DEF 14A of Haverty Furniture Companies Inc
Filed Mar 27, 2024 · FY20230001140361-24-015464
Our Board of Directors
Our Board of Directors Our board is a highly engaged group of individuals that provides strong, effective oversight of Havertys. Both individually and collectively, our directors have the qualifications, skills and experience needed to inform and oversee the company’s long-term strategic growth priorities. The board believes that a variety and balance of perspectives on the board results in more thoughtful and robust deliberations, and ultimately, better decisions. The nominees for election at the 2024 annual meeting were recommended to the board by its Nominating, Compensation and Governance Committee (the “NCG Committee”). The board of directors has a rigorous process to ensure that its composition is diverse, balanced and aligned with the evolving needs of the company. Currently the board consists of nine members, Mylle Mangum, will retire from the board as of the 2024 Annual Meeting, consistent with our Corporate Governance Guidelines on director retirement. All of the nominees are currently directors of Havertys except for Natalie Morhous, who is standing for election for the first time at the 2024 Annual Meeting. Ms. Morhous was recommended as a nominee by several Havertys directors. Each director nominee was nominated on the basis of the unique experience, background, qualifications, attributes and skills that he or she brings to the board, as well as how those factors blend with those of the other nominees. The holders of Class A common stock will elect six directors and holders of common stock will elect three directors. Each elected director will hold office until the next annual meeting. The election of our directors requires a plurality of votes cast at the meeting by the holders of the respective classes of common stock. We expect that each of the nominees will be available for election, but if any of them is unable to serve at the time the election occurs, it is intended that the proxies will vote for the election of another nominee to be designated by the NCG Committee and the board. The biography of each of the nominees contains information regarding such nominee’s experience and his or her director positions held currently or at any time during the last five years. The fact that an icon is not shown does not mean the individual does not possess the experience, qualification, or skill.
Our Board of Directors
| Proposal 1: Election of Directors | | | | What am I voting on? | | Holders of Class A common stock are being asked to elect six directors for a one-year term. Holders of common stock are being asked to elect three directors for a one-year term. | | Voting recommendations: | | Our board of directors recommends a vote “For” each of the director nominees. |
Director Nominee Highlights
Director Nominee Highlights
Director Nominee Highlights
| Building Our Board - Nominee Demographics |
Director Nominee Highlights
The Board strives to maintain an appropriate balance of tenure, diversity and skills on the board.
Director Nominee Highlights
| Nominee Attributes and Skills |
Director Nominee Highlights
| All Director nominees exhibit: • High integrity • Strategic and innovative thinking • Strong leadership skills • A proven record of success • Financial acumen • Excellent communication skills • Knowledge of corporate governance requirements and practices • Able to identify and manage risks • Strong collaboration, discussion, and decision-making skills | 5 out of 9 current or former CEO 5 out of 9 Other public board experience 7 out of 9 finance experience | 8 out of 9 Risk Assessment experience 7 out of 9 Consumer-focused experience 5 out of 9 Marketing/ Brand Building experience | 7 out of 9 Sales experience 1 out of 9 Cybersecurity experience |
Director Nominee Highlights
| | L. ALLISON DUKES Age 49 | Independent Director since 2016 | | | Principal Occupation: Senior Managing Director and Chief Financial Officer, Invesco Ltd. since August 2020. Deputy Chief Financial Officer, Invesco Ltd. from March 2020 to August 2020. Former Chief Financial Officer for SunTrust Banks, Inc. from March 2018 until December 2019. Head of Commercial Banking for SunTrust Banks, Inc. from 2017 until 2018. Affiliations: Board of Trustees of Children’s Healthcare of Atlanta and Board of Trustees of Emory University; past chair of the Board of Junior Achievement of Georgia. Experience: | |
Director Nominee Highlights
| | RAWSON HAVERTY JR. Age 67 | Non-Independent Non-Management Director since 2023 Management Director from 1992-2023 | | | Principal Occupation: Retired, former Senior Vice President, Real Estate and Development of Havertys from 1998 until 2023. Affiliations: Southface Institute, Christopher’s Haven Atlanta, and Advisory Board of the Emory University Center for Ethics. Experience: | |
Director Nominee Highlights
| | NATALIE B. MORHOUS Age 40 | Ms. Morhous is standing for election for the first time. | | | Principal Occupation: CEO, RaceTrac Inc., since January 2024. President from February 2019 until January 2024. Affiliations: Board of Directors of RaceTrac, Inc., Board of Directors of the National Association of Convenience Stores, Advisory Board of the Emory University Center for Ethics, Young President’s Organization, and Leadership Georgia‑2023. Experience: | |
Director Nominee Highlights
| | VICKI R. PALMER Age 70 | Independent Director since 2001 | | | Principal Occupation: Retired, former Executive Vice President, Financial Services and Administration for Coca-Cola Enterprises Inc. from 2004 until 2009. Senior Vice President, Treasurer and Special Assistant to the CEO of Coca‑Cola Enterprises Inc. from 1999 to 2004. Other Public Directorships: First Horizon National Corporation. Affiliations: Finance Chair of the Black Economic Alliance, Lifetime Trustee of Spelman College, Rhodes College, and Woodward Academy. Experience: | |
Director Nominee Highlights
| | DEREK G. SCHILLER Age 53 | Independent Director since 2020 | | | Principal Occupation: President and Chief Executive Officer of the Atlanta Braves, a Major League Baseball Club, since 2018. President of Business for the Braves from 2016 to 2018. Affiliations: Member of the Board of the Metro Atlanta Chamber of Commerce, the Atlanta Convention and Visitors Bureau, the Atlanta Sports Council, and the Jack and Jill Late-Stage Cancer Foundation. Experience: | |
Director Nominee Highlights
| | AL TRUJILLO Age 64 | Independent Director since 2003 | | | Principal Occupation: President and Chief Operating Officer of the Georgia Tech Foundation since 2013. Investment Funds Advisor from 2007 to 2013. Former President and Chief Executive Officer of Recall Corporation, a global information management company from 2002 until 2007. Other Public Directorships: Former director of SCANA Corporation, which was acquired by Dominion Energy in 2018. Affiliations: Member of the Board of Trustees of Marist School. Experience: | |
Director Nominee Highlights
| Proposal 1: Nominees for Election By Holders of Common Stock |
Director Nominee Highlights
| | MICHAEL R. COTE Age 62 | Independent Director since 2022 | | | Principal Occupation: Retired, former CEO of Secureworks from 2002 to 2022 and chairman of the board from 2002 to 2011. Other Public Directorships: Secureworks from 2016 to 2021. Affiliations: Executive Chairman of the Board of Directors of Nitel, Inc., Director of Palmetto Technology Group, Board of Trustees of Children’s Healthcare of Atlanta, and the Board of Trustees at Marist School. Experience: | |
Director Nominee Highlights
| | G. THOMAS HOUGH Age 69 | Independent Director since 2018 Lead Director since 2021 | | | Principal Occupation: Retired, Americas Vice Chair of Ernst & Young LLP (“EY”). Vice Chair of Assurance Services of EY from 2009 to 2014. Other Public Directorships: Equifax Inc., Federated Hermes Fund Family, and former director of Publix Super Markets, Inc. from 2015 until 2020. Affiliations: President’s Cabinet of the University of Alabama. Experience: | |
Director Nominee Highlights
| | CLARENCE H. SMITH Age 73 | Management Director since 1989 Chairman of the Board since 2012 | | | Principal Occupation: Chief Executive Officer of Havertys since 2003. President and Chief Executive Officer from 2003 until March 2021. Over 48 years with Havertys in various positions. Other Public Directorships: Oxford Industries, Inc. Affiliations: Executive Committee of Metro Atlanta Chamber of Commerce, and member of the Board of Trustees of Marist School. Experience: | | | Clarence H. Smith and Rawson Haverty, Jr. are first cousins. | | |
Director Nominee Highlights
| Retiring Director – Not Standing For Election |
Director Nominee Highlights
| | MYLLE H. MANGUM Age 75 | Independent Director since 1999 | | | Principal Occupation: Chief Executive Officer of IBT Holdings, LLC, a provider of design, construction and consultant services for the retail banking and specialty retail industries, since 2003. Other Public Directorships: Barnes Group, Inc., Express, Inc., and former director of PRGX Global, Inc., which merged with Ardian in March 2021. Affiliations: The Shopping Center Group. Experience: | |
Director Nominee Highlights
| Dual Class Stock Structure |
Director Nominee Highlights
We have a dual-class capital structure, which we believe is in the best interests of Havertys and its stockholders. Havertys was founded in 1885 and its initial public offering was in October 1929. The Company’s dual-class structure began in 1986 when each holder of common stock received a share of Class A common stock. The long-term success of the Company for the benefit of our stockholders has been, and continues to be, the primary focus and engagement of the Board and management. Our capital structure ensures that the Company has a solid and supportive investor base throughout challenging economic cycles and crises. Messrs. Haverty and Smith and their families, as descendants of the Company’s founder and significant shareholders, have a deep interest in the long-term growth and success of the Company. We believe that historically, our ownership structure and this “patient capital” approach have provided a strategic advantage helping to mitigate some of the short-term pressures and exposure faced by some companies. Our structure allows management and the Board to focus on transforming the business model for sustainable growth and maintaining a strong balance sheet that generally benefits all stockholders. This long-term focus is especially critical in the current macroenvironment, which includes depressed housing sales, higher interest rates, wars, and geopolitical unrest. Our shareholder returns have significantly exceeded relevant market indices over the past 15 years since the “Great Recession.” Our cumulative Total Stockholder Return between December 31, 2008 and December 31, 2023 has been 674%, compared to 504% for the S&P Small Cap Index and 364% for the NYSE/AMEX/Nasdaq Home Furnishings & Equipment Store Index. The following sections provide an overview of our corporate governance structure and processes as they relate specifically to our board of directors.
Director Nominee Highlights
| Board Leadership |
Director Nominee Highlights
Our company is led by Clarence Smith, who has served as chief executive officer since 2003 and chairman of the board since August 2012. Our board nominees are composed of seven independent directors, one non‑independent director, and Mr. Smith as a management director. Our independent directors meet in executive session at each board meeting. These sessions are presided over by the lead director. Chairman/CEO: We believe that having a combined chairman/CEO, independent chairs for each of our board committees, and an independent lead director helps provide strong, unified leadership for our board of directors and management team and is currently the right structure for our company. We have one individual who we believe is seen by employees, business partners, and stockholders as providing leadership for Havertys, and we have experienced independent directors providing oversight of company operations. Lead Director: Consistent with industry best practices, our lead director helps Havertys maintain a corporate governance structure with appropriate independence and balance. The lead director chairs the executive sessions of independent directors and facilitates communications between the chairman/CEO and other directors. The lead director, currently Mr. Hough, is elected by the independent directors annually. The board believes that its current leadership structure is in the best interests of the Company and its stockholders, and that the board should continue to have the flexibility to determine the appropriate leadership structure for Havertys.
Director Nominee Highlights
| Attendance |
Director Nominee Highlights
During 2023, the board met four times and the committees met as indicated in the following table. Each director attended at least 88% of the meetings of the board and committees on which he or she served during 2023. We do not have a policy regarding director attendance at the annual meeting of stockholders. We have historically received proxies representing approximately 88% of eligible shares and had no stockholders in attendance at our annual meetings. No directors attended the 2023 annual meeting, and none are expected to attend the 2024 annual meeting.
Director Nominee Highlights
| Committees of the Board |
Director Nominee Highlights
Our board has three standing committees: Audit Committee, NCG Committee and Executive Committee. The table on the next page shows the current membership, the principal functions and the number of meetings held in 2023.
Director Nominee Highlights
| Name, Meetings and Members | Principal Functions | | Audit Committee Meetings: 4 Al Trujillo – Chair Michael R. Cote G. Thomas Hough Vicki R. Palmer Each member has been designated as “an audit committee financial expert” as defined by the Securities and Exchange Commission (“SEC”) and meets the independence requirements of the New York Stock Exchange (“NYSE”), SEC, and our Governance Guidelines as well as the enhanced standards for Audit Committee members in Section 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). | ➢ Provides oversight of the systems and procedures relating to the financial statements, financial reporting process, systems of internal accounting and financial controls. ➢ Reviews and discusses with management the company’s risk assessment framework and management policies including cybersecurity and the framework with respect to significant financial and enterprise risk exposures. ➢ Monitors the qualifications, independence and performance of the company’s internal audit function and independent auditor and meets after each quarterly meeting with management, the internal audit team, and the independent auditor in separate executive sessions. ➢ Committee charter on Havertys’ website at https://ir.havertys.com/corporate-governance-information/corporate-governance-documents | | NCG Committee Meetings: 2 L. Allison Dukes – Chair G. Thomas Hough Mylle H. Mangum Derek G. Schiller Al Trujillo Each member meets the independence requirements of the NYSE, SEC and our Governance Guidelines as well as the enhanced standards for Compensation and Governance Committee members in Rule 16b-3 promulgated under the Exchange Act. | ➢ Translates our compensation objectives into a compensation strategy that reinforces alignment of the interests of our executives with that of our stockholders. ➢ Approves and evaluates the company’s director and executive officer compensation plans, policies and programs. ➢ Conducts an annual review and evaluation of the CEO’s performance in light of the company’s goals and objectives. ➢ Reviews and makes recommendations for composition and structure of the board and policies relating to the recruitment of new board members and nomination and reelection of existing board members. ➢ Oversees the compliance structure and programs with annual reviews of Havertys’ corporate governance documents. ➢ Oversees the company’s ESG-related initiatives. ➢ Reviews and approves related person transactions in accordance with board practices. ➢ Committee charter on Havertys’ website at https://ir.havertys.com/corporate-governance-information/corporate-governance-documents | | Executive Committee Meetings: 0 Actions by Unanimous Consent: 1 Independent Members: G. Thomas Hough – Chair L. Allison Dukes Al Trujillo Management Member: Clarence H. Smith | ➢ In accordance with our bylaws, acts with the power and authority of the board in the management of our business and affairs in the interim period between meetings of the board. ➢ Generally, holds meetings to approve specific terms of financings or other transactions after these items have previously been presented to the board. ➢ Committee charter on Havertys’ website at https://ir.havertys.com/corporate-governance-information/corporate-governance-documents |
Director Nominee Highlights
| Board of Directors Oversight Roles |
Director Nominee Highlights
Stockholders elect our board to serve their long-term interests and to oversee management. Our management is responsible for understanding and managing the risks that we face in our business. Our board works with management to determine our mission and long-term strategy. Our board and its committees work closely with management to provide feedback from stockholders and oversight, review, and counsel related to long-term strategy, risks, and opportunities. It also oversees corporate governance, risk management, CEO succession planning, and the annual CEO evaluation. Our board looks to the expertise of its committees to provide strategic oversight in their areas of focus. Examples of oversight areas are provided below. Risk Oversight. Inherent in the board’s responsibilities are the understanding and oversight of the various risks facing the company. Effective risk oversight is an important priority of the board. The board exercises its oversight responsibility for risk both directly and through its committees which have specific areas of focus for risk management. The board, as a whole, examines specific business risks, such as those associated with our business model and innovation, supply chain, and cybersecurity, in its regular meetings in addition to the reports from its committees. Long-Term Business Strategy. The board reviews management’s long-term business strategy including capital allocation priorities and business development opportunities each year and approves Havertys’ strategic plan. Updates on the key elements of the plan are reviewed by the board at each board meeting throughout the year. Stockholder Engagement. We value stockholder views and insights and believe management has the primary responsibility for stockholder communications and engagement. The chairman and other members of Havertys’ senior management team communicate regularly with stockholders on a variety of topics throughout the year to address stockholders’ questions and to seek input concerning company policies and practices. The board receives regular updates concerning stockholder feedback which cover topics including our strategy and performance, capital allocations and corporate governance matters. Oversight of ESG. Havertys’ board of directors believes the company’s business strategy and ESG strategy should be in alignment and focus on material risks and business drivers. The board has delegated oversight of certain ESG matters to its committees. Audit Committee: Consistent with its oversight of financial and other metrics, the Audit Committee is tasked with reviewing our ESG disclosures. NCG Committee: ESG oversight related to compensation and human capital management is delegated to the NCG Committee. This includes reviewing Havertys’ culture and organization and the execution of ESG-related initiatives. The NCG Committee is also tasked with evaluating whether there is sufficient diversity on the board. Management: The ESG Working Group is comprised of cross-functional leaders that are responsible for strategy and executional buildout of all ESG activities and reports to the ESG Steering Committee. The ESG Steering Committee is responsible for providing oversight and approving the recommendations set forth by the Working Group and informing the board. We began issuing a report in December 2021 containing disclosures on environmental, social, and governance factors that we consider relevant to our business. We update and share this important information and metrics related to our journey to reduce our environmental impact, strengthen our team and communities, and enhance our long-term, value-creating focus on sustainability.
Director Nominee Highlights
| Governance Guidelines and Policies |
Director Nominee Highlights
Our board and management team are committed to achieving and maintaining high standards of corporate governance, as well as a culture of and reputation for the highest levels of ethics, integrity and reliability. We annually review our governance policies and practices against evolving standards. In considering possible modifications, our board and management focus on those changes that are appropriate for our company and our industry, rather than adopting a one-size-fits-all approach. Our board recognizes that excellence in corporate governance is essential in carrying out its responsibilities to our stockholders, employees, customers, suppliers and communities. The board has adopted guidelines and a number of policies to support our values and good corporate governance and practices. These governance practices and policies include: Director Independence. Our Corporate Governance Guidelines state that a majority of the directors must be non-management directors who meet the “independence” requirements of the NYSE. The NCG Committee conducts an annual review to determine the independence of each director based on the standards contained in our Governance Guidelines and NYSE corporate governance requirements. The board, based on the recommendation of the NCG Committee and its review, has affirmed that each of the following non-employee director nominees is independent and has no material relationship with the company that could impair their independence:
Director Nominee Highlights
| • Michael R. Cote | • G. Thomas Hough | • Vicki R. Palmer | • Al Trujillo | | • L. Allison Dukes | • Natalie B. Morhous | • Derek G. Schiller | |
Director Nominee Highlights
The board also determined that Ms. Mangum who is currently a director, but is retiring at the end of the 2023 board year, is also independent with no material relationship with the company that could impair her independence. Ms. Mangum currently serves on the NCG Committee. For more information regarding our policy on Transactions with Related Persons, please see page 12 of this proxy statement. Annual Evaluations. The board is committed to continuous improvement with respect to its ability to carry out its responsibilities. Each year the board and its independent committees, supervised by the NCG Committee, conduct self-assessments related to their performance. These annual assessments are an important tool to ensure the board is well-positioned to provide effective oversight. Board Tenure, Mandatory Retirement and Resignation from Board. As of the start of the 2024 board year, the average tenure of our independent directors is nine years. Our independent directors are subject to a mandatory retirement age and cannot stand for re-election in the calendar year following their 75th birthday. On the recommendation of the NCG Committee, the board may waive this requirement on an annual basis. A director is also required to submit his or her resignation from the board to the NCG Committee in the event that a director retires from or otherwise leaves his or her principal occupation or employment. The NCG Committee can choose to accept or reject the resignation. Director Nominations. The NCG Committee is primarily responsible for identifying and evaluating director candidates and for recommending re-nomination of incumbent directors. The NCG Committee, which consists entirely of independent directors, regularly reviews the appropriate size and composition of the board and anticipates vacancies and required expertise. The NCG Committee reviews potential nominees from several sources, including directors, management, stockholders or others. The NCG Committee is also authorized to retain search firms to identify potential director candidates, as well as other external advisors, including for purposes of performing background reviews of potential candidates. In evaluating potential nominees, the NCG Committee will review and consider, among other things, the nominee’s relevant career and business operations experience, judgment, industry knowledge, independence, character, gender, race, ethnicity, age, demonstrated leadership skills, financial literacy, and experience in the context of the needs of the board at the time and the then-current mix of director attributes. The NCG Committee believes that it is essential that the board members represent diverse viewpoints. In considering candidates for the board, the NCG Committee considers the entirety of each candidate’s credentials. The NCG Committee will consider recommendations for directors submitted by stockholders. Stockholders should submit their recommendations in writing to the NCG Committee (See “Communications with Directors”). The proponent should submit evidence that he or she is a stockholder of Havertys, together with a statement of the proposed nominee’s qualifications to be a director. There is no difference in the manner in which the NCG Committee evaluates proposed nominees that are recommended by a stockholder. Communications with Directors. The board welcomes questions or comments about the company and its operations. Interested persons wishing to write any director, committee or the board should send correspondence to the Corporate Secretary, Haverty Furniture Companies, Inc., 780 Johnson Ferry Road, Suite 800, Atlanta, Georgia 30342. Please specify to whom your correspondence should be directed. Code of Conduct. All of our directors and employees, including our chief executive officer and other executive officers, are required to comply with our Code of Conduct to help ensure that our business is conducted in accordance with the highest standards of ethical behavior. Hedging and Pledging Policies. We prohibit our directors, officers and employees from hedging their ownership of Havertys stock, including purchasing or selling derivative securities relating to Havertys stock and from purchasing financial instruments that are designed to hedge or offset any decrease in the market value of Havertys securities. Our directors and executive officers are prohibited from pledging Havertys securities as collateral for a loan and from holding any Havertys securities in margin accounts. There are no outstanding pledges or margin accounts involving Havertys securities by any of our directors or executive officers. Related Party Transaction Policy. Our board has adopted a written policy for the review, approval or ratification of certain related party transactions. The term “related party transaction” is defined as any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which (1) the aggregate amount involved will exceed $120,000 in any calendar year; (2) we are a participant; and (3) any related party of Havertys (such as an executive officer, director, nominee for election as a director or beneficial owner of greater than 5% of our stock, or their immediate family members) has or will have a direct or indirect interest. The board has determined that the NCG Committee is best suited to review and approve related party transactions. When reviewing the material facts of related party transactions, the NCG Committee must take into account whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction. Certain categories of transactions have standing pre-approval under the policy including: (1) certain transactions with another company in which the related party’s only relationship is as an employee (other than an executive officer), director or beneficial owner of less than 10% of that company’s stock; (2) certain transactions where the related person’s interest arises solely from the ownership of our common stock and all holders of our common stock receive the same benefit on a pro rata basis (e.g. dividends, stock repurchases, rights of offerings); (3) certain banking-related services in which the terms of such transactions are generally the same or similar to accounts offered to others in the ordinary course of business; and (4) transactions made on the same or similar terms available to all of our employees. During 2023, there were no related party transactions requiring approval under the policy or disclosure in this proxy statement. Compensation Committee Interlocks and Insider Participation. All NCG Committee members are independent and none of the NCG Committee members has served as an officer or employee of Havertys. None of our executive officers has served as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board or NCG Committee. Therefore, there is no relationship that requires disclosure as a Compensation Committee interlock.
Director Nominee Highlights
| Director Compensation |
Director Nominee Highlights
Non-employee directors receive a combination of cash and stock-based compensation designed to attract and retain qualified candidates to serve on the board and further align their interest with that of our stockholders. Mr. Smith, as a management director, did not receive any compensation for serving on the board during 2023.
Compensation for 2024 Board Year
| Director | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | All Other Compensation (2) | Total ($) | | Michael R. Cote | $50,000 | $90,000 | $— | $140,000 | | L. Allison Dukes | 56,667 | 90,000 | — | 146,667 | | Rawson Haverty Jr. (2) | 33,333 | 60,000 | 103,677 | 197,010 | | C. Thomas Hough | 62,000 | 90,000 | — | 152,000 | | Vicki R. Palmer | 50,000 | 90,000 | — | 140,000 | | Derek G. Schiller | 50,000 | 90,000 | — | 140,000 | | Al Trujillo | 60,000 | 90,000 | — | 150,000 | | Mylle H. Mangum (3) | 53,333 | 90,000 | — | 143,333 |
2023 Performance Highlights
| Compensation Component | Key Features | Purpose | 2023 Actions | | Base Salary | • Fixed base of cash compensation commensurate with job responsibilities and experience. | • Provide a fixed amount of cash compensation to attract and retain talented executives and differentiate the scope and complexity of executive’s positions as well as individual performance over time. | • Base salaries were increased in January 2023 by approximately 5.1% for the NEOs. | | Annual Cash Incentive (MIP) | • Individual MIP opportunities are expressed as a percentage of base salary and can vary for executives based on their positions. Target MIP award opportunities are generally established so that total annual cash compensation (base salary plus target MIPs) approximates the median of our peer group. • Performance-based cash incentive pay is comprised of two plans: MIP-I is tied to the company achieving certain pre-tax earnings levels during the year (80% of total target cash incentive pay) and MIP-II is based on successfully meeting individual performance goals (20% of total target cash incentive pay). • The range of potential payouts for actual results relative to these goals is zero to 175% of target for MIP-I and zero to 100% of target for MIP-II. • MIP amounts are earned based on the results achieved as determined by the Committee after evaluating company and individual performance against pre-established goals. | • Motivate and reward achieving or exceeding company and individual performance objectives, reinforcing pay-for-performance. • Align performance measures for NEOs on key business objectives to lead the organization to achieve short-term financial and operational goals. • Ensure alignment of short-term and long-term strategies of the company. | • 2023 performance resulted in total MIP-I earned at 85.3% of its target and MIP-II earned at 100% of its target for the NEOs. | | Long-Term Equity | • Awards are granted annually with consideration of competitive market grant levels. • Awards to NEOs are in the form of performance restricted stock units (PRSUs) based on EBITDA and Sales, and in the form of time-based restricted stock units. • Vesting: The PRSUs granted in 2023 that are earned will cliff vest in February 2026. The restricted stock units vest in equal increments over a three-year period. The grants are forfeitable upon termination of employment, except in the cases of death, disability, or normal retirement. | • Stock-based compensation links executive compensation directly to stockholder interests. • PRSUs provide a direct connection to company performance. • Multi-year vesting creates a retention mechanism and provides incentives for long-term creation of stockholder value. | • Award sizes were determined in consideration of market levels, internal equity, and historical practices. • 80% of our CEO’s and 70% of our other NEO’s equity awards were granted as PRSUs, with the remainder granted as RSUs. The PRSUs were tied 80% to EBITDA and 20% tied to Sales. • 2023 performance-based awards tied to EBITDA were earned at 83.9% of target and awards tied to Sales were earned at 44.5% of target. These earned performance-based awards will vest in February 2026. |
2023 Performance Highlights
The Committee has overall responsibility for approving and evaluating the company’s executive officers’ compensation plans, policies and programs. The Committee is also responsible for providing a NCG Committee report reviewing the company’s CD&A. The Committee uses several different tools and resources in reviewing elements of executive compensation and making compensation decisions. These decisions, however, are not purely formulaic and the Committee exercises judgment and discretion in making them. Compensation Consultants. The Committee retained Meridian Compensation Partners, LLC (“Meridian”) as an independent consultant to provide advice on executive compensation matters. Meridian serves as a resource for market data on pay practices and trends and provides independent advice to the Committee for setting executive compensation. Meridian reports directly and exclusively to the NCG Committee. However, at the Committee’s direction, Meridian works with management to review or prepare materials for the Committee’s consideration. Meridian provided no additional services to Havertys outside of the scope of the agreement with the Committee. The Committee annually evaluates the compensation consultant's performance. During 2023, the Committee reviewed Meridian’s independence and determined that there were no conflicts of interest as a result of the Committee’s engagement of Meridian. The Committee did not engage any consultant other than Meridian during 2023 to provide compensation consulting services. Compensation Analysis. In determining appropriate compensation opportunities for our named executive officers, the Committee received input from Meridian. The Committee reviewed and analyzed competitive market data to be used as background for 2023 pay decisions and to obtain a general understanding of current compensation practices. This data was referenced when establishing the pay opportunities for NEOs discussed below. Market data was based primarily on public disclosures of pay opportunities available to executive officers in comparable positions at similar companies (our “peer group”). The peer group included companies from the retail furniture industry, retailers of big-ticket postponable items, and specialty retailers. The peer group is re-evaluated annually to take into account changes in their operations and our own. The peer group companies used in setting 2023 compensation were the same as used in the prior year except that Miller Knoll, Inc. was added and At Home, Knoll, Inc., and Vera Bradley were removed.
2023 Performance Highlights
| Peer Group | | | | American Woodmark | Ethan Allen Interiors Inc. | La-Z-Boy Incorporated | | Bassett Furniture Industries Inc. | Flexsteel Industries, Inc. | Miller Knoll, Inc. | | Big 5 Sporting Goods Corporation | Hibbett Sports, Inc. | Oxford Industries, Inc. | | Conn’s Inc. | Hooker Furnishings Corporation | Sleep Number Corporation | | Culp, Inc. | Kimball International, Inc. | The Lovesac Company |
2023 Performance Highlights
Role of CEO. The compensation of every Havertys employee, including each named executive officer, is influenced in large part by the responsibilities of the position and the need to ensure that employees having similar job responsibilities are paid equitably, with consideration for individual performance. During early 2023, Mr. Smith provided recommendations to the NCG Committee with respect to the base salary amounts, performance targets for the annual and long-term incentive programs, and any equity awards for each executive officer (other than himself). These recommendations were based on the peer data provided by Meridian and Mr. Smith’s assessment of the executive’s relative experience, overall performance, and impact on the accomplishment of Havertys’ financial goals and strategic objectives during the prior year. While the NCG Committee took Mr. Smith’s recommendations under advisement, it independently evaluated the pay recommendations for each executive and made all final compensation decisions in accordance with its formal responsibilities as defined in its Charter.
2023 Performance Highlights
| MIP-I Goal and Earned | | | | | | | | (in millions) | Q1 | Q2 | Q3 | Q4 | Annual | Total | | MIP-I Weighting | 9% | 10% | 10% | 11% | 60% | 100% | | MIP-I Pre-Tax Earnings Goal | $17.5 | $19.6 | $20.7 | $20.9 | $78.9 | | | 2023 Pre-Tax Earnings | $15.4 | $15.8 | $22.9 | $18.5 | $72.7 | | | % of Goal Achieved | 88% | 81% | 111% | 89% | 92% | | | Target % Achieved | 76% | 62% | 133% | 78% | 84% | | | % of MIP-I Earned | 6% | 6% | 13% | 9% | 50% | 85% |
2023 Performance Highlights
The Committee reviewed the payout results of 85% of target based on the company’s 2023 pre-tax earnings performance. The overall payout resulted from payouts for our financial results in each quarter as well as the annual component of MIP-I. The MIP-II design supports individual goals with payout ranging from 0% to 100% of target. The Committee reviewed each NEO’s performance relative to their MIP-II goals and determined that the individual goal payouts under the MIP-II was 100% for each of the NEOs. The combination of the approved MIP-I and MIP-II payouts resulted in a total average MIP payout of 88.3% of target for the NEOs. See the “Summary Compensation Table,” which shows the actual non-equity incentive plan compensation paid to our named executive officers for our 2023 performance. Long-Term Equity Incentive Compensation. Our executives receive long-term equity incentive compensation intended to link their compensation to the company’s long-term financial success. All equity awards for our executives are approved by the Committee and the 2023 annual equity award grants were set at its meeting in January 2023. The 2023 grants were comprised of a mix of PRSUs based on EBITDA, PRSUs based on sales, and time-based restricted stock units. The graphs below highlight the mix of the types of equity awards granted in 2023. The EBITDA-based PRSU grants use adjusted EBITDA as the performance measure to determine the number of shares that will vest, measured over a performance period commencing January 1, 2023 and ending December 31, 2023. The 2023 EBITDA target was $93.3 million, exclusive of adjustments to eliminate unusual or non-recurring items, with a range from a threshold of $65.3 million that would earn 40% of the target shares to a maximum of $116.7 million that would earn 175% of the target shares. EBITDA for 2023 was calculated at $85.8 million, resulting in 83.9% of the target shares being earned.* The shares will cliff vest in February 2026. The Sales-based PRSU grants use net sales to determine the number of shares that will vest, measured over a performance period commencing January 1, 2023, and ending December 31, 2023. Net sales is the amount included in our Form 10-K for the year ended December 31, 2023. The sales target for 2023 was $950.0 million, with a range from a threshold of $855.0 million that would earn 40% of the target shares to a maximum of $1,045.0 million that would earn 125% of target shares. Net sales were $862.1 million in 2023, resulting in 44.5% of the target number of shares being earned. These shares will cliff vest in February 2026. The time-based restricted stock units vest in three equal annual installments beginning in May 2024. Dividend and voting rights are not applicable to stock awards until vested. Additional details regarding grants are provided in the “Grants of Plan Based Awards Table” and “Outstanding Equity Awards Value at Year-End Table.” *EBITDA is a non-GAAP financial measure. A reconciliation of EBITDA to the most directly comparable GAAP financial measure is provided in Appendix A.
Compensation Committee Report
| Summary Compensation Table |
Compensation Committee Report
| Name, Principal Position, and Year | Salary | Non-Equity Incentive Plan Compensation (1) | Stock Awards (2) | Change in Pension Value (3) | All Other Compensation (4) | Total | | Clarence H. Smith Chairman and Chief Executive Officer | | | | | | | | 2023 | 760,000 | 670,746 | 1,330,012 | 60,223 | 66,713 | 2,887,694 | | 2022 | 725,000 | 772,676 | 1,150,562 | — | 30,953 | 2,679,191 | | 2021 | 690,000 | 1,104,000 | 1,109,213 | 202,381 | 73,238 | 3,161,832 | | Steven G. Burdette President | | | | | | | | 2023 | 525,000 | 324,341 | 472,486 | 23,326 | 46,845 | 1,391,998 | | 2022 | 462,833 | 369,516 | 384,790 | — | 48,544 | 1,302,850 | | 2021 | 365,165 | 494,000 | 510,738 | — | 45,110 | 1,512,681 | | Richard B. Hare Executive Vice President and Chief Finance Officer | | | | | | | | 2023 | 465,000 | 266,754 | 399,988 | — | 28,842 | 1,160,584 | | 2022 | 440,000 | 304,807 | 338,614 | — | 25,850 | 1,109,271 | | 2021 | 420,000 | 436,800 | 343,875 | — | 27,537 | 1,228,212 | | J. Edward Clary Executive Vice President and Chief Information Officer | | | | | | | | 2023 | 420,000 | 222,405 | 300,007 | 35,819 | 26,990 | 1,005,221 | | 2022 | 400,000 | 255,782 | 250,130 | — | 32,422 | 938,334 | | 2021 | 387,000 | 371,520 | 274,609 | — | 28,284 | 1,061,413 | | John L. Gill Executive Vice President, Merchandising | | | | | | | | 2023 | 420,000 | 222,405 | 300,007 | 10,690 | 27,706 | 980,808 | | 2022 | 400,000 | 255,782 | 250,130 | — | 25,133 | 931,045 | | 2021 | 351,088 | 371,122 | 274,609 | — | 25,067 | 1,058,19 |
Compensation Committee Report
| Summary Compensation Table Footnotes |
Compensation Committee Report
| 2023 Grants of Plan Based Awards Table |
Compensation Committee Report
| Outstanding Equity Awards at 2023 Fiscal Year-End Table |
Compensation Committee Report
| Outstanding Equity Awards Table (continued) |
Compensation Committee Report
| Outstanding Equity Awards Table Footnotes |
Compensation Committee Report
| Option Exercises and Stock Vested Table |
Compensation Committee Report
| Non-Qualified Deferred Compensation Plans |
Compensation Committee Report
| 1. | We disclose the amounts related to the SERP Plan and the plans in which each NEO participates in the Pension Benefits, the Top Hat Mutual Fund Option Plan and the Deferred Compensation Plan Tables. |
Compensation Committee Report
| CEO Pay Ratio |
Equity Compensation Plan Information
| Plan Category | Number of Securities to be issued upon exercise of outstanding equity awards (a) | Weighted-average exercise price of outstanding options and stock-settled stock appreciation rights (SSARs) (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in Column (a)) (c) | | Equity compensation plans approved by stockholders: | | | | | Long-Term Incentive Plans (1) | 578,508(2) | — | 1,003,267(3) | | Non-Employee Director Compensation Plan | 171,962(4) | — | 434,415(5) | | Equity compensation plans not approved by stockholders | — | — | — | | Total | 750,470 | — | 1,437,682 |
Equity Compensation Plan Information
| (1) Shares issuable pursuant to outstanding equity awards under our 2014 LTIP and 2021 LTIP. |
Equity Compensation Plan Information
| (5) Shares remaining under the Non-Employee Director Compensation Plan. Shares are issued from those held in the company’s treasury. |