DEF 14A of MSC Industrial Direct Co Inc
Filed Dec 13, 2023 · FY20230001003078-23-000141
and 2023 Proxy Statement
| Fiscal Year 2023 Grants of Plan-Based Awards | 51 | | Outstanding Equity Awards at 2023 Fiscal Year-End | 52 | | Fiscal Year 2023 Option Exercises and Stock Vested | 54 | | Pension Benefits and Nonqualified Deferred Compensation | 54 | | Potential Payments Upon Termination or Change in Control | 54 | | Potential Payments Upon Termination or Change in Control Table as of September 1, 2023 | 56 | | Indemnification Agreements; Directors and Officers Liability Insurance | 58 | | CEO PAY RATIO | 59 | | PAY VERSUS PERFORMANCE | 60 | | ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION (PROPOSAL NO. 3) | 64 | | ADVISORY VOTE ON THE FREQEUNCY OF FUTURE ADVISORY VOTES TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION (PROPOSAL NO. 4) | 65 | | EQUITY COMPENSATION PLAN INFORMATION | 66 | | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 67 | | SHAREHOLDER PROPOSALS FOR THE 2025 ANNUAL MEETING OF SHAREHOLDERS | 69 | | INFORMATION ABOUT THE ANNUAL MEETING | 69 | | OTHER MATTERS | 72 | | APPENDIX A: NON-GAAP FINANCIAL MEASURES AND DEFINITIONS | A-1 |
and 2023 Proxy Statement
| Named Executive Officer | Fiscal Year 2023 Base Salary ($) | Competitive Positioning(1) of Base Salary | Fiscal Year 2023 Target Bonus ($) | Competitive Positioning(1) of Target Bonus | Fiscal Year 2023 Stock Awards ($) | Fiscal Year 2023 Target Total Direct Compensation ($)(2) | Competitive Positioning(1) of Target Total Direct Compensation | | Erik Gershwind | 825,446 | <25th percentile | 1,500,000 | >75th percentile | 3,249,955 | 5,575,401 | between 25th & 50th percentiles | | Kristen Actis-Grande | 540,385 | between 25th & 50th percentiles | 378,942 | between 25th & 50th percentiles | 749,901 | 1,669,228 | between 25th & 50th percentiles | | Martina McIsaac | 497,115 | between 25th & 50th percentiles | 354,327 | approx. 50th percentile | 1,099,877 | 1,951,319 | approx. 50th percentile | | John Hill | 520,192 | approx. 75th percentile | 338,438 | between 50th & 75th percentiles | 549,916 | 1,408,546 | approx. 50th percentile | | Elizabeth Bledsoe | 407,308 | between 25th & 50th percentiles | 204,039 | <25th percentile | 399,969 | 1,011,316 | approx. 25th percentile |
and 2023 Proxy Statement
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | | Erik Gershwind | 2023 | 825,446 | — | 3,249,955 | — | 826,575 | 26,148 | 4,928,124 | | President and Chief Executive Officer | 2022 | 815,937 | — | 3,249,890 | — | 2,362,500 | 24,916 | 6,453,243 | | Kristen Actis-Grande | 2023 | 540,385 | — | 749,901 | — | 208,816 | 21,710 | 1,520,812 | | Executive Vice President and Chief Financial Officer | 2022 | 504,808 | — | 649,944 | — | 538,546 | 6,329 | 1,699,627 | | Martina McIsaac(1) | 2023 | 497,115 | 200,000 | 1,099,877 | — | 195,252 | 33,619 | 2,025,863 | | Executive Vice President and Chief Operating Officer | | | | | | | | | | John Hill(1) | 2023 | 520,192 | — | 549,916 | — | 186,496 | 42,369 | 1,298,973 | | Senior Vice President and Chief Digital Information Officer | | | | | | | | | | Elizabeth Bledsoe | 2023 | 407,308 | — | 399,969 | — | 112,435 | 21,265 | 940,977 | | Senior Vice President and Chief People Officer | 2022 | 381,731 | — | 324,887 | — | 267,420 | 21,645 | 995,683 |
Reclassification Special Committee
Reclassification Special Committee On February 1, 2023, the Board formed a special committee of independent and disinterested members of the Board, consisting of Messrs. Michael Kaufmann, Steven Paladino and Philip Peller (the “Special Committee”), to review, evaluate and, if applicable, negotiate a reclassification of the Company’s Class B Common Stock and related aspects to such reclassification. On June 20, 2023, the Board, based upon the unanimous recommendation of the Special Committee, authorized, approved and declared advisable, fair to and in the best interests of the Company and the unaffiliated holders of the Company’s Class A Common Stock, the terms of the Reclassification Agreement and related documents as well as the Reclassification and related transactions. During fiscal 2023, the Special Committee met 29 times. At a special meeting of shareholders on October 4, 2023, the Reclassification was approved by the unaffiliated holders of Class A Common Stock, representing approximately 85% of the Company’s Class A Common Stock outstanding on the record date for the special meeting. The Reclassification closed on October 6, 2023.
Reclassification Special Committee
| Shareholder Recommendations for Director Candidates |
Reclassification Special Committee
Shareholders may recommend a director candidate to be considered for the Company’s 2025 Annual Meeting of Shareholders by submitting the candidate’s name in accordance with provisions of the Company’s Third Amended and Restated By-Laws, which require advance notice to the Company and certain other information. Written notice must be delivered to the Company’s Vice President, General Counsel and Corporate Secretary at MSC Industrial Direct Co., Inc., 515 Broadhollow Road, Suite 1000, Melville, New York 11747 not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the anniversary date of the Annual Meeting. As a result, notice of director candidates submitted by a shareholder pursuant to the provisions of the Company’s Third Amended and Restated By-Laws (other than proposals submitted pursuant to Rule 14a-8 of the Exchange Act) must be received not earlier than the close of business on September 26, 2024 and not later than the close of business on October 26, 2024. However, in the event that the 2025 Annual Meeting of Shareholders is called for a date that is more than 30 days before or more than 70 days after January 24, 2025, notice by the shareholder in order to be timely must be so delivered not earlier than the close of business on the 120th day prior to the date of the 2025 Annual Meeting of Shareholders and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Company. Notwithstanding the foregoing, in the event that the number of directors to be elected to the Board is increased and there is no public announcement by the Company naming all of the nominees for director proposed by the Board or specifying the size of the increased Board at least 10 days prior to the applicable deadline described above, a shareholder’s notice shall also be considered timely, but only with respect to proposed nominees for any new positions created by such increase, if it is delivered to the Company’s Vice President, General Counsel and Corporate Secretary at MSC Industrial Direct Co., Inc., 515 Broadhollow Road, Suite 1000, Melville, New York 11747 not later than the close of business on the 10th day following the day on which a public announcement of such increase is first made by the Company. The notice must contain certain information about the director candidate and the shareholder submitting the nomination, as set forth in the Company’s Third Amended and Restated By-Laws. With respect to the director candidate, the notice must contain, among other things (i) the name, age, business address and residence address of the person, (ii) a complete biography and statement of such person’s qualifications, including the principal occupation or employment of the person (at present and for the past five years), (iii) the Specified Information (as defined in the Company’s Third Amended and Restated By-Laws) for the person and any immediate family member (as defined in the Company’s Third Amended and Restated By-Laws) of the person, or any affiliate or associate (each, as defined in the Company’s Third Amended and Restated By-Laws) of the person, or any person acting in concert therewith, (iv) a complete and accurate description of all direct and indirect compensation and other monetary or non-monetary agreements, arrangements and understandings (whether written or oral) existing presently, that existed during the past three years or that were offered during the past three years (whether accepted or declined), and any other material relationships, between or among the shareholder or any beneficial owner on whose behalf the nomination is being made or any Shareholder Associated Person (as defined in the Company’s Third Amended and Restated By-Laws), on the one hand, and the person, and any immediate family member of the person, and the person’s respective affiliates and associates, or others acting in concert therewith, or any other person or persons, on the other hand (including the names of such persons), and all biographical, related party transaction and other information that would be required to be disclosed pursuant to the federal and state securities laws, including Rule 404 promulgated under Regulation S-K under the the Securities Act (or any successor provision), if the shareholder or any beneficial owner on whose behalf the nomination is being made or any Shareholder Associated Person was the “registrant” for purposes of such rule and such person was a director or executive officer of such registrant, (v) any other information relating to the person that would be required to be disclosed in a proxy statement or any other filings required to be made in connection with solicitations of proxies for the election of directors in a contested election or that is otherwise required pursuant to and in accordance with Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named in proxy statements as a proposed nominee of the shareholder and to serving as a director if elected), and (vi) a completed and signed questionnaire, representation and agreement and any and all other information required by the Company’s Third Amended and Restated By-Laws. With respect to the shareholder submitting the nomination and any beneficial owner on whose behalf the nomination is being made, the notice must contain, among other things (i) the name and address of each such person, as the name and address appear on the Company’s books, and the name and address of any Shareholder Associated Person, (ii) the Specified Information for each such person and any Shareholder Associated Person, (iii) a representation by the shareholder that such shareholder is a holder of record of shares of capital stock of the Company entitled to vote at such meeting, will continue to be a shareholder of record of the Company entitled to vote at such meeting through the date of such meeting and intends to appear in person or by proxy at the meeting to propose such nomination, (iv) any other information relating to each such person and any Shareholder Associated Person that would be required to be disclosed in a proxy statement and form of proxy or other filings required to be made in connection with solicitations of proxies for the election of directors in a contested election, (v) a representation by the shareholder as to whether any such person and/or any Shareholder Associated Person intends or is part of a group which intends: (a) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Company’s outstanding capital stock required to elect the proposed nominee, and/or (b) otherwise to solicit proxies from shareholders in support of such nomination, (vi) a certification by the shareholder that each such person and any Shareholder Associated Person has complied with all applicable federal, state and other legal requirements in connection with its acquisition of shares of capital stock or other securities of the Company and/or such person’s acts or omissions as a shareholder of the Company, (vii) the statement required by Rule 14a-19(b)(3) of the Exchange Act (or any successor provision), (viii) the names and addresses of other shareholders (including beneficial owners) known by any such person, proposed nominee or Shareholder Associated Person to support such nominations, and, to the extent known, the class or series and number of shares of capital stock or other securities of the Company which are, directly or indirectly, held of record or owned beneficially by each such other shareholder or beneficial owner, and (ix) a representation by the shareholder as to the accuracy of the information set forth in the notice.
Reclassification Special Committee
A shareholder who is interested in recommending a director candidate should request a copy of the Company’s Third Amended and Restated By-Laws by writing to the Company’s Vice President, General Counsel and Corporate Secretary at MSC Industrial Direct Co., Inc., 515 Broadhollow Road, Suite 1000, Melville, New York 11747. Appropriate submission of a recommendation by a shareholder does not guarantee the selection of the shareholder’s candidate or the inclusion of the candidate in the Company’s proxy materials; however, the Nominating and Corporate Governance Committee will consider any such candidate in accordance with the director nomination process described above.
Reclassification Special Committee
| Universal Proxy Rules for Director Nominations |
Reclassification Special Committee
In addition to satisfying the foregoing requirements under the Company’s Third Amended and Restated By-Laws, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees for the 2025 Annual Meeting of Shareholders must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act.
Reclassification Special Committee
| Director Meeting Attendance |
Reclassification Special Committee
Each incumbent director attended, or participated by means of remote communication in, 75% or more of the aggregate number of meetings of the Board and committees of the Board on which the director served during fiscal year 2023. We encourage attendance by the directors at our annual meeting of shareholders. All eight of the Company’s directors participated in the Company’s 2023 Annual Meeting of Shareholders, which was held virtually via live audio webcast.
Reclassification Special Committee
| Board Leadership Structure; Executive Sessions of the Independent Directors |
Reclassification Special Committee
The Board functions collaboratively and emphasizes active participation and leadership by all of its members. The Board currently consists of eight directors, each of whom, other than Messrs. Gershwind and Jacobson, is independent under our Corporate Governance Guidelines and applicable SEC rules and NYSE listing standards. Mr. Gershwind has served as our President and Chief Executive Officer since January 2013 and as a member of the Board since 2010. Mr. Jacobson, who is one of our principal shareholders, was elected Chairman of the Board in January 1998 and became Non-Executive Chairman of the Board in January 2013. Mr. Jacobson previously served as our President from October 1995 through November 2003, and as our Chief Executive Officer from October 1995 through November 2005. The Board has separated the roles of Chairman and Chief Executive Officer since 2005 and has appointed an independent Lead Director since 2007. The Board of Directors believes that the most effective Board leadership structure for the Company at the present time is for the roles of Chief Executive Officer and Chairman of the Board to be separated. Under this structure, our Chief Executive Officer is generally responsible for setting the strategic direction for the Company and for providing the day-to-day leadership over our operations, and our Chairman of the Board sets the agenda for meetings of the Board and presides over Board meetings. In addition, our independent directors meet at regularly scheduled executive sessions without members of management present. Mr. Peller, who has served as our Lead Director since 2007, presides over the executive sessions of the independent directors. The Lead Director also has such other duties and responsibilities as determined by the Board from time to time. Those additional duties and responsibilities include: •making recommendations to the Board regarding the structure of Board meetings; •recommending matters for consideration by the Board; •determining appropriate materials to be provided to the directors; •serving as an independent point of contact for shareholders wishing to communicate with the Board; •assigning tasks to the appropriate Board committees with the approval of the Nominating and Corporate Governance Committee; and •acting as a liaison between management and the independent directors. The Board retains the authority to modify this leadership structure as and when appropriate to best address our unique circumstances at any given time and to serve the best interests of our shareholders.
Reclassification Special Committee
| Role of the Board in Risk Oversight |
Reclassification Special Committee
The Board’s role in risk oversight involves both the full Board and its committees. The full Board is responsible for the oversight of the Company’s risk management and reviews our major financial, operational, compliance, cybersecurity, ESG, and reputational and strategic risks, including steps to monitor, manage and mitigate such risks. In addition, each of the Board committees is responsible for oversight of risk management practices for categories of risks relevant to its functions. For example, the Audit Committee has oversight responsibility for our major financial risk exposures and the steps that have been taken to monitor and mitigate such exposures, including with respect to risk assessment and risk management and receives regular reports on Enterprise Risk Management (ERM) from senior management. Similarly, the Nominating and Corporate Governance Committee has oversight responsibility over ESG, governance and compliance matters and the Compensation Committee has oversight responsibility for our risk management practices for risks relating to our overall compensation structure, including review of our compensation practices, in each case with a view toward assessing associated risks. Please see “Compensation Risk Assessment” on page 48 of this Proxy Statement. The Audit Committee oversees our financial and risk management policies, including risk management policies and programs related to cybersecurity designed to monitor, mitigate and respond to cyber risks, threats, and reports. To more effectively prevent, detect and respond to information security threats, the Company’s cyber risk management program is supervised by a dedicated Vice President of Information Security whose team is responsible for leading enterprise-wide cybersecurity strategy, policy, standards, architecture and processes. The Audit Committee receives regular reports from the Chief Digital Information Officer and the Vice President, Information Security on, among other things, the Company’s cyber risks and threats, the status of projects to strengthen the Company’s information security systems, assessments of the Company’s cybersecurity program and the emerging cyber threat landscape. The Company maintains cybersecurity insurance and regularly reviews its policy and levels of coverage based on current risks. All associates of the Company complete an annual cybersecurity training program in which specific threats and scenarios are highlighted based on the cyber risk management team’s analysis of current cyber risks to the organization. Associates also receive ongoing communications regarding the importance of guarding against phishing, social engineering and other cyber attack vectors. The Board as a group is regularly updated on specific risks in the course of its review of corporate strategy, business plans and reports to the Board by management and its respective committees. The Board believes that its leadership structure supports its risk oversight function by providing a greater role for the independent directors in the oversight of the Company.
Reclassification Special Committee
| Corporate Governance Guidelines |
Reclassification Special Committee
We have adopted Corporate Governance Guidelines, which are available on our website at https://investor.mscdirect.com/corporate-governance.
Reclassification Special Committee
| Non-Executive Director Stock Ownership Guidelines |
Reclassification Special Committee
To more closely align the interests of our non-executive directors with those of our shareholders, the Board of Directors, upon the recommendation of the Nominating and Corporate Governance Committee, has adopted stock ownership guidelines for our non-executive directors. The ownership guidelines provide for each of our non-executive directors to own a minimum number of shares having a value equal to five times his or her base annual cash retainer on his or her first year of service on the Board (i.e., a value equal to $210,000 for directors whose tenure began before the adoption of the guidelines, a value equal to $250,000 for Messrs. Kaufmann and Paladino, a value equal to $275,000 for Ms. Seseri, and a value equal to $450,000 for Ms. Purcell). All shares held by our non-executive directors, including unvested restricted stock units (“RSUs”), count toward this guideline. The guidelines provide for our non-executive directors to reach this ownership level within the later of five years from the date on which the guidelines were adopted or five years from the date on which the director was first elected. Once a non-executive director has attained his or her minimum ownership requirement, he or she must maintain at least that level of ownership. If a non-executive director has not satisfied his or her proportionate minimum stock ownership guideline, the director must retain an amount equal to 100% of the net shares received as a result of the vesting of RSUs. All of our non-executive directors are in compliance with their current stock ownership guidelines.
Reclassification Special Committee
| Overview of Director Compensation |
Reclassification Special Committee
| Fiscal Year 2023 Director Compensation |
Reclassification Special Committee
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2)(3) | All Other Compensation ($) | Total ($) | | Louise Goeser(4) | 105,000 | 124,923 | — | 229,923 | | Mitchell Jacobson(4) | 125,000 | — | 313,880(5) | 438,880 | | Michael Kaufmann(4) | 144,300 | 124,923 | — | 269,223 | | Steven Paladino(4) | 159,300 | 124,923 | — | 284,223 | | Philip Peller(4) | 169,300 | 124,923 | — | 294,223 | | Rahquel Purcell(4)(6) | 48,945 | 124,923 | — | 173,868 | | Rudina Seseri(4) | 90,000 | 124,923 | — | 214,923 |
Fiscal Year 2023 Compensation Highlights
| Named Executive Officer | Fiscal Year 2023 Base Salary ($) | Competitive Positioning(1) of Base Salary | Fiscal Year 2023 Target Bonus ($) | Competitive Positioning(1) of Target Bonus | Fiscal Year 2023 Stock Awards ($) | Fiscal Year 2023 Target Total Direct Compensation ($)(2) | Competitive Positioning(1) of Target Total Direct Compensation | | Erik Gershwind | 825,446 | <25th percentile | 1,500,000 | >75th percentile | 3,249,955 | 5,575,401 | between 25th & 50th percentiles | | Kristen Actis-Grande | 540,385 | between 25th & 50th percentiles | 378,942 | between 25th & 50th percentiles | 749,901 | 1,669,228 | between 25th & 50th percentiles | | Martina McIsaac | 497,115 | between 25th & 50th percentiles | 354,327 | approx. 50th percentile | 1,099,877 | 1,951,319 | approx. 50th percentile | | John Hill | 520,192 | approx. 75th percentile | 338,438 | between 50th & 75th percentiles | 549,916 | 1,408,546 | approx. 50th percentile | | Elizabeth Bledsoe | 407,308 | between 25th & 50th percentiles | 204,039 | <25th percentile | 399,969 | 1,011,316 | approx. 25th percentile |
MSC Executive Severance Plan
| Summary Compensation Table |
MSC Executive Severance Plan
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | | Erik Gershwind | 2023 | 825,446 | — | 3,249,955 | — | 826,575 | 26,148 | 4,928,124 | | President and | 2022 | 815,937 | — | 3,249,890 | — | 2,362,500 | 24,916 | 6,453,243 | | Chief Executive Officer | 2021 | 771,151 | 500 | 3,249,925 | — | 1,124,738 | 23,789 | 5,170,103 | | Kristen Actis-Grande | 2023 | 540,385 | — | 749,901 | — | 208,816 | 21,710 | 1,520,812 | | Executive Vice President and | 2022 | 504,808 | — | 649,944 | — | 538,546 | 6,329 | 1,699,627 | | Chief Financial Officer | 2021 | 408,654 | 150,000 | 749,871 | — | 256,170 | 14,808 | 1,579,503 | | Martina McIsaac(6) | 2023 | 497,115 | 200,000 | 1,099,877 | — | 195,252 | 33,619 | 2,025,863 | | Executive Vice President and | | | | | | | | | | Chief Operating Officer | | | | | | | | | | John Hill(7) | 2023 | 520,192 | — | 549,916 | — | 186,496 | 42,369 | 1,298,973 | | Senior Vice President and Chief Digital Information Officer | | | | | | | | | | Elizabeth Bledsoe (8) | 2023 | 407,308 | — | 399,969 | — | 112,435 | 21,265 | 940,977 | | Senior Vice President and Chief People Officer | 2022 | 381,731 | — | 324,887 | — | 267,420 | 21,645 | 995,683 |
MSC Executive Severance Plan
| Fiscal Year 2023 Grants of Plan-Based Awards |
MSC Executive Severance Plan
| Outstanding Equity Awards at 2023 Fiscal Year-End |
MSC Executive Severance Plan
| Fiscal Year 2023 Option Exercises and Stock Vested |
MSC Executive Severance Plan
| Pension Benefits and Nonqualified Deferred Compensation |
MSC Executive Severance Plan
| Potential Payments Upon Termination or Change in Control |
MSC Executive Severance Plan
| Potential Payments Upon Termination or Change in Control Table as of September 1, 2023 |
MSC Executive Severance Plan
| CEO PAY RATIO |
MSC Executive Severance Plan
| PAY VERSUS PERFORMANCE |
MSC Executive Severance Plan
| | | | | | Value of Initial Fixed $100 Investment Based on: | | | | | | Year | Summary Compensation Table Total for CEO | Compensation Actually Paid to CEO | Average Summary Compensation Table Total for other NEOs | Average Compensation Actually Paid to other NEOs | Total Shareholder Return | Peer Group Total Shareholder Return | Net Income (in thousands) | Adjusted Operating Margin | Organic Revenue Growth (ADS) | | | ($)(1) | ($)(1) (2) (3) | ($)(1) | ($)(1) (2) (3) | ($)(4) | ($)(4) | ($) | (%)(5) | (%)(5) | | 2023 | 4,928,124 | 8,189,514 | 1,446,656 | 1,756,748 | 177.22 | 154.70 | 343,107 | 12.5 | 10.6 | | 2022 | 6,453,243 | 6,528,550 | 1,232,010 | 974,416 | 132.02 | 121.48 | 340,482 | 12.7 | 10.1 | | 2021 | 5,170,103 | 7,914,763 | 1,199,324 | 1,603,809 | 138.24 | 122.97 | 217,937 | 11.5 | 1.5 |
Relationship Between Compensation Actually Paid and Company Total Shareholder Return
Relationship Between Compensation Actually Paid and Company Total Shareholder Return
Relationship Between Compensation Actually Paid and Net Income
Relationship Between Compensation Actually Paid and Net Income
Relationship Between Compensation Actually Paid and Adjusted Operating Margin
Relationship Between Compensation Actually Paid and Adjusted Operating Margin
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
| Most Important Financial Performance Measures(1) | | Adjusted Operating Margin | | Organic Revenue Growth (ADS) | | Adjusted ROIC |
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
(1)Adjusted Operating Margin, Organic Revenue Growth (ADS) and Adjusted ROIC are all non-GAAP financial measures. See Appendix A to this Proxy Statement for definitions and reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures. As required by Section 14A of the Exchange Act, this proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to vote to approve or not approve, on an advisory basis, the compensation of our named executive officers, which is described in the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this Proxy Statement. This vote is not intended to address any specific item or element of compensation or the compensation of any particular officer, but rather the overall compensation of our named executive officers and the philosophy, principles and policies used to determine compensation. Shareholders were most recently asked to approve the compensation of our named executive officers at the Company’s 2023 Annual Meeting of Shareholders, and shareholders approved our named executive officer compensation with approximately 99% of the votes cast in favor. At the Company’s 2018 Annual Meeting of Shareholders, we asked shareholders to indicate whether future advisory say-on-pay votes should occur every one, two or three years, with the Board recommending an annual advisory vote. Because the Board views it as a good corporate governance practice, and because at the Company’s 2018 Annual Meeting of Shareholders a majority of the votes cast were in favor of an annual advisory vote, shareholders will have the opportunity at the Annual Meeting to provide feedback to the Compensation Committee on the Company’s executive compensation programs by endorsing or not endorsing the compensation of our named executive officers. Shareholders will also have the opportunity at the Annual Meeting to cast an advisory vote on the frequency of future say-on-pay votes (see “Advisory Vote on the Frequency of Future Advisory Votes to Approve Named Executive Officer Compensation (Proposal No. 4)”). As described in greater detail in the section entitled “Compensation Discussion and Analysis,” our key compensation goals are to: create a performance driven culture based on personal accountability by linking rewards to Company and individual performance; provide a market competitive compensation opportunity to enable the Company to attract, retain and motivate highly talented associates; and recruit, retain and motivate highly talented executives, align our executives’ interests with those of our shareholders and provide performance-based compensation that appropriately rewards our executives. Our compensation programs include a number of key features designed to accomplish these goals. The Board urges our shareholders to read the section entitled “Compensation Discussion and Analysis,” which describes in detail how our executive compensation practices operate and are designed to achieve our key compensation goals, as well as the Summary Compensation Table and other related compensation tables and narrative discussion appearing under the section entitled “Executive Compensation,” which provide detailed information about the compensation of our named executive officers. Based on Company and individual performance, the Compensation Committee believes that compensation levels for fiscal year 2023 were appropriate and consistent with the philosophy and objectives of the Company’s executive compensation programs. Accordingly, we are asking shareholders to vote, on an advisory basis, “FOR” the following resolution at the Annual Meeting: RESOLVED, that the Company’s shareholders hereby approve the compensation of the named executive officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC, including the “Compensation Discussion and Analysis” section, the compensation tables and the related narrative discussion. This vote is advisory, which means that the shareholder vote on this proposal will not be binding on the Company, the Compensation Committee or the Board. However, the Compensation Committee and the Board value the opinions of the Company’s shareholders and will carefully consider the outcome of the vote when making future compensation decisions for the named executive officers of the Company.
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
| THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT. UNLESS OTHERWISE SPECIFIED, PROXIES WILL BE VOTED “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT. |
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
As required by Section 14A of the Exchange Act, we also are providing our shareholders with the opportunity to cast an advisory vote to express a preference regarding the frequency of future advisory votes to approve the compensation of our named executive officers. We currently hold our say-on-pay vote every year. In voting on this proposal, you will be asked to select from the following four options: whether the advisory vote should occur every one, two or three years, or to abstain from voting on the proposal. For the reasons explained below, the Board recommends that you vote for a one-year frequency, a continuation of our current policy. After careful consideration, the Board of Directors has determined that holding an advisory vote to approve the compensation of our named executive officers every year is the most appropriate policy for us and our shareholders at this time. An annual say-on-pay vote provides shareholders with the opportunity to evaluate, on an annual basis, the Company’s executive compensation programs. The Board of Directors believes that the annual say-on-pay vote has worked well, allowing shareholders to provide input on the Company’s executive compensation philosophy, principles and policies as disclosed in the proxy statement each year and giving the Compensation Committee and the Board the opportunity to evaluate executive compensation decisions each year in light of the shareholder feedback. The option of every one year, two years or three years that receives the highest number of votes cast by the shareholders will be considered to be the frequency for the advisory vote to approve named executive officer compensation that has been selected by our shareholders. The Compensation Committee and the Board of Directors will consider the shareholder vote when deciding how often an advisory vote to approve named executive officer compensation will be requested from the Company’s shareholders. Because this vote is advisory, and not binding on the Company, the Compensation Committee or the Board of Directors, the Board may decide that it is in the best interests of us and our shareholders to hold an advisory vote to approve named executive officer compensation more or less frequently than the option selected by the Company’s shareholders.
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
| THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF A FREQUENCY OF EVERY “1 YEAR” FOR FUTURE ADVISORY VOTES TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS. UNLESS OTHERWISE SPECIFIED, PROXIES WILL BE VOTED IN FAVOR OF A FREQUENCY OF EVERY “1 YEAR” FOR FUTURE ADVISORY VOTES TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS. |
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
| EQUITY COMPENSATION PLAN INFORMATION |
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
Information for our equity compensation plans in effect as of September 2, 2023 is as follows:
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
| | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (#) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ($) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (#) | | Plan Category | (a) | (b) | (c) | | Equity compensation plans approved by security holders: | | | | | Equity compensation plans (excluding Associate Stock Purchase Plan) | 218,161 | $81.60 | 2,188,348(1) | | Associate Stock Purchase Plan | — | — | 234,103 | | Equity compensation plans not approved by security holders | — | — | — | | Total | 218,161 | $81.60 | 2,422,451 |
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
(1)Represents shares available for future issuance under the 2023 Omnibus Incentive Plan. Such shares may become subject to stock option grants or SARs or may be issued directly as stock awards with such terms and conditions, performance requirements, restrictions, forfeiture provisions, contingencies and other limitations as determined by the plan administrator.
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
The information set forth in the table below is based on information furnished as of the close of business on December 6, 2023, except as otherwise noted, regarding the beneficial ownership of our Class A Common Stock by: •each shareholder known to us to be the beneficial owner of more than 5% of our Class A Common Stock; •each director and nominee for director of the Company; •each of our named executive officers; and •all directors and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC that deem shares to be beneficially owned by any person who has or shares voting or investment power with respect to such shares. In computing the number of shares of Class A Common Stock beneficially owned by a person and the ownership percentage of such person, shares of Class A Common Stock deemed outstanding include (i) shares of Class A Common Stock subject to stock options held by such person that are currently exercisable or exercisable within 60 days of December 6, 2023 and (ii) RSUs and performance share units that are currently vested or vest within 60 days of December 6, 2023. However, these shares or units are not deemed outstanding for the purpose of computing the ownership percentage of any other person. The ownership percentage is based on 56,409,351 shares of our Class A Common Stock outstanding as of the close of business on December 6, 2023. Except as otherwise indicated in the footnotes below, the persons listed in the table below have advised us that they have sole voting and investment power with respect to the shares listed as beneficially owned by them. Unless otherwise indicated in the footnotes below, the address for each of the beneficial owners is c/o MSC Industrial Direct Co., Inc., 515 Broadhollow Road, Suite 1000, Melville, New York 11747. All fractional shares reported in the table below have been rounded to the nearest whole share.
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
| Name | Number of Shares and Nature of Beneficial Ownership | Ownership Percentage | | Principal Shareholders: | | | | Mitchell Jacobson | 8,268,359(1) | 14.7% | | BlackRock, Inc. | 6,031,316(2) | 10.7% | | The Vanguard Group, Inc. | 4,817,016(3) | 8.5% | | American Century Investment Management, Inc. and related entities | 2,828,892(4) | 5.0% | | Directors, Director Nominees and Named Executive Officers: | | | | Mitchell Jacobson | 8,268,359(1) | 14.7% | | Erik Gershwind | 2,239,784(5) | 4.0% | | Louise Goeser | 12,962(6) | * | | Michael Kaufmann | 12,404(6) | * | | Steven Paladino | 12,404(6) | * | | Philip Peller | 19,826(6)(7) | * | | Rahquel Purcell | 795(8) | * | | Rudina Seseri | 4,766(6) | * | | Kristen Actis-Grande | 4,622 | * | | Martina McIsaac | 1,808 | * | | Elizabeth Bledsoe | 5,728 | * | | John Hill | 1,461 | * | | Directors and executive officers as a group (14 persons) | 10,608,751(9) | 18.8% |
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
_____________________________ * Less than 1% (1)This number consists of (i) 1,958,311 shares of Class A Common Stock owned directly by Mr. Jacobson; (ii) 239,168 shares of Class A Common Stock held by a family charitable foundation, of which Mr. Jacobson is a director, as to which shares Mr. Jacobson has shared voting and dispositive power; (iii) 2,907,454 shares of Class A Common Stock held by trusts of which Mr. Jacobson is the settlor and over whose trustees Mr. Jacobson can exercise remove and replace powers; and (iv) 3,163,426 shares of Class A Common Stock held by grantor retained annuity trusts of which Mr. Jacobson is the settlor, sole annuitant and trustee, and other trusts over whose portfolio securities Mr. Jacobson exercises voting and dispositive power. Mr. Jacobson disclaims beneficial ownership of the 239,168 shares of Class A Common Stock held by the foundation and the 6,070,880 shares of Class A Common Stock that are held by these trusts, except to the extent of his pecuniary interest. (2)Based on information supplied by BlackRock, Inc. (“BlackRock”) in a Schedule 13G/A filed with the SEC on January 23, 2023. The address of BlackRock is 55 East 52nd Street, New York, New York 10055. The Schedule 13G/A reports that BlackRock has sole voting power over 5,617,408 shares, shared voting power over no shares and sole dispositive power over all of the shares shown. (3)Based on information supplied by The Vanguard Group, Inc. (“Vanguard”) in a Schedule 13G/A filed with the SEC on October 10, 2023. The address of Vanguard is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. The Schedule 13G/A reports that Vanguard has sole voting power over no shares, shared voting power over 15,821 shares, sole dispositive power over 4,751,609 shares and shared dispositive power over 65,407 shares. (4)Based on information supplied by American Century Investment Management, Inc. (“ACIM”), American Century Companies, Inc. (“ACC”) and Stowers Institute for Medical Research (“Stowers”) in a Schedule 13G/A filed jointly with the SEC on February 8, 2023. ACC is controlled by Stowers. ACIM is a wholly owned subsidiary of ACC. The address of each of ACIM, ACC and Stowers is 4500 Main Street, 9th Floor, Kansas City, Missouri 64111. The Schedule 13G/A reports that each of ACIM, ACC and Stowers has sole voting power over 2,602,102 shares, shared voting power over no shares and sole dispositive power over all of the shares shown. (5)This number consists of (i) 1,439,538 shares of Class A Common Stock owned directly by Mr. Gershwind; (ii) 80,071 shares of Class A Common Stock issuable upon the exercise by Mr. Gershwind of stock options that are currently exercisable or exercisable within 60 days of December 6, 2023; (iii) 21,695 shares of Class A Common Stock held by family charitable foundations, of which Mr. Gershwind is a director, as to which shares Mr. Gershwind has sole voting and dispositive power for 18,782 shares and shared voting and dispositive power for 2,913 shares; (iv) 232,554 shares of Class A Common Stock held by grantor retained annuity trusts of which Mr. Gershwind is the settlor, sole annuitant and trustee; (v) 61,027 shares of Class A Common Stock held by a trust of which Mr. Gershwind is a co-trustee and beneficiary; (vi) 302,464 shares of Class A Common Stock held by trusts over whose the trustee Mr. Gershwind can exercise remove and replace powers and the beneficiaries of which are family members of Mr. Gershwind; and (vii) 102,435 shares of Class A Common Stock held by a trust of which Mr. Gershwind is the trustee. Mr. Gershwind disclaims beneficial ownership of the 21,695 shares of Class A Common Stock that are held by the foundations and the 698,480 shares of Class A Common Stock held by the trusts, except to the extent of his pecuniary interest. (6)Includes 795 RSUs scheduled to vest on January 25, 2024 and 811 RSUs scheduled to vest on January 26, 2024. (7)Includes 14,896 shares held by an irrevocable trust, of which Mr. Peller is the settlor, Mr. Peller’s daughter is the sole trustee, and Mr. Peller’s wife is the beneficiary. (8)Includes 795 RSUs scheduled to vest on January 25, 2024. (9)Includes: (i) 89,215 shares of Class A Common Stock issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days of December 6, 2023; (ii) 337 RSUs scheduled to vest on December 17, 2023, 4,770 RSUs scheduled to vest on January 25, 2024 and 4,055 RSUs scheduled to vest on January 26, 2024.
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
| SHAREHOLDER PROPOSALS FOR THE 2025 ANNUAL MEETING OF SHAREHOLDERS |
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
Any shareholder proposal intended to be included in the Company’s proxy statement and form of proxy relating to the 2025 Annual Meeting of Shareholders must be in writing and received by the Company not later than August 15, 2024. Any such shareholder proposal must also comply with Rule 14a-8 of the Exchange Act, which lists the requirements for the inclusion of shareholder proposals in company-sponsored proxy materials. Shareholder proposals should be addressed to the attention of the Company’s Vice President, General Counsel and Corporate Secretary at MSC Industrial Direct Co., Inc., 515 Broadhollow Road, Suite 1000, Melville, New York 11747. Pursuant to the SEC rules, submitting a proposal will not guarantee that it will be included in the Company’s proxy materials. In addition, any shareholder proposal intended to be presented at the 2025 Annual Meeting of Shareholders, but that will not be included in the Company’s proxy statement and form of proxy relating to the 2025 Annual Meeting of Shareholders, must be in writing and delivered to the Company’s Vice President, General Counsel and Corporate Secretary at MSC Industrial Direct Co., Inc., 515 Broadhollow Road, Suite 1000, Melville, New York 11747 not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the anniversary date of the Annual Meeting. As a result, any proposals submitted by a shareholder pursuant to the provisions of the Company’s Third Amended and Restated By-Laws (other than proposals submitted pursuant to Rule 14a-8 of the Exchange Act) must be received not earlier than the close of business on September 26, 2024 and not later than the close of business on October 26, 2024. However, in the event that the 2025 Annual Meeting of Shareholders is called for a date that is more than 30 days before or more than 70 days after January 24, 2025, notice by the shareholder in order to be timely must be so delivered not earlier than the close of business on the 120th day prior to the date of the 2025 Annual Meeting of Shareholders and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Company. Shareholder proposals must include the specified information concerning the proposal and the shareholder submitting the proposal as set forth in the Company’s Third Amended and Restated By-Laws. A copy of the Company’s Third Amended and Restated By-laws may be obtained by writing to the Company’s Vice President, General Counsel and Corporate Secretary at MSC Industrial Direct Co., Inc., 515 Broadhollow Road, Suite 1000, Melville, New York 11747.
Relationship Between Compensation Actually Paid and Organic Revenue Growth (ADS)
| INFORMATION ABOUT THE ANNUAL MEETING |