DEF 14A of Vontier Corp
Filed Apr 15, 2024 · FY20230001552781-24-000233
Proposal 1. Election of Directors
Proposal 1. Election of Directors
Declassification of the Board
Declassification of the Board At the 2022 Annual Meeting of Stockholders, the stockholders approved a proposal from our Board to amend our Certificate of Incorporation to declassify the Board and to provide, starting with the 2023 Annual Meeting of Stockholders, for the election of directors to one-year terms. As a result, our Board will be declassified in the following manner:
Declassification of the Board
| | The directors elected at the Annual Meeting of Stockholders (and at each annual meeting thereafter) will serve one-year terms | | | Beginning with this Annual Meeting of Stockholders, a majority of the directors will be elected annually | | | Beginning with the 2025 Annual Meeting of Stockholders, the entire Board will be elected annually |
Election of Directors
Election of Directors At the Annual Meeting, stockholders will be asked to elect each of the director nominees identified below (each of whom has been recommended by the Nominating and Governance Committee and nominated by the Board) to serve a one-year term until the 2025 Annual Meeting of Stockholders and until his or her successor is duly elected and qualified. If you submit a proxy but do not indicate any voting instructions, the persons named as proxies will vote the shares of common stock represented by the proxy for the election as directors of the persons whose names and biographies appear below, each of whom is currently a director and each of whom has consented to be named in this Proxy Statement and to serve if elected. In the event that any nominee is unable to serve or for good cause will not serve as a director at the time of the meeting, it is intended that votes will be cast for a substitute nominee designated by the Board or the Board may elect to reduce its size. We do not expect that any nominee will be unable or will decline to serve as a director. If you are a beneficial owner of shares of Common Stock held in street name and you do not provide your broker with voting instructions, your broker may not vote your shares on the election of directors. Therefore, it is important that you vote. The name of and certain information regarding each director nominee is set forth below, together with information regarding our directors remaining in office. This information is based on data furnished to us by the nominees and directors. There is no family relationship between any director, executive officer or person nominated to become a director or executive officer. The business address for each nominee and director for matters regarding the Company is 5438 Wade Park Boulevard, Suite 600, Raleigh, North Carolina 27607. Our directors are comprised of current directors with diverse skills, background, and experience, which the Board believes contributes to the effective oversight of the Company. The average board tenure is three years.
Election of Directors
| Proposal 1. Election of Directors | | 11 |
Attributes, Skills, Qualification and Diversity of Directors
Attributes, Skills, Qualification and Diversity of Directors Our nine director nominees are comprised of current directors with diverse skills, background, and experience, which the Board believes contributes to the effective oversight of the Company. Our directors have diverse attributes, skills and qualifications, including breadth of experience in mergers & acquisitions, being a key executive driver of turnarounds, significant public board service, operational experience in large, global organizations and risk management experience. While our directors are strong across each of these dimensions, the following matrix highlights the top seven attributes, skills and qualifications of each director that is relevant to the Company and their service on the Board.
Attributes, Skills, Qualification and Diversity of Directors
| | Boyland | Eatroff | Francis | Foulkes | Gafinowitz | Klein | Miller | Morelli | Sylvester | | Mergers & Acquisitions | | • | | | • | • | • | • | | | Strategy Development/Portfolio Transformation | • | • | | • | • | • | | • | • | | Capital Allocator | | • | | | | • | • | | | | Public Board Experience | • | | • | | | • | • | | • | | Technology/Innovation | • | • | • | • | | | | | • | | Finance/Accounting/Investor Relations | | • | | | | • | • | | | | Global/International Experience or Exposure | • | • | | • | • | | | • | • | | Relevant Industry Knowledge | • | | • | | • | | | | | | Business System | | | | | • | | | • | | | Cybersecurity/Privacy Security/IT | | • | | | | | • | | | | Engineering/Product Development | | | | • | • | | | • | • | | Data Analytics | • | | | | | | • | | | | Executive Leadership | | | • | • | | • | • | • | • | | HR/Human Capital/Compensation & Benefits | | | • | • | • | • | | | | | Marketing/Sales/PR | | | • | | | | | | | | Operations/Project Delivery | • | | • | • | | | | • | • | | Diversity | Female Racially Diverse | | Female | | | | | Veteran | Female |
Attributes, Skills, Qualification and Diversity of Directors
| 12 | 2024 PROXY STATEMENT | Proposal 1. Election of Directors | |
Director Nominees—
Director Nominees—
For Terms Expiring at this Annual Meeting
| | | | | | | Karen C. Francis Director | | Gloria R. Boyland Director | | Director since: September 2020 | | Director since: October 2020 | | | Committees: Compensation and Management Development | | Committees: Audit, Nominating and Governance (Chair) | | | Karen C. Francis has served as a member of our Board of Directors since September 2020 and serves as Senior Advisor to TPG Capital and is an independent director for private equity and venture capital funded companies in Silicon Valley, including CelLink and Nauto. In 2021, Ms. Francis received her CERT Certificate in Cybersecurity Oversight from the National Association of Corporate Directors. Ms. Francis also serves on the Board of Directors of Polestar (NASDAQ: PSNY) and is a member of its Nominating & Governance Committee and Chair of the Compensation Committee. Ms. Francis served on the Board of Directors of Telenav, Inc. from December 2016 to November 2019 where she served as lead independent director, chair of the Compensation Committee and a member of the Nominating and Governance Committee, Reinvent Technology Partners Y from March 2021 to November 2021 and TuSimple Holdings, Inc. from December 2020 to November 2022. Ms. Francis served on the Board of Directors of Quanergy Systems, Inc. (NYSE: QNGY) from February 2022 to April 2023 and chaired the Nominating and Governance Committee. Prior to that, she served as a director of The Hanover Insurance Group, Inc. from May 2014 to May 2017 and AutoNation, Inc. from February 2016 to April 2018. In addition, Ms. Francis served as Chief Executive Officer of AcademixDirect, Inc., a technology innovator in education, from 2009 to 2014 and as its Executive Chairman from 2009 to 2017. From 2004 to 2007, Ms. Francis was Chairman and Chief Executive Officer of Publicis & Hal Riney, based in San Francisco and part of the Publicis global advertising and marketing network. From 2001 to 2002, she served as Vice President of Ford Motor Company, where she was responsible for the corporate venture capital group, as well as global e-business strategies, customer relationship management and worldwide export operations. From 1996 to 2000, Ms. Francis held several positions with General Motors, including serving as General Manager of the Oldsmobile Division. | | Gloria R. Boyland has served as a member of our Board of Directors since October 2020. Since January 2021, Ms. Boyland has served on the Board of Directors of United Natural Foods, Inc. (NYSE: UNFI) and is a member of the Compensation and Technology Innovation Committees. Since March 2023, Ms. Boyland has served on the board of Aurora Innovation, Inc. (NASDAQ: AUR) and is a member of the Audit and Nominating and Corporate Governance Committees. Prior to that, Ms. Boyland was Corporate Vice President of Operations & Service Support, responsible for leadership of operational cost reduction and process improvement initiatives, operations technology innovation, service quality improvement, customer experience, and new service offerings, at FedEx Corporation (NYSE: FDX), a $50 billion global transportation service provider, until her retirement in January 2020. Ms. Boyland joined FedEx Corporation in 2004 and was Staff Vice President, Service Experience Leadership from 2004-2015. Prior to joining FedEx, she held a broad variety of positions with increasing responsibility, including Customer Experience Management, Quality Management Systems, Business Development, Acquisition Integration, and general management. Ms. Boyland served as a member of the Audit and Nominating and Governance Committees of the Board of Directors of Chesapeake Energy Corporation (NYSE: CHK) from December 2016 to January 2021. Ms. Boyland received a FedEx Corporate Five Star Award for the transformation of its Service Quality Index, which internally measures critical experience touchpoints that drive FedEx customer loyalty. Ms. Boyland currently sits on the board of the Memphis Brooks Museum and is a sponsor for Teach For America. | | | Ms. Francis brings to our board her experience as a Chief Executive Officer, director, strategic advisor and investor with a deep knowledge of corporate governance and a strong track record of building businesses in the technology and transportation sectors. | | Ms. Boyland brings to our Board significant experience leading operational and logistical transformation at global companies. In addition, through her leadership role with a large, global company in the transportation industry, she has insight into the business practices, including future-focused logistics and supply chain knowledge, that are critical to the success of Vontier. | |
For Terms Expiring at this Annual Meeting
| | | | | | | Maryrose Sylvester Director | | David M. Foulkes Director | | Director since: March 2021 | | Director since: March 2023 | | | Committees: Audit, Nominating and Governance | | Committees: Compensation and Management Development | | | Ms. Sylvester has served as a member of our Board of Directors since March 2021. Since 2016, Ms. Sylvester has served on the board of Harley-Davidson, Inc. (NYSE: HOG) and is chair of its Human Resources Committee and serves as a member of its Nominating and Corporate Governance and Sustainability and Safety Committees. Since March 2021, Ms. Sylvester has served on the board of Waste Management, Inc. (NYSE: WM) and is a member of its Management Development and Compensation and Nominating and Governance Committees. Since September 2022, Ms. Sylvester has served on the board of Flex (NASDAQ: FLEX) and is a member of Flex’s Compensation and People Committee. From June 2019 to August 2020, Ms. Sylvester was the U.S. Managing Director and U.S. Head of Electrification of ABB Group, a global technology company, operating mainly in areas of electrification, robotics, power, and automation. Prior to joining ABB Group, Ms. Sylvester spent more than 30 years at General Electric, where she held a number of leadership roles, including serving as President and Chief Executive Officer of each of GE Lighting, GE Intelligent Platforms, which focused on automation, and GE Current, a digital power service business that delivers integrated energy systems. | | David M. Foulkes has served as a member of our Board of Directors since March 2023. Mr. Foulkes has served as Chief Executive Officer and director for Brunswick Corporation (“Brunswick”) (NYSE: BC) since January 2019. Prior to his role as CEO, Mr. Foulkes served as Brunswick’s Chief Technology Officer and President, Brunswick Marine Consumer Solutions. Mr. Foulkes joined Brunswick in 2007 and for ten years was the head of product development at Mercury Marine. Since 2012, Mr. Foulkes also has had responsibility for Mercury Racing. Prior to joining Brunswick, Mr. Foulkes spent 18 years with Ford Motor Company in a series of assignments of progressing responsibilities. | | | Ms. Sylvester brings to our Board significant experience transforming industrial businesses that is consistent with our ongoing portfolio transformation. Ms. Sylvester also brings extensive knowledge regarding marketing at an international company as well as in engineering product development in areas like energy storage and EV charging, both of which are instrumental to help guide our businesses. | | Mr. Foulkes brings to our Board extensive experience in technology and innovation and a deep understanding of global operations and manufacturing. | |
For Terms Expiring at this Annual Meeting
| | | | | | | Christopher J. Klein Director | | Mark D. Morelli Chief Executive Officer and Director | | Director since: December 2020 | | Director since: October 2020 | | | Committees: Compensation and Management Development (Chair), Nominating and Governance | | Committees: None | | | Christopher J. Klein has served as a member of our Board of Directors since December 2020 and as a member of the Board of Directors of Thor Industries (NYSE: THO) since December 2017 and is a member of its Nominating and Compensation and Developments Committees. Mr. Klein has also served as a member of the Board of Directors of W.W. Grainger, Inc. (NYSE: GWW) since December 2023. Mr. Klein served as the Executive Chairman of the Board of Directors of Fortune Brands Home & Security, Inc., a leading manufacturer of home and security products until December 2020, having retired as Chief Executive Officer in January 2020. He joined Fortune Brands, Inc. in 2003 and held corporate strategy, business development and operational positions, and served in the role of Chief Executive Officer of Fortune Brands Home & Security from 2010 to January 2020, taking the company public in a spin-off in 2011. Prior to joining Fortune Brands, Inc., Mr. Klein held key strategy and operating positions at Bank One Corporation. Previously, he was a partner at McKinsey & Company, a global management consulting firm where he spent eight years in the firm’s Chicago office. Mr. Klein spent his early career in commercial banking, at both ABN/AMRO and First Chicago. | | Mark D. Morelli has served as our President and Chief Executive Officer since January 2020. Mr. Morelli has served as a member of the Board of Directors of Xylem Inc. (NYSE: XYL) since February 2022. He also serves as chair of Xylem’s Leadership Development and Compensation Committee and is a member of the Audit Committee. Mr. Morelli previously served as President and Chief Executive Officer of Columbus McKinnon Corporation from February 2017 to January 2020 and prior to that served as President and Chief Operating Officer of Brooks Automation, Inc. from January 2012 to March 2016. Prior to serving at Brooks Automation, Inc., Mr. Morelli was the Chief Executive Officer of Energy Conversion Devices, an alternative energy company (which voluntarily filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code within one year after the date on which Mr. Morelli ceased to serve as its Chief Executive Officer). Prior to that, Mr. Morelli served in various positions with United Technologies Corporation from June 1993 to September 2007, where he progressed through product management, marketing, strategy and increasing responsibilities of general management. Mr. Morelli began his career as a U.S. Army officer and helicopter pilot. | | | Mr. Klein brings to our Board extensive public company and operational leadership experience, including management experience as Chief Executive Officer of a public company as well as significant corporate strategy experience. | | Mr. Morelli brings to our Board a track record of driving improvements in innovation to accelerate long-term growth and has demonstrated a strategic ability to transform a company portfolio for long-term value generation, both of which are key to our success. Mr. Morelli also has experience building resilient and high-performing teams and cultures. | |
Class II Directors with Terms Expiring in 2025
Class II Directors with Terms Expiring in 2025
Class II Directors with Terms Expiring in 2025
| Name | Age | Position with Vontier | Director Since | | Robert L. Eatroff | 58 | Director | March 2021 | | Martin Gafinowitz | 65 | Director | October 2020 | | Andrew D. Miller | 63 | Director | October 2020 |
Class II Directors with Terms Expiring in 2025
| | | | | | | Robert L. Eatroff Director | | Martin Gafinowitz Director | | Director since: March 2021 | | Director since: October 2020 | | | Committees: Audit | | Committees: None | | | Robert L. Eatroff has served as a member of our Board of Directors since March 2021. As Executive Vice President of Global Corporate Development and Strategy for Comcast Corporation since January 2016, Mr. Eatroff manages Comcast NBCUniversal’s Corporate Development and leads its mergers and acquisitions (“M&A”) efforts and other strategic initiatives. Prior to joining Comcast, Mr. Eatroff spent more than 20 years at Morgan Stanley’s investment banking division, where he served as lead advisor on some of the firm’s largest and most high-profile M&A transactions and held many leadership positions, including Managing Director, Investment Banking Division and Head-Mergers and Acquisitions-Americas. | | Martin Gafinowitz has served as a member of our Board of Directors since September 2019. Mr. Gafinowitz has over 25 years of international and industry experience, most recently having global responsibility for Fortive Corporation’s transportation technologies and franchise distribution platforms as Senior Vice President of Fortive Corporation from July 2016 to October 2020. Prior to July 2016, Mr. Gafinowitz has a long history as a senior executive with Danaher Corporation (“Danaher”) and its operating companies. Mr. Gafinowitz served as Senior Vice President of Danaher from March 2014 to July 2016 after serving as Group Executive of Danaher from 2005 to March 2014. | | | Mr. Eatroff brings significant experience in capital allocation and M&A to the Board providing the Company valuable perspective on its capital allocation and M&A activities. | | Mr. Gafinowitz brings to our Board extensive prior M&A and operational experience in our businesses and long tenured mobility industry relationships, which enables him to provide deep insights about the past, present and future direction of the Company. | |
Class II Directors with Terms Expiring in 2025
| Proposal 1. Election of Directors | | 17 |
Class II Directors with Terms Expiring in 2025
| | | | | Andrew D. Miller Director | | Director since: October 2020 | | | Committees: Audit (Chair), Compensation and Management Development | | | Andrew D. Miller has served as a member of our Board of Directors since October 2020 and has served on the Board of Directors of iRobot Corporation (NASDAQ: IRBT) since September 2016. Mr. Miller was appointed to be iRobot’s Board Chair in January 2024 and has been a member of the Audit Committee since May 2022. Mr. Miller has also served as a member of the Audit Committee of the Board of Directors of Verint Systems Inc. (NASDAQ: VRNT), a global software and cloud provider of Actionable Intelligence solutions, since December 2019. Mr. Miller previously served as Executive Vice President and Chief Financial Officer of PTC, a provider of software technology platforms and solutions, from early 2015 until May 2019. At PTC, he was responsible for global finance, tax and treasury, investor relations, information technology, pricing, corporate real estate, and customer administration. From 2008 to 2015, Mr. Miller served as Chief Financial Officer of Cepheid, a high-growth molecular diagnostics company. While at Cepheid, he built world-class finance and information technology teams and a nationally recognized investor relations program. Mr. Miller has also served in financial leadership roles at Autodesk, MarketFirst Software, Cadence Design Systems, and Silicon Graphics. He is a former director of United Online. | | | Mr. Miller brings to our Board his extensive experience in financial leadership roles, significant experience in investor relations and background in software and information technology enabling him to provide valuable guidance on our strategic plan. | |
Class II Directors with Terms Expiring in 2025
| 18 | 2024 PROXY STATEMENT | Corporate Governance | |
Class II Directors with Terms Expiring in 2025
Corporate Governance
Compensation and Management Development Committee
| • | reviewing and making recommendations to the Board with respect to the form and amounts of director compensation; |
Policy
| Director Compensation | | 29 |
Summary of Director Compensation
Summary of Director Compensation Pursuant to our non-employee director compensation policy, each of our non-employee directors will receive the following compensation:
Summary of Director Compensation
| • | An annual retainer of $100,000, payable in cash and/or restricted stock units (“RSUs”) pursuant to an election made by each director in the prior year under the terms of our Non-Employee Directors’ Deferred Compensation Plan, as described more fully below (the “Election”). |
Summary of Director Compensation
| • | An annual equity award with a target award value of $175,000, comprised of RSUs. The RSUs will vest upon the earlier of (1) the first anniversary of the grant date, or (2) the date of, and immediately prior to, the next annual meeting of our stockholders following the grant date. The distribution of RSUs may be deferred under the terms of our Non-Employee Directors’ Deferred Compensation Plan. |
Summary of Director Compensation
| • | Reimbursement for out-of-pocket expenses, including travel expenses and expenses for education, related to the director’s service on the Board. |
Summary of Director Compensation
In addition to the foregoing amounts:
Summary of Director Compensation
| • | The Board chair will receive an annual retainer of $92,500, payable pursuant to the Election and an annual equity award with a target value of $92,500 (divided either equally between options and RSUs or comprised solely of RSUs, in each case, as described above for purposes of the annual equity award). |
Summary of Director Compensation
| • | The chair of the Audit Committee will receive an annual retainer of $25,000, the chair of the Compensation and Management Development Committee will receive an annual retainer of $20,000, the chair of the Nominating and Governance Committee will receive an annual retainer of $15,000 and the chair of the Capital Deployment Advisory Group will receive an annual retainer of $20,000, in each case, payable pursuant to the Election. |
Summary of Director Compensation
| • | Each non-chair member of the Audit Committee will receive an annual retainer of $15,000, each non-chair member of the Compensation and Management Development Committee will receive an annual retainer of $10,000, each non-chair member of the Nominating and Governance Committee will receive an annual retainer of $7,500, and each non-employee, non-chair member of the Capital Deployment Advisory Group will receive an annual retainer of $10,000, in each case, payable pursuant to the Election. |
Summary of Director Compensation
As described above, pursuant to our Non-Employee Directors’ Deferred Compensation Plan, each non-employee director may make an election during the prior year (subject to certain exceptions for newly appointed directors) to receive his or her annual retainer, including the base annual retainer payable to all non-employee directors, the additional annual retainer payable to the Board chair, and the additional annual retainers payable to the committee chairs and non-chair members, in the form of:
Summary of Director Compensation
| • | cash payable in four equal installments following each quarter of service; or |
Summary of Director Compensation
| • | RSUs with a target value equal to the annual retainer and granted concurrently with the annual equity award (as described above) that the directors may choose to defer distribution under the terms of the Non-Employee Directors’ Deferred Compensation Plan. |
Summary of Director Compensation
| 30 | 2024 PROXY STATEMENT | Director Compensation | |
Director Compensation Table
Director Compensation Table The table below summarizes the compensation earned or paid to the non-employee directors for the year ended December 31, 2023. Mr. Morelli is a member of the Board but does not receive any additional compensation for services provided as a director.
Director Compensation Table
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2) | Total ($) | | Gloria R. Boyland | 130,000 | 183,940 | 313,940 | | David Foulkes | 85,833 | 231,368 | 317,201 | | Karen C. Francis | 212,500 | 281,243 | 493,743 | | Robert L. Eatroff | — | 322,455 | 322,455 | | Martin Gafinowitz | 110,000 | 183,940 | 293,940 | | Christopher J. Klein | 137,500 | 183,940 | 321,440 | | Andrew D. Miller | 135,000 | 183,940 | 318,940 | | Maryrose Sylvester | 122,500 | 183,940 | 306,440 |
Director Compensation Table
| (1) The amounts reflected in this column represents the aggregate grant date fair value of the applicable award computed in accordance with Accounting Standards Codification Topic 718 (“ASC 718”). With respect to stock awards, generally the grant date fair value under ASC 718 is calculated based on the number of shares of our Common Stock underlying the award, multiplied by the closing price of a share of our Common Stock on the date of grant. |
Director Compensation Table
| (2) Pursuant to the Non-Employee Directors’ Deferred Compensation Plan, each of the directors was entitled to defer up to 100% of the annual retainer into RSUs with a target value equal to the amount of the annual retainer deferred. Ms. Boyland and Ms. Francis elected to defer their annual stock award and Mr. Eatroff elected to defer 100% of his cash fees and annual stock award. Since RSUs granted in 2023 for the annual retainer deferred are accounted for under ASC 718, they are reported under the “Stock Awards” column in the table above. All stock awards are outstanding as of December 31, 2023. |
Director Compensation Table
| Proposal 2. Ratification of Independent Registered Public Accounting Firm | | 31 |
Director Compensation Table
Proposal 2. Ratification of Independent Registered Public Accounting Firm The Audit Committee on behalf of the Company has selected Ernst & Young LLP, an international accounting firm of independent certified public accountants, to act as the independent registered public accounting firm for the Company and its consolidated subsidiaries for the year ending December 31, 2024. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions. Although stockholder approval of the selection of Ernst & Young LLP is not required, the Board believes that it is advisable to give our stockholders an opportunity to ratify this selection. If this proposal is not approved by our stockholders, the Audit Committee will reconsider its selection of Ernst & Young LLP. Even if the selection of Ernst & Young LLP is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.
2023 Executive Compensation Highlights
| • | Long-Term Incentive Compensation: Our Long-Term Incentive Plan (“LTIP”) awards are designed to align executive pay with long-term value creation for our stockholders. The 2023 annual LTIP awards for NEOs included 50% Performance Share Units (“PSUs”) earned based on a three-year EPS metric with a rTSR modifier relative to the S&P 500 and 50% time- based RSUs. The value of 2023 LTIP awards granted to the NEOs, as disclosed in the Summary Compensation Table, was set to generally align with market median and to reflect performance and long-term potential. |
2023 Executive Compensation Highlights
Additional details on LTIP awards are in the “2023 Compensation Decisions” section under “Long-Term Incentive Compensation”. At the end of 2023, the Compensation and Management Development Committee set out to design a program for the NEOs that would work in tandem with the Company’s current LTIP to: (i) drive the creation of long-term stockholder value, (ii) further strengthen the alignment of the NEOs’ interests with those of long-term stockholders, and (iii) encourage the retention of NEOs. Beginning in 2024, the Compensation and Management Development Committee decided to add a performance-based stock option program where annual stock options are granted on the same date on which the Company grants its annual LTIP awards to its NEOs if, and only if, the Company’s prior year’s performance on a particular financial metric is above established stretch targets. If not, no performance-based stock options are granted for that fiscal year. Initial targets were set in early 2024 for an opportunity of an option grant in early 2025. Once earned based on performance and to increase their retentive value, each grant of performance-based stock option vests 50%, 25% and 25% on the one-year, two-year and three-year anniversaries of the grant date, subject to the NEOs’ continued employment through such respective vesting date. Additional details of the performance-based stock option program, including 2024 metric and targets, will be included in Vontier’s 2025 proxy statement.
Elements of Executive Compensation
Elements of Executive Compensation Consistent with our executive compensation philosophy, we have adopted a compensation program that includes a mix of cash and equity-based compensation. While fixed compensation is important to provide a stable source of income, we believe that executive compensation should include a significant portion of variable and at-risk compensation with a strong emphasis on the long-term incentives directly linked to shareholder value in the form of equity awards. The following table sets forth the principal elements of our compensation program:
Elements of Executive Compensation
| Element | Form of Compensation | Primary Objectives | | Base Salary | • Cash | • Help attract and retain top talent • Provide stable source of income • Recognize day-to-day role and scope of responsibility | | Annual Incentive Compensation | • Cash | • Reward annual performance on key operational and financial measures • Motivate and reward high individual performance | | Long-Term Incentive Compensation | • RSUs • PSUs • Stock Options | • Drive sustainable performance that delivers long-term value to our stockholders • Help retain executive talent through multi-year vesting schedules • Align the interest of the executive with those of our stockholders | | Other Compensation | • Employee Benefit Plans • Severance Benefits | • Provide competitive compensation at an actual cost to Vontier lower than the perceived value to the executives |
2023 Executive Compensation Decision Making
| Compensation and Management Development Committee | • Review and approve goals and objectives with respect to the compensation of, and any employment agreement, severance agreement, change in control agreement, and other compensatory agreements or plans for, the CEO and the other executive officers • Annually evaluate the performance of the CEO and the other executive officers in light of these goals and objectives and such other factors as the Compensation and Management Development Committee deems appropriate • Determine and approve the compensation for the CEO and the other executive officers • Oversee the leadership development and succession plans for senior leadership; review the talent management programs and human capital initiatives for the Company | | Board of Directors and Management | • The Compensation and Management Development Committee consults the Board of Directors, the CEO, and other members of management as the Compensation and Management Development Committee evaluates performance of, and establishes the compensation programs and policies for, our executive officers | | Independent Compensation Consultant to the Compensation and Management Development Committee | • Provides independent advice, research and analysis on topics such as the compensation of our NEOs and non-employee directors, executive compensation trends and companies that may be utilized for comparative purposes • Participate in meetings of the Compensation and Management Development Committee and communicates with the Chair of the Compensation and Management Development Committee between its meetings |
Competitive Market Data
Competitive Market Data An important element of our overall compensation philosophy is to deliver a total pay opportunity that is competitive in the market. As a result, the Compensation and Management Development Committee will consider the executive compensation practices of companies in a peer group that was selected in consultation with Pearl Meyer, as one of several factors used in setting executive compensation. The Compensation and Management Development Committee does not target a specific percentile range within the peer group when determining the compensation of our NEOs. Instead, the Compensation and Management Development Committee uses the publicly filed data provided by the peer group as one reference point that is useful for determining the form and amount of compensation. The Compensation and Management Development Committee does not rely solely on peer group pay practices. The Compensation and Management Development Committee considers competitive data from relevant, published compensation surveys and custom research as other sources of competitive data.
Competitive Market Data
| Compensation Discussion and Analysis | | 39 |
Competitive Market Data
The Compensation and Management Development Committee will review the peer group each year with the assistance of its independent compensation consultant. In deciding whether a company should be included in the peer group, the Compensation and Management Development Committee considered, among other factors, the business model, end market exposure, product type and revenue size of companies considered for the peer group. In August 2022, the Compensation and Management Development Committee reviewed potential peer companies with an industrial and information technology focus. The Compensation and Management Development Committee, after consulting with Pearl Meyer and management, removed Colfax and FLIR due to the companies being acquired and approved the 2023 peer group consisting of the following companies:
Competitive Market Data
| Altra Industrial Motion Corp.(1) | Dover Corporation | Lincoln Electric Holdings, Inc. | | AMETEK, Inc. | Franklin Electric Co., Inc. | Rockwell Automation | | Carlisle Companies Incorporated | IDEX Corporation | Snap-on Incorporated | | Crane Co. | Ingersoll Rand Inc. | Trimble Inc. | | Donaldson Company, Inc. | ITT Inc. | Zurn Water Solutions Corporation |
Competitive Market Data
(1)Altra Industrial Motion Corp was acquired by Regal Rexnord in 2023.
Annual Incentive Compensation
Annual Incentive Compensation In order to align our executive compensation program with our business strategy, reward annual performance by our executive officers based on the achievement of key operational and financial measures, and motivate and reward high individual performance, we provide annual cash bonuses to executives based on the achievement of annual performance measures relating to our business and the executive’s personal performance. Final award payouts cannot exceed 200% of target award opportunities.
Annual Incentive Compensation
| 40 | 2024 PROXY STATEMENT | Compensation Discussion and Analysis | |
Annual Incentive Compensation
During fiscal year 2023, target annual incentive opportunities were as follows:
Annual Incentive Compensation
| NEO | Target Annual Incentive Compensation | | Mark D. Morelli | 150% | | Anshooman Aga | 100% | | Kathryn K. Rowen | 70% |
Determination of the Actual 2023 Annual Incentive Award Payout
Determination of the Actual 2023 Annual Incentive Award Payout We provide annual incentives to our NEOs under our Incentive Compensation Plan (“ICP”). The ICP provides cash bonuses to executives based on the achievement of annual performance metrics relating to our business and may be modified based on an executive’s personal performance. In 2023, the target bonus opportunity for each NEO was equal to the NEO’s annual base salary as of December 31, 2023 multiplied by the relevant target award percentage(s) applicable set forth above. The 2023 actual bonus was equal to target bonus percentage(s) multiplied by a Company Financial Factor (“CFF”) as well as a Personal Performance Factor (“PPF”), described in more detail below. The CFF for the corporate NEOs was 0-200% of target. The 2023 CFF for the NEOs was based on the combined performance of Vontier's operating companies against the following metrics:
Determination of the Actual 2023 Annual Incentive Award Payout
| Metric | Weight | | Adjusted Operating Profit(1) | 50% | | Core Sales Growth(2) | 30% | | Adjusted Free Cash Flow (“FCF”) Conversion(3) | 20% |
Determination of the Actual 2023 Annual Incentive Award Payout
| (1) Adjusted for non-normal operational items as per our public disclosures. |
Determination of the Actual 2023 Annual Incentive Award Payout
| (2) The change in sales excluding (i) sales from acquired and certain divested businesses; (ii)the impact of currency translation; and (iii) certain other items (when applicable). |
Determination of the Actual 2023 Annual Incentive Award Payout
| (3) Free Cash Flow adjusted for non-normal operational items as per our public disclosures, divided by Adjusted Net Earnings, which is net earnings adjusted for non-normal operational items as per our public disclosures. |
Determination of the Actual 2023 Annual Incentive Award Payout
Core sales growth is a critical measure of the business’s ability to increase customer demand for services and products over time, while adjusted operating profit and adjusted FCF conversion are key contributors to stockholder returns and important barometers of the overall health of the business. In 2023, the achievement of the financial measures described above gave rise to a CFF for these executives of 130% of target for the NEOs. We do not disclose the specific targets for our operating companies’ performance metrics as they are highly confidential and would provide competitors and third parties with insight into the Company’s internal planning processes that may allow them to predict our financial and/or operational strategies of our operating companies resulting in potential competitive harm. The performance metrics of adjusted operating profit, core sales growth, and adjusted free cash flow conversion were based on a range of factors, including growth outlooks for our respective product portfolios, the competitive environment, our internal budgets, external market economic conditions and market expectations. For example, growth rates implicit in targets for any one operating company may be above or below the growth rates targeted for the entire Company, due to faster or slower growth in relevant markets or smaller or larger market shares. These considerations result in operating company targets that are intended to coincide with Company-wide targets in their level of difficulty to achieve and probability for success. The performance targets are set at levels that we believe are challenging and which generally constitute an improvement over the prior comparable period, in line with our culture of continuous improvement.
Determination of the Actual 2023 Annual Incentive Award Payout
| Compensation Discussion and Analysis | | 41 |
Personal Performance Factor & Individual Payouts
Personal Performance Factor & Individual Payouts Following the end of 2023, the Compensation and Management Development Committee used its judgment and determined for each executive a PPF rating between 0 – 150% for each NEO. Without assigning any particular weight to any individual factor, the Compensation and Management Development Committee took into account financial performance, the executive’s execution against operational and personal goals for the year and overall leadership effectiveness. Our Compensation and Management Development Committee has discretion in determining the PPF of each executive officer, which is an important risk-mitigating element to our compensation program.
Personal Performance Factor & Individual Payouts
| Name | Annual Base Salary ($) | Target Annual Incentive Compensation (% of Base Salary) | Target Annual Incentive Compensation ($) | Target Annual Incentive Compensation Multiplied by CFF | Total Incentive Compensation Payout(1) | | Mark D. Morelli | $1,080,000 | 150% | $1,620,000 | $2,106,000 | $2,106,000 | | Anshooman Aga | $625,000 | 100% | $625,000 | $812,500 | $812,500 | | Kathryn K. Rowen | $572,500 | 70% | $400,750 | $520,975 | $520,975 |
Personal Performance Factor & Individual Payouts
| (1) The PPF for each executive officer was 1.0, which did not result in an adjustment to the incentive compensation payout up or down. |
Long-Term Incentive Compensation
Long-Term Incentive Compensation Our long-term incentive compensation program is designed to drive sustainable performance that delivers long-term value to stockholders, help retain executive talent through multi-year vesting schedules and align the interest of the NEOs with those of Vontier’s stockholders. The 2023 annual LTIP awards for NEO’s were comprised of 50% PSUs and 50% RSUs. PSUs are earned based on a three-year EPS metric which may be modified ±15% based on TSR relative to the S&P 500 companies over a three- year period.
Long-Term Incentive Compensation
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Long-Term Incentive Compensation
The table below shows the target annual long-term incentive award values granted for fiscal year 2023 for each of the NEOs:
Long-Term Incentive Compensation
| Name | PSUs (at Target) | RSUs | Total Value* | | Mark D. Morelli | $2,675,000 | $2,675,000 | $5,350,000 | | Anshooman Aga | $750,000 | $750,000 | $1,500,000 | | Kathryn K. Rowen | $500,000 | $500,000 | $1,000,000 |
Long-Term Incentive Compensation
* Award amounts for PSUs and RSUs were determined based on the twenty-day average closing price leading up to and including the date of grant on February 28, 2023, which was $24.47.
PSUs Earned and Vested in 2023
PSUs Earned and Vested in 2023 In January 2024, the Compensation & Management Development Committee determined payouts for the 2020 and 2021 PSU awards granted to Mr. Morelli and Ms. Rowen. The 2020 grant was in recognition of the spin-off from Fortive, and the 2021 grant was part of their regular, annual long-term incentive compensation. These PSU payouts were determined entirely by rTSR performance over the corresponding three-year performance period relative to a comparator group. For these awards, if Vontier’s TSR was negative over the three-year performance period, but performance met or exceeded the threshold, awards would be capped at 100% of target regardless of performance versus the comparator group. If Vontier’s TSR over the three-year performance period was positive, NEOs had the ability to earn a payout of 25% of target, regardless of performance versus the comparator group (Vontier eliminated this feature of the plan design starting with grants in 2022). For the 2020 grant, our TSR for the 2021-2023 performance period was at the 13th percentile. As a result, the NEOs earned 25% of their target PSUs based on performance as shown below.
PSUs Earned and Vested in 2023
| Year | Performance Metric | Performance Level | Payout | Actual Result | Actual Payout | | 2020 | rTSR vs 2021 Comp Peer Group | >= 80th percentile 50th percentile 25th percentile <25th percentile | 200% 100% 50% 0% | 13th Percentile | 25.00% |
PSUs Earned and Vested in 2023
For the 2021 grant, our TSR for the 2021-2023 performance period was at the 30th percentile. As a result, the NEOs earned 60.29% of their target PSUs based on performance as shown below.
PSUs Earned and Vested in 2023
| Year | Performance Metric | Performance Level | Payout | Actual Result | Actual Payout | | 2021 | rTSR vs S&P 500 Peer Group | >= 80th percentile 50th percentile 25th percentile <25th percentile | 200% 100% 50% 0% | 30th Percentile | 60.29% |
PSUs Earned and Vested in 2023
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Recoupment Policy
| • | The portion of any incentive compensation with financial performance measures (including cash and equity) received by any covered person within the three-year period prior to the date such material restatement is first publicly disclosed that would not have been awarded had the consolidated financial statements that are the subject of such restatement been correctly stated. In addition, our Board has the right to require reimbursement of the entire amount of any such incentive compensation payment or equity grant from any covered person whose fraud or other intentional misconduct in our Board’s judgment alone or with others caused such restatement; and |
Recoupment Policy
| • | all gains from other equity awards realized by any covered person during the twelve-month period immediately following the original filing of the consolidated financial statements that are the subject of such restatement. |
Recoupment Policy
In addition, aside from our Policy, above, under the terms of our 2020 Stock Incentive Plan, all outstanding unvested equity awards will be terminated immediately upon, and no employee can exercise any outstanding equity award after, such time he or she is terminated for gross misconduct. Under the terms of the Vontier EDIP, if the administrator determines that termination of an employee’s participation in the Vontier EDIP resulted from the employee’s gross misconduct, the administrator may determine that the employee’s vesting percentage is zero with respect to all balances that were contributed by Vontier.
Executive Officer Letter Agreements
| Name And Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($)(2) | Total ($) | | Mark D. Morelli, President and Chief Executive Officer | 2023 | 1,072,500 | — | 5,953,567 | — | 2,106,000 | 192,856 | 9,324,923 | | | 2022 | 1,037,500 | — | 4,197,627 | — | 945,000 | 178,300 | 6,358,427 | | | 2021 | 1,003,846 | — | 4,496,611 | — | 2,925,000 | 261,437 | 8,686,894 | | Anshooman Aga, Senior Vice President, Chief Financial Officer | 2023 | 625,000 | — | 1,669,199 | — | 812,500 | 290,537 | 3,397,236 | | | 2022 | 216,346 | 600,000 | 1,596,141 | — | 128,425 | 319,716 | 2,860,628 | | Kathryn K. Rowen, Senior Vice President, Chief Administrative Officer | 2023 | 561,875 | — | 1,112,890 | — | 520,975 | 87,016 | 2,282,756 | | | 2022 | 532,250 | — | 893,283 | — | 222,600 | 85,486 | 1,733,619 | | | 2021 | 472,500 | — | 1,672,105 | — | 604,598 | 156,633 | 2,905,836 |
Executive Officer Letter Agreements
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Executive Officer Letter Agreements
| | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | Year | Summary Compensation Table Total for PEO(1) | Compensation Actually Paid to PEO(1)(2) | Average Summary Compensation Table Total for Non-PEO NEOs(1) | Average Compensation Actually Paid to Non-PEO NEOs(1)(3) | TSR(4) | Peer Group TSR(5) | Net Income ($MM)(6) | Adjusted Operating Profit ($MM)(7) | | 2023 | $9,324,923 | $18,677,596 | $2,839,996 | $4,172,979 | $104.16 | $149.82 | $376.9 | $664.3 | | 2022 | $6,358,427 | ($110,112) | $2,300,506 | $408,028 | $58.08 | $126.82 | $401.3 | $716.2 | | 2021 | $8,686,894 | $5,819,382 | $2,599,946 | $1,802,544 | $91.94 | $134.17 | $413.0 | $684.8 | | 2020 | $19,603,296 | $10,693,129 | $4,262,389 | $2,431,212 | $99.70 | $110.78 | $342.0 | $579.0 |
Executive Officer Letter Agreements
| (2) The dollar amounts reported in this column represent the amount of “compensation actually paid” to Mr. Morelli, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Mr. Morelli during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Morelli’s total compensation for each year to determine the compensation actually paid: |
Executive Officer Letter Agreements
| Year | Summary Compensation Table Total for PEO | Exclusion of Stock Awards and Option Awards(a) | Inclusion of Equity Values(b) | Compensation Actually Paid to PEO | | 2023 | $9,324,923 | $5,953,567 | $15,306,240 | $18,677,596 | | 2022 | $6,358,427 | $4,197,627 | ($2,270,912) | ($110,112) | | 2021 | $8,686,894 | $4,496,611 | $1,629,099 | $5,819,382 | | 2020 | $19,603,296 | $13,025,513 | $4,115,346 | $10,693,129 |
Executive Officer Letter Agreements
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Executive Officer Letter Agreements
| (3) The dollar amounts reported represent the average amount of “compensation actually paid” to the NEOs as a group (excluding Mr. Morelli), as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the NEOs as a group (excluding Mr. Morelli) during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation for the NEOs as a group (excluding Mr. Morelli) for each year to determine the average compensation actually paid, using the same methodology described above in Note 2: |
Executive Officer Letter Agreements
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Executive Officer Letter Agreements
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