Notice of
2018
Annual Meeting
and
Proxy Statement
WHETHER OR NOT YOU PRESENTLY PLAN TO ATTEND THE MEETING IN
PERSON, THE BOARD OF DIRECTORS URGES YOU TO VOTE.
Owens & Minor, Inc.
9120 Lockwood Boulevard
Mechanicsville, Virginia 23116
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒ Filed by a Partyparty other than the Registrant ☐
Check the appropriate box:
| ☐ | Preliminary Proxy Statement | |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| ☒ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material Under Rule 14a-12 | |
Owens & Minor, Inc.
(Name of registrantRegistrant as specified in its charter)Specified In Its Charter)
(Name of person(s) filing proxy statement,Person(s) Filing Proxy Statement, if other than the registrant)Registrant)
Payment of Filing Fee (Check the appropriate box):
| ☒ | No fee required. | |||
| ☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
| (1) | Title of each class of securities to which transaction applies:
| |||
| (2) | Aggregate number of securities to which transaction applies:
| |||
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
| |||
| (4) | Proposed maximum aggregate value of transaction:
| |||
| (5) | Total fee paid:
| |||
| ☐ | Fee paid previously with preliminary materials. | |||
| ☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its | |||
| (1) | Amount previously paid:
| |||
| (2) | Form, Schedule or Registration Statement No:
| |||
| (3) | Filing party:
| |||
| (4) | Date Filed:
| |||
Notice of
2018
Annual Meeting
and
Proxy Statement
WHETHER OR NOT YOU PRESENTLY PLAN TO ATTEND THE MEETING IN
PERSON, THE BOARD OF DIRECTORS URGES YOU TO VOTE.
Owens & Minor, Inc.
9120 Lockwood Boulevard
Mechanicsville, Virginia 23116
  | ||||||
9120 Lockwood Boulevard | ||||||
Mechanicsville, Virginia 23116 | ||||||
| (804)723-7000 |
March 26, 201817, 2021
Dear Shareholders:
It is a pleasure to invite you to ourthe Owens & Minor, Inc. Annual Meeting of Shareholders on Tuesday, May 8, 2018Thursday, April 29, 2021 at 9:00 a.m. The meetingEastern Time. Due to ongoing concerns regarding the COVID-19 virus, the Annual Meeting will be held at The Jefferson Hotel, Empire Room, 101 West Franklin Street, Richmond, Virginia, 23220. Directionsin a virtual meeting format only, via the Internet. Additionally, we believe that a virtual meeting allows us to The Jefferson Hotel aremake participation accessible for shareholders from any geographic location while reducing the costs and environmental impact associated with holding an in-person meeting. Information regarding attending the virtual Annual Meeting can be found on the last page 51 of the proxy statement.Proxy Statement.
The Notice of 20182021 Annual Meeting of Shareholders and Proxy Statement describe the items of business for the meeting. In addition to considering these matters, we will review significant accomplishments and events since our last shareholders’ meeting as well as future opportunities and initiatives we intend to pursue. Our Board of Directors and management team will be there to discuss items of interest and to answer any questions.
The Notice of 20182021 Annual Meeting of Shareholders contains instructions on how to access our proxy materials and our 20172020 Annual Report/Form10-K over the Internet as well as how shareholders can receive paper copies of such documents, if they so desire.
You may vote your shares byvia the Internet or by telephone or, if you prefer, you may request paper copies of the proxy materials and submit your vote by mail by following the instructions on the proxy card. We encourage you to vote via the Internet. Whichever method you choose, your vote is important so please vote as soon as possible. All of us at Owens & Minor appreciate your continued interest and support.
Warm regards,
P. CODY PHIPPSMark A. Beck
Chairman, PresidentChair of the Board of Directors
Owens & Chief Executive OfficerMinor, Inc.
WHETHER OR NOT YOU PRESENTLY PLAN TO ATTEND THE MEETING,
THE BOARD OF DIRECTORS URGES YOU TO VOTE.
Proxy Statement
| Page | ||||
i | ||||
1 | ||||
4 | ||||
5 | ||||
6 | ||||
9 | ||||
9 | ||||
10 | ||||
12 | ||||
12 | ||||
13 | ||||
13 | ||||
18 | ||||
Proposal 2: | ||||
| ||||
20 | ||||
22 | |||||||
23 | |||||||
23 | |||||||
24 | |||||||
24 | |||||||
| 25 | ||||||
33 | |||||||
43 | |||||||
Proposal | |||||||
50 | |||||||
50 | |||||||
Further Information About Attending the Virtual Annual Meeting | |||||||
| |||||||
YOUR VOTE IS IMPORTANTYour Vote Is Important
Whether or not you plan to attend the annual meeting,Annual Meeting, please vote your shares promptly, as instructed in the Notice of InternetRegarding the Availability of Proxy Materials, by the Internet or by telephone. You may also request a paper proxy card to submit your vote by mail, if you prefer. We encourage you to vote via the Internet.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERSNotice of Annual Meeting of Shareholders
To Be Held Tuesday, May 8, 2018Thursday, April 29, 2021
TO THETHE SHAREHOLDERS OFOF OWENS & MINOR, INC.:
The Annual Meeting of Shareholders of Owens & Minor, Inc. (the “Company” or “Owens & Minor”) will be held on Tuesday, May 8, 2018Thursday, April 29, 2021 at 9:00 a.m. EDT in a virtual meeting format only, via the Internet. You will not be able to attend the Annual Meeting in person. To be admitted to the Annual Meeting at The Jefferson Hotel, Empire Room, 101 West Franklin Street, Richmond, Virginia, 23220.www.meetingcenter.io/294274694 you must enter the 15-digit control number found on your proxy card, voting instruction form or notice you previously received. We encourage you to access the meeting in advance of the designated start time.
The purposes of the meeting are:
| 1. | To elect the |
| 2. |
| To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, |
| 3. | To conduct an advisory vote to approve the compensation of the Company’s named executive officers; and |
| 4. | To transact any other business properly before the |
Shareholders of record as of March 13, 20185, 2021 will be entitled to vote at the annual meeting.Annual Meeting.
Your attention is directed to the attached proxy statement.Proxy Statement. The Notice of InternetRegarding the Availability of Proxy Materials is being distributed on or about March 26, 2018.17, 2021. This proxy statement,Proxy Statement, the proxy card and Owens & Minor’s 20172020 Annual Report/Form Report/Form10-K10-K are being furnished on the Internet on or about March 26, 2018.17, 2021.
BY ORDER OFOF THETHE BOARD OFOF DIRECTORS
NICHOLAS J. PACE
Executive Vice President, General Counsel &
Corporate Secretary & Communications
Owens & Minor, Inc. ● 2021 Proxy Statementi
Street Address | Mailing Address | |
| 9120 Lockwood Boulevard | P.O. Box 27626 | |
| Mechanicsville, Virginia 23116 | Richmond, Virginia 23261-7626 |
PROXY STATEMENTProxy Statement
Annual Meeting of Shareholders
to be held on May 8, 2018April 29, 2021
ABOUT THE MEETINGAbout the Meeting
When and Where the Annual Meeting Will Be Held
The Annual Meeting will be held virtually on Thursday, April 29, 2021 at 9:00 a.m. EDT at www.meetingcenter.io/294274694 through a live webcast. We have adopted a virtual format for our Annual Meeting to ensure the health and well-being of our teammates, directors and shareholders in the current COVID-19 environment. Additionally, we believe that a virtual meeting allows us to make participation accessible for shareholders from any geographic location with Internet connectivity, while reducing costs and environmental impact associated with holding and arranging for an in-person meeting.
How to Attend the Virtual Annual Meeting
Shareholders at the close of business on March 5, 2021 (the “Record Date”) have a right to attend the Annual Meeting. In order to be admitted to the Annual Meeting at www.meetingcenter.io/294274694, registered shareholders must enter the 15-digit control number found in the shaded bar on your Notice of Internet Availability or proxy card. The password for the meeting is OMI2021. Further information regarding attending the virtual Annual Meeting can be found at page 51 of this Proxy Statement.
What You Are Voting On
Proxies are being solicited by the Board of Directors for purposes of voting on the following proposals and any other business properly brought before the meeting:
| Proposal 1: | Election of the |
| Proposal 2: |
| Ratification of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, |
| Proposal | Advisory vote to approve the compensation of our named executive |
Who is Entitled to Vote
Shareholders of Owens & Minor, Inc. (the “Company” or “Owens & Minor”) as of the close of business on March 13, 20185, 2021 (the “Record Date”) are entitled to vote. Each share of the Company’s common stock (“Common Stock”) is entitled to one vote with respect to each matter to be voted upon at the meeting. As of March 13, 2018, 61,822,2775, 2021, 73,504,099 shares of Common Stock were issued and outstanding.
Owens & Minor, Inc. ● 2021 Proxy Statement1
About the Meeting |
How to Vote
You can vote via the Internet, by telephone or by mail.
By Internet. You may vote via the Internet by following the specific instructions on the Notice of Internet Availability of Proxy Materials. Shareholders who have requested a paper copy of a proxy card by mail may submit proxies over the Internet by following the instructions on the proxy card. We encourage you to vote via the Internet. If your shares are held by your bank or broker in street name, please refer to the instruction form that you receive from your bank or broker or contact your bank or broker to determine whether you will be able to vote via the Internet.
By Telephone. You may vote by telephone by calling the toll-free number on the proxy card and following the instructions. Shareholders will need to have the control number that appears on their notice available when voting. If your shares are held by your bank or broker in street name, please refer to the instruction form that you receive from your bank or broker or contact your bank or broker to determine whether you will be able to vote by telephone.
By Mail. Shareholders who have requested a paper copy of a proxy card by mail may submit proxies by completing, signing and dating the enclosed proxy card and returning it in the postage-paid envelope provided.
However you choose to vote, you may revoke a proxy prior to the meeting by (1) submitting a subsequently dated proxy by any of the methods described above, (2) giving notice in writing to the Corporate Secretary of the Company or (3) voting in person at the virtual meeting (attendance at the meeting will not itself revoke a proxy).
What Happens if You Do Not Make Selections on Your Proxy
If your proxy contains specific voting instructions, those instructions will be followed. However, if you sign and return your proxy card by mail or submit your proxy by telephone or via the Internet without making a selection on one or more proposals, you give authority to the individuals designated on the proxy card to vote on the proposal(s) for which you have not made specific selections or given instructions and any other matter that may arise at the meeting. If no specific selection is made or instructions given, it is intended that all proxies that are signed and returned or submitted via telephone or Internet will be voted “FOR” the election of all nominees for director, “FOR” approval of the 2018 Stock Incentive Plan, “FOR” the ratification of KPMG LLP as our independent registered public accounting firm in 20182021, and “FOR” the approval on an advisory basis, of the compensation of our named executive officers (together, the “NEOs,” and, individually, an “NEO”).Say on Pay Proposal.
Whether Your Shares Will be Voted if You Don’t Provide Your Proxy
Whether your shares will be voted if you do not provide your proxy depends on how your ownership of shares of Common Stock is registered. If you own your shares as a registered holder, which means that your shares of Common Stock are registered in your name, and you do not provide your proxy, your shares will not be represented at the meeting, will not count toward the quorum requirement, which is explained below, and will not be voted.
If you own your shares of Common Stock in street name, your shares may be voted even if you do not provide your broker with voting instructions. Brokers have the authority under New York Stock Exchange (“NYSE”) rules to vote shares for which their beneficial owner customers do not provide voting instructions on certain “routine” matters. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a brokernon-vote.
The Company believes that only the proposal to ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 20182021 is a routine matter for which brokerage firms will have discretionary voting power if you do not give voting instructions with respect to this proposal. The proposal to elect directors the proposal to approve the 2018 Stock Incentive Plan, and the proposal to approve,Say on an advisory basis, the compensation of our NEOs,Pay Proposal, arenon-routine matters for which brokerage firms will not have discretionary voting power and for which specific voting instructions from their customers are required. As a result, brokerage firms will not be allowed to vote on thesenon-routine matters on behalf of their customers if the customers do not return specific voting instructions.
2Owens & Minor, Inc. ● 2021 Proxy Statement
About the Meeting |
What Constitutes a Quorum
A majority of the outstanding shares of Common Stock present or represented by proxy constitutes a quorum. A quorum is required to conduct the annual meeting.Annual Meeting. If you vote your proxy, you will be considered part of the quorum. Abstentions and shares held by brokers or banks in street name (“broker shares”) that are voted on any matter are included in the quorum. Broker shares that are not voted on any matter will not be included in determining whether a quorum is present.
The Vote Required to Approve Each Item
Election of Directors. The affirmative vote of a majority of the votes cast at the meeting is required for the election of each director. A majority of votes cast means that the number of votes cast “FOR” a nominee’s election must exceed the number of votes cast “AGAINST” that nominee’s election. Abstentions and brokernon-votes will not be counted as votes cast and will have no effect on the results of this vote.
Approval of 2018 Stock Incentive Plan. The approval of the 2018 Stock Incentive Plan requires the affirmative vote of a majority of the votes cast on this proposal. Abstentions will be considered as votes cast under the rules of the NYSE and will have the effect of a vote against this proposal for purposes of the rules of the NYSE. Brokernon-votes will not be counted as votes cast on this proposal and will have no effect on the results of this vote.
Ratification of Appointment of KPMG LLP. The appointment of KPMG LLP will be ratified if the votes cast “FOR” this proposal exceed the number of votes cast “AGAINST” this proposal. Abstentions will not be counted as votes cast on this proposal and will have no effect on the results of this vote. There should be no brokernon-votes because this is considered a routine matter under the rules of the NYSE.
AdvisoryAdvisory Vote to Approve Executive Compensationthe Say on Pay Proposal. The compensation of our executive officers named in the Summary Compensation Table will be approved on an advisory basis if the votes cast “FOR” this proposal exceed the number of votes cast “AGAINST” this proposal. Abstentions and brokernon-votes will not be counted as votes cast on this proposal and will have no effect on the results of this vote.
How to Obtain a Paper Copy of the Proxy Materials
Shareholders will find instructions about how to obtain a paper copy of the proxy materials on the notice they received in the mail about the Internet availability of proxy materials.
What it Means if You Get More Than One Notice about the Internet Availability of Proxy Materials
Your shares are probably registered differently or are held in more than one account. Please vote all proxies to ensure that all your shares are voted. Also, please have all of your accounts registered in the same name and address. You may do this by contacting our transfer agent, Computershare, Inc., at1-866-252-0358.
Costs of Soliciting Proxies
Owens & Minor will pay all costs of this proxy solicitation. The Company has retained Georgeson, LLC to aid in the distribution and solicitation of proxies for approximately $6,000$7,500 plus expenses. The Company will reimburse brokers and other custodians, nominees and fiduciaries for their expenses in forwarding proxy and solicitation materials.
Owens & Minor, Inc. ● 2021 Proxy Statement3
CORPORATE GOVERNANCECorporate Governance
General.General. The Company is managed under the direction of the Board of Directors, which has adopted Corporate Governance Guidelines to set forth certain corporate governance practices. Each year, we review our corporate governance policies and practices relative to applicable laws, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Sarbanes-Oxley Act of 2002 and rules and regulations promulgated thereunder or adopted by the Securities and Exchange Commission (“SEC”) and the NYSE, the exchange on which the Common Stock is listed, as well as the policies and practices recommended by groups and authorities active in corporate governance.
Corporate Governance Materials.Materials. The Company’s Bylaws, Corporate Governance Guidelines, Code of Honor and the charters of the Audit Committee, the Compensation & Benefits Committee (the “Compensation Committee”), and the Governance & Nominating Committee are available on our website athttp://www.owens-minor.com under “Corporate Governance” in the “Investor Relations” tab. The information available on, or that can be accessed through, our website is not a part of, or incorporated by reference into, this proxy statement.Proxy Statement.
Code of Honor.Honor. The Board of Directors has adopted a Code of Honor that is applicable to all employeesteammates of the Company, including the principal executive officer, the principal financial officer and the principal accounting officer, as well as the members of the Board of Directors. We intend towould post any amendments to or waivers from our Code of Honor (to the extent applicable to the Company’s principal executive officer, principal financial officer, principal accounting officer, any other executive officer or any director) on our website http://www.owens-minor.com under “Corporate Governance” in the “Investor Relations” tab.
Director Independence.Independence. The Board of Directors has determined that the following Board members and/or nominees are “independent” within the meaning of the NYSE listing standards and the Company’s Corporate Governance Guidelines: StuartAster Angagaw, Mark A. Beck, Gwendolyn M. Essig, JohnBingham, Robert J. Henkel, Stephen W. Gerdelman, Barbara B. Hill, Lemuel E. Lewis, Martha H. Marsh,Klemash, Mark F. McGettrick, Eddie N. Moore, Jr., James E. Rogers, David S. Simmons,Michael C. Riordan, and Robert C. Sledd and Anne Marie Whittemore.Sledd. To assist it in making determinations of independence, the Board has adopted categorical standards which are included in the Company’s Corporate Governance Guidelines available on our website at http://www.owens-minor.com under “Corporate Governance” in the “Investor Relations” tab. The Board has determined that all directors and/or nominees identified as independent in this proxy statementProxy Statement meet these standards.
Structure and Leadership of the Board. The Board of Directors does not have a firm policy with respect to the separation of the offices of ChairmanChair of the Board and the Chief Executive Officer. Instead, the Board believes that it is in the best interests of the Company for the Board to make this determination to be made as part of the succession planning process when it selects a new Chief Executive Officer or when a ChairmanChair ceases his or her service on the Board. At the time of Mr. Phipps’ commencement as Chief Executive Officer of the Company,this juncture, the Board believedbelieves that maintaining anon-executive as Chairman of the Board was in the best interests of the Company because it preserved continuity in the Board’s performance of its duties, assisted in the transition of Mr. Phipps to the Chief Executive Officer position and management of the succession plan and provided a strong source of institutional knowledge and history of operations of the Company. In 2017, thenon-executive Chairman notified the Board that he would retire and not stand forre-election to our Board. In connection therewith, the Board evaluated the separation of the offices of the Chairman and Chief Executive Officer. As part of that evaluation, the Board determined that, based on Mr. Phipps’ then18-plus months of Board service and his performance and leadership as the Chief Executive Officer through a period of strategic transformation and repositioning of the Company, it would be in the best interest of the Company to have Mr. Phipps serve as Chairman.
The Board believes that the combination of the ChairmanChair and Chief Executive Officer roles also currently serves the best interests of the Company for the following reasons:
this structure results in the most effective leadershipby allowing a non-executive, independent director to helplead the Board discharge its oversight duties during a period of transformation and repositioning of the Company;
thewhile our current Chief Executive Officer is well situated to identifyfocuses on the key risks facing our organizationCompany’s performance, day-to-day operations, customer service, teammate engagement and the successimplementation of its transformation and repositioning, and ensure that these risks are brought to the attention of the Board; and
having one leader serving as both the Chairman and Chief Executive Officer provides decisive leadership while reducing the likelihood of confusion about leadership roles and duplication of efforts, and allows the Company to speak with a unified voice.
Our Corporate Governance Guidelines also provide for the annual election of ana lead independent lead director by ournon-management directors to, among other things, presidein the event that the Chair is not independent. The lead independent director primarily presides at Board meetings in the absence of the Chairman, presideChair, presides at meetings of the independent directors, serveserves as the principal liaison between the independent directors and the ChairmanChair and Chief Executive Officer, and adviseadvises the ChairmanChair with respect to agendas and information requirements relating to the Board and committee meetings. The Board believes that the lead independent lead director, when the Chair is not independent, enhances communications between Board members (including the Chairman)Chair) and committees as well as the overall functioning of the Board’s leadership.
Majority Vote Requirement for Election of Directors.Directors. The Company’s Bylaws and Corporate Governance Guidelines provide for the election of directors by majority vote in uncontested elections. Under the Company’s Corporate Governance Guidelines, with respect to director nominations, the Board will only nominate those incumbent directors who submit irrevocable resignations effective upon the failure of such director nominee to receive the required vote forre-election and Board’s acceptance of such resignation. In the event an incumbent director fails to receive a majority of the votes cast, the Governance & Nominating Committee (or such other committee designated by the Board) will make a recommendation to the Board as to whether to accept or reject the resignation. The Board must act on the resignation, taking into account the Governance & Nominating Committee’s recommendation, and publicly disclose its decision regarding the resignation, including, if applicable, its rationale for rejecting a resignation, in a press release and an appropriate disclosure with the SEC within 90 days following certification of the election results. The Governance & Nominating Committee in making its recommendation, and the Board in making its decision, may each consider any factors or other information that it considers appropriate and relevant.
4Owens & Minor, Inc. ● 2021 Proxy Statement
Corporate Governance |
The Board’s Role in Risk Oversight.Oversight. The Board of Directors currently administers its risk oversight function through the full Board and not through a separate risk committee of the Board. However, each of the Audit Committee, the Compensation Committee and the Governance & Nominating Committee oversees the specific financial, compensation, compliance and governance risks, respectively, relating to its functions and responsibilities and reports on these matters to the full Board. The Board performs its risk oversight function through regular reporting by the Board committees as well as the officers and management-level personnel who supervise theday-to-day risk management activities of the Company, including an enterprise risk steering committee comprised of senior leaders of the Company.
Risk Assessment of Compensation Programs. With respect to our overall compensation programs, Company management reviews our compensation policies and practices each year to determine whether they create risks that are reasonably likely to have a material adverse effect on the Company. As part of this assessment and with assistance and guidance provided by independent compensation consultant Semler Brossy Consulting Group, LLC (“Semler Brossy”), we reviewed the design and features of our compensation and benefits programs and policies, potential risks that could be created by these programs and features of our programs and corporate governance policies that help to mitigate risk. Semler Brossy reviewed and discussed the results of the assessment with the Compensation Committee. Based on this review and assessment, we believe that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
Annual Performance Evaluation.Evaluation. The Board conducts an annual self-evaluation to determine whether it and its committees are functioning effectively. The Governance & Nominating Committee receives comments from all directors and reports annually to the Board with an assessment of the Board’s performance. The assessment focuses on the Board’s contribution to the Company and specifically focuses on areas in which the Board or management believes that the Board can improve.
Board Diversity. Consistent with the Company’s Corporate Governance Guidelines, the Governance & Nominating Committee seeks to select Directors who reflect a diverse set of skills, professional and personal backgrounds, perspectives and experiences. While the Board has not adopted a formal policy with regard to the consideration of diversity in identifying director nominees, the Governance & Nominating Committee and the Board believe that considering diversity is consistent with the goal of creating a Board that best serves the needs of the Company and the interests of its shareholders, and it is one of the many factors that they consider when identifying individuals for Board membership. Twenty-five percent of our Director nominees are women and/or ethnically diverse.
REPORT OF THE GOVERNANCEReport of the Governance & NOMINATING COMMITTEENominating Committee
The Governance & Nominating Committee is composed of fivesix directors, all of whom are independent. The Governance & Nominating Committee met fourfive times during 2017.2020. In performing the various duties and responsibilities outlined in its charter, the Governance & Nominating Committee, among other things, received regular reports on the Company’s enterprise quality and regulatory compliance; reviewed the performance of the chief executive officer; reviewed and approved changes to its charter and the Corporate Governance Guidelines; engaged an outside compensation firm to reviewreviewed and assessassessed the Company’s director compensation program relative to comparable peer companies;companies, including appropriate compensation for the non-executive Chair of the Board; and implementedled the annual Board assessment process. During 2017,2020, the Committee reviewed and recommended foralong with the full Board approval several changes in the executive management team as presented by the Chief Executive Officer and devoted time to management succession planning, including the review and approval of updates to the CEO emergency replacement plan. In anticipationplan and, in conjunction with the Compensation Committee, reviewed the performance of the Chief Executive Officer. Also during 2020, the Committee undertook oversight of the Company’s environmental, social and governance programs.
Due to the upcoming retirement of severaltwo directors over the next several years,during 2021, the Committee devoted considerable time and attention to director succession planning, includingwhich included the continued engagement ofwith an outside consulting firm to assist in the identification and strategic recruitment of directors possessing the qualities, character, experience and expertise that will contribute to the leadership and success of the Company.
| THE GOVERNANCE & NOMINATING COMMITTEE |
| Eddie N. Moore, Jr., Chair |
| Aster Angagaw |
| Mark A. Beck |
| Gwendolyn M. Bingham |
| Robert J. Henkel |
| Michael C. Riordan |
Owens & Minor, Inc. ● 2021 Proxy Statement5
Corporate Governance |
Environmental, Social and Governance
The world has changed since Owens & Minor’s founding in 1882, but one constant over the years is our commitment to taking care of our teammates, customers and the communities in which we operate. Owens & Minor is committed to conducting our business in an environmentally friendly, socially conscious and sustainable manner.
In 2020 we formalized our environmental, social and governance (“ESG”) program as discussed below and in 2021, we expect to advance our commitment to ESG by performing an ESG materiality assessment and further developing our program. This assessment will help us identify our priority ESG topics that are salient for our Company and our ability to create long-term value. These priority ESG topics will also serve as the foundation for our ESG strategy and inaugural ESG report, which we expect to publish this year.
In the sections below, we have provided an overview of how Owens & Minor is beginning to integrate ESG practices across our governance, operations, supply chain and communities in which we operate.
Our Values
Our values reflect our commitment to our customers, our teammates, the environment and the communities where we live and work. They embody “IDEAL” behavior — Integrity, Development, Excellence, Accountability and Listening. All Owens & Minor teammates are responsible for embodying these values every day.
GOVERNANCE
We maintain a Code of Honor (the “Code”) that sets forth the standards and guidelines for ethical behavior expected of everyone who works for and with our company. The Code is core to our mission and values. We require that every Owens & Minor teammate and member of our Board of Directors pledge to abide by the standards set forth by the Code. The Code addresses a variety of topics, including our expectations related to diversity and equal opportunity employment, data privacy, fair compensation and anti-bribery.
6Owens & Minor, Inc. ● 2021 Proxy Statement
Corporate Governance |
ESG Governance
In 2020, our executive leadership together with a subcommittee of Board members began defining our ESG governance, strategy and accountability structure. It is expected that the Governance & Nominating Committee will oversee the development and implementation of Owens & Minor’s ESG strategy and this Committee’s charter will be amended in 2021 to include information regarding our ESG strategy and governance.
In addition, leadership has designated an ESG team comprised of teammates from functions across the company to develop the ESG strategy. Representatives from Investor Relations, Human Resources, Supply Chain, Community Engagement, Environment, Health and Safety, Compliance and Legal as well as other functions are expected to contribute to this effort.
Ethics and Compliance
We have combined social compliance and environmental sustainability into one overarching Corporate Responsibility Policy Statement that demonstrates our commitment to our teammates, suppliers, shareholders, and customers. Among other issues, the Statement includes topics such as business integrity, code of honor, anti-bribery and corruption and protections against child labor and forced labor practices. The Statement can be found on our website at “Corporate Governance” in the rapidly changing healthcare industry.“Investor Relations” tab.
THE GOVERNANCEOPERATIONS
Environment, Health and Safety
Environmental Initiatives
We are committed to environmentally responsible business practices and conducting business in compliance with applicable environmental laws, rules, and regulations. We aim to comply with all relevant regulatory standards pertaining to air emissions, storm water and pollution prevention under the U.S. EPA and other global authorities. We have also developed environmental initiatives that focus on reducing our impact across our manufacturing sites and vehicle fleets.
At our manufacturing sites, we strive to eliminate waste, reduce our carbon footprint and increase the use of renewable energy. A majority of our global manufacturing sites have measured greenhouse gas emissions (“GHG”), water and waste data annually since 2015 and use this data to implement site-level goals and initiatives to reduce their environmental footprint. In addition, several sites have established site-level goals, including commitments to zero waste-to-landfill and sourcing 100% renewable energy. Several manufacturing sites are also in the process of obtaining ISO 14001 certification for their environmental management systems.
From a vehicle fleet perspective, Owens & NOMINATINGMinor uses a combination of owned fleet and contract carriers to conduct deliveries from our distribution centers to customers. Our Field Operations team focuses on fuel efficiency initiatives including route optimization and replacing equipment regularly to reduce our fuel consumption.
COMMITTEEHealth and Safety Initiatives
Martha H. Marsh, ChairmanThe safety of our teammates is paramount to our success. We are committed to providing a work environment that empowers all teammates to make safe choices and leave work safely each day. A substantial part of our workforce is comprised of teammates who work in distribution centers and manufacturing facilities, operating equipment and machinery and performing physical labor.
Stuart M. EssigAcross our manufacturing and distribution center operations, we have a Safety Management System (“SMS”) to standardize safety procedures and to improve performance. We continuously assess the health and safety risks our teammates face in their jobs, and we work to mitigate those risks using our SMS through job hazard assessments, Behavior Based Safety (“BBS”) protocols, teammate engagement programs, and internal safety inspections.
Lemuel E. LewisMoreover, in 2020, we established a Global Safety & Risk Council to bring together all Owens & Minor business units to share best practices, standardize compliance procedures and strengthen the Company’s safety culture. Our commitment to safety and investments in training has led to a 71% reduction in our Total Recordable Incident Rate (“TRIR”) for our manufacturing and distribution center operations since 2018.
Eddie N. Moore, Jr.
James E. RogersOwens & Minor, Inc. ● 2021 Proxy Statement7
Corporate Governance |
Our COVID-19 Safety Measures
Our first and foremost priority is always teammate safety. We have established a COVID-19 Steering Committee which is responsible for establishing and overseeing implementation of COVID-19 protocols across the Company, including usage of PPE, social distancing, limiting the number of visitors, temperature checks, testing and most recently, vaccination availability. The Committee members meet on a weekly basis with Operations and Distribution leaders to track cases and provide resources necessary for our teammates to continue producing and delivering life-saving medical products to health care systems globally.
Additional information on our COVID-19 response can be found in “Taking Care of Our Teammates” on page 26 of this Proxy Statement and on our website at https://www.owens-minor.com/COVID-19/.
Diversity and Inclusion
We are committed to fostering an empowering work environment that enables our teammates to thrive. Diversity and inclusion are a critical part of fulfilling our IDEAL Values and delivering on our mission. We actively participate in and support initiatives that promote diversity and inclusion in our workplace.
For example, in 2020, we created Teammate Resource Groups (“TRGs”) that provide space, resources and support for underrepresented identity groups. Our current TRGs include African American/Black, Veteran, LGBTQ+, Military, Women in Healthcare and Women in Tech TRGs.
We also embed diversity and inclusion in our teammate recruitment practices. Our diversity recruiting initiatives include actively partnering with Historically Black Colleges and Universities (“HBCUs”) to increase the visibility of Owens & Minor’s hiring opportunities for students and alumni. In addition, we are a proud military employer of choice and we partner with multiple military and Veteran organizations to support the service-members in our Company and communities.
We track and measure representation across gender and ethnic minority as part of our commitment to fostering an empowering work environment where every teammate can thrive, and are committed to increasing diversity in our workforce, particularly in leadership roles.
SUPPLY CHAIN
Supply Chain Integration into Supplier Standards
We believe that good corporate citizenship by our Company and those we do business with is essential to our long-term business success. We engage in business globally and work with third-party suppliers across our global supply chain. We maintain Supplier Social Compliance Standards (“SSCS”) to hold our third-party suppliers accountable to our expectations. These standards communicate our values and address our expectation of our suppliers with respect to health and safety, environmental impact, prohibition of child or forced labor, working conditions, freedom of association and collective bargaining, anti-discrimination, integrity and conflict minerals.
Our Social Compliance Leadership Committee oversees the implementation of our SSCS internally and externally within our supply chain. This Committee also oversees the auditing and due diligence of suppliers, conducts trainings to educate teams across manufacturing, supply chain and procurement and raises awareness of trends and issues related to global social compliance.
We are also committed to advancing supplier diversity by working with minority, women, disabled and veteran owned businesses. We believe a thriving community of diverse suppliers generates innovation while contributing to the economic development of the communities in which we live and work.
COMMUNITIES
Community Engagement
We are active members of the communities where we operate. By contributing financially and through volunteer work, we help build stronger communities and create a better environment. We accomplish this in a number of ways, including direct
8Owens & Minor, Inc. ● 2021 Proxy Statement
Corporate Governance |
contributions and corporate sponsorships to charitable organizations, specific programs designed to enrich our communities and community volunteer efforts. Our primary focus areas are:
Health and wellness: We strive to improve the quality of life for our teammates and the people in our communities by supporting organizations such as the Special Olympics, American Heart Association and American Cancer Society.
Education: The quality of an education ensures the growth of the future workforce and provides better opportunities for our community. We strive to strengthen programs by supporting Community in Schools, the Boys & Girls Club and local high schools.
Civic and community: We invest in our communities by providing opportunities for teammates to volunteer where they live and work, supporting organizations such as FeedMore and Red Cross of America.
Our teammates are active members of our larger, global communities through fundraising and volunteering with community groups. We actively engage our teammates to identify organizations to support through our Charitable Contribution Committee.
Our Path Forward
In 2021, we expect to reinforce our commitment to ESG through developing a formal strategy with focus areas and goals to track progress and an external report to increase transparency of our ESG initiatives.
We provide disclosures on our ESG efforts and relevant policies on our website at http://www.owens-minor.com under “Corporate Governance” in the “Investor Relations” tab.
The Board of Directors held 1516 meetings during 2017.2020. All directors attended at least 75% of the meetings of the Board and committees on which they served. Our directors attend our annual meetingAnnual Meeting of shareholders unless there is compelling reason why they cannot. All of our directors with the exception of Mr. Moore,in office at that time attended our 20172020 Annual Meeting of Shareholders.
Under the Company’s Corporate Governance Guidelines, the independent directors meet in executive session after each regularly scheduled Board meeting. These meetings are chaired by our lead directorChair who is elected annually by thenon-management directors following each annual meetingthe Annual Meeting of shareholders. Anne Marie Whittemore currently serves as lead director and presides over these executive sessions. As lead director, Ms. Whittemore is also invited to participate in meetings of all Board committees but is permitted to vote only in meetings of committees of which she is a member.Shareholders. Shareholders and other interested parties may contact the lead directorChair by following the procedures set forth in “Communications with the Board of Directors” on page 1112 of this proxy statement.Proxy Statement.
COMMITTEES OF THE BOARDCommittees of the Board
The Board of Directors currently has the following committees, which the Board established to assist it with its responsibilities:
Audit Committee: Oversees (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the qualification and independence of the Company’s independent registered public accounting firm, (iv) the performance of the Company’s independent registered public accounting firm and internal audit functions and (v) issues involving the Company’s ethical and legal compliance responsibilities. The Audit Committee has sole authority to appoint, retain, compensate, evaluate and terminate the Company’s independent registered public accounting firm. The Board of Directors has determined that each of Lemuel E. LewisMessrs. McGettrick and Eddie N. Moore Jr. is an “audit committee financial expert,” as defined by SEC regulations and that each member of the Audit Committee is financially literate under NYSE listing standards. All members of the Audit Committee are independent as such term is defined under the enhanced independence standards for audit committees in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules thereunder as incorporated into the NYSE listing standards and under the Company’s Corporate Governance Guidelines. The Audit Committee met 10 times during 2020.
Compensation & Benefits Committee: Administers executive compensation programs, policies and practices. Advises the Board on salaries and compensation of the executive officers and makes other studies and recommendations concerning
Owens & Minor, Inc. ● 2021 Proxy Statement9
Corporate Governance |
compensation and compensation policies. May delegate authority forday-to-day administration and interpretation of compensation plans to certain senior officers of the Company (other than for matters affecting executive officer compensation and benefits). For further information on this committee’s processes and procedures, see “Compensation Discussion and Analysis” on page 33 of this proxy statement. All members of the Compensation Committee are independent within the meaning of the enhanced NYSE listing standards and the Company’s Corporate Governance Guidelines.Guidelines and are “non-employee directors” as defined in Rule 16b-3 under the Exchange Act. The Compensation Committee met 6six times during 2017.2020.
Governance & Nominating Committee: Considers and recommends nominees for election as directors and officers and nominees for each Board committee. Reviews and recommends changes to director compensation. Reviews and evaluates the procedures, practices and policies of the Board and its members and leads the Board in its annual self-review. Oversees the governance of the Company, including reviewing and recommending changes to the Corporate Governance Guidelines. Conducts succession planning for senior management. All members of the Governance & Nominating Committee are independent within the meaning of the NYSE listing standards and the Company’s Corporate Governance Guidelines. The Governance & Nominating Committee met five times during 2020.
Executive Committee: Exercises limited powers of the Board when the Board is not in session. The Executive Committee did not meet during 2017.2020.
BOARD COMMITTEE MEMBERSHIPBoard Committee Membership
| Director | Board | Audit | Compensation & Benefits | Executive | Governance & Nominating | ||||||||||||||||||||
P. Cody Phipps* | X* | X* | |||||||||||||||||||||||
Stuart M. Essig | X | X | |||||||||||||||||||||||
John W. Gerdelman | X | X | |||||||||||||||||||||||
Barbara B. Hill | X | X | |||||||||||||||||||||||
Lemuel E. Lewis | X | X* | X | X | |||||||||||||||||||||
Martha H. Marsh | X | X | X | X* | |||||||||||||||||||||
Mark F. McGettrick** | X | ||||||||||||||||||||||||
Eddie N. Moore, Jr. | X | X | X | ||||||||||||||||||||||
James E. Rogers*** | X | X | X | ||||||||||||||||||||||
David S. Simmons*** | X | X | |||||||||||||||||||||||
Robert C. Sledd | X | X | X* | X | |||||||||||||||||||||
Anne Marie Whittemore | X | X | |||||||||||||||||||||||
No. of meetings in 2017 | 15 | 7 | 6 | 0 | 4 | ||||||||||||||||||||
Director | Board | Audit | Compensation & Benefits | Executive | Governance & Nominating | ||||||||||||||||||||
Aster Angagaw** |
| X |
| X | |||||||||||||||||||||
Mark A. Beck |
| X | * |
| X |
| X | * |
| X | |||||||||||||||
Gwendolyn M. Bingham |
| X |
| X |
| X | |||||||||||||||||||
Robert J. Henkel |
| X |
| X | * |
| X |
| X | ||||||||||||||||
Stephen W. Klemash** |
| X |
| X |
| X | |||||||||||||||||||
Mark F. McGettrick |
| X |
| X | * |
| X |
| X | ||||||||||||||||
Eddie N. Moore, Jr. |
| X |
| X |
| X |
| X | * | ||||||||||||||||
Edward A. Pesicka |
| X |
| X | |||||||||||||||||||||
Michael C. Riordan |
| X |
| X |
| X | |||||||||||||||||||
Robert C. Sledd |
| X |
| X | |||||||||||||||||||||
No. of Meetings in 2020 |
| 16 |
| 10 |
| 6 |
| 0 |
| 5 | |||||||||||||||
*Chairman
| * | Chair of the Board of Directors or respective Committee. |
**Mr. McGettrick was appointed to the Board on March 1, 2018.
***Mr. Rogers and Mr. Simmons have notified the Board of Directors that they are not standing forre-election at the annual meeting.
| ** | Ms. Angagaw and Mr. Klemash were elected to the Board of Directors on March 1, 2021 and subsequently appointed to their respective Committees. |
DIRECTOR COMPENSATIONDirector Compensation
The Governance & Nominating Committee reviews director compensation annually, and it is the responsibility of this committee to recommend to the Board of Directors any changes in director compensation. The Board of Directors makes the final determination with respect to director compensation. The Governance & Nominating Committee has the authority under its charter to retain outside consultants or advisors to assist it in gathering information and making decisions.
The Company uses a combination of cash and equity compensation to attract and retain qualified candidates to serve on its Board of Directors. In setting director compensation, the Company considers the commitment of time directors must make in performing their duties, the level of skills required by the Company of its Board members and the market competitiveness of its director compensation levels. Additionally, from time to time, the Company performs a market review with respect to other leading companies of similar size to the Company and with respect to the Company’s peer group, under the supervision of the Governance & Nominating Committee, and upon recommendation of the Company’s independent compensation consultant, to determine the compensation arrangements for the independent directors of the Company. The table below sets forth the schedule of fees paid tonon-employee directors for their annual retainer and service in various capacities on Board committees and in Board leadership roles. Employee directors do not receive any additional compensation for serving on the Board or any of its committees.
10Owens & Minor, Inc. ● 2021 Proxy Statement
Corporate Governance |
Schedule of Director Fees
| Type of Fee | Cash | Equity | ||||||
Annual Retainer | $ | 35,000 | $ | 100,000 | (1) | |||
Additional Annual Retainer for Lead Director | 35,000 | N/A | ||||||
Additional Annual Retainer for Audit Committee Chair | 10,000 | N/A | ||||||
Additional Annual Retainer for Compensation Committee Chair | 10,000 | N/A | ||||||
Additional Annual Retainer for Governance & Nominating Committee Chair | 9,000 | N/A | ||||||
Additional Annual Retainer for Other Committee Chairs | 8,000 | N/A | ||||||
Board or Audit Committee Attendance Fee (per meeting) | 2,000 | N/A | ||||||
Compensation Committee Attendance Fee (per meeting) | 1,800 | N/A | ||||||
Other Committee Attendance Fee (per meeting) | 1,500 | N/A | ||||||
Board or Committee Telephone Conference Attendance Fee (per meeting, other than Audit Committee) | 1,000 | N/A | ||||||
Audit Committee Telephone Conference Attendance Fee (per meeting) | 1,200 | N/A | ||||||
Board Strategy Retreat Attendance Fee (annual2-day meeting) | 3,000 | N/A | ||||||
Type of Fee | Cash | Equity | ||||||
Annual Retainer | $ | 125,000 |
| $ | 125,000 | (1) | ||
Additional Annual Retainer for the Chair |
| 60,000 |
|
| N/A |
| ||
Additional Annual Retainer for Audit Committee Chair |
| 20,000 |
|
| N/A |
| ||
Additional Annual Retainer for Compensation Committee Chair |
| 20,000 |
|
| N/A |
| ||
Additional Annual Retainer for Governance & Nominating Committee Chair |
| 15,000 |
|
| N/A |
| ||
(1) Restricted stock grant withone-year vesting period.
| (1) | Restricted stock grant with one-year vesting period. |
Directors may defer the receipt of all or part of their director fees under the Directors’ Deferred Compensation Plan. Amounts deferred are “invested” in bookkeeping accounts that measure earnings and losses based on the performance of a particular investment. Directors may elect to defer their fees into the following two subaccounts: (i) an account based upon the price of the Common Stock and (ii) an account based upon the current interest rate of the Company’s fixed income fund in its 401(k) plan.Retirement and Savings Plan (the “401(k) Plan”). Subject to certain restrictions, a director may take cash distributions from a deferred fee account either prior to or following the termination of his or her service as a director.
Director Compensation Table
The table below summarizes the actual compensation paid by the Company tonon-employee directors who served during the year ended December 31, 2017.2020.
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | ||||||||||||||||||||||||||||
| Name | Fees Earned in Cash ($) (1) | Stock Awards ($) (1)(2)(4) | Option Awards ($) (3) | Non-Equity ($) | Change in Compensation Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||
Stuart M. Essig | 64,900 | 100,000 | — | — | — | — | 164,900 | ||||||||||||||||||||||||||||
John W. Gerdelman | 70,400 | 100,000 | — | — | — | — | 170,400 | ||||||||||||||||||||||||||||
Barbara B. Hill | 72,150 | 125,000 | — | — | — | — | 197,150 | ||||||||||||||||||||||||||||
Lemuel E. Lewis | 87,400 | 100,000 | — | — | — | — | 187,400 | ||||||||||||||||||||||||||||
Martha H. Marsh | 84,000 | 100,000 | — | — | — | — | 184,000 | ||||||||||||||||||||||||||||
Mark F. McGettrick (5) | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||
Eddie N. Moore, Jr. | 76,400 | 100,000 | — | — | — | — | 176,400 | ||||||||||||||||||||||||||||
James E. Rogers | 75,000 | 100,000 | — | — | — | — | 175,000 | ||||||||||||||||||||||||||||
David S. Simmons | 65,200 | 100,000 | — | — | — | — | 165,200 | ||||||||||||||||||||||||||||
Robert C. Sledd | 89,000 | 100,000 | — | — | — | — | 189,000 | ||||||||||||||||||||||||||||
Craig R. Smith | 44,500 | N/A | — | — | — | — | 44,500 | ||||||||||||||||||||||||||||
Anne Marie Whittemore | 94,000 | 100,000 | — | — | — | — | 194,000 | ||||||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | ||||||||||||||||||||||||||||
Name | Fees Earned in Cash ($)(1) | Stock Awards ($)(1)(2)(4) | Option Awards ($)(3) | Non-Equity ($) | Change in Compensation Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||
Aster Angagaw(5) |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A | |||||||||||||||||||||
Mark A. Beck |
| 161,667 |
| 125,000 |
| — |
| — |
| — |
| — |
| 286,667 | |||||||||||||||||||||
Gwendolyn M. Bingham |
| 114,583 |
| 145,833 |
| — |
| — |
| — |
| — |
| 260,416 | |||||||||||||||||||||
Robert J. Henkel |
| 130,000 |
| 125,000 |
| — |
| — |
| — |
| — |
| 255,000 | |||||||||||||||||||||
Stephen W. Klemash(5) |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A | |||||||||||||||||||||
Mark F. McGettrick |
| 145,000 |
| 125,000 |
| — |
| — |
| — |
| — |
| 270,000 | |||||||||||||||||||||
Eddie N. Moore, Jr. |
| 140,000 |
| 125,000 |
| — |
| — |
| — |
| — |
| 265,000 | |||||||||||||||||||||
Michael C. Riordan |
| 125,000 |
| 125,000 |
| — |
| — |
| — |
| — |
| 250,000 | |||||||||||||||||||||
Robert C. Sledd |
| 170,000 |
| 125,000 |
| — |
| — |
| — |
| — |
| 295,000 | |||||||||||||||||||||
(1)
| (1) | Includes amounts deferred by the directors under the Directors’ Deferred Compensation Plan. |
| (2) | The amounts included in the “Stock Awards” column are the aggregate grant date fair value of the awards computed in accordance with the FASB ASC Topic 718. |
| (3) | Option Awards were not granted to Directors in 2020. |
| (4) | The Stock Award amount of $125,000 equated to 17,242 shares of Restricted Stock based on the closing stock price of $7.25 on May 11, 2020, the date of grant. These shares vest on May 11, 2021. Upon her appointment to the Board on March 5, 2020, Ms. Bingham received a Stock Award in the amount of $20,833 which equated to 3,513 shares of Restricted Stock based on the closing price of $5.93 on that date. These shares vested on March 5, 2021. |
| (5) | Ms. Angagaw and Mr. Klemash were elected to the Board of Directors on March 1, 2021 and did not receive compensation during the year ended December 31, 2020. |
(2) The amounts included in the “Stock Awards” column are the aggregate grant date fair value of the awards computed in accordance with the FASB ASC Topic 718.
(3) Option Awards were not granted to Directors in 2017.
(4) The Stock Award amount of $100,000 equated to 3,050 shares of Restricted Stock based on the closing stock price of $32.79 on May 5, 2017, the date of grant. These shares vest on May 5, 2018. Upon her appointment to the Board on February 9, 2017, Ms. Hill received a Stock Award in the amount of $25,000 which equated to 696 shares of Restricted Stock based on the closing price of $35.91 on that date. These shares vested on February 9, 2018. Mr. Smith did not receive a Stock Award during 2017.
(5) Mr. McGettrick was appointed to the Board on March 1, 2018 and therefore did not receive compensation during the year ended December 31, 2017.Owens & Minor, Inc. ● 2021 Proxy Statement11
Corporate Governance |
Stock Ownership Guidelines for Directors
The Company maintains stock ownership guidelines for its directors whichand modified those guidelines in 2018 to provide that each director shall attain, within five years after his or her service on the Board begins (or by May 8, 2023 for directors serving as of May 8, 2018), a level of equity ownership of Common Stock having a value of at least five times the annual cash retainer fee or $150,000, whichever is higher. Each director who has served on the Board for at least five years has achieved this ownership objective.$325,000.
DIRECTOR NOMINATING PROCESSDirector Nominating Process
Director Candidate Recommendations and Nominations by Shareholders. The Governance & Nominating Committee charter provides that the Governance & Nominating Committee will consider director candidate recommendations by shareholders. Shareholders should submit any such recommendations to the Governance & Nominating Committee through the method described under “Communications with the Board of Directors” below. In addition, our Bylaws provide that any shareholder of record entitled to vote for the election of directors at the applicable meeting of shareholders may nominate directors by complying with the notice procedures set forth in the Bylaws and summarized in “Shareholder Proposals” on page 6750 of this proxy statement.Proxy Statement.
Process for Identifying and Evaluating Director Candidates.Candidates. The Governance & Nominating Committee evaluates all director candidates in accordance with the director qualification standards and the criteria described in our Corporate Governance Guidelines. These guidelines require the Governance & Nominating Committee on an annual basis to review and evaluate the requisite skills and characteristics of individual Board members and nominees as well as the composition of the Board as a whole. This assessment includes whether the member or candidate is independent and includes considerations of diversity, age, skills and experience in the context of the Board’s needs. The goal of the Governance & Nominating Committee is to have a Board whose membership reflects a mix of diverse skill sets, technical expertise, educational and professional backgrounds, industry experiences and public service as well as perspectives of different genders and ethnicities. The Governance & Nominating Committee reviews its annual assessment with the Board each year and, as new member candidates are sought, attempts to maintain and enhance the level of diverse backgrounds and viewpoints of directors constituting the Board. As part of the Board’s annual self-assessment process, the Board will consider the effectiveness of its overall composition and structure as well as its performance and functioning.
There are no differences in the manner in which the Governance & Nominating Committee evaluates director candidates based on whether the candidate is recommended by a shareholder. The Governance & Nominating Committee did not receive any nominations from any shareholders for the 20182021 Annual Meeting.
Our Bylaws provide that no director nominee can stand for election if, at the time of appointment or election, the nominee is over the age of 72; however, on exceptional circumstances, the Board may waive on a temporary basis the director age limitations to allow a director to be appointed, elected and serve past age 72.
Proxy Access. Our Bylaws further permit a shareholder, or a group of up to 20 shareholders, owning 3% or more of the outstanding shares of the Company’s stock eligible to vote in the election of directors continuously for at least three years, to nominate and include in the Company’s Annual Meeting proxy materials director candidates to comprise generally up to two or 20% of the Board seats (whichever is greater), provided that such shareholder or group of shareholders satisfies the requirements set forth in Article I, Section 1.10 of the Bylaws. No shareholder nominated a director candidate for the
2021 Annual Meeting.
COMMUNICATIONS WITH THE BOARD OF DIRECTORSCommunications with the Board of Directors
The Board of Directors has approved a process for shareholders and other interested parties to send communications to the Board. Shareholders and other interested parties can send written communications to the Board, any committee of the Board,non-management directors as a group, the Chair, the lead director or any other individual director at the following address: P.O. Box 2076, Mechanicsville, VA 23116-2076. All communications will be relayed directly to the applicable director(s).
12Owens & Minor, Inc. ● 2021 Proxy Statement
PROPOSALProposal 1: ELECTION OF DIRECTORSElection of Directors
TenEight directors have been nominated for election to the Board of Directors for aone-year term expiring at the 20192022 Annual Meeting of Shareholders or until their respective successors are elected. Each nominee has agreed to serve if elected and qualified. If any nominee is not able to serve, the Board may designate a substitute or reduce the number of directors serving on the Board. Proxies will be voted for the nominees shown below (or if not able to serve, such substitutes as may be designated by the Board). The Board has no reason to believe that any of the nominees will be unable to serve.
Our Bylaws currently provide that the Board of Directors consistsshall consist of 1210 directors and the Board has approved an amendmentCompany intends to ouramend its Bylaws to decrease the number ofprovide for eight directors to 10 effective upon Messrs. Rogers and Simmons’ retirement from the Board effective upon the 2018 Annual Meeting.election of the eight nominees in this Proxy Statement. The Governance & Nominating Committee has recommended to the Board of Directors, and the Board of Directors has approved, 10eight persons as nominees for election to the Board of Directors. At its meeting immediately following the 2021 Annual Meeting, the Board of Directors intends to amend the Bylaws to decrease the size of the Board of directors from 10 to eight directors to remove vacancies created by the departure of retiring directors Messrs. Moore and Sledd. Proxies cannot be voted for a greater number of directors than the number of nominees named.
Information on each nominee, including the particular experience, qualifications, attributes or skills that led the Board to conclude that he or she should serve as a director of the Company, is set forth below.
NOMINEES FOR ELECTIONNominees for Election
Aster Angagaw | ||||
Principal Occupation: Former President, Age 57 Director since March 2021 Independent Director Committees: Governance & Nominating |
Background: Ms. Angagaw served as Qualifications: The Board of Directors has | |||
Owens & Minor, Inc. ● 2021 Proxy Statement13
Proposal 1: Election of Directors |
Mark A. Beck | ||
Principal Occupation: Co-founder and CEO of B-Square Precision, LLC Age 55 Director since Independent Director, Chair of the Board Committees: Compensation & Benefits, Executive, | Background: Mr. Beck serves as the Board’s Chair, a position he has held since September 2020, and is the co-founder and CEO of B-Square Precision, LLC, a private company engaged in the acquisition and management of companies that manufacture high-precision tools, dies, molds and components. Previously, Mr. Beck served as President and Chief Executive Officer of JELD-WEN Holding, Inc. (JELD-WEN), one of the world’s largest door and window manufacturers, from November 2015 to February 2018, and was a director of JELD-WEN from May 2016 to February 2018. Prior to JELD-WEN, Mr. Beck served as an Executive Vice President at Danaher Corporation, leading Danaher’s water quality and dental platforms, beginning in April 2014. Previously, he spent 18 years with Corning Incorporated in a series of management positions with increasing responsibility, culminating in his appointment as Executive Vice President overseeing Corning’s environmental technologies and life science units in July 2012. Mr. Beck currently serves on the board of directors of IDEX Corporation. He formerly served on the board of directors of Dow-Corning Corporation from 2010 to 2014. Qualifications:
The Board of Directors has nominated Mr. | |
Gwendolyn M. Bingham | ||
Principal Occupation: Retired United States Army (three-stars) Age 61 Director since March 2020 Independent Director Committees: Compensation & Benefits, | Background: Lieutenant General (three-stars) Bingham retired in September 2019 from the United States Army following a 38-year career in the military. During her military career, LTG (retired) Bingham served as Department of the Army Assistant Chief of Staff for Installation Management from 2016 through her retirement in 2019. Previously, she was Commanding General, US Army Tank-Automotive and Qualifications: The Board of Directors has nominated LTG (retired) Bingham to continue her service as a director of the Company based on her over 20 years of senior executive leadership experience in complex logistics and supply chain management, resource management, environmental and energy matters, talent management and strategic planning. Additionally, LTG (retired) Bingham has unique experience in leading the Army’s most significant integrated material management center with manufacturing centers in multiple locations and personnel worldwide to support the Army’s efforts to sustain, prepare and transform its operations, which provides insight into the challenges faced in the business of global distribution and supply chain management. | |
14Owens & Minor, Inc. ● 2021 Proxy Statement
Proposal 1: Election of Directors |
Robert J. Henkel | ||||
Principal Occupation: President, Healthcare Transformation at the THEO Executive Group Age 66 Director since 2019 Independent Director Committees: Compensation & Benefits (Chair), Executive, Governance & Nominating |
Background: Mr. Henkel is Qualifications:
The Board of Directors has nominated Mr. | |||
|
| |||
Stephen W. Klemash | ||||
Principal Occupation: Lead Partner, Ernst & Young Age 60 Director since March 2021 Independent Director Committees: Audit, Compensation & |
Background: Mr. Klemash has been a Partner with Ernst & Young LLP (EY) since 1997, and is Qualifications:
The Board of Directors has nominated Mr. | |||
Owens & Minor, Inc. ● 2021 Proxy Statement15
|
| |
| Mark F. McGettrick | ||||
Principal Occupation: Retired Executive Vice President and Chief Financial Officer of Dominion Energy Inc. Age 63 Director since 2018 Independent Director Committees: Audit (Chair), Compensation & Benefits, Executive |
Background: Mr. McGettrick Qualifications:
The Board of Directors has nominated Mr. McGettrick to serve as a director of the Company based on his background and breadth of experience in risk management, business planning, accounting, mergers and acquisitions and financial analysis through his service as a Chief Financial Officer of a large publicly-traded company. The Board of Directors has also designated Mr. McGettrick as an audit committee financial expert based on his strong financial knowledge and experience. | |||
Edward A. Pesicka | ||||
Principal Occupation: President and Chief Executive Officer of Age 53 Director since 2019 Committees: Executive | Background: Mr. Pesickais the President and Chief Executive Officer of Owens & Minor, Inc. since March 2019. Previously Mr. Pesicka served as an independent consultant and advisor in the healthcare, life sciences and distribution industries since January 1, 2016. From January 2000 through April 2015, Mr. Pesicka served in various roles of increasing responsibility at Thermo Fisher Scientific Inc., including, most recently, Chief Commercial Officer and Senior Vice President from January 2014 to April 2015. Prior to that, he was President, Customer Channels at Thermo Fisher from July 2008 to January 2014 and President, Research Market from November 2006 to July 2008. Earlier in his career, Mr. Pesicka held various Vice President-level roles in Thermo Fischer Scientific’s finance department, serving as Chief Financial Officer of numerous divisions. Prior to Thermo Fisher Scientific, Mr. Pesicka spent eight years with TRW, Inc. in its finance department and three years with PricewaterhouseCoopers as an auditor. Qualifications: The Board of Directors has nominated Mr. Pesicka to serve as a director of the Company based upon his unique ability as President and Chief Executive Officer to communicate to and inform the Board about the Company’s day-to-day operations, implementation of strategic initiatives, and industry developments. The Board believes that Mr. Pesicka brings an important perspective on the Company’s current operations and ongoing relationships with customers and suppliers. Mr. Pesicka’s substantial experience and expertise in distribution, as well as the healthcare and life sciences industries, allow him to contribute valuable industry perspectives and strategic leadership to the Board. | |||
16Owens & Minor, Inc. ● 2021 Proxy Statement
Proposal 1: Election of Directors |
Michael C. Riordan | ||
Principal Occupation: Former Co-Chief Executive Prisma Health Age 62 Director since 2019 Independent Director Committees: Audit, Governance & | Background: Mr. Riordan served as Co-Chief Executive Officer and Director of Prisma Health, the largest Health System in South Carolina, from November 2017 to June 2019. Prior to the formation of Prisma Health company in 2017, he served as the President and Chief Executive Officer for the Greenville Health System (“GHS”) from 2006 to 2016. Before joining GHS, he served as President and CEO of the University of Chicago Hospitals and Health System and as Chief Operating Officer for Emory University Hospital. Prior to that, Mr. Riordan held multiple administrative roles at Crawford Long Hospital in Atlanta, Georgia. He also served three years as an infantry officer in the United States Marine Corps. Qualifications: The Board of Directors has nominated Mr. Riordan to continue his service as a director of the Company based on his extensive experience in the healthcare industry. Mr. Riordan brings considerable leadership and management experience and insight specific to the healthcare industry, including unique strategic and operational experience from the healthcare industry. His unique perspective will benefit Owens & Minor as it continues to expand as a full-service partner for customers that focus on healthcare solutions and understand the challenges faced at multiple levels within the healthcare industry. | |
The Board of Directors recommends a vote FOR the election of each nominee as director.
Owens & Minor, Inc. ● 2021 Proxy Statement17
Proposal 1: Election of Directors |
Effective immediately following the Annual Meeting, Messrs. Moore and Sledd’s respective terms will expire, at which time each of them will retire from the Board. The Company gratefully acknowledges and thanks Messrs. Moore and Sledd for their respective years of service on the Board and dedication to the Company, its shareholders and teammates.
Eddie N. Moore, | ||
Principal Occupation: Retired President & Chief Executive Officer of Norfolk Age 72 Director since 2005 Independent Director Committees: Audit, Executive, Governance & Nominating (Chair) | Mr. Moore retired in 2017 as President & Chief Executive Officer of Norfolk State
| |
Robert C. Sledd | ||||
Principal Occupation: Managing Partner of Pinnacle Ventures, LLC Age 67 Director since 2007 Independent Director Committees: Audit |
Mr. Sledd served as the Board’s Chairman from 2018 to September 2020 and previously as the Interim President
| |||
|
| |||
|
| |||
18The Board of Directors recommends a vote FOR the election of each nominee as director.Owens & Minor, Inc. ● 2021 Proxy Statement
Effective immediately following the Annual Meeting, Messrs. Rogers and Simmons’ terms will expire, at which time they will retire from the Board. The Company gratefully acknowledges and thanks Mr. Rogers’ for his 26 years and Mr. Simmons for his four yearsProposal 2: Ratification of service and dedication to our Board.
| ||
| ||
PROPOSAL 2: APPROVAL OF THE OWENS & MINOR, INC. 2018 STOCK INCENTIVE PLAN
The Company currently has in effect the 2015 Stock Incentive Plan (the “2015 Plan”). The 2015 Plan permits the grant of options, stock appreciation rights, stock awards, stock units and incentive awards. On February 8, 2018, our Board of Directors adopted the Owens & Minor, Inc. 2018 Stock Incentive Plan (the “2018 Plan”), subject to the approval of shareholders. Like the 2015 Plan, the 2018 Plan authorizes the grant of options, stock appreciation rights, stock awards, stock units and incentive awards. If the shareholders approve the 2018 Plan, no additional awards will be granted under the 2015 Plan after the date of shareholder approval of the 2018 Plan. The closing price of the Company’s Common Stock on March 1, 2018 was $16.11 per share.
Our Board of Directors believes that the 2015 Plan has benefited, and the 2018 Plan will benefit, the Company, by (i) assisting in recruiting and retaining the services of teammates andnon-employee directors with high ability and initiative, (ii) providing greater incentives for teammates andnon-employee directors who provide valuable services to the Company and its subsidiaries and affiliates and (iii) associating the interests of these persons with those of the Company and its shareholders.
Key features of the 2018 Plan, which contains provisions considered best practices for compensation and governance purposes, include:
The 2018 Plan generally will be administered by our Compensation Committee which consists entirely of independentnon-employee directors.
The 2018 Plan sets reasonable limits as to the awards any teammate, ornon-employee director may receive in any calendar year.
All stock options and stock appreciation rights must have an exercise price that is not less than the fair market value of the underlying stock on the grant date.
The maximum number of shares of our Common Stock that will be made available under the 2018 Plan is the sum of (i) 3,600,000 shares, less the number of shares of our Common Stock subject to awards granted under the 2015 Plan after March 1, 2018,plus (ii) the number of shares of our Common Stock subject to awards granted under the 2015 Plan that become available after March 1, 2018 because of the expiration, cancellation or forfeiture of the award without the issuance of the underlying shares. Between January 1, 2018 and March 1, 2018, awards representing 705,882 shares of Common Stock were granted under the 2015 Plan. This does not include awards to be granted in connection with our acquisition of Halyard Health S&IP, which we estimate will represent approximately 364,540 shares (based on a Common Stock price of $16.11 per share). We currently expect this acquisition to close early in the second quarter of 2018.
Shares of Common Stock not issued as the result of a net settlement of options, stock appreciation rights, stock awards, stock units and incentive awards, or tendered or withheld to pay the exercise price, purchase price or withholding taxes relating to options, stock appreciation rights, stock awards, stock units and incentive stock awards, shall not again be made available for issuance as awards under the 2018 Plan.
All awards granted under the 2018 Plan will be subject to aone-year minimum vesting period, provided that (i) up to 5% of the shares authorized for issuance under the 2018 Plan (subject to adjustments) may provide for vesting of awards in less than one year and (ii) awards granted tonon-employee directors may vest earlier than one year upon the annual meeting of the Company’s shareholders that occurs in the year immediately following the year of grant so long as the awards vest as of a date that is not earlier than two weeks prior to the anniversary date of the immediately preceding year’s annual shareholders meeting.
In connection with a change in control, vesting oftime-based awards will only be accelerated if the time-based awards are not assumed or converted into substitute awards following the change in control and vesting ofperformance-based awards shall only be accelerated to the extent of actual
|
The 2018 Plan does not include any reload feature which would provide for an automatic grant of additional awards or any “evergreen” share replenishment features which would provide for an automatic increase in the number of shares available for issuance.
The 2018 Plan prohibits the repricing of outstanding stock options, stock appreciation rights and other stock awards in the nature of purchase rights, whether by amending an existing award or by substituting a new award at a lower price, without shareholder approval. The 2018 Plan also prohibits the payment of cash, awards or other securities in exchange forout-of-the-money awards, without shareholder approval.
Awards granted under the 2018 Plan are subject to the Company’s Recoupment Policy (which is described on page 52 of this proxy statement).
There is not a liberal change in control definition in the 2018 Plan. A change in control does not occur on announcement or commencement of a tender offer or a potential takeover or on shareholder approval of a merger or other transaction.
Any material amendments to the 2018 Plan require shareholder approval.
No dividends or dividend equivalents may be granted in connection with options, stock appreciation rights or other awards in the nature of purchase rights. No dividends or dividend equivalents may be paid in connection with a stock award or stock unit unless and until the award is no longer subject to forfeiture conditions, and any such dividends or dividend equivalents will either be (i) deemed reinvested in additional awards which remain subject to the same forfeiture and other conditions applicable to the award to which such dividends or dividend equivalents related or (iii) accumulated (without interest) and become payable only at the time and to the extent the related award becomes nonforfeitable and/or payable. No dividends may be paid with respect to an award that is forfeited.
The 2018 Plan does not provide for taxgross-ups of any kind.
A summary of the principal features of the 2018 Plan is included below. However, every aspect of the 2018 Plan is not addressed in this summary and shareholders are encouraged to read the full text of the 2018 Plan which is attached to this proxy statement asAnnex A. We have no current plans, proposals or arrangements, written or otherwise, to grant any specific awards under the 2015 Plan that have not been granted as of March 1, 2018or under the 2018 Plan, except in connection with the closing of our acquisition of Halyard Health S&IP or as provided for under our Board of Directors compensation plan (as described on pages 18 and 9 respectively of this proxy statement).
Reasons for the 2018 Plan and Recommendation of the Board of Directors
As described in more detail in this proxy statement under “Executive Compensation—Compensation Disclosure and Analysis,” we believe our compensation programs are structured to attract, retain and motivate our teammates andnon-employee directors. Our Board of Directors believes that equity incentive awards play a key role in these programs as they help align the interests of teammates andnon-employee directors with those of our shareholders. As of March 1, 2018, there were (1) 61,488,172 shares of our Common Stock outstanding, (2) 1,532,907 full value shares outstanding which include outstanding Performance Shares at target but there are no outstanding stock options or stock appreciation rights, and (3) only 773,638 shares available for grant under the 2015 Plan, which amount will be further reduced by the grant of awards representing an estimated 364,540 additional shares of Common Stock in connection with the Halyard Health S&IP acquisition.
Historical Burn Rate; Potential Economic Dilution Analysis. We are committed to managing the use of our equity incentives prudently to balance the benefits equity compensation brings to our compensation programs against the dilution it causes our shareholders. As part of our analysis when considering the number of shares to be reserved under the 2018 Plan, we considered the 2015 Plan’s “burn rate,” calculated as the number of shares subject to equity awards granted under the 2015 Plan, divided by the weighted average number of shares outstanding for that period. Our average burn rate for the three years ending December 31, 2017 was 3.73%. The total potential dilution resulting from issuing all shares authorized under our equity plans as of March 1, 2018 would be approximately 3.8%. We believe that our burn rate and potential dilution amounts are reasonable for our industry and market conditions. Since the 2015 Plan was adopted, we have sought to provide equity compensation to our teammates andnon-employee directors who we believe are important to our organization in furthering our business strategy. In addition, since that time we have made multiple leadership appointments and promotions to advance our strategy. We made equity grants from the 2015 Plan in connection with each of these new hires and promotions. We believe these new hires and promotions are key to the development and strengthening of the management team with the experience and talent necessary to further implement our transformation. Additionally, we have made two significant acquisitions in 2017 and 2018, Byram Healthcare and Halyard Health S&IP, to accelerate our transformation and have issued awards under our 2015 Plan prior to March 1, 2018 representing 63,501 shares of Common Stock to teammates who have joined us from Byram Healthcare and expect to issue awards representing an additional 364,540 shares of Common Stock to teammates who will join us from Halyard Health S&IP.
Expected Duration. We expect that the shares available under the 2018 Plan for future awards, if the 2018 Plan is approved by our shareholders, will be sufficient forcurrently-anticipated awards for the next three- four years. Expectations regarding future share usage could be impacted by a number of factors such as hiring and promotion activity at the executive level; the rate at which shares are returned to the 2018 Plan reserve upon awards’ expiration, forfeiture or cash settlement; the future performance of our stock price; factors involved in acquiring other companies; and other factors. While we believe that the assumptions we used are reasonable, future share usage may differ from current expectations.
For the foregoing reasons, our Board of Directors recommends that our shareholders approve the 2018 Plan.
Administration of the 2018 Plan
The 2018 Plan is generally administered by the Compensation Committee. The Compensation Committee approves all terms of awards to teammates under the 2018 Plan. The Compensation Committee also approves the teammates who will receive grants under the 2018 Plan, determines the type of award that will be granted and approves the number of shares of Common Stock subject to the grant. The Governance & Nominating Committee of the Board of Directors administers the 2018 Plan in the case of any award that is made to a member of the Board who is not also a teammate of the Company or an affiliate. References in this summary to the “Compensation Committee” include, with respect to awards made tonon-employee directors, the Governance & Nominating Committee.
Participation in 2018 Plan
Because awards under the 2018 Plan are made at the Compensation Committee’s discretion, we are unable to determine who will be selected to receive awards or the type, size or terms of the awards that may be granted. For the same reason, we are unable to determine the awards that would have been granted last year if the 2018 Plan had been in effect. However, outstanding awards previously granted under the 2015 Plan are reported herein. See “Grants of Plan Based Awards Table” on page 56 and “Outstanding Equity Awards at FiscalYear-End Table” on page 58 of this proxy statement.
Any teammate, consultant ornon-employee director of the Company or any affiliate who, in the judgment of the Compensation Committee, has contributed significantly or can be expected to contribute significantly to
the performance of the Company and/or its affiliates may receive an award under the 2018 Plan. The Company currently has approximately 8,600 teammates (including approximately 10 teammates who are officers), and the Company currently has 11non-employee directors. In fiscal 2017 the Company made awards to 301 participants, which included nine executive officers and our 10non-employee directors. The Compensation Committee has the complete discretion, as provided in the 2018 Plan, to select eligible teammates, consultants and/ornon-employee directors to receive awards under the 2018 Plan and to determine for each teammate, consultant ornon-employee director the nature of the award and the terms and conditions of each award.
The basis for participation in the 2018 Plan is that the Compensation Committee has determined that such participation will further the 2018 Plan’s purposes. In exercising its discretion, the Compensation Committee will consider the recommendations of management and the purposes of the 2018 Plan, which include the recruiting and retaining of teammates andnon-employee directors with high ability and initiative, providing greater incentives for teammates andnon-employee directors who provide valuable services to the Company and its subsidiaries and affiliates and associating the interests of these persons with those of the Company and its shareholders. For a description of the basis of participation for our executive officers andnon-employee directors during fiscal 2017, see “Compensation Discussion and Analysis” beginning on pages 33 through 53 of the proxy statement and “Director Compensation” on page 9 of the proxy statement.
The 2018 Plan includes reasonable limits on the benefits that any participant may receive for any calendar year. No teammate may be granted, in any calendar year, (i) options, stock appreciation rights or other purchase rights for more than 2,000,000 shares of our Common Stock, (ii) stock awards or stock units for more than 1,000,000 shares of our Common Stock or (iii) incentive awards exceeding $10,000,000. The foregoing limitations can be multiplied by two for awards granted to teammates during the calendar year in which the teammate first commences employment or other service. The 2018 Plan also provides that in any calendar year anon-employee director may not be granted awards during any single calendar year in respect of thenon-employee director’s service as a member of the board that, taken together with any cash fees paid to thenon-employee director, exceeds $750,000 in total value (calculating the value of any such awards based on the grant date fair value of such awards for financial accounting purposes). The Compensation Committee may, however, make exceptions to the foregoing limit (up to twice such limit) for anon-executive chair of the Board of Directors or, in extraordinary circumstances, for other individualnon-employee directors, as the Compensation Committee may determine, provided that thenon-employee director receiving such awards may not participate in the decision to make such awards.
Share Authorization
The maximum aggregate number of shares of Common Stock that may be issued under the 2018 Plan is the sum of (i) 3,600,000 shares, less the number of shares of our Common Stock subject to awards granted under the 2015 Plan afterMarch 1, 2018, plus (ii) the number of shares of our Common Stock that are subject to awards granted under the 2015 Plan that become available after March 1, 2018 because of the expiration, cancellation or forfeiture of the award without the issuance of the underlying shares. In connection with stock splits, stock dividends, recapitalizations and certain other events, the Board will make adjustments that it deems appropriate in the aggregate number of shares of Common Stock that may be issued under the 2018 Plan, the terms of outstanding awards and the per individual grant limitations.
Except as described herein, each share of Common Stock issued in connection with an award granted under the 2018 Plan will reduce the total number of shares of Common Stock available for issuance under the 2018 Plan by one. If any options, stock appreciation rights, stock awards, stock units or other awards terminate, expire or are canceled, forfeited, exchanged or surrendered without having been exercised or paid or without issuance of the underlying shares, the Common Stock subject to such awards, to the extent of the termination, expiration, cancellation, forfeiture, surrender or cash settlement, will again be available for awards under the 2018 Plan. Any shares of Common Stock that are tendered or withheld from the settlement of an award to satisfy the grant or exercise price or to satisfy a tax withholding obligation under an award will not be available for future awards to
be granted under the 2018 Plan. If Common Stock is issued in settlement of a stock appreciation right, the number of shares available for future awards will be reduced by the number of shares for which the stock appreciation right was exercised rather than the number of shares issued. Shares of Common Stock that may be issued under the 2018 Plan may not be increased through the Company’s purchase of shares of Common Stock on the open market with the proceeds obtained from the exercise of options or other purchase rights granted under the 2018 Plan.
Awards
The Compensation Committee will determine the eligible individuals who will receive awards under the 2018 Plan and the Compensation Committee will specify the type of award that is made and will prescribe the terms and conditions that govern each award. The 2018 Plan generally provides that no award will become fully exercisable or entirely vested before the first anniversary of the date of grant of the award, provided that (i) awards may be granted without regard to this minimum vesting requirement with respect to a maximum of 5% of the shares of Common Stock authorized for issuance under the 2018 Plan and (ii) awards may be granted without regard to the minimum vesting requirement tonon-employee directors as described above. Notwithstanding the preceding sentence, the Compensation Committee may accelerate the exercisability or vesting of awards (i) in connection with a termination of employment or other service (including without limitation on death, disability, retirement or involuntary termination) or (ii) if the award has been outstanding for at least one year, and up to 5% of the shares of Common Stock authorized for issuance under the 2018 Plan may be issued without regard to any such restrictions on accelerated vesting of awards.
Options. The 2018 Plan authorizes the Compensation Committee to grant incentive stock options (under Section 421 of the Internal Revenue Code) and options that do not qualify as incentive stock options. The exercise price of each option will be determined by the Compensation Committee, provided that the price cannot be less than 100% of the fair market value of the Common Stock on the date on which the option is granted (or 110% of the shares’ fair market value on the grant date in the case of an incentive stock option to an individual who is a “ten percent shareholder” under Sections 422 and 424 of the Internal Revenue Code). Except in the event of stock splits, stock dividends and other changes in our capitalization, unless approved by shareholders, the exercise price of an outstanding option cannot be reduced and no payment can be made to cancel an option if the exercise price exceeds the shares’ fair market value on the date of cancellation.
The exercise price for any option is generally payable (i) in cash, (ii) in a cash equivalent acceptable to the Compensation Committee, or (iii) by the surrender of Common Stock (including Common Stock otherwise issuable upon exercise of the option) (or attestation of ownership of Common Stock) with an aggregate fair market value on the date on which the option is exercised equal to the exercise price for the number of shares being purchased.
The term of an option cannot exceed 10 years from the date of grant (or five years in the case of an incentive share option granted to a “ten percent shareholder”). The Compensation Committee may grant options that have a term less than the maximum term permitted under the 2018 Plan. The 2018 Plan provides for the automatic exercise of options if (a) the participant remains in the continuous employ or service of the Company from the date of grant until the stated expiration date of the option and (b) the fair market value of the shares subject to the option exceeds the exercise price. In that event, if not exercised by the participant, the option will be exercised on the stated expiration date and the participant will be issued shares of Common Stock that have a fair market value equal to the excess of the aggregate number of shares subject to the exercised portion of the option over the number of shares whose fair market value equals the aggregate exercise price of the option and applicable tax withholdings.
No dividends may be paid with respect to an option.
Stock Awards. The 2018 Plan also provides for the grant of stock awards. A stock award is an award of Common Stock that will be subject to restrictions on transferability and such other restrictions as the
Compensation Committee determines on the date of grant and consistent with the terms of the 2018 Plan, including the vesting requirements described above. The vesting requirements or restrictions may be stated with reference to one or more performance objectives, including objectives stated with respect to “performance goals” as described below under “Performance Objectives.” The restrictions, if any, may lapse over a specified period of time or through the satisfaction of conditions, in installments or otherwise, as the Compensation Committee may determine.
A participant who receives a stock award will have all of the rights of a shareholder as to those shares, including, without limitation, the right to vote and the right to receive dividends or distributions on the shares; provided, however, that the 2018 Plan provides that dividends payable on a stock award shall either be deemed reinvested in additional stock awards, which shall remain subject to the same forfeiture and transfer conditions applicable to the stock award with respect to which such dividends related, or accumulated and paid in cash, without interest, if and at the time the related stock award is no longer subject to forfeiture and transfer conditions. During the period, if any, when stock awards arenon-transferable or forfeitable, (i) a participant is prohibited from selling, transferring, pledging, exchanging, hypothecating or otherwise disposing of his or her stock award shares, (ii) the company will retain custody of the certificates and (iii) a participant must deliver a share power to the Company for each stock award. No dividends may be paid with respect to a stock award that is forfeited.
Stock Appreciation Rights. The 2018 Plan authorizes the Compensation Committee to grant stock appreciation rights that provide the recipient with the right to receive, upon exercise of the stock appreciation right, cash, Common Stock or a combination of the two. The amount that the recipient will receive upon exercise of the stock appreciation right generally will equal the excess of the fair market value of the Common Stock on the date of exercise over the shares’ fair market value on the date of grant (the “initial value”). Stock appreciation rights will become exercisable in accordance with terms prescribed by the Compensation Committee and consistent with the terms of the 2018 Plan, including the vesting requirements described above. Stock appreciation rights may be granted in tandem with an option grant or independently from an option grant. The term of a stock appreciation right cannot exceed ten years from the date of grant or five years in the case of a share appreciation right granted in tandem with an incentive stock option awarded to a “ten percent shareholder”. The Compensation Committee may grant stock appreciation rights that have a term less than such maximum terms. The 2018 Plan provides for the automatic exercise of a stock appreciation right if (a) the participant remains in the continuous employ or service from the date of grant until the stated expiration date of the stock appreciation right and (b) the fair market value of the shares subject to the stock appreciation right exceeds the initial value per share. In that event, if not exercised by the participant, the stock appreciation right will be exercised on the stated expiration date and the participant will receive the amount payable for exercises on that date (subject to applicable withholdings).
Except in the case of stock splits, stock dividends and other changes in our capitalization, the initial value of an outstanding stock appreciation right cannot be reduced without the approval of shareholders. In addition, the 2018 Plan provides that no payment may be made on account of the cancellation of a stock appreciation right if the initial value exceeds the fair market value of a share of Common Stock.
No dividends may be paid with respect to any stock appreciation rights.
Stock Units. The 2018 Plan also authorizes the Compensation Committee to grant awards of stock units. Stock units represent the participant’s right to receive an amount, based on the value of the Common Stock, if the requirements established by the Compensation Committee are satisfied. Consistent with the terms of the 2018 Plan, including the vesting requirements described above, the Compensation Committee will determine the applicable performance period, the performance goals and such other conditions that apply to the stock unit award. Performance goals may be stated with respect to the performance criteria described below under “Performance Objectives” or such other criteria determined by the Compensation Committee. If the performance goals and other requirements are met, stock units will be paid in cash, Common Stock or a combination thereof.
Incentive Awards. The 2018 Plan also permits the grant of incentive awards. An incentive award is an opportunity to earn a payment upon the terms and conditions prescribed by the Compensation Committee. The terms and conditions may provide that the incentive award will be earned only if the participant’s employment continues for a specified period or only to the extent that the participant, the Company or an affiliate achieves objectives measured over a period of at least one year. The objectives may be stated with reference to one or more of the performance criteria described below under “Performance Objectives” or such other criteria determined by the Compensation Committee. If an incentive award is earned, the amount payable will be paid in cash, Common Stock or a combination thereof. No dividends may be paid in respect of an incentive award.
Change in Control
Unless an outstanding award is assumed or otherwise continued after a change in control, upon a change in control andcash-out of the award, (i) each option and stock appreciation right shall be fully exercisable thereafter, (ii) each stock award will become transferable and nonforfeitable, (iii) each stock unit award shall be earned in its entirety and converted into a transferable and nonforfeitable stock award, and (iv) each incentive award shall be earned, in whole or in part, in accordance with the terms of the applicable award agreement, except that (i) each performance-based option and stock appreciation right shall be exercisable, (ii) each performance-based stock award will become transferable and nonforfeitable, (iii) each performance-based stock unit award will be earned and converted into a transferable and nonforfeitable stock award, and (iv) each performance-based incentive award shall be earned only to the extent of actual performance through the date of the change in control or pro rata based on the elapsed portion of the performance period as of the date of the change in control, whichever the Committee determines appropriate.
In the event of a change in control, the Compensation Committee, in its discretion and without the need for a participant’s consent, may provide that an outstanding option, stock appreciation right, stock award, stock unit award or incentive award shall be assumed by, or a substitute award granted by, the surviving entity in the change in control. Such assumed or substituted award shall be of the same type of award as the original option, stock appreciation right, stock award, stock unit award or incentive award being assumed or substituted.
Unless an outstanding award is to be assumed or otherwise continued after the change in control, the Compensation Committee, in its discretion and without the need of a participant’s consent, may provide that (i) each option and stock appreciation right that is or will be exercisable on the date of the change in control, (ii) each stock award that is or will become transferable and nonforfeitable, (iii) each stock unit award that is or will be earned and convertible into a transferable and nonforfeitable stock award and (iv) each inventive award that is or will be earned shall be cancelled in exchange for a payment. The payment may be in cash, shares of Common Stock or other securities or consideration received by Company shareholders in the change in control transaction. The amount of the payment will be equal to (i) the amount by which the price per share received by the shareholder in the transaction exceeds the exercise price of the option or initial value of the stock appreciation right, (ii) the price per share received by the shareholders in the transaction for each share subject to a stock award or stock unit or (iii) the amount earned under the incentive award. Notwithstanding the foregoing, however, awards that are not vested,non-forfeitable or payable as of the change in control will be cancelled without any payment therefor.
A change of control under the 2018 Plan generally occurs if:
a person, entity or affiliated group (with certain exceptions) acquires, in a transaction or series of transactions, at least 30% of our combined voting power;
we merge with another entity unless (i) the voting securities of the Company immediately prior to the merger continue to represent more than 50% of the combined voting power of the securities in the merged entity or its parent or (ii) the merger is effected to implement a recapitalization transaction in which no person acquires more than 30% of our combined voting power;
there is consummated an agreement for the sale or disposition of all or substantially all of our assets;
the stockholders approve a plan of complete liquidation; or
during any period of twelve (12) consecutive months, individuals who, at the beginning of such period, constitute our Board, together with any new directors whose nomination or election was approved by a majority of the directors then so in office (other than individuals who become directors in connection with certain transactions or election contests), cease for any reason to constitute a majority of our Board.
The Internal Revenue Code has special rules that apply to “parachute payments,”i.e., compensation that is payable on account of a change in control. If the parachute payments exceed a safe harbor amount prescribed by the Internal Revenue Code, then the recipient is liable for a 20% excise tax on a portion of the parachute payments, and the Company is not allowed to claim a federal income tax deduction for a portion of the parachute payments.
The 2018 Plan provides for a reduction in benefits if the benefits of awards, either alone or together with parachute payments under other plans and agreements, exceed the safe harbor amount. In that event, the participant’s total parachute payments will be reduced to the safe harbor amount,i.e., the maximum amount that may be paid without an excise tax liability or loss of deduction. However, the benefits will not be reduced, and the participant will receive all of the parachute payments, if the participant will receive a greaterafter-tax benefit, taking into account the excise tax payable by the participant, by receiving all of the parachute payments. The 2018 Plan provides that these provisions do not apply to a participant who, under an agreement with the Company or the terms of another plan is not permitted to receive parachute payments in excess of the safe harbor amount.
Performance Objectives
The 2018 Plan also identifies performance criteria that may be used to establish performance goals that will determine whether an award becomes vested or is earned. The Compensation Committee may prescribe that an award will become vested or be earned upon the attainment of one or more performance goals or objectives, including but not limited to: (i) gross, operating or net earnings before or after taxes; (ii) return on equity; (iii) return on capital; (iv) return on sales; (v) return on assets or net assets; (vi) earnings per share; (vii) cash flow per share; (viii) book value per share; (ix) earnings growth; (x) sales or sales growth; (xi) volume growth; (xii) cash flow (as defined by the Compensation Committee); (xiii) Fair Market Value; (xiv) total shareholder return; (xv) market share; (xvi) productivity; (xvii) level of expenses; (xviii) quality; (xix) safety; (xx) customer satisfaction; (xxi) total economic value added; (xxii) earnings before interest, taxes, depreciation and amortization; and (xxiii) revenues or revenue growth.
A performance goal or objective may be stated with respect to the Company, a subsidiary or a business unit and also may be stated with respect to one or more of these criteria or may be expressed on an absolute basis or relative to the performance of one or more similarly situated companies or a published index. In establishing a performance goal or objective, the Compensation Committee may exclude any or all special, unusual or extraordinary items as determined under generally accepted accounting principles, including the charges or costs associated with restructurings of the Company, discontinued operations, other unusual ornon-recurring items and the cumulative effects of accounting changes. The Compensation Committee may also adjust performance goals or objectives, including to reflect the impact of unusual ornon-recurring events affecting the Company and for changes in applicable tax laws and accounting principles.
Section 162(m) Transition Rule
If and to the extent that the Compensation Committee grants an award under the 2018 Plan in substitution for an award intended to constitute “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code, as in effect prior to the enactment of the Tax Cuts and Jobs Act of 2017, or pursuant to a
binding contract in effect as of November 2, 2017 and intended to constitute “qualified performance-based compensation” under the special transition rule under Section 162(m) then such award shall be (i) subject to such terms and conditions as are required for the award to continue to qualify under the transition rule for “qualified performance-based compensation” under Section 162(m) under the Tax Cuts and Jobs Act of 2017, as the Compensation Committee shall determine, (ii) the award will be administered by asub-committee of the Compensation Committee which is comprised of two or more members that qualify as “outside directors” under Section 162(m) prior to the enactment of the Tax Cuts and Jobs Act of 2017, and (iii) none of the provisions of the 2018 Plan shall apply to such award to the extent such provisions would result in the award no longer qualifying under the transition rule for “qualified performance-based compensation” under Section 162(m) prior to the Tax Cuts and Jobs Act of 2017.
Return of Awards; Repayment
The 2018 Plan provides that all awards, and all payments under awards, are subject to any policy that the Company adopts requiring the return or repayment of compensation and/or benefits,i.e., a claw-back or compensation recoupment policy. To the extent required by any such policy as in effect on the date that the award is granted, the date the option or stock appreciation right was exercised, the date of payment or the date the award became vested or earned, a participant will be required to return any award (if not previously exercised or settled) and any payment previously made or proceeds received with respect to any award (if the award has vested or been settled).
Amendment; Termination
The 2018 Plan may be amended or terminated at any time by the Board of Directors; provided that no amendment may adversely impair the rights of participants under outstanding awards. Our shareholders must approve any amendment if such approval is required under applicable law or stock exchange requirements. Our shareholders also must approve any amendment that materially increases the benefits accruing to participants under the 2018 Plan, materially increases the aggregate number of shares of Common Stock that may be issued under the 2018 Plan (other than adjustments to reflect stock dividends, stock splits and other changes in capitalization) or materially modifies the requirements as to eligibility for participation in the 2018 Plan. In addition, except in connection with adjustments to reflect stock dividends, stock splits and other changes in capitalization, the exercise price of an option, the purchase price of an award or the initial value of a stock appreciation right may not be reduced and no action that would constitute are-pricing of such awards may be taken without the approval of shareholders.
The 2018 Plan provides that, unless terminated sooner by the Board or extended with shareholder approval, no awards may be made under the 2018 Plan after February 7, 2028.
Deferral of Awards
The Compensation Committee may permit a participant to defer, or if and to the extent specified in an award agreement require the participant to defer, receipt of the payment of cash or the delivery of shares of Common Stock that would otherwise be due by virtue of the lapse or waiver of restrictions with respect to awards, the satisfaction of any requirements or goals with respect to awards, the lapse or waiver of the deferral period for awards, or the lapse or waiver of restrictions with respect to awards. If such deferral is permitted, the Compensation Committee will establish rules and procedures for making such deferral elections and for the payment of such deferrals which will be intended to conform in form and substance with applicable regulations promulgated under Section 409A of the Internal Revenue Code. There are no assurances, however, that a participant will not be subjected to tax penalties under Section 409A with respect to any awards or such deferrals.
No Employment Rights
Awards do not confer upon any individual any right to continue in the employ or service of the Company or any affiliate.
U.S. Federal Income Tax Consequences
The grant of an option or stock appreciation right will create no tax consequences for the participant or the Company at the time of the grant. A participant will have no taxable income upon exercise of an incentive stock option except that a participant must recognize income equal to the fair market value of the shares acquired minus the exercise price for alternative minimum tax purposes. Upon exercise of an option (other than an incentive stock option) or a stock appreciation right, a participant generally must recognize ordinary income equal to the fair market value of the shares and/or the amount of cash acquired minus the exercise price or initial value. Upon a disposition of shares acquired by exercise of an incentive stock option on or before the earlier of the second anniversary of the grant of such incentive stock option or the first anniversary of the exercise of such option, the participant generally must recognize ordinary income equal to the lesser of (1) the fair market value of the shares at the date of exercise minus the exercise price, or (2) the amount realized upon the disposition of the incentive stock option shares minus the exercise price. Otherwise, a participant’s disposition of shares acquired upon the exercise of an option (including an incentive stock option for which the incentive stock award option holding periods are met) generally will result in only capital gain or loss. Other awards under the 2018 Plan, including stock awards, stock units and incentive awards, will generally result in ordinary income to the participant equal to the cash or the fair market value of the shares received (minus the amount, if any, paid by the participant for such shares) at the time such cash or shares are received by the participant or, if later, the time that the substantial risk of forfeiture of such shares lapses.
The Company generally will be entitled to claim a tax deduction with respect to an award granted under the 2018 Plan when the participant recognizes ordinary income with respect to the award in an amount equal to the ordinary income that is recognized by the participant. The Company will not be entitled to claim any tax deduction of any amount recognized by a participant as capital gains.
The Company will be permitted to withhold from any award granted under the 2018 Plan any required withholding taxes. Payment of withholding taxes may be made through one or more of the following means: payment in cash (including personal check or wire transfer), or, with the approval of the Committee, by delivering shares previously owned by the grantee or by delivery of shares acquired or to be acquired under the award.
Section 83(b) of the Internal Revenue Code.A participant may elect under Section 83(b) of the Internal Revenue Code to be taxed at the time of grant of a stock award on the fair market value of the shares at that time rather than to be taxed when the risk of forfeiture lapses on the stock, and the Company will have a deduction available at the same time and in the same amount as the participant recognized income. If a participant files an election under Section 83(b) and the participant subsequently forfeits the restricted shares, he or she would not be entitled to any tax deduction, including as a capital loss, for the value of the shares on which he or she previously paid tax. Except as discussed below, the Company generally will be entitled to a tax deduction at the time and equal to the amount recognized as ordinary income by the participant in connection with an option, stock appreciation right, or other award, but will be entitled to no tax deduction relating to amounts that represent a capital gain to a participant, Thus, the Company will not be entitled to any tax deduction with respect to an incentive stock option if the participant holds the shares for the incentive stock option holding periods.
The Board of Directors recommends that you vote FOR approval of the Owens & Minor, Inc. 2018 Stock Incentive Plan.
PROPOSAL 3: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMIndependent Registered Public Accounting Firm
The Audit Committee (with confirmation of the Board) has selected KPMG LLP to serve as the Company’s independent registered public accounting firm for the year ending December 31, 20182021 and has directed that management submit such appointment of KPMG LLP for ratification by the shareholders at the annual meeting.Annual Meeting. Representatives of KPMG LLP will be present at the annual meetingAnnual Meeting to answer questions and to make a statement, if they desire to do so.
Under the Sarbanes-Oxley Act of 2002 and the rules of the SEC promulgated thereunder, the Audit Committee is solely responsible for the appointment, compensation and oversight of the work of the Company’s independent registered public accounting firm. Shareholder ratification of this appointment is not required by the Company’s Bylaws or otherwise. If shareholders fail to ratify the appointment, the Audit Committee will take such failure into consideration in future years. If shareholders ratify the appointment, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it is determined that such a change would be in the best interests of the Company.
Prior to selecting KPMG LLP for fiscal 2018,2021, the Audit Committee evaluated KPMG’sKPMG LLP’s performance with respect to fiscal 2017.2020. In conducting this annual evaluation, the Audit Committee considered management’s assessment of KPMG’sKPMG LLP’s performance in areas such as (i) independence, (ii) the quality and the efficiency of the services provided, including audit planning and coordination, (iii) industry knowledge and (iv) the quality of communications, including KPMG LLP staff accessibility and keeping management apprised of issues. The Audit Committee also considered KPMG’sKPMG LLP’s tenure, the impact on the Company of changing auditors and the reasonableness of KPMG’sKPMG LLP’s billable rates. The Audit Committee is responsible for the audit fee negotiations associated with the retention of KPMG LLP. In order to assure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent registered accounting firm. Further, in conjunction with the rotation of the auditing firm’s lead engagement partner every five years, the Audit Committee and its chairpersonchair will continue to be directly involved in the selection of KPMG LLP’s new lead engagement partner. The members of the Audit Committee and the Board believe that the continued retention of KPMG LLP to serve as our independent external auditor is in the best interests of us and our stockholders.shareholders.
The Board of Directors recommends a vote FOR the ratification of the appointment of KPMG LLP to serve as
the Company’s independent registered public accounting firm for the year ending December 31, 2018.2021.
FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMFees Paid to Independent Registered Public Accounting Firm
For each of the years ended December 31, 20172020 and 2016,2019, KPMG LLP billed the Company the fees set forth below in connection with professional services rendered by that firm to the Company:
| Year 2017 | Year 2016 | Year 2020 | Year 2019 | |||||||||||||
Audit Fees | $ | 2,110,500 | $ | 1,956,000 | $ | 3,571,000 |
| $ | 4,449,000 |
| ||||||
Audit-Related Fees | 23,500 | 32,000 |
| 40,000 |
|
| 30,000 |
| ||||||||
Tax Fees | 264,000 | 102,000 |
| 345,000 |
|
| 835,000 |
| ||||||||
All Other Fees | — | — |
| 2,000 |
|
| — |
| ||||||||
|
| |||||||||||||||
Total | $ | 2,398,000 | $ | 2,090,000 | $ | 3,958,000 |
| $ | 5,314,000 |
| ||||||
Audit Fees. These were fees for professional services performed for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s filings on Forms10-K and10-Q, Sarbanes-Oxley compliance, and services normally provided in connection with statutory and regulatory filings or engagements.
Audit-Related Fees. These were fees primarily for the annual audits of the Company’s employee benefit plan financial statements, internal control attestations in certain foreign jurisdictions and consultations by management related to financial accounting and reporting matters.
Tax Fees. These were fees primarily for advice and consulting services related to the structuring of international operations, and the restructuring of business operations.
Owens & Minor, Inc. ● 2021 Proxy Statement19
Proposal 2: Ratification of Independent Registered Public Accounting Firm |
All Other Fees. All other fees in 2020 include fees for online resources provided by KPMG LLP. There were no other fees in 2019 other than those described above.
The Audit Committee has established policies and procedures for thepre-approval of audit services and permittednon-audit services in order to ensure the services do not impair the auditor’s independence. The Audit Committee willpre-approve on an annual basis the annual audit services engagement terms and fees and will alsopre-approve certain audit-related services that may be performed by the independent auditors up to thepre-approved fee levels, as well as permissible tax planning and compliance services. The Audit Committee may delegatepre-approval authority to one or more of its members, but anypre-approval decision by such member or members must be presented to the full Audit Committee at its next scheduled meeting. All services provided by and fees paid to KPMG LLP in 20172020 werepre-approved by the Audit Committee in accordance with thepre-approval policies, and there were no instances of waiver of approval requirements or guidelines during this period.
REPORT OF THE AUDIT COMMITTEEReport of the Audit Committee
The Audit Committee is composed of four directors, each of whom is independent under the enhanced independence standards for audit committees in the Exchange Act and the rules thereunder as incorporated into the listing standards of the NYSE and under the Company’s Corporate Governance Guidelines, and two of whom have been determined by the Board of Directors to be audit committee financial experts. The Audit Committee met seven10 times during 2017.2020. The Audit Committee operates under a written charter adopted by the Board of Directors, which the Audit Committee reviews at least annually and revises as necessary to ensure compliance with current regulatory requirements and industry changes.
As its charter reflects, the Audit Committee has a broad array of duties and responsibilities. With respect to financial reporting and the financial reporting process, management, the Company’s independent registered public accounting firm and the Audit Committee have the following respective responsibilities:
Management is responsible for:
Establishing and maintaining the Company’s internal control over financial reporting;
Assessing the effectiveness of the Company’s internal control over financial reporting as of the end of each year; and
Preparation, presentation and integrity of the Company’s consolidated financial statements.
The Company’s independent registered public accounting firm is responsible for:
Performing an independent audit of the Company’s consolidated financial statements and the Company’s internal control over financial reporting;
Expressing an opinion as to the conformity of the Company’s consolidated financial statements with U.S. generally accepted accounting principles; and
Expressing an opinion as to the effectiveness of the Company’s internal control over financial reporting.
The Audit Committee is responsible for:
Selecting the Company’s independent registered public accounting firm;
Overseeing and reviewing the consolidated financial statements and the accounting and financial reporting processes of the Company; and
Overseeing and reviewing management’s evaluation of the effectiveness of internal control over financial reporting.
In this context, the Audit Committee has met and held discussions with management and KPMG LLP, the Company’s independent registered public accounting firm. Management represented to the Audit Committee that the Company’s consolidated financial statements for the year ended December 31, 20172020 were prepared in accordance with U.S. generally accepted accounting principles. The Audit Committee has reviewed and discussed these consolidated financial statements with management and KPMG LLP, including the scope of the independent registered public accounting firm’s responsibilities, critical accounting policies and practices used and significant financial reporting issues and judgments made in connection with the preparation of such financial statements.
20Owens & Minor, Inc. ● 2021 Proxy Statement
Proposal 2: Ratification of Independent Registered Public Accounting Firm |
The Audit Committee has discussed with KPMG LLP the matters required to be discussed pursuant to Public Company Accounting Oversight Board Auditing Standard No. 1301 (Communications with Audit Committees). The Audit Committee has also received the written disclosures and communications from KPMG LLP required by the PCAOB regarding the independence of that firm and has discussed with KPMG LLP the firm’s independence from the Company.
In addition, the Audit Committee has discussed with management its assessment of the effectiveness of internal control over financial reporting and has discussed with KPMG LLP its opinion as to the effectiveness of the Company’s internal control over financial reporting.
Based upon its discussions with management and KPMG LLP and its review of the representations of management and the report of KPMG LLP to the Audit Committee, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form10-K for the year ended December 31, 20172020 for filing with the SEC.
THE AUDIT COMMITTEE
Lemuel E. Lewis, Chairman
John W. Gerdelman
| THE AUDIT COMMITTEE |
Mark F. McGettrick, Chair Stephen W. Klemash Eddie N. Moore, Jr. Michael C. Riordan Robert C. Sledd |
Owens & Minor, Inc. ● 2021 Proxy Statement21
STOCK OWNERSHIP INFORMATIONStock Ownership Information
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on the Company’s records and information provided by our directors, executive officers and beneficial owners of more than 5% of the Common Stock, we believe that all reports required to be filed by our directors and executive officers under Section 16(a) of the Exchange Act were filed on a timely basis during 2017,2020, except in the following instances: (1)that for Mr. P. Cody Phipps, theJeffrey Jochims, EVP, Chief Operating Officer & President, Chief Executive Officer and Chairman of the Company, an amendment to a timely filed Form 4 was filed to correct an administrative error in reporting the amount of securities acquired; (2) for Mr. M. Jay Romans, a former executive officer of the Company, an amendment to a timely filed Form 4 was filed to correct an administrative error in reporting the amount of securities acquired; (3) for Ms. Barbara B. HillMedical Distribution, and Mr. Lemuel E. Lewis, directors of the Company,Mark Zacur, EVP, Chief Commercial Officer, Form 4s were inadvertently filed late to report the acquisitionshares surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of phantom stock, derivative securities beneficially owned through the Company’s Directors’ Deferred Compensation Plan.restricted stock.
Stock Ownership by Management and the Board of Directors
The following table shows, as of March 13, 2018,5, 2021, the number of shares of Common Stock beneficially owned by each director and director nominee, the executive officers identified as our “NEOs” in the Summary Compensation Table in this Proxy Statement and all current directors and executive officers of the Company as a group.
Name of Beneficial Owner | Sole Voting and Investment Power (1) | Other (2) | Aggregate Percentage Owned | ||||||||||||
Stuart M. Essig | 27,847 | — | * | ||||||||||||
John W. Gerdelman | 24,190 | — | * | ||||||||||||
Barbara B. Hill | 6,506 | — | * | ||||||||||||
Lemuel E. Lewis | 39,579 | — | * | ||||||||||||
Martha H. Marsh | 16,065 | — | * | ||||||||||||
Mark F. McGettrick | 1,397 | — | * | ||||||||||||
Eddie N. Moore, Jr. | 28,688 | — | * | ||||||||||||
James E. Rogers | 58,991 | — | * | ||||||||||||
David S. Simmons | 14,102 | — | * | ||||||||||||
Robert C. Sledd | 22,901 | — | * | ||||||||||||
Anne Marie Whittemore | 74,316 | — | * | ||||||||||||
P. Cody Phipps | 396,484 | — | * | ||||||||||||
Richard A. Meier | 127,158 | — | * | ||||||||||||
Stuart Morris-Hipkins | 62,061 | ||||||||||||||
Charles C. Colpo | 43,944 | — | * | ||||||||||||
Rony C. Kordahi | 48,160 | — | * | ||||||||||||
All Executive Officers and Directors as a group (21 persons) | 1,274,493 | — | 2.04 | % | |||||||||||
Name of Beneficial Owner | Sole Voting and Investment Power(1) | Other(2) | Aggregate Percentage | ||||||||||||
Aster Angagaw |
| 610 |
| — |
|
| * | ||||||||
Mark A. Beck(3) |
| — |
| — |
|
| * | ||||||||
Gwendolyn M. Bingham |
| 20,755 |
| — |
|
| * | ||||||||
Robert J. Henkel(3) |
| 21,000 |
| — |
|
| * | ||||||||
Stephen W. Klemash |
| 610 |
| — |
|
| * | ||||||||
Mark F. McGettrick(3) |
| — |
| — |
|
| * | ||||||||
Eddie N. Moore, Jr.(3) |
| 61,893 |
| — |
|
| * | ||||||||
Michael C. Riordan |
| 24,609 |
| 20,000 |
|
| * | ||||||||
Robert C. Sledd |
| 91,990 |
| 200,000 |
|
| * | ||||||||
Edward A. Pesicka |
| 1,609,455 |
| — |
| 2.19 | % | ||||||||
Andrew G. Long |
| 120,985 |
| — |
|
| * | ||||||||
Jeffrey T. Jochims |
| 128,436 |
| — |
|
| * | ||||||||
Christopher M. Lowery |
| 339,465 |
| — |
|
| * | ||||||||
All Executive Officers and Directors as a group (18 persons) |
| 3,196,659 |
|
| 4.65 | % | |||||||||
* Represents less than 1% of the total number of shares outstanding.
| * | Represents less than 1% of the total number of shares outstanding. |
(1) No officer or director of the Company has the right to acquire any shares through the exercise of stock options within 60 days following March 13, 2018.
| (1) | No officer or director of the Company has the right to acquire any shares through the exercise of stock options within 60 days following March 5, 2021. There are no outstanding options, warrants or rights as of December 31, 2020. |
| (2) |
|
| (3) | The following directors hold shares in the common stock account of the Directors’ Deferred Compensation Plan: Mr. Beck 40,299 shares; Mr. Henkel 37,035 shares; Mr. McGettrick 107,789 shares; and Mr. Moore 28,814 shares. |
22Owens & Minor, Inc. ● 2021 Proxy Statement
Stock Ownership Information |
Stock Ownership by Certain Shareholders
The following table shows, as of March 13, 2018,5, 2021, any person (including any “group” as that term is used in Section 13(d)(3) of the Exchange Act) who, to our knowledge, was the beneficial owner of more than 5% of theour Common Stock.
Name and Address of Beneficial Owner | Shares Beneficially Owned | Percentage Owned | ||||||||
BlackRock, Inc. 55 East 52nd Street, New York, NY 10055 | 11,385,387 | (1) | 15.49 | % | ||||||
The Vanguard Group 100 Vanguard Blvd., Malvern, PA 19355 | 5,916,724 | (2) | 8.05 | % | ||||||
Dimensional Fund Advisors LP 6300 Bee Cave Road, Building One, Austin, TX 78746 | 4,381,747 | (3) | 5.96 | % | ||||||
| (1) | ||||||||||
Based upon a Schedule 13G report or amendment filed by BlackRock Inc.
| ||||||||||
| (2) | |||||||||
Based upon a Schedule 13G report or amendment filed by Vanguard Group, Inc.
|
| (3) | ||||||||||
Based upon a Schedule 13G report or amendment filed by Dimensional Fund Advisors LP with the SEC on February 16, 2021.
|
(1) Based upon a Schedule 13G report or amendment filed by BlackRock, Inc. with the SEC on January 19, 2018.
(2) Based upon a Schedule 13G report or amendment filed by Vanguard Group, Inc. with the SEC on February 9, 2018.
(3) Based upon a Schedule 13G report or amendment filed by Dimensional Fund Advisers LP with the SEC on February 9, 2018.
Equity Compensation Plan Information
The following table shows, as of December 31, 2017,2020, information with respect to compensation plans under which shares of Common Stock are authorized for issuance.
| Plan Category | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) | (b) Weighted-average exercise price of outstanding options, warrants and rights (1) | (c) Number of securities | (a) Number of securities to be issued upon exercise of outstanding options, warrants and | (b) Weighted-average exercise price of outstanding options, warrants and rights(1) | (c) Number of securities | ||||||||||||||||||||||||
Equity compensation plans approved by shareholders (2) | 360,556 | — | 1,292,281 | 1,309,444 | — | 4,155,959 | ||||||||||||||||||||||||
Equity compensation plans not approved by shareholders (3) | — | — | — | — | — | — | ||||||||||||||||||||||||
Total | 360,556 | — | 1,292,281 | 1,309,444 | — | 4,155,959 | ||||||||||||||||||||||||
(1)
| (1) | There are no outstanding options, warrants or rights as of December 31, 2020. The total in column (a) above relate to performance shares. |
| (2) | These equity compensation plans are the 2018 Stock Incentive Plan adopted and approved by shareholders on May 8, 2018 (as amended May 10, 2019 and May 1, 2020), the 2015 Stock Incentive Plan and the 2005 Stock Incentive Plan. No additional awards may be made under the 2005 Stock Incentive Plan or the 2015 Stock Incentive Plan. |
| (3) | The Company does not have any equity compensation plans that have not been approved by shareholders. |
Owens & Minor, Inc. ● 2021 Proxy Statement23
The Company is both an accelerated filer and a smaller reporting company under the rules promulgated by the SEC, and is providing disclosure regarding executive officer compensation pursuant to the rules applicable to smaller reporting companies. Therefore, the Executive Compensation Overview below is not comparable to the “Compensation Discussion and Analysis” that is required of SEC reporting companies that are not smaller reporting companies.
The following table summarizes for the years ended December 31, 2020 and 2019 as applicable, the total compensation of our named executive officers (“NEOs”), who include our President & Chief Executive Officer, Edward A. Pesicka, and our two other most highly compensated executive officers as of December 31, 2017. 2020, Andrew G. Long, Executive Vice President & Chief Financial Officer, and Christopher M. Lowery, President, Global Products. For enhanced disclosure, we have also included compensation information for Jeffrey T. Jochims, Executive Vice President, Chief Operating Officer & President, Medical Distribution. We have chosen to include Mr. Jochims as an NEO because he has profit and loss responsibility for our medical distribution business.1
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus(1) ($) | Stock ($) | Option ($) | Non-Equity Incentive Plan Compensation(3) ($) | Change in Value and Non-Qualified | All Other Compensation(4) ($) | Total ($) | |||||||||||||||||||||||||||
Edward A. Pesicka President & Chief Executive Officer | | 2020 2019 |
| $
| 912,000 718,385 |
| $
| — — |
| $
| 4,400,000 4,000,004 |
| | — — |
| $
| 2,280,000 760,000 |
| | — — |
| $
| 36,179 92,100 |
| $
| 7,628,179 5,570,489 |
| |||||||||
| ||||||||||||||||||||||||||||||||||||
Andrew G. Long Executive Vice President & Chief Financial Officer | 2020 | $ | 500,000 | $ | 250,000 | $ | 700,000 | — | $ | 800,000 | — | $ | 89,266 | $ | 2,339,266 | |||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
Jeffrey T. Jochims Executive Vice President, Chief Operating Officer & President, Medical Distribution | 2020 | $ | 534,296 | $ | — | $ | 800,000 | — | $ | 872,435 | — | $ | 25,276 | $ | 2,232,007 | |||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
Christopher M. Lowery President Global Products | 2020 | $ | 579,600 | $ | — | $ | 700,000 | — | $ | 927,361 | — | $ | 54,169 | $ | 2,261,130 | |||||||||||||||||||||
| 2019 | 565,323 | — | 700,006 | — | 539,028 | — | 32,763 | 1,837,120 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
| (1) | The amount included as Bonus for Mr. Long reflects a sign-on bonus paid in 2020 following Mr. Long’s start date in 2019. |
| (2) | The amounts included in column (e) are the aggregate grant date fair value of the awards computed in accordance with FASB ASC Topic 718, and column (e) includes awards subject to performance conditions. Of the total awards reflected in column (e) for 2020, the amount specified below for each officer represents awards subject to performance and market conditions, which are valued at the grant date based on probable achievement at target levels: |
Mr. Pesicka, $2,200,000; Mr. Long, $350,000; Mr. Jochims, $400,000, Mr. Lowery $350,000.
The totalgrant date value of the above performance-based awards for 2020 would equal the following for each officer assuming achievement of the highest level of performance conditions:
Mr. Pesicka, $4,400,000; Mr. Long, $700,000; Mr. Jochims, $800,000, Mr. Lowery $700,000.
Assumptions used in the calculation of the stock awards included in column (a) above relate(e) are included in note 12 to performance shares.
(2) These equity compensation plansthe consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which is incorporated herein by reference. The actual value an NEO may receive for stock awards depends on market prices, and there can be no assurance that the amounts shown are the 2015 Stock Incentive Plan adopted and approved by shareholders on April 30, 2015 and the 2005 Stock Incentive Plan. No additional awards mayamounts that will be made under the 2005 Stock Incentive Plan.realized.
(3) The Company does not have any equity compensation plans that have not been approved by shareholders.
| (3) | The amounts included in column (g) reflect cash awards to the NEOs under the Company’s performance-based annual incentive programs. |
| 1 | Mr. Long joined our Company in November 2019 and Mr. Jochims joined us in April 2019. In early 2021, Mr. Jochims assumed the role of President, Medical Distribution, in addition to his other duties as Chief Operating Officer. |
24Owens & Minor, Inc. ● 2021 Proxy Statement
Executive Compensation For 2020, the amounts included in column (i) consist of the following benefits or Company contributions attributable to the following: Tax Return Dividends on Restricted Stock Awards Deferred Company Edward A. Pesicka $ 15,000 $ — $ 1,242 $ 16,387 $ 1,050 $ 2,050 $ 36,179 Andrew G. Long $ 3,500 $ — $ 2,322 $ 13,077 $ — $ 70,367 $ 89,266 Jeffrey T. Jochims $ 3,500 $ — $ 1,242 $ 19,484 $ — $ 1,050 $ 25,276 Christopher M. Lowery $ 645 $ 37,878 $ 2,322 $ 12,052 $ — $ 1,272 $ 54,169 Mr. Long’s Other Compensation includes reimbursed moving expenses. This Executive Compensation The past EXECUTIVE COMPENSATION(4)
Planning/
PreparationLife
Insurance
Premiums
Compensation
Plan and 401(k)
Plan
MatchAnnual
Physical/
Medical
AccessOther(a) Total (a) COMPENSATION DISCUSSION AND ANALYSISExecutive Compensation OverviewDiscussion and Analysis (“CD&A”)Overview describes our executive compensation philosophy and programs, elements of executive compensation, the role of our Compensation & Benefits Committee and its independent consultant, and the compensation decisions made by the Compensation Committee under these programs and the considerations that went into our decisions in lightawards as a result of the Company’s performance in 2017.Our fiscal year 2017 named executive officers (“NEOs”) are: Named Executive Officer TitleP. Cody PhippsChairman, President & Chief Executive OfficerRichard A. MeierExecutive Vice President, Chief Financial Officer & President, InternationalStuart Morris-Hipkins*Executive Vice President, Global Manufacturer ServicesCharles C. Colpo**Senior Vice President, Strategic Supplier ManagementRony C. KordahiExecutive Vice President, North American Operations*Mr. Morris-Hipkins joined the Company effective March 13, 20172020 as its Executive Vice President, Manufacturing Services,they relate to our NEOs — Messrs. Pesicka, Long, Jochims and was promoted to President, Global Solutions on January 3, 2018.**Mr. Colpo became Senior Vice President, Strategic Supplier Management on November 26, 2017, having previously served as Senior Vice President, Europe Operations.Lowery.Executive SummaryReview of 2020 Company Performance & Significant Accomplishments2017 Business Transformation, Performance12-plus months have presented challenges never before seen in our Company’s nearly 140-year history. A deadly, widespread global pandemic put tremendous stress on the entire healthcare industry from product manufacturing to supply chains to healthcare providers on the frontline caring for their patients. Overrun ICUs, quarantining, mounting COVID-19 cases, demand for product in excess of supply, and Compensation Review
2017 was a year of strategic transformation forsupply chain interruptions became the norm. However, Owens & Minor was uniquely positioned to assist in the global response to this unprecedented event, and against this backdrop and in an effort to strengthenincredibly difficult operating environment, our core Domestic distributionCompany consistently delivered for our customers, our teammates, our shareholders and logistics business and to reposition the Companycommunities where we operate.
Delivering for future success as a global healthcare solutions company. Our Customers
At the outset of 2017,the pandemic, Owens & Minor acted swiftly to ensure our customers and front-line healthcare workers received critical personal protective equipment (“PPE”) and other medical supplies necessary to combat COVID-19 and care for their patients. Our teammates responded to the pandemic with relentless focus on serving our customers and delivering on our mission of ‘Empowering Our Customers to Advance Healthcare’, while exemplifying our IDEAL values. Specifically, we:
Significantly increased facial protection PPE production capacity and output at our Americas-based locations to enhance supply available to healthcare providers:
Over 1000% increase in N95 production
Nearly 100% increase in surgical and procedure mask production through new capital investment and improving efficiency of operations
Over 600% increase in face shield production through new capital investment
Added a new dedicated melt blown fabric manufacturing line to ensure end-to-end control of our supply chain, providing self-sufficiency from base material to finished mask to better meet our customers’ needs —unlike other suppliers who rely on supply from Asia
Delivered over 12 billion units of PPE to healthcare workers in the fight against COVID-19, of which approximately 5 billion units were produced with materials manufactured in our American factories or Owens & Minor owned facilities
Partnered with federal and state agencies to strengthen the nation’s response to the pandemic through investment in PPE manufacturing capacity, distribution of PPE to frontline healthcare workers and replenishment of the strategic national stockpile
Owens & Minor, Inc. ● 2021 Proxy Statement25
Executive Compensation |
Improved shipping accuracy of products to customers and maintained average of 99.9% throughout 2020 to ensure our customers received the products they needed
Improved on-time delivery of products to customers and maintained average of 99% throughout 2020 to ensure our customers received products when needed
Maintained close contact with supplier partners and customers to maintain the vital supply chain
Taking Care of Our Teammates
The pandemic has had a profound impact on many of our teammates and their families, yet our more than 18,000 global teammates answered the call and responded to serve our customers. Our teammates worked tirelessly in 2020 as many of our distribution centers and manufacturing facilities operated nearly around the clock in order to meet the needs of our customers.
Our teammates are critical to our success and at the heart of our mission. Top priorities of the Company recognized that its core Domesticin 2020 included keeping our teammates employed and safe and reducing the stress caused by the pandemic however we could. We took the following actions to demonstrate our appreciation of our teammates’ work and the value we place on their commitment:
Ensured safe working conditions in our distribution centers and logistics business was under marginmanufacturing facilities through regular temperature checks, social distancing protocols, and competitive pressuresprovision of gloves, masks and goggles
Increased routine cleaning/sanitizing, as a result of market dynamicswell as enhanced industrial cleaning and vertically integrated competitors bundlingdisinfecting
Enhanced communications, training and subsidizing distribution with product margins. The business was also being impacted by thesupport for our teammates
Enhanced teammate benefits, including covering all costs for de-leveragingCOVID-19 effecttesting, providing free telemedicine and relaxing our attendance policies
Ensured job security in this uncertain time; we did not engage in mass reductions-in-force or furloughs
Held healthcare premiums flat for our teammates for 2021
Made an additional 401(k) contribution to all eligible teammates equal to 2% of the lossteammate’s salary (in addition to our standard Company provided 4.0% match)
Paid mid-year special bonuses to all hourly teammates in consideration of a large customer in 2016.their extraordinary efforts
Allowed teammates to carry-over or cash out much of their paid-time-off balances, rather than lose those balances at year’s end
For our Honduran teammates who suffered through devastating hurricane-caused flooding, we provided additional compensation, clothing, beds and household items to lessen the severity of the impact
Creating Value for our Shareholders
To combat these pressures,In 2020, we significantly improved the Boardfinancial performance of our business, strengthened our balance sheet through deleveraging and executive management resolved to:improved cash flow, and delivered outsized returns for our shareholders. We also established a solid foundation for future profitability. In 2020, our laser-focus and execution produced the following:
Strong earnings performance
Recognizing the competitive pressures in the Domestic segment earnings (which makes up the vast majority of the Company’s revenue and operating earnings), in February 2017 the Compensation Committee approved the Company’s 2017 Annual Incentive Plan (“2017 AIP”) for our NEOs that would:
Reduce potential payouts compared to fiscal 2016 for performance at or below the Board-approved annual operating plan (“AOP”) such that reaching 100% of 2017 AOP target would result in 75% AIP performance; and
Further incentivize AOP outperformance with steeper leverage for potential payouts above target (as further discussed on page 43).”
2017 Financial and Operational Performance
In 2017, the Company made significant progress on each of the three items above to advance the Company’s business transformation:
Record Adjusted Operating Income (“AOI”) of $283.4 million as compared to | ||
The Company completed its acquisitionRecord Adjusted Earnings Per Share (“EPS”) of Byram Healthcare, the second largest U.S. home health distributor, on August 1, 2017, advancing its strategy$2.26 as compared to expand along the continuuma 2020 goal of care;$0.50 per share and representing an over 260% increase from 2019
On November 1, 2017, the Company announced its pending $710 million acquisitionYear-over-year gross margin expansion of Halyard Health’s Surgical & Infection Protection (“S&IP”) business (anticipated to close early in the second quarter285 basis points and AOI margin expansion of 2018). The Company expects this acquisition to provide the Company with market-leading brands in certain product categories, the ability to have owned-brand products in excess of 10% of sales, and a scalable global manufacturing platform to leverage for future growth.173 basis points
2017 Compensation Decisions
The Compensation Committee took the following significant compensation actions in 2017:
No NEO salaries were increased for 2017;
The 2017 AIP for our NEOs was designed so that NEOs would only earn 75% of target bonus opportunities for performance at the 100% level of the Board-approved AOP; and
Long-term incentives provided an additional opportunity that would only be earned if Company performance in 2019 returns to previously stated adjusted earnings per share growth goals.
In 2017, the Company and the NEOs successfully performed against a portion of the Company’s objectives, making significant progress on its business transformation while not meeting the target performance of adjusted operating earnings. The Company achieved annual GAAP earnings of $1.20 per share and adjusted earnings of $1.61 per share for 2017, with consolidated operating earnings of $89.3 million and adjusted consolidated operating earnings of $180 million. For the purposes of determining financial performance for the 2017 AIP, adjusted operating earnings was $166 million which was below the 2017 AOP target of $204 million but above threshold of $163.2 million.1.
We believe our 2017 compensation results are consistent with our 2017 operating performance and that the incentive awards earned by our executive officers reflected our performance and the performance of our NEOs in 2017.
2017 adjusted operating earnings performance resulted in NEOs earning a 37% of target payout for the financial component of the 2017 AIP (weighted 80% of the overall plan); and
The Compensation Committee exercised negative discretion on the individual Qualitative Performance Factor (“QPF”) component of the 2017 AIP (weighted 20% of the overall plan) for Messrs. Phipps, Meier, Colpo and Kordahi for failure to meet certain financial and operational goals (as further described on page 46).
Summary of 2017 Compensation Actions and Performance Pay Results
Our 2017 Annual Incentive Program (AIP) was structured as follows:
Adjusted (non-GAAP) earnings from continuing operations, or AOI, and other non-GAAP financial measures included in this Proxy Statement and a reconciliation to |
26Owens & Minor, Inc. ● 2021 Proxy Statement
Executive Compensation Renegotiated our credit agreement to provide greater financial flexibility Completed an over-subscribed equity offering and used proceeds to reduce debt Operating cash flow more than doubled in 2020 to $339 million when compared to 2019 Shareholder Return Owens & Minor stock price increased over 424% in 2020 from Ranked #1 performer in the S&P Small Cap 600 Index for 2020 Foundation for Future Profitability In conjunction with our Board of Continued to re-invest in the business across technology, infrastructure and services Expanded PPE manufacturing capacity to address future needs of our customers Maintained our industry leading customer service levels Invested in and continued to drive growth in our home healthcare direct to patient business in response to population health trends Reconfirmed our status as valuable partner to our customers, including government agencies, and an integral part of the global PPE and medical/surgical supply chain Divested non-core assets, Movianto and Fusion5 Enriching our Communities Owens & Minor teammates are active members of the communities where we operate. In 2020, in light of our successful financial performance, we enhanced our financial giving to organizations focused on health & wellness, education and civic/community matters. In addition to the charitable activities described on pages 8-9 we also assisted many of our local communities through COVID-19 by providing PPE and volunteering our time and efforts. 2020 was, by nearly every measure, a successful year for Owens & Minor in an incredibly challenging environment. Under the leadership of our 2017 Annual Incentive ResultsAdjusted Operating Earnings was $166 million, equating to 37% attainment of the Annual Operating Earnings goal under the 2017 AIP for our NEOs.Strong Balance Sheet and Improved Cash FlowQualitative Performance Factor results varied for individual NEOs based on performance againstpre-determined goals. After its review of each individual NEO’s performance, the Compensation Committee exercised negative discretion with respect to Messrs. Phipps, Meier, Colpo and Kordahi for failure to meet certain financial and operational goals (as discussed on page 46).Total debt reduced by $534 million or 34% reduction in total debt during 20202017 AIP payouts rangedSubstantial reduction in interest expense of 15% for the full year33%$5.16 to 37%$27.05targetDirectors, developed a three-year strategic planNEOs.
Our 2017 Long-Term Incentive (LTI) program was structuredNEOs and the broader Owens & Minor executive team, the Company successfully delivered on numerous fronts for its constituents in 2020. The Company far exceeded its financial goals and, as follows:
Results for 2016 Performance Share Grant (FY 2016 and FY 2017 performance period):Review of 2020 Compensation Plan Design & Key Decisions
The Compensation Committee took the following noteworthy actions:
The Company did not achieveCommittee structured our annual cash incentive plan (“AIP”) to be heavily weighted on financial performance for our NEOs, including our President & Chief Executive Officer whose 2020 cash incentive compensation was determined 70% by the Company’s financial performance against its LTIAOI from continuing operations goals and therefore there was no payout on 2016-2017 LTI and all performance shares related thereto did not vest and were forfeited.30% against MBOs.
Return on Invested Capital (ROIC) was less than 9% against a goalThe Committee chose AOI as the financial metric for Company performance for the 2020 AIP because it believes AOI is one of 10% (and thresholdthe most relevant measure of 9%).the financial and operational performance of the Company.
Adjusted Diluted Earnings per ShareThe Committee developed MBOs for our NEOs, including our President & Chief Executive Officer, focused on profit improvement, revenue performance, operational excellence and service expansion, and developing, retaining and attracting top talent based on the Committee’s determination that these objectives would drive 2020 performance and establish a strong foundation for future profitability.
Owens & Minor, Inc. ● 2021 Proxy Statement27
Executive Compensation |
The Committee granted long-term equity incentive awards comprised 50% of restricted stock that vests over three years and 50% performance shares that are earned, if at all, based on the Company’s adjusted EPS performance over the two year period 2020-2021 and then subject to a one-year time based vesting period.
When setting 2020 total target compensation for our NEOs, the Committee determined to hold NEO base salaries constant, unless an adjustment was $1.49 against a targetnecessary to recognize additional responsibilities, and to put more emphasis on annual incentive compensation to drive and incentivize performance. Accordingly, the Committee increased AIP targets for Messrs. Long, Jochims and Lowery from 75% of $2.12 (and thresholdbase salary to 80%, and approved an annual salary increase to Mr. Jochims of $1.90).7% to recognize the additional duties he had undertaken in his role as Chief Operating Officer, including overseeing the Company’s information technology, corporate development and communications departments.
Transformational Performance-Based Retention Equity Award
WhileFollowing the end of 2020, the Compensation Committee lowereddetermined that the 2017 AIP target bonus opportunity for achieving target AOP performance,consolidated AOI was $283.4 million, or greater than 200% achievement, as compared to the Company’s AOI goal of $139.6 million.
Following the end of 2020, the Compensation Committee wanted to ensuredetermined that executives remain focusedeach of Messrs. Pesicka, Long, Jochims and Lowery had earned annual bonuses at 200% of target. The Compensation Committee based this determination on translating the near-term investments and cost reductions into building a stronger Company long-term and delivering on the goals ofboth the Company’s strategic transformation. Therefore,superior financial and operational performance in 2020 and the Committee approved an additional performance-based LTI opportunity designedoutstanding performance of our NEOs with respect to deliver the Company’s transformational agenda and earnings goals through 2019. The value of the award at the time of grant equaledone-half of the recipient’s annual LTI award value. These awards caused a modest increase in the total compensation for Messrs. Phipps, Meier and Colpo for 2017their MBOs as compared to 2016 as set forth in the Summary Compensation Table on page 54. These awards, which are more fully described on page 48, are entirely performance-basedbelow.
Following the end of 2020, the Compensation Committee determined that the respective performance metrics for performance shares granted to Mr. Lowery upon his joining the Company in 2018 and require stretch financial performance overto Messrs. Pesicka and Lowery in 2019 as part of their annual incentive awards had been earned at a multi-year period in orderlevel that would equate to vest.200% performance.
Owens & Minor’sOur Executive Compensation Philosophy and Goals
The fundamental principle underlying Owens & Minor’sour executive compensation program is that we pay for sustained performance, profitable growth and achievement of results. Our goal is to encourage highWe reward for Company
and individual performance within a framework that allows us to attract, retain and motivate our executives. Components ofWe designed our executive compensation program are designedprograms to create the appropriate balance between short- and long-term incentives and between fixed andat-risk incentive compensation, to weigh cost against expected benefit and to align with the creation of shareholder value while providing market-competitive compensation packages that promote executive retention. These components include:
Reasonable but market-competitive base salaries to attract and retain executives;
Annual cash incentives to drive critical business goals forresults each year.year;
Restricted stock and performance share grantsLong-term incentive equity awards to retain management and focus executives on longer-term financial performance and execution of our operational and strategic plans.
Reasonable but market-competitive base salaries so executives are not motivated to take excessive risks.plans; and
Retirement, severance and other benefits to attract executive talent and encourage retention.
Risks of Compensation Program and Practices
With respect to our overall compensation programs,We believe the Company periodically reviews our compensation policies and practices to ensure that they do not create risks that are reasonably likely to have a material adverse effect on the Company or encourage inappropriate risk-takingactions taken by executives. Additionally, the Compensation Committee in 2020 and its independent Compensation Consultant, Semler Brossy Consulting Group, LLC (“Semler Brossy”) consider risks when designing new executive compensation programs, and Semler Brossy periodically provides an external reviewoutcomes of the 2020 incentive programs and features of our programs and corporate governance policies that help mitigate risk. In October 2017, management engaged in a formal compensation risk review and assessment processwere in-line with input from Semler Brossy. Based on this review and assessments, we believe that our compensation programs do not create risks that are reasonably likely to have a material adverse effect on the Company or encourage our executives to take excessive or inappropriate risks for our business. Our compensation philosophy and practices continue to evolve into a more market-driven pay structure with a lower percentage of fixed pay and a higher percentage of variable and performance-based pay in order to enhance the program’s pay for performance orientation. Further discussion and disclosure of the Company’s compensation policiesphilosophy. Further, we believe the 2020 pay results illustrate and practices are includedemphasize the strong link between actual pay and the results of our Company. In 2020, the Company’s financial performance far exceeded its AOI goals delivering results in excess of 100% of goal. Additionally, the pages following this Executive Summary.NEOs successfully outperformed all of their MBOs (discussed below) and led the Company to significant financial and operational accomplishments through the difficult operating environment created by the COVID-19 pandemic. As a result, the Compensation Committee approved annual bonuses at 200% of target for our NEOs.
28Owens & Minor, Inc. ● 2021 Proxy Statement
Executive Compensation |
Our Executive Compensation Governance Practices
OurWe design our compensation programs and practices are designed to align with our compensation philosophy, meet compensation best practicespractice standards and to drive performance that creates long-term shareholder value.
WHAT WE DO
WHAT WE DO | ||||
| Pay for Performance. We link pay to performance and a significant portion of our executives’ potential total annual compensation, both cash and equity, is | |||
| Performance-Based Equity Awards. At least half of our annual equity award grants are performance shares with multi-year performance requirements and an additional year of vesting on earned shares. | |||
| Share Ownership Guidelines. We have established stock ownership guidelines for our officers, and all of our NEOs meet or exceed the established ownership guidelines | |||
| Limited Perquisites. We tie perquisites to a legitimate business purpose and limit the value provided to executive officers. | |||
| Double-Triggered Change in Control Provisions. Equity vesting and severance | |||
| Recoupment Policy. We | |||
| Risk Mitigation. We | |||
| Independent Compensation Consulting Firm. The Compensation Committee receives advice about its compensation programs and practices from an independent consulting firm that provides no other services to the Company, and the Company is not aware of any conflicts of interest with respect to its work. | |||
WHAT WE DON’T DO
WHAT WE DON’T DO | ||||
| No Employment Agreements. | |||
| No Hedging. We prohibit our executive officers and directors from hedging against the economic ownership of Company stock. | |||
| No Pledging. We prohibit our executive officers from pledging Company stock. | |||
| NoRe-pricing of Equity Awards. Our stock plans do not permit there-pricing of equity | |||
| No TaxGross-Ups. We do not provide | |||
Say-On-Pay Vote Vote
In May 2017,2020, our shareholders approved the compensation of our NEOs for 20162019 in oursay-on-pay advisory advisory vote with over 94%92% of votes cast in support of the program. Based on this support, the Compensation Committee made no material changes to the core structure and philosophy behind our executive compensation program in 20172020 but continues to evaluate our paycompensation programs and practices to ensure that they are both market competitive and equitable.drive performance. At our upcoming 20182021 Annual Meeting, our shareholders will provide an advisory vote to approve 20172020 executive compensation, and the Compensation Committee will continue to consider results from these advisory votes in setting executive compensation.
TheOur Process for Setting 2020 Executive Compensation
Role of the Compensation Committee.The Compensation Committee establishes, approves and administers the Company’s executive compensation levels and programs are established, approved and administered by the Compensation Committee, which is currently composed of five independent directors.programs. The Compensation Committee solicits the views of its independent outside consulting firmconsultant and senior management on incentive compensation and plan design issues.design. In addition, the Compensation Committee sets performance goals and evaluates the performance of our Chief Executive Officer on an annual basis jointly with theour Governance & Nominating Committee, and theCommittee. Our Chief Executive Officer setsrecommends to the Compensation Committee for its
Owens & Minor, Inc. ● 2021 Proxy Statement29
Executive Compensation |
approval the compensation levels, performance goals and provides performance evaluations of our other executive officers and makes recommendations asthe Compensation Committee recommends the compensation of our Chief Executive Officer and other officers to their compensation levels.the independent directors for Board approval. Our Chief Executive Officer does not make recommendations to the Compensation Committee with respect to his compensation and does not participate in Committee meetings when the Committee reviews his compensation is discussed.compensation.
Role of the Independent Advisor.Compensation Consultant. The Compensation Committee has the authority under its charter to retain independent consultants or advisors to assist it in gathering information and making decisions. Management may not engage any independent advisor retained byIn 2020, the Compensation Committee to perform services without the prior approval of the committee, and no such engagement by management was undertaken in 2017. The Compensation Committee also obtains information and assistance from the Company’s human resources and finance department in evaluating and making decisions on executive compensation.
The Compensation Committee continued to engageengaged Semler Brossy in 2017 as its independent advisorconsultant to, among other things, (1) provide recommendations in changes to our peer group; (2) provide guidance and advice in our search for new executive officers and the compensation package offered to those new leaders; (3) analyze competitive levels of each element of compensation and total compensation for each of the executive officers relative to our peer group and industry trends; (4)(2) provide information regarding executive compensation trends and regulatory changes and developments; (5)and (3) provide input on annual and long-term incentive design; and (6) periodically assist in conducting a risk assessment of our compensation programs, policies and practices.design. The Compensation Committee has analyzed whether the work of Semler Brossy has raised any conflict of interest and has concluded that the work of our advisor, including the individuals employed by our advisor who provide consulting services to the committee,Committee, has not created any conflict of interest. The Compensation Committee also considered and confirmed the independence of legal advisors retained by the Compensation Committee during 2017.2020.
Factors UsedWe Use to Determine Executive Compensation. Consistent with past years, theCompensation. The Compensation Committee considered a variety of factors in making decisions regarding compensation targets for our NEOs in 2017. The primary factors were as follows:2020, including:
PerformancePerformance-Based Compensation.. Our policy is to provide executive officers with compensation opportunities that are based upon Company performance and their contribution to Company performance.
Mix We base a significant portion of Short-Term and Long-Term Compensation. Because the successful operation of our business requires a long-term approach, one element of our executive compensation program is long-term compensation. Although we have never had specific policies on the percentage of total compensation that should be short-term versus long-term, we considered this relationship in determining the overall balance and reasonableness of our
executives’ total direct compensation packages. We believe that short-term compensation is necessary in conjunction with long-term compensation to provide remuneration for performance of the short-term goals or milestones that ultimately lead to achievement of our long-term objectives and strategic initiatives. In 2017, the Compensation Committee gave additional considerationobjective financial measures in order to the Company’s transformational and strategic acquisition activities and the importance of incentivizing and retaining key leaders to deliver upon these long-term goals.
Mix of Performance-Based Compensation. To create a strong link between pay and performance, a significant portion of compensation is based on the achievement of objective financial measures.performance. We have no specific policies on the percentage of total compensation that should be “performance-based,” but consider this relationship in determining the overall balance and reasonableness of the executives’ total direct compensation packages. In 2020, our President & Chief Executive Officer’s total target compensation was 52% performance-based and 48% fixed, and our other NEOs’ total target compensation was 50% performance-based and 50% fixed.
ImpactShort-Term vs. Long-Term Compensation. Because the successful operation of our business requires a long-term approach, one significant element of our executive compensation program is long-term incentive compensation. We considered the relationship of short-term to long-term compensation in determining the overall balance and Mixreasonableness of our executives’ total direct compensation packages. We believe that short-term compensation is necessary in conjunction with long-term compensation to provide remuneration for performance of short-term goals that ultimately lead to achievement of our long-term objectives and strategic initiatives. In 2020, our President & Chief Executive Officer’s total target compensation was 68% long-term and 32% short-term and our other NEOs’ total target compensation was 40% long-term and 60% short-term.
Cash vs.Non-Cash CompensationCompensation.. We consider both the cost and the motivational value of the various components of compensation. Although we have no specific policies onWe consider the percentagerelationship of totalcash to equity compensation that should be “cash versus equity,” we consider this relationship in determining the overall balance and reasonableness of the executives’ total direct compensation packages.packages and the alignment that equity compensation can have with the creation of shareholder value. In 2020, our President & Chief Executive Officer’s total cash and non-cash compensation components were 32% and 68% of total target compensation, respectively and our other NEOs’ total cash and non-cash components were 60% and 40% of total target compensation, respectively.
30Owens & Minor, Inc. ● 2021 Proxy Statement
Executive Compensation |
Taking into account the above factors, our Chief Executive Officer and other NEOs had the following proportionate mix of performance-based opportunities, short vs. long-term compensation and cash vs. non-cash compensation target opportunities in 2020:
 |  |
We believe our proportionate mix of compensation opportunities is appropriate in that we provide a greater relative percentage of incentive-based compensation tied to financial performance and long-term compensation to the CEO versus other NEOs because the CEO is in a position to more directly impact financial results and creation of long-term shareholder value.
Peer Group ComparisonsComparisons.. Each year, we evaluate our compensation levels and programs through comparisons to available information for a group of peer companies selected by the Compensation Committee (“Peer Companies”) based in part on recommendations from and analyses prepared by our compensation advisors.the Compensation Committee’s independent consultant. This evaluation helps us to assess whether our level and mix of executive pay is competitive and reasonable when compared to certain industry standards.
In general, the Peer Companies were selectedwe select peer companies after consideration of one or more of the following factors:
Quantitative Factors:revenue, net income, total assets, and/or market capitalization
Qualitative Factors:business model (health care services and products, health care distribution and companies from other distribution industries) and geographygeographic scale
Owens & Minor, Inc. ● 2021 Proxy Statement31
Our Peer Companies include a mix of health care distribution and companies from other distribution industries in order to capture companies of comparable business model and size to us.
Executive Compensation |
The Compensation Committee periodically reviews the peer group to ensure it remains appropriate and relevant as a market reference and modifies the peer group as necessary to reflect changes at Owens & Minor,the Company, among the peers or within the industry. Relative to the Quantitative Factors of the Peer Companies, Owens & Minor generally ranks between the 25th percentile and median of the group. The Peer Companiespeer companies we used for 2017 consisted of the following:in 2020 were:
| ||||
| Medical Products & Distribution | $8.480 billion | ||
Peer Company Name | Business/GICS Sub-Industry | 2020 Revenues | ||
C.H. Robinson Worldwide, Inc. | Air freight logistics | $16.207 billion | ||
| Health Care Suppliers | $3.342 billion | ||
Genuine Parts Company | Distributors | $16.537 billion | ||
Henry Schein, Inc. | Health Care Distributors | $10.119 billion | ||
| Health Care Equipment | $2.881 billion | ||
Patterson Companies, Inc. | Health Care Distributors | $5.490 billion | ||
Premier, Inc. | Health Care Services | $1.300 billion | ||
ResMed, Inc. | Health Care Equipment | $2.957 billion | ||
STERIS Plc | Health Care Equipment | $3.031 billion | ||
SYNNEX Corporation | Technology Distributors | $24.676 billion | ||
The Cooper Companies, Inc. | Health Care Supplies | $2.431 billion | ||
United Natural Foods, Inc. | Food Distributors | $26.514 billion | ||
Univar Solutions, Inc. | Trading Companies and Distributors | $8.265 billion | ||
WestRock Co. | Paper Packaging | $17.579 billion | ||
Using the Peer Companies, Semler Brossy analyzed the compensation components and levels for the NEOs of the Peer Companies and prepared a comparison of 2017 target total direct compensation and each element thereof to reported information for the Peer Companies. The Compensation Committee also considered data from
a Towers Watson General Industry survey, using a survey cut incorporating a discount to Owens & Minor’s revenue in light of thelow-margin nature of the Company’s business relative to general industry companies. When the Compensation Committee reviews data from the Peer Companies, it considers the 50th percentile of the group as a reference point for positioning target total compensation. This is a reference point, not a policy, and actual compensation may be above or below the target level based on performance. Data from the Peer Companies is one of a number of factors considered by the Compensation Committee when determining each executive’s pay. Other factors considered during this process include, but are not limited to, the executive’s performance, internal equity of pay, general market competitiveness and whether or not the executive participates in thenow-frozen Company SERP program.
Tally SheetsSheets.. We also To review total compensation levels for executive officers, at least annually through the use ofCompensation Committee reviews tally sheets that quantify each element of direct and indirect compensation provided to individual executives and the portion of the executive’s total compensation represented by each element of compensation. This annual review of tally sheets also includes information on the value of executives’ outstanding equity awards, as well as an evaluation of the payments and benefits that would be paid to executive officers in the event of termination of employment, including retirement or following a change in control of the Company. While providing additional context to us in making compensation decisions, the information from the tally sheets regarding outstanding equity awards and termination payments and benefits generally does not affect our compensation decisions for the NEOs. This reflects our view that an executive’s compensation level should be based on the Company’s performance, the executive’s performance and the executive’s contribution to the Company’s performance.
Total Program CostCost.. We consider the cost (including aggregate share usage and dilution) of the various components of our compensation program in evaluating the overall balance and reasonableness of our executives’ total direct compensation packages.
Risk ConsiderationsConsiderations.. In setting executive compensation, the Compensation Committee reviewsstructures the various components of our program to consider whether they are appropriately structured to promote the achievement of our business goals without encouraging the taking of unnecessary risks. We believe that several elements of our program mitigate risks associated with performance-based compensation, including the following:
Limits on Incentive Compensation. We cap our annual incentive program awards at 200% of the executive’s target award to protect against excessive short-term incentives, and the Compensation Committee has discretion to reduce awards based on factors it deems appropriate, including whether officers took unnecessary risks. Performance Metrics.We use financial performance metrics for our AIP that emphasize profitable and disciplined growth and require responsible and risk-based decision-making by our executives. We also use operational metrics and specific MBOs to reward executives for appropriate decision-making and accomplishment of non-financial goals. Performance Shares/Long-Term Equity Awards. At least half of an executive’s annual equity compensation consists of performance shares with a multi-year performance cycle and an additional year of service-based vesting, which focuses management on sustaining the Company’s long-term performance. The other portion of an executive’s annual equity compensation consists of restricted stock awards that vest over a period of three years and, accordingly, further encourages a focus on long-term performance. Share Ownership Guidelines. Our share ownership guidelines ensure that our executives have a substantial stake tied to long-term holdings in Owens & Minor stock. 32Owens & Minor, Inc. ● 2021 Proxy Statement
Recoupment Policy. Performance-based cash and equity compensation to our executive officers is subject to recoupment under circumstances involving misconduct that result in a restatement of our financial statements.
Owens & Minor, Inc. ● 2021 Proxy Statement33
In 2020, our executive compensation
A number of key 2020 compensation-related decisions resulted from our achievements as described in this overview. The following section describes actual compensation received by 2020 Base Salaries Our executive officers
decisions: (1) (2) (3) (4) In
34Owens & Minor, Inc. ● 2021 Proxy Statement
Annual Performance-Based Cash Incentives We provide annual performance-based cash incentive opportunities to executive officers to motivate their performance in achieving our current-year business and financial goals. Each year
2020 Company For 2020, the
metric on which our NEOs’ 2020 annual incentive compensation would be primarily based. The Compensation Committee selected
is a common metric to all of our business units,
is widely understood by our teammates and is the internal metric of greatest focus,
is one of the most important underlying drivers of business performance and other financial metrics (such as revenue, adjusted
is aligned with creating shareholder value as sustained
is aligned with our investor communications and the area of focus of our investor
is in part driven by our performance
2019 full-year AOI performance; 2019 fourth quarter AOI performance and the trajectory of the Company’s business at that time; infrastructure, technology, and services investments planned for lost income associated with the pending divestiture of the Company’s Movianto business that interest expense impact in 2020 related to financing activity that occurred in 2019; Owens & Minor, Inc. ● 2021 Proxy Statement35
past customer non-renewals that would impact 2020 full-year financial performance the Company’s The Committee approved the 2020 AOI goals and
2020 NEO MBOs and Performance The Compensation Committee structured our 2020 AIP to include MBOs as performance metrics that allow a significant portion (30-40%) of any incentive compensation earned by the NEOs to be based on an assessment of the The NEOs’ material individual 2020 MBOs and respective performance in 2020 are set forth in the table below. Taking into account the performance of our NEOs against their specific MBOs, the Compensation Committee 36Owens & Minor, Inc. ● 2021 Proxy Statement
Owens & Minor, Inc. ● 2021 Proxy Statement37
Andrew G. Long, Executive Vice President & Chief Financial Officer
38Owens & Minor, Inc. ● 2021 Proxy Statement
Jeffrey T. Jochims, Executive Vice President, Chief Operating Officer & President, Medical Distribution
Christopher M. Lowery, President, Global Products
Owens & Minor, Inc. ● 2021 Proxy Statement39
In early 2021, taking into account the Company’s
Long-Term Incentives Our Our 2018 Stock Incentive Plan, as amended, permits us to award grants ofnon-qualified stock options, incentive stock options, stock awards, performance share awards, stock units and stock appreciation rights. Except in instances of initial executive hiring, We generally make annual equity award grants to
Our 2020 Awards The Company granted 2020 performance share awards to our executives that can be earned in an amount ranging from 0% to 200% of the number of awarded shares
40Owens & Minor, Inc. ● 2021 Proxy Statement
January 1, 2020 through December 31, Based on the foregoing considerations, in 2020 the Compensation Committee granted to the
Following the end of 2020, the Compensation Committee determined that the Company’s two-year average ROIC was 8.7% equating to a maximum award of performance shares. The Compensation Committee also determined that the Company’s relative TSR was greater than the 75th percentile compared to companies in the SPDR S&P Health Care Services Exchange Traded Fund and SPDR S&P Health Care Equipment Exchange Traded Fund. However, because the earned performance shares were at the maximum level of 200% based on ROIC performance, the shares were not adjusted upward for the strong TSR performance. The earned performance shares are subject to an additional one-year vesting period. The 2019 performance share award two-year average ROIC targets and actual performance were as follows:
Sign-on Performance Share Awards The Company granted performance share awards, in Owens & Minor, Inc. ● 2021 Proxy Statement41
December 31, 2020 for the second award tranche. The purpose of the award was to drive synergies and financial performance Common Stock Ownership We have established Common Stock ownership guidelines for our executive officers that are expected to be achieved and maintained. Under these guidelines, officers The ownership guidelines are as follows:
The Chief Executive Officer’s higher ownership target reflects the larger portion of his total compensation represented by long-term incentive award value. Eligible holdings in meeting these targets include direct holdings, indirect holdings, shares held through Company plans such as the teammate stock purchase plan, and restricted stock holdings (but excluding any stock options). Using the closing price of our stock on December 31, 2020 of $27.05, our NEOs actual stock ownership levels were 19.4x, 4.8x, 4.8x and 9.0x of base salary for Messrs. Pesicka, Long, Jochims and Lowery, respectively.
Outstanding Equity Awards at Fiscal Year-End Table The following table summarizes for each NEO information regarding unexercised stock options, unvested restricted stock awards and incentive plan awards outstanding as of
Owens & Minor, Inc. ● 2021 Proxy Statement43
Other Benefits In addition to the components of compensation discussed above, we provide certain other limited benefits to executives to help maximize the time key executives are able to spend on the Company’s business and to ensure that our executive compensation program remains competitive in the marketplace for key executive talent. These other benefits consist of the following and are specifically disclosed by amount in footnote (3) to the Summary Compensation Table on page 24 of this Proxy Statement: funding of life insurance policy premiums, tax and financial planning and tax return preparation assistance, and an annual physical and access to a concierge medical practice. In addition, NEOs may participate in our health and welfare plans and teammate stock purchase plan on the same basis as other full-time teammates. We do not provide tax gross-ups on any income executives may realize as a result of the foregoing benefits. Our Board of Directors has determined that it is in the best interests of the Company to encourage the use of our corporate aircraft for the personal travel of our President & Chief Executive Officer because it increases his time available for business purposes and enhances his safety and security, especially during the COVID-19 pandemic. Beginning in March 2021, our President & Chief Executive Officer has personal travel allowance of up to 40 hours on our corporate aircraft. He will not receive tax reimbursement for any imputed income associated with personal travel. Change in Control Agreements The Company has entered into change in control agreements (“CIC Agreements”) with its The CIC Agreements do not provide for excise taxgross-up payments. In addition, the severance payment obligation under the CIC Agreements has a “double trigger” such that the payment of a severance benefit may only be made if there is a qualifying change of control and the Termination of employment by the A change in control is generally deemed to
44Owens & Minor, Inc. ● 2021 Proxy Statement
The CIC Agreements provide the following benefits to our NEOs4:
The CIC Agreements provide that the In consideration for any benefits paid, the change in control agreements impose certain non-competition and non-solicitation restrictive covenants on the officers for a period of 12 months following employment termination and prohibit the Equity awards have the same “double-trigger” feature discussed above for accelerated vesting and exercisability, as applicable, in the event of a change in control. These same terms apply to the equity awards of all other teammates in the Company upon a change in control.
Owens & Minor, Inc. ● 2021 Proxy Statement45
The severance policy does not address the disposition of outstanding stock awards upon involuntary termination without cause. That is Potential Payments Upon Termination or Change in Control The following table reflects the estimated potential compensation payable to
46Owens & Minor, Inc. ● 2021 Proxy Statement
Executive Compensation The amounts shown in the table do not include accrued salary and vacation payable through the date of the executive’s employment termination or the distribution of any balances under the Executive Deferred Compensation Plan or the Company’s 401(k) Plan. See the discussion of the Company’s severance policy below for information on benefits payable to the NEOs upon involuntary termination without cause. See the discussion of the Company’s CIC Agreements on page 44 for information on benefits payable to the NEOs upon a change in control. A termination of employment due to death or disability entitles the NEOs to benefits under the Company’s life insurance or disability plan, as applicable, available to salaried teammates generally. In addition and also as applicable to salaried teammates generally who receive grants of stock options and restricted stock, upon termination of employment due to death, all stock options and shares of restricted stock immediately vest; and, upon termination of employment due to disability, unvested stock options are forfeited and shares of restricted stock vest on a pro rata basis. In addition, upon death, officers are entitled to receive performance shares that are actually earned based on achievement of performance conditions and, upon disability, a pro rata portion of any such shares earned relative to time worked during the performance period. The amounts in this column represent the estimated benefit to the NEO due to accelerated vesting of equity awards and are calculated based on the number of shares subject to accelerated vesting multiplied by $27.05, the closing price of the Company’s Common Stock on December 31, 2020. Any performance shares that vest are valued based upon assumed performance at the target level. If executive would be better off on an after-tax basis, the parachute payment will be reduced to a level equal to the 280G safe harbor per the provisions of each executive’s change in control agreement. Recoupment Policy In an effort to mitigate any imprudent risk-taking behavior associated with incentive compensation, the Company has a policy that permits the recoupment of performance-based cash and equity compensation paid to executive officers. This compensation is recoverable from an executive officer if: The payment or award was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement of the Company’s financial statements; The Board (or its designated Compensation Committee) determines that the executive engaged in misconduct that caused or substantially caused the need for the restatement; and A lower payment would have been made to the executive officer based upon the restated financial results. If the foregoing conditions are met, as determined by the Board (or its designated committee), the Company, under terms of the applicable program or award agreements, will recover from the executive officer the amount by which his or her performance-based compensation for the relevant period exceeded the amount (if any) that would have been paid based on the restated financial results. The Board (or its designated committee) may take such further action as it deems necessary or appropriate to remedy the misconduct and prevent its recurrence. The recoupment policy currently will not apply to performance-based compensation after the second anniversary of the date on which such compensation was paid. We continue to monitor additional requirements that may be imposed pursuant to Section 304 under the Sarbanes-Oxley Act of 2002 and that would lead to modification of this policy to the extent required by the Dodd-Frank Act of 2010 and the related final rules of the SEC. Hedging, Pledging and Derivatives Trading Prohibition The Company has policies that prohibit directors, officers and other teammates with access to confidential information of the Company from engaging in certain transactions relating to our common stock, including buying or selling options and short sales. We also prohibit these individuals from hedging the economic risk of ownership of our common stock and holding our stock in a margin account or pledging our stock as collateral for a loan. Tax Considerations Section 162(m) of the Internal Revenue Code generally precludes a tax deduction by any publicly-held company for compensation paid to any “covered employee” to the extent the compensation paid to such covered employee exceeds $1 million during any taxable year of the company. Owens & Minor, Inc. ● 2021 Proxy Statement47
compensation is required to be reported to the shareholders of the company by reason of being among the three highest paid officers of the 48
In accordance with Section 14A of the Exchange Act, shareholders have the opportunity to cast an advisory vote to approve the compensation of our NEOs as disclosed in this
Accordingly, the Board of Directors recommends that shareholders vote in favor of the following resolution: “RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in the Proxy Statement for the The Board of Directors recommends a vote FOR the foregoing resolution approving, on an advisory basis, the compensation of our named executive officers as disclosed in this Owens & Minor, Inc. ● 2021 Proxy Statement49
In accordance with the Audit Committee charter, the Audit Committee shall review and discuss with management and the independent auditor any transactions or courses of dealing with parties related to the Company which transactions are significant in size or involve terms that differ from those that would likely be negotiated with independent parties and which are relevant to an understanding of the Company’s financial statements. The Audit Committee charter further provides that the Audit Committee shall review and approve all transactions between the Company and any related person that are required to be disclosed pursuant to Regulation S-K Item 404. The Company has not
Under regulations of the SEC, any shareholder desiring to make a proposal to be acted upon at the Our Bylaws provide that a shareholder of the Company entitled to vote for the election of directors may nominate persons for election as directors only at an
the name and address of record of the shareholder intending to make the nomination, the beneficial owner, if any, on whose behalf the nomination is made and of the person or persons to be nominated;
a representation that such shareholder is a shareholder of record and intends to appear in person or by proxy at such meeting to nominate the director candidate;
the class and number of shares of Common Stock that are owned by such shareholder and such beneficial owners;
a description of all arrangements, understandings or relationships between such shareholder and each director nominee and any other person(s) (naming such person(s)) pursuant to which the nomination is to be made by such shareholder;
a description (including the names of any counterparties) of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, hedging transactions and borrowed or loaned shares) that has been entered into as of the date of the shareholder’s notice by, or on behalf of, the shareholder and any other person on whose behalf the nomination is made, the effect or intent of which is to mitigate loss, manage risk or benefit resulting from share price changes of, or increase or decrease the voting power of the shareholder or any other person on whose behalf the nomination is made with respect to, shares of stock of the Company;
a description (including the names of any counterparties) of any agreement, arrangement or understanding with respect to such nomination between or among the shareholder or any other person on whose behalf the nomination is made and any of its affiliates or associates, and any others acting in concert with any of the foregoing;
a representation that the shareholder will notify the Company in writing of any changes to certain information provided above (as further specified in the Bylaws);
such other information regarding each nominee proposed by such shareholder as would be required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required to be disclosed, pursuant to the proxy rules of the SEC, had the nominee been nominated, or intended to be nominated, by the Board of Directors; and
the written consent of the nominee to serve as a director if elected. 50Owens & Minor, Inc. ● 2021 Proxy Statement
In order for a shareholder to bring other business before a shareholder meeting, timely notice must be received by the Company within the time limits described in the immediately preceding paragraph. The shareholder’s notice must contain the information required by our Bylaws, including but not limited to:
the information described above with respect to the shareholder proposing such business;
a brief description of the business desired to be brought before the meeting, including the complete text of any resolutions to be presented at the
any material interest of such shareholder and such beneficial owner in such business. The requirements found in our Bylaws are separate from the requirements a shareholder must meet to have a proposal included in the Company’s Our Bylaws further permit a shareholder, or a group of up to 20 shareholders, owning 3% or more of the outstanding shares of the Company’s stock eligible to vote in the election of directors continuously for at least three years, to nominate and include in the Company’s Annual Meeting proxy materials director candidates to comprise generally up to two or 20% of the Board seats (whichever is greater), provided that such shareholder or group of shareholders satisfies the requirements set forth in Article I, Section 1.10 of the Bylaws. Further Information About Attending the Virtual Annual Meeting You are entitled to participate in the Annual Meeting only if you were a shareholder as of the close of business on the Record Date, or if you hold a valid proxy for the Annual Meeting. No physical meeting will be held. You will be able to virtually attend the Annual Meeting online and submit your questions during the meeting by visiting www.meetingcenter.io/294274694. You also will be able to vote your shares online by attending the Annual Meeting by webcast. To participate in the Annual Meeting, you will need to log on using the control number from your proxy card or meeting notice. The control number can be found in the shaded box. The password for the meeting is OMI2021. If you are a registered shareholder, you do not need to register to attend the Annual Meeting virtually on the Internet. If you hold your shares through an intermediary, such as a bank or broker, you must register in advance in order to attend the meeting. To register to attend the Annual Meeting online by webcast you must submit proof of your proxy power (legal proxy) reflecting your holdings along with your name and email address to Computershare. You must contact the bank or broker who holds your shares to obtain your legal proxy. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, three business days prior to the meeting date. You will receive a confirmation of your registration by email after we receive your legal proxy. Requests for registration should be directed to us by emailing an image of your legal proxy, to legalproxy@computershare.com. If you do not have your control number, you may attend as a guest (non-shareholder) but will not have the option to vote your shares or ask questions at the virtual meeting. The online meeting will begin promptly at 9:00 a.m., Eastern Daylight Time. We encourage you to access the meeting prior to the start time leaving ample time for the check in. Owens & Minor, Inc. ● 2021 Proxy Statement51 The Board of Directors is not aware of any matters to be presented for action at the March
Please sign exactly as
03EPSA
Thursday, April 29, 2021 at 9:00 a.m. Eastern Daylight Time, virtually via the internet at www.meetingcenter.io/294274694. To access the virtual meeting, you must have the information that is printed in the shaded bar located on the reverse side of this form. The Important notice regarding the Internet availability of proxy materials for the The
▼IF
Annual Meeting of Shareholders to be held April 29, 2021 This Proxy Mark A. Beck, Edward A. Pesicka and Michael C. Riordan, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned Shares represented by this proxy (
▼IF VOTING BY MAIL,
Please sign exactly as
03EPTB
9:00 a.m. Important notice regarding the Internet availability of proxy materials for the The ▼IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
Annual Meeting of Shareholders to be held April 29, 2021 This Proxy Mark A. Beck, Edward A. Pesicka and Michael C. Riordan, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned Shares represented by this proxy ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
