UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.)
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☒ | Definitive Proxy Statement | |
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☐ | Soliciting Materials Pursuant to § 240.14a-12 |
EMERSON ELECTRIC CO.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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8000 W. Florissant Avenue
St. Louis, MO 63136
I am pleased to invite you to join us at the
At this year’s meeting, we will vote on the election of frequency of such future advisory votes. We will also report on our business and provide an opportunity for shareholders to ask questions. |
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The past year was truly transformative for our company |
YourEmerson delivered strong performance in 2022, exceeding the underlying sales and adjusted earnings per share targets we set at the beginning of the year, with net sales up 8%, underlying sales up 9%, earnings per share up 42% and adjusted earnings per share up 16%.
Our leadership team and Board of Directors executed a series of decisive transactions in 2022 that are reshaping Emerson as a global automation leader. We are guiding our portfolio journey with a clear vision and purpose: to drive significant value creation for our shareholders through a higher value, higher growth and cohesive Emerson. There have been many important steps in our transformation journey, including divesting several non-core businesses and making a number of acquisitions in the last year to bolster our automation capabilities. These strategic actions are transforming the portfolio and will enable Emerson to enhance our end market diversification. Our journey is not complete, however, and we will continue to actively manage our portfolio, including pursuing acquisitions in attractive, high-growth automation markets.
A critical component of our value creation strategy – and an area of accelerated focus for us in 2022 – is our culture. This year, we have built upon our foundation and made great strides to reimagine what it means to be an employee at Emerson. We are creating an environment where everyone feels valued, trusted and empowered. A couple of highlights include work we have done to modernize our talent philosophy and talent management processes. We also implemented a global listening strategy, created remote working guidelines, fostered an inclusive environment through our 12,000-person Employee Resource Group community and identified targets to keep us accountable for building diverse and innovative teams as we continue to grow. We will continue to invest in our culture as we know this is key to unlocking the potential of our employees, driving innovation, executing with excellence and being a best-in-class global automation solutions organization.
I am thankful for the performance of the Emerson team that delivered this transformational year, and I appreciate the support of the Board of Directors who has been instrumental in enabling this transformation.
This is an important moment in the transformation of our company – and every vote is very important. I encourage you toPlease complete, sign and return your proxy card, or use telephone or internet voting prior to the meeting, so that your shares will be represented and voted at the meeting even if you cannot attend. Please see our 2022 Annual Report to Shareholders made available with this Proxy Statement.
On behalf of the Board of Directors and all of us at Emerson, thank you for your ongoing support and commitment.
December 15, 20179, 2022
Sincerely,
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SURENDRALAL (LAL) L. KARSANBHAI
PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
President, Chief Executive Officer and Director
i | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
Notice of Annual Meeting of Shareholders
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DATE AND TIME: | Tuesday, February 7, 2023, 10:00 a.m. CST | |||
| Virtual Meeting website accessible at www.virtualshareholdermeeting.com/EMR2023 | |||
ITEMS OF BUSINESS: |
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| 1. | To elect as Directors the | ||
2. | To ratify the appointment of KPMG LLP as our independent registered public accounting firm. | |||
3. | To approve, on an advisory basis, the compensation of Emerson’s named executive officers. | |||
4. | To | |||
frequency of future advisory votes on executive compensation. 5. To transact other business, if any, properly brought before the meeting. | ||||
WHO CAN VOTE: | Record holders of Emerson common stock at the close of business on November | |||
HOW TO VOTE: | Your vote is important, and we urge you to cast your vote in advance of the meeting by telephone, internet or mailing your completed and signed proxy card or voting instruction form, or | |||
MEETING ADMISSION: | To access the virtual meeting please visit www.virtualshareholdermeeting.com/EMR2023 and enter the 16-digit control number on your notice of internet availability, proxy card, or voting instruction form. Shareholders as of the close of business on November 29, 2022, the record date for the Annual Meeting, or their legal proxy holders may participate in, submit questions, examine the list of shareholders and vote at the Annual Meeting by following instructions on the virtual meeting site. Participants may access the virtual meeting site beginning at 9:45 a.m. Central Time to allow log-in prior to the start of the Annual Meeting at 10:00 a.m., Central Time.
For registered shareholders, the | |||
SHAREHOLDER LIST: | The Company will make a list of shareholders entitled to | |||
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TECHNICAL SUPPORT: | Anyone who has technical difficulties accessing or using the virtual meeting site during the Annual Meeting should call the technical support number on the virtual meeting site. The virtual meeting site is supported on browsers (e.g., Edge, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most updated version of applicable software and plugins. Each participant should ensure strong WiFi or other internet connection. | |||
2022 ANNUAL REPORT AND DATE OF DISTRIBUTION: | For more complete information regarding Emerson, please review the Annual Report to Shareholders and the Company’s Annual Report on Form10-K for the fiscal year ended September 30, |
By order of the Board of Directors, | ||
December | SARA YANG BOSCO | |
St. Louis, Missouri | Secretary |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
Emerson’s Notice of Annual Meeting, Proxy Statement, Form of Proxy, and Annual Report to Shareholders, which includes our Annual Report on Form 10-Kfor the fiscal year ended September 30,
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ii PROXY STATEMENT FOR EMERSON 2018
ii | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
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iii PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
This summary highlights information contained elsewhere in this Proxy Statement and does not contain all of the information you should consider. You should read the entire Proxy Statement before voting.
Annual Meeting
Voting Matters2023 ANNUAL MEETING INFORMATION
For additional information about our Annual Meeting, including instructions on accessing the virtual meeting,
see Questions and Board RecommendationsAnswers beginning on page 59.
Meeting Date Tuesday February 7, 2023 | Meeting Place The Annual Meeting will be | Meeting Time 10:00 a.m. Central Time |
Record Date November 29, 2022 |
Voting Matters | Board Recommendation
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Management Proposals
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Item 1 Election of Directors |
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Item 2 | Ratification of appointment of KPMG LLP as Independent Registered Public Accounting Firm | FOR |
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Item 3 | Approval of named executive officer compensation | FOR |
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Item 4 Frequency of advisory votes on executive officer compensation |
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Casting Your Vote
For the election of Directors, you have the choice of voting “FOR” individual nominees, “AGAINST” individual nominees, or “ABSTAIN” for individual nominees. For proposal two and three, you have the choice to vote “FOR”, “AGAINST” or “ABSTAIN”. For proposal four, you have the choice of whether the vote should occur every one, two or three years, or to abstain on the matter. Whether or not you plan to attend the meeting, please provide your proxy by internet, phone, or by filling in, signing, dating and promptly mailing your proxy card or voting instruction form.
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Attending the Meeting
All attendees must present government-issued photo identification, suchTo access the virtual meeting please visit www.virtualshareholdermeeting.com/EMR2023 and enter the 16-digit control number on your notice of internet availability, proxy card, or voting instruction form. Shareholders as a driver’s licenseof the close of business on November 29, 2022, the record date for the Annual Meeting, or passport.their legal proxy holders may participate in, submit questions, examine the list of shareholders and vote at the Annual Meeting by following instructions on the virtual meeting site. Participants may access the virtual meeting site beginning at 9:45 a.m. Central Time to allow log-in prior to the start of the Annual Meeting at 10:00 a.m., Central Time.
For registered shareholders, the control number can be found on your proxy card or notice of internet availability that you previously received. If you are a shareholder of record, please check the box on your proxy cardbeneficial or “street name” holder and bring thetear-off admission ticket with you. Ifhold your shares are held by someone else (suchthrough an intermediary, such as a broker) please bring a letterbroker, bank or account statementother nominee, you must obtain instructions from that firm showing you were a beneficial holder on November 28, 2017. Failureyour broker, bank or other nominee to provide such identification may resultparticipate in, your exclusion fromsubmit questions, examine the meeting.
1 PROXY STATEMENT FOR EMERSON 2018
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 1 |
PROXY STATEMENT SUMMARY
Our Board of Directors
Nominees and Continuing Directors
The Emerson Board is divided into three classes. You are being asked to vote on the fourthree Director nominees indicated below for the specified terms. The fiveeight continuing Directors were previously elected to three-year terms ending at the Annual Meeting specified. All Directors are independent, except Mr. Farr.Karsanbhai. Please see “Proxy Item No. 1 – Election of Directors” for more information.
AC Audit Committee
CC Compensation Committee
FC Finance Committee
NC Nominating and Corporate Governance Committee
EC Executive Committee
Nominees | ||||||||||||
Martin S. Craighead Former Chairman and Baker Hughes, Inc. Age: 62 Director Since 2019 Committees: CC, NC | Gloria A. Flach Retired Corporate Vice President and COO, Age: 63 Director Since 2017 Committees: CC, EC, FC | Matthew S. Levatich Retired President and Age: 57 Director Since 2012 Committees: AC, FC |
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Mark A. Blinn Former Chief Executive Age: 60 Director Since 2019 Committees: AC, CC |
| Arthur F. Golden Former Sr. Partner,
Director Since 2000
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| Candace Kendle | Retired Chairman and
Age: Director Since 2014 Committees: AC, NC | |||||||||
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| James S. Turley Board Chair, Emerson,
Age: Director Since 2013 Committees: AC, EC, NC |
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| William H. Easter III Former Chairman, Age: 73 Director Since 2020 Committees: CC, FC |
| Surendralal (Lal) L. Karsanbhai President and
Director Since 2021 Committees: EC | Lori M. Lee CEO AT&T Latin America
Age: 57 Director Since Committees: |
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Admiral Joseph W. Prueher, currently an independent Director and a member of the Compensation Committee and Finance Committee, will be retiring from the Board as of the Annual Meeting.
2 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT SUMMARY
2017 Business Highlights
Executive Compensation HighlightsKey Accomplishments
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Shareholder Engagement
We value our shareholders’ perspective on our businesses and each year interact with shareholders and investment analysts through a variety of engagement activities. These include our annual investor conference in February and participation in industry conferences in May and September. In addition, we routinely schedule additional engagement meetings with investors and analysts in various locations around the world, which in 2017 included meetings in New York, Boston, Chicago London and Frankfurt, among other locations. Investors and analysts may schedule meetings with our Director of Investor Relations to request additional information regarding the Company. We reach out to our largest shareholders each year in connection with our Annual Meeting to discuss the matters that will be voted on at the meeting and respond to questions or concerns. Our Investor Relations department can be reached at314-553-2197, investor.relations@emerson.com, or at www.emerson.com, Investors, Investor Resources, Stockholder Information.
3 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT SUMMARY
Named Executive Officer and Director Share Ownership
The following summarizes beneficial ownership of Emerson common stock by our NEOs and Directors as of September 30, 2017. You should refer to the more detailed information under “Ownership of Emerson Equity Securities” on page 57 for additional information about how these amounts are calculated under SEC rules and the ownership of our other executive officers and other information about these shares.
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Announced Net Zero Targets
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Board at A Glance
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Total Board and committee meetings in fiscal 2022 | Attendance by Directors at committee meetings in fiscal 2022
| Attendance by Directors at 12 Board meetings in fiscal 2022 | Director attendance at 2022 Annual Meeting | Average Director Age | Required committees are chaired by women |
Director Skills and Experience
Each member of the Board brings invaluable experience. Below we have highlighted skillsets that will be essential as we continue to transform our culture and portfolio. For a full breakdown of the Board’s skills and each Director’s skills and experience, see “Nominees and Continuing Directors’ Skills and Experience Matrix” on page 47.
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PROXY STATEMENT SUMMARY
Fiscal 2022 Performance Highlights
Significant Progress on Our Portfolio Transformation
Emerson made some of the boldest portfolio moves in our more than 130-year history. Our leadership team and Board of Directors engaged in a series of decisive transactions that are reshaping Emerson as a focused global automation leader.
4 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
PROXY STATEMENT SUMMARY
Environmental, Social & Governance Highlights
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Corporate Governance Highlights
Director Independence |
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•All Board Committees are independent pursuant to requirements of the NYSE and our governance documents
•Regular executive sessions attended bynon-management Directors only | |
Net Zero and GHG Reduction | • Announced Net Zero and greenhouse gas reduction (GHG) targets • Previously appointed the Company’s first Chief Sustainability Officer • Recently announced a goal to reduce our value chain emission by 25% by 2030 • Recently joined RE100 and announced a goal to source 100% renewable electricity by 2030 • Aligned executive compensation with achievement of GHG reduction targets | |
Diversity | • 45% of Directors are women or persons of color • 3 of 5 Named Executive Officers are women or persons of color • Recently aligned executive compensation with achievement of diversity goals at leadership level • Previously appointed the Company’s first Chief People Officer • 6 of 10 members of the Office of the Chief Executive are diverse • Designated portion of charitable giving budget to be directed by employee resource groups • Trained over 25,000 employees on diversity awareness and unconscious bias • 8 employee resource groups with over 12,000 members | |
People and Community | • Recently established Emerson Assistance Fund for employees • Refocused charitable giving to focus on addressing education equity in our communities | |
Three Audit Committee | • The Board has determined that three members of the Audit Committee are Audit Committee Financial Experts under SEC rules | |
Shareholder Responsiveness | • In 2020, we again proposed to amend our Restated Articles to declassify our Board of Directors • In 2018, we proposed to amend our Restated Articles to allow shareholders the right to amend our Bylaws
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Proxy Access Bylaw | •Proactive adoption in 2017 of proxy access for Director nominees
•A shareholder, or group of up to 20, holding 3% of Company stock for 3 years may place a limited number of Director nominees in the Company’s proxy statement for election
• Recently, we further improved our proxy access Bylaw to remove a limitation on the number of proxy access nominees that was based on our classified Board structure | |
Board Refreshment | • Added six new Directors in last six years •Balance of new and continuing Directors, with average tenure for all Directors of 8
•Average Director age of
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Other | •Directors elected by majority voting
•Comprehensive new Director orientation
•No shareholder rights plan or “poison pill”
•Blackout, clawback, pledging and anti-hedging policies
•Director and executive officer stock ownership policies
•Annual
• Amended the Company’s Corporate Governance Principles and Practices to add overboarding limits |
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 5 |
4 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERSDear Fellow Shareholder:
This has been an energizing year to serve on the Emerson Board of Directors as we partnered with President and CEO, Lal Karsanbhai, the leadership team and Emerson employees to tackle a challenging external environment while delivering a truly transformational year. In 2022, Emerson built a strong foundation for long-term success as a global automation solutions provider. As a Board, we have had increased opportunities to work with and guide Lal and the leadership team as they set a long-term strategy, continued shaping Emerson’s portfolio and set ambitious environmental, social and governance (ESG) targets. We have consistently engaged with the team to assess risk as Emerson makes bold, impactful decisions for the future. This past year, the Emerson leadership team outlined and acted on a decisive long-term strategy for value creation – prioritizing organic growth, portfolio management and operational excellence, all while keeping Emerson’s culture and people at the heart of the company. By evolving the company’s strategy, we as a Board have confidence in Emerson’s ability to create higher-value solutions for its customers, drive increased innovation and empower its teams. |
BOARD AND COMMITTEE OPERATIONSThe leadership team continued transforming the Emerson portfolio through both acquisitions and divestitures, such as the transaction with AspenTech to bolster Emerson’s industrial software portfolio and the sale of a majority stake of Climate Technologies, a transaction expected to close in the first half of calendar year 2023. The Board has provided oversight and counsel throughout these transactions, and we have been pleased by the world-class approach to creating a truly cohesive Emerson with a primary focus on global automation solutions.
This year was also pivotal for Emerson as a global citizen as the company outlined new ESG targets and initiatives. ESG is an area of distinct focus for the Board, and we have been proud of the swift progress and new targets Emerson has announced. An important goal – achieving net zero GHG emissions across its value chain (Scopes 1, 2 and 3) by 2045 – was announced in the company’s most recent ESG report.
As a Board, we also continue to advance our commitment to sound governance, ensuring Emerson is managed to the highest standards of ethics and excellence. This past year, we continued our Board refreshment efforts, which included the engagement of an outside consultant to further develop the skills and competencies that are most desirable in new directors and match the company’s portfolio transformation. We will help ensure the right balance of tenure, experience and diversity on our Board to guide Emerson’s journey to become the world’s leading provider of comprehensive automation solutions.
We look forward to our continued collaboration with Lal and the leadership team to go boldly toward the future of Emerson, and we are energized by what the future will offer for all of Emerson’s stakeholders.
On behalf of the Board, thank you for your ongoing trust.
James S. Turley
Chair of Board of Directors, Emerson
6 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
Board and Committee Operations
Board and Corporate Governance
Board Responsibility Overview
The primary responsibility of our Board is to foster ourthe Company’s long-term success. In fulfilling this role, each Director must exercise good faith business judgment in the best interests of Emerson, our shareholders, employees and our shareholders.communities in which we operate. Our Board has responsibility for establishing broad corporate policies, setting strategic direction and overseeing management. Management has responsibility for ourday-to-day operations, implementing these policies and strategic direction, subject to Board oversight.
Governance Principles and Ethics Program
Our Board has adopted the Company’s Corporate Governance Principles and Practices that govern the structure and operations of our Board, Board oversight of management and relations between the Board and our shareholders. In addition, our Board has adopted an ethics program that applies to all Emerson employees and our Directors, and includes an employee codeEmployee Code of conduct,Conduct, supplements that are specifically applicable to our Directors and executive officers, and an additional code of ethics applicable to our Chief Executive Officer, (“CEO”), Chief Financial Officer, Chief Accounting Officer and Controller.
The Company’s Corporate Governance Principles and Practices and each component of its ethics program are available on the Company’s website at www.Emerson.com, Investors, Corporate Governance, Business Ethics. Printed copies of these documents are available to shareholders upon written request to Emerson Electric Co., 8000 West Florissant Avenue, St. Louis, Missouri 63136, Attn: Secretary. The Company intends to satisfy the disclosure requirement under Item 5.05 of Form8-K by posting required informationany amendments and/or waivers to its ethics code at the same location on its website.
The Board of Directors annually reviews its governance policies and practices, taking into account changes in applicable law, trends in corporate governance and input from shareholders.
RecentBoard Role in Environmental, Social & Governance (ESG)
Our ESG and corporate social responsibility strategy is overseen by our Board and its committees as a part of their oversight of our overall strategy and risk management. These efforts are part of a process that is designed to provide the Board timely visibility into the identification, reporting, assessment, and management of ESG issues. The Corporate Governance and Nominating Committee is responsible for assisting the Board in the oversight of the Company’s sustainability strategy, engaging with shareholders on inquiries related to ESG, and establishing principles and policies for ESG, which includes, among other things, the matters covered in the Company’s ESG Report. Our ESG Report (formerly our Corporate Social Responsibility Report) has been published annually since 2015 and these reports are available on our website. Our Audit Committee provides oversight of the integrity of our ESG data in the Company’s disclosures, reviews a summary of the Company’s environmental activities and a summary of anticipated environmental audits and expenditures each year. Our Compensation Committee provides oversight of alignment of management compensation with the Company’s ESG objectives, including diversity, equity and inclusion (DE&I) and GHG emissions reduction targets.
In our business and manufacturing operations around the world, our strategy focuses on efficient use of energy and natural resources to help reduce the intensity of the Company’s GHG emissions. In 2019, we announced a goal to reduce our GHG emissions by 20%, normalized to sales, across our manufacturing and shared services facilities by the year 2028. As part of these efforts, in 2021 we appointed our first Chief Sustainability Officer who is leading the Company and the Environmental Sustainability Steering Committee, comprised of senior-level Emerson executives, to further our environmental sustainability efforts. In 2022, we announced ambitious net zero GHG emissions targets and surpassed our original EHG emissions reduction targets, normalized to sales.
Our human capital management and succession planning, including DE&I initiatives, are important components of our strategy. Attracting, developing, and retaining talent is key to our business and operating results. Nearly half of the members of our current Board of Directors are women or persons of color. We have developed and continue to enhance a robust and comprehensive company-wide talent management program. In 2021, we introduced a diversity goal at our leadership level and evaluate progress in attaining those goals as part of our management’s compensation. We have developed processes to track our progress towards achieving these goals, which are reviewed under the supervision of the Audit Committee. We hired our first Chief People Officer in 2021 to help ensure the Company remains positioned to grow and retain talent now and in the future. To assess and improve employee retention and engagement, the Company surveys employees with the assistance of third-party consultants and takes actions to address areas of employee concern. Over 26,000 employees participated in our most recent surveys and overall gave high scores in our three focus areas: employee engagement, processes and procedures related to COVID-19 and diversity. As part of our DE&I efforts, among other things, the Company has a Diversity Council, comprised of 14 senior-level Emerson executives to advance diversity and inclusion within the company. Over 25,000 employees have completed training modules addressing diversity awareness and unconscious bias. The Company has established the following employee resource groups: Black Employee Alliance, LGBTQ + Allies, Somos (focusing on supporting the Latin Americans and Hispanics at Emerson and in the communities we serve), the Veterans Resource Group, the Women’s Impact Network, the Asian & Pacific Islander Alliance, and Mosaic (focusing on employees working away from their home country). In 2022, we formed a new employee resource group named Diverse Abilities (focusing on encouraging social awareness of perceived impairments and/or disabilities). In addition, we have also amplified our diversity objectives with focus within our communities, including working more closely with Historically Black Colleges and other diverse academic institutions, allocating a portion of our charitable contribution funds to be directed by our employee resource groups.
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 7 |
BOARD AND COMMITTEE OPERATIONS
Highlights of Recent ESG Changes
Our Corporate Governance and Nominating Committee regularly considers a broad range of corporate governance issues and is committed to adopting governance practices that are the most beneficial to the Company and its shareholders. As part of its review process, the Board recently made the following changes to Emerson’s ESG-relatedcorporate governance polices:policies:
Net Zero and GHG Targets. In 2022, we announced ambitious Net Zero GHG emissions targets as well as a goal to reduce our value chain emission by 25% by 2030, aligned with the Science Based Targets initiative (SBTi). Additionally, we joined the RE100 and announced a goal to source 100% renewable electricity by 2030.
Overboarding Policy. In 2022, we amended the Company’s Corporate Governance Principles and Practices to limit all nonemployee Directors to serving on three other boards of publicly traded companies. A Director that is also the CEO of the Company is limited to serving on one other board of a publicly traded company. All other NEOs are limited to serving on one public board.
Independent Board Chair. In 2021, we amended our Bylaws and the Company’s Corporate Governance Principles and Practices to allow for the splitting of the roles of the CEO and the Board Chair and we elected James Turley as our independent Board Chair.
Board Refreshment. To ensure that the Board continues to evolve and be refreshed in a manner that serves the Company’s changing business and strategic needs, six new Directors have joined the Company within the last six years.
Board Diversity. To further advance diverse perspectives on our Board, we have added four diverse Directors in the last five years.
Emphasis on ESG and Corporate Social Responsibility. We recently amended the charter of our Corporate Governance and Nominating Committee to emphasize its role in overseeing important public policy issues and issues of corporate social responsibility, including health, safety and environmental and sustainability policies and reporting. We also formed the Environmental Sustainability Steering Committee to further our environmental sustainability efforts and a Diversity Council to advance diversity and inclusion efforts within the Company. We established numerous employee resource groups to provide support to diverse employees within our Company.
Our Recent Proposals to Declassify Our Board and to Allow Shareholders the Right to Amend Our Bylaws. We recognize that many of our shareholders would prefer a declassified board structure and the right of shareholders to amend bylaws and that these policies are increasingly considered important aspects of good corporate governance. In response to these trends and shareholder requests, we have acted. In 2020, we again asked our shareholders to amend our Restated Articles to declassify our Board of Directors. However, the amendment did not receive the required vote to pass. We made a similar proposal in 2013 with the same result. Similarly, in 2018, we proposed amendments to our Restated Articles providing shareholders the right to amend our Bylaws, but it also did not receive the required approval. We were advised that, based on an analysis of our shareholder base, these proposals would likely not be successful this year. We have discussed this analysis with certain of our larger shareholders. As a result, we are not resubmitting either of these proposals at this year’s Annual Meeting, but we will continue to assess the potential for approval in the future.
Added ESG to Compensation. We consider our progress toward DE&I and GHG reduction goals as part of executive compensation bonus awards.
Proxy Access BylawBylaw.. Amended In 2017, we amended our Bylaws to adopt proxy access, which provides eligible shareholders a process for including their director nominees in the Company’s proxy materials. Proxy access is discussed below at “Corporate Governance and Nominating Committee—Committee — Proxy Access” on page 10.13. In fiscal 2021, we further improved our proxy access Bylaw to remove a limitation on the number of proxy access nominees that was based on our classified Board structure.
Lead Independent Director. Amended our Corporate Governance Principles to provide for a Lead Independent Director, as discussed below in “Board Leadership Structure” on page 6.
• | ESG and Corporate Social Responsibility Reporting. In 2015, at the Board’s direction, we published our first Corporate Social Responsibility Report highlighting the Company’s environmental stewardship, integrity and ethics, corporate governance, political spending and lobbying, human resources and diversity, supply chain practices and community involvement. In 2020, the Company expanded and published its fifth Corporate Social Responsibility (CSR) Report. In 2021, we published our first ESG Report, which expands on the disclosures in our prior CSR Reports. |
Corporate Social Responsibility Reporting.Human Rights.Last We published our Global Human Rights Policy earlier this year, at the Board’s direction, the Company published its first Corporate Social Responsibility Report highlighting the Company’s environmental stewardship, integritywhich addresses our stance on topics including equal opportunity, health and ethics, corporate governance, political spendingsafety, forced labor and lobbying, human resourcestrafficking and diversity, supply chain practices and community involvement. We recently published an updated and expanded report.freedom of association.
We believe these actions are marksindicators of good governance and enhance our accountability to shareholders.
Board Meetings and Attendance
There were eighttwelve meetings of the Board during fiscal 2017.2022. All Directors attended at least 75% of the meetings of the Board and committees on which he or she served. Moreover, Directors had 98% Board meeting attendance and the Directors’ average attendance rate at meetings of the committees on which they served.serve was 98%. Directors are strongly encouraged to attend the Annual Meeting, although the Company has no policy requiring attendance. All of the Directors then in office attended the 20172022 Annual Meeting.
5 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
BOARD AND COMMITTEE OPERATIONS
Board Leadership Structure
The Board believes that it should have the flexibility to determine whether the same person should serve as both Chair and CEO based on what it believes will provide appropriate Company leadership.leadership and deep global industry knowledge. In 2021, the Board determined to separate the roles of the Chief Executive Officer and the Chair of the Board and to elect an independent Chair. The Board believes that itsthis current structure, with Mr. FarrKarsanbhai serving as both ChairCEO and CEOas a Director and Mr. Turley serving as an independent, non-executive Board Chair, is appropriate given Mr. Farr’s past successKarsanbhai’s recent promotion and Mr. Turley’s extensive experience in thesekey Board roles and leadership experience. Consistent with past practice, if those functions are re-combined in the efficiencies of havingfuture, the CEO serve as Chair, the Company’s strong corporate governance structure, including Mr. Stephenson’s strong leadership role asCompany anticipates that it would designate a Lead Independent Director at such time.
8 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
BOARD AND COMMITTEE OPERATIONS
The Board Chair serves an important role in our governance structure with roles and responsibilities specified in the Company’s financial performance under Mr. Farr’s leadership. Corporate Governance Principles and Practices, which includes, among other things:
As part
Presiding at all shareholder and Board meetings, including executive sessions of its leadership structure review, in October 2016 the Board established the Lead Independent Director position to strengthen the independent leadership of the Board. The Lead Independent Director is elected from the independent Directors for a three-year term. Among other things, the Lead Independent Director chairs regularly scheduled meetings ofor non-management Directors reviews
Establishing Board meeting agendas in conjunction with the CEO and information, callsSecretary
Calling Board meetings and meetings of the independent Directors acts
Acting as the Board’s key liaison with the ChairmanCEO and serves onchairs the Board’s executive committee.Executive Committee
Consulting with shareholders as requested by the Company
Engaging in one-on-one meetings with other members of the Board
Each year the Board, through its Corporate Governance and Nominating Committee, reviews its leadership structure to ensure that it remains appropriate for the Company.
Board Role in Company Strategy
One of the Board’s responsibilities is overseeing management’s development and execution of the Company’s strategy. The ChairBoard receives updates from management and CEO consults periodicallyengages with management to understand and monitor business objectives, competitive landscape, economic trends and other developments. The Board looks to the Lead Independent Directorexpertise of its committees, and third-party experts as needed, to inform its oversight responsibilities. The Board was actively engaged in the Company’s recent M&A activities, including the Company’s investment in AspenTech, the sale of a majority interest in its Climate Technologies business and the committee Chairs, all of whom are independent, on Board mattersdecision to exit business operations in Russia and on issues facing the Company. divest Metran.
Board Role in Risk Oversight
The Board has responsibility for oversight of the Company’s risk management process. The Board administers its risk oversight both through active review and discussion by the full Board and by delegating certain oversight responsibilities to one of its committees for further consideration and evaluation of specific risks. Each committee reports to the full Board with respect to the committee’s risk oversight activities on a regular basis. This process is designed to provide to the Board timely visibility into the identification, assessment and management of critical risks. The areas of critical risk include strategic, macroeconomic and operational risks. With respect to the Board’s committees, the Compensation Committee provides oversight for risks associated with its purpose, including, among others, risks related to human capital. The Governance and Nominating Committee provides oversight for risks associated with its purpose, including, among others, risks related to the Company’s reputation, matters of shareholder interest, social issues, laws and regulations. The Audit Committee provides oversight for risks associated with its purpose, including, among others, risks related to financial reporting, compliance with laws and regulations, reputational issues and cybersecurity. The Audit Committee also assists the Board by annually reviewing and discussing with management this process and its functionality. The areas of critical risk include strategic, operational, compliance, environmental, financial and reputational. The full Board, or the appropriate committee, receives this information through updates from management to enable it to understand and monitor the Company’s risk management process.
Shareholder Engagement
We value our shareholders’ perspective on our businesses and each year interact with shareholders and investment analysts through a variety of engagement activities. These engagement activities include our annual investor conference and participation in industry conferences throughout the year. In addition, we routinely schedule additional engagement meetings with investors and analysts in various locations around the world. Investors and analysts may schedule meetings with our Vice President of Investor Relations to request additional information regarding the Company. We reach out to our largest shareholders each year in connection with our Annual Meeting to discuss, among other things, the matters that will be voted on at the meeting, leadership structure, business strategy, financial performance, governance, executive compensation, diversity, sustainability initiatives, and we respond to questions or concerns raised by shareholders. We discuss input provided by our shareholders during these meetings with our full Board, Corporate Governance and Nominating Committee, Compensation Committee, and other Committees of the Board as appropriate. Our Investor Relations department can be reached at 314-553-2197, investor.relations@emerson.com, or at www.Emerson.com, Investors, Investor Resources, Shareholder Information.
Board Composition
Our current Board consists of 10eleven Directors. We have added six new Directors in the last six years.
As required by our Restated Articles of Incorporation, our Board is divided into three classes, with the terms of office of each class ending in successive years. The Directors in one class are elected at each Annual Meeting to serve for a three-year term and until their successors are duly elected and qualified, subject to their earlier death, resignation or removal. Periodically, a Director is elected to a class with a shorter term, or moved into a different class between meetings, to rebalance the classes as a result of the early departure of a Director.classes.
Pursuant to the Company’s Bylaws, a Director may not stand for election after age 72.72 without Board review and assessment. If our Board determines that continued service beyond this period is in the best interests of Emerson and our shareholders, our Board may amend the Bylaws to waive this requirement and allow election to an additionalone-year terms. Adm. Prueher is retiring from term, subject to our classified Board structure and key business issues. In light of his extensive experience and recent addition to our Board, in 2021 we amended our Bylaws to permit Mr. Easter to stand for election at the 2022 Annual Meeting. The Bylaws also permitted Mr. Golden and Dr. Kendle to stand for election to the Board pursuant to this requirement as offor an additional term at the 20182021 Annual Meeting, after which our Board will have nine Directors.Meeting.
We are committed to reviewing our Board’s composition to ensure that we continue to have the right mix of skills, diversity, background and tenure. After Adm. Prueher’s retirement,Our Board retained Spencer Stuart to perform an analysis of the diversityBoard’s composition and tenure composition of our Board will be as follows:its alignment with the Company’s strategic direction.
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 9 |
BOARD AND COMMITTEE OPERATIONS
Our Board’s membership represents a balanced approach to Director tenure, allowing our Board to benefit from the experience of longer-serving Directors as well as the fresh perspectives of newer Directors. The Board is continuouslycontinually seeking out highly-qualified, diverse candidates to add to the range of skills and experiencesexperience represented on our Board.
6 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
BOARD AND COMMITTEE OPERATIONS
Our Directors have a wide range of skills and experience in a variety of professions and industries, including:
DIRECTOR SKILLS AND EXPERIENCE | ||
|
| |
• Global business | • | |
• Financial leadership or expertise | • Technology and innovation | |
• Corporate governance | • Operational leadership | |
• growth areas | • Business development expertise, including |
The specific background, skills and experience of each of our Directors is detailed under Proposal“Proxy Item No. 1 – Election of Directors.
Directors” on page 47. The Corporate Governance and Nominating Committee has the primary responsibility for developing a Director succession plan. The Committee periodically reviews our Board composition and, as further discussed above, identifies the appropriate mix of experiences, skills, attributes and tenure for our Board in light of our Company’s current and future business environment and strategic direction, all with the objective of recommending a group of Directors that can best continue our success and represent our shareholders’ interests. The Committee and our Board are committed to developing a diverse pool of potential candidates for future Board service. In 2022, the Committee retained Spencer Stuart to assist in identifying and evaluating potential candidates.
Other Key Governance Policies
We have adopted corporate governance policies which encourage significant long-term stock ownership and align the interests of our executives with our shareholders. These policies include:
Executive compensation practices that incentivize long-term performance andwith equity compensation using multi-year performance and vesting periods.periods; align executive and shareholder interests and reward for superior performance rather than creating a sense of entitlement and without encouraging excessive or unnecessary risk taking. See “Executive Compensation—Compensation – Compensation Discussion and Analysis” on page 16.19.
Stock ownership guidelines, which that require NEOs to hold stock equal to at least a specified multiple of their base salaries.
Blackout and stock trading policies whichthat require permission to trade in Emerson stock.
Clawback policieswhich, in some cases, that allow us toreduce,to reduce, cancel or recover executiveincentive compensation tied to intentional misconduct that led to a material restatement of our financial statements.statements or in connection with violations of the Company’s ethics and compliance programs and policies, including our Code of Conduct. See “Policies Supporting Our Fundamental Principles” on page 33.
Pledging and anti-hedging policies, which that prohibit certain speculative transactions that are not in alignment with our shareholders. Specifically, our hedging policy prohibits any officer (including any executive officers) and Directors from engaging in transactions to hedge or offset value declines in the value of our stock, regardless of how acquired, such as short selling, put or call options, forward sale or purchase contracts, equity swaps and exchange funds. Our pledging policy prohibits pledging of Company shares as collateral for a loan by Directors or elected officers. See “—Alignment with Shareholder Interests”“Policies Supporting Our Fundamental Principles” on page 22.33.
Review, Approval or Ratification of Transactions with Related Persons
We have developed and implemented processes to obtain and review all transactions and relationships in which the Company and any of our Directors, Director nominees or executive officers, or any of their immediate family members, are participants, and to determine whether any of these individuals have a direct or indirect material interest in any such transaction. Our Corporate Governance and Nominating Committee reviews and provides oversight over related party transactions. Transactions that are determined to be material to a related person are disclosed as required. Pursuant to these processes, all Directors and executive officers annually complete a Director and Executive Officer Questionnaire and a Conflict of Interest Questionnaire that are designed to identify related person transactions and both actual and potential conflicts of interest. We also review the nature and extent of business between the Company and other companies affiliated with our Directors or executive officers. Under the Company’s ethics program, an executive officer is required to immediately disclose all the relevant facts and circumstances of any actual or potential conflict of interest to the Company’s Ethics Committee. If the Ethics Committee determines that there is a conflict, it will refer the matter to the Board of Directors. A Director is required to immediately disclose all the relevant facts and circumstances of any actual or potential conflict of interest to the Board. In each case, the Board will review the matter to make a final determination as to whether a conflict exists, and, if so, the appropriate resolution.
The Company has a written ethics program applicable to all Directors and executive officers of the Company that prohibits Directors and executive officers from entering into transactions, or having any relationships, that would result in a conflict of interest with the Company. Waivers of the ethics program requirements for Directors and executive officers may only be granted by the Board of Directors. The Company’s ethics program documents can be found on the Company’s website at www.Emerson.com, Investors, Corporate Governance, Business Ethics.
7 PROXY STATEMENT FOR EMERSON 2018
10 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
BOARD AND COMMITTEE OPERATIONS
Certain Business Relationships and Related Party Transactions
Based on the review described above, there were no transactions from October 1, 20162021, through the date of this proxy statement, and there are no currently proposed transactions, in which the Company was or is to be a participant, in which the amount involved exceeded $120,000 and in which any of the Company’s Directors, nominees or executive officers or any of their immediate family members, or any beneficial holder of more than 5% of our common stock, either had or will have a direct or indirect material interest.
Director Independence
The Board has determined that all current Directors, other than Mr. Farr,Karsanbhai, are independent, as defined under the general independence standards of the NYSE. W. R. Johnson resignedNew York Stock Exchange (“NYSE”). C. A. H. Boersig retired from the Board in May 16, 2017,at the 2022 Annual Meeting but was determined to be independent while he served. All Directors identified as independent meet the Board adopted independence standards. These standards are included in Appendix A and are available on the Company’s website at www.Emerson.com, Investors, Corporate Governance, Principles & Practices.
In the course of the Board’s independence determinations, it considered any transactions, relationships and arrangements as required by the Company’s independence standards. In particular, with respect to each of the three most recently completed fiscal years, the Board considered for:
Levatich and Stephenson,Lee, the annual amount of sales to Emerson by the company which the Director serves or served as an executive officer, and purchases by that company from Emerson, and determined that in each case the amounts of such sales and purchases in fiscal 20172022 were less than 0.013%0.02% of such other company’s annual revenue and in each year were immaterial and well below the threshold set in the Emerson independence standards.
Turley, the annual amount of contributions by Emerson to charitable organizations for which the Director serves as a director, officer or trustee and determined that such contributions were immaterial, well below the threshold set in the Emerson independence standards, were made through the Company’s normal corporate charitable donation approval process and were not made “onon behalf of”of any Director. For 2017,2022, the amountamounts of such contributions were: Levatich: $3,000 to Northwestern University; Prueher: $2,500were $785,000 to the UniversityMunicipal Theatre Association of Virginia; and Turley: $133,500 (1.33% of total revenue) to the Boy Scouts of America-Greater St. Louis Area Council, $61,000 (0.36% of total revenue) to the St. Louis Municipal Opera Theatre, and $625,000 (3.12% of total revenue)$25,000 to Forest Park Forever. These last threetwo organizations are prominent St. Louis civic organizations to which Emerson, as a St. Louis headquartered company, has provided substantial support for over 30 years, long before Mr. Turley joined the Emerson Board or the boards of these organizations.
Committees of Our Board of Directors
Our Board of Directors has delegated certain of its responsibilities to committees to provide for more efficient Board operations and allow Directors to engage in deeper analysis and oversight in specific areas of importance. The members and Committee Chairs are designated by the Board based on recommendations from the Corporate Governance and Nominating Committee. The Chair of each Committee helps develop the agenda for that Committee and provides a report to our Board on Committee activities. Each Committee annually reviews the adequacy of its Charter and conducts an evaluation of its performance.
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 11 |
BOARD AND COMMITTEE OPERATIONS
Our Board has adopted written Committee charters which are available on our website, www.emerson.com,www.Emerson.com, Investors, Corporate Governance, Committee Charters. The primary responsibilities and membership of each Committee are below:
COMMITTEE | PRIMARY RESPONSIBILITIES AND MEMBERSHIP | |
AUDIT
| The Audit Committee assists the Board in providing oversight of the systems and procedures relating to the integrity of the Company’s financial statements, financial reporting process, systems of internal accounting and financial controls, internal audit process, risk management (including technology and cybersecurity), compliance with legal and regulatory requirements and the independent audit of the annual financial statements. The |
8 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
BOARD AND COMMITTEE OPERATIONS
|
| |
Committee is directly responsible for the appointment, oversight, qualification, independence, performance, compensation and retention of the Company’s independent registered public accounting firm, including audit fee negotiations. The Committee reviews with management major financial risk exposures and the steps management has taken to monitor, mitigate and control such exposures. | ||
The members of the Audit Committee are L. M. Lee (Chair), M. A. Blinn, C. Kendle, M. S. Levatich and J. S. 2022. | ||
COMPENSATION
| The Compensation Committee discharges the Board’s oversight of the Company’s executive compensation program and produces the Committee’s proxy statement report on executive compensation. Among other things, the Committee approves goals and objectives, evaluates performance and sets compensation for the CEO; approves elements of compensation for and oversees the evaluation of certain other officers, including the NEOs; oversees the Company’s equity incentive plans; and monitors the Senior Management Succession Plan.
The current Compensation Committee members are 2022. | |
CORPORATE GOVERNANCE AND NOMINATING
| The Corporate Governance and Nominating Committee oversees the Company’s corporate governance; reviews its governance principles and independence standards; oversees the annual Board and Committee
The members of the Committee are J. B. Bolten (Chair), M. Craighead, C. Kendle 2022. | |
EXECUTIVE
| The Executive Committee exercises Board authority between Board meetings on matters in which specific direction has not been given by the Board, to the extent permitted by law and except for certain specified matters.
The members of the Committee are 2022. | |
FINANCE
| The Finance Committee advises the Board with respect to the Board’s oversight of the Company’s financial affairs, including long-range financing requirements and strategy, capital structure, dividend and share repurchase policies, short-term investment policy and hedging strategies, and retirement plans, as well as Company charitable contributions and the Emerson Charitable Trust.
The members of the Committee are 2022. |
Board and Committee Self-EvaluationsEvaluations
Our Board assesses annually its effectiveness and that of its Committees. All Directors complete a self-evaluationan evaluation form for the Board and for each Committee on which they serve. These forms include numerical ratings for certain key metrics, as well as the opportunity for written comments. The comments provide key insights into the areas Directors believe the Board can
9 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
BOARD AND COMMITTEE OPERATIONS
improve or in which its performance is strong. The self-evaluationevaluation results are reported to the full Board, and each Committee is provided with its Committee evaluation results. The Corporate Governance and Nominating Committee oversees the process. Self-evaluationEvaluation topics include number and length of meetings, topics covered and materials provided, Committee structure and activities, Board composition, including any comments on other members of the Board and their expertise, succession planning, Director participation and interaction with management and promotion of ethical behavior. Our Board discusses the results of each annual self-evaluationevaluation and, as appropriate, implements enhancements and other modifications identified during the self-evaluation.evaluation.
Also as part of the annual self-assessment process, the Chair of the Board meets with each Director individually to solicit peer-to-peer evaluations. The Chair then meets with each Director individually to provide feedback on their performance that was obtained in the peer-to-peer evaluation sessions.
12 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
BOARD AND COMMITTEE OPERATIONS
Corporate Governance and Nominating Committee
Nomination Process
The Corporate Governance and Nominating Committee is primarily responsible for identifying and evaluating director candidates and for recommending re-nomination of incumbent directors. The Committee, which consists entirely of independent directors under applicable SEC rules and NYSE listing standards, regularly reviews the appropriate size and composition of the Board and anticipates vacancies and required expertise. The Committee reviews potential nominees from several sources, including Directors, management, shareholders or others. The Company mayCommittee is also authorized to retain an independent search firmfirms to identify potential director candidates, as well as other external advisors, including for purposes of performing background reviews of potential candidates. The Committee retained Spencer Stuart in 2021 to assist in identifying and evaluating potential nominees. Ms. Flach, who is standing for election for the first time, was recommended by the search firm and by an independent Director.candidates.
In evaluating potential nominees, the Committee considers the knowledge, reputation, experience, integrity and judgment of the candidates, their contribution to the diversity of backgrounds, experience and skills on the Board and their ability to devote sufficient time and effort to their duties as Directors. The Board considers the following experience particularly relevant: manufacturing, global business, in particular in emerging markets and China, business development, technology and innovation, legal, investment banking, acquisitions and finance, government,business development, large company CEO or COO, financial leadership or expertise, corporate governance, operational leadership, industry, end markets and information technology,targeted growth areas, as well as experience on the boards of other major organizations. The Company’s Corporate Governance Principles and Practices set forth the minimum qualifications for nominees. Candidates are interviewed multiple times by the Chair of the Board, the CEO, the Chair of the Corporate Governance and Nominating Committee and other members of the Board to ensure that candidates not only possess the requisites skills and characteristics, but also the personality, leadership traits, work ethic, and independence of thought to effectively contribute as a member of the Board. The best candidates are then recommended by the Committee to the Board.
To ensure that the Board continues to evolve and be refreshed in a manner that serves the Company’s changing business and strategic needs, before recommending for re-nomination a slate of incumbent directors for an additional term, the Committee also evaluates whether incumbent directors possess the requisite skills and perspective, both individually and collectively. This evaluation is based primarily on the results of the periodic review the Committee performs of the requisite skills and characteristics of Board members, as well as the composition of the Board as a whole, and the results of the Board’s annual evaluation.
The Board’s policy is to seek qualified candidates. In evaluating candidates, the most qualified candidates without regard toCommittee will consider diversity criteria such as race, ethnicity, gender, cultural background, national origin, religion, disability, age or sexual orientation. However, in evaluating candidates the Committee will consider these diversity criteria. The Board seeks to maintain a balance of perspectives, qualities and skills on the Board to obtain a diversity of viewpoints to better understand the technical, economic, political and social environments in which the Company operates. ExistingThe Board is committed to using refreshment opportunities to strengthen its cognitive diversity. To accomplish this, existing Board members and outside agencies are required to recommend candidates to further these policy objectives. The Board’s success on these objectives is measured by the range of viewpoints represented on the Board.
The Committee will consider candidates recommended by shareholders if required biographical information is properly submitted as described in “Other Matters—Matters – Future Shareholder Proposals and Nominations” aton page 62 below.61. Properly submitted shareholder recommendations are sent to the Committee and will receive the same consideration as others identified to the Committee.
The Company’s Bylaws permit shareholders to nominate Directors at an annual meeting of shareholders or at a special meeting at which Directors are to be elected. The procedures for making such nominations are discussed in “Other Matters—Matters – Future Shareholder Proposals and Nominations” beginning on page 62.61.
Director Orientation and Continuing Education
Our orientation process familiarizes new Directors with the Company’s businesses, operational strategy, and policies to optimize their Board service in their assigned committees. New Directors receive an extensive suite of onboarding materials which addresses topics including director roles and responsibilities, corporate governance policies and procedures, leadership structure, and Company strategy. We encourage our Directors to engage in continuing education to help ensure our Directors maintain a deep and up-to-date understanding of the critical issues and corporate governance developments relating to the operation of public company boards. We also provide Directors with access to director education programs provided by third parties.
Proxy Access
In 2017, the Board amended the Company’s Bylaws to permit up to 20 shareholders owning in the aggregate at least 3% of the Company’s outstanding common stock continuously for at least three years to nominate and include in the Company’s proxy materials director nominees constituting up to the greater of two individuals or 20% of the Board, provided that the nominating holders and the nominees satisfy the requirements specified in the Bylaws, including providing the Company with advance notice of the nomination. For more information on how to submit a nominee for inclusion in Company proxy materials pursuant to these provisions, see “Other Matters—Matters – Future Shareholder Proposals and Nominations” on page 62 below.61.
In fiscal 2021, the Board amended the Company’s proxy access Bylaw to remove a limitation relating to our classified board structure. The limitation provided that as long as we maintained a classified Board, the maximum number of proxy access nominees in a year could not exceed one-half of the number of Directors to be elected at that annual meeting.
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 13 |
BOARD AND COMMITTEE OPERATIONS
Director Compensation
Processes and Procedures for Determination of Director Compensation
The Corporate Governance and Nominating Committee annually reviews compensation practices for the Company’s Directors and makes recommendations to the Board regarding the form and amount of compensation for determination by the Board. To assist the Committee in performing these duties, management engages an outside consultant to prepare a director compensation analysis and to make recommendations. Based on this analysis, management makes recommendations
10 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
BOARD AND COMMITTEE OPERATIONS
regarding Director compensation for the Committee’s consideration. Frederic W. Cook & Co. prepared this analysis for fiscal 2017. No changes2022. Changes were recommended by management orand the Committee orand made by the Board.
Director Compensation Program
Eachnon-management Director is paid an annual retainer comprised of cash and equity in cash and/orthe form of restricted stock or restricted stock units (RSUs)(“RSUs”), as well as meeting fees and reimbursement of expenses. The Lead Independent DirectorBoard Chair and each Committee Chair receive an additional cash retainer. Mr. FarrKarsanbhai does not receive any additional compensation for service on the Board. In fiscal 2017,2022, the Director compensation program provided for the following payments:
Type | Amount | |
Annual Cash Retainer | $ | |
Restricted Stock or RSU Retainer | $ | |
| $ | |
Committee Chair Retainers | Audit and Compensation Finance and Corporate Governance & Nominating | |
Meeting Fees |
|
Effective October 1, 2021, the cash portion of the annual retainer was increased to $140,000, the annual restricted stock or RSU retainer was increased to $175,000 and meeting fees were eliminated for the first 24 Board or Committee meetings per year.
Emerson’s Director Stock Ownership Policy generally requiresnon-management Directors to hold stock equal to five times annual cash compensation.compensation, subject to a phase-in policy for new Directors. Ournon-management Directors generally are required to hold all restricted stock and RSUs until retirement.retirement from our Board. The awards generally do not vest until the last day of a Director’s term after the age of 72, or earlier death, disability or a change of control of the Company. If a Director’s tenure on the Board ends for any other reason, the vesting of the award is at the discretion of the Committee. If the restrictions on the awards do not lapse, the awards are forfeited to the Company. Restricted stock includes both dividend and voting rights. Dividend equivalents are paid on RSUs, which do not have voting rights.
Directors may defer all or a part of their cash compensation under the Company’s Deferred Compensation Plan forNon-EmployeeNon-employee Directors. Directors may also defer payment of the dividend equivalents on RSUs. Deferred amounts are credited with interest quarterly at the Bank of America prime rate. Under SEC rules, interest on deferred amounts is considered above-market if the rate of interest exceeds 120% of the applicable federal long-term rate. During fiscal 2017,2022, the applicable prime rate ranged from 3.5%3.25% to 4.25%6.25%, while 120% of the applicable federal long-term rate ranged from 2.32%2.07% to 3.34%3.95%. A. F. Golden and R. L. Stephenson participated in this deferral program during fiscal 20172022 and above-market earnings on theirhis deferred amounts are set forth in the Director Compensation Table. All deferred amounts are payable in cash.
As part of the Company’s charitable contributions practice, the Company may, in the Board’s discretion, make a charitable contribution in the names of Emerson and a Director (including management Directors) upon retirement from the Board (as determined by the Board), taking into account the Director’s Board tenure, accomplishments, and other relevant factors.
The table below sets forthnon-management Director compensation for fiscal 2017.
Director Compensation
Name(1)
| Fees Earned or Paid in Cash ($)
| Stock Awards ($)(2)(3)
| Change in Pension Value and Nonqualified Deferred
| All Other Compensation ($)(5)
| Total ($)
| |||||||||||||||
C. A. H. Boersig
|
| 142,000
|
|
| 139,960
|
|
| —
|
|
| 10,000
|
|
| 291,960
|
| |||||
J. B. Bolten
|
| 139,000
|
|
| 139,960
|
|
| —
|
|
| 5,000
|
|
| 283,960
|
| |||||
G. A. Flach
|
| 49,166
|
|
| 104,953
|
|
| —
|
|
| —
|
|
| 154,119
|
| |||||
A. F. Golden
|
| 118,000
|
|
| 139,960
|
|
| 22,511
|
|
| 10,000
|
|
| 290,471
|
| |||||
W. R. Johnson(6)
|
| 83,168
|
|
| 139,960
|
|
| —
|
|
| —
|
|
| 223,128
|
| |||||
C. Kendle
|
| 119,500
|
|
| 139,960
|
|
| —
|
|
| —
|
|
| 259,460
|
| |||||
M. S. Levatich
|
| 128,500
|
|
| 139,960
|
|
| —
|
|
| 10,000
|
|
| 278,460
|
| |||||
J. W. Prueher(7)
|
| 127,000
|
|
| 139,960
|
|
| —
|
|
| 10,000
|
|
| 276,960
|
| |||||
R. L. Stephenson
|
| 160,667
|
|
| 139,960
|
|
| 12,962
|
|
| —
|
|
| 313,589
|
| |||||
J. S. Turley
|
| 144,000
|
|
| 139,960
|
|
| —
|
|
| 5,000
|
|
| 288,960
|
|
11 PROXY STATEMENT FOR EMERSON 2018
14 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
BOARD AND COMMITTEE OPERATIONS
The table below sets forth non-management Director compensation for fiscal 2022.
Director Compensation Table
Name(1) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(2)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||||
Mark A. Blinn | 140,000 | 174,936 | — | — | 314,936 | |||||||||||||||
Clemens A. H. Boersig(6) | 46,667 | — | — | — | 46,667 | |||||||||||||||
Joshua B. Bolten | 160,000 | 174,936 | — | 10,000 | 344,936 | |||||||||||||||
Martin S. Craighead | 140,000 | 174,936 | — | — | 314,936 | |||||||||||||||
William H. Easter III | 140,000 | 174,936 | — | — | 314,936 | |||||||||||||||
Gloria A. Flach | 165,000 | 174,936 | — | — | 339,936 | |||||||||||||||
Arthur F. Golden | 160,000 | 174,936 | 36,640 | 10,000 | 381,576 | |||||||||||||||
Candace Kendle | 140,000 | 174,936 | — | 5,000 | 319,936 | |||||||||||||||
Lori M. Lee | 162,917 | 174,936 | — | 4,400 | 342,253 | |||||||||||||||
Matthew S. Levatich | 140,000 | 174,936 | — | 10,000 | 324,936 | |||||||||||||||
James S. Turley | 344,166 | 174,936 | — | — | 519,102 |
(1) | Mr. |
(2) | On February |
(3) | The total number of shares of restricted stock held by each of thenon-management Directors at September 30, |
(4) | Includes above-market earnings for fiscal |
(5) | Includes Company matching contributions under the Company’s charitable matching gifts program, which matches charitable gifts of up to $10,000 for all employees and Directors of the Company. |
(6) | Mr. |
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 15 |
BOARD AND COMMITTEE OPERATIONS
Report of the Audit Committee
The Audit Committee (“Committee”) assists the Board in providing oversight of the systems and procedures relating to the integrity of the Company’s financial statements, the Company’s financial reporting process, its systems of internal accounting, financial and reporting controls, the performance of the internal audit process,function, risk management, the independent audit process of the Company’s annual financial statements and the Company’s compliance with legal and regulatory requirements. Management is responsible for these processes.
The Audit Committee reviews with management the Company’s major financial risk exposures and the steps management has taken to monitor, mitigate and control such exposures. Additionally, the Committee provides oversight of the Company’s processes for managing cybersecurity risk, including the Company’s framework for preventing, detecting, and addressing cybersecurity, and processes and metrics related to our management of human capital and our stated diversity goals. An independent third party is used to audit our systems and processes for alignment with ISO 27001.
Management has the responsibility for the implementation of these activities. In fulfilling its oversight responsibilities, the Committee reviewed and discussed with management the audited financial statements in the Company’s Annual Report on Form10-K for the fiscal year ended September 30, 2017,2022, including a discussion of the quality and the acceptability of the Company’s financial reporting and controls. The Committee also reviews the Company’s quarterly earnings press releases and reports on Form10-Q prior to distribution and filing.
The Company’s independent registered public accounting firm is responsible for expressing an opinion on the conformity of those audited financial statements with U.S. generally accepted accounting principles and on the effectiveness of the Company’s internal control over financial reporting. The Committee reviewed with the independent registered public accounting firm the firm’s judgments as to the quality and the acceptability of the Company’s financial reporting and such other matters as are required to be discussed with the Committee under auditing standardsby the applicable requirements of the PCAOB, includingPublic Company Accounting Oversight Board (“PCAOB”) and the matters required to be discussed by PCAOB Interim Auditing Standard AU Section 380, Communication with Audit Committees.Securities and Exchange Commission. In addition, the Committee has discussed with the independent registered public accounting firm the firm’s independence from management and the Company, including the impact of nonaudit-relatednon-audit related services provided to the Company and the matters in the independent registered public accounting firm’s written disclosures required by Rule 3526the applicable requirements of the PCAOB, as may be modified or supplemented.PCAOB.
The Committee also discussed with the Company’s internal auditors and the independent registered public accounting firm in advance the overall scope and plans for their respective audits, including timing, risk assessments, locations and coverage,
12 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
BOARD AND COMMITTEE OPERATIONS
and any reliance by the external auditors on work performed by the internal auditors. The Committee meets at least quarterly with the internal auditor and the independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s accounting and financial reporting.
The Committee is directly responsible for the appointment, oversight, qualification, independence, performance, compensation and retention of the Company’s independent registered public accounting firm, including audit fee negotiations and approval. The Committee has evaluated whether retaining KPMG LLP (KPMG) as the Company’s independent auditor for the year is in the best interest of Emerson and its shareholders. The CompanyCommittee considers whether KPMG’s known legal risks include involvement in proceedings that could impair their ability to perform the annual audit, and reviews historical and proposed KPMG fees charged to the Company.
In performing its review, the Committee also considers the quality, candor and effectiveness of KPMG’s communications with the Committee and management; how effectively KPMG maintained its independence as demonstrated by exercising judgment, objectivity and professional skepticism; reports of the U.S. Public Company Accounting Oversight BoardPCAOB; and other available data regarding the quality of work performed by KPMG; KPMG’s long tenure and experience as the Company’s auditor, and the geographic reach and expertise of KPMG to address the demands placed on an auditor by the global breadth and complexity of Emerson’s business in terms of quantity, quality and location of staff.
The Committee also considers whether, to assure continuing auditor independence, there should be rotation of the independent registered public accounting firm.
The Committee is responsible for the selection of the lead engagement partner, and as required by law, assures rotation of the lead partner every five years. When appropriate, KPMG provides a list of candidates for the role of lead engagement partner, who are then interviewed by members of senior management. The Committee considers their recommendations and those of KPMG leadership, evaluates the candidate’s qualifications, strengths and weaknesses and selects the lead engagement partner.
In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form10-K for the fiscal year ended September 30, 20172022, for filing with the Securities and Exchange Commission. In accordance with its Charter, the Committee has reappointed KPMG LLP as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for fiscal 2018,2023, based on their overall qualifications, objectivity, significant experience and understanding of the Company’s operations, and their ability to deploy resources to match Emerson’s global operations.
Audit Committee
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BOARD AND COMMITTEE OPERATIONS
Fees Paid to KPMG LLP
Fees paid to KPMG LLP, the Company’s independent registered public accounting firm:
$ in millions | 2021 | 2022 | ||||||
Audit Fees | $ | 20.4 | $ | 25.6 | ||||
Audit-Related Fees | 1.4 | 9.8 | ||||||
Tax Fees | 0.3 | 0.3 | ||||||
All Other Fees | — | — | ||||||
Total KPMG LLP Fees | $ | 22.1 | $ | 35.7 |
Audit Fees primarily represent the cost for the audit of the Company’s annual financial statements, reviews of quarterly SEC filings and statutory audits at non-U.S. locations. This includes $4.1 million of fees for AspenTech, which is a majority owned subsidiary of the Company.
Audit-Related Fees are primarily attributable to audit procedures related to potential divestitures, acquisition and divestiture due diligence, audits of employee benefit plans and statutory filings.
Tax Fees are related to tax compliance services.
The Audit Committee approved in advance all services provided by KPMG LLP. The Audit Committee’s pre-approval policies and procedures are included within the Audit Committee Charter, which can be found on the Company’s website at www.Emerson.com, Investors, Corporate Governance.
The Compensation Committee operates under a written charter that details the Committee’s authority, composition and procedures. The Committee may delegate authority with respect to specific matters to one or more members, provided that all decisions of any such members are presented to the full Committee at its next meeting.
For fiscal 2022, the Compensation Committee reviewed management’s process for assessing risk in the Company’s compensation programs, policies and practices for its employees, including the Company’s executive compensation program and practices. The Committee accepted the result of these reviews that our compensation programs, policies and practices do not create risks that are reasonably likely to have a material adverse effect on our business. See “Our Compensation Best Practices” on page 23 and “Policies Supporting our Fundamental Principles” on page 33 for additional information.
Role of Executive Officers and the Compensation Consultant
Executive Officers
As described in “Compensation Discussion and Analysis – Setting Annual Total Compensation” on page 25, our CEO makes recommendations to the Compensation Committee based on management input regarding total compensation of the other executive officers. Management also develops and presents to the Committee design recommendations for compensation programs.
The Compensation Committee has unrestricted access to management and may request the participation of management or the Committee’s independent consultant at any meeting or executive session. Committee meetings are regularly attended by the CEO, except for executive sessions and discussions of his own compensation, Senior Vice President and Chief People Officer, who leads some of the discussions regarding the Company’s compensation programs, and the Committee’s independent consultant. The Committee regularly reports to the Board on compensation matters and annually reviews the CEO’s compensation with the Board in executive sessions of non-management Directors only.
Compensation Consultant
The Compensation Committee has sole discretion, at Company expense, to retain and terminate compensation consultants, independent legal counsel or other advisors, including sole authority to approve their fees and retention terms. Any Committee member may request the participation of independent advisors at any meeting. The Committee has engaged Exequity LLP (Exequity) as its independent consultant. Exequity reports directly to the Committee and performs services as directed by the Committee. In 2022, Exequity reviewed our comparator group companies, the compensation of our CEO and the other NEOs and a pay for performance analysis. Management engages Frederic W. Cook & Co. from time to time to assist with executive compensation program design and competitive pay analysis as well as director compensation analysis. The Committee reviews this information in determining compensation for the NEOs. Neither Exequity nor Frederic W. Cook & Co. provides any other services to the Company. See also “Competitive Market Information” on page 24.
BOARD AND COMMITTEE OPERATIONS
Compensation Committee Report
The Compensation Committee of the Board of Directors acts on behalf of the Board to establish and oversee the Company’s executive compensation program in the interests of the Company and its shareholders. For a discussion of the Compensation Committee’s policies and procedures, see “Compensation” on page 12, “Compensation Committee” on page 17 and “Role of Our Compensation Committee” on page 21.
Management of the Company has prepared the Compensation Discussion and Analysis describing the Company’s compensation program for senior executives, including the NEOs. See “Compensation Discussion and Analysis” beginning on page 19. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis for fiscal 2022 with the Company’s management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement for its 2023 Annual Meeting of Shareholders.
Compensation Committee
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Compensation Committee Interlocks and Insider Participation
The functions and members of the Compensation Committee are set forth above under “Compensation” on page 12. All Committee members are independent and none of the Committee members has served as an officer or employee of the Company or a subsidiary of the Company. During fiscal 2022, no member of the Committee and no other Director was an executive officer of another company on whose compensation committee or board any of our executive officers served.
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18 | PROXY STATEMENT FOR EMERSON
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Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes the compensation programs and practices regarding our Named Executive Officers (“NEOs”) for the 2022 fiscal year. Our NEOs for fiscal 2022 included our Chief Executive Officer, Chief Financial Officer and the next three most highly compensated officers, listed below:
NEO NAME | NEO TITLE | |
Surendralal (Lal) L. Karsanbhai | President & Chief Executive Officer | |
Frank J. Dellaquila | Senior Executive Vice President and Chief Financial Officer | |
Ram R. Krishnan | Executive Vice President and Chief Operating Officer | |
Mark J. Bulanda | Executive President Automation Solutions | |
Sara Y. Bosco | Senior Vice President, Secretary and General Counsel |
Executive Summary
At Emerson, our goal is to attract and retain talented executives who deliver value to our shareholders through the achievement of the Company’s specific business objectives, such as consistent growth in earnings per share, cash flow and return on investments. Our executive compensation program and overall pay for performance philosophy align with that goal and drive our results.
In fiscal 2022, the Company took decisive steps to position Emerson as a leading global automation company. In addition to the significant progress made in our portfolio transformation, the Company continued to advance its culture evolution, expanded its industrial software capabilities and continued its strong operational execution.
Fiscal 2022 Performance Highlights
66 Consecutive years of increased dividends to shareholders
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Strong and consistent financial performance despite a challenging external environment for the Company and the essential industries we serve
Net sales of $19.6 billion, an 8% increase year-over-year, with underlying sales up 9%
Earnings per share increased 42% to $5.41, with adjusted earnings per share up 16% to $5.25
Pre-tax margin up 480 basis points and adjusted EBITA up 180 basis points
Operating cash flow of $2.9 billion and free cash flow of $2.4 billion
Executive Summary of Fiscal Year 2017
Fiscal 2017 was a pivotal year for Emerson. The year began with the completion of the Company’s strategic portfolio repositioning plan, which was announced in late fiscal 2015, followed closely by the closing of the acquisition of the Pentair valves & controls business. With our repositioning completed, we reshaped our remaining businesses into two global franchises, Automation Solutions and Commercial & Residential Solutions and restructured our corporate services consistent with the new structure. With this new structure, we focused on strengthening our core businesses, serving our customers in new and innovative ways, increasing revenue and expanding margins, and capitalizing on improving global economic conditions, especially in the markets in which we operate. We also focused on aggressively integrating the valves & controls business to realize the expected synergy gains from the acquisition. The combination of these actions helped lead to Emerson’s return to growth in fiscal 2017, allowing the Company to increase profitability and return significant amounts of cash to shareholders, and positioned Emerson to drive sales, earnings and cash flow growth through the next phase of the economic cycle.
Sales were up 5 percent. Underlying sales were up 1 percent, with acquisitions, primarily valves & controls, adding 4 percent. Earnings per share from continuing operations were $2.54, up 4 percent, including approximately $0.10 for first year acquisition accounting charges relating to valves & controls which deducted 4 percentage points. Excluding the first-year accounting charges related to the acquisition of the valves & controls business, earnings per share from continuing operations were $2.64, up 8 percent. Earnings per share, which includes discontinued operations, were $2.35, a decline of 7% versus $2.52 in 2016. Gross profit margin was 42.0%, a decrease of 1.1 percentage points versus 2016, primarily due to dilution and charges relating to the valves & controls acquisition.
Operating cash flow from continuing operations of $2.7 billion increased 8% from $2.5 billion in 2016. Free cash flow from continuing operations was $2.2 billion, excluding capital expenditures of $476 million, an increase of 8 percent from 2016. The Company returned $1.6 billion of cash to shareholders through dividends and share repurchases. The Company increased its annual dividend for fiscal 2017 to $1.92 per share from $1.90 per share in the prior year—its 61st consecutive year of increased dividends. The first quarter 2018 dividend was increased to $0.485 ($1.94 annual rate).
The Committee believes Emerson’s overall pay for performance philosophy and the primary elements of its compensation program align with the Company’s results described above. Taking into account the successful completion of the strategic repositioning efforts, the acquisition and progress on integrating the valves & controls business and the Company’s financial performance, the Committee’s key executive compensation decisions for fiscal 2017 were as follows:
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PROXY STATEMENT FOR EMERSON | 19 |
EXECUTIVE COMPENSATION
Purpose Driven - Culture, Portfolio and Execution
At Emerson, our Purpose is to drive innovation that makes the world healthier, safer, smarter and more sustainable. Our Purpose builds on and is supported by our foundational Values of Integrity, Collaboration, Safety & Quality, Continuous Improvement, Customer Focus, Innovation and Support Our People. In this transformative time for our Company, through portfolio reshaping and continued global economic and social obstacles and challenges, we are focused on strategically driving the Company forward through three priority areas: Culture, Portfolio and Execution. We want to continue to build upon our legacy and advance our business with intention and purpose and reinforce a strong future of Emerson for our employees, communities, customers, shareholders and valued partners.
Culture
We believe that strengthening the foundation of our culture by continuing our focus on our people will make our Company more collaborative, innovative and successful. We are committed to enabling a culture where everyone feels valued, trusted and empowered and continuing to integrate environmental, social and governance (ESG) priorities, including as part of our total compensation discussions and programs. In June 2022, the Company published its most recent ESG report. That report outlines the Company’s ESG plans and goals, which include specific net zero and DE&I goals. We also implemented a global listening strategy, created remote working guidelines, and fostered an inclusive environment through our more than 12,000-person Employee Resource Group community. Further, in determining fiscal year 2022 annual bonuses, the Compensation Committee considered the Company’s progress in our announced GHG and DE&I goals.
Portfolio
In fiscal 2022, the Company accelerated critical portfolio changes at a scale that is unprecedented in its recent history. These portfolio changes (below) are reshaping the Company into a focused automation leader. The Company expects these actions to deliver higher growth and a cohesive portfolio.
Completed the combination of the Company’s industrial software businesses – OSI Inc. and its Subsurface Science and Engineering business – with AspenTech to create a global industrial software leader, of which Emerson owns a 55% interest
Approved the pending acquisition of Micromine by AspenTech
Completed the acquisition of Fluxa, a life sciences software provider to help customers accelerate the speed to market for new therapies, drugs and vaccines
Completed the acquisition of Mita-Teknik, a leader in the control automation business for renewable power
Completed the sale of Therm-O-Disc
Completed the sale of the InSinkErator (closed in October 2022)
In October 2022, the Company announced an agreement to sell a majority stake in its Climate Technologies business to a joint venture with Blackstone. This is a key step in the Company’s transformation into a focused automation leader, and the Company expects that it will lead to additional strategic investments in automation markets.
Execution
The Company’s financial performance highlighted its strong focus on execution as it navigated the impact of the global pandemic, geopolitical challenges, supply chain disruptions, labor shortages and inflation. The Company delivered 8% net sales and 9% underlying sales growth, a 42% earnings per share, 16% adjusted earnings per share increase, operating cash flow of $2.9 billion, free cash flow of $2.4 billion, and 90% operating cash flow conversion with 98% adjusted free cash flow conversion. Through this transformative year, the Company also continued to reinvigorate its organic growth engine through innovation and commercial excellence programs. The Company’s portfolio actions position it to be a more focused automation company that is accelerating key growth initiatives such as industrial software enablement, energy transition readiness and end-market diversification.
20 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
EXECUTIVE COMPENSATION
Pay for Performance Fundamental Principles
Our executive compensation program is based on a consistent set of key principles that directs compensation decisions and communicates to participants the Company’s Purpose, core Values, critical business strategies and performance objectives. These principles guide the performance objectives that drive strong results to maximize shareholder value, make Emerson a good global citizen, enhance critical capabilities for us and our customers and encourage career-long commitments to the Company.
These fundamental compensation principles include:
Maximizing shareholder value by allocating a significant percentage of compensation to performance-based pay that is dependent on achievement of the Company’s performance goals, without encouraging excessive or unnecessary risk taking;
Aligning executive and shareholder interests by providing long-term stock-based incentives as a significant portion of total compensation;
Attracting and retaining talented executives by providing competitive compensation and career-growth opportunities; and
Rewarding overall corporate results while recognizing individual contributions.
Shareholder Engagement and Compensation Program Benchmarking We engage with and value the feedback of our shareholders on the components of our executive compensation program. We also regularly engage with our independent compensation consultants and other industry groups to work to ensure that we are continually reviewing and evolving our compensation programs with competitive market standards. We share feedback received on our compensation programs and market practices with our Compensation Committee. Our Compensation Committee carefully considers the long-term interests of the Company and our shareholders when making decisions regarding our compensation programs. Emerson’s shareholders again expressed strong support for our executive compensation program at our 2022 Annual Meeting, with a vote of nearly 89% in support. |
Role of Our Compensation Committee
Our Compensation Committee acts on behalf of our Board to establish our compensation philosophy and oversee our executive compensation program. The current members of our Compensation Committee are Gloria A. Flach (Chair), Mark A. Blinn, Martin S. Craighead and William H. Easter III. Pursuant to its Charter, which can be found on our website at www.Emerson.com, our Committee is responsible for:
Compensation Responsibilities | Organizational/Talent Responsibilities | |
• Reviewing and approving compensation of our CEO, NEOs and other executive officers
• Reviewing and approving all compensation plans and aggregated payouts • Reviewing CEO compensation with non-management members of the Board • Designating comparator group companies to determine competitive market pay ranges • Establishing performance objectives and benchmarks for performance-based incentive programs • Monitoring NEO stock ownership • Approving all executive benefit plans | • Evaluating CEO’s performance • Reviewing and discussing performance and leadership potential of NEOs and other executive officers with the CEO • Working with the CEO on succession planning for executive management and our next generation of leaders |
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 21 |
EXECUTIVE COMPENSATION
Compensation Mix
In determining the total compensation of each of our NEOs, the Compensation Committee balances the compensation mix considering the executive’s level of responsibilities, leadership and career potential, individual performance and service with the Company, with the objective of achieving a high and sustainable level of Company and individual performance. At-risk compensation (annual cash bonus and performance shares) increases as responsibilities increase and generally makes up 75% or more of the total compensation mix for our NEOs. Total compensation is targeted to the median market range of our compensation comparator group.
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Base Salary | Reflects specific job responsibilities and
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Performance Shares | Supports achievement of long-term strategic operating goals, such as consistent and sustained
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Restricted Stock | Supports succession planning, critical retention and key leadership development efforts
• Used only in special situations without any set frequency or value level
• Cliff vests no sooner than 3 years and generally 5 to 10 years |
Key Compensation Decisions in Fiscal 2022
Awarded annual cash bonuses for fiscal 2022 to all NEOs and utilized an ESG performance modifier based on the achievement of ESG targets in support of our publicly disclosed leadership representation and GHG goals
Recently introduced changes to our annual cash bonus program to incorporate objective targets for fiscal 2023 cash bonuses. These targets are metrics-based both on financial and ESG targets: GHG emissions reductions and diversity targets (women and U.S. minorities in leadership)
Awarded performance shares to all NEOs, subject to the achievement of financial targets for the three-year performance period ending September 30, 2024
22 | PROXY STATEMENT FOR EMERSON |
EXECUTIVE COMPENSATION
Our Compensation Best Practices
What We Do
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PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 23 |
EXECUTIVE COMPENSATION
Competitive Market Information
How We Determine Our Compensation Comparator Group
The Compensation Committee annually reviews and approves the compensation comparator group that it uses to conduct market analysis and determine competitive pay ranges for our NEOs. As in prior years, the Committee reviewed a special study and screening prepared by Frederic W. Cook & Co. and selected compensation comparator companies for fiscal 2022 compensation based upon one or more of the following criteria (which are not assigned any specific weight):
Net Revenue Approximately 1/2 to 2x Emerson revenues? | Innovation Brings innovation to market? Grows through repositioning existing product or service offerings? Expands to new market segments? | |||||
Market Capitalization Approximately 1/2 to 2x Emerson market capitalization? | Global Presence Less than 40% of revenue from one country/region? | |||||
Common Industries An Emerson main competitor? Do we compete for customers? Do we compete for talent? | Business Complexity Significant business presence in multiple different industries? | |||||
Advanced Technology Employs high technology to fuel growth? | Emerson Customer A current Emerson customer in a familiar industry? |
Fiscal 2022 Compensation Comparator Group Companies
For fiscal 2022, Ingersoll Rand and United Technologies were removed and Carrier Global, DuPont, Stanley Black & Decker and Trane were added, resulting in the 24-company compensation comparator group listed below:
Fiscal 2022 Comparator Group | ||||||||
Carrier | DuPont | Honeywell | Parker Hannifin | TE Connectivity | ||||
Caterpillar | Eaton | Illinois Tool Works | PPG | Textron | ||||
Cummins | Fluor | International Paper | Raytheon | Trane Technologies | ||||
Danaher | General Dynamics | Lockheed Martin | Schlumberger | 3M | ||||
Deere | Goodyear Tire | Northrop Grumman | Stanley Black & Decker |
Emerson vs. Compensation Comparator Group
Source: Capital IQ
Results as of 9/30/22
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In fiscal 2017 Frederic W. Cook & Co. provided analysis of competitive pay (cash and long-term stock compensation) at the median range for the proxy reported officer positions at the comparator group companies. The Committee’s compensation consultant, Exequity, reviewed the comparator group and the results of the competitive pay analysis provided by Frederic W. Cook and concurred that the comparator group was appropriate and that the NEOs’ compensation is consistent with competitive market practice.
Setting Total Compensation
The Company targets total compensation in the median range of our comparator group, using the competitive pay analysis described above as a frame of reference. Actual pay is dependent on Company and individual performance. The pay decisions are not formulaic and the Committee exercises judgment in making them. This analysis is not used to establish performance goals in the Company’s compensation programs. The Committee also reviews the relative internal compensation relationships between the CEO and the other NEOs. While the Committee monitors these pay relationships, it does not target any specific pay ratios.
For the CEO, the Committee receives and reviews a summary showing all elements of his compensation, including base salary, annual cash bonus, long-term stock compensation, retirement and other benefits and perquisites. The summary shows compensation that may be paid upon voluntary or involuntary termination of employment, retirement, death or disability, or upon a change of control. CEO compensation is also annually reviewed and discussed by thenon-management Directors in executive session.
Each year, management meets with business unit and corporate executives to evaluate the individual performance and leadership potential of our key executives. Our CEO uses these performance and leadership evaluations to develop the individual pay recommendations made to the Committee for the NEOs. The Committee reviews the CEO’s performance evaluations and pay recommendations for the NEOs and sets their compensation. The Committee separately meets in executive session without the CEO to review the CEO’s performance and set his compensation.
The Committee does not set specific financial targets related to cash compensation. The Committee does set performance objectives to establish maximum bonus amounts for compliance with IRC Section 162(m) (see “Regulatory Considerations” at page 24 below).
The Committee noted that shareholders expressed strong support for the Company’s executive compensation program at our 2017 Annual Meeting.
Long-Term Stock Compensation
Our long-term stock compensation consists of three programs: performance shares, restricted stock and stock options. Stock options have not been granted to NEOs since 2015. The Committee makes these awards to the Company’s NEOs and other
18 PROXY STATEMENT FOR EMERSON 20182023 ANNUAL MEETING OF SHAREHOLDERS
EXECUTIVE COMPENSATION
Compensation of our Named Executive Officers
Setting Annual Total Compensation
The Compensation Committee targets annual total compensation (cash and annual long-term stock compensation) for our NEOs in the median market range of our compensation comparator group. To determine the median market range, the Committee uses a competitive pay analysis of total compensation for the proxy reported officer positions at the compensation comparator group companies prepared by Frederic W. Cook & Co. The Committee also reviews and confirms the competitive market pay analysis with Exequity, its independent compensation consultant. The competitive pay analysis is not used to establish performance goals in the Company’s compensation programs. The Committee does monitor the relative internal compensation relationships between the CEO and the other NEOs, however, no specific pay ratio is targeted.
For the fiscal 2022 annual bonus, the Committee did not set specific financial or operating targets related to annual cash compensation and pay determinations were not based on any formula. Actual pay was dependent on Company and individual performance and based on the Committee’s informed judgment. However, for 2022, the Committee utilized an ESG performance modifier based on the achievement of ESG targets in support of our publicly disclosed leadership representation and GHG goals. This ESG modifier provided that the discretionary bonus amount determined by the Committee would be adjusted by plus or minus 7.5% based on progress toward the ESG goals.
The Committee meets in executive session to review and set the CEO’s compensation. For fiscal 2022, the Committee considered a number of factors in making its decision, including: market data, compensation elements, Company performance, tenure and experience, retention and the CEO’s individual performance, leadership, contributions to the Company and impact on results. The Committee also discusses the CEO’s compensation annually with the non-management Directors in executive session.
For the NEOs and other key executives, our CEO reviews with the Committee the individual performance and leadership potential of these key executives, along with the Company’s financial results, and makes individual pay recommendations to the Committee. The CEO’s recommendations are informed by our robust annual organizational review, compensation planning and performance review processes.
For the fiscal 2023 annual bonus, the Committee determined to shift to a formulaic bonus structure with pay dependent on the Company’s progress toward objective pay criteria utilizing adjusted EPS, operating cash flow and ESG goals.
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 25 |
EXECUTIVE COMPENSATION
Fiscal 2022 CEO and NEO Performance
CEO Performance. In determining the appropriate level of total compensation for Mr. Karsanbhai, the Committee evaluated the Company’s strong and consistent financial performance in fiscal 2022 (summarized on page 19) and his focus and actions on Company’s strategy as driven by portfolio transformation, cultural evolution, and strong operational execution.
Mr. Karsanbhai’s annual total compensation (cash and annual long-term stock compensation) is in the median market range of our compensation comparator group. The Committee noted that Mr. Karsanbhai has successfully led the Company through this period of transition and highlighted the following significant accomplishments.
Fiscal 2022 CEO Accomplishments | ||
Led extensive M&A activity that positions us as a go-forward automation focused company and to provide higher gross profit margins and segment EBITA | ||
Redesigned the Emerson Management system to drive culture into our businesses through four critical initiatives: accelerated innovation, commercial excellence, operational execution and world-class M&A | ||
Furthered Emerson’s culture evolution through the establishment of a business led culture steering committee which has driven the articulation of our future state culture and culture activation roadmap | ||
Accelerated our environmental sustainability journey by committing to science-based net zero carbon GHG emissions across Scopes 1, 2 and 3 by 2045 | ||
Realized significant improvements in safety across the company reaching a record low TRR of 0.27 representing 213 recordable injuries | ||
Achieved the diversity goals for the year with 21.4% women in leadership and 16.5% for U.S. minority and reached 15% participation across our eight global Employee Resource Groups | ||
Introduced Go Boldly as our new company tagline, embodying where we are going while valuing the many attributes that made Emerson special over the years | ||
Made six investments valued at $20 million in the $100 million Emerson Ventures Fund, investing in disruptive discrete automation solutions, environmental sustainability technologies and industrial software | ||
Refocused charitable giving to focus on early childhood education, pledging $200 million to address education inequity over the next 10 years | ||
Managed performance despite an unpredictable global economic environment affecting commodity prices, supply chain, logistics, and financing | ||
Closed the fiscal year with sales up 9.4%, adjusted EBITA margin expanded by 180 basis points, and adjusted EPS up 16.4% over 2021 despite very challenging market conditions | ||
Continued Emerson’s longstanding commitment to creating shareholder value inclusive of the Company’s 66th consecutive year of increased dividends |
Other Named Executive Officer Performance. In setting compensation for the other NEOs, the Committee considered the Company’s strong and consistent fiscal 2022 financial performance, the mitigation of supply risks, labor shortages and other geopolitical challenges, the disciplined management of the Company’s business and operations, including through continued progress toward cost reset targets and the continued focus on safety and wellbeing of our employees, as well as our CEO’s evaluation of each NEO’s individual performance, leadership and accomplishments. The Committee also evaluated the NEOs based on their interactions with and presentations to the Board.
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EXECUTIVE COMPENSATION
NEO Fiscal 2022 Accomplishments
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F. J. Dellaquila | ||||
Implemented term financing for $6.0 billion cash portion of AspenTech acquisition purchase price, pre-funding a significant | ||||
Provided complex analytical support for the decision process and subsequent negotiation of the divestiture of Climate Technologies, as well as for other portfolio transactions and managed pre-divestiture restructuring to maximize after-tax proceeds from divestitures | ||||
Implemented processes to integrate AspenTech acquisition into Emerson financial reporting process and began integration of financing activity to minimize costs for both companies | ||||
Centralized certain finance functions in best cost locations to reduce cost and improve quality of financial reporting | ||||
R. R. Krishnan | ||||
Managed strategic global supply chain activities to ensure continued supply, production, and delivery for customers as business recovered from the | ||||
Launched transformation of indirect materials management across the enterprise, leveraging spend and resources to realize cost containment and productivity | ||||
Drove execution of operating plans via the enhanced Emerson Management Process and collaboration to deliver top-quartile performance | ||||
Enhanced Emerson’s world-class mergers and
| ||||
Launched Emerson Ventures Inc. as a $100 million fund over five years focused on disruptive discrete automation technologies, industrial software, and environmental sustainability, and closed four investments in fiscal 2022 | ||||
Further unified the enterprise-wide IT function, expanded Emerson’s cloud utilization strategy, and achieved record high cost reduction and critical system operational performance, while supporting information systems requirements of portfolio actions | ||||
M. J. Bulanda | ||||
Delivered record orders, strong sales growth with strong leverage on the growth to achieve record high adjusted EBITA | ||||
Managed the platform to serve our customers through significant supply chain disruptions and
| ||||
Continued to reinforce and | ||||
Promoted DE&I efforts through key management development and | ||||
S. Y. Bosco | Oversaw legal risks evaluation for complex acquisitions to support Emerson’s evolving business portfolio, and drove efforts to manage complex IP and asbestos litigation strategy | |||
Drove efforts to optimize legal services spend through specific vendor management initiatives driving overall reductions and organization initiatives to drive consistency and standards across the | ||||
Managed risks evaluation process arising from trade sanctions actions taken by multiple nations in response to | ||||
Oversaw implementation of | ||||
Promoted DE&I through efforts on development opportunities and career development, designing governance protocols for company response to social issues and disinformation campaigns, and executive sponsorship of the |
ESG Performance Modifier
After determining the discretionary bonus for fiscal 2022 based on the factors described above, the Committee adjusted the bonus amounts for the results of an ESG performance modifier based on the achievement of ESG targets in support of our publicly disclosed leadership representation and GHG goals. This ESG modifier provided that the discretionary bonus amount determined by the Committee would be adjusted by plus or minus 7.5% based on progress toward the ESG goals, including the Company’s goals to double the representation of women globally and U.S. minorities in leadership roles by 2030, and the Company’s goal to reduce GHG emissions by 20%, normalized to sales. As a result of this modifier, each of the NEO’s annual bonus was increased by 5%.
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
EXECUTIVE COMPENSATION
Fiscal 2022 Annual Total Compensation Mix
We believe that our practice of setting a majority of our NEOs’ compensation as “at-risk” pay underscores our commitment to our fundamental pay-for-performance principles. By tying a significant percentage of NEO annual total compensation (cash and performance shares) to performance-based pay that is dependent on achievement of the Company’s performance goals as well as the consistent attainment of strong individual performance, we maximize the value we can deliver to shareholders. In fiscal 2022, 91% of our CEO’s annual pay and an average of 84% of the other NEOs’ annual pay was comprised of “at-risk” compensation (calculated on base salary paid as shown in Summary Compensation Table; amounts do not include other forms of compensation shown in the Summary Compensation Table or special restricted stock grants).
Annual Cash Compensation
The Committee targets total annual cash compensation in the median market range of market total cash compensation, while placing more emphasis on performance basedperformance-based annual cash bonus than on base salary. Base salary is the only guaranteed component of our NEOs annual total compensation and generally represents10-20% of annual total NEO compensation and bonuscompensation. Bonus generally represents15-25%. of annual total compensation.
Base Salary. BaseThe Compensation Committee generally determines NEO base salaries effective as of October 1 of each year. Fiscal 2022 base salary increases were based on the Committee’s review of the Company’s fiscal 2022 performance, individual performance, and potential and competitive market compensation. The Committee also considered market survey data that indicated that the predicted merit increase, without promotions, for comparable executive positions averaged approximately 3%.positions.
NEO Name | FY 2021 | FY 2022 | % Change | |||||||||
S. L. Karsanbhai (1)
| $
| 1,200,000
|
| $
| 1,260,000
|
|
| 5
| %
| |||
F. J. Dellaquila
| $
| 762,000
|
| $
| 800,000
|
|
| 5
| %
| |||
R. R. Krishnan (2)
| $
| 700,000
|
| $
| 750,000
|
|
| 7
| %
| |||
M. J. Bulanda (3)
| $
| 650,000
|
| $
| 680,000
|
|
| 5
| %
| |||
S. Y. Bosco
|
| (4
| )
| $
| 775,000
|
|
| —
|
|
(1) | Mr. Karsanbhai was appointed CEO on February 5, 2021. |
(2) | Mr. Krishnan was appointed Executive Vice President and Chief Operating Officer on February 17, 2021. |
(3) | Mr. Bulanda was appointed Executive President Automation Solutions on February 17, 2021. Mr. Bulanda is retiring from the Company effective December 31, 2022. |
(4) | Ms. Bosco was not an NEO for fiscal 2021. |
As shown above, for fiscal 2022, base salary (the only guaranteed portion of NEO compensation) comprised only 9% of our CEO’s and an average of 16% of our other NEOs’ annual total compensation.
Bonus.BonusAs described on page 16 above,. In determining fiscal 2022 bonuses, the fiscal 2017 bonuses were based onCompensation Committee reviewed the reshaping of the Company and completion of the strategic repositioning, the Company’s strong financial performance and integration of the valves & controls business,strong actions in portfolio, culture and execution, as well as the individual performance and leadership of each NEO described on pages19-20.NEO. The Committee did not assignused discretion and based its decisions on its informed judgment considering these factors collectively. No individual weightings were assigned to any of these factors, but rather used them collectively to determine the bonus amounts for fiscal 2017. The determination of individual fiscal 2017 bonus amounts are made in the discretion of the Committee. The bonus amount is subject to the IRC Section 162(m) limitation established by the Committee (see “Regulatory Considerations” on page 24).
See “Annual Cash Compensation Components” on page 20 for specific fiscal 2017 cash compensation decisions.
Fiscal 2017 CEO and NEO Performance
CEO Performance. In determining the appropriate level of total compensation for Mr. Farr, the Committee evaluated the Company’s strong financial performance in fiscal 2017 (summarized on page 16), his reshaping of the Company into two global franchises, the success of the Board-approved strategic repositioning plan, the Company’s return to growth and his critical succession planning leadership, and the retention of Mr. Farr. The Committee noted that Mr. Farr’s 2016 total compensation was below the median range and reviewed alternatives for delivering the appropriate level of total compensation for Mr. Farr, taking into account cash compensation and the value of long-term awards allocable to the current year.
In particular the Committee noted that Mr. Farr successfully led the Company through this pivotal transformational year, including:factors.
19 PROXY STATEMENT FOR EMERSON 2018
28 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
EXECUTIVE COMPENSATION
Other Named Executive Officer Performance. In setting compensation for the other NEOs, the Committee considered the Company’s strong fiscal 2017 financial performanceachievement of ESG targets in support of our publicly disclosed leadership representation and the successful strategic repositioning and operational realignmentGHG emission reduction goals. As a result of this modifier, each of the Company, as well as Mr. Farr’s evaluation of each NEO. The Committee also evaluated the NEOs based on their frequent interactions with, and presentations to, the Board of Directors. The Committee considered the following accomplishmentsNEO’s annual bonus was increased by 5%. In addition, with respect to the NEOs other than Mr. Farr:year-over-year increase in NEO bonuses, the Committee considered key actions that occurred in the fiscal year related to the shaping and transformation of the Company’s portfolio and the need to retain key leadership in a competitive market environment.
NEO Name
| FY 2021
| FY 2022
| % Change
| |||||||
S. L. Karsanbhai (1)
| $
| 2,016,000
|
| $
| 2,600,000
|
| 29%
| |||
F. J. Dellaquila
| $
| 1,200,000
|
| $
| 1,365,000
|
| 14%
| |||
R. R. Krishnan (2)
| $
| 600,000
|
| $
| 1,050,000
|
| 75%
| |||
M. J. Bulanda (3)
| $
| 640,000
|
| $
| 708,750
|
| 11%
| |||
S. Y. Bosco
|
| (4
| )
| $
| 656,250
|
| — %
|
(1) | Mr. Karsanbhai was appointed CEO on February 5, 2021. |
(2) | Mr. Krishnan was appointed Executive Vice President and Chief Operating Officer on February 17, 2021. |
(3) | Mr. Bulanda was appointed Executive President Automation Solutions on February 17, 2021. Mr. Bulanda is retiring from the Company effective December 31, 2022. See “Description of M.J. Bulanda Letter Agreement” on page 44. |
(4) | Ms. Bosco was not an NEO for fiscal 2021. |
As shown above, for fiscal 2022, cash bonus comprised only 17% of our CEO’s and an average of 20% for our other NEOs’ annual total compensation.
Annual Long-Term Stock Compensation
The Committee targets total annual compensation for our NEOs in the integrationmedian market range of our compensation comparator group, with performance-based stock compensation being the largest component of our NEOs annual total compensation. We value our long-term stock compensation awards based on the grant date fair value computed in accordance with FASB ASC Topic 718; however, an executive may realize more or less than his or her targeted long-term compensation depending on Company and stock performance over the performance period.
Performance Shares. Performance shares awards are the primary long-term compensation element and the cornerstone of our pay-for-performance philosophy. When determining the amount of an NEO’s annual award, the Committee may increase or decrease the amount based on individual performance. The Committee targets the median market range for each NEO’s total annual compensation. We believe that performance shares align the interests of our executives and shareholders and support the achievement of long-term strategic operating goals such as premium, sustained growth in earnings and cash flow.
Each annual Performance Shares Program has a three-year performance period with defined operating performance targets set by the Committee at the beginning of the valves & controls business intoperiod from the Company’s final control business, including sales force, service, operations, supply chain and facility consolidation; implemented and filled all key positions in the new final control organization structure; drove significant improvement in emerging market orders, especially in China; continued to contribute to completion of the strategic repositioning; and served the Company in global leadership positions with a variety of international economic advisory organizations.
For allIncentive Shares Plans. An award of performance shares under the NEOs,program represents the Committee made its annual pay decisions for eachright to receive shares of the compensation components as outlined below.
Annual Cash Compensation Components
Base salary: In early fiscal 2017, the Committee approved the base salary increases for fiscal 2017 set forth below.
Name
| FY 2016 (Rate)
| FY 2017 (Rate)
| 2016-2017 Percentage Increase
| |||||||
D. N. Farr
| $
| 1,300,000
|
| $
| 1,300,000
|
| —%
| |||
E. L. Monser
| $
| 740,000
|
| $
| 750,000
|
| 1.4%
| |||
F. J. Dellaquila
| $
| 660,000
|
| $
| 690,000
|
| 4.5%
| |||
E. M. Purvis
| $
| 660,000
|
| $
| 680,000
|
| 3.0%
| |||
S. J. Pelch
| $
| 435,000
|
| $
| 460,000
|
| 5.7%
|
Annual bonus: In early fiscal 2018, the Committee determined to make the following annual bonus paymentsour common stock to the NEOs with respect to fiscal 2017 performance.
Name
| FY 2016
| FY 2017
| 2016-2017 Percentage Change
| |||||||
D. N. Farr
| $
| 1,700,000
|
| $
| 2,500,000
|
| 47%
| |||
E. L. Monser
| $
| 950,000
|
| $
| 1,150,000
|
| 21%
| |||
F. J. Dellaquila
| $
| 950,000
|
| $
| 1,150,000
|
| 21%
| |||
E. M. Purvis
| $
| 760,000
|
| $
| 910,000
|
| 20%
| |||
S. J. Pelch
| $
| 350,000
|
| $
| 500,000
|
| 43%
|
Mr. Farr’s annual bonus increase follows a decreased bonus in 2016 and flat or reduced bonuses each year since 2013.
20 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
EXECUTIVE COMPENSATION
Long-Term Stock Compensation Program Components and Awards
Performance Shares Program. Beginning in fiscal 2016,extent the Committee moved to annualidentified performance share awards with a three-year performance period.objectives are met. Dividend equivalents may be paid, but only on earned awards at the end of the performance period. The payout isHistorically, payouts have been made primarily in common stock, with a portion paid in cash to cover tax obligations. To facilitate fixed accounting treatment for these awards beginning with the fiscal 2022 - 2024 Performance Shares Awards, the Company will no longer pay a portion of earned awards in cash (other than accrued dividends). Awards include confidentiality, non-competition and non-solicitation obligations and expanded clawback rights and are subject to a double triggerdouble-trigger change of control provision.
2017At the end of a performance period, the Committee reviews the Company’s financial results against the operating performance targets and certifies the level of achievement for payout of the awards. The Committee may include or exclude from both targets and actual results specified items of an unusual, non-recurring or extraordinary nature as allowed by the plans or as defined in the specific Program award agreement. Pursuant to our Incentive Shares Plans, the Committee also has the discretion to adjust a payout percentage where results and/or business climate warrant, except as may be defined in the specific Program award agreement. For the fiscal 2022 – 2024 Performance Shares Program, the Committee has adopted a defined set of acceptable adjustments, removing negative discretion under the Plans, to facilitate fixed accounting treatment.
InFor the fiscal 2017, Mr. Farr2021 – 2023 Performance Shares Program and earlier Programs, our operating targets were benchmarked to growth over nominal G7 GDP growth, and the target growth rate was awarded 150,000set at three percentage points above G7 GDP. Beginning with our fiscal 2021 – 2023 Performance Shares Program, we also added a relative total shareholder return modifier benchmark (“rTSR”) to measure our total shareholder return performance shares and eachrelative to the S&P 500 Capital Goods Index group of companies (the “CGI Group”). After the payout percentage is determined by reviewing our financial performance for the performance period against the operating metrics, we will then measure our three-year total shareholder return relative to the CGI Group performance for the same period. If our total shareholder return is at or above the 80th percentile of the other NEOs was awarded 50,000 performance shares, subjectCGI Group, the payout percentage from operating results will be increased by 20 percentage points. If our total shareholder return is at or below the 20th percentile of the CGI Group, the payout percentage will be decreased by 20 percentage points. No adjustment to the achievementpayout percentage will be made for relative performance between the 20th and 80th percentile of the financial targetsCGI Group.
For the fiscal 2022 – 2024 Performance Shares Program, we determined that the G7 GDP benchmark does not sufficiently reflect our strategic objectives for the performance period and our determination for increased value creation. Accordingly, for the fiscal 2022 – 2024 Program, we set forth below.
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 29 |
EXECUTIVE COMPENSATION
specific operating growth targets and have removed the G7 GDP +3% growth benchmark. The new operating growth targets are based on our three year operating plan and are intended to be difficult but attainable and incentivize the achievement of that plan. The operating growth targets were set using defined growth rates of Adjusted EPS (weighted 60%) and cumulative free cash flow (weighted 40%). We also defined categories of acceptable adjustments removing any negative discretion. We retained the rTSR benchmark.
Fiscal 2022 – 2024 Performance Metrics
(Period from October 1, 2021 – September 30, 2024)
What do we consider when we make performance shares awards?
In making an individual annual award, the Committee considers the NEO’s: (1) ability to make a significant contribution to the Company’s financial results, (2) level of responsibility, (3) individual performance, (4) commitment to the Company’s Purpose, Values and the Enabling Pillars of Culture, Portfolio and Execution, and (5) leadership potential. The annual performance shares award generally represents more than half of the NEO’s total compensation, depending on the NEO’s role and responsibilities.
In fiscal 2022, 100% of our NEOs annual long-term incentive awards were performance-based awards.
Why these performance metrics?
Each year, the Compensation Committee works with executive management and its independent executive compensation consultant to review and establish financial and operational performance metrics that are consistent with our long-term strategic objectives and in line with market practices. The Committee sets targets for the three-year performance period that will challenge our business leaders to drive operating results that generate shareholder returns. At the end of the performance period, our NEOs earned awards are based on the level of achievement against these targets.
Historically, the Committee utilized earnings per share and cumulative free cash flow (operating cash flow less capital expenditures) as the metrics most appropriate to drive growth. However, beginning with the fiscal 2022 – 2024 Performance Shares Program, the Committee determined to utilize adjusted EPS instead of EPS to align with the use of adjusted EPS for the supplemental reporting of results to our shareholders, and cumulative FCF. The Company uses adjusted EPS to facilitate period-to-period comparisons and provide additional insight into the underlying, ongoing operating performance of the Company.
Adjusted Earnings per share (EPS)
EPS provides a holistic measure of the Company’s ability to create value for our shareholders. It emphasizes our operational performance measured through earnings growth, demonstrates the effectiveness of our capital allocation strategy through share repurchases and reflects tax efficient strategies. Adjusted EPS excludes intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction, and AspenTech pre-closing costs, and certain gains, losses or impairments. Adjusted EPS aligns with the supplementation reporting of results to our shareholders. |
Cash generation is a true indicator of our earnings, asset management and investment performance. Operating earnings are the largest contributor to free cash flow and are the result of leverage on incremental sales, specific cost reduction and productivity initiatives, and price increases to offset inflation. Improvements in inventory management, days sales outstanding and days payable contribute to working capital reductions which also contribute to free cash flow. Investments in organic growth and acquisitions add to free cash flow. The return on these investments generate returns for our shareholders. |
Growth Targets
For the fiscal 2022 – 2024 Performance Shares Program and the fiscal 2023 – 2025 Performance Shares Program, the Committee determined that the G7 GDP benchmark (as used in prior years) does not sufficiently reflect our strategic objectives for the performance period and our determination for increased value creation. Accordingly, we have set specific operating growth targets, removing the G7 GDP +3% growth benchmark for the performance period. The operating growth targets for the fiscal 2022 – 2024 Performance Shares Program are based on three year operating plan targets, weighted at 60% Adjusted EPS and 40% Cumulative FCF.
30 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
EXECUTIVE COMPENSATION
We have retained the rTSR benchmark. The Committee will review our total shareholder return for the three-year period relative to the CGI Group. If our total shareholder return is above the 80th percentile or below the 20th percentile of the CGI Group, the payout percentage will be adjusted as discussed above.
How do we calculate results against our performance metrics?
At the end of the fiscal 2022 – 2024 Performance Period, the Committee will review our financial results against the performance targets set at the beginning of the performance period. Subject to the predefined categories of acceptable adjustments, the Committee will consider whether there are any adjustments that should be made to account for unusual, non-recurring or extraordinary items. The Committee will then certify the level of achievement against the targets for payout of the awards.
Determination of Adjusted EPS Performance |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| Free cash flow Cumulative free cash flow from | |
Maximum Payout Each performance metric is capped at 125% achievement, for a maximum aggregate payout for these awards of 125% prior to measuring rTSR for No adjustment to the payout |
2013Fiscal 2022 – 2024 Performance Shares Program Awards.
As previously disclosed, the 2013 In fiscal 2022, 100% of our NEOs’ annual long-term stock compensation was comprised of performance shares awards. The following individual performance shares awards were made to the last awards made underNEOs:
NEO Name | FY 2022 – 2024 Performance Shares Awarded ($ Value)(1) | FY 2022 – 2024 Performance Shares Awarded (# Shares) | ||||
S. L. Karsanbhai | $ | 11,060,131 | 109,680 | |||
F. J. Dellaquila | $ | 3,370,678 | 33,426 | |||
R. R. Krishnan | $ | 3,423,316 | 33,948 | |||
M. J. Bulanda(2) | $ | 2,791,352 | 27,681 | |||
S. Y. Bosco | $ | 2,475,319 | 24,547 |
(1) | Each amount constitutes the aggregate grant date fair value calculated in accordance with FASB ASC Topic 718. |
(2) | Mr. Bulanda is retiring from the Company effective December 31, 2022. For a description of the effect of his departure on his equity awards, see “Description of M. J. Bulanda Letter Agreement” on page 44. |
For fiscal 2022, performance shares represented 74% of our prior program design, with a three-year award cycle, four-yearCEO’s annual total compensation and an average of 64% for our other NEOs.
Fiscal 2020 – 2022 Performance Shares Program. The performance period payout of 60% offor the earned awards atfiscal 2020 – 2022 Performance Shares Program ended on September 30, 2022. The targets and weightings were calculated as described above. The Committee determined that the end oftarget earnings per share was $4.22 and target cumulative free cash flow was $8.076 billion. In determining the results for the performance period, the Committee determined that it was appropriate to adjust for certain discrete items, including adjustments primarily related to a gain on a subordinated interest, acquisition and divestiture activity, write-offs associated with the Company’s announced Russia exit, as well as other tax items.
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 31 |
EXECUTIVE COMPENSATION
The Committee determined that the fiscal 2022 EPS, after an aggregate downward adjustment of $0.79 (from $5.41), was $4.62, and cumulative free cash flow over the performance period, after an upward adjustment of $218 million (from $7.930 billion), was $8.148 billion. The performance results after the impact from the adjustments resulted in a payout percentage of 106% of the remaining 40% subject to an additional one year of service. That remaining 40% was paid out atpreviously awarded shares under the end of fiscal 2017 and is set forthformula. The payouts are reflected in the Option Exercises and Stock Vested table on page 29.39.
Other Stock Awards
Performance MeasuresRestricted Stock
The Committee has authority to determine the targets for each program from the various measures set forth in the Company’s Incentive Shares Plans. The measures specified in the 2015 Incentive Shares Plan are: sales, profit, operating profit, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization,pre-tax earnings, earnings, net earnings, any related margins, earnings per share, asset management, cash flow, operating cash flow, free cash flow, days sales outstanding, days payables outstanding, inventory turnover, return on total capital, return on equity, total shareholder return, share price, acquisition and divestiture performance, development and achievement of strategic business objectives, customer satisfaction, new product introductions and performance, cost reductions, manufacturing efficiency, delivery lead time performance, research and development achievements, market share, working capital and geographic expansion. Pursuant to these plans, the Committee may include or exclude from both targets and actual results specified items of an unusual,non-recurring or extraordinary nature. Pursuant to the Company’s incentive shares plans, the Company’s earnings per share and free cash flow will be appropriately adjusted to reflect the repositioning.
Restricted Stock.. Restricted stock is designed to retain key executivesalso available for award under our long-term stock-based compensation program. In limited circumstances, such as special retention, recognition and future leaders,succession planning needs, the Committee may make a separate award of restricted stock. Awards of restricted stock are highly selective. Restricted stock awards are not considered as a portion of an NEO’s annual total compensation and participation is highly selective.may, therefore, result in compensation above the median range in the year of award. The Committee views this program as an important management succession planning and retention tool. The objective is to lock in top executives and their potential replacements identified through the succession planning process. Restricted stock provides participants with dividends and voting rights beginning on the award date. There is no set frequency
21 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
EXECUTIVE COMPENSATION
of restricted stock awards, and they are granted with long-term cliff vesting periods of up to ten10 years and no less than three3 years.
In early fiscal 2017, the Committee granted shares Mr. Karsanbhai received an award of restricted stock in connection with his appointment as follows: E. L.Monser-10,000; F. J.Dellaquila-20,000; E. M.Purvis-10,000;CEO in fiscal 2021. Each of Messrs. Krishnan and S. J.Pelch-10,000. CompletionBulanda also received awards of the strategic portfolio repositioning, succession planningrestricted stock in connection with their appointments and for key executive leadership and retention in fiscal 2021. No awards of restricted stock were key considerations.made in fiscal 2022.
Stock Options. Our 2011 Stock Option Plan expired on November 2, 2020. Although our NEOs have stock options outstanding, no stock option awards provide long-term focus and arehave been made to any of the primary form of long-termNEOs since 2016. All stock compensation for a broader group of key employees. Stock option awards areoptions previously awarded were issued at no less than fair market value on the date of the award and generally vestwith vesting over a period of three years.years with a ten-year term. We do not pay dividend equivalents on stock options and do not “reprice” awards. No stock option awards
32 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
EXECUTIVE COMPENSATION
Policies Supporting Our Fundamental Principles
To support our pay-for-performance philosophy and underlying fundamental principles of our compensation programs, we have been made to anyimplemented certain policies regarding NEO ownership of the NEOs since 2015.
Mr. Purvis will retire on December 31, 2017. For a discussion of the effect of his retirement on his performance share and restricted stock awards, please see “Description of E. M. Purvis Letter Agreement” on page 34.
Compensation Mix
The combination of performance share awards and annual cash bonus represents performance based compensation of approximately 89% of Mr. Farr’s total compensation for fiscal 2017. Of this performance based compensation, 76% represents long-term performance based compensation in the form of performance shares. For the other NEOs, the combination of the performance shares and annual cash bonus awarded by the Committee represents performance based compensation of approximately68-76% of their total compensation for fiscal 2017, with69-84% of performance based pay consisting of long-term performance based pay. Performance based incentives, weighted significantly towards long-term compensation, reward the NEOs for the achievement of outstanding long-term Company performance, which builds shareholder value. For all of the NEOs, the combination of cash bonus and salary represented only24-38% of total compensation, with the rest in equity. For purposes of these amounts other forms of compensation that are shown in the Summary Compensation Table were not included.
Summary Compensation Table Analysis
The primary components of Mr. Farr’s total compensation for 2017 were essentially flat compared to 2016, except for the increase in bonus as discussed on page 20. Mr. Farr’s total compensation as shown in the Summary Compensation Table also includes an amount for the actuarial change in his pension value. This amount was significantly higher in 2016 compared to 2017 and 2015 as a result of a lower applicable discount rate in 2016, over which the Committee has no control. No changes were made in the method of calculating NEO benefits. The Stock Awards column for fiscal 2015 reflects the full value of a significant restricted stock grant to Mr. Farr for retention purposes related to the Company’s strategic repositioning and succession planning.
Total compensation in the table for the other NEOs for 2017 was comparable to 2016, except for the increase in bonus discussed on page 20. Performance share awards were made to all the NEOs in fiscal 2017 and 2016 under our annual award cycle, and to Mr. Purvis in fiscal 2015 (under the 2013 program)actions in connection with his promotion. Totalstock and other incentive compensation. In addition to our compensation for certain NEOs was also impacted by changes in the discount rate used to calculate pension benefits.
Alignment with Shareholder Interests
Weprograms, we believe our balanced executive compensation program, ourthat appropriate stock ownership guidelines and our stock trading, policy, clawback policy and our pledging, and anti-hedging policies further align the interests of our executives with shareholders by encouraging long-term superior performance without encouraging excessive or unnecessary risk taking.
Our long-standing compensation philosophy is a key component of our history of sustainable growth, aligning the interests of participants and shareholders and rewarding each with increased value over the long term. As discussed above, compensation for our senior management is primarily based on performance over a long-term period. Under the performance shares program, relative EPS and free cash flow performance over a minimum of a three-year performance period is required to earn compensation, which drives long-term decision making, discourages adverse risk taking that may occur with year-over-year performance measurements, and rewards for growth over the long term. Our restricted stock awards have long vesting terms that reward participants for increased value over the term. Annual cash amounts are limited and subject to Committee discretion, which discourages short-term risk taking.
22 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
EXECUTIVE COMPENSATION
Other policies that serve to align executive and shareholder interests include the following:
Fundamental Policies
|
Stock ownership | Requires NEOs to hold Emerson stock equal to at least a specified multiple of base salary. NEOs generally have
| |||||||||||||
Position | Req. Multiple(1) | Actual(2) | ||||||||||||
CEO | From 5X to 6X | |||||||||||||
CFO | From 3X to 4X | |||||||||||||
Other NEOs | From 1X to 3X | 9.7X-20.6X | ||||||||||||
Stock trading | Requires written permission from | |||||||||||||
Clawback |
Provides that our Board may reduce, cancel or require recovery of all or a portion of any executive officer’s annual bonus or long-term incentive compensation if the Board determines that the executive officer has engaged in intentional misconduct leading to a material restatement of the Company’s financial statements. Our 2015 Incentive Shares Plan includes additional clawback provisions. Beginning in fiscal 2019, the Company expanded clawback rights for all incentive compensation awards and payments to provide for potential forfeiture or clawback in connection with violations of the Company’s ethics and compliance programs and policies, including its Code of Conduct and Code of Ethics to the extent allowed by law.
| |||||||||||||
Hedging |
Our hedging policy prohibits
| |||||||||||||
Pledging |
Prohibits pledging of Company shares as collateral for a loan by Directors or elected officers.
|
(1) | Includes share equivalents and shares in retirement accounts and restricted stock. |
(2) | Actual multiple based on beneficial ownership, excluding options (see page 57), and share price of |
Severance, Executive Termination and Retirement
Emerson does not have employment agreements, severance agreements or golden parachute agreements with the NEOs. The terms of all executive terminations and retirements are determinedreviewed by the Committee individually based on specific facts and circumstances and not on formulaic rules. We follow these general principles:
We do not pay lump sum,non-forfeitable cash severance payments.
As permitted under shareholder-approved plans, departing plan participants, including NEOs, may have additional time to exercise stock options, up to the time permitted in the original grants.
The Committee may allow continuation (without accelerated vesting) of previously granted performance shares or restricted stock awards, which would be paid if and when the Company achieves specified performance targets or time vesting requirements are met.
Departing executives sign extendednon-competition,non-solicitation and confidentiality agreements, and/or reaffirm existing agreements on these matters. Executives forfeit awards if they breach theirnon-competition,non-solicitation or confidentiality agreements.
The Committee has adopted an Executive Officer Severance Policy which provides that the Company shall not implement individual severance or change of control agreements providing certain benefits (as described in the Policy) to any NEO in excess of 2.99 times the sum of the NEO’s then current base salary and most recent cash bonus without shareholder ratification. The policy is located at www.Emerson.com, Investors, Corporate Governance, Executive Officer Severance Policy.
E. M. Purvis, ourJ. Bulanda, Executive Vice President and Chief Operating Officer, announced his retirementAutomation Solutions, is retiring from the Company effective December 31, 2017, and we2022. We entered into a letter agreement with Mr. PurvisBulanda which, among other things, reaffirmed and extended his restrictive covenants. Please seeSee “Description of E. M. PurvisJ. Bulanda Letter Agreement” aton page 34 below44 for a description of his retirement arrangements.
Change of Control
If a change of control occurs, we protect all employees who participate in long-term stock plans, the Savings Investment Restoration PlanPlans and the Pension Restoration Plan as described under “Potential Payments Upon Termination or Change of Control” aton page 32 below.41. Our 2011 Stock Option Plan and 2015 Incentive Shares Plan include a “double trigger” for vesting following a change of control, although stock awards under our prior stock option and incentive shares plansplan vest upon a change of control. When triggered, we would expect to accelerate vesting of stock awards and pay accrued benefits under the Savings Investment Restoration PlanPlans and the Pension Restoration Plan. We do not credit additional years of service under any plans or continue medical or other benefits. We do not make additional cash payments related to stock compensation plans. We do not increase payouts to cover payment of taxes and do not provide taxgross-ups.
23 PROXY STATEMENT FOR EMERSON 2018
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 33 |
EXECUTIVE COMPENSATION
Security and Perquisites
Due to increased security risks inherent in senior executive positions, we provide NEOs with residential security monitoring and personal security as needed. The Company’s security policy and the Board of Directors require, unless otherwise approved in advance by the Chief Financial Officer and the Head of Global Security, that the Chairman and CEO use Company aircraft for all travel for business to promotefacilitate business efficiency and safety.safety given our global footprint. Because of his importance to the Company and the level of security risk inherent in his position, the CEO is encouraged to use the Company aircraft for personal travel. The Head of Security must review in advance the itinerary and security assessment for any trips made by the CEO on commercial aircraft. The Company provides limited personal use of Company aircraft to the other NEOs.NEOs, and all such use must be approved in advance by the CEO. All NEOs reimburse the Company at first class400% of the Standard Industry Fare Level Rate rates for personal use.
The Company historically has also provides leasedprovided NEOs with cars, club memberships, financial planning and an annual physical. TheseIn fiscal 2021, we performed a thorough review of these perquisites, including a review of market data for our compensation comparator group, the S&P 500 Capital Goods Index group of companies and the general industry to determine the prevalence of these perquisite practices. Following such review, we determined that effective January 1, 2022, the Company would no longer provide or reimburse for club memberships. The review of market data showed the car, financial planning, annual physical and personal security monitoring perquisites remain a prevalent market practice. We are, long-standingtherefore, continuing to provide these perquisites whichto assist in retaining and attracting executives and which we believe are similar to those often provided at othersimilarly-sized companies.executives. NEOs and other employees may also receive Company tickets for sporting, entertainment or other events. The Committee reviews these perquisites annually. Total perquisite costs and related information appear in the Summary Compensation Table on page 25.36. The Company does not provide any reimbursement for taxes on perquisites.perquisites, except as may be prescribed in our relocation policies applicable to all employees.
Other Benefits
The NEOs are eligible for Company-provided benefits that are generally available to all other employees, including a qualified 401(k) savings plan,plans, a qualified defined-benefit pension plan, medical, life and disability insurance, and a charitable matching gifts program, among others. The defined-benefit pension is beingphased-out but a majoritywas closed to new participants effective October 1, 2016. A portion of U.S. employees, including certain of the NEOs, continue to participate. The following additional benefits are also available to the NEOs:
Nonqualified savings planplans which allowsallow the NEOs to defer up to 20 percent of cash compensation and continue to receive the Company match after reaching the Internal Revenue Service (IRS) qualified plan limits.
A nonqualified defined-benefit pension plan, which provides benefits based on the qualified plan without regard to IRS limits but does not provide additional credited years of service. Participation is by award and based on the executive’s individual contributions and long-term service to the Company. Participation in this plan is limited to NEOs who were not closed to participation in the defined benefit plan effective October 1, 2016. Ms. Bosco met the Committee approved criteria and was awarded participation in the Pension Restoration Plan in fiscal 2022. In early fiscal 2023, the Committee also determined that Mr. Bulanda met the criteria and he was awarded participation in the Pension Restoration Plan.
Term life insurance coverage.
No changes were made for fiscal 2022 in the method of calculating any NEO benefits that appear in the Summary Compensation Table beginning on page 36.
Regulatory Considerations
IRCInternal Revenue Code Section 162(m) imposes a $1 million limit on the Company’s deductions for compensation paid to anyspecified executive officers (“Covered Employees”). For taxable years beginning before January 1, 2018, the Covered Employees consisted of the NEOsa corporation’s chief executive officer and up to three other highly compensated executive officers (other than the Chief Financial Officer. Thischief financial officer) and qualifying “performance-based compensation” was not subject to this limitation does not apply to “qualified performance based” compensationif specified requirements were met (i.e., compensation paid only if performance meetspre-established objective goals based on performance criteria approved by shareholders). The Company’s incentive compensation plans are generally designed
Pursuant to ensure tax deductibility under Section 162(m). However, time-based restricted stock awardsthe Tax Cuts and Jobs Act of 2017, for taxable years beginning after December 31, 2017, (i) the remuneration of a public corporation’s chief financial officer is now also subject to the deduction limit, (ii) once an individual is considered a Covered Employee with respect to a taxable year, he or she will be considered a Covered Employee for all future years, including after termination of employment or death, and (iii) the exemption from the deduction limit for “performance-based compensation” is no longer available. These changes do not qualifyapply to remuneration provided under Section 162(m)a binding written contract in effect on November 2, 2017, which is not materially modified after that date. Consequently, for fiscal years beginning after December 31, 2017, no remuneration in excess of $1 million paid to a Covered Employee will be deductible unless such compensation is granted pursuant to a written binding contract that was in effect prior to November 2, 2017.
While the Committee considers the impact of the tax treatment of executive compensation, the primary factor influencing program design is the support of business objectives, and the Committee retains the flexibility to design and administer compensation programs that are in the best interests of Emerson and its shareholders.
NEOs bonuses are discretionary, subject to maximum amounts based on the Section 162(m) performance objectives selected by the Committee annually from among the objectives identified in the annual incentive plan. The objectives are not communicated to participants as targets. The 2017 performance objective was earnings per share. Based on fiscal 2017 performance, the maximum amount of bonus that could be paid to each covered NEO was as follows: D. N. Farr-$6.32 million; E. L. Monser-$3.16 million; E. M. Purvis-$2.37 million; and S. J. Pelch-$2.37 million. The Committee may exercise “negative discretion”does not communicate annual bonus targets to reduce the award below these amounts based on an assessment of performance.NEOs. Our compensation plans also comply with IRC Section 409A for nonqualified deferred compensation arrangements.
In accordance with FASB ASC Topic 718, for financial statement purposes we expense all equity-based awards over the period earned, or subsequently, based upon their estimated grant date fair value, depending on the terms of the award. FASB ASC Topic 718 has not resulted in any significant changes in our compensation program design.
34 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
EXECUTIVE COMPENSATION
Equity Compensation Grant Practices
The Committee approves all grants of equity compensation to executive officers, as defined in Section 16 of the Exchange Act. All elements of executive officer compensation are reviewed by the Committee annually at its October or November meetings. Generally, equity awards are made at those meetings, but may be made at other meetings. The Committee meeting date, or the next business day if the meeting is on anon-business day, is the grant date for equity awards. The Committee has delegated to the CEO authority to grant stock options (1) to employees other than corporate officers and business unit Presidents, subject to the Committee’s prior approval of the aggregate number awarded, and (2) in connection with retention, promotion and acquisitions, which he uses on an infrequent basis. This delegation of authority does not extend to executive officers or other officers who are subject to the Company’s trading blackout policy.
24 PROXY STATEMENT FOR EMERSON 2018
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 35 |
COMPENSATION TABLES
The following information relates to compensation received or earned by our Chief Executive Officer, our Chief Financial Officer, and each of our othernext three most highly compensated executive officers for the last fiscal year (the “named executive officers” or “NEOs”).
Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings($)(4) | All Other Compensation ($)(5) | Total ($) | ||||||||||||||||||||||||
D. N. Farr | 2017 | 1,300,000 | 2,500,000 | 7,736,250 | — | 526,000 | 486,278 | 12,548,528 | ||||||||||||||||||||||||
Chairman of the Board and | 2016 | 1,300,000 | 1,700,000 | 7,368,000 | — | 4,258,000 | 511,533 | 15,137,533 | ||||||||||||||||||||||||
Chief Executive Officer(6) | 2015 | 1,300,000 | 1,800,000 | 10,335,200 | — | 1,439,000 | 439,613 | 15,313,813 | ||||||||||||||||||||||||
E. L. Monser | 2017 | 750,000 | 1,150,000 | 3,094,500 | — | 162,000 | 124,171 | 5,280,671 | ||||||||||||||||||||||||
President | 2016 | 740,000 | 950,000 | 2,456,000 | — | 815,000 | 133,436 | 5,094,436 | ||||||||||||||||||||||||
2015 | 720,000 | 1,000,000 | — | — | 736,000 | 143,073 | 2,599,073 | |||||||||||||||||||||||||
F. J. Dellaquila | 2017 | 690,000 | 1,150,000 | 3,610,250 | — | 538,000 | 108,370 | 6,096,620 | ||||||||||||||||||||||||
Senior Executive Vice | 2016 | 660,000 | 950,000 | 2,456,000 | — | 1,785,000 | 115,775 | 5,966,775 | ||||||||||||||||||||||||
President and Chief | 2015 | 620,000 | 1,000,000 | — | — | 898,000 | 115,678 | 2,633,678 | ||||||||||||||||||||||||
Financial Officer | ||||||||||||||||||||||||||||||||
E. M. Purvis | 2017 | 680,000 | 910,000 | 3,094,500 | — | 65,000 | 82,332 | 4,831,832 | ||||||||||||||||||||||||
Executive Vice President and | 2016 | 660,000 | 760,000 | 2,456,000 | — | 278,000 | 265,127(7) | 4,419,127 | ||||||||||||||||||||||||
Chief Operating Officer(8) | 2015 | 609,562 | 800,000 | 833,700 | 347,700 | 91,000 | 304,770(7) | 2,986,732 | ||||||||||||||||||||||||
S. J. Pelch | 2017 | 460,000 | 500,000 | 3,094,500 | — | 35,000 | 65,369 | 4,154,869 | ||||||||||||||||||||||||
Executive Vice President -- | 2016 | 435,000 | 350,000 | 3,192,800 | — | 228,000 | 126,401(7) | 4,332,201 | ||||||||||||||||||||||||
Organization Planning and | ||||||||||||||||||||||||||||||||
Development(8)
|
Name and Principal Position
| Fiscal
| Salary
| Bonus
| Stock ($)(2)
| Option Awards ($)
|
Change in
| All Other
| Total
| ||||||||||||||||||||||||
S. L. Karsanbhai President and Chief Executive Officer(5) |
| 2022 |
|
| 1,260,000 |
|
| 2,600,000 |
|
| 11,060,131 |
|
| — |
|
| — |
|
| 257,975 |
|
| 15,178,106 |
| ||||||||
| 2021 |
|
| 973,371 |
|
| 2,016,000 |
|
| 12,651,359 |
|
| — |
|
| 16,000 |
|
| 149,306 |
|
| 15,806,036 |
| |||||||||
| 2020 |
|
| 512,188 |
|
| 605,000 |
|
| 2,500,000 |
|
| — |
|
| 95,000 |
|
| 101,737 |
|
| 3,813,925 |
| |||||||||
F. J. Dellaquila Senior Executive Vice President and Chief Financial Officer |
| 2022 |
|
| 800,000 |
|
| 1,365,000 |
|
| 3,370,678 |
|
| — |
|
| — |
|
| 123,310 |
|
| 5,658,988 |
| ||||||||
| 2021 |
|
| 762,000 |
|
| 1,200,000 |
|
| 3,029,934 |
|
| — |
|
| 710,000 |
|
| 123,477 |
|
| 5,825,411 |
| |||||||||
| 2020 |
|
| 709,613 |
|
| 1,050,000 |
|
| 2,999,956 |
|
| — |
|
| 1,776,000 |
|
| 119,711 |
|
| 6,655,280 |
| |||||||||
R. R. Krishnan Executive President and Chief Operating Officer(6) |
| 2022 |
|
| 750,000 |
|
| 1,050,000 |
|
| 3,423,316 |
|
| — |
|
| — |
|
| 73,223 |
|
| 5,296,539 |
| ||||||||
| 2021 |
|
| 624,904 |
|
| 600,000 |
|
| 4,272,020 |
|
| — |
|
| 50,000 |
|
| 57,111 |
|
| 5,604,035 |
| |||||||||
M. J. Bulanda Executive President Automation Solutions(7) |
| 2022 |
|
| 680,000 |
|
| 708,750 |
|
| 2,791,352 |
|
| — |
|
| — |
|
| 92,571 |
|
| 4,272,673 |
| ||||||||
| 2021 |
|
| 608,698 |
|
| 640,000 |
|
| 3,562,057 |
|
| — |
|
| 70,000 |
|
| 73,274 |
|
| 4,954,029 |
| |||||||||
S. Y. Bosco Senior Vice President, Secretary and General Counsel | 2022 | 775,000 | 656,250 | 2,475,319 | — | 1,977,000 | 66,190 | 5,949,759 | ||||||||||||||||||||||||
(1) | Represents cash bonus amounts paid after the end of the fiscal year with respect to that fiscal year’s performance. |
(2) | The amounts relate to |
For each year, includes the aggregate change in the actuarial present value of the NEOs’ accumulated benefits under the Company’s defined benefit pension plans. However, pursuant to applicable regulations, does not include the aggregate decline in actuarial present values as follows in fiscal 2022: Mr. Karsanbhai-($289,000), Mr. Dellaquila-($2,530,000), Mr. Krishnan-($293,000), Mr. Bulanda ($481,000). For fiscal |
25 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
COMPENSATION TABLES
|
36 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
COMPENSATION TABLES
(4) | Includes the following amounts for |
Name | Perquisites (a) | Savings Plan (b) | Life Insurance (c) | Total (d) | ||||||||||||
D. N. Farr
| $
| 390,641
|
| $
| 75,000
|
| $
| 20,637
|
| $
| 486,278
|
| ||||
E. L. Monser
| $
| 48,219
|
| $
| 42,490
|
| $
| 33,462
|
| $
| 124,171
|
| ||||
F. J. Dellaquila
| $
| 47,823
|
| $
| 40,969
|
| $
| 19,578
|
| $
| 108,370
|
| ||||
E. M. Purvis
| $
| 29,148
|
| $
| 35,979
|
| $
| 17,205
|
| $
| 82,332
|
| ||||
S. J. Pelch | $
| 38,733
|
| $
| 20,224
|
| $
| 6,412
|
| $
| 65,369
|
|
Name
| Perquisites(a)
| Savings Plan(b)
| Life Insurance(c)
| Total(d)
| ||||||||||||
S. L. Karsanbhai |
| 64,675 |
|
| 193,300 |
|
| — |
|
| 257,975 |
| ||||
F. J. Dellaquila |
| 43,667 |
|
| 49,960 |
|
| 29,683 |
|
| 123,310 |
| ||||
R. R. Krishnan |
| 39,525 |
|
| 33,698 |
|
| — |
|
| 73,223 |
| ||||
M. J. Bulanda |
| 48,295 |
|
| 32,969 |
|
| 11,307 |
|
| 92,571 |
| ||||
S. Y. Bosco |
| 31,841 |
|
| 34,349 |
|
| 66,190 |
|
(a) | The perquisites provided |
(b) | Contributions by the Company for the NEOs to the Company’s retirement savings plans. |
(c) | Premiums paid by the Company on behalf of the NEOs for term life insurance. |
(d) | None of these amounts were grossed up for taxes. |
Mr. |
(6) | Mr. Krishnan became Executive Vice President and Chief Operating Officer in February 2021. Mr. Krishnan was formerly President, Final Control. |
(7) | Mr. Bulanda became Executive President, Automation Solutions in |
The following table provides information about equity awards granted to the NEOs in fiscal 2017.2022
Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | All Other Underlying | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock Option Awards ($)(3) | ||||||||||||||||||||||||||||
Name | Grant Date | Threshold (#) | Target (#)(1) | Maximum (#)(1) | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
D. N. Farr | 11/1/2016 | N/A | 150,000 | 187,500 | 7,736,250 | |||||||||||||||||||||||||||
E. L. Monser | 11/1/2016 | N/A | 50,000 | 62,500 | 2,578,750 | |||||||||||||||||||||||||||
11/1/2016 | 10,000 | 515,750 | ||||||||||||||||||||||||||||||
F. J. Dellaquila | 11/1/2016 | N/A | 50,000 | 62,500 | 2,578,750 | |||||||||||||||||||||||||||
11/1/2016 | 20,000 | 1,031,500 | ||||||||||||||||||||||||||||||
E. M. Purvis(4) | 11/1/2016 | N/A | 50,000 | 62,500 | 2,578,750 | |||||||||||||||||||||||||||
11/1/2016 | 10,000 | 515,750 | ||||||||||||||||||||||||||||||
S. J. Pelch | 11/1/2016 | N/A | 50,000 | 62,500 | 2,578,750 | |||||||||||||||||||||||||||
11/1/2016 | 10,000 | 515,750 |
Name
| Grant
| Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#)
|
All Other (#)
| Exercise or Base Price of Option Awards ($/Sh)
| Grant Date Fair Value of Stock and Option Awards ($)(2)
| ||||||||||||||||||||||||||||
Threshold (#)
| Target (#)(1)
| Maximum (#)(1)
| ||||||||||||||||||||||||||||||||
S. L. Karsanbhai | 11/1/2021 |
| N/A |
|
| 109,680 |
|
| 159,036 |
|
| 11,060,131 |
| |||||||||||||||||||||
F. J. Dellaquila | 11/1/2021 |
| N/A |
|
| 33,426 |
|
| 48,468 |
|
| 3,370,678 |
| |||||||||||||||||||||
R. R. Krishnan | 11/1/2021 |
| N/A |
|
| 33,948 |
|
| 49,225 |
|
| 3,423,316 |
| |||||||||||||||||||||
M. J. Bulanda(3) | 11/1/2021 |
| N/A |
|
| 27,681 |
|
| 40,137 |
|
| 2,791,352 |
| |||||||||||||||||||||
S. Y. Bosco | 11/1/2021 |
| N/A |
|
| 24,547 |
|
| 35,593 |
|
| 2,475,319 |
|
(1) | Includes performance shares awards granted in November |
26 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
COMPENSATION TABLES
(2) |
Includes the grant date fair value of awards of |
Mr. |
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 37 |
COMPENSATION TABLES
Outstanding Equity Awards at FiscalYear-End
The following table provides holdings of stock options, performance shares and restricted stock by our NEOs at the end of fiscal 2017,2022, including unexercised stock options, unvested restricted stock and performance shares with performance conditions or service requirements that had not yet been satisfied.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name | Date of Award | Number of Securities Underlying Unexercised Options (#) Exercisable (1) | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) | Option Expiration Date | Date of Award | Number of Shares or Units of Stock That Have Not Vested (#) | Market Vested | Equity Have Not | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | ||||||||||||||||||||||||||||||
D. N. Farr | 10/4/10 | 250,000 | 53.3100 | 10/4/2020 | (2) | 340,000(2) | 21,365,600 | |||||||||||||||||||||||||||||||||
10/1/13 | 200,000 | 65.0700 | 10/1/2023 | 11/3/15 | 150,000(4) | 9,426,000 | ||||||||||||||||||||||||||||||||||
11/1/16 | 150,000(5) | 9,426,000 | ||||||||||||||||||||||||||||||||||||||
E. L. Monser(6) | 10/4/10 | 130,000 | 53.3100 | 10/1/2020 | (2) | 10,000(2) | 628,400 | |||||||||||||||||||||||||||||||||
10/1/13 | 120,000 | 65.0700 | 10/1/2023 | 11/3/15 | 50,000(4) | 3,142,000 | ||||||||||||||||||||||||||||||||||
11/1/16 | 50,000(5) | 3,142,000 | ||||||||||||||||||||||||||||||||||||||
F. J. Dellaquila | 2/19/09 | 15,000 | 30.0250 | 2/19/2019 | (2) | 60,000(2) | 3,770,400 | |||||||||||||||||||||||||||||||||
10/4/10 | 95,000 | 53.3100 | 10/4/2020 | 11/3/15 | 50,000(4) | 3,142,000 | ||||||||||||||||||||||||||||||||||
10/1/13 | 100,000 | 65.0700 | 10/1/2023 | 11/1/16 | 50,000(5) | 3,142,000 | ||||||||||||||||||||||||||||||||||
E. M. Purvis(7) | 5/6/08 | 10,000 | 55.3200 | 5/6/2018 | (2) | 40,000(2) | 2,513,600 | |||||||||||||||||||||||||||||||||
10/4/10 | 40,000 | 53.3100 | 10/4/2020 | 11/3/15 | 50,000(4) | 3,142,000 | ||||||||||||||||||||||||||||||||||
10/1/13 | 40,000 | 65.0700 | 10/1/2023 | 11/1/16 | 50,000(5) | 3,142,000 | ||||||||||||||||||||||||||||||||||
2/2/15 | 20,000 | 10,000 | 58.9700 | 2/2/2025 | ||||||||||||||||||||||||||||||||||||
S. J. Pelch | 2/19/09 | 3,200 | 30.0250 | 2/19/2019 | (2) | 35,000(2) | 2,199,400 | |||||||||||||||||||||||||||||||||
10/4/10 | 15,000 | 53.3100 | 10/4/2020 | 11/3/15 | 50,000(4) | 3,142,000 | ||||||||||||||||||||||||||||||||||
10/1/13 | 15,000 | 65.0700 | 10/1/2023 | 11/1/16 | 50,000(5) | 3,142,000 | ||||||||||||||||||||||||||||||||||
27 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
COMPENSATION TABLES
Option Awards
| Stock Awards
| |||||||||||||||||||||||||||||||||||||||||||||||||||
Name
| Date of
| Number of
| Number of
| Option
| Option Expiration Date
| Date of Award
| Number of
| Market Vested
| Equity
| Equity
| ||||||||||||||||||||||||||||||||||||||||||
S. L. Karsanbhai |
| 10/1/13 |
|
| 10,000 |
|
| 65.07 |
|
| 10/1/23 |
|
| (2) |
|
| 75,000(2) |
|
| 5,491,500 |
| |||||||||||||||||||||||||||||||
| 8/5/14 |
|
| 4,000 |
|
| 62.84 |
|
| 8/5/24 |
|
| 11/3/20 |
|
| 36,346(4) |
|
| 2,661,254 |
| ||||||||||||||||||||||||||||||||
| 2/1/16 |
|
| 15,000 |
|
| 45.50 |
|
| 2/1/26 |
|
| 2/1/21 |
|
| 67,900(4) |
|
| 4,971,638 |
| ||||||||||||||||||||||||||||||||
| 11/1/21 |
|
| 109,680(5) |
|
| 8,030,770 |
| ||||||||||||||||||||||||||||||||||||||||||||
F. J. Dellaquila |
| 10/1/13 |
|
| 100,000 |
|
| 65.07 |
|
| 10/1/23 |
|
| (2) |
|
| 10,000(2) |
|
| 732,200 |
| |||||||||||||||||||||||||||||||
| 11/3/20 |
|
| 43,615(4) |
|
| 3,193,490 |
| ||||||||||||||||||||||||||||||||||||||||||||
| 11/1/21 |
|
| 33,426(5) |
|
| 2,447,452 |
| ||||||||||||||||||||||||||||||||||||||||||||
R. R. Krishnan |
| (2) |
|
| 22,000(2) |
|
| 1,610,840 |
| |||||||||||||||||||||||||||||||||||||||||||
| 11/3/20 |
|
| 15,114(4) |
|
| 1,106,647 |
| ||||||||||||||||||||||||||||||||||||||||||||
| 4/6/21 |
|
| 20,000(4) |
|
| 1,464,400 |
| ||||||||||||||||||||||||||||||||||||||||||||
| 11/1/21 |
|
| 33,948(5) |
|
| 2,485,673 |
| ||||||||||||||||||||||||||||||||||||||||||||
| 7/20/20 |
|
| 1,000(6) |
|
| 73,220 |
| ||||||||||||||||||||||||||||||||||||||||||||
M. J. Bulanda(7) |
| 10/1/13 |
|
| 40,000 |
|
| 65.07 |
|
| 10/1/23 |
|
| (2) |
|
| 22,000(2) |
|
| 1,610,840 |
| |||||||||||||||||||||||||||||||
| 11/3/20 |
|
| 36,346(4) |
|
| 2,661,254 |
| ||||||||||||||||||||||||||||||||||||||||||||
| 11/1/21 |
|
| 27,681(5) |
|
| 2,026,803 |
| ||||||||||||||||||||||||||||||||||||||||||||
S. Y. Bosco |
| 10/1/13 |
|
| 12,000 |
|
| 65.07 |
|
| 10/1/23 |
|
| 11/3/20 |
|
| 31,985 (4) |
|
| 2,341,942 |
| |||||||||||||||||||||||||||||||
| 11/1/21 |
|
| 24,547(5) |
|
| 1,797,331 |
|
(1) | The options |
(2) | Consists of restricted stock which vests as follows: |
Name | Number of Shares | Vesting Term (in years) | Grant Date | Vesting Date | ||||||||||||||||||||||||||||||||||||
D. N. Farr | 80,000 | 6 | 10/3/2011 | 10/3/2017 | ||||||||||||||||||||||||||||||||||||
60,000 | 3 | 11/4/2014 | 11/4/2017 | |||||||||||||||||||||||||||||||||||||
100,000 | 10 | 10/7/2008 | 10/7/2018 | |||||||||||||||||||||||||||||||||||||
100,000 | 5 | 11/4/2014 | 11/4/2019 | |||||||||||||||||||||||||||||||||||||
E. L. Monser | 10,000 | 3 | 11/1/2016 | 11/1/2019 | ||||||||||||||||||||||||||||||||||||
F. J. Dellaquila | 10,000 | 10 | 10/7/2008 | 10/7/2018 | ||||||||||||||||||||||||||||||||||||
20,000 | 10 | 10/5/2009 | 10/5/2019 | |||||||||||||||||||||||||||||||||||||
10,000 | 8 | 10/1/2013 | 10/1/2021 | |||||||||||||||||||||||||||||||||||||
20,000 | 5 | 11/1/2016 | 11/1/2021 | |||||||||||||||||||||||||||||||||||||
E. M. Purvis(7) | 20,000 | 10 | 10/1/2007 | 10/1/2017 | ||||||||||||||||||||||||||||||||||||
10,000 | 3 | 11/1/2016 | 11/1/2019 | |||||||||||||||||||||||||||||||||||||
10,000 | 10 | 10/3/2011 | 10/3/2021 | |||||||||||||||||||||||||||||||||||||
S. J. Pelch | 10,000 | 5 | 11/1/2016 | 11/1/2021 | ||||||||||||||||||||||||||||||||||||
10,000 | 10 | 10/1/2013 | 10/1/2023 | |||||||||||||||||||||||||||||||||||||
15,000 | 10 | 11/3/2015 | 11/3/2025 |
Name
|
Number of Shares
|
Vesting Term (in years)
| Grant Date
| Vesting Date
| ||||||||||||
S. L. Karsanbhai |
| 10,000 |
|
| 10 |
|
| 2/1/2016 |
|
| 2/1/2026 |
| ||||
| 10,000 |
|
| 10 |
|
| 11/6/2018 |
|
| 11/6/2028 |
| |||||
| 5,000 |
|
| 10 |
|
| 11/3/2020 |
|
| 11/3/2030 |
| |||||
| 50,000 |
|
| 10 |
|
| 2/8/2021 |
|
| 2/8/2031 |
| |||||
F. J. Dellaquila |
| 10,000 |
|
| 5 |
|
| 4/30/2018 |
|
| 4/30/2023 |
| ||||
R. R. Krishnan |
| 5,000 |
|
| 5 |
|
| 11/7/2017 |
|
| 11/7/2022 |
| ||||
| 5,000 |
|
| 5 |
|
| 11/3/2020 |
|
| 11/3/2025 |
| |||||
| 12,000 |
|
| 5 |
|
| 2/8/2021 |
|
| 2/8/2026 |
| |||||
M. J. Bulanda |
| 10,000 |
|
| 10 |
|
| 10/1/2013 |
|
| 10/1/2023 |
| ||||
| 12,000 |
|
| 5 |
|
| 2/8/2021 |
|
| 2/8/2026 |
|
(3) | Based on the closing |
(4) | Consists of performance |
(5) | Consists of performance |
38 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
COMPENSATION TABLES
(6) | Consists of restricted stock |
(7) | Mr. |
28 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
COMPENSATION TABLES
Option Exercises and Stock Vested
The following table provides the number of shares acquired and value realized upon vesting for our NEOs in fiscal 20172022 for stock option exercises, performance shares awards earned and the vesting ofvested restricted stock and the remaining 40% portion of the earned 2013 performance share awards on September 30, 2017.stock.
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(4) | ||||||||||||
D. N. Farr | 190,713 | 1,886,431 | 163,400 | (2) | 10,262,337 | |||||||||||
E. L. Monser(5) | 180,000 | 2,780,500 | 58,480 | (2) | 3,672,836 | |||||||||||
5,000 | (3) | 269,100 | ||||||||||||||
F. J. Dellaquila | 15,000 | 137,025 | 44,720 | (2) | 2,808,640 | |||||||||||
15,000 | (3) | 807,300 | ||||||||||||||
E. M. Purvis
|
| 15,000
|
|
| 137,025
|
|
| 34,400
| (2)
|
| 2,160,492
|
| ||||
S. J. Pelch | 8,000 | 73,680 | 8,944 | (2) | 561,728 |
Option Awards
|
Stock Awards
| |||||||||||||||
Name
|
Number of Shares Acquired on Exercise
|
Value Realized on Exercise ($)(1)
|
Number of Shares Acquired on Vesting (#)
|
Value Realized on Vesting ($)(4)
| ||||||||||||
S. L. Karsanbhai |
| 36,319(2) |
|
| 3,170,629 |
| ||||||||||
F. J. Dellaquila |
| 43,582(2) |
|
| 3,804,700 |
| ||||||||||
| 10,000(3) |
|
| 946,000 |
| |||||||||||
| 20,000(3) |
|
| 1,956,700 |
| |||||||||||
R. R. Krishnan |
| 16,960(2) |
|
| 1,480,608 |
| ||||||||||
M. J. Bulanda
|
| 10,000 |
|
| 531,400 |
|
| 36,319(2) |
|
| 3,170,629 |
| ||||
| 5,000(3) |
|
| 489,175 |
| |||||||||||
S. Y. Bosco |
| 31,960(2) |
|
| 2,790,113 |
|
(1) | Represents the difference between the option exercise price and the average of the high and low |
(2) | Reflects the |
(3) | Represents the vesting of |
(4) | Values realized for performance shares earned are based on the average of the high and low |
Below is information on the pension benefits for the NEOs under each of the following pension plans.
Emerson Retirement Plan
The Emerson Electric Co. Retirement Plan is atax-qualified retirement program that covered approximately 60,00031,000 participants on September 30, 2017,2022, including the NEOs. Plan benefits are based primarilygenerally on a formula that considers the highest consecutive five-yearfive-calendar-year average of the executive’s annual cash earnings, base salary plus bonus (final average earnings), not to exceed theIRS-prescribed limit applicable totax-qualified plans ($265,000305,000 for fiscal 2017)calendar year 2022).
The plan provides an annual benefit accrual for each year of service of 1.0% of final average earnings up to “covered compensation” and 1.5% of final average earnings in excess of “covered compensation,” limited to 35 years of service. When the employee has attained 35 years of service, the annual accrual is 1.0% of final average earnings. “Covered compensation” is based on the average of Social Security taxable wage bases, and varies per individual based on Social Security retirement age. A small portion of the accrued benefits payable from the plan for Messrs. Farr, Pelch and Purviseach of the NEOs (other than Mr. Dellaquila) includes benefits determined under different but lesser pension formulas for periods of prior service at Company business units. In addition, Mr. Karsanbhai is no longer accruing pension benefit service under the plan.
The accumulated benefit that an employee earns over his or her career with the Company is payable upon retirement as a monthly annuity for life with a guaranteed minimum term of five years. The normal retirement age for this plan is 65. Employees who have attained age 55 and 10 years of service
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 39 |
COMPENSATION TABLES
are eligible to retire early under the plan. As of September 30, 2017,2022, Messrs. Farr, Monser, Dellaquila and PurvisBulanda and Ms. Bosco are eligible for early retirement. If an employee retires before age 65, the accrued benefit is reduced for the number of years prior to age 65 that the benefit commences (4% for each of the first 5five years that retirement precedes age 65, and 5% for each additional year). Employees vest in their accrued benefit after 5five years of service. The plan provides for spousal joint and survivor annuity options. No employee contributions are required.
29 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
COMPENSATION TABLES
Benefits under the plan are subject to the limitations under IRC Section 415, which in fiscal 2017 is $215,0002022 was $245,000 per year for a single life annuity payable at anIRS-prescribed retirement age. This limitation may be actuarially adjusted in accordance with IRS rules for items such as other forms of distribution and different annuity starting dates.
Emerson Pension Restoration Plan
The Emerson Electric Co. Pension Restoration Plan is anon-qualified plan that is an unfunded obligation of the Company. Benefits are payable from the Company’s general operating funds. Participation in, and benefits payable from, the plan are by award, subject to Compensation Committee approval. A participant who terminates employment with a vested retirement benefit will receive at age 65 or later termination of employment a benefit based on the same final average earnings formula as described above for the Emerson Retirement Plan, for all years of service at Emerson, and not subject to theIRS-prescribed limitations on benefits and compensation applicable to the Emerson Retirement Plan. The benefit payable from the Pension Restoration Plan is reduced by the benefit received from the Emerson Retirement Plan. Benefits payable from the Pension Restoration Plan are generally payable as a monthly annuity for life with a guaranteed minimum term of five years, provided that in certain circumstances a participant or a participant’s beneficiary may be eligible to receive a lump sum payment. If an NEO is terminated for cause or engages in actions that adversely affect the Company, the benefits may be forfeited. No pension benefits were paid to any of the NEOs during fiscal 2017. 2022. At September 30, 2022, only Mr. Dellaquila and Ms. Bosco participated in the Pension Restoration Plan. In early fiscal 2023, Mr. Bulanda met the Committee approved criteria and also became a participant.
The amounts reported in the table below equal the present value of the accumulated benefit at September 30, 20172022 for the NEOs under each plan based upon the assumptions described in footnote (2).
Pension Benefits
Name | Plan Name | Number Of Years Credited Service (#)(1) | Present Value of Benefit ($)(2) | Payments During Last Fiscal Year ($) | ||||||||||
D. N. Farr | Emerson Electric Co. Retirement Plan Emerson Electric Co. Pension Restoration Plan | | 37 37 |
| | $1,620,000 $23,581,000 |
| | — — | |||||
E. L. Monser | Emerson Electric Co. Retirement Plan Emerson Electric Co. Pension Restoration Plan | | 16 16 |
| | $772,000 $4,519,000 |
| | — — | |||||
F. J. Dellaquila | Emerson Electric Co. Retirement Plan Emerson Electric Co. Pension Restoration Plan | | 26 26 |
| | $1,097,000 $6,009,000 |
| | — — | |||||
E. M. Purvis(3) | Emerson Electric Co. Retirement Plan | 34 | $1,414,000 | — | ||||||||||
S. J. Pelch | Emerson Electric Co. Retirement Plan | 31 | $924,000 | — |
Pension Benefits Table | ||||||||||||
Name
| Plan Name
| Number Of Years Credited Service (#)(1)
| Present Value of Benefit ($)(2)
| Payments
| ||||||||
S. L. Karsanbhai(3) | Emerson Electric Co. Retirement Plan | 20 | $ | 457,000 | — | |||||||
F. J. Dellaquila | Emerson Electric Co. Retirement Plan Emerson Electric Co. Pension Restoration Plan | 31 31 | $ $ | 1,359,000 8,616,000 |
| | — — |
| ||||
R. R. Krishnan | Emerson Electric Co. Retirement Plan | 26 | $ | 451,000 | — | |||||||
M. J. Bulanda | Emerson Electric Co. Retirement Plan | 37 | $ | 924,000 | — | |||||||
S. Y. Bosco | Emerson Electric Co. Retirement Plan Emerson Electric Co. Pension Restoration Plan | 18 18 | $ $ | 793,000 2,157,000 |
| | — — |
|
(1) | The number of years of service credited under the plans is computed as of the same pension plan measurement date used for financial statement reporting purposes with respect to the Company’s financial statements for the last completed fiscal year. |
(2) | The accumulated benefit is based on service and earnings under the plans through September 30, |
(3) | Mr. |
30 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
COMPENSATION TABLES
Nonqualified Deferred Compensation
The Emerson Electric Co. Savings Investment Restoration Plan (“(the “Savings Investment Restoration Plan I”) and the Emerson Electric Co. Savings Investment Restoration Plan”Plan II (the “Savings Investment Restoration Plan II” and together with the Savings Investment Restoration Plan I, collectively, the “Savings Investment Restoration Plans”) is aare nonqualified, unfunded defined contribution plan.plans. The plan providesplans provide benefits that would have been provided under the Emerson Electric Co. Employee Savings Investment Plan, the Company’s qualified 401(k) plan (the “ESIP”), but could not be provided due to IRC qualified plan compensation limits.
Participants in the Savings Investment Restoration PlanPlans are designated by the Compensation Committee. Participants may defer up to 20% of compensation and the Company will make matching contributions for participants who defer at least 5% of compensation in an amount equal toto: (a) for the Savings Investment Restoration Plan I, 50% of the first 5% of those deferrals (not to exceed 2.5% of compensation less the maximum matching
40 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
COMPENSATION TABLES
amount the participant could have received under the ESIP).; and (b) for the Savings Investment Restoration Plan II, 7.5% of the participant’s compensation less (x) the maximum matching amount the participant could have received under the ESIP and (y) any other contribution for the applicable year made on behalf of the participant under the ESIP. Compensation generally includes cash pay (base salary and annual bonus) received by a participant, including employee ESIP contributions, and excludes any reimbursements, awards or other payments under equity compensation plans, stock option gains, any severance payments and other incentive payments. Amounts deferred under the plan are 100% vested and will beare credited quarterly with returns based on the sameparticipant’s selection of available investment alternatives, selected by the participant under the ESIP, which include an Emerson common stock fund and more than 20 other mutual fund investment alternatives. The Company matching contributions vest 20% each year for the first 5 years of service, after which the participant is 100% vested in all contributions. The matching contributions are credited to a book-entry account reflecting units equivalent to Emerson stock. There are no “above-market earnings” as all earnings are market-based consistent with the investment funds elected. All deferred amounts and Company matching contributions are accounted for on the Company’s financial statements and are unfunded obligations of the Company and paid in cash when benefit payments commence.
Generally, distribution of vested account balances occurs in a lump sum no later than one year following termination of employment. Upon retirement, or in other certain instances, participants may receive their account balances in up to ten10 equal annual installments, if previously elected. Unvested matching contributions become fully vested upon (i) retirement with Compensation Committee approval on or after the age of 55, (ii) death or disability, (iii) termination of the plan, or (iv) a change of control of the Company. Additionally, under the Savings Investment Restoration Plan II, a participant will be entitled to payment of vested matching contributions only if the Compensation Committee determines that such participant is an executive in good standing at the time the executive terminates employment (whether upon retirement or otherwise); provided, that if such participant is discharged for cause and/or engages in other activity that is harmful to or competitive with the Company, the rights of such participant to such amount will be forfeited and any such amount that has previously been paid to the participant may be recovered by the Company, unless the Committee determines that such activity is not detrimental to the best interests of the Company. All or a portion of any participant’s vested account balance may be distributed earlier in the event of an unforeseeable emergency, if approved by the Compensation Committee. For amounts deferred or vested as of December 31, 2004, a participant may receive a distribution ofafter-tax deferrals upon 30 days’ notice.
Nonqualified Deferred Compensation
Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(1) | Aggregate Earnings in Last FY ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance ($)(1)(3) | |||||||||||||||
D. N. Farr | 240,000 | 67,050 | 1,654,562 | — | 10,653,016 | |||||||||||||||
E. L. Monser | 135,967 | 34,740 | 432,354 | — | 3,265,764 | |||||||||||||||
F. J. Dellaquila | 158,988 | 33,019 | 228,164 | — | 3,728,241 | |||||||||||||||
E. M. Purvis | 143,917 | 28,029 | 131,359 | — | 1,151,189 | |||||||||||||||
S. J. Pelch | 89,097 | 15,057 | 149,197 | — | 941,148 |
Nonqualified Deferred Compensation Table
| ||||||||||||||||||||
Name
| Executive Contributions in Last FY ($)(1)
| Emerson Contributions ($)(1)
| Aggregate Earnings in Last FY ($)(2)
| Aggregate Withdrawals/ Distributions ($)
| Aggregate ($)(1)(3)
| |||||||||||||||
S. L. Karsanbhai | 166,300 | 175,550 | (146,396 | ) | — | 670,332 | ||||||||||||||
F. J. Dellaquila | 101,588 | 41,260 | (784,420 | ) | — | 5,027,792 | ||||||||||||||
R. R. Krishnan | 137,917 | 24,998 | (45,846 | ) | — | 159,716 | ||||||||||||||
M. J. Bulanda | 215,533 | 25,269 | (215,150 | ) | — | 1,144,335 | ||||||||||||||
S. Y. Bosco | 281,250 | 28,536 | (517,149 | ) | — | 2,435,314 |
(1) | Includes amounts contributed by each NEO and by the Company, respectively, to the Savings Investment Restoration |
(2) | Aggregate earnings under the plan are not above-market and are not included in the Summary Compensation Table. |
(3) | Includes amounts reported as compensation for the NEOs in the Summary Compensation Table for prior years. The following aggregate amounts of NEO and Company contributions were included in the Summary Compensation Table for fiscal |
31 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
COMPENSATION TABLES
Potential Payments Upon Termination or Change of Control
As described above, the NEOs do not have any written or oral employment agreements with the Company and have no other agreements that contain severance or “golden parachute” provisions. As described on page 34,44, the terms and conditions of Mr. Purvis’Bulanda’s retirement are set forth in a letter agreement. Please see “Description of M. J. Bulanda Letter Agreement” on page 44.
The information below generally describes payments or benefits under the Company’s compensation plans and arrangements that would be available to all participants in the plans, including the NEOs, in the event of the participant’s termination of employment or of a Change of Control of the Company. Any such payments or benefits that an NEO has elected to defer would be provided in accordance with IRC Section 409A. Payments or benefits under other plans and arrangements that are generally available to the Company’s employees on similar terms are not described.
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 41 |
COMPENSATION TABLES
Conditions and Obligations Applicable to Receipt of Termination/Change of Control Payments
In the event of any termination or Change of Control, all executives participating in stock options, performance shares, restricted stock or the Pension Restoration Plan have the following obligations to the Company.
Stock Options. NEOsareNEOs are obligated to keep Company information confidential, assign to the Company intellectual property rights, and, during and for one year after termination, not compete with, or solicit the employees of, the Company.
Performance Shares and Restricted Stock. NEOs are obligated not to compete with, or solicit the employees of, the Company during and for two years after termination.termination (one year in the case of restricted stock unit awards for Mr. Krishnan). For awards granted from November 2018, the awards are also conditioned upon the participant’s compliance with all practices and policies under Emerson’s Ethics and Compliance Program, including the Code of Conduct and Code of Ethics, and that a participant’s actions will reflect Emerson’s Core Value of Integrity. Violations of such Ethics and Compliance Program may result in the forfeiture of such awards or the repayment of any amounts paid under such awards.
Pension Restoration Plan. If an NEO is discharged for cause, enters into competition with the Company, interferes with the Company’s relations with a customer, or engages in any activity that would result in a decrease in sales by the Company, the NEO’s rights to benefits under the Plan will be forfeited, unless the Compensation Committee determines that the activity is not detrimental to the Company.
Savings Investment Restoration Plans. The NEO’s rights to benefits under the Savings Investment Restoration Plan II will be forfeited if the NEO is (a) not in good standing at the time the NEO terminates employment (whether upon retirement or otherwise) as determined by the Compensation Committee, or (b) is discharged for cause, enters into competition with the Company, interferes with the Company’s relations with a customer, or engages in any activity that would result in a decrease in sales by the Company, unless the Compensation Committee determines that the activity is not detrimental to the Company.
Additionally, upon retirement or involuntary termination, NEOs generally execute letter agreements reaffirming their applicable confidentiality,non-competition andnon-solicitation obligations and may enter into extendednon-competition agreements.
Payments Made Upon Retirement
Upon retirement, the Company’s compensation plans and arrangements provide as follows:
The Compensation Committee has the discretion to determine whether any annual cash bonus award would be paid, subject to satisfaction of any pre-established performance conditions;
Upon retirement, as determined by the Compensation Committee, all unvested stock options held for at least 12 months before retirement would vest, and all unexercised options could be exercised for a period of five years after retirement, up to the original option term;
Upon retirement after age 65, the NEOs would receive a prorated payout of performance shares, as reasonably determined by the Compensation Committee, subject to satisfaction ofpre-established performance conditions, to be paid after the applicable performance period. Before age 65, the Compensation Committee has the discretion to determine whether the NEOsa NEO would receive a prorated, other or no payout of performance shares, which payout would be made after the performance period, subject to the satisfaction of performance conditions;
The Compensation Committee has the discretion to determine whether to allow the NEOs to continue to vest in restricted stock following retirement, or to reduce the vesting period to not less than three years;
If not previously vested, the NEOs would be vested in Company contributions to the Savings Investment Restoration PlanPlans if retirement occurs with the approval of the Compensation Committee on or after age 55; and
Under the Company’s Pension Restoration Plan, an NEO’s benefit commences after age 65 or later retirement and is paid as a monthly annuity, or a lump sum if elected.
Payments Made Upon Death or Disability
Upon death or total disability, the Company’s compensation plans and arrangements provide as follows:
The Compensation Committee has the discretion to determine whether any annual cash bonus award would be paid, subject to satisfaction of any pre-established performance conditions;
32 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
COMPENSATION TABLES
The Compensation Committee has the discretion to determine whether the NEOs would receive full, partial or no payout of performance shares after the performance period and subject to satisfaction ofpre-established performance conditions;
Restricted stock will be prorated for years of service during the vesting period and distributed free of restriction at the end of the vesting period, with Compensation Committee discretion to reduce the vesting period to not less than three years;
If not previously vested, the NEOs would vest in Company contributions to the Savings Investment Restoration Plan;Plans;
Upon the death of an NEO participating in the Pension Restoration Plan, the surviving spouse would receive, in the form of a monthly annuity payment commencing at the NEO’s earliest retirement date, 50% of the actuarially equivalent accrued benefit. The estate of a single person who dies while employed will receive a lump sum benefit as of the date of death which is actuarially equivalent to the annuity that the surviving spouse of a married person would have received. Upon termination due to disability, benefits would start the later of when the NEO reaches age 65 or termination, and be paid in the form of a monthly annuity or a lump sum distribution; and
Upon an NEO’s death, the beneficiaries would receive proceeds from Company provided term life insurance.
42 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
COMPENSATION TABLES
Payments Made Upon Other Termination
If an NEO’s employment terminates for any other reason (i.e., voluntary termination, termination for cause or involuntary termination), he or she would only receive:
Payment of the vested portion of the NEO’s accounts in the Savings Investment Restoration Plan account,Plans, in a single lump sum after termination.termination, subject, in the case of any Savings Investment Restoration Plan II account, to (i) the Compensation Committee’s determination that the NEO is in good standing at the time of the termination, and (ii) the NEO not being discharged for cause or engaging in other activity that is harmful to or competitive with the Company, as provided under the Savings Investment Restoration Plan II.
Under the Company’s compensation plans and arrangements, the Compensation Committee may also, in its discretion, determine whether to provide any additional payments or benefits to the NEO. This exercise of discretion is unlikely to result in any additional benefits in the case of a voluntary quitresignation or termination for cause. This includes the discretion to:
Determine whether any annual cash bonus award would be paid, subject to satisfaction ofpre-established performance conditions;
If termination occurs with Company consent, the Compensation Committee may allow the NEO up to three months after termination, up to the original option term, to exercise vested stock options;
Determine whether the NEO would receive full, partial or no payout of performance shares after the performance period and subject to satisfaction ofpre-established performance conditions;
Determine whether to allow the NEO to continue to vest in restricted stock, or to reduce the vesting period to not less than three years; and
Determine whether an NEO terminated for cause or for engaging in actions that adversely affect the Company will forfeit the right to receive vested benefits under the Pension Restoration Plan starting after the later of age 65 or termination, paid in the form of a monthly annuity or a lump sum distribution.
Payments Made Upon Change of Control
Upon a Change of Control, the Company’s compensation plans and arrangements provide as follows:
Annual cash bonus awards are not paid;
All unvested stock options become fully exercisable if either the options have not been appropriately assumed by the acquiror, or within two years after the change of control, the optionee is involuntarily terminated other than for cause, the optionee’s title, duties or responsibilities are adversely changed, or the optionee is required to relocate;
Performance objectives of outstanding performance shares awards would be deemed satisfied, with payout made immediately. For performance shares granted under the shareholder approved 2015 Incentive Shares Plan, performance objectives would be deemed satisfied at the highest level provided for in the award, if a “double trigger” event occurs, meaning that in connection with a change of control (a) the award has not been appropriately assumed or an equivalent award substituted by the acquiror, (b) cash is the primary form of consideration paid to shareholders, or (c) following the change of control, the holder is involuntarily terminated other than for cause, or within two years after the change of control, the holder’s title, duties or responsibilities are adversely changed, or the holder is required to relocate by more than 50 miles;
33 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
COMPENSATION TABLES
|
The NEO would vest in all unvested Company contributions to the Savings Investment Restoration Plan,Plans, and the vested amount would be paid in a single lump sum; and
An NEO participating in the Pension Restoration Plan would become fully vested and could elect immediate payment in the form of a lump sum or a life annuity. In early fiscal 2016, for benefits accruing after 2004, the Plan was amended to conform the assumptions used in calculating lump sums payable to the assumptions used by the Company to accrue liabilities with respect to U.S. retirement plans for financial reporting purposes, as set forth in the Company’s Annual Report on Form10-K.
“Change of Control” Definition
“Change of Control” generally means: (i) the acquisition of beneficial ownership of 20% or more of the Company’s common stock, (ii) individuals who currently make up the Company’s Board of Directors (or who subsequently become Directors after being approved for election by at least a majority of current Directors) ceasing to make up at least a majority of the Board, or (iii) approval by the Company’s shareholders of (a) a reorganization, merger or consolidation which results in the ownership of 50% or more of the Company’s common stock by persons or entities that were not previously shareholders; (b) a liquidation or dissolution of the Company; or (c) the sale of substantially all of the Company’s assets. With respect to participants who have deferred payment of earned awards under the 2006 Incentive Shares Plan, and as provided for in the 2015 Incentive Shares Plan, the Change of Control must also meet the requirements of IRC Section 409A and any transaction referenced in (iii) above must have actually occurred, rather than merely have been approved. With respect to the Company’s Pension Restoration Plan and Savings Investment Restoration Plan,Plans, a Change of Control refers to a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, as such terms are defined under IRC Section 409A and the regulations promulgated thereunder.
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 43 |
COMPENSATION TABLES
Description of E. M. PurvisJ. Bulanda Letter Agreement
E. M. Purvis has announced that he will retire onMr. Bulanda is retiring from the Company effective December 31, 2017.2022. On November 8, 2017,22, 2022, the Company and Mr. PurvisBulanda entered into a letter agreement in connection with his retirement.
Under the letter agreement, Mr. Purvis agrees,Bulanda agreed, among other things: (i) not to compete with, or solicit toor hire the employees of, the Company or any of its affiliatessubsidiaries during a period of fivethree years from his date of resignation;the retirement date; (ii) not to use or disclose any confidential information of the Company; (iii) to reaffirm all existingnon-compete, invention,non-disclosure andnon-solicitation obligations he has to the CompanyCompany; and (iv) to comply withnon-disparagement obligations. Mr. Purvis willBulanda also releasereleased and dischargedischarged the Company, its affiliates, and its and their respective directors, officers, employees, agents and agentsother parties from any and all claims or liabilityliabilities of whatever nature and will remain subject to the Company’s clawback policy.policies.
Under the Letter Agreement, Mr. PurvisBulanda will continue to receive his base salary and certain other benefits through the retirement date and will receive salary continuation payments at his current base salary rate until the earlier of September 30, 2023 or the date on which he commences other employment. Mr. Bulanda remained eligible to receive his fiscal 2022 annual bonus based on the Company’s financial performance for fiscal 2022. In accordance with the Company’s 2011 Stock Option Plan, all of his outstanding fully vested options will remain exercisable through October 1, 2023, their original expiration date. As permitted under the Company’s 2015 Incentive Shares Plan, Mr. Bulanda will remain eligible to receive a full payout of any earned awardawards under the 2016Fiscal 2021 – 2023 Performance Shares Program, and 2017 performance shares programs,a full payout of any earned awards under the Fiscal 2022 – 2024 Performance Shares Program, subject, in each case, to the Company’s achievement of the applicable performance objectives.objectives, to be paid at the times provided for under the programs. As permitted under the Company’s Incentive Shares Plans, Mr. Purvis’ unvested options held as of his retirement will vest, and all vested options will remain exercisable for five years following retirement, but no longer than the original term of each option. In addition, Mr. Purvis’Bulanda’s restricted stock awardsaward granted on October 1, 2013 will continue to vest in accordance with their terms.according to its terms and be payable on October 1, 2023, the original vesting date, and his restricted stock award granted on February 8, 2021 will be canceled. Please see the “Outstanding Equity Awards at Fiscal Year-End Table” aton page 27 above38 for more information on these awards. The intrinsic value of his unvested options as September 30, 2017 was $38,700.
Mr. PurvisBulanda will be eligible to receive monthly pension benefits earned under the Company’s qualified and non-qualified pension plan. Mr. Purvis was awarded participation in the Company’snon-qualified pension under which he will be eligible at age 65 to receive monthly benefits of approximately $49,000, depending on the form of annuity election andplans, pursuant to the terms and conditions of and to be paid in the plan.manner and at the times set for in such plans. He will also be eligible to receive distributions fromunder the Company’s qualified andnon-qualified 401(k) and profit-sharing retirement savings plans, as provided under those plans.
34 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
COMPENSATION TABLES
If Mr. PurvisBulanda violates any of his obligations to the Company under the letter agreement,Letter Agreement, he will forfeit all payments to be made or benefits provided under the letter agreement,Letter Agreement and will repay to the Company, as liquidated damages,one-half of the economic value of all benefits provided to him under the letter agreementLetter Agreement prior to the date of breach.
44 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
COMPENSATION TABLES
Quantification of Payments and Benefits
The following tables quantify the potential payments and benefits upon termination or a Change of Control of the Company for each of the NEOs, assuming the NEO’s employment terminatedevent occurred on September 30, 2017,2022, given the NEO’s compensation and service level as of that date and, if applicable, based on the Company’s closing stockshare price of $62.84$73.23 on that date. Other benefit assumptions made with respect to specific payments or benefits are set forth in applicable footnotes to the tables. See “Description of E. M. PurvisJ. Bulanda Letter Agreement” above for a description of the Mr. Purvis’Bulanda’s retirement arrangements. Due to the number of factors that affect the nature and amount of any payments or benefits provided upon a termination or Change of Control including, but not limited to, the date of any such event, the Company’s stock price and the NEO’s, any actual amounts paid or distributed may be different. None of the payments set forth below would begrossed-up for taxes.
S. L. Karsanbhai | ||||||||||||||||||||||||||||||||||||||||||||||||
D. N. Farr
| ||||||||||||||||||||||||||||||||||||||||||||||||
Executive Benefits and Payments Upon Termination | Retirement($) | Death($) | Disability($) | Voluntary or For Cause Term. ($) | Invol. Term. not for Cause ($) | Change of Control ($) | Retirement ($)
| Death ($)
| Disability ($)
|
Voluntary or For ($)
| Invol. Term. not ($)
| Change of ($)(13)
| ||||||||||||||||||||||||||||||||||||
Annual Cash Incentive
|
| —
| (1)
|
| —
| (1)
|
| —
| (1)
|
| —
| (2)
|
| —
| (1)
|
| —
| (3)
|
| — | (1) |
| — | (1) |
| — | (1) |
| — | (2) |
| — | (1) |
| — | (3) | ||||||||||||
Stock Options
|
| —
| (4)
|
| —
| (4)
|
| —
| (4)
|
| —
|
|
| —
|
|
| —
| (4)
|
| — | (4) |
| — | (4) |
| — | (4) |
| — |
|
| — |
|
| — | (4) | ||||||||||||
Performance Shares
|
| —
| (2)
|
| —
| (2)
|
| —
| (2)
|
| —
| (2)
|
| —
| (2)
|
| 22,622,400
| (5)
|
| — | (5)(6) |
| — | (5)(6) |
| — | (5)(6) |
| — | (2)(5) |
| — | (5)(6) |
| 22,712,309 | (7) | ||||||||||||
Restricted Stock
|
| —
| (6)
|
| 18,223,600
| (7)
|
| 18,223,600
| (7)
|
| —
| (6)
|
| —
| (6)
|
| 21,365,600
| (8)
|
| — | (8) |
| 1,610,840 | (9) |
| 1,610,840 | (9) |
| — | (8) |
| — | (8) |
| 5,491,500 | (10) | ||||||||||||
Pension Restoration Plan(9)
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| —
|
| ||||||||||||||||||||||||||||||
Pension Restoration Plan |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||||||||||
Life Insurance Benefits
|
| —
|
|
| 200,000
| (10)
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||
F. J. Dellaquila | ||||||||||||||||||||||||||||||||||||||||||||||||
E. L. Monser
| ||||||||||||||||||||||||||||||||||||||||||||||||
Executive Benefits and Payments Upon Termination | Retirement($) | Death($) | Disability($) | Voluntary or For Cause Term. ($) | Invol. Term. not for Cause ($) | Change of Control ($)(11) | Retirement ($)
| Death ($)
| Disability ($)
|
Voluntary or For ($)
| Invol. Term. not ($)
| Change of ($)(13)
| ||||||||||||||||||||||||||||||||||||
Annual Cash Incentive
|
| —
| (1)
|
| —
| (1)
|
| —
| (1)
|
| —
| (2)
|
| —
| (1)
|
| —
| (3)
|
| — | (1) |
| — | (1) |
| — | (1) |
| — | (2) |
| — | (1) |
| — | (3) | ||||||||||||
Stock Options
|
| —
| (4)
|
| —
| (4)
|
| —
| (4)
|
| —
|
|
| —
|
|
| —
| (4)
|
| — | (4) |
| — | (4) |
| — | (4) |
| — |
|
| — |
|
| — | (4) | ||||||||||||
Performance Shares
|
| —
| (2)
|
| —
| (2)
|
| —
| (2)
|
| —
| (2)
|
| —
| (2)
|
| 7,540,800
| (5)
|
| — | (5)(6) |
| — | (5)(6) |
| — | (5)(6) |
| — | (2)(5) |
| — | (5)(6) |
| 8,179,366 | (7) | ||||||||||||
Restricted Stock
|
| —
| (6)
|
| 209,467
| (7)
|
| 209,467
| (7)
|
| —
| (6)
|
| —
| (6)
|
| 628,400
| (8)
|
| — | (8) |
| 585,760 | (9) |
| 585,760 | (9) |
| — | (8) |
| — | (8) |
| 732,200 | (10) | ||||||||||||
Pension Restoration Plan(9)
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| —
|
| ||||||||||||||||||||||||||||||
Pension Restoration Plan(11) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||||||||||
Life Insurance Benefits
|
| —
|
|
| 200,000
| (10)
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| — |
|
| 200,000 | (12) |
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||
R. R. Krishnan | ||||||||||||||||||||||||||||||||||||||||||||||||
F. J. Dellaquila
| ||||||||||||||||||||||||||||||||||||||||||||||||
Executive Benefits and Payments Upon Termination | Retirement($) | Death($) | Disability($) | Voluntary or For Cause Term. ($) | Invol. Term. not for Cause ($) | Change of Control ($)(11) | Retirement ($)
| Death ($)
| Disability ($)
|
Voluntary or For ($)
| Invol. Term. not ($)
| Change of ($)(13)
| ||||||||||||||||||||||||||||||||||||
Annual Cash Incentive |
| — | (1) |
| — | (1) |
| — | (1) |
| — | (2) |
| — | (1) |
| — | (3) | ||||||||||||||||||||||||||||||
Stock Options |
| — | (4) |
| — | (4) |
| — | (4) |
| — |
|
| — |
|
| — | (4) | ||||||||||||||||||||||||||||||
Performance Shares |
| — | (5)(6) |
| — | (5)(6) |
| — | (5)(6) |
| — | (2)(5) |
| — | (5)(6) |
| 7,332,243 | (7) | ||||||||||||||||||||||||||||||
Restricted Stock |
| — | (8) |
| 912,809 | (9) |
| 912,809 | (9) |
| — | (8) |
| — | (8) |
| 1,684,060 | (10) | ||||||||||||||||||||||||||||||
Pension Restoration Plan |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||||||||||
Life Insurance Benefits |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||||||||||
M. J. Bulanda | ||||||||||||||||||||||||||||||||||||||||||||||||
Executive Benefits and Payments Upon Termination
| Retirement ($)
| Death ($)
| Disability ($)
|
Voluntary or For ($)
| Invol. Term. not ($)
| Change of ($)(13)
| ||||||||||||||||||||||||||||||||||||||||||
Annual Cash Incentive
|
| —
| (1)
|
| —
| (1)
|
| —
| (1)
|
| —
| (2)
|
| —
| (1)
|
| —
| (3)
|
| — | (1) |
| — | (1) |
| — | (1) |
| — | (2) |
| — | (1) |
| — | (3) | ||||||||||||
Stock Options |
| — | (4) |
| — | (4) |
| — | (4) |
| — |
|
| — |
|
| — | (4) | ||||||||||||||||||||||||||||||
Performance Shares |
| — | (5)(6) |
| — | (5)(6) |
| — | (5)(6) |
| — | (2)(5) |
| — | (5)(6) |
| 6,797,683 | (7) | ||||||||||||||||||||||||||||||
Restricted Stock |
| — | (8) |
| 1,010,436 | (9) |
| 1,010,436 | (9) |
| — | (8) |
| — | (8) |
| 1,610,840 | (10) | ||||||||||||||||||||||||||||||
Pension Restoration Plan |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||||||||||
Life Insurance Benefits |
| — |
|
| 200,000 | (12) |
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||||||||||
S. Y. Bosco | ||||||||||||||||||||||||||||||||||||||||||||||||
Executive Benefits and Payments Upon Termination
| Retirement ($)
| Death ($)
| Disability ($)
|
Voluntary or For ($)
| Invol. Term. not ($)
| Change of ($)(13)
| ||||||||||||||||||||||||||||||||||||||||||
Annual Cash Incentive |
| — | (1) |
| — | (1) |
| — | (1) |
| — | (2) |
| — | (1) |
| — | (3) | ||||||||||||||||||||||||||||||
Stock Options
|
| —
| (4)
|
| —
| (4)
|
| —
| (4)
|
| —
|
|
| —
|
|
| —
| (4)
|
| — | (4) |
| — | (4) |
| — | (4) |
| — |
|
| — |
|
| — | (4) | ||||||||||||
Performance Shares
|
| —
| (2)
|
| —
| (2)
|
| —
| (2)
|
| —
| (2)
|
| —
| (2)
|
| 7,540,800
| (5)
|
| — | (5)(6) |
| — | (5)(6) |
| — | (5)(6) |
| — | (2)(5) |
| — | (5)(6) |
| 6,001,946 | (7) | ||||||||||||
Restricted Stock
|
| —
| (6)
|
| 2,136,560
| (7)
|
| 2,136,560
| (7)
|
| —
| (6)
|
| —
| (6)
|
| 3,770,400
| (8)
|
| — | (8) |
| — | (9) |
| — | (9) |
| — | (8) |
| — | (8) |
| — | (10) | ||||||||||||
Pension Restoration Plan(9)
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| —
|
| ||||||||||||||||||||||||||||||
Pension Restoration Plan |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||||||||||
Life Insurance Benefits
|
| —
|
|
| 200,000
| (10)
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
35 PROXY STATEMENT FOR EMERSON 2018
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 45 |
COMPENSATION TABLES
S. J. Pelch
| ||||||||||||||||||||||||
Executive Benefits and Payments Upon Termination | Retirement($) | Death($) | Disability($) | Voluntary or For Cause Term. ($) | Invol. Term. not for Cause ($) | Change of Control ($)(11) | ||||||||||||||||||
Annual Cash Incentive
|
| —
| (1)
|
| —
| (1)
|
| —
| (1)
|
| —
| (2)
|
| —
| (1)
|
| —
| (3)
| ||||||
Stock Options
|
| —
| (4)
|
| —
| (4)
|
| —
| (4)
|
| —
|
|
| —
|
|
| —
| (4)
| ||||||
Performance Shares
|
| —
| (2)
|
| —
| (2)
|
| —
| (2)
|
| —
| (2)
|
| —
| (2)
|
| 7,540,800
| (5)
| ||||||
Restricted Stock
|
| —
| (6)
|
| 565,560
| (7)
|
| 565,560
| (7)
|
| —
| (6)
|
| —
| (6)
|
| 2,199,400
| (8)
| ||||||
Pension Restoration Plan
|
| N/A
|
|
| N/A
|
|
| N/A
|
|
| N/A
|
|
| N/A
|
|
| N/A
|
| ||||||
Life Insurance Benefits
|
| —
|
|
| 200,000
| (10)
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
(1) | The Committee has discretion whether or not to pay a bonus, subject to satisfaction of performance conditions. For illustrative purposes only, the bonuses paid for fiscal |
(2) | This column assumes the Committee would exercise its discretion not to pay a bonus or make a payout of outstanding performance shares. |
(3) | There would be no acceleration or special treatment for annual cash incentive opportunities for the fiscal year in which the Change of Control occurs. |
(4) | Represents the closing share price of |
(5) | The Committee has discretion to provide a prorated, other or no payout, subject to the achievement of performance conditions. |
(6) | Assumes the Committee does not allow any payout for the performance shares awards granted in 2021 or 2022. See Outstanding Equity Awards at Fiscal Year-End table on page 38. |
(7) | The amount shown includes the entire amount of |
Assumes Committee would exercise its discretion to not allow any further vesting. |
Represents pro rata value of all unvested restricted stock, based on years elapsed rounded to whole years. For Mr. Krishnan includes 1,000 restricted stock units. |
Represents the value of all unvested shares of restricted |
See “Pension Benefits” on page |
Represents face amount of policies paid for by the Company which are not generally available to all employees. |
The Change of Control column assumes that the applicable conditions for a “double trigger” change in control were met as of September 30, |
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we determined the ratio of the annual total compensation of our CEO compared to the annual total compensation of our median employee. As is permitted under the SEC rules, to determine our median employee in 2022, we used “Base Pay, Shift Premium and Overtime, Bonus and Commission or equivalent” as our consistently applied compensation measure. As of our determination date of July 1, 2022, we collected wages for 83,745 employees. Applying the 5% de Minimis exemption, we excluded 4,185 employees from 11 countries (4.99% of the global workforce), under the 5% de Minimis rule, resulting in a remainder of 79,560 employees. Excluded countries and employee counts were as follows: Algeria (22), Angola (6), Chile (102), Costa Rica (1,030), Czech Republic (624), Hungary (1,359), Indonesia (32), Serbia Montenegro (4), Slovakia (926), Tunisia (11) and Ukraine (69).
Applying a valid statistical sampling methodology to the remaining 79,560 employees, we produced a sample of employees within a 5% range of the estimated median of the established compensation measure, then selected an employee from within that group as our median employee. We determined that the 2022 Summary Compensation Table total compensation and value of nondiscriminatory benefits for our CEO and median employee were $15,194,411, and $58,101, respectively, which includes $16,305 and $22,475 in company-paid benefits, respectively. The Company provided benefits are not included in the compensation of our CEO in the Summary Compensation Table on page 36. The estimate of the ratio of CEO pay to median worker pay calculated using a methodology consistent with the SEC rules as described above is 262:1.
As the SEC rules allow for companies to adopt a wide range of methodologies, to apply country exclusions and to make reasonable estimates and assumptions that reflect their compensation practices to identify the median employee and calculate the CEO pay ratio, the pay ratios reported by other companies may not be comparable to the pay ratio reported above.
36 PROXY STATEMENT FOR EMERSON 2018
46 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
MANAGEMENT PROPOSALS
PROXY ITEMProxy Item No. 1: 1:ELECTION OF DIRECTORS
Nominees and Continuing Directors
The Board of Directors currently has eleven Directors and is divided into three classes, with the terms of office of each class ending in successive years. The Board of Directors has nominated fourthree Directors of the Company to be elected for termsa term ending at the Annual MeetingsMeeting specified below, or until their successors have been elected and qualified. Pursuant to the Company’s Bylaws, a person may not stand for election as a Director after attaining the age of 72, provided that the Bylaws provide that this restriction does not apply to (i) Mr. Golden and Dr. Kendle until the Company’s 2022 Annual Meeting, and (ii) Mr. Easter until the Company’s 2023 Annual Meeting. Information with respect to the nominees for election, as well as the other Directors whose terms will continue after the Annual Meeting, is set forth below. All of the nominees meet the Board membership criteria described on page 1013 under “Nomination Process.” Each of the nominees and continuing Directors has had the same position or other executive positions with the same employer over the last five years unless otherwise indicated. This information includes each nominee’s specific experience, qualifications, attributes and skills that led the Board to conclude that he or she should serve as a Director, and prior directorships held by each nominee at other public companies within the last five years.
Director Nominees for Terms Ending in 2021and Continuing Directors’ Skills and Experience Matrix
Skills and Experience (1) (2) | ||||||||||||||||||||||||||||||||||||||||||||||||
Global Business | ||||||||||||||||||||||||||||||||||||||||||||||||
Technology and Innovation | ||||||||||||||||||||||||||||||||||||||||||||||||
Large Company CEO or COO | ||||||||||||||||||||||||||||||||||||||||||||||||
Financial Leadership or Expertise | ||||||||||||||||||||||||||||||||||||||||||||||||
Corporate Governance | ||||||||||||||||||||||||||||||||||||||||||||||||
Operational Leadership | ||||||||||||||||||||||||||||||||||||||||||||||||
Industry, End-Markets and Growth Areas | ||||||||||||||||||||||||||||||||||||||||||||||||
Business Development |
| A green star “ ” in the chart indicates a key skill or experience that is particularly relevant to a Director’s service on Emerson’s Board and is given additional weighting when the combined expertise of the Board is considered for planning purposes. | |
(2) | A blue circle “ ” in the chart indicates a skill or experience that is relevant to a Director’s service on Emerson’s Board. A Director may possess meaningful experience or skill in an area that lacks a “ ”. |
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 47 |
MANAGEMENT PROPOSALS
THE BOARD UNANIMOUSLY RECOMMENDS
A VOTE “FOR” THE ELECTION OF THE NOMINEES LISTED BELOW.
Director Nominees for Terms Ending in 2026
Martin S. Craighead
|
• CEO Experience • Global Business Experience • Business Development Expertise Qualifications Mr. Craighead’s qualifications also include his leadership experience, global business experience and extensive background in the oil and gas industry, including his prior service as Chairman of Baker Hughes from April 2013 to July 2017; as Chief Executive Officer of Baker Hughes from January 2012 to July 2017; and as President of Baker Hughes from July 2010 to July 2017. He first joined Baker Hughes in 1986 and was its Chief Operating Officer from 2009 to 2012 and Group President of drilling and evaluation from 2007 to 2009. He also served as President of INTEQ from 2005 to 2007 and President of Baker Atlas from February 2005 to August 2005. Mr. Craighead was also the Vice Chairman of Baker Hughes from July 2017 to May 2019. |
Age 62 | Director Since 2019 | Committees of Our Board Compensation Committee Nominating Committee | Current Public Company Directorships Texas Instruments |
Gloria A. Flach Retired Corporate Vice President | Key Skills and Experience • Operational Leadership • Global Business Experience • Technology and Innovation Expertise Qualifications With over 35 years in the aerospace and defense industry, Ms. Flach’s qualifications to serve on the Board include her leadership, international and business experience as Chief Operating Officer of Northrop Grumman Corporation (“NGC”) from January 2016 through December 2017, overseeing and enhancing program execution, risk management and operational excellence across the company; her leadership of NGC’s global supply chain and service as a member of the Corporate Policy Council; her NGC service as President of the Electronic Systems Sector from January 2013 through December 2015 and President of Enterprise Shared Services from March 2010 through December 2012; and her current service on the Loyola University, Maryland, board of advisors. |
Age 63 | Director Since 2017 | Committees of Our Board Compensation Committee Executive Committee Finance Committee |
Key skills and experience, identified above, are particularly relevant to a Director’s service on Emerson’s Board and are given additional weighting when the combined expertise of the Board is considered for planning purposes. Please see the Directors’ Skills and Experience Matrix on page 47 for additional skills and experience for each Director.
48 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
MANAGEMENT PROPOSALS
Matthew S. Levatich Retired President and Chief Executive Officer, | Key Skills and Experience • CEO Experience • Operational Leadership • Global Business Experience Qualifications Mr. Levatich’s qualifications also include his extensive manufacturing, global marketing and management experience as a former Harley-Davidson executive, including his prior service as President and Chief Executive Officer from May 2015 to March 2020; as President and Chief Operating Officer of Harley-Davidson Motor Company, Inc. from 2009 to May 2015; as President and Managing Director of MV Agusta Motor S.p.A., a subsidiary of Harley-Davidson, Inc.; and as Vice President and General Manager, Parts & Accessories and Custom Vehicle Operations of Harley-Davidson, Inc.; and his experience on the Dean’s Advisory Committee for the Robert R. McCormick School of Engineering and Applied Sciences at Northwestern University. |
Age 57 | Director Since 2012 | Committees of Our Board Audit Committee Finance Committee | Prior Public Company Directorships (year service ended) Harley-Davidson, Inc. (2020) |
Continuing Directors
The following Directors are not standing for election at the 2023 Annual Meeting of Shareholders.
Directors with Terms Ending in 2024
Mark A. Blinn Former Chief Executive Officer | Key Skills and Experience • CEO Experience • Financial Expertise • Global Business Experience Qualifications Mr. Blinn’s qualifications also include his leadership experience, global business experience, industry experience, and extensive Board experience, including his prior service as the Chief Executive Officer and President of Flowserve from October 2009 until March 2017. He previously served Flowserve as Chief Financial Officer from 2004 to 2009 and in the additional role of Head of Latin America from 2007 to 2009. Prior to Flowserve, Mr. Blinn served in senior finance, treasury and planning positions at FedEx Kinko’s Office and Print Services, Inc., Centex Corp., FirstPlus Financial Inc., Electronic Data Systems Corp. and Commercial Capital Funding Inc. He also serves on the executive board for Southern Methodist University’s Cox School of Business. |
Age 60 | Director Since 2019 | Committees of Our Board Audit Committee Compensation Committee | Current Public Company Directorships Globe Life Inc. Leggett & Platt Incorporated Texas Instruments Incorporated |
Key skills and experience, identified above, are particularly relevant to a Director’s service on Emerson’s Board and are given additional weighting when the combined expertise of the Board is considered for planning purposes. Please see the Directors’ Skills and Experience Matrix on page 47 for additional skills and experience for each Director.
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 49 |
MANAGEMENT PROPOSALS
Arthur F. Golden Former Senior Partner, Davis Polk & Wardwell,
| Key Skills and Experience • Business Development Expertise • Global Business Experience • Corporate Governance Experience Qualifications Mr. Golden’s qualifications to serve on the Board include his leadership, international and industry experience as a former Senior Partner, GlobalCo-Chair of Mergers and Acquisitions and Head of the Antitrust Practice at Davis Polk; leading Davis Polk teams in private and governmental litigation; representing large multinational companies in corporate governance matters and acquisition-related transactions; counseling multinational companies on antitrust matters; his prior service as a member of his firm’s Management Committee; and his
|
Age
| Director Since 2000 | Committees of Our Board Executive Committee Finance Committee |
Candace Kendle
Executive Officer, Kendle International Inc.,
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• Corporate Governance Experience • Industry, End-Markets and Growth Areas Qualifications Dr. Kendle’s qualifications to serve on the Board include her leadership, international and healthcare experience, gained from her prior service asco-founder, |
Age
| Director Since 2014 | Committees of Our Board Audit Committee Nominating Committee | Prior Public Company Directorships (year service ended) United Parcel Service, Inc. (2019) H. J. Heinz (2013) |
Key skills and experience, identified above, are particularly relevant to a Director’s service on Emerson’s Board and are given additional weighting when the combined expertise of the Board is considered for planning purposes. Please see the Directors’ Skills and Experience Matrix on page 47 for additional skills and experience for each Director.
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37 PROXY STATEMENT FOR EMERSON 2018
50 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
MANAGEMENT PROPOSALS
Retired Chairman of The Board |
• CEO Experience • Corporate Governance Experience Qualifications Mr. Turley’s qualifications to serve on the Board include his leadership and expertise in audit and financial reporting as Chairman and Chief Executive Officer of Ernst &
|
Age 67 | Director Since 2013 | Committees of Our Board Audit Committee Executive Committee Nominating Committee | Current Public Company Citigroup, Inc. Northrop Grumman Corporation Precigen, Inc. |
Director Nominee for a TermDirectors with Terms Ending in 2020 (to balance Board classes)2025
|
|
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38 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
MANAGEMENT PROPOSALS
Continuing Directors
The following Directors are not standing for election at the 2018 Annual Meeting of Shareholders.
Directors with Terms Ending in 2019
|
| ||
|
|
Age 68 | Director Since 2012 | Committees of Our Board Executive Committee Nominating Committee | Current Public Company Global Advisory PIMCO Global Advisory Board |
Key skills and experience, identified above, are particularly relevant to a Director’s service on Emerson’s Board and are given additional weighting when the combined expertise of the Board is considered for planning purposes. Please see the Directors’ Skills and Experience Matrix on page 47 for additional skills and experience for each Director.
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 51 |
MANAGEMENT PROPOSALS
DCP Midstream LLC,
|
• Operational Leadership • Global Business Experience Qualifications Mr. |
Age 73 | Director Since 2020 | Committees of Our Board Compensation Committee Finance Committee | Current Public Company Delta Airlines Inc. | Prior Public Company Baker Hughes, Inc. (2017) Concho Resources Inc. Grupo Aeromexico, S.A.B. de C.V. (2022). | ||||
39 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
MANAGEMENT PROPOSALS
Directors with Terms ending in 2020
|
• Global Business Experience • Industry, End-Markets and Growth Areas Qualifications Mr. |
Age 53 | Director Since 2021 | Committees of Our Board Executive |
Key skills and experience, identified above, are particularly relevant to a Director’s service on Emerson’s Board and are given additional weighting when the combined expertise of the Board is considered for planning purposes. Please see the Directors’ Skills and Experience Matrix on page 47 for additional skills and experience for each Director.
Current Public Company Directorships: International Business Machines Corporation
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52 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
MANAGEMENT PROPOSALS
Lori M. Lee
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• Technology and Innovation Expertise • Global Business Experience Qualifications Ms. Lee’s qualifications to serve on the Board also include |
Age 57 | Director Since 2018 | Committees of Audit Committee Executive Committee Finance Committee |
Key skills and experience, identified above, are particularly relevant to a Director’s service on Emerson’s Board and are given additional weighting when the combined expertise of the Board is considered for planning purposes. Please see the Directors’ Skills and Experience Matrix on page 47 for additional skills and experience for each Director.
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40 PROXY STATEMENT FOR EMERSON 2018
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 53 |
MANAGEMENT PROPOSALS
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
In accordance with its Charter, the Audit Committee has selected KPMG LLP, independent registered public accounting firm, to audit the Company’s consolidated financial statements for fiscal 2018.2023. KPMG LLP served as the Company’s independent registered public accounting firm for fiscal 20172022 and has been retained continuously as the Company’s external auditor for more than 50 years.since 1938.
The members of the Audit Committee (i) having received KPMG LLP’s written independence report and having discussed same with KMPG LLP; and (ii) having assessed KPMG LLP’s past service and qualifications believe that the continued retention of KPMG LLP is in the best interests of the Company and its shareholders. The Audit Committee is asking the shareholders to ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2018.2023.
The Audit Committee is not required to take any action as a result of the outcome of this ratification vote. In the event shareholders fail to ratify the appointment, the Audit Committee may reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent accounting firm at any time during the year if the Committee determines that such a change would be in the Company’s and the shareholders’ best interests.
The Audit Committee has approved in advance all services provided by KPMG LLP. A member of KPMG LLP willis expected to be present at the meeting with the opportunity to make a statement and respond to appropriate questions from shareholders.
OUR BOARD AND AUDIT COMMITTEE UNANIMOUSLY RECOMMEND A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING
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54 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
MANAGEMENT PROPOSALS
ADVISORY VOTE ON EXECUTIVE COMPENSATION
At each of the last seven Annual Meetings of Shareholders, over 90% of shares voted were in support of the Company’s executive compensation program. Pursuant to Section 14A of the Exchange Act and SEC rules, our Board of Directors is again submitting for anon-binding shareholder vote our executive compensation as described in this proxy statement (commonly referred to as“say-on-pay”). We plan to hold this vote annually.
Emerson is a performance-driven, financially focused company with a long track record of strong performance in good economic times, and stable profitability and returns to shareholders even when economic conditions are unfavorable. Ourpay-for-performance executive compensation program is an integral part of our consistent and rigorous management process. We believe it has effectively motivated and rewarded Emerson executives to meet the challenges of recessions, inflationary periods, technological changes and intense global competition, and it continues to do so today.
We encourage shareholders to review the Compensation Discussion and Analysis on pages 1619 to 24.35. The Company’s executive compensation program the core of which was established in 1977, supports Emerson’s rigorously-applied management, processorganizational review and compensation planning processes, which hashave been implemented over the years by successive teams of talented and committed executives.
The foundational elements of our program include paying for performance, maximizing shareholder value without excessive risk, aligning executive and shareholder interests, providing competitive pay to attract and retain executives and rewarding results while recognizing individual contributions.
41 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
MANAGEMENT PROPOSALS
We believe the program strikes the appropriate balance between responsible, measured pay practices and incentivizing our executives to dedicate themselves fully to value creation for our shareholders, as evidenced by Emerson’s pay practices:
Pay for Performance.NEO compensation is tied to Company performance. (Pgs.16-22)
We Target Competitive and Market Based Pay with Actual Pay Dependent on Performance. (Pgs.16-22)
Long-Term Performance.Our primary incentive compensation – performance shares – is based on the Company’s achievement of established financial objectives over a minimum three yearthree-year performance period. (Pgs.16-22)
Maximize Shareholder Value While Mitigating Risk.Our performance shares program is based on above-market growthsignificant financial targets and rewards growth over the long term, discouraging short-term risk taking. (Pgs.22-23)
Alignment with Shareholders. We have substantial stock ownership requirements, which our NEOs greatly exceed, and blackout, expanded clawback, pledging and anti-hedging policies. (Pgs.22-23)
No TaxGross-Ups.We do not provide taxgross-ups to our NEOs.NEOs (except with respect to our relocation policy applicable to all employees).
No Employment, Severance or Golden Parachute Agreements with any of our NEOs.(Pgs. 23,32-36)
Non-compete,Non-solicitation and Confidentiality Agreements. We require executives to enter intonon-competition,non-solicitation and confidentiality agreements as a condition of all equity awards. (Pgs. 23 and 32)
Double Trigger Change of Control.We utilize double trigger provisions on change of control in our 2011 Stock Option Plan and in our 2015 Incentive Shares Plan. (Pgs. 23,32-36)
We regularly evaluate the individual elements of our compensation program in light of market conditions and governance requirements and make changes as appropriate for Emerson’s business.
The Board strongly endorses the Company’s executive compensation program and recommends that the shareholders vote in favor of the following resolution:
RESOLVED, that the shareholders approve the compensation of the Company’s named executive officers as described in this proxy statement under “Executive Compensation” and “Compensation Tables”, including the Compensation Discussion and Analysis and the tabular and narrative disclosure contained in this proxy statement.
Because the vote is advisory, it will not be binding upon the Board or the Compensation Committee, and neither the Board nor the Compensation Committee will be required to take any action as a result of the vote. The Compensation Committee will carefully evaluate the outcome of the vote when considering future executive compensation arrangements. After our Annual Meeting on February 6, 2018,7, 2023, we expect that the nextsay-on-pay vote will occur at our next Annual Meeting scheduled to be held on February 5, 2019.6, 2024.
OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE
“FOR” THIS PROPOSAL.
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
42 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
MANAGEMENT PROPOSALS
PROXY ITEMProxy Item No. 4:VOTE ON FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION
AMENDMENT OF THE RESTATED ARTICLES OF INCORPORATION TO
ALLOW SHAREHOLDERS TO AMEND BYLAWS
The Board of Directors, upon the recommendationAs required by Section 14A of the Corporate GovernanceExchange Act and Nominating Committee, has determined that it isSEC rules, we are asking shareholders to vote, on an advisory basis, on whether the required say-on-pay vote in proposal 3 should occur every one, two or three years. SEC rules require us to submit this vote to shareholders at least once every six years. You have the best interestsoption to vote for any one of the Companythree options, or to submit for approval by shareholders an amendment to our Restated Articles of Incorporation to provide shareholders the right to amend our Bylaws (the “Articles Amendment”).
Article 5, Section 3 of the Company’s Restated Articles of Incorporation currently provides that only the Board of Directors has the power to amend our Bylaws. The Articles Amendment would amend Article 5, Section 3 of the Restated Articles of Incorporation to allow the holders of a majority of the total voting power of all outstanding shares of voting stock of the Company, voting as a single class, to amend the Company’s Bylaws, in addition to the Board’s power to amend.
Background of the Proposal
Our Corporate Governance and Nominating Committee regularly considers a broad range of corporate governance issues and is committed to adopting governance practices that are the most beneficial to the Company and its shareholders. The ability of shareholders to amend bylaws is increasingly considered an important aspect of good corporate governance.
The Board recognizes that allowing shareholders to amend the Bylaws would enhance their rights and permit them to express their viewsabstain on the provisions of the Company’s governance documents. However, the Board also believes that the current structure helps ensure stability of the Company’s governance, including the conduct of Board and shareholder meetings, and helps reinforce the Board’s commitment to long-term shareholder value. Limiting the ability of shareholders to amend the Bylaws also provides protection against certain abusive tactics that could distract from the orderly management of the Company’s affairs and allows the Board to focus on long-term shareholder value. Due to these competing interests, the Board has determined that the Company’s shareholders should decide the appropriate balance of their involvement in corporate governance based on the Company’s facts and circumstances and their views of the proper role of shareholders in the governance process.
After careful deliberation, the Board adopted resolutions submitting the Articles Amendment to shareholders and is recommending the Articles Amendment to shareholders for approval. This proposal demonstrates the Board’s continuing commitment to strong corporate governance practices that promote accountability of management and our Board to our shareholders and that the Board believes are consistent with its goal of creating long-term, sustainable value for our shareholders.matter.
The Board has determined that an annual advisory vote on executive compensation is the appropriate standardbest approach for amendment of the Bylaws by shareholders is a majority of the total voting power of all outstanding shares of voting stock, voting as a single class. The Board believes that adopting this standard provides shareholders with the opportunity to participate meaningfully in the corporate governance of the Company.
This general description of the Articles Amendment is qualified in its entirety by reference to the text of the Articles Amendment, which is set forth in its entirety in Appendix B to this proxy statement. Additions to the Restated Articles of Incorporation are indicated by underlining and deletions are indicated by strike-outs.
The affirmative vote of 85% of the total voting power of all outstanding shares, whether or not present or represented by proxy at the 2018 Annual Meeting, is required to amend the Company’s Restated Articles of Incorporation to provide shareholders the right to amend the Company’s Bylaws. If the proposed Articles Amendment is adopted and becomes effective, the Board will adopt a conforming amendment to the Company’s Bylaws. If the Articles Amendment is not approved, the Restated Articles of Incorporation and Bylaws will remain unchanged.
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43 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
MANAGEMENT PROPOSALS
RATIFICATION, BYNON-BINDING ADVISORY VOTE,
OF FORUM SELECTION BYLAW
On August 2, 2016, the Board of Directors adopted an amendment (“Amendment”) to the Company’s Bylaws to add a forum selection provision in Section 6 of Article VIII of the Bylaws. Shareholder approval was not required, but the Board has nevertheless decided to request that shareholders ratify the Amendment on an advisory basis.
The Amendment provides that, unless the Company consents to an alternative forum, the exclusive forum for specified legal actions generally will be the United States District Court for the Eastern District of Missouri, or, in some cases the Circuit Court located in St. Louis County, Missouri or other Missouri courts.
The specified actions include:
Under the Amendment, shareholders are deemed to have given consent to personal jurisdiction for such actions in such forum. The full text of the Amendment is attached as Appendix C to this proxy statement.
Background and Reasons for Forum Selection Provision
The Board believes that the Company and its shareholders will benefit from having intra-corporate disputes litigated in Missouri, where the Company is incorporated and whose laws govern such disputes. The Amendment is intended to provide a streamlined, efficient and organized process for resolution of such disputes. The Amendment addresses plaintiff forum shopping and the related practice of filing parallel lawsuits in multiple jurisdictions. The Board approved the Amendment as a good governance measure in light of the incidence of such suits and multi-forum litigation.
In determining whether to adopt the Amendment, the Board considered a number of factors,considerations, including the following:
While our compensation strategies are related to both the Companyshort-term and longer-term business outcomes, we make compensation decisions annually;
An annual vote is consistent with our recent shift to potentially avoid litigating actionsan annual award cycle for performance shares;
An annual vote provides shareholders the opportunity to evaluate key performers and our executive compensation program more frequently;
An annual advisory vote gives us more frequent feedback on the same topic in multiple jurisdictions, with the associated duplication of litigation expenses, the potential for inconsistent outcomesour compensation disclosures and the possibility that courts in other states will misconstrue Missouri law.compensation of our named executive officers; and
An annual vote is consistent with market practice and may discourage illegitimate claims.
Although forum selection provisions have become more common, and the vote is non-binding, our Board knows of no reason a court in another state would not be willing to enforce the Amendment, there is no assurance that a courtDirectors will enforce it. However, courts may be more likely to enforce the Amendment if it has been approved by the shareholders.
The Company is aware that certain proxy advisors have recommended against forum selection provisions unless the Company has provided evidence of abuse of legal process in other jurisdictions or past harm from shareholder lawsuits. The Board believes this position fails to adequately take into account the prevalence of such litigation generally and the risk of
44 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
MANAGEMENT PROPOSALS
litigation over proxy statement disclosures that threaten to delay a shareholder meeting at significant cost to the Company. These cases have often been filed in a state other than the defendant’s home state, or in multiple states, forcing one or more courts generally less familiar with the relevant laws to interpret and apply those laws, often under a very tight time frame. The Board believes that it is in the best interest of shareholders to take preventive measures before the Company and its shareholders are harmed by such litigation. Importantly, the Amendment was not adopted by the Board in reaction to any specific litigation confronting the Company. Rather, this action was taken to prevent potential future harm to the Company and its shareholders. We also note that one proxy advisor has updated its position to be more supportive of such provisions when, as is the case here, the selected venue is the company’s state of incorporation.
Although shareholder approval is not required to amend the Bylaws, the Board of Directors believes this is an important issue and that it is in the best interestsoutcome of the Companyvote when making future decisions about the Company’s executive compensation policies and itsprocedures. As discussed under “Shareholder Engagement”, the Company’s shareholders also have the opportunity to seek anon-binding, advisory shareholder vote to ratify the Amendment. Because the vote is advisory, it will not be binding upon the Board and neither the Board norprovide additional feedback on important matters, including executive compensation, at any Board committee will be required to take any action as a result of the vote. If shareholder ratification is not obtained, the Board of Directors will reconsider whether the Amendment is in the best interests of the Company and its shareholders.
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45 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
SHAREHOLDER PROPOSALS
Certain shareholders have submitted the four proposals below for inclusion in this year’s proxy statement. The proposals have been carefully considered by our Board, which has concluded that adoption of the proposals would not be in the best interests of the Company or its shareholders. For the reasons stated after each proposal, our Board recommends a vote “AGAINST” each of the proposals.
The proposals and supporting statements are presented as received from the shareholders in accordance with SEC rules, and Emerson disclaims any responsibility for their content. The Company will provide to shareholders the names and addresses of the proponents and the number of Emerson shares held by them promptly upon receiving an oral or written request therefor. Each shareholder proposal will be voted upon at the Annual Meeting only if properly presented at the meeting by the proponents, which we understand that the proponents intend to do.
Information regarding the inclusion of proposals in the proxy statement for our 2019 Annual Meeting of Shareholders can be found on page 62 under “Other Matters – Future Shareholder Proposals and Nominations.”
SHAREHOLDER PROPOSAL ON INDEPENDENT BOARD CHAIRtime.
Emerson Electric – Separate Chair & CEOOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE
RESOLVED:The shareholders request the Board of Directors to adopt as policy, and amend the bylaws as necessary, to require the Chair of the Board of Directors, whenever possible, to be an independent member of the Board. This policy would be phased in for the next CEO transition.
If the Board determines that a Chair who was independent when selected is no longer independent, the Board shall select a new Chair who satisfies the requirements of the policy within a reasonable amount of time. Compliance with this policy is waived if no independent director is available and willing to serve as Chair.
Supporting Statement:
We believe:
Emerson’s CEO David Farr serves both as CEO and Chair of the Company’s Board of Directors. We believe the combination of these two roles in a single person weakens a corporation’s governance structure, which can harm shareholder value.
As Intel’s former chair Andrew Grove stated, “The separation of the two jobs goes to the heart of the conception of a corporation. Is a company a sandbox for the CEO, or is the CEO an employee? If he’s an employee, he needs a boss, and that boss is the Board. The Chairman runs the Board. How can the CEO be his own boss?”
In our view, shareholders are best served by an independent Board Chair who can provide a balance of power between the CEO and the Board empowering strong Board leadership. The primary duty of a Board of Directors is to oversee the management of a company on behalf of shareholders. We believe a combined CEO / Chair creates a potential conflict of interest, resulting in excessive management influence on the Board and weaker oversight of management.
46 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
SHAREHOLDER PROPOSALS
Chairing and overseeing the Board is a time intensive responsibility. A separate Chair also frees the CEO to manage the company and build effective business strategies.
While Emerson’s governance was strengthened by appointing a Lead Director, the combined CEO/Chair role still concentrates power in one person.
Numerous institutional investors recommend separation of these two roles. For example, California’s Retirement System CalPERS’ Principles & Guidelines encourage separation, even with a lead director in place.
According to ISS “2017 Board Practices”, (March 2017), 58% of S&P 1,500 firms now separate these two positions. And the law firm Davis Polk estimates about 50% of the S&P 500 have separate roles.
The shareholder resolution urging separation of CEO and Chair received a 42% vote at Emerson in 2016, an indication of strong investor support.
This policy would be phased in and implemented when the next CEO is chosen.TO CONDUCT AN ADVISORY VOTE ON EXECUTIVE COMPENSATION EVERY ONE YEAR.
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The Board has considered the above proposal carefully, and believes that it is not in the best interests of our shareholders. The Board believes that a combined Chair/CEO structure has served the Company well. In addition, Emerson recently implemented a Lead Independent Director position for its Board and appointed Randall Stephenson as its first Lead Independent Director, with significant powers and responsibilities that are similar to those of an independent Chair. The Board believes this change provides independent Board leadership as well as strong continuity and support for the Chairman and CEO, both now and as the Company moves forward and plans for the eventual successor to Mr. Farr. The Board believes the shareholders are best served if the Board retains the flexibility to select the best person to serve as Chairman as part of this succession process, rather than being forced to elect an independent Chair. The proponent provides no evidence showing that an independent Chairman improves performance or leads to increased shareholder value.
A combined Chair/CEO Board leadership structure has served Emerson and its shareholders well.
The Board believes that Emerson and its shareholders continue to be well served by a Board leadership structure with the CEO also serving as Board Chair. The Board believes that combining these roles can be appropriate based on the skills and experience of the CEO, the CEO’s relationship with the Board, the efficiencies of having the CEO also serve as Chair, the Company’s corporate governance structure and the Company’s performance under that CEO. As has been the case with Mr. Farr, as Chair the CEO may be able to better direct Board focus on the most impactful areas for the Company and promote responsible decision-making by the Board, due to the CEO’sin-depth,day-to-day knowledge of our business, transparency, openness and responsiveness to feedback, and ability to draw on the resources and expertise of the Board. The CEO’s leadership as Chair is balanced by a strong, independent Board led by our Lead Independent Director and by Emerson’s strong corporate governance practices, which serve to minimize any potential conflicts that could result from combining the roles of CEO and Chair.
The Board currently believes that the existing structure is the best way to efficiently and effectively protect and enhance our long-term success and shareholder value. The Board will continue to monitor the appropriateness of this structure as it does with all governance issues. The Board believes that a requirement to split the roles of Chair and CEO in the future could cause our management and governance processes to be less effective and efficient than they are today with a combined Chair/CEO through duplication of work and potential blurring of accountability and responsibility, without any proven offsetting benefits.
47 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
SHAREHOLDER PROPOSALS
Emerson recently adopted a Lead Independent Director structure providing strong independent leadership.
Mr. Farr currently serves as both CEO and Chairman. For many years Emerson appointed an independent Director as Board Discussion Leader to preside at meetings ofnon-management Directors. In October 2016, the Board voted to further strengthen the Board’s independent leadership with the appointment of a Lead Independent Director. The Board believes that this position provides a stronger independent leadership voice for the Board and better continuity and support for the Chairman and CEO as the Company moves forward and plans for the eventual successor to Mr. Farr as CEO.
The Board elected Randall L. Stephenson, Chairman, Chief Executive Officer and President of AT&T, as its first Lead Independent Director for a three year term. As Lead Independent Director, Mr. Stephenson has many of the powers and responsibilities that might be held by an independent Chairman of the Board. Among other duties, the Lead Independent Director:
The Chairman and CEO consults periodically with the Lead Independent Director, the Chairs of our Board committees and other independent Directors on Board matters and issues facing the Company.
Emerson has strong corporate governance practices.
The Board recognizes the importance of strong independent Board leadership and corporate governance. In addition to a strong Lead Independent Director position, Emerson’s strong corporate governance practices include the following:
48 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
SHAREHOLDER PROPOSALS
The Board believes that shareholders are best served if the Board retains the flexibility to select the best person to serve as Chairman.
The Board believes that it is uniquely qualified to evaluate the optimal leadership structure of the Company at any particular time based upon its evaluation of the Company’s strategy, operations, management, input from shareholders and other factors. Effective corporate governance should enable the Board to make this determination based on its own evaluations at any point in time. The Board has changed its structure at various times in the past depending upon the specific circumstances, at times combining the functions of Board Chair with those of the CEO and at other times separating those functions. Previously, the Board had a Board Discussion Leader who chaired the executive sessions ofnon-management Directors, but now has a Lead Independent Director with significant additional powers and responsibilities. The Board’s determinations were made based on what it believed would provide appropriate leadership for the Company at the time. The Board believes that it should continue to have flexibility to make this determination in the future.
Our Bylaws currently require that our Board Chair shall be our Chief Executive Officer. The Board is aware that in the future, there may be circumstances under which an independent Chairman would be appropriate, and would not hesitate to amend the Bylaws if it made that determination, but does not believe it is appropriate to have a policy requiring the separation of the Board Chair and CEO.
Effective corporate governance requires more than just a mechanical, “one size fits all” approach. Based on the foregoing, the Board believes that the rigid policy advocated by the shareholder proposal would impair the Board’s ability to determine the optimal Board leadership structure and select the individual it believes is best suited to serve as Board Chair when the transition to our next CEO occurs. Preserving such flexibility for the Board, while maintaining an effective, balanced corporate governance structure, will continue to best serve the interests of the Company and its shareholders.
Finally, a combined Chair/CEO leadership structure is also in line with many other public companies. According to the 2016 Spencer Stuart Board Index, 73% of companies in the S&P 500 do not have an independent board chair, an increase from 2015, and a majority have a single person serving as both chair and CEO.
49 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
SHAREHOLDER PROPOSALS
SHAREHOLDER PROPOSAL ON POLITICAL CONTRIBUTIONS REPORTING
Resolved, shareholders ofEmerson Electric Co. (the “Company”) request the Company to prepare and semiannually update a report, which shall be presented to the pertinent board of directors committee and posted on the Company’s website, that discloses the Company’s:
The report shall be made available within 12 months of the annual meeting and identify all recipients and the amount paid to each recipient from Company funds.
Supporting Statement
As long-term Emerson Electric Co. shareholders, we support transparency and accountability in corporate spending on political activities. Disclosure is in the best interest of the Company and its shareholders. The Supreme Court’s 2010 Citizens United ruling recognized the importance of disclosure when it said: “[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”
The Company contributed at least $1,724,266 in corporate funds since the 2010 election cycle. (CQ http://moneyline.cq.com; National Institute on Money in State Politics http://www.followthemoney.org)
We acknowledge that our Company discloses a policy on corporate political spending and its contributions to state-level candidates, parties and committees on its website. We believe this is deficient because the Company will not disclose the following expenditures made for political purposes:
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
Information on indirect political engagement through trade associations and 501(c)(4) groups cannot be obtained by shareholders unless the Company discloses it. This proposal asks the Company to disclose all of its political spending, direct and indirect. This would bring our Company in line with a growing number of companies, includingCummins andUnited Technologies, which support comprehensive political disclosure and accountability and present this information on their websites.
The Company’s board and shareholders need comprehensive disclosure to be able to evaluate the political use of corporate assets. We urge your support for this critical governance reform.
50 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
SHAREHOLDER PROPOSALS
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In light of the political spending disclosures already provided by the Company and its current disclosure ratings relative to other companies, the Company’s Board of Directors believes that the additional disclosures called for by this proposal are not in the best interests of the Company or its shareholders for the following reasons:
Prior Year Proposals and Political Disclosure Ranking
We note that proposals seeking expansion of the Company’s political spending disclosures have been made in each of the prior four years, with the identical proposal received last year. In 2017 the political spending proposal received support from only approximately 35% of voted shares, and only 25% of outstanding shares. In spite of this low level of support, the Company has provided additional information on its political spending and lobbying activities in its updated Corporate Social Responsibility Report and on its Political Spending and Trade Associations and Lobbying webpages. Among other things, these updates provided better transparency regarding individual recipients of contributions from Emerson’s federal and Missouri political action committees. As a result of its current political spending disclosures, the Company received a score of 51.4 out of 100 in the recently released 2017CPA-Zicklin Index, placing it in the top half of the S&P 500 at number 219. This is an improvement over the Company’s 2016CPA-Zicklin Index score of 50.
Current Political Spending Disclosures
The information described herein is disclosed on our website at www.emerson.com, Investors, Corporate Governance, Political Contributions and in our Corporate Social Responsibility Report provided on the Emerson website. We urge you to review the disclosures contained in these reports in making your decision on whether to support this proposal.
Emerson believes strongly that:
The Company provides no direct support to federal candidates, because U.S. law prohibits companies from contributing to candidates for federal office. However, in states where corporate contributions are permitted by law, Emerson may make contributions to state and local candidates and ballot issues of importance to our Company or may make such contributions from the Missouri PAC. Currently, the Company discloses on its Political Contributions web page the annual $1,000,000 limit on Company expenditures to support state and local political candidates, as well as those for campaigns, ballot issues and bonds, and the identity of the recipients. This limit is set annually by the Board’s Corporate Governance and Nominating Committee, which has oversight responsibility for the Company’s political activities. We also disclose our federal and Missouri
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SHAREHOLDER PROPOSALS
PAC activities in reports regularly filed with the Federal Election Commission and the Missouri Ethics Commission, as required by law, and have this year added lists of individual recipients included in those reports to whom contributions exceeded $5,000 to provide greater transparency to our shareholders. The federal and Missouri PAC reports for the last 18 months are publicly available and linked from our website.
All contributions from either the federal or Missouri PAC or from the Company are made solely on the basis of issues of importance to our Company, our employees and our shareholders. Contributions are made to supportpro-manufacturing,pro-business andpro-economic growth policies, and specifically include trade, taxes, energy, healthcare, environment and legal liability, to name but a few. In making contribution decisions, both the Company and the PAC boards consider the views, quality and effectiveness of the candidate, organization or cause, and whether the candidate or cause is likely to succeed. They also review organizations and individuals associated with proposed recipients to determine whether the positions taken by those organizations or individuals could be inconsistent with Emerson’s interests.
All Company political expenditures are initially reviewed by Emerson’s government affairs office in Washington, D.C. Proposed contributions are then reviewed by the office of the General Counsel to assure legal compliance. Final authorization is required from the Chief Executive Officer.
For PAC contributions, the Emerson Washington, D.C. office generates a list of candidates these PACs can support based on the PAC giving criteria, requests from third parties and suggestions from PAC members. Outside legal counsel then conducts a review of proposed disbursements. Separate boards made up of Emerson employees set overall contribution budgets and approve all contributions by each PAC. The PAC boards retain counsel to ensure compliance with applicable laws and regulations. Each PAC undergoes an independent annual audit and legal review.
Trade Association Disclosures
The proposal makes references to contributions to trade associations and other organizations. Like many companies, we participate in industry trade organizations to enhance our industry’s public image, promote best practices and standards, and improve products and technologies. While we generally support the goals of these organizations, they may also engage in legislative activity and we do not necessarily support all of their lobbying efforts or political goals. We pay dues or make contributions to these organizations which are not necessarily related to their lobbying efforts. These organizations operate independently of their members. As a result, disclosure of general contributions to such organizations may overstate our connection to their activities and may not provide our shareholders with greater understanding of our specific strategies or philosophies and, in fact, may be misleading. Furthermore, support for these organizations is often determined at the business unit level, rather than directed at the corporate level, and therefore compiling information regarding every trade organization to which any Emerson business unit may have made a payment, no matter how small the amount, would be of little or no benefit to our shareholders and be an inefficient use of Company resources.
The Proposal is Unworkable, Vague and Misleading
Even if Emerson believed the disclosures in the proposal would be of benefit to shareholders, the vague wording of the proposal makes compliance with the language of the proposal largely unworkable.
52 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
SHAREHOLDER PROPOSALS
SHAREHOLDER PROPOSAL ON LOBBYING REPORTING
Whereas, we believe full disclosure of Emerson Electric’s (“Emerson”) direct and indirect lobbying activities and expenditures is required to assess whether Emerson’s lobbying is consistent with its expressed goals and in the best interests of shareholders.
Resolved, the proponents request the preparation of a report, updated annually, disclosing:
For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation, and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a trade association or other organization of which Emerson is a member.
Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the local, state, and federal levels. Neither “lobbying” nor “grassroots lobbying communications” include efforts to participate or intervene in any political campaign or to influence the general public or any segment thereof with respect to an election or referendum.
The report shall be presented to the Audit Committee or other relevant oversight committees and posted on Emerson’s website.
Supporting statement:
Since 2010, Emerson spent over $5.7 million on federal lobbying – not including state-level expenditures, where Emerson also lobbies, but disclosure is uneven or absent.
Further, Emerson is a member of trade associations that engage in lobbying, yet does not disclose its memberships in, or payments to, such associations, or the portions of such amounts that are used for lobbying. For example, an Emerson executive sits on the board of the Chamber of Commerce (the “Chamber”), which spent more than $1.3 billion on lobbying since 1998, and Emerson’s Chair and CEO is the Chair of the Board for the National Association of Manufacturers (“NAM”), which spent over $25 million on lobbying in 2015 and 2016.
Absent a system of accountability, Company assets could be used for objectives contrary to Emerson’s long-term interests. For example, Emerson states, “Following The Paris Agreement (COP 21), national carbon reduction targets are set. The global 2°C target isn’t attainable unless industrial manufacturers contribute heavily. Government regulations and carbon markets are inevitable. The time is now to strategically invest in your energy and emissions performance.” Yet, both the Chamber and NAM have publicly worked to undermine the Paris Climate Agreement.
For the past four years, Emerson shareholders have voted on this proposal, and each year it has received approximately 40 percent support out of votes cast for and against. We urge the Board to respond by instituting comprehensive lobbying disclosure.
53 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
SHAREHOLDER PROPOSALS
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A substantially similar proposal has been submitted to, and rejected by, shareholders at each of the last four annual meetings. At the 2017 Annual Meeting, the proposal received support from only approximately 35% of voted shares and only 25% of outstanding shares.
The Company’s Board of Directors continues to believe that the Company’s current approval and compliance procedures for lobbying spending are sufficient to ensure accountability. The Board therefore believes that the measures requested by the proposal are not necessary and are not in the best interests of Emerson or its shareholders. There is already public disclosure available regarding the Company’s lobbying activities on the trade associations and lobbying page of our website, at www.emerson.com, Investors, Corporate Governance, Trade Associations and Lobbying. We believe that more extensive disclosure would work to our competitive disadvantage, may be susceptible to misuse, and may not even be possible given that some of the information sought is in the hands of third parties.
Emerson believes strongly that:
Emerson’s shareholders, employees, and customers are keenly affected by public policies at all levels of government. To protect shareholder value, Emerson maintains a small office in Washington, D.C. to engage with public officials at all levels of government to educate them on our company’s operations, emerging technologies and markets. This office also follows and, when necessary, seeks to influence public policy decisions that impact the company and its shareholders.
These activities are governed and regulated by federal and state laws. With the help of knowledgeable employees throughout the Company, Emerson’s government affairs team identifies and follows issues of importance to Emerson’s continued well-being. When those issues lend themselves to public policy solutions at the federal level, Emerson’s government affairs team sometimes reaches out to policymakers on Capitol Hill and in the Executive Branch to raise awareness and educate them as to potential effects of policies under consideration. Under federal law, that process is considered “direct lobbying.” Sometimes, rather than reaching out directly to policymakers, Emerson engages with policymakers on issues through one or more trade associations to which Emerson belongs and who share our concerns and interests. That is considered “indirect lobbying.” Emerson engages in both direct and indirect lobbying. Emerson does not engage in “grassroots” lobbying. All decisions about which government policies Emerson seeks to shape are based upon what is in the best interests of our industry, our company, our employees and, most importantly, our shareholders.
Disclosures
Emerson discloses its policy that lobbying activities are conducted in accordance with law and reported as required. In 2014, we added a trade associations and lobbying expenditures webpage to our website at www.emerson.com, Investors, Corporate Governance, Trade Associations and Lobbying. This webpage discloses the purpose and limited nature of our lobbying expenditures, and provides easy access to our Lobbying Disclosure Act filings for the last 18 months, which include the names of recipients and amounts contributed to the extent required by law.
In addition to our voluntary disclosures, lobbying activities are subject to comprehensive regulation at both the federal and state levels. We are in full compliance with all laws governing lobbying activities, including the Lobbying Disclosure Act and Honest Leadership and Open Government Act, which require reporting on lobbying activities and certification of compliance with Congressional gift rules. We file quarterly reports with the federal government that disclose our lobbying expenditures and
54 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
SHAREHOLDER PROPOSALS
detail our lobbying activities. These reports are available at http://www.senate.gov/legislative/Public_Disclosure/LDA_reports.htm and http://lobbyingdisclosure.house.gov/. State lobbying activities are also subject to extensive registration and disclosure requirements, and such reports are publicly available through the applicable state authorities.
SHAREHOLDER PROPOSAL ON GREENHOUSE GAS EMISSIONS
RESOLVED: Shareholders request that Emerson Electric adopt time-bound, quantitative, company-wide goals for reducing total greenhouse gas (GHG) emissions, taking into account the goals of the Paris Climate Agreement, and issue a report at reasonable cost and omitting proprietary information on its plans to achieve these goals.
Supporting Statement
In December 2015, representatives from 195 countries adopted the Paris Climate Agreement, which specifies a goal to limit the increase in global average temperature to well below 2°C above preindustrial levels. In order to meet the2-degree goal, climate scientists estimate it is necessary to reduce global emissions by 55 percent by 2050 (relative to 2010 levels), entailing a US reduction target of 80 percent.
In 2017, The Task Force on Climate-related Financial Disclosures (TCFD), commissioned by the Financial Stability Board, issued their recommendations. Supported by a cross section of influential investors and business leaders, the TCFD recommends that companies adopt targets to manage climate-related risks and disclose related strategies.
Sixty-four percent of Fortune 100 companies have set goals, while 44 percent of the smallest 100 companies in the Fortune 500 have done so (Source: Power Forward 3.0). Many of Emerson Electric’s peers and customers have set GHG goals:
A strong business case is leading companies to set GHG emissions reduction, energy efficiency, or renewable energy targets. Power Forward 3.0 reports that 190 companies among the Fortune 500 are collectively saving $3.7 billion annually as a result of energy efficiency programs – a key way to reduce GHG emissions. CDP research finds that four out of five companies earn a higher return on carbon reduction investments than on their overall corporate capital investments. Among Emerson Electric’s peers, Honeywell reports energy efficiency projects that will result in annual savings exceeding $8 million, all with payback periods of 3 years or less.
Fifty-three Fortune 500 companies have established a renewable energy target – another strategy to reduce emissions. And nearlytwo-dozen of these companies have committed to power all of their operations with renewable energy. Many of these companies publicly state that sourcing renewable energy saves them money.
While Emerson Electric’s products help its clients reduce energy usage and climate impacts, our company has not committed publicly to GHG emissions reductions targets for its own operations. By not setting and pursuing GHG reduction goals, Emerson may not achieve the benefits realized by its peers – a competitive disadvantage for the company and shareholders alike.
For the past two years, overone-third of shares (excluding abstentions) voted in favor of this resolution, a substantial level of support that management should not ignore.
55 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
SHAREHOLDER PROPOSALS
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We note that similar proposals regarding time-bound GHG emission goals were made at our annual meetings in the last two years. In 2017, the proposal received support from approximately 28% of voted shares and 20% of outstanding shares. This support was down from 31% of voted shares in 2016.
The Emerson Board of Directors acknowledges the importance of addressing and minimizing the environmental impact of the Company’s operations. To that end, the Company’s emissions data are available through the Carbon Disclosure Project, which works with thousands of global companies and institutional investors, and has the world’s largest repository of self-reported corporate environmental data. We also began disclosing information regarding our greenhouse gas emissions as part of our initial Corporate Social Responsibility Report. We have added comparative data regarding greenhouse gas emission, to better allow shareholders to evaluate our progress over time, to our updated Corporate Social Responsibility Report, which can be found at www.Emerson.com, About Us, Corporate Social Responsibility. Additional disclosure of strict GHG emissions goals, as requested by the shareholder proposal, would not provide significant incremental benefits to the Company, its shareholders, or the environment. More meaningful progress would be achieved by continuing to direct the Company’s resources and focus towards actually reducing emissions and other environmental efforts.
Emerson is a diversified company, with business units spanning many industries and approximately 200 manufacturing sites worldwide. Changing business priorities make setting specific time-bound, quantitative, company-wide goals, as requested by the shareholder proponent, unduly limiting to the Company’s ability to compete. Moreover, measuring performance against preset goals may present a misleading view of the Company’s progress in reducing emissions given the Company’s dynamic portfolio. Not only is the Company continually adjusting the businesses within its portfolio, as evidenced by the Company’s recent significant repositioning actions, including the completion in early fiscal 2017 of the sales of its Network Power and Leroy Somer and Control Techniques businesses and the acquisition of the valves & controls business of Pentair plc, but the environmental impact of the businesses added to or removed from the portfolio may be significantly different, making comparisons based on total Company sales misleading.
The Company’s goal with respect to GHG emissions is to minimize emissions at each of its locations while striving to continually reduce overall emissions from its worldwide operations taken as a whole. In order to determine performance against this goal, Emerson does track GHG emissions from its manufacturing locations worldwide. More generally, the Company annually assesses environmental compliance at each facility, measuring our performance against Emerson standards, which in all cases meet or exceed applicable law. Tracking GHG reduction progress and addressing the concerns on a disaggregated and individualized basis has allowed the Company to reduce its emissions by over 60% for theten-year period ending December 31, 2016. The Company expects the downward trend to continue and works towards continually decreasing emissions levels.
Emerson is also focused on helping our customers with the most complex and important challenges facing the world in the process, industrial, commercial, and residential markets. Our Automation Solutions business is helping customers make the greatest use of the world’s valuable resources, helping nations move their economies forward in responsible ways, enabling the performance and safety of industries, and advancing the industries that are the backbones of daily life. Our Commercial & Residential Solutions business is helping customers ensure human comfort and health, protecting food quality and sustainability, advancing energy efficiency and environmental conservation, creating sustainable infrastructure, and continuing research and development momentum. For example, Automation Solutions’ Plantweb digital plant architecture provides a comprehensive framework to help manufacturers achieve performance in the areas of safety, reliability, production and energy use in the top 25% of peer companies. Similarly, Commercial & Residential Solutions’ $35 million dollar Helix Innovation Center is driving technology improvements in the areas of ice machine efficiency, use of natural refrigerants, and turning food waste into energy and fertilizer through the Grind2Energy initiative. The Grind2Energy technology alone diverted 7,400 tons of food waste from landfills and eliminated greenhouse gases equivalent to driving 11.9 million miles in fiscal 2016. Further information on the Company’s environmental initiatives and how they are helping our customers improve the environment and the communities in which they operate, see our Corporate Social Responsibility report on the Company website at www.Emerson.com.
By reporting its emissions through the Carbon Disclosure Project, pursuing internal efforts to substantially reduce emissions, and continuing to develop innovative products to help customers across a range of critical industries achieve their
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SHAREHOLDER PROPOSALS
environmental goals, the Company maintains its steadfast commitment to sustainable practices and acting as a responsible steward of the environment. The Company does not believe that taking the additional steps outlined in this proposal would result in better Company performance, lower Company emissions or better returns to shareholders, and therefore does not believe it would be appropriate to expend the resources required to comply with the proposal.
Ownership of Emerson Equity Securities
Ownership of Directors and Executive Officers
The following table shows the number of shares of the Company’s common stock that are beneficially owned by the Directors, by each of the NEOs, and by all Directors and executive officers as a group, as of September 30, 2017.2022. No person reflected in the table owns more than 0.5% of the outstanding shares of Emerson common stock.
Name | Total Shares of Emerson Common Stock Beneficially Owned(1)(2) | |||
Blinn | ||||
| ||||
Sara Y. Bosco(3) | ||||
Mark J. Bulanda | ||||
Martin S. Craighead | ||||
Frank J. Dellaquila(4) | ||||
William H. Easter III | ||||
Gloria A. Flach | ||||
Arthur F. Golden | ||||
Surendralal (Lal) L. Karsanbhai(5) | ||||
Candace Kendle(6) | ||||
Ram R. Krishnan(7) | ||||
Lori M. Lee | ||||
Levatich | ||||
James S. Turley | 20,931 | |||
All Directors and Executive Officers as a group |
(1) | Under rules of the SEC, persons who have power to vote or dispose of securities, either alone or jointly with others, are the beneficial owners of such securities. Each person reflected in the table has both sole voting power and sole investment power with respect to the shares included in the table, except as described in the footnotes below and except for the following shares of restricted common stock over which the person named has no investment power:Mr. |
(2) | As required by SEC rules, includes the following shares which such persons have, or will have within 60 days after September 30, |
57 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
OWNERSHIP OF EMERSON EQUITY SECURITIES
(3) | Includes 370 shares held in the Emerson Directors’ and Officers’ Charitable Trust over which Ms. Bosco exercises investment power but has no financial invest. |
(4) | Includes 8,442 shares held by the spouse of Mr. Dellaquila. Also includes 56,486 shares held by the FJD Gift Trust, a grantor trust for Mr. Dellaquila with Mr. Dellaquila’s spouse and descendants as beneficiaries and Mr. Dellaquila as trustee. Also includes 75,315 shares held by the SRD Gift Trust, a grantor trust for Mr. Dellaquila’s spouse with Mr. Dellaquila’s descendants as beneficiaries and Mr. Dellaquila and his spouse as trustees. |
Includes |
(5) | Includes 907 shares held as custodian for Mr. Karsanbhai’s son and daughter and 49,439 shares held by trust over which Mr. Karsanbhai exercises investment power. |
(6) | Includes 1,200 shares held by the spouse of Dr. Kendle. |
(7) | Includes |
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 57 |
OWNERSHIP OF EMERSON EQUITY SECURITIES
(8) | Includes |
(9) | Includes |
(10) | Includes 3,994 shares held in the Emerson Directors’ and Officers’ Charitable Trust over which |
Ownership of Greater than 5% Shareholders
The following table lists the beneficial ownership of each person holding more than 5% of Emerson’s outstanding common stock as of September 30, 20172022, based on a review of filings with the SEC on Schedule 13G.
Name and Address
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Total Shares of Emerson Common Stock Beneficially Owned
| Percent of Class
| ||||||
The Vanguard Group(1) | 41,293,408 | 6.4 | % | |||||
100 Vanguard Blvd., Malvern, PA 19355
| ||||||||
BlackRock, Inc.(2) | 39,086,630 | 6.1 | % | |||||
55 East 52nd Street, New York, NY 10055
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State Street Corporation(3) | 32,277,664 | 5.0 | % | |||||
State Street Financial Center, One Lincoln St., Boston, MA 02111
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Name and Address
|
Total Shares of
|
Percent of Class
| ||||||||||||||
The Vanguard Group (1)
| 51,951,679 | 8.7 | % | |||||||||||||
100 Vanguard Blvd., Malvern, PA 19355
| ||||||||||||||||
BlackRock, Inc. (2)
| 37,288,768 | 6.2 | % | |||||||||||||
55 East 52nd Street, New York, NY 10055
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(1) | The Vanguard Group filed a Schedule 13G/A on February |
(2) | BlackRock, Inc. filed a Schedule 13G/A on |
The Company is not aware of any other shareholders who beneficially own more than 5% of its outstanding common stock.
58 PROXY STATEMENT FOR EMERSON 2018
58 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
OWNERSHIP OF EMERSON EQUITY SECURITIES
Section 16(a) Beneficial Ownership Reporting Compliance
The Company’s Directors and executive officers are required, pursuant to Section 16(a) of the Exchange Act, to file statements of beneficial ownership and changes in beneficial ownership of common stock of the Company with the SEC and the NYSE, and to furnish copies of such statements to the Company. Based solely on a review of the copies of such statements furnished to the Company and written representations that no other such statements were required, the Company believes that during fiscal 2017 its Directors and executive officers complied with all such requirements.
Questions and Answers About the 20182023 Annual Meeting
1. Why did I receive these materials?
Our Board of Directors is soliciting proxies on its behalf to be voted at the 20182023 Annual Meeting of Shareholders on February 6, 20187, 2023, at 10:00 a.m., Central Time, to be held in a virtual format accessible at the Headquarters of the Company, 8000 W. Florissant Avenue, St. Louis, MO 63136. www.virtualshareholdermeeting.com/EMR2023. The proxies also may be voted at any adjournments or postponements of the meeting. All properly executed written proxies, and all properly completed proxies submitted by telephone or by the internet, that are delivered pursuant to this solicitation will be voted at the meeting in accordance with the directions given in the proxy, unless the proxy is earlier revoked.
2. How are these materials being distributed?
On or about December 15, 2017,9, 2022, we began mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) to certain shareholders of record as of November 28, 2017,29, 2022, and posted our proxy materials for shareholder access at www.proxyvote.com. As more fully described in the Notice, shareholders may also request printed proxy materials. The Notice and website also provide information regarding how you may request proxy materials in printed or electronic form or electronically on an ongoing basis. We also mailed proxy materials to certain shareholders.
3. Why am I getting these materials from my broker, bank or other nominee, and not directly from Emerson?
If you hold your shares through a broker, bank or other nominee, you may also receive either the Notice or printed proxy materials from that entity, as required by SEC rules.
4. What is the difference between a shareholder of record and a shareholder who holds shares in street name?
If your shares are registered in your name on the books and records of our transfer agent, Computershare Trust Company, N.A., you are a shareholder of record. If your shares are held for you in the name of your broker, bank or other nominee, your shares are held in street name.
5. What is the record date? Who can vote?
The record date for the 20182023 Annual Meeting is November 28, 201729, 2022 (“record date”). The record date was established by our Board under Missouri law. Holders of Emerson common stock at the close of business on the record date are entitled to receive notice of and vote at the meeting, or in the case of holders in street name, provide voting instructions to their broker, bank or other nominee. Each shareholder of record on the record date is entitled to one vote for each share of our common stock held on that date. There is no cumulative voting with respect to the election of Directors. On the record date, there were issued and entitled to be voted 638,635,418582,303,104 shares of our common stock, par value $0.50 per share.
6. What are the different methods I can use to vote my shares?
59 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
QUESTIONS AND ANSWERS ABOUT THE 2018 ANNUAL MEETING
By Telephone or InternetInternet:: All shareholders of record may vote their shares by telephone (within the United States, U.S. territories and Canada, there is no charge for the call) or by internet, using the procedures and instructions described on the proxy card, notice of internet availability of proxy materials and other enclosures. If you vote by telephone or internet, you need not mail back your proxy card. A
control number, located on the proxy card or Notice, must be provided to verify your identity and allow you to vote your shares and confirm that your voting instructions have been properly recorded.
Street name holders may vote by telephone or internet if their brokers, banks or other nominees make those methods available. Each broker, bank or other nominee will enclose instructions with the proxy materials. Follow the voting instructions on the form you receive from that firm.
In Writing: All shareholders also may vote by mailing their completed and signed proxy card (in the case of shareholders of record) or their completed and signed voting instruction form (in the case of street name holders).
In Person:At the Meeting: All shareholders of record may vote in person at the meeting.meeting by following the instructions on the virtual meeting site, accessible at www.virtualshareholdermeeting.com/EMR2023, and entering the 16-digit control number on the notice of internet availability, proxy card, or voting instruction form. Street name holders must obtain a legal proxy and other instructions from their broker, bank or other nominee and bring the legal proxy to the meeting in order to vote in person at the meeting.meeting through the virtual meeting site.
7. How many votes must be present to hold the 2023 Annual Meeting?
To conduct the meeting, a majority of our issued and outstanding shares entitled to vote as of the record date for the meeting, (November 28, 2017),November 29, 2022, must be present in person or by proxy at the meeting. This is referred to as a quorum.
Your shares are counted as present at the meeting if you attend the meeting and vote in person or if you properly vote by internet, telephone or mail. Abstentions, proxies which are marked or voted to deny discretionary authority on other matters and shares of record held by a broker, bank or other nominee (“broker shares”) that are voted on any matter are also included in determining the number of shares present. Broker shares that are not voted on any matter will not be included in determining whether a quorum is present.
8. What vote is required to pass the proposals?
If a quorum is present, the affirmative vote of a majority of the shares entitled to vote whichthat are present in person or represented by proxy at the 20182023 Annual Meeting is required to elect Directors, to ratify the appointment of KPMG, to approve the compensation of the Company’s NEOs, to ratify the Company’s forum selection Bylaw, to approve the shareholder proposals and to act on any other matters properly brought before the meeting. The affirmative vote of 85%Because of the total voting powernature of all outstanding shares, whether orthe vote on the frequency of advisory votes on executive compensation, there is not present or representedstandard for determining which frequency has been “adopted” by proxy at the 2018 Annual Meeting, is required to amend the Company’s Restated Articles of Incorporation to provide shareholders the right to amend the Company’s Bylaws.shareholders.
Shares represented by proxies which are marked or voted “withhold authority”“AGAINST” or “ABSTAIN” with respect to the election of any one or more nominees for election as Directors, proxies which are marked or voted “abstain” on the other proposals, and proxies which are marked or voted to deny discretionary authority on other matters will be counted for the purpose of determining the number of shares represented by proxy at the meeting. Such proxies will thus have the same effect as a vote against such nominee or nominees, against such proposals and against such other matters, respectively. Proxies marked or voted “abstain” on the proposals regarding the frequency of advisory votes on executive compensation will not be counted as a vote for any of the three options, and the Board of Directors shall determine the impact of such votes.
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 59 |
QUESTIONS AND ANSWERS ABOUT THE 2023 ANNUAL MEETING
9. What if I do not specify a choice for a matter when returning a proxy?
If your proxy card is signed and returned without specifying choices, the shares will be voted FOR the nominees for Director in Proposal 1, FOR the ratification of the appointment of KPMG LLP as our independent registered public accounting firm in Proposal 2, FOR the approval, on an advisory basis, of the compensation of the Company’s NEOs in Proposal 3 “FOR” the approval of a proposed amendment to our Restated Articles of Incorporation to provide shareholders the right to amend the Company’s Bylawsand for ONE YEAR in Proposal 4, “FOR” thenon-binding advisory vote to ratify the Company’s forum selection Bylaw in Proposal 5, and “AGAINST” the shareholder proposals in Proposals 6, 7, 8 and 9.4. Otherwise, signed proxy cards without specified choices will be voted in the discretion of the proxies.
60 10. How will my shares be voted on any other matters to come before the meeting?PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
QUESTIONS AND ANSWERS ABOUT THE 2018 ANNUAL MEETING
The Company knows of no other matters to come before the meeting. If any other matters properly come before the meeting, the proxies solicited hereby will be voted on such matters in the discretion of the persons voting such proxies, who are members of the Company’s management, except proxies which are marked to deny discretionary authority. The Company knows of no reason why any of the nominees for Director named herein would be unable to serve. In the event, however, that any nominee named should prior to the election become unable to serve as a Director, your proxy (unless designated to the contrary) will be voted for such other person or persons, if any, as the Board of Directors of the Company may recommend.
11. Will my shares be voted if I do not provide my proxy or voting instructions?
Shareholders of Record: If you are a shareholder of record, your shares will not be voted if you do not provide your proxy or vote in person at the meeting. It is, therefore, important that you vote your shares.
Street Name Holders: If your shares are held in street name and you do not provide your voting instructions to your broker, bank or other nominee, your shares may be voted by your broker, bank or other nominee only on certain “routine” matters, pursuant to rules of the NYSE.
Only the ratification of the selection of KPMG LLP as our independent registered public accounting firm is considered a “routine” matter for which brokers, banks or other nominees may vote uninstructed shares. The other proposals to be voted on at the meeting are not considered “routine” under NYSE rules. If you do not provide voting instructions on anon-routine matter, your broker may indicate on the proxy that it does not have discretionary voting authority and your shares will not be voted on that matter, which is referred to as a “brokernon-vote.” Brokernon-votes will not be considered as present and entitled to vote with respect to that matter and thus will have no effect on the outcome of the vote with regard to such matters, except that with respect to the proposal to amend the Company’s Restated Articles of Incorporation such votes would have the same effect as if the shares represented thereby were voted against such proposal.matters.
12. How can I revoke a proxy or change my vote?
You may revoke your proxy at any time before it is voted (in the case of proxy cards) by giving notice to the Secretary of the Company or by executing and mailing a later-dated proxy. To revoke a proxy, or change your vote cast, by telephone or internet, you must do so by telephone or internet, respectively (following the directions on your proxy card), by 11:59 p.m. Eastern Standard Time on February 5, 2018.6, 2023. If your shares
are held in street name, you should follow the instructions provided by your broker, bank or other nominee to revoke or change your voting instructions
13. Who will pay the cost of this proxy solicitation?
The solicitation will be by internet and mail and the expense thereof will be paid by the Company. The Company has retained Saratoga Proxy Consulting, LLCMacKenzie Partners, Inc. to assist in the solicitation of proxies at an estimated cost of $15,000 plus expenses. In addition, solicitation of proxies may be made by additional mailings, electronic mail, telephone or in person by Directors, officers or other employees of the Company and we may request brokerage houses, banks and other custodians, nominees and fiduciaries to forward soliciting material to the beneficial owners of shares held of record by such persons. We will reimburse such persons for expenses incurred in forwarding such soliciting material.
14. How do I obtain admission to the 2023 Annual Meeting?
Please see “Proxy Statement Summary – Summary—Attending the Meeting” above for information on attending the meeting and required information. If you have questions regarding whether you have the required information, directions, or if you require any special accommodations due to a disability, please contact the Emerson Investor Relations Department at314-553-2197 in advance of the meeting. TheParticipants may access the virtual meeting facilities will opensite beginning at 9:3045 a.m. Central Time to allow log-in prior to the start of the Annual Meeting at 10:00 a.m., Central Time, to facilitate your registration and security clearance. For your security, you will not be permitted to bring any packages, briefcases, large pocketbooks or bags intoTime. To access the meeting.virtual meeting please visit www.virtualshareholdermeeting.com/EMR2023. Also, cellular and digital phones, audio tape recorders, video and still cameras, pagers, laptops and other portable electronic devices will not be permitted intorecording the meeting.meeting is prohibited. We thank you in advance for your patience and cooperation with these rules.
61 15. What does it mean if I receive more than one proxy card?PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
QUESTIONS AND ANSWERS ABOUT THE 2018 ANNUAL MEETING
It means that you have multiple accounts with brokers and/or our transfer agent. Please vote all shares represented by each proxy card or other voter information card received from your bank or broker. We recommend that you contact your bank or broker, or our transfer agent, to consolidate as many accounts as possible under the same name and address. Our transfer agent is Computershare Trust Company, N.A, P.O. Box 505000, Louisville, Kentucky 40233;43006, Providence, Rhode Island 02940; you can reach Computershare at1-888-213-0970 (from within the U.S. or Canada) or1-781-575-2879 (from outside the U.S. or Canada).
16. May shareholders ask questions at the 2023 Annual Meeting?
Yes. The ChairmanBoth the Chair and CEO will answer shareholders’ questions during the Q&A period of the meeting. In order to provide an opportunity for everyone who wishes to ask a question, each shareholder will be limited to two minutes. Shareholders may ask a second question only after all others have first had their turn and if time allows. Please follow the instructions on the virtual meeting site regarding how to submit questions. When speaking,submitting questions, shareholders must direct questions to the ChairmanChair and confine their questions to matters that relate directly to the business of the meeting.
60 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
Future Shareholder Proposals and Nominations
Proposals for Inclusion in Proxy Statement Pursuant to Rule14a-8
Proposals of shareholders intended to be presented at the 20192024 Annual Meeting scheduled to be held on February 5, 2019,6, 2024, must be received by the Company by August 17, 201811, 2023, for inclusion in the Company’s proxy statement and proxy relating to that meeting pursuant to Rule14a-8 under the Exchange Act. Upon receipt of any such proposal, the Company will determine whether or not to include such proposal in the proxy statement and proxy in accordance with regulations governing the solicitation of proxies.
Proposals and Nominations Not for Inclusion in Proxy Statement
In accordance with our Bylaws, a shareholder who intends to submit an item of business, including a Director nomination or other proposal, outside of our proxy statement, at an Annual Meeting must comply with the requirements of our Bylaws including the provision of timely notice to the Secretary of Emersonthe Company in advance of the meeting. To be timely, a shareholder’s notice ordinarily must be received at the principal executive offices of the Company not less than 90 nor more than 120 days before the meeting, i.e.,meeting. For the 2024 Annual Meeting of Shareholders to be held on February 6, 2024, such notice must be received between October 89 and November 7, 2018 for the 2019 Annual Meeting.8, 2023. However, if the Company gives less than 100 days’ (1) notice of the meeting or (2) prior public disclosure of the date of the meeting, then such notice must be received within 10 days after notice of the meeting is mailed or other public disclosure of the meeting is made.
A shareholder’s notice to the Secretary shall set forth (i) as to each matter the shareholder proposes to bring before the Annual Meeting, a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the Annual Meeting, and (ii) as to the proposing shareholder(s) and the beneficial owner, if any, on whose behalf the proposal is made, and their respective affiliates or associates or others acting in concert therewith various “proposing shareholder information” as specified in detail in our Bylaws. This proposing shareholder information includes such information as material interests or arrangements, names and addresses, the number of shares beneficially owned, any derivative or hedging positions, any material interest in any contract with the Company or any affiliate or competitor, all information that would be required to be set forth in a Schedule 13D (or an amendment) if such a statement were required, any other information relating to any such person that would be required to be disclosed in a proxy statement or proxy contest, a representation whether any such person is or intends to participate in the solicitation of proxies, and a representation that the shareholder is a shareholder of record entitled to vote and intends to continue to hold such stock of the Company through the meeting.
In addition to the proposing shareholder information, for Director nominations outside of our proxy statement, the notice shall also include, as to each person whom the shareholder proposes to nominate, the information specified in detail in our Bylaws.
62 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
OTHER MATTERS
Such information includes the name, age, business address and residence of such nominee, the principal occupation, the number of shares beneficially owned, any other information relating to such person that is required to be disclosed in solicitations of proxies for Director elections or is otherwise required, in certain cases details of any relationship, or understanding between the shareholder(s) and the nominee.
Our Bylaws also set out specific eligibility requirements that nominees for Director must satisfy, which require nominees to:
complete and return a written questionnaire with respect to the background and qualification of the nominee and the background of any other person or entity on whose behalf the nomination is being made; and
provide a written representation and agreement that the nominee:
is not and will not become a party to (1) any agreement or arrangement with, and has not given any commitment or assurance to, any person as to how such nominee will act or vote (a “Voting Commitment”) that has not been disclosed to us or (2) any Voting Commitment that could limit or interfere with the nominee’s ability to comply with the nominee’s fiduciary duties under applicable law; |
is not and will not become a party to any agreement or arrangement with any person with respect to any compensation, reimbursement or indemnification in connection with service as a director that has not been disclosed therein; and |
if elected, would be in compliance and will comply with all of our applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines. |
These requirements are separate from the requirements a shareholder must meet to have a proposal included in the Company’s proxy statement. The foregoing time limits also apply in determining whether notice is timely for purposes of rules adopted by the SEC relating to the exercise of discretionary voting authority.
Director Nominees for Inclusion in Proxy Statement (Proxy Access)
In August 2017, the Board amended the Bylaws to permit a holder (or a group of not more than 20 holders) of at least 3% of our outstanding common stock continuously for at least three years to nominate and include in our proxy materials director nominees constituting up to the greater of two individuals or 20% of the Board, provided that the nominating holder(s) and the nominee(s) satisfy the requirements specified in the Bylaws, including providing the Company with advance notice of the nomination. Notice of director nominees submitted under these Bylaw provisions must be delivered to and received by the Secretary of the Company, whose address is 8000 West Florissant Avenue, St. Louis, Missouri 63136, no sooner than July 18, 201812, 2023, and no later than August 17, 2018,11, 2023, to be considered timely for purposes of the Company’s 20192024 Annual Meeting.
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | 61 |
OTHER MATTERS
To utilize proxy access, among other things, the electing shareholder and proposed nominee must comply with the detailed requirements set forth in our Bylaws, including the provision of the proposing shareholder information, various other required information, representations, undertakings, agreements and other requirements as set forth in the Bylaws and as required by law.
In each case the notice must be given to the Secretary of the Company, whose address is 8000 West Florissant Avenue, St. Louis, Missouri 63136. Any shareholder desiring a copy of the Company’s Bylaws will be furnished one without charge upon written request to the Secretary. A copy of the Bylaws is available on the Company’s website at www.Emerson.com, Investors, Corporate Governance, Bylaws.
Universal Proxy Rules
In addition to satisfying the foregoing requirements, including the timing and other requirements, under the Bylaws summarized above under “—Proposals and Nominations Not for Inclusion in Proxy Statement,” to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees for the 2024 Annual Meeting must also provide notice to Secretary of the Company, whose address is 8000 West Florissant Avenue, St. Louis, Missouri 63136, that sets forth all information required by Rule 14a-19 under the Exchange Act no later than December 9, 2023 (or, if the 2024 Annual Meeting is called for a date that is not within 30 calendar days of the anniversary of the date of the 2023 Annual Meeting, then notice must be provided by the later of 60 calendar days prior to the date of the 2024 Annual Meeting or by the close of business on the tenth calendar day following the day on which public announcement of the date of the 2024 Annual Meeting is first made). A shareholder seeking to utilize the universal proxy rules must comply with those rules and must also comply with our Bylaws, including the obligation to provide timely notice (not less than 90 nor more than 120 days before the meeting) as described above under “—Proposals and Nominations Not for Inclusion in Proxy Statement.”
Communications with the Company and Obtaining Emerson Documents
Shareholders and other interested persons may contact the Lead Independent DirectorChair of the Board or any of our Directors in writing c/o Emerson Electric Co., 8000 West Florissant Avenue, St. Louis, Missouri 63136, Attn: Secretary. All such letters will be forwarded promptly to the Lead Independent DirectorChair of the Board or relevant Director.
The Company’s Corporate Governance Principles and Practices and the charters of all Board committees are available on the Company’s website at www.Emerson.com, Investors, Corporate Governance. The foregoing documents are available in print to shareholders upon written request delivered to Emerson Electric Co., 8000 West Florissant Avenue, St. Louis, Missouri 63136, Attn: Secretary.
63 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
OTHER MATTERS
Additional Filings
The Company’sForms 10-K,10-Q,8-K10-K, 10-Q, 8-K and all amendments to those reports are available without charge through the Company’s website on the internet as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. They may be accessed as follows: www.Emerson.com, Investors, SEC filings. Information on our website does not constitute part of this proxy statement.
Householding of Proxies
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for annual reports, proxy statements and notices of internet availability of proxy materials with respect to two or more shareholders sharing the same address by delivering a single annual report, proxy statement and/or a notice of internet availability of proxy materials addressed to those shareholders. This process, which is commonly referred to as “householding,” can provide extra convenience for shareholders and cost savings for companies. The Company and some brokers household annual reports, proxy materials and notices of internet availability of proxy materials, delivering a single annual report, proxy statement and and/or notice of internet availability of proxy materials to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders.
Once you have received notice from your broker or the Company that your broker or the Company will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate annual report, proxy statement and notice of internet availability of proxy materials, or if you currently receive multiple copies of these documents and would prefer to participate in householding, please notify your broker if your shares are held in a brokerage account or us if you hold registered shares. You can notify us by sending a written request to Emerson Electric Co., 8000 West Florissant Avenue, St. Louis, Missouri 63136, Attn: Investor Relations, or by telephoning314-553-2197 or by visiting our website.
Forward-Looking Statements
This Proxy Statement may include forward-looking statements within the meaning of Section 21E of the Securities Exchange Act that are intended to enjoy the protection of the safe harbor for forward-looking statements provided by the Securities Exchange Act and other federal securities laws. All statements other than statements of historical or current facts, including statements regarding our strategy, outlook, operations, prospects, aspirational purpose, causes, values, and related commitments, goals or targets, including those regarding sustainability, greenhouse gas emissions, our net zero ambition and related goals, diversity, equity and inclusion or other initiatives, plans, targets, objectives or goals are forward-looking. We use words such as “anticipates,” “believes,” “expects,” “future,” “intends,” and similar expressions to identify forward-looking statements. These forward-looking statements are based on current expectations and are subject to risks and uncertainties. Emerson undertakes no obligation to update any such statements to reflect later developments. These risks and uncertainties include the Company’s ability to successfully complete on the terms and conditions contemplated, and the financial impact of, the proposed Climate Technologies transaction, the scope, duration and ultimate impact of the COVID-19 pandemic and the Russia-Ukraine conflict, as well as economic and currency conditions, market demand, including related to the pandemic and oil and gas price declines and volatility, pricing, protection of intellectual property, cybersecurity, tariffs, competitive and technological factors, inflation, among others, which are set forth in the “Risk Factors” of Part I, Item 1A, and the “Safe Harbor Statement” of Part II, Item 7, to the Company’s Annual Report on Form 10-K for the year ended September 30, 2022 and in subsequent reports filed with the SEC, which are available at http://www.sec.gov. Website references throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by reference into this document.
62 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
64 PROXY STATEMENT FOR EMERSON 2018 ANNUAL MEETING OF SHAREHOLDERS
EMERSON DIRECTOR INDEPENDENCE STANDARDS
In order to be considered independent under the rules of the New York Stock Exchange, the Board must determine that a director does not have any direct or indirect material relationship with Emerson Electric Co. (“Emerson”). The Board has established the following guidelines to assist it in determining director independence under the NYSE rules. Any Director who meets the following standards will be deemed independent by the Board:
1. The Director was not employed by Emerson, and no immediate family member of the Director was employed by Emerson as an executive officer, within the preceding three years;
1. | The Director was not employed by Emerson, and no immediate family member of the Director was employed by Emerson as an executive officer, within the preceding three years; |
2. The Director is not a partner or employee of Emerson’s independent auditor, and no immediate family member of the Director is a partner of Emerson’s independent auditor, or is employed by such auditor and personally works on Emerson’s audit, and neither the Director nor any immediate family member has been within the preceding three years a partner of or employed by Emerson’s independent auditor and has personally worked on Emerson’s audit within that time;
2. | The Director is not a partner or employee of Emerson’s independent auditor, and no immediate family member of the Director is a partner of Emerson’s independent auditor, or is employed by such auditor and personally works on Emerson’s audit, and neither the Director nor any immediate family member has been within the preceding three years a partner of or employed by Emerson’s independent auditor and has personally worked on Emerson’s audit within that time; |
3. Neither the Director nor any immediate family member of the Director was employed as an executive officer by any company at the same time any Emerson executive officer served as a member of such company’s compensation committee within the preceding three years;
3. | Neither the Director nor any immediate family member of the Director was employed as an executive officer by any company at the same time any Emerson executive officer served as a member of such company’s compensation committee within the preceding three years; |
4. Neither the Director, nor any member of the Director’s immediate family received in any twelve-month period during any of Emerson’s last three fiscal years direct compensation in excess of $120,000 from Emerson other than regular director compensation, pension and other deferred payments that are not in any way contingent on continued service to Emerson, and compensation received by an immediate family member for service as anon-executive officer of Emerson;
4. | Neither the Director, nor any member of the Director’s immediate family received in any twelve-month period during any of Emerson’s last three fiscal years direct compensation in excess of $120,000 from Emerson other than regular director compensation, pension and other deferred payments that are not in any way contingent on continued service to Emerson, and compensation received by an immediate family member for service as a non-executive officer of Emerson; |
5. If the Director is an employee of, or if any immediate family member is an executive officer of, another organization that does business with Emerson, the annual sales to, or purchases from, Emerson by such company in each of the last three fiscal years were less than the greater of two percent of the annual revenues of such company or $1,000,000;
5. | If the Director is an employee of, or if any immediate family member is an executive officer of, another organization that does business with Emerson, the annual sales to, or purchases from, Emerson by such company in each of the last three fiscal years were less than the greater of two percent of the annual revenues of such company or $1,000,000; |
6. If the Director is an executive officer of another organization which is indebted to Emerson, or to which Emerson is indebted, the total amount of either company’s indebtedness to the other is less than two percent of the total consolidated assets of the company the Director serves as an executive officer;
6. | If the Director is an executive officer of another organization which is indebted to Emerson, or to which Emerson is indebted, the total amount of either company’s indebtedness to the other is less than two percent of the total consolidated assets of the company the Director serves as an executive officer; |
7. If the Director is, or is a director, executive officer or greater than 10% owner of an entity that is, a paid advisor, paid consultant or paid provider of professional services to Emerson, any member of Emerson’s senior management or any immediate family member of a member of Emerson’s senior management, the amount of such payments is less than the greater of 2% of such entity’s annual revenues or $1,000,000 during Emerson’s current fiscal year;
7. | If the Director is, or is a director, executive officer or greater than 10% owner of an entity that is, a paid advisor, paid consultant or paid provider of professional services to Emerson, any member of Emerson’s senior management or any immediate family member of a member of Emerson’s senior management, the amount of such payments is less than the greater of 2% of such entity’s annual revenues or $1,000,000 during Emerson’s current fiscal year; |
8. If the Director is a partner, principal or counsel in a law firm that provides professional services to Emerson, the amount of payments for such services is less than the greater of 2% of such law firm’s annual revenues or $1,000,000 during Emerson’s current fiscal year;
8. | If the Director is a partner, principal or counsel in a law firm that provides professional services to Emerson, the amount of payments for such services is less than the greater of 2% of such law firm’s annual revenues or $1,000,000 during Emerson’s current fiscal year; |
9. If the Director serves as an officer, director or trustee of a charitable organization to which Emerson makes contributions: (i) Emerson’s discretionary contributions to such organization are less than the greater of two percent of such organization’s total annual charitable receipts or $1 million; (ii) Emerson’s contributions are normal matching charitable gifts and similar programs available to all employees and independent directors; or (iii) the charitable donation goes through the normal corporate charitable donation approval processes, and is not made “on behalf of” a Director;
9. | If the Director serves as an officer, director or trustee of a charitable organization to which Emerson makes contributions: (i) Emerson’s discretionary contributions to such organization are less than the greater of two percent of such organization’s total annual charitable receipts or $1 million; (ii) Emerson’s contributions are normal matching charitable gifts and similar programs available to all employees and independent directors; or (iii) the charitable donation goes through the normal corporate charitable donation approval processes, and is not made “on behalf of” a Director; |
10. The Director’s ownership of Emerson stock, direct or indirect, is less than 1% of the total outstanding Emerson stock;
10. | The Director’s ownership of Emerson stock, direct or indirect, is less than 1% of the total outstanding Emerson stock; |
11. If the Director is affiliated with, or provides services to, an entity in which Emerson has an ownership interest, such ownership interest is less than 20%; and
11. | If the Director is affiliated with, or provides services to, an entity in which Emerson has an ownership interest, such ownership interest is less than 20%; |
12. Any other relationship between the Director and Emerson not covered by the standards set forth above is an arrangement that is usually and customarily offered to customers of Emerson.
12. | Any other relationship between the Director and Emerson not covered by the standards set forth above is an arrangement that is usually and customarily offered to customers of Emerson; and |
13. | If any relationship exists between Emerson and any Director that is not addressed by the standards set forth above, the Directors meeting these standards shall determine whether such relationship impairs the independence of such Director. |
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | A-1 |
A-1
PROPOSED AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
ARTICLE 5
3. Amendment ofBy-Laws
TheBy-Laws of the Corporation may beNON-GAAP RECONCILIATIONSThe powerGAAP to make, altered, amended or repealedtheBy-laws of the Corporation shall be vested solely inonly by the Board of Directorsor by the holders of not less than a majority of the total voting power of all outstanding shares of voting stock of the Corporation, voting as a single class. TheBy-laws may contain any provisions for the regulation and management of the affairs of the Corporation not inconsistent with law or the Articles of Incorporation.
2022 Underlying Sales Change | Emerson | |||
Reported (GAAP) | 8 | % | ||
(Favorable) / Unfavorable FX | 2 | % | ||
Acquisitions | (2 | )% | ||
Divestitures | 1 | % | ||
Underlying | 9 | % |
B-1
FORUM SELECTION BYLAW
ARTICLE VIII
Section 6.Forum for Certain Actions. Unless the Corporation consents in writing to the selection of an alternative forum, the United States District Court for the Eastern District of Missouri shall be, to the fullest extent permitted by law, the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary or any other duty owed by any current or former director, officer, employee, agent, shareholder or affiliate of the Corporation to the Corporation or to the Corporation’s shareholders, (c) any action asserting a claim against the Corporation or any of its directors, officers, employees, agents or shareholders arising pursuant to any provision of the General and Business Corporation Law of Missouri, the Articles of Incorporation or theseBy-Laws, (d) any action asserting a claim against the Corporation or any of its directors, officers, employees, agents or shareholders governed by the internal affairs doctrine, or (e) any action to interpret, apply, enforce or determine the validity of the Articles of Incorporation or theseBy-Laws, in each case regardless of whether such action or proceeding is based on common law, statutory, equitable, legal or other grounds, and, in each case, including any action brought by a beneficial owner of the Corporation’s shares; provided, however, that in the event that such court lacks jurisdiction over any such action or proceeding, the sole and exclusive forum for such action or proceeding shall be the Circuit Court located in the County of St. Louis, Missouri, or in the event that such court lacks jurisdiction, any other court of the State of Missouri; except for, in all cases, with respect to any action or proceeding as to which such federal or state court determines that there is an indispensable party not subject to the jurisdiction of such court (and the indispensable party does not consent to the personal jurisdiction of such court within ten days following such determination). Any person or entity holding, purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to (i) consent to (A) the personal jurisdiction of the United States District Court for the Eastern District of Missouri (or if such court does not have jurisdiction, the Circuit Court located in the County of St. Louis, or if such court does not have jurisdiction, another court of the State of Missouri) in any proceeding brought to enjoin, or otherwise enforce this Section 6 with respect to, any action by that person or entity that is inconsistent with the exclusive jurisdiction provided for in this Section 6 (an “Inconsistent Action”) and (B) having service of process made upon such person or entity in any such proceeding by service upon such person’s or entity’s counsel in such Inconsistent Action as agent for such person or entity and (ii) have waived any argument relating to the inconvenience of the forums referenced above in connection with any action or proceeding described in this Section 6. Failure to enforce the foregoing provisions would cause the Corporation irreparable harm and the Corporation shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions.
Without limiting any of the foregoing, nothing contained in this Section 6 is intended to limit, determine or address the merits or substance of any action or proceeding (including, whether any action or proceeding should be commenced or maintained against the Corporation or against any of the Corporation’s directors, officers or employees, or whether any particular type or form of remedy or relief should be sought or is available against the Corporation or against any of its directors, officers or employees), but instead, the provisions of this Section 6 are solely procedural in nature and govern only the exclusive location, forum and venue for the commencement of actions and proceedings expressly enumerated in clauses (a) through (e) of the immediately preceding sentence.
Earnings Per Share | FY22 | Change | ||||||
Earnings per share (GAAP) | $ | 5.41 | 42 | % | ||||
Restructuring and related costs | 0.15 | (5 | )% | |||||
Amortization of intangibles | 0.48 | (2 | )% | |||||
Gain on subordinated interest | (0.60 | ) | (13 | )% | ||||
Gain on sale of Therm-O-Disc | (0.72 | ) | (16 | )% | ||||
Russia business exit | 0.32 | 7 | % | |||||
Acquisition/divestiture costs and interest on pre-acquisition AspenTech debt | 0.19 | 4 | % | |||||
AspenTech Micromine purchase price hedge | 0.04 | 1 | % | |||||
Investment-related gains | (0.02 | ) | — | % | ||||
OSI purchase accounting | — | (2 | )% | |||||
Adjusted earnings per share | $ | 5.25 | 16 | % |
C-1
EBITA Margin | FY22 | Change | ||||||
Pretax margin (GAAP) | 20.8 | % | 480 bps | |||||
Interest expense, net | 1.0 | % | 20 bps | |||||
Restructuring and related costs | 0.6 | % | (40) bps | |||||
Amortization of intangibles | 2.3 | % | 50 bps | |||||
Gain on sale of Therm-O-Disc | (2.5 | )% | (250) bps | |||||
Gain on subordinated interest | (2.3 | )% | (230) bps | |||||
Russia business exit | 0.9 | % | 90 bps | |||||
Acquisition/divestiture costs | 0.6 | % | 60 bps | |||||
AspenTech Micromine purchase price hedge | 0.3 | % | 30 bps | |||||
Investment-related gains | (0.1 | )% | — bps | |||||
OSI purchase accounting items | — | % | (30) bps | |||||
Adjusted EBITA margin | 21.6 | % | 180 bps |
Year-To-Date Cash Flow | FY22 | |||
Operating cash flow (GAAP) | $ | 2,922 | ||
Capital expenditures | (531 | ) | ||
Free cash flow | $ | 2,391 |
B-1 | PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS |
APPENDIX B
Cash Flow to Net Earnings Conversion | FY 22 | |||
Operating cash flow to net earnings (GAAP) | 90 | % | ||
Capital expenditures | (16 | %) | ||
Free cash flow to net earnings | 74 | % | ||
Vertiv gain & taxes paid / Therm-O-Disc gain and taxes paid / Russia business exit | 24 | % | ||
Adjusted free cash flow to net earnings | 98 | % |
PROXY STATEMENT FOR EMERSON 2023 ANNUAL MEETING OF SHAREHOLDERS | B-2 |
EMERSON ELECTRIC CO.
8000 WEST FLORISSANT AVENUE
P.O. BOX 4100
ST. LOUIS, MO 63136-8506
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING. BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK. IF YOU VOTE BY INTERNET OR PHONE, YOU DO NOT NEED TO RETURN THIS PROXY CARD.
VOTE BY INTERNET
Before The Meeting - Go towww.proxyvote.com or scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. Eastern Time on February 6, 2023 for shares held directly and by 11:59 P.M. Eastern Time on February 2, 2023 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting - Go to www.virtualshareholdermeeting.com/EMR2023
You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. Eastern Time on February 6, 2023 for shares held directly and by 11:59 P.M. Eastern Time on February 2, 2023 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. If you vote by mail, your proxy card must be received prior to the start of the Annual Meeting of Shareholders for your vote to be counted.
SPECIAL VOTING DEADLINE NOTICE TO PARTICIPANTS IN EMERSON ELECTRIC CO. BENEFIT PLANS
If you own shares of Emerson Electric Co. common stock through any benefit plan of Emerson or any of its subsidiaries, the shares represented by your proxy card include those shares. To allow sufficient time for the plan trustees to vote, the trustees must receive your voting instructions by 11:59 P.M. Eastern Time on February 6, 2023. If the trustees do not receive your properly completed instructions by that date, the trustees will vote the shares in the same proportion as the votes that the trustees receive from other plan participants, unless otherwise required by law.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
D93549-P80175-Z83426 KEEP THIS PORTION FOR YOUR RECORDS
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY | |
EMERSON ELECTRIC CO. | ||||||||||||||||||||||||||||||||||||
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THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3 AND FOR “ONE YEAR” IN PROPOSAL 4.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING NOMINEES:
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| ELECTION OF DIRECTORS FOR TERMS ENDING IN 2026 | |||||||||||||||||||||||||||||||||||
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Nominees: | For | Against | Abstain | |||||||||||||||||||||||||||||||||
1a. Martin S. Craighead | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||||||||
1b. Gloria A. Flach | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||||||||
1c. Matthew S. Levatich | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||||||||
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING: | For | Against | Abstain | |||||||||||||||||||||||||||||||||
2. | Ratification of KPMG LLP as Independent Registered Public Accounting Firm. | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||
3. | Approval, by non-binding advisory vote, of Emerson Electric Co. executive compensation. | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF EVERY “ONE YEAR” ON ITEM NO. 4. | One Year | Two Years | Three Years | Abstain | ||||||||||||||||||||||||||||||||
4. | Advisory vote on frequency of future shareholder advisory approval of the Company’s executive compensation. | ☐ | ☐ | ☐ | ☐ |
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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The undersigned hereby acknowledges receipt of Notice of Annual Meeting and accompanying Proxy Statement. | ||||||||||||||||||||||||||||||||||||||||||||
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(NOTE:Please sign exactly as your name(s) appear(s) hereon. All holders must sign. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. If a corporation, please sign in full corporate name by authorized officer. If a partnership, please sign in partnership name by authorized person.) | ||||||||||||||||||||||||||||||||||||||||||||
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Signature [PLEASE SIGN WITHIN BOX] | Date | ||||||||||||||||||||||||||||||||||||||
Signature | Date |
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ADMISSION TICKET
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, February 6, 2018
10:00 A.M., Central Standard Time
Emerson Electric Co. Headquarters
8000 West Florissant Avenue
St. Louis, MO 63136
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and our Annual Report to Shareholders, including our Annual Report on
Form 10-K,for the fiscal year ended
September 30, 2017,2022, are available at www.proxyvote.com.
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PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, does hereby appoint D.N. FARR,S.L. KARSANBHAI, S.Y. BOSCO, and J.G. SHIVELY,J.A. SPERINO, or any of them, with full powers of substitution, the true and lawful attorneys-in-fact, agents and proxies of the undersigned to represent the undersigned at the Annual Meeting of the Shareholders of EMERSON ELECTRIC CO., to be held on February 6, 2018,7, 2023, commencing at 10:00 A.M., Central Standard Time, via the internet at the Headquarters of the Company, 8000 West Florissant Avenue, St. Louis, Missouri,www.virtualshareholdermeeting.com/EMR2023, and at any and all adjournments or postponements of said meeting, and to vote all the shares of Common Stock of the Company standing on the books of the Company which the undersigned is entitled to vote as specified and in their discretion on such other business as may properly come before the meeting. The matters stated on the reverse side were proposed by the Company, except as indicated.
THIS PROXY WILL BE VOTED AS SPECIFIED AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES IN PROPOSAL 1, FOR PROPOSALS 2 AND 3 4 AND 5, AND AGAINST PROPOSALS 6, 7, 8 AND 9.FOR “ONE YEAR” IN PROPOSAL 4.
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(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
(Continued, and to be marked, dated and signed, on the other side)