shares subject to any transfer restriction imposed by the Amended Director Plan,
the Governance Committee may, in its sole discretion (subject to certain exceptions), accelerate the time at which:
such substantial risk of forfeiture or prohibition or restriction on transfer will lapse,
such restriction period will end,
such other award will be deemed to have been fully earned, or
when such transfer restriction will terminate.
The Governance Committee may also waive any other limitation or requirement under any such award.
The Governance Committee may amend the terms of any awards granted under the Amended Director Plan prospectively or retroactively. Except in connection with certain corporate transactions described in the Amended Director Plan, no amendment will impair the rights of any participant without his or her consent.
The Cliffs Board may, in its discretion, terminate the Amended Director Plan at any time. Termination of the Amended Director Plan will not affect the rights of participants or their successors under any outstanding awards and not exercised in full on the date of termination.
Transferability. Except as otherwise determined by the Governance Committee, no restricted shares, RSUs or other awards granted under the Amended Director Plan, or dividend equivalents paid with respect to awards made under the Amended Director Plan, or deferred shares will be transferable by the participant except pursuant to a domestic relations order (that contains any information required by us to effectuate the transfer) or by will or the laws of descent and distribution, and in no event shall any such award granted under the Amended Director Plan be transferred for value.
The Governance Committee may provide at the date of grant additional restrictions on transfer for shares issued under certain awards under the Amended Director Plan.
Adjustments. The Governance Committee shall make or provide for such adjustments in the number of shares covered by outstanding restricted shares and RSUs granted under the Amended Director Plan and, if applicable, in the number of shares covered by other awards, the number of deferred shares, and in the kind of stock covered by such awards as the Governance Committee, in its sole discretion, exercised in good faith, may determine is equitably required to prevent dilution or enlargement of the rights of participants that otherwise would result from:
any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of our company;
any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities; or
any other corporate transaction or event having an effect similar to these events or transactions.
Such adjustment shall be conclusive and binding for all purposes with respect to the plan. Moreover, in the event of any such transaction or event or in the event of a change in control of Cliffs, the Governance Committee, in its discretion, may provide in substitution for any or all

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 24

PROPOSAL 2 APPROVE AMENDED AND RESTATED 2014 NONEMPLOYEE DIRECTORS' COMPENSATION PLAN

outstanding awards granted under the Amended Director Plan such alternative consideration (including cash), if any, as it, in good faith, shall determine to be equitable in the circumstances and may require the surrender of all such awards so replaced in a manner that complies with Section 409A of the Code.
The Governance Committee shall also make or provide for such adjustments in the total number of shares available under the Amended Director Plan, the per-person award limits expressed in shares and any other share limits under the Amended Director Plan as the Governance Committee, in its sole discretion, exercised in good faith, may determine is appropriate to reflect any transaction or event described above.
Effective Date and Termination. The Amended Director Plan will be effective as of the date the Amended Director Plan is approved by our shareholders. Outstanding awards granted under the Current Director Plan will continue unaffected following the effective date of the Amended Director Plan.
No grant will be made under the Amended Director Plan after July 29, 2024, which date is 10 years after the date on which our shareholders approved the Current Director Plan, but all grants made on or prior to such date will continue in effect thereafter subject to the terms of the applicable evidence of award and the terms of the Current Director Plan or the Amended Director Plan, as applicable.
Fractional Shares. We will not be required to issue any fractional shares under the Amended Director Plan. The Governance Committee can either eliminate fractional shares for no payment or settle fractional shares in cash.
New Plan Benefits
It is not possible to determine the specific amounts and types of awards that may be awarded in the future under the Amended Director Plan because the grant and actual settlement of awards under the Amended Director Plan are subject to the discretion of the plan administrator.
Federal Income Tax Consequences
The following is a brief summary of some of the federal income tax consequences of certain transactions under the Amended Director Plan based on federal income tax laws in effect. This summary, which is presented for the information of shareholders considering how to vote on this proposal and not for Amended Director Plan participants, is not intended to be complete and does not describe federal taxes other than income taxes (such as Medicare and Social Security taxes), state, local or foreign tax consequences.
Tax Consequences to Participants
Restricted Shares. The recipient of restricted shares generally will be subject to tax at ordinary income rates on the fair market value of the restricted shares (reduced by any amount paid by the participant for such restricted shares) at such time as the common shares are no longer subject to forfeiture or restrictions on transfer for purposes of Section 83 of the Code (the “Restrictions”). However, a recipient may instead elect under Section 83(b) of the Code within 30 days of the date of transfer of the common shares to have taxable ordinary income on the date of transfer of the shares equal to the excess of the fair market value of such common shares (determined without regard to the Restrictions) over the purchase price, if any, of such restricted shares. If a Section 83(b) election has not been made, any dividends received with respect to restricted shares that are subject to the Restrictions generally will be treated as compensation that is taxable as ordinary income to the participant.
RSUs and Deferred Shares. No income generally will be recognized upon the award of RSUs or deferred shares. The recipient of an RSU or deferred share award generally will be subject to tax at ordinary income rates on the fair market value of unrestricted common shares on the date that such shares are transferred to the participant under the award (reduced by any amount paid by the participant for such RSUs or deferred shares), and the capital gains/loss holding period for such shares will also commence on such date.
Registration with the SEC
We intend to file a Registration Statement on Form S-8 relating to the issuance of additional shares under the Amended Director Plan with the SEC pursuant to the Securities Act as soon as practicable after approval of the Amended Director Plan by our shareholders.
The affirmative vote of the holders of a majority of the voting power of our common shares present in person or represented by proxy at the 2016 Annual Meeting and entitled to vote on the Amended Director Plan, voting together as a single class, is required to approve the Amended Director Plan.
The Board of Directors unanimously recommends a vote "FOR" Proposal 2 to approve the Amended and Restated 2014 Nonemployee Directors’ Compensation Plan.


CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 25


 
COMPENSATION DISCUSSION AND ANALYSIS
 
 
In this section of the proxy statement, we discuss in detail our executive compensation program for 2015 for our named executive officers (the "NEOs") consisting of our principal executive officer, our chief financial officers, the next three highest paid executive officers employed as of December 31, 2015, and one other former executive officer who served during 2015 and whose compensation would have qualified him as being among the next three highest paid executive officers had he still been serving as of December 31, 2015. Our NEOs for 2015 are:
Lourenco Goncalves, Chairman, President and Chief Executive Officer (the "CEO").
P. Kelly Tompkins, Executive Vice President and Chief Financial Officer (the "CFO").
Terry G. Fedor, Executive Vice President, United States Iron Ore.
Maurice D. Harapiak, Executive Vice President, Human Resources.
Clifford T. Smith, Executive Vice President, Business Development.
Terrance M. Paradie, former Executive Vice President, CFO and Treasurer. Mr. Paradie resigned from Cliffs on April 1, 2015.
David L. Webb, former Executive Vice President, Global Coal. Mr. Webb's employment with Cliffs ceased on October 31, 2015 as a result of a job elimination.

EXECUTIVE SUMMARY
Our executive compensation programs are designed to attract, motivate and retain highly talented executives who will promote the short- and long-term growth of the Company and create continuous shareholder value. We use performance-based equity awards and other mechanisms to align the long-term interests of our NEOs with those of our shareholders. By utilizing this approach, in down market conditions like we have been facing, our executives typically realize lower total compensation than in more favorable market conditions.
Our employees have been relentless in reducing costs, exiting non-strategic businesses and strengthening our balance sheet while operating our assets in a safe and environmentally responsible way. Consequently, while our annual incentive plan has paid for excellent operating results in this challenging environment, our long-term incentives are tracking below threshold. In addition, we stepped outside our normal equity grant practices in 2015 and made retention grants to a number of our executive team to ensure we retain them through this particularly difficult period.

2015 LEADERSHIP TRANSITIONS
We experienced several NEO transitions during 2015:
Mr. Paradie resigned from his position as Executive Vice President, CFO and Treasurer of the Company to pursue an opportunity with another public company effective April 1, 2015.
Mr. Tompkins, former Executive Vice President, Business Development, replaced Mr. Paradie as Executive Vice President and CFO effective April 1, 2015.
Simultaneously with Mr. Tompkins' appointment as Executive Vice President and CFO, Mr. Smith, the Company's Executive Vice President, Seaborne Iron Ore, was named Executive Vice President, Business Development, and the position previously occupied by Mr. Smith was eliminated.
Mr. Webb's employment with Cliffs as Executive Vice President, Global Coal ceased on October 31, 2015 as a result of a job elimination.
We believe that this realignment of our executive leadership structure repositions our senior team toward our most critical current and future business needs and opportunities. During extraordinary and complex times, the executive leadership team must continue to lead the Company in a progressive and sensible manner to deliver long-term growth and total shareholder return.
As a result of these transitions, our CD&A and the related compensation tables and narratives cover seven NEOs for 2015 and analyze a variety of compensation decisions and actions, some of which were made specifically with regard to these transition events. Not all of the NEOs participated in or received all of the compensation elements described in this CD&A. When discussing each compensation element in this CD&A, we will explain the degree to which each NEO participated or was eligible for the program.
The following discussion focuses primarily on compensation actions taken and decisions made during our 2015 fiscal year, but also contains information regarding compensation actions taken and decisions made both before and after the fiscal year to the extent that such information enhances the understanding of our executive compensation program. It includes a description of the principles underlying our executive

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 26

COMPENSATION DISCUSSION AND ANALYSIS

compensation policies and our most important executive compensation decisions for 2015, and provides analysis of these policies and decisions. The discussion gives context for and should be read together with the data presented in the compensation tables, the footnotes and the narratives to those tables and the related disclosures appearing elsewhere in this proxy statement.

2015 BUSINESS RESULTS
Cliffs Natural Resources Inc. is a leading mining and natural resources company in the United States. Cliffs is a major supplier of iron ore pellets to the North American steel industry from our mines and pellet plants located in Michigan and Minnesota. We also operate an iron ore mining complex in Western Australia. Driven by the core values of safety, social, environmental and capital stewardship, Cliffs' employees endeavor to provide all stakeholders operating and financial transparency. We are the market leading iron ore producer in the United States, supplying differentiated iron ore pellets under long-term contracts to the largest U.S. steel producers. Pricing protections and long-term supply certainty provided by our existing contracts and our low-cost operating profile positions U.S. Iron Ore as our most stable and profitable business. We expect to continue to strengthen U.S. Iron Ore profitability through our operational expertise and disciplined capital allocation policies.
As Cliffs made the strategic shift to become a company fully focused on the U.S. iron ore business, management selected the best exit strategy for the non-core assets to fortify its financial position. An important component of Cliffs’ strategy was the complete divestiture of our North America Coal business. By December 2015, we finalized a transaction to sell Pinnacle and Oak Grove mines in which the buyer assumed substantially all of the liabilities of that business, including those related to reclamation, United Mine Workers of America pensions, and various litigation matters. Cliffs continues to operate its Asia Pacific Iron Ore business, a well-recognized and reliable supplier to steelmakers in Asia. During 2015, Asia Pacific Iron Ore achieved a record year in production and cost reduction. As we approach the end of life of this mine, we are focused on limiting capital expenditures while continuing to endeavor to meet environmental, safety and permission-to-operate requirements. With the deterioration of the seaborne price levels, Cliffs will continue to monitor market conditions with this business.
Within Canada, we initiated formal restructuring proceedings under the Companies’ Creditors Arrangement Act (Canada) (the “CCAA”) for the Bloom Lake and the Wabush mines. Substantial progress was made with these proceedings and, by year-end, an interested party entered into an asset purchase agreement to acquire the Bloom Lake Mine, some mineral claims and related rail assets. In January 2016, the CCAA Court approved the sale of the Bloom Lake Mine, some mineral claims and related rail assets. Under CCAA, we also completed the sale of our Chromite assets in Northern Ontario. We also completed the sale of the Decar Nickel project in British Columbia and the remaining portfolio of exploration projects. These transactions represent very important and final steps in the implementation of our U.S. iron ore pellet-centric strategy.
Within our U.S. Iron Ore business, the demand for pellets from our domestic steel producers was down in 2015. In addition, the price of steel in the U.S. was significantly impacted by record levels of unfairly traded imports into the market, which also has an impact on our realized pricing. Despite these headwinds, we continued to reduce costs quarter-over-quarter and year-over-year for this segment.
During 2015, we developed a highly disciplined corporate and capital expenditure plan with a focus on improving our cost profile and increasing long-term profitability. We reduced our corporate support functions to align the Company’s strategic direction and smaller footprint. We decreased year-over-year selling, general & administrative ("SG&A"), to $110 million from $155 million in 2015. Throughout 2015, the focus was on cost reduction, operating efficiencies and optimizing cash flow drove solid results, despite depressed iron and steel prices. At the operating level, Cliffs achieved improved cost rates across all segments. Our operating teams delivered lower production costs and good operating margins across operations. Full-year capital expenditures and SG&A spending were reduced to levels not seen in many years at Cliffs. Capital expenditures during 2015 were $81 million, down from $284 million in 2014. Most important, the discipline and cost focus of our operating teams did not come at the expense of safety and environmental stewardship.
Despite these intense headwinds from deteriorating pricing in the global iron and steel markets, Cliffs reported adjusted EBITDA of $293 million. This was primarily attributable to the U.S. Iron Ore segment, which reported adjusted EBITDA of $352 million. See Annex B for reconciliation to GAAP of our non-GAAP financial measures. 
For the full year, we recorded a net loss to Cliffs' common shareholders of $788 million, or $5.13 per diluted share, compared with a net loss to Cliffs’ common shareholders of $7.3 billion, or $40.36 per diluted share, in 2014. Our full-year 2015 adjusted net loss from continuing operations attributed to Cliffs' common shareholders was $124 million, or $0.81per diluted share, compared with an adjusted net income of $623 million, or $3.77 per diluted share, in 2014.
Our market capitalization at December 31, 2015 was approximately $242.7 million and our total shareholder return ("TSR"), was negative 78 percent on a year-over-year basis. The main factor contributing to our lower year-over-year share price was the 40 percent decline in the benchmark iron ore price, which opened the year at $72 per ton and ended the year at $43 per ton. This significant price decline was driven by the combination of increased low-cost supply of the commodity as well as softening demand from Chinese steel manufacturers. As a result of our previous strategy, many investors still associate this benchmark as a proxy for the value of the company. With Cliffs’ strategy of focusing on strengthening our U.S. Iron Ore operations, the Company’s profitability is significantly less tied to the benchmark iron ore pricing. As we continue to execute on this strategy, we believe our value will decouple from the value of seaborne iron ore.

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 27

COMPENSATION DISCUSSION AND ANALYSIS


EXECUTIVE COMPENSATION PHILOSOPHY AND CORE PRINCIPLES
The Compensation Committee designed our executive compensation program to help attract, motivate, reward and retain high-performing executives. The goal was to align pay with Cliffs’ performance in the short-term through variable cash compensation based on measures of financial performance and operational and strategic excellence, and over the long-term through stock-based incentives. Our compensation philosophy was to place a significant portion of compensation at risk based on our performance, and increase the portion of compensation that is at risk as the responsibility level of the individual increases, consistent with market practices. The Compensation Committee also sought to balance this performance focus with sufficient retention incentives, including a competitive fixed salary and the use of time-based restricted share units in our long-term incentive program.
Our guiding compensation principles as established by the Compensation Committee for 2015 were as follows:
Align short-term and long-term incentives with results delivered to shareholders.
Design a simple and transparent incentive plan that focuses on absolute performance objectives tied to our business plan (including profitability-related and cost control objectives), relative performance objectives tied to market conditions (including relative TSR, measured by share price appreciation plus dividends, if any), and performance against other key objectives tied to our business strategy (including safety, protection of our core assets and SG&A cost control).
Provide competitive fixed compensation elements over the short-term (base salary) and long-term (equity and retirement benefits) to encourage long-term retention of our key executives.
Continue to structure programs as in prior years to align with corporate governance best practices (for example, such practices include elimination of "gross-ups" related to change in control payments, use of "double-trigger" change in control equity provisions vesting for future equity awards, use of Share Ownership Guidelines and operation of a clawback policy related to incentive compensation for our executive officers).

Relationship between Our Performance and CEO Compensation
Our executive compensation program is designed to strongly align executive compensation with the Company’s financial performance. In 2015, 89% of target total direct compensation for our CEO was variable. Below target performance goals were met under the Company’s annual cash EMPI Plan for 2015, and, therefore, the CEO only received a 86.4% payout. The Company is also not expected to meet the goal for the long-term equity incentive awards granted in 2014 and 2015 to our senior executives, including our NEOs, that have a three-year performance period. Accordingly, in 2015, realized total direct compensation for our CEO was 69% below target reflecting only a partial cash incentive compensation payout. Further, none of the performance-based restricted share units awarded to Mr. Goncalves in 2014 are expected to be earned, and none of the stock options awarded to Mr. Goncalves in 2014 are expected to be exercisable in the near term.
Highlighting the strong alignment between pay and performance, the following chart illustrates our CEO’s actual realized total direct compensation as compared to target total direct compensation over the Company’s last two fiscal years.
(1) For 2014, Mr. Goncalves' base salary was prorated based on his hire date of August 7, 2014.
(2) For 2015, Mr. Goncalves' equity was evaluated using the closing price on December 31, 2015.

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 28

COMPENSATION DISCUSSION AND ANALYSIS

Key Incentive Features of Our Compensation Program for 2015
At the direction of our Compensation Committee, we reward for the achievement of performance and to align compensation with shareholder return. We generally maintained our compensation program for 2014 and did not make significant changes to compensation elements in 2015. Our approach to 2015 compensation was designed to provide our NEOs with a mix of both fixed and variable short-term and long-term compensation that was intended to incentivize and retain our NEOs. Our variable compensation programs were designed to align compensation with short-term and long-term performance. Our annual incentive program tied payouts to the achievement of absolute performance results in the short-term. Our long-term equity incentive program tied payouts to our relative share price performance as compared to other metals and mining companies over the long-term (typically, three-year performance periods) and also provided retention incentives in the form of service-based restricted share units and stock options. More specifically:
Annual Incentive Program: We selected Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") and safety as the performance metrics for the EMPI Plan. In addition:
The 2015 EMPI design for corporate officer positions was to measure corporate and global results and the design for business unit officer positions was to measure business unit results.
We included a minimum EBITDA condition in our EMPI Plan, which means that no bonuses were payable under our EMPI Plan if our corporate EBITDA had been less than $50 million.
The Compensation Committee was permitted (solely by exercising negative discretion) to increase or decrease the final EMPI Plan payout based on its evaluation of an individual's performance for 2015; provided, however, that any such increase did not result in a final EMPI Plan payout in excess of the maximum potential EMPI award.
Long-Term Incentive Program: We granted long-term performance shares that are tied to our relative TSR performance against the SPDR S&P Metals and Mining Exchange Traded Fund over a three-year performance period. We chose TSR as the sole metric for our performance share plan. In addition, we granted service-based restricted share units that vest one-third per year for the next three years and we introduced stock options to reward executives for stock price appreciation that vest at the end of the three-year period.
Retention grants: In 2015, the Compensation Committee reviewed the retention provided by the unvested equity held by our executives and the unlikelihood the outstanding performance based equity would provide value. The Compensation Committee determined that given the significant headwinds facing our industry, it was important that we retain our executive team. Therefore the Compensation Committee approved special retention grants in September 2015. These retention grants are discussed later in this CD&A.

Governance Practices
Over the last several years the Compensation Committee has adopted the following key policies and practices in response to evolving good governance practices in executive compensation and changes in our business and industry:
A policy, effective mid-September 2013, that the vesting of all future equity grants will be subject to "double-trigger" change in control equity acceleration, rather than "single-trigger" acceleration.
An incentive compensation clawback policy applicable to our executive officers was adopted by the Board in November 2012.
Suspension of the performance-based contribution under the 401(k) Savings Plan beginning in fiscal year 2012 and continuing through 2015.
Elimination of tax "gross-ups" on change in control payments related to excise taxes and cash paid in lieu of health and welfare benefits effective January 2012.
Elimination of all industry service credits related to the supplemental retirement plan benefit for all future hires effective April 2012.
A long-standing insider trading policy that prohibits executive officers from profiting from short- and long-term speculative swings in the value of our shares, including, but not limited to, short sales, put and call options, and hedging transactions.
An insider trading policy that also prohibits any officer or director pledging Cliffs' securities.
Retention of an independent compensation consultant to advise the Compensation Committee and keep it apprised of evolving market practices in executive compensation.
Share Ownership Guidelines provide that our officers and directors own a certain dollar amount of our common shares.
An annual Say-on-Pay vote.
Minimal non-compensatory perquisites and benefits for our executive officers.
An annual compensation-related risk review.


CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 29

COMPENSATION DISCUSSION AND ANALYSIS

2015 Say-on-Pay Vote
At our 2015 Annual Meeting of Shareholders on May 19, 2015, 90.7% of our voting shareholders voted in favor of our annual advisory vote on the NEOs' compensation, commonly referred to as "Say-on-Pay". The Compensation Committee believes that the strong support from our shareholders for the Say-on-Pay vote is evidence that the Company's shareholders trust that our pay for performance programs, in certain cases newly implemented in 2015, are effective and are aligned with our shareholders' interests.

OVERSIGHT OF EXECUTIVE COMPENSATION

The Role of the Compensation Committee
The Compensation Committee establishes and administers our executive compensation program, including compensation for our NEOs. The specific responsibilities of the Compensation Committee related to executive compensation include:
Oversight of Compensation Policies and Programs
Oversee development and implementation of Cliffs’ compensation policies and programs for executive officers.
Ensure that the criteria for awards under the EMPI Plan and the 2015 Equity and Incentive Compensation Plan (or its predecessors) are appropriately related to Cliffs’ strategic plan and operating performance objectives.
Make recommendations to the Board with respect to the approval, adoption and amendment of all cash- and equity-based incentive compensation plans in which any executive officer of Cliffs participates.
Review of Executive Officer Performance and Approval of Compensation
At least annually, evaluate the performance of the executive officers and determine and approve such executive officers’ compensation levels, except for the CEO/President.
Approve the compensation level of the CEO/President, subject to ratification by the independent members of the Board.
Determine and measure achievement of corporate and individual goals and objectives for the executive officers under Cliffs’ incentive compensation plans.
Approve stock options and other equity-based awards granted to employees.
Review of Employment and Severance Plans; Assistance in Succession Planning; Review of Candidates
Review and recommend to the Board candidates for election as executive officers, and review and approve offers of employment or employment agreements with such officers.
Review and approve severance or retention plans, and any severance or other termination payments proposed to be made to executive officers.
Assist the Board with respect to management development and succession planning.

The Role of the Executive Officers
The following describes the role of the executive officers in 2015 in the compensation process:
Proposed performance measures and levels for our annual and long-term incentive programs, after reviewing our operational forecasts, key economic indicators affecting our businesses, historical performance, recent trends, and our strategic plans.
Proposed performance measures that they believed to be most important and meaningful to the achievement of our strategic goals.
Proposed what they believed to be the appropriate weighting to give to each factor in the calculation of overall incentive awards, and threshold, target and maximum payout levels appropriate for each of the performance measures we chose.
The Compensation Committee, with the advice of its independent executive compensation consultant, reviews the proposed performance measures and weightings each December. At a subsequent meeting in February, the Compensation Committee reviews and approves threshold, target and maximum payout levels and makes the final determination of what performance measures, weightings and payout levels will be used for each incentive award. The Compensation Committee often directs members of management to work with its independent executive compensation consultant to provide information and otherwise help with the consultant’s analyses. However, the Compensation Committee does not delegate any of its decision making authority to executive officers or other members of management.


CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 30

COMPENSATION DISCUSSION AND ANALYSIS

The Role of the Executive Compensation Consultant
The Compensation Committee initially engaged Pearl Meyer as its independent executive compensation consultant in 2014. The executive compensation consultant reported directly to the Compensation Committee on all work assignments from the Compensation Committee. The Compensation Committee retained the executive compensation consultant directly although, in carrying out its assignments, the consultant also interacted with management when necessary and appropriate. Specifically, members of management interacted with the executive compensation consultant to provide compensation and performance data for individual executives and the Company. In addition, the executive compensation consultant, in its discretion, sought input and feedback from the CEO and other members of management regarding its work product prior to presenting such work product to the Compensation Committee to confirm the work product’s alignment with the Company’s business strategy, determine what additional data needed to be gathered, or identify other issues.
The executive compensation consultant work for the Compensation Committee with respect to 2015 compensation decisions included:
Commenting on the competitiveness of our executive compensation programs;
Providing information about market trends in executive pay practices;
Advising on compensation program design and structure;
Reviewing the relationship between executive compensation and Company performance; and
Assisting in the preparation of our proxy statement.

The Independence of the Executive Compensation Consultant
The Compensation Committee with respect to Pearl Meyer concluded that its compensation consultant is independent and does not have a conflict of interest in its engagement by the Compensation Committee. In making this conclusion, the Compensation Committee considered the following factors confirmed to the Compensation Committee by the compensation consultant:
The executive compensation consultant provides no other services to the Company; it provides only executive and director compensation advisory services to the Compensation Committee;
The executive compensation consultant maintains a conflicts policy to prevent a conflict of interest or other independence issues;
None of the individuals on the executive compensation consultant's team assigned to the engagement has any business or personal relationship with members of the Compensation Committee outside of the engagement;
Neither the individuals on the executive compensation consultant's team assigned to the engagement, nor to our knowledge, the executive compensation firm, has any business or personal relationship with any of our executive officers outside of the engagement;
None of the individuals on the executive compensation consultant's team assigned to the engagement maintains any direct individual position in our shares;
The executive compensation consultant has regular discussions with only the members of the Compensation Committee (or select members of the Compensation Committee) present and when it interacts with management, it is at the Compensation Committee chair’s request and/or with the chair’s knowledge and approval;
None of the individuals on the executive compensation consultant's team assigned to the engagement has provided any gifts, benefits, or donations to us, nor have they received any gifts, benefits, or donations from us; and
The executive compensation consultant is bound by strict confidentiality and information sharing protocols.

Market for Talent
When making decisions regarding the compensation of our NEOs, the Compensation Committee considers information from a variety of sources; the review of survey data as well as detailed proxy analysis of the executive compensation among the members of our comparator group.
The comparator group was based on companies with sales, size and scope reasonably comparable to those of Cliffs. Among other factors, the members of this comparator group are selected because the Company directly or indirectly competes with them for employees, business, capital and/or investors, with a similar range of market capitalization, geographic location, manner of operations, and/or other relevant characteristics.
The Compensation Committee periodically reviews the comparator group to evaluate whether it remains reasonable and appropriate. Although the Compensation Committee plans to review the comparator group again later this year, it last engaged in such a review at its September 2012 meeting. At that meeting, the Compensation Committee’s executive compensation consultant, Semler Brossy, presented a report in which it recommended few changes to the Company’s then-existing comparator group. The Compensation Committee approved those recommended changes. As a result, the Company’s comparator group currently consists of the following companies:

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 31

COMPENSATION DISCUSSION AND ANALYSIS

Cliffs Comparator Group
 
Agrium Inc.
FMC Corporation
Airgas, Inc.
Goldcorp Inc.
Air Products and Chemicals, Inc.
Kinross Gold Corporation
Allegheny Technologies Incorporated
Mosaic Company (The)
Arch Coal, Inc.
Newmont Mining Corporation
Celanese Corporation
Peabody Energy Corporation
CF Industries Holdings, Inc.
Praxair, Inc.
CONSOL Energy Inc.
Teck Resources Limited
Eastman Chemical Company
Vulcan Materials Company

Pay Mix
Since our NEOs are in a position to directly influence our overall performance, a significant portion of their compensation is variable and tied to our short- and long-term performance, in order to align their interests with those of our shareholders. The variable pay components include the annual incentive (cash-based) and long-term incentive (equity-based) awards. For the 2015 fiscal year, the pay mix at target for the CEO and other NEOs is displayed below.
As illustrated in the charts below, 89% of our current CEO’s target total direct compensation, and 78%, on average, of target total direct compensation for our other NEOs, was provided through annual incentives tied to the achievement of short-term performance goals and equity-based incentives that are dependent upon long-term corporate performance and share-price appreciation:

Principal Elements of 2015 Compensation
During 2015, the executive compensation and benefits provided to our NEOs primarily consisted of the components listed in the following table, which provides a brief description of the principal elements of compensation, how performance factors into each type of compensation and the objectives served by each element. These elements are discussed in more detail in the sections that follow.

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 32

COMPENSATION DISCUSSION AND ANALYSIS

Fiscal Year 2015 Principal Compensation Elements
Element
Description
Performance Conditions
Primary Objectives
Base Salary
Fixed cash payment
Based on level of responsibility, experience and individual performance
Attraction and retention
EMPI Plan
Short-term incentive (annual cash payment)
Based on EBITDA and safety metrics
Motivate the achievement of short-term strategic and financial objectives
Retention Payment
Short and long-term incentive (annual cash payment and Restricted Share Units)
Retain key employees
Performance Shares
Long-term incentive (equity-based payment)
Based on TSR relative to a comparator group
Attraction and retention and promotion of long-term strategic and financial objectives and long-term share performance
Restricted Share Units
Long-term retention (equity-based payment)
Value related to share performance
Attraction and retention and promotion of long-term share performance
Stock Options
Long-term incentive (equity-based payment)
Value related to share performance

Attraction and retention and alignment of our employee interests with those of the Company and our shareholders
Retirement and Welfare Benefits
Health and welfare benefits, deferred compensation, 401(k) Company contributions, defined benefit pension participation and supplemental executive retirement plans
Attraction and long-term retention
Executive Perquisites
Financial services and Company-paid parking
Avoid distraction from Cliffs’ duties

ANALYSIS OF 2015 COMPENSATION DECISIONS
Base Salary
The Compensation Committee generally considered the following factors when approving 2015 annual base salaries: market median levels of base pay; individual performance; tenure and experience; retention considerations; the individual’s historical compensation; and internal fairness considerations.
The Compensation Committee reviewed the base salaries of the NEOs and, with the help of Pearl Meyer, determined the following: (1) a merit increase for Mr. Goncalves was considered unwarranted because his current salary was deemed competitive and reasonable compared to competitors; (2) Mr. Fedor's merit increase of 7% was primarily implemented to move his base salary closer to the market median; and (3) the remaining NEOs each received a merit increase of 3%, which was consistent with the merit increase generally applied to the salaried employees of the Company.
 
Effective January 1, 2015 ($)
Percent Change from 2014
Goncalves
1,200,000
0%
Tompkins
537,000
3%
Fedor
402,000
7%
Harapiak
372,000
3%
Smith
402,000
3%
Paradie
519,000
3%
Webb
402,000
3%

Annual Incentive Program
Our EMPI Plan provides an opportunity for our NEOs to earn an annual cash incentive based on our financial performance relative to business plans and achievement against key corporate objectives. The objective of the EMPI Plan is to provide our NEOs with a competitive annual cash compensation opportunity while aligning actual pay results with Cliffs’ short-term financial and strategic performance. Target annual incentives generally are positioned at or above market median; thus, when combined with salaries generally at median, the total target cash compensation opportunity for our NEOs generally is positioned at or above market median on average. The positioning of individual NEOs may vary from this general target based on the factors described above.
2015 EMPI Plan Award Opportunities. In March 2015, for each NEO who was serving at such time, the Compensation Committee established a threshold, target and maximum EMPI Plan opportunity, expressed as a percentage of base salary. Actual incentive payouts below maximum

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 33

COMPENSATION DISCUSSION AND ANALYSIS

funding levels were determined under a weighted scoring system, with the scoring of each performance metric expressed as a percentage of the maximum payout, subject to the Compensation Committee discretion. The target level of overall performance would produce a payout equal to 50% of the total maximum award, and an overall scoring at the threshold level would produce a payout equal to 25% of the maximum award. Performance below threshold would result in a payout of zero for the relevant factor.
EMPI Plan award opportunities (expressed as a percentage of base salary) approved for each of the NEOs on March 26, 2015 were as follows:
 
EMPI Plan Award Opportunities
 
Threshold
Target
Maximum
Goncalves 
100%
200%
400%
Tompkins
40%
80%
160%
Fedor
40%
80%
160%
Harapiak
40%
80%
160%
Smith
40%
80%
160%
Paradie
40%
80%
160%
Webb
40%
80%
160%
2015 EMPI Plan Underlying Performance Measures. The EMPI Plan uses an underlying “performance scorecard” with multiple performance standards that are related to Cliffs' financial metrics and safety for 2015. Cliffs believes that a significant portion of our NEOs’ potential compensation should be dependent on our business results as well as our NEOs’ successful leadership.
The underlying performance metrics for our corporate employees are based on our corporate and global results, while the underlying performance metrics for our business unit employees are measured by their business unit results.
2015 EMPI Plan Target Setting and 2015 Results. Performance targets and ranges under the EMPI Plan were established and approved by the Compensation Committee in the first quarter of 2015, taking into consideration management's financial plans for the current year. Each performance element was assigned a minimum threshold level, a target level and a maximum level, representing attainment of 25%, 50% and 100%, respectively, of the EMPI Plan maximum award opportunity associated with that element. For performance below the minimum threshold performance requirement for each metric, funding would be zero percent for that factor.
As a top level performance metric, the EMPI Plan included a minimum EBITDA condition, which meant that no amounts were payable under our EMPI Plan if our corporate EBITDA had been less than $50 million.
For 2015, at the direction of the Compensation Committee, we implemented new executive compensation programs to provide better alignment between the interests of our NEOs with those of our shareholders. These changes were in direct response to shareholder concerns, some of which were expressed in public filings by Casablanca Capital prior to the 2014 Annual Meeting. For our annual incentive plan, we simplified the EMPI by reducing the number of performance metrics from five to two. These two performance metrics are EBITDA and safety. The Compensation Committee believes that focusing on EBITDA is in the best long-term interest of shareholders while emphasizing the importance of operating in a safe manner by incorporating a safety measure into the plan.
The specific elements, respective weightings and funding results for the underlying metrics were as follows:
2015 EMPI - Corporate
 
 
 
 
 
 
EMPI Plan Performance Metric
Threshold
50%
Target
100%
Maximum
200%
Corporate/Global Weighting (%)

2015 Actual

2015 Funding

Corporate EBITDA (USD $ in millions)
$223.00
$323.00
$490.00
90.0
%
$292.90
76.4
%
2015 Safety Scorecard
150 - 175 points
176 - 249 points
250+ points
10.0
%
242

10.0
%
 
Total
100.0
%
 
86.4
%

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 34

COMPENSATION DISCUSSION AND ANALYSIS

2015 EMPI - United States Iron Ore
 
 
 
 
 
 
EMPI Plan Performance Metric
Threshold
50%
Target
100%
Maximum
200%
Business Unit Weighting (%)

2015 Actual

2015 Funding

Corporate EBITDA (USD $ in millions)
$223.00
$323.00
$490.00
50.0
%
$292.90
42.5
%
United States Iron Ore EBITDA (USD $ in millions)
$446.00
$486.00
$526.00
40.0
%
$384.70
%
2015 Safety Scorecard
150 - 175 points
176 - 249 points
250+ points
10.0
%
242

10.0
%
 
Total
100.0
%
 
52.5
%
Total annual incentives for 2015 under the EMPI Plan were paid in the amounts set forth in the following table to the NEOs:
 
EMPI Plan Payout ($)

Goncalves
2,073,600

Tompkins
371,174
Fedor
277,862

Harapiak
257,126
Smith
277,862

Paradie (1)

Webb (1)

(1)
Messrs. Paradie and Webb forfeited the EMPI award upon their terminations in 2015.

Long-Term Incentive Program
The objectives of our long-term incentive program are to reward our NEOs for sustained performance over multiple years, to enhance retention of NEOs by delaying the vesting of awards and, when compensation is realized, to align the long-term interests of our NEOs with those of our shareholders. For long-term incentive awards, we have historically used performance shares and restricted share units to reward and retain executives. In 2015, we introduced stock options to reward executives for stock price appreciation. The performance share, restricted share units and stock options are denominated and payable in Cliffs’ common shares in order to align the interests of our executives with our shareholders through direct ownership.
Each year, we establish a target long-term incentive award opportunity for each NEO as a pre-determined percentage of base salary based on market competitive practices and internal equity considerations. In general, the Compensation Committee sought to position target long-term incentive opportunities at or above the median of market for equivalent roles so that, in combination with base salaries near median, and at or above market annual incentive targets, the total target compensation opportunity for our NEOs is generally above the median of market on average. Actual positioning may vary from this target for NEOs based on the factors described above. In addition, actual awards to each NEO may vary from the target established for each role, based on the CEO’s assessment of individual performance in the case of grants made to NEOs other than the CEO, and based on the Board’s assessment of the CEO’s performance in the case of grants made to the CEO.
Administrative Process. Long-term incentive awards for NEOs are granted annually on the date of the Compensation Committee’s approval or a later date as set by the Compensation Committee. Grants for new or newly promoted NEOs or for long-term retention are approved by the Compensation Committee at the next regularly scheduled Compensation Committee meeting following the hire or promotion date or in a special meeting, as needed. The grant date for new hire or promotion-related awards is the date of such approval or such later date as the Compensation Committee determines. We do not time grants to coordinate with the release of material non-public information. Beginning in 2014, all NEOs grants were awarded under the 2012 Incentive Equity Plan or the Amended and Restated 2012 Incentive Equity Plan. Additional grants awarded after our 2015 Annual Meeting were made under the 2015 Equity and Incentive Compensation Plan (which was approved by our shareholders at the 2015 Annual Meeting). Effective March 1, 2015, payments of accrued dividends were eliminated for certain equity grants awarded under the 2012 Incentive Equity Plan, the Amended and Restated 2012 Incentive Equity Plan and the 2015 Equity and Incentive Compensation Plan.
Performance Shares. In 2015, performance shares comprised one-third of the total target annual long-term incentive grant. A performance share granted in 2015 provides an opportunity to earn common shares based on our performance over a three-year period, with potential funding between zero and 200% of the target grant depending on the level of attained performance. We use performance shares to reward for share price performance relative to industry conditions, taking into consideration TSR, as compared to comparator companies’ returns in the metals and mining industries (performance share comparator companies identified below).

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 35

COMPENSATION DISCUSSION AND ANALYSIS

The calibration of the pay-for-performance relationship for 2015 grants is as follows and payout is interpolated for performance between threshold, target and maximum levels:
 
 
Performance Level
Performance Factor
Weight
Below Threshold
Threshold
Target
Maximum
Relative TSR
100%
Below 35th percentile
35th percentile
55th percentile
75th percentile
Payout
 
—%
50%
100%
200%
2015 - 2017 Performance Share Comparator Group. The comparator group used for the performance share awards is comprised of the constituent companies in the SPDR S&P Metals and Mining ETF on the last trading day of the three-year performance period, which ends on December 31, 2017. As of December 31, 2015, the index included the following companies:
AK Steel Holding Corporation
Freeport-McMoRan, Inc.
Royal Gold, Inc.
Alcoa Inc.
Haynes International, Inc.
Schnitzer Steel Industries Inc.
Allegheny Technologies Incorporated
Hecla Mining Company
Steel Dynamics, Inc.
Carpenter Technology Corporation
Kaiser Aluminum Corporation
Stillwater Mining Company
Coeur Mining, Inc.
Materion Corporation
TimkenSteel Corporation
Commercial Metals Company
Newmont Mining Corporation
United States Steel Corporation
Compass Minerals International, Inc.
Nucor Corporation
Worthington Industries, Inc.
CONSOL Energy Inc.
Reliance Steel & Aluminum Co.

 
The performance comparator group focuses on steel, metals and commodity mineral mining companies that generally will be affected by the same long-term market conditions as those that affect us. The Compensation Committee evaluates this comparator group for each new cycle of the performance share program based on recommendations made by its compensation consultant and makes adjustments as needed based on changes in the industry makeup and relevance of our specific comparators. The performance comparator group used to assess performance for performance share grants is not the same as the comparator group used to assess the competitiveness of our compensation, because the latter is limited to those companies who are similar in revenue and industry. As discussed above, for purposes of measuring relative TSR performance, we utilized a broader comparator group than that used for compensation benchmarking that was not determined solely by size or location.
Restricted Share Units. Restricted share units are earned based on continued employment and are retention-based awards. A restricted share unit award vests one-third each year following the date of grant, and is payable in our common shares. Restricted share units comprised one-third of the total annual long-term incentive grant for our NEOs in 2015.
Stock Options. Stock options are earned based on continued employment with the Company. A stock option award vests in full at the end of the same three-year period used for the performance shares, and if a vested option is exercised it is exercisable for our common shares. Stock options comprised one-third of the total annual long-term incentive grant for our NEOs in 2015.
2015 - 2017 Performance Share, Restricted Share Unit and Stock Option Grants. On January 12, 2015, the Compensation Committee approved target awards (expressed as a percentage of base salary) of performance share, restricted share unit and stock option awards under the Amended and Restated 2012 Incentive Equity Plan for our NEOs. The number of shares subject to the awards granted to each NEO was determined by dividing the total grant values by the 60-day average closing price of our common shares ending on the date of grant ($8.55 for grants made in 2015). The use of the 60-day average price to calibrate the number of shares granted limits the potential to grant an unusually high or low number of shares due to an exceptionally low or high share price on the date of the grant. The following amounts of performance shares, restricted share units and stock options, granted at the closing share price of $7.70 per share on January 12, 2015, the date of grant, were awarded to our NEOs for the 2015 - 2017 period:
 
Target %

Total Grant Value ($)
Target Performance Shares (#)
Restricted Share Units (#)
Stock Options (#)
Goncalves
400
%
4,322,857
187,137
187,137
187,136
Tompkins
175
%
846,384
36,640
36,640
36,640
Fedor
175
%
633,633
27,430
27,430
27,430
Harapiak
175
%
586,355
25,383
25,383
25,384
Smith
175
%
633,633
27,430
27,430
27,430
Paradie
175
%
817,971
35,410
35,410
35,410
Webb
175
%
633,633
27,430
27,430
27,430

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 36

COMPENSATION DISCUSSION AND ANALYSIS


Special Retention Program
2015 Cash and Restricted Share Unit Grants. On September 10, 2015, the Compensation Committee approved special retention awards of cash and restricted share units for certain of our NEOs. The objective of these awards were to provide Cliffs' executives and other key management employees with a meaningful financial incentive to drive Company performance and remain with Cliffs through the critical challenges of the next few years. Retention has become a significant priority as Cliffs looks to the future for growth potential and the ability to deliver value to our shareholders.  It is critical for Cliffs to retain the knowledge and experience of our executives and key management employees during this turbulent time. For this reason, it is our objective to attract and retain the best talent available and to invest in those individuals who can deliver long-term productivity.
The program was developed with a significant cash component to achieve maximum financial impact and certainty of value for participants but also to limit shareholder dilution and pressure on the share pool available for employee share participation. The program's cash component will be paid after the 2016 accounting year end (projected at the end of February 2017) and the restricted share units will vest in December 2017. The special retention award equals the value of the NEOs' incentive targets: cash is valued at 100% of their annual EMPI Plan target, plus 50% of the annual long-term incentive target and the restricted share units are valued at 50% of their annual long-term incentive target.
In determining the size of the retention grants, the Compensation Committee considered the following factors: (1) the individual’s importance to the success of the Company; (2) the amount of unvested equity held by the individual; (3) the likelihood of realizable value from the outstanding equity awards; and (4) the individual’s annual and long-term incentive opportunities. In addition, the Compensation Committee asked the compensation consultant to review retention grants made by other companies facing similar market conditions to ensure the reasonableness of the grants.
The following amounts of cash and restricted share units, granted at the closing share price of $4.06 per share on September 10, 2015, the date of grant, were awarded to our NEOs:
 
Total Award Value ($)

Cash Award ($)
Restricted Share Units (#)
Restricted Share Units ($)
Goncalves
7,223,240

4,650,000
633,803
2,573,240
Tompkins
1,436,906

899,500
132,366
537,406
Fedor
1,075,635

673,350
99,085
402,285
Harapiak
995,361

623,100
91,690
372,261
Smith
1,075,635

673,350
99,085
402,285
Paradie (1)




Webb (2)




(1)
Mr. Paradie resigned in April 2015 and therefore was not eligible for the program.
(2)
The Compensation Committee did not recommend an award for Mr. Webb due to the probability of his job elimination.

RETIREMENT AND DEFERRED COMPENSATION BENEFITS
Defined Benefit Pension Plan
We maintain a defined benefit pension plan for all U.S.-based employees (the "Pension Plan"), and a Supplemental Executive Retirement Plan (the "SERP"), in which all of the NEOs are eligible to participate following one year of service. The Compensation Committee believed that pension benefits are a typical component of total benefits for employees and executives at companies in industries similar to ours, and that providing such benefits is important to delivering a competitive package to attract and retain employees. The objective of the SERP is to provide benefits above the statutory limits for qualified pension plans for highly paid executives. Additional detail is shown in the 2015 Pension Benefits Table below.
401(k) Savings Plan
Our U.S.-based employees, including our NEOs, are eligible to contribute up to 35% of their base salary under our 401(k) Savings Plan. Annual pre-tax contributions are limited by Internal Revenue Service regulations. For the 2015 calendar year, employee pre-tax contributions were limited to $18,000 ($24,000 for persons age 50 or older). We match 100% of employee contributions up to the first three percent, and 50% for the next two percent of contributions. We believe our 401(k) match is competitive and necessary to attract and retain employees.

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 37

COMPENSATION DISCUSSION AND ANALYSIS

Deferred Compensation Plan
Under the 2012 NQDC Plan, the NEOs and other senior executives, are permitted to defer, on a pre-tax basis, up to 50% of their base salary and all or a portion of their annual incentive under the EMPI Plan. The Compensation Committee believed the opportunity to defer compensation is a competitive benefit that addresses the goal of attracting and retaining talent.
Deferrals earn interest at the Moody’s Corporate Average Bond Yield, which was approximately 3.95% for 2015, or any mutual investment option provided in the 401(k) Savings Plan for U.S. salaried employees. Additionally, the 2012 NQDC Plan provides for an annual supplemental matching contribution. The amount of the supplemental matching contribution is equal to what the NEO would have received as matching contributions in the 401(k) Savings Plan without regard to the applicable Internal Revenue Code limits for 2015.
Other Benefits
Our other benefits and perquisites for senior executives, including our NEOs, are limited to Company-paid parking, executive physicals, fitness facility reimbursement and personal financial services. The Compensation Committee believed that these benefits will prevent distraction from duties as an executive officer and encourage the health and well-being of our executive leadership team. Due to the location of our corporate offices, we provide Company-paid parking to corporate employees in mid- to upper-level management positions and executive officers. These benefits are disclosed below in the 2015 Summary Compensation Table under “All Other Compensation” and described in footnote 8.

SUPPLEMENTARY COMPENSATION POLICIES
Cliffs uses several additional policies to ensure that our overall compensation structure is aligned with shareholder interests and is competitive with market practices. Specific policies include:
Stock Ownership Guidelines
Our Board adopted Share Ownership Guidelines to ensure that senior executives, including our NEOs, have a meaningful direct ownership stake in Cliffs and that the interests of executives thereby are aligned with our shareholders. Our guidelines provide that senior executives, including our NEOs, own the dollar value of shares at least equal to the respective multiple times their base salary. To be compliant, each executive has five years from the time he or she is appointed to his or her officer position to satisfy the Share Ownership Guidelines. The guidelines are as follows:
 
Multiple of Base Pay
CEO
6x
Executive / Senior Vice President
3x
Vice President
1.5x
Effective October 27, 2015, the senior executives, including our NEOs, must hold 50% of their “net profit shares” (the shares remaining after deducting the number of shares required to be sold in order to pay tax obligations) from their vested restricted share units until the senior executives has met the ownership guideline. Currently, none of the NEOs are in compliance with our guidelines, but all are projected to be within the five-year period.
Change in Control Severance Agreements
Effective as of January 1, 2014, the Compensation Committee approved, and we entered into, new change in control severance agreements with all of our NEOs in service at such time. We also entered into a change in control severance agreement with Mr. Goncalves on September 11, 2014. The Compensation Committee believes that such agreements support the goals of attracting and retaining highly talented individuals by clarifying the terms of employment and reducing the risks to the NEO in situations where the NEO believes, for example, that we may engage in a merger, be acquired in a hostile tender offer or be involved in a proxy contest. In addition, the Compensation Committee believes that such agreements align the interests of NEOs with the interests of our shareholders if a qualified offer is made to acquire Cliffs, in that each of our NEOs would likely be aware of or involved in any such negotiation and it is to the benefit of our shareholders to have NEOs negotiating in the shareholders’ best interests without regard to the NEOs' personal financial interests. The level of benefits under these agreements was determined consistent with market practices at the time that the agreements were established. The agreements generally provide for the following change in control benefits (see accompanying narrative below for more details):
For grants made prior to mid-September 2013, automatic vesting of unvested equity incentives upon a change in control; however, for grants made on or after mid-September 2013, equity grants that are replaced, assumed or continued after the change in control will vest only upon a qualifying termination of employment following the change in control;

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 38

COMPENSATION DISCUSSION AND ANALYSIS

Depending on position, two or three times annual base salary and target annual incentive as severance upon termination (within 24 months) following the change in control, and, under certain circumstances, continuation of welfare benefits for two or three years, depending on position; and
Non-competition, confidentiality and non-solicitation restrictions on NEOs who receive severance payments following the change in control.
The change in control severance agreements that were in effect through December 31, 2013 with our NEOs serving at such time had been amended to eliminate (1) "gross-ups" relating to excise taxes following a change in control and tax "gross-ups" relating to cash payments in lieu of certain health and welfare benefits and (2) industry service credits related to the supplemental retirement plan benefit provided upon termination after a change in control were eliminated.
Severance Agreement and Release - Webb. Mr. Webb's job was eliminated with the Company as its EVP, Global Coal, effective October 31, 2015. He received the following separation payment ($1,782,555) in exchange for his general release of claims and non-solicitation, non-disclosure and non-disparagement undertakings:
An amount equal in value to 24 months of base salary ($804,000);
An amount equal in value to two times his target bonus under the EMPI Plan ($643,200);
Accrued benefits under the Cliffs Defined Benefit Pension Plan and SERP ($238,563);
Accrued but unused vacation ($16,492);
Outplacement services ($60,300); and
Financial planning perquisites ($20,000).
Severance Agreement and Release - Paradie. Mr. Paradie resigned from his position as Executive Vice President, CFO and Treasurer of the Company to pursue an opportunity with another public company effective April 1, 2015. He received the following separation payment ($73,192) in exchange for his general release of claims and non-solicitation, non-disclosure and non-disparagement undertakings:
An amount equal to 1 month of base pay ($43,250); and
Accrued but unused vacation ($29,942).
Please see footnote 8(e) and 8(f) of the 2015 Summary Compensation Table for more information regarding Mr. Webb's and Mr. Paradie's separation-related payments, benefits and arrangements, including assumptions used in estimating these amounts.

Certain Material Tax and Accounting Implications
Section 162(m) of the Internal Revenue Code generally disallows a federal income tax deduction to public companies like Cliffs for compensation in excess of $1 million paid to the CEO and to each of the three other most highly compensated executive officers (other than, generally, the CFO) in any taxable year. However, compensation that qualifies as “performance-based compensation” under Section 162(m) of the Internal Revenue Code may be excluded from this $1 million limit. Our 2012 EMPI Plan and the 2015 Equity and Incentive Compensation Plan are intended to permit us to grant certain awards that may be able to qualify as “performance-based compensation” for purposes of Section 162(m) of the Internal Revenue Code. However, some grants of equity-based awards under these equity plans and some awards under the 2012 EMPI Plan may not qualify as “performance-based compensation” for purposes of Section 162(m) of the Internal Revenue Code under certain circumstances. While the Compensation Committee considers the deductibility of the compensation it awards, it retains the flexibility to award compensation that is consistent with our objectives and philosophy even if it does not qualify for a tax deduction. The Compensation Committee believes that the tax deduction limitation should not be permitted to compromise our ability to design and maintain executive compensation arrangements that will attract and retain the executive talent to compete successfully. Accordingly, achieving the desired flexibility in the design and delivery of compensation may result in compensation that in certain cases is not deductible for federal income tax purposes, and it is possible that awards intended to qualify as “performance-based compensation” may not so qualify. Moreover, even if the Compensation Committee intends to grant compensation under the 2012 EMPI Plan, the 2015 Equity and Incentive Compensation Plan and the Amended and Restated 2012 Incentive Equity Plan that qualifies as “performance-based compensation” for purposes of Section 162(m) of the Internal Revenue Code, we cannot guarantee that such compensation will so qualify or ultimately will be deductible.


CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 39



 
COMPENSATION COMMITTEE REPORT
 
 
The following report has been submitted by the Compensation and Organization Committee of the Board:
The Compensation and Organization Committee of the Board has reviewed and discussed the Company’s Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation and Organization Committee recommended to the Board that the Compensation Discussion and Analysis be included in the definitive proxy statement on Schedule 14A for Cliffs’ 2016 Annual Meeting and in Cliffs’ Annual Report on Form 10-K for the year ended December 31, 2015, each as filed with the Securities and Exchange Commission.
This report is furnished on behalf of the Compensation and Organization Committee of the Board of Directors.
Robert P. Fisher, Jr., Chair
Joseph A. Rutkowski, Jr.
Douglas C. Taylor

 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
 
None of the individuals who served as members of the Compensation Committee in 2015 were or have been an officer or employee of ours or engaged in transactions with us (other than in his capacity as director).
None of our executive officers serves as a director or member of the Compensation Committee of another organization whose executive officers serve as a member of either our Board or our Compensation Committee.

 
COMPENSATION-RELATED RISK ASSESSMENT
 
 
In 2015, the Risk Management and Human Resources Departments reviewed existing policies and plan design features within the framework of employee compensation plans in which employees (including the NEOs) participate in order to identify whether these arrangements had any design features that might encourage unnecessary and excessive risk taking that would have a material adverse effect on Cliffs. The review team analyzed a series of risk factors and concluded that the risk mitigation features in our compensation policies and plans, including pay mix (variable versus fixed and short-term versus long-term), multi-year performance periods, incentive compensation clawbacks and Share Ownership Guidelines, provide adequate safeguards to either prevent or discourage excessive risk taking. The review team did not identify any risk within the framework of our compensation policies and plans for our NEOs and our employees generally that are, either individually or in the aggregate, reasonably likely to have a material adverse effect on Cliffs. The Compensation Committee received a report summarizing the work of the review team and concurs with this conclusion.


CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 40


 
EXECUTIVE COMPENSATION
 
 
EXECUTIVE COMPENSATION TABLES

2015 Summary Compensation Table
The following table sets forth the compensation earned by our NEOs for services rendered to Cliffs and our subsidiaries for the fiscal years ended December 31, 2015, 2014 and 2013 (as applicable).
Name and Principal Position(a)
Year (b)
Salary ($)
(2)(3) (c)

Bonus ($) (d)

Stock Awards ($) (4) (e)

Option Awards ($) (5) (f)

Non-Equity Incentive Plan Compensation
($) (1)(6) (g)

Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (7) (h)

All Other Compensation
($) (8) (i)

Total ($) (j)

Lourenco Goncalves
Chairman, President & CEO (1)
2015
1,200,000


6,177,499

1,440,947

2,073,600

133,502

88,260

11,113,808

2014
482,308

1,200,000

4,244,000

3,457,500



93,334

9,477,142

 
 
 
 
 
 
 
 
 
P. Kelly Tompkins
EVP & CFO
2015
537,000


1,243,092

282,128

371,174

72,987

27,055

2,533,436

2014
513,750


838,310


499,000

201,850

199,087

2,251,997

2013
484,125


1,091,597


364,241

5,738

39,566

1,985,267

Terry G. Fedor
EVP, United States Iron Ore
 
 
 
 
 
 
 
 
 
2015
402,000


930,587

211,211

277,862

42,800

19,934

1,884,394

 
 
 
 
 
 
 
 
 
Maurice D. Harapiak
EVP, Human Resources
 
 
 
 
 
 
 
 
 
2015
372,000


861,137

195,457

257,126

67,400

87,976

1,841,096

 
 
 
 
 
 
 
 
 
Clifford T. Smith
EVP, Business Development
2015
402,000


930,587

211,211

277,862

35,000

31,646

1,888,306

2014
385,000


1,061,179


312,000

196,625

989,675

2,944,479

 
 
 
 
 
 
 
 
 
Terrance M. Paradie
Former EVP, CFO & Treasurer
2015
131,746


681,997

272,657



77,855

1,164,255

2014
488,750


1,374,077


404,000

185,728

215,695

2,668,250

2013
415,000


432,452


269,808

68

39,326

1,156,654

David L. Webb
Former EVP, Global Coal
2015
335,000


528,302

211,211


141,625

1,790,684

3,006,822

2014
387,500


1,061,179


312,000

106,851

865,927

2,733,457

 
 
 
 
 
 
 
 
 
(1)
CEO Reported Pay vs. Realized Pay:
It is important to note that the grant date fair value of the stock and option awards (both time-based and performance-based vesting) as set forth in our 2015 Summary Compensation Table above is for accounting and SEC disclosure purposes and is not realized pay for the indicated year. The table below shows the pay Mr. Goncalves realized for the past two years in contrast to the reported pay presented in the 2015 Summary Compensation Table. The difference between reported pay and realized pay reinforces the concept that a significant portion of Mr. Goncalves' compensation is at risk of forfeiture and dependent on the performance of the Company.
Year of Compensation
Reported Pay
($)(a)
Realized Pay
($)(b)
Realized Pay as a Percentage of Reported Pay (%)
2015
10,892,046
3,503,828
32.17%
2014
9,383,808
1,682,308
17.93%
(a)
Reported Pay includes salary, bonus, stock and option awards, and non-equity incentive compensation.
(b)
Realized Pay is compensation actually received by Mr. Goncalves during the indicated fiscal year, consisting of salary, bonus, annual incentive received, net spread on stock option exercises, and market value at vesting of previously granted stock and option awards . Excludes the value of any unearned and unvested stock and option awards, including performance shares, which will not actually be received, if earned, until a future date.    
(2)
2015 amounts in columns (c) and (g) reflect the salary and non-equity incentive plan compensation for each NEO, respectively, before pre-tax reductions for contributions to the 401(k) Savings Plan, the 2012 NQDC Plan and certain other benefit plans.

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 41

EXECUTIVE COMPENSATION

(3)
The 2015 salary of the NEOs includes their base salary before the employees’ contribution to the 401(k) Savings Plan. Messrs. Tompkins, Fedor, Harapiak, Smith, Paradie and Webb received a salary increase effective January 1, 2015.
The following table summarizes salary contributions for the 401(k) Savings Plan for NEOs in 2015:
 
401(k) Contribution ($)

Catch-Up Contribution ($)

Total ($)

Goncalves
18,000

6,000

24,000

Tompkins
18,000

6,000

24,000

Fedor
18,000

6,000

24,000

Harapiak
18,000

6,000

24,000

Smith
18,000

6,000

24,000

Paradie
9,222


9,222

Webb
18,000

6,000

24,000

(4) (5)
The 2015 amounts in columns (e) and (f) reflect the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, for awards of performance shares, restricted share units and stock options, as applicable, granted during 2015. For performance shares granted during 2015, the amounts reported are based on the probable outcome as of the grant date. For additional information, refer to Item 8, Note 8 in our Annual Report on Form 10-K for the year ended December 31, 2015. These types of awards are discussed in further detail in “Compensation Discussion and Analysis - Analysis of 2015 Compensation Decisions", under the sub-headings “2015 - 2017 Performance Share, Restricted Share Unit and Stock Option Grants” and "Special Retention Program".
The table below shows the grant date fair values for the performance shares granted to our NEOs on January 12, 2015, assuming a maximum payout of 200% and using a grant date fair value, computed in accordance with FASB ASC Topic 718, of $11.56 per share.
 
Maximum Fair Value of 2015-2017 Performance Shares ($)

Goncalves
4,326,607

Tompkins
847,117

Fedor
634,182

Harapiak
586,855

Smith
634,182

Paradie
818,679

Webb
634,182


(6)
The 2015 amounts in column (g) reflect the incentive awards earned in 2015 under the EMPI Plan, which is discussed in further detail in “Compensation Discussion and Analysis - Analysis of 2015 Compensation " under the sub-heading “Annual Incentive Plan.”
(7)
The 2015 amounts in column (h) reflect the actuarial increase in the present value of the NEO’s benefits under the Pension Plan and the SERP, both of which are discussed in “Compensation Discussion and Analysis - Retirement and Deferred Compensation Benefits” under the sub-heading “Defined Benefit Pension Plan,” determined using interest rate and mortality assumptions consistent with those used in our financial statements and may include amounts in which the NEO is not fully vested. The present value of accumulated pension benefits for the NEOs generally increased from December 31, 2014 to December 31, 2015. This is primarily the result of the one additional year of benefit accruals earned under the qualified and nonqualified pension plans. This column also includes amounts for above-market interest for the NEOs’ balances in the 2012 NQDC Plan.
The following table summarizes changes in pension values and above-market earnings on deferred compensation in 2015:
 
Present Value of Pension Accruals ($)

Above-Market Interest
on Deferred Compensation ($)

Total ($)

Goncalves
133,500

2

133,502

Tompkins
72,900

87

72,987

Fedor
42,800


42,800

Harapiak
67,400


67,400

Smith
35,000


35,000

Paradie (a)



Webb
141,557

68

141,625

(a)
Mr. Paradie had a decrease in the present value of pension accruals of negative $19,134.


CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 42

EXECUTIVE COMPENSATION

(8)
The 2015 amounts in column (i) reflect the combined value of the NEOs' perquisites or the benefits attributable to our paid parking, fitness reimbursement program, financial services, dividends paid or accrued on equity holdings, matching contributions made on behalf of the executives under the 401(k) Savings Plan, and the 2012 NQDC Plan.
The following table summarizes perquisites and other compensation in 2015:
 
Paid Parking ($)

Fitness Reimbursement Program ($)

Executive Physicals ($)

Financial Services ($)

Dividends and Accrued Dividends ($) (a)

401(k) Savings Plan Matching Contributions ($)

NQDC Plan Matching Contributions ($)

Other ($)

 
Total ($)

Goncalves
3,480


1,765

6,500


10,600

13,400

52,515

(b)
88,260

Tompkins
3,480

300


1,875


10,600

10,800


 
27,055

Fedor
3,480

300




10,600

5,480

74

(c)
19,934

Harapiak
3,480

600


9,978


10,600

4,280

59,038

(d)
87,976

Smith
3,480

300

1,786

10,000


10,600

5,480


 
31,646

Paradie
1,160



3,344




73,351

(e)
77,855

Webb
2,900



5,097




1,782,687

(f)
1,790,684

(a)
Cliffs' Board of Directors decided to eliminate quarterly dividends on Cliffs' common shares, the decision was applicable for the first quarter of 2015 and all subsequent quarters.
(b)
Other compensation for Mr. Goncalves includes commuting expenses ($52,515).
(c)
Other compensation for Mr. Fedor reflects a wellness gift card ($50) and a tax gross-up on the wellness card ($24).
(d)
Other compensation for Mr. Harapiak:
Includes payments related to relocation ($43,144) and a tax gross-up on relocation expense ($15,820); and
Reflects a wellness gift card ($50) and a tax gross-up on the wellness card ($24).
(e)
Other compensation for Mr. Paradie:
Includes payments related to his April 1, 2015 resignation pursuant to his Severance Agreement and Release for:
An amount equal to 1 month base pay ($43,250);
Accrued but unused vacation ($29,942); and
Medicare and local tax gross-up after his termination ($159).
(f)
Other compensation for Mr. Webb:
Includes payments related to his October 31, 2015 termination pursuant to his Severance Agreement and Release for:
An amount equal to 24 months base pay ($804,000);
An amount equal in value to two times his target bonus under the EMPI Plan ($643,200);
Accrued benefits under the Cliffs Defined Benefit Pension Plan and SERP ($238,563);
Accrued but unused vacation ($16,492);
Outplacement services ($60,300);
Financial planning perquisites ($20,000); and
Medicare tax gross-up after his termination ($132).
But does not reflect an equity payout ($96,902) reflective of other vested grants and/or awards under the 2012 Incentive Equity Plan. The value for these accelerated equity awards is not included in the “All Other Compensation” column of the 2015 Summary Compensation Table because amounts covering these awards were otherwise disclosed in the “Stock Awards” column of the 2015 Summary Compensation Table or in the Summary Compensation Table in 2014 (and thus would represent double-counting), and do not represent additional compensation. However, to provide shareholders with context for these amounts, the values are included here in this footnote.

2015 Grants of Plan-Based Awards
This table discloses in columns (c), (d) and (e) the potential payouts at the threshold, target and maximum levels of the awards under the EMPI Plan for 2015. See “Compensation Discussion and Analysis - Analysis of 2015 Compensation Decisions - Annual Incentive Plan” above for a description of the EMPI Plan. Actual payouts for the 2015 EMPI awards are shown in the 2015 Summary Compensation Table.
Columns (f), (g) and (h) of the table below show the potential payouts at the threshold, target and maximum levels of the 2015 - 2017 performance share awards; such performance shares generally vest over a three-year period ending December 31, 2017. Column (i) shows the number of restricted share units generally payable in equal thirds on each of December 31, 2015, December 31, 2016 and December 31, 2017. Column (j) represents stock options granted under our equity plans, which options generally vest in full on December 31, 2017. Column (l) shows the grant date fair value of such equity awards, based on the grant date fair value of $11.56 per share of each equity award granted during the last fiscal year, computed in accordance with FASB ASC Topic 718, based on the probable outcome for each award that is subject to performance

CLIFFS NATURAL RESOURCES INC. - 2016 Proxy Statement 43

EXECUTIVE COMPENSATION

conditions. The 2015 equity awards were granted under our 2015 Equity and Incentive Compensation Plan and the Amended and Restated 2012 Incentive Equity Plan.
The table shows in columns (i) and (l) the number of restricted share units granted in connection with the 2015 - 2017 period based on the grant date price of $7.70 per share (or $4.06 per share for the restricted share units granted on September 10, 2015) of those restricted share unit grants under FASB ASC 718.
 
 
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards ($) (1)
Estimated Future Payouts Under Equity Incentive Plan Awards (#) (2)
 
 
 
 
 
 
Name (a)
Grant Date (b)
Threshold ($) (c)

Target  ($) (d)

Maximum ($) (e)
Threshold (#) (f)
Target  (#) (g)
Maximum (#) (h)
All Other Stock Awards: Number of Shares of Stock or Units (#) (i)
 
All Other Option Awards: Number of Securities Underlying Options (#) (j)
Exercise or Base Price of Option Awards ($) (k)

Grant Date Fair Value of Stock and Option Awards ($) (l)

Goncalves
1/12/2015



 
93,569

 
187,137

 
374,274

 

 

 

2,163,304

1/12/2015



 

 

 

 
187,137

 

 

1,440,955

1/12/2015



 

 

 

 

 
187,136

 
$7.70
1,440,947

3/26/2015
1,200,000

2,400,000

4,800,000

 

 

 

 

 

 


9/10/2015



 

 

 

 
633,803

(3
)

 

2,573,240

Tompkins
1/12/2015



 
18,320

 
36,640

 
73,280

 

 

 

423,558

1/12/2015



 

 

 

 
36,640

 

 

282,128

1/12/2015



 

 

 

 

 
36,640

 
$7.70
282,128

3/26/2015
214,800

429,600

859,200

 

 

 

 

 

 


9/10/2015



 

 

 

 
132,366

(3
)

 

537,406

Fedor
1/12/2015



 
13,715

 
27,430

 
54,860

 

 

 

317,091

1/12/2015



 

 

 

 
27,430

 

 

211,211

1/12/2015



 

 

 

 

 
27,430

 
$7.70
211,211

3/26/2015
160,800

321,600

643,200

 

 

 

 

 

 


9/10/2015



 

 

 

 
99,085

(3
)

 

402,285

Harapiak
1/12/2015



 
12,692

 
25,383

 
50,766

 

 

 

293,427

1/12/2015



 

 

 

 
25,383

 

 

195,449

1/12/2015



 

 

 

 

 
25,384

 
$7.70
195,457

3/26/2015
148,800

297,600

595,200

 

 

 

 

 

 


9/10/2015



 

 

 

 
91,690

(3
)

 

372,261

Smith
1/12/2015



 
13,715