DEF 14A of Nacco Industries Inc
Filed Apr 10, 2024 · FY20230000789933-24-000028
What NACCO Does and Doesn't Do
| Good Compensation Governance Practiced by NACCO | | | •Align our executive compensation with corporate performance on both a short-term and a long-term basis. | •Set target compensation at the 50th percentile of our chosen benchmark. | | •Establish target and maximum awards for our short-term and long-term incentive plans. | •Equity compensation awards for Directors and NEOs generally must be held for up to ten years. | | •In 2023, approximately 70% of total NEO compensation was performance based. | •Conduct an annual risk assessment of our compensation program. | | •Use an independent compensation consultant who does not perform any other work for the Company. | •Our CHC Committee is made up solely of independent directors and makes all NEO compensation decisions. | | •Provide limited change in control protections for all employees that (1) accelerate the time of payment of previously vested incentive benefits and non-qualified retirement benefits and (2) provide for pro-rata target incentive payments for the year of any change in control. | •Provide a modest level of perquisites for certain key executives, the majority of which are paid in cash, that are determined based on market data. |
What NACCO Does and Doesn't Do
| Controversial Compensation Governance NOT Practiced by NACCO | | | •Provide our NEOs any minimum or guaranteed bonuses. | •Provide uncapped award opportunities. | | •Use total shareholder return (“TSR”) as a performance metric. In our experience, TSR captures fluctuations in stock price, rather than measuring the performance of our executive team in operating our business. Additionally, | •Provide active defined benefit plans for executives (we do not have any active defined benefit plans and gave our eligible NEO credit only for time actually worked under our frozen pension plans). | | our stock is not heavily traded. Accordingly, we do not | | | consider fluctuations in our stock price to be indicative of our performance. | •Provide our NEOs with employment or severance agreements or individual change-in-control agreements. | | •Provide any tax gross-ups except for service awards and certain relocation expenses. | •Permit stock awards to be hedged or transferred during the restriction period. | | •Take into account our long-term awards when determining our retirement benefits. | |
Compensation Philosophy and Objectives
| •Competitive pay levels: Total compensation is competitive with industry peers to attract and retain all employees, including our executives, with similar levels of experience, skills, education and responsibilities. | •Internal equity: Compensation takes into account the different levels of responsibilities, scope, risk, performance and future potential of our executives. | | •Balance cash and equity: We balance the mix of cash and equity compensation to align compensation to both long- and short-term results of the Company. | •Align compensation with stockholder interests: The interests of our executive officers should be linked with those of our stockholders through the risks and rewards of the ownership of our Class A Common Stock. | | •Pay for performance: A significant portion of the compensation of our executive officers should vary with business performance to reward the successful achievement of our growth objectives and drive the development of a successful and profitable business. | •Clearly communicate plans so that they are understood: We clearly communicate to our employees, and especially to our NEOs, their specific goals, targets, and objectives to help ensure our executives are focused on achieving the financial and operational results that the CHC Committee believes will best promote stockholder value. |
Compensation-Setting Process
Compensation-Setting Process Role of our Compensation and Human Capital Committee The CHC Committee establishes and oversees the administration of our policies for compensating our employees, including our NEOs. The members of the CHC Committee consist solely of independent Directors. A summary of some of the CHC Committee's responsibilities are listed beginning on page 8. Role of Management Our management, in particular the President and CEO of the Company, reviews our goals and objectives relevant to the compensation of our executive officers. The President and CEO of the Company annually reviews the performance of each executive officer (other than the President and CEO whose performance is reviewed by the CHC Committee) and makes recommendations based on these reviews, including with respect to salary adjustments and incentive compensation award amounts, to the CHC Committee. In addition to the President and CEO's recommendations, the CHC Committee considers recommendations made by Korn Ferry, our independent outside compensation consultant, which bases its recommendations upon an analysis of similar positions at a broad range of domestic industries, as well as an understanding of our policies and objectives, as described above. The CHC Committee may exercise its discretion in modifying any recommended adjustments or awards to executive officers. After considering these recommendations, the CHC Committee determines the base salary and incentive compensation levels for the executive officers, including each NEO, and any additional discretionary payments. Role of Compensation Consultant The CHC Committee receives assistance and advice from Korn Ferry, an internationally recognized compensation consulting firm. Korn Ferry is engaged directly by and reports to the CHC Committee and also provides advice and discusses compensation issues directly with management. Korn Ferry makes recommendations regarding substantially all aspects of compensation for our Directors and senior management employees, including the NEOs. For 2023, Korn Ferry was engaged to make recommendations regarding: •director compensation levels; •2023 salary midpoints, incentive compensation targets (calculated as a percentage of salary midpoint) and target total compensation for senior management positions; •2023 salary midpoints and/or range movement for all other employee positions; •mid-year job evaluations for all senior management, which may include adjustments to salary point levels, salary midpoints and incentive targets and/or changes to current senior management positions; and •geographic pay differentials for all exempt and certain non-exempt positions. All senior management salary point recommendations are determined by Korn Ferry through the consistent application of the Korn Ferry salary point methodology, which is a proprietary method that takes into account the know-how, problem solving and accountability requirements of the position. Representatives of Korn Ferry attended one of the CHC Committee meetings in 2023 and, during that meeting, consulted with the CHC Committee in executive session without management present. The CHC Committee considered and assessed all relevant factors, including the six factors set forth in Rule 10c-1(b)(4)(i)-(vi) under the Securities Exchange Act of 1934 (the "Exchange Act"), that could give rise to a potential conflict of interest with respect to Korn Ferry. For 2023, these factors included the fact that, as described above, one of our Directors (Lori J. Robinson) is a director of Korn Ferry. Based on this review, the CHC Committee assessed the independence of Korn Ferry, but did not identify any independence concern or conflict of interest that has been raised by the work performed by Korn Ferry. Competitive Market Review The CHC Committee believes that benchmarking against other companies in our industry would not produce a meaningful peer group due to the diversification of our operating businesses, ranging from coal, aggregates and other minerals mining, oil and gas and other minerals development, and stream and wetland mitigation solutions. Accordingly, we use survey data provided by Korn Ferry to assess the competitiveness of our executive compensation program. Specifically, we use Korn Ferry's General Industry survey, which includes a broad group of domestic industrial organizations ranging in size from approximately $500 million to approximately $1 billion in annual revenues. We exclude retail and finance segments from the data results. We did not select the entities that comprise this survey group, and the component entities' identities were not a material factor in this analysis. The CHC Committee chose this survey as its benchmark for the following reasons: •it provides relevant information regarding the compensation paid to employees, including senior management employees, with similar skill sets used in our industry and represents the talent pool from which we recruit; •the use of a broad-based survey reduces volatility and lessens the impact of cyclical upswings or downturns in any one industry that could otherwise skew the survey results in any particular year; and •it provides a competitive framework for recruiting employees from outside our industry. Using its proprietary salary point methodology, Korn Ferry compares positions of similar scope and complexity with the data contained in the General Industry survey. The CHC Committee directs Korn Ferry to derive a median salary level for each salary point level targeted at the 50th percentile of the General Industry survey (the "salary midpoint"). The CHC Committee typically sets target compensation levels at (or slightly above or below) the salary midpoint determined by Korn Ferry because it believes that the use of salary midpoints (1) helps to ensure our compensation program provides sufficient compensation to attract and retain talented executives and (2) maintains internal pay equity, without overcompensating our employees.
Total Target Compensation
| Named Executive Officer | (A) Salary Midpoint ($) | (%) | (B) Cash in Lieu of Perquisites ($) (1) | (%) | (C) Short-Term Plan Target ($) | (%) | (D) Long-Term Plan Target ($) (2) | (%) | (A)+(B)+(C)+(D) Target Total Compensation ($) | | J.C. Butler, Jr. | $835,600 | 26% | $35,000 | 1% | $752,040 | 24% | $1,537,504 | 49% | $3,160,144 | | Carroll L. Dewing | $387,400 | 47% | $16,000 | 2% | $174,330 | 21% | $245,031 | 30% | $822,761 | | John D. Neumann | $365,600 | 48% | $16,000 | 2% | $164,520 | 22% | $210,220 | 28% | $756,340 |
Total Target Compensation
(1)In addition to providing limited perquisites to a limited number of employees in unique circumstances, senior management employees, including our NEOs, are paid a fixed dollar amount of cash in lieu of perquisites. The dollar amounts provided to the NEOs in 2023 were approved by the CHC Committee in December 2022 based on a triennial analysis performed by Korn Ferry in August 2020, at which time the CHC Committee decided not to change the amounts. Based on this analysis, the CHC Committee set a defined perquisite allowance for each senior management employee, based on salary point levels. These amounts are paid in cash ratably throughout the year. This approach satisfies our objective of providing competitive total compensation to our NEOs while recognizing that perquisites are largely just another form of compensation. (2)The amounts shown include a 15% increase from the Korn Ferry-recommended long-term plan target awards that the CHC Committee applies each year to account for the immediately taxable nature of NACCO Industries, Inc.'s Executive Long-Term Incentive Compensation Plan ("Long-Term Equity Plan") awards. Target total compensation is supplemented by health and welfare benefits and retirement benefits, which consist of both (1) a qualified defined contribution plan and (2) a nonqualified defined contribution plan (the "Excess Plan"). Mr. Dewing is also entitled to frozen qualified and nonqualified defined benefit retirement benefits. In addition, the CHC Committee may award discretionary cash and equity bonuses to employees, including the NEOs. In February 2018, the Company terminated certain nonqualified deferred compensation plans. As a result, the Company was required to amend the Excess Plan so that participants could no longer defer short-term incentive payments, which prevented the participants from also receiving matching and profit sharing contributions to the Excess Plan based on the deferrals from the short-term incentive payments. The CHC Committee approved make-whole payments to account for the lost matching and profit sharing contributions which would be paid as a bonus. Make-whole payments were provided in 2020-2022, and the make-whole payment was made again for 2023.
Incentive Compensation
Incentive Compensation One of the principles of our compensation program is that senior management employees, including the NEOs, are compensated based on the performance of the Company or the business unit for which the employee performed services. In 2023, all of the NEOs participated in (1) the NACCO Industries, Inc. Short-Term Incentive Compensation Plan (the "Short-Term Plan") and (2) the Long-Term Equity Plan. Our incentive compensation plans are designed to align the compensation interests of the senior management employees with our short-term and long-term interests. A significant portion of the NEOs' compensation is linked directly to the attainment of specific corporate financial and operating targets. The CHC Committee believes that a material percentage of the NEOs' compensation should be contingent on the performance of the Company and its subsidiaries. As illustrated on the target total compensation table on page 16, over 72% of Mr. Butler's 2023 target total compensation was variable or "at risk" and tied to Company performance and, as a group, over 50% of the other NEOs' target total compensation was tied to Company performance. Each of the NEOs' incentive compensation payouts for 2023 exceeded the sum of their respective fixed payments (base salary plus perquisite allowance) for the year. The performance criteria and target performance levels for the incentive plans are established within the CHC Committee's discretion, and are based upon management's recommendations as to the performance objectives of the Company or the particular business unit for the year. Two types of performance targets are used in the incentive compensation plans: •Targets Based on Annual Operating Plans. Certain performance targets were based on financial forecasts contained in the Company's 2023 annual operating plan ("AOP"). With respect to these targets, there is an expectation that these performance targets will be met during the year. If they are not, the participants will not receive all or a portion of the award that is based on these performance criteria. •Targets Based on Strategic Business Goals. Other performance targets were not based on the 2023 AOP. Rather, they were based on important, strategic short-term and long-term goals established by the CHC Committee. Because these targets are not based on the AOP, it is possible in any given year that the level of expected performance may be above or below the specified performance target for that year. The Project Focus List and Special Project Award, which are under the Short-Term Plan and Long-Term Equity Plan, are examples of a target based on strategic corporate objectives that the CHC Committee believes will strengthen performance in the current year and also deliver over the long-term. The Minerals Management Investment Award target under the Long-Term Equity Plan is an example of a target based on long-term corporate objectives that the CHC Committee believes we should deliver over the long-term, not the performance that is expected in the current year or the near term. Each NEO is eligible to receive a short-term incentive award and a long-term incentive award based on a target incentive amount that is equal to a percentage of salary midpoint. However, the final payout may be higher or lower than the targeted amount. Incentive Compensation Tables. When reviewing the incentive compensation tables beginning on page 18, the following factors should be considered: •The CHC Committee considered the factors described above under "Incentive Compensation" to set the performance criteria and target performance levels for the 2023 incentive compensation awards. The particular performance criteria for 2023 were chosen because they were believed to continue to have a positive correlation with long-term stockholder returns. •For 2023, the maximum awards under the Short-Term Plan may not exceed 150% of the target award level. The cash-denominated awards under the Long-Term Equity Plan may not exceed 200% of the target award level (or the greater of $12,000,000 and the fair market value of 500,000 shares of Class A Common, determined at the time of payment). •Achievement percentages are based on the formulas contained in performance guidelines adopted annually by the CHC Committee. The formulas do not provide for straight-line interpolation from the performance target to the maximum payment target. •Target awards for each executive are equal to a specified percentage of the executive's 2023 salary midpoint, based on the number of salary points assigned to the position and the appropriate level of incentive compensation targets recommended by Korn Ferry and adopted by the CHC Committee at that level. The CHC Committee then increases the target awards under the Long-Term Equity Plan by 15% to account for the immediately taxable nature of the award. •The plans have a one-year performance period. Final awards are determined after year-end by comparing actual performance to the pre-established performance targets that were set by the CHC Committee. •The CHC Committee, in its discretion, may decrease or eliminate awards. The CHC Committee, in its discretion, may also increase awards and may approve the payment of awards where business unit performance would otherwise not meet the minimum criteria set for payment of awards. As a result, these awards incentivize performance during the year, but are potentially subject to substantial payout discretion in certain years. No such discretion was implemented for 2023. •Short-Term Plan awards are paid annually in cash. Long-Term Equity Plan awards are paid annually as a combination of cash and restricted shares of Class A Common. The cash portion of the award is to satisfy tax withholding requirements. The restricted shares are subject to a holding period of ten years for our NEOs. •All awards are fully vested when granted.
Short-Term Incentive Compensation
Short-Term Incentive Compensation Our short-term incentive compensation is an annual performance-based cash incentive arrangement. Each NEO's target short-term incentive opportunity is based on the competitive market analysis performed by Korn Ferry, and reviewed by the CHC Committee, every three years. The following table shows the short-term target awards and payouts approved by the CHC Committee for each NEO for 2023:
Short-Term Incentive Compensation
| Named Executive Officer | (A) 2023 Salary Midpoint ($) | (B) Short-Term Plan Target as a % of Salary Midpoint (%) | (C) = (A) x (B) Short-Term Plan Target ($) | (D) Short-Term Plan Payout as % of Target (%) | (E) = (C) x (D) Short-Term Plan Payout ($) | | J.C. Butler, Jr. | $835,600 | 90% | $752,040 | 118.4% | $890,415 | | Carroll L. Dewing | $387,400 | 45% | $174,330 | 118.4% | $206,407 | | John D. Neumann | $365,600 | 45% | $164,520 | 118.4% | $194,792 |
Short-Term Incentive Compensation
The performance goals were set by the CHC Committee at its February 2023 meeting.
Short-Term Incentive Compensation
| The 2023 short-term incentive awards were tied to results in the following areas: | | | | | Corporate Financial Objectives | Strategic Objectives | Safety Objectives | Environmental Objectives | | •operating profit, which measures business efficiency and profitability | •corporate or business unit-specific goals that contribute to the Company's long-term strategy to protect its existing business as well as grow and diversify | •specific safety goals that contribute to a safe working environment for our people | •specific environmental goals that contribute to a better environment for our communities |
Short-Term Incentive Compensation
The following table shows the performance criteria established by the CHC Committee for 2023 under the Company's Short-Term Plan to determine final incentive compensation payments for the NEOs. As detailed in the performance chart below, most of the performance metrics have their own cap, while the total short-term incentive payout is capped at 150%.
Short-Term Incentive Compensation
| Short-Term Plan Performance Criteria and Achievement | | | | | | | | Performance Criteria | (A) Weighting | Performance Target | Cap on Performance Factor Achievement | Performance Result | (B) Achievement Percentage | (A) x (B) Payout Percentage | | Consolidated Operating Profit | 35% | $20,664,824 | 200% | $(534,485) | 0% | 0% | | Project Focus List (1) | 20% | — | 125% | — | 106.3% | 21.3% | | Special Project Award (2) | 15% | — | N/A | — | 431.9% | 64.8% | | Safety Incident Report Index (3) | 15% | 50% of National Average | 150% | 42.7% | 107.3% | 16.1% | | MSHA/OSHA Violations (4) | 5% | 50% of National Average | 150% | 26.6% | 123.4% | 6.2% | | Environmental Citations (5) | 10% | Zero Citations per location | 150% | — | 100% | 10.0% | | Final Payout Percentage | | | | | | 118.4% |
Short-Term Incentive Compensation
(1)We do not disclose the Project Focus List targets or results due to their competitively sensitive nature. They are highly specific, task-oriented goals which focus on the Company's efforts to protect its existing business and grow and diversify. Among other things, they identify specific future projects, customers and contracts. During 2023, the Project Focus List involved projects concerning: (a) Red Hills Mine and other coal initiatives; (b) North American Mining and other non-coal initiatives, including the development of Sawtooth Mining; (c) Catapult Mineral Partners and other minerals management initiatives; (d) Mitigation Resources and other mitigation banking initiatives; (e) regulatory initiatives; and (f) looking at additional new business platforms that could provide additional growth and diversification with acceptable risk adjusted returns. For 2023, the CHC Committee believed that NACCO could reasonably meet certain targets outlined in the 2023 Project Focus List since they were designed to be reasonably achievable with strong management performance. (2)We do not disclose the Special Project Award targets or results due to their competitively sensitive nature. The Special Project Award is calculated based on the present value of new or extended projects (determined based on the present value of the forecasted after-tax cash flow over the life of the project based on the contract terms) against a pre-determined target established by the CHC Committee for the award year. In order to promote business growth, there is no cap on the Special Project Award factor; however, the entire Short-Term Plan award is limited to 150% of target. For 2023, the CHC Committee believed the Company could reasonably meet this target, since it was designed to be reasonably achievable with strong management performance. (3)The Safety Incident Report Index represents the number of Mine Safety and Health Administration (“MSHA”) injuries or Occupational Safety and Health Administration (“OSHA”) injuries that occurred for each 200,000 employee hours worked in the performance year. The goal is to have a safety incident rate that is lower than 50% of the national average. The Safety Incident Rate is calculated based on each site, with the NEOs receiving an award based on the average Safety Incident Rate for all sites. (4)The MSHA/OSHA Violations factor involves our locations' weighted average of the number of violations per inspection days relative to the national average violation per inspection days average for MSHA or OSHA violations. The goal is to have a MSHA/OSHA violations weighted average that is lower than 50% of the national weighted average. The MSHA/OSHA violations factor is calculated at each site, with the NEOs receiving an award based on the average MSHA/OSHA violations for all sites. (5)The Environmental Citations factor assesses a location's environmental citations received. A location must have zero citations to receive an award at target.
Long-Term Incentive Compensation
Long-Term Incentive Compensation The purpose of our long-term incentive compensation is to enable senior management employees to accumulate capital through strong, long-term managerial performance, which the CHC Committee believes contributes to the future success of our businesses. Our long-term incentive program requires a long-term commitment on the part of our senior management employees, and stock sales are generally not permitted for a number of years. Award shares issued under the plan have a holding period of three, five, or ten years, as determined by the CHC Committee. The CHC Committee has determined that the ten-year holding period applies to all award shares issued to Messrs. Butler, Dewing and Neumann. Thus, the awarded amount is effectively invested in the Company for an extended period which encourages our executives to focus on our long-term profitability and strengthens the tie between stockholders' and the NEOs' long-term interests. Those individual NEOs who have a greater impact on our long-term strategy receive a higher percentage of their compensation as long-term compensation. In general, the CHC Committee does not consider an NEO's long-term incentive award for prior periods when determining the value of a long-term incentive award for the current period because it considers those prior awards to represent compensation for past services. Target awards under the Long-Term Equity Plan are initially expressed in a dollar amount equal to a percentage of the participant's salary midpoint based on the number of salary points assigned to the executive's position and the long-term incentive compensation targets for that salary point level recommended by Korn Ferry and adopted by the CHC Committee. The CHC Committee then increases these amounts by 15% to account for the immediately taxable nature of the equity awards. Approximately 65% of the award is distributed in shares of restricted stock and the remaining 35% is distributed in cash to approximate the income tax withholding obligation as a result of the issuance of the restricted stock. The full amount of the award, including the fair market value of the restricted shares on the date of grant, is fully taxable to the participant on the award date. The actual number of shares of stock issued is determined by taking the dollar value of the stock component of the award and dividing it by a formula share price. For this purpose, the formula share price is calculated as the lesser of: •The average closing price of our Class A Common on the NYSE at the end of each week during the 2022 calendar year (or such other previous calendar year as determined by the CHC Committee no later than the 90th day of the award year); or •The average closing price of our Class A Common on the NYSE at the end of each week during the 2023 award year. Participants have all of the rights of a stockholder, including the right to vote and receive dividends upon receipt of the shares. However, the award shares are subject to transfer restrictions for a period of up to ten years from the last day of the award year. The transfer restrictions lapse earlier in the event of (1) the participant's death or permanent disability or (2) three years (or earlier with the approval of the CHC Committee) from the date of retirement. The CHC Committee has the right to release the restrictions at an earlier date, but rarely does so except in the case of the release of a limited number of shares for the payment of educational and medical expenses or home purchases, as permitted under the terms of the plan. No early release requests were requested by or granted to the NEOs in 2023. Any gain participants realize in the long-run from awards that are issued under the Long-Term Equity Plan depends on what management does to drive the financial performance of the Company and increase the stock price. This is because the restricted shares of Class A Common that are awarded to NEOs under the Long-Term Equity Plan generally may not be transferred for a period of ten years following the last day of the award year. During the holding period, the ultimate value of the shares is subject to change based on the value of the shares of stock. The value of the award is enhanced over the holding period as the value of the stock increases or is reduced as the value of the stock decreases. Thus, the awards provide the executives with an incentive over the holding period to increase the value of the Company, which is expected to lead to long-term returns to stockholders. The CHC Committee believes that this encourages our executives to maintain a long-term focus on our profitability, which is also in the Company's best interests. As a result of the annual equity grants under the Long-Term Equity Plan and the corresponding transfer restrictions, the number of shares of stock that an executive holds generally increases each year. Consequently, executives will continue to have or accumulate exposure to long-term Company performance notwithstanding any short-term changes in the price of shares of Class A Common. This increased exposure strongly aligns the long-term interests of our NEOs with those of other stockholders. Depending on the NEO's position, the Long-Term Equity Plan was designed to provide target long-term incentive compensation between 50% and 160% of his 2023 salary midpoint (57.5% and 184% including a 15% increase in target percentages to reflect the immediately taxable nature of the equity awards). The table below shows the long-term target awards and payouts approved by the CHC Committee for each NEO for 2023:
Long-Term Incentive Compensation
| Named Executive Officer | (A) Salary Midpoint ($) | (B) Long-Term Plan Target as a % of Salary Midpoint ($) (1) | (C)= (A) x (B) Long-Term Plan Target ($) | (D) Long-Term Plan Payout as a% of Target (%) | (E)=(C) x (D) Cash-Denominated Long-Term Plan Payout ($) (2) | (F) Fair Market Value of Long-Term Plan Payout ($) (2) | | J.C. Butler, Jr. | $835,600 | 184.0% | $1,537,504 | 140.8% | $2,164,806 | $2,126,224 | | Carroll L. Dewing | $387,400 | 63.3% | $245,224 | 140.8% | $345,003 | $338,854 | | John D. Neumann | $365,600 | 57.5% | $210,220 | 140.8% | $295,990 | $290,715 |
Long-Term Incentive Compensation
(1)The target percentages for participants in the Long-Term Equity Plan include a 15% increase from the Korn Ferry-recommended long-term plan target awards that the CHC Committee applies each year to account for the immediately taxable nature of the Long-Term Equity Plan awards. (2)Awards under the Long-Term Equity Plan are initially denominated in dollars. The amounts shown in columns (C) and (E) reflect the dollar-denominated target and actual awards. This is the amount that is used by the CHC Committee when analyzing the total compensation of the NEOs. As a result, these awards incentivize performance during the year, but are potentially subject to substantial payout discretion in certain years. No such discretion was implemented for 2023. The dollar-denominated awards are then paid to the participants in a combination of cash (approximately 35%) and restricted shares of Class A Common (approximately 65%). The actual number of shares of stock issued are determined by taking the dollar value of the stock component of the award and dividing it by the lower of the average share price during the 2023 performance period or the preceding calendar year. For 2023, the CHC Committee defined the "average share price" for this purpose as the lower of (1) the average NACCO Class A Common share price for 2022, which was $42.743 or (2) the average of the NACCO Class A Common share price for 2023, which was $35.195. The amount shown in column (F) is the sum of (a) the cash distributed and (b) the grant date fair value of the stock that was distributed for the 2023 Long-Term Equity Plan awards. This amount is computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 ("FASB ASC Topic 718"). See Note (2) to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 for more information regarding the accounting treatment of our equity awards. The shares were valued on the date on which the Long-Term Equity Plan awards were approved by the CHC Committee. The difference in the amounts disclosed in columns (E) and (F) is due to the fact that the number of shares issued in Column (E) was calculated using the formula share price of $35.195 (explained above), while the grant date fair value in Column (F) was calculated using $34.230, which is the average of the high and low share price on the date the shares were granted. The performance goals were set by the CHC Committee at its February 2023 meeting.
Long-Term Incentive Compensation
| The 2023 long-term incentive awards were tied to results in the following areas: | | | Corporate Financial Objectives | Strategic Objectives | | •return on total capital employed ("ROTCE"), which measures the level of investment to achieve profit •operating profit, which measures business efficiency and profitability | •corporate or business unit-specific goals that contribute to the Company's long-term strategy to protect its existing business and grow and diversify |
Long-Term Incentive Compensation
The following table shows the information for awards granted to NEOs under the Long-Term Equity Plan for 2023. As detailed in the performance chart below, most of the performance metrics have their own cap, while the total long-term incentive payout is capped at 200%.
Long-Term Incentive Compensation
| Long-Term Plan Performance Criteria and Achievement | | | | | | | | Performance Criteria | (A) Weighting | Performance Target | Cap on Performance Factor Achievement | Performance Result | (B) Achievement Percentage | (A) x (B) Payout Percentage | | Consolidated NACCO ROTCE | 25% | 5.2% | 150.0% | 0.2% | 0% | 0% | | Consolidated Operating Profit | 20% | $20,664,824 | 200.0% | $(534,485) | 0% | 0% | | Project Focus List (1) | 25% | — | 125.0% | — | 106.3% | 26.6% | | Special Project Award (2) | 20% | — | N/A | — | 431.9% | 86.4% | | Minerals Management Investment Award (3) | 10% | — | N/A | — | 277.6% | 27.8% | | Final Payout Percentage | | | | | | 140.8% |
Long-Term Incentive Compensation
(1)We do not disclose the Project Focus List targets or results due to their competitively sensitive nature. They are highly specific, task-oriented goals which focus on the Company's efforts to protect its existing business and grow and diversify. Among other things, they identify specific future projects, customers and contracts. During 2023, the Project Focus List involved projects concerning: (a) Red Hills Mine and other coal initiatives; (b) North American Mining and other non-coal initiatives, including the development of Sawtooth Mining; (c) Catapult Mineral Partners and other minerals management initiatives; (d) Mitigation Resources and other mitigation banking initiatives; (e) regulatory initiatives; and (f) looking at additional new business platforms that could provide additional growth and diversification with acceptable risk adjusted returns. For 2023, the CHC Committee believed that NACCO could reasonably meet certain targets outlined in the 2023 Project Focus List since they were designed to be reasonably achievable with strong management performance. (2)We do not disclose the Special Project Award targets or results due to their competitively sensitive nature. The Special Project Award is calculated based on the present value of new or extended projects (determined based on the present value of the forecasted after-tax cash flow over the life of the project based on the contract terms) against a pre-determined target established by the CHC Committee for the award year. In order to promote business growth, there is no cap on the Special Project Award factor; however, the entire Long-Term Plan award is limited to 200% of target. For 2023, the CHC Committee believed the Company could reasonably meet this target, since it was designed to be reasonably achievable with strong management performance. (3)We do not disclose the Minerals Management Investment Award targets or results due to their competitively sensitive nature. Similar to the Special Project Award, the Minerals Management Investment Award is calculated based on the present value of new or extended investments in the minerals management business (determined based on the forecasted after-tax cash flow over the life of the investment based on the contract terms) against a pre-determined target established by the CHC Committee for the award year. In order to promote business growth, there is no cap on the Minerals Management Investment Award factor; however, the entire Long-Term Equity Plan award is capped at 200%. For 2023, the CHC Committee believed the Company could meet this target, since it was designed to be reasonably achievable with strong management performance.
Other Compensation of Named Executive Officers
Other Compensation of Named Executive Officers Discretionary Restricted Stock Awards. The Company also maintains the NACCO Industries, Inc. Supplemental Executive Long-Term Incentive Bonus Plan (the "Supplemental Equity Plan"), which gives the CHC Committee the flexibility to provide additional discretionary equity compensation. The CHC Committee did not grant any awards under this plan for services performed in 2023. Discretionary Cash Bonuses. The CHC Committee has the authority to grant, and has from time to time granted, discretionary cash bonuses to employees, including the NEOs, in addition to the incentive compensation described above. The CHC Committee uses discretionary cash bonuses to reward substantial achievement or superior service to the Company and/or its subsidiaries, particularly when such achievement or service is not reflected in the performance criteria established under our incentive plans. No discretionary cash bonuses were awarded to the NEOs for 2023 performance. However, as discussed in Note (2) of the Summary Compensation Table, the CHC Committee approved a make-whole payment to account for the lost matching and profit sharing contributions to the Excess Plan, and 2023 was the fourth year of the make-whole payments. Mr. Butler and Mr. Dewing were the only NEOs to receive a make-whole payment for 2023. Retirement Plans. The NEOs do not currently accrue any defined benefit pension benefits. Mr. Dewing is entitled to receive payments from a frozen qualified pension plan and a frozen nonqualified pension plan as indicated in the Pension Benefits Table on page 31. We provide all of our employees, including the NEOs, with defined contribution retirement benefits. Employer contributions are designed to provide employees with competitive retirement income. The CHC Committee believes that the target level of retirement benefits gives us the ability to attract and retain talented management employees at the senior executive level and below. In general, the NEOs and other senior management employees receive the same retirement benefits as all other employees. However, the benefits that are provided to the NEOs and other senior management employees are provided under a combination of qualified and nonqualified defined contribution plans, while the benefits that are provided to other employees are provided only under qualified plans. The Excess Plan provides retirement benefits that would have been provided under the qualified plan, but that cannot be provided due to various Internal Revenue Service limits and non-discrimination requirements. Our qualified defined contribution plan contains the following three types of benefits: (1) employee deferrals; (2) matching contributions; and (3) profit sharing contributions (only for our employees classified as full-time or part-time). The compensation that is taken into account under the plan generally includes base salary and short-term incentive payments, but excludes most other forms of compensation, including long-term incentive compensation and other discretionary payments. The Excess Plan contains the same three types of benefits, but does not include short-term incentive payments as compensation taken into account for determining these benefits. Under the plans, eligible employees may elect to defer up to 50% of compensation. For 2023, the NEOs received employer matching contributions equal to 5% of compensation. Eligible employees also receive a profit sharing contribution equal to 6.0% of compensation and 5.7% of compensation in excess of the Social Security Wage Base for the year. The NEOs are each 100% vested in their retirement benefits. Benefits under the qualified plan are payable at any time following a termination of employment. Participants have the right to invest their qualified plan account balances among various investment options that are offered by the plan's trustee. Participants can elect various forms of payment including lump sum distributions, partial withdrawals and installments. Under the Excess Plan: •Participants' account balances are credited with interest during the year based on the rate of return of the Vanguard Retirement Savings Trust fixed income fund, which is one of the investment funds under the qualified plans (14% maximum); •The amounts credited under the Excess Plan each year are paid prior to March 15th of the following year to avoid regulatory complexities and eliminate the risk of non-payment to the executives based on the unfunded nature of the Excess Plan; and •The amounts credited under the Excess Plan (other than the portion of the employee deferrals that are in excess of the amount needed to obtain a full employer matching contribution) are increased by 15% to reflect the immediately taxable nature of the payments. Other Benefits. All U.S. employees, including the NEOs, participate in a variety of health and welfare benefit plans that are designed to enable us to attract and retain our workforce in a competitive marketplace. Perquisites and Other Personal Benefits. Although we provide limited perquisites and other personal benefits to certain executives, we do not believe these perquisites and other personal benefits constitute a material component of the executive officers' compensation package. The modest amount of cash paid to the NEOs in lieu of perquisites in 2023 is separately disclosed in the tables on pages 16 and 17 and the limited non-cash perquisites are disclosed in Note (7) to the Summary Compensation Table on page 26. No Individual Employment or Severance Agreements. None of the NEOs has an employment agreement that provides for a fixed period of employment, fixed positions or duties, or for a fixed base salary or actual or target incentive bonus. Upon an NEO's termination of employment with us for any reason, the NEOs (and all other employees) are entitled to: •Amounts earned during their term of employment, including earned but unpaid salary and accrued but unused vacation and holiday pay; and •Benefits that are provided under the retirement plans, incentive plans, and Excess Plan. There are no individual severance contracts with any of the NEOs. Upon termination of employment in certain circumstances and in accordance with the terms of the plans, the NEOs are only entitled to severance pay and continuation of certain health benefits provided under broad-based severance pay plans that are generally available to all salaried employees that provide benefits for a stated period of time based on length of service, with various maximum time periods. The CHC Committee will consider the facts and circumstances of an NEO's separation to determine whether any material severance payment that is in excess of the amount the NEO is otherwise entitled to receive under the broad-based severance plans is appropriate. Limited Change in Control Benefits for All Employees. In order to advance the compensation objective of attracting, retaining and motivating qualified management, the CHC Committee believes that it is appropriate to provide limited change in control protections to our employees. Our NEOs have the same protections as other senior management employees. In the event of a change in control, we provide for: •The payment of accrued benefits under our retirement plans; and •The payment of a pro-rata target award under the current year's incentive plans. The CHC Committee believes that: •These change in control payment provisions are appropriate to assure payment to the executives due to the unfunded nature of the benefits provided under these plans. •The skills, experience and services of our key management employees are a strong factor in our success and the occurrence of a change in control transaction would create uncertainty for these employees.
Other Compensation of Named Executive Officers
•Some key management employees would consider terminating employment in order to trigger the payment of their unfunded benefits if an immediate payment is not made when a change in control occurs and our limited change in control payment triggers are designed to encourage key management employees to remain employed during and after a change in control. Importantly, these change in control provisions are not employment agreements and do not guarantee employment for any of the executives for any period of time. In addition, none of the change in control payments will be "grossed up" for any excise taxes imposed on the executives as a result of the receipt of payments upon a change in control. For a further discussion of the potential payments that may be made to the NEOs in connection with a change in control, see Potential Payments Upon Termination/Change in Control beginning on page 29.
Impact of "Say-on-Pay" Stockholder Vote
| Summary Compensation Table |
Impact of "Say-on-Pay" Stockholder Vote
| SUMMARY COMPENSATION TABLE For Year Ended December 31, 2023 | | | | | | | | | | Name and Principal Position | Year | Salary ($) (1) | Bonus ($) (2) | Stock Awards ($) (3) | Non-Equity Incentive Plan Compensation ($) (4) | Change in Pension Value (5) and Nonqualified Deferred Compensation Earnings ($) (6) | All Other Compensation ($) (7) | Total ($) | | J.C. Butler, Jr.; President and CEO | 2023 | $871,544 | $171,308 | $1,368,515 | $1,648,124 | $18,737 | $226,700 | $4,304,928 | | | 2022 | $826,432 | $149,223 | $2,208,419 | $1,921,918 | $17,548 | $215,890 | $5,339,431 | | Carroll L. Dewing; Vice President, Operations | 2023 | $409,297 | $265 | $218,079 | $327,182 | $9,436 | $121,141 | $1,085,400 | | | 2022 | $393,083 | $397 | $354,273 | $387,725 | $7,422 | $111,651 | $1,254,551 | | John D. Neumann; Vice President, General Counsel and Secretary | 2023 | $402,604 | $— | $187,101 | $298,406 | $8,158 | $116,111 | $1,012,380 | | | 2022 | $386,665 | $— | $303,933 | $354,399 | $7,527 | $106,421 | $1,158,945 |
Impact of "Say-on-Pay" Stockholder Vote
| Grants of Plan-Based Awards Table |
GRANTS OF PLAN-BASED AWARDS
GRANTS OF PLAN-BASED AWARDS
For Year Ended December 31, 2023
| Description of Material Factors Relating to the Summary Compensation Table and Grants of Plan-Based Awards Table |
For Year Ended December 31, 2023
| STOCK VESTED For Year Ended December 31, 2023 | | | | Named Executive Officer (1) | Number of Shares Acquired on Vesting (#) (2) | Value Realized on Vesting ($) (2) | | J.C. Butler, Jr. | 38,845 | $1,329,664 | | Carroll L. Dewing | 6,371 | $218,079 | | John D. Neumann | 5,466 | $187,101 |
For Year Ended December 31, 2023
| Potential Payments Upon Termination/Change in Control |
For Year Ended December 31, 2023
| POTENTIAL PAYMENTS UPON TERMINATION/CHANGE IN CONTROL | | | | | | Name | Estimated Total Value of Payments Based on Incentive Plan Award Targets in Year of Change in Control ($) (1) | Estimated Total Value of all Payments on Change in Control ($) (2) | | | J.C. Butler, Jr. | $2,289,544 | $2,289,544 | | | Carroll L. Dewing | $419,361 | $419,361 | | | John D. Neumann | $374,740 | $374,740 |
For Year Ended December 31, 2023
| Nonqualified Deferred Compensation Benefits |
NONQUALIFIED DEFERRED COMPENSATION
NONQUALIFIED DEFERRED COMPENSATION
PENSION BENEFITS
PENSION BENEFITS
As of Year Ended December 31, 2023
| CEO Pay Ratio |
2023 CEO Pay Ratio
2023 CEO Pay Ratio We calculated total compensation for 2023 for the median employee using the same methodology we use for our NEOs as set forth in the 2023 Summary Compensation Table, which median employee annual total compensation we determined to be $124,001. CEO compensation for purposes of this disclosure represents the total compensation reported for Mr. Butler under the 2023 Summary Compensation Table for the year ended 2023, which was $4,304,928. As a result, the CEO pay ratio is approximately 35:1.
2023 CEO Pay Ratio
| Pay Versus Performance |
Overview
| PAY VERSUS PERFORMANCE(1) | | | | | | | | Year (a) | Summary Compensation Table (“SCT”) Total for PEO (1) (b) | Compensation Actually Paid to PEO (1)(2) (c) | Average Summary Compensation Table Total for Non-PEO Named Executive Officers (1) (d) | Average Compensation Actually Paid to Non-PEO Named Executive Officers (1)(2) (e) | Value of Initial Fixed $100 Investment Based On Total Shareholder Return (TSR) (3) (f) | Net Income (4) (g) | | 2023 | $4,304,928 | $4,395,683 | $1,048,890 | $1,061,488 | $149.52 | $(39,587,000) | | 2022 | $5,339,431 | $5,306,512 | $1,206,748 | $1,201,842 | $151.82 | $74,158,000 | | 2021 | $4,135,014 | $4,463,481 | $1,009,515 | $1,058,709 | $142.23 | $48,125,000 |
Description of Relationships Between Compensation Actually Paid and Certain Financial Performance Measure Results
Description of Relationships Between Compensation Actually Paid and Certain Financial Performance Measure Results The following charts provide, across the covered years, a clear description of the relationships between (1) CAP to the PEO and the financial performance measures results set forth in columns (f) and (g) of the PVP Table above, and (2) average CAP to our non-PEO named executive officers and the financial performance measures results set forth in columns (f) and (g) of the PVP Table above. The following table lists the two financial performance measures that we used to link compensation actually paid to our named executive officers for year ended December 31, 2023 to our performance:
Description of Relationships Between Compensation Actually Paid and Certain Financial Performance Measure Results
| Consolidated Operating Profit | | Consolidated NACCO ROTCE |
Description of Relationships Between Compensation Actually Paid and Certain Financial Performance Measure Results
| PART III - PROPOSALS TO BE VOTED ON AT THE 2024 ANNUAL MEETING |
Description of Relationships Between Compensation Actually Paid and Certain Financial Performance Measure Results
| PROPOSAL 1 - ELECTION OF DIRECTORS |
Director-Nominee Information
Director-Nominee Information Our Board has nominated thirteen Directors for election at the Annual Meeting. The Directors will hold office from election until the next annual meeting and until their successors are elected or until their death, resignation or removal. All of the nominees named in the following table are currently Company Directors who were elected at our 2023 annual meeting of stockholders, with the exception of W. Paul McDonald. Mr. McDonald was recommended to our NCG Committee for appointment to the Board by management, and was subsequently recommended by the NCG Committee to the Board. Mr. McDonald was appointed by the Board as a Director, effective February 21, 2024. It is intended that shares represented by proxies in the enclosed form will be voted for the election of the nominees listed below unless contrary instructions are received. We have no reason to believe that any of the nominees will be unable to serve if elected. However, if an unexpected occurrence should make it necessary, in the judgment of the proxy holders, to substitute some other person for any of the nominees, shares represented by proxies will be voted for such other person as the proxy holders may select. The disclosure below provides biographical information about each Director nominee. We have also highlighted certain notable qualifications and skills that led our Board to the conclusion that each of them should serve as a Director. We believe that the nomination of each of our Director nominees is in the best long-term interests of our stockholders, as each individual possesses the highest personal and professional ethics, integrity and values, and has the judgment, skill, independence and experience required to serve as a member of our Board. Each Director has also demonstrated a strong commitment of service to the Company.
Director-Nominee Information
| J.C. Butler, Jr.: Age 63; Director Since 2017 | | President and CEO of the Company from prior to 2019 to present. President and CEO of NNR from prior to 2019 to present. From prior to 2019 to present, Director of Hyster-Yale Materials Handling Group, Inc. ("Hyster-Yale") and of Hamilton Beach Brands Holding Company ("HBBHC"). Director of Midwest AgEnergy Group, a developer and operator of ethanol facilities in North Dakota, from prior to 2019 to 2022. Serves on the Board of the National Mining Association and is a member of the Management Committee of the Lignite Energy Council. | | With over 25 years of service in the Company's senior management, including as the President and Chief Executive of the Company and NNR, Mr. Butler has extensive knowledge of our operations and strategies. | | John S. Dalrymple, III: Age 75; Director Since 2017 | | Self-employed (farm manager) from prior to 2019 to present. Former Governor of North Dakota. | | Mr. Dalrymple's experience as the manager of one of the largest agricultural farms in North Dakota and as the former chief executive of North Dakota enables him to provide our Board with significant insight with respect to leadership and management, as well as the political and regulatory landscape in North Dakota, where NNR has multiple operations. | | John P. Jumper: Age 79; Director Since 2012 | | Retired Director and former Chairman and CEO of Leidos Holdings, Inc. ("Leidos") (an engineering and information technology company) and Retired Chief of Staff, United States Air Force. From prior to 2019 to present, Director of Hyster-Yale and HBBHC. | | Through his extensive military career, including as the highest-ranking officer in the U.S. Air Force, General Jumper developed valuable and proven leadership and management skills that make him a significant contributor to our Board. In addition, General Jumper's service on the boards of other publicly traded corporations and his experience as Chairman and CEO of two major publicly traded companies allow him to provide valuable insight to the Board on matters of corporate governance and executive compensation policies and practices. In addition, General Jumper brings extensive cybersecurity knowledge and expertise to our Board. His cybersecurity experience includes overseeing the creation of the first information warfare squadron in the U.S. Air Force during his tenure leading the U.S. Air Force and also serving as CEO of Leidos, which is a leading federal cybersecurity contractor for the U.S. Department of Defense, U.S. Department of Homeland Security and United States Intelligence Community including the National Security Agency. |
Director-Nominee Information
| Dennis W. LaBarre: Age 81; Director Since 1982 | | Retired Partner of Jones Day (a law firm). From prior to 2019 to present, Director of Hyster-Yale and HBBHC. | | Mr. LaBarre is a lawyer with broad experience counseling boards and senior management of publicly traded and private corporations regarding corporate governance, compliance and other domestic and international business and transactional issues. In addition, he was a member of senior management of a major international law firm for more than 30 years. These experiences enable him to provide our Board with an expansive view of the legal and business issues pertinent to the Company, which is further enhanced by his extensive knowledge of us as a result of his many years of service on our Board and through his involvement with its committees. | | W. Paul McDonald: Age 65; Director Since 2024 | | Retired Vice President - Engineering of Pioneer Natural Resources Company (an oil and gas company). | | Mr. McDonald joined Pioneer Natural Resources Company in 1993 and served in various executive leadership roles until his retirement in 2019. Mr. McDonald has over thirty-five years of experience in the oil and gas industry and brings a depth of engineering and operational expertise in the oil and gas industry to the Board. In addition to his extensive oil and gas experience, Mr. McDonald brings valuable and proven leadership and management skills to our Board. | | Michael S. Miller: Age 72; Director Since 2016 | | Retired Managing Director of The Vanguard Group (a registered investment advisor). From prior to 2019 to 2022, Director of Vanguard's Irish-domiciled funds and management company. From prior to 2019 to present, Director of HBBHC. From March 2021 to present, Board Trustee of Vanguard Charitable. | | Mr. Miller's qualifications to serve on our Board include his experience in senior management of a major financial services and investment management company, his experience as a partner of a major law firm, and his service on the boards of many academic and civic institutions. Mr. Miller provides our Board with financial, legal, compliance/risk management and strategic planning expertise gained through his careers in finance and law and his service on the audit committees of Vanguard's Irish-domiciled funds and management company and, prior to his retirement, various audit committees of Vanguard's affiliated companies. | | Alfred M. Rankin, Jr.: Age 82; Director Since 1972 | | Non-Executive Chairman of the Company and Non-Executive Chairman of NNR. Chairman, President and CEO of the Company until September 2017. From May 2023 to present, Executive Chairman of Hyster-Yale. From prior to 2019 to May 2023, Chairman and CEO of Hyster-Yale and Chairman of Hyster-Yale Group. From prior to 2019 to February 2021, President of Hyster-Yale. From January 2019 to present, Non-Executive Chairman of HBBHC, from September 2017 to December 2018, Executive Chairman of HBBHC and from prior to 2019 to present, Chairman of HBBHC’s principal subsidiary, Hamilton Beach Brands, Inc. | | In over 50 years of service to the Company as a Director and over 25 years in senior management, Mr. Rankin has amassed extensive knowledge of all of our strategies and operations. In addition to his extensive knowledge of the Company, he also brings to our Board unique insight resulting from his service on the boards of other publicly traded corporations and the Federal Reserve Bank of Cleveland. Additionally, through his dedicated service to many of Cleveland's cultural institutions, he provides a valuable link between our Board, the Company, and the community surrounding our corporate headquarters. Mr. Rankin is also the grandson of the founder of NACCO and additionally brings the perspective of a long-term taxable stockholder to our Board. | | Matthew M. Rankin: Age 51; Director Since 2017 | | President and CEO of Carlisle Residential Properties (a real estate property management and development company) from prior to 2019 to present. | | Mr. M. Rankin's experience as the chief executive of a significant property management and development company allows him to provide valuable insight to the Board. Mr. M. Rankin is the great-grandson of the founder of the Company and brings the perspective of a long-term taxable stockholder to our Board. | | Roger F. Rankin: Age 71; Director Since 2020 | | Self-employed (personal investments) from prior to 2019 to present. Mr. R. Rankin has also served as a Director of NNR from prior to 2019 to present and as a Director of HBBHC from prior to 2019 to February 2020. | | Mr. R. Rankin is the grandson of the founder of the Company and brings the perspective of a long-term taxable stockholder to our Board. |
Director-Nominee Information
| Lori J. Robinson: Age 65; Director Since 2019 | | Self-employed consultant, The Robinson Group, LLC. Retired General, United States Air Force. From 2019 to present, Director of Centene Corporation and Director of Korn Ferry. General Robinson also serves as a non-resident Senior Fellow at Harvard Kennedy School's Belfer Center for Science and International Affairs. | | After more than 37 years in the U.S. Air Force and retiring as the Commander of the North American Aerospace Defense Command (NORAD) and the United States Northern Command (USNORTHCOM), where she became the United States' first female combatant commander, General Robinson brings valuable and proven leadership and management skills to our Board. | | Valerie Gentile Sachs: Age 68; Director Since 2023 | | Retired Vice President, General Counsel and Corporate Secretary of OM Group, Inc., a formerly publicly traded global developer and manufacturer of magnetic technologies, battery technologies and engineered specialty chemicals. From prior to 2019 to present, Director of CECO Environmental Corp. | | Ms. Sachs will bring a combination of legal expertise, extensive executive management and leadership experience to our Board. As the former General Counsel of three public companies, Ms. Sachs has developed expertise in the areas of corporate governance, compliance and executive compensation, which provides strong support and additional depth to our Board. | | Robert S. Shapard: Age 68; Director Since 2020 | | Retired Chief Executive Officer of Oncor Electric Delivery. From prior to 2019 to present, Mr. Shapard has served as a Director of Oncor Electric Delivery and Leidos Holdings, Inc. | | Mr. Shapard's experience in senior management of a large electric utility company provides our Board with significant insight into operations, leadership and management, particularly with respect to the power generation industry. | | Britton T. Taplin: Age 67; Director Since 1992 | | Self-employed (personal investments) from prior to 2019 to present. Mr. Taplin has also served as a Director of Hyster-Yale and Hamilton Beach Brands, Inc. from prior to 2019 to present. | | Mr. Taplin is the grandson of the founder of the Company and brings the perspective of a long-term taxable stockholder to our Board. |
Director-Nominee Information
| YOUR BOARD RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE DIRECTOR NOMINEES PRESENTED IN PROPOSAL 1. |
Director Compensation
Director Compensation The CHC Committee retained Korn Ferry to evaluate the compensation program for the Directors. Korn Ferry performs an in-depth evaluation of our Director compensation program on a triennial basis, which last occurred in August 2023, and performs interim reviews annually. Korn Ferry utilizes the National Association of Corporate Directors' survey of director compensation, focusing on small companies, which have $500 million to $1 billion in annual revenues. Korn Ferry recommends changes to our Director compensation program based on its review of our program and the survey data. Korn Ferry also reviews the compensation structure for our Non-Executive Chairman, which includes an annual retainer of $250,000 to serve as Chairman and $250,000 in consulting fees for consulting services Mr. A. Rankin provides to the Company that are in addition to his responsibilities as Chairman of the Board. Mr. A. Rankin has extensive executive management experience (including long-tenured service as a public company CEO) and provides valuable advice and insight regarding the Company's development and implementation of its strategic priorities and risk management programs. Additional information concerning Mr. A. Rankin's responsibilities under the consulting agreement are discussed in Note (4) to the Director Compensation Table. Based on Korn Ferry's review of Mr. A. Rankin's compensation structure, the CHC Committee has determined that Mr. A. Rankin's compensation is reasonable for his duties and responsibilities and the services he provides. The following table sets forth all compensation of each Director for services as our Directors rendered during 2023, other than J.C. Butler, Jr. In addition to being a Director, Mr. Butler serves as President and CEO of the Company and NNR. He does not receive any compensation for his services as a Director and his compensation for services as one of our executive officers is shown in the Summary Compensation Table on page 26.
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | All Other Compensation ($)(3) | Total ($) | | John S. Dalrymple, III | $86,187 | $111,561 | $7,701 | $205,449 | | John P. Jumper | $93,055 | $111,561 | $7,701 | $212,317 | | Dennis W. LaBarre | $98,055 | $111,561 | $5,424 | $215,040 | | Michael S. Miller | $103,055 | $111,561 | $7,701 | $222,317 | | Alfred M. Rankin, Jr. (4) | $125,035 | $152,169 | $255,424 | $532,628 | | Matthew M. Rankin | $85,055 | $111,561 | $7,701 | $204,317 | | Roger F. Rankin | $65,055 | $111,561 | $7,701 | $184,317 | | Lori J. Robinson | $83,055 | $111,561 | $2,924 | $197,540 | | Valerie Gentile Sachs | $134 | $117,921 | $4,198 | $122,253 | | Robert S. Shapard | $93,055 | $111,561 | $2,602 | $207,218 | | Britton T. Taplin | $65,055 | $111,561 | $2,424 | $179,040 |
DIRECTOR COMPENSATION
(1)Amounts in this column reflect the annual retainers and other fees earned by the Directors in 2023. They also include payment for fractional shares of Class A Common that were paid under NACCO Industries, Inc.'s Non-Employee Directors' Equity Compensation Plan ("Non-Employee Directors' Plan") described below. (2)Under the Non-Employee Directors' Plan, the Directors are required to receive a portion of their annual retainer in shares of Class A Common (the "Mandatory Shares"). They are also permitted to elect to receive all or part of the remainder of the retainer and all fees in the form of shares of Class A Common (the "Voluntary Shares"). Amounts in this column reflect the aggregate grant date fair value of the Mandatory Shares and Voluntary Shares that were granted to Directors under the Non-Employee Directors' Plan, determined pursuant to FASB ASC Topic 718. See Note (2) to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 for more information regarding the accounting treatment of our equity awards. All Mandatory Shares and Voluntary Shares are immediately vested when granted. Therefore, no equity awards remained outstanding at the end of the fiscal year ended December 31, 2023. (3)The amount listed includes: (1) Company-paid life insurance premiums; (2) other Company-paid premiums for accidental death and dismemberment insurance for the Director and his spouse (other than for Mr. Shapard's spouse); and (3) personal excess liability insurance premiums for the Directors and immediate family members (other than Messrs. LaBarre, A. Rankin, and Taplin and General Robinson). The amount listed also includes charitable contributions made in our name on behalf of the Director and their spouse under our matching charitable gift program in the amount of $5,000 for each other Director (other than General Robinson, whose amount is $2,500, Ms. Gentile Sachs, whose amount is $2,750, Mr. Shapard, whose amount is $0, and Mr. Taplin, whose amount is $2,000). Note (4) below describes additional amounts reported in the "All Other Compensation" column for A. Rankin. (4)Upon Mr. Alfred M. Rankin Jr.'s retirement from the Company, the Company and Mr. Rankin entered into a consulting agreement independent of his continuing role as the Non-Executive Chairman of the Board. The Company believes that Mr. Rankin's extensive experience transitioning NACCO from underground mining to surface mining in the 1980s is vital as the Company pursues non-coal mining opportunities. Mr. Rankin meets with senior management on a regular basis to discuss growth and diversification strategies, including (a) possible investment opportunities in our mitigation resources and minerals management businesses, (b) improving return on capital for investments at MLMC and North American Mining, (c) developing other non-coal mining opportunities, and (d) our rebranding efforts. Mr. Rankin meets with the CEO more frequently, which can be numerous times a month, to further discuss Company strategy. The Company pays Mr. Rankin a monthly consulting fee of $20,833.33 for services under the consulting agreement. The consulting agreement continued in effect until December 31, 2023. In addition to the items described in Note (3) above, the amount reported for Mr. Rankin in the "All Other Compensation" column includes $250,000 in consulting fees paid for 2023.
Additional Information Relating to the Director Compensation Table
Additional Information Relating to the Director Compensation Table Each non-employee Director is entitled to receive the following compensation for service on our Board and the NNR Board:
Additional Information Relating to the Director Compensation Table
| Type of Compensation | Amount | | Annual Board Retainer: | $175,000 ($110,000 of which is required to be paid in shares of Class A Common) except that the Chairman receives an annual retainer of $250,000 ($150,000 of which is required to be paid in shares of Class A Common) | | Annual Committee Retainer: | $8,000 Audit Review Committee member; $5,000 for members of other Board committees except the Executive Committee; and $0 for Executive Committee | | Committee Chairman Retainer: | $20,000 Audit Review Committee Chairman; $15,000 Compensation and Human Capital Committee Chairman; $10,000 for Chairman of other Board Committees except the Executive Committee; and $0 for Executive Committee |
Additional Information Relating to the Director Compensation Table
The retainers are paid quarterly in arrears. Each Director is also reimbursed for expenses incurred as a result of attendance at meetings. We also may make chartered aircraft available to Directors for attendance at meetings. Under the Non-Employee Directors' Plan, each non-employee Director except the Chairman receives $110,000 of his or her $175,000 retainer in the form of restricted shares of Class A Common while the Chairman receives $150,000 of his $250,000 retainer in the form of restricted shares of Class A Common. Any fractional shares are paid in cash. The number of shares of Class A Common issued to a Director is determined by the following formula: the dollar value of the portion of the applicable retainer that was earned by the Director each quarter divided by the average closing price of shares of Class A Common on the NYSE for each week during such quarter. These shares are fully vested on the date of grant, and the Director is entitled to all rights of a stockholder, including the right to vote and receive dividends. However, the Directors are generally required to hold the shares for a period of ten years from the last day of the calendar quarter for which the shares were earned and, during that ten-year holding period, the shares cannot be assigned or transferred except in the event of divorce or to a trust for the benefit of the Director or his spouse, children or grandchildren. The transfer restrictions lapse earlier in the event of: •Death; permanent disability or five years from the date of the Director's retirement; •The date that a Director is both retired from our Board and has reached age 70; or •At such other time as determined by the Board in its sole discretion. In addition, each Director may elect to receive shares of Class A Common in lieu of cash for up to 100% of the balance of his retainers. However, these Voluntary Shares are not subject to the previously described transfer restrictions. Each Director may also receive (1) $50,000 in Company-paid life insurance; (2) Company-paid accidental death and dismemberment insurance for the Director and spouse; (3) $10 million in personal excess liability insurance for the Director and immediate family members who reside with the Director and (4) up to $5,000 per year in matching charitable contributions.
Additional Information Relating to the Director Compensation Table
| PROPOSAL 2 - APPROVAL OF AN AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO EXPAND THE EXCULPATION PROVISION TO LIMIT LIABILITY OF CERTAIN OFFICERS |
Additional Information Relating to the Director Compensation Table
The Company’s Certificate of Incorporation currently limits the monetary liability of directors in certain circumstances pursuant to and consistent with Section 102(b)(7) of the Delaware General Corporation Law ("DGCL"). Effective August 1, 2022, Section 102(b)(7) of the DGCL was amended to enable Delaware corporations to limit the liability of certain officers in limited circumstances. In light of this update, we are proposing to amend our Certificate of Incorporation to provide for the exculpation of certain of the Company’s officers in specific circumstances, as permitted by Delaware law. Delaware law only permits, and our proposed amendment would only permit, exculpation of certain officers for direct claims (as opposed to derivative claims made by stockholders on behalf of the corporation) and would not apply to breaches of the duty of loyalty, acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, or any transaction in which the officer derived an improper personal benefit. The proposed amendment would not be retroactive to any act or omission occurring prior to its effective date. Further, the exculpation provision would only apply to certain officers, namely a person who (during the course of conduct alleged to be wrongful) (i) is or was president, chief executive officer, chief operating officer, chief financial officer, chief legal officer, controller, treasurer or chief accounting officer; (ii) is or was identified in the Company’s public filings with the SEC as one of the most highly compensated executive officers of the Company; or (iii) has, by written agreement with the Company, consented to be identified as an officer for purposes of accepting service of process. These proposed limits on the scope of our officers’ liability are intended to strike a balance between stockholders’ interest in accountability and their interest in the Company being able to attract and retain quality officers. Our NCG Committee and our Board considered the benefits and detriments of eliminating our officers’ personal liability under certain circumstances. Adopting the proposed amendment would better position the Company to attract top officer candidates and retain our current officers and enable the Company to assure those persons that exculpation under certain circumstances is available. The nature of the role of officers often requires them to make decisions on crucial matters and in response to time-sensitive opportunities and challenges, which can create substantial risk of investigations, claims, actions, suits, or proceedings seeking to impose liability based on hindsight regardless of merit, especially in the current litigious environment. Limiting our current and prospective officers’ concern about the risk of personal liability would empower them to best exercise their business judgment in furtherance of the interests of the Company and our stockholders. Our Board has considered the narrow class and type of claims for which officers’ liability would be exculpated and the benefits the Board believes would accrue to the Company and its stockholders – namely, an enhanced ability to attract and retain talented officers – and has determined that it would be advisable and in the best interest of the Company and our stockholders to amend the Certificate of Incorporation as described herein. We expect that failing to adopt the proposed amendment could impact our ability to recruit and retain exceptional officer candidates who determine that the potential exposure to liabilities, costs of defense, and other risks of proceedings exceeds the benefits of serving as an officer of the Company. The discussion above is qualified in its entirety by reference to the full text of the proposed amendment, which is attached hereto as Appendix A.
Additional Information Relating to the Director Compensation Table
| YOUR BOARD RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 2 TO APPROVE THE PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION. |
Additional Information Relating to the Director Compensation Table
| PROPOSAL 3 - ADVISORY VOTE TO APPROVE THE COMPANY'S NAMED EXECUTIVE OFFICER COMPENSATION |
Additional Information Relating to the Director Compensation Table
As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd Frank Act"), and Section 14A of the Exchange Act, we are asking our stockholders to cast a non-binding advisory vote to approve the Company's Named Executive Officer compensation, commonly referred to as a "say-on-pay" vote. The vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the policies and practices described in this Proxy Statement. At our 2023 annual meeting, our executive compensation program received approval from approximately 93% of the stockholder votes cast. We believe that this result demonstrates our stockholders' endorsement of our CHC Committee's executive compensation decisions and policies.