DEF 14A of Stanley Black & Decker, Inc.
Filed Mar 8, 2024 · FY20230001206774-24-000242
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
| POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL | 59 | | CEO PAY RATIO | 69 | | PAY VERSUS PERFORMANCE | 70 | | ITEM 2—ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS | 74 | | ITEM 3—APPROVAL OF 2024 OMNIBUS AWARD PLAN | 75 | | ITEM 4—APPROVAL OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM | 82 | | VOTING INFORMATION | 83 | | APPENDIX A—RECONCILIATION OF GAAP TO NON-GAAP MEASURES USED IN THIS PROXY STATEMENT | 88 | | APPENDIX B—2024 OMNIBUS AWARD PLAN | 92 |
CORPORATE GOVERNANCE HIGHLIGHTS
CORPORATE GOVERNANCE HIGHLIGHTS The Corporate Governance Committee and the Board are committed to managing the Company with integrity and strong corporate governance to generate long-term value for all of our stakeholders. In line with this commitment, our Corporate Governance Guidelines, Restated Certificate of Incorporation, as amended, and Bylaws are regularly reviewed and updated to incorporate robust governance practices and regulatory updates, including the following practices:
CORPORATE GOVERNANCE HIGHLIGHTS
| Governance Principle | Corporate Governance Practice | | Accountability to Shareholders | ● Only one class of common stock, with one vote per share ● Annual director elections, with majority standard for uncontested elections, and director resignation policy ● Proxy access, allowing eligible long-term shareholders holding 3% or more of our outstanding shares of common stock to include nominations for directors in the Company’s Proxy Statement ● No shareholder rights (“poison pill”) plan ● Shareholder right to act by written consent and to amend Bylaws by a majority vote ● Shareholders representing 25% of voting power may call special meeting | | Robust Board Independence | ● Independent Board Chair ● All directors are independent, other than our CEO ● Independent directors meet in executive session at each regularly scheduled Board and committee meeting | | Comprehensive Board Policies and Practices | ● Committed to balanced Board refreshment with six new directors in the last four years and a mixture of director tenures. ● Director overboarding policy that prevents directors from serving on more than four other public company boards (or one other public company board for the CEO) ● Mandatory director retirement at age 75 to support efficient succession planning ● Annual Board and committee self-assessments to review effectiveness ● Full Board reviews ESG strategies and goals as a component of our annual strategic plan review process while the Corporate Governance Committee provides director oversight of the Company’s ESG policies, objectives and practices | | Alignment of Interests with Long-term Shareholders | ● Policy adopted to prohibit the hedging or pledging of Company stock for all directors, executive officers and employees ● Robust stock ownership guidelines for directors and executive officers | | Compensation Governance aligns with Best Practices | ● Both our 2022 equity plan and our proposed 2024 equity plan contain an annual limit on total director compensation ● No excise tax gross-ups under change in control agreements with executive officers or our equity plans and no tax gross-ups on perquisites, other than on relocation benefits ● Double trigger vesting provisions requiring both a change in control and qualifying termination of employment under our equity plans ● Recoupment (“clawback”) policies covering equity and cash incentive compensation of all Section 16 Officers, including in compliance with Rule 10D-1 and related NYSE listing standards |
Board Nominees
Board Nominees The following table provides summary information about each of the Company’s current directors (please see “Item 1—Election of Directors” for more information). Because the election of directors is uncontested, directors will be elected by the vote of the majority of votes cast, which means that the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that director. An incumbent director who fails to achieve a majority of the votes cast for his or her election will offer to tender his or her resignation from the Board. The Corporate Governance Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the Corporate Governance Committee’s recommendation, considering all factors that the Board believes to be relevant, and will publicly disclose its decision within 90 days from the date of the certification of the election results. The resignation, if accepted by the Board, will be effective at the time of the Board’s determination to accept the resignation.
Board Nominees
| Name | Age | Director Since | Occupation | Committee Memberships | | | | | | | | | | Exec. | Audit | Corporate Governance | Finance & Pension | Comp. & Talent Dev. | | Andrea J. Ayers, Chair of the Board | 60 | 2014 | Retired President and Chief Executive Officer, Convergys Corporation | C | | | | | | Donald Allan, Jr. | 59 | 2022 | President and Chief Executive Officer, Stanley Black & Decker, Inc. | | | | | | | Patrick D. Campbell | 71 | 2008 | Retired Senior Vice President and Chief Financial Officer, 3M Company | | C | | | | | Susan K. Carter | 65 | 2023 | Retired Senior Vice President and Chief Financial Officer, Ingersoll Rand plc (now Trane Technologies plc) | | | | | | | Debra A. Crew | 53 | 2013 | Chief Executive, Diageo plc | | | | | C | | Michael D. Hankin | 66 | 2016 | President and Chief Executive Officer, Brown Advisory Incorporated | | | | C | | | Robert J. Manning | 60 | 2022 | Retired Chairman and Chief Executive Officer, MFS Investment Management | | | | | | | Adrian V. Mitchell | 50 | 2022 | Chief Operating Officer and Chief Financial Officer, Macy’s, Inc. | | | | | | | Jane M. Palmieri | 54 | 2021 | President, Industrial Intermediates & Infrastructure, Dow Inc. | | | | | | | Mojdeh Poul | 61 | 2021 | Former Executive Vice President, Healthcare Business Group, 3M Company | | | | | | | Irving Tan | 53 | 2020 | Executive Vice President, Global Operations, Western Digital Corporation | | | C | | |
Board Nominees
Committee composition and Committee Chair designations are as of the date of this Proxy Statement. Committee memberships are indicated in yellow, with Committee Chairs indicated by a “C”. In anticipation of Mr. Campbell transitioning off the Board at the Annual Meeting, Mr. Manning will join the Audit Committee and replace Mr. Campbell as Audit Committee Chair effective March 9, 2024. All current directors, other than Mr. Allan, are independent.
ITEM 1—ELECTION OF DIRECTORS
ITEM 1—ELECTION OF DIRECTORS The Board, based on the recommendation of the Corporate Governance Committee, has nominated the ten nominees set forth below to the Board of Directors, each of whom will hold office until the next Annual Meeting of Shareholders or until his or her successor shall have been elected and qualified. Patrick D. Campbell will be completing his tenure as a member of the Board effective as of the Annual Meeting, at which time the size of the Board will be reduced to 10 directors. Mr. Campbell and each of the nominees is currently a director of the Company and was most recently elected at the 2023 Annual Meeting to hold office until the 2024 Annual Meeting or until his or her successor has been elected and qualified, except for Susan K. Carter. Ms. Carter was elected as a director by the Board of Directors effective October 23, 2023, and was recommended to the Corporate Governance Committee by an independent third-party search firm. Each nominee has consented to serving as a nominee, being named in this Proxy Statement, and serving on the Board until the 2025 Annual Meeting if elected. The Board expects that the ten nominees will be available to serve as directors. However, if, for any reason, any nominee should not be a candidate for election at the time of the Annual Meeting, the proxies may be voted, at the discretion of those named as proxies, for a substitute nominee or the Board may reduce its size. The Board of Directors recommends a vote FOR each nominee.
Information Concerning Nominees for Election as Directors
Information Concerning Nominees for Election as Directors
Information Concerning Nominees for Election as Directors
| DONALD ALLAN, JR. President and Chief Executive Officer of the Company | | | Director Since 2022 Age 59 Committees Served: ● Executive | Expertise As CEO of the Company, Mr. Allan provides the Board with essential experience and expertise gained from his service in several executive roles over his 20+ year tenure at the Company, including intimate knowledge of the daily workings of the business. This expertise is critical to the Board when overseeing the execution of the Company’s strategy. Business Experience Stanley Black & Decker ● President & Chief Executive Officer (July 2022 to present) ● President & Chief Financial Officer (February 2021 to July 2022) ● Executive Vice President & Chief Financial Officer (2016 to February 2021) ● Senior Vice President & Chief Financial Officer (2010 to 2016) ● Vice President & Chief Financial Officer (2009 to 2010) ● Vice President & Corporate Controller (2002 to 2009) ● Corporate Controller (2000 to 2002) ● Assistant Controller (1999 to 2000) Loctite Corporation ● Mr. Allan held financial management positions of increasing responsibility Ernst & Young ● Mr. Allan held financial management positions of increasing responsibility Other Current Public Company Directorships ● None Past Public Company Directorships (Last 5 Years) ● None |
Information Concerning Nominees for Election as Directors
| ANDREA J. AYERS Retired President and Chief Executive Officer of Convergys Corporation | | | Independent Director Since 2014 (elected Chair in 2022) Age 60 Committees Served: ● Compensation and Talent Development ● Executive (Chair) ● Finance and Pension | Expertise Ms. Ayers’ experience transforming Convergys Corporation from a company with three business lines to a customer management solutions company with approximately 125,000 employees worldwide provides critical insight as the Board navigates important strategic decisions related to the Company’s transformation and its global operations. Her expertise in customer management analytics, technology, and human capital management provides an important and unique perspective to the Board. Business Experience Convergys Corporation, a customer outsourcing services company ● President & Chief Executive Officer (November 2012 to October 2018) ● Chief Operating Officer of Convergys Customer Management Group Inc. (2010 to 2012) ● President of Convergys Customer Management Group Inc. (2008 to 2012) Other Current Public Company Directorships ● United States Steel Corporation (2023 to present) Past Public Company Directorships (Last 5 Years) ● Endurance International Group Holdings, Inc. (2019 to 2021) |
Information Concerning Nominees for Election as Directors
| SUSAN K. CARTER Retired Senior Vice President and Chief Financial Officer of Ingersoll Rand plc (now Trane Technologies plc) | | | Independent Director Since 2023 Age 65 Committees Served: ● Audit ● Corporate Governance | Expertise Ms. Carter brings more than 30 years of financial and leadership experience to the Board. Ms. Carter has helped multiple public companies, including Ingersoll Rand plc (now Trane Technologies plc), deliver long-term shareholder value by driving execution and optimizing business and financial performance. Ms. Carter’s extensive experience in financial reporting, information technology, accounting, capital management, and global operations significantly enhances our Board’s oversight of these matters. Business Experience Ingersoll Rand plc (now Trane Technologies plc), a diversified, global industrial manufacturer of sustainable and efficient climate solutions for buildings, homes and transportation ● Senior Vice President & Chief Financial Officer (2013 to 2020) KBR, Inc. ● Executive Vice President & Chief Financial Officer (2009 to 2013) Lennox International Inc. ● Executive Vice President & Chief Financial Officer (2004 to 2009) Cummins Inc. ● Vice President & Chief Accounting Officer (2002 to 2004) Other Current Public Company Directorships ● Amcor plc (2021 to present) ● ON Semiconductor Corporation (2020 to present; Chair of Audit Committee) Past Public Company Directorships (Last 5 Years) ● Air Products and Chemicals, Inc. (2011 to 2021) |
Information Concerning Nominees for Election as Directors
| DEBRA A. CREW Chief Executive of Diageo plc | | | Independent Director Since 2013 Age 53 Committees Served: ● Compensation and Talent Development (Chair) ● Executive ● Finance and Pension | Expertise Ms. Crew brings a breadth of marketing, operations and strategy experience to the Board, underscored by her executive roles at Diageo plc, Reynolds American, Inc., and PepsiCo, Inc. Ms. Crew’s global perspective and exposure to world class innovation planning processes, combined with proven commercial excellence at leading consumer products companies, provides the Board with critical insights. Business Experience Diageo plc, a global alcoholic beverage company ● Chief Executive (June 2023 to present) ● Interim Chief Executive (June 2023) ● Chief Operating Officer (October 2022 to June 2023) ● President, North America & Global Supply (July 2020 to September 2022) Reynolds American, Inc. ● President & Chief Executive Officer (January 2017 to December 2017) R.J. Reynolds Tobacco Co. ● President & Chief Operating Officer (October 2015 to December 2016) ● President & Chief Commercial Officer (October 2014 to October 2015) PepsiCo, Inc. ● Ms. Crew held roles of increasing responsibility including, President, North America Nutrition; President, PepsiCo Americas Beverages; and President, Western Europe Kraft Foods, Nestlé S.A. and Mars, Inc. ● Ms. Crew held roles of increasing responsibility (1997 to 2010) United States Army ● Captain (1993 to 1997) Other Current Public Company Directorships ● Diageo plc (June 2023 to present) Past Public Company Directorships (Last 5 Years) ● Mondelēz International, Inc. (2018 to 2021) ● Newell Brands Inc. (2018 to 2020) ● Diageo plc (2019 to 2020) |
Information Concerning Nominees for Election as Directors
| MICHAEL D. HANKIN President and Chief Executive Officer of Brown Advisory Incorporated | | | Independent Director Since 2016 Age 66 Committees Served: ● Audit ● Executive ● Finance and Pension (Chair) | Expertise Mr. Hankin’s experience building and running a complex global financial company, evidenced by successfully growing Brown Advisory Incorporated from approximately $1.5 billion assets under management to over $149 billion during his tenure, gives the Board a unique perspective on finance, capital allocation, global operations, and corporate strategy. His familiarity with financial and investment planning and analysis, his understanding of capital structure and valuation issues, and his experience with cybersecurity make him a valuable resource for the Board and management. Business Experience Brown Advisory Incorporated, an investment management and strategic advisory firm ● President & Chief Executive Officer (1998 to present) Alex Brown Investment Advisory & Trust Company ● Executive Vice President & Chief Operating Officer (1993 to 1998) Piper & Marbury (now DLA Piper) ● Partner, business and tax law Other Current Public Company Directorships ● None Past Public Company Directorships (Last 5 Years) ● None |
Information Concerning Nominees for Election as Directors
| ROBERT J. MANNING Retired Chairman and Chief Executive Officer of MFS Investment Management | | | Independent Director Since 2022 Age 60 Committees Served: ● Compensation and Talent Development ● Corporate Governance | Expertise Mr. Manning’s more than three decades of financial services, investment stewardship, and leadership experience enables him to provide vital insights to the Board and management related to risk management, capital allocation, financial planning, and ESG. The wealth of experience Mr. Manning has gained throughout his financial career provides the Board with a more thorough understanding of investors’ perspectives and how to incorporate those perspectives into their oversight of the Company’s long-term strategic plan. Business Experience MFS Investment Management, a global investment manager (“MFS”) ● Chairman (2010 to 2022) ○ Non-Executive Chairman (2021 to 2022) ○ Executive Chairman (2017 to 2021) ● Chief Executive Officer and Chief Investment Officer (2004 to 2017) ○ Co-Chief Executive Officer (2015 to 2017) ● Mr. Manning joined MFS in 1984 as a Fixed Income Research Analyst and held several positions with increasing responsibility within the firm’s Investment division, including Fixed Income Portfolio Manager, Fixed Income Strategist and Director of Fixed Income Research Other Current Public Company Directorships ● None Past Public Company Directorships (Last 5 Years) ● None |
Information Concerning Nominees for Election as Directors
| ADRIAN V. MITCHELL Chief Operating Officer and Chief Financial Officer of Macy’s, Inc. | | | Independent Director Since 2022 Age 50 Committees Served: ● Audit ● Corporate Governance | Expertise Mr. Mitchell’s extensive background in corporate strategy and finance, coupled with his operations experience and expertise in technology, digital, data, and advanced analytics make him a critical resource for the Board and management team. Having served in multiple leadership positions at consumer product companies, including Macy’s, Arhaus, and Crate and Barrel, Mr. Mitchell provides a unique industry-specific perspective to the Board. Business Experience Macy’s, Inc., an omni-channel fashion retailer ● Chief Operating Officer and Chief Financial Officer (March 2023 to present) ● Executive Vice President and Chief Financial Officer (November 2020 to March 2023) Digital BCG and Consumer Practices of Boston Consulting Group, a global consulting firm ● Managing Director and Partner (July 2017 to October 2020) Arhaus LLC ● Chief Executive Officer (2016 to 2017) Crate and Barrel ● Chief Financial Officer (2010 to 2015) ● Chief Operating Officer (2011 to 2015) ● Interim Chief Executive Officer (2014 to 2015) Target Corporation ● Mr. Mitchell held management positions at Target Corporation, including director of strategy and interactive design for target.com and director of innovation and productivity (2007 to 2010) McKinsey & Company ● Mr. Mitchell spent approximately 10 years at McKinsey & Company where he co-founded the North American Lean Operations Retail Practice Other Current Public Company Directorships ● None Past Public Company Directorships (Last 5 Years) ● None |
Information Concerning Nominees for Election as Directors
| JANE M. PALMIERI President, Industrial Intermediates & Infrastructure of Dow Inc. | | | Independent Director Since 2021 Age 54 Committees Served: ● Corporate Governance ● Finance and Pension | Expertise Ms. Palmieri’s demonstrated record leading global industrial operating segments, in addition to her experience in sales, digital marketing innovation, mergers and acquisitions, and operations, helps the Board oversee the broad array of challenges the Company faces. Ms. Palmieri’s engineering background and expertise in product design, with a focus on sustainability and energy efficiency, makes her an important resource for the Board and management team. Business Experience Dow Inc., a materials science corporation ● President, Industrial Intermediates & Infrastructure; Asia Pacific oversight (2017 to present) ● Business President, Dow Building & Construction (2013 to 2017) ● Ms. Palmieri has also held a variety of business roles throughout her career, spanning marketing, sales, new business development and business operations in several Dow businesses, including Dow Automotive, Dow Specialty Chemicals, Dow Coating Solutions, and Dow Solar Other Current Public Company Directorships ● None Past Public Company Directorships (Last 5 Years) ● None |
Information Concerning Nominees for Election as Directors
| MOJDEH POUL Former Executive Vice President, Health Care Business Group of 3M Company | | | Independent Director Since 2021 Age 61 Committees Served: ● Audit ● Compensation and Talent Development | Expertise Ms. Poul brings a wide range of experience to the Board, including corporate strategy, global operations and profit and loss management, mergers and acquisitions, product engineering and development, sales and marketing, and government relations. Throughout her career, Ms. Poul has built and led high-performing teams across different functions, businesses, and geographies, including in highly regulated industries and businesses requiring strong market development expertise. Business Experience 3M Company, a diversified global manufacturer, technology innovator and marketer of a wide variety of products and services ● Group President & Executive Vice President, Health Care Business Group (2019 to 2022) ● Group President & Executive Vice President, Safety & Graphics Business Group (2018 to 2019) ● President and General Manager of 3M Canada (2016 to 2018) ● Ms. Poul held global Division President roles in the Food Safety and Infection Prevention businesses (2013 to 2016) ● Global Marketing Leader for the Critical and Chronic Care Solutions Division (2011 to 2013) Medtronic & Boston Scientific ● Ms. Poul held several leadership roles of increasing responsibility with Medtronic and Boston Scientific General Electric Plastics ● Ms. Poul held multiple engineering positions Other Current Public Company Directorships ● Align Technology (December 2023 to present) ● iRhythm Technologies, Inc. (June 2023 to present) Past Public Company Directorships (Last 5 Years) ● None |
Information Concerning Nominees for Election as Directors
| IRVING TAN Executive Vice President, Global Operations of Western Digital Corporation | | | Independent Director Since 2020 Age 53 Committees Served: ● Audit ● Corporate Governance (Chair) ● Executive | Expertise Mr. Tan’s expertise in digitization and innovation, and in developing and implementing a global operating strategy, is critical to the Board as it oversees the Company’s innovation efforts. Mr. Tan’s global perspective and deep knowledge of Asian markets, in addition to his expertise in operating strategy, are critical to the Board as it oversees the Company’s long-term strategy. Business Experience Western Digital Corporation, a computer drive manufacturer and data storage company ● Executive Vice President, Global Operations (March 2022 to present) Cisco Systems, Inc., a multinational digital communications technology conglomerate corporation ● Chairman, Asia-Pacific Japan & China (2020 to February 2022) ● Executive Vice President and Chief of Operations (2018 to 2020) ● Mr. Tan also held positions of increasing responsibility, including serving as the leader of Cisco Asia-Pacific and Japan (APJ), leader of Cisco ASEAN, leader of Cisco Singapore and Brunei, and senior manager in both Enterprise Sales Operations and Managed Services Hewlett-Packard ● Business-unit leader for the APJ Communications and Media Solutions Group (2008 to 2009) A.T. Kearney ● Principal, mergers and acquisitions and merger integration in IT and communication (2000 to 2006) Other Current Public Company Directorships ● None Past Public Company Directorships (Last 5 Years) ● None |
Board of Directors
Board of Directors Nomination Process. All candidates for Board membership are evaluated by the Corporate Governance Committee. In evaluating candidates, including existing Board members, the Corporate Governance Committee considers an individual candidate’s personal and professional responsibilities and experiences, the composition of the Board, including diversity with respect to gender, ethnicity, race, nationality, geographic origin, age, experience and skills, and the challenges and needs of the Company so that the Board is comprised of a diverse group of members who are positioned to best serve the needs of the Company and its shareholders. In addition to recommendations from directors, management and shareholders, the Corporate Governance Committee may also consider recommendations from third-party search firms retained to assist in identifying qualified candidates. In general, and in giving due consideration to the composition of the Board at the time a candidate is being considered, the Corporate Governance Committee considers a potential nominee’s or director’s:
Board of Directors
| ● | integrity and demonstrated high ethical standards; |
Board of Directors
| ● | experience with business administration processes and principles and risk management; |
Board of Directors
| ● | ability to express opinions, raise difficult questions, and make informed, independent judgments; |
Board of Directors
| ● | knowledge, experience, and skills in one or more specialty areas (such as accounting or finance, legal, regulatory or governmental affairs, human capital management, sustainability and climate-related risks, product development, manufacturing, technology, digitization and cybersecurity, global operations, real estate or corporate strategy, among others); |
Board of Directors
| ● | ability to devote sufficient time to prepare for and attend Board meetings; |
Board of Directors
| ● | willingness and ability to work with other members of the Board in an open and constructive manner; |
Board of Directors
| ● | ability to communicate clearly and persuasively; and |
Board of Directors
| ● | diversity with respect to other characteristics, which may include gender, age, ethnicity, race, nationality, geographic origin, skills and experience. |
Board of Directors
Shareholder Nominations and Recommendations of Candidates. Shareholders who wish to recommend individuals to be considered by the Corporate Governance Committee may do so by writing to us at: Stanley Black & Decker, Inc., Attention: Secretary, 1000 Stanley Drive, New Britain, CT 06053. All shareholder recommendations for director candidates are evaluated in the same manner as other director candidates. Shareholders wishing to nominate a director should follow the specific procedures and requirements set forth in the Company’s Bylaws (which incorporate the requirements of Rule 14a-19 of the Exchange Act), as discussed below. Proxy Access. The Company’s Bylaws permit a shareholder, or a group of up to 20 shareholders, owning 3% or more of the outstanding common stock of the Company continuously for at least three years to nominate and include in the Company’s proxy materials director nominees constituting up to two individuals or 20% of the Board (whichever is greater), provided that the shareholder(s) and the nominee(s) satisfy the procedures and requirements specified in the Company’s Bylaws. Qualifications of Directors and Nominees. The Board is committed to maintaining a diverse and well-rounded membership, complete with qualifications, skills and experience that support not only the Company’s business needs, but that also provide independent and objective oversight of the Company’s strategy and business model. Over the years, the Board has developed a deep and varied skill set, with a membership that we believe reflects a comprehensive spectrum of both professional and personal experiences. The Board continues to focus its efforts on identifying candidates that add to, or otherwise complement, the skills and qualifications of its existing members. The Board is committed to diversity and inclusion at the Board level and throughout the Company, and its leadership. The Board assesses its effectiveness in this regard as part of the annual board and director evaluation process. Specifically, the Corporate Governance Committee will take reasonable steps to include diverse candidates with respect to gender, ethnicity, race, nationality, geographic origin, age, skills and experience in the context of the needs of the Board in the pool of potential candidates under consideration. The Corporate Governance Committee and the Board carefully considered the qualifications, skills and experience of each nominee when concluding that this year’s nominees should serve on the Board. The chart below highlights skills, knowledge, background and experience that are represented by each of the director nominees named in this Proxy Statement.
Board of Directors
| | | | | | | | | | | | | Skills and Experience | | | | | | | | | | | | Current Executive (non-CEO) Experience provides current insight into the best practices and challenges of leading a complex organization. | | | | | | | ü | ü | | ü | | CEO experience (current and former) Provides insight into effectively leading a complex organization like ours with transparency and integrity. | ü | ü | | ü | ü | ü | | | | | | Corporate Social Responsibility Experience is important in managing risk and furthering long-term value creation for shareholders by operating in a sustainable and responsible manner. | | ü | ü | | ü | ü | | ü | ü | ü | | Digital Experience is relevant to understanding and evaluating the Company's efforts in areas such as eCommerce and data and analytics. | | ü | | | | ü | ü | ü | ü | ü | | Finance/Accounting/Capital Allocation Experience enables effective monitoring of the Company's financial reporting and control environment; assessment of its financial performance; and supporting appropriate shareholder returns. | ü | ü | ü | | ü | ü | ü | | ü | ü | | Legal/Regulatory/Government Affairs Experience enhances understanding of the impact and risks of legal and regulatory matters and public policy issues. | | | ü | ü | ü | ü | | | ü | ü | | Product Development Experience provides insight into ideation, research and development, and commercialization of products and services. | | | | ü | | ü | | ü | ü | | | Manufacturing/ Logistics/Supply Chain/Global Operations Experience enhances the Board's ability to oversee cost-effective, technology-driven manufacturing and logistics processes and facilitates assessment of the Company's complex, international operations. | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | | Risk Management Experience is important to the identification, oversight and mitigation of significant risks. | | ü | ü | ü | ü | ü | ü | ü | ü | ü | | Innovation/Technology Experience enhances the Board's ability to appraise our progress in executing the strategy of becoming known as one of the world's leading innovators. | | ü | ü | ü | ü | ü | ü | | ü | ü | | Cybersecurity Experience Provides insight to the Board as it oversees the Company's cyber risk management program in an evolving environment. | | | ü | | ü | ü | ü | | | ü | | Sales/Marketing/Brand Management Experience provides insights into the sales and marketing process and increasing the perceived value of our brands in the marketplace. | | | | ü | ü | ü | ü | ü | ü | ü | | Sustainability and Climate-Related Risk Experience strengthens the Board's oversight of environmental policies, initiatives and reporting. | | | ü | | ü | ü | | ü | | ü |
Board of Directors
Director Nominee Tenure and Age and Board Refreshment. The tenure of our director nominees ranges from less than a year to more than 10 years, and the Board believes maintaining varying lengths of service provides a balance between new ideas and longstanding Company knowledge and valuable insight. Our director nominees reflect a wide age range, providing a range of experience and expertise. See more information below:
Director Compensation
Director Compensation The Corporate Governance Committee is responsible for recommending the compensation program for our non-employee directors to the Board for approval. Based on a periodic review of our director compensation against market data, the Corporate Governance Committee considers whether any changes in the amount or manner in which the Company compensates its non-employee directors is appropriate and provides its recommendation to the full Board. Under the 2022 Plan, the maximum total compensation payable to any non-employee director is $750,000 per year. As described in “Item 3—Approval of 2024 Omnibus Award Plan,” the proposed 2024 Plan maintains this limit. During 2023, the Corporate Governance Committee directed its independent consultant, Pay Governance, to conduct an analysis of director compensation and made the following recommendations to the Board but determined that non-employee director compensation was otherwise aligned with the median for the Company’s Compensation Peer Group (as defined on page 37): ● eliminate the product allowance of up to $10,000 per year for Company products; ● increase the annual grant date fair value of fully vested RSUs pursuant to the Company’s 2020 Restricted Stock Unit Deferral Plan for Non-Employee Directors (the “Restricted Stock Unit Deferral Plan”), by $25,000; and ● increase the annual fee of the chair of the Corporate Governance Committee by $5,000. During 2023, the annual compensation paid by the Company to its non-employee directors consisted of:
Director Compensation
| Annual Cash Retainer | $125,000 | | Annual RSU Grant (Fully Vested) | $185,000 | | Quarterly RSU Grants (Fully Vested) for Chair of the Board | $50,000 | | Committee Chair Cash Retainers: | | | Audit Committee Chair | $25,000 | | Compensation Committee Chair | $20,000 | | Corporate Governance Committee Chair* | $20,000 | | Finance and Pension Committee Chair | $15,000 |
Director Compensation
| * The annual fee for the Corporate Governance Committee Chair increased to $20,000 from $15,000 effective April 21, 2023. |
Director Compensation
Non-employee directors may defer any or all of their cash retainer fees in the form of units tied to the value of Company common stock or cash accruing interest at the five-year Treasury bill rate under the Company’s Deferred Compensation Plan for Non-Employee Directors. Grants of RSUs to non-employee directors are made under the Restricted Stock Unit Deferral Plan, which provides for deferred settlement of RSUs on or about the 90th day following the non-employee director’s separation from service (either in a lump sum on such date or in specified annual installments). In addition, any dividends that accrue in respect of deferred RSU awards will be reinvested in shares of Company common stock and paid out if and when the underlying award is settled. Director Compensation Table The compensation paid to each of the Company’s non-employee directors during 2023 is as follows:
Director Compensation
| | Fees Earned or Paid in Cash | Stock Awards | All Other Compensation | Total | | Name | ($) | ($) | ($) | ($) | | Andrea J. Ayers | 125,000 | 385,018 | — | 510,018 | | Patrick D. Campbell | 150,000 | 185,008 | 1,055 | 336,063 | | Carlos M. Cardoso | 38,099 | — | 1,902 | 40,001 | | Susan K. Carter | 23,695 | — | — | 23,695 | | Robert B. Coutts | 38,099 | — | 4,953 | 43,052 | | Debra A. Crew | 145,000 | 185,008 | 1,039 | 331,047 | | Michael D. Hankin | 140,000 | 185,008 | 4,130 | 329,138 | | Robert J. Manning | 130,137 | 185,008 | — | 315,145 | | Adrian V. Mitchell | 125,000 | 185,008 | — | 310,008 | | Jane M. Palmieri | 125,000 | 185,008 | — | 310,008 | | Mojdeh Poul | 125,000 | 185,008 | — | 310,008 | | Irving Tan | 143,750 | 185,008 | — | 328,758 |
2023 Executive Appointments and Compensation
| Executive | Christopher J. Nelson | Patrick D. Hallinan | John T. Lucas | | Role | Chief Operating Officer, Executive Vice President and President, Tools & Outdoor Effective June 14, 2023 | Executive Vice President, Chief Financial Officer Effective April 6, 2023 | Senior Vice President, Chief Human Resources Officer Effective January 30, 2023 | | Annual Base Salary | $850,000 | $800,000 | $650,000 | | 2023 Target MICP Bonus | 120% of 2023 base salary | 100% of 2023 base salary | 100% of 2023 base salary | | 2023 Long-Term Incentive (“LTI”) Equity Mix | 50% long-term incentive plan (“LTIP”) performance stock Units (“PSUs”) 25% stock options 25% time-based RSUs | 50% LTIP PSUs 25% stock options 25% time-based RSUs | 50% LTIP PSUs 50% time-based RSUs | | 2023 LTI Aggregate Grant Value | $3.6 million | $3.65 million | $1.1 million | | One-Time Sign-On/ Make-Whole Awards | RSU grant with aggregate grant value of $5.5 million, which was primarily intended to compensate Mr. Nelson for compensation forfeited in connection with his departure from his prior employer as well as to provide for immediate alignment with shareholder interests | Sign-on cash bonus of $350,000. 100% of this cash bonus must be repaid if Mr. Hallinan voluntarily terminates his employment or the Company terminates his employment for violation of company rules or misconduct within the first two years of his employment RSU grant with aggregate grant date fair value of $2.65 million, which provides for immediate alignment with shareholder interests The combined value of the cash bonus and RSU grant were intended to compensate Mr. Hallinan for compensation forfeited upon his departure from his prior employer | Sign-on cash bonus of $600,000. 100% of this cash bonus must be repaid if Mr. Lucas voluntarily terminates his employment or the Company terminates his employment for violation of company rules or misconduct in the first year of his employment. If such a termination occurs in his second year of employment, 50% of this cash bonus must be repaid RSU grant with aggregate grant date fair value of $600,000, which was intended to provide for immediate alignment with shareholder interests |
Executive Compensation Practices Linked to Our Executive Compensation Philosophy
| Compensation Practice | Rationale and Impact | Pay for Performance | Align with Shareholders | Competitive Pay | Balance Risk vs. Reward | | Emphasize performance- based incentives | ● 90% of CEO target pay is variable and tied to performance against preset goals or share price ● No guaranteed cash bonuses | ü | ü | ü | ü | | Focus on long-term Company performance | ● LTIP PSUs comprise at least 50% of long-term incentive compensation for our CEO ● No dividend equivalents paid out unless the underlying award is earned or vests | ü | ü | ü | ü | | Provide competitive total compensation opportunity | ● Executive total compensation opportunity is generally targeted at the 50th percentile benchmark of our Compensation Peer Group | | ü | ü | ü | | Require executives to be shareholders | ● A majority of each executive’s total target compensation is in the form of equity-based awards ● Robust stock ownership guidelines further align executives’ interests with those of our shareholders | ü | ü | | | | Minimize compensation risk | ● Compensation program risk assessed annually to ensure that structure does not incentivize excessive risk-taking ● Clawback policies ● Anti-hedging and anti-pledging policies | ü | ü | | ü | | Protect shareholder interests | ● No repricing or cash buyouts of options without shareholder approval ● Double-trigger vesting for severance and equity awards in the event of a change in control ● No excise tax gross-ups under change in control agreements and no tax gross-ups on perquisites (other than relocation benefits) | ü | ü | | |
Pay for Performance
Pay for Performance Our executive compensation program focuses on aligning pay with the Company’s performance. As a result, the 2021–2023 LTIP PSUs were earned below threshold, and the Company anticipates zero payout for the 2022–2024 LTIP PSUs. In addition, outstanding stock options held by the named executive officers, other than the most recently granted awards, are generally underwater. The MICP has also reflected pay for performance alignment, with an above target payout for 2023 but a three-year average payout from 2021 through 2023 that was below target. See pages 42 and 45 for further details regarding the performance results for the MICP and LTIP PSUs. The range of these outcomes underscores the at-risk nature of these components of our executive compensation program and highlights the rigor of the preset performance targets. The Committee remains committed to emphasizing performance-based incentives that focus executives on both short- and long-term Company performance.
2023 MICP
| ● | Removed the Organic Sales Growth metric from the MICP and added a Relative Organic Sales Growth versus Market metric to the 2023–2025 LTIP PSU program to simplify the MICP plan design; |
2023 MICP
| ● | Added a transformation modifier that could increase the final payout by up to an additional 20% based upon our achievement against our goal of a $1 billion run rate in annualized savings from our Global Cost Reduction Program by year-end 2023, to increase focus on our Global Cost Reduction Program. |
2023–2025 LTIP PSU
2023–2025 LTIP PSU We made the following design changes to our 2023–2025 LTIP PSU program:
2023–2025 LTIP PSU
| ● | Removed the Adjusted EPS metric and replaced it with a new Relative Organic Sales Growth versus Market metric to align with our long-term strategy to achieve 2 to 3 times market revenue growth; and |
2023–2025 LTIP PSU
| ● | Replaced the custom LTIP peer group used for measuring relative TSR performance with the S&P 500 Capital Goods Index. The Company believes that the S&P 500 Capital Goods Index is a more appropriate comparison because it represents a broader group of companies across major industrial manufacturing categories that carry similar operational characteristics to the Company. |
2023–2025 LTIP PSU
The 2024–2026 LTIP PSUs will retain this revised design.
Why You Should Vote FOR the 2024 Advisory Vote on the Approval of Named Executive Officer Compensation
| ü | Our executive compensation program is designed to incentivize and reward executives for taking actions that create sustainable shareholder value. | | | 90% of CEO target compensation is variable and tied to performance against preset goals or share price performance. | | | Our executive compensation is aligned with short- and long-term Company performance, as evidenced by the 132.5–163.8% payouts under the 2023 MICP and payout at 20.4% of target under the 2021–2023 LTIP PSUs. | | | Our annual incentive compensation plan, the MICP, is based 100% on short-term Company performance against objective preset goals. | | | 50% of long-term incentives for our CEO are contingent on financial and relative TSR performance over a 3-year performance period, and 25% are stock options which generate value only if our stock price has appreciated from the exercise price at the time of exercise. | | | Total executive pay opportunities are generally targeted at the 50th percentile benchmark of our Compensation Peer Group. | | | Robust policies minimize compensation risk and strengthen the alignment of executives’ interests with those of our shareholders. | | | Regular engagement enables shareholder feedback to serve as a key input to Board and committee discussions and decisions. |
Executive Compensation Philosophy Tenets
| Pay for Performance | ● A majority of annual and long-term compensation is performance-based, directly linked to both absolute and relative Company performance against preset goals. ● Above target compensation should be paid when performance exceeds goals, and below target compensation should be paid when performance falls short. | | Competitive Pay | ● To attract and retain high caliber executive talent, total target compensation for our named executive officers is generally aligned with the median of our Compensation Peer Group and published surveys (as described on page 37). ● While focusing on the market median, the Compensation Committee retains the flexibility to set individual total compensation opportunities based on its assessment of performance, experience, service in current position, responsibilities, and/or retention risk. | | Alignment with Shareholder Interests | ● Interests of executives are aligned with long-term interests of shareholders through stock-based compensation, stock ownership requirements and performance metrics that drive share value. | | Balance Risk vs. Reward | ● Providing a competitive performance-based compensation package that motivates executives to take actions aligned with our strategic objectives. ● Designing an appropriate incentive structure mitigates compensation risk by disincentivizing excessively risky decisions. |
Role of Independent Compensation Consultant
Role of Independent Compensation Consultant To enhance the Compensation Committee’s ability to perform its responsibilities, the Compensation Committee retained Pay Governance, an independent compensation consultant, to advise on executive compensation matters. As an independent advisor to the Compensation Committee, Pay Governance:
Role of Independent Compensation Consultant
| ● | reviews and recommends adjustments to the total compensation strategy, peer group and pay levels for the Company’s named executive officers; |
Role of Independent Compensation Consultant
| ● | examines all aspects of the Company’s executive compensation programs to assess whether the programs continue to support the Company’s business strategy; |
Role of Independent Compensation Consultant
| ● | informs the Compensation Committee of developing legal and regulatory considerations affecting executive compensation and benefit programs; and |
Role of Independent Compensation Consultant
| ● | provides general advice to the Compensation Committee with respect to compensation decisions pertaining to the CEO and senior executives. |
Role of Independent Compensation Consultant
In addition to the services provided to the Compensation Committee, Pay Governance periodically provides information and advice to the Corporate Governance Committee regarding the compensation of the Company’s non-employee directors. Pay Governance provides no other services to the Company. As described in more detail on page 18, prior to receiving advice from Pay Governance, the Compensation Committee determined that Pay Governance is independent and that there is no conflict of interest between Pay Governance and the Compensation Committee or the Company.
Use of Peer Companies and Benchmarking
Use of Peer Companies and Benchmarking Our Compensation Committee, in consultation with Pay Governance, determines which companies should be included in our peer group for compensation-setting and design purposes (the “Compensation Peer Group”) based on several criteria, including the selection of peers that are both business and labor market competitors, as well as size (primarily revenue size, but secondarily market capitalization and employee headcount). For 2023, the Compensation Committee found that, on average, annual compensation (at target opportunity) for our named executive officers was aligned with the intended median positioning level of the Compensation Peer Group. The median 2023 revenue of the 2023 Compensation Peer Group was $18.9 billion, and the median market cap of the 2023 Compensation Peer Group as of the end of 2023 was $37.4 billion, as compared to 2023 revenue for the Company of $15.8 billion, and the market cap for the Company at the end of 2023 of $15.0 billion. As the Compensation Committee determined that this group continued to reflect an appropriate comparison group for the Company, there were no changes made to the Compensation Peer Group for 2023.
Use of Peer Companies and Benchmarking
| 2023 Compensation Peer Group Companies | | | Carrier | Owens Corning | | Cummins, Inc. | PACCAR, Inc. | | Dover Corporation | Parker Hannifin Corporation | | Eaton Corporation plc | PPG Industries | | Emerson Electric Company | Rockwell Automation, Inc. | | Illinois Tool Works, Inc. | The Sherwin-Williams Company | | Johnson Controls International plc | Textron Inc. | | Masco Corporation | Whirlpool Corporation |
Use of Peer Companies and Benchmarking
The data derived from the Compensation Peer Group provides ranges of compensation that the Compensation Committee then considers in setting executive salary levels and incentive opportunities that are consistent with the Company’s overall objectives. The published survey benchmark data reviewed by the Compensation Committee are statistical summaries of the pay practices at these companies and are not representative of the compensation levels at any one organization.
2023 Compensation Elements
| Key Compensation Elements | At Risk? | Key Features | 2023 Commentary | | Annual Cash Compensation | | | | | Base Salary Reward the skill and expertise that our executive officers contribute daily | | ● ●Benchmarked to median market levels ● Individual salaries reflect individual performance, experience, length of service, responsibilities, location, and retention risk | Base salaries of our named executive officers inclusive of new hires (see “2023 Executive Appointments and Compensation” above) were generally in line with the market median. | | Annual Incentive Compensation under MICP Balance complementary short-term goals of profitability and operational stability Encourage executives to maximize profitability, growth and efficiency | ü | ● Target awards set as a percentage of base salary ● 100% of MICP compensation based on preset performance goals ● Metrics and weightings established by the Compensation Committee at the beginning of the performance period ● Payouts earned between 0% and 200% of target depending on performance against preset goals ● 0% payout for a particular MICP metric if threshold performance is not achieved ● Payouts for executives with responsibility for specific business units are based on both corporate and business unit performance | 2023 MICP Metrics: ● Adjusted EPS* (weighted at 30%) ● Free Cash Flow* (operating cash flow less capital expenditures) (weighted at 40%) ● Adjusted Gross Margin Rate* (weighted at 30%) ● Transformation modifier can increase (but not decrease) the final payout up to an additional 20% based on achievement in relation to $1 billion run rate in annualized savings from our Global Cost Reduction Program by year-end 2023 ● Bonus opportunities for the leaders of our different business units also reflect divisional operating margin, working capital and organic sales goals See page 41 for a discussion of these calculations. * See Appendix A for an explanation and/or reconciliation of GAAP to Non-GAAP measures used in this Proxy Statement. |
2023 Compensation Elements
| Key Compensation Elements | At Risk? | Key Features | 2023 Commentary | | Long-Term Equity Incentives | | | | | LTIP PSUs Incentivize executives to achieve sustainable performance results and maximize growth and efficiency Align payouts with financial performance and the creation of long-term shareholder value | ü | ● PSUs are earned or forfeited based on performance against pre-established goals over a three-year performance period ● Program design recognizes that stock returns typically take longer to develop than earnings and that TSR, while an important assessment of long-term performance, is less directly influenced by our management team | 2023–2025 LTIP PSU Metrics: ● Cash Flow Return On Investment (“CFROI”)* (weighted at 40%) ● Relative Organic Sales Growth* versus Market (Market defined as revenue weighted GDP performance. Organic Sales Growth excludes acquisitions, divestitures, and foreign currency impact) (weighted at 35%) ● Relative TSR (measured based on three-year cumulative return against the S&P 500 Capital Goods Index (“TSR”)) (weighted at 25%) See pages 43–44 for a discussion of these calculations. * See Appendix A for an explanation and/or reconciliation of GAAP to Non-GAAP measures used in this Proxy Statement. | | RSUs Align executives’ interests with our shareholders and bolster retention | ü | ● RSUs generally vest in three installments on each of the first three anniversaries of the grant date, reflecting a shift from the four-year vesting schedule applicable to awards prior to December 2022 | Beginning in February 2023, RSUs are granted in the first quarter at the time of the February Board meeting annually rather than in December. | | Stock Options Reward management only if there is share price appreciation | ü | ● Stock options have an exercise price equal to fair market value at the time of grant and expire 10 years from the grant date ● Stock options generally vest in three installments on each of the first three anniversaries of the grant date, reflecting a shift from the four-year vesting schedule applicable to awards prior to December 2022 | Beginning in February 2023, stock options are granted in the first quarter at the time of the February Board meeting annually rather than in December. |
2023 Executive Incentive Compensation Payouts
2023 Executive Incentive Compensation Payouts While our three-year relative TSR was well below the 25th percentile relative to our compensation peers, our one-year 2023 TSR was at the 57th percentile compared to our compensation peers. The table below reflects the results of performance-based incentive compensation earned by our named executive officers pursuant to the 2023 MICP and 2021–2023 LTIP PSUs:
2023 Executive Incentive Compensation Payouts
| Compensation Element | Performance Alignment and Payouts | Page Reference | | Annual Incentive Compensation: MICP Awards | Performance results were above target resulting in a 132.5–163.8% bonus payout for the named executive officers, which includes performance results against corporate and/or division based goals as applicable. Notwithstanding our achievement above the maximum cost savings goal for the transformation modifier, in light of the Company’s overall performance (inclusive of TSR), management recommended, and the Compensation Committee agreed, not to apply the modifier to increase the bonus payouts for the named executive officers or any of the other executive officers above the core performance results. | 42 | | Long-Term Incentives: LTIP PSUs | Weighted average performance goal achievement equal to 20.4% of target for the 2021–2023 performance period as a result of above target performance for 2021 year Adjusted EPS; below threshold performance for all other metrics in 2021; and below threshold performance for all metrics in 2022 and 2023. | 45–46 |
Annual Incentive Compensation
Annual Incentive Compensation
MICP Target Bonus Opportunities
MICP Target Bonus Opportunities For 2023, the named executive officer target cash bonus opportunities (as a percentage of base salary) were as follows:
MICP Target Bonus Opportunities
| Officer | Target Bonus (% of Base Salary) | | Donald Allan, Jr. | 150% | | Patrick D. Hallinan | 100% | | Tamer K. Abuaita(1) | 85% | | John T. Lucas | 100% | | Christopher J. Nelson | 120% | | Corbin B. Walburger | 50% |
MICP Target Bonus Opportunities
| (1) Mr. Abuaita’s target bonus was increased from 75% to 85% in February 2023 to align with market median. |
Incentive Measure Definitions for Annual Incentive Award Program
Incentive Measure Definitions for Annual Incentive Award Program Under our annual incentive performance award program, 2023 MICP awards are earned or forfeited at the end of the performance year depending on the achievement of pre-established Adjusted EPS, Free Cash Flow, and Adjusted Gross Margin Rate performance goals, subject to a transformation modifier. Bonus opportunities for the leaders of our different business units also reflect divisional operating margin, working capital and organic sales goals. Adjusted EPS* is defined as diluted GAAP EPS, excluding certain gains and charges. Free Cash Flow* is defined as cash flow from operations less capital and software expenditures. Adjusted Gross Margin Rate* is defined as gross margin, which is sales less cost of sales, and is adjusted for certain gains and charges, primarily supply chain transformation costs, as a percentage of sales. The transformation modifier can increase (but not decrease) the final payout by up to an additional 20% based upon achievement in relation to $1 billion run rate in annualized savings from our Global Cost Reduction Program by year-end 2023. Total cost savings of $800 million or less would not result in any increase in payout. Target cost savings of $900 million would correspond to an increase in payout by an additional 10% and cost savings of $1 billion or more would correspond with a maximum increase in payout by an additional 20%. Cost savings of more than $800 million and less than $900 million or more than $900 million and less than $1 billion would result in an interpolated payout modifier. * See Appendix A for an explanation and/or reconciliation of GAAP to Non-GAAP measures used in this Proxy Statement.
MICP Performance Goals and Results
MICP Performance Goals and Results The table below sets forth the threshold, target and maximum performance levels for each performance goal under the 2023 MICP, as well as the actual performance for 2023.
MICP Performance Goals and Results
| | Threshold | Target | Maximum | 2023 Actual Result | | Adjusted EPS* | $0.00 | $1.00 | $2.00 | $1.45 | | Free Cash Flow* | $500M | $700M | $1,000M | $852.6M | | Adjusted Gross Margin Rate* | 23.8% | 24.8% | 25.8% | 26.0% | | Transformation Modifier** | $800M | $900M | $1,000M | $1,035M |
MICP Performance Goals and Results
| * See Appendix A on page 88 for an explanation and/or reconciliation of GAAP to Non-GAAP measures used in this Proxy Statement. |
MICP Performance Goals and Results
| ** Transformation modifier can increase the final payout by up to an additional 20% but cannot reduce the final payout. Total cost savings of $800 million or less would not result in any increase in payout. Target cost savings of $900 million would correspond to an increase in payout by up to an additional 10% and cost savings of $1 billion or more would correspond with a maximum increase in payout by an additional 20%. |
MICP Performance Goals and Results
In establishing the threshold, target and maximum performance levels described above, the Compensation Committee sought to align the 2023 goals with our 2023 operating plan expectations and our shareholder guidance released in February 2023. Although the Adjusted EPS* and Adjusted Gross Margin Rate* goals were set at levels lower than their respective 2022 MICP goals and actual 2022 performance, the 2023 operating plan was determined to be appropriately challenging in light of the Company’s ongoing supply chain transformation (which included production cuts greater than 20% and significant reductions in high cost inventory) initiated in response to the normalization of demand following historic strength during the COVID-19 pandemic into early 2022. The Compensation Committee also considered the expected pricing and production cost environment and mix impact related to acquisition and business growth across the portfolio, as well as recent divestitures, when setting 2023 performance goal levels. The 2023 Adjusted Gross Margin Rate* target of 24.8% was established at a level requiring a +4 point increase from 23% in the first half to 27% in the second half of 2023 and a +5 point improvement versus the 19.5% Adjusted Gross Margin Rate* in the fourth quarter of 2022, and the 2023 Adjusted EPS* goal was established at a level requiring a turnaround from a negative result in the fourth quarter of 2022. The weighting for each of these measures, the potential bonus payouts and the amounts attained for 2023 performance are set forth in the table below. The amounts reported for Mr. Nelson are based on the corporate goals set forth above and the results of the Tools & Outdoor business, weighted as indicated in the table below. For 2023, the divisional operating margin was achieved above target, the divisional working capital performance was below target and the divisional organic sales growth performance was below threshold. The specific divisional operating margin, working capital, and organic sales growth goals and results are not disclosed, as the disclosure of such information would result in competitive harm to the Company and would be of limited additional use to investors. Although the transformation modifier was achieved above the maximum goal based on the Company’s strong achievement of cost savings, after considering the Company’s overall performance (inclusive of TSR), management recommended, and the Compensation Committee agreed, not to apply the modifier to the bonus payouts earned by the named executive officers or any of the other executive officers.
MICP Performance Goals and Results
| | Weighting of Measures | | | | | | | Potential Bonus Payouts ($) | | | Weighted Avg. Payout Earned on All Measures (% of target)** | | | | Corporate | | | Division | | | | | | | | | | | Adjusted EPS* | Free Cash Flow* | Adjusted Gross Margin Rate* | Operating Margin | Trade Working Capital | Organic Sales | Transformation Modifier | Threshold | Target | Maximum | | Payout ($) | | Donald Allan, Jr. | 30% | 40% | 30% | N/A | N/A | N/A | +20% | $937,500 | $1,875,000 | $3,750,000 | 163.8% | $3,071,250 | | Patrick D. Hallinan | 30% | 40% | 30% | N/A | N/A | N/A | +20% | $400,000 | $800,000 | $1,600,000 | 163.8% | $1,310,400 | | Tamer K. Abuaita | 30% | 40% | 30% | N/A | N/A | N/A | +20% | $261,375 | $522,750 | $1,045,500 | 163.8% | $856,265 | | John T. Lucas | 30% | 40% | 30% | N/A | N/A | N/A | +20% | $325,000 | $650,000 | $1,300,000 | 163.8% | $1,064,700 | | Christopher J. Nelson | 20.3% | 27.0% | 20.3% | 10.0% | 12.5% | 10.0% | +20% | $510,000 | $1,020,000 | $2,040,000 | 132.5% | $1,351,500 | | Corbin B. Walburger | 30% | 40% | 30% | N/A | N/A | N/A | +20% | $105,000 | $210,000 | $420,000 | 163.8% | $343,980 |
MICP Performance Goals and Results
| * See Appendix A on page 88 for an explanation and/or reconciliation of GAAP to Non-GAAP measures used in this Proxy Statement. |
MICP Performance Goals and Results
| ** Excludes the effect of the transformation modifier. As described above, although the transformation modifier was achieved above the maximum goal, management recommended, and the Compensation Committee agreed, not to apply the modifier to the bonus payouts for fiscal year 2023. |
Outstanding Stock-Settled MICP Awards
Outstanding Stock-Settled MICP Awards In 2019 and 2020, the Compensation Committee granted awards under its MICP program as stock-settled performance share units (the “MICP PSUs”), before reverting back to fully cash-settled awards in 2021. The plan metrics and related weightings for the stock-settled MICP PSUs were consistent with then current MICP design, and performance was measured based on a one-year performance period. However, the MICP PSUs that were earned based on established goals for the 2020 performance period were settled in shares in three equal installments thereafter, subject to the executive officer’s continued employment until the applicable settlement date, with certain exceptions for death, disability or retirement. The final installment of the 2020 MICP PSUs was settled in March 2023.
Long-Term Incentives
Long-Term Incentives The following describes the process by which goals are established for our long-term incentive awards.
Long-Term Incentives
| Performance goals for each performance period are recommended by management based on the Company’s historical performance, strategic direction, and anticipated future operating environment, and are generally established during the first quarter of the year. For the 2023–2025 LTIP PSU plan, the threshold, target and maximum CFROI goals for each fiscal year in the performance period were all pre-established in 2023, the first year of the three-year performance period. | | | | The Compensation Committee considers management’s recommended performance goals, the Company’s performance to date and strategic direction, and the nature of the Company’s future operating environment. Generally, the Compensation Committee seeks to establish goals such that the likelihood of missing the target goal is at least as high as the likelihood of achieving the target goal based on reasonable assumptions and projections at the time of grant. The Compensation Committee may establish the target at a higher or lower level in appropriate circumstances. | | | | Once satisfied with the degree of difficulty associated with goal achievement, the Compensation Committee approves the targets. | | | | At the end of the three-year performance period, performance is assessed and payouts are approved, with a weighted average payment made for the CFROI goal based on performance achieved by the end of each fiscal year during the performance period plus an amount related to achievement of three-year relative TSR and Relative Organic Sales Growth versus Market goals. |
Incentive Measure Definitions for Long-Term Incentive Award Program
Incentive Measure Definitions for Long-Term Incentive Award Program Our 2023–2025 LTIP PSUs are earned or forfeited following the conclusion of a three-year performance period depending on the achievement of (i) CFROI performance goals for each fiscal year in the performance period, all of which are pre-established at the beginning of the three-year performance period, (ii) a three-year relative cumulative TSR goal, and (iii) a three-year relative Relative Organic Sales Growth versus Market goal. For the 2023–2025 LTIP PSU program, the Adjusted EPS metric used in prior years was removed and replaced with a new Relative Organic Sales Growth versus Market metric, thereby eliminating the use of Adjusted EPS in our long-term incentive program and aligning with our long-term strategy to achieve 2 to 3 times market revenue growth. TSR is calculated as an annualized rate of return reflecting share price appreciation and dividends paid during the measurement period with starting and ending prices measured as 20-day averages to account for daily trading volatility. In the event the Company’s TSR is negative for the three-year measurement period there is a cap such that the maximum payout cannot exceed target regardless of how the Company’s stock performs relative to the LTIP Peer Group, the S&P 500 Capital Goods Index. Following the Company’s portfolio transition in 2022, the Company elected to replace the peer group used in prior LTIP PSUs with the S&P 500 Capital Goods Index. The Company believes that the S&P 500 Capital Goods Index is a more appropriate comparison because it represents a broader group of companies across major industrial manufacturing categories that carry similar operational characteristics to the Company. CFROI* is defined as cash from operations plus after-tax interest expense, divided by the two-point average (beginning and end of the year) of debt plus equity. CFROI has been adjusted, consistent with the terms of grant, to exclude the impact of certain gains and charges for comparability to the originally established goal. Including this measure helps align performance goals with the Company’s objectives by encouraging participants to give greater weight to the projected cash flow return in relation to the cost of capital when considering investments. Relative Organic Sales Growth* versus Market is defined as (i) Organic Sales Growth, which is the difference between total current and prior year sales less the impact of companies acquired and divested in the past 12 months and any foreign currency impacts, divided by prior year sales, versus (ii) Market, which measures our performance relative to market performance defined as gross domestic product (GDP) weighted by global revenue distribution over the three-year performance period.
How We Determine Target LTI Values
How We Determine Target LTI Values The allocation of the long-term incentive values among stock options, RSUs and LTIP PSUs varies by named executive officer. Our most senior officers have a greater percentage of their long-term incentive awards allocated to LTIP PSUs than do other officers and employees because our most senior officers have the greatest ability to influence the financial measures underlying the program. For Mr. Allan and our other named executive officers, this equity mix has resulted in a significant portion of the total long-term incentive value delivered in LTIP PSUs. The Compensation Committee establishes long-term incentive values considering market data and internal peer comparisons. The following table shows the 2023 grant date fair value allocation of regular long-term incentive awards for our named executive officers (i.e., excluding any one-time sign-on bonuses and RSU grants, as discussed further below on page 46).
How We Determine Target LTI Values
| | LTIP PSUs | Stock Options | RSUs | | Donald Allan, Jr. | 50% | 25% | 25% | | Patrick D. Hallinan | 50% | 25% | 25% | | Tamer K. Abuaita | 40% | 30% | 30% | | John T. Lucas | 50% | 0% | 50% | | Christopher J. Nelson | 50% | 25% | 25% | | Corbin B. Walburger | 26% | 37% | 37% |
How We Determine Target LTI Values
The number of shares granted under each award type identified in the above table are shown in the “2023 Grants of Plan-Based Awards Table” on page 53.
Long-Term Incentive Performance Goals and Performance Period Results
Long-Term Incentive Performance Goals and Performance Period Results Rigorous goals are established at the beginning of each three-year performance period, based on our long-term strategic plan and annual operating plan, and are aligned with our financial objectives. The goals for the 2023–2025 performance period exclude the estimated impact of Non-GAAP adjustments described in Appendix A. As previously discussed under “2023 & 2024 Compensation Changes” above, effective with the 2023–2025 LTIP PSU cycle, the Adjusted EPS goal was removed and replaced by a Relative Organic Sales Growth versus Market metric, which was established in alignment with the 2023 annual operating plan and three-year strategic plan outlook. Although the CFROI goals for the 2023–2025 LTIP PSUs are lower than those for the 2022–2024 LTIP PSUs as a result of the 2022 Security segment and Oil & Gas business divestitures, necessary inventory reduction and gross margin rate pressures, the goals were set progressively higher year over year and reflect the expectation of share buybacks (if any), working capital execution, and net income growth. The threshold, target and maximum performance goals for the 2023–2025 LTIP PSUs are as follows:
Long-Term Incentive Performance Goals and Performance Period Results
| | CFROI* (weighted 40%) | | | Relative Organic Sales Growth* versus Market (weighted 35%) | | | Relative TSR (weighted 25%) | | | | | Threshold | Target | Maximum | Threshold | Target | Maximum | Threshold | Target | Maximum | | 2023(1) | 8% | 9% | 10% | | | | 25th percentile | 50th percentile | 75th percentile | | 2024 | 9% | 10% | 11% | 0.5X | 1.0X | 1.5X | | | | | 2025 | 10% | 11% | 12% | | | | | | |
Long-Term Incentive Performance Goals and Performance Period Results
| (1) 2023 CFROI performance was above target at 9.44%. |
Long-Term Incentive Performance Goals and Performance Period Results
| * See Appendix A on page 88 for an explanation and/or reconciliation of GAAP to Non-GAAP measures used in this Proxy Statement. |
Long-Term Incentive Performance Goals and Performance Period Results
The following table details the individual award opportunities for the 2023–2025 LTIP PSUs:
Long-Term Incentive Performance Goals and Performance Period Results
| | Potential LTIP PSUs to Be Earned | | | Target LTIP PSUs | | | | Threshold | Target | Maximum | % of Salary | | | Donald Allan, Jr. | 26,238 | 52,476 | 104,952 | 370% | $4,624,999 | | Patrick D. Hallinan | 12,481 | 24,961 | 49,922 | 228% | $1,824,961 | | Tamer K. Abuaita | 3,489 | 6,978 | 13,956 | 100% | $615,010 | | John T. Lucas | 3,120 | 6,240 | 12,480 | 85% | $549,966 | | Christopher J. Nelson | 9,711 | 19,421 | 38,842 | 212% | $1,800,006 | | Corbin B. Walburger | 1,192 | 2,383 | 4,766 | 50% | $210,027 |
Long-Term Incentive Performance Goals and Performance Period Results
2022–2024 Performance Period The threshold, target and maximum performance goals for the 2022–2024 LTIP PSUs are as follows:
Long-Term Incentive Performance Goals and Performance Period Results
| | CFROI* (weighted 40%) | | | Adjusted EPS* (weighted 35%) | | | Relative TSR (weighted 25%) | | | | | Threshold | Target | Maximum | Threshold | Target | Maximum | Threshold | Target | Maximum | | 2022(1) | 15% | 16% | 17% | $11.02 | $12.25 | $13.48 | 25th percentile | 50th percentile | 75th percentile | | 2023(1) | 15% | 16% | 17% | $11.87 | $13.19 | $14.51 | | | | | 2024 | 15% | 16% | 17% | $12.73 | $14.15 | $15.57 | | | |
Long-Term Incentive Performance Goals and Performance Period Results
| (1) The CFROI performance for 2022 and 2023 was below threshold at (6.1)% and 10.15%, respectively, and Adjusted EPS performance for 2022 and 2023 was below threshold at $4.67 and $1.43, respectively. |
Long-Term Incentive Performance Goals and Performance Period Results
| * See Appendix A on page 88 for an explanation and/or reconciliation of GAAP to Non-GAAP measures used in this Proxy Statement. |
Long-Term Incentive Performance Goals and Performance Period Results
2021–2023 Performance Period The threshold, target and maximum performance goals and actual performance results for the 2021–2023 LTIP PSUs are illustrated in the following table. The results achieved for the 2021–2023 LTIP PSUs resulted in a weighted average goal achievement across all performance measures of 20.4% of target.
Long-Term Incentive Performance Goals and Performance Period Results
| | Adjusted EPS* | | | | CFROI* | | | | Relative TSR | | | | | | Threshold | Target | Maximum | Achieved | Threshold | Target | Maximum | Achieved | Threshold | Target | Maximum | Achieved | | 2021 | $9.23 | $10.25 | $11.28 | $11.02 | 13.0% | 14.0% | 15.0% | 5.7% | 25th percentile | 50th percentile | 75th percentile | 0% percentile | | 2022 | $9.92 | $11.02 | $12.12 | $5.32 | 13.0% | 14.0% | 15.0% | (4.3)% | | | | | | 2023 | $10.80 | $12.00 | $13.20 | $2.20 | 13.0% | 14.0% | 15.0% | 10.8% | | | | |
Long-Term Incentive Performance Goals and Performance Period Results
| * See Appendix A on page 88 for an explanation and/or reconciliation of GAAP to Non-GAAP measures used in this Proxy Statement. |
Long-Term Incentive Performance Goals and Performance Period Results
| ** In determining whether the Adjusted EPS and CFROI performance goals were met for the 2021–2023 performance period, actual results in 2021, 2022 and 2023 were adjusted, consistent with the terms of grant, to exclude the impact of Non-GAAP adjustments described in Appendix A. The results shown in the foregoing table reflect these adjustments for comparability to the original goals. The $2.20 2023 Adjusted EPS for the 2021–2023 performance period differs from the $1.45 Adjusted EPS for the MICP bonus discussed on page 42 due to the effect of computing Adjusted EPS for LTIP PSU purposes based on the fixed shares outstanding at the inception of the performance period, as well as the impact of adding back pro forma EPS for the divested Security business for the post-divestiture period for comparability to the originally established goals. The numerator and denominator of CFROI in each year were also adjusted for the cash flow and equity impacts, as applicable, pertaining to the adjustments in calculating EPS, for comparability to the originally established goals. |
Long-Term Incentive Performance Goals and Performance Period Results
The following table sets forth the number of 2021–2023 LTIP PSUs earned by each of the named executive officers. Only Messrs. Allan and Walburger received 2021–2023 LTIP PSUs, as the other four named executive officers were hired after the February 18, 2021 grant date.
Long-Term Incentive Performance Goals and Performance Period Results
| | Potential LTIP PSUs (Number of Shares) | | | Actual Payout (shares) | Weighted Average Payout (% of target) | | | Threshold | Target | Maximum | | | | Donald Allan, Jr. | 4,575 | 9,149 | 18,298 | 1,866 | 20.4% | | Corbin B. Walburger | 584 | 1,167 | 2,334 | 238* | 20.4% |
Long-Term Incentive Performance Goals and Performance Period Results
| * 119 of Mr. Walburger’s 2021–2023 LTIP PSUs were deferred under the Stanley Black & Decker, Inc. Deferred Compensation Plan Relating to Long-Term Performance Awards. |
New Hire Grants
New Hire Grants In connection with Mr. Lucas’ appointment as Senior Vice President, Chief Human Resources Officer, the Compensation Committee approved a one-time grant of RSUs with a value of $600,000 and a grant date of February 15, 2023. This award will vest 1/3 on the first anniversary of the grant date and 2/3 on the second anniversary of the grant date. These RSUs were intended to provide for immediate alignment with shareholder interests. In connection with Mr. Hallinan’s appointment as Executive Vice President, Chief Financial Officer, the Compensation Committee approved a one-time grant of RSUs with a value of $2.65 million and a grant date of April 12, 2023. This award will vest ratably over a three-year period on each anniversary of the grant date. These RSUs were intended to keep Mr. Hallinan whole for compensation forfeited in connection with his departure from his prior employer as well as provide for immediate alignment with shareholder interests. In connection with Mr. Nelson’s appointment as Chief Operating Officer, Executive Vice President and President, Tools & Outdoor, the Compensation Committee approved a one-time grant of RSUs with a value of $5.5 million and a grant date of June 29, 2023. This award will vest ratably over a three-year period on each anniversary of the grant date, provided that such RSUs will fully vest upon termination if either: (a) the Company involuntarily terminates Mr. Nelson’s employment without cause or (b) the Board announces that someone other than Mr. Nelson has been selected to succeed Mr. Allan as CEO of the Company and Mr. Nelson voluntarily terminates his employment within 30 days of such announcement. These RSUs were primarily intended to keep Mr. Nelson whole for compensation forfeited upon his departure from his prior employer as well as to provide for immediate alignment with shareholder interests.
Clawback of Awards in the Event of a Financial Restatement
Clawback of Awards in the Event of a Financial Restatement The Board has adopted a “recoupment” or “clawback” policy relating to performance-based equity and cash incentive compensation of all executive officers (the “Recoupment Policy”). Pursuant to this policy, in the event the Board or an appropriate committee thereof determines that any fraud, negligence or intentional misconduct by an executive officer was a significant contributing factor to the Company having to restate any of its financial statements, the Board (or a committee thereof) will take such action as it deems necessary, in its discretion, to remedy the misconduct and prevent its recurrence. The Board will, to the extent permitted by applicable law, in all appropriate cases, require reimbursement of bonuses or incentive compensation (including amounts paid under LTIP PSUs) paid to an executive officer after January 1, 2007, require reimbursement of gains realized upon the exercise of stock options, and cancellation of restricted or deferred stock awards and outstanding stock options if, and to the extent that (i) the amount of incentive compensation was calculated based on the achievement of certain financial results that were subsequently reduced due to a restatement; (ii) the officer engaged in any fraud or misconduct that caused or contributed to the need for the restatement; and (iii) the amount of the bonus or incentive compensation that would have been awarded to the officer had the financial results been properly reported would have been lower than the amount actually awarded. In determining what actions are appropriate, the Board (or a committee thereof) will take into account all relevant factors, including whether the restatement was the result of fraud, negligence or intentional misconduct. A copy of the Recoupment Policy Relating to Unearned Compensation of Executive Officers is available on the “Governance Documents” section of the Company’s website at www.stanleyblackanddecker.com (which appears under the “Investors” heading and the “Governance” subheading). As a result of the Securities and Exchange Commission’s final clawback rule adopted in October 2022, the Company adopted a second clawback policy in compliance with applicable rules and regulations of the Securities and Exchange Commission and NYSE listing requirements (the “2023 Clawback Policy”). The 2023 Clawback Policy provides that, in the event of a “Financial Restatement” (as defined in the 2023 Clawback Policy), the Company shall reasonably promptly recover any incentive-based compensation received by any “Covered Executive” (i.e. any Section 16 officer who served during the performance period applicable to the Financial Restatement), subject to limited exceptions to the extent permitted by NYSE listing standards. Incentive compensation subject to recoupment under the 2023 Clawback Policy generally includes the excess of the amount of incentive-based compensation received by any Covered Executive during the three completed fiscal years immediately preceding the “Recoupment Trigger Date” (as defined in the 2023 Clawback Policy) over the amount of incentive-based compensation that would have been received by the Covered Executive had such compensation been determined based on restated amounts in the Financial Restatement. A copy of the 2023 Clawback Policy is available on the “Governance Documents” section of the Company’s website at www.stanleyblackanddecker.com (which appears under the “Investors” heading and the “Governance” subheading).
Assessment of Risk Arising from Compensation Policies and Practices
Assessment of Risk Arising from Compensation Policies and Practices The Compensation Committee reviews, on a periodic basis, the operation and structure of the Company’s compensation programs and has considered whether its compensation policies and practices create risks that are reasonably likely to have a material adverse effect on the Company. The Compensation Committee has concluded that the Company’s compensation practices and policies do not create such risks based on the following considerations: As discussed on page 42, the MICP utilizes a combination of corporate and divisional goals. Divisional goals are established with overall corporate objectives in mind and do not conflict with corporate goals. To further minimize the risk that any employee or group of employees would pursue achievement of divisional goals in a manner that would have an adverse impact on the overall corporate goals, at least 25% of the annual bonus opportunity for all managers is based on achievement of the corporate goals. In addition to divisional goals, managers other than named executive officers may be assigned individual performance goal targets as a component of their MICP award. Any such individual achievement goals account for a relatively small percentage of the total bonus opportunity and, accordingly, disincentivize any individual from pursuing achievement of an individual goal in a manner that would jeopardize performance of his or her division as a whole or the Company as a whole. The RSUs and stock options, which vest over three years, align recipients’ interests with those of the Company’s shareholders in maintaining or increasing share value, making it against the interests of award recipients to pursue behaviors that create a material risk to the Company. LTIP PSU grants generally are earned based on achievement of corporate performance goals over a three-year performance period. Beginning with the 2023-2025 cycle, a portion of each LTIP PSU grant will be contingent on achieving stated levels in Relative Organic Sales Growth versus Market during the performance period, a portion based on targets relating to CFROI, and a portion contingent on achieving TSR relative to a peer group. The Company believes that using Relative Organic Sales Growth versus Market and CFROI as performance measures provides appropriate incentives for management to optimize the principal financial drivers that generate shareholder return and reinforce the Company’s quest for continued growth. Similarly, the Company believes that including three-year relative TSR as a performance measure encourages management to continuously benchmark Company performance against that of a broadly defined group of comparable companies, further supporting the Company’s quest for growth. In determining whether Relative Organic Sales Growth versus Market and CFROI goals have been met, the Compensation Committee retains the discretion to adjust the manner in which achieved Relative Organic Sales Growth versus Market and CFROI are determined to take into account certain non-recurring events (such as significant acquisitions or divestitures). Providing the Compensation Committee this discretion allows the Compensation Committee to ensure the results are comparable to the originally established goals. It also has the effect of reducing any incentive to take a particular action in order to increase the earned LTIP PSUs that would be distributed at the end of the applicable performance period. Other incentive programs provided to employees are common in companies in durable goods and services businesses, such as commissions on sales for sales representatives. None of these programs accounts for a significant percentage of the relevant business unit’s revenues. In addition, our compensation programs contain many design features that mitigate the likelihood of encouraging excessive or inappropriate risk-taking behavior. These features include robust stock ownership guidelines, a policy against hedging or pledging of Company stock and “recoupment” or “clawback” policies in the event of certain financial restatements as described on pages 48–49.
Timing of Stock Option and RSU Grants
Timing of Stock Option and RSU Grants The Compensation Committee determined that, beginning in 2023, annual equity grants, including LTIP PSUs, stock options and RSUs, to executive officers would be made in the first quarter of each year to facilitate cohesive award communication to participants and better align with prevalent market practice. The exercise price for all stock option grants is set no lower than the average of the high and low price of a share as quoted on the New York Stock Exchange Composite Tape on the date of grant. The Compensation Committee may occasionally make off-cycle grants during the year. Such off-cycle grants typically relate to promotions, hiring, acquisitions, or other significant business events that have a meaningful impact on our ability to recruit or retain management talent. The Compensation Committee has also delegated authority to the Company’s CEO to make annual grants and occasional off-cycle grants to employees who are not Section 16 officers of the Company and to accelerate the vesting of such awards. The grant date for any grants made by the Company’s CEO is either the date the grant authorization is signed by the CEO, or a later date specified in the grant authorization. We neither backdate equity awards, nor grant spring-loaded equity awards (i.e., we do not make equity grants shortly before announcing market-moving information with better-than-expected results or the disclosure of a significant transaction).
Summary Compensation Table
Summary Compensation Table The table below summarizes the total compensation earned by our named executive officers for each of the last three fiscal years.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | | Donald Allan, Jr., | 2023 | 1,250,000 | — | 6,937,461 | 2,312,491 | 3,071,250 | 306,442 | 13,877,644 | | President and CEO | 2022 | 1,060,000 | — | 5,078,138 | 1,671,738 | — | 283,380 | 8,093,256 | | | 2021 | 863,833 | — | 2,351,585 | 711,750 | 969,612 | 325,227 | 5,222,007 | | Patrick D. Hallinan Executive Vice President, Chief Financial Officer | 2023 | 585,641 | 350,000 | 5,387,467 | 912,506 | 1,310,400 | 161,156 | 8,707,170 | | Tamer K. Abuaita Senior Vice President, Global Supply Chain | 2023 | 602,500 | — | 2,071,058 | 456,011 | 856,265 | 76,245 | 4,062,079 | | John T. Lucas Senior Vice President, Chief Human Resources Officer | 2023 | 445,833 | 600,000 | 1,699,920 | — | 1,064,700 | 151,286 | 3,961,739 | | Christopher J. Nelson Chief Operating Officer, Executive Vice President and President, Tools & Outdoor | 2023 | 467,500 | — | 8,199,989 | 900,009 | 1,351,500 | 84,820 | 11,003,818 | | Corbin B. Walburger | 2023 | 420,000 | — | 514,044 | 303,999 | 343,980 | 305,472 | 1,887,495 | | Vice President of | 2022 | 421,667 | — | 1,512,597 | 304,003 | — | 522,638 | 2,760,905 | | Business Development | | | | | | | | |
2023 Grants of Plan-Based Awards Table
2023 Grants of Plan-Based Awards Table This table sets forth information concerning equity grants to the named executive officers during the fiscal year ended December 30, 2023, granted under the 2022 Omnibus Award Plan (the “2022 Plan”), as well as the range of estimated future payouts under the Company’s non-equity incentive programs.
2023 Grants of Plan-Based Awards Table
| | | | Estimated Future 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 ($/Sh) | Closing Price at Date of Grant ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | | Name | Award Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | | | | Donald Allan, Jr. | MICP | | 937,500 | 1,875,000 | 3,750,000 | | | | | | | | | | | LTIP PSU | 2/15/2023 | | | | 26,238 | 52,476 | 104,952 | | | | | 4,624,998 | | | RSU | 2/15/2023 | | | | | | | 25,603 | | | | 2,312,463 | | | Option | 2/15/2023 | | | | | | | | 88,263 | 90.32 | 91.94 | 2,312,491 | | Patrick D. Hallinan | MICP | | 400,000 | 800,000 | 1,600,000 | | | | | | | | | | | LTIP PSU | 4/12/2023 | | | | 12,481 | 24,961 | 49,922 | | | | | 1,824,961 | | | RSU | 4/12/2023 | | | | | | | 11,556 | | | | 912,520 | | | RSU | 4/12/2023 | | | | | | | 33,559 | | | | 2,649,986 | | | Option | 4/12/2023 | | | | | | | | 41,935 | 78.97 | 78.11 | 912,506 | | Tamer K. Abuaita | MICP | | 261,375 | 522,750 | 1,045,500 | | | | | | | | | | | LTIP PSU | 2/15/2023 | | | | 3,489 | 6,978 | 13,956 | | | | | 615,010 | | | RSU | 2/15/2023 | | | | | | | 5,049 | | | | 456,026 | | | RSU | 2/15/2023 | | | | | | | 11,072 | | | | 1,000,022 | | | Option | 2/15/2023 | | | | | | | | 17,405 | 90.32 | 91.94 | 456,011 | | John T. Lucas | MICP | | 325,000 | 650,000 | 1,300,000 | | | | | | | | | | | LTIP PSU | 2/15/2023 | | | | 3,120 | 6,240 | 12,480 | | | | | 549,966 | | | RSU | 2/15/2023 | | | | | | | 6,089 | | | | 549,958 | | | RSU | 2/15/2023 | | | | | | | 6,643 | | | | 599,996 | | Christopher J. Nelson | MICP | | 510,000 | 1,020,000 | 2,040,000 | | | | | | | | | | | LTIP PSU | 6/29/2023 | | | | 9,711 | 19,421 | 38,842 | | | | | 1,800,006 | | | RSU | 6/29/2023 | | | | | | | 9,641 | | | | 899,988 | | | RSU | 6/29/2023 | | | | | | | 58,918 | | | | 5,499,995 | | | Option | 6/29/2023 | | | | | | | | 32,006 | 93.35 | 94.61 | 900,009 | | Corbin B. Walburger | MICP | | 105,000 | 210,000 | 420,000 | | | | | | | | | | | LTIP PSU | 2/15/2023 | | | | 1,192 | 2,383 | 4,766 | | | | | 210,027 | | | RSU | 2/15/2023 | | | | | | | 3,366 | | | | 304,017 | | | Option | 2/15/2023 | | | | | | | | 11,603 | 90.32 | 91.94 | 303,999 |
Outstanding Equity Awards at 2023 Fiscal Year-End
Outstanding Equity Awards at 2023 Fiscal Year-End The following table sets forth information regarding outstanding stock options and stock awards held by the named executive officers on December 30, 2023.
Outstanding Equity Awards at 2023 Fiscal Year-End
| | | Option Awards | | | | Stock Awards | | | | | Name | Option Grant Date | Number of Shares Underlying Unexercised Options (#) Exercisable | Number of Shares Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, 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 ($) | | Donald Allan, Jr. | 12/4/2015 | 20,000 | — | $109.25 | 12/4/2025 | 51,367 | $5,039,076 | | | | | 12/2/2016 | 25,000 | — | $118.66 | 12/2/2026 | | | 52,913 | $5,190,795 | | | 12/7/2017 | 25,000 | — | $168.78 | 12/7/2027 | | | 7,161 | $702,494 | | | 12/4/2018 | 25,000 | — | $130.88 | 12/4/2028 | | | | | | | 12/3/2019 | 25,000 | — | $150.70 | 12/3/2029 | | | | | | | 12/3/2020 | 14,062 | 4,688 | $179.85 | 12/3/2030 | | | | | | | 12/29/2021 | 7,300 | 7,300 | $193.97 | 12/29/2031 | | | | | | | 7/5/2022 | 7,265 | 21,795 | $107.74 | 7/5/2032 | | | | | | | 12/6/2022 | 11,667 | 23,333 | $77.83 | 12/6/2032 | | | | | | | 2/15/2023 | — | 88,263 | $90.32 | 2/15/2033 | | | | | | Patrick D. Hallinan | 4/12/2023 | — | 41,935 | $78.97 | 4/12/2033 | 49,908 | 4,895,927 | | | | | | | | | | | | 25,169 | 2,469,092 | | Tamer K. Abuaita | 12/6/2022 | 6,894 | 13,786 | $77.83 | 12/6/2032 | 29,279 | 2,872,248 | | | | | 2/15/2023 | — | 17,405 | $90.32 | 2/15/2033 | | | 7,036 | 690,246 | | | | | | | | | | 814 | 79,853 | | John T. Lucas | | | | | | 13,930 | 1,366,541 | | | | | | | | | | | | 6,292 | 617,245 | | Christopher J. Nelson | 6/29/2023 | — | 32,006 | $93.35 | 6/29/2033 | 72,288 | 7,091,436 | | | | | | | | | | | | 19,583 | 1,921,089 | | Corbin B. Walburger | 12/7/2017 | 10,000 | — | $168.78 | 12/7/2027 | 17,006 | 1,668,334 | | | | | 12/4/2018 | 2,500 | — | $130.88 | 12/4/2028 | | | 2,403 | 235,733 | | | 12/3/2019 | 10,000 | — | $150.70 | 12/3/2029 | | | 317 | 31,049 | | | 12/3/2020 | 5,625 | 1,875 | $179.85 | 12/3/2030 | | | | | | | 12/10/2021 | 2,877 | 2,878 | $193.97 | 12/10/2031 | | | | | | | 12/6/2022 | 4,596 | 9,191 | $77.83 | 12/6/2032 | | | | | | | 2/15/2023 | — | 11,603 | $90.32 | 2/15/2033 | | | | |
Option Exercises and Stock Vested During 2023 Fiscal Year
Option Exercises and Stock Vested During 2023 Fiscal Year The following table provides information concerning options exercised and time-vested RSUs, LTIP PSUs and MICP PSUs vested for each named executive officer during the Company’s 2023 fiscal year.
Option Exercises and Stock Vested During 2023 Fiscal Year
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | | Donald Allan, Jr. | — | $— | 17,374 | 1,560,081 | | Patrick D. Hallinan | — | $— | — | — | | Tamer K. Abuaita | — | $— | 4,590 | 419,478 | | John T. Lucas | — | $— | — | — | | Christopher J. Nelson | — | $— | — | — | | Corbin B. Walburger | — | $— | 3,933 | 351,884 |
Non-Qualified Deferred Compensation Plans in Fiscal Year 2023
Non-Qualified Deferred Compensation Plans in Fiscal Year 2023 The following table shows the contributions, earnings and account balances for fiscal 2023 for each named executive officer participating in the Supplemental RAP, the Deferred Compensation Plan for Participants in the Company’s Management Incentive Plan (the “Deferred Compensation Plan (MIP)”), the Stanley Works Deferred RSU Plan (the “Deferred RSU Plan”) and the Deferred Compensation Plan Relating to Long-Term Performance Awards (the “Deferred Compensation Plan (LTIP)”). No withdrawals or distributions from these plans were made in 2023.
Non-Qualified Deferred Compensation Plans in Fiscal Year 2023
| Name | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | | Donald Allan, Jr. | | | | | | | Supplemental RAP | 62,500 | 74,378 | 229,428 | — | 2,873,505 | | Deferred Compensation Plan (MIP) | — | — | 6,743 | — | 140,703 | | Deferred RSU Plan | — | — | 93,740 | — | 393,800 | | Patrick D. Hallinan | | | | | | | Supplemental RAP | — | 3,338 | — | — | 3,338 | | Tamer K. Abuaita | | | | | | | Supplemental RAP | 42,175 | 10,150 | 5,597 | — | 74,839 | | John T. Lucas | | | | | | | Supplemental RAP | — | 3,139 | — | — | 3,139 | | Christopher J. Nelson | | | | | | | Supplemental RAP | — | — | — | — | — | | Corbin B. Walburger | | | | | | | Supplemental RAP | 13,017 | 25,298 | 198,235 | — | 1,170,546 | | Deferred Compensation Plan (LTIP) | 65,663 | — | 40,877 | — | 204,677 |
Non-Qualified Deferred Compensation Plans
Non-Qualified Deferred Compensation Plans The Company maintains the Supplemental RAP, the Deferred Compensation Plan (MIP), the Deferred RSU Plan and the Deferred Compensation Plan (LTIP). Certain employees, including each of the named executive officers, may defer bonuses and other compensation pursuant to the Supplemental RAP. Mr. Walburger is the only named executive officer who elected to defer shares under the Deferred Compensation Plan (LTIP), pursuant to which he deferred 727 earned shares from the 2020–2022 LTIP PSUs.
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control
Equity Award Agreements
Equity Award Agreements The outstanding stock option and RSU awards provide for accelerated vesting in the event of the named executive officer’s retirement (other than retention RSU awards), death or disability. Under the outstanding LTIP PSUs, in the event of the named executive officer’s retirement, death or disability, the LTIP PSUs will remain outstanding and eligible to become earned based on actual performance; however, if such termination occurs during the first year of the performance period, the number of LTIP PSUs that will remain eligible to become earned will be prorated. Retirement for purposes of the award agreements is defined as (i) age 55 and 10 years of service for awards granted before February 14, 2023, and (ii) the earlier of age 55 and 10 years of service or age 65 and 1 year of service for awards granted thereafter. Mr. Allan met the age 55 and 10 years of service requirements at December 30, 2023, whereas the other named executive officers did not meet retirement eligibility requirements.
CEO PAY RATIO
CEO PAY RATIO Our Company seeks to establish fair and competitive employee compensation programs in each local market within our global operations to effectively attract, retain and motivate our talented workforce. As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and in accordance with Securities and Exchange Commission regulations, we are providing the following information to explain the relationship between the annual total compensation of our estimated median employee and the annual total compensation of our CEO.
Pay Ratio
Pay Ratio Based on our CEO’s annualized total compensation compared to the compensation for the estimated median employee, our estimated pay ratio as calculated pursuant to applicable Securities and Exchange Commission regulations is 216:1. Our estimated pay ratio is influenced by a number of factors, including the geographic distribution of our employees, the mix of hourly versus salaried employees included in our employee population, and compensation trends within our specific industry. As a result of these and other variables, we do not believe comparisons to the pay ratios of other companies, including our competitors, are likely to be meaningful.
Pay Ratio
| PAY VERSUS PERFORMANCE The following table sets forth the compensation for our principal executive officers (the “PEOs”) and the average compensation for our other named executive officers (“NEOs”), both as reported in the Summary Compensation Table on page 51 of this Proxy Statement and with certain adjustments to reflect the “compensation actually paid” to such individuals, as defined under the SEC’s pay versus performance disclosure rules, for each of 2023, 2022, 2021 and 2020. The table also provides information on our cumulative total shareholder return (“TSR”), the cumulative TSR of our peer group, net income and CFROI. Pay Versus Performance | | | | | | | | | | | | | James M. Loree | | Donald Allan, Jr. | | | | Value of Initial Fixed $100 Investment Based On: | | | | | Year | Summary Compensation Table Total for PEO | Compensation Actually Paid to PEO | Summary Compensation Table Total for PEO | Compensation Actually Paid to PEO | Average Summary Compensation Table Total for non-PEO NEOs | Average Compensation Actually Paid to non-PEO NEOs | Total Shareholder Return | Peer Group Total Shareholder Return | Net Income (GAAP) in millions | CFROI | | 2023 | n/a | n/a | $13,877,644 | $14,893,456 | $5,924,460 | $6,500,142 | $66 | $151 | $(310.5) | 10.8% | | 2022 | $13,625,418 | $(10,577,275) | $8,093,256 | $(3,215,054) | $2,787,366 | $(1,031,574) | $48 | $127 | $1,062.5 | (4.2)% | | 2021 | $13,159,209 | $11,587,123 | n/a | n/a | $3,655,494 | $3,504,244 | $118 | $127 | $1,689.2 | 5.8% | | 2020 | $16,349,446 | $24,617,703 | n/a | n/a | $4,054,082 | $6,887,666 | $110 | $107 | $1,233.8 | 16.0% |
Pay Ratio
Summary Compensation Table Total for PEO and Average Summary Compensation Table Total for non-PEO NEOs. Reflects amounts reported in the “Summary Compensation Table” for the PEOs set forth below and average amounts reported in the “Summary Compensation Table” for the non-PEO NEOs set forth below:
Pay Ratio
| Year | PEO | Non-PEO NEOs | | 2023 | Donald Allan, Jr. | Patrick D. Hallinan, Tamer K. Abuaita, John T. Lucas, Christopher J. Nelson, Corbin B. Walburger | | 2022 | Donald Allan, Jr. and James M. Loree | Corbin B. Walburger, Janet M. Link, Robert H. Raff and John H. Wyatt | | 2021 | James M. Loree | Donald Allan, Jr., Janet M. Link, Jaime A. Ramirez and John H. Wyatt | | 2020 | James M. Loree | Donald Allan, Jr., Jeffrey D. Ansell, Jaime A. Ramirez and Graham N. Robinson |
Pay Ratio
Compensation Actually Paid to PEO and Average Compensation Actually Paid to non-PEO NEOs. Compensation actually paid for the PEO and average compensation actually paid for our non-PEOs in 2023, 2022, 2021 and 2020 reflect the respective amounts set forth in these columns, adjusted as follows in accordance with the SEC’s pay versus performance disclosure rules. These dollar amounts do not reflect the actual amount of compensation earned by or paid to the PEOs and our other NEOs during the applicable year. For information regarding the decisions made by our Compensation Committee with respect to the PEOs’ and our other NEOs’ compensation for fiscal year 2023, see Compensation Discussion and Analysis beginning on page 28 of this Proxy Statement.
Pay Ratio
| | PEO (Allan) | Average of Non-PEOs | | Total Reported in Summary Compensation Table for 2023 | $13,877,644 | $5,924,460 | | Less, value of equity awards reported in the Summary Compensation Table | $(9,249,952) | $(4,089,001) | | Add, year-end value of equity awards granted in 2023 that are unvested and outstanding | $8,873,957 | $4,415,277 | | Add, change in fair value (from prior year-end) of prior year equity awards that are unvested and outstanding | $944,425 | $195,729 | | Add, fair market value of equity awards granted in 2023 and that vested in 2023 | $— | $— | | Add, change in fair value (from prior year-end) of prior year equity awards that vested in 2023 | $447,382 | $53,677 | | Less, prior year-end fair value of prior year equity awards that failed to vest in 2023 | $— | $— | | Add, dividends and dividend equivalent payments paid during 2023 on unvested equity awards | $— | $— | | Less, change in present value of accumulated pension plan benefits reported in the Summary Compensation Table | $— | $— | | Add, service cost for defined benefit and pension plans | $— | $— | | Add, prior service cost for defined benefit and pension plans | $— | $— | | Compensation Actually Paid for Fiscal Year 2023 | $14,893,456 | $6,500,142 |
Pay Ratio
The assumptions used to calculate the fair values set forth in the table above are computed in accordance with ASC 718 and did not differ materially from those used to calculate the grant date fair value for each award. Value of Initial Fixed $100 Investment Based On Total Shareholder Return and Peer Group Total Shareholder Return. TSR is cumulative for the measurement periods beginning on December 31, 2019, and ending on December 31 of each of 2023, 2022, 2021 and 2020, respectively, calculated in accordance with Item 201(e) of Regulation S-K. The S&P 500 Capital Goods Index peer group for purposes of this table reflects the Company’s industry sector and is the same as our peer group disclosed in the Stock Performance Graph in Item 5 of Part II of the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023. Net Income (GAAP). Reflects “Net Income” as reported under the caption “Net (Loss) Earnings Attributable to Stanley Black & Decker, Inc.” in the Company’s Consolidated Statements of Operations included in the Company’s Annual Reports on Form 10-K for the years ended December 30, 2023, December 31, 2022, January 1, 2022 and January 2, 2021. Net Income is inclusive of the results of discontinued operations. The 2022 and 2023 Net Income reflects an $884.9 million after-tax gain and $(28.8) million after-tax loss on sale of the Security business, respectively. CFROI. CFROI is utilized in the 2023–2025 LTIP with a 40% weight, representing the highest weighted metric for those awards. CFROI is calculated as cash from operations plus after-tax interest expense, divided by the two-point average (beginning and end of the year) of debt plus equity. CFROI has been adjusted, consistent with the terms of grant, to exclude the impact of certain gains and charges. See Appendix A for a calculation of CFROI. The CFROI results reported for 2022 and 2021 represent the CFROI results achieved under the 2020–2022 LTIP PSU cycle as reported in the Company’s Proxy Statement for the 2023 Annual Meeting of Shareholders but are 0.1% higher than the CFROI results for the corresponding years in the 2021–2023 LTIP cycle described in “Long-Term Incentive Performance Goals and Performance Period Results” on page 45 due to differing assumptions based on expected Non-GAAP adjustments at the time of the establishment of the respective CFROI goals at the beginning of the applicable LTIP cycle.
Relationships Between Compensation Actually Paid and Financial Performance Measures
Relationships Between Compensation Actually Paid and Financial Performance Measures
Compensation Actually Paid, Company TSR and Peer Group TSR
Compensation Actually Paid, Company TSR and Peer Group TSR The chart below describes the relationship between the Company’s TSR and the compensation actually paid to the PEOs (which for 2022 is the sum of the compensation actually paid to Mr. Allan and Mr. Loree) and the average amount of compensation paid to non-PEO NEOs, as well as between the Company’s TSR and the TSR of the Company’s peer group, the S&P 500 Capital Goods Index. Compensation actually paid generally aligns with the Company’s TSR over the four years presented in the table because a significant portion of the compensation actually paid to our NEOs is comprised of equity awards whose value is directly tied to the value of the Company’s common stock performance.
Compensation Actually Paid and Net Income
Compensation Actually Paid and Net Income The chart below describes the relationship between net income and the compensation actually paid to the PEOs (which for 2022 is the sum of the compensation actually paid to Mr. Allan and Mr. Loree) and the average amount of compensation paid to non-PEO NEOs. As demonstrated by the following table, the amount of compensation actually paid to our CEO and the average compensation paid to our Non-PEO NEOs was generally aligned to our net income in 2020 and 2021. In 2022, net income included a non-recurring $884.9 million after-tax gain on the Security divestiture reported in discontinued operations and the compensation actually paid, as reported, was negative primarily due to the 2022 decline in the company stock price. In 2023, the divergence in net income versus compensation actually paid primarily pertained to appreciation in the company stock price in 2023, as well as $566.2 million of Non-GAAP adjustments, principally related to asset impairment charges and supply chain transformation costs included in net income but excluded from the incentive compensation program payouts, along with the strategic choice to prioritize inventory reductions which impacted gross margin and net income despite improved gross margin performance relative to 2022. While the Company does not use net income as a performance measure in the overall executive compensation program, the measure of net income is somewhat correlated with the Adjusted EPS measure, which is used in the MICP and LTIP PSUs for the 2022-2024 and prior cycle. However, the Adjusted EPS measure utilized in the incentive programs excludes Non-GAAP adjustments, and therefore excludes the after-tax gain and loss on the Security business divestiture reported in discontinued operations in 2022 and 2023, respectively, which are included in net income.
Compensation Actually Paid and CFROI
Compensation Actually Paid and CFROI The chart below describes the relationship between the Company-selected performance measure of CFROI and compensation actually paid to the PEOs (which for 2022 is the sum of the compensation actually paid to Mr. Allan and Mr. Loree) and the average amount of compensation paid to non-PEO NEOs, showing alignment over the four years presented in the table.
Reasons Why You Should Vote to Approve the 2024 Plan
| ● | Director Compensation Limit: The total annual compensation of non-employee directors is limited to $750,000, including pursuant to awards under the 2024 Plan and retainer fees, and by approving the 2024 Plan, shareholders will be deemed to have also ratified this limit; |
Limit on Director Compensation
Limit on Director Compensation The 2024 Plan provides that the maximum amount of compensation that may be paid to any non-employee director in respect of such individual’s service as a non-employee director in any single fiscal year (including awards under the 2024 Plan, determined based on the fair market value of such award as of the grant date, as well as cash retainer fees) may not exceed $750,000.