UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.)
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The Eastern Company
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112 Bridge Street
P.O. Box 460
Naugatuck, CT 06770-0460
______________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 3, 20172, 2018
______________
The Annual Meeting of shareholdersShareholders of The Eastern Company (“Eastern”("Eastern" or the “Company”"Company") will be held on May 3, 20172, 2018 at 11:00 a.m., local time, at the office of the Company, 112 Bridge Street, Naugatuck, Connecticut 06770-0460, for the following purposes:
| 1. | To elect twofour directors. |
| 2. | To vote on a nonbinding advisory vote to approve the compensation of the named executive officers. |
| 3. | To vote on a nonbinding advisory vote on the frequency of presenting future advisory votes to approve the compensation of the named executive officers. |
| 4. | To ratify the Audit Committee’sCommittee's recommendation and the Board of Directors’Directors' appointment of Fiondella, Milone & LaSaracina LLP as the independent registered public accounting firm to audit the consolidated financial statements of the Company and its subsidiaries for the fiscal year 2017.2018. |
| 5.4. | To transact such other business as may properly come before the annual meeting of shareholders or any adjournment thereof. |
The Board of Directors has fixed March 1, 20172018 as the record date for the determination of common shareholders entitled to notice of, and to vote at, the Annual Meetingannual meeting or any adjournment thereof.
Your vote is very important. Whether or not you plan to attend the Annual Meeting,annual meeting of shareholders or any adjournment thereof, we urge you to sign, date and return the enclosedvote your proxy cardas promptly in the postpaid return envelope that is provided or call the toll free number provided on the enclosed proxy card.as possible. If you attend the annual meeting and desire to vote in person before your proxy is exercised, your proxy will be deemed revoked and will not be used.
All shareholders are cordially invited to attend the annual meeting of shareholders or any adjournment thereof, and management looks forward to seeing you there.
By order of the Board of Directors,
Theresa P. Dews
Secretary
March 15, 20172018
PROXY STATEMENT
of
THE EASTERN COMPANY
for the Annual Meeting of Shareholders
To Be Held on May 3, 20172, 2018
The Board of Directors of The Eastern Company (“Eastern”("Eastern," the "Company," "we," "us" or the “Company”"our") is furnishing this proxy statement in connection with its solicitation of proxies for use at the 20172018 Annual Meeting of Shareholders and at any adjournment thereof.thereof (the "Annual Meeting"). This proxy statement is first being furnished to shareholders on or about March 15, 2017.
2018.
GENERAL INFORMATION REGARDING VOTING AT THE ANNUAL MEETING
The Board of Directors of Eastern (the "Board") has fixed the close of business on March 1, 20172018 as the record date for determining the shareholders entitled to notice of, and to vote at, the Annual Meeting. On the record date, there were 6,256,0986,263,245 outstanding shares of Eastern common stock, no par value (“("Common Shares”Shares"), with each Common Share entitled to one vote.
The presence, in person or by proxy, of holders of a majority of the voting power of the Common Shares entitled to vote at the Annual Meeting is necessary to constitute a quorum.
Shares represented by Eastern’sEastern's proxy card will be voted at the Annual Meeting, either in accordance with the directions indicated on the proxy card, or, if no directions are indicated, in accordance with the recommendations of the Board of Directors contained in this Proxy Statement and on the form of proxy. If a proxy is signed and returned without specifying choices, the Common Shares represented thereby will be voted (1) FOR the proposal to elect Messrs.Mr. John W. Everets, Mr. Michael A. McManus, Jr., Mr. James A. Mitarotonda, and Mr. August M. Vlak to the Board of Directors; (2) FOR the approval of the compensation of the named executive officers; (3) FOR the approval of the frequency of the advisory vote on the compensation of the named executive officers to be every three years; and (4)(3) FOR the proposal to appoint Fiondella, Milone & LaSaracina LLP as the Company's independent registered public accounting firm. The Company is not aware of any matters other than those set forth herein which will be presented for action at the Annual Meeting. If other matters should be presented, the persons named in the proxy intend to vote such proxies in accordance with their best judgment.
If you submit a proxy and then wish to change your vote, you will need to revoke the proxy that you have submitted. A shareholder may revoke his or her proxy at any time before it is exercised by voting in person at the appointmentAnnual Meeting or by timely delivery of a properly executed, later-dated proxy or a written revocation of his or her proxy. A later-dated proxy or written revocation must be received before the Annual Meeting by making a later appointment or by giving notice of revocation to The Eastern[the Corporate Secretary of] the Company, at 112 Bridge Street, P.O. Box 460, Naugatuck, CT 06770-0460.06770-0460, or it must be delivered to [the Corporate Secretary of] the Company at the Annual Meeting before proxies are voted. You may also revoke your proxy by submitting a new proxy on the Internet [at www.proxyvote.com] no later than 11:59 p.m. local time on May 1, 2018. Attendance at the Annual Meeting does not, in itselfwithout further action, revoke the appointment of a proxy; however, it may be revoked by giving noticevoting in open meeting. A revocation made duringperson at the Annual Meeting after the polls have been closed will not affect the previously taken vote.before your proxy is exercised.
The Common Stock ofShares are listed under the Company is registeredticker symbol "EML" on The NASDAQ Stock Market LLC (“NASDAQ”("NASDAQ").
Solicitation of Proxies
The cost of solicitation of proxies will be borne by the Company. This solicitation by mail to the Company’s shareholders (including this proxy statement and the enclosed proxy) began onOn approximately March 15, 2017. In addition to this solicitation by mail, officers and regular employees2018, we mailed a Notice of internet availability of Proxy Materials advising our shareholders that they could view all of the Companyproxy materials online or request a paper or e-mail copy of the proxy materials. We chose to use this online access format because it expedites the delivery of materials, reduces printing and its subsidiaries may make solicitation by mail, telephone or personal interviews,postage costs and arrangements may be made with companies, brokerage firms,eliminates bulky paper documents, creating a more efficient process for both shareholders and others to forward proxy material to their principals. The Company will defray the expenses of such additional solicitations.Company.
TheYou may receive a paper or e-mail copy of the proxy statement is also available onmaterials free of charge by requesting a copy through one of the Company’s website at www.easterncompany.com.following methods:
1) BY INTERNET: www.proxyvote.com
2) BY TELEPHONE: 1-800-579-1639
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3) BY E-MAIL: sendmaterial@proxyvote.com
Voting at the Annual Meeting
Except in the case of a contested election, directors will be elected by a majority of the votes cast by the shares entitled to vote in the election of directors at the annual meeting of the shareholders at which a quorum is present. Consequently, a nominee will be elected as a director if the votes cast for the nominee’snominee's election as a director exceed the votes cast against such nominee’snominee's election as a director. However, in a contested election, directors will be elected by a plurality of the votes cast at the annual meeting.meeting of shareholders. An election will be considered to be contested if, as of the record date for the annual meeting of shareholders, there are more nominees for election to the Board of Directors than there are positions on the Board of Directors to be filled by election at the annual meeting. Because the election of directors at the 2017this year's Annual Meeting is not a contested election, a nominee for election as a director at the 2017 Annual Meeting will be elected if the votes cast for the nominee exceed the votes cast against the nominee.
If a director is subject to reelection in an uncontested election by a majority of the votes cast, but a majority of the votes are cast against his or her reelection, then the Board of Directors will request that the director to tender his or her resignation. The Board of Directors will nominate for election or reelection as a director only those candidates who agree to tender, promptly following the Annual Meetingannual meeting of shareholders at which they are elected or reelected as a director, irrevocable resignations that will be effective upon: (a) their failure to receive the required vote at the Annual Meetingannual meeting of shareholders at which they face reelection; and (b) the acceptance of such resignation by the Board of Directors.Board. In addition, the Board of Directors will fill vacancies on the Board of Directors and new directorships only with candidates who agree to tender, promptly following their appointment to the Board, of Directors, the same form of resignation tendered by other directors. If an incumbent director fails to receive the required vote for reelection, the Board of Directors will act on an expedited basis to determine whether to accept or reject the director’sdirector's resignation. A director whose resignation is under consideration must abstain from participating in any decision regarding that resignation.
Each matter to be acted upon at the Annual Meeting other than the election of directors will be approved if the votes cast in favor of the matter exceed the votes cast opposing the matter.
Under Connecticut law, an abstaining vote or a broker “non-vote”"non-vote" is considered to be present for purposes of determining a quorum but is not deemed to be a vote cast. A broker “non-vote”"non-vote" occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner. As a result, abstentions and broker “non-votes”"non-votes" are not included in the tabulation of the voting results for the election of directors or the other matters to be acted on at the Annual Meeting, each of which requires the approval of a majority of the votes cast, and therefore do not have the effect of votes of opposition in such tabulations.
The Board of Directors recommends voting:
FOR the election of Messrs.Mr. John W. Everets, Mr. Michael McManus, Jr., Mr. James A. Mitarotonda, and Mr. August M. Vlak as directors.
FOR the approval of the compensation of the named executive officers.
FOR the approval of the frequency of the advisory vote on the compensation of the named executive officers to be every three years.
FOR the appointment of Fiondella, Milone & LaSaracina LLP as the Company's independent registered public accounting firm.
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Item No. 1
ELECTION OF DIRECTORS
At the meeting, twoAnnual Meeting, four directors will be elected to serve for a one-year termterms, which expiresexpire in 20182019 or until his successor is duly elected and qualified. Mr. John W. Everets, Mr. Michael McManus, Jr., Mr. James A. Mitarotonda, and Mr. August M. Vlak, each of whom is a current director whose term expires in 2017, is a nominee2018, are the Company's nominees for election at the meeting. Mr. August M. Vlak is the other nominee for election at the meeting.Annual Meeting.
Unless otherwise specified in your proxy, the persons with power of substitution named in the proxy card will vote your shares FOR the Company’s nominees named below.Company's nominees. If a nominee is unable or unwilling to accept nomination, the proxies will be voted for the election of such other person as may be recommended by the Board. However, the Board of Directors. The Board of Directors, however, has no reason to believe that the Company’sCompany's nominees will be unavailable for election at the Annual Meeting. Approval of this resolution requires the affirmative vote of a majority of the votes duly cast by the sharesCommon Shares represented at the meeting whichAnnual Meeting that are entitled to vote on the matter.
The Board of Directors recommends a vote FOR the election of Mr. John W. Everets, Mr. Michael McManus, Jr., Mr. James A. Mitarotonda, and Mr. August M. Vlak as directors.
Each director has furnished the biographical information set forth below with respect to his present principal occupation, business and other affiliations, and beneficial ownership of equity securities of the Company. Unless otherwise indicated, each director has been employed in the principal occupation or employment listed for at least the past five years.
Company Nominees for Election at the 20172018 Annual Meeting
For a one-year term expiring in 20182019
John W. Everets, age 70,71, has been a Partner in Arcturus Capital LLC, Boston since 2016. Mr. Everets was the Chairman and CEOChief Executive Officer of SBM Financial in Portland, Maine, from May 2010 until October 2016. Mr. Everets was also Chairman and CEOChief Executive Officer of The Bank of Maine from May 2010 until October 2016. He previouslyMr. Everets was Chairmanthe CEO of Yorkshire Capital in Boston, MassachusettsGE HPSC from January2004 until 2006 through May 2010 and he was the Chairman and CEO of H.P.S.C. which was acquired by General Electric inHPSC a healthcare equipment finance company from 1993 to 2004. He then became President and CEO of the acquired company, G.E. H.P.S.C., from 2004 to 2006.
Mr. Everets has been a Director of the Company since 1993 and brings to the Board of Directors extensive knowledge of the Company’sCompany's business. He serves on the Audit, Compensation, Pension Investment Review, and Nominating and Corporate Governance Committees. Mr. Everets has also servedserves on the Boards of Dairy Mart Convenience Stores, Micro Financial/M.F.I. IncDirector of Medallion Financial Corp., Newman's Own Foundation and Newman's Own, Inc. since July 2017 and December 2016, respectively. Mr. Everets is a former director of Financial Security Assurance, (FSA), Crowns North Corp,FSA, Dairy Mart and ADVEST Group and as Trustee of theThe Martin Currie Business Trust Edinburgh Scotland.Edinburgh.
Michael A. McManus, Jr., age 75, is the former Chairman, President and Chief Executive Officer of Misonix, Inc., a publicly traded medical device company. Mr. McManus previously served as President of New York Bankcorp, a New York Stock Exchange company, until its sale in 1998. Earlier, he served as President of Jamcor Pharmaceuticals, as a Vice President of strategic planning at Pfizer, and as an executive vice president of MacAndrews and Forbes, Revlon, Inc., and Pantry Pride.
Mr. McManus has been a Director of the Company since 2015. Mr. McManus is the Chairman of the Company's Compensation Committee and also serves on the Audit, Executive, and Nominating and Corporate Governance Committees.
Mr. McManus is an experienced public company director and has experience in financial matters, sales and marketing, strategic acquisitions, government relations and international business matters. He serves as a director of Novavax, Inc., a vaccine company. He previously served on the respective Boards of Directors of the Communications Satellite Corporation, Arrhythmia Research Technology, Inc., National Wireless Holdings, American Home Mortgage, A. Schulman, Inc. and Guest Services, Inc.. He currently serves as Vice Chairman of the U.S. Olympics Committee Trust.
James A. Mitarotonda, age 63, has served as the Chairman of the Board of Directors, President and Chief Executive Officer of Barington Capital Group, L.P., an investment firm, since 1991.
Mr. Mitarotonda is an experienced public company director. He currently serves as a director of A. Schulman, Inc. and OMNOVA Solutions Inc. During the past five years, Mr. Mitarotonda has also served as a director of The Pep Boys – Manny, Moe & Jack, The Jones Group, Inc., Barington/Hilco Acquisition Corp. and Ebix, Inc. Mr. Mitarotonda serves as a member of the Board of Trustees for Queens College.
Mr. Mitarotonda was elected as a Director of the Company at the annual meeting of shareholders held on May 20, 2015. The Board appointed Mr. Mitarotonda to serve as Chairman of the Board, effective January 1, 2016. Mr. Mitarotonda is the Chairman of the Nominating and Corporate Governance Committee, and he also serves on the Compensation and Executive Committees.
Mr. August M. Vlak, age 50,51, was appointed President and Chief Executive Officer of the Company on January 1, 2016. From 2012 to 2015, Mr. Vlak was a senior advisor to Barington Capital Group, L.P. Prior to that, he was a partner at Katzenbach Partners, a senior advisor at Booz & Company, and a consultant at McKinsey & Company. At his prior positions, Mr. Vlak’sVlak's work focused on growth strategy and operational performance improvement at more than 50 companies, - including leading domestic and global industrial enterprises - where he has worked directly with numerous senior management teams and boards of directors. He was an Investment Banker with Lehman Brother's Health Care Banking Group. Mr. Vlak holds a B.A. degree in Economics from Amherst College, where he was elected Phi Beta Kappa, and an M.B.A. from Stanford University.enterprises.
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Mr. Vlak was elected as a Director of the Company at last year's annual meeting of shareholders, which was held on May 3, 2017.
Continuing Directors (Terms to Expire in 2019)
Fredrick D. DiSanto, age 55,56, is the Chairman and Chief Executive Officer of The Ancora Group, a registeredholding company that oversees three investment advisor.advisors, and has served in such capacities since 2014 and 2006, respectively. Mr. DiSanto was the President and Chief Operating officerOfficer of Maxus Investment Group from 1998 until December of 2000. In January 2001, whenafter Maxus Investment Group was sold to Fifth Third Bank, heMr. DiSanto served as Executive Vice President and Manager of Fifth Third Bank’sBank's Investment Advisor Division.
Mr. DiSanto is an experienced public company director and has knowledge and background in finance, strategic planning, governance and international business. He currently serves as a Directordirector for RBrands,Regional Brands, Inc., Edgewater Technology, Inc. and Medical Mutual of Ohio, and previously served on the boardsrespective Boards of directorsDirectors of Axia NetMedia Corporation, LNB Bancorp, Inc. and PVF Capital Corporation.
Mr. DiSanto was elected as a Director of the Company at the last Annual Meeting,2016 annual meeting of shareholders, which was held on April 26, 2016. Mr. DiSanto is the Chairman of the Audit Committeeand the Pension Investment Review Committees and serves on the Executive Committee.
Charles W. Henry, age 67,68, is an attorney and partner with the law firm Henry & Federer, LLP located in Woodbury, Connecticut. Mr. Henry has been a Director of the Company since 1989 and brings to the Board of Directors extensive knowledge of the Company’sCompany's business. He serves on the Audit, Compensation, Executive, Pension Investment Review, and Nominating and Corporate Governance Committees.
Mr. Henry’sHenry's independent legal expertise is valuable to the Company if and when matters of law or regulation arise in the normal course of the Company’sCompany's businesses. His law firm does not provide any services to the Company.
Continuing Directors (Terms to Expire in 2018)
James A. Mitarotonda, age 62, has been the Chairman of the Board, President and Chief Executive Officer of Barington Capital Group, L.P., an investment firm, since 1991.
Mr. Mitarotonda is an experienced public company director. He currently serves as a director of A. Schulman, Inc., OMNOVA Solutions Inc. and Barington/Hilco Acquisition Corp. During the past five years, Mr. Mitarotonda has also served as a director of The Pep Boys – Manny, Moe & Jack, The Jones Group Inc. and Ebix, Inc. Mr. Mitarotonda serves as a member of the Board of Trustees for Queens College.
Mr. Mitarotonda was elected as a Director of the Company at the Annual Meeting held on May 20, 2015. The Board of Directors appointed Mr. Mitarotonda to serve as Chairman of the Board, effective January 1, 2016. Mr. Mitarotonda is the Chairman of the Nominating and Corporate Governance Committee, and he also serves on the Compensation and Executive Committees.
Michael A. McManus, Jr., age 74, is the former Chairman, President and Chief Executive Officer of Misonix, Inc., a public medical device company. Mr. McManus previously served as President of New York Bankcorp, a NYSE company until its sale in 1998. Earlier he served as President of Jamcor Pharmaceuticals, as a Vice President of strategic planning at Pfizer, and as an executive vice president of MacAndrews and Forbes, Revlon, and Pantry Pride. Mr. McManus was elected as a Director of the Company at the Annual Meeting held on May 20, 2015. Mr. McManus is the Chairman of the Company’s Compensation Committee, and he also serves on the Audit, Executive, and Nominating and Corporate Governance Committees.
Mr. McManus is an experienced public company director and has experience in financial matters, sales and marketing, strategic acquisitions, government relations and international business matters. He serves as a Director of Novavax, Inc., a vaccine company. He previously served on the Board of Directors of the Communications Satellite Corporation, Arrhythmia Research, National Wireless Holdings, American Home Mortgage, A. Schulman and Guest Services. He currently serves as Vice Chairman of the U.S. Olympics Committee Trust.4
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Name | Common Stock Beneficially Owned as of March 1, 2017 | Percentage Of Class | Common Stock Beneficially Owned as of March 1, 2018 | Percentage Of Class |
Fredrick D. DiSanto (1) | 14,754 | 0.24% | 52,861 | 0.84% |
John W. Everets | 95,081 | 1.52% | 115,665 | 1.85% |
Charles W. Henry | 65,325 | 1.04% | 61,585 | 0.98% |
Leonard F. Leganza (2) | 127,110 | 2.03% | |
Michael A. McManus, Jr. | 2,855 | 0.05% | 9,216 | 0.15% |
James A. Mitarotonda (3) | 528,460 | 8.45% | |
August M. Vlak | - | - | |
James A. Mitarotonda (2) | | 580,294 | 9.27% |
August M. Vlak (3) | | 8,836 | 0.14% |
(1) | Mr. DiSanto has direct ownership of 6,054directly owns 9,064 Common Shares and shares and has shared voting |
power and shared investment power ofover an additional 8,700 shares.43,797 Common Shares.
(2) | Mr. Leganza retired as the ChairmanMitarotonda directly owns 4,591 Common Shares and Chief Executive Officer of thehas voting |
Company on December 31, 2015. His term as a director of the Companyor investment power over an additional 575,703 Common shares.
expired on March 8, 2017 as a result of his death.
(3) | Mr. Mitarotonda has direct ownership of 2,855 shares and beneficialIncludes 1,760 Common Shares underlying stock appreciation rights |
ownership of an additional 525,605 shares.
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that became exercisable on February 1, 2018.
Item No. 2
ADVISORY VOTE ON THE COMPENSATION OF THE NAMED EXECUTIVESEXECUTIVE OFFICERS
We are asking our shareholders to cast a non-binding advisory vote to approve the compensation of our named executive officers described in the Compensation Discussion and Analysis and in the tabular and accompanying narrative disclosure regarding named executive officer compensation (the "Say-on-Pay Vote"). We encourage you to read the Compensation Discussion and Analysis and the tables and narratives for the 2017 compensation of our named executive officers.
While our Board values the opinions expressed by shareholders and intends to carefully consider the result of the shareholder vote on this proposal, the vote will be nonbinding and is only advisory in nature.
The Board recommends that shareholders approve the compensation of Directors is presenting the following proposal, which is required pursuant to Section 14A of the Securities Exchange Act of 1934. It provides for you as a shareholder to either endorse or not endorse the Company’s compensation program for theour named executive officers as disclosed in the Compensation Discussion and Analysis, and in the tabular and accompanying narrative disclosure of this proxy statement by voting for or againstFOR the following resolution, which is commonly referred to as “say-on-pay”.resolution:
RESOLVED, that the compensation paid to the Company’sCompany's named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.
While our Board of Directors intends to carefully consider the result of the shareholder vote on this proposal, the vote will be nonbinding and is only advisory in nature.
The Board of Directors recommends voting FOR approval of the compensation of our named executive officers as disclosed in the Compensation Discussion and Analysis and the compensation tables of this proxy statement. Proxies will be voted FOR approval of the proposal unless otherwise specified.
The Board of Directors recommends votinga vote FOR the approval of the compensation program of theour named executive officers.
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Item No. 3
ADVISORY VOTE ON THE FREQUENCY OF THE VOTE ON THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS
The Board of Directors is presenting the following proposal, which is required pursuant to Section 14A of the Securities Exchange Act of 1934, commonly known as a “say on pay” proposal. This proposal gives you as a shareholder the opportunity to inform the Board as to how often you wish the Company to include in our proxy statement a proposal such as the proposal in proxy Item No. 2. You can vote on the following resolution:
RESOLVED, that the shareholders wish the Company to include an advisory vote on the compensation of the Company’s named executive officers pursuant to Section 14A of the Securities Exchange Act of 1934 (select one):
1) every year;
2) every two years;
3) every three years; or
4) abstain from vote.
For the purposes of this Item No. 3, which provides for an advisory vote on the compensation of our named executive officers every one, two, or three years, the Company will treat the option selected by the affirmative vote of a plurality of shares present and entitled to vote as the option approved by the shareholders.
While our Board of Directors intends to carefully consider the shareholder vote resulting from this proposal, the final vote will be nonbinding and is only advisory in nature.
The Board has adopted a policy that it will include an advisory vote on the compensation of the named executive officers similar to Item No. 2 every three years.
The Board of Directors recommends voting FOR choice number 3, which provides that shareholders will have an advisory vote every three years on the compensation of the Company’s named executive officers.
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Item No. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The firm of Fiondella, Milone & LaSaracina LLP acts as our principal independent registered public accounting firm. The services of Fiondella, Milone & LaSaracina LLP for the fiscal year ended December 31, 201630, 2017 included an audit of the consolidated financial statements of the Company; assistance in connection with filing the Company's Annual Report on Form 10-K annual report with the Securities and Exchange Commission;Commission (the "SEC"); assistance on financial accounting and reporting matters; preparation of state and federal tax returns; audits of employee benefit plans; and meetings with the Audit Committee of the Board of Directors.Committee.
AllIt is the policy of our Audit Committee to approve all audit and acceptable non-audit engagements provided by the independent registered public accounting firm regarding the scope of the services provided by Fiondella, Milone & LaSaracina LLP for 2016, which were similarthe independent registered public accounting firm. These services may include audit, audit-related, tax and other services. The independent registered public accounting firm and management are required to the audit service provided in prior years, were approved byreport to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in advance of the work being performed.accordance with this policy.
The Audit Committee has recommended, and the Board of Directors has approved, continuing the services of Fiondella, Milone & LaSaracina LLP for the current2018 fiscal year. Accordingly, the Board of Directors will recommendrecommends that shareholders vote at the meeting that the shareholders approveAnnual Meeting FOR the appointment of Fiondella, Milone & LaSaracina LLP to audit the consolidated financial statements of the Company for the current2018 year.
The proposal to appoint Fiondella, Milone & LaSaracina LLP as the Company's independent registered public accounting firm will be approved if, at the Annual Meeting at which a quorum is present, the votes cast in favor of the proposal exceed the votes cast opposing the proposal.
Representatives of Fiondella, Milone & LaSaracina LLP will be present at the Annual Meeting and will have an opportunity to make a statement, if they desire to do so, as well asand will be available to respond to questions.
All fees related to audit services described below were approved in advance by our Audit Fees: Fiondella, Milone & LaSaracina LLP audit fees were $375,000 in 2016 and $375,000 in 2015. Audit fees include fees associated with the annual audit and the reviews of the Company’s quarterly reports on Form 10-Q for the quarters ended April 2, 2016, July 2, 2016 and October 1, 2016.Committee.
| | 2017 | | 2016 |
Audit Fees – Annual & quarterly reviews | | $ | 420,000 | | $ | 375,000 |
Audit-Related Fees – Employee Benefit Plans | | $ | 51,223 | | $ | 50,712 |
Tax Fees – Federal and State Return preparation | | $ | 32,623 | | $ | 31,390 |
Other Fees – Non-audit services | | $ | 71,446 | | $ | 42,000 |
Audit-Related Fees: Fiondella, Milone & LaSaracina LLP fees for audit related services were $50,712 in 2016 and $51,136 in 2015. Audit related services primarily include audits of the employee benefit plans of the Company.
Tax Fees: Fiondella, Milone & LaSaracina LLP fees paid in 2016 for preparation of the 2015 federal and state income tax returns were $31,390, and fees paid in 2015 for preparation of the 2014 federal and state income tax returns were $31,529.
All Other Fees: Fiondella, Milone & LaSaracina LLP fees paid in 2016 for non-audit services were $42,000. Fiondella, Milone & LaSaracina LLP did not provide any non-audit services in 2015.
The Board of Directors recommends a vote FOR the appointment of Fiondella, Milone & LaSaracina LLP as the Company's independent registered public accounting firm.
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firm for the 2018 fiscal year.
AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Directors has determined that all audit committee members are financially literate and are independent under the current listing standards of NASDAQ. The Board has also determined that Fredrick D. DiSanto qualifiesDiSanto, John W. Everets and Michael A. McManus, Jr. qualify as an “audit"audit committee financial expert”experts" as defined by the SEC rules adopted pursuant to the Sarbanes-Oxley Act of 2002.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company’sCompany's financial reporting process on behalf of the Board of Directors.Board. The Board of Directors adopted a revised written charter for the Audit Committee on February 4, 2004. A copy of the Audit Committee’sCommittee's charter is available on the Company’sCompany's website at www.easterncompany.com.
Management has the primary responsibility for the financial statements and the reporting process, including the system of internal control. The independent registered public accounting firm is responsible for expressing an opinion on the conformity of those statements with generally accepted accounting principles.principles in the United States. Within this framework, the Audit Committee has reviewed and discussed the audited financial statements included in the Annual Report on Form 10-K with the independent registered public accounting firm and management. In connection therewith, the Audit Committee reviewed with the independent registered public accounting firm their judgments as to the quality not justand the acceptability of the Company’sCompany's accounting principles; the reasonableness of significant judgments; the clarity of disclosures in the financial statements; and other related matters as required to be discussed under generally accepted auditing standards.standards in the United States.
In addition, the Audit Committee has discussed with the independent registered public accounting firm the auditors’ independence of such firm from management and from the Company, including the matters in the written disclosures required by the Public Company Accounting Oversight Board and the Independence Standards Board, and has considered the compatibility of nonauditnon-audit services with the auditors’such firm's independence.
The Audit Committee also discussed with the Company’sCompany's independent registered public accounting firm the overall scope and plan for their audit, their evaluation of the Company’sCompany's internal controlscontrol and the overall quality of the Company’sCompany's financial reporting. The Audit Committee meetsheld five meetings with the Company's independent registered public accounting firm, both with and without management present, and held six meetings during fiscal year 2016.2017.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’sCompany's Annual Report on Form 10-K for the year ended December 31, 201630, 2017 for filing with the Securities and Exchange Commission.SEC. The Audit Committee has recommended, and the Board of Directors has approved, subject to shareholder ratification, the selection of Fiondella, Milone & LaSaracina LLP as the Company’sCompany's independent registered public accounting firm for the current2018 fiscal year.
Audit Committee:
Fredrick D. DiSanto, Chairman
Charles W. Henry
John W. Everets
Michael A. McManus, Jr.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL SHAREHOLDERS
The following table sets forth information, as of March 1, 20172018 (unless a different date is specified in the notes to the table), with respect to (a)(i) each person known by the Board of Directors of the Company to be the beneficial owner of more than 5% of the Company’sCompany's outstanding Common Shares, (b)(ii) each current director of the Company and nominee to be a director of the Company, (c)(iii) each of the Named Executive Officers (as hereinafter defined) and (d)(iv) all directors, nominees and executive officers of the Company as a group:group. Unless set forth in the following table, the address of each shareholder is c/o The Eastern Company, 112 Bridge Street, Naugatuck, Connecticut 06770-0460.
Shareholder | Amount and nature of beneficial ownership (a) | Percent of class (b) | Amount and nature of beneficial ownership (a) | Percent of class (b) |
| | | |
GAMCO Investors, Inc. (c) One Corporate Center Rye, NY 10580 | 1,039,209 | 16.61% | 1,105,474 | 17.65% |
Barington Capital Group, L.P. (d) 888 Seventh Avenue, 17th Floor New York, NY 10019 | 525,605 | 8.40% | 575,703 | 9.19% |
Minerva Advisors LLC (e) 50 Monument Road, Suite 201 Bala Cynwyd, PA 19004 | 369,891 | 5.91% | |
Dimensional Fund Advisors LP (f) Building One 6300 Bee Cave Road Austin, TX 78746 | 333,628 | 5.33% | |
Fredrick D. DiSanto | 14,754 | 0.24% | |
Dimensional Fund Advisors LP (e) Building One 6300 Bee Cave Road Austin, TX 78746 | | 369,436 | 5.90% |
Minerva Advisors LLC (f) 50 Monument Road, Suite 201 Bala Cynwyd, PA 19004 | | 359,251 | 5.74% |
Fredrick D. DiSanto (g) | | 52,861 | 0.84% |
John W. Everets | 95,081 | 1.52% | 115,665 | 1.85% |
Charles W. Henry | 65,325 | 1.04% | 61,585 | 0.98% |
Angelo M. Labbadia (g) Leonard F. Leganza (h) | - 127,110 | - 2.03% | |
Angelo M. Labbadia (h) | | 2,278 | 0.04% |
James A. Mitarotonda (i) | 528,460 | 8.45% | 580,294 | 9.27% |
Michael A. McManus, Jr. | 2,855 | 0.05% | 9,216 | 0.15% |
John L. Sullivan III (j) | 26,894 | 0.43% | 29,688 | 0.47% |
August M. Vlak (k) | - | - | 8,836 | 0.14% |
All directors, nominees and executive officers as a group (9 persons)(l) | 860,479 | 13.75% | |
All directors, nominees and executive officers as a group (8 persons)(l) | | 860,423 | 13.74% |
| (a) | The Securities and Exchange CommissionSEC has defined “beneficial owner”"beneficial owner" of a security to include any person who has or shares voting power or investment power with respect to any such security or who has the right to acquire beneficial ownership of any such security within 60 days. Unless otherwise indicated, (i) the amounts owned reflect direct beneficial ownership and (ii) the person indicated has sole voting and investment power. |
| Amounts shown include the number of Common Shares (if any) subject to outstanding options or stock appreciation rights granted under the Company’s stock incentive planAmounts shown include the number of Common Shares (if any) subject to outstanding options or stock appreciation rights granted under the Company's 2010 Executive Stock Incentive Plan (the "2010 Plan") that are exercisable within 60 days. |
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Reported shareholdings include, in certain cases, shares owned by or in trust for a director or nominee, and in which all beneficial interest has been disclaimed by the director or the nominee.
| Reported shareholdings include, in certain cases, shares owned by or in trust for a director or nominee, and in which all beneficial interest has been disclaimed by the director or the nominee. |
| (b) | The percentages shown for the directors and executive officers are calculated on the basis that outstanding shares include Common Shares (if any) subject to outstanding options or stock appreciation rights under the Company’s stock option plansCompany's 2010 Plan that are exercisable by the directors and officers within 60 days. |
| (c) | GAMCO Investors, Inc., an investment advisor,Based on information set forth in Amendment No. 8 to Schedule 13D filed a Schedule 13D/Awith the SEC on November 10, 2016. The following entities affiliated with GAMCO Investors, Inc. in the aggregate have sole voting and dispositive power of a total of 902,124 shares:April 7, 2017 by Gabelli Funds, LLC, GAMCO Asset Management Inc., Gabelli Securities,Foundation, Inc., Teton Advisors, Inc., GGCP, Inc., GAMCO Investors, Inc. ("GAMCO Investors"), Associated Capital Group, Inc. ("AC Group"), and Mario J. Gabelli Foundation. Eachwith the SEC. Gabelli Funds, LLC is an investment adviser registered under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), which provides advisory services for a variety of investment funds, investment companies, investment trusts and other investment entities. GAMCO Asset Management Inc., a wholly-owned subsidiary of GAMCO Investors, is an investment adviser registered under the Advisers Act that is an investment manager providing discretionary managed account services for employee benefit plans, private investors, endowments, foundations and others. Gabelli Foundation, Inc. is a private foundation for which Mario Gabelli is the Chairman, a Trustee and the Investment Manager and Elisa M. Wilson is the President. Teton Advisors, Inc. is an investment adviser registered under the Advisers Act that provides discretionary advisory services to The TETON Westwood Mighty Mitessm Fund, The TETON Westwood Income Fund, The TETON Westwood SmallCap Equity Fund, and The TETON Westwood Mid-Cap Equity Fund. GGCP, Inc. makes investments for its own account and is the manager and a member of GGCP Holdings LLC, which is the controlling shareholder of GAMCO Investors and AC Group. GAMCO Investors, a public company listed on the New York Stock Exchange, is the parent company for a variety of companies engaged in the securities business. AC Group, a public company listed on the New York Stock Exchange, is the parent company for a variety of companies engaged in the securities business. Mario J. Gabelli acts as chief investment officer or directly or indirectly controls various entities, including the aforementioned entities, that are engaged in various aspects of the securities business, primarily as investment adviser to various institutional and individual clients, including registered investment companies and pension plans, and as general partner or the equivalent of various private investment partnerships or private funds. Certain of these entities owns individually less than 10% of the outstanding shares of the Company, and such entities have stated inmay also make investments for their Schedule 13D/A that they do not admit to constituting a group for purposes of the securities laws.own accounts. |
| (d) | Barington Capital Group, L.P., per a Form 4 filed on December 20, 201621, 2017 by Mr. Mitarotonda, is deemed to have beneficial ownership of 525,605575,703 Common Shares. Mr. Mitarotonda beneficially owns 2,855 shares of common stock4,591 Common Shares granted to him under The Eastern Company’sCompany's Directors Fee Program. He may also be deemed to beneficially own 525,605 shares of common stock575,703 Common Shares beneficially owned by Barington Companies Equity Partners, L.P. (“BCEP”("BCEP"). Mr. Mitarotonda is the sole stockholder and director of LNA Capital Corp, the general partner of Barington Capital Group, L.P., which is the majority member of Barington Companies Investors, LLC, the general partner of BCEP. Mr. Mitarotonda disclaims beneficial ownership of the shares beneficially owned by BCEP except to the extent of his pecuniary interest therein. |
| (e) | Based on information set forth in Amendment No. 5 to Schedule 13G filed with the SEC on February 9, 2018 by Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the Advisors Act. Dimensional Fund Advisors LP furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, as amended, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the "Dimensional Funds"). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Dimensional Funds. In its role as investment advisor, sub-adviser and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, "Dimensional") may possess voting and/or investment power over the Common Shares that are owned by the Dimensional Funds, and may be deemed to be the beneficial owner of the Common Shares held by the Dimensional Funds. However, all Common Shares are owned by the Dimensional Funds, and Dimensional disclaims beneficial ownership of such Common Shares. |
| (f) | Based on information set forth in Amendment No. 3 to Schedule 13G filed with the SEC on February 13, 2018 by Minerva Advisors LLC, Minerva Group, LP, Minerva GP, LP, Minerva GP, Inc., and David P. Cohen. Each of Minerva Advisors LLC, Minerva Group, LP, Minerva GP, LP, Minerva GP, Inc., and David P. Cohen peris deemed a Schedule 13G/A filed on February 8, 2017, are deemed to beneficially own 369,891beneficial owner of the 214,985 Common Shares. Minerva Advisors LLC has sole voting and dispositive power over 222,712 shares and shared voting and dispositive power over 144,929 shares. Mr. Cohen is President and sole member of Minerva Advisors LLC, whose principal business is serving as an investment advisor toShares held by Minerva Group, and to individually-managed accounts. Mr.LP. David P. Cohen is the beneficial owner of the 2,250 shares.Common Shares that he owns individually and is also deemed a beneficial owner of the 357,001 Common Shares beneficially owned by Minerva Advisors LLC. |
| (f)(g) | Dimensional Fund Advisors LP (“Dimensional”), a registered investment advisor, is deemed to have beneficial ownership of 333,628Mr. DiSanto's shareholdings include 43,797 Common Shares per a Schedule 13G filed as of February 9, 2017. Dimensionalover which he has sole voting and dispositive power over 322,019 shares and sole dispositive power over the remaining 11,609 shares. The shares are owned by the clients of Dimensional, and it disclaimsindirect beneficial ownership of the shares.ownership. |
| (g)(h) | Mr. Labbadia is a Named Executive Officer of the Company. See “Executive Compensation – Summary Compensation Table” for information regarding Mr. Labbadia’s age and business experience. Mr. Labbadia’sLabbadia's security ownership does not include anyincludes 880 Common Shares underlying stock appreciation rights granted on March 2, 2017 because theythat are not exercisable within 60 days. exercisable. |
| (h) | Mr. Leganza’s term as a director expired on March 8, 2017 as a result of his death. |
| (i) | Mr. Mitarotonda’sMitarotonda's shareholdings include 525,605575,703 Common Shares held by Barington Capital Group, L.P., ofover which he may have indirect beneficial ownership. |
| (j) | Mr. Sullivan is a Named Executive Officer of the Company. See “Executive Compensation – Summary Compensation Table” for information regarding Mr. Sullivan’s age and business experience. Mr. Sullivan’sSullivan's security ownership does not include anyincludes 880 Common shares underlying stock appreciation rights granted on March 2, 2017 because theythat are not exercisable within 60 days. exercisable. |
| (k) | Mr. Vlak is a nominee for election to the Board at the Annual Meeting. Mr. Vlak was appointed President and Chief Executive Officer effective January 1, 2016 and is a Named Executive Officer of the Company. See “Executive Compensation – Summary Compensation Table” for information regarding Mr. Vlak’s age and business experience. Mr. Vlak’sVlak's security ownership does not include anyincludes 1,760 Common Shares underlying stock appreciation rights granted on March 2,February 8, 2017 because theythat are not exercisable within 60 days. exercisable. |
| (l) | Unless otherwise indicated, Directors, Nominees and Named Executive Officers have sole voting and investment power as to 860,479860,423 shares (13.75%(13.74% of the outstanding stock). |
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’sCompany's directors and officers, and persons who beneficially own more than 10% of a registered class of the Company’sCompany's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and with NASDAQ. Directors,SEC. SEC regulations require the Company's directors, officers and greater-than-10%10% beneficial owners are required by SEC regulations to furnish the Company with copies of all Section 16(a) reports that they file. Based solely on itsa review of the copies of such reports filed with the SEC, orand written representations from certain reporting persons that no such reports were required for those persons, the Company believes that all persons subject to the reporting requirements ofdirectors, officers and 10% beneficial owners complied with applicable Section 16(a) have filed the required reports on a timely basisfiling requirements during the fiscal year endingended December 31, 2016.30, 2017, except for Messrs. Henry and Labbadia, each of whom inadvertently filed on late Form 4 reporting on late transaction.
THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company is currently composed of fivesix members, allfive of whom are independent as defined inby the listing standards of NASDAQ. August M Vlak, the nominee to become theThe sixth director, of the Company,August M. Vlak, is the Chief Executive Officer of the Company, and willis not be an independent director as defined inby the listing standards of NASDAQ.
During fiscal year 2016,2017, Leonard F. Leganza, the former Chairman, President and Chief Executive Officer of the Company, wasserved as a director of the Company. However, hisHis term expired on March 8, 2017, as a result ofupon his death.
TheSince January 1, 2016, the Company has separated the positions of the Chairman of the Board and Chief Executive Officer. The Board of Directors andbelieve that having a separate Chairman allows the Chief Executive Officer to focus on the day-to-day management of the Company are not combined aswhile enabling the Board of January 1, 2016.Directors to maintain an independent perspective on the activities of the Company and executive management.
The current leadership structure of the Board allows it to perform its duties effectively and efficiently considering the relatively small size of the Company. All directors are membersThe Company's Board of all committees, except thatDirectors has five standing committees: the former ChairmanExecutive Committee, Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Pension Investment Review Committee. Each committee is composed of four independent Directors with the exception of the Executive Committee, which has three members. The President and Chief Executive Officer is not a member of the audit, compensation, or nominatingAudit, Compensation, and corporate governance committees,Nominating and two directors are not a member of the executive committee.Corporate Governance Committees.
Because of the Company’sCompany's diversified manufacturing and marketing activities, risk oversight responsibilities are focused generally on the Board’sBoard's overall assessment of broad and general business and economic conditions in the market sectors in which the Company operates. With Board oversight, the executive management team’steam's planning and review and extensive Sarbanes-Oxley compliance testing of internal controls substantiates the credibility of the Company’sCompany's financial reporting and operating controls.
The Board is provided with detailed and timely financial and operating communications, including the nature of significant capital projects as well as other important business matters indicating business trends and economic projections that might affect the Company’sCompany's businesses.
The subject of Board “diversity” has not been approached in any formal manner but is reviewed and discussed. The Board currently does not have any specific policy focused on diversity. Diversity is, however, considered.
Directors were selected to serve based on their individual professional and business background and skills as they might relate especially to activities beyond the “core” businesses of the Company. Those skills include finance, legal, governance matters, sales, marketing, and international and government relations.
The Board of Directors of the Company is committed to sound corporate governance practices. The Board of Directorspractices and believes that itsour current corporate governance practices enhance the Company’sCompany's ability to achieve its goals and enable the Board to govern the Company with the highest standards of integrity.
The Company’s Board of Directors has four standing committees: an Executive Committee, an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. During 2016,In 2018, the Board initiated an annual evaluation of the Board's processes, committee structure, and composition. The Board reviewed the assessment at its regular meeting on February 7, 2018.
In 2017, the Board held seven meetings. All six Directors had nine (9) meetings. During 2016, each Director attended allmore than 75% of those meetings and the meetings of committees on which he served with the exception of Mr. Leganza who was absent from 3 Board meetings.held.
Executive Committee. The Executive Committee, acting with the full authority of the Board of Directors, approves minutes, monthly operating reports, capital expenditures, banking matters, and other issues requiring immediate attention when the Board is not in session. During 2016,In 2017, the Executive Committee held four (4) meetings.
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did not meet.
Audit CommitteeCommittee. . The Audit Committee advises the Board of Directors and provides oversight on matters relating to the Company’sCompany's financial reporting process, accounting functions and internal controls, and the qualifications, independence, appointment, retention, compensation and performance of the Company’sCompany's independent registered public accounting firm. The Audit Committee also provides oversight with respect to the legal compliance and ethics programs established by management and the Board of Directors.Board. The Company’sCompany's Code of Business Conduct and Ethics, as adopted by the Board of Directors on February 4, 2004, is available on the Company’sCompany's website at www.easterncompany.com. During 2016,2017, the Audit Committee held five (5) meetings.
Compensation Committee. The Compensation Committee is responsible for establishing basic management compensation, incentive plan goals, and all related matters, as well as determining stock incentive grants to employees. The Board of Directors adopted the Company’scharter of the Compensation Committee Charter on December 13, 2006, and itwhich is available on the Company’sCompany's website at www.easterncompany.com. During 2016,2017, the Compensation Committee held five (5) meetings.
Nominating and Corporate Governance Committee. The Board of Directors adopted the Company’scharter of the Nominating and Corporate Governance Committee Charter on May 21, 2015, and itwhich is available on the Company’sCompany's website at www.easterncompany.com. As defined by the rules and regulations of NASDAQ, the independent members of the Board of Directors of the Company include all of the members of the Board of Directors other than the former chairman, presidentPresident and chief executive officer of the Company. TheseChief Executive Officer. The independent directors select and nominate individuals for election to the Board of Directors.Board. During 2016,2017, the Nominating and Corporate Governance Committee held two (2)four meetings.
Pension Investment Review Committee. In 2017, the Board established the Pension Investment Review Committee and adopted the Committee's charter, which is available on the Company's website at www.easterncompany.com. The committee is responsible for reviewing the Company's qualified retirement plans. The Pension Investment Review Committee held four meetings in 2017.
Each member of the Board of Directors must have the ability to apply goodsound business judgment and must be able to exercise his or her duties of loyalty and care. Candidates for the position of director must exhibit proven leadership capabilities and high integrity, exercise high level responsibilities within their chosen careers, and have an ability to quickly grasp complex principles of business and finance. In general, candidates will be preferred to the extent they hold an established executive level position in business, finance, law, education, research, government or civic activities. When current members of the Board of Directors are considered for nomination for reelection, their prior contributions to the Board of Directors, their performance and their meeting attendance records are taken into account.
The independentWith the aim of developing a diverse, experienced and highly-qualified Board of Directors, the Nominating and Corporate Governance Committee is responsible for developing and recommending to the Board the desired qualifications, expertise and characteristics of members of the Board, including qualifications that the Nominating and Corporate Governance Committee believes are necessary for one or more of Directorsthe members of the Board to possess.
Since selecting qualified directors requires consideration of many factors and will considerbe influenced by the particular needs of the Board from time to time, the Board has not adopted a specific set of minimum qualifications, qualities or skills that are necessary for a nominee to possess, other than those that are necessary to meet U.S. legal, regulatory and NASDAQ listing requirements and the provisions of our Certificate of Incorporation, Bylaws, and charters of the Board Committees. In addition, neither the Board nor the Nominating and Corporate Governance Committee has a formal policy with regard to the consideration of diversity in identifying nominees. When considering nominees, the Nominating and Corporate Governance Committee takes into consideration many factors, including a candidate's independence, integrity, skills, financial and other expertise, experience, knowledge about our business or the industries in which we operate and ability to devote adequate time and effort to responsibilities of the Board. Through the nominating process, the Nominating and Corporate Governance Committee seeks to promote Board membership that reflects a diversity of business experience, expertise, viewpoints, personal backgrounds and other characteristics that are expected to contribute to the Board's overall effectiveness. The brief
biographical description of each director set forth in Item 1 includes the individual experience, qualifications, attributes and skill of each Director that led to the conclusion that each director should serve as a member of our Board at this time.
The Nominating and Corporate Governance Committee considers Director nominees who are identified either by the directors,Directors, by the shareholders, or through some other source. The independent members of the Board of DirectorsNominating and Corporate Governance Committee may also utilizeuse the services of a third party search firm to assist them in the identification or evaluation of directorDirector candidates, as they deem necessary or appropriate.
Shareholders wishing to submit the names of qualified candidates for possible nomination to the Board of DirectorsNominating and Corporate Governance Committee may make such a submission by sending the information described in the Company's Bylaws to the Board of Directors (in care of the Secretary of the Company) the information described in the Company’s Bylaws.. This information generally must be submitted not more than 90 days nor less than 60 days prior to the first anniversary of the preceding year’syear's annual meeting.meeting of shareholders.
The independent members of the Board of DirectorsNominating and Corporate Governance Committee will make a preliminary assessment of each proposed nominee based upon his or her resume and biographical information, the individual’sindividual's willingness to serve as a director,Director, and other background information. This information is evaluated against the criteria described above and the specific needs of the Company at the time. Based upon a preliminary assessment of the candidate(s), those who appear best suited to meet the needs of the Company may be invited to participate in a series of interviews, which are used as a further means of evaluating potential candidates. On the basis of information learned during this process, the independent members of the Board of DirectorsNominating and Corporate Governance Committee will determine which nominee(s) they will recommend for election to the Board of Directors. The independent members of the Board of DirectorsNominating and Corporate Governance Committee use the same process for evaluating all nominees, regardless of the original source of the nomination.
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DIRECTOR COMPENSATION IN FISCAL 20162017
Name (1) | Fees Earned or Paid in Cash ($) (2) | Stock Awards ($) | Option Awards ($) | Non-equity Incentive Plan Compensation ($) | Change in pension value and nonqualified deferred compensation earnings ($) | All Other Compensation ($) (3) | Total ($) | Fees Earned or Paid in Cash ($) (2) | Stock Awards ($) | Option Awards ($) | Non-equity Incentive Plan Compensation ($) | Change in pension value and nonqualified deferred compensation earnings ($) | All Other Compensation ($) (3) | Total ($) |
Fredrick D. DiSanto (4) | $20,000 | | | | | $ 29.85 | $20,029.85 | $ 38,550 | | | | | $ 30 | $38,580 |
John W. Everets | 32,400 | | | | | 29.85 | 32,429.85 | 32,300 | | | | | 15 | 32,315 |
Charles W. Henry | 32,400 | | | | | 29.85 | 32,429.85 | 31,800 | | | | | 30 | 31,830 |
Leonard F. Leganza(5)(4) | 32,000 | | | | | 14.93 | 32,014.93 | 5,000 | | | | | 15 | 5,015 |
Michael A. McManus, Jr. | 32,400 | | | | | 14.93 | 32,414.93 | 34,425 | | | | | 15 | 34,440 |
James A. Mitarotonda | 32,400 | | | | | 29.85 | 32,429.85 | 44,633 | | | | | 30 | 44,663 |
| (1) | This table discloses the compensation received by all non-employee directors who served as a director in 2016.2017. |
| (2) | In 2016, The Eastern2017, the Company paid non-employee directors at an annual rate of $30,000, which was paid in Common Shares of the Company or cash, in accordance with the Directors Fee Program adopted by the shareholders on March 26, 1997 and amended on January 5, 2004. The amounts listed could include adjustments for fractional shares from previous periods. On May 20, 2015, it was resolved that, in addition to the annual retainer fee, all non-employee directors will be compensated for all meetings in addition to the Board’sBoard's six regularly scheduled meetings as follows: $1,200 for each in-person meeting and $800 for each telephonic meeting. On August 2, 2017, it was resolved that the Chairman of the Board be compensated at an annual rate of $60,000 and that Board members who also serve as Committee Chairman receive an additional stipend as follows: Audit Committee Chairman, $10,000; Compensation Committee Chairman, $7,500; Pension Investment Review Committee Chairman, $5,000; and Nominating and Governance Committee Chairman, $2,000. The directorsCompany does not maintain a minimum share ownership requirement for any Director. The Directors make an annual election, within a reasonable time before their first quarterly payment, to receive their fees in the form of cash, stockCompany Shares or a combination thereof. The election remains in force for one year. Messrs. DiSanto, Everets, Henry, McManus and Mitarotonda elected to receive their director compensation in stock.Company Shares. |
(3) | All non-employee directors are provided a life insurance benefit. Messrs. DiSanto, Everets, Henry and Mitarotonda have a $50,000 benefit and Messrs. LeganzaMr. Everets and Mr. McManus have a $25,000 benefit. The life insurance benefit is reduced after age 70.70-1/2. |
(4) | Mr. DiSanto was elected as a director at the 2016 Annual Meeting, and his fees were pro-rated for the second quarter of 2016. |
(5) | Mr. Leganza is the former Chairman and Chief Executive Officer of the Company. His term as a directorDirector expired on March 8, 2017 as a result of his death. His fees were pro-rated for the first quarter of 2017. |
| POLICIES AND PROCEDURES CONCERNING RELATED PERSONS TRANSACTIONS |
POLICIES AND PROCEDURES CONCERNING RELATED PERSONS TRANSACTIONS
Our Code of Business Conduct and Ethics prohibits all conflicts of interest between the Company and any of its directors, officers and employees, except under guidelines approved by the Board of Directors or committees of the Board of Directors.Committees. A conflict of interest exists whenever an individual’sindividual's private interests interfere or conflict in any way (or even appear to interfere or conflict) with the interests of the Company. Employees are encouraged to report any conflicts of interest, or potential conflicts of interest, to their supervisors or superiors. However, if they doan employee does not believe it appropriate or if they arehe or she is not comfortable approaching theirhis or her supervisors or superiors, about their concerns or complaints, then theythe employee may contact either the chairmanChairman of the Audit Committee of the Board of Directors or Company counsel. The Code of Business Conduct and Ethics is available for review at our website at www.easterncompany.com.
To identify related party transactions, each year the Company requires our directors and executive officers to complete a questionnaire that identifies any transaction with the Company or any of its subsidiaries in which the director or executive officer or theirmembers of his or her family members have an interest. If any related party transactions are reported, the Board of Directors reviews them to determine if the potential for a prohibited conflict of interest exists. Prior to its review, the Board of Directors will require full disclosure of all material facts concerning the relationship and financial interest of the relevant individuals in the transaction. Each year, our directors and executive officers also review our Code of Business Conduct and Ethics.
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COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Committee of the Board is established pursuant to a resolution adopted by the Board. The Committee recommends to the Board policies and processes for the regular and orderly review of the performance and compensation of the Company’sCompany's senior executive management personnel, including the President and Chief Executive Officer. The Compensation Committee reviews and approves corporate goals and objectives relevant to compensation of the Company's Chief Executive Officer and other executive officers; recommends to the Board of Directors and/or the Company's Management with respect to compensation of executives other than named executive officers and administers the Company's stock plan, The Eastern Company 2010 Executive Stock Incentive Plan, and all other equity-based plans from time to time. The Compensation Committee regularly reviews, administers, and when necessary recommends changes to the Company’sCompany's stock incentive and performance-based compensation plans. The Compensation Committee has adopted a charter, and itwhich is available on the Company’sCompany's website at www.easterncompany.com.
, under the "About Us" tab.
The Compensation Committee is comprised of members of the Board, none of whom may be an active or retired officer or employee of the Company or any of its subsidiaries. Members of the Compensation Committee are appointed annually by the Board. Messrs. Michael A. McManus, Jr., Fredrick D. DiSanto, John W. Everets, Charles W. Henry, and James A. Mitarotonda are the members of the Compensation Committee. Mr. McManus ishas been the Chairman of the Compensation Committee as ofsince July 29, 2015. The Compensation Committee held five meetings during the fiscal year ended December 31, 2016.30, 2017. Neither the Compensation Committee nor management engaged any compensation consultant during fiscal 2016.
year 2017.
This report by the Compensation Committee will focusDiscussion and Analysis focuses on:
· | The guiding principles and objectives underlying the Company’sCompany's compensation program, including whatthe performance levels that the program is designed to reward; and |
· | A description of each of the components of the compensation program, including an explanation ofas to why these elements have beenwere selected as the preferred means to achieve the compensation program’sprogram's objectives, and how the amount of each element of compensation is determined. |