DEF 14A of Borgwarner Inc
Filed Mar 19, 2025 · FY20240001558370-25-003243
A Resilient Portfolio That We Believe is Well Positioned for Growth
A Resilient Portfolio That We Believe is Well Positioned for Growth While the automotive industry continues to see volatility, which varies by region, we believe our broad product portfolio of electric, hybrid, and combustion vehicle technology is well positioned for profitable growth. Our product portfolio is a result of our long-term investment strategy, which includes taking a disciplined approach to our mergers, acquisitions, and divestitures activity and pursuing opportunities that fit from a strategic and financial perspective.
A Resilient Portfolio That We Believe is Well Positioned for Growth
| Foundational | | | COMBUSTION | HYBRID | ELECTRIC | | | | Turbos | | | | | | | AWD/4WD | | | | | | | Intake & EGRs | | | | | | | ECUs | | | | | | | Engine Timing | | | | | | | Transmission Products | | | | | eProducts | | Inverters | | | | | | | Other Power Electronics | | | | | | | Thermal Management | | | | | | | EV Gearboxes | | | | | | | Electric Drive Motors | | | | | | | Battery Systems | | | |
A Resilient Portfolio That We Believe is Well Positioned for Growth
| | Denotes Foundational Products* | | Denotes eProducts* |
A Resilient Portfolio That We Believe is Well Positioned for Growth
*Foundational Products include products used on internal combustion engines plus those products and components that are also included in hybrid powertrains. eProducts are products utilized on electric vehicles (“EVs”) plus those products that are included in hybrid powertrains whose underlying technologies are adaptable or applicable to those used in or for EVs. Dear Fellow Stockholder:
A Resilient Portfolio That We Believe is Well Positioned for Growth
| | | | | | Date Wednesday, April 30, 2025 | Time 9:00 a.m., local time | Place 3850 Hamlin Road Auburn Hills, Michigan 48326 | Record Date March 3, 2025 |
A Resilient Portfolio That We Believe is Well Positioned for Growth
On behalf of the Board of Directors (“Board”) and the management of BorgWarner, we invite you to attend the 2025 Annual Meeting of Stockholders (the “Annual Meeting”) at our world headquarters located at 3850 Hamlin Road, Auburn Hills, Michigan 48326, on Wednesday, April 30, 2025, at 9:00 a.m., local time, for the following purposes:
A Resilient Portfolio That We Believe is Well Positioned for Growth
| Proposals to be Voted: | | Recommendation | | ❶ | Elect eight directors to serve for the next year See page 13 | FOR the Board’s nominees | | ❷ | Approve, on an advisory basis, the compensation of our named executive officers See page 29 | FOR | | ❸ | Ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company for 2025 See page 73 | FOR | | ❹ | Vote on a stockholder proposal to remove the one-year holding requirement to call a special meeting of stockholders See page 76 | VOTE AGAINST |
A Resilient Portfolio That We Believe is Well Positioned for Growth
Your Vote is Important! You can submit your vote by:
A Resilient Portfolio That We Believe is Well Positioned for Growth
| | -800-690-6903 and follow the instructions. | | | Telephone Call us free of charge at 1-800-690-6903 and follow the instructions. | | | Internet Access the internet, go to www.proxyvote.com, and follow the instructions. | | | Mail Vote by mail by requesting a paper copy of the materials, which will include a proxy card. See page 78 for instructions on how to receive a paper copy of our proxy materials. | | | In Person If you attend the meeting, you may vote in person if you wish to do so, even if you have previously submitted your proxy. |
A Resilient Portfolio That We Believe is Well Positioned for Growth
Only stockholders of record at the close of business on March 3, 2025, are entitled to vote at the Annual Meeting or any adjournment or postponement thereof. Please read the attached proxy statement carefully as it describes in greater detail the matters to be acted upon and your voting rights with respect to those matters. The proxy card delivered to stockholders is solicited by the Board. Along with the attached proxy statement, we are providing you with a copy of our Annual Report on Form 10-K for our fiscal year ended December 31, 2024. Stockholders should not regard our Annual Report on Form 10-K, which includes our audited financial statements, as proxy solicitation material. By Order of the Board, Tonit M. Calaway Executive Vice President, Chief Administrative Officer, General Counsel and Secretary March 19, 2025 Auburn Hills, Michigan
A Resilient Portfolio That We Believe is Well Positioned for Growth
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
A Resilient Portfolio That We Believe is Well Positioned for Growth
This summary of ballot items provides information that you should consider before voting on the proposals presented at this year’s Annual Meeting. This summary does not contain all the information that you should consider, and you should read the entire Proxy Statement carefully before voting. Director Nominee Demographics It is a top priority of our Board and Corporate Governance Committee that our directors possess the expertise, knowledge, and qualifications necessary to effectively represent the long-term interests of the Company and our stockholders. The Corporate Governance Committee regularly reviews and updates, as needed, the skills and attributes (see page 21) that they believe are needed to guide the Company. We also focus on-board refreshment because we believe that fresh perspectives of newer directors blended with the institutional knowledge of longer-tenured directors is crucial for innovation. Since 2020, we have added five new directors to our Board.
A Resilient Portfolio That We Believe is Well Positioned for Growth
| Director Nominee Tenure | Director Nominee Gender and Racial/Ethnic Diversity | | | | | Director Nominee Independence | Director Nominee Age | | | |
A Resilient Portfolio That We Believe is Well Positioned for Growth
| 2025 Proxy Statement | | 1 |
A Resilient Portfolio That We Believe is Well Positioned for Growth
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
A Resilient Portfolio That We Believe is Well Positioned for Growth
| Proposal 1 To Elect Eight Directors to the Board of Directors | Our Board recommends that you vote “FOR” the Board’s nominees. | |
A Resilient Portfolio That We Believe is Well Positioned for Growth
| | Joseph F. Fadool President and Chief Executive Officer, BorgWarner Inc. | | Sara A. Greenstein President and Chief Executive Officer, Axel Johnson Inc. | | Michael S. Hanley Retired Global Automotive Leader, Ernst & Young LLP | | Non-Independent Age: 58 Director since: 2025 Other current public company directorships: ● None Committees: None Skills: | | Independent Age: 50 Director since: 2021 Other current public company directorships: ● None Committees: CC, CGC* Skills: | | Independent Age: 69 Director since: 2016 Other current public company directorships: ● None Committees: AC*, EC Skills: | | | | | | | | | | | Shaun E. McAlmont Former President and Chief Executive Officer, Ninjio, LLC | | Deborah D. McWhinney Retired Chief Executive Officer of Global Enterprise Payments, Citigroup Inc. | | Alexis P. Michas Non-Executive Chair of the Board, BorgWarner Inc.; Managing Partner, Juniper Investment Company, LLC | | Independent Age: 59 Director since: 2020 Other current public company directorships: ● Lee Enterprises, Inc. Committees: CC, CGC Skills: | | Independent Age: 69 Director since: 2018 Other current public company directorships: ● Franklin Templeton ETF Trust Committees: AC, CC* Skills: | | Independent Age: 67 Director since: 1993 Other current public company directorships: ● AstroNova, Inc., Revvity, Inc. Committees: EC* Skills: | | | | | | | | | | | Sailaja K. Shankar Senior Vice President, Engineering of the Security Business Group, Cisco Systems, Inc. | | Hau N. Thai-Tang Retired Chief Industrial Platform Officer, Ford Motor Company | Committees: AC = Audit CC = Compensation CGC = Corporate Governance EC = Executive *Chair Grey Background = Non-Independent Green Background = Independent | | | Independent Age: 58 Director since: 2022 Other current public company directorships: ● None Committees: AC, CC Skills: | | Independent Age: 58 Director since: 2023 Other current public company directorships: ● None Committees: AC, CGC Skills: | | | | | | | | | | |
A Resilient Portfolio That We Believe is Well Positioned for Growth
| Skills and Experience Key: | | | | | | | | | | Notable Auto Industry Experience | | Experience as Chair/CEO of Multi-National Business | | Background Contributes to Desired Diversity | | Legal/Governance Experience | | | Non-U.S. Origin | | Product or Clean Technology/ Electronics Expertise | | Non-Automotive Technology Expertise | | Manufacturing Experience | | | Meets SEC Definition of “Audit Committee Financial Expert” | | Environmental/Sustainability Experience | | Cybersecurity/Risk Management Expertise | | |
A Resilient Portfolio That We Believe is Well Positioned for Growth
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
Information on Nominees for Directors
Information on Nominees for Directors The following pages set forth as of March 3, 2025, each of the director nominees’ names, the year in which he or she first became a director of the Company, their age, principal occupation, and his or her current directorships in other entities. The pages also include a narrative description of the director nominee’s experience, qualifications, attributes, and skills, as well as all directorships at public companies and registered investment companies held since March 3, 2020. Each of the nominees for election has agreed to serve, if elected. All nominees are currently directors of the Company. If any nominee should become unavailable for election, our Board may designate a substitute nominee, in which event the shares represented by proxies at the meeting will be voted for such substitute nominee, unless an instruction to the contrary is indicated on the proxy card.
Information on Nominees for Directors
| | Our Board recommends a vote “FOR” the election of each of the nominees for director: Joseph F. Fadool; Sara A. Greenstein; Michael S. Hanley; Shaun E. McAlmont; Deborah D. McWhinney; Alexis P. Michas; Sailaja K. Shankar; and Hau N. Thai-Tang. |
Information on Nominees for Directors
| 2025 Proxy Statement | | 13 |
Information on Nominees for Directors
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
Directors and Nominees
Directors and Nominees
Directors and Nominees
| Joseph F. Fadool President and Chief Executive Officer, BorgWarner Inc. Age: 58 Director Since: 2025 BorgWarner Committees: None Other Current Public Company Directorships: None | Principal Occupation, Directorships, and Education Mr. Fadool has served as the President and Chief Executive Officer of the Company since February 2025. Prior to this role, he was Executive Vice President and Chief Operating Officer from July 2024 to February 2025. From October 2019 to June 2024, he was Vice President of the Company and President and General Manager of BorgWarner Emissions Systems LLC, BorgWarner Thermal Systems Inc., and BorgWarner Turbo Systems LLC. He was Vice President of the Company and President and General Manager of BorgWarner Turbo Systems LLC from May 2019 to October 2019. He was Vice President of the Company and President and General Manager of BorgWarner Emissions Systems LLC and BorgWarner Thermal Systems Inc. from January 2017 to May 2019. He was Vice President of the Company and President and General Manager of BorgWarner Ithaca LLC (d/b/a BorgWarner Morse Systems) from July 2015 until December 2016. From May 2012 to July 2015, he was the Vice President of the Company and President and General Manager of BorgWarner Morse TEC Inc. Mr. Fadool holds a Bachelor of Science in electrical engineering from Lawrence Technological University and earned a Master of Science in computer and electronic controls from Wayne State University. | | | Key Attributes, Skills, and Experience Mr. Fadool brings to the Board his deep understanding of the automotive industry and an intimate knowledge of the Company’s product portfolio, operations, and culture. | | Sara A. Greenstein President and Chief Executive Officer, Axel Johnson Inc. Age: 50 Director Since: 2021 BorgWarner Committees: Compensation, Corporate Governance (Chair) Other Current Public Company Directorships: None | Principal Occupation, Directorships, and Education Ms. Greenstein has served as the President and Chief Executive Officer of Axel Johnson Inc. (“Axel Johnson”), a privately held investment company that invests in global manufacturing and service businesses, since June 2022. Prior to Axel Johnson, she was the President, Chief Executive Officer, and Board Member of Lydall, Inc. (NYSE: LDL), a leading global manufacturer of value-added engineered materials and specialty filtration solutions serving the industrial, automotive, agribusiness, and medical markets, from November 2019 to October 2021. Prior to joining Lydall, Inc., Ms. Greenstein served as Senior Vice President of United States Steel Corporation (NYSE: X), an integrated steel producer, where she managed the company’s $4 billion Consumer Solutions business unit from 2014 to November 2019. Prior to United States Steel Corporation, Ms. Greenstein served as President, Supply Chain and Sustainability of UL, LLC (formerly Underwriters Laboratories) from 2012 to 2014 and various other executive roles at UL since 2001. Ms. Greenstein currently serves on the board of Copeland, a global climate technologies company, where she also serves on the compensation committee. Previously, Ms. Greenstein served on the board of directors of Briggs & Stratton Corporation from August 2018 to January 2021, where she served on its Finance and Nominating and Governance Committees. Ms. Greenstein holds a Bachelor of Science in business administration, with a concentration in industrial distribution management, from the Gies College of Business at the University of Illinois, Urbana-Champaign. Ms. Greenstein earned an MBA from the University of Michigan Stephen M. Ross School of Business. | | | Key Attributes, Skills, and Experience Ms. Greenstein brings to the Board her executive leadership skills, including experience as a public company chief executive officer, as well as cybersecurity expertise and her knowledge of public company matters from her service on other public company boards. |
Directors and Nominees
Skills and Experience Key:
Directors and Nominees
| | Notable Auto Industry Experience | | Experience as Chair/CEO of Multi-National Business | | Background Contributes to Desired Diversity | | Legal/Governance Experience | | | Non-U.S. Origin | | Product or Clean Technology/ Electronics Expertise | | Non-Automotive Technology Expertise | | Manufacturing Experience | | | Meets SEC Definition of “Audit Committee Financial Expert” | | Environmental/Sustainability Experience | | Cybersecurity/Risk Management Expertise | | |
Directors and Nominees
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
Directors and Nominees
| Michael S. Hanley Retired Global Automotive Leader, Ernst & Young LLP Age: 69 Director Since: 2016 BorgWarner Committees: Audit (Chair), Executive Other Current Public Company Directorships: None | Principal Occupation, Directorships, and Education Mr. Hanley retired as a Partner from Ernst & Young LLP in 2014. He served as the firm’s Global Automotive Leader from 2003 to 2014 and was Senior Advisory Partner or Global Coordinating Partner for many automotive clients during his 24-year span as a Partner. Previously, Mr. Hanley served on the board of directors of Shiloh Industries, Inc. from 2014 until the sale of the company in 2020 to private investors. Mr. Hanley holds a Bachelor of Business Administration in accounting from the University of Toledo and is a Certified Public Accountant (Retired). | | | Key Attributes, Skills, and Experience Mr. Hanley brings to the Board his extensive knowledge of accounting and his financial expertise in the automotive industry including experience in assurance and industry advisory services and global automotive industry strategy and initiatives, as well as his knowledge of public company matters from his service on other public company boards. | | Shaun E. McAlmont Former President and Chief Executive Officer, Ninjio, LLC Age: 59 Director Since: 2020 BorgWarner Committees: Compensation, Corporate Governance Other Current Public Company Directorships: Lee Enterprises, Inc. | Principal Occupation, Directorships, and Education Dr. McAlmont, a business and leadership consultant, served as President and Chief Executive Officer of Ninjio, LLC (“Ninjio”), a cybersecurity training company which provides enterprise level awareness training, from January 2022 to September 2024. Prior to Ninjio, he served as the President of Career Learning for Stride, Inc. (NYSE: LRN), a provider of online consumer and corporate talent development programs, from 2018 to October 2021. Prior to joining Stride, he worked as President and CEO of Neumont College of Computer Science, a for-profit career college, from 2015 to 2017, and previously as CEO and Director of Lincoln Educational Services (NASDAQ: LINC), which includes the Lincoln Tech automotive training institutes, from 2005 to 2015. His corporate training and consumer skill development experiences are balanced by early career roles in traditional education operations at Brigham Young and Stanford Universities. Dr. McAlmont currently serves on the board of Lee Enterprises, Inc. (NASDAQ: LEE), an American media company, since April 2022, and serves on its audit and risk management committee and the executive compensation committee. Dr. McAlmont also serves as a member of the Brigham Young University Marriott School of Business National Advisory Council. Dr. McAlmont holds a Bachelor of Science from Brigham Young University, a Master of Arts in education administration from the University of San Francisco, and a Doctorate in higher education from the University of Pennsylvania. At the University of Pennsylvania, he graduated with a rare dual distinction both for his dissertation and for the defense of his research on student advising and development. In addition to his academic and career achievements, Dr. McAlmont is a former NCAA and international athlete. | | | Key Attributes, Skills, and Experience Dr. McAlmont brings to the Board his executive leadership experience, including proficiency as a public company chief executive officer, as well as expertise in corporate cybersecurity awareness training, human capital management, workforce training and development, and adult education. |
Directors and Nominees
| | Notable Auto Industry Experience | | Experience as Chair/CEO of Multi-National Business | | Background Contributes to Desired Diversity | | Legal/Governance Experience | | | Non-U.S. Origin | | Product or Clean Technology/ Electronics Expertise | | Non-Automotive Technology Expertise | | Manufacturing Experience | | | Meets SEC Definition of “Audit Committee Financial Expert” | | Environmental/Sustainability Experience | | Cybersecurity/Risk Management Expertise | | |
Directors and Nominees
| 2025 Proxy Statement | | 15 |
Directors and Nominees
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
Directors and Nominees
| Deborah D. McWhinney Retired Chief Executive Officer of Global Enterprise Payments, Citigroup Inc. Age: 69 Director Since: 2018 BorgWarner Committees: Audit, Compensation (Chair) Other Current Public Company Directorships: Franklin Templeton ETF Trust | Principal Occupation, Directorships, and Education Ms. McWhinney retired from Citigroup Inc. (NYSE: C), one of the largest financial services firms, in 2014 as Chief Executive Officer of Global Enterprise Payments. She joined Citigroup in 2009 as President of Wealth Management & Personal Banking. Ms. McWhinney also co-chaired Citi Women, an internal program aimed to improve training and sponsorship for women across the group and to develop high potential female executives. Prior to Citigroup, she spent six years as President of Charles Schwab Corp.’s (NYSE: SCHW) division that serves financial advisors and was a member of the Schwab Bank board of directors. Ms. McWhinney currently serves on the board of Franklin Templeton ETF Trust. In addition to her public board service, Ms. McWhinney serves as a director of LegalShield and of Fortress Net Lease REIT. She is also on the Board of Trustees for the California Institute for Technology and the Institute for Defense Analyses. Previously, Ms. McWhinney served on the boards of Fluor Corp (NYSE: FLR); Focus Financial Partners, Inc. (NYSE: FOCS); Lloyds Banking Group PLC (NYSE: LLOY), where she was Chair of the Cyber and IT Resilience Committee; Fresenius Medical Company (NYSE: FMS); and S&P Global Inc. (NYSE:SPGI). Ms. McWhinney holds a Bachelor of Arts in communications from the University of Montana. | | | Key Attributes, Skills, and Experience Ms. McWhinney brings to the Board her executive leadership skills in developing and implementing global technology services for some of the world’s largest corporations and governments, including her financial expertise, knowledge of cybersecurity matters, and broad understanding of corporate governance matters. | | Alexis P. Michas Non-Executive Chair of the Board, BorgWarner Inc.; Managing Partner, Juniper Investment Company, LLC Age: 67 Director Since: 1993 BorgWarner Committees: Executive (Chair) Other Current Public Company Directorships: AstroNova, Inc., Revvity, Inc. | Principal Occupation, Directorships, and Education Mr. Michas is the founder and acting Managing Partner of Juniper Investment Company, LLC, an investment management firm based in New York, since 2008. Mr. Michas is also a Principal of Aetolian Investors, LLC, a registered Commodity Pool Operator. Mr. Michas has been the Non-Executive Chairman of Revvity, Inc. (NYSE: RVTY) (formerly PerkinElmer Inc.) since December 2019, has been a director of AstroNova, Inc. (NASDAQ: ALOT) since June 2022, and is a director of Theragenics Corporation, a privately held company. Previously, Mr. Michas also served as the Non-Executive Chairman of the board of directors of Lincoln Educational Services Corporation (NASDAQ: LINC) until 2015 and was a director of Allied Motion Technologies, Inc. (NASDAQ: AMOT) until July 2017. Mr. Michas holds a Bachelor of Arts from Harvard College and an MBA from Harvard Business School. | | | Key Attributes, Skills, and Experience Mr. Michas brings to the Board his many years of private equity experience across a wide range of industries, and a successful record of managing investments in public companies. Mr. Michas also brings extensive transactional expertise, including mergers and acquisitions, IPOs, debt and equity offerings, and bank financing which provides valuable insight on trends in global debt and equity markets, and the impact of such trends on the capital structure of the Company. The Board also benefits from his corporate governance knowledge of public company matters from his service on other public company boards, including his service as Non-Executive Chair, lead director, and a member of the compensation, governance, audit, finance, and executive committees of such companies. Mr. Michas’ thorough knowledge of the Company and his comprehensive understanding of the role of boards of directors qualify him to serve on our Board and as our Non-Executive Chair. |
Directors and Nominees
Skills and Experience Key:
Directors and Nominees
| | Notable Auto Industry Experience | | Experience as Chair/CEO of Multi-National Business | | Background Contributes to Desired Diversity | | Legal/Governance Experience | | | Non-U.S. Origin | | Product or Clean Technology/ Electronics Expertise | | Non-Automotive Technology Expertise | | Manufacturing Experience | | | Meets SEC Definition of “Audit Committee Financial Expert” | | Environmental/Sustainability Experience | | Cybersecurity/Risk Management Expertise | | |
Directors and Nominees
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
Directors and Nominees
| Sailaja K. Shankar Senior Vice President, Engineering of the Security Business Group, Cisco Systems, Inc. Age: 58 Director Since: 2022 BorgWarner Committees: Audit, Compensation Other Current Public Company Directorships: None | Principal Occupation, Directorships, and Education Ms. Shankar has served as the Senior Vice President, Engineering of the Security Business Group, Cisco Systems, Inc. (NASDAQ: CSCO), a leading global manufacturer of networking hardware, software, telecommunications equipment, and other high-technology services and products, since January 2023. In this role, she is responsible for engineering including strategy execution and architecture. From September 2021 to January 2023, Ms. Shankar was the Senior Vice President and General Manager of SBG. From June 2021 to September 2021, Ms. Shankar was the Senior Vice President and General Manager of the Cloud and Network Security business unit within SBG. Prior to joining Cisco, Ms. Shankar served as Senior Vice President of Engineering, Enterprise of McAfee Corp. (NASDAQ: MCFE), a computer security software company, where she was responsible for its security and threat defense solutions across endpoint, extended detection and response, data center security, and cloud native application processes, from February 2019 to June 2021. She also acted as General Manager of Mobile and ISP Solutions Business Unit from February 2016 to February 2019. Ms. Shankar currently serves as a member of the board of advisors of Team8, a global venture capital company. Ms. Shankar also serves as a board observer of Qwiet AI (formerly ShiftLeft, Inc.), a company focused on cybersecurity solutions. Ms. Shankar holds a Bachelor of Science in chemistry from Maris Stella College, and a Bachelor and Master of Arts from Andhra University in mass communications/journalism and English literature, respectively. In 2022, Ms. Shankar received accolades for her executive leadership within the IT industry and beyond and was named among 10 Women Making a Difference in Cybersecurity by CRN, a top technology news and information source for solution providers, IT channel partners, and value-added resellers. | | | Key Attributes, Skills, and Experience Ms. Shankar brings to the Board her deep experience innovating technological solutions, driving strategic change in global enterprises, and portfolio building experience including cybersecurity and artificial intelligence (“AI”) expertise. Ms. Shankar also prides herself on being a champion of diversity, mentoring the next generation of technical women, and is a global advisor with “How Women Lead.” At Cisco, Ms. Shankar is the executive sponsor for Women in AI, Women in Tech, Women in Cyber Security, and Humans of AI. | | Hau N. Thai-Tang Retired Chief Industrial Platform Officer, Ford Motor Company Age: 58 Director Since: 2023 BorgWarner Committees: Audit, Corporate Governance Other Current Public Company Directorships: None | Principal Occupation, Directorships, and Education Mr. Thai-Tang retired from Ford Motor Company (NYSE: F), a global automotive manufacturer, in 2022 as Chief Industrial Platform Officer. In this position, Mr. Thai-Tang led global research and advanced engineering, product development, design, manufacturing engineering, purchasing, and supply chain teams to deliver an industry leading product portfolio of digitally connected ICE and BEV vehicles. Mr. Thai-Tang joined Ford in 1988 and held positions of increasingly significant responsibility. Previous positions included Chief Product Platform and Operations Officer from October 2020 to October 2021; Chief Product Development and Purchasing Officer from July 2017 to October 2020; and Group Vice President of Global Purchasing from August 2013 to July 2017. Mr. Thai-Tang currently serves on the board of Bose Corporation, a private American manufacturing company of audio equipment. He is a member of the Nominating and Corporate Governance, and Compensation committees. Mr. Thai-Tang holds a Bachelor of Science in mechanical engineering from Carnegie Mellon University and an MBA from the University of Michigan Stephen M. Ross School of Business. | | | Key Attributes, Skills, and Experience Mr. Thai-Tang brings to the Board his extensive automotive industry experience, including his 34-year career at Ford and excellent forward-looking perspective on the industry, particularly the transformation around electrification. In addition to his engineering, product planning, product development, cybersecurity, and technology expertise, Mr. Thai-Tang has a strong operational background, including supply chain and procurement. Mr. Thai-Tang led Ford’s product development and purchasing organizations during its launches of the Mustang-E, F-150 Lightning, Bronco, Maverick, and Puma. |
Directors and Nominees
| | Notable Auto Industry Experience | | Experience as Chair/CEO of Multi-National Business | | Background Contributes to Desired Diversity | | Legal/Governance Experience | | | Non-U.S. Origin | | Product or Clean Technology/ Electronics Expertise | | Non-Automotive Technology Expertise | | Manufacturing Experience | | | Meets SEC Definition of “Audit Committee Financial Expert” | | Environmental/Sustainability Experience | | Cybersecurity/Risk Management Expertise | | |
Directors and Nominees
| 2025 Proxy Statement | | 17 |
Directors and Nominees
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
Directors and Nominees
Director Nominee Requirements The Corporate Governance Committee seeks to establish and maintain a board that is strong in its collective knowledge and that possesses a diversity of skills, background, and experience in areas that are relevant to guide the Company in executing its business strategy. In considering whether to recommend to the full Board any candidate for inclusion in our Board’s slate of recommended director nominees, the Corporate Governance Committee will consider, among other things, the extent to which candidates possess the following factors:
Directors and Nominees
| ● | The highest personal and professional ethics, integrity, and values |
Directors and Nominees
| ● | Demonstrated business acumen, experience, and the ability to use sound judgment to contribute to effective oversight of the business and financial affairs of the Company |
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| ● | Ability to evaluate strategic options and risks, form independent opinions, and state those opinions in a constructive manner |
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| ● | Active, objective, and constructive participation at meetings of our Board and its committees |
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| ● | Flexibility in approaching problems |
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| ● | Open-mindedness on policy issues and areas of activity affecting the overall interests of the Company and its stockholders |
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| ● | Stature to represent the Company before the public, stockholders, and various others who affect the Company |
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| ● | Involvement only in activities and interests that do not create a conflict with the director’s responsibilities to the Company and its stockholders |
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| ● | Willingness to objectively appraise management performance in the interest of the stockholders |
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| ● | Interest and availability of time to be involved with the Company and its employees over a sustained period |
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| ● | Ability to work well with others, with a deep and wide perspective in dealing with people and situations while respecting the views of others |
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| ● | A reasoned and balanced commitment to the social responsibilities of the Company |
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| ● | Contribution to our desired diversity and balance of our Board |
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| ● | Willingness of independent directors to limit public company board service to four or fewer boards (any exceptions would require Corporate Governance Committee approval) |
Directors and Nominees
| ● | Willingness to tender, promptly following the annual meeting at which they are elected or re-elected as director, an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which they face re-election, and (ii) our Board’s acceptance of such resignation |
Directors and Nominees
| ● | Willingness to provide all information, including completion of a questionnaire, required by the Company’s Amended and Restated By-laws (“By-laws”) |
Directors and Nominees
Nomination Process and Evaluation The Corporate Governance Committee accepts candidate recommendations and referrals from a variety of sources, including stockholders, directors, management, search firms, and other sources. An overview of the process undertaken by the Corporate Governance Committee when evaluating candidates includes:
Directors and Nominees
| ● | Use of a skills matrix to identify specific attributes desired to be represented on our Board |
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| ● | An assessment of the candidates’ freedom from conflicts of interest and independence |
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| ● | Consideration of the candidates’ qualifications, expertise, and cognitive diversity |
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| ● | Qualified candidates are discussed and interviewed by the Corporate Governance Committee, Non-Executive Chair, and CEO |
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| ● | The Corporate Governance Committee recommends nominees to the full Board |
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| ● | The full Board selects nominees |
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| ● | Stockholders vote on nominees at annual stockholders’ meetings |
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| ● | The Corporate Governance Committee evaluates the full Board, its committees, and individual directors annually |
Directors and Nominees
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
Directors and Nominees
Board Refreshment We routinely assess the Board’s composition to ensure we have the right mix of attributes, experiences, perspectives, qualifications, and skills to maximize our Board’s potential. We believe the Company, our employees, our stockholders, and our other stakeholders benefit from the continuity of longer-tenured directors complemented by the fresh perspectives of newer directors. Over the last five years, our Board has undergone significant refreshment, resulting in a lower average tenure and broad diversity of backgrounds.
Directors and Nominees
| 2020 | 2021 | 2022 | 2023 | 2025 | | | | | | | | Shaun E. McAlmont | Sara A. Greenstein | Sailaja K. Shankar | Hau N. Thai-Tang | Joseph F. Fadool | | Joined on 8/21/20 | Joined on 11/9/21 | Joined on 9/21/22 | Joined on 2/8/23 | Joined on 2/6/25 |
Compensation Discussion and Analysis
| 51 | Treatment of Equity upon Qualifying Termination (Not in the Event of a Change of Control) | | 52 | Looking Ahead to 2025 | | 53 | Other Executive Compensation Practices, Policies, and Guidelines | | 53 | Stock Ownership Guidelines | | 53 | Clawback Policy | | 53 | Policies and Practices Relating to the Timing of Equity Awards | | 53 | Insider Trading and Confidentiality Policy | | 53 | Executive Benefits and Perquisites | | 54 | Amended Employment Agreement with Mr. Lissalde | | 55 | Change of Control Agreements and Executive Severance Plan | | 55 | Compensation Risk Management | | 56 | Tax Deductibility of Compensation | | 56 | Compensation Committee Report | | 56 | Compensation Committee Interlocks and Insider Participation | | 57 | Executive Compensation Tables | | 57 | Fiscal Year 2024 Summary Compensation Table | | 58 | All Other Compensation Table | | 58 | Grants of Plan-Based Awards in 2024 | | 59 | Outstanding Equity Awards at Fiscal 2024 Year End | | 60 | Option Exercises and Stock Vested in 2024 | | 60 | Pension Benefits | | 61 | Non-Qualified Deferred Compensation | | 62 | Potential Payments Upon Termination or Change of Control | | 62 | Change of Control Employment Agreements | | 64 | Potential Payments Under Executive Severance Plan | | 64 | Executive Severance Plan | | 65 | Potential Payments Under Death, Disability and Retirement | | 66 | CEO Pay Ratio | | 67 | Pay Versus Performance | | 70 | Director Compensation |
Joseph F. Fadool
Joseph F. Fadool Joseph F. Fadool was appointed to the Board effective at the close of business on February 6, 2025, to fill the vacancy created by the resignation of Mr. Lissalde. On the same date, Mr. Fadool, who was then the Company’s Executive Vice President of BorgWarner Inc. and Chief Operating Officer, was appointed to succeed Mr. Lissalde as President and Chief Executive Officer of BorgWarner Inc. In connection with Mr. Fadool’s appointment, the Compensation Committee approved a compensation package for Mr. Fadool as President and Chief Executive Officer. Effective as of February 6, 2025, Mr. Fadool’s annual base salary was increased to $1,250,000. His target annual bonus opportunity (which will be pro-rated for 2025) is $1,875,000 (150% of base salary). Mr. Fadool’s long-term equity incentive target opportunity for 2025 was $8,125,000 (650% of base salary). In recognition of his new role, in February 2025, Mr. Fadool also received an award of 59,760 additional performance shares for the performance period of January 1, 2024, to December 31, 2026, using the same performance measures as awards that we made to other executives in February 2024. In addition, Mr. Fadool received an increase in his perquisite allowance to $50,000. The Compensation Committee established the compensation for Mr. Fadool based on benchmarking information that its independent compensation consultant provided, referencing the compensation for chief executive officer positions in our compensation peer group. The Committee set the total target direct compensation for Mr. Fadool equal to $11,250,000 (allocated as set out above), which was broadly equal to 80% of the median CEO target direct compensation of the compensation peer group. This approach is consistent with the Committee’s past practice of setting compensation below the median for executives new to a role.
Craig D. Aaron
Craig D. Aaron On December 5, 2023, BorgWarner Inc. announced the appointment of Craig D. Aaron, who was then the Company’s Vice President and Controller, to the role of Executive Vice President and Chief Financial Officer, effective March 1, 2024, succeeding Kevin A. Nowlan. In connection with Mr. Aaron’s appointment, the Compensation Committee approved a compensation package for him as Executive Vice President and Chief Financial Officer, effective as of March 1, 2024. The Compensation Committee established the compensation based on benchmarking information that its independent compensation consultant provided, referencing the compensation for chief financial officer positions in our compensation peer group. The Committee increased Mr. Aaron’s annual base salary to $675,000, and his target annual bonus opportunity (which was pro-rated for 2024) was $810,000 (120% of base salary). His long-term equity incentive target opportunity for 2024 was $2,025,000 (300% of base salary). In recognition of his new role, on March 1, 2024, Mr. Aaron received 17,080 additional performance shares for the performance period of January 1, 2023, through December 31, 2025, using the same performance measures as awards that we made to other executives in February 2023. He also entered into a Change of Control Agreement and received an increase in his perquisite allowance to $35,000. The Committee set the total target direct compensation for Mr. Aaron equal to $3,510,000 (allocated as set out above) which was broadly equal to 80% of the median CFO target direct compensation of the compensation peer group. This approach is consistent with the Committee’s past practice of setting compensation below the median for executives new to a role.
Tonit M. Calaway
Tonit M. Calaway As a result of the executive transitions that we discuss above (appointing a first-time CEO and first-time CFO) and to ensure stability in the leadership team, on May 28, 2024, the Compensation Committee approved a one-time grant of restricted stock to Tonit M. Calaway, the Company’s Executive Vice President, Chief Administrative Officer, General Counsel and Secretary, with a target grant date fair value of $4,500,000. We granted this award under the Company’s 2023 Stock Incentive Plan effective on July 1, 2024, and the award will vest on July 1, 2026, contingent on Ms. Calaway’s continuous employment or service through the vesting date. The award would vest immediately upon Ms. Calaway’s earlier termination of employment due to death, disability, an involuntary termination by the Company without “cause” (as defined in the 2023 Stock Incentive Plan), or Ms. Calaway’s resignation for “good reason” (defined in substantially the same manner as in the Plan). The number of shares of restricted stock subject to the award was equal to the target grant date fair value divided by the closing share price on July 1, 2024, which resulted in the issuance of 142,903 shares. The award is subject to the terms and conditions of a Restricted Stock Award Agreement, the form of which we filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024. During her over eight years at BorgWarner, Ms. Calaway has served in several leadership roles including as Chief Human Resources Officer. In her role as Chief Administrative Officer, she was instrumental in, among other things, executing the Company’s strategy given her deep expertise in mergers, acquisitions and divestitures. She was a key part of the leadership team that led the acquisition of Delphi Technologies PLC in 2020 and the spin-off of our Fuel Systems and Aftermarket segments into a separate, publicly traded company, PHINIA Inc. in 2023. The Compensation Committee deemed it to be in the best interest of the Company and its stockholders to ensure Ms. Calaway’s continued service during the period of transition of both our Chief Financial Officer and our Chief Executive Officer. The Compensation Committee, with support from its independent compensation consultant Pearl Meyer and based on benchmarking done for similar grants by other companies, determined the target grant date fair value amount of $4,500,000 to be appropriate as approximately equal to two annual long-term equity incentive awards for Ms. Calaway (her target annual LTI award for 2024 was $2,849,000 as shown on page 35) to align with the retention period of two years (July 2024 to July 2026). Additionally, the Compensation Committee considered it appropriate to issue the award in the form of time-based restricted stock, all of which would cliff vest at the end of the two-year period (July 2026) subject to Ms. Calaway’s continued service. The Compensation Committee did not deem it necessary to use performance measures for this grant as the intention was to ensure continued service for the two-year period. These transitions reflect our Board’s rigorous and ongoing talent review process, which includes consideration of backgrounds, capabilities, and development opportunities for potential internal successors. Our Board, which works closely with our President and CEO and other members of the management team to address succession, aims to foster successful NEO transitions that will be effective in helping the Company deliver strong execution in 2025, despite industry volatility. Any future retention awards will be evaluated on a case-by-case basis and granted only in limited circumstances. The Compensation Committee believes special awards should be rare and reserved for exceptional circumstances, as shown by the fact that the Compensation Committee did not grant other retention awards to NEOs in the past 10 years.
Tonit M. Calaway
| ● | Annual Incentives: From a financial performance perspective, the Company delivered AOM of 10.06%, which was above the maximum performance level that we set under our MIP for 2024. This qualified for a payout of 200% of target for the AOM portion of the MIP award. For purposes of the MIP calculation, the Company also generated $729 million of Free Cash Flow which was above the maximum performance level for this metric. This performance qualified for a payout of 200% of target for the FCF portion of the award. With a 50% weighting for each of the designated metrics, NEOs qualified for a combined payout of 200% of target under the 2024 MIP before application of the performance modifier. |
Tonit M. Calaway
| ● | Long-Term Equity Incentives: Long-term equity incentives that we granted in 2024 consisted of performance shares (two thirds of the total value of target long-term equity incentive opportunity) and restricted stock (one third of the total value of target long-term equity incentive opportunity). For the 2024–2026 performance cycle, the mix of performance metrics consisted of the following: |
Tonit M. Calaway
| ● | Relative TSR Payout for 2022–2024: The Company’s Relative TSR was at the 64th percentile of the performance peer group (ranking 9th out of 23 companies), which resulted in a payout of TSR performance shares at 156% of target. |
Tonit M. Calaway
| ● | eProducts Revenue Mix Payout for 2022–2024: The Company’s eProducts Revenue Mix in 2024 was 16.6%, compared to a target of 16% and a maximum of 24%. The above-target performance resulted in a 2022–2024 eProducts Revenue Mix performance share payout at 108% of target. |
Tonit M. Calaway
| ● | eProducts Revenue Payout for 2022–2024: The Company’s eProducts Revenue in 2024 was $2.335 billion, which was between the threshold of $2.0 billion and the target of $3.0 billion. The performance resulted in a 2022–2024 eProducts Revenue performance share payout at 67% of target. |
Tonit M. Calaway
| ● | Cumulative FCF Payout for 2022–2024: The Company’s Cumulative FCF was $1.975 billion, which was between the target level of $1.7 billion and the maximum of $2.0 billion and resulted in a 2022–2024 Cumulative FCF performance share payout at 192% of target. |
Tonit M. Calaway
| ● | Metrics for both short-term and long-term incentive plans |
Tonit M. Calaway
In addition to the feedback that we received from our stockholders, we also received feedback relating to our compensation peer group and specifically the size of some of the peers that we include in our compensation peer group. The key points of the discussions with stockholders appear below:
Metrics for Incentive Plans
Metrics for Incentive Plans Stockholders expressed a preference for incentive plan metrics that are more aligned with share price performance such as income, return, or growth metrics. They also preferred that we set the target performance level for TSR above the median of the performance peer group and that we apply an overall cap on the payout when absolute total stockholder return is negative. Additionally, stockholders (consistent with feedback in prior years) were not generally in favor of overlapping metrics in the short-term and long-term incentive plans. Prior to 2024, we had included Free Cash Flow as a metric in both the short-term and long-term incentive plans. However, starting in 2024, we removed Free Cash Flow as a metric in the long-term equity incentive plan for awards relating to the 2024–2026 performance period.
Responsive Actions
| ● | Introducing long-term equity incentive plan metrics that are based on Cumulative Adjusted Earnings Per Share and Relative Revenue Growth which are more directly aligned with share price performance (and which avoids overlap of metrics with the short-term incentive plan) |
Responsive Actions
| ● | Requiring above median performance for relative TSR with a payout of 100% of target for performance at the 55th percentile of the performance peer group in response to stockholders’ preference that target performance level be set above the median of the performance peer group |
Responsive Actions
| ● | Applying a cap of 100% of target on the relative TSR payout in the event that absolute total stockholder return is negative |
Responsive Actions
| ● | Removing some of the largest companies (by market capitalization) from the 2025 compensation peer group |
What Guides Our Program
| ● | Align the interests of our executives with the long-term interests of the business, our stockholders, and employees |
What Guides Our Program
| ● | Motivate exceptional performance through metrics that support our long-term strategy of growth and create stockholder value |
What Guides Our Program
| Element | How It’s Paid | Key Features | | Base Salary | Cash (Fixed) | Provides a competitive fixed rate of pay relative to similar positions in the market and enables the Company to attract and retain critical executive talent ● Based on job scope, level of responsibilities, individual performance, experience, and market levels of pay | | Annual Cash Incentive | Cash (Variable) | Focuses executives on achieving annual financial goals that drive long-term stockholder value ● 50% based on AOM, which measures the Company’s profitability relative to the sales it generates ● 50% based on FCF, which measures how much operating cash flow the Company generates net of capital expenditures to allow the Company to pursue opportunities that enhance stockholder value ● The MIP allows the Compensation Committee to apply a performance modifier (upward or downward) of up to 10% of the target MIP award to modify the MIP payout that would otherwise result based on the achievement of Company-wide strategic goals | | Long-Term Equity Incentive | Equity (Variable) | Provides incentives for executives to execute on longer-term financial goals that drive stockholder value creation and support the Company’s retention strategy ● We grant two thirds of the total value of the target long-term equity incentive opportunity using Performance Shares ● 25% based on eProducts Revenue measured in the last year of a three-year performance period ● 25% based on eProducts AOM measured in the last year of a three-year performance period ● 25% based on Foundational AOM measured in the last year of a three-year performance period ● 25% based on Relative TSR measured over a three-year performance period ● We grant one third of the total value using Restricted Shares, with 50% vesting on the second anniversary of the grant date, and the remainder of the shares vesting on the third anniversary of the grant date, provided that the recipient is still employed by the Company |
The Role of the Independent Compensation Consultant
The Role of the Independent Compensation Consultant Our Compensation Committee retained Pearl Meyer & Partners, LLC as its independent compensation consultant. The Compensation Committee annually reviews its relationship with Pearl Meyer to ensure continued independence. The review process includes consideration of the factors impacting independence set forth in New York Stock Exchange rules. Pearl Meyer reports directly to the Compensation Committee and provides benchmarking data to the Corporate Governance Committee with respect to Board compensation. Pearl Meyer regularly participates in Compensation Committee meetings and, in collaboration with the Compensation Committee, aids in determining the appropriate compensation program, design, levels, and peer groups for the Company.
The Role of the Independent Compensation Consultant
| 2025 Proxy Statement | | 43 |
The Role of the Independent Compensation Consultant
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
The Role of Peer Groups
The Role of Peer Groups Compensation Peer Group: The Compensation Committee regularly assesses the market competitiveness of the Company’s executive compensation program based on data from a comparator peer group (called “the compensation peer group”). The Compensation Committee reviews and determines the compensation peer group’s composition on an annual basis, considering input from its independent compensation consultant and management. In evaluating and setting compensation, our Compensation Committee considers several factors including individual and business performance, internal equity, retention, the degree of alignment between the executive’s job duties and the benchmarked job description, as well as an assessment of market practices. The benchmarking exercise is a useful tool that allows the Company to regularly review the market in which we compete for talent and provides credibility for our compensation program with our employees and stockholders. In determining the 2024 compensation peer group, the Compensation Committee removed Deere & Company from the compensation peer group to better align with companies of similar size and also removed Tenneco Inc. from the compensation peer group following its acquisition by private equity in 2022. The Compensation Committee did not make any other changes from the 2023 compensation peer group. Accordingly, the following companies comprised the 2024 compensation peer group:
The Role of Peer Groups
| 3M Company | Eaton Corporation plc | PACCAR Inc. | | Adient plc | Emerson Electric Co. | Parker-Hannifin Corporation | | American Axle & Manufacturing Holdings, Inc. | Fortive Corporation | Rockwell Automation, Inc. | | Aptiv PLC | Honeywell International Inc. | Stanley Black & Decker, Inc. | | Autoliv, Inc. | Illinois Tool Works Inc. | Textron Inc. | | Cummins Inc. | Lear Corporation | The Goodyear Tire & Rubber Company | | Dana Incorporated | Magna International Inc. | Trane Technologies plc | | Dover Corporation | Oshkosh Corporation | |
The Role of Peer Groups
Performance Peer Group: For performance share grants in 2024, the Compensation Committee continued to use the Automotive Parts & Supplier index performance peer group for purposes of measuring relative TSR. This performance peer group is more specific to the Company’s current industry. There were no changes to the performance peer group, and the following companies comprise the 2024 performance peer group:
The Role of Peer Groups
| Allison Transmission Holdings, Inc. | Fox Factory Holding Corp. | Magna International, Inc. | | American Axle & Manufacturing Holdings, Inc. | Gentex Corporation | Modine Manufacturing Company | | Aptiv PLC | Gentherm Incorporated | Standard Motor Products, Inc. | | Autoliv, Inc. | Honeywell International Inc. | Stoneridge, Inc. | | Commercial Vehicle Group, Inc. | Illinois Tool Works Inc. | Strattec Security Corporation | | Cooper-Standard Holdings Inc. | LCI Industries | Superior Industries International, Inc. | | Dana Incorporated | Lear Corporation | Visteon Corporation | | Dorman Products, Inc. | | |
The Role of Peer Groups
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
The Role of Peer Groups
Based on feedback from stockholders and comments from proxy advisers, the Compensation Committee took a fresh look at the compensation and performance peer groups and implemented the following changes for compensation decisions in 2025. Compensation Peer Group: The Compensation Committee reviewed the compensation peer group and, based on advice from its compensation consultant, elected to remove Honeywell International Inc. and Eaton Corporation plc to better align the compensation peer group with companies of similar size to BorgWarner. Accordingly, the following companies will comprise the 2025 compensation peer group:
The Role of Peer Groups
| 3M Company | Dover Corporation | PACCAR Inc. | | Adient plc | Emerson Electric Co. | Parker-Hannifin Corporation | | American Axle & Manufacturing Holdings, Inc. | Fortive Corporation | Rockwell Automation, Inc. | | Aptiv PLC | Illinois Tool Works Inc. | Stanley Black & Decker, Inc. | | Autoliv, Inc. | Lear Corporation | Textron Inc. | | Cummins Inc. | Magna International Inc. | The Goodyear Tire & Rubber Company | | Dana Incorporated | Oshkosh Corporation | Trane Technologies plc |
The Role of Peer Groups
Performance Peer Group: The Compensation Committee reviewed the performance peer group and, based on advice from its compensation consultant, determined that the companies in the performance peer group remained appropriate. There were no changes to the performance peer group, and the following companies comprise the 2025 performance peer group:
The Role of Peer Groups
| Allison Transmission Holdings, Inc. | Fox Factory Holding Corp. | Magna International, Inc. | | American Axle & Manufacturing Holdings, Inc. | Gentex Corporation | Modine Manufacturing Company | | Aptiv PLC | Gentherm Incorporated | Standard Motor Products, Inc. | | Autoliv, Inc. | Honeywell International Inc. | Stoneridge, Inc. | | Commercial Vehicle Group, Inc. | Illinois Tool Works Inc. | Strattec Security Corporation | | Cooper-Standard Holdings Inc. | LCI Industries | Superior Industries International, Inc. | | Dana Incorporated | Lear Corporation | Visteon Corporation | | Dorman Products, Inc. | | |
The Role of Peer Groups
| 2025 Proxy Statement | | 45 |
The Role of Peer Groups
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
2024 Executive Compensation Program in Detail
The Compensation Committee based the increases on market data for our compensation peer companies as well as individual and business performance and experience. Mr. Aaron received a base salary increase of 68.8% (from $400,000 to $675,000) on March 1, 2024, relating to his appointment as Chief Financial Officer. Mr. Fadool received an increase on April 1, 2024, as part of the annual review of compensation process of 2.9% (an increase from $875,000 to $900,000) and a further increase on July 1, 2024, of 25% (an increase from $900,000 to $1,125,000) due to his promotion to Chief Operating Officer. Mr. Nowlan left the organization in March 2024 and did not receive a base salary increase. The Compensation Committee determined the promotional salary increases for Mr. Aaron and Mr. Fadool based on advice from its compensation consultant, ensuring their compensation aligns with similar roles in the compensation peer group. Consistent with past practice, the Compensation Committee set the total target direct compensation at approximately 80% of the median for Mr. Aaron and Mr. Fadool, considering they are both new in their roles. Management Incentive Plan The MIP is our cash-based, annual incentive plan for executives and is intended to drive executive behavior to accomplish key business strategies. The MIP plays a critical role in our continued efforts to be an employer of choice in the automotive industry as we accelerate our penetration in EV propulsion and continue to transform the Company. For this reason, management, with the support of the Compensation Committee, determined that all members of the senior leadership team, including the NEOs, should be on the same compensation plan, which is directly tied to Company performance. The Compensation Committee will continue to refine the MIP to be consistent with the Company’s strategic priorities and ensure that senior management operates as one team with the same goals and objectives.
2024 MIP Target Award Opportunities
2024 MIP Target Award Opportunities We express target bonus opportunities as a percentage of base salary and establish them based on the NEO’s level of responsibility and ability to impact the Company’s overall results. The Compensation Committee also considers market data in setting target award amounts. The 2024 target bonus opportunity for our NEOs ranged from 120% to 160% of base salary in accordance with market median total cash compensation. NEOs receive 50% of the target opportunity for achieving threshold performance and 200% of the target opportunity for achieving maximum performance or above, with results in between these levels and target linearly interpolated. The Compensation Committee increased Mr. Aaron’s target bonus as a percentage of base salary on March 1, 2024, from 55% to 120% as a result of his promotion to Chief Financial Officer. Mr. Fadool’s target bonus as a percentage of base salary remained at 120% during 2024.
2024 MIP Performance Goals and Results
2024 MIP Performance Goals and Results Each year, the Compensation Committee establishes threshold, target, and maximum performance goals for the Company at the beginning of the fiscal year. To establish these goals, the Compensation Committee considers the broader economic environment, industry conditions, and the Company’s annual budget, current guidance, and past performance with respect to operating earnings and cash flow generation.
2024 MIP Performance Goals and Results
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
2024 MIP Performance Goals and Results
The Compensation Committee based performance under the 2024 MIP on the achievement of two pre-established financial performance metrics: AOM and FCF. The Compensation Committee selected these metrics because delivering strong operating income and free cash flow generation are critical to our long-term success. AOM and FCF were weighted equally and calculated and defined as follows:
2024 MIP Performance Goals and Results
| AOM% | = | Adjusted Operating Income | ÷ | Net Sales | | AOM% | | Adjusted Operating Margin is defined as (a) U.S. GAAP Operating Income adjusted to eliminate the impact of restructuring expense; merger, acquisition, and disposition expense; intangible asset amortization expense; other net expenses, discontinued operations; and other gains and losses not reflective of the Company’s ongoing operations, divided by (b) externally reported sales. For MIP purposes, the AOM% excludes the impact of any acquisitions that closed during the calendar year, which would not have been contemplated in the Company’s annual budget. | | |
2024 MIP Performance Goals and Results
The Compensation Committee selected AOM because it:
2024 MIP Performance Goals and Results
| ● | Is one of the Company’s primary internal performance metrics, which is measured and reported monthly by every manufacturing location globally; |
2024 MIP Performance Goals and Results
| ● | Supports the Company’s longer-term goal of increasing its historically strong margin profile; |
2024 MIP Performance Goals and Results
| ● | Has a high degree of correlation to stock price valuation; and |
2024 MIP Performance Goals and Results
| ● | Is strongly connected to the determination of economic value. |
2024 MIP Performance Goals and Results
| FCF | = | Operating Cash Flow | - | Capital Expenditures, including Tooling Outlays | | FCF | | Free Cash Flow is defined as (a) the net cash provided by operating activities minus (b) capital expenditures, including tooling outlays, and (c) adjusted for operating cash inflows or outflows not reflective of the Company’s ongoing operations. For MIP purposes, FCF excludes the impact of any acquisitions that closed during the calendar year, which would not have been contemplated in the Company’s annual budget. | | |
2024 MIP Performance Goals and Results
The Compensation Committee selected FCF because it places emphasis on driving strong cash flow performance, which supports the Company’s ability to invest in future growth plans and to return value directly to stockholders. Goal Setting for AOM: The Compensation Committee set the 2024 target performance level for AOM at 9.45% based on the Company’s budget, which was in line with our guidance range of 9.2% to 9.6% that we disclosed in February 2024. The Company’s AOM target for 2024 was set below the prior year AOM actual performance (9.63% for 2023) due to the December 2023 acquisition of the electric hybrid systems business segment of Eldor Corporation. With Eldor, the Company acquired strong engineering capabilities in a quickly expanding eProducts market. However, this acquisition had very little expected revenue in 2024 and was expected to have a 30–40 bps negative impact on the Company’s AOM for 2024. Goal Setting for FCF: The Compensation Committee set the 2024 target performance level for FCF at $525 million based on the Company’s budget, which was in line with our guidance range of $475 million to $575 million that we disclosed in February 2024. The Company’s FCF target for 2024 was set below the prior year FCF ($581 million for FY2023) because the 2023 figure included an adjustment relating to non-recurring M&A activity and the 2024 target included a modest increase in working capital to support revenue growth. For both AOM and FCF, the Compensation Committee set the maximum performance levels well above the high end of the guidance ranges to require significant performance above guidance to achieve a maximum payout. The Compensation Committee also set threshold performance levels to allow a payout for performance below the target that was consistent with the performance required for a maximum payout. The 2024 AOM and FCF performance targets and actual results were as follows:
2024 MIP Performance Goals and Results
| | Performance Level | | | | | | Threshold | Target | Maximum | | | | (50% | (100% | (200% | | | Performance Metric | payout) | payout) | payout) | Actual Results | | AOM | 8.95% | 9.45% | 9.95% | 10.06% | | FCF | $425 million | $525 million | $625 million | $729 million |
2024 MIP Performance Goals and Results
For 2024, we delivered AOM of 10.06%, which was above the maximum performance level, and strong levels of FCF at $729 million, which was above the maximum performance level. As a result of this performance, both the AOM and FCF portion of the award qualified for payouts of 200% of target, respectively. With a 50% weighting for each of the metrics, the Company’s performance qualified for a combined payout of 200% of target under the 2024 MIP before application of the performance modifier as illustrated below. A reconciliation of AOM to Operating Income and Margin and FCF to Net Cash Provided by Operating Activities is in the Appendix.
2024 MIP Performance Goals and Results
| 2025 Proxy Statement | | 47 |
2024 MIP Performance Goals and Results
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
2024 MIP Performance Modifier
2024 MIP Performance Modifier The Compensation Committee carefully considers each element of our executive compensation program to ensure that those elements promote execution of our business strategy. To further BorgWarner’s mission to execute on our accelerated electrification strategy and continue to deliver innovative and sustainable mobility solutions for the vehicle market, the Compensation Committee added a performance modifier to the MIP plan starting in 2022. With the performance modifier, the Compensation Committee may apply up to plus or minus 10% of the target MIP award to modify the MIP payout that would otherwise result for all MIP participants, based on its overall assessment of Company financial performance results and the achievement of Company-wide strategic goals. However, the payout remains capped at 200% of target (i.e., if financial performance is at maximum performance level, then the modifier cannot increase the award). The Compensation Committee may apply the modifier based on progress against quantitative or qualitative targets, by way of example, in the following areas:
2024 MIP Performance Modifier
| ● | Environmental, Social, and Governance initiatives |
2024 MIP Performance Modifier
| ● | Acquisitions and dispositions, including integration |
2024 MIP Performance Modifier
| ● | Succession planning and talent development |
2024 MIP Performance Modifier
| ● | Leadership during unusual and challenging circumstances |
2024 MIP Performance Modifier
| ● | Strategic change management |
2024 MIP Performance Modifier
Although the Compensation Committee was pleased with both the financial and non-financial performance of the Company, 2024 was a challenging year within the automotive industry. Despite strong adjusted operating margins and free cash flow, as well as returning approximately $500 million in share repurchases and dividends, the Company, along with many of its peers, did not achieve a positive return to stockholders during 2024. Accordingly, the Compensation Committee utilized the performance modifier to reduce the MIP payout by 10% of the MIP target for each of the NEOs and other senior executives.
2024 MIP Payouts
2024 MIP Payouts For our former President and CEO, Frédéric Lissalde, this performance provided the following bonus payout:
2024 MIP Payouts
| MIP Result as a % of Target Bonus | = | AOM% 200% Payout as % of Target x 50% | + | FCF 200% Payout as % of Target x 50% | – | Negative Adjustment of 10% of Target | = | 190% | | Bonus Payout | = | Base Salary of $1,450,000 | • | Target Bonus of 160% of Base Salary | • | MIP Result of 190% of Target Bonus | = | $4,408,000 |
2024 MIP Payouts
| | | Target Bonus as a | | | | | | Percentage of | MIP Payout | | | NEO | Base Salary | Base Salary | as % of Target | Bonus Payout | | Frédéric B. Lissalde | $1,450,000 | 160% | 190% | $4,408,000 | | Craig D. Aaron | $629,918 | 113% | 190% | $1,355,230 | | Tonit M. Calaway | $740,000 | 120% | 190% | $1,687,200 | | Joseph F. Fadool | $1,013,115 | 120% | 190% | $2,309,902 | | Stefan Demmerle | $845,000 | 120% | 190% | $1,926,600 | | Kevin A. Nowlan | $— | —% | —% | $— |
2024 MIP Payouts
The base salaries shown for Mr. Aaron and Mr. Fadool represent their salaries considering their promotions during the year. The table above shows the effective annual bonus percentage.
2024 MIP Payouts
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
2024 MIP Payouts
Based on feedback from stockholders and comments from proxy advisers, the Compensation Committee took a fresh look at the Management Incentive Plan and implemented the following changes for 2025:
2024 MIP Payouts
| ● | The Compensation Committee established the AOM target for 2025 at 10.4%, a level well above the 2024 actual achievement of 10.06% and above the external guidance range for 2025 that we disclosed in February 2025 of 10.0% to 10.2%. In addition, the Compensation Committee set the FCF target at $800 million, a level well above the 2024 actual achievement of $729 million and above the external guidance range for 2025 that we disclosed in February 2025 of $650 million to $750 million. |
2024 MIP Payouts
| ● | The MIP payout for business unit presidents includes a portion of their business unit AOM performance, thereby ensuring that their compensation is closely aligned with the performance of their business unit. |
2024 MIP Payouts
Long-Term Equity Incentives We believe that an ownership culture that rewards our executives for maximizing long-term stockholder value drives long-term performance. Our long-term equity incentive plans provide participants with appropriate incentives to acquire equity interests in our Company and align their interests with the interests of our stockholders. We detail below the shares that our NEOs earned, and we reflect them in the Option Exercises and Stock Vested table on page 60.
2022–2024 Performance Share Awards Earned
2022–2024 Performance Share Awards Earned For the 2022–2024 performance cycle, participants could earn performance shares based on the achievement of four measures: Relative TSR weighted at 25%, eProducts Revenue Mix weighted at 25%, eProducts Revenue weighted at 25%, and Cumulative FCF weighted at 25%. Results for the 2022–2024 performance cycle were as follows:
2022–2024 Performance Share Awards Earned
| Relative Total Stockholder Return (“TSR”) | eProducts Revenue Mix | | The Company’s Relative TSR was at the 64th percentile of the performance peer group (ranking 9th out of 23 companies), which resulted in a payout of TSR performance shares at 156% of target. | The Company’s eProducts Revenue Mix in 2024 was 16.6%, compared to a target of 16% and a maximum of 24%. The above target performance resulted in an eProducts Revenue Mix performance share payout at 108% of target. | | | | | eProducts Revenue | Cumulative FCF* | | The Company’s eProducts Revenue was $2.335 billion, which was between the threshold level of $2.0 billion and the target level of $3.0 billion and resulted in an eProducts Revenue performance share payout at 67% of target. | The Company’s Cumulative FCF was $1.975 billion, which was between the target level of $1.7 billion and the maximum of $2.0 billion and resulted in a Cumulative FCF performance share payout at 192% of target. | | | |
2022–2024 Performance Share Awards Earned
*Free Cash Flow is a non-GAAP measure. Reconciliations to the comparable GAAP measure for FCF can be found in the Appendix. With a 25% weighting for each of the designated performance cycle metrics, the combined payout was 131% of target for the 2022–2024 performance shares.
2022–2024 Performance Share Awards Earned
| 2025 Proxy Statement | | 49 |
2022–2024 Performance Share Awards Earned
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
2022–2024 Performance Share Awards Earned
Based on the above performance achievement for each of the four measures, the resulting shares vesting for each of the NEOs is set out in the table below:
2022–2024 Performance Share Awards Earned
| | Relative Total | | eProducts | | eProducts | | Cumulative | | | | Stockholder Return | | Revenue Mix | | Revenue | | Free Cash Flow | | | | Shares at | Shares | Shares at | Shares | Shares at | Shares | Shares at | Shares | | NEO | Target | Earned | Target | Earned | Target | Earned | Target | Earned | | Frédéric B. Lissalde | 48,658 | 75,906 | 48,658 | 52,551 | 48,658 | 32,601 | 48,658 | 93,423 | | Craig D. Aaron | 1,729 | 2,697 | 1,729 | 1,867 | 1,729 | 1,158 | 1,729 | 3,320 | | Tonit M. Calaway | 11,741 | 18,316 | 11,741 | 12,680 | 11,741 | 7,866 | 11,741 | 22,543 | | Joseph F. Fadool | 13,911 | 21,701 | 13,911 | 15,024 | 13,911 | 9,320 | 13,911 | 26,709 | | Stefan Demmerle | 12,995 | 20,272 | 12,995 | 14,035 | 12,995 | 8,707 | 12,995 | 24,950 | | Kevin A. Nowlan | — | — | — | — | — | — | — | — |
2022–2024 Performance Share Awards Earned
Mr. Nowlan retired on April 1, 2024, and forfeited all outstanding shares.
2024–2026 Performance Share Awards
2024–2026 Performance Share Awards The Compensation Committee designed the performance share awards for a select group of senior executives, including the NEOs, to provide a competitive payout at the end of a three-year performance period, with financial goals set at the beginning of each performance period. A new performance period begins on January 1 and ends three years later on December 31. As part of the annual equity award process, the Compensation Committee considers a mix of equity vehicles when granting long-term equity incentive awards. For 2024, we awarded two-thirds of the total value of the target long-term equity incentive opportunity through performance shares and one-third through restricted stock. We use a consistent methodology based on the market median for long-term equity incentives to determine the target dollar amount of the long-term equity incentive opportunity for each executive. We grant performance share awards and restricted stock in terms of a number of shares, and we convert the target dollar amount to a specific number of shares. We calculate this by using the average closing price of the Company’s common stock for all the trading days in the January immediately preceding the date of the grant. For the 2024–2026 awards, the share price we used to convert the award value into units was $33.86.
2024–2026 Performance Share Awards
| | Long-Term | Restricted | eProducts | eProducts | Foundational | Relative Total | | | Incentive Plan | Stock | Revenue | AOM | AOM | Stockholder Return | | | Award Value | Shares Awarded | Shares Awarded | Shares Awarded | Shares Awarded | Shares Awarded | | NEO | | | | | | | | Frédéric B. Lissalde | $11,237,500 | 110,640 | 55,310 | 55,310 | 55,310 | 55,310 | | Craig D. Aaron | $2,025,000 | 19,930 | 9,970 | 9,970 | 9,970 | 9,970 | | Tonit M. Calaway | $2,849,000 | 28,060 | 14,020 | 14,020 | 14,020 | 14,020 | | Joseph F. Fadool | $3,375,000 | 33,230 | 16,610 | 16,610 | 16,610 | 16,610 | | Stefan Demmerle | $3,168,750 | 31,180 | 15,600 | 15,600 | 15,600 | 15,600 | | Kevin A. Nowlan | $— | — | — | — | — | — |
2024–2026 Performance Share Awards
For the 2024-2026 performance cycle, the Compensation Committee used the following mix of performance metrics for purposes of earning performance shares:
2024–2026 Performance Share Awards
| eProducts Revenue | eProducts AOM | Foundational AOM | Relative Total Stockholder Return (“TSR”) | | | | | | | Our total revenue in 2026 derived from eProducts* | The Adjusted Operating Margin in 2026 that we derive from eProducts | The Adjusted Operating Margin in 2026 that we derive from foundational products | Determined by ranking the Company’s three-year TSR among a peer group of companies (see “performance peer group” on page 44) |
2024–2026 Performance Share Awards
*eProducts revenue will be subject to the following adjustments: (1) For any acquisitions completed during calendar year 2026, the full amount of 2026 eProducts revenue from the acquired company will be included in the numerator and the full amount of 2026 revenue from the acquired company will be included in the denominator (on a proforma basis), as though the acquisition had been completed on January 1, 2026; and (2) for any dispositions completed during calendar year 2026, the full amount of 2026 revenue from the disposition will be excluded from the numerator (if applicable) and the denominator (on a proforma basis), as though the disposition had been completed on January 1, 2026.
2024–2026 Performance Share Awards
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
2024–2026 Performance Share Awards
The Compensation Committee established this mix for the 2024–2026 performance cycle to place an emphasis on delivering organic and inorganic growth to drive higher eProducts revenue and generate high levels of AOM in both our eProducts and our foundational products, while maintaining a balanced focus on long-term growth and stockholder value creation. As the eProducts market matures, the Compensation Committee elected to replace eProducts Revenue Mix (which we used in the 2023–2025 performance cycle), with eProducts AOM to drive profitable growth in our eProducts. Additionally, the Compensation Committee replaced Cumulative Free Cash Flow (which we used in the 2023–2025 performance cycle), with Foundational AOM to promote profitable margins in our foundational products business. The Compensation Committee also took into account stockholder feedback related to not using Free Cash Flow in both the short-term incentive and long-term equity incentive plans. Actual award payouts for each performance metric for the 2024–2026 performance cycle can range between 0% and 200% of the target based on performance results as follows:
2024–2026 Performance Share Awards
| eProducts Revenue | eProducts AOM | | Foundational AOM | Relative TSR |
Restricted Stock
Restricted Stock Restricted stock awards incentivize and reward executives for improving long-term stock value and serve as a retention tool. Generally, we grant restricted stock in February, with one half of the shares that we grant vesting on the second anniversary of the grant date and the remainder of the shares that we grant vesting on the third anniversary of the grant date, in each instance provided that the recipient is still employed by the Company.
Treatment of Equity in the Event of a Change of Control
Treatment of Equity in the Event of a Change of Control All restricted stock and performance shares are subject to double-trigger vesting (rather than single-trigger vesting) upon a change of control. Specifically, to the extent the successor or purchaser in a change of control transaction honors or assumes outstanding equity-based awards on an equivalent basis, these awards will not automatically be subject to accelerated exercisability, vesting, or settlement upon the change of control. Rather, vesting will occur upon the participant’s termination of employment if they are terminated by the Company (or its successor) without cause or if the participant terminates for good reason (assuming the participant has such right under an employment or other agreement) during the two-year period following the change of control. If the successor or purchaser in the change of control transaction does not assume the awards or issue replacement awards, then upon the date of the change of control, restricted stock will become fully vested and performance shares will vest proportionately (based on the performance period up to the change of control date compared to the original performance period of the grant), with performance deemed to be satisfied at target.
Treatment of Equity upon Qualifying Termination (Not in the Event of a Change of Control)
Treatment of Equity upon Qualifying Termination (Not in the Event of a Change of Control) In the case of a termination of employment (not in connection with a change of control) that qualifies a participant for benefits under the Executive Severance Plan described on pages 64–65, a pro rata portion of restricted stock and restricted stock units held by the participant will generally vest upon the participant’s termination. Additionally, the participant will forfeit unearned performance shares, performance stock units and performance-vesting restricted stock units, and unvested stock options or stock appreciation rights.
Treatment of Equity upon Qualifying Termination (Not in the Event of a Change of Control)
| 2025 Proxy Statement | | 51 |
Treatment of Equity upon Qualifying Termination (Not in the Event of a Change of Control)
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
2025–2027 Performance Share Awards
2025–2027 Performance Share Awards In alignment with our business focus and based on feedback from stockholders, the Compensation Committee approved the metrics to use for long-term equity incentives that we granted in February 2025. With input from the Compensation Committee’s compensation consultant, the Compensation Committee decided to use the following metrics for the 2025–2027 Long-Term Equity Incentive, or LTI, Plan:
2025–2027 Performance Share Awards
| ● | 50% based on Relative Total Stockholder Return measured over a three-year performance period |
2025–2027 Performance Share Awards
| ● | 25% based on Cumulative Adjusted Earnings Per Share measured over a three-year performance period |
2025–2027 Performance Share Awards
| ● | 25% based on Relative Revenue Growth over a three-year performance period |
2025–2027 Performance Share Awards
We will determine performance under these performance measures as follows:
2025–2027 Performance Share Awards
| ● | Relative TSR: Determined by ranking the Company’s three-year TSR among a peer group of companies. |
2025–2027 Performance Share Awards
| ● | Cumulative Adjusted EPS: Determined based on the Company’s cumulative adjusted earnings per share over the three-year performance measurement period. |
2025–2027 Performance Share Awards
| ● | Relative Revenue Growth: Determined based on the three-year average annual change in revenue (excluding the impact of changes in currency exchange rates and acquisition and divestiture activity) in excess of the three-year average annual change in industry vehicle production, weighted to reflect the Company’s relative participation in the vehicle markets of the various regions of the world and the Company’s relative participation in the passenger car and on-highway commercial vehicle markets. We will determine the change in industry vehicle production using data published by S&P Global, a leading global automotive research firm. |
2025–2027 Performance Share Awards
Above Target Payout: In addition to using these metrics, the Compensation Committee elected to revise the payout scale for Relative Total Stockholder Return to target the 55th percentile for a 100% of target payout. The graph below describes the revised payout scale: Cap on Negative TSR: Furthermore, based on stockholder feedback, the Compensation Committee elected to implement a cap on the payout for the Relative TSR metric. The payout for the Relative TSR metric will be capped at 100% of target in the event that the absolute total stockholder return is negative during the performance period. The Compensation Committee believes this is appropriate to ensure alignment with stockholders and reward management in cases where stockholders are also rewarded.
2025–2027 Performance Share Awards
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
Other Executive Compensation Practices, Policies, and Guidelines
Our U.S.-based executives who exceed the limits under the qualified BorgWarner Inc. Retirement Savings Plan participate in the BorgWarner Inc. Retirement Savings Excess Benefit Plan, or “Excess Plan.” All our NEOs received Company contributions under the Excess Plan in 2024. For further details, see page 61 under the Non-Qualified Deferred Compensation section. Executive perquisites for the U.S.-based NEOs are limited to a taxable annual perquisite allowance. The allowance is equal to $50,000 per annum for the CEO, $35,000 per annum for the CFO, and $30,000 for the other NEOs. We generally do not provide tax gross-ups on benefits or perquisites. NEOs may use Company aircraft for personal purposes in special circumstances. Any requests for use of Company aircraft must be made in writing and approved by the CEO or CFO. On certain limited occasions, and consistent with Company policy, an NEO’s spouse or other family member may accompany the NEO on a business trip in which Company aircraft is used. The Company does not incur any additional direct operating cost in such situations because there is no incremental cost associated with the additional traveler. None of our NEOs participates in, or has account balances in, any of the Company-sponsored qualified or non-qualified defined benefit pension plans. Amended Employment Agreement with Mr. Lissalde As we previously disclosed, on September 9, 2022, we entered into an employment agreement (“Employment Agreement”) with Mr. Lissalde. Under the terms of the Employment Agreement, Mr. Lissalde will remain employed by the Company until his retirement on August 30, 2025 (the “Term”). If Mr. Lissalde remains employed until the end of the Term, he will retire at such time (such date, which is August 30, 2025, the “Retirement Date”). Mr. Lissalde served as President and CEO until February 6, 2025, when Mr. Fadool succeeded him. Following the appointment of Mr. Fadool, Mr. Lissalde transitioned to a consultant role to the Board, supporting the transition of his duties as reasonably requested by Mr. Fadool or the Board, to ensure an orderly transition through the end of the Term (the “Transition Period”). Prior to the end of the Transition Period, Mr. Lissalde was eligible to participate in our MIP at a level commensurate with his position as President and CEO. He was also eligible to receive awards under the Company’s 2018 Stock Incentive Plan (and successor plans) as determined by the Compensation Committee at a level commensurate with the position of CEO and a base salary rate equal to his then-current salary rate as CEO, provided that, for 2025, the target grant date fair value of the award was 8/12ths of the value that would otherwise have been granted to him in accordance with the foregoing. During the Transition Period, Mr. Lissalde’s annual base salary is sixty-seven percent (67%) of his annual base salary as in effect immediately prior to the end of the Transition Period, and he is not entitled to participate in the MIP for any performance periods beginning on or after the end of the Transition Period. He will be eligible for a pro rata MIP payment, if otherwise earned, for the performance period in which the end of the Transition Period occurred based on the length of time he served as President and CEO during such performance period. The Employment Agreement also provides that, during the Term, Mr. Lissalde will receive reimbursement for reasonable expenses incurred for international financial planning and advice and international tax preparation services. He will also remain eligible to participate in the Company’s benefit plans and receive other benefits that are provided to him as of the date he entered into the Employment Agreement. Following the Retirement Date, Mr. Lissalde will continue to receive health care and other benefits as set forth in the Company’s welfare benefit plans. Mr. Lissalde’s employment may be terminated prior to the end of the Term by the Company for cause, by Mr. Lissalde for any or no reason upon providing ninety (90) days’ advance notice to the Company, or by mutual agreement of the Company and Mr. Lissalde. Mr. Lissalde’s employment will automatically terminate upon his death or disability. In the event of any such termination, Mr. Lissalde will be entitled to any accrued but unpaid salary and vacation, as well as reimbursement of reasonable business expenses incurred prior to the date of termination. Mr. Lissalde’s original employment agreement provided for restricted stock and performance shares granted within 12 months of the Retirement Date to be pro-rated upon retirement. The parties amended the agreement in February 2025 to provide for the awards to be pro-rated when granted with no proration or forfeiture at retirement to achieve the same result more directly. Accordingly, if Mr. Lissalde remains employed until his Retirement Date, has satisfied his obligations under the Employment Agreement, and executes a release of claims in favor of the Company and its affiliates, then we will treat such termination as “Retirement” within the meaning of the 2018 Stock Incentive Plan (and successor plans) and Mr. Lissalde will: (1) Vest in his restricted stock granted within 12 months prior to the Retirement Date on a pro rata basis, determined by dividing the number of months Mr. Lissalde was employed from January 1 of the year in which the grant date occurred through the Retirement Date by 12, provided that the restricted stock that was granted in 2025 (and has already been pro-rated by 8/12ths) will vest in full (2) Vest in his restricted stock granted more than 12 months prior to the Retirement Date on a pro rata basis, determined by dividing the number of months Mr. Lissalde was employed from the grant of such restricted stock through the Retirement Date and the denominator of which is the number of months in the applicable restriction period.
Other Executive Compensation Practices, Policies, and Guidelines
(3) Vest in his performance shares granted within 12 months of the Retirement Date, upon completion of the performance period, in the amount earned based on achievement of the applicable performance goals, but then pro-rated, determined by dividing the number of months Mr. Lissalde was employed from January 1 of the year in which the grant date occurred through the Retirement Date by 12, provided that, with respect to the performance shares granted in 2025 (which have already been pro-rated) and are still outstanding and unvested, following the end of the performance period, shall vest in full based on the actual achievement of the applicable performance goals, without proration. (4) Vest in his performance shares granted more than 12 months prior to the Retirement Date, upon completion of the performance period, in the full number of performance shares earned, based on achievement of the applicable performance goals. The Company will also pay any pro-rated MIP bonus to which Mr. Lissalde is entitled that has not yet been paid and will provide Mr. Lissalde with its standard repatriation benefits for senior executive officers in connection with his relocation to France. If a “Change of Control” as defined in the Change of Control Employment Agreement (the “COC Agreement”) between Mr. Lissalde and the Company occurs after the end of the Transition Period, Mr. Lissalde’s restricted shares and performance shares will vest upon a change of control of the Company pursuant to the terms of the 2018 Stock Incentive Plan (and successor plans) or upon a change of control of the Company pursuant to the COC Agreement. In such a case, the number of restricted shares and performance shares that will vest will be the greater of (1) the number determined under the 2018 Stock Incentive Plan (and successor plans) or the COC Agreement, as applicable, or (2) the number determined under clauses (1) and (2), calculated as if the Retirement Date occurred on the date of such change of control. In exchange for the benefits provided by the Employment Agreement, Mr. Lissalde has agreed to certain non-competition and non-solicitation restrictions that extend for two years following the end of the Term or earlier termination of the Employment Agreement, as well as confidentiality and non-disparagement covenants. Change of Control Agreements and Executive Severance Plan We have entered into COC Agreements with each of our NEOs and certain other executives. In establishing the COC Agreements, our Board determined that it is in the best interests of the Company and its stockholders to: (i) maintain NEOs’ continued dedication in the event of either a contemplated or actual change of control, and (ii) provide three years of compensation to NEOs terminated in connection with a change of control to ensure they focus on executing the transaction rather than personal uncertainties and risks associated with such change of control. COC Agreements: (i) do not provide for excise tax gross-up provisions, (ii) allow a portion of any benefit received in connection with a change of control to be attributable to a non-compete agreement to reduce the potential for the excise tax, and (iii) require an executive to forego a portion of change of control payments that could otherwise trigger excise tax if such reduction would be beneficial to the executive. Effective May 28, 2024, consistent with competitive market practice, the Compensation Committee adopted an Executive Severance Plan to provide financial protection to our NEOs in the event that their employment is involuntarily terminated by the Company (without cause) or by the NEO for good reason (as defined in the plan), subject to the terms of the plan and not in connection with a change of control. The Executive Severance Plan applies to our NEOs other than the former CEO, Mr. Lissalde. In the case of Mr. Lissalde, any benefits payable will be determined under the Employment Agreement summarized above under “Amended Employment Agreement with Mr. Lissalde.” The Executive Severance Plan provides for a lump sum payment equal to one and a half times the sum of the NEOs base salary and recent average bonus. The plan also provides medical and dental coverage for a limited time and outplacement services. In no event would an NEO receive a payment under both the COC Agreement and the Executive Severance Plan. See pages 62–65 for further details on the Change of Control Agreements and Executive Severance Policy. Compensation Risk Management Each year, the Compensation Committee oversees a risk assessment of the Company’s executive compensation program. Based on its most recent review, the Compensation Committee concluded that our compensation program and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. Our executive compensation program includes several features that mitigate unnecessary risk taking, including a balance of short- and long-term incentives, with long-term equity incentives comprising the majority of our executives’ target direct compensation; a mix of performance metrics on our short- and long-term incentives; clawback provisions; and stock ownership.
Most Important Performance Measures
| Compensation Actually Paid and TSR |
Most Important Performance Measures
| Compensation Actually Paid and Net Income |
Most Important Performance Measures
| Compensation Actually Paid and Adjusted Operating Margin |
Director Compensation
Director Compensation The following table details the compensation earned by each non-employee director who served on the Board in 2024. Pearl Meyer conducts an annual review of the non-employee director compensation. Based on Pearl Meyer’s market study of peer company compensation, the annual cash retainers for the non-employee directors and the Non-Executive Chair increased from $125,000 to $130,000. In addition, Pearl Meyer recommended, and the Board approved, an increase to the non-employee director annual equity compensation from $160,000 to $165,000. The compensation levels for our Board are at the 50th percentile compared to our peers. Directors who are employees of BorgWarner are not compensated for their service on the Board:
Director Compensation
| | | | | | Changes | | | | | | | | | | in Pension | | | Aggregate | | | | | | | Value and | | | Number of | | | Fees | | | | Nonqualified | | | Outstanding | | | Earned | | | Non-Equity | Deferred | | | Stock and | | | or Paid | Stock | Option | Incentive Plan | Compensation | All Other | | Option | | | in Cash | Awards(1) | Awards | Compensation | Earnings | Compensation | Total | Awards(2) | | Name | ($) | ($) | ($) | ($) | ($) | ($) | ($) | (#) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | Sara A. Greenstein | 157,994 | 165,000 | — | — | — | — | 322,994 | 4,953 | | Michael S. Hanley | 162,994 | 165,000 | — | — | — | — | 327,994 | 4,953 | | Shaun E. McAlmont | 144,497 | 165,000 | — | — | — | — | 309,497 | 4,953 | | Deborah D. McWhinney | 161,494 | 165,000 | — | — | — | — | 326,494 | 4,953 | | Alexis P. Michas | 315,497 | 165,000 | — | — | — | — | 480,497 | 4,953 | | Sailaja K. Shankar | 145,997 | 165,000 | — | — | — | — | 310,997 | 4,953 | | Hau N. Thai-Tang | 142,997 | 165,000 | — | — | — | — | 307,997 | 4,953 |
Director Compensation
| (1) The values in column (c) reported for 2024 represent the grant date fair market value of the restricted stock award granted on April 24, 2024. (FMV at grant date = number of restricted shares times the closing stock price on April 24, 2024, of $33.65). |
Director Compensation
| (2) Aggregate number of outstanding shares of restricted stock and outstanding vested and unvested stock options at fiscal year-end only, including dividends. |
Director Compensation
Annual compensation for our non-employee directors for 2024 was comprised of the following components: annual cash retainer and equity compensation consisting of restricted stock for board service and retainers for committee service. Our non-employee directors were not granted any stock option awards and did not receive any non-equity incentive plan compensation for 2024.
Director Compensation
| 2024 Annual Non-Employee Director Compensation | Cash Retainers for Board Service | Amount ($) | | | Committee Members | | | | Corporate Governance | $6,000 | | | Compensation | $9,000 | | | Audit | $7,500 | | | Committee Chairs | | | | Corporate Governance | $20,000 | | | Compensation | $25,000 | | | Audit | $30,000 |
Director Compensation
In 2024, non-employee directors’ target annual cash retainer for board service increased from $125,000 to $130,000, effective February 7, 2024. They also received annual equity compensation of $165,000 worth of restricted stock. Committee members received annual retainers as follows for each committee on which they served: $6,000 for the Corporate Governance Committee, $9,000 for the Compensation Committee, and $7,500 for the Audit Committee. As a result of Pearl Meyer’s market study, effective February 7, 2024, chairs of the committees received increases to their additional annual retainers for their service to the committees in view of their commitment of additional time to their oversight of the committees. Committee Chairs received annual retainers as follows for each committee which they chair: $20,000 for the Corporate Governance Committee, $25,000 for the Compensation Committee, and $30,000 for the Audit Committee. The Non-Executive Chair’s total compensation was targeted to be $481,000 consisting of an annual cash retainer of $316,000 (increased from $311,000 on February 7, 2024) and an equity retainer of $165,000 granted in restricted stock. Board and standing committee meeting attendance fees are not paid. Non-employee directors are paid up to $1,000 per day for their attendance requested by the Company at meetings or events not associated with board or committee meetings. Additional compensation arrangements may be made if special committees are convened, though none are planned at this time. The stock ownership expectation of non-employee directors is an amount equivalent to five times the amount of the annual cash retainer for board service within five years of joining the Board. All our directors met the stock ownership guidelines as of March 3, 2025, or were appropriately progressing toward meeting them.
Director Compensation
| Proxy Summary | Sustainability | Election of Directors | Executive Compensation | Ratification of Auditor | Stockholder Proposal | Other Information | Appendix |
Cumulative Free Cash Flow
Cumulative Free Cash Flow Cumulative Free Cash Flow is equal to net cash provided by operating activities less capital expenditures. The table below shows a summary of Free Cash Flow for the years ending 2022, 2023, and 2024.
Cumulative Free Cash Flow
| | | Year Ended | Year Ended | Year Ended | Total | | ($ in millions) | | December 31, 2022 | December 31, 2023 | December 31, 2024 | 2022-2024 | | A. | Net cash provided by operating activities | $1,569 | $1,397 | $1,382 | $4,348 | | B. | Capital expenditures, including tooling outlays | (723) | (832) | (671) | (2,226) | | C. | Customer advances related to capital expenditures | | | 18 | 18 | | D. | Free Cash Flow (A plus B plus C) | 846 | 565 | 729 | 2,140 | | E. | Free Cash Flow from discontinued operations | | (31) | | (31) | | F. | Spin-off related costs | | (134) | | (134) | | G. | Free Cash Flow, excluding adjustments (D plus E plus F) | $846 | $400 | $729 | $1,975 |
Cumulative Free Cash Flow
| (1) Amounts for the year ended December 31, 2022 are as reported in the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2022. Corresponding amounts for the year ended December 31, 2022 as reported in the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2024 (the “2024 Form 10-K”) differ because the historical results of operations of PHINIA for 2022 are presented as discontinued operations in the 2024 Form 10-K. |