The Company's management annually engages in an enterprise risk management process, the key output of which is a series of risk matrices intended to identify and categorize strategic risks. The matrices also identify (1) those members of senior management who are responsible for monitoring each major risk, and (2) whether that risk is reviewed by the Board or a committeeCommittee of the Board. The development of the matrices is facilitated by the Company'sour Business Risk Group (the internal audit function of the Company), through discussions with executive and senior management. Management and the Business Risk Group annually review and discuss the (1) risk assessment process, (2) top enterprise risks, and results(3) mitigation plans to address the top enterprise risks with the Audit Committee and if applicable, recommend what risks are being adequately addressed, directly or indirectly, on a regular basis and what risks should be further discussed with the full Board, or other committees and the appropriate form and timing of such discussions. The Business Risk Group is the internal audit group of the Company.as appropriate.
Under the Guidelines, the Board of Directors is responsible for evaluating CEO performance, monitoring succession planning, reviewing the Company's major financial objectives, evaluating whether the business is being properly managed, and overseeing the processes for maintaining the integrity of the Company with respect to itsour financial statements, public disclosures, and compliance with laws. The Board has delegated the primary oversight for managing the risk with respect to some of these to various board committeesBoard Committees as described in the committeeCommittee charters.
Our Board has adopted a Code of Conduct that applies to all our employees, officers, and directors. This code also serves as the code of ethics for our CEO and senior financial officers. This code is posted on our website at http://www.hermanmiller.com/legal/corporate-code-of-conduct.html.corporate-code-of-conduct. Any changes to or waivers of the code must be approved by the Board of Directors and will be disclosed on the Company'sour website. The Code of Conduct was last materially modified in December 2015.July
As required by our Guidelines, our Board has determined that each of our directors, other than Ms. Owen, qualifies as an “Independent Director,“independent director,” as such term is defined in the NASDAQ listing standards, and that none of those independent directors has a material relationship with the Company. The Board's determination was made as a result of its review of a summary of completed individual questionnaires addressing the nature and extent of each member's relationship with the companyCompany and taking into consideration the definition of “Independent Director” under the NASDAQ rules.
Each of our directors is expected to attend all meetings of the Board and applicable committeeCommittee meetings, and Directorsdirectors are encouraged to join the webcast for the Annual Meeting. All of our then currentthen-current directors did so for our 20182020 Annual Shareholders Meeting. During fiscal 2019,2021, the Board held foursix meetings; each director attended at least 75 percent100% of the aggregate number of meetings of our Board and Board Committees on which they served. Consistent with the requirements of our Guidelines, the independent members of our Board met in executive sessions without the presence of management at the conclusion ofafter each regularly scheduled Board meeting.
Shareholders and other parties interested in communicating directly with one or more of our directors may do so by writing to us, c/o Corporate Secretary, 855 East Main Avenue, PO Box 302, Zeeland, Michigan 49464-0302. The Corporate Secretary will forward all relevant correspondence to the director or directors to whom the communication is directed.
Our Bylaws contain certain procedural requirements applicable to shareholder nominations of directors. Shareholders may nominate a person to serve as a director if they provide written notice to us notno earlier than the close of business on the 120th day and notno later than the close of business on the 90th day prior to the first anniversary of the preceding year's Annual Meeting of Shareholders and, with respect to any special meeting of shareholders, notwritten notice must be provided no later than the close of business on the 10th day following the date on which the meeting is first publicly announced or, if there is no announcement, the 10th day following the date on which the notice of that meeting was first sent to our shareholders. The notice must include (1) the name and address of the shareholder providing notice and of the person or persons nominated, including information on the securities of the companyCompany held by those individuals, including any derivative securities, the details of which are set forth in our Bylaws,Bylaws; (2) a representation that the shareholder is a current record holder and will continue to hold those shares through the date of the meeting and intends to attend the meeting in person or by proxy,proxy; (3) for each proposed nominee, (a) all information relating to that person that would be required to be disclosed in a Proxy Statement required to be made in connection with solicitations or proxies for election of directors in a contested election pursuant to Section 14 of the Securities and Exchange Act of 1934 (including that person's written consent to be named in the Proxy Statement as a nominee and to serve as a director if elected), and (b) a description of all direct and indirect compensation and other material monetary arrangements existing during the past three years, as well as any other material relationships between or among the shareholders (and beneficial owner, if any) and their respective affiliates and associates and the proposed nominee and his or her respective affiliates and associates, including all information required to be disclosed pursuant to Rule 404 under Regulation S-K,S-K; and (4) the completed and signed questionnaire from each nominee with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made.
Under our Bylaws and Governance Guidelines, no person may be elected as a director after he or she attains age 72, and a director who attains age 72 while in office is required to tender his or her written resignation, which resignation shall be effective as of (or no later than) the annual meeting of shareholders at or immediately after such person attains age 72.
Board Committees
Our Board has four standing Committees. Committee responsibilities are detailed in written charters. These charters are available on our website at www.hermanmiller.com/charters. The Committees are as follows:
Nominating
Governance and GovernanceCorporate Responsibility Committee
We have a Governance and Corporate Responsibility Committee (previously referred to as the Nominating and Governance CommitteeCommittee) comprised of Mary Vermeer Andringa (chair), John R. Hoke III, and Michael Volkema.Candace S. Matthews. The NominatingGovernance and GovernanceCorporate Responsibility Committee develops and recommends to the Board governance standards and policies and board compensation to the Board, including that of the Chairman of the Board. In addition, the Committee identifies and recommends to the Board candidates for election to the Board. The Committee also reviews and assesses the effectiveness of the Company's goals and objectives relating to environmental, social, and governance responsibility, stewardship, and sustainability practices, and recommends to the Board such measures and actions deemed appropriate by the Committee. The Committee met fivefour times during the last fiscal year.
Audit Committee
We have an Audit Committee comprised of Lisa A. Kro (chair), J. Barry Griswell,Michael C. Smith, and Michael C.R. Smith. The Board has determined that Ms. Kro is qualified as an “Audit Committee financial expert” within the meaning of the applicable SEC regulations. This Committee, composed entirely of independent directors under the applicable listing standards of the NASDAQ listing requirements, as well as the requirements of the Sarbanes-Oxley Act of 2002, is responsible for overseeing management's reporting practices, internal controls, compliance framework, and enterprise risk management on behalf of the Board of Directors, including overseeing and regularly evaluating (quarterly) the company'sCompany's cybersecurity risks, which isare regularly reported to and discussed among members of the Board of Directors. The committeeCommittee is also responsible for appointing, approving the compensation of, and overseeing our independent registered public accounting firm. The Audit Committee met nineeight times during the last fiscal year.
Executive Compensation Committee
We have an Executive Compensation Committee comprised of David A. Brandon (chair), Douglas D. French, and Heidi J. Manheimer. The Executive Compensation Committee recommends to the Board the annual executive incentive plan and the annual compensation of our Chief Executive Officer and President to the Board, approves the annual compensation and executive incentive plan for the other executive officers, approves the grants of employee equity awards, and acts as the administrative committeeCommittee for our equity-based compensation plans. A description of the committee'sCommittee's processes and procedures for the consideration and determination of executive and director compensation is set forth under the caption “Compensation Discussion and Analysis - Executive Summary” below in this Proxy Statement. The committeeCommittee met four times during the last fiscal year.
Executive Committee
We have an Executive Committee comprised of Michael A. Volkema (chair), Mary Vermeer Andringa, David A. Brandon, and Lisa A. Kro. The Executive Committee acts from time to time on behalf of the Board in managing our business and affairs (except as limited by law or our Bylaws) and is delegated certain assignments and functions by the Board of Directors. The committeeCommittee met fivesix times during the last fiscal year.
Executive Compensation Committee Interlocks and Insider Participation
No member of the Executive Compensation Committee is or has been an officer or employee of the companyCompany or had any relationship that is required to be disclosed as a transaction with a related party except as noted under Certain Relationships and Related Party Transactions. In addition, no current executive officer of the companyCompany has ever served as a member of the Board of Directors or compensation committeeCompensation Committee of any other entity that has or has had one or more executive officers serving as a member of our Board of Directors or Executive Compensation Committee.
Proposal #2 - Proposal to Amend the Articles of Incorporation of the Company to Change its Name from Herman Miller, Inc. to MillerKnoll, Inc.
On July 13, 2021, our Board unanimously approved an amendment to our Restated Articles of Incorporation (our Articles) to change our corporate name from "Herman Miller, Inc." to "MillerKnoll, Inc.". The Board believes it is in the Company's and our shareholders' best interests to effect the name change and recommends to our shareholders the approval and adoption of the name change amendment (the "Amendment").
Reason for the Amendment
Effective July 19, 2021, we completed the acquisition of Knoll, Inc. As we discussed and disclosed previously, the transaction resulted in the combination of iconic and distinct brands in our industry. To better reflect the combination of those brands and enhance the continuing recognition and preservation of those brands, management and the Board determined that it is in the best interest of our shareholders to change the Company's name to "MillerKnoll, Inc." In addition, the Company conducted significant market research regarding the use of this combined name.
We chose MillerKnoll as the name of our company because it recognizes and celebrates the substantial brand legacies established by both Herman Miller and Knoll, while also allowing each brand to continue to thrive as independent brands. Anchored by two strong heritage brands, MillerKnoll becomes the common thread that brings us all together as part of a collective of design-driven brands, including the people and products that make each of our 19 brands unique.
Effects of the Amendment
The Board has adopted resolutions setting forth the proposed Amendment in the form of an Amendment to Article I of our Articles. For the reasons set forth above, our Board recommends that our shareholders approve the Amendment. The following is the text of the proposed Amendment to Article I of our Articles:
"The name of the Corporation is MillerKnoll, Inc."
If approved, the Amendment will become effective upon the filing of the Amendment with the Michigan Department of Licensing and Regulatory Affairs, which will occur as soon as reasonably practicable following the Annual Meeting.
If the Amendment becomes effective, the rights of our shareholders holding certificated shares under currently outstanding stock certificates and the number of shares represented by those certificates will remain unchanged. The name change will not affect the validity or transferability of any currently outstanding stock certificates, nor will it be necessary for shareholders with certificated shares to surrender or exchange any stock certificates they currently hold as a result of the name change. Any new stock certificates that are issued after the name change becomes effective will bear the name "MillerKnoll, Inc."
Following the name change, our shares will continue to be listed in the NASDAQ Market System; however we are exploring a change to our stock ticker to reflect the new name.
Vote Required
The approval of the Amendment to our Articles requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock. Accordingly, abstentions and broker non-votes will have the same effect as a vote against this proposal. The Board recommends that the shareholders vote "FOR" this proposal.
The Board of Directors has determined that the proposed amendment is desirable, in the best interest of our shareholders, and recommends a vote FOR its approval.
Herman Miller, Inc., and Subsidiaries20
Proposal #3 - Ratification of Audit Committee's selectionSelection of Independent Registered Public Accounting Firm
TheOur Audit Committee of the Board completed a competitive process for purposes of selecting an audit firm to servehas appointed KPMG LLP as the company’sour independent registered public accounting firm for the fiscal year ending May 30, 2020 (“Fiscal 2020”). As of May 6, 2019, the Audit Committee approved the engagement28, 2022. Representatives of KPMG LLP (“KPMG”) as the company’s independent registered public accounting firm for purposes of auditing the company’s financial statements effective June 2, 2019 for the 2020 fiscal year. This selection resultedwill participate in the dismissal of Ernst & Young LLP (“E&Y”), which had served in that role, effective upon the filing of the company’s Annual Report on Form 10-K for the company’s fiscal year ended June 1, 2019.
The audit reports of E&Y on the consolidated financial statements of the company as of and for the fiscal years ended June 1, 2019, and June 2, 2018, did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles. Representatives of E&Y are expected to be in attendance at our Annual Meeting of Shareholders and will be available to respond to appropriate questions andsubmitted in advance. Shareholders may submit questions in advance online at www.virtualshareholdermeeting.com/MLHR2021. The KPMG LLP representatives will have the opportunity to make such statements asa statement if they mayso desire.
During
Although the company’s two most recent fiscal years ended June 1, 2019,submission of this matter for approval by shareholders is not legally required, our Board of Directors believes that such submission follows sound corporate business practice and June 2, 2018, andis in the subsequent interim period through July 30, 2019, the effective datebest interests of E&Y’s dismissal (the “Relevant Period”), (i) there were no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) between the company and E&Y on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures that, if not resolved to the satisfaction of E&Y, would have caused E&Y to make reference to the subject matter of the disagreement in its report, and (ii) there were no reportable events (as defined in Item 304(a)(1)(v) of Regulation S-K).
During the Relevant Period, neither the company nor anyone acting on its behalf consulted KPMG regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the company’s financial statements, and neither a written report nor oral advice was provided to the company that KPMG concluded was an important factor considered by the company in reaching a decision as to any accounting, auditing, or financial reporting issue, or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).
We are askingour shareholders. If our shareholders to ratifydo not approve the selection of KPMG, the selection of this firm as our independent registered public accounting firm. Althoughfirm will be reconsidered by the Audit Committee. This ratification is not legally required,of the Board is submitting the selectionappointment of KPMG to our shareholders for ratification as a matter of good corporate governance.
Therequires the affirmative vote of the holders of thea majority of the shares represented in person or by proxy and entitled to vote on this item will be required for approval. Abstentions and broker non-votes will not be treated as votes cast on this matter.proposal. Unless otherwise instructed by you, brokers, banks, and other street-namedstreet name holders will have the discretionary authority to vote your shares on this matter.
If our shareholders do not ratify the appointment, the appointment will be reconsidered by the Audit Committee and the Board. Even if the selection is ratified, the Audit Committee, at its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interest of our company and our shareholders.
The Board of Directors recommends a vote FOR this proposal to ratify the appointment of KPMG LLP as our company’s independent registered public accounting firm for Fiscal 2020.fiscal 2022.
Disclosure of Fees Paid to Independent Auditors
AggregateThe following table summarized the aggregate fees billed to us by KPMG LLP for the fiscal years ended June 2, 2018May 30, 2020, and June 1, 2019, byMay 29, 2021.
| | | | | | | | |
Fiscal Year Ended (in millions) | May 30, 2020 | May 29, 2021 |
Audit Fees (1) | $ | 2.6 | | $ | 2.5 | |
| Audit-Related Fees | — | | — | |
Tax Fees (2) | 0.3 | | 0.3 | |
| Total | $ | 2.9 | | $ | 2.8 | |
(1)Includes fees billed for the audit of and accounting consultations related to our independent registered public accounting firm, Ernst & Young LLP were as follows:consolidated financial statements included in our Annual Report on Form 10-K, including the associated audit of our internal controls, the review of our financial statements included in our quarterly reports on Form 10-Q, and services in connection with statutory and regulatory filings.
(2)Includes fees billed for tax compliance, tax advice, and tax planning. |
| | | | | | |
| Fiscal Year Ended | June 2, 2018 |
| June 1, 2019 |
|
Audit Fees (1) | $ | 2,153,500 |
| $ | 2,211,400 |
|
| Audit Related Fees | — |
| — |
|
Tax Fees (2) | 445,000 |
| 115,000 |
|
| Total | $ | 2,598,500 |
| $ | 2,326,400 |
|
| |
(1) | Includes fees billed for the audit of and accounting consultations related to our consolidated financial statements included in our Annual Report on Form 10-K, including the associated audit of our internal controls, the review of our financial statements included in our quarterly reports on Form 10-Q, and services in connection with statutory and regulatory filings. |
| |
(2) | Includes fees billed for tax compliance, tax advice, and tax planning. |
Our Audit Committee has adopted a policy for pre-approving services performed by our independent registered accounting firm and other firms. This policy requires the Audit Committee's pre-approval of all services that may be provided by our independent registered public accounting firm and certain audit services provided by other firms. The policy authorizes the committeeCommittee to delegate to one or more of its members pre-approval authority with respect to permitted services. All services provided by E&Y under the captions “Audit Fees,” “Audit Related Fees,” and “Tax Fees” were approved by the Audit Committee under this policy.
Report of the Audit Committee
TheOur Audit Committee’s purpose is to oversee the accounting and financial reporting processes of the company,Company; the audits of the company’sour financial statements and management’sManagement’s assessment of the company’s internal controls,controls; the qualifications of the public accounting firm engaged as the company’sCompany’s independent registered public accounting firm,firm; and the performance of the company’sour internal auditors and independent registered public accounting firm. The Committee’s function is more fully described in its charter, which the Board has adopted and is available on the company's web siteour website at http://www.hermanmiller.com/content/dam/hermanmiller/documents/investors/audit_committee_charter.pdf. The Committee reviews the charter on an annual basis. The Board annually reviews the NASDAQ listing standards definition of independence for audit committeeAudit Committee members and has determined that each member of the Committee meets that standard.
Management is responsible for the preparation, presentation, and integrity of the company’sCompany’s financial statements, accounting and financial reporting principles, internal controls, and procedures designed to ensure compliance with accounting standards, applicable laws, and regulations. The company’sOur independent registered public accounting firm, during fiscal 2019, Ernst & YoungKPMG, LLP held responsibilityis responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with U.S. generally accepted accounting principles. Ernst & YoungUS Generally Accepted Accounting Principles (GAAP). KPMG, LLP wasis also responsible for auditing and providing an opinion on the effectiveness of the company’sour internal control over financial reporting.
We have
The Audit Committee of the Herman Miller Inc. Board of Directors (Committee or we) has reviewed and discussed with managementManagement and Ernst & YoungKPMG, LLP the Company’s audited financial statements for the year ended June 1, 2019, management’sMay 29, 2021, Management’s assessment of the effectiveness of the company’sCompany’s internal controls over financial reporting, and Ernst & YoungKPMG, LLP’s evaluation of the company’sour internal controls over financial reporting.
We have
The Committee has discussed with Ernst & YoungKPMG, LLP the results of the independent auditors’ examinations and the judgments of the independent auditors concerning the quality, as well as the acceptability, of the company’sCompany’s accounting principles and such other matters that we are required to discuss with the independent auditors under applicable rules, regulations, or generally accepted auditing standards, including the matters required to be discussed by applicable rules of the Public Company Accounting Oversight Board ("PCAOB")(PCAOB). We have also received and reviewed the written disclosures and the letter from Ernst & YoungKPMG, LLP per the applicable requirements of the PCAOB regarding Ernst and YoungKPMG, LLP's communications with the Audit Committee around independence and we have discussed with Ernst & YoungKPMG, LLP their independence including a consideration of the compatibility of non-audit services with their independence.
Based on the reviews and discussions referred to above, wethe Committee recommended to the Board of Directors that the financial statements referred to above be included in the company’sCompany’s Form 10-K Report for the year ended June 1, 2019. WeMay 29, 2021, and we selected KPMG, LLP as the independent auditor for fiscal year 2020.2022. The Board is recommending that shareholders ratify that selection at the annual meeting.
|
| | | | | | | |
| Lisa A. Kro (Chair) | J. Barry Griswell | Michael C. Smith | Michael R. Smith |
Herman Miller, Inc., and Subsidiaries22
Proposal #3#4 - Proposal to Approve, on an Advisory Basis, the Compensation Paid to the Company's Named Executive Officers
Consistent with our Board's recommendation, as approved by our shareholders and as required pursuant to Section 14A of the Securities Exchange Act, we allow our shareholders the opportunity to vote on the compensation of our Named Executive Officers (Say on Pay) on an advisory and annual basis, on the compensation of our named executive officers ("Say on Pay").basis. Thus, you are asked to vote upon the following resolution at this year's annual meeting.
The Executive Compensation Committee ("Committee")(Committee) has considered the results of the 20182020 advisory vote on executive compensation in which more than 96% of the votes cast were voted for the approval, on an advisory basis, of the compensation of our named executive officersNamed Executive Officers as described in the 20182020 Proxy Statement. Consistent with those voting results, the Committee believes that the total compensation paid to the Chief Executive Officer and the other named executive officers,Named Executive Officers, as disclosed in the Compensation Discussion and Analysis, is fair and appropriate and should be approved by our shareholders. The compensation of the named executive officersNamed Executive Officers is designed to vary with the results of the business and to reward consistent improvement in the results delivered to shareholders. In fiscal year 2020, changes in the baseThe incentive compensation of each executive officer primarily reflect changes in the benchmarking data for the position. The change in the variable element ofearns each executive's compensation reflectsyear is directly tied to our financial and relatedoperational performance relative to performanceagainst the criteria approved by the Committee and Board. The Committee believes that the compensation paid to each named executive officerNamed Executive Officer, as disclosed in the Compensation Discussion and Analysis, is appropriate in the light of the Company's and the officer's performance during the fiscal year. In addition, each of the elements of compensation, and the total compensation opportunity at target for each officer, has been benchmarked against comparable positions.positions in the competitive market. While the Committee elected to make some modifications to our traditional programs in the near-term to recognize the impact of COVID-19 and the criticality of the work that management is doing and continues to do, we believe our programs and the Committee's governance of the programs remains exceptionally strong.
Shareholders are being asked to approve the following resolution at the Annual Meeting:
“RESOLVED, that the compensation paid to the company's named executive officers,Company's Named Executive Officers, as disclosed in the company'sCompany's Proxy Statement for this annual meeting pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables, and narrative disclosure, is hereby APPROVED."
The Board of Directors recommends a vote FOR this proposal.
This vote is advisory and non-binding; however, the Board of Directors and Committee will review and consider the voting results in connection with future deliberations concerning our executive compensation program.
Voting Securities and Principal Shareholders
On August 16, 2019,13, 2021, we had 59,054,301had 75,749,130 shares of common stock issued and outstanding, par value $.20 per share. Shareholders are entitled to one vote for each share of common stock registered in their names at the close of business on August 16, 2019,13, 2021, the record date Record Date for the Annual Meeting fixed by our Board of Directors. Votes cast at the meeting and submitted by proxy will be tabulated by Broadridge Financial Solutions, Inc. As of August 16, 2019,13, 2021, no person was known by management to be the beneficial owner of more than five percent5% of our common stock, except as follows.
| | | | | | | | |
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class |
BlackRock, Inc.(1) | 8,622,512 | | 11.38 | |
| 55 East 52nd Street | | |
| New York, NY 10055 | | |
The Vanguard Group, Inc.(2) | 7,381,513 | | 9.74 | |
| 100 Vanguard Blvd. | | |
| Malvern, PA 19355 | | |
AllianceBernstein L.P.(3) | 5,280,657 | | 6.97 | |
| 1345 Avenue of the Americas | | |
| New York, NY 10105 | | |
(1)This information is based solely upon information as of December 31, 2020, contained in a filing with the SEC on January 27, 2021, by BlackRock, Inc. with respect to Herman Miller shares, including notice that it has, along with certain institutional investment managers for which it is the parent holding company, sole voting power as to 7,203,084 shares and sole dispositive power as to 7,460,321 shares and information as of December 31, 2020, contained in a filing with the SEC on January 29, 2021, by BlackRock, Inc. with respect to Knoll, Inc. shares, including notice that it has, along with certain institutional investment managers for which it is the parent holding company, sole voting power as to 3,528,119 shares and sole dispositive power as to 3,631,848 shares. Ownership in Knoll, Inc. shares were converted to Herman Miller shares using the merger consideration ratio of 0.32, which equates to 1,162,191 Herman Miller shares included in the beneficial ownership total.
(2)This information is based solely upon information as of March 31, 2021, contained in a filing with the SEC on April 12, 2021, by The Vanguard Group Inc. with respect to Herman Miller shares, including notice that it has sole dispositive power as to 5,811,347 shares, shared voting power as to 60,530 shares, and shared dispositive power as to 112,062 shares and information as of December 31, 2020, contained in a filing with the SEC on February 10, 2021, by The Vanguard Group Inc. with respect to Knoll, Inc. shares, including notice that it has sole dispositive power as to 4,468,330 shares, shared voting power as to 49,023 shares, and shared dispositive power as to 88,246 shares. Ownership in Knoll, Inc. shares were converted to Herman Miller shares using the merger consideration ratio of 0.32, which equates to 1,458,104 Herman Miller shares included in the beneficial ownership total.
(3)This information is based solely upon information as of June 30, 2021, contained in a filing with the SEC on July 30, 2021, by AllianceBernstein L.P. with respect to Herman Miller shares, including notice that it has sole voting power as to 4,481,898 shares, sole dispositive power as to 5,182,438 shares and information as of June 30, 2021, contained in a filing with the SEC on July 30, 2021, by AllianceBernstein L.P. with respect to Knoll, Inc. shares, including notice that it has investment discretion as to 306,937 shares. Ownership in Knoll, Inc. shares were converted to Herman Miller shares using the merger consideration ratio of 0.32, which equates to 98,219 Herman Miller shares included in the beneficial ownership total.
Herman Miller, Inc., and Subsidiaries24
|
| | | |
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class |
BlackRock, Inc.(1) | 6,868,890 |
| 11.63 |
| 55 East 52nd Street | | |
| New York, NY 10055 | | |
The Vanguard Group, Inc.(2) | 5,623,073 |
| 9.52 |
| PO Box 2600 | | |
| Valley Forge, PA 19482 | | |
| |
(1) | This information is based solely upon information as of June 30, 2019, contained in filings with the SEC on August 13, 2019 by BlackRock, Inc., including notice that it has, along with certain institutional investment managers for which it is the parent holding company, sole voting power as to 6,709,139 shares and sole dispositive power as to 6,868,890 shares. |
| |
(2) | This information is based solely upon information as of June 30, 2019, contained in a filing with the SEC on August 14, 2019 by The Vanguard Group Inc., including notice that it has sole voting power as to 129,077 shares and sole dispositive power with respect to 5,492,746 shares, and shared voting power as to 8,106 shares and shared dispositive power with respect to 130,597 shares. |
Director and Executive Officer Information
Security Ownership of Directors
The following table shows, as of August 16, 2019,13, 2021, the number of shares beneficially owned by each of the nominees and directors. Except as described in the notes following the table, the following persons have sole voting and dispositive power as to all their respective shares.
| | | | | | | | |
| Name | Amount and Nature of Beneficial Ownership | Percent of Class(1) |
| Mary Vermeer Andringa | 37,017 | | 0.05 |
David A. Brandon(2) | 16,809 | | 0.02 |
Douglas D. French(2) | 12,162 | | 0.02 |
| John R. Hoke III | 31,822 | | 0.04 |
| Lisa A. Kro | 22,236 | | 0.03 |
| Candace S. Matthews | 3,013 | | — |
| Heidi J. Manheimer | 19,119 | | 0.03 |
| Andi R. Owen | see table below |
| Michael C. Smith | 5,726 | | 0.01 |
| Michael R. Smith | 85 | | — |
| Michael A. Volkema | 125,000 | | 0.17 |
|
| | | |
| Name | Amount and Nature of Beneficial Ownership | Percent of Class(1) |
| Mary Vermeer Andringa | 39,281 |
| 0.07 |
David A. Brandon(2) | 16,809 |
| 0.03 |
Douglas D. French(2) | 11,848 |
| 0.02 |
| J. Barry Griswell | 21,366 |
| 0.04 |
| John R. Hoke III | 30,924 |
| 0.05 |
| Lisa A. Kro | 21,608 |
| 0.04 |
| Heidi J. Manheimer | 16,217 |
| 0.03 |
| Andrea R. Owen | see table below |
| Michael C. Smith | 3,279 |
| 0.01 |
| Michael A. Volkema | 75,000 |
| 0.13 |
| |
(1) | Percentages are calculated based upon shares outstanding plus shares that may be acquired under stock options exercisable within 60 days. |
| |
(2) | Excludes 1,143 Shares held in Mr. Brandon's deferred compensation account and 3,842 shares held in Mr. French's deferred compensation account. |
(2)Excludes 2,250 Shares held in Mr. Brandon's deferred compensation account and 3,969 shares held in Mr. French's deferred compensation account.
Security Ownership of Management
The following table shows, as of August 16, 2019,13, 2021, the number of shares beneficially owned by each of the Named Executive Officers (NEOs) identified in the executive compensation tables of this Proxy Statement, and by all directors and executive officers as a group. Except as described in the notes following the table, the following persons have sole voting and dispositive power as to all their respective shares.
| | | | | | | | |
| Name | Amount and Nature of Beneficial Ownership(1) | Percent of Class(2) |
| Andi R. Owen | 215,889 | | 0.29 | |
| Jeffrey M. Stutz | 148,203 | | 0.2 | |
| B. Ben Watson | 106,329 | | 0.14 | |
| Debbie F. Propst | 25,112 | | 0.03 | |
| Megan Lyon | 26,354 | | 0.03 | |
All executive officers and directors as a group (22 persons)(3) | 904,304 | | 1.19 | |
(1)Includes the following number of shares with respect to which the NEOs have the right to acquire beneficial ownership under stock options exercisable within 60 days: 210,827 shares for Ms. Owen; 112,631 shares for Mr. Stutz; 75,741 shares for Mr. Watson; and 24,018 shares for Ms. Propst; 23,033 shares for Ms. Lyon. Includes the following number of deferred equity units; 4,013 units for Mr. Stutz.
(2)Percentages are calculated based upon shares outstanding plus shares that may be acquired under stock options exercisable within 60 days.
(3)Included in this number are 505,649 shares with respect to which executive officers and directors have the right to acquire beneficial ownership under options exercisable within 60 days. Includes the following number of deferred equity units 4,888.
|
| | | | |
| Name | Amount and Nature of Beneficial Ownership(1) | Percent of Class(2) |
| Andrea R. Owen | 25,816 |
| 0.04 |
|
Brian C. Walker(3) | — |
| — |
|
| Jeffrey M. Stutz | 82,164 |
| 0.14 |
|
| Gregory J. Bylsma | 38,263 |
| 0.06 |
|
Stephen C. Gane(4) | 18,300 |
| 0.03 |
|
| Jeremy J. Hocking | 19,644 |
| 0.03 |
|
| B. Ben Watson | 65,410 |
| 0.11 |
|
All executive officers and directors as a group (23 persons)(5) | 534,816 |
| 0.91 |
|
| |
(1) | Includes the following number of shares with respect to which the NEOs have the right to acquire beneficial ownership under stock options exercisable within 60 days: 25,816 shares for Ms. Owen; 58,579 shares for Mr. Stutz; 6,032 shares for Mr. Bylsma; no shares for Mr. Gane; and 39,461 shares for Mr. Watson. Includes the following number of deferred equity units; 9526 units for Mr. Gane and 3900 units for Mr. Stutz. |
| |
(2) | Percentages are calculated based upon shares outstanding plus shares that may be acquired under stock options exercisable within 60 days. |
| |
(3) | Mr. Walker served as our President and Chief Executive Officer until his retirement on August 21, 2018 |
| |
(4) | Mr. Gane's employment with the Company ended on May 31, 2019. |
| |
(5) | Included in this number are 180,352 shares with respect to which executive officers and directors that have the right to acquire beneficial ownership under options exercisable within 60 days. Includes the following number of deferred equity units 14,611. |
Letter from the Executive Compensation Committee Chair
Dear Fellowfellow Herman Miller Shareholder,shareholder,
Fiscal 2019 reflected
While fiscal 2021 brought a yearcontinuation of positive financial performance driven by significant sales growth and impressive operating margin expansion, despite greater than expected pressure from commodity input costs and tariffs duringpandemic-related challenges, the year. Looking ahead, Andi Owen and her leadership team developed a set of compelling strategic priorities to guide the organization forward that were shaped by industry trends and leverage corestory for Herman Miller capabilitiesproved to create shareholder value.
We are proudbe one of the successes we achieved financiallygrowth, momentum, and operationally during the year as detailed in the "Financial Highlights from Fiscal 2019" section of this proxy statement. Our executive compensation programs continue to exhibit strong alignment with financial performance:
Executive annual incentive awards were paid at 77.61% of target, which reflected adjusted EBITDA performance (as described in the "Reconciliation of Non-GAAP Measures" on pg. 48) of $290.8 million versus a target of $300.9 million. These results reflected the pressures from higher than expected commodity and tariff-related costs during fiscal 2019.
On a three-year basis, however, HMVA performance did not meet the threshold performance level and HMVA units granted for the 2017-2019 performance period did not result in an incentive payout.
We continue to evaluate our executive compensation programs to most effectively align long-term incentive compensation with long-term shareholder value.decisive action. As a result of the management's diligent and evolving response to the pandemic, we have madeoutperformed the followingfinancial plan design changes effectiveset at the beginning of the fiscal year. Our broad product portfolio, differentiated sales channels, and extensive distribution capabilities enabled Herman Miller to manage through the pandemic, despite the unprecedented challenges.
Given the uncertainty we faced as we entered fiscal 2021, management and the Board of Directors took aggressive steps to manage cash and liquidity. This included implementing a number of compensation-related actions, including temporary pay reductions for fiscal 2020:
Replace Adjusted EBITDA with Adjusted Operating Income as the primary financial metric in the annual incentive program. This change better aligns our performance targets with a sharp focus on capital allocationall salaried employees and operating margin expansion.
Establish incentive payout targetssalary deferrals for the leadership team, based on consolidated corporate performance to better align themsuspension of both the annual merit increase and the traditional annual bonus program, as well as suspension of US retirement plan contributions. We approached these decisions with our One Herman Miller strategic priority.
Revise the mix of long-term incentive awards, as described in more detail later in this report, to weight performance results more fully towards our strategic focus on operating income and revenue growth, with actual payout modified based on our relative total shareholder return.
These changes complement the existingsame strong governance and best practices already underlyingoversight we have always applied to our executive compensation programsprograms.
Throughout the fiscal year, the Executive Compensation Committee adapted its decision making in response to balance the inherent needcircumstances created by the pandemic. While we suspended our traditional fiscal 2021 bonus plan, we implemented an alternative plan based on Herman Miller’s business plan, limiting the maximum payout to attract, retain,100% of normal target levels. At the close of the fiscal year, the Committee approved a 100% payout of that plan based on the Company’s outperformance of the business plan and incentivize world class talent while aligningconsidering:
•The Committee’s review of Herman Miller’s fiscal 2021 performance compared to the business plan;
•Herman Miller’s response to the COVID-19 pandemic include managing expenses, liquidity, and employee safety; and
•Management’s continued execution against strategic priorities.
Given the increasingly stable business performance as the fiscal year progressed, we were able to restore all other fiscal 2021 compensation reductions by end of the year. The Committee also approved vesting of July 2018 relative TSR awards at 86%, based on share price performance compared to our entire organization directlypeer group. The July 2018 HMVA awards did not meet threshold performance and did not vest.
Entering fiscal 2022, the Committee has decided to return to our historical compensation approach, with long-term shareholder interests.the following exceptions:
Our Say on Pay Proposal is found on page 18 of this proxy statement,
•The annual bonus program has been reinstated, with adjusted operating income performance goals being set and measured separately for the first half and the Board recommends that you vote ‘FOR’ this proposal. Wesecond half of the fiscal year, respectively. This approach reflects the ongoing uncertainty surrounding global pandemic mitigation efforts, while also invite yousignaling our overall confidence in Herman Miller’s ability to consider additional information onovercome these lingering challenges. Company performance for the two time periods will be combined to determine the annual bonus payout level, which will be paid at the end of the fiscal year.
•Herman Miller’s long-term incentive program will return to its normal structure and July grant timing. The long-term incentive award will be allocated as follows: 50% PSUs, 25% RSUs, and 25% stock options; our compensation philosophy and decisionstypical relative TSR modifier will apply to the PSU awards.
•The PSU component of the long-term incentive award will comprise a three-year performance period with annual goals being set in the following categories:
•40% weight on adjusted operating income performance
•40% weight on revenue performance
•20% weight on non-financial metrics, focusing on key initiative areas such as employee engagement; employee diversity, equity, and inclusion; customer satisfaction; and key opportunity win rate conversion.
Herman Miller, Inc., and Subsidiaries26
While overall uncertainty persists, we remain confident in Herman Miller’s ability to navigate these and other challenges that may arise. The Executive Compensation Discussion and Analysis. I amCommittee is confident that our executive compensation programs willare structured to drive the behaviors and results the Board expects and thoseresults that are in the best long-term interest of our shareholders.
Sincerely,
David A. Brandon
Chair, Board Executive Compensation Committee
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes the material elements of our executive compensation program. It also provides an overview of the specific decisions the Executive SummaryCompensation Committee made for our NEOs for fiscal 2021, including the key factors that the Executive Compensation Committee considered in determining the compensation arrangements. The Committee’s decisions reflected the unique circumstances and challenges presented by the pandemic.
Executive Officers Covered by this Compensation Discussion and Analysis
We are required to provide information regarding our compensation policies and decisions related to our President and Chief Executive Officer, (including any individual who served as our Chief Executive Officer during the past fiscal year), our Chief Financial Officer, and the three other most highly compensatedhighly-compensated executive officers serving as executive officers at the end of the fiscal year (including up to two additional offices who would qualify as a named executive officer but for the fact that he or she was not serving as such as of 2019 fiscal year-end).year. We refer to the foregoing individuals for whom disclosure is required as our Named Executive Officers ("NEOs")(NEOs). We intend this Compensation Discussion and Analysis to provide information regarding, among other things, the overall objectives of our compensation program and each element of compensation provided to the NEOs.
The NEOs for fiscal year 20192021 and their titles are listed in the following table:
|
| | | | |
| Name | Title |
AndreaAndi R. Owen | President and Chief Executive Officer (CEO) |
Brian C. Walker (1)
| Former President and Chief Executive Officer |
| Jeffrey M. Stutz | Chief Financial Officer (CFO) |
Gregory J. Bylsma | President, North America Contract |
Stephen C. Gane (2)
| Former President, Herman Miller Specialty Brands |
Jeremy J. Hocking | President, Herman Miller International |
| B. Ben Watson | Chief Creative Officer |
| Debbie F. Propst | President, Herman Miller Group Retail |
(1)
Megan Lyon | Mr. Walker was not eligible to participate in the fiscal 2019 annual incentive or long-term incentive programs due to his retirement. Mr. Walker retired effective August 21, 2018, from all positions with the company including as a member of our Board of Directors. Mr. Walker is listed as a NEO in accordance with the SEC's disclosure requirements.Chief Strategy Officer |
| |
(2)
Executive Summary Impact of COVID-19 Pandemic on Our Business Our fiscal year began approximately two months after the COVID-19 pandemic struck the United States. Herman Miller responded to the challenges brought about by the COVID-19 pandemic, by maintaining focus on the continued execution of our strategic priorities, while adapting to the extraordinary circumstances of the pandemic. We adapted our workplace policies and practices to keep our employees safe and took a number of actions to manage expenses and preserve liquidity. We executed several cost management actions, including instituting pay reductions for all salaried staff. We suspended merit increases for the fiscal year and suspended US retirement plan contributions. As the business stabilized throughout the fiscal year, we were able to reinstate these programs. In addition, Ms. Owen and her leadership team deferred portions of their remaining salaries.
Impact of COVID-19 Pandemic on Our Compensation Programs The Executive Compensation Committee (Committee) and management determined that maintaining liquidity and profitability, as well as charting a path to restore shareholder value, were paramount. As such, key compensation actions taken by the Committee reflected these priorities and included:
•The Committee took a holistic view of compensation. The Committee elected to review the potential impacts of COVID-19 on the business and executive compensation holistically. The Committee reviewed the status of outstanding programs, considered the compensation elements available, and acted as necessary over the course of the year, favoring measured action across the fiscal year over any significant one-time changes.
•The Committee elected to suspend our traditional annual incentive plan design. The tremendous amount of uncertainty at the start of the fiscal year, including when we would be able to manufacture and deliver products to our customers, and the volatile economic environment made it challenging to set objective financial goals. While the Board approved a 2021 business plan that anticipated the impact of the pandemic based on what was known at the time, the Committee acknowledged the ongoing uncertainty and determined that no above-target opportunity would be provided. As a result, the Committee capped the potential payout of our 2021 annual incentive plan at target. Herman Miller, Inc., and Subsidiaries28
•The Committee approved a modified approach to granting long-term incentive awards in fiscal 2021. The Committee chose to retain the performance orientation of our long-term incentive program but modified the mix and timing of grants to reflect the challenges of setting multi-year goals due to the extraordinary impact of the pandemic. The Committee granted 60% of each NEO’s target long-term incentive award in July of 2020, per our historical practice, split evenly between RSUs and stock options; the remaining 40% of target value was granted in January of 2021 in the form of PSUs. Because the ability to establish multi-year financial and operating goals did not improve sufficiently over the first half of the fiscal year, the Committee elected to utilize relative TSR as the sole performance metric for the PSUs and reduce the maximum payout from 200% of target to 125% of target.
•The Committee awarded performance-based awards tied to shareholder value creation to select employees, including the NEOs. As disclosed in last year’s proxy, in fiscal 2021, the Committee approved a grant of premium-priced stock options to approximately 60 key employees, including the NEOs. The premium-priced option awards were intended to further align the key employees with the goal of increasing shareholder value. These awards enhanced the focus on the long-term impact of the critical steps management was taking, and needed to continue to take, to aid in the recovery from the effects of the COVID-19 pandemic on the business and position the Company for future growth. The Board determined to grant premium-priced stock options, as opposed to other forms of incentive compensation, because of the long-term nature of options and their direct alignment with share price appreciation. These options vest ratably over a three-year period and only have value if our stock price increases by more than 10% from the stock price on the date of grant.
| Mr. Gane's role as President of Herman Miller Specialty Brands ended on May 31, 2019, the day before the last day of fiscal 2019 year end. Mr. Gane is listed as a NEO in accordance with the SEC's disclosure requirements. |
Fiscal 20192021 Company Performance
While demand for the Company's products and services, particularly in the Contract channel of the business, was adversely impacted, our multi-channel go-to-market approach enabled us to serve customers where, and how, they needed to be served. In addition, the investments we made in people, technology, and products positioned us well to capitalize on emerging opportunities as our customers' needs changed throughout the COVID-19 crisis. This strategy allowed for our Retail business to benefit from the unanticipated emerging work-from-home trend as well as "home is my castle" trends as consumers are focusing on and upgrading their broader home environments. Key highlights include:
•Net sales were $2,465.1 million (0.9% decrease year-over-year)
•Gross margin of 38.5% (1.9% increase year-over-year)
•Adjusted Operating Income of $246(1) million
•2021 Total Shareholder Return (TSR) of 104%
Fiscal 2021 Incentive Plan Outcomes as a Result of Business Performance
We continued to make significant progressoutperformed our fiscal 2021 business plan that anticipated the impact of the pandemic based on what was known at the time, driven by extraordinary growth in our Retail business and enabled by the amplification of our omni-channel and digital strategies. However, our three-year financial performance lagged versus the goals established in fiscal 2019 on our long-term vision for creating shareholder value. In addition to meaningful progress on our key strategic priorities, we achieved increased sales and orders for the ninth consecutive year and delivered consolidated revenue of $2,567.2 million in fiscal 2019. Revenue growth, strong expense management, and a lower tax rate helped offset commodity costs and tariff headwinds to deliver adjusted EPS 29%(1) over the prior year, which is discussed elsewhere in this Proxy Statement. We also continued to maintain a strong balance sheet and cash flow profile. Asas a result of this financialthe pandemic. Implications for our compensation programs include:
•Fiscal 2021 annual incentive plan payout capped at 100% of target
•2019-2021 Herman Miller Value Added PSU payout of 0% of target
•2019-2021 relative TSR PSU payout of 86% of target (reflecting 44th percentile performance we recently announced a 6% increase toagainst our quarterly dividend rate beginning in October 2019.peer group)
Overview of Compensation Philosophy and How We Set Pay
Compensation Philosophy
Overview of Compensation Program
Our compensation philosophy, as approved by the Committee, is to reward our executives for meeting financial and operational goals that ultimately lead to creating shareholder value. We have designed our compensation program to provide executive officers performing their duties at a proficient level with target compensation levels that reflect the market median compensation for their
(1) Non-GAAP measurements; see accompanying reconciliations and explanations.
position based upon data that our independent compensation consultant provides (as we describefurther described in the section ontitled "Benchmarking of Compensation"). The compensation program requires that a majority of the executive officer’s compensation be determined based upon the company’s performance. The Committee believes that the compensation program, through the use of base salary, annual incentive and long-term incentive awards (referred to collectively as "total annual compensation") operates in a manner consistent with these objectives. The Committee also believes that the compensation program rewards performance that generates both consistent and long-term enhancement of shareholder value.
(1) Non-GAAP measurements; see accompanying reconciliations and explanations on pg. 48.
Compensation Discussion and Analysis (continued)
Compensation Philosophy
The Company's compensation philosophy, as approved by the committee, is to provide compensation levels that are commensurate with individual and company-wide performance by rewarding appropriate levels of risk-taking in consideration of creating shareholder value. We establish market-competitive target compensation levels but provide the opportunity to earn above or below-target levels based on this performance. Consistent with this philosophy, the key objectives of our executive officer compensation program are to:
•Link a material portion of executive officers' total annual compensation directly to the company'sCompany's performance.
•Reinforce our commitment to our people, planet, and communities.
•Align the interests of executive officers with the long-term interests of shareholders.
•Attract, motivate, and retain executive officers of outstanding ability.
Compensation Policies and Practices That Reflect Our Compensation Philosophy
|
| | | | |
| What We Do |
| a | Pay for Performanceperformance |
| a | Balance Long-Termlong-term and Short-Term Incentivesshort-term incentives |
| a | Benchmark Compensation Againstcompensation against an Appropriate Peer Groupappropriate peer group |
| a | Maintain Clawback Policyclawback policy |
| a | Conduct an Annual Risk Assessmentannual risk assessment |
| a | Maintain Stock Ownership Requirementsstock ownership requirements |
| a | Prohibit Hedginghedging and Pledgingpledging |
| a | Limit Perquisitesperquisites |
| a | Engage an Independent Compensation Consultantindependent compensation consultant |
| a | Hold Executive Officer Sessionsexecutive sessions at Each Committee Meetingeach committee meeting |
| What We Do Not Do |
| x | No Gross-Upsgross-ups for Excise Taxesexcise taxes |
| x | No "Single Trigger" Severance"single-trigger" severance |
| x | No Repricingrepricing of Optionsoptions |
| x | No Guaranteed Compensationguaranteed compensation |
| x | No Dividendsdividends on Unvested Equityunvested equity |
| |
Compensation DiscussionHerman Miller, Inc., and Analysis Subsidiaries(continued)30
Elements of the Compensation Program
The following table provides an executive summary of our fiscal 20192021 compensation program for our executive officers:
|
| | |
| | | | | |
| Compensation Element | General Description | Objective of Compensation Element |
| Base Salary | Base salaries reflect market rates for comparative positions, each NEO's historical level of proficiency and performance, as well asand their roles and duties. | The base salary of NEOs typically varies around the median depending on an individual’s experience, performance, and internal equity considerations. The Committee or the Board in each circumstance uses its judgment and experience in setting the specific level of base salary relative to the general market median data. |
| Annual Incentive | We provide executive officers the opportunity to earn an annual incentive pursuant to the Annual Executive Incentive Cash Bonus Plan.Plan (annual incentive plan). The plan provides for the annual payment of a cash bonus (incentive) to selected executive officers based upon the performance of the companyCompany (and in some cases, various business units and/or functional goals) during the fiscal year. The primary measure of financial performance for the fiscal 20192020 incentive was measured by adjusted EBITDA, which represents the company's earnings before interest, taxes, depreciation and amortization (excluding non-controlling ownership interests).Adjusted Operating Income. | The purpose of the Annual Executive Incentive Cash Bonus Planannual incentive plan is to closely link incentive cash compensation to the creation of shareholder value. We intend for the plan to foster a culture of performance, promote employee accountability, and establish a framework of manageable risks imposed by variable pay. We also intend the plan to reward long-term, continued improvements in shareholder value with a share of the wealth created. |
The Committee believes that, to support the Company'sour strategy around operating as a single business unit as well as supporting functional business units, it is important to tie a significant portion of the executive officers' annual incentive to the overall company performance (as well as functional business units supported by executive officers as applicable). |
An executive officer's total cash compensation is comprised of both base salary andperformance; NEO’s annual incentive.incentive awards are based on consolidated Company performance. |
| Long-Term Equity Incentives | The Committee and Board have historically granted various types of long-term incentive awards including:including Restricted Stock Awards, Restricted Stock Units, Performance Share Units,RSUs, PSUs, Relative TSR Performance Share Units,Total Shareholder Return (TSR) PSUs, and Stock Options with a three yearthree-year vesting period. | The key objectives of granting long-term equity incentive awards are: |
| - to provide an appropriate level of equity reward to executive officers that ties a meaningful part of their compensation to the long-term returns generated for shareholders. |
| - to provide an appropriate equity award to the next level of executive officers where market data would support their inclusion in an annual equity award plan. |
- to assist the achievement of ourin developing an ownership stake and achieving share ownership requirements. |
- to attract, retain, and reward key employees. We believe a significant portion of executive officer pay should be aligned with long-term shareholder returns and that encouraging long-term strategic thinking and decision-making requires that executive officers have a significant stake in the long-term success of Herman Miller.the Company. |
| Retirement and Health Benefits | We maintain retirement plans along with a broad base of health insurance plans available to full-time and most part-time employees. | The NEOs participate in such retirement plans and health insurance plans on the same terms as all other employees within their respective geographic region or business unit. |
| Other Executive Compensation Plans | We provide limited additional compensation programs to our executive officers, including a compensation protection program in the form of executive long-term disability;disability and a retirement equalization program in the form of a non-qualified retirement match program with an optional deferred compensation element. | It is our goal to provide market competitive benefits which allow us to attract and retain critical executive talent. |
| | |
Compensation Discussion and Analysis 31(continued)2021 Proxy Statement
The following charts illustrate the key elements of our compensation for our NEOs:
Elements of Total Annual Target Compensation for fiscal 20192021
Base Salary Fiscal 2019
The Committee and the Board granted merit increases for fiscal 2019 to our employees, including the NEOs. The base salaries of each of our NEOs was within the range established based on market data for their position. Salary changes went into effect on or after July 16, 2018, and are detailed as follows:
|
| | | | | |
| Name | Salary for Fiscal 2019 | Percent Increase from Prior Year |
Andrea R. Owen (1) | $ | 1,000,000 |
| N/A |
|
Brian C. Walker (2) | $ | 975,000 |
| — | % |
| Jeffrey M. Stutz | $ | 480,000 |
| 6.7 | % |
| Gregory J. Bylsma | $ | 480,000 |
| 3.2 | % |
| Stephen C. Gane | $ | 350,000 |
| 2.9 | % |
Jeremy J. Hocking (3) | $ | 348,234 |
| 28.8 | % |
| B. Ben Watson | $ | 445,000 |
| 3.5 | % |
| |
(1) | Ms. Owen became President and CEO of the Company as of August 22, 2018. |
| |
(2) | Mr. Walker retired effective August 21, 2018 and did not receive a salary increase for fiscal 2019. |
| |
(3) | Measured in pounds sterling at an exchange rate of 1.2994 would yield £268,000.
|
Ms. Owen’s salary was established in connection with her commencement as the company’s President and CEO. Mr. Stutz’s increase is the result of his proficient performance in his role as CFO, particularly in light of the complexities in the global financial environment. Mr. Bylsma’s increase reflects his continued improvement of the company’s operations capabilities as well as his new responsibility for the overall North America Contract business which includes North America Work, Government, Healthcare and Education businesses. Mr. Gane's increase was in recognition of his leadership of the Specialty Business. Mr. Hocking increase was in recognition of his new leadership role as President of
Compensation Discussion and Analysis (continued)
Herman Miller International. Mr. Watson’s increase is in recognition of the improvement in the company’s brand strategy and messaging, his new responsibility for R&D and our global portfolio of new products.
Due to a reorganization of the leadership team In February 2019, Messrs. Stutz, Bylsma, and Watson received a base salary increase due to increased responsibilities. Their salaries for fiscal 2019 after the reorganization are as follows:
|
| | | | | |
| Name | Salary for Fiscal 2019 | Percent Increase |
| Jeffrey M. Stutz | $ | 510,000 |
| 6.3 | % |
| Gregory J. Bylsma | $ | 550,000 |
| 14.6 | % |
| B. Ben Watson | $ | 480,000 |
| 7.3 | % |
Annual Executive Incentive Cash Bonus Plan (Annual Incentive)
Setting Incentive Targets
Each year, the Committee establishes a target incentive for each participant,NEO expressed as a percentage of base salary, which is the incentive amount the NEO would receive if all performance goals were achieved at target. TheOrdinarily, the NEOs each have the opportunity to earn up to a maximum of 200% of target and may earn zero percent of target if our goalstarget; however, as discussed above, the Committee determined that the maximum payout should not exceed 100% for fiscal 2021 due to the extraordinary circumstances presented by the pandemic. As in years past, no bonuses are not achieved.earned unless performance meets or exceeds the threshold level. The annual cash incentive opportunity levels for each of our NEOs for 2019,fiscal 2021, as a percentage of base salary, were as follows: | | | | | | | | | | | |
| Name | Threshold Incentive as % of Base Salary | Target Incentive as % of Base Salary | Maximum Incentive as % of Base Salary(1) |
| Andi R. Owen | 0% | 115% | 115% |
| Jeffrey M. Stutz | 0% | 65% | 65% |
| B. Ben Watson | 0% | 65% | 65% |
| Debbie F. Propst | 0% | 65% | 65% |
| Megan Lyon | 0% | 65% | 65% |
(1)The Committee determined that the maximum payout should not exceed 100% of target for fiscal 2021 due to the extraordinary circumstances presented by the pandemic.
Herman Miller, Inc., and Subsidiaries32
|
| | | |
| Name | Threshold Incentive as % of Base Salary | Target Incentive as % of Base Salary | Maximum Incentive as % of Base Salary |
| Andrea R. Owen | 0% | 100% | 200% |
| Brian C. Walker | N/A | N/A | N/A |
| Jeffrey M. Stutz | 0% | 65% | 130% |
| Gregory J. Bylsma | 0% | 65% | 130% |
| Stephen C. Gane | 0% | 65% | 130% |
| Jeremy J. Hocking | 0% | 65% | 130% |
| B. Ben Watson | 0% | 65% | 130% |
We set the target incentive percentage for the NEOs so that the incentive at target performance will generally equal 100% ofapproximate the market median incentive amount for comparable positions as shown in the market data and yield a median target total compensation opportunity, although we may adjust base pay and incentive to maintain total compensation in an amount that is consistent with our compensation philosophy. The Committee believes that this use of incentive is consistent with the objective of making compensation for executive officers more variable with the company’sCompany’s performance.
The Committee, at the beginning of each fiscal year, establishes threshold, target, and maximum performance goals under our Annual Executive Cash Incentive Bonus Plan. The Committee determines these performance goals after review and discussion with management of the company’s annual financial plan as approved by the Committee and the Board. For fiscal 2019, each NEO’s annual incentive was tied to our 2019 consolidated adjusted EBITDA results. Messrs. Bylsma, Gane, and Hocking also had a portion of their incentive based on the adjusted EBITDA results for the business units they lead.
2019Fiscal 2021 Performance Results and Incentive Payouts
ForAt the end of fiscal 2019,2021, the Committee established consolidatedreviewed actual adjusted EBITDA performance goals based on its reviewoperating income of $246(2) million versus the fiscal 2021 business plan that had acknowledged the impact of the Board-approved financialpandemic and determined that this level of performance far exceeded the target level of performance set at the beginning of fiscal 2021. In accordance with the 2021 design, the Committee capped the Company Performance Factor at 100%, which resulted in a target payout for all annual incentive plan and discussions with management. The target was set above fiscal 2018 target and actual adjusted EBITDA performance reflecting our growth imperative and our expectations of continued growth in specified markets.
|
| | | | |
Performance Measure | Performance Goals | Actual Performance |
Threshold | Target | Maximum |
Consolidated adjusted EBITDA | $255.8M | $300.9M | $346.0M | $290.8M |
participants, including the NEOs.
Compensation Discussion and Analysis (continued)
Based on the performance results for fiscal 2019,2021, the incentive amounts the Company paid to the NEOs were as follows:
| | | | | | | | | | | | | | | | | |
| Name | Target Incentive Tied to Adjusted Operating Income | Company Performance Factor | Total Incentive Amount Earned | Incentive Amount Deferred (1) |
| ($) | (%) | | ($) | ($) |
| Andi R. Owen | $ | 1,150,000 | | 115.00 | % | 1.0000 | $ | 1,123,462 | | $ | 44,938 | |
| Jeffrey M. Stutz | $ | 335,400 | | 65.00 | % | 1.0000 | $ | 327,660 | | $ | 36,043 | |
| B. Ben Watson | $ | 315,900 | | 65.00 | % | 1.0000 | $ | 308,610 | | $ | 30,861 | |
| Debbie F. Propst | $ | 325,000 | | 65.00 | % | 1.0000 | $ | 317,500 | | $ | — | |
| Megan Lyon | $ | 315,900 | | 65.00 | % | 1.0000 | $ | 308,610 | | $ | 12,344 | |
|
| | | | | | | | | | | | | | | | | | | |
| Name | Target incentive Percent Tied to adjusted EBITDA |
Company Performance Factor | Incentive Earned For Company Performance | Target Incentive Percent tied to Business Unit | Business Unit Performance Factor | Incentive Earned For Function/Bus Unit Performance |
Total Incentive Amount Paid |
Incentive Amount Deferred (1) |
| Andrea R. Owen | 100.00 | % | 0.7761 | $ | 776,100 |
| | | | $ | 776,100 |
| $ | 38,805 |
|
| Brian C. Walker | N/A |
| 0.7761 | $ | — |
| | | | $ | — |
| $ | — |
|
| Jeffrey M. Stutz | 65.00 | % | 0.7761 | $ | 243,324 |
| | | | $ | 243,324 |
| $ | 26,766 |
|
| Gregory J. Bylsma | 32.50 | % | 0.7761 | $ | 124,548 |
| 32.50 | % | 0.7943 |
| $ | 127,462 |
| $ | 252,010 |
| $ | 25,201 |
|
| Stephen C. Gane | 32.50 | % | 0.7761 | $ | 87,882 |
| 32.50 | % | 1.6407 |
| $ | 185,800 |
| $ | 273,682 |
| $ | 54,736 |
|
| Jeremy J. Hocking | 32.50 | % | 0.7761 | $ | 87,825 |
| 32.50 | % | 2.0000 |
| $ | 226,352 |
| $ | 314,181 |
| $ | — |
|
| B. Ben Watson | 65.00 | % | 0.7761 | $ | 227,413 |
| | | | $ | 227,413 |
| $ | 22,741 |
|
| |
(1) | This amount represents the portion of the bonus that the NEO elected to defer under the Herman Miller, Inc. Executive Equalization Retirement Plan described later in this Compensation Discussion and Analysis. |
(1)This amount represents the portion of the bonus that the NEO elected to defer under the Herman Miller, Inc. Executive Equalization Retirement Plan described later in this Compensation Discussion and Analysis.
Prior to incentive payout, the Audit Committee approves the calculation of financial results for the year and the resulting company performance factor. The Committee also certifies the company performance factor and the function/business unit performance factors for use in the incentive calculation. The Committee did not elect to exercise any discretion in its determination of incentive payouts for the NEOs.
Long-Term Equity Incentives
Setting Target LTILong-Term Incentive (LTI) Values
For each Executive Officer,executive officer, the Committee calculates a target value of LTI grants for the current fiscal year that is expressed as a percentage of base salary and determines the percent of the target LTI value that should be allocated to each award type. The Committee sets the total target value of the LTI grants for each NEO at a level intended to ensure that the NEO’s total direct compensation would correspond with the market median of the market data for a comparable NEO’s individual position. Following the end of the fiscal year, the Committee determines the total value of LTI grants for each NEO based on each NEO’s target value and the company’s financial performance for that year relative to target.value. We convert that value for each NEO into grants of: a) RSUs based on the twenty (20) trading-day average of restrictedour stock units and performance share unitsprice, b) PSUs based on the closing price of our stock on the date of grant, and c) grants of stock options, as applicable, using a Black-Scholes valuation on the date of grant usingand the share price on the date of grant as the exercise price. As noted above, the exercise price for certain options granted in fiscal 2021 was set at 110% of current fair market value.
Target Grants Awarded in Fiscal 20192021
The table below illustrates the target value of the LTI grants, expressed as a percentage of the NEO's base salary, that the Committee and Board established and granted inas part of the regular annual award process – segmented between July 2018,2020 and inJanuary 2021. As discussed above, the case of Ms. Owen, were granted on August 22, 2018, the date of her commencement of employment and in accordance with her employment agreement with the Company. The target values associated with these grants were allocated approximately equally among the following fourthree award types: 30% delivered in RSUs, Herman Miller Value Added Performance Share Units, Relative Total Shareholder Return Performance Share Units,30% delivered in stock options, and stock options.40% delivered in PSUs tied to the Company’s relative TSR performance from grant date to end of fiscal year 2023. Each of these awards, as described in more detail below, directly ties management’s compensation opportunity to the creation of shareholder value.
(2) Non-GAAP measurements; see accompanying reconciliations and explanations.
The following table discloses the target awards granted in fiscal 2019:2021:
|
| | | | | | | | | | | | |
| Name | Target of LTI as a % of Salary | Restricted Stock Units | Herman Miller Value Added Performance Share Units at Target | Relative Total Shareholder Return Performance Share Units at Target | Number of Stock Options | Option Exercise Price |
| Andrea R. Owen | 250 | % | 16,383 |
| 16,383 |
| 12,164 |
| 77,447 |
| 38.15 |
|
| Brian C. Walker | N/A |
| — |
| — |
| — |
| — |
| N/A |
|
| Jeffrey M. Stutz | 125 | % | 3,672 |
| 3,672 |
| 2,647 |
| 17,512 |
| 38.30 |
|
| Gregory J. Bylsma | 125 | % | 3,794 |
| 3,794 |
| 2,735 |
| 18,096 |
| 38.30 |
|
| Stephen C. Gane | 90 | % | 1,997 |
| 1,997 |
| 1,440 |
| 9,527 |
| 38.30 |
|
| Jeremy J. Hocking | 80 | % | 1,459 |
| 1,459 |
| 1,052 |
| 6,958 |
| 38.30 |
|
| B. Ben Watson | 90 | % | 2,526 |
| 2,526 |
| 1,821 |
| 12,049 |
| 38.30 |
|
| | | | | | | | | | | | | | |
| Name | Target of LTI as a % of Base Salary | Stock Options(1) | RSUs | PSUs |
| Andi R. Owen | 275 | % | 124,247 | | 35,408 | | 29,562 | |
| Jeffrey M. Stutz | 125 | % | 29,142 | | 8,305 | | 6,934 | |
| B. Ben Watson | 125 | % | 27,447 | | 7,822 | | 6,531 | |
| Debbie F. Propst | 125 | % | 28,238 | | 8,047 | | 6,719 | |
| Megan Lyon | 125 | % | 27,447 | | 7,822 | | 6,531 | |
Compensation Discussion and Analysis(1) (continued)Excludes premium priced options granted in fiscal 2021
Key Features of Each Award
Restricted Stock Units: The restricted stock units (RSUs)RSUs represent the right to receive shares of Herman Miller, Inc. common stock. Each unit represents the equivalent of one share of the common stock as of the date of grant and cliff vests aftervest on the anniversary of the grant date over three years.years with the following schedule: 25%, 25% and 50%. RSUs convert into shares upon vesting. Dividends are not paid over the vesting period but accrue on the RSUs and are added to the total value of the units at the time of vesting. Upon vesting,
Stock Options: Stock options provide the opportunity to recognize value only if the share price appreciates above the price on the date of grant. Because our stock options vest over ratably over three years, after grant, the actual value an executive officer may realize is directly relatedthis creates a multi-year alignment between option recipients and shareholders and motivates participants to the value createdimplement and achieve financial and operational goals that will lead to a growth in share price over the vesting period.a long period of time.
Herman Miller Value Added Performance Share Units:Relative TSR PSUs: The Herman Miller Value Added (HMVA) performance share unitspayout opportunity for the PSUsthe Committee awarded in January are units representing the rightsubject to receive company shares of at the end of the specified performance period. The Committee establishes the Herman Miller Value Added goals at the start of each three-year performance period. These units cliff vest after three years if certain Herman Miller Value Added goals are met. The awards provide that the total number of shares that vest may vary between 0% and a maximum of 200% of the number of units awarded depending uponmodification based on our TSR performance relative to the established Herman Miller Value Added goal. HMVA performance share units convert into company stock upon vesting. Dividends do not accrue on the awards.peer group. The awards also provide the Committee the ability to extend the performance period torelative TSR modifier provides for a total of five years; however, if the extension is granted, then no more than 34% of the target grant may vest.
Herman Miller Value Added is defined as the Company’s annual earnings before interest, taxes, depreciation and amortization, adjusted for non-recurring and special charges as outlined below (EBITDA), less a capital charge. The capital charge for each cycle is determined by multiplying the company’s capital by its cost of capital. The Committee approves the determination of the cost of capital and EBITDA for purposes of the Herman Miller Value Added Performance Share Units. HMVA PSUs are not earned if the Company has not been able to generate returns above our cost of capital - and the value of any units that are earned is directly related25% increase to the value shareholders have realized over the performance andPSU vesting period.
Relative Total Shareholder Return ("TSR") Performance Share Units: Relativeif our relative TSR Performance Share Unit Awards are units representing the right to receive company shares at the end of the specified performance period. These units cliff vest after three years if we meet certain TSR objectives. The awards provide that the total number of shares that finally vest may vary between 0% and a maximum of 200% of the number of units awarded depending upon performance relative to established total shareholder return goals, with the award amount vesting if performance is at or above the target level. Any value ultimately realized75th percentile of our peer group or a 25% decrease to the PSU vesting if our relative TSR performance is below the 25th percentile of our peer group. The maximum payout on these awards is 125% of target. This approach was approved by the executive officers is directly related to both Herman Miller’s relative TSR as well asCommittee, unique for FY2021 given the absolute performance of our share price.ongoing uncertainty in the marketplace.
TSR is calculated as the total shareholder return to Herman Miller shareholders, including reinvested dividends and share price changes that occur during a fiscal year.the performance period. We determine TSR performance by comparing the company’sour TSR relative to a peer group of companies. The peer group of companies for fiscal year 20192021 is the same as the peer group that we use for purposes of benchmarking NEO compensation, and those companies are described below in the section entitled "Benchmarking of Compensation".
For Relative TSR Performance Share Units granted in fiscal year 2019, the Committee established the following vesting goals:
|
| |
Payout % of Target | 3-year Average Relative TSR |
200% of Target PSUs | 80th percentile or greater
|
100% of Target PSUs | 50th percentile
|
No PSUs Earned | Below 30th percentile
|
Stock Options: The options vest ratably over three years and have a ten-year life, and the exercise price of each option equals the fair market value of our stock on the date of grant.
Program Design Changes for Fiscal 20202022
TheFor fiscal 2022, the Committee decided to return to its historical compensation approach, with the following chart illustrates design changes made to both the Annual Incentive and Long-Term Incentive Programs that simplify the programs and ensure alignment and motivation of executive officers towards achieving key strategic priorities while delivering strong financial performance and creating shareholder value.
exceptions:
Compensation Discussion•The annual incentive plan will utilize adjusted operating income as the sole metric with performance goals being set and Analysis measured separately for the first half and the second half of the fiscal year, respectively, to reflect the ongoing uncertainty due to the continued effects of the pandemic. Performance for the two time periods will be combined to determine the annual payout level, to be paid at the end of the fiscal year. No payout will occur until after the end of fiscal 2022.
•(continued)Long-term incentive awards were allocated for NEOs as follows: 50% PSUs, 25% RSUs, and 25% stock options, and were granted in July 2021 (consistent with our normal grant timing).
•The PSU component of the long-term incentive award is tied to 80% financial goals and 20% strategic goals, with the total value subject to the relative TSR modifier. Performance will be measured over a three-year period but will rely upon annual goals, again to appropriately accommodate the uncertainty associated with the ongoing impacts of the pandemic.
Herman Miller, Inc., and Subsidiaries34
|
| | |
| Design Change | Reason for Change |
Annual Incentive Program | Replaced Adjusted EBITDA with Adjusted Operating income as the primary financial metric. | - Operating income is more closely monitored by investors.
- Operating income better recognizes our goals related to capital allocation and margin expansion.
|
Incentive will be based solely on consolidated corporate performance for all participants. | - Coming together as a family of complementary brands under
One Herman Miller requires the entire leadership team to be aligned around the same corporate performance goals.
|
Long-Term Incentive Program
| Change in the mix of LTI awards from: 25% HMVA PSUs, 25% rTSR PSUs, 25% stock options, and 25% time-based RSUs to 45% Operating Income Growth PSUs, 30% Revenue Growth PSUs, and 25% time-based RSUs; with the PSUs having a rTSR modifier of +/-25%. | - Reduce dilution while creating greater focus on absolute long-term financial performance. 75% of executive officers’ long-term incentive award opportunity is subject to achievement of multi-year financial goals. |
- Operating Income and Revenue Growth provide clear line of sight for our employees and our shareholders on the alignment of our financial performance with share price. The growth orientation of these new measures is clearly linked to our strategy. |
- The payout opportunity for all PSUS (75% of the target award opportunity) is subject to modification based on our TSR performance relative to the peer group.
- The relative TSR modifier provides for a 25% increase to the PSU vesting if our relative TSR performance is at or above the 75th percentile of the peer group or a 25% decrease to the PSU vesting if our relative TSR performance is below the 25th percentile of the peer group.
- The relative TSR modifier cannot increase the PSU payout above 200% of target.
|
-Create a more direct linkage between critical financial goals and leadership team earning opportunity.
-Our performance against our three-year growth goals will have a significant impact on our ability to create future shareholder value.
|
Base Salary for Fiscal 2020
The Committee and Board of Directors approved the following changes in the base salaries of the continuing NEOs for fiscal 2020 as we discuss below:
|
| | | | |
| Name | Salary for Fiscal 2020 | Percent Increase |
| Andrea R. Owen | 1,000,000 |
| — | % |
| Jeffrey M. Stutz | 516,000 |
| 1 | % |
| Gregory J. Bylsma | 556,000 |
| 1 | % |
Jeremy J. Hocking (1) | 400,000 |
| 15 | % |
| B. Ben Watson | 486,000 |
| 1 | % |
(1)Measured in pounds sterling at an exchange rate of 1.2994 would yield £307,834.
Mr. Hocking’s increase was in recognition of continued expanding of responsibilities in new role and the International business unit’s performance. Messrs. Stutz, Bylsma, and Watson received mid-year increases in fiscal 2019 as mentioned in the Base Salary Fiscal 2019 section. The 1% increase is due to adjustments made to their compensation packages as part of the elimination of the bundled benefits program. Ms. Owen’s base salary was not adjusted for fiscal 2020.
LTI Grants Awarded in Fiscal 2020
The target value of the LTI grants that the Committee and Board established for our NEOs that occurred in July 2019 (fiscal 2020) as a percent of base salary was 275% for Andrea Owen and 125% for Jeffrey Stutz, Gregory Bylsma, Jeremy Hocking and Ben Watson. The total target value was allocated 45% Adjusted Operating Income PSUs, 30% Revenue Growth PSUs, and 25% RSUs with the PSUs having a rTSR modifier of +/-25%.
Compensation Discussion and Analysis (continued)
The following table discloses the types of awards granted in July 20192021 (fiscal 2020)2022):
| | | Name | Restricted Stock Units | Adjusted Operating Income Performance Share Units at Target | Revenue Growth Performance Share Units at Target | Name | Stock Options | RSUs | PSUs |
| Andrea R. Owen | 15,319 | 25,976 | 17,317 | |
| Andi R. Owen | | Andi R. Owen | 60,374 | | 18,956 | | 37,345 | |
| Jeffrey M. Stutz | 3,593 | 6,093 | 4,062 | Jeffrey M. Stutz | 16,667 | | 5,233 | | 10,310 | |
| Gregory J. Bylsma | 3,871 | 6,565 | 4,377 | |
| Jeremy J. Hocking | 2,787 | 4,725 | 3,150 | |
| B. Ben Watson | 3,384 | 5,738 | 3,826 | B. Ben Watson | 13,393 | | 4,205 | | 8,285 | |
| Debbie F. Propst | | Debbie F. Propst | 16,667 | | 5,233 | | 10,310 | |
| Megan Lyon | | Megan Lyon | 13,393 | | 4,205 | | 8,285 | |
Details of our Executive Compensation Program
Role of the Executive Compensation Committee (Committee)
The Committee consists of three directors, each qualifying as independent under NASDAQ’s listing requirements. The Board has determined that each member of the Committee also meets the definition of independence under our corporate governance guidelines and qualifies as a non-employee director for purposes of Rule 16b-3 under the Securities Exchange Act of 1934.
The Committee’s primary functions are to oversee the compensation philosophy and strategy, to determine or recommend to the Board the compensation of company executive officers, including the NEOs, and to act as the administrative committeeCommittee for our executive compensation and broad-based equity and benefit plans.
The Committee is also responsible for providing recommendations to the full Board with respect to all aspects of the annual compensation of our President and CEO. In addition, the Committee, based upon recommendations from our CEO, approves the annual compensation for all other officers covered by Section 16 of the Securities Exchange Act of 1934 including the NEOs and other executive officers. Our President and CEO establishes the base salary of all other executive officers.
Among other responsibilities, the Committee establishes the performance objectives for the Annual Executive Incentive Cash Bonus Planannual incentive plan and our equity-based compensation plans, which cover the President and CEO, NEOs, other executive officers, and other executive employees.
The Committee is also tasked to review and approve compensation and benefit plans as required by the Committee Charter and review the risk assessment of the annual compensation plans’ risk assessment.plans. The Committee annually reviews tally sheets for each NEO that reflect the total direct compensation provided to the NEOs and information relating to all other elements of compensation, including payments under severance or change in control obligations. The Committee uses this information to help it determine that our compensation program is consistent with market norms, and with our compensation philosophy, and the objectives referenced above.
Role of the External Compensation Consultants
The Committee has the authority and sole discretion to select independent compensation consultants, legal consultants, and other advisors to provide it independent advice. The Committee retained Pay Governance LLC as its independent compensation consultants with respect to the compensation matters regarding our executive officers for fiscal 2019.2021. The independent services that Pay Governance provided to the Committee included reviewing the elements of compensation of the President and CEO as well as the other executive officers and comparing those elements to our compensation philosophy and objectives and to market practices. We do not permit Pay Governance to provide other consulting services to the company.Company.
Pay Governance concluded that our compensation program established for those officers is consistent with our compensation philosophy and objectives as well as with market practices. With the approval of the Committee, management retained Meridian Compensation Partners LLC in fiscal 2019 to provide compensation consulting services to management for employees other than the executive officers.
Benchmarking of Compensation
To ensure that executive officer compensation is competitive, the Committee uses marketplace compensation data to compare our compensation program to market pay practices. The Committee in determining fiscal 2019 compensation, also used a specific peer group for benchmarking compensation in determining fiscal 2021 compensation. A listing of the peer group members is provided below. This peer group included both direct competitors as well as comparable companies in other industries to reflect the competitive market for talent in which we compete.
Compensation Discussion and Analysis (continued)
Pay Governance used the peer group information, along with the following survey sources, when analyzing the fiscal 20192021 market competitiveness of pay levels of executive officers: Willis Towers Watson Executive Compensation Database and Aon Hewitt Executive Total Compensation Measurement Database and Mercer Executive Database (we refer to the peer group information and these survey sources collectively as “market data”). The marketSurvey data is usedare size-adjusted to determine competitiveness of base pay, annual incentive and long-term incentive awards. Pay Governance uses a regression analysis and aging to make allowances for time differences in the data and to align the data so that it isbe representative of companies having revenues equivalent to the operations that our individual executive officers manage. Pay Governance compared the base salary, target total cash, and target total direct compensation of each executive officer to the 25th, 50th (market median), and 75th percentile of the Market Datamarket data for a comparable benchmark position.
Pay Governance provided the Committee with benchmarking data, market practices and trends, peer group selection, and pay for performance evaluation information to provide appropriate context for the Committee’s deliberations. Our former CEOMs. Owen made recommendations to the Committee regarding the compensation package for each of the executive officers (other than himself)herself). The former CEOMs. Owen based hisher recommendations with respect to executive officers on the Pay Governance information, hisher evaluation of the individual’s performance, the company’sCompany’s performance, and other factors. The Committee based its approval of the former CEO’sMs. Owen’s recommendations for the compensation of executive officers (other than the CEO) on the Committee’s review of the information from Pay Governance relative to market pay, advice from Pay Governance, and the Committee members’ own judgment, including their judgment on the relative performance of both the companyCompany and its executive officers. Decisions related to Ms. Owen’s compensation was established in connection withwere determined by the commencementCommittee and approved by the Board of her employment with the Company.Directors.
The Committee reviews and approves the peer group that we use in benchmarking compensation on an annual basis. The peers that we used for fiscal 20192021 are set forth below:
|
| | | | | | | |
| American Woodmark Corporation | JELD-WEN Holdings, Inc. | RH aka Restoration Hardware Holdings, Inc. |
Armstrong World Industries, Inc. | Kimball International, Inc. | Sleep Number Corporation |
| Ethan Allen Interiors, Inc. | Knoll, Inc. | Steelcase, Inc. |
Hill-Rom Holdings,Floor and Decor, Inc. | La-Z-Boy, Inc. | Tempur Sealy International, Inc. |
| HNI Corporation | Leggett & Platt, Inc. | Universal Forest Products, Inc. |
| Interface, Inc. | Masonite International Corporation | Williams-Sonoma, Inc. |
| JELD-WEN Holdings, Inc. | RH aka Restoration Hardware Holdings, Inc. | Wayfair, Inc. |
Our peer group is intended to represent companies against which we may compete for talent, with an emphasis on a number of criteria.criteria such as revenue scope, market capitalization and business model. For fiscal 2019,2021, we made a number of changes to the 2018 peer group in light of these criteria: We removed Aaron’s, Acuity Brands, Belden, Brunswick, Lennox International and Polaris because of differences in industry and customer focus. We replaced these six companies with American Woodmark, Armstrong World Industries, JELD-WEN, Masonite, Universal Forest Products and Williams Sonoma which better meet our selection criteria and enable usInc. due to maintain a peer group of robust size.
EBITDA Adjustments
The Committee has adopted guidelines for determining when adjustments totheir revenue scope being on the company’s EBITDA are appropriate in calculating incentive plan performance. Under these guidelines, the Committee will consider whether adjustments are appropriate to best reflect the operating results of our business and appropriately incent management in a manner that is in the best interest of shareholders. Some common examples of potential adjustments under the guidelines include restructuring related charges, transaction costs, effects of purchase accounting, and income associated with acquisitions. We may exclude these items only in limited circumstances or only for certain periods or specified awards. The guidelines also include a framework for evaluating potential EBITDA adjustments that considers as to a potential item of adjustment:
Whether it is material to the resultlow end of the business;
Its impact on near-term cash flows;
Whether it is an accounting adjustment that does not reflect the ongoing operationsdesired range and Hill-Rom because of the business;
Whether ita misalignment of business dynamics; we added Floor & Décor Holdings, Inc., which aligns the company’s performance outlook with long-term shareholder interests;
Whether the adjustment unfairly impacts one business unit;
Whether the company has made similar adjustments in recent reporting periods; and
Whether the related income or expense was offset in a prior reporting period (and, if so, if it was excluded from EBITDA).
Compensation Discussion and Analysis (continued)
For fiscal 2019, company EBITDA performance was adjusted for incentive plan purposes to reflect the following items (refer to the section “Reconciliation of Non-GAAP Measures” for further information):
|
| | |
Description | Adjustment to EBITDA
($ millions)
| Rationale for the Adjustment |
Restructuring Charges, net of amortization | $8.9 | Ensure management’s near-term compensation goals are not in conflict with the long-term strategic objectives of the business. Instead, these costs will be amortized over a 5-year period and such amortization will be included in the annual incentive bonus calculation. |
Third Party Consulting Expense, net of amortization | $(4.8) | Ensure the company's profit optimization plans for the Retail and North America Contract business segments are not in conflict with management’s near-term compensation goals. Instead, related costs are amortized against EBITDA as the savings from the initiatives are realized on a dollar-for-dollar basis. Third party consulting expense was fully amortized as of 2019 fiscal year-end |
CEO Transition Plan Expenses | $4.5 | CEO transition plan costs are not reflective of the ongoing operation of the business. |
Investment Gain | $(2.1) | The Committee determined it is appropriate to exclude a one-time, non-cash investment gain. |
Long-Term Equity Incentives
Our 2011 Long-Term Incentive Plan (which we refer to as the LTI Plan) authorizes us to grant various forms of equity-based compensation (which we refer to as Long-Term Incentive Grants or LTI grants or awards). The Committee is responsible for administering all elements of the LTI Plan and for making all Long-Term Incentive Grants, with the exception of the CEO whose grants the Board approves.
The Committee establishes targets relating to Long-Term Incentive awards at the beginning of each fiscal year for grants made in July for that fiscal year. Typically, the Committee and the Board at their June and July meetings take four actions in connection with our LTI Plan: (a) set the target value for the LTI awards for the current fiscal year, (b) determine the types of awards to be used for the current fiscal year, (c) establish the performance criteria, if any, for certain awards for the current fiscal year;global, retail, and (d) grant the long-term incentive awards for the current fiscal year.high growth strategic initiatives.
Grants under the LTI Plan are typically made in connection with the Board of Directors meeting in July of each year following the public release of our fiscal year-end financial results. We do not attempt to influence the amount of executive officer compensation by timing equity grants in connection with the disclosure of material information to the public. The backdating of equity award dates is specifically prohibited under policies adopted by the Board of Directors.
Retirement and Health Benefits
Health Plans
We maintain a broad-basebroad base of health insurance plans available to all full-time and qualified part-time employees. The NEOs participate in such health insurance plans on the same terms as all other employees within their respective geographic region or business unit.
Herman Miller, Inc., and Subsidiaries36
Retirement Plans
We maintain broad-based retirement plans available for employees in the United States, andwith one plan covering the United Kingdom (UK).majority of our employees. Our retirement plans are designed to provide an appropriate level of replacement income upon retirement. The benefits available to NEOs are the same as those available to other non-executive employees in their respective geographic region subject to limitations provided by law or regulation. The primary retirement plans include:
The Herman Miller, Inc. Profit Sharing and 401(k) Plan
The Herman Miller Limited Retirement Benefits Plan (UK)
plan, covering most US-based employees including the NEOs is:
Compensation Discussion and Analysis (continued)
Profit Sharing Plan and 401(k) Plan: •The Herman Miller, Inc. Profit Sharing and 401(k) Plan consists of two parts. First, we make a core contribution to an employee’s 401(k) account equal to 4% of base salary on a quarterly basis. The amount of salary included in the calculation is limited to the maximum salary level permitted by the IRS. Second, the 401(k) portion of the plan permits employees to make salary deferrals into the plan up to the maximum amount permitted by law. We also make a matching contribution to fully match employee contributions up to 4% of the employee’s compensation contribution.
Herman Miller Limited Retirement Plan: Herman Miller Limited, our wholly owned UK subsidiary, provides a defined contribution retirement plan which provides for a non-discretionary fixed company contribution and a company matching contribution. The fixed company contribution for employees varies between 2.4% and 6.4% of the employee’s eligible compensation depending upon age and date of hire. In addition, the company will match an employee’s contributions up to an additional 2.8% of eligible compensation. Jeremy Hocking is the only NEO who participates in this defined contribution retirement plan. He is also a participant in the frozen defined benefit plan sponsored by Herman Miller Limited for employees hired prior to March 1, 2012.
Other Executive Compensation Plans
Deferred Compensation Plan
The Herman Miller, Inc. Executive Equalization Retirement Plan was approved by the Committee and the Board in 2007. The plan is a supplemental deferred compensation plan and became available for salary deferrals beginning in January 2008. The plan is available to highly compensated United States employees who are selected for participation by the Committee. All NEOs are currently able to participate, except Jeremy Hocking due to his employment outside the United States.participate. The plan allows participants to defer up to 50% of their base salary and 100% of their incentive.annual incentive compensation. Company contributions to the plan “mirror” the amounts we would have contributed to the Herman Miller, Inc. Profit Sharing and 401(k) Plan had the employee’s compensation not been above the statutory ceiling (currently $280,000)$290,000). Investment options under this plan are the same as those available under the 401(k) Plan. Company contributions in fiscal 20192021 appear in the 20192021 Summary Compensation Table under All Other Compensation.
Executive Long-Term Disability Plan
TheThis plan covers 60% of the rolling two-year average of compensation. executivecompensation for a qualified disability. Executive officers are eligible to participate when they have earned over $6,000 in annual executive incentive compensation. This benefit continues as long as the executive officer remains disabled until age 65. The monthly benefit is capped at $10,000.
Perquisites
We eliminated the program previously provided to executive officers, effective May 31, 2019. The Committee has adopted a policy that specifically restricts the use of corporate aircraft for non-business purposes.
Mr. Hocking has a Spouse Travel Reimbursement benefit in the amount of £20,000. He must pay the expense as incurred from his personal funds and submit the proper form for reimbursement. This reimbursement benefit does not have a carry forward option to the next plan year.
Perquisites
In fiscal 2019,2021, we provided a select benefit to the NEOs and all other executive officers with the opportunity to obtain comprehensive physicals at our cost.
Retirement, Retention, and Change in Control Agreements
Mr. Brian C. Walker’s Retirement
As previously disclosed, Mr. Walker retired from his position with the company as of August 21, 2018. In connection with his retirement, Mr. Walker agreed to extend his post-employment non-compete and non-solicitation covenants from 12 to 18 months and to an unlimited confidential information and non-disparagement covenant. He also agreed to be available on a consultative basis for 18-months after his retirement to help with the transition of the new CEO and specifically to provide the new CEO with guidance and back ground on our unique “contract” furniture business. In exchange for agreeing to extend his post-employment non-compete and non-solicitation covenants and to provide consulting services for up to 18 months, we agreed to pay Mr. Walker his base salary for an additional six months. Because Mr. Walker was already entitled to 12 months of base salary in exchange for his original 12 months of non-compete and non-solicitation covenants, he received base salary continuation for a total of 18 months following his retirement. We also agreed to provide Mr. Walker with a lump sum payment equal to 18 months of the employer portion of the premiums for his health and dental benefits. Mr. Walker was not eligible for any equity compensation grants for fiscal 2019 or for a 2019 annual incentive opportunity.
Compensation Discussion and Analysis (continued)
Change in Control Agreements
Change in Control
Each NEO is party to a changeManagement Continuity Agreement (referred to as a Change in control agreementControl or CIC Agreement) with us.us that provides for severance benefits in the event of both a change-in-control and the NEOs termination of employment (“double-trigger”). The Committee believes the use of change in control agreements is appropriate as they help ensure a continuity of management during a possible take-over and help ensure that management remains focused on completing a transaction that is likely to maximize shareholder value. Potential payments under the change in control agreements are included in the tally sheets that the Committee reviews annually.
The narrative and footnotes to the tables entitled Potential Payments upon Termination, Death, Disability, Retirement, or Change in Control describe the change in control payments in greater detail.
Hedging and Pledging Policy
The Committee and the Board of Directors have adopted a policy prohibiting the Board of Directors and executive officers from hedging the economic risk of their ownership of our stock, including options or other derivatives related to the stock, and are prohibited from pledging Herman Miller stock.
Stock Ownership Guidelines
The Committee believes that significant stock ownership by top management is of critical importance to our ongoing success, as it helps link the interests of senior managementexecutive officers and our shareholders. As such, we have established stock ownership guidelines, which apply to the members of the Leadership TeamNEOs and beginning January 1, 2018, certain other executive officers who work alongside the Leadership Teamdirect reports to ensure global strategic alignment across business units and functions.our CEO. The stock ownership guidelines
require these individuals to own shares of our common stock equal to a specified multiple of their annual base salary. The applicable levels are as follows:
•President and Chief Executive Officer 6- six times base salary
•Executive officers with LTIP target equal to or greater than 100% of salary 4- four times base salary
•Certain other direct reports to the CEO 3- three times base salary
Other
All NEOs and other executive officers 1 times base salarycovered by the stock ownership guidelines have met or are on an appropriate pace to meet the requirement.
Stock Retention Requirements
Until the ownership guidelines are met, the executive officer must retain a certain amount in company stock, equal to 40% of the pretax spread value of vested restricted stock, performance shares, restricted stock units,PSUs, RSUs, deferred stock, and 40% of the pretax spread value of exercised stock options must be retained in company stock.options. Compliance with the requirements is determined at each time an executive officer disposes of company stock.
Incentive Clawback
The Herman Miller Compensation Recovery Policy provides for the recoupment of certainboth cash compensation and equity incentives from Executive Officersexecutive officers in the event of a restatement and/or improper conduct. The Board may, in its sole discretion, after evaluating the associated costs and benefit, and any other factors it deems relevant, seek to recover all or any portion of the recoverable incentive paid to any such Executive Officerexecutive officer during the applicable period.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation in excess of $1 million paid for any fiscal year to individuals who are covered executives. For compensation paid for fiscal 2019,2021, as a result of changes made to the applicability of Section 162(m) of the Code pursuant to the Tax Cuts and Jobs Act, our number of covered executives expanded to include our covered executives for 2019fiscal 2021 plus any executive who serves as our CEO or CFO, or who is among the three most highly compensated executive officers for any fiscal year. In addition, only qualifying performance-based compensation that is paid pursuant to a binding contract in effect on November 2, 2017 will be exempt from the deduction limit. Accordingly, any compensation that we pay in the future pursuant to new compensation arrangements entered into after November 2, 2017, even if performance-based, will count towards the $1 million fiscal year deduction limit if paid to a covered executive. Because of these changes to Code Section 162(m) by the Tax Cuts and Jobs Act, some of the compensation that we provide to our named executive officersNEOs in 2019 and future years may not be deductible under Section 162(m).
Compensation Discussion and Analysis (continued)
Post-Employment Compensation
The NEOs are generally “at will” employees. This means that they can be discharged at any time and for no reason. We have agreed to payestablished a severance policy that applies if an executive officers' severance if they areofficer is terminated for reasons other than malfeasance or voluntary separation. For each NEO, severance would be equal to 18 months of base salary subject to the employee not competing with us during that period. The Committee’s determination as to the amount of severance payments for these NEOs is the result of benchmarking our practices to the market data. In addition, we maintain the health insurance on such employee during the salary continuation period. In exchange for such payments the employee provides the companyCompany with a mutual release of all claims and agrees not to work for a competitor or solicit our employees during the salary continuation period.
Executive Compensation Committee Report
The Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with Management and, based on such review and discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Proxy Statement.
Herman Miller, Inc., and Subsidiaries38
|
| | |
David A. Brandon (chair) | Douglas D. French | Heidi J. Manheimer |
Summary Compensation Table
The summary compensation table below shows the compensation for the NEOs for the fiscal years ended May 29, 2021 (2021), May 30, 2020 (2020) and June 1, 2019 (2019), June 2, 2018 (2018) and June 3, 2017 (2017). The details of the company'sCompany's executive officer compensation program are found in the Compensation Discussion and Analysis (CD&A) above.
| | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | Year | Salary ($)(1) | Stock Awards ($)(2) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) |
Andi R. Owen(5) | 2021 | 976,923 | | 1,857,025 | | 2,309,253 | | 1,123,462 | | 121,690 | | 6,388,353 | |
| President and Chief Executive Officer | 2020 | 992,308 | | 2,749,995 | | — | | 789,976 | | 126,185 | | 4,658,464 | |
| 2019 | 742,308 | | 1,837,820 | | 624,997 | | 776,100 | | 226,895 | | 4,208,120 | |
| Jeffrey M. Stutz | 2021 | 504,092 | | 435,575 | | 599,641 | | 327,660 | | 34,900 | | 1,901,868 | |
| Chief Financial Officer | 2020 | 511,084 | | 747,908 | | — | | 229,988 | | 59,365 | | 1,548,345 | |
| 2019 | 482,308 | | 413,575 | | 140,621 | | 243,324 | | 321,011 | | 1,600,839 | |
| B. Ben Watson | 2021 | 474,784 | | 410,253 | | 519,151 | | 308,610 | | 32,212 | | 1,745,010 | |
| Chief Creative Officer | 2020 | 481,315 | | 683,247 | | — | | 216,592 | | 111,603 | | 1,492,757 | |
| 2019 | 450,769 | | 284,507 | | 96,753 | | 227,413 | | 407,293 | | 1,466,735 | |
Debbie F. Propst(6) | 2021 | 488,462 | | 422,060 | | 418,654 | | 317,500 | | 63,008 | | 1,709,684 | |
| President, Herman Miller Retail | 2020 | 178,846 | | 625,000 | | — | | 80,481 | | 62,500 | | 946,827 | |
Megan Lyon(7) | 2021 | 474,784 | | 410,253 | | 401,657 | | 308,610 | | 36,164 | | 1,631,468 | |
| Chief Strategy Officer | 2020 | 481,315 | | 607,503 | | — | | 216,592 | | 100,925 | | 1,406,335 | |
(1)Effective April 3, 2020 through August 8, 2020, amounts reflect salary reductions of 10% of base salary for each NEO.
(2)For all NEOs, amounts represent the aggregate grant date fair value of stock awards computed in accordance with FASB ASC Topic 718. The assumptions used in calculating these amounts are set forth in the Company's consolidated financial statements for the fiscal year ended May 29, 2021 included in our Annual Report on Form 10-K.
(3)Includes the amounts earned in fiscal 2021 and paid in fiscal 2022 under the Annual Incentive Cash Bonus Plan as described in the Compensation Discussion and Analysis for the NEOs. Certain executives have elected to defer a part of the incentive under the Key Executive Deferred Compensation Plan. The amount of the deferrals and the corresponding company contributions will be shown in next year's Nonqualified Deferred Compensation Table.
(4)The amounts for fiscal 2021 for all other compensation are described in the table below.
(5)Ms. Owen's employment with the Company commenced on August 21, 2018 (fiscal 2019).
(6)Ms. Propst's employment with the Company commenced on January 6, 2020 (fiscal 2020).
(7)Ms. Lyon's employment with the Company commenced on February 4, 2019 (fiscal 2019).
| | | | | | | | | | | | | | | | | | | | | | | |
| Other Taxable Income(1) | Long-term Disability Insurance | Relocation Expenses | Personal Use of Company Property | Nonqualified Deferred Compensation Contribution(2) | Comprehensive Physical Exam | Total Other
Compensation |
| Andi R. Owen | 1,346 | | 4,346 | | — | | — | | 112,398 | | 3,600 | | 121,690 | |
| Jeffrey M. Stutz | 208 | | 3,052 | | — | | — | | 31,640 | | — | | 34,900 | |
| B. Ben Watson | 196 | | 3,543 | | — | | — | | 28,473 | | — | | 32,212 | |
| Debbie F. Propst | 62,634 | | 374 | | — | | — | | — | | — | | 63,008 | |
| Megan Lyon | 196 | | 1,036 | | 6,459 | | — | | 28,473 | | — | | 36,164 | |
(1) Other taxable income includes interest paid on base salary deferrals at a rate of 4% per annum; interest was accrued monthly on the principal amount. Ms. Propst received the remaining 50% of the cash sign-on bonus as outlined in her offer letter, valued at $62,500.
(2)Amounts represent the Company's contribution to the Herman Miller, Inc. Executive Equalization Retirement Plan.
|
| | | | | | | | | | | | | |
Name and Principal Position
| Year | Salary ($) |
| Stock Awards ($)(1) |
| Option Awards ($)(1) |
| Non-Equity Incentive Plan Compensation ($)(2) |
| All Other Compensation ($)(3) |
| Total ($) |
|
Andrea R. Owen (4) | 2019 | 742,308 |
| 1,837,820 |
| 624,997 |
| 776,100 |
| 226,895 |
| 4,208,120 |
|
| President and Chief Executive Officer | | | | | | | |
Brian C. Walker (5) | 2019 | 281,250 |
| — |
| — |
| — |
| 827,908 |
| 1,109,158 |
|
| Former President and Chief | 2018 | 966,327 |
| 1,782,466 |
| 920,000 |
| 894,142 |
| 165,106 |
| 4,728,041 |
|
| Executive Officer | 2017 | 916,846 |
| 1,626,984 |
| 1,240,002 |
| 684,059 |
| 233,597 |
| 4,701,488 |
|
| Jeffrey M. Stutz | 2019 | 482,308 |
| 413,575 |
| 140,621 |
| 243,324 |
| 321,011 |
| 1,600,839 |
|
| Executive Vice President and Chief | 2018 | 442,116 |
| 734,197 |
| 146,670 |
| 265,888 |
| 40,183 |
| 1,629,054 |
|
| Financial Officer | 2017 | 392,115 |
| 225,982 |
| 316,667 |
| 190,176 |
| 57,383 |
| 1,182,323 |
|
| Gregory J. Bylsma | 2019 | 493,846 |
| 427,319 |
| 145,311 |
| 252,010 |
| 322,357 |
| 1,640,843 |
|
| President, North America Contract | 2018 | 461,058 |
| 820,191 |
| 183,335 |
| 269,903 |
| 49,080 |
| 1,783,567 |
|
| | 2017 | 438,423 |
| 347,057 |
| 379,166 |
| 214,257 |
| 83,616 |
| 1,462,519 |
|
Stephen C. Gane (6) | 2019 | 348,462 |
| 224,944 |
| 76,502 |
| 273,682 |
| 378,896 |
| 1,302,486 |
|
| Former President, Herman Miller | 2018 | 337,635 |
| 507,927 |
| 86,668 |
| 229,423 |
| 21,238 |
| 1,182,891 |
|
| Specialty | 2017 | 323,423 |
| 162,729 |
| 208,996 |
| 117,629 |
| 60,475 |
| 873,252 |
|
Jeremy J. Hocking (7) | 2019 | 348,234 |
| 164,340 |
| 55,873 |
| 314,177 |
| 337,756 |
| 1,220,380 |
|
| President, Herman Miller | 2018 | 279,344 |
| 330,618 |
| 64,481 |
| 189,563 |
| 110,225 |
| 974,231 |
|
| International | 2017 | 267,495 |
| 31,510 |
| 31,522 |
| 103,627 |
| 126,253 |
| 560,407 |
|
| B. Ben Watson | 2019 | 450,769 |
| 284,507 |
| 96,753 |
| 227,413 |
| 407,293 |
| 1,466,735 |
|
| Chief Creative Officer | 2018 | 426,058 |
| 639,249 |
| 107,997 |
| 261,429 |
| 126,104 |
| 1,560,837 |
|
| | 2017 | 403,108 |
| 190,314 |
| 223,246 |
| 227,474 |
| 148,624 |
| 1,192,766 |
|
| |
(1) | For all NEOs, amounts represent the aggregate grant date fair value of stock awards and option awards computed in accordance with FASB ASC Topic 718. The assumptions used in calculating these amounts are set forth in Note 9 of the company's consolidated financial statements for the fiscal year ended June 1, 2019 included in our Annual Report on Form 10-K. |
| |
(2) | Includes the amounts earned in fiscal 2019 and paid in fiscal 2020 under the Executive Incentive Cash Bonus Plan as described in the Compensation Discussion and Analysis for the NEOs. Certain executives have elected to defer a part of the incentive under the Key Executive Deferred Compensation Plan. The amount of the deferrals and the corresponding company contributions will be shown in next year's Nonqualified Deferred Compensation Table. |
| |
(3) | The amounts for fiscal 2019 for all other compensation are described in the table below. |
| |
(4) | Ms. Owen's employment with the Company commenced on August 22, 2018. |
| |
(5) | Mr. Walker retired as President and Chief Executive Officer as of August 21, 2018. |
| |
(6) | Mr. Gane's employment ended on May 31, 2019. |
| |
(7) | Amounts paid to Mr. Hocking in GBP during fiscal 2019 are converted to USD using the average annual conversion rate for fiscal 2019 of 1.2994. |
|
| | | | | | | | | | | | | | | | | | |
| | Bundled Benefits(1) |
| Car Allowance (UK Only) |
| Payment in Lieu of Pension Contribution (UK Only) |
| Long-term Disability Insurance |
| Relocation Expenses |
| Personal Use of Company Property |
| Retention and Severance(2) |
| Nonqualified Deferred Compensation Contribution(3) |
| Total Other Compensation |
|
| Andrea R. Owen | — |
| — |
| — |
| — |
| 226,895 |
| — |
| — |
| — |
| 226,895 |
|
| Brian C. Walker | — |
| — |
| — |
| 1,296 |
| — |
| — |
| 826,612 |
| — |
| 827,908 |
|
| Jeffrey M. Stutz | 16,176 |
| — |
| — |
| 2,661 |
| — |
| — |
| 265,888 |
| 36,286 |
| 321,011 |
|
| Gregory J. Bylsma | 11,719 |
| — |
| — |
| 3,435 |
| — |
| — |
| 269,903 |
| 37,300 |
| 322,357 |
|
| Stephen C. Gane | 21,865 |
| — |
| — |
| 3,716 |
| — |
| — |
| 329,423 |
| 23,892 |
| 378,896 |
|
Jeremy J. Hocking (4) | 7,865 |
| 11,617 |
| 126,532 |
| — |
| 8,336 |
| — |
| 183,406 |
| — |
| 337,756 |
|
| B. Ben Watson | 22,073 |
| — |
| — |
| 3,543 |
| — |
| 86,426 |
| 261,429 |
| 33,822 |
| 407,293 |
|
| |
(1) | Bundled Benefits are provided on a calendar year basis and include accounting fees, cell phone fees, club dues, family travel, education and training, home office expenses, vehicle expenses, and life insurance. Benefits for Messrs. Bylsma, Hocking, Stutz, and Watson include the approved amount for calendar 2019 plus carryover for calendar year 2018. Benefits for Mr. Gane include the approved amount for calendar 2019 plus carryover for calendar year 2018 and 2017. The bundled benefits program was discontinued as of 2019 fiscal year-end and all allowable calendar year expenses were incurred during fiscal 2019. |
| |
(2) | As part of the CEO transition, the Board initiated retention agreements with executive leaders that included a cash bonus payment matching to actual bonus percentage achieved for FY18, subject to a maximum payout amount of 250% (inclusive of the matching payment) of their annual target bonus, which 50% was paid on the date FY18 annual bonuses were paid (July 12, 2018) and 50% on the last pay period in December 2018 (December 27, 2018). |
| |
(3) | Amounts represent the company's contribution to the Herman Miller, Inc. Executive Equalization Retirement Plan. |
| |
(4) | Mr. Hocking serves the company through its United Kingdom subsidiary. As such, his benefits are paid according to the benefits paid in the United Kingdom, which are different from the benefits in the United States. His benefits include car allowance, spouse travel, and contributions to a pension plan. All amounts paid to Mr. Hocking in GBP are converted to USD using the average annual conversion rate for fiscal 2019 of 1.2994. |
Grants of Plan-Based Awards
The Grants of Plan-Based Awards table below sets forth information on equity awards granted by the companyCompany to the NEOs during fiscal 20192021 under the Long-Term Incentive Plan (LTI Plan) and the possible payouts to the NEOs under the Annual Executive Incentive Cash Bonus Plan (Annual Cash Bonus Plan) for fiscal 2019.2021. The Compensation Discussion and Analysis provides further details of grants under the LTI Plan, as well as the performance criteria under the Annual Cash Bonus Plan. (ThePlan (the LTI grants are discussed in the CD&A under the heading Long-Term Equity Incentives Grants Awarded in Fiscal 2019)fiscal 2021).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | | | | |
| | | | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | All Other Option Awards: Number of Securities Underlying Options (#)(4) | Exercise or Base Price of Option Awards ($/Sh)(5) | Grant Date Fair Value of Stock and Option Awards ($)(6) |
| Name | Grant
Date | Threshold
($) | Target
($) | Maximum
($) | | Threshold
(#) | Target
(#) | Maximum
(#) | |
| Andrea R. Owen | 07/14/20 | | | | | | | | | | 124,247 | | 21.38 | | 758,416 | |
| 07/14/20 | | | | | | | | | | 275,930 | | 23.52(7) | 1,550,837 | |
| 07/14/20 | | | | | | | | | 35,408 | | | | 757,023 | |
| 01/14/21 | | | | | | 29,562 | | 36,953 | | | | | | 1,100,002 | |
| | 0 | 1,123,461 | | 2,246,922 | | | | | | | | | | |
| Jeffrey M. Stutz | 07/14/20 | | | | | | | | | | 29,142 | | 21.38 | 177,886 | |
| 07/14/20 | | | | | | | | | | 75,040 | | 23.52(7) | 421,755 | |
| 07/14/20 | | | | | | | | | 8,305 | | | | 177,561 | |
| 01/14/21 | | | | | | 6,934 | | 8,668 | | | | | | 258,014 | |
| | 0 | 327,660 | | 655,320 | | | | | | | | | | |
| B. Ben Watson | 07/14/20 | | | | | | | | | | 27447 | 21.38 | 167,539 | |
| 07/14/20 | | | | | | | | | | 62,560 | | 23.52(7) | 351,612 | |
| 07/14/20 | | | | | | | | | 7,822 | | | | 167,234 | |
| 01/14/21 | | | | | | 6,531 | | 8,164 | | | | | | 243,019 | |
| | 0 | 308,610 | | 617,220 | | | | | | | | | | |
| Debbie Propst | 07/14/20 | | | | | | | | | | 28,238 | | 21.38 | | 172,368 | |
| 07/14/20 | | | | | | | | | | 43,820 | | 23.52(7) | 246,286 | |
| 07/14/20 | | | | | | | | | 8,047 | | | | 172,045 | |
| 01/14/21 | | | | | | 6,719 | | 8,399 | | | | | | 250,014 | |
| | 0 | — | — | | | | | | | | | |
| Megan Lyon | 07/14/20 | | | | | | | | | | 27,447 | | 21.38 | | 167,539 | |
| 07/14/20 | | | | | | | | | | 41,655 | | 23.52(7) | 234,118 | |
| 07/14/20 | | | | | | | | | 7,822 | | | | 167,234 | |
| 01/14/21 | | | | | | 6,531 | | 8,164 | | | | | | 243,019 | |
| | 0 | 308,610 | | 617,220 | | | | | | | | | | |
(1)Under the Executive Incentive Cash Bonus Plan, executives can earn incentive compensation based on the achievement of certain company performance goals. The actual Cash Bonus amount paid with respect to any year may range from zero to two times of the target based upon the relative achievement of our Adjusted Operating Income targets as set forth in the Summary Compensation Table above.
(2)The PSUs represent the right to receive shares of the Company's common stock, and such shares are to be issued to participants at the end of a measurement period beginning in the year that PSUs are granted. The units reflect the number of shares of common stock that may be issued, subject to a modifying metric of relative TSR. The PSUs provide that the total number of shares which finally vest may vary between 75% and 125% of the target amount depending upon relative TSR performance and cliff vest on August 1, 2023.
(3)The RSUs represent the right to receive shares of the Company's common stock. These units reflect fair market value of the common stock as of the date of grant and cliff vest 25% on August 1, 2021, 25% on August 1, 2022, and 50% on August 1, 2023.
(4)Each option has a term of ten years and vests pro-rata over three years.
(5)Stock options awarded at an option price not less than the market value of the Company's common stock on the date of grant.
(6)Aggregate grant date values are computed in accordance with FASB ASC Topic 718. For PSUs, the grant date fair value was determined based upon the vesting at 100% of the target units awarded.
(7)Stock option price is 110% of the market value of the Company's common stock on the date of grant.
Herman Miller, Inc., and Subsidiaries40
|
| | | | | | | | | | | | | | | | | | | | | | |
| Name | Grant Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | | | | | |
| | | | | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) |
| All Other Option Awards: Number of Securities Underlying Options (#)(4) |
| Exercise or Base Price of Option Awards ($/Sh)(5) |
| Grant Date Fair Value of Stock and Option Awards ($)(6) |
|
| | | Threshold ($) |
| Target ($) |
| Maximum ($) |
| | Threshold (#) | Target (#) |
| Maximum (#) |
| |
| Andrea R. Owen | 08/22/18 | | | | | 0 | 28,547 |
| 57,094 |
| | | | | 1,212,808 |
|
| | 08/22/18 | | | | | | |
| | 16,383 |
| | | 625,012 |
|
| | 08/22/18 | | | | | | | | | | 77,447 |
| 38.15 |
| 624,997 |
|
| | | 0 |
| 1,000,000 |
| 2,000,000 |
| | | | | | | | |
|
| Jeffrey M. Stutz | 07/16/18 | | | | | 0 | 6,319 |
| 12,638 |
| | | | | 272,937 |
|
| | 07/16/18 | | | | | | |
| | 3,672 |
| | | 140,638 |
|
| | 07/16/18 | | | | | | | | | | 17,512 |
| 38.30 |
| 140,621 |
|
| | | 0 |
| 313,500 |
| 627,000 |
| | | | | | | | | |
| Gregory J. Bylsma | 07/16/18 | | | | | 0 | 6,529 |
| 13,058 |
| | | | | 282,088 |
|
| | 07/16/18 | | | | | | |
| | 3,794 |
| | | 145,310 |
|
| | 07/16/18 | | | | | | | | | | 18,096 |
| 38.30 |
| 145,311 |
|
| | | 0 |
| 321,000 |
| 642,000 |
| | | | | | | | | |
| Stephen C. Gane | 07/16/18 | | | | | 0 | 3,437 |
| 6,874 |
| | | | | 148,459 |
|
| | 07/16/18 | | | | | | |
| | 1,997 |
| | | 76,458 |
|
| | 07/16/18 | | | | | | | | | | 9,527 |
| 38.30 |
| 76,502 |
|
| | | 0 |
| 226,500 |
| 453,000 |
| | | | | | | | | |
| Jeremy J. Hocking | 07/16/18 | | | | | 0 | 2,511 |
| 5,022 |
| | | | | 108,461 |
|
| | 07/16/18 | | | | | | | | | 1,459 |
| | | 55,880 |
|
| | 07/16/18 | | | | | | | | | | 6,958 |
| 38.30 |
| 55,873 |
|
| | | 0 |
| 226,352 |
| 452,704 |
| | | | | | | | | |
| B. Ben Watson | 07/16/18 | | | | | 0 | 4,347 |
| 8,694 |
| | | | | 187,762 |
|
| | 07/16/18 | | | | | | |
| | 2,526 |
| | | 96,746 |
|
| | 07/16/18 | | | | | | | | | | 12,049 |
| 38.30 |
| 96,753 |
|
| | | 0 |
| 293,000 |
| 586,000 |
| | | | | | | | |
|
| |
(1) | Under the Annual Cash Bonus Plan, executives can earn incentive compensation based on the achievement of certain company performance goals. The actual Cash Bonus amount paid with respect to any year may range from 0 to 2 times of the target based upon the relative achievement of our adjusted EBITDA targets as set forth in the Summary Compensation Table above. |
| |
(2) | The performance share units represent the right to receive shares of the company's common stock, and such shares are to be issued to participants at the end of a measurement period beginning in the year that performance shares are granted. The units reflect the number of shares of common stock that may be issued if certain adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and TSR return goals are met. The PSUs provide that the total number of shares which finally vest may vary between 0 and 200% of the target amount depending upon performance relative to the established adjusted EBITDA and TSR goals, respectively, and cliff vest after three years. |
| |
(3) | The restricted stock units represent the right to receive shares of the company's common stock. These units reflect fair market value of the common stock as of the date of grant and cliff vest after three years. |
| |
(4) | Each option has a term of ten years and vests pro rata over three years. |
| |
(5) | Stock options are awarded at an option price not less than the market value of the company's common stock at the grant date in accordance with the LTI Plan. |
| |
(6) | Aggregate grant date values are computed in accordance with FASB ASC Topic 718. For performance share units, the grant date fair value was determined based upon the vesting at 100% of the target units awarded. |
Outstanding Equity Awards at Fiscal Year-End
The Outstanding Equity Awards at Fiscal Year-End table below shows the option awards and stock awards that were outstanding as of June 1, 2019.May 29, 2021. The table shows both exercisable and unexercisable options. The table also shows share units and equity plan awards that have not vested.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | Grant
Date | Option Awards | | Stock Awards |
| | Number of Securities Underlying Unexercised Options (#)(1) Exercisable | Number of Securities Underlying Unexercised Options (#)(1) Unexercisable | Option
Exercise
Price
($) | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) |
| Andi R. Owen | 08/22/18 | 51,632 | | 25,815 | | 38.15 | | 08/22/28 | | 16,901 | | 807,868 | | 28,547 | | 1,364,547 | |
| 07/16/19 | | | | | | 15,762 | | 753,424 | | 43,293 | | 2,069,405 | |
| 07/14/20 | — | | 124,247 | | 21.38 | | 07/14/30 | | 35,751 | | 1,708,898 | | | |
| 07/14/20 | — | | 275,930 | | 23.52 | | 07/14/30 | | | | | |
| 01/14/21 | | | | | | | | 29,562 | | 1,413,064 | |
| Jeffrey M. Stutz | 07/19/16 | 37,441 | | — | | 31.86 | | 07/19/26 | | | | | |
| 07/18/17 | 22,953 | | — | | 33.75 | | 07/18/27 | | | | | |
| 07/16/18 | 11,674 | | 5,838 | | 38.30 | | 07/16/28 | | 3,860 | | 184,508 | | 6,319 | | 302,048 | |
| 07/16/19 | | | | | | 3,697 | | 176,717 | | 10,155 | | 485,409 | |
| 07/14/20 | — | | 29,142 | | 21.38 | | 07/14/30 | | 8,385 | | 400,803 | | | |
| 07/14/20 | — | | 75,040 | | 23.52 | | 07/14/30 | | | | | |
| 01/14/21 | | | | | | | | 6,934 | | 331,445 | |
| B. Ben Watson | 07/18/11 | — | | 7,388 | | 25.75 | | 07/18/21 | | | | | |
| 07/17/12 | — | | 9,363 | | 18.17 | | 07/17/22 | | | | | |
| 07/19/16 | — | 22,710 | | 31.86 | | 07/19/26 | | | | | |
| 07/18/17 | — | | 5,634 | | 33.75 | | 07/18/27 | | 2,655 | | 126,909 | | | |
| 07/16/18 | 8,033 | | 4,016 | | 38.30 | | 07/16/28 | | 2,606 | | 124,567 | | 4,347 | | 207,787 | |
| 07/16/19 | | | | | | 3,482 | | 166,440 | | 9,564 | | 457,159 | |
| 07/14/20 | 27,447 | | — | | 21.38 | | 07/14/30 | | 7,898 | | 377,524 | | | |
| 07/14/20 | 62,560 | | — | | 23.52 | | 07/14/30 | | | | | |
| 01/14/21 | | | | | | | | 6,531 | | 312,182 | |
| Debbie F. Propst | 01/06/20 | | | | | | 3,793 | | 181,305 | | 11,290 | | 539,662 | |
| 07/14/20 | — | | 28,238 | | 21.38 | | 07/14/30 | | 8,125 | | 388,375 | | 6,529 | | 312,086 | |
| 07/14/20 | — | | 43,820 | | 23.52 | | 07/14/30 | | | | | |
| 01/14/21 | | | | | | | | 6,719 | | 321,168 | |
| Megan Lyon | 02/04/19 | | | | | | 2,597 | | 124,137 | | | |
| 07/16/19 | | | | | | 3,482 | | 166,440 | | 9,564 | | 457,159 | |
| 07/14/20 | — | | 27,447 | | 21.38 | | 07/14/30 | | 7,898 | | 377,524 | | | |
| 07/14/20 | — | | 41,655 | | 23.52 | | 07/14/30 | | | | | |
| 01/14/21 | | | | | | | | 6,531 | | 312,182 | |
(1)Options vest in three equal annual installments beginning on the first anniversary of the grant date.
(2)The awards issued reflect credited dividends through the end of fiscal 2021 and cliff vest after three years.
(3)Assumes a stock price of $44.80 per share, which was the closing price of a share of common stock on the last trading day of fiscal 2021.
(4)The PSU awards cliff vest after three years, depending upon the achievement of certain performance goals.
|
| | | | | | | | | | | | | | | | | |
| Name | Grant Date | Option Awards | | Stock Awards |
| | | Number of Securities Underlying Unexercised Options (#)(1) Exercisable |
| Number of Securities Underlying Unexercised Options (#)(1) Unexercisable |
| Option Exercise Price ($) |
| Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#)(2) |
| Market Value of Shares or Units of Stock That Have Not Vested ($)(3) |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) |
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) |
|
| Andrea R. Owen | 08/22/18 | — |
| 77,447 |
| 38.15 |
| 08/22/28 | | 16,663 |
| 591,370 |
| 28,547 |
| 1,013,133 |
|
| Brian C. Walker | 07/19/16 | — |
| 75,110 |
| 31.86 |
| 07/19/26 | | | | 26,365 |
| 935,694 |
|
| | 07/18/17 | — |
| 95,988 |
| 33.75 |
| 07/18/27 | | | | 27,259 |
| 967,422 |
|
| Jeffrey M. Stutz | 07/19/16 | 38,353 |
| 19,180 |
| 31.86 |
| 07/19/26 | | 3,883 |
| 137,811 |
| 3,662 |
| 129,964 |
|
| | 07/18/17 | 7,651 |
| 15,302 |
| 33.75 |
| 07/18/27 | | 4,508 |
| 159,989 |
| 4,346 |
| 154,240 |
|
| | 02/09/18 | | | | | | 12,686 |
| 450,214 |
| | |
| | 07/16/18 | — |
| 17,512 |
| 38.30 |
| 07/16/28 | | 3,735 |
| 132,549 |
| 6,319 |
| 224,261 |
|
| Gregory J. Bylsma | 07/19/16 | 21,699 |
| 22,966 |
| 31.86 |
| 07/19/26 | | 5,964 |
| 211,662 |
| 5,624 |
| 199,596 |
|
| | 07/18/17 | 9,563 |
| 19,128 |
| 33.75 |
| 07/18/27 | | 5,634 |
| 199,951 |
| 5,432 |
| 192,782 |
|
| | 02/09/18 | | | | | | 13,108 |
| 465,203 |
| | |
| | 07/16/18 | — |
| 18,096 |
| 38.30 |
| 07/16/28 | | 3,859 |
| 136,956 |
| 6,529 |
| 231,714 |
|
| Stephen C. Gane | 07/19/16 | 12,655 |
| — |
| 31.86 |
| 07/19/26 | | | | 2,564 |
| 90,996 |
|
| | 07/18/17 | 4,521 |
| — |
| 33.75 |
| 07/18/27 | | | | 1,641 |
| 58,239 |
|
| | 07/16/18 | | | | | | | | 1,050 |
| 37,265 |
|
| Jeremy J. Hocking | 07/19/16 | 3,818 |
| 1,909 |
| 31.86 |
| 07/19/26 | | 1,053 |
| 37,383 |
| 989 |
| 35,100 |
|
| | 07/18/17 | 3,364 |
| 6,727 |
| 33.75 |
| 07/18/27 | | 1,991 |
| 70,660 |
| 1,911 |
| 67,821 |
|
| | 02/09/18 | | | | | | 7,535 |
| 267,414 |
| | |
| | 07/16/18 | — |
| 6,958 |
| 38.30 |
| 07/16/28 | | 1,491 |
| 52,898 |
| 2,511 |
| 89,115 |
|
| B. Ben Watson | 07/18/11 | 7,388 |
| — |
| 25.75 |
| 07/18/21 | | | | | |
| | 07/17/12 | 9,363 |
| — |
| 18.17 |
| 07/17/22 | | | | | |
| | 07/19/16 | 27,038 |
| 13,522 |
| 31.86 |
| 07/19/26 | | 3,270 |
| 116,060 |
| 3,084 |
| 109,451 |
|
| | 07/18/17 | 5,634 |
| 11,267 |
| 33.75 |
| 07/18/27 | | 3,319 |
| 117,801 |
| 3,200 |
| 113,568 |
|
| | 02/09/18 | | | | | | 12,122 |
| 430,194 |
| | |
| | 07/16/18 | — |
| 12,049 |
| 38.30 |
| 07/16/28 | | 2,569 |
| 91,182 |
| 4,347 |
| 154,275 |
|
| |
(1) | Options vest in three equal annual installments beginning on the first anniversary of the grant date. |
| |
(2) | The 02/09/18 awards issued reflect credited dividends through the end of fiscal 2019 and cliff vest after two years. The remaining awards reflect credited dividends through the end of fiscal 2019 and cliff vest after three years. |
| |
(3) | Assumes a stock price of $35.49 per share, which was the closing price of a share of common stock on the last trading day of fiscal 2019. |
| |
(4) | The Performance Share Unit awards cliff vest after three years, depending upon the achievement of certain adjusted EBITDA and TSR return goals. For the July 2016 equity award, the actual three-year average HMVA performance was $181 million, which is below the $191 million threshold, resulting in a 0% payout. |
Option Exercises and Stock Vested
This table provides information on the number and value of options exercised in fiscal 20192021 and the vesting of restricted stock (on an aggregate basis).
|
| | | | | | | | | |
| Name | Option Awards | | Stock Awards |
| | Number of Shares Acquired on Exercise (#) |
| Value Realized on Exercise ($)(1) |
| | Number of Shares Acquired on Vesting (#) |
| Value Realized on Vesting ($)(2) |
|
| Andrea R. Owen | — |
| — |
| | — |
| — |
|
| Brian C. Walker | 153,437 |
| 980,484 |
| | 142,214 |
| 5,395,022 |
|
| Jeffrey M. Stutz | 2,419 |
| 31,288 |
| | 5,868 |
| 227,399 |
|
| Gregory J. Bylsma | 28,533 |
| 208,660 |
| | 22,932 |
| 888,619 |
|
| Stephen C. Gane | — |
| — |
| | 25,884 |
| 955,964 |
|
| Jeremy J. Hocking | — |
| — |
| | 6,818 |
| 253,857 |
|
| B. Ben Watson | — |
| — |
| | 13,560 |
| 525,456 |
|
| |
(1) | Represents the difference between the exercise price and the fair market value of our common stock on the date of exercise. |
| |
(2) | Value based on the closing market price of the company's common stock on the vesting date. |
| | | | | | | | | | | | | | | | | |
| Name | Option Awards | | Stock Awards |
| Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) |
| Andi R. Owen | — | | — | | | — | | — | |
| Jeffrey M. Stutz | — | | — | | | 6,765 | | 155,935 | |
| B. Ben Watson | — | | — | | | 4,981 | | 114,821 | |
| Debbie F. Propst | — | | — | | | — | | — | |
| Megan Lyon | — | | — | | | — | | — | |
HMVA (1) Represents the difference between the exercise price and the fair market value of our common stock on the date of exercise.
(2) Value based on the closing market price of the Company's common stock on the vesting date.
PSUs Vesting in 2019fiscal 2021
HMVA PSUsPerformance awards granted in fiscal 20162018 (July 2017) were eligible to vest in fiscal 2019.2021. The threshold performance level of $191 million was not achieved. The Committee chose not to utilize their discretion to extend the performance period and, therefore, no awards vested.extraordinary impact
Pension Benefits
The Pension Benefits table below provides certain information regarding the retirement benefits available under the only retirement plan of the company that is not a defined contribution planCOVID-19 pandemic required the Committee to carefully consider the appropriate measurement of performance related to the only NEO that participates in2018 Herman Miller Value Added PSUs to determine the plan atpayout level. Given the enduniqueness of fiscal 2019.the situation and the impact of the COVID-19 pandemic on our fourth quarter results, the Committee determined it was appropriate to provide a prorated, below target annual incentive payment of 49.50% based on performance for the first 11 of 12 quarters of the 2017-2020 performance period.
The retirement plan is described in the Compensation Discussion and Analysis.
Herman Miller, Inc., and Subsidiaries42
|
| | | | | | | |
| Name | Plan Name | Number of Years Credited Service (#) |
| Present Value of Accumulated Benefit ($) |
| Payments During Last Fiscal Year ($) |
|
Jeremy J. Hocking (1) | Herman Miller Limited Retirement Plan | 14 |
| 6,474,575 |
| — |
|
| |
(1) | Mr. Hocking was covered from 1990-2002 and beginning again during fiscal 2011 under the UK Pension Plan which is now frozen. |
Nonqualified Deferred Compensation
The Nonqualified Deferred Compensation table below provides certain information relating to our two compensation plans that provide for the deferral of compensation on a basis that is not tax-qualified.
| | | | | | | | | | | | | | | | | |
| Name | Executive Officer Contributions in Last Fiscal Year ($)(1) | Company Contributions in Last Fiscal Year ($)(2) | Aggregate Earnings in Last Fiscal Year ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Fiscal Year End ($) |
| Andi R. Owen | 90,268 | | 112,398 | | 76,861 | | — | | 500,878 | |
| Jeffrey M. Stutz | 66,102 | | 31,640 | | 118,627 | | — | | 680,426 | |
| B. Ben Watson | 69,698 | | 28,473 | | 217,548 | | — | | 1,055,686 | |
| Debbie F. Propst | — | | — | | — | | — | | — | |
| Megan Lyon | 25,889 | | 28,473 | | 4,012 | | — | | 64,207 | |
|
| | | | | | | | | | |
| Name | Executive Officer Contributions in Last Fiscal Year ($)(1) |
| Registrant Contributions in Last Fiscal Year ($)(2) |
| Aggregate Earnings in Last Fiscal Year ($)(3) |
| Aggregate Withdrawals/ Distributions ($) |
| Aggregate Balance at Fiscal Year End ($) |
|
| Andrea R. Owen | 21,154 |
| — |
| 41 |
| — |
| 21,195 |
|
| Brian C. Walker | 94,031 |
| — |
| 1,092 |
| 3,390,570 |
| — |
|
| Jeffrey M. Stutz | 59,727 |
| 36,286 |
| 1,252 |
| — |
| 334,963 |
|
| Gregory J. Bylsma | 65,390 |
| 37,300 |
| 2,436 |
| 92,975 |
| 486,292 |
|
| Stephen C. Gane | 80,731 |
| 23,892 |
| 11,332 |
| 45,483 |
| 659,045 |
|
Jeremy J. Hocking (4) | — |
| — |
| — |
| — |
| — |
|
| B. Ben Watson | 71,220 |
| 33,822 |
| 3,743 |
| — |
| 597,295 |
|
| |
(1) | Amounts in this column represent the deferrals of base salary earned in fiscal 2019 which are included in Summary Compensation Table under Salary, plus deferral of amounts earned in fiscal 2018 and paid in fiscal 2019 under the Annual Executive Incentive Cash Bonus Plan which was included in the fiscal 2018 Summary Compensation Table under Non-Equity Incentive Plan Compensation. |
| |
(2) | Amounts in this column represent the company's contribution and are included in the "All Other Compensation" column of the Summary Compensation Table. |
| |
(3) | Amounts reflect increases (decreases) in value of the employee's account during the year, based upon deemed investment of deferred amounts. |
| |
(4) | Mr. Hocking is not eligible to participate in the Nonqualified Deferred Compensation plan. |
(2)Amounts in this column represent the Company's contribution and are included in the "All Other Compensation" column of the Summary Compensation Table.
(3)Amounts reflect increases (decreases) in value of the employee's account during the year, based upon deemed investment of deferred amounts.
The Committee approved The Herman Miller, Inc. Executive Equalization Retirement Plan for salary and incentive compensation deferrals that began in January 2008. The Plan allows all United States employees who have compensation above the statutory ceiling to defer income in the same proportion as if the statutory ceiling did not exist. The company makesWe make contributions to the planPlan such that the amounts in the planPlan “mirror” the amounts the companywe would have contributed to the company’sCompany’s tax-qualified 401(k) plan had the employee's compensation not been above the statutory ceiling. Distributions from the plan are paid out in cash based on the deferral election specified by the participant. We do not guarantee a rate of return under the Plan. Instead, participants make investment elections for their deferrals and company contributions. Investment options are the same as those available under our 401(k) plan.Plan.
Executive Compensation Committee Report
The Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Proxy Statement.
| | | | | | | | |
| David A. Brandon (Chair) | Douglas D. French | Heidi J. Manheimer |
Potential Payments upon Termination, Death, Disability, Retirement, or Change in Control
The following table quantifies the estimated payments that would be made to each NEO in the event of his or her termination by the companyCompany without cause, in the event of his or her termination under circumstances that would trigger payments under change in control agreements, and upon a change in control without a termination of employment, in each case assuming that the change in control and/or termination occurred on May 31, 2019.29, 2021.
| | | | | | | | | | | | | | | | | | | | |
| Name | Benefit | Death ($) | Disability ($) | Retirement ($)(1) | Without Cause ($) | Change in Control ($) |
| Andi R. Owen | Cash Severance(2) | — | | — | | — | | 1,500,000 | | 6,450,000 | |
| Unvested Restricted Stock Units(3) | 3,285,472 | | 3,285,472 | | — | | 1,689,670 | | 3,285,472 | |
| Unvested Performance Stock Units(4) | 718,073 | | 231,925 | | — | | 231,925 | | 2,068,538 | |
| Unvested Stock Options(5) | — | | — | | — | | — | | 10,231,301 | |
| Health and Welfare(6)(7) | — | | — | | — | | 48,521 | | 48,521 | |
| Total | 4,003,545 | | 3,517,397 | | — | | 3,470,116 | | 22,083,832 | |
| Jeffrey M. Stutz | Cash Severance(2) | — | | — | | — | | 774,000 | | 1,702,800 | |
| Unvested Restricted Stock Units(3) | 762,033 | | 762,033 | | — | | 393,577 | | 762,033 | |
| Unvested Performance Stock Units(4) | 160,190 | | 54,400 | | — | | 54,400 | | 476,717 | |
| Unvested Stock Options(5) | — | | — | | — | | — | | 2,647,364 | |
| Health and Welfare(6)(7) | — | | — | | — | | 31,648 | | 31,648 | |
| Total | 922,223 | | 816,433 | | — | | 1,253,625 | | 5,620,562 | |
| B. Ben Watson | Cash Severance(2) | — | | — | | — | | 729,000 | | 1,603,800 | |
| Unvested Restricted Stock Units(3) | 670,864 | | 670,864 | | 607,944 | | 326,439 | | 670,864 | |
| Unvested Performance Stock Units(4) | 124,016 | | 51,238 | | 190,365 | | 51,238 | | 421,379 | |
| Unvested Stock Options(5) | — | | — | | — | | — | | 2,282,268 | |
| Health and Welfare(6)(7) | — | | — | | — | | 37,634 | | 37,634 | |
| Total | 794,880 | | 722,102 | | 798,309 | | 1,144,311 | | 5,015,945 | |
| Debbie F. Propst | Cash Severance(2) | — | | — | | — | | 750,000 | | 1,650,000 | |
| Unvested Restricted Stock Units(3) | 569,696 | | 569,696 | | 203,045 | | 188,469 | | 569,696 | |
| Unvested Performance Stock Units(4) | 52,713 | | 52,713 | | — | | 52,713 | | 356,497 | |
| Unvested Stock Options(5) | — | | — | | — | | — | | 1,809,998 | |
| Health and Welfare(6)(7) | — | | — | | — | | 42,332 | | 42,332 | |
| Total | 622,409 | | 622,409 | | 203,045 | | 1,033,514 | | 4,428,523 | |
| Megan Lyon | Cash Severance(2) | — | | — | | — | | 729,000 | | 1,603,800 | |
| Unvested Restricted Stock Units(3) | 668,102 | | 668,102 | | — | | 299,690 | | 668,102 | |
| Unvested Performance Stock Units(4) | 51,238 | | 51,238 | | — | | 51,238 | | 346,522 | |
| Unvested Stock Options(5) | | | | | 1,736,533 | |
| Health and Welfare(6)(7) | — | | — | | — | | 28,624 | | 28,624 | |
| Total | 719,340 | | 719,340 | | — | | 1,108,552 | | 4,383,581 | |
Herman Miller, Inc., and Subsidiaries44
|
| | | | | | | | | | | |
| Name | Benefit | Death |
| Disability |
| Retirement |
| Without Cause |
| Change in Control |
|
| Andrea R. Owen | Cash Severance(1) | | | | $1,500,000 | $6,000,000 |
| | Prorated Annual Incentive | | | | | |
| | Equity | | | | | |
| | Restricted Stock Units(2) | 591,381 |
| 591,381 |
| — |
| 147,845 |
| 591,381 |
|
| | Performance Shares(3) (4) | 337,711 |
| — |
| — |
| — |
| 1,583,230 |
|
| | Unexercisable Options | | | | | — |
|
| | Total | 929,092 |
| 591,381 |
| — |
| 147,845 |
| 2,174,611 |
|
| | Retirement Benefits | | | | | |
| | Other Benefits | | | | | |
| | Health and Welfare(5) | — |
| — |
| — |
| 14,569 |
| 29,139 |
|
| | Outplacement | — |
| — |
| — |
| 25,000 |
| 25,000 |
|
| | Total | — |
| — |
| — |
| 39,569 |
| 54,139 |
|
| | Total | $929,092 | $591,381 | $0 | $1,687,414 | $8,228,750 |
| Jeffrey M. Stutz | Cash Severance(1) | | | | $765,000 | $1,683,000 |
| | Prorated Annual Incentive | | | | | |
| | Equity | | | | | |
| | Restricted Stock Units(2) | 880,564 |
| 880,564 |
| 858,472 |
| 714,960 |
| 880,564 |
|
| | Performance Shares(3) (4) | 74,754 |
| — |
| — |
| — |
| 434,252 |
|
| | Unexercisable Options | — |
| — |
| — |
| — |
| 96,249 |
|
| | Total | 955,318 |
| 880,564 |
| 858,472 |
| 714,960 |
| 1,411,065 |
|
| | Retirement Benefits | | | | | |
| | Other Benefits | | | | | |
| | Health and Welfare(5) | — |
| — |
| — |
| 5,143 |
| 6,858 |
|
| | Outplacement | — |
| — |
| — |
| 25,000 |
| 25,000 |
|
| | Total | — |
| — |
| — |
| 30,143 |
| 31,858 |
|
| | Total | 955,318 |
| 880,564 |
| 858,472 |
| 1,510,103 |
| 3,125,923 |
|
| Gregory J. Bylsma | Cash Severance(1) | | | | $825,000 | $1,815,000 |
| | Prorated Annual Incentive | | | | | |
| | Equity | | | | | |
| | Restricted Stock Units(2) | 1,013,770 |
| 1,013,770 |
| 990,944 |
| 825,336 |
| 1,013,770 |
|
| | Performance Shares(3) (4) | 77,238 |
| — |
| — |
| — |
| 467,063 |
|
| | Unexercisable Options | — |
| — |
| — |
| — |
| 116,649 |
|
| | Total | 1,091,008 |
| 1,013,770 |
| 990,944 |
| 825,336 |
| 1,597,482 |
|
| | Retirement Benefits | | | | | |
| | Other Benefits | | | | | |
| | Health and Welfare(5) | — |
| — |
| — |
| 23,982 |
| 31,976 |
|
| | Outplacement | — |
| — |
| — |
| 25,000 |
| 25,000 |
|
| | Total | — |
| — |
| — |
| 48,982 |
| 56,976 |
|
| | Total | $1,091,008 | $1,013,770 | $990,944 | $1,699,318 | $3,469,458 |
(1)Only Mr. Watson is retirement eligible.
Potential Payments upon Termination, Death, Disability, Retirement(2)"Without Cause" amount equals 18 months of base salary and "CIC" amount equals 3x (CEO) or Change2x (Other NEOs) base salary + greater of prior year actual bonus or current year target bonus.
(3)Accelerated vesting and no proration for time worked for "Death," "Disability," "Retirement," (award are prorated if retirement occurs within the first 12 months of grant date) and "CIC". Accelerated vesting and proration for time worked for "Without Cause."
(4)For "Death," accelerated vesting and proration based on time worked. For "Disability," accelerated vesting and proration based on time worked only for awards granted in Control (continued)fiscal 2021. For "Retirement", accelerated vesting and proration based on time worked only for awards granted in fiscal 2021 and accelerated vesting and no proration for awards granted prior to fiscal 2021. For "Without Cause," accelerated vesting and proration based on time worked only for awards granted in fiscal 2021. For "CIC," accelerated vesting and no proration for time worked. All scenarios use actual performance and are based on the following: Herman Miller Value Added PSUs granted in fiscal 2019 = 0% of target, Relative TSR PSUs granted in fiscal 2019 = 86% of target, Operating Income PSUs granted in fiscal 2020 = 0% of target, Revenue PSUs granted in fiscal 2020 = 0% of target and Relative TSR PSUs granted in fiscal 2021 = 111% of target.
(5)Forfeited under "Death", "Disability," and "Without Cause." Continued vesting under "Retirement." Accelerated vesting under "CIC." There is no accelerated vesting of stock options or PSUs under "Retirement." |
| | | | | | | | | | | |
| Name | Benefit | Death |
| Disability |
| Retirement |
| Without Cause |
| Change in Control |
|
Jeremy J. Hocking(6) | Cash Severance(1) | | | | $522,351 | $1,253,642 |
| | Prorated Annual Incentive | | | | | |
| | Equity | | | | | |
| | Restricted Stock Units(2) | 426,475 |
| 426,475 |
| 417,698 |
| 359,013 |
| 426,475 |
|
| | Performance Shares(3) (4) | 29,705 |
| — |
| — |
| — |
| 176,155 |
|
| | Unexercisable Options | — |
| — |
| — |
| — |
| 18,635 |
|
| | Total | 456,180 |
| 426,475 |
| 417,698 |
| 359,013 |
| 621,265 |
|
| | Retirement Benefits | | | | | |
| | Other Benefits | | | | | |
| | Health and Welfare(5) | — |
| — |
| — |
| 9,679 |
| 12,906 |
|
| | Outplacement | — |
| — |
| — |
| 25,000 |
| 25,000 |
|
| | Total | — |
| — |
| — |
| 34,679 |
| 37,906 |
|
| | Total | $456,180 | $426,475 | $417,698 | $916,043 | $1,912,813 |
| B. Ben Watson | Cash Severance(1) | | | | $720,000 | $1,584,000 |
| | Prorated Annual Incentive | | | | | |
| | Equity | | | | | |
| | Restricted Stock Units(2) | 755,237 |
| 755,237 |
| 740,040 |
| 637,124 |
| 755,237 |
|
| | Performance Shares(3) (4) | 51,425 |
| — |
| — |
| — |
| 302,839 |
|
| | Unexercisable Options | — |
| — |
| — |
| — |
| 68,689 |
|
| | Total | 806,662 |
| 755,237 |
| 740,040 |
| 637,124 |
| 1,126,765 |
|
| | Retirement Benefits | | | | | |
| | Other Benefits | | | | | |
| | Health and Welfare(5) | — |
| — |
| — |
| 13,238 |
| 17,651 |
|
| | Outplacement | — |
| — |
| — |
| 25,000 |
| 25,000 |
|
| | Total | — |
| — |
| — |
| 38,238 |
| 42,651 |
|
| | Total | 806,662 |
| 755,237 |
| 740,040 |
| 1,395,362 |
| 2,753,416 |
|
| |
(1) | "Without Cause" amount equals 18 months of base salary and "CIC" amount equals 3x (CEO) or 2x (Other NEOs) base salary + greater of prior year actual bonus or current year target bonus. |
| |
(2) | Awards are not pro-rated for "Death", "Disability" and "CIC". Awards are pro-rated for "Retirement" (if granted within the past 12 months) and "Without Cause" (excluding 2018 retention awards). |
| |
(3) | For "Death" (July 2018 grants), awards are pro-rated for the number of months between start of performance period and termination date. For "Disability" and "Without Cause" and "Death" (July 2016 and July 2017 grants), awards are eligible for continued vesting (i.e., no accelerated vesting) after pro-ration. For "CIC", actual shares earned are equal to target shares adjusted for actual performance. The following actual performance estimates were used: Herman Miller Value Added PSUs granted in 2016 = 0% of target, Herman Miller Value Added PSUs granted in 2017 = 55% of target, Herman Miller Value Added PSUs granted in 2018 = 129% of target, Relative TSR PSUs granted in 2018 = 193% of target. |
| |
(4) | There is no accelerated vesting of performance share units or stock options under a "Retirement" scenario (awards either continue to vest or are pro-rated for time employed since grant). |
| |
(5) | "Without Cause" amount equals 18 months of benefits continuation and "CIC" amount equals 36 months (CEO) or 24 months (Other NEOs) benefits continuation. |
| |
(6) | Amounts provided in GBP have been converted to USD using an exchange rate of 1 GBP = 1.29938 USD. |
(7)Other benefits reflect outplacement ($25,000).
Potential Payments upon Termination without Change in Control
The company under its•18 months base salary continuation plan has agreed to pay executive officers and other executives severancefor NEOs if they are terminated for reasons other than cause. The payments are equal to 18 months' basecause
•Maintain health insurance during salary continuation for the NEOs. In addition, the company maintains the health insurance on such employee during the salary continuation period. In exchange for such payments, the employeeperiod
•Employee provides the companyCompany with a mutual release of all claims and agrees not to work for a competitor during the salary continuation period. In the event of a termination covered by the change in control agreements described below, the payments under those agreements are reduced by any amounts received under the salary continuation plan.
period
Potential Payments upon Termination, Death, Disability, Retirement or Change in Control (continued)
The Executive Long-Term Disability Plan covers 60% of the rolling two-year average of compensation executive officers are eligible to participate when they have earned over $6,000 in annual executive incentive compensation. This benefit continues as long as the executive officer remains disabled until age 65. The monthly benefit is capped at $10,000.
Potential Payments upon Termination in Connection with Change in Control
In fiscal 2019,2021, each NEO was party to a CIC Agreement with the Company that contains “double-trigger” change in control agreement with the company. The change in control agreements are all “double trigger” agreements. This meansprovisions. These provisions state that both thesethere must be both a change in control and the employee must incur an actual or constructive termination of employment by us to be entitled to a payment.
The agreements defineA change in control as having occurred (1) when a(as defined) occurs if:
•A third party becomes the owner of 35 percent35% or more of the company'sCompany's stock, (2) when a
•A majority of the Board of Directors is composed of persons who are not recommended by the existing Board, or (3) under
•Under certain transactions involving a merger or reorganization, a sale of all or substantially all of the company'sCompany's assets, or a liquidation in which the companyCompany does not maintain certain control thresholds.
An employee is entitled to a payment under the change in control agreementCIC Agreement if within 2two years after a change in control heif the Company terminates the employment of the Executive without cause or she (1) has hisfor good reason, which is defined as the occurrence of any one or her employmentmore of the following without the Executive's express written consent.
•The Executive is assigned duties that are materially different from or inconsistent with the company terminated byduties, responsibilities and status of the company for reasons other than causeExecutive's position at any time during the six months prior to the Change of Control , or (2) voluntarily terminates hiswhich result in a significant reduction in Executive's authority and responsibility as an executive of the Company or her employment if (a)a Subsidiary.
•A reduction in the responsibilities of his or her job are significantly reduced, (b) theExecutive's base salary, target value of the annual incentive, or target value of the long-term incentive he or she receives is reduced, (c)plan awards.
•The Company requires the benefits he or she receives are reduced by more than 5 percent, (d) theExecutive to be based at a location of his or her job is relocated more thanover 50 miles from its current location,the facility, which is the Executive’s principal business office.
•A reduction of 5% or (e)more in the obligationsaggregate benefits provided to the Executive and their dependents under the Company’s employee benefit plans.
•The failure of the change in control agreements are not assumed byCompany to obtain a satisfactory agreement from any successor company.to assume and agree to perform this Agreement.
If both triggering events occur, then the NEO is entitled to a change in control payment. The change in control payment that consists of three elements (1) amounts owed for current yearof:
•A lump sum cash amount equal to the Executive's annual base salary, on-target incentive prorated to the date of termination and all amounts of deferred income, (2) medical and other insurance benefits, and (3) a separation payment. In addition, all existing unvested options and other equity units become immediately vested and exercisable. The separation paymentmultiplied by two (or three, in the case of the CEO is to beCEO).
•A lump sum cash amount equal to two (or three, times the amount described below and in the case of all other NEOs the payment is equal to twoCEO) times the amount described below. The separation payment is a lump sum equal to either two or three times the sum of (a) the executive officer's base salary plus (b) the greater of (1) the executive officer's actual incentiveExecutive's average bonus of the previous three years or (2) the Executive's target bonus for the precedingfiscal year or his or her on-target incentivein which the Change of Control occurs, plus a prorated amount of Executive's target bonus for the current year. This amount is reducedfiscal year in which the termination date occurs.
•Healthcare coverage, and life and disability insurance for the 24 (or 36, in the case of the CEO) consecutive month period beginning immediately after the Termination Date.
•Outplacement services up to a maximum of $25,000.
•All outstanding awards held by any severance payment that executive officer receivesExecutive under the severance benefit described above.Company’s LTI Plan shall vest in full as of the Termination Date. Specific treatment of each award type is summarized in the "Vesting of Outstanding Long-Term Incentive Awards" section below.
The companyCompany has no obligation to make a “gross up”“gross-up” payment to the executive officer if the amount of the payments under the change in control agreements is subject to an excise tax under Section 4999 of the Internal Revenue Code of 1986.
To receive the payments, the NEO is obligated to comply with the non-competition covenant of the agreement, committing him or herthe Executive to refrain from competing with the companyCompany for a period equal to the number of years of compensation received by the NEO under the agreement.
Accelerated Vesting upon Death, Disability, Retirement, or Change in Control
Various compensation plans containThe Executive Equalization Retirement Plan, as described earlier in the Deferred Compensation Plan section of the proxy, contains provisions that permit accelerated vesting upon death, disability, or change in control. In the event of a change in control, the Key Executive Deferred CompensationEqualization Retirement Plan and the Executive Incentive Cash Bonus Plan provideprovides for the acceleration of payment even if the NEO has not been terminated. In addition, the vesting of each restricted stock unit and performance share unit will accelerate upon a change in control under the terms of the award agreements. These are so-called single trigger payment provisions. These so-called single trigger payments will no longer exist starting with grants in July 2018. The Long-Term Incentive Plan, Executive Incentive Cash Bonus Plan and Key Executive Deferred Compensation Plan each has provisions dealing with vesting upon death, disability or retirement. The definition of change in control for these plansthis plan is the definition contained in Treasury Regulations for Section 409A of the Internal Revenue Code.
Vesting of Long-Term Incentive PlanAwards
Change in Control
Under our 2011 Long-Term Incentive Plan, except as otherwise provided in an award agreement, awards that are outstanding at the time of (with a qualifying termination), Death, Disability, Retirement, and Termination without Cause unrelated to a change in control transaction, will accelerate
Herman Miller, Inc., and immediately vest if (1) awards are not assumed or continued by the surviving corporation or (2) if the participant’s employment is terminated without cause or by the participant with good reason within a one-year period following the change in control. However, all our award agreements for currently outstanding awards provide that the awards will vest immediately upon a change in control. Going forward starting in July 2018, all awards are double-trigger awards. Specifically, with respect to performance-based awards, if less than half the performance period has lapsed, those awards will be converted into shares or similar securities assuming target performance has been achieved. If at least half of the performance period has lapsed, those performance-based awards will be converted into shares or similar securities based upon actual performance-to-date. We quantify the benefits that each named executive officer would receiveSubsidiaries46
| | | | | | | | | | | | | | |
| Long-Term Incentive Vehicle | CIC with a Qualifying Termination | Termination Upon Death and Disability | Qualified Retirement | Termination Without Cause Unrelated to CIC |
| Stock Options | Unvested stock options vest in full. | Unvested stock options are forfeited. Exercise period for vested options will be five years from the date of the event or the remaining life of the option if less. If the Executive dies while on disability, the exercise period is the longer of the five-year exercise period or one year after the date of death, not to exceed the remaining life of the option. | Unvested stock options continue to vest. If an Executive retires in the first year after the award date, unvested stock options will be prorated as defined by the award agreement. | Unvested stock options are forfeited. Vested options must be exercised within three months following termination or they are forfeited. |
| RSUs | Unvested RSUs vest in full. | Unvested RSUs vest in full. | Unvested RSUs vest in full. If an Executive retires in the first year, unvested RSUs will be prorated as defined by the award agreement. | Unvested RSUs subject to vesting will be prorated as defined by the award agreement. |
| PSUs | Unvested PSUs earned are based on actual performance through the CIC date. | Vesting is not accelerated. Target PSUs are prorated for time worked during the performance period with continued vesting. PSUs earned are based on actual performance over the performance period. | Vesting is not accelerated. If an Executive retires in the first year, the target PSUs will be prorated as defined by the award agreement. | Vesting is not accelerated. Target PSUs are prorated for time worked during the performance period with continued vesting. PSUs earned are based on actual performance over the performance period. |
Potential Payments upon Termination, Death, Disability, Retirement or Change in Control (continued)
upon a change in control in the table under the heading "Potential Payments upon Termination, Death, Disability, Retirement or Change in Control."
Death, Disability and Retirement
Options granted under the LTI Plan to the extent vested at the date of death or disability remain exercisable for the balance of their original term but not more than 60 months following the date of termination of employment. If an employee retires, the options granted prior to fiscal 2013 to the extent vested remain exercisable for the balance of their original term but not more than 60 months following the date of termination of employment. For options granted beginning in fiscal 2013, the grant will be prorated over 12 months if retiring within one year of the grant; after the initial 12 months, they will vest in full. They remain exercisable for the balance of their original term but not more than 60 months following the date of termination of employment. In all other cases, the vested options terminate three months after the termination of employment.
In the case of restricted stock units, if an employee dies or becomes disabled, units vest immediately. All vest ratably if the employee is terminated for reasons other than cause. Vesting is determined by comparing the number of months the employee has been with the company between the date of grant and the date of termination to the original vesting period. If an employee retires, units will be prorated over 12 months if retiring within one year of the grant; after the initial 12 months, they will vest in full.
Performance shares, as explained earlier, are granted at a target value and the actual number of units converted into shares is determined at the end of a 3-year measurement period. The percentage of the performance share target grant that is eligible to vest if an employee dies, becomes disabled, or is terminated for reasons other than cause is determined by comparing the number of months between the date of grant and the date of termination to the original vesting period. If an employee retires in the first year, the target performance share grant subject to vesting will be prorated over 12 months. If the employee retires after the first year, 100 percent of the target performance share grant is subject to vesting.
The Annual Executive Incentive Cash Bonus Plan
The Annual Executive Incentive Cash Bonus Plan requires that an employee be employed by the company on the last day of a fiscal year to be eligible to receive the incentive, with certain exceptions noted below. The plan provides that in the events of death, disability or retirement an employee does not need to be employed on the last day of the fiscal year to receive an incentive payout. The employee's incentive will be reduced to reflect the portion of the year that he or she was employed by the company. In the event of a change in control, the incentive is immediately vested (based upon actual results achieved through the date of the change in control) and payable and is not reduced by virtue of the fact that it is calculated upon a partial year. The same provisions governing payment in the event of death, disability, retirement or change in control are also found in the incentive plan applicable to all other employees.
Pay Ratio
Pursuant to the SEC’s guidance under Item 402(u) of Regulation S-K, we are required to disclose the annual total compensation for both our Chief Executive Officer and median employee and the ratio of those two amounts. For 2019:fiscal 2021:
•The annual total compensation of our Chief Executive Officer was $4,245,303.$6,388,353.
•The annual total compensation of our identified median employee was $41,819.$44,810.
•The ratio of the annual total compensation of our Chief Executive Officer to that of our identified median employee was 102143 to 1.
We used the same median employee for the pay ratio in 2019 as in 2018. There was no material change in our employee population or in our employee compensation arrangements or other material change that we reasonably believe would significantly affect our pay ratio calculation. In addition, there have been no changes in the circumstances of the median employee identified for 2018 that we reasonably believe would significantly impact our pay ratio disclosure. The methodology we used to identify our median employee for the 20182021 pay ratio analysis is summarized in the following table:
|
| | | | |
| Item | Description |
| Determination Date | March 31, 201827, 2021 |
| Employee Population | Total employee population (excluding the CEO) as of the determination date was 7,6267,696. |
| Consistently Applied Compensation Measure (CACM) | Gross wages, measured over the twelve-months12 months ending on the determination date. For new hires, we annualized gross wages for any employees hired during the twelve-month12 month period ending on March 31, 2018.27, 2021. For non-U.S.non-US employees, values were converted into U.S. DollarsUSD using the exchange rates in effect on the determination datedate. |
Herman Miller, Inc., and Subsidiaries48
Director Compensation
The following Director Compensation table provides information on the compensation of each director for fiscal 2019.2021. The standard annual compensation of each director is $175,000.$200,000. The Audit Committee Chair receives an additional $20,000, the Executive Compensation Committee Chair receives an additional $15,000, and the NominatingGovernance and GovernanceCorporate Responsibility Committee Chair receives an additional $10,000. Non-chair members of the Audit Committee receive an additional $8,000 per year, non-chair members of the Executive Compensation Committee receive an additional $6,000 per year, and non-chair members of the Nominating and Governance Committee receive an additional $4,000 per year due to the increased workload of these committees. The Chairman of the Board of Directors receives additional annual compensation of $120,000$100,000 and is eligible to participate in the company'sCompany's health insurance plan. Ms. Owen, the company'sCompany's President and CEO, does not receive any additional compensation for serving on the Board of Directors.
The annual retainercompensation and any chairperson or additional fees (collectively, the "Annual Fee") is payable by one or more of the following means, as selected by each director: (1) in cash; (2) in shares of our stock valued as of January 15 of each year; (3) credit under the Director Deferred Compensation Plan described below; (4) stock options valued as of January 15 of each year under the Black-Scholes Valuation Model; or (5) as a contribution to our company employee scholarship fund. Any director who does not meet the stock ownership guidelines, described below, must take at least 50 percent50% of his or her annual fee in one of the permissible forms of equity.
Stock Compensation Plan
Under our 2011 Long-Term IncentiveLTI Plan, nonemployeenon-employee directors may be granted options to purchase shares of our stock if they elect to receive their compensation in stock options. Subject to certain exceptions, options are not exercisable prior to the first anniversary of the award date and expire 10 years after the date of the grant. The option price is payable upon exercise in cash or, subject to certain limitations, in shares of our stock already owned by the optionee, or a combination of shares and cash.
Deferred Compensation Plan
We also maintain a Non-employeeNon-Employee Officer and Director Deferred Compensation Stock Purchase Plan. The Plan permits a participant to defer receipt of all or a portion of his or her Annual Fee to his or her deferred account. Each account is credited with a number of units equal to a number of shares of the investment selected by the director, including company stock and other investment alternatives. The initial value of the deferral is equal to the dollar amount of the deferral, divided by the per share fair market value of the selected investment at the time of the deferral. The units are credited with any dividends paid on the investment. The companyCompany maintains a Rabbi-Trust"Rabbi-Trust" relating to obligations under this plan.
Director Compensation (continued)
Stock Ownership Guidelines
Director stock ownership guidelines have been in effect since 1997. These guidelines, like those applicable to the management, team, are intended to reinforce the importance of linking shareholder and director interests. Under these guidelines each director is encouraged to reach a minimum level of share ownership having a value of at least threetwo times the annual director retainercompensation over a five-year period after first becoming a director.
Other
Directors are reimbursed for travel and other necessary business expenses incurred in the performance of their services for the company,Company, and they are covered under the company'sour business travel insurance policies and under the Director and Officer Liability Insurance Policy.
Perquisites
Some directors' spouses or partners accompany them to Board meetings. The companyCompany pays for their expenses, and foras well as some amenities for the Directorsdirectors and their spouses, including some meals and social events. The total of these perquisites is less than $10,000 per Director.director. Directors are approved to purchase company products under employee discount pricing. The value of this perquisite was less than $10,000 for all but three Directorsone director as to whom the value has been includednoted in All Other Compensation in the Director Compensation Table.
Director Compensation Table
| | | | | | | | | | | | | | |
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | All Other Compensation ($)(3) | Total ($) |
| Mary Vermeer Andringa | 210,000 | | — | | — | | 210,000 | |
| David A. Brandon | 215,000 | | — | | — | | 215,000 | |
| Douglas D. French | 200,000 | | — | | — | | 200,000 | |
| | | | |
| John R. Hoke III | 200,000 | | — | | — | | 200,000 | |
| Lisa A. Kro | 220,000 | | — | | — | | 220,000 | |
| Heidi J. Manheimer | 200,000 | | — | | — | | 200,000 | |
| Candace S. Matthews | 200,000 | | — | | — | | 200,000 | |
| Michael C. Smith | 200,000 | | — | | — | | 200,000 | |
| Michael A. Volkema | 300,000 | | — | | 13,692 | | 313,692 | |
|
| | | | | | | | |
| Name | Fees Earned or Paid in Cash ($)(1) |
| Stock Awards ($)(2) |
| All Other Compensation ($)(3) |
| Total ($) |
|
| Mary Vermeer Andringa | 85,000 |
| 100,000 |
| — |
| 185,000 |
|
| David A. Brandon | 190,000 |
| — |
| 15,340 |
| 205,340 |
|
| Douglas D. French | 181,000 |
| — |
| 11,925 |
| 192,925 |
|
| J. Barry Griswell | 183,000 |
| — |
| — |
| 183,000 |
|
| John R. Hoke III | 179,000 |
| — |
| — |
| 179,000 |
|
| Lisa A. Kro | 155,000 |
| 40,000 |
| — |
| 195,000 |
|
| Heidi J. Manheimer | 90,500 |
| 90,500 |
| — |
| 181,000 |
|
| Michael C. Smith | 75,000 |
| 108,000 |
| — |
| 183,000 |
|
| Michael A. Volkema | 295,000 |
| — |
| 50,854 |
| 345,854 |
|
| |
(1) | The amounts shown in the “Fees Earned or Paid in Cash” column include amounts that may be deferred under the Non-employee Officer and Director Deferred Compensation Plan. Amounts deferred are retained as units associated with hypothetical investments under the plan. The plan permits non-employee directors to elect to defer amounts that they would otherwise receive as director fees. Directors at the time of deferral elect the deferral period. These amounts may also reflect contributions to the Michael Volkema Scholarship fund which awards college scholarships to children of employees. During fiscal 2019, nine of the directors who received fees contributed a portion to the fund. |
| |
(2) | Amounts represent the aggregate grant date fair value of stock awards computed in accordance with FASB ASC Topic 718. The assumptions used in calculating these amounts are set forth in the company's consolidated financial statements for the fiscal year ended June 1, 2019, included in our Annual Report on Form 10-K. |
| |
(3) | Represents value received on product purchases under employee discount program. |
(2)Amounts represent the aggregate grant date fair value of stock awards computed in accordance with FASB ASC Topic 718. The assumptions used in calculating these amounts are set forth in the Company's consolidated financial statements for the fiscal year ended May 29, 2021, included in our Annual Report on Form 10-K.
(3)Represents value received on product purchases under the employee discount program.
As of June 1, 2019,May 29, 2021, no member of the Board of Directors had outstanding stock options.
Equity Compensation Plan Information
As noted in the Compensation Discussion and Analysis, we maintain certain equity compensation plans under which common stock is authorized for issuance to employees and directors in exchange for services. We maintain our 2011 Long-Term Incentive2020 LTI Plan (LTI Plan) and Employees' Stock Purchase Plan.
The following table sets forth certain information regarding the above referencedabove-referenced equity compensation plans as of June 1, 2019.May 29, 2021.
| | | | | | | | | | | |
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights(1) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(2) |
| (a) | (b) | (c) |
| Equity compensation plans approved by security holders | 2,542,870 | | $ | 24.63 | | 7,274,779 | |
| Equity compensation plans not approved by security holders | — | | | — | |
| Total | 2,542,870 | | $ | 24.63 | | 7,274,779 | |
(1)The weighted-average exercise price is calculated based solely on the exercise prices of the outstanding options and does not reflect the shares that will be issued upon the vesting of outstanding awards of RSUs and PSUs, which have no exercise price.
(2)The number of shares that remain available for future issuance under our plans is 7,274,779 which includes 6,755,331 under the 2020 LTI Plan and 519,448 under the Employees' Stock Purchase Plan.
|
| | | | | | | |
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights |
| Weighted-average exercise price of outstanding options, warrants and rights |
| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(1) |
|
| | (a) |
| | |
| Equity compensation plans approved by security holders | 1,427,909 |
| $ | 32.2333 |
| 2,920,715 |
|
| Equity compensation plans not approved by security holders | — |
| | — |
| Total | 1,427,909 |
| $ | 32.2333 |
| 2,920,715 |
|
| |
(1) | The number of shares that remain available for future issuance under our plans is 2,920,715 which includes 2,259,658 under the Long-Term Incentive Plan and 661,058 under the Employees' Stock Purchase Plan. |
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
Our directors and officers, as well as any person holding more than 10 percent10% of our common stock, are required to report initial statements of ownership of our securities and changes in such ownership to the SEC. Based upon written
Herman Miller, Inc., and Subsidiaries50
representations by each director and officer, all the reports were timely filed by such persons during the last fiscal year.year except for Kevin J. Veltman who had one delinquent filing representing a stock option award granted.
Certain Relationships and Related Party Transactions
The Board of Directors has adopted a written policy on Related Party Transactions. Under that policy, with certain limited exceptions, all proposed transactions between the companyCompany and any directors or officers or their respective affiliates are required to be reported to the NominatingGovernance and GovernanceCorporate Responsibility Committee prior to entering such a transaction. Management is obligated to provide the NominatingGovernance and GovernanceCorporate Responsibility Committee with information relating to the terms and conditions of the proposed transaction, how it complies with the policy, and if the proposed transaction is with a director, advise the NominatingGovernance and GovernanceCorporate Responsibility Committee if the transaction would impact that director's status as an independent director. The NominatingGovernance and GovernanceCorporate Responsibility Committee has the authority to determine whether the proposed transaction is exempt from approval or, if not, whether to approve the transaction as compliant with the policy or refer the matter to the Board of Directors. All approved or exempted transactions must be reported by the NominatingGovernance and GovernanceCorporate Responsibility Committee to the full Board of Directors.
To approve a transaction under the policy, the NominatingGovernance and GovernanceCorporate Responsibility Committee must determine that either (1) the dollar amount of the transaction and other transactions with the director during that year is less than $100,000 and, for any director that is a member of the Audit Committee, does not constitute a proscribed consulting, advisory, or other compensated fee,fee; or (2) if the proposed transaction is for the acquisition of products or services and is less than $100,000 or is subject to a bid process involving three or more competing parties, and the transaction is in the best interest of the companyCompany and its shareholders, provided that (a) management determined that the proposed transaction will provide the best value for the company,Company, (b) the compensation is consistent with the proposals submitted by the other bidders, and (c) the director did not directly participate in the proposal process.
Reconciliation of Non-GAAP Financial Measures
This report contains references to adjusted earningsOrganic Net Sales, Adjusted Earnings per share ("EPS"), organic net sales, adjusted operating earningsShare - diluted, and adjusted EBITDA, all ofAdjusted Operating Earnings which are non-GAAP financial measures (referred to collectively asmeasures. Organic Net Sales represents the "Adjusted financial measures").
change in reported Net sales, excluding currency translation effects and the impact of acquisitions. Adjusted Earnings per Share Adjusted operatingrepresents reported diluted earnings and Adjusted EBITDA are calculatedper share excluding the impact from the adoption of U.S. Tax Reform, an investment fair value adjustment, amortization of an inventory step up on the HAY equity method investment,adjustments related to restructuring expenses, impairments, acquisition and integration charges, and other special charges or gains, including related taxes. Adjusted Operating Earnings represents reported operating earnings plus restructuring expenses, impairments, acquisition and integration charges, and other special charges. Restructuring expenses include actions involving facilities consolidation and optimization, targeted workforce reductions, and costs associated with an early retirement program. Special charges include certain costs related to the CEO transition, certain business structure realignment costs, and third party consulting costs related to the Company's profit enhancement initiatives.arising as a direct result of COVID-19.
Organic net sales represents the change in sales excluding currency translation effects, the divestiture of owned dealers, the impact of the adoption of the new revenue recognition standard, and the impact of the change in DWR shipping terms in fiscal 2018 .
The Company presentsbelieves presenting Organic Net Sales, Adjusted Earnings per Share and Adjusted Operating Earnings is useful for investors as it provides financial information on a more comparative basis for the periods presented by excluding items that are not representative of the ongoing operations of the Company.
Organic Net Sales, Adjusted financial measures because we consider them to be important supplemental measures of our performanceEarnings per Share, and believe them to be useful in analyzing ongoing results from operations. The adjusted financial measuresAdjusted Operating Earnings are not measurements of our financial performance under GAAP and should not be considered an alternativeas alternatives to Earnings per share - diluted, or the Company's reported Net sales under GAAP. The Adjusted financial measuresrelated GAAP measurement. These non-GAAP measurements have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company'sour results as reported under GAAP. The Company'sOur presentation of the Adjusted financialnon-GAAP measures should not be construed as an indication that itsour future results will be unaffected by unusual or infrequent items. The Company compensatesWe compensate for these limitations by providing prominence of theour GAAP results and using the Adjustednon-GAAP financial measures only as a supplement.
The following table reconciles EPS to Adjusted EPS for the fiscal years indicated:
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| | June 1, 2019 |
| June 2, 2018 |
|
| Earnings per Share - Diluted | $ | 2.70 |
| $ | 2.12 |
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| | | |
| Less: Adjustments relating to adopting U.S. Tax Cuts and Job Acts | (0.02 | ) | (0.05 | ) |
| Less: Investment fair value adjustment, after tax | (0.03 | ) | — |
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| Add: Special charges, after tax | 0.18 |
| 0.16 |
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| Add: Inventory step-up on HAY equity method investment, after tax | 0.01 |
| — |
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| Add: Restructuring expenses, after tax | 0.13 |
| 0.07 |
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| Adjusted Earnings Per Share - Diluted | $ | 2.97 |
| $ | 2.30 |
|
| Weighted average shares outstanding (used for calculating Adjusted Earnings per share) | 59,381,791 |
| 60,311,305 |
|
The following table reconciles Net Sales to Organic net salesNet Sales by segment for the fiscal years ended:
| | | | June 1, 2019 | June 2, 2018 | | May 29, 2021 | May 30, 2020 |
| | North America | International | Retail | Total | North America | International | Retail | Total | | North America | International | Retail | Total | North America | International | Retail | Total |
| Net Sales, as reported | $ | 1,686.5 |
| $ | 492.2 |
| $ | 388.5 |
| $ | 2,567.2 |
| $ | 1,589.8 |
| $ | 434.5 |
| $ | 356.9 |
| $ | 2,381.2 |
| Net Sales, as reported | $1,194.0 | $669.0 | $602.0 | $2,465.1 | $1,598.2 | $502.8 | $385.6 | $2,486.6 |
| % change from PY | 6.1 | % | 13.3 | % | 8.9 | % | 7.8 | % | | | | % change from PY | (25.3)% | 33.1% | 56.1% | (0.9)% | | | | |
| | Proforma Adjustments | | | | | | | Proforma Adjustments | | | | | | | |
| Dealer divestitures | — |
| — |
| — |
| — |
| (0.8 | ) | — |
| — |
| (0.8 | ) | |
Currency translation effects (1) | 3.8 |
| 12.4 |
| 0.3 |
| 16.5 |
| — |
| — |
| — |
| — |
| |
| Impact of Revenue Recognition Adoption | — |
| — |
| — |
| — |
| 23.9 |
| 12.3 |
| — |
| 36.2 |
| |
| Impact of Change in DWR Shipping Terms | — |
| — |
| — |
| — |
| — |
| — |
| (5.0 | ) | (5.0 | ) | |
| Acquisitions | | Acquisitions | (10.6) | (87.3) | — | (97.9) | — | — | — | — |
Currency Translation Effects (1) | | Currency Translation Effects (1) | 1.8 | (19.6) | (0.5) | (21.9) | — | — | — | — |
| Organic net sales | $ | 1,690.3 |
| $ | 504.6 |
| $ | 388.8 |
| $ | 2,583.7 |
| $ | 1,612.9 |
| $ | 446.8 |
| $ | 351.9 |
| $ | 2,411.6 |
| Organic net sales | $1,181.6 | $562.1 | $601.6 | $2,345.3 | $1,598.2 | $502.8 | $385.6 | $2,486.6 |
| % change from PY | 4.8 | % | 12.9 | % | 10.5 | % | 7.1 | % | | % change from PY | (26.1)% | 11.8% | 56.0% | (5.7)% | | |
| |
(1) Currency translation effects represent the estimated net impact of translating current period sales using the average exchange rates applicable to the comparable prior yearprior-year period.
The following table reconciles EPS to Adjusted EPS for the fiscal years ended:
| | | | | | | | |
| | May 29, 2021 | May 30, 2020 |
| (Loss) Earnings per Share - Diluted | $ | 2.92 | | $ | (0.15) | |
| | |
| Less: Gain on consolidation of equity method investments | — | | (0.63) | |
| Less: Gain on legal settlement after tax | (0.06) | | — | |
| Add: Special charges, after tax | 0.02 | | 0.15 | |
| Add: Impairment charges, after tax | — | | 2.90 | |
| Add: Acquisition and integration charges, after tax | 0.15 | | |
| Add: Restructuring expenses, after tax | 0.02 | | 0.34 | |
| Adjusted Earnings Per Share - Diluted | $ | 3.05 | | $ | 2.61 | |
| | |
| Weighted Average Shares Outstanding (used for Calculating Adjusted Earnings per Share) – Diluted | 59,389,598 | | 58,920,653 | |
Reconciliation of Non-GAAP Financial Measures (continued)
The following table reconciles Operating earningsEarnings to Adjusted operating earnings by segmentOperating Earnings for the fiscal years ended:
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| Twelve Months Ended |
| May 29, 2021 | May 30, 2020 |
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| Herman Miller, Inc. | | | | |
| Net Sales | $2,465.1 | 100.0% | $2,486.6 | 100.0% |
| Gross Margin | 949.2 | 38.5% | 910.7 | 36.6% |
| Total Operating Expenses | 718.6 | 29.2% | 949.1 | 38.2% |
| Operating Earnings | 230.6 | 9.4% | (38.4) | (1.5)% |
| | | | |
| Adjustments | | | | |
| Special Charges | 1.2 | —% | 12.3 | 0.5% |
| Impairment | — | —% | 205.4 | 8.3% |
| Restructuring | 2.7 | 0.1% | 26.4 | 1.1% |
| Acquisition and Integration Charges | 11.0 | 0.4% | — | —% |
| Adjusted Operating Earnings | $245.5 | 10.0% | $205.7 | 8.3% |
Herman Miller, Inc., and Subsidiaries52
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 1, 2019 | June 2, 2018 |
| | North America | International | Retail | Corporate | Total | North America | International | Retail | Corporate | Total |
| Operating earnings (loss) | $ | 189.7 |
| $ | 57.8 |
| $ | 5.3 |
| $ | (49.3 | ) | $ | 203.5 |
| $ | 175.2 |
| $ | 36.9 |
| $ | 13.9 |
| $ | (47.1 | ) | $ | 178.9 |
|
| % Net sales | 11.2% | 11.7% | 1.4% | | 7.9% | 11.0% | 8.5% | 3.9% | | 7.5% |
| |
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| Add: Special charges | 0.6 |
| 0.2 |
| 0.8 |
| 11.5 |
| 13.1 |
| — |
| 2.5 |
| — |
| 11.3 |
| 13.8 |
|
| Add: Restructuring expenses | 7.7 |
| 2.5 |
| — |
| — |
| 10.2 |
| 1.8 |
| 3.9 |
| — |
| | 5.7 |
|
| Adjusted operating earnings (loss) | $ | 198.0 |
| $ | 60.5 |
| $ | 6.1 |
| $ | (37.8 | ) | $ | 226.8 |
| $ | 177.0 |
| $ | 43.3 |
| $ | 13.9 |
| $ | (35.8 | ) | $ | 198.4 |
|
| % Net Sales |
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|
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| | 8.8 | % | | | | | 8.3 | % |
The following table reconciles Current Year Net Income to Adjusted EBITDA used for the Annual Executive Incentive Cash Bonus Plan:
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| | | |
| | Fiscal Year Ended |
| (Dollars In millions) | June 1, 2019 |
| Current Year Net Income Attributable to HMI | $ | 160.5 |
|
| Standard Add Backs: | |
| Interest Expense | 12.1 |
|
| Income Taxes | 39.6 |
|
| Depreciation and Amortization | 72.1 |
|
| EBITDA | 284.3 |
|
| Standard Adjustments per Guidelines: | |
| Amortization of previously excluded restructuring | (3.4 | ) |
| Amortization of third party consulting costs | (11.3 | ) |
| Non-Standard Adjustments Requiring Approval: | |
| Restructuring expense | 12.3 |
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| Third party consulting costs, net of amortization | 6.5 |
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| Costs associated with the CEO transition plan | 4.5 |
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| Non-cash investment gain | (2.1 | ) |
| Adjusted EBITDA | $ | 290.8 |
|
Submission of Shareholder Proposals for the 20202022 Annual Meeting
Shareholders wishing to submit proposals on matters appropriate for shareholder action to be presented at our 20202021 Annual Meeting of Shareholders and to be included in our proxy materials for that meeting may do so in accordance with Rule 14a-8 promulgated under the Exchange Act,Act; whereby (1) all applicable requirements of Rule 14a-8 must be satisfied, (2) the notice must include various stock ownership and related information detailed in our Bylaws, and (3) such proposals must be received by us at our principal executive offices at 855 East Main Avenue, PO Box 302, Zeeland, Michigan, 49464-0302, not earlier than the close of business on the one hundred twentieth (120th) day and not later than the close of business on the ninetieth (90th) day, prior to the first anniversary of the preceding year’s annual meeting.
Our bylaws,Bylaws, which are available on our website at www.hermanmiller.com/bylaws, contain certain procedural requirements that shareholders must follow to nominate a person for election as a director at an annual meeting or to bring an item of business before the annual meeting. These procedures require that notice of an intention to nominate a person for election to the Board and/or to bring an item of business before our 20202021 annual meeting must be received in writing by our Corporate Secretary at 855 East Main Avenue, PO Box 302, Zeeland, Michigan 49464-0302 no earlier than April 16, 2020June 14, 2022, and no later than May 16, 2020.July 14, 2022. The notice must contain certain information about the shareholder making the proposal for nomination, including a representation that the shareholder intends to appear in person or by proxy at the annual meeting to nominate the person named in the notice or bring the item of business before the meeting, and about the nominee and/or the item of business and, in the case of a nomination, must be accompanied by a written consent of the proposed nominee to be named as a nominee and to serve as a director, if elected. We did not receive any proposals to be presented at the 20192020 Annual Meeting.
Miscellaneous
The cost of the solicitation of proxies will be borne by us. In addition to the use of the mails,mail, proxies may be solicited personally or by telephone or electronic means by a few of our regular employees. We may reimburse brokers and other people holding stock in their names or in the names of nominees for their expenses in sending proxy materials to the principals and obtaining their proxies.
Our mailing for the fiscal year ended June 1, 2019,May 29, 2021, includes the Notice Regarding the Availability of Proxy Materials. A copy of the Notice of 20192021 Annual Meeting of Shareholders and the 20192021 Form 10-K (Annual Report) as well as the Proxy Statement, both filed with the SEC, are available, without charge, upon written request from the Secretary of the Company, 855 East Main Avenue, PO Box 302, Zeeland, Michigan 49464-0302.
Shareholders are urged to vote promptly. Questions related to your registered holdings can be directed as follows:
Computershare Investor Services, LLC, 250 Royall Street, Canton, Massachusetts 02021 Phone: 1-866-768-5723 inside the United States Phone: 1-781-575-2723 outside the United States http://www.computershare.comwww.computershare.com.
By Order of the Board of Directors
Jacqueline H. Rice, General Counsel and ActingCorporate Secretary
September 3, 2019
August 31, 2021
50 2019532021 Proxy Statement
