How we govern and manage our company and footprint impacts the communities in which we operate, the people we employ and the customers we serve. How we address these issues is also vital to demonstrating the sincerity of our commitment to sustainability. While many companies work hard to protect the environment from the potentially harmful impacts of their business, at WM, protecting the environment is our business. That’s why our sustainability strategy is fully integrated into our governance and management systems and reflected in a set of ambitious sustainability goals.

Board Structure, Composition and Diversity

Nine members serve on the WM Board of Directors, all of whom, including the Chairman of our Board, are independent as defined by the New York Stock Exchange. The role of Board Chairman has been performed by a non-executive, independent director since 2004. WM’s President & CEO is the only non-independent director. Board members are each elected annually.

There are three standing committees: the Audit Committee, the Management Development and Compensation Committee, and the Nominating and Governance Committee.

Our Audit Committee receives regular enterprise risk management updates with in-depth discussions on specific risk topics. The Committee receives quarterly reports on our compliance programs, including ethics and environmental and safety audits, with an annual in-depth review of our compliance programs with risk assessments. Our Audit Committee also has responsibility for oversight of information and cyber security and assessment of cyber threats and defenses. Our Audit Committee receives reports from our most senior executives in the Digital organization, and our executive officers, at least twice a year. Topics historically covered in such reports include third-party evaluation of our technology infrastructure and information security management system against the industry-standard National Institute of Standards and Technology (NIST) cyber security framework; risk mitigation through the Company’s enterprise-wide cyber security training, including our Board of Directors, conducted at least annually, regular simulated phishing tests and third-party penetration testing; review of the Company’s cyber incident insurance coverage and external cyber incident resources; review of the Company’s incident response plan and consideration of applicable laws and regulations, including those related to privacy.

The Management Development and Compensation Committee is appointed by the Board to discharge the Board’s responsibilities relating to executive compensation and benefits and management succession and development. The Committee oversees the policies governing all compensation and benefits programs for executive officers and the Senior Leadership Team including risk associated with compensation programs. The Committee also provides review and approval of corporate goals and objectives relevant to compensation for the CEO. This Committee incorporated the ESG modifier for the 2023 executive annual cash incentive program.

The Nominating and Governance Committee is continually engaged in reviewing the skills, expertise and qualifications of our existing directors, as well as potential external candidates, to identify and nominate the best possible candidates to guide and support the company’s strategy and its commitment to serve and care for our customers, the environment, the communities in which we work and our stockholders. The Committee seeks diversity of background, thoughts and opinions on the Board obtained through, among other factors, diversity in business experience, professional expertise, gender and racial/ethnic background. The Committee’s primary formal mechanism to support Board refreshment is the retirement age policy set forth in the Corporate Governance Guidelines, which includes the guideline that directors will not stand for reelection to the Board after reaching age 75 unless the Nominating and Governance Committee, having considered the foregoing factors, recommends otherwise. The Committee believes that existing practices have been effective at bringing in new expertise and perspectives, while also maintaining the valuable industry knowledge, experience and stability that our longer-tenured directors provide. Our Board of Directors’ biographies, Committee charters, and our Corporate Governance Guidelines are posted on our website.

Sustainability Oversight

As North America’s leading provider of comprehensive environmental services, sustainability and environmental stewardship is embedded in all that we do. As a result, it would not be effective, or possible, to assign responsibility for oversight of our environmental, social and governance (ESG) risk and performance to any one Committee of our Board of Directors. Rather, various aspects of ESG, which are already organically a part of our Board and Committees’ oversight of our performance, risk management and strategic vision, are addressed in different committees and with our full Board of Directors, as appropriate depending on the subject matter. For example, issues that are integral to our business, including recycling, fleet optimization and energy, and aspects of these issues, are discussed by the full Board of Directors at every meeting.

Our Board has a dedicated annual strategic planning session with our Senior Leadership Team and receives focused strategic updates quarterly. Given the nature of our business, those sessions will address topics such as our people, sustainable operations, waste diversion, recycling business improvements, sustainability growth investments, potentially disruptive technologies and environmental impacts, risks and opportunities. Additionally, reflective of the importance of diversity and inclusion and safety to our organization, the full Board of Directors receives annual in-depth reports on leadership, workforce and supplier diversity, as well as quarterly safety performance updates and a detailed annual health and safety report. Additionally, the Company’s Chief Sustainability Officer presents a quarterly ESG dashboard to the entire Board to highlight critical focus areas and track progress toward ESG goals, including our climate impact target. Through these reports and our ESG dashboard, our Board directly oversees our progress toward ESG goals.

Our Audit Committee also plays a significant role in the oversight of ESG risk and performance. Our Audit Committee receives regular enterprise risk management updates with in-depth discussion on specific risk topics, and at least annually, one of the in-depth discussions will look at an aspect of ESG risk. Additional areas of ESG oversight managed by our Management Development and Compensation Committee include review of employee health, welfare and benefit programs. The Committee also engages in quarterly sessions with our President & CEO and our Senior Vice President and Chief Human Resources and Diversity & Inclusion Officer regarding talent development and succession planning at several levels of our organization. A critical component of these talent development and succession planning efforts is the recognition that diversity and inclusion are fundamental Company values. Recognizing the importance of diversity, our Human Resources programs, overseen by our Management Development and Compensation Committee, embrace and cultivate respect, trust, open communication and diversity of thought and people. The Committee is also responsible for executive compensation incentive plan design and the incorporation and measurement of the ESG scorecard performance modifier discussed below.

Aspects of WM’s sustainability service offerings are discussed at most Board meetings because these services are linked so closely with company strategy. Topics discussed include sustainability growth strategy, progress and trends; recycling goals, market conditions and operations; generation of renewable energy and investment in related infrastructure; and innovations in operations to increase efficiency and provide environmentally superior service. Customers’ sustainability goals, such as waste reduction, recycling and materials reuse, and expansion of renewable energy capacity.

As investors, stakeholders and policymakers are increasing their focus on companies’ ESG reporting, policies and initiatives, WM has established an ESG Disclosure Committee (Committee). The Committee is comprised of a cross-functional group of leaders that participate in the oversight of ESG related data, policy and disclosure. The Committee meets to collectively discuss and review proposed ESG messaging and applicable regulations and standards.

Compensation Incentives

The objective of our compensation programs is to attract, retain, reward and incentivize talented employees who will lead the company in the successful execution of our strategy. The company seeks to accomplish this goal by designing a compensation program that is supportive of and aligns with the strategy of the company and the creation of stockholder value, while discouraging excessive risk-taking.

We have enabled a people-first, technology-led focus that leverages and sustains the strongest asset network in the industry to drive best-in-class customer experience and growth. We believe that positive financial results, including the results for the performance measures on which our executives are compensated, are naturally aligned with the successful execution of our goals to put our People First and position them to serve and care for our customers, the environment, the communities in which we work and our stockholders. On the other hand, we believe our company would not be successful, on financial performance measures or otherwise, without our industry-leading focus on sustainability.

The use of long-term equity-based incentives and our annual cash incentive program are intended to motivate and sustain high performance levels from our senior leaders. A direct relationship is created between employee compensation and company performance by aligning the company’s and leadership’s long-term strategic objectives. These incentives reflect corporate financial performance, which in turn is impacted by the success of safety and sustainability platforms like recycling and the sale of green energy and sustainability consulting services.

Beginning in 2023, the Management Development and Compensation Committee of the Board of Directors also incorporated an ESG modifier into the annual cash incentive program, such that annual cash incentive payouts to executive officers may be increased, or decreased, by up to five percent depending on achievement calculated using an ESG scorecard. The ESG scorecard contains four quantifiable performance measures, one each in the areas of safety, diversity and inclusion, circularity and climate. The MD&C Committee believes that these performance measures align with the Company’s commitments and values, sustainability growth strategy and 2030 goals.

The MD&C Committee continually reviews our compensation program to ensure it is clearly aligned with the business strategy and best supports the accomplishment of our goals. The MD&C Committee also believes that consistency in program design reinforces its efforts to maintain a compensation program that is straightforward, easy to communicate and readily translates into actionable goals.

The MD&C Committee has considered the impact of the Company’s strategy to accelerate investments in recycling and renewable energy growth projects on the cash flow generation performance measure. The MD&C Committee anticipates that it will be appropriate to exclude the impact of such incremental strategic capital investments that were approved by the Board. The MD&C Committee also anticipates a corresponding exclusion of the benefits resulting from such incremental strategic capital expenditures that were not anticipated when the performance measures were established. The MD&C Committee believes that these exclusions are supportive of positive actions by management to advance sustainable growth.

Additional information on governance strategies can be found in the Annual 10K, Annual Proxy Statement and on our governance web page.

Risk Management

Our executive officers have primary responsibility for risk management within our company. Our Board of Directors oversees risk management to ensure that the processes designed, implemented and maintained by our executives are functioning as intended and adapted, when necessary, to respond to changes in our company’s strategy as well as emerging risks. The primary means by which our Board oversees our risk management processes is through its regular communications with management and by regularly reviewing our enterprise risk management (ERM) framework. We believe that our leadership team’s engagement and communication methods are supportive of comprehensive risk management practices and that our Board’s involvement is appropriate to ensure effective oversight.

Our ERM process is supported by regular inquiries of our company’s SLT, and additional members of management and operations leadership across the enterprise. These inquiries include emerging risks, that may affect the execution of our business performance or strategic priorities on a short-term, intermediate or long-term basis. We also consult with a range of outside advisors and experts throughout the year, depending on the subject matter of the risk being evaluated. We believe the use of outside advisors and experts complements our ERM process by ensuring our efforts are comprehensive and balanced. Our ERM process is periodically reviewed and discussed with our Chief Compliance and Ethics Officer and our Vice President of Internal Audit and Controls to enhance alignment with our disclosure controls and procedures. Additionally, our Compliance and Ethics department conducts periodic risk assessments for a range of ongoing risks that are monitored. If those risks rise to certain materiality or frequency thresholds, they receive further analysis and review through the ERM base evaluation and priority risk evaluation processes.

For the most significant risks, the ERM process is designed to generate actionable insights that are actively discussed and reviewed with the SLT and our Board. Risks and opportunities are assessed and then prioritized using internal evaluations of financial impact, likelihood of occurrence, outlook for changes in the nature or extent of risk exposure and a self-assessment of the company’s confidence in existing risk mitigation efforts. The SLT reviews the outcomes of the risk assessments, focusing largely on the estimated scope of impacts, as well as the adequacy of current support by internal staff, the sufficiency of financial support for mitigation measures needed to manage and reduce risk, and the sufficiency of any third-party expertise that may be necessary to supplement internal resources. All significant risks have a standardized scorecard that includes forward-looking action plans with measurable indicators and progress updates on action plans from previous assessments.

At quarterly Audit Committee meetings, management provides an ERM report and regularly provides an in-depth update on specific risk topics. Additionally, risks related to our strategy, operations and financial results are also addressed in our Board meetings. Our President and Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Legal Officer, Chief Human Resources and Diversity & Inclusion Officer and Chief Sustainability Officer report to our Board and Audit Committee at these meetings. Other members of management periodically attend and present information, including those responsible for our Internal Audit and Controls, Environmental Audit, Business Ethics and Compliance, Human Resources, Government Affairs, Digital, Insurance, Safety, and Finance and Accounting functions. These presentations allow our directors to have direct communication with management and assess management’s evaluation and administration of the company’s risk profile through our ERM process. Additionally, in accordance with the New York Stock Exchange requirements, the Audit Committee is responsible for discussing our major financial risk exposures, steps management has taken to monitor and control such exposures and the company’s process for risk assessment and management, and quarterly reports are made to the Audit Committee on financial and compliance risks.

Management is encouraged to communicate with our Directors with respect to any issues or developments that may require consideration between regularly scheduled Board meetings, and members of management are regularly in direct contact with our Non-Executive Chairman of the Board and our Committee chairs. Our Non-Executive Chairman of the Board also facilitates communications with our Board of Directors as a whole and is integral in initiating the discussions among the independent directors necessary to ensure management is adequately evaluating and overseeing risks to our Company.

We identify a number of risks and uncertainties that could affect our business and financial statements for 2023 and beyond in our Annual Report. Key areas of assessment include:

Technology. - WM’s Digital and Corporate Development and Innovation (CDI) department provides risk mitigation regarding new technologies that would affect our business model. The SLT is formally updated quarterly and on an ad hoc basis in between. The SLT then sets priority areas. The Board of Directors is briefed at least once a year, with an emphasis on identification and strategic planning regarding technologies potentially disruptive to our business model.

WM has direct investments in third-party companies that are developing technologies and business models that could change the competitive landscape in the markets in which we compete. These investments match our current expertise, particularly in current sorting and waste conversion technologies, as well as complex logistics and local market analysis, with the developers of new and potentially disruptive technologies. Additionally, WM is invested in three venture capital funds in North America and Europe that provide us with visibility into emerging “cleantech” technologies. WM, through its CDI department, reviews approximately 180 companies annually, looking for technologies and business models that could improve our cost competitiveness and help us, our customers and communities achieve sustainability goals regarding waste reduction, upcycling, recycling, waste conversion, fleet emissions reductions and green energy production.

As WM seeks to expand its business and modify its traditional business model to address local, state or federal policies and requirements, CDI maintains a large database, derived from global sources, that routinely provides information to key WM line managers about the efficacies of an array of technologies offered by competitors. Subject to nondisclosure agreements, this information can be used by officials and regulators to help shape public policy on the environment by providing real-time data on testing, performance, verification and economics of environmental technologies.

Legislative/regulatory risk and opportunity. - Corporate and Market Area Government Affairs staff report biweekly, and confer monthly, on key legislative and regulatory developments affecting WM’s business. In an annual strategic planning meeting, in-depth discussion of priority issues helps identify strategic legislative and regulatory risks and opportunities that we plan to address. A central Public Policy risk management team is charged with identifying and managing risk on priority issues affecting the company entity-wide. Public Affairs and Area Government Affairs staff survey risks and opportunities in terms of likelihood, severity and financial impact, and specific risk-management goals are set and tracked through our formal performance management system.

Operational risk. - Continual assessment of potential risk associated with current technologies and structures is provided by engineering and environmental management specialists. WM is a founder and current Research Council member of the Environmental Research and Education Foundation (EREF), which focuses on sustainability performance, environmental stewardship and higher-process knowledge within the environmental service industry. We have committed to communicating our programmatic goals and progress to the Board periodically.

Employee safety and health. - Our safety personnel employ risk matrices to review and create mitigation plans for identified health and safety risks, continually updating based upon new information. Depending upon the severity of the consequence of the risk and its likelihood, the department manages according to a hierarchy of controls, eliminating the highest risk and intervening to limit exposure to risk where appropriate.

Reputation and reporting accuracy. - As a service organization, WM relies upon its reputation for reliable service, compliance, safety and sustainable innovation. Managers receive emails reporting the reputational footprint of WM and our competitors, which are also available on our internal app, WM Now. These insights are supplemented by field staff focused on gauging reputation and accurate representation of the company in all major markets. Communications on sustainability topics are coordinated centrally with the Sustainability team, including response to RFPs and supply chain sustainability questionnaires with consistency and accuracy. Trends identified in customer and stakeholder questions and feedback are then input into the risk management process.

New acquisitions evaluation for environment, health, safety and social indicators. - WM’s acquisitions are almost exclusively in North America, and our risk assessment procedures reflect our ability to rely upon the rigor of national environment, safety and human rights law. We have developed an in-depth due diligence process to evaluate all aspects of a target business, including environmental condition, regulatory compliance, financial viability and legal status to identify and quantify risk areas prior to acquisition. Most acquisitions are subsumed into existing WM operations and management and become fully subject to WM standards and policies, including our Code of Conduct and its monitoring. Employees of acquired companies are onboarded as new WM employees, subject to our mandatory enforcement of immigration laws and company background checks and drug screening. In the less frequent event of a stock acquisition, we look closely at the seller’s employment, labor, safety and working conditions (including working hours, overtime, benefits, and compensation), both in terms of meeting WM’s standards and practices and in terms of potential liabilities for past practices. The Legal and People departments are active members of the due diligence team. With regard to safety metrics, WM senior staff are active in engaging with ANSI Z245 standards for our industry. ANSI Z245 standards are voluntary, but many—including those that are the basis for WM policy and procedures—have been adopted into federal OSHA regulations.

Recycling market risks. - WM has invested in the assets to meet customer demand for recycling and waste reduction, with costs of processing and recovery through commodity sales as part of our economic model. As a result, our exposure to commodity prices has created a risk that can impact revenues by hundreds of millions of dollars. WM is acting to mitigate the commodity risk through sales practices and contract terms. The recycling export team moves material to customers in China, Southeast Asia, India, Europe, North America and South America to diversify the price risk and ensure that markets remain balanced. We have undergone a multi-year process of changing contracts to prioritize increased transparency and cost sharing in our contract language to ensure movement of material, utilize market pricing on inbound material and mitigate our commodity risk. Customers are now asked to pay processing fees for recycling their material with the remaining value split by both parties. These new terms protect WM from the risk of volatile commodity prices. Moreover, this more transparent pricing policy strengthens our ability to withstand sustained down markets in commodities and retain core recycling capacity.

The recycling industry provides additional transitional risk. The potential adoption of extended producer responsibility legislation puts WM’s recycling programs at risk, and China’s policy decision to halt imports of recyclables had an impact on commodity pricing. Both impact life cycle GHG reduction benefits associated with recycling and meeting sustainability goals for WM and our customers. This complex risk and opportunity was analyzed and discussed by the SLT and the Board who determined WM should be a sector leader, engage customers and educate customers and consumers on these policy issues. Therefore, WM created a focused campaign to help municipal, commercial and industrial customers understand how to maximize GHG reductions through contamination-free recycling of the commodities providing the greatest life cycle benefits. We estimate that our educational campaigns reach almost all of our recycling customers, either directly or through our municipal partners and other stakeholders.

Municipal contracts. - WM’s Finance department conducts ongoing, in-depth audits on large contracts annually. A separate audit team manages SOX Contract 7 compliance on all new or renewal contracts with over $1 million in annual revenue. We have contract compliance teams in franchise markets who proactively audit all contractual requirements, reporting, fee payments, billing, etc. Our Public Sector Services department employs a financial model going through multiple levels of approval up to the SLT. That model includes risk characterization factors such as market conditions and regulatory risks.

Training Employees on Risk Identification

Risk identification and reduction is considered a core element of every employee’s responsibilities. Our Safety, Internal Audit, Internal Controls, Compliance and Enterprise Risk Management departments perform tailored trainings and information sessions for employees, focused on building a culture of risk awareness and response.

Our Safety and Operations departments have integrated tools to support a culture of zero tolerance for unsafe behaviors and conditions. The objective is to conduct operations in a manner that engages our employees to be safe, operate efficiently, protect the environment and respect our neighbors. There are specific meetings by discipline area (Safety, Internal Audit, Internal Controls, Compliance and Enterprise Risk Management) and reporting tools (such as Safety’s Incident Reporting Tool) to identify and report risks throughout the organization, and employees are encouraged to do so.

Post-Employment Covenants and Clawback Policies

The 2017 Employment Agreements contain noncompetition and nonsolicitation restrictions that apply during employment and for a two-year period following termination. Additionally, the Severance Protection Plan contains (a) a requirement that the individual execute a general release prior to receiving post-termination benefits and (b) a clawback feature that allows for the suspension and refund of termination benefits for subsequently discovered cause. The clawback feature generally allows the Company to cancel any remaining payments due and obligates the named executive to refund to the Company severance payments already made if, within one year of termination of employment of the named executive by the Company for any reason other than for cause, the Company determines that the named executive could have been terminated for cause.

Our current equity award agreements also include a requirement that, in order to be eligible to vest in any portion of the award, the employee must enter into an agreement containing restrictive covenants applicable to the employee’s behavior following termination. Additionally, our equity award agreements include compensation clawback provisions that provide, if the MD&C Committee determines that an employee either engaged in or benefited from misconduct, then the employee will refund any amounts received under the equity award agreements. Misconduct generally includes any act or failure to act that caused or was intended to cause a violation of the Company’s policies, generally accepted accounting principles or applicable laws and that materially increased the value of the equity award. Further, our MD&C Committee has adopted a clawback policy applicable to our annual cash incentive awards that is designed to recoup annual cash incentive payments when the recipient’s personal misconduct affects the payout calculations for the awards. Clawback terms applicable to our incentive awards allow recovery within the earlier to occur of one year after discovery of misconduct and the second anniversary of the employee’s termination of employment.