DEF 14A of Stepan Co
Filed Mar 26, 2024 · FY20230001193125-24-076968
PROPOSAL NO. 1: ELECTION OF DIRECTORS
PROPOSAL NO. 1: ELECTION OF DIRECTORS Stockholders and the persons named in the enclosed proxy will vote, pursuant to the authority granted by the stockholder in the enclosed proxy, on the election of Mr. Randall S. Dearth, Ms. Susan M. Lewis and Ms. Jan Stern Reed as directors of the Company, to hold office until the Annual Meeting of Stockholders to be held in 2027. The Board of Directors is divided into three classes serving staggered three-year terms. Directors for each class are elected at the annual meeting of stockholders in the year in which the term for their class expires. Mr. Dearth, Ms. Lewis and Ms. Reed are current directors whose terms expire in 2024. Mr. Dearth and Ms. Reed were last elected by the Company’s stockholders at the 2021 Annual Meeting. Ms. Lewis was elected by the Board of Directors on February 15, 2024. The nominations of Mr. Dearth, Ms. Lewis and Ms. Reed have each been reviewed and recommended by the Nominating and Corporate Governance Committee and the Board of Directors. It is with great sadness that the Board of Directors and the Company acknowledge the death of Gregory E. Lawton on August 18, 2023. Mr. Lawton had been a director since 2006. The Board of Directors and the Company wish to honor the memory of Mr. Lawton and the valuable leadership and guidance he provided. In the event any of Mr. Dearth, Ms. Lewis and Ms. Reed is unable to serve as director, votes will be cast, pursuant to the authority granted in the proxy, for such person or persons as may be designated by the Board of Directors. The Board of Directors at this time is not aware of any nominee who is or will be unable to serve as director, if elected. Under the Company’s Amended and Restated By-laws, in an uncontested election directors are elected by a majority of the votes cast by stockholders. An uncontested election of directors means an election for which the number of nominees does not exceed the number of directors to be elected at the specific election. Because three directors are to be elected, and Mr. Dearth, Ms. Lewis and Ms. Reed are the sole nominees, this election is uncontested, and therefore the nominees must receive a majority of votes cast by stockholders to be elected.
Nominees for Director
Nominees for Director The following table sets forth certain information about the nominees for director:
Nominees for Director
| Randall S. Dearth | | | Age: 60 Director Since: 2012 | Experience Senior Director of SK Capital Partners, LP, a private investment firm, since January 2021. President and Chief Executive Officer of GCP Applied Technologies Inc., a leading global provider of construction products technologies, from August 2019 to September 2020. President and Chief Operating Officer of GCP Applied Technologies Inc. from September 2018 to August 2019. Qualifications Mr. Dearth also previously served as the President and Chief Executive Officer of LANXESS Corporation, a global chemicals manufacturer, and of Calgon Carbon Corporation, a global manufacturer of activated carbon and innovative treatment systems. Mr. Dearth provides the Board of Directors with global executive leadership in the chemical industry and a global perspective on strategy and business conditions. |
Nominees for Director
| Susan M. Lewis | | | Age: 59 Director Since: 2024 | Experience Principal of Susan Lewis Consulting LLC, a business and executive consulting firm, from March 2021 through July 2023. Senior Vice President, Global Operations, of Corteva, Inc., a global agriculture company, from September 2018 to March 2021. Qualifications Ms. Lewis spent over 30 years at Dow Inc., a materials science company, with operations, environmental, health and safety, sustainability and risk management responsibilities. Ms. Lewis brings the Board of Directors global experience in Six Sigma, supply chain, process optimization and capital project management. Ms. Lewis has also sponsored organizational redesign, mergers and acquisitions and transformation projects. | | Jan Stern Reed | | | Age: 64 Director Since: 2015 | Experience Senior Vice President, General Counsel and Corporate Secretary of Walgreens Boots Alliance, Inc., a global pharmacy-led, health and wellbeing enterprise, from February 2015 to February 2016. Senior Vice President, General Counsel and Secretary of Walgreen Co. from October 2014 to February 2015. Director of AngioDynamics, Inc. (NASDAQ: ANGO) and Avita Medical, Inc. (NASDAQ: RCEL). Qualifications Prior to joining Walgreens, Ms. Reed was the Executive Vice President of Human Resources, General Counsel and Secretary of Solo Cup Company. Ms. Reed provides the Board of Directors with global executive leadership experience in legal, corporate governance and strategic business matters, as well as extensive experience with risk management, compliance, acquisitions and employee development. |
Nominees for Director
PROPOSAL: The Board of Directors recommends that the stockholders vote FOR the election of Mr. Dearth, Ms. Lewis and Ms. Reed to the Board of Directors, each for a three-year term.
Continuing Directors Whose Terms Are Not Expiring
Continuing Directors Whose Terms Are Not Expiring The following table sets forth certain information about those directors who are not up for election:
Continuing Directors Whose Terms Are Not Expiring
| Scott R. Behrens | | | Age: 54 Director Since: 2022 Term Expires: 2025 | Experience President and Chief Executive Officer of the Company since April 2022. President and Chief Operating Officer of the Company from January 2021 through April 2022. Vice President and General Manager – Surfactants of the Company from September 2014 through December 2020. Qualifications Mr. Behrens has served the Company for 30 years, including as general manager of the Company’s largest business segment, Surfactants. The Board believes that Mr. Behrens provides key insight into the Company’s day-to-day operations and strategic direction. | | Lorinda A. Burgess | | | Age: 61 Director Since: 2021 Term Expires: 2025 | Experience Vice President, Finance and Chief Financial Officer, Americas Region of Medtronic Inc., a medical technology company, from March 2015 through June 2023. Director of AngioDynamics, Inc. (NASDAQ: ANGO). Qualifications Ms. Burgess spent 25 years at Medtronic and retired as a regional chief financial officer. She provides the Board of Directors with financial expertise and with broad operational and strategic experience developed throughout her career in a range of financial leadership roles. |
Continuing Directors Whose Terms Are Not Expiring
| Joaquin Delgado | | | Age: 64 Director Since: 2011 Term Expires: 2026 | Experience Executive Vice President, Consumer Business Group of 3M Company, a global diversified technology company, from July 2016 to July 2019. Executive Vice President, Health Care Business Group of 3M Company, from October 2012 to July 2016. Trustee of each of Goldman Sachs Trust, Goldman Sachs Trust II, Goldman Sachs ETF Trust, Goldman Sachs ETF Trust II, Goldman Sachs Variable Insurance Trust, and Goldman Sachs Real Estate Diversified Income Fund, each of which is registered as an investment company under the Investment Company Act of 1940. Qualifications Dr. Delgado also held other executive leadership positions at 3M Company and holds a doctorate in polymer science and engineering. Dr. Delgado provides the Board of Directors with chemistry and innovation expertise and global business, operational, manufacturing, marketing and corporate development experience. | | F. Quinn Stepan, Jr. | | | Age: 63 Director Since: 1999 Term Expires: 2026 | Experience Chairman of the Company since January 2017. Chief Executive Officer of the Company from January 2006 through April 2022. President of the Company from February 1999 through December 2020. Qualifications In his over 30-year career with the Company, Mr. Stepan served in a number of positions of increasing responsibility and in a variety of functions within the Company’s operations. Mr. Stepan’s leadership provides the Board of Directors with extensive knowledge of the Company’s strategy and operations. | | Edward J. Wehmer | | | Age: 70 Director Since: 2003 Term Expires: 2025 | Experience Executive Chairman, Founder and Senior Advisor of Wintrust Financial Corporation, a financial services company, since May 2023. Founder and Chief Executive Officer of Wintrust Financial Corporation from February 2020 through April 2023. President and Chief Executive Officer of Wintrust Financial Corporation from May 1998 to February 2020. Director of Wintrust Financial Corporation (NASDAQ: WTFC). Qualifications Mr. Wehmer is also a Certified Public Accountant. Mr. Wehmer provides the Board of Directors with expertise in strategic, financial, banking and accounting matters. Mr. Wehmer also has extensive experience with acquisitions. |
Key Developments Impacting Executive Compensation
| (2) Due to the Company’s 2023 financial performance, and regardless of the level of achievement of individual performance goals, the NEOs did not receive any annual incentive awards for 2023. In addition, and also as a result of failing to meet certain financial goals, the performance shares that were granted to the NEOs in February 2023 under the Company’s long-term incentive plan were forfeited. |
Compensation Philosophy
Compensation Philosophy The basic premise of the Company’s executive compensation philosophy is to pay for performance. The Company’s intention is to foster a performance-driven culture with competitive total compensation as a key driver for all employees. Compensation levels commensurate with Company performance are designed to align the interests of our employees with the interests of our stockholders. To better align our NEOs’ compensation with the interests of our stockholders, a substantial portion of compensation is at-risk and performance-based. The Company’s guiding philosophy in setting executive compensation is that the compensation of executive officers should reflect the scope of their job responsibilities and the level of individual and corporate performance achieved. Executive compensation should be competitive internally and externally with like or comparable positions based on job descriptions and responsibilities at similarly sized companies within the Company’s industry, Peer Group (as defined below) and other appropriate related industry data or survey information. The Company’s compensation philosophy is reviewed at least annually by the Committee. The effectiveness of the executive compensation program is primarily measured by Company performance, stock price, external market dynamics, the ability of the Company to attract and retain executive officers, and comparison against other relevant, external benchmarks as needed. The Committee generally does not consider the impact of previously awarded compensation in determining current executive total compensation. The Committee does, however, use both a chemical industry peer group as well as aggregate executive compensation survey data to annually assess executive compensation as described below under “Compensation Peer Group and Survey Data.” Except for the limits regarding incentive compensation as described below, the Committee does not use specific policies to allocate between cash and non-cash compensation or between short-term and long-term compensation.
Role of the Compensation Consultant
Role of the Compensation Consultant The Committee engaged Exequity LLP (“Exequity”) as its independent compensation consultant for 2023. Exequity advises the Committee on a range of executive compensation matters. The scope of Exequity’s services to the Committee includes, but is not limited to, the following:
Role of the Compensation Consultant
| • | Providing the Committee with an assessment of the market competitiveness of the Company’s executive compensation. |
Role of the Compensation Consultant
| • | Apprising the Committee of executive compensation-related trends and developments in the marketplace. |
Role of the Compensation Consultant
| • | Informing the Committee of regulatory developments relating to executive compensation practices. |
Role of the Compensation Consultant
| • | Assisting the Committee with goal setting, calibrating levels of pay to various levels of performance, and pay for performance alignment. |
Role of the Compensation Consultant
| • | Comparing Company executive compensation plan designs and practices to the marketplace. |
Role of the Compensation Consultant
| • | Recommending changes to the executive compensation program to maintain competitiveness and ensure consistency with business strategies, good governance practices and alignment with stockholder interests. |
Role of the Compensation Consultant
Exequity reports directly to the Committee. The Committee conducted its annual assessment of Exequity’s independence pursuant to SEC rules and determined that no conflict of interest exists that would prevent Exequity from independently advising the Committee. Exequity does not provide any other services to management or the Company.
Executive Pay Mix
Executive Pay Mix The Company targets a total compensation mix where fixed pay, consisting of base salary, is less than half of the total compensation that any NEO or executive officer may earn in any given year. The combined mix of both short-term and long-term incentives for executive officer compensation is structured to encourage the necessary focus and motivation to achieve outstanding results on an ongoing basis, both in the short term and long term. In addition, the combined focus on both short-term and long-term objectives is designed to align executive officers’ and stockholders’ interests. Short-term incentives for executive officers are based on individual and Company performance. Long-term incentives for executive officers are based on Company performance (performance shares) or are time-vested (RSUs and SARs). The Company’s total compensation targets assume above-average Company performance, and potential compensation can vary considerably depending on overall Company performance. The graphics below illustrate the pay mix for our Chief Executive Officer and other NEOs other than Mr. Mergner, who retired on July 3, 2023, (on an average basis) using target level of performance for all incentive awards.
Compensation Peer Group and Survey Data
Compensation Peer Group and Survey Data To better understand the compensation practices of similar companies, the Committee reviews data gathered from a custom peer group (“Peer Group”) and general market survey data from Mercer LLC (“Mercer”). Information gathered from the Peer Group serves as the primary reference point for the Committee, with Mercer survey data used as a secondary reference. The Peer Group consists of companies selected on the basis of chemical industry affiliation and size as compared to the Company (e.g., total revenues and market capitalization). The following companies comprised the Peer Group that the Committee referenced when setting 2023 compensation:
Compensation Peer Group and Survey Data
| AdvanSix Inc. | The Chemours Company | NewMarket Corporation | | Ashland Inc. | H.B. Fuller Company | Quaker Chemical Corporation | | Avient Corporation | Innospec Inc. | RPM International Inc. | | Cabot Corporation | Koppers Holdings, Inc. | Sensient Technologies Corporation |
Compensation Peer Group and Survey Data
The Committee undertakes annual evaluations of the Peer Group in order to ensure the Company is comparing itself with companies that have the characteristics to appropriately match the Company. Exequity performed a review of the Peer Group listed above in July 2023 and the Committee did not make changes to the Peer Group as a result of such review. The Committee and its independent compensation consultant will continue to monitor the Peer Group going forward as appropriate. When assessing the competitiveness of Company compensation programs, the Committee, in part, uses median compensation levels in the Peer Group as a reference point to provide a framework for and on which to base individual compensation decisions. The Committee generally references median total compensation for executive officers, but the Committee retains discretion to determine appropriate compensation levels. The Committee believes that all NEOs’ and executive officers’ total compensation amounts are within appropriate and reasonable levels as compared to the Peer Group data considering performance, experience level, time in position and both external and internal equity evaluations.
Short-Term Incentive Compensation
Short-Term Incentive Compensation NEOs and certain other employees are eligible for short-term incentive compensation as set forth in the Management Incentive Plan. The purpose of the Company’s short-term incentive compensation program is to promote improvement in year-over-year financial performance; to motivate, attract and retain executive, managerial and key employees of outstanding ability; and to align participants’ interests directly with the Company’s financial targets. The target amount of short-term incentive compensation for each NEO is expressed as a percentage of the executive’s actual base salary earned during the respective calendar year. Because senior managers have a greater ability to impact Company results, a significant percentage of their total target compensation is at-risk. The Chief Executive Officer position has the highest level of responsibility, and therefore, the target percentage exceeds the other NEOs’ target percentages. The extent, if any, to which an incentive award will be payable to an NEO will be based solely upon the degree of achievement of pre-established performance goals over the specified calendar year. In years when Company performance is exceptional and above the Target level, it is possible for NEOs to receive annual incentive payments above Target, while in years when Company or individual performance is below the Threshold level for a particular metric, no annual incentive will be paid based upon performance on that metric. In addition, the Committee may, in its sole discretion, reduce or eliminate the amount that would otherwise be payable to the NEO with respect to a calendar year. The following chart reflects the Target Annual Incentive Award and Maximum Annual Incentive Award for each NEO for 2023 under the terms of the Management Incentive Plan (which target amounts were the same as for 2022 for each NEO who was employed by the Company in 2022):
Short-Term Incentive Compensation
| NEO | Target Annual Incentive Award (% of 2023 Salary Earned) | Maximum Annual Incentive Award (% of 2023 Salary Earned) | | Scott R. Behrens, | 100.0% | 200.0% | | Luis E. Rojo | 75.0% | 150.0% | | Robert J. Haire, Jr. | 75.0% | 150.0% | | David G. Kabbes | 65.0% | 130.0% | | Sean T. Moriarty | 75.0% | 150.0% | | Arthur W. Mergner | 75.0% | 150.0% |
Short-Term Incentive Compensation
Each NEO’s annual incentive payment is determined based on the Company’s achievement of overall financial performance objectives (“Corporate Financial Performance Objectives”) and the achievement of individual performance objectives (“Individual Performance Objectives”), as described below. For 2023, each NEO’s Annual Incentive Award could be increased by a prorated amount if Corporate Net Income exceeded the Target objective, with a two times multiplier applied if Corporate Net Income met or exceeded the Maximum objective. Similarly, each NEO’s Annual Incentive Award could be reduced if Corporate Net Income did not meet the Threshold objective. Corporate Financial Performance Objectives The Committee establishes the Corporate Financial Performance Objectives at the beginning of each calendar year. For 2023, the Committee established targets for the two Corporate Financial Performance Objectives for all NEOs: Corporate Net Income and Corporate Growth Goal.(2) For 2023, the following performance levels were established for the Corporate Net Income objective:
Short-Term Incentive Compensation
| | Threshold | Target | Maximum | | Corporate Net Income | $130.0 million | $145.0 million | $160.0 million |
Short-Term Incentive Compensation
The Corporate Growth Goal consisted of profit goals for three categories of products and customers. Together, the three categories of products and customers had an assigned profit goal, with a target increase over 2022 profit. The Corporate Growth Goal was based upon strategic growth priorities for the Company and was designed to be difficult but achievable. The Corporate Growth Goal consisted of profit growth in the following categories: Rigid Polyols, Functional Surfactants and Tier 2 and Tier 3 Surfactant Customers. For 2023, the following performance levels were established for the Corporate Growth Goal with reference to the profit achieved:
Short-Term Incentive Compensation
| | Threshold | Target | | Corporate Growth Goal | $667.0 million | $715.5 million |
Short-Term Incentive Compensation
Each NEO’s annual incentive objectives include these Corporate Financial Performance Objectives. For 2023, all NEOs had at least 35% of their annual incentives tied to these objectives. Within the Corporate Financial Performance Objectives, a weighting of approximately 85% was assigned to the Corporate Net Income objective and a weighting of approximately 15% was assigned to the Corporate Growth Goal objective. (2) Corporate Net Income is a non-GAAP measure that differs from the Company’s reported net income. See Appendix A for a definition. The following table shows the Company’s performance against the Corporate Net Income and Corporate Growth Goal objectives in 2023:
Short-Term Incentive Compensation
| Objective | 2023 Results | 2023 Threshold | Annual Incentive Award Earned (% of 2023 Salary Earned) | | Corporate Net Income | $50.7 million | $130.0 million | 0% | | Corporate Growth Goal | $593.9 million | $667.0 million | 0% |
Short-Term Incentive Compensation
For 2023, the Company did not meet the Corporate Net Income Threshold objective of $130.0 million, with a result of $50.7 million, and did not meet the Corporate Growth Goal Threshold objective of $667.0 million, with a result of $593.9 million. Because the Company did not meet the Threshold Corporate Financial Performance Objectives, the NEOs did not earn any portion of their Annual Incentive Awards for 2023. Individual Performance Objectives The President and Chief Executive Officer and the Committee agreed upon the Individual Performance Objectives for the President and Chief Executive Officer at the beginning of 2023. For executives other than the Chief Executive Officer, the Chief Executive Officer and the executive agree upon Individual Performance Objectives at the beginning of each calendar year. These Individual Performance Objectives may either be financial objectives for a particular business segment or function, or achievement of certain strategic objectives specific to their function and responsibility. For 2023, the Chief Executive Officer’s Individual Performance Objectives included enhancing long-term Company performance by championing core culture and values, including safety, compliance, and employee engagement and accountability, as well as specific operational objectives in areas such as supply chain and capital project execution. For each business segment leader, the financial performance of the executive’s segment comprises a significant portion of the executive’s Individual Performance Objectives. For example, for 2023, global surfactant operating income comprised 30% of the short-term incentive compensation objectives for Mr. Moriarty, the Company’s Vice President and General Manager – Surfactants. As stated above, as a result of the Company’s 2023 financial performance, and notwithstanding achievement of any Individual Performance Objectives, the NEOs did not earn any annual incentive awards for 2023.
Long-Term Incentive Compensation
Long-Term Incentive Compensation The Committee typically grants equity awards annually to the NEOs under the Company’s long-term incentive plan. In 2023, the Committee reviewed and approved an allocation of long-term incentives for the NEOs at approximately 25% of the total grant value as SARs, approximately 25% of the total grant value as RSUs and approximately 50% of the total grant value as performance shares. The Committee changed the equity award mix to add RSUs in 2023 in order to better align with market practice.
Long-Term Incentive Compensation
| NEO | Stock Appreciation Rights Value | Restricted Stock Units Value | Performance Shares Value | Total 2023 LTI Value | | Scott R. Behrens | $780,000 | $780,000 | $1,560,000 | $3,120,000 | | Luis E. Rojo | $225,000 | $225,000 | $450,000 | $900,000 | | Robert J. Haire, Jr. | $150,000 | $150,000 | $300,000 | $600,000 | | David G. Kabbes | $150,000 | $150,000 | $300,000 | $600,000 | | Sean T. Moriarty | $150,000 | $150,000 | $300,000 | $600,000 | | Arthur W. Mergner | $168,750 | $168,750 | $337,500 | $675,000 |
Long-Term Incentive Compensation
The chart below shows the number of each type of equity award that the Committee granted to the NEOs as part of the annual 2023 equity grant. The number of SARs granted was calculated by dividing the amounts in the table above by the Black-Scholes value of a SAR on the date of the grant. The number of RSUs and performance shares granted was calculated by dividing the amounts in the table above by the average of the opening price and closing price of the Company’s common stock on the date of the grant.
Long-Term Incentive Compensation
| NEO | Stock Appreciation Rights | Restricted Stock Units | Performance Shares (at Target) | | Scott R. Behrens | 19,742 | 7,096 | 14,192 | | Luis E. Rojo | 5,695 | 2,047 | 4,094 | | Robert J. Haire, Jr. | 4,744 | 1,649 | 3,299 | | David G. Kabbes | 3,797 | 1,365 | 2,729 | | Sean T. Moriarty | 3,797 | 1,365 | 2,729 | | Arthur W. Mergner | 4,271 | 1,535 | 3,070 |
Long-Term Incentive Compensation
The grants of SARs, RSUs and performance share awards to the NEOs are shown in the Grants of Plan-Based Awards Table. The Board of Directors believes that the mix of such awards provides long-term incentive compensation that is market competitive to attract and retain executives who drive the long-term growth of the Company and further align the interests of those executives with the interests of the Company’s stockholders. In addition to the annual long-term incentive awards, grants of SARs, RSUs, performance shares and other stock awards may be awarded to executive officers at other times based on factors that the Committee determines to be relevant, including upon hire, upon promotion or for extraordinary job performance. In recognition of his service as Interim Chief Human Resources Officer during 2023, Mr. Kabbes was awarded, in addition to the grants set forth above, a grant of 762 RSUs with a value of $50,000 in October 2023. Stock Appreciation Rights SARs are granted annually at the average of the opening price and closing price of Common Stock on the date of the grant and have a ten-year term. SARs vest ratably over a three-year period and are settled in stock. Restricted Stock Units RSUs are granted annually at the average of the opening price and closing price of Common Stock on the date of the grant. RSUs vest ratably over a three-year period and are settled in stock. Performance Shares Performance shares are contingently awarded at a target number of shares and subject to certain performance conditions established by the Committee. The Committee chose Corporate Net Income as a performance measure because the Company uses net income as an important indicator of business performance. The Company uses an adjusted measure, rather than reported net income, because the adjusted measure excludes items that may not be indicative of the Company’s core operating results. The initial target number of shares may increase or decrease by up to 50% based on the Company’s Corporate Net Income results for the calendar year in which the grant is made versus Threshold, Target and Maximum Corporate Net Income objectives. If the Company’s Corporate Net Income result for such year is below the Threshold objective, then the performance shares are forfeited entirely. If the Company’s Corporate Net Income result for such year exceeds the Maximum objective, then the target number of shares will be increased by 50%. Following completion of the three-year performance period, the number of shares may further increase or decrease by up to 30%, based on a three-year average Corporate Return on Invested Capital (“ROIC”) modifier.(3) For the performance shares granted in 2023, the Committee set the following Corporate Net Income objectives:
Long-Term Incentive Compensation
| Performance Level | 2023 Corporate Net Income | Initial Share Award (% of Target) | | Threshold | $130 million | 50% | | Target | $145 million | 100% | | Maximum | $160 million | 150% |
Long-Term Incentive Compensation
The Committee set the following ROIC modifiers for the three-year performance period ending December 31, 2025:
Long-Term Incentive Compensation
| 2023-2025 Average ROIC | Award Modifier | | Less than or equal to 6.75% | -30% | | 7.50% | No impact | | Equal to or greater than 8.25% | +30% |
Long-Term Incentive Compensation
The 2023 Corporate Net Income result of $50.7 million was below the Threshold objective level. Therefore, the performance shares granted in 2023 were forfeited and no shares will be earned or issued in respect thereof. For the performance shares granted in 2021, the initial calculation of the number of performance shares was based on the following Corporate Net Income objectives:
Long-Term Incentive Compensation
| Performance Level | 2021 Corporate Net Income | Initial Share Award (% of Target) | | Threshold | $116 million | 50% | | Target | $145 million | 100% | | Maximum | $159 million | 150% |
Long-Term Incentive Compensation
The Committee determined the actual number of performance shares issued after the three-year performance period ending December 31, 2023, based on the following ROIC modifiers:
Long-Term Incentive Compensation
| 2021-2023 Average ROIC | Award Modifier | | Less than or equal to 9.75% | -30% | | 10.75% | No impact | | Equal to or greater than 11.75% | +30% |
Long-Term Incentive Compensation
(3) Return on Invested Capital is a non-GAAP measure. See Appendix A for a definition. The 2021 Corporate Net Income result was $143.5 million and the 2021-2023 average ROIC result was 8.08%. Therefore, the number of shares earned and issued for the 2021 grant of performance shares was 68.18% of the initial target number of shares. The following chart reflects the number and value of shares earned and issued in respect of the performance shares granted in 2021.
Long-Term Incentive Compensation
| Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (2) | | Scott R. Behrens | 2,205 | $202,606 | | Luis E. Rojo | 1,488 | $136,725 | | Robert J. Haire, Jr. (1) | — | — | | David G. Kabbes | 1,102 | $101,257 | | Sean T. Moriarty | 1,323 | $121,564 | | Arthur W. Mergner | 1,226 | $112,651 |
Long-Term Incentive Compensation
| (1) Mr. Haire joined the Company on May 1, 2023. |
Long-Term Incentive Compensation
| (2) The value is based on the market value of the Company’s Common Stock of $91.89 per share, the average of the high and low prices on February 15, 2024, the date of vesting. |
Clawback Policy
Clawback Policy The Company has adopted a Clawback Policy that applies to the Company’s executive officers who are subject to Section 16 of the Exchange Act. The current version of the policy applies to compensation received on or after October 2, 2023, and is intended to comply with applicable SEC and New York Stock Exchange requirements. Under this policy, in the event of a restatement of the Company’s financial statements, the Company will recover from all covered executives, regardless of fault and without regard to any taxes paid, compensation that would not have been paid had the restated financial statements initially been correct. The compensation that could be recovered includes short-term and long-term incentive compensation awarded based on the subsequently restated financial statements that was paid during the three completed fiscal years preceding the restatement. The previous version of the policy applies to compensation received prior to October 2, 2023. Under that version of the policy, in the event that any executive covered by the policy engages in willful misconduct or fraud that substantially contributes to a material restatement of the Company’s financial statements, the Company will recover from all covered executives compensation that would not have been paid had the restated financial statements initially been correct. The compensation that could be recovered includes short-term and long-term incentive compensation awarded based on the subsequently restated financial statements that was paid during the 12 months preceding the restatement.
Post-Termination Benefits
Post-Termination Benefits The Company does not maintain any plans or other arrangements with its executives that provide for severance or post-termination compensation in the event of a future termination of the executive’s employment. Subject to Committee approval, the Company may, however, occasionally enter into separation agreements or arrangements with its executives at the time of the executive’s termination of employment that provide for severance payments or benefits. In addition, executives and other employees may receive accelerated vesting of equity awards in the event of death or disability, and prorated accelerated vesting of equity awards in the event of retirement, pursuant to the terms of the applicable grant agreements.
2023 Summary Compensation Table
2023 Summary Compensation Table The table below summarizes the total compensation paid to or earned by each of the NEOs for the fiscal year ended on December 31, 2023 (and, to the extent applicable, December 31, 2022, and December 31, 2021). Additional information related to each component of compensation for the NEOs is provided above in the Compensation Discussion and Analysis.
2023 Summary Compensation Table
| Name and Principal Position | Year | Salary (2) | Stock Awards (3) | Option Awards (4) | Non-Equity Incentive Plan Compensation (5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (6) | All Other Compensation (7) | Total | | Scott R. Behrens (1) President and Chief Executive Officer | 2023 | $933,333 | $2,275,829 | $780,006 | — | $17,791 | $116,934 | $4,123,893 | | | 2022 | $780,833 | $1,152,739 | $1,800,005 | $1,099,840 | — | $125,929 | $4,959,346 | | | 2021 | $500,000 | $387,216 | $600,005 | $417,240 | — | $66,948 | $1,971,409 | | Luis E. Rojo Vice President and Chief Financial Officer | 2023 | $540,834 | $656,514 | $225,009 | — | N/A | $57,555 | $1,479,912 | | | 2022 | $508,333 | $307,588 | $479,995 | $529,036 | N/A | $66,650 | $1,891,602 | | | 2021 | $468,333 | $261,338 | $405,003 | $315,194 | N/A | $56,248 | $1,506,116 | | Robert J. Haire, Jr. Executive Vice President, Supply Chain | 2023 | $306,667 | $434,878 | $150,005 | — | N/A | $49,671 | $941,221 | | David G. Kabbes Vice President, General Counsel and Secretary | 2023 | $460,833 | $487,672 | $150,019 | — | N/A | $53,549 | $1,152,073 | | | 2022 | $442,500 | $230,691 | $360,005 | $425,896 | N/A | $62,694 | $1,521,786 | | | 2021 | $427,000 | $193,548 | $299,984 | $253,997 | N/A | $50,529 | $1,225,058 | | Sean T. Moriarty Vice President and General Manager – Surfactants | 2023 | $458,333 | $437,677 | $150,019 | — | $18,376 | $56,904 | $1,121,309 | | | 2022 | $437,500 | $230,691 | $360,005 | $366,891 | — | $63,566 | $1,458,653 | | | 2021 | $425,000 | $232,354 | $360,047 | $236,938 | — | $55,557 | $1,309,896 | | Arthur W. Mergner Former Executive Vice President, Supply Chain | 2023 | $416,142 | $492,305 | $168,747 | — | $31,710 | $31,516 | $1,140,420 | | | 2022 | $477,500 | $259,568 | $405,010 | $413,475 | — | $62,865 | $1,618,418 | | | 2021 | $465,000 | $261,338 | $405,003 | $252,319 | — | $55,059 | $1,438,719 |
2023 Summary Compensation Table
(1) Mr. Behrens was promoted to President and Chief Executive Officer on April 25, 2022. (2) Amount for 2023 for Mr. Mergner includes (a) vacation payout in the amount of $70,767 upon retirement and (b) fees for his consulting services after his retirement on July 3, 2023, in the amount of $100,000. (3) Amounts for 2023 include (a) the grant date fair value of RSUs granted during the fiscal year ended December 31, 2023, calculated in accordance with FASB ASC Topic 718, and (b) performance share awards that are subject to performance-based vesting conditions and reflect the target outcome award value at the date of the grant in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. See Note 11, Stock-based Compensation, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, for a discussion of relevant assumptions used in calculating the fair values pursuant to FASB ASC Topic 718. These performance share awards are subject to achievement of the performance conditions as described in the section above entitled “Compensation Discussion and Analysis—Elements of Compensation—Long-Term Incentive Compensation.” The maximum grant date values, assuming achievement of the highest level of performance conditions, would be:
2023 Summary Compensation Table
| Name | 2023 | | Scott R. Behrens | $2,916,822 | | Luis E. Rojo | $841,440 | | Robert J. Haire, Jr. | $555,558 | | David G. Kabbes | $560,891 | | Sean T. Moriarty | $560,891 | | Arthur W. Mergner | $630,977 |
2023 Summary Compensation Table
(4) Amounts for 2023 include the grant date fair value of SARs granted during the fiscal year ended December 31, 2023, calculated in accordance with FASB ASC Topic 718. See Note 11, Stock-based Compensation, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, for a discussion of relevant assumptions used in calculating the fair values pursuant to ASC Topic 718. (5) Based on the Company’s financial performance in 2023, and the related decision of the Human Capital and Compensation Committee not to give credit for individual performance objectives in light of such financial performance, the NEOs did not earn Annual Incentive Awards for 2023. (6) Amounts for 2023 reflect the actuarial increase in the present value of the NEO’s benefits under the Company’s pension plan determined using interest rate and mortality rate assumptions consistent with those used in the Company’s financial statements. (7) Amounts for 2023 include Company contributions (including profit-sharing contributions) to each NEO’s defined contribution accounts as follows: Mr. Behrens: $65,030; Mr. Rojo: $37,683; Mr. Haire: $20,367; Mr. Kabbes: $32,109; Mr. Moriarty: $31,935; and Mr. Mergner: $15,749. Amounts for 2023 also include personal use of Company-leased vehicles and airline club membership fees. Amounts for 2023 for NEOs other than Mr. Haire also include long-term disability insurance premiums; such premiums amounted to $26,828 for Mr. Behrens. Amount for 2023 for Mr. Behrens also includes personal and family use of entertainment events. Amounts for 2023 for Messrs. Behrens and Rojo also include spousal travel and service awards. Amount for 2023 for Mr. Haire also includes relocation allowance ($10,000) and moving expenses ($17,715). Amount for 2023 for Mr. Mergner also includes personal and family use of the Company-owned condominium and retirement gifts.
2023 Grants of Plan-Based Awards
2023 Grants of Plan-Based Awards
2023 Grants of Plan-Based Awards
| | Type of Award (1) | Grant Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) (3) | Grant Date Fair Value of Stock and Option Awards ($) (4) | | Name | | | Threshold ($) | Target ($) (2) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | | | Scott R. Behrens | MIP | — | $0 | $933,333 | $1,866,666 | | | | | | | | | | SA | 2/14/2023 | | | | 7,096 | 14,192 | 27,674 | | | | $1,495,837 | | | RSU | 2/14/2023 | | | | | | | 7,096 | | | $779,992 | | | SAR | 2/14/2023 | | | | | | | | 19,742 | $109.92 | $780,006 | | Luis E. Rojo | MIP | — | $0 | $405,625 | $811,250 | | | | | | | | | | SA | 2/14/2023 | | | | 2,047 | 4,094 | 7,893 | | | | $431,508 | | | RSU | 2/14/2023 | | | | | | | 2,047 | | | $225,006 | | | SAR | 2/14/2023 | | | | | | | | 5,695 | $109.92 | $225,009 | | Robert J. Haire, Jr. | MIP | — | $0 | $230,000 | $460,000 | | | | | | | | | | SA | 5/1/2023 | | | | 1,650 | 3,299 | 6,433 | | | | $284,902 | | | RSU | 5/1/2023 | | | | | | | 1,649 | | | $149,977 | | | SAR | 5/1/2023 | | | | | | | | 4,744 | $90.95 | $150,005 | | David G. Kabbes | MIP | — | $0 | $299,542 | $599,084 | | | | | | | | | | SA | 2/14/2023 | | | | 1,365 | 2,729 | 5,322 | | | | $287,637 | | | RSU | 2/14/2023 | | | | | | | 1,365 | | | $150,041 | | | SAR | 2/14/2023 | | | | | | | | 3,797 | $109.92 | $150,019 | | | RSU | 10/16/2023 | | | | | | | 762 | | | $49,995 | | Sean T. Moriarty | MIP | — | $0 | $343,750 | $687,500 | | | | | | | | | | SA | 2/14/2023 | | | | 1,365 | 2,729 | 5,322 | | | | $287,637 | | | RSU | 2/14/2023 | | | | | | | 1,365 | | | $150,041 | | | SAR | 2/14/2023 | | | | | | | | 3,797 | $109.92 | $150,019 | | Arthur W. Mergner | MIP | — | $0 | $184,031 | $368,062 | | | | | | | | | | SA | 2/14/2023 | | | | 1,535 | 3,070 | 5,987 | | | | $323,578 | | | RSU | 2/14/2023 | | | | | | | 1,535 | | | $168,727 | | | SAR | 2/14/2023 | | | | | | | | 4,271 | $109.92 | $168,747 |
2023 Grants of Plan-Based Awards
| (1) Type of Award: MIP – Management Incentive Plan award; SA – stock award (performance shares); RSU – restricted stock units; SAR – stock appreciation rights. |
2023 Grants of Plan-Based Awards
| (2) Reflects Target payouts under the Company’s Management Incentive Plan. These Target amounts are based on the NEO’s base salary and position as of the date of grant. Actual amounts paid are set forth in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. |
2023 Grants of Plan-Based Awards
| (3) Reflects the SAR exercise price, which is the average of the opening price and closing price on the date of the grant. |
2023 Grants of Plan-Based Awards
| (4) Reflects the grant date fair value calculated in accordance with FASB ASC Topic 718 for performance shares, RSUs and SARs granted during the fiscal year ended December 31, 2023. See Note 11, Stock-based Compensation, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, for a discussion of relevant assumptions used in calculating the fair values pursuant to ASC Topic 718. The performance share awards granted on February 14, 2023, are subject to achievement of the performance conditions as described in the section above entitled “Compensation Discussion and Analysis—Elements of Compensation—Long-Term Incentive Compensation.” The grant date fair values of performance share awards are calculated using the most probable outcome of applicable performance conditions. |
Outstanding Equity Awards at 2023 Fiscal Year-End
Outstanding Equity Awards at 2023 Fiscal Year-End
Outstanding Equity Awards at 2023 Fiscal Year-End
| | Option Awards | | | | Stock Awards | | | | | Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) (2) | Market Value of Shares or Units of Stock That Have Not Vested ($) (3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (3) | | Scott R. Behrens | 3,165 | | $78.58 | 2/20/2027 | 9,301 | $879,410 | 17,058 | $1,612,829 | | | 3,447 | | $72.99 | 2/20/2028 | | | | | | | 13,499 | | $92.29 | 2/19/2029 | | | | | | | 13,884 | | $102.30 | 2/18/2030 | | | | | | | 16,443 | | $123.73 | 2/16/2031 | | | | | | | 16,811 | 8,406 | $111.26 | 2/15/2032 | | | | | | | 9,001 | 18,002 | $98.00 | 4/24/2032 | | | | | | | | 19,742 | $109.92 | 2/13/2033 | | | | | | Luis E. Rojo | 7,461 | | $70.86 | 5/1/2028 | 3,535 | $334,234 | 4,453 | $421,003 | | | 13,499 | | $92.29 | 2/19/2029 | | | | | | | 13,884 | | $102.30 | 2/18/2030 | | | | | | | 11,099 | | $123.73 | 2/16/2031 | | | | | | | 8,966 | 4,483 | $111.26 | 2/15/2032 | | | | | | | | 5,695 | $109.92 | 2/13/2033 | | | | | | Robert J. Haire, Jr. | | 4,744 | $90.95 | 4/30/2033 | 1,649 | $155,913 | 1,155 | $109,172 | | David G. Kabbes | 12,077 | | $93.33 | 7/22/2029 | 3,229 | $305,302 | 3,220 | $304,451 | | | 11,571 | | $102,30 | 2/18/2030 | | | | | | | 8,221 | | $123.73 | 2/16/2031 | | | | | | | 6,724 | 3,363 | $111.26 | 2/15/2032 | | | | | | | | 3,797 | $109.92 | 2/13/2033 | | | | | | Sean T. Moriarty | 3,797 | | $78.58 | 2/20/2027 | 2,688 | $254,150 | 3,220 | $304,451 | | | 3,218 | | $72.99 | 2/20/2028 | | | | | | | 10,124 | | $92.29 | 2/19/2029 | | | | | | | 10,413 | | $102.30 | 2/18/2030 | | | | | | | 9,867 | | $123.73 | 2/16/2031 | | | | | | | 6,724 | 3,363 | $111.26 | 2/15/2032 | | | | | | | | 3,797 | $109.92 | 2/13/2033 | | | | | | Arthur W. Mergner | 12,659 | | $78.58 | 2/20/2027 | 1,226 | $115,918 | 1,378 | $130,318 | | | 13,787 | | $72.99 | 2/20/2028 | | | | | | | 13,499 | | $92.29 | 2/19/2029 | | | | | | | 13,884 | | $102.30 | 2/18/2030 | | | | | | | 7,400 | | $123.73 | 2/16/2031 | | | | | | | 3,782 | | $111.26 | 2/15/2032 | | | | | | | 475 | | $109.92 | 2/13/2033 | | | | |
Outstanding Equity Awards at 2023 Fiscal Year-End
| (1) Reflects SARs that vest as set forth in the table below. |
Outstanding Equity Awards at 2023 Fiscal Year-End
| Name | SARs (#) | Vesting Date | | Scott R. Behrens | 6,580 | 2/14/2024 | | | 9,001 | 4/25/2024 | | | 8,406 | 12/31/2024 | | | 6,581 | 2/14/2025 | | | 9,001 | 4/25/2025 | | | 6,581 | 2/14/2026 | | Luis E. Rojo | 1,898 | 2/14/2024 | | | 4,483 | 12/31/2024 | | | 1,898 | 2/14/2025 | | | 1,899 | 2/14/2026 | | Robert J. Haire, Jr. | 1,581 | 5/1/2024 | | | 1,581 | 5/1/2025 | | | 1,582 | 5/1/2026 | | David G. Kabbes | 1,265 | 2/14/2024 | | | 3,363 | 12/31/2024 | | | 1,266 | 2/14/2025 | | | 1,266 | 2/14/2026 | | Sean T. Moriarty | 1,265 | 2/14/2024 | | | 3,363 | 12/31/2024 | | | 1,266 | 2/14/2025 | | | 1,266 | 2/14/2026 |
Outstanding Equity Awards at 2023 Fiscal Year-End
| (2) For NEOs other than Mr. Haire, reflects stock awards granted in February 2021 that vested in February 2024 based on the Company’s achievement of pre-established goals for the performance measurement period ended December 31, 2023. Also reflects RSUs that vest as set forth in the table below. |
Outstanding Equity Awards at 2023 Fiscal Year-End
| Name | RSUs (#) | Vesting Date | | Scott R. Behrens | 2,365 | 2/14/2024 | | | 2,365 | 2/14/2025 | | | 2,366 | 2/14/2026 | | Luis E. Rojo | 682 | 2/14/2024 | | | 682 | 2/14/2025 | | | 683 | 2/14/2026 | | Robert J. Haire, Jr. | 549 | 5/1/2024 | | | 550 | 5/1/2025 | | | 550 | 5/1/2026 | | David G. Kabbes | 455 | 2/14/2024 | | | 254 | 10/16/2024 | | | 455 | 2/14/2025 | | | 254 | 10/16/2025 | | | 455 | 2/14/2026 | | | 254 | 10/16/2026 | | Sean T. Moriarty | 455 | 2/14/2024 | | | 455 | 2/14/2025 | | | 455 | 2/14/2026 |
Outstanding Equity Awards at 2023 Fiscal Year-End
| (3) The market value of stock awards reported in this table is based on the $94.55 closing market price of the Company’s Common Stock on December 29, 2023. |
Outstanding Equity Awards at 2023 Fiscal Year-End
| (4) Reflects stock awards that will vest as set forth in the table below based on the Company’s achievement of pre-established performance goals. The number of shares that vest following the ROIC performance period ending December 31, 2024, will be determined based on the number of shares earned for the one-year Corporate Net Income measurement period ended December 31, 2022, with the shares earned increased or decreased based on the average ROIC achieved for the three-year period ending December 31, 2024. The number of shares that vest following the ROIC performance period ending December 31, 2025, will be determined based on the number of shares earned for the one-year Corporate Net Income measurement period ended December 31, 2023, with the shares earned increased or decreased based on the average ROIC achieved for the three-year period ending December 31, 2025. The number of shares reported for awards with a performance period ending December 31, 2024, is based on achieving Maximum Corporate Net Income performance with the ROIC modifier for Threshold performance because the Company exceeded Target Corporate Net Income and did not meet Threshold ROIC performance in the applicable measurement period. The number of shares reported for awards with a performance period ending December 31, 2025, is based on achieving Threshold Corporate Net Income performance with the ROIC modifier for Threshold performance. Because the Company did not meet Threshold Corporate Net Income in the applicable measurement period, no amounts will be earned for awards with a performance period ending December 31, 2025. |
Outstanding Equity Awards at 2023 Fiscal Year-End
| Name | Stock Awards (#) | Last Day of Performance Period | | Scott R. Behrens | 11,515 | 12/31/2024 | | | 7,096 | 12/31/2025 | | Luis E. Rojo | 2,876 | 12/31/2024 | | | 2,047 | 12/31/2025 | | Robert J. Haire, Jr. | 1,650 | 12/31/2025 | | David G. Kabbes | 2,157 | 12/31/2024 | | | 1,365 | 12/31/2025 | | Sean T. Moriarty | 2,157 | 12/31/2024 | | | 1,365 | 12/31/2025 | | Arthur W. Mergner | 2,427 | 12/31/2024 | | | 256 | 12/31/2025 |
2023 Option Exercises and Stock Vested
2023 Option Exercises and Stock Vested
2023 Option Exercises and Stock Vested
| | Option Awards (1) | | Stock Awards (2) | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (3) | | Scott R. Behrens | — | — | 3,833 | $402,350 | | Luis E. Rojo | — | — | 3,833 | $402,350 | | Robert J. Haire, Jr. | — | — | — | — | | David G. Kabbes | — | — | 3,194 | $335,274 | | Sean T. Moriarty | — | — | 2,875 | $301,789 | | Arthur W. Mergner | 14,200 | $786,566 | 3,833 | $402,350 |
2023 Option Exercises and Stock Vested
| (1) Reflects exercises of stock options and stock-settled SARs. |
2023 Option Exercises and Stock Vested
| (2) The stock awards, which were granted in 2020, vested in 2023 as a result of the Company achieving certain financial performance targets during the performance period ended December 31, 2022. |
2023 Option Exercises and Stock Vested
| (3) The value is based on the market value of the Company’s Common Stock of $104.97 per share, the average of the high and low prices on March 3, 2023, the date of issuance. |
2023 Pension Benefits
2023 Pension Benefits The pension values included in the table below are the present value of the benefits expected to be paid in the future under the Company’s Retirement Plan for Salaried Employees. The amount of each future payment is based on the current accrued pension benefit and the values of the benefits issued under these plans are determined using interest rate and mortality rate assumptions consistent with those used in the Company’s financial statements. The retirement age is the earliest unreduced retirement age as defined in each plan. The Company froze the Retirement Plan for Salaried Employees in 2006. Further information regarding the Company’s Retirement Plans is provided above in the Compensation Discussion and Analysis. For the Retirement Plan for Salaried Employees amounts included in the Present Value of Accumulated Benefit column, the normal retirement benefit is based on the following formula:
2023 Pension Benefits
| • | 50% of final average earnings less 50% of the participant’s primary Social Security benefit multiplied by service up to 30 years divided by 30. |
2023 Pension Benefits
| • | Normal Retirement: Age 65. |
2023 Pension Benefits
| • | Early Retirement: Retirement before age 65 but after attaining age 55 and completing five years of vesting service. The normal retirement benefit is reduced by 0.33% per month for each month between the date on which payments begin and the date of the participant’s 63rd birthday. Arthur W. Mergner is eligible to begin early retirement benefits. |
2023 Pension Benefits
| • | Service: Credited from the date of hire to June 30, 2006, with a maximum of 30 years. |
2023 Pension Benefits
| • | Final Average Earnings: Highest consecutive five years of base compensation during last ten years of service through June 30, 2006. This amount is limited for the Retirement Plan for Salaried Employees to the amount allowed by the Internal Revenue Code of 1986, as amended (the “Code”) regulations. |
2023 Pension Benefits
The specific assumptions used in estimating the amounts in the Present Value of Accumulated Benefit column include:
2023 Pension Benefits
| • | Assumed Retirement Age: Pension benefits are assumed to begin at each participant’s earliest unreduced retirement age, but not before the participant’s current age. The earliest unreduced retirement age is 63 for both plans. |
2023 Pension Benefits
| • | Discount Rate: The applicable discount rate as of December 31, 2023, was 5.2%. |
2023 Pension Benefits
| • | Mortality Table: The mortality table used as of December 31, 2021, is the Pri-2012 table (with contingent survivor mortality rates used after the original retiree’s death) projected forward generationally using Order 2 variation of scale MP-2021 with separate improvement tables for males and females. The mortality table used as of December 31, 2022, is the Pri-2012 table (with contingent survivor mortality rates used after the original retiree’s death) projected forward generationally using Order 2 variation of scale MP-2021 with separate improvement tables for males and females. There was no update to mortality. The mortality table used as of December 31, 2023, is the Pri-2012 table (with contingent survivor mortality rates used after the original retiree’s death) projected forward generationally using Order 2 variation of scale MP-2021 with separate improvement tables for males and females. There was no update to mortality. |
2023 Pension Benefits
The information shown in the table below has been developed based on actuarial assumptions that the Company believes to be reasonable. Other actuarial assumptions could also be considered to be reasonable and would result in different values.
2023 Pension Benefits
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | | Scott R. Behrens | Retirement Plan for Salaried Employees | 13.4 | $172,726 | — | | Luis E. Rojo | Retirement Plan for Salaried Employees | N/A | N/A | N/A | | Robert J. Haire, Jr. | Retirement Plan for Salaried Employees | N/A | N/A | N/A | | David G. Kabbes | Retirement Plan for Salaried Employees | N/A | N/A | N/A | | Sean T. Moriarty | Retirement Plan for Salaried Employees | 13.8 | $178,982 | — | | Arthur W. Mergner | Retirement Plan for Salaried Employees | 17.4 | $363,725 | — |
2023 Nonqualified Deferred Compensation
2023 Nonqualified Deferred Compensation Pursuant to the Company’s Management Incentive Plan, certain executives, including the NEOs, may defer annual incentive awards earned. Deferral elections are made by eligible executives in June of each year for the amounts to be earned for that year. An executive may defer all or a portion of his or her award pursuant to the provisions of the Management Incentive Plan. Deferred amounts are credited with earnings or losses based on the rate of return of mutual funds selected by the executive, which the executive may change as allowed under the Management Incentive Plan. Additional information regarding the Management Incentive Plan is included in the “Elements of Compensation” section of the Compensation Discussion and Analysis. After an executive has elected to defer all or a portion of his or her annual incentive awards, no amounts can be paid until the executive has separated from service with the Company in accordance with the provisions of the Management Incentive Plan. At that time, benefits in the executive’s account shall be paid in a single sum or in substantially equal annual installments over three, five or ten years, as elected by the executive. Executives may also elect to defer receipt of all or a portion of certain incentive compensation payments in accordance with the Stepan Company Performance Award Deferred Compensation Plan (effective January 1, 2008) (the “Performance Award Deferred Compensation Plan”). Information regarding deferrals under the Management Incentive Plan and Performance Award Deferred Compensation Plan is included in the table below.
2023 Nonqualified Deferred Compensation
| Name | Plan | Executive Contributions in Last Fiscal Year ($) (1) | Registrant Contributions in Last Fiscal Year ($) | Aggregate Earnings (Losses) in Last Fiscal Year ($) (2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year-End ($) (3) | | Scott R. Behrens | Management Incentive Plan | — | — | (84,011) | — | 1,775,204 | | | Performance Award Deferred Compensation Plan | — | — | (127,215) | — | 1,030,955 | | Luis E. Rojo | Management Incentive Plan | — | — | 169,094 | — | 1,237,333 | | | Performance Award Deferred Compensation Plan | — | — | (39,713) | — | 366,889 | | Robert J. Haire, Jr. | Management Incentive Plan | — | — | — | — | — | | | Performance Award Deferred Compensation Plan | — | — | — | — | — | | David G. Kabbes | Management Incentive Plan | — | — | 19,192 | — | 232,140 | | | Performance Award Deferred Compensation Plan | — | — | — | — | — | | Sean T. Moriarty | Management Incentive Plan | — | — | (48,471) | — | 594,220 | | | Performance Award Deferred Compensation Plan | — | — | — | — | — | | Arthur W. Mergner | Management Incentive Plan | — | — | 21,165 | — | 1,653,056 | | | Performance Award Deferred Compensation Plan | — | — | (319,448) | — | 2,633,866 |
2023 Nonqualified Deferred Compensation
| (1) Reflects annual incentive awards deferred, if any, under the Management Incentive Plan for 2023, which otherwise would have been paid in 2024. Amounts deferred pursuant to the Management Incentive Plan are included in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table for 2023. Also reflects performance share awards deferred, if any, under the Performance Award Deferred Compensation Plan for the performance period ended on December 31, 2023, which otherwise would have been distributed in 2024. |
2023 Nonqualified Deferred Compensation
| (2) These amounts are not included in the Summary Compensation Table for 2023 because the amounts included in this column do not include above-market or preferential earnings. |
2023 Nonqualified Deferred Compensation
| (3) The following amounts reported in this column previously were reported as compensation in prior years’ Summary Compensation Tables: Mr. Behrens: $1,894,200, Mr. Rojo: $1,556,899, Mr. Kabbes: $212,948, Mr. Moriarty: $47,554 and Mr. Mergner: $4,009,628. |
Potential Payments upon Termination or Change in Control
Potential Payments upon Termination or Change in Control The Company has no contracts, agreements, plans or other arrangements with its executives that provide for severance payments to NEOs in connection with a termination or change in control of the Company other than (1) benefits and payments disclosed in the 2023 Pension Benefits and 2023 Nonqualified Deferred Compensation tables above, (2) employee benefit plans and arrangements that do not discriminate in scope, terms or operation in favor of executive officers and that are generally available to all salaried employees and (3) the long-term incentive awards, which provide for accelerated vesting on termination or change in control as described below. The Company may, however, occasionally enter into separation agreements with its executives at the time of the executive’s termination of employment that provide for severance payments or benefits. RSUs and SARs granted under the Company’s 2022 Equity Incentive Compensation Plan vest on a pro rata basis upon retirement and vest in full upon a termination of employment due to death or disability. Performance shares granted under the Company’s 2022 Equity Incentive Compensation Plan or under the Company’s 2011 Incentive Compensation Plan remain outstanding and eligible to vest based on actual performance on a pro rata basis in the case of retirement and in full in the case of death or disability. Under the 2022 Equity Incentive Compensation Plan, (a) if a replacement award is not granted, upon a change in control or (b) if a replacement award is granted, upon a termination by the Company without cause or a termination by the employee for good reason within two years following a change in control, outstanding RSUs and SARs vest in full and performance shares vest at the applicable target payout. The 2011 Incentive Compensation Plan does not require accelerated vesting of (i) RSUs or SARs in the event a termination of employment due to retirement, death or disability or in connection with a change in control or (ii) performance shares in connection with a change in control. The table below quantifies the estimated benefit to NEOs other than Mr. Mergner in connection with a trigger occurring on the last business day of the Company’s 2023 fiscal year based on a share price of $94.55, the closing price of the Company’s Common Stock on December 29, 2023. Because Mr. Mergner retired from the Company on July 3, 2023, the following table does not show estimated benefits to Mr. Mergner in connection with a death, disability or change in control triggering event. The amounts shown for Mr. Mergner reflect the value of the outstanding RSUs and SARs the vesting of which accelerated upon his retirement. The amounts shown for Mr. Mergner also reflect the value of performance shares that remained outstanding at Mr. Mergner’s retirement and were eligible to vest after the end of the applicable performance periods. The closing price of the Company’s Common Stock on the date of Mr. Mergner’s retirement was $95.47. The performance share amounts for all NEOs assume performance at target levels for the applicable performance periods.
Potential Payments upon Termination or Change in Control
| Name | Type of Award | Retirement ($) | Death or Disability ($) | Qualifying Termination in Connection with Change in Control ($) | | Scott R. Behrens | RSUs | 186,369 | 670,927 | 670,927 | | | SARs | — | — | — | | | Performance Shares | 1,478,794 | 2,736,277 | 1,341,854 | | | Total | 1,665,162 | 3,407,204 | 2,012,780 | | Luis E. Rojo | RSUs | 53,762 | 193,544 | 193,544 | | | SARs | — | — | — | | | Performance Shares | 516,621 | 865,322 | 387,088 | | | Total | 570,383 | 1,058,865 | 580,632 | | Robert J. Haire, Jr. | RSUs | 34,647 | 155,913 | 155,913 | | | SARs | 3,795 | 17,078 | 17,078 | | | Performance Shares | 103,973 | 311,920 | 311,920 | | | Total | 142,416 | 484,912 | 484,912 | | David G. Kabbes | RSUs | 39,853 | 201,108 | 201,108 | | | SARs | — | — | — | | | Performance Shares | 374,765 | 614,764 | 258,027 | | | Total | 414,618 | 815,872 | 459,135 | | Sean T. Moriarty | RSUs | 35,850 | 129,061 | 129,061 | | | SARs | — | — | — | | | Performance Shares | 354,447 | 645,398 | 258,027 | | | Total | 390,297 | 774,459 | 387,088 | | Arthur W. Mergner | RSUs | 16,283 | | | | | SARs | — | | | | | Performance Shares | 338,298 | | | | | Total | 354,581 | | |
CEO Pay Ratio
CEO Pay Ratio As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information regarding the ratio of the annual total compensation of the Company’s median employee to the annual total compensation of Scott R. Behrens, the Company’s President and Chief Executive Officer. We consider the pay ratio specified below to be a reasonable estimate, calculated in a manner that is intended to be consistent with the requirements of Item 402(u) of Regulation S-K. For the fiscal year ended December 31, 2023:
CEO Pay Ratio
| • | The median of the annual total compensation of all employees of the Company, except the President and Chief Executive Officer, was $72,284; |
CEO Pay Ratio
| • | The annual total compensation of the Company’s President and Chief Executive Officer was $4,123,893; and |
CEO Pay Ratio
| • | The ratio of the median of the annual total compensation of all Company employees, other than the Company’s President and Chief Executive Officer, to the annual total compensation of the Company’s President and Chief Executive Officer was approximately 1 to 57. |
CEO Pay Ratio
The Company chose December 31, 2023, as the date for determining the employee population used to identify the median employee. The Company identified the median employee using the base salaries of all employees globally, converting local currency non-U.S. base salaries into U.S. dollars using December 31, 2023, exchange rates. Permanent employees who joined in 2023 and permanent employees who were on leave during 2023 were assumed to have worked for the entire year. The Company used base salaries to identify the median employee because the Company does not widely distribute annual equity awards to employees and because this measure approximately reflects the total annual compensation of employees. The Company calculated the median employee’s and the President and Chief Executive Officer’s annual total compensation consistent with the disclosure requirements for the Summary Compensation Table. For purposes of this calculation, the median employee’s annual total compensation consisted of wages, premium pay (including overtime, holiday pay and shift differential), paid time off, non-equity incentive plan compensation, change in pension value and retirement plan contributions.
Pay Versus Performance Table
Pay Versus Performance Table As required by Item 402(v) of Regulation S-K, we are providing the following information about the relationship between compensation actually paid (“CAP”), as defined in Item 402(v), and performance.
Pay Versus Performance Table
| Year | Summary Compensation Table Total for First Principal Executive Officer (PEO) (1) | Compensation Actually Paid to First PEO (2)(3) | Summary Compensation Table Total for Second (PEO) (1) | Compensation Actually Paid to Second PEO (2)(3) | Average Summary Compensation Table Total for Non-PEO Named Executive Officers (NEOs) (1) | Average Compensation Actually Paid to Non-PEO NEOs (2)(3) | Value of Initial Fixed $100 Investment Based On: | | Net Income (millions) (5) | Adjusted Net Income (millions) (6) | | | | | | | | | Total Shareholder Return | Peer Group Total Shareholder Return (4) | | | | 2023 | $4,123,893 | $1,047,254 | — | — | $1,166,988 | $486,718 | $97 | $143 | $40.2 | $50.7 | | 2022 | $4,959,346 | $5,118,772 | $4,745,670 | $243,286 | $1,622,615 | $1,470,109 | $108 | $130 | $147.2 | $153.5 | | 2021 | — | — | $5,380,963 | $5,838,352 | $1,556,535 | $1,666,269 | $124 | $116 | $137.8 | $143.5 | | 2020 | — | — | $6,330,645 | $8,750,899 | $1,705,840 | $2,223,882 | $118 | $116 | $126.8 | $132.0 |
Pay Versus Performance Table
| (1) For 2022 and 2023, the first PEO listed is Scott R. Behrens, who became President and Chief Executive Officer on April 25, 2022, and the second PEO listed is F. Quinn Stepan, Jr., who served as President and Chief Executive Officer until April 25, 2022. For 2020 and 2021, F. Quinn Stepan Jr. was the PEO but is designated second PEO in the chart for those years. Our other NEOs for the covered years were as follows: |
Pay Versus Performance Table
| 2020 | 2021 | 2022 | 2023 | | Luis E. Rojo | Luis E. Rojo | Luis E. Rojo | Luis E. Rojo | | Arthur W. Mergner | Arthur W. Mergner | Arthur W. Mergner | Arthur W. Mergner | | David G. Kabbes | Sean T. Moriarty | David G. Kabbes | David G. Kabbes | | Scott R. Behrens | Scott R. Behrens | Sean T. Moriarty | Sean T. Moriarty | | | | | Robert J. Haire, Jr. |
Pay Versus Performance Table
| (2) The following adjustments relating to equity awards were made to total compensation to determine CAP for 2023: |
Pay Versus Performance Table
| Year | Value of Equity Awards Disclosed in the Summary Compensation Table (Stock Awards and Option Awards Columns) | | Year End Value of Equity Awards Granted During the Covered Year | Change in Fair Value of Outstanding and Unvested Equity Awards as of Covered Year-End | | Fair Value of Awards Granted and Vesting in the Covered Year | Value of Awards Granted in Prior Years Vesting During the Covered Year | | Value of Awards Granted in Prior Years that Fail to Meet Applicable Vesting Conditions During the Covered Year | | Total Equity Award Adjustments | | | 2023 First PEO | -$ | 3,055,835 | $1,179,324 | -$ | 835,066 | $0 | -$ | 347,271 | | 0 | -$ | 3,058,848 | | 2023 Average Non-PEO NEO | -$ | 670,569 | $298,733 | -$ | 102,574 | $5,980 | -$ | 90,433 | -$ | 111,389 | -$ | 670,253 |
Pay Versus Performance Table
| The valuation methodologies used to calculate fair values for each measurement date do not materially differ from those used at the time of grant of each respective award. |
Pay Versus Performance Table
| (3) The following adjustments relating to the Company’s frozen defined benefit and pension plans (as applicable) were made to total compensation for each year to determine CAP: |
Pay Versus Performance Table
| | Aggregate Change in Actuarial Present Value of Pension Benefits | | Service Cost and Prior Service Cost of Pension Benefits | | Total Pension Benefit Adjustments | | | | | Year | First PEO | Non-PEO NEOs | First PEO | Non-PEO NEOs | First PEO | | Non-PEO NEOs | | | 2023 | -$17,791 | -$10,017 | $0 | $0 | -$ | 17,791 | -$ | 10,017 |
Pay Versus Performance Table
| (4) Represents the cumulative total shareholder return (“TSR”) for the Dow Jones U.S. Chemicals Index. |
Pay Versus Performance Table
| (5) The dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the applicable year (GAAP net income). |
Pay Versus Performance Table
| (6) Adjusted net income represents the most important financial performance measure used by the Company to link CAP for 2023 to Company performance. 4 |
Analysis of the Information Presented in the Pay versus Performance Table
Analysis of the Information Presented in the Pay versus Performance Table The graphics below depict the relationship between (a) CAP and Company TSR, and Dow Jones U.S. Chemicals Index TSR (referred to as the “peer group TSR” for purposes of Item 402(v) of Regulation S-K), and (b) between CAP and GAAP net income and adjusted net income. 4 Adjusted net income is a financial measure that has not been calculated pursuant to U.S. GAAP. See Appendix A for further discussion and a reconciliation of this non-GAAP financial measure to net income, the most directly comparable GAAP measure.
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION
Overview of Director Compensation Program
Overview of Director Compensation Program The Human Capital and Compensation Committee engaged Exequity as its independent consultant for Board compensation for 2023. Exequity advises the Committee on Board compensation matters such as the annual retainer fee, Board committee chair fees, and stock awards based on the Company’s peer group and market competitiveness. The Company uses a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on the Board. The Human Capital and Compensation Committee annually reviews the adequacy and competitiveness of the amount of the annual retainer fee, Board committee chair fees, and stock awards, and makes adjustments as it deems appropriate.
2023 Director Compensation Table
2023 Director Compensation Table The table below summarizes the compensation paid by the Company to Non-Employee Directors for the fiscal year ended December 31, 2023.
2023 Director Compensation Table
| Name (1) | Fees Earned or Paid in Cash | Stock Awards (2) | Total | | Lorinda A. Burgess | $120,000 | $124,974 | $244,974 | | Randall S. Dearth | $105,604 | $124,974 | $230,578 | | Joaquin Delgado | $120,000 | $124,974 | $244,974 | | Gregory E. Lawton | $75,916 | $124,974 | $200,890 | | Jan Stern Reed | $120,000 | $124,974 | $244,974 | | F. Quinn Stepan, Jr. | $325,000 | $124,974 | $449,974 | | Edward J. Wehmer | $120,000 | $124,974 | $244,974 |
2023 Director Compensation Table
| (1) Gregory E. Lawton’s term as a director ended on August 18, 2023. Susan M. Lewis is not included in this table because her service as a director began on February 15, 2024. |
2023 Director Compensation Table
| (2) Reflects stock awards granted in April 2023, which were vested upon grant. Each Non-Employee Director was awarded 1,325 shares. The value is based on the market value of the Company’s Common Stock of $94.32, the average of the opening and closing prices of Common Stock on the day of the grant in accordance with FASB ASC Topic 718. For information regarding outstanding stock option awards held by certain Non-Employee Directors as of the end of fiscal year 2023, see “Security Ownership of the Board of Directors and Management.” |