DEF 14A of Cintas Corp
Filed Sep 12, 2023 · FY20230000723254-23-000030
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
(Item 1 on the Proxy Card)
(Item 1 on the Proxy Card) The Nominating and Corporate Governance Committee of the Board has nominated for election the following individuals: Gerald S. Adolph, John F. Barrett, Melanie W. Barstad, Karen L. Carnahan, Robert E. Coletti, Scott D. Farmer, Martin Mucci, Joseph Scaminace, Todd M. Schneider and Ronald W. Tysoe. Proxies solicited by the Board will be voted for the election of these nominees if no direction is given. All directors elected at the Annual Meeting will be elected to hold office until the next Annual Meeting, with each director to serve until such director's successor is elected and qualified or until such director's earlier resignation or removal. In voting to elect directors, shareholders are not entitled to cumulate their votes. In accordance with NASDAQ Stock Market, LLC (NASDAQ) rules, our Board affirmatively determines the independence of each director and nominee for election as a director in accordance with the elements of independence set forth in the NASDAQ listing standards and rules promulgated under the Securities Exchange Act of 1934 (Exchange Act). Cintas' director independence standards, incorporated in the Corporate Governance Guidelines, are available on our website at www.cintas.com, under About – Investor Relations – Corporate Governance. Based on these standards, the Board determined that each of the following nonemployee directors is independent: Gerald S. Adolph, John F. Barrett, Melanie W. Barstad, Karen L. Carnahan, Martin Mucci, Joseph Scaminace and Ronald W. Tysoe. Our Audit, Compensation and Nominating and Corporate Governance Committees are composed solely of independent directors. All directors are elected for one-year terms. Information on each of our nominees is given below. An uncontested election is one in which the number of nominees does not exceed the number of directors to be elected. In an uncontested election, like this election, our Bylaws require that any nominee who does not receive a majority of the votes cast with respect to such nominee must promptly offer his or her resignation to the Board. The Nominating and Corporate Governance Committee will take the matter under advisement and make a recommendation to the Board on whether to accept or reject the resignation or whether other action should be taken. The Board has 90 days following certification of the shareholder vote to consider the offer of resignation. Within such 90-day period, the Board will promptly disclose publicly its decision whether to accept the director's resignation offer. If a director nominee becomes unavailable before the election, your proxy card authorizes us to vote for a replacement nominee if the Board names one. The Board recommends you vote FOR each of the following nominees:
(Item 1 on the Proxy Card)
| Gerald S. Adolph | | Age: 69 | | Director Since: 2006 | | Independent Director | | Board Committees: - Compensation Committee (Chair) - Nominating and Corporate Governance Committee |
(Item 1 on the Proxy Card)
Background: Gerald S. Adolph was a Senior Partner with Booz Allen Hamilton (later changed to Booz & Company), a consulting firm, from 1981 to 2016. Mr. Adolph held numerous positions at Booz & Company, including Worldwide Chemicals Practice Leader, Worldwide Consumer and Health Practice Leader and Global Mergers and Restructuring Practice Leader. He also served on the Booz Allen Hamilton board of directors from 1994 to 1997. Qualifications and Key Skills: The Board believes that Mr. Adolph's consulting experience, giving him insight into various corporate governance and business management issues, as well as his status as an independent director, makes his service on the Board integral to Cintas.
(Item 1 on the Proxy Card)
| John F. Barrett | | Age: 74 | | Director Since: 2012 | | Independent Director | | Board Committees: - Audit Committee - Nominating and Corporate Governance Committee |
(Item 1 on the Proxy Card)
Background: John F. Barrett is the Chairman, President and Chief Executive Officer of Western & Southern Financial Group, a Cincinnati-based diversified family of financial services companies. He has been Chief Executive Officer since 1994. He served as a director of Convergys Corporation from 1998 to 2016, The Fifth Third Bancorp and its subsidiary, The Fifth Third Bank, from 1988 to 2009, The Andersons, Inc. from 1992 to 2008 and Cincinnati Bell Inc. from 1992 to 1998. Qualifications and Key Skills: The Board believes that Mr. Barrett's principal executive officer experience and service as a director of other publicly-traded companies, which have provided him with a deep understanding of business matters, his broad financial acumen and his status as an independent director, make his service on the Board valuable to Cintas.
(Item 1 on the Proxy Card)
| Melanie W. Barstad | | Age: 70 | | Director Since: 2011 | | Independent Director | | Board Committees: - Compensation Committee - Nominating and Corporate Governance Committee |
(Item 1 on the Proxy Card)
Background: Melanie W. Barstad was with the Johnson & Johnson Family of Companies, a diversified global provider of consumer products, prescription medicines and medical devices, for 23 years, retiring in 2009 as President of Women's Health in the Medical Device and Diagnostics Division. She served as a management board member on numerous Johnson & Johnson operating company boards from 1997 to 2009, including Johnson & Johnson Health Care Systems, Ethicon Endo Surgery and Johnson & Johnson Medical. Ms. Barstad also served as co-chair of the Johnson & Johnson Women's Leadership Initiative and served on the Auburn University Foundation Board of Directors from 2008 to 2016, where she chaired the Directorship Committee and served on the Executive Committee. She was recognized in 2018 by the Auburn University Alumni Association receiving the Auburn University Lifetime Achievement Award. Ms. Barstad was honored in 2019 by Women Inc. as one of the 2019 Most Influential Corporate Board Directors. She has also been included in the Agenda Compensation 100 listing. Qualifications and Key Skills: The Board believes that Ms. Barstad's experience running complex, enterprise-wide global businesses as a line executive and as a management board member and her status as an independent director, makes her service on the Board valuable to Cintas.
(Item 1 on the Proxy Card)
| Karen L. Carnahan | | Age: 69 | | Director Since: 2019 | | Independent Director | | Board Committees: - Audit Committee (financial expert under SEC guidelines) - Nominating and Corporate Governance Committee |
(Item 1 on the Proxy Card)
Background: Karen L. Carnahan was an employee-partner of Cintas for more than 30 years, where she served at an executive level for more than 20 years, including the roles of Vice President and Treasurer, Vice President of Corporate Development and President and Chief Operating Officer of Cintas' document management division. In 2014, Ms. Carnahan joined Shred-it International Inc. (Shred-it) as chief operating officer when Cintas' document management business merged with Shred-it, from which she then retired in 2015. Ms. Carnahan is on the Board of Trustees of Touchstone Investments (a member of Western & Southern Financial Group). In addition, Ms. Carnahan has received several prestigious awards including being named a Woman of Excellence by the West Chester, Ohio Chamber Alliance in 2007, a Greater Cincinnati YWCA Career Woman of Achievement in 2009 and received the Ohio Diversity Council's Glass Ceiling Award in 2013. Qualifications and Key Skills: The Board believes that Ms. Carnahan's understanding of Cintas through her many years as a trusted employee-partner at Cintas, her status as an independent director and the fact that she is an "audit committee financial expert" under SEC guidelines, make her service on the Board beneficial to Cintas.
(Item 1 on the Proxy Card)
| Robert E. Coletti | | Age: 66 | | Director Since: 2016 | | Board Committees: - Executive Committee |
(Item 1 on the Proxy Card)
Background: Robert E. Coletti has served as a retired partner emeritus of the law firm of Keating Muething & Klekamp PLL (KMK). Mr. Coletti joined KMK in 1982, where he became a partner in 1988 and a senior partner in 2016, with a practice concentrated in the corporate, securities and financing areas. Mr. Coletti currently serves on the Board of Directors of The Everglades Foundation and Gilligan Oil Company. Mr. Coletti served on the Miami University Board of Trustees from 2014 to 2021. He was a Trustee of the Miami University Foundation from 2006 to 2012, where he also served as Chairman of the Board from 2010 to 2012. Qualifications and Key Skills: The Board believes that Mr. Coletti's knowledge of Cintas, gained through his many years of advising Cintas and his legal expertise surrounding complicated business matters, make his service on the Board valuable to Cintas.
(Item 1 on the Proxy Card)
| Scott D. Farmer | | Age: 64 | | Director Since: 1994 | | Board Committees: - Executive Committee |
(Item 1 on the Proxy Card)
Background: Scott D. Farmer joined Cintas in 1981. He has held the positions of Vice President – National Account Division, Vice President – Marketing and Merchandising, Rental Division Group Vice President and Chief Operating Officer. He was elected Chief Executive Officer in July 2003. Mr. Farmer was appointed Chairman of the Board in September 2016, and upon his retirement as Chief Executive Officer in May 2021, he was appointed Executive Chairman of the Board. Qualifications and Key Skills: The Board believes that Mr. Farmer's breadth of knowledge and experience in the areas of marketing, business development and corporate strategy, as well as his familiarity with all aspects of Cintas' business, render his service on the Board extremely beneficial to Cintas.
(Item 1 on the Proxy Card)
| Martin Mucci | | Age: 63 | | Director Since: 2023 | | Independent Director | | Board Committees: - Audit Committee (financial expert under SEC guidelines) - Nominating and Corporate Governance Committee |
(Item 1 on the Proxy Card)
Background: Martin Mucci was appointed a Director of Cintas in fiscal 2023. Mr. Mucci served as Chief Executive Officer of Paychex, Inc. (Paychex), a human capital services company, from September 2010 to October 2022, which he originally joined in 2002 as Senior Vice President, Operations. Prior to joining Paychex, Mr. Mucci had a 20-year career with Frontier Communications of Rochester, a telecommunications company, where he held various senior level positions, including President of Telephone Operations and President and Chief Executive Officer of Frontier Telephone of Rochester. He currently serves as the Chairman of the Board of Paychex and is also a board member of NCR Corporation. Qualifications and Key Skills: The Board believes that Mr. Mucci’s senior leadership in digital transformation, customer experience and corporate financial matters for publicly traded companies, as well as his independent director status and that the fact that he is an “audit committee financial expert” under SEC guidelines, makes his service on the Board extremely beneficial to Cintas.
(Item 1 on the Proxy Card)
| Joseph Scaminace | | Age: 70 | | Director Since: 2010 | | Independent Director | | Board Committees: - Compensation Committee - Nominating and Corporate Governance Committee (Chair) - Executive Committee (Chair) |
(Item 1 on the Proxy Card)
Background: Joseph Scaminace is designated as Lead Director of the Cintas Board of Directors. Mr. Scaminace was Chairman, President and Chief Executive Officer of Vectra Corporation (formerly OM Group, Inc.), a diversified industrial growth company, from 2005 until his retirement in 2015. Prior to joining Vectra Corporation, Mr. Scaminace was the President and Chief Operating Officer of The Sherwin-Williams Company, a paint and coatings company, where he had worked in various capacities since 1983. He is a member of the Board of Trustees of The Cleveland Clinic. Mr. Scaminace is also a director of Parker Hannifin Corporation. Qualifications and Key Skills: The Board believes that Mr. Scaminace's principal executive officer experience and service as a director of another publicly-traded company, which have provided him insight into high-level corporate governance and executive compensation matters, as well as his independent director status, make him an integral member of Cintas' Board.
(Item 1 on the Proxy Card)
| Todd M. Schneider | | Age: 56 | | Director Since: 2021 |
(Item 1 on the Proxy Card)
Background: Todd M. Schneider joined Cintas in 1989. He has held various positions within Cintas, including several management positions. He was Vice President of Sales of the Midwest/South Central Region Rental Division and President and Chief Operating Officer of the former Document Management Division. He served as Senior Vice President of Sales of the Rental Division until June 2013, when he was appointed President & Chief Operating Officer of the Rental Division. In July 2018, Mr. Schneider was appointed Executive Vice President and Chief Operating Officer responsible for operations and marketing. In June 2021, Mr. Schneider was appointed President and Chief Executive Officer of Cintas. Qualifications and Key Skills: The Board believes Mr. Schneider's extensive knowledge of Cintas through his various management and leadership roles makes his service on the Board extremely beneficial to Cintas.
(Item 1 on the Proxy Card)
| Ronald W. Tysoe | | Age: 70 | | Director Since: 2008 | | Independent Director | | Board Committees: - Audit Committee (Chair) (financial expert under SEC guidelines) - Nominating and Corporate Governance Committee |
(Item 1 on the Proxy Card)
Background: Ronald W. Tysoe served as Vice Chairman of Federated Department Stores, Inc. (now known as Macy's Inc.), a clothing and home furnishings company, from April 1990 to October 2006. Mr. Tysoe has previously served as a director of Taubman Centers, Inc. from 2007 to 2020, J. C. Penney Company, Inc. from 2013 to 2020, Canadian Imperial Bank of Commerce from 2004 to 2019, Pzena Investment Management Inc. from 2008 until 2013 and Scripps Networks Interactive, Inc. from 2008 to 2018. Qualifications and Key Skills: The Board believes that Mr. Tysoe's service as a Vice Chairman of another publicly-traded company, his independent director status and the fact that he is an "audit committee financial expert" under SEC guidelines, given his understanding of accounting and financial reporting, disclosures and controls, make his Board service extremely beneficial to Cintas.
COMPENSATION TABLE
| Name | Fees Earned or Paid in Cash(1) ($) | Stock Awards(2) ($) | Option Awards(2) ($) | Total ($) | | Gerald S. Adolph | 100,000 | 72,639 | 72,507 | 245,146 | | John F. Barrett | 97,500 | 72,639 | 72,507 | 242,646 | | Melanie W. Barstad | 96,500 | 72,639 | 72,507 | 241,646 | | Karen L. Carnahan | 97,500 | 72,639 | 72,507 | 242,646 | | Robert E. Coletti | 85,000 | 72,639 | 72,507 | 230,146 | | Martin Mucci(3) | — | 38,170 | 37,948 | 76,118 | | Joseph Scaminace | 121,500 | 72,639 | 72,507 | 266,646 | | Ronald W. Tysoe | 107,000 | 72,639 | 72,507 | 252,146 |
Compensation Decision-Making Process
Compensation Decision-Making Process The Compensation Committee determines the compensation for the executive officers based on recommendations made by management as discussed below. Annually, the Compensation Committee conducts a job evaluation for each NEO, which includes a review of the job duties and a market analysis of executive compensation plans. As opposed to reviewing a limited number of peer group companies, we have chosen to a evaluate the practices of a larger group of similar sized companies. The analysis focuses on published general industry survey data by revenue size. We did not select the companies included in this survey group, and the component companies' identities were not a material factor in our compensation analysis. The Compensation Committee evaluates base salary, annual cash incentives, long-term compensation and other compensation. We believe that our NEOs' target compensation is competitive with the total compensation of comparable NEOs in our market analysis. Based on the market analysis and individual performance, the Senior Vice President of Human Resources and Chief Diversity Officer makes a recommendation to the Compensation Committee on the CEO's base salary and annual cash incentive target for the upcoming fiscal year. The CEO makes a recommendation to the Compensation Committee for the base salaries and annual cash incentive targets for the upcoming fiscal year for other executive officers. In October 2022, and at various meetings held during the remainder of fiscal 2023, the Board reviewed the results of our 2022 "say-on-pay" vote, in which over 97% of the votes cast approved of our NEOs' compensation. In addition, after taking into consideration the strong support for our executive compensation program reflected in the 2022 say-on-pay results, the Compensation Committee decided to generally continue to apply the same philosophy, compensation objectives and governing principles as it used for fiscal 2022 when making subsequent decisions regarding NEO compensation. The Compensation Committee believes the voting results again demonstrate significant support for our NEO pay program and did not make any changes to the fiscal 2023 program specifically in response to the 2022 say-on-pay results. The Compensation Committee has, however, continued to monitor the voting policies of our institutional shareholders and their advisors since last year, as well as reviewed the overall program to seek to ensure it achieves the designed goal as set forth in "Compensation Philosophy and Objectives" and will continue to take those voting policies and the effectiveness of the program into account when considering changes to our executive compensation program.
Key Elements of Compensation
| Element | Form of Compensation | Purpose | | Base Salaries | Cash | Provides competitive, fixed compensation to attract and retain exceptional executive talent | | Annual Cash Incentives | Cash | Provides a variable financial incentive to achieve corporate and individual goals | | Long-Term Equity Incentives | Non-qualified stock options, restricted stock units and/or restricted stock | Encourages, under the terms of Cintas' equity plan, NEOs to build and maintain a long-term equity ownership position in Cintas so that their interests are aligned with our shareholders | | Health, Retirement and Other Benefits | Eligibility to participate in benefit plans generally available to our employee-partners, including the Cintas Partners' Plan contributions (described below), health, life insurance and disability plans, our Deferred Compensation Plan (described below), and certain perquisites | Benefit plans are part of a broad-based employee benefits program. The Deferred Compensation Plan and perquisites provide competitive benefits to our NEOs |
Annual Cash Incentives
Annual Cash Incentives The Compensation Committee strongly believes that variable annual cash incentives provide a direct financial incentive for executive officers to achieve corporate and individual goals. Near the beginning of each fiscal year, the Compensation Committee establishes an annual cash incentive target for each participating NEO based on certain financial goals and non-financial performance. The performance components and targets were derived from the operating plans for Cintas for fiscal 2023 and represent goals for that year that the Compensation Committee believed would be challenging for Cintas, yet achievable if senior and operating management met or surpassed their business unit goals and objectives. The Compensation Committee currently anticipates that performance components and targets similar to those described below will be utilized in fiscal 2024 because these objectives are important, and Cintas continues to make progress on these objectives. However, the Compensation Committee reserves the right to determine on an ongoing basis the performance components and targets it will use in developing the performance-based portion of the NEOs' compensation. For fiscal 2023, the Compensation Committee approved a total compensation plan for each of Mr. Schneider and Mr. Farmer. The aggregate amount of annual cash incentive for fiscal 2023 that could be earned by each of Mr. Schneider and Mr. Farmer was based on the financial objectives of fiscal 2023 Cintas EPS and fiscal 2023 sales growth and certain non-financial goals. The EPS and sales growth goals were established with reference to the operating plans for Cintas for fiscal 2023. The EPS goals for all participants for fiscal 2023 were identical. Mr. Schneider's non-financial goals related to safety, employee diversity, corporate development, asset capacity utilization and leadership development matters. The non-financial goal for Mr. Farmer related to safety. Based upon the overall achievement of these objectives, each of Mr. Schneider and Mr. Farmer could earn from 0% to a maximum of 185% of the target annual cash incentive (with the maximum for each officer reflecting 200% of the portion of the award related to EPS and sales growth and 100% of the portion of the award related to non-financial goals). The following table summarizes the annual cash incentive target awards and performance criteria (including percentage weightings) that were reviewed and approved by the Compensation Committee:
Annual Cash Incentives
| Name | Annual Cash Incentive Target | EPS Component | Sales Growth Component | Non-Financial Component | Increase in Target Award vs. the Prior Fiscal Year | | Todd M. Schneider | $1,040,000 | 42.5% | 42.5% | 15.0% | 4.0% | | Scott D. Farmer | $500,000 | 42.5% | 42.5% | 15.0% | —% |
Annual Cash Incentives
Under the Management Incentive Plan, annual cash incentive calculations for achievement of financial goals are based on actual results, subject to adjustment at the discretion of the Compensation Committee to exclude extraordinary items that are not operational, such as accounting principle changes or revenue from an acquisition that was not in the business plan. The potential annual cash incentive payout percentage multiplier for each component of Mr. Schneider's and Mr. Farmer's target annual cash incentive is provided in the following tables (for each participating NEO, annual cash incentive payouts were designed to be interpolated on a straight-line basis for achievement between the levels of achievement established for the EPS and sales growth components of the annual cash incentives):
Annual Cash Incentives
| EPS Component Level of Achievement | EPS Goals | Annual Cash Incentive Payout | | Below Threshold | <$11.50 | 0% | | Threshold | $11.50 | 25% | | Target | $12.10 | 100% | | Maximum | $12.95 | 200% |
Annual Cash Incentives
| Sales Growth Component Level of Achievement | Sales Growth Goals (% Growth Over Prior Fiscal Year) | Annual Cash Incentive Payout | | Below Threshold | <6.65% | 0% | | Threshold | 6.65% | 25% | | Target | 8.15% | 100% | | Maximum | 11.15% | 200% |
Annual Cash Incentives
| Non-Financial Component Level of Achievement | Annual Cash Incentive Payout | | Does Not Meet Goals | 0% | | Meets Most Goals | 25% | | Meets Goals | 100% |
Annual Cash Incentives
The Grants of Plan-Based Awards for Fiscal 2023 table outlines estimated possible payouts under these non-equity incentive plan awards. Based on Cintas' EPS and sales growth for fiscal 2023, Mr. Schneider and Mr. Farmer earned an annual cash incentive payout of $1,768,000 and $850,000, respectively. The fiscal 2023 Cintas EPS achievement for incentive plan calculation purposes was determined to be $12.95. This EPS figure is the "Maximum" that could have been achieved, and it differs from the Company's reported diluted EPS of $12.99, which was higher than the "Maximum." Sales growth achievement for fiscal 2023 incentive plan calculation purposes was determined to be 11.15%. This sales growth figure is the "Maximum" that could have been achieved, and it differs from the Company's reported sales growth of 12.20%, which was higher than the "Maximum" level of achievement. Mr. Schneider and Mr. Farmer received $156,000 and $75,000, respectively, based on the performance of their non-financial goals outlined above. The individual performance level for both Mr. Schneider and Mr. Farmer was "Meets Goals." For fiscal 2023, the Compensation Committee also approved total compensation plans for each of Mr. Hansen, Mr. Thompson and Mr. Denton. The aggregate amount of annual cash incentive payout that could be earned for fiscal 2023 by each of Mr. Hansen, Mr. Thompson and Mr. Denton was designed to be based on the sum of that NEO's earned incentive for the fiscal 2023 Cintas EPS component and the individual performance component (consisting of an overall subjective performance evaluation rather than performance against specified individual performance goals). Based upon overall performance, the eligible NEOs could earn from 0% to a maximum of 200% of the annual cash incentive target. The following table summarizes the annual cash incentive target awards and performance criteria (including percentage weightings) that were reviewed and approved by the Compensation Committee:
Annual Cash Incentives
| Name | Annual Cash Incentive Target | EPS Component | Individual Performance Component | Increase in Target Award vs. the Prior Fiscal Year | | J. Michael Hansen | $476,099 | 50% | 50% | 4.0% | | Michael L. Thompson | $463,777 | 50% | 50% | 4.0% | | D. Brock Denton | $248,040 | 50% | 50% | 4.0% |
Annual Cash Incentives
The potential annual cash incentive payout percentage multiplier for each component of Mr. Hansen's, Mr. Thompson's and Mr. Denton's target annual cash incentive is provided in the following tables (for each participating NEO, annual cash incentive payouts were designed to be interpolated on a straight-line basis for achievement between the levels of achievement established for the EPS component of the annual cash incentives):
Annual Cash Incentives
| EPS Component Level of Achievement | EPS Goals | Annual Cash Incentive Payout | | Below Threshold | <$11.50 | 0% | | Threshold | $11.50 | 50% | | Target | $12.10 | 100% | | Maximum | $12.95 | 200% |
Annual Cash Incentives
| Individual Performance Component Level of Achievement | Annual Cash Incentive Payout | | Does Not Meet Goals | 0% | | Meets Most Goals | 50% | | Meets Goals | 100% | | Exceeds Goals | 150% | | Outstanding Achievement | 200% |
Annual Cash Incentives
The Grants of Plan-Based Awards for Fiscal 2023 table outlines estimated possible payouts under these non-equity incentive plan awards. As presented to and approved by the Compensation Committee, the actual annual cash incentive payments earned for fiscal 2023 as reflected in the Fiscal 2023 Summary Compensation Table are as follows: Mr. Hansen earned a fiscal 2023 annual cash incentive award of $952,198, and Mr. Hansen's individual performance level was "Outstanding Achievement." Mr. Thompson earned a fiscal 2023 annual cash incentive award of $927,553, and his individual performance level was "Outstanding Achievement." Mr. Denton earned a fiscal 2023 annual cash incentive award of $496,080, and his individual performance level was "Outstanding Achievement." Fiscal 2023 Cintas EPS was achieved at the "Maximum" level, as disclosed above.
Long-Term Equity Incentives
Long-Term Equity Incentives Long-term equity incentive compensation is comprised of annual, performance-based opportunities to earn non-qualified stock options, restricted stock units and/or restricted stock. With respect to the participating NEOs, these awards are made pursuant to Compensation Committee decisions substantially along lines as described above for the Management Incentive Plan. The purpose of such awards is to incentivize NEOs to profitably grow Cintas' long-term business objectives and encourage NEOs to build and maintain a long-term equity ownership position in Cintas so that their interests are aligned with those of our shareholders. The following table summarizes the fiscal 2023 annual long-term equity incentive target award opportunities and performance criteria (including percentage weightings) that were reviewed and approved by the Compensation Committee:
Long-Term Equity Incentives
| Name | Annual Long-Term Equity Incentive Target Award | EPS Component | Sales Growth Component | Individual Performance Component | | Todd M. Schneider | $4,442,984 | 50.0% | 50.0% | —% | | Scott D. Farmer | $2,220,614 | 50.0% | 50.0% | —% | | J. Michael Hansen | $1,054,111 | 50.0% | —% | 50.0% | | Michael L. Thompson | $995,720 | 50.0% | —% | 50.0% | | D. Brock Denton | $1,006,205 | 50.0% | —% | 50.0% |
Long-Term Equity Incentives
As determined by the Compensation Committee, Mr. Schneider, Mr. Farmer, Mr. Hansen and Mr. Thompson received their award in restricted stock, and Mr. Denton received 50% of his award in stock options and 50% of his award in restricted stock. The following information provides more detail with respect to the target award percentage multiplier tied to each milestone level of achievement. The EPS component for all NEOs was considered by the Compensation Committee on the following basis:
Long-Term Equity Incentives
| EPS Component Level of Achievement | EPS Goals | Equity Award | | Below Threshold | <$11.50 | 0% | | Threshold | $11.50 | 50% | | Target | $12.10 | 100% | | Maximum | $12.95 | 200% |
Long-Term Equity Incentives
The sales growth component for Mr. Schneider and Mr. Farmer was considered by the Compensation Committee on the following basis:
Long-Term Equity Incentives
| Sales Growth Component Level of Achievement | Sales Growth Goals (% Growth Over Prior Fiscal Year) | Equity Award | | Below Threshold | <6.65% | 0% | | Threshold | 6.65% | 50% | | Target | 8.15% | 100% | | Maximum | 11.15% | 200% |
Long-Term Equity Incentives
The individual achievement components for Mr. Hansen, Mr. Thompson and Mr. Denton were considered by the Compensation Committee on a subjective basis as described above under the Annual Cash Incentives section. The factors that influence the determination of equity grant targets include level of responsibility, market compensation analysis and overall performance of the individual. The Compensation Committee reviewed and approved the targets at the beginning of the fiscal year, and the actual award payout was granted based upon that NEO's performance compared to the targets. On August 10, 2023, Mr. Denton was awarded 9,934 non-qualified stock options under the 2016 Equity and Incentive Compensation Plan, as amended (2016 Plan), based on Cintas fiscal 2023 EPS and his individual performance level achievements, as outlined under the Annual Cash Incentives section. Regarding Mr. Schneider's, Mr. Farmer's, Mr. Hansen's and Mr. Thompson's awards, with consideration that Mr. Schneider, Mr. Farmer, Mr. Hansen and Mr. Thompson are over the age of 55, the Compensation Committee awarded Mr. Schneider, Mr. Farmer, Mr. Hansen and Mr. Thompson time-based restricted stock. On August 10, 2023, Mr. Schneider and Mr. Farmer were awarded 20,240 and 10,116 shares of restricted stock, respectively, under the 2016 Plan based on Cintas fiscal 2023 EPS ("Maximum") and fiscal 2023 sales growth ("Maximum") achievements, as outlined under the Annual Cash Incentives section. Mr. Hansen and Mr. Thompson were awarded 4,802 and 4,534 shares of restricted stock, respectively, under the 2016 Plan based on Cintas fiscal 2023 EPS and their individual performance level achievements, as outlined under the Annual Cash Incentives section. These shares were awarded as Mr. Schneider's, Mr. Farmer's, Mr. Hansen's and Mr. Thompson's long-term equity awards. Also on August 10, 2023, Mr. Denton was awarded 2,012 shares of restricted stock under the 2016 Plan based on Cintas fiscal 2023 EPS and his individual performance level achievements as outlined under the Annual Cash Incentives section. In accordance with the 2016 Plan, stock option awards have an exercise price equal to the closing stock price on the date of the award. As a result, stock options awarded to the NEOs increase in value only if the market price of the common stock increases. Stock options generally vest at a rate of 33% per year, beginning on the third anniversary of the date of grant and ending on the fifth anniversary of the date of grant. Restricted stock for NEOs generally vests three years from the date of grant.
Change in Control Agreements
Change in Control Agreements Cintas has no policy regarding change in control agreements. For a further discussion on this topic, please see the section titled "Potential Payments Upon Termination, Retirement or Change of Control" of this proxy statement.
Recovery of Prior Awards
Recovery of Prior Awards Cintas currently operates a claw-back policy, which provides that in the event of an accounting restatement due to material noncompliance with financial reporting requirements under the U.S. federal securities laws, the Compensation Committee has the right to use reasonable efforts to recover from any of our current or former officers who received incentive-based compensation (including annual cash incentives, non-qualified stock options or restricted stock) during the three-year period preceding the date on which Cintas is required to prepare an accounting restatement, any excess incentive-based compensation awarded as a result of the misstatement. This policy applies to incentive based compensation granted after June 1, 2011. We expect to review and consider changes to our clawback provisions in light of the recent promulgation of the final Dodd-Frank Act clawback rules.
COMPENSATION TABLE
| Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards(1) ($) | Option Awards(1) ($) | Non-Equity Incentive Plan Compen- sation(2) ($) | All Other Compen- sation(3) ($) | Total ($) | | Todd M. Schneider | 2023 | 1,040,000 | — | 4,442,984 | — | 1,924,000 | 163,272 | 7,570,256 | | President and Chief Executive Officer | 2022 | 1,000,000 | — | 4,316,592 | 506,307 | 1,850,000 | 104,201 | 7,777,100 | | | 2021 | 638,703 | — | 1,176,207 | 676,531 | 1,110,486 | 139,808 | 3,741,735 | | Scott D. Farmer | 2023 | 500,000 | — | 2,220,614 | — | 925,000 | 338,772 | 3,984,386 | | Executive Chairman of the Board | 2022 | 500,000 | — | 2,073,717 | — | 925,000 | 407,029 | 3,905,746 | | | 2021 | 1,145,772 | — | 5,058,293 | — | 2,073,561 | 757,767 | 9,035,393 | | J. Michael Hansen | 2023 | 641,659 | — | 1,054,111 | — | 952,198 | 65,446 | 2,713,414 | | Executive Vice President and Chief Financial Officer | 2022 | 616,980 | — | 490,988 | 491,455 | 915,544 | 69,540 | 2,584,507 | | | 2021 | 533,925 | — | 705,661 | 405,882 | 732,919 | 110,929 | 2,489,316 | | Michael L. Thompson | 2023 | 583,390 | — | 995,281 | — | 927,553 | 87,145 | 2,593,369 | | Former Executive Vice President and Chief Administrative Officer | 2022 | 560,952 | — | 927,684 | — | 891,884 | 80,583 | 2,461,103 | | | 2021 | 480,816 | — | 998,368 | — | 707,195 | 107,051 | 2,293,430 | | D. Brock Denton | 2023 | 520,000 | — | 442,103 | 564,102 | 496,080 | 36,807 | 2,059,092 | | Senior Vice President, General Counsel and Secretary | 2022 | 500,000 | — | 467,920 | 582,818 | 477,000 | 18,853 | 2,046,591 |
OUTSTANDING EQUITY AWARDS
OUTSTANDING EQUITY AWARDS
OPTION EXERCISES AND STOCK
OPTION EXERCISES AND STOCK
CEO PAY RATIO
CEO PAY RATIO For fiscal 2023, the ratio of the annual total compensation of Mr. Schneider, our CEO (CEO Compensation), to the median of the annual total compensation of all employee-partners of Cintas and its consolidated subsidiaries, other than the CEO (Median Annual Compensation), was approximately 121 to 1. We note that, due to our permitted use of reasonable estimates and assumptions in preparing this pay ratio disclosure, the disclosure may involve a degree of imprecision, and thus this ratio disclosure is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K using the data and assumptions described below. Our calculation of the pay ratio may be different than the pay ratios of other public companies as a result of different methodologies used to determine the pay ratios. As a result, we would discourage the use of reported ratios as a basis for any comparison between companies. In this summary, we refer to the employee-partner who received the Median Annual Compensation as the “Median Employee-Partner.” For purposes of this pay ratio disclosure, the date used to identify the Median Employee-Partner was May 28, 2021 (the Determination Date). The CEO Compensation for purposes of this pay ratio disclosure was $7,570,256 for fiscal 2023, which is the amount reported for Mr. Schneider in the “Total” column of the Fiscal 2023 Summary Compensation Table. Additionally, for purposes of this pay ratio disclosure, the Median Annual Compensation for fiscal 2023 was $62,513 and was calculated in accordance with Item 402(c)(2)(x) of Regulation S-K. Because there were no changes to our employee-partner population or compensation arrangements in fiscal 2023 that we reasonably believe would result in a significant change to our pay ratio disclosure, we continued to rely on our fiscal 2021 methodology used to identify the Median Employee-Partner. Due to the fact that the employee-partner originally identified as the Median Employee-Partner was no longer employed by the Company, we picked a new Median Employee-Partner whose compensation was substantially similar to that of the original Median Employee-Partner in fiscal 2021, based on the consistently applied compensation measure described below. To identify the Median Employee-Partner, we first measured compensation for the period beginning on May 29, 2020, and ending on May 28, 2021 (measurement period) for approximately 40,000 employee-partners, representing all full-time, part-time, seasonal and temporary employee-partners of the Company and its consolidated subsidiaries as of the Determination Date. This number does not include any independent contractors or “leased” workers, as permitted by the applicable SEC rules. This number does not exclude any employee-partners of businesses acquired by us or combined with us. Also, as permitted by SEC rules, under the 5% “de minimis exemption,” we excluded all non-U.S. and non-Canadian employee-partners, which represent less than 5% of our total workforce. The excluded employee-partners consisted of approximately 500 employee-partners in Mexico and approximately 500 employee-partners in Honduras. This compensation measurement was calculated by totaling salary and wages for each employee-partner for the measurement period. Specifically excluded from the calculation were the value of equity and equity-based awards, as such awards are not widely distributed to our employee-partner population. Further, we did not utilize any statistical sampling or cost-of-living adjustments for purposes of this pay ratio disclosure. A portion of our employee-partner workforce (full-time and part-time) identified above worked for less than the full measurement period due to commencing employment during that period. In determining the Median Employee-Partner, we extrapolated the compensation measure over the full measurement period for such individuals (but avoided creating full-time equivalencies) based on reasonable assumptions and estimates relating to our employee-partner compensation program.
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K promulgated under the Exchange Act, we are providing the following information about the relationship between executive compensation actually paid and certain financial performance of the Company. For further information concerning the Company’s variable pay-for-performance philosophy and how it aligns executive compensation with the Company’s performance, see the Compensation Discussion and Analysis section.
PAY VERSUS PERFORMANCE
| | | | | | Value of Initial Fixed $100 Investment Based on: | | | | | Fiscal Year(1) | Summary Compensation Table Total for PEO(2) ($) | Compensation Actually Paid to PEO(3) ($) | Average Summary Compensation Table Total for Non-PEO NEOs(4) ($) | Average Compensation Actually Paid to Non-PEO NEOs(5) ($) | Total Shareholder Return(6) ($) | Peer Group Total Shareholder Return(7) ($) | Net Income (thousands)(8) ($) | Adjusted Diluted EPS(9) ($) | | 2023 | 7,570,256 | 19,652,770 | 2,837,688 | 6,352,215 | 197.10 | 143.56 | 1,348,080 | 12.99 | | 2022 | 7,777,100 | 18,315,893 | 2,749,487 | 6,719,935 | 164.60 | 129.63 | 1,235,757 | 11.28 | | 2021 | 9,035,393 | 15,389,401 | 2,667,811 | 14,063,683 | 144.68 | 132.83 | 1,110,968 | 10.24 |
PAY VERSUS PERFORMANCE
___________ (1) For purposes of this table the principal executive officer (PEO) and non-PEO NEOs are as follows:
PAY VERSUS PERFORMANCE
| Fiscal Year | PEO | Non-PEO NEOs | | 2023 | Todd M. Schneider | Scott D. Farmer, J. Michael Hansen, Michael L. Thompson, D. Brock Denton | | 2022 | Todd M. Schneider | Scott D. Farmer, J. Michael Hansen, Michael L. Thompson, D. Brock Denton | | 2021 | Scott D. Farmer | Todd M. Schneider, J. Michael Hansen, Michael L. Thompson, Thomas E. Frooman |
PAY VERSUS PERFORMANCE
(2) Represents the amount of total compensation reported for the PEO for each corresponding fiscal year in the “Total” column of the Summary Compensation Table for each applicable fiscal year. (3) Represents the amount of “compensation actually paid” to the PEO, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not necessarily reflect the actual amount of compensation earned by or paid to the PEO during the applicable fiscal year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to the PEO’s total Summary Compensation Table compensation for each year to determine the compensation actually paid:
PAY VERSUS PERFORMANCE
| Fiscal Year | Reported Summary Compensation Table Total for PEO ($) | Reported Value of Equity Awards(a) ($) | Equity Award Adjustments(b) ($) | Compensation Actually Paid to PEO ($) | | 2023 | 7,570,256 | (4,442,984) | 16,525,498 | 19,652,770 | | 2022 | 7,777,100 | (4,822,899) | 15,361,692 | 18,315,893 | | 2021 | 9,035,393 | (5,058,293) | 11,412,301 | 15,389,401 |
PAY VERSUS PERFORMANCE
(a) The grant date fair value of equity awards represents the total of the amounts reported in the “Stock Awards” and “Option Awards” columns in the Summary Compensation Table for the applicable fiscal year. (b) The equity award adjustments for each applicable fiscal year include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in the applicable fiscal year that are outstanding and unvested as of the end of the fiscal year; (ii) the amount of change as of the end of the applicable fiscal year (from the end of the prior fiscal year) in fair value of any awards granted in prior fiscal years that are outstanding and unvested as of the end of the applicable fiscal year; (iii) for awards that are granted and vest in same applicable fiscal year, the fair value as of the vesting date; (iv) for awards granted in prior years that vest in the applicable fiscal year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (v) for awards granted in prior fiscal years that are determined to fail to meet the applicable vesting conditions during the applicable fiscal year, a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (vi) the dollar value of any dividends or other earnings paid on stock or option awards in the applicable fiscal year prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for the applicable fiscal year. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. The amounts deducted or added in calculating the equity award adjustments are as follows:
PAY VERSUS PERFORMANCE
| Fiscal Year | Year End Fair Value of Unvested Covered Year Equity Awards ($) | Year over Year Change in Fair Value of Outstanding and Unvested Prior Year Equity Awards ($) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year ($) | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year ($) | Total Equity Award Adjustments ($) | | 2023 | 9,556,114 | 6,916,705 | — | 52,679 | 16,525,498 | | 2022 | 8,399,186 | 5,134,815 | — | 1,827,691 | 15,361,692 | | 2021 | 10,568,018 | — | — | 844,283 | 11,412,301 |
PAY VERSUS PERFORMANCE
(4) Represents the average of the amounts reported for Cintas' non-PEO NEOs as a group in the “Total” column of the Summary Compensation Table in each applicable fiscal year. (5) Represents the average amount of “compensation actually paid” to the non-PEO NEOs as a group, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not necessarily reflect the actual average amount of compensation earned by or paid to the non-PEO NEOs as a group during the applicable fiscal year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total Summary Compensation Table compensation for the non-PEO NEOs as a group for each year to determine the compensation actually paid, using the same methodology described above in footnote three.
PAY VERSUS PERFORMANCE
| Fiscal Year | Average Reported Summary Compensation Table Total for Non-PEO NEOs ($) | Average Reported Value of Equity Awards(a) ($) | Average Equity Award Adjustments(b) ($) | Average Compensation Actually Paid to Non-PEO NEOs ($) | | 2023 | 2,837,688 | (1,319,175) | 4,833,702 | 6,352,215 | | 2022 | 2,749,487 | (1,258,646) | 5,229,094 | 6,719,935 | | 2021 | 2,667,811 | (1,258,330) | 12,654,202 | 14,063,683 |
PAY VERSUS PERFORMANCE
(a) The grant date fair value of equity awards represents the average of the amounts reported in the “Stock Awards” and “Option Awards” columns in the Summary Compensation Table for the applicable fiscal year. (b) The amounts deducted or added in calculating the equity award adjustments are as follows:
PAY VERSUS PERFORMANCE
| Fiscal Year | Average Year End Fair Value of Unvested Covered Year Equity Awards ($) | Year over Year Average Change in Fair Value of Outstanding and Unvested Prior Year Equity Awards ($) | Average Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year ($) | Year over Year Average Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year ($) | Total Average Equity Award Adjustments ($) | | 2023 | 2,836,813 | 1,975,658 | — | 21,231 | 4,833,702 | | 2022 | 2,433,694 | 1,624,432 | — | 1,170,968 | 5,229,094 | | 2021 | 2,412,208 | 8,129,869 | — | 2,112,125 | 12,654,202 |
PAY VERSUS PERFORMANCE
(6) Cumulative total shareholder return (TSR) is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period. (7) Represents the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. The peer group used for this purpose is the group of four comparison companies used for the stock performance graph on page 15 of our Annual Report on Form 10-K for the fiscal year ended May 31, 2023 (ABM Industries, Aramark, Rollins, Inc. and UniFirst Corporation). (8) Represents the amount of net income reflected in the Company’s audited financial statements for the applicable fiscal year. (9) Our non-GAAP adjusted financial measure for diluted earnings per share excludes the impact of special gains and the related income tax impact.