Page 20 - 2021 Proxy Statement

Compensation Philosophy and Objectives

Fuel Tech’s compensation philosophy is to promote long-term, sustainable stockholder value by incentivizing
individual performance, as well as promoting overall financial performance of the Company on an annual and long-term
basis.

With that compensation philosophy in mind, our compensation programs are designed to achieve the following
objectives:

• to ensure we remain a market leader in the development of innovative solutions;
• to provide stockholders with a superior rate of return;
• to attract, motivate, and retain top talent to advance the achievement of business goals, strategies and
objectives; and
• to support an integrated team-oriented philosophy.

Compensation Elements

Our executive compensation program has as a primary purpose to attract, retain and motivate the highly talented
individuals whose enterprise will enable us to succeed. Typically, the key components of that program include three
elements: base salary, short-term incentives and long-term incentives, as more fully described below. Among those three
elements, from year to year, when considering its goal of promoting the overall financial performance of the Company
on an annual and long-term basis, the use by the Committee of any or the extent of use of the short-term and long-term
incentives described below may vary, but when used in the compensation packages for NEOs retain the pay-for-
performance characteristics described below.

Base Salary

Base salaries requiring review by the Committee under its Charter are reviewed by the Committee on
recommendation of the Chief Executive Officer and approved by the Board, except that the base salary of the Chief
Executive Officer is reviewed and recommended by the Committee itself without the Chief Executive Officer being
present during such deliberations or Committee voting and approved by the Board. In its performance of these activities
the Committee acts in its business judgment on what it understands to be fair, reasonable and equitable compensation
in view of Fuel Tech’s requirements for recruiting and retention in a highly competitive market. To assist in that
determination, the Committee may refer to compensation consultant reports as to general market information and
benchmarking data from a peer group of companies approved by the Committee and also:

• the executive’s compensation relative to other officers;
• recent and expected performance of the executive;
• Fuel Tech’s recent and expected overall performance; and
• Fuel Tech’s overall budget for base salary increases.

Short Term Incentives

Corporate Incentive Plan

On February 25, 2021 and March 9, 2020 the Compensation Committee adopted a Corporate Incentive Plan
(CIP) to provide all U.S. or Canadian based employees (excluding sales personnel such as Mr. Cummings) that Fuel Tech
designates to participate in the CIP with the opportunity to earn an annual cash bonus based upon employee
performance and Fuel Tech’s achievement of certain level of operating income as discussed below. As such, Ms.
Albrecht and Mr. Arnone were each participants in the CIP. Potential cash awards under the CIP are designed to focus
employees on the achievement of both positive earnings growth for Fuel Tech as well as on their own individual
performance.
Both in 2021 and 2020, the CIP was structured as follows:

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