United StatesUNITED STATES
Securities and Exchange CommissionSECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
ScheduleSCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the SecuritiesPROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
Exchange Act ofEXCHANGE ACT OF 1934 (Amendment No.(AMENDMENT NO. )
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| Definitive Proxy Statement |
| Definitive Additional Materials |
| Soliciting Material Pursuant to Section 240.14a-12 |
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Littelfuse, Inc.
O’Hare Plaza
8755 West Higgins Road, Suite 500
Chicago, IL 60631
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Chicago, Illinois 60631APRIL28, 2017
Notice ofThe 2017 Annual Meeting of Stockholders
APRIL 24, 2015
The 2015 annual meeting of the stockholders of Littelfuse, Inc. (the “Company”) will be held at the Chicago Marriott O’Hare, 8535 West Higgins Road, Chicago, Illinois 60631, on Friday, April 24, 201528, 2017 at 9:00 a.m., local time, for the following purposes as described in the attached Proxy Statement:
1. | To elect |
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| To conduct an advisory (non-binding) vote on the compensation of our named executive officers (“NEOs”) |
3. | To conduct an advisory (non-binding) vote on the frequency of future advisory votes on the compensation of our NEOs; |
4. | To approve the Amended and Restated Littelfuse, Inc. Long Term Incentive Plan to increase the number of shares authorized for issuance under the Plan, and to make certain other changes to the Plan; |
5. | To approve and ratify the appointment by the Audit Committee of Grant Thornton LLP as the Company’s independent auditors for the fiscal year ending December 30, 2017; and |
| To transact such other business as may properly come before the |
Stockholders of record of the Company at the close of business on February 26, 2015March 1, 2017 will be entitled to vote at the meeting.
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| Ryan K. Stafford |
Corporate Secretary |
March 13, 2015
16, 2017
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to Be Held on April 24, 2015:28, 2017:
Whether or not you plan to attend the annual meeting, yourYour vote is important. Please readreview our proxy materials, including the attachedenclosed Proxy Statement, and promptly complete, executevote your shares by using the Internet or telephone or by signing, dating and returnreturning the enclosed proxy in the accompanying postage-paid envelope.card. If you attend the annual meeting,Annual Meeting, you may revoke your proxy and vote in person if you so desire.
The Proxy Statement and the 20142016 Annual Report to Stockholders of Littelfuse, Inc., including the Annual Report on Form 10-K for the fiscal year ended December 27, 2014,31, 2016, are available atwww.proxyvote.com.
2017 PROXY STATEMENT
TABLE OF CONTENTSCONTENTS
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Proxy Statement2017 PROXY STATEMENT
For
Annual Meeting Of Stockholders
To Be Held On
APRIL 24, 2015TABLE OF CONTENTS (Continued)
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GENERAL INFORMATION AND FREQUENTLY ASKED QUESTIONS |
We are furnishing this Proxy Statement to the stockholders of Littelfuse, Inc. in connection with the solicitation by the Board of Directors of Littelfuse, Inc. (the “Board”) of proxies to be voted at our annual meeting of stockholders to be held on April 24, 2015.28, 2017, (the “Annual Meeting”). The annual meetingAnnual Meeting will be held at the Chicago Marriott O’Hare, 8535 West Higgins Road, Chicago, Illinois 60631, at 9:00 a.m., local time, and at any postponements or adjournments of that meeting.
When used in this Proxy Statement, the terms “we,” “us,” “our,” “the Company” and “Littelfuse” refer to Littelfuse, Inc.
Any stockholder giving aThe Notice of Internet Availability of Proxy Materials is first being mailed to stockholders on or about March 16, 2017, to notify stockholders of record that the proxy will havematerials (this Proxy Statement, proxy card, and the right2016 Annual Report on Form 10-K) are available online atwww.proxyvote.com, or in hard copy by request, free of charge. We encourage all stockholders to revoke it at any time prioraccess their proxy materials online to reduce the time it is voted. A proxy may be revoked by written notice to us sent toenvironmental impact and the attentioncost of our Corporate Secretaryproxy solicitation. You may request a paper copy of the proxy materials using any of the following methods:
1. | By Internet: go towww.proxyvote.com |
2. | By Phone: 1-800-579-1639 |
3. | By Email: sendmaterial@proxyvote.com |
We encourage you to access and review all of the important information in the proxy materials before voting.
What is requiredfor a quorum at O’Hare Plaza, 8755 West Higgins Road, Suite 500, Chicago, Illinois 60631, executionthe Annual Meeting?
A quorum of stockholders is required for the transaction of business at our Annual Meeting. Our bylaws provide that a majority of all of the shares of common stock entitled to vote whether present in person or represented by proxy, constitutes a quorum for the transaction of business at the meeting. Abstentions and “broker non-votes” will also be considered as present for purposes of determining the presence or absence of a subsequent proxy, voting on the Internet or by telephone or attendancequorum at the annual meeting Annual Meeting.
How are proxies solicitedand voting in person. Mere attendancewhat is the cost?
The proxy accompanying this proxy statement is solicited on behalf of our Board of Directors, for use at the annual meeting will not automatically revoke the proxy. All shares represented by effective proxies will be voted at the annual meeting or at any postponements or adjournment thereof.
Annual Meeting. We will bear the cost of soliciting proxies. Copies of solicitation materials will be furnished to brokerage firms, fiduciaries and custodians holding shares in their names that are beneficially owned by others to forward to such beneficial owners. The Company may reimburse such persons for the costs they incur to forward the solicitation material to such beneficial owners. In addition to solicitation by mail, our officers and employees may solicit proxies by telephone or in person.
Under Securities and Exchange Commission rules, this Proxy Statement, our 2014 Annual Report to Stockholders, including our Annual Report on Form 10-K for the fiscal year ended December 27, 2014, and other proxy materials are available online atwww.proxyvote.com. We encourage you to access and review all of the important information in the proxy materials before voting. The Notice of Internet Availability of Proxy MaterialsWhat is first being mailed to stockholders on or about March 13, 2015.Householding?
The BoardUnder SEC rules, only one copy of Directors recommends a vote FOR ALLthis proxy statement is being delivered to stockholders residing at the nominees for director named in Proposal No. 1, a vote FORsame address, unless the approval and ratificationstockholders have notified the Company of their desire to receive multiple copies of the appointment of Grant Thornton LLPproxy statement. This process, which is commonly referred to as independent auditors as discussed in Proposal No. 2, a vote FOR the re-approval of the performance goals in the Littelfuse, Inc. Long-Term Incentive Plan in Proposal No. 3“householding,” potentially means extra convenience for stockholders and a vote FOR the approval of the compensation of our NEOs as discussed in Proposal No. 4. cost savings for companies.
Forward-Looking Information
Statements in this Proxy Statement not based on historical facts are considered “forward looking” and, accordingly, may involve risks and uncertainties that could cause actual results to differ materially from those discussed. Although such forward-looking statements have been made in good faith and are based on reasonable assumptions, there is no assurance that the expected results will be achieved. These statements include (without limitation) statements as to future expectations, beliefs, plans, strategies, objectives, events, conditions and financial performance. These statements are intended to constitute “forward-looking” statements in connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. We are providing this cautionary statement to disclose that there are important factors that could cause actual results to differ materially from those anticipated. See our Annual Report on Form 10-K for the year ended December 27, 2014 (the “2014 Annual Report on Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) for a list of such factors in Item 1A. “Risk Factors.”
| 2017 Proxy Statement 1 |
VotingIf you receive notice from your broker that it will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report, please notify your broker directly or direct your written request to our Corporate Secretary at 8755 West Higgins Road, Suite 500, Chicago, Illinois 60631.
Record Date; Stock Outstanding and Entitled to Vote; Voting of ProxiesWho may vote at theAnnual Meeting?
Stockholders of record on the books of the Company at the close of business on February 26, 2015,March 1, 2017, the record date for the annual meeting, will be entitled to notice of and to vote at the meeting. On February 26, 2015,March 1, 2017, we had outstanding 22,759,52322,641,223 shares of our common stock, par value $.01 per share. Each outstanding share of common stock entitles the holder to one vote per share on each matter submitted to a vote at the meeting.
A list of the stockholders of record entitled to vote at the meeting will be available for examination by any stockholderstockholders for any purpose germane to our annual meeting during ordinary business hours for a period of at least ten days prior to the meeting at our headquarters located at O’Hare Plaza,8755 West Higgins Road, Suite 500, Chicago, Illinois 60631.
What shares are included on theproxy card?
If your shares are registered directly in your name with the Company’s transfer agent, Wells Fargo, you are considered a stockholder of record with respect to those shares. If your shares are held in a bank or brokerage account, you are considered the beneficial owner of those shares.
If you are a stockholder of record, you will receive only one notice or proxy card for all the shares you hold in certificate form, or book-entry form.
If you are a beneficial owner, you will receive voting instruction information from the bank, broker or other nominee through which you own your shares.
What if I am a beneficialowner anddo not give voting instructions to my broker?
If you are a beneficial owner and do not provide voting instructions to your bank, broker or other nominee, the following applies:
Non-Discretionary Items. The election of directors, the advisory vote on executive compensation, the advisory vote on the frequency of future executive compensation votes, and the approval of the amendment and restatement of the Long Term Incentive Plan are nondiscretionary items and may not be voted on by brokers, banks or other nominees that have not received specific voting instructions from beneficial owners. This is called a “broker non-vote.”
Discretionary Items. The ratification of the appointment of the Company’s independent registered public accounting firm (Grant Thornton LLP) is a discretionary item. Generally, banks, brokers and other nominees that do not receive voting instructions from beneficial owners may vote on this proposal in their discretion.
How do I vote?
● Via Internet: visitwww.proxyvote.com | ● By Mail: sign, date and return your proxy card to the address listed on the proxy card. |
● By Phone: call 1-800-690-6903 | ● In Person: All stockholders of record may vote in person at the annual meeting. |
| 2017 Proxy Statement 2 |
All shares entitled to vote and represented by properly executed and unrevoked proxies will be voted at the Annual Meeting in accordance with the instructions given therein. If no instructions are indicated on a properly executed proxy (other than broker non-votes), the shares represented by that proxy will be voted as recommended by the Board.
What can I do if I change my mind after I vote my shares?
Any stockholder giving a proxy has the right to revoke it at any time prior to the time it is voted. A proxy may be revoked by (1) written notice to us sent to the attention of our Corporate Secretary at 8755 West Higgins Road, Suite 500, Chicago, Illinois 60631, (2) execution of a subsequent proxy, (3) voting on the Internet or by telephone, or (4) attending the annual meeting and at Wells Fargo Bank, N.A., our transfer agent, at 161 North Concord Exchange South, St. Paul, Minnesota 55075.
The shares represented by proxies will be voted as directedvoting in the proxies. In the absence of specific direction, the shares represented by proxies will be voted FOR ALL of the nominees for director, FOR the approval and ratification of the appointment of Grant Thornton LLP as independent auditors, FOR the re-approval of the of the performance goals in the Littelfuse, Inc. Long-Term Incentive Plan and FOR the approval of the compensation of our NEOs. In the event any nominee for director is unable to serve, which is not now contemplated, the shares represented by proxies may be voted for a substitute nominated by the Board. If any matters are to be presentedperson. Mere attendance at the annual meeting other thanwill not automatically revoke the matters referred to in this Proxy Statement, theproxy. All shares represented by effective proxies will be voted at the discretion of the named proxies.
annual meeting or at any postponements or adjournment thereof.
Quorum and Abstentions; Broker Non-Votes
What are the voting standards for each of theProposals tobe voted on at the Annual Meeting?
A quorum of stockholders is required forStockholders are being asked to vote on the transaction of businessfollowing matters at ourthe 2017 annual meeting. Our bylaws provideThe voting standard and our Board of Directors’ voting recommendation for each matter is described below:
Proposal | Voting Standard* | Board Recommendation |
Proposal 1: Election of Director Nominees | Majority of votes cast** | FOR ALL the nominees for director |
Proposal 2: Advisory Vote on Executive Compensation | Majority of votes cast | FOR |
Proposal 3: Advisory Vote Regarding Frequency of Executive Compensation Vote | Plurality of votes cast | EVERY YEAR |
Proposal 4: Approval of the Amended and Restated Littelfuse Long Term Incentive Plan | Majority of votes cast | FOR |
Proposal 5: Approval and Ratification of the Appointment of Grant Thornton LLP as Independent Auditors | Majority of votes cast | FOR |
*Majority of votes cast means that the number of votes cast “For” the proposal exceeds the number of votes cast “Against”.Plurality of votes cast for purposes of Proposal 3 means that the frequency of advisory votes (One Year, Two Years or Three Years) that receives the most votes will be deemed the advisory vote of our stockholders.
**Except in the event of a contested election. In the event of a contested election, directors shall be elected by plurality of votes cast. Also, our Corporate Governance Guidelines include a resignation policy, which provides, among other things, that if a director nominee does not receive a majority of allthe votes cast:
● | such nominee must tender his or her resignation within ten days; |
● | the Nominating and Governance Committee of the Board must recommend to our Board whether such resignation should be accepted or rejected; and |
● | our Board must take final action no later than 90 days after the stockholder vote. |
| 2017 Proxy Statement 3 |
How are abstentions and “broker non-votes”brokernon-votescounted?
Abstentions will not be included in vote totals and will have no effect on Proposal 1 – the election of director nominees. Abstention votes on each be counted as present for purposes of determining the presence of a quorum. A “broker non-vote” occurs when a broker has not received voting instructions from you on a “non-routine” matter, in which case the broker does not have authority to vote your shares with respect to such matter. Unless you provide voting instructions to a broker holding shares on your behalf, your broker may not use discretionary authority to vote your shares on any of the matters to be considered at our annual meeting other than the ratification of our independent auditors. To determine whether a specific proposal has received sufficient votes to be passed, for shares deemed present, an abstentionProposal 2, 3, 4 and 5 will have the same effect as a vote “against” the proposal, while a broker non-vote“Against”.
Broker non-votes will not be included in vote totals and will have no effect on the outcome of any of the vote. proposals to be voted on at the 2017 Annual Meeting.
Required VoteWhat do I need in order to attend the AnnualMeeting?
Assuming that a quorum is present, our stockholders may take action at our annual meeting with the votes described below.
Election of Directors. Except in the event of a contested election, each director to be elected by shareholders shall be elected by the vote of the majority of the votes cast at a meeting for the election of directors at which a quorum is present. A “majority of the votes cast” means that the number of votes cast “for” a director’s election exceeds the number of votes “withheld” or cast “against.” Votes cast exclude abstentions and any “broker non-votes” with respect to that director’s election. In the event of a contested election, directors shall be elected by the vote of a plurality of the votes cast at a meeting for the election of directors at which a quorum is present.
In addition, our Corporate Governance Guidelines include a resignation policy, which provides, among other things, that if a nominee for our Board of Directors does not receive a majority of the votes cast:
such nominee must tender his or her resignation within ten business days;
the Corporate Governance and Nominating Committee of the Board of Directors must recommend to our Board of Directors whether such resignation should be accepted or rejected; and
our Board of Directors must take final action no later than 90 days after the shareholder vote.
Ratification of the Appointment of Grant Thornton LLP as our Independent Auditors. The affirmative vote by the holders of a majority of the shares present (whether in person or by proxy) at the meeting will be required for the ratification of Grant Thornton LLP as independent auditors.
Re-Approval ofthe Performance Goals inthe Littlefuse, Inc. Long-Term Incentive Plan. The affirmative vote by the holders of a majority of the shares present (whether in person or by proxy) at the meeting will be required for the re-approval of the performance goals in the Littelfuse, Inc. Long-Term Incentive Plan.
Advisory (Non-Binding) Vote on the Compensation of our Named Executive Officers. With respect to approval of the compensation of our NEOs, the affirmative vote by the holders of a majority of the shares present (whether in person or by proxy) at the meeting will be required to approve the proposal. The stockholder vote with respect to approval of the compensation of our NEOs is advisory in nature and will not be binding on the Company. However, our Board and our Compensation Committee value the opinions of our stockholders and will consider the outcomes of the advisory vote when making future decisions regarding executive compensation.
Ownership Of Littelfuse, Inc. Common Stock
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of February 26, 2015, by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, by each director, by each executive officer named in the Summary Compensation Table and by all of our directors and executive officers as a group. Information concerning persons known to us to be beneficial owners of more than 5% of our common stock is based upon the most recently available reports furnished by such persons on Schedule 13G as filed with the SEC. Of the shares reported, none are subject to pledge or lien in a margin account or pursuant to a loan agreement.
Number of Shares of Common Stock Beneficially Owned(a) | ||||||||
Shares | Percent | |||||||
BlackRock, Inc. (b) | 1,921,669 | 8.4 | % | |||||
40 East 52nd Street | ||||||||
New York, New York 10022 | ||||||||
The Vanguard Group, Inc. (c) | 1,482,223 | 6.5 | % | |||||
100 Vanguard Boulevard | ||||||||
Malvern, Pennsylvania 19355 | ||||||||
T. J. Chung (d) | 24,596 | * | ||||||
Cary T. Fu (e) | 3,302 | * | ||||||
Anthony Grillo (f) | 82,996 | * | ||||||
John E. Major (g) | 32,154 | * | ||||||
William P. Noglows (h) | 26,997 | * | ||||||
Ronald L. Schubel (i) | 37,894 | * | ||||||
Michael P. Rutz (j) | 5,332 | * | ||||||
Philip G. Franklin (k) | 52,756 | * | ||||||
David W. Heinzmann (l) | 60,183 | * | ||||||
Gordon Hunter (m) | 80,990 | * | ||||||
Ryan K. Stafford (n) | 45,092 | * | ||||||
All current directors and executive officers as a group (17 persons) | 557,305 | 2.4 | % |
*Indicates ownership of less than 1% of common stock.
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| Admittance information. |
Attendance is limited to stockholders of record as |
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Who will tabulate andcountthe votes?
We retain an independent inspector of election from Broadridge Financial Solutions, to attend our Annual Meeting and to certify the results of the vote.
When will the Company announcethe votingresults?
We will announce the preliminary voting results at the 2017 Annual Meeting of Stockholders. The Company will report the final results on a Current Report on Form 8-K, to be filed with the SEC within four business days following the Annual Meeting.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires our executive officers, directors and holders of more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Based solely on our review of the copies of these reports and on information provided by the reporting persons, we believe that during the fiscal year ended December 27, 2014 our directors, executive officers and owners of more than 10% of our common stock complied with all applicable filing requirements.
Proposal No. 1
Election Of Directors
The Board currently consists of seveneight members. All of our current directors are standing for re-election. We are asking our stockholders to elect seveneight directors at the annual meeting to serve a term of one year and until their successors have been duly elected and qualified. The nominees for director, all of whom are now serving as directors, are listed below together with certain biographical information as of March 13, 2015.1, 2017.
Name | Position |
Tzau-Jin Chung | Director |
Cary T. Fu | Director |
Anthony Grillo | Director |
David W. Heinzmann | Director |
Gordon Hunter | Executive Chairman of the Board |
John E. Major | Director |
William P. Noglows | Lead Independent Director |
Ronald L. Schubel | Director |
The Board of Directors recommends that the stockholders voteFOR ALL of the director nominees listed below as directors..
Tzau-Jin (T. J.) Chung, age 52, has been a director of Littelfuse since July 2007. Mr. Chung is President and CEO of Navman Wireless, a market leader in fleet management solutions and GPS technologies. Mr. Chung assumed his position in early 2007 upon the acquisition of Navman Wireless from the New Technologies Division of Brunswick Corporation. Previously, Mr. Chung served as President of the New Technologies Division of Brunswick Corporation from 2002 to 2007. Prior to that, he served as Vice President — Strategy of Brunswick Corporation, where he was responsible for corporate-wide strategic planning, mergers and acquisitions and information technology. Mr. Chung earned his bachelor’s degree in science, electrical and computer engineering from the University of Texas — Austin. He also holds a Master of Science degree in computer science from North Carolina State University and a Master of Business Administration degree from the Fuqua School of Business at Duke University. Mr. Chung has been determined by the Board to be “independent” under the listing standards of the Nasdaq Global Select Market (“NASDAQ”). In nominating Mr. Chung for election as a director, our Board focused on his past experience in developing new products and his experience with operations in Asia as important attributes for his continuing to serve as one of our directors. Mr. Chung serves on the Technology and the Nominating and Governance Committees and is the Chairman of the Compensation Committee.
Tzau-Jin (T.J.) Chung, 54 | Director since 2007 |
Committee Membership: ● Compensation Chair ● Nominating & Governance ● Technology | Mr. Chung served as president and chief executive officer of Navman Wireless and Teletrac Inc., a market leader in fleet management solutions and GPS technologies, from 2007 until May 2016. Previously, Mr. Chung served as president of the New Technologies Division of Brunswick Corporation from 2002 to 2007. Prior to that, he served as vice president — strategy of Brunswick Corporation, where he was responsible for corporate-wide strategic planning, mergers and acquisitions and information technology. Mr. Chung has served on the board of directors of MCBC Holdings, Inc. (NASDAQ:MCFT), since December 2016. Mr. Chung earned his bachelor’s degree in science, electrical and computer engineering from the University of Texas — Austin. He also holds a MS in computer science from North Carolina State University and an MBA from the Fuqua School of Business at Duke University. In nominating Mr. Chung for election as a director, our Board focused on his past experience in developing new products and his experience with operations in Asia as important attributes for his continuing to serve as one of our directors |
Cary T. Fu, 68 | Director since 2012 |
Committee Membership: ● Audit Chair ● Technology | Mr. Fu is the co-founder of Benchmark Electronics, Inc. (NYSE:BHE), a solutions provider for high technology OEM customers. He served as chairman of the board of Benchmark from 2009 until his retirement in 2012, and served as a director from 1990 until 2012. Mr. Fu also served as the chief executive officer of Benchmark from 2004 to 2011, and was the president and chief executive officer from 2004 to 2006. From 1986 to 2004, Mr. Fu served in various capacities with Benchmark, including as executive vice president, treasurer and secretary. Mr. Fu has served on the board of directors of Teradata Corporation (NYSE:TDC), since 2008. Mr. Fu holds an MS in accounting from the University of Houston and is a certified public accountant. In nominating Mr. Fu for election as a director, our Board focused on his past experience in the industry and unparalleled management experience. |
Cary T. Fu, age 66, has been a director of the Company since July 2012. Mr. Fu is the co-founder of Benchmark Electronics, Inc. (“Benchmark Electronics”) and was a director of Benchmark Electronics from 1990 through 2012 and Chairman of the Board from May 2009 until December 2012. He served as Chief Executive Officer of Benchmark Electronics from September 2004 to December 2011, President and Chief Executive Officer of Benchmark Electronics from September 2004 to December 2006, President and Chief Operating Officer of Benchmark Electronics from May 2001 to September 2004, Executive Vice President from 1990 to May 2001 and Executive Vice President — Financial Administration from 1990 to April 1992. He also served Benchmark Electronics as Treasurer from 1986 to January 1996, Secretary from 1990 to January 1996 and from 1986 to 1988 and Assistant Secretary from 1988 to 1990. In addition, Mr. Fu also served as a director of Benchmark Electronics from 1986 to 1988. From 1983 to 1986, Mr. Fu was employed by Intermedics as Controller of Benchmark Electronics and another subsidiary of Intermedics. Mr. Fu holds an M.S. degree in accounting from the University of Houston and is a Certified Public Accountant. Mr. Fu also serves on the board of directors of Teradata Corporation. Mr. Fu has been determined by the Board to be “independent” under NASDAQ listing standards. In nominating Mr. Fu for election as a director, our Board focused on his past experience in the industry and unparalleled management experience. Mr. Fu serves on the Technology Committee and is Chairman of the Audit Committee.
| 2017 Proxy Statement 5 |
Anthony Grillo, age 59, has been a director of Littelfuse since December 1991. Mr. Grillo is the founder of American Securities Advisors, LLC, an advisory and investment firm established in 2005. From 2001 through 2004, Mr. Grillo was a Senior Managing Director of Evercore Partners, Inc., an investment banking boutique providing advisory services to multinational corporations on significant mergers, acquisitions, divestitures, restructurings and other strategic corporate transactions, where he founded the restructuring practice for the firm. From 1999 through 2001, Mr. Grillo was a Senior Managing Director of Joseph Littlejohn & Levy, Inc., a private equity firm. From 1991 through 1999, Mr. Grillo was a Senior Managing Director of the Blackstone Group L.P., an investment banking firm. During those years, Mr. Grillo was the co-founder of Blackstone’s Restructuring and Reorganization Group, Chief Operating Officer of the firm’s mergers and acquisitions practice and a member of its Investment Committee. Mr. Grillo served as Chairman of the Board of Silicon Graphics, Inc. and as the Chairman of its Compensation Committee. Mr. Grillo has been determined by the Board to be “independent” under NASDAQ listing standards. In nominating Mr. Grillo for election as a director, our Board focused on his past experience in the financial markets, his experience with corporate acquisitions, his value as an audit committee financial expert and the knowledge of the Company that he has gained and shared from serving as a director since 1991 as important attributes for his continuing to serve as one of our directors. Mr. Grillo serves on the Audit Committee.
Anthony Grillo, 61 | Director since 1991 |
Committee Membership: ● Audit | Mr. Grillo is the founder of American Securities Advisors, LLC and affiliates (now known as Ascribe Opportunities Management, LLC), an advisory and investment firm established in 2005. From 2001 through 2004, Mr. Grillo served as Senior Managing Director of Evercore Partners, Inc. (NYSE:EVR), an investment banking boutique providing advisory services to multinational corporations on significant mergers, acquisitions, divestitures, restructurings and other strategic corporate transactions, where he founded the restructuring practice for the firm. From 1999 through 2001, Mr. Grillo served as Senior Managing Director of Joseph Littlejohn & Levy, Inc., a private equity firm. From 1991 through 1999, Mr. Grillo was a Senior Managing Director of the Blackstone Group L.P., an investment banking firm. Mr. Grillo has served on the board of directors of Lumeta Corporation since 2016. Mr. Grillo previously served as a director of GeoKinetics from 2013 through 2015. In nominating Mr. Grillo for election as a director, our Board focused on his past experience in the financial markets, his experience with corporate acquisitions, his value as an audit committee financial expert and the knowledge of the Company that he has gained and shared from serving as a director since 1991 as important attributes for his continuing to serve as one of our directors. |
Gordon Hunter, 65 | Director since 2002 |
Committee Membership: ● Technology Chair | Mr. Hunter serves as the Executive Chairman of the Board, since January 2017. He previously served as a director since 2002, and as our Chairman of the Board, President and Chief Executive Officer from 2005 until January 2017. From 2003 to 2005 he served as our Chief Operating Officer. Prior to joining Littelfuse, Mr. Hunter served as vice president, Intel communications group, and general manager, optical products group for Intel Corporation (NASDAQ:INTC) from 2002 to 2003. Prior to joining Intel in 2002, he served as president of Elo TouchSystems, a subsidiary of Raychem Corporation. Mr. Hunter also served in a variety of positions during a 20-year career at Raychem Corporation, including vice president of commercial electronics and a variety of sales, marketing, engineering and management positions. Mr. Hunter served on the council of advisors of Shure Incorporated from 2003 through April 2016, and became a member of the board of directors in April 2016. He also has served on the board of directors of Veeco Instruments, Inc. (NASDAQ:VECO) since 2010, and the board of directors of CTS Corporation (NYSE:CTS) since 2011. Mr. Hunter holds a BS in electrical engineering from the University of Liverpool, England, and an MBA from London Business School. In nominating Mr. Hunter for election as a director, our Board focused on his leadership, vision and execution as our Chief Executive Officer in growing and reshaping the Company and setting and communicating the proper cultural and behavioral tone as important attributes for his continuing to serve as one of our directors. |
| 2017 Proxy Statement 6 |
David W. Heinzmann,53 | Director since January 2017 |
Committee Membership: ● None | Mr. Heinzmann serves as the President and Chief Executive Officer and a member of the Board since January 2017. He previously served as our Chief Operating Officer, since 2014. Mr. Heinzmann began his career at Littelfuse in 1985 as a manufacturing engineer and has held positions of increasing responsibility since that time. From 2004 through 2007, he served as Vice President and General Manager, Automotive segment, and then as Vice President, Global Operations until 2014. Mr. Heinzmann has served on the board of directors of Pulse Electronics Corporation, since 2014. Mr. Heinzmann holds a BS in mechanical engineering from Missouri University of Science and Technology. In nominating Mr. Heinzmann for election as a director, our Board focused on his extensive experience with Littelfuse as a key driver for continued growth and evolution of the Company. |
John E. Major, 71 | Director since 1991 |
Committee Membership: ● Nominating and Governance Chair ● Audit ● Technology | Mr. Major has served as president of MTSG, a strategic consulting, governance and investments company, since he founded it in 2003. From 2004 to 2006, Mr. Major served as chief executive officer of Apacheta Corporation, a mobile wireless software company. From 2000 to 2003, he served as chairman and chief executive officer of Novatel Wireless Inc., a wireless data access solutions company. Previously, Mr. Major was chairman and chief executive officer of Wireless Knowledge. Prior to that,Mr. Major served in executive level positions at Qualcomm Incorporated, including president of its wireless infrastructure division, and prior to that he held various leadership positions at Motorola, Inc., including senior vice president and chief technology officer. Mr. Major has served on the boards of directors of Lennox International Inc. (NYSE:LII) since 1993, Pulse Electronics since 2013, Resonant, Inc. (NASDAQ:RESN) since 2013, and ORBCOMM Inc. (NASDAQ:ORBC) since 2007. He previously served as a director of Broadcom Corporation (NASDAQ: BRCM) from 2003 until its acquisition by Avago Technologies in February 2016. Mr. Major received a BS in Mechanical and Aerospace Engineering from the University of Rochester, an MS in Mechanical Engineering from the University of Illinois, an MBA from Northwestern University and a JD from Loyola University. In nominating Mr. Major for election as a director, our Board focused on his seasoned experience from having served as an executive officer and on the boards and board committees of varied technology companies, his vision and expertise in matters of corporate governance, his expertise in technical development and the knowledge of the Company that he has gained and shared as a director since 1991 as important attributes for his continuing to serve as one of our directors. |
| 2017 Proxy Statement 7 |
William P. Noglows, 59 | Director since 2007 |
Committee Membership: ● Compensation ● Nominating and Governance Chair | Mr. Noglows has served as chairman of the board of Cabot Microelectronics Corporation (NASDAQ:CCMP), a leading worldwide supplier of consumable products used in the semiconductor manufacturing process, since January 2016. He previously served as executive chairman of the board from 2014 until December 2015, and served as chairman, president and chief executive officer of Cabot from 2003 through 2014. Prior to that, Mr. Noglows served as executive vice president and general manager at Cabot. Mr. Noglows has served on the board of directors of Aspen Aerogels, Inc. (NYSE: ASPN) since 2014, and he also served on the Aspen board from 2011 to 2013. He received a bachelor’s degree in chemical engineering from the Georgia Institute of Technology. In nominating Mr. Noglows for election as a director, our Board focused on his experience as chief executive officer of a leading public company and his expertise in developing technology as important attributes for his continuing to serve as one of our directors. |
Ronald L. Schubel, 73 | Director since 2002 |
Committee Membership: ● Compensation ● Technology | Mr. Schubel retired as corporate executive vice president and president of the Americas region for Molex Incorporated, a global manufacturer of interconnect systems, in 2007. He began his career with Molex in 1981, spending five years in Singapore as president of the far east south region. Prior to joining Molex, for 15 years Mr. Schubel held various leadership roles at General Motors, the most recent of which was director of operations for the Packard Electric division. Mr. Schubel is Chair of the Board of Trustees of Elmhurst Health Care Corporation and serves on the board of the Edward Cayman Corporation for investment and insurance support of Edward-Elmhurst Health Service Corporation, a nonprofit corporation, and its affiliate of the EHSC Cayman Segregated Portfolio Company, which is the insurance company of EHSC. He also serves as an advisor for Oaktree Capital, a global alternative investment management firm, working with the board of directors of Isola Group Ltd. In nominating Mr. Schubel for election as a director, our Board focused on his knowledge of managing manufacturing operations and his experience with operations in Asia as important attributes for his continuing to serve as one of our directors. |
| 2017 Proxy Statement 8 |
Gordon Hunter, age 63, has been a director of Littelfuse since June 2002 and became our Chairman of the Board, President and Chief Executive Officer in January 2005. Mr. Hunter became our Chief Operating Officer in November 2003. Prior to joining Littelfuse, Mr. Hunter was Vice President, Intel Communications Group, and General Manager, Optical Products Group. Mr. Hunter was responsible for managing Intel’s access and optical communications business segments within the Intel Communications Group. Prior to joining Intel in February 2002, he served as President of Elo TouchSystems, a subsidiary of Raychem Corporation. Mr. Hunter also served in a variety of positions during a 20-year career at Raychem Corporation, including Vice President of Commercial Electronics and a variety of sales, marketing, engineering and management positions. Mr. Hunter currently serves on the Council of Advisors of Shure Incorporated, the Board of Directors of Veeco Instruments, Inc., where he serves on the Compensation Committee and the Strategic Planning Committee, and the Board of Directors of CTS Corporation. Mr. Hunter holds a BS in electrical engineering from the University of Liverpool, England, and an MBA from London Business School. In nominating Mr. Hunter for election as a director, our Board focused on his leadership, vision and execution as our Chief Executive Officer in growing and reshaping the Company and setting and communicating the proper cultural and behavioral tone as important attributes for his continuing to serve as one of our directors. Mr. Hunter is the Chairman of the Technology Committee.
John E. Major, age 69, has been a director of Littelfuse since December 1991. Mr. Major has been President of MTSG, a strategic consulting and investments company, since January 2003. From April 2004 to October 2006, Mr. Major served as Chief Executive Officer of Apacheta Corporation, a mobile wireless software company whose products are used to manage retail inventory, service and deliveries. From August 2000 through January 2003, he was Chairman and Chief Executive Officer of Novatel Wireless Inc., a wireless data access solutions company. Previously, Mr. Major was Chairman and Chief Executive Officer of Wireless Knowledge, a QUALCOMM and Microsoft joint venture that developed a unique solution to allow all Internet-enabled devices, including cell phones, to access critical corporate information such as email, contacts and calendar entries in a convenient and secure manner. Prior to joining Wireless Knowledge, Mr. Major served as Corporate Executive Vice President of QUALCOMM, Inc. and President of its Wireless Infrastructure Division, where he managed the high growth rate and global expansion of the company’s infrastructure business. Under his leadership, the division achieved a leading position in open interface, wireless systems and developed a new line of extremely compact base stations. Prior to that, for approximately 18 years, Mr. Major held various executive and leadership positions at Motorola, Inc., the most recent of which was Senior Vice President and Chief Technology Officer, where he directed a broad range of research initiatives and led Motorola’s efforts to develop world class excellence in software.
Mr. Major received a B.S. in Mechanical and Aerospace Engineering from the University of Rochester, an M.S. in Mechanical Engineering from the University of Illinois, an M.B.A. from Northwestern University and a J.D. from Loyola University. Mr. Major holds eleven U.S. patents.
Mr. Major is the past chairman of the Telecommunications Industry Association (TIA) and the Electronic Industries Association (EIA). He served on the University of California President’s Board on Science and Innovation. He serves on the Dean’s Advisory Committee of the University of Rochester Hajim School of Engineering and Applied Science and as Chairman of the University of Illinois at Chicago Engineering School Advisory Board. Mr. Major serves as Chairman Emeritus of the Board of CommNexus, a nonprofit telecom industry group and as Chairman of the Board of the La Jolla Institute for Allergy and Immunology.
Mr. Major’s distinguished career and successes in a range of areas, including his senior management leadership at both large and startup technology companies, as well as his drive for innovation, as evidenced by his achievements at Wireless Knowledge, Qualcomm and Motorola, make Mr. Major a valuable contributor to our Board of Directors. Mr. Major also brings considerable directorial, financial and governance experience to the Board, currently serving on the boards of directors and several board committees of Lennox International, Inc., Broadcom Corporation, Pulse Electronics, Resonance and ORBCOMM Inc.
Mr. Major has been determined by the Board to be “independent” under NASDAQ listing standards. In nominating Mr. Major for election as a director, our Board focused on his seasoned experience from having served as an executive officer and on the boards and board committees of varied technology companies, his vision and expertise in matters of corporate governance, his expertise in technical development and the knowledge of the Company that he has gained and shared as a director since 1991 as important attributes for his continuing to serve as one of our directors. Mr. Major serves on the Audit and Technology Committees and is the Chairman of the Nominating and Governance Committee.
William P. Noglows, age 57, has been a director of Littelfuse since February 2007. Mr. Noglows is the current Executive Chairman, and former Chairman, President and Chief Executive Officer of Cabot Microelectronics Corporation (NASDAQ:CCMP), a leading worldwide supplier of consumable products used in the semiconductor manufacturing process. Mr. Noglows became Executive Chairman at Cabot Microelectronics Corporation in 2015, and Chairman, President and Chief Executive Officer in 2003. Prior to that, he was an Executive Vice President and General Manager at Cabot Corporation. He received a bachelor’s degree in chemical engineering from the Georgia Institute of Technology. Mr. Noglows has been determined by the Board to be “independent” under NASDAQ listing standards. Mr. Noglows also serves on the Board of Directors of Aspen Aerogels, Inc. (ASPN) and is the Chairman of its Compensation Committee. In nominating Mr. Noglows for election as a director, our Board focused on his experience as chief executive officer of a leading public company and his expertise in developing technology as important attributes for his continuing to serve as one of our directors. Mr. Noglows serves on the Compensation and Nominating and Governance Committees and is the independent Lead Director.
Ronald L. Schubel, age 71, has been a director of Littelfuse since June 2002. In October 2007, Mr. Schubel retired as Corporate Executive Vice President and President of the Americas Region for Molex Incorporated, a global manufacturer of interconnect systems. He began his career with Molex in 1981, spending five years in Singapore as President of the Far East South Region. Prior to joining Molex, Mr. Schubel worked for General Motors for 15 years. His last position with General Motors was Director of Operations for the Packard Electric Division. In addition, Mr. Schubel serves as the Chairman of the Board of Trustees for the Edward-Elmhurst Health Service Corporation, a nonprofit corporation. In addition he serves on the board of the Edward Cayman Corporation for investment and insurance support of Edward-Elmhurst and its affiliate of the EHSC Cayman Segregated Portfolio Company, which is the insurance company of EHSC. Further, Mr. Schubel is an advisor for Oaktree Capital working with the board of directors of Isola Group Ltd. Mr. Schubel has been determined by the Board to be “independent” under NASDAQ listing standards. In nominating Mr. Schubel for election as a director, our Board focused on his knowledge of managing manufacturing operations and his experience with operations in Asia as important attributes for his continuing to serve as one of our directors. Mr. Schubel serves on the Compensation and Technology Committees.
Information Concerning The Board Of Directors And Its Committees
Compensation of Directors. Compensation
For the 20142016 fiscal year, non-employee directors who are not our employees arewere paid an annual retainer of $65,000, paid in quarterly installments, plus reimbursement ofreasonableof reasonable expenses relating to attendance at meetings. Directors are not paid any additional fees for attendance at meetings. In addition, our Lead Director is paid an additional annual retainer of $15,000, the Chairperson of the Audit Committee is paid an additional annual retainer of $18,000, the Chairperson of the Compensation Committee is paid an additional annual retainer of $15,000, the Chairperson of the Nominating and Governance Committee is paid an additional annual retainer of $7,500, and the Chairperson of the Technology Committee is paid an additional annual retainer of $5,000. No additional fees are paid to directors who are alsoemployee directors. Additional annual retainers are paid to our full-time employees.Board Leadership, as shown below:
Role | Annual Retainer | ||
Lead Director | $15,000 | ||
Audit Committee Chairperson | $18,000 | ||
Compensation Committee Chairperson | $15,000 | ||
Nominating and Governance Committee Chairperson | $10,000 | ||
Technology Committee Chairperson | $10,000 |
In addition to cash compensation, each non-employee director receives aan equity grant of equity under the Littelfuse, Inc. Long-Term Incentive Plan (the “Long-Term Plan”) valued at approximately $105,000. The equity grant is comprised of (1) one-third stock options and two-thirds restricted stock units (“RSUs”) upon his or her election or reelection tothat vest on the Board at the Company’s Annual Meeting of Stockholders. The valuefirst three annual anniversaries of the annual grant of equity is equal to $95,000, based on a valuation performed by the Compensation Committee’s independent consultant. The stock options vest ratably over three years,date, have an exercise price equal to the fair market value of our common stock on the date of grant, and have a seven-year term. The RSUsterm, and (2) two-thirds restricted stock units (“RSUs”) that are granted upon his or her election or reelection to the Board at the Company’s annual meeting that vest ratably overon the first three years and entitleannual anniversaries of the director to receive one share of common stock per unit upon vesting.grant date. On April 25, 2014,22, 2016, Messrs. Chung, Fu, Grillo, Fu, Major, Noglows and Schubel were each granted 1,3501,200 stock options and 671 RSUs. Mr. Hunter is not a non-employee director for purposes of director compensation. For 2017 he is our Executive Chairman of the Board and is compensated pursuant to purchase shares of common stock and 774 RSUs.his Executive Retirement Agreement, described on page 35.
Non-employee directors may elect to defer receipt of their cash fees under the Littelfuse Deferred Compensation Plan for Non-employee Directors (the “Directors Plan”) and defer payout of their equity grants and any dividend distributions under the Long-Term Plan. All deferrals are deposited with a third-party trustee, where they (and any distributions thereon) are invested in Littelfuse common stock. Deferred cash fees are generally paid in a lump sum or in installments when the director ceases to be a director of Littelfuse. Deferred equity grants are generally paid out when the director ceases to be a director or the date specified by the director at the time of his or her deferral election. Deferred payments owing to GordonMr. Hunter as a result of his prior service as a non-employee director are expected to be delayed an additional six months following his separation from service as both a director and employee of Littelfuse as required by law due to his status as a "specified employee" under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).amended.
| 2017 Proxy Statement 9 |
The following table sets forth compensation paid to all persons who were non-employee directors at any time during 2014:2016:
2014 Director Compensation Table
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (b) | Option Awards ($) (c) | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation | Total | Fees Earned or Paid in Cash ($) | Stock Awards ($)(2) | Option Awards ($)(3) | Total | ||||||||||||||||||||||||||||||||||
T. J. Chung | $ | 80,000 | $ | 72,059 | $ | 35,438 | - | - | - | $ | 187,497 | ||||||||||||||||||||||||||||||||||
T.J. Chung | $ | 80,000 | $ | 79,084 | $ | 31,272 | $ | 190,356 | |||||||||||||||||||||||||||||||||||||
Cary T. Fu | Cary T. Fu | $ | 74,000 | $ | 72,059 | $ | 35,438 | - | - | - | $ | 181,497 | $ | 83,000 | $ | 79,084 | $ | 31,272 | $ | 193,356 | |||||||||||||||||||||||||
Anthony Grillo | (a) | $ | 74,000 | $ | 72,059 | $ | 35,438 | - | - | - | $ | 181,497 | |||||||||||||||||||||||||||||||||
Anthony Grillo (1) | $ | 65,000 | $ | 79,084 | $ | 31,272 | $ | 175,356 | |||||||||||||||||||||||||||||||||||||
John E. Major | John E. Major | $ | 72,500 | $ | 72,059 | $ | 35,438 | - | - | - | $ | 179,997 | $ | 75,000 | $ | 79,084 | $ | 31,272 | $ | 185,356 | |||||||||||||||||||||||||
William P. Noglows | (a) | $ | 80,000 | $ | 72,059 | $ | 35,438 | - | - | - | $ | 187,497 | $ | 80,000 | $ | 79,084 | $ | 31,272 | $ | 190,356 | |||||||||||||||||||||||||
Ronald L. Schubel | Ronald L. Schubel | $ | 65,000 | $ | 72,059 | $ | 35,438 | - | - | - | $ | 172,497 | $ | 65,000 | $ | 79,084 | $ | 31,272 | $ | 175,356 | |||||||||||||||||||||||||
| Fees earned by |
(2) |
| On April 22, 2016, each director received an annual RSU award of 671 shares of common stock. The amounts |
(3) |
| On April 22, 2016, each director received an annual stock option award of 1,200 shares. The amounts |
| 2017 Proxy Statement 10 |
CERTAIN GOVERNANCEMATTERS |
Stock Ownership PolicyBoard Leadership.
In February 2011, the Board adopted a stock ownership policy that requires our executive officersconjunction with his retirement as President and directors to hold and maintain a certain number of shares of common stock of the Company. Each non-employee director is required to hold a number of shares equal to five times (5x) the amount of his annual cash retainer. All new directors have five years from the date of election or appointment to satisfy their required stock ownership level. Until such time as a director achieves the required stock ownership level, the director is required to retain 50% of the shares of common stock realized from any equity awards granted by the Company. In the case of stock options, such shares are limited to “net shares” that remain after shares are sold or withheld to pay the exercise price of stock options, if applicable. Failure of a director to satisfy the applicable stock ownership level within the required compliance period may result in the director being ineligible to receive his annual equity award or being subject to a 100% retention requirement. All of our directors are in compliance with the guidelines and requirements set forth in our stock ownership policy except for Mr. Fu, who has been a director of the Company since July 2012 and who has until July 2017 to meet his holding requirement.
Attendance at Meetings.
The Board held seven meetings during fiscal year 2014. All of the directors attended 100% of the meetings of the Board and the committees on which they served. Consistent with our policy, all of our directors attended our 2014 annual meeting of stockholders.
Independent members of our Board regularly meet in executive session without management present. Stockholders wishing to communicate directly with the Board or individual directors should communicate in writing to our Corporate Secretary at our principal executive offices. Our Corporate Secretary will in turn promptly forward such communication to the directors.
Board Leadership Structure and Role in Risk Oversight.
Our Chief Executive Officer, effective January 1, 2017, Gordon Hunter also serves asbecame the Executive Chairman of the Board. Additionally, William Noglows serves as the independent Lead Director. Among other things, the Lead Director convenes and chairs regular and special executive sessions of the independent directors and serves as liaison between the independent directors and our CEO and Chairman of the Board.Chief Executive Officer (“CEO”). We believe that our leadership structure allows the Board to have better control of the direction of management, while still retaining independent oversight.
The Board held eight meetings during fiscal year 2016. All of the directors attended 100% of the meetings of the Board and at least 75% of the meetings of the committees on which they served. Consistent with our policy, all of our directors attended our 2016 annual meeting of stockholders. Independent members of our Board regularly meet in executive session without management present.
Director Independence; FinancialExperts
There is no arrangement or understanding between any of our directors and any other person or entity other than the company to which any director was or is to be selected as a director. The Board has affirmatively determined that each current board member, except Messrs. Hunter and Heinzmann, (i) is “independent” within the definitions contained in the current NASDAQ listing standards and the rules and regulations of the SEC, and (ii) has no other “material relationship” with the Company that could interfere with his or her ability to exercise independent judgment. In understandingaddition, the Board has determined that (i) each Audit Committee member is “independent” within the enhanced requirements for audit committee members under NASDAQ and SEC rules, (ii) each Compensation Committee member is a “non-employee director” under SEC rules, and (iii) each Compensation Committee member qualifies as an “outside director” pursuant to IRS Code Section 162(m). Furthermore, the Board has determined that Messrs. Fu and Grillo are “audit committee financial experts” as defined by the SEC.
| 2017 Proxy Statement 11 |
Board Committees
We have four standing committees: the Audit Committee, Compensation Committee, Nominating and Governance Committee and Technology Committee. Each of these committees has a written charter approved by our structure, itBoard, copies of which are posted under the “Corporate Governance” section of the Company’s website at http://investor.littelfuse.com/governance. Current membership of each committee is importantprovided below, followed by a description of each committee’s responsibilities.
Director | Audit Committee | Compensation Committee | Nominating and Governance Committee | Technology Committee |
T.J. Chung | Chairman | X | X | |
Cary T. Fu | Chairman | X | ||
Anthony Grillo | X | |||
David W. Heinzmann | ||||
Gordon Hunter | Chairman | |||
John E. Major | X | Chairman | X | |
William P. Noglows | X | X | ||
Ronald L. Schubel | X | X |
Audit Committee
Meetings held in 2016: 9
The Audit Committee is responsible to, rememberamong other things:
● | Appoint, compensate, retain and oversee the independent registered public accounting firm (including resolving any disagreements with management regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company. |
● | Review the adequacy and effectiveness of the accounting and financial controls and procedures of the Company. |
● | Review the annual internal audit plan and performance of the internal audit function. |
● | Review any legal or regulatory matters that may have a material effect on the financial statements of the Company or related Company compliance policies. |
● | Review the Company’s risk assessment and risk management process. |
● | Review procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters. |
● | Review swap transactions, reliance on end-user exception and related policies and procedures. |
● | Prepare the Audit Committee report required to be included in the Company’s annual proxy statement. |
| 2017 Proxy Statement 12 |
Compensation Committee
Meetings heldin 2016: 7
The Compensation Committee is responsible to, among other things:
● | Review the Company’s compensation practices and policies. |
● | Review and recommend to the Board for its consideration and determination the compensation for the Chief Executive Officer and the other executive officers. |
● | Review and recommend to the Board for its consideration and determination any employment agreements, severance agreements, change-in-control arrangements and any special or supplemental benefits for the executive officers of the Company. |
● | Establish and certify the achievement of performance goals for performance-based compensation. |
● | Evaluate Chief Executive Officer performance. |
● | Review and recommend to the Board for its consideration and determination the director compensation fees and equity-based awards. |
● | Review and report to the Board on the Company’s organizational structure, succession plans for executive officers and programs for development of individuals to assume positions of higher responsibility. |
● | Review and report on our compensation discussion and analysis and recommend its inclusion in our Annual Report on Form 10-K and Proxy Statement each year. |
The Compensation Committee has the authority under its charter to engage services of outside advisors to assist in carrying out its duties. Under this authority, the Compensation Committee retained Compensation Strategies, Inc. as its independent compensation consultant during the 2016 fiscal year to assist the Compensation Committee with compiling a comprehensive analysis of market data and analyzing its implications for executive compensation at the Company, as well as various other executive compensation matters such as: (1) reviewing our annual incentive and long-term incentive programs; (2) providing an update on executive compensation trends and pending and enacted legislation relevant to the compensation of our executive officers; and (3) providing advice on compensation matters relating to the CEO transition, described on page 24. The Compensation Committee has assessed the independence of Compensation Strategies, Inc. and determined that Mr. Hunter servedCompensation Strategies, Inc. did not have any economic interests or other relationships that would conflict with its obligation to provide impartial and objective advice.
Nominating and Governance Committee
Meetings held in 2016: 5
The Nominating and Governance Committee is responsible to, among other things:
● | Identify individuals qualified to serve on our Board and to recommend director nominees to the Board for nomination at our annual meeting of stockholders. |
● | Initiate and oversee an annual self-assessment of the Board and its committees. |
● | Monitor the orientation and training needs of directors. |
● | Review new legislation, rules, regulations and other developments affecting corporate governance and make recommendations to the Board, as appropriate. |
● | Review all potential related party transactions that require the Committee’s approval. |
● | Review the Company’s Code of Conduct and monitor the communication thereof. |
● | Develop corporate governance guidelines for the Company. |
| 2017 Proxy Statement 13 |
Technology Committee
Meetings held in 2016:4
The Technology Committee is responsible to, among other things:
● | Review the technology program scope, direction, quality, investment levels and execution of the technology strategies presented by the Company’s management. |
● | Review the Company’s key information technology controls. |
● | Review significant emerging technology issues and trends that may affect the Company, its business and strategy. |
● | Review the Company’s technology competitiveness, including the effectiveness of its technological efforts and investments in developing new products and business. |
Director Candidates
In considering a person as a nominee as a director the Nominating and Governance Committee takes into consideration such factors as it deems appropriate, including:
● | Experience as an executive or director of a publicly traded company; |
● | Familiarity with our business and our industry; |
● | Availability to actively participate in meetings of the Board and attend the annual meeting of stockholders; |
● | Knowledge and experience in the preparation or evaluation of financial statements; |
● | Diversity of background, including gender and ethnic diversity, knowledge, skills and experience to create a well-rounded Board; |
● | Satisfaction of the criteria for independence established by the SEC and NASDAQ listing standards, as they may be amended from time to time; and |
● | Ability to interact in a productive manner with the other members of the Board. |
The Nominating and Governance Committee used the same criteria to evaluate Mr. Hunter and determine it to be in the best interest of Littelfuse before servingthe Company to nominate him as an executive officer.a director through the annual meeting of stockholders occurring during the 2017 and 2018 calendar years, pursuant to the CEO transition described on page 24.
The Nominating and Governance Committee will consider nominees for the Board recommended by stockholders, using the same evaluation process as for any other nominee. Recommendations must comply with the procedures in our Bylaws and be submitted to the Corporate Secretary at 8755 West Higgins Road, Suite 500, Chicago, Illinois 60631. Any recommendation must include:
● | The name and address of the candidate; |
● | A brief biographical description, including his or her occupation for at least the last five years, and a statement of the qualifications of the candidate, taking into account the qualification factors set forth above; and |
● | The candidate’s signed consent to be named in the Proxy Statement if nominated and to serve as a director if elected. |
To be considered by the Nominating and Governance Committee for nomination and inclusion in our proxy statement for the 2018 annual meeting of stockholders, stockholder recommendations for director must have been received by us no later than November 16, 2017. Each stockholder recommendation must include the name and address of the nominating stockholder and the number of shares beneficially owned by such stockholder.
| 2017 Proxy Statement 14 |
Role inRisk Oversight
The Board’s role in our risk oversight process includes receiving regular reports from members of management on areas of material risk to the Company, including operational, financial, legal, regulatory, compensation and strategic risks. The full Board, or the appropriate committee, receives these reports from management to enable it to understand our risk identification, risk management and risk mitigation strategies. When a committee receives theAll Board committees meet regularly and report the chairman of the relevant committee reports on the discussion to the full Board during the committee reports portion of the next Board meeting.on risk management matters. This enables the Board and its committees to coordinate the risk oversight role, particularly with respect to risk interrelationships. In addition,
CompensationRisk
At the full Board and each committeedirection of the BoardCompensation Committee, management conducts an annual self-assessment based on feedback received from the individual membersa comprehensive risk assessment of the Board and each committee.
We reviewed our compensation policies and practices and presents its findings to assess whether suchthe Compensation Committee. The assessment includes a review of the risk areas within the Company’s compensation programs to ensure that there are no design flaws which motivate inappropriate or excessive risk taking. Management conducted this assessment of all compensation policies and practices as they relate tofor all employees, including the Company’s employees were reasonably likely to have a material adverse effect onNEOs, and determined that the Company. This assessment was made by the Executive Vice President, Chief Legal and Human Resources Officer and senior members of the Company’s human resources department in consultation with outside counsel. Where appropriate, the Executive Vice President, Chief Legal and Human Resources Officer and the senior members of the Company’s human resources department sought input from the Compensation Committee’s compensation consultant, the Company’s accounting and financial staff, and other senior management. We concluded that any risks arising from our policies and programs are not reasonably likely to have a material adverse effect on the Company. Our
During the review, several risk mitigating factors in our programs reflect sound risk management practices,were noted, including:
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● | Our annual incentive program awards are capped to limit |
● | The Compensation Committee has the ability to apply negative discretion over annual incentive program |
● | Our equity incentive awards vest over several years, so while the potential compensation payable for equity incentive awards is tied directly to appreciation of our stock price, taking excessive risk for a short-term gain is discouraged because it would not maximize the value of equity incentive awards over the long |
● | Our executive officers and directors are subject to a stock ownership policy that aligns their interests with the interests of our stockholders. |
StockOwnership Policy
The Board maintains a stock ownership policy that requires our executive officers and directors to hold and maintain a certain number of shares of common stock of the Company. The policy provides for the following:
● | Each executive officer and non-employee director is required to reach stock ownership levels, detailed below, within five years of their election or appointment. |
o | Non-Employee Directors: 5 times annual retainer |
o | Chief Executive Officer and Executive Chairman: 5 times base salary |
o | Chief Financial Officer and Executive Vice Presidents: 3 times base salary |
o | Senior Vice Presidents: 2 times base salary |
● | Until such time as the director or executive officer achieves the required stock ownership level, the director or executive officer is required to retain 50% of the net after-tax shares of common stock |
● | Failure of a director or named executive officer to satisfy the applicable stock ownership level within the required compliance period may result in their removal of participation in the Company’s annual equity grants, and/or being subject to a 100% retention requirement. |
| 2017 Proxy Statement 15 |
All of our directors are in compliance with the guidelines and requirements set forth in our stock ownership policy. The executive officers’ compliance with the stock ownership policy is discussed further in the Compensation Discussion and Analysis Section on page 33.
Corporate Governance Guidelines; Code of Conduct
The Board Committeeshas adopted Corporate Governance Guidelines. These guidelines address items such as the qualifications and responsibilities of our directors and director candidates and the corporate governance policies and standards applicable to the Board. In addition, the Board has adopted a Code of Conduct that applies to all our directors, principal executive officer, principal financial officer, principal accounting officer and controller, and all employees. The full text of our Corporate Governance Guidelines and our Code of Conduct is available on our website at: http://investor.littelfuse.com/governance. We will also disclose on this page of our website any amendments to, or waivers from the Code of Conduct.
Certain Relationships andRelated Transactions
WeThe Board maintains a Related Person Transactions Policy that governs the review, approval and ratification of transactions involving the Company and related persons where the amount involved exceeds $120,000. The Nominating and Governance Committee reviews and approves all proposed Related Person Transactions (as defined below).
Related persons include:
● | any person who is, or at any time since the beginning of our last fiscal year was, a director, executive officer, or a nominee to become a director of Littelfuse; |
● | any person who is known to be the beneficial owner of more than 5% of any class of our voting securities; |
● | any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the director, executive officer, nominee, or more than 5% beneficial owner; |
● | any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee, or more than 5% beneficial owner; |
● | any firm, corporation or other entity in which any of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest; and |
● | any charitable or non-profit organization in which any of the foregoing persons is actively involved in fundraising or otherwise serves as a director, trustee or in a similar capacity. |
The policy defines a Related Person Transaction as a transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships in which the Company (including any of our subsidiaries) was, is or will be a participant, the amount involved exceeds $120,000, and in which any Related Person had, has or will have four standing committees:a direct or indirect interest.
Our Executive Vice President, Chief Legal and Human Resources Officer and Corporate Secretary (“CHRO”) determines for purposes of the Auditpolicy whether a proposed transaction is a Related Person Transaction that must be approved by the Nominating and Governance Committee.
| 2017 Proxy Statement 16 |
The Nominating and Governance Committee will consider all of the Compensation Committee,relevant facts and circumstances available to the Nominating and Governance Committee, and the Technology Committee. Each of these committees has a written charter approved by our Board.including (if applicable) but not limited to:
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Audit Committee.
The Audit Committee of the Board (the “Audit Committee”) is responsible for, among other things, the appointment, compensation, retention and oversight of the work of the independent registered public accounting firm engaged (including resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company. It is also the responsibility of the Audit Committee to (1) review the adequacy and effectiveness of the accounting and financial controls and procedures of the Company and (2) review transactions posing a potential conflict of interest between us and our directors, officers and affiliates. A copy of the Audit Committee Charter is available on our website atwww.littelfuse.com. The Audit Committee met seven times in 2014. Members of the Audit Committee are Cary T. Fu, (Chairman), John E. Major and Anthony Grillo each of whom has been deemed by the Board to be “independent” and to meet the enhanced requirements for audit committee members under the NASDAQ rules and listing standards and the rules and regulations of the SEC. The Board has determined that Messrs. Fu and Grillo are “audit committee financial experts” as defined by the SEC based on Mr. Fu’s prior experience as a certified public accountant, and Mr. Grillo’s experience as a certified public accountant, an investment banker and a private equity investor.
Compensation Committee.
The charter for the Compensation Committee of the Board (the “Compensation Committee”) is posted on our website atwww.littelfuse.com. The Compensation Committee is charged in the charter with the authority to, among other things, review our compensation practices and policies, review and recommend to the Board for its consideration and determination the compensation for the directors, Chief Executive Officer and the other executive officers, evaluate Chief Executive Officer performance, and annually review and report on our compensation discussion and analysis and recommend its inclusion in our 2014 Annual Report on Form 10-K and Proxy Statement. The Compensation Committee held five meetings in 2014. The members of the Compensation Committee are T.J. Chung(Chairman), William P. Noglows and Ronald L. Schubel, each of whom has been deemed by the Board to be independent under NASDAQ listing standards. See the “Compensation Committee Report” below.
Processes and Procedures.
The Compensation Committee focuses on good governance practices and procedures in its operation. In 2014, this included:
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Delegation of Authority.
The Compensation Committee charter does not provide authority to the Compensation Committee to delegate to anyone its role and responsibilities with respect to executive officer compensation. However, pursuant to its charter, the Compensation Committee has the power, in its discretion, to retain at the Company’s expense, such independent counsel and other advisors and experts as it deems necessary or appropriate to carry out the Compensation Committee’s duties.
Independent Compensation Consultant.
The Compensation Committee has the authority under its charter to engage services of outside advisors to assist in carrying out its duties. Under this authority, the Compensation Committee retained Compensation Strategies, Inc. in August 2007 to assist in the structuring of executive compensation for 2008. The Compensation Committee has continued to work with Compensation Strategies, Inc. on executive compensation and nonemployee director compensation matters as requested by the Compensation Committee. During the 2014 fiscal year, Compensation Strategies, Inc. assisted with compiling a comprehensive analysis of market data and analyzing its implications for executive compensation at the Company, as well as various other executive compensation matters such as: (1) reviewing our annual incentive and long-term incentive programs; (2) reviewing the executive compensation philosophy; (3) providing an update on executive compensation trends and pending and enacted legislation relevant to the compensation of our executive officers; (4) providing an update on renewal of change of control agreements; and (5) reviewing the executive and director share ownership guidelines. The Compensation Committee has assessed the independence of Compensation Strategies, Inc. and determined that Compensation Strategies, Inc. did not have any economic interests or other relationships that would conflict with its obligation to provide impartial and objective advice.
A discussion of the role of the Board, management and consultants in determining compensation levels can be found in this Proxy Statement under “Executive Compensation – Compensation Discussion and Analysis.”
Nominating and Governance Committee.
It is the responsibility of the Nominating and Governance Committee of the Board (the “Nominating and Governance Committee”) to identify individuals qualified to serve on our Board and to recommend those individuals the Board should nominate for election at our annual meeting of stockholders. The Board has adopted a charter for the Nominating and Governance Committee. A copy of that charter is available on our website atwww.littelfuse.com. The Nominating and Governance Committee met three times during 2014. The Nominating and Governance Committee reviewed the performance of all of the current members of the Board and determined and recommended to the Board that all of the current directors should be nominated for re-election. In making this recommendation, consideration was given to matters such as attendance at meetings, preparation for meetings, input at meetings, interaction with other Board members, and other tangible and intangible benefits their service as directors brought to us. No other candidates were recommended or evaluated. Members of the Nominating and Governance Committee are John E. Major(Chairman), T.J. Chung and William P. Noglows, each of whom has been deemed by the Board to be independent under NASDAQ listing standards.
Director Qualification Standards. The Nominating and Governance Committee, in considering a person for a nominee as a director, takes into consideration such factors as it deems appropriate, including:
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The Nominating and Governance Committee will consider nominees forapprove only those Related Person Transactions that are in, or are not inconsistent with, our best interests and the Board recommended bybest interest of our stockholders, using the same evaluation process as for any other candidate. Recommendations should be submitted to the Corporate Secretary at our principal executive offices or directly to any member of the Nominating and Governance Committee. Any recommendation must include:Committee determines in good faith.
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To be considered by the Nominating and Corporate Governance Committee for nomination and inclusionWe did not enter into any Related Person Transactions in our proxy statement for the 2016 Annual Meeting, stockholder recommendations for director must have been received by us no later than November 16, 2015. Each stockholder recommendation must include the name and address of the nominating stockholder and the number of shares owned beneficially and of record by such stockholder. 2016.
Technology Committee.It is the responsibility of the Technology Committee of the Board (the “Technology Committee”) to review our research and development activities and ensure we maximize the use of appropriate technology throughout the organization. The Board has adopted a charter for the Technology Committee, which is available on our website atwww.littelfuse.com. The Technology Committee met four times in 2014. Members of the Technology Committee are Gordon Hunter(Chairman), T. J. Chung, Cary T. Fu, John E. Major, and Ronald L. Schubel.
Compensation Committee Interlocks and Insider Participation
T.J. Chung, William P. Noglows and Ronald L. Schubel served on the Compensation Committee during fiscal year 2014.2016, and none of them is now or ever was an employee of the Company. None of our executive officers served as a member of the Compensation Committee,compensation committee, or on a board of directors performing equivalent functions, of any entity that had one or more of its executive officers serving as a director or member of our Compensation Committee.
Executive CompensationBoard Communication
Stockholders wishing to communicate directly with the Board or individual directors should communicate in writing at the following address:
Littelfuse, Inc.
8755 West Higgins Road, Suite 500
Chicago, Illinois 60631
Attention: Corporate Secretary
All written communications are received and processed by the Corporate Secretary prior to being forwarded to the chairman of the board or other appropriate members of the Board. Directors generally will not be forwarded communications that are primarily commercial in nature, relate to improper or irrelevant topics, or request general information about the Company.
In addition to internal reporting procedures, the Audit Committee has established communication procedures through an independent telephonic voice call-in system and an independent website that can be accessed globally. The independent phone line and website provide for communication, either anonymously or identified, from employees, vendors, and other interested parties to communicate concerns, including concerns with respect to our accounting, internal controls or financial reporting, to the Audit Committee and CHRO. Concerns may be reported via telephone in the U.S. at 1-800-803-4135 or via the link in our Code of Conduct found on the Company’s website at http://investor.littelfuse.com/governance.
| 2017 Proxy Statement 17 |
OWNERSHIP OFLITTELFUSE, INC. COMMONSTOCK |
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of March 1, 2017, by (1) each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, (2) each director, (3) each NEO, and (4) all of our directors and executive officers as a group. Information concerning persons known to us to be beneficial owners of more than 5% of our common stock is based upon our review of Schedules 13D, 13F and 13G, and amendments thereto, as filed with the SEC. Of the shares reported, none are subject to pledge or lien in a margin account or pursuant to a loan agreement.
Beneficial Ownership Table
Shares of Common Stock Beneficially Owned (1) | Percentage of Common Stock (2) | |||||||
5% Principal Stockholders | ||||||||
BlackRock, Inc. (3) | 2,160,642 | 9.5 | % | |||||
55 East 52nd Street New York, New York 10055 | ||||||||
The Vanguard Group (4) | 1,761,848 | 7.8 | % | |||||
100 Vanguard Boulevard Malvern, Pennsylvania 19355 | ||||||||
Neuberger Berman Group LLC | 1,462,343 | 6.5 | % | |||||
1290 Avenue of the Americas New York, New York 10104 | ||||||||
Silvercrest Asset Management Group LLC Silvercrest L.P. Silvercrest Asset Management Group Inc. (6) | 1,197,192 | 5.3 | % | |||||
1330 Avenue of the Americas, 38th Floor New York, New York 10019 | ||||||||
Directors | ||||||||
T.J. Chung (7) | 23,538 | * | ||||||
Cary T. Fu (8) | 7,124 | * | ||||||
Anthony Grillo (9) | 53,060 | * | ||||||
David W. Heinzmann (10) | 74,096 | * | ||||||
Gordon Hunter (11) | 53,730 | * | ||||||
John E. Major (12) | 29,610 | * | ||||||
William P. Noglows (13) | 25,579 | * | ||||||
Ronald L. Schubel (14) | 31,549 | * | ||||||
Officers | ||||||||
Meenal A. Sethna (15) | 7,177 | * | ||||||
Ryan K. Stafford (16) | 40,053 | * | ||||||
Michael P. Rutz (17) | 15,401 | * | ||||||
Philip G. Franklin (18) | 4,878 | * | ||||||
All current directors and executive officers as a group (15 persons) (19) | 403,459 | 1.8 | % |
*Indicates ownership of less than 1% of common stock.
| 2017 Proxy Statement 18 |
(1) | Shares beneficially owned includes all outstanding stock options, restricted stock units, and deferred restricted stock units exercisable for or convertible into our common stock either currently or within 60 days after March 1, 2017. |
(2) | Applicable ownership percentage is based upon 22,641,223 shares of common stock outstanding as of March 1, 2017. |
(3) | The information is based on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on January 25, 2017 reporting beneficial ownership as of December 31, 2016. BlackRock, Inc. reported that they have sole voting power with respect to 2,114,357 shares, and sole dispositive power with respect to all of the shares reported. |
(4) | The information is based on a Schedule 13G/A filed by The Vanguard Group with the SEC on February 10, 2017 reporting beneficial ownership as of December 31, 2016. The Vanguard Group reported that they have sole voting power with respect to 44,111 shares, shared voting power with respect to 2,398 shares, shared dispositive power with respect to 45,407 shares, and sole dispositive power with respect to 1,716,441 shares. |
(5) | The information is based on a Schedule 13G/A filed by Neuberger Berman Group LLC and Neuberger Berman Investment Advisers LLC with the SEC on February 14, 2017 reporting beneficial ownership as of December 31, 2016. The Neuberger Berman Group LLC and its affiliates reported that they have shared voting and shared dispositive power with respect to all of the shares reported. |
(6) | The information is based on a Schedule 13G filed by Silvercrest Asset Management Group LLC, Silvercrest L.P. and Silvercrest Asset Management Group Inc. with the SEC on February 14, 2017 reporting beneficial ownership as of December 31, 2016. The Silvercrest Asset Management Group LLC and its affiliates reported that they have shared voting and shared dispositive power with respect to all of the shares reported. |
(7) | Includes (i) 6,079 stock options currently exercisable or that become exercisable within 60 days, (ii) 989 restricted stock units that vest within 60 days, and (iii) 7,308 deferred restricted stock units granted pursuant to the directors deferred compensation plan that are deferred until termination of service from the Board. |
(8) | Includes (i) 4,431 stock options currently exercisable or that become exercisable within 60 days, and (ii) 989 restricted stock units that vest within 60 days. |
(9) | Includes (i) 7,842 stock options currently exercisable or that become exercisable within 60 days, (ii) 731 restricted stock units that vest within 60 days, and (iii) 774 deferred restricted stock units granted pursuant to the directors deferred compensation plan that are deferred until termination of service from the Board. |
(10) | Includes (i) 47,911 stock options currently exercisable or that become exercisable within 60 days, (ii) 4,504 restricted stock units that vest within 60 days, and (iii) 6,349 shares held indirectly by trust. |
(11) | Includes (i) 39,384 stock options currently exercisable or that become exercisable within 60 days, and (ii) 10,859 restricted stock units that vest within 60 days. |
(12) | Includes (i) 6,079 stock options currently exercisable or that become exercisable within 60 days, and (ii) 989 restricted stock units that vest within 60 days. |
(13) | Includes (i) 7,842 stock options currently exercisable or that become exercisable within 60 days, (ii) 224 restricted stock units that vest within 60 days, and (iii) 2,468 deferred restricted stock units granted pursuant to the directors deferred compensation plan that are deferred until termination of service from the Board. |
| 2017 Proxy Statement 19 |
(14) | Includes (i) 7,842 stock options currently exercisable or that become exercisable within 60 days, and (ii) 989 restricted stock units that vest within 60 days. |
(15) | Includes (i) 5,771 stock options currently exercisable or that become exercisable within 60 days, and (ii) 1,130 restricted stock units that vest within 60 days. |
(16) | Includes (i) 22,311 stock options currently exercisable or that become exercisable within 60 days, and (ii) 6,115 restricted stock units that vest within 60 days. |
(17) | Includes (i) 12,805 stock options currently exercisable or that become exercisable within 60 days, and (ii) 2,118 restricted stock units that vest within 60 days. |
(18) | Mr. Franklin retired from his position as CFO effective March 31, 2016 and remained employed as an advisor to the Company through July 31, 2016. |
(19) | Our executive officers as of March 1, 2017 consisted of our named executive officers (excluding Mr. Franklin) and Messrs. Matthew Cole, Ian Highley, Deepak Nayar, and Dieter Roeder. |
Section 16(a) Beneficial Ownership ReportingCompliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers, directors and holders of more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Based solely on our review of the copies of these reports and on information provided by our executive officers and directors, we believe that during the fiscal year ended December 31, 2016 our directors and executive officers complied with all Section 16(a) filing requirements, with the following exception: A Form 5 was filed late, in February 2017, on behalf of Mr. Schubel to disclose a gift transaction entered into by Mr. Schubel in November 2014.
| 2017 Proxy Statement 20 |
PROPOSALNO. 2 -ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS |
Under the Dodd-Frank Act and the related rules promulgated by the SEC, we are requesting your advisory, non-binding approval of the compensation of our NEOs as disclosed in the following Compensation Discussion Andand Analysis, the compensation tables, and the accompanying narrative as presented in this Proxy Statement. This proposal, commonly known as a “Say-on-Pay” proposal, gives stockholders the opportunity to provide their input on our executive pay program and policies.
Executive Compensation Vote
We believe that our executive compensation program effectively aligns the interests of stockholders and executives, incentivizes the accomplishment of corporate goals, and attracts and retains talented executives. The key components of our compensation program are as follows:
● | Alignment of executive and stockholder interests through short and long-term incentives linked to operating performance; |
● | Short-term cash compensation based upon individual contribution and performance; |
● | Compensation structured to attract and retain the most talented industry leaders; and |
● | Compensation program based, in part, on the practices of peers in our industry and other comparable companies. |
At our 2016 Annual Meeting of Stockholders, more than 95% of the shares voted were cast in support of our executive compensation program. The Board and Compensation Committee value the opinions of our stockholders and took this high level of approval into account when developing the compensation for our NEOs.
This vote is not intended to address any specific item of compensation; rather the overall compensation of our NEOs and the philosophy, policies and practices described in this Proxy Statement. Our Board urges you to approve the compensation of our NEOs by voting in favor of the following resolution:
“RESOLVED, that the stockholders approve, on an advisory basis, the compensation of our NEOs, as disclosed in the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative as presented in this Proxy Statement.”
The Board of Directors recommends that you voteFOR the approval of the compensation of our NEOs.
| 2017 Proxy Statement 21 |
PROPOSAL NO. 3 -ADVISORY VOTEON THE FREQUENCY OF ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS |
In connection with the requirements of the Dodd-Frank Act and the related rules promulgated by the SEC, we are asking you to provide an advisory, non-binding vote on how frequently you wish to cast an advisory vote on the compensation of our named executive officers; once every year, once every two years, or once every three years. This proposal, often called a “Say-When-on-Pay” proposal, allows stockholders to provide advisory input on the frequency with which they would prefer an advisory vote on executive compensation be included as a proposal in our Proxy Statement.
Frequency of Advisory Vote onExecutive Compensation
After careful consideration, the Board has determined that an advisory vote on executive compensation that occurs every year is the most appropriate alternative for the Company at this time, and therefore the Board recommends that you vote for a one-year interval for the advisory vote. In formulating its recommendation, the Board considered that an annual advisory vote on executive compensation will allow our stockholders to provide us with current direct input on our compensation philosophy, policies and practices as disclosed in the Proxy Statement, consistent with our policy of seeking input from and engaging in discussions with our stockholders on corporate governance matters and our executive compensation philosophy, policies and practices. The Board also considered the stockholders’ advisory vote on the Say-When-on-Pay proposal presented at the Company’s annual meeting in 2011, when a plurality of votes cast were cast in favor of one-year intervals.
Although the Board of Directors recommends that stockholders vote for a Say-on-Pay proposal every year, you may cast your vote on your preferred voting frequency by choosing the option of one year, two years or three years, or abstain from voting, when you indicate your preference in response to the following resolution:
“RESOLVED, that the stockholders determine on an advisory basis that the frequency with which the stockholders shall have an advisory vote on the compensation of the named executive officers, as disclosed in the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative as presented in the Proxy Statement, shall be (A) every year, (B) every two years or (C) every three years.”
Vote Required
While we believe that a vote once every year is the best choice for us, you are not voting to approve or disapprove our recommendation, but rather to make your own choice among a vote once every year, every two years or every three years. You may also abstain from voting on this item. The option of one year, two years or three years that receives a plurality of votes cast by our stockholders will be the frequency for the advisory vote on executive compensation that has been selected by our stockholders. However, because this vote is advisory and will not be binding on the Board of Directors, the Board of Directors may decide that it is in the best interests of our stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option selected by stockholders.
The Board of Directors recommends that you vote for a frequency of
every YEAR for future stockholder advisory votes on the compensation of our named executive officers.
| 2017 Proxy Statement 22 |
COMPENSATION DISCUSSIONAND ANALYSIS |
The following Compensation Discussion and Analysis, or CD&A, describes our 20142016 executive compensation program.programs. This CD&A is intended to be read in conjunction with the tables beginning on page 30,37, which provide detailed historical compensation information for our following NEOs.
Name | Title | Notes | |
David W. Heinzmann | President and Chief Executive Officer and Former Chief Operating Officer | Appointed to current role effective January 1, 2017. | |
Gordon Hunter | Executive Chairman of the Board, and Former Chairman of the Board, President and Chief Executive Officer | Appointed to current role effective January 1, 2017. | |
| Executive Vice President, | ||
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Ryan K. Stafford | Executive Vice President, Chief Legal and Human Resources Officer and Corporate Secretary | Appointed to expanded role as Corporate Secretary effectiveJanuary 1, 2017. | |
Michael P. Rutz | Senior Vice President, Global Operations | Appointed to current role effective February 1, 2015. | |
Philip G. Franklin | Former Executive Vice President and Chief Financial Officer | Retired from his role as CFO effective March 31, 2016; remained employed as an advisor to the Company through July 31, 2016. |
Effective February 1, 2015, Mr. Franklin was promoted from Senior Vice President and Chief Financial Officer to the Company’s Executive Vice President and Chief Financial Officer, and Mr. Stafford was promoted from Senior Vice President, Chief Legal and Human Resources Officer to the Company’s Executive Vice President, Chief Legal and Human Resources Officer.
Mr. Rutz was hired on February 10, 2014 as the Company’s Vice President of Supply Chain and Operational Excellence. Effective February 1, 2015, Mr. Rutz was promoted to Senior Vice President, Global Operations.
Executive Summary
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, our stockholders are entitled to cast an advisory vote to approve the compensation of our NEOs as disclosed in this Proxy Statement. The stockholder vote with respect to approval of the compensation of our NEOs is advisory in nature and will not be binding on the Company. However, our Board and our Compensation Committee value the opinions of our stockholders and will consider the outcome of the advisory vote when making future compensation decisions regarding the Company’s NEOs.
As described below, our executive compensation programs are designed to pay for performance and align the interests of our executives with those of our stockholders, by rewarding performance that meets or exceeds established corporate and individual performance goals. Company performance is based on the achievement of specified financial objectives applicable to each NEO, which include sales, earnings per share and cash from operations, as well as performance measurements of the areas within the scope of authority of the NEO; whereas individual performance is based on each NEO’s achievement of specified individual performance objectives.
The compensation of our NEOs during fiscal year 2014 should be viewed in light of our strong shareholder returns. Our compounded annual shareholder return for the five year period ending December 27, 2014 (assuming reinvestment of dividends) was 25.9%, as compared to the compounded annual shareholder return over the same period of 16.1% for the Dow Jones Electrical Components and Equipment Industry Group Index and 15.5% for the Russell 2000 Index.
Our executive compensation program is designed to pay for performance.stockholders. In fiscal year 2014,2016, our annual incentive award targetsawards for our NEOs were weighted at 80% for targets that were directly performance-basedbased on (i) the Company’s achievement of financial objectives related to its base business operations, which exclude the impact of material acquisitions completed during the year, (ii) the acquisition and 20% for targets that were tied to individual goals that promote valueintegration during 2016 of three businesses key to the Company.Company’s long-term strategy, and (iii) the NEOs’ individual performances. In addition, a significant portion of our executive compensation program consists of long-term compensation subject to long-term vesting requirements.
The Compensation Committee continually reviews the compensation programs for our NEOs to ensure they achieve the desired goals of aligning our executive compensation structure with our stockholders’ interests and current market practices. We believe we have programs that align the compensation of our executives with the interests of our stockholders and manage compensation risk, including through stock ownership guidelines, an independent Compensation Committee and the use of an independent compensation consultant.
Pursuant to the SEC’s say-on pay rules, our shareholders approved, by the affirmative vote of 96% of the shares present in person or represented by proxy at the meeting and entitled to vote at our 2014 Annual Meeting, the compensation for our NEOs in our 2014 proxy statement. The Compensation Committee takes this approval into account when developing the compensation for our NEOs.
We are asking our stockholders to indicate their support for our NEO compensation as described in this proxy statement under Proposal No. 4, which allows our stockholders the opportunity to express their views on our NEOs’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs during fiscal year 2016 directly ties to our strong performance during the Company’s milestone year. Revenues crossed the $1 billion dollar mark, we achieved a record level of cash flow from operations, and we achieved many of the philosophy, policies and practices describedgoals in our 2012 – 2016 growth strategy. We continued to return capital to stockholders through cash dividends, with a 13.8% increase in the Compensation Discussion and Analysis, the executive compensation tables, and the accompanying narrative as presented in this Proxy Statement.quarterly dividend rate during 2016.
| 2017 Proxy Statement 23 |
On November 15, 2016, Mr. Hunter notified the Board of his retirement as President and Chief Executive Officer of the Company, effective January 1, 2017. Mr. Hunter agreed to serve the Company as Executive Chairman of the Board upon his retirement as President and Chief Executive Officer, effective January 1, 2017 through December 31, 2017. In connection with his retirement, Mr. Hunter and the Company entered into an Executive Retirement Agreement, which provided that (i) the Company and Mr. Hunter intend for him to serve as Chairman of the Board through at least the Company’s annual meeting of stockholders occurring in the 2019 calendar year; provided, that, effective December 31, 2017, Mr. Hunter will hold the title of Non-Executive Chairman of the Board, and (ii) the Company will nominate Mr. Hunter for service on the Board as its Chairman at each annual meeting of stockholders occurring during the 2017 and 2018 calendar years. The terms of the Executive Retirement Agreement are described further on page 35.
In connection with Mr. Hunter’s retirement, the Board promoted Mr. Heinzmann, who previously served as the Company’s Chief Operating Officer, to succeed Mr. Hunter as President and Chief Executive Officer of the Company, effective January 1, 2017. In addition, the Board approved the expansion of the number of directors constituting the whole Board to eight members and elected Mr. Heinzmann to serve as a member of the Board, effective January 1, 2017. The terms of Mr. Heinzmann promotion are described further on page 36.
TotalRewards Philosophy
The Compensation Committee is responsible for guiding and overseeing the formulation and application of the Company’s Total Rewards Philosophy relating to the compensation and benefit programs for executive officers. OurPay for performance is an essential element of our Total Rewards Philosophy, for executive compensationwhich is designed to drive performance in the form of global business growth and success by fully leveragingfinancially incentivizing our investment in our human capitalexecutive officers to create stockholder value. To achieve our goals, we must attract and retain individuals with the appropriate expertise and leadership ability, and we must motivate and reward them to build long-term stockholder value.
The Compensation Committee has worked with our management and the Compensation Committee’s compensation consultant to design compensation programs with the following primary objectives:
● | Attract, retain and motivate highly qualified |
● | Reward executives based upon our financial performance at levels competitive with peer |
● | Align a significant portion of the executive compensation with driving our performance and stockholder value in the form of performance-based executive incentive awards and long-term awards. |
The designguiding principles of our specific programs is based on the following guiding principles:Total Rewards Philosophy are as follows:
Performance
Performance.We believe that the best way to accomplish alignment of compensation with the interests of our stockholders is to link a significant portion of total compensation directly to meeting andor exceeding individual, business unit and overall Company performance goals. When performance exceeds expectations, total pay levels are expected to be above the competitive median. When performance falls below expectations, total pay levels are expected to be below competitive levels.
Competitiveness
CompensationCompetitiveness. Our compensation and benefit programs are designed to be competitive with thosethe compensation provided by companies with whom we compete for talent. While we generally target the 50th50th percentile of the total compensation programs of competitor companies, in some instances, we provide compensation above or below the 50th50th percentile to account for other factors such as an executive’s operating responsibilities, management level, and tenure and performance in the position, etc. In order toposition. To help us analyze the competitiveness of our compensation programs, we developed a referencecompensation peer group whichthat was used to set compensation for the 20142016 fiscal year, as discussed in more detail below in “Total Rewards Philosophy – Competitive Analysis.” This peer group is updated from time to time and was last updated in October 2013. Our health and welfare benefit programs, perquisites and other benefits are designed to provide competitive levels of protection and financial security but are not based on performance.below.
Cost
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Cost.Compensation and benefit programs are designed to be cost effective, ensuring that the interests of our stockholders are considered.
The Annual Compensation Process
The Compensation Committee reviews industry data and performance results presented by its compensation consultant in determining the appropriate aggregate and individual compensation levels for the year. In conducting its review, the Compensation Committee considers quantitative performance results, the overall need of the organization to attract, retain and motivate the executive team, and the total cost of compensation programs. The Compensation Committee also reviews information showing the executive’s total target and actual compensation during the year. The amount of compensation already realized or potentially realizable, however, does not determine the level at which future pay opportunities may be set.
The Compensation Committee reviews base salaries starting in the fall, with any changes to be effective February 1 of the following year. This process aligns the timing of annual executive salary adjustments with the timing of adjustments for all other employees. To-date, approval of incentive awards for NEOs under the Littelfuse, Inc. Annual Incentive Plan (the “Annual Incentive Plan”) for the preceding year and the terms of the incentive awards for NEOs for the current year have been approved by the Compensation Committee at its January or February meeting (and such practice is expected to continue in the future). Stock options and RSUs are granted at the meetings of the Compensation Committee and the full Board held in connection with our Annual Meeting of Stockholders (please see discussion below in the section entitled “Equity Compensation”). Since we establish the annual meeting schedule for our grants well in advance, there is no opportunity for manipulation of exercise prices on option grants if we are in possession of non-public information at the time of the meetings. The Compensation Committee oversees the administration of the Company’s equity-based programs and makes recommendations to the Board for its consideration and approval of equity awards to be made to the CEO and other executive officers. The Compensation Committee has delegated authority to the CEO to grant equity awards to other non-executive officer employees. Ratification of grants for any non-executive officers who are newly-hired or promoted during the course of the year generally occurs at the Compensation Committee meeting immediately following the hiring or promotion, as applicable.
Competitive Analysis
Competitive compensation levels for our Chief Executive Officer and other NEOs are established through, among other methods, the use of data obtained from the Compensation Committee’s compensation consultant. These analyses include base salary, annual incentive opportunities and long-term incentive opportunities for comparable companies. With the advice of our compensation consultant, we adopted an industry reference group as a source to evaluate compensation levels, which industry group was used to set compensation for the 2014 fiscal year. The reference group consists of 17 publicly-traded companies of reasonably similar size to us in the electronic equipment/electronic manufacturing services industry, the electronic components and equipment industry and the semiconductor/semiconductor equipment and manufacturing industry, representing different segments of our business. The companies included in the reference group are set forth below:
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The raw data derived from each company in the reference group is size-adjusted to approximate our revenues for the corresponding fiscal year. The total compensation for our NEOs is generally targeted at the 50th percentile of the adjusted data specific to each position. In some instances, however, we provide compensation above or below the 50th percentile for a particular element and/or for a particular position, based on internal factors, including the executive’s operating responsibilities, management level, possible differences in compensation standards in the representative industries, and tenure and performance of the executive officer in the position.
In 2014, the Compensation Committee awarded total target compensation to Messrs. Hunter, Franklin, Heinzmann, Stafford and Rutz that was +17%,+15%,-13%,+18% and+14%, respectively, in relation to the median of our peer group for our 2014 fiscal year. In making the awards to our NEOs in 2014 above the median of our peer group for our 2014 fiscal year, in addition to analysis of our peer group, the Compensation Committee considered the individual scope of responsibility of each NEO, each NEO’s historical compensation levels, the NEO’s years of experience, the NEO’s past, and expected future, contributions to our success, market practice, internal equity considerations and individual performance.
Allocation between Cash and Non-Cash Compensation andShort-Termand Long-Term Compensation
We believe that both cash components and non-cash components are appropriate mechanisms for delivering compensation. Cash compensation is used as short-term compensation (i.e., base salary and annual incentive awards), while non-cash compensation (i.e., stock options and RSUs) is generally used for long-term compensation. The allocation between cash and non-cash compensation is an outcome of our targeted competitiveness for individual program elements, including salary, annual incentive compensation and long-term incentive grants, and our practice with respect to allocating between the different types of incentive grants. The mix of compensation ultimately realized by the NEOs is determined by a combination of individual, team and Company-wide performance over time.
The allocation between short-term and long-term compensation is based primarily on competitive market practices relative to base salaries, annual incentive awards and long-term incentive values, as opposed to a targeted allocation between short-term and long-term pay. We also consider certain internal factors that may cause us to target a particular element of a NEO’s compensation differently. These internal factors may include the NEO’s operating responsibilities, management level and tenure and performance in the position. We consider the total compensation to be delivered to individual NEOs, and as such, exercise discretion in determining the portion allocated to annual and long-term incentive opportunity. We believe that this “total compensation” approach provides the ability to align pay decisions with the short-term and long-term needs of the business and the interests of our stockholders. It also allows for the flexibility needed to recognize differences in performance of each NEO by providing differentiated pay.
Benchmarking
Competitive compensation levels for our executive officers are in part established through the review of competitive market compensation data provided by the Compensation Committee’s independent compensation consultant. This review includes base salary, annual incentive opportunities and long-term incentive opportunities for comparable companies. In 2015, we selected an industry compensation peer group as a source to evaluate compensation levels for the 2015 and 2016 fiscal years. The compensation peer group consisted of 17 publicly-traded companies of reasonably similar size to us in the electronic equipment/electronic manufacturing services industry, the electronic components and equipment industry and the semiconductor/semiconductor equipment and manufacturing industry, representing different segments of our business. The compensation peer group is set forth below:
Cabot Microelectronics Corporation (CCMP) | MTS Systems Corporation (MTSC) |
CTS Corporation (CTS) | ON Semiconductor Corporation (ON) |
Diodes Incorporated (DIOD) | Rogers Corporation (ROG) |
Electro Scientific Industries, Inc. (ESIO) | Semtech Corporation (SMTC) |
Fairchild Semiconductor International, Inc. (FCS) | Stoneridge, Inc. (SRI) |
Gentex Corporation (GNTX) | TTM Technologies, Inc. (TTMI) |
Hubbell Incorporated (HUBA, HUBB) | Veeco Instruments Inc. (VECO) |
KEMET Corporation (KEM) | Vishay Intertechnology, Inc. (VSH) |
Methode Electronics, Inc. (MEI) |
For 2016, the raw data derived from each compensation peer group companies’ 2015 proxy statement was aged at an annual rate of 3% for cash and 5% for equity, and was size-adjusted to approximate our revenues for the corresponding fiscal year. The total compensation for our NEOs is generally targeted at the 50th percentile of the competitive market data. In 2016, the Compensation Committee awarded total annual target compensation to Messrs. Heinzmann, Hunter, Stafford, Rutz and Ms. Sethna that was +6%, +11%, +16%, +14%, and +1%, respectively, in relation to the median of our peer group. In addition, Ms. Sethna and Mr. Stafford received special retention grants, as described on page 33, which are not reflected in these percentages. In making the awards to our NEOs in 2016 above the median of our peer group, the Compensation Committee considered the individual scope of responsibility of each NEO, each NEO’s historical compensation levels, the NEO’s years of experience, the NEO’s past, and expected future, contributions to our success, market practice, internal equity considerations and individual performance. Additional information regarding the components of total compensation for our NEOs is discussed below under “Components of Total Compensation.”
| 2017 Proxy Statement 25 |
Annual Compensation Process
The Compensation Committee reviews industry data and performance results presented by its independent compensation consultant in determining the appropriate aggregate and individual compensation levels for the year. In conducting its review, the Compensation Committee considers quantitative performance results, the overall need of the organization to attract, retain and motivate the executive team, and the total cost of compensation programs.
The Compensation Committee reviews base salaries annually with any changes to be effective February 1 of the following year. The approval of incentive awards for NEOs under the Littelfuse, Inc. Annual Incentive Plan (the “Annual Incentive Plan”) for the preceding year and the terms of the incentive awards for NEOs for the current year are approved by the Compensation Committee at its January or February meeting. Long term equity compensation is granted by the Compensation Committee and the full Board at the April meeting, held in connection with the annual meeting of stockholders. The Compensation Committee oversees the administration of the Company’s equity-based programs and makes recommendations to the Board for its consideration and approval of equity awards to be made to the CEO and other executive officers. The Compensation Committee has delegated authority to the CEO to grant equity awards to other non-executive officer employees. Ratification of grants for any non-executive officers who are newly-hired or promoted during the course of the year generally occurs at the Compensation Committee meeting immediately following the hiring or promotion, as applicable.
Role of the Board,Compensation Committee, Management and Consultants.
The Compensation Committee establishes, reviews and recommends all elements of the executive compensation program to the independent members of the Board for approval. The Compensation Committee works with an independent compensation consultant, Compensation Strategies, Inc., for advice and perspective regarding market trends that may affect decisions about our executive compensation program and practices. Compensation Strategies, Inc.Our independent compensation consultant also advises the Compensation Committee in connection with nonemployeeon non-employee director compensation matters. Additional responsibilities of the Board, the Compensation Committee, management and the independent compensation consultant include:
Board of Directors and Compensation Committee
● | The Compensation Committee reviews and recommends the |
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| 2017 Proxy Statement 26 |
Management and Consultants
The key elements of management’s role in determining compensation levels for the NEOs (except the Chairman and Chief Executive Officer) are as follows:
● | Compensation program design: Management makes recommendations in consultation with the independent compensation consultant on compensation program design and pay levels |
● | Develop performance measures: Management identifies appropriate performance measures, recommends performance targets that are used to determine annual awards, and develops individual performance objectives for each NEO. |
● | Compile competitive market data: Management works with the independent compensation consultant in compiling compensation information and preparing the data for presentation to the Compensation Committee. |
● | Develop compensation recommendations: Based on the compensation survey data and publicly-disclosed compensation information, our |
Impact of Accounting and Tax Issueson ExecutiveCompensation
In setting each NEO’s compensation levels, we do not have a stated policy that all compensation must be tax deductible. The Compensation Committee willand Board analyze the overall expense arising from aggregate executive compensation levels and consider various alternatives to preserving the tax deductibility of compensation payments and benefits to the extent reasonably practicable and to the extent consistent with our other compensation goals. The Compensation Committee and the Board analyze the overall expense arising from aggregate executive compensation levels and awards and the components of our pay programs. Section 162(m) of the Internal Revenue Code (“Section 162(m)”) places a limit of $1,000,000 on the amount of compensation that we may deduct in any one year with respect to our Chief Executive OfficerCEO and our three other most highly compensated officers other than the principal financial officer. Compensation, including compensation pursuant to plans or arrangements approved by our stockholders, that qualifies as “performance- based“performance-based compensation” under Section 162(m) is not subject to the deduction limit. The Annual Incentive Plan and the Long-TermLong Term Incentive Plan have been approved by our stockholders; as a result, stock options, stock appreciation rights, RSUs, performance shares, performance units and annual cash incentive awards under all of these plans that qualify as “performance-based“performance based compensation” will not be subject to the deductibility limit imposed by Section 162(m). WeIn fiscal 2016, the Compensation Committee established an annual incentive plan structured to allow payments to be made, if a certain financial target is met, that are asking that shareholders re-approvedeductible under Section 162(m). In fiscal 2016, we met the performance goals in the Long-Term Plan (see Proposal No. 3) so that awards granted under that Long-Term Plan can continue to not be subject to the deductibility limit imposed by Section 162(m), if desired by the Compensation Committee.objective of our annual incentive plan, as described further on page 29.
Employment Contracts
| 2017 Proxy Statement 27 |
Since May 1, 2006, we have had in place an employment agreement with Mr. Gordon Hunter, our Chairman
Components of Total CompensationCompensation
The compensation of our NEOs usually consists of five components:
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Each component iscomponents, each designed to help achieve our compensation objectives and to contribute to a total compensation arrangement that is competitive, appropriately performance-based and valued by our NEOs.NEOs, as described in the following table.
| Purpose | |
Base | Designed to attract, retain and motivate highly-qualified executives by paying a competitive salary. | |
Annual Incentive Plan (cash awards) | Designed to provide a performance-based cash reward to executives and key employees of the Company for contributing to the achievement of our short-term corporate goals. | |
Long Term Incentive Plan (stock option and RSU awards) | Designed to emphasize the goals of our equity compensation: (1) align each NEO’s financial interests with driving stockholder value; (2) focus the NEOs’ efforts on long-term financial performance of the Company; and (3) assist in the retention of our NEOs. | |
Perquisites and Health and Welfare Programs | Designed to provide competitive levels of health and welfare protection and financial security to executives. | |
Retirement and Post-Employment Compensation |
Purpose: TheInformation regarding the administration and the determination of amounts of each NEO’s base salarycomponent is designed to attract, retain and motivate highly-qualified executives by paying a competitive salary. below.
A. Base Salary
Administration:Administration: Our Chief Executive OfficerCEO and our Executive Vice President, Chief Legal and Human Resources OfficerCHRO recommend NEO salary levels (other than for the Chief Executive Officer)CEO) to the Compensation Committee for approval. The Compensation Committee reviews thesethe NEO salary recommendations along with the reference group information and other information and advice of the compensation consultant, if any, and makes its recommendations to the full Board for approval. The Compensation Committee determines and makes Chief Executive OfficerCEO salary recommendations to the full Board, other than the CEO, for approval by the independent directors.approval.
Determination of amounts:amounts While base: Base salary is generally targeted at the 50th percentile of the referencecompensation peer group, although we also take into account factors such as individual scope of responsibility, years of experience, past and future contributions to our success and possible differences in compensation standards in our industry. We strive to be market competitive in an effort to attract, retain and motivate highly-talented executive officers. The NEOs’ salaries are determined by market salary data and each individual’s position, responsibility and longevity within our Company and performance in that position.
The base salaries for the NEOs in 2014 were determined based on historical compensation for our NEOs and on compensation information provided by the compensation consultant.
| 2017 Proxy Statement 28 |
In both 20142016 and 2015,for 2017, the Compensation Committee recommended to the Board and the Board approved increases in base salary for all NEOs, effective as of February 1, of the next year except that a special increase was approved for Mr. Heinzmann, effective January 10, 2014 to coincide with his promotion from Vice President of Global Operations to the Company’s Chief Operating Officer. In connection with Mr. Heinzmann’s promotion, the Compensation Committee, after considering a compensation review prepared by Compensation Strategies, Inc., approved an increase in his annual base salary from $307,178 to $400,000.
as noted. The base salary amounts for the NEOs, effective as of February 1, 20142016 and February 1, 2015 (or January 10, 2014, in the case of Mr. Heinzmann and February 10, 2014 in the case of Mr. Rutz), respectively,2017, are as follows:
2014 | 2015 | |||||||
Name | Annualized Base Salary | Annualized Base Salary | ||||||
Gordon Hunter | $ | 730,714 | $ | 752,635 | ||||
Philip G. Franklin | $ | 408,512 | $ | 420,767 | ||||
David W. Heinzmann | $ | 400,000 | $ | 475,000 | ||||
Ryan K. Stafford | $ | 372,768 | $ | 383,951 | ||||
Michael P. Rutz | $ | 340,000 | $ | 350,200 |
Name | 2016 Annualized Base Salary | 2017 Annualized Base Salary | ||||||
David W. Heinzmann (1) | $525,000 | $700,000 | ||||||
Gordon Hunter (1) | $782,740 | $600,000 | ||||||
Meenal A. Sethna | $375,000 | $393,750 | ||||||
Ryan K. Stafford (2) | $400,000 | $463,500 | ||||||
Michael P. Rutz | $360,706 | $371,527 | ||||||
Philip G. Franklin (3) | $420,767 | - |
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(2) | 2016 Annualized Base Salary was increased from $400,000 to $450,000 effective as of July 20, 2016, in light of Mr. Stafford’s ongoing performance and the Company’s desired retention of Mr. Stafford. |
(3) | Upon his transition to an advisor role from April 1, 2016 to July 31, 2016, Mr. Franklin served as a part-time employee and his base salary was reduced accordingly. |
In General: B. Annual Incentive Plan
In January 2014, our Compensation Committee and our Board approved the Annual Incentive Plan and on April 25, 2014 our stockholders approved the Annual Incentive Plan. The Annual Incentive Plan contains terms substantially similar to its predecessor.(“AIP”).
Purpose:Administration The Annual Incentive Plan is designed to provide a performance-based cash reward to the NEOs (among other executives and key employees of the Company) for contributing to the achievement of our corporate goals and driving stockholder value, thereby addressing the objectives of our executive compensation policies.
Administration:: The Compensation Committee establishes, after (1) consulting with our Chief Executive OfficerCEO and our Executive Vice President, Chief Legal and Human Resources Officer,CHRO, (2) reviewing the referencecompensation peer group information and other information and advice if any, of the independent compensation consultant and (3) discussing the financial goals and targets of the Company for the next fiscal year with our Chief Executive Officer, our Chief Operating Officer,CEO and our Executive Vice President and Chief Financial Officer, establishes aCFO, the threshold, target and maximum amountamounts that may be awarded as an annual award under the Annual Incentive PlanAIP to each NEO for the calendarfiscal year. The threshold,annual target and maximum amounts are set as percentages of each NEO’s base salary in effect as of October 31stand the maximum amount is set at 200% percent of the performance period.annual target percentage.
AwardsDetermination ofeligible AIPamounts: Our AIP is intended to compensate NEOs for their short-term contributions to the Company’s performance. Annual incentive awards to NEOs are granted based on an explicit formulathe NEOs’ and the Company’s performances and are approved by the Compensation Committee and recommended to the full Board for approval, typically at the first meeting of each year. At the end of each year, the amount of the total award payable to each of the NEOs is calculated byapproval. While one factor the Compensation Committee based on Company and individual performance measures using a mathematical formula weighing each ofconsiders regarding the factors. The Compensation Committee then recommends the awards to the full Board for approval.
The Compensation Committee retains the discretion to decrease the total award payable to any NEO and to adjust (upward or downward) any performance measure for extraordinary events or circumstances, except that no adjustment to performance measures will be made if it would cause an award intended to satisfy the requirements of performance-based compensation under Section 162(m) to fail to qualify. In the past, these adjustments have included severance charges and extreme commodity price changes.
Determination of amounts: Incentive amounts are earned by each NEO based on the achievement of established objectives on a sliding scale from 0% to 200% of the target amount, which is set as a percentage of the NEO’s base salary. The maximum incentive amount that can be paid for a performance period has been limited under the Annual Incentive Plan to $2,500,000. While one factor we consider in compensation of our NEOs is where that compensation falls in relation to the 50th percentile of the total compensation of our referencecompensation peer group, we doit does not necessarily match our annual incentive awards against a certain percentile of the referencecompensation peer group and we considerit considers other factors, such as internal equity considerations, executive experience and the years of service of the NEO, in setting the compensation amounts. We settargets as a percent of base salary. It sets the threshold, target and maximum amounts for the AIP so that, if earned, we pay sufficient total annual compensation to remain competitive. The maximum incentive amount that may be paid to an employee for a performance period has been limited under the AIP to $2,500,000.
Incentive awards
| 2017 Proxy Statement 29 |
The following table summarizes the AIP opportunity percentages for the NEOs for 2016, excluding Mr. Franklin who retired from his role as CFO effective March 31, 2016 and did not participate in the 2016 AIP:
2016AIP TargetOpportunity (as a% of2016 Base Salary) | ||||||||||||
Name | Threshold | Target | Maximum | |||||||||
David W. Heinzmann | 40% | 80% | 160% | |||||||||
Gordon Hunter | 50% | 100% | 200% | |||||||||
Meenal A. Sethna | 35% | 70% | 140% | |||||||||
Ryan K. Stafford | 35% | 70% | 140% | |||||||||
Michael P. Rutz | 30% | 60% | 120% |
In 2016, the Compensation Committee structured the AIP to ensure sufficient flexibility to determine appropriate non-equity incentive compensation and preserve corporate tax deductions for performance-based compensation under Section 162(m). Under the 2016 AIP, the Compensation Committee established a performance goal and a maximum annual award percentage that could be paid to individualeach NEO; the NEOs have been based on bothwere eligible to receive up to a maximum of 200% of their target annual incentive opportunities, upon the actual financial results in relation to the target goals under the Annual Incentive Plan and an evaluationCompany’s achievement of the NEO’s performance in relation to his or her individual performance objectives. Approximately 80%$1.00 of the award has been tied to the actual financial results, such as sales,diluted earnings per share (“EPS”) for 2016. In January 2017, the Compensation Committee determined that the Company had achieved $4.60 of EPS for 2016, thereby satisfying the performance goal under the 2016 AIP. The Compensation Committee then exercised its negative discretion to determine each NEO’s 2016 AIP award amount.
Exercise of negative discretion: With respect to the 2016 AIP award amounts for NEOs, the Compensation Committee gave consideration to three performance areas: (i) the Company’s achievement of financial objectives related to its base business operations, which exclude the impact of material acquisitions completed during the year, (ii) the acquisition and cash from operations, as well asintegration during 2016 of three businesses key to the Company’s long-term strategy, and (iii) the NEOs’ individual performances.
The Compensation Committee considered the performance measurements of the areas within the scope of authority of the NEO, in relation to the target goals under the Annual Incentive Plan and, except for an earnings per share thresholdCompany’s base business operations with respect to Messrs. Hunter, Franklinthe financial performance metrics shown in the table below. Notably, these metrics excluded the financial impact of the three businesses we acquired and Heinzmann,integrated in 2016 (i.e., PolySwitch, ON Portfolio and Menber’s, which are further described below). The Compensation Committee believed that these metrics reflected the performance of the Company’s ongoing operations with respect to its existing business.
Base Business Operations Performance Metric (1) | Threshold Performance (50%) | Target Performance (100%) | Maximum Performance (200%) | Actual Performance | Percentage Achievement | |||||||||||||||
Corporate Sales ($M) | $851.2 | $896.0 | $940.8 | $890.6 | 94% | |||||||||||||||
AIP Earnings per Share(“AIP EPS”) | $5.53 | $5.95 | $6.37 | $5.95 | 100% | |||||||||||||||
Cash from Operations ($M) | $170.2 | $193.4 | $216.6 | $205.8 | 153% |
(1) | The performance metrics were determined as follows: |
● | Corporate Sales - represents our 2016 sales as reported in our audited financial statements, less sales attributable to businesses acquired in 2016. |
● | AIP EPS – represents our 2016 AIP net income, as described below, divided by our diluted weighted-average common shares outstanding. “AIP net income” is calculated as our net income, as reported in our audited financial statements, excluding the after-tax impact of the following items: acquisition, divestiture and integration costs; restructuring charges related to business reorganizations; plant closure and related move and reduction in force costs; intangible asset impairment; expensing of inventory fair market value step-up; non-operating foreign exchange gains and losses; and net income/loss related to businesses acquired in 2016. |
● | Cash from Operations – represents our 2016 cash flow from operations, as reported in our audited financial statements, less the cash flow from operations attributable to, or expended in connection with, businesses acquired in 2016. |
| 2017 Proxy Statement 30 |
In 2016, the Company completed three separate acquisitions that furthered the Company’s long-term strategic growth plan. In March 2016, the Company acquired the circuit protection business (“PolySwitch”) of TE Connectivity Ltd. for a net amount of approximately 20% has been based on$348 million; this was the largest acquisition in the Company’s history. In April 2016, the Company acquired Menber’s S.p.A. (“Menber’s”) for a net amount of approximately $19 million. In August 2016, the Company acquired certain assets of select businesses (the “ON Portfolio”) of ON Semiconductor Corporation for approximately $104 million.
Significant efforts were required both to negotiate and accomplish the three acquisitions and to integrate the acquired business after the acquisitions. The Compensation Committee gave consideration to: the successful completion of the three acquisitions and the achievement of specific integration objectives including (i) execution of synergy plans that yielded significant savings, (ii) retention of key talent, and (iii) the accelerated integration of those businesses. The Compensation Committee attributes much of the Company’s success regarding the acquisitions and integrations to the performance of the Company’s management including the NEOs.
The Compensation Committee also reviews the individual performance objectives, some of whicheach NEO. These reviews are qualitative in nature and require subjective determinations by the Compensation Committee in its discretion. Since Section 162(m) allows payout amounts to be reduced (but not increased) at the discretion of theCommittee. The Compensation Committee 20% of awards for Messrs. Hunter, Franklinreceives input from the CEO and Heinzmann have been fully earned at a maximum level based on meeting a minimum amount of earnings per share, but then has been subjectCHRO with respect to reduction to appropriate levels based on performance against his stated goals, as determined by the Compensation Committee or Board in their negative discretion.
The following table summarizes the Annual Incentive Plan opportunity percentages for the NEOs for 2014:
2014 Annual Incentive Plan Opportunity (as a Percentage of 2014 Base Salary) | ||||||||||||
Name | Threshold | Target | Maximum | |||||||||
Gordon Hunter | 50% | 100% | 200% | |||||||||
Philip G. Franklin | 35% | 70% | 140% | |||||||||
David W. Heinzmann | 35% | 70% | 140% | |||||||||
Ryan K. Stafford | 35% | 70% | 140% | |||||||||
Michael P. Rutz | 30% | 60% | 120% |
The threshold, target and maximum amounts as percentages of each NEO’s base salary are set forth in the “Grants of Plan Based Awards in 2014 Table” included in this Proxy Statement. Based on our previous financial performance and the projections for 2014 performance, the Compensation Committee set what it considered aggressive Company performance objectives for the prior Annual Incentive Plan in 2014.
In January 2015, the Compensation Committee made determinations asconsiders factors generally related to the satisfaction of the individual performance factors for 2014 for each NEO and determined payouts under the Annual Incentive Plan for 2014. The table below shows the amounts earned under the awards granted under the prior Annual Incentive Plan in 2014 for each NEO and the amount as a percentage of base salary:
Name | Amounts Awarded Under the 2014 Annual Incentive Plan | Awarded Amount as a Percent of Base Salary | ||||||
Gordon Hunter | $ | 887,087 | 121 | % | ||||
Philip G. Franklin | $ | 341,720 | 84 | % | ||||
David W. Heinzmann | $ | 334,600 | 84 | % | ||||
Ryan K. Stafford | $ | 317,040 | 85 | % | ||||
Michael P. Rutz (a) | $ | 173,570 | 51 | % |
(a) The amount awarded to Mr. Rutz was pro-rated to reflect his hire date of February 10, 2014.
In connection with making the above awards, the Committee certified that the following performance had been achieved for 2014:
Goals | Weight | Target Performance | Actual Performance | Incentive Earned (% of Total Target) | ||||||||||||
Gordon Hunter | ||||||||||||||||
Corporate Sales | 20% | $ | 854.3 | M | $ | 852.0 | M | 19.4 | % | |||||||
Earnings per Share | 30% | $ | 4.88 | $ | 4.78 | 26.4 | % | |||||||||
Cash from Operations | 20% | $ | 135.0 | M | $ | 153.0 | M | 40.0 | % | |||||||
Working Capital | 10% | 25.8 | % | 27.7 | % | 6.6 | % | |||||||||
Individual: | 20% | 100 | % | 145 | % | 29.0 | % | |||||||||
Total: | 100% | 121.4 | % | |||||||||||||
Philip G. Franklin | ||||||||||||||||
Corporate Sales | 10% | $ | 854.3 | M | $ | 852.0 | M | 9.7 | % | |||||||
Earnings per Share | 40% | $ | 4.88 | $ | 4.78 | 35.2 | % | |||||||||
Cash from Operations | 20% | $ | 135.0 | M | $ | 153.0 | M | 40.0 | % | |||||||
Working Capital | 10% | 25.8 | % | 27.7 | % | 6.6 | % | |||||||||
Individual: | 20% | 100 | % | 140 | % | 28.0 | % | |||||||||
Total: | 100% | 119.5 | % | |||||||||||||
David W. Heinzmann | ||||||||||||||||
Corporate Sales | 10% | $ | 854.3 | M | $ | 852.0 | M | 9.7 | % | |||||||
Earnings per Share | 40% | $ | 4.88 | $ | 4.78 | 35.2 | % | |||||||||
Cash from Operations | 20% | $ | 135.0 | M | $ | 153.0 | M | 40.0 | % | |||||||
Working Capital | 10% | 25.8 | % | 27.7 | % | 6.6 | % | |||||||||
Individual: | 20% | 100 | % | 140 | % | 28.0 | % | |||||||||
Total: | 100% | 119.5 | % | |||||||||||||
Ryan K. Stafford | ||||||||||||||||
Corporate Sales | 10% | $ | 854.3 | M | $ | 852.0 | M | 9.7 | % | |||||||
Earnings per Share | 40% | $ | 4.88 | $ | 4.78 | 35.2 | % | |||||||||
Cash from Operations | 20% | $ | 135.0 | M | $ | 153.0 | M | 40.0 | % | |||||||
Working Capital | 10% | 25.8 | % | 27.7 | % | 6.6 | % | |||||||||
Individual: | 20% | 100 | % | 150 | % | 30.0 | % | |||||||||
Total: | 100% | 121.5 | % | |||||||||||||
Michael P. Rutz | ||||||||||||||||
Corporate Sales | 10% | $ | 854.3 | M | $ | 852.0 | M | 9.7 | % | |||||||
Earnings per Share | 40% | $ | 4.88 | $ | 4.78 | 35.2 | % | |||||||||
Cash from Operations | 10% | $ | 135.0 | M | $ | 153.0 | M | 20.0 | % | |||||||
Working Capital | 20% | 25.8 | % | 27.7 | % | 13.2 | % | |||||||||
Individual: | 20% | 100 | % | 120 | % | 24.0 | % | |||||||||
Total: | 100% | 102.1 | % |
The personal performance objectives vary for each NEO, as described below, and are tailored to the job responsibilities of each individual NEO. Personal performance objectives considered in determining incentive awards are subject to change from year-to-year, depending on the needs of the Company and the role of the NEO; however, personal performance objectives in 2014 generally fell under three broad categories: (1)(i) overall Company business performance; (2)performance, (ii) development of managerial leaders and talent within the Company; and (3)(iii) legal compliance and corporate governance best practices. practices, and (iv) other matters specific to each NEO’s scope of responsibility.
The Compensation Committee also received recommendations from Mr. Hunter’s personalHunter related to the 2016 AIP award amounts for the other NEOs. It received input from its independent compensation consultant with respect to the appropriate 2016 AIP award amount for Mr. Hunter. After consideration of the three performance objectives included: successionareas described above and talent development; business stability; acquisition momentumthe recommendations from Mr. Hunter and integration; businessinput from the independent compensation consultant, the Compensation Committee approved and operational excellence;recommended to the Board, and legal compliance and corporate governance. Mr. Franklin’s personal performance objectives included: team development and succession planning; mergers and acquisitions; investor relations; and balance sheet optimization. Mr. Heinzmann’s personal performance objectives included: operational excellence; business unit performance strategy execution; acquisition growth; talent development and succession planning; and lean enterprise. Mr. Stafford’s personal performance objectives included: corporate communication and branding execution; risk management strategies; human capital strategy and talent development; and compliance and corporate governance.Mr. Rutz’s personal performance objectives included: operational/business excellence; lean enterprise; mergers and acquisitions; and leadership and talent development.the Board approved, the following 2016 AIP awards to the NEOs at levels less than the entire amounts for which the NEOs were eligible under the 2016 AIP:
NEO | Eligible Award Under the 2016 AIP ($) | Actual 2016 AIPAward after Negative Discretion (% of target) | Actual 2016 AIPAward after Negative Discretion ($) | |||||||||
David W. Heinzmann | $840,000 | 150.0% | $630,000 | |||||||||
Gordon Hunter | $1,565,480 | 153.3% | $1,200,000 | |||||||||
Meenal A. Sethna | $525,000 | 150.0% | $393,750 | |||||||||
Ryan K. Stafford | $560,000 | 150.0% | $472,500 | |||||||||
Michael P. Rutz | $432,850 | 133.0% | $287,844 |
| 2017 Proxy Statement 31 |
While some of the 2014 individual performance objectives for each NEO may be measured by objective standards, others may be more qualitative in nature and are ultimately subject to the determination of the Compensation Committee based on input from our Chief Executive Officer. In the case of Messrs. Hunter, Franklin and Heinzmann, their 20% portion is fully earned on meeting an earnings per share threshold of $2.00 and then is subject to reduction by the Compensation Committee or the Board in their negative discretion based on individual performance against stated goals.
2017 Annual Incentive Plan:At its January 20152017 meeting, the Compensation Committee approved the same annual incentive plan structure providing for sufficient flexibility under Section 162(m) and established the threshold,NEOs’ target and maximum amounts (as a percentage of base salary) to be awarded under the Annual Incentive Plan for 2015annual incentive plan opportunity percentages for the NEOs, subject to2017 AIP. It also established a 2017 financial performance goal that was based on the achievement of financial objectives of the Company and individualsame performance objectives set by the Compensation Committee for 2015.
The Board also approved these increases.
metric as in 2016. The following table summarizes Annual Incentive PlanAIP target opportunity percentages, as a percentage of base salary for the NEOs for 2015:2017:
2015 Annual Incentive Plan Opportunity (as a Percentage of 2015 Base Salary) | ||||||||||||
Name | Threshold | Target | Maximum | |||||||||
Gordon Hunter | 50% | 100% | 200% | |||||||||
Philip G. Franklin | 35% | 70% | 140% | |||||||||
David W. Heinzmann | 40% | 80% | 160% | |||||||||
Ryan K. Stafford | 35% | 70% | 140% | |||||||||
Michael P. Rutz | 30% | 60% | 120% |
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2017AIPOpportunity (as a% of Base Salary) | ||||||||||||
Name | Threshold | Target | Maximum | |||||||||
David W. Heinzmann | 45% | 90% | 180% | |||||||||
Gordon Hunter | 50% | 100% | 200% | |||||||||
Meenal A. Sethna | 35% | 70% | 140% | |||||||||
Ryan K. Stafford | 35% | 70% | 140% | |||||||||
Michael P. Rutz | 30% | 60% | 120% |
Purpose: In 2014,C. Long-Term Incentive Compensation
Consistent with prior years’ practice, in 2016 the Compensation Committee awarded a combination of two types of equity awards under the Long-Term Incentive Plan to our NEOs: stock option awards and RSUs. The Compensation Committee determined that the two award types emphasize the goals of our equity compensation: (1) to align each NEO’s financial interests with driving stockholder value; (2) to focus the NEOs’ efforts on long-term financial performance of the Company; and (3) to assist in the retention of our NEOs.
Administration:The Compensation Committee approves the awards of stock options and RSUs based upon (1) the recommendations of our Chief Executive Officer and our Executive Vice President, Chief Legal and Human Resources Officer with respect to the NEOs other than the Chief Executive Officer, and on its own with respect to the Chief Executive Officer; and (2) reviewing the reference group information and other information and advice of the compensation consultant, if any. The overall funding levels for our equity awards, however, are ultimately subject to the judgment and approval of the Compensation Committee to ensure appropriate alignment with the interest of our stockholders.
Since 2010, the Compensation Committee has granted stock options withvest one-third annually over a three-year vesting period and have an exercise price equal to the fair market value of our common stock on the date of grant andgrant. The RSUs withalso vest one-third annually over a three-year vesting period. Upon vesting, one share
Administration: The Compensation Committee reviews the compensation peer group information, the advice of the independent compensation consultant and, for NEOs other than the CEO, the recommendation of our common stock will be delivered for each restricted stock unit award, net of any shares necessaryCEO and our CHRO with respect to satisfy applicable tax withholding. The Long-Term Plan does not permitthe NEOs’ long-term incentive grants of stock options with exercise prices belowand RSUs. The Compensation Committee makes recommendations to the fair market valueBoard, other than the CEO, for the grant of stock options and RSUs to the stock at the time of the grant.CEO.
Determination of Amounts:While we generallyamounts: We target total equity compensation awards at the 50th percentile of our referencecompensation peer group, although we also take into account other factors, such as years of service with the Company and internal pay equity considerations, when determining total equity compensation. The allocation by the Committee between the types of equity compensation is based primarily on a combination of market practice, internal equity considerations, individual performance and relative importance of the objectives behind each of the types (i.e. long-term financial performance and retention). In 2014,2016, based on a valuation performed by the Compensation Committee’s independent compensation consultant, the Compensation Committee determined that approximately 50% of the value of the equity awards shouldwould be made in stock options, with the remainingand 50% of the value of the equity awards towould be made in RSUs. The restricted stock unit awards and stock options granted in 20142016 to the NEOseach NEO, other than Mr. Franklin who retired from his position as CFO effective March 31, 2016, are set forth in the “Grants of Plan-Based Awards in 2014Table” below.
Name | RSU Award | RSUVesting Schedule (1) | Stock Option Award | OptionVesting Schedule (1) | Option Grant Price | |||||||||
David W. Heinzmann | 4,755 | 3-year vest | 17,004 | 3-year vest | $120.15 | |||||||||
Gordon Hunter | 10,087 | 3-year vest | 36,074 | 3-year vest | $120.15 | |||||||||
Meenal A. Sethna | 3,389 | 3-year vest | 12,121 | 3-year vest | $120.15 | |||||||||
Ryan K. Stafford | 3,006 | 3-year vest | 10,750 | 3-year vest | $120.15 | |||||||||
Michael P. Rutz | 2,134 | 3-year vest | 7,632 | 3-year vest | $120.15 |
(1) | 2016 grant of RSUs and Options vest in installments of 33% on each anniversary of the grant date. |
| 2017 Proxy Statement 32 |
In connection withSpecial Retention Awards
As reported in our Current Report on Form 8-K filed on July 26, 2016, the Board awarded 5,594 RSUs to Mr. Heinzmann’s promotionStafford and 2,486 RSUs to Chief Operating Officer, the Compensation Committee recommended, after considerationMs. Sethna, in light of a compensation review prepared its compensation consultant,each of their ongoing performance and the full Board approved, a special, one-time awarddesired retention. The awards were granted pursuant to him of 2,142 RSUs under the Long-Term Plan. The RSUs fullyIncentive Plan, and vest on the third anniversary of their grant date (subject to accelerated vesting upon death, disability, or change in control).
In connection with the Company’s desire to retain Mr. Stafford, the Compensation Committee recommended and the full Board approved a one-time award to him of 1,983 RSUs under the Long-Term Plan. The RSUs fully vest on the third anniversary of their grant date (subject to accelerated vesting upon death, disability, or change in control).
In connection with Mr. Rutz’s employment offer, the Compensation Committee recommended and the full Board approved a sign-on restricted stock unit award grant under the Long-Term Plan having a value of $75,000 (based on the closing price of Littelfuse stock on the date of grant). The RSUs fully vest on the third anniversary of their grant date (subject to accelerated vesting upon death, disability, or change in control).
after three years.
Stock Ownership Policy
As mentioned above underdiscussed on page 15, theDirector Compensation section, we adopted Company maintains a stock ownership policy in fiscal year 2011 that requires ourapplicable to all executive officers and directors to hold and maintain a certain number of shares of common stock ofdirectors. The table below describes the Company. Our Chiefownership guidelines for each Named Executive Officer, is required to hold a number of shares equal to five times (5x)excluding Mr. Franklin who retired from his base salary, our Chief Operating Officer , Executive Vice PresidentCFO role effective March 31, 2016, and Chief Financial Officer, and our Executive Vice President, Chief Legal and Human Resources Officer, are each required to hold a number of shares equal to three times (3x) his respective base salary, and each of our other vice presidents and senior vice presidents is required to hold a number of shares equal to two times (2x) his or her respective base salary, each as may be adjusted by the Compensation Committee from time to time to account for a significant increase in the price of the Company’s common stock. As noted above, the stock ownership policy permits the Compensation Committee to adjusttheir progress towards the ownership requirements, in the eventas of a significant increase in the price of the Company’s common stock. In light of the approximately 51% increase in the price of the Company’s common stock during the 2013 fiscal year, in January 2014 the Compensation Committee approved an adjustment to the ownership requirements using the average January 2014 closing price of the Company’s common stock of $93 per share. As a result, effective January 2014, the ownership requirements for each person covered by the stock ownership policy (including the members of the Board) were adjusted by dividing the number of shares required to be held before the adjustment (for example, 5x base salary for our Chief Executive Officer) by $93 per share. All new executive officers have five years from the date of election or appointment to satisfy their required stock ownership level. Like the directors, until such time as an officer achieves the required stock ownership level, that officer is required to retain 50% of the “net shares” of common stock realized from any equity awards granted by the Company. Failure to satisfy the applicable stock ownership level within the required compliance period may result in an officer being ineligible to receive his or her annual equity award, ineligible to receive any cash bonus in the form of shares of common stock, and/or being subject to a 100% retention requirement. The NEOs are currently in compliance with the stock ownership policy, with the exception of Mr. Rutz, who was hired on February 10, 2014 and who has five years from such hiring date to satisfy his holding requirement.March 1, 2017.
Name | Ownership Requirement as % of Base Salary | Number of Shares Required (1) | Number of Shares Owned(2) |
David W. Heinzmann | 500% | 23,000 | 37,865 |
Gordon Hunter | 500% | 19,700 | 39,729 |
Meenal A. Sethna (3) | 300% | 7,800 | 6,949 |
Ryan K. Stafford | 300% | 9,100 | 25,339 |
Michael P. Rutz (4) | 200% | 4,900 | 4,731 |
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(2) | Includes direct and indirect ownership of beneficially owned shares and restricted stock/units. |
(3) | Ms. Sethna has five years from the date of her promotion to Executive Vice President, Chief Financial Officer, or until March 31, 2021, to meet the stock ownership requirements. |
(4) | Mr. Rutz has five years from his date of hire, or until February 3, 2019, to meet the stock ownership requirements. |
D. Perquisites and Health and Welfare Programs
Perquisites
Our Chief Executive Officer and other NEOs are provided with the opportunity to receive executive physicals and financial planning services on an annual basis. We participate in anThe executive physical program that provides approximately $5,000 in services per NEO.NEO annually. In addition, pursuant to Mr. Hunter’s Amended and Restated Employment Agreement, dated December 31, 2007, Mr. Hunter is entitled to $15,000 per year of financial planning and tax consulting services, and each of our other NEOs is entitled to $12,000 per year of financial planning services. Additionally, Mr. Hunter is provided with continued use of a Company automobile through December 31, 2017, and during 2016 and the Company provided reimbursement of certain spouse travel to industry events. We provide these benefits to help our NEOs efficiently manage their time and financial affairs and to allow them to stay focused on business issuesissues. Amounts and minimize distractionstypes of this type. Additionally, Mr. Hunter is provided with a Company automobile as required by his employment agreement,perquisites are included in the terms2016 All Other Compensation Table below on page 38.
| 2017 Proxy Statement 33 |
Health and Welfare Programs
Our U.S. NEOs participate in the same health and welfare programs designed for all of our full-time U.S. employees including participation in certain Company wellness initiatives which provide the opportunity to earn a bonus for the successful completionemployees. The program includes partial reimbursement of those initiatives. We believe these programs are important components of a total compensation system, and we provide them to remain competitive. The core package includesgym membership dues, group health, dental, disability, business travel accident, life and accidental death and dismemberment (AD&D) coverage. The U.S.Our NEOs are also provided with an increased amount of life and AD&D insurance in order to provide a targeted level of coverage equal to three times base salary. WeThese programs are important components of our total compensation program, and we provide these benefitsthem to remain competitive with those U.S. companies with whom we compete for executive talent.competitive.
E.Retirement andPost-Employment Compensation |
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Retirement Plans
We provide retirement benefits to our U.S. employees and NEOs through the following plans:
Littelfuse, Inc. 401(k) Retirement and Savings Plan
NEOs may elect to participate in the Littelfuse, Inc. 401(k) Retirement and Savings Plan (“401(k) Plan”) on the same basis as all other U.S. employees. The Littelfuse, Inc. 401(k) Retirement and Savings Plan (“401(k) Plan”) provides employees the opportunity to save for retirement on a tax-favored basis. The Company amended the 401(k) Plan, effective as of January 1, 2012, to provide mandatorydiscretionary Company contributions equal to 2% of a participant’s annual eligible pay. This is in addition to the existing Company matching contributions, which provide a dollar-for-dollar match on participant salary deferrals up to 4% of a participant’s annual eligible pay (subject to IRS compensation limits). The Plan also provides for discretionary contributions for those eligible, active participants who as of January 1, 2010, participated in the Littelfuse, Inc. Retirement Plan (“Pension Plan”) and had earned a minimum of 10 years of service and a combined age and years of service of at least 60 (the “60 Point Group”). Currently, Mr. Heinzmann is the only NEO who is a member of the 60 Point Group. The Company has currently set these contributions at 5% of base pay (subject to IRS compensation limits). All contributions to the 401(k) Plan are fully vested and nonforfeitable.
Littelfuse, Inc. Supplemental Retirement and Savings Plan
NEOs may elect to participate in theThe Littelfuse, Inc. Supplemental Retirement and Savings Plan effective January 1, 2010 (the “Supplemental Plan”). The Supplemental Plan is offered to a select group of U.S. management employees who earn above a designated threshold. The Supplemental Plan is a top-hat non-qualified defined contribution retirement plan that allows participantsis intended to provide supplemental retirement income benefits to employees whose benefits under our tax-qualified 401(k) plan for retirementare limited by deferring up to 90%the application of Internal Revenue Code Section 415, which includes our NEOs. Participants can defer a portion of their annual eligible pay.compensation to the Supplemental Plan. The Company makes fully vestedprovides a matching contributions which providecontribution designed to ensure that participants receive a dollar-for- dollarcombined match on total participant salary deferrals to bothunder the Supplemental Plan and the Company’s 401(k) plan on the first 4% of their annual compensation that they defer to both plans. The Company also makes the same 5% contribution as it makes to the Company’s 401(k) Plan less any match already made under the 401(k) Plan. This match is intended to ensure that the IRS deferral and compensation limits that apply to the 401(k)for Supplemental Plan do not prevent participants from deferring the desired percentage of their earnings and receiving their full matching contribution on such amount. The Company may also provide fully vested contributions to certain U.S.who are members of the 60 Point Group, (as defined above) to ensure they receivebased on their full contribution, without regard tocompensation in excess of the IRS compensation limit that applies tolimit. Currently Mr. Heinzmann is the 401(k) Plan ($260,000 for 2014). The Supplemental Plan tracksonly NEO who receives this additional contribution as a member of the compensation definitions and 60 Point Group contribution percentages that apply to the 401(k) Plan.Group.
| 2017 Proxy Statement 34 |
Littelfuse Inc. Retirement Plan (“Pension Plan”)
The NEOs (other than Mr. Rutz) accrued a retirement benefit under the Littelfuse, Inc. Retirement Plan (the “Pension Plan”) prior to it being frozen effective April 1, 2009. See the section entitled “Pension Benefits” below for more information. As reported in our Current Report on a Form 8-K current report that we filed on July 31, 2014, the Board of Directors terminated the Pension Plan oneffective July 31,30, 2014, and the Company is in the process of distributingsettled all Pension Plan benefitsliabilities either via lump sum payout or the purchase of a group annuity contract by the end of the 2015 fiscal year. Therefore, due to participants, including the NEOs.plan termination, no 2016 Pension Benefits Table is provided.
Other Plans
Mr. Franklin accrued a retirement benefit under the Littelfuse, Inc. Supplemental Executive Retirement Plan (the “SERP”) prior to its termination effective December 31, 2009. SeeAmounts earned are reported in the section entitled “Nonqualifiedfootnotes to the 2016 Nonqualified Deferred Compensation” below for more information. Compensation table.
Post-Employment Compensation
As reported on a Form 8-K current report that we filed on December 22, 2014, on December 16, 2014, weChange in Control Agreements
Each of the NEOs has entered into newa change of control agreements, effective as of January 1, 2015,agreement with each of our NEOsthe Company that provide the sameprovides certain payments and benefits on termination of employment in connection with a change of control of the Company as provided in their priorCompany. Additional information including the terms of our NEO’s change of control agreements is included below on page 46.
Employment Contracts
We have not entered into an employment agreement with any NEO, other than Mr. Hunter. However, in connection with the CEO transition, we entered into a Letter Agreement with Mr. Heinzmann. The terms of Mr. Hunter’s employment agreement and Mr. Heinzmann’s Letter Agreement are described below.
Mr. Hunter.As previously disclosed, the Company has entered into an Executive Retirement Agreement, effective January 1, 2017 through December 31, 2017 (the “Term”), with Mr. Hunter in connection with his retirement as President and Chief Executive Officer and assumption of the Executive Chairman of the Board role. The Executive Retirement Agreement amends Mr. Hunters prior Amended and Restated Employment Agreement, dated December 31, 2007.
Pursuant to the Executive Retirement Agreement, Mr. Hunter will receive a base salary of $600,000, and continue to participate in the Annual Incentive Plan with a target bonus of 100% of his base salary for the 2017 fiscal year. In lieu of any other 2017 annual equity awards, the Executive Retirement Agreement provided for the grant of restricted stock units having a grant date value of $2,240,000 that expiredvest on December 31, 2014. For more information2017. During the Term of the agreement, all outstanding equity awards granted to Mr. Hunter will remain outstanding and continue to vest in accordance with their terms. However, at the end of the Term, any then-unvested equity awards will become immediately vested, subject to Mr. Hunter’s continued employment through the end of the Term. The termination provisions under the Executive Retirement Agreement and Mr. Hunter’s Change in Control Agreement are described on our changepage 45.
Mr. Hunter and the Company entered into an employment agreement dated May 1, 2006, as amended and restated on December 31, 2007. The employment agreement, as amended, remains in effect and provides that Mr. Hunter will receive certain benefits, including a home office, an automobile, and up to $15,000 in annual financial planning and tax counseling services. The employment agreement also contains non-disclosure, non-competition, non-solicitation and non-hire restrictions applicable to Mr. Hunter following cessation of control agreements, please seehis employment with us. Additional discussion regarding the section entitled “Post-Employment Compensation – Changeterms of Control Agreements Post- Employment Provisions.”Mr. Hunter’s employment agreement are below on page 45.
| 2017 Proxy Statement 35 |
Mr. Heinzmann. As previously disclosed, the Company has entered into a Letter Agreement effective January 1, 2017, with Mr. Heinzmann in connection with his assumption of the President and Chief Executive Officer role. Pursuant to the Letter Agreement, Mr. Heinzmann’s base salary was increased to $700,000 and his target bonus was increased to 90% of base salary. In addition, the Letter Agreement provided for the grant of restricted stock units having a grant date value of $1,050,000, that vest on the third anniversary of the grant. The Company also entered into a new change of control agreement with Mr. Heinzmann, consistent with the terms described on page 46.
COMPENSATION COMMITTEEREPORT
To the Board of Directors of Littelfuse, Inc.:
We have reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement.
Based on the review and discussion referred to above, we recommend to the Board of Directors that the Compensation Discussion and Analysis referred to above be included in this Proxy Statement and in our Annual Report on Form 10-K for the year ended December 27, 2014.31, 2016.
| Compensation Committee: |
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Tzau-Jin William P. Noglows Ronald L. Schubel |
The foregoing report is not deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission or subject to the Securities and Exchange Commission’s proxy rules or the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, and the report shall not be deemed to be incorporated by reference into any prior or subsequent filing by us under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
| 2017 Proxy Statement 36 |
Compensation Tables and Narrative DisclosuresCOMPENSATION TABLES
The following table sets forth compensation information for our NEOs for services rendered in all capacities to us and our subsidiaries in fiscal years 2014, 20132015 and 2012.2016.
20142016 Summary Compensation Table
Salary | Bonus | Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation | Total | |||||||||||||||||||||||||||
Name and Principal Position | Year | (a) ($) | (b) ($) | (c) ($) | (d) ($) | (e) ($) | (f) ($) | (g) ($) | ($) | |||||||||||||||||||||||||
Gordon Hunter | 2014 | $ | 725,966 | $ | 300 | $ | 1,031,548 | $ | 1,013,775 | $ | 887,087 | $ | 10,789 | $ | 132,897 | $ | 3,802,362 | |||||||||||||||||
Chairman of the Board, | 2013 | $ | 709,431 | - | $ | 731,693 | $ | 987,070 | $ | 994,735 | $ | 0 | $ | 119,140 | $ | 3,542,069 | ||||||||||||||||||
President and Chief Executive Officer | 2012 | $ | 688,768 | - | $ | 737,693 | $ | 925,848 | $ | 725,706 | $ | 37,679 | $ | 192,675 | $ | 3,308,369 | ||||||||||||||||||
Philip G. Franklin | 2014 | $ | 404,738 | $ | 150 | $ | 348,194 | $ | 342,563 | $ | 341,720 | $ | 21,371 | $ | 61,042 | $ | 1,519,777 | |||||||||||||||||
Executive Vice President and | 2013 | $ | 384,307 | - | $ | 287,135 | $ | 387,180 | $ | 399,031 | - | $ | 70,201 | $ | 1,527,854 | |||||||||||||||||||
Chief Financial Officer | 2012 | $ | 373,114 | - | $ | 289,279 | $ | 362,390 | $ | 300,737 | $ | 74,499 | $ | 77,722 | $ | 1,477,741 | ||||||||||||||||||
David W. Heinzmann | 2014 | $ | 395,308 | $ | 150 | $ | 579,908 | $ | 377,213 | $ | 334,600 | $ | 116,587 | $ | 69,677 | $ | 1,873,442 | |||||||||||||||||
Chief Operating Officer | 2013 | $ | 307,178 | - | $ | 197,283 | $ | 265,290 | $ | 299,186 | $ | 0 | $ | 62,321 | $ | 1,131,258 | ||||||||||||||||||
2012 | $ | 298,231 | - | $ | 199,226 | $ | 250,166 | $ | 206,040 | $ | 178,789 | $ | 47,726 | $ | 1,180,178 | |||||||||||||||||||
Ryan K. Stafford | 2014 | $ | 367,474 | $ | 150 | $ | 468,729 | $ | 280,875 | $ | 317,040 | $ | 11,351 | $ | 50,868 | $ | 1,496,487 | |||||||||||||||||
Executive Vice President, Chief Legal | 2013 | $ | 330,362 | - | $ | 231,141 | $ | 310,700 | $ | 321,766 | $ | 0 | $ | 44,895 | $ | 1,238,864 | ||||||||||||||||||
and Human Resources Officer | 2012 | $ | 320,740 | - | $ | 233,150 | $ | 292,250 | $ | 221,591 | $ | 17,283 | $ | 47,968 | $ | 1,132,982 | ||||||||||||||||||
Michael P. Rutz | (h) | 2014 | $ | 300,115 | $ | 0 | $ | 266,727 | $ | 190,313 | $ | 173,570 | - | $ | 17,124 | $ | 947,849 | |||||||||||||||||
Senior Vice President Global Operations |
Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(6) | All Other Compensation ($)(7) | Total ($) | ||||||||||||||||||||||||
David W. Heinzmann | 2016 | $ | 522,917 | $ | 150 | $ | 560,424 | $ | 443,124 | $ | 630,000 | $ | 0 | $ | 95,166 | $ | 2,251,781 | ||||||||||||||||
President and Chief | 2015 | $ | 477,532 | $ | 0 | $ | 436,995 | $ | 387,814 | $ | 594,623 | $ | 0 | $ | 83,954 | $ | 1,980,918 | ||||||||||||||||
Executive Officer and Former Chief Operating Officer | 2014 | $ | 395,308 | $ | 150 | $ | 579,908 | $ | 377,213 | $ | 334,600 | $ | 116,587 | $ | 69,677 | $ | 1,873,442 | ||||||||||||||||
Gordon Hunter | 2016 | $ | 780,231 | $ | 700 | $ | 1,188,854 | $ | 940,088 | $ | 1,200,000 | $ | 0 | $ | 89,703 | $ | 4,199,576 | ||||||||||||||||
Executive Chairman | 2015 | $ | 759,239 | $ | 600 | $ | 1,074,594 | $ | 954,382 | $ | 1,128,556 | $ | 945 | $ | 134,247 | $ | 4,052,563 | ||||||||||||||||
of the Board and Former Chairman, President and Chief Executive Officer | 2014 | $ | 725,966 | $ | 300 | $ | 1,031,548 | $ | 1,013,775 | $ | 887,087 | $ | 10,789 | $ | 132,897 | $ | 3,802,362 | ||||||||||||||||
Meenal A. Sethna(8) Executive Vice President and Chief Financial Officer | 2016 | $ | 372,917 | $ | 700 | $ | 690,886 | $ | 315,873 | $ | 393,750 | $ | 0 | $ | 47,510 | $ | 1,821,637 | ||||||||||||||||
Ryan K. Stafford | 2016 | $ | 421,034 | $ | 150 | $ | 1,010,128 | $ | 280,145 | $ | 472,500 | $ | 0 | $ | 58,252 | $ | 2,242,209 | ||||||||||||||||
Executive Vice | 2015 | $ | 387,320 | $ | 150 | $ | 297,609 | $ | 264,398 | $ | 399,536 | $ | 0 | $ | 50,436 | $ | 1,399,449 | ||||||||||||||||
President, Chief Legal and Human Resources Officer and Corporate Secretary | 2014 | $ | 367,474 | $ | 150 | $ | 468,729 | $ | 280,875 | $ | 317,040 | $ | 11,351 | $ | 50,868 | $ | 1,496,487 | ||||||||||||||||
Michael P. Rutz | 2016 | $ | 359,831 | $ | 150 | $ | 251,513 | $ | 198,890 | $ | 287,844 | $ | 0 | $ | 51,670 | $ | 1,149,898 | ||||||||||||||||
Senior Vice President | 2015 | $ | 353,273 | $ | 0 | $ | 201,545 | $ | 178,754 | $ | 295,546 | $ | 0 | $ | 34,343 | $ | 1,063,461 | ||||||||||||||||
Global Operations | 2014 | $ | 300,115 | $ | 0 | $ | 266,727 | $ | 190,313 | $ | 173,570 | $ | 0 | $ | 17,124 | $ | 947,849 | ||||||||||||||||
Philip G. Franklin (9) | 2016 | $ | 148,414 | $ | 150 | $ | 109,246 | $ | 0 | $ | 0 | $ | 0 | $ | 43,750 | $ | 301,560 | ||||||||||||||||
Former Executive | 2015 | $ | 424,459 | $ | 150 | $ | 363,535 | $ | 322,373 | $ | 431,955 | $ | 58,361 | $ | 81,965 | $ | 1,682,798 | ||||||||||||||||
Vice President and Chief Financial Officer | 2014 | $ | 404,738 | $ | 150 | $ | 348,194 | $ | 342,563 | $ | 341,720 | $ | 21,371 | $ | 61,042 | $ | 1,519,777 |
| Base salary includes compensation deferred under the |
| Represents discretionary bonuses earned in connection with our wellness initiatives in fiscal year |
(3) |
| Represents the full grant date fair value of RSUs for fiscal years |
| 2017 Proxy Statement 37 |
(4) | Represents the full grant date fair value of stock option awards for fiscal years |
(5) |
|
(6) | Amounts shown |
(7) |
|
(8) | Ms. Sethna became CFO effective March 31, 2016. |
(9) | Mr. Franklin retired from his position as CFO effective March 31, 2016. |
2016 All Other Compensation Table
The table below provides additional information about the amounts that appear in the “All Other Compensation” column in the Summary Compensation Table above. For additional information regarding perquisites and health and welfare programs, refer to page 33.
NEO | 401(k) Plan Company Matching Contributions ($) | Supplemental Plan Company Matching Contributions ($) | Miscellaneous ($) | Total All Other Compensation ($) | ||||||||||||
David W. Heinzmann | $ | 29,150 | $ | 52,156 | $ | 13,860(1) | $ | 95,166 | ||||||||
Gordon Hunter | $ | 15,900 | $ | 23,705 | $ | 50,098(2) | $ | 89,703 | ||||||||
Meenal A. Sethna | $ | 15,900 | $ | 11,722 | $ | 19,889(3) | $ | 47,510 | ||||||||
Ryan K. Stafford | $ | 15,900 | $ | 23,152 | $ | 19,201(4) | $ | 58,252 | ||||||||
Michael P. Rutz | $ | 15,900 | $ | 17,512 | $ | 18,259(5) | $ | 51,670 | ||||||||
Philip G. Franklin | $ | 10,600 | $ | 12,615 | $ | 20,535(6) | $ | 43,750 |
(1) | The |
(2) | The amount
|
| 2017 Proxy Statement 38 |
(3) | The amount reported for Ms. Sethna includes the cost of partial reimbursement of health club membership dues generally available to U.S. employees, an executive physical, life and AD&D insurance, tax and financial planning, and club membership dues. |
(4) |
| The amount reported for Mr. |
(5) | The amount reported for Mr. Rutz includes the cost of an executive physical, life and AD&D insurance, and tax and financial planning. |
(6) | The amount reported for Mr. Franklin includes the cost of an executive physical, life and AD&D insurance, tax and financial planning, and club membership dues. |
Grants of Plan-Based Awards in 2016
The following table provides additional information with respect to options and stock-basedsets forth plan-based awards granted to our NEOs in 2014, the value of which was provided in the Stock Awards and Options Awards columns of the Summary Compensation Table, and the potential range of payouts associated with the Annual Incentive Plan.
2016.
Grants of Plan-Based Awards in 2014 Table
Estimated Future Payouts Under Non-Equity Incentive Plan Awards | All Other Stock Awards: | All Other Option Awards: | Exercise | Grant Date Fair | |||||||||||||||||||||||||||||
Name | Type of Award | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Number of Shares of Stock or Units (#) | Number of Securities Underlying Options (#)(1) | or Base Price of Option Awards ($/sh)(2) | Value of Stock and Option Awards (3) | ||||||||||||||||||||||||
David W. | RSUs | 4/22/16 | - | - | - | 4,755 | (5) | - | - | $ | 560,424 | ||||||||||||||||||||||
Heinzmann | Options | 4/22/16 | - | - | - | - | 17,004 | $ | 120.15 | $ | 443,124 | ||||||||||||||||||||||
Annual Cash (4) | - | $ | 210,000 | $ | 420,000 | $ | 840,000 | - | - | - | - | ||||||||||||||||||||||
Gordon | RSUs | 4/22/16 | - | - | - | 10,087 | (5) | - | - | $ | 1,188,854 | ||||||||||||||||||||||
Hunter | Options | 4/22/16 | - | - | - | - | 36,074 | $ | 120.15 | $ | 940,088 | ||||||||||||||||||||||
Annual Cash (4) | - | $ | 391,370 | $ | 782,740 | $ | 1,565,481 | - | - | - | - | ||||||||||||||||||||||
Meenal A. | RSUs | 4/22/16 | - | - | - | 3,389 | (5) | - | - | $ | 399,428 | ||||||||||||||||||||||
Sethna | RSUs | 7/20/16 | - | 2,486 | (6) | - | $ | 291,459 | |||||||||||||||||||||||||
Options | 4/22/16 | - | - | - | - | 12,121 | $ | 120.15 | $ | 315.873 | |||||||||||||||||||||||
Annual Cash (4) | - | $ | 131,250 | $ | 262,500 | $ | 525,000 | - | - | - | - | ||||||||||||||||||||||
Ryan K. | RSUs | 4/22/16 | - | - | - | 3,006 | (5) | - | - | $ | 354.287 | ||||||||||||||||||||||
Stafford | RSUs | 7/20/16 | - | - | - | 5,594 | (6) | - | $ | 655,841 | |||||||||||||||||||||||
Options | 4/22/16 | - | - | - | - | 10,750 | $ | 120.15 | $ | 280,145 | |||||||||||||||||||||||
Annual Cash (4) | - | $ | 140,000 | $ | 280,000 | $ | 560,000 | - | - | - | - | ||||||||||||||||||||||
Michael P. | RSUs | 4/22/16 | - | - | - | 2,134 | (5) | - | - | $ | 251,513 | ||||||||||||||||||||||
Rutz | Options | 4/22/16 | - | - | - | - | 7,632 | $ | 120.15 | $ | 198,890 | ||||||||||||||||||||||
Annual Cash (4) | - | $ | 108,212 | $ | 216,424 | $ | 432,847 | - | - | - | - | ||||||||||||||||||||||
Philip G. Franklin | RSUs | 7/31/16 | - | - | - | 3,499 | (7) | - | - | $ | 109,246 |
Estimated FuturePayouts UnderNon-Equity Incentive Plan Awards | Estimated Future Payouts UnderEquity IncentivePlan Awards | All Other Stock Awards: Number of Shares of | All Other Option Awards: Number of Securities | Exercise or Base Price | Grant Date Fair Value | ||||||||||||||||||||||||||||||||||||||||||
Stock or | Underlying | of Option | of Stock | ||||||||||||||||||||||||||||||||||||||||||||
Type of | Grant | Threshold | Target | Maximum | Threshold | Target | Maximum | Units | Options | Awards | Awards | ||||||||||||||||||||||||||||||||||||
Name | Award | Date | ($) | ($) | ($) | (#) | (#) | (#) | (#) | (#) (a) | ($ / sh) (b) | (c) | |||||||||||||||||||||||||||||||||||
Gordon Hunter | RSUs | 4/25/14 | - | - | - | 11,080 | (e) | - | - | $ | 1,031,548 | ||||||||||||||||||||||||||||||||||||
Options | 4/25/14 | - | - | - | - | 38,620 | $ | 94.84 | $ | 1,013,775 | |||||||||||||||||||||||||||||||||||||
Annual Cash | - | $ | 365,357 | $ | 730,714 | $ | 1,461,428 | (d) | - | - | - | - | |||||||||||||||||||||||||||||||||||
Philip G. Franklin | RSUs | 4/25/14 | - | - | - | 3,740 | (e) | - | - | $ | 348,194 | ||||||||||||||||||||||||||||||||||||
Options | 4/25/14 | - | - | - | - | 13,050 | $ | 94.84 | $ | 342,563 | |||||||||||||||||||||||||||||||||||||
Annual Cash | - | $ | 142,979 | $ | 285,958 | $ | 571,917 | (d) | - | - | - | - | |||||||||||||||||||||||||||||||||||
David W. Heinzmann | RSUs | 1/10/14 | - | - | - | 2,142 | (f) | - | - | $ | 196,336 | ||||||||||||||||||||||||||||||||||||
RSUs | 4/25/14 | - | - | - | 4,120 | (e) | - | - | $ | 383,572 | |||||||||||||||||||||||||||||||||||||
Options | 4/25/14 | - | - | - | - | 14,370 | $ | 94.84 | $ | 377,213 | |||||||||||||||||||||||||||||||||||||
Annual Cash | - | $ | 140,000 | $ | 280,000 | $ | 560,000 | (d) | - | - | - | - | |||||||||||||||||||||||||||||||||||
Ryan K. Stafford | RSUs | 4/25/14 | - | - | - | 3,070 | (e) | - | - | $ | 285,817 | ||||||||||||||||||||||||||||||||||||
RSUs | 4/25/14 | - | - | - | 1,983 | (g) | - | - | $ | 182,912 | |||||||||||||||||||||||||||||||||||||
Options | 4/25/14 | - | - | - | - | 10,700 | $ | 94.84 | $ | 280,875 | |||||||||||||||||||||||||||||||||||||
Annual Cash | - | $ | 130,469 | $ | 260,938 | $ | 521,875 | (d) | - | - | - | - | |||||||||||||||||||||||||||||||||||
Michael P. Rutz | RSUs | 2/10/14 | - | - | - | 835 | (h) | - | - | $ | 73,079 | ||||||||||||||||||||||||||||||||||||
RSUs | 4/25/14 | - | - | - | 2,080 | (e) | - | - | $ | 193,648 | |||||||||||||||||||||||||||||||||||||
Options | 4/25/14 | - | - | - | - | 7,250 | $ | 94.84 | $ | 190,313 | |||||||||||||||||||||||||||||||||||||
Annual Cash | - | $ | 85,000 | $ | 170,000 | $ | 340,000 | (d) | - | - | - | - |
(1) |
|
|
| 2017 Proxy Statement 39 |
| The exercise price shown for individual options is the fair market value of the Company’s |
| Represents the full grant date fair value of |
| These amounts represent annual incentive cash awards granted under the 2016 Annual Incentive Plan. The actual |
| Represents the annual |
| Represents special |
| Represents |
|
|
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2014 Table
Annual Incentive Plan
The amounts listedSee discussion of information presented in the Threshold, TargetSummary Compensation Table and Maximum columns under the Estimated Possible Payouts Under Non-Equity Incentive Plan Awards heading of the Grants of Plan-Based Awards Table in 2014 Table represent the potential rangesection titled “Components of cash awards for the prior Annual Incentive Plan for 2014. For 2014, threshold, target and maximum awards were established for each NEO as a percent of base salary as shown below.
2014 Annual Incentive Plan Opportunity (as a Percentage of 2014 Base Salary) | ||||||||||||
Name | Threshold | Target | Maximum | |||||||||
Gordon Hunter | 50% | 100% | 200% | |||||||||
Philip G. Franklin | 35% | 70% | 140% | |||||||||
David W. Heinzmann | 35% | 70% | 140% | |||||||||
Ryan K. Stafford | 35% | 70% | 140% | |||||||||
Michael P. Rutz | 30% | 60% | 120% |
Option Awards and Restricted Stock Unit AwardsTotal Compensation” starting on page 28.
The stock option awards granted to NEOs in 2014 under the Long-Term Plan vest ratably over three years and have a seven-year term. The RSUs granted to NEOs in 2014 under the Long-Term Plan also vest ratably over three years, except as discussed in the “Long-Term Incentive Compensation” section of the Compensation Discussion and Analysis. Upon vesting, one share of our common stock will be delivered for each restricted stock unit award (or, where non-U.S. law prohibits settlement in stock, payment may be made in cash).
| 2017 Proxy Statement 40 |
See “Compensation Discussion and Analysis” for a discussion of the proportion of salary and bonus in relation to total compensation, which is discussed under “Allocation between Cash and Non-Cash Compensation and Short-term and Long-term Compensation,” and other material terms of our NEOs’ compensation and the related amounts included in the foregoing tables.
Outstanding Equity Awards at 2016 Fiscal Year-End Table
The following table provides information regarding the outstanding equity awards held by each of the NEOs as of December 27, 2014.31, 2016, other than Mr. Franklin who retired from his position as CFO effective March 31, 2016 and all outstanding unvested equity was accelerated on July 31, 2016, following his service as an advisor to the Company.
Outstanding Equity Awards at 2014 Fiscal Year-End Table
| Option Awards | Stock Awards | |||||||||||||||||||||||
Name | Date of Grant | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($)(1) | Option Expiration Date | Number of Shares or Unitsof Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | ||||||||||||||||||
David W. | 04/27/2012 | 5,000 | 0 | $ | 63.09 | 04/27/2019 | 0 | $ | 0 | ||||||||||||||||
Heinzmann | 04/26/2013 | 11,100 | 0 | $ | 66.68 | 04/26/2020 | 0 | $ | 0 | ||||||||||||||||
01/10/2014 | - | - | - | - | 2,142 | $ | 325,091 | ||||||||||||||||||
04/25/2014 | 9,580 | 4,790 | (3) | $ | 94.84 | 04/25/2021 | 1,373 | $ | 208,380 | ||||||||||||||||
04/24/2015 | 5,887 | 11,773 | (4) | $ | 96.15 | 04/24/2022 | 3,093 | $ | 469,425 | ||||||||||||||||
04/22/2016 | 0 | 17,004 | (5) | $ | 120.15 | 04/22/2023 | 4,755 | $ | 721,666 | ||||||||||||||||
Gordon | 04/25/2014 | 0 | 12,873 | (3) | $ | 94.84 | 04/25/2021 | 3,693 | $ | 560,487 | |||||||||||||||
Hunter | 04/24/2015 | 0 | 28,973 | (4) | $ | 96.15 | 04/24/2022 | 7,606 | $ | 1,154,363 | |||||||||||||||
04/22/2016 | 0 | 36,074 | (5) | $ | 120.15 | 04/22/2023 | 10,087 | $ | 1,530,904 | ||||||||||||||||
Meenal A. | 06/08/2015 | 1,730 | 3,458 | (6) | $ | 97.00 | 06/08/2022 | 798 | $ | 121,112 | |||||||||||||||
Sethna | 04/22/2016 | 0 | 12,121 | (5) | $ | 120.15 | 04/22/2023 | 3,389 | $ | 514,349 | |||||||||||||||
07/20/2016 | - | - | - | - | 2,486 | $ | 377,300 | ||||||||||||||||||
Ryan K. | 04/25/2014 | 7,133 | 3,567 | (3) | $ | 94.84 | 04/25/2021 | 3,006 | $ | 456,221 | |||||||||||||||
Stafford | 04/24/2015 | 4,014 | 8,026 | (4) | $ | 96.15 | 04/24/2022 | 2,106 | $ | 319,628 | |||||||||||||||
04/22/2016 | 0 | 10,750 | (5) | $ | 120.15 | 04/22/2023 | 3,006 | $ | 456,221 | ||||||||||||||||
07/20/2016 | - | - | - | - | 5,594 | $ | 849,001 | ||||||||||||||||||
Michael P. | 02/10/2014 | - | - | - | - | 835 | $ | 126,728 | |||||||||||||||||
Rutz | 04/25/2014 | 4,833 | 2,417 | (3) | $ | 94.84 | 04/25/2021 | 693 | $ | 105,177 | |||||||||||||||
04/24/2015 | 2,714 | 5,426 | (4) | $ | 96.15 | 04/24/2022 | 1,426 | $ | 216,424 | ||||||||||||||||
04/22/2016 | 0 | 7,632 | (5) | $ | 120.15 | 04/22/2023 | 2,134 | $ | 323,877 |
Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||
Date of | Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price | Option Expiration | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested | |||||||||||||||||||||||||||
Name | Grant | Exercisable | Unexercisable | (a) ($) | Date | (#) | (b) ($) | (#) | ($) | ||||||||||||||||||||||||||
Gordon Hunter | 04/27/2012 | 0 | 13,200 | (c) | 63.09 | 04/27/2019 | 3,987 | $ | 393,756 | - | - | ||||||||||||||||||||||||
04/26/2013 | 0 | 27,533 | (d) | 66.68 | 04/26/2020 | 7,486 | $ | 739,317 | - | - | |||||||||||||||||||||||||
04/25/2014 | 0 | 38,620 | (e) | 94.84 | 04/25/2021 | 11,080 | $ | 1,094,261 | - | - | |||||||||||||||||||||||||
Philip G. Franklin | 04/30/2010 | 3,200 | 0 | 42.13 | 04/30/2017 | 0 | $ | 0 | - | - | |||||||||||||||||||||||||
04/29/2011 | 11,000 | 0 | 62.21 | 04/29/2018 | 0 | $ | 0 | - | - | ||||||||||||||||||||||||||
04/27/2012 | 10,333 | 5,167 | (c) | 63.09 | 04/27/2019 | 1,563 | $ | 154,362 | - | - | |||||||||||||||||||||||||
04/26/2013 | 5,400 | 10,800 | (d) | 66.68 | 04/26/2020 | 2,940 | $ | 290,354 | - | - | |||||||||||||||||||||||||
04/25/2014 | 0 | 13,050 | (e) | 94.84 | 04/25/2021 | 3,740 | $ | 369,362 | - | - | |||||||||||||||||||||||||
David W. Heinzmann | 04/30/2010 | 4,000 | 0 | 42.13 | 04/30/2017 | 0 | $ | 0 | - | - | |||||||||||||||||||||||||
04/29/2011 | 8,700 | 0 | 62.21 | 04/29/2018 | 0 | $ | 0 | - | - | ||||||||||||||||||||||||||
04/27/2012 | 7,133 | 3,567 | (c) | 63.09 | 04/27/2019 | 1,077 | $ | 106,365 | - | - | |||||||||||||||||||||||||
04/26/2013 | 3,700 | 7,400 | (d) | 66.68 | 04/26/2020 | 2,020 | $ | 199,495 | - | - | |||||||||||||||||||||||||
01/10/2014 | - | - | - | - | 2,142 | $ | 211,544 | - | - | ||||||||||||||||||||||||||
04/25/2014 | 0 | 14,370 | (e) | 94.84 | 04/25/2021 | 4,120 | $ | 406,891 | - | - | |||||||||||||||||||||||||
Ryan K. Stafford | 04/27/2012 | 8,333 | 4,167 | (c) | 63.09 | 04/27/2019 | 1,260 | $ | 124,438 | - | - | ||||||||||||||||||||||||
04/26/2013 | 4,334 | 8,666 | (d) | 66.68 | 04/26/2020 | 2,366 | $ | 233,666 | - | - | |||||||||||||||||||||||||
04/25/2014 | 0 | 10,700 | (e) | 94.84 | 04/25/2021 | 5,053 | $ | 499,034 | - | - | |||||||||||||||||||||||||
Michael P. Rutz | 02/10/2014 | - | - | - | - | 835 | $ | 82,465 | - | - | |||||||||||||||||||||||||
04/25/2014 | 0 | 7,250 | 94.84 | 04/25/2021 | 2,080 | $ | 205,421 | - | - |
| The exercise price shown for individual optionees is the fair market value of the Company’s |
| Values are based on the closing stock price of |
| Options vest annually in installments of 33% beginning |
| Options vest annually in installments of 33% beginning |
| Options vest annually in installments of 33% beginning |
(6) | Options vest annually in installments of 33% beginning June 8, 2016, such that the options are fully exercisable on or after three years from the date of grant. |
Narrative disclosures of the compensation awarded to our NEOs as reported in the Summary Compensation Table and Grants of Plan-Based Awards Table are included on pages –28 - 36 of the Compensation Discussion and Analysis.
| 2017 Proxy Statement 41 |
Options Exercises and Stock Vested in 2016 Table
The following table provides the amounts received upon exercise of options or similar instruments or the vesting of stock or similar instruments during the most recent fiscal year.
year 2016.
Options Exercises and Stock Vested in 2014 Table
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | ||||||||||||
David W. Heinzmann | 9,400 | $ | 604,010 | 3,930 | (3) | $ | 472,042 | |||||||||
Gordon Hunter | 54,001 | $ | 1,999,790 | 11,240 | (4) | $ | 1,350,972 | |||||||||
Meenal A. Sethna | - | - | 400 | (5) | $ | 47,596 | ||||||||||
Ryan K. Stafford | 25,500 | $ | 1,695,299 | 3,260 | (6) | $ | 391,949 | |||||||||
Michael P. Rutz | - | - | 1,407 | (7) | $ | 168,538 | ||||||||||
Philip G. Franklin | 59,430 | $ | 3,470,614 | 7,823 | (8) | $ | 958,879 |
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) (a) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (b) | ||||||||||||
Gordon Hunter | 37,567 | $ | 1,072,168 | 10,697 | (c) | $ | 1,002,457 | |||||||||
Philip G. Franklin | 42,000 | $ | 2,352,578 | 4,066 | (d) | $ | 381,425 | |||||||||
David W Heinzmann | 5,900 | $ | 326,683 | 2,886 | (e) | $ | 270,460 | |||||||||
Ryan K. Stafford | 8,800 | $ | 288,112 | 3,277 | (f) | $ | 307,409 | |||||||||
Michael P. Rutz | - | - | - | - |
(1) |
Nonqualified Deferred Compensation
The following table discloses contributions, earnings and balances under the
|