UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrant☒                            Filed by a Party other than the Registrant☐

Check the appropriate box:

PARKER-HANNIFIN CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

PARKER-HANNIFIN CORPORATION

6035 Parkland Boulevard—Cleveland, Ohio 44124-4141

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

OCTOBER 24, 201823, 2019

TO OUR SHAREHOLDERS:

You are cordially invited to attend the Annual Meeting of Shareholders of Parker-Hannifin Corporation. The meeting will be held at our headquarters located at 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, on Wednesday, October 24, 2018,23, 2019, at 9:00 a.m., Eastern Daylight Time, for the following purposes:

Shareholders of record at the close of business on August 31, 2018,30, 2019 are entitled to vote at the meeting. Your vote is important, so if you do not expect to attend the meeting, or if you do plan to attend but wish to vote by proxy, please mark, date, sign and return the enclosed proxy card promptly in the envelope provided or vote electronically via the internet or by telephone in accordance with the instructions on the enclosed proxy card. Please refer to the section “How to Attend the Annual Meeting of Shareholders” and to the back page of this Proxy Statement for directions to attend the Annual Meeting.

Thank you for your support of Parker-Hannifin Corporation.

By Order of the Board of Directors

Joseph R. Leonti

Secretary

September 24, 201823, 2019

Important Notice Regarding the Availability of Proxy Materials for

the Annual Meeting of Shareholders to be held on October 24, 2018.23, 2019.

This Proxy Statement, along with our Annual Report on Form10-K for the fiscal year ended June 30, 2018,2019, is available free of charge on our investor relations website (www.phstock.com).

Table of Contents

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PARKER-HANNIFIN CORPORATION

6035 Parkland Boulevard—Cleveland, Ohio 44124-4141

PROXY STATEMENT

This Proxy Statement is furnished in connection with the solicitation by our Board of Directors of proxies to be voted at the Annual Meeting of Shareholders scheduled to be held on October 24, 2018,23, 2019, and at all adjournments thereof. Only shareholders of record at the close of business on August 31, 2018,30, 2019, will be entitled to vote at the meeting. On August 31, 2018, 132,416,04330, 2019, 128,498,788 common shares were outstanding and entitled to vote at the meeting. Each share is entitled to one vote. This Proxy Statement and the form of proxy are being mailed to shareholders on or about September 24, 2018.23, 2019.

GOVERNANCE DOCUMENTS

Our Global Code of Business Conduct, our Corporate Governance Guidelines, and our Independence Standards for Directors are posted and available on the Corporate Governance page of our investor relations website at www.phstock.com. Shareholders may request copies of these documents, free of charge, by writing to Parker-Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, Attention: Secretary, or by calling(216) 896-3000. The information contained on or accessible through our website is not a part of this Proxy Statement.

PROXY STATEMENT SUMMARY

This summary highlights certain information relating to items to be voted on at thisour 2019 Annual Meeting of Shareholders and compensation andour corporate governance matters.and executive compensation. Additional details are found in the discussions contained inthroughout this Proxy Statement.

We are pleased to provide the following key governance, sustainability and compensation highlights for fiscal year 2018.2019. We believe that these measures will better position us to continue to drive employee engagement, premier customer experience, profitable growth and financial performance and otherwise compete and win as a leading worldwide diversified manufacturer of motion and control technologies and systems, utilizing keysystems. In considering our governance and compensation programs for fiscal year 2019, we utilized insights drawn from engagement with our shareholders and the results of our shareholders’shareholder votes.

Our Board of Directors is committed to sound corporate governance and sustainability practices, promoting the long-term interests of our shareholders and holding itself and management accountable for our performance. The following table summarizes some of the key elements of our corporate governance framework.

The following table below highlights some of the key aspects of our executive compensation program for fiscal year 2018. The2019. This table is not a substitute for, nor does it reflect,purport to include, all of the information provided in our Compensation Discussion and Analysis section and in the Compensation Tables presented later in this Proxy Statement.

ITEM 1 – ELECTION OF DIRECTORS

Shareholder approval is sought to elect Lee C. Banks, Robert G. Bohn, Linda S. Harty, Kevin A. Lobo, Candy M. Obourn, Joseph Scaminace, Åke Svensson, Laura K. Thompson, James R. Verrier, James L. Wainscott and Thomas L. Williams for a term that will expire at theour Annual Meeting of Shareholders in 2019. Each candidate for Director is elected only if the votes “for” the candidate exceed the votes “against” the candidate. Abstentions and brokernon-votes shall not be counted as votes “for” or “against” a candidate. If the number of candidates exceeds the number of Directors to be elected, then in that election the candidates receiving the greatest number of votes shall be elected.2020.

Our Board of Directors has concluded that the nominees presented in this “Item 1 — 1—Election of Directors” collectively represent a highly-qualified and diverse group of individuals who will effectively serve the long-term interests of our business, our employees and our shareholders. Our Board of Directors believes that each nominee should serve on our Board of Directors for the coming year based on his or her record of effective past service on our Board of Directors and the specific experiences, qualifications, attributes and skills described in his or her biographical information presented in this “Item 1 — 1—Election of Directors” section.

Should any nominee become unable to accept nomination or election, the proxies will be voted for the election of another person as our Board of Directors may recommend. However, our Board of Directors has no reason to believe that this circumstance will occur.

NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 20192020

Director since 2015		THOMAS L. WILLIAMS Age: 5960 Committees:  None   Mr. Williams has been our Chairman of the Board since January 2016; and our Chief Executive Officer since February 2015. He was our Executive Vice President from August 2008 to February 2015 and our Operating Officer from November 2006 to February 2015. Mr. Williams is also a Directordirector at The Goodyear Tire & Rubber Company as of February 26, 2019, and was a director of Chart Industries, Inc. until May 22, 2019.   Our Board of Directors believes that Mr. Williams will effectively serve our Board of Directors, our business, our employees and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things:   •  extensive service as Chief Executive Officer and Executive Vice President and Operating Officer and in various operational leadership positions during his14-year16-year career with us;   •  intimate, working knowledge of ourday-to-day business, plans, strategies and initiatives;   •  present service on another public company board;   •  proven ability to work efficiently and effectively with our other Directors to oversee and address issues and risks facing our business; and   •  high level of commitment to our Board of Directors, our business, our employees and our shareholders, and a high level of integrity, honesty, judgment and professionalism.

ANNUAL ELECTIONS; MAJORITY VOTING; NO CUMULATIVE VOTING.

Our Code ofAmended and Restated Regulations providesprovide for the annual election of our entire Board of Directors. Accordingly, each Director elected at this Annual Meeting of Shareholders will hold office until the next Annual Meeting of Shareholders and until his or her successor is elected.

Our Amended Articles of Incorporation provide for a majority voting standard in the annual election of our Directors. Accordingly, at each Annual Meeting of Shareholders, each candidate for Director is elected only if the votes “for” the candidate exceed the votes “against” the candidate, unless the number of candidates exceeds the number of Directors to be elected. Shareholders are not able to cumulate votes in the election of Directors. Abstentions and brokernon-votes shall not be counted as votes “for” or “against” a candidate. If the number of candidates exceeds the number of Directors to be elected, then in that election the candidates receiving the greatest number of votes shall be elected. Abstentions and brokernon-votes shall not be counted as votes “for” or “against” a candidate, and shareholders are not able to cumulate votes in the election of Directors.

NEW ELECTIONSAND RETIREMENTS.

NoneOn October 24, 2018, Robert J. Kohlhepp, Klaus-Peter Műller and Wolfgang R. Schmitt retired from our Board of Directors in fiscal year 2018.accordance with the mandatory Director retirement provisions of our Corporate Governance Guidelines. Immediately prior to those retirements, Mr. Kohlhepp served on the Human Resources and Compensation Committee, Mr. Műller served on the Corporate Governance and Nominating Committee, and Mr. Schmitt served on the Audit Committee and the Corporate Governance and Nominating Committee.

Laura K. Thompson was identified as a potential Director candidate by a third-party search firm and was evaluated by management and our Corporate Governance and Nominating Committee. Upon our Corporate Governance and Nominating Committee’s recommendation and as permitted under our Amended and Restated Regulations, our Board of Directors elected Ms. Thompson to our Board of Directors on January 23, 2019 for a term expiring at this Annual Meeting of Shareholders. More detail and information on our Director recruiting, succession and refreshment process can be found under the caption “Director Selection and Nomination, Qualifications and Diversity.”

CORPORATE GOVERNANCE

BOARD OF DIRECTORS

MEETINGSAND ATTENDANCE; EXECUTIVE SESSIONS.

During fiscal year 2018,2019, there were sevennine meetings of our Board of Directors. Each Director attended at least 75% of the meetings held by our Board of Directors and the Committees of our Board of Directors on which he or she served.

We hold a regularly scheduled meeting of our Board of Directors in conjunction with our Annual Meeting of Shareholders. Directors are expected to attend the Annual Meeting of Shareholders absent an appropriate reason. All of the members of our Board of Directors at the time of our 20172018 Annual Meeting of Shareholders attended that meeting.

In accordance with the listing standards of the New York Stock Exchange, ournon-management Directors are scheduled to meet regularly in executive sessions without management and, if required, our independent Directors will meet at least once annually. Additional meetings of ournon-management Directors may be scheduled from time to time when ournon-management Directors determine that such meetings are desirable. Ournon-management Directors met four times during fiscal year 2018.2019.

NUMBER; CURRENT TERM; RELATIONSHIPS.

Our Board of Directors presently consists of 13eleven members. The current term of each member of our Board of Directors expires at our 20182019 Annual Meeting of Shareholders. Assuming the election of all of the Director nominees, we expect our Board of Directors to consist of 10eleven members after the 20182019 Annual Meeting of Shareholders. None of our Directors are related to each other and no arrangements or understandings exist pursuant to which any Director was selected as a Director or Director nominee.

DIRECTOR INDEPENDENCE.

Our Corporate Governance Guidelines require at least a majority of our Directors to be “independent” as defined in the listing standards established by the New York Stock Exchange. Our Board of Directors has also adopted standards for directorDirector independence, which are set forth in our Independence Standards for Directors.

We strongly favor a governance structure that includes an independent Board of Directors. Of the 13eleven current members of our Board of Directors, 11nine are independent based on our Board of Directors’ consideration of the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors. In addition, in fiscal year 2018,2019, each of the Audit Committee, the Corporate Governance and Nominating Committee, the Finance Committee and the Human Resources and Compensation Committee of our Board of Directors was composed entirely of independent directors.Directors. As a result, our independent Directors directly oversee critical matters such as our executive compensation program for executive officers, our corporate governance guidelines, policies and practices, our corporate finance strategies and initiatives, the integrity of our financial statements and our internal controls over financial reporting.

Our Board of Directors has affirmatively determined that the following 11nine individuals who currently serve as Directors are independent: Robert G. Bohn, Linda S. Harty, Robert J. Kohlhepp, Kevin A. Lobo, Klaus-Peter Müller, Candy M. Obourn, Joseph Scaminace, Wolfgang R. Schmitt, Åke Svensson, Laura K. Thompson, James R. Verrier and James L. Wainscott.

Among other things, our Board of Directors does not consider a Director to be independent unless it affirmatively determines that the Director has no material relationship with us either directly or as a

partner, shareholder or officer of an organization that has a relationship with us. Our Board of Directors annually reviews and determines which of its members are independent based on the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors. During the course of such review, our Board of Directors broadly considers all facts and circumstances which it deems relevant, including any

commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships between us and any of our Directors.

In fiscal year 2018,2019, after considering the facts and circumstances applicable to each Director, our Board of Directors determined that the following relationshipseach of Ms. Thompson, and Messrs. Lobo and Verrier served as an executive officer of a company that has an existing customer or supplier relationship with us, and that each such relationship required further analysis to confirm that the following Directors were independent:

CURRENT LEADERSHIP STRUCTURE.

Our Board of Directors currently employs a “dual leadership” structure. We have a Lead Director who is also the Chair of the Corporate Governance and Nominating Committee, and a Chairman of the Board, who is our Chief Executive Officer. Our Lead Director is elected solely by the independent members of our Board of Directors and holds a position separate and independent from our Chairman of the Board. Our Corporate Governance Guidelines provide that the Chair of the Corporate Governance and Nominating Committee will serve as our Lead Director and that the Chair of the Corporate Governance and Nominating Committee is elected every five years.

The specific authorities, duties and responsibilities of our Lead Director are described in our Corporate Governance Guidelines. Among other things, our Lead Director presides over and supervises the conduct of all meetings of our independent Directors, calls meetings of ournon-management, independent Directors, and prepares and approves all agendas and schedules for meetings of our Board of Directors.Board.

Our Board of Directors believes that having a Lead Director who is elected by our independent Directors ensures that our Board of Directors will at all times have an independent Director in a leadership position. At the same time, our Board of Directors believes that it is important to maintain flexibility in its leadership structure to allow for a member of management to serve in a leadership position alongside the Lead Director if our Board of Directors determines that such a leadership structure best meets the then current needs of our Board, of Directors, our business, our employees and our shareholders.

Our Board of Directors has determined that this leadership structure is currently more efficient and effective than a structure which employs a single, independent Chairman of the Board. Our Board of Directors views this structure as one that ensures both independence in leadership and a balance of knowledge, power and authority. For example, our leadership structure employs both a Chairman of the Board who is also our Chief Executive Officer and who possesses an intimate, working knowledge of ourday-to-day business, plans, strategies and initiatives, and a Lead Director who has a strong working relationship with ournon-management, independent Directors. These two individuals combine and utilize their unique knowledge and perspectives to ensure that management and our independent Directors work together as effectively as possible. Among other things, our Chairman of the Board ensures that our Board of Directors addresses strategic issues that management considers critical, while our Lead Director ensures that our Board of Directors addresses strategic issues that our independent Directors consider critical.

Our Board of Directors recognizes, however, that no single leadership model may always be appropriate. Accordingly, our Board of Directors regularly reviews its leadership structure to ensure that it continues to represent the most efficient and effective structure for our Board of Directors, our business, our employees and our shareholders.

DIRECTORSELECTIONAND NOMINATION O, QFUALIFICATIONSAND DIRECTORSIVERSITY.

The Corporate Governance and Nominating Committee of our Board of Directors is responsible for identifying, evaluating and recommending potential Director candidates. The Corporate Governance and Nominating Committee utilizes a varietyensures that Director recruiting, succession and refreshment are persistent areas of methods for identifyingfocus and evaluating candidates. regularly reviews the size, composition and independence of our Board, and any expected vacancies, in determining whether and to what extent to actively recruit new Directors or to replace departing Directors.

The Corporate Governance and Nominating Committee regularly reviews whether the sizeutilizes a variety of methods and processes to identify potential Director candidates, including through reputable third-party search firms, unsolicited recommendations from other third-party search firms, and referrals from current or past members of our Board of Directors is appropriate and whether any vacancies on our Board of Directors are expected due to retirements or otherwise.Board. In the event that any vacancies are anticipated or otherwise arise,addition, the Corporate Governance and Nominating Committee will give appropriate consideration to qualified persons recommended by shareholders for nomination as Directors (provided that such recommendations comply with the procedures set forth under the caption “Shareholder Recommendations for Director Nominees”) and will consider various potential candidates.

In evaluating proposed Director nominees,such candidates on the same basis as candidates recommended by other sources. The Corporate Governance and Nominating Committee considers a variety of factors such as those described below under the caption “Director Qualifications; Board Diversity.” generally will not, however, consider recommendations for Director nominees submitted by individuals who are not affiliated with us.

The Corporate Governance and Nominating Committee has developed and implemented a robust process to ensure that its formal Director searches are appropriately scoped and designed to produce a slate of potential candidates representing a broad range of backgrounds, educations, experiences, skills and viewpoints that will enable them, individually and collectively, to address the issues affecting our Board, our business, our employees and our shareholders, and optimize the functioning and decision-making and oversight roles of our Board and its Committees. The Corporate Governance and Nominating Committee currently focuses on the following key search and evaluation criteria, but considers the entirety of each proposed candidate’s credentials and all available information that may be relevant to theeach candidate’s nomination.

Following such consideration,its initial screening and evaluations, the Corporate Governance and Nominating Committee may seek additional information regarding, and may request interviews with any candidate it wishes to further pursue. Based uponon all information reviewed and interviews conducted, the Corporate Governance and Nominating Committee collectively determines whether to recommend the candidate to our entire Board of Directors.

During fiscal year 2018, the Corporate Governance and Nominating Committee retained a third-party search firm to assist in identifying, evaluating and recommending potential Director candidates. Candidates may also be recommended by other third-party search firms and current members of our Board of Directors. In addition, the Corporate Governance and Nominating Committee will give appropriate consideration to qualified persons recommended by shareholders for nomination as Directors, provided that such recommendations comply with the procedures set forth under the caption “Shareholder Recommendations for Director Nominees” on page 81 of this Proxy Statement. The Corporate Governance and Nominating Committee, will consider candidates recommended by shareholders on the same basis as candidates from other sources. The Corporate Governanceutilizing its robust and Nominating Committee generally will not, however, consider recommendations for Director nominees submitted by individuals who are not affiliated with us.

DIRECTOR QUALIFICATIONS; BOARD DIVERSITY.

We believe that oversight from a highly-qualified and diverse Board of Directors is essential for the short-term and long-term success of our business. The size and scope of our global operations, markets, product offerings and employee base raise a wide range of issues. Consequently, we strive to attract and retain Directors who represent a broad range of backgrounds, educations, experiences, skills and viewpoints that will enable them to individually and collectively address the issues affecting our Board of Directors, our business, our employees and our shareholders.

Our Board of Directors, through its Corporate Governance and Nominating Committee, diligently evaluates each Director and Director nominee and our Board of Directors as a whole to ensure that our Board of Directors has a complementary mix of qualified and diverse individuals designed to optimize the functioning and the decision-making and oversight roles of our Board of Directors and its Committees. Our Board of Directors does not have any formal policies with respectthoughtful approach to Director qualifications or diversity. As a general matter, however, the Corporate Governancerecruiting, succession and Nominating Committee considers a broad range of factors such as judgment, skill, integrity, independence, possible conflicts of interest, experience with businessesrefreshment, has built an experienced, diverse and other organizations of comparable size or character, the interplay of the candidate’s experienceindependent Board that provides significant oversight over our plans and approach to addressing business issues with the experiencestrategies for growth, financial performance and approach of incumbent members of our Board of Directors and other new Director

candidates, and the candidate’s ability to effectively monitor and oversee the risks facing our business. More specifically, our Board of Directors seeks to identify nominees who have one or more of the following attributes:

Our Corporate Governance Guidelines and our Global Code of Business Conduct also require each of our Directors to act with the commitment, integrity, honesty, judgment and professionalism necessary to serve the long-term interests of our Board of Directors, our business, our employees and our shareholders.shareholder value creation.

RISK MANAGEMENT.

Management and our Board of Directors and its Committees are collectively engaged in identifying, overseeing, evaluating and managing the material risks facing our business and ensuringto ensure that our strategies and objectives work to minimize such risks. Our Board of Directors has the ultimate responsibility to monitor the risks facing our business. Among other things, our Board of Directors reviews and discusses in detail, at least annually, our corporate strategy and annual operating plan, which covercovers significant strategic topics such as our key markets, operational priorities under The Win Strategy™Strategy^™, strategic positioning, financial and operational outlooks, capital allocation, balance sheet strength, debt portfolio and positions, share repurchase activity, and dividend history and strategies. Our Board also maintains regular oversight of other key risk areas such as corporate strategy, management succession planning, cybersecurity, enterprise risk management, and environmental, social and governance matters.

Various members of our management are responsible for ourday-to-day risk management activities, including members of our Human Resources, Internal Audit and Compliance, Legal, Tax, Risk Management, Treasury, Finance, and ITInformation Technology departments, and our internal Cyber Security Committee. Those individuals are charged with identifying, overseeing, evaluating and managing risks in their areas of responsibility and for ensuring that any significant risks are addressed with our Board of Directors or in the appropriate Committee of the Board.Board Committees. The Committees of our Board of Directors are each responsible for the various areas of risk oversight as described in the “Committees of theour Board of Directors” section of this Proxy Statement. Management and the Chair of the applicable Committee ensure that any significant risks are reported to and addressed with the entire Board of Directors. Our Lead Director and the other Committee Chairs ensure that risk management is a recurring agenda item for meetings of our Board of Directors and its Committees.

Management and our Board of Directors and its Committees also engage outside advisors where appropriate to assist in the identification, oversight, evaluation and management of the risks facing our business. These outside advisors include our independent registered public accounting firm, external legal counsel and insurance providers, and the independent executive andnon-employee Director compensation consultant retained by the Human Resources and Compensation Committee of our Board of Directors.

Our Board of Directors believes that its current level of independence, leadership structure and qualifications and diversity of its members facilitate the effective identification, oversight, evaluation and management of risk. Our Lead Director meets regularly with our other independent Directors without management to discuss current and potential risks and the means of mitigating those risks, and has the authority to direct and evaluate our risk management efforts.

Management and our Board of Directors and its Committees view the risk management role of our Board of Directors and its Committees, and their relationship with management in the identification, oversight, evaluation and management of risk, as paramount to the short-term viability and long-term

sustainability of our business. The ability to effectively monitor and oversee the most critical current risks facing our business is a key consideration for our Board of Directors and its Committees in identifying potential Director nominees and evaluating our current Directors and Committee assignments.

COMMITTEES OF OUR BOARD OF DIRECTORS

BOARD COMMITTEES; COMMITTEE CHARTERS.

Our Board of Directors has established and delegated certain authorities and responsibilities to three committees: the Human Resources and Compensation Committee, the Corporate Governance and Nominating Committee, and the Audit Committee. OurEach Committee of our Board of Directors has adoptedis governed by a written charter for each of these Committees, which charters areis posted and available on the Corporate Governance page of our investor relations website at www.phstock.com. Shareholders may request copies of these charters, free of charge, by writing to Parker-Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, Attention: Secretary, or by calling(216) 896-3000.

During fiscal year 2018, our Board also maintained a separate Finance Committee, the members of which were Kevin A. Lobo (committee chair), Linda S. Harty, Robert J. Kohlhepp, Klaus-Peter Müller, and Åke Svensson. The Finance Committee met two times during fiscal year 2018. Effective July 1, 2018, our Board of Directors elected to eliminate the Finance Committee and reallocate its responsibilities among the Board of Directors and the Audit Committee.

All members of each Committee are independent under the listing standards of the New York Stock Exchange as well as our Independence Standards for Directors. Each Committee provides regularregularly reports of its activities to the full Board of Directors, as the full Board of Directors has the ultimate responsibility for monitoring the risks facing our business.Directors.

Information about the respective Committee purposes, memberships and number of meetings are reflected in the following chart:

* Committee Chair

Our Board of Directors has determined that each of Linda S. Harty, the Chair of the Audit Committee, and Kevin A. Lobo, a member of the Audit Committee, is anare audit committee financial expertexperts (designated in the above chart as ACFE) as defined in the federal securities laws.

Each of our Committees works with the applicable members of our Human Resources, Internal Audit and Compliance, Legal, Tax, Risk Management, Treasury, Finance, and IT Information Technology

departments and other management personnel to oversee and evaluate risks or relevant concerns to each Committee.

THE HUMAN RESOURCESAND COMPENSATION COMMITTEE.

As described on page 23 of this Proxy Statement, theThe Human Resources and Compensation Committee has duties and responsibilities with respect tooversees the administration, oversightstructure and determination of our executive compensation program. In addition, the Human Resources and Compensation Committee works with its independent executive compensation consultant and our Human Resources, Legalhuman resources, legal and other management personnel to oversee and evaluate risks arising from and relating to:to our compensation policies and practices for all employees;employees, our succession planning and talent development strategies and initiatives;initiatives, and other human resources issues facing our business.

In particular, the Human Resources and Compensation Committee monitors any significant existing or potential risks arising from our compensation policies and practices for all employees through its oversight of an annual compensation risk review conducted by management and the Human Resources and Compensation Committee’s independent executive compensation consultant. The results of this review are evaluated and discussed among management, the Human Resources and Compensation Committee and its independent executive compensation consultant and, if any significant risks are identified, the full Board of Directors. Based on the review conducted during fiscal year 2018,2019, we do not believe that any risks arising from our current compensation policies and practices are designed to mitigate risks related to compensation, and such policies and practices are not reasonably likely to have a material adverse effect on our business.

The annual compensation risk review begins with a global assessment of any plans or programs that could potentially encourage excessive risk-taking or otherwise present significant risks to our business. The review also surveystakes into account our individual business units to determine whether any of them carries a significant portion of our risk profile, structures compensation significantly different than others or is significantly more profitable than others. The review then evaluates whether the applicable plans and programs are likely to encourage excessive risk-taking or detrimental behavior, vary significantly from our risk-reward structure, or otherwise present significant risks to our business.

During our fiscal year 20182019 compensation risk review, we also identified and evaluated various mechanisms that we currently have in place that may serve to mitigate any existing or potential risks arising from our compensation policies and practices, including the following:

During the annual compensation risk review, we also consider whether any changes to our compensation plans and programs may be necessary to further mitigate risk. The Human Resources and Compensation Committee did not make any such changes based on the results of our fiscal year 20182019 review.

THE CORPORATE GOVERNANCEAND NOMINATING COMMITTEE.

Among other things, the Corporate Governance and Nominating Committee is responsible for evaluating and recommending to our Board of Directors qualified nominees for election as Directors and qualified Directors for Committee membership, establishing evaluation procedures for the performance of our Board of Directors and its Committees, developing corporate governance guidelines and independence standards, and considering other matters pertaining toregarding our corporate governance.governance structure. In addition, the Corporate Governance and Nominating Committee works with our Legallegal and other management personnel to oversee and evaluate risks arising from:evaluate:

THE AUDIT COMMITTEE.

The Audit Committee of our Board of Directors is our standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. Each Director who is a member of our Audit Committee is independent, as defined in our Independence Standards for Directors and in compliance with the independence standards applicable to audit committee members under the New York Stock Exchange listing standards and under the federal securities laws.

Among other things, the Audit Committee is responsible for appointing, compensating, retaining, and overseeing our independent registered public accounting firm and evaluating its independence, approving all audit andnon-audit engagements with our independent registered public accounting firm, and reviewing our annual and quarterly financial statements, internal and independent audit plans, the results of such audits and the adequacy of our internal control structure.

In addition, the Audit Committee works with our Internal Auditinternal audit and Compliance, Legal, Tax, Treasurycompliance, legal, tax, treasury and Financefinance departments and other management personnel to oversee and evaluate risks, including major financial, tax, strategic, and operational risk exposures and risks related to compliance with legal and regulatory requirements, and significant litigation and claims.

The Audit Committee also meets privately at each of its meetings with representatives from our independent registered public accounting firm and our Vice President—InternalPresident – Audit, Compliance and Compliance.Enterprise Risk Management.

OTHER GOVERNANCE MATTERS

REVIEWAND APPROVALOF TRANSACTIONSWITH RELATED PERSONS.

The Charter of the Corporate Governance and Nominating Committee provides that the Corporate Governance and Nominating Committee is responsible for considering questions of possible conflicts of interest of Directors and executive officers and for making recommendations to prevent, minimize or eliminate such conflicts of interest. Our Global Code of Business Conduct provides that our Directors, officers, employees and their spouses and other close family members must avoid interests or activities that create any actual or potential conflict of interest. These restrictions cover, among other things, interests or activities that result in receipt of improper personal benefits by any person as a result of his or her position as our Director, officer, employee or as a spouse or other close family member of any of our Directors, officers or employees. Our Global Code of Business Conduct also requires our Directors, officers and employees to promptly disclose any potential conflicts of interest to our Corporate Compliance Office. We also require that each of our executive officers and Directors complete a detailed annual questionnaire that requires, among other things, disclosure of any transactions with a related person meeting the minimum threshold for disclosure under the relevant U.S. Securities and Exchange Commission, or SEC, rules. All responses to the annual questionnaires are reviewed and analyzed by our legal counsel and, as necessary or appropriate, presented to the Corporate Governance and Nominating Committee for analysis, consideration and, if appropriate, approval.

The Corporate Governance and Nominating Committee will consider the following in determining if any transaction presentedwith a related person or party should be approved, ratified or rejected:

During fiscal year 2018,2019, we reviewed the annual questionnaires and determined that no potential related-party transactions exist. This review included a detailed evaluation of the transactions reviewed and analyzed by our Board of Directors in determining Director independence as described in the “Director Independence” section beginning on page 10.of this Proxy Statement. Based on management’s review and analysis, no actual or potential related-party transactions were presented to the Corporate Governance and Nominating Committee for analysis, consideration or approval.

DELINQUENTSECTION 16(A) BENEFICIAL OWNERSHIPREPORTINGEPORTS COMPLIANCE.

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers, Directors and beneficial owners of more than 10% of our Common Shares to file initial stock ownership reports and reports of changes in ownership with the SEC. SEC regulations require that we are furnished withreceive copies of these reports. Based solely on a review of these reports and upon written representations from our executive officers and Directors, we believe that there was complianceall Directors, Officers and 10% or greater beneficial owners complied with all such filing requirements for fiscal year 2018,2019, except that (i) Yoon Michael Chung, formerCatherine A. Suever, Executive Vice President –E-Business, IoT Finance & Services, inadvertentlyAdministration and Chief Financial Officer, filed one late Form 4 to correct the inadvertent underreporting of 1,620 shares awarded to her, and (ii) Robert G. Bohn, Director, filed one late Form 4 to report the sale of 3,950 common120 shares owned outright, during fiscal year 2018, and (ii) Lee C. Banks, President and Chief Operating Officer, inadvertently filed one late Form 4, to report the disposition of 16,171 shares which were withheld to satisfy tax obligations.acquired through a broker dividend reinvestment plan.

EPXECUTIVEROXY SAUMMARYCCESS—FISCAL YEAR 2018.

ObjectivesIn 2018, our Shareholders approved an amendment to our Code of Regulations (subsequently restated and Philosophiesnamed Amended and Restated Regulations) to permit a shareholder, or a group of up to twenty shareholders, owning three percent or more of the Executive Compensation Program.

Refreshed in 2015, The Win Strategy^TM has beenCompany’s outstanding shares of Common Stock continuously for at least three years to nominate and include the foundation of our business and has represented the unified vision of our employees worldwide since it was first introduced in 2001. The Win Strategy^TM defines the key goals, operational priorities and metrics used to profitably grow our business. We are confident that a worldwide focus on The Win Strategy^TM will maximize the long-term value of our shareholders’ investments by helping us to realizetop-quartile performance among our competitors and peers and steady appreciation of our stock price.

The Win Strategy^TM also provides the means by which we can measure and reward success. In fact, the objective of our executive compensation program is to encourage and reward performance that implements the strategies and advances the goals of The Win Strategy^TM. The program is designed to:

Categories and Elements of Executive Compensation.

Our executive compensation program covers all compensation paid to our executive officers. Our executive officers include, among others, our Chief Executive Officer, our Chief Financial Officer and the three other most highly compensated executive officers identified in the Summary Compensation Table for Fiscal Year 2018 on page 48, which we refer to as the Named Executive Officers.

Our executive compensation program offers the categories and elements of compensation identified in the following table. Each element of compensation is more specifically defined and described in the “Elements of Executive Compensation” section of this Compensation Discussion and Analysis beginning on the page indicated in the table.

“Pay-for-Performance”—Structure, Key Financial Metrics and Impact on Compensation Payouts.

Our executive compensation program is structured to ensure that a significant portion of the compensation for executive officers is dependent upon the performance of our business. This“pay-for-performance” structure drives the program to achieve its objective to encourage and reward performance that implements the strategies and advances the goals of The Win Strategy^TM. Our program is also structured to ensure that the compensation for our executive officers is not overly weighted towardCompany’s annual cash incentive compensation and does not otherwise have the potential to threaten long-term shareholder value by promoting unnecessary or excessive risk-taking by our executive officers. The “Allocation of Executive Compensation” section beginning on page 26 describes our policies and practices for allocating executive compensation among the various categories and elements.

To illustrate, the chart below shows the mix of fixed andat-risk annual and long-term and cash and equity compensation represented by base salaries and the elements of annual cash incentive compensation and long-term incentive compensation for the Named Executive Officers. The percentages of total compensation reflected in this chart were calculated using each Named Executive Officer’s fiscal year 2018 base salary, target annual cash incentive compensation and target long-term incentive compensation.

Emphasis on Sustained Performance

The “Elements of Executive Compensation ” section beginning on page 30 provides detailed discussion and analysis as to how each element of compensation encourages and rewards performance that implements the strategies and advances the goals of The Win Strategy^TM. Our compensation structure includes both fixed andat-risk compensation as noted above, the various cash and equity elements of which may be depicted generally as follows:

* General RONA and Converted RONA

We provide base salaries, employee benefits and executive perquisites primarily to ensure that our executive compensation program remains competitive to attract, retain and motivate the individuals needed to implement and advance our strategies and goals. In addition, as illustrated in the following table, we provide each element of annual cash incentive compensation and each element of long-term incentive compensation primarily to encourage and reward performance that implements and advances The Win Strategy™, in particular our

strategies and goals relating to financial performance and profitable growth, aligning such elements with our performance in certain key financial metrics that we use to measure the overall performance of our business.

The following table shows the behaviors, key financial metrics and fiscal year 2018 results driven by each element ofat-risk compensation provided to the Named Executive Officers.

* Free cash flow margin is calculated as disclosed on page 32.

** Officer participation on our Profitable Growth Incentive Plan is limited to our operating group presidents; as such, Mr. Malone (Vice President and President—Filtration Group) is the only Named Executive Officer who was subject to the Profitable Growth Incentive Plan in fiscal year 2018.

Highlights and Significant Changes to Executive Compensation Program during Fiscal Year 2018.

We continue to maintain several long-standing compensation practices that we believe contribute to good corporate governance, including our “claw-back” policy described on page 29, our stock ownership guidelines described on page 30, our hedging, pledging and other stock ownership restrictions described on page 30, and our annual compensation risk review described beginning on page 15. In fiscal year 2018, after review and consideration of peer data and our annual plan for free cash flow margin, the Human Resources and Compensation Committee approved updated free cash flow payout thresholds for our Target Incentive Bonuses of 5% for a 50% payout, 8% for a 100% payout, and 11% for a 200% payout, all as more fully described on page 32.

ADMINISTRATION, OVERSIGHTAND DETERMINATIONOF EXECUTIVE COMPENSATION.

Human Resources and Compensation Committee.

The Human Resources and Compensation Committee, which we refer to in this Compensation Discussion and Analysis as the Committee, consists solely of independent directors and has various duties and responsibilities with respect to the administration, oversight and determination of executive compensation. As described in the Committee’s Charter, which is posted and available on the Corporate Governance page of our investor relations website at www.phstock.com, these duties and responsibilities include:

The Committee also retains the discretion to authorize periodic compensation adjustments due to promotions or increases in the responsibilities of our executive officers.

In fulfilling its duties and responsibilities, the Committee seeks periodic input, advice and recommendations from various sources, including our Board of Directors, our executive officers and the Committee’s independent executive compensation consultant. The Committee is not bound by that input or advice or those recommendations. The Committee at all times exercises independent discretion in its executive compensation decisions.

Board of Directors.

Our Board of Directors approves all incentive compensation plans and equity-based plans reviewed and recommended by the Committee and all other plans and programs which, by their terms, require approval of our Board of Directors. Our Board of Directors does not authorize or approve any other specific executive compensation matters. Our Board of Directors oversees the Committee’s activities and performance, including the identification, evaluation and monitoring of risks arising from our compensation policies and practices, and reviews all material information relating to executive compensation matters approved by the Committee. This oversight ensures that the Committee fulfills its duties and responsibilities and that the executive compensation program is reasonable and appropriate, meets its objectives and effectively serves the interests of our business and our shareholders.

Executive Officers.

Our executive officers also play a role in the administration, oversight and determination of executive compensation. At the beginning of each fiscal year, each executive officer sets annual performance goals for his or her direct reports, which may include other executive officers. The performance goals are designed to promote

individual performance consistent with the strategies and goals of The Win Strategy^TM. Throughout the fiscal year, each executive officer’s performance is reviewed and evaluated against his or her performance goals. At the end of the fiscal year, each executive officer conducts a final performance review for each of his or her direct reports. Based on those reviews, our executive officers, other than our Chief Executive Officer, recommend any annual compensation adjustments and awards for their executive officer direct reports to our Chief Executive Officer.

Our Chief Executive Officer similarly reviews and evaluates his direct reports, which include each of the other Named Executive Officers except for Mr. Malone who is reviewed and evaluated by Mr. Banks. Our Chief Executive Officer also reviews and evaluates the recommendations made with respect to all of our other executive officers and makes any modifications that he deems appropriate. Our Chief Executive Officer then recommends to the Committee annual compensation adjustments and awards for all of our executive officers other than himself.

Our Chief Executive Officer, our Chief Operating Officer, our Executive Vice President—Human Resources & External Affairs and our Secretary attend all meetings of the Committee other than appropriate executive sessions, and neither our Chief Executive Officer nor our Chief Operating Officer attends any meetings relating to his performance or compensation. Our executive officers prepare and provide to the Committee tally sheets for certain executive officers, which are used by the Committee to understand and measure the performance and effectiveness of our annual cash incentive compensation and long-term incentive compensation. Our executive officers also periodically consult with and assist the Committee in calculating incentive compensation payouts, establishing and monitoring performance goals and addressing other appropriate executive compensation matters.

COMPENSATION CONSULTANTSAND BENCHMARKING.

The Committee regularly monitors, reviews and evaluates our executive compensation program to ensure that it provides reasonable compensation ranges at appropriate levels and remains competitive and effective. The Committee engages Mercer Human Resource Consulting, an independent human resources and compensation consulting firm, which we refer to as Mercer, to assist the Committee in its monitoring, review and evaluation and to otherwise provide assistance and guidance to the Committee on executive officer and director compensation matters. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies, Inc. The Committee first engaged Mercer in fiscal year 2009 following a robust procurement process involving multiple consulting firms. Mercer emerged from that process as the Committee’s provider of choice based on its level of expertise and financial and strategic fit. Mercer reports directly to the Committee and attends all meetings of the Committee. The Committee has sole authority for the appointment, removal, replacement, compensation and oversight of Mercer and its affiliates for executive officer and director compensation matters.

Mercer provides a wide range of executive officer and director compensation consulting services for the Committee. Mercer prepares and provides to the Committee a comprehensive annual review of base salaries, target annual cash incentive compensation, target long-term incentive compensation and target total cash and direct compensation for all of our executive officers. Mercer uses this annual review to advise the Committee with respect to the effectiveness and competitiveness of our executive compensation program. The Committee considers this annual review when establishing compensation levels and otherwise to ensure that our executive compensation program remains competitive and effective.

Mercer prepares the annual review by usingmeeting proxy statement data and surveys published by leading human resources and compensation consultants to conduct market analyses of base salaries, target annual bonuses, target long-term incentive compensation and target total cash and direct compensation offered to executives of other diversified industrial companies with revenues and market values comparable to ours, which we refer to as the Peer Group. Mercer also uses broader market data on companies outside of the Peer Group to the extent that it is available and appropriate.

The Committee regularly reviews and, when necessary or advisable, updates the Peer Group to make sure that it consists of companies which directly compete with us for talented employees and shareholder investment and that it otherwise represents a meaningful group of peers. In evaluating the Peer Group companies, the Committee looks for companies in the Diversified Industrials industry/sector with similar characteristics and business strategies to ours. The Peer Group for fiscal year 2018 consisted of the following companies:

Other executive officer and director compensation consulting services provided for the Committee by Mercer during fiscal year 2018 included:

For fiscal year 2018, we paid $207,097 in fees, administrative charges,out-of-pocket expenses and other costs to Mercer for executive officer and director compensation consulting services provided for the Committee.

Management directly engages Marsh & McLennan Companies, Inc. and its affiliates (including Mercer) in the ordinary course, without the approval of our Board of Directors or the Committee, to provide services in areas other than executive officer and director compensation. These additional services include:

For fiscal year 2018, we paid $1,447,518 in fees, administrative charges, commissions,out-of-pocket expenses and other costs to Marsh & McLennan Companies, Inc. and its affiliates (including Mercer) for these

additional services. The majority of these fees were not paid pursuant to engagements of Marsh & McLennan Companies, Inc. by management, but were rather either paid by our third-party administrators to Marsh & McLennan Companies, Inc. relating to risk insurance and for our insurance and prescription drug services provided under our employee health and welfare plans, or were direct engagements with Marsh & McLennan Companies, Inc. made by various divisions all over the world for market surveys related to those particular divisions. The consolidated revenues of Marsh & McLennan Companies, Inc. were $14.0 billion as reported in its Annual Report on Form10-K for the fiscal year ended December 31, 2017.

The Committee has considered and assessed all relevant factors, including but not limited to those set forth in Rule10C-1(b)(4)(i) through (vi) under the Securities Exchange Act of 1934, that could give rise to a potential conflict of interest with respect to Mercer. Based on this review, we are not aware of any conflict of interest that has been raised by the work performed by Mercer. The Committee also periodically reviews the relationship with Mercer to determine whether there are sufficient internal safeguards in place to ensure that Mercer provides services to the Committee independent of any influence from management. The Committee identified the following safeguards:

GENERAL POLICIES AND PRACTICES RELATING TO EXECUTIVE COMPENSATION.

Allocation of Executive Compensation.

The Committee seeks to provide a package of compensation, employee benefits and executive perquisites which is adequate to keep us competitive in attracting, retaining and motivating present and future executive officers. Annually, base salaries, target annual cash incentive compensation and long-term incentive compensation for each executive officer is compared to the median of companies included in Mercer’s annual review with the objective that, in the aggregate, our compensation generally remains at the median of the Peer Group.

When deciding whether to materially increase or decrease the amount of any element of compensation, the Committee considers Mercer’s annual review, the annual performance reviews of the executive officers and the performance of our business as a whole. The Committee does not consider amounts realized from prior compensation in determining the levels of compensation paid to executive officers.

To ensure that our executive compensation program meets its objectives to drive and support The Win Strategy^TM, the Committee allocates the majority of compensation for executive officers to annual cash incentive compensation and long-term incentive compensation. Each of theat-risk elements of compensation within those

categories is directly tied to appreciation of our stock price and/or to significant financial and operational performance goals. More thanone-half of the targeted total compensation for the executive officers is, therefore, “at risk” and may significantly fluctuate from year to year based on our financial, operational and stock performance. In addition, the Committee makes sure that executive officers, as compared to other employees, have a greater proportion of their total compensation allocated to theseat-risk elements. The Committee structures the program in this manner to better align the financial interests of our executive officers with the financial interests of our shareholders, to better ensure a“pay-for-performance” result and to promote internal equity by recognizing that our executive officers, as compared to other employees, have greater responsibility and influence over the performance of our business.

Our executive compensation program is also structured to offer a reasonable balance of annual and long-term, as well as cash and equity, elements of compensation. The program provides a mix of those elements specifically designed to encourage and reward performance that contributes to the advancement of The Win Strategy^TM and is in consideration of the best interest of our shareholders. The Committee does not have any formal policies or guidelines with respect to the allocation of executive compensation between annual and long-term elements, cash and equity elements or different forms of equity elements. In practice, however, the Committee has taken the following approaches.

The Committee generally makes all elements of executive compensation available to all executive officers and makes executive compensation decisions on a consistent and equitable basis. The Committee generally does not offer any element to an executive officer that is not available to other executive officers. As described beginning on page 35, however, the PG RONA Multiplier is applied only to our operating group presidents, and, therefore, Mr. Malone is our only Named Executive Officers to whom the PG RONA Multiplier is applied.

Accounting and Tax Considerations.

Our executive compensation program is structured to achieve flexibility, maximize benefits and minimize detriments to our business and our executive officers from a tax and accounting perspective. As a result, we continuously review and evaluate the impact of changes in tax laws and accounting practices and interpretations and similar factors affecting our executive compensation program. For example, Financial Accounting Standards Board ASC Topic 718, which results in recognition of compensation expense for Stock Incentives, and Section 409A of the Internal Revenue Code, which impacts deferred compensation arrangements, are considered as we evaluate structure and implement changes to the program.

In addition, we try to structure the program and each element of compensation in a way that allows us to deduct compensation payments for tax purposes. In fiscal year 2018, for example, the Committee took into account whether particular elements were “performance-based” compensation under Section 162(m) of the Internal Revenue Code. Section 162(m) set a limit of $1,000,000 on the amount we could deduct in any one year for compensation paid to certain executive officers. Compensation that qualified as “performance-based” compensation under Section 162(m) would not count toward the $1,000,000 limit. Base salary would not qualify as “performance-based” compensation under Section 162(m), but the Committee generally tried to make sure that annual cash incentive compensation and long-term incentive compensation qualified as fully deductible “performance-based” compensation under Section 162(m).

The 2015 Performance Bonus Plan, approved by our shareholders at the 2015 Annual Meeting of Shareholders, was designed to allow annual cash incentive compensation and long-term incentive compensation awarded under the plan to potentially qualify as “performance-based” compensation exempt from the $1,000,000 deduction limit under Section 162(m). The Committee reserved the right to award compensation outside of the Performance Bonus Plan, even if the awards could not be deducted by the Company, if the Committee determined that the awards were reasonable and appropriate. The Committee granted LTIP Awards under the Performance Bonus Plan due to the unpredictability over a long-term period of which executive officers would be covered by Section 162(m) and whether or not annual compensation to those executive officers in future years would exceed $1,000,000. The Committee also granted Target Incentive Bonuses and General RONA Bonuses under the Performance Bonus Plan to executive officers who may potentially be subject to Section 162(m), and then only to the extent that the Committee deems necessary to ensure their deductibility under Section 162(m).

The Tax Cuts and Jobs Act, enacted December 22, 2017, includedmaterials a number of significant changesdirector nominees up to Section 162(m), such as the repeala greater of (x) two, or (y) twenty percent of the “performance-based” compensation exemptionBoard, provided that the shareholder(s) and the expansion of the definition of “covered employees” (for example, by including the chief financial officer as a covered employee). As a result of these changes, compensation to each Named Executive Officer in excess of $1,000,000 generally will no longer be tax deductible. In addition, each Named Executive Officer will be subject to the limit under Section 162(m) for all future tax years. We will continue to comply withnominee(s) satisfy the requirements of Section 162(m) to the extent to which our outstanding awards are determined to be tax deductible under the transitional relief; however, there are still uncertainties regarding the scope of transitional relief available. The Committee may also determine that certain good governance practices of Section 162(m) should remain in place, such as establishing performance goals within the first ninety days of a performance period, selecting performance goals that are set forthspecified in the 2016 Omnibus Stock Incentive PlanAmended and requiring the Committee to certify results prior to the payout of any award. The Committee, however, reserves the right to modify any compensation program if it determines that such modification is consistent with our business needs.

Committee Discretion.

The Committee does not change thepre-determined performance goals or increase the amount of anyat-risk compensation following the grant date except as permitted by applicable laws and regulations. The Committee may increase the amount of any award of annual cash incentive compensation made outside of the Performance Bonus Plan if appropriate to account for corporate policy changes, executive compensation program changes and major corporate programs, and to account for the negative impact of acquisitions on goodwill and amortization expense, losses on dispositions of real property during plant moves or shutdowns and other unexpected occurrences that negatively impact awards. The Committee has historically exercised this discretion only with respect to General RONA Bonuses (to encourage our employees to engage in activities and initiatives that drive and support The Win Strategy^TM but have an adverse impact on General RONA Bonuses), and once used such discretion with respect to Target Incentive Bonuses.

The Committee may reduce the amount of any award of annual cash incentive compensation or long-term incentive compensation made outside of the Performance Bonus Plan other than Stock Incentives. The Committee also had the discretion to reduce the amount of any award made under the Performance Bonus Plan as long as the award continued to qualify as “performance-based” compensation under Section 162(m). The Committee retains this downward discretion for the following purposes:

The Committee has historically exercised this downward discretion with respect to General RONA Bonuses awarded under the Performance Bonus Plan to the Chief Executive Officer, and to the Chief Financial Officer and certain other executive officers. At the beginning of the year, the Committee determines for each of these executive officers a General RONA Bonus award opportunity that is large enough to ensure that we meet our objectives for annual cash incentive compensation and, at the same time, preserve the ability of the Committee to exercise its discretion to reduce the amount of the award payout to an appropriate level as compared to the final payouts made to executive officers who receive annual cash incentive compensation outside the Performance Bonus Plan and after taking into account individual performance and contributions to the success of our business. In addition, as described beginning on page 36, our calculation methodology for LTIP Award payouts will also allow the Committee to exercise this discretion with respect to LTIP Award payouts.Restated Regulations.

“CLAW-BACK” POLICY.CLAW-BACK” POLICY

Our Board of Directors maintains a “claw-back” policy which allows us to recover or withhold any Target Incentive Bonuses, General RONA Bonuses, Converted RONA Bonuses or LTIP Awards which are paid or payable to an executive officer if:

STOCK OWNERSHIP GUIDELINES.STOCK OWNERSHIP GUIDELINES

The Committee recommended, and inIn 2015 our Board of Directors approved amended stock ownership guidelines to further align the financial interests of our executive officers directors and Directors with those of our shareholders by encouraging the accumulation and retention of our common stock by our directorsDirectors and executive officers. TheseThe current guidelines for our directorsDirectors and executive officers are as follows:

The recommended time period for achieving compliance with the guidelines is five years from election or appointment to the position that is subject to the guidelines. The Human Resources and Compensation Committee reviews share ownership information with the Chief Executive Officer in August of each year to ensure compliance with the guidelines. As of June 30, 2018,2019, all executive officers and directorsDirectors in their positions for at least five years were in compliance with the guidelines.

STOCK OWNERSHIP RESTRICTIONS.STOCK OWNERSHIP RESTRICTIONS - SPECULATIVE TRANSACTIONS / HEDGING

We maintain an insider trading policy which, among other things, restrictsthat applies to all of our executiveDirectors, officers, employees and consultants. The insider trading policy prohibits those covered by the policy from hedging or pledging their stock ownership positions or engaging in other speculative transactions with respect to Company securities that could lead to inadvertent violations of securities laws, such as short sales and acquiring exchange-traded options (including puts, calls and other derivatives). Furthermore, the insider trading laws.policy prohibits certain arrangements that could result in sales or transfers of Company securities without the covered person’s consent at times at which he or she is not permitted to trade in Company securities, including holding Company securities in margin accounts or pledging them as collateral.

The insider trading policy also prohibits those covered by the policy from entering into hedging or monetization transactions (such as zero-cost collars and forward sale contracts) with respect to Company securities, because such transactions may provide ownership of Company securities without the full risks and rewards of such ownership.

COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY—FISCAL YEAR 2019

Objectives and Philosophies of the Executive Compensation Program

The Win Strategy^TM has been the foundation of our business and has represented the unified strategic vision of our employees worldwide since it was first introduced in 2001. The Win Strategy defines the key goals, operational priorities and metrics used to profitably grow our business. We are confident that our continuing focus on The Win Strategy maximizes long-term shareholder value by helping us realize our goal oftop-quartile performance among our competitors and peers and steady appreciation of our stock price.

The Win Strategy also provides the means by which we measure and reward success. In fact, the objective of our executive compensation program is to encourage and reward performance that implements the strategies and advances the goals of The Win Strategy. The program is designed to:

Categories and Elements of Executive Compensation

Our executive compensation program covers all compensation paid to our executive officers. Our executive officers include, among others, our Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers identified in the Summary Compensation Table for Fiscal Year 2019, which we refer to as the Named Executive Officers.

Our executive compensation program offers the categories and elements of compensation identified in the following table. Each element of compensation is more specifically defined and described in the “Elements of Executive Compensation” section beginning on the page indicated in the table.

“Pay-for-Performance”—Structure, Key Financial Metrics and Impact on Compensation

Our executive compensation program is structured to ensure that a significant portion of the compensation for executive officers is dependent upon the performance of our business. This“pay-for-performance” structure drives the program to achieve its objective to encourage and reward performance that implements the strategies and advances the goals of The Win Strategy. Our program is also structured to ensure that the compensation for our executive officers is not overly weighted toward annual cash incentive compensation and does not otherwise have the potential to threaten long-term shareholder value by promoting unnecessary or excessive risk-taking by our executive officers. The “Allocation of Executive Compensation” section describes our policies and practices for allocating executive compensation among the various categories and elements.

To illustrate, the following chart shows the mix of fixed andat-risk annual and long-term cash and equity compensation represented by base salaries and the elements of annual cash incentive compensation and long-term incentive compensation for the Named Executive Officers. The percentages of total compensation reflected in this chart were calculated using each Named Executive Officer’s fiscal year 2019 base salary, target annual cash incentive compensation and target long-term incentive compensation.

The “Elements of Executive Compensation” section provides detailed discussion and analysis regarding how each element of compensation encourages and rewards performance that implements the strategies and advances the goals of The Win Strategy. Our compensation structure includes both fixed andat-risk compensation comprised of various cash and equity elements, which is structured generally as follows:

* General RONA and Converted RONA, which are based on our return on net assets.

We provide base salaries, employee benefits and executive perquisites primarily to ensure that our executive compensation program remains competitive to attract, retain and motivate the individuals needed to implement and advance our strategies and goals. In addition, as illustrated in the following

table, we provide each element of annual cash incentive compensation and each element of long-term incentive compensation primarily to encourage and reward performance that implements and advances The Win Strategy, in particular, our strategies and goals relating to financial performance and profitable growth, aligning such elements with our performance in certain key financial metrics that we use to measure the overall performance of our business.

The following table shows the behaviors, key financial metrics and fiscal year 2019 results driven by each element ofat-risk compensation provided to the Named Executive Officers.

Element of Compensation

Encourages executive officers to maximize...

By focusing on various key business strategies, such as...

Fiscal year 2019 results...

RONA Bonuses (General and Converted) (cash)

return on net assets

value pricing and strategic supply chain, market-driven innovation, system solutions and strong distribution channels

Our return on consolidated net assets was above target.

Target Incentive Bonuses (cash)

free cash flow

continuous improvement in net income, lean initiatives, inventory controls, collection of receivables, control of payables and capital expenditures, and the ability to finance dividends, acquisitions and product innovations

Our operating cash flows were $1.730 billion or 12.08% of sales, resulting in a free cash flow margin of 12.12%.*

Profitable Growth Incentive Plan** (cash)

sales growth (organic and through acquisitions)

profitable and sustainable sales growth

The Profitable Growth Incentive Plan multiplier was applied to Mr. Malone’s and Ms. Parmentier’s General RONA Bonus with the effect of increasing both Mr. Malone’s General RONA Bonus payout by approximately 30% and Ms. Parmentier’s General RONA Bonus by approximately 2%.

LTIP Awards (equity)

long-term sales growth, earnings per share growth, and growth in average return on invested capital

market-driven innovation,on-time delivery of quality products, value-added services and systems, strategic supply chain, lean enterprise, value pricing and profitable growth

Our results for average return on invested capital were between the median and top quartile performance levels, and our results for revenue growth and earnings per share growth were at top quartile, resulting in a payout at 183.52% of target.

Stock Incentives/Restricted Stock Units (equity)

our stock price

sustained profitable growth and financial and operational performance that contribute to appreciation of our stock price

Our average daily closing per share stock price was $167.99 in fiscal year 2019, as compared to $177.39 in fiscal year 2018.

* Free cash flow margin is calculated as disclosed on page 35

** Officer participation on our Profitable Growth Incentive Plan is limited to our operating group presidents; as such, Mr. Malone (Vice President and President—Filtration Group) and Ms. Parmentier (Vice President and President—Motion Systems Group) are the only Named Executive Officers who were eligible for the Profitable Growth Incentive Plan in fiscal year 2019.

ADMINISTRATION, OVERSIGHTAND DETERMINATIONOF EXECUTIVE COMPENSATION

Human Resources and Compensation Committee

The Human Resources and Compensation Committee, which we refer to in this Compensation Discussion and Analysis as the Committee, consists solely of independent Directors and has various duties and responsibilities with respect to the administration, oversight and determination of executive compensation. As described in the Committee’s Charter, which is posted and available on the Corporate Governance page of our investor relations website at www.phstock.com, these duties and responsibilities include:

The Committee also retains the discretion to authorize periodic compensation adjustments due to promotions or increases in the responsibilities of our executive officers.

In fulfilling its duties and responsibilities, the Committee seeks periodic input, advice and recommendations from various sources, including our Board of Directors, our executive officers and the Committee’s independent executive compensation consultant. The Committee is not bound by that input or advice or those recommendations. The Committee at all times exercises independent discretion in its executive compensation decisions.

Board of Directors

Our Board of Directors approves all incentive compensation plans and equity-based plans reviewed and recommended by the Committee and all other plans and programs which, by their terms, require approval of our Board. Our Board does not authorize or approve any other specific executive compensation matters. Our Board of Directors oversees the Committee’s activities and performance, including the identification, evaluation and monitoring of risks arising from our compensation policies and practices, and reviews all material information relating to executive compensation matters approved by the Committee. This oversight ensures that the Committee fulfills its duties and responsibilities and that the executive compensation program is reasonable and appropriate, meets its objectives and effectively serves the interests of our business and our shareholders.

Executive Officers

Our executive officers also play a role in the administration, oversight and determination of executive compensation. At the beginning of each fiscal year, each executive officer sets annual performance goals for his or her direct reports, which may include other executive officers. The performance goals are designed to promote individual performance consistent with the strategies and goals of The Win Strategy. Throughout the fiscal year, each executive officer’s performance is reviewed and evaluated against his or her performance goals. At the end of the fiscal year, each executive officer conducts a final performance review for each of his or her direct reports. Based on those reviews, our executive officers, other than our Chief Executive Officer, recommend any annual compensation adjustments and awards for their executive officer direct reports to our Chief Executive Officer.

Our Chief Executive Officer similarly reviews and evaluates his direct reports, which include each of the other Named Executive Officers except for Mr. Malone and Ms. Parmentier who are reviewed

and evaluated by Mr. Banks. Our Chief Executive Officer also reviews and evaluates the recommendations made with respect to all of our other executive officers and makes any modifications that he deems appropriate. Our Chief Executive Officer then recommends to the Committee annual compensation adjustments and awards for all of our executive officers other than himself.

Our Chief Executive Officer, our Chief Operating Officer, our Executive Vice President—Human Resources & External Affairs and our Secretary attend all meetings of the Committee other than executive sessions, and neither our Chief Executive Officer nor our Chief Operating Officer attends any meetings relating to his performance or compensation. Our executive officers prepare and provide to the Committee performance summaries for certain executive officers, which are used by the Committee to understand and measure the performance and effectiveness of our annual cash incentive compensation and long-term incentive compensation. Our executive officers also periodically consult with and assist the Committee in calculating incentive compensation payouts, establishing and monitoring performance goals and addressing other appropriate executive compensation matters.

COMPENSATION CONSULTANTSAND BENCHMARKING

The Committee regularly monitors, reviews and evaluates our executive compensation program to ensure that it provides reasonable compensation ranges at competitive, appropriate and effective levels. The Committee engages Mercer Human Resource Consulting, an independent human resources and compensation consulting firm, which we refer to as Mercer, to assist the Committee in its monitoring, review and evaluation responsibilities, and to otherwise provide assistance and guidance to the Committee on executive officer and Director compensation matters. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies, Inc. The Committee first engaged Mercer in fiscal year 2009 following a robust procurement process involving multiple consulting firms. The Committee selected Mercer based on its level of expertise and financial and strategic fit. Mercer reports directly to the Committee and attends all meetings of the Committee. The Committee has sole authority for the appointment, removal, replacement, compensation and oversight of Mercer and its affiliates for executive officer and Director compensation matters.

Mercer provides a wide range of executive officer and Director compensation consulting services for the Committee. Mercer prepares and provides to the Committee a comprehensive annual review of base salaries, target annual cash incentive compensation, target long-term incentive compensation and target total cash and direct compensation for all of our executive officers. Mercer uses this annual review to advise the Committee with respect to the effectiveness and competitiveness of our executive compensation program. The Committee considers this annual review when establishing compensation levels and otherwise to ensure that our executive compensation program remains competitive and effective.

Mercer uses proxy statement data and surveys published by leading human resources and compensation consultants to conduct market analyses of base salaries, target annual bonuses, target long-term incentive compensation and target total cash and direct compensation offered to executives of other diversified industrial companies with revenues and market values comparable to ours, which we refer to as the Peer Group or Peer Group companies. Mercer also uses broader market data on companies outside of the Peer Group to the extent that it is available and appropriate.

The Committee regularly reviews and, when necessary or advisable, updates the Peer Group to make sure it consists of companies that directly compete with us for talented employees and shareholder investment, and it otherwise represents a meaningful group of peers. In evaluating the Peer Group companies, the Committee looks for companies in the Diversified Industrials sector with

characteristics and business strategies similar to ours. The Peer Group companies for fiscal year 2019 remained the same as fiscal year 2018 and consisted of the following companies:

Mercer also provided other compensation consulting services to the Committee during fiscal year 2019, including:

In fiscal year 2019, we paid $232,945 in fees, administrative charges,out-of-pocket expenses and other costs to Mercer for executive officer and Director compensation consulting services provided to the Committee.

We also directly engage Marsh & McLennan Companies, Inc. and its affiliates (including Mercer) in the ordinary course of business, without the approval of our Board of Directors or the Committee, to provide services in areas other than executive officer and Director compensation. These additional services included:

In fiscal year 2019, we paid $1,242,045 in fees, administrative charges, commissions,out-of-pocket expenses and other costs to Marsh & McLennan Companies, Inc. and its affiliates (including Mercer) for these additional services. The majority of these fees were not paid pursuant to

engagements of Marsh & McLennan Companies, Inc. by management, but were rather either paid by our third-party administrators to Marsh & McLennan Companies, Inc. relating to risk insurance and for insurance and prescription drug services provided under our employee health and welfare plans, or were direct engagements with Marsh & McLennan Companies, Inc. made by various divisions worldwide for market surveys related to those particular divisions. The consolidated revenues of Marsh & McLennan Companies, Inc. were $14.95 billion as reported in its Annual Report on Form10-K for the fiscal year ended December 31, 2018.

The Committee has considered and assessed all relevant factors, including but not limited to those set forth in Rule10C-1(b)(4)(i) through (vi) under the Securities Exchange Act of 1934, that could give rise to a potential conflict of interest with respect to Mercer. Based on this review, we are not aware of any conflict of interest that has been raised by the work performed by Mercer. The Committee also periodically reviews the relationship with Mercer to determine whether sufficient internal safeguards are in place to ensure that Mercer provides services to the Committee independent of any influence from management. The Committee identified the following safeguards:

GENERAL POLICIES AND PRACTICES RELATING TO EXECUTIVE COMPENSATION

Allocation of Executive Compensation

The Committee seeks to provide compensation, employee benefits and executive perquisites which are competitive with the market and help us attract, retain and motivate present and future executive officers. Annually, base salaries, target annual cash incentive compensation and long-term incentive compensation for each executive officer is compared to the median of companies included in Mercer’s annual review with the objective that, in the aggregate, our target compensation generally remains at the median of the Peer Group companies.

When deciding whether to increase or decrease the amount of any element of compensation, the Committee considers Mercer’s annual review, the annual performance reviews of the executive officers and the performance of our business as a whole. The Committee does not consider amounts realized from prior compensation in determining the levels of compensation paid to executive officers.

To ensure that our executive compensation program meets its objectives to drive and support The Win Strategy, the Committee allocates the majority of compensation for executive officers to annual cash incentive compensation and long-term incentive compensation. Each of theat-risk elements of compensation within those categories is directly tied to appreciation of our stock price and/or to significant financial and operational performance goals. More thanone-half of the targeted total compensation for the executive officers is, therefore, “at risk” and may significantly fluctuate from year to year based on our financial, operational and stock performance. In addition, the Committee makes sure that executive officers have a greater proportion of their total compensation allocated to theseat-risk elements than other employees. The Committee structures the program in this manner to better align the financial interests of our executive officers with the financial interests of our shareholders, to better ensure a“pay-for-performance” result and to promote internal equity by recognizing that our executive officers, as compared to other employees, have greater responsibility and influence over the performance of our business.

Our executive compensation program is also structured to offer a reasonable balance of annual and long-term, as well as cash and equity, elements of compensation. The program provides a mix of those elements specifically designed to encourage and reward performance that contributes to the advancement of The Win Strategy. The Committee does not have any formal policies or guidelines with respect to the allocation of executive compensation between annual and long-term elements, cash and equity elements or different forms of equity elements. In practice, however, the Committee has taken the following approaches.

The Committee generally makes all elements of executive compensation available to all executive officers and makes executive compensation decisions on a consistent and equitable basis. The Committee generally does not offer any element to an executive officer that is not available to other executive officers. As described beginning on page 39, however, the PG RONA Multiplier is applied only to our operating group presidents, and, therefore, Mr. Malone and Ms. Parmentier are our only Named Executive Officers to whom the PG RONA Multiplier was applied in fiscal year 2019. The Committee also occasionally grants retention and/or recognition awards to executive officers who make extraordinary contributions to the Company’s success, or for whom a retention incentive is appropriate.

Accounting and Tax Considerations

Our executive compensation program is structured to achieve flexibility, maximize benefits and minimize detriments to our business and our executive officers from a tax and accounting perspective. As a result, we continuously review and evaluate the impact of changes in tax laws and accounting practices and interpretations and similar factors affecting our executive compensation program. For example, Financial Accounting Standards Board ASC Topic 718, which results in recognition of compensation expense for Stock Incentives, and Section 409A of the Internal Revenue Code, which impacts deferred compensation arrangements, are considered as we evaluate structure and implement changes to the program.

In addition, our executive compensation program has historically been designed to allow us to deduct compensation payments for tax purposes. For example, while the Committee believes that tax deduction is only one of several relevant considerations in setting compensation, the Committee generally tried to make sure that annual cash incentive compensation and long-term incentive compensation qualified as fully deductible “performance-based” compensation under Section 162(m) of the Internal Revenue Code.

The Tax Cuts and Jobs Act, enacted December 22, 2017, included a number of significant changes to Section 162(m), such as the repeal of the “performance-based” compensation exemption and the expansion of the definition of “covered employees” (for example, by including the chief financial officer as a covered employee). As a result of these changes, compensation to each Named Executive Officer in excess of $1,000,000 generally will no longer be tax deductible. In addition, each Named Executive Officer will be subject to the limit under Section 162(m) for all future tax years. We will continue to comply with the requirements of Section 162(m) to the extent to which our outstanding awards are determined to be tax deductible under the transitional relief; however, there are still uncertainties regarding the scope of transitional relief available. The Committee may also determine that certain good governance practices of Section 162(m) should remain in place, such as establishing performance goals within the first ninety days of a performance period, selecting performance goals that are set forth in our 2016 Omnibus Stock Incentive Plan and requiring the Committee to certify results prior to the payout of any award. The Committee, however, reserves the right to modify any compensation program if it determines that such modification is consistent with our business needs.

Committee Discretion

The Committee does not change thepre-determined performance goals or increase the amount of anyat-risk compensation following the grant date except as permitted by applicable laws and regulations. The Committee may increase the amount of any award of annual cash incentive compensation made outside of the Performance Bonus Plan if appropriate to account for corporate policy changes, executive compensation program changes and major corporate programs, and to account for the negative impact of acquisitions on goodwill and amortization expense, losses on dispositions of real property during plant moves or shutdowns and other unexpected occurrences that negatively impact awards. The Committee has historically exercised this discretion only with respect to General RONA Bonuses (to encourage our employees to engage in activities and initiatives that drive and support The Win Strategy but may have an adverse impact on General RONA Bonuses), and once used such discretion with respect to Target Incentive Bonuses.

The Committee may reduce the amount of any award of annual cash incentive compensation or long-term incentive compensation made outside of the Performance Bonus Plan other than Stock Incentives. The Committee also has the discretion to reduce the amount of any award made under the Performance Bonus Plan as long as the award, if eligible for such treatment, continues to qualify as “performance-based” compensation under Section 162(m). The Committee retains this downward discretion for the following purposes:

The Committee has historically exercised this downward discretion with respect to General RONA Bonuses awarded under the Performance Bonus Plan to the Chief Executive Officer, the Chief Financial Officer and certain other executive officers. At the beginning of the year, the Committee determines for each of these executive officers a General RONA Bonus award opportunity that is large enough to ensure that we meet our objectives for annual cash incentive compensation and, at the same time, preserve the ability of the Committee to exercise its discretion to reduce the amount of the award payout to an appropriate level as compared to the final payouts made to executive officers who receive annual cash incentive compensation outside the Performance Bonus Plan and after taking into account individual performance and contributions to the success of our business. In addition, our calculation methodology for LTIP Award payouts also allows the Committee to exercise this discretion with respect to LTIP Award payouts.

ELEMENTS OF EXECUTIVE COMPENSATION.COMPENSATION

Our executive compensation program provides the Named Executive Officers with the elements of compensation described below. All of these elements are designed to work together to contribute to our continuing effort to achievetop-quartile performance among our peers and increaseencourage behavior that promotes long-term value creation for our stock price by pursuingshareholders within the strategies and goalsframework of The Win Strategy^TM.Strategy.

Base Salaries.Salaries

Each of the Named Executive Officers receives an annual base salary paid monthly, as compensation for services rendered during the fiscal year. We provide base salaries to:

The Committee establishes a base salary range for each Named Executive Officer by using Mercer’s annual review to analyze base salaries of persons holding comparable positions within the companies included in the annual review.Peer Group companies. The Committee determines the base salary for each Named Executive Officer for the next fiscal year based on the Named Executive Officer’s annual performance review, and compares the amount to the applicable market range to make sure that it is reasonable. The Committee may increase base salaries, where

appropriate, periodically throughout the fiscal year based on the results of interim performance reviews. The Committee generally tries to target base salary amounts at approximately the median of the companies included in Mercer’s annual review.Peer Group companies. During fiscal year 2018,2019, the Named Executive Officers received the base salaries included in the “Salary” column of the Summary Compensation Table for Fiscal Year 2018 on page 48.2019.

Annual Cash Incentive Compensation.Compensation

Our executive officers are eligible to receive annual cash incentive compensation based onpre-determined financial and growth objectives that are dependent on free cash flow margin, return on net assets and revenue growth. This category of compensation consists of three specific elements, which we refer to as Target Incentive Bonuses, General RONA Bonuses, and Converted RONA Bonuses. All of the Named Executive Officers are eligible to receive Target Incentive Bonuses, General RONA Bonuses and Converted RONA Bonuses. As described beginning on page 35,39, Mr. Malone isand Ms. Parmentier are the only Named Executive OfficerOfficers whose General RONA Bonus is subject to the application of our Profitable Growth Incentive Plan, which we refer to as the PGI Plan.

The Committee allocates a significant portion of the total cash compensation for executive officers to annual cash incentive compensation, which is wholly dependent on achievingpre-determined financial and operational goals. At the beginning of fiscal year 2018,2019, Target Incentive Bonuses, General RONA Bonuses and Converted RONA Bonuses, at target, represented the Committee set the following target percentages of base salary represented by Target Incentive Bonuses and General and Converted RONA Bonuses for each of our Named Executive Officers:

The Committeepre-determines the performance measures applicable to each element by analyzing our annual goals and objectives for each performance measure and, for Target Incentive Bonuses, Mercer’s annual review. The Committee directly and materially links annual cash incentive compensation to performance that drives and supports The Win Strategy^TM.Strategy.

Target Incentive Bonuses.Bonuses

During fiscal year 2018,2019, the Named Executive Officers received annual cash incentive compensation based on our free cash flow margin, which we refer to as Target Incentive Bonuses. Free cash flow margin is calculated as the percentage of sales represented by actual operating cash flow less capital expenditures, excluding any discretionary pension contributions made during the fiscal year.

The Committee identified free cash flow margin as a performance measure critical to the profitable growth and financial performance and profitable growth goals of The Win Strategy^TM.Strategy. Maximizing free cash flow allows us to continue to pay annual dividends, strategically acquire our outstanding shares, and reinvest in our business by funding innovation and financing growth through acquisitions of businesses and technologies. Target Incentive Bonuses encourage executive officers to maximize free cash flow by increasing net income, implementing lean initiatives, controlling inventory, collecting receivables, controlling accounts payable, and optimizing capital expenditures. We have also identified a strong correlation between increases in free cash flow and increases in operating earnings.

Target Incentive Bonuses are designed to directly reward executive officers for free cash flow margin performance against our annual plan and the performance of the Peer Group. Specifically, the Committee determines the target awardsaward opportunity for each of the executive officers and establishes the levels of performance for threshold, target and maximum payouts after evaluating our annual plan for free cash flow margin and theone-year, three-year and five-year average free cash flow margin within the Peer Group. Based on this data, the Committee estimated that 5%5.5%, 8%8.5% and 11%11.5% free cash flow margins would represent bottom-quartile, median andtop-quartile free cash flow margin results, respectively, within the Peer Group companies during fiscal year 2018,2019. After review and developedconsideration of such data and our annual plan for free cash flow margin, the Committee increased the free cash flow payout thresholds for our Target Incentive Bonuses in fiscal year 2019 from 5.0% to 5.5% for a 50% payout, 8.0% to 8.5% for a 100% payout, and 11% to 11.5% for a 200% payout.

The following table to illustrateillustrates how final fiscal year 20182019 Target Incentive Bonus amounts would be calculated:

This table illustrates that each recipient of a Target Incentive Bonus would receive ayear-end payout of 100% of his or her target award if our free cash flow margin for fiscal year 20182019 was 8%8.5% and a maximum payout of 200% of his or her target award if our free cash flow margin was greater than or equal to 11%11.5%, representingtop-quartile free cash flow margin. This table also illustrates that no Target Incentive Bonuses would be paid if our free cash flow margin for fiscal year 20182019 was less than 5%5.5%. The payout percentage that is applied is interpolated on a linear basis between the points in the above table.

In addition,consideration of the foregoing, at the beginning of fiscal year 2018,2019, the Committee approved the following target awardsTarget Incentive Bonuses for each of the Named Executive Officers:

Our actual free cash flow margin for fiscal year 20182019 was 9.46%12.12% (calculated by taking the difference of fiscal year 2019 cash flow from operating activities forof $1,730,140,000 less fiscal year 2018 of $1,600,287,000 less2019 capital expenditures forof $195,089,000, plus a $200,000,000 discretionary pension contribution, and dividing the result by fiscal year 2018 of $247,667,000 and dividing it by2019 net sales for fiscal year 2018 of $14,302,392,000)$14,320,324,000). As a result,Accordingly, each of the Named Executive Officers received 148.67%200% of their targetTarget Incentive Bonus award. These amounts are included in the“Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for Fiscal Year 2018 on page 48.2019.

Target Incentive Bonuses are paid in one lump sum in August for each executive officer whose Target Incentive Bonus is awarded under the Performance Bonus Plan, and are paid in three installments in March, June and August for all other executive officers. The March and June payments are estimated based onyear-to-date results, and the August payment represents the balance of the Target Incentive Bonus payable based on the actual results for the entire fiscal year. We generally hold back 25% of theyear-to-date estimate from each March and June payment to ensure that we have the flexibility to reconcile the August payments to finalyear-end results. All payments are made in cash, except that the August payment may, at the election of the recipient, be deferred as a credit to the recipient’s account under the Executive Deferral Plan, which we describe beginning on page 41.in the section,“Non-Qualified Benefit Plans”.

General RONA Bonuses and Converted RONA Bonuses.Bonuses

During fiscal year 2018,2019, each of the Named Executive Officers was eligible for, and received, annual cash incentive compensation based on our return on net assets, which we refer to as General RONA Bonuses and Converted RONA Bonuses. The Committee awards General RONA Bonuses to our executive officers to encourage and reward performance which maximizes our returns on net assets. The Committee awards Converted RONA Bonuses to our executive officers in place of certain executive perquisites.

The performance measures used to determine the amount of the payouts on General RONA Bonuses are as follows:

The performance measure used to determine the amount of the payouts on Converted RONA Bonuses is the return on average net assets for all of our divisions.

Return on net assets is calculated by dividing earnings(year-to-date segment operating income) by average assets (average of inventory, accounts receivable, prepaid expenses, property, plant and equipment, goodwill and intangibles, less trade accounts payable and contract reserves, at the beginning of the fiscal year and at the end of each applicablequarter-end to date). quarter.

The Committee identified return on net assets as a performance measure critical to the financial performance and profitable growth goals of The Win Strategy^TM.Strategy. The Committee uses General RONA Bonuses and Converted RONA Bonuses to encourage executive officers and other employees to increase segment operating income and control net average assets by reducing investments in assets and increasing efficiency in managing those investments. In addition, General RONA Bonuses and Converted RONA Bonuses encourage executive officers and other employees to increase sales and to reduce operating expenses and other costs associated with managing our working capital and investments. The Committee also believes that offering Converted RONA Bonuses in lieu of certain eliminated executive perquisites is appropriate to keep us competitive in attracting, retaining, and motivating present and future executive officers and to hold our executive officers accountable for results.

General RONA Bonuses awarded under the Performance Bonus Plan are paid in one lump sum in August. General RONA Bonuses awarded outside the Performance Bonus Plan and Converted RONA Bonuses, which are not awarded under the Performance Bonus Plan, are paid in four installments in October, January, April and August. Each installment is based on actualyear-to-date results. We generally hold back 25% of theyear-end estimate from each October, January and April installment to ensure that we have the flexibility to reconcile the August payments towith finalyear-end results. All payments are made in cash, except that General RONA Bonus payments made in August may, at the election of the recipient, be deferred as a credit to the recipient’s Executive Deferral Plan account.

The Committee determines and calculates General RONA Bonuses and Converted RONA Bonuses as follows:

•

Converting Target Amounts to “RONA shares”: Once determined, the target amounts set for General RONA Bonuses and Converted RONA Bonuses are converted into a number of “RONA shares” based on our annual goals for return on net assets. In fiscal year 2018,2019, we established and communicated an overall goal of 21.4% return on net assets on a consolidated basis, with a target “multiple” of 5% onof base salary for each “share.”“share”. The target amounts were converted into “shares” at the 5% target multiple by dividing the executive officer’s General RONA Bonus or Converted RONA Bonus target by the product of the executive officer’s base salary and the 5% target “multiple.”

The following tables show each of the Named Executive Officers’ General RONA Bonus and Converted RONA Bonus target amounts, “shares”, “multiples” and actual amounts.

Each of the Named Executive Officers received the General RONA Bonuses and Converted RONA Bonuses included in the“Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for Fiscal Year 2018 on page 48.2019. In arriving at these amounts, the Committee compared the original target award opportunities for executive officers receiving General RONA Bonuses under the Performance Bonus Plan (including each of the Named Executive Officers)Officers other than Ms. Parmentier) with the final payout amounts of annual cash incentive compensation for the other executive officers, and evaluated the individual performance and contributions to the success of our business of the executive officers receiving General RONA Bonuses under the Performance Bonus Plan. Based on that comparison and evaluation, the Committee determined that it would be appropriate to exercise downward discretion and reduce the final General RONA Bonus payout amounts for General RONA Bonuses awarded to the Named Executive Officers under the Performance Bonus Plan between 32% and 40%, with an average reduction ofby approximately 35%. The amounts reported in the tabletables above represent the final amounts paid to the Named Executive Officers following that exercise of discretion.

Converted RONA Bonus payments are not eligible for deferral under the Executive Deferral Plan, the Retirement Savings Plan, described on page 40, or the Savings Restoration Plan described on page 41.Plan. Converted RONA Bonuses are also not considered in calculating benefits under the Pension Plan, described beginning on page 39, the Pension Restoration Plan, described beginning on page 42, the Supplemental Retirement Program, described on page 43, the Defined Contribution Supplemental Retirement Program, described on page 43, the Executive Long-Term Disability Plan, described on page 44, and the Change in Control Agreements described on page 44.Agreements. The Committee determined that it would not be appropriate to allow Converted RONA Bonuses to be deferred under those plans or considered in those calculations because they are awarded in place ofintended to replace executive perquisites which, historically, were not used or taken into account for those purposes.

Profitable Growth Incentive Plan:Plan

Our PGI Plan is designed to implement the strategies and advance the goals of The Win Strategy^TM by encouraging and rewarding participants for sales growth, organically and through acquisitions.acquisitions at the operating group or division level. The Committee identified sales growth, organically and through acquisitions, as a performance measure critical to advance the financial performance and profitable growth goals of The Win Strategy^TM.Strategy. Under our PGI Plan, the General RONA Bonuses for participants may be adjusted after each fiscal year on the basis of a multiplier, which we refer to as the PG RONA Multiplier, that is determined by the three-year compound annual growth rate of external customer sales for the applicable operating group or division, which we refer to as3-year CAGR. The following

table sets forth examples of the PG RONA Multiplier that may be applied to, and which may adjust,increase or decrease, the General RONA Bonuses under our PGI Plan after each fiscal year:

The PG RONA Multipliers that may be applied areMultiplier is interpolated on a linear basis between the points in the above table. Of our executive officers, only our operating group presidents’ General RONA Bonuses are subject to our PGI Plan, and, therefore, the PGI Plan applies to Mr. Malone and Ms. Parmentier, but not to any of our other Named Executive Officers. During fiscal year 2018,2019, the three-year CAGR applicable toto: Mr. Malone’s General RONA Bonus was 27.41%29.30%, resulting in a PG RONA Multiplier of 130%. This; and to Ms. Parmentier’s General RONA Bonus was 6.17%, resulting in a PG RONA Multiplier wasof 102%. These PG RONA Multipliers were applied to Mr. Malone’s and Ms. Parmentier’s final RONA BonusBonuses causing the increase from a 4.43%5.24% General RONA Bonus multiple to 5.76%,6.81% for Mr. Malone, and the increase from a 6.58% General RONA Bonus multiple to 6.70% for Ms.  Parmentier, as reflected in the General RONA Bonuses chart above.

Long-Term Incentive Compensation.Compensation

The Named Executive Officers receive long-term incentive compensation consisting of long-term incentive performance awards, which we refer to as LTIP Awards, and stock appreciation rights, which we refer to as Stock Incentives. The target amounts of LTIP Awards and the number of Stock Incentives awarded to the Named Executive Officers are based on similar compensation awarded to persons holding comparable positions within the companies includedPeer Group companies. In fiscal year 2019, the Committee also granted Messrs. Banks and Malone and Ms. Parmentier restricted stock units for retention purposes and in Mercer’s annual review.recognition of their extraordinary contributions to our success in furtherance of The Win Strategy.

LTIP Awards and Stock Incentives encourage long-term focus on shareholder value and are directly and materially linked to performance that advances both the financial performance and profitable growth goals of The Win Strategy^TM over the long-term. LTIP Award payouts are based on a comparison of our performance against the Peer Group companies in certain key financial metrics over a three-year performance period. The holders of Stock Incentives realize a payout only if our stock price increases above the applicable grant price over a long-termthree-yearpro-rata vesting period. LTIP Awards and Stock Incentives work together to align the long-term financial interests of our executive officers and shareholders.

LTIP Awards are granted to eligible employees on an annual basis at the January meeting of the Committee. This meeting is typically scheduled at least one year in advance. The only exceptions to this practice are thatpro-rated LTIP Awards are granted to individuals who become executive officers, are promoted to new executive officer positions, or are given increased responsibilities during a performance period.

Stock Incentives are granted to eligible employees on an annual basis at the August meeting of the Committee. This meeting is typically scheduled at least one year in advance.

The Committee does not grant LTIP Awards or Stock Incentives to executive officers in anticipation of the release of significant positive earnings announcements or other materialnon-public information likely to result in changes to the price of our common stock. Similarly, the Committee does not time the release of materialnon-public information based on Stock Incentive grant dates.

LTIP Awards.Awards

During the third quarter of fiscal year 2011, the Committee adopted a Long-Term Incentive Performance Plan under the Performance Bonus Plan, which we refer to as the Officer LTIP Plan. The Officer LTIP Plan, establishesto

establish the terms and conditions for LTIP Awards granted to our executive officers during and after fiscal year 2011.

During the third quarter of fiscal year 2018,2019, the Committee granted to each of the Named Executive Officers, under our Officer LTIP Plan and our 2016 Omnibus Stock Incentive Plan, which we refer to as the 2016 Equity Plan, the following target LTIP Awards based on the following target LTIP Award values:

The target LTIP Award shares shown in this table (along with the awarded dividend equivalent units applicable to the calendar year2019-20-21 performance period) are also included in the “Estimated Future Payouts Under Equity Incentive Plan Awards—Target” column of the Grants of Plan-Based Awards for Fiscal Year 2018 table on page 50.2019 table. The “Stock Awards” column of the Summary Compensation Table for Fiscal Year 2018 on page 482019 includes the aggregate grant date fair value of these awards in fiscal year 2018.2019.

Under the Officer LTIP Plan, the actual payouts for these LTIP Awards will be calculated following the three-year performance period ending December 31, 2020,2021, as follows:

To provide the Committee with guidelines for exercising its discretion, the Officer LTIP Plan provides that the Committee may, among other things, following the calendar year2018-19-202019-20-21 performance period compare our revenue growth, growth in fully diluted earnings per share from continuing operations and average return on invested capital from continuing operations against the corresponding results for all members of the Peer Group companies during their three most recent fiscal years. The Committee has identified long-term revenue growth, earnings per share growth and return on invested capital as performance measures critical to the financial performance and profitable growth goals of The Win Strategy^TM because, among other things, they encourage our executive officers to provideon-time delivery of quality products, value-added services and systems, strategic procurement of goods and services,supply chain, lean operations, strategicenterprise, value pricing, productmarket-driven innovation and strong distribution.

Specifically, the Officer LTIP Plan provides for using weights of 20% for revenue growth, 40% for growth in fully diluted earnings per share from continuing operations, and 40% for average return on invested capital from continuing operations for the applicable performance periods, and the following table to calculate final LTIP Award payouts:

At the end of calendar year 2020,2021, if we achieve an average return on average equity or an average free cash flow margin of 4% or greater, the Committee may exercise discretion in determining the appropriate payout by determining our percentile rank as compared to the Peer Group for each of the three performance measures. Using this table, the Committee will calculate the portion of the target LTIP Award value earned with respect to each performance measure. The Committee will multiply each portion by its applicable weight and add up the total to determine the total LTIP Award payout for the calendar year2018-19-202019-20-21 performance period. This table illustrates that recipients of LTIP Awards granted during calendar year 20182019 will receive the maximum payout of 200% of the applicable target LTIP Award value if we rank at or above the 75th percentile among the Peer Group companies in the aggregate based on all three performance measures, and will receive no payout if we rank at or below the 35th percentile in the aggregate based on all three performance measures. The payout percentage that is applied is interpolated on a linear basis between the points in the above table.

LTIP Award payouts for the calendar year2018-19-202019-20-21 performance period may only be paid after the end of the applicable three-year performance period in unrestricted shares of our common stock.

The Committee designed these LTIP Awards to reward executive officers directly in relation to our long-term performance against the Peer Group. The Committee determined that requiring performance in excess of the 50th percentile for a payout in excess of 100% would encourage executive officers to achieve performance above median Peer Group performance. The Committee also determined that requiring performance at the 75th percentile for a maximum payout, and awarding no payout for performance at or below the 35th percentile, would further encourage executive officers to achievetop-quartile performance within the Peer Group.Group companies.

In addition, each of the Named Executive Officers received a payout under LTIP Awards granted during the third quarter of fiscal year 20152016 for the three-year performance period ending December 31, 2017.2018. We exceeded our threshold performance measures with an average return on average equity for the three-year performance period of 17.4%20.4% and average free cash flow margin for the three-year performance period of 9.8%10.4%. The Committee decided to exercise discretion to determine the appropriate payout and determined that we achieved the following percentile rankings among the Peer Group companies with respect to the LTIP Award performance measures for the calendar year2015-16-172016-17-18 performance period:

As a result, each of the Named Executive Officers received the LTIP Award payout during fiscal year 20182019 included in the “Number of Shares Acquired on Vesting” column of the Option Exercises and Stock Vested for Fiscal Year 2018 table on page 53.2019 table. Each payment represents a total payout of 175%183.52% of the target LTIP Award values for the three-year performance period ended December 31, 2017.2018.

Stock Incentives.Incentives

Each of the Named Executive Officers received Stock Incentives under our 2016 Equity Plan during the first quarter of fiscal year 2018.2019. The Committee grants Stock Incentives to executive officers to encourage and reward efforts and accomplishments that advance the goals of The Win Strategy^TM and make other contributions to maximize our stock price.long-term shareholder value.

The number of Stock Incentives granted by the Committee is determined by utilizing the Black-Scholes valuation model to convert a target dollar value into the number of Stock Incentives to be granted. The Committee uses Mercer’s annual review to ensure the target dollar values are reasonable in relation to the median

of similar compensation offered within the companies included in Mercer’s annual review. The following table shows the Target Value and the number of Stock Incentives granted to each of the Named Executive Officers in the first quarter of fiscal year 2018:2019:

The fiscal year 20182019 Stock Incentive grants shown above are also included in the “All Other Option Awards: Number of Securities Underlying Options” column of the Grants of Plan-Based Awards for Fiscal Year 20182019 table on page 50 and the “Option Awards—Number of Securities Underlying Unexercised Options—Unexercisable” column of the Outstanding Equity Awards at June 30, 2018 table beginning on page 51.2019 table. The “Option Awards” column of the Summary Compensation Table for Fiscal Year 2018 on page 482019 includes the aggregate grant date fair value of these awards in fiscal year 2018.2019.

As required by the terms of our 2016 Equity Plan, these fiscal year 20182019 Stock Incentives have an exercise price equal to the closing price of our common stock on the date of grant. The plan does not permit there-pricing of Stock Incentives. The Committee analyzed the terms of our 2016 Equity Plan and considered Mercer’s annual review to establish all other terms of these Stock Incentives. These fiscal year 20182019 Stock Incentives have aten-year term and vest inone-third increments over three years following the grant date. When vested, each Stock Incentive will entitle the holder to receive the increase in value of one common share from the grant date to the date of exercise.

Upon exercise of fiscal year 20182019 Stock Incentives, common shares will be issued directly to the holder. The appreciation in these Stock Incentives will be calculated by subtracting the grant price from the fair market value of the common shares at exercise, and multiplying the result by the number of Stock Incentives exercised. The number of common shares to be issued is determined by dividing that appreciation by the market price of the common shares at exercise.

During fiscal year 2018,2019, none of the Named Executive Officers exercised Stock Incentives previously granted under our 2016 Equity Plan, 2009 Omnibus Stock Incentive Plan and 2003 Stock Incentive Plan,Plan.

Restricted Stock Units

During fiscal year 2019, the Committee granted retention and recognition awards of restricted stock units, which we refer to as RSUs, to the following Named Executive Officers for retention purposes and in recognition of their significant performance and contributions to the execution of the goals of The Win Strategy:

Each RSU represents the right to receive one share of common stock. The RSUs will vest in full on the applicable vesting date identified above, provided that the Named Executive Officer remains an active full-time employee throughout the vesting period. If the Named Executive Officer ceases to be employed by us for any reason, other than death, disability or a Change in Control as defined beginning on page 68, she or he will forfeit the entire award. In the event of the Named Executive Officer’s death, disability or a Change in Control prior to the applicable vesting date, the RSUs will vest immediately. Upon the applicable vesting date, the RSUs will be paid to the Named Executive Officer or her or his estate in shares of our common stock. The Named Executive Officer does not receive dividends nor does she or he have voting rights in the common shares underlying the RSUs, however, she or he does receive dividend equivalents.

The above described RSUs are included in the “Option“Estimated Future Payouts Under Equity Incentive Plan Awards—Number of Shares Acquired on Exercise”Target” column of the Option Exercises and Stock VestedGrants of Plan-Based Awards for Fiscal Year 2018 table on page 53.2019 table. The “Stock Awards” column of the Summary Compensation Table for Fiscal Year 2019 includes the aggregate grant date fair value of this award in fiscal year 2019.

Employee Benefits.Benefits

The Named Executive Officers are eligible to participate in various employee benefit plans and programs. These plans and programs reward experience, expertise, level of responsibility, continuity of leadership and advancement. We use these plans to ensure that our executive compensation program remains sufficiently competitive to attract, retain and motivate the executive officers and other employees necessary to advance the goals of The Win Strategy^TM.Strategy.

Qualified Benefit Plans.Plans

During fiscal year 2018,2019, the Named Executive Officers participated in the followingtax-qualified benefit plans and programs:

The Pension Plan is a qualified defined benefit pension plan in which most full-timenon-union U.S. salaried employees hired prior to April 1, 2004, participate. The Pension Plan offers normal retirement, early retirement and death benefits. The monthly normal retirement benefit is the greater of a minimum benefit and an amount based on final average pay. The minimum benefit and final average pay amounts are calculated as follows:

The amount of the benefit is reduced by 6% per year for each year prior to age 65 if retirement occurs and payments commence before age 65 and after age 55. We elected to freeze new participation in the Pension Plan in 2004. All participants as of April 1, 2004, were given the option to either remain in the Pension Plan or terminate in favor of maintaining a retirement income account under the Retirement Savings Plan. Employees hired after April 1, 2004, such as Messrs.including Mr. Malone and Leonti,Ms. Parmentier, were not eligible to participate in the Pension Plan and instead maintain a retirement income account under the Retirement Savings Plan. Each of the Named Executive Officers who are in the Pension Plan elected to remain in and continue to accrue benefits under the Pension Plan. All benefits accrued by employees who elected to terminate participation in the Pension Plan were frozen as of June 30, 2004. Those employees initiated their retirement income accounts on July 1, 2004.

The Retirement Savings Plan is a qualified defined contribution pension plan under Section 401(k) of the Internal Revenue Code. Most full-time U.S. employees are eligible to participate in the Retirement Savings Plan. Participants may makepre-tax andpost-tax contributions to the Retirement Savings Plan up to the applicable statutory limit. Converted RONA Bonuses are not eligible for deferral under the Retirement Savings Plan. We provide to each participant a matching contribution of 100% on the first 3% of pay contributed and 50% on the 4th and 5th percent of pay contributed on apre-tax basis or Roth basis. As described above, certain participants also maintain a retirement income account within the Retirement Savings Plan. We provide to each holder of a retirement income account an annual contribution equal to a percentage of the amount of the participant’s annual compensation

up to the Internal Revenue Service statutory limit (currently $275,000$280,000 per year), based on age and length of service. These contributions range from 0.5% to 6% of the participant’s compensation which does not exceed that limit. Participants accrue earnings on contributions based on the performance of various investment funds available within the Retirement Savings Plan. The contributions made by us under the Retirement Savings Plan for the Named Executive Officers during fiscal year 20182019 are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 20182019 on page 48.54.

Non-Qualified Benefit Plans.Plans

During fiscal year 2018,2019, the Named Executive Officers participated in the followingnon-qualified benefit plans and programs:

The Savings Restoration Plan is available to employees who earn base salaries equal to or in excess of $150,000 per year and who are otherwise eligible to participate in the plan. The Savings Restoration Plan was established to restore deferral opportunities and matching contributions lost because of statutory limits in the Retirement Savings Plan. Specifically, the Savings Restoration Plan allows executive officers to defer a portion of theirpre-tax compensation and receive matching contributions from us that would have been available under the Retirement Savings Plan if the Internal Revenue Service statutory limit did not exist. Converted RONA Bonuses are not eligible for deferral under the Savings Restoration Plan. Each Named Executive Officer may annually defer to his or her Savings Restoration Plan account any portion of the compensation that he or she cannot defer under the Retirement Savings Plan due to the statutory limit, other than Converted RONA Bonuses, up to the greater of 20% of base pay or $25,000. We provide to each participant a matching contribution of common stock equal to 100% on the first 3% of pay contributed and 50% on the 4th and 5th percent of pay contributed, reduced by the maximum matching contribution available to the participant under the Retirement Savings Plan. We also take into account the matching contributions made under the Retirement Savings Plan to ensure that the maximum match under both plans does not exceed $17,000. In addition, all participants who maintain a retirement income account within the Retirement Savings Plan also maintain a separate retirement income account within the Savings Restoration Plan. We provide to each holder of a retirement income account an annual contribution equal to a percentage of the amount of the participant’s annual compensation in excess of the Internal Revenue

Service statutory limit determined based on age and length of service. These contributions range from 0.5% to 6% of the amount of the participant’s compensation in excess of that limit. All deferrals and contributions are made under the Savings Restoration Plan by accounting entry rather than any physical exchange of cash or common stock. Participants also accrue earnings, on an accounting-entry basis, on deferrals based on the performance of various investment fund choices and on contributions based on the performance of our common stock. Participants are our unsecured creditors for their respective account balances. Account balances in the

Savings Restoration Plan and Executive Deferral Plan account balances are paid out upon any of the following events as indicated in the chart below.follows:

Our matching contributions made under the Savings Restoration Plan for the Named Executive Officers during fiscal year 20182019 are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2018 on page 48.2019. All contributions, earnings, withdrawals, distributions and aggregate balances for the Named Executive Officers participating in the Savings Restoration Plan during fiscal year 20182019 are included in the Nonqualified Deferred Compensation for Fiscal Year 2018 table on page 55.2019 table.

The Executive Deferral Plan is available to executive officers and certain other key employees. The Executive Deferral Plan provides executive officers with an opportunity to defer a portion of their compensation (in addition to that deferred under the Retirement Savings Plan and the Savings

Restoration Plan) on apre-tax basis, including Target Incentive Bonuses and General RONA Bonuses, and to accumulatetax-deferred earnings on the deferrals. LTIP Award payouts and Converted RONA Bonuses are not eligible for deferral under the Executive Deferral Plan. Each executive may defer to his or her account up to 80% of base salary and 80% of

General RONA Bonuses paid in August and Target Incentive Bonuses paid in August. Similar to the Savings Restoration Plan, all deferrals are made under the Executive Deferral Plan by accounting entry rather than any physical exchange of cash. Participants also accrue earnings on an accounting-entry basis based on the performance of various investment fund choices. Participants are our unsecured creditors for their respective account balances. Account balances in the Executive Deferral Plan are paid as indicated in the chart below. For those who were participants in the Executive Deferral Plan prior to January 1, 2016, prior to distribution, the balances are increased to reflect any“gross-up” amount necessary to offset federal excise taxes and anyafter-tax value the participant would have received if the account had remained in place and been paid as elected by the participant. Any balances on distribution to a participant in the Executive Deferral Plan who becomes a participant on or after January 1, 2016, are no longer increased to reflect any“gross-up” amount to offset federal excise taxes and anyafter-tax value the participant would have received if the account had remained in place and been paid as elected by the participant. All contributions, earnings, withdrawals, distributions and aggregate balances for the Named Executive Officers participating in the Executive Deferral Plan during fiscal year 20182019 are included in the Nonqualified Deferred Compensation for Fiscal Year 2018 table on page 55.2019 table.

Savings Restoration Plan and Executive Deferral Plan account balances are paid out upon any of the following events as follows:

The Pension Restoration Plan is available to all individuals who participate in the Pension Plan and who are otherwise eligible to participate in the Pension Restoration Plan. The Pension Restoration Plan was established to restore benefits lost because of statutory limits on the Pension Plan. Specifically, the benefits available under the

Pension Restoration Plan equal the amount that would be payable to the participant under the Pension Plan in excess of the Internal Revenue Service statutory limit if that limit did not exist and the participant had not elected to defer any compensation under the Savings Restoration Plan and the Executive Deferral Plan. Similar to the Pension Plan, Converted RONA Bonuses are not considered in calculating the benefits available under the Pension Restoration Plan.

The Supplemental Retirement Program was established to provide executive officers with retirement benefits supplemental to the benefits under the Pension Plan. The benefit provided under the Supplemental Retirement Program is intended, at age 65, to provide to participants with at least 15 years of service 55% of the average of the three highest years of base salary plus annual cash incentive compensation. Similar to the Pension Plan and the Pension Restoration Plan, Converted RONA Bonuses are not considered in calculating the benefits available under the Supplemental Retirement Program. LTIP Awards and Stock Incentives are also not considered in calculating the benefits available under the Supplemental Retirement Program. The benefit is subject to reduction for early retirement, less than 15 years of service, benefits under the Pension Plan, the Pension Restoration Plan and any of ournon-U.S. pension plans, 50% of primary social security benefits and 100% of any similarnon-U.S. state-provided retirement benefits, and contributions to the participant’s retirement income accounts under the Retirement Savings Plan and the Savings Restoration Plan. Participants vest at age 60, or at age 55 with the consent of the Committee, and with five years of participation in the Supplemental Retirement Program, or a lesser period established by the Committee at the time they become participants. To receive a benefit under the Supplemental Retirement Program, however, a vested participant must have at least five years of service. In January 2015, the Committee closed the Supplemental Retirement Program to new participants as of July 1, 2014.

The Defined Contribution Supplemental Retirement Program was established to provide executive officers and certain other key management employees with retirement benefits supplemental to the benefits under the Retirement Savings Plan and the Savings Restoration Plan. The Defined Contribution Supplemental Retirement Program was established to replace the Supplemental Retirement Program for executive officers who are designated as participants on or after July 1, 2014.

Depending on a participant’s salary grade on December 31 of each year, we provide an annualnon-discretionary employer contribution of 8%, 10% or 12% of a participant’s base salary, Target Incentive Bonus and General RONA Bonus that was paid during the calendar year. The Committee may determine to make an additional annual discretionary contribution to a designated participant’s account. Participants vest at age 60, or at age 55 with the consent of the Committee, and with five years of participation in the Defined Contribution Supplemental Retirement Program, or a lesser period established by the Committee at the time they become participants. To receive a benefit under the Defined Contribution Supplemental Retirement Program, however, a vested participant must have at least five years of service. Messrs.Mr. Malone and LeontiMs. Parmentier are our only Named Executive Officers who participate in the Defined Contribution Supplemental Retirement Program.

Our contributions made under the Defined Contribution Supplemental Retirement Program for Messrs.Mr. Malone and LeontiMs. Parmentier during fiscal year 20182019 are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2018 on page 48.2019. All contributions, earnings, withdrawals, distributions and aggregate balances for the Named Executive Officers participating in the Defined Contribution Supplemental Retirement Program during fiscal year 20182019 are included in the Nonqualified Deferred Compensation for Fiscal Year 2018 table on page 55.2019 table.

Health and Welfare Benefits.Benefits

The Named Executive Officers participated in various health and welfare programs generally available to all employees during fiscal year 2018.2019. The Named Executive Officers also participated in our Officer Life Insurance Plan and our Executive Long-Term Disability Plan.

Under the Officer Life Insurance Plan, we pay all required premiums for life insurance on executive officers who were participants prior to January 1, 2008 (which includes Named Executive Officers Messrs. Williams and

Banks) for the longer of 10 years or until the executive officer reaches age 65. For those executive officers who were participants after January 1, 2008 (which includes Named Executive Officers Ms.Mses. Suever and Messrs. MaloneParmentier and Leonti)Mr. Malone) we pay all required premiums for life insurance until retirement up to age 65. The premiums are designed to maintain death benefits equal to:

If the participant retires between ages 55 and 65, the post-retirement death benefit is reduced by 10% of base salary for each year prior to age 65 that the participant retires. The amount of the death benefit is adjusted each year on January 1st based on the participant’s base salary as of the preceding December 1st. The policies underlying the plan are cash value life insurance policies owned by the participants. The premiums we paid on behalf of the Named Executive Officers during fiscal year 20182019 are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2018 on page 48.2019.

The Executive Long-Term Disability Plan is intended to replace a reasonable amount of an executive officer’s income upon disability. The plan provides a total benefit in the event of a qualifying disability oftwo-thirds of base salary plus Target Incentive Bonuses and General RONA Bonuses (after applying the PG RONA Multiplier if applicable) paid during the calendar year ending December 31 of

the year prior to the disability, up to a maximum monthly benefit, in the case of Messrs. Williams Banks, and Malone,Banks and Ms. Suever, of $33,000, or, in the case of Mr. Leonti,Malone and Ms. Parmentier, of $35,000. Our executive officers are not eligible to receive the long-term disability benefit generally available to other employees.

Change in Control Agreements.Agreements

We are not a party to any written employment agreements with our executive officers. We have, however, entered into separate Change in Control Severance Agreements with our executive officers, which we refer to as the Change in Control Agreements. We are not obligated to pay severance to executive officers under any agreement other than the Change in Control Agreements. The executive officers are, however, eligible to receive severance upon termination for reasons other than a change in control in accordance with our general severance policy for salaried employees. The Change in Control Agreements are designed to attract, retain and motivate executive officers, provide for stability and continuity of management in the event of any actual or threatened change in control, encourage executive officers to remain in service after a change in control and ensure that executive officers are able to devote their entire attention to maximizing shareholder value and safeguarding employee interests in the event of a change in control. The Committee determined that the amounts payable under the Change in Control Agreements are reasonable and necessary to achieve those objectives. The Potential Payments upon Termination or Change of Control at June 30, 2018,2019, tables and the related narrative descriptions beginning on page 56 provide additional information on the Change in Control Agreements, including a brief discussion of the material provisions of the Change in Control Agreements beginning on pages 61 and 63 under the captions “Payments upon a Change in Control” and “Payments upon a Qualifying Termination in Connection with a Change in Control.”

Indemnification Agreements.Agreements

We enter into separate Indemnification Agreements with each of our executive officers. Each agreement remains in effect during and after employment with respect to any action taken while the individual serves as an executive officer. The agreements are designed to attract, retain and motivate executive officers by encouraging reasonable and measured risk-taking in the interests of our business and our shareholders, and protecting against liabilities incurred in the performance of their duties to the maximum extent permitted by Ohio law.

The agreements provide for indemnification for all expenses, including attorney fees, judgments, fines, and settlement amounts, that the executive officer incurs by reason of his or her service:

Executive Perquisites.Perquisites

During fiscal year 2018,2019, we made various executive perquisites available to each of the Named Executive Officers. These perquisites are offered to promote the business objectives for each perquisite as described below and to ensure that our executive compensation program remains competitive to attract, retain and motivate the individuals necessary to advance the goals of The Win Strategy^TM.Strategy. The costs of these perquisites for the Named Executive Officers reportable for fiscal year 20182019 are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2018 on page 48.2019.

Private Clubs. We pay or reimburse initiation fees for one private club for each executive officer. We offer this perquisite to encourage executive officers to entertain business colleagues and customers, engage in social interaction with peers from other companies, local leadership and the community, and hold business meetings at offsite locations. Historically we have paid or reimbursed the initiation fees and provided gross up payments on those fees for additional clubs for the Chief Executive Officer, the Chief Financial Officer, the President and Chief Operating Officer and at the Executive and Senior Vice President levels on a business-needs basis and only with appropriate advance approval. We maintain a policy of not providing gross up payments on private club initiation fees, and in fiscal year 20182019 no such gross up payments were made.

Spousal Travel. In limited circumstances and only with appropriate advance approval, we reimburse our executive officers for transportation, lodging, meals, entertainment and other travel expenses for their spouses or other family members who accompany them onout-of-town business. We offer these perquisites to encourage executive officers to spend an appropriate amount of time with their direct reports in locations away from corporate headquarters, to allow executive officers and their spouses to develop a more personal relationship with the executive officers’ subordinates and their families, and to encourage spouses to attend retirement parties, funerals, business dinners and other corporate functions at locations away from their homes.

Executive Physicals. We pay for annual physicals and any necessary travel vaccinations for each of our executive officers and certain other key employees. We offer this benefit as part of our overall preventive medicine program to promptly identify and address medical issues and to preserve our investment in our executive officers by encouraging them to maintain healthy lifestyles and be proactive in addressing actual or potential health issues.

Leased Vehicles. We lease an automobile for each of our executive officers and for certain other key employees. We offer this perquisite to provide executive officers with use of a company car for business travel needs, recognizing that the vehicles can also be used for personal purposes. We pay or reimburse each executive officer for lease payments on one automobile, typically for a three-year term. Each executive officer has a maximum allowance of $1,570 per month. We also reimburse each executive officer for the cost of tires and maintenance and provide insurance on each vehicle during the lease term. We require each executive officer to take title to his or her vehicle at the end of the lease term because we amortize the entire cost of the vehicle over the lease term. We pay or reimburse each executive officer for sales taxes on his or her vehicle at the time of title transfer, but the executive officer is responsible for the payment of all income taxes assessed on payments and reimbursements made during the lease term and at the time of title transfer, including those assessed on the fair market value of the vehicle at the time of title transfer.

Matching Gifts Program. We match any amount in excess of $20 contributed to any accredited educational institution by an active, full-time employee, retiree, or member of our Board of Directors.Directors with at least one year of service. Our matching contributions are capped at $5,000 per fiscal year for any individual’s contribution to any single institution, and $10,000 per fiscal year for any individual’s aggregate contributions to all institutions.

Company Apartments. We maintain apartments in Cleveland, Ohio, Newport Beach, California and London, England to provide accommodations to employees workingoff-site at or relocating to our primary facilities. The apartments are also available to the executive officers for personal use with appropriate advance approval if the apartments are not otherwise being used for business purposes.

Entertainment Venues. We maintain loges, boxes and tickets at various entertainment venues to provide civic support to arts, entertainment and other cultural activities at certain significant business locations and to provide a favorable setting for our employees to entertain customers and other business associates. The loges, boxes and tickets are, however, available to executive officers for

personal use if they are not otherwise being used for business purposes. We pay all costs of admission, but all costs of food are paid by the executive officer using the venue only for personal use.

Corporate Aircraft. InEffective May 1, 2019, the Committee elected to offer limited circumstances, we providenon-business use of our corporate aircraft to our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer for purposes of their safety, security, confidentiality and productivity while traveling. Such use is limited to U.S. domestic travel only and 50 hours of flight time per fiscal year for our Chief Executive Officer and 30 hours of flight time per fiscal year to each of our Chief Operating Officer and Chief Financial Officer. Otherwise,non-business use of our corporate aircraft by our executive officers with use of corporate aircraft fornon-business purposes at no cost. Otherwise, the executive officers may use corporate aircraft fornon-business travelis only available if (a) the flight was previously authorized for business purposes, there are available seats that are not being used for those business purposes and the officer’s use does not involve a deviation or extension of the planned business-travel itinerary.itinerary, or (b) there is a medical emergency or other special circumstance and the flight ispre-approved by our Chief Executive Officer, Chief Operating Officer or Chief Financial Officer.

CONSIDERATION OF 20172018SAY-ON-PAY VOTING RESULTS.RESULTS

At our 20172018 Annual Meeting of Shareholders, we received approval, based on the total votes cast, for our advisory“say-on-pay” vote to approve the compensation of our Named Executive Officers. The Committee and Mercer specifically considered the voting results when exploring potential changes to our executive compensation program in fiscal year 2018.2019. The Committee believes the voting results demonstrate strong, consistent support for our executive compensation program. The Committee will continue to explore with Mercer potential improvements to our executive compensation program to the extent appropriate to keep our executive compensation program aligned with best practices in our competitive market.

COMPENSATION COMMITTEE REPORT

The Human Resources and Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of RegulationS-K with the Corporation’s management and, based on such review and discussions, the Human Resources and Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

Human Resources and Compensation Committee:

Candy M. Obourn, Chair

Robert G. Bohn

Robert J. KohlheppKevin A. Lobo

Joseph Scaminace

James R. Verrier

James L. Wainscott

COMPENSATION TABLES

SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 20182019

The following table sets forth compensation information for our Named Executive Officers.