DEF 14A of Itt Inc.
Filed Apr 2, 2024 · FY20230001104659-24-042254
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SHAREHOLDER VALUE CREATION ITT’s total shareholder return (“TSR”) of 49% in 2023 outpaced the S&P 400 Capital Goods and S&P 500 indices by over 1,100 and 2,200 basis points, respectively, demonstrating ITT’s sustainable differentiation. Similarly, over the 3- and 5-year periods we continued to outpace both indices by a wide margin, demonstrating the strength and diversity of our business.
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| ITT INC. | 2024 PROXY STATEMENT | 3 |
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(TSR is calculated by the growth in capital from purchasing a share in the company and assuming dividends are reinvested at the time they are paid.)
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| 4 | ITT INC. | 2024 PROXY STATEMENT |
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| PROXY STATEMENT EXECUTIVE SUMMARY 2023 BUSINESS PRIORITIES |
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2023 BUSINESS PRIORITIES At ITT, we focus on four key priorities to guide our day-to-day work, which we believe will drive sustainable performance over the long term. Customer centricity describes the ways we engage with our customers and is key to our long-term growth. Our teams live by this principle every day. We work closely with our customers to understand and address their needs through superior quality, on-time delivery, innovation and the development of new technologies. This affords us exceptional customer intimacy and drives high customer retention rates. Our Friction business in MT demonstrates this through its annual outperformance in volume of brake pads sold compared to global auto OE production, which in 2023 was approximately 600 basis points. We are seeing the benefits of this in share gains in electric vehicles, pumps, connectors and rail. We are also winning content on large green projects in our flow business to support the green energy transition. For example, in 2023, our ‘green project’ orders increased 1.5 times from 2022. Operational excellence enables continuous supply chain and manufacturing efficiency improvement, which drives our cost competitiveness and allows us to exceed customers’ expectations. In 2023, our Friction business maintained its near-perfect on-time delivery to automotive OE manufacturers, a defect rate below one part per million, and was able to execute strategic pricing actions to offset cost inflation. We also made considerable progress in deploying lean practices throughout our manufacturing plants, which led to a 40 basis-point improvement in operating margin in 2023. We did this while funding new research and development to drive the next generation of innovative technologies across our businesses. On capital deployment, we continued to fund organic investments, shown by an increase in capital expenditures of 4% in 2023, including approximately $5 million of investments toward green capital expenditure projects to advance our sustainability initiatives and improve our carbon footprint. M&A is a central component of our capital deployment strategy and in 2023, we were active in this area. In May 2023, we acquired Micro-Mode, a differentiated manufacturer of miniature and high-bandwidth specialized connectors for smart defense systems, and in November 2023, we announced the acquisition of Svanehøj (which closed in January 2024). After increases of 20% and 30% in 2022 and 2021, we increased our dividend by another 10% in 2023. Finally, we repurchased $60 million of ITT shares, which, along with the benefit of prior share repurchases, reduced our weighted-average share count by approximately 1%. In total, in 2023, we committed to deploy over $750 million of capital, 1.75 times our annual free cash flow. Lastly, we made considerable progress on our sustainability and innovation priorities, including a significant reduction in Scope 1 and 2 GHG emissions and continued improvement in key safety metrics towards our objective of zero incidents. We have also demonstrated a commitment to diversity across the organization, including in our leadership ranks and on our Board. Further, we continued to develop innovative products and new environmentally friendly technologies across our portfolio to ensure we and our customers are making the world a more sustainable place. 2023 SUSTAINABILITY HIGHLIGHTS In October 2023, we released our Sustainability Update, which details our performance across all of ITT’s key environmental, social and governance metrics and progress towards the emissions reduction and diversity, equity and inclusion targets we set in 2022. We continue to drive sustainability into our operations and daily practices, and are building a safer, more inclusive and more energy-efficient company. The following updates demonstrate the significant progress we made: ■ Safety remains our number one priority. Nearly 60% of ITT sites around the world had zero recordable incidents in both 2022 and 2023 and approximately 30% of ITT sites had zero incidents in the last three years. This focus drove an improved Injury Severity Rate of more than 20% versus 2022 while our Injury Frequency Rate of 0.6 remained roughly flat to 2022. ■ We drove a significant reduction in Scope 1 and 2 GHG emissions in 2022, the first full year after establishing the target of a 10% reduction by the end of 2026 against a 2021 baseline. This was despite significantly higher volumes and activity in 2022. We also reduced our water consumption, reduced the amount of waste sent to landfills and increased our recycled materials as compared to 2021. ■ Over 12% of revenue for the period came from our electric and emissions-reducing products. We are focused on accelerating the transition to environmentally friendly and sustainable technologies that reduce waste, limit downtime and remove harmful emissions related to flaring and other sources of pollutants. ■ We drove a 48% increase in our philanthropic efforts overall, including those to empower and serve underrepresented populations. ■ We increased our spending with diverse U.S. suppliers by 10% by strengthening existing partnerships with diverse suppliers and developing new relationships. We announced a $25 million commitment toward green energy projects, including solar panel investments and energy efficiency initiatives in April 2023, and are committed to installing approximately 20,000 solar panels at eight manufacturing facilities globally. A number of these installations began generating electricity in 2023, including at facilities in the United States, the Netherlands, China, Italy, Mexico and South Korea.
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| ITT INC. | 2024 PROXY STATEMENT | 5 |
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| PROXY STATEMENT EXECUTIVE SUMMARY SNAPSHOT OF 2024 DIRECTOR NOMINEES |
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SNAPSHOT OF 2024 DIRECTOR NOMINEES Our director nominees possess diverse and complementary qualifications and have the skills and attributes necessary for a well-functioning, highly qualified and independent Board. The information below provides highlights of our directors’ roles and characteristics:
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| DIRECTOR SNAPSHOT | | | | | | | | | | | | | | | | Board Committees | | | | Name | Age | Director Since | Independent | Other Public Company Boards | Position | Audit | CHC | N&G | | Kevin Berryman | 65 | 2023 | | 1 | Former CFO and President at Jacobs Solutions, Inc. | | | | | Donald DeFosset, Jr. | 75 | 2011 | | 1 | Former Chairman, President & CEO of Walter Industries, Inc. | | | | | Nazzic S. Keene | 63 | 2023 | | 1 | Former CEO at Science Applications International Corporation | | | | | Rebecca A. McDonald | 71 | 2013 | | 0 | Former CEO of Laurus Energy, Inc. | | | | | Christopher O’Shea | 50 | New Director Nominee | | 0 | CEO of Centrica plc | * | | | | Timothy H. Powers non-executive Chairman | 75 | 2015 | | 0 | Former Chairman, President & CEO of Hubbell Incorporated | | | | | Luca Savi | 58 | 2019 | | 1 | CEO & President of ITT Inc. | | | | | Cheryl L. Shavers | 70 | 2018 | | 1 | Chair & CEO of Global Smarts, Inc. | | | | | Sharon Szafranski | 57 | 2024 | | 0 | EVP, Welding Segment at Illinois Tool Works Inc. | | | |
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Chair Mr. Powers, as independent chair, is an ex-officio, non-voting member of all Board committees other than the Audit Committee, which he chairs Committee Member If elected, the Board expects to appoint Mr. O’Shea to the Audit Committee
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| 6 | ITT INC. | 2024 PROXY STATEMENT |
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| PROXY STATEMENT EXECUTIVE SUMMARY CORPORATE GOVERNANCE HIGHLIGHTS |
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CORPORATE GOVERNANCE HIGHLIGHTS We are committed to robust governance practices that protect the long-term interests of our shareholders and establish strong Board and management accountability. The “Corporate Governance and Related Matters” section beginning on page 10 describes our governance framework. We have adopted key corporate governance best practices, including:
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| WHAT WE DO | | | | | | Independent Chairman of the Board | | Annual Board and committee evaluation and self-assessments | | | Independent, diverse and qualified Board | | Active Board refreshment with three new director appointments within the last year in addition to new director nominee | | | Annual election of directors | | Director skill sets aligned with corporate strategy | | | Majority voting for uncontested director elections | | Limit on outside directorships | | | Regular executive sessions of the Board and its committees | | Meaningful stock ownership guidelines for directors and executive officers | | | Proxy access right | | Formal director orientation and continuing education programs | | | Shareholder right to call special meetings at 25% threshold | | Proactive engagement with shareholders | | | A policy prohibiting hedging and pledging of the Company’s securities | | Directors may not stand for reelection after the year in which they turn 75 |
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| ITT INC. | 2024 PROXY STATEMENT | 7 |
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| PROXY STATEMENT EXECUTIVE SUMMARY SHAREHOLDER ENGAGEMENT AND RESPONSIVENESS |
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SHAREHOLDER ENGAGEMENT AND RESPONSIVENESS
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| Fall 2023 Shareholder Engagement Outreach Efforts | | | | Number of Shareholders Contacted: | Percent of Outstanding Shares Contacted: | Percent of Outstanding Shares Engaged: | | 27 | ~70% | ~26% |
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Fostering long-term relationships with our shareholders remains a priority for the Board. We have developed a robust engagement program that ensures an active and open, year-round dialogue with shareholders and other stakeholders. The feedback we received from our engagement with shareholders in 2023 was shared with the Board and members of senior management. Key discussion topics from these conversations included our corporate governance practices and disclosures, our progress towards environmental and social targets released last year and continued alignment of director skills and expertise with our long-term strategy as part of the Board’s ongoing refreshment process. We also discussed with investors our annual incentive plan design, and in particular the potential increase in the weighting of the cash flow metric to drive additional focus on inventory, collection and costs. In the spring, we conduct follow-up conversations with shareholders to address important annual meeting matters, as needed. These conversations continue to inform the Board’s actions in various areas, including our executive compensation practices, our strategy and disclosure relating to ESG topics and the Board’s approach to diversity and refreshment. These meetings also strengthen ITT’s relationships with our shareholders and reinforce our commitment to be responsive to their feedback. EXECUTIVE COMPENSATION HIGHLIGHTS The Compensation and Human Capital Committee continues to firmly believe in pay-for-performance and has structured the executive compensation program to align our executives’ interests with the long-term interests of our shareholders. The Compensation and Human Capital Committee also regularly incorporates feedback from shareholders when structuring our executive compensation program. Our Chief Executive Officer (“CEO”) and other named executive officers (the “Named Executive Officers” or “NEOs”) have a significant amount of their target pay tied to our Annual Incentive Plan (“AIP”) and long-term incentives (“LTI”), which are at-risk and dependent on ITT’s financial performance and stock price.
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Our 2023 financial performance was very strong and our results exceeded target for each of the four metrics that drive the AIP, which resulted in a bonus payout for our CEO that was 182% of target and for our NEOs that averaged 179% of target. Our Performance Share Unit (“PSU”) payout is based on three-year performance (2021-2023) of ITT’s relative TSR and Return on Invested Capital (“ROIC”). Our three-year ROIC results were significantly above target and our relative TSR results were above the median of our peers, which resulted in a 2021 PSU payout of 170% of target.
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| 2023 CEO AIP PAYOUT | 2021 PSU PAYOUT | | | |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK ■ Increased Transparency in Political Spending: In response to our discussions with shareholders regarding transparency in our political spending, we have posted our formal political contributions policy on the Governance section of our website, as well as our 2023 Political Contributions Report, which describes our political spending for the year covered by the report. This policy and the 2023 Political Contributions Report have been reviewed and approved by the Nominating and Governance Committee, which will review and approve any material future changes to the policy. In addition, the Nominating and Governance Committee will annually review the Company’s website disclosure regarding political contributions. ■ Sustainability: We continue to evolve and enhance our sustainability practices and disclosure, taking into account shareholder feedback. Our 2023 Sustainability Update detailed our progress on our previously released GHG emissions target and DEI goals. We remain committed to progressing our efforts and issuing future sustainability reports outlining our goals and initiatives. We encourage shareholders to continue to engage with us and let us know their thoughts about ITT or bring matters to our attention. Please feel free to write directly to us at ITT Inc., 100 Washington Boulevard, 6th Floor, Stamford, CT 06902, Attention: Corporate Secretary. COMMUNICATION WITH THE BOARD OF DIRECTORS Shareholders and other interested parties may contact any of our directors (including the non-executive Chairman), a committee of the Board, the Board’s non-management directors as a group, or the Board as a whole by writing to them c/o ITT Inc., 100 Washington Boulevard, 6th Floor, Stamford, CT 06902, Attention: Corporate Secretary. Communications are distributed to the Board, or to any individual director(s), as appropriate under the facts and circumstances. Junk mail, advertisements, product inquiries or complaints, resumes, spam and surveys are not forwarded to the Board. Material that is threatening, unduly hostile or deemed by the Corporate Secretary to be trivial, irrelevant or inappropriate will also not be forwarded. Any non-management director may request any communications that have been excluded be made available. ESG OVERVIEW ESG OVERSIGHT Our Board, executive leadership and employees are committed to effectively managing ESG topics. We design our governance policies and processes to provide appropriate Board-level oversight of significant ESG issues relevant to ITT. Our ESG governance structure, policies, processes and areas of focus are informed by ESG reporting standards and our proactive engagement with investors, customers and other stakeholders. Management works closely with the Board to identify relevant ESG risks and opportunities to enhance our bottom line and deliver long-term financial value to our shareholders. The Nominating and Governance Committee has overall oversight responsibility for sustainability and our other ESG initiatives. In addition, each committee has primary responsibility for oversight of other specific aspects of the Company’s ESG initiatives, consistent with their areas of responsibility as reflected in their respective charters and described below. The Environmental, Safety, Health and Security (“ESH&S”) Council is an internal team of senior executives led by our General Counsel that establishes corporate-wide processes and strategies and oversees ESH&S matters across the Company. The ESH&S Council meets monthly and includes, among others, our General Counsel, our Director of Environmental Affairs and each of our three Value Center ESH&S leaders. Members of the ESH&S Council provide regular reports to the Board and our committees, including an annual review of our environmental liabilities provided to our Audit Committee. Our Environmental Task Force is comprised of leaders in our ESH&S Council, finance, research and development and supply chain management, is led by our CFO and meets monthly to discuss green capex initiatives, establish corporate-wide environmental and sustainability goals and identify sustainability-related opportunities across our Value Centers.
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| 20 | ITT INC. | 2024 PROXY STATEMENT |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| BOARD OF DIRECTORS |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
Receives regular reports from management regarding matters related to ESH&S and provides oversight of sustainability and other ESG initiatives, primarily through its committees
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| Audit Committee | Nominating and Governance Committee | Compensation and Human Capital Committee | | ■ Oversight of environmental liabilities and assets, including the accuracy of budgeting and the forecasting process related to environmental liabilities ■ Oversees and reviews cybersecurity and other information technology risks, controls and procedures | ■ Oversees sustainability in general and maintains an informed status on key ESG initiatives, engagement with key stakeholders, non-governmental organizations and ESG rating organizations ■ Receives updates from our investor relations department regarding sustainability initiatives at least annually | ■ Oversees human capital management programs, including responsibilities relating to the compensation and benefits of our executive officers, and the recruitment, development and retention of diverse talent necessary to ensure our success ■ Receives regular briefings from our Chief Human Resources Officer regarding diversity, equity and inclusion as well as written reports at least once a quarter |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| Environmental Task Force | Environmental, Safety, Health & Security Council | | Internal management team that establishes corporate-wide environmental and sustainability goals and identifies sustainability-related opportunities across our Value Centers | Internal management team that establishes corporate-wide processes and strategies and oversees ESH&S matters across the Company |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
ESG HIGHLIGHTS In October 2023, with the oversight of our Nominating and Governance Committee, we published our 2023 Sustainability Update (available on our website), which details our approach to sustainability and our progress towards the emissions reduction and DEI targets we established in November 2022. ENVIRONMENTAL HIGHLIGHTS We have made significant progress towards our GHG emissions reduction target through the increased implementation of renewable energy sources, including the use of solar energy. As we continue to focus on reducing our footprint, in April 2023, we announced a $25 million commitment toward green energy projects, including solar panel installations at eight manufacturing facilities globally. Once completed, we expect the solar installations to reduce ITT’s carbon emissions by approximately 6,000 tons of CO2 per year. Over the past year, we also drove a reduction in water consumption and an increase in materials recycled across our facilities. We continue to innovate to solve our customers’ most challenging problems with environmentally friendly and sustainable technologies that reduce waste, limit downtime and remove harmful emissions related to flaring and other sources of pollutants. For example, our twin-screw and multiphase pumping technology are deployed on large decarbonization projects across the world. In one oil and gas application, our pumping technology was projected to help our customer reduce more than 300,000 tons of CO2 in a single year and avoid fines. We continue to further the development of key technologies that help ensure our customers are preparing for upcoming regulations in transportation and energy and can meet increasing demand in the growing electric vehicle market.
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| ITT INC. | 2024 PROXY STATEMENT | 21 |
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| CORPORATE GOVERNANCE AND RELATED MATTERS DIRECTOR ORIENTATION AND CONTINUING EDUCATION |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
SOCIAL HIGHLIGHTS Occupational health and safety is a top priority at ITT. Our focus on driving proactive, zero-incident workplace cultural behaviors as well as our granular, root-cause approach towards identifying improvement actions permeates our organization. These efforts are reflected in the continued progress we are making. Nearly 60% of ITT sites around the world had zero recordable incidents in both 2022 and 2023 and approximately 30% of ITT sites had zero incidents in the last three years. This focus drove an improved Injury Severity Rate of more than 20% versus 2022 while our Injury Frequency Rate of 0.6 remained roughly flat to 2022. We are also invested in our employees and provide meaningful opportunities to support professional and personal development at ITT. We offer a range of programs to elevate both the technical and leadership skills of our employees and facilitate networking programs to enable our employees to grow and thrive. Our development philosophy is built around a “know-do” framework which includes both formal training and experiential learning. Tailored learning programs, coaching and mentoring elevate both technical and other skills (the “know”) while challenging, well-planned work experiences and global assignments prepare ITTers for current and future roles (the “do”). Successful employee development is also supported by thoughtful plans built in partnership between employees and their managers. Our development planning tools and processes ensure targeted, concrete action planning, and we promote continuous feedback and regular check-ins. For example, over the past few years, ITT has expanded enrollment in our leadership programs through UP Academy for emerging leaders, which we developed in partnership with the European Centre for Executive Development. Finally, we are committed to the principle of having a diverse and inclusive workforce and to creating a higher-performance culture. We support inclusive hiring practices, have implemented programs related to unconscious bias training, promote local inclusion efforts to identify site-specific needs and sponsor employee resource group development, including the global “I-Win” Women’s Interest Network. We are focused on demonstrating our commitment to diversity, equity and inclusion through our actions. We work to create an environment where all ITTers can fully engage, achieve their personal potential and freely share ideas that guide us toward more innovative thinking and better business decisions and solutions. In service to our commitment to provide transparency to our stakeholders, we first disclosed our employee diversity targets in our 2022 Sustainability Report, and we have posted our annual consolidated EEO-1 report since 2021, including the 2023 report, on our website at www.itt.com/our-people/eeo-1-report. We will continue to focus on driving results relating to human capital management initiatives and enhancing disclosure on human capital strategy and metrics. DIRECTOR ORIENTATION AND CONTINUING EDUCATION Given the appointment of three new directors within the last year and the nomination of an additional new director candidate for election at the 2024 Annual Meeting, our director onboarding process is an important element of our Board’s overall approach to providing strong oversight. As part of ITT’s director orientation program, new directors participate in one-on-one introductory meetings with members of ITT’s leadership team and other functional leaders. This director orientation familiarizes the directors with our business and strategic plans, significant financial, accounting and risk management issues, human resources matters, our compliance programs and other controls, policies and procedures. The orientation also addresses Board procedures, our Principles and our Board committee charters and provides directors with the opportunity to meet with our officers and other key members of senior management. Finally, in order to provide our new directors with a resource for questions and insight about our business, culture and governance practices, and to foster collegiality on our Board, each new director is informally paired with another director or member of management who can assist the new director in obtaining whatever information they may need. The Company also endeavors to provide ongoing director education throughout the year. Our annual strategy session, where senior management presents the strategic plans for each of the businesses and the Company as a whole, is one component of that ongoing education. We aim to periodically hold the annual strategy session at an ITT facility in order to increase the Board’s understanding of the Company’s people, operations, product lines and overall business. Members of our senior management as well as outside advisors and industry experts also present topics throughout the year to the Board in order to increase directors’ understanding of the Company’s business operations, strategies, risks and opportunities. Directors may also enroll in external continuing education programs at ITT’s expense on topics associated with a director’s service on a public company board in order to provide a forum for them to maintain their insight into leading governance practices, exchange ideas with peers and keep current their skills and understanding of their duties as directors.
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| 22 | ITT INC. | 2024 PROXY STATEMENT |
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BOARD AND GOVERNANCE POLICIES COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION None of the members of the Compensation and Human Capital Committee during 2023 or as of the date of this Proxy Statement in 2024 has been an officer or employee of the Company and no executive officer of the Company has served on the compensation committee or board of any company that employed any member of our Compensation and Human Capital Committee or Board. CODE OF CONDUCT The Company has adopted the ITT Code of Conduct which was updated in 2022 and applies to all employees (including part-time and temporary workers and contractors), including the CEO, CFO, and Principal Accounting Officer and, where applicable, to its non-management directors. The ITT Code of Conduct is available on our website at www.itt.com/newsroom/ publications/code-of-conduct. We disclose on our website any changes to or waivers from the Code of Conduct for the Company’s CEO, CFO, Principal Accounting Officer, non-management directors and other executive officers. In addition, the Company will disclose within four business days any substantive changes in or waivers of the Code of Conduct granted to our CEO, CFO, and Principal Accounting Officer, or persons performing similar functions. We intend to do this by posting such information on our website as set forth above rather than by filing a Form 8-K with the SEC. The Company has established a confidential ethics phone line and website to respond to employees, suppliers, contractors and customers’ questions and reports of ethical concerns. Also, the Audit Committee has established a policy with procedures to receive, retain and treat complaints received by the Company regarding accounting, internal controls or auditing matters and to allow for the confidential, anonymous submission by employees of concerns regarding accounting or auditing matters. ITT does not allow any form of retaliation against anyone who raises a concern in good faith. POLICIES FOR APPROVING RELATED PARTY TRANSACTIONS The Board has adopted a written Related Party Transaction Policy (the “RPT Policy”) that addresses the reporting, review and approval or ratification of transactions with related parties. The RPT Policy covers (but is not limited to) those related party transactions and relationships required to be disclosed under Item 404(a) of the SEC’s Regulation S-K, and applies to each director or executive officer of the Company, any nominee for election as a director of the Company, any security holder who is known to the Company to own of record or beneficially more than 5% of any class of the Company’s voting securities, and any immediate family member of any of the foregoing persons (each, a “Related Party”). The Company recognizes transactions with Related Parties may involve potential or actual conflicts of interest and pose the risk they may be, or be perceived to have been, based on considerations other than the Company’s best interests. Accordingly, as a general matter, the Company seeks to avoid such transactions. However, the Company recognizes that in some circumstances transactions between Related Parties and the Company may be incidental to the normal course of business, may provide an opportunity that is in the best interests of the Company to pursue, or may not otherwise be inconsistent with the best interests of the Company. In other cases it may be inefficient for the Company to pursue an alternative transaction. The RPT Policy therefore is not designed to prohibit Related Party transactions; rather, it is designed to provide for timely internal reporting of such transactions and appropriate review, oversight and public disclosure of them. The RPT Policy supplements the provisions of our Code of Conduct concerning potential conflict of interest situations. Under the RPT Policy, an amendment to an arrangement that is considered a Related Party transaction is, unless clearly incidental in nature, considered a separate Related Party transaction. The RPT Policy provides for the Nominating and Governance Committee to review all Related Party transactions and, wherever possible, to approve such transactions in advance of any such transaction being given effect. In connection with approving or ratifying a Related Party transaction, the Nominating and Governance Committee considers, in light of the relevant facts and circumstances, whether or not the transaction is in, or consistent with, the best interests of the Company, including, as applicable, consideration of the following factors: ■ the position within or relationship of the Related Party with the Company; ■ the materiality of the transaction to the Related Party and the Company, including the dollar value of the transaction, without regard to profit or loss; the business purpose for and reasonableness of the transaction, taken in the context of the alternatives available to the Company for attaining the purposes of the transaction;
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| ITT INC. | 2024 PROXY STATEMENT | 23 |
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whether the transaction is comparable to a transaction that could be available on an arms-length basis or is on terms the Company offers generally to persons who are not Related Parties; ■ whether the transaction is in the ordinary course of our business and was proposed and considered in the ordinary course of business; and ■ the effect of the transaction on our business and operations, including on the Company’s internal control over financial reporting and system of disclosure controls or procedures, and any additional conditions or controls (including reporting and review requirements) that should be applied to such transaction. The RPT Policy provides standing pre-approval for certain types of transactions the Nominating and Governance Committee has determined do not pose a significant risk of conflict of interest, either because a Related Party would not have a material interest in a transaction of that type or due to the nature, size and/or degree of significance to the Company. The Board reevaluates the RPT Policy periodically. HEDGING AND PLEDGING Our directors and certain employees (including executive officers) are prohibited from hedging and speculative trading in the Company’s securities, including short sales and leverage transactions such as puts, calls and listed and unlisted options. We also prohibit our directors and certain employees, including our executive officers, from pledging Company securities as collateral for a loan.
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| 24 | ITT INC. | 2024 PROXY STATEMENT |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
DIRECTORS’ QUALIFICATION AND SELECTION PROCESS BOARD COMPOSITION AND REFRESHMENT The Board manages its composition and refreshment with significant support from the Nominating and Governance Committee, taking into consideration the skills, experiences and attributes of the existing directors, both individually and as a group. As part of its ongoing refreshment strategy, the Board has been and is currently engaged in a thoughtful and deliberate search process to add new directors with capabilities that align to our long-term strategic and financial direction. The Board is committed to diversity among its members including gender and ethnic/racial diversity as well as diversity of backgrounds, perspectives and cultural experiences. In October 2023, the Board appointed Nazzic Keene and Kevin Berryman, and in January 2024, the Board appointed Sharon Szafranski, to the ITT Board. The Board is also nominating Christopher O’Shea as a new director nominee for election at the 2024 Annual Meeting. These four individuals were each selected as candidates by a sub-committee of our Board, working with the assistance of a third-party professional search firm which sourced suitable candidates based on the specific skills and attributes desired by the Board. The Nominating and Governance Committee also reviewed the skills, experiences and attributes of all director candidates before recommending their election to the full Board. Ms. Keene brings broad public company experience to our Board while Mr. Berryman brings extensive financial and operational experience on a global scale. Both are experienced public company directors and bring deep mergers and acquisitions and integration experience. Ms. Szafranski is an accomplished executive with more than thirty years of manufacturing experience and who also brings broad strategy and innovation experience. Mr. O’Shea is the CEO of a multinational energy and services company and brings current experience in transforming business and financial performance. Biographical information about Ms. Keene, Mr. Berryman, Ms. Szafranski and Mr. O’Shea can be found in the section entitled “Election of Directors (Proxy Item No. 1)—2024 Director Nominees.” These appointments and nominations represent an important step in the Board’s refreshment strategy and in the continued evolution of director capabilities and skill sets. Looking ahead, the Board intends to continue to proactively manage its composition and pursue refreshment in light of various factors, particularly the Board’s mix of skills, experience and attributes, to ensure that the Board is well prepared for its governance responsibilities. BOARD MEMBERSHIP CRITERIA The Nominating and Governance Committee regularly considers and reviews with the Board the appropriate skills and characteristics for Board members in fulfilling its responsibility to identify and recommend qualified candidates for membership on the Board. As part of the membership criteria for new Board members, the Principles state that individuals who are nominated are expected to have significant accomplishments and recognized business stature and possess attributes and experiences such as diversity, management skills and business, technological and international experience. The Nominating and Governance Committee’s top priority is therefore ensuring the Board is composed of directors who bring diverse viewpoints and perspectives, exhibit a variety of skills, professional experience and backgrounds, and effectively represent the long-term interests of shareholders. Criteria for identifying and evaluating candidates for the Board include: ■ personal qualities and characteristics, accomplishments and reputation in the business community; ■ current knowledge and contacts in the Company’s business communities and industries; ■ the fit of the individual’s skills and personality with those of other directors in building a Board that is effective, collegial and responsive; ■ ability and willingness to commit adequate time to Board and committee matters; ■ diversity of viewpoints, background, experience and other demographics; ■ independence (including independence from the interests of a particular group of shareholders); ■ absence of potential conflicts with our interests; and such other criteria as the Board may from time to time determine relevant.
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
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RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| DIRECTORS’ QUALIFICATION AND SELECTION PROCESS DIRECTOR NOMINEE SKILLS AND DIVERSITY |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
DIRECTOR NOMINEE SKILLS AND DIVERSITY Our director nominees possess relevant experience, skills and qualifications which contribute to a well-functioning Board that effectively oversees the Company’s strategy and management. All of our director nominees bring to the Board a balance of executive leadership experience derived from their diverse professional backgrounds and areas of expertise that are relevant to ITT. As a group, they have global industrial and financial expertise, leadership and public company board experience, and sound business acumen. In identifying and evaluating candidates for the Board, the Nominating and Governance Committee considers the overall diversity of the Board as a specific factor, including diversity of skills, experience and backgrounds, as well as ethnic and gender diversity. We believe our Board nominees appropriately reflect a diversity of experience and skills and of professional, gender, ethnic and personal backgrounds. The Board is committed to maintaining these different facets of diversity among its members.
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| | | Berryman | DeFosset | Keene | McDonald | O’Shea | Powers | Savi | Shavers | Szafranski | Total | | International Market Exposure International business and/or management experience supports the Board’s oversight of key risks involving our global customer and supplier bases and our challenges managing global compliance systems | | | | | | | | | | | 9 | | Operations General management operations experience at a publicly traded or private company allows directors to critically evaluate our operations and product development | | | | | | | | | | | 9 | | Industrial Experience Significant business or management experience with a company in the multi-industrial segment enables enhanced oversight of product development and sharpens focus on safety and quality | | | | | | | | | | | 5 | | Public Company Board Experience Service on the board of directors of at least one public company other than ITT provides directors with similar oversight experience | | | | | | | | | | | 8 | | Executive Leadership Experience Experience in a senior level management position (preferably CEO or reporting to CEO or Cabinet Member) of a publicly traded company, large private company or governmental department facilitates effective oversight of management and sharpens the Board’s succession planning process | | | | | | | | | | | 9 |
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| 26 | ITT INC. | 2024 PROXY STATEMENT |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| DIRECTORS’ QUALIFICATION AND SELECTION PROCESS PROCESS FOR IDENTIFYING AND SELECTING NEW BOARD MEMBERS |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| | | Berryman | DeFosset | Keene | McDonald | O’Shea | Powers | Savi | Shavers | Szafranski | Total | | Experience in One or More End Markets Business or management experience in one or more end markets allows directors to evaluate our market strategy, contracting and relationships with key customers | | | | | | | | | | | 8 | | Significant Financial Experience CFO, Audit Committee Chair or Audit Committee Financial Expert (as per NYSE listing standards) or other employment or financial educational experience enhances the Board’s deliberations regarding capital allocation, long-term strategy and regulatory compliance | | | | | | | | | | | 5 | | Mergers & Acquisition Experience Significant experience in mergers, acquisitions or other business combinations enables oversight of our strategy of growth through targeted acquisitions | | | | | | | | | | | 9 | | Race/Ethnicity | | | | | | | | | | | | | White | | | | | | | | | | | 8 | | Ethnic/Racial Diversity | | | | | | | | | | | 1 | | Gender | | | | | | | | | | | | | Male | | | | | | | | | | | 5 | | Female | | | | | | | | | | | 4 | | Citizenship | | U.S. | U.S. | U.S. | U.S. | U.K. | U.S. | Italy | U.S. | U.S. | |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
All skills are self-assessed. PROCESS FOR IDENTIFYING AND SELECTING NEW BOARD MEMBERS The Nominating and Governance Committee identifies director candidates through a variety of sources including independent search firms, personal references and business contacts. Shareholders who wish to recommend candidates may contact the Nominating and Governance Committee in the manner described in “Corporate Governance and Related Matters — Shareholder Engagement and Communications— Communication with the Board of Directors.” Shareholder nominations must be made according to the procedures required by our By-laws and described in this Proxy Statement under the heading “Information about the Proxy Statement & Voting.” Shareholder recommended candidates and shareholder nominees whose nominations comply with these procedures and who meet the criteria referred to above will be evaluated by the Nominating and Governance Committee in the same manner as other nominees. A key component to the nomination (and re-nomination) process is the Nominating and Governance Committee’s consideration of the results of the Board’s self-evaluation process. The results generated from this evaluation process include nominee attributes and experiences that will individually and collectively complement the existing Board, taking into account the Board’s needs for expertise and recognizing that having a diverse Board will benefit the Company’s businesses and operations, which are diverse and global in nature. Prior to recommending nominees for election as directors, the Nominating and Governance Committee, and then the full
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| ITT INC. | 2024 PROXY STATEMENT | 27 |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| DIRECTORS’ QUALIFICATION AND SELECTION PROCESS BOARD TENURE |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
Board, engages in a deliberative process and considers the criteria discussed in “Board Membership Criteria” above to ensure the nominee will contribute to an effective Board. Biographical information for each director candidate is evaluated and candidates participate in interviews with existing Board members and management. We conduct thorough background checks on each candidate and nominees must meet the requirements of the Company’s By-laws and the Principles. Balanced and effective Board composition, supplemented by a thoughtful approach to refreshment, is a priority for ITT. The selection of a qualified group of directors with an appropriate mix of skills, experience and attributes is essential to the Board’s successful oversight of our business. BOARD TENURE The Board strives to maintain an appropriate balance of tenure and refreshment among directors and acknowledges that these priorities may shift over time. The Board believes there are benefits from the valuable experience and familiarity with the Company and its people and processes that longer-tenured directors bring, as well as significant benefits from the fresh perspectives and ideas that new directors bring. The average tenure of our director nominees is approximately five years. The Board aims to continue to refresh its membership over time. DIRECTOR INDEPENDENCE The Board, through the Nominating and Governance Committee, conducts an annual review of the independence of its members. With the assistance of legal counsel to the Company, the Nominating and Governance Committee has reviewed the applicable standards for Board and committee member independence, as well as the standards established by the Principles. A summary of the answers to annual questionnaires completed by each of the directors and a report of transactions with director-affiliated entities are also made available to the Nominating and Governance Committee to enable its comprehensive independence review. On the basis of this review, the Nominating and Governance Committee has delivered a report to the full Board, and the Board has made its independence determinations based upon the committee’s report and the supporting information. Under NYSE listing standards, an independent director must not have any material relationship with the Company, either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company. The NYSE requirements pertaining to director independence also include a series of objective tests, such as the requirement that the director is not an employee of the Company and has not engaged in various types of business dealings with the Company. The Board also considers whether directors have any relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The SEC has a separate independence requirement for Audit Committee members that overlays the NYSE requirements. The NYSE also requires directors who serve on compensation committees to satisfy additional independence requirements specific to that service. The Board has determined that Mr. Savi is not “independent” because of his employment as CEO of the Company. The Board has reviewed all relationships between the Company and each other member of the Board and has affirmatively determined all of the members of the Board other than Mr. Savi are “independent” pursuant to the applicable listing standards of the NYSE. None of these directors were disqualified from “independent” status under the objective tests set forth in the NYSE standards. In assessing independence under the subjective relationships test described above, the Board took into account the criteria for disqualification set forth in the NYSE’s objective tests, and reviewed and discussed additional information provided by each director and the Company with regard to each director’s business and personal activities as they may relate to the Company and its management. The Board considered transactions occurring since the beginning of the Company’s 2021 fiscal year between the Company and entities associated with the directors or members of their immediate families. All identified transactions that appear to relate to the Company and a person or entity with a known connection to a director were presented to the Board for consideration. The Board also considered in its analysis the Company’s contributions to tax-exempt organizations with respect to each of the non-management directors. Based on the foregoing, as required by the NYSE, the Board made the subjective determination as to each of these directors that no material relationships with the Company exist and no relationships exist which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of such director. The Board also determined that the current members of the Audit Committee and of the Compensation and Human Capital Committee meet the applicable SEC and NYSE listing standard independence requirements with respect to membership on such committees. The Company did not make any contributions to any tax exempt organizations in which any non-management director serves as an executive officer within the past three fiscal years where such contributions exceeded the greater of $1 million or 2% of such organization’s consolidated gross revenues.
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| 28 | ITT INC. | 2024 PROXY STATEMENT |
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ELECTION OF DIRECTORS (PROXY ITEM NO. 1) ELECTION PROCEDURES Each director must be elected by a majority of the votes cast by the shareholders represented at the virtual meeting or by proxy at the Annual Meeting. A “majority of the votes cast” means the number of votes cast “for” a director must exceed the number of votes cast “against” that director (with abstentions and broker non-votes not counted as votes cast with respect to that director). In a contested election for directors (an election in which the number of nominees for election as directors is greater than the number of directors to be elected), the vote standard would be a plurality of votes cast. In accordance with our By-laws and the Principles, the Board will only nominate director candidates who agree to tender an irrevocable resignation promptly following their failure to receive the required vote for re-election in an uncontested election. In addition, the Board will fill director vacancies and new directorships only with candidates who agree to tender the same form of resignation promptly following their appointment to the Board. If an incumbent director fails to receive the required vote for re-election in an uncontested election and submits his or her resignation to the Chairman of the Board or the Corporate Secretary, then the Nominating and Governance Committee (or the equivalent committee then in existence) shall promptly consider the resignation and all relevant facts and circumstances concerning any vote and the best interests of the Company and its shareholders. After such consideration, the Nominating and Governance Committee will make a recommendation to the Board regarding whether the resignation should be accepted or rejected, or whether any other action should be taken. The Board will act on the Committee’s recommendation no later than its next regularly scheduled Board meeting (after certification of the shareholder vote) or within 90 days after certification of the shareholder vote, whichever is earlier, and the Board will promptly publicly disclose its decision and the reasons for its decision. Each nominee elected as a director will continue in office until the earlier of the 2025 Annual Meeting of Shareholders, his or her successor having been duly elected and qualified, or his or her death, resignation or removal. The nine nominees for election to the Board in 2024 have agreed to serve if elected, and management has no reason to believe such nominees will be unavailable to serve. In the event any of the nominees is unable or declines to serve as a director at the time of the Annual Meeting, then the persons named as proxies may vote for a substitute nominee chosen by the present Board to fill the vacancy. Alternatively, the Board may reduce the size of the Board. The individuals named as proxies in the proxy card intend to vote your proxy (if you are a shareholder of record) for the election of each of these nominees, unless you indicate otherwise on the proxy card. 2024 DIRECTOR NOMINEES Eight members of our Board and one new director nominee are standing for election to hold office until the 2025 Annual Meeting of Shareholders. We believe our 2024 director nominees evidence our commitment to maintain an appropriate balance of tenure, turnover, diversity, skills and experience on the Board. Of the nine directors who are nominees for election at the Annual Meeting, four are female, one is racially or ethnically diverse and two are citizens of a non-U.S. country. As discussed in detail in our nominees’ biographies, the nominees come from varied professional backgrounds and industries, including manufacturing, finance, energy and technology. Each of our 2024 director nominees was recommended for election by the Nominating and Governance Committee, and such recommendation was approved unanimously by the Board.
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| ITT INC. | 2024 PROXY STATEMENT | 29 |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
The principal occupation and certain other biographical information about the nominees is set forth on the following pages.
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| KEVIN BERRYMAN | | | | Age: 65 Director since: October 2023 Former Chief Financial Officer and President at Jacobs Solutions, Inc. Independent | CAREER: Kevin Berryman served as the Chief Financial Officer and President of Jacobs Solutions Inc. (“Jacobs”), a multi-billion dollar global technical services company that specializes in engineering, design, and consulting, from 2015 to August 2023. He currently serves as Special Advisor to the CEO of Jacobs. Prior to joining Jacobs, Mr. Berryman was the Executive Vice President and Chief Financial Officer of International Flavor and Fragrances, Inc., a global manufacturer of flavors and fragrances to consumers, a role that he served from 2009 to 2014. Mr. Berryman also spent 23 years in a number of leadership positions at Nestle, S.A., including Chief Financial Officer of one its largest acquisitions, Purina PetCare Company. Mr. Berryman is currently a director of Sealed Air Corporation where he has served since 2021 (Audit Committee; People and Compensation Committee). | | | | REASONS FOR ELECTION TO THE BOARD OF ITT: In considering Mr. Berryman for director of the Company, the Board considered his financial and operational experience as President and Chief Financial Officer of a global technical service company as well as his deep mergers and acquisitions and integration experience. | | | | BOARD COMMITTEES: ■ Audit Committee | CURRENT PUBLIC COMPANY BOARDS: ■ Sealed Air Corporation (SEE) | | | SKILLS AND QUALIFICATIONS: | |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| DONALD DEFOSSET, JR. | | | | Age: 75 Director since: October 2011 Former Chairman, President & CEO of Walter Industries, Inc. Independent | CAREER: Donald DeFosset, Jr. retired in 2005 as Chairman, President & Chief Executive Officer of Walter Industries, Inc., a diversified public company with principal operating businesses in homebuilding and home financing, water transmission products and energy services. Mr. DeFosset had served since November 2000 as President & CEO, and since March 2002 as Chairman, of Walter Industries. Over his career, Mr. DeFosset held significant leadership positions in major multinational corporations, including Dura Automotive Systems, Inc., Navistar International Corporation and AlliedSignal, Inc. Mr. DeFosset is currently a director of Terex Corporation, where he has served since 1999 (Chairman of the Compensation and Human Capital Committee; Governance, Nominating and Corporate Responsibility Committee). Mr. DeFosset is also a director of various private companies and not-for-profit organizations. | | | | REASONS FOR ELECTION TO THE BOARD OF ITT: In considering Mr. DeFosset for director of the Company, the Board considered his extensive experience as a CEO of a large diversified industrial company and as a senior executive of an international machinery manufacturer. His service on the boards of directors of a variety of large public companies further enhances his experience and adds value to the Company’s Board. | | | | BOARD COMMITTEES: ■ Nominating and Governance Committee (Chair) ■ Audit Committee | CURRENT PUBLIC COMPANY BOARDS: ■ Terex Corporation (TEX) | | | SKILLS AND QUALIFICATIONS: | FORMER PUBLIC COMPANY BOARDS: ■ National Retail Properties, Inc. (2008-2022) ■ Regions Financial Corporation (2005-2022) |
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| 30 | ITT INC. | 2024 PROXY STATEMENT |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| NAZZIC S. KEENE | | | | Age: 63 Director since: October 2023 Former Chief Executive Officer at Science Applications International Corporation Independent | CAREER: Nazzic S. Keene retired in 2023 from her position as Chief Executive Officer and a director of Science Applications International Corporation (“SAIC”), a multi-billion-dollar global company engaged in integrating information technology systems that manage engineering, large-scale IT modernization, and security, logistics, simulation and data analytics for government bodies, a role in which she served since 2019. She was appointed to the position of CEO and elected as a director after having served as Chief Operating Officer of SAIC from 2017 to 2019 and as the President of Global Markets & Missions from 2013 to 2017. Ms. Keene is currently a director of Automatic Data Processing Inc. where she has served since 2020 (Chair of the Nominating/Corporate Governance Committee; Audit Committee). | | | | REASONS FOR ELECTION TO THE BOARD OF ITT: In considering Ms. Keene for director of the Company, the Board considered her extensive public company experience as CEO of a multi-billion-dollar global organization where she demonstrated a history of driving growth and change. In addition, Ms. Keene has deep mergers and acquisitions and integration background in the information technology industry and is an experienced public company director. | | | | BOARD COMMITTEES: ■ Nominating and Governance Committee | CURRENT PUBLIC COMPANY BOARDS: ■ Automatic Data Processing Inc. (ADP) | | | SKILLS AND QUALIFICATIONS: | FORMER PUBLIC COMPANY BOARDS: ■ Science Applications International Corporation (2019-2023) |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| REBECCA A. MCDONALD | | | Age: 71 Director since: December 2013 Former CEO of Laurus Energy Inc. Independent | CAREER: Rebecca A. McDonald retired in 2012 as CEO of Laurus Energy Inc., a privately held company involved in underground coal gasification development, a role in which she served since 2008. She previously served as President, Gas and Power, at BHP Billiton from March 2004 to September 2007, and, from October 2001 to January 2004, she served as President of the Houston Museum of Natural Science. Ms. McDonald has more than 25 years of experience in the energy industry. She has been responsible for the development, construction and operation of natural gas and liquids pipelines, gas and electricity distribution companies, as well as power plant and gas processing facilities in North America, Asia, Africa and South America. | | | REASONS FOR ELECTION TO THE BOARD OF ITT: In considering Ms. McDonald for director of the Company, the Board considered her significant expertise in the oil and gas industry, as well as her executive-level experience and extensive knowledge of business systems and operations. The Board also considered her experience as a director of a variety of public and private companies within the energy industry. | | | BOARD COMMITTEES: ■ Compensation and Human Capital Committee (Chair) ■ Nominating and Governance Committee | | | SKILLS AND QUALIFICATIONS: |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| ITT INC. | 2024 PROXY STATEMENT | 31 |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| CHRISTOPHER O’SHEA | | | | Age: 50 New Director Nominee CEO of Centrica plc Independent | CAREER: Christopher O’Shea has served as the CEO of Centrica plc, a multi-billion dollar integrated energy company listed on the London Stock Exchange, since 2020 and also sits on Centrica’s Board of Directors. He was appointed to the position of CEO after serving as Centrica’s CFO from 2018-2020. Mr. O’Shea also served as CFO of Smiths Group plc, a U.K. public company engaged in global diversified industrial, security, and medical technology, from 2015-2017. In addition, Mr. O’Shea served as CFO of Vesuvius plc, a public company and global leader in metal flow engineering, from 2012-2015. Mr. O’Shea previously held various leadership roles with BG Group plc, Shell plc, and Ernst & Young from 1998-2012. | | | | REASONS FOR ELECTION TO THE BOARD OF ITT: In considering Mr. O’Shea for director of the Company, the Board considered his strong global and engineering background, as well as his strong track record of transforming businesses through cultural change, structural simplification and improving optimal performance. The Board also considered his extensive financial foundation, including his experience as CFO, and in raising capital and structuring innovative commercial financing arrangements. | | | | BOARD COMMITTEES: ■ Audit Committee* * If elected, the Board expects to appoint Mr. O’Shea to the Audit Committee | CURRENT PUBLIC COMPANY BOARDS: ■ Centrica plc | | | SKILLS AND QUALIFICATIONS: | |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| TIMOTHY H. POWERS | | | | Age: 75 Director since: February 2015 Chairman of the Board of ITT Inc. Former Chairman, President & CEO of Hubbell Incorporated Independent | CAREER: Timothy H. Powers retired in 2013 as Chairman, President & Chief Executive Officer of Hubbell Incorporated, a public company engaged in the global manufacturing of electrical products and utility solutions, a role in which he served since 2004. He was appointed to the position of Chairman after having served as the President and CEO of Hubbell from 2001 to 2004 and as the Senior Vice President and Chief Financial Officer from 1998 to 2001. Mr. Powers also served as Executive Vice President, Finance and Business Development Americas Region at ABB, Inc. and as Vice President and Corporate Controller for BBC Brown Boveri, Inc. Mr. Powers served as a director of WestRock Company (formerly MeadWestvaco Corporation) from 2006 until January 2021. In addition, Mr. Powers served as a director of the National Electric Manufacturers Association and as a trustee for Manufacturers Alliance for Productivity and Innovation until 2013. | | | | REASONS FOR ELECTION TO THE BOARD OF ITT: In considering Mr. Powers for director of the Company, the Board considered his significant experience as a chief executive officer and finance officer in global manufacturing and engineering companies. The Board also considered his experience in the areas of management, strategic planning, and mergers and acquisitions in the manufacturing industry. | | | | BOARD COMMITTEES: ■ Audit Committee (Chair) ■ Compensation and Human Capital Committee (ex-officio) ■ Nominating and Governance Committee (ex-officio) | FORMER PUBLIC COMPANY BOARDS: ■ WestRock Company (2006-2021) | | | SKILLS AND QUALIFICATIONS: | |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| 32 | ITT INC. | 2024 PROXY STATEMENT |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| LUCA SAVI | | | | Age: 58 Director since: January 2019 CEO & President of ITT Inc. | CAREER: Luca Savi was appointed CEO, President and a director of the Company in January 2019. He previously served as President and Chief Operating Officer of the Company since August 2018 and as Executive Vice President and Chief Operating Officer since January 2017. Prior to that, he served as Executive Vice President and President, Motion Technologies since February 2016 and as Senior Vice President and President, Motion Technologies since November 2011. Prior to joining the Company, Mr. Savi served as Chief Operating Officer, Comau Body Welding at Comau, a subsidiary of the Fiat Group responsible for producing and serving advanced manufacturing systems, from 2009 to 2011 and as CEO, Comau North America from 2007 to 2009. Mr. Savi previously held leadership roles at Honeywell International Inc. and Royal Dutch Shell plc and technical roles at Ferruzzi-Montedison Group. Mr. Savi is currently a director of MSA Safety Incorporated (Compensation Committee). | | | | REASONS FOR ELECTION TO THE BOARD OF ITT: In considering Mr. Savi for director of the Company, the Board considered Mr. Savi’s significant experience in many of the Company’s most important end markets. The Board also considered his extensive operations, strategy, growth and innovation experience with industrial companies and, in particular, his knowledge of the Company’s business and operations having served as the President of the Company’s largest business unit and as its Chief Operating Officer. | | | | SKILLS AND QUALIFICATIONS: | CURRENT PUBLIC COMPANY BOARDS: ■ MSA Safety Incorporated (MSA) |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| CHERYL L. SHAVERS | | | | Age: 70 Director since: October 2018 Chair & CEO of Global Smarts, Inc. Independent | CAREER: Dr. Cheryl L. Shavers has served as the Chair & CEO of Global Smarts, Inc., an advisory services and strategy firm that specializes in integration of capital, technology and information across national borders, since February 2001. From 1999 to 2001, Dr. Shavers served as the Undersecretary of Commerce for Technology at the U.S. Department of Commerce, where she oversaw the Office of Technology Policy and the Technology Administration, the focal point for partnerships between the U.S. government and the private sector pertaining to commercial and industrial innovation, productivity and economic growth. In that role, she also headed the National Institute of Standards & Technology of the U.S. Department of Commerce, which is responsible for the development of encryption standards, the U.S. cybersecurity framework as well as other technology and standards. She also served as Undersecretary Designate from April 1999 to November 1999. Dr. Shavers has also served as a director of the Knowles Corporation since 2017 (Chair of the Nominating and Governance Committee; Compensation Committee). Dr. Shavers previously served as the chair of the Technology and Cybersecurity Committee at Rockwell Collins, Inc. | | | | REASONS FOR ELECTION TO THE BOARD OF ITT: In considering Dr. Shavers for director of the Company, the Board considered her extensive experience as a highly regarded and sought after technical and business expert and her extensive experience with technology development, innovation and management of growth opportunities. | | | | BOARD COMMITTEES: ■ Nominating and Governance Committee ■ Compensation and Human Capital Committee | CURRENT PUBLIC COMPANY BOARDS: ■ Knowles Corporation (KN) | | | SKILLS AND QUALIFICATIONS: | |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| ITT INC. | 2024 PROXY STATEMENT | 33 |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| SHARON SZAFRANSKI | | | Age: 57 Director since: January 2024 Executive Vice President, Welding Segment, Illinois Tool Works Inc. (ITW) Independent | CAREER: Sharon Szafranski has served as the Executive Vice President of the Welding segment at Illinois Tool Works, Inc. (“ITW”), a Fortune 200 global manufacturing leader, since 2022. Ms. Szafranski previously served as the Executive Vice President of ITW’s Construction Products segment from 2020 to 2021 and Group President of the Test and Measurement segment from 2019-2020. Ms. Szafranski has held eleven different roles of increasing responsibility in ITW since beginning her career in their sales training program in 1994. | | | REASONS FOR ELECTION TO THE BOARD OF ITT: In considering Ms. Szafranski for director of the Company, the Board considered her multi-industry and global business expertise, as well as her extensive manufacturing experience resulting from holding several leadership positions in an international manufacturing company. The Board also considered her significant experience fostering innovation with highly engineered products. | | | BOARD COMMITTEES: ■ Audit Committee | | | SKILLS AND QUALIFICATIONS: |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| RECOMMENDATION OF THE BOARD OF DIRECTORS | | | | THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF THE NINE NOMINEES LISTED ABOVE AS DIRECTORS. UNLESS A CONTRARY CHOICE IS SPECIFIED, PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THE ELECTION OF THE NINE NOMINEES LISTED ABOVE AS DIRECTORS. |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| 34 | ITT INC. | 2024 PROXY STATEMENT |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
RATIFICATION OF APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROXY ITEM NO. 2) The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the Company’s independent registered public accounting firm. To execute this responsibility, the Audit Committee engages in a comprehensive annual evaluation of the independent registered public accounting firm’s qualifications, performance and independence and considers whether the independent registered public accounting firm should be rotated and the potential impact of selecting a different independent registered public accounting firm. The Audit Committee has selected, and the Board has ratified the selection of, Deloitte & Touche LLP (“Deloitte”) to serve as our independent registered public accounting firm for 2024. Deloitte has served as the Company’s independent registered public accounting firm since 2002. In accordance with SEC rules and Deloitte policies, audit partners are subject to rotation requirements that limit the number of consecutive years an individual partner may provide service to our Company. For lead partners and engagement quality review partners, the maximum number of consecutive years of service in that capacity is five years. The process for selection of the Company’s lead audit partner pursuant to this rotation policy involves a meeting between the Chair of the Audit Committee and the candidate for the role, as well as discussion by the full committee and with management. The Audit Committee and full Board believe the continued retention of Deloitte as our independent registered public accounting firm is in the best interest of the Company and our shareholders, and we are asking our shareholders to ratify the selection of Deloitte as our independent registered public accounting firm for 2024. Although ratification is not required by our By-laws or otherwise, the Board is submitting the selection of Deloitte to our shareholders for ratification because we value our shareholders’ views on the Company’s independent registered public accounting firm and as a matter of good corporate practice. In the event our shareholders fail to ratify the selection, it will be considered a recommendation to the Board and the Audit Committee to consider the selection of a different firm. In addition, even if shareholders ratify the selection of Deloitte, the Audit Committee may in its discretion select a different independent registered public accounting firm at any time during the year if it determines such a change would be in the best interests of the Company and our shareholders. Deloitte is a registered public accounting firm regulated by the Public Company Accounting Oversight Board (the “PCAOB”). Representatives of Deloitte attended all regularly scheduled meetings of the Audit Committee during 2023. The Audit Committee discussed with the independent registered public accounting firm all communications required by auditing standards of the PCAOB. In addition, the committee discussed with the registered public accounting firm its independence from the Company and its management, the scope of Deloitte’s audit, the Company’s critical accounting estimates, significant accounting policies and the critical audit matters addressed during the audit. The Audit Committee annually reviews and considers Deloitte’s performance of the Company’s audit, including the following performance factors:
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| ■ independence | ■ leadership | ■ compliance and ethics program | | ■ experience | ■ non-audit services | ■ industry insight | | ■ technical capabilities | ■ management structure | ■ financial strength | | ■ client service assessment | ■ peer review program | ■ appropriateness of fees charged | | ■ responsiveness | ■ commitment to quality report | |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
The Audit Committee also reviewed the terms and conditions of Deloitte’s engagement letter including an agreement between the Company and Deloitte to submit disputes between Deloitte and the Company to a dispute resolution process. The Audit Committee discussed the engagement letter, as well as Deloitte’s fees and services with Deloitte and Company management. The Audit Committee also determined any non-audit services (services other than those described in the annual audit services engagement letter) provided by Deloitte were permitted under the rules and regulations concerning auditor independence promulgated by the SEC and rules promulgated by the PCAOB. Representatives of Deloitte will be present at the Annual Meeting to answer questions. Representatives of Deloitte also will have the opportunity to make a statement if they desire to do so.
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| ITT INC. | 2024 PROXY STATEMENT | 35 |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| RATIFICATION OF APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROXY ITEM NO. 2) INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES Aggregate fees to the Company for the fiscal years ended December 31, 2023 and 2022 represent fees by Deloitte and its foreign affiliates.
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| Fiscal Year Ended (in thousands) | 2023 | 2022 | | Audit Fees(1) | $3,972 | $3,861 | | Audit-Related Fees(2) | 99 | 35 | | Tax Fees:(3) | | | | Tax Compliance Services | 26 | 51 | | Tax Planning Services | 530 | 293 | | Total Tax Services (sum of Tax Fees) | 557 | 344 | | All Other Fees | — | — | | TOTAL | $4,628 | $4,240 |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
(1) Fees for audit services in 2023 and 2022 consisted of: • audit of the Company’s annual financial statements and internal control over financial reporting; • reviews of the Company’s quarterly financial statements; • statutory and regulatory audits, consents and other services related to SEC matters; and • financial accounting and reporting consultations. (2) Fees for audit-related services in 2023 and 2022 consisted of miscellaneous attest services. (3) Fees for tax services in 2023 and 2022 consisted of tax compliance and tax planning and advice: • tax compliance services are services rendered, based upon facts already in existence or transactions that have already occurred, to document, compute and obtain government approval for amounts to be included in tax filings consisting primarily of: - federal, foreign, state and local income tax return assistance; - Internal Revenue Code and foreign tax code technical consultations; and - transfer pricing analyses. • tax planning services are services and advice rendered with respect to proposed transactions or services to analyze an anticipated tax result. Such services consisted primarily of tax advice related to intra-group restructuring. PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES The Audit Committee pre-approves audit services provided by Deloitte. The Audit Committee has a policy on pre-approval of permitted non-audit services provided by Deloitte. The purpose of the policy is to identify thresholds for services, project amounts and circumstances where Deloitte may perform permitted non-audit services. A second level of review and approval by the Audit Committee is required when such permitted non-audit services, project amounts or circumstances exceed the specified amounts. The Audit Committee has determined that, where practical, all permitted non-audit services shall first be placed for competitive bid prior to selection of a service provider. Management may select the party deemed best suited for the particular engagement, which may or may not be Deloitte. The policy is reviewed and reaffirmed on a regular basis to assure conformance with applicable rules. The Audit Committee has approved specific categories of audit, audit-related and tax services incremental to the normal auditing services, which Deloitte may provide without further Audit Committee pre-approval. These categories include, among others, the following: 1. Due diligence, closing balance sheet audit services, purchase price dispute support and other services related to mergers, acquisitions and divestitures; 2. Employee benefit advisory services, independent audits and preparation of tax returns for the Company’s defined contribution, defined benefit and health and welfare benefit plans, preparation of the associated tax returns or other employee benefit advisory services; 3. Tax compliance and certain tax planning and advice work; and Accounting consultations and support related to GAAP.
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| 36 | ITT INC. | 2024 PROXY STATEMENT |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| RATIFICATION OF APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROXY ITEM NO. 2) PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
The Audit Committee has also approved specific categories of audit-related services, including the assessment and review of internal controls and the effectiveness of those controls, which outside internal audit service providers may provide without further approval. If fees for any pre-approved non-audit services provided by either Deloitte or any outside internal audit service provider exceed a pre-determined threshold during any calendar year, any additional proposed non-audit services provided by that service provider must be submitted for second-level approval by the Audit Committee. Other audit, audit-related and tax services that have not been pre-approved are subject to specific prior approval. The Audit Committee reviews the fees paid or committed to Deloitte during regularly scheduled meetings and at other times as necessary. The Company has policies and procedures in place prohibiting, in some cases, employment of former Deloitte employees who were members of the audit engagement team.
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| RECOMMENDATION OF THE BOARD OF DIRECTORS | | | | THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF DELOITTE TO SERVE AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2024 FISCAL YEAR. UNLESS A CONTRARY CHOICE IS SPECIFIED, PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THE RATIFICATION OF DELOITTE. |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| ITT INC. | 2024 PROXY STATEMENT | 37 |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
AUDIT COMMITTEE REPORT ROLE OF THE AUDIT COMMITTEE The Audit Committee of the Board provides oversight on matters relating to the Company’s financial reporting process and ensures the Company develops and maintains adequate financial controls and procedures, and monitors compliance with these processes. This includes responsibility for, among other things: ■ determination of qualifications and independence of Deloitte, the Company’s independent registered public accounting firm; ■ appointment, compensation and oversight of Deloitte in preparing or issuing audit reports and related work; ■ review of financial reports and other financial information provided by the Company, its systems of internal accounting and financial controls, and the annual independent audit of the Company’s financial statements; ■ oversight and review of procedures developed for consideration of accounting, internal accounting controls and auditing-related complaints; ■ review of the Company’s policies with respect to risk assessment, risk management and the Company’s major financial risk exposures; ■ monitoring all elements of the Company’s internal control over financial reporting; and ■ adoption of and monitoring the implementation and compliance with the Company’s Non-Audit Services Policy. The Audit Committee also has oversight responsibility for confirming the scope and monitoring the progress and results of internal audits conducted by the Company’s internal auditor. The Audit Committee discussed with the Company’s internal auditors and Deloitte the plans for their respective audits. The Audit Committee met with the internal auditors and Deloitte, with and without management present, and discussed the results of their examinations, their evaluation of the Company’s internal controls, and the Company’s financial reporting. The Company’s management has primary responsibility for the financial statements, including the Company’s system of disclosure and internal controls. The Audit Committee may investigate any matter brought to its attention. In that regard, the Audit Committee has full access to all books, records, facilities and personnel of the Company, and the Audit Committee may retain outside counsel, auditors or other independent experts to assist the Committee in performing its responsibilities. Any individual may also bring matters to the Audit Committee by following the procedures set forth in this Proxy Statement under the heading “Corporate Governance and Related Matters—Shareholder Engagement and Communications—Communication with the Board of Directors.” AUDIT COMMITTEE CHARTER The Board has adopted a written charter for the Audit Committee, which the Board and the Audit Committee review and at least annually update and reaffirm. The charter sets out the purpose, membership and organization, and key responsibilities of the Audit Committee. REGULAR REVIEW OF FINANCIAL STATEMENTS During 2023, the Audit Committee reviewed and discussed the Company’s audited financial statements with management. The Audit Committee, management and Deloitte reviewed and discussed the Company’s unaudited financial statements before the release of each quarter’s earnings report and filing on Form 10-Q, and the Company’s audited financial statements before the annual earnings release and filing on Form 10-K. COMMUNICATIONS WITH DELOITTE The Audit Committee has reviewed and discussed with management and Deloitte the matters required to be discussed under the standards of the PCAOB. These discussions included Deloitte’s responsibilities under generally accepted auditing standards in the United States, the scope of Deloitte’s audit, significant accounting policies and management judgments, the quality of the Company’s accounting principles and accounting estimates, new accounting guidance and any critical matters addressed during the audit. The Audit Committee met privately with Deloitte eight times during 2023.
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| 38 | ITT INC. | 2024 PROXY STATEMENT |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| AUDIT COMMITTEE REPORT INDEPENDENCE OF DELOITTE |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
INDEPENDENCE OF DELOITTE Deloitte is directly accountable to the Audit Committee and the Board. The Audit Committee has received the written disclosures and the letter from Deloitte required by applicable requirements of the PCAOB regarding Deloitte’s communications with the Audit Committee concerning independence and has discussed with Deloitte their independence from management and the Company, any disclosed relationships and the impact of those relationships on Deloitte’s independence. RECOMMENDATION REGARDING ANNUAL REPORT ON FORM 10-K In performing its oversight function with regard to the 2023 financial statements, the Audit Committee relied on financial statements and information prepared by the Company’s management. It also relied on information provided by the internal audit staff as well as Deloitte. The Audit Committee reviewed and discussed with management the Company’s audited financial statements as of and for the year ended December 31, 2023. Based on these discussions, and the information received and reviewed, the Audit Committee recommended to the Company’s Board that the Company’s financial statements be included in the Company’s 2023 Annual Report on Form 10-K. This report is furnished by the members of the Audit Committee.
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| ■ Kevin Berryman | ■ Donald DeFosset, Jr. | ■ Nicholas C. Fanandakis | | ■ Timothy H. Powers (Chair) | ■ Sharon Szafranski | |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| ITT INC. | 2024 PROXY STATEMENT | 39 |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
NON-BINDING ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (PROXY ITEM NO. 3) In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, we are including in these proxy materials a separate resolution subject to shareholder vote to approve, in a non-binding vote, the compensation of our Named Executive Officers as defined by the SEC in Item 402 of Regulation S-K as disclosed later in this Proxy Statement in the Compensation Discussion and Analysis. The following resolution will be submitted for a shareholder vote at the Annual Meeting: “RESOLVED, that the shareholders of ITT Inc. (the “Company”) approve, on a non-binding advisory basis, the compensation of the Company’s Named Executive Officers, as disclosed in the Company’s Proxy Statement for the 2024 Annual Meeting of Shareholders pursuant to Item 402 of the Securities and Exchange Commission Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and narrative disclosures.” In considering their vote, shareholders may wish to review with care the information on the Company’s compensation policies and decisions regarding the NEOs presented in this Proxy Statement in the Compensation Discussion and Analysis. In particular, shareholders should note the Company’s Compensation and Human Capital Committee bases its executive compensation decisions on the following: ■ alignment of executive and shareholder interests by providing incentives linked to the performance of certain financial metrics; ■ the ability for executives to achieve long-term shareholder value creation without undue business risk; ■ creating a clear link between an executive’s individual contribution and performance and his or her compensation; ■ the extremely competitive nature of the industries in which we operate and our need to attract and retain the most creative and talented industry leaders; and ■ comparability to the practices of peers in the industries in which we operate and other comparable companies generally. The vote on this resolution is not intended to address any specific element of compensation; rather, the vote relates to the compensation of our NEOs, as described in this Proxy Statement in accordance with the SEC’s compensation disclosure rules. The Board values the opinions of the Company’s shareholders as expressed through their votes and other communications. This vote is advisory in nature and non-binding; however, the Board will review and consider the shareholder vote when determining executive compensation. Although SEC rules require ITT to submit to shareholders a non-binding shareholder advisory vote to approve the compensation of ITT’s executives only every three years, we believe the “say-on-pay” advisory vote should occur annually as a corporate governance best practice, and our shareholders agreed pursuant to a non-binding vote in 2023. Therefore, we currently conduct non-binding advisory votes on executive compensation on an annual basis. At the 2023 annual meeting of shareholders, 98.2% of the votes cast favored our “Say on Pay” proposal.
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| RECOMMENDATION OF THE BOARD OF DIRECTORS | | | | THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ADVISORY RESOLUTION APPROVING THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS AS DESCRIBED IN THIS PROXY STATEMENT. UNLESS A CONTRARY CHOICE IS SPECIFIED, PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THIS MANAGEMENT PROPOSAL. |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| 40 | ITT INC. | 2024 PROXY STATEMENT |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
COMPENSATION DISCUSSION AND ANALYSIS
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| TABLE OF CONTENTS | | | EXECUTIVE SUMMARY | 41 | | GOVERNANCE AND COMPENSATION | 45 | | ELEMENTS OF COMPENSATION | 47 | | 2023 ANNUAL INCENTIVE PLAN | 48 | | 2023 LONG-TERM INCENTIVE COMPENSATION | 51 | | BENEFITS AND PERQUISITES | 54 | | OTHER COMPENSATION AND BENEFITS | 54 | | POLICIES | 55 | | COMPENSATION TABLES | 58 |
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
ALIGNMENT OF OUR 2023 INCENTIVE PLANS TO BUSINESS RESULTS Our business strategy drives the design and metrics of our incentive plans. Our 2023 AIP includes metrics and weightings that encourage both growth (20% Adjusted EPS and 20% Organic Revenue) and operational excellence (20% Free Cash Flow and 20% Adjusted Operating Margin), in addition to a 20% component that rewards executive officers for individual and team performance. 2023 was the final performance year of our 2021 PSU award, which had a payout determined by our return on invested capital (“ROIC”), which is intended to encourage efficient and disciplined use of capital, and relative total shareholder return (“TSR”), which is intended to directly align executive pay with shareholder return relative to our peer companies. More information on how ROIC and relative TSR are calculated can be found under “2023 Long-Term Incentive Compensation—Performance Stock Units.” Because all of the financial performance metrics that drive the AIP payout were above target in 2023, the payouts of our incentive plans were also above target. ■ Our CEO, Mr. Savi, received an AIP payout that was 182% of target, and the average payout to our other NEOs who were employed by ITT at the end of 2023 was 179%. ■ The 2021 PSU award paid out at 170% of target.
RECENT BOARD ACTIONS IN RESPONSE TO INVESTOR FEEDBACK
| 2023 CEO AIP PAYOUT | 2021 PSU PAYOUT | | | |
CEO PAY DECISIONS
| Pay Component | 2023 Target Pay | 2024 Target Pay | Drivers for Pay Decisions | | Base Salary | $1,100,000 | $1,150,000 | The Committee considered Mr. Savi’s performance, relative pay positioning to peers, as well as the inflationary environment and competitive labor market, and approved an increase of his 2024 base salary by 4.5%. | | Annual Incentive Plan Target | $1,485,000 | $1,552,500 | Mr. Savi received a bonus payout of $2,702,700 for 2023 performance, which was 182% of target. 80% of the AIP payout was tied directly to ITT’s financial results and was awarded at 142% of target. 20% of the AIP payout was for the individual component and was awarded at 200% of target because Mr. Savi: ■ Drove exceptional financial results, including record achievement in the following metrics: organic revenue, adjusted operating margin, free cash flow and adjusted EPS; ■ Demonstrated exceptional leadership in an environment that continues to be challenged by supply chain disruptions and global macroeconomic and political uncertainty; and ■ Created additional value for ITT shareholders through strategic capital deployment to all key priorities including organic investments, M&A, share repurchases and dividends. The Committee did not change Mr. Savi’s AIP percentage target for 2024, which remains at 135% of salary. | | Long-Term Incentives (LTI)(1) | $4,700,000 | $5,300,000 | The Committee considered Mr. Savi’s performance, relative pay positioning to peers, as well as the compensation philosophy to emphasize variable, performance-based pay and increased the 2024 LTI award to $5,300,000. LTI ties the actual amount that Mr. Savi will receive in pay to ITT’s financial performance and stock price, and encourages retention. | | TOTAL TARGET COMPENSATION | $7,285,000 | $8,002,500 | |
CEO PAY DECISIONS
| WHAT WE DO | | WHAT WE DON’T DO | | | | Emphasize Long-Term Compensation to Ensure Alignment of Pay with Long-Term Performance | | No Hedging or Pledging of Company Stock | | | Significant Majority of Pay is Performance-Based and Not Guaranteed | | No Accelerated Vesting of Equity Awards or Severance Benefits Solely Upon a Change in Control | | | Stock Ownership Requirements Require Meaningful Holdings | | No Tax Gross-Ups (unless related to international assignment or relocation) | | | Double-Trigger Change in Control Vesting of Equity Awards | | No Golden Parachutes | | | Clawback Policy That Applies to Our Annual Incentive Plan and Equity Awards | | No Repricing of Stock Options | | | Proactive Engagement with Shareholders | | No Supplemental Defined Benefit Pension for Executives | | | Engage an Independent Compensation Consultant | | No Excessive Perquisites or Personal Benefits |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT In 2023, the Compensation and Human Capital Committee continued to use the services of Pay Governance in fulfilling its obligations under its charter, the material terms of which are described elsewhere in this Proxy Statement under the heading “Corporate Governance and Related Matters—Board and Committee Structure—Overview of Committees— Compensation and Human Capital Committee.” Pay Governance attended the five regularly scheduled meetings of the Compensation and Human Capital Committee in 2023 and provided the Committee with objective expert analyses, assessments, research and recommendations for executive compensation programs, incentives, perquisites and compensation standards. In this capacity, they provided services that related solely to work performed for, and at the direction of, the Compensation and Human Capital Committee, including analysis of material prepared by management for the Committee’s review. Pay Governance also provides advice related to compensation for directors to the Nominating and Governance Committee. The Compensation and Human Capital Committee selected Pay Governance to serve as its independent compensation consultant only after assessing the firm’s independence. As part of its independence review, the Compensation and Human Capital Committee reviewed the Company’s relationship with Pay Governance and determined no conflicts of interest existed. The Compensation and Human Capital Committee has the sole authority to retain and terminate consultants, including Pay Governance, with respect to compensation matters. EXTERNAL BENCHMARKING In 2023, as in prior years, the Compensation and Human Capital Committee considered competitive market compensation data, in addition to other factors, in determining policies and programs that address executive compensation, benefits and perquisites. For 2023 pay decisions for the CEO and CFO, the Committee reviewed a peer group of 20 companies comparable to ITT in terms of revenue, market capitalization and industry in order to better evaluate executive compensation market practices (the “Representative Peer Group”). When making pay decisions the Committee also considers other factors such as individual experience and performance, the need for critical skills and the general talent market for each senior executive. The Committee annually reviews and evaluates this Representative Peer Group to ensure it remains appropriate.
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| 2023 Representative Peer Group | | | | ■ AMETEK, Inc. (AME) | ■ ESAB Corporation (ESAB) | ■ Moog Inc. (MOG-A) | | ■ Barnes Group Inc. (B) | ■ Flowserve Corporation (FLS) | ■ Nordson Corporation (NDSN) | | ■ Carlisle Companies Incorporated (CSL) | ■ Graco Inc. (GGG) | ■ Pentair plc (PNR) | | ■ Crane Company (CR) | ■ Hubbell Incorporated (HUBB) | ■ Sensata Technologies Holding plc (ST) | | ■ Curtiss-Wright Corporation (CW) | ■ IDEX Corporation (IEX) | ■ Watts Water Technologies, Inc. (WTS) | | ■ Donaldson Company, Inc. (DCI) | ■ Ingersoll Rand Inc. (IR) | ■ Woodward, Inc. (WWD) | | ■ Enpro Inc. (NPO) | ■ Lincoln Electric Holdings, Inc. (LECO) | |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
There were no changes to the Representative Peer Group for 2024. The Compensation and Human Capital Committee’s review of the external compensation market also included data and practices from general compensation surveys and other compensation survey information provided by Pay Governance. This data provides a broader view of executive compensation from companies that are similar in size and industry to ITT.
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| 46 | ITT INC. | 2024 PROXY STATEMENT |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| COMPENSATION DISCUSSION AND ANALYSIS ELEMENTS OF COMPENSATION |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
ELEMENTS OF COMPENSATION NEO COMPENSATION ELEMENTS AT A GLANCE The compensation of our executive officers, including our NEOs, is reviewed in detail by the Compensation and Human Capital Committee during the first quarter of every year. NEO direct compensation for 2023 consisted of a base salary, an AIP award and LTI award, each of which is detailed below.
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| 2023 Compensation Element | Form | Metrics & Weightings | Rationale for Providing | | Base Salary | Cash | Not Applicable | Base salary is a competitive fixed pay element tied to role, experience, performance and criticality of skills. | | Annual Incentive Plan Award | Cash | ■ Adjusted EPS (20%) ■ Adjusted Operating Margin (20%) ■ Free Cash Flow (20%) ■ Adjusted Revenue (20%) ■ Individual and Team Goals (20%) | The AIP is designed to reward achievement of the Company, business unit (where applicable) and individual performance objectives. The AIP is structured to emphasize overall performance and collaboration among the business units. It uses metrics that are fundamental short-term drivers of shareholder value. Each NEO also has 20% of his or her AIP tied to the achievement of individual and team goals. AIP may pay out from 0% to 200% of target. | | Long-Term Incentive Awards | Stock | PSU Awards: ■ Relative TSR (50%) ■ ROIC (50%) | The LTI plan is designed to reward performance that drives long-term shareholder value through the use of three-year cliff vesting: ■ PSUs (60% of LTI mix) provide rewards linked to stock price performance (due to denomination as ITT share units) and can go up or down based on relative TSR and ROIC, equally weighted, and aligned with long-term growth. PSUs may pay out from 0% to 200% of target. ■ RSUs (40% of LTI mix) link compensation to absolute stock price performance and strengthen retention value. The grant date of PSUs and RSUs is determined on the date which the Compensation and Human Capital Committee approves these awards, and is typically in March. |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
The Company also provides benefits and limited perquisites to its NEOs it believes are competitive with the external market for talent. For a more detailed discussion of these benefits and perquisites, see the discussion under the heading “Benefits and Perquisites.” 2023 BASE SALARY INCREASES The Compensation and Human Capital Committee reviewed the compensation level of each NEO compared to the Representative Peer Group and/or the external survey data. Based on the Committee’s targeted pay positioning and evaluation of each NEO’s performance, the Committee awarded base salary merit increases effective in March 2023 as reflected in the following table.
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| Named Executive Officer | 2022 Annual Base Salary | 2023 Annual Base Salary | Percent Increase | | Luca Savi | $1,031,000 | $1,100,000 | 6.7% | | Emmanuel Caprais(1) | 600,000 | 600,000 | N/A | | Lori B. Marino(2) | N/A | 480,000 | N/A | | Davide Barbon(3) | 337,260 | 451,000 | 33.7% | | Bartek Makowiecki | 420,000 | 440,000 | 4.8% | | Carlo Ghirardo(4) | 435,050 | 435,050 | —% |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
(1) Mr. Caprais received a salary increase in October 2022 and did not receive a salary increase during 2023. Ms. Marino rejoined ITT on January 1, 2023.
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| ITT INC. | 2024 PROXY STATEMENT | 47 |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
Mr. Barbon received a 7.6% salary increase in March 2023 and an additional 24% salary increase in October 2023 when he was appointed President of Motion Technologies in recognition of his performance and his increased responsibilities as President of ITT’s largest Value Center. Mr. Barbon’s salary has been converted from Euros to U.S. Dollars using the 2023 average exchange rate of 1.1. (4) Mr. Ghirardo separated from ITT on October 23, 2023. His salary has been converted from Euros to U.S. Dollars using the 2023 average exchange rate of 1.1. 2023 ANNUAL INCENTIVE PLAN Our financial performance was very strong in 2023 and our results exceeded target for each of the metrics that drive the AIP payout. The AIP payout for our CEO was 182% of target and averaged 179% of target for our NEOs who were serving at the end of 2023 and received a bonus. The Company’s AIP provides for an annual cash payment to participating executives established as a target percentage of base salary. In setting AIP awards, the Compensation and Human Capital Committee approves target AIP awards after careful consideration of external data, individual roles and responsibilities and individual performance. The Company pays for AIP performance that demonstrates substantial achievement of plan goals. We established strong incentives and set aggressive goals for all financial metrics. The Company must achieve a certain threshold for each of the four financial performance metrics discussed below in order for each performance component to be considered in the calculation of the AIP payout. Performance below the threshold performance level results in a zero payout for that particular performance component. The formula to determine each NEO’s AIP total potential payment is as follows:
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| 2023 AIP Potential Payout = | | (Base Salary Rate) x (Target Award Percentage) x (AIP Performance Factor) |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
AIP award payouts are capped at 200% of an individual’s annual cash bonus target. 2023 AIP AWARDS PAID IN 2024 The 2023 AIP awards paid in March 2024 are as follows:
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| Named Executive Officer | 2023 Target AIP Awards as Percentage of Base Salary | 2023 AIP Target Amounts | 2023 AIP Awards (Paid in 2024) | 2023 AIP Awards as Percentage of Target (Paid in 2024) | | Luca Savi | 135% | $1,485,000 | $2,702,700 | 182% | | Emmanuel Caprais | 75% | 450,000 | 729,000 | 162% | | Lori B. Marino | 75% | 360,000 | 655,200 | 182% | | Davide Barbon(1) | 75% | 338,250 | 676,500 | 200% | | Bartek Makowiecki | 75% | 330,000 | 567,600 | 172% | | Carlo Ghirardo(2) | N/A | — | — | N/A |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
(1) Mr. Barbon’s 2023 AIP Target and 2023 AIP Award (paid in 2024) have been converted from Euros to U.S. Dollars using the 2023 average exchange rate of 1.1. Mr. Ghirardo separated from ITT on October 23, 2023 and did not receive a 2023 AIP payout.
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| 48 | ITT INC. | 2024 PROXY STATEMENT |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
2023 AIP PERFORMANCE METRICS AND WEIGHTINGS Based on the Company’s 2023 business objectives, the Compensation and Human Capital Committee identified four financial performance metrics and an individual component for the 2023 performance year, which together comprise the AIP Performance Factor.
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| Metric | Weighting | Reason for Selection | Details | | Adjusted Earnings Per Share (“Adjusted EPS”) | 20% | Important measure of the value provided to shareholders | Adjusted EPS is defined as income from continuing operations attributable to ITT per diluted share, adjusted to exclude special items on an after-tax basis. The after-tax basis of each special item is determined using the jurisdictional tax rate of where the expense or benefit occurred. | | Free Cash Flow and Segment Free Cash Flow | 20% | Important measure of how the Company converts its net earnings into deployable cash | Free Cash Flow is defined as net cash provided by operating activities less capital expenditures, adjusted for cash payments for restructuring costs, realignment actions and other significant items that impact current results which management views as unrelated to the Company’s ongoing operations and performance. Segment Free Cash Flow is defined as segment level net cash provided by operating activities less capital expenditures, adjusted for special items and the impact of foreign currency fluctuations. | | Adjusted Operating Margin and Adjusted Segment Operating Margin | 20% | Emphasizes the importance of maintaining healthy margins | Adjusted Operating Margin and Adjusted Segment Operating Margin are defined as the ratio of Adjusted Operating Income or Adjusted Segment Operating Income, over Organic Revenue, adjusted to exclude special items that include, but are not limited to, restructuring, divestiture-related costs, certain asset impairment charges, certain acquisition-related impacts, and unusual or infrequent operating items. Special items represent significant charges or credits that impact the current results, which management views as unrelated to the Company’s ongoing operations and performance. | | Organic Revenue and Organic Segment Revenue | 20% | Reflects the Company’s emphasis on growth | Organic Revenue is defined as revenue, excluding the estimated impact of foreign currency fluctuations and acquisitions. Organic Segment Revenue is defined as segment level revenue excluding the estimated impact of foreign currency fluctuations, acquisitions and divestitures. In both cases, divestitures include sales of portions of our business that did not meet the criteria for presentation as a discontinued operation. | | Individual Component | 20% | Provides focus on supporting enterprise initiatives that will create growth and increase shareholder value | Each NEO establishes several personal or team goals related to Company initiatives or segment-specific initiatives that are aligned with the strategy of the business and the goals of the CEO. For 2023, the areas established at the start of the performance period were: ■ Financial: Deliver on our financial commitments. ■ Culture and Talent: Operationalization of our Higher Performance Culture; strengthen and develop our talent pipeline; advance Diversity, Equity & Inclusion; engage and energize employees around our strategy. ■ Execution: Drive customer-centered fundamentals and cultivate customer relationships; achieve operational excellence by differentiating through safety, effectiveness, and efficiencies; ensure the organization is optimized and delivering on customer commitments with premier profitability. ■ Growth and Innovation: Advance our technology and capabilities to create new opportunities and growth for the medium and long-term. ■ Capital Deployment: Drive actions to maximize returns of our organic investments and cultivate value-creating, inorganic growth opportunities. |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| ITT INC. | 2024 PROXY STATEMENT | 49 |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
As permitted by the ITT Annual Incentive Plan for Executive Officers, the Compensation and Human Capital Committee may exclude the impact of acquisitions, divestitures and other special items in computing AIP awards. Special items represent significant charges or credits that impact current results, which management views as unrelated to the Company’s ongoing operations and performance. Special items may include, but are not limited to, restructuring costs, realignment costs, pension settlement and other curtailment costs, certain acquisition-related expenses, income tax settlements or adjustments, and unusual and infrequent items. The four financial performance metrics applicable to each NEO are non-GAAP financial measures and should not be considered a substitute for measures determined in accordance with GAAP. These non-GAAP financial measures may not be comparable to similar measures reported by other companies or those that we use in our Form 10-K or other external financial presentations. 2023 AIP PERFORMANCE TARGETS AND RESULTS The Adjusted EPS, Free Cash Flow, Adjusted Operating Margin and Organic Revenue targets were approved in February 2023 based on the Company’s operating budget. The target of each financial metric was set higher than our 2022 actual results. The Compensation and Human Capital Committee reviewed the operating budget with management to ensure the targets were appropriate and determined the achievement of the combination of financial goals would be challenging and reflect strong performance. In addition to these metrics, ITT Inc. and each of the business segments have working capital financial targets that if not achieved will result in up to a five-point reduction of the final AIP financial score. The table below sets forth the target and actual results for each 2023 AIP financial performance metric at the corporate level. ITT INC. FINANCIAL PERFORMANCE TARGETS The financial targets for Mr. Savi, Mr. Caprais, Ms. Marino and Mr. Makowiecki reflect ITT Inc. targets.
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| Metric | Threshold (50%) | Target (100%) | Maximum (200%) | 2023 Results | 2023 Payout | | Adjusted Earnings Per Share | $4.28 | $4.75 | $5.23 | $5.21 | 198% | | Free Cash Flow | $323M | $380M | $437M | $438.5M | 200% | | Adjusted Operating Margin | 15.3% | 16.1% | 16.9% | 17.1% | 200% | | Organic Revenue | $2,903M | $3,225M | $3,548M | $3,262M | 111% |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
SEGMENT FINANCIAL PERFORMANCE TARGETS The financial targets for Mr. Barbon reflect the APAC region, in addition to the ITT Inc. Adjusted Earnings Per Share target. Business segments receive an additional benefit to their financial score and bonus payout pool when they meet or exceeds their financial targets. As a result, Mr. Barbon received an additional 28 points toward his AIP financial score, which are not reflected in the table below. Financial Targets and results of the APAC region, which apply to Mr. Barbon, are in the table below.
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| Metric | Threshold (50%) | Target (100%) | Maximum (200%) | 2023 Results | 2023 Payout | | Adjusted Segment Free Cash Flow | $81M | $95M | $110M | $105M | 169% | | Adjusted Segment Operating Margin | 21.1% | 22.3% | 23.4% | 23.3% | 193% | | Organic Segment Revenue | $485M | $539M | $593M | $546M | 113% |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
Mr. Ghirardo separated from ITT on October 23, 2023 and did not receive a 2023 AIP payout.
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| 50 | ITT INC. | 2024 PROXY STATEMENT |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
AIP INDIVIDUAL COMPONENT CONSIDERATIONS Each NEO has 20% of their AIP bonus target based on the individual component, which rewards achievement of their individual and team goals. The Compensation and Human Capital Committee considered the following achievements when determining the individual component payout of each NEO. The considerations for the CEO were described previously in the “Executive Summary.” Mr. Ghirardo separated from ITT on October 23, 2023 and did not receive a 2023 AIP payout. ■ Emmanuel Caprais, Senior Vice President and Chief Financial Officer: ● Supported delivery of a record year for ITT’s financial results ● Relentless focus on operational performance and cost takeout ● Continued to provide critical leadership in driving ITT’s focus on environmental projects and reporting ■ Lori B. Marino, Senior Vice President, General Counsel and Corporate Secretary: ● Provided exceptional leadership and direction on all global legal matters ● Ensured strong execution of critical corporate governance initiatives ● Supported strategic capital deployment investments including M&A ■ Davide Barbon, Senior Vice President and President, Motion Technologies and APAC: ● Delivered record financial results for the APAC region ● Drove unprecedented customer focus and won key orders and projects ● Continued to build and retain a high performing APAC team in a competitive talent market ■ Bartek Makowiecki, Senior Vice President, Strategy and Business Development ● Developed and drove comprehensive enterprise strategy and venture capabilities ● Delivered two strategic acquisitions and one divestiture ● Continued to lead a high performing team with strong partnerships across ITT’s Value Centers CHANGES TO OUR AIP DESIGN IN 2024 Each year we review our compensation plans with the Compensation and Human Capital Committee, including the design of our AIP and LTIP, to ensure alignment with our business strategy and market practices. As we continue to invest in projects and acquisitions that drive long-term growth and value for our stakeholders, we understand that strong cash flow is critical for execution of our strategy. For 2024, the Compensation and Human Capital Committee approved an update to the AIP formula to increase the weighting of the free cash flow metric from 20% to 25%, and reduce the weighting of the individual component from 20% to 15%. This update aligns with our strategy and continues to tie AIP payouts for executive officers directly to our financial performance, while balancing the need to reward individual performance and accomplishments. During our annual investor engagement process in November and December, we specifically ask for feedback on the current design of our plans, and we ask for input on any potential changes we are considering. We continue to receive support for our incentive plans and generally received positive feedback about this change in weighting to our metrics. 2023 LONG-TERM INCENTIVE COMPENSATION In 2023, the Compensation and Human Capital Committee approved two types of grants for the Company’s annual LTI awards with each addressing long-term shareholder value alignment in different ways. The Committee believes that granting a combination of PSUs and RSUs provides alignment with shareholder interests, retention value and a direct connection between pay and the performance of our Company over the long term. The 2023 LTI award grants for our NEOs were allocated as follows:
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| 60% PSUs | + | 40% RSUs |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
The following table shows the target value of the 2023 LTI award grants made to NEOs in March 2023 as part of the Company’s annual compensation process. These LTI values were determined by taking into account base pay and annual incentive values, assessing market competitive total compensation levels and seeking to find an appropriate mix of fixed versus variable and short-term versus long-term incentives. These values also considered each NEO’s role, potential long-term contribution, performance, experience and skills.
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| ITT INC. | 2024 PROXY STATEMENT | 51 |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| Named Executive Officer | PSUs (Target Award) | RSUs | Total(1) | | Luca Savi | $2,820,000 | $1,880,000 | $4,700,000 | | Emmanuel Caprais | 900,000 | 600,000 | 1,500,000 | | Lori B. Marino | 390,000 | 260,000 | 650,000 | | Davide Barbon | 360,000 | 240,000 | 600,000 | | Bartek Makowiecki | 450,000 | 300,000 | 750,000 | | Carlo Ghirardo(2) | 210,000 | 140,000 | 350,000 |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
(1) The values in this table reflect target amounts approved by the Compensation and Human Capital Committee; the values reported in the SCT and the Grants of Plan-Based Awards tables present the grant date fair value as calculated under GAAP. (2) Mr. Ghirardo separated from ITT on October 23, 2023. PERFORMANCE STOCK UNITS PSUs are settled in shares after a three-year performance vesting period, with performance tied equally to the Company’s three-year TSR performance relative to a group of peer companies and the Company’s ROIC. Delivery of shares generally requires employment throughout the three-year performance period. PSUs provide alignment with absolute stock performance, relative stock performance, Company performance and potential retention value. For each eligible employee, there may be up to three outstanding PSU award periods at any time. No dividend equivalents are paid on unvested PSUs.
ROIC (50% WEIGHTING)
ROIC (50% WEIGHTING) ■ The Compensation and Human Capital Committee approved ROIC as a metric to align executive pay with the Company’s performance in driving efficient and disciplined deployment of capital. ■ The ROIC target is a three-year average of the annual ROIC results within the performance period. ■ ROIC for the 2023 PSUs is a percentage that will be calculated by dividing (A) after-tax income from continuing operations attributable to the Company, adjusted to exclude the after-tax impact from special items, interest income or expense and amortization of expense from intangible assets by (B) average total assets from continuing operations, less non-interest bearing current liabilities for the five preceding quarterly periods. Special items represent significant charges or credits that impact results, such as unbudgeted acquisitions or divestitures, but may not be related to the Company’s ongoing operations and performance, as disclosed in the Company’s filings with the SEC. ■ The Compensation and Human Capital Committee establishes the ROIC targets during February or early March each year, before the PSU awards are granted, and the targets for currently outstanding PSUs are reflected in the table below. The ROIC targets will be adjusted annually during the performance period for certain one-time events such as material acquisitions and divestitures and changes in law or accounting principles.
ROIC (50% WEIGHTING)
| PSU ROIC Targets | | | | | PSU Award | Threshold (50% Payout) | Target (100% Payout) | Maximum (200% Payout) | | 2023-2025 PSU | 13.0% | 14.5% | 15.9% | | 2022-2024 PSU | 13.0% | 14.4% | 15.8% | | 2021-2023 PSU | 11.0% | 12.2% | 13.4% |
RELATIVE TSR (50% WEIGHTING)
RELATIVE TSR (50% WEIGHTING) ■ Relative TSR was approved by the Committee to ensure executive compensation is aligned with shareholder value creation. ■ The relative TSR peer group includes companies in the S&P 400 Capital Goods index and additional companies from the transportation and industrial pump/flow industries (collectively, the “TSR peer group”) in order to provide a broad set of companies that align with ITT’s portfolio mix. ■ TSR performance is measured by comparing the average closing stock price for the month of December prior to the start of the three-year performance cycle, to the average closing stock price for the month of December that concludes the three-year period. Vesting at the end of the applicable three-year performance period is based on the Company’s TSR performance ranked against the TSR performance of the other companies within the TSR peer group.
RELATIVE TSR (50% WEIGHTING)
| 52 | ITT INC. | 2024 PROXY STATEMENT |
RELATIVE TSR (50% WEIGHTING)
| If Company’s Relative Total Shareholder Return Performance is: | Payout Factor for TSR Component of PSUs* | | at the 80th percentile or greater | 200% | | at the 50th percentile | 100% | | at the 35th percentile | 50% | | less than the 35th percentile | 0% |
RELATIVE TSR (50% WEIGHTING)
* Payouts for performance between the percentiles shown are interpolated. PAYOUT ON PSUs GRANTED IN 2021 In 2021, ITT granted PSUs to certain executives, including each of the NEOs. The three-year performance targets were based equally on the Company’s TSR performance relative to the performance of companies in the TSR peer group and the Company’s ROIC performance. The payout of the 2021 PSUs was 170% of target based on the following results: ■ ROIC Results (50% weighting): In July 2021, ITT divested its legacy asbestos liabilities and insurance assets to Delticus HoldCo L.P. In April 2022, ITT completed the acquisition of Habonim Industrial Valves and Actuators Ltd. and in May 2023, ITT completed the acquisition of Micro-Mode. The 2021 ROIC targets were adjusted for these transactions in accordance with the Company’s 2021 PSU award agreement, which states that targets will be adjusted for material acquisitions, divestitures or other one-time events, or material changes in laws, regulations or accounting principles. ITT’s three-year average ROIC was 13.9%, which met the adjusted maximum threshold of 13.4%, resulting in a payout of 200% of target. ■ 2021-2023 Relative TSR Results (50% weighting): During the three-year performance period, ITT’s TSR was at the 62nd percentile of the TSR peer group. The payout for the TSR metric was 140% of target. RESTRICTED STOCK UNITS RSUs are settled in shares after a three-year vesting period and provide alignment with stock performance and retention value. Grants of RSUs provide NEOs with stock ownership of ITT shares after the restrictions lapse. NEOs receive RSU awards because, in the judgment of the Compensation and Human Capital Committee, and based on management recommendations, these individuals are in positions most likely to influence the achievement of the Company’s long-term value creation goals and to create shareholder value over time. The Compensation and Human Capital Committee reviews all grants of RSUs for executive officers prior to the award, including awards based on performance, retention-based awards, and awards contemplated for new employees as part of employment offers. The CEO has the authority to grant RSUs to other employees in certain situations. These grants are reviewed by the Compensation and Human Capital Committee at its next scheduled meeting. RSUs do not grant dividend or voting rights to the holder over the vesting period, however, dividend equivalents are accrued and paid after vesting. In certain cases, such as for new hires or to facilitate retention, selected employees may receive RSUs subject to different vesting terms. PERFORMANCE-RELATED GRANTS In addition to annual LTI awards, the Compensation and Human Capital Committee may award other grants in the form of PSUs, RSUs or stock options. These grants are used to attract new senior executives to ITT, provide additional retention incentive or reward extraordinary performance. The Compensation and Human Capital Committee approved a $300,000 RSU award that was granted in January 2023 with 3-year cliff vesting to Ms. Marino as part of a competitive and attractive compensation package to rejoin ITT. The Committee also approved a 2023 PSU award with a target value of $300,000 for Mr. Barbon on October 23, 2023 because of the additional responsibilities he assumed as leader of the Motion Technologies Value Center, and to encourage his retention.
RELATIVE TSR (50% WEIGHTING)
| ITT INC. | 2024 PROXY STATEMENT | 53 |
RELATIVE TSR (50% WEIGHTING)
| COMPENSATION DISCUSSION AND ANALYSIS BENEFITS AND PERQUISITES |
RELATIVE TSR (50% WEIGHTING)
BENEFITS AND PERQUISITES All of the NEOs are eligible to participate in the Company’s broad-based U.S. employee benefits program other than Mr. Barbon, who receives benefits as employees of ITT Italy Holdings s.r.l. Prior to his separation from ITT, Mr. Ghirardo also received benefits as an employee of ITT Italy Holdings s.r.l. The U.S. employee benefits program includes the ITT Retirement Savings Plan, group medical and dental coverage, group life insurance, group accidental death and dismemberment insurance and other benefit plans. All of the NEOs except for Mr. Barbon and Mr. Ghirardo, together with most of the Company’s other salaried employees who work in the United States, participate in the ITT Retirement Savings Plan, a tax-qualified savings plan, which allows employees to contribute to the plan on a before-tax basis, on an after-tax basis or as a Roth contribution. The Company makes a core contribution of 3% or 4% of pay to the plan for all eligible employees and matches 50% of employee contributions, up to 6% of pay. The core contribution is 3% for employees whose age plus years of service is less than 50, and 4% for employees whose age plus years of service is at least 50. The Company provides only those perquisites it considers to be reasonable and consistent with competitive practices. Perquisites available for our U.S.-based NEOs are financial and estate planning reimbursements of up to $15,000 per year. Mr. Barbon receives a company car, which is a common market practice for senior executives based in Shanghai, China and Italy. Mr. Ghirardo received a company car before his separation from ITT in October. Amounts reported as perquisites also include reimbursement of certain relocation-related expenses, which are described in detail in the notes to the “All Other Compensation Table” in the section entitled “Compensation Tables.” RETIREMENT AND BENEFITS PLAN FOR MR. BARBON Mr. Barbon is employed by ITT’s Italian subsidiary and is eligible for statutory retirement and health and welfare benefits that are generally provided to our employees in Italy that have the classification of Dirigenti (Executive). He also participates in a Motion Technologies (Italy) supplemental retirement plan provided under the terms of the collective bargaining agreement applicable to executives of industrial companies. These benefits are provided in addition to the Italian government-provided retirement benefits. During Mr. Barbon’s assignment in China, he and his family were covered by ITT’s international healthcare plan, which covers all employees that participate in an international assignment. OTHER COMPENSATION AND BENEFITS POST-EMPLOYMENT COMPENSATION
SEVERANCE PLAN ARRANGEMENTS
SEVERANCE PLAN ARRANGEMENTS The Company maintains severance arrangements for most of its senior executives, including all of the NEOs. These arrangements are included in two plans, one covering most severance circumstances (the “ITT Senior Executive Severance Pay Plan”), and the other covering severance following a change-in-control event (the “ITT Senior Executive Change in Control Severance Pay Plan”). These plans do not allow for the payment of tax gross-ups on severance pay or other benefits. The purpose of the ITT Senior Executive Severance Pay Plan is to provide a period of transition for senior executives upon termination of employment. The terms of the ITT Senior Executive Severance Pay Plan apply to Mr. Savi, Mr. Caprais, Ms. Marino, and Mr. Makowiecki. The severance terms for Mr. Barbon are covered under the National Collective Agreement for the Industrial Sector Managers in Italy. This agreement provides Mr. Barbon with termination benefits in the event his employment is terminated other than for cause. Mr. Ghirardo separated from ITT in October 2023 and is no longer covered by any ITT severance plans. Senior executives who are full-time salaried employees of the Company or any subsidiary, who are paid under a U.S. payroll and who report directly to the CEO are covered by the ITT Senior Executive
SEVERANCE PLAN ARRANGEMENTS
| 54 | ITT INC. | 2024 PROXY STATEMENT |
SEVERANCE PLAN ARRANGEMENTS
Severance Pay Plan. The plan generally provides for severance payments if the Company terminates a senior executive’s employment without cause. In the event any payment would constitute an excess parachute payment within the meaning of Section 280G of the Internal Revenue Code, as amended (the “Code”), then the aggregate of all payments would be reduced so the present value of the aggregate of all payments is maximized, but is not subject to excise tax under Section 4999 of the Code or the deduction limitation of Section 280G of the Code. The purpose of the ITT Senior Executive Change in Control Severance Pay Plan is to provide compensation in the case of termination of employment in connection with an acceleration event (defined under the heading “Compensation Tables— Potential Post-Employment Compensation—Change in Control Arrangements”) including a change in control. The ITT Senior Executive Change in Control Pay Plan applies to all NEOs. The provisions of this plan are specifically designed to address the inability of senior executives to influence the Company’s future performance after certain change of control events. The plan is structured to encourage executives to act in the best interests of shareholders by providing for certain compensation and retention benefits and payments in the case of an acceleration event and qualifying termination of employment. These plans, including the potential post-employment payments our NEOs would receive pursuant to these plans, are described in more detail elsewhere in this Compensation Discussion and Analysis under the heading “Compensation Tables—Potential Post-Employment Compensation.” The severance plans apply to our key employees as defined by Section 409A of the Code. POLICIES THE ROLE OF RISK AND RISK MITIGATION The Compensation and Human Capital Committee regularly reviews risk factors associated with our businesses in determining compensation structure and pay practices. The structure of the Board’s committees facilitates this evaluation and determination. Further, overall enterprise risk is considered and discussed at Board meetings, providing additional important information to the Compensation and Human Capital Committee. The CEO attends those portions of the Compensation and Human Capital Committee meetings at which plan features and design configurations of our annual and LTI plans are considered and approved.
SEVERANCE PLAN ARRANGEMENTS
| ITT INC. | 2024 PROXY STATEMENT | 55 |
SEVERANCE PLAN ARRANGEMENTS
We believe our executive compensation program appropriately balances risk with maximizing long-term shareholder value. The following features of our executive compensation program help to contribute to the achievement of this goal.
SEVERANCE PLAN ARRANGEMENTS
| Emphasis on Long-Term Compensation | By granting long-term incentive compensation at 31% to 65% of our NEOs’ total compensation package, the Compensation and Human Capital Committee believes it is encouraging strategies that correlate with the long-term interests of the Company. Our LTI awards, described elsewhere in this Compensation Discussion and Analysis under the heading “2023 Long-Term Incentive Compensation,” feature a three-year vesting threshold at the senior vice president level and above, encouraging behavior focused on long-term value creation. PSUs focus on ITT’s three-year TSR and ROIC performance, encouraging behavior focused on long-term goals. | | Pay Mix | 15% to 39% of total target compensation is fixed for NEOs while the remaining total compensation is tied to performance, consistent with our pay-for-performance philosophy. As scope of responsibility increases, the amount of performance-based pay increases and fixed pay decreases relative to other officers. Our incentive design provides multiple performance time frames and a variety of financial measures that are intended to drive profitable and sustained growth. | | Clawback Policy | We have an SEC-compliant policy that: ■ provides for the recoupment of certain compensation from our executive officers (including our NEOs) in the event of an accounting restatement resulting from material noncompliance with any financial reporting requirements under the federal securities laws on a “no-fault” basis; and ■ provides for recoupment of performance-based compensation if the Board determines a senior executive (including our NEOs) has engaged in fraud or willful misconduct that caused or otherwise contributed to the need for a material restatement of the Company’s financial results. | | Required Executive Stock Ownership | NEOs are required to own Company shares or share equivalents with a value equal to a multiple of their base salary, as discussed in more detail below. We believe this requirement aligns their interests with the interests of the Company’s shareholders and also discourages behavior that places focus only on the short-term. | | Prohibition Against Speculating, Hedging or Pledging Stock | We have a policy prohibiting employees from hedging and speculative trading in and out of the Company’s securities, including short sales and leverage transactions, such as puts, calls, and listed and unlisted options. We also prohibit employees from pledging Company securities as collateral for a loan. | | Rule 10b5-1 Trading Plans | The Board has authorized the use by executive officers of prearranged trading plans under Rule 10b5-1 under the Exchange Act. Rule 10b5-1 permits insiders to adopt predetermined plans for selling specified amounts of stock or exercising stock options under specified conditions and at specified times. Executive officers may only enter into a trading plan during an open trading window, they must not possess material nonpublic information regarding the Company at the time they adopt the plan and must act in good faith with respect to the plan. Using trading plans, insiders can diversify their investment portfolios while avoiding concerns about transactions occurring at a time when they might possess material nonpublic information. Generally, under these trading plans, the individual relinquishes control over the transactions once the plan is put into place. Accordingly, sales may occur at any time, including possibly before, simultaneously with, or immediately after significant events involving the Company. Both new plans and modifications are subject to a statutory “cooling-off period” designed to safeguard the plans from manipulation or market timing. Trading plans adopted by executive officers are reviewed and approved by our legal department. |
SEVERANCE PLAN ARRANGEMENTS
| 56 | ITT INC. | 2024 PROXY STATEMENT |
SEVERANCE PLAN ARRANGEMENTS
EXECUTIVE STOCK OWNERSHIP GUIDELINES The Company maintains stock ownership guidelines for all of its executive officers, including the NEOs. Executive officers have five years in order to meet the guidelines. Stock ownership guidelines for officers specify the desired levels of Company stock ownership and encourage a set of behaviors for each officer to reach the guideline levels. The guidelines specify expected stock ownership levels expressed as a multiple of base salary, as set forth in the table below. Only the following equity holdings count toward achieving these ownership levels: shares owned outright, Company unvested RSUs, shares held in the Company’s dividend reinvestment plan, shares owned in the ITT Retirement Savings Plan and “phantom” shares held in a fund that tracks an index of the Company’s stock in the deferred compensation plan. Unvested PSUs, which comprise a significant percentage of total compensation for the CEO and other NEOs, do not count towards the achievement of our executive stock ownership guidelines. The guidelines, and compliance with the guidelines, are monitored periodically. As of December 31, 2023 all NEOs either have met the guidelines, or are on track to meet the guidelines.
SEVERANCE PLAN ARRANGEMENTS
| Chief Executive Officer | 6 x Annual Base Salary | | Executive Vice Presidents | 4 x Annual Base Salary | | Senior Vice Presidents | 3 x Annual Base Salary | | Selected Vice Presidents | 1 x Annual Base Salary |
SEVERANCE PLAN ARRANGEMENTS
HEDGING POLICY Our NEOs are subject to the Company’s hedging policy described at page 24. CONSIDERATIONS OF TAX AND ACCOUNTING IMPACTS In establishing total compensation for the executive officers, the Compensation and Human Capital Committee has considered the effect of Section 162(m) of the Code and the accounting rules associated with the Company’s compensation programs. As a general matter, Section 162(m) disallows a tax deduction for compensation over $1,000,000 paid for any fiscal year to the CEO, the CFO and the three other highest-paid NEOs. The Compensation and Human Capital Committee did not design the 2023 executive compensation program to preserve the deductibility of compensation that is paid to executive officers, as it did prior to the adoption of the Tax Cuts and Jobs Act of 2017.
SEVERANCE PLAN ARRANGEMENTS
| ITT INC. | 2024 PROXY STATEMENT | 57 |
SEVERANCE PLAN ARRANGEMENTS
COMPENSATION TABLES SUMMARY COMPENSATION TABLE The following table provides information regarding the compensation earned by each of our NEOs.
SEVERANCE PLAN ARRANGEMENTS
| Name and Principal Position | Year | Salary | Bonus | Stock Awards(1) | Non-Equity Incentive Plan Comp(2) | Change in Pension Value and Non-qualified Deferred Comp Earnings | All Other Comp(3) | Total | | Luca Savi Chief Executive Officer and President | 2023 | $1,086,733 | $— | $5,388,142 | $2,702,700 | $— | $158,983 | $9,336,558 | | | 2022 | 1,025,037 | — | 4,529,297 | 1,090,800 | — | 196,984 | 6,842,118 | | | 2021 | 996,922 | — | 4,723,075 | 1,794,000 | — | 168,132 | 7,682,129 | | Emmanuel Caprais Senior Vice President and Chief Financial Officer | 2023 | 600,000 | — | 1,719,861 | 729,000 | — | 78,787 | 3,127,648 | | | 2022 | 495,307 | — | 1,516,165 | 436,500 | — | 73,657 | 2,521,629 | | | 2021 | 450,000 | — | 1,012,655 | 491,400 | — | 46,933 | 2,000,988 | | Lori B. Marino(4) Senior Vice President, General Counsel and Corporate Secretary | 2023 | 480,000 | 200,000 | 1,046,185 | 655,200 | — | 32,573 | 2,413,958 | | Davide Barbon(5) Senior Vice President and President, Motion Technologies and Asia Pacific Region | 2023 | 380,600 | — | 1,059,782 | 676,500 | — | 848,936 | 2,965,818 | | | 2022 | 336,050 | — | 655,665 | 311,130 | — | 735,292 | 2,038,137 | | | 2021 | 342,000 | — | 427,554 | 297,882 | — | 382,289 | 1,449,725 | | Bartek Makowiecki Senior Vice President, Strategy and Business Development | 2023 | 436,157 | — | 860,446 | 567,600 | — | 47,642 | 1,911,845 | | | 2022 | 420,000 | 370,000 | 679,433 | 258,300 | — | 25,200 | 1,752,933 | | Carlo Ghirardo(6) Former Senior Vice President and President, Motion Technologies | 2023 | 352,362 | — | 401,548 | — | — | 1,866,535 | 2,620,445 |
SEVERANCE PLAN ARRANGEMENTS
| COMPENSATION TABLES GRANTS OF PLAN-BASED AWARDS IN 2023 |
SEVERANCE PLAN ARRANGEMENTS
| COMPENSATION TABLES OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END |
SEVERANCE PLAN ARRANGEMENTS
| COMPENSATION TABLES OPTION EXERCISES AND STOCK VESTED IN 2023 |
SEVERANCE PLAN ARRANGEMENTS
| COMPENSATION TABLES CEO PAY RATIO |
SEVERANCE PLAN ARRANGEMENTS
| Year | Summary Compensation Table Total for PEO(1) | Compensation Actually Paid to PEO(2) | Average Summary Compensation Table Total for Non-PEO NEOs(1) | Average Compensation Actually Paid to Non-PEO NEOs(2) | Value of Initial Fixed $100 Investment Based On: | | Net Income (in millions)(5) | Company- Selected Measure(6) | | | | | | | Total Shareholder Return(3) | Peer Group Total Shareholder Return(4) | | | | 2023 | $9,336,558 | $20,000,560 | $2,607,943 | $3,918,660 | $262 | $251 | $410.5 | $5.21 | | 2022 | 6,842,118 | (2,317,626) | 1,979,464 | 866,354 | 176 | 183 | 367.0 | 4.44 | | 2021 | 7,682,129 | 16,989,404 | 1,724,038 | 2,829,322 | 218 | 203 | 316.3 | 4.05 | | 2020 | 6,625,380 | 5,026,488 | 1,492,468 | 1,094,288 | 163 | 159 | 72.5 | 3.20 | | 2019 | 7,068,573 | 12,612,311 | 1,844,792 | 4,111,507 | 155 | 133 | 325.1 | 3.81 |
SEVERANCE PLAN ARRANGEMENTS
| Name | Fees Earned or Paid in Cash | Stock Awards(1) | Total | | Kevin Berryman(2) | $66,667 | $93,333 | $160,000 | | Donald DeFosset, Jr. | 115,000 | 140,000 | 255,000 | | Nicholas C. Fanandakis | 100,000 | 140,000 | 240,000 | | Nazzic S. Keene(2) | 66,667 | 93,333 | 160,000 | | Richard P. Lavin(3) | 100,000 | — | 100,000 | | Rebecca A. McDonald | 115,000 | 140,000 | 255,000 | | Timothy H. Powers | 182,500 | 202,500 | 385,000 | | Cheryl L. Shavers | 100,000 | 140,000 | 240,000 | | Sabrina Soussan(4) | 100,000 | 70,000 | 170,000 |
SEVERANCE PLAN ARRANGEMENTS
| 2023 NON-MANAGEMENT DIRECTOR COMPENSATION |
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS The Company’s By-laws provide in uncontested elections, a director nominee shall be elected by a majority of the votes cast by the shareholders represented at the virtual meeting or by proxy at the Annual Meeting. A “majority of the votes cast” means the number of votes cast “for” a director nominee must exceed the number of votes cast “against” that nominee (with abstentions and broker non-votes not counted as votes cast with respect to that director nominee). The By-laws further provide in uncontested elections, any director nominee who fails to be elected by a majority, but who is also a director at the time, shall promptly provide a written conditional resignation, as a holdover director, to the Chairman of the Board or the Corporate Secretary, and remain a director until a successor is elected and qualified. The Nominating and Governance Committee shall promptly consider the resignation and all relevant facts and circumstances concerning any vote and the best interests of the Company and its shareholders. After consideration, the Nominating and Governance Committee shall make a recommendation to the Board whether to accept or reject the tendered resignation, or whether other action should be taken. The Board will act on the Nominating and Governance Committee’s recommendation no later than its next regularly scheduled Board meeting (after certification of the shareholder vote) or within 90 days after certification of the shareholder vote, whichever is earlier, and the Board will promptly publicly disclose its decision and the reasons for its decision. As discussed above, brokers (and many banks and other record holders of “street name” shares that follow the applicable NYSE voting rules for member brokers) do not have discretionary voting power with respect to director elections unless they have customer voting instructions. This means, without your voting instructions on this matter, a broker non-vote will occur because your broker (or bank or other holder of record) does not have the power to vote your shares on the election of directors. As a result, it is very important you return voting instructions relating to the election of directors to your broker, bank or other holder of record.