DEF 14A of Parker-Hannifin Corp
Filed Sep 20, 2024 · FY20240001308179-24-000719
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Parker-Hannifin Corporation is a Fortune 250 global leader in motion and control technologies. For more than a century, the Company has engineered the success of its customers in a wide range of diversified industrial and aerospace markets.
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| The Win Strategy™ - | The Win Strategy is Parker’s business system that defines the goals and initiatives that drive growth, transformation and success. |
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| Our Values - | Our values shape our culture and our interactions with stakeholders and the communities in which we operate and live. |
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| Our Purpose - | Our purpose provides inspiration and direction for our team members and highlights how we can have a positive impact on the world. |
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ENABLING ENGINEERING BREAKTHROUGHS THAT LEAD TO A BETTER TOMORROW. Parker-Hannifin Corporation 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141
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| Notice of Annual Meeting of Shareholders |
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| | DATE AND TIME October 23, 2024 (Wednesday) 9:00 a.m. EDT | | ADDRESS Parker-Hannifin Corporation 6035 Parkland Boulevard Cleveland, Ohio 44124 | | RECORD DATE September 6, 2024 |
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To Our Shareholders: You are cordially invited to attend the Annual Meeting of Shareholders of Parker-Hannifin Corporation. The meeting will be held at our headquarters located at 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, on Wednesday, October 23, 2024 at 9:00 a.m., Eastern Time, for the following purposes:
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| Voting Items | | | | | 1 | Election of Directors | | FOR each director nominee | | 2 | Approval of the Compensation of Our Named Executive Officers on a Non-Binding, Advisory Basis | | FOR | | 3 | Ratify the Appointment of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm | | FOR |
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and to transact such other business as may properly come before the meeting. Shareholders of record at the close of business on September 6, 2024 are entitled to vote at the meeting. On September 6, 2024, 128,670,356 shares were outstanding and entitled to vote at the meeting. Each share is entitled to one vote. This Proxy Statement and the form of proxy are being mailed to shareholders on or about September 20, 2024. Your vote is important, so if you do not expect to attend the meeting, or if you do plan to attend but wish to vote by proxy, please mark, date, sign and return the enclosed proxy card promptly in the envelope provided or vote electronically via the internet or by telephone in accordance with the instructions on the proxy card. Please refer to the section “General Information About the Annual Meeting” for more information. Thank you for your support of Parker-Hannifin Corporation. By Order of the Board of Directors
Governance
Governance
Governance
| Board Diversity and Composition | Our Board of Directors is committed to sound corporate governance practices, promoting the long-term interests of our shareholders and holding itself and management accountable for performance. The metrics included in the graphic below reflect the Board structure and composition of our twelve current Directors. Each Director brings his or her own unique background and range of expertise, knowledge and experience, which we believe provides an optimal and diverse mix of skills and qualifications necessary for our Board to effectively fulfill its oversight responsibilities. | | | | Board Tenure 8.6 years AVERAGE TENURE | Independence 92% INDEPENDENT | | | Age 61 years AVERAGE AGE | Diversity 75% GENDER/RACIALLY/ ETHNICALLY DIVERSE* * One of our directors is both gender diverse and racially diverse. Another one of our directors is both racially and ethnically diverse. Ethnicity is defined as country of birth or citizenship other than the United States. | | | Director Experience | | | | Public Company Leadership | Manufacturing | | | Corporate Strategy & Culture | Technology & Innovation | | | Risk Management | Finance & Accounting | | | International | Sales & Marketing | | | Industrial/Aerospace Industries | |
Governance
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Governance
| Board and Committee Practices | ●Our Corporate Governance Guidelines and the charters of our Audit, Corporate Governance and Nominating and Human Resources and Compensation Committees expressly identify the specific areas of ESG oversight responsibility of the full Board and each Committee. ●Director retirement is mandatory (with no exceptions or conditions) after reaching age 72. ●Robust stock ownership guidelines for our Directors and executive officers (all of whom are compliant with such guidelines) ●Annual Board, Committee and individual Director evaluations ●Annual review of our Chief Executive Officer by all independent Directors ●Thoughtful management of our Directors' outside commitments – three do not sit on any other public company boards, six sit on one other public company board, and three sit on two other public company boards ●Average Director attendance at all of our Board of Directors and Committee meetings was 97% and each of our Directors attended at least 80% of his or her meetings of our Board of Directors and his or her Committee meetings during fiscal year 2024. ●Each Committee of our Board of Directors has a published charter that is reviewed and evaluated at least annually. | | Shareholder Rights | ●Annual election of all Directors ●Majority voting and resignation policy for uncontested Director elections ●Proxy access permitted for eligible shareholders | | Board Independence | ●Board Committees are 100% comprised of independent Directors ●Independent Directors meet regularly and frequently (at least four times per year) without management | | Oversight of Risk | ●Our Chairman of the Board and Lead Director ensure the entire Board of Directors maintains regular oversight of key risk areas, such as corporate strategy, management succession planning, cybersecurity, enterprise risk management, and ESG matters. For more information on the Board's oversight responsibilities, see pages 27-29 of this Proxy Statement. | | Guidelines and Codes of Conduct | ●Published Global Code of Business Conduct applicable to our Board of Directors ●Published Corporate Governance Guidelines |
Governance
| 2024 Proxy Statement | 9 |
Board Nominees
Board Nominees
Board Nominees
| | | | Committee Membership | | | | Name | Principal Employment | Director Since | HRC | CGN | AC | | Denise Russell Fleming | Executive Vice President, Technology & Global Services and Chief Information Officer of Becton, Dickinson & Company | 2023 | | | | | Lance M. Fritz | Former Chairman, President and Chief Executive Officer of Union Pacific Corporation | 2021 | | | | | Linda A. Harty | Former Treasurer of Medtronic plc | 2007 | | | | | Kevin A. Lobo | Chairman, Chief Executive Officer and President of Stryker Corporation | 2013 | | | | | Jennifer A. Parmentier | Chairman of the Board and Chief Executive Officer of Parker-Hannifin Corporation | 2023 | | | | | E. Jean Savage | President and Chief Executive Officer of Trinity Industries, Inc. | 2024 | | | | | Joseph Scaminace | Former Chairman and Chief Executive Officer of OM Group, Inc. | 2004 | | | | | Laura K. Thompson | Former Executive Vice President and Chief Financial Officer of The Goodyear Tire & Rubber Company | 2019 | | | | | James R. Verrier | Former President and Chief Executive Officer of BorgWarner, Inc. | 2016 | | | | | James L. Wainscott (Lead Director) | Former Chairman, Chief Executive Officer and President of AK Steel Holding Corporation | 2009 | | | |
Board Nominees
| AC Audit Committee | | Member | | HRC Human Resources and Compensation Committee | | Chair | | CGN Corporate Governance and Nominating Committee | | |
Board Nominees
| | THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES TO THE BOARD OF DIRECTORS. |
Board Nominees
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Director Selection and Nomination, Qualifications and Diversity
Director Selection and Nomination, Qualifications and Diversity The Corporate Governance and Nominating Committee of our Board is responsible for identifying, evaluating and recommending potential Director candidates. The Corporate Governance and Nominating Committee ensures that Director recruiting, succession and refreshment are persistent areas of focus and regularly reviews the size, composition and independence of our Board, and any expected vacancies, in determining whether and to what extent to actively recruit new Directors or to replace departing Directors. The Corporate Governance and Nominating Committee utilizes a variety of methods and processes to identify potential Director candidates, including through reputable third-party search firms, unsolicited recommendations from third-party search firms, and referrals from current or past members of our Board. In addition, the Corporate Governance and Nominating Committee will give appropriate consideration to qualified persons recommended by shareholders for nomination as Directors provided that such recommendations comply with the procedures set forth under the caption “Shareholder Recommendations for Director Nominees” and will consider such candidates on the same basis as candidates recommended by other sources. The Corporate Governance and Nominating Committee generally will not, however, consider recommendations for Director nominees submitted by individuals who are not affiliated with us. The Corporate Governance and Nominating Committee has developed and implemented a robust process to ensure that its formal Director searches are appropriately scoped and designed to produce a slate of potential candidates representing a broad range of backgrounds, educations, experiences, skills and viewpoints that will enable them, individually and collectively, to address the issues affecting our Board, our business, our team members and our shareholders, and optimize the functioning and decision-making and oversight roles of our Board and its Committees. The Corporate Governance and Nominating Committee currently focuses on the following key search and evaluation criteria but considers the entirety of each proposed candidate’s credentials and all available information that may be relevant to each candidate’s nomination.
Director Selection and Nomination, Qualifications and Diversity
| Key Criteria | Overall Philosophy and Approach | | Culture and Values | The Corporate Governance and Nominating Committee places high value on cultural fit. Our Directors must be able to work together to efficiently and effectively oversee the issues and risks facing our business, and have the commitment, integrity, honesty, judgment and professionalism required under our Corporate Governance Guidelines and Global Code of Business Conduct, and to otherwise serve the long-term interests of our Board of Directors, our business, our team members and our shareholders. | | Diversity | The Corporate Governance and Nominating Committee firmly believes diversity is critical to a well-functioning Board of Directors and is committed to ensuring diversity on our Board. As a result, our Corporate Governance Guidelines include a policy requiring each search for qualified director candidates to include individuals with diverse backgrounds, including gender, ethnicity and race. Currently, 50% of our Board is gender diverse and 75% of our Board is diverse in terms of gender, race, or ethnicity. Since 2019, we have recruited and on-boarded seven new directors, six of whom are diverse in terms of gender and/or race. | | Skills and Qualifications | The Corporate Governance and Nominating Committee also believes it is essential to have a Board with the range of skills and experience needed to effectively evaluate, monitor and oversee the wide range of considerations presented by the size and scope of our Company, operations, products and markets. As a result, the Corporate Governance and Nominating Committee seeks to identify nominees who are independent and well equipped with a broad set of key skills, including those shown on the table on page 14. |
Director Selection and Nomination, Qualifications and Diversity
The Corporate Governance and Nominating Committee, utilizing its robust and thoughtful approach to Director recruiting, succession and refreshment, has built an experienced, diverse and independent Board that provides significant oversight over our plans and strategies for growth, financial performance and shareholder value creation.
Director Selection and Nomination, Qualifications and Diversity
| 2019 Laura K. Thompson | | 2021* Jillian C. Evanko Lance M. Fritz William F. Lacey | | 2023 Jennifer A. Parmentier Denise Russell Fleming | | 2024 E. Jean Savage | 7 new directors since 2019 6 new diverse directors since 2019 |
Director Selection and Nomination, Qualifications and Diversity
| * Ms. Evanko is not standing for reelection (see "New Elections and Departures" on page 21 of this Proxy Statement). Mr. Lacey resigned in fiscal year 2023 to pursue a new career opportunity. |
Director Selection and Nomination, Qualifications and Diversity
| 2024 Proxy Statement | 13 |
Director Skills/Experience/Diversity
Director Skills/Experience/Diversity In addition to the metrics included on page 8, the following table presents on an individual basis the skills and experience of our Board Nominees in areas that are of importance to our Company. Our Board refreshment efforts over the last several years have strengthened the culture, skills and diversity of our Board. Each Director nominee brings his or her own unique background and range of expertise, knowledge and experience, which provides a comprehensive and optimal mix of skills and qualifications necessary for our Board to effectively fulfill its oversight responsibilities.
Director Skills/Experience/Diversity
| | Director Experience | | | | | | | | | | | | | Public Company Leadership Experience serving as CEO, COO, CFO, or other senior leadership roles, and/or on the Board of Directors of publicly traded companies of significant size and complexity. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | | | Corporate Strategy & Culture Experience developing and implementing strategies to drive and enhance culture, values, purpose, engagement, customer experience, profitable growth and financial performance. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | | | Risk Management Experience identifying, managing and mitigating significant business risks (financial, operational, compliance, reputational, etc.) including those related to ESG, cybersecurity, human capital and supply chain. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | | | International Experience conducting business inside and outside the U.S., or other meaningful exposures to non-U.S. cultures, markets, economies, etc. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | | | Industrial/Aerospace Industries Experience in the industrial and aerospace markets in which we operate or in those with similar business requirements, priorities, risks and challenges. | ● | ● | ● | | ● | ● | ● | ● | ● | ● | | | Manufacturing Experience managing manufacturing operations, capabilities, capital needs, supply chains, cost and operating efficiencies, etc. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | | | Technology & Innovation Experience in engineering, research and development, product and/or process innovation, information technology, digitization, e-commerce, data management, etc. | ● | ● | | ● | ● | ● | ● | ● | ● | ● | | | Finance & Accounting Experience in financial management, reporting and controls, capital allocation, capital markets, mergers and acquisitions, etc. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | | | Sales & Marketing Experience growing revenue and market shares through effective sales and marketing, customer relationships and channel management, reputation and brand building, etc. | ● | ● | | ● | ● | ● | ● | ● | ● | ● |
Director Skills/Experience/Diversity
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Director Skills/Experience/Diversity
| Director Diversity | Gender | Race | Ethnicity (Country of Birth/Citizenship) | | Denise Russell Fleming | F | Black | United States | | Lance M. Fritz | M | White | United States | | Linda A. Harty | F | White | United States | | Kevin A. Lobo | M | Asian | Country of Birth: India Dual Citizenship: Canada, United States | | Jennifer A. Parmentier | F | White | United States | | E. Jean Savage | F | White | United States | | Joseph Scaminace | M | White | United States | | Laura K. Thompson | F | White | United States | | James R. Verrier | M | White | Country of Birth: United Kingdom Dual Citizenship: United Kingdom, United States | | James L. Wainscott | M | White | United States |
Director Skills/Experience/Diversity
| 2024 Proxy Statement | 15 |
Director Biographies
Director Biographies Nominees for Election as Directors for Terms Expiring in 2025
Director Biographies
| | Denise Russell Fleming Director Since: 2023 Age: 54 Committees: Audit Corporate Governance and Nominating | Other Public Company Directorships (current in bold): ●None | | Ms. Fleming has been Executive Vice President, Technology and Global Services and Chief Information Officer of Becton, Dickinson & Company (medical technology) since July 2022. She was the Vice President, Information Technology at Boeing Defense, Space & Security (aerospace and defense) from December 2016 until June 2022. Prior to Boeing, Ms. Fleming served in several information technology leadership roles at BAE Systems, Inc. (aerospace and defense) from 2010 to 2016 and at Sprint Nextel Corporation (telecommunication technology) from 1997 to 2010. Ms. Fleming has held the senior leadership positions noted above and various other public company leadership roles in significant global companies, including publicly traded technology, manufacturing and aerospace and defense companies. She has demonstrated significant expertise in leading and/or overseeing information technology systems, cybersecurity, digitization, aerospace markets, team member engagement, industrial manufacturing, ESG initiatives, and process optimization, among other critical areas. Based on her strong background, experience and performance in senior leadership roles, our Board believes Ms. Fleming will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | | |
Director Biographies
| | Lance M. Fritz Director Since: 2021 Age: 61 Committees: Corporate Governance and Nominating Human Resources and Compensation | Other Public Company Directorships (current in bold): ●Fiserv Inc. (since 2024) ●Union Pacific Corporation (former) (2015-2023) | | Mr. Fritz currently serves as Special Advisor to Union Pacific Corporation (rail transport), where he previously served as Chairman of the Board from October 2015 to August 2023 and President and Chief Executive Officer from February 2015 to August 2023. He also served as President and Chief Operating Officer of Union Pacific Railroad Company (the principal operating company of Union Pacific Corporation) from February 2014 to February 2015, and in various labor relations, sales and marketing, and other leadership roles with Union Pacific from July 2000 to February 2014. Mr. Fritz has served in the public company leadership capacities noted above as well as other significant senior leadership roles. His experience includes leading and/or overseeing corporate strategy and culture, risk management, international trade, operations, compliance, supply chain and logistics, corporate finance, ESG initiatives, cybersecurity, capital allocation, M&A, and other key commercial functions including sales and marketing. Additionally, Mr. Fritz has gained significant experience, perspective and insight from his service on other public company boards. Based on his strong background, experience and performance in senior leadership roles and as a director, our Board believes Mr. Fritz will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | | |
Director Biographies
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Director Biographies
| | Linda A. Harty Director Since: 2007 Age: 64 Committees: Audit Corporate Governance and Nominating | Other Public Company Directorships (current in bold): ●Westinghouse Air Brake Technologies Corporation (Wabtec) (since 2016) ●Chart Industries, Inc. (since 2021) ●Syneos Health, Inc. (former) (2017-2023) | | Now retired, Ms. Harty was Treasurer of Medtronic plc (medical technology) from February 2010 to April 2017. Prior to joining Medtronic, Ms. Harty served as Executive Vice President and Treasurer of Cardinal Health, Inc. (healthcare) from May 2008 to December 2009 and from August 2006 to March 2007, Executive Vice President – Finance and Chief Financial Officer of Cardinal Health’s Healthcare Supply Chain Services from March 2007 to May 2008, and Senior Vice President of Cardinal Health from January 2005 to August 2006. Ms. Harty has served in the public company leadership capacities noted above as well as other significant leadership roles. Her experience includes leading and/or overseeing key commercial functions including corporate finance, financial reporting, risk management, strategic planning and pricing, capital allocation, M&A analysis and financing, supply chain management, and process innovation. Additionally, Ms. Harty has extensive and significant experience, perspective and insight, including management of cybersecurity events, from her service and leadership roles on other public company boards. Based on her strong background, experience and performance in senior leadership roles and as a director, our Board believes Ms. Harty will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | | |
Director Biographies
| | Kevin A. Lobo Director Since: 2013 Age: 59 Committees: Audit (Chair) Human Resources and Compensation | Other Public Company Directorships (current in bold): ●Stryker (since 2012) | | Mr. Lobo has been Chairman of the Board of Stryker Corporation (medical technologies) since July 2014 and has been Chief Executive Officer, President and a Director since October 2012. He previously served as Group President for Stryker's Orthopedics and Neurotechnology and Spine Groups. Mr. Lobo has held the senior leadership positions noted above and other various public company leadership roles in global companies, including publicly traded medical technology and consumer products companies. His experience includes leading and/or overseeing corporate strategy and culture, profitable growth and financial performance, and key commercial functions including strategic pricing, sales and marketing, high-tech innovation, automation, digitization, capital allocation, cybersecurity, management of ESG initiatives and other significant risks and opportunities. Additionally, Mr. Lobo has gained significant experience, perspective and insight from his service on other public company boards. Based on his strong background, experience and performance in senior leadership roles and as a director, our Board believes Mr. Lobo will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | | |
Director Biographies
| 2024 Proxy Statement | 17 |
Director Biographies
| | Jennifer A. Parmentier Director Since: 2023 Age: 57 Committees: None | Other Public Company Directorships (current in bold): ●Nordson Corporation (since 2020) | | Ms. Parmentier has been our Chairman of the Board since January 2024 and our Chief Executive Officer since January 2023. From August 2021 to December 2022 she was our Chief Operating Officer. Prior to August 2021, she was Vice President and President of the Motion Systems Group from February 2019 to August 2021 and Vice President and President of the Engineered Materials Group from September 2015 to February 2019. Ms. Parmentier has served in the public company leadership capacities noted above as well as other significant leadership roles since joining us in 2008. Her experience includes leading and/or overseeing all of our operating groups, regions, and key commercial functions. She has been instrumental in driving and implementing strategies to strengthen our financial performance, culture, values, purpose, team member engagement, customer experience, profitable growth, and management of ESG initiatives, cybersecurity and other significant risks and opportunities. Additionally, Ms. Parmentier has gained significant experience, perspective and insight from her service on other public company boards. Based on her strong background, experience, performance in senior leadership roles and intimate working knowledge of our business, plans, strategies, and initiatives, our Board believes Ms. Parmentier will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | | |
Director Biographies
| | E. Jean Savage Director Since: 2024 Age: 60 Committees: Audit Corporate Governance and Nominating | Other Public Company Directorships (current in bold): ●Trinity Industries, Inc. (since 2018) ●WestRock Company (2022-2024) | | Ms. Savage has been President and Chief Executive Officer of Trinity Industries, Inc. (rail car products and services) since January 2020. She was the Vice President, Surface Mining and Technology at Caterpillar Inc. (construction and mining equipment, engines, industrial gas turbines and diesel-electric locomotives) from August 2017 until January 2020, and prior to that role she held a variety of senior leadership roles within Caterpillar that spanned operations, technology and innovation, and quality and continuous improvement. Prior to those roles, Ms. Savage held a variety of engineering and general manager roles at Parker-Hannifin Corporation from 1988 until 2002. Ms. Savage began her career as an intelligence officer with the U.S. Army Reserves. Ms. Savage has served in the public company leadership capacities noted above as well as other significant leadership roles. Her experience includes leading and/or overseeing corporate strategy and culture, sales and marketing, financial and operational risk management, cybersecurity, technology, industrial manufacturing, capital allocation, M&A, and corporate finance. Additionally, Ms. Savage has gained significant experience, perspective and insight from her service on other public company boards. Ms. Savage was recommended to the Corporate Governance and Nominating Committee by our third party search firm, Russell Reynolds Associates. Based on her strong background, experience and performance in senior leadership roles and as a director, our Board believes Ms. Savage will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | | |
Director Biographies
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Director Biographies
| | Joseph Scaminace Director Since: 2004 Age: 71 Committees: Human Resources and Compensation (Chair) Corporate Governance and Nominating | Other Public Company Directorships (current in bold): ●Cintas Corporation (since 2010) (Lead Director) | | Now retired, Mr. Scaminace served as the Chairman and Chief Executive Officer of OM Group, Inc. (metal-based specialty chemicals) from June 2005 to October 2015 and Chairman of the Board of OM Group from August 2005 to October 2015. Prior to joining OM Group, Mr. Scaminace held multiple leadership roles at The Sherwin-Williams Company (paints and coatings), ultimately serving as President and Chief Operating Officer from October 1999 to May 2005. Mr. Scaminace has served in various senior leadership roles in significant global publicly traded manufacturing companies. He has demonstrated meaningful expertise in the management and oversight of corporate strategy and culture, sales and marketing, risk management, cybersecurity, ESG initiatives, international trade and compliance, M&A, aerospace markets, inventory controls, supply chain, and financial planning, performance and reporting. Additionally, Mr. Scaminace has gained significant experience, perspective and insight from his service and leadership roles on other public company boards. Based on his strong background, experience and performance in senior leadership roles and as a director, our Board believes Mr. Scaminace will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | | |
Director Biographies
| | Laura K. Thompson Director Since: 2019 Age: 60 Committees: Audit Corporate Governance and Nominating | Other Public Company Directorships (current in bold): ●Wesco International (since 2019) ●Titan International, Inc. (since 2021) | | Now retired, Ms. Thompson served as Executive Vice President of The Goodyear Tire & Rubber Company (tire manufacturing) from December 2013 until her retirement in March 2019, and Chief Financial Officer of Goodyear from December 2013 until October 2018. Prior to those roles, Ms. Thompson held multiple leadership positions at Goodyear, including Vice President of Finance from 2009 to 2013 and Vice President of Business Development from 2005 to 2009. Ms. Thompson has served in the public company leadership capacities noted above as well as other significant leadership roles. She has meaningful expertise in corporate strategy and culture, business development, financial and operational risk management, cybersecurity, corporate finance, financial reporting, international trade, industrial manufacturing, capital allocation, distribution, supply chain management, sales and marketing, technology and process innovation, and M&A strategy, finance and execution. Additionally, Ms. Thompson has significant experience, perspective and insight from her service on other public company boards. Based on her strong background, experience and performance in senior leadership roles and as a director, our Board believes Ms. Thompson will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | | |
Director Biographies
| 2024 Proxy Statement | 19 |
Director Biographies
| | James R. Verrier Director Since: 2016 Age: 61 Committees: Audit Human Resources and Compensation | Other Public Company Directorships (current in bold): ●BorgWarner, Inc. (former) (2013-2018) | | Now retired, Mr. Verrier served as a Board Advisor to BorgWarner, Inc. (powertrain solutions) from August 1, 2018 until his retirement on February 28, 2019. He previously served as Chief Executive Officer and director of BorgWarner, Inc. from January 2013 until July 2018, and President of BorgWarner from March 2012 until July 2018. Prior to those roles, Mr. Verrier held multiple leadership roles with BorgWarner, including Chief Operating Officer and other roles within operations management, quality control and human resources. Mr. Verrier has served in various senior leadership roles in significant global publicly traded manufacturing companies, primarily at BorgWarner. He has demonstrated meaningful expertise in the management and oversight of corporate strategy and culture, sales and marketing, financial and operational risk management, cybersecurity, ESG initiatives, international trade and compliance, capital allocation, and supply chain management. Additionally, Mr. Verrier has gained significant experience, perspective and insight from his service on other public company boards. Based on his strong background, experience and performance in senior leadership roles and as a director, our Board believes Mr. Verrier will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | | |
Director Biographies
| | James L. Wainscott Director Since: 2009 (Lead Director since 2016) Age: 67 Committees: Corporate Governance and Nominating (Chair) Human Resources and Compensation | Other Public Company Directorships (current in bold): ●CSX Corporation (since 2020) | | Now retired, Mr. Wainscott was Chairman of the Board of AK Steel Holding Corporation (steel producer) from January 2006 to May 2016; and President, Chief Executive Officer and a Director of AK Steel Holding Corporation from October 2003 to January 2016. Prior to those roles, Mr. Wainscott held multiple leadership roles with AK Steel, including Chief Financial Officer from 1998 to 2003. Mr. Wainscott has served in various senior leadership roles in significant global publicly traded manufacturing companies, primarily at AK Steel. He has significant expertise in corporate strategy and culture, manufacturing, financial and operational risk management, cybersecurity, international trade and compliance, supply chain management, inventory control, labor relations, quality and customer relations, cost control, sales and marketing, and financial planning, performance and reporting. Additionally, Mr. Wainscott has gained significant experience, perspective and insight from his service and leadership roles on other public company boards and as our Lead Director since 2016. Based on his strong background, experience and performance in senior leadership roles and as a director, our Board believes Mr. Wainscott will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | | |
Director Biographies
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Other Governance Matters
| Director Compensation |
Compensation of Directors
Compensation of Directors Team members who also serve as Directors do not receive any additional compensation for their services as Directors. Accordingly, Jennifer A. Parmentier, Thomas L. Williams, and Lee C. Banks, each of whom served as executive officers during fiscal year 2024, did not receive additional compensation for their services as Directors and are not included in the Director Compensation for Fiscal Year 2024 table below. Ms. Parmentier and Mr. Banks are Named Executive Officers for fiscal year 2024, and their fiscal year 2024 compensation is fully disclosed in the Summary Compensation Table for Fiscal Year 2024 on page 59 of this Proxy Statement. Mr. Williams was an executive officer, but not a Named Executive Officer, during fiscal year 2024, and, therefore, his fiscal year 2024 compensation is not included in this Proxy Statement. During fiscal year 2024, non-employee Directors received an annual cash retainer and a restricted stock unit ("RSU") award. Our non-employee Directors are also eligible to participate in our Matching Gifts Program as described in the Compensation Discussion and Analysis section on page 58 of this Proxy Statement. The following table reflects the annual retainers of the non-employee Directors effective during fiscal year 2024:
Compensation of Directors
| | Approved August 17, 2022 | Approved August 7, 2023 | | Annual Retainers | Effective beginning 10/26/2022 | Effective beginning 10/25/2023 | | Lead Director and Corporate Governance and Nominating Committee Chair: | $225,000 | $230,000 | | Audit Committee Chair: | $185,000 | $185,000 | | Human Resources and Compensation Committee Chair: | $185,000 | $185,000 | | Non-Chair Committee members: | $155,000 | $155,000 |
Compensation of Directors
In addition to the annual retainers described above, non-employee Directors are entitled to receive a $2,000 cash fee for attending each Board of Directors or Committee meeting that exceeds the number of regularly scheduled Board or Committee meetings in a fiscal year by more than two. On that basis, for fiscal year 2024, Lance M. Fritz, Linda A. Harty, Laura K. Thompson, and James L. Wainscott each received one additional payment of $2,000. During fiscal year 2024, non-employee Directors could elect to defer all or a portion of their annual retainers under our Deferred Compensation Plan for Directors. Our non-employee Directors also receive a target value of $180,000 per year in RSUs (increased from fiscal year 2023 target value of $170,000). Accordingly, each non-employee Director who was serving as a non-employee Director on October 25, 2023 was granted 453 RSUs under the Parker-Hannifin Corporation 2023 Omnibus Stock Incentive Plan (the "2023 Equity Plan"). The terms of the RSUs provide that the RSUs will vest 100% on the later of (a) one year from the grant date; or (b) on the date of our next Annual Shareholders Meeting, also known as, in each case, the Vesting Date, except that if a non-employee Director ceases to be a Director for any reason prior to the next Annual Meeting of Shareholders that occurs after the grant date, a pro-rated portion of his or her RSUs will vest on the Vesting Date and the remaining RSUs will be forfeited. In connection with her appointment to the Board, Ms. Fleming also received 69 RSUs under the Parker-Hannifin Corporation 2016 Omnibus Stock Incentive Plan (the "2016 Equity Plan") on September 1, 2023, representing a pro-rata portion of the RSU award made to our non-employee Directors in fiscal year 2023, which RSUs vested on September 1, 2024. All RSUs earn dividend equivalent units paid as additional RSUs, which are subject to the terms and conditions of the original RSU award and are payable directly to each non-employee Director to whom they are issued.
Compensation of Directors
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Director Compensation
Director Compensation
Director Compensation for Fiscal Year 2024
Director Compensation for Fiscal Year 2024 The following table sets forth compensation information for our non-employee Directors for fiscal year 2024. Ms. Savage does not appear in the table below because she joined our Board in fiscal year 2025.
Director Compensation for Fiscal Year 2024
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | | Jillian C. Evanko | 155,000 | 166,487 | — | 321,487 | | Denise Russell Fleming | 129,167 | 195,636 | — | 324,803 | | Lance M. Fritz | 157,000 | 166,487 | — | 323,487 | | Linda A. Harty | 166,435 | 166,487 | 10,000 | 342,922 | | Kevin A. Lobo | 175,564 | 166,487 | — | 342,051 | | Joseph Scaminace | 185,000 | 166,487 | 10,000 | 361,487 | | Åke Svensson | 155,000 | 166,487 | — | 321,487 | | Laura K. Thompson | 157,000 | 166,487 | 2,500 | 325,987 | | James R. Verrier | 155,000 | 166,487 | — | 321,487 | | James L. Wainscott | 230,427 | 166,487 | 10,000 | 406,914 |
Director Compensation for Fiscal Year 2024
| (1) This column represents the aggregate grant date fair value of RSUs granted under our 2023 Equity Plan and 2016 Equity Plan in fiscal year 2024 and computed in accordance with Financial Accounting Standards Board ("FASB") ASC Topic 718. The amount was calculated using the closing stock price on the date of each of the grants and factors in the dividend equivalent units that may be paid on the underlying RSU grants. Each of the non-employee Directors serving as a Director on October 25, 2023 received 453 RSUs with an aggregate grant date fair value of $166,487 on his or her grant date. Ms. Fleming, who was appointed in September 2023, also received 69 RSUs with an aggregate grant date fair value of $29,150 under our 2016 Equity Plan on September 1, 2023, which RSUs vested on September 1, 2024. As of June 30, 2024, each non-employee Director included in the table above, other than Ms. Fleming, held 453 RSUs, and Ms. Fleming held 522 RSUs. None of the non-employee Directors held options or SARs. | | (2) The amounts reported in this column consist of matching gifts under our Matching Gifts Program. For more information, see the Compensation Discussion and Analysis section on page 58 of this Proxy Statement. |
Director Compensation for Fiscal Year 2024
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Director Compensation for Fiscal Year 2024
| Executive Compensation |
2024 Executive Compensation Program
| Category of Compensation | Element(s) of Compensation | Defined/Described Beginning on: | | Base Salaries | Base Salaries | Page 45 | | Annual Cash Incentive Compensation | Officer ACIP Awards | Page 45 | | Long-Term Incentive Compensation | LTIP Awards | Page 49 | | | Stock Incentives | Page 51 | | Employee Benefits | Various | Page 52 | | Executive Perquisites | Various | Page 57 |
2024 Executive Compensation Program
| (1) The percentages in this chart do not include Mr. Bracht's retention RSU grant described below. |
2024 Executive Compensation Program
| | LTIP Awards and Target Stock Incentives (Long Term/Equity) |
Compensation Practices
| | What We Do | | What We Don't Do | | Executive compensation program with pay-for-performance structure aligned with The Win Strategy The target total direct compensation package for our Chief Executive Officer is a mix of 9% fixed and 91% at-risk, and for our other Named Executive Officers is an average mix of 19% fixed and 81% at-risk Annual advisory vote on executive compensation with consistent high degree of approval One-year minimum vesting or performance period requirements for equity incentives Clawback policies and provisions to recover or withhold incentive-based compensation to executive officers in certain circumstances Anti-hedging and anti-pledging policy for Directors and executive officers Robust Stock Ownership Guidelines for executive officers and Directors | | Offer employment agreements to our executives Offer above-market earnings on contributions to deferred compensation accounts Grant stock options or SARs with an exercise price less than the fair market value of Parker’s common stock on the date of grant Re-price stock options or SARs Cash out underwater stock options or SARs Include reload provisions in any stock option or SAR grant Permit Directors or employees, or their respective related persons, to engage in short sales of Parker’s stock or to trade in instruments designed to hedge against price declines in Parker’s stock Permit Directors or officers to hold Parker securities in margin accounts or to pledge Parker securities as collateral for loans or other obligations | |
Compensation Consultants and Competitive Market Analysis
Compensation Consultants and Competitive Market Analysis The Committee regularly monitors, reviews and evaluates our executive compensation program to help ensure that it provides reasonable compensation ranges at competitive, appropriate and effective levels. The Committee engages Mercer Consulting, an independent human resources and compensation consulting firm, which we refer to as Mercer, to assist the Committee in its monitoring, review and evaluation responsibilities, and to otherwise provide assistance and guidance to the Committee on executive officer and Director compensation matters. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies, Inc. The Committee first engaged Mercer in fiscal year 2009 following a robust procurement process involving multiple consulting firms. The Committee selected Mercer based on its level of expertise and financial and strategic fit. Mercer reports directly to the Committee and attends all meetings of the Committee. The Committee has sole authority for the appointment, removal, replacement, compensation and oversight of Mercer and its affiliates for executive officer and Director compensation matters. Mercer provides a wide range of executive officer and Director compensation consulting services for the Committee. Mercer prepares and provides to the Committee a comprehensive annual review of base salaries, target annual cash incentive compensation, target long-term incentive compensation and target total cash and direct compensation for all of our executive officers. Mercer uses this annual review to advise the Committee with respect to the effectiveness and competitiveness of our executive compensation program. The Committee considers this annual review when establishing compensation levels and otherwise to ensure that our executive compensation program remains competitive and effective. Mercer uses proxy statement data and surveys published by leading human resources and compensation consultants to conduct market analyses of base salaries, target annual cash incentive compensation, target long-term incentive compensation and target total cash and direct compensation offered to executives of other diversified industrial companies with revenues and market values comparable to ours, which we refer to as the Peer Group or Peer Group companies. Mercer also uses broader market data on companies outside of the Peer Group to the extent that it is available and appropriate. The Committee regularly reviews and, when necessary or advisable, updates the Peer Group to make sure it consists of companies that directly compete with us for talented team members and shareholder investment, and it otherwise represents a meaningful group of peers. In evaluating the Peer Group companies, the Committee looks for companies in the Diversified Industrials sector with characteristics and business strategies similar to ours. In January 2023, the Committee modified the Peer Group in order to more closely align the Peer Group with the current size, characteristics and business strategy of the Company. Accordingly, the Committee removed Enovis Corporation and Danaher Corporation from the Peer Group and added 3M Company, Moog Inc. and RTX Corporation to the Peer Group. The Peer Group companies used for purposes of fiscal year 2024 compensation decisions therefore consisted of the following companies:
Compensation Consultants and Competitive Market Analysis
| Peer Group Companies | | | | ●3M Company ●Caterpillar Inc. ●Cummins Inc. ●Deere & Company ●Dover Corporation ●Eaton Corporation plc ●Emerson Electric Co. | ●Flowserve Corporation ●Fortive Corporation ●Honeywell International Inc. ●Illinois Tool Works Inc. ●Ingersoll Rand Inc. ●ITT Inc. | ●Johnson Controls International plc ●Moog Inc. ●RTX Corporation ●Rockwell Automation, Inc. ●Textron Inc. ●Trane Technologies plc |
Compensation Consultants and Competitive Market Analysis
Mercer also provided other compensation consulting services to the Committee during fiscal year 2024, including:
Compensation Consultants and Competitive Market Analysis
| ● | preparing for and participating in the Committee’s meetings and conference calls, including advance and subsequent meetings with the chair of the Committee and senior management; | | ● | conducting a pay-for-performance review to evaluate the level of alignment between our executive compensation program and performance levels relative to our Peer Group companies; | | ● | preparing and providing to the Committee a comprehensive review of compensation provided to our non-management Directors; | | ● | assessing our cash flow margin performance versus peers over a one, three and five-year period; | | ● | working with management to conduct the annual compensation risk review; and | | ● | periodically assisting management on other select executive compensation topics. |
Compensation Consultants and Competitive Market Analysis
| 2024 Proxy Statement | 41 |
Compensation Consultants and Competitive Market Analysis
In fiscal year 2024, we paid $255,500 in fees, administrative charges, out-of-pocket expenses and other costs to Mercer for executive officer and Director compensation consulting services provided to the Committee. We also directly engage Marsh & McLennan Companies, Inc. and its affiliates (including Mercer) in the ordinary course of business, without the approval of our Board of Directors or the Committee, to provide services in areas other than executive officer and Director compensation. In fiscal year 2024, these additional services included:
Compensation Consultants and Competitive Market Analysis
| ● | consulting services regarding life insurance, prescription drug and other benefits programs for our team members generally; | | ● | providing benchmarking surveys for information on compensation and benefits for our team members generally; and | | ● | providing services as an insurance broker. |
Compensation Consultants and Competitive Market Analysis
In fiscal year 2024, we paid $1,104,400 in fees, administrative charges, commissions, out-of-pocket expenses and other costs to Marsh & McLennan Companies, Inc. and its affiliates (including Mercer) for these additional services. The majority of these fees were not paid pursuant to engagements of Marsh & McLennan Companies, Inc. by management, but were rather either paid by our third-party administrators to Marsh & McLennan Companies, Inc. relating to risk insurance and for insurance and prescription drug services provided under our team member health and welfare plans, or were direct engagements with Marsh & McLennan Companies, Inc. made by various divisions worldwide for market surveys related to those particular divisions. The consolidated revenues of Marsh & McLennan Companies, Inc. were $22.74 billion as reported in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The Committee has considered and assessed all relevant factors, including but not limited to those set forth in Rule 10C-1(b)(4)(i) through (vi) under the Securities Exchange Act of 1934, that could give rise to a potential conflict of interest with respect to Mercer. Based on this review, we are not aware of any conflict of interest that has been raised by the work performed by Mercer. The Committee also periodically reviews the relationship with Mercer to determine whether sufficient internal safeguards are in place to ensure that Mercer provides services to the Committee independent of any influence from management. The Committee identified the following safeguards:
Compensation Consultants and Competitive Market Analysis
| ● | Mercer reports directly to the Committee and not to management on executive officer and Director compensation matters; | | ● | at each Committee meeting, Mercer and the Committee meet in executive session without members of management present; | | ● | all non-executive compensation services are provided by Mercer consultants who are not involved in providing executive officer and Director compensation consulting services to the Committee; | | ● | the Committee has exclusive authority to retain and set the compensation for Mercer’s executive officer and Director compensation consulting services; | | ● | the individual Mercer consultants to the Committee do not provide any services to us other than those provided for the Committee; | | ● | the individual Mercer consultants to the Committee do not participate in any client development activities that are not directly related to executive officer or Director compensation services for the Committee; and | | ● | the amounts paid to Mercer by the Committee are not directly impacted by any growth in the fees we pay to Marsh & McLennan Companies, Inc. and its affiliates (including Mercer). |
General Policies and Practices Relating to Executive Compensation
| ● | Allocation between annual and long-term elements. The Committee considers Mercer’s annual review as it sets each executive officer’s base salary and annual cash incentive compensation to ensure that it is reasonable in the context of the midpoint value of his or her comparable position within the Peer Group. The Committee also considers Mercer’s annual review as it sets the total target value of each executive officer’s long-term incentive compensation as a multiple of the midpoint of the base salary range of his or her comparable position within the Peer Group companies. | | ● | Allocation between cash and equity elements. Base salaries and annual cash incentive compensation are paid in cash. Long-term incentive compensation is paid in equity because of the long-term nature of equity awards and our desire to encourage performance that drives long-term shareholder value. | | ● | Allocation between different forms of equity elements. The Committee generally allocates 50% of the total target value of each executive officer’s long-term incentive compensation to LTIP Awards and 50% to Stock Incentives. The Committee takes this approach to balance the allocation between elements based on long-term financial, operational and strategic metrics and those based on long-term performance of our common stock. |
Compensation Risk Review
| ● | our executive officers and other management-level team members are compensated with a mix of annual and long-term incentives, fixed and at-risk compensation, cash and multiple forms of equity compensation; | | ● | compensation packages gradually become more focused on long-term, at-risk and equity compensation as our team members ascend to and through management-level positions; | | ● | our global compensation plans and programs generally utilize the same or substantially similar performance measures; | | ● | we use multiple performance measures to determine payout levels under certain elements of incentive compensation and different performance measures for our annual incentives as compared to our long-term incentives; | | ● | the performance of our team members is not evaluated or measured based solely on changes in our stock price; | | ● | our incentive compensation programs generally limit payouts to a specified maximum, while those that do not are mitigated by other factors (e.g., stock appreciation rights are mitigated by long-term vesting periods and stock ownership guidelines); | | ● | we do not offer “guaranteed” bonuses and all of our incentive compensation elements carry downside risk for participants; | | ● | our executive officers are subject to specific stock ownership guidelines and clawback policies and provisions requiring forfeiture of certain elements of incentive compensation under certain circumstances; | | ● | our compensation packages, including severance packages and supplemental pensions, are within market ranges; | | ● | the Committee has the discretion to assess the quality of our results in relation to our various performance measures and the risks taken to attain those results in approving final incentive payouts; | | ● | our decentralized organizational structure lessens the impact of any excessive risks taken by individual business units or operating groups; and | | ● | our team members are evaluated, measured and assessed based on their compliance with our Global Code of Business Conduct and other internal policies and controls, and the extent to which they act in the best interests of our business and our shareholders. |
Base Salaries
| ● | encourage and reward individual performance in connection with the annual performance review process; | | ● | recognize experience, expertise, level of responsibility, continuity of leadership, leadership qualities, advancement, individual accomplishment and other significant contributions to the enhancement of shareholder value and the success of our business; and | | ● | attract, retain and motivate the highly-talented and values-driven individuals we need to advance the goals of The Win Strategy. |
Base Salaries
The Committee establishes a base salary range for each Named Executive Officer by using Mercer’s annual review to analyze base salaries of persons holding comparable positions within the Peer Group companies. The Committee determines the base salary for each Named Executive Officer for the next fiscal year based on the Named Executive Officer’s annual performance review and compares the amount to the applicable market range to make sure that it is reasonable. Among other matters, annual performance reviews and base salary adjustments consider performance and results aligned with The Win Strategy, including in certain of its ESG-related metrics such as, among others, team member safety, engagement and inclusion. The Committee may increase base salaries, where appropriate, periodically throughout the fiscal year based on the results of interim performance reviews. The Committee generally tries to target base salary amounts at approximately the median of the Peer Group companies. In fiscal year 2024 base salaries for the Named Executive Officers were generally increased in the range of approximately 5.9% to 7.7% for officers remaining in their same role year over year in consideration of the factors described above and to better align with the Peer Group median for similarly situated persons at our Peer Group companies. The table below reflects the base salary rates as approved by the Committee in fiscal year 2024 as well as the total base salary actually paid to each of the Named Executive Officers during fiscal year 2024, which is also included in the "Salary" column of the Summary Compensation Table for Fiscal Year 2024.
Annual Cash Incentive Compensation
Annual Cash Incentive Compensation In August 2023, the Committee established fiscal year 2024 target opportunities under the Parker-Hannifin Corporation Officer Annual Cash Incentive Plan (the “Officer ACIP”) for the Company's executive officers. The Officer ACIP provides for annual award payouts based on the achievement of performance goals. The performance goals are tied to three performance metrics (segment operating income weighted at 40%, sales revenue weighted at 20% and cash flow margin weighted at 40%), with each metric evaluated at three performance levels (threshold, target or maximum). The performance levels equate to a percentage of the target payout with respect to the applicable metric (50% for threshold, 100% for target and 200% for maximum). The percentage payout for each metric will be interpolated for performance levels achieved between threshold and target and between target and maximum. The award payout may be further modified by applying a multiplier of up to plus or minus 20% based upon the Committee's evaluation of each Named Executive Officer's performance relating to environmental, social and governance ("ESG") matters and other strategic imperatives, but in no event can the total payout exceed the 200% maximum.
Annual Cash Incentive Compensation
| 2024 Proxy Statement | 45 |
Annual Cash Incentive Compensation
Segment Operating Income is consolidated operating income as reported, excluding any effects of currency rate changes, acquisitions and divestitures. Sales Revenue is consolidated net sales revenue as reported, excluding any effects of currency rate changes, acquisitions and divestitures. Cash Flow Margin is the percentage of sales represented by net cash flow from operating activities less capital expenditures, excluding any discretionary pension contributions and effects of acquisitions. The Committee predetermines the performance goals applicable to each financial metric by analyzing our annual goals and objectives for each such metric and in consideration of Mercer’s annual review. Through this process the Committee directly and materially links annual cash incentive compensation to performance that drives and supports The Win Strategy. The Committee identified segment operating income, sales revenue and cash flow margin as performance measures critical to the financial performance and profitable growth goals of The Win Strategy. Utilizing segment operating income encourages executive officers and other team members to increase sales and to reduce operating expenses and other costs associated with managing our working capital and investments, while the sales revenue metric encourages strong sales execution, product and innovation investments, and market share gains. The Committee determined to continue to use cash flow margin, which was also an element of our prior annual incentive program, because of its importance in driving increases in net income, implementing lean initiatives, controlling inventory, collecting receivables, controlling accounts payable, and optimizing capital expenditures. To further align annual cash incentive compensation to the value that we place on ESG matters and other strategic imperatives, the Committee incorporated a performance multiplier as a component of the Officer ACIP. This multiplier may adjust Officer ACIP payout amounts upward or downward by up to 20% based on the Committee's evaluation of each such Named Executive Officer's individual performance related to our ESG and other strategic imperatives. In fiscal year 2024, for example, the multiplier incentivized our leaders to foster a culture of inclusion, drive reductions in carbon emissions, successfully integrate Meggitt and advance other strategic imperatives that are important to our goals under The Win Strategy. The Committee will not apply the multiplier to increase an annual cash incentive payout above the overall cap of 200% of the participant’s total target payout opportunity. The Committee believes that the use of segment operating income, revenue growth and cash flow margin, combined with the performance multiplier, aligns Officer ACIP awards to the most meaningful drivers of Company performance and shareholder value creation.
Setting Targets
Setting Targets The Committee allocates a significant portion of the total cash compensation for executive officers to annual cash incentive compensation, which is dependent on achieving predetermined financial and operational goals. For fiscal year 2024, Officer ACIP awards, at target, represented the following percentages of base salary for each of our Named Executive Officers, which percentages remained consistent with target aggregate percentages under the annual incentive compensation program for fiscal year 2023.
Performance Results
| | Below Threshold | Threshold | Target | Maximum | | | | | Actual Segment Operating Income Performance: $4,955,360 % of Target Payout Earned: 180.48% | | | Segment Operating Income | | | | | | (40% weight) | Less than | | | | | | $4,127,622 | $4,127,622 | $4,586,246 | $5,044,871 | | | | | Actual Sales Revenue Performance: $19,939,768 % of Target Payout Earned: 108.33% | | | Sales Revenue | | | | | | (20% weight) | Less than | | | | | | $17,797,529 | $17,797,529 | $19,775,033 | $21,752,536 | | | | | Actual Cash Flow Margin Performance: 14.97% % of Target Payout Earned: 199.25% | | | Cash Flow Margin | | | | | | (40% weight) | Less than | | | | | | 7% | 7% | 11% | 15% | | Payout % | 0% | 50% | 100% | 200% |
Performance Results
| | % of Target Payout Earned | Weighted Payout % | | Segment Operating Income | 180.48% | 72.19% | | Sales Revenue | 108.33% | 21.67% | | Cash Flow Margin | 199.25% | 79.70% | | Total Weighted Payout % | | 173.56% |
Long-Term Incentive Compensation
Long-Term Incentive Compensation The Named Executive Officers receive long-term incentive compensation consisting of long-term incentive performance awards, which we refer to as LTIP Awards, and stock appreciation rights, which we refer to as Stock Incentives. The target amounts of LTIP Awards and the number of Stock Incentives awarded to the Named Executive Officers are based on similar compensation awarded to persons holding comparable positions within the Peer Group companies. LTIP Awards and Stock Incentives encourage long-term focus on shareholder value and are directly and materially linked to performance that advances both the financial performance and profitable growth goals of The Win Strategy over the long term. LTIP Award payouts are based on a comparison of our performance against the Peer Group companies in certain key financial metrics over a three-year performance period. The holders of Stock Incentives realize a payout only if our stock price increases above the applicable grant price over a three-year pro-rata vesting period and the applicable exercise period thereafter. LTIP Awards and Stock Incentives work together to align the long-term financial interests of our executive officers and shareholders.
Long-Term Incentive Compensation
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Long-Term Incentive Compensation
| Component | Description | 2024 | 2025 | 2026 | | LTIP Awards | LTIP Awards are granted to eligible employees on an annual basis at the January meeting of the Committee. This meeting is typically scheduled several years in advance. Pro-rated LTIP Awards are also granted to individuals who become executive officers, are promoted to new executive officer positions, or are given increased responsibilities during a performance period. | "Cliff" vesting after three-year performance period | | | | Stock Incentives | Stock Incentives are granted to eligible team members on an annual basis at the August meeting of the Committee. This meeting is scheduled several years in advance. | Annual vesting over three-year performance period | | | | | | 1/3 | 1/3 | 1/3 |
Long-Term Incentive Compensation
The Committee does not grant LTIP Awards to executive officers in anticipation of the release of significant positive earnings announcements or other material non-public information likely to result in changes to the price of our common stock. Stock Incentives, including stock appreciation rights and stock options, for our regular annual equity awards are typically approved by the Committee at a regularly-scheduled Committee meeting that occurs in August of each year. These grants are generally made effective on the date of such approval. Committee meetings are scheduled several years in advance and generally occur in the third week of August. Stock Incentive values to be utilized for such annual awards are determined as of the grant date based upon a Black-Scholes valuation model. Those values are then used to determine the number of Stock Incentives to be granted to recipients. The Committee does not take material nonpublic information into account when determining the timing and terms of such awards. The Company has not timed the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation. During fiscal year 2024, we did not grant Stock Incentives, or any other stock appreciation rights or stock options (or similar awards), to any Named Executive Officer during any period beginning four business days before and ending one business day after the filing of any Company periodic report on Form 10-Q or Form 10-K, or the filing or furnishing of any Company Form 8-K that disclosed any material non-public information. LTIP Awards The Committee has adopted an Officer Long-Term Incentive Performance Plan, which we refer to as the Officer LTIP Plan, that operates under the 2023 Omnibus Stock Incentive Plan, which we refer to as the 2023 Equity Plan, to establish the terms and conditions for LTIP Awards granted to our executive officers. During the third quarter of fiscal year 2024, the Committee granted to each of the Named Executive Officers, under the terms of the Officer LTIP Plan and the 2023 Equity Plan, the following target LTIP Award shares for the calendar year 2024-25-26 performance period based on the following target LTIP Award values for the calendar year 2024-25-26 performance period:
Long-Term Incentive Compensation
| Named Executive Officer | Target LTIP Award Values ($)(1) | Target LTIP Award Shares(2) | | Jennifer A. Parmentier | 5,750,000 | 12,820 | | Todd M. Leombruno | 1,700,000 | 3,790 | | Andrew D. Ross | 1,950,000 | 4,350 | | Berend Bracht | 925,000 | 2,060 | | Joseph R. Leonti | 925,000 | 2,060 | | Lee C. Banks(3) | — | — |
Long-Term Incentive Compensation
| (1) Target LTIP Award Values were increased from fiscal year 2023 values to more closely align with the median of our Peer Group companies following a comparative market review by Mercer. For Ms. Parmentier, the increase to her target LTIP Award for fiscal year 2024 reflected her assumption of the role of Chief Executive Officer on January 1, 2023. The target LTIP Award values previously approved for Ms. Parmentier in August 2022 for fiscal year 2023 reflected her role at that time prior to the leadership transition in January 2023. | | (2) Target LTIP Award Share amounts were determined by dividing the Target LTIP Award Values by $448.65, which was the daily average stock pricing during the month immediately preceding the award grant (i.e., December 2023), and rounding to the nearest whole number ending in zero. | | (3) Mr. Banks retired effective December 31, 2023, which predated the grant of LTIP Awards to our executive officers during fiscal year 2024. |
Long-Term Incentive Compensation
The target LTIP Award shares shown in this table are also included in the “Estimated Future Payouts Under Equity Incentive Plan Awards—Target” column of the Grants of Plan-Based Awards for Fiscal Year 2024 table. The “Stock Awards” column of the Summary Compensation Table for Fiscal Year 2024 includes the aggregate grant date fair value of these awards in fiscal year 2024.
Long-Term Incentive Compensation
| 2024 Proxy Statement | 49 |
Long-Term Incentive Compensation
Under the Officer LTIP Plan, the actual payouts for these LTIP Awards will be calculated following the three-year performance period ending December 31, 2026, as follows:
Long-Term Incentive Compensation
| ● | The Committee will first determine if, during the performance period, we achieved an average return on average equity of 4% or an average free cash flow margin of 4%. | | ● | If at least one of these threshold performance measures above is not achieved, participants will not receive a payout. | | ● | If at least one of these threshold performance measures above is achieved, participants will become eligible to receive the maximum payout of 200% of the applicable target LTIP Award shares. The Committee will then, if appropriate, apply its discretion to reduce the final payouts based on any performance measures that the Committee determines to be appropriate. The Committee determined that this calculation methodology would provide the Committee with more flexibility to ensure payout levels are as accurately reflective of the Company’s performance against the Peer Group (set forth above on page 41) as possible and are otherwise in the best interests of our business and our shareholders. |
Long-Term Incentive Compensation
To provide the Committee with guidelines for exercising its discretion, the Officer LTIP Plan provides that the Committee may, among other things, following the calendar years 2024-25-26 performance period compare our revenue growth, growth in fully diluted earnings per share from continuing operations and average return on invested capital from continuing operations against the corresponding results of the Peer Group companies during their three most recent fiscal years. The Committee has identified long-term revenue growth, earnings per share growth and return on invested capital as performance measures critical to the financial performance and profitable growth goals of The Win Strategy because, among other things, they encourage our executive officers to provide on-time delivery of quality products, value-added services and systems, strategic supply chain, lean enterprise, value pricing, market-driven innovation and strong distribution. For calendar year 2024-25-26 LTIP Awards, the Committee determined to keep the same weighting as the prior year for revenue growth, growth in the fully diluted earnings per share from continuing operations, and average return on invested capital from continuing operations at 40%, 40% and 20%, respectively. The following table illustrates how final LTIP Awards will pay out using the weightings as specified above for the applicable performance period:
Long-Term Incentive Compensation
| Peer Group Percentile Rank: | Less than 25th | 25th | 50th | 75th or higher | | Payout% | 0% | 50% | 100% | 200% |
Long-Term Incentive Compensation
For calendar year 2024-25-26 LTIP awards, the Committee determined to adjust the threshold performance level from the 35th to the 25th percentile to more closely align with the prevalent practice in the Peer Group according to data presented by Mercer. At the end of calendar year 2026, if we achieve an average return on average equity or an average free cash flow margin of 4% or greater for the performance period, the Committee may exercise discretion in determining the appropriate payout by determining our percentile rank as compared to the Peer Group companies for each of the three performance measures. Using the table above, the Committee will calculate the portion of the target LTIP Award value earned with respect to each performance measure. The Committee will multiply each portion by its applicable weight and add up the total to determine the total LTIP Award payout for the calendar years 2024-25-26 performance period. This table illustrates that recipients of LTIP Awards granted during calendar year 2024 will receive the maximum payout of 200% of the applicable target LTIP Award shares if we rank at or above the 75th percentile among the Peer Group companies in the aggregate based on all three performance measures, and will receive no payout if we rank below the 25th percentile in the aggregate based on all three performance measures. The payout percentage that is applied is interpolated on a linear basis between the points in the above table. LTIP Award payouts for the calendar years 2024-25-26 performance period may only be paid after the end of the applicable three-year performance period in unrestricted shares of our common stock. The Committee designed these LTIP Awards to reward executive officers directly in relation to our long-term performance against the Peer Group companies. The Committee determined that requiring performance in excess of the 50th percentile for a payout in excess of 100% would encourage executive officers to achieve performance above median Peer Group performance. The Committee also determined that requiring performance at the 75th percentile for a maximum payout, and awarding no payout for performance below the 25th percentile, would further encourage executive officers to achieve top-quartile performance within the Peer Group companies. In addition, each of the Named Executive Officers received a payout during fiscal year 2024 under LTIP Awards granted during the third quarter of fiscal year 2021 for the three-year performance period ending December 31, 2023. We exceeded our threshold performance measures of 4% average return on average equity and 4% average free cash flow margin with an average return on average equity for the three-year performance period of 25.4% and average free cash flow margin for the three-year performance period of 12.8%, which caused each participant to be eligible for a payout of 200% of the applicable LTIP Award. The Committee decided to exercise discretion to
Long-Term Incentive Compensation
| 50 | |
Long-Term Incentive Compensation
determine the appropriate payout and determined that we achieved the following percentile rankings among the peer group companies disclosed in the Company's 2021 proxy statement with respect to the LTIP Award performance measures for the calendar years 2021-22-23 performance period:
Long-Term Incentive Compensation
| Performance Measure | Result | Percentile Rank | Weighted Payout Percentage | | Revenue Growth (40%) | 46.80% | 83.33 | 40.00% | | Earnings Per Share Growth (40%) | 83.89% | 61.11 | 57.78% | | Average Return on Invested Capital (20%) | 17.29% | 50.00 | 40.00% |
Long-Term Incentive Compensation
The percentile rank performance levels used to calculate the payout for the calendar years 2021-22-23 LTIP Awards were the same as set forth above for the calendar years 2024-25-26 LTIP Awards, except that the threshold performance level was the 35th percentile. As a result, the Named Executive Officers received the following LTIP Award payouts during fiscal year 2024, which are included in the “Number of Shares Acquired on Vesting” column of the Option Exercises and Stock Vested for Fiscal Year 2024 table: Ms. Parmentier—17,211; Mr. Leombruno—7,986; Mr. Ross—5,864; Mr. Bracht—3,098; Mr. Leonti—3,732; and Mr. Banks—12,775. Each payment represents a total payout of 137.78% of the target LTIP Award shares for the three-year performance period ended December 31, 2023. Stock Incentives Each of the Named Executive Officers received Stock Incentives under our Amended and Restated 2016 Omnibus Stock Incentive Plan, which we refer to as the 2016 Equity Plan, during the first quarter of fiscal year 2024. The Committee grants Stock Incentives to executive officers to encourage and reward efforts and accomplishments that advance the goals of The Win Strategy and make other contributions to maximize long-term shareholder value. The number of Stock Incentives granted by the Committee is determined by utilizing the Black-Scholes valuation model to convert a target dollar value into the number of Stock Incentives to be granted. The Committee uses Mercer’s annual review to help ensure the target dollar values are reasonable in relation to the median of similar compensation offered within the companies included in Mercer’s annual review. The following table shows the target value and the number of Stock Incentives granted to each of the Named Executive Officers in the first quarter of fiscal year 2024:
Long-Term Incentive Compensation
| Named Executive Officer | Target Values ($) | Stock Incentive Grants (# of Underlying Shares) | | Jennifer A. Parmentier(1) | 5,750,000 | 42,600 | | Todd M. Leombruno | 1,700,000 | 12,590 | | Andrew D. Ross(2) | 1,950,000 | 14,450 | | Berend Bracht | 925,000 | 6,850 | | Joseph R. Leonti | 925,000 | 6,850 | | Lee C. Banks | 2,900,000 | 21,480 |
Long-Term Incentive Compensation
| (1) For Ms. Parmentier, the Stock Incentive target value was increased in August 2023 in connection with her assumption of the role of Chief Executive Officer on January 1, 2023. The Stock Incentive target value previously granted to Ms. Parmentier in August 2022 reflected her role at that time prior to the leadership transition in January 2023. | | (2) For Mr. Ross, the Stock Incentive target value approved in August 2023 reflects his role at that time prior to his assumption of the role of President (in addition to Chief Operating Officer) in January 2024. No additional Stock Incentives were granted upon assumption of this additional role. |
Long-Term Incentive Compensation
The fiscal year 2024 Stock Incentive grants shown above are also included in the “All Other Option Awards: Number of Securities Underlying Options” column of the Grants of Plan-Based Awards for Fiscal Year 2024 table and the “Option Awards—Number of Securities Underlying Unexercised Options—Unexercisable” column of the Outstanding Equity Awards at June 30, 2024 table. The “Option Awards” column of the Summary Compensation Table for Fiscal Year 2024 includes the aggregate grant date fair value of these awards in fiscal year 2024. As required by the terms of our 2016 Equity Plan, these fiscal year 2024 Stock Incentives have an exercise price equal to the closing price of our common stock on the date of grant. The plan does not permit the re-pricing of Stock Incentives. The Committee analyzed the terms of our 2016 Equity Plan and considered Mercer’s annual review to establish all other terms of these Stock Incentives. These fiscal year 2024 Stock Incentives have a ten-year term and vest in one-third increments over three years following the grant date. When vested, each Stock Incentive will entitle the holder to receive the increase in value of one common share from the grant date to the date of exercise.
Long-Term Incentive Compensation
| 2024 Proxy Statement | 51 |
Long-Term Incentive Compensation
Upon exercise of fiscal year 2024 Stock Incentives, common shares will be issued directly to the holder. The appreciation in these Stock Incentives will be calculated by subtracting the grant price from the fair market value of the common shares at exercise, and multiplying the result by the number of Stock Incentives exercised. The number of common shares to be issued is determined by dividing that appreciation by the market price of the common shares at exercise. Retention Grant of Restricted Stock Units On October 24, 2023 the Committee granted an award of 2,500 RSUs to Mr. Bracht for retention purposes and in recognition of his performance and contributions to the execution of the goals of The Win Strategy. This award will vest on October 24, 2027 provided that Mr. Bracht remains an active full-time employee through that date. This RSU award is included in the “All Other Stock Awards: Number of Shares of Stock or Units” column of the Grants of Plan-Based Awards for Fiscal Year 2024 table, and its fiscal year 2024 aggregate grant date fair value is included in the “Stock Awards” column of the Summary Compensation Table for Fiscal Year 2024.
Employee Benefits
| Minimum Benefit: | $21.00 multiplied by years of service, up to a maximum of 40 years. | | Final Average Pay Amount: | ●0.75% of the highest five consecutive year average of monthly base salary and eligible annual cash incentive bonuses up to the social security wage base, multiplied by years of service up to a maximum of 35 years; plus ●1.36% of the highest five consecutive year average of monthly base salary and eligible annual cash incentive bonuses in excess of the social security wage base, multiplied by years of service up to a maximum of 35 years; plus ●0.50% of the highest five consecutive year average of monthly base salary and annual cash incentive bonuses multiplied by years of service in excess of 35 up to a maximum of five years. |
Change in Control Agreements
Change in Control Agreements We are not a party to any written employment agreements with our executive officers. We have, however, entered into separate Change in Control Severance Agreements with our executive officers, which we refer to as the Change in Control Agreements. We are not obligated to pay severance to executive officers under any agreement other than the Change in Control Agreements. The executive officers are, however, eligible to receive severance upon termination for reasons other than a change in control in accordance with our general severance policy for salaried employees. The Change in Control Agreements are designed to attract, retain and motivate executive officers, provide for stability and continuity of management in the event of any actual or threatened change in control, encourage executive officers to remain in service after a change in control and ensure that executive officers are able to devote their entire attention to maximizing shareholder value and safeguarding team member interests in the event of a change in control. The Committee determined that the amounts payable under the Change in Control Agreements are reasonable and necessary to achieve those objectives. The Potential Payments upon Termination or Change of Control at June 28, 2024 tables and the related narrative descriptions provide additional information on the Change in Control Agreements, including a brief discussion of the material provisions of the Change in Control Agreements under the captions “Payments upon a Change in Control” and “Payments upon a Qualifying Termination in Connection with a Change in Control.” Such section also provides information regarding the benefits and compensation that Mr. Banks received in connection with his retirement.
Compensation Tables
| Name and Principal Position | Year | Salary ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | All Other Compensation ($)(6) | Total ($) | | Jennifer A. Parmentier Chairman of the Board and Chief Executive Officer | 2024 | 1,383,333 | 5,959,762 | 6,460,290 | 3,961,507 | — | 975,829 | 18,740,721 | | | 2023 | 1,086,667 | 10,062,781 | 1,717,543 | 3,043,673 | — | 493,682 | 16,404,346 | | | 2022 | 765,423 | 3,304,641 | 1,229,346 | 1,373,446 | — | 434,018 | 7,106,874 | | Todd M. Leombruno Executive Vice President and Chief Financial Officer | 2024 | 891,667 | 1,761,895 | 1,909,274 | 1,547,577 | 1,164,044 | 465,139 | 7,739,596 | | | 2023 | 838,333 | 1,488,960 | 1,457,822 | 1,620,414 | 762,629 | 362,927 | 6,531,085 | | | 2022 | 736,667 | 1,412,505 | 1,042,956 | 1,138,332 | 31,605 | 308,269 | 4,670,334 | | Andrew D. Ross(7) President and Chief Operating Officer | 2024 | 920,000 | 2,022,228 | 2,191,343 | 1,836,265 | 1,941,924 | 226,061 | 9,137,821 | | | 2023 | 782,117 | 2,897,563 | 910,517 | 1,531,435 | 134,074 | 102,280 | 6,357,986 | | Berend Bracht(7) Vice President and President - Motion Systems Group | 2024 | 673,333 | 1,890,853 | 1,038,803 | 934,910 | — | 336,026 | 4,873,925 | | Joseph R. Leonti(7) Vice President, General Counsel and Secretary | 2024 | 801,667 | 957,653 | 1,038,803 | 1,113,098 | — | 407,055 | 4,318,276 | | | 2023 | 749,167 | 797,214 | 781,154 | 1,158,452 | — | 312,049 | 3,798,036 | | | 2022 | 687,067 | 756,475 | 558,342 | 848,946 | — | 325,737 | 3,176,567 | | Lee C. Banks Former Vice Chairman and President | 2024 | 636,667 | — | 3,257,442 | 1,436,499 | 9,395,450 | 146,877 | 14,872,935 | | | 2023 | 1,204,167 | 2,766,984 | 2,706,672 | 3,025,794 | 1,167,509 | 234,689 | 11,105,815 | | | 2022 | 1,112,500 | 2,624,120 | 1,936,799 | 2,018,734 | — | 244,187 | 7,936,340 |
Payments upon Retirement
Payments upon Retirement Upon the retirement of a Named Executive Officer at (A) age 65 or older, or (B) age 60 or older with at least ten years of service, the Named Executive Officer will receive the “Payments Generally Available” described above and the “Payments Upon Death” described above, except that:
Payments upon Retirement
| (i) | all outstanding Stock Incentives will fully vest but will become exercisable according to the original schedule and will remain exercisable until the original expiration date of the award; | | (ii) | unvested amounts under the Deferred Compensation Plan (if any) would vest upon a Named Executive Officer's attainment of age 55 with at least five years of service; | | (iii) | if the Named Executive Officer is (A) age 65 or older, or (B) age 60 or older with at least ten years of service and 12 months of continuous employment during the performance periods, he or she will receive a full LTIP Award payout for calendar years 2022-23-24, 2023-24-25 and 2024-25-26 performance periods, to be determined at the end of the performance periods, as if he or she had remained continuously employed through the end of the performance periods; and | | (iv) | the Named Executive Officer will not receive death benefits under the Officer Life Insurance Plan unless death subsequently occurs. |
Payments upon Retirement
If a Named Executive Officer retires outside of the age and service thresholds stated in (iii) above, he or she will receive a pro-rated LTIP Award payout for the calendar years 2022-23-24, 2023-24-25 and 2024-25-26 performance periods, to be determined at the end of the respective performance periods, based on the number of full months served during each of the performance periods. If the Named Executive Officer is less than 60 years of age on the date of retirement, then the Named Executive Officer must seek early retirement approval from the Human Resources and Compensation Committee to receive payments with respect to the following:
Payments upon Retirement
| ● | the Supplemental Retirement Program; and | | ● | the Defined Contribution Supplemental Retirement Program. |
Payments upon Retirement
The Named Executive Officers' account balances under such nonqualified deferred compensation plans as of June 28, 2024 are set forth in the Nonqualified Deferred Compensation for Fiscal Year 2024 section of this Proxy Statement. In addition, Named Executive Officers must be at least 55 years of age on the date of retirement to continue to receive premium payments under the Officer Life Insurance Plan, which if needed will continue for the greater of ten years from commencement of plan participation or the number of years until they reach age 65. As of June 28, 2024, Ms. Parmentier and Mr. Ross had each reached 55 years of age with at least 10 years of service. In determining the amounts payable upon retirement reported in the following table, we assumed that none of our Named Executive Officers obtained Human Resources and Compensation Committee approval for early retirement.
Payments upon Retirement
| Officer | Pension Plan ($) | Pension Restoration Plan ($) | Supplemental Retirement Program ($) | Stock Incentives ($) | LTIP Awards ($) | Defined Contribution Supplemental Retirement Program ($) | Post-Retirement Insurance Premiums ($) | Totals ($) | | Jennifer A. Parmentier | — | — | — | 7,653,780 | 10,811,352 | 5,312,707 | 427,604 | 24,205,443 | | Todd M. Leombruno | 627,302 | 2,944,070 | — | 4,151,209 | 3,211,135 | 1,062,374 | 280,943 | 12,277,033 | | Andrew D. Ross | 708,417 | 3,140,862 | — | 3,169,662 | 3,501,723 | — | 245,316 | 10,765,980 | | Berend Bracht | — | — | — | 2,234,399 | 1,719,754 | 471,286 | — | 4,425,439 | | Joseph R. Leonti | — | — | — | 2,234,399 | 1,719,754 | 5,067,883 | 215,990 | 9,238,026 |
Payments upon Retirement
| 70 | |
Payments upon Termination for Cause or Resignation
Payments upon Termination for Cause or Resignation Upon the termination for cause or the resignation of a Named Executive Officer, the Named Executive Officer will receive the “Payments Generally Available” described above, except that the Named Executive Officer will (i) forfeit his or her Supplemental Retirement Program benefit and his or her Defined Contribution Supplemental Retirement Program benefit if the termination for cause is the result of competition by the Named Executive Officer against us, and (ii) forfeit his or her LTIP Awards if the termination or resignation occurs during the applicable performance period. In determining the amounts payable upon termination for cause under the Supplemental Retirement Program and the Defined Contribution Supplemental Retirement Program, we assumed that the termination did not result from competition against us.
Payments upon Termination for Cause or Resignation
| Officer | Pension Plan ($) | Pension Restoration Plan ($) | Supplemental Retirement Program ($) | Totals ($) | | Jennifer A. Parmentier | — | — | — | — | | Todd M. Leombruno | 627,302 | 2,944,070 | — | 3,571,372 | | Andrew D. Ross | 708,417 | 3,140,862 | — | 3,849,279 | | Berend Bracht | — | — | — | — | | Joseph R. Leonti | — | — | — | — |
Payments upon Termination without Cause
Payments upon Termination without Cause Upon the termination without cause of a Named Executive Officer, the Named Executive Officer will receive the “Payments Generally Available” described above. In addition, if the Named Executive Officer signs a release of all claims against us, the Named Executive Officer will receive a lump sum payment equal to one week’s pay for each full year of service up to a maximum of twenty-six weeks of pay and continuation of premium payments for medical and dental insurance based on the applicable COBRA rates for the Named Executive Officer for up to three months. Additionally, he or she will be entitled to pro-rated LTIP Award payouts for the calendar years 2022-23-24, 2023-24-25 and 2024-25-26 during each of the performance periods. Also, if a Named Executive Officer's employment is terminated without cause when such Named Executive Officer has attained the age of at least 55, but less than 60, such Named Executive Officer's benefit under the Supplemental Retirement Program will become fully vested. In determining the amounts payable upon termination without cause reported in the following tables, we assumed that the Named Executive Officer signed a release.
Payments upon Termination without Cause
| Officer | Severance Pay ($) | Pension Plan ($) | Pension Restoration Plan ($) | Supplemental Retirement Program ($) | LTIP Awards ($) | Medical and Dental Benefits ($) | Totals ($) | | Jennifer A. Parmentier | 403,846 | — | — | — | 10,811,352 | 6,828 | 11,222,026 | | Todd M. Leombruno | 450,000 | 627,302 | 2,944,070 | — | 3,211,135 | 6,828 | 7,239,335 | | Andrew D. Ross | 456,731 | 708,417 | 3,140,862 | 10,179,050 | 3,501,723 | 6,879 | 17,993,662 | | Berend Bracht | 65,385 | — | — | — | 1,719,754 | 4,218 | 1,789,357 | | Joseph R. Leonti | 280,385 | — | — | — | 1,719,754 | 6,591 | 2,006,730 |
Chief Executive Officer Pay Ratio
Chief Executive Officer Pay Ratio As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information regarding the ratio of the annual total compensation of Jennifer A. Parmentier, our Chief Executive Officer, to the annual total compensation of our median team member. Our pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll records and the methodology described below. The SEC rules for identifying the median compensated team member and calculating the pay ratio based on that team member’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. Therefore, the estimated pay ratio we report may not be comparable to the pay ratios reported by other companies and should not be used as a basis for comparison between companies. As reported in the Summary Compensation Table, our Chief Executive Officer had annual total compensation for fiscal year 2024 of $18,740,721. Using the Summary Compensation Table methodology, the annual total compensation of our median team member for fiscal year 2024 is $60,849. As a result, we estimate that the ratio of our Chief Executive Officer’s annual total compensation to that of our median team member for fiscal year 2024 was approximately 308 to 1. For purposes of the fiscal year 2024 Chief Executive Officer pay ratio, we identified the “median team member” from our employee population on April 30, 2024, which included full-time, part-time, temporary, and seasonal team members who were employed on that date, whether in the U.S. or in foreign jurisdictions. As of April 30, 2024, we estimated there were 29,962 U.S. team members and 28,889 non-U.S. team members included in our team member population. We excluded independent contractors and leased employees from our calculation as any independent contractors or leased employees have compensation determined by an unaffiliated third party. We further applied the de minimis exemption, which permits exempting non-U.S. team members that account for five percent or less of our total U.S. and non-U.S. team members. In total, 746 team members were excluded, consisting of the parenthetical numbers below in the following countries: Algeria (1), Argentina (33), Austria (20), Belarus (3), Chile (33), Denmark (34), Greece (1), Hong Kong (27), Hungary (1), Indonesia (45), Ireland (38), Israel (2), Kazakhstan (1), Morocco (4), New Zealand (21), Norway (49), Peru (5), Portugal (2), Romania (2), Singapore (182), Slovenia (3), South Africa (75), Taiwan (Province of China) (30), Thailand (52), Turkey (41) and United Arab Emirates (41). The consistently applied compensation measure we used was total cash compensation for fiscal year 2024. We annualized the earnings of all permanent employees who were on a leave of absence or were new-hires during the measurement period for fiscal year 2024. We did not make any other adjustments permissible by the SEC nor did we make any other material assumptions or estimates to identify our median employee.
Chief Executive Officer Pay Ratio
| 2024 Proxy Statement | 75 |
Pay Versus Performance Disclosure
Pay Versus Performance Disclosure Our executive compensation program is designed to align pay outcomes with annual and long-term business performance and shareholders’ interests. Our program design choices, including the level of pay at risk, the mix of short-term and long-term incentives, the mix of long-term incentive vehicles, the metrics selected, and the rigor of incentive goals, all work together toward this objective. The Human Resources and Compensation Committee, along with its independent compensation consultant, Mercer, routinely assesses the relationship between our executive compensation program and the financial and total shareholder return (TSR) performance of the Company as discussed in the Compensation Discussion and Analysis section of this Proxy Statement. The results of these analyses have influenced our pay decisions and the evolution of our compensation program to help ensure strong pay and performance alignment. This Pay Versus Performance disclosure, as required by the SEC, provides an additional perspective on pay and performance alignment by evaluating the link between “Compensation Actually Paid,” herein sometimes referred to as “CAP,” as defined by the SEC, and various measures of market and financial performance. Pay Versus Performance Table In accordance with rules adopted by the SEC, we provide the following disclosure regarding executive compensation for our principal executive officers (“PEOs”) and Non-PEO NEOs (as defined below) and Company performance for the fiscal years listed below. The Human Resources and Compensation Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years shown.
Pay Versus Performance Disclosure
| Fiscal Year | Summary Compensation Table Total for PEO 1(1) ($) | Summary Compensation Table Total for PEO 2(1)(2)(3) ($) | Compensation Actually Paid to PEO 1(1)(2)(3) ($) | Compensation Actually Paid to PEO 2(1)(2)(3) ($) | Average Summary Compensation Table Total for Non-PEO NEOs(1) ($) | Average Compensation Actually Paid to Non-PEO NEOs(1)(2)(3) ($) | Value of Initial Fixed $100 Investment Based on:(4) | | Net Income ($ Millions)(5) | EPS Growth Relative to Peer Group(6) | | | | | | | | | TSR ($) | Peer Group TSR ($) | | | | 2024 | — | 18,740,721 | — | 35,620,597 | 8,190,674 | 11,353,217 | 293.00 | 189.61 | 2,845 | 70th Percentile | | 2023 | 18,657,423 | 16,404,346 | 44,288,911 | 35,395,261 | 7,044,646 | 16,016,277 | 223.03 | 164.12 | 2,084 | 78th Percentile | | 2022 | 18,448,169 | — | 14,327,292 | — | 5,842,460 | 5,316,820 | 138.26 | 131.12 | 1,316 | 28th Percentile(7) | | 2021 | 17,034,500 | — | 55,284,335 | — | 4,631,585 | 13,265,147 | 170.00 | 151.45 | 1,747 | 78th Percentile |
Pay Versus Performance Disclosure
| (1) Thomas L. Williams was our PEO during the period covered by the table through December 31, 2022 (“PEO 1”). Jennifer A. Parmentier was our PEO from January 1, 2023, through the end of the period covered by the table (“PEO 2”). The individuals comprising the non-PEO named executive officers ("Non-PEO NEOs") for each fiscal year presented are listed below. |
Pay Versus Performance Disclosure
| 2021 | 2022 | 2023 | 2024 | | Todd M. Leombruno | Todd M. Leombruno | Todd M. Leombruno | Todd M. Leombruno | | Lee C. Banks | Lee C. Banks | Lee C. Banks | Lee C. Banks | | Joseph R. Leonti | Jennifer A. Parmentier | Andrew D. Ross | Andrew D. Ross | | Andrew M. Weeks | Andrew M. Weeks | Roger S. Sherrard | Berend Bracht | | Catherine A. Suever | | | Joseph R. Leonti |
Pay Versus Performance Disclosure
| (2) The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not necessarily reflect compensation actually earned, realized, or received by the NEOs. These amounts reflect the Summary Compensation Table Totals with certain adjustments as described in footnote 3 below. |
Pay Versus Performance Disclosure
| (3) Compensation Actually Paid reflects the exclusions and inclusions of certain amounts for the PEOs and the Non-PEO NEOs in accordance with SEC rules. The exclusions and inclusions for fiscal year 2024 are set forth in the tables below. Equity award values are calculated in accordance with FASB ASC Topic 718. Amounts in the Exclusion of Stock Awards and Option Awards columns are the totals from the Stock Awards and Option Awards columns set forth in the Summary Compensation Table for Fiscal Year 2024. Amounts in the Exclusion of Change in Pension Value columns reflect the amounts attributable to any positive Change in Pension Value reported in the Summary Compensation Table for Fiscal Year 2024. Amounts in the Inclusion of Pension Service Cost are based on the service cost for services rendered during the listed year. |
Pay Versus Performance Disclosure
| Year | Summary Compensation Table Total for PEO 2 ($) | Exclusion of Change in Pension Value for PEO 2 ($) | Exclusion of Stock Awards and Option Awards for PEO 2 ($) | Inclusion of Pension Service Cost for PEO 2 ($) | Inclusion of Equity Values for PEO 2 ($) | Compensation Actually Paid to PEO 2 ($) | | 2024 | 18,740,721 | — | (12,420,052) | — | 29,299,928 | 35,620,597 |
Pay Versus Performance Disclosure
| 76 | |
Pay Versus Performance Disclosure
| Year | Average Summary Compensation Table Total for Non-PEO NEOs ($) | Exclusion of Average Change in Pension Value for Non-PEO NEOs ($) | Exclusion of Average Stock Awards and Option Awards for Non-PEO NEOs ($) | Inclusion of Average Pension Service Cost for Non-PEO NEOs ($) | Inclusion of Average Equity Values for Non-PEO NEOs ($) | Average Compensation Actually Paid to Non-PEO NEOs ($) | | 2024 | 8,190,674 | (2,500,284) | (3,213,658) | 306,027 | 8,570,458 | 11,353,217 |
Pay Versus Performance Disclosure
The amounts in the Inclusion of Equity Values in the tables above are derived from the amounts set forth in the following tables:
Pay Versus Performance Disclosure
| Year | Year-End Fair Value of Equity Awards Granted During Fiscal Year That Remained Unvested as of Last Day of Fiscal Year for PEO 2 ($) | Change in Fair Value from Last Day of Prior Fiscal Year to Last Day of Fiscal Year of Unvested Prior- Fiscal Year Equity Awards for PEO 2 ($) | Vesting-Date Fair Value of Equity Awards Granted During Fiscal Year that Vested During Fiscal Year for PEO 2 ($) | Change in Fair Value from Last Day of Prior Fiscal Year to Vesting Date of Unvested Prior-Fiscal Year Equity Awards that Vested During Fiscal Year for PEO 2 ($) | Fair Value at Last Day of Prior Fiscal Year of Equity Awards Forfeited During Fiscal Year for PEO 2 ($) | Total - Inclusion of Equity Values for PEO 2 ($) | | 2024 | 20,148,837 | 8,281,523 | — | 869,568 | — | 29,299,928 |
Pay Versus Performance Disclosure
| Year | Average Year-End Fair Value of Equity Awards Granted During Fiscal Year That Remained Unvested as of Last Day of Fiscal Year for Non-PEO NEOs ($) | Average Change in Fair Value from Last Day of Prior Fiscal Year to Last Day of Fiscal Year of Unvested Prior-Fiscal Year Equity Awards for Non-PEO NEOs ($) | Average Vesting-Date Fair Value of Equity Awards Granted During Fiscal Year that Vested During Fiscal Year for Non-PEO NEOs ($) | Average Change in Fair Value from Last Day of Prior Fiscal Year to Vesting Date of Unvested Prior-Fiscal Year Equity Awards that Vested During Fiscal Year for Non-PEO NEOs ($) | Average Fair Value at Last Day of Prior Fiscal Year of Equity Awards Forfeited During Fiscal Year for Non-PEO NEOs ($) | Total - Average Inclusion of Equity Values for Non-PEO NEOs ($) | | 2024 | 4,989,795 | 3,102,003 | — | 478,660 | — | 8,570,458 |
Pay Versus Performance Disclosure
| (4) The Peer Group TSR set forth in this table utilizes the S&P 500 Industrials (Sector) Index (“S&P Industrials Index”), which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K included in our Annual Report for the fiscal year ended June 30, 2024. The comparison assumes $100 was invested (with reinvestment of dividends) for the period starting June 30, 2020, through the end of the listed fiscal year in the Company and in the S&P Industrials Index, respectively. Historical stock performance is not necessarily indicative of future stock performance. |
Pay Versus Performance Disclosure
| (5) Fiscal year 2023 net income has been updated from the amount included in last year's Pay Versus Performance table to reflect the appropriate rounding convention. |
Pay Versus Performance Disclosure
| (6) We determined EPS Growth Relative to Peer Group to be the most important financial performance measure used to link Company performance to Compensation Actually Paid to our PEO and Non-PEO NEOs in fiscal year 2024. As described in the Compensation Discussion & Analysis, the LTIP Award for the three-year performance period is, in part, based on a comparison of the Company’s EPS growth relative to the Peer Group companies in the aggregate. However, in compliance with SEC guidance, the table above reflects our relative as reported earnings per share performance for each listed fiscal year as compared with the Peer Group companies disclosed in the Compensation Discussion & Analysis. This performance measure may not have been the most important financial performance measure for prior years and we may determine a different financial performance measure to be the most important financial performance measure in future years. |
Pay Versus Performance Disclosure
| (7) The relative performance of as reported earnings per share in fiscal year 2022 was significantly impacted by costs associated with our acquisition of Meggitt. |
Pay Versus Performance Disclosure
| 2024 Proxy Statement | 77 |
Pay Versus Performance Disclosure
Relationship Between PEO and Average Non-PEO NEO Compensation Actually Paid and Total Shareholder Return (“TSR”) The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our Non-PEO NEOs, and the Company’s cumulative TSR and the Peer Group TSR over the four most recently completed fiscal years.
PEO and Average Non-PEO NEO Compensation Actually Paid Versus TSR
PEO and Average Non-PEO NEO Compensation Actually Paid Versus TSR Relationship Between PEO and Average Non-PEO NEO Compensation Actually Paid and Net Income The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our Non-PEO NEOs, and our Net Income during the four most recently completed fiscal years.
PEO and Average Non-PEO NEO Compensation Actually Paid Versus Net Income
PEO and Average Non-PEO NEO Compensation Actually Paid Versus Net Income
PEO and Average Non-PEO NEO Compensation Actually Paid Versus Net Income
| 78 | |
PEO and Average Non-PEO NEO Compensation Actually Paid Versus Net Income
Relationship Between PEO and Average Non-PEO NEO Compensation Actually Paid and EPS Growth Relative to Peer Group The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our Non-PEO NEOs, and our EPS Growth Relative to Peer Group during the four most recently completed fiscal years.
PEO and Average Non-PEO NEO Compensation Actually Paid Versus EPS Growth Relative to Peer Group
PEO and Average Non-PEO NEO Compensation Actually Paid Versus EPS Growth Relative to Peer Group 2024 Performance Measures
Shareholder Recommendations for Director Nominees
Shareholder Recommendations for Director Nominees The Corporate Governance and Nominating Committee will consider shareholder recommendations for nominees for election to our Board of Directors if such recommendations are in writing and set forth the information listed below. Such recommendations must be submitted to Parker-Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, Attention: Secretary, and must be received at our executive offices on or before June 30 of each year in anticipation of the following Annual Meeting of Shareholders. All shareholder recommendations for Director nominees must set forth the following information:
Shareholder Recommendations for Director Nominees
| 1. | The name and address of the shareholder recommending the candidate for consideration as such information appears on our records; the telephone number where such shareholder can be reached during normal business hours; the number of common shares owned by such shareholder; the length of time such shares have been owned by the shareholder and any direct or indirect interest of such shareholder in any contract with us or any subsidiaries or affiliates or any of our principal competitors (a list of which will be provided by the Company within ten days following a request therefor by such shareholder); any material transaction between such shareholder and us, any subsidiaries or affiliates or any of our principal competitors (a list of which will be provided by the Company within ten days following a request therefor by such shareholder); and if such shareholder is not a natural person, the identity of the natural person or persons associated with such shareholder and the qualifications and background of such shareholder and any proportionate shares in us or derivative interests held, directly or indirectly, by a general or limited partnership of such shareholder for which such shareholder is a general partner or runs a beneficial interest in a general partner. If such person is not a shareholder of record or if such shares are owned by an entity, reasonable evidence of such person’s beneficial ownership of such shares or such person’s authority to act on behalf of such entity; | | 2. | Complete information as to the identity and qualifications of the proposed nominee, including the full legal name, age, business and residence addresses and telephone numbers and other contact information, and the principal occupation and employment of the candidate recommended for consideration, including his or her occupation for at least the past five years, with a reasonably detailed description of the background, education, professional affiliations and business and other relevant experience (including directorships, employment and civic activities) and qualifications of the candidate; | | 3. | The reasons why, in the opinion of the recommending shareholder, the proposed nominee is qualified and suited to be a Director; |
Shareholder Recommendations for Director Nominees
| 2024 Proxy Statement | 87 |
Shareholder Recommendations for Director Nominees
| 4. | The disclosure of any relationship of the candidate being recommended with us or any of our subsidiaries or affiliates, whether direct or indirect; | | 5. | A description of all relationships, arrangements and understandings between the proposing shareholder and the candidate and any other person(s) (naming such person(s)) pursuant to which the candidate is being proposed or would serve as a Director, if elected; and | | 6. | A written acknowledgment by the candidate being recommended that he or she has consented to being considered as a candidate, has consented to our undertaking of an investigation into that individual’s background, education, experience and other qualifications in the event that the Corporate Governance and Nominating Committee desires to do so, has consented to be named in our Proxy Statement and has consented to serve as a Director, if elected. |
Shareholder Recommendations for Director Nominees
| 88 | |
Shareholder Recommendations for Director Nominees
| Company Information |