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METHODE ELECTRONICS, INC.
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METHODE ELECTRONICS, INC.
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7401WilsonBryn Mawr Avenue, Suite 10006070660631SHAREHOLDERSSTOCKHOLDERS13, 201815, 2021the Shareholdersour Stockholders::Notice is hereby given that (“Methode” or the annual meeting of shareholders of Methode Electronics, Inc.“Company”) will be held on Thursday,Wednesday, September 13, 201815, 2021 at 11:00 a.m., Central Daylight Time, at Methode’s corporate offices at 7401 West Wilson Avenue, Chicago, Illinois, 60706 forTime. The 2021 Annual Meeting will be a virtual meeting conducted via live webcast. You will be able to attend the Annual Meeting as well as vote and submit your questions during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/MEI2021 and entering the 16-digit control number included in the Notice of Internet Availability of Proxy Materials, on your proxy card or in the instructions that accompanied your proxy materials.purposes:matters, each as more fully described in the accompanying proxy statement:1. To elect each director nominee to hold office until the Company’s 2022 Annual Meeting of Stockholders or until such director’s earlier resignation, or a Board of Directors;respective successor is duly elected and appointed;2. To ratify the Audit Committee’s selection of Ernst & Young LLP to serve as our independent registered public accounting firm for the fiscal year ending April 27, 2019;30, 2022;3. To provideapprove, on a non-binding, advisory approvalbasis, the compensation of Methode’s named executive officer compensation;officers; and4. To transact such other business as may properly come before the annual meetingAnnual Meeting or any adjournment or postponement thereof.
Our Board of Directors has fixed the close of business on July 16, 2018 as the record date for the determination of shareholders entitled to notice of and to vote at the annual meeting and at any adjournment or postponement thereof.
We are furnishing materials for our annual meeting on the Internet. You may vote your shares in person by attending our annual meeting, or by proxy. To vote by proxy, you may vote using the Internet, by toll-free telephone number or, if you request and receive a paper copy of the proxy card by mail, by signing, dating and mailing the proxy card in the self-addressed, postage-paid envelope provided. Information regarding voting by using the Internet or by telephone is contained in the Notice of Internet Availability of Proxy Materials. Instructions regarding voting by mail are contained on the proxy card.
It is important that your shares be represented and voted at the annual meeting. Whether or not you plan to attend the annual meeting, please vote on the matters to be considered. Thank you for your interest and cooperation.
Chicago, IllinoisJuly 30, 2018
METHODE ELECTRONICS, INC.7401 West Wilson AvenueChicago, Illinois 60706(708) 867-6777PROXY STATEMENTANNUAL MEETING OF SHAREHOLDERSSeptember 13, 2018GENERAL INFORMATION
We are furnishing this proxy statement to you in connection with the solicitation of proxies on behalf of Methode Electronics, Inc. (“Methode” or the “Company”) for use at our annual meeting of shareholders to be held on Thursday, September 13, 2018 at 11:00 a.m.(Proposal 1), Central Daylight Time, at Methode’s corporate offices at 7401 West Wilson Avenue, Chicago, Illinois, 60706 and at any adjournment or postponement of the annual meeting. On July 30, 2018, we mailed our Notice of Internet Availability of Proxy Materials, which contains instructions for our shareholders to access our proxy statement and annual report over the Internet or request a paper copy of the proxy materials.
At the annual meeting, we will ask our shareholders to (i) elect our Board of Directors, (ii) ratify the Audit Committee’s selection of Ernst & Young LLP (“EY”) to serve as our independent registered public accounting firm for fiscal 2019, (iii) provide advisory approval of Methode’s named executive officer compensation, and (iv) consider and vote upon any other business which properly comes before the annual meeting.
The Board of Directors recommends that you vote “FOR” each of Methode’s nominees for director, “FOR” the ratification of EY as our independent registered public accounting firm and(Proposal 2) and “FOR” advisory approval of Methode’s named executive officer compensation.
You may vote your shares in person, by attending our annual meeting, or by proxy. To vote by proxy,the Say-on-Pay Proposal (Proposal 3).
It is important thatwithout indicating your shares be represented and voted at the annual meeting. Whether or not you plan to attend the annual meeting in person, please vote on any matter, the mattersdesignated proxies will vote in favor of all three proposals.
Record Date; Shares Outstanding
Our Board of Directors has fixed the close of business on July 16, 2018 as the record date for the determination of shareholders entitled to notice of and to vote at the annual meeting and at any adjournment or postponement thereof. Asapprove each of the record date, there were 37,006,049 sharesproposals?
Quorum; Votes Required
In deciding all questions, assuming a quorum isvoting power present a holder of Methode’s common stock is entitled to one vote, in person or represented by proxy at the Annual Meeting is required to approve each proposal. Broker non-votes will not be counted for each sharepurposes of determining the number of votes present in person or represented by proxy with respect to the election of directors (Proposal 1) and the Say-on-Pay Proposal (Proposal 3). Abstentions will be considered as present but will not be considered as votes in favor of any proposal. Consequently, abstentions have the effect of voting against all proposals, while broker non-votes have no effect as to voting for or against Proposal 1 or Proposal 3.
With respect to the election of directors, the ratification of the selection of EY as our independent registered public accounting firm and providing advisory approval of our executive compensation, shareholders may vote (1) “for,” (2) “against,” or (3) to “abstain” from voting on each matter and each such matter requires approval by a majority of the shares of common stock representedbe properly presented at the meeting and entitledAnnual Meeting other than those referred to vote. Both abstentions and broker
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non-votes will be considered as present but will not be considered as votes in favor of any matter. Broker non-votes are excluded from the “for,” “against” and “abstain” counts, and instead are reported as simply “broker non-votes.” Consequently, abstentions have the effect of voting against these matters, while broker non-votes have no effect as to voting for or against any such matter.
Under New York Stock Exchange rules, the proposal to ratify the selection of EY is considered a routine item. Therefore, brokers may vote in their discretion on this matter on behalf of clients who have not furnished voting instructions to the broker. In contrast, all other proposals set forth in this proxy statementstatement. If other matters are considered non-routine items, and brokers who have not received voting instructions from their clients may not vote on these proposals.
All properly executed and timely delivered proxies will be voted in accordance with the instructions provided. Unless contrary instructions are indicated, proxies will be voted “FOR” each of Methode’s nominees for director, “FOR” the ratification of the selection of EY and “FOR” advisory approval of Methode’s named executive officer compensation. The Board of Directors knows of no other business that will be presented for consideration at the annual meeting. If any other matter is properly presented, it is the intentionAnnual Meeting, and you are a stockholder of record and have authorized a proxy to vote your shares, the persons named inas proxies will have the discretion to vote on those matters for you.
Voting Procedures
It is important that your shares be represented at the annual meeting. You may vote your shares in person, by attending our annual meeting, or by proxy. To vote by proxy, you may vote using the Internet, by toll-free telephone number or, if you request and receive a paper copy of the proxy card by mail, by signing, dating and mailing the proxy card in the self-addressed, postage-paid envelope provided. Information regarding voting by using the Internet or by telephone is contained in the Notice of Internet Availability of Proxy Materials. Instructions regarding voting by mail are contained on the proxy card. Please do not submit a proxy card if you have voted by telephone or the Internet. You may revoke your proxy as described below.
Revoking Your Proxy
If you decide to change your vote, you may revoke your proxy at any time before the annual meeting.my shares?
Proxy Solicitation Expenses
The proxy is being solicited on behalf of Methode.previously authorized by you. We will bearhonor the entire costproxy card or authorization with the latest date.
In the event that beneficial owners of our shares request paper copies of our proxy materials, banks, brokerage houses, fiduciaries
Householding of Annual Meeting Materials
how does it affect me?
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would preferlike to participate in householding;householding or if you would like to opt out of householding, for future mailings, you may do so at any time by contactingplease contact us at: Methode Electronics, Inc., 74018750 West WilsonBryn Mawr Avenue, Suite 1000, Chicago, Illinois 60706,60631, Attention: Corporate Secretary, or telephonically at 708-867-6777.
stockholders.
NYSE.
| Committee | | | Members | | | Principal Functions | | | Number of Meetings in Fiscal | | |||
| Audit | | | Therese M. Bobek Angelo V. Pantaleo Mark D. Schwabero Lawrence B. Skatoff | | | • | | | Oversees accounting and financial reporting processes, and audits of financial statements. | | | | |
| • | | | Monitors performance of internal audit function and our system of internal | | |||||||||
| • | | | Monitors performance, qualifications and independence of our independent registered public accounting firm, | | |||||||||
| • | | | Monitors compliance with legal and regulatory requirements pertaining to financial statements. | | |||||||||
| • | | | Reviews our financial press releases and certain SEC filings. | | |||||||||
| • | | | Discusses with management major financial risk exposures and the steps taken to monitor and control such exposures, and | | |||||||||
| • | | | If applicable, reviews related party transactions and potential conflict of interest situations. | |
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| Committee | | | Members | | | Principal Functions | | | Number of Meetings in Fiscal | | |||
| Compensation | | | Walter J. Aspatore Brian J. Cadwallader Darren M. Dawson | | | • | | | Oversees our executive compensation policies and plans. | | | | |
| • | | | Approves goals and incentives for the compensation of our Chief Executive Officer and, with the advice of the Chief Executive Officer, the other executive officers. | | |||||||||
| • | | | Approves grants under our stock | | |||||||||
| • | | | Makes decisions regarding the retention, compensation and termination of any Committee compensation | | |||||||||
| • | | | Evaluates whether risks arising from our compensation policies and practices are reasonably likely to have a material adverse effect. | | |||||||||
| Nominating and Governance | | | Brian J. Cadwallader (Chair) Walter J. Therese M. Mark D. Schwabero Lawrence B. Skatoff | | | • | | | Recommends director candidates for election to our | | | | |
| • | | | Recommends Board committee assignments. | | |||||||||
| • | | | Recommends compensation and benefits for directors. | | |||||||||
| • | | | Oversees our Enterprise Risk Management (ERM) program. | | |||||||||
| • | | | Reviews succession planning for our executive officers. | | |||||||||
| • | | | Oversees our Environmental, Social and Governance (ESG) program. | | |||||||||
| • | | | Reviews and recommends revisions to our Corporate Governance Guidelines. | | |||||||||
| • | | | Oversees an annual evaluation by the independent directors of the performance of the CEO. | | |||||||||
| • | | | Conducts an annual assessment of Board and committee | | |||||||||
Technology | | | Darren M. Dawson (Chair) David P. Blom Janie Goddard Angelo V. Pantaleo | | | • | | | Reviews with management our technology assets and future needs. | | | 4 | | |
| • | | | Reviews technology research and development activities and possible acquisitions of technology. | | |||||||||
| Medical Products | | | David P. Blom (Chair) Bruce K. Crowther Donald W. Duda Janie Goddard Mary A. Lindsey | | | • | | | Reviews with management our business strategies for developing and marketing our medical device products. | | | 6 | |
| • | | | Evaluates industry and market trends that may affect our medical device business. | |
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by the respective committees on which he or she served. Under our Corporate Governance Guidelines, our directors are expected to attend Board and shareholderstockholder meetings and meetings of committees on which they serve. Our directors are expected to meet as frequently as necessary to properly discharge their responsibilities.
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The Committee has adopted a process for identifying new director candidates. Recommendations may be received by the Committee from various sources, including current or former directors and Company contacts. In the event theThe Committee deems it appropriate to engageuses a search firm itto assist with the independent director recruitment process and has sole authority to retain and terminate any such search firm and approve the search firm’s fees. In June 2018, the Committee retained a search firm to assist with the independent director recruitment process.
Our annual meeting of shareholders
2021 Annual Meeting.
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For the fiscal year ended April 28, 2018,2021, our non-employee directors received an annual cash retainer, of $44,000meeting fees and an attendance feeannual stock award with immediate vesting. Our Chairman, Vice Chairman, committee chairs and members of $1,000 per committeethe Audit and Compensation Committees received additional cash retainers for their service in these capacities. In connection with the Company’s cost-cutting measures related to the COVID-19 pandemic, the retainers and meeting fees for our non-employee directors were reduced twenty percent (20%) for our first and for each board meeting other than the regularly scheduled quarterly meetings. In addition, in July 2017, the Compensation Committee, upon the recommendationsecond quarters of thefiscal 2021.
amounts for fiscal 2021 and fiscal 2022.
| Compensation Component | | | Fiscal 2021 Amount | | | Fiscal 2022 Amount | | |||
| Annual Cash Retainer | | | $52,000 | | | $80,000 | | |||
| Additional Annual Chairman of the Board Cash Retainer | | | $30,000 | | | $80,000 | | |||
| Additional Annual Vice Chairman of the Board Cash Retainer | | | $12,000 | | | $12,000 | | |||
| Additional Annual Committee Chair Cash Retainer | | | | | | |||||
| • | | | Audit Committee | | | $24,000 | | | $24,000 | |
| • | | | Compensation Committee | | | $24,000 | | | $24,000 | |
| • | | | Nominating and Governance Committee | | | $12,000 | | | $12,000 | |
| • | | | Technology Committee | | | $12,000 | | | $12,000 | |
| • | | | Medical Products Committee | | | $12,000 | | | $12,000 | |
| Additional Annual Committee Member Cash Retainer | | | | | | |||||
| • | | | Audit Committee | | | $10,000 | | | $0 | |
| • | | | Compensation Committee | | | $10,000 | | | $0 | |
| Fee for Each Committee and Special Board Meeting | | | $1,000 | | | $1,500 | | |||
| Annual Stock Grant | | | 3,000 Shares | | | Shares valued at $140,000 | |
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | ||||||
Martha Goldberg Aronson | 91,000 | 120,900 | 211,900 | ||||||
Walter J. Aspatore | 119,000 | 120,900 | 239,900 | ||||||
Warren L. Batts(2) | 25,500 | 120,900 | 146,400 | ||||||
Brian J. Cadwallader(2) | 18,500 | -0- | 18,500 | ||||||
Darren M. Dawson | 88,000 | 120,900 | 208,900 | ||||||
Stephen F. Gates(2) | 3,000 | -0- | 3,000 | ||||||
Isabelle C. Goossen | 107,000 | 120,900 | 227,900 | ||||||
Christopher J. Hornung | 75,000 | 120,900 | 195,900 | ||||||
Paul G. Shelton | 90,000 | 120,900 | 210,900 | ||||||
Lawrence B. Skatoff | 79,000 | 120,900 | 199,900 |
| Name | | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($)(1) | | | Total ($)(2) | |
| Walter J. Aspatore | | | 97,000 | | | 86,280 | | | 183,280 | |
| David P. Blom | | | 62,800 | | | 86,280 | | | 149,080 | |
| Therese M. Bobek | | | 78,400 | | | 86,280 | | | 164,680 | |
| Brian J. Cadwallader | | | 77,400 | | | 86,280 | | | 163,680 | |
| Bruce K. Crowther | | | 82,400 | | | 86,280 | | | 168,680 | |
| Darren M. Dawson | | | 85,400 | | | 86,280 | | | 171,680 | |
| Janie Goddard(3) | | | 7,500 | | | 0 | | | 7,500 | |
| Isabelle C. Goossen(3) | | | 33,600 | | | 86,280 | | | 119,880 | |
| Mary A. Lindsey | | | 86,200 | | | 86,280 | | | 172,480 | |
| Angelo V. Pantaleo | | | 63,800 | | | 86,280 | | | 150,080 | |
| Mark D. Schwabero | | | 65,600 | | | 86,280 | | | 151,880 | |
| Lawrence B. Skatoff | | | 80,200 | | | 86,280 | | | 166,480 | |
(1) | The reported amounts reflect the fair value at the date of grant calculated in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718. Details of the assumptions used in valuing these awards are set forth in Note |
(2) |
(3) |
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Stockholders
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class (%) | ||||
BlackRock, Inc.(1) 55 East 52nd Street New York, New York 10055 | 4,570,332 | 12.0 | ||||
The Vanguard Group(2) 100 Vanguard Blvd. Malvern, Pennsylvania 19355 | 3,367,765 | 8.8 | ||||
Dimensional Fund Advisors LP(3) Building One 6300 Bee Cave Road Austin, TX 78746 | 2,039,210 | 5.3 |
| Name and Address of Beneficial Owner | | | Amount and Nature of Beneficial Ownership | | | Percent of Class (%) | |
| BlackRock, Inc.(1) 55 East 52nd Street New York, New York 10055 | | | 6,036,730 | | | 16.1 | |
| The Vanguard Group(2) 100 Vanguard Blvd. Malvern, Pennsylvania 19355 | | | 3,828,459 | | | 10.2 | |
| Dimensional Fund Advisors LP(3) Building One 6300 Bee Cave Road Austin, TX 78746 | | | 2,032,885 | | | 5.4 | |
(1) | Information is based on a Schedule 13G/A filed with the |
(2) | Information is based on a Schedule 13G/A filed with the SEC on February |
(3) | Information is based on a Schedule 13G/A filed with the SEC on February |
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership(1) | Percent of Class (%) | ||||
Martha Goldberg Aronson | 9,000 | (2) | * | |||
Walter J. Aspatore | 30,000 | (3) | * | |||
Brian J. Cadwallader | 3,000 | * | ||||
Darren M. Dawson | 13,000 | * | ||||
Donald W. Duda | 648,277 | (4) | 1.7 | |||
Isabelle C. Goossen | 42,950 | * | ||||
Christopher J. Hornung | 40,850 | * | ||||
Paul G. Shelton | 44,850 | * | ||||
Lawrence B. Skatoff | 42,350 | (5) | * | |||
Andrea J. Barry | 21,420 | (6) | * | |||
John R. Hrudicka | 0 | * | ||||
Joseph E. Khoury | 237,200 | (7) | * | |||
Theodore P. Kill | 176,656 | (8) | * | |||
Ronald L.G. Tsoumas | 88,703 | (9) | * | |||
All current directors and executive officers as a group | 1,259,526 | (10) | 3.4 |
| Name of Beneficial Owner | | | Amount and Nature of Beneficial Ownership(1) | | | Percent of Class (%) | |
| Walter J. Aspatore | | | 29,955(2)(3) | | | * | |
| David P. Blom | | | 5,955 | | | * | |
| Therese M. Bobek | | | 5,955(3) | | | * | |
| Brian J. Cadwallader | | | 11,955(3) | | | * | |
| Bruce K. Crowther | | | 9,855(4) | | | * | |
| Darren M. Dawson | | | 12,955(3) | | | * | |
| Donald W. Duda | | | 830,055(5) | | | 2.2 | |
| Janie Goddard | | | 2,955 | | | * | |
| Mary A. Lindsey | | | 5,955(3) | | | * | |
| Angelo V. Pantaleo | | | 5,955 | | | * | |
| Mark D. Schwabero | | | 8,955(3) | | | * | |
| Lawrence B. Skatoff | | | 42,305(6) | | | * | |
| Andrea J. Barry | | | 66,023(7) | | | * | |
| Joseph E. Khoury | | | 292,420(8) | | | * | |
| Kevin M. Martin | | | 50,500(9) | | | * | |
| Ronald L.G. Tsoumas | | | 141,589(10) | | | * | |
| All current directors and executive officers as a group (18 persons) | | | 1,638,852(11) | | | 4.3 | |
* | Percentage represents less than 1% of the total shares of common stock outstanding. |
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(1) | Beneficial ownership arises from sole voting and dispositive power unless otherwise indicated by footnote. |
(2) |
(3) | Includes 2,955 shares of phantom stock held in the Company’s Deferred Compensation Plan. |
(4) | Shares are held in a trust pursuant to which |
Includes |
Shares are held in a trust pursuant to which Mr. Skatoff shares voting and investment power with his wife. |
Includes |
Includes options to purchase 12,000 shares of common stock exercisable within 60 days, |
(9) |
Includes options to purchase 8,000 shares of common stock exercisable within 60 days, |
Includes |
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Martha Goldberg AronsonFormer Executive Vice President and President of Global HealthcareEcolab, Inc.Director since 2016Age 50
Ms. Goldberg Aronson served from 2012 to 2016 as Executive Vice President and President, Global Healthcare, at Ecolab, Inc., a specialty chemical company. From 2010 to 2012, Ms. Goldberg Aronson was President, North America at Hill-Rom Holdings, Inc., a global medical technology company. Prior to Hill-Rom, Ms. Goldberg Aronson spent 18 years at Medtronic, Inc., a medical technology provider, most recently serving as Senior Vice President and Chief Talent Officer. Ms. Goldberg Aronson is currently a member of the Board of Directors of Cardiovascular Systems, Inc., Conmed Corporation and Clinical Innovations, LLC. Ms. Goldberg Aronson also serves as Chair of the Board of Directors of the Guthrie Theater. Ms. Goldberg Aronson served as a director of Hutchinson Technology, Inc. from 2010 through 2016. Based on her extensive leadership experience and experience in the global health care markets, Ms. Goldberg Aronson has provided valuable insights to the Board.
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Dr. Darren M. DawsonLeroy C. and Aileen H. Paslay Dean,College of Engineering,Kansas State University
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our Board.
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Isabelle C. Goossen
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Christopher J. Hornung, Vice ChairmanCo-Founder,Sturbridge CapitalDirector since 2004Age 66
Mr. Hornung co-founded Sturbridge Capital, an investment fund, in 2011. Mr. Hornung served as Chairman of Doskocil Manufacturing Company Inc., doing business as Petmate, a producer and distributor of pet products, from 2010 to May, 2017. Prior thereto, Mr. Hornung served as Chief Executive Officer of Next Testing, Inc.,Lindsay Corporation, a provider of comprehensive, sport-specific athletic testing programs, from January 2007 to November 2013. From February 2004 through December 2006, Mr. Hornung served as Presidentwater management and road infrastructure products and services. In addition, Ms. Lindsey serves on the Board and Audit Committee of the Pacific Cycle Division of Dorel Industries, Inc.Orion Engineered Carbons S.A., a global consumer products company. Priorsupplier of carbon products. Ms. Lindsey’s experience as a chief financial officer of a publicly traded company and her financial and tax expertise bring valuable perspectives to the acquisition of Pacific Cycle by Dorel Industries Inc., our Board.
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Paul G. SheltonRetired Vice President and Chief Financial Officer,FleetPride, Inc.Director since 2004Age 68
Mr. Shelton retired in 2003 as Vice President and Chief Financial Officer of FleetPride Inc., an independent heavy-duty truck parts distributor. From 1981 through 2001, Mr. Shelton served in various management positions at AMCOL International Corporation, a supplier of specialty minerals and chemicals, most recently as Senior Vice President from 1994 through 2001 and Chief Financial Officer from 1984 through 2001. Mr. Shelton serves on two private company boards and was a former member of the boardAudit Committee, Executive Compensation and Human Resources Committee, Executive Committee, and Governance and Nominating Committee of directors1st Source. In addition, Mr. Schwabero serves on the Advisory Committee of AMCOL International CorporationThe Ohio State University Center for Automotive Research. Mr. Schwabero’s leadership experience, international expertise and six private companies. Mr. Shelton has used his executive, financial and board experience to contribute to the operations and deliberationsdetailed knowledge of the Board.
Lawrence B. SkatoffRetired Executive Vice Presidentautomotive and Chief Financial Officer,BorgWarner Inc.Director since 2004Age 78
Mr. Skatoff retired in 2001 as Executive Vice President and Chief Financial Officer of BorgWarner Inc., a manufacturer of highly engineered systems and components for the automotive industry. Priorindustrial industries bring valuable perspectives to joining BorgWarner Inc., Mr. Skatoff was Senior Vice President and Chief Financial Officer of Premark International, Inc., a diversified consumer products company, from 1991 through 1999. Before joining Premark, Mr. Skatoff was Vice President-Finance of Monsanto Company, a worldwide manufacturer of chemicals and pharmaceuticals. Mr. Skatoff’s executive experience and financial background has led to continued contributions to theour Board.
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stockholders.
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Shareholders may vote for or against the following resolution, or may abstain from voting. The affirmative vote of a majority of the shares present or represented at the annual meeting and entitled to vote is required to approve the proposed resolution.
“RESOLVED, that the compensation of Methode’s named executive officers, as disclosed in Methode’s Proxy Statement for the 2021 Annual Meeting of Stockholders pursuant to the SEC’s compensation disclosure rules, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure, is hereby approved.” |
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE FOREGOING RESOLUTION.
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| | AUDIT COMMITTEE | |
| | ||
| | ||
| | ||
| | Mark D. Schwabero | |
| | Lawrence B. Skatoff |
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Fiscal 2018 | Fiscal 2017 | |||||
Audit Fees(1) | $ | 2,669,509 | $ | 2,094,248 | ||
Tax Fees(2) | $ | 98,389 | $ | 25,593 | ||
All Other Fees(3) | $ | 395,929 | $ | 494,892 | ||
Total | $ | 3,163,827 | $ | 2,614,733 |
| | Fiscal 2021 | | | Fiscal 2020 | |
Audit Fees(1) | | | $2,775,303 | | | $2,868,035 |
Audit-Related Fees | | | — | | | — |
Tax Fees(2) | | | $32,261 | | | $27,821 |
All Other Fees | | | — | | | — |
Total | | | $2,807,564 | | | $2,895,856 |
(1) | Audit fees represent aggregate fees billed for professional services rendered by |
(2) | Tax fees primarily include fees for consultations regarding intercompany transfer pricing. |
Pre-Approval Policy
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Overview
Executive Summary
COVID-19 pandemic and supply chain disruptions, we reported record fiscal 2021 net sales of $1.09 billion and reported net income of $122.3 million. For fiscal 2021, our quarterly dividend rate was $0.11 per share, and we distributed dividends of $16.5 million to our stockholders. In addition, we purchased 167,949 shares of our common stock in fiscal 2021 through our stock buyback program, for an aggregate purchase price of $7.5 million.
• | Salary. In |
• | Annual Performance-Based Cash Bonus. |
• |
• | 2021 LTI Program. |
| What We Do | | • | | | Provide for a | |
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| • | | Provide an appropriate mix of | | |
| • | | | Utilize an independent compensation consultant | |
| • | | | Require significant executive officer and director stock ownership | |
| • | | | Maintain a | |
| • | | | Conduct an | |
| • | | | Conduct an | |
| • | | | Disclose EBITDA performance measures under our 2021 LTI | |
| What We Don’t Do | | | • | | | No excessive post-termination benefits | |
| • | | | No excise tax gross ups | | |||
| • | | | No “single trigger” change of | |
| • |
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No dividends or | | ||||
| • | | | No hedging or pledging of our stock | |
| • | | | No excessive perquisites | |
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Our Compensation Process
The Compensation Committee regularly holds executive sessions without any members of management present.
The Compensation Committee reviewed information provided by FW Cook addressing the independence of FW Cook and the representatives serving the Committee. Based on this information, the Compensation Committee concluded that the work performed by FW Cook and its representatives involved in the engagement did not raise any conflict of interest and that FW Cook and such representatives are independent from the Company’s management.
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Market Benchmarking and Positioning of Fiscal 2018 Executive Compensation
We strive to provide compensation opportunities that are market competitive. In order to assist the Compensation Committee in achieving this objective for fiscal 2018, FW Cook was retained to conduct a review of our executive compensation peer group and benchmark our executive compensation program using a custom peer group and third-party survey data. The Compensation Committee considers this benchmarking information in reviewing each element of our compensation program.
After considering the advice of FW Cook, the Compensation Committee approved using the fiscal 2017 peer group for fiscal 2018, subject to a few modifications. One former peer company, Multi-Fineline Electronix, Inc., was eliminated since it had been acquired. One new peer company, Kemet Corporation, was added. Kemet Corporation satisfies the Compensation Committee’s criteria for the peer group as summarized below.
The peer group used for benchmarking purposes in fiscal 2018 was selected using the following criteria:
For compensation decisions affecting fiscal 2018 compensation, the peer group included the following companies:
In benchmarking our compensation program for fiscal 2018, the Compensation Committee also reviewed information compiled by FW Cook from major third-party executive pay surveys.
As a general policy, we targeted fiscal 2018 executive officer total direct compensation (salary, annual cash bonus and long-term incentive compensation) and each component thereof in the 50th to 75th percentile range of
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competitive practice, which aligned with the Company’s relative positioning in terms of revenues, net income and market capitalization versus its peer group. In making benchmarking determinations for fiscal 2018 compensation, the Compensation Committee assumed that each executive would achieve the target level of performance under all performance-based awards. In addition, in valuing the RSA and RSU awards outstanding under the LTI Program, the Compensation Committee assumed each executive would achieve the target level of performance under the RSAs and included an annualized portion of these shares in the comparative calculations since the LTI Program is intended to cover all long-term incentive grants to the participants through fiscal 2020. One-fifth of the grant date fair value of these shares is included for each executive officer, except one-fourth for Mr. Hrudicka and one-third for Ms. Barry due to their mid-cycle hiring dates.
In setting each compensation component for our executive officers, the Compensation Committee considered the competitive market data, together with other relevant factors, including the individual performance and experience of each executive, retention issues, internal pay equity and consistency issues, the Company’s performance, expected future contributions of each executive, historical compensation levels, tenure and industry conditions. These and other factors may affect whether one or more of the compensation components for any of our executive officers is set outside of the benchmark range. In addition, the total direct compensation, annual cash bonus and long-term incentive compensation for one or more of our executive officers could be above or below this target range depending on the amounts earned under the performance-based awards.
Consistent with our pay-for-performance philosophy, our executive compensation program is generally structured so that a significant amount of each of our named executive officers’ compensation is variable compensation and “at risk” for non-payment if we fail, or the executive fails, to meet performance targets.
Components of Fiscal 2018 Compensation
Salary. Our Compensation Committee establishes salaries on an annual basis, taking into account the guideline benchmark target, levels of responsibility, prior experience and breadth of knowledge, potential for advancement, recent promotions and hirings, past performance, internal equity issues and external pay practices. In setting fiscal 2018 salary levels, the Compensation Committee reviewed advice from FW Cook regarding market practices and considered Mr. Duda’s recommendations for officers other than himself.
After deliberation, the Compensation Committee decided to increase the salary of each of Messrs. Duda, Hrudicka, Kill and Tsoumas by 3% and to increase Mr. Khoury’s salary by 12%. In addition to the factors listed above, the Compensation Committee considered Mr. Khoury’s increased responsibilities in setting his salary. The Compensation Committee set Ms. Barry’s salary at $275,000 in connection with her hiring as our Chief Human Resources Officer.
Annual Performance-Based Bonuses. In July 2017, our Compensation Committee established fiscal 2018 annual performance-based cash bonus opportunities for certain of our executive officers after considering the guideline benchmark target, the individual performance and experience of each executive, retention issues, internal pay equity and industry conditions. The Compensation Committee reviewed advice from FW Cook regarding market practices and considered Mr. Duda’s recommendations for officers other than himself. In setting the performance measures, our Compensation Committee considered, among other matters, past performance, the fiscal 2018 operating budget, product development matters and general economic conditions. The Compensation Committee determined that for all of our executive officers other than Mr. Kill, 70% of the target bonus would be based on a Company pre-tax income measure (as adjusted for acquisitions and related expenses and divestitures and related gains/losses and expenses) and 30% would be based on new business bookings or revenue objectives and/or individual objectives. For Mr. Kill, 100% of the target bonus was based on performance measures related to our Dabir Surface medical device products. The maximum amount payable with respect to the Company pre-tax income measure and Dabir Surface revenue measure was set at 200% of the amount payable at the target level of performance, which aligns the opportunity with competitive practice among the peer group.
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Set forth below is an outline of the annual performance-based cash bonus awards for fiscal 2018 performance, including the maximum bonus, the relevant performance measures and the bonus paid.
Executive | Maximum Bonus | Performance Measures and Amounts Payable* | Bonus Earned | ||||
Donald W. Duda | $ | 1,364,543 | (1) Achieve consolidated pre-tax income (as adjusted for business acquisitions or dispositions) of $114.48 million (threshold), $120.50 million (target) and $138.58 million (maximum), with $258,157, $516,314 and $1,032,627 payable at threshold, target and maximum, respectively. The Company achieved consolidated pre-tax income of $121.69 million and Mr. Duda earned $550,352. (2) Obtain certain new business bookings of at least $60 million (with certain minimum pre-tax margins), $110,639 payable. The Company booked $62 million for such new business. (3) Achieve revenue from our Dabir Surface medical device products of $2 million (threshold), $5 million (target) and $8 million (maximum), with $55,319, $110,639 and $221,277 payable at threshold, target and maximum, respectively. This performance measure was not met. | $ | 660,991 | ||
Ronald L.G. Tsoumas | $ | 275,860 | (1) Achieve consolidated pre-tax income (as adjusted for business acquisitions or dispositions) of $114.48 million (threshold), $120.50 million (target) and $138.58 million (maximum), with $56,795, $113,590 and $227,179 payable at threshold, target and maximum, respectively. The Company achieved consolidated pre-tax income of $121.69 million and Mr. Tsoumas earned $121,078. (2) Implement the new revenue recognition standard required under US GAAP ($32,454 payable). This performance measure was achieved. (3) Implement a formal foreign exchange policy that includes certain pre-established analytics ($16,227 payable). This performance measure was not achieved. | $ | 155,532 | ||
Joseph E. Khoury | $ | 455,556 | (1) Achieve consolidated pre-tax income (as adjusted for business acquisitions or dispositions) of $114.48 million (threshold), $120.50 million (target) and $138.58 million (maximum), with $93,791, $187,582 and $375,164 payable at threshold, target and maximum, respectively. The Company achieved consolidated pre-tax income of $121.69 million and Mr. Khoury earned $199,948. (2) Obtain certain new business bookings of at least $60 million (with certain minimum pre-tax margins), $80,392 payable. The Company booked $62 million for such new business. | $ | 280,340 |
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Executive | Maximum Bonus | Performance Measures and Amounts Payable* | Bonus Earned | ||||
Theodore P. Kill | $ | 390,393 | (1) Achieve revenue from our Dabir Surface medical device products of $2 million (threshold), $5 million (target) and $8 million (maximum), with $86,574, $173,508 and $347,016 payable at threshold, target and maximum, respectively. This performance measure was not met. (2) Deliver a presentation to the Board of Directors on the strategy for Dabir Surfaces ($43,377 payable). This performance measure was met. | $ | 43,377 | ||
Andrea J. Barry | $ | 308,550 | (1) Achieve consolidated pre-tax income (as adjusted for business acquisitions or dispositions) of $114.48 million (threshold), $120.50 million (target) and $138.58 million (maximum), with $63,525, $127,050 and $254,100 payable at threshold, target and maximum, respectively. The Company achieved consolidated pre-tax income of $121.69 million and Ms. Barry earned $135,426. (2) Develop the Company’s internal recruiting department and reduce the use of outside recruiting agencies by 50% percent ($36,300 payable). This performance measure was achieved. (3) Develop a commission structure and compensation program for Dabir Surfaces ($18,150 payable). This performance measure was achieved. | $ | 189,876 | ||
John R. Hrudicka | $ | 520,047 | (1) Achieve consolidated pre-tax income (as adjusted for business acquisitions or dispositions) of $114.48 million (threshold), $120.50 million (target) and $138.58 million (maximum), with $107,069, $214,137 and $428,274 payable at threshold, target and maximum, respectively. (2) Deliver a presentation to the Board of Directors on the strategy for Dabir Surfaces ($30,591 payable). (3) Implement a global consolidation and management reporting application program to address forecasting, budgeting, financial reporting and advanced analytics ($61,182 payable). Since Mr. Hrudicka was not employed by the Company on the date the annual bonus amounts were paid, he was not entitled to any annual bonus payment. | $ | 0 |
Other Benefits and Perquisites. Our U.S.-based executive officers are eligible to participate in all of our employee benefit plans, such as medical, dental, vision, group life, disability and, as applicable, our 401(k) savings plan (with a company contribution equal to three percent (3%) of salary, subject to certain limitations), in each case, on the same basis as our other employees. Our U.S.-based executive officers are also provided deferred compensation opportunities through a non-qualified Deferred Compensation Plan. We have never contributed any amounts to the
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Deferred Compensation Plan on behalf of any of the named executive officers. For a description of the Deferred Compensation Plan, please see “Executive Compensation — Nonqualified Deferred Compensation,” below. In addition, a few perquisites are provided to the named executive officers. Perquisites include a company car allowance, professional association dues and provision for an annual physical exam. Mr. Hrudicka was paid $50,000 as a relocation bonus.
Change of Control Arrangements. We have entered into change of control agreements with all of our named executive officers, other than Mr. Khoury, that provide certain benefits upon termination in connection with a change of control event. As a Lebanese resident, Mr. Khoury is entitled to certain payments in the event of his termination under the Lebanese Labor Laws. These change of control agreements are designed to promote stability and continuity of senior management if a change of control event were to occur, both of which are in the best interest of Methode and our shareholders. Our executives are not entitled to a gross-up payment for excise taxes under our change of control agreements. In addition, our change of control agreements are “double trigger” whereby the executives are only entitled to a severance payment if an executive is terminated without cause or an executive terminates for good reason subsequent to a change of control. Our change of control provisions for the named executive officers are summarized below under “Executive Compensation − Potential Payments Upon Termination or Change of Control.”
Fiscal 2016 to 2020 Long-Term Incentive Program
During fiscal 2016, our Compensation Committee adopted a five-year, long-term incentive program consisting of a mix of 60% performance-based RSAs, at target performance, and 40% time-based RSUs (the “LTI Program”). Mr. Hrudicka and Ms. Barry received awards under the LTI Program in fiscal 2017 and 2018, respectively. The number of RSAs earned will vary based on performance relative to established goals for threshold, target and maximum performance. Performance will be based on the Company’s earnings before net interest, taxes, fixed asset depreciation and intangible asset amortization (“EBITDA”) for fiscal 2020, subject to certain adjustments, including adjustments for certain acquisitions and divestitures. The RSUs are subject to a vesting period based on continued service, subject to acceleration in certain limited circumstances. The Compensation Committee intends for the LTI Program to cover all long-term equity incentive grants to the participants through fiscal 2020.
A key consideration of the Compensation Committee in developing the LTI Program was the success of the prior five-year, long-term incentive program which concluded as of the end of fiscal 2015 (the “Fiscal 2011 LTI Program”). The Fiscal 2011 LTI Program included performance-based RSAs, performance-based tandem cash awards, RSUs and stock options. During the five-year period of the Fiscal 2011 LTI Program, revenues grew at an annualized rate of 18.5%, which supported annualized pre-tax profit growth and diluted earnings per share growth of 73.0% and 47.5%, respectively. In addition, we realized strong annualized total shareholder return of 34.0% during the period. During this period, our industry-leading performance reflected the introduction of numerous new products and technologies, the benefits of selective licensing and other business arrangements, the expansion of lower-cost manufacturing facilities and further vertical integration The Compensation Committee concluded that the Fiscal 2011 LTI Program succeeded in focusing our executive officers on growing the Company and appropriately rewarded our executive officers for creating value for our shareholders.
The Compensation Committee intends for the LTI Program to continue creating value for our shareholders using a long-term program that aligns pay with performance and includes a strong retention feature. In structuring the LTI Program, the Compensation Committee considered the advice of FW Cook, its independent executive compensation consultant, regarding market practices, award mix and size, possible performance criteria and alternative program structures. The Compensation Committee also considered Mr. Duda’s recommendations for officers other than himself.
The Compensation Committee considered multiple approaches for the LTI program, including the use of annual grants and alternative performance periods. After careful review, the Compensation Committee determined that the five-year program is appropriate after considering the success of the Fiscal 2011 LTI Program discussed above, as well as the lengthy sales and product development cycles and significant upfront capital requirements for many of the Company’s products. The Compensation Committee believes the term will focus our executive officers on the Company’s long-term objectives and retain our top executive talent over the period.
The LTI Program is comprised entirely of equity awards in order to directly align the interests of our executive officers with those of our shareholders. The Compensation Committee believes that the award mix of 60% performance-based RSAs, at target performance, and 40% time-vested RSUs supports the Company’s operating performance and retention objectives, respectively. Unlike the Fiscal 2011 LTI Program, stock options and
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performance-based tandem cash awards are not components of the LTI Program, in part due to accounting considerations, including the high costs of stock options relative to historical grants.
The Compensation Committee applied adjusted EBITDA as the RSA performance metric because it is one of the primary operating metrics tracked by the Company and its shareholders. The adjusted EBITDA performance goals set forth below align with the Company’s targeted 9% to 10% annual growth rate for EBITDA for the period. The adjustments to EBITDA for acquisitions and divestitures are designed to mitigate unintended windfalls to management for certain acquisitions and also to safeguard management from unintended penalties for shareholder-friendly divestitures that negatively impact the fiscal 2020 performance results.
In general, the Compensation Committee targeted the LTI Program awards in the 50th to 75th percentile range of competitive practice, which aligned with the Company’s relative positioning in terms of revenues, net income and market capitalization versus its peer group. In making these benchmarking determinations, the Compensation Committee assumed that each executive would achieve the target level of performance under the RSAs and included one-fifth of the grant date fair value of these shares in these comparative calculations. For Mr. Hrudicka and Ms. Barry, one-fourth and one-third, respectively, of the grant date fair value of these shares was included due to their mid-cycle hiring date. In determining the size of the award to each of our executive officers, the Compensation Committee also considered other relevant factors, including the individual performance and experience of each executive, internal pay equity and consistency issues, expected future contributions of each executive, historical compensation levels and tenure.
The table below sets forth the number of target RSAs and RSUs awarded to the named executive officers (“Target Shares”). All of the RSAs and RSUs awarded to Mr. Hrudicka were forfeited upon the date of his termination of employment.
Executive | Number of Shares | |||||
Target RSAs* | RSUs | |||||
Donald W. Duda | 180,000 | 120,000 | ||||
Ronald L.G. Tsoumas | 33,000 | 22,000 | ||||
Joseph E. Khoury | 90,000 | 60,000 | ||||
Theodore P. Kill | 90,000 | 60,000 | ||||
Andrea J. Barry | 12,600 | 8,400 |
Performance-Based RSAs. The number of RSAs earned will vary based on performance relative to established goals for threshold performance, target performance and maximum performance. The executive will not earn any shares if threshold performance is not met. Performance will be based on the Company’s EBITDA for fiscal 2020, subject to certain adjustments. All positive EBITDA from acquisitions that close during the term of the program and that are not accretive (as defined in the respective award agreement) in fiscal 2020 will be excluded. All positive EBITDA from acquisitions that close during fiscal 2019 or fiscal 2020 that are accretive in fiscal 2020 shall be included for purposes of determining fiscal 2020 EBITDA up to the target level and shall be excluded for purposes of determining fiscal 2020 EBITDA above the target level. For any divestitures approved by the Board during the period, the final four quarters of EBITDA from the divested business will be included in fiscal 2020 EBITDA. The performance measures and corresponding percentages of the target shares earned are set forth below.
Dividends will not be paid on the RSAs until the shares have been earned. At such time, the executive will be entitled to a dividend equivalent payment based on the dividends declared during the restricted period and the number of shares earned.
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In the event of an executive’s death or disability, he or she will earn all of the Target Shares. In the event of an executive’s qualified retirement, the executive will be eligible to earn a prorated number of shares based on the number of months during the 60-month performance period that have elapsed prior to retirement and Methode’s actual fiscal 2020 adjusted EBITDA result. In the event of a change of control in which the successor company does not assume the RSAs, the executive will earn a prorated number of the Target Shares based on the number of months during the 60-month performance period that have elapsed prior to the change of control. If the successor company assumes the RSAs and, if the executive is terminated without cause or resigns for good reason within a period of time after the transaction (two years for Mr. Duda and one year for Messrs. Khoury, Kill and Tsoumas and Ms. Barry), then the executive will earn a prorated number of the Target Shares based on the number of months during the 60-month performance period that have elapsed prior to termination of employment. The Compensation Committee believes these provisions regarding the treatment of the RSAs in the event of death, disability, retirement or a change of control reflect fair and reasonable treatment under these scenarios based on current governance best practices and competitive standards.
Time-Based RSUs. The RSUs are subject to a vesting period based on continued service, with 30% vested at the end of fiscal 2018, 30% vesting at the end of fiscal 2019, and 40% vesting at the end of fiscal 2020. Following vesting, the delivery of the stock underlying the RSUs will be deferred for all executive officers other than Ms. Barry until the earlier of the executive’s termination of employment or a change of control. Dividend equivalents will not be paid on the RSUs until the units have vested. Following vesting and until the delivery of the underlying common stock, each executive will be entitled to a quarterly payment in an amount equal to the aggregate per share cash dividend paid during the quarter multiplied by the number of vested RSUs held by the executive.
In the event of an executive’s death or disability, all unvested RSUs will become immediately and fully vested. In the event of an executive’s qualified retirement, a prorated number of RSUs will vest based on the months during the 60-month vesting period that have elapsed prior to retirement. In the event of a change of control in which the successor company does not assume the RSUs, all unvested RSUs will become immediately and fully vested. If the successor company assumes the RSUs and, if the executive is terminated without cause or resigns for good reason within a period of time after the transaction (two years for Mr. Duda and one year for Messrs. Khoury, Kill and Tsoumas and Ms. Barry), then all unvested RSUs will become immediately and fully vested. The Compensation Committee believes these provisions regarding the treatment of the RSUs in the event of death, disability, retirement or a change of control reflect fair and reasonable treatment under these scenarios based on current governance best practices and competitive standards.
Recent Management Changes
In March 2018, Mr. Hrudicka ceased to be employed by the Company, and Mr. Tsoumas was promoted to Chief Financial Officer. Mr. Kill retired from the Company in May, 2018.
Salary for Mr. Tsoumas. In June 2018, our Compensation Committee reviewed Mr. Tsoumas’ compensation. The Compensation Committee discussed Mr. Tsoumas’ promotion and increased responsibilities, reviewed advice from its independent compensation consultant and considered Mr. Duda’s recommendation. The Compensation Committee also considered other relevant factors, including Mr. Tsoumas’ performance, skills and experience, internal pay equity issues and peer comparisons. Based on these factors, the Compensation Committee increased Mr. Tsoumas’ annual salary to $400,000.
Agreement with Mr. Hrudicka. Pursuant to an Agreement and General Release between the Company and Mr. Hrudicka, he is entitled to certain compensation in return for a release of claims and an eighteen-month non-compete covenant. Mr. Hrudicka will be paid his annual salary of $464,000 for eighteen months, in accordance with the Company’s regular payroll practices, and $50,000 in connection with his relocation from Quincy, Illinois. Mr. Hrudicka is also entitled to continuing coverage under the Company’s health plan through September, 2019.
Retirement of Mr. Kill. Under the terms of our LTI Program, 37,000 of Mr. Kill’s RSUs vested upon his retirement and he is eligible to earn 55,500 of his RSA shares at target fiscal 2020 performance and 83,250 of his RSA shares at maximum performance. The Company and Mr. Kill entered into a Consulting Agreement with a one-year term, subject to early termination.
provide excise tax gross-ups.
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ofstockholders. The guidelines for stock ownership our Compensation Committee maintains stock ownership guidelines for ouras a multiple of executive officers. The requirementsofficers’ base salaries are subject to a phase-in period in the event of a new hire or a promotion. Our Chief Executive Officer is expected to own stock with a value at least equal to six (6) times his base salary and all other executive officers are expected to own stock with a value at least equal to two (2) times their base salary. as follows:
| Title | | | Guideline | |
| Chief Executive Officer | | | Six times salary | |
| Chief Operating Officer | | | Three times salary | |
| Other Executive Officers | | | Two times salary | |
Insider Trading Policy2021, subject to the phase-in-period for new appointments and promotions.
| Belden Corporation | | | Gentherm Incorporated | | | OSI Systems, Inc. | |
| Benchmark Electronics, Inc. | | | Kemet Corporation | | | Rogers Corporation | |
| CTS Corporation | | | LCI Industries | | | Stoneridge, Inc. | |
| Delphi Technologies PLC | | | Littelfuse, Inc. | | | TTM Technologies, Inc. | |
| Franklin Electric Company, Inc. | | | MTS Systems Corporation | | | Visteon Corporation | |
| Component | | | Purpose | |
| Salary | | | Attract, retain and motivate highly qualified executives. | |
| Annual Performance-Based Bonuses | | | Provide a cash reward for contributing to the achievement of our short-term company objectives, and in certain cases, individual objectives. | |
| Transition Bonuses | | | Seek to retain key members of management in a highly competitive job market over multiple years in order to transition the Company from the pre-pandemic economy through the recovery. | |
| Component | | | Purpose | |
| LTI Program Awards | | | Focus the executive’s efforts on our long-term performance, encourage significant ownership of our common stock and assist in retention. | |
| Other Benefits and Perquisites | | | Provide competitive levels of health and welfare protection and retirement and savings programs. | |
| Executives | | | Performance Measures | |
| Donald W. Duda Joseph E. Khoury Andrea J. Barry | | | Secure new bookings for certain business with a minimum pre-tax margin. The performance levels are established based on the probability of securing bookings for the projected annual business opportunities offered by our customers based on their product development cycles. The performance levels are not established based on year-over-year growth as customer product development cycles vary significantly from year to year. The performance levels for such new business were $88.0 million at threshold, $93.0 million at target and $107.0 million at maximum. This performance measure was weighted at 70% of the target amount payable for these executives. The Company booked $161.5 million for such new business which caused these executives to earn 200% of their respective target bonus amount for this measure. | |
| Executives | | | Performance Measures | |
| Donald W. Duda Ronald L.G. Tsoumas Joseph E. Khoury Andrea J. Barry | | | Effectively manage the impact of the COVID-19 pandemic on the Company as determined by the Compensation Committee based on criteria selected in early fiscal 2021. The Compensation Committee established that it would evaluate management’s performance based on actions taken on a global basis with respect to the following key areas: safety plans, staffing reorganization, supply chain management, cash management planning, succession planning and acquisition assessments. This performance measure was weighted at 30% of the target amount payable for Messrs. Duda and Khoury, 25% for Mr. Tsoumas and 15% for Ms. Barry. In reviewing the actions taken by these executive officers to manage the COVID-19 pandemic and the relevant criteria, the Compensation Committee considered a variety of factors, including the following: • Safety. Management successfully prioritized the health and safety of the Company’s employees. The Company quickly implemented numerous safety protocols at its 40 global facilities, including its plants which were required to continue operating as essential businesses. The safety protocols related to hygiene and disinfections, testing, quarantines, contact tracing, social distancing, and personal protective equipment (PPE). At a time when supply of PPE was severely limited, management leveraged the Company’s global purchasing power to secure PPE for its entire workforce. Management rapidly implemented the sharing of best practices throughout the Company’s global facilities, resulting in effective and standardized safety guidelines and procedures, updated on a regular basis, promoting the health and safety of employees and enabling our facilities to remain open. As a result of these actions, the percentage of positive COVID-19 cases traceable to a Methode facility was extremely low and we were not required to shut down any of our facilities due to an outbreak among employees or by local authorities due to inadequate safety protocols. • Staffing. Management swiftly evaluated and redesigned the Company’s staffing requirements and structures to reflect the ongoing impact of the pandemic on the Company’s business and operations. Among other actions, management successfully implemented several important business consolidations and successfully managed pandemic-related labor issues at its facilities in Mexico. Management’s actions avoided significant interruption to our operations and resulted in substantial labor cost savings. • Supply Chain. Management effectively managed the Company’s global supply chain to minimize production and customer issues. The Company implemented processes to continuously monitor and strengthen the supply chain to proactively mitigate potential disruptions. As a result of these actions, and apart from issues related to the worldwide semi-conductor shortage, the Company did not experience any significant production issues during fiscal 2021. Additionally, the Company was able to fulfill its customer commitments at an exceptionally high level in spite of these challenges, and our strong customer satisfaction levels contributed to the Company’s record financial results. • Cash Management. Management instituted heightened and effective procedures and practices to successfully manage liquidity, cash, accounts receivable, accounts payable, capital expenditures and indebtedness during the pandemic. • Succession Planning. Management implemented an emergency succession plan to ensure continuity in the event a member of senior leadership was unable to serve due to COVID-19. The succession plan was vetted by the Nominating and Governance Committee in early fiscal 2021. • Acquisitions. Management continued to evaluate potential acquisition opportunities in support of Methode’s strategic priorities. After thorough review, the Compensation Committee determined that these executive officers did an excellent job managing the unprecedented challenges and uncertainties of the COVID-19 pandemic on a global basis. The Compensation Committee noted that due to management’s timely and strategic response, the Company reported record net sales for fiscal 2021 despite the significant challenges from the COVID-19 pandemic. Because of these record results and based on management’s outstanding performance, the Compensation Committee approved the maximum level of payout for this performance measure and these executives each earned 200% of their respective target bonus amount for this measure. | |
| Executive | | | Performance Measures | |
| Ronald L.G. Tsoumas | | | (1) Achieve a net debt position of $141.5 million at threshold, $134.8 million at target and $114.5 million at maximum. For this purpose, net debt is defined as total debt minus cash. This performance measure was weighted at 50% of Mr. Tsoumas’ target bonus. As of the end of fiscal 2021, the Company’s net debt position was $6.9 million and Mr. Tsoumas earned 200% of his target bonus amount for this measure. (2) Achieve at least two of the following objectives: (a) assist with the launch of a companywide ESG program to the satisfaction of the Nominating and Governance Committee and the CEO; (b) develop a robust ERM program to the satisfaction of the Nominating and Governance Committee and the CEO; (c) improve the global finance team and function, including expanding the use of the content management system and reducing turnover, to the satisfaction of the Audit Committee and the CEO; and (d) assist with the implementation of a new succession management/talent review process for the global finance team to the satisfaction of the CEO. This performance measure was weighted at 25% of Mr. Tsoumas’ target bonus. The target bonus will be earned if two or three objectives are achieved and the maximum bonus will be earned if all four objectives are achieved. All four objectives were achieved and Mr. Tsoumas earned 200% of his target bonus amount for this measure. | |
| Andrea J. Barry | | | Achieve at least one of the following objectives: (a) complete the implementation of the Workday HR software system for all facilities in Mexico and India to the satisfaction of the CEO; and (b) implement the newly developed succession management and talent review process down to the vice president level on a global basis to the satisfaction of the CEO. This performance measure was weighted at 15% of Ms. Barry’s target bonus. The target bonus will be earned if one of these objectives is achieved and the maximum bonus will be earned if both objectives are achieved. Both objectives were achieved and Ms. Barry earned 200% of her target bonus amount for this measure. | |
| Kevin M. Martin | | | (1) Secure new bookings for certain business in North America with a minimum pre-tax margin. The performance levels are established based on available development programs for these products, not on year-over-year growth. The performance levels for such new business were $53.8 million at threshold, $56.6 million at target and $65.1 million at maximum. This performance measure was weighted at 40% of Mr. Martin’s target bonus. The Company booked $69.1 million for such new business and Mr. Martin earned 200% of his target bonus amount for this measure. (2) Achieve EBITDA for a collection of business units at a threshold, target and maximum level of performance. This performance measure was weighted at 25% of Mr. Martin’s target bonus. The business units achieved EBITDA between the target and the maximum levels of performance and Mr. Martin earned 111% of his target bonus amount for this measure. (3) Complete the implementation of at least two of four systems and programs into the Grakon operations, including new product development systems, pricing models, and quotation programs, to the satisfaction of the CEO and the COO. This performance measure was weighted at 25% of Mr. Martin’s target bonus. The threshold bonus will be earned if two objectives are achieved, target bonus will be earned if three objectives are achieved and the maximum bonus will be earned if all four objectives are achieved. All four objectives were achieved and Mr. Martin earned 200% of his target bonus amount for this measure. (4) Achieve inventory turns for the North American automotive business at a threshold, target and maximum level of performance as determined by the CEO and COO. This performance measure was weighted at 10% of Mr. Martin’s target bonus. The business achieved inventory turns below the threshold level of performance and Mr. Martin did not earn any of his target bonus amount for this measure. | |
| Executive | | | Number of Shares | | | Grant Date Market Value | | ||||||
| Target RSAs | | | RSUs | | | Target RSAs* | | | RSUs | | |||
| Donald W. Duda | | | 375,000 | | | 375,000 | | | $10,605,000 | | | $10,605,000 | |
| Ronald L.G. Tsoumas | | | 75,500 | | | 75,500 | | | $2,135,140 | | | $2,135,140 | |
| Joseph E. Khoury | | | 144,000 | | | 144,000 | | | $4,072,320 | | | $4,072,320 | |
| Andrea J. Barry | | | 52,500 | | | 52,500 | | | $1,484,700 | | | $1,484,700 | |
| Kevin M. Martin | | | 50,500 | | | 50,500 | | | $1,444,805 | | | $1,444,805 | |
* | In accordance with the accounting and SEC disclosure rules, the “Stock Awards” column of the Summary Compensation Table does not include any value attributable to the RSAs. For financial statement reporting purposes and based on the accounting rules, the Company will not record an expense for the RSAs until the Company determines with sufficient certainty that at least the threshold level of performance for fiscal 2025 EBITDA will be achieved. As noted above, the fiscal 2025 EBITDA target performance goal aligns with the Company’s targeted EBITDA compound annual growth rate of approximately 8% for organic and inorganic growth during the five-year program period and includes EBITDA from accretive acquisitions. |
| Executive | | | Maximum Number of Performance Units* | |
| Donald W. Duda | | | 187,500 | |
| Ronald L.G. Tsoumas | | | 37,750 | |
| Joseph E. Khoury | | | 72,000 | |
| Andrea J. Barry | | | 26,250 | |
| Kevin M. Martin | | | 25,250 | |
* | Only earned in the event the Company’s fiscal 2025 EBITDA exceeds the RSA target performance goal. |
| Performance Goal | | | Fiscal 2025 EBITDA, As Adjusted | | | Percentage of RSAs Earned* | |
| Threshold Performance | | | $270 million | | | 50% | |
| Target Performance | | | $300 million | | | 100% | |
* | Payouts are interpolated for performance falling between the threshold and target performance measures. |
| Performance Goal | | | Fiscal 2025 EBITDA, As Adjusted | | | Percentage of Performance Units Earned* | |
| Target Performance | | | $300 million | | | 0% | |
| Maximum Performance | | | $330 million | | | 100% | |
* | Payouts are interpolated for performance falling between the target and maximum performance measures. |
Clawback Policy. In the event we are required to restate our financial statements due to material noncompliance, our Incentive Compensation Recoupment Policy requires us to recover from our current or former executive officers certain amounts of incentive-based compensation paid within the prior three years that were erroneously paid.
| | COMPENSATION COMMITTEE | |
| | ||
| | ||
| | ||
|
27
37
TABLES
Name and Principal Position | Fiscal Year | Salary ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||||
RSAs(2) | RSUs(3) | ||||||||||||||||||||
Donald W. Duda President and Chief Executive Officer | 2018 | 736,476 | — | — | 660,991 | 148,159 | 1,545,626 | ||||||||||||||
2017 | 716,108 | — | — | 955,541 | 138,169 | 1,809,818 | |||||||||||||||
2016 | 695,588 | 6,080,400 | 4,053,600 | 572,102 | 311,114 | 11,712,804 | |||||||||||||||
Ronald L.G. Tsoumas, Chief Financial Officer and Vice President, Corporate Finance(6) | 2018 | 245,942 | — | — | 155,532 | 30,174 | 431,648 | ||||||||||||||
2017 | 238,703 | — | — | 210,425 | 27,017 | 476,145 | |||||||||||||||
2016 | 231,880 | 1,114,740 | 743,160 | 129,628 | 21,976 | 2,241,384 | |||||||||||||||
Joseph E. Khoury Chief Operating Officer(7) | 2018 | 400,025 | — | — | 280,340 | 15,682 | 696,047 | ||||||||||||||
2017 | 362,518 | — | — | 320,261 | 14,482 | 697,261 | |||||||||||||||
2016 | 359,600 | 3,040,200 | 2,026,800 | 184,127 | 90,221 | 5,700,948 | |||||||||||||||
Theodore P. Kill Retired Vice President, Worldwide Automotive Sales and President of Dabir Surfaces(8) | 2018 | 328,117 | — | — | 43,377 | 41,212 | 412,706 | ||||||||||||||
2017 | 316,720 | — | — | 156,749 | 37,760 | 511,229 | |||||||||||||||
2016 | 310,034 | 2,704,500 | 1,803,000 | 191,079 | 113,866 | 5,122,479 | |||||||||||||||
Andrea J. Barry Chief Human Resources Officer(9) | 2018 | 269,711 | 562,590 | 375,060 | 189,876 | 13,273 | 1,410,510 | ||||||||||||||
John R. Hrudicka Former Chief Financial Officer and Vice President, Corporate Finance(6) | 2018 | 454,688 | — | — | — | 170,714 | 625,402 | ||||||||||||||
2017 | 346,154 | 1,675,200 | 1,116,800 | 396,303 | 12,481 | 3,546,938 |
| Name and Principal Position | | | Fiscal Year | | | Salary ($)(1) | | | Stock Awards ($)(2) | | | Non-Equity Incentive Plan Compensation ($)(3) | | | All Other Compensation ($)(4) | | | Total ($) | |
| Donald W. Duda President and Chief Executive Officer | | | 2021 | | | 725,596 | | | 10,605,000 | | | 1,565,600 | | | 435,358 | | | 13,331,554 | |
| 2020 | | | 851,107 | | | — | | | 234,840 | | | 429,171 | | | 1,515,118 | | |||
| 2019 | | | 759,719 | | | — | | | 455,832 | | | 174,027 | | | 1,389,578 | | |||
| Ronald L.G. Tsoumas Chief Financial Officer | | | 2021 | | | 381,893 | | | 2,135,140 | | | 543,840 | | | 77,161 | | | 3,138,034 | |
| 2020 | | | 467,504 | | | — | | | 81,576 | | | 80,978 | | | 630,058 | | |||
| 2019 | | | 420,749 | | | — | | | 39,600 | | | 28,682 | | | 489,031 | | |||
| Joseph E. Khoury Chief Operating Officer(5) | | | 2021 | | | 425,507 | | | 4,072,320 | | | 690,000 | | | 155,227 | | | 5,343,054 | |
| 2020 | | | 460,005 | | | — | | | 103,500 | | | 148,249 | | | 711,754 | | |||
| 2019 | | | 446,607 | | | — | | | 176,854 | | | 22,062 | | | 645,523 | | |||
| Andrea J. Barry Executive Vice President and Chief Human Resources Officer | | | 2021 | | | 283,639 | | | 1,484,700 | | | 403,920 | | | 20,819 | | | 2,193,078 | |
| Kevin M. Martin, Vice President, North America | | | 2021 | | | 304,731 | | | 1,444,805 | | | 343,515 | | | 36,741 | | | 2,129,792 | |
(1) |
(2) |
(3) |
Amounts reflect annual performance-based cash bonuses. Additional details regarding these bonus awards are set forth in “Compensation Discussion and Analysis – Components of Fiscal 2021 Compensation – Annual Performance-Based Bonuses.” |
28
Amounts included in All Other Compensation reflect the following for fiscal |
Executive | Vested RSU Dividend Equivalents ($) | 401(k) Contribution ($) | Life Insurance ($) | Car Allowance ($) | Executive Physical ($) | Gift Card ($) | ||||||||||||
Mr. Duda | 119,945 | 8,250 | 3,564 | 9,600 | 6,725 | 75 | ||||||||||||
Mr. Tsoumas | 8,000 | 8,250 | 1,002 | 6,000 | 6,847 | 75 | ||||||||||||
Mr. Khoury | 12,000 | 0 | 0 | 0 | 3,682 | 0 | ||||||||||||
Mr. Kill | 12,000 | 8,250 | 3,048 | 12,000 | 5,839 | 75 | ||||||||||||
Ms. Barry | 0 | 8,091 | 1,012 | 0 | 4,095 | 75 | ||||||||||||
Mr. Hrudicka | 0 | 8,250 | 610 | 0 | 3,995 | 75 |
For Mr. Hrudicka, also includes $50,000 paid in connection with the sale of his house as a result of his move to Chicago, Illinois and $107,783.66 paid pursuant to the Agreement described in footnote (6) below.
| Executive | | | Vested RSU Dividend Equivalents ($) | | | 401(k) Contribution ($) | | | Life Insurance ($) | | | Car Allowance ($) | |
| Mr. Duda | | | 413,879 | | | 8,700 | | | 3,179 | | | 9,600 | |
| Mr. Tsoumas | | | 60,877 | | | 8,700 | | | 1,584 | | | 6,000 | |
| Mr. Khoury | | | 155,227 | | | — | | | — | | | — | |
| Ms. Barry | | | 11,096 | | | 8,700 | | | 1,023 | | | — | |
| Mr. Martin | | | 16,426 | | | 8,700 | | | 815 | | | 10,800 | |
(5) |
Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | |||||||||||||||||||||
Name | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||
Donald W. Duda | 7/11/2017 | 424,115 | 737,592 | 1,364,543 | — | — | — | — | — | ||||||||||||||||
Ronald L.G. Tsoumas | 7/11/2017 | 105,476 | 162,271 | 275,860 | — | — | — | — | — | ||||||||||||||||
Joseph E. Khoury | 7/11/2017 | 174,183 | 267,974 | 455,556 | — | — | — | — | — | ||||||||||||||||
Theodore P. Kill | 7/11/2017 | 130,131 | 216,885 | 390,393 | — | — | — | — | — | ||||||||||||||||
Andrea J. Barry | 5/1/2017 | — | — | — | 6,300 | 12,600 | 18,900 | 8,400 | 937,650 | ||||||||||||||||
7/11/2017 | 117,975 | 181,500 | 308,550 | — | — | — | — | — | |||||||||||||||||
John R. Hrudicka | 7/11/2017 | 198,842 | 305,910 | 520,047 | — | — | — | — | — |
| | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | All Other Stock Awards: Number of Shares of Stock or Units | | | Grant Date Fair Value of Stock and Option Awards ($)(5) | | ||||||||||||||
| Name | | | Grant Date | | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | ||||||
| Donald W. Duda | | | 9/27/2020(1) | | | — | | | — | | | — | | | 187,500 | | | 375,000 | | | 375,000 | | | — | | | 0 | |
| 9/27/2020(2) | | | — | | | 0 | | | 5,032,500 | | | — | | | — | | | — | | | — | | | — | | |||
| 9/27/2020(3) | | | — | | | — | | | — | | | — | | | — | | | — | | | 375,000 | | | 10,605,000 | | |||
| 7/7/2020(4) | | | 391,400 | | | 782,800 | | | 1,565,600 | | | — | | | — | | | — | | | — | | | — | | |||
| Ronald L.G. Tsoumas | | | 9/27/2020(1) | | | — | | | — | | | — | | | 37,750 | | | 75,500 | | | 75,500 | | | — | | | 0 | |
| 9/27/2020(2) | | | — | | | 0 | | | 1,067,570 | | | — | | | — | | | — | | | — | | | — | | |||
| 9/27/2020(3) | | | — | | | — | | | — | | | — | | | — | | | — | | | 75,500 | | | 2,135,140 | | |||
| 7/7/2020(4) | | | 135,960 | | | 271,920 | | | 543,840 | | | — | | | — | | | — | | | — | | | — | | |||
| Joseph E. Khoury | | | 9/27/2020(1) | | | — | | | — | | | — | | | 72,000 | | | 144,000 | | | 144,000 | | | — | | | 0 | |
| 9/27/2020(2) | | | — | | | 0 | | | 2,036,160 | | | — | | | — | | | — | | | — | | | — | | |||
| 9/27/2020(3) | | | — | | | — | | | — | | | — | | | — | | | — | | | 144,000 | | | 4,072,320 | | |||
| 7/7/2020(4) | | | 172,500 | | | 345,000 | | | 690,000 | | | — | | | — | | | — | | | — | | | — | | |||
| Andrea J. Barry | | | 9/27/2020(1) | | | — | | | — | | | — | | | 26,250 | | | 52,500 | | | 52,500 | | | — | | | 0 | |
| 9/27/2020(2) | | | — | | | 0 | | | 742,350 | | | | | | | | | | | | ||||||||
| 9/27/2020(3) | | | — | | | — | | | — | | | — | | | — | | | — | | | 52,500 | | | 1,484,700 | | |||
| 7/7/2020(4) | | | 100,980 | | | 201,960 | | | 403,920 | | | — | | | — | | | — | | | — | | | — | | |||
| Kevin M. Martin | | | 9/29/2020(1) | | | — | | | — | | | — | | | 25,250 | | | 50,500 | | | 50,500 | | | — | | | 0 | |
| 9/29/2020(2) | | | — | | | 0 | | | 722,402 | | | — | | | — | | | — | | | — | | | — | | |||
| 9/29/2020(3) | | | — | | | — | | | — | | | — | | | — | | | — | | | 50,500 | | | 1,444,805 | | |||
| 9/16/2020(4) | | | 108,900 | | | 217,800 | | | 435,600 | | | — | | | — | | | — | | | — | | | — | |
(1) | Reflects the performance-based RSAs awarded under the 2021 LTI Program. Additional details regarding these awards are set forth in “Compensation Discussion and Analysis – Components of Fiscal 2021 Compensation – 2021 LTI Program.” |
(2) | Reflects the Performance Units awarded under the 2021 LTI Program. Amounts shown have been determined based on the closing price for the Company’s common stock on the grant date, or if no trading occurred on such date, the closing price on the following date. Additional details regarding these awards are set forth in “Compensation Discussion and Analysis-2021 LTI Program.” |
(3) | Reflects the time-based RSUs awarded under the 2021 LTI Program. Additional details regarding these awards are set forth in “Compensation Discussion and Analysis – Components of Fiscal 2021 Compensation – 2021 LTI Program.” |
(4) | Reflects the annual performance-based cash bonus |
(5) |
29
Alternative Summary Compensation Table
Annual Performance-Based Bonus Awards. As discussed in “Compensationthe Compensation Discussion and Analysis-Fiscal 2016 Long-Term Incentive Program,” inAnalysis, during fiscal 2016,2021, each of the named executive officers was awarded an annual performance-based cash bonus opportunity. The target amount payable was set at 100% of base salary for Mr. Duda, 75% for Mr. Khoury and 66% for our Compensation Committee adopted a five-year, long-term equity incentive program consisting of a mix of 60% performance-based RSAs, at target performance, and 40% time-based RSUs (the “LTI Program”). Mr. Hrudicka and Ms. Barry received awards under the LTI Program in fiscal 2017 and fiscal 2018, respectively.other
Under the SEC’s proxy statement disclosure rules, the grant date fair value200%, respectively, of the number of RSAs eligible for vestingamount payable at the target level of performance. The annual performance measures included new business bookings, management of the uncertainties and challenges of the total number of RSUs awarded underCOVID-19 pandemic, financial objectives, and individual performance objectives. The amounts paid to the LTI Program has been reportednamed executive officers pursuant to these awards are included in the Summary Compensation Table under the column captioned “Non-Equity Incentive Plan Compensation.” Please see “Components of Fiscal 2021 Compensation – Annual Performance-Based Bonuses” in the Compensation Discussion and Analysis above for further information regarding these awards.
The Company is presenting the following Alternative Summary Compensation Table in order to illustrate howSeptember 2020, the Compensation Committee views annualized total compensation underadopted the 2021 LTI Program. ThePlease See “Components of Fiscal 2021 Compensation Committee believes that due to the front-loaded nature of the RSA and RSU awards, the compensation amounts disclosed– 2021 Long-Term Incentive Program” in the Summary Compensation TableDiscussion and Analysis above for our named executive officers other than Mr. Hrudicka and Ms. Barry overstate compensation attributable to fiscal 2016 and understate compensation attributable to fiscal 2017 and fiscal 2018. For Mr. Hrudicka and Ms. Barry, the Compensation Committee believes that the compensation amounts disclosed in the Summary Compensation Table overstate compensation for fiscal 2017 and 2018, respectively.
The values inadditional information regarding this table differ from the values disclosed in the Summary Compensation Table in that the value of the RSAs and the RSUs have been annualized equally over the respective five-year periods of the programs. For Mr. Hrudicka and Ms. Barry, the value of the grants has been annualized over four years and three years, respectively, due to their mid-cycle hiring dates. In both the Summary Compensation Table and the Alternative Summary Compensation Table, the values for the RSA and RSU awards reflect grant date fair values calculated in accordance with the applicable accounting rules. The Alternative Summary Compensation Table below has been revised as described and does not comply with SEC rules for the Summary Compensation Table. Shareholders should not view this alternative table as a substitute for the Summary Compensation Table and should review this Alternative Summary Compensation Table together with the Summary Compensation Table and other compensation tables contained herein that have been prepared in accordance with SEC rules.
30
Alternative Summary Compensation Table
Name and Principal Position | Fiscal Year | Salary ($) | Annualized Value of Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||||
RSAs(2) | RSUs(3) | ||||||||||||||||||||
Donald W. Duda President and Chief Executive Officer | 2018 | 736,476 | 1,216,080 | 810,720 | 660,991 | 148,159 | 3,572,426 | ||||||||||||||
2017 | 716,108 | 1,216,080 | 810,720 | 948,700 | 138,169 | 3,829,777 | |||||||||||||||
2016 | 695,598 | 1,216,080 | 810,720 | 572,102 | 311,114 | 3,605,614 | |||||||||||||||
Ronald L.G. Tsoumas Chief Financial Officer and Vice President, Corporate Finance | 2018 | 245,942 | 222,948 | 148,632 | 155,532 | 30,174 | 803,228 | ||||||||||||||
2017 | 238,703 | 222,948 | 148,632 | 210,425 | 27,017 | 847,725 | |||||||||||||||
2016 | 231,880 | 222,948 | 148,632 | 129,628 | 21,976 | 755,064 | |||||||||||||||
Joseph E. Khoury Chief Operating Officer(6) | 2018 | 400,025 | 608,040 | 405,360 | 280,340 | 15,682 | 1,717,170 | ||||||||||||||
2017 | 362,518 | 608,040 | 405,360 | 320,261 | 14,482 | 1,710,661 | |||||||||||||||
2016 | 359,600 | 608,040 | 405,360 | 184,127 | 90,221 | 1,647,348 | |||||||||||||||
Theodore P. Kill Retired Vice President, Worldwide Automotive Sales and President of Dabir Surfaces | 2018 | 328,117 | 540,900 | 360,600 | 43,377 | 41,212 | 1,314,206 | ||||||||||||||
2017 | 316,720 | 540,900 | 360,600 | 156,749 | 37,760 | 1,412,729 | |||||||||||||||
2016 | 310,034 | 540,900 | 360,600 | 191,079 | 113,866 | 1,516,479 | |||||||||||||||
Andrea J. Barry, Chief Human Resource Officer | 2018 | 269,711 | 187,530 | 125,020 | 189,876 | 13,273 | 785,410 | ||||||||||||||
John R. Hrudicka Former Chief Financial Officer and Vice President, Corporate Finance | 2018 | 454,688 | 418,800 | 279,200 | — | 170,714 | 1,323,402 | ||||||||||||||
2017 | 346,154 | 418,800 | 279,200 | 396,303 | 12,481 | 1,452,938 |
31
Outstanding Equity Awards at Fiscal Year-End
Name | Option Awards | Stock Awards | ||||||||||||||||||||||
Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Share of Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Numbers of Unearned Shares, Units or Other Rights That Have Not Yet Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Yet Vested ($)(3) | |||||||||||||||||
Donald W. Duda | 40,000 | — | 37.01 | 7/7/2024 | 84,000 | 3,406,200 | 270,000 | 10,948,500 | ||||||||||||||||
Ronald L.G. Tsoumas | 8,000 | — | 37.01 | 7/7/2024 | 15,400 | 624,470 | 49,500 | 2,007,225 | ||||||||||||||||
Joseph E. Khoury | 12,000 | — | 37.01 | 7/7/2024 | 42,000 | 1,703,100 | 135,000 | 5,474,250 | ||||||||||||||||
Theodore P. Kill | — | — | — | — | 42,000 | 1,703,100 | 135,000 | 5,474,250 | ||||||||||||||||
Andrea J. Barry | — | — | — | — | 5,880 | 238,434 | 18,900 | 766,395 | ||||||||||||||||
John Hrudicka(5) | — | — | — | — | — | — | — | — |
| | | Option Awards(1) | | | Stock Awards | | |||||||||||||||||||
| Name | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercise Price ($) | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested (#)(2) | | | Market Value of Share of Units of Stock That Have Not Vested ($)(3) | | | Equity Incentive Plan Awards: Numbers of Unearned Shares, Units or Other Rights That Have Not Yet Vested (#)(4) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Yet Vested ($)(3) | |
| Donald W. Duda | | | 40,000 | | | 0 | | | 37.01 | | | 7/7/2024 | | | 375,000 | | | 16,848,750 | | | 375,000 | | | 16,848,750 | |
| Ronald L.G. Tsoumas | | | 8,000 | | | 0 | | | 37.01 | | | 7/7/2024 | | | 75,500 | | | 3,392,215 | | | 75,500 | | | 3,392,215 | |
| Joseph E. Khoury | | | 12,000 | | | 0 | | | 37.01 | | | 7/7/2024 | | | 144,000 | | | 6,469,920 | | | 144,000 | | | 6,469,920 | |
| Andrea J. Barry | | | — | | | — | | | — | | | — | | | 52,500 | | | 2,358,825 | | | 52,500 | | | 2,358,825 | |
| Kevin M. Martin | | | — | | | — | | | — | | | — | | | 50,500 | | | 2,268,965 | | | 50,500 | | | 2,268,965 | |
(1) | These options were granted in July 2014. One-third of these options vested on each of the first, second and third anniversaries of the grant date. |
(2) | These RSUs are generally subject to a five-year vesting period based on continued service, with |
(3) | Calculated based on the closing price of the Company’s common stock on April |
(4) | These |
Option Exercises and Stock Vested
The following table sets forth certain information regarding option exercises by the
Name | Option Awards | Stock Awards | ||||||||||
Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#)(2) | Value Realized on Vesting ($)(3) | |||||||||
Donald W. Duda | — | — | 36,000 | 1,459,800 | ||||||||
Ronald L.G. Tsoumas | — | — | 6,600 | 267,630 | ||||||||
Joseph E. Khoury | — | — | 18,000 | 729,900 | ||||||||
Theodore P. Kill | — | — | 18,000 | 729,900 | ||||||||
Andrea J. Barry | — | — | 2,520 | 102,186 | ||||||||
John Hrudicka | — | — | — | — |
32
Name | Executive Contributions in Last Fiscal Year ($)(1) | Registrant Contributions in Last Fiscal Year ($) | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions ($)(2) | Aggregate Balance at Last Fiscal Year-End ($) | ||||||||||
Donald W. Duda | 0 | 0 | 294 | 0 | 31,364 | ||||||||||
Ronald L.G. Tsoumas | 244,449 | 0 | 14,508 | 0 | 1,104,696 | ||||||||||
Joseph E. Khoury | 0 | 0 | 0 | 0 | 0 | ||||||||||
Theodore P. Kill | 145,482 | 0 | 139,716 | 0 | 1,488,591 | ||||||||||
Andrea J. Barry | 0 | 0 | 0 | 0 | 0 | ||||||||||
John Hrudicka | 0 | 0 | 0 | 0 | 0 |
| Name | | | Executive Contributions in Last Fiscal Year ($)(1) | | | Registrant Contributions in Last Fiscal Year ($) | | | Aggregate Earnings in Last Fiscal Year ($) | | | Aggregate Withdrawals/ Distributions ($)(2) | | | Aggregate Balance at Last Fiscal Year- End ($) | |
| Donald W. Duda | | | 0 | | | 0 | | | 4 | | | 0 | | | 32,492 | |
| Ronald L.G. Tsoumas | | | 31,252 | | | 0 | | | 2,601 | | | 0 | | | 1,223,102 | |
| Joseph E. Khoury | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
| Andrea J. Barry | | | 59,164 | | | 0 | | | 107,634 | | | 0 | | | 412,087 | |
| Kevin M. Martin | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
(1) | All executive contributions were reported as compensation in the “Summary Compensation Table” under the “Salary” and/or “Non-Equity Incentive Plan Compensation” columns, depending on the source of the executive contribution. |
(2) | Reflects distributions in accordance with the terms of each executive’s deferral election. |
The Methode Electronics, Inc. Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”) allows a select group of management and highly compensated employees to defer up to 75% of their annual base salary and/or 100% of their annual bonus, and/or 100% of their tandem cash award, if applicable, with an aggregate minimum deferral of $3,000. Directors are allowed to defer up to 100% of their director compensation paid in cash or shares of Common Stock. The minimum period of deferral is three years. Participants are immediately 100% vested.
2021.
daily.
33
Potential Payments Upon Termination or a Change of Control
The following table summarizes payments payable to our named executive officers upon a change in control or the executive’s death, disability or qualified retirement under our outstanding equity and cash bonus awards.
34
Messrs. Duda, Tsoumas and KillKhoury and Ms. Barry are parties to change of control agreements with the Company. Mr. Khoury is not a party to a change of control agreement. Pursuant to these change of control agreements, if within two years of a change of control or during a period pending a change of control, we terminate the executive’s employment without good cause or the executive voluntarily terminates his or her employment for good reason, the executive is entitled to the following:
| | | Termination Scenario | | ||||||||||
| Type of Award | | | Change in Control | | | Death or Disability | | | Termination Without Cause | | | Retirement(1) | |
| Annual Performance-Based Bonus | | | The target bonus is paid. | | | The target bonus is paid. | | | No bonus is paid. | | | A prorated bonus is paid based on the retirement date and year-end performance. | |
| Restricted Stock Units (“RSUs”) | | | All RSUs are fully vested. | | | All RSUs are fully vested. | | | If Messrs. Duda, Tsoumas or Khoury or Ms. Barry are terminated after the end of fiscal 2021, a prorated number of RSUs will vest based on the number of months elapsed since the start of fiscal 2021. | | | A prorated number of RSUs will vest based on the months elapsed since the start of fiscal 2021. If Mr. Duda retires after the end of fiscal 2023, all of his RSUs will fully vest. | |
| Performance-Based Restricted Stock Awards (“RSAs”) | | | A prorated number of RSA shares will vest. For Messrs. Duda and Martin, the proration will be based on the number of months elapsed since the start of fiscal 2021. For Messrs. Tsoumas and Khoury and Ms. Barry, (A) if the termination occurs in fiscal 2021, all RSA shares are forfeited; (B) if the termination occurs in fiscal 2022 or 2023, the proration will be based on | | | All RSA shares are fully vested. | | | If Messrs. Duda, Tsoumas or Khoury or Ms. Barry are terminated without cause after the end of fiscal 2021, a prorated number of RSA shares will be eligible for vesting based on the number of months elapsed since the start of fiscal 2021. The number of RSA shares to actually vest will depend on the Company’s fiscal 2025 EBITDA. | | | A prorated number of RSA shares will be eligible for vesting based on the number of months elapsed since the start of fiscal 2021. If Mr. Duda retires after fiscal 2023, all of his RSA shares will be eligible for vesting. The number of RSA shares to actually vest will depend on the Company’s fiscal 2025 EBITDA. | |
| | | Termination Scenario | | ||||||||||
| Type of Award | | | Change in Control | | | Death or Disability | | | Termination Without Cause | | | Retirement(1) | |
| | | the number of months elapsed since the start of fiscal 2021; and (C) if the termination occurs in fiscal 2024 or 2025, all RSA shares will fully vest. | | | | | | | | ||||
| Performance Units | | | All of the Performance Units are forfeited to the Company. | | | All of the Performance Units are forfeited to the Company. | | | If Messrs. Duda, Tsoumas or Khoury or Ms. Barry are terminated without cause after the end of fiscal 2021, a prorated number of Performance Units will be eligible to be earned based on the number of months elapsed since the start of fiscal 2021. The number of Performance Units to actually be earned will depend on the Company’s fiscal 2025 EBITDA. | | | A prorated number of Performance Units will be eligible to be earned based on the number of months elapsed since the start of fiscal 2021. If Mr. Duda retires after fiscal 2023, all of his Performance Units will be eligible to be earned. The number of Performance Units to actually be earned will depend on the Company’s fiscal 2025 EBITDA. | |
| Transition Awards | | | Following any change in control, if an executive is terminated without cause or resigns for good reason, the unpaid portion of the transition award will be paid. | | | The unpaid portion of the transition award will be paid. | | | The unpaid portion of the transition award will be paid. | | | The executive must repay any transition award amounts previously paid. | |
(1) | An executive’s qualified retirement occurs at or after age 65, or after age 55 with our consent. Mr. Duda is 65 years old. All of our other named executive officers are between 55 and 65 years old. |
Name | Termination Scenario (on 4/27/18) | Salary and Bonus Severance ($) | Payment of Annual Performance- Based Bonus ($) | Vesting of RSUs ($) | Vesting of RSAs ($)(1) | Health and Welfare Benefits ($)(2) | ||||||||||
Donald W. Duda | Upon Change of Control(3) | — | $ | 660,991 | $ | 3,406,200 | $ | 7,484,400 | — | |||||||
Resignation for Good Reason/Termination Without Cause Following Change of Control(4) | $ | 4,192,161 | — | — | — | 70,203 | ||||||||||
Death or Disability | — | $ | 660,991 | $ | 3,406,200 | $ | 7,484,400 | — | ||||||||
Qualified Retirement | — | $ | 660,991 | $ | 2,043,720 | $ | 4,564,800 | — | ||||||||
Ronald L.G. Tsoumas | Upon Change of Control(3) | — | $ | 155,532 | $ | 624,470 | $ | 1,372,140 | — | |||||||
Resignation for Good Reason/Termination Without Cause Following Change of Control(4) | $ | 802,948 | — | — | — | 47,490 | ||||||||||
Death or Disability | — | $ | 155,532 | $ | 624,470 | $ | 1,372,140 | — | ||||||||
Qualified Retirement | — | $ | 155,532 | $ | 374,682 | $ | 836,880 | — |
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Name | Termination Scenario (on 4/27/18) | Salary and Bonus Severance ($) | Payment of Annual Performance- Based Bonus ($) | Vesting of RSUs ($) | Vesting of RSAs ($)(1) | Health and Welfare Benefits ($)(2) | ||||||||||
Joseph E. Khoury | Upon Change of Control(3) | — | $ | 280,340 | $ | 1,703,100 | $ | 3,742,200 | — | |||||||
Resignation for Good Reason/ Termination Without Cause Following Change of Control | — | — | — | — | — | |||||||||||
Death or Disability | — | $ | 280,340 | $ | 1,703,100 | $ | 3,742,200 | — | ||||||||
Qualified Retirement | — | $ | 280,340 | $ | 1,021,860 | $ | 2,282,400 | — | ||||||||
Theodore P. Kill | Upon Change of Control(3) | — | $ | 43,337 | $ | 1,703,100 | $ | 3,717,900 | — | |||||||
Resignation for Good Reason/ Termination Without Cause Following Change of Control(4) | $ | 742,988 | — | — | — | 24,096 | ||||||||||
Death or Disability | — | $ | 43,337 | $ | 1,703,100 | $ | 3,717,900 | — | ||||||||
Qualified Retirement(5) | — | $ | 43,337 | $ | 1,021,860 | $ | 2,258,100 | — | ||||||||
Andrea J. Barry | Upon Change of Control(3) | — | $ | 189,876 | $ | 238,434 | $ | 515,970 | — | |||||||
Resignation for Good Reason/ Termination Without Cause Following Change of Control(4) | $ | 451,211 | — | — | — | 24,096 | ||||||||||
Death, Disability | — | $ | 189,876 | $ | 238,434 | $ | 515,970 | — | ||||||||
Qualified Retirement | — | $ | 189,876 | $ | 143,060 | $ | 311,598 | — | ||||||||
John Hrudicka | Separation(6) | 746,000 | — | — | — | 16,048 |
| Name | | | Termination Scenario (on 5/1/21) | | | Salary and Bonus Severance ($) | | | Annual Performance Based Bonus ($) | | | Transition Award ($) | | | Vesting of RSUs ($)(1) | | | Vesting of RSAs ($)(1)(2) | | | Vesting of Performance Units ($)(2) | | | Health and Welfare Benefits ($)(3) | |
| Mr. Duda | | | Upon Change of Control(4) | | | — | | | 782,800 | | | — | | | 16,972,500 | | | 3,394,500 | | | — | | | — | |
| Resignation for Good Reason/Termination Without Cause Following Change of Control(5) | | | 3,052,920 | | | — | | | 1,570,000 | | | — | | | — | | | — | | | 51,861 | | |||
| Death or Disability | | | — | | | 782,800 | | | 1,570,000 | | | 16,972,500 | | | 16,972,500 | | | — | | | — | | |||
| Qualified Retirement | | | — | | | 1,565,600 | | | 0 | | | 3,394,500 | | | 3,394,500(6) | | | 0 | | | — | | |||
| Termination Without Cause | | | — | | | — | | | 1,570,000 | | | 0 | | | 0 | | | 0 | | | — | | |||
| Mr. Tsoumas | | | Upon Change of Control(4) | | | — | | | 271,920 | | | — | | | 3,417,130 | | | 0 | | | — | | | — | |
| Resignation for Good Reason/Termination Without Cause Following Change of Control(5) | | | 987,152 | | | — | | | 620,000 | | | — | | | — | | | — | | | 34,574 | | |||
| Death or Disability | | | — | | | 271,920 | | | 620,000 | | | 3,417,130 | | | 3,417,130 | | | — | | | — | | |||
| Qualified Retirement | | | — | | | 543,840 | | | 0 | | | 683,426 | | | 683,426(6) | | | 0 | | | — | | |||
| Termination Without Cause | | | — | | | — | | | 620,000 | | | 0 | | | 0 | | | 0 | | | — | | |||
| Mr. Khoury | | | Upon Change of Control(4) | | | — | | | 345,000 | | | — | | | 6,517,170 | | | 0 | | | — | | | — | |
| Resignation for Good Reason/ Termination Without Cause Following Change of Control(5) | | | 1,100,216 | | | — | | | 805,000 | | | — | | | — | | | — | | | — | | |||
| Death or Disability | | | — | | | 345,000 | | | 805,000 | | | 6,517,170 | | | 6,517,170 | | | — | | | — | | |||
| Qualified Retirement | | | — | | | 690,000 | | | 0 | | | 1,303,434 | | | 1,303,434(6) | | | 0 | | | — | | |||
| Termination Without Cause | | | — | | | — | | | 805,000 | | | 0 | | | 0 | | | 0 | | | — | | |||
| Ms. Barry | | | Upon Change of Control(4) | | | — | | | 201,960 | | | — | | | 2,376,150 | | | 0 | | | — | | | — | |
| Resignation for Good Reason/ Termination Without Cause Following Change of Control(5) | | | 724,166 | | | — | | | 460,000 | | | — | | | — | | | — | | | 51,162 | | |||
| Death or Disability | | | — | | | 201,960 | | | 460,000 | | | 2,376,150 | | | 2,376,150 | | | — | | | — | | |||
| Qualified Retirement | | | — | | | 403,920 | | | 0 | | | 475,230 | | | 475,230(6) | | | 0 | | | — | | |||
| Termination Without Cause | | | — | | | — | | | 460,000 | | | 0 | | | 0 | | | 0 | | | — | | |||
| Mr. Martin | | | Upon Change of Control(4) | | | — | | | 217,800 | | | — | | | 2,285,630 | | | 457,126 | | | — | | | — | |
| Resignation for Good Reason/ Termination Without Cause Following Change of Control(5) | | | — | | | — | | | 365,000 | | | — | | | — | | | — | | | — | | |||
| Death, Disability | | | — | | | 217,800 | | | 365,000 | | | 2,285,630 | | | 2,285,630 | | | — | | | — | | |||
| Qualified Retirement | | | — | | | 343,515 | | | 0 | | | 457,126 | | | 457,126(6) | | | 0 | | | — | | |||
| Termination Without Cause | | | — | | | — | | | 365,000 | | | — | | | — | | | — | | | — | |
(1) |
(2) | For purposes of this table, we have assumed that the target performance level will be achieved with respect to the |
Reflects the estimated lump-sum present value of all future premiums which will be paid on behalf of the executive under our health and welfare benefit plans. |
(4) |
These amounts are in addition to amounts payable under the preceding row “Upon Change of Control.” For the transition awards, assumes the executive is terminated without good cause or voluntarily terminates employment for good reason within two years. |
(6) |
PAY RATIO
For fiscal 2018,
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To identify the median of the annual total compensation of all of our employees, we first determined our employee population as of February 1, 2018. As a global manufacturer, we have2021, which was approximately 7,200 employees in the United States, Mexico, Malta, Egypt, China, Canada,Egypt, India, Belgium, Lebanon,Canada, the United Kingdom, Germany, Italy, Lebanon, the Netherlands, Switzerland, Singapore, France and Hong Kong. As of February 1, 2018, we had 5,679 employees worldwide.
Taiwan. For purposes of identifying the median employee, from our employee population, we considered annual base salary as of February 1, 2018,2021, plus overtime, allowances and short-term incentive compensation for the trailing twelve months, each as reported in our payroll records and adjusted to US dollars based on foreign currency exchange rates in effect as of March 12, 2018.dollars. We did not make any cost-of-living adjustments to the pay of employees living in different jurisdictions than our CEO, but we did include certain adjustments for the annualization of pay for employees who were employed for only part of the period.
Using the above methodology,
The pay ratio andall of our employees (other than Mr. Duda) was $7,532. Our median annual total compensation disclosed above reflectreflects that the bulk of our employees are located in countries that have much lower prevailing wages than the United States.
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Reports
Shareholder
60631.
| | By Order of the Board of Directors, | |
| | ||
| | Walter J. Aspatore | |
Chairman |
Chicago, Illinois
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