DEF 14A of Douglas Dynamics, Inc
Filed Mar 22, 2024 · FY20230001437749-24-008924
ELECTION OF DIRECTORS (Proposal 1)
ELECTION OF DIRECTORS (Proposal 1) Our Board currently consists of seven members. Our Board is divided into three classes for purposes of election. The director or directors in one class are generally elected at each annual meeting of stockholders to serve for a three-year term and until their successors are duly elected and qualified. Each director elected at our Annual Meeting will hold office for a three-year term expiring at our 2027 annual meeting of stockholders and until his or her successor is duly elected and qualified. Other than the two directors who are nominated for election at our Annual Meeting, our other current directors are not up for election this year and will continue in office for the remainder of their terms. As of the date of this proxy statement, each of the nominees for election has indicated that he or she is able and willing to serve as a director. However, if some unexpected occurrence should require our Board to substitute some other person or persons for one or more of the nominees, it is intended that the shares represented by proxies received and voted for such other candidate or candidates, or not voted, will be voted for another nominee or nominees selected by our Board.
Nominees for Election at the Annual Meeting
Nominees for Election at the Annual Meeting The following sets forth certain information, as of the Record Date, about the nominees for election at our Annual Meeting. Each of the nominees is currently a director of our Company.
Director Nominees for Terms Expiring in 2027
Director Nominees for Terms Expiring in 2027 Kenneth W. Krueger, 67, has been serving as a director since 2011. He also has served as Chairman of The Manitowoc Company, Inc., a capital goods manufacturer, since March 2016. Previously, he served as interim Chairman, President and Chief Executive Officer of The Manitowoc Company, Inc. from October 2015 through March 2016 and as a director and Chairman of the Audit Committee for that company from 2004 until October 2015. He also has served as a director of Albany International Corp., a global advanced textiles and materials processing company, since December 2016. Mr. Krueger is the Chairman of the Audit Committee of Albany International Corp. From May 2006 until August 2009, Mr. Krueger was the Chief Operating Officer of Bucyrus International, Inc., a global mining equipment manufacturer headquartered in South Milwaukee, Wisconsin. Mr. Krueger also served as Bucyrus International, Inc.’s Executive Vice President from December 2005 until May 2006. Prior to joining Bucyrus International, Inc., Mr. Krueger was Senior Vice President and Chief Financial Officer of A. O. Smith Corporation, a global manufacturer of water heaters in Milwaukee, Wisconsin, from August 2000 until June 2005. Mr. Krueger’s qualifications to serve on our Board include his leadership experience at a publicly traded company and his background in the manufacturing industry as a member of the senior management team at a global manufacturer of mining equipment. Lisa R. Bacus, 59, has been serving as a director since October 2020. Ms. Bacus served as the Executive Vice President and Global Chief Marketing Officer at Cigna Corporation, a global health care services company, from May 2013 until her retirement in July 2019. Prior to joining Cigna, Ms. Bacus was the Executive Vice President and Chief Marketing Officer at American Family Insurance Group, a property and casualty insurance company. Earlier in her career, Ms. Bacus spent 22 years with Ford Motor Company, where she held a number of executive leadership positions, including Executive Director of Global Market Research and Insights, Executive Director of Global Marketing Strategy, and head of marketing for Ford in Mexico. Ms. Bacus currently serves on the boards of directors of publicly-traded Teradata Corporation and Selective Insurance Group, Inc., as well as the board of privately-held Culver Franchising System, Inc. Ms. Bacus’ qualifications to serve on our Board include her leadership experience at complex global enterprises in multiple industries, her background in marketing, strategic planning and data analytics, as well as her vast multi-cultural and international business experience. In addition to her extensive professional experience, Ms. Bacus contributes to the Board’s diversity. OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE FOREGOING NOMINEES FOR ELECTION AS A DIRECTOR.
Directors Remaining in Office Until 2025
Directors Remaining in Office Until 2025 Margaret S. Dano, 64, has been serving as a director since 2012. She also has served as a member of the board of directors and the governance and compensation committees of Neenah Paper Inc. (NYSE: NP) since April 2015 and in 2018 retired as the chairman of the board of directors of Superior Industries International, Inc. (NYSE: SUP), a designer and manufacturer of aluminum road wheels for sale to original equipment manufacturers, where she served as lead director since 2010 and as a member of the board of directors since 2007. Ms. Dano was Vice President, Worldwide Operations of Garrett Engine Boosting Systems, a division of Honeywell International, Inc., from June 2002 until her retirement from that position in 2005. From April 2002 to June 2002, she was Vice President, Global Operations, Automation and Controls Solutions of Honeywell. Before joining Honeywell, Ms. Dano served in executive or management roles with Avery Dennison Corporation, Black & Decker Corporation and General Electric Corporation. Ms. Dano has been a member of the board of directors of Industrial Container Services, a provider of reusable container solutions in the United States, since 2011, and currently serves as lead director and as a member of the compensation committee. She has served on the board of directors and the audit, compensation and governance committees of Fleetwood Enterprises, Inc., and on the board of directors and as lead director and chair of the compensation committee of Anthony International Equipment Services Corp. Ms. Dano’s qualifications to serve on our Board include her leadership experience at publicly traded manufacturing companies and her background in the manufacturing industry as a member of senior management teams with responsibility for global operations. Donald W. Sturdivant, 63, has been serving as a director since 2010. Since December 2021, Mr. Sturdivant has served as an operating partner with TruArc LLC, a middle market private equity firm. From September 2016 until December 2021, Mr. Sturdivant served as an operating partner with Snow Phipps Group, LLC, predecessor to TruArc LLC. He has served as chairman of the board of directors at Teasdale Latin Foods since June 2019 and previously served as the chairman of the board of directors at Brook & Whittle Corporation from September 2017 to November 2021. He previously served as Chief Executive Officer of FleetPride, Inc., from June of 2015 through March of 2016 and served as a director at FleetPride from 2014 to 2016. Mr. Sturdivant was the Chief Executive Officer of Marietta Corporation from 2009 to 2015. He also served on the board of directors at Serta Simmons Bedding Company from 2010 to 2012. Earlier in his career, Mr. Sturdivant held various executive leadership roles including Chief Operating Officer at Altivity Packaging and Division President roles at Graphic Packaging International and Fort James Corporation. Mr. Sturdivant holds an MBA from the Florida Institute of Technology, and a B.S. from the University of Maine and served as a Chemical Corps Officer in the United States Army. Mr. Sturdivant’s qualifications to serve on our Board include his leadership experience at several publicly held corporations and his background in the manufacturing industry as a member of senior management at a number of manufacturing companies. Robert L. McCormick, 63, has been serving as our President and Chief Executive Officer and as a director since January 2019. Previously, Mr. McCormick served as our Chief Operating Officer from August 2017 until January 2019. Prior to becoming Chief Operating Officer, Mr. McCormick served as our Executive Vice President and Chief Financial Officer from September 2004 through August 2017, as our Secretary from May 2005 through August 2017, as our Assistant Secretary from September 2004 to May 2005 and as our Treasurer from September 2004 through December 2010. Prior to joining us, Mr. McCormick served as President and Chief Executive Officer of Xymox Technology Inc. from 2001 to 2004. Prior to that, Mr. McCormick served in various capacities in the Newell Rubbermaid Corporation, including President from 2000 to 2001 and Vice President Group Controller from 1997 to 2000. Mr. McCormick has served on the board of directors of Mayville Engineering Company, Inc. (NYSE: MEC) since December 2022. We believe that Mr. McCormick’s experience in various leadership positions both inside and outside the Company, as well as his deep understanding of the Company’s business, operations and strategy, qualify him to serve on our Board.
Directors Remaining in Office Until 2026
Directors Remaining in Office Until 2026 Joher Akolawala, 57, has been serving as a director since 2022. Mr. Akolawala has served as Executive Vice President and Chief Financial Officer of Pella Corporation, a privately-held manufacturer of windows and doors, since March, 2020. Prior to joining Pella, Mr. Akolawala was the Senior Vice President, Chief Financial Officer - International of Walgreens Boots Alliance, Inc., a publicly traded pharmaceutical retailer, from November, 2019 to March, 2020. From June, 2014 to October, 2019, Mr. Akolawala served Mondelez International, Inc., a publicly traded multinational food and beverage company (a successor company to Kraft Foods Group), in roles of increasing responsibility, most recently as Senior Vice President, Global Finance. Prior to that, Mr. Akolawala spent nearly 23 years with Kraft Foods Group, where he held a number of senior leadership positions, including Chief Financial Officer, Kraft Grocery; Vice President, Business Systems; and Chief Financial Officer, Kraft Foodservice. Mr. Akolawala’s qualifications to serve on our Board include his leadership experience at complex global enterprises in multiple industries, his extensive background in finance, information technology, cybersecurity, M&A, and strategy, as well as his vast multi-cultural and international business experience. In addition to his extensive professional experience, Mr. Akolawala contributes to the Board’s diversity. James L. Janik, 67, has been serving as our Chairman since 2014 and as a director since 2004. Mr. Janik served as our Executive Chairman from January 2019 until his retirement as an officer of our Company in April of 2020 Mr. Janik previously served as our President and Chief Executive Officer from 2004 until January 2019. Mr. Janik also served as President and Chief Executive Officer of Douglas Dynamics Incorporated, the entity that previously operated our business, from 2000 to 2004. Mr. Janik was Director of Sales of our Western Products division from 1992 to 1994, General Manager of our Western Products division from 1994 to 2000 and Vice President of Marketing and Sales from 1998 to 2000. Prior to joining us, Mr. Janik was the Vice President of Marketing and Sales of Sunlite Plastics Inc., a custom extruder of thermoplastic materials, for two years. During the 11 prior years, Mr. Janik held a number of key marketing, sales and production management positions for John Deere Company. Mr. Janik has served on the board of directors of Jason Industries L.L.C. since August 2020. Mr. Janik’s qualifications to serve on our Board include his 30 years of experience at our Company, including his 18 years of experience as our and Douglas Dynamics Incorporated’s President and Chief Executive Officer, as well as his depth of experience at businesses affected by weather-related seasonality. This experience, comprehensive knowledge of the snow and ice control equipment industry, and inside perspective of the day-to-day operations of the Company provides essential insight and guidance to our Board and qualifies him to serve as our Chairman.
Executive Summary
| • | The Compensation Committee established performance goals and target awards under our Annual Incentive Plan, as described further below under “Elements of Executive Compensation – Annual Incentive Plan.” |
Executive Summary
| • | The Compensation Committee made annual grants of performance share units and time‑vesting restricted stock units under our Amended and Restated 2010 Stock Incentive Plan (“2010 Stock Plan”), as described further below under “Elements of Executive Compensation – Long-Term Incentive Compensation.” |
Executive Summary
| • | The key components of our compensation program for our named executive officers for 2023 were base salary, annual cash incentive awards under our Annual Incentive Plan, long‑term incentive awards under our long‑term equity program and other compensation consisting primarily of matching 401(k) contributions, health and welfare benefits, and other perquisites. |
Executive Summary
| • | We do not provide “single trigger” change of control severance, which means that, for an executive officer to receive severance benefits under an employment agreement, in addition to the change in control there must be some adverse change in the circumstances of the executive officer’s employment. |
Executive Summary
| • | Our equity compensation plan does not permit repricing of stock options without stockholder approval. |
Executive Summary
| • | We do not guarantee salary increases or bonuses for our executive officers. |
Role of the Compensation Committee and Management in the Compensation-Setting Process
| • | approve stock option and other stock incentive awards for executive officers; |
Role of the Compensation Committee and Management in the Compensation-Setting Process
| • | review and approve employment agreements and severance and change of control arrangements for our executive officers; |
Role of the Compensation Committee and Management in the Compensation-Setting Process
Our Chief Executive Officer recommends base salaries for our executive officers other than himself to the Compensation Committee for its approval and recommends performance targets under the Annual Incentive Plan for approval by the Compensation Committee, as explained in more detail under the section entitled “Annual Incentive Plan” below. Our Chief Executive Officer also negotiates employment agreements with executive officers, subject to review by the Compensation Committee, and makes recommendations to the Compensation Committee with respect to equity awards for our named executive officers other than himself. All compensation elements for our Chief Executive Officer are reviewed and approved by the Compensation Committee.
Role of Benchmarking in the Compensation-Setting Process
Role of Benchmarking in the Compensation-Setting Process As described above under “Objectives of our Compensation Programs,” the Compensation Committee’s goal is to offer competitive compensation to our executive officers. To assist it in setting competitive pay levels and other benefits, the Compensation Committee has periodically engaged FW Cook, an independent compensation consultant. The Compensation Committee assessed the independence of FW Cook pursuant to SEC rules and NYSE listing standards and concluded that FW Cook’s work for the Compensation Committee does not raise any conflict of interest. In 2022, the Compensation Committee worked with FW Cook to identify an updated peer group that was used by the Compensation Committee in evaluating and setting compensation and other benefits for our executive officers for 2023. For this review, FW Cook considered peer group data from a group of 16 peer companies as well as broader survey data from a national general industry survey. The 16 peer companies were selected for our peer group based on their reasonable comparability to our Company in terms of size, industry and scope of operations. For size‑related screens, the focus was on ensuring that the peer group was appropriate from both revenue and market capitalization perspectives because we believe that these two metrics are most strongly correlated to compensation levels. The peer companies (the “2022 Peer Group”) were the following:
Role of Benchmarking in the Compensation-Setting Process
| • Alamo Group Inc. | • Hurco Companies, Inc. | | • Astec Industries | • Kadant Corporation | | • CECO Environmental Corp. | • Lindsay Corporation | | • CIRCOR Int’l | • Mayville Engineering Co. | | • Compass Minerals | • Motorcar Parts of America | | • Enerpac Tool Group | • Northwest Pipe Co. | | • ESCO Technologies | • Standex Int’l | | • Federal Signal Corp. | • The Shyft Group |
Role of Benchmarking in the Compensation-Setting Process
The Compensation Committee considered 2022 Peer Group data as one factor in setting compensation levels in 2023 for our named executive officers, but the 2022 Peer Group data was not the only factor or the determinative factor. Rather, the Compensation Committee also considered the individual named executive officer’s qualifications, experience and level of responsibility, internal pay equity considerations and the collective experience of the members of our Board, Compensation Committee and Mr. McCormick (with respect to the compensation of our other named executive officers), their business judgment and their experiences in recruiting and retaining executives.
Elements of Executive Compensation
The amount of base salary that we actually paid to each of our named executive officers in 2023 can be found in the “Salary” column of the Summary Compensation Table below. Note that the amount of base salary that we actually paid to the named executive officers in 2023 is less than the amount shown in the table above because their base salary increases became effective on March 1, 2023. Annual Incentive Plan Our named executive officers, as well as certain other management employees, participate in the Annual Incentive Plan, which provides an opportunity to earn a cash bonus upon achievement of certain performance targets approved by the Compensation Committee. These performance objectives are designed to link management’s focus with overall Company objectives by providing the executive an opportunity to earn additional short‑term compensation. We emphasize variable compensation to provide an opportunity for total annual compensation for our named executive officers to exceed what the Compensation Committee believes, based on its members’ collective experience, business judgment and experiences in recruiting and retaining executives, to be the general market level of compensation for similarly situated executives in the event of superior performance. The 2023 performance metrics under the Annual Incentive Plan for all of our named executive officers were adjusted operating income and free cash flow, weighted 70% and 30%, respectively. As in 2022, the payouts for Mr. McCormick, Ms. Lauber and Ms. Evans for 2023 were based entirely on our consolidated business results, while Mr. Van Genderen’s performance metrics for 2023 were based 75% on the performance of our Work Truck Attachments segment and 25% on our consolidated performance. In 2023, adjusted operating income was weighted 70% under the Annual Incentive Plan. This weighting reflects the Compensation Committee’s belief that any incentive compensation should be driven principally by the Company’s profitability. Our management is given discretion to recommend the performance metric or metrics that will comprise the remaining 30% of the annual bonus opportunity. This allows our management to select a metric or metrics that reflect the current focus of our business, which are then submitted by the Chief Executive Officer to the Compensation Committee for approval. Management recommended free cash flow for 2023, based on its use of free cash flow as a primary measure of the Company’s profitability and our ability to pay dividends and its view that free cash flow is influenced to a lesser degree by factors below the operating profit level than some other performance measures. For 2023, Mr. McCormick had a target bonus level of 100% of his base salary. Each other named executive officer had a target bonus level of 75% of his or her annual base salary. These target potential payment levels were set based on a review of the 2022 Peer Group companies and were based on what the Compensation Committee believed, based on its members’ collective experience, business judgment and experiences in recruiting and retaining executives, to be a competitive level of annual incentive compensation to provide appropriate incentives and retention. The Compensation Committee also established maximum potential payment levels under the Annual Incentive Plan of 200% of annual base salary for Mr. McCormick, and 150% for each other named executive officer, based on a review of 2022 Peer Group company practices. See below for a detailed discussion of our performance metrics and the calculation of payouts for 2023. For the year ending December 31, 2023, we paid out the following bonuses as a percentage of base salary to our named executive officers:
Elements of Executive Compensation
| Name | Payout Based On: | Total Bonus Paid (as a % of base salary) | % Bonus Paid Based on Operating Income | % Bonus Paid Based on FCF | | Robert L. McCormick | Consolidated Business | 21.5% | 21.5% | 0.0% | | Sarah C. Lauber | Consolidated Business | 16.1% | 16.1% | 0.0% | | Linda R. Evans | Consolidated Business | 16.1% | 16.1% | 0.0% | | Mark Van Genderen | 75% Work Truck Attachments Segment and 25% Consolidated Business | 9.5% | 9.5% | 0.0% |
Elements of Executive Compensation
The adjusted operating income metric, as defined in the Annual Incentive Plan, measures the degree by which actual adjusted operating income performance achieves, exceeds or falls short of baseline adjusted operating income. Actual adjusted operating income is defined as earnings before interest, taxes, depreciation and amortization less depreciation, plus other expense, adjusted for non‑recurring expenses, as approved by the Compensation Committee. Baseline adjusted operating income is set annually by the Compensation Committee. For 2023, if actual adjusted operating income fell below 50% of baseline adjusted operating income, no adjusted operating income bonus would be earned. If actual adjusted operating income fell between 50% and 100% of baseline adjusted operating income, adjusted operating income bonus would be reduced linearly for each 1% reduction in actual adjusted operating income below baseline adjusted operating income. If actual adjusted operating income exceeded baseline adjusted operating income, adjusted operating income bonus would be increased linearly for each 1% increase in actual adjusted operating income above baseline adjusted operating income. For 2023, the Compensation Committee set the baseline adjusted operating income targets under the Annual Incentive Plan based on historical trends and assumptions recommended by management. Specifically, in setting the 2023 baseline targets, we assumed average snowfall, increasing truck sales and a slight improvement in overall economic conditions. For 2023, the baseline adjusted operating income targets and actual adjusted operating income (calculated according to the Annual Incentive Plan as described below) were as follows:
Elements of Executive Compensation
As a result, based on 2023 performance and the 70% weighting, the payout for the adjusted operating income component of the annual incentive plan was 21.5% of annual base salary for Mr. McCormick (whose payout was based on our consolidated business results), 16.1% of annual base salary for Ms. Lauber (whose payout was based on our consolidated business results), 16.1% of annual base salary for Ms. Evans (whose payout was based on our consolidated business results), and 9.5% of annual base salary for Mr. Van Genderen (whose payout was based 75% on our Work Truck Attachments segment results and 25% on our consolidated business results). The adjusted operating income that we used for purposes of determining the achievement of the adjusted operating income target under the Annual Incentive Plan was different than the actual operating income for our consolidated business as reported in our financial statements. To arrive at the metric used under the Annual Incentive Plan, we adjusted our operating income (as calculated consistent with United States Generally Accepted Accounting Principles, or U.S. GAAP) by adding back, as consistent with prior years, amortization, stock‑based compensation, severance, restructuring charges, and other legal and consulting expenses. The following table sets forth the calculation of the 21.5% of annual base salary payout based on adjusted operating income component for Mr. McCormick (dollars in millions):
Elements of Executive Compensation
Our free cash flow (“FCF”) is defined as cash generated by operating activities, less net cash used in capital expenditures, adjusted for non‑recurring items, as approved by the Compensation Committee. Target FCF is set annually by the Compensation Committee. Performance is measured by the degree to which FCF achieves, exceeds or falls short of target FCF. Achievement of target FCF results in a bonus as a percentage of base salary equal to bonus target level multiplied by the 30% weighting of the FCF metric. For 2023, achievement of target FCF would result in a bonus of 30.0% of base salary for Mr. McCormick and 22.5% of base salary for all other named executive officers. If the target FCF was achieved, then the target FCF bonus would be earned. If FCF was below the threshold goal, then no FCF bonus would be earned. If FCF was higher than target, then the payout increases linearly for increases in FCF above target FCF, subject to the overall Annual Incentive Plan cap of 200% of base salary for Mr. McCormick, and 150% of base salary for each of our other named executive officers. Since actual FCF was below the threshold level for any payout, there was no payout for this component for the Annual Incentive Plan based on 2023 performance.
Elements of Executive Compensation
| • | Alignment of Interests: Use adjusted earnings per share and return on net assets as the key performance metrics, linking executives’ incentive goals with the interests of our stockholders. |
Elements of Executive Compensation
In 2023, we granted our named executive officers performance share units that will vest based on our achievement of performance goals over the 2023-2025 performance period, and will be paid out, if earned, shortly after the end of the performance period. The performance goals for these performance share units are adjusted earnings per share and return on net assets, each weighted 50%. The minimum threshold performance for the performance share units granted in 2023, under which the minimum payout will be earned, is 75% of target for each performance metric (an increase from 70% of target for the 2022 grants to more closely correlate to historical performance), and the maximum threshold performance, over which the maximum payout will be earned, is 120% of target for each performance metric (a decrease from 130% of target for the 2022 grants to more closely correlate to historical performance). Our Compensation Committee determined the target aggregate value of 2023 stock-based awards for our named executive officers with reference to a percentage of the executive officer’s base salary. The Compensation Committee considered 2022 Peer Group company practices in determining the target award levels under the Long-Term Incentive Plan for each named executive officer. The Compensation Committee set the target award values for each named executive officer as follows: Mr. McCormick—276% of base salary (where prior year target was 230%); Ms. Lauber—135% of base salary (the same as prior year target); Ms. Evans – 75% of base salary (where prior year target was 65%); and Mr. Van Genderen—75% of base salary. The Compensation Committee chose the mix of performance‑vested versus time‑vested stock grants based on the Company’s historical mix of 40% retention and 60% performance share units, which mix was influenced in part by the Committee’s recognition of the inherent snowfall‑related performance volatility of the Company’s business. 2023-25 Performance Share Units. The performance share units granted in 2023 made up 60% of the total long‑term incentive award opportunity for our named executive officers. The target number of units granted was determined as of the grant date based on the average closing price during the 30 trading days prior to the grant date. The threshold, target and maximum number of performance share units subject to these awards for our named executive officers were as follows:
Elements of Executive Compensation
The performance goals for the performance share units granted in 2023 are three-year cumulative adjusted earnings per share (“EPS”), weighted 50%, and three-year cumulative return on net assets (“RONA”), weighted 50%. Our EPS is defined as adjusted earnings per share as reported, adjusted for other non-recurring expenses, as approved by the Compensation Committee. Our RONA is defined as cumulative net income for the three fiscal years of the performance period divided by the average of net assets on four distinct dates: the first day of the first fiscal year of the performance period and the last day of each of the three applicable fiscal years in the performance period. For purposes of our RONA definition, net income is defined as adjusted net income as reported, adjusted for other non-recurring expenses, as approved by the Compensation Committee. Also, for purposes of our RONA definition, net assets is defined as current assets, excluding cash, plus net fixed assets, less current liabilities, plus the current portion of long-term debt. 2021-23 Performance Share Units. The performance period for the performance share units granted in 2021 ended in 2023. The performance goals for the performance share units granted in 2021 were three-year cumulative adjusted EPS, weighted 50%, and three-year cumulative RONA, weighted 50%, EPS and RONA had the same definitions as under our 2023-25 performance share units as described above (but relating to the 2021-23 performance period). Although the plan under which the performance share units were granted permits the Compensation Committee to adjust the actual performance results for other non-recurring expenses, no such adjustments were made for the 2021-23 performance period. The performance goals, actual performance and actual payout for the performance share units granted in 2021 were as follows:
Elements of Executive Compensation
Time‑Vesting Restricted Stock Units Granted in 2023. The time‑vesting restricted stock units made up the remaining 40% of the total long‑term incentive award opportunity for our named executive officers for 2023 and vest ratably over the three years following the grant date, contingent on continued employment or a qualifying retirement. The number of units granted was determined as of the grant date based on the average closing price during the 30 trading days prior to the grant date.
Severance and Change of Control Arrangements
Severance and Change of Control Arrangements We maintain an employment agreement with each of our named executive officers. Under each of these employment agreements, the named executive officer is eligible for severance benefits. In January 2023, we entered into a new employment agreement with Mr. Van Genderen. Mr. McCormick’s employment agreement states that, upon a qualifying termination of employment without cause or resignation due to a material breach of the agreement by us prior to a change of control, he would be entitled to receive severance equal to the product of one and one-half multiplied by the sum of his annual base salary plus his target annual bonus. If Mr. McCormick’s employment is terminated without cause or he resigns with good reason during the 24 months following a change of control, then he would be entitled to receive severance equal to the product of two and one-quarter multiplied by the sum of his annual base salary plus his target annual bonus. Mr. McCormick would also be eligible for continued coverage under the Company’s benefit plans at the active employee rates for up to 18 months following termination of employment. Each of Ms. Lauber’s, Ms. Evans’s, and Mr. Van Genderen’s employment agreements state that, upon a qualifying termination of employment without cause or resignation due to a material breach of the agreement by us prior to a change of control, they would be entitled to receive severance equal to the sum of the executive’s annual base salary plus the executive’s target annual bonus. If Ms. Lauber’s, Ms. Evans’s or Mr. Van Genderen’s employment is terminated without cause or as a result of resignation with good reason during the 24 months following the event of a change of control, then they would be entitled to receive severance equal to the product of one and three-quarters multiplied by the sum of their respective annual base salaries plus their respective target bonuses. Ms. Lauber, Ms. Evans, and Mr. Van Genderen would also be eligible for continued coverage under the Company’s benefit plans at the active employee rates for up to 12 months following termination of employment. For purposes of the employment agreements, a “change of control” means any time (a) any person, other than certain affiliates, becomes the beneficial owner of 50% or more of the combined voting power of our outstanding voting securities; (b) during any period of two consecutive years, the majority of our Board changes (other than through Board-approved appointments); (c) certain extraordinary transactions involving our company become effective or are consummated; or (d) a sale, transfer or any other disposition (including, without limitation, by way of spin-off, distribution, complete liquidation or dissolution) of all or substantially all of our business or assets to an unrelated third party is consummated. A termination of employment is generally deemed to be for “good reason” under the amended and restated employment agreements if the executive terminates employment following a material reduction in the executive’s base salary, a material adverse change in the executive’s responsibilities or certain required relocations of the executive’s principal place of employment. In addition to the benefits described above, each of our named executive officers would have been entitled, at the discretion of our Board, to receive a pro‑rated portion of his or her annual bonus under the Annual Incentive Plan if his or her employment were terminated for any reason other than a termination by us for cause or resignation other than for a material breach. We compete for executive talent in a highly competitive market in which companies routinely offer similar benefits to named executive officers. We view these benefits as appropriate for the named executive officers who may not be in a position to readily obtain comparable employment within a reasonable period of time. Please refer to the discussion below under “—Potential Payments upon Termination or Change of Control” for a more detailed discussion of our severance and change of control arrangements.
Summary Compensation Table for Fiscal Year Ended December 31, 2023
Summary Compensation Table for Fiscal Year Ended December 31, 2023
Summary Compensation Table for Fiscal Year Ended December 31, 2023
| Name and Principal Position | Year | Salary(1) | Bonus | Stock Awards(2) | Non‑Equity Incentive Plan Compensation(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(4) | All Other Compensation (5) | Total | | Robert L. McCormick | 2023 | $757,000 | $— | $1,464,873 | $162,938 | $— | $106,062 | $2,490,873 | | President and Chief Executive Officer | 2022 | $721,000 | $— | $2,206,968 | $498,211 | $— | $113,560 | $3,539,739 | | | 2021 | $700,000 | $— | $1,979,253 | $559,300 | $— | $100,260 | $3,338,813 | | Sarah C. Lauber | 2023 | $472,909 | $— | $448,298 | $76,342 | $— | $30,628 | $1,028,1773 | | Executive Vice President, Chief Financial Officer and Secretary | 2022 | $450,390 | $— | $809,175 | $233,415 | $— | $24,981 | $1,517,961 | | | 2021 | $415,000 | $— | $693,169 | $249,000 | $— | $22,790 | $1,379,959 | | Linda R. Evans | 2023 | 306,642 | $— | $161,500 | $49,502 | $— | $60,996 | $578,640 | | Chief Human Resources Officer | 2022 | $292,040 | $— | $252,596 | $151,350 | $— | $58,874 | $754,860 | | | 2021 | $267,000 | $— | $214,595 | $160,200 | $— | $56,854 | $698,649 | | Mark Van Genderen | 2023 | $340,000 | $— | $179,053 | $32,066 | $— | $26,114 | $577,233 | | President, Work Truck Attachments | | | | | | | | |
Summary Compensation Table for Fiscal Year Ended December 31, 2023
| (1) Reflects salary amounts actually paid during the year indicated. |
Summary Compensation Table for Fiscal Year Ended December 31, 2023
| (2) Reflects the grant date fair value of stock awards as determined pursuant to Accounting Standards Codification (“ASC”) Topic 718. See Note 14, Stock‑based Compensation in the notes to the consolidated financial statements contained in our Annual Report on Form 10‑K for the year ended December 31, 2023. The amount includes awards that are subject to performance conditions, valued at the grant date based upon the probable outcome of the performance goals pursuant to ASC Topic 718, as follows: Mr. McCormick—$613,203; Ms. Lauber—$187,676; Ms. Evans—$67,605; and Mr. Van Genderen—$74,964. The value of these awards at the grant date assuming that the maximum level of performance conditions would be achieved is as follows: Mr. McCormick—$2,555,010; Ms. Lauber—$781,985; Ms. Evans—$281,687; and Mr. Van Genderen—$312,348. |
Summary Compensation Table for Fiscal Year Ended December 31, 2023
| (3) Reflects the actual payouts for the 2023, 2022, and 2021 Annual Incentive Plan, respectively. |
Summary Compensation Table for Fiscal Year Ended December 31, 2023
| (4) There were no above market or preferential earnings on nonqualified deferred compensation. |
Summary Compensation Table for Fiscal Year Ended December 31, 2023
| (5) Reflects Company contributions to the 401(k) plan, Company contributions to the Douglas Dynamics Nonqualified Deferred Compensation Plan and the cost of Company‑paid insurance premiums and executive physicals. See table below. |
Summary Compensation Table for Fiscal Year Ended December 31, 2023
| Name | 401(k) Contribution | Contribution to Deferred Compensation Plan | Company Paid Insurance Premiums | Executive Physicals | Total All other Compensation | | Robert L. McCormick | $14,434 | $47,904 | $43,724 | — | $106,062 | | Sarah C. Lauber | $14,850 | — | $10,525 | $5,253 | $30,628 | | Linda R. Evans | $14,850 | $37,941 | $8,205 | — | $60,996 | | Mark Van Genderen | $14,850 | — | $11,264 | — | $26,114 |
Outstanding Equity Awards at Year End 2023
Outstanding Equity Awards at Year End 2023 The following table sets forth for each named executive officer unvested restricted stock and performance share units as of the end of 2023. None of the named executive officers had unexercised stock options as of the end of 2023.
Outstanding Equity Awards at Year End 2023
| | Stock Awards | | | | | Name | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(2) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | | Robert L. McCormick | 39,123(3) | $1,161,171 | 85,208 | $2,528,973 | | Sarah C. Lauber | 12,950(4) | $384,356 | 28,864 | $856,684 | | Linda R. Evans | 4,351(6) | $129,138 | 9,459 | $280,743 | | Mark Van Genderen | 3,863(5) | $114,654 | 7,333 | $217,643 |
Outstanding Equity Awards at Year End 2023
| (1) Based on a market value as of December 29, 2023, of $29.68 per share, which was the closing sale price of a share of our common stock on the last trading day of the year. |
Outstanding Equity Awards at Year End 2023
| (2) The amounts shown in this column are based on the following target or maximum performance share units, as indicated in the narrative following the table: |
Outstanding Equity Awards at Year End 2023
| Name | Granted March 11, 2021 | Granted in 2022 | Granted February 15, 2023 | | Robert L. McCormick | 26,436 | 26,690 | 32,082 | | Sarah C. Lauber | 9,259 | 9,786 | 9,819 | | Linda R. Evans | 2,867 | 3,055 | 3,537 | | Mark Van Genderen | 1,198 | 2,213 | 3,922 |
Outstanding Equity Awards at Year End 2023
Actual performance with respect to the performance shares granted on March 11, 2021 was trending below target, actual performance with respect to the performance share units granted in 2022 was trending below target, and actual performance with respect to the performance share units granted on February 14, 2023 was trending below target. Consistent with the SEC’s disclosure requirements, we have therefore reported in the columns to which this footnote relates the number of shares that would be earned if target performance were achieved for performance share units granted on March 11, 2021, the number of shares that would be earned if target performance were achieved for performance share units granted in 2022, and the number of shares that would be earned if target performance were achieved for performance share units granted on February 15, 2023. The number of shares, if any, that will be earned and issued under these performance share unit awards is based on cumulative EPS (weighted at 50%) and cumulative RONA (weighted at 50%) over a three-year performance period from 2021-2023, in the case of the 2021 grants, over a three-year performance period from 2022-2024, in the case of the 2022 grants, and over a three-year performance period from 2023-2025, in the case of the 2023 grants. Any shares earned will be issued shortly after end of the performance period.
Outstanding Equity Awards at Year End 2023
| (3) 18,935 shares will vest on March 6, 2024, 13,059 shares will vest on March 6, 2025, and 7,129 shares will vest on March 6, 2026. |
Outstanding Equity Awards at Year End 2023
| (4) 6,413 shares will vest on March 6, 2024, 4,356 shares will vest on March 6, 2025, and 2,181 shares will vest on March 6, 2026. |
Outstanding Equity Awards at Year End 2023
| (5) 1,630 shares will vest on March 6, 2024, 1,362 shares will vest on March 6, 2025, and 871 shares will vest on March 6, 2026. |
Outstanding Equity Awards at Year End 2023
| (6) 2,101 shares will vest on March 6, 2024, 1,464 shares will vest on March 6, 2025, and 786 shares will vest on March 6, 2026. |
Option Exercises and Stock Vested in Fiscal 2023
Option Exercises and Stock Vested in Fiscal 2023 The table below sets forth the number of shares of stock acquired by our named executive officers upon the vesting of equity awards during 2023. There were no option exercises in 2023.
Option Exercises and Stock Vested in Fiscal 2023
| | Stock Awards | | | Name | Number of Shares Acquired on Vesting | Value Realized on Vesting ($)(1) | | Robert L. McCormick | 21,148 | $793,473 | | Sarah C. Lauber | 7,804 | $292,806 | | Linda R. Evans | 2,378 | $89,211 | | Mark Van Genderen | 758 | $28,440 |
Option Exercises and Stock Vested in Fiscal 2023
| (1) Amounts represent the product of the number of shares acquired on vesting and the closing market price of the shares on the vesting date. |
Pension Benefits
Pension Benefits We did not maintain a defined benefit pension plan during the year ended December 31, 2023.
Potential Payments upon Termination or Change of Control
Potential Payments upon Termination or Change of Control The information below describes certain compensation and benefits to which our named executive officers are entitled in the event their employment is terminated under certain circumstances and/or a change of control occurs. See the table at the end of this section for the amount of compensation and benefits that would have become payable under existing plans and contractual arrangements assuming a termination of employment and/or change of control had occurred on December 31, 2023 assuming a market value of our common stock on December 29, 2023, of $29.68 (which was the closing sale price of a share of our common stock on the last trading day of the year) given the named executive officers’ compensation and service levels as of such date. There can be no assurance that an actual triggering event would produce the same or similar results as those estimated if such event occurs on any other date or at any other price, or if any other assumption used to estimate potential payments and benefits is not correct. Due to the number of factors that affect the nature and amount of any potential payments or benefits, any actual payments and benefits may be different.
Pay Ratio
Pay Ratio As required by Item 402(u) of Regulation S‑K, we are providing the following information about the ratio of the median annual total compensation of our employees and the annual total compensation of Mr. McCormick, our chief executive officer. For the year ended December 31, 2023:
Pay Ratio
| • | the annual total compensation of our median employee was reasonably estimated to be $62,513. |
Pay Ratio
| • | the annual total compensation of Mr. McCormick was $2,490,873. |
Pay Ratio
| • | Based on this information, the ratio of the annual total compensation of our chief executive officer to the annual total compensation of our median employees is estimated to be 39.85 to 1. |
Pay Ratio
We identified our median employee by examining wages reported in Box 1 on Form W‑2 for all individuals employed by us on December 31, 2023, whether full‑time, part‑time, or on a seasonable basis, except that, in reliance on the “de minimis” exemption, we excluded from our employee population any employee located in China. As of December 31, 2023, we had 14 employees located in China, which constituted less than 5% of our 1,885 total employees. The total number of our U.S. employees on December 31, 2023, irrespective of the de minimis exception, and used for the de minimis calculation, was 1,871, and the total number of our non-U.S. employees on December 31, 2023, irrespective of the de minimis exception was 14. To identify our median employee, we annualized wages for all permanent employees who were hired after January 1, 2023, as permitted by SEC rules. Once we identified our median employee, we added together all of the elements of such employee’s compensation for 2023 in the same way that we calculate the annual total compensation of our named executive officers in the Summary Compensation Table. To calculate our ratio, we then divided Mr. McCormick’s annual total compensation reported in the Summary Compensation Table by the annual total compensation of our median employee.
Pay Versus Performance Disclosure
Pay Versus Performance Disclosure We are providing the following disclosure comparing our named executive officer (“NEO”) compensation to company performance pursuant to the SEC rules relating to Section 14(i) of the Securities Exchange Act of 1934. The table below sets forth our pay versus performance disclosure in accordance with Item 402(v) of the SEC’s Regulation S-K.
Pay Versus Performance Disclosure
| Year (a) | Summary Compensation Table Total for PEO (b) | Compensation Actually Paid to PEO (c) | Average Summary Compensation Table Total for Non-PEO NEOs (d) | Average Compensation Actually Paid to Non-PEO NEOs (e) | Total Share- holder Return (f) | Peer Group Total Shareholder Return (g) | Net Income (millions) (h) | Adjusted EBITDA (millions) (i) | | 2023 | $2,490,873 | $455,862 | $728,017 | $342,675 | $95.58 | $150.31 | $23.7 | $68.1 | | 2022 | $3,539,739 | $3,351,817 | $1,140,702 | $1,105,461 | $112.00 | $130.60 | $38.6 | $86.8 | | 2021 | $3,338,813 | $2,876,666 | $1,040,747 | $941,902 | $117.22 | $166.50 | $30.7 | $79.5 | | 2020 | $2,156,264 | $1,137,567 | $835,452 | $488,272 | $124.71 | $146.44 | $(86.6) | $74.9 | | 2019 | $1,987,820 | $2,516,827 | $836,889 | $1,176,353 | $156.28 | $123.72 | $49.2 | $108.1 |
Pay Versus Performance Disclosure
| (a) Although the SEC’s rules require the disclosure to cover only the four most recent fiscal years in this second year of the new requirements, we are voluntarily disclosing five years (2023, 2022, 2021, 2020, and 2019). |
Pay Versus Performance Disclosure
| (b) The principal executive officer (“PEO”) is Mr. McCormick for 2019, 2020, 2021, 2022, and 2023. |
Pay Versus Performance Disclosure
| (c) Compensation actually paid is adjusted from summary compensation table total compensation for changes in fair value of outstanding unvested stock during period plus dividends on unvested stock. See additional detail below. The amounts shown for years prior to 2023 have been adjusted from the amounts shown in our Definitive Proxy Statement on Schedule 14A filed with the SEC on March 24, 2023 to reflect the treatment of certain awards as vested, solely for purposes of the compensation actually paid calculation, when the award holder reaches retirement eligibility under the terms of the award. |
Pay Versus Performance Disclosure
| (d) Includes Ms. Lauber for 2019, 2020, 2021, 2022 and 2023; Ms. Evans for 2021, 2022 and 2023; Mr. Van Genderen for 2023; and Keith Hagelin for 2019, 2020, 2021 and 2022. |
Pay Versus Performance Disclosure
| (e) Average of (d) adjusted for same items as PEO in (c). The amounts shown for years prior to 2023 have been adjusted from the amounts shown in our Definitive Proxy Statement on Schedule 14A filed with the SEC on March 24, 2023 to reflect the treatment of certain awards as vested, solely for purposes of the compensation actually paid calculation, when the award holder reaches retirement eligibility under the terms of the award. |
Pay Versus Performance Disclosure
| (f) Assumes $100 invested on market close on December 31, 2018 through end of the fiscal year for which Total Shareholder Return (“TSR”) is being calculated. TSR is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period. |
Pay Versus Performance Disclosure
| (g) Represents the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. The peer group used for this purpose is the Russell 2000, which comprises the same issuers we use for purposes of Item 201(e)(1)(ii) of Regulation S-K. |
Pay Versus Performance Disclosure
| (h) Net income pursuant to U.S. GAAP |
Pay Versus Performance Disclosure
| (i) Represents our company selected measure – Adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”). Adjusted EBITDA represents net income (loss) before interest, taxes, depreciation and amortization, as further adjusted for certain charges consisting of unrelated legal and consulting fees, pension termination costs, stock based compensation, severance, restructuring charges, loss on disposal of fixed assets related to facility relocations, litigation proceeds, certain non-cash purchase accounting expenses, impairment charges, expenses related to debt modifications, loss on extinguishment of debt, and incremental costs related to the COVID-19 pandemic. |
Pay Versus Performance Disclosure
To calculate compensation actually paid (“CAP”), the following amounts were deducted from and added to Summary Compensation Table (“SCT”) total compensation:
Pay Versus Performance Disclosure
| Adjustments to Determine Compensation “Actually Paid” for PEO | 2023 | 2022 | 2021 | 2020 | 2019 | | Deduction for amounts reported under the “Stock Awards” column in the SCT | $(1,464,873) | $(2,206,968) | $(1,979,253) | $(944,935) | $(779,720) | | Deduction for amounts reported under the “Option Awards” columns in the SCT | $0 | $0 | $0 | $0 | $0 | | Increase for fair value of awards granted during year that remain unvested as of year end | $457,053 | $1,509,433 | $815,746 | $118,400 | $742,399 | | Increase for fair value of awards granted during year that vest during year | $639,074 | $511,341 | $717,039 | $363,808 | $320,906 | | Increase/deduction for change in fair value from prior year-end to current year-end of awards granted prior to year that were outstanding and unvested as of year-end | $(1,738,610) | $(53,351) | $(132,531) | $(575,748) | $225,441 | | Increase/deduction for change in fair value from prior year-end to vesting date of awards granted prior to year that vested during year | $8,010 | $(13,534) | $59,877 | $0 | $0 | | Deduction of fair value of awards granted prior to year that were forfeited during year | $0 | $0 | $0 | $0 | $0 | | Increase based upon incremental fair value of awards modified during year | $0 | $0 | $0 | $0 | $0 | | Increase based on dividends or other earnings paid during year prior to vesting date of award | $64,336 | $65,157 | $56,975 | $19,868 | $19,981 | | Total Adjustments | $(2,035,010) | $(187,922) | $(462,147) | $(1,018,607) | $529,007 |
Pay Versus Performance Disclosure
| Adjustments to Determine Compensation “Actually Paid” for Non-PEO NEOs | 2023 | 2022 | 2021 | 2020 | 2019 | | Deduction for amounts reported under the “Stock Awards” column in the SCT | $(262,951) | $(520,176) | $(445,224) | $(267,501) | $(196,932) | | Deduction for amounts reported under the “Option Awards” columns in the SCT | $0 | $0 | $0 | $0 | $0 | | Increase for fair value of awards granted during year that remain unvested as of year end | $172,663 | $433,954 | $280,727 | $152,678 | $263,651 | | Increase for fair value of awards granted during year that vest during year | $23,485 | $57,864 | $58,132 | $29,934 | $25,965 | | Increase/deduction for change in fair value from prior year-end to current year-end of awards granted prior to year that were outstanding and unvested as of year-end | $(334,006) | $(17,426) | $(38,913) | $(239,265) | $225,282 | | Increase/deduction for change in fair value from prior year-end to vesting date of awards granted prior to year that vested during year | $4,185 | $(6,204) | $29,330 | $(29,669) | $8,417 | | Deduction of fair value of awards granted prior to year that were forfeited during year | $0 | $0 | $0 | $0 | $0 | | Increase based upon incremental fair value of awards modified during year | $0 | $0 | $0 | $0 | $0 | | Increase based on dividends or other earnings paid during year prior to vesting date of award | $11,282 | $16,747 | $17,103 | $6,643 | $13,081 | | Total Adjustments | $(385,342) | $(35,241) | $(98,845) | $(347,180) | $339,464 |
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION In 2023, compensation for our non‑employee directors consisted of the following:
DIRECTOR COMPENSATION
| • | annual cash retainer fee for all outside directors of $75,000; |
DIRECTOR COMPENSATION
| • | additional retainer fee of $110,000 in the form of fully vested restricted stock units; |
DIRECTOR COMPENSATION
| • | additional cash retainer fee for our lead director of $25,000; |
DIRECTOR COMPENSATION
| • | additional cash retainer fee for our Audit Committee chairman of $15,000; |
DIRECTOR COMPENSATION
| • | additional cash retainer fee for our Compensation Committee chairman of $12,500; |
DIRECTOR COMPENSATION
| • | additional cash retainer fee for our Nominating and Corporate Governance Committee chairman of $10,000; and |
DIRECTOR COMPENSATION
| • | additional cash retainer fee for our chairman of the Board of $75,000. |
DIRECTOR COMPENSATION
We also reimburse all directors for out‑of‑pocket expenses incurred in connection with attendance at Board and committee meetings. The restricted stock units are granted annually at the first quarter Nominating and Corporate Governance Committee meeting of the year. The restricted stock units and the underlying shares are issued to our outside directors pursuant to our 2010 Stock Plan. The table below sets forth information regarding the compensation of our non-employee directors for 2023. Mr. McCormick received no additional compensation for his service as a director and he is therefore not included in the table.
DIRECTOR COMPENSATION
| Name | Fees Earned or Paid in Cash | Stock Awards(1) | Total | | James L. Janik | $150,000 | $110,431 | $260,431 | | James D. Staley(2) | $56,868 | - | $56,868 | | Donald Sturdivant | $92,891 | $110,431 | $203,323 | | Kenneth W. Krueger | $90,000 | $110,431 | $200,431 | | Margaret Dano | $85,000 | $110,431 | $195,431 | | Lisa Rojas Bacus | $80,391 | $110,431 | $190,823 | | Joher Akolawala | $76,427 | $110,431 | $186,858 |
DIRECTOR COMPENSATION
| (1) Reflects the grant date fair value of restricted stock unit awards as determined pursuant to ASC Topic 718. See Note 14 Stock‑Based Compensation, in the notes to the consolidated financial statements contained in our Annual Report on Form 10‑K for the year ended December 31, 2023. Each outside director received 2,820 restricted stock units. |
DIRECTOR COMPENSATION
| (2) Mr. Staley retired from the Board effective upon conclusion of the 2023 annual meeting of stockholders. |