policies and best practices that they believe are in the best interest of the Company and our shareholders. Following are some of the practices that have been adopted over time that we believe help us to achieve these goals.
Significant emphasis on performance-based compensation
Use of an independent compensation consultant whose firm does no other work for the Company
Annual benchmarking of compensation mix and levels for executive officers to ensure competitiveness
Use of the TSR metric in the long-term incentive plan to align executive and shareholder interests
Include caps on both the annual incentive plan and the long-term incentive plan
Provide limited perquisites to executive officers
Maintain stock ownership guidelines for our executive officers and non-employee Directors
Established anti-hedging and anti-pledging policies
Recoupment of compensation (“clawback”) policy
Conduct an annual compensation risk assessment
The Compensation Committee
The Committee has the responsibility for determining the compensation paid to the Company’s executive officers. In carrying out its responsibilities, among other things, the Committee does the following:
Ensures there is a clear, reasonable, and logical linkage between executive officer compensation programs and overall Company performance
Considers comparison to the Company’s established Comparator Group and the broader market to ensure appropriate mix and level of competitiveness of compensation
Reviews and approves annual base salary levels, annual incentive plan targets, and long-term incentive plan targets, in alignment with the level and performance of each NEO as well as Company performance and market conditions
Reviews, advises on, and approves new or revised compensation plans
Independent Compensation Consultant
The Committee retains the services of an independent compensation consultant to assist the Committee with the following:
Appraising relevant trends and compensation developments in the market
Providing advice regarding issues such as long-term incentives and change in control arrangements and other topics as needed
Providing Comparator Group analysis
Providing market data for the CEO position and other executive officers
In 2020, the Committee’s compensation consultant was Total Rewards Strategies, LLC (“TRS”).
Management
The Committee considers the recommendations and evaluations of the CEO when setting the compensation of the other executive officers. The Committee generally approves executive officer base salaries at its December meeting, which become effective January 1 of the following year.
Executive officers’ base salaries remain fixed throughout the year unless a promotion, change in responsibilities, or special circumstances occur.
Annual Incentive Awards
Our executive officers participate in our Annual Incentive Plan (“AIP”) which provides for annual cash payments based on the achievement of specific financial goals. As described above, the Company believes that a substantial portion of each executive’s overall compensation should be directly tied to quantifiable measures of financial performance. At the March 2019 Compensation Committee meeting, the Committee approved the Company’s 2019 AIP targets and performance metrics. The AIP targets are expressed as a percentage of the executive officer’s base salary.
For 2019, the structure of our AIP included both consolidated financial performance metrics and, where appropriate, divisional metrics to incentivize specific performance. In addition, there is an individual performance metric for executive officers (excluding Mr. DeGaynor) and other leaders in the Company as a way to incentivize and reward specific strategic and measurable activities that are particular to each leader’s area of responsibility. The individual metrics are considered critical to the achievement of the overall financial and operational metrics. The individual performance metric functions as a multiplier to the overall Weighted Achievement, and can range from 90% to 110%.
The consolidated and divisional financial performance metric targets were established based on our 2019 business plan. The targets were intended to be challenging but achievable based on industry conditions known at the time they were established. Under the 2019 AIP, the threshold level for achievement on the consolidated and divisional financial metrics was based on 80% of target while the maximum level was based on 130% of target.
For each performance metric, specific levels of achievement for threshold, target, and maximum were established. At target, 100% payout is achieved for each element of the plan; at maximum, 200% payout is achieved; and at threshold, 50% payout is achieved. Below the threshold, no incentive is earned on that metric. Threshold achievement on the Operating Income metric is required for the other metrics to pay out above their threshold levels. The AIP incentive compensation payout earned between the threshold and maximum levels is prorated.
The stated objectives of the AIP include retaining key employees and rewarding them for performance aligned with the growth and profitability of Stoneridge. In 2019, there were two external events that impacted Consolidated Operating Income – the General Motors (“GM”) strike and tariffs on Chinese produced components (“China tariffs”). Mr. DeGaynor requested that the Committee consider adjustments to Consolidated Operating Income to exclude the impact of these external events, for the employees other than himself who participate in AIP. The rationale was that these events were outside of management’s control, and the intent was to drive continued motivation and retention of key team members.
The Committee considered the request and used its discretion to approve the adjustments to the 2019 Consolidated Operating Income results to exclude the impact of the GM strike and China tariffs, which were external factors beyond management’s control. Mr. DeGaynor did not receive a payment under the 2019 AIP as the Company’s unadjusted results did not achieve the threshold Consolidated Operating Income.