DEF 14A of APi Group Corp
Filed Apr 29, 2024 · FY20230001628280-24-019083
Table of Contents
| Potential Payments Upon Termination or Change in Control | 35 | | CEO Pay Ratio | 36 | | Pay Versus Performance | 37 | | Compensation Committee Report | 41 | | Security Ownership | 42 | | Proposal 2—Ratification of Independent Registered Public Accountants for 2024 Fiscal Year | 45 | | Fees Billed to the Company by its Independent Registered Public Accounting Firms | 45 | | Pre-Approval Policies and Procedures for Audit and Permitted Non-Audit Services | 45 | | Audit Committee Report | 46 | | Proposal 3—Advisory Vote on Executive Compensation | 47 | | Other Matters | 48 | | Delinquent Section 16(a) Reports | 48 | | Requirements, including Deadlines, for Submission of Proxy Proposals, Nomination of Directors and Other Business of Shareholders | 48 | | List of Shareholders Entitled to Vote at the 2024 Annual Meeting | 49 | | Expenses Relating to this Proxy Solicitation | 48 | | Communication with Our Board of Directors | 49 | | Householding | 49 | | Available Information | 50 | | Questions and Answers About Voting at the 2024 Annual Meeting and Related Matters | 51 | | Appendix | A-1 |
Board of Directors
Board of Directors
Board of Directors
| Name | Director Since | Independent | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | | Sir Martin E. Franklin, Board Co-Chair | 2017 | No | | | | | James E. Lillie, Board Co-Chair | 2017 | Yes | | | | | Ian G.H. Ashken | 2019 | Yes | ✓* | | ✓ | | Russell A. Becker | 2019 | No | | | | | Paula D. Loop | 2022 | Yes | ✓ | ✓ | | | Anthony E. Malkin | 2019 | Yes | | | ✓ | | Thomas V. Milroy | 2017 | Yes | | ✓* | | | Cyrus D. Walker | 2019 | Yes | | ✓ | ✓* | | Carrie A. Wheeler | 2019 | Yes | ✓ | | |
Board of Directors
✓ Member* Chair
Director Compensation
Director Compensation Our non-employee director compensation policy provides for the following compensation for our non- employee directors: •Annual Retainer. Each non-employee director is entitled to an annual cash fee of $75,000, payable quarterly. •Committee Fees. Members of any of our Committees are entitled to an additional annual cash fee of $5,000. Each of the chairs of our Committees is entitled to an additional $10,000 annual cash fee. •Annual Equity Award. Each non-employee director will be granted annually a number of restricted stock units with a value of $100,000 at the date of issue. The restricted stock units will vest and settle into shares of common stock on the earlier of the one-year anniversary of the date of issuance and the date of the following year’s annual meeting of shareholders. In addition, all of our directors are entitled to be reimbursed by the Company for reasonable expenses incurred by them in the course of their directors’ duties relating to the Company. Sir Martin does not receive any additional compensation for services as a director in light of his affiliation with Mariposa Capital, LLC, which provides advisory services to the Company in exchange for a fee. In addition, Mr. Becker, who serves as our CEO, is not entitled to receive any additional compensation for his services as a director. Mr. Blitzer elected to waive all compensation for his service as a director for 2023. The table below sets forth the non-employee director compensation for the year ended December 31, 2023.
Director Compensation
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2) | Total ($) | | Sir Martin E. Franklin | — | — | — | | James E. Lillie | $75,000 | $100,000 | $175,000 | | Ian G.H. Ashken | $90,000 | $100,000 | $190,000 | | David S. Blitzer | — | — | — | | Paula D. Loop | $82,500 | $100,000 | $182,500 | | Anthony E. Malkin | $80,000 | $100,000 | $180,000 | | Thomas V. Milroy | $88,750 | $100,000 | $188,750 | | Cyrus D. Walker | $90,000 | $100,000 | $190,000 | | Carrie A. Wheeler | $83,750 | $100,000 | $183,750 |
Director Compensation
(1)Represents the aggregate grant date fair values of restricted stock units granted during 2023, computed in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions used in calculating the amounts for 2023, see Note 20 to our historical consolidated financial statements for the year ended December 31, 2023 included in our Annual Report on Form 10-K for the year ended December 31, 2023. (2)The following table sets forth the aggregate number of restricted shares of our common stock and unexercised stock options to purchase our common stock outstanding at December 31, 2023 for each of our non-employee directors:
Proposal 1—Election of Directors
Proposal 1—Election of Directors Under our bylaws, directors are elected for a one-year term expiring at the next annual meeting of shareholders. Upon the recommendation of the Nominating and Corporate Governance Committee, our Board has nominated Sir Martin E. Franklin, James E. Lillie, Ian G.H. Ashken, Russell A. Becker, Paula D. Loop, Anthony E. Malkin, Thomas V. Milroy, Cyrus D. Walker and Carrie A. Wheeler for election or re-election, each for a one-year term that will expire at the 2025 Annual Meeting of shareholders. Each of our directors consented to serve if elected. Our bylaws provide that directors are elected by a majority of the votes cast with respect to the nominee for election to the Board at any meeting of shareholders at which directors are to be elected and a quorum is present, except in the case of a contested election. As set forth in our bylaws, “a majority of the votes cast” means that the number of shares voted “for” a nominee for election to the Board exceeds the votes cast “against” such nominee and will not include abstentions. In the event of a contested election, in accordance with our bylaws, directors are elected by a plurality of the votes cast. We believe that each of our directors possesses the experience, skills and qualities to fully perform his or her duties as a director and contribute to our success. Our directors were nominated because we believe each is of high ethical character, highly accomplished in his or her field with superior credentials and recognition, has a reputation, both personal and professional, that is consistent with our image and reputation, has the ability to exercise sound business judgment, and is able to dedicate sufficient time to fulfilling his or her obligations as a director. Our directors as a group complement each other and each of their respective experiences, skills and qualities so that collectively the Board operates in an effective, collegial and responsive manner. Below we have set out each director’s principal occupation and other pertinent information about particular experience, qualifications, attributes and skills that led the Board to conclude that such person should serve as a director.
Proposal 1—Election of Directors
| Director Since 2017 Co-Chair Since 2019 Age: 59 Other Public Co. Boards: •Nomad Foods Limited •Element Solutions Inc •Admiral Acquisition Limited | Sir Martin E. Franklin | | | Sir Martin has served as a director of APi Group Corporation since September 2017 and has served as Co-Chair since October 2019. Sir Martin is the founder and Chief Executive Officer of Mariposa Capital, LLC, and Chairman and controlling shareholder of Royal Oak Enterprises, LLC, a manufacturer of charcoal and grilling products, since July 2016. Sir Martin is also founder and Executive Chairman of Element Solutions Inc, a specialty chemicals company, and has served as a director since its inception in April 2013, co-founder and co-chairman of Nomad Foods Limited, a leading European frozen food company, and has served as a director since its inception in April 2014, and a founder and director of Admiral Acquisition Limited since May 2023. Sir Martin was the co-founder and Chairman of Jarden Corporation (“Jarden”) from 2001 until April 2016 when Jarden merged with Newell Brands Inc (“Newell”) serving also as its CEO from 2001 to 2011 and its Executive Chairman from 2011-2016. Prior to founding Jarden in 2001, between 1992 and 2000, Sir Martin served as the Chairman and/or Chief Executive Officer of three public companies: Benson Eyecare Corporation, an optical products and services company; Lumen Technologies, Inc., a holding company that designed, manufactured and marketed lighting products; and Bollé Inc., a holding company that designed, manufactured and marketed sunglasses, goggles and helmets worldwide. Qualifications: We believe Sir Martin’s qualifications to serve on our Board include his executive leadership experience, experience as a member of other corporate boards and his knowledge of public companies. |
Table of Contents
| Director Since 2017 Co-Chair Since 2019 Age: 62 Other Public Co. Boards: • Nomad Foods Limited | James E. Lillie | | | Mr. Lillie has served as a director of APi Group Corporation since September 2017 and has served as Co-Chair since October 2019. Previously, he served as Jarden’s Chief Executive Officer from June 2011 until Jarden’s business combination with Newell in 2016. From 2003 to 2011 he served as Jarden’s Chief Operating Officer and President (from 2004). From 2000 to 2003, Mr. Lillie served as Executive Vice President of Operations at Moore Corporation, Limited. From 1999 to 2000, he served as Executive Vice President of Operations at Walter Industries, Inc., a Kohlberg, Kravis, Roberts & Company (“KKR”) portfolio company. From 1990 to 1999, Mr. Lillie held a succession of senior level management positions across a variety of disciplines including human resources, manufacturing, finance and operations at World Color, Inc., another KKR portfolio company. Since June 2015, Mr. Lillie has served on the board of directors of Nomad Foods Limited and served on the board of directors of Tiffany & Co. from February 2017 until January 2021. Qualifications: We believe Mr. Lillie’s qualifications to serve on our Board include his executive experience, service on other corporate boards and his knowledge of public companies. | | Director Since 2019 Age: 63 Committees: •Audit (Chair) •Nominating and Corporate Governance Other Public Co. Boards: •Nomad Foods Limited •Element Solutions Inc. | Ian G.H. Ashken | | | Mr. Ashken has served as a director of APi Group Corporation since October 2019. Previously, he was the co-founder of Jarden and served at various times as its Vice Chairman, President, Chief Financial Officer, Secretary, and a director from June 2001 until the consummation of Jarden’s business combination with Newell in April 2016. Prior to Jarden, Mr. Ashken served as the Vice Chairman and/or Chief Financial Officer of three public companies: Benson Eyecare Corporation, Lumen Technologies, Inc. and Bollé Inc. between 1992 and 2000. Mr. Ashken also serves as a director of Element Solutions Inc and Nomad Foods Limited and is a director or trustee of a number of private companies. Qualifications: We believe Mr. Ashken’s qualifications to serve on our Board include his executive experience, service on other corporate boards and his knowledge of public companies. | | (Chief Executive Officer) Director Since 2019 Age: 58 Other Public Co. Boards: •None | Russell A. Becker | | | Mr. Becker has served as a director of APi Group Corporation since October 2019. Mr. Becker joined APi Group, Inc. in 2002 as President and Chief Operating Officer and became CEO in 2004. Mr. Becker has continued to serve as CEO of APi Group Corporation following its acquisition of APi Group, Inc. in October 2019. Prior to leading APi Group, Inc., Mr. Becker served in a variety of roles at The Jamar Company, a subsidiary of APi Group, Inc., including as a Manager of Construction from 1995 to 1997 and as President from 1998 until he joined APi Group, Inc. in 2002. Mr. Becker served as a project manager for Ryan Companies from 1993 to 1995 and as a field engineer with Cherne Contracting from 1991 to 1993. Since July 2017, Mr. Becker has served on the board of directors of Liberty Diversified Industries and since January 2019 has served on the board of directors for Marvin Companies, each a private company. Mr. Becker also serves on the advisory board for the Science of Engineering at Michigan Technological University. Qualifications: We believe Mr. Becker’s qualifications to serve on our Board include his extensive knowledge of APi Group and his years of executive leadership at APi Group. |
Proposal 1—Election of Directors
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Proposal 1—Election of Directors
| Director Since 2022 Age: 62 Committees: •Audit •Compensation Other Public Co. Boards: •Fastly, Inc. •Robinhood Markets, Inc. | Paula D. Loop | | | Ms. Loop has served as a director of APi Group Corporation since March 2022. Ms. Loop retired as an Assurance Partner at PricewaterhouseCoopers (“PwC”) in June 2021 after over 30 years with PwC. At PwC she was the leader of PwC’s Governance Insights Center and served on the Board of Partners from 2017 to 2021. She was also previously the New York Metro Regional Assurance Leader leading one of PwC’s largest Assurance practices. Ms. Loop has significant experience working with boards and audit committees across multiple markets and industry sectors on governance, accounting and SEC reporting matters. She serves as a director of Robinhood Markets, a financial services company, since June 2021 and as a director of Fastly Inc., an edge cloud computing company, since July 2021. Ms. Loop holds a bachelor’s degree in business administration from the University of California at Berkeley. Qualifications: We believe Ms. Loop’s qualifications to serve on our Board include her public company experience specifically working with boards, audit committees and SEC reporting, and her service on other public company boards. | | Director Since 2019 Age: 61 Committees: •Nominating and Corporate Governance Other Public Co. Boards: •Empire State Realty Trust, Inc. | Anthony E. Malkin | | | Mr. Malkin has served as a director of APi Group Corporation since October 2019. Since October 2013, Mr. Malkin has served as Chairman and Chief Executive Officer of Empire State Realty Trust, Inc. (“ESRT”), a real estate investment trust. Mr. Malkin joined ESRT’s predecessor entities in 1989. Mr. Malkin is the Chairman of Malkin Holdings L.L.C. Mr. Malkin has been a leader in existing building energy efficiency retrofits through coordinating the team of Clinton Climate Initiative, Johnson Controls, JLL and Rocky Mountain Institute in a groundbreaking project at the Empire State Building. Mr. Malkin led the development of standards for energy efficient office tenant installations, now known as the Tenant Energy Optimization Program, at the Urban Land Institute. Mr. Malkin also serves as a member of the Real Estate Roundtable and Chair of its Sustainability Policy Advisory Committee, the Climate Mobilization Advisory Board of the New York City Department of Buildings, Urban Land Institute, the Board of Governors of the Real Estate Board of New York, and the Partnership for New York City’s Innovation Council. Qualifications: We believe Mr. Malkin’s qualifications to serve on our Board include his real estate investment experience, service on other corporate boards and his knowledge of public companies. |
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Proposal 1—Election of Directors
| (Lead Independent Director) Director Since 2017 Age: 68 Committees: •Compensation (Chair) Other Public Co. Boards: •Interfor Corporation •Admiral Acquisition Limited | Thomas V. Milroy | | | Mr. Milroy has served as a director of APi Group Corporation since September 2017. Mr. Milroy has been retired since 2015, and worked for BMO Capital Markets (“BMOCM”), an investment banking firm, from 1993 to January 2015. From March 2008 to October 2014, Mr. Milroy served as Chief Executive Officer of BMOCM and acted as senior advisor to the Chief Executive Officer of BMO Financial Group from November 2014 until his retirement in January 2015. During his tenure as Chief Executive Officer at BMOCM, he was responsible for all of BMO’s business involving corporate, institutional and government clients globally. Mr. Milroy also serves as a director of Interfor Corporation, a large lumber producer, Admiral Acquisition Limited, and Generation Capital Limited, a private investment company. Mr. Milroy is a member of the Law Society of Ontario. Previously, Mr. Milroy served as a director of Tim Hortons Inc. from August 2013 to December 2014 and Restaurant Brands International Inc. from December 2014 to June 2018. Qualifications: We believe Mr. Milroy’s qualifications to serve on our Board include his experience as past Chief Executive Officer of a large financial services company, service on other corporate boards and his knowledge of finance, investment and corporate banking, mergers and acquisitions, risk assessment and business development. | | Director Since 2019 Age: 56 Committees: •Nominating and Corporate Governance (Chair) • Compensation Other Public Co. Boards: •Houlihan Lokey, Inc. | Cyrus D. Walker | | | Mr. Walker has served as a director of APi Group Corporation since October 2019. As of August 2023, Mr. Walker has served as a Strategic Advisor for Fifth Down Capital, an investment firm that focuses on private companies in the global internet, software, consumer, and fintech industries. Mr. Walker has served as a director for Starwood Credit Income Real Estate Trust (S-CREDIT) since November 2023. Since February 2022, Mr. Walker has been a principal at Discovery Land Company, a U.S.- based real estate developer and operator of private communities and resorts. Since January 2022, Mr. Walker has been an operating partner at Vistria Group, a private equity investment firm, and has served as a director for The Mather Group, an investment advisory firm and affiliate of Vistria Group. Mr. Walker has served as a director for Flores & Associates LLC, also a Vistria Group affiliated company, since August 2022. Mr. Walker has served as a director of privately held jewelry company, Kendra Scott, since May 2021, and as a director of Houlihan Lokey, Inc since November 2020. From April 2018 to March 2022, Mr. Walker served as the founder and Chief Executive Officer of The Dibble Group, an insurance brokerage and consulting firm and from January 2000, has served in several roles at Nemco Group, LLC, an insurance brokerage and consulting firm, including serving as its Co-Chief Executive Officer until April 2012, when it was acquired by a subsidiary of NFP Corp., a multi-national insurance brokerage and consulting business. Mr. Walker also founded and served as Chief Executive Officer of OSI Benefits, an insurance brokerage consulting firm and division of Opportunity Systems, Inc., from 1995 to January 2000. Qualifications: We believe Mr. Walker’s qualifications to serve on our Board include his executive experience and service on other corporate boards. |
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Proposal 1—Election of Directors
| Director Since 2019 Age: 52 Committees: •Audit Other Public Co. Boards: •Opendoor •TKO Group Holdings, Inc. | Carrie A. Wheeler | | | Ms. Wheeler has served as a director of APi Group Corporation since October 2019. Ms. Wheeler has served as Chief Executive Officer of Opendoor, a technology firm for residential real estate, since December 2022. She previously served as Opendoor’s Chief Financial Officer since September 2020. From 1996 to 2017, Ms. Wheeler was with TPG Global, a global private equity firm, including as a Partner and Head of Consumer and Retail Investing. In addition, Ms. Wheeler has served as a director for TKO Group Holdings, Inc. since September 2023, and has previously served on a number of other corporate boards, including Dollar Tree, Neiman Marcus Group, and Petco Animal Supplies. Qualifications: We believe Ms. Wheeler’s qualifications to serve on our Board include her executive leadership, extensive experience in business assessment, mergers and acquisitions, financing and guiding public market transactions, her current experience as a Chief Executive Officer and former Chief Financial Officer of a public company, and her substantial experience serving on other corporate boards, including her previous service on other companies’ audit committees. |
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Compensation Governance Practices
| What We DO | | | ✓ | Pay for performance with a substantial majority of pay dependent on performance, not guaranteed | | ✓ | Use multi-year vesting terms for annual executive officer equity awards | | ✓ | Balance short- and long-term incentives | | ✓ | Require executive officers to place compensation at risk of “clawback” actions by the Company in appropriate circumstances | | ✓ | Engage an independent compensation consultant | | ✓ | Benchmark compensation to peer and market data during compensation decision-making process | | ✓ | Maintain stock ownership guidelines for officers |
Compensation Governance Practices
| What We DON’T DO | | Maintain single trigger severance provisions upon a change in control in employment agreementsX | | Permit liberal share recyclingX | | Stock option repricing or exchange without shareholder approvalX | | Permit hedging or short sales of the Company’s stockX | | Provide excise tax gross-ups for change in control paymentsX | | Provide excessive severance to executive officersX | | Provide excessive perquisitesX |
Roles and Responsibilities
| Role | Responsibilities | Description | | | | | Compensation Committee | Oversees Programs and Decisions | Our Board has adopted a written Compensation Committee Charter that governs the responsibilities of the Compensation Committee. The Compensation Committee is responsible for, among other things: •reviewing and approving corporate goals and objectives with respect to compensation for the CEO, evaluating the CEO’s performance and approving the CEO’s compensation based on such evaluation; and •determining compensation for the Company’s other executive officers. In reviewing and determining executive compensation, the Compensation Committee generally considers: compensation levels at peer companies and information derived from compensation surveys provided by outside consultants, as further described below; the Company’s past-year performance and growth; the results of any Say-on-Pay votes by shareholders; achievement of specific pre-established financial goals; a subjective determination of the executives’ past performance and expected future contributions to the Company; past equity awards granted to such executives; and the recommendation of the CEO. | | | | | Shareholders | Provide Feedback | The Compensation Committee evaluates the most recent advisory vote of the Company's shareholders on executive compensation, known as the "Say-on-Pay" vote, as well as other feedback that it may receive from the Company's largest shareholders in connection with this vote. Our Say-on- Pay results consistently reflect strong support for the linkage between pay and performance in our compensation programs. Over the past three years our Say-on-Pay results have been above 95%. | | | | | | | | 2021 | 2022 | 2023 | | | | Say on Pay Results | 97.5% | 96.5% | 95.5% | | | | The Compensation Committee believes these voting results demonstrate significant continuing support for our executive compensation program. We seek input from our shareholders and conduct shareholder engagement efforts throughout the year. The Compensation Committee will continue to consider the views of our shareholders in connection with executive pay practices and programs and will make adjustments based on evolving best practices and changing regulatory or other requirements. | | | | | Independent Compensation Consultant | Advises Compensation Committee | In 2023, the Compensation Committee used WTW to serve as the independent compensation consultant. The information from WTW regarding pay practices at peer companies is used by the Compensation Committee as a resource in its deliberations regarding executive compensation and will be useful in determining the marketplace competitiveness as well as reasonableness and appropriateness of our executive compensation programs. | | | | | Executive Officers | Provide Input and Insights | The Compensation Committee considers input from our CEO, CFO, and Chief People Officer when determining performance metrics and objectives for our STI and LTI plans and evaluating performance against such metrics and objectives. Our CEO and Chief People Officer then evaluate the individual performance and the competitive pay positioning of senior management members who report directly to the CEO, including the NEOs, and then make recommendations to the Compensation Committee regarding the target compensation for such NEOs and other executive officers of the Company. | | | |
Compensation Peer Group
Compensation Peer Group How we use peer group data We compare our executive compensation programs to those of 17 companies that make up our compensation peer group. The Compensation Committee uses peer group data to generally inform: •compensation plan design, •compensation levels for our NEOs, including base salaries, annual incentive targets and LTI award targets, and •form and mix of equity awards granted to our NEOs. When making compensation decisions, the Compensation Committee generally analyzes data relating to our peer group and considers the dynamics of operating in the safety services and specialty services industries, the importance of rewarding and retaining talented and experienced executives to continue to guide the Company, the alignment of our executive compensation program with shareholders’ interests and the voting guidelines of certain proxy advisory firms and shareholders. In addition, in connection with the 2023 executive compensation program design, the Compensation Committee received analyses, guidance and recommendations, including general information on executive compensation market trends and practices of peer companies, provided by the Compensation Committee’s independent compensation consultant. The Compensation Committee does not strictly benchmark executive pay against this comparative compensation information, but instead uses this data as a market check on its compensation decisions. How our peer group was determined In determining our 2023 peer group, the Compensation Committee considered factors such as revenue, market capitalization, global scope of operations, and industry alignment. The approach taken by the Compensation Committee in selecting the peer group excluded larger companies from the market data review but included them as “reference peers” for the purpose of providing qualitative data about program design for the Compensation Committee’s reference. For 2023 five peers were removed given they are predominantly construction and contracting companies and five peers were added that had a significant recurring service element to their business.
Compensation Peer Group
| 2023 Peer Group | | | | ADT Inc. | Comfort Systems USA, Inc. | Resideo Technologies, Inc. | | ABM Industries Incorporated | Ecolab Inc. | SNC-Lavalin Group Inc. | | Aramark | EMCOR Group, Inc. | The Brink's Company | | ASGN Incorporated | Jacobs Engineering Group Inc. | Waste Connections, Inc. | | Cintas Corporation | Otis Worldwide Corporation | Xylem Inc. | | Clean Harbors, Inc. | Republic Services, Inc. | | | Reference Peer | | | | Johnson Controls International plc | | |
Compensation Peer Group
| Peer Group Changes Made for 2023 | | | | Removed from peer group: | | | | Dycom Industries, Inc. | Primoris Services Corporation | Tutor Perini Corporation | | MasTec, Inc. | Quanta Services, Inc. | | | Added to peer group: | | | | ABM Industries Incorporated | Republic Services, Inc. | Waste Connections, Inc. | | Clean Harbors, Inc. | The Brink's Company | |
Components of the Executive Compensation Program
| Role | Compensation Element & Purpose | Key Characteristics | How the Amount is Determined | | Fixed | Base Salary Attract and retain top talent | Fixed compensation component paid in cash | Base salary decisions are informed by peer group market data by role, individual contributions to business outcomes, pay equity and future potential, among other factors | | Variable (At- Risk) | Short-Term Incentives (STI) Align compensation with annual financial performance on key financial metrics and motivate the achievement of those results For further details see the "Short-Term Incentive Compensation" section | Variable compensation payable in cash, based on the achievement of pre- established annual financial goals 100% based on Adjusted EBITDA Payouts can range from 0-200% of target | Each NEO has an individual target set as a % of base salary Individual target STI % are informed by peer group market data by role, job scope and responsibilities, pay equity and future potential Payouts are determined based on actual financial results vs. the pre- established annual financial goals | | | Long-Term Incentives (LTI) Align the interests of our executives with shareholders, encourage long-term value creation and serve as a retention vehicle For further details on the Performance Share Units ("PSUs") and Restricted Stock Units ("RSUs") see the "Long- Term Incentive (LTI)" section. | Variable compensation tied to stock price performance and, in some cases, pre- established 3-year financial goals 60% Cumulative Adjusted EBITDA PSUs, payout range of 0-200%; 40% RSUs | Each NEO has an individual target set as a % of base salary Individual target LTI %s are informed by peer group market data by role, individual contributions to business outcomes, pay equity and future potential, among other factors |
Short-Term Incentive Compensation
Short-Term Incentive Compensation In 2023, Company executives had an opportunity to earn cash incentive compensation based on the achievement of annual performance goals developed in the annual budget process and approved by the Compensation Committee. The Compensation Committee annually reviews, and revises if necessary, the appropriateness of the performance metrics, their correlation to the Company’s overall growth strategy and the impact of such performance metrics on long-term shareholder value. The Compensation Committee did not make any revisions to the STI plan after the goals were approved at the beginning of the performance period. STI Opportunity. For 2023, all our NEOs were eligible for an annual cash incentive opportunity as outlined below, based on the achievement of a performance goal tied to the Company’s annual Adjusted EBITDA performance. Amounts payable under the annual incentive portion of the executive compensation plan can range from 0-200% of target, with a threshold payout at 40% of target and a maximum payout of 200% of target based on achievement of the performance goal. If the performance goal was achieved between the threshold level and target or between the target and maximum level, the amount of the annual incentive payment with respect to that performance goal is calculated on a linear basis from the target level. Performance Metrics, Target, 2023 Performance and Payout. For 2023, the Compensation Committee determined that the annual incentive compensation paid to our NEOs would be based on performance against adjusted EBITDA targets. Adjusted EBITDA is calculated based on net income, adjusted as described in the Appendix and to eliminate the impact of foreign currency fluctuations. The Compensation Committee believes that our NEOs can impact adjusted EBITDA and that it is one of the most important performance metrics used by investors, shareholders and creditors as an indicator of the performance of our core business.
Compensation Discussion & Analysis
| Payout % | 0% | 40% | 100% | 200% | | Metric | < Threshold | Threshold | Target | Maximum | | 2023 Adjusted EBITDA Targets ($ in millions) | <$719.2 | $719.2 | $757.0 | $794.9 | | 2023 Adjusted EBITDA Actual Performance ($ in millions) | $783.2 | | | | | 2023 Financial Performance Score | 169.1% | | | |
Compensation Discussion & Analysis
| Named Executive Officer | Target STI as a % of Base Salary | Financial Performance Payout Factor | Payout | | Russell A. Becker | 125% | 169.1% | $3,012,094 | | Kevin S. Krumm | 100% | 169.1% | $1,339,272 | | Louis B. Lambert | 75% | 169.1% | $634,125 | | Kristina M. Morton | 75% | 169.1% | $602,419 |
Long-Term Incentive (LTI) Compensation
Long-Term Incentive (LTI) Compensation
2023 LTI Grants
2023 LTI Grants The 2023 executive compensation program adopted by the Compensation Committee includes the grant of LTI Awards under the Equity Incentive Plan. The Compensation Committee used a percentage of each NEO’s base salary to determine the value of the LTI Award to be granted to each NEO each year. The Compensation Committee also believes that the structure of LTI Awards should correlate the value of any such award to the achievement by the Company of long-term and strategic objectives. As such, the Compensation Committee expects that a significant percentage of the amount of LTI Awards will be subject to the achievement of Company performance goals. Time-based awards are awarded as part of a balanced approach to encourage retention and ensure that the Company’s compensation programs do not encourage excessive risk-taking. For 2023, the Compensation Committee approved the grant of a mix of PSUs and RSUs to the NEOs. The RSUs represent 40% of the total target award amount and will vest ratably over three years from the date of grant. The PSUs represent 60% of the total target award amount, assuming performance and vesting at target levels. The performance metric for the 2023 PSU LTI Awards were based on cumulative adjusted EBITDA dollars. The metric was chosen because we believe it is a driver of sustained value creation over the long term for our shareholders. The cumulative adjusted EBITDA dollar metric has a three-year performance period and a payout range of 0-200% based on the achievement of the pre-established goals (below threshold performance equating to 0%, threshold performance equating to 25%, target performance equating to 100% and maximum performance equating to 200%), the achievement of which will be determined by the Compensation Committee
Compensation Discussion & Analysis
| Named Executive Officer | Target LTI as a % of Base Salary | Total Grant Date Fair Value ($) | PSUs | RSUs | | Russell A. Becker | 400% | $5,700,030 | $3,420,023 | $2,280,007 | | Kevin S. Krumm | 250% | $1,980,021 | $1,188,003 | $792,018 | | Louis B. Lambert | 175% | $875,018 | $525,006 | $350,012 | | Kristina M. Morton | 150% | $712,530 | $427,509 | $285,021 |
Compensation Discussion & Analysis
Each of the above PSU awards represents the target grant amount; actual shares earned at vesting, if any, may be higher or lower depending on the level of performance achieved.
2021-2023 PSU
2021-2023 PSU In February 2024, Mr. Becker received the vested shares with respect to the PSU awards that were granted in February 2021 for the three-year performance period ending December 31, 2023 based on Adjusted EBITDA Margin percentage at the of the performance period. The original PSU targets were adjusted due to the dilutive impact to margin percentage resulting from the Company's transformational acquisition of the Chubb Fire and Security business for $2.9 billion in January 2022. For the trailing twelve-month period immediately preceding execution of the acquisition agreement, Chubb Fire and Security had revenue of approximately $2.2 billion and adjusted EBITDA of approximately $213 million. After the Chubb adjustment, these awards achieved 100% of the goal number of shares. The following table summarizes performance achievement for this award.
2021-2023 PSU
| Payout % | 0% | 25% | 100% | 200% | | Metric | < Threshold | Threshold | Target | Maximum | | 2023 Adjusted EBITDA Margin Targets | <10.7% | 10.7% | 11.3% | 13.3% | | 2023 Adjusted EBITDA Margin Actual Performance | 11.3% | | | | | 2021-2023 PSU Performance | 100.0% | | | |
2022-2024 PSU—Target Share Price
2022-2024 PSU—Target Share Price In March 2022, Mr. Becker and Mr. Krumm were granted PSUs with a target share price performance criteria. These PSUs vest at target and only in the event that the performance target was achieved. The share price performance criteria was a $30+ per share price for 20 consecutive trading days. This represented a 44% increase from the grant date share price. On December 27, 2023 that performance criteria was met. The shares associated with this award will vest at target on March 7, 2025.
Change in Control
Change in Control The Employment Agreements with Mr. Becker and Mr. Krumm provide that if the executive is terminated either without “cause” (as defined in their Employment Agreements) or terminates their employment for “good reason” (as defined in their Employment Agreements) during the two-year period immediately following a “change in control” (as defined in the Equity Incentive Plan), they will be entitled to certain payments and benefits. The Executive Severance Policy, effective January 1, 2023, provides that if an Eligible Executive (as defined in the policy and not including Mr. Becker and Mr. Krumm specifically) is terminated without “cause” (as defined in the policy) or terminates their employment for “good reason” (as defined in the Equity Incentive Plan) during the one-year period following a “change in control” (as defined in the Equity Incentive Plan), they will be entitled to certain severance payments and benefits. See the “Potential Payments Upon Termination or Change in Control” section below. We believe such change in control provisions serve the best interests of the Company and our shareholders by allowing our executives to exercise sound business judgement without fear of significant economic loss in the event they lose their employment with the Company as a result of a change in control. We also believe that such arrangements are competitive, reasonable and necessary to attract and retain key executives.
Executive Severance
Executive Severance Under their Employment Agreements, if Mr. Becker or Mr. Krumm are involuntarily terminated without “cause” or terminate their employment for “good reason” during a period outside the two-year period
Compensation Discussion & Analysis
immediately following a change in control, each will be entitled to: (i) all previously earned and accrued but unpaid amounts of their base salary up to their termination date; and (ii) subject to certain conditions, severance pay as described under the “Potential Payments Upon Termination or Change in Control” section below. Under the Executive Severance Policy, effective January 1, 2023, Mr. Lambert and Ms. Morton are entitled to severance pay as described under the “Potential Payments Upon Termination or Change in Control” section below.
Summary Compensation Table
Summary Compensation Table The following table summarizes the compensation of our NEOs for the fiscal years presented.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) | | Russell A. Becker | 2023 | $1,425,000 | — | $5,700,030 | $3,012,094 | $60,506 | $10,197,630 | | President and Chief Executive Officer | 2022 | $1,350,000 | — | $5,400,052 | $1,898,100 | $53,705 | $8,701,857 | | | 2021 | $1,250,012 | — | $5,700,280 | $1,025,000 | $52,216 | $8,027,508 | | Kevin S. Krumm | 2023 | $792,315 | — | $1,980,020 | $1,339,272 | $39,732 | $4,151,339 | | Executive Vice President and Chief Financial Officer | 2022 | $750,000 | — | $1,875,022 | $1,054,500 | $27,398 | $3,706,920 | | | 2021 | $213,068 | — | $1,250,003 | $220,000 | $5,199 | $1,688,270 | | Louis B. Lambert | 2023 | $500,000 | — | $875,018 | $634,125 | $22,127 | $2,031,270 | | Senior Vice President,General Counsel and Secretary | 2022 | $218,750 | $120,000 | $600,013 | $230,672 | $5,431 | $1,174,866 | | Kristina M. Morton | 2023 | $475,000 | — | $712,530 | $602,419 | $32,061 | $1,822,010 | | Senior Vice President, Chief People Officer | 2022 | $397,211 | $107,000 | $1,600,017 | $418,859 | $16,896 | $2,539,983 |
Summary Compensation Table
(1)The amounts in this column do not reflect compensation actually received by the NEOs, nor do they reflect the actual value that will be recognized by the NEOs. Instead, the amounts represent the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions used in calculating the amounts for 2023, see Note 20 to our historical consolidated financial statements for the year ended December 31, 2023 included in our Annual Report on Form 10-K for the year ended December 31, 2023. (2)Amounts shown in this column represent the aggregate grant date fair value of PSUs granted to certain of our NEOs, and the grant date fair value of time-based RSUs granted to each of our NEOs in the fiscal years indicated, computed in accordance with FASB ASC Topic 718. The aggregate grant date fair value of the PSUs that have an EBITDA performance condition was computed based on the probable outcome of the applicable performance target as of the grant date and 100% achievement of such performance target. For 2023, the value of these PSUs at the grant date assuming the highest level of performance achieved, earned at 200% of target would be $6,840,045 for Mr. Becker; $2,376,006 for Mr. Krumm; $1,050,012 for Mr. Lambert; and $855,017 for Ms. Morton. The grant date fair value of the time-based RSUs was computed in accordance with FASB ASC Topic 718, based on the closing market price of our common stock on the grant date. Additional information regarding the 2023 equity awards is set forth below in the Grants of Plan-Based Awards During 2023 table. (3)The amounts reported reflect compensation earned for 2023 performance under our annual cash incentive compensation program. We make payments under this program in the first quarter of the fiscal year following the fiscal year in which they were earned after finalizing our annual audited financial statements. (4)These amounts represent Company matching contributions to the 401(k) Plan, Company profit-sharing contributions of common stock to the 401(k) Plan, executive life and disability insurance benefits, annual executive physicals, club fees and car allowance. Additional detail regarding the components of the amounts shown for 2023 for each of our NEOs is provided in the "All Other Compensation Table" below.
Grants of Plan-Based Awards During 2023
Grants of Plan-Based Awards During 2023 The following table provides information about cash (non-equity) and equity incentive compensation awarded to our NEOs in 2023. Information on the terms of these awards is discussed in greater detail in this proxy statement under the caption “Compensation Discussion and Analysis.” See “Potential Payments Upon Termination or Change in Control” for a discussion of how equity awards are treated under various termination scenarios.
Grants of Plan-Based Awards During 2023
| Name | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Grant Date and Approval Date | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | Grant Date Fair Value of Stock Awards ($)(4) | | | Threshold ($) | Target ($) | Maximum ($) | | Threshold (#) | Target (#) | Maximum (#) | | | | Russell A. Becker | $712,500 | $1,781,250 | $3,562,500 | 2/27/2023 | 36,508 | 146,030 | 292,060 | | $3,420,023 | | | | | | 2/27/2023 | | | | 97,353 | $2,280,007 | | Kevin S. Krumm | $316,800 | $792,000 | $1,584,000 | 2/27/2023 | 12,682 | 50,726 | 101,452 | | $1,188,003 | | | | | | 2/27/2023 | | | | 33,818 | $792,018 | | Louis B. Lambert | $150,000 | $375,000 | $750,000 | 2/27/2023 | 5,604 | 22,417 | 44,834 | | $525,006 | | | | | | 2/27/2023 | | | | 14,945 | $350,012 | | Kristina M. Morton | $142,500 | $356,250 | $712,500 | 2/27/2023 | 4,564 | 18,254 | 36,508 | | $427,509 | | | | | | 2/27/2023 | | | | 12,170 | $285,021 |
Grants of Plan-Based Awards During 2023
(1)The amounts in these columns reflect potential payments of annual cash incentive compensation based on 2023 performance. The 2023 annual cash incentive payments were made in March 2024. The actual amounts paid under our annual cash incentive compensation program are the amounts reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. (2)This column represents the number of PSUs granted in 2023 to the NEOs. The threshold, target and maximum amounts reflect the maximum number of shares that may be earned assuming that 25%, 100% and 200% of the applicable performance target is achieved. See footnote 3 to the Summary Compensation Table and page 28 of the CD&A for additional information. (3)This amount represents the number of RSUs granted in 2023 to the NEOs. The RSUs vest in equal installments on the first, second and third anniversaries of the grant date. (4)Each amount reported in this column represents the grant date fair value of the applicable award which was determined pursuant to FASB ASC Topic 718. The actual amounts that will be received by our NEOs with respect to these performance-based awards will be determined at the end of the performance period based upon our actual stock price performance, which may differ from the performance that was deemed probable at the date of the grant.
Outstanding Equity Awards at 2023 Year End
Outstanding Equity Awards at 2023 Year End The following table provides information concerning unvested RSUs and PSUs held by each of our NEOs as of December 31, 2023.
Outstanding Equity Awards at 2023 Year End
| Name | Stock Awards | | | | | | | Grant Date | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: # of Unearned Shares Not Vested (#) | Equity Incentive Plan Awards: Value Unearned Shares Not Vested ($)(2) | | Russell A. Becker | 2/27/2023 | 97,353 | $3,368,414 | | | | | 2/27/2023(3) | | | 36,508 | $1,263,177 | | | 3/9/2022 | 34,666 | $1,199,444 | | | | | 3/9/2022(4) | | | 143,618 | $4,969,183 | | | 3/9/2022(5) | | | 26,000 | $899,600 | | | 2/17/2021 | 17,452 | $603,839 | | | | | 2/17/2021(6) | | | 209,425 | $7,246,105 | | Kevin S. Krumm | 2/27/2023 | 33,818 | $1,170,103 | | | | | 2/27/2023(3) | | | 12,682 | $438,797 | | | 3/9/2022 | 12,036 | $416,446 | | | | | 3/9/2022(4) | | | 49,868 | $1,725,433 | | | 3/9/2022(5) | | | 9,028 | $312,369 | | | 9/20/2021 | 20,148 | $697,121 | | | | Louis B. Lambert | 2/27/2023 | 14,945 | $517,097 | | | | | 2/27/2023(3) | | | 5,605 | $193,933 | | | 8/2/2022 | 22,359 | $773,621 | | | | Kristina M. Morton | 2/27/2023 | 12,170 | $421,082 | | | | | 2/27/2023(3) | | | 4,564 | $157,914 | | | 3/9/2022 | 51,356 | $1,776,918 | | |
Outstanding Equity Awards at 2023 Year End
(1)The RSUs vest in equal installments on the first, second and third anniversaries of the grant date. (2)These amounts are calculated by multiplying the closing price of the underlying shares of common stock on December 29, 2023, or $34.60 per share, by the number of units. The actual value realized could be different based upon the stock price at the time of settlement. (3)These PSUs are subject to a three-year performance period beginning January 1, 2023 and ending December 31, 2025, and may be earned and vested at the end of the three-year performance period. The amount shown represents the number of units assuming threshold level performance. There is no assurance that the target amount will be the actual amount ultimately paid. (4)These PSUs vest at the later of the third anniversary of the grant date and the date the performance target is achieved on or prior to the fifth anniversary of the grant date. (5)These PSUs are subject to a three-year performance period beginning January 1, 2022 and ending December 31, 2024, and may be earned and vested at the end of the three-year performance period. The amount shown represents the number of units assuming threshold level performance. There is no assurance that the target amount will be the actual amount ultimately paid. (6)These PSUs are subject to a three-year performance period beginning January 1, 2021 and ending December 31, 2023, and may be earned and vested at the end of the three-year performance period. The amount shown represents the number of units at target level performance.
Stock Vested During 2023
Stock Vested During 2023 The following table provides information regarding vesting of RSUs and the value realized on vesting of RSUs on an aggregated basis during the fiscal year ended December 31, 2023 for each of the NEOs.
Stock Vested During 2023
| Name | Stock Awards(1) | | | | # of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | | Russell A. Becker | 34,785 | $778,797 | | Kevin S. Krumm | 26,167 | $709,156 | | Louis B. Lambert | 11,180 | $322,990 | | Kristina M. Morton | 25,679 | $583,427 |
Stock Vested During 2023
(1)These columns reflect RSUs previously awarded to the NEOs that vested during 2023 and represents gross amounts before withholding for tax purposes. (2)Calculated based on the closing price of a share of common stock on the applicable vesting dates.
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control Our Employment Agreements with Mr. Becker and Mr. Krumm as in effect in 2023 provide for severance payments under certain circumstances. Under these Employment Agreements, the Company may terminate Mr. Becker’s and Mr. Krumm’s employment at any time with or without “cause” (as defined in their respective Employment Agreements), and each of these executives may terminate employment at any time for “good reason” (as defined in their respective Employment Agreements). If the Company terminates the employment of Mr. Becker or Mr. Krumm without cause or if they terminate employment for good reason, each would be entitled to receive (i) his base salary for two years from the date of termination, (ii) an amount equal to two times his target annual bonus, paid in two annual installments, (iii) any earned and accrued but unpaid base salary up to the date of termination, (iv) his prorated annual bonus for the year in which the termination occurs, (v) any unpaid annual bonus with respect to any completed fiscal year and (vi) his vested employee benefits. In addition, Mr. Krumm would be entitled to continued insurance coverage for eighteen months following the date of termination. Neither Mr. Becker nor Mr. Krumm would be entitled to any unearned salary, bonus or other benefits if the Company were to terminate them for cause or if they were to terminate employment voluntarily without good reason. With respect to Mr. Becker and Mr. Krumm, pursuant to their respective Employment Agreements, if employment should terminate as a result of the death or disability of the executive, the executive, or his estate, would be entitled to receive (i) all previously earned and accrued but unpaid base salary up to the date of termination and (ii) his prorated annual bonus for the year in which termination occurs. The Company’s obligation under the Employment Agreements with these executives terminates on the last day of the month in which the executive’s death occurs or on the date of termination of employment on account of the executive’s disability. With respect to Mr. Lambert and Ms. Morton, as provided under the Executive Severance Policy (i) if, during the one-year period immediately following a “change in control,” the Company terminates the executive without “cause” (as defined in the policy) or if the executive terminates employment for “good reason” (as defined in the Equity Incentive Plan), the executive would be entitled to receive, subject to satisfaction of certain conditions, (a) an amount equal to 1.5x base salary, (b) an annual bonus amount based on target performance, (c) continued insurance coverage for twelve months following the date of termination, and (d) accelerated vesting of his or her unvested RSUs and PSUs at the greater of actual or target performance; and (ii) if the Company should terminate the executive without cause at any other time, the executive would be entitled to receive, subject to satisfaction of
CEO Pay Ratio
CEO Pay Ratio As required by Section 953(b) of the Dodd-Frank Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the median annual total compensation of our employees and the annual total compensation of our CEO, Mr. Becker. For fiscal 2023: •The total compensation of our median employee, calculated in accordance with the rules applicable to the Summary Compensation Table, was $59,235;
Pay Versus Performance
Pay Versus Performance As required by pay versus performance rules adopted by the SEC in 2022 (“PVP Rules”), the below Pay Versus Performance table (“PVP Table”) provides information about compensation for this proxy statement’s NEOs, as well as NEOs from our 2023, 2022, and 2021 proxy statements (each of 2020, 2021, 2022, and 2023, a “Covered Year”). The PVP Table also provides information about the results for certain financial performance measures during those same Covered Years. In reviewing this information, there are a few important things to consider: •The information in columns (b) and (d) comes directly from this and prior years’ Summary Compensation Tables, without adjustment; •As required by the PVP Rules, we describe the information in columns (c) and (e) as “compensation actually paid” (or “CAP”) to the applicable NEOs, but these CAP amounts may not necessarily reflect compensation that our NEOs actually earned for their service in the Covered Years; •The PVP Rules require that we choose a peer group or index for purposes of TSR comparisons, and
Executive Compensation
| Year | Summary Compensation Table Total for PEO (1) | Compensation Actually Paid to PEO (1)(2) | Average Summary Compensation Table Total for Non-PEO NEOs (1) | Average Compensation Actually Paid to Non-PEO NEOs (1)(3) | Value of Initial Fixed $100 Investment Based On: | | Net Income (Loss) (millions) | Adjusted EBITDA (millions) | | | | | | | Total Shareholder Return | Peer Group Total Shareholder Return (4) | | | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | 2023 | $10,197,630 | $21,082,748 | $2,668,206 | $4,283,108 | $328 | $206 | $153 | $782 | | 2022 | $8,701,857 | $4,391,722 | $1,928,794 | $1,723,965 | $178 | $172 | $73 | $673 | | 2021 | $8,027,508 | $11,514,717 | $1,611,370 | $1,288,101 | $244 | $181 | $47 | $407 | | 2020 | $1,742,994 | $4,880,625 | $858,874 | $1,069,057 | $172 | $126 | ($153) | $381 |