DEF 14A of Parker-Hannifin Corp
Filed Sep 24, 2018 · FY20180001193125-18-280648
Important Notice Regarding the Availability of Proxy Materials for
| | Page | | Potential Payments Upon Termination or Change of Control at June 30, 2018 | 56 | | CEO Pay Ratio | 65 | | Director Compensation for Fiscal Year 2018 | 66 | | Report of the Audit Committee | 68 | | Item 2 – Ratification of the Appointment of Independent Registered Public Accounting Firm | 69 | | Item 3 – Proposal to Approve the Compensation of our Named Executive Officers on a Non-Binding, Advisory Basis | 71 | | Item 4 –Proposal to Approve an Amendment to Our Code of Regulations to Permit Proxy Access | 73 | | Item 5 –Proposal to Approve an Amendment to Our Code of Regulations to Allow the Board to Amend Our Code of Regulations to the Extent Permitted by Ohio Law | 77 | | Principal Shareholders | 79 | | Shareholders’ Proposals | 80 | | Shareholder Recommendations for Director Nominees | 81 | | Communications with Directors | 81 | | General | 82 | | How to Attend the Annual Meeting of Shareholders | 84 | | Annex A: Parker-Hannifin Corporation Proxy Access Amendments to Code of Regulations | A-1 |
PROXY STATEMENT SUMMARY
PROXY STATEMENT SUMMARY This summary highlights information relating to items to be voted on at this Annual Meeting of Shareholders and compensation and corporate governance matters. Additional details are found in the discussions contained in this Proxy Statement.
PROXY STATEMENT SUMMARY
| General Information for 2018 Annual Meeting of Shareholders | | | Time and Date | October 24, 2018 at 9:00 A.M. EDT | | Place | Parker-Hannifin Corporation 6035 Parkland Boulevard Cleveland, Ohio 44124-4141 | | Record Date | August 31, 2018 | | Voting Matters and Recommendations | | | Voting Matter | Board Recommendations | | Election of Directors | FOR ALL NOMINEES | | Ratification of Deloitte & Touche LLP as Independent Auditor | FOR | | Advisory Vote to Approve Executive Compensation | FOR | | Amendment to Our Code of Regulations to Permit Proxy Access | FOR | | Amendment to Our Code of Regulations to Allow the Board to Amend Our Code of Regulations to the Extent Permitted by Ohio Law | FOR |
PROXY STATEMENT SUMMARY
We are pleased to provide the following key governance and compensation highlights for fiscal year 2018. We believe that these measures will better position us to continue to drive profitable growth and financial performance and otherwise compete and win as a leading worldwide diversified manufacturer of motion and control technologies and systems, utilizing key insights drawn from engagement with our shareholders and the results of our shareholders’ votes. Our Board of Directors is committed to sound corporate governance, promoting the long-term interests of our shareholders and holding itself and management accountable for performance. The following table summarizes some of the key elements of our corporate governance framework.
PROXY STATEMENT SUMMARY
| Governance Highlights | | | ✓ Annual election of all Directors | ✓ Separate Chairman of the Board and Independent Lead Director roles | | ✓ Published Corporate Governance Guidelines | ✓ Published Global Code of Business Conduct applicable to our Board of Directors | | ✓ Majority voting and resignation policy for uncontested Director elections | ✓ Board Committees are 100% comprised of independent Directors | | ✓ Our Board of Directors includes two women | ✓ Independent Directors meet regularly and frequently (at least four times per year) without management present | | ✓ Average age of our Director nominees is 61 | | | ✓ Director retirement is after reaching age 72 | ✓ Robust stock ownership guidelines for Directors and executive officers | | ✓ Each Committee of our Board of Directors has a published charter that is reviewed and discussed at least annually | ✓ All Directors and executive officers have met stock ownership guidelines | | ✓ No shareholders rights plan | ✓ Annual Board and Committee evaluations | | ✓ Each of our Director nominees attended 100% of the Board of Director meetings and 100% of his or her applicable Committee meetings during fiscal year 2018 | ✓ Annual reviews of our Chief Executive Officer by all independent Directors | | ✓ None of our Director nominees are “overboarded” – four of our Director nominees do not sit on any other public company board of directors, four of our Director nominees sit on just one other public company board of directors and two of our Director nominees sit on two other public company boards of directors | ✓ 70% of our Director nominees have a tenure of under 10 years. Director tenure of this year’s Director nominees: 0-5 years: 40% 6-9 years: 30% ³10 years: 30% | | ✓ Our Viewpoint on Social Responsibility is published annually, addressing our commitment to, and actions and oversight around, sustainability; governance, ethics and compliance; our people; the planet; and product stewardship. | |
PROXY STATEMENT SUMMARY
The table below highlights key aspects of our executive compensation program for fiscal year 2018. The table is not a substitute for, nor does it reflect, all of the information provided in our Compensation Discussion and Analysis and in the Compensation Tables presented later in this Proxy Statement.
PROXY STATEMENT SUMMARY
| Compensation Highlights | | | ✓ Annual advisory vote on executive compensation with consistent high degree of approval | ✓ Anti-hedging and anti-pledging policy for Directors and executive officers | | ✓ Claw-back policy to recover or withhold incentive-based compensation paid to executive officers | ✓ Executive compensation program with pay-for-performance structure aligned with The Win Strategy(TM) | | ✓ Chief Executive Officer’s target compensation package is a mix of 10% fixed and 90% at risk | ✓ One-year minimum vesting requirement for restricted stock awards, restricted stock unit awards, unrestricted stock awards, grants of stock options, and stock appreciation rights, under our 2016 Omnibus Stock Incentive Plan | | ✓ Average target compensation mix for Named Executive Officers other than our Chief Executive Officer is a mix of 21% fixed and 79% at risk | |
ITEM 1 – ELECTION OF DIRECTORS
ITEM 1 – ELECTION OF DIRECTORS Shareholder approval is sought to elect Lee C. Banks, Robert G. Bohn, Linda S. Harty, Kevin A. Lobo, Candy M. Obourn, Joseph Scaminace, Åke Svensson, James R. Verrier, James L. Wainscott and Thomas L. Williams for a term that will expire at the Annual Meeting of Shareholders in 2019. Each candidate for Director is elected only if the votes “for” the candidate exceed the votes “against” the candidate. Abstentions and broker non-votes shall not be counted as votes “for” or “against” a candidate. If the number of candidates exceeds the number of Directors to be elected, then in that election the candidates receiving the greatest number of votes shall be elected. Our Board of Directors has concluded that the nominees presented in this “Item 1 — Election of Directors” collectively represent a highly-qualified and diverse group of individuals who will effectively serve the long-term interests of our business, our employees and our shareholders. Our Board of Directors believes that each nominee should serve on our Board of Directors for the coming year based on his or her record of effective past service on our Board of Directors and the specific experiences, qualifications, attributes and skills described in his or her biographical information presented in this “Item 1 — Election of Directors” section. Should any nominee become unable to accept nomination or election, the proxies will be voted for the election of another person as our Board of Directors may recommend. However, our Board of Directors has no reason to believe that this circumstance will occur.
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 2019
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 2019
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 2019
| Director since 2015 | LEE C. BANKS Age: 55 Committees: None Mr. Banks has been our President and Chief Operating Officer since February 2015. He was our Executive Vice President from August 2008 to February 2015 and our Operating Officer from November 2006 to February 2015. Mr. Banks is also a Director of Nordson Corporation. Our Board of Directors believes that Mr. Banks will effectively serve our Board of Directors, our business, our employees and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things: • extensive service as President and Chief Operating Officer and Executive Vice President and Operating Officer and in various operational leadership positions during his over 25-year career with us; • intimate, working knowledge of our day-to-day business, plans, strategies and initiatives; • present service on another public company board; • proven ability to work efficiently and effectively with our other Directors to oversee and address issues and risks facing our business; and • high level of commitment to our Board of Directors, our business, our employees and our shareholders, and a high level of integrity, honesty, judgment and professionalism. |
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 2019
| Director since 2010 | ROBERT G. BOHN Age: 65 Committees: Audit Committee Human Resources and Compensation Committee Now retired, Mr. Bohn was Chairman of the Board of Oshkosh Corporation (specialty vehicles and vehicle bodies manufacturing) from January 2000 to February 2011. Mr. Bohn is also a Director of Carlisle Companies, Inc. and The Manitowoc Company, Inc. Our Board of Directors believes that Mr. Bohn will effectively serve our Board of Directors, our business, our employees and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things: • extensive service as Chief Executive Officer and Chairman of the Board of Oshkosh Corporation, a successful global industrial company of significant size; • past and present service on other public company boards; • independence under the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors; • proven ability to work efficiently and effectively with our other Directors to oversee and address issues and risks facing our business; and • high level of commitment to our Board of Directors and integrity, honesty, judgment and professionalism. | | Director since 2007 | LINDA S. HARTY Age: 58 Committees: Audit Committee (Chair) Now retired, Ms. Harty was Treasurer of Medtronic plc (medical technology) from February 2010 to April 2017. Ms. Harty is also a Director of Wabtec Corporation and Lead Director of Syneos Health, Inc. (formerly INC Research Holdings, Inc.). Our Board of Directors believes that Ms. Harty will effectively serve our Board of Directors, our business, our employees and our shareholders based on her significant and diverse experiences, skills, qualifications and viewpoints from, among other things: • extensive service in senior finance and accounting leadership positions at Medtronic plc and other successful global companies of significant size; • present service on other public company boards; • qualification as an audit committee financial expert as defined in the federal securities laws; • independence under the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors; • proven ability to work efficiently and effectively with our other Directors to oversee and address issues and risks facing our business; and • high level of commitment to our Board of Directors and integrity, honesty, judgment and professionalism. |
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 2019
| Director since 2013 | KEVIN A. LOBO Age: 53 Committees: Audit Committee Mr. Lobo has been Chairman of the Board of Stryker Corporation (medical technology) since July 2014 and has been Chief Executive Officer, President and a Director since October 2012. Our Board of Directors believes that Mr. Lobo will effectively serve our Board of Directors, our business, our employees and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things: • extensive service in senior leadership positions at Stryker Corporation and other successful global companies of significant size; • present service on another public company board; • qualification as an audit committee financial expert as defined in the federal securities laws; • independence under the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors; • proven ability to work efficiently and effectively with our other Directors to oversee and address issues and risks facing our business; and • high level of commitment to our Board of Directors and integrity, honesty, judgment and professionalism. | | Director since 2002 | CANDY M. OBOURN Age: 68 Committees: Human Resources and Compensation Committee (Chair) Corporate Governance and Nominating Committee Ms. Obourn has been Chairman of Isoflux Incorporated (coating technologies) since April 2012. Our Board of Directors believes that Ms. Obourn will effectively serve our Board of Directors, our business, our employees and our shareholders based on her significant and diverse experiences, skills, qualifications and viewpoints from, among other things: • service as Chief Executive Officer and President of a coating technologies company, Chief Executive Officer and President of a health care products company and in senior leadership positions at other global companies of significant size; • independence under the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors; • proven ability to work efficiently and effectively with our other Directors to oversee and address issues and risks facing our business; and • high level of commitment to our Board of Directors and integrity, honesty, judgment and professionalism. |
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 2019
| Director since 2004 | JOSEPH SCAMINACE Age: 65 Committees: Corporate Governance and Nominating Committee Human Resources and Compensation Committee Mr. Scaminace was a Director and Chief Executive Officer of OM Group, Inc. (metal-based specialty chemicals) from June 2005 to October 2015 and Chairman of the Board of OM Group from August 2005 to October 2015. Mr. Scaminace is also a Director of Cintas Corporation and The Cleveland Clinic Foundation. Our Board of Directors believes that Mr. Scaminace will effectively serve our Board of Directors, our business, our employees and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things: • extensive service as Chief Executive Officer and Chairman of the Board of OM Group, Inc., and prior leadership positions at other global industrial companies of significant size; • past and present service on other public company boards; • independence under the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors; • proven ability to work efficiently and effectively with our other Directors to oversee and address issues and risks facing our business; and • high level of commitment to our Board of Directors and integrity, honesty, judgment and professionalism. | | Director since 2010 | ÅKE SVENSSON Age: 66 Committees: Audit Committee Mr. Svensson has been Chairman of the Association of Swedish Engineering Industries, and Board Member of the Confederation of Swedish Enterprise since May 2018. He was previously Chairman of Swedavia AB (transport infrastructure) from April 2016 to May 2018, and Director General of Swedish Engineering Industries from September 2010 to August 2016. Mr. Svensson serves on the Board of Business Sweden (export support organization), and was formerly a Director of Saab AB. Our Board of Directors believes that Mr. Svensson will effectively serve our Board of Directors, our business, our employees and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things: • extensive service as Chief Executive Officer and President of Saab AB, a successful European aerospace, defense and security company of significant size; • extensive knowledge of European aerospace, defense and security businesses and related issues and trends; • independence under the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors; • proven ability to work efficiently and effectively with our other Directors to oversee and address issues and risks facing our business; and • high level of commitment to our Board of Directors and integrity, honesty, judgment and professionalism. |
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 2019
| Director since 2016 | JAMES R. VERRIER Age: 55 Committees: Audit Committee Human Resources and Compensation Committee Mr. Verrier has served as a Board Advisor to Borg Warner, Inc. (powertrain solutions) since August 1, 2018. He was previously Chief Executive Officer and Director of BorgWarner, Inc. from January 2013 until July 31, 2018, and President of BorgWarner from March 2012 until July 31, 2018. Our Board of Directors believes that Mr. Verrier will effectively serve our Board of Directors, our business, our employees and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things: • service as Director, Chief Executive Officer and President of BorgWarner, Inc., a successful global automotive industry components and parts supplier of significant size, and a public company; • prior service on another public company board; • independence under the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors; • proven ability to work efficiently and effectively with our other Directors to oversee and address issues and risks facing our business; and • high level of commitment to our Board of Directors and integrity, honesty, judgment and professionalism. | | Director since 2009 | JAMES L. WAINSCOTT Age: 61 Committees: Corporate Governance and Nominating Committee (Chair and Lead Director) Human Resources and Compensation Committee Now retired, Mr. Wainscott was Chairman of the Board of AK Steel Holding Corporation (steel producer) from January 2006 to May 2016; and President, Chief Executive Officer and a Director of AK Steel Holding from October 2003 to January 2016. Our Board of Directors believes that Mr. Wainscott will effectively serve our Board of Directors, our business, our employees and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things: • extensive service as President, Chief Executive Officer and Chairman of the Board of AK Steel Holding Corporation, a successful global industrial company of significant size; • prior service on other public company boards; • independence under the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors; • proven ability to effectively serve as our Lead Director and to otherwise work efficiently and effectively with our other Directors to oversee and address issues and risks facing our business; and • high level of commitment to our Board of Directors and integrity, honesty, judgment and professionalism. |
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 2019
| Director since 2015 | THOMAS L. WILLIAMS Age: 59 Committees: None Mr. Williams has been our Chairman of the Board since January 2016; and our Chief Executive Officer since February 2015. He was our Executive Vice President from August 2008 to February 2015 and our Operating Officer from November 2006 to February 2015. Mr. Williams is also a Director of Chart Industries, Inc. Our Board of Directors believes that Mr. Williams will effectively serve our Board of Directors, our business, our employees and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things: • extensive service as Chief Executive Officer and Executive Vice President and Operating Officer and in various operational leadership positions during his 14-year career with us; • intimate, working knowledge of our day-to-day business, plans, strategies and initiatives; • present service on another public company board; • proven ability to work efficiently and effectively with our other Directors to oversee and address issues and risks facing our business; and • high level of commitment to our Board of Directors, our business, our employees and our shareholders, and a high level of integrity, honesty, judgment and professionalism. |
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 2019
ANNUAL ELECTIONS; MAJORITY VOTING; NO CUMULATIVE VOTING. Our Code of Regulations provides for the annual election of our entire Board of Directors. Accordingly, each Director elected at this Annual Meeting of Shareholders will hold office until the next Annual Meeting of Shareholders and until his or her successor is elected. Our Articles of Incorporation provide for a majority voting standard in the annual election of our Directors. Accordingly, at each Annual Meeting of Shareholders, each candidate for Director is elected only if the votes “for” the candidate exceed the votes “against” the candidate, unless the number of candidates exceeds the number of Directors to be elected. Shareholders are not able to cumulate votes in the election of Directors. Abstentions and broker non-votes shall not be counted as votes “for” or “against” a candidate. If the number of candidates exceeds the number of Directors to be elected, then in that election the candidates receiving the greatest number of votes shall be elected. NEW ELECTIONS AND RETIREMENTS. None in fiscal year 2018. RECOMMENDATION REGARDING PROPOSAL 1: EACH OF THE NOMINEES TO THE BOARD OF DIRECTORS.
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
BOARD OF DIRECTORS
BOARD OF DIRECTORS MEETINGS AND ATTENDANCE; EXECUTIVE SESSIONS. During fiscal year 2018, there were seven meetings of our Board of Directors. Each Director attended at least 75% of the meetings held by our Board of Directors and the Committees of our Board of Directors on which he or she served. We hold a regularly scheduled meeting of our Board of Directors in conjunction with our Annual Meeting of Shareholders. Directors are expected to attend the Annual Meeting of Shareholders absent an appropriate reason. All of the members of our Board of Directors at the time of our 2017 Annual Meeting of Shareholders attended that meeting. In accordance with the listing standards of the New York Stock Exchange, our non-management Directors are scheduled to meet regularly in executive sessions without management and, if required, our independent Directors will meet at least once annually. Additional meetings of our non-management Directors may be scheduled from time to time when our non-management Directors determine that such meetings are desirable. Our non-management Directors met four times during fiscal year 2018. NUMBER; CURRENT TERM; RELATIONSHIPS. Our Board of Directors presently consists of 13 members. The current term of each member of our Board of Directors expires at our 2018 Annual Meeting of Shareholders. Assuming the election of all of the Director nominees, we expect our Board of Directors to consist of 10 members after the 2018 Annual Meeting of Shareholders. None of our Directors are related to each other and no arrangements or understandings exist pursuant to which any Director was selected as a Director or Director nominee. DIRECTOR INDEPENDENCE. Our Corporate Governance Guidelines require at least a majority of our Directors to be “independent” as defined in the listing standards established by the New York Stock Exchange. Our Board of Directors has also adopted standards for director independence, which are set forth in our Independence Standards for Directors. We strongly favor a governance structure that includes an independent Board of Directors. Of the 13 current members of our Board of Directors, 11 are independent based on our Board of Directors’ consideration of the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors. In addition, in fiscal year 2018, each of the Audit Committee, the Corporate Governance and Nominating Committee, the Finance Committee and the Human Resources and Compensation Committee of our Board of Directors was composed entirely of independent directors. As a result, our independent Directors directly oversee critical matters such as our executive compensation program for executive officers, our corporate governance guidelines, policies and practices, our corporate finance strategies and initiatives, the integrity of our financial statements and our internal controls over financial reporting. Our Board of Directors has affirmatively determined that the following 11 individuals who currently serve as Directors are independent: Robert G. Bohn, Linda S. Harty, Robert J. Kohlhepp, Kevin A. Lobo, Klaus-Peter Müller, Candy M. Obourn, Joseph Scaminace, Wolfgang R. Schmitt, Åke Svensson, James R. Verrier and James L. Wainscott. Among other things, our Board of Directors does not consider a Director to be independent unless it affirmatively determines that the Director has no material relationship with us either directly or as a partner, shareholder or officer of an organization that has a relationship with us. Our Board of Directors annually reviews and determines which of its members are independent based on the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors. During the course of such review, our Board of Directors broadly considers all facts and circumstances which it deems relevant, including any commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships between us and any of our Directors. In fiscal year 2018, after considering the facts and circumstances applicable to each Director, our Board of Directors determined that the following relationships required further analysis to confirm that the following Directors were independent:
BOARD OF DIRECTORS
| 1. | Each of Ms. Harty and Messrs. Lobo and Verrier served as an employee, officer and/or director of a company that has an existing customer or supplier relationship with us. Our Board of Directors further analyzed these relationships and found that none of these Directors receive any direct or indirect personal benefits as a result of these relationships, and that the amounts paid to or by us under such relationships fell significantly below the thresholds for independence provided in the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors. Based on such further analyses, our Board of Directors affirmatively concluded that each of these Directors is independent. |
BOARD OF DIRECTORS
| 2. | Mr. Müller served as Chairman of the Supervisory Board of Commerzbank AG, with which we have a commercial banking relationship. Our Board of Directors further analyzed this relationship and found that Mr. Müller does not receive any direct or indirect personal benefits as a result of such relationship, and that the amount of our indebtedness to Commerzbank AG is insignificant when compared to the purchase and sale thresholds for independence provided in the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors. We also do not have an exclusive banking relationship with Commerzbank AG in Germany or elsewhere. Based on such further analysis, our Board of Directors affirmatively concluded that Mr. Müller is independent. |
BOARD OF DIRECTORS
CURRENT LEADERSHIP STRUCTURE. Our Board of Directors currently employs a “dual leadership” structure. We have a Lead Director who is also the Chair of the Corporate Governance and Nominating Committee, and a Chairman of the Board, who is our Chief Executive Officer. Our Lead Director is elected solely by the independent members of our Board of Directors and holds a position separate and independent from our Chairman of the Board. Our Corporate Governance Guidelines provide that the Chair of the Corporate Governance and Nominating Committee is elected every five years. The specific authorities, duties and responsibilities of our Lead Director are described in our Corporate Governance Guidelines. Among other things, our Lead Director presides over and supervises the conduct of all meetings of our independent Directors, calls meetings of our non-management, independent Directors, and prepares and approves all agendas and schedules for meetings of our Board of Directors. Our Board of Directors believes that having a Lead Director who is elected by our independent Directors ensures that our Board of Directors will at all times have an independent Director in a leadership position. At the same time, our Board of Directors believes that it is important to maintain flexibility in its leadership structure to allow for a member of management to serve in a leadership position alongside the Lead Director if our Board of Directors determines that such a leadership structure best meets the then current needs of our Board of Directors, our business, our employees and our shareholders. Our Board of Directors has determined that this leadership structure is currently more efficient and effective than a structure which employs a single, independent Chairman of the Board. Our Board of Directors views this structure as one that ensures both independence in leadership and a balance of knowledge, power and authority. For example, our leadership structure employs both a Chairman of the Board who possesses an intimate, working knowledge of our day-to-day business, plans, strategies and initiatives, and a Lead Director who has a strong working relationship with our non-management, independent Directors. These two individuals combine and utilize their unique knowledge and perspectives to ensure that management and our independent Directors work together as effectively as possible. Among other things, our Chairman of the Board ensures that our Board of Directors addresses strategic issues that management considers critical, while our Lead Director ensures that our Board of Directors addresses strategic issues that our independent Directors consider critical. Our Board of Directors recognizes, however, that no single leadership model may always be appropriate. Accordingly, our Board of Directors regularly reviews its leadership structure to ensure that it continues to represent the most efficient and effective structure for our Board of Directors, our business, our employees and our shareholders. SELECTION AND NOMINATION OF DIRECTORS. The Corporate Governance and Nominating Committee of our Board of Directors is responsible for identifying, evaluating and recommending potential Director candidates. The Corporate Governance and Nominating Committee utilizes a variety of methods for identifying and evaluating candidates. The Corporate Governance and Nominating Committee regularly reviews whether the size of our Board of Directors is appropriate and whether any vacancies on our Board of Directors are expected due to retirements or otherwise. In the event that any vacancies are anticipated or otherwise arise, the Corporate Governance and Nominating Committee will consider various potential candidates. In evaluating proposed Director nominees, the Corporate Governance and Nominating Committee considers a variety of factors such as those described below under the caption “Director Qualifications; Board Diversity.” The Corporate Governance and Nominating Committee considers the entirety of each proposed candidate’s credentials and all available information that may be relevant to the candidate’s nomination. Following such consideration, the Corporate Governance and Nominating Committee may seek additional information regarding, and may request interviews with, any candidate it wishes to further pursue. Based upon all information reviewed and interviews conducted, the Corporate Governance and Nominating Committee collectively determines whether to recommend the candidate to our entire Board of Directors. During fiscal year 2018, the Corporate Governance and Nominating Committee retained a third-party search firm to assist in identifying, evaluating and recommending potential Director candidates. Candidates may also be recommended by other third-party search firms and current members of our Board of Directors. In addition, the Corporate Governance and Nominating Committee will give appropriate consideration to qualified persons recommended by shareholders for nomination as Directors, provided that such recommendations comply with the procedures set forth under the caption “Shareholder Recommendations for Director Nominees” on page 81 of this Proxy Statement. The Corporate Governance and Nominating Committee will consider candidates recommended by shareholders on the same basis as candidates from other sources. The Corporate Governance and Nominating Committee generally will not, however, consider recommendations for Director nominees submitted by individuals who are not affiliated with us. DIRECTOR QUALIFICATIONS; BOARD DIVERSITY. We believe that oversight from a highly-qualified and diverse Board of Directors is essential for the short-term and long-term success of our business. The size and scope of our global operations, markets, product offerings and employee base raise a wide range of issues. Consequently, we strive to attract and retain Directors who represent a broad range of backgrounds, educations, experiences, skills and viewpoints that will enable them to individually and collectively address the issues affecting our Board of Directors, our business, our employees and our shareholders. Our Board of Directors, through its Corporate Governance and Nominating Committee, diligently evaluates each Director and Director nominee and our Board of Directors as a whole to ensure that our Board of Directors has a complementary mix of qualified and diverse individuals designed to optimize the functioning and the decision-making and oversight roles of our Board of Directors and its Committees. Our Board of Directors does not have any formal policies with respect to Director qualifications or diversity. As a general matter, however, the Corporate Governance and Nominating Committee considers a broad range of factors such as judgment, skill, integrity, independence, possible conflicts of interest, experience with businesses and other organizations of comparable size or character, the interplay of the candidate’s experience and approach to addressing business issues with the experience and approach of incumbent members of our Board of Directors and other new Director candidates, and the candidate’s ability to effectively monitor and oversee the risks facing our business. More specifically, our Board of Directors seeks to identify nominees who have one or more of the following attributes:
BOARD OF DIRECTORS
| • | current or recent service as a Chief Executive Officer or in other senior executive positions at publicly-traded companies; |
BOARD OF DIRECTORS
| • | significant experience in corporate strategy, manufacturing, sales and marketing, industrial and/or aerospace industries, international business, finance and accounting, technology and digital applications, and other key areas; |
BOARD OF DIRECTORS
| • | ability to effectively monitor and oversee the most critical current risks facing our business; |
BOARD OF DIRECTORS
| • | independence under the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors; and/or |
BOARD OF DIRECTORS
| • | other relevant skills, experiences and characteristics. |
BOARD OF DIRECTORS
Our Corporate Governance Guidelines and our Global Code of Business Conduct also require each of our Directors to act with the commitment, integrity, honesty, judgment and professionalism necessary to serve the long-term interests of our Board of Directors, our business, our employees and our shareholders. RISK MANAGEMENT. Management and our Board of Directors and its Committees are collectively engaged in identifying, overseeing, evaluating and managing the material risks facing our business and ensuring that our strategies and objectives work to minimize such risks. Our Board of Directors has the ultimate responsibility to monitor the risks facing our business. Among other things, our Board of Directors reviews and discusses in detail, at least annually, our corporate strategy and annual operating plan, which cover significant strategic topics such as our key markets, operational priorities under The Win Strategy™, strategic positioning, financial and operational outlooks, capital allocation, balance sheet strength, debt portfolio and positions, share repurchase activity, and dividend history and strategies. Various members of our management are responsible for our day-to-day risk management activities, including members of our Human Resources, Internal Audit and Compliance, Legal, Tax, Risk Management, Treasury, Finance, and IT departments, and our internal Cyber Security Committee. Those individuals are charged with identifying, overseeing, evaluating and managing risks in their areas of responsibility and for ensuring that any significant risks are addressed with our Board of Directors or in the appropriate Committee of the Board. The Committees of our Board of Directors are each responsible for the various areas of risk oversight as described in the “Committees of the Board of Directors” section of this Proxy Statement. Management and the Chair of the applicable Committee ensure that any significant risks are reported to and addressed with the entire Board of Directors. Our Lead Director and the other Committee Chairs ensure that risk management is a recurring agenda item for meetings of our Board of Directors and its Committees. Management and our Board of Directors and its Committees also engage outside advisors where appropriate to assist in the identification, oversight, evaluation and management of the risks facing our business. These outside advisors include our independent registered public accounting firm, external legal counsel and insurance providers, and the independent executive and non-employee Director compensation consultant retained by the Human Resources and Compensation Committee of our Board of Directors. Our Board of Directors believes that its current level of independence, leadership structure and qualifications and diversity of its members facilitate the effective identification, oversight, evaluation and management of risk. Our Lead Director meets regularly with our other independent Directors without management to discuss current and potential risks and the means of mitigating those risks, and has the authority to direct and evaluate our risk management efforts. Management and our Board of Directors and its Committees view the risk management role of our Board of Directors and its Committees, and their relationship with management in the identification, oversight, evaluation and management of risk, as paramount to the short-term viability and long-term sustainability of our business. The ability to effectively monitor and oversee the most critical current risks facing our business is a key consideration for our Board of Directors and its Committees in identifying potential Director nominees and evaluating current Directors and Committee assignments.
COMPENSATION DISCUSSION AND ANALYSIS
| • | attract, retain and motivate highly-talented and ethical individuals at all levels who are focused on the long-term success of our business and who are equipped, motivated and poised to lead and manage our business presently and in the future; |
COMPENSATION DISCUSSION AND ANALYSIS
| • | promote accountability by providing executive officers an optimal mix of cash and equity compensation, allocating a greater proportion of the compensation for executive officers, as compared to other employees, to elements that are dependent on the performance of our business; and |
COMPENSATION DISCUSSION AND ANALYSIS
| Category of Compensation | Element(s) of Compensation | Defined/Described Beginning on: | | Base Salaries | Base Salaries | Page 30 | | Annual Cash Incentive Compensation | Target Incentive Bonuses General RONA Bonuses Converted RONA Bonuses PGI Plan | Page 31 Page 33 Page 33 Page 35 | | Long-Term Incentive Compensation | LTIP Awards Stock Incentives | Page 36 Page 38 | | Employee Benefits | Various | Page 39 | | Executive Perquisites | Various | Page 45 |
Emphasis on Sustained Performance
The Committee also retains the discretion to authorize periodic compensation adjustments due to promotions or increases in the responsibilities of our executive officers. In fulfilling its duties and responsibilities, the Committee seeks periodic input, advice and recommendations from various sources, including our Board of Directors, our executive officers and the Committee’s independent executive compensation consultant. The Committee is not bound by that input or advice or those recommendations. The Committee at all times exercises independent discretion in its executive compensation decisions. Board of Directors. Our Board of Directors approves all incentive compensation plans and equity-based plans reviewed and recommended by the Committee and all other plans and programs which, by their terms, require approval of our Board of Directors. Our Board of Directors does not authorize or approve any other specific executive compensation matters. Our Board of Directors oversees the Committee’s activities and performance, including the identification, evaluation and monitoring of risks arising from our compensation policies and practices, and reviews all material information relating to executive compensation matters approved by the Committee. This oversight ensures that the Committee fulfills its duties and responsibilities and that the executive compensation program is reasonable and appropriate, meets its objectives and effectively serves the interests of our business and our shareholders. Executive Officers. Our executive officers also play a role in the administration, oversight and determination of executive compensation. At the beginning of each fiscal year, each executive officer sets annual performance goals for his or her direct reports, which may include other executive officers. The performance goals are designed to promote individual performance consistent with the strategies and goals of The Win StrategyTM. Throughout the fiscal year, each executive officer’s performance is reviewed and evaluated against his or her performance goals. At the end of the fiscal year, each executive officer conducts a final performance review for each of his or her direct reports. Based on those reviews, our executive officers, other than our Chief Executive Officer, recommend any annual compensation adjustments and awards for their executive officer direct reports to our Chief Executive Officer. Our Chief Executive Officer similarly reviews and evaluates his direct reports, which include each of the other Named Executive Officers except for Mr. Malone who is reviewed and evaluated by Mr. Banks. Our Chief Executive Officer also reviews and evaluates the recommendations made with respect to all of our other executive officers and makes any modifications that he deems appropriate. Our Chief Executive Officer then recommends to the Committee annual compensation adjustments and awards for all of our executive officers other than himself. Our Chief Executive Officer, our Chief Operating Officer, our Executive Vice President—Human Resources & External Affairs and our Secretary attend all meetings of the Committee other than appropriate executive sessions, and neither our Chief Executive Officer nor our Chief Operating Officer attends any meetings relating to his performance or compensation. Our executive officers prepare and provide to the Committee tally sheets for certain executive officers, which are used by the Committee to understand and measure the performance and effectiveness of our annual cash incentive compensation and long-term incentive compensation. Our executive officers also periodically consult with and assist the Committee in calculating incentive compensation payouts, establishing and monitoring performance goals and addressing other appropriate executive compensation matters. COMPENSATION CONSULTANTS AND BENCHMARKING. The Committee regularly monitors, reviews and evaluates our executive compensation program to ensure that it provides reasonable compensation ranges at appropriate levels and remains competitive and effective. The Committee engages Mercer Human Resource Consulting, an independent human resources and compensation consulting firm, which we refer to as Mercer, to assist the Committee in its monitoring, review and evaluation and to otherwise provide assistance and guidance to the Committee on executive officer and director compensation matters. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies, Inc. The Committee first engaged Mercer in fiscal year 2009 following a robust procurement process involving multiple consulting firms. Mercer emerged from that process as the Committee’s provider of choice based on its level of expertise and financial and strategic fit. Mercer reports directly to the Committee and attends all meetings of the Committee. The Committee has sole authority for the appointment, removal, replacement, compensation and oversight of Mercer and its affiliates for executive officer and director compensation matters. Mercer provides a wide range of executive officer and director compensation consulting services for the Committee. Mercer prepares and provides to the Committee a comprehensive annual review of base salaries, target annual cash incentive compensation, target long-term incentive compensation and target total cash and direct compensation for all of our executive officers. Mercer uses this annual review to advise the Committee with respect to the effectiveness and competitiveness of our executive compensation program. The Committee considers this annual review when establishing compensation levels and otherwise to ensure that our executive compensation program remains competitive and effective. Mercer prepares the annual review by using proxy statement data and surveys published by leading human resources and compensation consultants to conduct market analyses of base salaries, target annual bonuses, target long-term incentive compensation and target total cash and direct compensation offered to executives of other diversified industrial companies with revenues and market values comparable to ours, which we refer to as the Peer Group. Mercer also uses broader market data on companies outside of the Peer Group to the extent that it is available and appropriate. The Committee regularly reviews and, when necessary or advisable, updates the Peer Group to make sure that it consists of companies which directly compete with us for talented employees and shareholder investment and that it otherwise represents a meaningful group of peers. In evaluating the Peer Group companies, the Committee looks for companies in the Diversified Industrials industry/sector with similar characteristics and business strategies to ours. The Peer Group for fiscal year 2018 consisted of the following companies:
Emphasis on Sustained Performance
| • | gathering and analyzing market compensation data for our executive compensation program relative to our Peer Group and other applicable survey data; |
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| • | providing benchmarking surveys for information on compensation and benefits for our employees generally; and |
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| • | Mercer reports directly to the Committee and not to management on executive officer and director compensation matters; |
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| • | all non-executive compensation services are provided by Mercer consultants who are not involved in providing executive officer and director compensation consulting services for the Committee; |
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| • | the Committee has exclusive authority to retain and set the compensation for Mercer’s executive officer and director compensation consulting services; |
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| • | Allocation between annual and long-term elements. The Committee considers Mercer’s annual review as it sets the total of each executive officer’s base salary and annual cash incentive compensation to ensure that it is reasonable in the context of the midpoint value of his or her comparable position within the companies included in the annual review. The Committee also considers Mercer’s annual review as it sets the total target value of each executive officer’s long-term incentive compensation as a multiple of the midpoint of the base salary range of his or her comparable position within the companies included in the annual review. |
Emphasis on Sustained Performance
| • | Allocation between cash and equity elements. Base salaries and annual cash incentive compensation are paid in cash. Long-term incentive compensation is generally paid in equity because of the long-term nature of equity awards and our desire to encourage performance that drives long-term shareholder value. |
Emphasis on Sustained Performance
The Committee has historically exercised this downward discretion with respect to General RONA Bonuses awarded under the Performance Bonus Plan to the Chief Executive Officer, and to the Chief Financial Officer and certain other executive officers. At the beginning of the year, the Committee determines for each of these executive officers a General RONA Bonus award opportunity that is large enough to ensure that we meet our objectives for annual cash incentive compensation and, at the same time, preserve the ability of the Committee to exercise its discretion to reduce the amount of the award payout to an appropriate level as compared to the final payouts made to executive officers who receive annual cash incentive compensation outside the Performance Bonus Plan and after taking into account individual performance and contributions to the success of our business. In addition, as described beginning on page 36, our calculation methodology for LTIP Award payouts will also allow the Committee to exercise this discretion with respect to LTIP Award payouts. “CLAW-BACK” POLICY. Our Board of Directors maintains a “claw-back” policy which allows us to recover or withhold any Target Incentive Bonuses, General RONA Bonuses, Converted RONA Bonuses or LTIP Awards which are paid or payable to an executive officer if:
Emphasis on Sustained Performance
| • | encourage and reward attainment of individual performance goals established during the annual performance review process; |
Emphasis on Sustained Performance
The Committee establishes a base salary range for each Named Executive Officer by using Mercer’s annual review to analyze base salaries of persons holding comparable positions within the companies included in the annual review. The Committee determines the base salary for each Named Executive Officer for the next fiscal year based on the Named Executive Officer’s annual performance review, and compares the amount to the applicable market range to make sure that it is reasonable. The Committee may increase base salaries, where appropriate, periodically throughout the fiscal year based on the results of interim performance reviews. The Committee generally tries to target base salary amounts at approximately the median of the companies included in Mercer’s annual review. During fiscal year 2018, the Named Executive Officers received the base salaries included in the “Salary” column of the Summary Compensation Table for Fiscal Year 2018 on page 48. Annual Cash Incentive Compensation. Our executive officers are eligible to receive annual cash incentive compensation based on pre-determined financial and growth objectives that are dependent on free cash flow margin, return on net assets and revenue growth. This category of compensation consists of three specific elements, which we refer to as Target Incentive Bonuses, General RONA Bonuses, and Converted RONA Bonuses. All of the Named Executive Officers are eligible to receive Target Incentive Bonuses, General RONA Bonuses and Converted RONA Bonuses. As described beginning on page 35, Mr. Malone is the only Named Executive Officer whose General RONA Bonus is subject to the application of our Profitable Growth Incentive Plan, which we refer to as the PGI Plan. The Committee allocates a significant portion of the total compensation for executive officers to annual cash incentive compensation, which is wholly dependent on achieving pre-determined financial and operational goals. At the beginning of fiscal year 2018, the Committee set the following target percentages of base salary represented by Target Incentive Bonuses and General and Converted RONA Bonuses for each of our Named Executive Officers:
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| Named Executive Officer | Target Percentage of Base Salary— Target Incentive Bonuses and General and Converted RONA Bonuses | | Thomas L. Williams | 125% | | Catherine A. Suever | 80% | | Lee C. Banks | 100% | | Robert W. Malone | 61% | | Joseph R. Leonti | 65% |
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| FY18 Free Cash Flow Margin: | Less than 5% | 5% | 8% | Greater than or equal to 11% | | Payout % | 0% | 50% | 100% | 200% |
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| Named Executive Officer | Target Awards—Target Incentive Bonuses | | Thomas L. Williams | $600,000 | | Catherine A. Suever | $250,300 | | Lee C. Banks | $427,500 | | Robert W. Malone | $109,200 | | Joseph R. Leonti | $169,500 |
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| • | return on consolidated net assets, for executive officers who receive General RONA Bonuses under the Performance Bonus Plan; |
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| • | Setting Target Amounts: During the first quarter of the fiscal year, the Committee determines target General RONA Bonuses and target Converted RONA Bonuses for each of the executive officers. The Committee makes these determinations after review and consideration of Mercer’s annual review, and focuses on setting targets that are reasonable in relation to the median of similar compensation offered by the companies included in the annual review. |
Emphasis on Sustained Performance
| • | Converting Target Amounts to “RONA shares”: Once determined, the target amounts set for General RONA Bonuses and Converted RONA Bonuses are converted into a number of “RONA shares” based on our annual goals for return on net assets. In fiscal year 2018, we established and communicated an overall goal of 21.4% return on net assets on a consolidated basis, with a target “multiple” of 5% on each “share.” The target amounts were converted into “shares” at the 5% target multiple by dividing the executive officer’s General RONA Bonus or Converted RONA Bonus target by the product of the executive officer’s base salary and the 5% target “multiple.” |
Emphasis on Sustained Performance
| • | Calculating the Actual RONA Bonuses: For General RONA Bonuses and Converted RONA Bonuses, the amounts of the actual bonuses earned are calculated by multiplying the executive officer’s “shares” by his or her multiple, and multiplying that total by his or her base salary for the fiscal year. |
Emphasis on Sustained Performance
| General RONA Bonuses | | | | | | Named Executive Officer | Target General RONA Bonus Amount | General RONA Bonus “Shares” | General RONA Bonus “Multiple” | Actual General RONA Bonus Amount | | Thomas L. Williams | $900,000 | 15 | 6.53% | $1,175,400 | | Catherine A. Suever | $321,750 | 9 | 6.53% | $420,206 | | Lee C. Banks | $522,500 | 11 | 6.53% | $682,385 | | Robert W. Malone | $233,680 | 8 | 4.43%* | $260,353 | | Joseph R. Leonti | $197,750 | 7 | 6.53% | $258,262 |
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| In fiscal year 2018, Mr. Malone received his General RONA Bonus under the Performance Bonus Plan. As a result, the Committee used return on consolidated net assets to determine that his maximum General RONA Bonus “Multiple” was 6.53%. As described below, however, Mr. Malone’s General RONA Bonus “Multiple” was reduced to 4.43% upon the Committee’s exercise of downward discretion after evaluating the overall performance of his operating group, and then increased to 5.76% after applying his PG RONA Multiplier under our PGI Plan.* |
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| Converted RONA Bonuses | | | | | | Named Executive Officer | Target Converted RONA Bonus Amount | Converted RONA Bonus “Shares” | Converted RONA Bonus “Multiple” | Actual Converted RONA Bonus Amount | | Thomas L. Williams | $76,610 | 1.19 | 6.53% | $100,053 | | Catherine A. Suever | $52,560 | 1.48 | 6.53% | $68,643 | | Lee C. Banks | $76,200 | 1.69 | 6.53% | $99,517 | | Robert W. Malone | $52,390 | 1.86 | 6.53% | $68,421 | | Joseph R. Leonti | $52,390 | 1.86 | 6.53% | $68,421 |
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Each of the Named Executive Officers received the General RONA Bonuses and Converted RONA Bonuses included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for Fiscal Year 2018 on page 48. In arriving at these amounts, the Committee compared the original target award opportunities for executive officers receiving General RONA Bonuses under the Performance Bonus Plan (including each of the Named Executive Officers) with the final payout amounts of annual cash incentive compensation for the other executive officers, and evaluated the individual performance and contributions to the success of our business of the executive officers receiving General RONA Bonuses under the Performance Bonus Plan. Based on that comparison and evaluation, the Committee determined that it would be appropriate to exercise downward discretion and reduce the final General RONA Bonus payout amounts for General RONA Bonuses awarded to the Named Executive Officers under the Performance Bonus Plan between 32% and 40%, with an average reduction of approximately 35%. The amounts reported in the table above represent the final amounts paid to the Named Executive Officers following that exercise of discretion. Converted RONA Bonus payments are not eligible for deferral under the Executive Deferral Plan, the Retirement Savings Plan described on page 40, or the Savings Restoration Plan described on page 41. Converted RONA Bonuses are also not considered in calculating benefits under the Pension Plan described beginning on page 39, the Pension Restoration Plan described beginning on page 42, the Supplemental Retirement Program described on page 43, the Defined Contribution Supplemental Retirement Program described on page 43, the Executive Long-Term Disability Plan described on page 44, and the Change in Control Agreements described on page 44. The Committee determined that it would not be appropriate to allow Converted RONA Bonuses to be deferred under those plans or considered in those calculations because they are awarded in place of executive perquisites which, historically, were not used or taken into account for those purposes. Profitable Growth Incentive Plan: Our PGI Plan is designed to implement the strategies and advance the goals of The Win StrategyTM by encouraging and rewarding participants for sales growth, organically and through acquisitions. The Committee identified sales growth, organically and through acquisitions, as a performance measure critical to advance the financial performance and profitable growth goals of The Win StrategyTM. Under our PGI Plan, the General RONA Bonuses for participants may be adjusted after each fiscal year on the basis of a multiplier, which we refer to as the PG RONA Multiplier, that is determined by the three-year compound annual growth rate of external customer sales for the applicable operating group or division, which we refer to as 3-year CAGR. The following table sets forth examples of the PG RONA Multiplier that may be applied to, and which may adjust, the General RONA Bonuses under our PGI Plan after each fiscal year:
Emphasis on Sustained Performance
The PG RONA Multipliers that may be applied are interpolated on a linear basis between the points in the above table. Of our executive officers, only our operating group presidents’ General RONA Bonuses are subject to our PGI Plan, and, therefore, the PGI Plan applies to Mr. Malone but not to any of our other Named Executive Officers. During fiscal year 2018, the three-year CAGR applicable to Mr. Malone’s General RONA Bonus was 27.41%, resulting in a PG RONA Multiplier of 130%. This PG RONA Multiplier was applied to Mr. Malone’s final RONA Bonus causing the increase from a 4.43% General RONA Bonus multiple to 5.76%, as reflected in the chart above. Long-Term Incentive Compensation. The Named Executive Officers receive long-term incentive compensation consisting of long-term incentive performance awards, which we refer to as LTIP Awards, and stock appreciation rights, which we refer to as Stock Incentives. The target amounts of LTIP Awards and the number of Stock Incentives awarded to the Named Executive Officers are based on similar compensation awarded to persons holding comparable positions within the companies included in Mercer’s annual review. LTIP Awards and Stock Incentives encourage long-term focus on shareholder value and are directly and materially linked to performance that advances both the financial performance and profitable growth goals of The Win StrategyTM over the long-term. LTIP Award payouts are based on a comparison of our performance against the Peer Group in certain key financial metrics over a three-year performance period. The holders of Stock Incentives realize a payout only if our stock price increases above the applicable grant price over a long-term vesting period. LTIP Awards and Stock Incentives work together to align the long-term financial interests of our executive officers and shareholders. LTIP Awards are granted to eligible employees on an annual basis at the January meeting of the Committee. This meeting is typically scheduled at least one year in advance. The only exceptions to this practice are that pro-rated LTIP Awards are granted to individuals who become executive officers, are promoted to new executive officer positions, or are given increased responsibilities during a performance period. Stock Incentives are granted to eligible employees on an annual basis at the August meeting of the Committee. This meeting is typically scheduled at least one year in advance. The Committee does not grant LTIP Awards or Stock Incentives to executive officers in anticipation of the release of significant positive earnings announcements or other material non-public information likely to result in changes to the price of our common stock. Similarly, the Committee does not time the release of material non-public information based on Stock Incentive grant dates. LTIP Awards. During the third quarter of fiscal year 2011, the Committee adopted a Long-Term Incentive Performance Plan under the Performance Bonus Plan, which we refer to as the Officer LTIP Plan. The Officer LTIP Plan establishes the terms and conditions for LTIP Awards granted to our executive officers during and after fiscal year 2011. During the third quarter of fiscal year 2018, the Committee granted to each of the Named Executive Officers, under our Officer LTIP Plan and our 2016 Omnibus Stock Incentive Plan, which we refer to as the 2016 Plan, the following target LTIP Awards based on the following target LTIP Award values:
Emphasis on Sustained Performance
| Named Executive Officer | Target LTIP Award Shares | Target LTIP Award Values | | Thomas L. Williams | 29,060 | $4,800,000 | | Catherine A. Suever | 7,570 | $1,250,000 | | Lee C. Banks | 13,930 | $2,300,000 | | Robert W. Malone | 3,630 | $600,000 | | Joseph R. Leonti | 3,940 | $650,000 |
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| • | If at least one of these threshold performance measures are not achieved, participants will not receive a payout. |
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| • | If at least one of these threshold performance measures are achieved, participants will become eligible to receive the maximum payout of 200% of the applicable target LTIP Award value. The Committee will then, if appropriate, apply its discretion to reduce the final payouts based on any performance measures that the Committee determines to be appropriate. The Committee determined that this calculation methodology would provide the Committee with more flexibility to ensure that payout levels are as accurately reflective of the Company’s performance against the Peer Group as possible and are otherwise in the best interests of our business and our shareholders. |
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| Peer Group Percentile Rank: | Less than 35th | 35th | 50th | 75th or higher | | Payout% | 0% | 50% | 100% | 200% |
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At the end of calendar year 2020, if we achieve an average return on average equity or an average free cash flow margin of 4% or greater, the Committee may exercise discretion in determining the appropriate payout by determining our percentile rank as compared to the Peer Group for each of the three performance measures. Using this table, the Committee will calculate the portion of the target LTIP Award value earned with respect to each performance measure. The Committee will multiply each portion by its applicable weight and add up the total to determine the total LTIP Award payout for the calendar year 2018-19-20 performance period. This table illustrates that recipients of LTIP Awards granted during calendar year 2018 will receive the maximum payout of 200% of the applicable target LTIP Award value if we rank at or above the 75th percentile among the Peer Group in the aggregate based on all three performance measures, and will receive no payout if we rank at or below the 35th percentile in the aggregate based on all three performance measures. The payout percentage that is applied is interpolated on a linear basis between the points in the above table. LTIP Award payouts for the calendar year 2018-19-20 performance period may only be paid after the end of the applicable three-year performance period in unrestricted shares of our common stock. The Committee designed these LTIP Awards to reward executive officers directly in relation to our long-term performance against the Peer Group. The Committee determined that requiring performance in excess of the 50th percentile for a payout in excess of 100% would encourage executive officers to achieve performance above median Peer Group performance. The Committee also determined that requiring performance at the 75th percentile for a maximum payout, and awarding no payout for performance at or below the 35th percentile, would further encourage executive officers to achieve top-quartile performance within the Peer Group. In addition, each of the Named Executive Officers received a payout under LTIP Awards granted during the third quarter of fiscal year 2015 for the three-year performance period ending December 31, 2017. We exceeded our threshold performance measures with an average return on average equity for the three-year performance period of 17.4% and average free cash flow margin for the three-year performance period of 9.8%. The Committee decided to exercise discretion to determine the appropriate payout and determined that we achieved the following percentile rankings among the Peer Group with respect to the LTIP Award performance measures for the calendar year 2015-16-17 performance period:
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| Performance Measure | Result | Percentile Rank | Weighted Payout Percentage | | Revenue growth | 0.47% | 69th | 35.00% | | Growth in fully diluted EPS | 11.51% | 75th | 80.00% | | Average return on invested capital | 17.47% | 63rd | 60.00% |
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As a result, each of the Named Executive Officers received the LTIP Award payout during fiscal year 2018 included in the “Number of Shares Acquired on Vesting” column of the Option Exercises and Stock Vested for Fiscal Year 2018 table on page 53. Each payment represents a total payout of 175% of the target LTIP Award values for the three-year performance period ended December 31, 2017. Stock Incentives. Each of the Named Executive Officers received Stock Incentives under our 2016 Plan during the first quarter of fiscal year 2018. The Committee grants Stock Incentives to executive officers to encourage and reward efforts and accomplishments that advance the goals of The Win StrategyTM and make other contributions to maximize our stock price. The number of Stock Incentives granted by the Committee is determined by utilizing the Black-Scholes valuation model to convert a target dollar value into the number of Stock Incentives to be granted. The Committee uses Mercer’s annual review to ensure the target dollar values are reasonable in relation to the median of similar compensation offered within the companies included in Mercer’s annual review. The following table shows the Target Value and the number of Stock Incentives granted to each of the Named Executive Officers in the first quarter of fiscal year 2018:
Emphasis on Sustained Performance
| Named Executive Officer | Target Value | Stock Incentive Grants (# of Underlying Shares) | | Thomas L. Williams | $4,800,000 | 92,340 | | Catherine A. Suever | $1,250,000 | 24,050 | | Lee C. Banks | $2,300,000 | 44,250 | | Robert W. Malone | $600,000 | 11,540 | | Joseph R. Leonti | $650,000 | 12,500 |
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The fiscal year 2018 Stock Incentive grants shown above are also included in the “All Other Option Awards: Number of Securities Underlying Options” column of the Grants of Plan-Based Awards for Fiscal Year 2018 table on page 50 and the “Option Awards—Number of Securities Underlying Unexercised Options—Unexercisable” column of the Outstanding Equity Awards at June 30, 2018 table beginning on page 51. The “Option Awards” column of the Summary Compensation Table for Fiscal Year 2018 on page 48 includes the aggregate grant date fair value of these awards in fiscal year 2018. As required by the terms of our 2016 Plan, these fiscal year 2018 Stock Incentives have an exercise price equal to the closing price of our common stock on the date of grant. The plan does not permit the re-pricing of Stock Incentives. The Committee analyzed the terms of our 2016 Plan and Mercer’s annual review to establish all other terms of these Stock Incentives. These fiscal year 2018 Stock Incentives have a ten-year term and vest in one-third increments over three years following the grant date. When vested, each Stock Incentive will entitle the holder to receive the increase in value of one common share from the grant date to the date of exercise. Upon exercise of fiscal year 2018 Stock Incentives, common shares will be issued directly to the holder. The appreciation in these Stock Incentives will be calculated by subtracting the grant price from the fair market value of the common shares at exercise, and multiplying the result by the number of Stock Incentives exercised. The number of common shares to be issued is determined by dividing that appreciation by the market price of the common shares at exercise. During fiscal year 2018, the Named Executive Officers exercised Stock Incentives previously granted under our 2016 Plan, 2009 Plan and 2003 Stock Incentive Plan, which are included in the “Option Awards—Number of Shares Acquired on Exercise” column of the Option Exercises and Stock Vested for Fiscal Year 2018 table on page 53. Employee Benefits. The Named Executive Officers are eligible to participate in various employee benefit plans and programs. These plans and programs reward experience, expertise, level of responsibility, continuity of leadership and advancement. We use these plans to ensure that our executive compensation program remains sufficiently competitive to attract, retain and motivate the executive officers and other employees necessary to advance the goals of The Win StrategyTM. Qualified Benefit Plans. During fiscal year 2018, the Named Executive Officers participated in the following tax-qualified benefit plans and programs:
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| • | The Parker-Hannifin Consolidated Pension Plan, which we refer to as the Pension Plan, except for Messrs. Malone and Leonti who are not eligible to participate in the Pension Plan; and |
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| • | The Parker Retirement Savings Plan, which we refer to as the Retirement Savings Plan. |
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The Pension Plan is a qualified defined benefit pension plan in which most full-time non-union U.S. salaried employees hired prior to April 1, 2004, participate. The Pension Plan offers normal retirement, early retirement and death benefits. The monthly normal retirement benefit is the greater of a minimum benefit and an amount based on final average pay. The minimum benefit and final average pay amounts are calculated as follows:
Emphasis on Sustained Performance
| Minimum Benefit: | $21.00 multiplied by years of service, up to a maximum of 40 years. | | Final Average Pay Amount: | • 0.75% of the highest five consecutive year average of monthly base salary, Target Incentive Bonuses and General RONA Bonuses up to the social security wage base, multiplied by years of service up to a maximum of 35 years; plus • 1.36% of the highest five consecutive year average of monthly base salary, Target Incentive Bonuses and General RONA Bonuses in excess of the social security wage base, multiplied by years of service up to a maximum of 35 years; plus • 0.50% of the highest five consecutive year average of monthly base salary, Target Incentive Bonuses and General RONA Bonuses, multiplied by years of service in excess of 35 up to a maximum of five years. |
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The amount of the benefit is reduced by 6% per year for each year prior to age 65 if retirement occurs and payments commence before age 65 and after age 55. We elected to freeze new participation in the Pension Plan in 2004. All participants as of April 1, 2004, were given the option to either remain in the Pension Plan or terminate in favor of maintaining a retirement income account under the Retirement Savings Plan. Employees hired after April 1, 2004, such as Messrs. Malone and Leonti, were not eligible to participate in the Pension Plan and instead maintain a retirement income account under the Retirement Savings Plan. Each of the Named Executive Officers who are in the Pension Plan elected to remain in and continue to accrue benefits under the Pension Plan. All benefits accrued by employees who elected to terminate participation in the Pension Plan were frozen as of June 30, 2004. Those employees initiated their retirement income accounts on July 1, 2004. The Retirement Savings Plan is a qualified defined contribution pension plan under Section 401(k) of the Internal Revenue Code. Most full-time U.S. employees are eligible to participate in the Retirement Savings Plan. Participants may make pre-tax and post-tax contributions to the Retirement Savings Plan up to the applicable statutory limit. Converted RONA Bonuses are not eligible for deferral under the Retirement Savings Plan. We provide to each participant a matching contribution of 100% on the first 3% of pay contributed and 50% on the 4th and 5th percent of pay contributed on a pre-tax basis or Roth basis. As described above, certain participants also maintain a retirement income account within the Retirement Savings Plan. We provide to each holder of a retirement income account an annual contribution equal to a percentage of the amount of the participant’s annual compensation up to the Internal Revenue Service statutory limit (currently $275,000 per year), based on age and length of service. These contributions range from 0.5% to 6% of the participant’s compensation which does not exceed that limit. Participants accrue earnings on contributions based on the performance of various investment funds available within the Retirement Savings Plan. The contributions made by us under the Retirement Savings Plan for the Named Executive Officers during fiscal year 2018 are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2018 on page 48. Non-Qualified Benefit Plans. During fiscal year 2018, the Named Executive Officers participated in the following non-qualified benefit plans and programs:
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| • | The Parker-Hannifin Corporation Savings Restoration Plan, which we refer to as the Savings Restoration Plan; |
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| • | The Parker-Hannifin Corporation Executive Deferral Plan, which we refer to as the Executive Deferral Plan, except for Mr. Malone who does not participate in the Executive Deferral Plan; |
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| • | The Parker-Hannifin Corporation Pension Restoration Plan, which we refer to as the Pension Restoration Plan, except for Messrs. Malone and Leonti who are not eligible to participate in the Pension Restoration Plan as they are not participants in the Pension Plan; |
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| • | The Parker-Hannifin Corporation Supplemental Executive Retirement Benefits Program, which we refer to as the Supplemental Retirement Program, except for Messrs. Malone and Leonti who are not eligible to participate in the Supplemental Retirement Program; and |
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| • | The Parker-Hannifin Corporation Defined Contribution Supplemental Executive Retirement Program, which we refer to as the Defined Contribution Supplemental Retirement Program (Messrs. Malone and Leonti are the only Named Executive Officers who participate in the Defined Contribution Supplemental Retirement Program). |
Emphasis on Sustained Performance
The Savings Restoration Plan is available to employees who earn base salaries equal to or in excess of $150,000 per year and who are otherwise eligible to participate in the plan. The Savings Restoration Plan was established to restore deferral opportunities and matching contributions lost because of statutory limits in the Retirement Savings Plan. Specifically, the Savings Restoration Plan allows executive officers to defer a portion of their pre-tax compensation and receive matching contributions from us that would have been available under the Retirement Savings Plan if the Internal Revenue Service statutory limit did not exist. Converted RONA Bonuses are not eligible for deferral under the Savings Restoration Plan. Each Named Executive Officer may annually defer to his or her Savings Restoration Plan account any portion of the compensation that he or she cannot defer under the Retirement Savings Plan due to the statutory limit, other than Converted RONA Bonuses, up to the greater of 20% of base pay or $25,000. We provide to each participant a matching contribution of common stock equal to 100% on the first 3% of pay contributed and 50% on the 4th and 5th percent of pay contributed, reduced by the maximum matching contribution available to the participant under the Retirement Savings Plan. We also take into account the matching contributions made under the Retirement Savings Plan to ensure that the maximum match under both plans does not exceed $17,000. In addition, all participants who maintain a retirement income account within the Retirement Savings Plan also maintain a separate retirement income account within the Savings Restoration Plan. We provide to each holder of a retirement income account an annual contribution equal to a percentage of the amount of the participant’s annual compensation in excess of the Internal Revenue Service statutory limit determined based on age and length of service. These contributions range from 0.5% to 6% of the amount of the participant’s compensation in excess of that limit. All deferrals and contributions are made under the Savings Restoration Plan by accounting entry rather than any physical exchange of cash or common stock. Participants also accrue earnings, on an accounting-entry basis, on deferrals based on the performance of various investment fund choices and on contributions based on the performance of our common stock. Participants are our unsecured creditors for their respective account balances. Account balances in the Savings Restoration Plan are paid as indicated in the chart below. Our matching contributions made under the Savings Restoration Plan for the Named Executive Officers during fiscal year 2018 are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2018 on page 48. All contributions, earnings, withdrawals, distributions and aggregate balances for the Named Executive Officers participating in the Savings Restoration Plan during fiscal year 2018 are included in the Nonqualified Deferred Compensation for Fiscal Year 2018 table on page 55. The Executive Deferral Plan is available to executive officers and certain other key employees. The Executive Deferral Plan provides executive officers with an opportunity to defer a portion of their compensation (in addition to that deferred under the Retirement Savings Plan and the Savings Restoration Plan) on a pre-tax basis, including Target Incentive Bonuses and General RONA Bonuses, and to accumulate tax-deferred earnings on the deferrals. LTIP Award payouts and Converted RONA Bonuses are not eligible for deferral under the Executive Deferral Plan. Each executive may defer to his or her account up to 80% of base salary and 80% of General RONA Bonuses paid in August and Target Incentive Bonuses paid in August. Similar to the Savings Restoration Plan, all deferrals are made under the Executive Deferral Plan by accounting entry rather than any physical exchange of cash. Participants also accrue earnings on an accounting-entry basis based on the performance of various investment fund choices. Participants are our unsecured creditors for their respective account balances. Account balances in the Executive Deferral Plan are paid as indicated in the chart below. For those who were participants in the Executive Deferral Plan prior to January 1, 2016, prior to distribution, the balances are increased to reflect any “gross-up” amount necessary to offset federal excise taxes and any after-tax value the participant would have received if the account had remained in place and been paid as elected by the participant. Any balances on distribution to a participant in the Executive Deferral Plan who becomes a participant on or after January 1, 2016, are no longer increased to reflect any “gross-up” amount to offset federal excise taxes and any after-tax value the participant would have received if the account had remained in place and been paid as elected by the participant. All contributions, earnings, withdrawals, distributions and aggregate balances for the Named Executive Officers participating in the Executive Deferral Plan during fiscal year 2018 are included in the Nonqualified Deferred Compensation for Fiscal Year 2018 table on page 55. Savings Restoration Plan and Executive Deferral Plan account balances are paid out upon any of the following events as follows:
Emphasis on Sustained Performance
| Retirement: | Balances are distributed to the participant in either a lump sum or in periodic installments, based on a prior election by the participant. The participant can delay the commencement of payments up to five years following retirement. Balances continue to accumulate earnings under the various investment funds at all times during the payout period. | | Termination Before Retirement: | Balances accruing on or prior to December 31, 2004 are, at our election, distributed to the participant in either a lump sum upon termination or in periodic installments. Account balances accruing on or after January 1, 2005 are distributed to the participant in a lump sum upon termination. | | Disability: | If we determine that a participant is totally disabled, the participant’s account balance will be paid upon termination in the same manner as if he or she retired. | | Withdrawals During Employment: | Balances can be withdrawn without penalty during employment only if we determine that the participant suffered severe financial hardship. Balances accruing on or prior to December 31, 2004 can also be withdrawn voluntarily during employment, subject to a 10% forfeiture penalty. | | Death: | Balances are distributed to the participant’s beneficiary in a lump sum or, if elected by the participant, in installments. | | Change in Control: | Under the Savings Restoration Plan, balances accruing on or prior to December 31, 2004 are distributed to the participant in a lump sum without penalty if the participant expressly elected a lump sum. If the participant did not expressly elect a lump sum, distributions are treated as unscheduled withdrawals and are subject to a forfeiture penalty of 5% if they are withdrawn within 30 days or 10% if they are withdrawn beyond the 30-day period. Balances accruing on or after January 1, 2005 are distributed to the participant in a lump sum. Under the Executive Deferral Plan, balances are distributed to the participant in a lump sum. |
Emphasis on Sustained Performance
The Pension Restoration Plan is available to all individuals who participate in the Pension Plan and who are otherwise eligible to participate in the Pension Restoration Plan. The Pension Restoration Plan was established to restore benefits lost because of statutory limits on the Pension Plan. Specifically, the benefits available under the Pension Restoration Plan equal the amount that would be payable to the participant under the Pension Plan in excess of the Internal Revenue Service statutory limit if that limit did not exist and the participant had not elected to defer any compensation under the Savings Restoration Plan and the Executive Deferral Plan. Similar to the Pension Plan, Converted RONA Bonuses are not considered in calculating the benefits available under the Pension Restoration Plan. The Supplemental Retirement Program was established to provide executive officers with retirement benefits supplemental to the benefits under the Pension Plan. The benefit provided under the Supplemental Retirement Program is intended, at age 65, to provide to participants with at least 15 years of service 55% of the average of the three highest years of base salary plus annual cash incentive compensation. Similar to the Pension Plan and the Pension Restoration Plan, Converted RONA Bonuses are not considered in calculating the benefits available under the Supplemental Retirement Program. LTIP Awards and Stock Incentives are also not considered in calculating the benefits available under the Supplemental Retirement Program. The benefit is subject to reduction for early retirement, less than 15 years of service, benefits under the Pension Plan, the Pension Restoration Plan and any of our non-U.S. pension plans, 50% of primary social security benefits and 100% of any similar non-U.S. state-provided retirement benefits, and contributions to the participant’s retirement income accounts under the Retirement Savings Plan and the Savings Restoration Plan. Participants vest at age 60, or at age 55 with the consent of the Committee, and with five years of participation in the Supplemental Retirement Program, or a lesser period established by the Committee at the time they become participants. To receive a benefit under the Supplemental Retirement Program, however, a vested participant must have at least five years of service. In January 2015, the Committee closed the Supplemental Retirement Program to new participants as of July 1, 2014. The Defined Contribution Supplemental Retirement Program was established to provide executive officers and certain other key management employees with retirement benefits supplemental to the benefits under the Retirement Savings Plan and the Savings Restoration Plan. The Defined Contribution Supplemental Retirement Program was established to replace the Supplemental Retirement Program for executive officers who are designated as participants on or after July 1, 2014. Depending on a participant’s salary grade on December 31 of each year, we provide an annual non-discretionary employer contribution of 8%, 10% or 12% of a participant’s base salary, Target Incentive Bonus and General RONA Bonus that was paid during the calendar year. The Committee may determine to make an additional annual discretionary contribution to a designated participant’s account. Participants vest at age 60, or at age 55 with the consent of the Committee, and with five years of participation in the Defined Contribution Supplemental Retirement Program, or a lesser period established by the Committee at the time they become participants. To receive a benefit under the Defined Contribution Supplemental Retirement Program, however, a vested participant must have at least five years of service. Messrs. Malone and Leonti are our only Named Executive Officers who participate in the Defined Contribution Supplemental Retirement Program. Our contributions made under the Defined Contribution Supplemental Retirement Program for Messrs. Malone and Leonti during fiscal year 2018 are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2018 on page 48. All contributions, earnings, withdrawals, distributions and aggregate balances for the Named Executive Officers participating in the Defined Contribution Supplemental Retirement Program during fiscal year 2018 are included in the Nonqualified Deferred Compensation for Fiscal Year 2018 table on page 55. Health and Welfare Benefits. The Named Executive Officers participated in various health and welfare programs generally available to all employees during fiscal year 2018. The Named Executive Officers also participated in our Officer Life Insurance Plan and our Executive Long-Term Disability Plan. Under the Officer Life Insurance Plan, we pay all required premiums for life insurance on executive officers who were participants prior to January 1, 2008 (which includes Named Executive Officers Messrs. Williams and Banks) for the longer of 10 years or until the executive officer reaches age 65. For those executive officers who were participants after January 1, 2008 (which includes Named Executive Officers, Ms. Suever, and Messrs. Malone and Leonti) we pay all required premiums for life insurance until retirement up to age 65. The premiums are designed to maintain death benefits equal to:
Emphasis on Sustained Performance
| • | five times base salary during employment and two times final base salary after retirement at age 65 for our Chief Executive Officer; |
Emphasis on Sustained Performance
| • | four times base salary during employment and two times final base salary after retirement at age 65 for our Chief Financial Officer and our President and Chief Operating Officer; and |
Emphasis on Sustained Performance
| • | three times base salary during employment and two times final base salary after retirement at age 65 for all other Named Executive Officers and other participants. |
Emphasis on Sustained Performance
If the participant retires between ages 55 and 65, the post-retirement death benefit is reduced by 10% of base salary for each year prior to age 65 that the participant retires. The amount of the death benefit is adjusted each year on January 1st based on the participant’s base salary as of the preceding December 1st. The policies underlying the plan are cash value life insurance policies owned by the participants. The premiums we paid on behalf of the Named Executive Officers during fiscal year 2018 are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2018 on page 48. The Executive Long-Term Disability Plan is intended to replace a reasonable amount of an executive officer’s income upon disability. The plan provides a total benefit in the event of a qualifying disability of two-thirds of base salary plus Target Incentive Bonuses and General RONA Bonuses (after applying the PG RONA Multiplier if applicable) paid during the calendar year ending December 31 of the year prior to the disability, up to a maximum monthly benefit, in the case of Messrs. Williams, Banks, and Malone, and Ms. Suever, of $33,000, or, in the case of Mr. Leonti, of $35,000. Our executive officers are not eligible to receive the long-term disability benefit generally available to other employees. Change in Control Agreements. We are not a party to any written employment agreements with our executive officers. We have, however, entered into separate Change in Control Severance Agreements with our executive officers, which we refer to as the Change in Control Agreements. We are not obligated to pay severance to executive officers under any agreement other than the Change in Control Agreements. The executive officers are, however, eligible to receive severance upon termination for reasons other than a change in control in accordance with our general severance policy for salaried employees. The Change in Control Agreements are designed to attract, retain and motivate executive officers, provide for stability and continuity of management in the event of any actual or threatened change in control, encourage executive officers to remain in service after a change in control and ensure that executive officers are able to devote their entire attention to maximizing shareholder value and safeguarding employee interests in the event of a change in control. The Committee determined that the amounts payable under the Change in Control Agreements are reasonable and necessary to achieve those objectives. The Potential Payments upon Termination or Change of Control at June 30, 2018, tables and the related narrative descriptions beginning on page 56 provide additional information on the Change in Control Agreements, including a brief discussion of the material provisions of the Change in Control Agreements beginning on pages 61 and 63 under the captions “Payments upon a Change in Control” and “Payments upon a Qualifying Termination in Connection with a Change in Control.” Indemnification Agreements. We enter into separate Indemnification Agreements with each of our executive officers. Each agreement remains in effect during and after employment with respect to any action taken while the individual serves as an executive officer. The agreements are designed to attract, retain and motivate executive officers by encouraging reasonable and measured risk-taking in the interests of our business and our shareholders, and protecting against liabilities incurred in the performance of their duties to the maximum extent permitted by Ohio law. The agreements provide for indemnification for all expenses, including attorney fees, judgments, fines, and settlement amounts, that the executive officer incurs by reason of his or her service:
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018 The following table sets forth compensation information for our Named Executive Officers.
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| Name and Principal Position | Year | Salary ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | | Thomas L. Williams, Chief Executive Officer and Chairman of the Board | 2018 | 1,200,000(1) | 6,068,600(2) | 2,961,344(3) | 2,167,473(4) | 5,667,239(5) | 173,790(6) | 18,238,446 | | | 2017 | 1,125,000 | 5,303,474 | 2,935,010 | 2,418,118 | 3,372,639 | 173,860 | 15,328,101 | | | 2016 | 1,000,000 | 3,062,194 | 1,871,520 | 1,887,760 | 2,837,394 | 127,460 | 10,786,328 | | Catherine A. Suever, (7) Executive Vice President – Finance and Administration and Chief Financial Officer | 2018 | 715,000(1) | 1,580,843(2) | 771,284(3) | 860,970(4) | 1,461,719(5) | 106,816(6) | 5,496,632 | | | 2017 | 570,747 | 1,849,646 | 153,010 | 538,377 | 343,023 | 96,011 | 3,550,813 | | Lee C. Banks, President and Chief Operating Officer | 2018 | 950,000(1) | 2,909,002(2) | 1,419,098(3) | 1,417,466(4) | 2,102,817(5) | 150,410(6) | 8,948,793 | | | 2017 | 900,000 | 2,571,744 | 1,422,993 | 1,622,363 | 931,306 | 166,586 | 7,614,992 | | | 2016 | 850,000 | 1,532,957 | 1,247,680 | 1,222,471 | 2,093,986 | 102,660 | 7,049,754 | | Robert W. Malone, (7) Vice President and President – Filtration Group | 2018 | 565,100(1) | 758,053(2) | 370,088(3) | 491,122(4) | --(5) | 708,893(6) | 2,893,256 | | | 2017 | 467,575 | 892,289 | 275,696 | 433,069 | -- | 643,788 | 2,712,416 | | Joseph R. Leonti, Vice President, General Counsel and Secretary | 2018 | 565,000(1) | 822,790(2) | 400,875(3) | 578,679(4) | --(5) | 534,670(6) | 2,902,014 | | | 2017 | 490,900 | 707,230 | 391,427 | 561,994 | -- | 509,312 | 2,660,863 | | | 2016 | 410,400 | 421,304 | 343,112 | 458,465 | -- | 479,043 | 2,112,324 |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| Includes the following amounts deferred under the Savings Restoration Plan and the Executive Deferral Plan for fiscal year 2018:(1) |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| Savings Restoration Plan: Mr. Williams—$25,000; Ms. Suever—$24,612; Mr. Banks—$26,250; and Mr. Leonti—$18,733; and Executive Deferral Plan: Mr. Leonti—37,500. |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| These amounts are also reported in the “Executive Contributions in Last Fiscal Year” column of the Nonqualified Deferred Compensation for Fiscal Year 2018 table on page 55. |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| Amount consists of the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of LTIP Awards granted during fiscal year 2018 to each of the Named Executive Officers. The amount does not reflect whether a Named Executive Officer has actually realized a financial benefit from the LTIP awards. The amount was calculated by multiplying the closing price on the date of grant by the number of LTIP Awards received and assuming a payout of 100%. As described beginning on page 36, however, LTIP Award payouts will be calculated following the applicable three-year performance period and could range from a minimum of 0% to a maximum of 200%. The grant date fair value of the LTIP Awards granted during fiscal year 2018 at the maximum payout of 200% are: Mr. Williams—$12,137,200; Ms. Suever—$3,161,686; Mr. Banks—$5,818,004; Mr. Malone—$1,516,106; and Mr. Leonti—$1,645,580. Dividends are not accrued or paid on the LTIP Awards until after the performance period ends and the shares are issued.(2) |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| Amount reflects the aggregate grant date fair value for fiscal year 2018 computed in accordance with FASB ASC Topic 718 of Stock Incentive grants. The amount does not reflect whether a Named Executive Officer has actually realized a financial benefit from the award. The amount was calculated using the Black-Scholes option pricing model with the following weighted-average assumptions:(3) |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| Fiscal Year of Grant | Participant | Grant Date | Type of Grant | Risk-free Interest Rate | Expected Life of Award | Expected Dividend Yield of Stock | Expected Volatility of Stock | | 2018 | Named Executive Officers | 8/17/2017 | annual grant | 1.41% | 5.75 years | 2.04% | 28.2% |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| During fiscal year 2018, no Stock Incentive awards were forfeited by any of the Named Executive Officers. |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| Amount consists of the following Target Incentive Bonuses, General RONA Bonuses with PGI Multiplier, if applicable, and Converted RONA Bonuses for fiscal year 2018, which were paid in one or more installments with the final payment in August 2018:(4) |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| Target Incentive Bonus for fiscal year 2018: Mr. Williams—$892,020; Ms. Suever—$372,121; Mr. Banks—$635,564; Mr. Malone—$162,348; and Mr. Leonti—$251,996. |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| General RONA Bonus for fiscal year 2018: Mr. Williams—$1,175,400; Ms. Suever—$420,206; Mr. Banks—$682,385; Mr. Malone—$260,353; and Mr. Leonti—$258,262. |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| Converted RONA Bonus for fiscal year 2018: Mr. Williams—$100,053; Ms. Suever—$68,643; Mr. Banks—$99,517; Mr. Malone—$68,421; and Mr. Leonti—$68,421. |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| Amount consists of the change in annual actuarial present value of pension benefits for Messrs. Williams and Banks and Ms. Suever, as also reported in the Pension Benefits for Fiscal Year 2018 table on page 54. Messrs. Malone and Leonti do not have a benefit under our defined benefit pension plans. None of the Named Executive Officers received above-market or preferential earnings on deferred compensation.(5) |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| The following table describes each component of the All Other Compensation column:(6) |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| Name | Company Contributions to Defined Contribution Plans (a) | Life Insurance Premiums Paid | Dividend Equivalents on RSUs | Perquisites (c) | Total “All Other Compensation” | | Thomas L. Williams | $15,306 | $110,607 | $0 | $47,877 | $173,790 | | Catherine A. Suever | 15,955 | 45,000 | 11,782(b) | 34,079 | 106,816 | | Lee C. Banks | 17,445 | 54,814 | 38,892(b) | 39,259 | 150,410 | | Robert W. Malone | 617,112 | 49,887 | 23,564(b) | 18,330 | 708,893 | | Joseph R. Leonti | 461,393 | 41,694 | $0 | 31,583 | 534,670 |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| Amount consists of the following company contributions to our Defined Contribution Plans:(a) |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
Retirement Savings Plan: Mr. Williams—$9,306; Ms. Suever—$10,976; Mr. Banks—$11,125; Mr. Malone—$18,795; and Mr. Leonti—$17,326. Savings Restoration Plan: Mr. Williams—$6,000; Ms. Suever—$4,979; Mr. Banks—$6,320; Mr. Malone—$23,773; and Mr. Leonti—$26,449. Defined Contribution Supplemental Retirement Program: Mr. Malone—$574,544; and Mr. Leonti—$417,618.
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| Reported in this column are cash dividends that Ms. Suever and Messrs. Banks and Malone received as dividend equivalents on RSUs that they were granted in Fiscal Year 2017.(b) |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| Reported in this column are amounts reimbursed or incurred by us with respect to (i) executive long-term disability insurance premiums; (ii) one or more of the following executive perquisites: (A) leased vehicle, including state sales tax if applicable; (B) spousal travel; (C) executive physicals; and (D) matching gifts program. The Named Executive Officers also use our loges, box seats or tickets to various entertainment venues. However, there is no incremental cost to us for their use of these loges, box seats and tickets. No Named Executive Officer received an executive perquisite in an amount that exceeds the greater of $25,000 or 10% of the total amount of executive perquisites received by the Named Executive Officer.(c) |
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2018
| Ms. Suever and Mr. Malone were not Named Executive Officers for fiscal year 2016.(7) |
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2018
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2018 The following table sets forth information with respect to non-equity and equity incentive plan awards granted to the Named Executive Officers during fiscal year 2018. The LTIP Awards, RSUs and Stock Incentives listed below have been granted under our 2009 Plan and our 2016 Plan.
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2018
| Name | Date | Compensation Committee Action Date (If Different than Grant Date) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | | | | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | | Thomas L. Williams | | | | | | | | | | | | | Target Incentive Bonus | 8/16/2017 | — | 0 | 600,000 | 1,200,000 | — | — | — | — | — | — | | General RONA Bonus | 8/16/2017 | — | 0 | 900,000 | (1) | — | — | — | — | — | — | | Converted RONA Bonus | 8/16/2017 | — | 0 | 76,610 | (1) | — | — | — | — | — | — | | LTIP Award (CY 18-19-20) | 1/24/2018 | — | — | — | — | 0 | 29,060 | 58,120 | — | — | 6,068,600(2) | | Stock Incentives | 8/16/2017 | — | — | — | — | — | — | — | 92,340 | 158.79 | 2,961,344 | | Catherine A. Suever | | | | | | | | | | | | | Target Incentive Bonus | 8/16/2017 | — | 0 | 250,300 | 500,600 | — | — | — | — | — | — | | General RONA Bonus | 8/16/2017 | — | 0 | 321,750 | (1) | — | — | — | — | — | — | | Converted RONA Bonus | 8/16/2017 | — | 0 | 52,560 | (1) | — | — | — | — | — | — | | LTIP Award (CY 18-19-20) | 1/24/2018 | — | — | — | — | 0 | 7,570 | 15,140 | — | — | 1,580,843(2) | | Stock Incentives | 8/16/2017 | — | — | — | — | — | — | — | 24,050 | 158.79 | 771,284 | | Lee C. Banks | | | | | | | | | | | | | Target Incentive Bonus | 8/16/2017 | — | 0 | 427,500 | 855,000 | — | — | — | — | — | — | | General RONA Bonus | 8/16/2017 | — | 0 | 522,500 | (1) | — | — | — | — | — | — | | Converted RONA Bonus | 8/16/2017 | — | 0 | 76,200 | (1) | — | — | — | — | — | — | | LTIP Award (CY 18-19-20) | 1/24/2018 | — | — | — | — | 0 | 13,930 | 27,860 | — | — | 2,571,744(2) | | Stock Incentives | 8/16/2017 | — | — | — | — | — | — | — | 44,250 | 158.79 | 1,419,098 | | Robert W. Malone | | | | | | | | | | | | | Target Incentive Bonus | 8/16/2017 | — | 0 | 109,200 | 218,400 | — | — | — | — | — | — | | General RONA Bonus | 8/16/2017 | — | 0 | 233,680 | (1) | — | — | — | — | — | — | | Converted RONA Bonus | 8/16/2017 | — | 0 | 52,390 | (1) | — | — | — | — | — | — | | LTIP Award (CY 18-19-20) | 1/24/2018 | — | — | — | — | 0 | 3,630 | 7,260 | — | — | 497,902(2) | | Stock Incentives | 8/16/2017 | — | — | — | — | — | | | 11,540 | 158.79 | 370,088 | | Joseph R. Leonti | | | | | | | | | | | | | Target Incentive Bonus | 8/16/2017 | — | 0 | 169,500 | 339,000 | — | — | — | — | — | — | | General RONA Bonus | 8/16/2017 | — | 0 | 197,750 | (1) | — | — | — | — | — | — | | Converted RONA Bonus | 8/16/2017 | — | 0 | 52,390 | (1) | — | — | — | — | — | — | | LTIP Award (CY 18-19-20) | 1/24/2018 | — | — | — | — | 0 | 3,940 | 7,880 | | | 707,230(2) | | Stock Incentives | 8/16/2017 | — | — | — | — | — | — | — | 12,500 | 158.79 | 400,875 |
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2018
| There are no maximum amounts for General RONA Bonuses or Converted RONA Bonuses. General RONA Bonuses and Converted RONA Bonuses are calculated as described in the Compensation Discussion and Analysis beginning on page 19.(1) |
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2018
| Calculated assuming a payout of 100% as described in footnote 2 to the Summary Compensation Table for Fiscal Year 2018 on page 48.(2) |
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2018
The elements of executive compensation included in each Named Executive Officer’s total compensation as reported in the Summary Compensation Table for Fiscal Year 2018 on page 48 and the compensation programs under which the grants described in the Grants of Plan-Based Awards for Fiscal Year 2018 table above were made are described in the Compensation Discussion and Analysis, beginning on page 19.
OUTSTANDING EQUITY AWARDS AT JUNE 30, 2018
OUTSTANDING EQUITY AWARDS AT JUNE 30, 2018 The following table sets forth information with respect to Stock Incentives and stock awards held by the Named Executive Officers as of June 30, 2018.
OUTSTANDING EQUITY AWARDS AT JUNE 30, 2018
| | Option Awards | | | | Stock Awards | | | Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Equity Incentive Plan Awards: Number of Shares, Unearned Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | | Thomas L. Williams | 0 | 33,422(2) | 116.46 | 1/31/2025 | — | — | | | 44,800 | 22,400(3) | 113.23 | 8/11/2025 | — | — | | | 26,240 | 0 | 113.19 | 8/12/2024 | — | — | | | 34,840 | 0 | 106.18 | 8/13/2023 | — | — | | | 35,167 | 70,333(4) | 124.36 | 8/16/2026 | — | — | | | 0 | 92,340(5) | 158.79 | 8/15/2027 | — | — | | | — | — | — | — | 31,010(6) | 4,832,909 | | | — | — | — | — | 35,470(7) | 5,528,000 | | | — | — | — | — | 29,060(8) | 4,529,001 | | Catherine A. Suever | 2,080 | 0 | 62.35 | 8/10/2020 | — | — | | | 5,200 | 0 | 69.10 | 8/16/2021 | — | — | | | 5,230 | 0 | 81.86 | 8/14/2022 | — | — | | | 6,660 | 0 | 106.18 | 8/13/2023 | — | — | | | 5,010 | 0 | 113.19 | 8/12/2024 | — | — | | | 3,213 | 1,607(3) | 113.23 | 8/11/2025 | — | | | | 1,834 | 3,666(4) | 124.36 | 8/16/2026 | — | — | | | 0 | 24,050(5) | 158.79 | 8/15/2027 | — | — | | | — | — | — | — | 4,830(6) | 752,756 | | | — | — | — | — | 7,833(7) | 1,220,773 | | | — | — | — | — | 7,570(8) | 1,179,785 | | | — | — | — | — | 4,300(9) | 670,155 | | Lee C. Banks | 0 | 22,281(2) | 116.46 | 1/31/2025 | — | — | | | 29,867 | 14,933(3) | 113.23 | 8/11/2025 | — | — | | | 26,240 | 0 | 113.19 | 8/12/2024 | — | — | | | 34,840 | 0 | 106.18 | 8/13/2023 | — | — | | | 35,990 | 0 | 81.86 | 8/14/2022 | — | — | | | 17,050 | 34,100(4) | 124.36 | 8/16/2026 | — | — | | | 0 | 44,250 (5) | 158.79 | 8/15/2027 | — | — | | | — | — | — | — | 17,720(6) | 2,761,662 | | | — | — | — | — | 17,200(7) | 2,680,620 | | | — | — | — | — | 13,930(8) | 2,170,991 | | | — | — | — | — | 14,194(10) | 2,212,135 | | Robert W. Malone | 5,787 | 2,893(3) | 113.23 | 8/11/2025 | — | — | | | 2,920 | 0 | 113.19 | 8/12/2024 | — | — | | | 3,870 | 0 | 106.18 | 8/13/2023 | — | — | | | 3,304 | 6,606(4) | 124.36 | 8/16/2026 | — | — | | | 0 | 11,540(5) | 158.79 | 8/15/2027 | — | — | | | — | — | — | — | 4,270(6) | 665,480 | | | — | — | — | — | 4,614(7) | 719,092 | | | — | — | — | — | 3,630(8) | 565,736 | | | — | — | — | — | 8,600(11) | 1,340,310 | | Joseph R. Leonti | 0 | 4,107(3) | 113.23 | 8/11/2025 | — | — | | | 4,784 | 9,380(4) | 124.36 | 8/16/2026 | — | — | | | 0 | 12,500(5) | 158.79 | 8/15/2027 | — | — | | | — | — | — | — | 4,870(6) | 758,990 | | | — | — | — | — | 4,730(7) | 737,171 | | | — | — | — | — | 3,940(8) | 614,049 |
OUTSTANDING EQUITY AWARDS AT JUNE 30, 2018
| The market value is calculated by multiplying the closing price of our Common Stock on June 30, 2018, $155.85, by the number of shares.(1) |
OUTSTANDING EQUITY AWARDS AT JUNE 30, 2018
| Represents a special Stock Incentive granted on February 1, 2015. Assuming continued full-time employment, the grant will vest on February 1, 2020.(2) |
OUTSTANDING EQUITY AWARDS AT JUNE 30, 2018
| Represents Stock Incentives granted on August 12, 2015. The Stock Incentives vest in three equal annual installments beginning August 12, 2016.(3) |
OUTSTANDING EQUITY AWARDS AT JUNE 30, 2018
| Represents Stock Incentives granted on August 17, 2016. The Stock Incentives vest in three equal annual installments beginning August 17, 2017.(4) |
OUTSTANDING EQUITY AWARDS AT JUNE 30, 2018
| Represents Stock Incentives granted on August 16, 2017. The Stock Incentives vest in three equal annual installments beginning August 16, 2018.(5) |
OUTSTANDING EQUITY AWARDS AT JUNE 30, 2018
| Assumes that we meet our target performance goals and payout will be at 100% of the target LTIP Award value. Assuming continued employment through the end of the performance period (December 31, 2018), actual payouts under the CY2016-17-18 LTIP Awards will be in common shares issued in April 2019 following the Committee’s certification of our performance results, subject to the Committee’s exercise of any discretion to reduce the amount payable and the Committee’s authorization of payment.(6) |
OUTSTANDING EQUITY AWARDS AT JUNE 30, 2018
| Assumes that we meet our target performance goals and payout will be at 100% of the target LTIP Award value. Assuming continued employment through the end of the performance period (December 31, 2019), actual payouts under the CY2017-18-19 LTIP Awards will be in common shares to be issued in April 2020 following the Committee’s certification of our performance results, subject to the Committee’s exercise of any discretion to reduce the amount payable and the Committee’s authorization of payment.(7) |
OUTSTANDING EQUITY AWARDS AT JUNE 30, 2018
| Assumes that we meet our target performance goals and payout will be at 100% of the target LTIP Award value. Assuming continued employment through the end of the performance period (December 31, 2020), actual payouts under the CY2018-19-20 LTIP Awards will be in common shares to be issued in April 2021 following the Committee’s certification of our performance results, subject to the Committee’s exercise of any discretion to reduce the amount payable and the Committee’s authorization of payment.(8) |
OUTSTANDING EQUITY AWARDS AT JUNE 30, 2018
| Represents two grants of 2,150 each of Restricted Stock Awards, also referred to as RSUs, awarded on January 25, 2017, and April 19, 2017, respectively, to Ms. Suever. Assuming continued full-time employment, the grants will vest on January 25, 2020 and April 19, 2020, respectively.(9) |
OUTSTANDING EQUITY AWARDS AT JUNE 30, 2018
| Represents the grant of 14,194 Restricted Stock Awards, also referred to as RSUs, awarded on August 17, 2016, to Mr. Banks. Assuming continued full-time employment, the grants will vest on August 17, 2022.(10) |
OUTSTANDING EQUITY AWARDS AT JUNE 30, 2018
| Represents the grant of 8,600 Restricted Stock Awards, also referred to as RSUs, awarded January 25, 2017, to Mr. Malone. Assuming continued full-time employment, the grants will vest on January 25, 2022.(11) |
OPTION EXERCISES AND STOCK VESTED FOR FISCAL YEAR 2018
OPTION EXERCISES AND STOCK VESTED FOR FISCAL YEAR 2018 The following table sets forth information with respect to Stock Incentives that were exercised during fiscal year 2018 and common shares issued under LTIP Awards and RSUs that vested for the Named Executive Officers during fiscal year 2018.
OPTION EXERCISES AND STOCK VESTED FOR FISCAL YEAR 2018
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | | Thomas L. Williams | 65,450 | 8,100,319 | 45,831 | 9,146,951 | | Catherine A. Suever | 5,223 | 654,181 | 4,685 | 935,032 | | Lee C. Banks | 39,174 | 2,332,304 | 27,806 | 5,549,521 | | Robert W. Malone | 0 | 0 | 6,171 | 1,231,608 | | Joseph R. Leonti | 28,909 | 1,906,283 | 7,928 | 1,582,270 |
OPTION EXERCISES AND STOCK VESTED FOR FISCAL YEAR 2018
| Calculated by multiplying the number of shares acquired by the difference between the exercise price and closing price of our common stock on the exercise date.(1) |
OPTION EXERCISES AND STOCK VESTED FOR FISCAL YEAR 2018
| Calculated by multiplying the number of shares acquired by the closing price of our common stock on the applicable vesting date.(2) |
PENSION BENEFITS FOR FISCAL YEAR 2018
PENSION BENEFITS FOR FISCAL YEAR 2018 The following table sets forth the actuarial present value of the benefits accumulated by each of the Named Executive Officers under the Pension Plan, the Pension Restoration Plan and the Supplemental Retirement Program.
PENSION BENEFITS FOR FISCAL YEAR 2018
| Name | Plan Name | Number of Years of Credited Service (#)(1) | Present Value of Accumulated Benefit ($)(2) | Payments During Last Fiscal Year ($) | | Thomas L. Williams | Pension Plan Pension Restoration Plan Supplemental Retirement Program | 14.6 14.6 14.6 | 480,141 4,432,215 13,977,992 | 0 0 0 | | Catherine A. Suever | Pension Plan Pension Restoration Plan Supplemental Retirement Program | 31.1 31.1 31.1 | 1,080,446 2,141,247 2,211,153 | 0 0 0 | | Lee C. Banks | Pension Plan Pension Restoration Plan Supplemental Retirement Program | 26.6 26.6 26.6 | 727,525 5,342,082 5,825,163 | 0 0 0 | | Robert W. Malone (3) | Pension Plan Pension Restoration Plan Supplemental Retirement Program | — — — | 0 0 0 | 0 0 0 | | Joseph R. Leonti (3) | Pension Plan Pension Restoration Plan Supplemental Retirement Program | — — — | 0 0 0 | 0 0 0 |
PENSION BENEFITS FOR FISCAL YEAR 2018
| Credited Service in the Pension Restoration Plan is frozen as of the date the Named Executive Officer becomes 100% vested in the Supplemental Retirement Program (typically age 60).(1) |
PENSION BENEFITS FOR FISCAL YEAR 2018
| The present value of the accumulated benefits is calculated under each plan using the following assumptions: (i) a discount rate of 4.01% for the Pension Plan; (ii) a discount rate of 3.82% for each of the Pension Restoration Plan and Supplemental Retirement Program; (iii) no pre-retirement decrements; and (iv) retirement at age 65.(2) |
PENSION BENEFITS FOR FISCAL YEAR 2018
| For the Pension Plan, additional assumptions include: (i) participants elect a life annuity; and (ii) the RP-2006 Mortality Table projected generationally with Scale MP-2017. |
PENSION BENEFITS FOR FISCAL YEAR 2018
| For the Pension Restoration Plan, using each Named Executive Officer’s participant elections under the Pension Restoration Plan, additional assumptions include: (i) calculating lump sums using the applicable mortality table under Section 417(e) of the Internal Revenue Code (ii) discount segment rates of 3.08%, 4.19% and 4.58%. |
PENSION BENEFITS FOR FISCAL YEAR 2018
| For the Supplemental Retirement Program, using each Named Executive Officer’s participant elections under the Supplemental Retirement Program, additional assumptions include: (i) calculating lump sums using the applicable mortality table under Section 417(e) of the Internal Revenue Code; and (ii) a discount rate of 3.02%. |
PENSION BENEFITS FOR FISCAL YEAR 2018
| Messrs. Malone and Leonti are not eligible to participate in these plans.(3) |
PENSION BENEFITS FOR FISCAL YEAR 2018
The Pension Plan, the Pension Restoration Plan and the Supplemental Retirement Program are described in the Compensation Discussion and Analysis, beginning on page 19.
NONQUALIFIED DEFERRED COMPENSATION FOR FISCAL YEAR 2018
NONQUALIFIED DEFERRED COMPENSATION FOR FISCAL YEAR 2018 The following table sets forth the contributions, earnings, withdrawals/distributions and aggregate balances for the Named Executive Officers participating in the Savings Restoration Plan, the Executive Deferral Plan and the Defined Contribution Supplemental Retirement Program during fiscal year 2018.
NONQUALIFIED DEFERRED COMPENSATION FOR FISCAL YEAR 2018
| Name | Executive Contributions in Last Fiscal Year ($)(1) | Registrant Contributions in Last Fiscal Year ($)(2) | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Withdrawals / Distributions ($) | Aggregate Balance at Last Fiscal Year End ($) | | Thomas L. Williams | | | | | | | Savings Restoration Plan | 25,000 | 6,000 | 40,409 | 0 | 699,913(3) | | Executive Deferral Plan | 0 | 0 | 2,115 | 0 | 23,150 | | Defined Contribution Supplemental Retirement Program | 0 | 0 | 0 | 0 | 0 | | Catherine A. Suever | | | | | | | Savings Restoration Plan | 24,612 | 4,979 | 56,463 | 0 | 699,830(3) | | Executive Deferral Plan | 0 | 0 | 12,777 | 0 | 259,019 | | Defined Contribution Supplemental Retirement Program | 0 | 0 | 0 | 0 | 0 | | Lee C. Banks | | | | | | | Savings Restoration Plan | 26,250 | 6,320 | 95,057 | 0 | 1,234,067(3) | | Executive Deferral Plan | 0 | 0 | 982,926 | 0 | 8,434,985 | | Defined Contribution Supplemental Retirement Program | 0 | 0 | 0 | 0 | 0 | | Robert W. Malone | | | | | | | Savings Restoration Plan | 0 | 23,773 | 5,968 | 0 | 106,958(3) | | Executive Deferral Plan | 0 | 0 | 0 | 0 | 0 | | Defined Contribution Supplemental Retirement Program | 0 | 574,544 | 254,722 | 0 | 2,645,515 | | Joseph R. Leonti | | | | | | | Savings Restoration Plan | 18,733 | 26,449 | 14,862 | 0 | 205,626(3) | | Executive Deferral Plan | 37,500 | 0 | 9,319 | 0 | 117,746 | | Defined Contribution Supplemental Retirement Program | 0 | 417,618 | 150,020 | 0 | 1,863,439 |
NONQUALIFIED DEFERRED COMPENSATION FOR FISCAL YEAR 2018
| For each of the Named Executive Officers, amounts are included in the “Salary” column and referenced in footnote 1 of the Summary Compensation Table for Fiscal Year 2018 on page 48.(1) |
NONQUALIFIED DEFERRED COMPENSATION FOR FISCAL YEAR 2018
| Amounts are included along with our contributions to the Retirement Savings Plan, which is a qualified deferred compensation plan, in the “Company Contributions to Defined Contribution Plans” column in the All Other Compensation components table in footnote 6 of the Summary Compensation Table for Fiscal Year 2018 on page 48.(2) |
NONQUALIFIED DEFERRED COMPENSATION FOR FISCAL YEAR 2018
| Includes the following amounts that were deferred during fiscal year 2017 under the Savings Restoration Plan: Mr. Williams—$25,000; Ms. Suever—$28,537; Mr. Banks—$22,500; Mr. Malone—$14,945; and Mr. Leonti—$31,028.(3) |
NONQUALIFIED DEFERRED COMPENSATION FOR FISCAL YEAR 2018
The Savings Restoration Plan, the Executive Deferral Plan, and the Defined Contribution Supplemental Retirement Program are described in the Compensation Discussion and Analysis, beginning on page 19. The investment options under each of the plans are identical. During fiscal year 2018, there were up to 11 investment funds that a Named Executive Officer could choose with annual rates of return for the year ended June 30, 2018, ranging from (0.18)% to 19.93%. Under the plans, participants have the ability to change their investments at any time.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
Payments upon Long-Term Disability
Payments upon Long-Term Disability Upon the long-term disability of a Named Executive Officer, the Named Executive Officer will receive the “Payments Generally Available” described above and the “Payments Upon Death” described above, except that:
Payments upon Long-Term Disability
| the term for all outstanding Stock Incentives will continue for the remainder of their ten-year terms;(i) |
Payments upon Long-Term Disability
| the account balance in the Defined Contribution Supplemental Retirement Program will be paid in a single lump sum as of the date of disability; and(ii) |
Payments upon Long-Term Disability
| (iii) | the Named Executive Officer will not receive death benefits under the Officer Life Insurance Plan until death subsequently occurs. |
Payments upon Long-Term Disability
In addition, the Named Executive Officer will receive the following:
Payments upon Long-Term Disability
| • | monthly benefits under the Executive Long-Term Disability Plan; |
Payments upon Long-Term Disability
| • | six months of premium payments for medical and dental insurance based on the applicable COBRA rates for the Named Executive Officer; and |
Payments upon Long-Term Disability
| • | for those Named Executive Officers who were participants prior to January 1, 2008, premium payments under the Officer Life Insurance Plan for the greater of ten years from commencement of plan participation or the number of years until the Named Executive Officer reaches age 65. For those Named Executive Officers who became participants on or after January 1, 2008, the participant will receive premium payments under the Officer Life Insurance Plan until retirement up to age 65. |
Payments upon Long-Term Disability
The benefit in the following table for each of the Named Executive Officers under the Executive Long-Term Disability Plan represents one year of long term disability benefits. The disability benefit payable under the plan is funded through group and individual long-term disability insurance policies owned by each of the Named Executive Officers that would be paid by the insurance company issuing the policies.
Payments upon Long-Term Disability
| Officer | Accelerated Vesting of Stock Incentives | Accelerated Vesting of Restricted Stock Units | Pension Plan | Pension Restoration Plan | Supplemental Retirement Program | LTIP Awards | Defined Contribution Supplemental Retirement Program | Executive Long- Term Disability Benefit | Medical and Dental Benefit | Officer Life Insurance Premiums | Vacation Pay | Totals | | Thomas L. Williams | 4,485,967 | — | 484,785 | 4,434,393 | 19,416,167 | 7,546,257 | — | 396,000 | 6,162 | 110,607 | 57,895 | 36,938,233 | | Catherine A. Suever | 337,824 | — | 1,047,163 | 2,138,168 | 3,825,429 | 1,434,314 | — | 396,000 | 2,994 | 45,000 | 54,767 | 9,281,659 | | Lee C. Banks | 2,587,902 | 2,212,135 | 622,145 | 5,168,069 | 10,615,757 | 4,003,527 | — | 396,000 | 9,702 | 54,814 | 62,719 | 25,732,770 | | Robert W. Malone | 238,742 | — | — | — | — | 1,008,401 | 2,645,515 | 396,000 | 9,540 | 49,887 | 23,701 | 4,371,786 | | Joseph R. Leonti | 968,143 | — | — | — | — | 1,103,418 | 1,863,439 | 420,000 | 5,922 | 41,694 | 24,389 | 4,427,005 |
Payments upon Retirement
Payments upon Retirement Upon the retirement of a Named Executive Officer at (A) age 65 or older, or (B) age 55 or older with at least ten years of service, the Named Executive Officer will receive the “Payments Generally Available” described above and the “Payments Upon Death” described above, except that:
Payments upon Retirement
| the vesting schedule in all outstanding Stock Incentives will continue as if employed;(i) |
Payments upon Retirement
| the term for all outstanding Stock Incentives will continue for the remainder of their ten-year terms;(ii) |
Payments upon Retirement
| (iii) | if the Named Executive Officer is (A) age 65 or older, or (B) age 60 or older with at least ten years of service and 12 months of continuous employment during the performance periods, he or she will receive a full LTIP Award payout for calendar years 2016-17-18 and 2017-18-19 performance periods, to be determined at the end of the performance periods, as if he or she had remained continuously employed through the end of the performance periods; and |
Payments upon Retirement
| the Named Executive Officer will not receive death benefits under the Officer Life Insurance Plan until death subsequently occurs.(iv) |
Payments upon Retirement
However, if the Named Executive Officer is less than 60 years of age on the date of retirement, then the Named Executive Officer must seek early retirement approval from the Human Resources and Compensation Committee to receive payments with respect to the following:
Payments upon Retirement
| • | the Supplemental Retirement Program; |
Payments upon Retirement
| • | the Defined Contribution Supplemental Retirement Program; and |
Payments upon Retirement
| • | account balance in the unvested portion of the Named Executive Officer’s LTIP Award deferrals under our Executive Deferral Plan. |
Payments upon Retirement
In addition, Named Executive Officers must be at least 55 years of age on the date of retirement to continue to receive premium payments under the Officer Life Insurance Plan which if needed will continue for the greater of ten years from commencement of plan participation or the number of years until they reach age 65. On June 30, 2018, both Messrs. Williams and Banks were 55 years of age. Since Ms. Suever and Messrs. Malone and Leonti each became an executive officer after January 1, 2008, we will not make any post-retirement premium payments on their behalf. In determining the amounts payable upon retirement reported in the following table, we assumed that the Named Executive Officer did not receive Human Resources and Compensation Committee approval for early retirement.
Payments upon Retirement
| Officer | Pension Plan | Pension Restoration Plan | LTIP Awards | Vacation Pay | Totals | | Thomas L. Williams | 484,785 | 4,434,393 | 7,546,257 | 57,895 | 12,523,330 | | Catherine A. Suever | 1,047,163 | 2,138,168 | 1,434,314 | 54,767 | 4,674,412 | | Lee C. Banks | 622,145 | 5,168,069 | 4,003,527 | 62,719 | 9,856,460 | | Robert W. Malone | — | — | 1,008,401 | 23,701 | 1,032,102 | | Joseph R. Leonti | — | — | 1,103,418 | 24,389 | 1,127,807 |
Payments upon Termination for Cause or Resignation
Payments upon Termination for Cause or Resignation Upon the termination for cause or the resignation of a Named Executive Officer, the Named Executive Officer will receive the “Payments Generally Available” described above, except that the Named Executive Officer will (i) forfeit his or her Supplemental Retirement Program benefit and his or her Defined Contribution Supplemental Retirement Program benefit if the termination for cause is the result of competition by the Named Executive Officer against us, and (ii) forfeit his or her LTIP Awards if the termination or resignation occurs during the applicable performance period. In determining the amounts payable upon termination for cause under the Supplemental Retirement Program and the Defined Contribution Supplemental Retirement Program, we assumed that the termination did not result from competition against us.
Payments upon Termination for Cause or Resignation
| Officer | Pension Plan | Pension Restoration Plan | Vacation Pay | Totals | | Thomas L. Williams | 484,785 | 4,434,393 | 57,895 | 4,977,073 | | Catherine A. Suever | 1,047,163 | 2,138,168 | 54,767 | 3,240,098 | | Lee C. Banks | 622,145 | 5,168,069 | 62,719 | 5,852,933 | | Robert W. Malone | — | — | 23,701 | 23,701 | | Joseph R. Leonti | — | — | 24,389 | 24,389 |
Payments upon Termination without Cause
Payments upon Termination without Cause Upon the termination without cause of a Named Executive Officer, the Named Executive Officer will receive the “Payments Generally Available” described above. In addition, if the Named Executive Officer signs a release of all claims against us, the Named Executive Officer will receive a lump sum payment equal to one week’s pay for each full year of service up to a maximum of twenty- six weeks of pay and continuation of premium payments for medical and dental insurance based on the applicable COBRA rates for the Named Executive Officer for up to three months. In determining the amounts payable upon termination without cause reported in the following tables, we assumed that the Named Executive Officer signed a release.
Payments upon Termination without Cause
| Officer | Severance Pay | Pension Plan | Pension Restoration Plan | Supplemental Retirement Program | Medical and Dental Benefits | Vacation Pay | Totals | | Thomas L. Williams | 8,100,000 | 484,785 | 4,434,393 | 19,416,167 | 3,081 | 57,895 | 32,496,321 | | Catherine A. Suever | 3,861,150 | 1,047,163 | 2,138,168 | 3,825,429 | 1,497 | 54,767 | 10,928,174 | | Lee C. Banks | 5,700,000 | 622,145 | 5,168,069 | 10,615,757 | 4,851 | 62,719 | 22,173,541 | | Robert W. Malone | 2,781,240 | — | — | — | 4,770 | 23,701 | 2,809,711 | | Joseph R. Leonti | 2,796,750 | — | — | — | 2,961 | 24,389 | 2,824,100 |
CHIEF EXECUTIVE OFFICER PAY RATIO
CHIEF EXECUTIVE OFFICER 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, we are providing the following information regarding the ratio of the annual total compensation of our Chairman and Chief Executive Officer, Mr. Williams, to the annual total compensation of our median employee. Our pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll records and the methodology described below. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. Therefore, the estimated pay ratio we report may not be comparable to the pay ratios reported by other companies and should not be used as a basis for comparison between companies. As reported in the Summary Compensation Table, our Chief Executive Officer had annual total compensation for fiscal year 2018 of $18,238,446. Using this Summary Compensation Table methodology, the annual total compensation of our median employee for fiscal year 2018 was $54,048. As a result, we estimate that the ratio of our Chief Executive Officer’s annual total compensation to that of our median employee for fiscal year 2018 was 337 to 1. We identified the “median employee” from our employee population on April 30, 2018, which included full-time, part-time, temporary, and seasonal employees who were employed on that date, whether in the U.S. or in foreign jurisdictions. As of April 30, 2018, we estimate there were 24,789 U.S. employees and 27,488 non-U.S. employees included in our employee population. We excluded independent contractors and leased employees from our calculation as any independent contractors or leased employees used have compensation determined by an unaffiliated third party. We further applied the de minimis exemption, which permits exempting non-U.S. employees that account for five percent or less of our total U.S. and non-U.S. employees. Employees from Hong Kong, Indonesia, Malaysia, Taiwan, Thailand, Vietnam, Austria, Belarus, Czech Republic, Denmark, Greece, Hungary, Ireland, Luxembourg, Morocco, Norway, Portugal, Romania, Russia, Slovenia, Turkey, Ukraine, United Arab Emirates, Argentina, Peru and Venezuela, (approximately 2,095 employees) were excluded. The consistently applied compensation measure we used was total cash compensation, which we measured for the 12-month period ended April 30, 2018. We annualized the earnings of all permanent employees who were on a leave of absence or were new-hires during the measurement period for fiscal year 2018. We did not make any other adjustments permissible by the SEC nor did we make any other material assumptions or estimates to identify our median employee.
DIRECTOR COMPENSATION FOR FISCAL YEAR 2018
DIRECTOR COMPENSATION FOR FISCAL YEAR 2018 The following table sets forth compensation information for our non-employee Directors for fiscal year 2018.
DIRECTOR COMPENSATION FOR FISCAL YEAR 2018
| Name(1) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(3) | All Other Compensation ($) | Total ($) | | Robert G. Bohn | 130,000 | 162,557 | 1,779 | 294,336 | | Linda S. Harty | 150,000 | 162,557 | 1,779 | 314,336 | | Robert J. Kohlhepp | 130,000 | 162,557 | 11,779 | 304,336 | | Kevin A. Lobo | 145,000 | 162,557 | 1,779 | 309,336 | | Klaus-Peter Müller | 130,000 | 162,557 | 1,779 | 294,336 | | Candy M. Obourn | 150,000 | 162,557 | 1,779 | 314,336 | | Joseph Scaminace | 130,000 | 162,557 | 1,779 | 294,336 | | Wolfgang R. Schmitt | 130,000 | 162,557 | 1,779 | 294,336 | | Åke Svensson | 130,000 | 162,557 | 1,779 | 294,336 | | James R. Verrier | 130,000 | 162,557 | 1,779 | 294,336 | | James L. Wainscott | 170,000 | 162,557 | 1,779 | 334,336 |
DIRECTOR COMPENSATION FOR FISCAL YEAR 2018
| Thomas L. Williams, our Chief Executive Officer and Chairman of the Board, and Lee C. Banks, our President and Chief Operating Officer, are not included in this table because they are Named Executive Officers and the compensation paid to them in fiscal year 2018 is reflected in the Summary Compensation table on page 48.(1) |
DIRECTOR COMPENSATION FOR FISCAL YEAR 2018
| This column represents the aggregate grant date fair value of RSUs granted under our 2016 Plan in fiscal year 2018 and computed in accordance with FASB ASC Topic 718. The amount was calculated using the closing stock price on the date of grant. Each of the non-employee Directors received 885 RSUs on his or her grant date, and as of June 30, 2018, had 885 unvested RSUs.(2) |
DIRECTOR COMPENSATION FOR FISCAL YEAR 2018
| The amounts reported in this column include (a) the value of the dividend equivalent units earned as additional RSUs on the unvested RSUs granted in fiscal year 2018 reported in footnote 2 to this table; and (b) the following matching gift under our Matching Gifts Program: Mr. Kohlhepp—$10,000.(3) |
Compensation of Directors
Compensation of Directors Directors who are also our employees do not receive any additional compensation for their services as Directors. During fiscal year 2018, non-employee Directors received an annual retainer, meeting fees (if applicable), and a restricted stock unit award, also referred to as an RSU. Our non-employee Directors are also eligible to participate in our Matching Gifts Program as described in the Compensation Discussion and Analysis beginning on page 19 of this Proxy Statement. The following annual retainers of the non-employee Directors were effective during fiscal year 2018:
Compensation of Directors
| | Approved August 17, 2016 | | | Effective beginning 10/26/2016 | | Annual retainer for Corporate Governance and Nominating Committee Chair: | $170,000 | | Annual retainer for Audit Committee Chair: | $150,000 | | Annual retainer for Human Resources and Compensation Committee Chair: | $150,000 | | Annual retainer for the Finance Committee Chair: | $145,000 | | Annual retainer for non-chair committee members: | $130,000 |
Compensation of Directors
In addition to the annual retainers described above, non-employee Directors were entitled to receive a $2,000 fee for attending each Board of Directors or Committee meeting that exceeds the number of regularly scheduled Board of Directors and relevant Committee meetings in a fiscal year by more than two. During fiscal year 2018, Directors could elect to defer all or a portion of their annual retainers under our Deferred Compensation Plan for Directors. Each Director who was serving as a Director on October 25, 2017 and who was not a current employee was granted 885 RSUs as of October 25, 2017 under our 2016 Plan. The terms of the RSUs provide that the RSUs will vest 100% on the later of (a) one year from the grant date; or (b) on the date of our next Annual Shareholders Meeting, also known as the Vesting Date, except that if a Director ceases to be a Director for any reason prior to the next Annual Shareholders Meeting that occurs after the grant date, a pro-rated portion of her or his RSUs will vest on the Vesting Date and the remaining RSUs will be forfeited. All RSUs earn dividend equivalent units paid as additional RSUs which are subject to the terms and conditions of the original RSU award and are payable directly to each Director to whom they are issued.
SHAREHOLDER RECOMMENDATIONS FOR DIRECTOR NOMINEES
SHAREHOLDER RECOMMENDATIONS FOR DIRECTOR NOMINEES The Corporate Governance and Nominating Committee will consider shareholder recommendations for nominees for election to our Board of Directors if such recommendations are in writing and set forth the information listed below. Such recommendations must be submitted to Parker-Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, Attention: Secretary, and must be received at our executive offices on or before June 30 of each year in anticipation of the following Annual Meeting of Shareholders. All shareholder recommendations for Director nominees must set forth the following information:
SHAREHOLDER RECOMMENDATIONS FOR DIRECTOR NOMINEES
| 1. | The name and address of the shareholder recommending the candidate for consideration as such information appears on our records, the telephone number where such shareholder can be reached during normal business hours, the number of common shares owned by such shareholder and the length of time such shares have been owned by the shareholder; if such person is not a shareholder of record or if such shares are owned by an entity, reasonable evidence of such person’s beneficial ownership of such shares or such person’s authority to act on behalf of such entity; |
SHAREHOLDER RECOMMENDATIONS FOR DIRECTOR NOMINEES
| 2. | Complete information as to the identity and qualifications of the proposed nominee, including the full legal name, age, business and residence addresses and telephone numbers and other contact information, and the principal occupation and employment of the candidate recommended for consideration, including his or her occupation for at least the past five years, with a reasonably detailed description of the background, education, professional affiliations and business and other relevant experience (including directorships, employment and civic activities) and qualifications of the candidate; |
SHAREHOLDER RECOMMENDATIONS FOR DIRECTOR NOMINEES
| 3. | The reasons why, in the opinion of the recommending shareholder, the proposed nominee is qualified and suited to be a Director; |
SHAREHOLDER RECOMMENDATIONS FOR DIRECTOR NOMINEES
| 4. | The disclosure of any relationship of the candidate being recommended with us or any of our subsidiaries or affiliates, whether direct or indirect; |
SHAREHOLDER RECOMMENDATIONS FOR DIRECTOR NOMINEES
| 5. | A description of all relationships, arrangements and understandings between the proposing shareholder and the candidate and any other person(s) (naming such person(s)) pursuant to which the candidate is being proposed or would serve as a Director, if elected; and |
SHAREHOLDER RECOMMENDATIONS FOR DIRECTOR NOMINEES
| 6. | A written acknowledgement by the candidate being recommended that he or she has consented to being considered as a candidate, has consented to our undertaking of an investigation into that individual’s background, education, experience and other qualifications in the event that the Corporate Governance and Nominating Committee desires to do so, has consented to be named in our Proxy Statement and has consented to serve as a Director, if elected. |