DEF 14A of Ingersoll Rand Inc.
Filed Apr 26, 2024 · FY20230001140361-24-022494
Davidson, North Carolina
| Employment Agreements | 59 | | Summary Compensation Table | 60 | | Grants of Plan-Based Awards in 2023 | 62 | | Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2023 | 63 | | Summary of NEO Offer Letters and Employment Agreements | 63 | | Outstanding Equity Awards at 2023 Fiscal Year End | 64 | | Option Exercises and Stock Vested in 2023 | 66 | | Pension Benefits – Fiscal 2023 | 66 | | Non-Qualified Deferred Compensation – Fiscal 2023 | 67 | | Potential Payments to Named Executive Officers upon Termination of Employment or Change in Control | 68 | | Severance Arrangements and Restrictive Covenants | 69 | | Treatment of Outstanding Equity Awards in the Event of Termination of Employment or Change in Control | 69 | | Director Compensation in Fiscal 2023 | 72 | | Description of Director Compensation | 72 | | Compensation Committee Interlocks and Insider Participation | 73 | | CEO Pay Ratio | 73 | | Pay vs. Performance (“PvP”) Disclosure | 74 | | Ownership of Securities | 77 | | Transactions with Related Persons | 79 | | Stockholder Proposals for the 2025 Annual Meeting | 80 | | Householding of Proxy Materials | 81 | | Other Business | 82 | | Annex A: Forward-Looking Statements and Reconciliation of GAAP Measures to Non-GAAP Measures | A-1 |
Election of Directors
Election of Directors Upon the recommendation of the Nominating and Corporate Governance Committee, the full Board of Directors has considered and nominated the following slate of nominees to stand for re-election for a one-year term expiring at the 2025 Annual Meeting of Stockholders or until his or her successor is duly elected and qualified:
Election of Directors
| Name | Age | Position | | Vicente Reynal | 49 | Chief Executive Officer, President and Chairman of the Board of Directors | | William P. Donnelly | 62 | Independent Lead Director | | Kirk E. Arnold | 64 | Independent Director | | Gary D. Forsee | 74 | Independent Director | | Jennifer Hartsock | 47 | Independent Director | | John Humphrey | 58 | Independent Director | | Marc E. Jones | 65 | Independent Director | | Julie A. Schertell | 55 | Independent Director | | JoAnna A. Sohovich | 52 | Independent Director | | Mark P. Stevenson | 61 | Independent Director |
Election of Directors
The biographies and qualifications of the ten director nominees in this Proposal No. 1 are set forth below under the heading “Director Biographies and Qualifications.” Mr. Tony White, after 27 years of service as a director of Ingersoll Rand and Ingersoll-Rand, plc, has decided to retire at the end of his current term. As such, he was not nominated for election at this year’s Annual Meeting. The Company gratefully acknowledges and thanks Mr. White for his years of service and dedication to our Board.
Election of Directors
| Your Board of Directors recommends that you vote “FOR” the election of each of the Director nominees named above. |
Election of Directors
Director Biographies and Qualifications The following information describes the offices held, other business directorships and the experiences, qualifications, attributes or skills that caused the Nominating and Corporate Governance Committee and the Board to determine that the director nominee should serve as a director.
Election of Directors
| Vicente Reynal Years of Service: 8 Age: 49 | Vicente Reynal has served as our chief executive officer, president and member of our Board of Directors since January 2016. Mr. Reynal was appointed chairman of our Board of Directors in November 2021. Mr. Reynal is responsible for leading the Company and driving its overall growth and profitability as a global supplier of innovative and application-critical flow control products, services and solutions. Mr. Reynal joined Gardner Denver in May 2015 as the president of our Industrials segment. Before joining Gardner Denver, Mr. Reynal spent 11 years at Danaher Corporation, a designer and manufacturer of professional, medical, industrial and commercial products and services, where he served in a progression of senior leadership roles. Prior to joining Danaher, Mr. Reynal served in various operational and executive roles at Thermo Fisher Scientific and AlliedSignal Corp. (which merged with Honeywell, Inc. to become Honeywell International, Inc. in 1999). Mr. Reynal serves on the board of directors for American Airlines. In addition, My. Reynal serves on the board of Ownership Works and is an active advocate of broad-based shared ownership programs that make every employee an owner. Mr. Reynal holds a bachelor of science degree in Mechanical Engineering from Georgia Institute of Technology and master of science degrees in both mechanical engineering and technology & policy from Massachusetts Institute of Technology. | | | Mr. Reynal has more than 25 years of experience in corporate strategy, new product development, general management processes and operations leadership with companies in the industrial, energy and life sciences industries. |
Election of Directors
| William P. Donnelly Years of Service: 7 Age: 62 | William P. Donnelly has been a member of our Board of Directors since May 2017 and was appointed Lead Director in November 2021. Mr. Donnelly joined Mettler- Toledo International Inc. in 1997 and from 2014 until his retirement in December, 2018, was its executive vice president responsible for finance, investor relations, supply chain and information technology. From 1997 to 2002 and from 2004 to 2014 Mr. Donnelly served as Mettler-Toledo’s chief financial officer. From 2002 to 2004, he served as division head of Mettler-Toledo’s product inspection and certain lab businesses. From 1993 to 1997, Mr. Donnelly served in various senior financial roles, including chief financial officer, of Elsag Bailey Process Automation, NV and prior to that, he was an auditor with PricewaterhouseCoopers LLP from 1983 to 1993. Mr. Donnelly currently serves on the board of directors of Quanterix Corporation and T. Rowe Price Group, Inc. Mr. Donnelly received a bachelor of science in business administration from John Carroll University. | | | Mr. Donnelly has many years of experience with publicly held company industrial and life science companies, including as chief financial officer and with leadership roles in strategy and operations and experience with respect to organic growth and product innovation. |
Election of Directors
| Kirk E. Arnold Years of Service: 4 Age: 64 | Kirk E. Arnold joined our Board of Directors upon completion of the Merger (as defined under “Compensation Discussion and Analysis - Letter From the Chair of the Compensation Committee and Lead Director of the Board”) in February 2020. She is currently an adviser at General Catalyst Ventures, and teaches at MIT’s Sloan School of Business. She was previously chief executive officer of Data Intensity, a cloud-based data, applications and analytics managed service provider from 2013 to 2017. Prior to that, Ms. Arnold was chief operating officer of Avid, a technology provider in the media industry, and chief executive officer and president of Keane, Inc., then a publicly traded global services provider. She has also held senior leadership roles at Computer Sciences Corp., Fidelity Investments and IBM. In addition, she was founder and chief executive officer of NerveWire, a management consulting and systems integration provider. Ms. Arnold currently serves on the boards of directors of Trane Technologies and Thomson Reuters, and formerly served on the board of directors of EnerNoc, Inc. In addition, she serves on the boards of directors of The Predictive Index and Housecall Pro, both private companies. Ms. Arnold received a bachelor’s degree from Dartmouth College. | | | Ms. Arnold has extensive management experience with various publicly held companies, including as a CEO and chief operating officer, and also has significant experience as a board member of a number of public and private companies. |
Election of Directors
| Gary D. Forsee Years of Service: 4 Age: 74 | Gary D. Forsee joined our Board of Directors upon completion of the Merger in February 2020. He served as president of the four-campus University of Missouri System from 2008 to 2011. He previously served as chairman of the board (from 2006 to 2007) and chief executive officer (from 2005 to 2007) of Sprint Nextel Corporation, and chairman of the board and chief executive officer of Sprint Corporation, a global telecommunications company located in Kansas City, Missouri, from 2003 to 2005. Mr. Forsee currently serves on the board of directors of Trane Technologies. Mr. Forsee previously served on the boards of Evergy, Inc., an investor-owned utility providing energy to customers in Kansas and Missouri, Great Plains Energy and KCP&L, which merged with Westar Energy to form Evergy, Inc., and DST Systems, Inc., an IT service management company. Mr. Forsee received his bachelor of science in engineering and an honorary engineering and doctorate from the Missouri University of Science and Technology (f/k/a University of Missouri-Rolla). | | | In addition to his broad operational and financial expertise, Mr. Forsee’s experience as chairman and chief executive officer of a significant global telecommunications company offers a deep understanding of the challenges and opportunities within markets experiencing significant technology-driven change. |
Election of Directors
| Jennifer Hartsock Years of Service: 1 Age: 47 | Jennifer Hartsock joined our Board of Directors in January 2023. Ms. Hartsock is an industry-recognized digital executive with international experience and proven success leading global technology organizations. She currently serves as the chief information and digital officer at Cargill, Inc., a privately held American corporation that provides products, services and insights to food, agriculture, financial and industrial customers in more than 125 countries. Ms. Hartsock manages the company’s global technology portfolio, which includes developing and executing technology, digital and data strategies to enable Cargill’s key growth priorities. Prior to joining Cargill, Ms. Hartsock served as chief information officer of Baker Hughes. While there, she also led the Digital Technology team that was responsible for delivering digital connectivity of devices and other technologies to enable connected customer solutions. Earlier in her career, she served as chief information officer at Cameron International and spent 17 years with Caterpillar Inc., during which she served as group chief information officer for its Construction Industries segment. Ms. Hartsock holds a bachelor’s degree in applied computer science from Illinois State University. | | | Ms. Hartsock has significant experience and leadership in digital transformation, which closely aligns with our focus on expanding our product and service innovation in the areas of digitization and IIoT. In addition, her deep understanding of global manufacturing and broad industrial technology experience supports our expansion into sustainable end markets and growth through strategic acquisitions. |
Election of Directors
| John Humphrey Years of Service: 6 Age: 58 | John Humphrey has been a member of our Board of Directors since February 2018. In 2017, Mr. Humphrey retired from Roper Technologies, a company that designs and develops software and engineered products and solutions for healthcare, transportation, food, energy, water, education and other niche markets worldwide. At Roper, he served from 2011 to 2017, as executive vice president and chief financial officer, and from 2006 to 2011, as vice president and chief financial officer. Prior to joining Roper, Mr. Humphrey spent 12 years with Honeywell International, Inc. and its predecessor company, AlliedSignal, in a variety of financial leadership positions. Mr. Humphrey’s earlier career included six years with Detroit Diesel Corporation, a manufacturer of heavy-duty engines, in a variety of engineering and manufacturing management positions. He is a member of the board of directors of EnPro Industries, Inc. and O-I Glass, Inc. Mr. Humphrey received a bachelor of science degree in industrial engineering from Purdue University and a master of business administration from the University of Michigan. | | | Mr. Humphrey has many years of experience at manufacturing companies and leading inorganic growth, including experience as the chief financial officer and board member of a publicly held company. His experience with respect to inorganic growth closely supports a pillar of our growth strategy. |
Election of Directors
| Marc E. Jones Years of Service: 5 Age: 65 | Marc E. Jones has been a member of our Board of Directors since December 2018. He has served as the chairman, president and chief executive officer of Aeris Communications, Inc., a provider of machine to machine and Internet of Things communications services, since 2008, and as the chairman of Aeris since 2005. Mr. Jones also served as chairman of Visionael Corporation, a network service business software and service provider, from 2004 to 2009 and as president and chief executive officer of Visionael from 1998 to 2004. Prior to joining Visionael, Mr. Jones served as president and chief operating officer of Madge Networks, a supplier of networking hardware, from 1993 to 1997; senior vice president, Integrated System Products at Chips and Technologies, Inc., one of the first fabless semiconductor companies, from 1988 to 1992; and senior vice president, corporate finance at LF Rothschild Unterberg Towbin & Co., a merchant and investment banking firm, from 1986 to 1987. Mr. Jones currently serves on the board of trustees of Stanford University and as the chair of the board of Stanford Healthcare. In addition, he serves on the board of directors of CDW Corporation. Mr. Jones holds both a bachelor of arts in political science and a juris doctor from Stanford University. | | | Mr. Jones has held senior leadership roles, including chief executive officer, at several technology companies and also has experience in senior financial leadership roles and a background in law. His technology background is invaluable as we harness the megatrend of digitization and its impact on our business. |
Election of Directors
| Julie A. Schertell Years of Service: 1 Age: 55 | Julie A. Schertell joined our Board of Directors in 2023. Since July 2022, Ms. Schertell has served as President and Chief Executive Officer of Mativ Holdings, Inc. and on its Board of Directors. Formerly President and Chief Executive Officer of Neenah, Inc., she has held numerous leadership positions within the company over the last 15 years, including Chief Operations Officer, Segment President of Technical Products and Fine Paper & Packaging, and Vice President and General Manager of Fine Paper & Packaging. Ms. Schertell began her career at Georgia-Pacific in 1992 as a Financial Analyst for Consumer Products. While at Georgia-Pacific, she served in several roles over her 16-year career there, including Vice President of Sales and Marketing Strategy, Vice President of Supply Chain, Director of Sales Operations and Director of Financial Planning and Analysis. Ms. Schertell graduated from Florida State University’s College of Business in 1991 with a bachelor of science in Accounting and received her MAcc degree from the University of Georgia’s Terry College of Business in 1992. | | | Ms. Schertell has extensive executive management and leadership experience as well as accounting and finance expertise. Having led a complex transformational merger, she brings significant insights on acquisition execution and integration that are applicable to our organic growth strategy. |
Election of Directors
| JoAnna L. Sohovich Years of Service: 1 Age: 52 | JoAnna L. Sohovich joined our Board of Directors in 2023. Ms. Sohovich has been on the Board of Directors of Barnes Group Inc. since 2014, and serves as Chair of the Compensation and Management Development Committee and as a member of the Executive Committee of the Board of Directors for Barnes Group Inc. Ms. Sohovich is also Chair of the Board of Directors for Chamberlain Group, a role she assumed on January 1, 2022 after serving as the Chief Executive Officer of Chamberlain Group from February 2016 until December 31, 2021. Prior to that, from January 2015 to February 2016, she was the Global President, STANLEY Engineered Fastening at Stanley Black & Decker, Inc. where she led a global technology and manufactured goods business. Before being appointed to this position in 2015, she served as Global President, Industrial & Automotive Repair since 2012 and, prior to that, Industrial & Automotive Repair President – North America, Asia and Emerging Regions since 2011, both at Stanley Black & Decker, Inc. From 2001 to 2011, Ms. Sohovich served in several roles of increasing responsibility at Honeywell International, including President, Security & Communications from 2010 to 2011 emphasizing new product development and innovation, Vice President & General Manager, Commercial Building Controls from 2008 to 2010 leading growth initiatives across a broad commercial building controls portfolio, and Integration Leader from 2007 to 2008 resulting in Honeywell’s successful acquisition and integration of Maxon Corporation. Ms. Sohovich served as General Manager, Building Controls Field Devices from 2005 to 2007 and Vice President, Six Sigma for Honeywell from 2004 to 2005. Her earlier experience includes plant management, repair and overhaul shop management, quality management and service as an officer in the United States Navy. She received a bachelor of science in Economics from the United States Naval Academy and a master of business administration from Santa Clara University. | | | Ms. Sohovich has extensive executive management and leadership experience, broad knowledge of industrial manufacturers, and direct experience in driving digitally focused product innovation and strategic growth initiatives, which experience is relevant to our product and service innovation in the areas of digitization and IIoT. |
Election of Directors
| Mark P. Stevenson Years of Service: 2 Age: 61 | Mark P. Stevenson joined our Board of Directors in July 2022. Mr. Stevenson currently serves as senior advisor for General Atlantic, a leading global growth equity firm and as a senior partner at Flagship Pioneering, a life sciences venture capital company that invests in biotechnology, life sciences, health and sustainability companies. He is the former executive vice president and chief operating officer of Thermo Fisher Scientific Inc., a Fortune 100 company and world leader in serving science through its life science solutions, analytical instruments, specialty diagnostics and laboratory products and biopharma services. He held this role from 2017 until his retirement in 2022. He joined the company in 2014 as executive vice president and president of Life Sciences Solutions through the acquisition of Life Technologies. Mr. Stevenson previously served as president and chief operating officer of Life Technologies, and president and chief operating officer of Applied Biosystems prior to its merger with Invitrogen Corporation in 2008. He has a master of business administration from Henley Management College, United Kingdom, and a bachelor’s degree in chemistry from the University of Reading, United Kingdom. | | | Mr. Stevenson’s experience in leading a growth compounder in sustainable end markets such as life sciences and medical aligns closely with our long-term strategy of expansion in high growth sustainable end markets, and his experience with machine learning systems supports our innovation in the areas of digitalization and IIoT. |
Compensation Governance Practices and Policies
| | WHAT WE DO | | WHAT WE DON’T DO | | | Significant Portion of Pay Focused on Long-Term Value Creation | | No Guaranteed Bonuses | | | 50% of Annual Long-Term Incentive Compensation in Performance-Vesting Equity Awards | | No Tax Gross-Ups in Connection with Change-in-Control Severance | | | Incentive Plan Goals Aligned with Stockholder Interests | | No Executive Pensions | | | Minimum one-year vesting on all equity awards | | No Fixed-Term Employment Agreements | | | Market-Leading Stock Ownership and Retention Guidelines | | No Stock Option Repricing | | | Capped Incentive Opportunities | | No Hedging of Company Stock | | | Mitigation of Risk Through Compensation Risk Assessments | | | | | Incentive Compensation Clawback Policy | | | | | Independent Compensation Consultant | | |
2023 Executive Compensation Decisions
| Name/Title | Annual Salary | | | 2023 AIP Target | | LTI Target Grant Value | Target TDC | | | 12/31/22 | 12/31/23 | % Change | as % of Salary | Value | | | | Vicente Reynal, Pres. & CEO | $1,100,000 | $1,144,000 | 4% | 150% | $1,716,000 | $7,000,000 | $9,860,000 | | Vikram Kini, SVP & CFO | $525,000 | $625,000 | 19% | 85% | $531,250 | $1,800,000 | $2,956,250 | | Andrew Schiesl, GC & CCO (Compliance) & Sec. | $500,000 | $520,000 | 4% | 75% | $390,000 | $1,150,000 | $2,060,000 | | Michael Weatherred, SVP, Ingersoll Rand Execution Excellence (IRX), and Commercial Excellence | $430,000 | $460,000 | 7% | 75% | $345,000 | $1,000,000 | $1,805,000 | | Gary Gillespie, SVP & GM Industrial Tech. and Services, Americas | $400,000 | $425,000 | 6% | 75% | $318,750 | $900,000 | $1,643,750 | | Enrique Miñarro Viseras, Former SVP & GM, Global Precision and Science Technologies(1) | $505,000 | $540,000 | 7% | 85% | $459,000 | $2,300,000 | $3,299,000 |
Rationale for Base Salary Increases
In assessing potential adjustments to compensation for its NEOs, the Committee considers each executive’s positioning relative to the market data provided by its independent compensation consultant, as well as other factors such as individual performance, historical compensation adjustments, tenure and succession. Base Salary Base salary is the only fixed component of NEO cash compensation. An NEO’s base salary is commensurate with the individual’s level of responsibility and provides them with a level of predictable and stable cash income. The Committee believes that base salaries for executives should reflect competitive levels of pay and factors unique to each executive such as experience and breadth of responsibilities, performance, individual skill set, time in the role and internal pay parity. Base salaries are reviewed annually or at other times when appropriate (for example, promotions, changes in job scope and/or responsibilities, etc.) and may be increased from time to time pursuant to such review. Consistent with our philosophy to focus on long-term variable pay over fixed cash compensation, the Committee established 2023 base salary rates at or below the median of Peer Group salary levels. For certain executives, such as our CFO, year-over-year increases were higher in order to provide a “glidepath” to get closer to median over a multi-year period. Annual Cash Bonus Opportunity To tie a significant portion of their annual cash compensation to actual performance, each NEO is eligible for an annual cash bonus award under our Management Incentive Plan (MIP) based on the achievement of our financial goals for the Company and their respective business units against preset goals. The MIP pays out to participants based on levels of performance against preset goals for financial metrics established by the Committee. To be eligible for a payout, a participant must be employed by the Company through the payment date or have an Approved Retirement (as defined below under “Potential Payments to Named Executive Officers upon Termination of Employment or Change in Control—Treatment of Outstanding Equity Awards in the Event of Termination of Employment or Change in Control”) on or after the end of the year but before the payment date. A target annual bonus opportunity, expressed as a percentage of an NEO’s base salary rate at year-end, is established annually and may be adjusted from time to time by the Committee in connection with a NEO’s promotion or performance. MIP Design Change For the year 2023, we made two changes to our MIP performance metrics. First, for our corporate NEOs, we moved from Adjusted EBITDA(11) as a metric (75% of total MIP opportunity for corporate managers) to adjusted earnings per share (“Adjusted EPS”). Adjusted EBITDA remained the earnings metric for non-corporate NEOs. Second, the Net Working Capital Percent of Revenue(12) metric (25% of the total previous MIP opportunity for all NEOs) was replaced with Free Cash Flow for corporate NEOs and “Business Operating Cash Flow” for our non-corporate NEOs. “Business Operating Cash Flow” is defined as Adjusted EBITDA less change in Net Working Capital less Capex. The Committee chose Adjusted EPS as it believes it is a more indicative measure of the overall earnings performance of the Company than Adjusted EBITDA since Adjusted EPS includes the impacts of interest and taxes as well as capital allocation decisions. In addition, Adjusted EPS is a critical component of the CEO special performance award, creating stronger alignment across the executive team. Free Cash Flow was chosen as a better measure of the economic performance of the Company compared to Net Working Capital Percent of Revenue since the Committee believes it provides a more holistic view of the cash flow performance of the Company. The Committee determined that an incentive design with a focus on these metrics was appropriate because it provides a reliable indicator of both our strategic growth and the strength of our overall earnings and cash flow results, while rewarding managers appropriately for their respective functions, geographies and lines of business. 2023 Performance Measures For 2023, annual cash bonus awards for Corporate NEOs (Messrs. Reynal, Kini, Schiesl, and Weatherred) were based on the achievement of overall corporate performance. Mr. Gillespie’s annual cash bonus award was based in part on the achievement of the overall Industrial Technologies and Services (“ITS”) group performance and ITS Americas to reflect his leadership of the ITS Americas business unit in 2023 and his ability to impact the overall ITS segment. Mr. Miñarro Viseras was not eligible for a cash bonus award under the MIP due to his leaving the Company on September 8, 2023.
Rationale for Base Salary Increases
| 2023 MIP Structure Program Payout (CEO, CFO, GC, IR Strategy and Bus. Development) | | | | | | | Corporate Metrics | Metric Weighting | Threshold 50% Payout | Target 100% Payout | Maximum 200% Payout | Payout | | Adjusted EPS | 75% | $2.28 | $2.53 | $2.78 | 200% | | Free Cash Flow | 25% | $931 | $1,035 | $1,138 | 200% | | Total Weighting | 100% | | | | 200% |
Rationale for Base Salary Increases
| 2023 MIP Structure Program Payout (SVP & GM ITS Americas) | | | | | | | | | ITS Americas Metrics | Metric Weighting | Segment Weighting | Calculated Weighting | Threshold 50% Payout | Target 100% Payout | Maximum 200% Payout | Payout | | BU AEBITDA | 75% | 70% | 53% | $647 | $719 | $791 | 200% | | Segment AEBITDA | | 30% | 23% | $1,301 | $1,445 | $1,590 | 200% | | BU Business Oper. Cash Flow | 25% | 100% | 25% | $596 | $662 | $728 | 186% | | Total Weighting | 100% | | 100% | | | | 196% |
Rationale for Base Salary Increases
The Committee did not apply any adjustments to the calculated results for executive officers under the MIP in 2023. The actual calculated MIP payout for our corporate NEOs resulted in a formulaic payout factor of 200% of target. The actual calculated MIP payout for Mr. Gillespie resulted in a formulaic payout factor of 196% of target. The following table sets forth our actual payout percentage with respect to each performance metric applicable to our NEOs and illustrates the annual cash incentive awards payable to our NEOs under the 2023 MIP in light of these performance results.
Rationale for Base Salary Increases
| | | | | Adjusted EPS (75%) | | Free cash flow (25%) | | | | | | NEO | 2023 Base Salary Rate $ | Target MIP % | Target MIP Amount $ | 2023 % of Tgt Achieved | Calc’d Payout % | 2023 Actual | Calc’d Payout % | Calc’d Payout Factor | Approved Payout Factor | 2023 MIP Payout $ | | Vicente Reynal | 1,144,000 | 150% | 1,716,000 | 117% | 200% | 1,272 | 200% | 200% | 200% | 3,432,000 | | Vikram Kini | 625,000 | 85% | 531,250 | 117% | 200% | 1,272 | 200% | 200% | 200% | 1,062,500 | | Andrew Schiesl | 520,000 | 75% | 390,000 | 117% | 200% | 1,272 | 200% | 200% | 200% | 780,000 | | Michael Weatherred | 460,000 | 75% | 345,000 | 117% | 200% | 1,272 | 200% | 200% | 200% | 690,000 | | Gary Gillespie | 425,000 | 75% | 318,750 | 119% | 200% | 719 | 186% | 196% | 196% | 624,750 |
Rationale for Base Salary Increases
| 1. | For Messrs. Reynal, Kini, Schiesl and Weatherred, reflects achievement and calculated payout factors vs. targets for the Company. For Mr. Gary Gillespie, reflects achievement and calculated payouts factors based 25% on BU Operating Cash Flow, and 75% on ITS Americas BU and ITS Segment AEBITDA. |
Long-Term Equity Incentive Awards
Long-Term Equity Incentive Awards 2023 Annual PSU, RSU and Stock Option Awards Our long-term incentive awards, established through the Company’s Amended and Restated 2017 Omnibus Incentive Plan (as amended by the First Amendment, dated April 27, 2021, the “2017 Omnibus Incentive Plan”), are intended to drive executives to deliver strong stock performance, align our executives’ compensation with long-term value creation, and to attract and retain highly qualified executives. The details of these awards are as follows:
Long-Term Equity Incentive Awards
| • | 50% in Performance Share Units (PSUs). The PSUs have a 3-year performance period that runs from January 1, 2023 through December 31, 2025 (the “Performance Period”) with the vesting of award based on Relative TSR vs. the S&P 500 Industrials as follows: |
Long-Term Equity Incentive Awards
○ Threshold Performance: 35th percentile ranking vs. index = 50% payout ○ Target Performance: 55th percentile ranking vs. index = 100% payout ○ Superior Performance: 75th (or greater) percentile ranking vs. index = 200% payout (capped) To ensure better alignment of payouts with stockholder value creation, even if relative performance would have resulted in a payout above target, the payout under the PSUs is capped at target if the Company’s absolute TSR is negative. TSR is calculated as the appreciation in the price per share of a company’s common stock during the Performance Period (assuming any dividends or distributions are reinvested), expressed as a percentage. Relative TSR is based on the percentile rank of the Company’s TSR against the TSRs of the companies and entities that, on January 1, 2023, comprised the S&P 500 Industrials.(13)
Long-Term Equity Incentive Awards
| • | 25% in Time-Vesting Stock Options. Stock Options vest in equal, annual installments over a four-year period, and expire 10 years from the grant date. |
Long-Term Equity Incentive Awards
| • | 25% in Time-Vesting Restricted Stock Units (RSUs). RSUs vest in equal, annual installments over a four-year period. |
Long-Term Equity Incentive Awards
Total target values for annual equity awards granted in 2023 for each NEO are shown below:
Long-Term Equity Incentive Awards
| NEO | PSUs (50%) $ | RSUs (25%) $ | Stock Options (25%) $ | | Vicente Reynal | 3,500,000 | 1,750,000 | 1,750,000 | | Vikram Kini | 900,000 | 450,000 | 450,000 | | Andrew Schiesl | 575,000 | 287,500 | 287,500 | | Michael Weatherred | 500,000 | 250,000 | 250,000 | | Gary Gillespie | 450,000 | 225,000 | 225,000 | | Enrique Miñarro Viseras(1) | 1,150,000 | 575,000 | 575,000 |
Long-Term Equity Incentive Awards
| 1. | Mr. Miñarro Viseras left the Company on September 8, 2023, and his 2023 equity grants were forfeited. |
Long-Term Equity Incentive Awards
Target annual equity award values were determined based on our competitive market analysis and our compensation philosophy, which targets award levels above the market median. The awards do not vest until the vesting criteria and/or time periods are satisfied, and actual value realized by executives is dependent on the stock price at the time of vesting thereby aligning payouts with the change in stockholder value. These grant amounts were translated into a target number of performance stock units, restricted stock units and stock options by taking such dollar amount and dividing it by the per share or per option “fair value” that was used for reporting the compensation
Long-Term Equity Incentive Awards
| 13 | If prior to the end of the Performance Period, a company or entity that is in the S&P 500 Industrials on January 1, 2023 ceases to publicly report a share price for the security used to determine the stock price at the beginning of the Performance Period, and such company or entity has not become “Insolvent” (as defined in the applicable award agreement), such company or entity will be excluded from the ranking. In addition, if a company or entity that is in the S&P 500 Industrials on January 1, 2023, becomes Insolvent prior to the end of the Performance Period, then such company or entity will be treated as having a cumulative TSR of negative one hundred percent (- 100%). |
Long-Term Equity Incentive Awards
expense associated with the grant under applicable accounting guidance. This “fair value” was based in part on the per share closing price of our common stock on the NYSE on the date of grant. CEO Performance-Conditioned Stock Options Earned in Respect of 2022 Performance and Granted in 2023 As noted above, an important part of Mr. Reynal’s Performance-Based Award approved by the Committee in 2022 was an agreement to grant Mr. Reynal stock options to purchase 100,000 shares for each fiscal year from 2022 through 2026 in which the Company achieves adjusted EPS (as defined in the Performance-Based Award) growth of more than 12% over the prior year. For fiscal year 2022, the Company achieved adjusted EPS growth of nearly 13% over 2021. As a result, in February 2023, the Committee certified that the first tranche of the CEO’s performance-conditioned stock options had been earned, and Mr. Reynal was awarded stock options to purchase 100,000 shares. Although the commitment to grant these options was contained in the 2022 Performance Based Award, since these options were legally granted in 2023, they are required to be treated as 2023 compensation in the Summary Compensation Table. However, the Committee views this grant of 100,000 options as an integral part of the overall terms of the 2022 Performance Based Award and does not view them as part of Mr. Reynal’s annual 2023 compensation. These options do not vest until the fifth anniversary of the grant date and will be forfeited if Mr. Reynal resigns before such date, and as such, provide a significant retention incentive.
CEO Performance-Based Leadership Equity Incentive Award
CEO Performance-Based Leadership Equity Incentive Award Background As previously disclosed, in September 2022, the Committee approved the grant of a Performance-Based Leadership Equity Incentive Award (the “Performance-Based Award”) to Vicente Reynal, CEO and Chairman of the Board, under the 2017 Omnibus Incentive Plan”. The Committee also approved, effective as of September 1, 2022, a new employment agreement with Mr. Reynal (the “Employment Agreement”). Rationale The Committee believes that Mr. Reynal’s vision and leadership have been integral to the Company’s growth and success, as reflected by the significant stockholder value creation during his tenure as CEO. Therefore, the Committee approved the Performance-Based Award and Employment Agreement to incentivize Mr. Reynal to continue this track record of financial outperformance and retain him as the Company’s CEO for the foreseeable future. In order to make the Performance-Based Award more effective at achieving its goal of retention, the Company entered into a revised Employment Agreement with Mr. Reynal for an initial term of five years. This new agreement also includes increased non-competition and non-solicitation covenants, which would remain in effect for two years after termination – an increase from the one year stipulated in the prior agreement. In line with its executive compensation philosophy, the Committee expressly designed the Performance-Based Award to: (i) drive the creation of long-term stockholder value, (ii) further strengthen the alignment of Mr. Reynal’s interests with those of long-term stockholders, and (iii) encourage the retention of Mr. Reynal for the next five to ten years. The Committee deliberately set very challenging, double-digit Adjusted EPS and stock price growth goals. During the first two years following the grant, we have exceeded these targets, resulting in industry-leading stock price performance. The Committee views this as confirmation of the challenging nature of the goals. Design Features of The Performance-Based Award
CEO Performance-Based Leadership Equity Incentive Award
| Features of the Performance-Based Award | Drives Exceptional Long-Term Stockholder Value Creation | Aligns Interests With Those of Long-term Stockholders | Encourages Retention | | 100% Performance-based Incentive | | | | | 5-year Performance Period | | | | | Drives Robust Earnings Growth and Stockholder Value Creation | | | | | No Guaranteed Compensation | | | | | Payout Aligned with Value Creation | | | | | Distinct and Discrete Metrics | | | | | 5-year Cliff-Vesting Performance-Contingent Stock Option Grant Extends Retentive Value and Performance Period | | | | | Change in Control (“CIC”) Provisions Protect Against Windfall Payouts and Require “Double Trigger” for Accelerated Vesting | | | |
Components of Performance-Based Award
| (i) Performance Stock Units (PSUs) that vest only if the Company achieves earnings growth objectives and robust stockholder value creation and Mr. Reynal remains employed for at least five years. PSUs would be earned and vested based upon the Company achieving earnings growth objectives (the “Adjusted EPS PSUs”) and robust stockholder value creation (the “TSR PSUs”). In the event that the threshold Adjusted EPS CAGR Goal (as described below) is not achieved during the five-year performance period, the Adjusted EPS PSUs will be automatically forfeited. Similarly, should the TSR Target Price (as defined below) not be achieved during the five-year performance period, the TSR PSUs will automatically be forfeited. The TSR Target Price was achieved on March 6, 2024. | | (ii) Stock Options will be granted only with respect to fiscal years 2022 through 2026 if, and only if, the Company’s Adjusted EPS growth (determined using the same standard used for the Adjusted EPS PSUs) in any such fiscal year is at least 12%, with any stock options granted in the following fiscal year on the same date on which the Company grants its annual long-term incentive plan awards to its senior executives. a. To increase the incentive and retentive value, each grant of stock options will have an exercise price equal to the closing price of the Company’s common stock on the date of grant, and will cliff vest on the fifth anniversary of the grant date, subject to Mr. Reynal’s continued employment through such respective vesting date. b. If the Adjusted EPS goal is not achieved, no stock options would be granted for that fiscal year under this component of the award. | | a. Adjusted EPS PSUs: 75% of the PSUs (750,000 PSUs) are eligible to vest at the end of the 5-year period based on the level of compounded annual growth rate (“CAGR”) of the Company’s Adjusted EPS over the 5-year performance period beginning on January 1, 2022 and ending on December 31, 2026 (the “EPS Performance Period”) relative to the fiscal year 2021 Adjusted EPS baseline. | | | | Adj. EPS CAGR Goals | # of PSUs Eligible to Vest | | | ≥10% | 250,000 | | | ≥12% | 500,000 | | | ≥15% | 750,000 | | | b. TSR PSUs: 25% of the PSUs (250,000) would be earned (but not vested) only if the TSR Target Price(14) is achieved during the five-year period commencing on the date of grant (“TSR Performance Period”). If earned, the award vests at the end of TSR Performance Period only if Mr. Reynal has been continuously employed by the Company throughout the TSR Performance Period. The TSR Target Price was achieved on March 6, 2024. | | |
Components of Performance-Based Award
A discussion of the termination and Change in Control provisions of Mr. Reynal’s Performance-Based Award is provided later under “Compensation Discussion and Analysis – Treatment of Outstanding Equity Awards in the Event of Termination of Employment or Change in Control” below.
2024 Compensation Actions
2024 Compensation Actions 2021-2023 PSU Award Certified in 2024 On February 20, 2024, the Committee certified that the TSR performance for the 2021-2023 performance period was 65%, which placed the Company in the 77th percentile of S&P 500 companies (which was the comparator group for TSR measurement approved at the time of grant), resulting in a maximum payout of 200% of target. The PSUs resulting from this performance vested on February 20, 2024 with respect to each NEO as shown below:
2024 Compensation Actions
| NEO | Target # PSUs Granted in 2021 | 2021-23 PSU Payout Factor | # PSUs Earned at 2023YE (Distributed in 2024) | | Vicente Reynal | 73,497 | 200% | 146,994 | | Vikram Kini | 12,066 | 200% | 24,132 | | Andrew Schiesl | 10,421 | 200% | 20,842 | | Michael Weatherred | 7,678 | 200% | 15,356 | | Gary Gillespie | 7,678 | 200% | 15,356 |
2024 Compensation Actions
CEO Performance-Conditioned Stock Options Earned in Respect of 2023 Performance and Granted in 2024 For fiscal year 2023, the Company achieved adjusted EPS growth of nearly 20% over 2022, significantly more than the 12% growth needed to satisfy the performance condition. As a result, in February 2024 the Committee certified that the second tranche of the CEO’s performance-conditioned stock options had been earned, and on February 27, 2024, Mr. Reynal was awarded stock options to purchase 100,000 shares. These options do not vest until the fifth anniversary of the grant date and will be forfeited if Mr. Reynal resigns before such date, and as such, provide a significant retention incentive.
The Decision-Making Process
| • | Compensation practices of Peer Group companies (as defined below) |
The Decision-Making Process
The Role of Management. Our CEO makes recommendations to the Committee regarding compensation for the executive officers other than himself. No member of management participates in discussions with the Committee regarding his or her own compensation. The Role of the Independent Consultant. Pearl Meyer & Partners, LLC (“Pearl Meyer”), a compensation consulting firm, served as the Committee's independent compensation consultant from mid-2016 through December 2023. The Committee utilized Pearl Meyer to assist it in evaluating the elements and levels of our executive compensation, including base salaries, annual cash incentive awards and equity-based incentives for our executive officers. In April 2024, the Committee determined that Pearl Meyer was independent from management and that Pearl Meyer’s work had not raised any conflicts of interest. Pearl Meyer reported directly to the Committee and the Committee had the sole authority to approve Pearl Meyer’s compensation and to terminate the relationship at any time. During 2023, the Committee directed Pearl Meyer to provide its expertise and analysis on a variety of topics, including the compensation peer group review, a competitive market assessment for executive and non-employee director compensation levels, a review of governance matters pertaining to executive and employee compensation and the structure of short- and long-term incentive programs. In the fall of 2023, the Committee initiated a request for proposal for a new independent compensation consultant, and appointed Pay Governance LLC (“Pay Governance”) to serve as the independent compensation consultant effective November 2023 instead of Pearl Meyer. The Committee would like to acknowledge Pearl Meyer for its many years of dedicated service and advice. In April 2024, the Committee determined that Pay Governance was independent from management and that Pay Governance’s work had not raised any conflicts of interest. Pay Governance reported directly to the Committee and the Committee had the sole authority to approve Pay Governance’s compensation and to terminate the relationship at any time. From commencement of appointment of Pay Governance, the Committee directed Pay Governance to provide its expertise and analysis on a variety of topics, including a review of governance matters pertaining to executive and employee compensation and the structure of short- and long-term incentive programs. Compensation Peer Group. The Committee believes it is important to understand current trends in compensation practices and pay levels for companies that are comparable to Ingersoll Rand. To assist the Committee in this analysis, the Committee, together with its independent consultant and input from management, develops a compensation Peer Group of comparable companies against which it performs benchmarking (the “Peer Group”). The Committee reviews the appropriateness of the Peer Group on an annual basis to determine if changes are required. When considering companies for inclusion in the Peer Group, the Committee receives data from its compensation consultant. Companies chosen for inclusion are comparable in revenue and enterprise value to the Company, as the Committee believes revenue and enterprise value are key determinants of compensation levels. Companies selected generally have revenue of 0.5x - 2x of Ingersoll Rand’s revenue and enterprise value. In addition to size, companies are in comparable industries where we compete for executive talent. After taking these considerations into account, for 2023, the Committee determined that no changes were required and that the current 12-company peer group remained appropriate. The Committee does not rely solely on data from the Peer Group in establishing compensation levels and practices but uses it to support the implementation of the Company’s compensation philosophy and the application of the factors described above when setting executive compensation. Given the Company’s focus on delivering long-term value creation for our stockholders, the Committee generally targets cash compensation of the NEOs at or below the median of the Peer Group and long-term equity incentive compensation greater than the median of the Peer Group. Additionally, the Committee may also consider survey compensation data based on companies of similar size to Ingersoll Rand. In 2023, during its annual review of the Peer Group, the Committee, using the criteria highlighted above, approved the following 12-company Peer Group for 2024 compensation decisions:
Severance and Change in Control Agreements
Severance and Change in Control Agreements The Company believes that reasonable and appropriate severance and change in control benefits are necessary in order to be competitive in the Company’s executive attraction and retention efforts. As discussed below, the offer letters we enter into with our NEOs provide for certain payments, rights and benefits to the NEOs upon an involuntary termination of employment without “cause” or a termination by the NEO for “good reason” (as such terms are defined in “Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control-Severance Arrangements and Restrictive Covenants” below). In addition, our equity award agreements provide for accelerated vesting upon a change in control in certain circumstances and upon certain qualifying terminations of employment, as more fully described above under “—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2023—Terms of Equity Awards.”
Employment Agreements
Employment Agreements As previously noted, we entered into a new employment agreement with Mr. Reynal in September 2022, which replaced his prior offer letter. We entered into offer letters setting forth initial compensation and benefits, as well as severance terms, with Messrs. Schiesl and Weatherred at the time of their initial employment. We also entered into an employment agreement with Mr. Miñarro Viseras in 2018, which was replaced by a new employment agreement, effective April 3, 2023. Full descriptions of the material terms of these offer letters and employment agreements, see “—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2023.” Summary Compensation Table The following table provides summary information concerning compensation of our NEOs for services rendered to us during the years indicated.
Employment Agreements
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) | | Vicente Reynal Chairman, President and Chief Executive Officer | 2023 | 1,133,000 | — | 6,315,820 | 4,466,985 | 3,432,000 | 175,945 | 15,523,750 | | | 2022 | 1,075,000 | — | 49,547,938 | 1,749,996 | 1,963,500 | 185,343 | 54,521,777 | | | 2021 | 1,000,000 | — | 5,779,046 | 1,674,995 | 2,730,000 | 183,524 | 11,367,565 | | Vikram Kini SVP and Chief Financial Officer | 2023 | 600,000 | — | 1,624,013 | 449,980 | 1,062,500 | 68,599 | 3,805,091 | | | 2022 | 518,750 | — | 1,185,766 | 349,991 | 531,038 | 90,115 | 2,675,660 | | | 2021 | 487,500 | 122,455 | 948,750 | 274,995 | 773,500 | 119,806 | 2,727,006 | | Andrew Schiesl SVP, General Counsel, Chief Compliance Officer and Secretary | 2023 | 515,000 | — | 1,037,546 | 287,488 | 780,000 | 70,318 | 2,690,353 | | | 2022 | 500,000 | — | 931,610 | 274,985 | 446,250 | 108,427 | 2,261,272 | | | 2021 | 500,000 | — | 819,380 | 237,486 | 682,500 | 63,103 | 2,302,469 | | Michael Weatherred SVP, IR Execution Excellence (IRX) and Business Excellence | 2023 | 452,500 | — | 902,235 | 249,994 | 690,000 | 62,755 | 2,357,485 | | | 2022 | 426,250 | — | 719,903 | 212,488 | 383,775 | 83,983 | 1,826,399 | | | 2021 | 415,000 | — | 603,721 | 174,989 | 566,475 | 39,811 | 1,799,996 | | Gary Gillespie SVP, General Manager of Industrial Technologies and Services (IT&S) | 2023 | 418,750 | — | 811,978 | 224,990 | 624,750 | 52,227 | 2,132,694 | | Enrique Miñarro Viseras SVP and GM, Global Precision and Science Technologies(5) | 2023 | 356,254 | — | 2,075,168 | 574,977 | ― | 169,684 | 3,176,083 | | | 2022 | 502,885 | — | 995,221 | 293,747 | 408,458 | 30,414 | 2,230,725 | | | 2021 | 481,304 | — | 948,750 | 274,995 | 538,123 | 78,026 | 2,321,198 |
Treatment of Outstanding Equity Awards in the Event of Termination of Employment or Change in Control
Treatment of Outstanding Equity Awards in the Event of Termination of Employment or Change in Control The outstanding RSU and option awards we have granted to our NEOs provide for accelerated vesting in the event of certain qualifying terminations of employment as described below and/or, in certain circumstances described below, in connection with a change in control. Annual Equity Awards Effect of Qualifying Termination on Vesting of PSUs, RSUs, and Options. In the event of an NEO’s termination without Cause (as defined below) or Approved Retirement (as defined below), such NEO’s outstanding RSUs and options that would have vested on the first vesting date otherwise scheduled to occur immediately following the date of such termination without Cause or Approved Retirement will vest as of the date of such termination without Cause or Approved Retirement, as applicable. In the event of an NEO’s death or Disability (as defined in the 2017 Omnibus Incentive Plan), such NEO’s outstanding RSUs and options that would have vested on the first and second vesting date otherwise scheduled to occur immediately following the date of such death or Disability shall vest as of the date of death or Disability. Notwithstanding the foregoing, if the Company receives a legal opinion that there has been a legal judgment and/or legal development in the NEO’s jurisdiction that would likely result in the favorable treatment that applies to the RSUs and options if the NEO’s termination occurs as a result of NEO’s Approved Retirement being deemed unlawful and/or discriminatory, the Company may determine that the NEO’s Retirement (as defined below) is no longer an Approved Retirement. In the event of an NEO’s termination without Cause, Approved Retirement or death or Disability occurring after the expiration of the Performance Period and before the vesting date, the PSUs that would have vested on the vesting date will vest on the vesting date. Effect of a Change in Control on Vesting of PSUs, RSUs, and Options. In the event of an NEO’s termination without Cause during the two-year period following a Change in Control (as defined in our 2017 Omnibus Incentive Plan), all of such NEO’s outstanding RSUs and options will immediately vest as of the date of such termination without Cause. With respect to the PSUs, if a Change in Control occurs during the Performance Period, then the calculation of the number of PSUs that will vest is conducted as though (i) the last day of the Performance Period was the date of the Change in Control and (ii) the Company’s stock price at the end of the Performance Period was the price per share of the Company’s common stock payable in connection with such Change in Control. The number of PSUs resulting from such calculation will be the number that will vest upon the consummation of such Change in Control. For purposes of the foregoing: “Approved Retirement,” “Cause,” “Detrimental Activity,” and “Retirement” have the definitions set forth in the relevant grant agreement or the 2017 Omnibus Incentive Plan, as applicable. CEO Performance-Based Leadership Equity Incentive Award Effect of Qualifying Termination or Termination due to Death or Disability on Vesting of the Adjusted EPS PSUs Vesting of the Adjusted EPS PSUs is subject to Mr. Reynal’s continued employment through December 31, 2026; however, if he is terminated by the Company without Cause or he resigns for Good Reason (each, a “Qualifying Termination” and as defined in his employment agreement) or he dies or becomes permanently disabled, in each case, after the expiration of the EPS Performance Period and before the date on which the Committee certifies the level of performance achieved (the “EPS PSU Vesting Date”), he remains entitled to receive the number of Adjusted EPS PSUs that the Committee certifies has become vested. If Mr. Reynal dies, becomes permanently disabled or experiences a Qualifying Termination prior to the end of the EPS Performance Period, the calculation to determine the number of Adjusted EPS PSUs, if any, that will become vested will be conducted as though (i) the last day of the EPS Performance Period was the date on which such termination occurs and (ii) the Company’s Adjusted EPS will be the Adjusted EPS for the last four completed fiscal quarters during the EPS Performance Period prior to the date of such termination (or, if there are not four completed fiscal quarters at the time of such termination, then all of the Adjusted EPS PSUs will be forfeited on the date of such termination) and, if the reason for such termination is a Qualifying Termination, the number of Adjusted EPS PSUs that will become vested will be prorated by the number of days Mr. Reynal was employed during the EPS Performance Period. Effect of a Change in Control on Vesting of the Adjusted EPS PSUs If a change in control (as defined in the 2017 Omnibus Incentive Plan) occurs following the expiration of the EPS Performance Period but prior to the EPS PSU Vesting Date, then the Adjusted EPS PSUs will vest on the closing of such change in control based on the achievement of Adjusted EPS in accordance with the table above under “Potential Payments to Named Executive Officers upon Termination of Employment or Change in Control” so long as Mr. Reynal has remained in continuous employment with the Company through such change in control. If a change in control occurs during the EPS Performance Period and the award is not assumed, then the calculation to determine the number of Adjusted EPS PSUs that will become eligible to vest will be conducted as though (i) the last day of the EPS Performance Period was the date of the change in control and (ii) the Company’s Adjusted EPS will be measured based on the last four completed fiscal quarters (or, if there are not four completed fiscal quarters at the time of such change in control, then all of the Adjusted EPS PSUs will be forfeited upon the change in control). The number of Adjusted EPS PSUs, if any, resulting from such calculation will become vested on the closing of the change in control so long as Mr. Reynal has remained continuously employed through such change in control. If a change in control occurs prior to the expiration of the EPS Performance Period and the award is assumed by the successor to the Company, and Mr. Reynal is subsequently terminated due to death, permanent disability or a Qualifying Termination following such change in control but prior to the end of the EPS Performance Period, the Adjusted EPS PSUs will become vested in full on the date of such termination. Effect of Qualifying Termination or Termination due to Death or Disability on Vesting of the TSR PSUs If the TSR Target Price is achieved prior to the end of the TSR Performance Period and Mr. Reynal is terminated due to his death or permanent disability prior to the expiration of such performance period, then all of the TSR PSUs will vest upon such termination. If the TSR Target Price is achieved prior to the end of the TSR Performance Period and Mr. Reynal experiences a Qualifying Termination prior to the end of the TSR Performance Period, then he will vest pro-rata in a number of TSR PSUs based on the number of days he was employed with the Company during the TSR Performance Period. The TSR Target Price was not achieved until March 6, 2024, so all the TSR PSUs would have been forfeited by Mr. Reynal if his employment had terminated due to one of the above-described events on December 29, 2023. Effect of a Change in Control on Vesting of the TSR PSUs If a change in control occurs following the date on which the TSR Target Price is achieved, then all of the TSR PSUs will become fully vested immediately prior to such change in control subject to Mr. Reynal’s continued employment through such change in control.
Treatment of Outstanding Equity Awards in the Event of Termination of Employment or Change in Control
Subject to Mr. Reynal’s continued employment through such change in control, if a change in control occurs during the TSR Performance Period and prior to the date on which the TSR Target Price is achieved, and the award is not assumed by the successor to the Company, then the TSR Performance Period will end on the date of the change in control and (i) if the sum of (A) the price per share of the Company’s common stock payable in connection with such change in control, plus (B) the cumulative value of any dividends paid during the TSR Performance Period through and including the date of the change in control equals or exceeds the TSR Target Price, the TSR PSUs will vest immediately prior to the closing of such change in control, and (ii) if such sum is less than the TSR Target Price, all of the TSR PSUs will automatically be forfeited immediately prior to the closing of such change in control. If a change in control had occurred on December 29, 2023 and the TSR PSUs were not assumed by the successor to the Company, no vesting of the TSR PSUs would have occurred based on the application of the above-described formula. If a change in control occurs prior to the date on which the TSR Target Price is achieved and the TSR PSUs are assumed by the successor to the Company and Mr. Reynal is terminated due to death, permanent disability or a Qualifying Termination following such change in control but prior to the end of the TSR Performance Period, the TSR PSUs will become fully vested on the date of such termination. Effect of Qualifying Termination on Vesting of the Performance-Conditioned Stock Option Grants If Mr. Reynal experiences a Qualifying Termination or he dies or becomes permanently disabled, the number of shares subject to the stock options that will become vested on the date of such termination will be determined as if the stock options had instead vested 20% per year over five years from the date of grant and, solely in the event of a termination due to his death or permanent disability, Mr. Reynal will become immediately vested in an additional 20% of the stock options. Effect of a Change in Control on Vesting of the Performance-Conditioned Stock Option Grants If a change in control occurs and the stock options are not assumed, then the stock options will become vested in full immediately prior to the change in control. If the stock options are assumed by the successor to the Company, and Mr. Reynal is subsequently terminated due to death, disability or a Qualifying Termination, the stock options will become fully vested on the date of such termination. DIRECTOR COMPENSATION IN FISCAL 2023
Treatment of Outstanding Equity Awards in the Event of Termination of Employment or Change in Control
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | | Kirk E. Arnold | 75,000 | 190,000 | 265,000 | | William P. Donnelly | 75,000 | 235,000 | 310,000 | | Gary D. Forsee | 75,000 | 185,000 | 260,000 | | Jennifer Hartsock | 75,000 | 185,000 | 260,000 | | John Humphrey | 75,000 | 200,000 | 275,000 | | Marc E. Jones | 75,000 | 190,000 | 265,000 | | Vicente Reynal | — | — | — | | Julie A. Schertell | 18,750 | 43,750 | 62,500 | | JoAnna L. Sohovich | 18,750 | 46,250 | 65,000 | | Mark P. Stevenson | 75,000 | 175,000 | 250,000 | | Michael Stubblefield(2) | 37,500 | 185,000 | 222,500 | | Tony L. White | 75,000 | 175,000 | 250,000 |
Treatment of Outstanding Equity Awards in the Event of Termination of Employment or Change in Control
| 1. | Represents the aggregate grant date fair value of stock awards granted during 2023 computed in accordance with FASB ASC Topic 718. The aggregate number of RSUs outstanding as of December 31, 2023 for each director was as follows: Ms. Arnold: 3,282; Mr. Donnelly: 4,059; Mr. Forsee: 3,195; Ms. Hartsock: 3,195; Mr. Humphrey: 3,454; Mr. Jones: 3,282; Mr. Stevenson: 3,022; Ms. Schertell: 663; Ms. Sohovich: 700 and Mr. White: 3,022. The RSUs of Mses. Arnold and Hartsock and Messrs. Donnelly, Forsee, Humphrey, Jones, Stevenson, and White vested in full on February 23, 2024. The 663 RSUs and 700 RSUs granted to Mss. Schertell and Sohovich, respectively, in connection with their appointments to the Board of Directors on October 2, 2023, are scheduled to vest in full on November 7, 2024. |
Treatment of Outstanding Equity Awards in the Event of Termination of Employment or Change in Control
| 2. | Mr. Stubblefield resigned from our Board of Directors effective August 6, 2023, and in connection with his departure his 3,195 RSUs granted on February 23, 2023 forfeited. |
Description of Director Compensation
Description of Director Compensation The Board made no changes to its director compensation program in 2023, which consists of the following components for our non-employee directors:
Description of Director Compensation
| • | Annual cash retainer of $75,000, payable quarterly in arrears and prorated for any partial year of service; |
Description of Director Compensation
| • | Annual equity award having a fair market value of $175,000, payable in RSUs, which vests on the anniversary of the grant date; |
Description of Director Compensation
| • | Additional annual equity award having a fair market value of $25,000, payable in RSUs, which vests on the anniversary of the grant date, for serving as the chairperson of our Audit Committee and an additional annual equity award having a fair market value of $10,000, payable in RSUs, which vests on the anniversary of the grant date, for serving as a member of such committee, prorated, in each case, for any partial year of service; |
Description of Director Compensation
| • | Additional annual equity award having a fair market value of $15,000, payable in RSUs, which vests on the anniversary of the grant date, for serving as the chairperson of our Committee, Nominating and Corporate Governance Committee or our Sustainability Committee, prorated, in each case, for any partial year of service; and |
Description of Director Compensation
| • | Additional annual equity award having a fair market value of $35,000, payable in RSUs, which vests on the anniversary of the grant date, to compensate our Lead Director, if applicable, for the additional time and responsibilities associated with this role. |
Description of Director Compensation
Our directors are not paid any fees for attending meetings, however, our directors are reimbursed for reasonable travel and related expenses associated with attendance at Board or committee meetings. We believe that an equity-focused compensation scheme for our directors strengthens the alignment of interests of our directors and stockholders. Stock Ownership and Retention Policy Our directors are also subject to the stock ownership guidelines and retention policy described under “Compensation Discussion and Analysis—Other Compensation Practices and Policies that Align Our NEOs to Our Stockholders—Stock Ownership and Retention Policy.” Compensation Committee Interlocks and Insider Participation During 2023, each of Messrs. Jones, Stevenson and White and Ms. Arnold and Ms. Hartsock served on our Compensation Committee for at least a portion of the year. None of the current (including Ms. Hartsock), or in the case of Mr. Donnelly, former, members of our Compensation Committee has at any time been one of our executive officers or employees. None of our executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee. CEO Pay Ratio As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K (“Item 402(u)”), the Company is providing the following information regarding the relationship of the annual total compensation of Vicente Reynal, our Chief Executive Officer (“CEO”) to the median all of our employees (except Mr. Reynal), calculated in a manner consistent with Item 402(u). For 2023, our last completed fiscal year:
Description of Director Compensation
| • | The median of the annual total compensation of all of our employees, excluding our CEO, was $55,400. |
Description of Director Compensation
| • | The annual total compensation of our CEO was $15,523,750. |
Description of Director Compensation
Based on this information, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all of our employees except our CEO was 280:1. If the impact of the 100,000 performance-based stock options that were part of the terms of the 2022 CEO’s Performance-Based Award were removed from the calculations:
Description of Director Compensation
| • | The annual total compensation of the CEO would have been $12,806,750. |
Description of Director Compensation
| • | The ratio of the annual total compensation of our CEO to the median of the annual total compensation of all of our employees except our CEO would have been 231:1. |
Description of Director Compensation
The median employee identified for calculating the ratio of the CEO’s annualized total compensation to that of all employees remains unchanged from the one disclosed in last year’s proxy statement. We are confident that no significant changes have been made to our employee population or compensation arrangements that would have a significant impact on our pay ratio disclosure. We determined that, as of December 31, 2023, our employee population consisted of 18,521 individuals, including full time, part time, and temporary employees. To identify our “median employee” from this employee population, we obtained annual base salary and target annual bonus information as of December 31, 2023 from our internal payroll records for each employee in our employee population. We believe this consistently applied compensation measure reasonably reflects annual compensation across our employee base. Base salary amounts for employees located outside the United States and compensated in currencies other than U.S. dollars were converted to U.S. dollars based on the average annual exchange rate for 2023. We then ranked the resulting annual base salary plus target annual bonus amounts for all of the employees in the employee population other than our CEO to determine our median employee. Once we identified our median employee, we combined all of the elements of such employee’s compensation for 2023 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K for the Summary Compensation Table. With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our Summary Compensation Table set forth above in this Proxy Statement. Pay vs. Performance (“PvP”) Disclosure As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K (“Item 402(v)”), the Company is providing the following information regarding the relationship between the executive compensation actually paid by the Company and the financial performance of the Company over the applicable time period of the disclosure, calculated in a manner consistent with Item 402(v). Refer to the “Compensation Discussion and Analysis” section of this Proxy Statement for a discussion on how the Committee determines named executive officer pay.
Description of Director Compensation
| Year | Summary Compensation Table Total for CEO $ | Compensation Actually Paid to CEO(a)(b)(c) $ | Average Summary Compensation Table Total for Non-CEO NEOs(d) $ | Average Compensation Actually Paid to Non-CEO NEOs(a)(b)(d) $ | Year-end value of $100 invested on 12/31/2019 | | Net Income ($mm) $ | Adjusted Diluted EPS(1) $ | | | | | | | Company TSR $ | S&P 500 IndustriaLs (TR) $ | | | | 2023 | 15,523,750 | 66,810,613 | 2,832,341 | 4,490,942 | 211.53 | 140.30 | 779 | 2.96 | | 2022 | 54,521,777 | 51,245,570 | 2,248,514 | 1,167,175 | 142.73 | 120.91 | 605 | 2.36 | | 2021 | 11,367,565 | 26,768,202 | 2,287,667 | 4,355,177 | 168.73 | 130.16 | 563 | 2.09 | | 2020 | 12,373,829 | 24,423,018 | 2,627,334 | 3,169,464 | 124.21 | 109.01 | (33) | 1.28 |
Description of Director Compensation
| (a) Deductions from, and additions to, total compensation in the Summary Compensation Table by year to calculate Compensation Actually Paid include: |
Description of Director Compensation
| | CEO | | | | Average Other NEOs | | | | | | 2023 $ | 2022 $ | 2021 $ | 2020 $ | 2023 $ | 2022 $ | 2021 $ | 2020 $ | | Summary Compensation Table (“SCT”) Total | 15,523,750 | 54,521,777 | 11,367,565 | 12,373,829 | 2,832,341 | 2,248,514 | 2,287,667 | 2,627,334 | | Adjustments for Pension | | | | | | | | | | Deduct: Change in Pension Value reported in SCT | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Add: Amount added for current year service cost | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | | Add: Amount added for prior service cost impacting current year | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | | Total Adjustments for Pension | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Adjustments for Equity Awards | | | | | | | | | | Deduct: Grant date values in SCT | (10,782,805) | (51,297,935) | (7,454,041) | (8,607,596) | (1,647,674) | (1,240,928) | (1,070,766) | (1,943,350) | | Add: Year-end fair value of unvested awards granted in the current year | 16,644,546 | 55,421,266 | 11,389,717 | 17,782,559 | 1,750,701 | 1,150,403 | 1,636,124 | 2,178,885 | | Add: Year-over-year difference of year-end fair values for unvested awards granted in prior years | 42,677,302 | (4,849,563) | 11,342,130 | 2,711,819 | 1,741,390 | (643,997) | 1,466,034 | 459,596 | | Add: Fair values at vest date for awards granted and vested in current year | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Add: Difference in fair values between prior year-end fair values and vest date fair values for awards granted in prior years | 2,747,820 | (2,549,976) | 122,831 | 162,409 | 312,802 | (346,817) | 36,118 | (153,000) |
Description of Director Compensation
| | CEO | | | | Average Other NEOs | | | | | | 2023 $ | 2022 $ | 2021 $ | 2020 $ | 2023 $ | 2022 $ | 2021 $ | 2020 $ | | Deduct: Forfeitures during current year equal to prior year-end fair value | 0 | 0 | 0 | 0 | (498,619) | 0 | 0 | 0 | | Add: Dividends or dividend equivalents not otherwise included in total compensation | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Total Adjustments for Equity Awards | 51,286,863 | (3,276,208) | 15,400,636 | 12,049,190 | 1,658,601 | (1,081,338) | 2,067,510 | 542,130 | | Compensation Actually Paid | 66,810,613 | 51,245,570 | 26,768,202 | 24,423,018 | 4,490,942 | 1,167,175 | 4,355,177 | 3,169,464 |
Description of Director Compensation
| 1. | Adjusted Diluted EPS is our “Company-Selected Measure” pursuant to Item 402(v). Amount presented for 2020 represents Supplemental Adjusted Diluted EPS. Adjusted Diluted EPS and Supplemental Adjusted Diluted EPS are non-GAAP metrics. For a reconciliation of Adjusted Diluted EPS to Diluted EPS (2023, 2022 and 2021) and of Supplemental Adjusted Diluted EPS to Diluted EPS (2020), see Annex A to this Proxy Statement. |
Description of Director Compensation
| (b) The following summarizes the valuation assumptions used for stock option awards included as part of Compensation Actually Paid: |
Description of Director Compensation
| — | Expected life of each stock option is based on the “simplified method” using an average of the remaining vest and remaining term, as of the vest/FYE date. |
Description of Director Compensation
| — | Strike price is based on each grant date closing price and asset price is based on each vest/FYE closing price. |
Description of Director Compensation
| — | Risk free rate is based on the Treasury Constant Maturity rate closest to the remaining expected life as of the vest/FYE date. |
Description of Director Compensation
| — | Historical volatility is based on daily price history for each expected life (years) prior to each vest/FYE date. Closing prices provided by S&P Capital IQ are adjusted for dividends and splits. |
Description of Director Compensation
| — | Represents annual dividend yield on each vest/FYE date. |
Description of Director Compensation
| (c) CEO Compensation Actually Paid in 2022 would have been $2,943,070 if Mr. Reynal’s special one-time Performance-Based Award was excluded from the calculation. We believe this is an appropriate alternative way to view Compensation Actually Paid in 2022 given the long-term nature of the award with vesting events occurring five to ten years after the grant date. In our view, including all of this long-term compensation as Compensation Actually Paid in a single year does not reflect the long-term nature of the award and overstates the actual compensation paid to Mr. Reynal in 2022. |
Description of Director Compensation
| (d) For the non-CEO NEOs, the amounts in the table reflect the average Summary Compensation Table total compensation and average Compensation Actually Paid for the following executives by year: |
Description of Director Compensation
2023: Vikram Kini, Andrew Schiesl, Enrique Minarro-Viseras, Michael Weatherred, Gary Gillespie 2022: Vikram Kini, Andrew Schiesl, Enrique Minarro-Viseras, Michael Weatherred 2021: Vikram Kini, Andrew Schiesl, Enrique Minarro-Viseras, Michael Weatherred 2020: Vikram Kini, Andrew Schiesl, Enrique Minarro-Viseras, Michael Weatherred, Emily Weaver Relationship Between Compensation Actually Paid and Company Performance As demonstrated in the table above, the Compensation Actually Paid values for our CEO and non-CEO NEOs are directionally aligned with our performance. The data demonstrates consistent year-over-year improvement for each of the financial performance measures displayed in the table (Net Income and Adjusted EPS) and for Company TSR (with the exception of Company TSR in 2022). In years where stock price has appreciated, Compensation Actually Paid exceeds the values reported in the Summary Compensation Table, whereas in the one reported year of stock price depreciation, Compensation Actually Paid is lower than the amounts reported in the Summary Compensation Table. The correlation would be even stronger if Mr. Reynal’s special one-time Performance-Based Award was not included in the Compensation Actually Paid calculation for 2022. For a discussion of the special circumstances of this award, see “Additional Disclosure on the Committee’s Rationale for 2022 Grants of Performance Stock Units and Performance Stock Options to Vicente Reynal” and “CEO Performance-Based Leadership Equity Incentive Award.” Over time, we expect that continued strong financial performance will positively influence Company TSR and increase Compensation Actually Paid, re-enforcing our commitment to pay-for-performance. As one of the key tenets of our compensation philosophy is to deliver the majority of compensation in long-term pay, each of our NEOs’ total pay packages are comprised primarily of equity awards; accordingly, we expect that the Compensation Actually Paid figures will generally move in tandem with Company TSR. Additionally, in each of the years disclosed in the table, Company TSR directionally tracked the S&P 500 Industrials Total Return and outpaced the S&P 500 Industrials’ return over the same measurement period. Tabular List of Financial Performance Measures Linked to Compensation Actually Paid The following financial performance measures represent, in the Company’s view, the most important financial measures used to link Compensation Actually Paid to the NEOs in 2023 to Company performance:
Description of Director Compensation
| Adjusted Diluted EPS | | Free Cash Flow | | Relative TSR vs. S&P 500 Industrials |